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Institutional Presentation
November / December 2009
10.6%
1983 1986 1989 1992 1995 1996 1997 1998 1999 2000 2001 2002
9.8%
10.0%
8.4%
6.5%
11010698
63
3524
17
CMMI 12.4%
IPO
13.9%
392
247
173
18.4%
490
21.9%
2004 2005 2006 2007 2008PF
941
21.2%
24x EBITDA10x Revenue
LTM²
12.4%
126
2003
Growth:14x EBITDA
7.5x Revenue
24.8%
Operating LeverageStrengthening / ExpansionFoundation
ProprietaryTechnology
Startup ofMicrosiga
Franchising System
ISO 9001
Argentina
ISO 9001: 2000(Franchises)
Mexico
Acquisition
Focus on management
and results
Growth inMargin
Midbyte and BCSAcquisitions
Acquisition
Gro
ss R
eve
nu
e (
R$
mill
ion
) an
d E
BIT
DA
Mar
gin
(%
) 1
1,048
(1) EBITDA Margin does not include extraordinary expenses(2) Last Twelve Months. from Oct’08 to Sep’09
Success Track Record
2
Cross-Selling
Structure of Business Model
(1) Does not include close to 4,000 employees of our franchises(2) Inclues Infrastructure, HR BPO, Education and Service Desk
Core
Digital TV
Synergies Synergies
TOTVS Customer Service and Relationship
Software – Base and New Clients ServicesExpanded Business
Technology
ERP CRMBusiness
Intelligence
VerticalModules
Consulting
Value-Added Service2
3
TOTVS
+ 135 DistributionChannels
+ 24,200 customers~ 5,000 direct employees¹
Flexible Technology
4
Fundamentals
1) Companies’ Basic need
2) Under-penetrated
market
3) Environment
4) Macro/Marketchanges
Eletricity, water, telephone and software
Brazilian SMB marketis 7.0% penetrated
according to Gartner
Latin America
SPED, WC 2014, Olympics 2016, PAC (infra-structure)
TOTVS 2009 Success EquationStrong
Fundamentals
Technology and Product
Fundamentals and Business Model
Distribution
5
TOTVS’ Differentials
Catalysts
• Low penetrated market
• Digital Bookkeeping (SPED)
• Software as Utility
• Efficiency gains
• Higher complexity
• Added valueServices offering
• Digital Bookkeeping (SPED)
• Fiscal changes
• Features Enhancement
• Low average ticket
• Software as Utility
LICENÇALicences Services Maintenance
Market
Latin America – growth and TOTVS’ market share
Sou
rce:
Fo
reca
st:
Gar
tner
En
terp
rise
So
ftw
are
Mar
kets
, Wo
rld
wid
e, 2
00
8-2
013
, 1Q
09
Up
dat
e 11.9%
11.5%
10.5%
7.4%
5.0%
2.3%
Latin America
Asia/Pacific
Japan
N. America
Middle East
Europe
ERP 2008-2013 estimated growth
Brazil46%
Mexico 28%
Argentina 10%
Venezuela8%
Chile3%
Peru3%
Colombia 2%
Source: IDC Latin America Semiannual ERM Applications Tracker 2008
6
Market
Estimates
Latin America ERP spend
3.7% 3.2% 3.0%
8.9% 8.4%8.0%
38.5%41.1% 41.0%
14.6%
16.2%18.3%
15.3%
13.3% 12.3%
2006 2007 2008
Market Share LA
A
B
C
D
8th Worldwide and leadership in Brazil
7
Source: IDC Latin America Semiannual ERM Applications Tracker 2008
163
179
186
208
210
216
247
284
353
458
796
1,313
1,696
2,719
5,732
Kenexa
IBM
Epicor
Cegid
Agresso
Concur
Exact
TOTVS
Lawson
Kronos
Microsoft
Infor
Sage
Oracle
SAP
License and maintenance revenues, in USD million
Source: Gartner - ERP Software, Worldwide, 2008.
Market
4.0% 3.3% 2.9%
5.7% 5.4% 5.0%
10.6%9.0% 8.4%
32.6% 34.2%32.0%
33.5%35.3%
38.7%
2006 2007 2008
2008 ERP Worldwide Ranking Market Share Brazil
A
BCD
Revenue/Business Model
New Customers
Base Customers
NewCustomers
BasicImplementation
Base Customers
New Licenses
New Modules
Consultingand
VAS+
Licences
Services
Maintenance
New Licenses
CorporateModel
TOTVS’ Business
8
Updates Upgrades(New version)
Help-desk
0.34 0.34 0.34 0.34 0.34 0.34 0.341.00
0.34
2.00
Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8
Traditional model Corporate model
No new licenses sold1 new licensesold per year
Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12… …
(1) IBGE estimates about the Brazilian market. (2) Source: Gartner “Dataquest Insight: TOTVS and the Brazilian SMB ERP Landscape”, mar’09
646
468,000
5,297,000
250 +
50 - 250
0 - 5
Large
Medium
Small
Micro
5 - 50(revenues of over
R$15 million/ year)
~ 24,200Active customers
64.2%Market Share
~ 37,700‘using’ ERP
468,000SMB market size
~ 8.0 %Penetrated
9
Market
Positioning Users # Companies1
Penetration
Gartner Estimates2 7.0 %
Penetrated
Industrial 46%
Services 21%
Retail10%
Financial 11%
Other 12%
Diversified client base
Datasul and RM Sistemas contributed to diversify even more the company’s client base
(1) Based on TOTVS 2008 revenue.(2) Industrial sector includes: chemicals, food, plastic, rubber and metallurgy industries as well as others.
Client Breakdown by Sector 1 Revenue Concentration 1
11-100 Largest
12%
Others83%
10 Largest
5%
10
TOTVS’ Business
Flexible middleware allows product integration
User View.
The language is responsible for communicating application commands, as ERP, to the next technological layer, the middleware.
The middleware acts as an interpreter and facilitator, “translating” and connecting the language commands with the framework. TOTVS Tec, the middleware developed by
TOTVS, translates and communicates the ADVPL and 4GL languages to a wide range of operating systems, working with any hardware. It provides platform independence and
access to the most advanced resources, such as SOA and Web Services.
The middlewares available in the market work based on a framework. TOTVS Tec’s framework is developed in C++ and is able to operate on any operating system, giving the
customer flexibility in the choice of the technology platform.
Middleware TOTVS Tecflexibility
O.S
.
Dat
abas
e
ERP
ADVPL 4GLProgress
ABL
Unix Windows OthersLinux
Oracle DB2
SQL Others
Framework
Languages
Har
dw
are
Intel OthersPowerPC
(Intel)
.NET
11
Technology
International Market
Subsidiaries
Products only
Source: Forecast: Enterprise Software Markets, Worldwide, 2008-2013, 1Q09 Update
►Gartner: expected growth: 12% 2008-2013 CAGR
►IDC: TOTVS’ SMB Market Share: 31% in 2007 vs 27% in
2006 – 1st company!
► Products over 17 countries
►Excluding Brazil:
+600 clients,
+25 distribution channels,
+380 employees.Franchises
►1 subsidiary, Portugal
►1 franchisees, Angola
►+30 clients, over 6 countries
Latin America
Other geographies
12
Distribution
TOTVS 2009 Success Equation
Fundamentals + Focus
+700 Brazilian institutions, +1.5 million students, choice of 67% of the consolidating groups
50 out of 100 biggest Brazilian
and 20 international builders, 450engineering and design customers
22k portfolios, 4k funds,
120k/day consumer credit
transactions, R$1.5 tri assets under custody, LA Financial Market Top provider
+200 sugar cane producers =
50% national crop, 120 grain
producers = 1 million hectares
+1,110 extractive and processing
customers, +1,000 metal and
plastic, +1,400 capital goods
13
Distribution Logistics
Financial Services
Agrobusiness
Manufacturing
Constructionand Projects
Services
Educational
Health
Legal
Small BusinessRetail
Strong Fundamentals
SegmentApproach
TOTVS 2009 Success Equation
Fundamentals + Focus
Specific offering : Vitrine, First, Personal Med and 4Transport+900 department stores, +140
supermarkets, +280 building materials distributors
7 out of 10 top law firms,
10,000 lawyers
+1,600 wholesaler distributors,
20% of shippers customers also have CRM
12 million lives, +9,700 beds,
medical registers to 35 specialties
14
Distribution Logistics
Financial Services
Agrobusiness
Manufacturing
Constructionand Projects
Educational
Health
Legal
Small BusinessRetail
Strong Fundamentals
SegmentApproach
2,300 services providers, 400Utilities providers, 470 travel and
passengers transportation
Services
TOTVS 2009 Success Equation
Results 3Q09
ConsistentResults
► Historical record in all revenue lines:
Net Revenue: organic growth of 15.6% compared to 3Q08, reaching R$252.596 million in
3Q09.
Licenses Revenue: R$65.782 million in 3Q09, 10.9% above 3Q08.
Services Revenue: growth of 15.8% (3Q09 vs. 3Q08). amounting to R$87.064 million.
Maintenance Revenue: R$123.268 million. Growth of 14.0% in comparison to 3Q08.
► Costs and Expenses: once again lower than revenue’s growth (3Q09 vs. 3Q08).
► EBITDA: R$66.450 million in 3Q09. 49.8% over 3Q08. Margin reached 26.3% in the quarter.
+600 basis points (3Q09 vs. Q08). 9M09 closes with margin over 25%.
► 4,676 clients served (new + existing clients) in the quarter. 17.6% over 2Q09.
► 827 new clients in 3Q09. additional 260 compared to 2Q09 and 45.9% over 2Q09. New record.
► Client base amounts approximately 24.2 thousand active clients.
Financial Highlights
OperationalHighlights
► Franchising Model Evolution = TOTVS Franchises
► TOTVS FINANCIAL SERVICES = YMF + TOOLS + TOTALBANCO
► 2008 Marketshare growth in Brazil (38.7%, +340b.p. vs 2007) and Latin America (18.3%, +210
b.p.): the only company in the top5 to post growth in both markets.
RecentEvents
15
Strong Fundamentals
SegmentApproach
Gross and Net Revenue (R$ million) 1
136.5152.2
187.6
242.6
276.1
120.2136.2
168.5
218.6
252.6
3Q05 3Q06 3Q07 3Q08 3Q09
Gross Revenue Net Revenue
New Record in Revenue...
242.6259.9 249.8
262.5276.1
218.6233.4 228.4
240.3252.6
3Q08 4Q08 1Q09 2Q09 3Q09
Gross Revenue Net Revenue
16
Financial Performance
(1) Values are pro forma as they include the numbers of RM Sistemas, acquired in April 2006 and Datasul, consolidated in September 2008 in the period analyzed.
HistoricalRecord
License Revenue (R$ million) 1
Financial Performance
17
31.5 34.5
42.5
59.3
65.8
3Q05 3Q06 3Q07 3Q08 3Q09
705
603
457
567
827
3Q08 4Q08 1Q09 2Q09 3Q09
New Clients
3099
3321
3822
3409
3849
3Q08 4Q08 1Q09 2Q09 3Q09
Clients Served
Base Clients
... with licenses surpassing 2Q09...
(1) Values are pro forma as they include the numbers of RM Sistemas, acquired in April 2006 and Datasul, consolidated in September 2008 in the period analyzed.
HistoricalRecord
70.375.2
88.4
108.1
123.3
3Q05 3Q06 3Q07 3Q08 3Q09
34.8 42.5
56.6
75.2
87.1
3Q05 3Q06 3Q07 3Q08 3Q09
18
…maintenance and services climbing significantly…
Services Revenue (R$ million) 1 Maintenance Revenue (R$ million) 1
Financial Performance
HistoricalRecord
(1) Values are pro forma as they include the numbers of RM Sistemas, acquired in April 2006 and Datasul, consolidated in September 2008 in the period analyzed.
EBITDA (R$ milhões) 1
44.4
51.5
59.9 58.7
66.520.3%
22.1%
26.2%
24.4%
26.3%
3Q08 4Q08 1Q09 2Q09 3Q09
21.8 26.1
37.0
44.4
66.5 18.1%19.2%
21.9%20.3%
26.3%
3Q05 3Q06 3Q07 3Q08 3Q09
19
Financial Performance
... delivering EBITDA growth
EBITDA Margin EBITDA Margin
HistoricalRecord
(1) Values are pro forma as they include the numbers of RM Sistemas, acquired in April 2006 and Datasul, consolidated in September 2008 in the period analyzed.
3Q08 3Q09
242.6
276.1
2005 2006 2007 2008
530.3
940.8
734.0
611.9
23.8%
24.6%
51.6%
27.3%
24.0%
48.7%
23.3%
29.4%
47.3%
44.9%
30.3%
24.8%
30.2%
9M08 9M09
680.9
788.4
45.3% 46.1%
29.6%
30.6%
23.3%
25.1%24.4%
31.0%
44.6%
23.8%
31.5%
44.7%
20
Revenue Breakdown
Financial Performance
(1) Values are pro forma as they include the numbers of RM Sistemas, acquired in April 2006 and Datasul, consolidated in September 2008 in the period analyzed.
Gross Revenue (R$ million) 1
Licences Services Maintenance
Scalability 1
18.0%
15.7%
9.6%
0.6%
-15.6%
Net Revenue
Cost of Services (+) R&D
G&A (+) Management fees
Selling expenses
Licenses Costs
Growth 9M09 x 9M08
21
G&A as % of the Net Revenue
Scalability
Financial Performance
13.0%
12.0%
11.0%
10.0%
9.0%
8.0%
7.0%
6.0%
3Q06 3Q07 3Q08 3Q09
(1) Values are pro forma as they include the numbers of RM Sistemas, acquired in April 2006 and Datasul, consolidated in September 2008 in the period analyzed.
24.2
32.311.1%
12.8%
3Q08 3Q09
18.717.5
8.6%
6.9%
3Q08 3Q09
8.8 8.1
4.0%
3.2%
3Q08 3Q09
55.357.0
9.0%7.9%
9M08 9M09
20.2 20.4
3.3% 2.8%
9M08 9M09
484.0 536.2
9M08 9M09
174.2 186.1
3Q08 3Q09
65.3
87.910.7%
12.2%
9M08 9M09
22
Financial Performance
Costs and Expenses Dashboard 1
(1) Values are pro forma as they include the numbers of RM Sistemas, acquired in April 2006 and Datasul, consolidated in September 2008 in the period analyzed.
(2) Excluding depreciation. amortization expenses and non-recurring expenses.
R&D (R$ million) x R&D / NR
G&A (R$ million) x G&A / NR Marketing Expenses (R$ million) x Mkt. Exp. / NR
Costs and Expenses2 (R$ million)
Financial Dashboard 1
(1) Values are pro forma as they include the numbers of RM Sistemas, acquired in April 2006 and Datasul, consolidated in September 2008 in the period analyzed.
(2) Net income adjusted refers to net income excluding the effects of goodwill, amortization, net of tax. Hence, it can be understood as net income from the Company’s regular operations.
Financial and Operational Performance
23
R$ million 3Q08 3Q09 Δ Q/Q 9M08 9M09 Δ 9M/9M
Net Revenue 218.559 252.596 15.6% 611.427 721.252 18.0%
Gross Profit 142.868 173.340 21.3% 397.591 492.335 23.8%
EBITDA 44.355 66.450 49.8% 127.391 185.066 45.3%
EBITDA Margin 20.3% 26.3% 600 p.b. 20.8% 25.7% 490 p.b.
Net Income
Adjusted 2 34.024 40.570 19.2% 96.741 114.429 18.3%
Cash by the end of the period: R$232.1 million
► When: 3Q08
► Source: BNDES
► Amount: R$ 212.5 million
► Current estimated cost: 8.5 ~ 9% p.a.
► Period: 2 + 5 years
Debt by the end of the period: R$423.6 million
Cash and debt on 30th September
Prosoft
► When: 3Q08
► Source: debentures holders (BNDES and others)
► Amount: R$ 211.1 million
► Current estimated cost: 10% p.a.
► Period: 8 + 3 years
Debentures
Net debt by the end of the period: R$191.5 million
Net Debt
24
Current scenario
Scenario
25
» REVENUE RECORD• Licenses: R$65.8 million• Services: R$87.1 million• Maintenance: R$123.3 million
» OPERACIONAL RECORD1
• New clients: 827; +46%• Base clients: 3,849; +12.9%
» EBITDA RECORD• R$66.5 million• Margin of 26.3%
3Q09 Results
(1) Growth over 2Q09
The material that follows is a presentation of general background information about TOTVS and Datasul activities as of the date of the
presentation in November 2009.
It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to potential
investors.
This presentation may contain statements that express management’s expectations and/or forecasts about future events.
These expectations and/or forecasts involve risks and uncertainties that could cause actual results to differ materially from those
projected in such forward-looking statements. Therefore, the future results of the company may differ from current expectations and
readers must not base their expectations exclusively on the information presented herein.
No representation or warranty, express or implied, is made concerning, and no reliance should be placed on the accuracy, fairness, or completeness of the information presented herein.
This document does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities.
Neither this document nor anything contained herein shall form the basis of any contract or commitment whatsoever.
Contacts
www.totvs.com/ir
QUESTIONS
Safe harbor
26