Good morning, everyone. Welcome to our video conference for the third quarter of 2023 results. I'm Sérgio Serio, Head of IR, and with me, our CEO, Dennis, CFO, Maia, VP of Customer Service and Relationship. As usual, in the first part, we will present the most important highlights of the last quarter's results, and then we will begin the Q&A session. Please note that participants who want to pose question live to raise their hands by pressing the button at the bottom of the Zoom platform. Or if you prefer to submit your question in writing, please use the Q&A Zoom button, and we will also try to answer them live or via IR team.
Before we proceed, we would like to clarify that statements made during this video conference regarding TOTVS's business outlook, projections, and operational and financial goals are belief and assumptions of the company's Management, as well as information currently available. Future considerations are not guarantees of performance, they involve risks, uncertainties, and assumption as they relate to future events, and therefore depend on circumstance, circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions, and other operational factors may affect TOTVS's future performance and may lead to results that differ materially from those expected in such future considerations. Dennis will start now from slide three, and I will return during the Q&A session.
Thank you, Sérgio. Good morning to all of you that join us in this video conference.
Before discussing the results, I want to publicly welcome Vivian Broge, who has joined us as VP of HR and Marketing, and Gustavo Avelar, who is with us in the new VP of Customer Journey. In HR and Marketing, Vivian will play a role in contributing to the ongoing evolution of our culture and people, as well as the TOTVS brand for customers, TOTVS, and other stakeholders. With the VP of Customer Journey, we are taking another step in the execution of our 3D Strategy, where Avelar will be responsible for leading the customer journey across the Business Dimensions, leading the design and the deployment of cross-dimensional offerings.
We also completed the acquisition of TOTVS IP franchise, which is part of the ongoing balancing between direct and channel operations in different regions of the country, aiming to accelerate and optimize the capture of growth potential in the Business Dimensions. It's important to reiterate that franchises are of the most important for TOTVS strategy and will continue with us as always. Finally, last night, we announced a new share buyback program of 18 million shares, which is 3.5% of our free float. The main goal of this movement is to maximize shareholders' returns. Considering current cash position and strong cash generation, we are confident that the program will promote efficient capital allocation without compromising our ability to execute the extensive M&A pipeline of the company. Now, about the result. Well, the third quarter was very good.
We made progress in all indicators, even when we compare it to past periods of strong performance, as we will mention as of slide 4. It's important to note that starting this quarter and pro forma comparative basis, our consolidated figures now include the results of Techfin by 50%. As we can see in the chart, we continue improving our results without sacrificing the balance between growth and profitability. The balance also occurs with the dimensions where we now share the EBITDA margins of the Management and Business Performance dimensions, which we will discuss further on.
Regarding growth, the consolidated net revenue advanced 19% year-over-year and 8.2% quarter-over-quarter, totaling BRL 1.2 billion, even with a 12, with IGP-M accumulated during the last 12 months, remaining negative for several months, reflecting excellent performance in the three dimensions. Regarding profitability, adjusted consolidated EBITDA was 295% with an adjusted EBITDA of 24.5%, which is 130 basis points higher than the second quarter. The highlights here were the EBITDA of Management, a strong recovery, which not only closed the quarter with positive EBITDA, but also showed year-over-year growth. It is also worth mentioning that we generated BRL 380 million in operating cash during this quarter, which led to the operating cash generation over the EBITDA ratio to reach 134%.
Cash profit was BRL 215 million, 29% higher than Q3 of 2022, and 62% than Q2 of this year. This is special performance that put TOTVS in a differentiated position, allowing us to continue investing in building competitive advantages to capture the opportunities in the Brazilian technology market, which continues to... expand positively. Now I'll give it over to Apendino, that will talk about Management dimensions from slide five. Apendino, you have the floor. Thank you, Dennis, and good morning to everyone. The Management dimension recorded another consistent quarter, with a 16% increase year-on-year in net revenue. The performance is primarily a result from recurring revenue, which grew by 18% in the same period, and represented 86% of the dimension's revenue, which highlights being 34% growth.
Cloud revenue and new SaaS signings Management ARR ended the quarter at over BRL 4.1 billion, with an organic net addition of BRL 147 million, reflecting mainly the strong sales volume that we have maintained, both with existing customers and new ones. The combination of the sales performance with the sharp reduction in inflation led to the share of the volume component increasing from 85%-88%. It is also worth noting, maintenance of the renewal rate above 98%, and the increase in the recurring revenue and ARR revenue that rose from 87.1% to 88.1%. Slide six. The adjusted EBITDA ended the quarter at BRL 276 million.
This is an 18% growth and a 40 basis point increase year-over-year in margin, which reached 26.6%, mainly due to the 18% year-over-year expansion of recurring revenue. In nine months, EBITDA margin reached 26.8%, one of the highest levels of our historic series, the highest EBITDA since I joined TOTVS in 2013. This is good. We continue focusing on providing our distribution network with data intelligence throughout our InfoData platform, and on reducing the total cost of ownership, whether through better alignment of our solution with customer needs and through remote implementations and resources sharing among operations. We believe that with these actions, we can further expand our recurring customer base.
In this regard, the consolidation carried out by our franchises and the constant pursuit of the optimal balance between company-owned and franchised operations, have been essential in supporting our growth. Now, Mayia will talk about business performance and tech dimensions from slide 7.
Thank you, Apendino. Good morning, everyone. Let's begin with business performance. The net revenue of this dimension was up 38% year-over-year, and 14% quarter-over-quarter. This strong increase in revenue is directly connected to the evolution of the ARR that reached 462 million BRL, accounting for a 6% growth over the second quarter, and 40% over the third quarter, 2022. Once again, CRM sales and conversational sales grew significantly above the dimension's average, and are materializing the strategy transition of RD Station from single product to multi-product strategy.
As we see on the chart to your right-hand side, when we disconsider Tail, which is not part of this stack, multi-product from RD Station, the organic net addition of this dimension added to BRL 34 million in this quarter, the largest amount of the historical series of this dimension in business performance. As we mentioned in previous quarters, Tail is an operation that's still concentrated in key accounts, which brings about more volatility to the outcomes, besides the fact that the go-to-market strategy is more similar to the Management strategy. That's why we're reassessing our positioning and our strategy for the Tail in this operation.
On slide number 8, we can see that even though we're growing in an accelerated pace and having added default operations, this dimension is, and has been a profitable business, which is uncommon in the market that we see in Brazil, which is still fragmented.
Under this context, TOTVS is one of the main players, and we've been setting ourselves apart since we're building a full stack multi-product at RD Station to cater to the needs of the digitization of SMB. Now, I'll talk about the results of the TechFin dimension on slide number 9. Before we begin, it's important to remember the structure and the dynamics of this dimension after we closed the JV. As stated in the second quarter's earnings release, the TechFin dimension is made of two business with different characteristics and maturity levels. The first one is made by Supplier, a company that's been in the market for 20 years under a consistent business model, with low exposure to credit risk and high profitability.
However, the main cost is the funding cost, to which the average term has been higher as compared to the credit portfolio, which is shorter than a quarter. However, that's positive because that reduces the liquidity risk of the operation. On the other hand, variations in production because of the six-month seasonality, may result in variability in profitability, since the funding cost for one quarter is given. As we see with the JV, there is an important improvement in this dynamics between the portfolio origination and the funding, once the availability of funding has significantly increased, which allows us to increase and have a better and more efficient cash Management practice, and therefore, the final funding cost is lower. The second business is what we call internally, the organic Techfin. It has been built inside TOTVS three years ago with a huge addressable market.
On top of which, we're building unique competitive differentials with investments, so as to create a wider portfolio in the JV. Understanding this dynamic is essential, so we can really comprehend what the dimension is about. Having said that, let's look at the results. Number one, the funding net revenue for Techfin grew by 106% in this quarter-over-quarter, and 35% year-over-year. This increase was leveraged by the advance of 53% of the Techfin revenue, along with the reduction of 7.5% in our funding cost. The strong performance in revenue is associated to credit production, that increased by 16% quarter-over-quarter, connected to the agribusiness segment, that increased the average production term by about 11 days as compared to the second quarter, and by about 4 days as compared to the third quarter, 2022.
The funding cost reduction is mainly associated to some benefits that we already see in the JV. Number one, as we see on the slide in the lower part, the lower proportion of the portfolio carried by the supplier, using our own funding mechanisms with a lower cost as compared to the FIDC rate. And B, the better efficiency in the use of the supplier cash and FIDC, as we see in the lower left-hand side of the slide. All delinquency ranges of the portfolio from 1-90 days, saw a reduction. This low delinquency levels behavior from 30-90 days, has been underpinned in previous quarters, which resulted in this quarter of a reduction of 30 base points in default rates above 90 days.
We can also see in the chart on your right-hand side, that the increase in the overall delinquency rate in the financial system with micro, small, and medium-sized companies, has had reduced impact in the Supplier operation. Since the difference between the Brazilian average and Supplier average in this segment, has gone from 200 basis points in the second quarter to 240 basis points in the third quarter, 2023. On slide number 10, we see that the Techfin EBITDA ended the quarter at BRL 24.2 million, a 31% growth year-over-year, and changing the trend of negative EBITDA in the previous quarter.
This advance year-over-year and quarter-over-quarter happened because of the performance in Supplier, that moved from 17.4% of EBITDA margin quarter to 43.8% in the third quarter, as you see on the chart. Remember, in the second quarter, aside from the agribusiness segment seasonality, we saw a negative change or variation, especially in the steel chain industry, that added to the negative environment in the B2B credit market, reduced production, and therefore, the profitability in the operation. In the third quarter, we saw a normalization of this production and a recovery of profitability in the operations of Supplier. With that, I'll bring the floor back to Dennis, who will talk about the highlights of ESG on slide number 11. Over to you, Dennis.
Thank you, Maia. We ended the third quarter with the important acknowledgment for our ESG agenda.
Number 1, TOTVS and RD Station are ranked amongst the 150 best companies to work for in Brazil in the GPTW list. TOTVS was ranked 45 for companies that have between 1,000 and 10,000 employees, and RD Station was ranked 9 amongst companies that have a hundred to 1,000 employees. TOTVS was still amongst the 15 better positions in the I-Diversa Index, comprising 75 companies. This index was created by B3 to promote representation of underrepresented groups and underpin the ESG agenda. Finally, it's worth mentioning that TOTVS achieved the Transparency Trophy and ANEFAC for the third consecutive year. This trophy awards companies that provide the best earnings release of their financial statements. With that, I'll move on to the final slide, number 12, where we'll share some updates on the enterprise application software market over the past 10 years.
They show that the market has grown above the GDP rate and fast-tracked its pace in the past years.
... both in terms of Management as well as in terms of business performance. TOTVS has been growing above the average pace of these markets, which resulted in 120 base points in market share gain in Management, and 480 base points gain in market share for business performance. Aside from historical data, we see with regards to the current market, we also have up-to-date data in potential market on slide 13. When we look at the Management and business performance markets in Brazil, it's clear that we're talking about markets that's still far from maturity levels. However, for Techfin market, we can see that this is a huge market that, combined with a differentiated journey and portfolio, can be seen as an opportunity for growth that's quite relevant for the company. This data altogether show that we see a huge market opportunity.
Brazil has what it takes for a long journey in terms of investments, with relatively low expenses in IT and software. TOTVS is well positioned to capture this expansion, and we're confident that we've got a solid business model, and we also trust the trusted advisor position we hold along with our customers. With that, we'll move on to the Q&A session that's going to be mediated by Sérgio.
Thank you, Dennis. Now, just a quick reminder, during this earnings call, if you want to ask a question live, please raise your hand by using the button you see at the bottom part of your Zoom screen. You can also send your questions in writing by using the Q&A button on Zoom, and we'll try to address all those questions live. If not, our IR team will get back to you shortly. With that, we'll begin with Bernardo from XP. Bernardo, over to you.
Good morning. Congratulations for your result. Thank you for taking my question. I have two questions regarding the Techfin. One, the credit production that was highly relevant, if the growth in the revenue was a positive surprise in the quarter, especially in the context of Selic, with the JV starting now, you talked about the agro contribution that presents an important seasonality during the second semester. I would like more color regarding the relevance of the segment, trying to understand the recurrence. Thinking about the upcoming quarter and cost in Techfin, apparently, you're spending less than your guidance. Is there something contained here for the fourth quarter? Are there? Will you review the cost of your JV? If you could also elaborate on the funding cost, the recurrence of this lower cost. You had high efficiency during this quarter.
It would be interesting to understand this trend for the upcoming periods.
Okay, good morning. Okay, so let's start. Starting by your first question, when you ask about agro and Supplier. Well, yes, agro is highly relevant when we analyze the year as a whole. I believe that agro represents one fourth of the total credit production of Supplier. Nonetheless, as you have the seasonality element, that it is strong, especially in agro, when you see, for example, Q3, even Q4, the representation of agro uptick, there's an uptick, and as agro has another element, is the average term is longer. Well, with this, from the revenue generation point of view and profit point of view, yes, agro is this is really important for Supplier.
Now, from the recurrence point of view, the importance of agro has already existed for many years in Supplier, and we don't see this changing in the upcoming years. And this means that it is a recurrent industry in credit production and Supplier origination. It's important to highlight, this is a sector that, from the Supplier point of view, has a lot of seasonalities. The first semester is much weaker in terms of agro. Q3 is generally the strongest moment. Q4 is still an important quarter for agro, but as the harvest is shipped, there is less origination. This is why the first two Qs are lower. And the average term, although it's longer, as the second semester goes by, the first semester loses its relevance in the agro portfolio.
This is a historic dynamic, and we see no significant changes, at least in the short run. Now, OpEx, Maia, perhaps you would like to add something, if you wish. Our guidance is a guidance of the organic OpEx. It is not a guidance that includes Supplier. This is one thing you have to note. Number two is that we already had this organic operation up and running here in our guide. Although it's not mature, it already exists for three years, so we have an OpEx up and running. OpEx try to give us a longer visibility until the end of next year regarding the expectation of the increase of investment in order to build the new product portfolio. Of course, you will always have a certain level of unpredictability between one quarter to, from one quarter to another.
You will not always be assertive regarding the values, especially when we're talking about expenses. This being said, no, there is no investment postponements. The only thing is that, once again, we gave you a range. There can be a quarter where this value will be slightly short, well, perhaps in another one, it will be higher. Well, the intention of the guidance isn't to hit the bull's eye, it's just to give you guidance. And in terms of guidance, I believe that the OpEx of Q3 is a good indicator. Now, to finalize, in terms of our funding efficiency, yes, we do believe that this improvement is here to stay, so it is not something as specific from Q3. We have costs with new funding instruments, lower than the original FIDC of Supplier, and we also have efficiency.
These are the windows to adjust our funding, and this is. This has already been applied structurally. We always try to improve our efficiency. We always try to have instruments that drop the total funding costs and... But what you've seen on Q3 is something as structural for this operation. Just an add-on regarding the second question, regarding the guidance. We have been slightly short from our guidance in terms of our range, and we mentioned this in the release. The pace of contracting was slightly slower, so we believe. We maintain our guidance, but we believe that we will be able to operate within the range throughout time, and we will normalize this pace. And this will be seen in the future intervals. Bernardo? Okay, so we will... Okay, thank you. Your answers were pristine. Next question from Itaú.
Thiago, you can pose your question. So thank you very much for taking my question. Good morning to everyone. I also have two questions. I believe that the first one, I apologize to ask more details about the Techfin, but this is, this is what, you know, this is the, the point that people last night wanted to know more about. This is more the gross, the gross, revenue of funding. When you see origination year-on-year, it is similar, but the growth of revenue was extremely high. And the ratio that was used was, we would divide the revenue by origination, by the average portfolio, and here you could see an improvement in this line year over year, where the aggressive factor shouldn't, shouldn't, shouldn't be the main reason.
Although we're talking about seasonality, here, the average portfolio is part of this ratio, but this is not clear for me. I don't know if you could elaborate a little bit more on, on the reason for this strong revenue. My main question is because we want to understand how much we can transfer our spreadsheets for the, for the future. Not at this level, actually, but perhaps, I don't know, the, we can have an expansion in revenue in the next quarters. And the next question would be regarding the recent acquisitions, franchises, and Dennis is here. So as we're talking about two in a relatively short period, we question if there is going to be a change in strategy, how you see distribution? Will you consolidate your franchises or if you are, you see this as opportunistic moments?
I don't know, could you give us more details regarding these acquisitions and what to expect in the future? Okay, I am going to start by your second question, that would be regarding franchises, and then I can give it to my colleagues to talk more about Techfin. No, nothing has changed in our strategy regarding our franchises. We insisted in including this in our current release. So the relevance of our franchises is still the same. Our franchises are part of the life and the success of TOTVS. Not only the life, but the success of TOTVS.
So when we work with SMB, this demands from us great capillarity and a level of coverage and presence and relevance in each one of the corners of this country, and each minimally relevant city in this country, and we're absolutely sure that we will not be able to do this alone. So these two actions in Rio Grande do Sul and TOTVS IP, these are specific actions that will not change our strategy and the relevance of the franchises. Every now and then, we will make adjustments because one day you buy, then the next day you can sell a region. This is a constant tactic, effort, where you try to find the best adjustment and the best balancing in each one of our regions. Nonetheless, our strategy continues the same. I totally agree with you.
What we have done, we have consolidated our franchises, and we don't publish this. We had Cascavel. There was a consolidation in Paraná to consolidate our our franchise network. With this, we can expand in nearby countries. So it is something very specific. We had cases in the past where we sold territories to the franchises. This isn't published. This is a tactic. Of course, the franchises are a driver, and this will take place every now and then, according to the opportunities. All right? Okay. Regarding our revenue, you are right. The first reason. Well, the first motive is the average term, as production was similar from last year, and the average range was different. So we also have the portfolio breakout, the part of Supplier and the part of FIDC.
So if you pay attention, there has been an increase throughout the quarters, and during this quarter, there was more relevance in the Supplier portfolio and the, and the flexibility of Techfin and Supplier. Here, we can use their cash, and the Supplier can carry more portfolio. So revenue recognition is different from the one that we do at the FIDC throughout time. So yes, there are two elements, and this is important for you because many of you follow the monthly reports from FIDC. So as the Supplier portfolio gains more relevance, FIDC loses its relevance as a consequence. Only following up FIDC in these situations, well, doesn't allow you to have a complete view throughout the quarter. This is an important point that we have to highlight.
You know, as we have access to different funding modalities that are even cheaper and more efficient with the JVs, the follow-up of the monthly report of FIDC gives you less ability to follow up in an anticipated fashion what will be the performance of Supplier. So it is extremely important for you to be aware of this. I'm not saying that you shouldn't follow FIDC, but it will... But less and less, it will give you the visibility of what happens in the Techfin.
...That's clear. Thank you very much for your answers. Thank you, Thiago. Next question, Fred Mendes from Bank of America. Over to you, Fred.
Thank you very much, Sérgio. Good morning, everyone. I've got two questions. Congratulations on the amazing results once again. The first question, I mean, I apologize, but I wanted to insist on franchises, because there's been a consolidation from 52 to 15, and as far as we understand, that would already bring about a higher financial capacity for these franchises to expand and to invest. I think, Apendino talked about that. He talked about branding, but it seems to me that this is a contrary movement when we look at the main competitive edge of TOTVS, which is distribution.
What we consider is that if you have these franchises in your hands, that would be a good test to increase your cross-selling for business performance products or something along those lines. I wanted to understand what changes on a commercial level when you purchase the franchises. And the second question is with regards to Management. Thank you for sharing the margins, by the way, that is very helpful. What should we understand that these margins should be for the next years? Is there room for growth? I mean, we're concerned about the negative rate of IGP-M, but is there room to increase these margins since the IGP-M ratio is now normalized? Thank you,
Fred. Thank you for your questions. With regards to franchises, once again, there is no change in our strategy. None, whatsoever. Franchises still play the same role.
They are still as important as they were before, and let me tell you, the franchise's performance over the past two years has been quite strong. I mean, very, very good. I remember I said this in other opportunities, maybe three, four or maybe five years ago, that there was a gap in performance between the units we owned and the franchises. Our units performed better in different efficiency indicators, productivity indicators, and so forth. And we worked quite hard so as to evolve the franchises, and the peak of that was the consolidation. And the results that we achieved because of that work came quite fast. They came about actually faster than we imagined. So we believe franchises will still be as relevant as they were before in terms of coverage, in terms of production, in terms of how close we are to our customers.
Nothing changed, so there is no reason to change our strategy. Now, having said that, since franchises do not compete with other franchises and with our units, depending on the situation, let me talk about TOTVS IP as an example. We're talking about the countryside of São Paulo, comprising important regions of the state. Well, the state of São Paulo is quite large and quite important, so we do not have only one franchise. We're talking about TOTVS IP countryside of São Paulo, but there are other franchises that cover other regions of the state. Now, for TOTVS IP, let's look at the Campinas, Jundiaí, and Sorocaba regions. These are the three main clusters for TOTVS IP. These regions, Fred, are quite closely located to the metropolitan region of São Paulo, so they're close to our headquarters.
Now, what we've realized in past years is that when we are close to the headquarters or to a very relevant capital city, then our own operations show more advantages. May that happen because we work with larger customers, or maybe because we can count on the support of our headquarters, and of course, because of other elements, too, that are not worth mentioning right now. Now, the decision we made of acquiring TOTVS IP was a tactical decision for that specific region. We came to the conclusion that it made sense for this region to be on board with us, but maybe in one, two, or maybe 10 years, we can reverse this decision. There's no dogma here. What we try to do is to act as pragmatically as possible.
If we come to the conclusion that any franchise is not performing as they should, or that we could have a better performance for that particular region, then we'll try to make a tactical movement again. The opposite may also happen if things do not prove right. Once again, I have no concerns in that regard. To wrap up... Cross-selling is a strategy for TOTVS, not for our own operations. The franchises are absolutely prepared, and to be honest with you, sometimes they are even more prepared as compared to our own operations. Let me give you some concrete examples of that. When we partnered up with VTEX, that was the beginning of our journey in business performance back in 2019. The first units that really invested to be ready for cross-selling approaches with VTEX were the franchises.
I'm not sure you remember that, but many of the franchises bought agencies of deployment and sales for VTEX. No unit of ours did that. We didn't buy any VTEX agency. So no, there is no change in that regard. Once again, the franchises are absolutely prepared and enabled, and not only that, they actually sell more business performance than our own units. Now, let's touch on the Management margins. You know, Fred, the answer is yes. I think there is still room for improvement for our Management margins. As Apendino said, as a coincidence, this is the highest margin of the past 10 years since he joined us, but of course, there is room for improvement. The IGP-M rate, like you said, has been negative for a while.
That means our agreements have not been readjusted, but there is still adjustment in our total cost for payroll, so there is room for improvement. But of course, on the other side, on the other hand, there are many investments we're looking into. AI is gaining force, becoming more important. If we are to extract all the efficiency gains we can bring about with AI for our internal processes and include that to our products so our customers can also make the most of it. Of course, there are investments to be made, but again, from a structural standpoint, there is still room for us to improve our Management margins.
Great! That was very clear. Thank you, Dennis.
Thank you, Fred. Thank you, Fred. Next question by Leo Olmos from UBS. Leo, over to you.
Hello, everyone. Good morning. Congratulations on your results. Thank you for taking this question.
I have two questions. One is on strategy and another one is on this quarter's results. The first one is with regards to capital allocation. You announced a very big program. Can you please give us some color on how that interacts with your major capital generation at TOTVS, and what your strategies are to allocate this exceeding flow that you have, aside from repurchase? The repurchase program can be something continuous and can even grow. I can ask the second question later. Hello, Leo. The buyback program has to do with our cash position, of course, but of course, also connected to our cash generation capacity. Over the past 12 months, our cash generation has been quite strong above our EBITDA during this period. So I think that gives us the confidence we need to announce this buyback program.
It's the largest program the company has ever announced, and that does not mean the company will have less power to execute M&As. We think this is very important. We're still working on this pipeline, and this is quite critical to execute our 3D Strategy. I think Dennis mentioned this in the previous quarter or two quarters ago, that, of course, you don't have visibility on our M&A pipeline because you can only see that after M&As are announced. But a lot has been done for this pipeline, and of course, unfortunately, we're the only ones who can have access to this pipeline. But we're still confident that there is a great myriad of opportunities to work with if we do it properly. So that does not jeopardize what we do. The resources we allocate and generate still have the same destination.
It's a combination of the levels we've been working on a historical level and excess cash that is targeted at M&A specifically. For this particular case, what we saw is that considering the market circumstances and considering the performance of the company over the past years, there is a mismatch between the price behavior and the operational behavior in the company. That opened up a whole new type of situation. When we look at the shareholder's perspective, there is a possibility of generating additional value, which can be quite interesting. I think that's it. Well, one last point. Differently or unlike the previous buyback programs, I'm sure you've noticed this, in general terms, our programs are focused to support our long-term incentives that are share-based for the company. Now, this buyback program will not be tackling that specifically. This program will be targeting returns to shareholders. Great!
That's a great message. Now, the second question has to do with your cash flow during this quarter. When we look at the operating cash flow and investments, and when we don't consider capital coming from Itaú, it seems to us that there was no cash gains during this semester. I probably saw this wrong, because you just mentioned that TOTVS generates a lot of cash every quarter. Was there something different during this quarter? There was not. Capital from Itaú came to our investment flow. Of course, traditionally, this is negative, because these are investments made by the company. But in this particular situation, as we had the close of the JV, this number was positive because resources came from Itaú, BRL 410 million positive in our investment flow. In the operating flow, that's not the case.
There's no impact to that, but there is consequence of our investment, but that does not translate in any kind of change or any particular change. Even if we don't consider the results of our investments, our cash flow was still above our EBITDA during this quarter, so there was nothing extraordinary here that would identify something specific of this quarter. If you look at the same metrics in the previous quarter, well, it was already running above 120% of our EBITDA.
Perfect. So the question was straight to the point. So TOTVS generated cash, right? Of course, yes, we generated cash. So thank you very much. Our next question from Marcelo Santos, JP Morgan. Marcelo, thank you for taking my questions. I also have two questions. Number one, I apologize for touching the Techfin, but investors are asking this, and I want to clarify this: could you elaborate on the credit seasonality projection be greater than in past years? You've given us some explanation, but could you explain this even further? Number two: I want to also congratulate the company for the margin disclosure, and as you gave us the margin of the business performance because it's in an accelerated growth, how can we see the long-term margin in this segment?
Which are the structural elements that we have to consider in order to think about a long-term projection? So thank you, Marcelo. Well, this year, you are right. There is an additional element which is not extremely relevant, but it does have a certain relevance. So you have the harvest at the end of the second quarter. This year, we didn't see this for instance, due to a number of reasons, we affiliated in agro and Supplier, and this isn't verified in the entire market, but there was a certain delay in certain transactions. So this resulted in elevating the volume at the end of Q2, beginning of Q3. Once again, this wasn't something significant. What happened was that we had a strong recovery, not only from the agro sector during Q2.
As it was mentioned, there were a number of matters in other important segments for Supplier, like the steel sector. Pulp and paper, also during Q2, had presented dynamics. Therefore, the production and the origination of Q2 was way below what we expected. So what happened on Q3 was a quick recovery, basically, in all of these segments, and not only in the agro sector. This being said, our Business Performance margin and structural margins regarding the behavior of this margin, well, we feel confident with this operation, because on one side, it's new and the market is much newer than the Management market. It is an extremely fragmented market, which means that our play is consolidation, it's to build a portfolio. It would be a multi-product thing, especially for our customers' profile, that is SMB, and the fit is excellent. The match is excellent.
On one side, we have a positive market. On the other side, we have a TOTVS competitive position.... extremely positive, and the unit economics that is extremely favorable. When we see the gross margin of this segment, in this dimension, it is higher than the gross margin of the Management dimension. Here, we're talking about a gross margin of around 80%. And why? Because basically, all the revenue from this dimension is recurrent, as all SaaS products, as all products are sold with no relevant deployment necessity. Therefore, the gross margin dynamic is structurally much better in this business, but it doesn't stop here. There are other elements that allow us to have a very good unit economics. You have the simplicity of R&D that is greater.
As these products started from the get-go, they were totally in cloud and SaaS. It's easier to standardize them, and therefore, you have a cost structure that, throughout the time, provides you scalability and operational leverage, which is greater. In addition to this, we have an additional element that is not connected to the market or our competitive position, nor to unit economics that can also generate a plus from the margin point of view. That is, as the time goes by, although business performance has its own sales dynamic and cross-selling dynamics within the business performance dynamic, we are still crawling when we see cross-selling and the convergence of business performance with the rest of TOTVS, especially the Management dimension. We're just starting the representation of cross-selling, of ERP, of business performance and Management.
It is still marginal, and as all cross-sell, the contribution margin of the cross-sell is positive. So we are using a structure that is up and running, and you're adding an additional revenue with a marginal cost that is proportionally lower. So once again, my answer is that we feel reassured that the margin of this business in the long run, because this is still a smaller business, much smaller than Management, it is a business with a positive structural margin. So thank you for your answers. Thank you, Marcelo. Now, to bring our Q&A session to an end, we have our last question from Osni, from BTG. Osni, you have the floor. Okay, good morning to everyone. It would be good to give us more color regarding the results of Business Performance that has grown year-over-year.
In the last quarter, you spoke about this operation, also the Tail operation. Could you give us granularity regarding the Business Performance? Thank you, Osni. Well, what you just mentioned, we saw strong results, and the result from Q2 were strong already. The name of the game here currently is our capacity to initiate the transition from single to multi-product. The Business Performance products are part of a journey, and this journey is in the beginning, especially for the small and medium customer. To deal with this journey from A to Z provides a lot of value. A smaller company has difficulties in seeing three, four, five, 10 different suppliers to complete the journey of sales, digital sales, digital marketing, and we still have a fragmented market.
Our strategy to of placing the different pieces in the jigsaw puzzle and creating this journey from A and, from A to Z, towards small and medium-sized companies, is highly receptive. Now, the ARR comes from cross-sell with, so we are selling with CRM, we sell to marketing customer, or marketing sell to customers that are from CRM. The e-commerce products also record a better performance. The name of the game, again, would be to go from single to multi-product. And in addition, we start we are placing in the right places, elements that will allow us throughout next year and throughout 2025, to increase the cross-sell of the, of cross-sell business performance and Management. Certainly, when we analyze next year and when we point at 2025, there will be targets within the commercial Management structure.
that become more important, that will be sales of Business Performance. And this is something that we expect to be an add-on to the ARR production. That is something that we see in the Business Performance world. Therefore, I believe that the prospects are positive within Business Performance. And just to end, when we talk about Tail, this is what we try to show. Tail is an operation that was acquired in the beginning of 2020, during the beginning of the pandemic. It is an operation that has given us a lot of value in terms of data, in terms of, in terms of the structure of our database and how we leverage this data, but the dynamic is different. It is focused on major accounts. The tickets here are dozens and sometimes hundreds of thousands of BRL. The average ticket business performance is hundreds of BRL.
There is a difference in average ticket and, and customer, and also the go-to-market is different. The ERP is sold in a consulted basis. You meet 1, 2, 3, 4, you call an expert from this and that. The customer wants to talk to 3 or 4 more customers of the product, and after months of negotiation, you're able to close the deal. Tail has a similar dynamic. It also requires this long time. It also requires experts explaining, meetings here and there, the whole nine miles. That is different than inbound SaaS or the model of, of Business Performance. So this is why we are discussing if it, if it makes sense to consolidate Tail in Business Performance, or it's just something that we have to put in the Management. We haven't decided anything, but we are discussing this. Perfect. Thank you. So thank you, Dennis. So thank you.
Well, I would like to thank all of you for your participation. And Dennis, well, I would just like to invite all of you, for all that can, well, today, we initiated our RD Summit for the first time. It is organized in São Paulo. It will be. It goes until the tenth in the Expo Center Norte. It is the greatest digital marketing event in Brazil and in the region, actually. So our expectation is to receive 18,000 attendees per day throughout the three days of the event, and obviously, a number of novelties for the ecosystem, for business performance ecosystems. For those that are interested in in receiving tickets, you can go to the event through our QR code and to talk with our IR team. So thank you, and until the next quarter. Bye-bye!