São Paulo, March 18, 2020 – LINX S.A. (B3: LINX3; NYSE: LINX), leader and specialist in technology for retail, informs its shareholders and the market in general of possible economic and financial impacts arising from the dissemination of the new Coronavirus (COVID-19) around the world.
According to the Brazilian Ministry of Health, the spread of COVID-19 was first reported in Wuhan, mainland China, on December 31, 2019 and later spread to several countries. Since then, several cases of contagion and fatalities have been reported by world authorities and by the media. On March 11, 2020, the World Health Organization (WHO) declared a global pandemic.
Still in March, Linx developed and put into practice plan comprising several preventive measures necessary to minimize the effects of the pandemic, among which we highlight:
- Creation of a Crisis Committee to continuously assess the evolution of COVID-19, possible impacts and necessary measures, in addition to monitoring all determinations made by the competent authorities in the regions where it operates;
- Definition of home office for all Employees who made an international trip and recently returned to their respective countries, respecting the quarantine period recommended by doctors;
- Suspension or postponement of national and international business trips; and
- Definition of interleaved home office for all employees since March 16, aiming to reduce the population density in their offices as a strategy to mitigate the risks of virus transmission.
So far, Linx has not suffered any material impact caused by the spread of the virus. Due to uncertainties regarding the dynamics of the outbreak’s evolution, the effects on the economic activities of our customers and suppliers and the measures to be adopted in Brazil and in other markets in which we operate, it is impossible to predict the total impact that the pandemic will have on the global economy as well as on our business.
In the current scenario, Linx has a certain degree of protection in financial terms considering that around 80% of revenues are monthly fees generated by the use of management software and integrated services, besides being capitalized. The migration of solutions to the cloud environment in recent years also offers resilience to the Company, since virtually all solutions can be accessed remotely.
However, negative impacts on the economy may result in possible losses for Linx, temporary or not, starting in the second half of March. Such impacts may cover mainly, but not only, delinquency levels, new sales, projects implementation, store activation, revenue linked to the volume of transactions (mainly Linx Digital and Linx Pay) and churn resulting from store closures. A strong exchange rate devaluation can influence cost levels, especially those linked to the public cloud. In addition, it is not possible to measure impacts on the health of our Employees, even if all measures have been taken.
On the other hand, there is the possibility of Linx contributing to its customers through initiatives related to retail digital transformation, such as e-commerce solutions, omnichannel (OMS) and delivery solutions to restaurants (Delivery App). Another opportunity is its strong presence in the verticals of Pharma, Gas Stations and convenience stores, segments that may eventually have increased demand.
Linx continues to constantly assess impacts on operations and is committed to informing possible new scenarios and necessary measures. The Company continues to operate normally, reaffirming its commitment to the safety of its Employees ensuring services to Customers and Suppliers, and consequently, to the business.