UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM CB

TENDER OFFER/RIGHTS OFFERING NOTIFICATION FORM

Please place an X in the box(es) to designate the appropriate rule provision(s) relied upon to file this Form:

Securities Act Rule 801 (Rights Offering)
☐
Securities Act Rule 802 (Exchange Offer)
☒
Exchange Act Rule 13e-4(h)(8) (Issuer Tender Offer)
☐
Exchange Act Rule 14d-1(c) (Third Party Tender Offer)
☐
Exchange Act Rule 14e-2(d) (Subject Company Response)
☐
Filed or submitted in paper if permitted by Regulation S-T Rule 101(b)(8)
☐

Sinqia S.A.
(Name of Subject Company)

N/A
(Translation of Subject Company’s Name into English (if applicable))

Brazil
(Jurisdiction of Subject Company’s Incorporation or Organization)

EVERTEC, Inc.
(Name of Person(s) Furnishing Form)

Common Shares
(Title of Class of Subject Securities)

N/A
(CUSIP Number of Class of Securities (if applicable))

Bernardo Francisco Pereira Gomes / Thiago Almeida Ribeiro da Rocha
Sinqia S.A.
Rua Bela Cintra, No. 755, 7th floor, Consolação, CEP 01415-003, São Paulo / SP
Tel: (11) 97515-9162
(Name, Address (including zip code) and Telephone Number (including area code)
of Person(s) Authorized to Receive Notices and Communications on Behalf of Subject Company)

Not applicable
(Date Tender Offer/Rights Offering Commenced)

PART I - INFORMATION SENT TO SECURITY HOLDERS

Item 1.
Home Jurisdiction Documents

(a) The following documents are attached as exhibits to this Form CB:

Exhibit
Number
  
English translation of notice for extraordinary general shareholders’ meeting  of Sinqia S.A. published on August 16, 2023 in Valor Economico.
English translation of Management Proposal of Sinqia S.A. regarding extraordinary general shareholders’ meeting.
English translation of form of Remote Voting Ballot for extraordinary general shareholders’ meeting of Sinqia S.A.

(b) Not applicable.

Item 2.
Informational Legends

A legend complying with Rule 802(b) under the U.S. Securities Act of 1933, as amended, is included in Exhibit 99.2 of Item 1.

PART II - INFORMATION NOT REQUIRED TO BE SENT TO SECURITY HOLDERS

(1) Not applicable.

(2) Not applicable.

(3) Not applicable.

PART III - CONSENT TO SERVICE OF PROCESS

Not applicable.

SIGNATURES

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

EVERTEC, Inc.
 
/s/ Luis A. Rodríguez
Name:
Luis A. Rodríguez
Title:
Executive Vice President, Chief Legal and Administrative Officer, and Secretary of the Board of Directors

Date: August 17, 2023

Exhibit 99.1
 
SINQIA S.A.
A Publicly Traded Company
CNPJ No. 04.065.791/0001-99
NIRE 35.300.190.785

EXTRAORDINARY GENERAL MEETING OF SINQIA S.A.
TO BE HELD ON SEPTEMBER 14, 2023
CALL NOTICE
 
Sinqia S.A. (B3: SQIA3) (“Sinqia” or “Company”) invites its shareholders to the Extraordinary General Meeting (“EGM”) to be held, on 1st call, on September 14, 2023, at 09h30 a.m. (BST–Brasilia Standard Time), exclusively in digital form, pursuant to CVM Resolution No. 81/22 (“RCVM 81”), when the shareholders will be called to resolve on the following agenda:

1.
To examine, discuss and resolve on the “Protocolo e Justificação de Incorporação de Ações de Emissão da Sinqia S.A. pela Evertec Brasil Informática S.A.” (“Protocol”) and on the merger of shares issued by the Company into Evertec Brasil Informática S.A. (“Evertec BR”) (“Merger of Shares”) upon the delivery, to the Company’s shareholders, of class A preferred shares and class B preferred shares issued by Evertec BR, automatically redeemable upon delivery, as consideration, of a cash installment and Level I Brazilian Depositary Receipts (BDRs) backed by common shares issued by Evertec, Inc. (“Evertec Inc”), under the terms and conditions set forth in the Protocol, hereby authorizing the Company’s Officers to adopt all the necessary measures to implement the resolutions that may be approved at the EGM;

2.
To resolve on the waiver of Evertec BR’s obligation to join the Novo Mercado segment of B3 S.A. - Brasil, Bolsa, Balcão (“Novo Mercado”) due to the Merger of Shares, pursuant to Article 46, Sole Paragraph, of the Novo Mercado Regulation; and
 
3.
To resolve on the termination of Sinqia’s Stock Concession Plan, immediately after the delivery of the shares covered by such plan to its beneficiaries.
 
Finally, it should be clarified, that, as considered part of a single operation, subject of the material fact published on July 20, 2023, the approval of each of the matters on the agenda will be conditioned to the full approval of all matters on the agenda of the EGM, being understood that the consummation of the operation described in the Protocol is conditioned to the implementation of all the conditions precedent provided for in the Protocol.

General Information
 
Support Materials: Support Materials: The information required by Law No. 6,404/76 (“Brazilian Corporate Law”) and RCVM 81 is available to shareholders on the Company’s website (ri.sinqia.com.br) as well as on the CVM website ( www.cvm.gov.br ) and B3 website (www.b3.com.br). The documents are also available for consultation at the Company’s headquarters.
 
Participation: The EGM will be held exclusively online, in accordance with RCVM 81, through Zoom platform.

Participation through Electronic System (Zoom)
 
Shareholders wishing to participate in the EGM, through the Zoom platform (“Electronic System”) must send a request to the email ri@sinqia.com.br, at least 48 hours in advance, that is until 09h30 a.m. (BST – Brasilia Standard Time) of September 12, 2023 accompanied by the following documents: (i) in the case of an individual, identity document with photo and, in the case of a legal entity or investment fund, bylaws and other documents proving the legal representation of the shareholder and identity document of the respective representative; and (ii) statement of its shareholding position, issued by the depositary institution or by the bookkeeping agent of the Company’s shares, depending on whether or not its shares are deposited in a central depository, issued no later than 3 days prior to the EGM.
 
Any shareholder may appoint a proxy to participate in the EGM and vote on his/her behalf. In this case, the shareholder must send the proxy and details of the proxy holder to the e-mail indicated above, observing the terms of Article 126 of the Brazilian Corporate Law, and in accordance with the guidelines contained in the Management Proposal.
 
Once the request has been received and the documentation provided has been verified, the Company will respond to the respective e-mail with the instructions for digital access of the shareholder to the EGM through the Electronic System, enabling the shareholder to exercise its respective voting rights and will be considered present and a subscriber to the minutes, in the form of Articles 28, §1º and 47, III and §1º, of RCVM 81. If the shareholder does not receive such email by 8:00 a.m. of September 14, 2023, the shareholder must contact the Company immediately for support, by calling the following phone number: +55 (11) 3478-4788.
 
Remote Voting: In order to facilitate and encourage the participation of the Company’s shareholders, the Company will adopt the remote voting system, allowing the delivery of the Remote Voting Form (“RVF”) (i) directly to the Company by sending the electronic file to the e-mail ri@sinqia.com.br with the subject “RVF EGM SEPT 2023”, accompanied by the documents required by the Company up to 7 days before the EGM, (ii) through the Company’s bookkeeper (Banco Bradesco S.A.) or (iii) through the respective agent of custody of the shareholder, according to guidelines comprised in RVF released on this date.

Finally, the Company clarifies that, pursuant to Art. 49 of RCVM 81, if it is necessary to hold the EGM on the 2nd call, the voting instructions sent by the shareholders through RVF (either directly to the Company or through the service providers) and validly received by the Company for the EGM on the 1st call will be validly considered at the EGM on the 2nd call, without the need for a new manifestation or express renewal of such voting instructions, considering, furthermore, such shareholders as present at the EGM, observing their respective shareholdings on the day of the EGM on the 2nd call.
 
São Paulo, August 14, 2023.
 
Antonio Luciano de Camargo Filho
Chairman of the Board of Directors
 

Exhibit 99.2





The proposed transaction involves the securities of a foreign company. The shareholder vote is subject to disclosure requirements of a foreign country that are different from those of the United States. Financial statements included in the document, if any, have been prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of United States companies.

It may be difficult for you to enforce your rights and any claim you may have arising under the federal securities laws, since the subject company is located in a foreign country, and some or all of its officers and directors may be residents of a foreign country. You may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court's judgment.

You should be aware that the issuer may acquire securities of the subject company otherwise than pursuant to completion of the merger, such as in open market or privately negotiated purchases.




São Paulo, August 14, 2023. Sinqia S.A. (B3: SQIA3) (“Sinqia” or “Company”), a technology provider for the financial sector, in compliance with CVM Resolution No. 81 of March 29, 2022 (“RCVM 81”), hereby makes available to its shareholders the documents and information for the Extraordinary General Shareholders’ Meeting (“EGM”) to be held, on the first call, exclusively in digital format, under the terms of RCVM 81, as indicated below:

Date: 09/14/2023, Thursday Time: 09:30h

Attendance: The EGM will be held exclusively in digital format, under the terms of RCVM 81, through the Zoom platform, as described in the Call Notice published on this date.

Participation through the Electronic System (Zoom)

Shareholders wishing to participate in the EGM, via the Zoom platform (“Electronic System”), must send a request to the e-mail address ri@sinqia.com.br, at least 48 hours before the EGM, i.e. until 09:30 a.m. (Brasília time) on September 12, 2023, accompanied by the following documents:

For natural persons:
◾          shareholder’s photo ID.

For legal entities:
◾          latest bylaws or consolidated articles of association and corporate documents proving the shareholder’s legal representation;
◾          photo ID of the legal representative.

For investment funds:
◾          latest consolidated fund regulations;
◾         bylaws or articles of association of its administrator or manager, as the case may be, observing the fund’s voting policy and corporate documents proving powers of representation;
◾          photo ID of the legal representative.

For all shareholders:
◾          statement of the shareholder’s position, issued by the depositary institution or by the bookkeeping agent of the Company’s shares, depending on whether or not their shares are deposited in a central depositary, issued no more than 3 days prior to the EGM; and
◾          in the case of representation by an attorney-in-fact, instruments of mandate for representation of the shareholder by an attorney-in-fact, granted under the terms of §1º of Art. 126 of Law No. 6.404/76 (“Brazilian Corporations Law”), without the need for notarization.

Once the request has been received and the documentation provided has been verified, the Company will reply to the respective e-mail with the instructions for the shareholder to access the EGM through the Electronic System, and the shareholder will be able to exercise their respective voting rights and will be considered present and sign the minutes, pursuant to Articles 28, §1 and 47, III and §1 of RCVM 81. If the shareholder does not receive this e-mail by 08:00 on 14/09/2023, they should contact the Company for support, immediately, by telephone (11) 3478-4788.

In accordance with the regulations in force, anyone who fails to register, accompanied by the requested documentation, within the aforementioned period, will not have access to the Electronic System on the date of the EGM.

By registering in advance, shareholders or their authorized representatives undertake to: (i) use the access data to the Electronic System received solely and exclusively for participation and remote voting during the EGM; (ii) not transfer or disclose, in whole or in part, the access data to any third party, shareholder or not, recognizing that these are for individual and non-transferable use; and (iii) not record or reproduce, in whole or in part, nor transfer, to any third party, shareholder or not, the content or any information transmitted by digital means during the holding of the EGM.

The Electronic System made available by the Company complies with the requirements set out in Article 28, § 1, of RCVM 81, including: (i) recording the attendance of shareholders and their respective votes; (ii) simultaneous expression and access to documents presented during the EGM that may not have been made available previously; (iii) full recording of the EGM by the Company itself; and (iv) communication between shareholders.
 
Todos os direitos reservados para Sinqia
The Company is not responsible for any operational or connection problems that the shareholder may face, as well as any other possible issues beyond the Company’s control that may make it difficult or impossible for the shareholder to participate in the EGM on the Electronic System.

Shareholders who request to participate in the Electronic System should familiarize themselves in advance with the use of the Zoom digital platform, as well as ensure the compatibility of their respective electronic devices with the use of the platform (by video and audio).

Participation by Remote Voting

The Company will also adopt the remote voting system, allowing the delivery of the Remote Voting Form (“RVF”) (i) directly to the Company; (ii) through the bookkeeper of the Company’s shares (Banco Bradesco S.A.) or (iii) through the shareholder’s respective custodian, in accordance with the guidelines of the RVF disclosed on this date and in accordance with the deadlines established by the respective custodians.

In order for the remote voting form to be considered valid, the shareholder opting for remote voting or their legal representative must (i) fill in all the fields of the respective RVF, and (ii) initial all the pages and sign the last page of the RVF. No notarization, sworn translation, notarization or consularization will be required.

In order for the RVF to be considered delivered, the shareholder who opts for remote voting must adopt one of the following alternatives: (i) sending it to the Company: the shareholder must send the respective RVF exclusively as a digital file, to the e-mail ri@sinqia.com.br with the subject “BVD AGE SET 2023” - physical copies sent to the Company’s head office will not be accepted - accompanied by the documents required by the Company, at least 7 days before the date of the EGM (RVFs received after this date may be disregarded); (ii) sending to the book-keeper: the shareholder must transmit the instruction to fill in the RVF to the book-keeping agent for the Company’s shares (Banco Bradesco S. A.), if your shares are deposited with the bookkeeping agent; or (iii) sending to the custodian: the shareholder must transmit the instruction to fill in the RVF to the custodian of your shares, if your shares are deposited with the central depositary, observing the procedures established by the respective custodian.

The documents that must accompany the RVF are:

For natural persons:
◾          shareholder’s photo ID.

For legal entities:
◾          latest bylaws or consolidated articles of association and corporate documents proving the shareholder’s legal representation;
◾          photo ID of the legal representative.

For investment funds:
◾          latest consolidated fund regulations;
◾          bylaws or articles of association of its administrator or manager, as the case may be, observing the fund’s voting policy and corporate documents proving powers of representation;
◾          photo ID of the legal representative.

Pursuant to Article 46 of RCVM 81, the Company will inform the shareholder within 3 days of receipt of the RVF and the documents, whether the documents received are sufficient for the vote to be considered valid, or the procedures and deadlines for any rectification or resubmission, if necessary. If necessary, the rectification or resubmission of the ballot must also be made no later than 7 days before the date of the EGM, i.e. no later than September 7, 2023 (including).

Pursuant to Art. 48, §2 of RCVM 81, if there are differences between the RVF received directly by the Company and the voting instruction contained in the voting map from the bookkeeper for the same CPF or CNPJ number, the voting instruction from the bookkeeper shall prevail.

The RVF for participation in the AGM is available on the Company’s website at Company (ri.sinqia.com.br), CVM (www.gov.br/cvm/) and B3 (www.b3.com.br).

Todos os direitos reservados para Sinqia
The Company also clarifies that, pursuant to Art. 49 of RCVM 81, if it becomes necessary to hold the EGM on the 2nd call, the voting instructions sent by shareholders via RVF (either directly to the Company or via service providers) and validly received by the Company for the EGM on the 2nd call will be validly considered at the EGM on the 2nd call, without the need for a new manifestation or express renewal of such voting instructions, and such shareholders will also be considered as present at the EGM, observing their respective shareholdings on the day of the EGM on the 2nd call.

Agenda:

As they are considered part of a single transaction, subject of the material fact published on July 20, 2023, the approval of each of the matters on the agenda will be conditioned to the full approval of all matters on the agenda of the EGM, provided that the consummation of the Transaction (defined below) is conditioned to the implementation of all the conditions precedent provided for in the Protocol and in the Merger Agreement, as defined below.

1.         To examine, discuss and resolve on the “Protocol and Justification for the Merger of Shares Issued by Sinqia S.A. by Evertec Brasil Informática S.A.” (“Protocol”) and on the merger of shares issued by the Company by Evertec Brasil Informática S.A. (“Evertec BR”) (“Merger of Shares”) upon the delivery, to the Company’s shareholders, of class A preferred shares and class B preferred shares issued by Evertec BR, automatically redeemable upon delivery, as consideration, of a cash installment and Level I Brazilian Depositary Receipts (BDRs) backed by common shares issued by Evertec, Inc. (“Evertec Inc”), under the terms and conditions set forth in the Protocol, hereby authorizing the Company’s board of officers to adopt all the necessary measures to implement the resolutions that may be approved at the EGM.

On July 20, 2023, the Company entered into the “Merger Agreement and Other Covenants” (“Merger Agreement”) with Evertec BR and with Evertec Inc, a company listed on the New York Stock Exchange - NYSE, headquartered in Puerto Rico (Evertec Inc and Evertec BR, jointly, “Evertec”), by which the terms and conditions of a business combination between the Company and Evertec were agreed, through the merger of the shares issued by Sinqia by Evertec BR (“Transaction”).

On the same date, shareholders holding shares issued by the Company representing more than 40% of the total shares with voting rights entered into certain Voting Agreements (“Voting Commitments”), which establish their obligation to vote in favor of the approval of the Transaction at the Company’s EGM. In addition, during the term of the Voting Commitments, such shareholders have undertaken not to transfer of or in any way dispose of the shares issued by the Company and held by them until the date of the Company’s EGM.

The Merger Agreement and the Voting Commitments were disclosed to the market by the Company on June 20, 2023 and are available on the Company’s website (ri.sinqia.com.br), the CVM’s website (www.gov.br/cvm/) and B3’s website (www.b3.com.br).

The Transaction will be implemented through (i) the Merger of Shares, which will result, after its consummation, in the conversion of the Company into a wholly-owned subsidiary of Evertec BR, with the attribution to the Company’s shareholders of mandatorily redeemable class A and class B preferred shares issued by Evertec BR (“New Evertec BR Shares”); and (ii) the automatic redemption of all these new redeemable preferred shares of Evertec BR (“Redemption”), through the payment of cash and the delivery of Brazilian Depositary Receipts (BDRs) Level I admitted to trading on B3, whose underlying assets will be common shares issued by Evertec Inc (“BDR”) traded on the NYSE.

Pursuant to articles 224 and 225 of the Brazilian Corporations Law, the managers of Sinqia and Evertec entered into, on August 14, 2023, the Protocol, as approved by the Board of Directors at a meeting held on August 13, 2023, set out in Exhibit I to this Proposal, which reflects the terms and conditions set out in the Merger Agreement and establishes the overall basis for the Merger of Shares, pursuant to article 252 of the Brazilian Corporations Law.

The Company’s Appraisal Report for the purposes of the Merger of Shares, prepared by Apsis Consultoria e Avaliações Ltda., is attached to this Proposal as Exhibit II.

In accordance with Article 22 of RCVM 81, more detailed information on the proposed Merger of Shares is available in Exhibit III to this Proposal.

Todos os direitos reservados para Sinqia
The business combination between Sinqia and Evertec is based on strategic fundamentals for the expansion of the companies’ activities, allowing the capture of synergy gains arising from their integration. The complementarity between Sinqia’s software and services for the financial system and Evertec’s payment solutions represents an opportunity to generate value for both parties, creating a more competitive and innovative company with greater capacity for growth.

The Company’s Board of Directors received a fairness opinion from Banco BTG Pactual S.A. regarding the reasonableness of the exchange ratio and the economic terms of the Transaction, having concluded that its terms are fair and equitable for all of the Company’s shareholders.

Therefore, in accordance with the provisions of the Protocol and the Merger Agreement, the Company’s Management hereby submits to the resolution of its shareholders and proposes the approval, within the scope of the EGM, of the Protocol, whose object is the terms and conditions of the Transaction, and of the Merger of Shares. Management informs that the approval of this item is subject to the approval of shareholders holding at least half of the shares with voting rights, under the terms of article 252, 2nd paragraph, of the Brazilian Corporations Law.

Information on the withdrawal right, as required by article 21 of RCVM 81, is provided in Exhibit IV to this Proposal.

Management also informs that (i) the Company’s financial statements as of March 31, 2023, (ii) Evertec BR’s financial statements as of March 31, 2023 and (iii) the pro forma financial information required under RCVM 81 and CVM Resolution 78, of March 29, 2022, are available in Exhibit V, Exhibit VI and Exhibit VII, respectively, to this Proposal.

In addition, management points out that the minutes of the meetings of the Board of Directors and Fiscal Council that discussed and resolved on the Transaction are included in Exhibit VIII and Exhibit IX to this Proposal.

2.          To resolve on the waiver of Evertec BR’s obligation to join the Novo Mercado segment of B3 (“Novo Mercado”) in the context of the Merger of Shares, pursuant to Article 46, sole paragraph, of the Novo Mercado Regulation

Pursuant to Article 46 of the Novo Mercado Regulation, except upon the approval of the majority of the holders of outstanding shares present at the EGM, the company resulting from a corporate reorganization involving the transfer of the shareholder base of a company listed on the Novo Mercado must apply for entry into the Novo Mercado segment within 120 days of the date of the shareholders’ meeting that resolves on said reorganization.

Under the terms of the Merger Agreement and the Protocol, and as detailed in Exhibit III to this Proposal, the consummation of the Transaction is conditioned to the waiver of Evertec BR’s eventual obligation to join the Novo Mercado segment, as expressly permitted by the sole paragraph of article 46 of the Novo Mercado Regulation.

Therefore, considering that (i) the New Evertec BR Shares delivered to Sinqia’s shareholders will be immediately redeemed in accordance with the Redemption Ratio described in Exhibit III to this Proposal; and (ii) the Transaction will not take place in the absence of a waiver of such obligation, Management proposes to waive the requirement for Evertec BR to enter the Novo Mercado segment.

As the matter depends on the approval of the majority of the holders of the Company’s outstanding shares present at the EGM, under the terms of the sole paragraph of article 46 of the Novo Mercado Regulation, the Company’s managers will not vote on this matter, given that the shares held by them do not fall within the concept of “outstanding shares” for the purposes of article 9 of the Novo Mercado Regulation.

3.        To resolve on the termination of the Sinqia Share Grant Plan (“Plan”), immediately following the delivery of the shares covered by said Plan to the beneficiaries

As provided for in the Merger Agreement, the Company’s Board of Directors approved, at the meeting held on July 20, 2023, the acceleration of the vesting and restriction periods of the stock options and restricted shares subject to the long-term incentive plans in shares of the Company, subject to the approval of all the matters of this EGM, in order to allow eligible beneficiaries to hold shares issued by the Company immediately prior to the date of consummation of the Transaction.

Todos os direitos reservados para Sinqia
In addition, as a condition precedent to the consummation of the Transaction, the Company undertook to cancel the long-term incentive plans in shares immediately after the delivery of the shares which are the object of the long-term incentive plans in shares to the eligible beneficiaries who comply with the procedures and deadlines stipulated by the Board of Directors.

Accordingly, Management proposes to approve the termination of the Plan, immediately following the delivery of the shares to such beneficiaries, as approved by the Company’s Board of Directors on July 20, 2023, which, in turn, will occur before the date of consummation of the Transaction.

***

Todos os direitos reservados para Sinqia
Annex I to Exhibit 99.2 – PROTOCOL AND JUSTIFICATION OF THE MERGER OF SHARES OF SINQIA S.A. BY EVERTEC BRASIL INFORMÁTICA S.A.

PROTOCOL AND JUSTIFICATION OF THE MERGER OF SHARES OF SINQIA S.A. BY EVERTEC BRASIL INFORMÁTICA S.A.

The Companies qualified below, through their managers:

(i)        EVERTEC BRASIL INFORMÁTICA S.A., a closed company incorporated and existing in accordance with the laws of the Federative Republic of Brazil, enrolled with CNPJ under No. 06.187.556/0001-15, with head offices in the City of São Paulo, State of São Paulo, at Alameda Lorena, 638, 3rd floor, suites 31 and 32, Jardim Paulista, CEP 01424-002, herein represented in accordance with its bylaws (“Evertec BR”);

(ii)        SINQIA S.A., a publicly held company incorporated and existing in accordance with the laws of the Federative Republic of Brazil, enrolled with CNPJ under No. 04.065.791/0001-99, with head offices in the City of São Paulo, State of São Paulo, at Rua Bela Cintra, No. 755, 7th floor, Consolação, CEP 01415-003, herein represented in accordance with its bylaws (“Sinqia” and, jointly with Evertec BR, the “Companies” or “Parties”);

And also,

(iii)       EVERTEC INC., a company incorporated and validly existing in accordance with the laws of Puerto Rico, listed on the NYSE, with registered office at Cupey Center Building, Road 176, Km. 1.3, San Juan, Puerto Rico 00926, hereby represented in the form of its articles of incorporation.

NOW, THEREFORE, the Parties have decided to enter into, on this date, as set forth under articles 224, 225 and 252 of Law No. 6.404/1976 (“Brazilian Corporations Law”) this Protocol and Justification of the Merger of Shares of Sinqia by Evertec BR (“Protocol”), which shall be submitted for the approval of their shareholders, under the following terms and conditions:

1.
Description of the Transaction

1.1.        Description of the Transaction. This Protocol governs the terms and conditions of a business combination between the Companies, to be submitted to the resolution of their shareholders, which will result in (a) the ownership, by Evertec BR, of all the shares issued by Sinqia; (b) the receipt, by Sinqia’s shareholders, of class A mandatorily redeemable preferred shares (“Evertec BR PNA Share”) and class B mandatorily redeemable preferred shares (“Evertec BR PNB Share” and, jointly with Evertec BR PNA Shares, the “Evertec BR New PN Shares”), all registered and without par value, issued by Evertec BR, in replacement of the common shares issued by Sinqia that Sinqia’s shareholders hold on the date of the consummation of the Merger of Shares (as defined below), to be timely disclosed to the market (“Sinqia Shareholders”); and, subsequently and interdependently, (c) the redemption of all the Evertec BR New PN Shares, through the delivery to their holders of the assets described in clause 2. 1(ii) et seq. below (“Transaction”).

1
1.2.       The entirety of the terms and conditions related to the Transaction are set out in the Merger Agreement and Other Covenants entered into between the Companies, with Evertec Inc. and certain of Sinqia’s shareholders as intervening consenting parties, on July 20, 2023 (“Merger Agreement”), as well as in the Voting Agreement and Other Covenants, entered into by and between the Companies, Evertec Inc and certain shareholders of Sinqia (“Voting Commitment”), both filed at Sinqia’s headquarters and disclosed by it, on the same date, through its Investor Relations website (ri.sinqia.com.br), as well as on the websites of the Brazilian Securities Commission (www.cvm.gov.br) and B3 (www.b3.com.br).

1.3.        The Companies reaffirm and ratify all provisions contained in the Merger Agreement and in the Voting Commitment.

1.4.        Capitalized terms that are not defined under this Protocol shall have the meanings attributed to them in the Merger Agreement.

2.
Transaction Steps, Exchange Ratio, Redemption Ratio and Justification

2.1.      Transaction Steps: Exchange Ratio and Redemption Ratio. The Transaction, subject to the corporate approvals provided for in Section 6 and the verification of the Conditions Precedent referred to in Section 3 below, will comprise the following stages, all interdependent and linked to each other, so that no stage will be effective individually without the others also having and being fully implemented:


 (i)
Merger of all shares issued by Sinqia, except for the shares already held by Evertec BR, pursuant to article 252 of the Brazilian Corporations Law, at market value, by Evertec BR, assigning to Sinqia Shareholders the Evertec BR New PN Shares (“Merger of Shares”). The Merger of Shares will observe the following exchange ratio: for each common share issued by Sinqia, there will be delivered (a) one (1) Evertec BR PNA Share; and (b) one (1) Evertec BR PNB Share (“Exchange Ratio”). Since they are already part of the equity of Evertec BR, the shares issued by Sinqia held by Evertec BR will be disregarded for the purposes of the Merger of Shares.


(ii)
On the same date of the implementation of the Merger of Shares, and as a subsequent and interdependent act, the automatic redemption of the Evertec BR New PN Shares (“Redemption”) will be implemented, through the delivery of the following assets to their holders (“Redemption Ratio”):


(a)
for each 1 (one) Evertec BR PNA Share held by its holder, it shall be paid, as consideration for the redemption, R$ 24.47 (twenty-four reais and forty-seven cents), adjusted pursuant to Section 2.3 and 2.4 below (“Cash Portion”); and

2

 (b)
for each one (1) Evertec BR PNB Share held by its holder, it shall be delivered, as consideration for the Redemption, 0.014354 Level I Brazilian Depositary Receipts (BDR) backed by common shares issued by Evertec Inc, with a par value of US$ 0.01 (one cent) per share and traded on the New York Stock Exchange, which will be admitted to trading on B3 – Brasil, Bolsa, Balcão (“B3”) as set forth in Section 6.6 (“Evertec Inc BDR”).

2.1.1.   After consummation of the Merger of Shares, Sinqia will become a wholly owned subsidiary of Evertec BR and will retain its status as a legal entity, rights and obligations for all purposes, with no legal succession.

2.2.        Assumptions of the Transaction. The Transaction, the Exchange Ratio and the Redemption Ratio were freely negotiated between the Companies and took into account the following assumptions:


 (i)
except with respect to the interest on equity already declared by Sinqia’s GSM held on April 27, 2023, in the amount of R$ 4,690,007.39 (four million, six hundred and ninety thousand and seven reais and thirty-nine cents) that will be paid until July 31, 2023 (“JCP Sinqia 2023”), there will be no declaration, payment of dividends or interest on equity by Sinqia between the date of signature of the Merger Agreement and the Closing Date;


(ii)
Sinqia’s corporate capital is represented by 87,941,972 (eighty-seven million, nine hundred and forty-one thousand, nine hundred and seventy-two) common, registered, book-entry shares, without par value, on a fully diluted basis, including treasury shares;


(iii)
Sinqia has 3,254,876 (three million, two hundred and fifty-four thousand, eight hundred and seventy-six) shares of its own issue held in treasury;


(iv)
there are 1,370,540 (one million, three hundred and seventy thousand, five hundred and forty) stock options issued by Sinqia under stock option plans and restricted shares issued by Sinqia under share granting plans that will have their respective vesting periods and share transfer restriction periods accelerated upon the approval of the Transaction at Sinqia’s GSM (“Sinqia’s Stock Plans”). Prior to the Closing Date, Sinqia will deliver, from its treasury, up to 1,370,540 (one million, three hundred and seventy thousand, five hundred and forty) shares in the context of Sinqia’s Stock Plans, and thereafter, all Sinqia Stock Plans will be terminated, with no remaining stock option or restricted share issued by Sinqia ; and

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 (v)
except as set forth in this Section, after the Closing Date, there shall be no further issue of shares or remaining obligation relating to Sinqia’s Stock Plans.

2.3.       SELIC Update. The Cash Portion provided for in Section 2. 1(ii)(a) will be duly updated by the SELIC rate on the amount of R$ 27.50 (twenty-seven reais and fifty cents) from the date of execution of the Merger Agreement until the Closing Date (“SELIC Adjustment”), subject to the following: (a) the SELIC Adjustment may not exceed R$ 1.00 (one Real) per Evertec BR PNA Share to be redeemed (“SELIC Adjustment Cap”); and (b) the SELIC Adjustment Cap shall not be applicable in case the Closing of the Transaction is delayed due to a delay in the fulfillment of the Conditions Precedent borne by Evertec provided for in Section 3. 2(iv) and Section 3.2(v), provided that all Conditions Precedent to be Fulfilled by Sinqia have been implemented in accordance with the provisions of Section 3.3 below (“Incremental Events”).

2.3.1.   Except with respect to the JCP Sinqia 2023, any distribution of dividends or interest on equity by Sinqia will reduce the calculation basis of the SELIC Adjustment of the Cash Portion, from the date of such distribution (including) until the Closing Date (excluding).

2.3.2.   For clarification purposes, any increase due above the SELIC Adjustment Cap must be calculated exclusively in relation to the period of time between the fulfillment of all Conditions Precedent to be Fulfilled by Sinqia (including) and the Incremental Events (excluding).

2.3.3.   For clarification purposes, the Selic Adjustment Cap shall limit the Cash Portion to the amount of R$ 25.47 (twenty-five reais and forty-seven cents), provided that, as set forth in Section 2.3(b), this limitation shall not apply if the Incremental Events occur.

2.3.4.   For the purposes of Section 2.3, the Condition Precedent set forth in Section 3.3(viii) shall only be deemed fulfilled after the expiration of thirty (30) days from the date of publication of the minutes of Sinqia’s GSM, during which period the shareholders of Sinqia may exercise their right of withdrawal in relation to the approval of the Merger of Shares by Sinqia’s GSM, pursuant to article 137 of the Brazilian Corporations Law.

2.4.        Cash Portion Adjustment. The Cash Portion shall be adjusted in the event that, up to and including the Closing Date, there is any change in the number of shares into which the corporate capital of Sinqia is divided on a fully diluted basis, except as authorized in Section 2.2(iv). Except with respect to the Sinqia 2023 JCP, the total amount of the Cash Portion shall also be reduced by the same amount of any dividends, interest on equity and other income declared or paid by Sinqia between the date of signing of the Merger Agreement and the Closing Date (including), adjusted by SELIC as of the date of payment.

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2.5.      Any repurchase or issuance of new shares by Evertec BR, Evertec Inc or any of their respective Subsidiaries, whether in the context of a merger and acquisition (M&A), capital increase, public offering, private offering, issuance of restricted share units (RSU), incentive programs or shares for their executives or exercise of stock options will not imply adjustments to the Redemption Ratio.

2.6.        Evertec BR may (but will not in any way be obliged to), unilaterally and without the need to amend this Protocol, increase the total cash value and/or the amount of Evertec Inc BDR, as the case may be, to be delivered as consideration for the Redemption of the Evertec BR New Shares.

2.7.       Treatment of fractions. There will be no fractions resulting from the Merger of Shares described in Section 2.1(i). Any fractions of Evertec Inc BDRs delivered to the shareholders of Sinqia as consideration for the Redemption will be grouped into whole numbers to be then sold in an auction managed by B3, after the Closing Date, under the terms of a notice to shareholders to be timely disclosed by Sinqia. The amounts earned as a result of such sale will be made available, net of fees, to the former Sinqia shareholders holding the respective fractions, in proportion to their participation, on a date to be duly disclosed by Sinqia, provided that Evertec BR must acquire the BDRs Evertec Inc that have not been acquired at the end of the auction, except if Evertec Inc. and/or its controlled companies hold material non-public information about Evertec Inc, as defined in the applicable legislation.

2.8.        Evertec BR New PN Shares. The Evertec BR New PN Shares will have the rights and benefits attributed to them under the terms of the bylaws of Evertec BR. The Evertec BR New PN Shares will not have voting rights, will have priority in the repayment of capital in the event of liquidation, without premium, and shall be automatically redeemed on the Closing Date, without the need, therefore, for a special meeting, in a date to be announced in due course by Sinqia.

2.9.      Justification. The business combination between the Companies is based on strategic fundamentals for the expansion of their activities, allowing the capture of synergy gains derived from their integration. The complementarity between Sinqia’s software and services for the financial system and Evertec Inc’s payment solutions represents an opportunity to generate value for the Parties, creating a more competitive and innovative company with greater capacity for growth.

2.10.      Tax Withholding. The amounts to be paid by Evertec BR to the Sinqia Shareholders under the Transaction shall be deducted, where applicable, from any taxes withheld at source that are due. To this end, Evertec BR may, when necessary, withhold part of the Cash Portion of a specific shareholder, as may be required in order to enable the withholding of taxes provided for herein.

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2.10.1.  In the case of Sinqia shareholders who are not, for tax purposes, residents in Brazil, as defined by Applicable Law, Evertec BR shall withhold and pay to the Brazilian Governmental Authorities any amounts of withholding taxes on capital gains or other taxes, which shall be deducted from the Cash Portion due to such shareholder. Such shareholders of Sinqia shall submit to Evertec BR, directly or through their custodian agents, five (5) days prior to the Closing Date, a written statement, accompanied by the documents capable of proving their average cost of acquisition of the shares issued by Sinqia, and Evertec BR shall use such information to calculate any capital gain taxes (withholding income tax on capital gain) related to such payments (“Withholding Amount”), if any. Evertec BR will then deduct the Withholding Amount from any Cash Portion payment in favor of such Sinqia’s shareholders and pay the Withholding Amount to the applicable Governmental Authority.

2.10.2.  If such Sinqia’s shareholders fail to present the documents able to prove their average acquisition cost of the shares issued by Sinqia, as set forth in this Section, Evertec BR may consider that their corresponding acquisition cost in the shares issued by Sinqia is equal to zero, for purposes of calculating the Withholding Amount .

2.10.3. Tax on foreign exchange transactions (IOF/Câmbio) or any other Tax applicable to such transactions at any time, levied or to be withheld from any Sinqia’s shareholders as a consequence of the foreign exchange transactions and/or remittances necessary for Evertec BR to fulfill its obligations under this Section shall be deducted by Evertec BR from any such payment .

2.11.      After the consummation of the Transaction, the shares issued by Sinqia will cease to be traded in B3’s Novo Mercado segment.

3.
Conditions Precedent to the Closing of the Transaction

3.1.       Condition Precedent of the Parties. Parties’ obligation to consummate the Transaction and perform the Closing is subject to the condition precedent that, on the Closing Date, there shall be no Governmental Order with the effect of preventing or otherwise preventing the consummation of the Transaction (“Condition Precedent of the Parties”) .

3.2.        Sinqia’s Conditions Precedent. The obligation of Sinqia to consummate the Transaction and perform its Closing is subject to the fulfillment or waiver (at Sinqia’s sole discretion) of each of the following conditions precedent (“Conditions Precedent to be Fulfilled by Evertec”) :


 (i)
Evertec BR’s Representations and Warranties. The representations and warranties made by Evertec BR in Section 8.1 of this Protocol shall be true and correct in all material respects between the date of execution of the Merger Agreement and the Closing Date (except where the representations and warranties themselves contain reference to an earlier date, when they shall be true and correct in all material respects as of such date);

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 (ii)
Evertec Inc’s Representations and Warranties. The representations and warranties made by Evertec Inc in the Merger Agreement shall be true and correct in all material respects between the date of execution of the Merger Agreement and the Closing Date (except where the representations and warranties themselves contain reference to an earlier date, when they shall be true and correct in all material respects as of such date);


(iii)
Compliance with Obligations. Evertec BR and Evertec Inc shall have complied with all material obligations and relevant commitments entered into in this Protocol and in the Merger Agreement;


(iv)
BDR Registration and Trading Admission. The registration of the BDR Level I program sponsored by Evertec Inc concerning the Evertec Inc BDRs (“BDR Program”) with CVM shall have been obtained and the Evertec Inc BDRs shall have been admitted for trade at the B3;


(v)
Evertec Notification. Upon completion of Evertec’s Financing efforts under the Merger Agreement, Evertec BR shall notify Sinqia that it has completed its Financing efforts for the Closing of the Transaction;


(vi)
Execution of the Protocol. This Protocol shall be approved and signed by Evertec BR’s management; and


(vii)
Corporate Approvals. Evertec BR shall have approved the Transaction, pursuant to the Applicable Laws and their articles of incorporation, as provided in Section 6.1(ii) and 6.1(iii) below.

3.2.1.   With respect to the Condition Precedent to be Fulfilled by Evertec set forth in Section 3.2(iv) above, Sinqia acknowledges and agrees that it may not waive such Condition Precedent prior to November 1, 2023.

3.3.       Evertec BR’s Conditions Precedent. The obligation of Evertec BR to consummate the Transaction is subject to the fulfillment or waiver (at Evertec BR’s sole discretion) of each of the following conditions precedent (“Conditions Precedent to be Fulfilled by Sinqia” and, jointly with the Condition Precedent of the Parties and the Conditions Precedent to be Fulfilled by Evertec, the “Conditions Precedent”):


 (i)
Sinqia’s Representations and Warranties. The representations and warranties made by Sinqia in Section 8.2 of this Protocol shall be true and correct in all material respects between the date of signature of the Merger Agreement and the Closing Date (except in the event that the representations and warranties themselves contain reference to an earlier date, when they shall be true and correct in all material respects as of such date;

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 (ii)
Key Shareholders’ Representations and Warranties. The representations and warranties made by the Key Shareholders in the Merger Agreement shall be true and correct in all material respects between the date of signature of the Merger Agreement and the Closing Date (except where the representations and warranties themselves contain reference to an earlier date, when they shall be true and correct in all material respects on such date);


(iii)
Compliance with Obligations Sinqia. Sinqia shall have complied with all material obligations and material commitments undertaken in this Protocol and in the Merger Agreement;


(iv)
Compliance with obligations by Key Shareholders. The Key Shareholders shall have complied with all material obligations and relevant commitments that, under the terms of the Merger Agreement and other documents of the Transaction, must be complied with prior to the Closing Date;


(v)
Third Party Consents. Sinqia shall have obtained the consent or waiver relating to the early redemption or early maturity of the obligations arising from the following two issues of debentures of Sinqia, as a result of the Transaction, or performed their prepayment: (a) 2nd issue of simple debentures, non-convertible into shares, of unsecured type, with real and additional fiduciary guarantees, in a single series; and (b) 3rd issue of simple debentures, non-convertible into shares, of the unsecured type, with additional real and additional fiduciary guarantees, in a single series;


(vi)
Sinqia’s Stock Plans. The one million, three hundred and seventy thousand and five hundred and forty (1,370,540) outstanding stock options and restricted shares issued by Sinqia related to Sinqia’s Stock Plans shall have their respective grace periods and transfer restriction periods accelerated or shall have been canceled by the Closing Date and all Sinqia’s Stock Plans shall be canceled until Closing;


(vii)
Execution of the Protocol. This Protocol shall be approved by Sinqia’s Board of Directors and signed by Sinqia, and immediately afterwards Sinqia shall call the Sinqia’s GSM;


(viii)
Corporate Approvals. Sinqia’s GSM (as defined in Section 6.1(i)) shall have approved the matters related to the Transaction, pursuant to the Brazilian Corporations Law, as set out in Section 6.1(i) below; and

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 (ix)
No Material Adverse Change. From the date of execution of the Merger Agreement until the Closing Date, there will be no material adverse change on Sinqia, which is understood to mean (1) any event, circumstance, effect, occurrence or factual situation, or any combination thereof, which, individually or as a whole, adversely affects or may be reasonably expected to adversely affect the business, operations, assets, properties, commercial or financial condition of Sinqia or any of its Subsidiaries, taken as a whole, in an amount equal to or greater than (a) fifteen (15%) of the consolidated net worth of Sinqia according to its annual financial statements of the fiscal year ended in 2022; or (b) fifteen (15%) of the consolidated gross revenues of Sinqia according to its annual financial statements of the fiscal year ended in 2022, whichever is lower, except to the extent that such change or adverse effect results from adverse economic or exchange effects on the whole industry in which Sinqia operates in Brazil, so long as such changes or conditions do not have an adverse impact in Sinqia or any of its Subsidiaries, as the case may be, taken as a whole, in a materially disproportionate manner relative to other similarly situated participants in the industries or markets in which they operate or (2) bankruptcy of Sinqia or any of its Subsidiaries or filing for recuperação judicial or extrajudicial of Sinqia or any of its Subsidiaries.

3.4.        Waiver of Conditions Precedent. Any waiver of a Condition Precedent shall be expressly notified to the other Party in writing.

3.5.       Satisfaction of Conditions Precedent to Closing. Upon satisfaction and/or waiver by the applicable Party of all Conditions Precedent, as the case may be, such Party shall, as soon as reasonably practicable, send a notice to the other Party confirming such satisfaction and/or waiver of the Conditions Precedent, as applicable, which notice shall be accompanied by sufficient evidence (“Closing Notice”). Upon receipt of the Closing Notice, the relevant Party shall, within ten (10) Business Days, reply to the Closing Notice indicating (a) its agreement with the Closing Notice sent by the other Party (“Confirmation Notice”); or (b) if it requires additional information to confirm the satisfaction of the Conditions Precedent, as  set forth in the Closing Notice, indicating in detail any such request for information.

3.5.1.   In the event the relevant Party fails to respond to the Closing Notice within ten (10) Business Days as provided above, then a Confirmation Notice shall be deemed to be issued on the Business Day following the lapse of such period.

3.5.2.   As it usually occurs in similar transactions, as a result of operational matters with B3 and the necessary procedures with non-resident investors who are holders of shares issued by Sinqia, the Parties estimate that the consummation of the Transaction, with the delivery of the Redemption Ratio, will take place in approximately 15 (fifteen) days from the Confirmation Notice, unless otherwise determined by B3, or on another date defined jointly by Sinqia and Evertec BR.

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3.6.       Cooperation for Closing. The Parties and Intervening Parties shall mutually cooperate for the Conditions Precedent to be satisfied within the shortest term reasonably possible, using reasonable efforts to perform the acts and take the measures necessary for that. The Parties, in an irrevocable and irreversible manner, undertake to cooperate with the practice of all necessary acts by the other Parties for the preparation of any documents related to the Transaction. Sinqia shall within 2 Business Days counted from the date of Sinqia’s GSM provide the publication of the minutes of Sinqia’s GSM.

3.6.1.   Each Party, as the case may be, shall inform the other Party as soon as possible, subject to Applicable Law, of any act, fact or omission of which it becomes aware and which may affect the satisfaction of any Condition Precedent.

3.6.2.   Sinqia shall keep Evertec BR informed in case of occurrence of any Material Adverse Change as from the date hereof

4.
Appraisal of sinqia’s shares for the Merger of Shares

4.1.       Appraisal Company: Evertec BR’s management has hired Apsis Consultoria Empresarial Ltda. (“Appraisal Company”) as a specialized company to prepare the appraisal report of the shares issued by Sinqia to be merged by Evertec BR at their market value (“Appraisal Report”), whose hiring will be submitted for ratification by the Evertec BR’s GSM that resolves on the Merger of Shares. The Appraisal Report is part of this Protocol as its Exhibit 4.1.

4.1.1.   Base Date. The base date used for purposes of the Merger of Shares is March 31, 2023 (“Base Date”).

4.1.2.   Determined Value. Under the terms of the Appraisal Report, the market value attributed to the shares issued by Sinqia to be merged into Evertec BR for purposes of the Merger of Shares is of R$ 26.50 per share (“Determined Value”).

4.1.3.   Accounting of Equity Variations. The equity variations occurred in Sinqia between the Base Date and the Closing Date will be borne by Sinqia, since a merger of shares does not result in the extinction of the company whose shares will be merged; provided that such variations will not impact the Exchange Ratio nor the Redemption Ratio, except in the cases expressly provided for in the Merger Agreement and in this Protocol.

4.2.       Representations. The Appraisal Company has declared (i) that there is no conflict or common interest, actual or potential, with the shareholders of the Companies or, also, in relation to the Merger of Shares itself; and (ii) that the shareholders or managers of the Companies have not directed, limited, hindered or practiced any acts that have or may have compromised the access, use or knowledge of information, assets, documents or working methodologies relevant to the quality of its conclusions.

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4.3.       Pro Forma Financial Statements. The pro forma financial statements on the Base Date were prepared in compliance with the provisions of article 7 of CVM Resolution 78/22 and submitted to reasonable assurance by an independent auditor registered with the Brazilian Securities Commission (“Pro Forma Financials”).

5.
Evertec BR’s Capital Increase

5.1.        In accordance with the amount determined in the Appraisal Report, the consummation of the Merger of Shares will result in an increase in the net equity of Evertec BR, which will be allocated to its corporate capital and to the capital reserve account, as the case may be. Continuously, through the Redemption of the Evertec BR New Shares, the Evertec BR New Shares will be cancelled through payment of the Redemption Ratio against the corporate capital or the capital reserve account, as the case may be. Accordingly, upon Closing of the Transaction, the bylaws of Evertec BR will be amended to reflect the aforementioned capital increase with the issuance of the New Evertec BR PN Shares, to be delivered to the shareholders of Sinqia.

6.
Corporate approvals, Right of Withdraw and Closing of the Transaction

6.1.       The consummation of the Transaction will depend on the performance of the following acts, all interdependent and with effects subject to the satisfaction (or waiver, as applicable) of the Conditions Precedent:


 (i)
Sinqia’s extraordinary general shareholders’ meeting to approve (a) this Protocol; (b) the Merger of Shares; (c) the authorization for Sinqia’s management to subscribe the Evertec BR New PN Shares on the Closing Date; (d) the waiver of Evertec BR’s admission to B3’s Novo Mercado special listing segment, pursuant to article 46, sole paragraph, of the Novo Mercado regulation; and (e) the authorization for the management to perform all acts necessary for the implementation of the resolutions taken (“Sinqia’s GSM”).


(ii)
Evertec BR’s extraordinary general shareholders’ meeting to approve (a) this Protocol; (b) the ratification of the engagement of the Appraisal Company; (c) the Appraisal Report; (d) the Merger of Shares; (e) the increase in the corporate capital of Evertec BR due to the Merger of Shares with the consequent issuance of the Evertec BR New PN Shares and amendment of its bylaws; (f) the Redemption of the Evertec BR New PN Shares and the cancellation of the Evertec BR New PN Shares upon payment of the Redemption Ratio, with the consequent amendment of its bylaws; (g) the authorization for the management of Evertec BR to adopt all measures necessary to implement the resolutions taken (“Evertec BR’s GSM”);

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6.2.       Sinqia’s management shall call Sinqia’s GSM within a period of up to five (5) Business Days from the date of signature of this Protocol. The call notice for Sinqia’s GSM must be published thirty (30) days in advance of Sinqia’s GSM, and such period may not be postponed without the prior written consent of Evertec BR, except in the case of a Governmental Order issued by a Governmental Authority. If the legal quorum required for installation of Sinqia’s GSM or for resolution on matters on the agenda is not obtained, Sinqia shall publish within two (2) Business Days from the date of Sinqia’s GSM the second call notice for Sinqia’s GSM, which must take place within eight (8) days from the said publication.

6.3.      Evertec BR’s GSM. Evertec BR’s GSM shall be held prior to the installation of Sinqia’s GSM, provided that Evertec BR’s GSM shall approve the Transaction subject to the approval of the matters by Sinqia’s GSM, as established in the Merger Agreement.

6.4.       Sinqia Right of Withdrawal. Pursuant to article 252, paragraphs 1 and 2 of the Brazilian Corporations Law, the right of withdrawal shall be ensured to shareholders who own, uninterruptedly since the date of disclosure of the first material fact on the Transaction, common shares issued by Sinqia, who do not vote in favor of the Merger of Shares, who abstain from voting or who do not attend Sinqia’s GSM, provided that they expressly state their intention to exercise the right of withdrawal within thirty (30) days from the publication of the minutes of Sinqia’s GSM referred to in Section 6.1(i).

6.4.1.   Refund Amount. The amount to be paid by virtue of the exercise of the right of withdrawal by Sinqia’s shareholders corresponds to R$ 7.39 (seven reais and thirty-nine cents) per common share issued by Sinqia, equivalent to the value of Sinqia’s net equity per share, based on the financial statements for the fiscal year ended December 31, 2022, without prejudice to the drawing up of a special balance sheet, under the terms of the applicable legislation.

6.5.        Evertec BR Right of Withdrawal. Evertec BR’s sole shareholders shall approve the Transaction, waiving any potential right of withdrawal.

6.6.        Registry of the Evertec BDR Program and Admission to Trading. Evertec Inc and Evertec BR will take all necessary measures to obtain the registration of the BDR Program with CVM and the admission of Evertec Inc’s BDRs to trading on B3.

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6.7.       Sinqia’s Share Compensation Plans. As provided for in the Merger Agreement, on July 20, 2023, a meeting of Sinqia’s Board of Directors was held, which approved, subject to the approval of the Transaction at Sinqia’s GSM, the anticipation of the vesting periods of all outstanding stock options and restricted shares subject to Sinqia’s Stock Plans, totaling one million three hundred and seventy thousand five-hundred and forty (1,370,540) options and restricted shares, so that their beneficiaries may hold shares issued by Sinqia immediately prior to the consummation of the Transaction.

6.8.       Closing of the Transaction. Unless otherwise determined by B3, the consummation of the Transaction shall occur within five (5) Business Days from the receipt of the Confirmation Notification mentioned in Section 3.5 or on another date jointly defined by the Companies (“Closing Date”).

7.
Ordinary Course of Business

7.1.        Between the date of execution of the Merger Agreement and the Closing Date, Sinqia has undertook, pursuant to Section 7.3 of the Merger Agreement, to conduct its operations in the ordinary course of business and to refrain from any acts that may materially affect the business or operations of Sinqia or its Subsidiaries, except if authorized by Evertec BR, which, on the other side, has undertook not to refuse this authorization without reason.

8.
Representations and Warranties

8.1.       Representations and Warranties by Evertec Inc and Evertec BR. Evertec Inc and Evertec BR represent and warrant that the following information is true, complete, precise, accurate and correct, on the date of execution of the Merger Agreement and will continue to be so until Closing (except where the representations and warranties themselves contain a reference to a previous date, in which case they shall be true and correct in all respects as of such date):


 (i)
Incorporation, Capacity and Authority. Evertec BR is a corporation duly organized and validly existing under the Laws of the Federative Republic of Brazil. The execution of the Merger and the Protocol were - and the consummation of the transactions contemplated by the Merger Agreement and the Protocol will have been on their respective dates - duly and regularly authorized and approved in accordance with the Applicable Law and the respective charter documents of Evertec BR. The Merger Agreement and the Protocol are valid and binding obligations on Evertec BR and Evertec Inc and are enforceable against it in accordance with their terms. All of Evertec Inc’s corporate approvals necessary for the execution of this Protocol and to comply with the obligations assumed herein have been obtained and there is no additional corporate approval required for Evertec Inc to consummate the Transaction that is not expressly mentioned in this Protocol.

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 (ii)
No Conflicts. The performance of the acts set forth in this Protocol and in the other documents entered into in the context of the Transaction by Evertec BR and Evertec Inc does not (a) materially violate any Applicable Law or Governmental Order with jurisdiction over Evertec BR, Evertec Inc or its Subsidiaries; and (b) violate any provision of Evertec BR’s bylaws or Evertec Inc’s charter documents. There is no legal action, suit or investigation known to Evertec BR or Evertec Inc, or proceeding pending or imminent against Evertec BR or Evertec Inc that, if adjudicated unfavorably, would impair Evertec BR or Evertec Inc’s ability to perform its obligations under the Merger Agreement and the Protocol and to consummate the Transaction.


(iii)
Governmental Authorization. The execution of the Merger Agreement and the Protocol and the performance by Evertec BR or Evertec Inc of the acts contemplated by the Merger Agreement and the Protocol are not dependent on any action, approval, consent or declaration of any Governmental Authority having jurisdiction over Evertec BR, assuming that the statements made by Sinqia in Sections 8.2(iv), 8.2(v), 8.2(xiv) below and by the Key Shareholders in Section 6.2(iv) of the Merger Agreement are correct.


(iv)
Exemption of SEC Registration. Assuming that the statement made by Sinqia in Section 8.2(xiv) is correct in all respects, no registration of the shares of Evertec Inc., including in the form of a BDR, under the U.S. Securities Act of 1933, as amended (“U.S. Securities Act”) is required for the offer, issuance and delivery of the BDRs of Evertec Inc. to Sinqia’s shareholders in connection with the transactions contemplated by this Protocol.


(v)
Absence of Revenues for Mandatory Notification with CADE. Evertec BR’s economic group, as defined in Brazilian Administrative Council for Economic Defense (CADE) Resolution No. 33, dated April 14, 2022, did not accrue annual revenues equal to or greater than seven hundred and fifty million Reais (R$ 750,000,000.00) in Brazil in the fiscal year ended on December 31, 2022.


(vi)
Bribery and Anti-Corruption. Evertec BR or Evertec Inc and its Subsidiaries have not carried out, offered, promised, nor given, directly or indirectly, nor allowed, within the terms of their duties, responsibilities and activities, that any director, employee, representative, consultant or other individual or legal entity, as well as any investment fund, entity or organization, national or foreign acting on their behalf to effect, offer, promise or give any gift, entertainment, payment, loan or other illegal contribution to any Governmental Authority or any officials, agents or employees of a Governmental Authority, in order to benefit Evertec BR, Evertec Inc or its Subsidiaries, and/or any of their Related Parties, or any Persons in any way, with the intention of: (a) having influence over the applicable Governmental Authority, servant, agent or employee to perform or perform any act or take any decision regarding his position and/or function; or (b) induce any Governmental Authority or employee, servant or agent thereof to perform or cease to perform any act in violation of the conduct recommended or required by applicable law with respect to the Governmental Authority, servant, agent or employee thereof; or (c) induce a Governmental Authority, servant, agent or employee thereof to use its influence to obtain any advantage or favorable treatment for the purpose of assisting Evertec BR, Evertec Inc or its Subsidiaries, or any of its Related Parties; or (d) perform any act in violation of Anti-Corruption Laws.

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 (vii)
Financial Capacity. Evertec BR will have, until the Closing Date, sufficient resources for the consummation of the Transaction and the fulfillment of all obligations assumed by it in the Merger Agreement, in this Protocol and in the other documents of the Transaction, including, but not limited to, the payment of the Redemption.

8.1.1.  No Other Representations or Warranties. Except for the representations and warranties contained in this Protocol and the Merger Agreement, Evertec BR or Evertec Inc do not provide Sinqia with any other representations or warranties, express or implied.

8.2.       Sinqia’s Representations and Warranties. Sinqia represents and warrants that the following information is true, complete, accurate, precise and correct, as of the date of execution of the Merger Agreement, and will continue to be so until the Closing Date (except where the representations and warranties contain a reference to an earlier date, in which case they will be true and correct in all respects as of that date):


 (i)
Incorporation, Capacity and Authority. Sinqia is a Brazilian corporation, duly organized and validly existing under the Laws of the Federative Republic of Brazil. The execution of the Merger Agreement and the Protocol were - and, as applicable, the consummation of the events provided for in the Merger Agreement and in the Protocol shall have taken place on the respective applicable dates - duly and regularly authorized and approved under Applicable Law and the respective organizational documents of Sinqia. The Merger Agreement and this Protocol constitute a valid and binding obligation on Sinqia and are enforceable against Sinqia in accordance with their terms.

15

 (ii)
No Conflicts. The performance of the acts provided for in the Merger Agreement, the Protocol and the other documents entered into in the context of the Transaction by Sinqia will not, (a) except for the contracts referred to in Exhibit 6.1(ii) of the Merger Agreement, result in conflicts or a breach and will not constitute a material default of any contract that has generated gross invoiced revenue equal to or greater than R$ 10,000,000.00 (ten million reais) considered individually, in the last twelve (12) months, counted from July 2022 to June 2023, or create a right, or give cause for allegation of termination or amendment, or require modification of financial obligations, involving an annual amount equal to or greater than R$ 10,000,000.00 (ten million reais) considered individually, in the last 12 (twelve) months counted from July 2022 to June 2023, or will give rise to early maturity of financial obligations, or cancellation or loss of benefit or the constitution of any liens (or obligation to constitute liens) on property, assets or rights of Sinqia or its Subsidiaries; (b) conflict with or result in the breach of any obligation under a Governmental Order or authorization, license, permit or consent of a Governmental Authority to which Sinqia or any of its Subsidiaries is subject or a party; nor (c) violate any provisions of Sinqia’s by-laws or charter documents. As of the date of execution of the Merger Agreement, there is no pending action, legal proceeding or investigation against Sinqia or its respective Subsidiaries that could legally hinder the performance of any of the transactions under this Protocol.


(iii)
Capital Stock. On the of execution of the Merger Agreement, the share capital of Sinqia was represented exclusively by eighty-seven million nine hundred and forty-one thousand nine hundred and seventy-two (87,941,972) book-entry common shares, registered and with no par value, including three million two hundred and fifty-four thousand eight hundred and seventy-six (3,254,876) shares held in treasury, all of which are validly issued and fully subscribed and paid in. Except for the obligations arising from Sinqia’s Stock Plans, (a) there are not, on the date hereof, and there will not be on the Closing Date, any put or call options, rights of first refusal, rights of conversion, repurchase or redemption rights or agreements of any nature to the benefit of any Person, to acquire, sell, subscribe, convert, exchange for, repurchase, redeem or otherwise transfer shares issued by Sinqia, that has been granted or issued by Sinqia; and (b) there are no contractual obligations to approve repurchase, redemption or any other form of acquisition of any shares issued by Sinqia or its Subsidiaries.


(iv)
Governmental Authorization. The execution of the Merger Agreement and the Protocol and the performance of the acts contemplated in these documents by Sinqia are not dependent on any action, approval, consent or declaration of any Governmental Authority, assuming that the statements made by Evertec BR and Evertec Inc in Section 8.1(v) are true.


(v)
Absence of Revenues for Mandatory Notification with CADE. Sinqia’s economic group, as defined in Brazilian Administrative Council for Economic Defense (CADE) Resolution No. 33, dated April 14, 2022, did not accrue annual revenues equal to or greater than seven hundred and fifty million Reais (R$ 750,000,000.00) in Brazil in the fiscal year ended on December 31, 2022.

16

 (vi)
Sinqia’s Financial Statements. Sinqia’s audited financial statements as of December 31, 2022, disclosed on CVM’s website, as well as any Quarterly Information - ITR or financial statement referring to the period subsequent to December 31, 2022, (jointly, “Sinqia’s Financial Statements”) are or shall be complete and true in all their material aspects, were or shall be prepared in accordance with the Brazilian GAAP, on a consistent basis, throughout all the relevant periods, adequately reflecting, in accordance with the Brazilian GAAP, Sinqia’s individual and consolidated financial position, results of operations and cash flows. Sinqia did not have, in the periods covered by Sinqia’s Financial Statements, any liabilities or obligations of any nature, involving material amounts, in addition to the liabilities or obligations that were disclosed, reflected or referred to in Sinqia’s Financial Statements in accordance with the Brazilian GAAP or in its reference form, disclosed on CVM’s website (“Reference Form”). Since December 31, 2022, Sinqia has been conducting its activities in the normal course of business and in a manner consistent with previously adopted practices.


(vii)
Reference Form. Sinqia’s Reference Form, as filed with CVM, is complete in all material aspects and does not contain any untrue information or statement about a relevant event or omission of information or relevant event that may cause the information and statements contained in Sinqia’s Reference Form not to be true, complete, consistent and/or misleading. On the date of execution of the Merger Agreement, except for the disclosure of the material fact notices related to the Transaction, there were no material fact pending disclosure to the market by Sinqia.


(viii)
Operational Activities. As of the date of execution of the Merger Agreement, there was no event or circumstance that could cause a Material Adverse Change on the operations of Sinqia or its Subsidiaries (including due to the execution of the Merger Agreement). Except as set forth in Sinqia’s Reference Form, Sinqia and its Subsidiaries have, as at the date of execution of the Merger Agreement and up to the Closing Date, all licenses, permits, permissions and authorizations for opening and operation that are materially necessary to conduct their businesses. There are no material challenges or disputes of any kind regarding the license, permit, permission or authorization for the operation of their establishments.

17

 (ix)
Intellectual Property. Sinqia’s and its Subsidiaries’ material Intellectual Property are duly registered and/or protected under Applicable Law and represent all Intellectual Property assets necessary to enable Sinqia and its Subsidiaries to conduct their businesses. Except as referred to in Exhibit 6.1(ix) of the Merger Agreement, Sinqia and its Subsidiaries have not received any notice of violation or conflict with third-party rights in connection with any Intellectual Property. The conduct of business by Sinqia and its Subsidiaries does not infringe, misappropriate, unduly use or violate any third-party Intellectual Property rights. All Sinqia’s and its Subsidiaries’ Software are solely owned by Sinqia or its Subsidiaries, as the case may be. Any employee or service provider participating in the development of Software has assigned its copyrights and all software development rights to Sinqia or its Subsidiaries, as the case may be, by operation of Applicable Law or by specific and licit agreements. No developer or any other third parties have any reason to claim ownership of Sinqia’s or its Subsidiaries’ Software or any rights related thereto.


(x)
Contingencies, Litigation and Liabilities. There are no obligations, liabilities, contingencies, direct damages, losses, pecuniary or convertible to pecuniary liability (including monetary adjustment, reasonable attorneys’ fees and court costs), claims, actions, investigations (that are known by Sinqia), lawsuits, final and non-appealable judgments (including judicial, administrative or arbitration judgements), fines, interest, penalties, costs, expenses and imposition of Liens (including the attachment of assets, property, rights or credits, and/or partial or total, temporary or permanent limitation, to the free use or disposition of any amounts deposited in bank accounts), of any nature, including but not limited to civil, labor, social security, tax, judicial, arbitration or administrative (before or by any person, public entity or arbitrator), involving Sinqia and its Subsidiaries that, according to Sinqia’s management best knowledge, is likely to result in a loss, individually or in the aggregate, higher than five million Reais (R$ 5,000,000.00) and which have not been disclosed in Sinqia’s Reference Form and/or in Sinqia’s Financial Statements.


(xi)
Agreements with Related Parties. All transactions carried out by Sinqia and its Subsidiaries with Related Parties complied with the Applicable Law, were carried out under market conditions and were duly accounted for. Any and all Taxes levied on operations carried out by Sinqia and/or its Subsidiaries with Related Parties were duly accounted for and paid. There are no transactions carried out by Sinqia and/or its Subsidiaries with Related Parties that have not been disclosed in Sinqia’s Reference Form as required in Applicable Law.

18

 (xii)
Bribery and Anti-Corruption. Sinqia and its Subsidiaries have not carried out, offered, promised, nor given, directly or indirectly, nor allowed, within the terms of their duties, responsibilities and activities, that any director, employee, representative, consultant or other individual or legal entity, as well as any investment fund, entity or organization, national or foreign acting on their behalf to effect, offer, promise or give any gift, entertainment, payment, loan or other illegal contribution to any Governmental Authority or any officials, agents or employees of a Governmental Authority, in order to benefit Sinqia or its Subsidiaries, and/or any of their Related Parties, or any Persons in any way, with the intention of: (a) having influence over the applicable Governmental Authority, servant, agent or employee to perform or abstain to perform any act or take any decision regarding his position and/or function; or (b) induce any Governmental Authority or employee, servant or agent thereof to perform or cease to perform any act in violation of the conduct recommended or required by applicable law with respect to the Governmental Authority, servant, agent or employee thereof; or (c) induce a Governmental Authority, servant, agent or employee thereof to use its influence to obtain any advantage or favorable treatment for the purpose of assisting Sinqia or its Subsidiaries, or any of its Related Parties; or (d) perform any act in violation of Anti-Corruption Laws.


(xiii)
Sanctions. Sinqia and its Subsidiaries are not (a) listed on any economic or financial sanctions-related restricted or prohibited list maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, or by the United Nations Security Council, Brazil, the European Union or any European Union member state or Her Majesty’s Treasury of the United Kingdom (“Blocked Person”); (b) operating, organized or resident in a country, region or territory which is itself the subject of comprehensive economic or financial sanctions; (c) an entity in which one or more Blocked Persons have in the aggregate, directly or indirectly, a fifty percent (50%) or greater equity interest; (d) an entity Controlled by a Blocked Person; or (e) been notified by any Governmental Authority that it may become a Blocked Person in the future.


(xiv)
US Shareholding Base Test Confirmation. As of July 19, 2023, U.S. holders (as defined in Rule 800(h) under the U.S. Securities Act of 1933, as amended (the “Securities Act”)) hold no more than ten percent (10%) of common shares issued by Sinqia that are the subject of the Transaction, in each case as calculated and determined in accordance with Rules 800 and 802 under the Securities Act.

8.2.1.   No Other Representation or Warranty. Except for the representations and warranties contained in this Protocol, Sinqia does not provide Evertec BR with any other express or implied representations or warranties.

9.
Applicable Law and Dispute Resolution

9.1.        Applicable Law. This Protocol shall be governed by and construed in accordance with the Laws of the Federative Republic of Brazil.

9.2.       Arbitration. Any dispute arising out of or in connection with this Protocol that is not amicably settled shall be submitted to arbitration, pursuant to Brazilian Law No. 9,307/96, to be administered by the Arbitration Chamber instituted by B3 (“Arbitration Chamber”) in accordance with its arbitration rules in force at the time of initiation of the arbitration (“Arbitration Rules”).

19
9.3.       Constitution of the Arbitral Tribunal. The arbitral tribunal shall be composed of three (3) arbitrators.  The claimant(s) shall appoint one (1) co-arbitrator and the respondent(s) shall appoint one (1) co-arbitrator, as per the Arbitration Rules. The two (2) co-arbitrators, shall jointly appoint the third arbitrator, who will act as president of the arbitral tribunal. If any of the parties to the arbitration fail to appoint the respective co-arbitrator, or if the two (2) co-arbitrators fail to agree on the appointment of the president of the arbitral tribunal within the time limits established by the Arbitration Chamber, the Arbitration Chamber shall make the missing appointments, as per the Arbitration Rules. Any provision in the Arbitration Rules referring to limitations to the appointment of arbitrators among those included in any arbitrators’ list shall not be applied.

9.4.        Multiparty Arbitration. In case of an arbitration involving three (3) or more parties in which (i) these parties are not set in just two groups of claimants or respondents; or (ii) the parties set in the same group of claimants or respondents disagree in relation to the appointment of the respective co-arbitrator, all arbitrators shall be appointed by the Arbitration Chamber, as per the Arbitration Rules, unless all the parties to the arbitration agree otherwise.

9.5.       Seat, Applicable Law and Language of the Arbitration. The seat of arbitration shall be the City of São Paulo, State of São Paulo, Brazil. The law applicable to this Agreement, the Transaction and the arbitration shall be the Brazilian law and the arbitrators shall not decide the dispute ex aequo et bono or as amiable compositeur. The language of the arbitral proceedings shall be English, provided that evidence may be produced in Portuguese without the need for translation.

9.6.      Urgent Measures. Prior to the constitution of the arbitral tribunal, any request for urgent measure may be addressed to the courts or to the emergency arbitrator, as per the Arbitration Rules. After the constitution of the arbitral tribunal, any request for urgent measures shall be addressed directly to the arbitral tribunal, which may grant, uphold, modify or revoke any measure previously requested to the courts or to the emergency arbitrator, as the case may be.

9.7.     Venue for Judicial Measures. Without prejudice to this arbitration clause, the Courts of São Paulo, State of São Paulo, Brazil shall have exclusive jurisdiction for any judicial request related to (i) the commencement of the arbitration, as per Article 7 of Brazilian Law No. 9,307/96; (ii) provisional or urgent measures, as per art. 22-A of Brazilian Law No. 9,307/96; (iii) the enforcement of extrajudicial enforcement title, without prejudice to the creditor’s prerogative pursuant to art. 781 of Brazilian Law No. 13,105/2015; (iv) the enforcement of arbitral awards, without prejudice to the creditor’s prerogative pursuant to art. 516, sole paragraph, of Brazilian Law No. 13,105/2015; (v) the annulment of or request for a supplemental arbitral award, as per Articles 32 and 33, § 4, of Brazilian Law No. 9,307/96; and (vi) any other disputes that are not subject to arbitration pursuant to Brazilian law. The filing of any judicial request admitted by or compatible with Brazilian Law No. 9.307/96 shall not be construed as a waiver to arbitration.

20
9.8.       Confidentiality. The arbitral proceedings (including its existence, the parties’ allegations and statements, third-party statements, evidence and documents presented, as well as any decisions rendered by the arbitral tribunal) shall be confidential and shall only be disclosed: (i) to the arbitral tribunal, the parties to the arbitration, its representatives and any person necessary to the proper conduction and the result of the arbitration; (ii) if disclosure of a specific information is required for compliance with duties imposed by Applicable Law; (iii) if the relevant information has been made public by any mean that does not represent a breach of this provision; or (iv) if disclosure of such information is necessary for purposes of any judicial request admitted by or compatible with Brazilian Law No. 9,307/96.

9.9.       Costs and Expenses.  During the arbitration, the costs of the proceedings, including the administrative costs of the Arbitration Chamber, arbitrator’s fees and independent expert’s fees, when applicable, shall be borne by the parties to the arbitration as per the Arbitration Rules. The arbitral award shall order the losing party to reimburse the winning party, according to the outcome of their respective claims and taking into account other circumstances that the arbitral tribunal may deem relevant, for the costs of the arbitration as well as other reasonable expenses incurred by the parties to the arbitration, including contractual attorney’s fees, expert’s fees and other expenses that may be necessary or useful for the arbitral proceedings. The arbitral tribunal shall not order payment of legal attorney’s fees (honorários de sucumbência).

9.10.     Consolidation. The Arbitration Chamber (if before the execution of the terms of reference) or the arbitral tribunal (if after the execution of the terms of reference) may, upon request of one of the parties to simultaneous arbitral proceedings, consolidate simultaneous arbitral proceedings involving this agreement or related instruments if: (i) the arbitration agreements are compatible; (ii) the existing or pending arbitrations relate to substantially similar questions of law or fact; and (iii) there is no unjustifiable harm caused to one of the parties to the consolidated arbitrations. In this case, the jurisdiction to consolidate shall be incumbent upon the first arbitral tribunal constituted and its decision shall be final and binding upon all parties to the consolidated arbitrations.

9.11.       Prevalence. In case of any dispute arising out of or in connection with the Sinqia’s bylaws, this arbitration agreement shall be applicable and shall prevail over the provisions of Section VIII, Article 33 of the bylaws in case of any discrepancy or incompatibility.

9.12.     Commitment Clause. The Parties hereby declare that they are bound by this arbitration clause and undertake to participate in any arbitration that may be commenced, as well as to comply with the arbitral tribunal’s orders, decisions and awards. The Parties declare their consent for any eventual disputes also related to the Merger Agreement and the Voting Commitment shall be decided in the same arbitration procedure based on this arbitration clause.

21
10.
Miscellaneous

10.1.     The applicable documentation will be available to shareholders at the respective head offices of the Companies as of the date of the call of the general meetings, as well as on the websites of the Brazilian Securities Commission (www.cvm.gov.br), B3 (www.b3.com.br) and Sinqia’s Investor Relations website (ri.sinqia.com.br).

10.2.      Amendment. This Protocol may only be amended by means of a written instrument signed by the Companies.

10.3.      Expenses. Except as otherwise expressly provided in this Protocol, each Party shall bear all costs and expenses it incurs.

10.4.     Termination. This Protocol shall terminate as of right in the event of the termination, rescission or expiration of the Merger Agreement in any of the events provided for therein and may not be terminated or rescinded in any other event.

10.5.     Irrevocability. Subject to the provisions of the Merger Agreement, this Protocol is irrevocable and irreversible, and the obligations assumed herein by the Companies shall also bind their successors in any capacity.

10.6.      Assignment. The assignment of any of the rights and obligations agreed in this Protocol is prohibited without the prior and express written consent of the Parties.

10.7.     Waiver. The failure or neglect by either Party to exercise the rights and privileges provided for in this Protocol shall not constitute a waiver or novation thereof, which shall continue to be exercisable at any time in accordance with Applicable Law. Any waiver shall only be effective if made in writing.

10.8.    Severability. If any provision of this Protocol is held to be void or ineffective under Applicable Law, the validity or effectiveness of the remaining provisions shall not be affected, and the Parties shall, for those provisions held to be void or ineffective, negotiate in good faith alternative arrangements in order to maintain the substance of this Protocol.

10.9.    Execution Instrument. This Protocol, signed together with two (2) witnesses, shall serve as an extrajudicial execution instrument in the form of civil procedural law (art. 784, III, of the Code of Civil Procedure), for all legal purposes.

10.10.   Specific Performance. The Parties undertake to fulfill, formalize and perform their obligations at all times in strict compliance with the terms and conditions set forth in this Protocol. The Parties hereby acknowledge and agree that all obligations assumed or that may be imputed under the terms of this Protocol are subject to specific performance under the terms of Articles 497 et seq., 537, 806 et seq. and 815 et seq. of the Code of Civil Procedure, without prejudice to the cumulative recovery of losses and damages as a result of non-compliance with the obligations agreed in this Protocol. The Parties expressly admit and bind themselves to the specific fulfillment of their obligations and to accept court orders, arbitration or any other similar acts.

22
10.11.    The Companies recognize the veracity, authenticity, integrity, validity and effectiveness of this Protocol and its respective terms in electronic format or signed by the Parties by means of electronic certificates, pursuant to article 10, paragraph 2, of Provisional Measure No. 2,220-2, of August 24, 2001, as well as the position of the respective electronic signatures by means of an electronic signature platform used as a means of proving authorship and integrity of documents in electronic form, producing all its effects in relation to the signatories. The Parties recognize that the electronic signature of this Protocol shall not prevent or prejudice its enforceability and shall be considered, for all legal purposes, an extrajudicial execution instrument. This Protocol shall take effect for all Parties from the date indicated therein, even if one or more Parties sign it electronically at a later date.

IN WITNESS WHEREOF, the Parties have caused this Protocol to be duly executed electronically in the presence of the two (2) witnesses below.

São Paulo, August 14, 2023.

23
(Signature page of the Protocol and Justification of the Merger of Shares of Sinqia S.A. by Evertec Brasil Informática S.A. executed on August 14, 2023


  
SINQIA S.A.
By: Bernardo Francisco Pereira Gomes e
 Thiago Almeida Ribeiro da Rocha


   
EVERTEC BRASIL INFORMÁTICA S.A.
By: Pilar Maria Bazterrica

     
EVERTEC, INC.
By: Alberto López Gaffney
 
Witnesses

     
Name: Roberta Sabino
  
Name: Jorge de Jesus Medina

24
Annex II to Exhibit 99.2 – Valuation Report for Purposes of the Merger of Shares


APPRAISAL REPORT: AP-00685/23-01
BASE DATE: August 01, 2023
 
APPLICANT: SINQIA S.A., hereinafter SINQIA.
 
A listed joint stock company with head offices at Rua Bela Cintra, 755, 7th floor, Consolação, City and State of São Paulo, corporate taxpayer’s registration (CNPJ) No. 4.065.791/0001-99.
 
SUBJECT MATTER: SINQIA STOCK ISSUE.
 
BUYER: EVERTEC BRASIL INFORMÁTICA S.A., hereinafter EVERTEC.
 
A closely held joint stock company with head offices at Alameda Lorena, 638, 3rd floor, Suites 31 and 32, Jardim Paulista, City and State of São Paulo, corporate taxpayer’s registration (CNPJ) No. 06.187.556/0001-15.
 
PURPOSE:
 
To determine the market value of SINQIA stock that EVERTEC plans to incorporate using a methodology based on the average weighted prices by volume and market multiples to comply with article 252 in Law 6404/1976.
 
EXECUTIVE SUMMARY
 
APSIS CONSULTORIA EMPRESARIAL LTDA., hereinafter APSIS, has been appointed to calculate the market value of SINQIA stock that EVERTEC plans to incorporate and thereby comply with article 252 in Law 6404/1976.
 
The Report’s uses the average of the market multiples and average weighted stock price methodologies.
 
The average weighted stock price methodology is based on the daily closing price weighted by each day’s trading volume. Based on the analyses described in Chapter 6, we obtained the weighted average stock price from a 9 business-day interval that corresponds to the period after the market announcement of SINQIA’S incorporation, i.e., from July 20, 2023 to the Report’s based date of August 1, 2023.
 
The market multiples methodology considers the average of a particular multiple for comparable companies1 (operating in the same sector) and transactions involving similar firms. We used SINQIA’S financial figures for the 12 months ending in the first quarter of 2023 (1Q23); the information on comparable companies and similar deals was collected from the S&P Capital IQ platform.
 
FINAL PRICE
 
The following table presents a summary of SINQIA’S enterprise value based on the average of 4 methodologies, including the 9-day VWAP2 subsequent to the transaction’s announcement and the EV/EBITDA and EV/ROL market multiples obtained on the closest date to the Report’s base date:
 
1
The comparable companies are presented on page 20 of the Report.
2
Volume weighted average price.

METHODOLOGY
PERIOD
BRL/SHARE
VWAP1 in the 9 business days prior to the deal announcement
7/20/2023 to 08/01/2023
26.45
Market Multiple Value (EV/EBITDA)
03/31/2023
27.89
Market Multiple Value (EV/ROL)
03/31/2023
24.96
Transaction Multiple Value (EV/EBITDA)
Last five years from the Base Date
26.72
SINQIA’S ENTERPRISE VALUE PER SHARE
26.50
NUMBER OF SHARES2
85,309,792
SINQIA’S ENTERPRISE VALUE (BRL thousands)
2,261,095

1
Volume weighted average price.
2
On the report’s base date SINQIA had 85,309,792 in circulation excluding treasury shares and including open share call options.

PRICE USING THE SINQIA MARKET PRICE METHODOLOGY
 
VALUE PARAMETER
MARKET VALUE (BRL thousands)
TOTAL NUMBER OF SHARES1
BRL/SHARE
9 day VWAP
2,256,449.55
85,309,792
26.45
1 On the report’s base date SINQIA had 85,309,792 in circulation excluding treasury shares and including open share call options.

PRICE USING THE EV/EBITDA MARKET MULTIPLES METHODOLOGY
 
SINQIA EBITDA (BRL
thousands)
MARKET MULTIPLES
OPERATIONAL VALUE
NET DEBT3
VALOR ECONÔMICO
BRL/SHARE4
165,132
15.94 x
2,632,496
252,890
2,379,606
27.89
SINQIA’S EBITDA values are for the 12 months ending in the first quarter of 2023 and were taken from the Investor Relations website.
2  Refers to the company debt in march 2023 according to the quarterly report also taken from the Investor Relations website
3   On the report’s base date the company had 85,309,792 in circulation excluding treasury shares and including open share call options.

PRICE USING THE EV/ROL MARKET MULTIPLES METHODOLOGY
 
SINQIA ROL (BRL thousands)
MARKET MULTIPLES
OPERATIONAL VALUE
NET DEBT2
VALOR ECONÔMICO
BRL/SHARE3
641,857
3.71 x
2,381,955
252,890
2,129,065
24.96
1 SINQIA’S Net Operating Revenue (ROL) values are for the 12 months ending in the first quarter of 2023 and were taken from the Investor Relations website.

3
Refers to the company debt in march 2023 according to the quarterly report also taken from the Investor Relations website
4
On the report’s base date the company had 85,309,792 in circulation excluding treasury shares and including open share call options.

PRICE USING THE MARKET TRANSACTIONS MULTIPLES METHODOLOGY
 
SINQIA ROL (BRL thousands)
TRANSACTION
MULTIPLES
OPERATIONAL VALUE
NET DEBT*
VALOR ECONÔMICO
BRL/SHARE3
641,857
3.95 x
2,532,151
252,890
2,279,261
26.72
1
SINQIA’S Net Operating Revenue (ROL) values are for the 12 months ending in the first quarter of 2023 and were taken from the Investor Relations website.
2
Refers to the company debt in march 2023 according to the quarterly report also taken from the Investor Relations website
3
On the report’s base date the company had 85,309,792 in circulation excluding treasury shares and including open share call options.

CONCLUSION
 
Based on our results, we have concluded SINQIA’S market value is BRL 2,266,610,000.00.
 
METHODOLOGY
PERIOD
BRL/SHARE
VWAP1 in the 9 business days prior to the deal announcement
7/20/2023 to 08/01/2023
26.45
Market Multiple Value (EV/EBITDA)
03/31/2023
27.89
Market Multiple Value (EV/ROL)
03/31/2023
24.96
Transaction Multiple Value (EV/EBITDA)
Last five years from the Base Date
26.72
SINQIA’S ENTERPRISE VALUE PER SHARE
26.50
NUMBER OF SHARES2
85,309,792
SINQIA’S ENTERPRISE VALUE (BRL thousands)
2,261,095

1
Volume weighted average price.

SUMMARY
 
PURPOSE:
1
EXECUTIVE SUMMARY
2
FINAL PRICE
2
PRICE USING THE EV/ROL MARKET MULTIPLES METHODOLOGY
4
CONCLUSION
5
SUMMARY
6
1. INTRODUCTION
 8
This report was produced by:
8
2. PRINCIPLES AND DISCLAIMERS
 9
3. DISCLAIMER
 9
5. SECTOR ANALYSIS
 14
Global IT Market in 2022
15
Information Technology Investment by Region in 2022
16
6. APPRAISAL METHODOLOGY
 17
MARKET APPROACH – STOCK EXCHANGE PRICES
17
SINQIA STOCK PRICES
17
MARKET APPROACH – MULTIPLES OF COMPARABLE COMPANIES
19
The market multiples methodology defines an average parameter that can be used to value companies in the same industry. This is based on the assumption companies in the same business are subject to the same risks and influences and have similar expected returns. This is how assets with similar characteristics can be priced.
19
MARKET APPROACH – TRANSACTION MULTIPLES
20
7. ESTIMATED MARKET VALUE
22
8. CONCLUSION
23
9. LIST OF ATTACHMENTS
24

1.  INTRODUCTION
 
APSIS CONSULTORIA E AVALIAÇÕES LTDA., hereinafter APSIS, with head offices at Rua do Passeio, 62, 6th floor, Centro, City and State of Rio de Janeiro, corporate taxpayer’s enrolment (CNPJ) No. 08.681.365/0001-30, was appointed to determine the market value of SINQIA stock that EVERTEC plans to incorporate and thereby comply with article 252 of Law No 6,404/1976.
 
Our work used public data and information for closing prices and trading volumes. The estimates used in this process are based on:
 
■
The report on the daily closing prices and trading volumes for SINQIA stock obtained from the S&P Capital IQ platform:
■
SINQIA’S Financial Statements, available from the company’s Investor Relations website.
 
This report was produced by:
 
■
ALLAN LOUZADA PARENTE - Projects
■
LEONARDO REBELLO DE MENDOZA – Projects
■
MIGUEL CÔRTES CARNEIRO MONTEIRO – Director / Economist and Accountant (CORECON/RJ 26898 and CRC/SP-344323/O-6)
■
THIAGO RICHTER FONSECA - Projects
 
2.    PRINCIPLES AND DISCLAIMERS
 
The Report, a detailed, calculated and paid project, complies fully with the following fundamentals, which are important and should be read carefully.
 
■
The consultants have no direct or indirect interest in the companies involved or the transaction and there are no other material circumstances that might represent a conflict of interest.
■
APSIS’ fees are in no way conditional on the Report’s conclusions.
■
To the best of the consultants’ knowledge, the Report’s analyses, opinions and conclusions are based on accurate and correct data, verifications, surveys and research.

■
Information received from third parties is presumed to be accurate and all sources are included and cited in the Report.
■
Forecasting is based on the assumption there are no judicial or extrajudicial burdens or onus on the companies in question and that have not been listed in this Report.
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The Report provides all the limitations imposed by the methodologies that were adopted, if any, and which may affect our analyses, opinions and conclusions.
■
The Report was produced by APSIS and the analyses and corresponding conclusions were prepared by the consultants themselves.
■
APSIS takes full liability, including any implicit liability, for the Appraisal and for their work, which is subject to rules set out in various laws, codes and regulations.
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The Report compliance with the criteria and recommendations issued by the Brazilian Association of Technical Standards (ABNT), the Uniform Standards of Professional Appraisal Practice (USPAP) and the International Valuation Standards (IVS).
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Neither the controlling shareholders no management of the companies involved have directed, limited, hampered or otherwise taken steps that have previously or could in the future compromise the availability of any information, assets, documents or methodologies that is relevant in reaching the Report’s conclusions.
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The internal process involved in producing and improving this document followed the steps described below: (I) analysis of documentation provided by management; (II) analysis of the market in which the company and comparable firms operate; (III) submission of the report for an independent in-house review; (IV) adoption of any suggested changes or improvements; (V) production of the final report.
 
3.   DISCLAIMER
 
■
APSIS used audited and unaudited historical data and information submitted in writing by the company’s management and other data and information obtained from the aforementioned sources to produce this Report. APSIS has therefore assumed the information obtained for this Report is accurate and correct and takes no liability for its veracity.
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The scope of work did not include auditing the financial statements or reviewing any of the work carried out by the auditors. Consequently, APSIS is not expressing an opinion on the Applicant’s financial statements.
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We take no liability for any losses the Applicant or its subsidiaries, shareholders, officers, creditors or other parties may suffer from using the0 data and information the company provided and which has been included in this Report.
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This Report was produced solely for the Applicant and its shareholders for internal use and should not be used for any other purpose (involving tax, corporate or other issues). This Report should not be published, circulated, reproduced, disclosed or updated for any purpose other than as a source of internal information without express, written approval from APSIS’ legal representative.
■
The analyses and conclusions contained herein are based on a number of assumptions themselves based on information provided prior to the date of this Report. This means the company’s future operating results may differ from any of the estimates or forecasts included in this Report, particularly if information not available at the time the Report was produced subsequently comes to light.
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The appraisal does not reflect any events occurring after the date of this Report, or any related impacts.
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APSIS takes no liability for any indirect or direct losses or business interruption that could result from misuse of this Report.
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We draw your attention to the fact that the Report and its attachments should be read in full in order to properly understand its conclusions; consequently, no conclusions should be drawn from a partial reading of the Report, as they may be incorrect or misleading.

4. DESCRIPTION OF SINQIA
SINQIA is a company that provides financial technology and software solutions to financial institutions in Brazil. Founded in 1996, it is based in São Paulo and, over the years, it has achieved market prominence and built a reputation as a go-to supplier of specialized systems to banks, credit cooperatives, brokers, fund managers, insurers and other financial market agents.
The company offers innovative and intelligent solutions that help customers drive growth and efficiency. Its mission is to provide reliable, secure and high performance systems that allow its customers to offer more flexible and efficient financial services that can adapt to market demands.

SINQIA offers a wide range of highly specialized products and solutions in various areas that are vital to the financial sector, including:
 
1.
Banks − The Full Banking platform provides end to end solutions for major bank and fintech processing requirements. It includes applications that range from front-end customer services channels to backend operational, calculation, accounting and accounting, tax and regulatory control operations, as well as settlement (Pix, SPB etc.).
2.
Funds − The company provides a cloud-based web interface provided as a software as a service (SaaS) or on premise solution. It serves various types of assets and portfolios (portfolios, clubs and funds). It is flexible and can be adapted to fund manager, distributor, controlling shareholder, custodian and management business requirements.
3.
Pensions − Focusing on the user experience, the platform can be used to manage and control investment portfolios and automate operational processes and customer service for pension, welfare, financial and controller areas and also provides a fully fledged health autosuggestion solution.
4.
Consortia − The suites for consortia include solutions for managing groups, from disposals to winding down procedures. They include accounting control and accounts payable, regulatory and digital library modules that can be used to create a database with version controls, document recovery and search features.
5.
Services − This unit installs, deploys, integrates and personalizes Sinqia’s systems. Date office services that allow customers to outsource management of systems and critical processes and provides consultancy on setting up, reorganizing, planning and process reviews for financial institutions.
6.
Digital − Created in 2021, this unit offers software as a service to manage and authorize transactions based on electronic signatures that have legal validity, thereby simplifying registration and analysis of antifraud documents, debt negotiations and regulatory compliance management.
 
Since SINQIA’S 2013 IPO, the company has shown continued growth driven by acquisitions and integrations that have increased its revenues. SINQIA has a wide-ranging product portfolio and robust customer base; this has created a reliable path toward ongoing expansion and sustainable profitability.
 
Based on its most recent financial statements (March 2023), SINQIA has the following shareholder structure:
 
SHAREHOLDERS
NUMBER OF SHARES*
PERCENTAGE
INTEREST %
HIX Investimentos Ltda.
9,588,025
10.90%
Antônio Luciano de Camargo
6,483,752
7.37%
Bernardo Francisco Pereira
5,689,450
6.47%
SFA Investimentos Ltda.
5,404,400
6.15%
SK Tarpon
4,405,877
5.01%
Treasury Shares
3,360,684
3.82%
Other shareholders
53,009,784
60.28%
TOTAL(=)
87,941,972
100%
* Source: Sinqia S.A. and Subsidiaries - Quarterly Information - ITR dated March 31, 2023.

The following organizational chart summarizes the information about its controlling shareholders.


Source: Sinqia S.A. and Subsidiaries - Quarterly Information - ITR dated March 31, 2023.

5.    SECTOR ANALYSIS
 
Software can be defined as a set of computer programs, data and instructions used to carry out various functions on a computer system. It is made up of algorithms, instructions and code that is written in a particular programming language.
 
There are various types of software, which can be divided into three main product categories. First there are infrastructure items, which include operating systems, server programs, middleware and network management, storage management and security system software. Then there are tools including languages for programming, data modeling, development management, business intelligence, data warehousing and Internet tools. Finally there are applications for areas such as Enterprise Resource Planning, Customer Relationship Management and Supply Chain Management.
 
The “Software Market 2023: Overview and Trends” survey conducted by the Brazilian Association of Software Companies (ABES) using data from the International Data Corporation (IDC) shows that global information technology (IT) output rose 7.4% in 2022. Growth in Brazil was 3.0%, a somewhat more moderate increase compared with the significant 17.4% growth seen in 2021. Despite softer growth, ABES indicated that information technology continues to outpace GDP growth in Latin America and Brazil. According to ABES director Jorge Sukarie Neto, factors such as the outbreak of the war in the Ukraine, the strong impact inflation has had on the global economy - and which affected investment in Brazil - rising rates of interest and US dollar volatility have, over the past several years, and responsible for lower IT sector growth.
 
Brazil is in 12th position on the global ranking for IT investment, dropping two places from the previous year; including the software, services and hardware markets, total investment was US$45.2 billion. Additionally, Brazil represents 36% of total IT investment in Latin America, which received a total of US$124 billion in investment. Brazil invests more in this sector than any other Latin American country.
 
The following chart highlights 2022 investment participation in the biggest countries.
 
Global IT Market in 2022
(Figures in US$ billions)
 

In terms of regional distribution, the domestic IT market is concentrated in the southeast, which represents 62.63% of the total IT market and 64.40% of the software market. It is followed by the South Region with 13.82% of the total IT market and 13.63% of the software market.

The following chart shows the percentage of IT investment in each Brazilian region in 2022.
 
Information Technology Investment by Region in 2022


Source: ABES.

The number of software and services companies globally has also arisen: there were 29,027 in 2021, rising to 33,475 in 2022; they can be divided into development (25.3%), distribution (35.3%) and services (39.3%) companies.
 
The “IDC Predictions Brasil 2023: Trends and Predictions for IT and Telecommunications in Brazil” report, looking at the outlook for industry growth, predicted the Brazilian hardware, software and services market will grow 5.4% in 2023, compared with 4.5% forecast expansion globally. The business IT market also grew 8.7%; this represents the amount invested in hardware, software and services, excluding products for general consumption.
 
The “Impact and Future of Artificial Intelligence in Brazil” study published by Google for Startups in conjunction with Abstartups and Box1824 reported that artificial intelligence (AI) has the potential to transform various areas of the Brazilian economy, drive innovation, increase efficiency and create pioneering artificial intelligence solutions. AI is already being applied in areas such as health, agriculture, finance, education and urban mobility, benefiting each of these sectors. Nevertheless, the survey indicates Brazil is likely to face a number of difficulties developing ARI, including the lack of labor qualified to work with technology and develop artificial intelligence projects and regional inequalities, as most technology companies are based in the south and southeast.
 
6.    APPRAISAL METHODOLOGY
 
MARKET APPROACH – STOCK EXCHANGE PRICES
 
This methodology values a company based on the sum of all its stock at market prices. As a price of the stock is defined by the present value of future dividend flows and a single price at the end of this period at a requisite rate of return, under the efficient markets hypothesis this model should provide investors with a correct valuation for the company. Once we obtained the closing prices and historical trading volumes for SINQIA (SQIA3) stock trading on the B3, we calculated the VWAP (volume weighted average price) for different periods; the inputs used are detailed in Annex 1.
 
SINQIA STOCK PRICES
 
SINQIA’s stock had an average price of BRL 22.00 in the two months preceding July 19, 2023. SINQIA’S incorporation by EVERTEC was announced on July 20, pushing the price up to a new level of BRL 26.29, which can be interpreted as the market viewing this announcement positively. According to the EVERTEC website, the acquisition will drive its growth strategy, provide geographic diversification and allow it to offer complementary products by creating an opportunity to provide SINQIA customers with access to EVERTEC’S tier one payment solutions.
 
The criterion that was chosen was the average weighted price of the stock on the stock exchange or organized over-the-counter market from the time the announcement was made up to the date of this Report, which is a nine-day period beginning on July 20, 2023 and ending on August 1, 2023 (the base date), as this was considered a period during which market agents received more information.
 
The methodology is intended to value the company based on the sum of all its stock in circulation and trading volumes. As a price of the stock is defined by the present value of future dividend flows and a single price at the end of this period at a requisite rate of return, in an ideal financial market this approach should provide investors with the correct price for the company.
 
The following chart and table show the daily closing price changes for SINQIA stock and B3 trading volumes.
 
Average historical prices B3:SQIA3 (5/9/2023 - 8/1/2023)


The chart above shows the day-to-day changes in closing prices for SINQIA stock and trading volumes between May 9, 2023 and August 1, 2023. The gray line shows when management announced EVERTEC was acquiring SINQIA. We used the average between the post announcement period and the dates of the Reports to calculate the average price.

MARKET APPROACH – MULTIPLES OF COMPARABLE COMPANIES
 
The market multiples methodology defines an average parameter that can be used to value companies in the same industry. This is based on the assumption companies in the same business5 are subject to the same risks and influences and have similar expected returns. This is how assets with similar characteristics can be priced.
 
The methodology also assumes the market prices companies correctly and the multiple takes into account variables such as risk, growth and cash flow patterns. The methodology therefore defines a company’s value by extrapolation; it compares the company with others operating in the same business and in markets with the same characteristics. Market multiples are calculated by dividing variables, such as a company’s market capitalization, by a series of indicators available in the financial statements, such as the equity value, estimated earnings and cash flows.
 
The multiple most frequently used is EV/EBITDA, which is derived from the ratio between enterprise value and operating income (Earnings Before Interest, Taxes, Depreciation and Amortization — EBITDA). The market price is based on each company’s price on the stock market on the Report’s base date, multiplied by the volume of shares.
 
Because of its scope and simplicity, EV/EBITDA is widely used as a business appraisal parameter. This metric is used to calculate a company’s price based on its operational income.
 
Additionally, another multiple uses EV/ROL, which comprise enterprise value with net annual operating revenues. The EV/ROL indicator shows how much a company is worth in terms of its billings.
 
PHASE 1 - USING THE EV/EBITDA MULTIPLE
 
As explained above, EV/EBITDA is the most popular multiple and is calculated as the ratio of a company’s market value, compared with its operating income. Use of a multiple that takes into account the company’s EBITDA is the most appropriate method for a company with SINQIA’S characteristics because it includes all of operational factors such as revenues, costs and expenses.
 
Furthermore, as SINQIA has existed for more than 20 years, it has presented recurrent income and a stable and robust EBITDA margin, which further supports the importance of adopting an EBITDA multiple.
 
PHASE 2 - DEFINING COMPARABLE COMPANIES
 
In the second phase we surveyed the S&P Capital IQ platform for public information on stock market prices and historical financial information from companies comparable to SINQIA that also work with technology and provide services to the financial industry.
 

5  The comparable companies are presented on page 20 of the Report and described in Annex 1.

Based on the public financial information from comparable companies, we analyzed the implicit EV/EBITDA and EV/ROL multiples using the Capital IQ database, as follows:
 
EV/ROL MARKET MULTIPLES
EV/EBITDA MARKET MULTIPLES
COMPANY
COUNTRY
EV/ROL*
COMPANY
COUNTRY
EV/EBITDA*
EVERTEC, Inc.
USA
4.49 x
EVERTEC, Inc.
USA
12.69x
Jack Henry & Associates, Inc.
USA
6.41 x
Jack Henry & Associates, Inc.
USA
23.42 x
Repay Holdings Corporation
USA
3.92 x
Repay Holdings Corporation
USA
16.82 x
i3 Verticals, Inc.
USA
3.06 x
i3 Verticals, Inc.
USA
18.45 x
WEX Inc.
USA
3.23 x
WEX Inc.
USA
9.35 x
Endava plc
United Kingdom
3.35 x
Endava plc
United Kingdom
17.71 x
Shift4 Payments, Inc.
USA
2.45 x
Shift4 Payments, Inc.
USA
20.16 x
Euronet Worldwide, Inc.
USA
1.74 x
Euronet Worldwide, Inc.
USA
8.20 x
SS&C Technologies Holdings, Inc.
USA
4.19 x
SS&C Technologies Holdings, Inc.
USA
12.23 x
TOTVS S.A.
Brazil
4.27 x
TOTVS S.A.
Brazil
20.40 x
AVERAGE
  
3.71 x
AVERAGE
  
15.94x
STANDARD DEVIATION
  
1.28 x
STANDARD DEVIATION
  
5.07 x
*Multiples calculated in a period covering the 12 months prior to March 2023
*Multiples calculated in a period covering the 12 months prior to March 2023

MARKET APPROACH – TRANSACTION MULTIPLES
 
Transaction multiples refers to a valuation method in which past company acquisitions are used to price assets. This method has certain similarities with the comparable multiples method as it uses the same indicates is to give assets relative values.
 
Transaction multiples are indicators based on the price for which a company in the same sector is acquired. However, transaction multiples only apply to the transaction date and therefore differ from comparable multiples, which use updated market information and the most recent financial statements available. In our analysis, we only selected transactions that took place in the past five years.
 
In light of the information available, we only implemented the EV/ROL indicator to estimate average transaction multiples. Based on the publicly available financial information from comparable companies, we analyzed the EV/ROL using information from the Capital IQ database, as shown in the table below.
 
EV/ROL TRANSACTION MULTIPLES
COMPANY (TARGET)
COUNTRY
% ACQUISITION
EV/ROL
Electra Information Systems, Inc.
USA
100%
2.69 x
Eze Software Group LLC
USA
100%
5.18 x
FICANEX Technology Inc.
Canada
100%
6.38 x
Fidessa Group Holdings Limited
United Kingdom
100%
4.10 x
Harvest S.A.
France
61%
3.72 x
Trustquay Financial Systems Limited
United Kingdom
100%
2.86 x
PATRONAS Financial Systems GmbH
Germany
100%
2.70 x
AVERAGE
    
3.95 x
STANDARD DEVIATION
    
1.40 x

7.    ESTIMATED MARKET VALUE
 
Based on our results and on the 4 methodologies we employed, we have concluded SINQIA’S market value is BRL 2,266,610,000.00.
 
METHODOLOGY
PERIOD
BRL/SHARE
VWAP1 in the 9 business days prior to the deal announcement
7/20/2023 to 08/01/2023
26.45
Market Multiple Value (EV/EBITDA)
03/31/2023
27.89
Market Multiple Value (EV/ROL)
03/31/2023
24.96
Transaction Multiple Value (EV/EBITDA)
Last five years from the Base Date
26.72
SINQIA’S ENTERPRISE VALUE PER SHARE
26.50
NUMBER OF SHARES2
85,309,792
SINQIA’S ENTERPRISE VALUE (BRL thousands)
2,261,095
1
Volume weighted average price.
2
On the report’s base date SINQIA had 85,309,792 in circulation excluding treasury shares and including open share call options.

8.   CONCLUSION
 
According to the studies APSIS has presented and in light of article 252 of Law 6404/76, the specialists have concluded that on the appraisal date, August 1, 2023, the market value for SINQIA stock is BRL 26.50. As there are 85,309,792 shares in circulation, we estimate the company’s total market value is BRL 2,261,095.
 
This Report did not take into account an appraisal of the ESG ( environmental, social or governance) aspects of the assets analyzed. Positive and negative ESG impact on the company can be assessed in an independent report issued exclusively for this purpose and based on a specific methodology.
 
Appraisal Report AP-00685/23-01 was produced by APSIS (CRC/RJ-005112/O-9), a company that specializes in asset valuations; it is legally represented herein by its consultants, who are happy to respond to any questions you may have.
 
Rio de Janeiro, August 01 2023

Officer
Projects

9.  LIST OF ATTACHMENTS
 
1.
Daily Closing Prices and Trading Volumes – B3:SQIA3
2.
Description of Comparable Companies
3.
Glossary
 
2 On the report’s base date SINQIA had 85,309,792 in circulation excluding treasury shares and including open share call options.

Annex III to Exhibit 99.2 – Information Regarding the Merger of Shares

EXHIBIT III
INFORMATION REGARDING THE MERGER OF SHARES
(in accordance with Exhibit I of CVM Resolution No. 81)

1.   Protocol and Justification of the Transaction, as set forth in Articles 224 and 225 of Law No. 6,404/1976.

The “Protocol and Justification of the Merger of Shares Issued by Sinqia S.A. by Evertec Brasil Informática S.A.”, as approved by Sinqia S.A.’s (“Sinqia” or “Company”) Board of Directors in a meeting held on August 13, 2023 (“Protocol”), is set out in Exhibit I to this Management Proposal (“Proposal”).

In addition, the Protocol is also available at the websites of the Company (ri.sinqia.com.br), the Brazilian Securities Commission – CVM (“CVM”) (www.gov.br/cvm/) and B3 S.A. - Brasil, Bolsa, Balcão (“B3”) (www.b3.com.br).

2.  Other agreements, contracts and precontracts regulating the exercise of voting rights or the transfer of shares issued by the companies subsisting or resulting from the transaction, filed at the company’s headquarters or to which the company’s controlling shareholder is a party to.

On July 20, 2023, shareholders holding shares issued by the Company representing more than 40% of the total shares with voting rights entered into certain Voting Agreements (“Voting Commitments”), which establish their obligation to vote in favor of the approval of the Transaction at the Company’s General Shareholders’ Meeting now called (“GSM”). In addition, during the term of the Voting Commitments, such shareholders have undertaken not to transfer of or in any way dispose of the shares issued by the Company and held by them until the date of the Company’s GSM.

These Voting Commitments are filed at the Company’s headquarters, as well as available at the electronic addresses of CVM (www.cvm.gov.br), B3 (www.b3.com.br) and the Company (ri.sinqia.com.br).

3.     Description of the Transaction, including:

a.      Terms and Conditions

Pursuant to the Protocol and to the Merger Agreement and Other Covenants (“Merger Agreement”), entered into between the Company, Evertec Brasil Informática S.A. (“Evertec BR”) and, as consenting parties, Evertec, Inc., a company headquartered in Puerto Rico and listed on the New York Stock Exchange - NYSE (“Evertec Inc” and, jointly with Evertec BR, “Evertec”) and certain shareholders of the Company, the integration of the activities of the Company and Evertec BR will be implemented through the following steps:

(i)    the merger of all shares issued by the Company into Evertec BR, pursuant to article 252 of Law No. 6,404/76 (“Brazilian Corporations Law”), at market value (“Merger of Shares”), with the attribution to the Company’s shareholders of mandatorily redeemable preferred class A shares (“Evertec BR PNA Share”) and mandatorily redeemable preferred class B shares (“Evertec BR PNB Share” and, together with Evertec BR PNA Share, “Evertec BR New Shares”) issued by Evertec BR; and;

(ii)    on the same date, as a subsequent and interdependent act, the redemption of all the Evertec BR New Shares (“Redemption”), through (a) the payment of a cash installment; and (b) the delivery of Level I BDR admitted to trading on B3, whose underlying assets will be common shares issued by Evertec Inc. (“BDR”) traded on the NYSE (“Transaction”).

I) Exchange Ratio

Within the scope of the Merger of Shares, the Evertec BR New Shares will be attributed to Sinqia’s shareholders, so that, for each common share issued by Sinqia that they hold, it will be delivered, in replacement: (i) one (1) Evertec BR PNA Share; and (ii) one (1) Evertec BR PNB Share.

The Evertec BR New Shares will have the rights and benefits attributed to them under the bylaws of Evertec BR. The Evertec BR New Shares will not have voting rights, will have priority in the reimbursement of capital in the event of winding up, without premium, and will be automatically redeemed on the date of consummation of the Transaction, without the need, therefore, for a special meeting for this purpose.

II) Redemption Ratio

Subject to the provisions of items V and VI below, on the same date of the implementation of the Merger of Shares, and as a subsequent and interdependent act, the Redemption will be implemented, through the delivery of the following assets to its holders (“Redemption Ratio”):

(i)    each Evertec BR PNA Share will be redeemed through payment, to its holder, of the amount of R$ 24.47 (twenty-four reals and forty-seven cents) (“Cash Portion”); and

(ii)    each Evertec BR PNB Share will be redeemed upon delivery, to its holder, of 0.014354 Level I BDR backed by Evertec Inc common shares, with a par value of US$0.01 (one dollar cent) per share, traded on the New York Stock Exchange – NYSE, whose value was equivalent to R$ 2.72 on the date of execution of the Merger Agreement.

The amount of the Cash Portion will be updated by positive variation of the SELIC rate calculated on the base value of R$ 27.50 (twenty-seven reals and fifty cents) between the date of execution of the Merger Agreement (i.e. July 20, 2023) and the date of consummation of the Transaction, it being certain that the update amount may not exceed R$ 1.00 (one real) per Evertec BR PNA Share to be redeemed, except in the cases specified in the Merger Agreement (“SELIC Adjustment Cap”).

Any fractions of Evertec Inc BDR delivered to Sinqia shareholders in consideration for the Redemption will be grouped into whole numbers to be then sold in an auction administered by B3, after the date of consummation of the Transaction, under the terms of a notice to shareholders to be timely disclosed by Sinqia. The amounts earned as a result of the aforementioned sale will be made available, net of fees, to the former Sinqia shareholders holding the respective fractions, in proportion to their participation, on a date to be duly disclosed by Sinqia, provided that Evertec BR undertakes to acquire any leftover BDR Evertec Inc at the auction, except in the event that Evertec Inc and/or its subsidiaries have material non-public information under the terms of the applicable law.

Also, Evertec BR may, unilaterally and without the need to amend the Protocol, increase the total amount of the Cash Portion and the amount of BDR Evertec Inc, as the case may be, to be delivered as consideration for the Redemption.

III) Evertec Inc BDR

Prior to the consummation date of the Transaction, Evertec shall promote (i) the registration of the Level I BDR Program relating to the BDR (“BDR Program”) with the CVM and (ii) the admission of the BDR to trading on B3.

IV) Right of Withdrawal

Pursuant to Art. 252, §2, of the Brazilian Corporations Law, the right of withdrawal will be ensured to the Company’s shareholders holding, uninterruptedly since the close of the trading session of July 20, 2023 (date of disclosure of the first material fact on the Transaction), common shares issued by the Company, who vote against the Merger of Shares, who abstain from voting or who do not attend the GSM, and who expressly express their intention to exercise the right of withdrawal within 30 days from the date of publication of the minutes of the GSM that approves the Merger of Shares.

Further details on the exercise of the right of withdrawal are set out in Exhibit IV to the Proposal.

V) Conditions Precedent

Sinqia’s and Evertec BR’s obligation to consummate the Transaction is conditioned on the fulfillment or waiver, as the case may be, of certain conditions precedent, usual in this type of transaction, duly described in the Merger Agreement and in the Protocol, among which the following are highlighted:

(i)     the approval, by the Company’s shareholders, of the Protocol, with the terms and conditions of the Merger of Shares, and of the other matters submitted to the Company’s GSM to which this Proposal makes reference to;

(ii)   obtaining the consent or waiver for non-acceleration of the maturity date, or performance of the prepayment of the: (a) second (2nd) issuance of simple debentures, non-convertible into shares, of unsecured type, single series, with real and additional fiduciary guarantees; and (b) third (3rd) issuance of simple debentures, non-convertible into shares, of the unsecured type, with real and additional fiduciary guarantees, in a single series;

(iii)    non-occurrence, until the date of consummation of the Transaction, of a Material Adverse Change on Sinqia, as defined in the Protocol and the Merger Agreement; and

(iv)     the registration of the BDR Program with the CVM and the admission for trading of BDR on B3.

If the conditions precedent are not fulfilled or waived by the respective party, as the case may be, the Transaction will not be implemented, and the resolutions taken at the Company’s GSM and the acts carried out within the scope of the intended Transaction will become null and void.

(VI) Closing Date of the Transaction

As usually occurs in similar transactions, due to operational issues with B3 and the necessary procedures with non-resident investors who hold shares issued by the Company, it is estimated that the consummation of the Transaction, with the delivery of the Redemption Ratio, will occur in approximately 15 days from the confirmation of the implementation or waiver, as the case may be, of the conditions precedent, under the terms of the Merger Agreement and the Protocol, unless otherwise determined by B3, or on another defined date, jointly by the Company and Evertec BR.

In this context, the Company and Evertec Inc will disclose to the market (i) the base date of the ownership of the shares issued by Sinqia object of the Exchange Ratio, with the consequent definition of the shareholders who will receive the Evertec BR New Shares; and of (ii) the closing date of the Transaction, including the date on which the shares issued by Sinqia will cease to be traded on B3.

The other terms and conditions of the Transaction are set forth in the Protocol (Exhibit I) and in the Merger Agreement, available at the websites of the Company (ri.sinqia.com.br), CVM (www.gov.br/cvm/) and B3 (www.b3.com.br).

b.    Obligation to Indemnify:

(i)   The managers of any of the companies involved;

None.

(ii)    In case the Transaction does not occur.

Pursuant to the Merger Agreement, no fine will be due in case of mere non-approval of the Transaction by the Company’s GSM.

As set forth under item 2 above, shareholders holding approximately forty percent (40%) of the Company’s voting capital assumed, among other obligations, the obligation to (a) vote in favor of the Transaction at the Company’s GSM; and (b) not dispose of or in any way dispose of their shares issued by the Company until the date of the Company’s GSM.

In the event of non-compliance with such obligations, as well as the occurrence of other events described in the Voting Commitments, such shareholders have individually undertaken to pay Evertec BR a fine corresponding to 25% (twenty-five percent) of the number of shares held by them multiplied by R$ 28.50 (twenty-eight reals and fifty cents).

Pursuant to the Merger Agreement, the parties agreed that, in the event of non-compliance by the Company with the exclusivity obligations set forth in the Merger Agreement and of the occurrence of other events provided for in the Merger Agreement, the Company shall pay a fine to Evertec Inc in the amount of R$ 120,000,000.00 (one hundred and twenty million reals) (“Sinqia Break-Up Fee”).

In the event that Evertec Inc or Evertec BR fails to fulfill its obligation to consummate the Transaction after the fulfillment (or waiver, as the case may be) of all conditions precedent set forth in the Merger Agreement and the Protocol, Evertec BR shall pay Sinqia a fine in the amount of R$ 72,000,000.00 (seventy-two million reals) (“Evertec Break-Up Fee” and, together with Sinqia Break-Up Fee, “Break-Up Fee”).

In any of the cases provided for above, the responsible party shall pay the Break-Up Fee to the other party within 5 (five) business days from the date of occurrence of the event giving rise to the Break-Up Fee.

In the event of delay in the payment of the Break-Up Fee, the party responsible for the payment of the fine shall pay (i) a fine of 1% (one percent) of the unpaid amount; plus (ii) the unpaid amount adjusted by SELIC; plus (iii) default interest equivalent to 1% (one percent) per month, calculated pro rata die, from the first day of delay until the date of actual payment.

c.    Comparative table of the rights, advantages and restrictions of the shares of the companies involved or resulting from the transaction, before and after the transaction .

Below is a table comparing the rights, advantages and restrictions of the shares issued by the Company and the Evertec BR New Shares:
 Company
Evertec BR (PNA and PNB shares)
Right to
Dividends
Pursuant to the Company’s bylaws, at least 25% of the balance of the net income remaining after the allocations to the legal reserve and to the contingency reserve, will be allocated to the payment of the minimum mandatory dividend, which may be paid through interest on equity.

The remaining net income, after the allocations described above, may be allocated to the formation of the reserves provided for in the Company’s bylaws, subject to certain limits set forth in the bylaws.
At least 25% of the balance of the net profit remaining after the allocations to the legal reserve, under the terms of the Brazilian Corporations Law, will be allocated to the payment of the minimum mandatory dividend.

The remaining balance will be allocated as determined by the General Shareholders’ Meeting of Evertec BR.
Voting
Rights
Full
No
Conversibility
No
No


Company
Evertec BR (PNA and PNB shares)
Rights in
Equity
Repayment
Under the terms of the Brazilian Corporations Law.
Priority in the repayment of equity in the event of winding-up, without premium.
Restrictions
to
Circulation
 
No
No
Conditions
for
modifying
the rights
granted
by such
securities
The rights granted to the shares that are not established by the applicable legislation may be modified by amending the bylaws, approved at a general shareholders’ meeting, to be held in accordance with the installation and resolution quorums and conditions established in the Brazilian Corporations Law.

In accordance with the Brazilian Corporations Law, the company’s bylaws and the resolutions adopted by its shareholders at general meetings may not deprive its shareholders of the following rights: (i) the right to participate in the distribution of profits; (ii) the right to participate, in proportion to their interest in the share capital, in the distribution of any assets remaining in the event of winding-up; (iii) preemptive rights in the subscription of shares, debentures convertible into shares or subscription warrants, except in certain circumstances provided for in the Brazilian Corporations Law; (iv) the right to supervise, in the manner provided for in the Brazilian Corporations Law, the management of corporate business; and (v) the right to withdraw in the cases provided for in the Brazilian Corporations Law.
The rights granted to the shares that are not established by the applicable legislation may be modified by amending the bylaws, approved at a general shareholders’ meeting, to be held in accordance with the installation and resolution quorums and conditions established in the Brazilian Corporations Law.

In accordance with the Brazilian Corporations Law, the company’s bylaws and the resolutions adopted by its shareholders at general meetings may not deprive its shareholders of the following rights: (i) the right to participate in the distribution of profits; (ii) the right to participate, in proportion to their interest in the share capital, in the distribution of any assets remaining in the event of winding-up; (iii) preemptive rights in the subscription of shares, debentures convertible into shares or subscription warrants, except in certain circumstances provided for in the Brazilian Corporations Law; (iv) the right to supervise, in the manner provided for in the Brazilian Corporations Law, the management of corporate business; and (v) the right to withdraw in the cases provided for in the Brazilian Corporations Law.
Possibility
of
Redemption
No
Mandatorily redeemable shares, whose redemption will occur on the Transaction consummation date, under the terms described in this exhibit.
Other
relevant characteristics
Listed at B3’s Novo Mercado special segment.
Not applicable.

d.    Need for approval by debenture holders or other creditors.

In order to implement the Transaction, the Company must perform the early redemption or obtain consent or waiver regarding the early maturity of the obligations arising from the following issues of debentures of Sinqia: (i) 2nd issue of simple debentures, non-convertible into shares, unsecured, with real and additional fiduciary guarantees, in a single series; and (ii) 3rd issue of simple debentures, non-convertible into shares, unsecured, with real and additional fiduciary guarantees, in a single series. In mutual cooperation with Evertec BR, the Company’s management is already taking all the necessary measures for such approvals.

e.    Assets and liabilities that will form each portion of the equity, in case of spin-off.

Not applicable.

f.    Intention of the resulting companies to obtain registration as issuer of securities.

The waiver of Evertec BR’s obligation to list its shares in the Novo Mercado special listing segment of B3, pursuant to the sole paragraph of article 46 of the Novo Mercado Regulation, is part of the agenda and will be resolved by the Shareholders at the GSM.

With the consummation of the Transaction, the shares issued by Sinqia will cease to be traded in the Novo Mercado segment of B3. As mentioned in item 3(a) above, Sinqia’s shareholders will receive, within the scope of the Redemption, BDR from Evertec Inc. The BDR program will be registered with the CVM and trading of the BDRs will be admitted to B3.

4.     Plans for the conduction of corporate affairs, in particular with regard to specific corporate events that are intended to be promoted.

Except for the Redemption, which will occur indissociably and immediately after the Merger of Shares, to be timely promoted by Evertec Inc, there is no decision or plans by Sinqia’s management regarding specific corporate events that are intended to be promoted after the consummation of the Merger of Shares.

As a result of the Merger of Shares, Sinqia will become a wholly-owned subsidiary of Evertec BR and Evertec BR will remain as a closed company, not registered with the CVM and not adhering to the Novo Mercado Regulation of B3.

5.    Analysis of the following aspects of the transaction:

a.    Description of the main expected benefits, including: (i) synergies, (ii) tax benefits; and (iii) strategic advantages.

The business combination between the Companies is based on strategic fundamentals for the expansion of their activities, allowing the capture of synergy gains derived from their integration and, according to the fairness opinion produced by Banco BTG Pactual, has fair and equitable economic terms for all Sinqia shareholders. The complementarity between Sinqia’s software and services for the financial system and Evertec Inc’s payment solutions represents an opportunity to generate value for the parties, creating a more competitive and innovative company, with greater capacity for growth.

b.    Costs.

According to the estimate of Sinqia’s management, the costs of carrying out the Transaction will be of approximately R$ 60 million, which mainly include costs with financial advisors, legal advisors, appraisals and publications, among other costs necessary for the implementation of the Transaction.

The management of Evertec BR and Evertec Inc estimate that the costs of carrying out the Transaction, for Evertec, will be approximately R$ 172 million, which mainly include costs with the financing of the Transaction, financial advisors, legal advisors, appraisals and publications, among other costs necessary for the implementation of the Transaction.

c.    Risk Factors.

The Transaction seeks to integrate the businesses of Sinqia and Evertec in order to take advantage of the synergies between both operations. This integration process may result in risks of an operational, regulatory, commercial, financial and contractual nature, which may cause the companies to fail to take advantage of the expected synergies, or imply unforeseen losses or expenses.

The market value of the shares of Sinqia and Evertec Inc at the time of consummation of the Transaction may have varied materially from the quotation used as a reference for the definition of the agreed Exchange Ratio and Redemption Ratio. The variation in the market value of the shares may occur as a result of a variety of factors that are beyond the control of Sinqia and Evertec Inc, including changes in their business, operations and projections, timing and regulatory issues, general market and economic conditions as well as industry-related conditions. Nevertheless, there are also natural risks of changes in the price of Evertec Inc’s shares after the consummation of the Transaction, which are inherent in the capital markets.

Volatility in the Brazilian real/U.S. dollar exchange rate and the depreciation of the Brazilian real against the U.S. dollar may also impact the value originally negotiated in the Transaction for the Redemption Ratio, as they may affect the price of the common shares of Evertec Inc, the underlying asset of the BDR. As the exchange rate of the Brazilian real and the US dollar fluctuates, the implied value of this portion of the Redemption Ratio also fluctuates.

In addition, there are potential risks regarding the implementation of the Transaction itself, given that it is subject to the verification of conditions precedent, some of which are not under the control of the Company and Evertec Inc and may, as a result, delay or make impossible the consummation of the Transaction. The uncertainty regarding the possible non-implementation of the Transaction may also negatively affect the price of the shares issued by the Company and Evertec Inc. shares issued by the Company and Evertec Inc.

d.  In the case of a transaction with a related party, any alternatives that could have been used to achieve the same objectives, indicating the reasons why these alternatives were discarded.

Not applicable, considering that the Transaction is not a transaction with a related party.

e.    Exchange Ratio.

Pursuant to the Merger Agreement, the Protocol and article 252 of the Brazilian Corporations Law, the Merger of Shares will be carried out in compliance with the following Exchange Ratio: for each common share issued by Sinqia, it shall be delivered: (i) one (1) Evertec BR PNA Share; and (ii) one (1) Evertec BR PNB Share.

On the closing date, immediately after the issuance and delivery of the Evertec BR New Shares to the then shareholders of Sinqia, the Evertec BR New Shares will be automatically redeemed and canceled, subject to the Redemption Ratio described under item 3(a) above.

f.    In transactions involving parent companies, subsidiaries or companies under common control:

Not applicable.

6.    A copy of the minutes of all meetings of the Board of Directors, Fiscal Board and special committees at which the transaction was discussed, including any dissenting votes.

The minutes of the meetings of the Company’s Fiscal Board and Board of Directors at which the Transaction was discussed and approved are attached as Exhibits VIII and IX to this Proposal.

7.    Copies of studies, presentations, reports, opinions or appraisal reports of those involved in the transaction made available to the controlling shareholder at any stage of the transaction.

Not applicable, given that the Company has no controlling shareholder. In any event, the minutes of the meetings of the Board of Directors and the Fiscal Board of the Company that assessed the Transaction and the appraisal report on the Merger of Shares are available in this Proposal.

8.    Identification of any conflicts of interest between the financial institutions, companies and professionals who have drawn up the documents mentioned in item 7 and the companies involved in the transaction.

Not applicable.

9.    Draft articles of association or amendments to the articles of association of the companies resulting from the transaction.

The consummation of the Merger of Shares will result in the increase of the corporate capital of Evertec BR, corresponding to the market value of the shares issued by Sinqia, according to the appraisal report prepared by Apsis Consultoria Empresarial Ltda. through the issuance of Evertec BR PNA Shares and Evertec BR PNB Shares.

Continuously, the Evertec BR New Shares will be redeemed, pursuant to the Redemption Ratio, and subsequently canceled.

Therefore, upon consummation of the Transaction, the bylaws of Evertec BR will be amended to reflect the aforementioned capital increase with the issuance of the Evertec BR New Shares, to be delivered to Sinqia’s shareholders.

10.    Financial statements used for the purposes of the operation, in accordance with the applicable rules.

The quarterly financial information of Sinqia and Evertec BR for the quarter ended March 31, 2023, was used, which, accompanied by the respective special review reports of their independent auditors, are attached, respectively, as Exhibits V and VI to this Proposal.

11.    Pro forma financial statements prepared for the purposes of the transaction, in accordance with the applicable rules.

In compliance with article 7 of CVM Resolution No. 78, of March 29, 2022, the management of Evertec BR prepared pro forma financial statements of Evertec BR for the purposes of the Merger of Shares, reflecting its effects as if it had already been consummated on the base date of March 31, 2023, which were submitted to reasonable assurance by BDO RCS Auditores Independentes - SS Ltda. and are attached as Exhibit VII to this Proposal.

12.     Documents containing information on the companies directly involved that are not public companies, including :

a.    Risk factors, in accordance with items 4.1 to 4.3 of the reference form.

The information below has been transmitted by Evertec BR. Expressions such as “our”, “ours”, “the Company” or related should be interpreted as referring to Evertec BR and the economic group in which it is inserted, and to which Sinqia will be inserted as from the consummation of the Transaction.

Evertec BR holds direct and indirect interest in other companies and has a relatively small operation. If the Transaction is consummated, the interest held in Sinqia will come to represent the greater part of Evertec BR’s activities, equity and potential revenues, as well as the greater part of its risks.

Currently, Evertec BR is subject to the risks factors listed below, among others that may have not been identified.

If we cannot keep pace with rapid developments and change in our industry and continue to acquire new clients, the use of our services could decline, reducing our revenues.

The financial software and electronic payments and processing market in which we compete is subject to rapid and significant changes. This market is characterized by rapid technological change, new product and service introductions, evolving industry standards, changing client needs and the entrance of non-traditional competitors. In order to remain competitive and continue to acquire new clients, we are continually involved in a number of projects to develop new services or compete with these new market entrants, including the development of mobile phone applications, e-commerce services, digital banking, ERP, digital wallet account and processing offerings and other new offerings emerging in the electronic payments and processing industry. These projects carry risks, such as cost overruns, delays in delivery, performance problems and lack of client adoption. Any delay in the delivery of new services or the failure to differentiate our services or to accurately predict and address market demand could render our services less desirable, or even obsolete, to our clients. Furthermore, even though these markets are evolving, they may not continue to develop rapidly enough for us to recover the costs we have incurred in developing new services targeted at this market.

In addition, the services we deliver are designed to process very complex transactions and provide reports and other information concerning those transactions, all at high volumes and processing speeds. Any failure to deliver an effective and secure service or any performance issue that arises with a new service could result in significant processing or reporting errors or other losses. As a result of these factors, our development efforts could result in increased costs and/or we could also experience a loss in business that could reduce our earnings or could cause a loss of revenue if promised new services are not timely delivered to our clients or do not perform as anticipated. We also rely in part, and may in the future rely in part, on third parties, including some of our competitors and potential competitors, for the development of, and access to, new technologies. Our future success will depend in part on our ability to develop or adapt to technological changes and evolving industry standards. We cannot predict the effects of technological changes on our business. If we are unable to develop, adapt to or access technological changes or evolving industry standards on a timely and cost-effective basis, our business, financial condition and results of operations could be materially and adversely affected.

Furthermore, our competitors may have the ability to devote more financial and operational resources than we can to the development of new technologies and services, including e-commerce and mobile payment processing services, that provide improved operating functionality and features to their existing service offerings. If successful, their development efforts could render our services less desirable to clients, resulting in the loss of clients or a reduction in the fees we could generate from our offerings.

Degradation of the quality of the products and services we offer, including support services, could adversely affect our ability to attract and retain clients and partners.

Our clients expect a consistent level of quality in the provision of our products and services. The support services that we provide are also a key element of the value proposition to our clients. If the reliability or functionality of our products and services is compromised or the quality of those products or services is otherwise degraded, or if we fail to continue to provide a high level of support, we could lose existing clients and find it harder to attract new clients and partners. If we are unable to scale our support functions to address the growth of our merchant and partner network, the quality of our support may decrease, which could adversely affect our ability to attract and retain clients and partners.

The Company is subject to risks related to errors and malfunctions of its products that may be difficult or even impossible to correct.
 
We offer technically complex products that, when first introduced to the market or released as new versions, may contain defects not previously identified in the approval phase or whose correction is complex to perform.
 
The existence of defects, errors, and any delays or inability to correct them may cause negative consequences, including: (i) cancellation of orders; (ii) additional warranty expenses; (iii) delays in collecting receivables; (iv) termination of agreements; (v) loss of acceptance of the Company’s products in the market; (vi) relocation of research and development resources that could be used in the creation and development of new products; (vii) potential actions for damages; and (viii) reputation problems in the market. The occurrence of such defects or delays and the inability to correct them may adversely affect our results and reputation in the market.
 
The Company may not be able to compete effectively in the highly competitive software industry.
 
The Company competes in markets characterized by high competitiveness, technological developments, changing needs of customers/clients, standards adopted by the industry in which it operates, and frequent introductions of new products, technologies and services. In addition, the Company competes with several companies operating in the global, regional, and local market for software and related services, including integrated business management software providers, developers that make their software available for free, and companies providing consulting services and technology startups. Some of the Company’s current or potential competitors are involved in a broader range of businesses, some of which have a larger installed base of customers/clients for their products and services or have significantly larger financial, technical, sales, and other resources compared to those of the Company, thus increasing their ability to compete with the Company. Competition in the Company’s market may become more intense because of mergers between potential customers of the Company’s products, as well as partnerships between its competitors and other companies. In response to competition, to mergers in the sectors in which the Company operates, and to adverse economic conditions, the Company may be led to grant discounts or other price reductions to its customers/clients, or even change its billing models, to remain competitive.
 
Likewise, the Company may lose market share or become unable to advance into new markets if it cannot advance in the digitalization of its sales and distribution channels at a speed equal to or greater than its competitors, as well as the companies with which it is up to them to introduce or acquire new products that compete with theirs or add new features to them.
 
The Company may not be able or may fail to protect its intellectual property rights, which could have a negative impact on its operating results.
 
The success of the Company’s business depends on its ability to protect its current and future intellectual property assets, such as trademarks, source codes, domain names, among other intellectual property rights.
 
Events such as the definitive rejection of the Company’s trademark registration applications before the National Institute of Industrial Property of Brazil (“INPI”), any unauthorized or improper use of such trademarks, or even the possible recognition of administrative nullity of trademark registrations may decrease the value of the Company’s intellectual property assets, adversely affecting its business and/or reputation.
 
Moreover, the Company may not be able to renew the registration of any of its brands in a timely manner or its competitors may contest the use of any of our registered or future assets requested or licensed by the Company.
 
In addition, third parties may claim that the products or services of the Company violate their intellectual property rights. In these cases, lawsuits may be required to guarantee the Company’s intellectual property rights. Any dispute or litigation connected to intellectual property assets can be costly and time-consuming due to the uncertainty of litigation on the matter. The Company may also be required to change, in whole or in part, some of its brands that, as the case may be, violate the intellectual property rights of third parties, and may be required to pay significant fines, royalties, or licensing fees for the use of patents or copyrights of third parties that, could eventually be charged or claimed as compensation.
 
Any unauthorized access to physical or digital media may increase the risk of theft or misuse of its property. In addition, third parties may be able to copy or steal, by reverse engineering, a portion of the Company’s products or otherwise obtain and use its intellectual property, which could harm the Company’s competitive position in certain segments and reduce the value of its brands and products.
 
Any discussion about the Company’s right to use and exploit brands may adversely affect the Company’s reputation, negatively impacting its results. In addition, such changes may require management attention and/or lead to additional expenses, including legal expenses, factors that could materially and negatively affect the Company’s financial operating results.
 
If we fail to manage our growth effectively, our business could be harmed.
 
In order to manage our growth effectively, we must continue to strengthen our existing infrastructure, develop and improve our internal controls, create and improve our reporting systems, and timely address issues as they arise. These efforts may require substantial financial expenditures, commitments of resources, developments of our processes, and other investments and innovations. Furthermore, we aim to quickly develop and launch new features for our products and services. As we grow, we may not be able to execute as quickly as smaller, more efficient organizations. If we do not successfully manage our growth, our business will suffer.
 
Acquisitions present risks, and the Company may not reach the strategic goals foreseen at the time of any transaction.
 
Mergers and acquisitions are an important factor of the Company’s strategy and it expects to continue to acquire companies, products, services, and technologies. The Company is subject to the following risks in these acquisitions: (i) the acquisition may not contribute to the Company’s business strategy, or it may pay more than its fair value for it; (ii) the Company may find it difficult to assimilate the technologies or products acquired to its product lines, failing to maintain uniform standards, controls, procedures and policies; (iii) the relationship with current and new professionals, customers/clients and distributors may be impaired; (iv) the due diligence process may not identify technical problems, such as issues related to product quality or product structure of the acquired company, as well as aspects related to deficiencies in governance, in the internal environment and other unknown liabilities; (v) the Company may face contingencies with respect to product liability, intellectual property, financial disclosures and accounting practices or internal controls; (vi) acquisitions may lead to lawsuits filed by dismissed employees or third parties; (vii) acquisition processes may suffer setbacks, and the attention of the Company’s management may be diverted to issues related to transition or integration; (viii) the Company may not be able to obtain, in a timely manner, licenses/permits from public authorities under the laws that govern antitrust issues; and (ix) purchases and acquisitions of companies having an organizational culture with very different characteristics versus the Company’s culture, thus hindering the process of integration and retention of strategic talent for the business; and (x) loss of key people with specific knowledge of the business of the purchased companies.
 
Likewise, the integration process of the acquired operations may not result in the expected benefits, which could adversely affect the Company’s businesses. In addition to the aforementioned risks, during such integration process the Company may face other risks, including those detailed below:
 
• Integration difficulties, such as: (i) higher-than-expected costs to continue expanding the distribution channel network with quality and capillarity to serve the market; (ii) inability to manage a larger number of employees, geographically dispersed; (iii) inability to create and effectively implement uniform standards, controls, procedures and policies, which may even lead to non-compliance with the conduct guidelines set forth by the Company; (iv) resistance and delays in the process of dissemination and unification of the organizational culture, and (v) limitations imposed by antitrust authorities.
 
• Possible inability to coordinate and integrate sales and software development efforts to effectively communicate product mix-selling possibilities, cross-sell products, and successfully manage product mix-selling, as well as the integration of development activities performed by acquired, failing to maximize the expected synergies.
 
Further, other unknown and undisclosed liabilities associated with the acquisition and integration of operations acquired by the Company may exist.
 
These factors could have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows, particularly in the case of acquisitions of larger companies or a greater number of acquisitions.
 
Our systems and our third party providers’ systems may fail due to factors beyond our control, which could interrupt our service, cause us to lose business and increase our costs.
 
The Company’s operations depend on the functionality, availability, integrity, and operational stability of its information technology systems, as well as require a highly complex technological structure and depend on the uninterrupted and efficient operation of its systems, including software systems, data centers, internet, telecommunications and third parties systems. Accordingly, we rely on our information technology systems to process, transmit, and store electronic data, as well as to communicate with consumers and suppliers.

The Company may be adversely affected if those systems are interrupted, damaged by unforeseen events or failures over a long period, including because of third-party action, natural disasters, cyberattacks, information security failures in the development, operation and maintenance of our products, telecommunications problems, viruses, lack of evaluation of information security requirements in hiring suppliers, absence or insufficiency of vulnerability tests in their systems, as well as security failures in companies purchased by the Company, among other factors.

Despite the Company having cyber insurance to reduce the effects of any IT occurrences in the cloud, the results of its activities might be detrimentally affected in the instance of a technology system incident, particularly if it is not covered by the corresponding cyber insurance policy.

Any information security incidents could cause a disruption in the Company’s business and result in reduced performance and increased operating costs, which could have an adverse effect on the Company’s business, financial condition, and results of operations. Furthermore, security incidents could result in misappropriation of the Company’s exclusive or confidential information and/or the personal data of its customers, clients, employees, and third parties, which may materially and adversely affect the Company’s reputation.
 
Any security incident in the computing environment that results in unauthorized access, unauthorized loss or disclosure of data, unavailability of access to the Company’s systems, malware, phishing, ransonware and other events that may have an adverse impact on the security of the Company’s data technology may subject it to significant litigation, regulatory fines, and other penalties, customer/client losses or damage to its reputation, which may have a material adverse effect on its business, financial condition, operating results, cash flow, liquidity, reputation and/or future business of the Company.
 
Therefore, the success of the Company’s businesses significantly depends on the good performance of information technology systems, so that any failure of the Company to prevent violations that affect the confidentiality, integrity, or availability of information and/or personal data stored and processed by the Company, could harm its reputation and, also, substantially affect the Company’s business and results of its operations.
 
The Company is subject to risks associated with non-compliance with data protection laws (both domestic and international) and may be adversely affected by the imposition of fines and other types of sanctions.
 
The Company is subject to the Federal Constitution of Brazil, besides to the Brazilian Law No. 10.406/02 (Civil Code of Brazil), Law No. 8.078/90 (Consumer Defense Code) and), Law No. 12.965/14 (Internet Civil Mark), Decree No. 8.771/16 and the recent Law No. 13.709/2018, which entered into force on September 18, 2020, called the General Data Protection Law of Brazil (“LGPD”), these being the main laws that regulate practices related to the processing of personal data in Brazil.
 
The LGPD law sets forth rules for the processing of personal data in Brazil in all sectors of the economy, for organizations of all sizes, both digital and physical. Among other requirements provided for in the legislation, in order for the Company to collect, use, store and otherwise process personal data, it is necessary that there is a legal hypothesis for each processing and that all the principles and rights of the subjects stipulated in the legislation are complied with, including information to data subjects on the Company’s personal data processing practices. The LGPD law also provides for administrative sanctions in case of any non-compliance with its provisions, which range from a simple warning and order to delete personal data processed irregularly to the imposition of a fine.
 
The security measures adopted on our internal networks and platforms may not work as expected or may not be sufficient to protect our internal networks and platforms against certain attacks. In addition, the techniques used to sabotage or gain unauthorized access to networks on which data is stored or through which data is transmitted change and improve frequently. As a result, the Company may not be able to anticipate these techniques or implement suitable preventive measures to prevent attacks on its systems.
 
On February 27, 2023, the ANPD published a Resolution with the standards for the Dosimetry and Application of Administrative Sanctions, thus such sanctions and fines can already be applied by such agency for any non-compliance with the LGPD, including for processes opened before the publication of said Resolution.
 
If the Company does not comply with such legislation, it will be subject to the following penalties, individually or cumulatively: (i) of warning, and a deadline will be determined for it to take corrective measures; (ii) obligation to disclose the corresponding incident, after its occurrence is duly investigated and confirmed; (iii) temporary blocking until its regularization and/or elimination of the personal data corresponding to the infringement; (iv) fine of up to 2% (two percent) of the gross income of the company, group or business conglomerate in Brazil in its last fiscal year, excluding taxes, up to the global amount of R$50,000,000 (fifty million Reals) per violation. In case of recurrence, more severe administrative penalties provided for in the LGPD law may be applied, such as:(i) partial suspension of the operation of the database and/or the activity of personal data processing to which the violation refers to, for a maximum period of 6 (six) months, extendable for an equal period; and (ii) partial or total prohibition of the exercise of activities related to data processing.
 
The Company may also be held legally responsible for material, moral, individual, or collective damages caused to the holders of personal data, including when caused by subsidiaries, service providers, and partners who act as operators of personal data on behalf of the Company or as controllers in with the Company, because of any non-compliance with the obligations provided for in the LGPD. Any administrative sanctions or legal convictions may cause material financial impacts, in addition to adversely affecting the Company’s reputation in the market.
 
Actual or threatened epidemics, pandemics, outbreaks, or other public health crises, such as the COVID-19 pandemic, may have an adverse impact on our clients’ financial condition, consequently impacting our business.
 
Our business and the businesses of our clients could be materially and adversely affected by the risks (or the public perception of the risks) related to an epidemic, pandemic, outbreak, or other public health crisis, such as the recent outbreak of novel coronavirus (COVID-19).
 
An occurrence of a natural disaster, widespread health epidemic or other outbreaks could have a material adverse effect on our business, financial condition and results of operations.

Our business could be materially and adversely affected by natural disasters, such as fires or floods, or other events, such as wars, acts of terrorism, environmental accidents, power shortages or communication interruptions. The occurrence of a disaster or similar event could materially disrupt our business and operations. These events could also cause us to close our operating facilities temporarily, which would severely disrupt our operations and have a material adverse effect on our business, financial condition and results of operations. In addition, our net sales could be materially reduced to the extent that a natural disaster, health epidemic or other major event harms the economy of the countries where we operate. Our operations could also be severely disrupted if our clients or other participants were affected by natural disasters, health epidemics or pandemics or other major events.
 
If the Company’s customers/clients lose confidence in the security and use of their data because of the risk of leakage and/or misuse, the Company’s revenues may be adversely affected.
 
Attempts by experienced programmers or hackers to break into the security of networks of clients and customers or the security of Internet sites to misappropriate confidential information and data is currently a widespread phenomenon in the industry and affects computers and networks, passing through all platforms.
 
Actual or perceived security vulnerabilities of the Company’s products (or the Internet generally speaking) may lead some customers/clients to scale back or delay future purchases or purchase competing products other than Internet-based applications. Customers and clients will also be able to increase their spending to protect their computer networks from security breaches, which could delay the adoption of new technologies.
 
Any of such actions by customers and clients could harm the Company’s business and revenues.
 
The Company may have its customer base affected if its support and customer success processes are not adequate to serve its customers.
 
In view of the Company’s growth strategy, whether through acquisitions or organic growth, its product portfolio and customer base are expected to increase, bringing challenges from the point of view of covering the digitalization of customer support and service processes, as well as the implementation and maintenance of customer success initiatives.
 
If the Company is unable to provide service and support in an agile manner, in an appropriate period and in accordance with clients expectations, as well as contribute to the success of these customers through effective customer success processes and tools, our customer retention rate and its results may be adversely affected.
 
Unfavorable conditions in the Company’s industry or the global economy, as well as reductions in information technology expenditures, may limit the Company’s ability to grow and develop its business and negatively affect its operating results.
 
The Company’s operating results may vary depending on the impact of changes in the industry or the global economy relating to the Company or its customers/clients. The growth in revenue and potential profitability of our business depends on the demand for the Company’s software, processing services and support services related thereto, whose operation may also be affected by macroeconomic variables that significantly alter the interest rate, as well as low economic growth, factors that may inhibit customer demand for credit, change the conditions for granting credit and the company’s competitiveness.
 
In view that the Company acts as a service provider, part of its revenue comes from the number of new users in each of its customers/clients, which in turn is influenced by the policy for hiring employees of customers and potential customers/clients. To the extent that unfavorable economic conditions cause the Company’s customers/clients and potential clients to maintain or reduce demand for its services, its revenue may be negatively affected. Historically, economic crises have resulted in global reductions in information technology spending, as well as the pressure for longer billing cycles.
 
Proceedings involving the Company’s subsidiaries may give rise to subsidiary legal liability for the Company.
 
The Company may also be held jointly and severally liable for paying a fine and full compensation for the damages caused because of practices against the Anti-Corruption Law by its subsidiaries, affiliates, consortium or, within the scope of the corresponding agreements entered into with third parties, which could materially and adversely affect its reputation, business, financial condition and operating results or the market price of its shares.
 
Negative results of controlled companies may negatively affect the Company’s operating result.
 
The Company holds direct and indirect interest in several companies. Thus, part of its result derives from the results of such companies and, therefore, their unsatisfactory results may negatively affect the Company’s results. Moreover, the worsening of the sectorial and market conditions in the operations of such businesses could negatively affect the consolidated result of the Company’s operations.
 
Risks related to the Company’s managers
 
The Company’s continuity largely depends on its capacity to form and maintain potential successors to assume positions in the administration and in other positions considered strategic and depends on of the qualification of its professionals to succeed in its business, especially in relation to the definition and implementation of its strategies and development of its operations, products and services. Additionally, in the case of acquired companies, entrepreneurs may not remain in business after the period earn-out, and the Company may not have successors prepared to succeed them. If we are unable to promote the succession in these companies properly, the Company may be adversely affected by the loss of knowledge of the business (know-how) and having its operating results and its growth strategy impacted.
 
In this way, the loss of any person holding a key position could significantly harm the business and operating results of the Company, in case its succession plan is not effective. The company is also based on the continuity of service provision by qualified key employees with specific knowledge in technology, admittedly scarce in the current scenario, considering the high demand for these professionals in the market and the increasingly globalized competition for these talents.
 
In addition, the increasing adoption of remote work models in the general market increases competition for hiring these professionals, by breaking down or limiting the impact of territorial barriers. Furthermore, there are strong and continued competition in the information technology industry for hiring highly skilled professionals in the commercial, technical and other areas, and the Company competes, at a global level, in hiring these professionals. Consequently, the Company may not be able to obtain skilled labor or may have to offer higher remuneration to attract and retain skilled labor, which may represent costs additional costs not offset by increased productivity or higher prices.
 
The Company, additionally, may not be able to train and qualify its internal professionals in time and sufficient quantities to reduce dependence on hiring market professionals to meet demand.
 
Judicial or administrative decisions unfavorable to the Company’s management may affect adversely affect its operating results.
 
The Company’s managers may become, defendants in investigations, proceedings judicial and administrative and arbitration procedures, of the most diverse natures, including, but not limited to, civil, tax, labor, personal data protection and criminal proceedings.
 
Contrary decisions or agreements unfavorable to the Company’s management may affect its business, its financial condition and reputation in a negative way, including causing the loss of rights to contract with the public administration, to receive tax incentives or benefits or any funding and resources from the public administration or the right to exploit the telecommunications services provided. Still, we cannot ensure that the provisions constituted by the Company, in view of subjective aspects and critical judgments exercised by management in determining the possibility of loss attributed to each lawsuit, will be correct and sufficient to cover the total cost arising from judicial or administrative proceedings.
 
Judicial and administrative decisions unfavorable to the Company’s directors and directors, especially in processes involving relevant amounts and related causes, which reach substantial amounts or prevent the conducting business as initially planned, may have an adverse effect on the results of the Company, as well as its business, financial condition and the market value of its shares. Furthermore, any unfavorable decisions to the Company’s directors and directors may prevent the exercise of the functions they perform in the Company.
 
The loss of relationship with and/or bankruptcy of service providers, including as regards to services provided by information technology partners, or support services to maintain products and services, may impact the continuity of the Company’s operations.
 
The Company has suppliers and providers that are critical for the continuity of the operation and the provision of services to its customers and clients. The services and products that the Company uses from its partners, for example, telecommunication systems, internet, and data centers are essential parts of its infrastructure. In the event of interruptions or fluctuations in the level of service provision of these suppliers, including because of information security and data protection failures, the products and services offered by the Company to its clients and customers may be affected, and the failures that have occurred may negatively affect the market’s perception of the quality and reliability of its products or services.
 
The concentration on a few providers of services that are critical to the Company’s operation can generate a level of dependence that is harmful to the Company and negatively impact the quality of its products and services in any event of failure or inadequacy of the service level by its providers.
 
If the Company’s suppliers or service providers have problems that impact or prevent the delivery and quality of products and services or suffer an insolvency or bankruptcy process that compromises the fulfillment of their contracts, the Company may be adversely impacted on its operations and on the products and services offered to its clients/customers, as well as on its result, its reputation with customers/clients and the market, and the rate of customer/client retention.
 
The Company licenses technological platform providers that may affect and/or not keep up with delivery expectations according to our constantly developing product portfolio.  Such providers may also impact the initiatives of converging technologies.
 
Dependence on such suppliers and potential absences or failures in mapping the prioritization of products and solutions can affect the Company’s decision-making, costs and overall technological interfacing with processes, people, and systems. In addition, there is no way to guarantee that suppliers will follow and respond to changes in the external environment, strategic business goals, and those caused by disruptive solutions. In such cases, the Company’s business and results of operations may be adversely affected.
 
Changes or different interpretations in tax and labor legislation may adversely affect the Company’s strategy and results.
 
Tax authorities have been frequently changing tax regimes, such as changes in tax rates and the creation of taxes, whether temporary or permanent, which can affect the Company’s strategy. Some of these changes could increase the Company’s tax burden, which could restrict its ability to do business in our current markets and, therefore, materially adversely affect profitability.
 
The Company currently receives certain tax benefits and/or special taxation regimes. It is not possible to guarantee that these benefits will be maintained or renewed in the future, given the current political and economic environment in Brazil, especially in election year. If the Company cannot renew its tax benefits, or if such benefits are changed, limited, suspended, or revoked, the Company may be adversely affected. Moreover, certain tax laws may be subject to controversial interpretations by tax authorities. If the tax authorities may interpret tax laws in a way different from the Company’s interpretations, the Company could be adversely affected.
 
In addition, the activities performed by the Company are subject to the direct or indirect levy of taxes, fees, and contributions, which are subject to change, which may adversely affect its business, financial situation, operating results, and cash flow.
 
These changes may result in higher taxation to be applied: (i) on the Company’s gross revenue; (ii) on royalties that are paid to the Company’s partners, both in Brazil and abroad; (iii) on financial income; (iv) on gross profits; and (v) on the Company’s workforce costs. The adverse impact of such changes in tax and labor legislation may negatively affect the Company’s strategy and competitiveness vis-à-vis its competitors, especially foreigners, if these changes only increase taxation for companies established in Brazil.
 
Unforeseen changes in financial sector regulations could significantly impact the success of new business models.
 
The financial technology market is one of the pillars of the Company’s growth strategy. This requires operating in the financial segment, a domain governed by the Central Bank of Brazil (Bacen), which has a regulatory framework that is historically dynamic because of novel business models and products that arise in this sector.
 
Revisions in the current regulation or new regulatory requirements of the Central Bank of Brazil may hamper the growth of the products already offered, make it difficult or impossible to introduce new products, or require a significant capital outlay to ensure compliance. Should these events take place, the Company may experience a negative impact on its strategy and outcomes.
 
Foreign exchange rate risk.
 
The foreign exchange rate risk results from the possibility of losses because of fluctuations in exchange rates, which increase liabilities arising from loans and purchase commitments in foreign currency or that reduce the assets arising from amounts receivable in foreign currency. We may also have currency risk on any of our other assets and liabilities denominated in currencies, or linked to currencies other than our operating currency, including certain agreements entered into by the Company. Appreciation or depreciation of the Brazilian real against any of these foreign currencies, particularly the American dollar, could have a material adverse effect on our financial position and operational results.
 
Devaluations of the real against the dollar may create additional inflationary pressures in Brazil and cause interest rates to rise, which could negatively affect economic growth and harm the Company’s financial condition and the results of its operations. On the other hand, appreciation of the real against the American dollar and other foreign currencies could lead to a deterioration of the foreign exchange current account, as well as reduce the growth derived of exports. Depending on the circumstances, either devaluation or appreciation of the real may have an adverse effect on the growth of the Brazilian economy and on the Company.
 
Main Risks
 
Among the risks listed above, Evertec BR considers the most relevant to be:
 

 •
The Company may not be able to compete effectively in the highly competitive software industry.

•
If we cannot keep pace with rapid developments and change in our industry and continue to acquire new clients, the use of our services could decline, reducing our revenues.

•
Acquisitions present risks, and the Company may not reach the strategic goals foreseen at the time of any transaction.

•
Our systems and our third party providers’ systems may fail due to factors beyond our control, which could interrupt our service, cause us to lose business and increase our costs.

•
The Company is subject to risks associated with non-compliance with data protection laws (both domestic and international) and may be adversely affected by the imposition of fines and other types of sanctions.
 
Risks associated to Evertec Inc

Risks associated with Evertec Inc, which is the indirect controller of Evertec BR, and with the direct shareholders of Evertec BR, may indirectly affect Evertec BR. Evertec Inc’s and Evertec  BR’s direct shareholders risks are incorporated by reference into this Proposal and are available at (https://www.sec.gov/ix?doc=/Archives/edgar/data/1559865/00015598652300000 7/evtc-20221231.htm#ifdb1f224722c45ad88af6857149edbf3_25) and (https://www.sec.gov/ix?doc=/Archives/edgar/data/1559865/000155986523000037 /evtc-20230630.htm#i90f052b9c07c4a58b8bb6dc58ddee730_127).

b.  Description of the main changes in risk factors that occurred in the previous year and expectations regarding the reduction or increase in risk exposure as a result of the transaction.

Not applicable, considering that there were no relevant changes in the risk factors of Evertec BR in the previous year, as well as there are no expectations regarding the reduction or increase in the exposure to risks of Evertec BR as a result of the Transaction, except for the fact that it will be exposed to Sinqia’s risks, which are already disclosed in Sinqia’s Reference Form, available on the CVM website (www.gov.br/cvm) and the risks generally related to acquisitions, as detailed under item 12.a above.

c.    Description of its activities, pursuant to items 1.2 to 1.5 of the reference form.

Evertec BR is a corporation organized under the laws of Brazil and governed by its bylaws, whose corporate purpose is the: (i) development and licensing of software and its processing; (ii) provision of maintenance and support services for software related to financial transactions, own or of third parties; (iii) software development consultancy and consultancy in the area of financial transactions, data processing inherent to the activities linked to the aforementioned activities; (iv) sale of software on behalf of third parties; and (v) management of shareholdings in other companies and investments (holding).

d.    Description of the economic group, pursuant to item 6 of the reference form.

Please refer to item 13 below.

e.     Description of the corporate capital, pursuant to item 12.1 of the reference form.

The fully subscribed and partially paid in corporate capital of Evertec BR is of R$ 130,351,636.00 (one hundred and thirty million, three hundred and fifty-one thousand, six hundred and thirty-six reais), divided into 13,035,164 (thirteen million thirty-five thousand one hundred and sixty-four) common shares, all registered and without par value, held by (a) Caleidon S.A., a company headquartered in Uruguay, (b) Evertec Chile SpA., a company headquartered in Chile and (c) Evertec Group, LLC, a company headquartered in Puerto Rico. All of Evertec BR’s corporate capital is held indirectly by Evertec Inc.

The subscribed and not paid-in corporate capital, in the amount corresponding to R$1,240,998.53 (one million, two hundred and forty thousand, nine hundred and ninety-eight reais and fifty-three cents), will be fully paid-in within 1 (one) year from February 15, 2023.

13.     Description of the capital and control structure after the transaction, pursuant to item 6 of the Reference Form.
6.1/6.2 – Captable

Shareholder
CPF/CNPJ
% of Common Shares
% of Preferred Shares
% Total Shares
Controlling Shareholder
Party to a shareholders’ agreement?
EVERTEC BRASIL INFORMÁTICA S.A.
06.187.556/0001-15
100%
0%
100%
Yes
No

6.3 – Corporate Capital Distribution
 
Date of last general shareholders’ meeting / Date of last change
11/05/2023
Number of natural person shareholders
0
Number of legal entities shareholders
1
Number of institutional investor shareholders
0

Common shares free float
0
0%
Preferred shares free float
0
0%
Total
0
0%

6.4 – Equity in other Companies
 
Name
CNPJ
Issuer’s Stake (%)
Compliasset Software e Soluções Digitais S.A.
25.025.534/0001-01
60%
Homie do Brasil Informática S.A.
07.914.074/0001-82
60%
LOTE45 Participações S.A.
07.923.056/0001-67
52%
Rosk Software S.A.
06.145.272/0001-66
51%
Sinqia Tecnologia Ltda.
03.017.804/0001-91
100%
Torq Inovação Digital Ltda.
30.256.443/0001-09
100%

6.5 – Corporate Chart of Shareholders and Economic Group

 

6.6 – Other relevant information

Not applicable.

14.    Number, class, kind and type of securities of each company involved in the transaction held by any other companies involved in the transaction, or by persons connected with such companies, as defined by the rules dealing with public offers for the acquisition of shares.

Evertec Inc holds, on this date, indirectly, 13,035,164 common shares, registered and without par value, representing 100% of the share capital of Evertec BR.

15.    Exposure of any of the companies involved in the transaction, or of persons linked to them, as defined by the rules dealing with public offers for the acquisition of shares, in derivatives referenced to securities issued by the other companies involved in the transaction.

Sinqia: Not applicable.

Evertec BR: Not applicable.

16.    Report covering all trades carried out in the last 6 (six) months by the persons indicated below with securities issued by the companies involved in the transaction:

a.      By the companies involved in the transaction:

(i)      Private purchase transactions


 •
Average price:


•
Number of stocks involved:


•
Securities involved:


•
Percentage in relation to class and kind of security:


•
Other relevant conditions:

Sinqia: The Company has not carried out any private purchase transactions in the past 6 months.

Evertec BR: Evertec BR has not carried out any private purchase transactions in the past 6 months.

(ii)     Private sale transactions

Sinqia: the table below refers to the private sales made by the Company of its own shares as a result of the exercise of call options granted under its stock option plan and shares granted under its stock grant plan.

Private sale transactions performed by the Company
1) Average price:
R$ 13.52
2) Number of stocks involved:
163,678
3) Securities involved:
SQIA3
4) Percentage in relation to class and kind of security:
0.1861%
5) Other relevant conditions
Sales related to the exercise of stock options by certain executives of the Company.

Evertec BR: Evertec BR has not carried out any private sale transactions in the past 6 months.

(iii)    Purchase transactions in regulated markets


 •
Average price:


•
Number of stocks involved:


•
Securities involved:


•
Percentage in relation to class and kind of security:


•
Other relevant conditions:

Sinqia: The Company has not carried out any purchase transactions in regulated markets in the past 6 months.

Evertec BR: Evertec BR has not carried out any purchase transactions in regulated markets in the past 6 months.

(iv)          Sale transactions in regulated markets


 •
Average price:


•
Number of stocks involved:


•
Securities involved:


•
Percentage in relation to class and kind of security:


•
Other relevant conditions:

Sinqia: The Company has not carried out any sale transactions in regulated markets in the past 6 months.

Evertec BR: Evertec BR has not carried out any sale transactions in regulated markets in the past 6 months.

b.      Related parties involved in the transaction

(i)   Private purchase transactions

Sinqia: the table below refers to the private purchases made by related parties of the Company, of shares issued by the Company, as a result of the exercise of call options granted under its stock option plan and shares granted under its stock grant plan.

Private purchase transactions performed by related parties of the Company
1) Average price:
R$ 16.05
2) Number of stocks involved:
114,589
3) Securities involved:
SQIA3
4) Percentage in relation to class and kind of security:
0.1303%
5) Other relevant conditions
Purchases related to the exercise of stock options by certain executives of the Company.

Evertec BR: there was no private purchase transaction of securities issued by the companies involved in the Transaction by Evertec BR related parties in the past 6 months.

(ii)    Private sale transactions


 •
Average price:


•
Number of stocks involved:


•
Securities involved:


•
Percentage in relation to class and kind of security:


•
Other relevant conditions:

Sinqia: there was no private sale transaction of securities issued by the companies involved in the Transaction by the Company’s related parties in the past 6 months.

Evertec BR: there was no private sale transaction of securities issued by the companies involved in the Transaction by Evertec BR related parties in the past 6 months.

(iii)     Purchase transactions in regulated markets


 •
Average price:


•
Number of stocks involved:


•
Securities involved:


•
Percentage in relation to class and kind of security:


•
Other relevant conditions:

Sinqia: There was no purchase transaction in regulated markets of securities issued by the companies involved in the Transaction by the Company’s related parties in the past 6 months.

Evertec BR: There was no purchase transaction in regulated markets of securities issued by the companies involved in the Transaction by Evertec BR’s related parties in the past 6 months.

(iv)      Sale transactions in regulated markets

Sinqia: the table below refers to the sales in regulated markets made by related parties of the Company of securities issued by the Company in the past 6 months.

Sale transactions in regulated markets performed by related parties of the Company
1) Average price:
R$ 19.56
2) Number of stocks involved:
45,022
3) Securities involved:
SQIA3
4) Percentage in relation to class and kind of security:
0.0512%
5) Other relevant conditions
Sales of shares in the Stock Exchange performed by executives of the Company.

Evertec BR: There was no sale transaction in regulated markets of securities issued by the companies involved in the Transaction by Evertec BR’s related parties in the past 6 months.

17.   Document by which the Special Independent Committee submitted its recommendations to the Board of Directors, if the transaction was negotiated under the terms of Guidance Opinion No. 35 of 2008.

Not applicable.

Annex IV to Exhibit 99.2 – Information on the Exercise of the Withdrawal Rights

EXHIBIT IV
INFORMATION ON THE EXERCISE OF THE WITHDRAWAL RIGHT
(Exhibit H of CVM Resolution No. 81)

1.
Describe the event from which the withdrawal right arose/will arise and its legal base

Pursuant to articles 137, 2nd paragraph and article 252, 2nd paragraph of the Brazilian Corporations Law, the Merger of Shares, as defined in the main section of the Proposal, will give rise to a withdrawal right for shareholders of the Company who do not vote in favor of the Merger of Shares, who abstain from voting or who do not attend the shareholders’ meeting, provided that they expressly state their intention to exercise their withdrawal right within 30 days from the date of publication of the minutes of the shareholders’ meeting that approved the Merger of Shares.

2.
Inform the shares and classes to which the withdrawal right applies
 
The withdrawal right will apply to all common shares issued by Sinqia.
 
3.
Provide the date of the first publication of the call notice of the Shareholders Meeting, as well as the date in which the material fact related to the resolution from which the withdrawal right arose was disclosed
 
Material Fact: July 20, 2023.
 
Call Notice: August 16, 2023.
 
4.
Provide the term for the exercise of the withdrawal right and the date that will be considered for the purposes of establishing the holders of the shares who will be entitled to exercise the withdrawal right
 
Pursuant to articles 137, 2nd paragraph and article 252, 2nd paragraph of the Brazilian Corporations Law, shareholders of the Company who vote against the Merger of Shares, who abstain from voting or who do not attend the shareholders’ meeting, and who expressly state their intention to exercise their withdrawal right within 30 days from the date of publication of the minutes of the shareholders’ meeting that approved the Merger of Shares, will be granted the withdrawal right.
 
Pursuant to article 137, 1st paragraph, of the Brazilian Corporations Law, the withdrawal right, with the consequent payment of the reimbursement based on the book value of the shares issued by Sinqia, will only be ensured in relation to the shares issued by the Company which the dissident shareholder has demonstrably held since the close of trading on July 20, 2023 (the date of disclosure of the notice of Material Fact relating to the Transaction) and which have been held by him, in an uninterrupted manner, until the date of the effective exercise of the withdrawal right.

5.
Provide the reimbursement value per share or, if not previously determined, the management’s estimate of this value
 
The reimbursement value, under the terms of article 45 of the Brazilian Corporations Law, corresponds to BRL 7.39 per share.
 
6.
Inform how the reimbursement value was calculated
 
In accordance with the provisions of article 45 of the Brazilian Corporations Law, the reimbursement value was calculated based on the book value per share issued by the Company, as calculated in the financial statements for the fiscal year ended on December 31, 2022, approved at the Company’s annual shareholders’ meeting held on April 27, 2023, considering the number of shares issued by Sinqia on that date, without prejudice to the right to request the preparation of a special balance sheet.
 
7.
Inform if the shareholders will be entitled to request the preparation of a special balance sheet
 
Pursuant to article 45, 2nd paragraph of the Brazilian Corporations Law, shareholders will be entitled to request the preparation of a special balance sheet, given that the resolution will take place more than 60 days after the date of approval of the Company’s latest balance sheet by the annual shareholders’ meeting. For information purposes, the book value per share issued by the Company, according to the Company’s quarterly financial information for the 2nd quarter of 2023, corresponds to BRL 7.27 per share.

8.
If the reimbursement amount is determined by means of appraisal, list the specialists or specialized firms recommended by management
 
Not applicable.
 
9.
In the event of merger, merger of shares or consolidation (fusão) involving controlling, controlled or under common control companies: a) Calculate the replacement ratio of the shares based on the net equity amount at market price or other criteria accepted by the Brazilian Securities Commission (“CVM”); b) Inform if the replacement ratios of the shares provided in the transaction protocol are less beneficial than the ones calculated in accordance with item 9(a) above; c) Inform the reimbursement amount calculated based on the net equity amount at market price or other criteria accepted by CVM

Not applicable, since the Merger of Shares does not involve parent and subsidiary companies or companies under common control.

10.
Provide the equity value of each share according to the latest balance sheet approved
 
The book value per share calculated according to the latest balance sheet approved by the shareholders’ meeting is BRL 7.39.
 
***

Annex V to Exhibit 99.2 –Sinqia financial results for quearter ended on March 31, 2023

 

 

 

 

     
     

1Q23

 
HIGHLIGHTS

Annualized Net Revenues

R$642 million

R$164.2 million in the quarter, 18.3% higher than 1Q22
   

Annualized EBITDA

R$165 million

R$43.8 million in 1Q23, 20.9% higher than 1Q22, with EBITDA margin of 26.7%
   

Software ARR

R$556 million

21.7% higher than 1Q22
     

 

São Paulo, May 8th, 2023. Sinqia S.A. (B3: SQIA3) (“Company”), a leading provider of technology for the financial system, announces the consolidated results for the first quarter of 2023 (“1Q23”).

 

(R$ '000) 1Q23 1Q22 Var.
1Q23/1Q22		 4Q22 Var.
1Q23/4Q22		 LTM-1Q23 LTM-1Q22 Var. LTM-
1Q23/LTM-1Q22
ARR 556,217 457,106 21.7% 520,754 6.8% 556,217 457,106 21.7%
Net Revenue 164,241 138,856 18.3% 166,272 -1.2% 641,857 423,214 51.7%
Software 140,336 117,120 19.8% 140,840 -0.4% 545,696 341,510 59.8%
Service 23,905 21,736 10.0% 25,432 -6.0% 96,161 81,702 17.7%
Gross Profit 67,252 58,224 15.5% 72,663 -7.4% 271,976 167,739 62.1%
Gross Margin 40.9% 41.9% -1.0 p.p. 43.7% -2.8 p.p. 42.4% 39.6% 2.7 p.p.
Adjusted EBITDA 43,795 36,235 20.9% 41,473 5.6% 165,133 94,358 75.0%
Adjusted EBITDA Margin 26.7% 26.1% 0.6 p.p. 24.9% 1.7 p.p. 25.7% 22.3% 3.4 p.p.

 

         
SQIA3: R$ 15.62 per share 
Total shares: 87,941,972 
Market cap: R$ 1.37 billion		 EARNINGS CALL
May 09th , 2023 (Tuesday)
11 a.m. (Brasília) / 10 a.m. (NYC) / 3 p.m. (London)
Access the videoconference via QR code or this link		  
         

  

  1Q23 Results 2
 
 

 

 

| MESSAGE FROM MANAGEMENT

 

The results of this first quarter confirm our successful growth trajectory. Since our IPO in 2013, driven by successful acquisitions and integrations, we have multiplied by 13 our revenues. This significant progress has secured our market leadership. With a comprehensive product portfolio and a broad customer base, we have established a solid path for growth and profitability.

 

In this quarter, we reached a record in net sales of Software ARR, totaling R$14.7 million, already reaping the benefits of the recent commercial reorganization, leveraging cross-selling opportunities, and increased investment in R&D. In addition, contractual adjustments for inflation and volume amounted to R$14.1 million, a strong pace despite inflationary slowdown, driven by a significant increase in consumption. Thus, the Software ARR reached a record of R$556.2 million, a growth of 21.7% compared to the same period last year.

 

Net revenue in the quarter reached R$164.2 million (+18.3% vs. 1Q22), with Software growing 19.8% and Services 10.0%. As for profitability, Gross Profit was R$ 67.3 million (+15.5% vs. 1Q22) and Adjusted EBITDA was R$43.8 million (+20.9% vs. 1Q22), with a record Adjusted EBITDA margin of 26.7%.

 

Efficiency is our watchword for 2023 and we are conducting several initiatives related to pricing, streamlining our cost structure, and optimizing expenses that will generate significant results as early as the second half of 2023.

 

Also in the first quarter, we began the integration of Compliasset, our most recent acquisition and a reference in technological solutions for managing regulatory compliance programs. With this consolidation, our customer base reached a record (964 clients), an important progress to further increase cross-selling.

 

Thinking in the long term, we continue to advance in the unification of our product portfolio, implementation agility, and ensuring customer satisfaction. In terms of M&A, given the current economic scenario, we continue to analyze opportunities available in the market, but in a more selective and careful manner, seeking to maintain a healthy balance between leverage and growth. In the first quarter, we amortized R$ 94.4 million in debt, maintaining the trend of reducing our financial leverage.

 

Aware of how seasonality impacts our numbers more noticeably in a scenario where there were no new relevant acquisitions, we are satisfied with the first quarter, aware of the challenge imposed by the more adverse economic scenario, but confident in the results for the year. Our business is stable, predictable, and resilient.

 

  1Q23 Results 3
 
 

 

 

| RECENT EVENTS

 

Election of the Board of Directors. At the Annual Shareholders’ Meeting held on April 27, our shareholders elected the Board of Directors (“BD”) for the next term of office. The BD continues to include 7 members, 6 of which were re-elected and 1 new member joined the body. Mr. Carlos Furlan (Independent Member) no longer belongs to the Board of Directors, having made valuable contributions to discussions on the Company's innovation program. Mr. Caio Lewkowicz (Independent Member) has joined the staff.

 

Election of the Fiscal Council. At the Annual Shareholders’ Meeting held on April 27, we installed, for the 2nd consecutive year, the Fiscal Council (“FC”), whose purpose is to supervise the actions of managers and verify their compliance with legal and statutory duties and give an opinion on the financial statements and reports of the management, among other attributions described in Art. 163 of the Brazilian Corporation Law. To compose the FC, the Shareholders’ Meeting elected Messrs. Augusto Frederico Caetano Schaffer (Permanent Member) and Eduardo Sanchez Palma (Alternate); Wesley Montechiari Figueira (Permanent Member) and Cristiana Pereira (Alternate); and Hugo Paulo Ehrentreich (Permanent Member) and Bruno Cals de Oliveira (Alternate).

 

Payment of Interest on Shareholders' Equity (“JSCP”). At the Annual Shareholders’ Meeting held on April 27, we approved the payment of interest on shareholders’ equity for the year 2022, in the total amount of R$4,690,007.39, equivalent to R$0.055404594 per share. Shareholders on the base date of May 5, 2023 will be entitled to JSCP, and the shares will be traded "ex-JSCP" as from May 8, 2023. JSCP payment will be made in reais, in one single installment, as from August 31, 2023, without monetary adjustment.

 

  1Q23 Results 4
 
 

 

 

| OPERATING PERFORMANCE

 

Software ARR1

 

Software ARR reached a record R$556.2 million in 1Q23, 21.7% higher than that reported in 1Q22, representing a total addition of R$99.1 million. Excluding Compliasset's portfolio of contracts, consolidated in the quarter, in the amount of R$6.7 million, the ARR for the quarter increased by 20.2% in the annual comparison, representing a net addition² of R$92.4 million.

 

The net addition highlighted above reflected the combination of accumulated balances of: (i) net sales³ in the amount of R$39.1 million, given our satisfactory sales performance in the last 12 months, with an important contribution from cross-selling; and (ii) inflation and volume adjustments in the amount of R$53.2 million, 36.4% of which corresponded to inflationary transfers and 63.6% to increased volumes.

 

From the business point of view, the accumulated net addition amounted to R$37.7 million in Funds, R$22.2 million in Digital, R$15.2 million in Pension, R$11.4 million in Banks and R$5.9 million in Consortium. Therefore, all business units had positive net additions. In the case of the first two units, that is, Funds and Digital, the last 12 months were marked by important sales and expressive adjustments.

 

It is worth noting that the net addition in 1Q23 was a record, totaling R$28.7 million. Net sales of R$14.7 million were punctually high in the quarter, as a result of the closing of some sales opportunities that were expected for 2022, combined with above-average churn, mainly driven by Pension customers especially those whose cancellation was foreseen at the time of the acquisition of Mercer Seguridade. Inflation and volume adjustments of R$14.1 million remain strong despite the inflationary slowdown.

 

Software ARR (R$ million)

 

  

 

1 Annualized signed contracts, implemented or not, which started to generate recurring revenues after completion of the implementation. 

2 Result of the sum of sales, contract cancellations and contractual adjustments.

3 Result of the sum of sales and contract cancellations.

 

  1Q23 Results 5
 
 

 

 

Number of Customers

 

The Company ended the first quarter of 2023 with 964 customers in its portfolio, or an increase of 250 customers compared to the same period in 2022, as a result of the consolidation of Compliasset’s base and new sales. In 1Q23, the largest customer accounted for 2.2% of net revenues, down 0.3 p.p. against the same period of the previous year, reflecting the dilution of the portfolio on the entry of new customers.

 

Number of Customers

 

 

| FINANCIAL PERFORMANCE

 

Net Revenues

 

Net revenues for the quarter reached R$164.2 million, up 18.3% over the same period of the previous year. This result was due to the 19.8% increase in the Software unit, which totaled R$140.3 million, combined with the 10.0% growth in Services, which reached R$23.9 million. The highlight is the Funds unit, which outperformed the other units, having grown 50.2% compared to 1Q22.

 

Net Revenues (R$ million)

 

 

  1Q23 Results 6
 
 

 

 

Recurring Revenues

 

In 1Q23, recurring revenues reached a record of R$139.5 million, up by 22.9% compared to 1Q22. The level of recurring revenues over total net revenues in the quarter was 84.9%, up by 3.2 p.p. compared to the same period of the previous year. This performance is explained by both, the implementation of the backlog originated by new sales and the contractual readjustments that occurred in the quarter.

 

It is also worth mentioning that the drop in variable revenues in the annual comparison was mainly due to one-off projects carried out in some Services customers in 1Q22 that were not repeated in 1Q23. In the quarterly comparison, this reduction is explained by the seasonal effect of these revenues, given that Software customers tend to accelerate specific customization projects in the last quarter, which is not observed in other quarters.

 

Recurring Revenues (R$ million)

 

 

Costs

 

Costs for the quarter totaled R$97.0 million, 20.3% higher than in 1Q22. This increase was mainly due to the growth in the number of employees and salary adjustments arising from the collective bargaining agreement that was paid at the beginning of the year to workers located in São Paulo, which represented 67,0% of Company’s staff.

 

Gross Profit and Gross Margin

 

Gross profit for the quarter was R$67.3 million, or 15.5% higher than in the same quarter of the previous year, while the gross margin ended 1Q23 at 40.9%, or 1.0 p.p. below that observed in 1Q22. This performance was impacted by the reduction in variable income, and higher costs due to the increase in the number of employees and collective salary adjustments.

 

  1Q23 Results 7
 
 

 

 

Total Gross Profit (R$ million)

 

 

| Software Unit

 

Software Net Revenues

 

In 1Q23, net revenues from Software reached R$140.3 million, up 19.8% over the same period of the previous year, mainly driven by the good performance observed in all business units. We highlight that this growth already reflects the current dynamics of our business, in which we see an intensification of cross-selling with sales both between units, especially between (i) Funds and Pension and (ii) Digital and Consortia, and within the same unit.

 

Net subscription revenue was R$116.3 million, 24.6% higher than the same period last year, as a result of the good performance of all business units, with emphasis on Funds, which performed 49.4% above 1Q22, followed by Digital, which grew by 39.6% over the same period observed. Implementation and customization revenues, in turn, reached R$24.1 million, up by 1.2% over the same period of the previous year.

 

Software Net Revenues (R$ thousand)

 

 

  1Q23 Results 8
 
 

 

 

Software Costs

 

Software costs in the quarter totaled R$78.0 million, 24.4% higher than those reported in 1Q22, mainly reflecting the increase in teams in the period and the salary adjustment in January for employees in São Paulo.

 

Depreciation and Amortization costs totaled R$2.1 million in the quarter.

 

Software Gross Profit and Gross Margin

 

Gross profit in the quarter reached R$62.3 million, up by 14.5% compared to 1Q22. The gross margin was 44.4% in the period, 2.0 p.p. below that reported in the previous year, due to the increase in costs against revenues, as explained above.

 

Software Gross Profit (R$ million)

 

 

| Services Unit

 

Net Revenues from Services

 

Net Revenues from Services reached R$23.9 million in the quarter, up by 10.0% over the same period of the previous year. Outsourcing revenues was R$23.3 million, up by 15.3% over 1Q22, driven by the increase in operations within the customer’s base. The Projects line, in turn, totaled R$0.7 million, down by 56.0% compared to the amounts reported in 1Q22, mainly impacted by one-off projects observed in 1Q22 that were not repeated in the current quarter.

 

  1Q23 Results 9
 
 

 

 

Net Revenues from Services (R$ million)

 

 

Services Costs

 

The costs of services totaled R$19.0 million in the quarter, 5.9% above the amount reported in 1Q22, mainly as a result of the increase in expenses related to the expansion of operations in some customers of the base.

 

Depreciation and Amortization costs in 1Q23 amounted to R$0.9 million.

 

Gross Profit and Gross Margin from Services

 

Gross profit from Services in 1Q23 reached R$4.9 million, up by 29.3% over the same period of the previous year, while the gross margin ended the quarter at 20.6%, 3.1 p.p. higher than in 1Q22. This result is explained by the good performance of Outsourcing and the stabilization of turnover against the same period of the previous year. The margin expansion demonstrates that the offer of more specialized services and the expansion of the customer base has proven to be an efficient strategy to circumvent the challenging scenario, where we see customers being more cautious due to the macroeconomic situation.

 

Gross Profit from Services (R$ million)

 

 

  1Q23 Results 10
 

 

 

 

 

 

 

Operational Expenses

 

Selling, General & Administrative Expenses

 

Selling, general and administrative expenses totaled R$28.4 million, 17.2% higher than in 1Q22. In the quarter, expenses represented 17.3% as a proportion of net revenues, remaining stable against the same period of the previous year, even considering higher expenses with senior management and the sales and corporate teams, as well as the impacts of the annual collective bargaining agreement applied to the salary base in São Paulo as from Jan/23.

 

The main variations observed in the annual comparison occurred in the Sales and Administrative lines, which, together, recorded a 34.8% growth against 1Q22, reflecting, as mentioned above, the increase in expenses due to the restructuring of the sales area, the reinforcement of the staff and senior management in 2022, and the impact of the annual collective bargaining agreement in São Paulo. Additionally, IT and Facilities expenses grew by 67.1% compared to the same period of the previous year, due to the increase in the number of employees and salary adjustments, in addition to the increase in expenses with Information Security systems.

 

These increases were offset by the reduction in expenses with: (i) M&A, due to the lower volume of ongoing transactions; (ii) R&DI, given the activation of expenses relating to project development, which amounted R$2.0 million; and (iii) Other expenses, which were positively impacted by the reversal of the provision for labor and civil contingencies in the amount of R$2.3 million, with no cash impact.

 

General and Administrative Expenses (R$ thousand)

 

(R$ ‘000) 1Q23 1Q22 1Q23x1Q22 4Q22 1Q23x4Q22 LTM-1Q23 LTM-1Q22 LTM-1Q23 x
LTM-1Q22
SG&A Expenses (28,413) (24,238) 17.2% (34,496) -17.6% (122,875) (81,561) 50.7%
% of Revenue 17.3% 17.5% 2.0 p.p. 20.7% -3.4 p.p. 19.1% 19.3% -0.1 p.p.
Commercial (6,931) (5,817) 19.2% (7,032) -1.4% (28,464) (17,357) 64.0%
Marketing (991) (918) 7.9% (1,613) -38.6% (5,052) (2,636) 91.7%
Administrative (10,367) (7,014) 47.8% (10,947) -5.3% (38,563) (22,880) 68.5%
IT and Facilities (5,982) (3,581) 67.1% (5,449) 9.8% (21,690) (14,318) 51.5%
M&A (474) (1,394) -66.0% (469) 1.2% (1,560) (4,282) -63.6%
R&DI (2,028) (2,709) -25.1% (1,520) 33.5% (7,444) (10,647) -30.1%
Other expenses (1,639) (2,805) -41.5% (7,466) -78.0% (20,102) (9,442) 112.9%

 

Depreciation and amortization

 

In the quarter, total depreciation and amortization, which includes the portion that transits in costs and expenses, amounted to R$22.7 million, an increase of 41.2% over 1Q22. Depreciation of property and equipment totaled R$2.7 million, up by 9.9% compared to 1Q22, explained by the expansion in the lines of computers and peripherals and property leases. Amortization, in turn, amounted to R$19.9 million, increase of 47.0%, mainly impacted by the addition of intangible assets in the period, arising from the acquisitions made by the Company.

 

  1Q23 Results 11
 

 

 

 

 

 

Other amortizations were mainly impacted by the increase in the right of use of leases, given the higher expenses with servers.

 

Depreciation and Amortization (R$ thousand)

 

(R$ ’000) 1Q23 1Q22 1Q23 x1Q22 4Q22 1Q23 x4Q22 LTM-1Q23 LTM-1Q22 LTM-1Q23 x
LTM-1Q22
Depreciation and Amortization 22,662 16,048 41.2% 26,130 -13.3% 101,740 57,463 77.1%
Depreciation 2,746 2,498 9.9% 4,445 -38.2% 15,323 12,093 26.7%
Amortization 19,916 13,550 47.0% 21,685 -8.2% 86,417 45,366 90.5%
Amortization of acquisitions (Sinqia) 10,883 5,690 91.3% 12,402 -12.2% 50,490 22,596 123.4%
Amortization of acquisitions (minority interests) 1,712 1,832 -6.6% 1,693 1.1% 7,076 4,147 70.6%
Other amortizations 7,321 6,028 21.4% 7,591 -3.6% 28,851 18,623 54.9%

 

EBITDA and Adjusted EBITDA

 

Adjusted EBITDA reached a record R$43.8 million in the quarter, up by 20.9% over the same period of the previous year, with a 0.6 p.p. expansion in the EBITDA margin, which reached a record 26.7%. This performance is explained by the consolidation of results from the acquisitions carried out in recent quarters, combined with scale gains obtained in the period, as well as the dilution of expenses.

 

The adjustment made in the quarter in the amount of R$2.0 million is related to specific commitments assumed in the Company's recent acquisitions, and therefore, are not part of the day-to-day business and were adjusted accordingly.

 

Adjusted EBITDA (R$ million)

 

 

 

EBITDA reconciliation2 and Adjusted EBITDA3 (R$ thousand)

 

(R$ '000) 1Q23 1Q22 1Q23 x 1Q22 4Q22 1Q23 x 4Q22 LTM-1Q23 LTM-1Q22 LTM-1Q23 x
LTM-1Q22
EBITDA 41,770 36,235 15.3% 41,473 0.7% 161,763 92,997 73.9%
(+) Extraordinary expenses - earnout 2,025 - n.a - n.a 2,674 1.361 96.4%
(+} Extraordinary costs - integration - - n.a - n.a 696 - n.a
Adjusted EBITDA 43,795 36,235 20.9% 41,473 5.6% 165,133 94,358 75.0%
Adj. EBITDA Margin 26.7% 26.1% 0.6 p.p. 24.9% 1.7 p.p. 25.7% 22.3% 3.4 p.p.

 

 

2EBITDA is a non-accounting measurement prepared by the Company in accordance with CVM Instruction 527/12, which consists of the net result for the period, plus taxes on profit, financial result, and depreciation and amortization.

3Adjusted EBITDA, in turn, corresponds to EBITDA, plus extraordinary effects from acquisitions and non-recurring events.

 

  1Q23 Results 12
 

 

 

 

 

 

Financial Result

 

The financial result for the quarter was negative by R$14.5 million. Financial income reached R$5.9 million, up by 11.4% compared to 1Q22, explained by the increase in income from financial investments resulting from higher in interest rates. Financial expenses, in turn, totaled R$20.4 million, up by 14.4% over the same period of the previous year. This performance is explained by the growth in: (i) interest on loans, impacted by both, the increase in debt due to the issuance of debentures in Jul/22 and the increase in interest on the outstanding balance; and (ii) interest on investment acquisitions relating to obligations incurred in acquisitions made by the Company.

 

Due to the accounting of the options for the remaining installments of share capital of the partial acquisitions carried out by the Company (FEPWeb, QuiteJá, LOTE45 and Compliasset), the financial result started to be impacted by the adjustment to present value of the options, however, without impact on cash. In 1Q23, the net impact was negative by R$4.9 million, against R$7.2 million in 1Q22.

 

Financial Result (R$ thousand)

 

(R$ '000) 1Q23 1Q22 1Q23 x 1Q22 4Q22 1Q23 x 4Q22 LTM-1Q23 LTM-1Q22

LTM-1Q23 x LTM-

1Q22
Financial Result (14,503) (12,532) 15.7% 12,389 n.a (29,939) (7,547) 296.7%
Financial revenues 5,896 5,292 11.4% 34,073 -82.7% 51,535 29,118 77.0%
Financial expenses (20,399) (17,824) 14.4% (21,684) -5.9% (81,474) (36,665) 122.2%

 

Income Tax and Social Contribution

 

Income tax and social contribution amounted to R$2.8 million in 1Q23. Current taxes amounted to R$3.4 million, down by 49.8% compared to 1Q22, mainly including the result of acquired companies that still operate on a presumed profit basis (FEPWeb, LOTE45 and Compliasset). Deferred taxes were positive by R$0.6 million, with no cash impact, consisting of temporary differences, mainly due to the tax loss of subsidiaries that have fiscal goodwill amortization (R$ 6.3 million in 1Q23).

 

Income Tax and Social Contribution (R$ thousand)

 

(R$ '000) 1Q23 1Q22 1Q23 x 1Q22 4Q22 1Q23 x 4Q22 LTM-1Q23 LTM-1Q22

LTM-1Q23 x LTM-

1Q22
Income Tax and Social Contribution (2,836) (2,704) 4.9% (12,474) -77.3% (15,709) (3,602) 336.1%
Current (3,428) (6,824) -49.8% (7,268) -52.8% (22,979) (26,052) -11.8%
Defered 592 4,120 -85.6% (5,206) n.a 7,270 22,450 -67.6%

 

Net Income

 

Net income attributable to Sinqia shareholders was R$0.7 million in 1Q23, explained by the following variations: (i) increase of R$5.5 million in EBITDA; (ii) deterioration of R$6.6 million in Depreciation and Amortization; (iii) deterioration of R$2.0 million in the financial result; (iv) deterioration of R$132 thousand in income tax and social contribution; and (v) increase of R$1.0 million in non-controlling interest, relating to the portion of results of FEPWeb, QuiteJá, LOTE45 and Compliasset held by other partners.

 

  1Q23 Results 13
 

 

 

 

 

 

Adjusted Net Income (R$ thousand)

 

(R$ '000) 1Q23 1Q22 1Q23 x 1Q22 4Q22 1Q23 x 4Q22 LTM-1Q23 LTM-1Q22

LTM-1Q23 x LTM-

1Q22
Net income (attributable to shareholders) 681 4,911 -86.1% 14,672 -95.4% 12,555 24,311 -48.4%
(+) Extraordinary effects 2,025 - n.a - n.a 3,370 1,361 147.5%
(+) Intangible Amortization from acquisitions 7,183 3,755 91.3% 8,185 -12.2% 33,323 14,913 123.4%
(+) Recognition of put options (non-cash impact) 3,252 4,754 -31.6% (13,748) n.a (3,291) 4,754 n.a
Adjusted net income 13,141 13,420 -2.1% 9,109 44.3% 45,958 45,340 1.4%
(+) Def. income tax/Social Contr. (goodwill on acquisitions) 4,140 1,951 112.2% 2,099 97.3% 10,142 5,625 80.3%

Note: amounts net of tax calculated at a rate of 34% on the deductible portion.

 

Excluding the items highlighted in the table above – relating to extraordinary effects, amortization of intangible assets generated from acquisitions, and recognition of put options – the adjusted net income would have reached R$13.1 million.

 

Additionally, in the table above, it is possible to verify the breakdown of the tax benefit of R$4.1 million resulting from the amortization of goodwill generated from the merger of the acquired companies into the Company in the quarter.

 

  1Q23 Results 14
 

 

 

 

 

 

| FINANCIAL POSITION

 

Debt / Cash Position

 

The first quarter of the year showed an accelerated pace of financial deleveraging. At the end of the period the Company disbursed R$94.4 million connected to the amortizations od debentures and the payment of obligations contracted through the M&A transactions.

 

At the end of 1Q23, the gross cash balance was R$97.8 million, R$92.0 million lower than in 4Q22. In addition to the cash outflow mentioned above, the Company also disbursed R$18.0 million related to the upfront payment for Compliasset.

 

Adding the amount of R$24.9 million assigned as guarantee for the acquisition of ISP and issuance of debentures and the balance of R$58.2 million related to Treasury Stocks, the Company ended the quarter with an adjusted gross cash balance of R$180.8 million.

 

Regarding gross debt, the balance at the end of the quarter totaled R$350.6 million, a reduction of R$76.7 million compared to the balance at the end of 4Q22. This variation was due, as explained above, to debt amortization and payment of obligations related to M&As.

 

It is worth mentioning that, for gross debt calculation purposes, the balance regarding the accounting of the potential purchase of the remaining stakes in FEPWeb, LOTE45, QuiteJá and Compliasset, classified under the caption “Option to sell non-controlling interest”, was not considered in non-current liabilities in the balance sheet. Including this item in the gross debt balance, the adjusted gross debt was R$509.6 million.

 

At the end of 1Q23, the Company had a net debt of R$252.9 million, R$15.2 million lower than in 4Q22, representing an indebtedness of 1.5x adjusted EBITDA of LTM-1Q23. Including adjustments to gross cash and debt, we ended the period with an adjusted net debt of R$328.8 million, representing a debt level of 2.0x adjusted EBITDA of LTM-1Q23.

 

  1Q23 Results 15
 

 

 

 

 

 

(R$ '000) 1Q23 4Q22 1Q23 x 4Q22 1Q22 1Q23 x 1Q22
Liquidity          
(+) Cash and cash equivalents 83,984 37,941 121.4% 29,745 182.3%
(+) Financial investments 13,772 151,766 -90.9% 75,082 -81.7%
Cash and Investments 97,756 189,707 -48.5% 104,827 -6.7%
(+) Collateral balance 24,873 38,563 -35.5% 32,069 -22.4%
(+) Treasury stock 58,194 58,174 n/a 55,457 4.9%
Adjusted Gross Cash 180,823 286,444 -36.9% 192,353 -100.0%
Indebtedness          
(-) Loans and financing 218,163 236,656 -7.8% 170,916 27.6%
(-) Investment acquisition obligations 132,483 190,738 -30.5% 189,710 -30.2%
Gross Debt 350,646 427,394 -18.0% 360,626 -2.8%
(-) Non-controlling interest put option 158,945 142,270 11.7% 150,349 5.7%
Adjusted Gross Debt 509,591 569,664 -10.5% 510,975 -0.3%
Leverage          
(+) Adjusted Ebitda LTM 165,133 157,573 4.8% 94,358 75.0%
(-) Net debt 252,890 237,687 6.4% 255,799 -1.1%
Adjusted Net Debt/Adjusted EBITDA LTM 1.5 1.5 1.5% 2.7 -43.5%
(-) Adjusted Net Debt 328,768 283,220 16.1% 318,622 3.2%
Adjusted Net Debt/Adjusted EBITDA LTM 2.0 1.8 10.8% 3.4 -41.0%

 

Cash Flow

 

The Company's cash flow, measured by Adjusted EBITDA less expenses related to operations not captured by the indicator, namely those related to taxes, leasing, and Capex, totaled R$26,4 million. We highlight that Capex began to be impacted by the activation of a portion of R&D, in line with the strategy signaled by the Company to use these investments to accelerate the integration of solutions and boost cross-sell sales.

 

It is important to note that, from a managerial perspective, the conversion of Adjusted EBITDA into cash was 60.3%, a healthy level of profitability, demonstrating the predictability and security of our business model.

 

(R$ '000) 1Q23
Adjusted EBITDA 43,795
Income Tax and Social Contribution (3,571)
Investments (Capex) (7,999)
Operating Lease (5,824)
Adjusted Cash Flow 26,401

 

  1Q23 Results 16
 

 

 

 

 

 

| CAPITAL MARKET

 

Share Performance

 

The Company’s shares (NM: SQIA3) ended the first quarter of 2023 quoted at R$15.74, up by 4.7% compared to the quotation registered in the last quarter of 2022, of R$15.03. In the annual comparison, the quotation was 20.5% below that registered in the same quarter of 2022, of R$19.79.

 

Average Daily Traded Volume (ADTV)

 

The company’s shares experienced a reduction in liquidity during the first three months of 2023, with an average trading volume of R$9.3 million, compared to R$ R$14.0 million in 4Q22, and R$17.6 million in 1Q22.

 

Shareholding Base

 

The shareholding base ended 1Q23 with 73.7 thousand shareholders, down by 5.3% compared to 77.8 thousand in 4Q22, and down by 21.0% compared to 93.3 thousand in 1Q22.

 

Outstanding Shares (free float)

 

We ended 1Q23 with 81.1% of our shares in free float, 0.5p.p. lower than that reported in 4Q22, which reached 81.6%, and -0.9p.p. less than that disclosed in the 1Q22, when we ended the quarter with a free float of 82.0%.

 

  1Q23 Results 17
 

 

 

 

 

 

Statement from the Executive Board. According to items V and VI of article 27 of CVM Resolution 80/22, the Executive Board of Sinqia S.A. hereby declares that it has reviewed, discussed, and agreed on (i) the opinions expressed in the independent auditors’ report, and (ii) the Financial Statements for the period ended March 30, 2023.

 

  1Q23 Results 18
 

 

 

 

 

 

| EXHIBIT – FINANCIAL STATEMENTS

 

Exhibit I – Income Statement (Consolidated)

 

(R$ '000) 1Q23 1Q22 1Q23 x 1Q22 4Q22 1Q23 x 4Q22 LTM-1Q23 LTM-1Q22 LTM-1Q23 x
LTM-1Q22
Gross Revenues 182,731 153,689 18.9% 184,072 -0.7% 710,535 472,693 50.3%
Software 155,867 129,253 20.6% 155,505 0.2% 602,515 380,866 58.2%
Subscription 129,561 103,286 25.4% 123,569 4.8% 490,298 322,642 52.0%
Implementation 26,306 25,967 1.3% 31,937 -17.6% 112,216 58,224 92.7%
Services 26,864 24,437 9.9% 28,567 -6.0% 108,021 91,827 17.6%
Outsourcing 26,080 22,650 15.1% 27,867 -6.4% 104,534 87,599 19.3%
Projects 784 1,787 -56.1% 700 12.0% 3,487 4,228 -17.5%
Sales taxes (18,490) (14,833) 24.7% (17,800) 3.9% (68,678) (49,481) 38.8%
Software (15,530) (12,133) 28.0% (14,663) 5.9% (56,817) (39,357) 44.4%
Subscription (13,291) (9,954) 33.5% (12,203) 8.9% (47,889) (33,424) 43.3%
Implementation (2,240) (2,179) 2.8% (2,460) -8.9% (8,928) (5,932) 50.5%
Services (2,959) (2,700) 9.6% (3,137) -5.7% (11,862) (10,124) 17.2%
Outsourcing (2,885) (2,524) 14.3% (3,068) -6.0% (11,518) (9,700) 18.7%
Projects (74) (176) -57.6% (67) 11.7% (341) (424) -19.5%
Net Revenues 164,241 138,856 18.3% 166,272 -1.2% 641,857 423,212 51.7%
Software 140,336 117,120 19.8% 140,842 -0.4% 545,698 341,509 59.8%
Subscription 116,270 93,331 24.6% 111,365 4.4% 442,409 289,218 53.0%
Implementation 24,066 23,788 1.2% 29,477 -18.4% 103,288 52,292 97.5%
Services 23,905 21,736 10.0% 25,430 -6.0% 96,159 81,703 17.7%
Outsourcing 23,195 20,125 15.3% 24,798 -6.5% 93,015 77,899 19.4%
Projects 709 1,611 -56.0% 633 12.0% 3,146 3,804 -17.3%
Net Revenues 164,241 138,856 18.3% 166,272 -1.2% 641,857 423,212 51.7%
Recurring 139,465 113,457 22.9% 136,162 2.4% 535,424 367,117 45.8%
Variable 24,776 25,400 -2.5% 30,109 -17.7% 106,433 56,095 89.7%
% of Recurrence 84.9% 81.7% 3.2 p.p. 81.9% 3.0 p.p. 83.4% 86.7% -3.3 p.p.
Costs (96,989) (80,632) 20.3% (93,609) 3.6% (369,881) (255,472) 44.8%
Software (78,003) (62,701) 24.4% (74,704) 4.4% (295,003) (190,320) 55.0%
Services (18,986) (17,931) 5.9% (18,906) 0.4% (74,878) (65,154) 14.9%
Outsourcing (18,506) (16,806) 10.1% (18,379) 0.7% (71,799) (62,819) 14.3%
Projects (480) (1,125) -57.3% (527) -9.0% (3,079) (2,334) 31.9%
Gross profit 67,252 58,225 15.5% 72,663 -7.4% 271,976 167,740 62.1%
Gross margin 40.9% 41.9% -1.0 p.p. 43.7% -2.8 p.p. 42.4% 39.6% 2.7 p.p.
Software 62,333 54,418 14.5% 66,136 -5.8% 250,693 151,190 65.8%
Software gross mg. 44.4% 46.5% -2.0 p.p. 47.0% -2.5 p.p. 45.9% 44.3% 1.7 p.p.
Services 4,919 3,805 29.3% 6,526 -24.6% 21,283 16,548 28.6%
Services gross mg. 20.6% 17.5% 3.1 p.p. 25.7% -5.1 p.p. 22.1% 20.3% 1.9 p.p.
Outsourcing 4,689 3,319 41.3% 6,420 -27.0% 21,216 15,079 40.7%
Outsourcing gross mg. 20.2% 16.5% 3.7 p.p. 25.9% -5.7 p.p. 22.8% 19.4% 3.5 p.p.
Projects 230 486 -52.8% 106 116.3% 67 1,469 -95.4%
Projects gross mg. 32.4% 30.2% 0.1 p.p. 16.8% 15.6 p.p. 2.1% 38.6% -0.9 p.p.
Expenses (48,144) (38,037) 26.6% (57,321) -16.0% (211,954) (132,204) 60.3%
% of net revenues 29.3% 27.4% 1.9 p.p. 34.5% -5.2 p.p. 33.0% 31.2% 1.8 p.p.
General/administrative (28,413) (24,238) 17.2% (34,496) -17.6% (122,875) (81,561) 50.7%
% of net revenues 17.3% 17.5% -0.2 p.p. 20.7% -3.4 p.p. 19.1% 19.3% -0.1 p.p.
Depreciation/amort. (19,731) (13,799) 43.0% (22,825) -13.6% (89,079) (50,643) 75.9%
% of net revenues 12.0% 9.9% 2.1 p.p. 13.7% -1.7 p.p. 13.9% 12.0% 0.2 p.p.
EBIT 19,108 20,187 -5.3% 15,342 24.5% 60,022 35,535 68.9%
Financial result (14,503) (12,532) 15.7% 12,389 n.a (29,939) (7,547) 296.7%
Financial income 5,510 5,292 4.1% 34,073 -83.8% 51,149 29,118 75.7%
Financial expenses (20,012) (17,824) 12.3% (21,684) -7.7% (81,087) (36,665) 121.2%
EBT 4,605 7,655 -39.8% 27,731 -83.4% 30,082 27,988 7.5%
Income tax/social contribution (2,836) (2,704) 4.9% (12,474) -77.3% (15,709) (3,602) 336.1%
Current (3,428) (6,824) -49.8% (7,268) -52.8% (22,979) (26,052) -11.8%
Deferred 592 4,120 -85.6% (5,206) n.a 7,270 22,450 -67.6%
Results after IT and SC 1,769 4,951 -64.3% 15,257 -88.4% 14,374 24,385 -41.1%
Net margin 1.1% 3.6% -2.5 p.p. 9.2% -8.1 p.p. 2.2% 5.8% -3.5 p.p.
Assigned to:                
Sinqia's shareholders 681 4,911 -86.1% 14,672 -95.4% 12,555 24,311 -48.4%
Net margin 0.4% 3.5% -3.1 p.p. 8.8% -8.4 p.p. 2.0% 5.7% -3.8 p.p.
Minority interest 1,088 40 2620.1% 585 86.0% 1,819 74 2358.1%

 

  1Q23 Results 19
 

 

 

 

 

 

(R$ '000) 1Q23 1Q22 1Q23 x 1Q22 4Q22 1Q23 x 4Q22 LTM-1Q23 LTM-1Q22 LTM-1Q23 x
LTM-1Q22
                 
EBITDA 41.770 36.235 15,3% 41.473 0,7% 161.763 92.997 73,9%
EBITDA margin 25,4% 26,1% -0,7 p.p. 24,9% 0,5 p.p. 25,2% 22,0% 3,2 p.p.
(+) Extraordinary expenses 2.025 - n.a - n.a 2.674 1.361 n.a
(+) Extraordinary costs - - n.a - n.a 696 - n.a
Adjusted EBITDA 43.795 36.235 20,9% 41.473 5,6% 165.133 94.358 75,0%
Adj. EBITDA Margin 26,7% 26,1% 0,6 p.p. 24,9% 1,7 p.p. 25,7% 22,3% 3,4 p.p.
                 
Net income (attributable to shareholders) 681 4.911 -86,1% 14.672 -95,4% 12.555 24.311 -48,4%
(+) Extraordinary effects 2.025 - n.a - n.a 3.370 1.361 147,5%
(+) Intangible Amortization from acquisitions 7.183 3.755 91,3% 8.185 -12,2% 33.323 14.913 123,4%
(+)Recognition of put options (non-cash impact) 3.252 4.754 -31,6% (13.748) n.a (3.291) 4.754 n.a
Adjusted Net Income 13.141 13.420 -2,1% 22.857 -42,5% 45.958 45.340 1,4%
(+) Def. income tax/Social Contr. (goodwill on acquisitions) 4.140 1.951 112,2% 2.099 97,3% 10.142 5.625 80,3%
Note: amounts net of tax calculated at a rate of 34% on the deductible portion.            

 

  1Q23 Results 20
 

 

 

 

 

 

Exhibit II – Balance Sheet (Consolidated)

 

(R$ '000) 03.31.2023 12.31.2022 Var. 03.31.2022 Var. YoY
ASSETS 1,483,013 1,555,313 -5% 1,500,781 -1%
Current 173,764 251,050 -31% 167,574 4%
Cash and cash equivalents 83,984 37,941 121% 29,745 182%
Financial Investments 13,772 151,766 -91% 75,082 -82%
Receivables 52,550 40,881 29% 43,035 22%
Advanced expenses 2,300 1,761 31% 3,547 -35%
Taxes and contributions recoverable 19,897 15,840 26% 11,935 67%
Other receivables 1,261 2,861 -56% 4,230 -70%
Non-current 1,309,249 1,304,263 0% 1,333,207 -1.8%
Taxes and contributions recoverable 1,505 1,321 14% 3,051 -51%
Securities 91,385 99,267 -8% 93,241 -2%
Deposits in court 126 197 -36% 174 -28%
Deferred income tax and social contrib. 79,217 78,625 1% 74,782 6%
Property and equipment 47,272 46,740 1% 52,778 -10%
Intangible assets 1,089,744 1,078,113 1% 1,109,181 -1.8%
LIABILITIES AND EQUITY 1,483,013 1,555,313 -5% 1,500,781 -1%
Current 253,859 278,582 -9% 190,371 33.3%
Loans and financing 74,552 74,500 0% 36,746 102.9%
Leasing 23,970 24,334 -1% 16,804 43%
Trade payables 8,213 4,724 74% 9,675 -15%
Advances from customers 14,356 19,363 -26% 10,372 38%
Labor liabilities 69,628 62,234 12% 53,781 29%
Undistributed dividends 4,690 7,720 -39% 5,638 -17%
Tax liabilities 6,415 6,115 5% 10,200 -37%
Liabilities arising from invest. acquisition 51,714 79,101 -35% 46,620 10.9%
Other obligations 321 491 -35% 535 -40%
Non-current 560,348 606,358 -8% 637,321 -12%
Loans and financing 143,611 162,156 -11% 134,170 7%
Leasing 42,559 47,439 -10% 59,419 -28%
Provisions for legal proceedings 134,464 139,866 -4% 142,325 -6%
Advances from customers - 2,990 - 7,968 -
Liabilities arising from invest. acquisition 80,769 111,637 -28% 143,090 -44%
Non-controlling interest put option 158,945 142,270 12% 150,349 6%
Equity 668,806 670,373 0% 673,089 -1%
Share capital 813,303 813,303 0% 813,303 0%
Treasury shares (58,194) (58,174) 0% (55,457) 5%
Shares issue expenses (48,890) (48,890) 0% (48,890) 0%
Transactions with minority shareholders (136,563) (126,810) - (126,810) 8%
Capital reserve 12,643 11,867 7% 12,329 3%
Earnings reserve 59,010 59,010 0% 46,915 26%
Retained Earnings 681 - - 4,911 -86%
Total Equity of controlling shareholders 641,990 650,306 -1% 646,301 -1%
Non-controlling interests 26,816 20,067 34% 26,788 0%

 

  1Q23 Results 21
 

 

 

 

 

 

Sinqia S.A. and Subsidiaries

Quarterly Information as of
March 31, 2023 and

Independent Auditor’s review report

 

 

 

TABLE OF CONTENTS

 

Message from Management 3
Independent Auditor's Report on the Interim Financial Information 4
   
Interim Financial Information  
   
Balance Sheet 6
Income Statements for the Periods 9
Statements of Comprehensive Income 10
Statement of Changes in Shareholders' Equity 11
Statements of Cash Flows 12
Statements of Value Added 14
Notes 15
 

MESSAGE FROM MANAGEMENT

 

Dear Shareholders and other interested parties,

 

In compliance with legal provisions, Sinqia S.A., a provider of technology for the financial sector, hereby submits to its shareholders and other interested parties for review the Management Report and the corresponding Interim Financial Information, together with the independent auditor's review report, for the quarter ended March 31, 2023, prepared in accordance with CPC Technical Pronouncement No. 21 – Interim Statements and the international standard IAS 34 – Interim Financial Reporting.

 

RELATIONSHIP WITH INDEPENDENT AUDITORS

 

The Company's policy on contracting services not related to the external audit with the independent auditors is based on principles that preserve their independence. These principles consist of internationally accepted standards, in which: (a) the auditor should not audit their own work; (b) the auditor should not hold any management position at their client; and (c) the auditor must not create any conflicts with the interests of their clients.

 

Procedures used by the Company pursuant to article 17 of CVM Resolution No. 162 of July 13, 2022, the Company and its subsidiaries, as a formal procedure, prior to contracting professional services other than those related to external accounting auditing, consults with the independent auditors and the Board of Directors to ensure that the provision of those other services does not affect their independence and objectivity, as necessary for the performance of audit services, and to obtain approval from its Board of Directors.

 
Deloitte Touche Tohmatsu
Dr. Chucri Zaidan Avenue, 1.240 -
4th to 12th floors - Golden Tower
04711-130 - São Paulo - SP
Brazil

Tel.: + 55 (11) 5186-1000
Fax: + 55 (11) 5181-2911
www.deloitte.com.br

  

(Convenience Translation into English from the Original Previously Issued in Portuguese)

 

REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION

 

To the Shareholders, Board of Directors and Management of

Sinqia S.A.

 

Introduction

 

We have reviewed the accompanying individual and consolidated interim financial information of Sinqia S.A. ( “Company”), included in the Interim Financial Information Form (ITR), for the three-month period ended March 31, 2023, which comprises the individual and consolidated balance sheet as at March 31, 2023, and the corresponding individual and consolidated statements of income and comprehensive income, statements of changes in equity and individual and consolidated statements of cash flows for the three-month period then ended, including the explanatory notes.

 

Management is responsible for the preparation of the individual and consolidated interim financial information in accordance with technical pronouncement CPC 21 - Interim Financial Information and international standard IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board - IASB, as well as for the presentation of such information in accordance with the standards issued by the Brazilian Securities Commission (CVM), applicable to the preparation of Interim Financial Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review.

 

Scope of review

 

We conducted our review in accordance with Brazilian and international standards on review of interim financial information (NBC TR 2410 and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the standards on auditing and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion on the individual and consolidated interim financial information

 

Based on our review, nothing has come to our attention that causes us to believe that the accompanying individual and consolidated interim financial information included in the ITR referred to above was not prepared, in all material respects, in accordance with technical pronouncement CPC 21 and international standard IAS 34, applicable to the preparation of ITR, and presented in accordance with the standards issued by CVM.

 

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more.

 

Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. Our global network of member firms and related entities in more than 150 countries and territories (collectively, the “Deloitte organization”) serves four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 345,000 people make an impact that matters at www.deloitte.com.

 

© 2023. For information, contact Deloitte Global.

 

 

Emphasis of matter

 

Restatement of the corresponding figures for the quarter ended March 31, 2022

 

As mentioned in note 1.4 to the individual and consolidated financial statements, the corresponding figures for the quarter ended March 31, 2022, presented for purposes of comparison, were adjusted and are being restated as provided for in technical pronouncement CPC 23 - Accounting Policies, Changes in Accounting Estimates and Errors. Our opinion is not qualified in respect of this matter.

 

Other matters

 

Statements of value added

 

The interim financial information referred to above includes the individual and consolidated statements of value added for the three-month period ended March 31, 2023, prepared under the responsibility of the Company’s Management and presented as supplemental information for the purposes of international standard IAS 34. These statements were subject to the review procedures performed together with the review of the ITR to reach a conclusion on whether they are reconciled with the interim financial information and the accounting records, as applicable, and if their form and content are consistent with the criteria set forth in technical pronouncement CPC 09 - Statement of Value Added. Based on our review, nothing has come to our attention that causes us to believe that these statements of value added were not prepared, in all material respects, in accordance with the criteria set out in this standard and consistently with respect to the individual and consolidated interim financial information taken as a whole.

 

The accompanying individual and consolidated interim financial information has been translated into English for the convenience of readers outside Brazil.

 

São Paulo, May 8, 2023

 

   
DELOITTE TOUCHE TOHMATSU Fernando Augusto Lopes Silva
Auditores Independentes Ltda. Engagement Partner

 

2023SP022976

 

© 2023. For information, contact Deloitte Global.

 

 

SINQIA S.A. AND SUBSIDIARIES

BALANCE SHEET AS OF MARCH 31, 2023 AND DECEMBER 31, 2022

(In thousands of Reais – R$)

 

 

                Individual           Consolidated  
    Note     03/31/2023     12/31/2022     03/31/2023     12/31/2022  
ASSETS                              
Current                              
Cash and cash equivalents     6.a)       48,828       11,769       83,984       37,941  
Financial investments     6.b)       13,772       98,369       13,772       151,766  
Accounts receivable     7       25,983       19,335       52,550       40,881  
Prepaid expenses             508       611       2,300       1,761  
Taxes and contributions recoverable     8       14,332       11,743       19,897       15,840  
Other receivables             292       1,009       1,261       2,861  
                                         
Total current assets             103,715       142,836       173,764       251,050  
                                         
Non-current                                        
Accounts receivable from related parties     9.a)       619       3,393       -       -  
Taxes and contributions recoverable     8       1,328       945       1,505       1,321  
Financial assets     6.c)       39,848       52,972       91,385       99,267  
Court deposits     16       104       187       126       197  
Deferred income tax and social contribution     22.b)       30,754       25,606       79,217       78,625  
Investments     5       648,030       628,688       -       -  
Property and equipment     10       17,924       17,410       47,272       46,740  
Intangible assets     11       252,790       256,929       1,089,744       1,078,113  
                                         
Total non-current assets             991,397       986,130       1,309,249       1,304,263  
                                         
TOTAL ASSETS             1,095,112       1,128,966       1,483,013       1,555,313  

 

The notes are an integral part of the financial information.

 
6

SINQIA S.A. AND SUBSIDIARIES

BALANCE SHEET AS OF MARCH 31, 2023 AND DECEMBER 31, 2022

(In thousands of Reais – R$)

 

 

                Individual           Consolidated  
    Note     03/31/2023     12/31/2022     03/31/2023     12/31/2022  
LIABILITIES                              
CURRENT                              
Debentures     12       74,552       74,500       74,552       74,500  
Lease purchase     24       18,452       18,937       23,970       24,334  
Trade accounts payable             5,825       3,313       8,213       4,724  
Advances from customers             6,968       7,945       14,356       19,363  
Labor liabilities     13       45,639       38,619       69,628       62,234  
Earnings distributable     17.2.b)
    4,690       4,690       4,690       7,720  
Tax liabilities     14       1,216       1,065       6,415       6,115  
Investment acquisition liabilities     15       14,680       14,384       51,714       79,101  
Other accounts payable             327       61       321       491  
                                         
Total current liabilities             172,349       163,514       253,859       278,582  
                                         
NON-CURRENT                                        
Debentures     12       143,611       162,156       143,611       162,156  
Lease purchase     24       24,770       29,684       42,559       47,439  
Provisions for lawsuits     16       33,664       36,607       134,464       139,866  
Advances from customers             -       -       -       2,990  
Investment acquisition liabilities     15       25,845       35,918       80,769       111,637  
Non-controlling interest put option     25       52,883       50,781       158,945       142,270  
                                         
Total non-current liabilities             280,773       315,146       560,348       606,358  
 
7

SINQIA S.A. AND SUBSIDIARIES

BALANCE SHEET AS OF MARCH 31, 2023 AND DECEMBER 31, 2022

(In thousands of Reais – R$)

 

 

                Individual           Consolidated  
    Note     03/31/2023     12/31/2022     03/31/2023     12/31/2022  
                               
SHAREHOLDERS’ EQUITY                                        
Capital stock     17.1       813,303       813,303       813,303       813,303  
Treasury shares     17.4       (58,194)       (58,174)       (58,194)       (58,174)  
Share issuing costs     17.5       (48,890)       (48,890)       (48,890)       (48,890)  
Transactions with non-controlling shareholders             (136,563)       (126,810)       (136,563)       (126,810)  
Capital reserve     17.3       12,643       11,867       12,643       11,867  
Revenue reserves     17.2       59,010       59,010       59,010       59,010  
Retained earnings             681       -       681       -  
                                         
Total controlling shareholders' equity             641,990       650,306       641,990       650,306  
                                         
Non-controlling interest             -       -       26,816       20,067  
                                         
Total shareholders’ equity             641,990       650,306       668,806       670,373  
                                         
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY             1,095,112       1,128,966       1,483,013       1,555,313  

 

The notes are an integral part of the financial information.

 
8

SINQIA S.A. AND SUBSIDIARIES

INCOME STATEMENTS 

FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 

(In thousands of Reais (R$), except basic/diluted earnings per share)

 

 

                Individual           Consolidated  
    Note     03/31/2023     03/31/2022     03/31/2023     03/31/2022  
                (Restated)           (Restated)  
                               
NET REVENUES     18       72,054       67,834       164,241       138,856  
                                         
Cost of services provided     19       (51,216)       (35,711)       (96,989)       (80,632)  
                                         
GROSS PROFIT             20,838       32,123       67,252       58,224  
                                         
General, administrative and selling expenses     20       (29,753)       (14,584)       (48,144)       (38,037)  
Equity pickup     5       14,793       (52)       -       -  
                                         
OPERATING PROFIT BEFORE FINANCIAL RESULT             5,878       17,487       19,108       20,187  
                                         
Financial result, net     21       (10,346)       (9,219)       (14,503)       (12,532)  
                                         
PROFIT/(LOSS) BEFORE INCOME TAX AND SOCIAL CONTRIBUTION             (4,468)       8,268       4,605       7,655  
                                         
INCOME TAX AND SOCIAL CONTRIBUTION                                        
Current     22.a)       -       (2,307)       (3,428)       (6,824)  
Deferred     22.a)       5,149       (1,050)       592       4,120  
                                         
NET INCOME FOR THE PERIOD             681       4,911       1,769       4,951  
ATTRIBUTABLE TO:                                        
Controlling shareholders’ interest             681       4,911       681       4,911  
Non-controlling shareholders’ interest             -       -       1,088       40  
EARNINGS PER SHARE (in Reais (R$))                                        
Basic - attributable earnings per share for the period     23       0.008       0.058       0.008       0.058  
Diluted - attributable earnings per share for the period     23       0.008       0.057       0.008       0.057  

 

The notes are an integral part of the financial information.

 
9

SINQIA S.A. AND SUBSIDIARIES

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022

(In thousands of Reais – R$)

 

 

          Individual     Consolidated  
      03/31/2023       03/31/2022       03/31/2023       03/31/2022  
              (Restated)               (Restated)  
                                 
NET INCOME FOR THE PERIOD     681       4,911       1,769       4,951  
                                 
Other comprehensive income     -       -       -       -  
                                 
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD     681       4,911       1,769       4,951  
                                 
ATTRIBUTABLE TO:                                
Controlling shareholders     681       4,911       681       4,911  
Non-controlling shareholders     -       -       1,088       40  

 

The notes are an integral part of the financial information.

 
10

SINQIA S.A. AND SUBSIDIARIES

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022

(In thousands of Reais – R$)

 

 

                            Revenue Reserves                  
    Note   Capital stock   Capital reserve   Treasury shares   Share issuing costs   Transactions with non-controlling shareholders   Legal reserve   Profit retention   Retained earnings  

Shareholders’

equity

   Non-controlling interest   Consolidated Shareholders' Equity  
Balances as of December 31, 2021 (Restated)       813,303   12,227   (40,896)   (48,890)   (61,208)   3,542   43,373   -   721,451   19,081   740,532  
                                                   
Net income for the period       -   -   -   -   -   -   -   4,911   4,911   40   4,951  
Non-controlling interest put option       -   -   -   -   (65,602)   -   -   -   (65,602)   -   (65,602)  
Acquisition of non-controlling interest       -   -   -   -   -   -   -   -   -   7,666   7,666  
Share-based compensation   17   -   102   -   -   -   -   -   -   102   -   102  
Purchase of treasury shares   17   -   -   (14,561)   -   -   -   -   -   (14,561)   -   (14,561)  
Balances as of March 31, 2022 (Restated)       813,303   12,329   (55,457)   (48,890)   (126,810)   3,542   43,373   4,911   646,301   26,787   673,088  

 

                            Revenue Reserves                  
    Note   Capital stock   Capital reserve   Treasury shares   Share issuing costs   Transactions with non-controlling shareholders   Legal reserve   Profit retention   Retained earnings  

Shareholders’

equity

   Non-controlling interest   Consolidated Shareholders' Equity  
Balances as of December 31, 2022       813,303   11,867   (58,174)   (48,890)   (126,810)   4,381   54,629   -   650,306   20,067   670,373  
                                                   
Net income for the period       -   -   -   -   -   -   -   681   681   1,088   1,769  
Non-controlling interest put option       -   -   -   -   (9,753)   -   -   -   (9,753)   -   (9,753)  
Acquisition of non-controlling interests       -   -   -   -   -   -   -   -   -   5,661   5,661  
Purchase of treasury shares   17   -   -   (45)   -   -   -   -   -   (45)   -   (45)  
Share-based compensation       -   141   -   -   -   -   -   -   141   -   141  
Stock options exercised       -   635   25   -   -   -   -   -   660   -   660  
Balances as of March 31, 2023       813,303   12,643   (58,194)   (48,890)   (136,563)   4,381   54,629   681   641,990   26,816   668,806  

 

The notes are an integral part of the financial information.

 
11

SINQIA S.A. AND SUBSIDIARIES

STATEMENT CASH FLOWS 

FOR THE QUARTERS ENDED ON MARCH 31, 2023 AND 2022 

(In thousands of Reais – R$)

 

 

        Individual       Consolidated  
    03/31/2023   03/31/2022   03/31/2023   03/31/2022  
        (Restated)       (Restated)  
CASH FLOW FROM OPERATING ACTIVITIES                  
                   
Net income for the period   681   4,911   1,769   4,951  
Adjustments to reconcile net income:                  
Equity pickup   (14,793)   52   -   -  
Share-based compensation plan   810   102   810   102  
Depreciation and amortization   11,307   10,512   22,662   16,048  
Return on financial investments   (3,584)   (3,310)   (4,720)   (4,048)  
Provision (reversal of provision) for estimated                  
losses on doubtful debts   2   (174)   478   (341)  
Reversal of provision for lawsuits   (2,786)   (41)   (7,319)   (1,057)  
Interest and inflation adjustment of lawsuits   231   196   231   242  
Provision for bonuses and profit sharing   4,391   1907   7,618   3,174  
Interest and AVP incurred   14,319   13,474   20,070   17,366  
Remeasurement of call and put options   (567)   (1,224)   (664)   (1,174)  
Deferred income tax and social contribution   (5,149)   1,050   (592)   (4,120)  
Provision for current income tax and social contribution   -   2,307   3,428   6,824  
                   
Changes in operating asset and liability accounts                  
Accounts receivable   (6,650)   614   (14,497)   (1,253)  
Court deposits   83   -   71   -  
Taxes and contributions recoverable   (2,971)   (2,461)   (4,098)   (3,960)  
Other receivables   724   1,544   1,205   (9,956)  
Trade accounts payable   2,778   2,604   3,286   7,511  
Labor liabilities   2,629   2,577   (359)   4,971  
Tax liabilities   151   521   136   2,083  
Lawsuits paid   (388)   (334)   (718)   (336)  
Advances from customers   (977)   (2,680)   (5,007)   3,064  
Receipts (payment) from related parties   2,774   1,689   -   -  
                   
CASH FROM OPERATIONS   3,015   33,836   23,790   40,091  
                   
Income tax and social contribution paid   -   (1,230)   (3,571)   (3,187)  
interest paid   (11,812)   (8,264)   (15,181)   (9,683)  
                   
NET CASH FROM (USED IN) OPERATIONS   (8,797)   24,342   5,038   27,221  
 
12

SINQIA S.A. AND SUBSIDIARIES

STATEMENT CASH FLOWS 

FOR THE QUARTERS ENDED ON MARCH 31, 2023 AND 2022 

(In thousands of Reais – R$)

 

 

        Individual       Consolidated  
    03/31/2023   03/31/2022   03/31/2023   03/31/2022  
        (Restated)       (Restated)  
CASH FLOW FROM INVESTING ACTIVITIES                  
                   
Property and equipment and intangible assets purchased   (7,657)   (2,419)   (7,999)   (5,808)  
Business acquisitions, net of acquired cash   -   -   (17,058)   (438,637)  
Payment of investment acquisition obligations   -   (7,791)   -   (9,359)  
Capital contribution to subsidiaries   (15,377)   (463,151)   -   -  
Financial investments   88,181   474,460   142,714   465,966  
Financial assets - Securities   13,691   (4,952)   12,956   (8,980)  
                   
NET CASH FROM (USED IN) INVESTING ACTIVITIES   78,838   (3,853)   130,613   3,182  
                   
CASH FLOW FROM FINANCING ACTIVITIES                  
                   
Debenture amortization   (18,511)   (3,125)   (18,511)   (3,125)  
Leases paid   (4,740)   (5,277)   (5,824)   (6,331)  
Treasury shares purchased   (54)   (14,562)   (54)   (14,562)  
Dividends paid   -   -   (3,030)   (832)  
Investment acquisition obligations paid   (9,677)   -   (62,189)   -  
                   
NET CASH USED IN FINANCING ACTIVITIES   (32,982)   (22,964)   (89,608)   (24,850)  
                   
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   37,059   (2,475)   46,043   5,553  
                   
Cash and cash equivalents at the beginning of the period   11,769   10,354   37,941   24,192  
                   
Cash and cash equivalents at the end of the period   48,828   7,879   83,984   29,745  
                   
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   37,059   (2,475)   46,043   5,553  

 

The notes are an integral part of the financial information.

 
13

SINQIA S.A. AND SUBSIDIARIES.

STATEMENT OF VALUE ADDED 

FOR THE QUARTERS ENDED ON MARCH 31, 2023 AND 2022 

(In thousands of Reais – R$)

 

 

        Individual   Consolidated  
    03/31/2023   03/31/2022   03/31/2023   03/31/2022  
        (Restated)       (Restated)  
                   
REVENUES   80,865   76,350   182,253   154,028  
Sales of products and services   80,867   76,176   182,731   153,687  
Estimated loss on doubtful debts - Reversal (Formation)   (2)   174   (478)   341  
                   
INPUTS PURCHASED FROM THIRD   (9,801)   (8,887)   (16,178)   (19,839)  
PARTIES (ICMS, IPI, PIS and COFINS)                  
Cost of goods and services sold   (6,046)   (6,411)   (10,631)   (14,419)  
Materials, energy, third-party services and others   (3,755)   (2,476)   (5,547)   (5,420)  
                   
GROSS VALUE ADDED   71,064   67,463   166,075   134,189  
                   
DEPRECIATION AND AMORTIZATION   (11,307)   (10,512)   (22,662)   (16,048)  
                   
NET VALUE ADDED PRODUCED BY THE COMPANY   59,757   56,951   143,413   118,141  
                   
ADDED VALUE RECEIVED ON TRANSFER                  
    18,604   4,493   5,081   5,292  
                   
Equity pickup   14,793   (52)   -   -  
Financial revenues   3,811   4,545   5,081   5,292  
                   
TOTAL VALUE ADDED DISTRIBUTABLE   78,361   61,444   148,494   123,433  
                   
VALUE ADDED DISTRIBUTION   78,361   61,444   148,494   123,433  
                   
Personnel   59,539   31,672   104,986   82,423  
Direct compensation   47,194   33,686   85,474   66,297  
Benefits   9,161   (4,203)   13,952   11,925  
FGTS   3,184   2,189   5,560   4,201  
                   
Taxes, levies and contributions   3,885   11,895   21,610   17,711  
Federal   1,634   9,765   16,496   13,292  
Municipal   2,251   2,130   5,114   4,419  
                   
Return on borrowed capital   14,256   12,966   20,129   18,348  
Interest   12,502   12,445   17,445   16,435  
Rents   1754   521   2,684   1913  
                   
Return on equity   681   4,911   1,769   4,951  
Retained earnings for the period   681   4,911   681   4,911  
Non-controlling shareholders’ interest in   -   -   1,088   40  
retained earnings                  

 

The notes are an integral part of the financial information.

 
14

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 

Section A - GENERAL INFORMATION

 


 1 GENERAL INFORMATION

 

1.1 Operations

 

Sinqia S.A. (“Company”) is a publicly-held corporation, headquartered at Rua Bela Cintra No. 755, 7th floor, in the City of São Paulo, State of São Paulo, having its shares traded on B3 – Brasil, Bolsa, Balcão in the Novo Mercado listing segment.

 

The Company was incorporated in 1996 for the primary purpose of providing technology for the financial sector.

 

The Company is the parent of Sinqia Tecnologia Ltda., Torq Inovação Digital Ltda., Homie do Brasil Informática Ltda., Rosk Software S.A. and indirectly controls Lote45 Participações S.A. and Compliasset Software e Soluções Digitais S.A., companies whose purpose is to engage in activities complementary to the Company's business.

 

These quarterly statements are approved to be issued and authorized for disclosure by the Board of Directors on May 5, 2023.

 

1.2 Basis for preparation, presentation of the Quarterly Information, and summary of principal accounting practices

 

The individual and consolidated interim financial information was prepared and presented in accordance with CPC Technical Pronouncement 21 (R1) - Interim Statements, IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), and consistent with the rules issued by the Brazilian Securities Commission, as applicable to the preparation of Quarterly Information. The accounting practices in place in Brazil comprise those included in Brazilian corporate laws and in pronouncements, guidelines and interpretations issued by the Accounting Pronouncements Committee (CPC) and approved by the Brazilian Securities Commission (CVM). The quarterly information should be read in conjunction with the financial statements for the year ended December 31, 2022 (hereinafter referred to as “December 31, 2022 financial statements”), published on March 9, 2023 and made available through the following websites: www.gov.br/cvm, www.b3.com.br and www.sinqia.com/ri.

 

There was no change in the principal accounting policies in relation to those described in note 29 to the financial statements for the year ended December 31, 2022.

 

The financial statements were prepared using the historical cost as a base value, except for the valuation of certain assets and liabilities, such as those arising from financial instruments that are measured at fair value.

 

The preparation of the interim financial information requires the use of certain critical accounting estimates and the exercise of judgment by the Company's management in the process of applying its accounting policies. Those areas that require a higher level of judgment and are more complex, as well as the areas in which assumptions and estimates are significant for the financial information, are disclosed in Note 2. 

 
15

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 

The presentation of the individual Statement of Value Added (or VAS) is required by Brazilian corporate laws and by the accounting practices in place in Brazil, as applicable to publicly-held companies. The VAS was prepared in accordance with the criteria set forth in CPC Technical Pronouncement 9 – “Statement of Value Added”. IAS 34 - Interim Financial Reporting does not require the presentation of this statement. As a result, under IFRS, this statement is presented as supplementary information, without prejudice to the set of accounting information.

 

1.3 Consolidation

 

The Company consolidates all entities over which it has control, that is, when it is exposed or has rights to variable returns from its involvement with the investee and has the capacity to direct the relevant activities of the investee.

 

The subsidiaries included in the consolidation are described in Note 5.

 

1.4 Restatement of comparative balances

 

The Company's Management is restating the quarterly statements for the quarter ended March 31, 2022 due to adjustments related to: (i) accounting for call and put options related to business combinations involving the companies Homie do Brasil Informática Ltda., Rosk Software S.A. and Lote45 Participações S.A.; (ii) measurement and inclusion of the amount attributable to the non-controlling shareholders in the companies Homie do Brasil Informática Ltda., Rosk Software S.A. and Lote45 Participações S.A., and consequent impacts on the intangible assets and liabilities assumed.

 

Said adjustments do not have a material impact on the performance of operations, but they have a material effect on the equity position of the Company and its subsidiaries as previously presented in the financial statements for the year ended March 31, 2022. That said, Management understands that the adjustments in equity position and performance of its operations could distort the understanding of the Company's results. Therefore, adjustments were made retrospectively as set forth in CPC Technical Pronouncement 23 - Accounting Practices, Changes in Estimates and Error Corrections. There are no impacts on the opening shareholders' equity of the earliest period presented, which is why the Company is restating only the column for 03/31/2022.

 
16

 

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022
(In thousands of Reais – R$)

 

  

The following tables summarize the impacts in the Company's previous period:

 

INCOME STATEMENT

 

                Individual             Consolidated  
    Note           03/31/2022             03/31/2022  
        Published   Adjustment   Restated     Published   Adjustment   Restated  
                                 
General, administrative and selling expenses   20   (14,584)   -   (14,584)     (36,205)   (1832)   (38,037)  
Equity pickup   5   1,522   (1,574)   (52)     -   -   -  
                                 
Result of operations before financial result       19,061   (1,574)   17,487     22,019   (1832)   20,187  
                                 
Financial result, net   21   (4,401)   (4,818)   (9,219)     (5,329)   (7,203)   (12,532)  
                                 
Profit (loss) before income tax and social contribution       14,660   (6,392)   8,268     16,690   (9,035)   7,655  
                                 
Deferred income tax and social contribution   22   (2,688)   1,638   (1,050)     1,671   2,449   4,120  
                                 
Profit after income tax and social contribution       9,665   (4,754)   4,911     11,537   (6,586)   4,951  
                                 
Non-controlling interest       -   -   -     (1872)   1832   (40)  
                                 
Net income for the period       9,665   (4,754)   4,911     9,665   (4,754)   4,911  
                                 
Basic earnings per share –  in Reais   23   0.114   (0.056)   0.058     0.114   (0.056)   0.058  
Diluted earnings per share –  in Reais   23   0.113   (0.056)   0.057     0.113   (0.056)   0.057  

 

STATEMENT OF COMPREHENSIVE INCOME

 

            Individual             Consolidated  
            03/31/2022             03/31/2022  
    Published   Adjustment   Restated     Published   Adjustment   Restated  
                             
Net income for the period   9,665   (4,754)   4,911     11,537   (6,586)   4,951  
                             
Total comprehensive income for the period   9,665   (4,754)   4,911     11,537   (6,586)   4,951  
                             
ATTRIBUTED TO:                            
Controlling shareholders   9,665   (4,754)   4,911     9,665   (4,754)   4,911  
Non-controlling shareholders   -   -   -     1872   (1832)   40  

 

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

 

    Shareholders’ Equity  
    Published   Adjustment   Restated  
Balances as of December 31, 2021 (Restated)   782,659   (61,208)   721,451  
               
Net income for the period   9,665   (4,754)   4,911  
Non-controlling interest put option   -   (65,602)   (65,602)  
Balances as of March 31, 2022 (Restated)   777,865   (131,564)   646,301  

 

17

 

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022
(In thousands of Reais – R$)

 

 

    Non-controlling
interest		   Non-controlling
interest		   Non-controlling
interest		     Consolidated
Shareholders'
Equity		   Non-controlling
interest		   Consolidated
Shareholders'
Equity		  
    Published   Adjustment   Restated     Published   Adjustment   Restated  
Balances as of December 31, 2021 (Restated)   2,797   16,284   19,081     785,456   (44,924)   740,532  
                             
Net income for the period   1872   (1832)   40     11,537   (6,586)   4,951  
Non-controlling interest put option   -   -   -     -   (65,602)   (65,602)  
Non-controlling interests acquired   (354)   8,020   7,666     (354)   8,020   7,666  
Balances as of March 31, 2022 (Restated)   4,315   22,472   26,787     782,180   (109,092)   673,088  

 

STATEMENT OF CASH FLOWS

 

            Individual             Consolidated  
            03/31/2022             03/31/2022  
    Published   Adjustment   Restated     Published   Adjustment   Restated  
                             
Net income for the period   9,665   (4,754)   4,911     11,537   (6,586)   4,951  
Equity pickup   (1,522)   1,574   52     -   -   -  
Depreciation and amortization   10,512   -   10,512     14,216   1832   16,048  
Financial investments   -   (3,310)   (3,310)     -   (4,048)   (4,048)  
Interest and inflation adjustment of lawsuits   -   196   196     -   242   242  
Interest and AVP incurred   7,628   5,846   13,474     9,231   8,135   17,366  
Remeasurement of call and put options   -   (1,224)   (1,224)     -   (1,174)   (1,174)  
Deferred income tax and social contribution   2,687   (1,637)   1,050     (1,737)   (2,383)   (4,120)  
                             
Changes in operating asset and liability accounts                            
Tax liabilities   522   (1)   521     2,149   (66)   2,083  
                             
CASH FROM OPERATIONS   37,146   (3,310)   33,836     44,139   (4,048)   40,091  
                             
NET CASH FROM (USED IN) OPERATIONS   27,652   (3,310)   24,342     31,269   (4,048)   27,221  
                             
CASH FLOW FROM INVESTING ACTIVITIES                            
                             
Financial investments   471,150   3,310   474,460     461,918   4,048   465,966  
                             
NET CASH FROM (USED IN) INVESTING ACTIVITIES   (7,163)   3,310   (3,853)     (866)   4,048   3,182  

 

18

 

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022
(In thousands of Reais – R$)

 

 

STATEMENT OF VALUE ADDED

 

            Individual             Consolidated  
            03/31/2022             03/31/2022  
    Published   Adjustment   Restated     Published   Adjustment   Restated  
                             
DEPRECIATION AND AMORTIZATION   (10,512)   -   (10,512)     (14,216)   (1832)   (16,048)  
                             
NET VALUE ADDED PRODUCED BY THE COMPANY   58,175   -   58,175     121,147   (1832)   119,315  
                             
VALUE ADDED RECEIVED ON TRANSFER   4,843   (1,574)   3,269     4,118   -   4,118  
                             
Equity pickup   1,522   (1,574)   (52)     -   -   -  
                             
TOTAL VALUE ADDED DISTRIBUTABLE   63,018   (1,574)   61,444     125,265   (1832)   123,433  
                             
VALUE ADDED DISTRIBUTION   63,018   (1,574)   61,444     125,265   (1832)   123,433  
                             
Taxes, levies and contributions   13,533   (1,638)   11,895     20,160   (2,449)   17,711  
Federal   11,403   (1,638)   9,765     15,741   (2,449)   13,292  
                             
Return on borrowed capital   8,148   4,818   12,966     11,145   7,203   18,348  
Interest   7,627   4,818   12,445     9,232   7,203   16,435  
                             
Return on equity   9,665   (4,754)   4,911     11,537   (6,586)   4,951  
Retained earnings for the period   9,665   (4,754)   4,911     9,665   (4,754)   4,911  
Non-controlling shareholders’ interest in retained earnings   -       -     1872   (1832)   40  

 

Section B - RISKS

 


 2 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

 

Accounting estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events considered reasonable under the circumstances. In the quarter ended March 31, 2023, there were no changes in estimates and assumptions that posed a significant risk, likely to cause a material adjustment in the carrying amounts of assets and liabilities for the current fiscal year, in relation to those detailed in the annual financial statements.

 


 2.1 Critical accounting estimates and assumptions

 

There was no change in the critical accounting estimates and assumptions in relation to that described in Note 29 of the financial statements as of December 31, 2022.

 

19

 

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022
(In thousands of Reais – R$)

 

 


 2.2 Critical judgments in the application of accounting policies

 

There was no change in critical judgments in the application of accounting policies in relation to that described in Note 29 of the financial statements as of December 31, 2022.

 


 2.3 New standards, amendments and interpretations of accounting pronouncements

 

The Company's Management assessed the existing new standards, amendments and interpretations for initial adoption on January 1, 2023 and concluded that there is no material impact on the Company's individual and consolidated interim financial information.

 


 3 FINANCIAL RISK MANAGEMENT

 


 3.1 Financial risk factors

 

There was no change in the financial risk factors and the policy for managing these risks in relation to that described in the financial statements as of December 31, 2022, issued on March 9, 2023.

 


 3.2 Capital management

 

The purpose of the Company's capital management is to ensure that it maintains a strong credit rating with institutions and an optimal capital ratio, in order to support the Company's business and maximize shareholder value.

 

The Company controls its capital structure by making adjustments and adapting it to current economic conditions. To keep this structure adjusted, the Company may pay dividends, return capital to shareholders, raise new loans, issue promissory notes and contract derivative transactions.

 


 3.3 Fair value estimate

 

There were no changes regarding the criteria or techniques for measuring the fair value of assets and liabilities, nor were there any changes as to the classification of the Company’s financial instruments in relation to those disclosed in the financial statements as of December 31, 2022.

 


 3.4 Offsetting financial instruments

 

Financial assets and liabilities are offset (with the same counterparty), and the net amount reported in the balance sheet, when there is a legal right to offset the recognized amounts and there is an intention either to settle them on a net basis or to realize the asset and settle the liabilities simultaneously.

 

20

 

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022
(In thousands of Reais – R$)

 

 

Section C - SEGMENT INFORMATION

 


 4 THE PRESENTATION OF INFORMATION BY SEGMENT

 

The purpose of the Company's businesses is to provide information technology products and services, as well as advisory services, aimed at serving the financial sector. Although the products are intended for various segments within financial institutions, these are not controlled and managed by Management as independent segments, and the Company's results are tracked, monitored and evaluated in an integrated manner.

 

21

 

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022
(In thousands of Reais – R$)

 

 

Section D - GROUP STRUCTURE

 


 5 INVESTMENTS

 

(a) Changes in investments

 

    Sinqia Tecnologia
Ltda.		   Torq Inovação
Digital Ltda.		   Homie do Brasil
Informática Ltda.		   Rosk Software S.A.   Total  
Balance as of December 31, 2021 (Restated)   91,369   34,113   39,816   32,713   198,011  
Capital increase (i)   491,198   7,337   -   -   498,535  
Investment acquisition   -   -   -   1,438   1,438  
Dividend distribution   -   -   (4,333)   -   (4,333)  
Equity pickup   3,053   87   4,333   (704)   6,769  
Non-controlling interest put option   (65,602)   -   -   -   (65,602)  
Amortization (ii)   -   -   (2,342)   (3,788)   (6,130)  
Balance as of December 31, 2022   520,018   41,537   37,474   29,659   628,688  
Capital contribution (iii)   14,826   551   -   -   15,377  
Equity pickup   13,558   192   899   144   14,793  
Non-controlling interest put option   (9,753)   -   -   -   (9,753)  
Amortization (ii)   -   -   (585)   (490)   (1,075)  
Balance as of March 31, 2023   538,649   42,280   37,788   29,313   648,030  

 

(i) In 2022, the capital increase in Sinqia Tecnologia Ltda. was carried out to make the acquisitions of Lote45 Participações S.A., Mercer Seguridade Ltda. and Newcon Software S.A.

 

(ii) Amortization of capital gains generated in the business combination, attributed to non-controlling shareholders.

 

(iii) In 2023, the capital increase in Sinqia Tecnologia Ltda. was made for the acquisition of Compliasset Software e Soluções Digitais S.A., as set out in note 27.

 

22

 

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022
(In thousands of Reais – R$)

 

 


 (b) Subsidiary information

 

                        Total investment Equity pickup  
Direct investment   Shareholders’ Equity   Equity interest   Goodwill appreciation   Amortization   Result for the period   03/31/2023   12/31/2022   03/31/2023   03/31/2022 (Restated)  
                                       
Sinqia Tecnologia Ltda.   538,649   100%   -   -   13,558   538,649   520,018   13,558   (1,469)  
Torq Inovação Digital Ltda.   42,280   100%   -   -   192   42,280   41,537   192   (40)  
Homie do Brasil Informática Ltda.   1,511   60%   41,566   (4,684)   1,499   37,788   37,474   899   1,398  
Rosk Software S.A.   1,484   51%   32,834   (4,278)   283   29,313   29,659   144   59  
                        648,030   628,688   14,793   (52)  

 

(c) Indirect investments (Direct subsidiaries of Sinqia Tecnologia Ltda.)

 

                Total investment   Equity pickup
Indirect investment   Shareholders’ equity   Equity interest   Result for the period   03/31/2023   12/31/2022   03/31/2023   03/31/2022
                             
Sinqia Seguridade Ltda. (i)   at   at   -   -   -   -   1,117
Lote45 Participações S.A.   6,112   52%   2,551   3,178   1,720   1,326   983
Newcon Software Ltda. (ii)   at   at   -   -   -   -   4,476
Newcon Tecnologia Ltda. (ii)   at   at   -   -   -   -   (2)
Compliasset Software e Soluções Digitais S.A. (iii)   1,256   60%   87   754   -   52   -
                             
                3,932   1,720   1,378   6,574

 


 (i) On October 1, 2022, Sinqia Seguridade Ltda. was merged into Sinqia Tecnologia Ltda.

(ii) On December 31, 2022, Newcon Software S.A. and Newcon Tecnologia e Serviços Ltda. were merged into Sinqia Tecnologia Ltda.

(iii) On March 7, 2023, Sinqia Tecnologia acquired 60% of the shares in Compliasset Software e Soluções Digitais Ltda.

 

23

 

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022
(In thousands of Reais – R$)

 

 

Section E – SELECTED RELEVANT NOTES

 


 6 CASH AND CASH EQUIVALENTS

 

a) Cash and cash equivalents

 

        Individual         Consolidated  
    03/31/2023   12/31/2022     03/31/2023   12/31/2022  
                     
Banks   1,988   332     4,222   2,143  
Local currency fixed-income securities (i)   46,840   11,437     79,762   35,798  
                     
    48,828   11,769     83,984   37,941  

 

(i) The Company has financial investment policies in place providing that investments should be concentrated in low-risk securities and substantially remunerated based on percentage changes in the Interbank Deposit Certificate (CDI) rate. Therefore, they refer to investments in fixed-income investment funds, repurchase transactions and Bank Deposit Certificates (CDB), with yields ranging from 85% to 103% of the CDI rate as of March 31, 2023 and December 31, 2022 and immediate liquidity, that is, no grace period for redemptions.

 

b) Financial investments

 

        Individual         Consolidated  
    03/31/2023   12/31/2022     03/31/2023   12/31/2022  
                     
Local currency fixed-income securities (i)   -   98,369     -   151,766  
Collateral amounts (ii)   13,772   -     13,772   -  
                     
    13,772   98,369     13,772   151,766  

 

(i) The amounts correspond to cash allocated to investing activities, including future business combinations. The Company has financial investment policies in place providing that investments should be concentrated in low-risk securities and substantially remunerated based on percentage changes in the Interbank Deposit Certificate (CDI) rate. Therefore, they refer to investments in fixed-income investment funds, repurchase transactions and Bank Deposit Certificates (CDB), with yields ranging from 85% to 103% of the CDI rate as of December 31, 2022 and immediate liquidity, that is, no grace period for redemptions.

 

(ii) The collateral amounts correspond mainly to investments in fixed-income investment funds, with equivalent average interest ranging from 106.59% to 115.20% of the CDI rate, held as collateral to guarantee the payment of investment acquisition obligations and short-term debentures.

 

24

 

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022
(In thousands of Reais – R$)

 

 

c) Financial assets

 

        Individual         Consolidated  
    03/31/2023   12/31/2022     03/31/2023   12/31/2022  
                     
Collateral amounts (i)   24,873   38,563     24,873   38,563  
Investments in private entities (ii)   1,075   1,075     45,561   44,828  
Derivative financial instruments (iii)   13,900   13,334     20,951   15,876  
                     
    39,848   52,972     91,385   99,267  

 

(i) The collateral amounts mainly correspond to investments in fixed-income investment funds, with equivalent average interest ranging from 106.59% to 115.20% of the CDI rate, held as collateral to guarantee payment of investment acquisition obligations and debentures.

 

(ii) The amounts correspond to the fair value of investments in preferred shares of Celcoin Pagamentos S.A., Fundos de Investimento em Participações and loans convertible into shares.

 

(iii) The amounts refer to the call options for non-controlling shareholders in the subsidiaries Homie do Brasil Informática Ltda., Rosk Software S.A., Lote45 Participações S.A. and Compliasset Software e Soluções Digitais S.A.

 


 7 ACCOUNTS RECEIVABLE

 

        Individual         Consolidated  
    03/31/2023   12/31/2022     03/31/2023   12/31/2022  
                     
Amounts invoiced   18,303   16,114     37,509   34,449  
Services billable (i)   8,224   3,763     16,615   7,511  
Estimated losses on – doubtful debts   (544)   (542)     (1,574)   (1,079)  
                     
    25,983   19,335     52,550   40,881  

 

(i) The amount of services billable refers to revenue from services effectively provided to customers, but which, as of the base date of the accounting information, had not been billed.

 

25

 

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022
(In thousands of Reais – R$)

 

 

(ii) We present below the changes in estimated losses on doubtful accounts:

 

        Individual         Consolidated  
    03/31/2023   03/31/2022     03/31/2023   03/31/2022  
                     
Balance at the beginning   (542)   (1,432)     (1,079)   (2,578)  
                     
Additions due to corporate reorganization (i)   -   (236)     -   -  
Additions due to business acquisition (ii)   -   -     (25)   -  
Additions   (10)   (67)     (547)   (67)  
Write-offs   8   -     69   -  
Reversals – no effect on income   -   241     8   408  
                     
Balance at the end of the   (544)   (1,494)     (1,574   (2,237)  

 

(i) Regarding the acquisition and merger of Itaú Administração Previdenciária Ltda.

 

(ii) Regarding the acquisition of Compliasset Software e Soluções Digitais S.A. on March 7, 2023.

 

The aging list of accounts receivable is represented as follows:

 

        Individual         Consolidated  
    03/31/2023   12/31/2022     03/31/2023   12/31/2022  
                     
Services billable   8,224   3,763     16,615   7,511  
Coming due   15,504   15,087     29,968   29,869  
Overdue:                    
Up to 90 days   2,256   485     4,852   3,481  
91 to 180 days   11   6     1,594   248  
181 to 270 days   6   2     215   33  
271 to 360 days   2   6     49   20  
Over 360 days   524   528     831   798  
                     
    26,527   19,877     54,124   41,960  

 

26

 

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022
(In thousands of Reais – R$)

 

 


 8 TAXES AND CONTRIBUTIONS RECOVERABLE

 

        Individual         Consolidated  
    03/31/2023   12/31/2022     03/31/2023   12/31/2022  
                     
IRRF and IRPJ/CSLL to offset (i)   15,644   12,671     21,355   17,046  
PIS, COFINS and CS                    
withheld   -   -     24   47  
Others   16   17     23   68  
                     
    15,660   12,688     21,402   17,161  
                     
Current   14,332   11,743     19,897   15,840  
Non-current   1,328   945     1,505   1,321  

 

(i) Refers to withholding income tax and prepayments of income tax and social contribution.

 


 9 RELATED PARTIES

 


 a) Related party information

 

The table below provides information on outstanding balances as of March 31, 2023 and December 31, 2022 between the Parent Company, its subsidiaries and the Company's management:

 

        Individual  
Amounts receivable from Related Parties  –  Assets   03/31/2023   12/31/2022  
           
Sinqia Tecnologia Ltda.   260   3,067  
Homie do Brasil Informática Ltda.   359   326  
           
Non-current assets   619   3,393  
           
        Individual  
Recovery of Expenses (Expenses) – Income   03/31/2023   12/31/2022  
           
Sinqia S.A.   -   33,575  
Sinqia Tecnologia Ltda.   -   (11,558)  
Newcon Software S.A.   -   (22.017)  
           
    -   -  

 

Transactions between Group companies refer to the sharing of expenses, mainly administrative, and are carried out based on contracts signed between the parties. There are no purchase and sale transactions involving products or services between the companies.

 

27

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022

(In thousands of Reais – R$)

 

 


 b) Management compensation

 

The Company does not have any additional post-employment obligations, nor does it offer other long-term benefits, such as leaves and other benefits based on time served. The Company does not offer any benefits upon termination of senior management, either, other than those required by the applicable labor laws in Brazil.

 

Short-term benefits

 

The Annual Shareholders’ Meeting set overall annual compensation for the Company's managers for the year 2023 in the amount of no more than R$22,778,000 (compared to the amount realized of R$13,003,000 for the year 2022).

 

Short-term compensation includes salaries, payroll charges, benefits and variable bonuses and is summarized as follows:

 

    Individual and Consolidated
    03/31/2023     03/31/2022  
    (3 months)     (3 months)  
                 
Salaries and payroll charges     2,507       1,208  
Benefits     360       122  
Variable bonuses and payment in shares     -       23  
      2,867       1,353  

  


 c) Stock option plan

 

The Stock Option Plan (“Plan”) provides for the granting of options to purchase common shares (“Options”) in the Company. The Plan aims to (a) attract, retain and engage key personnel for the Company's management ("Beneficiaries"), (b) align the Beneficiaries' interests with the interests of the Company and its shareholders from a long-term perspective and (c) encourage Beneficiaries to contribute to obtaining good results for the Company.

 

Number of Shares Included in the Plan: The options granted under the Plan, including those already exercised or not, and excluding those canceled due to termination, death, permanent disability or retirement, may confer rights on common shares representing up to three percent (3%) of the Company's capital stock as of the date of approval of the Plan.

 

Exercise of Options: The options granted may be exercised so long as the terms and conditions stipulated in this Plan and by the Board of Directors are met, as well as the terms and conditions set forth in the relevant Option Agreements. The Beneficiary may exercise all or any part of the exercisable Options, but it is agreed that, in each partial exercise of the Options, the Beneficiary must exercise at least 25% of the Options that held thereby that are exercisable. The exercise of part of the Options by the Beneficiary will not affect the exercise of other Options held.

 

The fair value of options granted is estimated on the date of grant based on the Black-Scholes option pricing model. 

 
28

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022

(In thousands of Reais – R$)

 

 

The main events related to the current plans, the variables used in the calculations and the results are:

 

      Grants                 Fair value assumptions  
Date     Number of Options     Exercise price in Reais     Fair value of shares in Reais     Volatility rate     Risk-free rate     Maturity period  
09/30/2019       98,646       22.08       18.70       47.82 %     9.75 %     4 years  
03/31/2021       200,424       17.24       25.50       48.26 %     6.00 %     4 years  
05/31/2021       86,382       29.56       22.46       47.82 %     7.00 %     4 years  
09/02/2021       70,044       30.03       23.10       47.82 %     7.00 %     4 years  
04/30/2022       273,008       14.90       19.08       47.82 %     9.38 %     4 years  

  


 10 PROPERTY AND EQUIPMENT

 

The property and equipment of the Company and its subsidiaries are recorded at acquisition cost, and the depreciation of assets is calculated using the straight-line method and takes into account the estimated economic useful lives of the assets. The details of the Company's property and equipment are shown in the tables below:

 

                          Individual  
                          03/31/2023       12/31/2022  
    Useful life (years)     Cost       Accumulated depreciation       Net       Net  
                                     
Facilities and improvements
   9  – 10     7,848       (4,700 )     3,148       3,292  
Electrical appliances and materials
   9  – 12     561       (387 )     174       194  
Furniture and fixtures
   9  – 12     2,372       (1,608 )     764       817  
Lease right of use
   2  – 10     7,394       (2,508 )     4,886       4,786  
Computers and peripherals
   4  – 5     18,437       (9,485 )     8,952       8,321  
                                     
          36,612       (18,688 )     17,924       17,410  

 

                    Consolidated  
                          03/31/2023       12/31/2022  
    Useful life (years)     Cost       Accumulated depreciation       Net       Net  
                                     
Facilities and improvements
   9  – 10     10,524       (7,072 )     3,452       3,553  
Electrical appliances and materials
   9  – 12     749       (502 )     247       271  
Furniture and fixtures
   9  – 12     3,579       (2,167 )     1,412       1,476  
Lease right of use
   2  – 10     39,732       (13,053 )     26,679       26,565  
Computers and peripherals
   4 – 5     25,167       (12,540 )     12,627       11,990  
Vehicles
   5     300       (111 )     189       205  
Buildings
   25     3,900       (1,234 )     2,666       2,680  
                                     
          83,951       (36,679 )     47,272       46,740  

 

 
29

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022

(In thousands of Reais – R$)

 

 

    Individual
    Facilities and improvements     Electrical appliances and materials     Furniture and fixtures     Lease right of use     Computers and peripherals     Total  
                                     
Balances as of December 31, 2022     3,292       194       817       4,786       8,321       17,410  
Additions     8       -       24       -       1,352       1,384  
Additions - right of use (i)     -       -       -       303       -       303  
Depreciation     (152)
    (20)
    (77)
    (203)
    (721)
    (1,173)
Balances as of March 31, 2023     3,148       174       764       4,886       8,952       17,924  

 


 (i) The additions related to CPC 06 (R2) consist of the recognition of the right of use under new property lease agreements.

 

    Consolidated
    Facilities and improvements     Electrical appliances and materials     Furniture and fixtures     Lease right of use     Computers and peripherals     Vehicles     Buildings     Total  
                                                 
Balances as of December 31, 2022     3,553       271       1,476       26,565       11,990       205       2,680       46,740  
Additions     8       -       24       -       1,609       -       -       1,641  
Additions referring to CPC 06 (R2) (i)     -       -       -       1,443       -       -       -       1,443  
Additions due to business acquisitions (ii)     62       -       19       85       28       -       -       194  
Depreciation     (171)
    (24)
    (107)
    (1,414)
    (1,000)
    (16)
    (14)
    (2,746)
Balances as of March 31, 2023     3,452       247       1,412       26,679       12,627       189       2,666       47,272  

  


 (i) The additions referring to CPC 06 (R2) consist of the recognition of the right of use under new property lease agreements.

 


 (ii) In 2022, it refers to the assets arising from the business combination of Newcon Software Ltda., Sinqia Seguridade Ltda. and Lote45 Participações S.A., and in 2023, it refers to the assets arising from the business combination of Compliasset Software e Soluções Digitais S.A.
 
30

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022

(In thousands of Reais – R$)

 

 


 11 INTANGIBLE ASSETS

 

                    Individual  
                03/31/2023   12/31/2022  
    Useful life (years)   Cost   Accumulated amortization and impairment   Net   Net  
                       
Goodwill on acquisition of Subsidiaries Goodwill   -   160,829   (2,860)   157,969   157,969  
Right to use software   1-5   27,997   (21,179)   6,818   5,525  
Trademarks and patents   5-10   2,278   (2,278)   -   -  
Acquired software   5   21,983   (12,071)   9,912   10,535  
Customer portfolio   10   52,655   (15,143)   37,512   38,652  
Non-compete agreement   5   4,575   (4,575)   -   -  
New product development   5   11,832   (6,301)   5,531   3,601  
Right to use servers   1-3   61,987   (26,939)   35,048   40,647  
        344,136   (91,346)   252,790   256,929  

 

                    Consolidated  
                03/31/2023   12/31/2022  
    Useful life (years)   Cost   Accumulated amortization and impairment   Net   Net  
                       
Goodwill on acquisition of subsidiaries - Goodwill   -   644,658   (2,860)   641,798   630,596  
Right to use software   1-5   34,252   (23,989)   10,263   8,988  
Trademarks and patents   5-10   62,871   (12,901)   49,970   51,044  
Acquired software   5   104,794   (38,816)   65,978   65,152  
Customer portfolio   10   341,657   (62,162)   279,495   276,303  
Non-compete agreement   5   9,068   (8,146)   922   1,121  
New product development   5   12,571   (6,301)   6,270   4,262  
Right to use servers   1-3   61,987   (26,939)   35,048   40,647  
        1,271,858   (182,114)   1,089,744   1,078,113  
 
31

SINQIA S.A. AND SUBSIDIARIES.

March 31, 2023

(In thousands of Reais, except as indicated otherwise)

 

 

    Individual
    Goodwill on acquisition of subsidiaries - Goodwill (i)     Right to use software     Trademarks and patents     Acquired software     Customer portfolio     New product development     Right of use under leases     Total  
Balances as of December 31, 2022     157,969       5,525       -       10,536       38,652       3,600       40,647       256,929  
Additions     -       4,342       -       -       -       1931       -       6,273  
Additions - right of use (ii)     -       -       -       -       -       -       611       611  
Write-offs     -       -       -       -       -       -       (1964)
    (1964)
Amortization     -       (3,049)
    -       (624)
    (1,140)
    -       (4,246)
    (9,059)
Balances as of March 31, 2023     157,969       6,818       -       9,912       37,512       5,531       35,048       252,790  

 
(i)
 The additions referring to CPC 06 (R2) consist of the recognition of the right of use under the new server lease agreements.

 

    Consolidated
    Goodwill on acquisition of subsidiaries - Goodwill (i)     Right to use software     Trademarks and patents     Acquired software     Customer portfolio     Non-compete agreement     New product development     Right of use under leases     Total  
Balances as of December 31, 2022     630,596       8,988       51,044       65,152       276,303       1,121       4,262       40,647       1,078,113  
Additions     -       4,350       -       -       -       -       2008       -       6,358  
Additions right of use (ii)     -       -       -       -       -       -       -       611       611  
Additions due to business Acquisition (iii)     11,202       -       962       4,150       10,228       -       -       -       26,542  
Write-offs     -       -       -       -       -       -       -       (1964)
    (1964)
Amortization     -       (3,075)
    (2036)
    (3,324)
    (7,036)
    (199)
    -       (4,246)
    (19,916)
Balances as of March 31, 2023     641,798       10,263       49,970       65,978       279,495       922       6,270       35,048       1,089,744  

 
(i)
 The entire balance of goodwill recognized is allocated to the Company's only cash-generating unit.

(ii)
 The additions referring to CPC 06 (R2) consist of the recognition of the right of use under the new server lease agreements.

(iii)
 In 2022, it refers to the assets arising from the business combination of Newcon Software Ltda., Sinqia Seguridade Ltda. and Lote45 Participações S.A., and in 2023 it refers to the assets arising from the business combination of Compliasset Software e Soluções Digitais S.A.
 
32

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022

(In thousands of Reais – R$)

 

 


 12 DEBENTURES – INDIVIDUAL AND CONSOLIDATED

 

      Charges     Maturity     03/31/2023     12/31/2022  
                           
1st Issue of Debentures (i)       CDI+1.50%       02/22/2024       11,505       14,634  
2nd Issue of Debentures (ii)       CDI+2.30%       07/15/2026       206,658       222,022  
                                   
Total                       218,163       236,656  
                                   
Current                       74,552       74,500  
Non-current                       143,611       162,156  

 


 (i) The first issue of simple, non-convertible debentures is secured by credit rights arising from receivables. Additionally, the Company is required to keep the amount of R$3,000 deposited, which was recorded in the securities account in non-current assets.

 


 (ii) The second issue of simple, non-convertible debentures is guaranteed by credit rights from the checking accounts linked to the transaction and the funds deposited therein, arising from the Company's contracts and customers.

 

Shown below are changes in debentures:

 

      03/31/2023       03/31/2022  
                 
Balance at the beginning of the period     236,656       173,639  
Interest incurred     8,991       5,500  
Interest paid     (8,973)
    (5,098)
Amortization     (18,511)
    (3,125)
                 
Balance at the end of the period     218,163       170,916  

  

The expected payment of debentures is shown below:

 

      03/31/2023       03/31/2022  
                 
2022     -       24,737  
2023     55,553       49,236  
2024     64,159       38,803  
2025     62,177       36,716  
2026     36,274       21,424  
                 
      218,163       170,916  
 
33

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022

(In thousands of Reais – R$)

 

 


 (a) Covenants

 

The debentures have financial covenants that must be determined on the base date of December 31. For 2022, Net Debt divided by EBITDA must be equal to 3 or lower, and from 2023 to 2026, Net Debt divided by EBITDA must be equal to 2.75 or lower.

 

Gross Debt means the sum of short- and long-term debentures, including (i) bonds discounted with repayment and anticipation of receivables, (ii) lease purchasing, unless the lease purchase is due to rental agreements for operating properties and the right to use servers, (iii) non-convertible, fixed-income securities issued by public or private companies, in the local or international markets, (iv) liabilities arising from derivative financial instruments, (v) financial debts of acquired companies, provided that the interest is greater than fifty percent (50%) of the share capital of the respective acquiree, and not yet consolidated, (vi) debts and convertible securities, and (vii) loan liabilities net of loan assets, duly represented in the Issuer’s consolidated balance sheet, in the “Debentures” account in the consolidated quarterly financial information or in the consolidated annual financial statements.

 

Net Debt means the sum of Gross Debt net of cash, cash deposits, cash invested in financial assets with the expectation of generating value over time, available in a period of less than 360 days.

 

As of the present date, the Company expects to comply with all restrictive clauses.

 


 13 LABOR LIABILITIES

 

          Individual           Consolidated  
      03/31/2023       12/31/2022       03/31/2023       12/31/2022  
                                 
INSS/FGTS payable     7,249       5,021       14,430       10,172  
IRRF on salaries     3,390       4,516       5,153       7,256  
Vacation pay     16,703       15,045       29,511       26,655  
Bonuses, commissions and profit-sharing (i)     18,087       13,943       19,805       17,320  
Others     210       94       729       831  
                                 
      45,639       38,619       69,628       62,234  

 


 (i) The provision for bonuses and profit-sharing is recorded monthly and depends on the achievement of corporate and individual targets of employees. The payment of these earnings always occurs in March and April of the subsequent year.

 

 
34

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022

(In thousands of Reais – R$)

 

 


 14 TAX LIABILITIES

 

    Individual     Consolidated  

    03/31/2023       12/31/2022       03/31/2023       12/31/2022  
IR and CS payable     25       16       2,920       3,252  
ISS payable     779       801       2,082       1907  
PIS/COFINS payable     332       190       1,214       769  
Other taxes payable     80       58       199       187  
                                 
      1,216       1,065       6,415       6,115  

 


 15 INVESTMENT PURCHASE OBLIGATIONS

 

These refer to obligations consisting of installments payable for the acquisition of investments made by the Company and its subsidiaries, negotiated for payment by installments, and for contracts that are not linked market interest rates, the present value adjustment is made (using an average rate between 4.5% and 11%, reflecting the borrowed capital rate for the acquisition period). They are recorded in current and non-current liabilities, as follows:

 

          Individual           Consolidated  
      03/31/2023       12/31/2022       03/31/2023       12/31/2022  
                                 
Acquisition:                                
Atena     -       -       3,240       4,082  
ADSPrev     -       -       520       1,070  
SoftPar     -       -       6,372       6,230  
Stock&Info     -       -       1,034       965  
Tree Solution     -       -       3,352       3,203  
Fromtis     -       -       7,641       7,516  
ISP     32,525       42,372       32,525       42,372  
Dendron     3,600       3,568       3,600       3,568  
Simply     4,400       4,362       4,400       4,361  
Lote45     -       -       -       26,833  
Mercer     -       -       4,453       7,316  
Newcon     -       -       60,301       83,222  
Compliasset     -       -       5,045       -  
                                 
      40,525       50,302       132,483       190,738  
                                 
Current     14,680       14,384       51,714       79,101  
Non-current     25,845       35,918       80,769       111,637  
 
35

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022

(In thousands of Reais – R$)

 

 

Changes in investment acquisition obligations are show below:

 

    Individual     Consolidated  
    03/31/2023     03/31/2023  
                 
Balance at the beginning of the period     50,302       190,738  
Interest incurred     1,791       3,631  
Addition due to business acquisition (i)     -       5,045  
Interest paid     (1891)
    (4,742)
Amortization     (9,677)
    (62,189)
                 
Balance at the end of the period     40,525       132,483  

  

(i) It refers to amounts resulting from the acquisition of Compliasset Software e Soluções Digitais S.A.

 

    Individual     Consolidated  
      03/31/2023       03/31/2023  
                 
2023     4,000       13,444  
2024     14,680       52,319  
2025     10,841       29,764  
2026     11,004       24,065  
2027     -       12,891  
                 
      40,525       132,483  

  


 16 PROVISION FOR LAWSUITS

 

The Company, in the ordinary course of its business, is subject to tax, civil and labor lawsuits. Based on the opinion of its legal advisors, Management assesses the expected outcome of the lawsuits in progress and determines whether a provision needs to be set up based on the best estimate of the expenditure required to settle the current liability on the balance sheet date.

 

The table below presents the position of provisions for lawsuits:

 

      Individual     Consolidated  

      03/31/2023       12/31/2022       03/31/2023       12/31/2022  
                                   
Civil       9,077       9,223       10,998       11,784  
Labor       11,707       13,915       44,394       46,982  
Tax       12,880       13,469       79,072       81,100  
                                   
        33,664       36,607       134,464       139,866  
 
36

SINQIA S.A. AND SUBSIDIARIES.

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022

(In thousands of Reais – R$)

 

 

Changes in provisions for lawsuits are shown below:

 

    Individual     Consolidated  
      03/31/2023       03/31/2023  
                 
Balance at the beginning of the period     36,607       139,866  
Additions (i)     176       191  
Additions due to business acquisition (ii)     -       2,404  
Reversals     (2,962)
    (7,510)
Interest incurred     231       231  
Payments     (388)
    (718)
                 
Balance at the end of the period     33,664       134,464  

 

(i) Additions include new lawsuits and changes in values of lawsuits already recorded.

 

(ii) Concerning amounts resulting from the acquisition of Compliasset Software e Soluções Digitais S.A.

 

The Company and its subsidiaries are also a party to labor and tax lawsuits whose risk of loss, according to its legal advisors and the Company's Management, is rated as possible, for which no provision was recognized. The amount concerning the restated provisions for these lawsuits corresponds to R$33,599 in the Individual statement as of March 31, 2023 (R$33,030 as of December 31, 2022) and R$35,149 in the Consolidated statement as of March 31, 2023 (R$35,082 as of December 31, 2022). Additionally, the Company has court deposits amounting to R$104 in the Individual statement as of March 31, 2023 (R$187 as of December 31, 2022) and R$126 in the Consolidated statement as of March 31, 2023 (R$197 as of December 31, 2022).

 


 a) Labor

 

In general, labor claims involve overtime, additional hazard pay and/or dangerous work pay, wage parity, vacation pay, moral damages resulting from accidental actions, occupational illness, subsidiary liability involving service providers, etc.

 


 b) Tax

 

Tax proceedings refer to legal disputes involving municipal and federal taxes, particularly requests for offsets and/or refunds that have not been approved, as well as tax risks identified in the acquisition processes.

 


 c) Civil

 

The civil lawsuits mainly refer to actions filed on the grounds of certain problems in the provision of services offered and refund of amounts.

 
37

 

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 


 17 SHAREHOLDERS’ EQUITY

 


 17.1 Capital Stock

 

At a meeting held on August 26, 2021, the Board of Directors approved an increase in the Company’s capital stock, within the authorized capital limit, pursuant to article 5 of the Bylaws, in the amount of R$400,042, through the issuance of seventeen million, three hundred and ninety-three thousand, one hundred and sixty (17,393,160) common shares.

 

The Company’s capital stock is R$813,303, and is currently represented by 87,941,972 registered common shares with no par value. Holders of common shares are entitled to one vote per share at the Company’s shareholders’ meetings.

 

The table below shows the number of shares held by shareholders holding 5% or more of the common shares issued by the Company, as well as treasury shares.

 

        03/31/2023       12/31/2022
Shareholders   Shares   %   Shares   %
                 
HIX Investimentos Ltda.   9,588,025   10.90%   9,588,025   10.90%
Antônio Luciano de Camargo   6,483,752   7.37%   6,483,752   7.37%
Bernardo Francisco Pereira   5,689,450   6.47%   5,689,450   6.47%
SFA Investimentos Ltda.   5,404,400   6.15%   5,404,400   6.15%
SK Tarpon   4,405,877   5.01%   4,405,877   5.01%
Treasury shares   3,360,684   3.82%   3,362,360   3.82%
Other shareholders   53,009,784   60.28%   53,008,108   60.28%
    87,941,972   100.0%   87,941,972   100.0%

 


 17.2 Revenue reserve

 

The revenue reserve is made up of the legal reserve and the profit retention reserve arising from allocations of capital budgets approved at the Annual Shareholders’ Meetings.

 

a) Legal reserve

 

As of December 31, 2022, the legal reserve was determined in the amount of R$832. In 2023, there was still no formation of legal reserve that will be realized as of December 31, 2023.

 

b) Dividends and return on equity

 

As of December 31, 2022, a distribution of profits in the amount of R$4,690 was determined. In 2023, there was still no calculation of dividends that will be made as of December 31, 2023.

 


 17.3 Capital reserve

 

The balances of capital reserves are mainly composed of the effects of the share-based compensation plan and changes in the purchase and sale prices of treasury shares.

 

In 2023, an amount of R$141 (R$878 in 2022) was recognized in connection share-based compensation plans. There was a change of R$635 ((R$1,238) in 2022) in the capital reserve concerning shares exercised and not yet transferred to the beneficiaries, less the difference

 

38

 

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 

between the purchase price and the delivery price of treasury shares that have already been transferred.

 

The balance as of March 31, 2023 is R$12,643.

 


 17.4 Treasury shares

 

In a meeting held on March 10, 2021, the Board of Directors authorized the purchase of up to 5,241,054 shares, representing 8.9% of the outstanding shares, through the launch of the Sixth Share Buyback Program.

 

In 2021, shares were purchased for an amount of R$99,777, and part of these shares was delivered for an amount of R$56,109 in payment for the newly acquired Simply Sistemas S.A., Dendron Tecnologia S.A., Homie do Brasil Informática Ltda. and Rosk Software S.A.

 

For the quarter ended March 31, 2023, shares were purchased in the amount of R$45 (R$21,658 in 2022), and shares were transferred upon options being exercised under Stock Option Plan in the amount of R$25 (R$4,380 in 2022), resulting in a balance in the treasury shares account of R$58,194 (R$58,174 as of December 31, 2022).

 


 17.5 Share issuing costs

 

The share issuing costs account reflects changes in Shareholders’ Equity due to the issuance of new shares. In 2021, expenses of R$24,975 related to the increase in the Company’s capital stock were recorded, within the authorized capital limit, pursuant to article 5 of the Bylaws.

 


 17.6 Non-controlling interest

 

The non-controlling interest refers to the interest of the shareholders of Homie do Brasil Informática Ltda., Rosk Software S.A., Lote45 Participações S.A. and Compliasset Software e Soluções Digitais S.A., representing an amount of R$16,816 in 2023 (R$20,067 in 2022).

 

39

 

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 


 18 NET OPERATING REVENUE

 

        Individual       Consolidated
    03/31/2023   03/31/2022   03/31/2023   03/31/2022
                 
Software   54,541   52,107   155,867   129,252
Services   26,326   24,069   26,864   24,435
Total gross revenues   80,867   76,176   182,731   153,687
                 
Revenue deductions   (8,813)   (8,342)   (18,490)   (14,831)
                 
Net revenues   72,054   67,834   164,241   138,856
                 
Tax basis   80,867   76,176   182,731   153,687
                 
Deductions                
ISS   (2,251)   (2,129)   (5,115)   (4,418)
PIS and COFINS   (2,939)   (2,782)   (6,725)   (5,555)
Employer’s INSS   (3,623)   (3,431)   (6,650)   (4,858)
    (8,813)   (8,342)   (18,490)   (14,831)
                 
Software   48,626   46,951   140,336   117,118
Services   23,428   20,883   23,905   21,738
                 
    72,054   67,834   164,241   138,856

 

The average taxes levied on sales in the period was 10.12% for the Consolidated statement (9.65% on March 31, 2022), covering PIS/PASEP (Social Integration Program), COFINS (Financial Contribution for Social Security), the ISSQN (Tax on Services of Any Nature) and the employer’s INSS (National Social Security Institute).

 


 19 COSTS OF SERVICES PROVIDED

 

        Individual       Consolidated
    03/31/2023   03/31/2022   03/31/2023   03/31/2022
                 
Third-party services   3,567   2,247   7,296   7,248
Personnel, payroll charges and benefits   41,420       78,471    
Depreciation and   2,723   2,249   2,932   2,249
Other costs   3,506   3,000   8,290   6,198
                 
    51,216   35,711   96,989   80,632

 

40

 

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 

20 GENERAL, ADMINISTRATIVE AND SELLING EXPENSES

 

        Individual       Consolidated
    03/31/2023   03/31/2022   03/31/2023   03/31/2022
                (Restated)
                 
Third-party services   2,227   1,602   3,331   4,777
Personnel, payroll charges, benefits and bonuses   18,882   2,298   27,577   17,095
Commissions   991   1,140   1,294   1,247
Rents, insurance, condominium and other charges   319   438   828   783
Reversal of provision for lawsuits   (2,786)   (41)   (7,319)   (1,057)
Complement (reversal) of estimated provision for doubtful debts   2   (174)   478   (341)
Advertising and marketing   138   290   160   365
Depreciation and amortization   8,584   8,263   19,730   13,799
Other expenses   1,396   768   2,065   1,369
                 
    29,753   14,584   48,144   38,037

 

41

 

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 

21 FINANCIAL RESULT

 

        Individual       Consolidated
    03/31/2023   03/31/2022   03/31/2023   03/31/2022
        (Restated)       (Restated)
                 
Financial revenues:                
Return on financial investment   3,584   3,310   4,720   4,048
Adjustment to fair value of financial instruments (i)   567   1,224   664   1,174
Interest assets   50   11   126   70
Other financial revenues   69   -   386   -
    4,270   4,545   5,896   5,292
                 
Financial expenses:                
Interest on investment acquisition   (1,791)   (483)   (3,631)   (995)
Interest on debentures   (8,991)   (5,500)   (8,991)   (5,500)
Bank expenses   (23)   (19)   (50)   (110)
Adjustment to present value of leases   (1,435)   (1,448)   (1,856)   (2,495)
Adjustment to the present value of put option   (2,102)   (6,042)   (5,592)   (8,377)
IOF expenses   (43)   (32)   (48)   (46)
Interest and inflation adjustment of lawsuits   (231)       (231)   (242)
Other financial expenses   -   (44)   -   (59)
    (14,616)   (13,764)   (20,399)   (17,824)
                 
Financial result, net   (10,346)   (9,219)   (14,503)   (12,532)

 

42

 

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 


 22 PROVISION FOR INCOME TAX AND SOCIAL CONTRIBUTION

 

Current income tax and social contribution were computed at the prevailing rates and deferred income tax and social contribution are calculated on temporary differences and on accumulated tax losses and negative bases.

 


 a) Reconciliation of income tax and social contribution revenues (expense)

 

The following amounts of income tax and social contribution, current and deferred, were recorded in income statements for the periods:

 

        Individual   Consolidated
    03/31/2023   03/31/2022   03/31/2023   03/31/2022
        (Restated)       (Restated)
                 
                 
Profit before income tax and social contribution   (4,468)   8,268   4,605   7,655
Current tax rate   34%   34%   34%   34%
                 
IRPJ and CSLL at the combined rate   1,519   (2,811)   (1,566)   (2,603)
                 
Adjustments for calculating the effective rate:                
                 
Equity pickup   5,030   (18)   -   -
Bonus expense   (1,463)   (517)   (1,510)   (536)
Assumed profit in subsidiaries (ii)   -       (154)   62
Other permanent differences (i)   63   (11)   394   373
                 
Income tax and social contribution expense   5,149   (3,357)   (2,836)   (2,704)
                 
Income tax and social contribution:                
                 
Current   -   (2,307)   (3,428)   (6,824)
Deferred   5,149   (1,050)   592   4,120

 

(i) Other permanent differences consist mainly of deferred IR/CS from previous years, reversals of contingency capital gains and payment of shares.

 

(ii) Difference referring to group companies that follow the income tax and social contribution calculation system through assumed profit.

 

43

 

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 


 b) Deferred income tax and social contribution - Assets

 

Below is the breakdown of deferred income tax and social contribution:

 

        Individual   Consolidated
    03/31/2023   03/31/2022   03/31/2023   03/31/2022
                 
Non-current assets                
Tax loss and negative basis   35,967   28,882   56,000   49,070
                 
Estimated losses on doubtful debts   -   184   30   367
                 
Profit-sharing provision   323   328   323   443
                 
Provision for lawsuits   9,458   10,202   36,630   42,081
                 
Amortization of tax goodwill on business combination   (13,168)   (11,413)   (21,279)   (12,575)
Other provisions   1,256   1,254   4,906   1,424
Change in fair value of financial assets   (4,200)   (4,915)   980   (3,736)
Lease purchase   1,118   1,084   1,627   1,551
                 
    30,754   25,606   79,217   78,625

 


 23 EARNINGS PER SHARE – INDIVIDUAL AND CONSOLIDATED

 

Basic earnings per share are calculated by dividing net income for the period attributed to holders of common shares in the Parent Company by the weighted average number of common shares available during the period.

 

Diluted earnings per share is calculated by dividing net income for the period attributable to holders of common shares of the Parent Company by the weighted average number of common shares available during the period plus the weighted average number of common shares that would be issued upon conversion of all potential common shares diluted into common stock.

 

The tables below show the data on earnings and shares used in the calculation of basic and diluted earnings per share:

 


 a) Basic earnings per share

 

    03/31/2023   03/31/2022
        (Restated)
         
Earnings attributable to the Company’s controlling shareholders   681   4,911
         
Weighted average number of common shares outstanding   84,579,674   84,992,966
         
Basic earnings per share – R$   0.008   0.058

 

44

 

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 


 b) Diluted earnings

 

    03/31/2023   03/31/2022
        (Restated)
         
         
Earnings attributable to the Company’s controlling shareholders   681   4,911
Weighted average number of common shares outstanding   84,579,674   84,992,966
Potential increase in common shares due to the stock option and restricted stock plans   680,190   434,913
         
Diluted earnings per share – R$   0.008   0.057

 


 24 LEASE PURCHASE

 

The lease purchase liability was recognized as directed by CPC Accounting Pronouncement 6 (R2) (IFRS 16), which requires the recording of the liability for future payments and the right to use the leased assets for all contracts within the scope of the standard. For current leases, an average discount rate of 7.38% was used.

 

            Individual       Consolidated
    Expiration   03/31/2023   12/31/2022   03/31/2023   12/31/2022
                     
                     
Belo Horizonte office   12/31/2028   5,867   5,761   5,867   5,761
São Paulo office   07/01/2028   -   -   22,817   22,535
Curitiba office   08/31/2023   -   -   390   617
Taubate office   04/01/2025   -   -   100   -
Oracle do Brasil                    
(Servers)   12/31/2023   466   -   466   -
Solo Network (Servers)   07/31/2025   36,889   40,759   36,889   40,759
Claranet (Servers)   09/30/2026   -   2,101   -   2,101
                     
Total       43,222   48,621   66,529   71,773
                     
Current       18,452   18,937   23,970   24,334
Non-current       24,770   29,684   42,559   47,439

 

In accordance with CVM/SNC/SEP CIRCULAR LETTER No. 02/2019, the Company adopted as an accounting policy the requirements of CPC 06 (R2) in the measurement and remeasurement of its right of use, using the discounted cash flow technique without considering inflation (real cash flow discounted at the nominal rate). Management assessed the use of nominal flows and concluded that they do not present material misstatements in the information presented.

 

In order to safeguard the faithful representation of the information in view of the requirements of CPC 06 (R2) and to meet the guidelines of the CVM technical teams, the liabilities balances without inflation, effectively accounted for (real flow v. nominal rate), and the estimate of the inflated balances in the periods of comparison (nominal flow v. nominal rate).

 

45

 

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 

Other assumptions, such as the maturity schedule of liabilities and interest rates used in the calculation are disclosed in other items of this same note, as well as the inflation indices that are observable in the market, so that nominal flows can be prepared by users of the financial statements.

 

    Individual     Consolidated
03/31/2023 12/31/2022   03/31/2023 12/31/2022

Actual flow discounted at the nominal rate 

          
Lease liability 48,642 55,240   76,569 83,193
Present value adjustment (5,420) (6,619)   (10,040) (11,420)
  43,222 48,621   66,529 71,773
Nominal flow discounted at the nominal rate          
Lease liability 50,330 57,286   78,671 86,326
Present value adjustment (7,104) (6,773)   (12,239) (11,761)
  43,226 50,513   66,432 74,565

 

Shown below are changes in lease purchasing:

 

    Individual   Consolidated
    03/31/2023   03/31/2023
         
Balance at the beginning of the period   48,621   71,773
         
Additions   914   2,154
Interest incurred   1,435   1856
Interest paid   (1,044)   (1,466)
Amortization   (4,740)   (5,824)
Write-offs   (1964)   (1964)
         
Balance at the end of the period   43,222   66,529

 


 25 NON-CONTROLLING INTEREST PUT OPTION

 

As part of the business combinations where partial acquisitions of the acquired company’s capital were made, the Company issued a put option for the remaining portion to non-controlling shareholders. The put option was recorded based on the expected future exercise price, discounted at present value. The exercise price of the options will be measured based on a multiple of revenues, which will be determined by the EBITDA margin on a future date.

 

46

 

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 

As of the present date, the following options have been issued:

 

                     
            Individual   Consolidated
    Exercise date   03/31/2023   12/31/2022   03/31/2023   12/31/2022
                     
Homie do Brasil                    
Informática Ltda.   07/31/2025   18,768   17,982   18,768   17,982
Rosk Software S.A.    04/30/2025 and                
    04/30/2026   34,115   32,799   34,115   32,799
Lote45 Participações S.A.   04/30/2027   -   -   94,857   91,489
Compliasset Software e                    
Soluções Digitais S.A.   09/30/2026   -   -   11,205   -
                     
Total       52,883   50,781   158,945   142,270

 


 26 TRANSACTIONS THAT DID NOT AFFECT CASH

 

Investing and financing transactions that do not involve the use of cash or cash equivalents are not included in the statement of cash flows. The Company carried out the following non-cash investing and financing activities:

 

        Individual   Consolidated
    03/31/2023   03/31/2022   03/31/2023   03/31/2022
                 
Recognition (reversal) of lease assets   (1,146)   2,214   90   2,214
(Recognition) reversal of lease liabilities   1,146   (2,214)   (90)   (2,214)
Investment recognition from transaction with non-controlling shareholders   (9.753)   -   -   -
Portion withheld to pay for the acquisition of investments   -   -   300   109,657
Assets acquired in business combination   -   -   1,665   309,877
Liabilities acquired in business combinations   -   -   (1,665)   (309,877)

 


 28 BUSINESS COMBINATIONS

 

On March 7, 2023, the Company completed the acquisition of a 60% equity interest in Compliasset Software e Soluções Digitais S.A., through its subsidiary Sinqia Tecnologia Ltda. The transaction involved (i) an initial amount of R$17,700 in cash, (ii) a retained portion of R$300 to be paid 120 days after the acquisition date, and (iii) a variable portion conditional on net revenue for the period from August 1, 2023 to July 31, 2024. Additionally, the transaction provides for the call and put options for the remaining portion to be exercised in 2026 and the exercise price linked to Compliasset ’s 2025 net revenues and adjusted EBITDA margin.

 

Compliasset was created in 2016 based on the legal expertise of one of its founders in capital market compliance. It has more than 230 clients in the capital markets and a technological solution that supports compliance and privacy programs in a holistic way. Over time, it expanded its operations to other markets, such as Closed Complementary Pension Entities, having a strong partnership with the Brazilian Association of Closed Complementary Pension Entities (Abrapp).

 

47

 

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 

Goodwill of R$11,201, generated by the difference between the amount paid and the acquiree’s equity, was evaluated by an independent valuation company and corresponds to the value of future economic benefits (goodwill) arising from the synergies expected to occur with the acquisition carried out. The acquisition further expands Sinqia’s offering of solutions and reinforces the company’s strategy of building a complete ecosystem to serve the Financial System. With the addition of Compliasset to its portfolio, Sinqia accelerates its position as a one-stop-shop for customers, bringing yet another Software as a Service (SaaS), Plug & Play and Cloud solution focused on Regulatory Compliance Management.

 

In the consolidated interim information for the quarter ended March 31, 2023, Compliasset contributed net revenues of R$582 and net income of R$87, considering the period after the aforementioned acquisition date.

 

The Company hired a third-party valuator in order to carry out studies to measure the fair value of the assets acquired and liabilities assumed, since Sinqia has less than 100% equity interest in the acquiree, the fair value of the non-controlling interest was calculated through the application effective percentage of the non-controlling shareholders’ equity in the shareholders’ equity at fair value of the subsidiaries.

 

a) Fair value as of the acquisition date of the consideration transferred:

 

    60%
Payment in cash   17,700
Price adjustment   300
Variable price add-on (Earn Out)   4,745
Call and Put Options   (3,080)
Total consideration   19,665

 

48

 

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 


 b) Assets and liabilities recognized at fair value on the acquisition date:

 

BALANCE SHEET OF THE ACQUIRED COMPANY

 

 

    03/07/2023       03/07/2023
Current assets       Current liabilities    
             
Cash and cash equivalents   2   Trade accounts payable   33
Financial investments   640   Tax liabilities   164
Accounts receivable  

628

   Labor liabilities   135
Taxes recoverable   -        
Advances to suppliers   102        
Prepaid expenses   24        
             
Total current assets   1,396   Total current liabilities   332
             
Non-current assets       Non-current liabilities    
             
Accounts receivable   12   Lease purchase   100
Property and equipment   194   Contingencies   2,404
Intangible assets   15,340        
             
Total non-current assets   15,546   Total non-current liabilities   2,504
             
        Total shareholders’ equity   14,106
             
Total assets    16,942   Total liabilities   16,942

 


 c) Goodwill generated on the acquisition of equity interest

 

Estimated price 

   19,665
     
(-) Fair value of assets acquired:    
Software   4,150
Trademark   962
Customer portfolio   10,228
     

(+) Fair value of liabilities assumed: Contingencies 

  

2,404
     
(-) Book shareholders’ equity on the acquisition date   1,170
     
(+) Non-controlling interest   5,643
     
Goodwill for expected future profitability generated in the acquisition   11,202
     
Goodwill expected to be deductible for tax purposes   9,759

 

A contingent liability of R$2,404 was recognized due to labor and social security risks of R$1,462 and tax risks of R$942, referring to the risk period. As of March 31, 2023, there has been no change in the amounts recognized since the acquisition date for the liability or in the ranges of expected values or even in the assumptions used to develop the estimate.

 

49

 

SINQIA S.A. AND SUBSIDIARIES. 

MANAGEMENT’S NOTES FROM TO THE INTERIM INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2023 AND 2022 AND DECEMBER 31, 2022 

(In thousands of Reais – R$)

 

 

The following table shows the acquired intangible assets that were not initially recorded in the acquiree’s accounting books, as well as the estimated useful life and the amortization method:

 

        Amortization
    Useful life   method
Intangible Assets        
         
Software   5 years   Straight line
Trademark   10 years   Straight line
Customer portfolio   14.6 years   Straight line

 

Additionally, the Company reports that the assets and liabilities recognized at fair value of business combinations disclosed in 2022 have not changed.

 

50

 

Annex VI to Exhibit 99.2 –

(Convenience translation into English from the original previously issued in Portuguese)
EVERTEC BRASIL INFORMÁTICA LTDA.

Independent auditor’s report

Interim financial statements
As at March 31, 2023

EVERTEC BRASIL INFORMÁTICA LTDA.
 
Interim financial statements
As at March 31, 2023
 
Contents

Independent auditor’s report on the interim financial statements

Statements of financial position

Statements of income
 
Statements of comprehensive income

Statements of change in equity

Statements of cash flows

Statements of value added

Management’s notes to the financial statements

2
Tel.: + 55 51 3395 3065
Fax: + 55 51 3395 3065
www.bdo.com.br
 Rua André Puente, 441, sala 305 Independência – Porto Alegre, RS Brasil 90035-150

INDEPENDENT AUDITOR’S REPORT ON THE INTERIM FINANCIAL STATEMENTS
 
To the
Shareholders and Management of
Evertec Brasil Informática Ltda.
São Paulo - State of São Paulo

Opinion
 
We have audited the interim individual and consolidated financial statements of Evertec Brasil Informática Ltda. (the “Company”), identified in this report as company and consolidated, respectively, which comprise the statement of financial position as at March 31, 2023 and the statements of income, comprehensive income, change in equity and cash flows for the three-month period then ended, as well as the corresponding notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the interim individual and consolidated interim financial statements referred to above present fairly, in all material aspects, the individual and consolidated financial position of Evertec Brasil Informática Ltda. as at March 31, 2023 and financial performance and cash flows for the period then ended in accordance with Brazilian accounting practices and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
 
Basis for the opinion
 
We conducted our audit according to Brazilian and International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the section “Auditor’s responsibilities for the audit of the interim individual and consolidated financial statements” of our report. We are independent from the Company and its controlled companies in accordance with the relevant ethical principles established in the Code of Ethics for Professional Accountants and in the professional standards issued by the Brazilian Federal Association of Accountants (CFC), and we have fulfilled our other ethical responsibilities in accordance with those standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of matter
 
Significant transactions with related parties
 
As described in note 8 to the interim financial statements, significant operations exist between the Company and related parties. Thus, the result of operations should be analyzed taking into consideration that context. Our opinion is not qualified in respect of this matter.

Key audit matters
 
Key audit matters are those that, in our professional judgment, were of most significance in our audit of the financial statements. These matters were addressed in the context of our audit of the interim individual and consolidated financial statements taken as a whole and in forming our  opinion thereon, and we do not provide a separate opinion on these matters.

BDO RCS Auditores Independentes, an audit partnership organized according to Brazilian law, is a member of BDO International Limited, a UK company limited by guarantee, and makes part of the international BDO network of independent member firms. BDO is the brand name for BDO network and for each of the BDO Member Firms.

3
Revenue recognition
The Company’s revenue comes mostly from the provision of maintenance and support services to software used to process financial transactions. The associated performance obligations are fulfilled along the contract term, as the services are rendered. Services may or not have been invoiced yet according to the specific terms of each contract. The recognition of revenue takes place when the performance obligations of the contracts are met.
 
For the reasons above mentioned, as well as potential risk involved in relation to the definition of correct period for recognition of revenue, we considered this matter to be significant during our audit.
Audit response
Our audit procedures included, among other things:


◾
Understand the process and evaluate the effectiveness of the internal controls used at the Company, as well as the components considered significant in the recognition of revenue;

◾
Tests of revenue on a sampling basis, checking service contract terms, in order to reach a conclusion as to whether it was adequately accounted for. We also  checked if revenue was recorded in the proper periods and the cut-off.

◾
In addition, we evaluated the disclosure made in the interim financial statements.

Based on the evidence obtained, we concluded that the amount of revenue and the information disclosed in the notes relating the revenue from maintenance and support services provided are adequate.
Other matters

Reference amounts

We have not, neither other independent auditors have audited the interim financial statements corresponding to the period ended March 31, 2022, presented for comparison purposes. Our opinion is not qualified in respect of this matter.

Statement of value added
 
The interim individual and consolidated statements of the value added for the three-month period ended March 31, 2023 were prepared under responsibility of the Company’s Management and were submitted to the same audit procedures applied to the other interim financial statements. According to IFRS, they are presented as supplementary information. To reach an opinion, we evaluated if such statements matched the financial statements and other accounting records, as applicable, and if their form and contents comply with the criteria defined in standard NBC TG 09 – Statement of Value Added. We are not aware of any fact that could lead us to believe that those statements of value added were not prepared, in all material aspects, according to the criteria defined in the mentioned standard and or that they are not consistent with the interim individual and consolidated financial statements taken as a whole.

Responsibility of the Management and of those charged with governance for the interim financial statements
 
Management is responsible for the preparation and fair presentation of the interim individual and consolidated financial statements in accordance with Brazilian accounting practices and with IFRS, issued by the International Accounting Standards Board (IASB), and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

4
In preparing the interim individual and consolidated financial statements, management is responsible for assessing the ability of the Company and of its controlled companies to continue as going concerns, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company and its controlled companies or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the interim individual financial statements
 
Our objectives are to obtain reasonable assurance about whether the interim individual and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Brazilian standards and ISA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
 
As part of an audit in accordance with Brazilian standards and ISA, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:


 ◾
Identify and assess the risks of material misstatement of the interim individual and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
 

 ◾
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and its controlled companies' internal control;
 

 ◾
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management;
 

 ◾
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s and its controlled companies’ ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the interim individual and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and its controlled companies to cease to continue as a going concern;
 

 ◾
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the interim individual and consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation;
 

 ◾
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the interim individual and consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

5
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
 

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Porto Alegre, August 11, 2023.
BDO RCS Auditores Independentes SS Ltda.
CRC 2 SP 013846/O-1
 
/s/Márcio Silva
Márcio Silva
Accountant CRC 1 RS078817/O-2 – S - SP

6
EVERTEC BRASIL INFORMÁTICA LTDA.
Statements of financial position
as at March 31, 2023 and December 31, 2022
(in thousands of Brazilian Reais)

Assets

         
Parent Company
    
Consolidated
  
   
Note
    
3/31/2023
    
12/31/2022
    
3/31/2023
  
Current
                        
Cash and Cash Equivalents
    
5
      
21,307
      
15,709
      
32,616
  
Trade Accounts Receivables
    
6
      
3,452
      
8,237
      
5,803
  
Taxes to be recovered
            
141
      
224
      
244
  
Other Receivables
    
7
      
21
      
110
      
255,205
  
Total Current Assets
            
24,921
      
24,280
      
293,868
  
                                 
Non-Current Assets
                                
Contract Assets
    
6
      
4,036
      
2,718
      
4,036
  
Receivables from Related Parties
  
8|6
      
274
      
135
      
274
  
Other Receivables
            
10
      
9
      
469
  
                                 
Investments in Subsidiaries
  
2 | 9
      
131,740
       -
      -
 
Right of Use Asset
            
89
      
106
      
89
  
Fixed Assets
            
247
      
253
      
842
  
Intangible Assets
    
10
      
4,192
      
4,324
      
109,956
  
Total Non-Current Assets
            
140,588
      
7,545
      
115,666
  
                                 
Total Assets
            
165,509
      
31,825
      
409,534
  
 
Management's explanatory notes form an integral part of the individual and consolidated financial statements.

7
EVERTEC BRASIL INFORMÁTICA LTDA.
Statements of financial position
as at March 31, 2023 and December 31, 2022
(in thousands of Brazilian Reais)
 
Liabilities and Equity

         
Parent Company
    
Consolidated
  
   
Note
    
3/31/2023
    
12/31/2022
    
3/31/2023
  
Current
                        
Trade accounts payable
    
11
      
4,832
      
789
      
4,508
  
Lease Liability
            
97
      
96
      
114
  
Labor and Tax Obligations
    
12
      
3,257
      
2,345
      
4,988
  
Contract Liabilities
    
13
      
4,275
      
4,345
      
4,275
  
Other Liabilities
    
7
       -
      -
     
242,601
  
Total Current Liabilities
            
12,461
      
7,575
      
256,486
  
                                 
Non-Current Liabilities
                                
Lease Liability
            
2
      
20
      
2
  
Accounts Payable to Related Parties
  
8|11
      
6,367
      
5,764
      
6,367
  
Contract Liabilities
    
13
      
784
      
1,263
      
784
  
Total Non- Current Liabilities
            
7,153
      
7,047
      
7,153
  
                                 
Equity
    
15
                          
Capital stock
            
128,620
      
10
      
128,620
  
Accumulated Earnings
            
17,275
      
17,193
      
17,275
  
Total Equity
            
145,895
      
17,203
      
145,895
  
                                 
Total Liabilities and Equity
            
165,509
      
31,825
      
409,534
  

Management's explanatory notes form an integral part of the individual and consolidated financial statements.

8
EVERTEC BRASIL INFORMÁTICA LTDA.
Statements of Income
for the three month periods ended March 31, 2023 and 2022
(in thousands of Brazilian Reais)
 
         
Parent Company
    
Consolidated
  
   
Note
    
3/31/2023
    
03/31/2022
(Unaudited)
    
3/31/2023
  
Net operating revenue
    
16
      
7,952
      
5,365
      
10,385
  
Cost of goods sold
    
17
      
(4,421
)
    
(2,432
)
    
(5,985
)
Gross Profit
            
3,531
      
2,933
      
4,400
  
                                 
Operating (Expenses) Revenues
                                
Sales Expenses
    
17
      
(291
)
    
(107
)
    
(291
)
General and Administrative Expenses
    
17
      
(4,859
)
    
(4,218
)
    
(5,242
)
Other net operating revenues
    
17
      
12
      
15
      
12
  
Earnings of investments in subsidiaries
            
1,399
      
-
      
-
  
Income from operations
            
(208
)
    
(1,377
)
    
(1,121
)
                                 
Financial expenses
    
18
      
(1
)
    
(1
)
    
(1
)
Financial revenues
    
18
      
214
      
501
      
1,746
  
Exchange rate gains (losses)
    
18
      
72
      
2,541
      
59
  
                                 
Net financial income (loss)
            
285
      
3,041
      
1,804
  
                                 
Income before taxes            
77
      
1,664
      
683
  
                                 
Current Income tax and Social Contribution
    
14
      
(115
)
    
(440
)
    
(721
)
                                 
Net Income (loss) for the period
            
(38
)
    
1,224
      
(38
)

Management's explanatory notes form an integral part of the individual and consolidated financial statements.

9
EVERTEC BRASIL INFORMÁTICA LTDA.
Statements of Comprehensive Income
for the three month periods ended March 31, 2023 and 2022
(in thousands of Brazilian Reais)
 
   
Parent Company
    
Consolidated
  
   
3/31/2023
    
03/31/2022
(Unaudited)
    
3/31/2023
  
Net Income (loss) for the period
    
(38
)
    
1,224
      
(38
)
                         
Other comprehensive income to be reclassified to statement of income in subsequent periods
                        
                         
Total comprehensive income (loss), net of taxes
    
(38
)
    
1,224
      
(38
)

Management's explanatory notes form an integral part of the individual and consolidated financial statements.

10
EVERTEC BRASIL INFORMÁTICA LTDA.
Statements of Changes in Equity
(in thousands of Brazilian Reais)

   
Capital stock
    
Income
reserve
    
Accumulated
earnings
    
Total
equity
  
Balance at January 1, 2023
    
10
      
17,193
            
17,203
  
 
                              
Loss for the period
     -
       -
      
(38
)
    
(38
)
Increase in contributed capital
    
128,610
       -
       -
      
128,610
  
Share based compensation
     -
      
120
       -
      
120
  
Compensation for losses
     -
      
(38
)
    
38
       -
  
 
                                
Balance at March 31, 2023
    
128,620
      
17,275
      
-
      
145,895
  

Management's explanatory notes form an integral part of the individual and consolidated financial statements.

11
EVERTEC BRASIL INFORMÁTICA LTDA.
Statements of cash flows - Indirect method
For the three-month period ended March 31, 2023 and 2022
(in thousands of Brazilian Reais)

   
Parent Company
    
Consolidated
  
   
3/31/2023
    
03/31/2022
(Unadited)
    
3/31/2023
  
Cash flows from operating activities
                  
Net Income (loss) for the period
    
(38
)
    
1,224
      
(38
)
                         
Adjustments to reconcile net income (loss) to net cash provided by operating activities
                        
Depreciation and amortization
    
193
      
165
      
193
  
Provision for expected credit losses
    
(79
)
    
11
      
(79
)
Realization of deferred taxes
    
115
      
440
      
115
  
Unrealized exchange rate gains (losses)
    
(72
)
    
(2,541
)
    
(72
)
Share based compensation
    
121
      
85
      
121
  
Earning of investments in subsidiaries
    
(1,399
)
     -       -
  
                         
Operating lease liability
     28
       17
       28
  
Trade and other accounts receivable
     4,847       2,698
       (23,325 )
Taxes to be recovered
     (82 )     906
       1,995
  
Prepaid expenses
     1,317       (1,951 )     1,317  
Receivable from/Payable to related parties
     5,596       (2,310 )     5,600
  
Unrecognized revenues
     (549 )     (1,539 )     (549 )
Accounts payable and accrued expenses
     (2,969 )     (98 )     (203,359 )
Other liabilities
     328       (44 )     (7,647 )
                         
Net cash from operating activities
    
7,357
      
2,937
)
    
(225,700
)
                         
Cash flows from investing activities
                        
Acquisition of subsidiary, net of cash acquired
    
(130,342
)
     -
       7,840
  
Fixed assets acquisitions
     (27 )     (10 )     501
  
Investments
                     105,656
  
Net cash from investing activities
     (130,369 )     (10 )     113,997  
                         
Cash flows from financing activities
                        
Capital contribution
    
128,610
       -
      
128,610
  
                         
Net cash from financing activities
    
128,610
       -      
128,610
  
                         
Effect of foreign exchange rate on cash and cash equivalents
                        
                         
Net increase/(decrease) in cash and cash equivalents
    
5,598
      
(2,947
)
    
16,907
  
                         
Cash and cash equivalents at the beginning of the year
    
15,709
      
27,150
      
15,709
  
Cash and cash equivalents at the end of the year
    
21,307
      
24,203
      
32,616
  
                         
Net increase/(decrease) in cash and cash equivalents
    
5,598
      
(2,947
)
    
16,907
  

Management's explanatory notes form an integral part of the individual and consolidated financial statements.

12
EVERTEC BRASIL INFORMÁTICA LTDA.
Statements of Value Added
for the three month periods ended March 31, 2023 and 2022
(in thousands of Brazilian Reais)

   
Parent Company
     Consolidated  
   
3/31/2023
    
03/31/2022
(Unadited)
    
3/31/2023
  
Revenues
    
9,473
      
6,794
      
12,183
  
Sales of goods, products and services
    
9,382
      
6,768
      
12,092
  
Other Operating income
    
12
      
15
      
12
  
Provision for expected credit losses
    
79
      
11
      
79
  
                         
Inputs purchased from third parties
    
(6,220
)
    
(5,019
)
    
(6,485
)
(Includes tax amounts - ICMS, IPI, PIS e COFINS)
                        
Cost of merchandise of services sold
    
(4,052
)
    
(3,845
)
    
(4,052
)
Materials, Utilities and third party services or others
    
(2,168
)
    
(1,174
)
    
(2,433
)
                         
Gross added value
    
3,253
      
1,775
      
5,698
  
                         
Depreciation and amortization
    
(193
)
    
(165
)
    
(759
)
                         
Net added value produced by the entity
    
3,060
      
1,610
      
4,939
  
                         
Equivalency result in equity
    
1,399
       -
       -
  
Financial Income
    
367
      
3,025
      
1,891
  
                         
Additional total value to be distributed
    
4,826
      
4,635
      
6,830
  
                         
Distribution of added value
    
4,826
      
4,635
      
6,830
  
                         
Personnel
                        
Direct remuneration
    
2,213
      
1,090
      
2,711
  
Benefits
    
934
      
427
      
1,506
  
FGTS
    
84
      
49
      
122
  
                         
Taxes and contributions
                        
Federal
    
1,514
      
1,743
      
2,409
  
Municipal
    
118
      
100
      
118
  
                         
Capital remuneration to third parties
                        
Fees
     1
       2
       1
  
Rents
     -
       -
       -
  
Others
     -
       -
       1
  
                         
Equity return
                        
Net income (loss) for the period
    
(38
)
    
1,224
      
(38
)

Management's explanatory notes form an integral part of the individual and consolidated financial statements.

13
EVERTEC BRASIL INFORMÁTICA LTDA.
Statements of Changes in Equity
(in thousands of Brazilian Reais)

   
Capital stock
    
Income
reserve
    
Accumulated
earnings
    
Total
equity
  
Balance at January 1, 2022 (unaudited)
    
10
      
14,481
     -
       14,491
  
                               
Net income for the period
     -
       -
      
1,224
      
1,224
  
Share based compensation
     -
      
83
       -
       83
  
                                 
Balance at March 31, 2022 (unaudited)
    
10
      
14,564
      
1,224
      
15,798
  

Management's explanatory notes form an integral part of the individual and consolidated financial statements.

14
EVERTEC BRASIL INFORMATICA LTDA.

Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
1.
General information
 
EVERTEC Brasil Informática Ltda. (the “Company”), is a limited liability company, incorporated on March 25, 2004, headquartered in São Paulo, with the purpose of developing and licensing software and its processing; provision of maintenance and support services for programs relating to financial transactions, whether proprietary or third-party.
 
Direct and indirect subsidiaries:
 

 Location  
03/31/2023
    
12/31/2022
  
Direct Subsidiaries
Brazil
            
Paysmart Ltda.
      
100
%
    
-
  
Indirect Subsidiaries
                  
Issuer Holding Ltda.
Brazil
    
100
%
    
-
  
Issuer Institution de Pagamentos Ltda.
Brazil
    
100
%
    
-
  
 
Direct and indirect subsidiaries
 
Paysmart Ltda. (“Paysmart”) is a limited company, founded 19 years ago on March 26, 2004 under CNPJ 06.182.839/0001-74, located in Porto Alegre, RS. Paysmart's main activity is the development of custom computer programs. In addition, it also works with specialized retail trade of computer equipment and supplies; Consulting in information technology.
 
Issuer Holding Ltda. (“Issuer Holding”) is a limited liability company, founded 1 year ago on April 18, 2022 under CNPJ 46.052.634/0001-99, located in Porto Alegre, RS, being an investee of Paysmart A Issuer Holding its main activity is holding financial institutions.
 
The Issuer Instituição de Pagamento Ltda. (“Issuer IP”) is a limited company, founded 3 years ago on September 3, 2019 under CNPJ 34.747.388/0001-00. Located in Porto Alegre / RS, being an investee of Issuer Holding. Issuer IP's main activity is the intermediation and agency of services and businesses in general, except real estate. In addition, it also works with credit card administration.
 
2.
Acquisition of shares in companies (Business combination) Paysmart
 
On February 16, 2023, the Company acquired 100% of the share capital of Paysmart, following the completion of the "Due Diligence," through a "Share Purchase Agreement," thereby gaining control of Paysmart from that date onwards. The Company holds a direct 100% stake in this investment, thus being responsible for the entire consideration described below.

15
EVERTEC BRASIL INFORMATICA LTDA.

Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
The purchase was finalized for a total value of R$ 130,341,636 (one hundred and thirty million, three hundred and forty-one thousand, six hundred and thirty-six Brazilian reais), of which R$ 4,602,491 (four million, six hundred and two thousand, four hundred and ninety-one Brazilian reais) are recorded as accounts payable, as of February 16, 2023.
 
Paysmart and its subsidiaries engage in the following activities:
 
Paysmart is a company whose main activity is the development of customized computer programs. Additionally, it is involved in the specialized retail trade of computer equipment and supplies; Information technology consultancy.
 
Issuer Holding Ltda. is a subsidiary of Paysmart whose main activity is the holding of financial institutions.
 
Issuer Instituição de Pagamento Ltda. is a subsidiary of Issuer Holding, primarily engaged in intermediation and brokerage of services and general business, excluding real estate. Additionally, it is involved in credit card administration.
 
Below, we present the accounts of Paysmart and its subsidiaries, both assets and liabilities, impacted by the fair value measurement effect as of February 28, 2023:

   
Fair Value
  
Current Assets
      
Cash and Cash equivalents
    
138,182
  
Financial Investments
    
105,656
  
Other current assests
    
40,674
  
Recoverable Taxes
    
2,179
  
Accounts Receivable
    
1,772
  
Miscellaneous Receivables
    
310
  
Non-Current Assets
        
Security deposits
    
200,000
  
Accounts receivable
    
508
  
Assets in use
    
945
  
Net property, plant and equipment
    
438
  
Intangible assets
    
14,091
  
Identifiable Intangibles
        
Tradenames and trademarks
    
6,550
  
Software
    
4,950
  
Customer relationships
    
57,450
  
 
        
Current Liabilities
        
Accounts Payable and Accrued Expenses
    
(205,506
)
Labor and Tax Obligations
    
(2,901
)
Other Deposits
    
(256,992
)
Non Current Liabilities
        
Loans and Financing
    
(42
)
Lease Obligations
    
(384
)
Net Assets
    
107,880
  

16
EVERTEC BRASIL INFORMATICA LTDA.

Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
Below we present the preliminary calculation of purchased goodwill as of February 28, 2023:

 
  
Fair Value
  
Consideration – Parent Company
    
130,342
  
 
        
Total Consideration
    
130,342
  
 
        
(-) Net Assets
    
107,880
  
 
        
Goodwill
    
22,462
  
 
The preliminary fair values were obtained through fair value measurement techniques prepared by an independent specialized company located abroad. These values are currently under review by the appraiser in Brazil from the same company, who was hired to support the Management's conclusion. The fair values were derived using the following techniques:
 

 ◾
Trademarks and Trade Names, Software
 
The relief-from-royalty method with a revenue approach was used.
 
The relief-from-royalty method is a form of income approach commonly used to assess intangible assets that can be licensed to third parties, such as trademarks, trade names, software, patents, and certain technologies. The premise associated with this valuation technique is that, instead of owning the asset, a company would be willing to pay royalties to a third party for the use of that asset. The owner of the asset is spared from this cost. The value of the asset is estimated based on cost savings or the avoidance of royalty expenses.


 ◾
Customer Relationship
 
The multi-period excess earnings method with a revenue approach was used.
 
The multi-period excess earnings method indirectly measures the economic benefit by calculating the income attributable to an asset after appropriate returns have been paid to the complementary assets used in conjunction with the subject asset to generate the associated earnings, commonly referred to as Contributory Asset Charges (CAC).
 
The revenue included in the consolidated income statement for February 2023 includes the revenue generated by Paysmart amounting to R$ 2,433, which contributed R$ 1,399 to the result.

17
EVERTEC BRASIL INFORMATICA LTDA.

Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
If Paysmart had been consolidated starting from January 1, 2023, the consolidated pro forma net revenue would have been R$ 13,670 and pro forma EBITDA would have been R$ 2,334. This pro forma net revenue and result information was obtained by simply aggregating the acquired values to the consolidated result of the Company and does not represent the actual consolidated values for the year.

3.
Basis of Preparation
 
Statement of Compliance (with respect to IFRS and CPC standards)
 
The individual and consolidated interim financial statements have been prepared and are being presented in accordance with the accounting practices adopted in Brazil, which include the provisions of the Corporations Law, regulations of the Brazilian Securities and Exchange Commission ("CVM"), and the pronouncements of the Accounting Pronouncements Committee ("CPC"), as well as the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board ("IASB").
The individual and consolidated interim financial statements of the Company are being presented in accordance with Technical Guidance OCPC 07, which addresses the basic requirements for preparation and disclosure to be observed when disclosing accounting and financial reports, especially those contained in the explanatory notes. Management confirms that all relevant information specific to the individual and consolidated interim financial statements is being disclosed and that this information corresponds to that used in its management.
The presentation of the Statement of Value Added (SVA) is required by Brazilian Corporate Legislation and the accounting practices adopted in Brazil applicable to publicly traded companies, in accordance with CPC 09 - Statement of Value Added. IFRS standards do not require the presentation of this statement. As a result, under IFRS standards, this statement is presented as supplementary information, without prejudice to the set of individual and consolidated financial statements.
The individual and consolidated interim financial statements are presented in Brazilian Reais (BRL), which is also the functional currency of the Company.
 
The main accounting policies adopted in the preparation of these individual and consolidated interim financial statements are described below. These policies have been consistently applied in all periods presented, unless otherwise indicated.
 
The individual and consolidated financial statements have been approved for issuance by the Company's Management on August 11, 2023.

18
EVERTEC BRASIL INFORMATICA LTDA.

Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
4.
Summary of Key Accounting Policies
 

 a)
Measurement Basis

The individual and consolidated interim financial statements have been prepared using the historical cost as the measurement basis, except for recognized revaluations and the fair value measurement of certain assets and liabilities as financial instruments. These are measured at fair value.
 

 b)
Functional Currency and Presentation Currency

The individual and consolidated interim financial statements are prepared using the functional currency. The functional currency of an entity is the currency of the primary economic environment in which it operates.
 
In determining the functional currency, Management considered the currency that significantly influences the selling price of its products and services, as well as the currency in which most of the cost of its production inputs is paid or incurred.
 
The individual and consolidated interim financial statements are presented in Brazilian Reais (R$), which is the functional currency of the Company. All financial information is presented in thousands of reais, unless stated otherwise.
 

 c)
Foreign Currency Transactions and Balances

Foreign currency transactions and balances, which are those not conducted in the established functional currency, are converted using the historical exchange rate on the dates of each transaction, as determined by IAS 21/CPC 02 (R2) - Effects of Changes in Foreign Exchange Rates and Conversion of Financial Statements.
 
Assets and liabilities subject to foreign exchange fluctuations are adjusted using the rates of the respective currencies prevailing on the last business day of each reporting period. Gains and losses arising from variations in foreign investments are recognized directly in equity under the "other comprehensive income" account and recognized in the income statement when these investments are disposed of, wholly or partially.
Non-monetary items measured in terms of historical costs in foreign currency are converted using the exchange rate determined on the transaction date.

19
EVERTEC BRASIL INFORMATICA LTDA.

Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)

d)
Consolidation Basis

Business Combinations

The Company measured goodwill as the fair value of the consideration
transferred, including the recognized amount of any non-controlling interests in the acquired entity, net of the recognized amounts of identifiable assets and assumed liabilities measured at fair value, all assessed at the acquisition date.
 
For each business combination, the Company chooses whether to measure the non-controlling interest at fair value or at the proportionate share of the non-controlling interest's share in the identifiable net assets, determined at the acquisition date.
 
Transaction costs other than those associated with the issuance of debt or equity instruments, which the Company and its subsidiaries incur in relation to a business combination, are recognized as expenses as incurred.
 
Subsidiaries and Jointly Controlled Entities
 
The interim financial statements of subsidiaries are included in the consolidated interim financial statements from the date control is obtained until the date control ceases to exist.
 
Elimination of Intercompany Transactions
 
Balances and transactions between companies within the "Group," and any revenues or expenses arising from intercompany transactions, are eliminated when preparing the consolidated interim financial statements. Unrealized gains from transactions with investee companies recorded using the equity method are eliminated against the investment in proportion to the Company's ownership interest in the investee entities. Unrealized losses are not eliminated in the same way as unrealized gains; they are eliminated only to the extent that there is no evidence of impairment loss.
 

 e)
Use of Estimates and Judgments

The preparation of the individual and consolidated interim financial statements, in accordance with IFRS and CPC standards, requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues, and expenses. Actual results may differ from these estimates.

20
EVERTEC BRASIL INFORMATICA LTDA.

Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
Estimates and assumptions are continuously reviewed. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any affected future periods.
 

 f)
Cash and Cash Equivalents, and Marketable Securities

Cash and cash equivalents include cash on hand, bank deposits, and immediately liquid investments. Refer to Note 5 in the explanatory notes for further details on the Company's cash and cash equivalents.
 

 g)
Financial Instruments
 
The Company's financial instruments are in accordance with the accounting pronouncement adopted starting January 1, 2018, IFRS 9/CPC 48 - Financial Instruments, in which all assets and liabilities are recorded according to their respective practices.
 
Financial Assets
 
Financial assets are classified under the following categories: assets measured at amortized cost; fair value through profit or loss, or fair value through other comprehensive income. Assets are classified according to the business model adopted by the Company and the cash flow characteristics of the financial asset.
Foreign exchange fluctuations on financial assets and liabilities are recognized as financial income by the Company.
 
Recognition and Measurement

Upon initial recognition, the Company classifies its financial assets into three categories:
 

 i)
Financial assets measured at amortized cost;

ii)
Fair value through profit or loss; or

iii)
Fair value through other comprehensive income.
 

 ◾
Amortized Cost: Financial assets measured at amortized cost must be measured if both of the following conditions are met: i) the financial assets are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows, and ii) the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding.

21
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
The Company will recognize its interest income, foreign exchange gains and losses, and impairments directly in the income statement.
 

 ◾
Fair Value Through Profit or Loss: Financial assets must be measured at fair value through profit or loss only if they do not qualify as assets measured at amortized cost or fair value through other comprehensive income. The Company should recognize its interest income, foreign exchange gains and losses, impairments, along with other net gains and losses, directly in the income statement.

◾
Fair Value Through Other Comprehensive Income: Financial assets must be measured at fair value through other comprehensive income only when the following conditions are met: i) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and ii) the contractual terms of the financial asset give rise, on specified dates, to interest on the principal amount outstanding.

Financial assets measured at fair value through other comprehensive income are classified into two categories: i) Debt instruments: Interest income calculated using the effective interest rate method, foreign exchange gains and losses, and impairments are recognized in the income statement. Other net gains or losses are recognized directly in the Company's equity under "Other Comprehensive Income." Upon derecognition, the accumulated amount in other comprehensive income is reclassified to the income statement; or ii) Equity instruments are measured at fair value. Dividends are recognized as gains in the income statement unless the dividend clearly represents a recovery of part of the investment's cost.
 
Other net gains or losses are recognized directly in the Company's equity under "Other Comprehensive Income" and are never reclassified to the income statement.
 
The fair values of investments with quoted market prices are based on current purchase prices. If the market for a financial asset (including securities not listed on an exchange) is not active, the Company establishes fair value using valuation techniques.
 
These techniques include using recent transactions with third parties, referencing other substantially similar instruments, discounted cash flow analysis, and option pricing models that make maximum use of market- generated data and minimize reliance on data generated by the entity's own management.

22
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
Regular purchases and sales of financial assets are recognized on the trade date, which is the date the Company commits to buying or selling the asset.
 

 ◾
Derecognition of Financial Assets: Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred; in the latter case, provided that the Company has transferred substantially all the risks and benefits of ownership. If the entity retains substantially all the risks and benefits of ownership of the financial asset, it must continue to recognize the financial asset.

Financial Liabilities
 
Financial liabilities are classified into the following categories: financial liabilities at amortized cost or fair value through profit or loss. Management determines the classification of financial liabilities upon initial recognition.


 ◾
Financial liabilities at amortized cost: The Company should classify all of its financial liabilities at amortized cost except for financial liabilities classified at fair value through profit or loss, derivative liabilities, and guarantee contracts. Other financial liabilities are measured at amortized cost using the effective interest method. Interest expenses, gains, and losses from foreign exchange are recognized in the income statement. The Company holds the following non-derivative financial liabilities: trade accounts payables;


◾
Financial liabilities at fair value through profit or loss: Financial liabilities classified in this category are financial liabilities held for trading or those designated upon initial recognition. Derivatives are also categorized as held for trading and are thus classified in this category unless they have been designated as effective hedging instruments. Gains and losses related to financial liabilities classified at fair value through profit or loss are recognized in the income statement.

◾
Derecognition of Financial Liabilities: Financial liabilities are derecognized only when they are extinguished, i.e., when the obligation specified in the contract is settled, canceled, or expires. The Company also derecognizes a financial liability when the terms are modified, and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

23
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
Offsetting of Financial Instruments
 
Financial assets and liabilities are offset, and the net amount is reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle them on a net basis or to realize the asset and settle the liability simultaneously.
 
Derivative Financial Instruments
 
The Company did not engage in derivative financial instruments for the periods ended in March 2023 and 2022.
 

 h)
Accounts Receivable from Customers
 
They are presented at present and realization values, and accounts receivable from foreign customers are updated based on the exchange rates prevailing on the dates of the individual and consolidated interim financial statements. An Allowance for Current Expected Credit Losses (CECL) is established in an amount considered sufficient by Management, with the monitoring of overdue credits and receivables and the risk of non- receipt of amounts resulting from credit sales.


 i)
Fixed Assets

Recognition and Measurement
 
Items of property, plant, and equipment are measured at historical cost of acquisition or construction, less accumulated depreciation and accumulated impairment losses.
 
The cost includes expenses that are directly attributable to the acquisition of an asset. The cost of assets constructed by the Company itself includes the cost of materials and direct labor, any other costs to bring the asset to the location and condition necessary for it to be able to operate as intended by Management.
Rights related to tangible assets intended for the maintenance of the Company's activities, originating from lease transactions, are recognized as a right-of-use asset, with an associated lease liability recognized at the commencement of each lease transaction. These assets are also subject to depreciation calculated based on the estimated useful lives of the respective assets or the lease term.
 
Gains and losses from the disposal of a property, plant, or equipment item are determined by comparing the proceeds from the disposal with the net carrying amount of the asset and are recognized net within other income/expenses in the income statement.
 
24
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
Depreciation
 
Depreciation is recognized in the income statement, based on the straight- line method using the estimated useful lives of each component of a property, plant, and equipment item, as this method most closely reflects the pattern of consumption of future economic benefits embedded in the asset.
 
The average estimated useful lives determined by the Company's management, supported by technical studies for the current and comparative periods, are as follows:

   
Years
  
Machinery and Equipment
  
5 and 10
  
Furniture and Fixtures
    
10
  
Hardware
  
5 and 10
  

The depreciation methods, useful lives, and residual values are updated and reviewed at least at the end of each financial year, and any adjustments are recognized as changes in accounting estimates.
 

 j)
Leases
 
Contracts are considered leases when they cumulatively meet the following conditions:
 

 ◾
An explicitly or implicitly specified identifiable asset. In this case, the lessor does not have the practice of substituting the asset, or the substitution would not bring any economic benefit to the lessor.

◾
The right to control the use of the asset during the contract. In this case, the Company must have the authority to make decisions about the use of the asset and the ability to obtain substantially all the economic benefits from the use of the asset.
 
The right-of-use asset is initially measured at cost and includes the initial amount of the lease liability adjusted for any payments made before the start of the contract, plus any directly attributable initial costs incurred and an estimate of dismantling, removal, restoration costs of the asset at the location where it is located, less any incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the start date until the end of the lease term or the end of the useful life of the right-of-use asset, whichever comes first.

25
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
The lease liability is initially measured at the present value of the remaining payments, discounted at the incremental borrowing rate. The lease liability is subsequently measured at amortized cost using the effective interest method.
 
A lessee recognizes a right-of-use asset that represents its right to use the leased asset and a lease liability that represents its obligation to make lease payments. Optional exemptions are available for short-term leases and low-value items.


 k)
Intangible Assets
 
Intangible assets acquired separately are initially measured at cost and subsequently deducted by accumulated amortization and impairment losses, if applicable.
 
Intangible assets with a defined useful life are amortized according to their estimated economic life, and when indications of impairment are identified, they are subject to a recoverable amount assessment. Intangible assets with an indefinite useful life are not amortized but are subject to an annual impairment test.

Amortization

Amortization is calculated using the straight-line method based on the estimated useful life of the items, net of their estimated residual values. Amortization is generally recognized in the income statement.
 
   
Years
  
Software
    
8-10
  
Trademarks and Patents
    
1-15
  
Customer Portfolio
    
8-15
  

Goodwill arising from acquisition of subsidiaries

Goodwill represents the excess of the acquisition cost over the net fair value of acquired assets, assumed liabilities, and identifiable contingent liabilities of a subsidiary, jointly controlled entity, or associate, as of the respective acquisition date. Goodwill is recognized as an asset and included in the Investments account in the parent company and in the Intangible assets account in the consolidated financial statements.

26
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)

l)
Impairment testing of assets
 
Financial assets

The Company assesses annually whether there is any objective evidence indicating that the financial asset or group of financial assets is impaired. A financial asset or group of financial assets is considered impaired when there is an indication of loss in its economic value.
 
Non-financial assets
 
Management periodically reviews the net book value of assets with the aim of assessing events or changes in economic, operational, or technological circumstances that may indicate impairment or loss of their recoverable value. Upon identification of such evidence and upon determining that the net book value exceeds the recoverable value, a provision for impairment is immediately recognized, adjusting the net book value to its recoverable value.
 
The recoverable amount of an asset, or a specific Cash Generating Unit (“CGU”), is defined as the higher of its value in use and its net selling price.
 
In estimating the value in use of the asset, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the weighted average cost of capital for the industry in which the CGU operates.
 
The net selling price is determined, whenever possible, based on a firm sale contract in a transaction at arm's length, between knowledgeable and willing parties, adjusted for expenses attributable to the sale of the asset. When there is no firm sale contract, the net selling price is based on the market price defined in an active market, or the most recent transaction price involving similar assets.
 
The following criteria are also applied to assess impairment loss for specific assets:
 
Goodwill paid for expected future profitability
 
Impairment testing for goodwill is conducted at least annually, or when circumstances indicate a potential impairment of the carrying amount.
 
Indefinite-lived intangible assets
 
Indefinite-lived intangible assets are tested for impairment at least annually, either individually or at the CGU level, as applicable, or when circumstances indicate potential impairment of the carrying amount.

27
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)

m)
Other assets and liabilities (current and non-current)
 
An asset is recognized in the balance sheet when it is probable that its future economic benefits will flow to the Company, and its cost or value can be reliably measured.
A liability is recognized in the balance sheet when the Company has a legal obligation or a liability has arisen as a result of a past event, and it is probable that an outflow of economic resources will be required to settle it. Liabilities are increased, where applicable, by corresponding charges, monetary or exchange rate variations incurred, and adjustments to present value. Provisions are recorded based on the best estimates of the associated risks.
Assets and liabilities are classified as current when their realization or settlement is expected to occur within the next twelve months. Otherwise, they are presented as non-current.
 

 n)
Income Tax and Social Contribution
 
The current and deferred income tax and social contribution of the Company and its subsidiaries are calculated based on tax rates of 15%, plus an additional 10% on taxable income exceeding R$ 240 for income tax, and 9% on taxable income for social contribution on net income. These calculations consider the offset of tax losses and negative contribution base, limited to 30% of taxable income.
The expense related to income tax and social contribution comprises current and deferred taxes. Both current and deferred taxes are recognized in the income statement, unless they are related to business combinations, or items directly recognized in equity or other comprehensive income.
Deferred tax is recognized for temporary differences between the carrying amounts of assets and liabilities for accounting purposes and their corresponding values used for tax purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets and liabilities in a transaction that is not a business combination and does not affect either accounting or taxable profit or loss, and differences related to investments in subsidiaries and controlled entities when it is likely that they will not reverse in a foreseeable future.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same taxation authority on the same entity subject to taxation.

28
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
A deferred income tax and social contribution asset is recognized for tax losses, tax credits, differences due to the adoption of accounting practices (IFRS), and unused deductible temporary differences when it is probable that future taxable profits will be available against which they can be utilized.
 
Deferred income tax and social contribution assets are reviewed at each reporting date and are reduced to the extent that their realization is no longer probable.
 

 o)
Contingent assets and liabilities and legal obligations
 
The accounting practices for the recognition and disclosure of contingent assets, contingent liabilities, and legal obligations are as follows: (i) Contingent assets are recognized only when there are legal assurances or finalized favorable court decisions. Contingent assets with probable outcomes are only disclosed in the explanatory notes; (ii) Contingent liabilities are provisioned when losses are assessed as probable and the amounts involved can be reliably measured.
Contingent liabilities evaluated as possible losses are only disclosed in the explanatory notes, and contingent liabilities evaluated as remote losses are neither provisioned nor disclosed; and (iii) Legal obligations are recorded as liabilities, regardless of the assessment of the likelihood of success, for legal claims in which the Company has challenged the constitutionality of taxes.


 p)
Revenue Recognition Contracts with Customers
 
Revenue is measured based on the consideration specified in the contract with the customer. Recognition occurs as the performance obligations related to the provided service are fulfilled.
 
The recognized revenues are subject to assessments and judgments by the Company's management in determining their accounting recognition.
Sales revenue is presented net of taxes and discounts applicable to it. Sales taxes are recognized when sales are invoiced, and sales discounts are recognized when known. Service sales revenues are recognized at the consideration to which the Company expects to be entitled, deducted for returns, discounts, allowances, and other deductions if applicable, and recognized as the Company fulfills its performance obligation. The breakdown of sales revenue is disclosed in Explanatory Note 15.

29
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)

q)
New standards, amendments, and interpretations
 
During the year 2022, the IASB issued/revised certain IFRS standards, which are to be adopted for the year 2023 or later, and the Company is evaluating the impacts on its individual and consolidated interim financial statements resulting from the adoption of these standards:


 ◾
Amendment to IAS 1 – Classification of Liabilities as Current or Non- current: Clarifies aspects to be considered for the classification of liabilities as Current Liabilities or Non-current Liabilities. This standard amendment is effective for periods beginning on or after January 1, 2023. The Company does not expect significant impacts on its individual and consolidated interim financial statements.

◾
Amendment to IAS 1 and Disclosure of Accounting Policies: Clarifies aspects to be considered in disclosing accounting policies. This standard amendment is effective for periods beginning on or after January 1, 2023. The Company does not expect significant impacts on its individual and consolidated interim financial statements.

◾
Amendment to IAS 8 – Definition of Accounting Estimates: Clarifies aspects to be considered in defining accounting estimates. This standard amendment is effective for periods beginning on or after January 1, 2023. The Company does not expect significant impacts on its individual and consolidated interim financial statements.

◾
Amendment to IAS 12 – Deferred Tax related to Assets and Liabilities arising from a Single Transaction: Clarifies aspects to be considered in recognizing deferred tax assets and liabilities related to taxable and deductible temporary differences. This standard amendment is effective for periods beginning on or after January 1, 2023. The Company does not expect significant impacts on its individual and consolidated interim financial statements.

◾
Amendment to IFRS 16 – Leases in a Sale and Leaseback Transaction: Clarifies aspects to be considered for the treatment of an asset transfer as a sale. This standard amendment is effective for periods beginning on or after January 1, 2024. The Company does not expect significant impacts on its individual and consolidated interim financial statements.

◾
Amendment to IAS 1 – Non-current Liabilities with Covenants: Clarifies aspects of separate classifications in the balance sheet of current and non-current assets and liabilities, establishing presentation based on liquidity when it provides reliable and more relevant information. This standard amendment is effective for periods beginning on or after January 1, 2024. The Company does not expect significant impacts on its individual and consolidated interim financial statements.

30
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)

r)
Value Added Statements
 
The Company has prepared Value Added Statements (“VAS”) in accordance with the Technical Pronouncement CPC 09 - Value Added Statement, which are presented as an integral part of the interim financial statements under applicable BRGAAP for publicly traded companies. For IFRS, the VAS represents additional financial information as part of the interim financial statements taken as a whole.
 
The purpose of the VAS is to demonstrate the value of the wealth generated by the Company, its distribution among the components that contributed to the generation of this wealth, such as employees, financiers, shareholders, government, and others, as well as the portion of wealth not distributed.


 s)
Segment Information
 
Management believes that segment reporting is not applicable to the Company's activities, as it monitors its activities, evaluates performance, and makes decisions for resource allocation at the level of technology businesses.
 
5.
Cash and Cash Equivalents
 
The financial assets of the Company and its subsidiaries are as follows:
Parent Company

Consolidated
  


03/31/2023

12/31/2022

03/31/2023
  
Checking account banks

6,398


1,014


9,389
  
Financial Investments

14,909


14,695


23,227
  



21,307


15,709


32,616
  

The financial investments of the Company have been classified according to their characteristics and intention, measured at fair value through profit or loss, corresponding to Level 2 of the fair value hierarchy, and are summarized as follows:
 
Parent Company


Consolidated
  


03/31/2023
    
12/31/2022

03/31/2023
  
Measured at fair value through profit or loss (Level 2 of the fair value hierarchy).)

14,909
      
14,695


23,227
  
Total

14,909
      
14,695


23,227
  

31
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
6.
Accounts receivable from customers
 

    
Parent Company
    
Consolidated
  

   
03/31/2023
    
12/31/2022
    
03/31/2023
  
Accounts receivable - domestic market
    
3,684
      
8,547
      
6,034
  
Accounts receivable - related parties
    
274
      
135
      
274
  
Total
    
3,958
      
8,682
      
5,355
  
(-) Estimated losses on doubtful accounts
    
(232
)
    
(310
)
    
(231
)
     
(232
)
    
(310
)
    
(231
)
     
3,726
      
8,372
      
6,077
  
Accounts receivable from customers - current
    
3,452
      
8,237
      
5,803
  
Related parties - non-current
    
274
      
135
      
274
  
Total
    
3,726
      
8,372
      
6,077
  

Below are the balances of accounts receivable shown by age of maturity:
 

  
Parent Company
    
Consolidated
  
   
03/31/2023
    
12/31/2022
    
03/31/2023
  
To be collected
    
3,450
      
8,213
      
5,800
  
Overdue
                        
Up to 30 days
    
57
      
59
      
57
  
31 to 60 days
    
-
      
98
      
-
  
61 to 90 days
    
-
      
-
      
-
  
Above 91 day
    
177
      
177
      
177
  
Total
    
3,684
      
8,547
      
6,034
  
 
Expected losses are estimated based on historical analyses and the current situation of customers. Expected losses on doubtful accounts, as well as their reversals, are recorded in the income statement under the "Selling Expenses" category. The movement of expected credit losses for the period from March 2023 and as of December 31, 2022, is represented as follows:

Description
  
Value (R$)
  
Balances as of December 31, 2021 (unaudited)
    
148
  
Provisioned credits
    
234
  
Recovered credits
    
(72
)
Exchange rate variation
    
-
  
Balances as of December 31, 2022
    
310
  
Provisioned credits
    
-
  
Recovered credits
    
(78
)
Exchange rate variation
    
-
  
Balances as of March 31, 2023
    
232
  

32
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
The Company does not have any guarantee for overdue notes. The contract assets, recorded in non-current assets, are summarized in the tables shown below, corresponding to the services provided that will be billed in accordance with contractual provisions.


  
Parent Company
    
Consolidated
  
   
03/31/2023
    
12/31/2022
    
03/31/2023
  
Alelo
    
3,499
      
1,706
      
3,499
  
Bonsucceso
    
120
      
90
      
120
  
Cabal Brasil
    
-
      
180
      
-
  
Fidelity
    
63
      
235
      
63
  
Banco Original
    
23
      
-
      
23
  
Carrefour
    
27
      
-
      
27
  
Riachuelo
    
150
      
-
      
150
  
Sicredi
    
97
      
-
      
97
  
Agiplan
    
19
      
-
      
19
  
Livelo
    
-
      
117
      
-
  
Tribanco
    
38
      
390
      
38
  
Total
    
4,036
      
2,718
      
4,036
  
 
7.
Other receivables and payables
 
The balance of other receivables and other payables owed to the investee Issuer IP, related to payment method operations with short-term settlements, with assets and liabilities related to this operation.


    
Parent Company
   
Consolidated
  
   
03/31/2023
    
12/31/2022
    
03/31/2023
  
Other receivables
    
21
      
110
      
255,205
  
Other payables
    
-
      
-
      
(242,601
)
Total
    
21
      
110
      
12,604
  

8.
Related parties
 
Transactions with related parties, carried out under market conditions, are summarized in the tables shown below:


    
Parent Company
   
Consolidated
  
Accounts receivable
  
03/31/2023
    
12/31/2022
    
03/31/2023
  
Evertec Inc.
    
267
      
128
      
267
  
BBR Chile S.A.
    
7
      
7
      
7
  
Total
    
274
      
135
      
274
  


   
Parent Company
   
Consolidated
  
Accounts Payable
  
03/31/2023
    
12/31/2022
    
03/31/2023
  
Evertec Inc.
    
710
      
548
      
710
  
Paytrue S.A.
    
3,489
      
3,426
      
3,489
  
Evertec Chile S.p.A.
    
1,266
      
1,037
      
1,266
  
Evertec Placetopay S.A.S.
    
260
      
199
      
260
  
Evertec Colombia S.A.S.
    
642
      
554
      
642
  
Total
    
6,367
      
5,764
      
6,367
  

33
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
The Company, in the understanding of the full integration of its operations with its subsidiaries, carries out transactions for the sale and purchase of services related to software development.
 
The other transactions with related parties are presented below:
 

    
Parent Company
   
Consolidated
  
   
03/31/2023
    
12/31/2022
    
03/31/2023
 
Income from Management fees
                  
Evertec Inc.
    
139
      
80
      
139
  
BBR Chile S.A.
    
-
      
7
      
-
  
Total
    
139
      
87
      
139
  
Revenue from Services
                        
Paytrue S.A.
    
2,167
      
25,931
      
2,167
  
Evertec Placetopay S.A.S.
    
962
      
199
      
62
  
Evertec Colombia S.A.S.
    
100
      
554
      
100
  
Total
    
3,229
      
26,684
      
3,229
  
Expenses from Management fees
                        
Evertec Inc.
    
177
      
226
      
177
  
Paytrue S.A.
    
90
      
289
      
90
  
Evertec Chile S.p.A.
    
254
      
1,037
      
254
  
Evertec Placetopay S.A.S.
    
3
      
-
      
3
  
Total
    
524
      
1,552
      
524
  

Management compensation
 
As at March 31, 2023, the Company recorded expenses with the remuneration of its key personnel (Company Officers) in the amount of R$356 (R$1,176 as at December 31, 2022). All remuneration is short-term, as shown below:
 

    
Parent Company
 
   
03/31/2023
    
12/31/2022
 
Executive Board
    
356
      
1,176
  
Total
    
356
      
1,176
  

9.
Investments
 
As described in Note 2 to the Company carrying out the Paysmart acquisition, we demonstrate this below.
 
Investee
  
Percentual
    
Total assets
    
Capital stock
    
Equity +
Goodwill
    
Revenue
    
Profit
  
Paysmart
    
100
%
    
284,344
      
33,881
      
131,740
      
2,433
      
1,399
  

 
a.
Movement of investments
 
Investee
  
Acquisition of subsidiary
    
Equity income (loss)
    
Ending balance
  
Paysmart
    
130,341
      
1,399
      
131,740
  

34
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
10.
Intangible Assets
 
 
a.
Composition of the intangible assets as of March 31, 2023 and December 31, 2022


 
Parent Company
  
 
 
Description
  
Historical
cost
   
Accumulated
amortization
    
03/31/2023
Net
Balance
   
12/31/2022
Net
Balance
 
Software
    
5,240
      
(1,048
)
    
4,192
      
4,324
  
Total
    
5,240
      
(1,048
)
    
4,192
      
4,324
  

   
Consolidated
  
 
Description
  
Historical
cost
   
Accumulated amortization
    
03/31/2023
Net Balance
  
Software
    
27,522
      
(4,035
)
    
23,487
  
Trademarks
    
6,557
      
-
      
6,557
  
Relationship with customers
    
57,450
      
-
      
57,450
  
Goodwill
    
22,462
      
-
      
22,462
  
Total
    
113,991
      
(4,035
)
    
109,956
  


b.
Summary movement of the intangible assets during the period ended March 31, 2023 to the consolidated results

Consolidated
  
Goodwill
    
Software
    
Trademarks
    
Relationship with customers
    
Total
  
1 January 2023
    
-
      
4,324
      
-
      
-
      
4,324
  
Addition through company acquisition
    
22,462
      
4,950
      
6,557
      
57,450
      
91,419
  
Paysmart Intangible
    
-
      
14,498
      
-
      
-
      
14,498
  
Amortization
    
-
      
(285
)
    
-
      
-
      
(285
)
                                         
March 31 2023
    
22,462
      
23,487
      
6,557
      
57,450
      
109,956
  

11.
Accounts Payable
 

  
Parent Company
   
Consolidated
  
   
03/31/2023
    
12/31/2022
   
03/31/2023
 
Domestic
    
4,832
      
789
      
4,508
  
Related parties
    
6,367
      
5,764
      
6,367
  
     
11,199
      
6,553
      
10,875
  

35
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
12.
Labor and tax obligations
 

  
Parent Company
   
Consolidated
  
   
03/31/2023
    
12/31/2022
   
03/31/2023
 
Labor
                  
Salaries and management fees
    
644
      
446
      
227
  
IRRF
    
238
      
107
      
203
  
INSS
    
30
      
25
      
194
  
FGTS
    
84
      
45
      
122
  
Employer GPS
    
220
      
118
      
220
  
Trade unions
    
1
      
1
      
1
  
Third party
    
61
      
32
      
-
  
Vacation provision/13th and charges
    
539
      
449
      
641
  
Other income and charges
    
170
      
151
      
170
  
     
1,987
      
1,374
      
1,778
  


 
Parent Company
   
Consolidated
 
   
03/31/2023
    
12/31/2022
    
03/31/2023
 
Tax
                  
ISS
    
723
      
747
      
2,663
  
IRRF
    
540
      
203
      
540
  
PIS / COFINS
    
7
      
21
      
7
  
     
1,270
      
971
      
3,210
  
                         
     
3,257
      
2,345
      
4,988
  

13.
Contract liabilities
 

  
Parent Company
   
Consolidated
 
   
03/31/2023
    
12/31/2022
   
03/31/2023
 
Revenue not recognized (a)
    
5,059
      
5,608
      
5,059
  
     
5,059
      
5,608
      
5,059
  
                         
Current
    
4,275
      
4,345
      
4,275
  
Non-current
    
784
      
1,263
      
784
  
     
5,059
      
5,608
      
5,059
  

a. Contractual liabilities are recognized for the consideration received in relation to performance obligations not yet satisfied.

14.
Income Tax and Social Contribution
 
 
a)
Current – payable
 
The income tax and social contribution are calculated and recorded based on the taxable result, including the tax incentives that are recognized as the taxes are paid and considering the rates provided for by the current tax legislation, Law No. 12,973/2014.

36
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
15.
Equity
 

 a)
Capital stock
 
As of December 31, 2022, the share capital totals R$10,000.00 (ten thousand reais), which is divided into 1,000 (one thousand) shares, each with a nominal value of R$10.00 (ten reais). These shares were fully subscribed and paid in cash, in the currency of the country, and distributed among shareholders.
 
On February 15, 2023, the capital increase to R$ 130,351,636 million was approved, through the issuance of 13,034,164 (thirteen million, thirty- four, one hundred and sixty-four) shares, being partially paid up by the partner Evertec Group.
 

 b)
Dividends
 
The profits will be distributed according to the proportion to be decided by the partners, according to the Company's articles of incorporation.
 

 c)
Share Based Compensation
 
The Group carries out a plan through which Restricted Stock Units (“RSU”) of the Evertec Inc. are awarded to senior executives of Evertec Brasil Informática Ltda. The strike price of these RSU’s is equal to the market price of the shares on the date of grant. The rights to the RUS’s are acquired when the employee complies with the terms and conditions of the contract signed between the employee and the Company; otherwise, no RSU’s will be granted.

The fair value of the RSU’s is estimated at the date of assignment using the market value of the shares, taking into account the terms and conditions under which such RSU’s on shares were assigned. However, the conditions detailed above are considered only in determining the number of shares that will ultimately be granted.
 
The RSU’s can be exercised within the term and conditions defined in the contracts with each executive once the conditions are met, therefore, the average contractual term of each of the RSU’s granted is 1.27 years, and cannot be settled in cash. The Group accounts for RSU’s for senior executives as a plan that is settled through equity instruments.

37
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
16.
Net operating income
 
The following table demonstrates the breakdown of the Company's gross revenue:
 

  
Parent Company
   
Consolidated
  

     
03/31/2023
    
03/31/2022
(Unaudited)
   
03/31/2023
  
Revenue from services - domestic market
    
9,468
      
6,768
      
12,191
  
Deductions from revenue - taxes levied and
other
    
(1,516
)
    
(1,403
)
    
(1,806
)
     
7,952
      
5,365
      
10,385
  

17.
Expenses by nature
 

  
Parent Company
   
Consolidated
  
   
03/31/2023
    
03/31/2022
(Unaudited)
   
03/31/2023
 
Classified as
                  
Cost of goods sold
    
4,421
      
2,432
      
5,985
  
Sales expenses
    
291
      
107
      
291
  
General and administrative expenses
    
4,859
      
4,218
      
5,242
  
Other operating income
    
(12
)
    
(15
)
    
(12
)
Total
    
9,559
      
6,742
      
11,506
  
Expenditure by nature
                        
Variable selling expenses
    
291
      
107
      
291
  
General administrative and commercial expenses
    
1,601
      
1,425
      
1,981
  
Personnel administrative and business expenses
    
7,486
      
5,060
      
8,132
  
Depreciation and amortization expenses
    
193
      
165
      
1,114
  
Other operating income and expenses
    
(12
)
    
(15
)
    
(12
)
Total
    
9,559
      
6,742
      
11,506
  

18.
Net financial income (loss)
 

  
Parent Company
   
Consolidated
  

     
03/31/2023
    
03/31/2022
(Unaudited)
   
03/31/2023
  
Financial revenues
                  
Return from financial investments
    
214
      
501
      
1,746
  
Total
    
214
      
501
      
1,746
  
Financial expenses
                        
Other expenses
    
(1
)
    
(1
)
    
(1
)
Total
    
(1
)
    
(1
)
    
(1
)
Exchange rate gains (losses)
    
72
      
2,541
      
59
  
Monetary adjustment of the balance sheet
            
-
          
Net financial income (loss)
    
285
      
3,041
      
1,804
  

38
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
19.
Risk management and financial instruments
 

 a)
General considerations
 
The Company participates in transactions involving financial instruments, including cash and cash equivalents, financial investments, accounts receivable, accounts payable to suppliers and commercial leasing, for the purpose of managing the financial availability of its operations.
 

 b)
Risk management
 
The Company is exposed to liquidity risks, due to the possibility of not having enough cash to meet its operating needs, to market risks, arising from variations in interest rates and to credit risk, arising from the possibility of default of its counterparties in financial investments and accounts receivable.
 
The Company adopts liquidity, market and credit risk management procedures through financial market mechanisms that seek to minimize the exposure of the Company's assets and liabilities, protecting the profitability of contracts and equity.
 

 c)
Liquidity risk
 
The cash flow forecast is carried out by the Company, and its projection is continuously monitored in order to guarantee and ensure liquidity requirements, cash and equivalents are sufficient to meet the operational needs of the business.
 
The excess cash generated by the Company is invested in interest-bearing checking accounts, time deposits and short-term deposits, choosing instruments with appropriate maturities or sufficient liquidity to provide margin as determined by the aforementioned forecasts.
 
The following table analyzes the Company's non-derivative financial liabilities, by maturity ranges, corresponding to the period remaining between the balance sheet date and the contractual maturity date. The amounts disclosed in the table are the contracted undiscounted cash flows.
 
   
Less than
one year
(ii)
    
Between
one and
two years
(ii)
    
Between
two and
five years
(ii)
    
Over five
years (ii)
  
 
Parent Company
                        
Balances as of December 31, 2022
                        
Trade accounts payable and other obligations (i)
    
789
      
-
      
-
      
-
  
Balances as of March 31, 2023 Trade accounts payable and other obligations (i)
    
5,521
      
-
      
-
      
-
  

39
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
 
 
          Consolidated
  
Less than
one year
(ii)
   
Between
one and
two years
(ii)
   
Between two and five
years (ii)
    
Over five
years (ii)
 
Balances as of March 31, 2023
                        
Trade accounts payable and other obligations (i)
    
5.197
      
-
      
-
      
-
  
 

 (i)
The maturity analysis applies only to financial instruments and therefore obligations arising from legislation are not included.
 

 d)
Sensitivity analysis of financial assets and liabilities
 
The Company presents below the tables of sensitivity to the risk of interest rates to which it is exposed considering that the eventual temporal effects would impact the future results based on the exposures presented on March 31, 2023, being the effects on equity basically the same as the result.
 
i. Financial assets
 
In order to verify the sensitivity of the indexer in the financial investments to which the Company was exposed on the base date of March 31, 2023, 03 different scenarios were defined. Based on the CDI values, using the 2023 CDI, it was defined as a probable scenario (scenario I). From it, variations of 25% (scenario II) and 50% (scenario III) were calculated.

For each scenario, the "gross financial revenue" was calculated, not taking into account the incidence of taxes on the income from the investments. The following table shows the projection of the effect of the change in interest rates on equity and 3-month future income, considering the balances as of March 31, 2023.
 
         
Parent Company
    
Consolidated
  
 Instrument          
  
Risk
    
03/31/2023
   
03/31/2023
 
 
Financial investments
  
Reduction in CDI
      
14.909
      
23.227
  
                     
   
Rate
    
Revenue
          
Scenario I - Probable
    
3.25
%
    
485
      
755
  
Scenario II - Possible Adverse
    
4.06
%
    
605
      
943
  
Scenario III - Extreme Adverse
    
4.88
%
    
727
      
1.133
  

The Company did not operate in derivative financial instruments or other pegged financial instruments during the period ended March 31, 2023.

40
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)

e)
Exposure to credit risks
 
The operations that subject the Company to the concentration of credit risk reside mainly in bank current accounts and financial investments, where the Company is exposed to the risk of the financial institution involved. In order to manage this risk, the Company maintains bank current accounts and financial investments in institutions considered by the Administration as first-line.


 f)
Cash and cash equivalents, financial investment, accounts receivable, other current assets and liabilities
 
The carrying values of the Company's financial instruments approximate their realization values.
 
19.1. Capital management
 
The Company monitors capital based on the financial leverage ratio. This ratio corresponds to the net debt divided by the total capital. Net debt or net cash, in turn, corresponds to the total gross debt (leases, including current and non-current liabilities, as shown on the balance sheet), minus the amount of cash and cash equivalents. Total capital is calculated through the sum of equity, as shown on the balance sheet.
 
The financial leverage ratio as of March 31, 2023 can be summarized as follows:

   
Individual
   
Consolidated
 
   
March 31, 2023
   
March 31, 2023
 
Lease
    
99
      
116
  
Gross debt
    
99
      
116
  
Cash and cash equivalents (Note 6)
    
(21,307
)
    
(32,616
)
Net debt
    
(21,208
)
    
(32,500
)
Total equity
    
145,895
      
145,895
  
Financial leverage ratio - %
    
(15
%)
    
(22
%)

20.
Earnings per share
 
The Company disclosed the net result, by shares, considering the result attributable to the shareholders, divided by the number of shares at the end of the period. The Company does not have instruments that could potentially dilute the loss per share presented.

41
EVERTEC BRASIL INFORMATICA LTDA.
 
Management's explanatory notes to the individual and consolidated financial statements
For the periods ended March 31, 2023 and 2022 and December 31, 2022
(In thousands of Reais – R$ – unless otherwise indicated)
The calculation by share follows:
 
   
03/31/2023
 
Numerator
      
Result of the period
    
(38
)
Denominator
        
Number of outstanding shares
    
13,034,164
  
Earnings per share in Reais
    
0.0029
  

21.
Subsequent events Sinqia Acquisition
 
Evertec has made a proposal to buy Sinqia in July 2023, one of the largest Brazilian companies specializing in the financial industry niche. The proposed amount is R$ 2.5 billion, of which 90% will be paid in cash and 10% in Evertec Inc. shares. The business is structured as an incorporation.
 
Increase in share capital

In May 2023, a capital contribution of R$ 1,241 was made.

42
Annex VII to Exhibit 99.2 – Pro Forma Financials pursuant to RCVM 81 and CVM Resolution Number 78 of March, 2022

(Convenience translation into English from the original previously issued in Portuguese)
EVERTEC BRASIL INFORMÁTICA LTDA.

Independent Auditor’s Assurance Report
Pro forma condensed consolidated financial information
For the period ended March 31, 2023 and for the year ended December 31, 2022

EVERTEC BRASIL INFORMÁTICA LTDA.

Pro forma condensed consolidated financial information
For the period ended March 31, 2023 and year ended December 31, 2022

Contents

Independent Auditor’s Assurance Report on the Compilation of Pro Forma Condensed Consolidated Financial Information
 
Pro forma condensed consolidated balance sheet as of March 31, 2023
 
Pro forma condensed consolidated income statement for the period ended March 31, 2023
 
Pro forma condensed consolidated income statement for the year ended December 31, 2022
 
Notes to the pro forma condensed consolidated financial information

2
Tel.: +55 19 3294 2390
Fax: + 55 19 3254 1484
www.bdo.com.br
Av. José de Souza Campos, 243,
1° andar – Cambuí, Campinas, SP
Brasil 13025-320

INDEPENDENT AUDITOR ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

To the
Shareholders and Management of
Everted Brasil Informática Ltda.
São Paulo - SP

We concluded our assurance work to issue a report on the compilation of pro forma condensed consolidated financial information of Evertec Brasil Informática Ltda. (“Company”), prepared under the responsibility of its Management. The pro forma condensed consolidated financial information comprises the pro forma condensed consolidated balance sheet as of March 31, 2023, the pro forma condensed consolidated income statement for the period of three months ended March 31, 2023 and the pro forma condensed consolidated income statement for the year ended December 31, 2022 and the respective notes. The applicable criteria based on which the Company’s Management compiled the pro forma condensed consolidated financial information are specified in Comunicado CTG 06 - “Presentation of Pro Forma Financial Information” and are summarized in the notes that accompanying the pro forma condensed consolidated financial information.
 
The pro forma condensed consolidated financial information was compiled by the Company’s Management to illustrate the impacts of the Company’s probable transaction, presented in note n°1 on the pro forma condensed consolidated financial information. As part of this process, the information on the Company’s financial position and operating performances were extracted by the Company’s Management from its consolidated financial statements as of and for the period of three months ended March 31, 2023 and its financial statements as of and for the year ended December 31, 2022, on which we issued reports on the audit of the individual and consolidated financial statements, without modification, dated August 11, 2023 and on the audit of the financial statements of the Company, without modification, dated August 8, 2023, respectively.

Additionally, the information on Sinqia S.A.’s financial position and its operating performances were extracted by Company’s Management from the interim condensed consolidated financial statements as of and for the period of three months ended March 31, 2023 and the individual and consolidated financial statements for the year ended December 31, 2022 of Sinqia S.A., respectively, whose review was conducted under the responsibility of other independent auditors, who issued review report, without modification, dated May 8, 2023, and whose audit was conducted under the responsibility of other independent auditors, who issued audit report, without modification, dated March 8, 2023, respectively.
 
Moreover, the interim condensed consolidated financial information for the period of two months ended February 28, 2023 and the consolidated financial information for the year ended December 31, 2022 of Paysmart Pagamentos Eletrônicos Ltda., were extracted from its accounting records by the Company’s Management, whose information has not been audited or reviewed by independent auditors.

Responsibilities of Management and those charged with governance for the pro forma condensed consolidated financial information
 
The Company’s Management is responsible for compiling the pro forma condensed consolidated financial information based on the Comunicado CTG 06 - “Presentation of Pro Forma Financial Information” issued by the Brazilian Federal Accounting Council.

BDO RCS Auditores Independentes, uma empresa brasileira da sociedade simples, é membro da BDO Internacional Limited, uma companhia limitada por garantia do Reino Unido, e faz parte da rede internacional BDO de firmas-membro independentes. BDO é nome comercial para a rede BDO e cada uma das firmas da BDO.
3

Auditor’s responsibilities for the audit of the pro forma condensed consolidated financial information
 
Our responsibility is to express an opinion, as required by the Brazilian Securities and Exchange Commission (“CVM”), on whether the pro forma condensed consolidated financial information has been compiled by the Company’s Management, in all material respects, based on the Comunicado CTG 06 - Presentation of Pro Forma Financial Information by the Brazilian Federal Accounting Council.
 
We conduct our work in accordance with NBC TO 3420 - “Assurance Work on the Compilation of Pro Forma Financial Information Included in Prospectus”, issued by the Brazilian Federal Accounting Council, equivalent to the International Standard issued by the International Federation of Accountants ISAE 3420. These standards require that auditors comply with ethical requirements and that audit procedures be planned and performed with the objective of obtaining reasonable assurance that the Company’s Management has compiled, in all material respects, the pro forma condensed consolidated financial information based on the Comunicado CTG 06 - Presentation of Pro Forma Financial Information issued by the Brazilian Federal Accounting Council.
 
For the purposes of this work, we are not responsible for updating or re-issue any reports or opinions on any historical accounting information used in compiling the pro forma condensed consolidated financial information.
 
The purpose of the pro forma condensed consolidated financial information is solely to illustrate the material impacts of the probable transaction on the Company’s historical financial information, as if the probable transaction had taken place on the earlier date selected for illustrative purposes. Therefore, we do not provide any assurance that the actual result of the probable transaction would have been as presented.
 
A reasonable assurance engagement as to whether the pro forma condensed consolidated financial information has been compiled, in all material respects, based on the applicable criteria, involves performing procedures to assess whether the applicable criteria adopted by the Company’s Management in the compilation of the pro forma condensed consolidated financial information provide a reasonable basis for presenting the relevant effects directly attributable to the likely transaction, and for obtaining sufficient appropriate evidence as to whether:
 
◾
the corresponding pro forma adjustments provide an appropriate effect to these criteria; and
 
◾
the pro forma condensed consolidated financial information reflects the proper application of these adjustments to the historical financial information.
 
The procedures selected depend on the independent auditor’s judgment, taking into account their understanding of the Company, the nature of the event or the probable transaction in relation to which the pro forma condensed consolidated financial information was compiled, as well as other relevant circumstances of the work. The work also involves evaluating the general presentation of the pro forma condensed consolidated financial information.
 
We believe that the evidence obtained is sufficient and appropriate to support our opinion on the compilation of the pro forma condensed consolidated financial information.

4

Opinion on the pro forma condensed consolidated financial information
 
In our opinion, the pro forma condensed consolidated financial information was compiled, in all material respects, based on Comunicado CTG 06 - “Presentation of Pro Forma Accounting Information” issued by the Brazilian Federal Accounting Council.
 
Porto Alegre, August 11, 2023.

 
BDO RCS Auditores Independentes SS Ltda
CRC 2 SP 013846/O-1
/s/ Márcio Silva
Márcio Silva
Accountant CRC 1 RS 078817/O-2 – S - SP

5
Pro forma condensed consolidated balance sheet
as of March 31, 2023
(In thousands of Brazilian Reais)

Assets
  
Evertec Brasil
(historical)
(1)
    
Sinqia S.A. (historical)
(2)
    
Pro forma
adjustments
    Pro forma     Note  
Current assets
                              
Cash and cash equivalents
    
32,616
      
83,984
      
-
      
116,600
        
Financial investments
    
-
      
13,772
      
-
      
13,772
        
Accounts receivable from customers
    
5,803
      
52,550
      
-
      
58,353
        
Prepaid expenses
    
-
      
2,300
      
-
      
2,300
        
Taxes and contributions recoverable
    
244
      
19,897
      
-
      
20,141
        
Other receivables
    
255,205
      
1,261
      
-
      
256,466
        
Total current assets
    
293,868
      
173,764
      
-
      
467,632
        
                                       
Non-current assets
                                      
Contract assets
    
4,036
      
-
      
-
      
4,036
        
Other receivables
    
469
      
126
      
-
      
595
        
Financial assets
    
-
      
91,385
      
-
      
91,385
        
Taxes and contributions recoverable
    
-
      
1,505
      
-
      
1,505
        
Related parties
    
274
      
-
      
-
      
274
        
Deferred income tax and social contribution
    
-
      
79,217
      
-
      
79,217
        
                                       
Right-of-use assets
    
89
      
26,679
      
-
      
26,768
        
Property and equipment
    
842
      
20,593
      
-
      
21,435
        
Goodwill
    
22,462
      
641,798
      
1,106,461
      
1,770,721
    
2 (a)
Intangible
    
87,494
      
447,946
      
662,666
      
1,198,106
    
2 (b)
Total non-current assets
    
115,666
      
1,309,249
      
1,769,127
      
3,194,042
      
Total assets
    
409,534
      
1,483,013
      
1,769,127
      
3,661,674
        
 
(1)
Represents the historical audited consolidated balance sheet of Evertec Brasil Informática Ltda. and its subsidiaries (“Evertec Brasil”) as of March 31, 2023.
(2)
Represents the historical reviewed consolidated balance sheet of Sinqia S.A. and its subsidiaries (“Sinqia S.A.”) as of March 31, 2023.

The accompanying notes are an integral part of the pro forma condensed financial information.

1 of 10
Pro forma condensed consolidated balance sheet
as of March 31, 2023
(In thousands of Brazilian Reais)


Liabilities and Shareholders’ Equity
  
Evertec Brasil
(historical)
(1)
    
Sinqia S.A.
(historical)
(2)
    
Pro forma
adjustments
     Pro forma   Note
Current liabilities
                               
Debentures
    
-
      
74,552
      
-
      
74,552
    
Lease purchase
    
114
      
23,970
      
-
      
24,084
    
Trade accounts payable
    
4,508
      
8,213
      
-
      
12,721
    
Advances from customers
    
-
      
14,356
      
-
      
14,356
    
Labor and tax liabilities
    
4,988
      
76,043
      
-
      
81,031
    
Earnings distributable
    
-
      
4,690
      
-
      
4,690
    
Investment acquisition liabilities
    
-
      
51,714
      
-
      
51,714
    
Contract liability
    
4,275
      
-
      
-
      
4,275
    
Other accounts payable
    
242,601
      
321
      
-
      
242,922
    
Total current liabilities
    
256,486
      
253,859
      
-
      
510,345
    
                                   
Non-current liabilities
                                  
Debentures
    
-
      
143,611
      
-
      
143,611
    
Lease purchase
    
2
      
42,559
      
-
      
42,561
    
Provision for lawsuits
    
-
      
134,464
      
-
      
134,464
    
Related parties
    
6,367
      
-
      
-
      
6,367
    
Contract liability
    
784
      
-
      
-
      
784
    
Investment acquisition liabilities
    
-
      
80,769
      
-
      
80,769
    
Non-controlling interest put option
    
-
      
158,945
      
-
      
158,945
    
Total non-current liabilities
    
7,153
      
560,348
      
-
      
567,501
    
                                   
Shareholders’ Equity
                                  
Total shareholders’ equity attributed to controllers
    
145,895
      
641,990
      
1,769,127
      
2,557,012
  
2 (d)
Non-controlling interest
    
-
      
26,816
      
-
      
26,816
    
Total shareholders’ equity
    
145,895
      
668,806
      
1, 769,127
      
2,583,828
    
Total liabilities and shareholders’ equity
    
409,534
      
1,483,013
      
1, 769,127
      
3,661,674
    
 
(1)
Represents the historical audited consolidated balance sheet of Evertec Brasil Informática Ltda. (“Evertec Brasil”) as of March 31, 2023.
(2)
Represents the historical reviewed consolidated balance sheet of Sinqia S.A. as of March 31, 2023.

The accompanying notes are an integral part of the pro forma condensed financial information.

2 of 10
Pro forma condensed consolidated income statement
for the period ended March 31, 2023
(In thousands of Brazilian Reais, unless otherwise indicated)


  
Evertec Brasil
(historical)
(1)
    
Sinqia S.A.
(historical)
(2)
    
PaySmart
(historical)
(3)
    
Pro forma
adjustments
     Pro forma
    Note
 
                                  
Net revenues
    
10,385
      
164,241
      
7,221
      
181,847
            
 
                                          
Costs of services provided
    
(5,985
)
    
(96,989
)
    
(1,445
)
    
(104,419
)
          
 
                                          
Gross profit
    
4,400
      
67,252
      
5,776
      
77,428
            
 
                                          
Selling, general and administrative expenses
    
(5,521
)
    
(48,144
)
    
(2,845
)
    
(17,693
)
    
(74,203
)
  
2 (c)
 
                                            
Operating profit before financial result
    
(1,121
)
    
19,108
      
2,931
      
(17,693
)
    
3,225
      
 
                                            
Financial result, net
    
1,804
      
(14,503
)
    
82
      
(12,617
)
            
 
                                            
Profit/(loss) before income tax and social contribution
    
683
      
4,605
      
3,013
      
(17,693
)
    
(9,392
)
    
 
                                            
Income tax and social contribution
                                            
Current
    
(721
)
    
(3,428
)
    
(896
)
            
(5,045
)
    
Deferred
    
-
      
592
      
-
              
592
      
 
                                            
Net income
    
(38
)
    
1,769
      
2,117
      
(17,693
)
    
(13,845
)
    
 
                                            
Earnings per share (in Brazilian Reais (R$))
                                            
Basic
    
(0.0029
)
                            
(0.0459
)
  
2 (e)
Diluted
    
(0.0029
)
                            
(0.0459
)
  
2 (e)

(1) Represents the historical audited consolidated statement of income of Evertec Brasil Informática Ltda. (“Evertec Brasil”) for the period ended March 31, 2023.
(2) Represents the historical reviewed consolidated statement of income of Sinqia S.A for the period ended March 31, 2023.
(3) Represents the historical unaudited and not reviewed consolidated statement of income of PaySmart Pagamentos Eletronicos Ltda. (“PaySmart”) from January 1, 2023 to February 28, 2023.

The accompanying notes are an integral part of the pro forma condensed financial information.

3 of 10
Pro forma condensed consolidated income statement
for the year ended December 31, 2022
(In thousands of Brazilian Reais, unless otherwise indicated)

 
  
Evertec Brasil
(historical)
(1)
    
Sinqia S.A.
(historical)
(2)
    
PaySmart
(historical)
(3)
    
Pro forma
adjustments
     Pro forma     Note
 
                                  
Net revenues
    
33,615
      
616,472
      
47,405
    
     
697,492
      
 
                                          
Costs of services provided
    
(12,449
)
    
(353,524
)
    
(7,629
)
  
     
(373,602
)
    
 
                                          
Gross profit
    
21,166
      
262,948
      
39,776
    
     
323,890
      
 
                                          
Selling, general and administrative expenses
    
(19,750
)
    
(201,847
)
    
(12,515
)
    
(70,772
)
    
(304,884
)
  
2 (c)
 
                                            
Operating profit before financial result
    
1,416
      
61,101
      
27,261
      
(70,772
)
    
19,006
      
 
                                            
Financial result, net
    
2,144
      
(27,968
)
    
131
              
(25,693
)
    
 
                                            
Profit/(loss) before income tax and social contribution
     3,560       33,133       27,391       (70,772 )     (6,688 )    
 
                                            
Income tax and social contribution
                                            
Current
     (1,315 )     (26,375 )     (6,660 )             (34,350 )    
Deferred
     -
       10,798       -
               10,798      
 
                                            
Net income
     2,245       17,556       20,731       (70,772 )     (30,240 )    
 
                                            
Earnings per share (in Brazilian Reais (R$))
                                            
Basic
     2,245                               (0.1048 )   2 (e)
Diluted
     2,245                               (0.1048 )   2 (e)

(1) Represents the historical audited consolidated statement of income of Evertec Brasil Informática Ltda. (“Evertec Brasil”) for the year ended December 31, 2022.
(2) Represents the historical audited consolidated statement of income of Sinqia S.A for the year ended December 31, 2022.
(3) Represents the historical unaudited and not reviewed consolidated statement of income of PaySmart Pagamentos Eletronicos Ltda. (“PaySmart”) for the year ended December 31, 2022.

The accompanying notes are an integral part of the pro forma condensed financial information.

4 of 10
Notes to the pro forma condensed consolidated financial information
(In thousands of Brazilian Reais)

1.    Description of the transactions and basis for preparing the pro forma condensed consolidated financial information
 
(a)  Description of the transactions

Aquisition of Sinqia S.A.

On July 20, 2023, Evertec Inc, the leading full-service transaction processing company in Latin America and the Caribbean (“Evertec Inc”) and Evertec Brasil Informática Ltda. (“Evertec Brasil”), a company belonging to the same group as Evertec Inc, entered into the Merger Agreement and Other Covenants (“Merger Agreement”) with Sinqia S.A., leading provider of software for the financial services industry in Brazil (“Sinqia”) and other key shareholders of Sinqia. The aforementioned Merger Agreement established the terms and conditions regarding the business combination of Evertec Brasil and Sinqia, which will be carried out through a merger of all shares issued by Sinqia into Evertec Brasil in pursuant to provisions of the Brazilian Corporations Law (the “Merger of Shares”), and as a result of such Merger of Shares, Sinqia will become a wholly-owned subsidiary of Evertec Brasil (the “Transaction”). As Evertec Inc intends to incorporate the acquired assets, there are no deferred tax impacts on the allocated fair values.
 
At the effective time of the Merger of Shares:
 
•     each common share of Sinqia, issued and outstanding immediately prior to the Merger of Shares will be exchanged by:
 
(a)  one class A mandatorily redeemable preferred share issued by Evertec Brasil (“Evertec Brasil New Class A Shares”), and

(b) one class B mandatorily redeemable preferred share issued by Evertec Brasil (“Evertec Brasil New Class B Shares” and, jointly with New Evertec Brasil Class A Shares, the “Evertec Brasil New Shares”).
 
Immediately upon implementation of the Merger of Shares, all Evertec Brasil New Shares delivered to the shareholders of Sinqia will be automatically redeemed and canceled, and each then shareholder of Sinqia will be entitled to receive, for each Evertec Brasil New Class A Share held. The amount of twenty-four Brazilian Reais and forty-seven cents (R$ 24.47), to be:
 
a)
Properly adjusted by the base interest rate of Sistema Especial de Liquidação e de Custódia (the “SELIC Adjustment”) applied to the amount of twenty-seven Brazilian Reais and fifty cents (R$ 27.50) as from the date of execution of the Merger Agreement until the date of the closing of the Transaction (the “Closing” and such date, the “Closing Date”), observing the following (i) the SELIC Adjustment shall not exceed one Real (R$1.00) per Evertec Brasil New Class A Share to be redeemed (“SELIC Adjustment Cap”); (ii) the SELIC Adjustment Cap shall not apply in case the Closing of the Transaction gets delayed as a result of a delay in compliance of certain Conditions Precedent to be Fulfilled by Evertec, as defined in the Merger Agreement, provided that all Conditions Precedent to be Fulfilled by Sinqia have been complied pursuant to the the Merger Agreement; and (iii) for the avoidance of doubt, the SELIC Adjustment Cap will cap the abovementioned amount at twenty five Brazilian Reais and forty-seven cents (R$25.47), except as mentioned in item “(ii)” above.;
b)
Adjusted in case of any change, up to the Closing Date (included), to the number of outstanding shares into which Sinqia’s share capital is divided, on a fully diluted basis, except as authorized under the Merger Agreement;
c)
reduced by the same amount of any dividends, interest on equity and other earnings declared and/or paid by Sinqia as from the date of the Merger Agreement and up to Closing Date, adjusted by the SELIC Adjustment as from the payment date, except to the interest on equity declared by Sinqia at the annual general shareholders’ meeting held on April 27, 2023, as authorized under the Merger Agreement;

5 of 10
Notes to the pro forma condensed consolidated financial information
(In thousands of Brazilian Reais)

Additionaly, each Sinqia’s shareholder will be entitled to received, for each Evertec Brasil New Class B Share, 0.014354 Brazilian Depositary Receipt (BDR) Level I representing common shares issued by Evertec Inc, with a par value of one cent (USD 0.01), listed for trading on the New York Stock Exchange, which will be admitted for trade at B3 – Brasil, Bolsa, Balcão S.A. (“Evertec Inc BDR”).
 
All of the foregoing steps will occur substantially concurrently and will be conditional on the effectiveness of each of the other steps. The result of the Transaction will be: (a) Evertec Brasil will hold all of Sinqia’s share capital; and (b) Sinqia shareholders will receive (i) R$2,178,476 in cash, which will be restated according to the SELIC rate variation from July 20, 2023 until the Closing, subject to the above rules and the rules set forth in the Merger Agreement, and (ii) 0.014354 BDR Evertec Inc.
 
Evertec Inc has obtained financing commitments for the purpose of financing the Transaction and paying related fees and expenses. The financial institutions have agreed to provide Evertec Inc with debt financing in an aggregate principal amount of $600 million (as such amount may be increased) in one or more Incremental Term B Loans on the terms and subject to the conditions set forth in a debt commitment letter. The proceeds of such financing will be used to finance part of the cash consideration paid to current shareholders of Sinqia.
 
Aquisition of PaySmart Pagamentos Eletronicos Ltda.

On February 16, 2023, Evertec Inc by Evertec Brasil Informática Ltda. acquired 100% of Paysmart Pagamentos Eletronicos Ltda (“PaySmart”). Headquartered in Porto Alegre, Brazil, PaySmart provides issuer processing services and Banking Identification Number (BIN) sponsorship services for prepaid programs under domestic and international schemes in Brazil. The aggregate purchase price was R$130,000.

(b)  Basis of presentation of pro forma condensed consolidated financial information

The pro forma condensed consolidated financial information for the period ended March 31, 2023 presented herein is based on:

(i)
Evertec Brasil’s audited consolidated financial statements for the period ended March 31, 2023, prepared in accordance with accounting practices adopted in Brazil and international financial reporting standards (IFRS), issued by the International Accounting Standards Board (“IASB”), audited by BDO RCS Auditores Independentes SS Ltda. (“BDO”);
 
(ii)
Sinqia’s reviewed consolidated financial statements for the period ended March 31, 2023, prepared in accordance with accounting practices adopted in Brazil and IFRS, issued by the IASB, reviewed by Deloitte Touche Tohmatsu Auditores Independentes Ltda. (“Deloitte”);
 
(iii)
PaySmart’s unaudited and not reviewed consolidated financial information for the two-month period ended February 28, 2023, prepared by management in accordance with accounting practices adopted in Brazil and IFRS, issued by IASB, that comprised on the following financial information:
 
 
•
PaySmart’s unaudited and not reviewed financial information for the two-month period ended February 28, 2023, prepared by management in accordance with accounting practices adopted in Brazil;
 
 
•
Issuer Instituição de Pagamento Ltda.’s (“Issuer”) unaudited and not reviewed financial information two-month period ended February 28, 2023, prepared in accordance with accounting practices adopted in Brazil;
 
 
•
Issuer Holding Ltda.’s (“Issuer Holding”) unaudited and not reviewed financial information for the two-month period ended February 28, 2023, prepared in accordance with accounting practices adopted in Brazil.

6 of 10
Notes to the pro forma condensed consolidated financial information
(In thousands of Brazilian Reais)

The pro forma condensed consolidated financial information for the year-ended December 31, 2022 presented herein is based on:
 
(i)
Evertec Brasil’s audited financial statements for the year ended December 31, 2022, prepared in accordance with accounting practices adopted in Brazil and IFRS, issued by IASB and audited by BDO;
 
(ii)
Sinqia’s audited consolidated financial statements for the year ended December 31, 2022, prepared in accordance with accounting practices adopted in Brazil and IFRS, issued by the IASB and audited by Deloitte;
 
(iv)
PaySmart’s unaudited and not reviewed consolidated financial information for the year ended December 31, 2022, prepared by management, in accordance with accounting practices adopted in Brazil and IFRS, issued by IASB, that comprised on the following financial information:
 
 
•
PaySmart’s unaudited and not reviewed financial information for the year ended December 31, 2022, prepared in accordance with accounting practices adopted in Brazil;
 
 
•
Issuer Instituição de Pagamento Ltda.’s (“Issuer”) audited financial statements for the year ended December 31, 2022, prepared in accordance with accounting practices adopted in Brazil and audited by BDO;
 
 
•
Issuer Holding Ltda.’s (“Issuer Holding”) unaudited and not reviewed financial information for the year ended December 31, 2022, prepared in accordance with accounting practices adopted in Brazil.
 
The pro forma adjustments are based upon currently available information and certain assumptions, and actual results may differ from the pro forma adjustments. However, management believes that these estimates and assumptions provide a reasonable basis for presenting the significant effects of the contemplated transactions and that the pro forma adjustments are factually supportable and give appropriate effect to those estimates and assumptions.
 
The pro forma condensed consolidated financial information is not intended to represent what actual results would have been if the business combinations with Sinqia and PaySmart had occurred on the dates indicated, nor is it indicative of future results of operations or financial condition. The pro forma condensed consolidated financial information should be read in conjunction with Evertec Brasil’s historical consolidated financial statements, Sinqia’s historical consolidated financial statements and PaySmart’s unaudited and not reviewed financial information.
 
The pro forma adjustments have been prepared as if the Closing Date had taken place on March 31, 2023, in the case of the pro forma condensed balance sheet, on January 1, 2022 and on January 1, 2023, in the case of the pro forma condensed statements of income.

7 of 10
Notes to the pro forma condensed consolidated financial information
(In thousands of Brazilian Reais)

2.    Pro forma adjustments
 
The audited consolidated financial statements and the unaudited and not reviewed condensed consolidated financial statements from which the pro forma condensed consolidated financial information have been derived, were prepared in accordance with IFRS, issued by IASB. There were no differences between accounting practices adopted in Brazil and IFRS.
 
The acquisitions of Sinqia and PaySmart by Evertec Brasil are each accounted for as a business combination in accordance with IFRS 3 - Business Combinations, using the purchase method of accounting.
 
The pro forma information presented, including allocation of the purchase price, is based upon preliminary estimates of the fair value of the assets acquired and liabilities assumed, available information as of this date and management assumptions, and will be revised upon final calculations during the one year measurement period as from each acquisition date. Therefore, the actual adjustments may differ from the pro forma adjustments, and the differences may be material. The final purchase price allocation will be determined when Evertec Brasil has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include (1) changes in the value of the consideration transferred, (2) changes in allocations to intangible assets such as trademarks, customer relationships, softwares as well as goodwill and (4)  other changes to assets and liabilities.
 
The following are general descriptions of material adjustments that are directly attributable to the proposed Transaction, factually supportable and, with respect to the statement of income, expected to have a continuing impact on the consolidated results.
 
a) Consideration transferred
 
Evertec Brasil has performed a preliminary valuation analysis of the fair market value of Sinqia’s assets to be acquired and liabilities to be assumed. This preliminary purchase price allocation has  been  used  to  prepare pro  forma transaction  accounting  adjustments   in   the pro forma balance sheet and pro forma statement of income. Using the total consideration for the Transaction, Evertec Brasil has estimated the allocations to such assets and liabilities.
 
The following table summarizes the allocation of the preliminary purchase price as if the closing date had been March 31, 2023:
 
Cash consideration
    
2,178,476
  
Evertec Inc.’s shares
    
232,641
  
Total consideration
    
2,411,117
  
         
Book value of Sinqia’s shareholders’ equity (NCI not considered)
    
641,990
  
Elimination of book value of existing goodwill
    
(641,798
)
Book value of Sinqia’s shareholders’ equity (NCI not considered), net of goodwill
    
192
  
         
Trademarks
    
96,623
  
Customer relationships
    
411,741
  
Softwares
    
154,302
  
Total fair value impacts
    
662,666
  
Total pro forma goodwill
    
1,748,259
  
 
The total consideration amount indicated above takes account the SELIC Adjustment Cap and, therefore, the total consideration amount may vary depending on the exact Closing Date and the relevant provisions of the Merger Agreement.

8 of 10
Notes to the pro forma condensed consolidated financial information
(In thousands of Brazilian Reais)

The adjustment reflects the net increase in goodwill as of December 31, 2022 consist of the elimination of the book value of Sinqia’s existing goodwill in the amount of R$ (641,798) thousand and the goodwill generated by the Transaction in the amount of R$ 1,748,259.
 
b) Fair value of assets acquired and liabilities assumed
 
Evertec Brasil carried out an assessment of the fair value of Sinqia’s assets to be acquired and liabilities to be assumed, in accordance with CPC 15 (R1) - Combinação de negócios (IFRS 3 – Business combination), based on information available at the date of this pro forma condensed consolidated financial information. Using the total consideration for the Transaction, Evertec Brasil estimated the purchase price allocation.
 
The following table summarizes the purchase price allocation as if the transaction date had occurred on March 31, 2023:
 
   
Book value
   
Adjusted
    
Fair value
  
Trademarks
    
49,970
      
96,623
      
146,593
  
Customer relationships
    
279,495
      
411,741
      
691,236
  
Softwares
    
65,978
      
154,302
      
220,280
  
Goodwill
    
641,798
      
1,106,461
      
1,748,259
  
 
c) Intangibles

Reflects the adjustment to fair value of intangibles identified from brands, customer relationships and software. The table below demonstrates the methodology used to measure these intangible assets and the respective estimated fair values and amortizations for the year ended December 31, 2022 and for the period ended March 31, 2023.
 
Amortization expense estimated pro forma using the straight-line method recognized in general and administrative expenses:
 

   
Estimated
fair value
   
Estimated
useful life
   
Year
ended December
31, 2022
      
Period
ended
March 31,
2023
   
Trademarks
    
96,623
  
60 months
    
19,325
      
4,831
  
Customer relationships
    
411,741
  
240 months
    
20,587
      
5,147
  
Softwares
    
154,302
  
60 months
    
30,860
      
7,715
  
Total
    
662,666
        
70,772
      
17,693
  
 
Methodology
 
The valuation techniques used for measuring the fair value of separately identified intangible assets acquired were as follows:
 
Intangible assets
acquired
 
Valuation technique
Trademark and Softwares  
Relief from royalty
This methodology is based on the market remuneration of the use license granted to third parties. The value of the asset is restated by the savings of royalties that the owner would have to own the asset. It is necessary to determine a royalty rate that reflects the appropriate remuneration of the asset. The royalty payments, net of taxes, are discounted to present value.
     
Customer relationships
  
Multi-period excess earnings method
The method considers the present value of net cash flows expected to be generated by customer relationships, by excluding any cash flows related to contributory assets.

9 of 10
Notes to the pro forma condensed consolidated financial information
(In thousands of Brazilian Reais)

d) Equity
 
The pro forma adjustment to shareholders’ equity in March 31, 2023 is calculated as follows:

Capital contribution made by Evertec Inc in Evertec Brasil
    
2,178,476
  
Elimination of Sinqia’s Equity accounts
    
(641,990
)
Shares to be issued by Evertec Inc
    
232,641
  
Total Pro Forma adjustment
    
1,769,127
  

e) Pro forma basic and diluted earnings per share

Pro forma basic and diluted earnings per share were adjusted considering the issuance of  288,680,915 shares of Evertec Inc., as shown below:


  
Year ended
December 31,
2022
   
Period ended
March 31, 2023
 
Weighted average of Evertec Brasil Shares - in thousands of shares
     1      
13,034
  
Shares issued by Evertec Inc - in thousands of shares
     288,681      
288,681
  
Total pro forma weighted average of shares - in thousands of shares
     288,682      
301,715
  
                 
Pro Forma Net Income
     (30,240 )    
(13,845
)
Pro Forma Earnings per Share (in Brazilian Reais)
     (0.1048 )    
(0.0459
)

*          *          *

10 of 10
Annex VIII to Exhibit 99.2 – Minutes of the Board of Directors of Sinqia (GSM)

SINQIA S.A.
Publicly-held company
CNPJ/ME No. 04.065.791/0001-99
NIRE 35.300.190.785
 
BOARD OF DIRECTORS’ MEETING MINUTES
HELD ON AUGUST 13, 2023

Date, Time and Location: On August 13, 2023 at 13h00, by video conference, as authorized by article 13 of the Bylaws of Sinqia S.A. (“Company”).

Call and Attendance: The prior call notice was waived, due to the attendance of all of the members of the Board of Directors of the Company, that is, Ana Carolina Ribeiro Strobel, Antonio Luciano de Camargo Filho, Bernardo Francisco Pereira Gomes, Caio Lewkowicz, Gustavo José Costa Roxo, Roberto Dagnoni e Rodrigo Heilberg.
 
Presiding Board: President: Antonio Luciano de Camargo Filho; Secretary: Verônica Belchior de Sousa Campos.
 
Resolutions: After analysis, discussions and clarifications, the Directors resolved, unanimously and without reservations, to:
 
1.
to approve the execution, by the Company’s board of officers, of the “Protocol and Justification for the Merger of Shares Issued by Sinqia S.A. by Evertec Brasil Informática S.A.” (“Protocol”), with the purpose of merging the shares issued by the Company by Evertec Brasil Informática S.A. (“Evertec BR”) (“Merger of Shares”) within the scope of the business combination between the Company and Evertec BR (“Transaction”), with the authorization for the Company’s board of officers to adopt all the necessary measures to implement the resolutions that may be approved at the Company’s General Shareholders’ Meeting (“GSM”);
 
2.
to approve, in accordance with the Protocol, and in compliance with the provisions of Articles 6, 8 and 12 of the Company’s Bylaws, the calling of the Company’s GSM, to resolve on the following agenda:
 

 (a)
To examine, discuss and resolve on the Protocol and on the Merger of Shares upon the delivery, to the Company’s shareholders, of class A preferred shares and class B preferred shares issued by Evertec BR, automatically redeemable upon delivery, as consideration, of a cash installment and Level I Brazilian Depositary Receipts (BDRs) backed by common shares issued by Evertec, Inc. (“Evertec Inc”), under the terms and conditions set forth in the Protocol, hereby authorizing the Company’s board of officers to adopt all the necessary measures to implement the resolutions that may be approved at the GSM;


(b)
To resolve on the waiver of Evertec BR’s obligation to join the Novo Mercado segment of B3 S.A. - Brasil, Bolsa, Balcão (“Novo Mercado”) due to the Merger of Shares, pursuant to Article 46, Sole Paragraph, of the Novo Mercado Regulation; and


(c)
To resolve on the termination of Sinqia’s Stock Granting Plan, immediately after the delivery of the shares covered by such plan to its beneficiaries.
 
As they are considered part of a single transaction, subject of the material fact published on July 20, 2023, the approval of each of the matters on the agenda will be conditioned to the full approval of all matters on the agenda of the GSM, provided that the consummation of the operation described in the Protocol is conditioned to the implementation of all the conditions precedent provided for in the Protocol.
 
3.
to approve the Management Proposal for the Company’s GSM, which will be made available at the Company’s headquarters and on its website (ri.sinqia.com.br), as well as on the CVM and B3 websites, which contains the information required by Law 6404/76 and CVM Resolution 81/2022; and
 
4.
authorize the officers of the Company to carry out any and all acts necessary for the implementation of the resolutions hereby approved.
 
Closing: There being no further business to discuss, the Chairman closed the meeting. These minutes were drawn up, found in compliance and executed by all those present. Directors: Ana Carolina Ribeiro Strobel, Antonio Luciano de Camargo Filho, Bernardo Francisco Pereira Gomes, Caio Lewkowicz, Gustavo José Costa Roxo, Roberto Dagnoni and Rodrigo Heilberg.
 
This is a true copy of the original minutes drawn up in the appropriate book.

São Paulo, August 13, 2023.

       
Antonio Luciano de Camargo Filho
Verônica Belchior de Sousa Campos
(digitally signed)
(digitally signed)
 
Annex IX to Exhibit 99.2 – Minutes of the Sinqia Fiscal Committee (GSM)

SINQIA S.A.
Publicly-held Company CNPJ/ME No. 04.065.791/0001-99
NIRE 35.300.190.785

FISCAL COUNCIL’S MEETING MINUTES
HELD ON AUGUST 13, 2023

Date, Time and Location: On August 13, 2023, at 13h00, by video conference, as authorized by article 8, 1st paragraph, of the Internal Regulations of the Fiscal Council of Sinqia S.A. (“Sinqia” or “Company”).

Call and Attendance: The prior call notice was waived, due to the attendance of all of the members of the Fiscal Council (“CF”), Mr. Augusto Frederico Caetano Schaffer, Mr. Hugo Paulo Ehrentreich and Mr. Wesley Montechiari Figueira. The Company’s Chief Executive Officer, Mr. Bernardo Gomes, and the Vice-President of Finance and Strategy and Chief Investor Relations Officer Mr. Thiago Rocha.

Presiding Board: Wesley Montechiari Figueira – President; Augusto Frederico Caetano Schaffer – Secretary.

Agenda: To give an opinion on the proposal of the Company’s management regarding the business combination between Sinqia and Evertec Brasil Informática S.A. (“Evertec BR”), through the merger of shares of the Company by Evertec BR (“Merger of Shares”), followed by the redemption of the new shares issued by Evertec BR, under the terms of the “Protocol and Justification for the Merger of Shares Issued by Sinqia S.A. by Evertec Brasil Informática S.A.” (“Protocol”), to be submitted to the Company’s general shareholders’ meeting (“EGM”).

Resolutions: Opening the meeting, the Chief Executive Officer presented to the members of the CF (i) the terms and conditions of the proposed Merger of Shares, as set out in the Protocol, duly shared with the members of the CF in advance of the meeting; as well as (ii) the fairness opinion prepared by Banco BTG S.A. attesting to the potential benefits of the Merger of Shares, the reasonableness of the exchange ratio and its economic terms. After analyzing and discussing the agenda, the members of the CF, unanimously and without restrictions, gave a favorable opinion on the Merger of Shares, to be submitted to the Company’s EGM.

Closing: There being no further business to discuss, the President closed the meeting.  These minutes were drawn up, found in compliance and digitally executed by all those present.
 
São Paulo, August 13, 2023.

           
Augusto Frederico Caetano Schaffer
Member of the Fiscal Council
Hugo Paulo Ehrentreich
Member of the Fiscal Council
     
Wesley Montechiari Figueira
Member and Coordinator of the Fiscal Council


Exhibit 99.3
 
 
Last update: 08/14/2023
 
DISTANCE VOTING BALLOT
 
Extraordinary General Meeting (EGM) - SINQIA S.A. to be held on 09/14/2023

Shareholder’s Name
 
Shareholder’s CNPJ or CPF
 
E-mail
 
Instructions on how to cast your vote

For this Remote Voting Form (“RVF) to be considered valid, the shareholder that opts for remote voting or its legal representative must (i) fill out all fields and (ii) sign all pages of this RVD. No notarization will be required. Documents that are in a foreign language must be translated to Portuguese, without need for sworn translation, notarization or consularization. Also, documents in foreign language which are in English are dismissed of translation.
Instructions for sending your ballot, indicating the delivery process by sending it directly to the Company or through a qualified service provider

For the RVF to be considered delivered, the shareholder who opts for remote voting must adopt one of the following alternatives:
 
(i) Send to the Company: The shareholder must send the respective RVF exclusively in a digitized file to the email ri@sinqia.com.br with the subject “RVF EGM SEPT 2023” - physical copies sent to the Company’s headquarters will not be accepted - accompanied by the documents required by the Company, at least 7 days before the date of the EGM (RVFs received after this date may be disregarded);
 
(ii) Send to the bookkeeper: The shareholder must transmit the voting instruction to fill out the RVF to the bookkeeper of the Company’s shares (Banco Bradesco S.A.), if their shares are held by the bookkeeper; or
 
(iii) Send to the custodian: The shareholder must transmit the voting instruction to fill out the RVF to the custodian of their shares, if their shares are deposited with the central depository, observing to the procedures established by the respective custodian.

The documents that must accompany the RVF are as follows:

For individuals:
Identification document with a photo of the shareholder

For legal entities:
The latest consolidated bylaws or articles of association and the corporate documents proving the legal representation of the shareholder; and
Identification document with a photo of the legal representative.

For investment funds:
The latest consolidated fund regulations;
Bylaws or articles of association of its administrator or manager, as the case may be, observing the funds voting policy and corporate documents proving the powers of representation; and Identification document with a photo of the legal representative.
 
In accordance with Article 46 of CVM 81, the Company will notify the shareholder within 3 days of receiving the RVF and the documents if the received documents are sufficient for the vote to be considered valid, or the procedures and deadlines for any rectification or resubmission, if necessary. If necessary, the rectification or resubmission of the voting form must also be made up to 7 days before the date of the EGM, that is, until 09/07/2023 (including).
Postal and e-mail address to send the distance voting ballot, if the shareholder chooses to deliver the document directly to the company / Instructions for meetings that allow electronic system’s participation, when that is the case.

Electronic: ri@sinqia.com.br (Subject: “RVF EGM SEPT 2023”)
Indication of the institution hired by the company to provide the registrar service of securities, with name, physical and electronic address, contact person and phone number

Banco Bradesco S.A. - Departamento de Ações e Custodia
Address: Cidade de Deus, Prédio Amarelo, 2nd floor, Vila Yara, Zip Code 06029-900, Osasco/SP, Brazil E-mail: dac.escrituracao@bradesco.com.br - Telephone: 0800 701 1616
 
The shareholder may send the remote voting instructions by delivering the Form in one of the agencies of Banco Bradesco S.A. with certified copies of the identification documents: a) individual: identity and proof of Residence issued less than 90 days; b) legal entity / investment funds: bylaws / social contract / regulation, documents proving representation and identity of the representative; and c) shareholders with tax domicile abroad: in addition, documents proving the origin of the resources will be required in accordance with CMN Resolution No. 4,373 or Law 4,131 / 62 and other related legislation.

DISTANCE VOTING BALLOT
 
Extraordinary General Meeting (EGM) - SINQIA S.A. to be held on 09/14/2023
 
Resolutions concerning the Extraordinary General Meeting (EGM)
[Eligible tickers in this resolution: SQIA3]

1. To examine, discuss and resolve on the “Protocolo e Justificação de Incorporação de Ações de Emissão da Sinqia S.A. pela Evertec Brasil Informática S.A.” (“Protocol”) and on the merger of shares issued by the Company into Evertec Brasil Informática S.A. (“Evertec BR”) (“Merger of Shares”) upon the delivery, to the Companys shareholders, of class A preferred shares and class B preferred shares issued by Evertec BR, automatically redeemable upon delivery, as consideration, of a cash installment and Level I Brazilian Depositary Receipts (BDRs) backed by common shares issued by Evertec, Inc. (Evertec Inc), under the terms and conditions set forth in the Protocol, hereby authorizing the Companys Officers to adopt all the necessary measures to implement the resolutions that may be approved at the EGM;
 
☐ Approve ☐ Reject ☐ Abstain
[Eligible tickers in this resolution: SQIA3]

2. To resolve on the waiver of Evertec BR’s obligation to join the Novo Mercado segment of B3
S.A. - Brasil, Bolsa, Balcão (“Novo Mercado”) due to the Merger of Shares, pursuant to Article 46, Sole Paragraph, of the Novo Mercado Regulation;
 
☐ Approve ☐ Reject ☐ Abstain
[Eligible tickers in this resolution: SQIA3]

3. To resolve on the termination of Sinqia’s Stock Concession Plan, immediately after the delivery of the shares covered by such plan to its beneficiaries.
 
☐ Approve ☐ Reject ☐ Abstain
 
City :
  
 
Date :
  
 
Signature :
  
 
Shareholder’s Name :
  
 
Phone Number :
  


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