Resultados Totvs

TOTVS S.A.
Financial Statements for the fiscal years ended

December 31, 2018 and 2017
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(A free translation of the original in Portuguese)
Contents
Management report and comments on company’s performance ....................................................... 3
Independent auditor’s report on the individual and consolidated financial statements ..................... 12
Audit Committee´s report ................................................................................................................ 18
Financial statements ...................................................................................................................... 20

Statement of financial position ........................................................................................................................ 20
Statement of profit or loss ............................................................................................................................... 21
Statement of comprehensive income ............................................................................................................. 22
Statement of changes in equity ..................................................................................................................... 23
Statement of cash flow ................................................................................................................................... 24
Statement of value added ............................................................................................................................... 25
Notes to the financial statements.................................................................................................................... 26
1. The Company and its operations.............................................................................................................................26
2. Basis of Preparation and presentation of the financial statements ..........................................................................26
3. Signiticant accounting judgments, estimates and assumptions ...............................................................................35
4. Corporate restructuring ...........................................................................................................................................37
5. Financial instruments and sensitivity analysis of financial assets and liabilities ......................................................38
6. Cash and cash equivalents .....................................................................................................................................43
7. Trade accounts receivable ......................................................................................................................................43
8. Inventories ...............................................................................................................................................................44
9. Taxes recoverable ...................................................................................................................................................45
10. Income taxes .........................................................................................................................................................45
11. Related-party balances and transactions ..............................................................................................................47
12.Investments ............................................................................................................................................................48
13 .Property, plant and equipment ..............................................................................................................................50
14. Intangible assets ...................................................................................................................................................52
15. Payroll and labor obligations .................................................................................................................................56
16. Tax liabilities ..........................................................................................................................................................57
17. Loans and debts ....................................................................................................................................................57
18. Debentures ............................................................................................................................................................58
19. Liabilities due to investment acquisition ................................................................................................................60
20. Provision for contingencies related to legal proceedings .......................................................................................60
21. Equity ....................................................................................................................................................................65
22. Dividends and Interest on Equity ...........................................................................................................................66
23. Share-based remuneration plan ............................................................................................................................67
24. Segment information .............................................................................................................................................69
25. Earnings per share ...............................................................................................................................................70
26. Gross sales revenue ............................................................................................................................................71
27. Expenses by nature ...............................................................................................................................................71
28. Financial income and expenses ............................................................................................................................72
29. Private pension plan – defined contribution ...........................................................................................................72
30. Commitments .......................................................................................................................................................73
31. Insurance coverage ...............................................................................................................................................74
32. Subsequent event .................................................................................................................................................74
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MANAGEMENT REPORT AND COMMENTS ON THE COMPANY’S PERFORMANCE
Dear Shareholders,
Pursuant to legal provisions, TOTVS S.A., the largest developer of application software, collaboration
and productivity platforms, hardware and consulting services in Brazil and Latin America, submits for the
appreciation of its shareholders the Management Report and the corresponding Financial Statements,
accompanied by the independent auditor's report for the fiscal years ended December 31, 2018, prepared in
accordance with the accounting practices adopted in Brazil.
MESSAGE FROM THE BOARD
The year 2018 was important for Brazilian democracy, with massive participation and social reflection
about politics and the country’s future, during to the presidential elections. During this period, TOTVS, as an
important relevant player in Brazil’s technology sector, did not stay off the discussions, but sought to stimulate
the citizenship engagement of its professionals, inciting everyone through the #CONSCIENTIOUSVOTE
campaign about their role in this process of building a better society.
Similarly, we continue to make progress in our corporate governance practices and our commitment
to ethics and transparency, reviewing the code of conduct and publishing the organizational policies, such as
Nominating Members to the Board of Directors, Engagement of Independent Auditor Services, and
Contributions, Donations and Sponsorships.
Also worth highlighting is the pillar of People, which was marked by the implementation of the Human
Relations and Compensation Management Policy and changes to the long-term incentive plan (ILP). Such
initiatives are important so that incentive continues to be an instrument for long-term alignment, engagement
and retention.
Lastly, the end of the 2018 cycle marked the start of a new phase at TOTVS, with the consolidation of
the company’s succession plan and the announcement of the arrival of Dennis Herszkowicz to replace the
Company’s founder, Laércio Cosentino, who was elected Chairman of the Board of Directors.
TOTVS has been transforming itself into a company with an increasingly broader business vision and
which shares knowledge and experience with the ecosystem. We are confident that we are on the right track
for business expansion and for supporting the new growth cycles of the organization. In this new cycle, we will
continue to focus on the democratization of technology as the basis for transforming, simplifying and removing
the bureaucracy in business.
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MESSAGE FROM THE MANAGEMENT
In 2018, TOTVS returned to accelerating software revenue growth, despite an economic scenario of slow
and gradual recovery. Software Revenue grew organically 8% in 4Q18 and 6% in 2018, boosted by Recurring
Revenue, which totaled R$1,547 billion, accounting for 73% of Software Revenue in 2018. This acceleration,
combined with greater operating efficiency, led to an 18% increase in Software Adjusted EBITDA in 2018 and
a gain of 160 basis points in Software Adjusted EBITDA Margin, closing 2018 at 16.4%.
This performance reiterates the positive growth trend of Software Revenue and the consolidation of
recovery in Software EBITDA Margin. This operation is the priority of TOTVS. We will continue to invest in it.
Hence, we started to report Software and Hardware results separately down to the EBITDA Margin line.
The results show that TOTVS has already built its subscription model, which, combined with its
maintenance model, represent a solid base of Recurring Revenues and high client renewal rates. Accordingly,
we are prepared for a new growth cycle, supported by the best and broadest portfolio of management
solutions, besides seeking opportunities in new markets, which will enable us to advance in the value chain of
our clients.
Finally, our financial position improved significantly in 2018, with free cash flow up 14%, reducing 84%
the net debt year on year, to reach 0.1 times the EBITDA, the lowest ratio in recent years. With this, we are
prepared to take advantage of inorganic opportunities.
We start 2019 focused on the satisfaction and success of our clients, maintaining the entrepreneurial
spirit and the purpose of “Simplifying the business world,” believing in a Brazil that MAKES IT HAPPEN,
innovates and produces. This energy of making things happen, delivering on our promises and even redoing if
necessary, always in a smart and balanced manner, will be put into each action, each customer interaction,
each sale and each project we work on.
TOTVS believes in a Brazil that makes it happen!
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ECONOMIC SCENARIO
In Brazil, the year 2018 was marked by the end of Michel Temer’s provisional government, mainly known
for approving the labor reform and fixing the ceiling on public spending. Nevertheless, the political
environment, marked by the truck drivers’ strike and the nebulous political and electoral scenario, directly
affected the country’s economic growth. The global economy slowed down, as evident from the high volatility
seen in the international financial markets, which influenced the global economic performance. In contrast,
there were significant mitigating factors that cooled down tempers between China and the United States and
which reflect prospects of greater dynamism in international trade in the coming years.
Brazil’s GDP should record modest economic growth in 2018, projected at around 1%, still due to the
unstable political landscape. In any case, it is worth contextualizing that after the worst recession in the
country between 2014 and 2016, the historical series in its wake shows a recovery in growth, which should
continue over the next cycle. As for inflation, the IGP-M index registered sharp monthly variations over the
year and ended at a high of 7.5%, while the IPCA stood at 3.8%, 0.80 percentage points higher than the 3.0%
recorded in 2017. With regard to monetary policy, the Monetary Policy Committee (COPOM) continued the
policy by maintaining the Selic interest rate below the structural interest rate, which reached 6.5%. The Long-
Term Interest Rate (TJLP) saw a significant change in 2018, when the National Monetary Council (CMN)
approved the rule that sets the conditions for automating the calculation and publication of the Rate, as
envisaged in law.
The unemployment rate, after reaching 12.8% in 2017, started 2018 on a downward trend, albeit slower
than expected, and should consolidate at 12.2%. In addition, default rates, of both individuals and corporates,
returned to the pre-crisis level of around 2%. Also reflecting the current scenario, strong oscillations in the
exchange rate marked 2018 in Brazil, which until then reflected the struggle to make predictions for Brazil in
the 2019-22 cycle. Thus, once the economic team of the new government and the fiscal guidelines to be
adopted were defined, the projections turned positive, indicating a possible appreciation of the Brazilian Real
in 2019.
After the elections, Brazil enters a new political phase characterized by a renovation in the legislative
environment, deep partisan fragmentation and the executive branch’s attempt to implement “new politics”.
Despite Jair Bolsonaro’s high popularity, the more than 30 parties in the Congress should pose additional
challenges to his ability to govern, who is starting his term with a simple discourse and high popularity.
As priorities on the policy agenda, notably the reforms agenda, urgent issues such as fiscal adjustment,
reduction of the State’s presence, opening of the economy, and tax and pension reforms have gained
prominence.
These measures, combined with factors such as inflation under control, consistent reduction in
individual and corporate defaults in the last cycle and the high consumption potential of the domestic market,
should drive the return of investments and speed up the pace of hiring in the country.
Finally, the scenario is positive and to ensure sustainable, long-term growth, it is imperative that the
Government focuses on resolving structural issues, which have limited the ability of GDP to grow to its full
potential in the last few years. Simplification, debureaucratization, efficiency and entrepreneurship should be
the watchwords of the new government.
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OPERATING AND FINANCIAL PERFORMANCE
Net Software Revenue ended 2018, accelerating its growth in 4Q18, to 8.2% from 4Q17 and 5.9% from
2017. On the other hand, Net Hardware Revenue continued its weak performance, declining 4% in 4Q18
compared to 4Q17 and 10.8% in 2018 versus 2017. Accordingly, Total Net Revenue of the Company increased
7% on the quarter and 4.2% on the year. The increase in Software EBITDA Margin outpaced the increase in
Total EBITDA Margin, due to the reduction in Hardware EBITDA Margin, which will be commented in the
“Software Result” and “Hardware Result” sections below.
SOFTWARE RESULT
Software Revenue - grew 5.9% in 2018, mainly due to Recurring Revenue, which totaled R$1,547,192
thousand in the year, accounting for 73.3% of Software Revenue. Manufacturing, Services, Distribution &
Logistics, Retail and Financial Services segments accounted for approximately 80% of Software Revenue. Of
these five key segments, Services stood out, posting growth above the overall software average. Among the
other segments, Education stood out, followed by Agribusiness, both growing over 20% year on year. On the
other hand, the Retail segment grew below the average. This diversity of sectors enabled TOTVS to capture
sales growth opportunities in different economic scenarios,
combined with the resilience of recurring revenue.
Recurring Revenue – grew 5.4% in 2018. This

performance resulted mainly from the acceleration of sales
growth and, to a lesser extent, the rise in the IGP-M inflation rate
in 12 months, throughout 2018. Annualized Recurring Revenue
totaled R$1,733,272 thousand in 4Q18, up 3.3% from 3Q18 and
8.3% from 4Q17. In the quarter, this growth represented a net
increase of R$55,789 thousand.
Non-Recurring Revenues – increased 7.3% in 2018. This growth was driven by the increase in Service
Revenues, which grew 7.6% in 2018, mainly due to: (i) the quicker pace of sales during 2018; and (ii) more
efficient deliveries of service projects during the quarters. In addition, License Revenue also contributed to the
increase in Non-Recurring Revenue, growing 6.6% in 2018, mainly driven by the higher share of sales to large
clients, despite a still weak economic scenario and the strong growth of the subscription model, which does
not involve license sales.
Software Cost – increased 3.3% in 2018, below the 5.9% growth in Software Revenue, resulting in an
increase of 90 basis points in Gross Margin for the year. This performance is mainly due to the greater
allocation of service teams and more efficient delivery of projects, despite the additional costs incurred in
support activities, to meet the requirements of new regulations (e.g.: e-Social) implemented during 2018.
Research and Development - the 11.3% year-on-year increase in Research and Development expenses
is due to: (i) investments made in innovation during the period; (ii) development efforts related to changes in
tax legislation, already mentioned in previous quarters under “Software Cost”; (iii) the currency translation
impacts on the structure of TOTVS Labs in California.
Selling and Marketing Expenses – as a percentage of Software Revenue, this line fell from 19.3% in
2017 to 18.3% in 2018. This 100-basis point reduction is mainly due to efficiency gains and the change in the
sales mix between own channels and franchises. In the quarter-on-quarter comparison, the 3.7% increase is
essentially related to Advertising and Marketing campaigns, reflecting the calendar of events, which is a part
of the Company's annual marketing plan.
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Allowance for doubtful accounts - corresponded to 1.8% of Software Revenue in 2018, as against 1.5%
in 2017. The growth in the allowance reflects the increase in defaults during the period, especially the increase
in requests for court-supervised reorganization.
General and Administrative Expenses and Provision for Contingencies - corresponded to 9.8% of
Software Revenue in 2018, down 190 basis points from 2017. This reduction reflects the gain in operating
efficiency and is mainly related to the integration of administrative operations, concluded in 4Q17. The
consequent structural adjustment helped reduce recurring personnel costs over subsequent quarters, despite
the negative impact of the 37.5% increase in provision for contingencies, reflecting mainly the progress of
labor lawsuits, which have been more significant in the final quarter of the year.
Other Operating Revenues (Expenses) - In the year, this line was mainly affected by: (i) the write-off
of property, plant and equipment totaling R$ 824 thousand, due to the physical inventory at the subsidiaries;
(ii) the partial reversal of the Provision for Obligations with Acquisitions, amounting to R$9,123 thousand; and
(iii) indemnity of R$4,250 thousand, paid for termination of a service agreement for software development,
which was insourced.
Adjusted EBITDA – Adjusted Software EBITDA grew year on year by 9.6% in the quarter and 17.9% in
2018, with Adjusted EBITDA Margin reaching 14.5% in the quarter and 16.4% in the year, which represents a
160-basis point increase on the 2017 margin and reflects the margin recovery process in Software.
HARDWARE RESULT
Revenue - The year-on-year decline in Hardware Revenue,

of 10.8% in 2018, continues to reflect the slower pace of fiscal printer
sales, due to changes in tax legislation in several states, as already
mentioned in previous quarters and shown in the chart on the right.
Gross Margin – the reduction of 600 basis points in 2018 is

due to the drop in sales of fiscal printers, which have higher margins,
and the higher unitary costs in general caused by the foreign
exchange variation during the year.
Operating Expenses – Despite this impact of the Impairment Provision, the Operating expenses in
4Q18 and 2018 decreased due to: (i) the integration of the administrative operations of Bematech and TOTVS,
concluded in 4Q17, and the consequent structural adjustment, which helped reduce recurring personnel costs
throughout 2018; (ii) the reduction in Selling and Marketing Expenses, due to the lower sales volume
compared to 2017; and (iii) lower Allowance for Doubtful Accounts due to the change in Bemacash’s sales
model in 2Q18.
Adjusted EBITDA – the decline in expenses during 2018 was not sufficient to neutralize the impact of
the drop in sales of fiscal solutions and the sales performance of other solutions, as Bemacash. Hence, the
structure was downsized once again in 4Q18, which implied non-recurring costs with employee terminations,
totaling R$2,270 thousand. Excluding this non-recurring cost, Adjusted EBITDA decreased year on year by
67.8% in 4Q18 and 85.9% in 2018.
RESULT AFTER EBITDA
Depreciation Expenses increased 14.0% in 2018, mainly due to the start of depreciation of assets at units
that underwent renovation during 2018 and the Capex plan in the year. The 23.1% decline in Amortization
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Expenses is essentially related to the conclusion of amortization of intangible assets derived from the merger
of Datasul, as informed in 3Q18
In the year-on-year comparison, Financial Result remained stable, reflecting the combination of the
following factors: (i) the decrease in revenue from financial investments due to the reduction in the basic
interest (Selic) rate; (ii) the decrease in revenue from inflation adjustment to tax credits, especially due to the
volume of utilization of these credits in 2018; and (ii) the increase in expenses with inflation adjustment, due
to the higher balance of provisions for contingencies.
The increase in the effective Income Tax and Social Contribution rate year on year is mainly associated
with: (i) the lower ratio of Interest on Equity to profit before income tax, due to the lower taxable income of
the parent company in 2018; (ii) the lower ratio of tax incentive for innovation to profit before income tax.
The year-on-year increase in Adjusted Net Income is mainly due to the growth in Adjusted Software
EBITDA and the reduction in Depreciation and Amortization Expenses. In the quarter-on-quarter comparison,
the decrease in Adjusted Net Income is mainly due to the variation in Adjusted Software EBITDA in the period,
as commented in “Software Result”.
The Adjusted EBITDA(*) of 2018 totalized R$348,316 thousand, 14.8% higher than 2017, as shown in
table below:
Consolidated
2018 2017 Change
Net Income 60,643 93,258 -35.0%
Equity Pickup 517 69 649.3%
Income Tax and Social Contribution 26,080 10,894 139.4%
Financial Result 39,502 39,447 0.1%
Depreciation and Amortization 133,213 150,894 -11.7%
EBITDA 259,955 294,562 -11.7%
Adjusts 88,361 8,936 888.8%
Adjusted EBITDA 348,316 303,498 14.8%
Year over year, the Adjusted EBITDA showed a 14.8% growth, mainly driven bu the 17.9% growth of the
Software Adjusted EBITDA, as presented in the “Software Result” session, despite the 85.9% decrease in the
Hardware Adjusted EBITDA.
The non-financial data included in this report, as number of clients, average ticket, market share and
others, were not object of examination by our independent auditors.
(*)EBITDA is a non-accounting (non-audited) measure prepared by the Company and consists of net income for the year, plus income
taxes, financial expenses net of financial revenues, and depreciation and amortization. Adjusted EBITDA represents EBITDA, deducted
from extraordinary effects as shown in the Earnings Release of the 4Q18, available on the Company website.
CAPITAL MARKETS
TOTVS ended the year with capital stock of R$1,041,229 thousand. At the end of 2018, the capital stock
of the Company was composed of 165,637,727 common shares, with 71.4% being free float, of which 98.4%
was held by institutional investors and 84.8% by foreign investors.
Free float is calculated as the total number of Company shares, excluding shares owned by Management
and related persons and Fundação Petrobras de Seguridade Social (PETROS), and treasury stock.
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In 2018, TOTVS shares (B3: TOTS3) depreciated 9.95%, while the Bovespa Index (IBovespa) rose 15.0%.
Average financial volume in 2018 stood at R$16 million/day, compared to R$14.1 million/day in 2017.
Interest on equity for 2018: On July 25, 2018, approval was given to the payment of interest on equity
for the first half of 2018, in the total amount of R$14,709 thousand. Shareholders of TOTVS on record as of
August 1, 2018, were entitled to interest on equity. Said interest on equity was paid on October 3, 2018.
On December 21, 2018, approval was given for the payment of interest on equity for the second half of
2018, totaling R$13,076 thousand. Shareholders of TOTVS on record as of December 28, 2018, were entitled
to interest on equity. Said interest on equity will be paid on May 9, 2019.
Interest on equity for 2017: On July 31, 2017, approval was given to the payment of interest on equity
for the first half of 2017, in the total amount of R$32,912 thousand. Shareholders of TOTVS on record as of
August 4, 2017, were entitled to interest on equity. Said interest on equity was paid on October 6, 2017.
On December 21, 2017, approval was given for the payment of interest on equity for the second half of
2017, totaling of R$17,434 thousand. Shareholders of TOTVS on record as of December 27, 2017, were entitled
to interest on equity. Said interest on equity was paid on May 9, 2018.
The interest on equity for both fiscal year was calculated towards the minimum mandatory dividend in
accordance with article 34 of the Bylaws of TOTVS.
Dividends for 2018: proposed by the Board of Directors on July 25, 2018, the dividends for the first half
of 2018 totaled R$17,978 thousand, payable to shareholders of TOTVS on record as of August 1, 2018. The
dividends were paid on October 3, 2018.
Dividends for 2017: proposed by the Board of Directors on February 5, 2018, and approved at the
Annual Shareholders Meeting on April 5, 2018, the dividends for fiscal year 2017 totaled R$5,442 thousand,
payable to shareholders of TOTVS on record as of April 5, 2018. The dividends were paid on May 9, 2018.
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CORPORATE GOVERNANCE
Novo Mercado: TOTVS was the first Brazilian software company to join the segment that meets the
highest corporate governance standards of the São Paulo Stock Exchange (B3).
Board of Directors: TOTVS’ Board of Directors is composed of 8 members, of which 7 of them are
independent members, in accordance with Novo Mercado regulations. 6 officers compose the Executive
Board. The list containing the names, position and a brief resume of the Board members and Executive Officers
is available on the Company´s Reference Form, in http://ir.totvs.com .
Audit Committee: It is an advisory body to support the Board of Directors, and its mission is to monitor,
evaluate and ensure the best operation of processes, management of internal and external audit mechanisms
and controls related to risk management and consistency of financial policies with the strategic guidelines and
business risk profile. Currently, the Audit Committee is composed of 3 independent external members elected
by the Board of Directors, chaired by an independent member of the Board of Directors.
Remuneration and People Committee: assists the Board in setting compensation policies and benefits
for directors, officers and participants. The company currently has 3 members elected by the Board of
Directors, of which 1 is external, and is chaired by an independent member of the Board of Directors.
Governance and Designation Committee: Composed of 3 members of the Board of Directors, its main
duties are to promote changes in the Company's corporate governance, to evaluate the adoption of good
practices and to select and appoint members to the Board of Directors and the Board of Executive Officers.
Arbitration: according to Novo Mercado Regulations and the Company’s Bylaws, the controlling
shareholder, administrators, the Company itself and the Fiscal Council members should undertake to settle all
and any dispute or controversy arising from or relating to Novo Mercado Regulations, the Novo Mercado
Adhesion Agreement, Arbitration Clauses, especially, regarding its application, validity, effectiveness,
interpretation, breach and their effects through arbitration. Disputes regarding the sale of the Company’s
control shall also be solved through arbitration.
Management Statement: in accordance with subparagraphs V and VI, Article 25 - CVM Instruction
480/09, the officers of TOTVS declare that they discussed, reviewed and agreed with the views expressed in
the independent auditors' report and financial statements for the fiscal year ended on December 31, 2018.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Company’s policy on engaging services not related to external audit by independent auditors is
grounded on the principles that preserve their autonomy. These principles consist of internationally accepted
standards, namely: (a) auditors must not audit their own work; (b) auditors must not exercise management
functions at their clients; and (c) auditors must not create conflicts of interest with their clients.
Procedures adopted by the Company pursuant to item III, article 2 of CVM Instruction 381/03: The
Company and its subsidiaries adopt as a formal procedure, before hiring independent auditors for
professionals services not related to external audit, ensuring that the execution of these other services does
not affect their autonomy and objectivity necessary for the performance of independent audit services, and
obtaining the approval of their Audit Committee. In addition, formal statements are requested from the
auditors regarding their autonomy in the execution of services not related to audit
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Other services were provided in addition to those related to the audit of financial statements in 2018.
The fees for these services totaled R$220,568 and corresponded to 14.07% of total fees related to external
audit.
ACKNOWLEDGEMENTS
We thank all those who contributed to the success of TOTVS in 2018, especially TOTVERS ,our clients,
employees, partners and shareholders.
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INDEPENDENT AUDITOR’S REPORT ON THE INDIVIDUAL AND CONSOLIDATED
FINANCIAL STATEMENTS
To the Shareholders, Board of Directors and Officers of

TOTVS S.A.
São Paulo, SP
We have audited the individual and consolidated financial statements of TOTVS S.A. (the “Company”),
identified as Company and Consolidated, respectively, which comprise the statement of financial position as
at December 31, 2018, and the statement of profit or loss, of comprehensive income (loss), of changes in
equity and cash flows for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the individual
and consolidated financial position of TOTVS S.A. as at December 31, 2018, and its individual and
consolidated financial performance and cash flows for the year then ended in accordance with the
accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS) issued
by the International Accounting Standards Board (IASB).
Basis for opinion
We conducted our audit in accordance with Brazilian and international Standards on Auditing. Our
responsibilities under those standards are further described in the “Auditor’s responsibilities for the audit of
the individual and consolidated financial statements” section of our report. We are independent of the
Company and its subsidiaries in accordance with the relevant ethical principles set forth in the Code of
Professional Ethics for Accountants, the professional standards issued by Brazil’s National Association of State
Boards of Accountancy (CFC) and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
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Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period. These matters were addressed in the context of our
audit of the individual and consolidated financial statements as a whole, and in forming our opinion thereon,
and we do not provide an individual opinion on these matters. For each matter below, our description of how
our audit addressed the matter, including any commentary on the findings or outcome of our procedures, is
provided in that context.
We have fulfilled the responsibilities described in the “Auditor’s responsibilities for the audit of the
individual and consolidated financial statements” section of our report, including in relation to these matters.
Accordingly, our audit included the performance of procedures designed to respond to our assessment of the
risks of material misstatements of the financial statements. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial statements.
Revenue recognition
Revenue recognition involves dependence on the proper operation of information technology systems
and their respective internal controls to ensure that all services rendered have been correctly measured and
properly recorded within the appropriate accounting period, including unbilled revenues from services
rendered. Service and software revenues have different performance obligations and are recognized based on
the schedule for the execution of services contracted and when there is a valid expectation of receipt from
the customer. The revenues earned by the Company and its subsidiaries and their respective recognition
criteria in P&L are disclosed in Note 2.4.i.
The monitoring of this matter was deemed significant to our audit, in view of the involvement of the
information technology infrastructure and the assurance of the integrity of information extracted from the
billing systems and used as essential elements for the purpose of calculating the revenues and their correct
recognition by the Company, therefore, we consider our procedures in this area as one of the key audit
matters.
How our audit addressed this matter
As part of our audit procedures performed, among others, we highlight:
 Internal control test: (i) of the general information technology control environment established by the
Company, which include controls over access management and changes onto the systems and their data;
and (ii) controls established by management related to the revenue recognition process as well as controls
to ensure the integrity of the reports extracted from the systems that are used to determine the revenue
accounting balance. We found deficiencies in the design of the internal controls associated with granting
user access and management of operation of the revenue-related system.
 Inspection of marks of unbilled earned revenue, in addition to discussions on possible variations in the
amount of unbilled revenues recognized at the end of the year;
 Documental tests for a sample of transactions in the revenue account, taking into consideration aspects of
significance and unpredictability in our sampling.
The deficiencies in the design of the Company’s internal controls, as mentioned above, changed our
assessment as to the nature, timing and extent of our substantive procedures designed to obtain sufficient
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and appropriate audit evidence regarding revenues, as we have not yet concluded on the operational
effectiveness of such general information technology controls throughout the year.
With that in view, based on the results of the audit procedures performed, which are consistent with
management’s assessment, we consider that the criteria for revenue recognition and measurement, as well
as the respective disclosures in the explanatory notes, are acceptable in the context of the overall financial
statements.
Goodwill impairment analysis
The Company has a balance of goodwill in the statement of financial position as at December 31, 2018
of R$625,193 million in the consolidated (Note 14 to the financial statements). The Company performed a
goodwill impairment test for each cash-generating unit to check whether its recoverable amount was lower
than its carrying amount and, as a result, concluded that there was the need to record a provision for
impairment loss amounting to R$87,023 million of Bematech Hardware cash-generating unit, of which
R$43,611 million refer to goodwill and R$43,412 million were allocated to other assets of the referred to cash-
generating unit. The other cash-generating units did not present the need to record a provision for impairment
loss.
This test is performed based on the business plan and cash flow projections approved by the Board of
Directors. The assumptions used in this procedure are disclosed in Note 14.2.
The monitoring of this matter was deemed significant to our audit, especially for Bematech Hardware
cash-generating unit, in view of the changes in the Company’s strategy and failure to achieve results expected
by management over the year. In addition, the process of evaluating the recoverability of goodwill is complex
and involves a high degree of subjectivity and is based on various assumptions, among them: revenue, cost
and operating expenses, discount rate and perpetuity growth rates. These assumptions may be materially
affected by the market conditions or future economic scenarios of Brazil that may not be confirmed in the
future.
Our audit procedures included, among others:
 Evaluation of the criteria used to identify and measure the recoverable amount of the entity’s cash-
generating units;
 Analysis of internal and external information that could indicate significant impairment of the assets;
 With the assistance of our corporate finance experts, we evaluated the key assumptions adopted in the
discounted cash flows used by management, including expectations of revenue growth, costs and
expenses, discount rate and profit margins as well as sensitivity analysis;
 Involvement of most experienced audit professionals in defining the test strategy, evaluating the audit
supporting documentation and supervising the audit procedures performed.
 We compared the budgets of the entity prepared and approved in the prior year with their actual amounts
calculated in order to evaluate the historical accuracy of the budgeting process;
 In addition, we compared the recoverable amount calculated based on the discounted cash flows, per
cash-generating unit, with their respective accounting balances and we assessed the adequacy of the
disclosures made in the financial statements.
Based on the audit procedures performed in the goodwill impairment test, which are consistent with
management’s assessment, we consider that the impairment criteria and assumptions adopted by
Page 14 of 74
management, as well as the respective disclosures in Note 14, are acceptable in the context of the overall
financial statements.
Other matters
Statements of value added
The individual and consolidated statements of value added (SVA) for year ended December 31, 2018,
prepared under the responsibility of Company management, and presented as supplementary information for
purposes of IFRS, were submitted to audit procedures conducted together with the audit of the Company’s
financial statements. To form our opinion, we evaluated if these statements are reconciled to the financial
statements and accounting records, as applicable, and if their form and content comply with the criteria
defined by CPC 09 - Statement of Value Added. In our opinion, these statements of value added were prepared
fairly, in all material respects, in accordance with the criteria defined in abovementioned accounting
pronouncement, and are consistent in relation to the overall individual and consolidated financial statements.
Other information accompanying the individual and consolidated financial statements and the
auditor’s report
Company management is responsible for such other information, which comprise the Management
Report.
Our opinion on the individual and consolidated financial statements does not cover the Management
Report and we do not express any form of assurance conclusion thereon.
In connection with our audit of the individual and consolidated financial statements, our responsibility
is to read the Management Report and, in doing so, consider whether this report is materially inconsistent
with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the
Management Report, we are required to report that fact. We have nothing to report in this regard. We have
nothing to report in this regard.
Responsibilities of management and those charged with governance for the individual and
consolidated financial statements
Management is responsible for the preparation and fair presentation of the individual and consolidated
financial statements in accordance with the accounting practices adopted in Brazil and with the International
Financial 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 of financial
statements that are free of material misstatement, whether due to fraud or error.
In preparing the individual and consolidated financial statements, management is responsible for assessing
the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate the
Company and its subsidiaries or to cease operations, or has no realistic alternative but to do so.
Those charged with governance of the Company and its subsidiaries, defined as Management, Audit
Committee and Board of Directors are responsible for overseeing the individual and consolidated financial
reporting process.
Page 15 of 74
Auditor’s responsibilities for the audit of individual and consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial
statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Brazilian and International Standards on Auditing will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Brazilian and International Standards on Auditing, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
 Identify and assess the risks of material misstatement of the individual and consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s and its subsidiaries’ internal control.
 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
 Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s and its subsidiaries’ ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the individual and consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the
Company and its subsidiaries to cease to continue as a going concern.
 Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the individual and consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements, including applicable independence requirements, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
Page 16 of 74
From the matters communicated with those charged with governance, we determine those that were
of most significance in the audit of the financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would reasonably be expected
to outweigh the public interest benefits of such communication.
São Paulo, February 11, 2019
ERNST & YOUNG

Auditores Independentes S.S.
CRC- 2SP034519/O-6
Luiz Carlos Marques

Accountant CRC-1SP147693/O-5
Page 17 of 74
AUDIT COMMITTEE’S REPORT

In accordance with its Charter, approved by the Board of Directors on December 20, 2018, the Audit
Committee is responsible for ensuring the adequate execution of processes and the management of internal
and external audit, risk management mechanisms and controls, and the consistency of financial policies with
the strategic guidelines and risk profile of the business, in addition to ensuring the quality and integrity of the
Company's financial statements, making recommendations to the Management regarding the approval of
financial reports and actions to improve internal controls and reduce risks.
In 2018, the Committee met 11 times and at the meeting held on February 6, 2019, it discussed and
evaluated the financial statements as at December 31, 2018. All the members were present in all the meetings
held during the period. The main topics and matters discussed for making recommendations to the Board of
Directors were: (i) Independent Audit (renewal of the audit services agreement; key findings of quarterly
reviews and report on the 2018 financial statements; deficiencies and recommendations for improvement
pointed out in the report on internal controls; final results for issuing ISAE No. 3402/2018); (ii) Internal Audit
(risk matrix and audit schedule for the 2018/2019 cycle; audit reports issued for own units and franchises); (iii)
Internal Controls, Corporate Risk Management, Compliance and Ombudsman (monitoring of restructuring
of the area, mapping of processes; key controls and indicators; corporate risk management; improvement of
information technology general controls; access profiles and segregation of functions; pilot project for the
management system by processes and indicators; action plans in the integrity program; adoption of
compliance policies and practices by managers and employees; results of the Net Promoter Score survey; (iv)
Financial Management, Provisions and Indicators (credit analysis policy, collection procedures and estimated
losses with bad debts; financial management of the software and hardware businesses; compliance with CVM
Resolution 594/2009; main legal claims and management's judgment on the predicted outcomes; evolution
of the controls environment in the legal department; annual tests of impairment and recoverability of deferred
tax assets; IFRS 15, 9 and 16); (v) Corporate Governance (recommendation of approval by the Board of
Directors of the quarterly and annual financial statements; proposals for interest on equity and dividends;
long-term incentive model for executives; notices, material facts and earnings presentations; initiatives and
operations involving mergers and acquisitions and merger of wholly-owned subsidiaries; update of Reference
Form; recommendations for the Integrated Report; crisis management plan; recommendation of approval by
the Board of Directors and for the publication of corporate policies; activities of the Ethics and Conduct
Committee, review of complaints received through the channel, investigations made and measures taken;
review of the Code of Ethics and Conduct; review of the Charter of the Ethics and Conduct Committee, as well
as its membership; Report on the Brazilian Code of Corporate Governance; Regulations of the Corporate
Internal Audit; impacts of the Data Protection Law and monitoring of the actions and measures taken by the
Company; evaluation of the matters discussed by the Tax and Labor Affairs Committees; management and
governance aspects of franchise networks; transactions with related parties).
Annual Financial Statements of 2018:
The members of the Audit Committee of TOTVS S.A., in the exercise of their legal responsibilities and
powers, pursuant to the Charter of the Audit Committee, examined and analyzed the financial statements,
accompanied by the preliminary report from the independent auditors and the annual report from
Management for the fiscal year ended December 31, 2018 (“Annual Financial Statements of 2018”) and,
considering the information provided by Management of the Company and by Ernst & Young Auditores
Independentes S.S., as well as the proposed allocation of the earnings from fiscal year 2018, unanimously
concluded that these adequately reflect, in all relevant aspects, the equity and financial position of the
Company and its subsidiaries, and recommended that the Board of Directors of the Company approve said
Page 18 of 74
documents and submit them to the Annual Shareholders Meeting, in accordance with Brazilian Corporations
Law.
São Paulo, February 6, 2019
Gilberto Mifano
Coordinator of the Audit Committee and member of the Board of Directors
Mauro Rodrigues da Cunha

Member of the Audit Committee and the Board of Directors
Paulo Sergio Caputo

Member of the Audit Committee and the Board of Directors
Page 19 of 74
TOTVS S.A.
Statement of financial position as at December 31, 2018 and 2017
(In thousands of reais)
Parent Company Consolidated Parent Company Consolidated
Assets 2018 2017 2018 2017 Liabilities and equity 2018 2017 2018 2017
Current assets 576,321 712,940 1,020,134 1,038,346 Current liabilities 549,151 486,735 709,612 619,286
Cash and cash equivalents (Note 6) 228,571 305,920 452,799 387,169 Payroll and labor obligations (Note 15) 125,943 117,635 174,874 148,836
Marketable securities (Note 19) 23,477 28,512 44,909 44,615 Trade accounts payable 71,343 66,812 113,907 108,424
Trade accounts receivable (Note 7) 337,186 359,904 504,056 515,545 Taxes payable (Note 16) 32,577 20,818 47,466 28,725
Provision for expected credit losses (Note 7) (88,515) (73,469) (118,518) (89,032) Commissions payable 35,721 33,798 43,166 39,769
Inventories (Note 8) - - 41,531 44,828 Dividends payable (Note 22) 13,737 18,015 13,902 18,487
Taxes recoverable (Note 9) 23,314 56,571 38,817 93,097 Loans and debts (Note 17) 155,278 191,810 166,154 220,215
Other assets 52,288 35,502 56,540 42,124 Debentures (Note 18) 77,319 3,841 77,319 3,841
Liabilities from acquisition of investments (Note 19) 30,752 31,459 59,597 47,561
Other liabilities 6,481 2,547 13,227 3,428
Noncurrent assets 1,621,436 1,625,844 1,371,143 1,455,279 Noncurrent liabilities 361,564 590,655 393,445 612,762
Marketable securities (Note 19) - - 5,334 7,013 Loans and debts (Note 17) 28,914 182,264 35,317 182,341
Trade accounts receivable (Note 7) 18,723 30,999 19,890 31,901 Debentures (Note 18) 199,869 265,297 199,869 265,297
Receivables from related parties (Note 11) 3,956 6,721 - - Payables to related parties (Note 11) 24 13,428 - -
Provision for contingencies related to legal proceedings
Taxes recoverable (Note 9) - - 236 20,695 (Note 20) 117,780 110,782 127,792 117,770
Deferred income and social contribution taxes
(Note 10) 45,845 44,889 125,124 104,715 Liabilities from acquisition of investments (Note 19) - 13,297 15,464 41,886
Financial assets (Note 5) - - 69,171 57,645 Other liabilities 14,977 5,587 15,003 5,468
Judicial deposits (Note 20) 51,171 49,207 65,965 61,127
Other assets 20,931 21,184 26,340 26,844 Equity (Note 21) 1,287,042 1,261,394 1,288,220 1,261,577
Capital 1,041,229 989,841 1,041,229 989,841
Investments (Note 12) 920,317 892,683 3,129 2,349 Treasury shares (70,026) (71,495) (70,026) (71,495)
Property, plant and equipment (Note 13) 177,858 163,834 198,826 182,022 Capital reserves 169,907 165,079 169,907 165,079
Intangible assets (Note 14) 382,635 416,327 857,128 960,968 Other comprehensive income 20,704 1,728 20,704 1,728
Income reserve 125,228 170,799 125,228 170,799
Proposed additional dividend - 5,442 - 5,442
Noncontrolling interests - - 1,178 183
Total assets Total liabilities and equity

2,197,757 2,338,784 2,391,277 2,493,625 2,197,757 2,338,784 2,391,277 2,493,625
The accompanying notes are an integral part of these financial statements.
Page 20 of 74
TOTVS S.A.
Statements of profit or loss
Years ended December 31, 2018 and 2017
(In thousands of reais, except by the earnings per share)
Parent Company Consolidated
2018 2017 2018 2017
Software 1,558,113 1,582,768 2,111,160 1,992,911
Hardware - - 209,109 234,419
Net revenue from services and sales (Note 26) 1,558,113 1,582,768 2,320,269 2,227,330
Cost of software (555,505) (569,595) (739,210) (715,470)

Cost of hardware - - (145,359) (148,006)
Gross profit 1,002,608 1,013,173 1,435,700 1,363,854
Operating income (expenses)

Research and development (276,150) (249,153) (396,595) (357,093)
Selling and marketing expenses (301,406) (310,562) (424,784) (431,619)
General and administrative expenses (197,365) (189,608) (243,705) (249,445)
Depreciation and amortization (Notes 13 and 14) (93,774) (97,724) (129,391) (147,574)
Provision for expected credit losses (Note 7) (24,226) (23,777) (43,364) (36,695)
Government subsidy - - 7,801 6,275
Other net operating income (expenses) 9,040 405 (78,920) (4,035)
Income before financial effects and equity pickup 118,727 142,754 126,742 143,668
Financial income (Note 28) 25,218 32,396 42,580 48,663

Financial expenses (Note 28) (67,930) (74,314) (82,082) (88,110)
Equity pick-up (Note 12) (11,591) (8,519) (517) (69)
Income before income tax and social contribution 64,424 92,317 86,723 104,152
Income tax and social contribution - current (3,180) (13,106) (42,003) (26,743)
Income tax and social contribution - deferred (1,696) 13,770 15,923 15,849
Total of Income tax and social contribution (Note 10) (4,876) 664 (26,080) (10,894)
Net income for the year 59,548 92,981 60,643 93,258
Net income attributable to controlling shareholders 59,548 92,981 59,548 92,981

Net income attributable to non-controlling interest - - 1,095 277
Basic earnings per thousand shares (in Reais) 0.3644 0.5691 0.3644 0.5951
Diluted earnings per thousand shares (in Reais) 0.3614 0.5645 0.3614 0.5645
Page 21 of 74
TOTVS S.A.
Statements of comprehensive income
(In thousands of Reais )
Parent Company
2018 2017
Net income for the year 59,548 92,981

Cumulative adjustment for currency exchange 18,976 (57)
Comprehensive income for the year 78,524 92,924
Consolidated
2018 2017
Net income for the year 60,643 93,258

Cumulative adjustment for currency exchange 18,976 (57)
Comprehensive income for the year 79,619 93,201
Net income for the year attributable to controlling shareholders 78,524 92,924
Attributable to non-controlling interest 1,095 277
Page 22 of 74
TOTVS S.A. (A free translation of the original in Portuguese)
Statements of changes in equity
(In thousands of reais)
Reserves
Capital Reserves Profits Reserves
Premium on
acquisition Other Proposed Non-
from non- Retained Treasury Comprehensive Retained additional Controlling Consolidated
Capital controlling Capital Legal profits shares Income earnings dividend Equity interest Equity
Balance at December 31, 2016 541,374 (25,518) 187,542 79,370 502,703 (73,443) 1,785 - 7,375 1,221,188 (272) 1,220,916
Capital transactions with partners
Capital increase 448,467 - - - (448,467) - - - - - 298 298
Stock option plan - - 4,950 - - 53 - - - 5,003 - 5,003
Dividends of previous year - - - - - - - - (7,375) (7,375) - (7,375)
Dividends - - - - - - - (5,442) 5,442 - (120) (120)
Interest on equity – distributed - - - - - - - (50,346) - (50,346) - (50,346)
Treasury shares - - (1,895) - - 1,895 - - - - - -
Acquisitions of subsidiaries - - - - - - - - - - - -
Total comprehensive income - - - - - - (57) 92,981 - 92,924 277 93,201
Net income for the year - - - - - - - 92,981 - 92,981 277 93,258
Cumulative adjustment for currency
exchange - - - - - - (57) - - (57) - (57)
Reserves set up - - - 4,649 32,544 - - (37,193) - - - -
Balance at December 31, 2017 989,841 (25,518) 190,597 84,019 86,780 (71,495) 1,728 - 5,442 1,261,394 183 1,261,557
Capital transactions with partners
Capital increase 51,388 - - - (51,388) - - - - - 373 373
Stock option plan - - 6,297 - - - - - - 6,297 - 6,297
Dividends of previous year - - - - - - - - (5,442) (5,442) (294) (5,736)
Dividends - - - - - - - (17,978) - (17,978) (164) (18,142)
Interest on equity – distributed - - - - - - - (27,785) - (27,785) - (27,785)
Treasury shares - - (1,469) - - 1,469 - - - - - -
Total comprehensive income - - - - - - 18,976 51,580 - 70,556 1,078 71,636
Net income for the year - - - - - - - 59,548 - 59,548 1,095 60,643
Opening balance CPC 47 / CPC 48 - - - - - - - (7,968) - (7,968) (15) (7,983)
Cumulative adjustment for currency
exchange - - - - - - 18,976 - - 18,976 - 18,976
Reserves set up - - - 2,977 2,840 - - (5,817) - - - -
Balance at December 31, 2018 1,041,229 (25,518) 195,425 86,996 38,232 (70,026) 20,704 - - 1,287,042 1,178 1,288,220
Page 23 of 74
TOTVS S.A.
Statement of cash flow
(In thousands of Reais)
2018 2017 2018 2017
Cash flow from operating activities
Profit before income and social contribution taxes 64,424 92,317 86,723 104,152
Adjustments for:
Depreciation and amortization ( Notes 13 and 14) 93,774 97,724 133,214 150,894
Share-based payments (Note 23) 6,297 4,950 6,297 4,950
Losses (gains) on disposal of fixed assets (1,245) 1,498 (843) 3,258
Provision for expected credit losses (Note 7) 24,226 23,777 43,364 36,695
Equity pickup (Note 12) 11,591 8,519 517 69
Provision for contingencies (Note 20) 47,591 35,970 50,577 34,046
Provision for impairment of assets (Note 14,2) - - 87,023 -
Provision for (reversal of) other obligations and others (8,527) 5,383 (8,238) 5,671
Interest and monetary variations and exchange variations
differences, net 59,117 60,152 60,792 61,388
Changes in operating assets and liabilities:
Trade accounts receivable 20,183 13,373 (2,264) 5,991
Inventories - - 3,830 (16,609)
Taxes recoverable 28,867 12,211 37,663 25,865
Judicial deposits (1,113) (17,365) (3,634) (18,185)
Other assets (7,816) 14,824 (3,288) 16,437
Labor and social security obligations 11,531 10,456 29,085 8,297
Suppliers 10,592 (546) 11,780 9,696
Commissions payable (857) (6,087) 612 (3,429)
Taxes payable 11,208 (151) 5,494 (8,105)
Other accounts payable (49,437) (21,115) (44,251) (29,534)
Cash flow provided by operations 320,406 335,890 494,453 391,547
Interest paid (38,261) (36,181) (39,688) (43,721)
Income tax and social contributions paid (2,629) (9,600) (28,759) (18,054)
Net cash from operating activities 279,516 290,109 426,006 329,772
Cash flow from investment activities
Capital increase in subsidiaries and associated companies (39,129) (13,169) (2,467) (997)
(Note 12)
Dividends received 15,481 11,673 - -
Purchases of intangible assets (Note 14) (22,661) (14,886) (23,498) (20,725)
Acquisition of capital interest (Note 4.1) - - (12,550) -
Cash and cash equivalents of merged subsidiaries - 7,814 - -
Value of sales of fixed assets 3,035 1,876 3,441 2,072
Purchases of property, plant and equipment (Note 13) (56,447) (21,880) (67,138) (30,662)
Net cash used in investing activities (99,721) (28,572) (102,212) (50,312)
Cash flow from financing activities
Payment of principal on loans and debt (169,505) (168,242) (180,705) (182,354)
Payment of principal on debentures - - - (29,436)
Payment of finance lease (25,908) (18,142) (25,973) (18,321)
Issue of debentures and new loans and debt - 199,475 - 199,475
Receivables from related companies (10,639) (4,896) - -
Dividends and interest on equity paid (51,092) (76,369) (51,486) (76,480)
Treasury shares, net - 53 - 53
Net cash used in financing activities (257,144) (68,121) (258,164) (107,063)
Increase (decrease) in cash and cash equivalents (77,349) 193,416 65,630 172,397
Cash and cash equivalents at beginning of year 305,920 112,504 387,169 214,772
Cash and cash equivalents at the end of the year 228,571 305,920 452,799 387,169
Page 24 of 74
TOTVS S.A.
Statement of Value Added
(In thousands of Reais)

2018 2017 2018 2017
1 – REVENUES 1,741,498 1,759,104 2,592,323 2,482,079

1.1 Sales of goods, products and services 1,756,824 1,782,477 2,620,444 2,516,533
1.2 Other revenue 8,900 404 15,243 2,241
1.3 Provision for expected credit losses – recording (24,226) (23,777) (43,364) (36,695)
2 - RAW MATERIALS ACQUIRED FROM THIRD-PARTIES

(includes ICMS and IPI taxes) (573,855) (561,539) (968,526) (857,486)
2.1 Cost of goods and services sold (79,814) (76,221) (234,817) (227,759)
2.2 Materials, energy, outsourced services and other (494,041) (485,318) (646,686) (629,727)
2.3 Loss / Recovery of assets - - (87,023) -
3 - GROSS VALUE ADDED (1-2) 1,167,643 1,197,565 1,623,797 1,624,593
4 - DEPRECIATION AND AMORTIZATION (93,774) (97,724) (133,214) (150,894)
5 - NET VALUE ADDED PRODUCED BY THE ENTITY (3-4) 1,073,869 1,099,841 1,490,583 1,473,699
6 - VALUE ADDED RECEIVED THROUGH TRANSFERS 13,627 23,877 42,063 48,594

6.1 Equity pick-up (11,591) (8,519) (517) (69)
6.2 Financial income 25,218 32,396 42,580 48,663
7 - TOTAL VALUE ADDED TO DISTRIBUTE (5+6) 1,087,496 1,123,718 1,532,646 1,522,293
8 - VALUE ADDED DISTRIBUTION 1,087,496 1,123,718 1,532,646 1,522,293

8.1 Personnel 685,814 694,120 961,475 933,519
8.1.1 Direct Compensation 552,656 564,161 785,371 758,792
8.1.2 Benefits 83,399 78,015 109,236 105,808
8.1.3 FGTS (Unemployment fund) 49,759 51,944 66,868 68,919
8.2 Taxes and contributions 238,525 234,848 383,100 364,155
8.2.1 Federal 191,198 191,908 299,309 284,667
8.2.2 State 29 20 19,393 25,017
8.2.3 Local 47,298 42,920 64,398 54,471
8.3 Interest and rent 103,609 101,769 127,428 131,361
8.3.1 Interest 67,930 74,314 82,082 88,110
8.3.2 Rents 35,679 27,455 45,346 43,251
8.4 Equity remuneration 59,548 92,981 60,643 93,258
8.4.1 Interest on equity 27,785 50,346 27,785 50,346
8.4.2 Dividends paid or credited to shareholders 17,978 5,442 17,978 5,442
8.4.3 Retained profit / loss for the year 13,785 37,193 13,785 37,193
8.4.4 Non-controlling interest in retained profits - 1,095 277
Page 25 of 74
TOTVS S.A.
Notes to the financial statements
(In thousands of Reais, unless otherwise stated)
1. The Company and its operations
a) General Information
TOTVS S.A. (“TOTVS”, or “Company”) is a publicly held corporation headquartered at Av. Braz Leme, 1000, in
the city and state of São Paulo, whose shares are traded on the Novo Mercado of BM&FBOVESPA - Securities,
Commodities and Futures Exchange.
b) Operations
The Company’s business objective is to provide business solutions for companies of all sizes, through the
development and sale of management software, productivity and collaboration platform, as well as the provision
of implementation, consulting, assistance and maintenance services. The Company, through its subsidiaries, also
has hardware manufacturing and sale activities, combining specialized solutions for system management, point of
sale (POS), commercial automation, tax solutions, e-commerce, mobility and payment methods. The solutions
developed by the Company and its subsidiaries are segmented according to the diverse sectors of the economy,
resulting in greater importance of the solutions in our customers’ business.
2. Basis of preparation and presentation of the financial statements
2.1. Compliance statement
The individual and consolidated financial statements were prepared and are presented in accordance with
the accounting practices adopted in Brazil, including the pronouncements issued by the Accounting
Pronouncements Committee (“CPC”) and the rules issued by the Brazilian Securities and Exchange Commission
(“CVM”), as well as the International Financial Reporting Standards (“IFRS”) issued by the International Accounting
Standards Board (“IASB”) and show all material information strictly relating to the financial statements, which is
consistent with that used by the management.
2.2. Basis of preparation and presentation
The Financial Statements presented in this document were approved at the Board of Directors’ Meeting held
on February 11, 2019, after a recommendation by the Audit Committee at a meeting held on February 6, 2019.
The financial statements were prepared on the historical cost basis, except for the valuation of certain assets
and liabilities, such as financial instruments from business combinations, which are measured at their fair value.
The individual and consolidated financial statements present comparative information in relation to the previous
period.
All the amounts in these Financial Statements are in thousands of Brazilian reais, unless otherwise stated.
Due to rounding, the numbers in the document may not add exactly to the totals presented herein.
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Moreover, the Company considered the guidelines issued under Accounting Guidance OCPC07 when
preparing its financial statements. Therefore, the relevant information pertaining specifically to the financial
statements is highlighted and corresponds to that used by the Management in managing the company.
2.3. Consolidation basis
The consolidated financial statements include the operations of the Company and the following subsidiaries
and associate companies. The percentages of the interests held by the Company at the statement of financial
position date are summarized below:
Direct interest: % Interest

Corporate Name Head office Name used Note 2018 2017
TOTVS Serviços Ltda. BRA TOTVS Serviços 100.00 100.00
Soluções em Software e Serviços TTS Ltda. BRA TOTVS Nordeste (
(former TOTVS Nordeste Software Ltda.) (iv) 100.00 100.00
TOTVS Brasília Software Ltda. BRA TOTVS Brasília 100.00 100.00
TQTVD Software Ltda. BRA TQTVD (i) 74.20 100.00
TOTVS Ventures Participações Ltda. BRA TOTVS Ventures 100.00 100.00
TOTVS Argentina S.A. ARG TOTVS Argentina 100.00 100.00
Datasul Argentina S.A. ARG Datasul Argentina 100.00 100.00
TOTVS México S.A. MEX TOTVS México 100.00 100.00
Datasul S.A. de CV. MEX Datasul México 100.00 100.00
TOTVS Corporation BVI TOTVS Corporation 100.00 100.00
TOTVS Incorporation USA TOTVS Inc. 100.00 100.00
Neolog Consultoria e Sistemas S.A. BRA Neolog 60.00 60.00
Ciashop - Soluções para Comércio Eletrônico S.A. BRA Ciashop 70.00 70.00
Bematech S.A. BRA Bematech 100.00 100.00
TFS Soluções em software Ltda. BRA TFS (ii) 100.00 100.00
Indirect Interest: % interest

Head
Corporate Name Name used Investor Note 2018 2017
office
DTS Consulting Partner, SA de CV MEX Partner TOTVS México 100.00 100.00
RMS Software S.A. BRA RMS TOTVS Nordeste (iv) - 100.00
Webstrategie Software Ltda. BRA Webstrategie TOTVS Nordeste (iv) 100.00 100.00
Kerina Software Ltda. BRA Kerina TQTVD 100.00 100.00
Bematech Hardware Ltda. BRA Bematech Hardware Bematech S.A. 100.00 100.00
Bematech Ásia Co.Ltd. TWN Bematech Ásia Bematech Hardware 100.00 100.00
Bematech S.A. and
Bematech Argentina S.A. ARG Bematech Argentina 100.00 100.00
Bematech Inter. Corp.
CMNet Soluções em Informática e Agência de
BRA CMNet Soluções Bematech S.A. (i) - 100.00
Viagens e Turismo S.A.
Bematech Internacional Corp. USA BIC Bematech Hardware 100.00 100.00
Logic Controls, Inc USA Logic Controls BIC 100.00 100.00
FICE - Bematech Foshan Shunde Ltd. CHN FICE Logic Controls, Inc 100.00 100.00
CMNet Participações S.A. BRA CMNet Participações Bematech S.A. 100.00 100.00
CM Soluciones – Argentina ARG CMNet Argentina CMNet Participações 100.00 100.00
CMDIR - Soluções Informática, Lda - Portugal PRT CMNet Portugal CMNet Participações 100.00 100.00
CM Soluciones – Chile CHL CMNet Chile CMNet Participações 100.00 100.00
CMNet España ESP CMNet Espanha CMDIR - Soluções 100.00 100.00
RJ Participações S.A. BRA RJ Participações Bematech S.A. (iii) 100.00 100.00
R.J. Consultores en Sistemas de Información S.C. MEX RJ México RJ Participações 100.00 100.00
R.J. Consultores e Informática Ltda. BRA RJ Consultores RJ Participações 100.00 100.00
TQTVD Software Ltda. BRA TQTVD Bematech S.A. (i) 25.80 -
National Computer Corporation (associate) RUS JV Russia TOTVS México 19.00 19.00
(i) Merger of CMNet with the subsidiary TQTVD on April 30, 2018. Further details in Note 4.2.
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(ii) Acquisition of interest in Passlak and merger with TFS, as per note 4.1.
(iii) Acquisition of non-controlling interest in RJ Participações on May 9, 2018 (see note 4.1).
(iv) Merger of RMS with the subsidiary TOTVS Nordeste on October 31, 2018 (see note 4.2).
The results of subsidiaries merged during the fiscal year ended December 31, 2018 and 2017 are included in
the statements of profit or loss since the date of their acquisition and/or merger. Hence, for the purpose of
comparison of the parent company’s results between 2018 and 2017, the dates of acquisition and merger of the
results of each subsidiary must be considered.
All intercompany balances and transactions were eliminated in consolidation.
2.4. Summary of significant accounting practices
Below is a summary of key accounting practices adopted by the Company, highlighting only information
considered relevant by Management.
a) Translation of balances denominated in foreign currency
The functional currency of the Company and its subsidiaries domiciled in Brazil is the Brazilian Real, the same
currency used to prepare and present the parent company and consolidated financial statements.
With regard to subsidiaries located abroad considered independent by the Management as they have
administrative, financial and operating autonomy, their assets and liabilities are translated into Brazilian real at the
foreign exchange rate on statement of financial postionclosing dates and their profit or loss are translated into
Brazilian real at the average monthly rates of the periods. Adjustments to investments arising from foreign
exchange are recognized as cumulative translation adjustments under equity.
b) Fair value measurement
The Company and its subsidiaries measure financial instruments at fair value on each reporting date. Fair
value is the price that would be received for the sale of an asset or paid for the transfer of a liability through an
unforced transaction between market players on the measurement date.
Fair value measurement is based on the assumption that the transaction to sell the asset or transfer the
liabilities will take place: (i)in the main market for the asset or liability; or (ii) In the absence of a main market, in
the most advantageous market for the asset or the liability.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorized within the following fair value hierarchy, based on the lowest-level information that is significant for
the measurement of the fair value as a whole:
• Level 1 – Market prices quoted (without adjustments) in active markets for identical assets or liabilities;
• Level 2 – Valuation techniques for which the lowest-level information that is significant for measuring the
fair value is directly or indirectly observable;
• Level 3 – Valuation techniques for which the lowest-level information that is significant for measuring the
fair value is not available.
c) Financial Instruments
The Company and its subsidiaries recognize their financial assets and liabilities at fair value upon initial
recognition, except for receivables which are measured at the transaction price, and subsequently measured at
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amortized cost or fair value through profit or loss, based on the business model used to manage their assets and
the characteristics of contractual cash flows of the financial asset.
Classification
The Company and its subsidiaries classify their financial assets based on the business model for managing
their financial assets, pursuant to the changes introduced by CPC 48/IFRS 9, measured at amortized cost and at fair
value through profit or loss as follows:
(i) Amortized cost
These represent financial assets and liabilities for which the Company’s business model is to hold the financial
assets for receiving contractual cash flows and which, exclusively, constitute payments of principal and interest on
the principal amount outstanding. The financial assets at amortized cost are subsequently measured using the
effective tax rate method and are subject to impairment. Profits and losses are recognized in the result when the
asset is written off, modified or is impaired. In this category, the Company mainly includes “Accounts receivable
from customers and other receivables” and “Cash and Cash Equivalents”, as well as “Trade Accounts Payable and
other accounts payable”.
(ii) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets
designated upon initial recognition at fair value through profit or loss. TOTVS maintains investments in companies
whose share of the interest is held indirectly through venture capital organizations and which are measured at fair
value through profit or loss.
d) Accounts receivable from customers
Accounts receivable from customers are shown at their net realizable value, and accounts receivable from
foreign customers are restated using the exchange rates in force at the date of the Financial Statements. Accounts
receivable maturing after one year are discounted to present value.
Accounts receivable are recognized at nominal value and deducted from the allowance for doubtful accounts,
which is set up based on the history of losses by maturity range, which the Company deems sufficient to cover any
losses.
e) Inventories
Inventories are measured at the lowest value between cost and net realizable value. Inventory costs are
based on the weighted average cost principle and include expenses with the acquisition of raw material, cost of
production and transformation and other costs to transport goods to their current locations and under existing
conditions. In case of manufactured inventories and Work in progress, the cost includes a portion of general
manufacturing costs based on the normal operating capacity.
f) Provision for impairment of assets
Management annually reviews the net book values of assets with a view to evaluating the impact of events
or economic, operational and technological changes that may indicate deterioration or impairment. When such
evidence is identified and the net book value exceeds the recoverable amount, a provision is established for the
impairment, adjusting the net book value to the recoverable amount.
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Goodwill paid for expected future profitability is tested annually for impairment or when circumstances
indicate a loss due to the depreciation of its book value (see note 14.1).
g) Leases
Leases of property, plant and equipment, of which the Company and its subsidiaries hold substantially all the
risks and rewards of ownership, are classified as finance leases. These are capitalized at the start of the lease at the
lowest value between the fair value of the leased asset and the present value of the minimum lease payments. The
corresponding liabilities, net of financial charges, are included in loans. Property, plant and equipment acquired
through finance lease is depreciated over the useful life of the asset.
Payments for operating leases (net of any incentives received from the lessor) are recognized in profit or loss
using the straight-line method during the lease period.
h) Adjustment to present value of assets and liabilities
Long-term monetary assets and liabilities are monetarily restated and therefore adjusted to their present
value. The adjustment to present value of short-term monetary assets and liabilities is calculated, and only
recorded, if it is considered relevant in relation to the financial statements taken as a whole. Based on the analysis
made and management's best estimates, the Company concluded that the adjustment to present value of current
monetary assets and liabilities is immaterial in relation to the financial statements taken as a whole and, therefore,
did not record any adjustments.
i) Revenues and expenses
The Company and its subsidiaries earn software revenue, made up of licensing and monthly software
services, revenue from services that includes implementation, customization and consulting, and revenue from
hardware. Revenues are presented net of taxes, returns, allowances and discounts, when applicable. Revenues are
recognized in an amount that reflects the consideration that the Company expects to be entitled to in exchange for
the transfer of goods or services to a customer.
Revenue related to software is recognized in accordance with the following criteria:
(i) Licensing rate, which is recognized at a given moment when all risks and rewards inherent in the license
are transferred to the buyer through software delivery and when the amount can be measured reliably,
as well as it is probable that economic benefits be generated for the benefit of the Company.
(ii) Recurring software, whereas revenue is recognized over time during the availability of the service, over
the terms of the agreements with customers.
(iii) Revenue from services represents performance obligations different from other services and is billed
separately and recognized over time as the services are performed pursuant to the execution schedule
and when there is a valid expectation to receive from customers. Billed revenue that does not meet the
recognition criteria is not included in the balances of respective revenue account and accounts
receivable.
The Company uses the following definitions for revenue segregation: (i) recurring software revenues that
comprise software subscription, technical support and technical evolution; and (ii) non-recurring software revenues
that include revenue from licensing fee, and implementation and customization services.
Hardware revenue is recognized at a particular time when there is reliable evidence that: (i) the risks and
rewards inherent in the product were transferred to the buyer; (ii) the economic benefits will flow to the entity;
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and (iii) the associated costs and possible return of goods may be estimated reliably. If a discount can probably be
granted and the amount can be reliably measured, the discount is deducted from revenue as sales are recognized.
Software costs consist mainly of the salaries of consulting, support personnel, and includes costs of
acquisition of databases and the price of licenses paid to third parties for resold software.
The Company and its subsidiaries capitalize the cost of variable compensation paid for the sale of software
subscription and amortize such cost based on the average period customers remain with the company.
Expenses with research and development incurred by the software development area, related to new
software versions and upgrades of existing software are registered as expenses for the year in which they are
incurred and are stated separately from selling costs, in operating expenses.
j) Taxation
Sales taxes
Revenues from sales and services are subject to the following taxes and contributions at the following basic
rates:
 Contribution tax on Gross Revenue for Social Integration Program (PIS) 0.65% and 1.65%;
 Contribution tax on Gross Revenue for Social Security Financing (COFINS) 3.0% and 7.6%;
 Service Tax (ISS) between 2% and 5%;
 Pension Contribution on Gross Income (CPRB) of 4.5%; and
 State value-added tax (ICMS) between 4% and 12%.
These charges are accounted for as sales deductions in the statement of profit or loss.
Income and social contribution taxes – current and deferred
The taxation on income includes Income and Social Contribution Taxes, which stand at the nominal rate of
34% on taxable profit, recognized using the accrual basis of accounting. Income taxes are recognized in the
statement of profit or loss, except if related to items directly recognized in equity or comprehensive income. In this
case, the tax is also recognized in equity or comprehensive income.
Deferred tax assets are recognized only in proportion to the expectation that future taxable income is
available and against which temporary differences can be used.
k) Government subsidy
Bematech Hardware, an indirect subsidiary of TOTVS S.A., enjoys the tax benefit established by State Decree
nº 1922/2011, which allows the appropriation of ICMS matching credit equivalent to the rate provided for in the
respective output of goods listed in the Decree. This benefit applies to industrial plants manufacturing IT and
automation products located in the state of Paraná and which meet the requirements of the Law of Information
Technology. This credit is given as a subsidy for investments, for which the Company must:
a) Have publications in Interministerial Administrative Ruling (Finance, Development, Industry and Foreign
Trade, and Science and Technology); and
b) Invest in research and development activities according to item II, paragraph 2, of Article 1 of State Decree
nº 1.922/2011.
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l) Hyperinflationary economy in Argentina
Since July 2018, Argentina has been considered a hyperinflationary economy and pursuant to IAS 29 / CPC
42, non-monetary assets and liabilities, equity items and the financial statements for subsidiaries in Argentina,
whose functional currency is the Argentine Peso, are being restated for the change in the general purchasing power
of the functional currency, applying the Consumer Price Index (IPC) of the local market.
For the purposes of converting the foreign currency to a non-hyperinflationary economy such as the Real,
the comparative amounts are presented as current year amounts in the financial statements for the prior year.
The effects of hyperinflation resulting from changes in the general purchasing power until December 31,
2017, were reported in other comprehensive income and the impacts of changes in the general purchasing power
as from January 1, 2018, were reported in the financial statements in a specific account for hyperinflation
adjustment, in financial income (expenses). The effect in net income for the year ended December 31, 2018 was
R$1,220.
m) New standards, amendments and interpretations to standards issued but not yet in force
The standards, amendments and interpretations of standards issued, but not yet in force until the date of
publication of these financial statements are shown below:
IFRS16/CPC 06(R2) – Leases - IFRS 16, this new standard introduces the principles for recognizing, measuring,
reporting and disclosing lease operations and requires lessees to record all leases in accordance with a single
statement of financial postiontemplate, similar to the accounting of financial leases pursuant to CPC 06 (R1). Certain
short-term or low value agreements may be outside the scope of this new standard. At the starting date of a lease,
the lessee recognizes a liability to make payments (a lease liability) and an asset representing its right to use the
leased asset during the lease term (a right-of-use asset). Lessees must recognize separately interest expenses on
the lease liability and depreciation of the right-of-use asset. The criteria for recognizing and measuring leases in
financial statements of lessors are substantially maintained.
IFRS 16 comes into effect for the year beginning January 1, 2019 and replaces IAS 17 – Lease Operations and
corresponding interpretations. The Company chose to adopt IFRS16/CPC 06(R2) using the retrospective method
with cumulative effect of initially applying this pronouncement as an adjustment to the opening balance.
According on the information currently available, the standard will affect the recording of the Company’s
outstanding operating lease transactions and expects an impact of approximately R$237 million in recognizing an
asset through right-of-use and liability through lease. Note that some of the existing commitments cited in note
30.2 may fit the exceptions to the standard – short term and small amount. Moreover, some commitments may be
related to agreements that will not be classified as leases under IFRS 16.
IFRIC 23 / ICPC 22 – Uncertainties over Income Tax Treatments, an interpretation that clarifies how to apply
the CPC 32 requirements for recognizing and measuring when uncertainties over income tax treatments exist. In
such cases, the entity must recognize and measure its current or deferred tax asset or liability, applying the CPC 32
/ IAS 12 requirements based on taxable income (tax loss), tax bases, unused tax losses, unused tax credits and tax
rates, defined based on this interpretation. This interpretation comes into effect on January 1, 2019, but certain
transition exemptions are available. The Company operates in a complex multinational tax environment and are in
the process of completing studies on the subject, but does not expect impacts from applying the interpretation.
There are no other standards, amendments and interpretations for standards issued and not yet adopted
that, in Management’s opinion, may have a significant impact on the results or equity disclosed by the Company.
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n) New standards, amendments and interpretations of standards in effect as from January

1, 2018
The new standards and amendments issued by IASB and CPC in effect as from January 1, 2018, that affected
the Company are:
IFRS 9/CPC48 – Financial Instruments, addresses the classification, measurement and recognition of
financial assets and liabilities. The complete version of IFRS 9 was published in July 2014, to come into force on
January 1, 2018, and replaces IAS 39. The main changes introduced by IFRS 9 were: (i) new criteria for classifying
financial assets; (ii) new impairment model for financial assets, a combination of expected and incurred losses,
replacing the current model of losses incurred; and (iii) flexibility of requirements to adopt hedge accounting.
The Company and its subsidiaries use a provision matrix to calculate the credit loss expected for receivables
and contractual assets based on the historical loss rates observed by the group and reviews this matrix in a
prospective manner in order to adjust it according to the historical credit loss experience.
IFRS 15/CPC47 - Revenue from Contracts with Customers. The standard sets a new model containing five
steps that must be applied to revenues from contracts with customers. According to IFRS 15/CPC47, revenues are
recognized in an amount that reflects the consideration to which an entity expects to be entitled to in exchange for
the transfer of goods or services to a customer.
The new standard replaces IAS 18 – Revenue, IAS 11 – Construction Contracts and the corresponding
interpretations. The Company adopted the new standard on January 1, 2018, using the modified retrospective
method, applying the practical expedient as from the date of adoption.
The table below shows the reconciliation of the new consolidated equity balances for the fiscal year ended
December 31, 2017 and the opening balance on January 1, 2018, affected by the new standards below:
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Financial Effects about

Statem ents first adoption of Financial
disclosed at IFRS15/CPC47 Statem ents at
ASSETS Note 12/31/2017 and IFRS9/CPC48 1/1/2018
CURRENT ASSETS 1,038,346 (8,288) 1,030,058

Cash and cash equivalents 387,169 - 387,169
Marketable securities 44,615 - 44,615
Trade accounts receivable (i) 515,545 (542) 515,003
Allow ance for doubtful accounts (iii) (89,032) (10,967) (99,999)
Stocks 44,828 - 44,828
Taxes recoverable 93,097 - 93,097
Other assets (ii) 42,124 3,221 45,345
NON-CURRENT ASSETS 1,455,279 3,467 1,458,746

Deferred income and social contribution taxes (iv) 104,715 3,467 108,182
Other non-current assets 1,350,564 - 1,350,564
Total assets 2,493,625 (4,821) 2,488,804
LIABILITIES AND EQUITY
CURRENT LIABILITIES 619,286 3,162 622,448

Taxes payable (i) 28,725 377 29,102
Commissions payable (i) 39,769 2,785 42,554
Other liabilities 550,792 - 550,792
NON-CURRENT LIABILITIES 612,762 - 612,762

EQUITY 1,261,577 (7,983) 1,253,594
Total liabilities and equity 2,493,625 (4,821) 2,488,804
For comparison purposes, the table below shows the reconciliation of impacts on the consolidated results
for the period ended December 31, 2018, without the effects of the new standards:
Effects about Statem ents of Profit

Statem ents of first adoption of or loss at 12/31/2018
profit or loss at IFRS15/CPC47 w ithout IFRS/CPC
Note 12/31/2018 and IFRS9/CPC48 effects
Softw are (i) 2,111,160 9,153 2,102,007

Hardw are 209,109 - 209,109
Net revenue from services and sales 2,320,269 9,153 2,311,116
(-) Total costs (884,569) - (884,569)

Gross profit 1,435,700 9,153 1,426,547
Operating incom e (expenses)

Other net operating income (expenses) (840,810) - (840,810)
Selling and marketing expenses (ii) (424,784) 1,851 (426,635)
Allow ances for doubtful accounts (iii) (43,364) (6,172) (37,192)
Incom e before financial effects and
equity pickup 126,742 4,832 121,910
Financial effects and equity pickup (40,019) - (40,019)

Total of Income tax and social contribution (iv) (26,080) (1,643) (24,437)
Net incom e for the fiscal year 60,643 3,189 57,454
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(i) The standard was applied for all agreements in effect and created the following impacts:
 Some contracts with customers offer joint hardware and software solutions, notably Bemacash. However,
the Company concluded, according to IFRS 15/CPC 47, that sales of these products reflects two distinct
performance obligations, since both products are offered separately, and that the control of both is
transferred to the customer in distinct moments and proportions. Therefore, the Company calculated a
positive impact on the opening balance of accounts receivables of R$5,781 on January 1, 2018, and R$165
on software revenue for the fiscal year ended December 31, 2018.
 Contracts with customers with recurring revenues may include discounts subject to a certain grace period.
Considering the probability that a significant reversal of the revenues will not happen, the Company
calculated a positive impact of R$832 in accounts receivables on January 1, 2018, and an impact of
R$1,419 on software revenue for the fiscal year ended December 31, 2018.
 Software implementation and customization services are sold separately in contracts with customer and
may be obtained from other suppliers. At present, revenue on these contracts is recognized as services
are provided, thus the Company concluded that these differ from other services offered. According to
IFRS 15/CPC 47, the Company concluded that revenue from implementation and customization contracts
is recognized over time and adopted the input method for measurement in accordance with the
requirements set forth by the standard and calculated a negative impact on accounts receivable of
R$7,155 on January 1, 2018, and of R$7,569 on software service revenue for the fiscal year ended
December 31, 2018.
 The effects applied in the aforementioned contracts with customers caused an increase of R$2,785 in
commissions in the opening balance on January 1, 2018, and a reduction of R$44 in sales and marketing
expenses for the fiscal year ended December 31, 2018.
(ii) Assets for incremental costs relating to variable compensation paid on the sale of software subscription
with impact of R$3,221 on the asset on January 1, 2018 and in profit or loss under sales and marketing expenses of
R$1,895 for the fiscal year ended December 31, 2018.
(iii) The Company and its subsidiaries, pursuant to the requirements for impairment of financial assets as
per IFRS 9/CPC 48, applied the simplified approach of the prospective model for expected losses. These changes
caused an impact of R$10,967 on equity on January 1, 2018, and R$6,172 on profit or loss under provision for
expected losses for the fiscal year ended December 31, 2018.
(iv) The aforementioned impacts related to the application of IFRS15/CPC47 and IFRS9/CPC48 consequently
caused an increase of R$3,467 in Deferred Income and Social Contribution taxes and of R$377 in Tax obligation on
January 1, 2018. In the fiscal year ended December 31, 2018, the impact on profit or loss under Deferred Income
Tax and Social Contribution was R$1,643.
3. Significant accounting judgments, estimates and assumptions
The preparation of financial statements requires the use of certain critical accounting estimates and the
exercise of judgment by Company management in applying the accounting policies of TOTVS S.A. and its
subsidiaries.
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3.1 Judgments
In the process of applying consolidated accounting policies, Management exercised judgment in identifying
the performance obligations for sales of software and hardware, which include licensing fee, recurring software,
and implementation/customization services that can have significant effects while recognizing revenue from
contacts with customers.
The Company concluded that such performance obligations are distinct as they are sold separately because
the commitment to transfer services or hardware occur in distinct moments from when the software is provided.
Besides, the implementation and customization services are offered by other suppliers.
3.2 Estimates and assumptions
The estimates and assumptions that represent a significant risk and which need a greater level of judgment
and complexity for the Company’s financial statements are:
(i) Provision for expected credit losses for accounts receivables - the Company and its subsidiaries use a
provision matrix based on the historical loss rates observed by the group to calculate the expected credit
loss. The evaluation of the correlation between the observed historical loss rates, the projected economic
conditions and the expected credit losses represents a significant estimate. The volume of expected credit
losses is sensitive to changes in the predicted economic conditions and circumstances. The Company and its
subsidiaries’s historical experience of credit loss and the projection of economic conditions may also not
represent the customer’s real situation in the future. Information on expected credit losses on accounts
receivables is described in Note 7.
(ii) Recoverable amount of tangible and intangible assets, including goodwill – an impairment loss exists when
the book value of an asset or cash-generating unit exceeds its recoverable amount, which is the higher
between the net fair value of selling expenses and the value in use. The main assumptions used to determine
the recoverable amount of cash-generating units, including sensitivity analysis, are detailed in Note 14.2.
(iii) Deferred taxes – Deferred tax assets are recognized for all tax losses not used to the extent that it is probable
that there is taxable income available to allow the use of said losses. Significant judgment from Management
is required to determine the value of the deferred tax asset that may be recognized, based on the probable
period and level of future taxable income, coupled with future tax planning strategies. For more details, see
Note 10.3.
(iv) Provision for contingencies tied to legal proceedings – the evaluation of probability of loss includes assessing
the available evidence, hierarchy of laws, available case law, the most recent court rulings and their relevance
in the legal system, as well as the opinion of external counsel. Provisions are reviewed and adjusted to
account for changes in circumstances, such as applicable limitation periods, conclusion of tax audits or
additional exposures identified based on new matters or court rulings. Further details in Note 20.
Settlement of the transactions involving these estimates could result in amounts that differ significantly from
those recorded in the financial statements due to uncertainties inherent in the estimate process. The Company
reviews its estimates at least annually.
More information on the estimates and assumptions used in the items mentioned above is provided in the
respective notes.
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4. Corporate restructuring
The Company uses the acquisition method to book business combinations. The Company recognizes the no
controlling interest in the company acquired both at its fair value and in proportion to the no controlling interest
in the fair value of the acquired company’s net assets. The fair value of identifiable assets acquired are measured
and recognized on the acquisition date. The methods and assumptions used for fair value measurements are based
on cash flow discounted to its present value and replacement cost. The amount of assets not identifiable from
business combinations are booked as goodwill based on technical studies of future profitability.
4.1. Acquisitions of equity interest
At December 31, 2018, the following acquisitions were recorded:
(i) On May 9, 2018, subsidiary Bematech S.A. exercised an option to purchase 20% of the capital stock of RJ
Participações. The amount attributed to this acquisition was R$9,880, of which R$4,350 were paid on the
date of exercise of the option while the rest is provisioned for payment in 2019. In addition, the call and
put option for the remaining 20% interest was postponed to 2021, to be measured based on the
performance metrics in 2020. Since the initial agreement for the acquisition of RJ Participações already
provided for call and put options for the remaining interest, the Company consolidates 100% of its results
and maintains an estimate of the payment in the “Obligations for acquisition of investments” liability.
(ii) On August 1, 2018, subsidiary TFS acquired and merged Passlack, a company focusing on development and
support for the Financial Services segment, for R$8,200. The net assets of Passlack were merged pursuant
to the Valuation Report on the net assets, approved at a partners’ meeting together with the agreement
and plan of merger.
There were no new acquisitions in the fiscal year ended December 31, 2017.
4.2. Merged companies
Over the course of 2018 and 2017, the Company and its subsidiaries merged the net assets, recorded at book
value, of the subsidiaries shown in the table below:
(i) On April 30, 2018, subsidiary CMNet Soluções was merged with TQTVD through an increase in the capital
of Bematech S.A. in TQTVD. Thus, TOTVS reduced its investment in the subsidiary, holding 74.20% of
TQTVD’s capital stock directly and 25.80% indirectly through Bematech S.A. CMNet’s merged net assets in
the amount of R$10,434 were valued by experts who issued the valuation report on the base date of March
31, 2018. Any changes in the net assets after the base date until the effective merger date were absorbed
by TQTVD.
(ii) On October 31, 2018, subsidiary RMS was merged with TOTVS Nordeste with net assets amounting to
R$630. The net assets were valued by experts who issued a valuation report on September 30, 2018. Any
changes in the net assets after the report base date until the effective merger date were absorbed by TOTVS
Nordeste.
(iii) On April 28, 2017, subsidiary PC Informática was merged with TOTVS Brasília with net assets amounting to
R$30,243. The net assets were valued by experts who issued a valuation report on March 31, 2017. TOTVS
Brasília absorbed any changes in the net assets after the report base date until the effective merger date.
(iv) On December 20, 2017, subsidiary Virtual Age was merged with TOTVS with net assets amounting to
R$18,055. The net assets were valued by experts who issued a valuation report on September 30, 2017,
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and any changes in the net assets after the base date of the valuation report until the effective merger date
were absorbed by TOTVS.
5. Financial instruments and sensitivity analysis of financial assets and liabilities
5.1. Analysis of financial instruments
The table below compares the Company’s financial instruments by class, as presented in its financial
statements:
Fair Value through Assets measured at Financial liabilities

profit or loss amortized cost measured at cost
12.31.2018 01.01.2018 12.31.2018 01.01.2018 12.31.2018 01.01.2018
Cash and cash equivalents (Note 6) - - 452,799 387,169 - -

Investment guarantees (Note 19) - - 50,243 51,628 - -
Accounts receivable, net (Note 7) - - 405,428 446,905 - -
Investments at fair value 69,171 57,645 - - - -
Financial Instruments receivable 69,171 57,645 908,470 885,702 - -
Loans and debt - - - - 201,471 402,556
Debentures and non-conversion premium - - - - 277,188 269,138
Accounts payable and suppliers - - - - 218,441 195,405
Obligation for acquisition of investments 24,729 35,838 - - 50,332 53,609
Financial liabilities 24,729 35,838 - - 747,432 920,708
The fair value of financial assets and liabilities is included in the amount for which the instrument could be
exchanged in a transaction where the parties are willing to negotiate, and not in an enforced sale or settlement.
The methods and assumptions below were used to estimate the fair value:
 Investment guarantees, trade accounts receivable, trade accounts payable and other short-term
liabilities approximate their respective book values mainly due to the short-term maturities of these
instruments.
 Financial assets at fair value not traded in an active market are estimated using a valuation technique,
such as discounted cash flow or multiple revenues, considering the reasonableness the range of values
shown indicated thereby.
 Loans and debt and debentures are recognized initially at fair value, net of costs incurred in the
transaction and are subsequently stated at amortized cost.
5.2. Financial assets
Investments in startups made by the Company have a medium-term strategy in which the exit is planned for
the moment when the expected financial returns are achieved and, therefore, are recognized as financial
instruments. The value of these investments at December 31, 2018 was R$69,171 (R$57,645 at December 31,
2017).
5.3. Measurement of fair value
It is assumed that the balances of accounts receivable and accounts payable to suppliers at book value, less
loss (impairment) in the case of accounts receivable, approximate their fair values.
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The table below presents the book value of the consolidated assets and liabilities measured at fair value as
at December 31, 2018 and 2017:
2018 2017
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Financial Assets
Financial investments (Note 6) - 407,874 - - 345,632 -
Financial assets (Note 5.2) - - 69,171 - - 57,645
Financial Liabilities
Loans and debt (Note 17) - 201,471 - - 402,556 -
Debentures and Premium due to 203,431
non-conversion (Note 18) - 73,757 - 203,524 65,614
There were no transfers between Levels 1, 2 and 3 in the year.
5.4. Changes in the liabilities of financing activities
Liabilities arising from financing activities are liabilities for which cash flows were or will be future cash flows
classified in the statement of cash flows as cash flows from financing activities. The following is a breakdown of
liabilities arising from financing activities:
Cash flow from
financing activities Non-cash items
Interest New Interest
2017 Principal paid Leases incurred Others (i) 2018
Loans and debts 339,103 (180,705) (17,818) - 18,702 - 159,282
Lease 63,453 (25,973) (8,186) 4,712 8,183 - 42,189
Debentures 269,138 - (13,684) - 21,734 - 277,188
Dividends payable and others 18,487 (51,486) - - - 46,901 13,902
Total 690,181 (258,164) (39,688) 4,712 48,619 46,901 492,561
Cash flow from

financing activities Non-cash items
Interest New Interest
2016 Principal paid Leases incurred Others (i) 2017
Loans and debts 517,729 (182,354) (30,178) - 33,906 - 339,103
Lease 44,012 (18,321) (8,209) 37,767 8,204 - 63,453
Debentures 90,661 170,039 (5,334) - 13,772 - 269,138
Dividends payable and others 41,561 (76,427) - - - 53,353 18,487
Total 693,963 (107,063) (43,721) 37,767 55,882 53,353 690,181
(i) The changes in the “Other” column included dividends payable and JSCP at the end of the year and of offset taxes on
the distribution of JSCP. The Company classifies interest paid as operating cash flows.
5.5. Sensitivity analysis of financial assets and liabilities
The financial instruments of the Company and its subsidiaries are represented by cash and cash equivalents,
accounts receivable, payables, debentures, loans and debts, and are recorded at cost plus income or charges
incurred or at fair value when applicable, at December 31, 2018 and 2017.
The main risks related to the Company’s operations are linked to the variation in:
(i) Brazilian Interbank Deposit Rate (CDI) for financial investments and debentures issued in 2017;
(ii) Long-Term Interest Rate (TJLP) for financing from the Brazilian Development Band and for
debentures issued in previous years; and
(iii) Extended Consumer Price Index (IPCA), for debentures issued in previous years.
Investments at fair value through profit or loss relate to startups privately held and which do not have quoted
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prices in an active market. The fair values of these investments are measured by a valuation technique or multiple
valuation techniques employed by the market, such as discounted cash flow or multiple revenues, considering the
reasonableness of the range of values shown by them. The fair value measurement is the point within that range
that best represents the fair value in the circumstances. Additionally, the biggest investment – GoodData - refers
to preferred shares, which have preference in case of liquidation.
To check the sensitivity of indexes for the financial investments that the Company was exposed to -at
December 31, 2018, three different scenarios were created. Based on the forecast by financial institutions, the
average CDI is 6.42% p.a. and was defined as the probable scenario (scenario I). From this rate, we calculated
variations of 25% (scenario II) and 50% (scenario III).
For each of these scenarios the “gross financial revenue” was estimated, without including taxes on
investment yields. The reference date for the portfolio was December 31, 2018, with a one-year projection to check
the sensitivity of CDI to each scenario.
Probable Scenario
Operation Balances in 2018 Risk Scenario (I) Scenario (II) (III)
Reduction
Financial investments R$407,874 CDI 6.42% 4.82% 3.21%
Financial income R$ 26,186 R$ 19,660 R$ 13,093
To check the sensitivity of the indexes to which the Company is exposed when estimating the debts as on
December 31, 2018, three different scenarios were created. Based on TJLP and the IPCA rates in force on December
31, 2017, the most probable scenario (scenario I) was determined for 2018 and, from this, variations of 25%
(scenario II) and 50% (scenario III) were calculated.
For each scenario, the gross financial expense was calculated, not taking into account the tax and the
maturity flow for each agreement scheduled for 2019. The reference date used for the debts and debentures was
December 31, 2018, projecting the rates for one year and checking their sensitivity in each scenario.
Probable
Operation Balances in 2018 Risk
Scenario (I) Scenario (II) Scenario (III)
Increase
Debts – Consolidated BNDES R$141,058 TJLP (a) 6.98% 8.73% 10.47%
Estimated Financial expense R$ 9,846 R$ 12,314 R$ 14,769
Increase
Consolidated debentures R$73,757 IPCA (b) 3.75% 4.69% 5.63%
TJLP (a) 6.98% 8.73% 10.47%
R$203,431 CDI (c) 6.42% 8.03% 9.63%
Estimated Financial expense R$21,114 R$24,788 R$28,461
(a) Long-term Interest Rate

(b) Brazil’s Extended Consumer Price Index
(c) Interbank Deposit Certificate
5.6. Financial risk management
The main financial risks to which the Company and its subsidiaries are exposed when conducting their
activities are:
a. Liquidity Risk
The Company’s and its subsidiaries’ liquidity and cash flow controls are monitored on a daily basis by the
Company’s management in order to ensure that cash flow from operations and funding, when necessary, are
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sufficient to meet their cash commitment schedule, not generating liquidity risks for the Company and its
subsidiaries.
The table below analyzes non-derivative financial liabilities of the Company, by maturity corresponding to
the remaining period between the statement of financial postiondate and the contractual maturity date. The
amounts disclosed in the table represent the contractual undiscounted cash flows.
Consolidated
Less than one Between one Between two
year (i) and two years (i) and five years (i)
As at December 31, 2018

Trade accounts payable 113,907 - -
Loans and debts 171,559 42,690 -
Debentures 78,704 213,310 -
Liabilities from investment acquisition 59,597 10,130 5,334
Other liabilities 13,227 15,003 -
As at December 31, 2017

Trade accounts payable 108,424 - -
Loans and debts 220,639 181,917 31,268
Debentures 14,968 80,886 215,334
Liabilities from investment acquisition 47,561 41,886 -
Other liabilities 3,428 5,467 -
(i) As the amounts included in the table represent undiscounted cash flows, these amounts will not be
reconciled with the amounts reported in the statement of financial position for loans, derivative
financial instruments, trade accounts payable and other obligations.
b. Credit risk
Credit risk is the risk that the counterparty in a deal will not fulfill an obligation set forth in a finance
instrument or contract with a customer, which would cause a financial loss.
Regarding the credit risk associated with financial institutions, the Company and its subsidiaries distribute
this exposure among financial institutions. Financial investments must be made in institutions whose risk rating is
equal to or lower than the Sovereign Risk (Brazil Risk) assigned by the rating agencies Standard & Poor’s, Moody’s
or Fitch. The amount allocated to each institution cannot exceed 30% of the total balances in current accounts plus
financial investments, and also not correspond more than 5% of the equity of the financial institution.
The credit risk related to services rendered and sale of licenses and hardware is minimized by strict control
of the customer base and active delinquency management through clear policies on the sale of services and sale of
software and hardware licenses. The subsidiary Bematech operates with distribution agreements and currently
concentrates its distribution in a single distributor, with a low credit risk.
c. Market risk
i) Interest rate and inflation risk: interest rate risk arises from the portion of the debt related to TJLP, IPCA
and CDI, as well as financial investments in CDI, which can adversely affect the financial income or expenses in the
event of unfavorable changes in the interest rate and inflation.
ii) Exchange rate risk: this risk arises from the possibility of losses due to currency rate fluctuations that could
increase the liabilities resulting from loans and foreign currency purchase commitments or that could reduce the
assets resulting from trade accounts receivable in foreign currency.
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Some subsidiaries have international operations and are exposed to exchange risk arising from exposures in
some currencies, such as the U.S. dollar (USD), Argentinean peso (ARS), Mexican peso (MXN), Taiwan new dollar
(TWD), Chilean peso (CLP) and the Russian ruble. The Company ensures that its net exposure is maintained at an
acceptable level in accordance with the policies and limits defined by the Management.
Below are the balances of each group company, showing a consolidated positive net exposure, since the
exchange gains exceed exchange losses for the fiscal years ended December 31, 2018 and 2017:
2018
Accounts Cash and cash Accounts Other Net
Company
payable equivalents receivable assets exposure Currency
Bematech Hardware (2,867) 10,299 579 - 8,011 USD
Logic Controls Inc. (3,397) 4,937 9,114 - 10,654 USD / CNY
Bematech Ásia Co. Ltd (15) 265 2,427 - 2,677 USD / TWD
RJ Consultores México (11) 1,203 480 - 1,672 Peso (MXN)
CMNet Participações EUR/ Peso (CHI
(309) 1,056 1,137 - 1,884
S.A. and ARS)
TOTVS S.A. (19,078) - - - (19,078) USD
TOTVS México (724) 720 3,025 - 3,021 Peso (MXN)
TOTVS Argentina (1,325) 2,786 5,846 - 7,307 Peso (ARS)
TOTVS Incorporation (117) 622 562 69,171 70,238 USD
Total (27,843) 21,888 23,170 69,171 86,386
2017
Cash and
Company Accounts cash Accounts Other Net
payable equivalents receivable assets exposure Currency
Bematech Hardware (2,930) - - - (2,930) USD
Logic Controls Inc. (2,476) 7,004 13,843 8,885 27,256 USD / CNY
Bematech Ásia Co. Ltd (18) 1,903 366 89 2,340 USD / TWD
RJ Consultores México (133) 41 760 48 716 Peso (MXN)
CMNet Participações EUR/ Peso (CHI
(1,444) 1,245 1,040 197 1,038
S.A. and ARS)
TOTVS México (1,383) 3,005 1,193 - 2,815 Peso (MXN)
TOTVS Argentina (2,982) 5,970 1,914 - 4,902 Peso (ARS)
TOTVS Incorporation (159) 466 552 57,645 58,504 USD
Total (11,525) 19,634 19,668 66,864 94,641
d. Investments at fair value through profit or loss
Investments at fair value through profit or loss consist of startup companies, as described in Note 5.2.
Startup companies could fail or not be able to raise additional funds when needed, or may receive lower
ratings than in previous investments. These events could cause our investments to become impaired. In addition,
market volatility could negatively affect our ability to realize our investments through liquidity events such as initial
public offerings, mergers, and private sales.
e. Derivatives
The Company and its subsidiaries do not maintain derivative transactions in the reported periods.
5.7. Capital management
The Company’s capital management aims to ensure a strong credit rating with institutions and an optimal
capital ratio in order to drive the Company’s businesses and maximize value for shareholders.
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TOTVS controls its capital structure by adjusting and adapting to current economic conditions. To maintain
this structure, the Company may pay dividends, repurchase shares, take out new loans, issue debentures and
promissory notes. The Company’s net debt structure includes loans and debentures, less cash and cash equivalents.

2018 2017 2018 2017
Loans and debts and lease 184,192 374,074 201,471 402,556
Debentures 277,188 269,138 277,188 269,138
Liabilities due to acquisitions of investments 30,752 44,756 75,061 89,447
(-) Cash and cash equivalents (228,571) (305,920) (452,799) (387,169)
(-) Investment guarantees (23,477) (28,512) (50,243) (51,628)
Net debt 240,084 353,536 50,678 322,344
Equity 1,287,042 1,261,394 1,288,220 1,261,577
Equity and debt 1,527,126 1,614,930 1,338,898 1,583,921
6. Cash and cash equivalents
Cash and cash equivalents are maintained for meeting short-term cash requirements to the Company’s
strategic investments, as well as for other purposes. The Company's cash equivalents include short-term
investments in CDB (Bank Deposit Certificates) and repurchase agreements, which are redeemable in a period of
up to 90 days from the date of the respective transactions.

2018 2017 2018 2017
Cash 10,571 16,610 44,925 41,537
Cash equivalents 218,000 289,310 407,874 345,632
Repurchase agreements 92,942 149,061 225,894 150,291
CDB 125,058 140,249 181,980 195,341
228,571 305,920 452,799 387,169
The Company has financial investment policies, which establish that the investments focus on low risk
securities and investments in top-tier financial institutions, and are significantly remunerated based on the CDI
variation, which averaged 99.22% of the CDI a month during the year ended December 31, 2018 (99.07% at
December 31, 2017).
7. Trade accounts receivable
The following are the amounts receivable in domestic and foreign markets:

2018 2017 2018 2017
Domestic market 355,384 390,043 508,394 530,824
Foreign market 525 860 15,552 16,622
Gross trade accounts receivable 355,909 390,903 523,946 547,446
(-) allowances for doubtful accounts (88,515) (73,469) (118,518) (89,032)
Net trade accounts receivable 267,394 317,434 405,428 458,414
Current assets 248,671 286,435 385,538 426,513
Noncurrent assets (a) 18,723 30,999 19,890 31,901
(a) Long-term accounts receivables refer basically to the sale of software license, software implementation and customization services,
and are presented net of adjustment to present value.
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Below is the aging list of receivables, net of provision of expected credit losses at December 31, 2018 and 2017:

2018 2017 2018 2017
Falling due 181,288 229,417 288,890 339,686
Unbilled 57,464 49,762 73,627 59,986
Overdue
1 to 30 days 8,607 15,370 13,758 24,082
31 to 60 days 3,896 5,799 7,216 9,801
61 to 90 days 2,346 4,466 3,785 6,995
91 to 180 days 2,834 6,984 4,919 10,236
181 to 360 days 2,264 2,281 2,924 3,456
more than 360 days 8,695 3,355 10,309 4,172
Net accounts receivable 267,394 317,434 405,428 458,414
Changes in the provision of expected credit losses are as follows:

2018 2017 2018 2017
Balance at beginning of the year 73,469 84,293 89,032 105,183
Merged company - 1,028 - -
Opening balance of IFRS9/CPC48 5,864 - 10,968 -
Additional provision in the year 24,226 23,777 43,364 36,695
Amounts written off of the provision (15,044) (35,629) (24,846) (52,846)
Balance at end of fiscal year 88,515 73,469 118,518 89,032
Management believes that the risk related to trade accounts receivable in general is minimized by the fact
that the Company’s customer portfolio is diluted, except for the distributor of Bematech Hardware which
cumulatively accounted for 5.5% of net accounts receivable in consolidated statements at December 31, 2018
(3.96% as of December 31, 2017). The Company does not require any guarantee on installment sales.
8. Inventories
The breakdown of inventories exclusively set up by Bematech Hardware is as follows:
Consolidated
2018 2017
Finished products 11,155 11,684
Raw material 19,157 24,047
Products for resale and other 8,539 8,218
Parts for technical assistance 962 764
Advances from supplier 2,872 1,078
(-) Provision for adjustment to realization value (1,154) (963)
41,531 44,828
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9. Taxes recoverable
The breakdown of taxes recoverable for the fiscal year ended on December 31, 2018 and 2017 is as follows:

2018 2017 2018 2017
State Goods and Services Tax (ICMS) (a) - - 6,284 42,188

Income tax to offset (b) 10,805 40,332 18,172 50,475
Social contribution tax to offset (b) 12,490 16,177 13,764 19,034
Withholding PIS and COFINS taxes 18 61 212 1,350
Other 1 1 621 745
23,314 56,571 39,053 113,792
Current 23,314 56,571 38,817 93,097
Noncurrent - - 236 20,695
(a) Refer to accumulated ICMS tax credits of Bematech. These credits arise from the hardware operation, which enjoys benefits for
investments granted by the State of Paraná. The Company and its subsidiary are currently conducting joint studies with their legal
advisors to realize said credits. In 2018, a provision for impairment of R$32,805 was recorded for ICMS credits in the cash
generating unit of Bematech Hardware (note 14.2).
(b) Refer to withholding income and social contribution tax credits in the current year and income and social contribution tax credits
to offset from previous years, as well as payments of estimated taxes in the current year.
10. Income taxes
10.1. Reconciliation of income and social contribution tax expenses
The reconciliation of expenses calculated by applying the Income and Social Contribution Tax rates is as
follows:

2018 2017 2018 2017
Income before taxes 64,424 92,317 86,723 104,152

Income and social contribution taxes at combined nominal
(21,904) (31,388) (29,486) (35,412)
rate of 34%
Adjustments for the statement of effective rate
Equity pick-up 740 3,464 43 23
Law No. 11.196/05 (Incentive for research and
9,154 10,447 12,839 11,410
development) (a)
Interest on equity 9,447 17,118 9,889 17,118
Subsidy for incentives - - 2,652 2,277
Effect of subsidiaries subject to special rates - - (4,153) (7,394)
Impairment losses (b) - - (14,828) -
Management stake (1,075) (459) (1,089) (459)
Workers' Meal Program 50 234 676 484
Other (1,288) 1,248 (2,623) 1,059
Income tax and social contribution expense (4,876) 664 (26,080) (10,894)
Current income tax and social contribution (3,180) (13,106) (42,003) (26,743)
Deferred income tax and social contribution (1,696) 13,770 15,923 15,849
Effective rate 7.6% -0.7% 30.1% 10.5%
(a) The Brazilian tax legislation provides a mechanism to encourage the technological development of the country, which
grants tax incentives to companies that carry out technological research and development (R&D).
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(b) Provision for impairment of subsidiary BIC based on United States.
10.2. Breakdown of deferred income and social contribution taxes

2018 2017 2018 2017
Income and social contribution tax loss carry forward - - 71,620 69,826
Deriving from temporary differences:
Difference between tax base and book value from goodwill 21,308 36,047 43,531 60,772
Amortization of tax benefit (86,828) (79,151) (132,612) (117,676)
Intangible asset allocation (13,491) (20,903) (20,835) (27,668)
Allocation of intangible assets – after Law nº 12.973 13,334 9,289 13,334 9,289
Provision for commissions 12,426 11,612 14,099 12,185
Advance income or revenues 5,253 5,012 9,705 5,941
Allowance for doubtful accounts 30,095 24,979 36,285 26,303
Provision for contingencies and other liabilities 40,045 37,666 43,447 39,955
Provision for trade accounts payable 7,902 8,012 10,396 8,556
Provision for losses on inventories and guarantees - - 317 1,754
Provision for impairment - - 14,760 -
Provision for share-based payments 5,550 3,503 5,720 3,513
Present value adjustment 2,766 3,076 4,803 3,092
Other 7,485 5,747 10,554 8,873
Net deferred income and social contribution tax 45,845 44,889 125,124 104,715
The net deferred income tax and social contribution of the Company and its subsidiaries are presented under
noncurrent assets.
Below is the description of deferred income tax and social contribution:

2018 2017 2018 2017
At January 1 44,889 30,449 104,715 88,658
Expense in statement of profit or loss (1,696) 13,770 15,923 15,849
Tax related to other comprehensive income 890 29 890 29
Merged company - 641 - -
Opening balance of IFRS15/CPC 47 and 1,765 3,466 -
IFRS9/CPC48 -
Other (3) - 130 179
At December 31, 2018 45,845 44,889 125,124 104,715
10.3. Estimated realization of deferred taxes
Based on projections of taxable income from future years approved by the Board of Directors, the Company
expects to recover tax credits recorded in non-current assets in the following years:

2019 64,883 71,472
2020 15,105 49,958
2021 12,364 31,172
2022 14,708 36,036
2023 11,256 25,993
2024 onwards 14,357 28,345
132,673 242,976
Tax benefit of goodwill (a) (86,828) (117,852)
Deferred tax assets, net 45,845 125,124
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(a) Refers to the amount of the tax benefit amortized without an established term for realization and
deferred tax on provision of impairment, since this will take place only through the sale or write-off of
Investments that generated said tax benefit.
During the year ended December 31, 2018, no material event occurred that indicates a limitation on the full
recovery of deferred taxes recognized within 10 years.
11. Related-party balances and transactions
Related-party transactions are carried out under market conditions and prices established by the parties, of
which balances between the Parent Company and its subsidiaries are eliminated for the purposes of consolidation.
11.1. Credits and liabilities with subsidiaries and associate companies
As at December 31, 2018 and 2017, the main balances of assets and liabilities with related parties that
affected the statements of profit or loss for the years are shown below:
Parent Company
2018 2017
Asset Liability Asset Liability
Ciashop 2,484 - 2,284 -
TQTVD - - 4,139 -
TOTVS Serviços 1,472 - - 7,332
TOTVS Ventures - - - 5,760
Others - 24 298 336
Total 3,956 24 6,721 13,428
The amounts in accounts payable and receivable among subsidiaries refer to short-term current account
transactions, without remuneration. There were no relevant transactions that passed through the results between
the group’s companies.
11.2. Transactions or relationships with shareholders and key management personnel
a) Shareholders
The Company maintains property lease agreements with companies, in which some of the shareholders also
hold TOTVS shares, directly or indirectly.
The rental and condominium expenses with related parties, including the new headquarters, recognized at
the end of the fiscal year ended December 31, 2018 summed up R$25,328 (R$16,543 at December 31, 2017,
covering only 7 months of rent for the new headquarters). All rental agreements with related parties are subject to
adjustment at the IGP-M inflation rate, every 12 months.
These Company shareholders and officers directly or indirectly hold 17.6% of the Company’s shares on
December 31, 2018 (17.6% at December 31, 2017), and the indirect interest is held through LC-EH
Empreendimentos e Participações S.A.
The Company still incurred expenses and revenues of small value over the year with related parties where
the total amount of expenditures was R$ 471 and receipts in the amount of R$ 265.
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11.3. Management fees
Expenses related to fees of managing officers of the Company and subsidiaries are summarized below:

2018 2017 2018 2017
Short-term benefits to managing officers
Salaries, fees and payroll charges 14,106 13,902 16,495 16,660
Private pension plan 147 448 173 474
Variable bonus 3,161 1,349 3,202 1,278
17,414 15,699 19,870 18,412
Indirect benefits 880 979 880 979
Share-based payments 3,725 3,549 3,726 3,549
22,019 20,227 24,476 22,940
Management are also entitled to vehicles that are replaced every 3 years. The residual value of vehicles
granted to management at December 31, 2018 is R$1,511 (R$733 at December 31, 2017). The Company does not
provide other long-term benefits, such as paid leave based on years of service and other benefits for years of service
at the Company.
12. Investments
The investments of the Company and its subsidiaries are assessed based on the equity method. The
breakdown of investments in subsidiaries and affiliate companies is shown below:
Summarized financial statements

of affiliate companies and subsidiaries Equity pick-up (parent Balance of investments
as at December 31, 2018 Company) for years ended: as of:
Assets Liabilities Net Equity Gross profit Profit or loss 2018 2017 2018 2017
Bematech (a) 477,889 57,678 420,211 60,861 (69,624) (79,463) 4,495 493,626 547,330
TOTVS Brasília 157,680 14,193 143,487 124,818 26,487 26,487 12,558 143,487 138,692
TOTVS Nordeste 90,260 15,072 75,188 12,040 7,670 7,670 (604) 75,188 67,908
TOTVS Serviços 66,806 17,751 49,055 142,714 29,699 29,699 95 49,055 20,725
TOTVS Inc. 71,938 (92) 72,030 154 (16,318) (16,318) (9,743) 72,030 59,801
Virtual Age (a) - - - - - - (1,218) - -
Neolog (a) 3,901 1,875 2,026 12,405 1,646 (1,070) (1,325) 18,920 20,681
TQTVD 31,014 6,920 24,094 36,907 3,202 2,439 (3,893) 17,876 10,461
TOTVS Ventures 5,133 1 5,132 - 137 137 (317) 5,132 10,756
Ciashop (a) 6,330 5,104 1,226 10,948 1,455 (855) (2,384) 5,323 5,334
TOTVS México 8,402 3,831 4,571 16,769 (7,894) (7,894) (5,666) 4,571 5,472
TOTVS Argentina 10,771 5,744 5,027 32,838 3,399 3,399 (1,179) 5,027 4,624
Datasul Argentina - - - - (58) (58) (127) - 62
TFS 48,564 18,545 30,019 82,476 24,238 24,236 789 30,017 799
NCC - - - - - - - 65 38
(11,591) (8,519) 920,317 892,683
892,683
(a) Goodwill from acquired companies is recorded under Investments in the parent company's profit or loss. The difference between
the results from acquired companies and equity pick-up refers to the amortization of intangible assets in the determination of fair
value of assets of the respective acquired companies.
The following table shows changes in investment accounts in the fiscal years ended December 31, 2018 and 2017:
Page 48 of 74
Equity
Foreign Opening
Equity Amortizati Exchange balance CPC
2017 Addition Dividends Pick-up on of PPA Total (ii) 47/48 (i) 2018
Bematech 547,330 23,596 (627) (69,624) (9,839) (79,463) 9,955 (7,165) 493,626
TOTVS Brasília 138,692 (9,134) (11,361) 26,487 - 26,487 - (1,197) 143,487
TOTVS Nordeste 67,908 (460) - 7,670 - 7,670 - 70 75,188
TOTVS Serviços 20,725 - (1,395) 29,699 - 29,699 - 26 49,055
TOTVS Inc. 59,801 18,159 - (16,318) - (16,318) 10,388 - 72,030
Neolog 20,681 - (689) 987 (2,057) (1,070) 1 (3) 18,920
TQTVD 10,461 - - 2,439 - 2,439 (1) 4,977 17,876
TOTVS Ventures 10,756 (5,760) - 137 - 137 (1) - 5,132
Ciashop 5,334 871 - 1,019 (1,874) (855) (1) (26) 5,323
TOTVS México 5,472 6,494 - (7,894) - (7,894) 871 (372) 4,571
TOTVS Argentina 4,624 346 - 3,399 - 3,399 (2,497) (845) 5,027
Datasul Argentina 62 - - (58) - (58) (4) - -
TFS 799 4,990 - 24,236 - 24,236 - (8) 30,017
NCC 38 27 - - - - - - 65
Sum of Investments 892,683 39,129 (14,072) 2,179 (13,770) (11,591) 18,712 (4,543) 920,317
(i) Impact on shareholders' equity of subsidiaries as of January 1, 2018 related to the initial adoption of
IFRS 15 / CPC 47 and IFRS 9 / CPC 48 (note 2.3)
(ii) (ii) Includes the inflation adjustment of the subsidiaries in Argentina.
Equity
Equity Pick- Amortizat Foreign Reclassif
2016 Addition Dividends up ion of PPA Total Exchange Write-off ication 2017
Bematech 550,513 - (8,866) 14,335 (9,840) 4,495 1,188 - - 547,330
TOTVS Brasília 129,486 1,067 (4,419) 12,558 - 12,558 - - - 138,692
TOTVS Nordeste 68,512 - - (604) - (604) - - - 67,908
TOTVS Serviços 20,630 - - 95 - 95 - - - 20,725
TOTVS Inc. 61,100 7,613 - (9,743) - (9,743) 831 - - 59,801
Virtual Age 74,626 - - 3,704 (4,922) (1,218) - (73,408) - -
Neolog 22,186 - (180) 732 (2,057) (1,325) - - - 20,861
TQTVD 14,354 - - (3,893) - (3,893) - - - 10,461
TOTVS Ventures 11,073 - - (317) - (317) - - - 10,756
Ciashop 8,226 700 - (496) (1,888) (2,384) - - (1,208) 5,334
TOTVS México 8,160 3,779 - (5,666) - (5,666) (801) - - 5,472
TOTVS Argentina 7,081 - - (1,179) - (1,179) (1,278) - - 4,624
Datasul Argentina 216 - - (127) - (127) (27) - - 62
NCC 38 - - - - - - - - 38
TFS - 10 - 789 - 789 - - - 799
Sum of Investments 976,201 13,169 (13,465) 10,188 (18,707) (8,519) (87) (73,408) (1,208) 892,683
Page 49 of 74
13. Property, plant and equipment
Property, plant and equipment of the Company are booked at the acquisition cost and depreciation of
assets is calculated according to the straight-line method, and takes into consideration the estimated useful
economic life of assets. The Company’s property, plant and equipment is broken down as follows:
Parent Company
Property,
Total
plant and
Facilities equipment Property,
Furniture machinery and Leasehold in progress Others plants and
Computers Vehicles and Fixtures equipment improvements (iii) (iv) equipment
Cost
Balance in 2016 110,166 7,362 13,517 18,801 - 65,500 41,415 256,761
Additions 26,406 3,015 619 98 6,956 18,314 171 55,579
Mergers 629 1,095 178 - - - 129 2,031
Transfers (i) 16,882 102 9,574 11,897 66,126 (80,100) (29,654) (5,173)
Write-offs (739) (2,146) (2,316) (4,816) - (188) (8,550) (18,755)
Balance in 2017 153,344 9,428 21,572 25,980 73,082 3,526 3,511 290,443
Additions 34,242 5,289 940 704 17,886 - 2,829 61,890
Transfers 2,131 107 555 (162) (4,606) 989 284 (702)
Write-offs (5,621) (4,623) (190) (119) (263) - (6) (10,822)
Balance in 2018 184,096 10,201 22,877 26,403 86,099 4,515 6,618 340,809
Depreciation
Balance in 2016 (64,736) (2,015) (7,019) (8,846) - - (20,019) (102,635)
Depreciation in
the year (ii) (20,577) (2,561) (3,310) (2,869) (6,148) - (1,468) (36,933)
Mergers (224) (535) (71) - - - (86) (916)
Transfers (i) (1,324) (102) (171) (33) (10,014) 10,009 (1,635)
Write-offs 684 1,328 1,696 3,081 - - 8,721 15,510
Balance in 2017 (86,177) (3,885) (8,875) (8,667) (16,162) - (2,843) (126,609)
Depreciation in
the year (ii) (25,582) (3,417) (2,985) (3,210) (8,622) - (1,530) (45,346)
Transfers 29 - (30) (24) - - (1) (26)
Write-offs 5,465 3,336 107 60 56 - 6 9,030
Balance in 2018 (106,265) (3,966) (11,783) (11,841) (24,728) - (4,368) (162,951)
Residual value
Balance in 2018 77,831 6,235 11,094 14,562 61,371 4,515 2,250 177,858
Balance in 2017 67,167 5,543 12,697 17,313 56,920 3,526 668 163,834
Average annual
20% to 25% 33% 10% to 25% 6.7% to 25% 5% to 20% - 20% -
depreciation rate
50
Consolidated
Property,
Facilities Total
plant and
Furniture machinery Leasehold equipment Property,
and and improveme in progress Others plant and
Computers Vehicles Fixtures equipment nts (iii) (iv) equipment
Cost
Balance in 2016 127,816 10,395 18,985 27,932 - 65,500 48,974 299,602
Additions 29,413 3,470 1,404 1,212 10,619 18,478 242 64,838
Transfers (i) 10,273 102 7,421 16,471 70,553 (80,351) (33,625) (9,156)
Write-offs (4,339) (2,788) (3,409) (5,733) - - (11,670) (27,939)
Exchange variation 2,126 26 623 (334) 405 - 71 2,917
Balance in 2017 165,289 11,205 25,024 39,548 81,577 3,627 3,992 330,262
Additions 37,691 5,832 1,777 1,816 22,294 - 3,169 72,579
Transfers 7,615 238 3,096 (6,495) (2,164) 844 284 3,418
Write-offs (7,192) (4,660) (1,393) (717) (1,120) - 14 (15,068)
Exchange variation 1,138 141 357 225 413 - (3) 2,271
Balance in 2018 204,541 12,756 28,861 34,377 101,000 4,471 7,456 393,462
Depreciation
Balance in 2016 (75,493) (2,994) (9,111) (12,508) - - (23,226) (123,332)
Depreciation in the
year (ii) (23,132) (3,398) (3,963) (4,648) (9,562) - (1,608) (46,311)
Transfers (i) 1,978 (229) 622 1,807 (13,040) 11,061 2,199
Write-offs 3,923 1,706 2,276 3,963 - - 10,716 22,584
Exchange variation (1,628) (8) (1,089) (403) (274) - 22 (3,380)
Balance in 2017 (94,352) (4,923) (11,265) (11,789) (22,876) - (3,035) (148,240)
Depreciation in the
year (ii) (28,122) (3,821) (3,550) (5,320) (11,044) - (982) (52,839)
Transfers (4,015) 54 (969) (26) 788 - 20 (4,148)
Write-offs 7,099 3,444 1,089 476 411 - (46) 12,473
Exchange variation (1,047) (96) (300) (45) (396) 2 (1,882)
Balance in 2018 (120,437) (5,342) (14,995) (16,704) (33,117) - (4,041) (194,636)
Residual value
Balance in 2018 84,104 7,414 13,866 17,673 67,883 4,471 3,415 198,826
Balance in 2017 70,937 6,282 13,759 27,759 58,701 3,627 957 182,022
Average annual 20% to
20% to 25% 10% to 25% 6.7% to 25% 5% to 20% - 20% -
depreciation rate 33%
(i) Includes the transfer of assets with residual value of the subsidiary RMS to the parent company in the amount of R$149 and the
transfer of R$6,957 to intangible assets, both at the parent company and consolidated.
(ii) The Company conducts every year the assessment of the useful lives of its assets, and in 2017, it assessed the useful
lives of its property, plant and equipment through the direct comparison with market data, jointly with a specialist
Page 51 of 74
firm. The assessment indicated the need to alter the useful lives and annual depreciation rates of some of these
assets, resulting in an increase of depreciation expenses by R$1,420 in 2017. There were no changes in estimates for
2018 related to these assets, except for the subsidiary Bematech Hardware, which conducted an assessment of
assets in connection with some products resulting in a change of useful life estimates causing an impact of R$717 on
depreciation expenses.
(iii) The column “Property, plant and equipment under construction” includes assets related to the construction of the
new headquarters. These assets started depreciating as of April 1, 2017 and were transferred to their respective
accounts, with leasehold improvements amounting to R$38,020.
(iv) Includes the write-off of the residual value of leasehold improvements of the previous headquarters and the
transfer between lines and “Others” to improve disclosure.
14. Intangible assets
Intangible assets acquired separately are measured at cost at the time of their initial recognition, and the
cost of intangible assets acquired in a business combination corresponds to the fair value on the date of
acquisition. Intangible assets and changes in this account are as follows:
Parent Company
Total
Trademarks Customer
Software Other (i) Goodwill Intangible
& patents portfolio
assets
Cost or valuation
Balance in 2016 265,925 63,149 208,969 16,337 233,811 788,191
Additions 25,728 - - - - 25,728
Subsidiary merger 26,244 - 4,011 2,413 46,497 79,165
Write-offs 6,957 - - - - 6,957
Balance in 2017 324,854 63,149 212,980 18,750 280,308 900,041
Additions 14,006 - - - - 14,006
Subsidiary merger 730 - - - - 730
Balance in 2018 339,590 63,149 212,980 18,750 280,308 914,777
Amortization
Balance in 2016 (171,335) (35,421) (179,119) (15,815) - (401,690)
Amortization in the year (36,554) (4,202) (19,752) (283) - (60,791)
Write-offs (17,245) - (1,575) (2,413) - (21,233)
Balance in 2017 (225,134) (39,623) (200,446) (18,511) - (483,714)
Amortization in the year (33,614) (4,202) (10,373) (239) - (48,428)
Balance in 2018 (258,748)
(33,614) (43,825) (210,819)
(10,373) (18,750) - (532,142)
(48,428)
Residual value
Balance in 2018 80,842 19,324 2,161 - 280,308 382,635
Balance in 2017 99,720 23,526 12,534 239 280,308 416,327
Average annual amortization rates 10% to 20% 6.7% to 8% 10% to 12.5% 10% to 50%
Page 52 of 74
Consolidated
Total
Trademarks Customer
Software R&D Others (i) Goodwill Intangible
& patents portfolio
assets
Cost or valuation
Balance in 2016 333,444 99,440 360,890 42,661 49,523 653,496 1,539,454
Additions 30,192 189 - - - - 30,381
Transfers (ii) 6,957 - - - - - 6,957
Write-offs (iii) (88) - - (13,902) - - (13,990)
Exchange variation (10) (7) 2 (118) 3 551 421
Balance in 2017 370,495 99,622 360,892 28,641 49,526 654,047 1,563,223
Additions 14,621 221 - 1 - 8,378 23,221
Transfers 730 - - (534) 534 - 730
Write-offs (1,236) (5) (162) (1) (212) - (1,616)
Exchange variation 288 994 - - - 6,379 7,661
Balance in 2018 384,898 100,832 360,730 28,107 49,848 668,804 1,593,219
Amortization
Balance in 2016 (202,088) (46,566) (207,362) (9,711) (45,591) - (511,318)
Amortization in the year (52,472) (7,982) (32,743) (8,004) (3,382) - (104,583)
Write-offs (iii) 112 - - 13,902 - - 14,014
Exchange variation (309) (42) - (14) (3) - (368)
Balance in 2017 (254,757) (54,590) (240,105) (3,827) (48,976) - (602,255)
Amortization in the year (42,200) (7,483) (21,216) (8,611) (865) - (80,375)
Write-offs 1,236 5 162 1 212 - 1,616
Provision for impairment - (218) - (10,389) - (43,611) (54,218)
Exchange variation (155) (704) - - - - (859)
Balance in 2018 (295,876) (62,990) (261,159) (22,826) (49,629) (43,611) (736,091)
Residual value
Balance in 2018 89,022 37,842 99,571 5,281 219 625,193 857,128
Balance in 2017 115,738 45,032 120,787 24,814 550 654,047 960,968
Average annual amortization rates 10% to 20% 6.7% to 8% 10% to 12.5% 20% 10% to 50%
(i) Includes primarily non-compete rights arising from the allocation of purchase price from business combinations.
(ii) The balance of R$6,957 refers to transfers from “property, plant and equipment under construction” to software under
intangible assets (Note 13).
(iii) Write-off of software developed by a subsidiary and fully amortized.
The amortization of intangible assets is based on their estimated useful lives. Intangible assets identified,
the amounts recognized and useful lives of assets resulting from a business combination are based on a technical
study by an independent specialist firm.
Page 53 of 74
14.1. Goodwill and intangible assets identified in business combinations
The breakdown and addition/write-off of goodwill in the fiscal years ended December 31, 2018 and 2017
is shown below:
Foreign Foreign Addition/

2016 exchange (i) 2017 exchange (i) Impairment 2018
Bematech (a) 255,376 551 255,927 6,379 (43,611) 218,695
RM 90,992 - 90,992 - - 90,992
W&D 64,070 - 64,070 - - 64,070
Virtual Age 46,497 - 46,497 - - 46,497
RMS 35,740 - 35,740 - - 35,740
SRC 33,688 - 33,688 - - 33,688
Datasul 30,084 - 30,084 - - 30,084
Gens FDES 16,340 - 16,340 - - 16,340
Seventeen 15,463 - 15,463 - - 15,463
TOTVS Agroindústria 13,128 - 13,128 - - 13,128
Neolog 12,565 - 12,565 - - 12,565
BCS 11,821 - 11,821 - - 11,821
Passlack (ii) - - - - 8,378 8,378
TotalBanco 6,008 - 6,008 - - 6,008
Logo Center 5,703 - 5,703 - - 5,703
Ciashop 4,465 - 4,465 - - 4,465
Others 11,556 - 11,556 - - 11,556
653,496 551 654,047 6,379 (35,233) 625,193
(i) Foreign exchange of Goodwill recorded in a foreign subsidiary

(ii) Goodwill generated from the acquisition of Passlack, see note 4.1.
14.2. Test for impairment of assets
The Company assesses the recoverable book value of goodwill by employing the “value in use” concept
through discounted cash flow models for cash generating units, representing the group of tangible and intangible
assets used in the development and sale of different solutions to its customers. Cash generating units valued were:
TOTVS, International Market, Ciashop, Neolog and Bematech Hardware.
Assumptions on cash flow increase and future cash flow projections are based on the Company’s business
plans, approved annually by management, as well as comparable market information, and represent
Management’s best estimates of the economic conditions that will exist during the useful life of these assets for
different cash generating units. Future cash flows were discounted based on the representative rate of cost of
capital.
In keeping with the economic valuation techniques, value in use is determined over a five-year period,
taking into account the perpetuity of assumptions and in view of the capacity of indefinite business continuity.
Flow growth projections were made in nominal terms.
The main assumptions used in the value in use estimate are:
Page 54 of 74
 Revenues – revenues were projected between 2019 and 2023, taking into account the growth of the
customer bases and business plans of different cash generating units.
 Operating costs and expenses – costs and expenses were projected based on the Company’s historical
performance of operations combined with the Company’s long-term business plan.
 Discount rate – represents the assessment of risks in the current market, specific to each cash-generating
unit, considering the value of money over time and the individual risks of related assets that were not
incorporated into the assumptions included in the cash flow model. Calculation of the nominal discount
rate is based on the specific circumstances of each CGU. Estimated future cash flows were discounted
at nominal rates ranging from 11.5% to 14.2.% p.a. (pre-tax) for each cash generating unit.
 Perpetuity – the nominal growth rates used to extrapolate the projections on December 31, 2018, in
addition to the five-year period ranging from 3.3% to 6.3%.
Key assumptions were based on the Company’s historical performance and reasonable macroeconomic
assumptions, and on financial market projections, documented and approved by the Company’s management.
The annual impairment test of intangible assets and goodwill of the Company resulted in a provision for
loss of R$87,023 at the cash-generating unit of Bematech Hardware at December 31, 2018. In the fourth quarter
of 2018, the strategy of the Hardware operation was reassessed based on the decision to make the Bemacash
solution agnostic, that is, no longer be associated exclusively with Bematech hardware devices. In addition, it was
also decided by the migration and centralization of all TEF solutions from the hardware to the software structure.
As a result, it became necessary to set up a Provision for Impairment of Hardware assets, reflecting the change in
the assumptions used in the results projections of this operation.
The provision for impairment in the amount of R$87,023 affected the following asset accounts in the
statement of financial position on December 31, 2018:
Assets 2018
Taxes recoverable (Note 9) 32,805
Intangible assets (Note 14) 54,218
Trademarks & patents 218
Customer portfolio 10,389
Goodwill 43,611
87,023
The other cash-generating units did not require provisions for losses since the estimated recoverable
amount of each cash-generating unit was higher than the net book value on the valuation date. On December 31,
2017, the impairment test for intangible assets and goodwill did not result in any provision for loss.
The Company applied sensitivity analysis on the impairment test of its assets. Below are the assumptions in
the sensitivity analysis for the fiscal year ended December 31, 2018:
• Discount rate with variation of 1 p.p.: An increase or reduction of 1 p.p. in the discount rate for each cash-
generating unit would result in a recoverable amount higher than the book value. Except for the Bematech
Hardware CGU, where a 1 p.p. increase would entail an impairment of R$93,154, and a 1 p.p. decrease would
Page 55 of 74
result in an impairment of R$81,360.
• Growth rate of perpetuity with variation of 1 p.p.: An increase or reduction of 1 p.p. in the perpetuity rate
for each cash-generating unit would result in a recoverable amount higher than the book value. Except for the
Bematech Hardware CGU, where a 1 p.p. increase would entail an impairment of R$84,112, and a 1 p.p. decrease
would result in an impairment of R$90,820.
• Variation of 6 p.p. in revenue: An increase or reduction of 6 p.p. for each cash-generating unit would result
in a recoverable amount higher than the book value. Except for the Bematech Hardware CGU, where recognition
of impairment loss would result in the amount of R$65,498, in case of an increase 6 p.p. in revenue, and of
R$112,557 in case of a decrease 6 p.p. in revenue.
The projections adopted by the Company for the hardware operation include a more challenging scenario
than that used in recent years, given the recent performance of the operation. The Company constantly monitors
its operations and may revise its projections and, consequently, the recoverability of assets in use.
15. Payroll and labor obligations
Balances of salaries and charges payable are broken down as follows:

2018 2017 2018 2017
Labor liabilities:
Salaries payable 20,618 20,041 28,782 25,379
Vacations payable 58,568 61,354 81,704 78,305
Profit sharing and bonus 23,109 11,780 30,492 13,343
IRRF 12,303 12,655 16,656 14,912
Pension plan payable (i) 1,287 - 1,287 -
Other 389 1,729 1,696 3,164
116,274 107,559 160,617 135,103
Payroll liabilities
FGTS (Workers ‘severance pay fund) payable 4,581 4,747 6,203 5,779
INSS (Brazilian Social Security Institute)
payable 5,088 5,329 8,054 7,954
9,669 10,076 14,257 13,733
125,943 117,635 174,874 148,836
(i) Refers to the actuarial provision for the medical assistance plan of the participants who contributed or
still contribute fixed installments to the plan and who are entitled to remain in the plan after retirement.
Page 56 of 74
16. Taxes liabilities
As at December 31, 2018 and 2017, the balances of tax liabilities are composed as follows:

2018 2017 2018 2017
Tax liabilities
INSS payable 6,836 7,454 9,378 8,814
ISS payable 4,101 3,808 5,917 4,737
PIS and COFINS payable 11,216 8,031 14,199 9,956
IRPJ and CSLL payable - - 4,632 548
Other taxes 10,424 1,525 13,340 4,670
Total 32,577 20,818 47,466 28,725
17. Loans and debts
Loans are initially recognized at fair value, net of transaction costs incurred, and are shown at amortized
cost. Any difference between the borrowed amounts (net of transaction costs) and the total amount payable is
recognized in the statement of profit or loss during the period when the loans are due, using the effective
interest rate method.
The loan and debt operations are as follows:

Annual financial charges 2018 2017 2018 2017
BNDES PROSOFT TJLP + 1.5 to 1.52% p.a. 129,194 282,387 137,940 296,565
BNDES PSI 3.5% to 4.0% p.a.. 12,197 26,838 18,224 36,701
Finance lease 15.12% to 17.24% 42,087 63,287 42,189 63,454
BNDES – Social TJLP 714 1,562 714 1,560
BNDES Inovação TJLP + 0.52% p.a.. - - 2,404 3,897
Secured accounts and other - - - 379
184,192 374,074 201,471 402,556
Current liabilities 155,278 191,810 166,154 220,215
Noncurrent liabilities 28,914 182,264 35,317 182,341
Amounts recorded in noncurrent liabilities as at December 31, 2018 and 2017, have the following maturity
schedule:

2018 2017 2018 2017
2019 13,173 160,990 19,583 161,017
2020 15,741 21,274 15,734 21,324
Page 57 of 74
Below is the breakdown of loans and debts as at December 31, 2018 and 2017:

2018 2017 2018 2017
Balance at beginning of year 374,074 519,501 402,556 561,741
Additions (lease) 4,712 37,547 4,712 37,767
Interest incurred 25,396 39,592 26,885 42,112
Payment of interest (24,577) (36,183) (26,004) (38,387)
Payment of principal (195,413) (186,383) (206,678) (200,677)
Balance at end of year 184,192 374,074 201,471 402,556
The Company and its subsidiary Bematech have loan and debt agreements with covenants usually
applicable to these types of operations, related to the meeting of economic, financial, cash generation and other
metrics. These covenants have been met and do not restrict the Company’s capacity to normally conduct its
operations.
a) Finance lease
Lease obligations are guaranteed by fiduciary sale of leased assets. The table below shows gross liabilities
of finance leases at December 31, 2018 and 2017:

2018 2017 2018 2017
Gross liabilities of Finance lease – minimum lease
payments
Less than one year 13,173 20,741 13,227 20,804
More than one year and less than five years 36,203 49,685 36,262 49,790
49,376 70,426 49,489 70,594
Future financing charges in Finance leases (7,289) (7,139) (7,300) (7,140)
Present value of liabilities of Finance lease 42,087 63,287 42,189 63,454
18. Debentures
At December 31, 2018 and 2017, the balance was broken down as follows:

Unit
Issue Debentures Annual financial charges 2018 2017 2018 2017
price
Single series 200,000 105.95% of CDI 1.00 (a)(i) 203,431 203,524 203,431 203,524
Premium due to non-conversion (c) 73,757 65,614 73,757 65,614
Total 277,188 269,138 277,188 269,138
(i) The value of the debentures issue is presented net of transactions costs of R$306.
Page 58 of 74
Maturity of noncurrent amounts is as follows:

2018 2017 2018 2017
2019 - 65,449 - 65,449
2020 199,869 199,848 199,869 199,848
199,869 265,297 199,869 265,297
The changes in the years are shown below:

Debentures and premiums from non-
2018 2017 2018 2017
conversions
Balance at beginning of year 269,138 58,784 269,138 90,661
Debenture issue - 199,475 - 199,475
Interest incurred 21,734 10,879 21,734 13,772
Amortization (13,684) - (13,684) (34,770)
Balance at end of year 277,188 269,138 277,188 269,138
a) Issue of Debentures
As at September 6, 2017, the Board of Directors approved the operation to raise R$200,000 through the
issue of 200,000 simple, unsecured, nonconvertible debentures of the Company with face value of R$1, in a single
series, which were subject to public distribution with restricted efforts.
For all legal purposes, the issue of debentures was September 15, 2017. The debentures will come due on
September 15, 2020, except in the events of early maturity.
The Debentures will bear interest corresponding to 105.95% of the accumulated variation of the daily
average DI (interbank) rates. Interests will be paid semiannually, with the first payment on March 15, 2018.
b) Premium due to non-conversion of debentures issued in 2008
On August 19, 2008, shareholders approved raising R$200,000 through the issue of up to 100,000 Units,
represented by Brazilian Depositary Receipts, comprised by two non-detachable debentures, one of which is first
series convertible and the other 2nd series convertible. The entire principal and interest amounts were amortized
in 2016.
In case of non-conversion, Company’s debentures would be entitled to a non-conversion premium, which

for the 1st series debentures will be equivalent to the difference between IPCA plus 8.0% p.a. and the interest
effectively paid, and for the 2nd series debentures, interest of 3.5% p.a.
Premium for non-conversion of 1st series debentures will be restated by IPCA plus 8.0% p.a., while the 2nd
series debentures will be restated at TJLP plus 5.0% p.a. The premium for non-conversion will be paid on at most
August 19, 2019.
Page 59 of 74
19. Liabilities due to investment acquisition
These refer to installments payable due to acquisition of investments by the Company and its subsidiaries,
negotiated with installment payments, recorded in current and noncurrent liabilities, as follows:

2018 2017 2018 2017
RMS - - 13,920 15,826
Virtual Age 15,293 15,368 15,293 15,368
RJ Participações - - 17,542 21,397
Neolog 7,187 14,441 7,187 14,441
Bematech Sistemas - - 7,256 7,191
Seventeen 2,873 7,560 2,873 7,560
Datasul MG 4,429 4,281 4,429 4,281
Mafipa - 1,398 - 1,398
Ciashop 366 698 366 698
W&D Participações - - 256 277
Other 604 1,010 5,939 1,010
Total 30,752 44,756 75,061 89,447

Noncurrent liabilities - 13,297 15,464 41,886
(a) Includes earn-out payments with maturity up to 2020.
As at December 31, 2018 and 2017, the liabilities for acquisition of investments had secured accounts
consisting of CBD operations in the amounts mentioned below:

2018 2017 2018 2017
Investment guarantees in current liabilities 23,477 28,512 44,909 44,615
Investment guarantees in non-current liabilities - - 5,334 7,013
Total 23,477 28,512 50,243 51,628
20. Provision for contingencies related to legal proceedings
20.1. Ongoing proceedings with recorded provision for contingencies and legal
liabilities related to legal proceedings
The Company and its subsidiaries are parties to several legal proceedings related to tax, social security,
labor and civil matters arising from the ordinary course of their business operations. A provision for contingencies
was set up by management, supported by its legal counsel and analysis of pending judicial proceedings, in an
amount considered sufficient to cover probable losses. The provision amount reflects the best current estimate
of the Company’s Management and its subsidiaries.
The amount of provisions set up as at December 31, 2018 and 2017 is as follows:
Page 60 of 74

2018 2017 2018 2017
Tax 2,337 2,257 2,946 2,827
Labor 88,394 73,762 94,832 78,945
Civil 27,049 34,763 30,014 35,998
117,780 110,782 127,792 117,770
The summary of main proceedings in progress is presented below.
Tax
The lawsuits classified as probable loss deal with recovering tax dues that the Company and its subsidiaries
consider improper. The amounts classified as probable losses from these lawsuits were R$2,946, on a consolidated
basis, at December 31, 2018 (R$2,827 at December 31, 2017).
Labor
Labor lawsuits assessed as probable losses refer to lawsuits filed by former employees of the Company
seeking labor dues, as well as service provider companies, seeking recognition of both employment relationship
and other labor dues.
The amounts assessed as probable losses from these lawsuits totaled R$94,832 at December 31, 2018
(R$78,945 at December 31, 2017), there being no individually significant case.
Civil
Civil lawsuits classified as probable loss refer mainly to lawsuits filed by customers alleging certain problems
with the delivery of products and/or services, application of the default increment, grace period in terminated
contracts and undue collections.
Notable among the individually significant cases are:
(i) Civil lawsuit filed by a client alleging problems resulting from the product implemented, which
would have caused direct and indirect damages to the client. The restated amount, deemed as
probable loss, sought at December 31, 2018, is R$9,578 (R$8,084 at December 31, 2017). The
Company appealed against the merits of the unfavorable decision and the amount involved.
Amounts classified as probable losses from other lawsuits totaled R$20,436 at December 31, 2018
(R$20,018 at December 31, 2017), there being no other individually significant cases.
Page 61 of 74
a) Changes in provisions
The breakdown of provisions in the year ended December 31, 2018 and 2017 is as follows:
Parent Company
Tax Labor Civil Total
Balances at December 31, 2016 2,259 54,513 28,551 85,323
(+) Additional provision 54 36,101 10,452 46,607
(+) Monetary restatement 194 6,103 3,989 10,286
(-) Reversal of provision not used (184) (9,384) (1,069) (10,637)
(-) Write-off due to payment (66) (13,571) (7,160) (20,797)
(+) Additional provision 1,289 51,875 14,544 67,708
(-) Write-off due to payment (1,258) (27,143) (23,611) (52,012)
Consolidated
Tax Labor Civil Total
(+) Monetary restatement (5,028) 6,547 4,040 5,559
(-) Reversal of provision not used (6,011) (9,705) (1,257) (16,973)
The provisions reflect management’s best current estimate, which is based on information, external
counsel has updated analyses and outcomes of previous legal proceedings in which the Company was defendant.
TOTVS’s risk monitoring and control constantly review this estimate. In 2018, a provision for success fees for
R$1,652 was recorded.
b) Judicial deposits
The judicial deposits bound and not bound to provisioned lawsuits are stated below and are recorded under
noncurrent assets in the Company’s financial statements:
Judicial deposits 2018 2017 2018 2017
Tax 4,678 8,719 14,113 17,897
Labor 33,883 27,722 38,436 29,823
Civil 12,610 12,766 13,416 13,407
51,171 49,207 65,965 61,127
Page 62 of 74
20.2. Possible contingencies
In addition, the Company and its subsidiaries are involved in other lawsuits, in which the risk of loss,
according to external lawyers and management, is possible, for which no provision has been recognized, as
follows:

Nature 2018 2017 2018 2017
Tax 118,507 107,517 154,953 137,140
Labor 151,820 127,544 160,326 161,978
Civil 295,108 245,092 315,507 272,499
565,435 480,153 630,786 571,617
The summary of main proceedings in progress is presented below.
Tax
As a result of inspection procedures of the Federal Revenue Service (RFB) in 2006, RFB issued a tax-
deficiency notice for understanding that the Company made payments to unidentified beneficiaries, levying the
withholding income tax (IRRF) on said amounts, and identified expenses allegedly not proved, adding the
respective amounts back to taxable profit. The tax deficiency notice was challenged and is currently awaiting
judgment of voluntary appeal. The restated amount for this lawsuit was R$12,301 at December 31, 2018
(R$11,613 at December 31, 2017).
In 2014, a tax deficiency notice was issued against the Company due to alleged joint liability for payment of
ICMS on untaxed outflows for installing outflow control software at the taxpayer (customer). TOTVS was
considered jointly liable because the Company installed at the taxpayer a software that controls outflow of goods.
The tax deficiency notice was challenged, with decision partially favorable to TOTVS, and currently awaits
judgment in the higher administrative court. The restated amount for this lawsuit at December 31, 2018 was
R$16,726 (R$15,791 at December 31, 2017).
A tax deficiency note issued by the Federal Revenue Service of Brazil requiring payment of IRPJ and CSLL on
presumed ICMS credits granted as subsidy by the State Government of Paraná in the years 2007 through 2009 to
the subsidiary Bematech. The lawsuit currently is at the Administrative Council of Tax Appeals (CARF). The restated
amount was R$26,345 at December 31, 2018 (R$24,627 at December 31, 2017).
In 2012, the Company offset debts with CSLL negative balance, but offsets were fully disallowed. The
statement of discontentment is pending judgment in the lower administrative court. This process is classified as
having a possible likelihood of loss by our legal advisors and the restated amount was R$11,478 at December 31,
2018 (R$10,836 at December 31, 2017).
Tax Execution distributed in 2002 with discussion of Social Security Contribution due to the overestimation
relative to the period from 1995 to 1999. The restated amount was at December 31, 2018 was R$ 10,294 (R$ 9,342
at December 31, 2017).
Page 63 of 74
The remaining tax cases assessed as possible losses deal with recovering debt, which the Company considers
improper. These cases totaled R$77,809 at December 31, 2018 (R$77,119 at December 31, 2017).
Labor
Labor lawsuits assessed as possible losses refer to lawsuits filed by former employees of the Company who
seek labor dues, as well as service provider companies, seeking recognition of both employment relationship and
other labor dues.
One of the individually significant tax cases is a lawsuit filed by the labor union challenging the application
of labor routines. The amount claimed by the plaintiff restated on December 31, 2018 is R$21,638 (R$18,681 at
December 31, 2017). The Company filed its defense challenging the merits of the allegation of the union and the
amount involved. In November 2018, the case was dismissed as totally unfounded, however is currently awaiting
judgment of the appeal brought by the labor union.
The other labor lawsuits totaled R$138,688 at December 31, 2018 (R$143,297 at December 31, 2017), there
being no other individually significant cases.
Civil
The civil lawsuits assessed as possible losses relate mainly to lawsuits filed by customers alleging problems
in the provision of services offered to clients, application of standard price increase, and application of grace
period in agreements rescinded and improper charges.
Notable among the individually significant cases are:
(i) Action for damages due to information filed against agency agreement, in addition to moral and
material damages. The action, which involves the updated amount of R$94,861 at December 31,
2018 (R$80,168 at December 31, 2017), is in the initial stage and was deemed as possible loss.
(ii) Action for alleged emotional distress and pecuniary damage was filed due to commercial problems
with former franchisees. The updated amount claimed at December 31, 2018, deemed as possible
loss, is R$16,741 (R$14,171 at December 31, 2017). The action is in evidentiary stage and the
Company has already filed due defense.
(iii) Civil lawsuit filed by a customer alleging problems resulting from the product implemented, which
would have caused damages. The updated amount claimed at December 31, 2018, deemed as
possible loss, is R$23,893 (R$20,224 at December 31, 2017). The lawsuit is in the trial stage and the
Company has already filed due defense.
The other suits totaled R$180,012 at December 31, 2018 (R$152,864 at December 31, 2017), there being
no other individually significant cases.
Page 64 of 74
21. Equity
a) Capital
As at December 31, 2018 and 2017, the Company’s capital was composed of 165,637,727 shares issued and
fully paid common registered shares, with no par value, as follows:
2018 2017
Shareholders Shares % Shares %
LC-EH Empreendimentos e Participações S.A. 26,760,990 16.16% 26,760,990 16.16%
Fundação Petrobrás de Seguridade Social - Petros 16,042,359 9.69% 16,042,359 9.69%
Genesis Asset Managers LLP 10,560,540 6.38% 8,436,429 5.09%
Kinney Asset Management, LLC 8,371,054 5.05% 1,951,990 1.18%
Laércio José de Lucena Cosentino 2,186,091 1.32% 1,950,616 1.18%
Ernesto Mário 16,810 0.01% 16,810 0.01%
CSHG Senta Pua Fia 45,400 0.03% 43,500 0.03%
Others 99,468,392 60.05% 108,203,066 65.33%
Outstanding shares 163,451,636 96.68% 163,405,760 98.65%
Treasury Shares 2,186,091 1.32% 2,231,967 1.35%
Total in units 165,637,727 100.00% 165,637,727 100.00%
On April 05, 2018, the General Shareholders' Meeting approved a capital increase with a retention reserve
of R$989,841, with the capital stock being R$1,041,229. Additionally, within the authorized capital limit, and
pursuant to the plans approved by the General Meeting, the Board of Directors may grant stock options to the
Company’s executives and employees, and to executives and employees of other companies that are direct or
indirect subsidiaries of the Company, with no preemptive right to shareholders.
b) Capital reserves
The balance of capital reserves at December 31, 2018 and 2017 was broken down as follows:
2018 2017
Goodwill reserve (a) 99,260 99,260
Goodwill reserve due merger 14,330 14,330
Premium on acquisition of non-controlling interest (25,518) (25,518)
Debentures converted into shares (fair value) (note 17) 44,629 44,629
Stock option plan (note 22) 37,206 32,378
169,907 165,079
(a) The goodwill reserve amount of R$99,260 is composed of R$31,557 relating to payments made in 2005 and R$67,703 relating to
corporate restructuring with Bematech.
Page 65 of 74
c) Treasury shares
As at December 31, 2018 and 2017, the "Treasury Shares" item was as follows:
Average price
Number of shares Value (in
per share (in
(units) thousand)
reais)
Balance at December 31, 2016 2,292,775 R$73,443 R$32.03
Used (60,808) (R$1,948) R$32.03
Used (45,876) (R$1,469) R$32.03
In the year ended December 31, 2018, the use of 45,876 treasury shares by the stock options plan consumed
R$1,469 from the capital reserve.
22. Dividends and Interest on Equity
The Annual Shareholders Meeting held on April 5, 2018 approved the distribution and payment of dividends
related to fiscal year ended December 31, 2017, in the amount of R$5,442 paid starting from May 9, 2018.
On July 25, 2018, the Board of Directors authorized distribution and payment of dividends and interest on
equity, relating to the 1st half of 2018, amounting to R$17,978 and R$14,709, respectively. The dividends and
interest on equity were paid as of October 3, 2018.
On December 21, 2018, the Board of Directors authorized the distribution and payment of interest on equity
to the Company’s shareholders, in the amount of R$13,076, to be calculated towards to the minimum mandatory
dividend for the year ended December 31, 2018 to be paid as of May 9, 2019.
Parent Company
2018 2017
Net income for the year - Company 59,548 92,981
Accrual of legal reserve (article 193 of Law No. 6404) (2,977) (4,649)
Opening balance of CPC 47 e CPC 48 (7,968) -
Net income after legal reserve allocation 48,603 88,332
Minimum mandatory dividend – 25% 14,143 22,083

Additional dividends proposed by management 31,620 33,705
Dividends proposed by management 45,763 55,788
Payment:
Interest on equity 27,785 50,346
Dividends 17,978 5,442
45,763 55,788
Number of outstanding shares at December 31 163,451,636 163,405,760
Dividends and interest on equity per thousand shares - in reais 0.2800 0.3414
Page 66 of 74
The balance of dividends and interest on equity payable of R$13,902 on December 31, 2018 (R$18,487 at
December 31, 2017) includes the distribution of the year, as presented above, as well as the residual balance of
previous years.
Interest on equity is a part of dividends, which is deductible for purposes of Brazilian tax law. It is, therefore,
reported in different lines in order to show the income tax effect.
Mandatory minimum dividends are shown in the statement of financial positions legal obligations
(provisions in current liabilities), and dividends in excess of this minimum as reserve in a special line in the
statement of equity.
The capital budget proposed for 2019 to be submitted to the Annual Shareholders Meeting, allocates the
balance in the amount of R$2,840 in the reserve account to retained earnings, for the following:
Investments: 2019
Investments in property, plant and equipment’s and 78,529
intangible assets
Investments in strategic projects 5,343
Total investments 83,872
Sources:
Retained earnings reserve on December 31, 2018 2,840
Operational resources to be generated from operating
and financing activities for the next year (unaudited) 81,032
Total sources 83,872
23. Share-based compensation plan
The Company measures the cost of transactions settled with shares to its employees based on the fair value
of the shares on the grant date.
The Incentive Plan based on Shares of the Company establishes rules for certain employees and directors
of TOTVS or other companies under its control so they can acquire shares of the Company through the grant of
shares, thereby aligning over the medium and long terms, interests of the beneficiaries and shareholders’
interests, broaden the sense of ownership and commitment of the executives through the concept of investment
and risk, tying the granting of long-term incentives to the short-term results of the Company and the executives,
and introduce the concept of a "Partners Program" which strengthens the power of retention of select strategic
group. The Plan is administered by the Board of Directors of the Company, which establishes grant programs
annually, and according to the rules of the Company's Code of Ethics, managers do not participate in the decisions
of the plan that directly benefit them.
Page 67 of 74
Under the current plan grants to beneficiaries the right to restricted shares that are divided into two
programs:
(i) Regular restricted shares: the participants (employees subject to CLT regime or statutory employees)
shall have the right to receive the Restricted Shares of the Regular Program and the Company shall be
obligated to transfer such Restricted Shares of the Regular Program at the end of the Grace Period of
the Regular Program, to eligible participants based on performance appraisals. During the Grace Period
of the Regular Program, participants will not be entitled to receive dividends or interest on equity in
connection with the Restricted Shares.
(ii) Partner program: the participants in this plan shall have the right to receive the Restricted Shares of
the Partner Program and the Company shall be obliged to transfer such Restricted Shares of the Partner
Program at the end of the Grace Period of the Partner Program, provided the Participant has and
maintains, on the date of granting of Restricted Shares, on a continuous and uninterrupted basis,
including on the date of delivery of the Restricted shares, in accordance with the criteria established in
the Agreement, an amount equal to twelve (12) fixed monthly gross salaries invested in Company
shares. During the Grace Period of the Partner Program, participants will not be entitled to receive
dividends or interest on equity in connection with the Restricted Shares.
(iii) Discretionary Bonus in Restricted Shares: This plan enables the Board, within the established limit for
dilution of shares, in order to attract and retain certain key personnel of the Company and/or its
subsidiaries, at its sole discretion, to use any remaining balance of Restricted Shares under this Plan
for additional grants to participants, in a restricted number, based on reports from the Personnel and
Compensation Committee.
The fair value of options granted is estimated on the grant date based on the Black-Scholes option pricing
model, whereas for restricted shares, the fair value is the market value of each one on the grant date. The main
events relating to plans in force, the variables used in the calculations and the results are:
Fair Value Assumptions

Grant
Expectation:
Number of Exercise price in Fair value of shares Free interest
Date Dividends Volatility
options/shares reais in reais rate risk Term Maturity
02.20.15 225,425 R$35.60 11.36 2.60% 29.61% 12.75% 3 years
02.20.15 28,161 - 33.27 2.60% 29.61% 12.75% 3 years
04.02.15 33,751 R$35.60 12.12 2.60% 29.61% 13.00% 3 years
04.02.15 9,468 - 34.06 2.60% 29.61% 13.00% 3 years
03.18.16 59,281 - 29.02 2.80% - - 3 years
03.18.16 117,015 - 29.02 2.80% - - 3 years
03.18.16 3 years and 10
272,142 - 28.37 2.80% - -
months
02.20.17 220,472 - 23.54 2.60% - - 3 years
05.04.18 661,750 - 31.15 1.80% - - 3 years
11.26.18 24,345 - 25.19 1.80% - - 6 months
11.26.18 24,345 - 24.94 1.80% - - 18 months
Page 68 of 74
Changes in options in the year are shown below:
December 31, 2018 December 31, 2017

Restricted Total equity Restricted Total equity
Share options Share options
shares instruments shares instruments
Average Average
price Number (in units) price Number (in units)
(in reais) (in reais)
Balance of options at
beginning of year 37.73 647,689 626,949 1,274,638 34.40 799,127 448,438 1,247,565
Transactions:
Exercised 2.38 (22,231) (34,815) (57,046) 0.01 (59,209) - (59,209)
Granted - - 710,440 710,440 - - 220,472 220,472
Cancelled 35.60 (8,901) (220,935) (229,836) 34.46 (34,055) (41,961) (76,016)
Expired 41.07 (404,332) - (404,332) 33.81 (58,174) - (58,174)
Balance of shares at end
of year 34.11 212,225 1,081,639 1,293,864 37.73 647,689 626,949 1,274,638
At December 31, 2018, there were 212,222 vested options, since the period of 36 months had already elapsed.
The cumulative effect in the year ended December 31, 2018 was R$6,297 (R$4,950 at December 31, 2017),
recorded as share-based compensation expenses.
24. Segment information
The presentation of information by operating segment is consistent with the internal report provided to the
Company’s main operational decision maker. In 2018, there was a change to the vision with which the Company’s
Management evaluates the business down to two business units: software and hardware.
Information on the results of each reportable segment is in the table below:
Software Hardware Total

2018 2017 (ii) 2018 2017 (ii) 2018 2017 (ii)
Net revenue 2,111,160 1,992,911 209,109 234,419 2,320,269 2,227,330

(-) Cost (739,210) (715,470) (145,359) (148,006) (884,569) (863,476)
Gross profit 1,371,950 1,277,441 63,750 86,413 1,435,700 1,363,854
Research and Development (382,078) (343,373) (14,517) (13,720) (396,595) (357,093)
Sales and marketing expenses (386,150) (384,309) (38,634) (47,310) (424,784) (431,619)
General and administrative expenses (228,165) (234,704) (15,540) (14,741) (243,705) (249,445)
Provision for expected losses (36,992) (31,970) (6,372) (4,725) (43,364) (36,695)
Government subsidy - - 7,801 6,275 7,801 6,275
Other operating income (expenses) 9,381 (1,110) (88,301) (2,925) (78,920) (4,035)
Profit (loss) before financial result
and depreciation and amortization 347,946 281,975 (91,813) 9,267 256,133 291,242
(i) Includes hardware depreciation costs of R$3,823 and R$3,320 at December 31, 2018 and 2017, respectively.
Page 69 of 74
(ii) Information per segment reported in the financial statements for the fiscal year ended 2017 were adjusted for comparison
purposes with 2018.
Information by Geographical Location

– Net Revenue
2018 2017
Brazil 2,242,993 2,142,289
International market 77,276 85,041
Total 2,320,269 2,227,330
Information on assets and liabilities by segment is not divided by business unit and is not regularly presented to
the Management.
25. Earnings per share
Basic earnings per share is calculated by dividing net income for the year (attributed to the parent
Company’s common shareholders) by the weighted average number of common shares outstanding in the year.
Diluted earnings per share is calculated by dividing net income attributed to the holders of the Parent
Company’s common shares by the weighted average number of common shares available in the year plus the
weighted average number of common shares that would be issued if all the potentially diluted common shares
are converted into common shares:
2018 2017
Basic earnings per share
Numerator
Net income for the year assigned to the Company’s shareholders 59,548 92,981
Denominator (in thousands of shares)

Weighted average number of common shares outstanding 163,434 163,384
Basic earnings per share – in reais 0.3644 0.5691
2018 2017
Diluted earnings per share
Numerator
Net income for the year assigned to the Company’s shareholders 59,548 92,981
Denominator (in thousands of shares)

Weighted average number of common shares outstanding 163,434 163,384
Weighted average number of stock options 1,320 1,339
Weighted average number of common shares adjusted according to
dilution effect 164,754 164,723
Diluted earnings per share – in reais 0.3614 0.5645
Page 70 of 74
26. Gross sales revenue
Below is information about gross revenue and respective deductions for calculation of net revenues
presented in the Company’s Statements of profit or loss for the years ended December 31, 2018 and 2017.

Gross revenue 2018 2017 2018 2017
Softwares 1,774,468 1,793,052 2,398,680 2.255.169
License fees 149,706 153,944 203,198 191,084
Subscription 1,201,329 1,171,418 1,580,843 1,477,926
Service 423,433 467,690 614, 639 586,159
Hardware - - 264,608 287,263
Total 1,774,468 1,793,052 2,663,288 2,542,432
Cancellations of sales (20,494) (10,575) (37,841) (25,896)
Sales tax (195,861) (199,709) (305,178) (289,206)
Deductions (213,671) (210,284) (341,418) (315,102)
Net revenues 1,558,113 1,582,768 2,320,269 2,227,330
27. Expenses by nature
The Company presents below the information on operating expenses by nature for the years ended
December 31, 2018 and 2017.

Nature 2018 2017 2018 2017
Salaries, benefits and payroll charges 685,814 694,120 961,475 933,519
Outsourced services and other inputs 382,591 401,513 671,844 675,867
Commissions 143,673 124,056 159,082 147,573
Depreciation and amortization 93,774 97,724 133,214 150,894
Provision for contingencies 47,591 35,970 50,577 34,046
Rents 35,679 27,455 45,346 43,251
Provision of expected losses 24,226 23,777 43,364 36,695
Provision for impairment - - 87,023 -
Other 26,038 35,399 41,602 61,817
Total 1,439,386 1,440,014 2,193,527 2,083,662
Page 71 of 74
28. Financial income and expenses
The financial income and expenses incurred for the years ended December 31, 2018 and 2017 were:

2018 2017 (i) 2018 2017
Financial income
Short-term investments yield 17,651 14,480 26,853 25,303
Interest received 5,617 6,446 7,000 8,125
Inflation adjustment gains 2,302 6,911 5,576 10,017
Adjustment to present value 1,553 3,144 1,702 3,165
Exchange gains (669) 692 3,187 1,422
Other financial income (1,236) 723 (1,738) 631
25,218 32,396 42,580 48,663
Financial expenses
Interest incurred (49,576) (53,605) (52,706) (60,822)
Inflation adjustment losses (10,235) (11,463) (13,252) (9,113)
Bank expenses (4,662) (5,101) (6,547) (7,078)
Discounts granted (502) (351) (819) (3,639)
Adjustment to present value of liabilities (808) (2,354) (1,663) (3,537)
Exchange losses (2,147) (912) (5,329) (2,449)
Other financial expenses - (528) (1,766) (1,472)
(67,930) (74,314) (82,082) (88,110)
Net financial income (expenses) (42,712) (41,918) (39,502) (39,447)
(i) There was a reclassification of some items between the lines of the financial result for better
comparability with the information of 2018.
29. Private pension plan – defined contribution
The Company offers the TOTVS Private Pension Plan, managed by Bradesco Seguros, which receives
contributions from the employees and the Company, described in the Program Membership Agreement. The three
types of contributions are:
 Basic Contribution – corresponds to 2% of the employee’s salary; in case of executive officers, the
contribution ranges from 2% to 5%.
 Voluntary Contribution – made exclusively by employees, with no matching contribution by the

Company;
 Company Contribution – corresponds to 100% of the basic contribution. The Company is allowed to
make extraordinary contributions, in the amounts and with the frequency it chooses.
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30. Commitments assumed
30.1 Investments in Research and Development
Bematech Hardware has a commitment to invest annually in information technology research and
development activities in Brazil. These commitments are tied to the tax benefits provided for in the Information
Technology Federal Law and government subsidy granted by the state of Paraná.
Calculation of the amount to be invested in research and development is around 3% of the net revenue
from sales of computers in the domestic market and 4% of net revenue from the sale of other products in the
domestic market, in accordance with applicable laws. In this context, Bematech Hardware will maintain the Basic
Production Process (PPB) of products authorized under Interministerial Ordinances of the Ministry of
Development, Industry and Trade (MDIC), and at December 31, 2018, the invested amount is R$3,451 (R$4,546 at
December 31, 2017), with a balance of R$654 to be realized in the first quarter of 2019.
30.2 Operating lease
The Company and its subsidiaries have diverse operating lease agreements for offices, as well as its current head
office, as mentioned in Note 11.2, in addition to sheds for the plant and warehouses. These lease agreements
have an average duration between 5 and 10 years, with each of them renewable at the end of the lease period at
market rates. Most of the agreements can be canceled upon notice sent between 90 and 180 days in advance.
As at December 31, 2018, the total amounts equivalent to the full period of the contracts were:

Up to one year 34,736 43,980
One to five years 124,334 140,708
Over five years 92,101 95,032
Total 251,171 279,720
Amounts above refer to the future operating lease payments and were not updated to present value.
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31. Insurance coverage
The Company and its subsidiaries, based on the opinion of their advisors, maintain insurance coverage at
amounts deemed sufficient to cover risks on their own and leased assets, and civil liability risks. Insured assets
include own and leased vehicles, as well as buildings where the Company and its subsidiaries operate.
As at December 31, 2018, the main insurances coverage items taken out were:
Insurance Effective Maximum limit of

Type
Company From To Responsibility
Comprehensive corporate AIG + ACE June/2018 June /2019 R$254,524
General civil liability ACE June /2018 June /2019 R$8,000
Itaú Seguros S.A.
Vehicles (i)
e Tokio Marine January/2018 May /2019 (*)Fipe Table
D&O - Liability insurance of directors (ii) AIG Seguros June /2018 June /2019 R$100,000
E&O – Liability insurance of professionals AIG Seguros June /2018 June /2019 R$10,000
International transportation Mapfre November/2018 November /2019 US$1,500
(i) Market value determined by FIPE - Institute of Economic Research.

(ii) For operations in Mexico, Argentina and the United States, the local policy issued in each country with coverage in the
amount of US$1,000.
32. Subsequent events
In January 2019, the Company was sued for the alleged underpayment of ISS in the calendar year 2014,
under the allegation of misrepresentation in the rates of the services it provides, in the approximate amount of
R$16,300 assessed as possible loss. Within the legal term, there will be administrative challenge of the assessment
notices.
* * *
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TOTVS S.A.

Financial Statements for the fiscal years ended

Audit Committee´s report ................................................................................................................ 18

Financial statements ...................................................................................................................... 20

MANAGEMENT REPORT AND COMMENTS ON THE COMPANY’S PERFORMANCE

MESSAGE FROM THE BOARD

MESSAGE FROM THE MANAGEMENT

TOTVS believes in a Brazil that makes it happen!

OPERATING AND FINANCIAL PERFORMANCE

Recurring Revenue – grew 5.4% in 2018. This

Revenue - The year-on-year decline in Hardware Revenue,

Gross Margin – the reduction of 600 basis points in 2018 is

RESULT AFTER EBITDA

RELATIONSHIP WITH INDEPENDENT AUDITORS

To the Shareholders, Board of Directors and Officers of

Basis for opinion

Key audit matters

How our audit addressed this matter

As part of our audit procedures performed, among others, we highlight:

Goodwill impairment analysis

Our audit procedures included, among others:

Statements of value added

São Paulo, February 11, 2019

ERNST & YOUNG

Luiz Carlos Marques

AUDIT COMMITTEE’S REPORT

Annual Financial Statements of 2018:

São Paulo, February 6, 2019

Mauro Rodrigues da Cunha

Paulo Sergio Caputo

Noncontrolling interests - - 1,178 183

Total assets Total liabilities and equity

The accompanying notes are an integral part of these financial statements.

Cost of software (555,505) (569,595) (739,210) (715,470)

Operating income (expenses)

Financial income (Note 28) 25,218 32,396 42,580 48,663

Net income for the year 59,548 92,981 60,643 93,258

Net income attributable to controlling shareholders 59,548 92,981 59,548 92,981

The accompanying notes are an integral part of these financial statements.

Net income for the year 59,548 92,981

Net income for the year 60,643 93,258

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

Parent Company Consolidated

1 – REVENUES 1,741,498 1,759,104 2,592,323 2,482,079

2 - RAW MATERIALS ACQUIRED FROM THIRD-PARTIES

3 - GROSS VALUE ADDED (1-2) 1,167,643 1,197,565 1,623,797 1,624,593

4 - DEPRECIATION AND AMORTIZATION (93,774) (97,724) (133,214) (150,894)

6 - VALUE ADDED RECEIVED THROUGH TRANSFERS 13,627 23,877 42,063 48,594

7 - TOTAL VALUE ADDED TO DISTRIBUTE (5+6) 1,087,496 1,123,718 1,532,646 1,522,293

8 - VALUE ADDED DISTRIBUTION 1,087,496 1,123,718 1,532,646 1,522,293

The accompanying notes are an integral part of these financial statements.

1. The Company and its operations

2. Basis of preparation and presentation of the financial statements

2.1. Compliance statement

2.2. Basis of preparation and presentation

2.3. Consolidation basis

Direct interest: % Interest

Indirect Interest: % interest

All intercompany balances and transactions were eliminated in consolidation.

2.4. Summary of significant accounting practices

a) Translation of balances denominated in foreign currency

b) Fair value measurement

(i) Amortized cost

(ii) Financial assets at fair value through profit or loss

d) Accounts receivable from customers