Brazil's Locaweb reports adjusted profit of BRL 25.6 million in Q3, but acquisitions put pressure on margin

The company's net operating revenue jumped 65.7%, but operating costs and expenses rose 89.6%, with part of this increase related to acquisitions made by the firm

Fernando Cirne, Locaweb's CEO. Photo: Courtesy/Locaweb
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  • Locaweb reported Wednesday adjusted net income of BRL 25.6 million;
  • Locaweb is now one of the largest buyers of companies in the country.

Brazil’s tech company Locaweb reported on Wednesday adjusted net income of BRL 25.6 million, almost double the result recorded a year earlier, with strong revenue growth, but acquisitions pressured the margins of the company specializing in web hosting and cloud computing.

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It is worth remembering that Locaweb is now one of the largest buyers of companies in the country: after raising BRL 575 million in its IPO, made 17 acquisitions in recent months, according to data from the platform Sling Hub.

The company’s net operating revenues jumped 65.7%, to BRL 209.1 million, with the Commerce segment – which considers revenues from Tray, Tray Corp, Best Shipping, Vindi, Ideris, Samurai, Dooca, Credisfera, Bling, Bagy, and Octadesk – soaring 162.2%, to R$105.6 million.

The costs and operating expenses of Locaweb, in turn, rose 89.6% year on year, with part of this evolution related to the acquisitions made by the company, in addition to marketing expenses mainly in Tray.

The result measured by Ebitda (earnings before interest, taxes, depreciation, and amortization) shrunk 6.1% to R$ 33.6 million, with a fall of 12.3 percentage points in the margin to 16%.

READ ALSO: Brazil-based ZAK, a SaaS startup for restaurants, raises $15 million from Tiger Global

The company linked the margin performance “to the consolidation of the results of the acquired companies, which have lower Ebitda margins than those presented in the group”.

Acquisition marathon

In recent months, Locaweb has been quite active. In the social commerce area, the company announced the incorporation of an e-commerce platform focused on social commerce Bagy, as well as Octadesk, a SaaS platform that helps companies engage with customers.

It also debuted in the ERP market with the dual acquisition of Bling for BRL 524.3 million and Pagcerto for an undisclosed amount. The “acquisition marathon” still counts with the companies Social Miner, Etus, Vindi, Melhor Envio, Connectplug, Samurai, Credisfera, and Dooca Commerce and, more recently, Squid.

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