Institutional Presentation

Transcription

1 Institutional Presentation May 2006

2 Introduction

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4 What is ERP? Software packages that automate and support the administrative, production, inventory and product development processes of a company Verticals Categories Modules Storage Operations Manufacturing Quality Supplies Financials Industry Solutions Control Fiscal Budget Human Resources CRM Relationship Mobile Solutions Portals Supply Chain

5 Leading ERP Provider to SMBs in Latin America Proprietary technology Distribution Products 14,500+ customers 2,600 direct employees (1) Software Expanded Business Model ERP CRM Business Intelligence Vertical Modules Management Consulting Business Process Outsourcing (BPO) Core Synergies (1) Does not include close to 1,800 employees of our franchises

6 Track Record of Success and Growth Consistent growth through several economic cycles Foundation Strengthening / Expansion Operating Leverage Net Revenues (R$ Million) and EBITDA Margin (%) Start up of Microsiga Franchising System ISO Argentina 24 Proprietary technology % 5x growth % ISO9001: 2000 (Franchises) Focus on management and profitability % Mexico 6.5% 10.6% 12.4% Margin increase 111 IPO % % Totvs - BMI CMMI Logocenter acquisition 2x growth RM PF (1) (1) 2005 EBITDA margin excludes one-time extraordinary charges Entering a new phase in the company s growth

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8 Market

9 Large and Growing Market Opportunity Latin America: a well-developed IT sector World ERP Market Growth Potential (CAGR E) 8.6% 8.3% 6.7% 6.6% 6.2% 5.4% Software Market Brazil 2006: According to IDC. growth of 5.9% in applications 2005: Estimated growth of 10% in Softwares 2006: Estimated growth of 13,8% in Enterprise Application Software Market Brazilian ERP Market Latin America Asia / Pacific Middle East / Africa North America Japan Europe ERP Market Preliminary data shows TOTVS with 23.4% of market share, positioning the company as the main regional Latin America ERP software provider. Source: Gartner Dataquest (March 2005) Sources: International Data Corporation. Business News Americas and the fastest growing ERP market in the world

10 SMB is the Fastest-Growing Market Segment Worldwide ERP Market Growth by Company Size 2004 Penetration Rate of ERP Software in Brazil by Market 2004 # of employees SMB 11.1% Less than 50 (1) (Low) 30% 70% (2) (Middle) 55% 45% SMB High End 8.3% More than 500 (2) (High) 71% 29% Source: Gartner Dataquest - September 2005 Note: SMB consists of companies with employees, High End companies have >999 Source: (1) Série Estudos 2004 (2) IDC 2005 Penetrated Unpenetrated

11 Penetration Rate United States Penetration Rate by segment. Low market Penetration Rate by segment. Middle Market CRM 16% 84% CRM 31% 69% ERP/SCM 8% 92% ERP/SCM 27% 73% Penetrated Un-Penetrated Penetrated Un-Penetrated Source: AMI-Partners /05 US SMB Business and Applications Software Market Overview and Assessment

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13 Totvs Overview and Strategy

14 Strong Market Position in Brazil Positioning Users Number of companies (1) Focus Example of customers High Complementary Middle ,000 Dominance Low 5-50 (revenues in excess of R$15 million / year) Micro 0-5 4,906,000 (1) IBGE estimates

15 Broad Geographic Coverage Broad sales, service and support throughout Brazil Geographic Presence Country Distribution Channels Clients Brazil 47 13,375 Mexico Argentina 1 56 Chile 1 32 Puerto Rico 1 4 Paraguay 1 4 Portugal 1 10 El Salvador - 81 Guatemala - 48 International Presence Subsidiaries Uruguay - 4 US - 1 Total 52 >14,000 Franchises Products only and expanding presence into other Latin American countries

16 Diversified Client Base Totvs revenue is well diversified across industries and customers Client Breakdown by Sector (2005) (1) Revenue Concentration (2005) (1) Other 11% Government 5% 10 Largest 6% 100 Largest 23% Retail 19% Industrial (2) 45% Other 77% Services 20% (1) Company estimates. (2) Industrial sector includes: chemistry, food, plastic, rubber and metallurgy industries as well as others.

17 Revenue Model Sale of licenses generates a continuous and recurring flow of revenues... Theoretical Cumulative Revenue Effect Revenue Model 1 new license sold per year No new licenses sold 2,00 1,00 0,34 0,34 0,34 0,34 0,34 0,34 0,34 0,34 Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Licenses Implementation Maintenance Corporate Model Licenses Implementation Maintenance Licenses (Corporate Model) Maintenance (Corporate Model)... with a potential multiplying effect from the Corporate Sales Model 17

18 Totvs Strategic Goal Be the natural choice for software and management support for companies in Latin America... Business Segment / Strategy Opportunities Actions (On Going) Market Growth (new companies) High Quality product/service Low penetration rates SMB: strenghten dominance Growing clients (new licenses) Wide access to Market Upside Focus New modules for current clients Increase market share High End: specific modules Verticals / specific modules Develop complementary businesses Latin America: continue expansion Comprehensive Business Model Moderate capital needs for growth Products already tailored to main countries Acquisitions (Consolidation) Marketing Specifc Sales Structures Acquisitions Expansion Acquisitions Franchises... with international profitability and financial return standards

19 RM Sistemas Company 3rd Biggest Brazilian software house clients 2005 Net Revenue R$ 91.6 million 2005 Adjusted EBITDA : R$ 21.9 million Margin EBITDA 23.9% 2006 estimated EBITDA: R$ 28.0 milhões Operation 100% Acquisition of Company s Shares R$ million cash payment R$ 41.2 millon variable according to 2006 performance

20 Strong Platform for Expansion Totvs business model leverages its operational infrastructure and intellectual property Business Units / Brands Development Sales / Implementation Segments 146 software engineers Independent SMB and Verticals 152 software engineers Independent Middle Market and Verticals Strategy Coordination Back-office Technology 125 software engineers Independent SMB and Verticals -- Independent / Cross-Sell SMB and facilitates expansion into new businesses 2

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22 Financial Performance

23 Highlights Net Revenue in 1Q06 was 21.6% over the 1Q05 Financing Performance 1 Net Revenue R$62.4 million Gross Revenue R$69.9 million Adjusted EBITDA in 1Q06 was 36.7% over the 1Q05 Adjusted EBITDA R$11.1 million EBITDA Margin growth 11.9% over 1Q05 Margin 1Q % Margin 1Q % Operational Performance new software clients. 15.3% over the 1Q05¹ Corporate-model sales increased. accounting for 28.1% of its new license fees (18% in 1Q05 ) Capital Market The Company s shares closing price on May was R$42.50 Companys s Market Value approximately of R$1.1 billion 1 Pro forma Information. presents Logocenter values in January 2005.

24 Financial Performance EBITDA (R$ Million) x Margin Net Revenue (R$ Million) 12.4% 12.4% 13,9% 15.9% 36.7% 17.8% % 183,1 222,0 21.6% 62, , ,4 51, Q05 1Q05 1Q Q05 1Q05 1Q Pro forma Information, presents Logocenter values in January Pro forma. presents Logocenter values of 2004

25 Financial Performance Gross Revenue Breakdown (R$ Million) Gross Revenue Distribution % % % % 26.1% % % % 37.8% % 26.8% % % % % % 25.5% % % Q05 1Q05 1Q06 Maintenance Services License Fees Q05 1Q05 1 1Q06 Maintenance Services License Fees 1 Pro forma Information, presents Logocenter values in January 2005

26 Financial Performance R&D (R$ Million) x R&D / Net Revenue 11,3% 10,1% 9,5% 18.2% Costs and Expenses (R$ Million) 21,0 8,5% 8,3% 5,7 14,7 5,2 12,6 4, Q05 1Q05 1Q06 General and Adm. Expenses (R$ Million) ,1 130,2 194,4 55,7 43,6 22.5% 53,4 28,2 45,8 11,4 (2.8%) 9,6 9, Q05 1Q05 1Q , Q05 1Q05 1Q06 1 Pro forma Information. presents Logocenter values in January Does not include the Extraordinary Expenses from IPO 1 Quarter Chg. 1Q06/1Q05

27 Operational Performance New Corporate-Model Clients New Clients 81.3% % Q05 1Q06 Recurring Revenue from Corporate Model (R$ Million) 99% 105.2% 3,0 4Q05 1Q05 1Q06 1 Pro forma Information. presents Logocenter values in January ,5 1Q05 1 1Q06

28 Operational Performance License Fees / New Clients (R$ Thousands) License Fees / New Corporate-Model Clients (R$ Thousands) 11.2% (16.2%) 26,0 25,8 28, Q05 1Q05 1Q Q05 1Q05 1Q06 License Fees / New Traditional Clients (R$ Thousands) License Fees / Base Clients (R$ Thousands) 25,9 23,3 18.9% 27,7 15,4 28.5% 13,2 10,2 1 4Q05 1Q05 1Q06 4Q05 1Q05 1Q Pro forma Information. presents Logocenter values in January 2005

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30 Performance

31 Offering Summary Offering Features Primary: shares (R$ million) Secondary: shares (R$ million) Net Proceeds of R$ million Transaction Dates IPO Date: March 09 Green Shoe Option: March 17 Main Selling Shareholders LC EH Participações e Empreendimentos BNDES Participações Logocenter Participações Free Float after Offering 56.9% Lock-Up Bookrunners 180 days 40% of company s position 181 to 360 days - 60% of company s position Itaú BBA Credit Suisse

32 TOTS3 x IBOVESPA x IGC TOTS3 R$ % IGC 4,522 Pts +8.8% IBOVESPA 40,212 Pts +7.8% Pricing 3/20/2006 3/30/2006 4/11/2006 4/25/2006 5/8/2006 Last Price Volume (in thousand shares) Financial Volume (in R$ million) Highest R$ (May 10th) Highest (March 9th) Highest R$ 85.5 (March 9th) Lowest R$ (March 9th) Lowest 13.1 (April 6th) Lowest R$ 0.5 (April 6th) Last R$ (May 12th) Last 47.9 (May 12th) Last R$ 2.0 (May 12th) Average Average R$ 9.5 Source: Bloomberg 05/12/06 Period: 03/08/06 to 05/12/06

33 Totvs x Comparables (US$ Million) Quarterly Data Net Revenue 28,792 19,012 47,853 87,695 60,056 84, ,900 Δ Y-o-Y 21.6% 11.5% -4.8% 6.0% -1.1% 26.5% 5.6% EBITDA 5,066 5,038 47,853 20,995 7,163 84,479 18,790 EBITDA Margin 17.8% 26.5% 7.9% 23.9% 11.9% 17.6% 23.3% Δ Q-o-Q 211.3% N/A % 26.0% 32.4% 19.0% 73.1% Δ Y-o-Y 12.4% 1.9% -6.2% 34.6% -39.8% 12.0% -3.1% EV/EBITDA 13.5x N/A 10.6x 10.7x 10.0x 9.9x 8.9x Premium Valuation!! Source: Bloomberg (1) January-March (2) December-February (3) November-January

34 Conclusion

35 Natural Choice for Software in Latin America Leading Latin American Software Company Leader in High Growth SMB Segment Consistent Revenue and Profitability Growth Unique Business Model Pure Play on Multiple Growth Trends Strong Management and Governance