LINX S.A. due diligence report.

Oto Suvari
5 min readJan 26, 2020


Hatchworks has conducted due diligence on LINX S.A., a Brazil-based company primarily engaged in the software development sector. The Company provides products, services and solutions for business optimization, as well as tools for the e-commerce market.

LINX S.A. specializes in technology solutions for retail and wholesale activities in such segments as apparel, gifts, building material, supermarkets, pharmacies and electronics, among others. Headquartered in São Paulo, Brazil, LINX S.A. is listed on the New York Stock Exchange under the symbol ‘’LINX’’.

Financials — LINX S.A.

LINX S.A’s current market cap is $6.7B and stock price is around $8.88.

With a predicted net-income growth of 41% for 2020E and 2021E, and a net income estimate for 2021E of in excess of $165M, this points to a P/E ratio of 41.5x.

The revenue/sales forecast is $923M for 2020E, indicating an EV/Sales ratio of 6.58x.

In terms of profitability, an operating margin of 13% is predicted for 2020E. This is lower than competitors such as Avast (AVST), for example, who has a strong operating margin of 52% for 2020E.

LINX S.A. (LINX) is a yielding equity with a low yield of 0.62% for 2020E.

The latest quarter results show that LINX S.A. (LINX) had an adjusted EBITDA increase of 13.1% year-on-year and a 13.7% year-on-year increase in subscription revenues. Also, it’s worth noting that the subscription revenue represents 80% of gross revenues.

These results also highlighted that the cross selling of financial services (Linx Pay Hub) and Linx Digital, both natively integrated with their end-to-end platform, remained the Company’s main growth driver, partially offsetting the net stores closures in their customer base due to the current macro-economic situation in Brazil. Linx Digital and Linx Pay Hub accounted for approximately 12% of total recurring revenue. This is due to the acquisition of Millennium which was allocated as part of Linx Core, increasing its representativeness in subscription revenue.

Latest news shows that LINX S.A. (LINX) recently signed 4 new partnerships, namely:

  • Magalu: This partnership will allow Magalu´s marketplace sellers to use their own physical stores as a delivery option for their products sold on the company’s platform. In order to have access to this delivery model, the marketplace seller must be a Linx OMNI OMS (Order Management System) user.
  • B2W: Comprises brands like, Submarino and Shoptime to integrate Linx’s OMNI OMS (Order Management System) with B2W´s Marketplace.
  • PicPay: One of the largest payment apps in Brazil, for integration with QR Linx. QR Linx acts as a wallet hub by centralizing all payment platforms in one engine. This way, the retailer will have access to integrated reconciliation and financial processes in one interface, without having a QR code on the counter for each digital wallet.
  • Rappi: This partnership will expand product offerings and give users the ability to purchase through the super app. Companies like Nike, Centauro, Boticário, Drogaria São Paulo, Hering, Alpargatas, Vivara, Lojas Marisa, TokStok, RiHappy, Inbrands and Restoque are among the users that could use this.

According to our analysis, LINX S.A. is high risk due to a combination of factors, such as a relatively high P/E ratio of 41.5x, a modest debt position of 1.41x (based on the latest quarterly results) and a low yield of 0.62%. Combine that with the uncertain macro-economic situation in Brazil, Hatchworks has decided not to take a position at this stage.

The Hatchscore is 5 out of 10. Full details can be found on Hatchnet:

What is Linx S.A.?

LINX S.A. offers its customers an integrated business management system that covers the entire retail chain, starting from business automation software, which perform all necessary operations from the point of sale (POS), until the full Enterprise resource planning (ERP), which includes, among other features, inventory management, customer relationship management, financial management, management of products lifecycle and supply management. Additionally, the Company provides customization, training and other services related to its products.

Big Investors:

  • BlackRock Advisors LLC.
  • GIC Pte Ltd. (Investment Management).
  • Genesis Investment Management LLP.
  • McKinley Capital Management LLC.

Advisors and Bookrunners:

  • Goldman Sachs & Co. LLC
  • Morgan Stanley.
  • Jefferies.
  • BofA Merrill Lynch.
  • Itau BBA.

What are the risks?

  • Brazilian economic and political conditions and perceptions of these conditions in the international market have a direct impact on LINX S.A. business that could materially adversely affect their results of operations and financial condition.
  • LINX S.A. is substantially dependent on revenue generated from services related to their integrated enterprise management software, including monthly subscription fees.
  • The software industry is highly competitive and LINX S.A. may be unable to compete effectively.
  • A failure to protect personal data may materially adversely affect LINX S.A. business.


  • Sogou Inc. (SOGO)
  • Chegg, Inc. (CHGG)
  • Avast. (AVST)
  • Appen Ltd. (APX)

Management team:

  • Nércio José Monteiro Fernandes: Chairman.
  • Alberto Menache: CEO.
  • Antonio Ramatis Fernandes Rodrigues: CFO.

The Hatchwork Team

The forecast figures are based on the data of, and not from hatchworks:

Legal Disclaimer — This report summary has been generated as a result of Hatchworks’ proprietary company vetting and filtering system. The level of due diligence conducted on investible assets conducted ranges from mediocre to significant, the latter being the case where Hatchworks has explicitly taken strategic positions in. By no means is the information in this file to be relied on as investment advice; this includes Hatchworks’ algorithmic composite score known as ‘Hatchscore’. Hatchworks has not received any compensation for this research. For more information you can reach us at This report is not for distribution in the United States of America. It is closed to U.S citizens. If you are a U.S. citizen, you should delete this report or return to sender.



Oto Suvari

Heading up the group’s R&D activities for Hatchworks.