F-1 1 a2238917zf-1.htm F-1

Table of Contents

As filed with the Securities and Exchange Commission on May 29, 2019.

Registration No. 333-              

 

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



FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Linx S.A.
(Exact Name of Registrant as Specified in its Charter)



Brazil
(State or other jurisdiction of
incorporation or organization)
  7372
(Primary Standard Industrial
Classification Code Number)
  N/A
(I.R.S. Employer
Identification Number)



Avenida Doutora Ruth Cardoso, 7,221
São Paulo — SP, 05425-902, Brazil
+55 (11) 2103-1575

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)



Cogency Global Inc.
10 East 40th Street, 10th Floor
New York, NY 10016
(212) 947-7200

(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Donald Baker, Esq.
John Guzman, Esq.
White & Case LLP
Avenida Brigadeiro Faria Lima, 2,277 — 4th Floor
São Paulo — SP 01452-000, Brazil
+55 (11) 3147-5600

 

Grenfel S. Calheiros, Esq.
Simpson Thacher & Bartlett LLP
Av. Presidente Juscelino Kubitschek, 1455 — 12th Floor
São Paulo — SP 04543-011, Brazil
+55 (11) 3546-1000



Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.

             If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

             If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

             If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

             If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

             Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

             Emerging growth company    ý

             If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.    o



CALCULATION OF REGISTRATION FEE

       
 

Title of Each Class of Securities
to be Registered

  Proposed Maximum
Aggregate Offering
Price(2)(3)
  Amount of
Registration Fee
 

Common shares including in the form of ADSs without par value(1)(2)

  US$100,000,000.00   US$12,120.00

 

(1)
Includes common shares (including in the form of ADSs) that are issuable upon the exercise of the underwriters' option to purchase additional shares. Also includes common shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public. These common shares are not being registered for the purpose of sales outside the United States.

(2)
American depositary shares issuable upon deposit of common shares registered hereby will be registered under a separate registration statement on Form F-6 (Registration No. 333-           ). Each American depositary share represents         common shares.

(3)
Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933.

             The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

   


The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. We and the selling shareholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED                           , 2019

PRELIMINARY PROSPECTUS

             Common Shares

LOGO

Linx S.A.

(incorporated in the Federative Republic of Brazil)

Including Common Shares in the form of American Depositary Shares

             This is a public offering of               common shares, including in the form of American depositary shares, or the ADSs, by Linx S.A. and the selling shareholder named in this prospectus, which consists of an international offering in the United States and other countries outside of Brazil, which we refer to as the "international offering" and a concurrent offering in Brazil by way of a Brazilian prospectus in Portuguese, which we refer to as the "Brazilian offering." We refer to the international offering and the concurrent Brazilian offering as the "global offering." These common shares are being offered directly or in the form of ADSs, each of which represents               common shares. The offering of the ADSs is being underwritten by the international underwriters named in this prospectus. The common shares purchased by investors located outside Brazil will be settled in Brazil and paid for in reais, and offered by the Brazilian underwriters named elsewhere in this prospectus. The offering of the common shares is being underwritten by the Brazilian underwriters. The closings of the international offering and the Brazilian offering are conditioned upon each other. We will not receive any proceeds from the sale of our common shares, including in the form of ADSs, by the selling shareholder.

             Prior to this offering, there has been no public market for ADSs representing our common shares. We intend to apply to list the ADSs on The New York Stock Exchange, or the NYSE, under the symbol "LINX." Our common shares are listed on the Novo Mercado segment of the B3 S.A. — Brasil, Bolsa, Balcão, or the B3, under the symbol "LINX3." The closing price of our common shares on               , 2019 was R$               per common share, which is equivalent to approximately US$               based upon the exchange rate of R$               to US$1.00 reported by the Central Bank of Brazil (Banco Central do Brasil), or the Central Bank, on               , 2019, or US$             per ADS after giving effect to the             :             common share: ADS ratio. See "Market Information." The price per common share and price per ADS in this offering will be determined based on the bookbuilding process and the closing price of our common shares on the B3 on the pricing date of the global offering.

             The global offering will be registered on the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários), or the CVM.

             We are an "emerging growth company" under the U.S. federal securities laws as that term is used in the Jumpstart Our Business Startups Act of 2012 and will be subject to reduced public company reporting requirements. Investing in the ADSs involves risks. See "Risk Factors" beginning on page 18 of this prospectus.

  Per ADS   Per
Common
Share
  Total
 

Initial public offering price(1)

  US$   R$   US$  

Underwriting discounts and commissions(1)

  US$   R$   US$  

Proceeds, before expenses, to us(1)(2)

  US$   R$   US$  

Proceeds, before expenses, to the selling shareholder(1)(2)

  US$   R$   US$  

(1)
Assumes no exercise of the underwriters' option to purchase additional common shares.

(2)
See "Underwriting" for a description of all compensation payable to the underwriters.

             The international underwriters have an option for a period of 30 days from the date of this prospectus to purchase up to               additional common shares in the form of ADSs from us, minus the number of common shares sold by us pursuant to the Brazilian underwriters' option to purchase additional shares referred to below, to cover over-allotments of ADSs, if any. The Brazilian underwriters also have an option to purchase up to               additional common shares from us, minus the number of common shares in the form of ADSs sold by us pursuant to the international underwriters' option to purchase additional shares, to cover over-allotments of common shares, if any.

             Neither the U.S. Securities and Exchange Commission, the CVM nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

             Delivery of the ADSs will be made through the facilities of The Depository Trust Company, or DTC, on or about                          , 2019. Delivery of our common shares not sold in the form of ADSs will be made in Brazil through the book-entry facilities of the B3 on or about                          , 2019.



Global Coordinators

Goldman Sachs & Co. LLC

 

 

      Morgan Stanley

 

 

 

 

        Jefferies

 

 

 

 

 

 

BofA Merrill Lynch

 

 

 

 

 

 

 

 

Itaú BBA

   

The date of this prospectus is                          , 2019.


Table of Contents

GRAPHIC


TABLE OF CONTENTS



    Page
 

Presentation of Financial and Other Information

    iii  

Summary

    1  

The Offerings

    13  

Summary Financial Information

    16  

Risk Factors

    18  

Cautionary Statement Regarding Forward-Looking Statements

    47  

Use of Proceeds

    49  

Dividends and Dividend Policy

    51  

Capitalization

    54  

Dilution

    55  

Exchange Rates

    58  

Market Information

    60  

Selected Financial Information

    66  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    70  

Industry Overview

    97  

Business

    100  

Management

    134  

Principal and Selling Shareholders

    147  

Related Party Transactions

    150  

Description of Capital Stock

    151  

Description of American Depositary Shares

    165  

Common Shares Eligible for Future Sale

    174  

Taxation

    176  

Underwriting

    188  

Expenses of The Global Offering

    203  

Legal Matters

    204  

Experts

    205  

Enforcement of Judgments and Service of Process

    206  

Where You Can Find More Information

    208  

Index to Financial Statements

    F-1  



          Neither we nor the selling shareholder have authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we may have referred you. Neither we nor the selling shareholder take responsibility for, or provide assurance as to the reliability of, any other information that others may give you. Neither we and the selling shareholder nor the underwriters have authorized any other person to provide you with different or additional information. Neither we and the selling shareholder nor the underwriters are making an offer to sell the ADSs in any jurisdiction where the offer or sale is not permitted.

          You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of the ADSs. Our business, financial condition, results of operations and prospects may have changed since the date on the front cover of this prospectus.

          This offering of ADSs is being made in the United States and elsewhere solely on the basis of the information contained in this prospectus. We and the selling shareholder are also offering our common shares in Brazil using a Portuguese-language prospectus. The Brazilian prospectus, which

i


has been filed with the CVM, is in a format different from that of this prospectus and contains information not generally included in documents such as this prospectus.

          For investors outside the United States: Neither we and the selling shareholder nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction, other than the United States, where action for that purpose is required. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the ADSs and the distribution of this prospectus outside the United States and in their jurisdiction.

          No offer or sale of ADSs may be made to the public in Brazil except in circumstances that do not constitute a public offer or distribution under Brazilian laws and regulations. Any offer or sale of ADSs in Brazil to non-Brazilian residents may be made only under circumstances that do not constitute a public offer or distribution under Brazilian laws and regulations.

          We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business, including our corporate name, logos and website names. Other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners. Solely for convenience, some of the trademarks, service marks and trade names referred to in this prospectus are listed without the ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and trade names.



          Unless otherwise indicated or the context otherwise requires, all references in this prospectus to "Linx," "Linx Group" or the "Company," "we," "our," "ours," "us" or similar terms refer to Linx S.A., together with its subsidiaries. The terms "selling shareholder" and "BNDESPAR" refers to "BNDES Participações S.A.".

          The term "Brazil" refers to the Federative Republic of Brazil and the phrase "Brazilian government" refers to the federal government of Brazil. "Central Bank" refers to the Brazilian Central Bank (Banco Central do Brasil) "CMN" refers to the National Monetary Council (Conselho Monetário Nacional). References in the prospectus to "real," "reais" or "R$" refer to the Brazilian real, the official currency of Brazil and references to "U.S. dollar," "U.S. dollars" or "US$" refer to U.S. dollars, the official currency of the United States.

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Financial Information

          We maintain our books and records in reais, which is our functional currency (the currency of the primary economic environment in which we operate) as well as our presentation currency. We prepare our consolidated financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or the IASB.

          Our financial information contained in this prospectus has been derived from our consolidated financial statements as of and for the three-month periods ended March 31, 2019 and 2018 and as of and for the years ended December 31, 2018, 2017 and 2016, and the respective notes thereto, included elsewhere in this prospectus.

Currency Information

          All references herein to the "real," "reais" or "R$" are to the Brazilian real, the official currency of Brazil. All references to "U.S. dollars," "dollars" or "US$" are to U.S. dollars. Solely for the convenience of the reader, we have translated certain amounts included in "Summary Financial Information," "Capitalization," "Selected Financial Information" and elsewhere in this prospectus from reais into U.S. dollars using the selling rate as reported by the Central Bank of R$3.8967 to US$1.00 as of March 31, 2019. As a result of fluctuations in the real/U.S. dollar exchange rate, the selling rate as of March 31, 2019 may not be indicative of current or future exchange rates. The U.S. dollar equivalent information presented in this prospectus is provided solely for the convenience of investors and should not be construed as implying that the amounts in reais represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. The selling rate was R$3.8748 to US$1.00 as of December 31, 2018, R$3.3080 to US$1.00 as of December 31, 2017 and R$3.2591 to US$1.00 as of December 31, 2016 in each case, as reported by the Central Bank. See "Exchange Rates" for information regarding exchange rates for the real since January 1, 2014.

Market and Other Information

          This prospectus contains information, including statistical and other information relating to the industry in which we operate, obtained from reports prepared by independent consultants, governmental agencies and general publications of the Central Bank, the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística), or IBGE, the Brazilian Association of Credit Card and Services Companies (Associação Brasileira de Empresas de Cartões de Crédito e Serviços), or ABECS, Brazilian Association of Electronic Commerce (Associação Brasileira de Comércio Eletrônico), or ABCOMM, the Brazilian Ministry of Labor (Ministério do Trabalho) and the World Bank Group.

          Additionally, this prospectus contains information obtained from a report issued in 2018 by the International Data Corporation, or IDC, regarding media around the world, or the 2018 IDC Survey.

          We believe that such sources of information are reasonably reliable and we have no reason to believe that any of this information is inaccurate in any material respect. The underwriters have not independently verified such information and make no representation as to the accuracy or completion of such information.

Rounding

          Certain percentages and other amounts included in this prospectus have been rounded for ease of presentation. Accordingly, figures shown as totals in certain tables may not be an arithmetical aggregation of the figures that precede them.

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Special Note Regarding Non-IFRS Financial Measures

          We have disclosed EBITDA, EBITDA Margin and Net Debt in this prospectus, which are non-IFRS financial measures. Generally, a non-IFRS financial measure is a numerical measure of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with IFRS. EBITDA, EBITDA Margin and Net Debt, however, should be considered in addition to, and not as substitutes for or superior to, net income, or other measures of the financial performance prepared in accordance with IFRS. For reconciliations of EBITDA, EBITDA Margin and Net Debt, see "Selected Financial Information."

          We calculate EBITDA as net income plus: (1) net financial income (expense); (2) income tax and social contribution and (3) depreciation and amortization.

          Because our calculation of EBITDA does not consider net financial income (expense), income tax and social contribution and depreciation and amortization, EBITDA serves as an indicator of our overall financial performance, which is not affected by changes in interest rates, income or social contribution tax rates or levels of depreciation and amortization. Consequently, we believe that EBITDA, when considered in conjunction with other accounting and financial information available, serves as a comparative tool to measure our operating performance, as well as to guide certain administrative decisions. We believe that EBITDA provides the reader with a better understanding not only of our financial performance, but also on our ability to pay interest and principal on our debt and to incur additional debt to finance our capital expenditures and our working capital. We calculate EBITDA and EBITDA margin in accordance with CVM rules.

          EBITDA margin is calculated by dividing EBITDA for the period by net operating revenues for the same period.

          We calculate Net Debt as the sum of current payables for the acquisition of businesses plus non-current payables for the acquisition of businesses plus current and non-current loans and financing minus cash and cash equivalents and financial assets. We believe that Net Debt is an adequate metric for assessing our capital structure and also provides useful information to our investors, market analysts and the general public that assists in the comparison of our operating performance with that of other companies, both in our sector and in other sectors. Our management believes that our current capital structure, measured principally by our Net Debt to shareholders' equity ratio, reflects our conservative leverage. Our calculation of Net Debt may differ from the calculation of Net Debt of other companies.

          EBITDA, EBITDA Margin and Net Debt are not measures of financial performance under IFRS, generally accepted accounting principles in the United States or Brazilian GAAP and should not be considered as alternatives to net income as measures of operating performance, operating cash flows or liquidity. EBITDA, EBITDA Margin and Net Debt do not have standardized meanings, and our definitions of EBITDA, EBITDA Margin and Net Debt may not be comparable with those used by other companies. EBITDA, EBITDA Margin and Net Debt present limitations that limit their usefulness as measures of profitability, as a result of not considering certain costs arising from business, which may affect, significantly, our profits, as well as financial expenses, taxes and depreciation.

Certain Definitions

          The following is a glossary of certain defined terms used in this prospectus:

          "Customer retention rate" is the rate at which billings from existing subscribed customers at the beginning of the period continue as billings during the end of such applicable period not

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adjusted for (x) any increases or decreases in billings for pricing changes or (y) additional products or services provided to these existing subscribed customers.

          "Gross Merchandise Value" is the sum of a retailer's merchandise sales volume processed through point of sale, or POS, and electronic funds transfer, or EFT, technology.

          "Subscription revenue" comprises the monthly subscription fees we charge our customers for the right to use our software and for technology support, helpdesk services, software hosting services, support teams and connectivity services.

          "Net dollar retention rate" is the customer retention rate adjusted for (x) any increases or decreases in billings for pricing changes and (y) additional products or services provided to existing subscribed customers.

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SUMMARY

          This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in the ADSs or our common shares. Before investing in the ADSs or our common shares, you should read this entire prospectus carefully to better understand our business, corporate structure and our common shares, including the information contained in "The Offering," "Risk Factors," "Selected Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our financial statements and the corresponding notes thereto, included elsewhere in this prospectus, before making a decision to invest in the ADSs or our common shares.

Overview

          We are a leading cloud-based technology company in Latin America and a market leader in Brazil in terms of revenue. We are focused on developing and providing affordable, easy-to-use, reliable and seamlessly integrated software solutions to retailers in Latin America, through our software-as-a-service, or SaaS, business model. During 2018, our subscription revenue accounted for 86.8%, or R$680.8 million, of our gross operating revenue, an increase of 15.5% over 2017 in reais. During the three-month period ended March 31, 2019, our subscription revenue accounted for 89.1%, or R$180.5 million, of our gross operating revenue, an increase of 11.1% over the corresponding period in 2018 in reais. With a comprehensive offering of solutions, we are an end-to-end service provider that offers business management tools, payment solutions, e-commerce and omni-channel applications through an integrated and ever-evolving platform to retailers of all sizes and capabilities.

          Since our incorporation in 1985, our consumer-centric and entrepreneurial culture has been focused on innovation, agility, and building a reliable infrastructure, all of which have enabled us to adapt to our customers' needs, deliver user-friendly software solutions and services and develop a comprehensive portfolio of integrated solutions. These capabilities have contributed to our resilient and predictable operations, with subscription revenue accounting for 86.8% of our gross operating revenue in 2018 and a quarterly customer retention rate of over 99% through the year. In addition, our growth is supported by a strong track record of adding new products to our portfolio, including our most recent Linx Pay Hub integrated payment processing solution, in order to anticipate trends and adapt to changes in our market. These ongoing efforts are exemplified by the upcoming products we intend to launch in 2019, including a QR code acceptance solution at cash registers that replaces debit cards and a digital wallet for retail customers that do not want a checking account.

          As a result of our innovation capacity, ability to adapt to evolving customer needs and our cross-selling efforts, we have successfully retained and increased year-over-year the share of our services in our customers' wallet, as demonstrated in the following cohort analysis. For purposes of the following chart, we define (1) "annual cohort" as the subscription revenue generated from customers and that is added to our portfolio of customers in a given year and (2) "compound cohort growth rate" as the percentage of the subscription revenue generated by the relevant annual cohort of customers in 2018 relative to the revenue generated by the same annual cohort in the year immediately after they were added to our portfolio of customers. Compound cohort growth rates are calculated using this method to capture customer-generated revenues over a 12-month period (a full fiscal year), while also mitigating the fact that customers are added to the portfolio on different days of the year. Annual cohort revenue estimated using this metric takes into consideration both new organic customers and customers of companies that we acquire. As evidenced in the following chart, all of our annual cohorts have been kept at more than 100% of their respective initial annual revenue.

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GRAPHIC

          As result of over 30 years of operations dedicated to the retail sector in Brazil, we have developed in-depth specialized knowledge and competitive advantages that have allowed us to become the leading player in the Brazilian software market. Consequently, we achieved a 41.3% market share in 2017 in terms of revenue in the retail management software solutions segment, according to the 2018 IDC Survey. We have successfully leveraged our extensive customer base to explore cross selling opportunities, resulting in greater economies of scale, greater customer loyalty (as reflected by our high customer retention rates) and lower customer acquisition costs, translating into a hard to replicate business model with strong natural barriers against the entry of competitors.

          Throughout our history, we have adapted our operations to our customers' needs and market trends by expanding our product portfolio to offer a unique integrated platform with comprehensive solutions and leading to a compelling value proposition. For instance, in addition to Linx Core, our core product line that offers integrated business management systems, we launched Linx Digital in 2018, an e-commerce platform and application designed to improve the omni-channel shopping experience for both retailers and their customers. Through Linx Digital, retailers are able to interact with their clients and deliver a seamless experience across a variety of channels, including physical stores, mobile applications and the internet. Moreover, in 2018, we further adapted to our customers' ever-evolving needs and launched Linx Pay Hub to offer payment processing solutions integrated with our Linx Core and Linx Digital product lines. By providing mission critical services and integrated solutions to our customers, we are able to better understand their business performance preferences while further enhancing our portfolio of offerings with a comprehensive payment processing solution.

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          The graphic below illustrates our primary product lines, each of their main services and international benchmarks.

GRAPHIC

          In addition to our own organic innovation capabilities we have also increased our retail product offerings through strategic acquisitions of synergic businesses with our own operations, enabling us to further develop our product developing capabilities. From 2008 to March 31, 2019, we have completed 28 acquisitions, which we believe is a testament to our ability to identify, execute and integrate acquisitions in a consistent and disciplined manner. We believe that we are a differentiated platform with the knowledge to capitalize on consolidation opportunities in our market segment and explore new verticals as the relationship between retailers and their customers continues to evolve.

          To support our growth trajectory, we successfully completed the initial public offering of our common shares in Brazil in 2013 and rapidly became one of the country's most prominent technology companies listed on the Novo Mercado segment, the listing segment of the B3 with the highest corporate governance standards. Moreover, on September 26, 2016, we completed the follow-on public offering of our common shares, using the net proceeds from the issuance to finance strategic acquisitions in the retail software sector.

Our Product Lines

          We offer three primary product lines: Linx Core, Linx Digital and Linx Pay Hub. We initiated our operations through our Linx Core product line, and as part of our efforts to adapt to ever-evolving

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customer needs, we created our Linx Digital and, most recently, Linx Pay Hub product lines. The solutions we offer through our product lines are specially designed for our customers' value chain ERP/POS offerings with the objective of developing a fully integrated ecosystem and becoming an end-to-end service provider for retailers. We believe that these three verticals allow us to become a partner of choice to retailers by providing services that increase efficiencies, integrating digital and physical stores, while ensuring a flexible payment solution suitable for each.

Linx Core

          Our Linx Core product line provides integrated business management systems. Linx Core products cater to the entire retail chain, from business automation software that performs all necessary operations at the POS to comprehensive enterprise resource planning, or ERP, applications, which include, among other features, inventory management, customer relationship management, or CRM, tools, financial, accounting and tax management, product lifecycle management, supply management, loyalty programs, e-receipt and other interconnected features. By offering our POS as a primary product, we are able to cross-sell many of our ERP capabilities by highlighting the seamless experience they provide. As of December 31, 2018, more than 45,000 retailers used Linx Core.

          We design our Linx Core software products to enable retailers to adapt to changing business requirements through consistent innovations and frequent upgrades that provide new functionalities and support our customers' navigation of the complex Brazilian tax system as well as evolving regulatory requirements. According to the 2018 IDC Survey, spending related to software in the Brazilian retail market totaled R$2.4 billion in 2017, or 10.4% growth over 2016.

          Our software products are evolving in response to performance demands and user experiences. Furthermore, through our cloud-based infrastructure we can derive even more operating leverage as we continue to grow our services and solutions, resulting in increased margins.

          Through Linx Core, we believe that we have the capability to offer our customers simple and cost-effective solutions that meet their requirements, personalized for their size and their verticals. Our modular and cloud-based solutions efficiently serve both small, medium and large-scale enterprises as well as large multinational retail chains. We offer our customers in-depth operational knowledge and best practices across a variety of verticals, including clothing stores, vehicle dealerships, pharmacies, electronic goods and household appliances stores, department stores, home improvement stores, fast food chains and gas stations.

Linx Digital

          Our in-depth knowledge of the Brazilian retail sector also enables us to offer focused innovative, scalable and machine-learning technology, tailored to the retail market as well as e-commerce platforms, data analytics and order management system, or OMS, technology fully integrated with our ERP software.

          Our Linx Digital product line is subdivided into three categories:

    Linx Commerce:  Our e-commerce platform, which provides our customers with a seamless and personalized cross-channel solution that enables a true omni-channel shopping experience (e.g., interactive electronic catalog with information regarding inventory and prices, among other functionalities);

    Linx Impulse:  big data and machine-learning based solutions for e-commerce operations, such as search and recommendation, re-engagement and advertising. Data engineering is key to unlocking insights by combining, integrating and analyzing data focusing on driving

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      customer acquisition and loyalty. In this context, our Linx Impulse product offering is capable of analyzing consumer behavior to help our customers improve their client conversion rates by, for example, reducing the shopping cart abandon rate (which represents the rate at which shoppers select a product for purchase online but abandon the purchase prior to its consummation), personalizing campaigns to increase revenue, predicting and avoiding customer churn and lowering customer acquisition costs; and

    Linx Omni:  OMS technology, which provides our customers with an integrated tool to manage multiple distribution channels and inventories seamlessly. With this solution, a brick-and-mortar store can fulfill an order accessing the inventory of another store and deliver it to the client at home, for example, reducing stockout, improving customer experience and reducing logistics costs.

          Based on our knowledge of the retail sector, we believe that e-commerce has significant growth potential in Brazil. In addition, the e-commerce conversion rate (which represents the rate at which shoppers enter a retailer's website and ultimately purchase a product) in Brazil was only 1.4% in 2017 according to the E-commerce Radar 2017 Survey published by ABCOMM. We believe that our product and service offerings will positively impact these rates through our rapid cycle of innovation as well as our Linx Digital capabilities, including big data and machine-learning technologies, each of which form an integral part our "Linx Impulse" strategy.

Linx Pay Hub

          In October 2018, we further expanded our platform to include payment solutions through Linx Pay Hub in response to our customers' ever-evolving needs. We believe that our ability to offer payments solutions powered by a full-fledged platform allows us to explore new product verticals at lower customer acquisition costs, differentiate ourselves from other commoditized and/or non-integrated solutions and increase our client loyalty. We believe these services can also be an important source of future growth given our relevant market share in the management software retail sector, high customer retention rates and superior services. In 2017, approximately R$250 billion in Gross Merchandise Volume, or GMV, were processed in our Linx Core platform, equivalent to approximately 18.4% of the industry's total purchase volume according to ABECS. Our goal is to cross-sell and convert as many of our customers into Linx Pay Hub and capture a large share of this revenue opportunity. We are confident in our ability to execute this strategy given our product portfolio integration and compelling value proposition.

          Our Linx Pay Hub product line offers wide range of services and solutions to our merchants including mainly the following:

    EFT: a subscription-based model that is fully integrated with our POS/ERP software and provides a faster and safer way for our customers to transact with merchant acquirers and their clients. Our EFT solution has already been adopted at more than 40,000 points of sale;

    Linx Pay: Sub-acquiring services to convert our customers into our payments platform; and

    Payment split: the ability to split payments between different recipients (such as different service providers or sales channels) and perform a more efficient transaction from an operational and tax perspective.

          With the combination of our core and digital solutions and the capabilities of our payments platform, our customers are able to have a seamless experience.

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Key Financial and Operating Information

          Our revenue streams consist of (1) subscription revenue generated from monthly subscription fees we charge our customers for the right to use our software and for continuous technology support, helpdesk services, software hosting services, support teams and connectivity service and (2) consulting service revenue (installation, implementation, customization and training services). At times, we charge one-time setup fees to our smallest enterprise customers related to our subscription service. This one-time setup fee was recognized upon the commencement of the service in 2017 and 2016. Upon adoption of IFRS 15 for 2018, this one-time setup fee is deferred over the average customer life. Our subscription revenue and consulting service revenue accounted for 86.8% and 13.2% of our gross operating revenue in 2018, respectively. The table below presents certain of our key financial and operating information for the periods indicated:

    For the Three-Month     For the Year Ended  

    Period Ended March 31,     December 31,
 

    2019     2019     2018     2018     2018     2017     2016
 

    (in millions of     (in millions of     (in millions of     (in millions of R$, unless  

    U.S.$, unless     R$, unless     U.S.$, unless     otherwise indicated)  

    otherwise     otherwise     otherwise                    

    indicated)(1)     indicated)     indicated)(1)                    

Financial information:

                                           

Net operating revenues

    45.4     176.8     158.4     175.9     685.6     571.6     494.6  

Net income

    4.4     17.2     26.5     18.2     71.1     84.8     68.5  

EBITDA(2)(7)

    12.7     49.7     47.6     43.3     168.8     144.3     124.5  

EBITDA margin (%)(3)(7)

    28.1 %   28.1 %   30.1 %   24.6 %   24.6 %   25.2 %   25.2 %

Subscription revenue(4) (%)

        89.1 %   89.3 %       86.8 %   89.8 %   89.6 %

Operating information:

                                           

Customer retention rate (%)(5)

        99.2 %   99.1 %       99.1 %   97.6 %   98.7 %

Net dollar retention rate(6)

        102.3 %   101.3 %       110.3 %   106.1 %   114.8 %

Total number of customers

        46,197     45,144         45,344     45,152     43,966  

(1)
Solely for the convenience of the reader, real amounts for the year ended December 31, 2018 and for the three-month period ended March 31, 2019 have been translated into U.S. dollars at the selling rate reported by the Central Bank at March 31, 2019 of R$3.8967 to US$1.00. See "Exchange Rates" for further information on recent fluctuations in exchange rates.

(2)
We calculate EBITDA as net income plus: (1) net financial income (expense); (2) income tax and social contribution; and (3) depreciation and amortization. EBITDA is not a measure of financial performance under IFRS, generally accepted accounting principles in the United States or Brazilian GAAP and should not be considered as an alternative to net income as measures of operating performance, operating cash flows or liquidity. EBITDA does not have a standardized meaning and our definition of EBITDA may not be comparable with that used by other companies.

(3)
EBITDA margin is calculated by dividing EBITDA for the period by net operating revenues for the same period.

(4)
Subscription revenue is calculated by dividing subscription revenues by total gross operating revenue.

(5)
The rate at which billings from existing subscribed customers at the beginning of the period continue as billings during the end of such applicable period not adjusted for (x) any increases or decreases in billings for pricing changes or (y) additional products or services provided to these existing subscribed customers.

(6)
The customer retention rate adjusted for (x) any increases or decreases in billings for pricing changes and (y) additional products or services provided to existing subscribed customers.

(7)
IFRS 16, Leases was adopted effective January 1, 2019, and impacted our depreciation, interest expense and rental expense, including with respect to the line items general and administrative and cost of services. As a result of adopting IFRS 16 for the three-month period ended March 31, 2019, our EBITDA was positively impacted. See "Management's Discussion and Analysis of Financial Condition and Results of Operations — Recent Accounting Pronouncements — New standards, interpretations and amendments adopted in 2019."

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Market Opportunity

          We are positioned in large and fast-growing markets with important trends that are benefiting the growth and market opportunity for our solutions.

Large and growing digital retail market

          According to the 2018 IDC Survey, IT retail investments in Brazil totaled R$7.4 billion in 2017. Of the total invested, software accounted for 32.5%, or R$2.4 billion. Moreover, the 2018 IDC Survey indicates that retail management software investments are expected to reach R$1.6 billion by 2021 (ERP and POS) as companies continue to invest in technology and automation through software in order to adapt to the evolving formalization and digitalization of the sector.

Relatively low e-commerce penetration in Brazil and Latin America

          Both in Brazil and Latin America, e-commerce penetration is still relatively low in comparison to other countries, indicating an important path for growth.

          With our increased presence in Latin America, our total addressable market has increased as well. Brazilian and other Latin American markets are witnessing the early stages of digitalization of retail channels and payments. In terms of payments, as of 2017, the penetration of credit and debit cards in Latin America was 19% and 41%, respectively, according to the World Bank Group. While approximately R$180 billion in payments were transacted through our international platform in 2017, we believe Linx Pay Hub is in a position of advantage to expand into these new markets.

Conversion of brick-and-mortar and digital retail to omni-channel

          Consumers now dictate how, when and where to interact with retailers and their expectations continue to rise. As digital retail grows, consumers expect to be able to transact through multiple sales channels without compromising functionality or experience. To adapt to this change, retailers will likely demand more omni-channel solutions that integrate their digital and physical operations efficiently. We therefore see an opportunity to cross-sell our Linx Digital solutions to our Linx Core customers.

Automation as a solution to increasing labor costs

          Over the past 10 years, labor costs in Brazil increased significantly. The average minimum wage increased 8.7% annually between 2008 and 2018, according to the Brazilian Ministry of Labor, compared to a 2.6% increase in the retail sales volume index in Brazil over the same period, according to IBGE. As a result of payroll expenses pressuring margins, we see an increasing demand for technologies that create opportunities for merchants to improve the experience of their clients and transact simultaneously with multiple clients in multiple locations. Accordingly, we believe Linx Core and Linx Digital are solutions that are well positioned to drive scalability and productivity gains of merchants who are not yet our clients.

Consumers moving away from cash transactions

          According to ABECS, transactions using credit, debit and pre-paid cards in Brazil totaled R$1.36 trillion in 2017, an increase of 12.6% over 2016, overtaking for the first time cash transactions, which totaled R$1.31 trillion, and payments by check, which totaled R$0.8 trillion. The increase in non-cash transactions is expected to drive merchants demand for new payment solutions such as POS technology, receivables management, and integration with management systems, among others. Therefore, business models that conciliate retail management solutions and

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financial solutions, like ours, are better positioned to serve merchants and benefit from this positive environment.

Our Competitive Advantages

We have become an end-to-end technology platform for our customers

          Leveraging our Linx Core product line and the launch of our Linx Digital and Linx Pay Hub product lines in 2018, we became an end-to-end platform for technology solutions for retailers to manage their businesses and points-of-sale. Through our integrated ever-evolving Linx Core, Linx Digital and Linx Pay Hub platforms we offer business management tools, payment solutions, e-commerce and omni-channel applications to retailers of all sizes and capabilities. Moreover, our seamless and costless merchant conversion process allow us to create an expedited and compelling value proposition for our customers, based on a product offering that we believe is unmatched in the industry.

          Our integrated solutions enable us to exercise significant control over the customer experience, enhancing our ability to leverage cross selling opportunities. This competitive advantage has contributed to lower customer acquisition costs, which has in turn limited the ability of our competitors to replicate our success through strong natural barriers to entry.

Our customer-centric, entrepreneurial and innovative culture

          We built a consumer-centric and entrepreneurial culture focused on innovation, agility and reliability. Our mission is to provide the best services and innovative solutions to address ever-evolving customer needs. As a result of these core values and our mission, we believe that through our ability to adapt we are able to embed a culture of constant innovation and proximity to customers that differentiate us from our competition.

          Our drive to become the partner of choice to retailers, offer seamless experiences and foster long-term relationship with customers culminated in a virtuous cycle: the more we dedicate ourselves to our customers; the more we understand their needs; and the more rapidly we can develop and deploy integrated solutions that further strengthen our relationships.

          Our belief in this culture translates into high contract renewal rates, low churn rates and high recurring revenues that we believe will foster our stable and sustained growth, and ultimately enhance our ability to accomplish our goals.

Successful track-record of acquisitions in Brazil and Latin America

          We have extensive capabilities and a strong track record of identifying, negotiating and integrating successful acquisitions. Moreover, we have developed an integration model that we believe enables us to integrate the businesses we acquire in a timely and efficient manner. From 2008 to March 31, 2019, we successfully acquired 28 companies to add new retail verticals to our product offerings, expanding our operations into new regions in Brazil and Latin America and developing new technologies that accelerate the pace of our innovations.

Extensive, diversified and loyal customer base

          We benefit from an extensive and diversified customer base ranging from small and mid-size businesses, or SMBs, to major retail chains such as Walmart, Nike and Forever 21, among other national and international retailers of different retail segments. As of December 31, 2018, we had more than 45,000 customers. We also benefit from low customer concentration, with our largest customer accounting for only 2% of our subscription revenue in 2018, while our 100 largest customers accounted for only 26% of our subscription revenue in the same year. We believe that our high level of customer satisfaction has allowed us to achieve quarterly customer retention rates of over 99% in 2018.

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Market leader in retail software solutions

          We are the market leader in retail management software in Brazil with a 41.3% market share in 2017 in terms of revenue according to the 2018 IDC Survey. We work closely with our customers to better understand their businesses and needs. As a result of these efforts, we have developed a suite of specialized services in a fully integrated platform that we believe is difficult to replicate. In particular, our long-term presence and exclusive focus on the retail sector has allowed us to develop a set of distinctive solutions of great depth, both in terms of specific retail verticals as well as across different sizes of retailers, creating strong natural barriers against new market entrants.

Ever-evolving and comprehensive solutions for retailers

          We believe we were the first company in Brazil to introduce several innovative retail software solutions integrated to a single platform, empowering Brazilian retailers to increase automation and efficiency. For example, we introduced consistent integration of ERP and POS in the 1990s, and the consistent integration of ERP, POS, connectivity and electronic payments in 2003. We are focused on continuing to lead technology migration in Brazil, enabling retailers to adopt next-generation solutions as their business needs grow, thereby increasing demand for our cloud-based, e-commerce and mobility solutions. For example, in 2018, we launched Linx Pay Hub to offer payment processing solutions integrated with our Linx Core and Linx Digital product lines as part of our ongoing commitment to adapt to our customers' needs.

          Our comprehensive and integrated solutions address the needs of retailers from SMBs to the largest global retailers and leading franchisers in Brazil. Our solutions are scalable and modular, and are easily configurable to allow specific functions and functionalities for different verticals and sizes, with seamless integration of retail stores, branches and franchise locations. For example, our personalized solutions can include (1) ERP, consisting of sales order management, production control, inventory management, store management, logistics, financial management, accounting and tax software products, (2) POS, (3) CRM, (4) an e-commerce search bar and recommendation engine (i.e., the identification of additional products for purchase by the consumer), (5) payments and (6) omni-channel applications.

          We design our software products to evolve in response to performance demands, user experiences and regulatory requirements applicable to our customers. By offering most of our software solutions as a cloud-based infrastructure, we enable our customers to operate the latest versions of our software without the burden of heavy initial outlays and costly upgrades, while also configuring our applications in order to meet their specific business needs.

Predictable business model with a track record of growth and profitability

          In 2018, subscription revenues represented 86.8% of our gross operating revenues, compared to the three-month period ended March 31, 2019, when subscription revenues represented 89.1% of our gross operating revenues. We sell our cloud-based and on-premise solutions primarily through annual, automatically-renewable agreements pursuant to which our customers pay us a monthly fee adjusted for inflation at each renewal based on the General Market Price Index (Índice Geral de Preços do Mercado), or IGP-M, resulting in a high degree of recurrent and predictable results under a SaaS operating model. We believe that our portfolio of products, services and business model enable us to attain a high level of customer satisfaction, proven by a quarterly customer retention rate of over 99% in 2018.

          From 2016 to 2018, our net operating revenues and our EBITDA increased at a compound annual growth rate, or CAGR, of 17.7% and 16.4% in reais, respectively. During the same period, the subscription portion of our gross revenue represented an average 88.8% of our total gross operating revenue, which we believe reflects the highly transparent and predictable nature of our

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business. In addition, our EBITDA margin was 24.6% in 2018, which provides us with flexibility to continue being competitive when negotiating contracts with our customers and continue our marketing efforts to expand our new products.

Our Strategy

Expand our customer base by continuing to penetrate the relatively underserved Brazilian retail market

          We believe our business model, with its focus on retail and cloud-based software solutions for the retail sector, has the ability to generate significant value for thousands of retailers in Brazil and Latin America. As the leading provider of retail management software in Brazil in terms of market share according to the 2018 IDC Survey, we believe we are well positioned to capitalize on the increasing penetration of retail software, and we intend to further strengthen our leading market position in the region. In particular, we intend to continue to invest in our direct and indirect sales and marketing capability aimed at increasing our customer base. We believe that our cloud-based solutions allow retailers of all sizes to adopt our software solutions easily as evidenced by their option to install our solutions themselves, or with the help of our service team, depending on their specific needs. We believe that our market is still in the early stages of its development and that it has the potential to undergo rapid future growth due to the relatively low penetration of e-commerce in Brazil and Latin America.

Further expand our relationships with our existing customers through cross-selling

          We intend to further expand our relationships with our existing customers through cross-selling, responding to their evolving business needs as they continue to open new stores throughout Brazil and Latin America. We intend to capture an increasing share of our customers' IT spending by selling more sophisticated products and leveraging our integrated end-to-end platform to cross-sell other products to them. For example, in 2019, we intend to develop and launch new product offerings that build on the success of our recently-introduced Linx Pay Hub payment solutions, including a QR code acceptance solution at cash registers that replaces debit cards and a digital wallet for retail customers that do not want a checking account. We believe we have a strong suite of e-commerce and mobility products to offer our existing customers as they continue to expand their sales channels. We further believe that we are at the early stages of increasing our penetration of these complementary offerings within our existing customer base. Given our successful track record in terms of cohort retention and growth, we believe these offerings will increase our growth potential in the coming years.

Continue to innovate and expand our platform

          We intend to continue adapting and offering the market innovative solutions and enhanced functionality for our existing suite of comprehensive and integrated products.

          Our omni-channel solutions are an important example of this strategy. This set of applications was designed to provide customer transparency across different sales channels and seamless integration between front and back offices. We enable retailers to track and better understand their clients during the life cycle of their relationship in-store, online, on mobile devices and on social networks. We believe our platform enables us to capture and analyze big data regarding the behavior of our customers' clients, which, in turn, provides our customers with actionable information, leading to a higher rate of return on our customers' marketing campaigns. This new platform also allows us to develop new partnerships in exploring marketing services and social networks, among other innovative means of contact with our customers' clients, representing an

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important opportunity to accelerate our organic growth in the coming years. Our Linx Pay Hub solution complements our portfolio of solutions making us an end-to-end platform.

          As an integrated platform, our seamless consulting services (implementation, installation, customization and training services) improves our margins and also opens a growth opportunity through cross-selling, identification of future trends and development of solutions to better serve our customers.

Continue to pursue and integrate strategic acquisitions

          We intend to continue to pursue selective acquisitions that are strategically aligned and compatible with our growth strategy within the retail software and payment sectors. In this context, we target acquisitions that complement our existing solutions, focusing our strategy on expanding our vertical and technology breadth while strengthening our geographic presence.

Continue to expand our geographic footprint in Latin America

          Through our international expansion efforts, we have increased our presence in Latin America, particularly in Mexico, Argentina and Chile, where we have developed a strong client base that includes leading national and international companies in these countries. Our international expansion has been facilitated in large part by the extensive knowledge and experience we have gained in our home market as well as the strength of our brand, reputation and our market-leading position. We intend to continue to leverage these strengths to expand our geographic footprint in Latin America both organically and through strategic acquisitions that add value to our shareholders.

Recent Developments

Acquisition of Hiper Software S.A.

          On April 2, 2019, we announced our acquisition of Hiper Software S.A., or Hiper, for an aggregate purchase price of R$17.7 million, subject to the payment of additional post-closing adjustments between 2019 and 2021 in the aggregate amount of R$32.3 million upon the attainment of certain metrics including those linked to the penetration of our EFT and Linx Pay Hub solutions into Hiper's client base. We believe that our acquisition of Hiper presents an important growth opportunity.

Summary of Risk Factors

          An investment in the ADSs is subject to a number of risks, including risks relating to our business and industry, risks related to Brazil and risks related to the offering and the ADSs. The following list summarizes some, but not all, of these risks. Please read the information in the section entitled "Risk Factors" for a more thorough description of these and other risks:

    We are substantially dependent on revenue generated from services related to our integrated enterprise management software, including monthly subscription fees.

    The software industry is highly competitive and we may be unable to compete effectively.

    Our success depends on our ability to develop new products and services, integrate acquired products and services, improve our existing products and services and keep up with technological developments.

    We are subject to risks and liability relating to system failures, the non-authorized or incorrect use of third-party data used by and/or made available to our systems.

    A failure to adequately protect personal data may materially adversely affect us.

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Additional Information

          Our corporate headquarters are located at Avenida Doutora Ruth Cardoso, 7221, 7th floor, São Paulo, SP, CEP 05425-902. Our telephone number at this address is +55-11-2103-1575 and our website is www.linx.com.br.

          Investors should contact us for any inquiries through the address and telephone number of our corporate headquarters. Our principal website is www.linx.com.br. The information contained in, or accessible through our website is not incorporated into this prospectus or the registration statement of which it forms a part.

Implications of Being an Emerging Growth Company

          As a company with less than US$1.07 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

    a requirement to have only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations disclosure (although we are not relying on this exemption for purposes of this offering); and

    an exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, in the assessment of our internal control over financial reporting (although we are not relying on this exemption for purposes of this offering).

          We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we (i) have more than US$1.07 billion in annual revenue, (ii) have more than US$700 million in market value of our common shares held by non-affiliates or (iii) issue more than US$1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We have not taken advantage of any of these reduced reporting burdens in this prospectus, although we may choose to do so in future filings and if we do, the information that we provide shareholders may be different than you might get from other public companies in which you hold equity.

          In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. Given that we currently report and expect to continue to report under IFRS as issued by the IASB, we will not be able to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required by the IASB.

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THE OFFERINGS

          This summary highlights information presented in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all the information you should consider before investing in the ADSs or in the common shares, as the case may be. You should carefully read this entire prospectus before investing in the ADSs or in the common shares including "Risk Factors" and our consolidated financial statements included elsewhere in this prospectus.

Issuer

  Linx S.A.

Selling Shareholder

 

BNDES Participações S.A.

Global Offering

 

The global offering consists of the international offering and the concurrent Brazilian offering. The number of common shares offered in the international offering and the Brazilian offering is subject to reallocation between the offerings. The closings of the international offering and the Brazilian offering are conditioned upon each other.

International Offering

 

             common shares, including common shares in the form of ADSs, are being offered by us and the selling shareholder through the international underwriters (which, in the case of the common shares, are acting as placement agents on behalf of the Brazilian underwriters named elsewhere in this prospectus) in the United States and other countries outside Brazil. The common shares purchased by any investor outside Brazil will be settled in Brazil and paid for in reais, and the offering of these common shares is being made by the Brazilian underwriters. Any investor outside Brazil purchasing common shares must be authorized to invest in Brazilian securities under the requirements established by Brazilian law, especially by the CVM and the Central Bank, complying with the requirements set forth in Resolution No. 4,373, dated as of November 29, 2014, as amended, of the CMN and Instruction No. 560, dated March 27, 2015, of the CVM, as amended.

Brazilian Offering

 

Concurrently with the international offering,              common shares are being offered by the Brazilian underwriters in Brazil to Brazilian investors. The Brazilian offering will be registered with the CVM and made by means of a separate Brazilian prospectus in Portuguese.

International Underwriters

 

Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, Jefferies LLC, BofA Securities, Inc. and Itau BBA USA Securities, Inc.

Brazilian Underwriters

 

Goldman Sachs do Brasil Banco Múltiplo S.A. and Banco Morgan Stanley S.A., Bank of America Merrill Lynch Banco Múltiplo S.A. and Banco Itaú BBA S.A.

Use of proceeds

 

We intend to use the net proceeds from the primary offering to finance (1) our general working capital requirements, (2) our acquisition strategy and (3) the further development of our new initiatives, including Linx Pay Hub.

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We will not receive any of the proceeds from the sale of our common shares and ADSs made by the selling shareholder.

ADSs

 

Each ADS represents             common shares.

 

ADSs will be issued under a deposit agreement entered into among us, The Bank of New York Mellon, as depositary, and the registered holders and beneficial owners from time to time of ADSs issued under the deposit agreement.

Offering price

 

The public offering price for the international offering for the ADSs is set forth on the cover page of this prospectus. The offering price for the common shares, which is also set forth on the cover page, is the approximate per common share real equivalent of the offering price per ADS in the international offering, based upon the selling rate reported by the Central Bank of R$             to US$1.00 on                  2019.

Option to purchase additional ADSs and common shares

 

The international underwriters have an option for a period of 30 days from the date of this prospectus to purchase up to             additional common shares in the form of ADSs from us, minus the number of common shares sold by us pursuant to the Brazilian underwriters' option to purchase additional shares referred to below, to cover over-allotments of ADSs, if any. The Brazilian underwriters also have an option to purchase up to             additional common shares from us, minus the number of common shares in the form of ADSs sold by us pursuant to the international underwriters' option to purchase additional shares, to cover over-allotments of common shares, if any.

Voting rights

 

Holders of our common shares have full voting rights, and are entitled to one vote per share in all shareholders' meetings.

 

The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and ADS holders may not be able to exercise any such rights in a timely manner. See "Risk Factors — Risks Relating to the ADSs and the Offering — The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the vote of our common shares underlying the ADSs" and "Description of American Depositary Shares — Voting Rights" elsewhere in this prospectus.

Listing

 

Our common shares are listed on the Novo Mercado of the B3 under the symbol "LINX3." See "Market Information." We intend to apply to list the ADSs on the NYSE under the symbol "LINX."

Share capital before and after offering

 

Our share capital consists of             common shares as of the date of this prospectus (excluding             treasury shares).

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Immediately after the global offering, we will have             common shares outstanding, assuming no exercise of the underwriters' option to purchase additional common shares, including common shares underlying the ADSs.

Dividend policy

 

Brazilian Law No. 6,404, dated December 15, 1976, as amended, or the Brazilian Corporate Law, and our bylaws require us to distribute at least 25% of our annual net income (calculated in accordance with the Brazilian Corporate Law and Brazilian GAAP) unless our board of directors suspends the payment of dividends after having concluded that such distribution would be incompatible with our financial condition.

 

Holders of the ADSs will be entitled to receive dividends paid to the owners of our common shares, after deduction of the fees of the depositary and the costs of foreign exchange conversion.

 

See "Dividends and Dividend Policy," "Description of Capital Stock" and "Description of American Depositary Shares."

Lock-up agreements

 

We have agreed with the underwriters, subject to certain exceptions, not to issue, offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of our common stock or ADSs or any securities convertible into or exchangeable or exercisable for any of our common stock and ADSs during the 90-day period after the date of this offering. Our directors and executive officers and certain relevant equity holders have agreed to substantially similar lock up provisions, subject to certain exceptions. See "Underwriting."

Taxation

 

For a discussion of the material Brazilian and U.S. federal income tax consequences relating to an investment in our common shares, including in the form of ADSs, see "Taxation."

ADS Depositary

 

The Bank of New York Mellon

Risk factors

 

See "Risk Factors" and the other information included in this prospectus for a discussion of factors you should consider before deciding to invest in the ADSs.

          Unless otherwise indicated, all information contained in this prospectus assumes no exercise of the option granted by us to the underwriters to purchase up to             additional common shares, including common shares underlying the ADSs, in connection with the offering.

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SUMMARY FINANCIAL INFORMATION

          The following summary financial information has been derived from our audited historical consolidated financial statements as of and for the three-month period ended March 31, 2019 and 2018 and as of and for the years ended December 31, 2018, 2017 and 2016, and the respective notes thereto, included elsewhere in this prospectus. These historical consolidated financial statements were prepared in accordance with IFRS as issued by the IASB.

          The tables below present summary financial information as of and for the periods indicated. You should read this information in conjunction with the rest of this prospectus, including the sections entitled "Presentation of Financial and Other Information," "Selected Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Income Statement Data

    For the Three-Month Period
Ended March 31,
    For the Year Ended December 31,
 

    2019(2)     2019(2)     2018     2018     2018     2017     2016
 

    (in millions of     (in millions of     (in millions of     (in millions of R$)  

    US$)(1)     R$)     US$)(1)                    

Net operating revenues

    45.4     176.8     158.4     175.9     685.6     571.6     494.6  

Cost of services rendered

    (15.4 )   (60.0 )   (56.7 )   (63.0 )   (245.6 )   (211.6 )   (183.5 )

General and administrative

    (11.3 )   (44.0 )   (42.5 )   (43.3 )   (168.6 )   (148.1 )   (116.3 )

Research and development

    (4.7 )   (18.4 )   (16.2 )   (18.9 )   (73.5 )   (64.3 )   (59.9 )

Selling

    (9.1 )   (35.3 )   (22.1 )   (28.5 )   (111.0 )   (72.4 )   (62.5 )

Other operating income

    2.1     8.1     8.0     2.2     8.4     4.3     1.2  

Other operating expenses

    (0.5 )   (1.9 )   0.2     (1.3 )   (5.1 )   (5.1 )   (5.6 )

Total operating expenses

    (38.9 )   (151.5 )   (129.2 )   (152.8 )   (595.5 )   (497.2 )   (426.4 )

Operating income

    6.5     25.3     29.2     23.1     90.1     74.4     68.2  

Financial income

    2.6     10.3     12.0     12.0     46.9     58.4     49.5  

Financial expenses

    (3.1 )   (12.0 )   (8.3 )   (11.5 )   (44.8 )   (24.0 )   (24.7 )

Net financial income (expenses)

    (0.5 )   (1.8 )   3.7     0.5     2.1     34.4     24.7  

Income before income tax and social contribution

    6.1     23.6     32.9     23.6     92.1     108.8     92.9  

Income tax and social contribution — current

    (0.5 )   (2.0 )   (1.7 )   (2.6 )   (10.0 )   (9.2 )   (10.6 )

Income tax and social contribution — deferred

    (1.1 )   (4.4 )   (4.7 )   (2.8 )   (11.1 )   (14.7 )   (13.8 )

Net income

    4.4     17.2     26.5     18.2     71.1     84.8     68.5  

(1)
Solely for the convenience of the reader, real amounts for the year ended December 31, 2018 and for the three-month period ended March 31, 2019 have been translated into U.S. dollars at the selling rate reported by the Central Bank at March 31, 2019 of R$3.8967 to US$1.00. See "Exchange Rates" for further information on recent fluctuations in exchange rates.

(2)
Reflects our adoption of IFRS 16, Leases as of January 1, 2019. See "Management's Discussion and Analysis of Financial Condition and Results of Operations — Recent Accounting Pronouncements — New standards, interpretations and amendments adopted in 2019."

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Balance Sheet Data

    As of March 31,     As of December 31,
 

    2019(2)     2019(2)     2018     2018     2017     2016
 

    (in millions of     (in millions of     (in millions of     (in millions of R$)  

    US$)(1)     R$)     US$)(1)        

Current Assets:

                                     

Cash and cash equivalents

    12.8     49.9     12.8     49.9     42.9     7.2  

Financial assets

    106.0     413.2     106.1     413.4     487.8     639.2  

Trade accounts receivable

    44.4     173.0     42.9     167.1     128.2     107.3  

Recoverable taxes

    8.1     31.6     9.0     35.1     33.1     29.7  

Other receivables

    8.4     32.7     11.1     43.4     28.1     12.2  

Total current assets

    179.8     700.5     181.9     708.8     720.1     795.6  

Non-Current Assets:

   
 
   
 
   
 
   
 
   
 
   
 
 

Financial assets

                    21.0     19.0  

Trade accounts receivable

    0.8     3.0     0.8     3.3     3.0     1.8  

Other receivables

    1.9     7.3     1.8     7.2     1.5     10.9  

Deferred taxes

    1.1     4.3     1.1     4.4     4.3     4.2  

Property, plant and equipment, net

    19.3     75.2     19.1     74.3     62.3     51.3  

Intangible assets, net

    246.0     958.6     218.0     849.6     751.9     600.6  

Total non-current assets

    269.0     1,048.4     240.9     938.8     843.9     687.8  

Total assets

    448.8     1,748.9     422.8     1,647.7     1,564.0     1,483.4  

Current Liabilities:

                                     

Suppliers

    3.2     12.5     3.5     13.6     8.5     6.3  

Loans and financing

    13.9     54.1     10.4     40.7     31.8     34.5  

Labor obligations

    13.8     53.9     11.2     43.8     38.9     31.2  

Taxes payable

    2.9     11.4     3.5     13.5     13.2     6.4  

Income tax and social contribution

    0.4     1.7     0.3     1.2     0.5     2.9  

Payables for the acquisition of businesses

    12.7     49.5     14.7     57.1     56.1     23.5  

Deferred revenue

    10.5     41.0     10.3     40.1     8.5     7.2  

Dividends payable

    0.7     2.8     0.7     2.8     4.2     1.1  

Other liabilities

    4.5     17.4     2.1     8.0     7.6     4.1  

Total current liabilities

    62.7     244.2     56.6     220.7     169.2     117.1  

Non-Current Liabilities:

   
 
   
 
   
 
   
 
   
 
   
 
 

Loans and financing

    71.0     276.8     53.7     209.3     65.5     96.3  

Labor obligations

    0.2     0.6                  

Payables for the acquisition of businesses

    11.7     45.5     14.2     55.4     74.7     57.1  

Deferred taxes

    19.8     77.2     18.6     72.6     80.3     57.2  

Deferred revenue

    3.5     13.7     4.9     19.2          

Other liabilities

    0.5     2.0     0.6     2.3     1.0     1.9  

Provision for contingencies

    3.2     12.3     2.8     11.0     2.8     0.5  

Total non-current liabilities

    109.9     428.1     94.9     369.8     224.3     213.0  

Total liabilities

    172.5     672.3     151.5     590.5     393.5     330.1  

Shareholders' Equity:

                                     

Capital

    125.4     488.8     125.4     488.5     486.0     480.8  

Capital reserves

    95.5     372.2     94.9     369.9     479.8     512.3  

Period income

    4.4     17.2                  

Profit reserves

    46.1     179.8     46.1     179.5     186.1     141.3  

Additional dividends proposed

    5.7     22.2     5.7     22.2     18.8     18.9  

Other comprehensive income (loss)

    (0.9 )   (3.7 )   (0.7 )   (2.8 )   (0.2 )    

Total shareholders' equity

    276.3     1,076.5     271.3     1,057.2     1,170.5     1,153.3  

Total liabilities and shareholders' equity

    448.8     1,748.9     422.8     1,647.7     1,564.0     1,483.4  

(1)
Solely for the convenience of the reader, real amounts as of December 31, 2018 and as of March 31, 2019 have been translated into U.S. dollars at the selling rate reported by the Central Bank at March 31, 2019 of R$3.8967 to US$1.00. See "Exchange Rates" for further information on recent fluctuations in exchange rates.

(2)
Reflects our adoption of IFRS 16, Leases as of January 1, 2019. See "Management's Discussion and Analysis of Financial Condition and Results of Operations — Recent Accounting Pronouncements — New standards, interpretations and amendments adopted in 2019."

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RISK FACTORS

          Investing in the ADSs or in our common shares involves a high degree of risk. You should carefully consider the risks described below before making an investment decision regarding the ADSs or in our common shares. Our business, financial condition, results of operations, cash flows and/or prospects could be adversely affected by any of these risks, among others. The market price of the ADSs, including the common shares underlying the ADSs, could decline due to the occurrence of any of these risks or other factors, and you may lose all or part of your investment. The risks described below are those that we currently believe may materially affect us. Additional risks and uncertainties not currently known to us, or those that we currently deem to be immaterial, may also materially and adversely affect our business, financial condition, results of operations, cash flow and/or prospects, and/or the price of the ADSs or our common shares.

          For purposes of this section, when we state that a risk, uncertainty or problem may, could or will have an "adverse effect" on us or "adversely affect" us, we mean that the risk, uncertainty or problem could have an adverse effect on our business, financial condition, results of operations, cash flow and/or prospects, and/or the trading price of the ADSs or our common shares, except as otherwise indicated. You should view similar expressions in this section as having similar meaning.

Risks Relating to Our Industry and Us

We are substantially dependent on revenue generated from services related to our integrated enterprise management software, including monthly subscription fees.

          Our revenue is substantially dependent on our integrated enterprise retail management software licensing and ongoing services related to them. The significant majority of our revenue is derived from the monthly subscription fees for the use of our software, which comprise almost all of our gross operating revenue (89.1%, 86.8%, 89.8% and 89.6% for the three-month period ended March 31, 2019, and for the years ended December 31, 2018, 2017 and 2016, respectively). As a result, a reduction in revenue from this source, whether due to increased competition, adverse market conditions or a general reduction in demand for integrated enterprise management software and services or other factors, could materially adversely affect our operational results, cash flows and liquidity.

The software industry is highly competitive and we may be unable to compete effectively.

          We compete in markets characterized by vigorous competition, changing technology, changing client and end-consumer needs, evolving industry standards and frequent introductions of new products and services. We compete with several companies that operate in the global, regional and local software industries, including providers of integrated enterprise management software, developers of free software, payment processing and companies providing consulting services and outsourcing. Some of our current or potential competitors may be engaged in a greater range of businesses, have a larger installed base of customers for their existing products and services or have greater financial, technical, sales or other resources than us. We expect competition to intensify in the future as traditional, non-traditional and new competitors introduce new services or enhance existing services. We may lose market share if our competitors introduce or acquire new products that compete with our software and related services or add new features to their products or if new entrants emerge in the market. Any of these events could cause a material adverse effect on our business, financial condition, results of operation or cash flows.

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Our success depends on our ability to develop new products and services, integrate acquired products and services, improve our existing products and services and keep up with technological developments.

          The market in which we operate is characterized by constant technological advances, changing hardware requirements, rapid development in software and communications infrastructure, increasingly complex customer requirements and frequent introductions of new products and improvements of existing products. If we fail to improve our products and services to accommodate such technological evolution, as well as any corresponding legislative changes, including changes to tax legislation, in a timely manner or to position and price our products and services to meet market demand, our customers may stop purchasing new software licenses and services from us and we may lose our ability to attract and retain customers.

          In addition, internet and network protocols and other industry standards are subject to rapid change and we cannot guarantee that the industry standards that we adopt in developing new products will enable us to compete effectively for new business opportunities in the markets in which we operate. Any of these events could materially adversely affect our revenue and cash generation.

We may experience difficulties in achieving our acquisition strategy.

          We have acquired, and may from time to time acquire, businesses, products, services and technologies. The success of an acquisition or investment will depend on our ability to make accurate assumptions regarding the valuation, operations, growth potential, integration and other factors related to that business. Our acquisitions or investments may not produce the results that we expect at the time we enter into or complete a given transaction. The risks that we may face in connection with these acquisitions include the following:

    we may experience a disruption in our existing business and our management's attention may be diverted to matters relating to the acquisitions, transitions or integration;

    we may experience difficulties in integrating the acquired company's human resources or other administrative systems;

    we may lose key personnel of the acquired company;

    we may suffer a deterioration in our existing business or the acquired company's relationships with customers, partners or suppliers of technology and outsourced products;

    an acquisition may not promote our business strategy as we expected, we may not be successful in integrating an acquired business or technology as successfully as expected, such integration may require spending more resources or we may not receive the expected return on our investments;

    we may encounter difficulties related to the management of technologies of the acquired company or its business lines or our entry into new markets where we have limited or no direct experience or where competitors may have stronger market positions;

    we may not realize the anticipated revenue increase from an acquisition for various reasons, such as a large number of customers declining to renew software license updates and product support contracts, our inability to sell the acquired products to our customer base or contracts of an acquired company not permitting timely revenue recognition;

    we may have difficulty incorporating acquired technologies or products with our existing product lines, as well as maintaining uniform standards, architecture, controls, procedures and policies;

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    as a result of our acquisitions, we may have multiple product lines that are offered, priced and supported in different ways, which could cause confusion among consumers and delays in supply or delivery and result in product discontinuity and a reduction in sales;

    we may have cost overruns resulting from the continued support and development of acquired products, from general and administrative functions that support new business models or from associated regulations that prove to be more complicated than originally expected;

    we may not receive expected approvals in a timely manner or may be subject to restrictions or other penalties imposed by unions or similar entities under applicable labor laws as a result of acquisitions, which could adversely affect our integration plans in certain jurisdictions;

    the use of cash to finance acquisitions could limit other potential expenses, including share repurchases and dividend payments;

    we may be subject to litigation, administrative or arbitral liabilities related to the acquired companies, and we may be obligated to pay sums for which we do not have a right to indemnification by the sellers of the respective acquired companies or for which we may be unable to receive, in whole or in part, indemnification from the sellers of the respective acquired companies; and

    we may be subject to questioning from tax authorities regarding the registration and amortization of goodwill for tax purposes.

          We may spend time and capital on acquisitions that do not increase our revenue. To the extent we pay the purchase price of any acquisition in cash, any such purchase would reduce our cash reserves, and to the extent the purchase price is paid with any of our shares, could be dilutive to our shareholders. To the extent we pay the purchase price with proceeds from the incurrence of debt, any such purchase would increase our level of indebtedness and could negatively affect our liquidity, restrict our operations and materially adversely affect our results of operations. Our competitors may be willing or able to pay more than us for acquisitions, which may cause us to be unable to take advantage of certain acquisition opportunities.

          The occurrence of any of these events could materially adversely affect our business, operational results, financial condition or cash flow, especially with respect to a large acquisition or several concurrent acquisitions.

We are subject to risks and liability relating to system failures, the non-authorized or incorrect use of third-party data used by and/or made available to our systems.

          Our systems may receive third-party data. Our efforts to protect such data used by and/or made available to our systems may be insufficient and may not ensure that we are in compliance with applicable rules and regulations related to the collection, treatment and use of users' data. Any non-compliance with applicable laws may subject us to penalties, such as fines, particularly in relation to (1) the express consent of users for the collection and treatment of their data, (2) the term provided by law for storing and excluding users' data and (3) the adoption of the required security standards for the conservation and protection of the collected and stored data. Accordingly, the incorrect use of third-party data in our systems and/or the lack of measures to protect such data may (1) result in significant costs to us and the reallocation of our resources and (2) divert the attention of our management and technology team, which may adversely affect our business, competitive position, financial situation, results of operations and cash flows.

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          Additionally, we retain billing data, intellectual property, personally identifiable information and other sensitive information from our customers on our networks. Our infrastructure and the third-party infrastructure we use to host our solutions may be vulnerable to hacker attacks or other problems, which may overcome the security measures we adopt. In particular, our cloud infrastructure may be vulnerable to security breaches, computer viruses or similar problems, and these systems are also subject to telecommunications failures, power loss and other system failures. Unimpeded access to the cloud servers is fundamental to the provision of services to our SaaS customers. Any of these occurrences, whether intentional or accidental, could lead to interruptions, delays or suspension of our SaaS data center operations and may compromise the information stored on our networks. Such an occurrence could materially adversely affect our reputation as a reliable supplier and host of such solutions and negatively affect the market perception of the safety or reliability of our products or services and, as to SaaS, may cause some of our customers to cancel their subscriptions to our cloud applications and subject us to indemnification payments.

          Sales to our customers are made through systems that we have developed, and in the case of our cloud-based solutions, stored on our servers. Any interruption in the operation of these systems may result in a loss of sales from our customers. Furthermore, any error in billing or in issuing the invoice or accounting products sold by our customers could result in substantial losses to them, which could materially adversely affect our results of operations, financial condition and our reputation.

A failure to adequately protect personal data may materially adversely affect us.

          We manage and maintain the personal data of our customers, employees and suppliers in the normal course of our business. Unauthorized disclosures or security breaches may subject us to legal action and penalties that may materially adversely us. In addition, in the course of our business activities, we are exposed to possible risks of noncompliance with policies, improper conduct of our employees or negligence and fraud, which may result in serious reputational or financial damage.

          Currently, the processing of personal data in Brazil is regulated by a diverse and complex body of legislation. Our efforts to protect personal data that we process may not guarantee the adequate protection of such data or compliance with the personal data protection rules established under the current legislative regime.

          The Brazilian General Data Protection Act (Federal Law 13,790/2018) was published in the Federal Official Gazette on August 15, 2018 and was amended by Provisional Measure No. 869, issued by the President of Brazil in December 2018, or the MP 869/2018. As amended by the MP 869/2018, the Brazilian General Data Protection Act will take effect in August 2020. This legislation is expected to transform the current legislative regime applicable to personal data protection in Brazil. The Brazilian General Data Protection Act establishes a new legal framework for the processing of personal data and provides for the rights of holders of personal data, legal standards applicable to the protection of personal data, requirements for obtaining consent, obligations and requirements related to security incidents, data leaks and data transfers, as well as the creation of a national data protection authority. We may face difficulties in complying with the Brazilian General Data Protection Act due to the quantity and complexity of the new obligations it will introduce. In the event of non-compliance with the General Data Protection Law, we may be subject to penalties including warnings, the requirement to remove personal data from our system and fines of up to two percent of our economic group's total most-recently reported annual net revenue and up to a maximum of R$50.0 million per infraction.

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          The absence of sufficient measures to protect the personal data processed by us, or our inability to comply with applicable legislation, may materially adversely affect us.

We depend on suppliers of telecommunications, internet and data centers for our "software-as-a-service," or SaaS, cloud and on-premise infrastructure, and any fluctuation or interruption in the provision of these services may materially adversely affect our abilities to serve our customers and profitability.

          Providers of telecommunications, internet and data centers are a fundamental part of our infrastructure of SaaS, cloud and on-premise software and services. We depend on them to provide such services and they constitute a key element in our business strategy and infrastructure. It is crucial that the infrastructure that we use to host our software products remains safe, does not suffer system failures and is perceived by our customers and partners to be safe and reliable. Instability or interruptions of our services due to failures by our suppliers are usually perceived by our customers as our responsibility and may adversely affect the market's perception of the quality of our products or services, including with respect to SaaS, cloud and on-premise software and services, which may cause some of our customers to cancel their subscriptions to our services and affect our ability to increase our sales.

Our investments in research and development may not result in increased revenue.

          The investment in the development of software products through research-driven product development and expansion of our knowledge base is costly and may not provide financial returns. Additionally, products with accelerated releases or with short life cycles require high levels of spending on research and development. We believe that we must continue to dedicate a significant amount of resources for research and development to maintain our competitive position. Our investments in research and development may not prove efficient and may not result in increased revenue or growth and, consequently, our financial condition and results of operations could be materially adversely affected. For additional information regarding our investments in research and development, see "Management's Discussion and Analysis of Financial Condition and Results of Operations — Capital Expenditures."

Our growth depends on the continued contributions of certain key members of senior management and our ability to continue to attract and retain qualified personnel.

          Our performance depends on the efforts and capabilities of certain key members of senior management who are responsible for making most of the critical decisions that guide our business, particularly regarding the implementation of our strategies and development of our operations. If we lose any of these executives, for any reason, we may have problems in defining and executing our business strategy and our financial condition and results of operations could be materially adversely affected.

          In addition, if any key members of our senior management leave our company for any reason, we may incur significant costs to attract new highly qualified professionals as replacements. There is significant competition in the global market for qualified personnel in the commercial, technical and other areas. Consequently, we may be required to pay higher compensation in order to attract and maintain qualified personnel, which may adversely affect our operating and financial results.

We are subject to partial or total failures or interruptions in our services and software related to IT infrastructure, which is highly complex.

          We require a highly complex technology infrastructure for our operations and depend on the efficient and uninterrupted operation of numerous systems, including our computer systems,

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software, data centers and telecommunications networks, as well as the systems of third parties. We are subject to partial or total failures or interruptions in our services and software that could give rise to loss of revenue, loss of customers, possible actions for damages from our customers, additional operating and development costs and diversion of technical and other resources, among others, adversely affecting our reputation among our customers and the markets in which we operate. In addition, depending on the degree of the damage caused, we may be subject to regulatory penalties, such as the loss of certain approvals to operate our software.

We may be subject to errors, delays or failures of security of our products and services.

          Our software may contain errors or security flaws, especially at the launch of new products or release of new versions of existing products. The errors in our software may affect the ability of our products to work with other hardware or software, as well as delay the development or release of new products or new versions or undermine the reputation of our products in the market. Our systems and operations could suffer damage or interruption from natural disasters, acts of terrorism, power shortages, telecommunications failure, cyberattacks, sabotage, unauthorized entry, computer viruses and physical or electronic break-ins and similar disruptions from unauthorized tampering with our computer systems and data centers, among others. If we experience errors or delays in the launch of new products or new versions of our existing products, we may lose customers or incur opportunity costs, which may have a material adverse effect on our financial condition, cash flows and operational results.

          Additionally, errors and security flaws in our software products may expose us to liability for product performance complaints and warranty claims, as well as damage to our reputation, which could impact future sales of our products and services. Moreover, addressing problems and complaints associated with actual or alleged errors or security flaws may require a significant amount of time and attention from our management team, resulting in high costs, which may have a material adverse effect on our business, financial condition and operational results.

As a holding company, we are dependent on dividends and other distributions from our subsidiaries, which we may not receive.

          As a holding company, our ability to comply with financial obligations and to pay dividends or other distributions to our shareholders and holders of the ADSs in the future will depend on our cash flows and our subsidiaries' results of operations, as well as the distribution of such results of operations to us in the form of dividends or interest on equity. The amount of any dividends or distributions which may be paid to us from time to time will depend on many factors including, for example: such subsidiaries results of operations and financial condition; limits on dividends under applicable law; its constitutional documents; documents governing any indebtedness; applicability of tax treaties; and other factors which may be outside our control. There is no guarantee that such resources will be actually available to us or sufficient for us to comply with our financial obligations and to pay dividends or other distributions to our shareholders and holders of the ADSs.

If we are unable to properly manage our growth, our results may be adversely affected.

          We may fail to correctly estimate, qualitatively or quantitatively, the costs and risks associated with our expansion, and can offer no assurance that our systems, procedures, business processes and management controls are sufficient to support the expected rapid expansion of our operations, including expansion to new markets and verticals. We cannot assure you that our current and planned systems, procedures and controls, personnel and third-party relationships will be adequate to support our future operations. In addition, we have entered and may enter into new lines of business that may involve complexities associated with the new products, services and regulations, which could place a strain on our management and operational and financial resources in the

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future. If we fail to successfully manage growth, our results of operations may be adversely affected.

Certain of our financing agreements contain cross-default clauses.

          Some of our financing agreements contain cross-default clauses or cross-acceleration clauses. Accordingly, the occurrence of an event of default under one of the contracts governing our outstanding debt could trigger an event of default on other debt or allow the creditors of our other debt to accelerate repayment to become immediately due and payable, which could materially adversely affect the results of our operations, cash availability and the price of our shares.

          Additionally, we have entered into credit facilities in which the Brazilian National Economic and Social Development Bank (Banco Nacional de Desenvolvimento Econômico e Social), or BNDES, imposed several restrictions on us, including the need for prior approval from BNDES for: (1) our or our subsidiaries' direct lending to individuals or entities which may or may not have shared corporate interests with us; (2) borrowing from individuals or entities which have shared corporate interests with us; (3) providing guarantees of any kind in operations with other creditors, in the event the guarantees have not also been provided to BNDES under the same conditions and having the same priority and (4) making investments in companies in Brazil or abroad. See "Management's Discussion and Analysis of Financial Condition and Results of Operations — Indebtedness."

Losses not covered by our insurance policies may have a material adverse effect on us.

          We are subject to risks for which we do not have adequate or any insurance coverage, including risks not managed by our backup systems and contingency plans. For instance, we have not obtained insurance to protect against cybersecurity risks. Furthermore, the quantification of risk exposure in existing clauses in our insurance policies may be inadequate or insufficient, and may lead to a lower-than-expected insurance repayment. In addition, our insurance policy coverage is conditional on the payment of premiums under such policies. Our failure to pay these premiums together with the occurrence of a claim may put us at risk, as the relevant insurer would not be liable to cover us for any losses we incurred. We cannot assure you that we will be able to maintain our insurance policies in the future or that we will be able to renew them at reasonable prices or on acceptable terms. Thus, if certain damaging events occur and we are not adequately insured against them, they may, individually or together, adversely affect our results of operations and require us to commit significant cash resources to cover such losses. See "Business — Insurance."

We are subject to unfavorable results in judicial or administrative proceedings that may adversely affect our results and financial condition.

          We are a party to certain legal and administrative proceedings. Unfavorable decisions in these proceedings may adversely affect our results and financial condition in the event our resulting liability exceeds any amounts we have provisioned or guarantees we have deposited in respect of these proceedings. See "Business — Legal and Administrative Proceedings."

Any significant interruption in our cloud-based platform could materially adversely affect our business and harm our reputation, forcing us to provide credits or refunds and may cause customers to terminate their contracts with us prior to their stated maturity, which may adversely affect us.

          Our cloud-based platform is a critical part of our business operations. Any significant interruption in our services, products and/or infrastructure may give rise to claims by our customers, which may negatively affect the results of our operations and our financial condition, as well as our reputation with our customers.

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We may suffer losses due to defaults by our customers.

          A default by one or more of our subscribed customers or by one or more groups of customers, could have a material adverse effect on our business, results of operation, financial condition and cash flows.

          Potential interruptions in payment by customers could be caused by a customer's financial difficulties including bankruptcy, among other factors. In addition, a failure on our part to properly analyze the credit or financial condition of these customers may result in the failure to properly identify and make provisions for default by customers.

Substantially all of our revenues are derived from customers concentrated in the retail sector, which is sensitive to unfavorable economic cycles and decreases in the purchasing power of consumers.

          Our activities are exclusively focused on the retail sector and substantially all of our revenues are derived therefrom. Historically, the Brazilian retail sector has been prone to periods of economic downturn resulting in an overall decline in consumer spending. The success of retail sector operations depends on several factors relating to consumer spending, including the general business climate at the time, interest rates, inflation, the availability of consumer credit, taxation, consumer confidence in future economic conditions, levels of employment and wages. Unfavorable conditions in the Brazilian economy can therefore significantly reduce consumer spending, which could materially adversely affect our sales, results of operations and financial condition.

We may experience unfavorable conditions in our industry or the global economy that result in reductions in spending on IT that could limit our ability to grow and develop our business, thereby adversely affecting our results of operations.

          Our results of operations may vary according to the impact of changes in our industry or global economy on us or our customers. Increases in revenue and profitability of our business depend on demand for our software and related services.

          In light of the fact that we are a service provider, part of our revenue results from the number of new users of our software, which in turn is influenced by general employment levels. Insofar as unfavorable economic conditions cause our customers and potential customers to merely maintain or even reduce their demand for our services, our revenue may be adversely affected. Historically, economic downturns have resulted in overall reductions in IT spending, as well as pressure for longer billing cycles, as occurred during the recession of 2016. If economic conditions deteriorate or do not improve significantly, our customers and potential customers may choose to reduce their IT solutions, which would limit our ability to expand our business and could materially adversely affect our results of operations.

Our business and results of operations could be harmed if we are unable to protect and enforce our intellectual property rights.

          Measures we have taken to protect our intellectual property may be inadequate to prevent misappropriation, resulting in the misuse of our products and forcing us to protect our intellectual property through legal or administrative proceedings. The misuse of our products or the measures we are required to take to protect our intellectual property rights could result in substantial costs to us and divert the resources and attention of our management and technical team, which could materially adversely affect our business, competitive position, financial condition, results of operations and cash flows.

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We are subject to the risk of lawsuits involving alleged violations of intellectual property rights of third parties, due in part to the recent increase in the number of patents and copyrights by technology companies.

          We may be required to change, in whole or in part, certain of our products that have allegedly infringed upon the intellectual property rights of third parties and may be required to pay significant amounts of penalties, royalties or licensing fees for the use of others' patents or copyrighted materials. Any changes to our products or to revenue attributable to any of our products that are in violation of others' intellectual property rights may materially adversely affect our results of operations, reputation and the demand for our products. In addition, such changes may require attention from our management, cause us to incur additional legal expenses, or in some cases, require us to create reserves, all of which may materially adversely affect us.

We benefit from Brazilian government tax incentive programs, which may be terminated or reduced in the future.

          We benefit from certain tax incentives related to research and development and technological innovation, established by Law No. 11,196, dated November 21, 2005, as amended, or Lei do Bem, and regulated by Decree No. 5,798, dated June 7, 2006. Our ability to benefit from these incentives depends on our compliance with certain obligations.

          Failure on our part to comply with certain obligations in accordance with the applicable rules or to provide the documentation required to substantiate such tax credits could result in the loss of such incentives that have not yet been used and claims by the Brazilian tax authorities of the amount corresponding to taxes not paid as a result of the incentives already used, in addition to penalties and interest under Brazilian tax laws. If any of our tax benefits expires, terminates or is cancelled, we may not be successful in obtaining new tax benefits that are equally favorable, which may materially adversely affect us. For more information, see "Management's Discussion and Analysis of Financial Condition and Results of Operation — Description of Principal Statement of Income Line Items — Current and Deferred Income Tax and Social Contribution."

Our business automation software and electronic invoice (Nota Fiscal Electronica), or NFE, services are provided pursuant to approvals by the Brazilian Internal Revenue Service (Secretaria da Fazenda), or Sefaz, of each Brazilian state.

          We offer business automation software and the use of NFEs and electronic tax receipts (Nota Fiscal Consumidor Electronica), or NFCEs, customized to meet the requirements of the tax laws of different Brazilian states. Such business automation solutions must be approved by the tax authorities of each Brazilian state to certify regulatory adherence. If we do not receive or are at any point denied any of these approvals, we will be prevented from continuing our business automation software and NFEs and NFCEs activities in the state where approval has been denied, which could have a material adverse effect on our financial results.

We or our directors could be accused of facilitating tax evasion by our customers in which case we could be held responsible, along with the customer, for back taxes due to Brazilian tax authorities.

          In Brazil, enterprise management systems are required to be structured so as not to allow for tax evasion. However, we cannot guarantee that our systems are not susceptible to security breaches that could enable tax evasion by a customer.

          If such an event were to occur, Brazilian tax authorities could conclude that our software allows our customers to avoid compliance with their tax obligations and that we had acted in bad faith. Any such conclusion may require us to pay the unpaid taxes of our customers, plus interest

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and penalties, as well as subject us and our management to civil and criminal liabilities, depending on the magnitude of tax evasion committed by our customer, which could materially adversely affect our results.

The simplification of Brazilian tax rules would reduce the barriers to entry of international competitors.

          The complexities of Brazilian tax rules largely discourage entry of international competitors into the Brazilian retail market for the software industry, as a strong familiarization of the applicable tax laws of each state and of the Brazilian government is required to function in the sector. The Brazilian government has indicated that it may simplify the tax rules, which would remove an important entry barrier to our foreign competitors and could result in increased competition and materially adversely affect our financial results.

We may experience difficulties in expanding our products or in expanding into new lines of business, industries and/or foreign markets.

          We may face challenges in connection with the expansion of our products as well as our expansion into new lines of business, industries and/or new geographic regions within or outside of Brazil. In particular, as we expand into new lines of business, such as Linx Pay Hub, we may face challenges associated with entering into a line of business in which we have limited or no experience and in which we may not be well-known. Offering new products and services or offering existing products in new industries or new geographic regions may require substantial expenditures and takes considerable time, and we may not recover our investments in new markets in a timely manner or at all. For example, we may be unable to attract a sufficient number of merchants as customers, fail to anticipate competitive conditions or fail to adapt and tailor our services to different markets.

          Currently, we have customers in markets other than Brazil (representing 5.6% of our net operating revenue as of December 31, 2018), and our long-term strategies include further expansion in these markets. We may experience the following difficulties related to the foreign markets in which we currently operate or will operate in the future, among others:

    unanticipated regulatory changes;

    an inability to attract staff and manage operations outside of Brazil;

    changes in tax rules;

    changes in the policies and regulations of trade and investment;

    difficulties in the registration and protection of trademarks and software;

    the adoption of protective measures, subsidies and other forms of government favoritism from competitors originating in such foreign markets; and

    cultural and linguistic barriers.

          Should one or more of these risks materialize, and we are not able to overcome these difficulties, we may be unable to implement our international expansion strategy.

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A decline in the use of credit, debit or prepaid cards as a payment mechanism for consumers or adverse developments with respect to the payment processing industry in general could have a materially adverse effect on revenues which we expect to derive from our new line of business, Linx Pay Hub.

          If consumers do not continue to use credit, debit or prepaid cards as a payment mechanism for their transactions or if there is a change in the mix of payments between cash, credit, debit, prepaid cards and other accepted method of payments that is adverse to Linx Pay Hub, the revenue we expect to derive from Linx Pay Hub may be materially adversely affected. We believe future growth in the use of credit, debit and prepaid cards and other electronic payments will be driven by the cost, ease-of-use, and quality of services offered to consumers and businesses. In order to consistently increase and maintain our profitability, end-consumers and businesses must continue to use electronic payment methods including, credit, debit and prepaid cards. Moreover, if there is an adverse development in the payments industry or Brazilian market in general, such as new legislation or regulation that makes it more difficult for our merchants to do business or utilize such payment mechanisms, the revenue we expect to derive from Linx Pay Hub may be materially adversely affected.

          Furthermore, we pay transaction fees to payment schemes, banks, acquiring payment institutions and other intermediaries that vary according to the method chosen by consumers to fund payment transactions. These transaction fees are higher when consumers fund payments using credit cards, and lower when consumers fund payments with debit cards. The financial success of Linx Pay Hub will be, therefore, sensitive to changes in the proportion of its business funded by consumers using credit and debit cards, which would increase its costs if we are unable to adjust the rates we charge our merchants accordingly.

Brazilian laws, CMN resolutions, circulars promulgated by the Central Bank, as well as future regulations and changes in tax rules affecting the payment industry in Brazil may materially adversely affect us in the event Linx Pay commences merchant acquisition operations.

          Due to the importance of the payment industry in Brazil, the Central Bank issued several new regulations in 2018 designed to increase the use of electronic payments, increase competitiveness in the sector, strengthen market governance, encourage supply and the differentiation of products for consumers as well as strengthen the use of credit and debit cards as a means of payment. Among the measures taken to effect these changes, the Central Bank issued the following noteworthy circulars:

    Circular 3,885/2018, which provides that institutions having an annual turnover greater than R$500 million or at least R$50 million in payment accounts that accept exclusively accept electronic payments and which issue a post-paid payment instrument will be granted automatic authorization by the Central Bank;

    Circular 3,886/2018, which defines and classifies "sub-creditors" and establishes a centralized settlement system for sub-creditors through the Brazilian Interbank Payments Chamber (Câmara Interbancária de Pagamentos); and

    Circular 3,887/2018, which establishes maximum limits for exchange rates and the percentage remuneration for debit card issuers of 0.5% of the quarterly weighted average and 0.8% of the transaction value.

          In addition to existing regulations, the Brazilian congress is currently considering several legislative initiatives that aim to modify the regulatory framework of the electronic payments sector, including changes in the period in which a card issuer makes payment to a commercial establishment and changes in the general rules of the Brazilian National Financial System (Sistema

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Financeiro Nacional). These initiatives are currently in varying stages of deliberation by the Brazilian congress and create significant uncertainty relating to the regulatory framework we may face in coming years. Brazilian laws, CVM resolutions, circulars or regulations resulting from such initiatives may materially adversely affect us.

We and our independent registered public accounting firm have identified material weaknesses in our internal control over financial reporting and, if we fail to implement and maintain effective internal controls over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud.

          In connection with the audit of our consolidated financial statements for the year ended December 31, 2018, we and our independent registered public accounting firm identified material weaknesses in our internal controls as noted below:

    During our testing of the IT general controls, we identified material weaknesses related to managing access to our systems and controls and changes to the programs that manage such systems and controls, which were not designed or operating effectively;

    We identified material weaknesses related to the recognition and measurement of revenues, which could result in an misstatement of our revenues if not timely identified by us; and

    We identified several control deficiencies related to the accounting for accruals, leases, stock options, and amortization of intangible assets that were not identified during the process of preparing our financials and that, when considered in the aggregate, would be considered a material weakness.

          If we are unable to properly maintain our internal controls, we may not be able to accurately report our financial results or prevent the occurrence of inappropriate or erroneous practices.

          Under Section 404 of the Sarbanes-Oxley Act of 2002, our management is not required to assess or report on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F for the fiscal year ending December 31, 2019. We are only required to provide such a report for the fiscal year ending December 31, 2020. At that time, our management may conclude that our internal control over financial reporting is not effective. In addition, until we cease to be an "emerging growth company" as such term is defined in the JOBS Act, which may not be until after five full fiscal years following the date of this offering, our independent registered public accounting firm is not required to attest to and report on the effectiveness of our internal control over financial reporting. Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may disagree with our assessment or may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company in the United States, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

          During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. If we fail to achieve and maintain an effective

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internal control environment, we could suffer material misstatements in our financial statements, fail to meet our reporting obligations or fail to prevent fraud, which would likely cause investors to lose confidence in our reported financial information. This could, in turn, limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of the ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the NYSE, regulatory investigations and civil or criminal sanctions.

In the event that Linx Pay commences merchant acquisition operations, it may be subject to losses arising from such operations due to the possibility that credit card issuers default on their obligations to merchant acquirers.

          While we are currently not a merchant acquirer, we intend to expand our Linx Pay operations into this area in the future. As a merchant acquirer, Linx Pay would be subject to the risk that credit card issuers may default on their obligation to pay Linx Pay the amounts required to complete a cardholder's transaction and process the corresponding payment to the applicable merchant. Merchant acquirers are also subject to the risk that cardholders may default on their obligations to credit card issuers.

          The extent to which Linx Pay, upon commencing merchant acquirer operations, becomes subject to these risks is dependent on the risk/guarantee model that the credit card brand adopts for credit card issuers and credit card holders. Each credit card brand has developed its own model for guarantees that are detailed in its regulations.

          Linx Pay may also be exposed to the risk that affiliated sub-merchant acquirers may not pass on the amounts received from us under credit card transactions to their affiliated establishments.

          The realization of any of these risks may materially adversely affect our business, results of operations or financial condition.

In the event that Linx Pay commences merchant acquisition operations, our operational results may be adversely affected by fraudulent transactions committed by third parties that are processed by us.

          In the event that Linx Pay becomes a merchant acquirer, we will be exposed to the risk of fraudulent transactions carried out by third parties using our credit and debit cards. Failure to effectively manage such risk and prevent fraud may increase our chargeback liability as well as other liabilities and materially adversely affect our business, results of operations or financial condition.

Our customers are charged for the use of certain of our products based on a percentage of the amount they bill to their clients, which may result in seasonal fluctuations that impact our quarterly results of operations.

          In recent years, we have experienced seasonal fluctuations in our revenues from the retail sector as a result of consumer spending patterns. Most of our revenues are not tied to the percentage of the amount our customers bill to their clients. Following the launch of our OMS and Linx Pay e-commerce platform, however, we have increased the number of products in our portfolio that generate revenue based on the amount our customers bill their clients. Historically, sales have been stronger during the last quarter of the year as a result of the holiday season in Brazil. This is due to the increase in the number and transaction volumes of digital transactions and electronic payments related to seasonal retail events. With the increase in the aforementioned products as a percentage of our revenue, adverse events that occur during these months may have a disproportionate effect on our results of operations throughout the fiscal year. As a result of

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quarterly fluctuations caused by these and other factors, comparisons of our results of operations between different fiscal quarters may not be indicative our future performance.

Significant and increasing competition within the payment industry may materially adversely affect us.

          Linx Pay may face competitive pressure on the fees it charges its clients. Linx Pay's competitors have already achieved a significant share of the markets in which Linx Pay operates. As a result, these competitors, particularly those that have relationships with financial institutions, can reduce their fees, offering rates that are more favorable to their current and potential clients, thereby impeding our growth in the market. If as a result of competition, Linx Pay is forced to reduce its fees, we may need to intensify our cost control efforts in order to maintain and expand our market share. An intensification of competition may cause us to lose current customers and may make it difficult for us to attract new customers, which may materially adversely affect our business, financial condition and results of operations.

Risks Relating to Brazil

Brazilian economic and political conditions and perceptions of these conditions in the international market have a direct impact on our business and our access to international equity and debt markets, and could materially adversely affect our results of operations and financial condition.

          Our operations are primarily conducted in Brazil, and we sell a material portion of our products to customers in Brazil. Accordingly, our financial condition and results of operations are substantially dependent on economic conditions in Brazil, and we cannot assure you that Brazilian gross domestic product, or GDP, will remain stable or grow in the future. Brazilian GDP, in real terms, decreased 3.6% in 2015, decreased 3.3% in 2016 and increased 1.1% and 1.1% in 2017 and 2018, respectively. Future developments in the Brazilian economy may affect Brazil's growth rates and, consequently, the consumption of our products. As a result, these developments could impair our business strategies, results of operations and financial condition.

          The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes material changes in policy and regulations. The Brazilian government's modifications to laws and regulations according to political, social and economic interests have often involved, among other measures, increases or decreases in interest rates, changes in fiscal and tax policies, wage and price controls, foreign exchange rate controls, blocking access to bank accounts, currency devaluations, capital controls and import restrictions. We have no control over and cannot predict the measures or policies that the Brazilian government may take in the future. Our business, results of operations and financial condition may be adversely affected by changes in government policies as well as general economic factors, including:

    growth or downturn of the Brazilian economy;

    depreciation of the real and other exchange rate fluctuations;

    interest rates and monetary policies;

    inflation rates;

    economic, political and social instability;

    labor and social security regulation;

    energy and water shortages and rationing;

    import and export controls;

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    exchange controls and restrictions on remittances abroad;

    liquidity of the domestic capital and credit markets;

    fiscal policies and changes in tax laws; and

    other political, diplomatic, social and economic policies and developments in or affecting Brazil.

Inflation, and the Brazilian government's measures to combat inflation, may significantly contribute to economic uncertainty in Brazil and may have material adverse effects on our business and results of operations.

          Brazil has historically experienced high rates of inflation. Inflation, as well as the Brazilian government's efforts to combat inflation, have had significant negative effects on the Brazilian economy, particularly prior to the introduction of comprehensive currency reform (the Plano Real) in July 1994. In more recent years 2016, 2017 and 2018, rates reached 6.3%, 2.9% and is expected by the Central Bank (according to the Focus Report dated December 28, 2018) to be 3.69%, respectively, measured by the Extended National Consumer Price Index (Índice de Preços ao Consumidor Amplo), or IPCA, according to the IBGE.

          Inflationary pressures continue to persist and the Brazilian government's measures to combat them, as well as speculation about any such future measures, have generated over the last few years a climate of economic uncertainty in Brazil and heightened volatility the Brazilian capital markets. Brazil may experience high levels of inflation in the future.

          As of March 31, 2019, 11.3% of our total loans and financing, including indebtedness outstanding and payables for the acquisition of businesses, were subject to varying rates of inflation IGP-M, IPCA and the Consumer Price Index (Índice de Preço ao Consumidor), or IPC. Increases in inflation could therefore adversely affect our financial expenses in the event of an unfavorable change in inflation. Additionally, inflationary pressures could lead to government intervention in the economy, including the introduction of policies that may adversely affect the overall performance of the Brazilian economy, which, in turn, could adversely affect the operations and the market value of the ADSs.

Developments and changes in the investors' perception of risk in other countries, particularly in the United States, Europe and other emerging markets, may materially and adversely affect the market value of securities, including the market value of the ADSs.

          The market for securities issued by Brazilian companies is influenced by, to varying degrees, economic and market conditions in other countries, including the United States, Europe and other emerging markets. Although the economic conditions in these countries are significantly different from the economic condition in Brazil, the reaction of investors to developments in these countries may adversely affect the market value of securities issued by Brazilian companies. Crises in other emerging markets may reduce investor interest in shares from Brazilian issuers, including the ADSs. This could materially adversely affect the market price of the ADSs.

          In addition, the financial crisis and political instability in the United States, Europe and other countries have affected the global economy, producing several effects that, directly or indirectly, impact the Brazilian capital market and economy, such as fluctuations in the price of securities issued by listed companies, reductions in credit supply, deterioration of the global economy, fluctuation in currency exchange rates and inflation, among others, which may, directly or indirectly, adversely affect us. In June 2016, the United Kingdom called a referendum in which a majority of its population voted for the United Kingdom to exit the European Union. We have no control over and cannot predict the effect of the United Kingdom's exit from the European Union nor over whether

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and the extent to which other member states will decide to exit the European Union in the future. On January 20, 2017, Donald Trump became the President of the United States. We have no control over and cannot predict the effect of Donald Trump's administration or policies. These developments, as well as potential crises and forms of political instability arising therefrom or any other unforeseen development, may adversely affect us and the market value of the ADSs.

Political and economic instability in Brazil may adversely affect our business and results of operations.

          Brazil's political environment has historically influenced, and continues to influence, the performance of the country's economy. Political crises have affected and continue to affect investor confidence and that of the general public, which resulted in economic deceleration and heightened volatility in the securities issued by Brazilian companies.

          The recent economic instability in Brazil has contributed to a reduction in market confidence in the Brazilian economy and to the aggravation of the situation of the domestic political environment. Furthermore, several ongoing investigations into accusations of money laundering and corruption being conducted by the Brazilian Federal Public Prosecutor's Office, including the largest such investigation known as "Car Wash" (Lava Jato), have had a serious negative impact on the Brazilian economy and political landscape.

          A number of senior politicians, including current and former members of Congress and the Executive Branch, and high-ranking executive officers of major corporations and state-owned companies in Brazil were arrested, convicted of various charges relating to corruption, entered into plea agreements with federal prosecutors and/or have resigned or been removed from their positions as a result of these Lava Jato investigations. These individuals are alleged to have accepted bribes by means of kickbacks on contracts granted by the government to several infrastructure, oil and gas and construction companies. The profits of these kickbacks allegedly financed the political campaigns of political parties forming the previous government's coalition that was led by former President Dilma Rousseff, which funds were unaccounted for or not publicly disclosed. These funds were also allegedly destined toward the personal enrichment of certain individuals. The effects of Lava Jato as well as other ongoing corruption-related investigations resulted in an adverse impact on the image and reputation of those companies that have been implicated as well as on the general market perception of the Brazilian economy, political environment and the Brazilian capital markets. We have no control over, and cannot predict, whether such investigations or allegations will lead to further political and economic instability or whether new allegations against government officials will arise in the future.

          Amidst this background of recent political uncertainty, in August 2016, the Brazilian Senate approved the removal from office of Brazil's of then-President Dilma Rousseff, after completion of legal and administrative impeachment proceedings, on the grounds of violation of budgetary laws. Michel Temer, the former Vice President, who had been serving as acting president since Ms. Rousseff's removal in May 2016 and assumed the presidency for the remainder of the presidential term, which ended in 2018. Throughout Mr. Temer's presidency, his approval ratings remained historically low and he faced scrutiny over other matters, including allegations of bribery and other corrupt acts, which contributed to the uncertain political and economic environment in Brazil. After a polarized presidential campaign, Jair Bolsonaro, a former member of the military and three-decade congressman, was elected as the president of Brazil on October 28, 2018 and took office on January 1, 2019. We cannot predict if, and for how long, the political divisions in Brazil that emerged before the election will continue and impact his presidency. It is also not clear what effects, if any, such political division will have on the ability of President Bolsonaro to govern Brazil and implement reforms. Any continuation of such division could result in an impasse in Brazil's Congress, political unrest and massive protests and/or strikes that could adversely affect our

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operations. Uncertainty regarding the implementation by the new government of related changes in monetary, fiscal and pension policies, as well as pertinent legislation, could contribute to economic instability. These uncertainties and new measures could increase the volatility of Brazilian securities markets, including in relation to our securities.

          We cannot foresee whether President Bolsonaro will adopt policies or changes to current policies that may have a material adverse effect on us. Political and economic uncertainty resulting from the presidential elections or otherwise may have a material adverse effect on our business, results of operations and financial condition.

          Uncertainty over whether the Brazilian government will implement changes in policy or regulation affecting these or other factors in the future may contribute to economic uncertainty in Brazil and to heightened volatility in the securities issued abroad by Brazilian companies. Historically, the political scenario in Brazil has influenced the performance of the Brazilian economy; in particular, political crises have affected the confidence of investors and the public in general, which adversely affected the economic development in Brazil.

We are subject to fluctuations in interest rates.

          The Central Bank establishes the basic interest rate for the Brazilian banking system. As of March 31, 2019, 91.4% of our total indebtedness, including outstanding loans and financing and payables for the acquisition of businesses (excluding present value adjustments relating to payables for the acquisition of businesses), were denominated in reais and subject to fluctuations in interest rates. The interest rate risk arises from the portion of our debt referenced to the Brazilian long term interest rate (taxa de juros de longo prazo), or TJLP, and Interbank Certificate of Deposit (Certificado de Depósito Interbancário), or CDI, which may adversely affect revenue or expenses in the event of an unfavorable change in interest rates and inflation. Any increase in interest rates could increase the cost of our borrowings, reduce demand for our products or have a materially adverse impact on our financial expenses and results of operations.

The volatility of the real against the U.S. dollar and other currencies may have a materially adverse effect on our business and the market price of the ADSs.

          Historically, Brazilian currency has suffered frequent devaluations. The Brazilian government has implemented various economic plans and utilized a number of exchange rate policies, including sudden devaluations, periodic mini-devaluations during which the frequency of adjustments has ranged from daily to monthly, a floating exchange rate, exchange controls and parallel market exchange rates. From time to time, there have been significant fluctuations in the exchange rate between the real, the U.S. dollar and other currencies. According to Central Bank data, at the end of years 2016, 2017 and 2018, the exchange rates between the real and the U.S. dollar were R$3.2591, R$3.3080 and R$3.8748, respectively. As of May 28, 2019, the exchange rate between the real and the U.S. dollar was R$4.0275 per US$1.00.

          Uncertainty over whether the Brazilian government will implement changes in policy or regulation affecting these or other factors in the future may contribute to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and in the securities issued abroad by Brazilian issuers. Therefore, these uncertainties and developments in the Brazilian economy may adversely affect us and the market price of the ADSs.

          Many of our customers are either foreign companies or multinational companies operating in Brazil and are exposed to exchange rate variations that could create an adverse effect on these companies. Additionally, the interest rate on our some of loans has been indexed to exchange rates. Any exchange rate fluctuations could therefore result in a materially adverse effect on our operations and financial results.

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Depreciation of the real relative to the U.S. dollar could negatively affect the growth of the Brazilian economy as a whole and harm our financial condition and results of operations.

          Depreciations of the real relative to the U.S. dollar could create additional inflationary pressures in Brazil and cause increases in interest rates, which could negatively affect the growth of the Brazilian economy as a whole and harm our financial condition and results of operations. On the other hand, appreciation of the real relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange current accounts, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real could materially and adversely affect the growth of the Brazilian economy and us.

          In addition, we believe that an increase in interest rates may cause an increase in financial expenses, negatively affecting our financial results. Similarly a reduction in interest rates may cause a decrease in financial income, which would also negatively affect our financial results.

Any further downgrading of Brazil's credit rating could adversely affect the market price of the ADSs.

          Credit ratings affect investors' perceptions of risk and, as a result, the yields required on future debt issuance in the capital markets. Rating agencies regularly evaluate Brazil and its sovereign ratings, which are based on a number of factors including macroeconomic trends, fiscal and budgetary conditions, indebtedness metrics and the perspective of changes in any of these factors. Brazil has lost its investment-grade sovereign debt credit rating by the three main U.S. based credit rating agencies, Standard & Poor's, Moody's and Fitch.

    In September 2015, Standard & Poor's lowered Brazil's sovereign credit rating to below investment grade, from BBB– to BB+, citing, among other reasons, general instability in the Brazilian market caused by the Brazilian government's interference in the economy and budgetary difficulties. Standard & Poor's again downgraded Brazil's credit rating in February 2016, from BB+ to BB, and maintained its negative outlook on the rating, citing a worsening credit situation since the September 2015 downgrade. In January 2018, Standard & Poor's lowered its rating to BB– with a stable outlook in light of doubts regarding this year's presidential election and pension reform efforts.

    In December 2015, Moody's placed Brazil's Baa3 ratings on review, citing negative macroeconomic trends and a deterioration of the government's fiscal conditions. Subsequently, in February 2016, Moody's downgraded Brazil's ratings to below investment grade, to Ba2 with a negative outlook, citing the prospect for further deterioration in Brazil's debt service in a negative or low growth environment, in addition to challenging political dynamics. In April 2018, Moody's maintained Brazil's credit rating at Ba2 but revised outlook from negative to stable, which it maintained in September 2018, citing expectations of further cuts to government spending.

    Fitch also downgraded Brazil's credit rating to BB+ with a negative outlook in December 2015, citing the country's rapidly expanding budget deficit and the worse-than-expected recession, and made a further downgrade in May 2016 to BB with a negative outlook, which it maintained in 2017 and downgraded to BB– in February 2018.

          Any further downgrade of Brazil's sovereign credit ratings could heighten investors' perception of risk and, as a result, increase the future cost of debt issuance and adversely affect the market price of the ADSs.

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Risks Relating to the ADSs, our common shares and the Offering

The volatility and illiquidity of the Brazilian securities market may substantially limit the ability of investors to sell the ADSs or our common shares at their preferred time and price.

          Prior to this offering, there has been no public market for the ADSs. Our common shares underlying the ADSs trade on the Novo Mercado segment of the B3. Although we have applied to have the ADSs listed on the NYSE, we cannot assure you that a liquid public market for the ADSs will develop.

          The investment in securities trading in emerging markets such as Brazil (or in ADSs of companies with securities also trading in emerging markets) frequently involves a higher risk compared to other global markets, as investments in emerging markets are generally considered more speculative in nature. Risks associated with emerging markets may substantially limit the capacity of holders of our common shares or the ADSs to sell them at their preferred time and price.

          With respect to our common shares, the Brazilian securities market is substantially smaller, less liquid, more concentrated and more volatile than some major international securities markets such as the United States and Europe. For example, as of December 31, 2018, the market capitalization of the B3 was approximately R$3.6 trillion (U.S.$929.1 billion at an exchange rate of U.S.$1.00 to R$3.8748), according to information published by the B3, and in 2018 it had an average daily trading volume of R$12.3 billion (U.S.$3.2 billion at an exchange rate of U.S.$1.00 to R$3.8748). Additionally, the Brazilian capital markets are significantly concentrated. The top ten stocks traded in terms of volume on the B3 accounted for approximately 46.0% of its total trading volume in 2018. In contrast, the market capitalization of the New York Stock Exchange was approximately U.S.$24.4 trillion as of December 31, 2018.

          In addition, the NYSE has from time to time experienced significant price and volume fluctuations that have affected the market prices for the securities of technology companies, particularly internet-related companies. As a result, investors in our securities may experience a decrease in the value of our common shares or the ADSs regardless of our operating performance or prospects. In the past, following periods of volatility in the market price of a company's securities, shareholders have often instituted securities class actions against that company. If we are involved in a class-action lawsuit, it could divert the attention of our senior management and, if adversely determined, could have a material adverse effect on our business, financial condition and results of operations.

Changes in Brazilian tax laws may have an adverse impact on the taxes applicable to a disposition of our common shares, including in the form of ADSs.

          Law No. 10,833, dated as of December 29, 2003, provides that the disposition of assets located in Brazil by a non-resident to either a resident or a non-resident of Brazil is subject to taxation in Brazil, regardless of whether the disposition occurs outside or within Brazil. This provision results in the imposition of income tax on the gains arising from a disposition of our common shares by a non-resident of Brazil to either a resident or a non-resident of Brazil. However, since currently there is no judicial guidance determining whether the ADSs should be considered assets located in Brazil, we are unable to predict whether Brazilian courts may decide that income tax under Law No. 10,833 applies to gains realized on dispositions of the ADSs. In the event that the disposition of assets located in Brazil is interpreted to include the disposition of the ADSs, this tax law would result in the taxation of non-residents of Brazil on any gain or loss recognized on the disposition of ADSs. Any gain or loss recognized by a U.S. holder (as defined in "Taxation — Material U.S. Federal Income Tax Considerations for U.S. Holders") on the disposition of common shares, including in the form of ADSs, generally will be treated as U.S. source gain or loss for U.S.

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foreign tax credit purposes. Thus, a U.S. holder may not be able to benefit from a foreign tax credit for Brazilian income tax imposed on the disposition of common shares, including in the form of ADSs, unless the U.S. holder can apply the credit against U.S. federal income tax payable on other income from foreign sources. See "Taxation — Material U.S. Federal Income Tax Considerations for U.S. Holders — Sale, Exchange or Other Disposition of Common Shares or the ADSs."

The Brazilian government may impose exchange controls and significant restrictions on remittances of reais abroad, which would adversely affect your ability to convert and remit dividends or other distributions or the proceeds from the sale of our common shares our capacity to make dividend payments or other distributions to non-Brazilian investors and would reduce the market price of our common shares, including in the form of ADSs, and our capacity to comply with payment obligations in foreign currency.

          In case of serious imbalances, the Brazilian Government may restrict the remittance abroad of proceeds of investments in Brazil and the conversion of the real into foreign currencies. The Brazilian government last imposed such remittance restrictions for a brief period in 1989 and early 1990. We cannot assure you that the Brazilian government will not take similar measures in the future. The return of any such restrictions would hinder or prevent your ability to convert dividends or other distributions or the proceeds from any sale of our common shares into U.S. dollars and to remit U.S. dollars abroad, our capacity to make dividend payments or other distributions to non-Brazilian investors, and our capacity to comply with payment obligations in foreign currency. The imposition of any such restrictions would have a material adverse effect on the stock market price of our common shares, including in the form of ADSs, and on our capacity to access foreign capital markets.

If you surrender your ADSs and withdraw common shares, you risk losing the ability to remit foreign currency abroad and certain Brazilian tax advantages.

          As an ADS holder, you benefit from the electronic certificate of foreign capital registration obtained by the custodian for our common shares underlying the ADSs in Brazil, permitting the custodian to convert dividends and other distributions with respect to our common shares into non-Brazilian currency and remit the proceeds abroad. If you surrender your ADSs and withdraw common shares, you will be entitled to continue to rely on the custodian's electronic certificate of foreign capital registration for only five business days from the date of withdrawal. There-after, upon the disposition of distributions relating to our common shares, unless you obtain your own electronic certificate of foreign capital registration, or you qualify under Brazilian foreign investment regulations that entitle certain foreign investors to buy and sell shares on Brazilian stock exchanges without obtaining separate electronic certificates of foreign capital registration, you would not be able to remit abroad non-Brazilian currency. In addition, if you do not qualify under the foreign investment regulations, you will generally be subject to less favorable tax treatment of dividends and distributions on, and the proceeds from any sale of, our common shares.

We may need to raise additional funds in the future and may issue additional common shares or convertible securities, which may result in a dilution of your interest in our common shares underlying the ADSs. In addition, a dilution of your interest in our common shares underlying the ADSs may occur in the event of our merger, consolidation or any other corporate transaction of similar effect in relation to companies that we may acquire in the future.

          We may have to raise additional funds in the future through private or public offerings of shares or other securities convertible into shares issued by us. The funds we raise through the public distribution of shares or securities converted into shares may be obtained with the exclusion of right of first refusal of our existing shareholders, including investors in our common shares

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underlying the ADSs, as provided by the Brazilian Corporate Law, which may dilute the interest of our then-existing investors. In addition, a dilution of your interest in our common shares underlying the ADSs may occur in the event of merger, consolidation or any other corporate transaction of similar effect in relation to companies that we may acquire in the future.

The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the vote of our common shares underlying the ADSs.

          Holders of ADSs do not have the same rights as our registered shareholders. As a holder of ADSs, you will not have any right to attend general meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the voting rights with respect to the underlying common shares represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Under the deposit agreement, you may vote only by giving voting instructions to the depositary. If we instruct the depositary to ask for your instructions, then upon receipt of your voting instructions, the depositary will try, as far as is practicable, to vote the underlying common shares that are represented by the ADSs, in accordance with your instructions. If we do not instruct the depositary to ask for your instructions, the depositary may still vote in accordance with instructions you give, but it is not required to do so. You will not be able to directly exercise your right to vote with respect to our underlying common shares represented by the ADSs unless you withdraw the shares and become the registered holder of such shares prior to the record date for the general meeting. We cannot guarantee that the process for the cancellation and exchange of the ADSs will be completed prior to the record date for the general meeting.

          When a general meeting is convened, you may not receive sufficient advance notice of the meeting to withdraw our common shares underlying your ADSs and to vote directly with respect to any specific matter or resolution to be considered and voted upon at the general meeting.

          If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We have agreed to give the depositary no less than 15 days' prior notice of shareholder meetings. Nevertheless, we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote our underlying common shares represented by the ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to direct how our common shares underlying the ADSs are voted and you may have no legal remedy if the common shares underlying the ADSs are not voted as you requested.

Your right to participate in any future offerings may be limited, which may result in the dilution of your interest in our capital stock.

          We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to you in the United States unless we register both the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. In particular, holders of our common shares, including our common shares underlying the ADSs benefit from certain preemptive rights in connection with future issuances by us of our common shares or securities convertible into our common shares. Holders of our common shares, including in the form of ADSs, will be unable to exercise the preemptive rights relating to our common shares unless a registration statement under the Securities Act is effective with respect to those preemptive rights or an exemption from registration requirement under the Securities Act is otherwise available.

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          In addition, under the deposit agreement, the depositary will not make rights available to you unless both the rights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act or exempt from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective and we may not be able to establish a necessary exemption from registration under the Securities Act.

          Accordingly, you may be unable to participate in our rights offerings or additional offerings of our common shares in the future and may experience dilution in your holdings.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, the market price and trading volume of our common shares, including in the form of ADSs, could decline.

          The trading market for our common shares, including in the form of ADSs, depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our common shares, including in the form of ADSs, could decline, which might cause the market price and trading volume of our common shares, including in the form of ADSs to decline.

We and the depositary are entitled to amend the deposit agreement and to change the rights of ADS holders under the terms of such agreement, and we may terminate the deposit agreement, without the consent of the ADS holders.

          We and the depositary are entitled to amend the deposit agreement and to change the rights of the ADS holders under the terms of such agreement, without the consent of the ADS holders. We and the depositary may agree to amend the deposit agreement in any way we decide is necessary or advantageous to us. Amendments may reflect, among other things, operational changes in the ADS program, legal developments affecting ADSs or changes in the terms of our business relationship with the depositary. In the event that the terms of an amendment are disadvantageous to ADS holders, ADS holders will only receive 30 days' advance notice of the amendment, and no consent of the ADS holders is required under the deposit agreement. Furthermore, we may decide to terminate the ADS facility at any time for any reason. For example, terminations may occur when we decide to list our shares on a non-U.S. securities exchange and determine not to continue to sponsor an ADS facility or when we become the subject of a takeover or a going-private transaction. If the ADS facility is to be terminated, ADS holders will receive at least 90 days' prior notice, but no consent is required from them. In the event that we decide to make an amendment to the deposit agreement that is disadvantageous to ADS holders or terminate the deposit agreement, the ADS holders may choose to sell their ADSs or surrender their ADSs and become direct holders of our underlying common shares, but will have no right to any compensation whatsoever.

ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.

          The deposit agreement governing the ADSs representing our common shares provides that, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our common shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws. If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether

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the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the City of New York, which has non-exclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before entering into the deposit agreement.

          If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action.

          Nevertheless, if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.

Holders of ADSs may not receive any dividends or interest on equity.

          Our bylaws require us to pay our shareholders a mandatory dividend of at least 25.0% of our annual adjusted net income, as calculated under Brazilian GAAP and as adjusted according to Brazilian Corporate Law, distributed as dividends or interest on equity. Our net income may be capitalized, used to offset losses or retained under the terms of Brazilian Corporate Law and may not be fully available for the payment of dividends or interest on equity. In addition, Brazilian Corporate Law allows publicly-held companies, like us, to suspend the required minimum distribution of dividends. The payment of dividends may be suspended if our board of directors reports at a general shareholders' meeting that such distribution would be incompatible with our financial condition. If the abovementioned occurs, holders of the ADSs underlying our common shares may not receive dividends or interest on equity.

          To the extent we distribute dividends or interest on equity, the depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our common shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of common shares your ADSs represent. However, the depositary may, at its discretion, decide that it is inequitable or impractical to make a distribution available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute certain property through the mail, or that the value of certain distributions may be less than the cost of mailing them. In such instances, the depositary may decide not to distribute such property to you.

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We do not have a controlling shareholder or a control group that holds more than 50% of our common shares, which may leave us susceptible to shareholder alliances, conflicts among shareholders and other events arising from the absence of a controlling shareholder or a group of controlling shareholders that holds more than 50% of our common shares.

          We do not have a controlling shareholder or a control group that holds more than 50% of our common shares. As of the date of this prospectus, our founding shareholders jointly hold a minority interest of 16.46% of our capital stock. Accordingly, shareholder alliances may be formed or shareholders' agreements may be entered into, which may result in the creation of a control group. In the event that a controlling group emerges and has decision-making power, we may suffer sudden and unexpected changes to our corporate policies and strategies, including the replacement of our executive officers. In addition, we may become more vulnerable to hostile attempts to acquire control and conflicts resulting therefrom.

          The absence of a controlling group with more than 50% of our common shares, on the other hand, could make certain decision-making processes more difficult, as the minimum quorum required by law for certain deliberations may not be reached. In the absence of a control group, we and our minority shareholders may not have the same protection provided by the Brazilian Corporate Law against abuses by other shareholders and, thus, may face certain difficulties in seeking indemnification for damages arising therefrom.

          Any sudden and unexpected changes to our management, corporate policies and strategies, hostile attempts to acquire control or any other dispute among our shareholders relating to their rights as shareholders may materially adversely affect us.

Our bylaws contain provisions for protection against a hostile takeover, which may prevent or delay transactions that may be of interest to you.

          Our bylaws contain provisions that make hostile takeover attempts difficult without prior negotiations with our controlling shareholders. One such provision requires a shareholder that becomes a holder of 25.0% or more of our capital stock to conduct a public offering to purchase all of our shares at a price calculated according to our bylaws, the Brazilian Corporate Law and applicable regulations. The same obligation exists when any person acquires certain rights over 30.0% or more of our capital stock. These provisions may prevent or delay takeover attempts and may discourage, delay or prevent takeover attempts that our controlling shareholders would deem inadvisable, including public tender offers for our common shares in which our shareholders would receive a premium.

Following completion of this offering, the same group of shareholders who exercise minority control over us will continue to exercise such control, and their interests may conflict with the interests of our other shareholders.

          The group of minority shareholders who effectively control us has the power to, among other matters, elect the majority of the members of our board of directors and determine the result of any decision that requires shareholder approval, provided there is no conflict of interest in relation to their voting rights, including with respect to related-party transactions, corporate restructuring, asset sales, partnerships and time of payment of any future dividends, subject to the mandatory minimum dividend required by the Brazilian Corporate Law. The group of minority shareholders who effectively control us may have conflicts of interest amongst themselves and/or with our other shareholders.

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Common shares, including common shares underlying ADSs, eligible for future sale may cause the market price of the ADSs to decline significantly.

          The market price of the ADSs and our common shares underlying the ADSs may decline as a result of sales of a large number of ADSs or common shares in the market after this offering or the perception that these sales may occur. These sales, or the possibility that these sales may occur, also may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

          Following the completion of this offering, we will have outstanding                  common shares, including                  common shares underlying the ADSs, assuming the underwriters do not exercise their option to purchase additional ADSs. Subject to the lock-up agreements described below, the ADSs sold in this offering, including our common shares underlying the ADSs, will be freely tradable without restriction or further registration under the Securities Act by persons other than our affiliates within the meaning of Rule 144 of the Securities Act.

          Our common shares underlying the ADSs trade on the Novo Mercado segment of the B3. A significant sell-off of our common shares on the B3 may materially adversely affect the market price of the ADSs. In addition, the perception in the public markets that sales by holders of our common shares might occur may also cause the market price of the ADSs to decline.

          We have agreed with the underwriters, subject to certain exceptions, not to issue, offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of our common stock or ADSs or any securities convertible into or exchangeable or exercisable for any of our common stock and ADSs during the 90-day period after the date of this offering. Our directors and executive officers and certain relevant equity holders have agreed to substantially similar lock up provisions, subject to certain exceptions. However, the underwriters may, in their sole discretion and without notice, release all or any portion of the shares from the restrictions in any of the lock-up agreements described above. In addition, these lock-up agreements are subject to the exceptions described in "Common Shares Eligible for Future Sale," including the right for our company to issue new shares if we carry out an acquisition or enter into a merger, joint venture or strategic participation.

          Sales of a substantial number of our common shares, or the ADSs, upon expiration of the lock-up agreements, the perception that such sales may occur, or early release of these lock-up periods, could cause our market price to fall or make it more difficult for you to sell your ADSs at a time and price that you deem appropriate.

As our initial public offering price is substantially higher than our net tangible book value per share, you will experience immediate and substantial dilution.

          If you purchase ADSs in this offering, you will pay more for your ADSs than the amount paid by existing shareholders for our common shares on a per ADS basis. As a result, you will experience immediate and substantial dilution of approximately US$             per ADS (assuming no exercise of outstanding options to acquire common shares), representing the difference between our pro forma net tangible book value per ADS of US$             as of             , 2019 after giving effect to this offering, and the assumed initial public offering price per share of US$             per ADS (the midpoint of the estimated initial public offering price range set forth on the front cover page of this prospectus). In addition, you may experience further dilution to the extent that our common shares are issued upon the exercise of share options. Substantially all of our common shares issuable upon the exercise of currently outstanding share options will be issued at a purchase price on a per ADS basis that is less than the initial public offering price per ADS in this offering. See "Dilution" for a more complete description of how the value of your investment in the ADSs will be diluted upon the completion of this offering.

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Transformation into a public company in the United States may increase our costs and disrupt the regular operations of our business.

          This offering will have a significant transformative effect on us. Our business historically has operated as a publicly-held company in Brazil, and we expect to incur significant additional legal, accounting, reporting and other expenses as a result of having ADSs publicly-traded in the United States.

          We also anticipate that we will incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as rules implemented by the SEC and the NYSE. We expect these rules and regulations to increase our legal and financial compliance costs and make some management and corporate governance activities more time-consuming and costly, particularly after we are no longer an "emerging growth company." These rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. This could have an adverse impact on our ability to recruit and bring on a qualified independent board.

          The additional demands associated with being a public company in the United States may disrupt regular operations of our business by diverting the attention of some of our senior management team away from revenue producing activities to management and administrative oversight, adversely affecting our ability to attract and complete business opportunities and increasing the difficulty in both retaining professionals and managing and growing our businesses. Any of these effects could harm our business, financial condition and results of operations.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

          Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of the ADSs and our underlying common shares. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, results of operations and financial condition. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value. See "Use of Proceeds."

As a foreign private issuer and an "emerging growth company" (as defined in the JOBS Act), we will have different disclosure and other requirements than U.S. domestic registrants and non-emerging growth companies.

          As a foreign private issuer and emerging growth company, we may be subject to different disclosure and other requirements than domestic U.S. registrants and non-emerging growth companies. For example, as a foreign private issuer in the United States, we are not subject to the same disclosure requirements as a domestic U.S. registrant under the Exchange Act, including the requirements to prepare and issue quarterly reports on Form 10-Q or to file current reports on Form 8-K upon the occurrence of specified significant events, the proxy rules applicable to domestic U.S. registrants under Section 14 of the Exchange Act or the insider reporting and short-swing profit rules applicable to domestic U.S. registrants under Section 16 of the Exchange Act. In addition, we intend to rely on exemptions from certain U.S. rules which will permit us to follow Brazilian legal requirements rather than certain of the requirements that are applicable to U.S. domestic registrants.

          Furthermore, foreign private issuers are required to file their annual report on Form 20-F within 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are

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required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information, although we will be subject to Brazilian laws and regulations having substantially the same effect as Regulation Fair Disclosure. As a result of the above, even though we are required to file reports on Form 6-K disclosing the limited information which we have made or are required to make public pursuant to Brazilian law, or are required to distribute to shareholders generally, and that is material to us, you may not receive information of the same type or amount that is required to be disclosed to shareholders of a U.S. company.

          The JOBS Act contains provisions that, among other things, relax certain reporting requirements for emerging growth companies. Under this act, as an emerging growth company, we will not be subject to the same disclosure and financial reporting requirements as non-emerging growth companies. For example, as an emerging growth company we are permitted to, and intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. Also, we will not have to comply with future audit rules promulgated by the U.S. Public Company Accounting Oversight Board, or PCAOB, (unless the SEC determines otherwise) and our auditors will not need to attest to our internal controls under Section 404(b) of the Sarbanes-Oxley Act. We may follow these reporting exemptions until we are no longer an emerging growth company. As a result, our shareholders may not have access to certain information that they deem important. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual revenue of at least US$1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common shares, including common shares underlying the ADSs, held by non-affiliates exceeds US$700.0 million as of the prior June 30, and (2) the date on which we have issued more than US$1.0 billion in non-convertible debt during the prior three-year period. Accordingly, the information about us available to you will not be the same as, and may be more limited than, the information available to shareholders of a non-emerging growth company.

          We could be an "emerging growth company" for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our common shares, including common shares underlying the ADSs, held by non-affiliates exceeds US$700 million as of any June 30 (the end of our second fiscal quarter) before that time, in which case we would no longer be an "emerging growth company" as of the following December 31 (our fiscal year end). We cannot predict if investors will find the ADSs less attractive because we may rely on these exemptions. If some investors find the ADSs less attractive as a result, there may be a less active trading market for the ADSs and the price of the ADSs and our common shares may be more volatile.

We are a foreign private issuer and, as a result, in accordance with the listing requirements of the NYSE we rely on certain home country governance practices from Brazil, rather than the corporate governance requirements of the NYSE.

          We report under the Exchange Act as a non-U.S. company with foreign private issuer status. The NYSE rules provide that foreign private issuers are permitted to follow home country practice in lieu of certain NYSE corporate governance standards. The standards applicable to us are considerably different than the standards applied to U.S. domestic issuers. For instance, we are not required to:

    have a majority of independent members on our board of directors (other than as may result from the requirements for audit committee member independence under the Exchange Act);

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    have a minimum of three members on our audit committee;

    have a compensation committee or a nominating and corporate governance committee;

    have regularly scheduled executive sessions of our board that consist of independent directors only; or

    adopt and disclose a code of business conduct and ethics for directors, officers and employees.

          As a foreign private issuer, we may follow our home country practice in Brazil in lieu of the above requirements. Therefore, the approach to governance adopted by our board of directors may be different from that of a board of directors consisting of a majority of independent directors, and, as a result, our management oversight may be more limited than if we were subject to all of the NYSE corporate governance standards. Accordingly, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers. See "Description of Capital Stock — Principal Differences between Brazilian and U.S. Corporate Governance Practices."

We may lose our foreign private issuer status which would then require us to comply with the Exchange Act's domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

          In order to maintain our current status as a foreign private issuer, either (a) more than 50% of our common shares, including common shares underlying the ADSs, must be either directly or indirectly owned of record by non-residents of the United States or (b)(i) a majority of our executive officers or directors must not be U.S. citizens or residents, (ii) more than 50% of our assets cannot be located in the United States and (iii) our business must be administered principally outside the United States. If we lose this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and NYSE rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the costs we will incur as a foreign private issuer.

Total return swap and hedge transactions may influence the demand and the price of our common shares.

          The underwriters or their respective affiliates may subscribe for our common shares underlying the ADSs in order to hedge transactions involving our common shares. These transactions may influence the demand and the price per ADS and reduce liquidity of our common shares, including the common shares underlying the ADSs, in the secondary market.

The protections afforded to minority shareholders in Brazil are different from those in the United States and may be more difficult to enforce.

          Under Brazilian law, the protections afforded to minority shareholders are different from those in the United States. In particular, the legal framework and case law pertaining to disputes between shareholders and us, our directors and officers or our shareholders is less developed in Brazil than it is in the United States and there are different procedural requirements for bringing shareholder lawsuits, such as shareholder derivative suits, which differ from those you may be familiar with under U.S. or other laws. There is also a substantially less active plaintiffs' bar for the enforcement of shareholders' rights in Brazil than there is in the United States. As a result, in practice it may be

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more difficult for our minority shareholders to enforce their rights against us or our directors or officers or shareholders than it would for shareholders of a U.S. domestic issuer.

Investors may experience difficulty in effecting service of process or enforcing judgments on us, our directors and/or our officers within the United States in connection with this offering.

          We are a corporation (sociedade anônima) incorporated under the laws of Brazil. All of our directors and officers reside outside the United States and a majority of our assets are located outside the United States. As a result, it may not be possible or it may be difficult for investors to effect service of process upon us or these other persons within the United States or to enforce judgments obtained in United States courts against us, our directors or our officers, including those predicated upon the civil liability provisions of the federal securities laws of the United States. Also, because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if certain conditions are met, you may face greater difficulties in protecting your interests in the case of actions against us or our board of directors or executive officers than would shareholders of a U.S. corporation. See "Enforcement of Judgments and Service of Process."

We may be a passive foreign investment company for U.S. federal income tax purposes in any year, which could result in adverse U.S. federal income tax consequences to U.S. holders

          In general, if for any taxable year 75% or more of our gross income consists of passive income or 50% or more of the average quarterly value of our assets consists of assets that produce, or are held for the production of, passive income, we would be characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. Passive income generally includes dividends, interest, rents, royalties and gains from the disposition of investment assets, subject to various exceptions. Based upon the current and anticipated composition of our gross income and gross assets, the market value of our assets and the nature of our business, we do not believe that we were treated as a PFIC for the taxable year ending on December 31, 2018 or will be treated as a PFIC in 2019 or in the foreseeable future. However, a company's PFIC status is a factual determination that is made on an annual basis and depends on the composition of a company's income and assets and the market value of its assets from time to time. If we are a PFIC for any taxable year during which a U.S. holder (as defined in "Material U.S. Federal Income Tax Considerations for U.S. Holders") owned our common shares or ADSs, such U.S. holder may be subject to certain adverse U.S. federal income tax consequences, including increased tax liability on gains from dispositions of our common shares or ADSs and certain distributions and a requirement to file annual reports with the Internal Revenue Service. See "Taxation — Material U.S. Federal Income Tax Considerations for U.S. Holders — Passive Foreign Investment Company Rules" for more information. Potential U.S. holders are urged to consult their tax advisors with respect to whether we may be treated as a PFIC and the tax consequences if we are so treated.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

          The statements included in this prospectus regarding our plans, forecasts, expectations of future events, strategies, projections, results of operations and financial trends affecting our business, as well as statements regarding other information, in particular under the sections "Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," include estimates and forward-looking statements.

          Our estimates and forward-looking statements are mainly based on our current expectations and estimates about future events and trends, which affect or may affect our business, results of operations, cash flow margins, financial condition, prospects and the trading price of our common shares underlying the ADSs, and the industry in which we operate. These estimates are subject to several risks and uncertainties. They are made in light of information currently available to us and are not guarantees of future performance.

          Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to risks and uncertainties, and are based on information currently available to us. As a result of the risks and uncertainties involved, the estimates and forward-looking statements discussed in this prospectus might not prove accurate or correct and our future results and our performance may differ materially from those expressed in these forward-looking statements due to, among others, the factors below, many of which are beyond our control or ability to predict. Because of these uncertainties, you should not place undue reliance on these forward-looking statements to make a decision to invest in our common shares.

          Our estimates and forward-looking statements may be affected by several factors, including, but not limited to, the following:

    government interventions resulting in changes in the economic, tax or regulatory environment in Brazil;

    changes in general economic, political, demographic and business conditions in Brazil, particularly in the regions in which we operate, including, for example, inflation, the devaluation of the real, interest rates, exchange rates, employment levels, population growth, consumer confidence and liquidity in the financial and capital markets;

    conditions affecting our industry and the financial condition of our customers;

    factors or trends that may affect our business, market share, financial condition, liquidity or results of operations;

    the impact of substantial and increasing competition in our market, innovation by our competitors, and our ability to compete effectively;

    our ability to successfully execute our expansion plan and growth strategy, including by securing adequate sources of financing;

    our relationships with our current and future suppliers, customers and service providers;

    our ability to maintain, protect and enhance our brand and intellectual property;

    our ability to innovate and respond to technological advances and significant changes in consumption preferences of our final customers; and

    other risk factors discussed in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this prospectus.

          Statements that depend on or are related to events, future or uncertain conditions or that include the words "believe," "anticipate," "continue," "expect," "estimate," "would," "plan,"

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"could," "will," "may," "shall," "intend," "foresee," "project" and other variations, as well as similar words, are intended to identify forward-looking statements. Forward-looking statements and estimates speak only as of the date they are made, and we do not undertake any obligation to update or revise any forward-looking statements to reflect new information, future events or other factors.

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USE OF PROCEEDS

          We estimate the net proceeds to us from our sale of common shares in the global offering, including common shares in the form of ADSs, will be approximately US$              million (or approximately US$              million if the underwriters' option to purchase additional shares is exercised in full), after deducting estimated underwriting discounts and commissions and estimated offerings payables by us. This estimate assumes (1) an offering price of R$             per common share in the Brazilian offering, which is the closing price per common share reported on the B3 on                          , 2019 (or US$             when converted at an exchange rate of R$             to US$1.00 as reported by the Central Bank on                          , 2019) and (2) that ADSs are offered in the international offering at             times that price, reflecting the ratio of             common shares per ADS).

          Each US$1.00 increase (decrease) in the assumed public offering price of US$             per ADS would increase (decrease) the net proceeds to us by approximately US$             , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 1.0 million in the number of ADSs we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by approximately US$              million, assuming the assumed initial public offering price stays the same.

          We intend to use the net proceeds from the primary offering to finance (1) our general working capital requirements, (2) our acquisition strategy and (3) the further development of our new initiatives, including Linx Pay Hub as set forth in the table below:

Use of Proceeds

    Percentage     Estimated Amount
 

          (in millions of reais)(1)(2)  

Finance working capital requirements

      %      

Finance our acquisition strategy

      %      

Finance the development of new initiatives

      %      

Total

      %      

(1)
Based on a price per common share of R$           per common share, the closing price per common share as reported on the B3 on                          , 2019.

(2)
After deducting estimated underwriting discounts and commissions and estimated offerings payables by us.

          We will have broad discretion in allocating the net proceeds from this offering. With respect to the financing of our acquisition strategy, we constantly analyze market acquisition opportunities as they arise and are currently analyzing such opportunities in the ordinary course of our business. As of the date of this prospectus, no such opportunity has progressed to advanced discussions or has otherwise reached a level in negotiations such that we would deem the acquisition to be probable.

          Although we currently anticipate that we will use the net proceeds from this offering as described above, there may be circumstances where a reallocation of funds is necessary. The amounts and timing of our actual expenditures will depend upon numerous factors, including the risk factors described under "Risk Factors." Accordingly, our management will have flexibility in applying the net proceeds from this offering. An investor will not have the opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use the proceeds.

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          Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, interest-bearing instruments and Brazilian and U.S. government securities.

          We will not receive any proceeds from the sale by the selling shareholder of its common shares including in the form of ADSs in the global offering.

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DIVIDENDS AND DIVIDEND POLICY

History of Dividend Payments and Net Income Retention

          Set forth in the table below are our historical dividend payments made in the years ended December 31, 2018, 2017 and 2016:

  For the Year Ended December 31,

  2018   2017   2016

  (in R$ thousands unless otherwise indicated)

Net income

  71,055   84,845   68,501

Dividends declared and interest on equity over net income for the period (%)

  56.29%   47.14%   52.55%

Dividends declared and interest on equity in relation to the equity of the Issuer (%)

  6.72%   7.25%   5.94%

Total dividends declared and interest on equity

  40,000   40,000   36,000

Profit retention

  31,055   44,845   32,501

Date of the retention approval

  April 24, 2019   April 16, 2018   April 7, 2017

Amounts Available for Distribution

          At each annual shareholders' meeting, our board of directors is required to advise on the allocation of our net income for the preceding year. The Brazilian Corporate Law and our bylaws in effect as of the date of completion of this offering require that we distribute annually to our shareholders a mandatory dividend, which is the mandatory distribution of a minimum percentage of our net income for the prior fiscal year, unless our board of directors recommends against such distribution due to considerations relating to our then financial condition.

          Also, according to the Brazilian Corporate Law, a corporation's net income may be allocated to profit reserves and to the payment of dividends.

          Our bylaws provide that an amount equal to at least 25% of our annual net profit, after deducting allocations to the legal reserve, statutory reserve, contingency reserve and other reserves, if any, or reversing contingency reserve amounts from prior years, if any, and unrealized profit reserve amounts, upon their realization and if not absorbed by subsequent losses, if any, should be available for distribution as mandatory dividends or interest on equity.

Payment of Dividends and Interest on Equity

          The Brazilian Corporate Law requires that the bylaws of a Brazilian corporation specify a minimum percentage of income available for the annual distribution of dividends, known as the mandatory dividend, which must be paid to shareholders either as dividends or interest on equity.

          Pursuant to the Brazilian Corporate Law and our bylaws in effect as of the date of completion of this offering, at least 25.0% of our adjusted net income should be allotted for the distribution and payment of the mandatory dividend to our shareholders. Our net income for this purpose is adjusted by reducing net income allocated to our legal reserve and other reserves, and by increasing net income by any reversals of the reserves.

          While we are required under the Brazilian Corporate Law to pay a mandatory distribution every year, we are also allowed to suspend the mandatory distribution of dividends if the board of directors reports to our annual shareholders' meeting that the distribution would be inadvisable given our financial condition. In addition, our management must submit a report setting out the reasons for the suspension to the CVM. Net income not distributed by virtue of a suspension is

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allocated to a separate reserve and, if not absorbed by subsequent losses, is required to be distributed as soon as the financial condition of the company permits such payments.

Dividends

          We are required, pursuant to the Brazilian Corporate Law, to hold a shareholders' meeting by no later than the fourth month after the end of each fiscal year, at which, among other matters, the shareholders shall decide on the yearly dividend distribution. The yearly dividend payment is based upon our audited financial statements for the immediately preceding fiscal year.

          Any holder of record of shares at the time a dividend is declared is entitled to receive dividends. Under the Brazilian Corporate Law, dividends are generally required to be paid within 60 days following the date on which the dividend is declared, unless a shareholders' resolution established another payment date, which, in any event, must occur before the end of the year in which the dividend is declared.

          Shareholders have a three-year period from the date of the resolution for the payment of dividends to claim the dividends or interest on equity, after which the aggregate amount of any unclaimed dividend legally reverts to us.

          Pursuant to our bylaws, our board of directors may declare interim dividends or interest attributable to shareholders' equity based on realized profits verified in semi-annual financial statements. The board of directors may also declare dividends based on financial statements prepared in shorter periods, provided that the total amount of dividends paid in each semester does not exceed the amounts accounted for in our capital reserve account set forth in paragraph 1 of Article 182 of the Brazilian Corporate Law.

Interest on equity

          Since January 1, 1996, Brazilian companies have been authorized to pay interest on equity to shareholders, and to treat those payments as a deductible expense for purposes of calculating corporate income tax and, since 1998, the social contribution. Payment of this interest on equity shall be made at the discretion of the board of directors, subject to the approval by shareholders at a general meeting.

          The amount of the tax deduction in each year is limited to the greater of 50.0% of our net income (after the deduction of any allowances for social contribution tax, but before considering allowances for corporate income tax and interest on equity) for the period in respect of which the payment is made and 50.0% of our accumulated profits and profit reserves at the beginning of the relevant period. Payments of interest on equity, net of withholding income tax, may be considered as part of the mandatory dividend distribution. The rate applied in calculating interest on equity cannot exceed the pro rata die variation of the TJLP. Under applicable law, we are required to pay to our shareholders an amount sufficient to ensure that the net amount they receive in respect of interest on equity, after payment of any applicable withholding tax, plus the amount of distributed dividends, is at least equivalent to the minimum mandatory dividend amount.

Dividend Policy

          The destination of our accrued profits is determined by our shareholders at the general shareholders' meeting, observing the limits set by applicable law and our bylaws. We maintain a legal reserve as well as a profit retention reserve that aims to strengthen our financial position and enable our organic growth. Five per cent of our net income must be allocated to our legal reserve, which may not exceed 20% of our capital stock, unless another destination cannot be determined

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at the general shareholders' meeting. The maximum limit of our profit retention reserve is equal to the value of our capital stock minus the balances of our other reserves.

Reserve Accounts

Capital reserves

          Under the Brazilian Corporate Law, our capital stock reserves consists of: the premium on the issuance of shares, special premium reserve from mergers, disposition of warrants, debentures issuance premium, tax incentive and donations. The amounts accounted as our capital stock reserve are disregarded for the purpose of determination of mandatory dividends. While listed under the Novo Mercado, we may not issue participation bonuses (partes beneficiárias). Capital stock reserves may only be applied to, (1) absorb losses that exceed accumulated earnings and profit reserves; (2) redeem, repay or purchase our common shares; (3) redeem the shares of our founding shareholder; (4) increase our capital stock and (5) pay dividends to preferred shares, when applicable. Amounts credited to our capital reserve are not included in the calculation of the minimum mandatory dividend.

Legal reserve

          Under the Brazilian Corporate Law and our bylaws in effect as of the date of completion of this offering, we are required to maintain a legal reserve to which we must allocate 5% of our net profit for each fiscal year, after certain deductions permitted by law, until the aggregate amount of the reserve equals 20% of our paid-in capital. However, we are not required to make any allocations to our legal reserve in a fiscal year in which the legal reserve, when added to our other capital reserves, exceeds 30% of our capital stock. The amounts to be allocated to such reserve must be approved by our shareholders in a shareholders' meeting, and may be used only for the increase of our capital stock or to offset net losses. Therefore, funds in our legal reserve are not available for the payment of dividends.

Profit retention reserve

          Pursuant to the Brazilian Corporate Law, our shareholders may decide at the annual shareholders' meeting to retain a portion of our net income for investments in the company. The amount retained must be used as provided for in a capital expenditure budget previously approved by our shareholders. If encompassing more than one year, this budget must be reviewed annually. The allocation of funds to this reserve cannot jeopardize the payment of the mandatory dividends.

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CAPITALIZATION

          The table below sets forth our cash and cash equivalents, and our total capitalization (defined as total current and non-current loans and financings plus shareholders' equity) as of March 31, 2019, as follows:

    (1)
    on an actual basis; and

    (2)
    as adjusted to give effect to the sale of our common shares by us, including common shares underlying the ADSs, in the global offering, and the receipt of approximately US$           million (R$           million) in estimated net proceeds, based on an offering price of R$           per common share in the Brazilian offering, the closing price per common share as reported on the B3 on                    , 2019 (and assuming that ADSs are offered in the international offering at           times that price, reflecting the ratio of            common shares per ADS), after deduction of the estimated underwriting discounts and commissions and estimated offering expenses payable by us in connection with the global offering, and the use of proceeds therefrom, and assuming the option to purchase additional common shares, including common shares underlying the ADSs, is not exercised.

          Investors should read this table in conjunction with our consolidated financial statements and the related notes included elsewhere in this prospectus, with the sections of this prospectus entitled "Selected Financial Information," with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with other financial information contained in this prospectus.

    As of March 31, 2019
 

    Actual     As Adjusted
 

    (in millions of US$)(1)     (in millions of R$)     (in millions of US$)(1)     in millions of R$)  

Current loans and financings

    13.9     54.1              

Non-current loans and financings

    71.0     276.8              

Current payables for the acquisition of businesses

    12.7     49.5              

Non-current payables for the acquisition of businesses

    11.7     45.5              

Total shareholder equity(2)

    276.3     1,076.5              

Total capitalization(2)(3)

    385.6     1,502.4              

(1)
Solely for the convenience of the reader, real amounts as of March 31, 2019 have been translated into U.S. dollars at the selling rate reported by the Central Bank at March 31, 2019 of R$3.8967 to US$1.00. See "Exchange Rates" for further information on recent fluctuations in exchange rates.

(2)
Each US$1.00 increase (decrease) in the offering price common share in the global offering would increase (decrease) our total capitalization and shareholders' equity by R$             .

(3)
Total capitalization corresponds to total current and non-current loans and financings plus current and non-current payables for the acquisition of businesses plus shareholders' equity.

          An increase (decrease) of 1.0 million in the number of our common shares sold in the global offering by us would increase (decrease) (1) the value of our total shareholders' equity by US$              million, and (2) our total capitalization by US$              million, assuming an initial public offering price of US$              per common share and after deducting estimated underwriting discounts and commissions and the estimated offering expenses payable by us.

          Other than as set forth above, there have been no material changes to our capitalization since March 31, 2019.

          The selling shareholder will receive all net proceeds from the sale of our common shares held by it. Therefore, we will not receive any net proceeds from their secondary offering and our capitalization will not be impacted by such net proceeds.

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DILUTION

          As of March 31, 2019, our shareholders' equity was R$1,076.5 million and our total capital stock consisted of 166,308,960 common shares. Based on our shareholders' equity as of March 31, 2019, our book value per common share as of March 31, 2019 was R$6.78. Book value represents our total assets less our total liabilities. Book value per common share as of March 31, 2019 is determined by dividing our total book value as of such date by the number of our common shares (not including our treasury shares) outstanding as of such date.

          After giving effect to the sale by us of           common shares offered by us in the global offering, and assuming (1) an offering price of R$           per common share, the closing price per common share as reported on the B3 on                    , 2019 (and assuming that ADSs are offered in the global offering at           times that price, reflecting the ratio of           common shares per ADS) and (2) no exercise of the underwriters' option to purchase additional common shares, including common shares underlying the ADSs, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our estimated shareholders' equity as of the date of this prospectus would have been approximately R$           million, representing R$           per common share, or US$           per ADS. This represents an immediate increase in book value of R$           per common share or US$           per ADS to existing shareholders and an immediate dilution in book value of R$           per common share, or US$           per ADS to new investors purchasing common shares or ADSs in this offering. Dilution for this purpose represents the difference between the price per common share or ADS paid by these purchasers and the book value per common share or ADS immediately after the completion of the offerings.

          The following table illustrates this dilution to new investors purchasing common shares, including common shares in the form of ADSs, in the global offering:

    Common
Shares
    ADSs(3)
 

Price per common share and ADS(1)

  R$                 US$                

Book value per common share and ADS as of March 31, 2019

                                     

Increase in book value per common share and ADS attributable to existing investors

                                     

Book value per common share and ADS after the global offering

                                     

Dilution per common share and ADS to new investors

  R$                 US$                

Percentage dilution in book value per common share and ADS for new investors(2)

      %     %

(1)
Based on a price per common share of R$           , the closing price per common share as reported on the B3 on                    , 2019.

(2)
Percentage dilution for new investors is calculated by dividing the dilution in book value for new investors by the price of the offering.

(3)
Translated into U.S. dollars at the selling rate reported by the Central Bank at March 31, 2019 of R$3.8967 to US$1.00. See "Exchange Rates" for further information on recent fluctuations in exchange rates.

          Each R$1.00 increase (decrease) in the offering price per common share would increase (decrease) the net book value after this offering by R$           per common share or US$           per ADS assuming no exercise of the underwriters' option to purchase additional common shares, including common shares underlying the ADSs, and the dilution to investors in the offering by R$           per common share or US$           per ADS, assuming that the number of common share offered in the Brazilian offering and the number of ADSs offered in the international offering, as set forth on the cover page of this prospectus, remain the same.

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Stock Option and Restricted Share Plans

          We approved (1) our stock option plans at our general shareholders' meetings held on December 4, 2012, April 27, 2016 and January 23, 2019 and (2) our restricted share plans at our general shareholders' meetings held on April 27, 2016 and January 23, 2019, or the Stock Plans.

          As of the date of this prospectus, 946,123 stock options and 2,045,714 restricted shares have been granted but not yet exercised under the Stock Option and Restricted Shares Plans.

          Our directors, senior executives and other key employees are eligible to participate in the Stock Plans. The total number of our common shares issued or which may be issued under the Stock may not exceed 5% of our total capital stock as of the date of the approval of each program under the Stock Plans. For more information, see "Management — Compensation — Share-Based Compensation."

          The table below illustrates the hypothetical effect of the exercise of all stock options and common shares granted under the Stock Plans as of on March 31, 2019, considering: (1) an exercise price of R$13.84 for stock options issued under our first option plan, representing the weighted average exercise price of all stock options granted under our first stock option plan; (2) an exercise price of R$16.53 for stock options under our second option plan, representing the weighted average exercise price of all stock options granted under our second stock option plan; and (3) an exercise price of R$21.38 for stock options under our third option plan, representing the weighted average exercise price of all stock options granted under our third stock option plan.

    (in US$, except
percentages)(3)
    (in R$, except
percentages)
 

Price per common share(1)

  US$                 R$                

Book value per common share as of March 31, 2019

             

Book value per common share as of March 31, 2019, taking into consideration the global offering and the exercise of all stock options and common shares granted under our Stock Option Plans

             

Increase in book value per common share attributable to existing investors

             

Dilution per common share to new investors, taking into consideration the global offering and the exercise of all stock options and common shares granted under our Stock Option Plans

             

Percentage of immediate dilution to our investors, considering this offering and the exercise of all stock options and common shares granted under our Stock Option Plans

                  %                 %

(1)
Based on a price per common share underlying the ADSs of R$           , the closing price per common share as reported on the B3 on                     , 2019.

(2)
Weighted average price of all grants.

(3)
Translated into U.S. dollars at the selling rate reported by the Central Bank at March 31, 2019 of R$3.8967 to US$1.00. See "Exchange Rates" for further information on recent fluctuations in exchange rates.

Common Share Purchase Price Comparison

          The following table summarizes the number of common shares acquired from us, the total cash consideration paid and the average price per common share paid to us in the past five years by our senior management or affiliated persons and the public contribution by investors in the

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global offering. This information is based on the initial public offering price of US$         per common share, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us in connection with the global offering.

    Common
Shares
Purchased
    Total
Consideration
    Average
price per
common
share
 

          (US$)(3)  

Senior management and affiliates(1)

    1,001,258 (2)            

Investors in the global offering

                              (4)

(1)
Comprises the current members of our board of directors and executive officers set forth under "Management."

(2)
Comprises our common shares purchased in public offerings and pursuant to our stock option plans as well as our common shares acquired in traditional brokerage transactions.

(3)
Translated into U.S. dollars at the selling rate reported by the Central Bank at March 31, 2019 of R$3.8967 to US$1.00. See "Exchange Rates" for further information on recent fluctuations in exchange rates.

(4)
Corresponds to the closing price per common share as reported on the B3 on                    , 2019.

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EXCHANGE RATES

          The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer of reais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures.

          The real depreciated against the U.S. dollar from mid-2011 to early 2016. In particular, during 2015, due to the poor economic conditions in Brazil, including as a result of political instability, the real depreciated at a rate that was much higher than in previous years. On September 24, 2015, the real fell to its lowest level since the introduction of the currency, at R$4.1945 per US$1.00. Overall in 2015, the real depreciated 32.0%, reaching R$3.9048 per US$1.00 on December 31, 2015. In 2016, the real fluctuated significantly, primarily as a result of Brazil's political instability, appreciating 19.8% to R$3.2591 per US$1.00 on December 31, 2016. In 2017, the real depreciated 1.5% against the U.S. dollar, ending the year at an exchange rate of R$3.3080 per US$1.00. In 2018, the real depreciated 14.6% against the U.S. dollar, ending the year at an exchange rate of R$3.8748 per US$1.00, primarily as a result of lower interest rates in Brazil, which reduced the volume of foreign currency deposited in Brazil in the "carry trade," as well as uncertainty regarding the Brazilian presidential elections held in October 2018. The real/U.S. dollar exchange rate reported by the Central Bank was R$3.6519 per US$1.00 on January 31, 2019, which reflected a 3.4% depreciation in the real against the U.S. dollar in that month. There can be no assurance that the real will not depreciate or appreciate further against the U.S. dollar.

          The Central Bank has intervened occasionally in the foreign exchange market to attempt to control instability in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian government will continue to allow the real to float freely or will intervene in the exchange rate market by re-implementing a currency band system or otherwise. The real may depreciate or appreciate substantially against the U.S. dollar in the future. Furthermore, Brazilian law provides that, whenever there is a serious imbalance in Brazil's balance of payments or there are serious reasons to foresee a serious imbalance, temporary restrictions may be imposed on remittances of foreign capital abroad. We cannot assure you that the Brazilian government will not place restrictions on remittances of foreign capital abroad in the future. In addition, Exchange rate fluctuations will affect the U.S. dollar equivalent of any distributions we make in respect of our common shares including our common shares underlying the ADSs, which will be made in reais. See also, "Risk Factors — Risks Related to Brazil — The volatility of the real against the U.S. dollar and other currencies may have a materially adverse effect on our business and the market price of our common shares."

          The following tables set forth the selling rate, expressed in reais per U.S. dollar (R$/US$) for the periods indicated, as reported by the Central Bank:

Year Ended December 31,

    Period-end     Average for
Period(1)
    Low     High
 

    (R$ per US$)  

2014

    2.6562     2.3547     2.1974     2.7403  

2015

    3.9048     3.3387     2.5754     4.1949  

2016

    3.2591     3.4833     3.1193     4.1558  

2017

    3.3080     3.1925     3.0510     3.3362  

2018

    3.8748     3.6658     3.1391     4.1879  

(1)
Represents the daily average of the exchange rates during the period.

Source: Central Bank

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          Average for              

Month

    Period-end     Period(1)     Low     High
 

    (R$ per US$)  

November 2018

    3.8633     3.7867     3.6973     3.8925  

December 2018

    3.8748     3.8851     3.8285     3.9330  

January 2019

    3.6519     3.7417     3.6519     3.8595  

February 2019

    3.7385     3.7236     3.6694     3.7756  

March 2019

    3.8967     3.8465     3.7762     3.9682  

April 2019

    3.9453     3.8962     3.8345     3.9725  

May 2019 (through May 28)

    4.0275     4.0065     3.9344     4.1056  

(1)
Represents the daily average of the exchange rates during the period.

Source: Central Bank

          As of May 28, 2019, the U.S. dollar selling rate published by the Central Bank was R$4.0275 per US$ 1.00.

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MARKET INFORMATION

          Prior to this offering, there has been no public market for the ADSs. We cannot assure you that an active trading market will develop for the ADSs, or that the ADSs will trade in the public market subsequent to the global offering at or above the initial public offering price. Each ADS will represent             common shares. The principal trading market for our common shares is the B3. Our common shares are listed on the B3 under the symbol "LINX3." As of March 31, 2019, we had 5,005 registered owners of our common shares.

Trading Price of Our Common Shares

          The following table shows the low, average and high trading prices of our common shares for the periods indicated:

    Average Daily     Price per Common Share
 

Period

    Volume     Low     Average(1)     High
 

    (R$ thousand)     (R$)  

2016

                         

First Quarter

    7,346,982     14.80     15.95     17.46  

Second Quarter

    4,444,952     14.70     15.82     17.11  

Third Quarter

    6,186,379     16.13     17.77     19.52  

Fourth Quarter

    9,751,310     15.86     18.03     19.99  

2017

                         

First Quarter

    8,627,877     16.05     17.15     18.40  

Second Quarter

    11,029,423     16.05     17.67     19.45  

Third Quarter

    11,442,615     16.86     18.29     21.00  

Fourth Quarter

    12,966,196     19.44     21.15     22.60  

2018

                         

First Quarter

    17,810,400     18.61     20.26     22.12  

Second Quarter

    12,212,320     16.99     19.92     22.28  

Third Quarter

    12,778,382     15.24     17.31     19.14  

Fourth Quarter

    41,475,452     16.18     25.41     32.60  

2019

                         

First Quarter

    40,666,439     26.00     30.35     37.00  

April

    63,608,333     31.20     35.30     38.77  

May (through May 5)

    45,316,342     31.40     31.95     32.95  

Source: B3.

Calculated as the average of the closing price for the period.

Regulation of the Brazilian Securities Market

          Pursuant to Law No. 6,385, of December 7, 1976, as amended, or the Brazilian Securities Law, and the Brazilian Corporate Law, the Brazilian securities market is regulated and supervised by the CMN, which has general authority over the stock exchanges and securities markets. The CMN regulates and supervises the activities of the CVM and has, among other powers, licensing authority over brokerage firms and also regulates foreign investment and foreign exchange transactions, according to the provisions of the Brazilian Securities Law and Law No. 4,595, dated December 31, 1964, as amended. These laws and other rules and regulations together set the requirements for disclosure of information applying to issuers of securities listed on stock exchanges, the criminal penalties for insider trading and price manipulation, the protection of minority shareholders,

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licensing procedures, supervision of brokerage firms and the governance of Brazilian stock exchanges.

          Under the Brazilian Corporate Law, a company may be either publicly held (companhia aberta), like us, or privately held (companhia fechada). A company is publicly held when it has registered as such with the CVM, thereby becoming subject to reporting and regulatory requirements. A company registered with the CVM may trade its securities either on the B3 or on the Brazilian over-the-counter market. The shares of a listed company may also be traded privately, subject to certain limitations.

          The over-the-counter market is divided into two categories: (1) organized over-the-counter market, in which the transactions are supervised by self-regulating entities authorized by the CVM and (2) non-organized over-the-counter market, in which the transactions are not supervised by self-regulating entities authorized by the CVM. In either case, transactions are directly traded among persons, outside the stock exchange market, through a financial institution authorized by the CVM. The institution shall be registered with the CVM (and in the relevant over-the-counter market), but there is no need for a special license to trade securities of a publicly held company on the over-the-counter market.

          The trading of securities on the B3 may be suspended at the request of a company in anticipation of an announcement of a material event. Trading may also be suspended by the B3 or the CVM based on or due to a belief that a company has provided inadequate information regarding a material event or has provided inadequate responses to inquiries by the CVM or the B3, among other reasons.

          Trading on Brazilian stock exchanges by non-residents of Brazil is subject to certain restrictions under the Brazilian foreign investment legislation. See "— Investment in Our Common Shares by Non-Residents of Brazil."

Trading on the B3

          Trading on the B3 is conducted every business day between 10:00 a.m. and 5:00 p.m. and between 10:00 a.m. to 6:00 p.m. during daylight savings time in Brazil on an automated system known as Megabolsa. The B3 also permits trading, except during daylight savings time in Brazil, from 5:30 p.m. to 6:00 p.m. on an online system called the "after market," which is connected to traditional and online brokers. Trading on the "after market" is subject to regulatory limits on price volatility and on the volume of shares transacted through Internet brokers.

          When investors trade shares on the B3, the settlement occurs in three business days after the trade date and no adjustments for inflation are made. Generally, the seller is required to deliver the shares to the B3 on the third business day following the trade date. Delivery of, and payment for, shares are made through the facilities of a clearing house, the Central Depositária of the B3.

          For a more efficient control of volatility of the BOVESPA Index, the B3 has adopted a circuit breaker system that suspends trading for 30 minutes or one hour whenever the BOVESPA Index falls below the limits of 10% and 15%, respectively, compared with the level at the close of trading during the preceding trading session. If the BOVESPA Index falls below the limit of 20%, the B3 may suspend trading for a period of time to be defined by the B3 at the time of such event.

The Novo Mercado

          In 2000, the B3 introduced three special stock market segments for the trading of shares, named Level 1, Level 2 and the Novo Mercado (the latter was last amended in October 2017). These stock market segments have the purpose of prompting public companies to (1) disclose information to the market and their shareholders in connection with their business in addition to the information required by law and (2) adopt corporate governance practices, such as best practices for management, transparency and protection of minority shareholders.

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          Our common shares are listed on the Novo Mercado. To have its shares listed on the Novo Mercado, a company, its management, controlling shareholder and the B3 must enter into the Novo Mercado Participation Agreement and the company's bylaws must comply with the rules of the Novo Mercado.

          Companies listed on the Novo Mercado are voluntarily subject to stricter rules than those provided for under the Brazilian Corporate Law, such as requirements to:

    issue common shares only;

    ensure that shares of the issuer representing at least 25.0% of its total capital are effectively available for trading;

    agree to adopt and publish (i) a code of conduct that establishes the principles and values that guide the company, (ii) an appointment policy for management members, (iii) a risk management policy, (iv) a remuneration policy, (v) a related-party transactions policy and (vi) an insider trading policy that applies, at a minimum, to the issuer, its controlling shareholder, the members of its board of directors and fiscal council, the executive management team and members of other corporate bodies that have a technical or consultative role as may be created from time to time by the company's bylaws;

    have an audit committee and implement compliance measures; and

    agree to require the issuer, its shareholders, directors and members of the fiscal council to resolve any and all disputes among them by arbitration before the Market Arbitration Chamber (Câmara de Arbitragem do Mercado, or CAM).

          Moreover, the board of directors of companies listed on the Novo Mercado must have members elected at a shareholders' meeting, with a term of up to two years, subject to reelection. At least two members or 20.0%, whichever is greater, of the members of the board of directors must be independent directors (and their independence must be demonstrated). Furthermore, the rules of the Novo Mercado do not permit the same individual to simultaneously hold the positions of chairman of the board of directors and chief executive officer (or comparable position), except when there is a vacancy in either position which cannot otherwise be filled.

          Companies listed on the Novo Mercado are required to, among other things:

    conduct public tender offers for purchase of shares under certain circumstances, such as a delisting from the Novo Mercado;

    conduct offerings that will facilitate broad share ownership;

    extend to all shareholders the same conditions given to the controlling shareholder by occasion of the sale of the share control of the company;

    provide quarterly nonfinancial information, including the number of shares held by the company's management and the number of outstanding shares; and

    disclose related-party transactions.

Corporate governance practices

          This section presents information on corporate governance practices adopted by us, and should be read in conjunction with "Description of Capital Stock."

          According to the Brazilian Institute of Corporate Governance (Instituto Brasileiro de Governança Corporativa), or IBGC, corporate governance is the system for managing and overseeing companies and it involves relationships between the company's shareholders, the board

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of directors, the board of executive officers, the independent auditors and the fiscal council. The basic principles of corporate governance are: (1) transparency; (2) equity; (3) accountability and (4) corporate responsibility.

          The principle of transparency requires that management provide to the market not only information about the company's financial performance but also with regard to other factors (even if intangible) which guide corporate actions. Equity means fair and equitable treatment of all minority groups, employees, customers, suppliers or creditors. Accountability refers to the fact that management must report to bodies which elected or appointed them and take full responsibility for their actions. Finally, corporate responsibility represents a broader view of corporate strategy, incorporating social and environmental considerations into the definition of business and operations.

          Among the corporate governance practices that we have adopted, the following stand out:

    Our share capital is comprised only of common shares, giving voting rights to all of our shareholders.

    We maintain and disclose a record containing the number of shares that each shareholder owns, and identify them by name.

    We maintain a requirement to make a mandatory offer to purchase shares that results in transfer of corporate control to all shareholders and not just to the holders of the controlling block. All shareholders should have the option to sell their shares under the same conditions. The transfer of control must be made at a transparent price. In case of sale of all of the control block, the purchaser must address the public offer to all shareholders under the same conditions as the controller (tag-along rights).

    We hire an independent auditing firm to analyze our balance sheets and financial statements.

    We have a statutory provision for installation of a fiscal council.

    We have careful site selection for our general meeting in order to facilitate the presence of all of our members or their representatives.

    Our bylaws in effect as of the date of the completion of this offering contain a clear definition of (1) the manner of convening our general meetings and (2) the manner of electing, removing and the terms of office of the members of our board of directors and our executive officers.

    We aim for transparency in our annual management report.

    We permit free access to the information and facilities of our board of directors.

    We resolve conflicts that may arise between our shareholders, officers, members of our fiscal council and us through arbitration.

Investment in Our Common Shares by Non-Residents of Brazil

          Investors who are non-residents in Brazil must register their investment in shares under Law No. 4,131, dated September 3, 1962 (as amended), or CMN Resolution No. 4,373, dated September 29, 2014 (as amended), and CVM Instruction No. 560 of March 27, 2015 (as amended).

          CMN Resolution No. 4,373 affords favorable tax treatment to foreign investors who are not residents in a low or nil tax jurisdiction, as defined by Brazilian tax laws (please refer to the section "Taxation — Material Brazilian Tax Considerations" for further discussion on the concept of a low or nil tax jurisdiction under Brazilian law).

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          Under CMN Resolution No. 4,373, investors who are non-residents in Brazil may invest in almost all financial assets and engage in almost all transactions available in the Brazilian financial and capital markets, provided that certain requirements are met. CMN Resolution No. 4,373 covers investors who are individuals, companies, mutual funds and other collective investment entities domiciled or headquartered outside of Brazil. Under CMN Resolution No. 4,373, an investor under this category must:

    appoint one or more representatives in Brazil, which must be a financial institution duly authorized by the Central Bank to receive service of process related to any action regarding financial and capital markets legislation, among others;

    obtain a taxpayer identification number from the Brazilian tax authorities;

    appoint one or more authorized custodians in Brazil for its investments, which custodian must be duly authorized by the CVM; and

    through its representative or representatives, register as a foreign investor with the CVM and register its investments with the Central Bank.

          In addition, an investor operating under the provisions of CMN Resolution No. 4,373 must be registered with the Brazilian internal revenue service pursuant to its Normative Ruling No. 1,863/2018. This registration process is undertaken by the investor's legal representative in Brazil.

          Securities and other financial assets held by non-Brazilian investors pursuant to CMN Resolution No. 4,373 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading is restricted to transactions carried out in the stock exchanges or through organized over-the-counter markets licensed by the CVM, except for transfers resulting from a corporate reorganization, or occurring upon the death of an investor by operation of law or will.

          Non-Brazilian investors may also invest directly under Law No. 4,131 and may sell their shares in both private and open market transactions, but these investors are subject to less favorable tax treatment on gains than Resolution No. 4,373 investors. A non-Brazilian direct investor under Law No. 4,131 must:

    register as a foreign direct investor with the Central Bank;

    obtain a Brazilian identification number from the Brazilian tax authorities;

    appoint a tax representative in Brazil; and

    appoint a representative in Brazil for service of process in respect of suits based on the Brazilian Corporate Law.

          If a holder of ADSs decides to exchange ADSs for the underlying common shares, the holder will be entitled to (i) sell the common shares on the B3 and rely on the depositary's electronic registration for five business days from the date of exchange to obtain and remit U.S. dollars abroad upon the holder's sale of our common shares, (ii) convert its investment into a foreign portfolio investment under of CMN Resolution No. 4,373, or (iii) convert its investment into a foreign direct investment under Law No. 4,131/62.

          If a holder of ADSs wishes to convert its investment into either an foreign portfolio investment under of CMN Resolution No. 4,373 or a foreign direct investment under Law No. 4,131/62, it should begin the process of obtaining foreign investor registration with the Central Bank or with the CVM as the case may be, in advance of exchanging the ADSs for common shares.

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          The custodian is authorized to update the depositary's electronic registration to reflect conversions of ADSs into foreign portfolio investments under CMN Resolution No. 4,373. If a holder of ADSs elects to convert its ADSs into a foreign direct investment under Law 4,131/62, the conversion will be effected by the Central Bank after receipt of an electronic request from the custodian with details of the transaction.

          If a foreign direct investor under Law No. 4,131/62 wishes to deposit its shares into the ADR program in exchange for ADSs, such holder will be required to present to the custodian evidence of payment of capital gains taxes. The conversion will be effected by the Central Bank after receipt of an electronic request from the custodian with details of the transaction. Please refer to "Taxation — Material Brazilian Tax Considerations" for a description of the tax consequences to an investor residing outside Brazil of investing in our common shares in Brazil.

          For additional information on Brazilian tax consequences of investing in our common shares, see "Taxation — Material Brazilian Tax Considerations."

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SELECTED FINANCIAL INFORMATION

          The following selected financial information has been derived from our audited historical consolidated financial statements as of and for the three-month period ended March 31, 2019 and 2018 and as of and for the years ended December 31, 2018, 2017 and 2016, and the respective notes thereto, included elsewhere in this prospectus. These historical consolidated financial statements were prepared in accordance with IFRS as issued by the IASB.

          The tables below present selected financial information as of the periods indicated. You should read this information in conjunction with the rest of this prospectus, including the sections entitled "Presentation of Financial and Other Information," "Summary Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Income Statement Data

    For the Three-Month Period
Ended March 31,
    For the Year Ended
December 31,
 

    2019(2)     2019(2)     2018     2018     2018     2017     2016
 

    (in millions of
US$)(1)
    (in millions of R$)     (in millions of
US$)(1)
    (in millions of R$)  

Net operating revenues

    45.4     176.8     158.4     175.9     685.6     571.6     494.6  

Cost of services rendered

    (15.4 )   (60.0 )   (56.7 )   (63.0 )   (245.6 )   (211.6 )   (183.5 )

General and administrative

    (11.3 )   (44.0 )   (42.5 )   (43.3 )   (168.6 )   (148.1 )   (116.3 )

Research and development

    (4.7 )   (18.4 )   (16.2 )   (18.9 )   (73.5 )   (64.3 )   (59.9 )

Selling

    (9.1 )   (35.3 )   (22.1 )   (28.5 )   (111.0 )   (72.4 )   (62.5 )

Other operating income

    2.1     8.1     8.0     2.2     8.4     4.3     1.2  

Other operating expenses

    (0.5 )   (1.9 )   0.2     (1.3 )   (5.1 )   (5.1 )   (5.6 )

Total operating expenses

    (38.9 )   (151.5 )   (129.2 )   (152.8 )   (595.5 )   (497.2 )   (426.4 )

Operating income

    6.5     25.3     29.2     23.1     90.1     74.4     68.2  

Financial income

    2.6     10.3     12.0     12.0     46.9     58.4     49.5  

Financial expenses

    (3.1 )   (12.0 )   (8.3 )   (11.5 )   (44.8 )   (24.0 )   (24.7 )

Net financial income (expenses)

    (0.5 )   (1.8 )   3.7     0.5     2.1     34.4     24.7  

Income before income tax and social contribution

    6.1     23.6     32.9     23.6     92.1     108.8     92.9  

Income tax and social contribution — current

    (0.5 )   (2.0 )   (1.7 )   (2.6 )   (10.0 )   (9.2 )   (10.6 )

Income tax and social contribution — deferred

    (1.1 )   (4.4 )   (4.7 )   (2.8 )   (11.1 )   (14.7 )   (13.8 )

Net income

    4.4     17.2     26.5     18.2     71.1     84.8     68.5  

(1)
Solely for the convenience of the reader, real amounts for the year ended December 31, 2018 and for the three-month period ended March 31, 2019 have been translated into U.S. dollars at the selling rate reported by the Central Bank at March 31, 2019 of R$3.8967 to US$1.00. See "Exchange Rates" for further information on recent fluctuations in exchange rates.

(2)
Reflects our adoption of IFRS 16, Leases as of January 1, 2019. See "Management's Discussion and Analysis of Financial Condition and Results of Operations — Recent Accounting Pronouncements — New standards, interpretations and amendments adopted in 2019."

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Balance Sheet Data

    As of March 31,     As of December 31,
 

    2019(2)     2019(2)     2018     2018     2017     2016
 

    (in millions of
US$)(1)
    (in millions
of R$)
    (in millions
of US$)(1)
    (in millions of R$)  

Current Assets:

                                     

Cash and cash equivalents

    12.8     49.9     12.8     49.9     42.9     7.2  

Financial assets

    106.0     413.2     106.1     413.4     487.8     639.2  

Trade accounts receivable

    44.4     173.0     42.9     167.1     128.2     107.3  

Recoverable taxes

    8.1     31.6     9.0     35.1     33.1     29.7  

Other receivables

    8.4     32.7     11.1     43.4     28.1     12.2  

Total current assets

    179.8     700.5     181.9     708.8     720.1     795.6  

Non-Current Assets:

   
 
   
 
   
 
   
 
   
 
   
 
 

Financial assets

                    21.0     19.0  

Trade accounts receivable

    0.8     3.0     0.8     3.3     3.0     1.8  

Other receivables

    1.9     7.3     1.8     7.2     1.5     10.9  

Deferred taxes

    1.1     4.3     1.1     4.4     4.3     4.2  

Property, plant and equipment, net

    19.3     75.2     19.1     74.3     62.3     51.3  

Intangible assets, net

    246.0     958.6     218.0     849.6     751.9     600.6  

Total non-current assets

    269.0     1,048.4     240.9     938.8     843.9     687.8  

Total assets

    448.8     1,748.9     422.8     1,647.7     1,564.0     1,483.4  

Current Liabilities:

                                     

Suppliers

    3.2     12.5     3.5     13.6     8.5     6.3  

Loans and financing

    13.9     54.1     10.4     40.7     31.8     34.5  

Labor obligations

    13.8     53.9     11.2     43.8     38.9     31.2  

Taxes payable

    2.9     11.4     3.5     13.5     13.2     6.4  

Income tax and social contribution

    0.4     1.7     0.3     1.2     0.5     2.9  

Payables for the acquisition of businesses

    12.7     49.5     14.7     57.1     56.1     23.5  

Deferred revenue

    10.5     41.0     10.3     40.1     8.5     7.2  

Dividends payable

    0.7     2.8     0.7     2.8     4.2     1.1  

Other liabilities

    4.5     17.4     2.1     8.0     7.6     4.1  

Total current liabilities

    62.7     244.2     56.6     220.7     169.2     117.1  

Non-Current Liabilities:

   
 
   
 
   
 
   
 
   
 
   
 
 

Loans and financing

    71.0     276.8     53.7     209.3     65.5     96.3  

Labor obligations

    0.2     0.6                  

Payables for the acquisition of businesses

    11.7     45.5     14.2     55.4     74.7     57.1  

Deferred taxes

    19.8     77.2     18.6     72.6     80.3     57.2  

Deferred revenue

    3.5     13.7     4.9     19.2          

Other liabilities

    0.5     2.0     0.6     2.3     1.0     1.9  

Provision for contingencies

    3.2     12.3     2.8     11.0     2.8     0.5  

Total non-current liabilities

    109.9     428.1     94.9     369.8     224.3     213.0