Institutional Presentation Dec. 2007

Transcription

1 Institutional Presentation Dec

2 Safe Harbor The material that follows is a presentation of general background information about TOTVS activities as of the date of the presentation in December 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 2

3 Topics Fundamentals Business Model Market Position Financial & Operational Performance 3

4 The Best Business Model in the ERP Market Flexible Technology 200+ Distribution Relationship 15,700+ customers 3,000+ direct employees¹ Expanded Tech Model TOTVS Customer Service and Relationship Software Base and New Clients Expanded Business Model Cross-Selling Government Digital TV ERP CRM Business Intelligence Vertical Modules Key Accounts Synergies Core Synergies (1) Does not include close to 1,800 employees of our franchises 4

5 Track Record of Success and Growth Consistent growth through several economic cycles Foundation Strengthening / Expansion Operating Leverage and EBITDA Ma argin (%) (3) Gross Reven nues (R$ Million) Franchising System ISO 9001 Proprietary Technology ISO 9001: 2000 (Franchises) Focus on management and profitability Mexico 9M07 R$358 21,9 % 126 CMMI Start up of % Microsiga 10.6% Argentina 6.5% Logocenter % Acquisition % 17 98% 9.8% Margin 5.5x growth Increase 2x growth PF (2) % 250 IPO 14.0% RM % 2006PF (1) (1) Pro forma values includes 1Q 2006 of RM Sistemas revenues (acquired in April 2006) (2) Pro forma values includes January 2005 of Logocenter s revenues (acquired in February 2005) (3) EBITDA margin excludes extraordinary expenses Entering a new phase in the company s growth 5

6 Revenue/Business Model Waterfall New Licenses New Customers Services Base Customers New Customers Basic Implementation Expanded Business Model Base Customers New Licenses New Modules Maintenance 6

7 Sales Models Corporate Model Revenues are linked to the growth of TOTVS client portfolio Traditional Model Traditional - Corporate Model 1 new license sold per year No new licenses sold Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Licenses Implementation Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Maintenance Corporate Model 7

8 Financial Performance Revenue Breakdown (R$ Million) % % 25.3% % 26.3% 33.1% 34.8% % 26.4% 38.5% 39.0% 37.8% 41.3% 41.6% 41.4% 4% 35.1% 34.8% 35.9% M06 9M07 Maintenance Services License Fees (1) Pro forma values of Logocenter for January/05, since this company was acquired in February/05. (2) Pro forma values, since it includes the figures of RM Sistemas, acquired in April/06. 8

9 The Brazilian Market SMBs companies grow 4x faster than High-End and Micro companies Positioning Users Number of companies (1) Example of customers High Complementary Dominance Middle ,000 Low 5-50 (revenues in excess of R$15 million / year) Dominance Micro 0-5 5,297,000 (1) Based on IBGE estimates 9

10 Market: ERP Brazil SMB Market Share 2005 US$ 117,139, US$ 141,599,347 B 4% A 23% Others 14% TOTVS 42% TOTVS 50% D 11% C 5% A 15% D 6% C 11% Others 15% B 4% 3 rd largest supplier in Latin America in the full ERP market (including high, middle, small and micro companies). Source: IDC - LA Annual ERM Applications Tracker 2006 SMB represents the sum of Small. Medium. and Education companies. 10

11 blessed with an under- penetrated Market. Positioning Users Number of companies (1) High ,700 active customers / 50% of market share = ~31,400 clients using ERP... Middle Low (revenues in excess of R$15 million / year) 468,000...in a potential market of 468,000 Micro 0-5 5,297,000 ~ 6.7% penetration (1) IBGE estimates...under penetrated market = growth potential 11

12 Large and Growing Market Opportunity Latin America: a well-developed IT sector and ERP Market Growth Potential (CAGR E) 2011E) Annual Latin America Taken Market for ERP in USD$ million ( E) 2011E) Latin America Western Europe Canada Japan 5.7% 5.5% 7.1% 81% 8.1% United States 5.3% Source: Gartner Dataquest February 2007 Source: Gartner Dataquest February 2007 an ERP market growing faster than all mature markets in the world 12

13 Diversified Client Base After the RM Sistemas acquisition, company s client base has become even more diversified. Client Breakdown by Sector 1 Revenue Concentration 1 Government 2% Others 14% 10 Largest 4% 100 Largest 17% Retail 11% Industrial 47% Services 26% Other 79% (1) Company estimates. (2) Industrial sector includes: chemicals, food, plastic, rubber and metallurgy industries as well as others. 13

14 Market Share World TOTVS is the 14 largest Company of the World s Enterprise Software Market (in US$ 000): Ranking Company Share 2005 Share 2006 Sales Growth 1º SAP 27.0% 27.0% 8.0% 2º Oracle 11.5% 13.2% 23.1% 3º Sage 6.8% 6.9% 9.2% 4º Infor 7.2% 5.2% -21.5% 5º Microsoft 3.8% 4.0% 13.0% 6º Kronos 1.9% 2.0% 17.0% 7º Hyperion 1.7% 1.8% 14.5% 8º Lawson 2.0% 1.6% -13.2% 9º Exact Software 1.1% 1.1% 2.6% 10º Epicor 09% 0.9% 09% 0.9% 42% 4.2% 11º QAD 0.9% 0.9% 0.5% 12º IBM (MRO) 0.8% 0.8% 8.2% 13º Agresso 0.6% 0.7% 21.5% 14º Totvs 0.5% 0.7% 29.7% Source: Gartner Dataquest - Market Share: ERP Software, Worldwide,

15 Market Share Latin America TOTVS is the 3 largest Company of Latin America s Enterprise Software Market (in US$ 000): Ranking Company Share 2005 Share 2006 Sales Growth 1º SAP 29.3% 28.9% 10.7% 2º Oracle 18.8% 19.6% 17.0% 3º Totvs 14.9% 17.3% 29.7% 4º X 6.6% 7.0% 18.0% 5º Y 5.3% 2.7% -42.2% Source: Gartner Dataquest - Market Share: ERP Software, Worldwide,

16 Market Share ex-north American Companies TOTVS is the 4 largest Company of the World s Enterprise Software Market, considering only Non-North American Companies (in US$ 000): Ranking Company Share 2005 Share 2006 Sales Growth 1º SAP 40.9% 41.1% 1% 8.0% 2º Sage 10.3% 10.5% 9.2% 3º Exact Software 1.7% 1.7% 2.6% 4º Totvs 0.8% 1.0% 29.7% 5º Fujitsu 0.7% 0.6% -1.1% Source: Gartner Dataquest - Market Share: ERP Software, Worldwide,

17 Market Share Emerging Markets TOTVS is the largest Enterprise Software Company coming from Emerging Markets, and among those, the one with the highest growth from 2005 to 2006 (in US$ 000): Region World Rank Company Share 2005 Share 2006 Sales Growth Latam 14º Totvs 05% 0.5% 07% 0.7% 29.7% China 20º Ufida 0.5% 0.5% 20.6% Latam 30º X 0.2% 0.3% 18.2% China 31º Kingdee 0.2% 0.3% 26.9% India 42º CCS 0.1% 0.1% 5.5% India 43º Ramco 0.1% 0.1% 24.9% Source: Gartner Dataquest - Market Share: ERP Software, Worldwide,

18 Flexible Middleware 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. 18

19 and a Wide Range of Products 19

20 International Markets Largest Latin-American Software Multinational Latin America: TOTVS Market Share: 17.3% in 2006 vs 14.9% in rd largest company Source: Gartner Dataquest - Market Share: ERP Software, Worldwide, 2006 Geographic Presence Country Distribution Channels Brazil 183 Mexico 12 Argentina 1 Bolivia 1 Chile 1 International Presence Subsidiaries Franchises Products only Puerto Rico 1 Paraguay 1 Portugal 1...With Over 200 Distribution Channels. 20

21 Based on a Solid Business Model our Challenge is... Market Technology / Product Distribution Execution 21

22 Financial i and Operational Performance 22 22

23 Highlights Q07 New Sales Structure New 10 Versions of Corpore RM, Logix, and Protheus Technology VP Update on Margin Guidance to 22% - 25% in between 2009 and Q07 TOTVS Day Acquisition of the total capital of TOTVS-BMI 3Q07 TOTVS and IBM Launch Application for the Linux Market; Solution for Micro Companies Launched (RM First); 4Q07 Série Estudos Magazine: TOTVS is the Largest Provider in Revenues in Brazil, considering the Totality of the Market Acquisition of Midbyte Informática S.A., a Leader in Retail Software Creation of TQTVD to Explore Opportunities in Digital TV 23

24 Highlights 3Q07 Historical Records: - EBITDA of R$ million. an expansion of 58.4%, over the R$ million in the 3Q06; - EBITDA Margin of 22.1%,, evolving 390 b.p.,, when compared to the 3Q06; Financial Performance - Net Revenue of R$ million, growth of 18.9% when compared to the 3Q06; - License Fees of R$ million in the 3Q07, growth of 12.8% when compared to the 3Q06; - Maintenance Revenues of R$ million, a growth of 18.0% up on 3Q06; - Services Revenues of R$ million an increase of 22.5% over the 3Q06; - Expansion of 39.0% in Gross Revenues of TOTVS-BMI, compared to the 3Q06. Operational Performance 337 new clients of software in the 3Q07; 68 new corporate model clients in the 3Q07. Recent Events TOTVS and IBM Launch Application for the Linux Market; Solution for Micro Companies Launched (RM First); International Business Development Section Goes Operational; Acquisition of Midbyte Informática S.A., a Leader in Retail Software; Creation of TQTVD to Explore Opportunities in Digital TV. 24

25 The Consistent Growth In Sales R$ million Q05 ¹ 4Q05 ¹ 1Q06 ¹ 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 Gross Revenues Net Revenues (1) Pro forma values includes 1Q 2006 of RM Sistemas revenues (acquired in April 2006). 25

26 and Expansion in EBITDA R$ million 18,5% 18,4% 21,9% 18.8%. 18,3% 16,6% 22,1% 70,5 70,6 24,8 42,44 50,6 14,11 15,7 9M05 9M06 9M07 FY2006 3Q05 3Q06 3Q07 (1) Pro forma values includes 1Q 2006 of RM Sistemas figures (acquired in April 2006). 26

27 ...Allow Us To Grow Organically and Achieve New Records, R$ million 3Q06 3Q07 Δ Q/Q 9M06 ¹ 9M07 Δ 9M/9M Net Revenue % % Gross Profit % % EBITDA % % EBITDA Margin 19.0% ² 22.1% 310 b.p. 18.4% ² 21.9% 350 b.p. Adjusted PF Net Income³ % % Net Margin 13.7% 15.5% 280 b.p. 15.0% 15.6% 60 b.p. (1) Pro forma values, since they include the figures of RM Sistemas, acquired in April/06, for the period in question. (2) Does not includes the IPO expenses. (3) The Adjusted Net Income is determined through the calculation of Net Income excluding the effect of extraordinary expenses as well as the amortization of goodwill expenses generated by the acquisitions of Logocenter and RM Sistemas. Thus, it could be understood as the Company s regular operations Net Income. 27

28 ...with Great Operational Performance, License Fees 68 New Corporate Clients; Base Clients: 967 in 3Q07 x 882 in 2Q07; Historical License Fees Record R$ million License Fees / New Clients Software (R$) +337 clients 3Q07 License Fees / Base Clients Software (R$) +967 clients 3Q07 37,013 34,739 28,781 27, ,158 14,143 12,371 12,791 3Q06 3Q07 9M06 9M07 (1) Pro forma values, since they include the figures of RM Sistemas, acquired in April/06, for the period in question Q06 3Q07 9M06 9M07 28

29 ...and the Search for Synergies in Costs and Expenses. R&D (R$ million) x R&D / Net Revenue Costs and Expenses² (R$ million) 8,3% 8,9% 8,4% 8,9% 28,8 7,8 87,5 10,0 78,7 224,5 23,22 251, Q06 3Q07 9M06 9M07 3Q06 3Q07 9M06 9M07 G&A (R$ million) x G&A / NR Marketing Expenses (R$ million) x MKT Exp. / NR 12,9% 12,9% 4,2% 3,9% 12,2 8,9% 9,9 35,4 92% 9,2% 29,7 4,0 2,8% 3,1 10,7 2,8% 9,1 1 3Q06 3Q07 9M06 9M07 1 3Q06 3Q07 9M06 9M07 (1) Pro forma values, since they include the figures of RM Sistemas, acquired in April/06, for the period in question. (2) Does not includes extraordinary expenses, as well as depreciation and amortization. 29

30 Thank You! 30