INSTITUTIONAL PRESENTATION AUGUST/2016
DISCLAIMER The information contained in this presentation and any forward-looking statements that may be made, related to business outlook, operational and financial projections of TOTVS are based on beliefs and assumptions of the Company s management, as well as information currently available. Forward-looking statements are not guarantee of future performance. They involve risks, uncertainties and assumptions as they refer to future events and, hence, depend on circumstances that may or may not occur. Investors must understand that general economic conditions, industry conditions and other operational factors could affect future performance of TOTVS and could lead to results that differ materially from those mentioned in these forward-looking statements. 2
WE ARE TOTVS BUSINESS SOLUTIONS Way beyond technology WHO WE ARE: WE DEVELOP TECHNOLOGY... To make companies even more complete and competitive through intelligent, integrated and scaled solutions. The ERP leader in Brazil, with more than 50% market share #1 in Latin America and one of the largest in the world 21 st most valuable brand in Brazil, according to Interbrand BUSINESS SOLUTIONS AND SERVICES PLATFORM CONSULTING Highest level of Corporate Governance (Novo Mercado) Clients in 41 countries 12,000 TOTVERS, including franchisees Sustainable financial results 3
GROSS REVENUES AND ADJUSTED EBITDA MARGIN (R$ Million and %) WE ARE TOTVS START UP WARM UP DNA NUMBER 1 BRAZIL THINK TOGETHER Solutions for the SMB Market Biggest ERP Player in Brazil 1st IT Company to go public Revenues of R$1.0 billion in 2010 Fluig 1390 Intera STORE THE CLIENT 2566* 1973 1777 1560 18.5%* 24.6% 24.9% 1233 26.7% 24.1% 760 1080 25.2% 25.6% Specialization by industry sector Fluid Technology Essentiality Agile ERP Microsiga Franchisees 17 Proprietary Technology Argentina 24 35 9.8% Results Management 63 10% 98 8.4% 106 6.5% 110 Mexico 126 173 10.6% 12.4%12.4% ICMM 392 490 247 21.9% 18.4% 13.9% 20.6% Company of the Year by Exame Magazine (*) Includes LTM figures of Bematech 4 LTM...>
WE ARE TOTVS BOARD OF DIRECTORS STRONG CORPORATE GOVERNANCE 8 out of 9 members of the Board are independent Pedro Passos Chairman Independent member Co-founder and member of the Natura Board of Directors Germán Quiroga Vice-Chairman Independent member Laércio Cosentino Member Founder and CEO of TOTVS Sérgio Foldes Independent Member International Division Director of BNDES Pedro Moreira Salles Independent Member Itaú Unibanco Chairman Maria Helena de Santana Independent Member Former president of CVM (Brazilian SEC) Danilo Silva Independent Member CFO of Petros (Petrobras Pension Fund) Wolney Betiol Independent Member Co-founder of Bematech S.A. Mauro Cunha Independent Member President of AMEC (Associação dos Investidores do Mercado de Capitais) 5
WE ARE TOTVS OWNERSHIP STRUCTURE 66.9% OF FREE-FLOAT: A CORPORATION WITH NO CONTROLLING GROUP 97% of the free-float held by institutional investors 94% of the free-float held by non-brazilian investors 6
WE ARE TOTVS PRO-FORMA REVENUE BY SEGMENT (R$ MM) SPECIALIZED BUSINESS SOLUTIONS FOR COMPANIES OF ALL SIZES IN 11 MARKET INDUSTRIES Agribusiness Construction and Projects Distribution Logistics Educational Financial Services Legal Manufacturing Healthcare Services Retail 7
WE ARE TOTVS OUR PRESENCE BUSINESS SOLUTIONS TOTVS s diversified positioning makes it the most successful provider that integrates different economic value chains, such as: MANUFACTURING RETAIL CONSTRUCTION AND PROJECTS Suppliers Suppliers Credit Producer Distributor Distributor Retailer Builders Credit Service providers 8
WE ARE TOTVS HOW WE SELL IN BRAZIL # Employees # Companies in Brazil Large Companies Private More than 500 employees ~6.6 thousand companies Small and Medium (SMB) 57 channels 52 franchisees 5 branches From 10 to 499 employees ~587 thousand companies Micro Companies ~5 thousand resellers Up to 9 employees ~4.2 million companies Source: IBGE 9
WE ARE TOTVS OUR PRESENCE TOTVS is present in the main business centers in Brazil and Latin America to be always near you and your company. All of this because by THINKING TOGETHER, WE DO BETTER. USA TOTVS Labs 2 Development Centers 1 Branch 1 Branch 3 Franchises EUROPE CHINA 1 Branch 1 Development Center LATIN AMERICA 4 Branches: 2 Argentina, 1 Colombia, 1 Mexico 25 Franchises 1 Development Center Mexico AFRICA 2 Franchises TAIWAN 1 Development Center BRAZIL 15 Branches: 3 (SP), 2 (RJ), 3 (MG), 2 (PR), 1 (CE), 1 (GO), 1 (SC), 1(PE), 1(DF) 52 Franchises spread out the country 5,000 distributors INNOVATION 10 Development Centers structured by segmented knowledge TOTVS TOTAL 22 Branches 82 Franchises 15 Development Centers 5 thousand distributors Development Centers Branches throughout the world 10
NEW BEHAVIORS AND TECHNOLOGY THINK ABOUT TOMORROW, BUT DO IT TODAY The speed of the changes in the world challenges companies to be prepared for what's new. See how TOTVS works for providing answers to questions still being asked: Fluid Technology Fluid Technology easy to use and implement, simple and mobile, promoting productivity, sharing, and collaboration, impacting a greater number of individuals and companies. Fluid Technology PRODUCTIVE AND COLLABORATIVE AGONOSTIC PLATFORM Essentiality Specific offers focused on "Core Business" for each segment with total adherence. Agile ERP Lighter Management systems and naturally focused on his/her "CORE, in "CLOUD", and "MOBILE", promoting a natural use interface. Essentiality Agile ERP TOTVS V12 MANAGEMENT SYSTEM BY INDUSTRY SECTOR New operating experience and complete adherence Transactional interface of open systems 11
RECENT FINANCIAL PERFORMANCE 12
RECENT EVENTS DIVIDENDS AND INTEREST ON EQUITY Payment of Dividends approved on the OESM of April 26, 2016 in the amount of R$66.6 million (R$0.40736 per share) Approval of the distribution of Interest on Equity in the amount of R$43.6 million (R$0.26703514 per share) to be paid on August, 24 to the shareholders of the Company as of August, 04 SALE OF THE BPO OPERATION Sale of the BPO services operation and beginning of the software partnership to provide BPO services to clients through TOTVS business solutions PARTNERSHIP WITH NATIONAL COMPUTER CORPORATION (NCC) Partnership to develop and provide to the Russian market a management system developed based on TOTVS technological platform MANAGEMENT ORIENTED BY SEGMENT AND VALUE CHAIN New executives for Services e Supply Chain 13
RECENT EVENTS NEW HEADQUARTERS PROJECT Campus 100% connected to other development, commercial and operational centers Reinforcement of TOTVS culture with the integration of all in-house and remote operations Innovation environment favorable to mobile and cloud Exclusive area for client services Investment of approximately R$90 million in the campus 14
REVENUE BY NATURE AND BUSINESS (R$ MM)* REVENUE BY NATURE REVENUE BY BUSINESS * Pro-forma information for the periods of 2015, since they include the results of Bematech 15
SOFTWARE (R$ MM)* SOFTWARE REVENUE REVENUE AND CONTRIBUTION MARGIN OF SOFTWARE * Pro-forma information for the periods of 2015, since they include the results of Bematech 16
SOFTWARE LICENSE FEE REVENUE (R$ MM)* NEW CLIENTS ADDED** 900 clients of subscription in 2Q16 847 clients of license in 2Q16 440 new Bemacash units in 2Q16 * Pro-forma information for the periods of 2015, since they include the results of Bematech ** Bemacash clients do not affected the subscription revenues in 2Q16 17
LINCENSES VS SUBSCRIPTION - THEORETICAL EXERCISE* (*) It considers that the license sales of TOTVS (excl. Bematech) were made in the subscription model only since 2013. Does not consider churn of clients and annual inflation adjustment in the contracts. The quarterly license revenue was deferred in 16 quarters. 18
SERVICES AND HARDWARE (R$ MM)* REVENUE AND CONTRIBUTION MARGIN OF SERVICES REVENUE AND CONTRIBUTION MARGIN OF HARDWARE * Pro-forma information for the periods of 2015, since they include the results of Bematech 19
COMMERCIAL & ADMINISTRATIVE EXPENSES (R$ MM)* SALES + COMMISSIONS MARKETING & ADVERTISEMENT ALLOWENCE FOR DOUBTFUL ACCOUNTS G&A + MGMT FEES + OTHERS * Pro-forma information for the periods of 2015, since they include the results of Bematech 20
EBITDA AND NET INCOME (R$MM)* EBITDA NET INCOME * Pro-forma information for the periods of 2015, since they include the results of Bematech 21
CASH FLOW AND DEBT (R$ MM) 22
SCHEDULE OF AMORTIZATION OF GROOS DEBT 23
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