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Linx S.A.

Financial statements December 31, 2018 with Independent auditors' report

Contents Management report .............................................................................................................................. 3 Independent auditor report on financial statements .............................................................................. 6 Balance sheets .................................................................................................................................. 14 Statements of income ........................................................................................................................ 16 Statements of comprehensive income ............................................................................................... 17 Statements of changes in shareholders' equity .................................................................................. 18 Statements of cash flows .................................................................................................................. .19 Statements of added value ............................................................................................................... .20 Notes to the financial statements ...................................................................................................... .21

Dear Shareholders,

The Management of Linx S.A. (“Linx”, “Company”) submits to your appreciation Financial Statements for the

periods ended December 31, 2018 (“4th quarter of 2018”, “4Q18”) comparatively to December 31, 2017

(“4th quarter of 2017”, “4Q17”).

Linx, in the market for more than 30 years, is leader in technologies for retail, using cloud, big data,

intelligence, among other innovations, to create a broad portfolio of transaction and performance solutions,

which include management software (POS – point-of-sales and ERP - enterprise resource planning), SaaS

(software as a service) highlighting Digital (OMS and e-commerce), Pay Hub (TEF and sub-acquiring) and

cross selling (NFCe and connectivity), among many others.

Operating and financial performance

We noted that in the 4Q18 a sequential increase in the Business Confidence Index (ICOM) from October

(+3.8% vs. September/18), reaching its highest level in December since April 2013. Additionally, according

eBit/Nielsen, Black Friday had a performance 25% up on prior year and our Digital tools had an important

role in such increase, 380 thousand searches per minute and 2 million recommendations per minute were

made. We also had the first retailer of our client base with all channels integrated with the OMS (Order

Management System) and a 100% Omnichannel operation. It is worth noting that we already have a pipeline

of approximately 8 thousand stores engaged for roll-outs throughout 2019 and 2020. However, despite

positive, the increase in the business confidence index is only the first step towards the resumption of retailer

investments. We thus ended the year with growth in recurring income of 15.3%, but still without acceleration

in organic growth.

In the 4Q18, recurring income reached R$170.2 million, +15.3% on the 4Q17 and +6.4% on the 3Q18,

representing 81% of gross operating income.

Income from services reached R$39.6 million in the quarter, +14.8% on the 4Q17 in view of the increase in

the number and size of implementation projects in the period, mainly associated with the OMS software.

(R$ thousand) 4Q18 4Q17 % 3Q18 % 2018 2017 % Net income 182,095 157,437 15.7% 174,309 4.5% 685,559 571,590 19.9% Costs of services rendered (51,887) (45,149) 14.9% (49,140) 5.6% (195,848) (168,873) 16.0% Gross income 130,208 112,288 16.0% 125,169 4.0% 489,711 402,717 21.6% Operating expenses (106,516) (89,726) 18.7% (109,140) -2.4% (399,648) (328,349) 21.7% EBIT 23,692 22,562 5.0% 16,029 47.8% 90,063 74,368 21.1% Depreciation and amortization 20,729 17,880 15.9% 20,596 0.6% 78,729 69,983 12.5% EBITDA 44,421 40,442 9.8% 36,625 21.3% 168,792 144,351 16.9%

EBITDA margin 24.4% 25.7% -120 bps 21.0% 330 bps 24.6% 25.3% -70 bps

(R$ thousand) 4Q18 4Q17 % 3Q18 % 2018 2017 % EBITDA 44,421 40,442 9.8% 36,625 21.3% 168,792 144,351 16.9% Net reversal of earn-outs (5,000) (1,134) 340.9% - n.a. (12,664) (3,243) 290.5% Adjustment in rental agreements 6,313 - n.a. - n.a. 6,313 - n.a. Discontinuance of Chaordic EUA operations - - n.a. 1,027 n.a. 1,027 - n.a. Organizational restructuring - - n.a. 4,069 n.a. 4,069 - n.a. Expenses with moving the SP and Recife branches - - n.a. - n.a. - 2,391 n.a. Adjusted EBITDA 45,734 39,308 16.3% 41,722 9.6% 167,538 143,499 16.8%

Adjusted EBITDA Margin 25.1% 25.0% 30 bps 23.9% 120 bps 24.4% 25.1% -80 bps

The adjusted EBITDA reached R$45.7 million in the quarter, +16.3% and +9.6% on the adjusted EBITDA

for the 4Q17 and 3Q18, respectively.

The adjusted EBITDA margin was 25.1% in the quarter, +30 bps and +120 bps on the 4Q18 and 3Q17,

respectively.

The adjusted net income was R$18.5 million in the 4Q18, an increase of 16.3% as compared to the 4Q17

and +31.1% in relation to the 3Q18. Additionally, the adjusted cash profit was R$26.4 million in the quarter,

-1.8% and +12.3% as compared to the 4Q17 and 3Q18, respectively.

Statement of the Statutory Executive Board

In compliance with Securities and Exchange Commission, the Statutory Executive Board of Linx declares

that discussed, reviewed and agreed with the conclusions expressed in the Independent Auditors' audit

report and with the annual financial statements for the year ended December 31, 2018, authorizing the

disclosure.

Relations with independent auditors

The financial statements of the Company and its subsidiaries are audited by Ernst & Young Auditores

Independentes.

The Company's policy for contracting services other than external audit intends to evaluate the existence of

conflict of interest; thus, the following aspects are analyzed: the auditor should not (i) audit his/her own work;

(ii) perform managerial jobs in the client, and (iii) promote his/her client's interest.

São Paulo, February 18, 2019.

Executive Board

LINX S.A.

Authorized Capital Publicly-held Company

EIN: 06.948.969/0001-75

NIRE: 35,300,316,584

OPINION REPORT OF TAX COUNCIL ON THE MANAGEMENT REPORT AND

FINANCIAL STATEMENTS OF LINX S.A. AS OF DECEMBER 31, 2018.

The Tax Council of Linx S.A. (“Company”), in the performance of its legal and

statutory duties, having examined the Company’s Management Report, Balance

Sheet, Statement of Income, Statement of Comprehensive Income, Statement

of Cash Flows, Statement of Changes in Shareholders’ Equity, Statement of

Added Value, and the respective Notes, related to the fiscal year ended

December 31, 2018, and based on the opinion of the Independent

Auditors/Accountants, holds the opinion that the aforementioned documents,

examined in the light of the corporate legislation in effect, have condition to be

examined by the Annual Shareholders’ Meeting of the Company.


______________________________ ______________________________

Flávio Cesar Maia Luz João Adamo Junior

President of the Tax Council Tax Council member

______________________________

Marcelo Amaral Moraes

Tax Council member

São Paulo Corporate TowersAv. Presidente Juscelino Kubitschek, 1.909Vila Nova Conceição04543-011 - São Paulo – SP - Brazil

Tel.: +55 11 2573-3000ey.com.br

A member firm of Ernst & Young Global Limited

A free translation from Portuguese into English of Independent Auditor’s Report on individual and consolidatedfinancial statements prepared in Brazilian currency

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Independent auditor's report on the individual and consolidated financialstatements

ToShareholders, Board Members and Directors ofLinx S.A.São Paulo - SP

Opinion

We have audited the accompanying individual and consolidated financial statements of Linx S.A.(“Company”), identified as Company and consolidated, respectively, which comprise the balancesheet as of December 31, 2018 and the statement of income, of comprehensive income, of changes inshareholders’ equity and cash flows for the year then ended, as well as corresponding otherexplanatory information, including a description of significant accounting policies.

In our opinion, the individual and consolidated financial statements referred to above present fairly, inall material respects, the individual and consolidated financial position of Linx S.A. as of December 31,2018, the individual and consolidated performance of its operations and its individual and consolidatedcash flows for the year then ended, in conformity with accounting practices adopted in Brazil andInternational Financial Reporting Standards - IFRS issued by the International Accounting StandardsBoard (IASB).

Basis for opinion

We conducted our audit in accordance with Brazilian and international standards on auditing. Ourresponsibilities, in accordance with such standards, are described in the following section entitled“Auditor’s responsibilities for the audit of individual and consolidated financial statements.” We areindependent of the Company and its subsidiaries, according to the significant ethical principlesprovided in the Accountant’s Code of Professional Ethics and the professional standards issued by theBrazil’ National Association of State Boards of Accountancy (CFC), and we comply with the otherethical responsibilities according to such standards. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.


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Key audit matters

The key audit matters are those who, in our professional judgment, were the most significant in ouraudit of current year. These matters were addressed in the context of our audit of the individual andconsolidated financial statements as a whole, and in forming our opinion thereon, and, therefore, wedo not express a separate opinion on these matters. For each matter below, a description of how ouraudit has addressed the matter, including any comments on the results of our procedures, ispresented in the context of the financial statements taken as a whole.

We have fulfilled the responsibilities described in the “Auditor's responsibilities for the audit ofindividual and consolidated financial statements” section, including those relating to these key auditmatters. Accordingly, our audit included the performance of procedures designed to respond to ourassessment of the risks of material misstatement of the financial statements. The results of ourprocedures, including those performed to address the matters below, provide the basis for our auditopinion on the Company's financial statements.

Revenue recognition for implementation and customization services

The Group provides implementation and customization services, recognized in profit or loss for theyear over time, using an input method to measure the progress up to the complete service provision,once the client simultaneously receives and consumes the benefits provided by the Group. Thismeasurement considers the debit of hours of professionals in the respective projects.

Considering the magnitude of the amounts involved in addition to the reliance of manual controls andjudgment to define the stage of completion of projects that may impact the value of accountsreceivable and related income in the financial statements, we consider this matter significant for ouraudit.

How our audit conducted this matter

Our income recognition procedures for implementation and customization services include, but are notlimited to:

· We evaluate the adequacy of the respective disclosures of the Company on the criteria forrecognition of income and amounts involved; and

· We performed the understanding and evaluation of the key internal controls implemented bythe Company related to the recognition of income from implementation and customizationservices, and identified deficiencies in the design and operation of these internal controlsassociated with determining the stage of completion of projects.


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In addition, we performed tests of details close to the annual accounting closing ("test cutoff of income")by comparing invoices issued, service order and client’s acceptance to evaluate the criteria used by theCompany in the recognition of income from services. As a result of this procedure, we identified anadjustment indicating the need to complement the balances of deferred income, which was not recordedby the Company's Management due to its materiality in relation to the financial statements taken as awhole.

Deficiencies in the design and operation of internal controls related to the recognition of income fromimplementation and customization services, as well as audit adjustment identified and aforementionedchanged our evaluation of the nature, timing and extent of our substantive procedures designed toobtain sufficient evidence and adequate audit information regarding the recognition of this income.Based on audit procedures performed, which are consistent with management's assessment, weunderstand that the policies for recognition and measurement of income from implementation andcustomization services, as well as the respective disclosures in note 3.14, are acceptable in regard tothe financial statements taken as a whole.

Capitalization of software development expenditures

The Company realizes the development of new or substantially improved products for its current andnew customers. Expenses with labor and materials that are directly attributable to the development ofthese products are capitalized as an intangible by the Company, according to Note 14.

The capitalization is carried out by the Company only when all of the following elements, defined byaccounting practices adopted in Brazil and International Financial Reporting Standards (IFRS)standards, issued by International Accounting Standards Board (IASB) are present: (i) technicalfeasibility to complete the intangible asset in order for it to be available for use or sale; (ii) intention tocomplete the intangible asset and use or sell it; (iii) ability to use or sell the intangible asset; (iv) theintangible assets should result in future economic benefit, useful for internal use or asset sale; (v)availability of technical, financial and other proper resources to conclude its development and to usethe intangible asset; and (vi) ability to accurately measure the expenses attributable to intangibleassets during their development.

This matter was considered significant for our audit, due to the degree of judgment involved indetermining the expenses that will be capitalized by the Company, which should demonstrate that thecriteria established for capitalization of software development costs were met.

How our audit conducted this issue


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Our procedures related to capitalization of software development costs included, among others:

· We understand the key internal controls implemented by the Company related to the processof capitalization of software development costs;

· We selected a sample of projects to verify its technical feasibility, the Company's intentionevaluation with the asset (sale or use) and its financial viability, in addition to conductinginquiries and interviews with those responsible for the projects capitalized to understand thetechnical feasibility;

· We performed documentary tests, where we analyze the debit of hours of the professionalsand its relation to the projects that are being capitalized, besides obtaining evidences thatcorroborate whether the activities performed by the employee in such projects is consistentwith the criteria for capitalization and obtaining representation from managers confirming theallocation of professionals to projects; and

· We evaluate the adequacy of the respective disclosures of the Company on the assumptionsconsidered in the capitalization of costs and the amounts involved.

Based on the auditing procedures performed, which is consistent with management's assessment, weunderstand that the cost capitalization policies are acceptable to support the judgments andinformation included in the context of the financial statements taken as a whole.

Impairment of goodwill

The Company carried out acquisitions of companies in previous years and in the current year thatresulted in the recognition of goodwill for future profitability and which represent significant amounts inits financial statements, as disclosed in Note 14. The recoverable value of these goodwill, as theyhave an indefinite useful life, are annually tested by the Company to verify that the recoverable valueis less than the carrying amount.

The evaluation of the recoverable value involves significant judgments in determining the assumptionsused in the cash flow projections, including growth and discount rates. Distortions in determining therecoverable value of goodwill may result in a material impact on the financial statements. Accordingly,this matter was considered significant for our audit.


Our procedures related to the evaluation of goodwill included, among others:

· Understanding of key internal controls implemented by the Company related to the process ofevaluating the recoverable value of goodwill;

· We involve our corporate finance specialists to assist us in evaluating the assumptions andmethodology used in the cash flow projections, including growth and discount rates, projectedresults and profit margins compared to macroeconomic information;


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· Comparison of the recoverable value based on the discounted cash flows, with the respectivebook values of the goodwill; and

· We evaluate the adequacy of the respective disclosures of the Company of the assumptionsconsidered in the recoverability calculations of the goodwill and the amounts involved.

Based on the auditing procedures performed on the goodwill impairment test, which is consistent withmanagement's assessment, we understand that the criteria and assumptions of goodwill used bymanagement, as well as the respective disclosures in note 14, are in the context of the financialstatements taken as a whole.

Business combination

During the year 2018, the Company acquired the companies Itecgyn Informática Ltda., ÚnicoSistemas e Consultoria S.A. and DCG Soluções para Venda Digital S.A. The acquisitions wererecorded by the Company, considering the acquisition method and represented significant amounts inthe financial statements, included in Note 5.

This matter was considered significant to our audit, due to the judgments involved in the identificationand determination of the fair value of acquired assets and assumed liabilities, and the consequentallocation of acquisition price, besides the magnitude of amounts involved.


Our business combination procedures included, among others:

· Understanding of key internal controls implemented by the Company related to the acquisitionprocess of companies;

· We involved our corporate finance specialists to assist us in evaluating the assumptions andmethodology used to determine and recognize the fair value of assets acquired, liabilitiesassumed and goodwill for future profitability;

· We have audit the opening balances of the acquired companies as at the acquisition date aspart of the determination of the fair values of assets and assumed liabilities; and

· We evaluate the adequacy of the respective Company disclosures of the businesscombinations.

Based on the audit procedures performed, which is consistent with management's assessment, weunderstand the Company's business combination accounting policies acceptable to support thejudgments and information included in the context of the financial statements taken as a whole.


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Other matters

Statement of value added

The individual and consolidated statements of added value (DVA) for the year ended December 31,2018, prepared under the responsibility of the Company’s management, and presented herein assupplementary information for IFRS purposes, have been subject to audit procedures jointlyperformed with the audit of the Company's financial statements. In order to form our opinion, weevaluated whether those statements are reconciled with the financial statements and accountingrecords, as applicable, and whether their format and contents are in accordance with criteriadetermined in the Technical Pronouncement CPC 09 - Statement of Added Value. In our opinion,these statements of added value were prepared, in all material respects, in accordance with thecriteria defined in this Technical Pronouncement and are consistent in relation to the individual andconsolidated financial statements taken as a whole.

Other information accompanying the individual and consolidated financial statements and theauditor's report

The Company management is responsible for the other information comprising the managementreport.

Our opinion on the individual and consolidated financial statements does not cover the ManagementReport and we do not express any form of audit conclusion on this report. In connection with our auditof the individual and consolidated financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent with theindividual and consolidated financial statements or our knowledge obtained in the audit, or otherwiseappears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of thisother information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and governance for the individual and consolidated financialstatements

Management is responsible for the preparation and fair presentation of the individual and consolidatedfinancial statements in accordance with Accounting Practices Adopted in Brazil and with InternationalFinancial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB)and for such internal control as management determines is necessary to enable the preparation offinancial statements that are free from material misstatement, whether due to fraud or error.


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In preparing the individual and consolidated financial statements, management is responsible forassessing the Company’s ability to continue as going concern, disclosing, when applicable, thematters related to its going concern, and the use of this accounting basis in the preparation of thefinancial statements, unless the management intends to liquidate the Company and its subsidiaries, orcease their operations, or do not have any realistic alternative to avoid the discontinuance ofoperations.

Those charged with governance of the Company and its subsidiaries are the people responsible foroverseeing the process of preparation of individual and consolidated financial statements.

Auditor’s responsibilities for the audit of individual and consolidated financial statements

Our objectives are to obtain reasonable assurance that the individual and consolidated financialstatements, taken as a whole, are free from material misstatement, whether due to fraud or error, andissue the audit report with our opinion. Reasonable assurance is a high level of assurance, but not aguarantee that the audit conducted pursuant to Brazilian and international auditing standards willalways detect any existing material misstatements. Misstatements may arise from fraud or error, andare considered material when, individually or in aggregate, may influence, from a reasonableperspective, the economic decisions of users taken based on such financial statements.

As part of an audit conducted according to the Brazilian and international auditing standards, weexercise professional judgment, and maintain professional skepticism during the audit. We also:

· Identify and assess the risks of material misstatement in the individual and consolidated financialstatements, whether caused by fraud or error, we planned and performed audit procedures inresponse to such risks, and we obtained proper and sufficient audit evidence to support our opinion.The risk of not detecting material misstatement resulting from fraud is higher than that arising fromerror, once the fraud may involve the act of dodging the internal controls, collusion, falsification,omission or false intentional representations.

· We obtained an understanding of the internal controls relevant to the audit to plan the auditprocedures appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of internal controls of the Company and its subsidiaries.

· We evaluate the appropriateness of the accounting policies used and the reasonableness of theaccounting estimates and respective disclosures made by Management.

· We conclude the appropriateness of Management’s use of the accounting basis for going concernand, based on the audit evidence obtained, as to whether there is a material uncertainty regardingevents or conditions that could raise a significant doubt regarding the Company’s and itssubsidiaries’ capacity for going concern. If we conclude that a material uncertainty exists, we arerequired to draw attention in our auditors’ report to the related disclosures in the individual and


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consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditors’ report.However, future events or conditions may cause the Company and subsidiaries to cease to continueas a going concern.

· We evaluate the overall presentation, structure and content of financial statements, includingdisclosures, and whether the individual and consolidated financial statements represent theunderlying transactions and events in a manner consistent with the objective of fair presentation.

· We obtained appropriate and sufficient audit evidence regarding the financial information of theentities or business activities of the group to express an opinion on the consolidated financialstatements. We are responsible for the management, oversight and performance of audit of thegroup, and, consequently, the audit opinion.

We communicated with the ones responsible for governance with respect to, among other aspects,the planned scope, time of the audit and significant audit findings, including possible materialweaknesses in internal controls identified by us during our audit.

We also provide those charged with governance with a statement that we complied with relevantethical requirements, including the applicable requirements of independence, and communicate allpotential relationships or matters that could materially affect our independence, including, whereapplicable, the related safeguards.

From the matters that were communicated with those charged with governance, we determined thosethat were considered as the most significant in the audit of financial statements for current year andthat, accordingly, comprise the key audit matters. We describe these matters in our audit report,unless a law or regulation has prohibited the public disclosure of the issue, or when, under extremelyrare circumstances, we determine that the issue shall not be communicated in our report, because theadverse consequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.


ERNST & YOUNGAuditores Independentes S.S.CRC-2SP034519/O-6

Lazaro Angelim SerruyaAccountant CRC-1DF015801/O-7

Linx S.A.

Balance sheetsDecember 31, 2018 and 2017(In thousands of reais)

Note 31/12/2018 31/12/2017 31/12/2018 31/12/2017AssetsCurrentCash and cash equivalents 6 50 33 49.850 42.918 Interest earnings bank deposits 7 60.108 6.891 413.374 487.816 Trade accounts receivable 8 - - 167.102 128.177 Recoverable taxes 9 8.848 7.330 35.094 33.054 Loans to related parties 10 - 2.877 - -Other receivables 11 49 28 43.407 28.119

69.055 17.159 708.827 720.084

Non-currentLong-term assetsInterest earnings bank deposits 7 - - - 20.990 Trade accounts receivable 8 - - 3.280 2.952 Deferred taxes 19 4.100 4.157 4.449 4.272 Other receivables 11 - - 7.213 1.485

Investments 12 987.300 1.182.321 - -

Property, plant and equipment 13 - - 74.273 62.332

Intangible assets 14 - - 849.634 751.909 991.400 1.186.478 938.849 843.940

Total assets 1.060.455 1.203.637 1.647.676 1.564.024

See the accompanying notes to financial statements.

Parent company Consolidated

Linx S.A.

Balance sheetsDecember 31, 2018 and 2017(In thousands of reais)

Note 31/12/2018 31/12/2017 31/12/2018 31/12/2017Liabilities and shareholders' equityCurrentSuppliers 47 7 13.623 8.518 Loans and financing 15 - 2.852 40.720 31.783 Labor obligations 16 16 292 43.801 38.869 Taxes and contributions payable 385 743 13.455 13.194 Income tax and social contribution - - 1.206 485 Accounts payable from acquisition of subsidiaries 17 - - 57.099 56.087 Deferred income 18 - - 40.053 8.478 Advance of dividends 2.764 4.223 2.764 4.211 Other liabilities 34 25.000 7.979 7.613

3.246 33.117 220.700 169.238

Non-current

Loans and financing 15 - - 209.261 65.505 Accounts payable from acquisition of subsidiaries 17 - - 55.388 74.680 Deferred taxes 19 - - 72.635 80.324 Deferred income 18 - - 19.195 -Provision for contingencies 21 - - 10.960 2.776 Other liabilities - - 2.328 981

- - 369.767 224.266

Shareholders' equity

Capital 20 488.467 486.032 488.467 486.032 Capital reserves 20 369.879 479.809 369.879 479.809 Profit reserves 20 179.457 186.137 179.457 186.137 Additional dividends proposed 20 22.236 18.789 22.236 18.789 Other comprehensive income (2.830) (247) (2.830) (247)

1.057.209 1.170.520 1.057.209 1.170.520

Total liabilities and shareholders' equity 1.060.455 1.203.637 1.647.676 1.564.024

1.647.676

See the accompanying notes to financial statements.1.647.676


Linx S.A.

Statements of incomeYears ended December 31, 2018 and 2017(In thousands of reais)

Note 31/12/2018 31/12/2017 31/12/2018 31/12/2017

Net income 22 - - 685.559 571.590

Cost of services rendered 23 - - (195.848) (168.873)

Gross income - - 489.711 402.717

Operating income (expenses)Administrative and general 23 (969) (1.467) (218.369) (190.870) Research and development 23/14 - (2) (73.527) (64.280) Sales 23 (2) (5) (111.008) (72.393) Equity in net income of subsidiaries 12 55.256 67.541 - - Other operating income 23 - - 8.401 4.311 Other operating expenses 23 - - (5.145) (5.117)

Income before financial income (loss) and taxes 54.285 66.067 90.063 74.368

Financial income 24 17.193 19.527 46.868 58.421 Financial expenses 24 (327) (883) (44.787) (24.028)

Net financial income (loss) 16.866 18.644 2.081 34.393

Income (loss) before taxes 71.151 84.711 92.144 108.761

Current income tax and social contribution 19 (38) 84 (9.959) (9.217) Deferred income tax and social contribution 19 (58) 50 (11.130) (14.699)

Net income for the year 71.055 84.845 71.055 84.845

Earnings per shareBasic (in Reais) 27 0,4357 0,5177 0,4357 0,5177 Diluted (In reais) 27 0,4329 0,5150 0,4329 0,5150



Linx S.A.

Statements of comprehensive incomeYears ended December 31, 2018 and 2017(In thousands of reais)

31/12/2018 31/12/2017 31/12/2018 31/12/2017


Other comprehensive income to be reclassified to income (loss) for the year in subsequent periods

Accumulated translation adjustments from operations in foreign currency (2.437) (247) (2.437) (247)

Other comprehensive income not reclassified to income (loss) for the year in subsequent periods

Post-employment benefit (146) - (146) -

Total comprehensive income 68.472 84.598 68.472 84.598



Linx S.A.

Statements of changes in shareholders' equityYears ended December 31, 2018 and 2017(In thousands of reais)

Note CapitalGoodwill in capital

subscriptionStock

option planTreasury shares

Share issuance costs

Total Legal

reserve Profit

retentionTotal

Retained earnings

Other comprehensive

income

Additional dividends proposed

Total

Balances at December 31, 2016 480.808 539.571 9.741 - (37.009) 512.303 7.037 134.255 141.292 - - 18.875 1.153.278

Capital increase 5.224 - - - - - - - - - - - 5.224

Additional dividend paid - - - - - - - - - - - (18.875) (18.875)

Expenses with issuance of shares - - - - (414) (414) - - - - - - (414)

Repurchase of shares - - - (33.887) - (33.887) - - - - - - (33.887)

Stock option plan - - 1.807 - - 1.807 - - - - - - 1.807

Other comprehensive income - - - - - - - - - - (247) - (247)

Net income for the year - - - - - - - - - 84.845 - - 84.845

Allocations

Additional dividends proposed - - - - - - - - - (18.789) - 18.789 -

Distribution of dividends - - - - - - - - - (4.211) - - (4.211)

Interest on own capital - - - - - - - - - (17.000) - - (17.000)

Profit retention - - - - - - - 44.845 44.845 (44.845) - - -

Balances at December 31, 2017 486.032 539.571 11.548 (33.887) (37.423) 479.809 7.037 179.100 186.137 - (247) 18.789 1.170.520

Prior-year adjustments

Effects from the first-time adoption of IFRS 9 - - - - - - - (1.015) (1.015) - - - (1.015)

Effects from the first-time adoption of IFRS 15 - - - - - - - (38.542) (38.542) - - - (38.542)

Opening balances at 01/01/2018 486.032 539.571 11.548 (33.887) (37.423) 479.809 7.037 139.543 146.580 - (247) 18.789 1.130.963

Capital increase 20 2.435 - - - - - - - - - - - 2.435

Repurchase of shares 20 - - - (114.486) - (114.486) - - - - - - (114.486)

Additional dividend paid 20 - - - - - - - - - - - (18.789) (18.789)

Stock option plan 28 - - 4.556 - - 4.556 - - - - - - 4.556

Effect from adoption of hyperinflation - - - - - - - 1.822 1.822 - - - 1.822

Post-employment benefit - - - - - - - - - - (146) - (146)

Accumulated translation adjustments from operations in foreign currency

- - - - - - - - - - (2.437) - (2.437)

Net income for the year - - - - - - - - - 71.055 - - 71.055

Allocations

Additional dividends proposed 20 - - - - - - - - - (22.236) - 22.236 -

Distribution of dividends 20 - - - - - - - - - (2.764) - - (2.764)

Interest on own capital 20 - - - - - - - - - (15.000) - - (15.000)

Profit retention 20 - - - - - - - 31.055 31.055 (31.055) - - -

Balances at December 31, 2018 488.467 539.571 16.104 (148.373) (37.423) 369.879 7.037 172.420 179.457 - (2.830) 22.236 1.057.209

Capital reserves Profit reserves

Linx S.A.

Statements of cash flows

Years ended December 31, 2018 and 2017(In thousands of reais)

Note 12/31/2018 12/31/2017 12/31/2018 12/31/2017

Cash flows from operating activities


Adjustments to reconcile net income to funds available

Generated by operating activities

Depreciation and amortization 14/13 - - 78.729 69.983

Equity in net income of subsidiaries 12 (55.256) (67.541) - -

Allowance for doubtful accounts 8 - - 2.956 1.432

Losses (gains) on write-off/disposal of goods - - 10.310 966

Addition (reversal) of adjustment to present value - - (5.266) 2.781

Stock option plan (486) - 4.556 1.807

Financial charges 36 - 17.842 11.720

Deferred taxes 19 58 (50) 11.130 14.699

Current taxes 19 38 (84) 9.959 9.217

Provisions for contingency 21 - - (495) 71

Other operating income 23 - - (8.997) (4.853)

Income from interest earning bank deposits 24 (1.204) (1.591) (26.500) (56.781)

Effect from adoption of hyperinflation - - 1.163 -

Other (13) - - -

(56.827) (69.266) 95.387 51.042

Change in operating assets and liabilities:

Trade accounts receivable - - (41.938) (14.507)

Recoverable taxes 1.158 143 (7.156) (5.181)

Other credits and judicial deposits 2.856 12.004 (17.393) (6.225)

Suppliers 40 (14) 4.022 (2.841)

Labor obligations (277) 292 3.426 7.665

Taxes and contributions payable (389) 662 1.891 6.826

Deferred income - - (7.037) 1.302

Other accounts payable 36 24.904 1.445 (5.872)

Income tax and social contribution paid 19 (2.683) - (6.003) (9.796)

Cash flow generated (invested) by operating activities 14.969 53.570 97.699 107.258

Cash flows from investment activities

Acquisition of fixed assets - - (25.132) (25.151)

Acquisition of intangible assets - - (57.681) (40.394)

Acquisition of entity, net of cash and cash equivalents acquired - - (75.132) (84.727)

Capital increase in subsidiaries - (1.500) - -

Advance of dividends received 190.000 - - -

Interest earning bank deposits 7 (187.970) (41.557) (774.028) (478.956)

Redemption of interest and interest earning bank deposits 7 135.957 67.518 897.614 685.153

Cash flow generated (invested) by investing activities 137.987 24.461 (34.359) 55.925

Cash flows from financing activities

Ingress of loans and financing - - 191.837 -

Payments of loans and financing 15 (2.799) (11.314) (40.851) (33.959)

Financial charges paid 15 (89) (659) (9.028) (9.480)

Payment for the acquisition of subsidiaries 17 - - (45.878) (19.454)

Interest on own capital paid (15.000) (17.000) (15.000) (17.000)

Treasury shares (114.486) (33.887) (114.486) (33.887)

Capital transfers from shareholders 20 2.435 5.224 2.435 5.224

Expenses with issuance of shares - (414) - (414)

Dividends paid (23.000) (20.000) (23.000) (20.000)

Cash flow generated (invested) by financing activities (152.939) (78.050) (53.971) (128.970)

Exchange rate change on cash and cash equivalents - - (2.437) 1.478

Increase (decrease) in cash and cash equivalents 17 (19) 6.932 35.691

Statement of increase (decrease) in cash and cash equivalents

At the beginning of the period 33 52 42.918 7.227

At the end of the period 50 33 49.850 42.918

Increase (decrease) in cash and cash equivalents 17 (19) 6.932 35.691



Linx S.A.

Statements of added valueYears ended December 31, 2018 and 2017(In thousands of reais)

31/12/2018 31/12/2017 31/12/2018 31/12/2017

Income

Gross sales of services and goods - - 763.201 638.411

Other income - - 8.401 4.311

Allowance for doubtful accounts - - (981) 1.432

- - 770.621 644.154

Inputs acquired from third parties

Cost of services and goods sold - - (75.801) (55.232)

Materials, energy, outsourced services and other operating items (383) (196) (121.291) (86.477)

Loss and recovery of asset values - - (4.272) (6.297)

(383) (196) (201.364) (148.006)

Gross added value (383) (196) 569.257 496.148

Depreciation and amortization - - (78.729) (69.983)

Net value added produced by the Company (383) (196) 490.528 426.165

Added value received as transfer

Equity in net income of subsidiaries 55.256 67.541 - -

Financial income 17.193 19.527 46.868 58.421

72.449 87.068 46.868 58.421

Total added value payable 72.066 86.872 537.396 484.586

Distribution of added value

Personnel 588 1.278 305.495 272.017

Direct remuneration 588 1.278 244.847 220.272

Benefits - - 36.868 31.750

FGTS - - 23.780 19.995

Taxes, duties and contributions 96 (134) 99.969 91.454

Federal 96 (134) 76.537 71.579

State - - 4.276 3.957

Municipal - - 19.156 15.918

Third-party capital remuneration 327 883 60.877 36.270

Interest 327 883 44.787 24.028

Rents - - 16.090 12.242

Own capital remuneration 71.055 84.845 71.055 84.845

Dividends and interest on own capital 40.000 40.000 40.000 40.000

Retained earnings 31.055 44.845 31.055 44.845



Notes to the financial statements as of December 31, 2018 (In thousands of Reais, unless otherwise indicated)

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1. Operations Founded in 1985 and headquartered at Avenida Das Nações Unidas, 7221, 7º Andar, city and state of São Paulo, Linx S.A. (“Company” or “Linx”), corporation, provides ERP (Enterprise Resource Planning) and POS (Point of Sale or Point of Service) management software solutions, and connectivity solutions, TEF (Electronic Funds Transfer), e-commerce and CRM (Customer Relationship Management), OMS (Order Management System) and payment methods to the retail industry in Brazil. The Company offers innovative and scalable technology, with focus upon and long-term specialization in the retail industry, its vertical model of operation, which combines its own teams in the commercial, implementation, consulting and support areas and through our differentiated business model. Linx went public as of February 8, 2013, and is engaged in holding interest in other Brazilian or foreign commercial or civil companies, as partner, shareholder or quotaholder and also the representation of other companies of any nature in Brazil or abroad and the management of own or third-party assets. The Company’s shares are listed on the New Market segment of São Paulo Stock Exchange B3 and are traded under the ticker symbol LINX3.

The issue of individual and consolidated financial statements was approved by the Board of Directors on February 18, 2019.

2. Preparation basis

2.1. Statement of conformity

The individual and consolidated financial statements were prepared and are being presented according to the accounting practices adopted in Brazil comprising the standards of the Securities and Exchange Commission, including the pronouncements issued by the Accounting Pronouncement Committee (CPC), as well as by the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). The consolidated financial statements present comparative information in relation to the prior year.

In addition, the Company considered the guidelines provided for in Technical Guideline OCPC 07, issued by CPC in November 2014, in the preparation of its financial statements. Accordingly, relevant information of the financial statements is being evidenced and corresponds to the information used by management when administrating.

2.2. Basis of measurement

The individual and consolidated financial statements have been prepared based on historical cost (except when different criteria is required) and adjusted to reflect the valuation of assets and liabilities measured at fair value or considering the mark-to-market, when such valuations are required by accounting standards.

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2.3 Current versus non-current rating

The Company has assets and liabilities recorded in the balance sheet based on current or non-current classification. An asset is classified as current when: • It is expected that it is carried out, or is intended to be sold or consumed in the normal course of the operating cycle of the entity; • It is essentially maintained with the purpose of being negotiated; • It is expected to be realized until 12 months after the balance sheet date. • It is cash or cash equivalent (as defined in Technical Pronouncement CPC 03 – Statement of Cash Flows), unless its exchange or use for settling liability is prohibited during at least the 12 months after the balance sheet date. All other assets are classified as non-current. A liability is classified as current when: • It is expected to be settled during the normal operating cycle of the entity. • It is essentially maintained with the purpose of being negotiated. • It shall be settled in the period of up to 12 months after the balance sheet reporting date. • The Entity has no unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. The Company classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified in non-current assets and liabilities.

2.4 Measurement of fair value The Company measures financial instruments at fair value on each reporting date. Fair value is the price received upon the sale of an asset or paid by transfer of a liability of a non-forced transaction between market participants at the measurement date. The measurement of fair value is based on the assumption that the transaction to sell the asset or transfer the liability will occur: • In the main market for the asset or liability. • In the absence of a main market, the market is more advantageous for the asset or the liability. The main or most advantageous market must be accessible by the Company. The fair value of an asset or liability is measured based on the assumptions that market participants would use when establishing a price for an asset or liability, assuming that market participants operate at their best economic interest criteria. Measurement of the fair value of a non-financial asset takes into account the ability of a market player to generate economic benefits through the best use as possible of the asset or by selling it to another market player who would also use the asset better. The Company uses valuation techniques which are appropriate according to the circumstances and for which there is sufficient data to measure the fair value, maximizing the use of relevant observable data and minimizing the use of unobservable data. All assets and liabilities for which the fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy described below based on the lowest level information that is significant to the measurement of the fair value as a whole:

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• Level 1 – Prices quoted (not adjusted) in active markets for identical assets and liabilities to which the entity may have access on the measurement date • Level 2 — Valuation techniques for which the lowest level and significant input to fair value measurement is directly or indirectly observable. • Level 3 — Valuation techniques for which the lowest level and significant input to fair value measurement is not available. For assets and liabilities recognized in the financial statements at fair value on a recurring basis, the Company determines whether transfers occurred between levels of the hierarchy, reassessing the categorization (based on the lowest and most significant information for measuring the fair value as a whole) at the end of each reporting period. The Company’s valuation committee determines the policies and procedures for measurement of fair value, unquoted financial assets, and non-recurring measurement. External appraisers are involved in the valuation of significant assets, as, for example, unquoted financial assets, and significant liabilities, such as contingent consideration. The involvement of external appraisers is annually decided by the evaluation committee, after discussion with the audit committee and the latter’s respective approval. The selection criteria include knowledge of the market, reputation, independence and verification whether the professional standards are followed. The valuation committee decides, after discussing with the Company’s external appraisers, which valuation techniques and information are used in each case. At each reporting date, the valuation committee analyzes the changes in the amounts of assets and liabilities that have to be measured or revalued according to the accounting policies of the Company. For purposes of this analysis, the valuation committee confirms the main information used in the last evaluation, comparing the information included in the valuation calculation with the contracts and other relevant documents. The evaluation committee, together with the Company’s external appraisers, also compares each change in the fair values of each asset and liability with the respective external sources aimed at determining whether the change is acceptable. For the purposes of fair value disclosures, the Company has determined classes of assets and liabilities based on the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above. The corresponding fair value disclosures of financial instruments and non-financial assets measured at fair value or at the time of disclosure of fair values are summarized in the respective notes. 2.5 Use of estimates and judgments The individual and consolidated financial statements were prepared in accordance with several measurement bases used in accounting estimates. The accounting estimates were based on objective and subjective factors, with a basis on Management's judgment for determination of the adequate amount to be recorded in the financial statements. Significant items subject to these estimates and assumptions include the selection of fixed assets and its recoverability in operations, deferred taxes, evaluation of financial assets at fair value, credit risk analysis to determine the allowance for doubtful accounts, and the analysis of the remaining risks to determine other provisions, including for contingencies.

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The settlement of transactions involving these estimates may result in significantly different amounts described in the financial statements due to the probabilistic treatment inherent to the estimation process. Estimates and assumptions are reviewed by the Company at least annually. Impairment loss Impairment loss occurs when book value of an asset or cash generating unit exceeds its recoverable value, which is the highest of fair value, net of selling expenses and value in use. Calculation of fair value, net of selling expenses is based on information available on similar assets’ selling transactions or market prices less selling expenses. The value-in-use calculation is based on the discounted cash flow model. Cash flows result from budget for the next five years and do not include restructuring activities to which the Company has not yet committed or significant future investments that will enhance the asset base of the cash generating unit under test. The recoverable value is sensitive to the discount rate used for the discounted cash flow method, as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. The key assumptions used to determine the recoverable value of cash generating units, including sensitivity analysis. Provision for estimated credit losses to accounts receivable and contract assets The Company uses a provision matrix to calculate the estimated credit loss for accounts receivable and contract assets. The applied provision rates are based on days past due for grouping of many client segments that show similar loss patterns (as, for example, by geographical region, product type or client type, and credit risk, among others). The provision matrix is initially based on the historical loss rates noted by the Company. The Company reviews the matrix prospectively to adjust it according to the historical credit loss experience. For example, if there is expectation of adverse changes in the forecast of economic conditions in the following year (for example, gross domestic product), which could lead to an increase in default in the manufacturing sector, the historical loss rates are adjusted. In all reporting dates, the observed historical loss rates are restated and changes in prospective estimates are analyzed. The evaluation of the correlation between observed historical loss rates, forecast of economic conditions and estimated credit losses are a significant estimate. The quantity of estimated credit losses is sensitive to changes in circumstances and estimated economic conditions. The Company’s historical credit loss experience and the provision of economic conditions may not also represent the actual pattern of the client in the future. Taxes Deferred tax asset is recognized for all tax losses not used to the extent that it is probable that there will be future taxable income against which they can be offset. Substantial judgment from Management is required to determine the amount of deferred tax asset that can be recognized, based on the probable term and amount of future taxable income, along with future tax planning strategies. Provisions for tax, civil and labor risks

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The Company recognizes provision for civil and labor claims. Determination of the likelihood of loss includes determination of evidences available, hierarchy of laws, jurisprudence available, more recent court decisions and relevance thereof in legal system, as well as evaluation of external lawyers. Provisions are reviewed and adjusted so as to consider changes in circumstances, such as applicable statute of limitations, conclusions of tax audits or additional exposures identified based on new matters or court rulings.

3. Significant accounting policies

The accounting policies described in detail below have been consistently applied to all the periods presented in these individual and consolidated financial statements. The accounting policies have also been consistently applied by the Company’s subsidiaries.

3.1. Presentation of segment information The operating segment information is shown consistently with the internal report supplied to the main operating decision maker. The main operating decision maker, in charge of allocating funds and evaluating performance of operating segments is the Executive Board, also in charge of the Company's strategic decision making. The Executive Board makes its operational and strategic decisions observing consolidated income (loss), that is, has only one operating segment.

3.2. Consolidation basis

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as of December 31, 2018. Control is obtained when the Company is exposed or entitled to variable returns based on its involvement with the investee, and has the ability to affect those returns through the power exercised in relation to the investee. Specifically, the Company controls an investee if, and only if, it has:

Power in relation to the investee (i.e., existing rights that guarantee the current ability to govern

the relevant activities of the investee); Exposure or right to variable returns based on its involvement with the investee; The ability to use its power over the investee to affect its incoem (loss).

Generally, it is assumed that the majority of voting rights results in control. To support this assumption, and when the Company has less than the majority of or similar voting rights of an investee, the Company considers all relevant facts and circumstances when assessing whether it has power over an investee, including:

The contractual agreement with other voting holders in the investee; Rights arising from contractual agreements; The voting rights and potential voting rights of the Company.

The Company re-evaluates whether or not it exercises control over an investee if facts and circumstances indicate that there are changes in one or more of the three control elements. The consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ends when the Company ceases to exercise said control. Assets, liabilities and income (loss) of a subsidiary acquired or sold during the year are included in the consolidated financial

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statements from the date the Company obtains control through the date the Company ceases to exercise control over the subsidiary. Income (loss) and each component of other comprehensive income is attributed to the Company’s controlling and non-controlling shareholders, even if this results in loss to non-controlling shareholders. Whenever necessary, adjustments are made to the financial statements of the subsidiaries to align their accounting practices with the Company’s accounting practices. All assets and liabilities, income (loss), income, expenses and cash flows of intra-group transactions are eliminated in the preparation of the consolidated financial statements. Unrealized gains, if any, originating from transactions with investee companies recorded using the equity method, are eliminated against the investment in the proportion of the Company's interest in the subsidiaries. Unrealized losses are eliminated in the same way as unrealized gains, but only up to the point where there is no evidence of loss due to impairment. The parent company’s individual financial statements, financial statements of subsidiaries are recognized under the equity method. The individual and consolidated financial statements include information of Linx S.A. and its subsidiaries, as follows:

Ownership percentage

12/31/2018 12/31/2017

Subsidiaries

Linx Sistemas e Consultoria Ltda. 99.99% 99.99%

Linx Telecomunicações Ltda. 99.99% 99.99%

Indirect subsidiaries

Napse S.R.L. 100.00% 100.00%

Sback Tecnologia da Informação Ltda. 100.00% 100.00%

Percycle Serviços Ltda. (**) - 100.00%

DCG Soluções para Venda Digital S.A. (*) 100.00% -

Linx Pay Meios de Pagamentos Ltda. (***) 100.00% - (**) Companies acquired by Linx Sistemas in 2018. (**) Companies merged into Linx Sistemas in 2018 (***) Change in corporate name (formerly Synthesis Brasil)

The Company and its subsidiaries (jointly, “Group”) is the direct parent company of the following companies: Linx Sistemas e Consultoria Ltda. (“Linx Sistemas”): is engaged in developing management software for the retail segment, providing technical support, advisory and training. Linx Telecomunicações Ltda. (“Linx Telecomunicações”): engaged in the provision of telecommunication services in general, such as transmission of voice, data, images and sound by any means, including services of networks and circuits, telephony, by any systems, including via Internet.

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It is the indirect parent company of the following companies: Napse S.R.L. (“Napse”): operates in the development and sales of point-of-sale (POS) automation software, electronic payment solutions (TEF) and promotion engine for large retail chains in the main Latin American markets. Sback Tecnologia da Informação Ltda. (“Sback”): operates in the cloud platform leader in technologies of retention, reengagement and recapture through Big Data and Intelligence for engagement. DCG Soluções para Venda Digital S.A. (“DCG”): operating in the development of e-commerce platform, focused on the development of technology solution in the Software as a Service (SaaS) model that allows digital sales and connection with marketplaces. Linx Pay Meios de Pagamentos Ltda. (“Linx Pay”): operates with the purpose of aggregating all of the Company’s initiatives related to fintech such as TEF (payment gateway), DUO (Smart POS) and the newly launched Linx Pay Easy (sub-acquiring), besides the new products aligned with Linx’s strategic positioning in such area.

3.3. Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured for the consideration amount transferred, valuated on fair value basis on the acquisition date, including the value of any non-controlling interest in the acquiree. For each business combination, the buyer must measure the non-controlling interest in the acquired business at the fair value of based on its interest in the net assets identified in the acquired business. Costs directly attributable to the acquisition should be accounted for as expense when incurred. On acquiring a business, the Company assesses the financial assets and liabilities assumed in order to rate and to allocate them in accordance with contractual terms, economic circumstances and pertinent conditions on the acquisition date, which includes segregation by the acquired entity of built-in derivatives existing in the acquired entity’s host contracts. Any contingent payments to be transferred by the acquiree will be recognized at fair value on the acquisition date. Subsequent changes in fair value of contingent consideration considered as an asset or a liability shall be recognized in the statement of income. The Company measures goodwill as the exceeding consideration transferred in relation to net assets acquired (net identifiable assets acquired and liabilities assumed). After initial recognition, the goodwill is carried at cost less any accumulated loss for the impairment losses. For impairment testing purposes, goodwill acquired in a business combination is, from the acquisition date, allocated to each cash-generating units of the Company that are expected to benefit from synergies of combination, regardless of other assets or liabilities of the acquiree being allocated to those units.

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3.4. Financial instruments – Initial recognition and subsequent measurement

A financial instrument is an agreement that originates a financial asset to an entity and a financial liability or equity instrument of another entity. i) Financial assets Initial recognition and measurement Financial assets are classified, at the initial recognition as measured: at amortized cost; fair value through other comprehensive income or fair value through profit or loss. The classification of financial assets in initial recognition depends on the characteristics of contractual cash flows of financial assets and the Company’s business model to manage such financial assets. With exception of trade accounts receivable that do not contain a significant financial component or for which the Company has adopted the practical expedient, the Company initially measures the financial asset at its fair value plus transaction costs, in case of financial asset not measured at fair value through profit or loss. The trade accounts receivable that do not contain a significant financial component are measured at the transaction price determined according to CPC 47. For a financial asset to be classified and measured at amortized cost or fair value through other comprehensive income, it has to generate cash flows on the outstanding principal amount. This evaluation is performed at instrument level. The Company’s business model to manage financial assets refers how it manages its financial assets to generate cash flows. The business model determines whether the cash flows will result from collecting contractual cash flows, selling financial assets, or both. Purchases and sales of financial assets that require the delivery of assets within an established schedule by regulation or agreement in the market (regular negotiation) are recognized on the negotiation date, that is, the date when the Company undertakes to buy or sell the asset.

Subsequent measurement For purposes of subsequent measurement, the financial assets are classified into four categories: • Financial assets at amortized cost (debt instruments). •.Financial assets at fair value through other comprehensive income (FVTOCI) with reclassification of accumulated gains and losses (debt instruments). • Financial assets designated at fair value through other comprehensive income, without reclassification of accumulated gains and losses at the time of its derecognition (equity instruments). • Financial assets at fair value through profit or loss. Financial assets at amortized cost This category is the most relevant for the Company. The Company measures the financial assets at amortized cost if both of the following conditions are met:

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• The financial asset held according to business model whose aim is to hold financial assets for the purpose of receiving contract cash flows. • The contractual terms of financial assets give rise, on specific dates, to cash flows that solely refer to payments of principal and interest on the principal amount outstanding. The financial assets at amortized cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or shows impairment. The Company’s financial assets at amortized cost include trade accounts receivable, loans to associates and executive officers, included in other non-current financial assets. Financial assets measured at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated in the initial recognition at fair value through profit or loss or financial assets to be compulsorily measured at fair value. Financial assets are classified as held-for-trading if they are acquired with the purpose of sale or buyback in the short term. Financial assets at fair value through profit or loss are presented in the balance sheet at fair value, with the net changes of fair value recognized in the statement of income. This category contemplates derivative instruments and listed equity investments, which the Company has not irrevocably classified based on fair value through other comprehensive income. Dividends on listed equity investments are also recognized as other income in statement of income when the right to payment is established. Derecognition A financial asset (or, when appropriate, part of a financial asset or part of a group of similar financial assets) is derecognized when: • The rights to receive cash flows from the asset have expired. • The Company transferred its rights to receive cash flows from the asset or assumed an obligation to pay the cash flows received in full without material delay to a third party under a 'pass-through' arrangement; and (a) the Company transferred substantially all risks and rewards of the assets, or (b) the Company neither transferred nor retained substantially all the risks and rewards of the asset, but transferred the control of asset. When the Company transfers its rights to receive the cash flows of an asset or enters into a transfer agreement, it evaluates if and to which extent it retains the ownership risks and rewards. When it neither transfers nor retains substantially all the risks and rewards of the asset, or transfers the control of the asset, the Company continues to recognize the transferred asset to the extent of its continuing engagement. In such case, the Company also recognizes a related liability. The transferred asset and associated liability are measured on a base that reflects the rights and obligations retained by the Company. The continued engagement in the form of guaranteeing the transferred asset is measured at the lower of (i) the amount of the asset and (ii) the maximum amount of the consideration received that the entity could be required to repay (the guarantee amount).

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Impairment of financial assets Additional disclosure regarding the impairment of financial assets are also provided in the following notes: • Disclosure of significant assumptions • Trade accounts receivable, including contractual assets The Company recognizes a provision for estimated credit losses for all debt instruments not held at fair value through profit or loss. The expected credit losses are based on the difference between the contractual cash flows payable according to the contract and all cash flows that the Company expects to receive, discounted at an effective interest rate that approximates to the original transaction rate. The expected cash flows will include the cash flows of the sale of the guarantees held or other credit improvements that are included in contractual terms. For trade accounts receivable and contract assets, the Company applies a simplified approach in the calculation of expected credit losses. Therefore, the Company does not follow the changes in credit risk, but recognizes a loss allowance based on lifetime expected credit losses at each reporting date. The Company established a provision matrix based on its historical credit loss experience, adjusted to specific prospective factors for debtors and economic environment. ii) Financial liabilities Initial recognition and measurement Financial liabilities are classified in the initial recognition as financial liabilities at fair value through profit or loss, loans and receivables, accounts payable, as appropriate. All financial liabilities are initially measured at their fair values, plus or minus, in case of financial liability other than fair value through profit or loss, the transaction costs that are directly attributable to the issue of financial liability. The Company's financial liabilities include suppliers and other accounts payable, loans and financing. Subsequent measurement The measurement of financial liabilities depends on their classification as described below: • Financial liabilities at fair value through profit or loss. • Financial liabilities at fair value through profit or loss include financial liabilities for trading and financial liabilities designated in the initial recognition, as measured at fair value through profit or loss. • Financial liabilities are classified as held-for-trading if they are acquired with the purpose of buyback in the short term. Gains or losses of liabilities for trading are recognized in the statement of income. The financial liabilities designated at initial recognition at fair value through profit or loss are designated at the initial recognition date, and only if the criteria of CPC 48 are met. Loans and receivables

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This is the most relevant category for the Company. After initial recognition, loans and financing obtained and granted subject to interest are subsequently measured at amortized cost, using the effective interest rate method. Gains and losses are recognized in profit or loss when liabilities are derecognized, as well as through the amortization process of effective interest rate. Amortized cost is calculated considering any discount or negative goodwill or goodwill in the acquisition and fees or costs which are not comprised by the effective interest rate method. The amortization under the effective interest rate method is included as financial expense in the statement of income. This category usually applies to loans and financing granted and taken out, subject to interests. Derecognition A financial asset is derecognized when the obligation under the liability is extinguished, that is, when the obligation specified in the contract is discharged, cancelled or expires. When an existing financial liability is replaced by another liability of the same lender at terms substantially different, or when existing liability terms are substantially changed, replacement or modification is treated as the derecognition of original liability and recognition of a new liability. The difference in the respective book values is recognized in statement of income. iii) Offset of financial instruments Financial assets and liabilities are offset and the net value reported in the consolidated balance sheet only when there is a legally enforceable right currently applicable to offset the amounts recognized and if there is intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

3.5 Cash and cash equivalents

Cash equivalents are maintained for the purpose of meeting short-term cash commitments rather than for investment or other purposes. The Company considers as cash equivalents highly liquid short-term investment in a known amount that is subject to an insignificant risk of changes in its value. Consequently, an investment normally qualifies as cash equivalent when it has short-term maturity; for example, three months or less, as of the contracting date.

3.6 Capital

Common shares Additional costs directly attributable to the issue of shares and share options are recognized as reducers from shareholders' equity. Tax effects related to the costs of these transactions are calculated in accordance with CPC 32/IAS 12.

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3.7 Property, plant and equipment

Recognition and measurement

Property, plant and equipment items are measured at historical acquisition, formation or construction cost, net of accumulated depreciation. The cost includes expenditures that are directly attributable to the acquisition of assets. Purchased software that is integral to the functionality of a piece of equipment is capitalized as part of that equipment.

When parts of a property, plant and equipment item have different useful lives, they are accounted for as separate items (major components) of Property, plant and equipment. Gains and losses on disposal of a property, plant and equipment item are determined by comparing the proceeds from disposal with the book value of Property, plant and equipment and are recognized net within "other income" in the statement of income.

Subsequent costs The replacement cost of a component of property, plant and equipment is recognized in the book value of the item when it is probable that the future economic benefits embodied in the component will flow to the Company and its subsidiaries and cost can be reliably measured. The book value of the component that has been replaced by another is written off. Costs of normal maintenance on property, plant and equipment are recognized in income (loss) as incurred.

Depreciation

Depreciation is calculated on the depreciable values, which is the cost of an asset, or other amount that substitutes cost, less residual values. Depreciation is recognized in income (loss) on a straight-line basis over the estimated useful lives of each component of a fixed asset item, as this method is that more closely reflects the pattern of consumption of future economic benefits embodied in the asset. The estimated useful lives for the current and comparative years are shown in the Note 13. The depreciation methods, useful lives and residual values are reviewed at the end of fiscal year and potential adjustments will be recognized as a change in accounting estimates, that is, on a prospective basis.

3.8 Intangible assets and goodwill

Goodwill Intangible assets acquired separately are measured at cost upon initial recognition. The cost of intangible assets acquired in a business combination corresponds to their fair value at acquisition date. After the initial recognition, the intangible assets are stated at cost, less accumulated amortization and impairment losses. Intangible assets generated internally,

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excluding capitalized development costs, are not capitalized, and the expenditure is reflected in the statement of income in the year in which it is incurred. The useful life of the intangible asset is classified as defined or undefined. Goodwill arising from the acquisition of subsidiaries is included in intangible assets in the consolidated financial statements. Intangible assets with defined life are amortized over the economic useful life and valued in relation to impairment whenever there is indication of loss of economic value of the asset. Amortization method and period of an intangible asset with defined life are reviewed at least at the end of each year. Changes in these assets’ estimated useful lives or in expected consumption of future economic benefits are accounted for through changes in amortization method or period, as applicable, and are addressed as changes in bookkeeping. The amortization of intangible assets with defined life is recognized in the statement of operations in the category of expense consistent with the use of the intangible assets. Intangible assets with undefined useful lives are not amortized but tested for impairment on an annual basis, individually or at cash generating unit level. The evaluation of indefinite useful life is reviewed annually to determine whether it is still justifiable. Otherwise, the change in useful life from indefinite to finite is made on a prospective basis. An intangible asset is derecognized when it is sold (that is, date when the beneficiary obtains control over the related asset) or when no future economic benefit is expected from its use or sale. Possible gains or losses from the derecognition of assets (the difference between the net sales price and book value) are recognized in the statement of income in the year. Goodwill impairment test is carried out on an annual basis as of December 31. Intangible assets with undefined useful lives are tested for impairment on an annual basis as of December 31, individually or at cash generating unit level, as the case may be or when circumstances indicate impairment loss of book value. Research and development Expenditures with research are carried as expenses when incurred, and expenditures with development related to technological innovations of existing products are capitalized if they are technologically and economically feasible, and amortized over the term benefits are expected under operating expenses. Development activities involve a plan or project aimed at producing new or substantially improved products. Development expenses are capitalized only when all the following elements are present: (i) technical feasibility to complete the intangible asset in order for it to be available for use or sale; (ii) intention to complete the intangible asset and use or sell it; (iii) ability to use or sell the intangible asset; (iv) the intangible assets should result in future economic benefit, useful for internal use or asset sale; (v) availability of technical, financial and other proper resources to conclude its development and to use the intangible asset, and (vi) ability to accurately measure the expenses attributable to intangible assets during their development. The expenditures capitalized include the cost of labor and materials that are directly attributable to preparing the asset. Other development expenses are recognized in income (loss) as incurred. After the initial recognition, the asset is stated at cost, less accumulated amortization and impairment losses. Amortization is triggered when the development is complete and the asset

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item is available for use for the future economic benefit period. During the development period, the asset is tested for impairment on an annual basis. Other intangible assets Other intangible assets that are acquired and have defined useful lives are measured at cost, less accumulated amortization and any impairment losses. Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures, including expenditures on internally-generated goodwill and trademarks, are recognized in income (loss) as incurred. Amortization is recognized in income (loss) on a straight-line basis over the estimated useful lives of the intangible assets, except goodwill, from the date they are available for use, since this is the method that best reflects the pattern of consumption of the future economic benefits embodied in the asset.

3.9 Non-financial assets

The book values of the non-financial assets of the Company and its subsidiaries, except for inventories and deferred income tax and social contribution assets are reviewed at each reporting date for indication of impairment. If such evidence exists, the recoverable value of the asset is determined. For goodwill and intangible assets with an undefined useful life, the recoverable value is estimated on an annual basis. An impairment loss is recognized when the book value of an asset or its CGU (cash generating unit) exceeds its recoverable value. The recoverable value of an asset or cash-generating unit is the greater of its value in use and its fair value less selling expenses. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment as to the recoverability period of capital and specific risks of the asset or cash generating unit. As to other assets, impairment losses recognized in prior years are valued on each presentation date for any indications that the loss has increased, decreased or no longer exists. A loss of value is reversed if there has been a change in estimates used to determine the recoverable value. An impairment loss is reversed only with the condition that the book value of the asset does not exceed the book value that would have been calculated, net of depreciation or amortization, if the value loss had not been recognized.

3.10 Provisions

Provisions are recognized when the Company has a present (legal or not formalized) obligation as a result of a past event. It is probable that economic benefits will be required to settle the obligation, and a reliable estimate can be made. When the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense related to any provision is presented in the statement of income, net of any reimbursement.

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If the effect of the time value of money is significant, the provisions are discounted using the current rate before the taxes it reflects, when appropriate, the risks specific to the liability. When the discount is adopted, the increase in the provision in view of the passage of time is recognized as financing cost. Provisions for tax, civil and labor risks The Company is a party to several judicial and administrative proceedings. Provisions are formed for all contingencies referring to lawsuits in which an outflow of funds will probably be required to settle the contingency or obligation and a reasonable estimate can be made. Determination of the likelihood of loss includes determination of evidences available, hierarchy of laws, jurisprudence available, more recent court decisions and relevance thereof in legal system, as well as evaluation of external lawyers. Provisions are reviewed and adjusted so as to consider changes in circumstances, such as applicable statute of limitations, conclusions of tax audits or additional exposures identified based on new matters or court rulings. Contingent liabilities recognized in a business combination A contingent liability recognized in a business combination is initially measured at fair value. Subsequently, it is measured between the higher amount that would be recognized according the accounting policy of the above provisions (CPC 25) and/or the amount initially recognized less, as the case may be, the accumulated amortization recognized according to the income recognition policy.

3.11 Transactions involving share-based payment Company employees receive share-based payments, in which the employees render services in exchange for membership certificates (“transactions settled with membership certificates”). In situations in which equity securities are issued and some or all goods or services received by the Company in exchange cannot be specifically identified, the unidentified goods or services received (or receivable) are measured by the difference between the fair value of share-based payment and the fair value of any good or service received on its grant date. Transactions settled with membership certificates The cost of transactions settled with equity instruments is measured with a basis on the fair value on the date in which they were granted. To determine the fair value, the Company uses an external evaluation expert, which uses an appropriate evaluation method. This cost is recognized in employee benefit expenses together with the corresponding increase in equity (in other reserves), during the period when the service is provided, and, when applicable, performance conditions are met (vesting period). The accumulated expense recognized for transactions that will be settled with membership certificates on each reporting date up to the vesting date reflects the extent to which the acquisition period may have expired and the Company’s best estimate of the number of grants which in the last instance, will be acquired. The expense or credit in the statement of income for the period represents the changes in accumulated expense recognized at the start and end of that period. When the terms of an equity-settled transaction are modified (for example, due to plan modifications), the minimum recognized expense is the fair value at the grant date, provided the original vesting conditions are met. An additional expense, measured on the modification date is recognized for any modification that increases the fair value of the contracts with share-

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based payment or otherwise, benefits the employees. When a grant is cancelled by the entity or counterpart, any remaining element of the fair value of the grant is immediately recognized as expense through profit or loss. The effect of dilution of outstanding options is reflected as dilution of additional share in the calculation of the diluted earnings per share.

3.12 Foreign currency translation Consolidated financial statements are presented in Real (R$), parent company’s functional currency. Each entity of the Company determines its own functional currency, and those whose functional currencies are different from Reais, the financial statements are translated into Reais on the reporting date. Transactions and balances Transactions in foreign currency are initially recorded at the exchange rate of the functional currency in force on the date of transaction. Monetary assets and liabilities denominated in foreign currency are translated at the closing foreign exchange rate on the reporting date. All differences are recorded in the statement of income, except for the cash items designated as part of net investment hedge. These differences are directly recognized in other comprehensive income up to the moment of the disposal of the net investment, when they are recognized in statement of income. The tax charges and effects attributed to exchange-rate change on such monetary items are also recognized in other comprehensive income. Non-monetary items that are measured at the historical cost in a foreign currency are translated using the foreign rate of the transaction date. Non-monetary assets which are measured at the fair value in foreign currency are translated based on current foreign exchange rates on the dates the fair value was measured. The gains or losses arising from the translation of non-monetary items measured at fair value are treated according to the recognition applicable to the gain or loss on the change in the fair value of the item (that is, conversion differences for items which gain or loss on fair value is recognized in other comprehensive income or profit or loss for the year are also recognized in other comprehensive income or profit or loss for the year, respectively). When determining the exchange rate to be used in the initial recognition of the respective asset, expense or income (or a portion of it) related to the payment or receipt in advance, the transaction date is the date when the Company initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt in advance. When there are several early payments or receipts, the Company determines transaction date for each consideration early payment or receipt. Foreign subsidiaries The assets and liabilities of foreign subsidiaries are translated into Reais at the closing exchange rate on the balance sheet date, and the corresponding statements of income are translated at the current foreign exchange rates when the transactions occur, as well as statements of cash flows. Foreign exchange rate differences resulting from such translation are recognized in other comprehensive income. At the time entity abroad is written-off,

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accumulated amount of exchange-rate changes related to this entity abroad, recognized in other comprehensive income, is reclassified to income.

3.13 Adjustment to present value of assets and liabilities Long-term monetary assets and liabilities are adjusted for inflation and, therefore, adjusted to their present value. The adjustment to present value of short-term monetary assets and liabilities is calculated, and only recognized, if it is considered as relevant with respect to the financial statements taken as a whole. For recognition and materiality determination purposes, the adjustment to present value is calculated taking into consideration the contractual cash flows and the explicit interest rate, and, in certain cases, the implicit interest rate of the related assets and liabilities. Based on analysis made and on best Management’s estimate.

3.14 Revenue from contracts with customers The Company recognizes its income from software license, which include license fees, income from maintenance, and income from services, which includes implementation and customization. Income is presented net of taxes, returns, rebates and discounts, when applicable. Income is recognized in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the transfer of services to a client.

Income from maintenance: They are recurring income derived from: (1) income related to services to provide the client with the right of use of software in a cloud-based infrastructure provided by the Company or by a third-party, or even based on the client’s own internal infrastructure, where the client has no right to end the contract and become the owner of the software or use in its IT infrastructure or a third-party’s infrastructure; and (2) income related to technological support, helpdesk, rent of equipment, software housing services, payment for the use of tools and support teams located in clients, and connectivity services. Monthly maintenance is aggregated in a contract usually valid for twelve months. Monthly maintenance income is not reimbursable and are billed and paid on a monthly basis. This income is recognized in income (loss) on a monthly basis, as services are provided, starting on the date in which services are made available to the client and all other income recognition criteria are met.

Income from service rendered is considered non-recurring and involves implementation services, including personalization, training, software licenses and other services. Income from services is recognized in proportion to the stage of completion of the service.

Income from royalties - Income from software licenses are recognized when: it is determined when all risks and rewards of the license are transferred upon the availability of the software and the amount may be reliably measured and it is likely that any expected future economic benefits will be generated on behalf of the Company. In case billed amounts exceed services rendered plus recognized income, the difference is stated in the balance sheet (current liabilities) as deferred income.

3.15 Financial income and expenses

Financial income comprises basically interest of interest earning bank deposits and discounts obtained. Financial expenses comprise basically bank fees, commercial discounts and

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interest on loans. Interest is recognized in the income (loss) for the period using the effective interest rate methodology.

3.16 Trade accounts receivable

An account receivable represents the Company’s entitlement to an unconditional consideration value (that is, only elapsing of time is necessary to make consideration payment due).

3.17 Income tax and social contribution The income tax and social contribution, both current and deferred, are calculated based on the rates of 15% plus a surcharge of 10% on taxable income in excess of R$ 240,000 (annual basis) for income tax and 9% on taxable income for social contribution on net income, and consider the offsetting of tax losses and negative basis of social contribution, limited to 30% of the taxable income. Income tax and social contribution expense comprises both current and deferred taxes. Current taxes and deferred taxes are recognized in income (loss) unless they are related to the business combination, or items directly recognized in shareholders' equity or other comprehensive income. Current taxes are the expected taxes payable on the taxable income for the period, at tax rates enacted or substantively enacted on the date of presentation of the financial statements, and any adjustments to taxes payable in relation to prior periods. Deferred taxes are recognized in relation to the temporary differences between the book values of assets and liabilities for accounting purposes and the related amounts used for taxation purposes. Deferred tax assets and liabilities are offset when there is a legal enforceable right to set off current tax assets and liabilities, and the latter relate to income taxes levied by the same tax authority on the same taxable entity. A deferred income tax and social contribution asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable income will be available against which the unused tax losses and credits can be utilized. Deferred income tax and social contribution assets are reviewed at each reporting date and reduced when their realization is no longer probable. As permitted by Brazilian tax legislation, the subsidiary Sback Tecnologia da Informação Ltda. adopts the deemed income taxation method. For these subsidiaries, income tax and social contribution are calculated at the rate of 32% on income from services and 100% on financial income. The regular rates of the respective tax and contribution apply to these. Tax exposures To determine current and deferred income tax, the Company and its subsidiaries take into consideration the impact of uncertainties on positions taken on taxes and if the additional income tax and interest payment has to be made. The Company and its subsidiaries believe that the provision for income tax recorded in liabilities is adequate for all outstanding tax

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periods, based on its evaluation of several factors, including interpretations of tax laws and past experience. This evaluation is based on estimates and assumptions that may involve several judgments on future events. New information may be made available, leading the Company and its subsidiaries to change its judgment on the adequacy of existing provision. These changes will impact income tax expenses in the year in which they occur.

3.18 Accounts payable to suppliers

Trade accounts payable are obligations due for assets or services acquired in the normal course of businesses, and are classified as current liabilities if payment is due within one year. Otherwise, accounts payable are presented as non-current liabilities. They are initially recognized at fair value and, subsequently, measured at amortized cost using the effective interest rate method.

3.19 Short-term employee benefits Obligations for short-term employee benefits are measured on a non-discounted basis and incurred as expenses as the related service is rendered. The liability is recognized at the amount expected to be paid under the cash bonus plans or short-term profit sharing if the Company and its subsidiaries have a legal or constructive obligation to pay this amount as a result of prior service rendered by the employee, and the obligation can be reliably estimated. a. Private pension plan and profit sharing The Company and its subsidiaries do not hold private pension plans or any pension plan for its employees and management. The Company and its subsidiaries have benefit plans for management and employees in the form of profit sharing and bonus plans. Profit sharing and bonus plans are expected to be settled in up to 12 months and are presented at expected settlement value. b. Post-employment benefit – health care plans The Company and its subsidiaries offer health care plans compatible with the market to its employees; the Company and its subsidiaries are co-sponsors of the plan and their employees contribute with a monthly fixed installment that may be extended to spouses and dependents. Costs with monthly defined contributions made by the Company and its subsidiaries are recognized in income on a monthly basis, in conformity with the accrual basis. Costs, contributions and actuarial liabilities related to such plans are determined annually, with a basis on an appraisal carried out by independent actuaries. c. Remuneration based on stock options The Company offers long-term incentive plans to its executives comprised of grant of stock option plan.

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Fair value of stock options granted to the executives of the Company and its subsidiaries is measured on grant date and the expense is recognized in income for the period in which the right is acquired, after meeting certain specific conditions. On balance sheet date, the Company and its subsidiaries review estimated regarding the number of stock options whose rights should be acquired based on such conditions, and, when applicable, recognized in income for the year, as a contra-entry to shareholders' equity, effect from review of these initial estimates.

3.20 IAS 29/CPC 42 Adoption of the accounting and reporting standard in highly hyperinflationary economy

In July 2018, considering that the inflation accumulated in the past three years in Argentina was higher than 100%, the adoption of the accounting and reporting standard in hyperinflationary economy (IAS 29/CPC 42) became mandatory in relation to the subsidiary Napse S.R.L., located in Argentina. Pursuant to IAS 29/CPC 42, non-cash assets and liabilities, the shareholders’ equity and the statement of income of subsidiaries that operate in hyperinflationary economies are adjusted by the change in the general purchasing power of the currency, applying a general price index. The financial statements of an entity whose functional currency is the currency of a hyperinflationary economy, whether they are based on the historical or current cost approach, should be expressed in terms of the current measurement unit at the balance sheet date and translated into Real at the closing exchange rate for the period. In view of the foregoing, the Company applied the accounting of hyperinflationary economy to its subsidiary in Argentina in these individual and consolidated financial statements by adopting the rules of IAS 29/CPC 42 as follows: (i) The accounting and reporting standard in hyperinflationary economy was adopted as of July 1, 2018 (according to paragraph 4 of IAS 29/CPC 42, the standard should be adopted to the financial statements of any entity since the period that the hyperinflation is identified); (ii) Non-cash assets and liabilities recorded at historical cost (for example, fixed assets, intangible assets, etc.) and the shareholders’ equity of the subsidiary in Argentina were adjusted based on an inflation index. The impacts of hyperinflation resulting from changes in the general purchasing power up to December 31, 2017 were reported in the retained earnings and the impacts of changes in the general purchasing power as of January 1, 2018 were reported in the statement of income under a specific account for adjustment of hyperinflation, in the financial income (loss.) Pursuant to paragraph 3 of IAS 29/CPC 42, there is no defined general price index, but allows the use of judgment when the restatement of the financial statements is necessary. Accordingly, the indices used were based on Resolution 539/18 issued by the Argentine Federation of Council of Economic Science Professionals: as of January 1, 2017, the national IPC (national consumer price index; up to December 31, 2016, the IPIM (internal wholesale price index); (iii) The statement of income, comprehensive income, cash flows and changes in shareholders’ equity for the year ended December 31, 2017 and respective balance sheets of the subsidiary in Argentina were not restated. According to IAS 21, paragraph 42 (b) when the amounts are translated into the currency of non-hyperinflationary economy, the comparative amounts should be those that would be presented as amounts of the current

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year in the financial statements for the prior year (that is, not adjusted to subsequent changes in the level of prices or subsequent changes in exchange rate). The statement of income of Argentina accumulated to December 31, 2018 was adjusted by the inflation index and, subsequently translated as CPC 02, as result of the adoption of IAS 29/CPC 42. The first-time adoption generated an impact for the period ended December 31, 2018, the use of the Accounting and reporting standard in Hyperinflationary Economy, pursuant to IFRS, positive in shareholders’ equity of R$ 1,822 and a negative impact in the net income of R$ 1,163.

3.21 Statements of added value

The presentation of the Individual and Consolidated Statement of Added Value is required by Brazilian corporate law and the accounting practices adopted in Brazil applicable to publicly-held companies. Statement of Added Value was prepared in accordance with criteria defined in Technical Pronouncement CPC 09 - "Statement of Added Value". The IFRS do not require the presentation of this statement. Accordingly, in conformity with IFRS, this statement is presented as supplementary information, without prejudice to financial statements as a whole.

3.22 Statement of cash flow

Statements of cash flows were prepared and presented in accordance with the Technical Pronouncement CPC 03 (R2) - Statement of Cash Flows. Paid interest is classified as financing cash flow in the Statement of Cash Flow, as it represents financial funds raising costs. In the years ended December 31, 2018 and 2017 he following transactions did not affect the cash:

Consolidated

12/31/2018 12/31/2017

Acquisition of computers, furniture and facilities 341 469

Acquisition of software and software developed - 599

3.23 New or reviewed pronouncements with first-time adoption in 2018

The Company adopted for the first time certain revised standards, effective for annual periods beginning on or after January 1, 2018. The Company decided not to early adopt any other standard, interpretation or change that has been issued but is not yet effective. The nature and impact of each of the new standards and revised standards are set out below:

CPC 47 - Revenue from contract with customer CPC 47, equivalent to international standard IFRS 15, replaces CPC 17 (R1) – Construction Contracts (equivalent to international standard IAS 11), CPC 30 – Revenues (equivalent to

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international standard IAS 18) and related interpretations, and applies to all revenues deriving from contract with client, with limited exceptions. CPC 47 establishes a five-stage model to account for income deriving from contract with client and requires an income to be recognized at an amount that reflects consideration that the entity expects to receive in exchange for transfer of assets or services to a client. CPC 47 requires entities to make judgments, taking into consideration all relevant facts and circumstances when applying each model stage to contracts with their clients. This standard also specifies bookkeeping of incremental costs for obtaining a contract and of costs directly related to compliance with a contract. In addition, this standard requires more detailed disclosures. The Company adopted CPC 47 using the modified retrospective adoption method. The Company did not apply any of the other available optional practical expedients.

CPC 48 - Financial instruments CPC 48 – Financial Instruments, equivalent to international standard IFRS 9, replaces CPC 38 (equivalent to international standard IAS 39) for annual periods beginning as of January 1, 2018, joining together all three aspects of financial instruments bookkeeping: classification and measurement; impairment. The Company applied it on a prospective basis with first-time adoption date being January 1, 2018. This change did not materially impact the Company’s operational, investment and financing cash flows and the basic and diluted earnings per share. Nature of such adjustments is as follows: (a) Classification and measurement In accordance with CPC 48, debt instruments are subsequently measured at fair value through profit or loss or amortized cost. Classification is based on two criteria: the Company’s business model to manage assets and whether instruments’ contract cash flows represent only payments of principal and interest on outstanding principal. Evaluation of the Company’s business model was carried out beginning as of first-time adoption date, January 1, 2018. Evaluation of whether debt instruments’ contract cash flows are exclusively comprised of payments of principal and interest was carried out based on facts and circumstances existing upon initial recognition of assets. Requirements for classification and measurement of CPC 48 did not significantly impact the Company. The Company continued to measure at fair value all financial assets previously held at fair value in accordance with CPC 38. Changes to the Company’s classification of assets are as follows:

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Classification - Financial assets and liabilities: Classification

IAS 39/CPC 38 Classification IFRS 9/CPC 48

Financial assets (Current / Non-current)

Cash and cash equivalents Loans and receivables

Amortized cost

Interest earnings bank deposits FVTPL FVTPL

Trade accounts receivable Loans and receivables

Amortized cost

Other receivables Loans and receivables

Amortized cost

Financial liabilities (Current / Non-current)

Suppliers Amortized cost Amortized cost

Loans and financing Amortized cost Amortized cost

Accounts payable from acquisition of subsidiaries Amortized cost Amortized cost

Other liabilities Amortized cost Amortized cost

i) Impairment of financial assets IFRS 9/CPC 48 substitutes the incurred losses model of IAS 39/CPC 38 for a prospective expected credit losses model. The new model for estimated losses is applicable to assets measured at amortized cost, contractual assets and debt instruments measured at FVTOCI. CPC 48 requires the Company to recognize a provision for credit losses expected in the future for all contract assets and debt instruments that are not maintained at fair value through profit or loss. Provisions for expected losses were measured considering simplified approach and were calculated based on actual credit loss experience calculated based on historical analysis of losses in the last 12 months. Reconciliation of new consolidated balance sheet balances for year ended December 31, 2017 and opening balance on January 1, 2018, affected by new rules:

Financial Statements

disclosed on 12/31/2017

Impacts concerning the

adoption of IFRS 15/CPC 47 IFRS

9/CPC 48

Financial statements - 01/01/2018

Assets

Current 720,084 (1,539) 718,545 Trade accounts receivable 128,177 (1,539) 126,638 Other current assets

591,907 - 591,907

Non-current 843,940 19,789 863,729 Deferred taxes 4,272 19,789 24,061 Other non-current assets

839,668 - 839,668

Total assets 1,564,024 18,250 1,582,274

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Liabilities

Current 169,238 30,850 200,088 Deferred income 8,478 30,850 39,328 Other current liabilities

160,760 - 160,760

Non-current 224,266 26,957 251,223 Deferred income - 26,957 26,957 Other liabilities

224,266 - 224,266

Shareholders' equity 1,170,520 (39,557) 1,130,963

Total liabilities 1,564,024 18,250 1,582,274

For comparison purposes, we present reconciliation of impacts on consolidated income (loss) for the period ended December 31, 2018, without effects from new standards:



Impacts concerning the

adoption of IFRS 15/CPC 47 IFRS

9/CPC 48

Financial Statements as of

12/31/2018 without effect of said

standards

Income (loss) Net income 685,559 (8,731) 676,828 Cost of services rendered (195,848) - (195,848) (=) Gross income 489,711 (8,731) 480,980 Operating expenses (399,648) 931 (398,717) (=) Income (loss) before financial income and expenses

90,063 (7,800) 82,263

Finance income (cost) 2,081 - 2,081 (=) Income (loss) before taxes 92,144 (7,800) 84,344 Current and deferred inc. tax and soc. contr. (21,089) 1,992 (19,097)

(=) Net income 71,055 (5,808) 65,247

The Company and its subsidiaries, in accordance with IFRS 9/CPC 48 requirements for financial assets impairment, applied the expected losses prospective model simplified approach. These changes generated an impact of R$ 1,539 in the shareholders’ equity as of January 01, 2018 and R$ 931 in the income (loss) for the year ended December 31, 2018. In accordance with IFRS 15/CPC 47, the Company concluded that the income referring to royalty rates are recognized along the period of the contract for use of software, and performance obligations are met over contract period, in accordance with standard requirements, and concluded with impact of R$57,807 on deferred income on January 1, 2018, and on income (loss) for the year ended December 31, 2018 of R$8,731 in income from royalty services. Above-mentioned impacts referring to adoption of IFRS15/CPC47 and IFRS9/CPC48 generated an increase of R$19,789 under “Deferred Income Tax and Social Contribution” caption on January 1, 2018. In the year ended December 31, 2018, the effect in income (loss) was R$ 1,992 in deferred income tax and social contribution.

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3.24 Issued standards that did not become effective

At the date these financial statements were prepared, the following standards and amendments had been published; however, application thereof was not mandatory. The Company did not early adopt any pronouncement or interpretation issued whose application was not mandatory. Standards and interpretations issued but not yet effective through the date the Company's financial statements were issued are set out below:

Standards and amended standards Effective date

(annual periods starting on or after)

IFRS 16 Financial lease operations January 1, 2019

IFRIC 23 Uncertainty related to income tax treatments January 1, 2019

Amendments to IFRS 9 Characteristics of prepayment with negative remuneration January 1, 2019

Amendments to IAS 28 Long-term Investment in Associated Companies and Joint Ventures

January 1, 2019

IFRS Standards Annual Improvements

Cycle 2015–2017 January 1, 2019

Amendments to IAS 19 Alteration of plan, Restriction or Settlement January 1, 2019

IFRS 17 Insurance contracts January 1, 2021

The Company does not expect relevant impacts as a result of standards and interpretations that were issued but are not yet effective, except for IFRS 16, described below.

CPC 06 (R2) - Lease operations

CPC 06 (R2) – Lease transactions, issued by the Accounting Pronouncements Committee, is equivalent to international standard IFRS 16 – Leases, issued in January 2016 to replace prior version of said standard (CPC 06 (R1), equivalent to international standard IAS 17). CPC 06 (R2) establishes principles for recognition, measurement, presentation and disclosure of lease transactions and requires lessees to account for all leases in accordance with a single balance sheet model, similar to bookkeeping of financial leases in accordance with CPC 06 (R1). This standard includes two recognition exemptions to lessees: leases of low-value assets (i.e., personal computers) and short-term leases (that is, leases with maturity of 12 months or less). On a lease’s initial date, lessee recognizes a liability to make payments (a lease liability) and an asset representing the right to use the asset over lease period (right-of-use asset). Lessees must recognize expenses with interest on lease liability and with depreciation of right-of-use asset separately.

Lessees must also reevaluate lease liability upon occurrence of certain events (for example, change in lease period, change in future lease payments as a result of change in rate or fee used to determine such payments). In general, lessee will recognize revaluation value of lease liability as an adjustment to right-of-use asset. CPC 06 (R2), which is effective for annual periods started beginning as of January 1, 2019, requires lessees and lessors to carry out more comprehensive disclosures than those provided for in CPC 06 (R1). Transition to CPC 06 (R2)

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The Company plans to adopt CPC 06 (R2) on a prospective basis. The Company will choose to adopt the standard for contracts that were previously identified as leases that use CPC 06 (R1). The Company will choose to use exemptions proposed by the standard for lease contracts whose period ends 12 months after first-time adoption date, and lease contracts with a low-value asset as their object. The Company leases office equipment (such as personal computers, printers and copy machines) that is considered as having low value. Due to adoption of CPC 06 (R2), the Company’s income before financial income and expenses will improve and its interest expenses will increase. This is due to change in bookkeeping of lease expenses that were classified as operating leases, in accordance with CPC 06 (R1). The Company identified operating lease contracts (rent of properties, IT equipment, and use of cloud space). Application of this standard (recognition of asset right-of-use and lease liabilities) will impact opening balance sheet for year 2019 by R$91,290 in Lease Asset and Liability. Weighted average increase rate used to measure lease liabilities was 9.15% per annum. During 2018, the Company carried out a detailed evaluation of CPC 06 (R2) impact. In short, impact from adoption of CPC 06 (R2) is expected to be as follows:



Impact concerning the adoption of IFRS

16/CPC 06(R2)

Financial statements - 01/01/2019

Assets

Current 708,827 - 708,827

Non-current 938,849 91,290 1,030,139 Intangible assets (Right to use) 849,634 91,290 940,924 Other non-current assets

89,215 - 89,215

Total assets 1,647,676 91,290 1,738,966

Liabilities

Current 220,537 6,156 226,693 Leasing payable - 6,156 6,156 Other current liabilities

220,537 - 220,537

Non-current 369,767 85,134 454,901 Leasing payable - 85,134 85,134 Other non-current liabilities

369,767 - 369,767

Shareholders' equity 1,057,372 - 1,057,372

Total liabilities 1,647,676 91,290 1,738,966

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4. Corporate Restructuring

4.1. Merger of Percycle

On June 30, 2018, merger of Percycle Serviços Ltda. was concluded and net assets were consolidated by subsidiary Linx Sistema e Consultoria Ltda. On May 31, 2018, book value of merged net assets of Percycle Serviços Ltda. was as follows:

Assets Liabilities Current assets Current liabilities

Cash and cash equivalents 568 Suppliers 1,319 Trade accounts receivable 1,812 Labor obligations 206 Recoverable taxes 739 Taxes and contributions payable 50

3,119 Income tax and social

contribution 122

Advance for future capital

increase 1,500

3,197

Non-current assets Non-current liabilities

Other receivables 101 Other accounts payable - Long-term 562

101 562

Property, plant and equipment 45 Shareholders' equity

146 Capital 1

Profit reserve (495)

(494)

3,265 3,265

Appraisal of assets of Percycle Serviços Ltda. was conducted by experts who issued an appraisal of the Company’s shareholders’ equity report dated June 15, 2018. The merger of Percycle Serviços Ltda. entailed no capital increase or changes in Company’s shareholding structure.

4.2. Merger of Único On August 31, 2018, merger of Único Sistemas e Consultoria S.A. was concluded, and net assets were consolidated by subsidiary Linx Sistema e Consultoria Ltda. On July 31, 2018, book value of merged net assets of Único Sistemas e Consultoria S.A. was as follows:

Assets Liabilities Current assets Current liabilities

Cash and cash equivalents 105 Suppliers 1 Trade accounts receivable 491 Loans and financing 113 Other receivables 81 Labor obligations 234

677 Taxes and contributions payable 153

Other accounts payable 28

529

48


Property, plant and equipment 217 Shareholders' equity 217 Capital 5,460

Capital reserve (2,900) Profit reserve (2,195)

365 894 894

Net assets of Único Sistemas e Consultoria S.A. was evaluated by experts who issued an appraisal report of Company’s shareholders’ equity dated August 10, 2018. The merger of Único Sistemas e Consultoria S.A. did not lead to a capital increase or changes in Company’s ownership interest.

4.3. Merger of Itec On October 31, 2018, merger of Itecgyn Informática Ltda. was concluded and net assets were consolidated by subsidiary Linx Sistema e Consultoria Ltda. The table below stated the book value as of September 30, 2018 of the net assets merged of Itecgyn Informática Ltda.:

Assets Liabilities

Current assets Current liabilities

Cash and cash equivalents 1 Suppliers 107

Trade accounts receivable 1,210 Social charges and labor obligations

355

Other receivables 726 Labor obligations 67

1,937 Taxes and contributions payable 81

Other accounts payable 18

628


Property, plant and equipment 133 Shareholders' equity Intangible assets 1,768 Capital 2,950

1,901 Profit reserve 260

3,210

3,838 3,838

Appraisal of assets of Itecgyn Informática Ltda. was conducted by experts who issued an appraisal of the Company’s shareholders’ equity report dated October 09, 2018. The merger of Itecgyn Informática Ltda. entailed no capital increase or changes in Company’s shareholding structure.

49

5. Business combination

5.1. Acquisition of Itec

On March 21, 2018, Purchase and Sale Contract was entered into by Linx Sistema e Consultoria Ltda., the Company’s wholly-owned subsidiary (acquiring company) and partners of Itecgyn Informática Ltda. (“Itec” or acquired company), which operates in developing and trading drugstore management and automation software. On March 21, 2018, the transaction was completed, and the control was transferred to the acquiror, with payment and transfer of 100% of quotas acquired where the price established for the purchase of all shares was R$ 25,500 to be paid as follows: The amount of R$ 14.400 (fourteen million and four hundred thousand reais), paid in cash as of March 22, 2018 to original shareholders, distributed according to the number of shares held by them; The amount of R$2,000 (two million Reais), paid on May 18, 2018 to original shareholders, was distributed in accordance with amount of shares they hold; The total of the additional price (“Contingent Installment”) up to R$ 9,100 (Fair value as of December 31, 2018 is R$ 8,312), divided into:

The amount of R$ 2,000 (two million reais) to the original shareholders if contingencies do not occur, restated at IPC-A (IBGE) through its effective payment, in accordance with the purchase and sale agreement; The amount of R$5,100 (five million and a hundred thousand Reais) will be paid to original shareholders in case Itec achieves gross billing goals in accordance with purchase and sale contract; Residual amount of R$2,000 (two million Reais) will be paid to original shareholders in case Itec achieves operating goals in accordance with purchase and sale contract.

Upon completion of the acquisition on March 21, 2018, the Company became the indirect parent company of Itec, and obtained 100% of voting capital. On acquisition date, purchase consideration value is as follows:

Purchase consideration

Amount paid in cash 14,400

Amount paid in credit 2,000

Fair value of contingent installment (Earn-out) 8,312

Total compensation 24,712

Analysis of cash flow from the acquisition


Net cash acquired from subsidiary (208)

Cash flow from investment activities 14,192

50

5.2. Acquisition of Único

On April 3, 2018, a Purchase and Sale Contract was entered into by Linx Sistema e Consultoria Ltda., the Company’s wholly-owned subsidiary (acquiring company) and representatives of Único Sistemas e Consultoria S.A. (“Único” or acquired company), which operates in developing cloud-based multi-channel tools for promotions and loyalty management. On April 03, 2018, the transaction was completed, and the control was transferred to the acquiror, with payment and transfer of 100% of quotas acquired where the price established for the purchase of all shares was R$ 25,000 to be paid as follows: The amount of R$ 15,000 paid in cash as of April 04, 2018 to original shareholders, distributed as the amount of shares held by them; The amount of R$1,000 (one million Reais), paid on May 14, 2018 to original shareholders, was distributed in accordance with the amount of shares held by them; The total of the additional price (“Contingent Installment”) up to R$ 9,000 (Fair value as of December 31, 2018 is R$ 8,101), divided into:

The amount of R$ 1,000 (one million reais) to the original shareholders if contingencies do not occur, restated at IPC-A (IBGE) through its effective payment, in accordance with the purchase and sale agreement; The amount of R$8,000 (eight million Reais) will be paid to original shareholders in case Único achieves financial goals in accordance with purchase and sale contract.

Upon completion of the acquisition on April 03, 2018, the Company became the indirect parent company of Único, and obtained 100% of voting capital.



Amount paid in credit 1,000







5.3. Acquisition of DCG

On June 22, 2018, a Purchase and Sale Contract was entered into by Linx Sistema e Consultoria Ltda., wholly-owned subsidiary of the Company (acquiring company) and representatives of DCG Soluções para Venda Digital S.A. (“DCG” or the acquired company), which operates developing e-commerce platforms and technological solutions

51

of the Software as a Service (SaaS) model, allowing digital sales and connection with marketplaces. On June 22, 2018, the transaction was completed, and the control was transferred to the acquiror, with payment and transfer of 100% of quotas acquired where the price established for the purchase of all shares was R$ 67,000 to be paid as follows: The amount of R$ 46,000 (forty-six million reais) paid in cash as of June 25, 2018 to original shareholders, distributed as the amount of shares held by them; The total of the additional price (“Contingent Installment”) up to R$ 21,000 (Fair value as of December 31, 2018 is R$ 19,468), divided into:

The amount of R$3,000 (three million Reais) was paid to original shareholders and distributed in accordance with the amount of shares held by them, in accordance with purchase and sale contract; The amount of R$3,000 (three million Reais) will be paid to original shareholders in case no contingencies occur, adjusted at CDI up to actual payment, in accordance with purchase and sale contract; The amount of R$15,000 (fifteen million Reais) will be paid to original shareholders in case DCG achieves operating and financial goals, in accordance with purchase and sale contract;

Upon completion of the acquisition on June 22, 2018, the Company became the indirect parent company of DCG, and obtained 100% of voting capital. Purchase consideration on acquisition date is shown in chart below.









5.4. Identifiable assets acquired and goodwill

Pursuant to IFRS 3 (R)/CPC 15 (R1) – Business Combinations, business acquisitions are accounted for under the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated by total fair values of transferred assets, liabilities assumed on acquisition date from the former controlling shareholders of the acquiree and the interest issued in exchange for control of the acquiree.

52

The fair value of identifiable assets acquired in business combinations was measured and recognized at the date of completion of the transaction:

Fair values recognized on acquisition: Itec Único DCG

Current assets 632 358 2,942

Cash and cash equivalents 208 37 23

Investments - -

1,654

Accounts receivable 423 281 986

Other current assets 1 40 279

Non-current assets 6,755 2,085 14,486

Software (*) 5,494 1,530 10,842

Client portfolio (*) 1,160 300

1,378

Other non-current assets - - 66

Property, plant and equipment 101 255 527

Intangible assets - - 1,673

Current liabilities 382 598 2,527

Suppliers 44 17 682

Loans and financing - 226 289

Social charges 157 121 1,082

Tax liabilities 61 234 465

Other liabilities payable 120 - 9

Non-current liabilities - 200 620

Loans and financing - - 582

Other Liabilities payable - 200 38

Fair value of assets acquired 7,387 2,443 17,428

Fair value of liabilities assumed 382 798 3,147

Total identifiable net assets 7,005 1,645 14,281

Fair value of consideration transferred (24,712)

(24,101) (65,468)

Goodwill on operation 17,707 22,456 51,187

5.5. Assets acquired and liabilities assumed

The fair value of trade accounts receivable of the acquirees is R$ 1,690. The gross amount of trade accounts receivable is R$ 3,152. There was no impairment loss on any trade accounts receivable, and the contractual amount is expected to be fully received.

53

Goodwill determined amounting to R$91,349 comprises future economic benefits stemming from synergies resulting from the acquisitions. Goodwill is expected to generate future tax benefits. On acquisition date, an analysis of goodwill recoverability was carried out, and, based on it, the Company concluded that no losses are expected Since the acquisition date, the acquirees have contributed to the Company with net income of R$ 16,042 and pre-tax income of R$ 96.

At the conclusion date of the preparation of these individual and consolidated financial statements, the Company is in the process of reviewing and adjusting the determination of fair value of identifiable assets acquired and liabilities assumed from the acquirees. This analysis is expected to be completed shortly, as soon as management has all relevant information of the facts, not exceeding a maximum period of 12 months from the acquisition date.

5.6 Acquisitions made in 2017

5.6.1 Acquisition of the Sythesis Group

On July 11, 2017, a purchase and sale agreement was entered into by and between Linx Sistemas e Consultoria LTDA, wholly-owned subsidiary of the Company (acquiror) and the representatives of Synthesis Holding LLC and Synthesis Information Technology S.R.L (“Synthesis Group” or acquirees).

Purchase consideration Amount paid in cash (*) 41,324



Analysis of cash flow from the acquisition Amount paid in cash 41,324 Net cash acquired from subsidiary (3,827)

Cash flow from investment activities 37,497 5.6.2 Acquisition of Sback

On October 18, 2017, a purchase and sale agreement was entered into by and between Linx Sistema e Consultoria LTDA, wholly-owned subsidiary of the Company (acquiror) and the representatives of Sback Tecnologia da Informação Ltda. (“Sback” or acquiree), which operates using a cloud platform that is a leader in retention, reengagement and recapture technologies through Big Data and intelligence for engagement.

Purchase consideration Amount paid in cash 36,500



54

Analysis of cash flow from the acquisition Amount paid in cash 36,500 Net cash acquired from subsidiary -


5.6.3 Acquisition of Percycle

On December 20, 2017, a purchase and sale agreement was entered into by and between Linx Sistema e Consultoria LTDA, wholly-owned subsidiary of the Company (acquiror) and the representatives of Percycle Serviços Ltda. (“Percycle” or acquiree), which operates in the leading native online media platform, uniting storeowners, brands and consumers.

Purchase consideration Amount paid in cash 10,750



Analysis of cash flow from the acquisition Amount paid in cash 10,750 Net cash acquired from subsidiary (20)


Identifiable assets acquired and goodwill

The fair value of identifiable assets acquired in business combinations was measured and recognized at the date of completion of the transaction:

Fair values recognized on acquisition: Synthesis Shopback Percycle

Current assets 10,742 1,162 3,361 Cash and cash equivalents 3,827 - 20 Accounts receivable 5,104 1,128 3,339 Other current assets 1,811 34 2

Non-current assets 36,592 17,693 6,949 Software 8,230 11,357 4,546 Client portfolio 16,335 6,331 2,273 Indemnifiable assets 10,751 - - Other non-current assets 1,276 5 130

Current liabilities 29,020 1,239 2,875 Suppliers 1,574 72 2,390 Tax liabilities 1,446 1,102 222 Provisions for contingencies 12,937 - - Deferred tax liabilities 8,352 - - Other Liabilities payable 4,711 65 263

Non-current liabilities - - 616 Other Liabilities payable - - 616

55

Fair value of assets acquired 47,334 18,855 10,310 Fair value of liabilities assumed 29,020 1,239 3,491 Total identifiable net assets 18,314 17,616 6,819

Fair value of consideration transferred 81,667 55,307 22,730

Goodwill on operation (63,353) (37,691) (15,911)

Assets acquired and liabilities assumed in 2017 The fair value of trade accounts receivable of the acquirees is R$ 9,571. The gross amount of trade accounts receivable is R$ 9,649. There was no impairment loss on any trade accounts receivable, and the contractual amount is expected to be fully received. Goodwill paid amounting to R$116,955 comprises future economic benefits stemming from synergies resulting from the acquisition. Goodwill is expected to generate future tax benefits (except for Synthesis). Since the acquisition date, the acquirees have contributed to the Company with net income of R$ 22,601 and pre-tax income of R$ 9,857. At the date of the preparation of this consolidated annual information, the Company is in the process of reviewing and adjusting the determination of fair value of identifiable assets acquired and liabilities assumed from the acquirees. This analysis is expected to be completed shortly, as soon as Management has all relevant information of the facts, not exceeding a maximum period of 12 months from the acquisition date.

6. Cash and cash equivalents

Parent company Consolidated 12/31/2018 12/31/2017 12/31/2018 12/31/2017 Cash and banks 34 17 45,422 37,854 Short-term interest earning bank deposits 16 16 4,428 5,064 50 33 49,850 42,918

Highly liquid short-term interest earning bank deposits are promptly convertible into a known sum of cash and subject to an insignificant risk of change of value. Interest earning bank deposits refer substantially to Fixed Income Fund remunerated at rate of 101.41% of the Interbank Deposit Certificate (CDI). The exposure of the Company and its subsidiaries to risk and the sensitivity analysis are disclosed in Note 25.8.

56

7. Interest earnings bank deposits


Type Name Date of

investment

Maturity Average yield in

relation to CDI (%) 12/31/2018 12/31/2017 12/31/2018 12/31/2017

Fund Retail Renda Fixa Crédito

Privado 02/15/2013 Undetermined 104.08% 60,108 6,891 413,374 487,816

LF Registered Financial Bill 10/13/2016 10/15/2018 103.00% - - - 20,990 60,108 6,891 413,374 508,806

Current 60,108 6,891 413,374 487,816 Non-current - - - 20,990 60,108 6,891 413,374 508,806

Breakdown of investment fund portfolio is as follows:

Type Code Date of investment Issue Maturity Quantity Index

Amount of the investment

12/31/2017 - Net value

Fixed income DEBLA 02/25/2016 02/25/2016 02/22/2018 22,188 CDI D 102% 7,588 9,367

Fixed income LF 10/21/2016–12/12/2017

10/21/2016–12/12/2017

10/22/2018–06/09/2020

236 CDI D 104.25% 70,800 79,531

Fixed income LFS 02/15/2013 01/16/2013 01/15/2019 28 CDI D 111% 8,453 15,177

Fixed income LFT 03/27/2015–09/18/2017

07/01/2000–01/11/2013

09/01/2018–09/01/2021

10,005 LFT 80,631 92,872

Fixed income PRE 12/29/2017 12/29/2017 05/15/2035 47,295 PRE 6.90 p.a. 149,555 149,555

Investment fund

Other funds - - - 660,673 - 141,358 141,358

Fixed income LF - 10/13/2016 10/15/2018 1 CDI 103% 20,990 20,990

508,850

Fund expenses (44)

508,806

Type Code Date of investment Issue Maturity Quantity Index

Amount of the investment

12/31/2018 - Net value

Fixed income LF 10/21/2016–03/19/2018

10/21/2016–03/19/2018

04/22/2019–06/09/2020

81 CDI D 101.75–

104.5% 21,700 25,033

Fixed income LFS 02/15/2013 01/16/2013 01/15/2019 28 CDI D 111% 8,453 16,166

Fixed income Eligible LFS 08/01/2018 08/01/2018 08/01/2025 17 CDI D 108.75% 5,100 5,273

Fixed income LFT 10/03/2016–12/21/2018

07/01/2000–01/05/2018

09/01/2021–03/01/2024

7,066 LFT / SELIC 65,133 69,779

Fixed income LTN 12/31/2018 12/31/2018 07/01/2020 50,503 PRE 6.40% p.a. 45,303 45,303

Investment fund

Other funds - - - 5,940,011 - 235,767 235,767

Fixed income LAMDI 11/27/2018–12/03/2018

11/27/2018–12/03/2018

11/29/2019–12/03/2019

16,000 CDI 103.0–

138.5% 16,000 16,088

413,409

Fund expenses (36)

Treasury balance 1

413,374

Management’s policy is to use these funds only and solely for punctual payments, such as acquisition of companies and payment of interest on own capital, not using funds invested in this account to cover operating cash flow needs. The exposure of the Company and its subsidiaries to risk and the sensitivity analysis are disclosed in Note 25.8.

57

8. Trade accounts receivable

Consolidated 12/31/2018 12/31/2017 Trade notes receivable:

Falling due 149,964 102,746 Overdue (a) 26,557 30,147 176,521 132,893

(-) Allowance for doubtful accounts (5,677) (1,183) (-) Adjustment to present value (462) (581) 170,382 131,129

Current 167,102 128,177 Non-current 3,280 2,952

(a) Securities overdue have the following breakdown:

Consolidated 12/31/2018 12/31/2017 Days: 1–30 9,591 14,181 31–60 3,468 4,684 61–90 3,063 3,145 91–180 4,483 4,481 >181 5,952 3,656 26,557 30,147

The Company and its subsidiaries form an allowance for doubtful accounts of securities past due over 180 days that basically represents the historical loss and trade notes receivable under discussion in court. The Company also recognizes a provision for expected losses in trade accounts receivable that comprise outstanding accounts receivable base. Percentage loss for each aging band is shown below.

Maturity Loss % falling due >1 year 0.4% falling due up to 1 year

0.4%

1–30 days 2.8% 31–60 days 8.0% 61–90 days 16.3% 91–120 days 22.3% 121–150 days 27.8% 151–180 days 35.5%

The changes in this provision in the consolidated is shown as follows:

Consolidated Changes in PECLD 12/31/2018 12/31/2017

Opening balance (1,183) (2,615) First-time adoption of IFRS 9 as of 01/01/2018

(1,539) -

Addition due to acquisition (1,462) - Addition of provision (5,734) (3,759) Use/reversal 4,241 5,191 Closing balance (5,677) (1,183)

58

9. Recoverable taxes

Parent company Consolidated 12/31/2018 12/31/2017 12/31/2018 12/31/2017

ICMS - - 4,286 3,231

Withholding taxes and contributions 8,848 7,330 29,272 28,412

PIS and COFINS - - 456 566

Other - - 1,080 845 8,848 7,330 35,094 33,054

10. Related parties Equity balances Assets – Accounts receivable Parent company 12/31/2018 12/31/2017 Current Non-current Current Non-current Linx Sistemas e Consultoria Ltda. - - 2,877 - - - 2,877 -

The balances with related parties refer to onlending and expenses. Loan balances between the Company’s companies were received up to March 2018. The related party transactions are performed under the normal course of Company’s business and under conditions agreed upon the parties.

10.1. Remuneration of key management personnel Total key management personnel remuneration (08 and 06 administrators in 2018 and 2017, respectively) for the period ended December 31, 2018 and 2017 are summarized as follows:

12/31/2018 12/31/2017

Short-term employee benefits Payment of Directors’ fees 11,571 9,611 Share-based payments 3,148 1,428

14,719 11,039

10.2. Income (loss) In the period ended December 31, 2018, there were shared expenses amounting to R$ 11,231 (R$ 11,935 at December 31, 2017), and financial expenses related to loan interest, amounting to R$ 36 (R$ 682 at December 31, 2017).

59

11. Other receivables


12/31/2018 12/31/2017 12/31/2018 12/31/2017

Prepaid expenses - Services - - 21,696 9,315 Retentions for contingencies – Acquired (*) - - 13,560 10,042 Advance to suppliers - - 7,102 3,718 Advance for vacation (**) - - 1,842 872 Other 49 28 6,420 5,657 49 28 50,620 29,604

Current assets 49 28 43,407 28,119 Non-current assets - - 7,213 1,485

(*) Refers to contingent portions of companies Direção, Spress, Rezende, Liderança, Quadrant, CSI, LZT, BR Coelho, Big Automação, Percycle, Único, Itec Informática and Napse, according to acquisition contracts. (**) Refers to advances to suppliers, employees, expenses, loans to employees and judicial deposits.

12. Investments

12.1. Investments in direct subsidiaries

Parent company 12/31/2018 12/31/2017

Linx Sistemas e Consultoria Ltda. 979,389 1,175,322 Linx Telecomunicações Ltda. 7,911 6,999 987,300 1,182,321

12.2. Information on direct subsidiaries

Linx Sistemas Linx Redes Linx Telecomunicações Total

December 31, 2017

Interest 99.99% - 99.99%

Current assets 724,574 - 7,709 732,283 Non-current assets 839,590 - 193 839,783 Total assets 1,564,164 - 7,902 1,572,066

Current liabilities 164,576 - 903 165,479 Non-current liabilities 224,266 - - 224,266 Total liabilities 388,842 - 903 389,745

Shareholders' equity 1,175,322 - 6,999 1,182,321

Income 678,453 26,198 14,685 719,336 Expenses (623,776) (14,271) (13,748) (651,795) Net income 54,677 11,927 937 67,541

December 31, 2018

Interest 99.99% - 99.99%

Current assets 635,731 - 9,289 645,020

60

Non-current assets 934,638 - 337 934,975 Total assets 1,570,369 - 9,626 1,579,995

Current liabilities 221,210 - 1,715 222,925 Non-current liabilities 369,770 - - 369,770 Total liabilities 590,980 - 1,715 592,695

Shareholders' equity 979,389 - 7,911 987,300

Income 823,205 - 16,157 839,362 Expenses (768,861) - (15,245) (784,106) Net income 54,344 - 912 55,256

12.3. Changes in investments

Linx

Sistemas Linx Redes Linx

Telecomunicações Total

Balance of investments at December 31, 2016

1,070,023

49,135

4,562

1,123,720

Equity in net income of subsidiaries

54,677

11,927

937

67,541

Accumulated translation adjustment

(247)

- - (247)

Capital increase

- - 1,500

1,500

Stock option plans

1,807

- - 1,807

Balance of merger

61,062

(61,062)

- -

Payment of dividends

(12,000)

- - (12,000)

Investment balances at December 31, 2017 1,175,322 - 6,999 1,182,321

Equity in net income of subsidiaries 54,344 -

912 55,256

Accumulated translation adjustment (2,437) - - (2,437)

Post-employment benefit (146) - - (146)

Effect of the adoption of IAS 29 (hyperinflation) 1,822 - - 1,822

Stock option plans 5,043 - - 5,043

Payment of dividends (*) (215,002) - - (215,002)

First-time adoption of IFRS 9 and 15 (39,557) - - (39,557)

Investment balances at December 31, 2018 979,389 - 7,911 987,300

(*) R$(25,002) referring to dividends paid in prior years plus R$(190,000) referring to dividends received in 2018 for the purpose of repurchasing shares.

13. Property, plant and equipment

Consolidated

Balance at 12/31/2016

Addition

Addition - acquisition

Depreciation Decreas

es Transfers


Computers and electronics 8,251 2,298 121 (3,106) (30) 1,819 9,353 Vehicles 4,178 984 78 (1,552) (395) - 3,293 Furniture and fixtures 4,457 980 89 (789) (16) 3,518 8,239

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Facilities, machinery and equipment

17,297 1,809 362 (2,652) 2 3,205 20,023

Property, plant and equipment in progress

- 18,120 - - (300) (17,820) -

Leasehold improvements 13,128 1,429 - (6,095) (135) 9,278 17,605 Real Estate 2,941 - - (128) - - 2,813 Other components 1,006 - - - - - 1,006

Total 51,258 25,620 650 (14,322) (874) - 62,332

Consolidated


Addition (*)

Addition - acquisitio

n (**)

IAS 29 (***)

Depreciation (****)

Decreases

Transfers


Computers and electronics 9,353 6,916 321 - (3,795) (490) 640 12,945 Vehicles 3,293 4,251 192 16 (1,720) (938) - 5,094 Furniture and fixtures 8,239 873 203 21 (1,330) (392) 1,419 9,033 Facilities, machinery and equipment

20,023 3,703 111 271 (3,206) (268) 1,400 22,034

Property, plant and equipment in progress

- 6,135 - - - - (6,135) -

Leasehold improvements 17,605 3,195 56 283 (2,732) (1) 3,077 21,483 Real Estate 2,813 - - - (134) - - 2,679 Other components 1,006 400 - - - - (401) 1,005

Total 62,332 25,473 883 591 (12,917) (2,089) - 74,273

(*) In the statement of cash flow, only additions with cash disbursement are being considered as investment activities. (**) Amounts related to the acquisitions of Itec as of March 21, 2018, Único as of April 3, 2018 and DCG as of June 22, 2018. (***) Amounts referring to adoption of IAS 29 (hyperinflation) in Napse Argentina. (****) Difference of R$23 between notes 14 and 23 refers to impact of application of IAS 29 in NAPSE’s income (loss).

Annual depreciation rates are stated as follows:

Computers and electronics 20% Vehicles 20% Furniture and fixtures 10% Facilities, machinery and equipment 10% Leasehold improvements 10% Real Estate 4%

Additions to accumulated depreciation, stated in changes for the period, were recorded under “Operating, general and administrative expenses”.

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14. Intangible

Consolidated


Addition (*)



Amortization Decreases Transfers Balance at 12/31/2017

Software 17,078 7,244 - - (5,860) (93) - 18,369 Software development 1,848 3,208 - - - - (2,300) 2,756 Software developed 34,812 27,607 - - (24,511) - 2,300 40,208 Software development – capitalized interest 1,980 2,934 - - (1,531) - - 3,383 Brands acquired 44,033 - - - (961) - - 43,072 Technology - acquisitions 25,754 - - 24,133 (10,744) - - 39,143 Client portfolio - acquisitions 69,845 - - 24,939 (12,053) - - 82,731 Goodwill 405,289 - - 116,955 - - - 522,244 Other 3 - - - - - - 3 Total 600,642 40,993 - 166,027 (55,660) (93) - 751,909

Consolidated


Addition (*)


(**)

IAS 29 (***)


(Note 3) Amortization Decreases

Transfers (****)


Software 18,369

18,235 1,673 351 - (7,915) (190) 500 31,023

Software development 2,756

12,878 - - - - - - 15,634

Software developed 40,208 23,039 - - - (27,071) - (500) 35,676

Software development – capitalized interest 3,383

2,660 - - - (1,985) - - 4,058

Brands acquired 43,072 - - - - (961) - - 42,111 Technology - acquisitions 39,143 - - - 17,866 (12,802) 5 (3,806) 40,406 Client portfolio - acquisitions 82,731 - - - 2,838 (15,078) 20 2,579 73,090 Goodwill 522,244 218 - - 91,349 - (7,405) 1,227 607,633 Other 3 - - - - - - - 3 Total 751,909 57,030 1,673 351 112,053 (65,812) (7,570) - 849,634

(*) In the statement of cash flow, only additions with cash disbursement are being considered as investment activities. (**) Amount related to the acquisition of DCG as of June 22, 2018. (***) Amounts referring to adoption of IAS 29 (hyperinflation) in Napse Argentina. (****) Transfers resulting from updating of acquisition reports. (*****) Difference of R$14 between notes 14 and 23 refers to impact of application of IAS 29 in NAPSE’s income (loss).

Annual average amortization rates:

Software development 33% Software developed 33% Software development – capitalized interest 33% Technology - acquisitions 10–20% Client portfolio - acquisitions 10–20% Software 10–20% Other 10–20%

Additions to accumulated amortization stated in changes for the period were recorded under caption operating, administrative and general expenses.

14.1. Goodwill impairment testing

The Company and its investees tested goodwill for impairment using the concept of value in use, under the discounted cash flow methodology. The process for determining the value in use involved the use of assumptions, judgments and estimates on cash flows, such as income growth rates, costs and expenses, investment estimates and future working capital and discount rates. Assumptions about cash flow growth

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projections were based on management’s estimates, market studies and macroeconomic projections. Future cash flows were discounted based on the weighted average cost of capital (WACC). Following the techniques of economic valuation, the assessment of value in use was carried out for a period of 5 years and, thereafter, considering the perpetuity of the assumptions based on the ability of the company to continue as a going concern for the foreseeable future. Management deemed the use of the 5-year period appropriate, based on its past experience in preparing the projections of its cash flows. Such understanding is in accordance with paragraph 35 of CPC 01 (R1) - Asset impairment. The growth rate used to extrapolate the projections beyond the 5-year period was 5.5% in 2018 and 2017, which refers to the perpetuity growth corresponding to the expected long-term inflation of Bacen (Central Bank of Brazil), plus of 1% real growth. The estimated future cash flows were discounted at the pre-tax discount rate of 13.85% in 2018 (12.89% in 2017), also at nominal values. The annual inflation rate for the period analyzed in the projected flows was 4.43% in 2018 (4.50% in 2017). Key assumptions were based on the historical performance of the Company and subsidiaries, on reasonable macroeconomic assumptions, and on financial market projections documented and approved by Company management. Based on the annual impairment test of the intangible assets of the Company and subsidiaries, prepared with the projections made on the financial statements as of December 31, 2018 and 2017, growth perspectives and operating income (loss) for the years ended December 31, 2018 and 2017, no losses or indicative losses were identified, since the value in use is higher than the net book value at the valuation date. Main assumptions used to calculate value in use Value in use calculation is mainly impacted by the following assumptions: Income Growth: this is based on the observation of the historical behavior of each income line as well as trends based on market analysis. Income projections refer to non-recurring lines (implementation consultancy and royalties for the use of its licenses), and recurring lines (contractual - related to the collection of system maintenance fees, with an annual restatement forecast), where the Company has seen annual growth of approximately 10% for the next 5 years. The Company’s costs were projected considering the maintenance of the gross margin, which varies between 71% and 72%. Capex volume: CAPEX investment needs were projected in line with historical indexes and sufficient to support the growth of operations. Discount rates: represent the risk assessment in the current market. The calculation of the discount rate is based on specific circumstances of the Company, and derives from:

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Weighted Average Cost of Capital (WACC): which takes into account both debt and shareholders’ equity. The cost of shareholders’ equity derives from the expected return on investment by the Company’s investors. The cost of debt is based on the financing with interest income that the Company is required to honor. Capital Asset Pricing Model (CAPM): which takes into account the sensitivity of the asset to non-diversifiable risk (also known as systemic risk or market risk), represented by the variable known as beta index or beta coefficient (β), as well as the expected return on the market and the expected return on a risk-free asset.

14.2. Software development The activity of the subsidiary Linx Sistemas e Consultoria Ltda. assumes the continuous development of new systems and applications aimed at increasing the range of options to the current clients and potential new clients, in view of the increasing market demand for computerized solutions for the businesses in general. In this context, several projects intended for client systems and applications are being developed. The amounts recorded in intangibles correspond to portion of the cost of the project development department, determined based on the number of hours of the respective employees. Each project is amortized as from the moment the asset is available for use for an average period of three years, which according to management, reflects the expected period of financial return of the projects. The amortization was recorded in the group of accounts general and administrative expenses in income for the period. In the year ended December 31, 2018, the amount of R$ 73,527 (R$ 64,280 on December 31, 2017) was recognized in income (loss) for the period in the consolidated, and was related to research and maintenance of the software developed.

15. Loans and financing


Type Charges Effective

rate Maturity Covenants 12/31/2018 12/31/2017 12/31/2018 12/31/2017

Loan - BNDES TJLP + 1.5% p.a. 9.274% p.a. 03/15/2018 - 2,852 - 2,852

Loan - BNDES TLP + IPCA + 3.10% p.a. + Spread 1.37% p.a

7.89% p.a. 12/31/2027 15,1 (a) - - 146,602 -

Loan - BNDES TJLP + 1.67% p.a. 9.446% p.a. 02/15/2021 15,1 (b) - - 57,526 83,330 Loan - BNDES TJLP + 1.96% p.a. 9.751% p.a. 03/15/2022 15,1 (c) - - 44,560 9,882 Loan - BNDES TJLP + 1.00% p.a. 8.768% p.a. 09/16/2019 - - 528 1,224 Loan - Itaú TJLP + 7.20% p.a. 8.447% p.a. 04/16/2021 - - 761 - Other - - 4 -

- 2,852 249,981 97,288

Current liabilities

- 2,852 40,720 31,783

Non-current liabilities - - 209,261 65,505

(*) Prevailing loan contracts do not have assets pledged in guarantee.

The amount classified in non-current liabilities in the parent company and consolidated should be paid as follows:

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Consolidated

Period 12/31/2018 12/31/2017

2019 - 29,282 2020 40,012 28,760 2021 39,387 6,846 2022 24,615 617 2023 21,043 - 2024 21,043 - 2025 21,043 - 2026 21,043 - 2027 21,075 - 209,261 65,505

Changes are shown below:

Parent company 12/31/2018 12/31/2017

Previous balance 2,852 14,106 Financial charges 36 719 Financial charges paid (89) (659) Payments of loans and financing (2,799) (11,314) - 2,852

Consolidated 12/31/2018 12/31/2017

Previous balance 97,288 130,767 Funds from acquisition of subsidiaries (Note 3) 1,097 - Additions of loans and financing 191,837 - Financial charges 9,658 9,960 Financial charges paid (9,048) (9,480) Payments of loans and financing (40,851) (33,959) 249,981 97,288

15.1. Changes in liabilities from financing activities In 2017, the Company adopted the amendments to IAS 7 (CPC 03 (R2)) issued as part of the IASB Disclosure Initiative. These changes require entities to provide disclosures that enable users of financial statements to assess changes in liabilities arising from financing activities, including changes arising from cash flows and non-cash changes. To the extent necessary to satisfy this requirement, the Company discloses the following changes in liabilities arising from financing activities:

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12/31/2016 Payments Receipts Exchange-

rate change

New acquisitions

Other (***)

12/31/2017

Loans and financing 130,767 (43,439) - - - 9,960 97,288 Accounts payable from acquisition of subsidiaries

80,594 (19,324) - 1,725 71,092 (3,320) 130,767

Capital 480,808 - 5,224 - - - 486,032 Dividends paid 20,000 (20,000) - - - 23,000 23,000 Profit reserve (*) 141,292 (17,000) - - - 61,845 186,137 Capital reserve (**) 512,303 (34,301) - - - 1,807 479,809 Total liabilities from financing activities

1,365,764 (134,064) 5,224 1,725 71,092 93,292 1,403,033

12/31/2017 Payments Receipts Exchange

-rate change

New acquisitions

Other (***)

12/31/2018

Loans and financing 97,288 (49,879) 191,837 - 1,097 9,638 249,981 Accounts payable from acquisition of subsidiaries

130,767 (45,878) - 6,033 38,881 (17,316) 112,487

Capital 486,032 - 2,435 - - - 488,467 Dividends paid 23,000 (23,000) - - - - Profit reserve (*) 186,137 (15,000) - - 6,840 177,977 Capital reserve (**) 479,809 (114,486) - - 1,435 366,758 Total liabilities from financing activities

1,403,033 (248,243) 194,272 6,033 39,978 597 1,395,670

(*) Payments of interest on own capital. (**) Buyback of shares and expenditures with issue of shares (***) Changes included in column “other” include effects from reclassification of non-current portion of loans and accounts payable due to acquisition, effect from recognition of interest not yet paid on loans and accounts payable due to acquisition and acquisitions’ adjustment to present value.

15.2. Covenants (a) BNDES loan raised on December 13, 2018 has covenant for early debt payment. The

following indices should be determined on a half-annual basis in consolidated financial statements: (i) General Indebtedness / total assets: equal or less than 60%;

(ii) Net debt / EBITDA: equal or less than 2.0;

In order to determine the indices, the following definitions and criteria should be adopted: General indebtedness: Total current and non-current liabilities

Net debt: The total balance of consolidated onerous debts of the Intervening Party, including loans and financing; loans, issuance of fixed-income securities, promissory notes and debentures, convertible or not, in the local or international capital market, and the sale or assignment of future receivables if they are recorded as liabilities; and other financial operations and debts of the Company, recorded in current and non-current liabilities, net of Cash and cash equivalents (cash and interest earning bank deposits).

EBITDA: Operating income (loss) before interest, income tax, depreciation and amortization;

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In the hypothesis that levels established in the item VII of the Clause Nine (Obligations of the Intervening Parent Company) are not met, the Company must present, within 120 days counted as of notification date, in written, from BNDES, real guarantees accepted by BNDES at an amount corresponding to at least 130% of financing value or deriving debt, except if within that period, above mentioned levels were re-established. We detected no event of non-compliance with covenants at December 31, 2018.

(b) BNDES loan raised on October 28, 2014 has covenant for early debt payment. During the contractual period, two of the following ratios, calculated semi-annually in the consolidated statements, should be maintained:

(i) General Indebtedness / total assets: equal or less than 60%;


(iii) EBITDA / Net operating income: equal or higher than 20%.

In order to determine the indices, the following definitions and criteria should be adopted:

EBITDA: Income (loss) before interest, income tax, depreciation and amortization; Net debt: balances of the consolidated onerous debts, including loans and financing;

loans, issuance of fixed-income securities, promissory notes and debentures, convertible or not, in the local or international capital market, and the sale or assignment of future receivables if they are recorded as liabilities; and other financial operations and debts of the Company, recorded in current and non-current liabilities, net of Cash and cash equivalents. In order to calculate this ratio, we will not consider the amounts classified as Accounts payable for the acquisition of subsidiaries in the balance sheet as Net Debt.

In the hypothesis that levels established in the contract are not met, the Company must present, within 180 days counted as of default date, real guarantees accepted by BNDES at an amount corresponding to at least 130% of financing value or deriving debt, or present a bank guarantee to be provided by the financial institution at BNDES criteria, and it is in financial economic situation assuring the degree of notorious solvency, the total amount of the debt, except if within that period, above mentioned levels were re-established. We detected no event of non-compliance with covenants at December 31, 2018.

(c) BNDES loan raised on December 11, 2015 has covenant for early debt payment. During

the contractual period, two of the following ratios, calculated semi-annually in the consolidated statements, should be maintained:

(i) General Indebtedness / total assets: equal or less than 60%;


(iii) EBITDA / Net operating income: equal or higher than 20%.

In order to determine the indices, the following definitions and criteria should be adopted:

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EBITDA: Income (loss) before interest, income tax, depreciation and amortization; Net debt: Balances of the consolidated onerous debts, including loans and financing;

loans, issuance of fixed-income securities, promissory notes and debentures, convertible or not, in the local or international capital market, and the sale or assignment of future receivables if they are recorded as liabilities; and other financial operations and debts of the Company, recorded in current and non-current liabilities, net of Cash and cash equivalents. In order to calculate this ratio, we will not consider the amounts classified as Accounts payable for the acquisition of subsidiaries in the balance sheet as Net Debt.

In the hypothesis that levels established in the contract are not met, the Company must present, within 180 days counted as of default date, real guarantees accepted by BNDES at an amount corresponding to at least 130% of financing value or deriving debt, or present a bank guarantee to be provided by the financial institution at BNDES criteria, and it is in financial economic situation assuring the degree of notorious solvency, the total amount of the debt, except if within that period, above mentioned levels were re-established. We detected no event of non-compliance with covenants at December 31, 2018.

16. Labor obligations

Parent company Consolidated 12/31/2018 12/31/2017 12/31/2018 12/31/2017 Provision for 13th salary and payroll charges - - 26,542 22,466 INSS payable 16 11 6,673 5,234 Provision for profit sharing - - 3,876 4,191 FGTS payable - - 2,137 1,907 Salaries payable - - 1,344 1,836 Other 164 281 3,229 1,849 180 292 43,801 37,483

17. Accounts payable from acquisition of subsidiaries

Accounts payable from the acquisitions of subsidiaries refer to amounts due to the previous owners for the acquisition of shares or quotas representing the capital of these companies. Debts are restated under contractual clauses and mature as follows:

Consolidated 12/31/2018 12/31/2017

Installments not subject to restatement 46,542 30,067 Napse installments subject to restatement based on exchange-rate change and LIBOR.

41,951 42,160

Installments subject to restatement based on the change in the CDI rate of 6.40%

3,608 492

Installments subject to restatement based on the change of IPCA – 3.75% 22,774 49,912 Installments subject to restatement based on the change of IGPM – 7.56% 7,690 9,848 Adjustment to present value (10,078) (1,712) 112,487 130,767

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Current liabilities 57,099 56,087 Non-current liabilities 55,388 74,680

The amount classified in non-current liabilities will be amortized following the schedule below:

Consolidated Period 12/31/2018 12/31/2017

2019 - 32,276 2020 35,373 26,530 2021 14,225 4,754 2022 5,065 11,120 2023 725 - 55,388 74,680

Of total amount payable on December 31, 2018, R$ 111,545 is related to contingent consideration (R$ 87,093 as of December 31, 2017). The Company expects to fully settle amounts related to contingent considerations, and there were no significant changes in expectations in relation to prior year. The fair value of these obligations also considered a market interest rate (Selic). Fair value hierarchy of contingent consideration is classified as level 3 (Note 25).

The changes in the consolidated are shown as follow:

Consolidated 12/31/2018 12/31/2017

Previous balance 130,767 80,594 Addition due to acquisition 114,281 159,796 Payment of principal/financial charges paid (121,278) (108,028) Restatement of financial charges 3,057 5,685 Contingencies (*) (5,343) (2,427) Earn-out (**) (8,997) (4,853) 112,487 130,767

(*) Contingencies arising from the acquired companies, offset by the amounts that the Company has to pay to former management.

(**) The amounts refer to reversal of unachieved earn-out of the acquirees Intercamp, Neemu and Napse.

18. Deferred income

Consolidated 12/31/2018 12/31/2017

Income from services (*) 8,902 8,478 Income from royalties (**) 50,346 - 59,248 8,478 Current 41,560 8,478 Non-current 17,688 -

(*) Refers to balances of bank of hours contracted by clients; recognition is carried out after provision of service and write-off of

service card.

(**) Refers to balances of software contracts’ (royalties) deferral deriving from first-time adoption of IFRS 15/CPC 47 and subsequent changes.

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19. Income tax and social contribution

19.1. Income tax and social contribution expense

Parent company Consolidated 12/31/2018 12/31/2017 12/31/2018 12/31/2017 Current tax Current tax on income for the year (38) 84 (9,959) (9,217) Deferred tax Deferred tax on income for the year (58) 50 (11,130) (14,699) Income tax and social contribution expense (96) 134 (21,089) (23,916)

The reconciliation between the tax expense as calculated by the combined nominal rates and the income tax and social contribution expense charged to income is presented below:

Parent company Consolidated 12/31/2018 12/31/2017 12/31/2018 12/31/2017 Income (loss) before income tax and social contribution 71,151 84,711 92,144 108,761 Rate income tax and social contribution 34% 34% 34% 34% Income tax and social contribution at the rate of 34% (24,191) (28,802) (31,329) (36,979) Permanent differences Equity in net income of subsidiaries 18,787 22,964 - - Law 11196/05 (Research and Development incentive) - - 1,574 8,382 Payment of interest on own capital 5,100 5,780 5,100 5,780 Unrecognized tax credit 203 - 329 - Income tax and social contribution determined by the deemed income - - 3,139 3,498 Effects of tax rates of foreign subsidiaries - - 1,542 - Other net differences 5 192 (1,444) (4,597) Income tax expense for effective rate (96) 134 (21,089) (23,916) Effective rate 0.13% -0.16% 23% 22%

19.2. Deferred taxes

The deferred income tax and social contribution are recognized to reflect future tax effects attributable to temporary differences between the tax bases of assets and liabilities and their book values, and to tax loss carryforwards. Temporary deferred income tax and social contribution are as follows:

Consolidated

12/31/2017 Recognized in income (loss)

Recognized in shareholders’ equity

12/31/2018

Deferred income and social contribution taxes on accounting and tax goodwill (58,885) (21,143) (80,028) Deferred income tax and social contr. on assets identified (Synthesis) (*) (8,352) 1,675 79 (6,598) Deferred income tax/ social contribution assets identified in acquisitions (21,967) 3,383 - (18,584) Deferred inc. tax and soc. contr. on first-time adoption of IFRS 15 - (1,516) (1,516)

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Deferred income tax and social contr. on the IFRS 15initial adoption - (377) 18,897 18,520 Inc. tax and soc. contr. on companies abroad - (271) (271) Deferred IR/CS on tax loss and negative basis 4,078 116 - 4,194 Deferred income and social contribution taxes on issuance of shares’ expenses 4,108 - - 4,108 Allowance for doubtful accounts 160 460 - 620 Provision of benefits to employees 2,192 212 - 2,404 Provision for contingencies 200 609 - 809 Provision for adjustment to present value 922 1,100 - 2,022 Provision for commission payments 161 (161) - - Stock option plan 806 202 - 1,008 Provision, Amortization 272 272 Deferred shares 567 715 - 1,282 Amortization, Technology, Companies - Not taken over - 948 - 948 Amortization, Client portfolio, Companies - Not taken over - 651 - 651 Other provisions (42) 1,995 - 1,953 Deferred taxes, net (76,052) (11,130) - 18,976 (68,206)

Deferred tax assets 4,272 4,210 Deferred tax liabilities (80,324) (72,416)

(*) Formation of income tax and social contribution arising from non-intention to merge with Napse

20. Shareholders' equity

20.1. Capital The Company is authorized to increase capital by up to R$1,000,000,000.00, regardless of its Bylaws’ reform, following the Board of Directors’ decision. Capital is solely represented by common shares and each of them corresponds to a vote in Shareholders’ Meeting decisions. Board of Directors is the competent body to decide on issuances and will determine issuance conditions, subscription, payment form and deadline, price per share, placement form (public or private) and its distribution in Brazil and/or abroad. At the criteria of the Board of Directors, the share issue may be made, without right of preference or with a reduction of the time frame addressed by article 171, §4 of Law 6404, dated December 15, 1976, as amended (“Corporation Law”) of shares and debentures that are convertible into shares or a subscription bonus, the flotation of which is made through a sale on the stock exchange or by public subscription, or even through an exchange for shares in a takeover bid, in the terms established in law, within the limits of the authorized capital. On February 28, 2018, the Company's capital increase was approved, within limit of authorized capital, in the amount of R$ 1,442, from R$ 486,032 (total as of December 31, 2017) to R$ 487,474, through issue of 166,212 new common registered, book-entry shares, with no par value. On August 31, 2018, the Company's capital increase was approved, within limit of authorized capital, in the amount of R$ 993, from R$ 487,474 to R$ 488,467, through issue of 71,172 new common registered, book-entry shares, with no par value.

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Capital is represented by authorized, subscribed and fully paid-up shares with no par value and is divided as follows:

Consolidated Shareholder Shares Total capital (%)

Founding shareholders 28,037,764 16.86% Treasury shares 7,502,115 4.51% Free float (*) 130,743,503 78.63% 166,283,382 100%

(*) BNDES Participações S.A. e Genesis Asset Managers hold shareholding interest higher than 5%.

20.2. Capital reserves

Regarding the issuance of shares on September 26, 2016, it is formed of goodwill in the subscription of capital in the amount of R$ 325,440 and transaction costs incurred in the obtainment of resources by means of the issuance of membership certificates in the amount of R$ 12,317 recorded in a reduction account, net of deferred income tax and social contribution. The capital reserve is set up as follows:

12/31/2018 12/31/2017 Goodwill in capital subscription (a) 539,571 539,571 Stock option plan (Note 27) 16,104 12,934 Treasury shares (b) (148,373) (33,887) Expenditures with issuance of shares (c) (37,423) (37,423) 369,879 481,195

(a) In compliance with 6,404/76, the issue price of the shares without par value may be allocated as part of the capital reserve.

(b) On June 22, 2018, occurred the approval of the opening of Company’s share buyback program and the purpose of the Buyback Program is to meet the exercise of deferred stock programs and possibly stock option programs. Shares may also be held in treasury, disposed or canceled, without reduction of the Company’s capital, in compliance with the provisions of item 1 of article 30 of the Brazilian Corporation Law, and the standards set forth in ICVM 567/15.

(c) In conformity with Pronouncement CPC 08 – Transaction Costs and Premiums on Issuance of Securities, transaction costs incurred on funding through issuance of new shares were recorded separately as a reduction to shareholders' equity.

20.3. Legal reserve It is formed of 5% of net income for the fiscal year, in conformity with article 193 of Law no. 6,404/76, up to the limit of 20% of the capital. For the period ended December 31, 2017, pursuant to paragraph 1 of article 193 of Law 6404/76, the Company did not set up a legal reserve, as the capital reserve amount exceeded the percentage of 30% of capital.

20.4. Dividends

The Company's Bylaws establish a minimum dividend of 25% calculated on the annual net income, adjusted as provided by Article 202 of Law 6404/1976.

12/31/2018 12/31/2017

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Net income for the year 71,055 84,845

( - ) Formation of legal reserve (Article 193 of Law 6.404)

-

- Net income after the allocation of the legal reserve 71,055 84,845 Minimum mandatory dividends 17,764 21,211 Additional dividends proposed by the Management 22,236 18,789 Dividends proposed by the Management 40,000 40,000

Dividends and interest on own capital per share 0.2519 0.2437 Payment method

Interest on own capital 15,000

17,000 Dividends 25,000 23,000 40,000 40,000

Changes in dividends Opening balance - Dividends payable for the prior year 23,000 20,000 Dividends paid in the prior year (23,000) (20,000) Minimum mandatory dividends for the year 17,764 21,211 Additional dividends proposed by the Management 22,236 18,789 Dividend and interest on own capital paid for the year (15,000) (17,000) Closing balance - Dividends payable for the year 25,000 23,000

Presentation of dividends Liabilities - Minimum mandatory dividends for the year 2,764 4,211 Shareholders’ equity - Additional dividends proposed by the

Management 22,236 18,789 25,000 23,000

The Board of Directors’ meeting held on April 16, 2018 approved, in the terms of article 9 of Law 9249/95 the payment of dividends in 2017 in the gross amount of R$ 23,000, which were included in the amount of the minimum dividend established by article 36 of the Company’s bylaws and paid on April 30, 2018. In meeting of the Board of Directors held on August 06, 2018, pursuant to article 1,072 of Law 10406, shareholders decided to approve the profit distribution as Interest on Own Capital (“JCP”), referring to the period from January 1, 2018 to July 31, 2018, in the gross amount of R$ 11,000. In meeting of the Board of Directors held on December 07, 2018, pursuant to article 1,072 of Law 10406, shareholders decided to approve the profit distribution as Interest on Own Capital (“JCP”) in the gross amount of R$ 4,000. Balance of interest on own capital paid of R$ 15,000 as of December 31, 2018, includes the distribution for the year aforementioned.

20.5. Profit retention reserve

The capital budget proposal as of December 31, 2018, which was prepared by the Company’s Executive Board allocates the balance of the profit retention reserve of 2018, totaling R$ 31,055, to the investments presented below:

Investments: 12/31/2018 12/31/2017

Infrastructure 4,303

6,346

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Innovative research and development 6,884

10,154 Acquisitions 19,868 28,345

Total investments

31,055 44,845

Sources of resources: Profit reserve 31,055 44,845

Total sources

31,055

44,845

21. Provision for contingencies The Company and its subsidiaries are parties (defendants) to judicial and administrative proceedings in various courts and governmental agencies, arising from the normal course of operations, involving tax, labor, civil and other issues. At December 31, 2018, management, based on information provided by its legal advisors, keep a provision amounting to R$10,960 and, at December 31, 2017, amounting to R$2,776. There are other lawsuits evaluated by legal advisors as being a possible risk in the amount of R$ 10,986 as of December 31, 2018 (R$2,773 as of December 31, 2017), for which no provision has been formed in view of the fact that the accounting practices adopted in Brazil do not require to be accounted for. The possible contingencies of the acquired companies will be guaranteed by the former owners according to contracts of purchase and sale. The Company has sufficient amounts held to meet these commitments, classified under other receivables in the balance sheet, based on diligences carried out during the acquisition process.

Consolidated

Changes Labor Civil Tax Addition -

acquisition (*) Total

Balance at December 31, 2017 1,339 344 1,093 - 2,776

Additions 1,946 1,145 - 8,580 11,671

Write-offs (2,296) (549) (601) - (3,446)

Restatement 60 82 - - 142

Exchange-rate change 309 - (492) - (183)

Balance at December 31, 2018 1,358 1,022 - 8,580 10,960

(*) Labor and tax contingencies deriving from acquisitions of companies Itec, Único and DCG (amounts prior to date of acquisition by

Linx Sistemas).

22. Net operating income Below, we show the reconciliation between gross income and net income presented in the statement of income for the period:

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Consolidated

12/31/2018 12/31/2017 Gross operating income Maintenance income 640,352 544,940 Income from royalties 40,448 44,580 Income from services 103,350 66,617 784,150 656,137

Sales deductions PIS (4,642) (3,932) COFINS (21,425) (18,148) ISS (17,619) (15,981) INSS (Social security) (29,393) (25,009) Other (4,563) (3,751) Cancellations and rebates (20,949) (17,726) (98,591) (84,547)

685,559 571,590

The Company does not have clients that individually represents more than 10% of income for years ended December 31, 2018 and 2017. Table below presents geographical information as required by IFRS 8 – information per segment.

Geographical information

2018 2017 Net income In Brazil 646,837 553,550 Abroad 38,722 18,040

Non-current assets In Brazil 1,619,075 1,542,294 Abroad 28,601 21,730

23. Costs, expenses and other expense / income


12/31/2018 12/31/2017 12/31/2018 12/31/2017 Type Rentals - - (16,090) (12,242) Commissions - - (35,699) (26,801) Depreciation and amortization - - (78,729) (69,983) Maintenance and preservation - - (6,553) (11,339) Personnel (588) (1,278) (305,495) (272,017) Advertising and publicity (2) (5) (12,623) (6,350) Outsourced services (102) 11 (62,479) (33,609) Travel and accommodation - - (13,824) (11,991) Expenses with link - - (37,291) (29,934) IT expenses - - (3,453) (3,489) Other income - - 8,401 4,311 Other (279) (202) (31,661) (23,778) (971) (1,474) (595,496) (497,222)

Function Cost of services rendered - - (195,848) (168,873)

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Administrative and general expenses (969) (1,467) (218,369) (190,870) Selling expenses (2) (5) (111,008) (72,393) Research and maintenance of software developed

- (2) (73,527) (64,280)

Other operating income (expenses) - - 3,256 (806) (971) (1,474) (595,496) (497,222)

24. Financial income

Parent company Consolidated 12/31/2018 12/31/2017 12/31/2018 12/31/2017

Financial income

Asset interest 15,766 18,683 1,959 357

Interest on interest earning bank deposits 910 (227) 24,703 52,999

Discounts obtained 8 - 902 39

Foreign-exchange gain - - 20,047 2,981

Effect from adoption of IAS 29 - - 742 -

Other income 509 1,071 (1,485) 2,045 17,193 19,527 46,868 58,421

Financial expenses

Liability interest 9 (9) (593) (470)

Interest on loans and financing (36) (682) (7,830) (7,611)

Discount granted (8) - (10,743) (9,141)

Foreign exchange loss - - (17,388) (3,607)

Effect from adoption of IAS 29 - - (1,682) -

Tax on financial operations (45) (20) (695) (560)

Other expenses (247) (172) (5,856) (2,639) (327) (883) (44,787) (24,028)

16,866 18,644 2,081 34,393

25. Financial risk management The Company and its subsidiaries are exposed to the following risks from the use of financial instruments: Credit risk

Liquidity risk

Market risk

Operating risk

25.1. Credit risk Credit risk is the possibility of financial loss of the Company and its subsidiaries if a client or a counterpart of a financial instrument fails to fulfill its contractual obligations arising mainly from trade accounts receivable and investments of its subsidiaries. The exposure of the Company and its subsidiaries to credit risk is influenced, mainly, by the individual characteristics of each client. The Company and its subsidiaries established a credit

77

policy whereby every new client has its credit capacity individually analyzed prior to the standard payment terms and conditions. The Company has a very diversified client portfolio with low concentration level, and major client represents only 2.3% of recurring income. The subsidiaries establish an allowance for doubtful accounts that represents its estimate of losses incurred in relation to trade accounts receivable (See Note 8). The main component of this allowance is specific and related to significant individual risks. On December 31, 2018, maximum exposure referring to cash and cash equivalents, interest earning bank deposits and accounts receivable. (i) Cash and cash equivalents and interest earning bank deposits


12/31/2018 12/31/2017 12/31/2018 12/31/2017

Cash and cash equivalents (Note 6) 50 33 49,850 42,918 Interest earnings bank deposits (Note

7) 60,108 6,891 413,374 508,806

60,158 6,924 463,224 551,724

(ii) Trade accounts receivable

Consolidated 12/31/2018 12/31/2017

Trade accounts receivable (Note 8) 170,382 131,129 170,382 131,129

25.2. Liquidity risk

Liquidity risk is the risk of the Company and its subsidiaries encountering difficulties in performing the obligations associated with its financial liabilities that are settled with cash payments or with another financial asset. The approach of the Company and its subsidiaries in liquidity management is to guarantee, as much as possible, that will always have sufficient liquidity to perform their obligations upon maturity, under normal and stress conditions, without causing unacceptable losses or with a risk of sullying the reputation of the Company and its subsidiaries. The table below shows the maturity of financial liabilities contracted in details:

Parent company Operation Up to 1 year Up to 2 years 3–5 years Total

Suppliers 47 - - 47 Other liabilities 34 - - 34

81 - - 81

Consolidated

Operation Up to 1 year Up to 2 years

3–5 years >5 years Total

Suppliers 13,623 - - - 13,623

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Loans and financing (note 15) 40,720 79,399 129,862 249,981 Accounts payable for the acquisition of

subsidiaries - Earn Out (Note 17) 35,610 48,932 6,407 - 90,949

Accounts payable for the acquisition of subsidiaries – retained installments (Note 17)

20,579 6,805 3,290 - 30,674

Accounts payable for the acquisition of subsidiaries – Other (Note 17)

909 33 - - 942

Other liabilities 7,979 2,328 - - 10,307 119,420 137,497 139,559 - 396,476

As amounts included in this table are non-discounted cash flows, they will not be reconciled to the amounts disclosed in the balance sheet for accounts payable for acquisition of subsidiaries. Typically, the Company and its subsidiaries ensure that they have sufficient cash at sight to cover expected operating expenses, including the compliance with financial obligations; this excludes the potential impact of extreme situations that cannot be reasonably foreseen, such as natural disasters.

25.3. Market risk Interest rate and inflation risk: Interest rate risk derives from debt portion indexed to TJLP, IPCA, IGPM and CDI and from interest earning bank deposits in CDI that may adversely affect financial income or expenses in case an unfavorable movement occurs in interest and inflation rates. This risk exposure as shown in the sensitivity analysis provided below.

25.4. Operating risk

Operating risk is the risk of direct or indirect losses arising from different causes related to the processes, personnel, technology and infrastructure of the Company and its subsidiaries, and external factors, except credit, market and liquidity risks, as those arising from legal and regulatory requirements and from generally accepted corporate behavior standards. The objective of the Company and its subsidiaries is to manage the operating risk and the service quality risk in order to avoid sustaining financial losses and harming the reputation of the Company and its subsidiaries.

25.5. Capital management The policy of the Executive Board is to maintain a solid capital base to maintain the confidence of investors, creditors and market and the future development of the business. The Executive Board monitors returns on capital, which the Company defines as income (loss) from operating activities divided by total shareholders' equity. Executive Board also monitors the level of dividends to its shareholders.

25.6. Financial instruments’ analysis There is a comparison below, by class of book and fair value of the Company’s financial instruments:

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Book value Fair value Book value Fair value Book value

Fair value Book value Fair value

12/31/2018 12/31/2018 12/31/2017 12/31/2017 12/31/2018 12/31/2018 12/31/2017 12/31/2017

Financial assets

Cash and cash equivalents (Note 6) 50 50 33 33 49,850 49,850 42,918 42,918 Interest earnings bank deposits (Note 7) 60,108 60,108 6,891 6,891 413,374 413,374 508,806 508,806

Trade accounts receivable (Note 8) - - -

- 170,382 170,382 131,129 131,129

Other receivables 49 49 28 28 50,620 50,620 29,604 29,604

Total 60,207 60,207 6,952 6,952 684,226 684,226 712,457 712,457

Financial liabilities

Suppliers 47 47 7 7 13,623 13,623 8,518 8,518 Loans and financing (Note 15) - - 2,852 2,852 249,981 249,981 97,288 97,288 Accounts payable for the acquisition of subsidiaries (Note 17)

- - - - 112,487 112,487 130,767 130,767

Other liabilities 34 34 25,002 25,002 10,307 10,307 8,594 8,594

Total 81 81 27,861 27,861 386,398 386,398 245,167 245,167

Amounts of these instruments recognized in the balance sheet do not significantly differ from their fair values.

Trade accounts receivable and suppliers approximate their respective book value

mostly due to the short-term maturity of these instruments.

Loans and financing and accounts payable due to acquisitions are contractually restated and represent the balance to be paid on the date of settlement of the contractual obligations.

Financial instruments per category:

Parent company

12/31/2018

12/31/2017

Fair value through

profit or loss

Amortized cost

Loans and receivables

Fair value through

profit or loss

Amortized cost

Financial assets

Cash and cash equivalents (Note 6) - 50 33 - -

Interest earnings bank deposits (Note 7) 60,108 - - 6,891 -

Other receivables - 49 28 - -

60,108 99 61 6,891 -


Suppliers - 47 - - 7

Loans and financing (Note 15) - - - - 2,852

Other liabilities - 34 - - 25,002

- 81 - - 27,861

Consolidated

12/31/2018

12/31/2017

Fair value

through profit or loss

Amortized cost

Loans and receivables

Fair value through profit or

loss

Amortized cost

Financial assets

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Cash and cash equivalents (Note 6) - 49,850 42,918 - -

Interest earnings bank deposits (Note 7) 413,374 - - 508,806 -

Trade accounts receivable (Note 8) - 170,382 131,129 - -

Other receivables - 50,620 29,604 - -

413,374 270,852 203,651 508,806 -


Suppliers - 13,623 - - 8,518

Loans and financing (Note 15) - 249,981 - - 97,288

Accounts payable for the acquisition of subsidiaries (Note 17)

- 112,487 - 30,961 99,806

Other liabilities - 10,307 - - 8,594

- 386,398 - 30,961 214,206

25.7. Fair value hierarchy

Different levels were defined as follows: Level 1 – Prices quoted (not adjusted) in active markets for identical assets and liabilities

Level 2: Inputs, except for quoted prices, included in Level 1 which are observable for assets or liabilities, directly (prices) or indirectly (derived from prices);

Level 3: Assumptions, for assets or liabilities, which are not based on observable market data (non-observable inputs).

Non-derivative financial instruments carried at fair value are the interest earning bank deposits that were classified into Level 2.

25.8. Sensitivity analysis for financial assets and liabilities Main risks related to the Company’s transactions are linked to TJLP, CDI, IPCA, IGPM, IPC and SELIC change for BNDES financing and accounts payable due to acquisition of companies, and to CDI for interest earning bank deposits. The investments with CDI are recorded at market value, according to quotations announced by the respective financial institutions and the others mainly refer to bank deposit certificates. Therefore, the recorded value of these securities does not differ from the market value. In order to check the sensitivity of the indexer of financial investments to which the Company was exposed to at December 31, 2018, we defined three scenarios for the risk of decrease in CDI. The December 2018 index, which was 6.40%, was defined as probable scenario; based thereon, 25% and 50% scenarios were defined.

Parent company

Operation Balance at 12/31/2018 Risk Scenario I (probable) Scenario II Scenario III

Interest earnings bank deposits 60,108 CDI 6.40% 4.80% 3.20% Finance income decr. 3,847 2,885 1,923

Consolidated

Operation Balance at 12/31/2018 Risk Scenario I (probable) Scenario II Scenario III

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Interest earnings bank deposits 413,374 CDI 6.40% 4.80% 3.20% Finance income decr. 26,456 19,842 13,228

In order to analyze sensitivity of debt indexes, to which the Company is exposed at December 31, 2018, three different scenarios were defined for the risk of increase in such indexes. This was based on TJLP, IPCA, IPC, IGPM, CDI and SELIC amounts in effect at December 31, 2018, available at CETIP, IBGE, Central Bank of Brazil, FGV, among others. Accordingly, a probable scenario was defined for 2018, based on which, 25% and 50% differences were calculated. For each scenario the Company calculated the gross financial expense, not taking into account the taxes levied and the flow of maturities for each contract scheduled for 2018. The base date used for financing was December 31, 2018, projecting indices for one year and verifying their sensitivity in each scenario.

Consolidated

Operation Balance at 12/31/2018 Risk

Scenario I (probable) Scenario II Scenario III

Financings – BNDES 249,981

TJLP incr. 17,449 21,823 26,173

Rate subject to change 6.98% 8.73% 10.47% Acquisition of companies 7,690

IGPM incr. 581 726 871


CDI incr. 232 290 347


IPCA incr. 854 1,068 1,282


R$ decr. 1,624 2,030 2,437

Rate subject to change 3.87% 4.84% 5.81%

26. Insurance coverage The Company and its subsidiaries adopt the policy of contracting insurance coverage for properties subject to risks in amounts considered sufficient to cover any casualties, considering the nature of their activity. As of December 31, 2018, insurance coverage for operating risks comprised in the consolidated in the amounts of R$ 7,500 for civil liability for professionals, R$ 70,000 for civil liability for management, R$ 119,000 for operating risks and R$ 600 for vehicles. Insurance coverages mentioned in these notes are not in the scope of audit review.

27. Earnings per share a) Basic earnings per share

Basic earnings per share is calculated by dividing profit attributable to company shareholders by the weighted average number of common shares, as follows:

Parent company 12/31/2018 12/31/2017 Net income for the year 71,055 84,845 Weighted average of shares 163,081,069 163,890,682

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Basic earnings per share - (in reais) 0.4357 0.5177

b) Diluted earnings per share

Diluted profit per share is calculated by adjusting the weighted average number of common shares, presuming the conversion of all the potential diluted common shares. The Company has a Stock Option Plan that provides for the granting of 4,060,627 stock options with the Plan’s total dilutive potential being represented by 946,123 stock options, including initial granting.

Parent company

12/31/2018 12/31/2017

Net income for the year 71,055 84,845 Weighted average number of shares (*) 164,150,504 164,747,222

Diluted earnings per share (in reais) 0.4329 0.5150

(*) Amounts after the stock split carried out on June 13, 2016.

28. Share-based payment In the Special Shareholders’ Meeting held on December 4, 2012, the Stock Option Plan of Linx S.A. was approved. Such plan establishes the general conditions for grant of shares issued by the Company, under the terms of article 168, paragraph 3, Law 6404/76. The Plan aims to attract and retain management and employees of the Company and companies under its direct or indirect control, providing managers and employees the opportunity, subject to certain conditions, become shareholders of the Company, with a view to: (i) reward them due to its positions and length of service with the Company; (ii) providing incentive for the achievement of the Company's social goals; (iii) aligning the Company's shareholders’ interests to those of the Company's management; and (iv) encourage performance and favor retention of key persons in the Company, to the extent in which their interest in the institution’s capital will permit them to benefit from results for which they have contributed and that are reflected in share price appreciation. The plan is managed by the Board of Directors, which establishes granting programs and is in charge of determining: (i) the creation and application of general rules relating to the grant of options under the Plan and the solution of questions of interpretation of the Plan; (ii) performance targets for the Company's top executives in order to establish objective criteria for election of beneficiaries; (iii) election of Plan Beneficiaries and authorization to grant stock options in their favor, establishing all conditions for options to be granted, as well as change of such conditions when it is necessary to adequate options to the terms of the law, standard or subsequent regulation; and (iv) issuance of new Company’s shares within authorized capital limit, or disposal of treasury shares to comply with exercise of stock options granted pursuant to the terms of the Plan. In order to meet the exercise of stock options granted on the terms of the Plan, the Company may, at Board of Directors’ discretion: (a) issue new shares within the authorized capital limit; or (b) sell treasury shares. On February 28, 2013, the Board of Directors approved the first concession of stock options and respective election of plan members - as well as definition of the number of shares that each of them may acquire when exercising the option - totaling 1,842,951 stock option at exercise price of

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R$ 6.24, subject to adjustments deriving from stock split, grouping and bonus, adjusted for inflation at General Market Price Index (IGP-M) disclosed by Fundação Getúlio Vargas, and also adjusted for possible dividend and/or interest on own capital payment. On February 28, 2014, the Board of Directors approved the concession of stock options and respective election of plan members - as well as definition of the number of shares that each of them may acquire when exercising the option - totaling 406,059 stock option at exercise price of R$ 11.28, subject to adjustments deriving from stock split, grouping and bonus, adjusted for inflation at General Market Price Index (IGP-M) disclosed by Fundação Getúlio Vargas, and also adjusted for possible dividend and/or interest on own capital payment. On February 27, 2015, the Board of Directors approved the concession of stock options and respective election of plan members - as well as definition of the number of shares that each of them may acquire when exercising the option - totaling 432,855 stock option at exercise price of R$ 15.01, subject to adjustments deriving from stock split, grouping and bonus, adjusted for inflation at General Market Price Index (IGP-M) disclosed by Fundação Getúlio Vargas, and also adjusted for possible dividend and/or interest on own capital payment. On February 29, 2016, the Board of Directors approved the concession of stock options and respective election of plan members - as well as definition of the number of shares that each of them may acquire when exercising the option - totaling 566,592 stock option at exercise price of R$ 15.50, subject to adjustments deriving from stock split, grouping and bonus, adjusted for inflation at General Market Price Index (IGP-M) disclosed by Fundação Getúlio Vargas, and also adjusted for possible dividend and/or interest on own capital payment. On March 31, 2017, the Board of Directors approved the concession of stock options and respective election of plan members - as well as definition of the number of shares that each of them may acquire when exercising the option - totaling 391,618 stock option at exercise price of R$ 16.57, subject to adjustments deriving from stock split, grouping and bonus, adjusted for inflation at General Market Price Index (IGP-M) disclosed by Fundação Getúlio Vargas, and also adjusted for possible dividend and/or interest on own capital payment. On March 31, 2018, the Board of Directors approved the concession of stock options and respective election of plan members - as well as definition of the number of shares that each of them may acquire when exercising the option - totaling 420,552 stock option at exercise price of R$ 19.16, subject to adjustments deriving from stock split, grouping and bonus, adjusted for inflation at General Market Price Index (IGP-M) disclosed by Fundação Getúlio Vargas, and also adjusted for possible dividend and/or interest on own capital payment. On March 31, 2017, the Board of Directors approved the concession of deferred shares totaling 945,048 stock option at exercise price of R$ 15.70, subject to adjustments deriving from stock split, grouping and bonus, adjusted for inflation at General Market Price Index (IGP-M) disclosed by Fundação Getúlio Vargas, and also adjusted for possible dividend and/or interest on own capital payment. On March 31, 2018, the Board of Directors approved the concession of deferred shares totaling 398,489 stock option at exercise price of R$19.16, subject to adjustments deriving from stock split, grouping and bonus, adjusted for inflation at General Market Price Index (IGP-M) disclosed by Fundação Getúlio Vargas, and also adjusted for possible dividend and/or interest on own capital payment.

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On March 23, 2017, the Board of Directors approved the opening of the Company’s share buyback program at its sole discretion and under the terms of the Buyback Program to acquire up to 2,000,000 (two million) registered, book-entry, common shares, with no par value, issued by the Company, corresponding to up to 1.206% of the total shares issued by the Company and up to 1.206% of the Outstanding shares. The purpose of the Buyback Program is to meet the exercise of deferred stock programs and possibly stock option programs. Shares may also be held in treasury, sold or canceled, without reduction of the Company’s capital, in compliance with the provisions of item 1 of article 30 of the Brazilian Corporation Law, and the standards set forth in CVM Ruling 567/15. Maximum term described under the terms of the 18-month (eighteen-month) Share Buyback Program, beginning March 23, 2017 and ending September 23, 2018. The fair value of each granted option is estimated on the concession date with basis on the Black-Scholes option pricing model and considering the following variables and results:

Stock Option Grant Fair value assumptions

Expected

Number Date Quantity

of options Strike price - reais

Option pricing

Dividends - % Volatility - % Risk-free

interest rate, % Maturity

term

1st 02/28/2013 1,842,951 6.24 4.24 3.30% 25.24% 10.27% 4 years 2nd 02/28/2014 406,059 11.28 3.94 0.80% 25.11% 10.12% 4 years 3rd 02/27/2015 432,855 15.01 3.95 1.28% 24.00% 7.05% 4 years 4th 02/29/2016 566,592 15.50 4.67 0.85% 25.01% 7.25% 4 years 5th 03/31/2017 391,618 16.57 3.83 1.34% 24.25% 9.71% 4 years 6th 03/31/2018 420,552 19.16 2.99 1.39% 23.69% 7.43% 4 years

Deferred shares Grant Fair value assumptions

Expected

Number Date Quantity

of options Strike price - reais

Option pricing

Dividends - % Volatility - % Risk-free

interest rate, % Maturity

term

1st 03/31/2017 945,048 15.70 14.85 1.34% 24.25% 9.71% 4 years 2nd 03/31/2018 398,489 19.16 18.12 1.39% 23.69% 7.43% 4 years

The accumulated effect in the year ended December 31, 2018 is R$ 4,556 (R$ 1,807 as of December 31, 2017) recorded in the statement of income as payroll expenses. This effect did not impact the Company’s cash.

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The accumulated balance in shareholders’ equity presented in the capital reserve under "stock option plan", is R$ 16,104 (R$ 11,548 as of December 31, 2017).

Alberto Menache CEO

Pedro Holmes Monteiro Moreira Financial Vice-President and IR

Eloisa Moraes Souza de Oliveira Accountant CRC-1SP247057/O-9

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