Business combinations (Tables)

12 Months Ended

Dec. 31, 2021

Business Combinations [Abstract]

Schedule of Business Combinations

Financial position of the business acquired

The net assets acquired, at fair value, on the date of the business combination, and the goodwill amount originated in the transaction are presented below.

Fair value	SimplesVet (as of April 01, 2021) (*)	VHSYS (as of April 01, 2021) (*)	Linx (as of July 01, 2021) (*)	Collact (as of July 31, 2021) (*)	Trampolin (as of July 31, 2021) (*)	Total
Cash and cash equivalents	11,107	13,731	41,618	38	294	66,788
Short-term investments	—	—	431,444	—	—	431,444
Accounts receivable from card issuers	—	—	349,471	—	—	349,471
Trade accounts receivable (a)	96	351	212,567	29	130	213,173
Recoverable taxes	—	—	43,927	—	—	43,927
Prepaid expenses	—	—	4,735	—	—	4,735
Deferred tax assets (b)	—	—	47,362	—	—	47,362
Property and equipment (c)	179	2,232	200,420	389	9	203,229
Intangible assets	—	2,522	56,917	—	—	59,439
Intangible assets - Customer relationship (c)	15,924	6,134	1,471,741	—	—	1,493,799
Intangible assets - Software (c)	2,807	14,583	340,780	11,634	7,874	377,678
Intangible assets - Trademarks and patents (c)	—	—	214,578	774	—	215,352
Other assets	137	109	77,367	322	2	77,937
Total assets	30,250	39,662	3,492,927	13,186	8,309	3,584,334
Accounts payable to clients	—	—	332,902	—	—	332,902
Trade accounts payable	106	3,515	107,205	261	—	111,087
Loans and financing	—	1,525	346,151	—	—	347,676
Labor and social security liabilities	566	2,019	85,829	852	—	89,266
Taxes payable	—	—	34,635	10	—	34,645
Deferred tax liabilities (c)	6,369	7,044	608,749	4,219	2,677	629,058
Provision for contingencies (b)	—	—	164,259	—	—	164,259
Other liabilities	843	177	111,233	902	125	113,280
Total liabilities	7,884	14,280	1,790,963	6,244	2,802	1,822,173
Net assets and liabilities	22,366	25,382	1,701,964	6,942	5,507	1,762,161
Consideration paid (Note 29.1.3)	39,583	55,411	6,737,900	14,116	24,993	6,872,003
Goodwill	17,217	30,029	5,035,936	7,174	19,486	5,109,842

(*)   Identification and measurement of assets acquired, liabilities assumed, consideration transferred, and goodwill are preliminary.

(a)   The gross contractual amounts for Linx is R$225,185. For the others acquirees the differences between gross and net amounts are not material.

(b)   A provision for contingent liabilities at fair value of R$164,259 was recognized on a preliminary basis at the acquisition date resulting from civil, labor and tax claims against Linx. The claims are subject to legal arbitration and to the Group’s re-assessment at the end of each reporting period, based on the expected probable outcome (see Note 19). The Group reviewed all the other liabilities at fair value and the effects of the measurement of these liabilities at fair value is not material. As result of the remeasurement of the provision for contingencies and other liabilities at fair value, the Group recognized the respective deferred tax asset.

(c)   The Company carried out an assessment of fair value of the assets acquired in the business combination, having identified customer relationship, trademarks and patents, and software as intangible assets. Details on the methods and assumptions adopted for evaluate these assets are described on Note 29.1.2. Additionally, the Group reviewed the fair value of all other assets previously recognized by the acquirees, recognizing an increase of R$20,297 in the property and equipment by the Linx acquisition, originated from the difference between the fair value and the carrying amount of this asset. As result of the remeasurement of the intangible assets and the property and equipment at fair value, the Group recognized the respective deferred tax liability.

The net assets acquired, at fair value, on the date of the business combination, and the goodwill amount originated in the transaction considering the preliminary and the final assessments are presented below.

29.2.1.1.    MLabs

Fair value	Preliminary amounts	Adjustments	Final amounts
Cash and cash equivalents	9,406	—	9,406
Trade accounts receivable	944	—	944
Property and equipment	1,695	—	1,695
Intangible asset - Customer relationship (a)	2,750	12,294	15,044
Deferred tax assets	—	1,562	1,562
Other assets	15,610	—	15,610
Total assets	30,405	13,856	44,261
Trade accounts payable	146	—	146
Labor and social security liabilities	980	142	1,122
Taxes payable	—	209	209
Deferred tax liabilities	935	4,180	5,115
Other liabilities	1,475	4,242	5,717
Total liabilities	3,536	8,773	12,309
Net assets and liabilities (b)	26,869	5,083	31,952
Consideration paid (Note 29.2.3.1)	69,636	(1,757)	67,879
Goodwill	42,767	(6,840)	35,927

(a)  The Company carried out an assessment of fair value of the assets acquired in the business combination, having identified Customer relationship as intangible asset. Details on the methods and assumptions adopted for evaluate these assets are described on Note 29.2.2.

(b)   The net assets recognized in the December 31, 2020 financial statements were based on a provisional assessment of their fair value while the Group sought an independent valuation for the intangible assets owned by MLabs. The valuation had not been completed by the date the 2020 financial statements were approved for issue by the Board of Directors. In the third quarter of 2021, the valuation was completed.

29.2.1.2.    Questor

Fair value	Preliminary amounts	Adjustments	Final amounts
Cash and cash equivalents	4,354	(12)	4,342
Trade accounts receivable	1,664	732	2,396
Property and equipment	1,575	393	1,968
Intangible asset	1,119	(1,119)	—
Intangible asset - Customer relationship (a)	23,649	(17,773)	5,876
Intangible asset - Software (a)	4,437	47,653	52,090
Intangible asset - Trademarks and patents (a)	—	5,734	5,734
Other assets	11,539	(498)	11,041
Total assets	48,337	35,110	83,447
Trade accounts payable	47	745	792
Labor and social security liabilities	2,822	—	2,822
Taxes payable	—	582	582
Deferred tax liabilities	9,549	12,109	21,658
Provision for contingencies (b)	—	7,040	7,040
Other liabilities	3,482	(1,831)	1,651
Total liabilities	15,900	18,645	34,545
Net assets and liabilities (c)	32,437	16,465	48,902
Consideration paid (Note 29.2.3.2)	58,324	7,303	65,627
Goodwill	25,887	(9,162)	16,725

(a)  The Company carried out an assessment of fair value of the assets acquired in the business combination, having identified Customer relationship, Software, and Trademarks and patents as intangible assets. Details on the methods and assumptions adopted for evaluate these assets are described on Note 29.2.2.

(b)   A provision for contingent liabilities at fair value of R$7,040 was recognized at the acquisition date resulting from tax claims against Questor. The claims are subject to legal arbitration and to the Group's re-assessment at the end of each reporting period, based on the expected probable outcome. The subsequent changes will be recognized in profit or loss.

(c)   The net assets recognized in the December 31, 2020 financial statements were based on a provisional assessment of their fair value while the Group sought an independent valuation for the intangible assets owned by Questor. The valuation had not been completed by the date the 2020 financial statements were approved for issue by the Board of Directors. In the third quarter of 2021, the valuation was completed.

29.2.1.3.    Sponte

Fair value	Preliminary amounts	Adjustments	Final amounts
Cash and cash equivalents	1,487	(592)	895
Trade accounts receivable	824	2,665	3,489
Property and equipment	811	9	820
Intangible asset	9	(9)	—
Intangible asset - Customer relationship (a)	8,784	6,606	15,390
Intangible asset - Software (a)	—	10,354	10,354
Intangible asset - Trademarks and patents (a)	—	6,632	6,632
Other assets	681	—	681
Total assets	12,596	25,665	38,261
Trade accounts payable	93	11	104
Labor and social security liabilities	2,069	—	2,069
Taxes payable	—	285	285
Deferred tax liabilities	2,987	8,021	11,008
Other liabilities	2,173	(299)	1,874
Total liabilities	7,322	8,018	15,340
Net assets and liabilities (b)	5,274	17,647	22,921
Consideration paid (Note 29.2.3.3)	80,553	8,568	89,121
Goodwill	75,279	(9,079)	66,200

(a) The Company carried out an assessment of fair value of the assets acquired in the business combination, having identified Customer relationship, Software, and Trademarks and patents as intangible assets. Details on the methods and assumptions adopted for evaluate these assets are described on Note 29.2.2.

(b)   The net assets recognized in the December 31, 2020 financial statements were based on a provisional assessment of their fair value while the Group sought an independent valuation for the intangible assets owned by Sponte. The valuation had not been completed by the date the 2020 financial statements were approved for issue by the Board of Directors. In the third quarter of 2021, the valuation was completed.

29.2.1.4.    Creditinfo Caribbean

Fair value	Preliminary amounts	Adjustments	Final amounts
Cash and cash equivalents	9,494	—	9,494
Trade accounts receivable	2,181	1,707	3,888
Property and equipment	800	—	800
Intangible asset	3,669	—	3,669
Intangible asset - Customer relationship (a)	7,285	(2,953)	4,332
Intangible asset - Exclusivity right (a)	38,827	(38,827)	—
Intangible asset - Software (a)	—	46,385	46,385
Intangible asset - Operating license (a)	—	7,121	7,121
Deferred tax assets	1,531	39	1,570
Other assets	1,908	(1,707)	201
Total assets	65,695	11,765	77,460
Trade accounts payable	2,334	(30)	2,304
Labor and social security liabilities	23	—	23
Taxes payable	—	222	222
Other liabilities	319	(154)	165
Total liabilities	2,676	38	2,714
Net assets and liabilities (b)	63,019	11,727	74,746
Consideration paid (Note 29.2.3.4)	102,868	(3,000)	99,868
Goodwill	39,849	(14,727)	25,122

(a)  The Company carried out an assessment of fair value of the assets acquired in the business combination, having identified Customer relationship, Software and Operating license as intangible assets. Operating license refers to the right conceded by the local government authority for Creditinfo Caribbean operate in Jamaica and Guyana. Details on the methods and assumptions adopted for evaluate these assets are described on Note 29.2.2.

(b)   The net assets recognized in the December 31, 2020 financial statements were based on a provisional assessment of their fair value while the Group sought an independent valuation for the intangible assets owned by Creditinfo Caribbean. The valuation had not been completed by the date the 2020 financial statements were approved for issue by the Board of Directors. In the fourth quarter of 2021, the valuation was completed.

Schedule of Intangible Assets

The assumptions adopted to measure the fair value of intangible assets identified in the business combination are described below, as well as whether the assessment is preliminary or final.

Customer relationship

	SimplesVet		VHSYS		Linx
Amount	$	15,924	$	6,134	$	1,471,741
Method of evaluation	MEEM (*)		MEEM (*)		MEEM (*)
Estimated useful life (a)	7 years		4 years		31 years and 6 months to 34 years and 6 months
Discount rate (b)	16%		16%		10.3%
Source of information	Acquirer’s management internal projections		Acquirer’s management internal projections		Acquirer’s management internal projections
Assessment status	Preliminary		Preliminary		Preliminary

(*)   Multi-Period Excess Earnings Method (“MEEM”)

(a)   Useful lives were estimated based on internal benchmarks. In the case of Linx useful life considers the observed behaviour of Linx customers who historically present a very low level of churn. The asset was measured for each of the Linx subsidiaries and for this reason the useful life is variable.

(b)  Discount rate used was equivalent to the weighted average cost of capital combined with the sector’s risk.

Software

	SimplesVet	VHSYS	Linx	Collact	Trampolin
Amount	2,807	14,583	340,780	11,634	7,874
Method of evaluation	Replacement cost	Replacement cost	Relief from royalties	Replacement cost	Replacement cost
Estimated useful life (a)	5 years	5 years	4 years to 10 years	4 years	5 years
Discount rate (b)	15.6%	15.6%	10.3%	18.0%	18.0%
Source of information	Historical data	Historical data	Acquirer’s management internal projections	Historical data	Historical data
Assessment status	Preliminary	Preliminary	Preliminary	Preliminary	Preliminary

(a)   Useful lives were estimated based on internal benchmarks. The asset was measured for each of the Linx subsidiaries and for this reason the useful life is variable.

(b)  Discount rate used was equivalent to the weighted average cost of capital combined with the sector’s risk.

Trademark and patents

	Linx	Collact
Amount	214,578,000	774
Method of evaluation	Relief from royalties	Relief from royalties
Estimated useful life (a)	Indefinite	25 years
Discount rate (b)	10.3%	18.0%
Source of information	Acquirer’s management internal projections	Acquirer’s management internal projections
Assessment status	Preliminary	Preliminary

(a)   Useful lives were estimated based on internal benchmarks.

(b)  Discount rate used was equivalent to the weighted average cost of capital combined with the sector’s risk.

The assumptions adopted to measure the fair value of intangible assets identified in the business combination are described below.

Customer relationship

	MLabs	Questor	Sponte	Creditinfo Caribbean
Amount	15,044	5,876	15,390	4,332
Method of evaluation	Replacement cost	MEEM (*)	MEEM (*)	Replacement cost
Estimated useful life (a)	1 year and 7 months	13 years and 3 months	14 years and 2 months	6 months to 2 years and 10 months
Discount rate (b)	16.6%	17.2%	14.5%	14.3%
Source of information	Acquirer’s management internal projections	Acquirer’s management internal projections	Acquirer’s management internal projections	Acquirer’s management internal projections

(*)   Multi-Period Excess Earnings Method (“MEEM”)

(a)   Useful lives were estimated based on internal benchmarks. The asset was measured for each of the Creditinfo Caribbean companies and for this reason the useful life is variable.

(b)   Discount rate used was equivalent to the weighted average cost of capital combined with the sector’s risk.

Software

	Questor	Sponte	Creditinfo Caribbean
Amount	52,090	10,354	46,385
Method of evaluation	Replacement cost	Replacement cost	MEEM (*)
Estimated useful life (a)	10 years	10 years	7 years
Discount rate (b)	18.2%	15.5%	15.3%
Source of information	Historical data	Estimated costs	Estimated costs

(*)	Multi-Period Excess Earnings Method (“MEEM”)
(a)	Useful lives were estimated based on internal benchmarks.
(b)	Discount rate used was equivalent to the weighted average cost of capital combined with the sector’s risk.

Trademark and patents

	Questor	Sponte
Amount	5,734	6,632
Method of evaluation	Relief from royalties	Relief from royalties
Estimated useful life (a)	Indefinite	Indefinite
Discount rate (b)	18.2%	15.5%
Source of information	Acquirer’s management internal projections	Acquirer’s management internal projections

(a)	Useful lives were estimated based on internal benchmarks.
(b)	Discount rate used was equivalent to the weighted average cost of capital combined with the sector’s risk.

Operating license

	Creditinfo Caribbean
Amount	7,121
Method of evaluation	Replacement cost
Estimated useful life (a)	4 months to 1 year and 6 months
Discount rate (b)	14.3%
Source of information	Historical data

(a)	Useful lives were estimated based on internal benchmarks. The asset was measured for each of the Creditinfo Caribbean companies and for this reason the useful life is variable.
(b)	Discount rate used was equivalent to the weighted average cost of capital combined with the sector’s risk.

Schedule of Fair Value of Consideration Paid

The fair value of the consideration paid on the business combination were as follows:

	SimplesVet	VHSYS	Linx	Collact	Trampolin	Total
Cash consideration paid to the selling shareholders	15,650	18,656	4,752,811	3,173	13,402	4,803,692
Cash consideration to be paid to the selling shareholders	5,750	—	—	167	—	5,917
Previously held equity interest in the acquiree, at fair value (a)	—	24,064	1,335,603	3,529	—	1,363,196
Shares of the Company issued to selling shareholders	—	—	618,514	—	—	618,514
Shares of the Company to be issued to the selling shareholders	—	—	—	—	9,897	9,897
Loans converted into shares	—	—	—	5,247	—	5,247
Non-controlling interest in the acquiree (b)	11,183	12,691	—	—	—	23,874
Contingent consideration (c)	7,000	—	30,972	2,000	1,694	41,666
Total	39,583	55,411	6,737,900	14,116	24,993	6,872,003

(a)   Refers to the acquiree’s shares previously acquired in stock market or from the selling shareholders.

As a result of the step acquisition of VHSYS, the Group recognized a gain of R$12,010 by the difference between the previously held 33.33% interest in VHSYS, at fair value, in the amount of R$24,064, and its carrying amount, of R$12,054.

As a result of the step acquisition of Collact, the Group recognized a gain of R$3,838 by the difference between the previously held 25% interest in Collact, at fair value, in the amount of R$3,529, and its carrying amount, of R$(309).

(b)  The Group has elected to measure the non-controlling interests in the acquiree using the present ownership instruments’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets.

(c)  SimplesVet’s contingent consideration will be transferred to the selling shareholders after the closing of the 2022 fiscal year and is determined based on predetermined formulas mainly based in the amount of revenue and profitability that the acquired company will have at the end of 2022.

Collact’s contingent consideration is related to revenue performance in 2021 fiscal year and will be paid to selling shareholders in 2022.

Trampolin’s contingent consideration will be paid to selling shareholders if the performance obligations related to revenue and number of active customers specified in the investment agreement are met within the next 36 months from the date of acquisition of the business.

Regarding Linx acquisition, the amount of R$30,972 refers to share-based payments that may be paid in the next months.

The fair value of the consideration paid on the business combination were as follows.

29.2.3.1.    MLabs

	Preliminary amounts	Adjustments	Final amounts
Cash consideration paid to the selling shareholders in 2020	37,371	(98)	37,273
Cash consideration to be paid to the selling shareholders after 2020	15,110	—	15,110
Non-controlling interest in the acquiree (a)	13,031	2,465	15,496
Contingent consideration (b)	4,124	(4,124)	—
Total	69,636	(1,757)	67,879

(a)

The Group has elected to measure the non-controlling interests in the acquiree using the present ownership instruments’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets. The adjustment refers to the effect of non-controlling shareholders interest on the change in the value of net assets acquired as result of final assessment.

(b)

MLab’s contingent consideration will be paid to the selling shareholders after the closing of the 2022 fiscal year and is determined based on predetermined formulas mainly based in the amount of revenue that the acquired company will have at the end of 2022. The contingent consideration is limited to R$11,741. The adjustment refers to changes in the Group’s projections regarding MLab’s revenue for 2022 fiscal year.

29.2.3.2.    Questor

	Preliminary amounts	Adjustments	Final amounts
Cash consideration paid to the selling shareholders in 2020	46,296	—	46,296
Cash consideration to be paid to the selling shareholders after 2020	3,031	—	3,031
Non-controlling interest in the acquiree (a)	16,218	8,233	24,451
Call option in the acquiree (b)	(10,891)	(10)	(10,901)
Contingent consideration (c)	3,670	(920)	2,750
Total	58,324	7,303	65,627

(a)	The Group has elected to measure the non-controlling interests in the acquiree using the present ownership instruments’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets. The adjustment refers to the effect of non-controlling shareholders interest on the change in the value of net assets acquired as result of final assessment.
(b)	The option has been evaluated in accordance with pre-determined formulas and was recorded in the consolidated statement of financial position as Derivative financial instruments. R$10,901 represents the final evaluate on acquisition date. This value is periodically recalculated, being subject to increase or decrease, and as of December 31, 2021 is included in the amount of R$9,044 mentioned in Note 2.1.
(c)	Questor’s contingent consideration will be paid to the selling shareholders after the closing of the 2021 fiscal year and is determined based on predetermined formulas mainly based in the amount of revenue, number of new clients and profit margin that Questor will have at the end of 2021.

29.2.3.3.    Sponte

	Preliminary amounts	Adjustments	Final amounts
Cash consideration paid to the selling shareholders in 2020	56,500	—	56,500
Cash consideration to be paid to the selling shareholders after 2020	6,500	—	6,500
Non-controlling interest in the acquiree (a)	527	1,765	2,292
Contingent consideration (b)	17,026	6,803	23,829
Total	80,553	8,568	89,121

(a)	The Group has elected to measure the non-controlling interests in the acquiree using the present ownership instruments’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets. The adjustment refers to the effect of non-controlling shareholders interest on the change in the value of net assets acquired as result of final assessment.
(b)	Sponte’s contingent consideration will be paid to the selling shareholders after the closing of the 2023 fiscal year and is determined based on predetermined formulas mainly based in the amount of revenue that Sponte will have at the end of 2023. The contingent consideration is limited to R$31,500.

29.2.3.4.    Creditinfo Caribbean

	Preliminary amounts	Adjustments	Final amounts
Cash consideration paid to the selling shareholders in 2020	73,281	—	73,281
Obligation related to the source code acquisition (a)	—	5,015	5,015
Non-controlling interest in the acquiree (b)	29,587	5,506	35,093
Call option in the acquiree (c)	—	(13,521)	(13,521)
Total	102,868	(3,000)	99,868

(a)    The obligation refers to an option of the Company to acquire the source code for the Credit Bureau System of the Creditinfo Caribbean for permanently use in Guyana, Caribbean or Brazil, becoming independent from Creditinfo Group HF. (seller shareholder). The Group has until 7 years starting from the acquisition date to exercise this option to obtain the definitive right over the software.

(b)     The Group has elected to measure the non-controlling interests in the acquiree using the present ownership instruments’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets. The adjustment refers to the effect of non-controlling shareholders interest on the change in the value of net assets acquired as result of final assessment.

(c)   The option has been evaluated in accordance with pre-determined formulas and was recorded in the consolidated statement of financial position as Derivative financial instruments. R$13,521 represents the final evaluate on acquisition date. This value is periodically recalculated, being subject to increase or decrease, and as of December 31, 2021 is included in the amount of R$9,044 mentioned in the Note 2.1.

Total Revenue and Net Income on a Pro-Forma Basis

The combined statement of profit or loss from the acquisition date through December 31, 2021 for all companies acquired in 2021, is presented below:

	2021
Net revenue from transaction activities and other services	61,007
Net revenue from subscription services and equipment rental	486,846
Financial income	14,273
Other financial income	748
Total revenue and income	562,874
Cost of services	(315,089)
Administrative expenses	(139,182)
Selling expenses	(107,308)
Financial expenses, net	(33,242)
Other income (expenses), net	(26,655)
	(621,476)
Loss before income taxes	(58,602)
Current income tax and social contribution	(7,922)
Deferred income tax and social contribution	5,833
Loss for the period	(60,691)

Total revenue and net income for the Group is presented below on a pro-forma basis assuming the acquisitions occurred at the beginning of the year of each acquisition:

	2021
Pro-forma total revenue and income	5,313,515
Pro-forma net income	(1,517,682)