institutional presentation - ri.totvs.com.brri.totvs.com.br/enu/2890/institutional...

INSTITUTIONAL PRESENTATION

DISCLAIMER

The information contained in this presentation and any forward-looking statements that may bemade, related to business outlook, operational and financial projections of TOTVS are based onbeliefs 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 circumstancesthat may or may not occur. Investors must understand that general economic conditions, industryconditions and other operational factors could affect future performance of TOTVS and could lead toresults that differ materially from those mentioned in these forward-looking statements.

WE ARE TOTVS

To make companies more competitive through intelligent, integrated

and scalable solutions.

WE DEVELOP TECHNOLOGY...

WHO WE ARE:

The ERP leader in Brazil, with ~50% marketshare

21st most valuable brand in Brazil, according to Interbrand

Highest level of Corporate Governance (Novo Mercado)

Specialized business solutions for 11 Industry Sectors

+12,000 TOTVERS, including franchisees

BUSINESS SOLUTIONS Way beyond technology

Contents

AI

APPs

CLOUD

Subscription Services+

START UP WARM UP DNA NUMBER 1 IN BRAZIL THINK TOGETHER PEOPLE, THINGS

& BUSINESS

1983 1986 1989 1992 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20142013

GR

OS

S R

EV

EN

UE

S A

ND

AD

JUS

TE

D E

BIT

DA

MA

RG

IN (

R$

Mill

ion

an

d %

)

Microsiga Argentina

ICMM

Franchisees

Proprietary

Technology

Results

Management

Mexico

Specialization by

industry sector

Company of the

Year by

Exame Magazine

Fluid Technology

Essentiality

Agile ERP

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 Intera TOTVS

DIGITAL

MODEL

63

95

8.9%

7.8%

106

6.3%

126173

247392

490

760

1080

1233

110

9.4%11.0%

10.5%13.9%

18.4%

21.9%

20.6%

25.2%

25.6%

1387

1539

1775

1957

26.7%

2117

24.1%

24.9%

24.6%

20.2%

2015

2519

16.4%

2016

WE ARE TOTVS

WE ARE TOTVS

OUR PRESENCE

TOTVS has presence in the main business centers of Brazil and Latin America to be always close to you and your company.

By thinking together, we do better.

USA

2 Development Centers

1 Branch

1 Channel

LATIN AMERICA

4 Branches: 2 Argentina, 1 Colombia, 1 Mexico

25 Channels

1 Development Center - Mexico

BRASIL

Headquarter – São Paulo

14 Branches: 2 (SP), 2 (RJ), 3 (MG), 2 (PR), 1 (CE), 1 (GO),

1 (SC), 1 (PE), 1 (DF)

52 Channels throughout the national territory

10 Development Centers

5,000 resellers TOTAL • 19 Branches

• 82 Channels

• 15 Development Centers

• 5,000 resellers

Headquarter Branches

Channels Development Centers

EUROPA

PORTUGAL1 Channel

AFRICA

ANGOLA 2 Channels

CHINA

1 Channel

1 Development CenterTAIWAN

1 Development Center

RUSSIA

1 Development Center

WE ARE TOTVSPedro

PassosChairman

Independent member

Co-founder and member

of Natura’s Board

of Directors

GermánQuiroga

Vice-Chairman

Independent member

Gilberto

MifanoIndependent Member

Former CEO of the

Brazilian Stock Exchange

PedroMoreira Salles

Independent Member

Itaú Unibanco

Chairman

Maria LetíciaCosta

Independent Member

Partner of Prada

Business Consulting

Henrique Trinckquel

Independent Member

CFO of Petros

(Petrobras

Pension Fund)

Wolney BetiolIndependent Member

Co-founder

of Bematech S.A.

Mauro CunhaIndependent Member

President of AMEC

(Associação dos

Investidores do

Mercado de Capitais)

LaércioCosentino

Member

Founder and CEO

of TOTVS

8 out of 9 members of the Board are

independent

STRONG CORPORATE GOVERNANCE

Audit Committee

monitors the procedures for compliance with legal provisions,

evaluates risk management policies and recommends

improvements to internal policies

Personnel and Compensation Committee

is responsible for advising the Board of Directors in

establishing the terms of compensation and other benefits

Strategy and Technology Committee

studies, debates, evaluates, proposes and monitors the main

guidelines of the corporate and technological strategy of TOTVS

Governance and Designation Committee

promotes the development of the Company’s corporate

governance, evaluates the adoption of good practices and

selects members to the Board of Directors and Executive Board

ADVISORY COMMITTEES

WE ARE TOTVS

• 98% of the free-float held by institutional investors

• 95% of the free-float held by non-Brazilian investors

66.9% OF FREE-FLOAT: A CORPORATION

WITH NO CONTROLLING GROUP

OWNERSHIP STRUCTURE

WE ARE TOTVS

~5 thousand resellers

Private

57 channels52 franchisees

5 branches

# Employees # Companies in

Brazil

Up to 9

employees

From 10 to 499

employees

More than 500

employees

~4.2 million

companies

~587

thousand

companies

~6.6 thousand

companies

Source: IBGE

Micro

Companies

Small and

Medium (SMB)

Large Companies

HOW WE SELL IN BRAZIL

WE ARE TOTVS

SPECIALIZED BUSINESS SOLUTIONS FOR

COMPANIES OF ALL SIZES IN 11 MARKET

INDUSTRIES

AgribusinessConstruction

and ProjectsDistribution Logistics Educational

Financial

ServicesLegal Manufacturing Healthcare Services Retail

PRO-FORMA REVENUE BY SEGMENT (R$ MM)

NEW BEHAVIORS AND TECHNOLOGY

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.

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.

Fluid Technology

Agile ERP

Essentiality

MANAGEMENT SYSTEM BY INDUSTRY SECTOR

PRODUCTIVE AND COLLABORATIVE AGONOSTIC PLATFORM

TOTVS V12

New operating experience and complete

adherence. Transactional interface

of open systems

THINK ABOUT TOMORROW, BUT DO IT TODAY

TOTVS DIGITAL MODEL - COMPONENTS

TOTVS DIGITAL MODEL

TDM

ID

Information & AI

Distribution

Cloud Productivity & Collaboration

Business

Interface

SOFTWARE BUSINESS EVOLUTION

Application Software• Process Automation

• Information and Content Generation

• Control & Management

So

ftw

are

Use

r

Application Software Platform• Process Automation

• Information and Content Generation

• Control & Management BY INDUSTRY

• MOBILITY

Iden

tity

(ID

)

AP

I W

eb S

ervi

ces APPs

External Content / AI

Solutions for Clients

License / Maintenance + Services

Closed, complex and for users

On Premises / Desktop First / Versions

Client

Quality, functionality or cost (QFC)

Solutions for the Client and its Clients

SUBSCRIPTION + Content / AI + APPs + Cloud with Services

Open, specialist and for IDs and APPs

Cloud / Mobile First / Upgrades

Client and/or by Client sharing

(QFC) and/or not to grab the usage growth among end users

Focus:

Business:

Software:

Priority:

Competition:

Risk of loss:

License

Maintenance Contract

Services

Contents

AI

APPs

CLOUD

Subscription Services+

Focus:

Business:

Software:

Priority:

Competition:

Risk of loss:

SINGLE SUBSCRIPTION COMPANY – BUSINESS MODEL

Content and AI$ by information usage

tcloudMonthly $ by CLOUD usage

TOTVS

TDM Subscription

INTERA

(limited usage by contracted IDs)

Monthly $ per ID

TOTVS STORE

APPs /

ADD-ons SubscriptionMonthly $ per APP or ADD-ons

contracted at TOTVS Store

Deployment and

Customization

Services$ per project / service

COMPANY’S AGENDA

SINGLE

SUBSCRIPTION

COMPANY

LICENSE BASED

Connecting People, Things and

Businesses

FINANCIAL PERFORMANCE

2Q17

NET REVENUE (R$ MM)*

IN THE LAST 12 MONTHS, THE SHARE OF RECURRING REVENUE OVER NET REVENUES

INCREASED 5.4 PERCENTAGE POINTS

* Pro-forma information for the periods of LTM-2Q16, since they include the results of Bematech

NET REVENUE (R$ MM)*

SOFTWARE AND HARDWARE PERFORMANCE LED TO NET REVENUE GROWTH YEAR

OVER YEAR


SOFTWARE (R$ MM)*

THE SUBSCRIPTION ACCELERATION BOOSTED THE SOFTWARE REVENUE IN THE PAST

4 QUARTERS**


** Excluding incremental licenses from corporate model

SOFTWARE (R$ MM)

The Annual Recurring Revenue (ARR) is a metric widely used in the SaaS model to measure the growth of recurring revenue for the next 12 months referring to contracts

already signed up to the end of the current period, excluding cancellations already requested.

THE SUBSCRIPTION ARR GREW 42% YEAR OVER YEAR, WITH A NET ADDITION OF R$23.3MILLION IN THE QUARTER

SOFTWARE (R$ MM)*

1Q17 2Q17 2Q/1Q 2Q16 2Q/2Q LTM-2Q16 LTM-2Q17 LTM/LTM

SOFTWARE REVENUE 374.1 366.8 -2.0% 344.1 6.6% 1,399.4 1,439.3 2.9%

COST OF SOFTWARE (20.8) (21.6) 3.9% (20.7) 4.5% (82.4) (81.5) -1.0%

COST DE SUPPORT (32.5) (32.6) 0.5% (32.8) -0.6% (122.1) (131.1) 7.4%

R&D (83.3) (83.3) 0.0% (74.7) 11.6% (317.6) (357.9) 12.7%

SOFTWARE RESULT 237.5 229.3 -3.5% 215.9 6.2% 877.3 868.8 -1.0%

CONTRIBUTION MARGIN 63.5% 62.5% -100bp 62.8% -30bp 62.7% 60.4% -230bp


THE CONTRIBUTION MARGIN DROP YEAR OVER YEAR WAS LOWER THAN THE DROP IN THE

LAST 12 MONTHS

SERVICES (R$ MM)*


SERVICE REVENUE 128.6 122.0 -5.2% 141.2 -13.6% 585.1 510.9 -12.7%

COST OF SERVICES (127.7) (119.9) -6.1% (126.6) -5.3% (540.9) (499.7) -7.6%

SERVICE RESULT 0.9 2.1 120.6% 14.5 -85.7% 44.2 11.3 -74.6%

CONTRIBUTION MARGIN 0.7% 1.7% 100bp 10.3% -860bp 7.6% 2.2% -540bp


THE DROP IN LICENSES IN PREVIOUS QUARTERS AFFECTED NEGATIVELY THE ALLOCATION OF

SERVICES PROFESSIONALS AND THE CONTRIBUTION MARGIN

HARDWARE (R$ MM)*


HARDWARE REVENUE 57.3 61.8 7.7% 59.6 3.5% 260.3 247.9 -4.8%

COST OF HARDWARE (35.9) (38.4) 7.0% (39.7) -3.2% (172.9) (158.5) -8.3%

GROSS RESULT 21.4 23.4 8.9% 19.9 16.9% 87.4 89.4 2.3%

GROSS MARGIN 37.4% 37.8% 40bp 33.5% 430bp 33.6% 36.1% 250bp

R&D (2.6) (2.7) 3.3% (2.9) -9.5% 9.0 11.8 31.8%

GOV. SUBSIDIES 2.7 1.9 -25.9% 2.5 -22.1% 9.9 11.0 10.5%

HARDWARE RESULT 21.5 22.6 5.3% 19.5 15.9% 106.3 112.2 5.6%

CONTRIBUTION MARGIN 37.5% 36.7% -80bp 32.8% 390bp 40.8% 45.3% 450bp


BOTH GROSS AND CONTRIBUTION MARGINS GREW YEAR OVER YEAR AND IN THE LAST 12

MONTHS

COMMERCIAL AND ADM. EXPENSES (%/NR)*


EBITDA ADJUSTED BY NON-RECURRING EVENTS (R$ MM)*


NET INCOME ADJUSTED BY NON-RECURRING EVENTS (R$ MM)*


2Q17 Ajusted by

the reversal of

provisions for

contigencies and

monetary

restatement in the

amount of R$5.6M

(PIS/COFINS)

CASH FLOW AND DEBT (R$ MM)*



NET INCOME, EXCL. NON-CASH ITEMS 82.9 98.2 18.4% 104.8 -6.3% 401.1 360.4 -10.1%

CHANGE IN WORKING CAPITAL (8.6) (10.9) 27.7% (25.7) -57.6% (149.3) (45.2) -69.7%

CASH USED IN OPERATIONAL ACTIVITIES 74.4 87.3 17.4% 79.0 10.5% 251.8 315.3 25.2%

NET CASH USED IN INVESTING ACTIVITIES (14.4) (17.8) 24.1% (30.2) -40.9% (588.6) (80.5) -86.3%

CASH USED IN OPERATING AND INV. ACTIVITIES 60.0 69.5 15.8% 48.9 42.2% (336.7) 234.8 -169.7%

NET CASH USED IN FINANCING ACTIVITIES (59.1) (93.7) 58.4% (108.9) -14.0% (139.6) (338.6) 142.6%

INCREASE (DECREASE) IN CASH 874 (24.2) -2869.8% (60.1) -59.7% (476.3) (103.9) -78.2%

GROSS CASH IN THE BEGINNING OF THE PERIOD 214.8 215.6 0.4% 355.4 -39.3% 771.6 295.3 -61.7%

GROSS CASH IN THE END OF THE PERIOD 215.6 191.4 -11.2% 295.3 -35.2% 295.3 191.4 -35.2%

GROSS DEBT 655.5 611.2 -6.8% 788.3 -22.5% 788.3 611.2 -22.5%

NET DEBT 439.9 419.7 -4.6% 493.0 -14.9% 493.0 419.7 -14.9%

NET DEBT/LTM ADJUSTED EBITDA 1.3 1.3 - 1.2 0.1 1.2 1.3 0.1

FREE CASH FLOW 69.0 75.6 9.7% 56.3 34.4% (295.3) 267.1 -190.4%

Software Revenue: +6.6% vs. 2Q16 | +2.9 in the last 12 months

Subscription Revenue: +36.4% vs. 2Q16 | 20.2% of software revenue in 2Q17

Annual Recurring Revenue of Subscription: R$304.0 millions in 2Q17 (+42.1% vs. 2Q16)

Non-Fiscal Hardware Solutions Revenue: +8.9% vs. 2Q16 | 74.9% of hardware revenue in 2Q17

Carol: Launchingof theArtificial Intelligence platform

2Q17 HIGHLIGHTS

totvs.com

@totvs

blog.totvs.comcompany/totvs

fluig.com

#WEARETOTVERS

The success of our client is our success

We value competent people who are nice people

Technology + Knowledge are our DNA

Investor Relations

[email protected]

+55 (11) 2099-7105

+55 (11) 2099-7773

+55 (11) 2099-7097

+55 (11) 2099-7089

institutional presentation - ri.totvs.com.brri.totvs.com.br/enu/2890/institutional...

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