TOTVS S.A. Quarterly information (ITR) at September 30, 2015 and report on review of quarterly information

Transcription

1 TOTVS S.A. Quarterly information (ITR) at September 30, 2015 and report on review of quarterly information

2 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Contents Company information Capital composition 1 Dividends 2 Parent company financial statements Balance sheet - assets 3 Balance sheet - liabilities and equity 4 Statement of income 6 Statement of comprehensive income 8 Statement of cash flow - indirect method 9 Statement of changes in equity 1/1/2015 to 9/30/ /1/2014 to 9/30/ Statement of value added 12 Consolidated financial statements Balance sheet - assets 13 Balance sheet - liabilities and equity 14 Statement of income 16 Statement of comprehensive income 18 Statement of cash flow - indirect method 19 Statement of changes in equity 1/1/2015 to 9/30/ /1/2014 to 9/30/ Statement of value added 22 Comments on performance 23 Notes 30 Opinions and statements Report on review of interim quarterly financial information 59

3 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Company information/capital composition Number of shares Current quarter (in units) 9/30/2015 Paid-up capital Common shares 163,467,071 Preferred shares - Total 163,467,071 Treasury shares Common shares 2,272,741 Preferred shares - Total 2,272,741 1

4 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Company information/dividends Events Approval Type Early payment Shares Earnings per share Annual Shareholders Meeting 3/30/2015 Dividends 4/15/2015 Common Board of Directors Meeting 7/27/2015 Interest on equity 8/19/2015 Common

5 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Parent company financial statements/balance sheet - assets (R$ thousand) Current quarter Previous year 1 Code 2 - Description 9/30/ /31/ Total assets 2,291,246 2,054, Current assets 1,174,724 1,038, Cash and cash equivalents 733, , Financial investments 14,451 10, Financial investments measured at amortized cost 14,451 10, Securities 14,451 10, Trade receivables 376, , Customer receivables 376, , Trade receivables 426, , Provision for doubtful accounts (50,269) (53,652) Taxes recoverable 14, Current taxes recoverable 14, Other current assets 35,047 21, Other 35,047 21, Other assets 35,047 21, Non-current assets 1,116,522 1,015, Long term receivables 105, , Financial investments measured at amortized cost 33,006 38, Securities 33,006 38, Trade receivables 41,975 51, Customer receivables 31,718 39, Other receivables 10,257 12, Deferred taxes - 22, Deferred income tax and social contribution - 22, Receivables from related parties 1,688 1, Receivables from subsidiaries 1,688 1, Other non-current assets 28,614 21, Judicial deposits 28,614 21, Investments 520, , Equity investments 520, , Interests in subsidiaries 520, , Property, plant and equipment 75,555 66, Property, plant and equipment in service 75,555 66, Intangible assets 415, , Intangible assets 415, ,378 3

6 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Parent company financial statements/balance sheet - liabilities and equity (R$ thousand) Current quarter Previous year 1 Code 2 - Description 9/30/ /31/ Total liabilities 2,291,246 2,054, Current liabilities 321, , Social and labor obligations 113,321 95, Social obligations 6,701 11, Labor obligations 106,620 84, Trade payables 37,855 28, National supplier payables 37,855 28, Tax obligations 9,772 11, Federal tax obligations 9,772 11, Income tax and social contribution 9,772 11, Borrowing 84,885 58, Borrowing 36,445 24, In local currency 36,445 24, Debentures 48,440 33, Other liabilities 75, , Other 75, , Dividends and interest on capital payable 1,109 47, Obligations for purchases of investments 20,127 18, Commission payable 53,443 56, Other liabilities Non-current liabilities 776, , Borrowing 669, , Borrowing 631, , In local currency 631, , Debentures 38,576 79, Other liabilities 77,516 73, Payables to related parties 21,288 13, Payables to subsidiaries 21,288 13, Other 56,228 60, Obligations for purchases of investments 56,197 60, Other liabilities Deferred taxes 19, Deferred income tax and social contribution 19, Provision 10,133 11, Tax, social security, labor and civil provision 9,413 10, Tax provision Social security and labor provision 6,719 9, Civil provision 2,656 1, Other provision Provision for losses on investments Equity 1,193,520 1,116, Paid-up capital 526, , Capital reserve 17,553 40,281 4

7 Parent company financial statements/balance sheet - liabilities and equity (R$ thousand) Current quarter Previous year 1 Code 2 - Description 9/30/ /31/ Special goodwill reserve on mergers 14,330 14, Share options 25,939 27, Treasury shares (73,384) (52,212) Goodwill reserve 31,557 31, Debentures converted into shares 44,629 44, Goodwill on purchases of non-controlling interests (25,518) (25,518) Revenue reserve 451, , Legal reserve 61,961 61, Profit retention reserve 389, , Additional proposed dividends - 97, Profit/Loss accumulated 174, Exchange variations on investments abroad 23,

8 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Parent company financial statements/statement of income (R$ thousand) Accumulated - current period 1/1/2015 to Same quarter of prior year 7/1/2014 to Accumulated - prior year 1/1/2014 to 9/30/2014 Current quarter 7/1/2015 to 1 Code 2 Description 9/30/2015 9/30/2015 9/30/ Sales and/or service revenue 394,149 1,176, ,775 1,143, Licensing fees 47, ,131 53, , Services 117, , , , Subscriptions 21,421 62,607 19,089 47, Maintenance 208, , , , Cost of sales and/or services (136,478) (395,132) (129,029) (366,333) Cost of software (18,658) (51,159) (18,567) (51,384) Cost of services (97,125) (282,396) (89,615) (255,385) Cost of support (20,695) (61,577) (20,847) (59,564) 3.03 Gross profit 257, , , , Operating income (expenses) (180,358) (532,534) (173,232) (518,095) Selling expenses (26,025) (76,425) (24,461) (74,149) General and administrative expenses (24,132) (70,782) (24,070) (68,496) Other operating expenses (130,221) (382,449) (126,977) (379,616) Research and development (56,803) (163,311) (55,754) (159,497) Advertising expenses (10,437) (29,228) (10,075) (26,493) Commission (34,296) (104,160) (35,041) (108,858) Management fees (5,087) (13,928) (3,364) (14,762) Depreciation and amortization (17,786) (52,786) (17,237) (51,629) Provision for doubtful accounts (7,082) (21,160) (5,855) (18,969) Other operating income and expenses, net 1,270 2, Equity pick-up 20 (2,878) 2,276 4, Profit before finance results and taxes 77, ,962 81, , Finance results 8,204 23,529 3,549 5, Finance income 28,889 75,693 14,245 43, Finance costs (20,685) (52,164) (10,696) (37,611) 3.07 Profit before taxes on income 85, ,491 85, , Income tax and social contribution on net income (13,739) (68,919) (16,850) (70,217) Current (13,513) (39,668) (15,324) (59,385) 6

9 Current quarter 7/1/2015 to 9/30/2015 Accumulated - current period 1/1/2015 to 9/30/2015 Same quarter of prior year 7/1/2014 to 9/30/2014 Accumulated - prior year 1/1/2014 to 9/30/ Code 2 Description Deferred (226) (29,251) (1,526) (10,832) 3.09 Profit for the period from continuing operations 71, ,572 68, , Profit for the period 71, ,572 68, , Earnings per share - (Reais/share) Basic earnings per share Common shares Diluted earnings per share Common shares

10 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Parent company financial statements/statement of comprehensive income (R$ thousand) Current quarter 7/1/2015 to 9/30/2015 Accumulated - current period 1/1/2015 to 9/30/2015 Same quarter of prior year 7/1/2014 to 9/30/2014 Accumulated - prior year 1/1/2014 to 9/30/ Code 2 - Description 4.01 Profit for the period 71, ,572 68, , Other comprehensive income 15,002 23,200 4, Exchange variations on investments abroad 22,729 35,150 6, Deferred income tax (7,727) (11,950) (2,077) (279) 4.03 Comprehensive income for the period 86, ,772 72, ,412 8

11 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Parent company financial statements/statement of cash flow - indirect method (R$ thousand) Accumulated current quarter Accumulated same quarter of previous year 1 - Code 2 - Description 9/30/2015 9/30/ Net cash provided by operating activities 266, , Cash provided by operations 353, , Profit before taxes for the period 272, , Depreciation and amortization 52,786 51, Share-based payments 3,280 4, Losses on sales of assets Provision for doubtful accounts 21,160 18, Equity pick-up 2,878 (4,166) Provision for (reversal of) contingencies (1,441) 3, Provision for (reversal of) other obligation (1,388) Interest, monetary and exchange variations, net 3,891 23, Changes in assets and liabilities (38,342) (82,853) Trade receivables (42,838) (66,879) Other assets 23,775 (8,931) Judicial deposits (6,803) (5,627) Social and labor obligations 17,564 31, Trade payables 9,309 (992) Commission payable (2,688) 2, Taxes payable (21,548) (35,425) Other payables (638) Taxes recoverable (14,475) 1, Other (48,343) (47,390) Interest paid (28,204) (18,997) Income tax and social contribution paid (20,139) (28,393) 6.02 Net cash used in investment activities (150,392) (157,133) Increase in capital of subsidiaries (66,575) (72,296) Purchases of intangible assets (59,921) (66,193) Value of fixed assets sale Dividends received Purchases of property, plant and equipment (25,089) (19,539) 6.03 Net cash used in financing activities (42,086) (213,557) Bank borrowing 181,055 (51,227) Credit from related companies 7,729 14,708 Dividends paid (172,860) (155,811) Debentures payment (32,002) Treasury shares, net (26,008) (21,227) 6.05 Increase (decrease) in cash and cash equivalents 74,494 (139,442) Cash and cash equivalents at the beginning of the period 659, , Cash and cash equivalents at the end of the period 733, ,444 9

12 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Parent company financial statements/statement of changes in equity - 1/1/2015 to 9/30/2015 (R$ thousand) Capital reserve, share options and treasury shares Other comprehensive income Paid-up Revenue Retained 1 - Code 2 Description share capital reserve earnings Equity 5.01 Opening balances 526,592 40, , ,116, Adjusted opening balances 526,592 40, , ,116, Capital transactions with owners - (22,728) (97,704) (29,194) - (149,626) Share options recorded - 3, , Purchases of treasury shares - (48,872) (48,872) Disposals of treasury shares - 22, , Dividends - - (97,704) - - (97,704) Interest on equity (29,194) - (29,194) 5.05 Total comprehensive income ,572 23, , Profit for the period , , Other comprehensive income ,200 23, Exchange variations on investments abroad ,200 23, Closing balances 526,592 17, , ,378 23,229 1,193,520 10

13 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Parent company financial statements/statement of changes in equity - 1/1/2014 to 9/30/2014 (R$ thousand) Capital reserve, share options and treasury shares Other comprehensive income Paid-up Revenue Retained 1 - Code 2 Description share capital reserve earnings Equity 5.01 Opening balances 526,592 85, ,382 - (1,720) 1,067, Adjusted opening balances 526,592 85, ,382 - (1,720) 1,067, Capital transactions with owners - (17,193) (102,912) (21,769) - (141,874) Share options recorded - 4, , Purchases of treasury shares - (43,739) (43,739) Disposals of treasury shares - 22, , Dividends - - (102,912) - - (102,912) Interest on equity (21,769) - (21,769) 5.05 Total comprehensive income , , Profit for the period , , Other comprehensive income Exchange variations on investments abroad Closing balances 526,592 68, , ,102 (1,179) 1,120,159 11

14 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Parent company financial statements/statement of value added (R$ thousand) Accumulated current quarter 9/30/2015 Accumulated same quarter of previous year 9/30/ Code 2 - Description 7.01 Revenue 1,266,554 1,229, Sales of goods and services 1,285,588 1,247, Other expenses 2, Provision for (reversal of) doubtful accounts (21,160) (18,969) 7.02 Inputs acquired from third parties (386,051) (379,588) Cost of sales and services (51,159) (50,311) Materials, energy, outsourced services and other (334,892) (329,277) 7.03 Gross value added 880, , Retentions (52,786) (51,629) Depreciation, amortization and depletion (52,786) (51,629) 7.05 Net value added generated 827, , Value added received through transfers 72,815 47, Equity in the results of subsidiaries (2,878) 4, Finance income 75,693 43, Total value added to distribute 900, , Distribution of value added 900, , Personnel 427, , Direct remuneration 346, , Benefits 50,230 43, Government Severance Indemnity Fund for Employees (FGTS) 30,886 26, Taxes and contributions 200, , Federal 169, , State Municipal 30,660 29, Remuneration of third party capital 69,517 55, Interest 52,164 37, Rent 17,353 18, Remuneration of own capital 203, , Interest on equity 29,194 21, Profits reinvested 174, ,102 12

15 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Consolidated financial statements/balance sheet - assets (R$ thousand) Current quarter Previous year 1 - Code 2 Description 9/30/ /31/ Total assets 2,376,674 2,143, Current assets 1,378,855 1,156, Cash and cash equivalents 833, , Financial investments 43,301 35, Financial investments measured at amortized cost 43,301 35, Securities 43,301 35, Trade receivables 434, , Customer receivables 434, , Trade receivables 489, , Provision for doubtful accounts (55,481) (58,864) Taxes recoverable 22,482 6, Current taxes recoverable 22,482 6, Other current assets 45,481 27, Other 45,481 27, Other assets 45,481 27, Non-current assets 997, , Long term receivables 250, , Financial investments measured at amortized cost 63,327 70, Securities 63,327 70, Trade receivables 52,222 58, Customer receivables 33,995 40, Other receivables 18,227 18, Deferred taxes 37,163 57, Deferred income tax and social contribution 37,163 57, Other non-current assets 98,116 69, Judicial deposits 28,882 22, Financial assets at fair value 69,234 46, Property, plant and equipment 89,660 79, Property, plant and equipment in service 89,660 79, Intangible assets 657, , Intangible assets 252, , Goodwill 404, ,070 13

16 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Consolidated financial statements/balance sheet - liabilities and equity (R$ thousand) Current quarter Previous year 1 Code 2 - Description 9/30/ /31/ Total liabilities 2,376,674 2,143, Current liabilities 390, , Social and labor obligations 137, , Social obligations 8,889 13, Labor obligations 128,654 97, Trade payables 44,297 35, National supplier payables 44,297 35, Tax obligations 12,536 13, Federal tax obligations 12,536 13, Borrowing 85,683 59, Borrowing 37,243 25, In local currency 37,243 25, Debentures 48,440 33, Other liabilities 110, , Other 110, , Dividends and interest on capital payable 1,109 47, Obligations for purchases of investments 48,972 51, Commission payable 57,783 58, Other liabilities 2,424 2, Non-current liabilities 792, , Borrowing 669, , Borrowing 631, , In local currency 631, , Debentures 38,576 79, Other liabilities 92,343 96, Other 92,343 96, Obligations for purchases of investments 86,518 88, Other liabilities 5,825 7, Deferred taxes 19, Deferred income tax and social contribution 19, Provision 11,370 13, Tax, social security, labor and civil provision 11,370 12, Tax provision Social security and labor provision 6,719 9, Civil provision 4,613 2, Other provision Provision for losses on investments Equity 1,193,627 1,118, Paid-up capital 526, , Capital reserve 17,553 40,281 14

17 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Consolidated financial statements/balance sheet - liabilities and equity (R$ thousand) Current quarter Previous year 1 - Code 2 Description 9/30/ /31/ Special goodwill reserve on mergers 14,330 14, Share options 25,939 27, Treasury shares (73,384) (52,212) Goodwill reserve 31,557 31, Debentures converted into shares 44,629 44, Goodwill on purchases of non-controlling interests (25,518) (25,518) Profit reserve 451, , Legal reserve 61,961 61, Profit retention reserve 389, , Additional proposed dividends - 97, Profit/Loss accumulated 174, Exchange variations on investments abroad 23, Participation of non-controlling shareholders 107 1,688 15

18 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Consolidated financial statements/statement of income (R$ thousand) Current quarter 7/1/2015 to 9/30/2015 Accumulated - current period 1/1/2015 to 9/30/2015 Same quarter of prior year 7/1/2014 to 9/30/2014 Accumulated - prior year 1/1/2014 to 9/30/ Code 2 Description 3.01 Sales and/or service revenue 464,503 1,374, ,568 1,316, Licensing fees 58, ,080 65, , Services 144, , , , Subscriptions 33,188 95,913 27,763 49, Maintenance 228, , , , Cost of sales and/or services (166,263) (476,273) (151,603) (435,613) Cost of software (19,496) (54,010) (21,012) (58,353) Cost of services (121,602) (348,423) (108,850) (313,824) Cost of support (25,165) (73,840) (21,741) (63,436) 3.03 Gross profit 298, , , , Operating income (expenses) (217,804) (645,983) (210,534) (616,866) Selling expenses (35,830) (104,887) (33,688) (99,383) General and administrative expenses (28,704) (86,142) (31,212) (86,125) Other operating expenses (153,270) (454,879) (145,514) (430,899) Research and development (67,829) (193,863) (62,217) (176,982) Advertising expenses (13,245) (36,319) (11,825) (31,100) Commission (38,922) (116,620) (39,227) (117,868) Management fees (5,995) (17,007) (4,862) (19,179) Depreciation and amortization (24,709) (74,481) (21,415) (65,405) Provision for doubtful accounts (7,702) (23,446) (6,489) (21,313) Other net revenue 5,132 6, Equity pick-up - (75) (120) (459) 3.05 Profit before finance results and taxes 80, ,570 83, , Finance results 10,736 34,634 2,874 4, Finance income 33,205 92,935 16,280 49, Finance costs (22,469) (58,301) (13,406) (45,053) 3.07 Profit before taxes on income 91, ,204 86, , Income tax and social contribution on net income (19,480) (84,173) (18,203) (74,762) Current (19,173) (56,488) (17,472) (65,651) 16

19 Current quarter 7/1/2015 to 9/30/2015 Accumulated - current period 1/1/2015 to 9/30/2015 Same quarter of prior year 7/1/2014 to 9/30/2014 Accumulated - prior year 1/1/2014 to 9/30/ Code 2 Description Deferred (307) (27,685) (731) (9,111) 3.09 Profit for the period from continuing operations 71, ,031 68, , Profit for the period 71, ,031 68, , Attributable to parent company s partners 71, ,572 68, , Attributable to non-controlling partners (86) (541) (111) (130) 3.99 Earnings per share - (Reais/share) Basic earnings per share Common shares Diluted earnings per share Common shares

20 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Consolidated financial statements/statement of comprehensive income (R$ thousand) Current quarter 7/1/2015 to 9/30/2015 Accumulated - current period 1/1/2015 to 9/30/2015 Same quarter of prior year 7/1/2014 to 9/30/2014 Accumulated - prior year 1/1/2014 to 9/30/ Code 2 Description 4.01 Profit for the period 71, ,031 68, , Other comprehensive income 15,002 23,200 4, Exchange variations on investments abroad 22,729 35,150 6, Deferred income tax (7,727) (11,950) (2,077) (279) 4.03 Comprehensive income for the period 86, ,231 72, , Attributable to the parent company's partners 86, ,772 72, , Attributable to non-controlling partners (86) (541) (111) (130) 18

21 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Consolidated financial statements/statement of cash flow - indirect method (R$ thousand) Accumulate current quarter 1 Code 2 - Description 1/1/2015 to 9/30/2015 Accumulated same quarter of previous year 1/1/2014 to 9/30/ Net cash provided by operating activities 269, , Cash provided by operations 390, , Profit before taxes for the period 287, , Depreciation and amortization 74,481 65, Share-based payments 3,280 4, Losses on sales of assets (6,207) Provision for doubtful accounts 23,446 21, Equity pick-up Provision (reversal) for contingencies (1,148) 4, Provision for (reversal of) other obligations (6,388) Interest, monetary and exchange variations, net 15,401 21, Changes in assets and liabilities (61,125) (97,023) Trade receivables (60,186) (73,851) Other assets 17,047 (7,596) Judicial deposits (6,462) (6,078) Social and labor obligations 25,385 35, Taxes recoverable (16,033) 1, Trade payables 8,766 (36) Commission payable (788) 2, Taxes payable (26,728) (41,638) Other payables (2,126) (7,379) Other (59,445) (48,568) Interest paid (28,204) (18,997) Income tax and social contribution paid (31,241) (29,571) 6.02 Net cash used in investment activities (82,406) (124,511) Acquisitions of investments, net of cash obtained (216) (433) Purchases of intangible assets (60,135) (97,657) Value of fixed assets sale Investments measured at fair value 6,088 (3,194) Purchases of property, plant and equipment (28,988) (23,785) 6.03 Net cash used in financing activities (51,552) (231,902) Bank borrowing 180,746 (52,666) Debentures payments (32,002) Dividends paid (174,288) (158,009) Treasury shares, net (26,008) (21,227) 6.05 Increase (decrease) in cash and cash equivalents 135,616 (116,011) Cash and cash equivalents at the beginning of the period 697, , Cash and cash equivalents at the end of the period 833, ,052 19

22 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Consolidated financial statements/statement of changes in equity - 1/1/2015 to 9/30/2015 (R$ thousand) Paid-up share capital Capital reserve, share options and treasury shares Other comprehensive income Noncontrolling interests Revenue Retained Consolidated 1 - Code 2 - Description reserve earnings Equity equity 5.01 Opening balances 526,592 40, , ,116,374 1,688 1,118, Adjusted opening balances 526,592 40, , ,116,374 1,688 1,118, Capital transactions with owners - (22,728) (97,704) (29,194) - (149,626) (1,040) (150,666) Share options recorded - 3, ,280-3, Purchases of treasury shares - (48,872) (48,872) - (48,872) Disposals of treasury shares - 22, ,864-22, Dividends - - (97,704) - - (97,704) (320) (98,024) Interest on equity (29,194) - (29,194) - (29,194) Acquisions of subsidiaries Acquisions of non-controlling interests (1,023) (1,023) 5.05 Total comprehensive income ,572 23, ,772 (541) 226, Profit for the period , ,572 (541) 203, Other comprehensive income ,200 23,200-23, Exchange variations on investments abroad ,200 23,200-23, Closing balances 526,592 17, , ,378 23,229 1,193, ,193,627 20

23 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Consolidated financial statements/statement of changes in equity - 1/1/2014 to 9/30/2014 (R$ thousand) Paid-up share capital Capital reserve, share options and treasury shares Other comprehensive income Noncontrolling interests Revenue Retained Consolidated 1 - Code 2 - Description reserve earnings Equity equity 5.01 Opening balances 526,592 85, ,382 - (1,720) 1,067,621 2,217 1,069, Adjusted opening balances 526,592 85, ,382 - (1,720) 1,067,621 2,217 1,069, Capital transactions with owners - (17,193) (102,912) (21,769) - (141,874) (223) (142,097) Share options recorded - 4, ,034-4, Purchases of treasury shares - (43,739) (43,739) - (43,739) Disposals of treasury shares - 22, ,512-22, Dividends - - (102,912) - - (102,912) (571) (103,483) Interest on equity (21,769) - (21,769) - (21,769) Acquisitions of subsidiaries Total comprehensive income , ,412 (130) 194, Profit for the period , ,871 (130) 193, Other comprehensive income Exchange variations on investments abroad Closing balances 526,592 68, , ,102 (1,179) 1,120,159 1,864 1,122,023 21

24 Quarterly information (ITR) - 9/30/2015- TOTVS S.A. Version: 1 Consolidated financial statements/statement of value added Accumulated current quarter Accumulated same quarter of previous year 1 - Code 2 Description 9/30/2015 9/30/ Revenue 1,483,035 1,413, Sales of goods and services 1,498,274 1,433, Other expenses 8, Provision for (reversal of) doubtful accounts (23,446) (21,313) 7.02 Inputs acquired from third parties (449,776) (432,604) Cost of sales and services (54,233) (59,529) Materials, energy, outsourced services and other (395,543) (373,075) 7.03 Gross value added 1,033, , Retentions (74,481) (65,405) Depreciation, amortization and depletion (74,481) (65,405) 7.05 Net value added generated 958, , Value added received through transfers 92,860 48, Equity pick-up (75) (459) Finance income 92,935 49, Total value added to distribute 1,051, , Distribution of value added 1,051, , Personnel 530, , Direct remuneration 433, , Benefits 60,772 54, Government Severance Indemnity Fund for Employees (FGTS) 36,488 31, Taxes and contributions 236, , Federal 201, , State (9) Municipal 35,007 33, Remuneration of third party capital 81,237 67, Interest 58,301 45, Rental 22,936 22, Remuneration of own capital 203, , Interest on equity 29,194 21, Profits reinvested 174, , Non-controlling interest in retained earnings (541) (130) 22

25 COMMENTS ON PERFORMANCE OPERATING AND FINANCIAL PERFORMANCE NET REVENUE Net revenue in 3Q15 grew 4.2% year-on-year, totaling R$ million, having Neolog, a company acquired in 1Q15, registering net revenue of R$2.253 million. This net revenue growth was mainly driven by recurring revenues, which grew by 6.5% year on year and by 8.7% in the last 12 months, reaching 61.6% of total net revenue in the quarter. Of the total recurring revenue, software accounted for 91.3% in the quarter 91.4% in the last 12 months. Services in the quarter grew 7.9% year on year and 4.6% quarter on quarter, chiefly reflecting the higher number of business days in 3Q15. Services not related to software implementation accounted for 37.9% of services revenue in the quarter, once again led by consulting services, which grew 37.4% year on year. Software revenue in the quarter grew 2.7% year on year and 2.2% quarter on quarter, lower than the growth rate of total revenue in the same periods, mainly due to the performance of non-recurring license fee revenue. 23

26 The quarter-on-quarter growth of 4.3% in license fee revenue is mainly a consequence of the 23.5% growth in revenue from sales to new clients, which combines the 13.4% increase in the number of new clients added and the 10.4% growth in average ticket from sales to new clients. In the year-on-year comparison, license fee revenue in 3Q15 decreased by 11.1%, and by 10.5% in the last 12 months. This decrease in license fee is concentrated in the number of sales to new clients, as a result of: (i) the downturn in economic activity in Brazil, which caused a longer period of conversion of the sales pipeline, especially among large clients; and (ii) the migration of a part of the sales pipeline to the subscription model, especially among smaller clients. The licensing average ticket from new clients added increased 16.8% in 3Q15 and 9.5% in the last 12 months, in comparison with the same period in the previous year. This decrease reflects the higher concentration of license sales to middle and large clients, due to the migration of the pipeline from license sales to subscription, which was more evident among small and medium clients in Software recurring revenue accounted for 81.7% of software revenue in the quarter, compared to 78.9% in 3Q14. In the last 12 months, software recurring revenue increased its share of total software revenue by 3.2 percentage points, from 76.3% to 79.5%. In 3Q15, software recurring revenue grew 6.3% year on year, mainly due to the growth of 19.5% in subscription revenue. Subscription revenue corresponded to 10.4% of total software revenue in the quarter, compared to 8.9% in 3Q14. The growth in subscription revenue in 3Q15 was driven by the increase of 140.6% in the average monthly ticket on subscriptions per new client in the year on year comparison and of 48.0% quarter on quarter. This increase was due to the higher share of sales to small and medium clients, caused by the subscription growth under the TOTVS Intera model, and by the drop in the number of clients added, especially among microenterprises. TOTVS Intera is the new subscription model for small, medium and large companies launched in June 2015, by which clients define and manage the number of IDs (identities) they will enable to have unrestricted and 24

27 simultaneous access to all the management, productivity and collaboration software solutions of TOTVS. The model allows clients to use the solutions in any of the clouds approved by TOTVS or, if more convenient, in their own infrastructure (on premises). Maintenance revenue accounted for 79.7% of total recurring revenue and 87.3% of the software recurring revenue in 3Q15. The year-on-year growth of 4.7% outperformed the average IGP-M (inflation index used to adjust prices in most of the maintenance contracts) of the last 12 months by 0.3 percentage point. Growth in this revenue line has been adversely affected mainly by: (i) the lower volume of license sales in previous periods; (ii) the suspension of maintenance due to defaults by clients; (iii) the partial cancellation of maintenance due to layoffs of employees at clients, especially large ones; and (iv) the lowest IGP-M level in the last 12 months. CONTRIBUTION MARGIN BY BUSINESS The drop in the software contribution margin reflects the lower growth in revenues, when compared to the growth of costs and expenses. In addition to what adversely affected the revenue growth mentioned in section "Net Revenue", the IGP-M (inflation index used to adjust the recurring revenues) was materially lower during 2015, when compared to the same period of With regard to software costs and expenses costs, the collective wage increases in this quarter were close to the IPCA and generated retroactive provisions for Christmas bonus and vacation. In addition, TOTVS adjusted its costs and expenses structure, resulting in the reduction in personnel hiring and employee termination that negatively impacted the software contribution margin of the quarter by 70 basis points. It is important to mention that TOTVS reiterates its commitment to discipline in managing costs in order to increase the software contribution margin in a sustainable manner in the medium and long term, while continuing to invest in innovation to meet market demands and foster new growth cycles. The reduction in services contribution margin in both the year-on-year and quarter-on-quarter comparison is mainly due to: (i) the lower allocation of implementation services professionals due to the slower pace of software sales, as 25

28 commented in the Net Revenue section; (ii) the additional costs with employee termination regarding the costs and expenses structure adjustments, as commented in the software contribution margin, which negatively affected services contribution margin in the quarter by 90 basis points; and (iii) the wage increases in 3Q15, as well as their effects on Christmas bonus and vacation provisions, due to the collective bargaining agreements in the regions of Belo Horizonte, Rio de Janeiro and Recife. In the last 12 months, services contribution margin decreased by 220 basis points, also due to additional costs with employee termination in 4Q14, as commented in that quarter. OTHER OPERATING EXPENSES As a ratio of net revenue, selling and commission expenses combined decreased by 30 basis points between 3Q14 and 3Q15, mainly due to (i) the lower volume of license sales in the quarter; and (ii) the change in the sales mix among franchises and own branches. Between 2Q15 and 3Q15, the 30-basis point increase in selling and commission expenses as a ratio of revenue is due to: (i) the wage increases in 3Q15, commented in the Contribution Margin by Business section; and (ii) 26

29 additional costs with employee termination, which corresponded to 10 basis points of net revenue in the period. Allowance for doubtful accounts in 3Q15 corresponded to 1.7% of net revenue, the same level as in 2Q15, despite the increase in delinquency rates in the economy during the quarter. It is important to mention that TOTVS will continue its credit analysis policy and will continue its efforts to recover credits already provisioned. Advertising and marketing expenses decreased 9.9% quarter on quarter, chiefly due to the higher concentration of investments in marketing in 2Q15 with the Universo TOTVS event and the launch of the new advertising campaign. In the year-on-year comparison, the 12% increase is mainly due to the reduction in marketing investments in 3Q14 with the end of the Soccer World Cup. General and administrative expenses decreased 8.0% year on year and increased 1.9% quarter on quarter, mainly due to the disciplined management of costs and expenses and the synergy gains from the administrative structures of the companies acquired in the last two years. Management fees increased by 23.3% in 3Q15 in comparison with the same period the previous year, mainly reflecting the provision for bonus for achievement of financial and individual targets of executives. Note that in 3Q14, management fees had already decreased by 19.5% quarter on quarter, due to the reduction resulting from the reversal of the bonus provision in that quarter. The amount of other revenues in 3Q15 mostly refers to earn-out reversal related to acquired companies in accordance with the achievement of financial and non-financial targets of those companies. This reversal was mainly due to (i) the downturn in economic activity in Brazil; and (ii) the level of cost inflation, which was higher than the inflation index used to adjust the recurring revenue of the acquired companies, and negatively affected the achievement of some of these targets. The year-on-year increase in depreciation and amortization is significantly impacted by the effects of allocation of the acquisition price of Virtual Age in 2Q15, when there was a non-recurring impact of R$5.458 million regarding the 12-month accumulated amortization of its intangible assets. 27

30 EBITDA AND NET INCOME EBITDA in 3Q15 was negatively impacted by additional costs with employee termination, in the amount of R$3.930 million, as commented in the Contribution Margin by Business and Other Operating Expenses sections, and positively impacted by the reversal of the provision for obligations relating to acquisitions, in the amount of R$6.388 million, as commented in the Other Operating Expenses section. Excluding these non-recurring events, EBITDA totaled R$ million in the quarter, compared to R$ million in 3Q14 and R$ million in 2Q15. The mismatch between the IGP-M and the inflation costs, which is more related to the IPC-A, created an additional challenge for EBITDA margin. IGP-M has shown some recovery, but since the inflation pass through is done on every anniversary of recurring contracts based on the last 12-month IGP-M, this recovery tends to contribute more relevantly to the growth of recurring revenues on the upcoming periods. It is also important to mention that a relevant part of costs have already been adjusted closely to the IPC-A levels during the year. 28

31 Despite the disciplined management of costs and expenses and excluding the non-recurring events mentioned above, EBITDA margin in 3Q15 came to 22.1%, 150 basis points lower than in 2Q15, mainly due to the reduction in contribution margins from software and services, explained in the Contribution Margin by Business section. Net income in the quarter totaled R$ million and was affected by additional costs with employee termination and by the reversal of the provision for obligations related to acquisitions. Excluding these impacts, net income in 3Q15 would be R$ million, an increase of 2.9% from the same period of the previous year, and net margin would be 15.1%, compared to 15.3% in 3Q14. In the quarter-on-quarter comparison, net income grew 6.3% and net margin increased 50 basis points, after excluding the 12-month accumulated amortization of intangible assets resulting from the acquisition of Virtual Age booked in 2Q15. CASH FLOW AND NET DEBT Net cash in 3Q15 totaled R$ million, decreasing by R$7.243 million from 2Q15. The increase of R$136,968 million in gross cash was mainly due to (i) the operating cash generation of R$ million, equivalent to 130.2% of the net income in the quarter; (ii) the amortization of 40% of the principal amount of debentures issued by TOTVS in 2008, in the amount of R$ million; (iii) the payment of interest of equity amounting to R$ million, related to the first half of 2015; (iv) the inflow of R$ million from the BNDES financing line contracted in 2013; and (v) the disbursement of R$ million related to the share buyback program, net of the share disposals. 29

32 Notes to the financial statements 1. Operations TOTVS S.A. (hereafter referred to as the Parent Company, TOTVS or the Company) is a publicly-held corporation headquartered at Av. Braz Leme, nd floor, in the City and State of São Paulo, whose shares are traded on the Novo Mercado segment of BM&FBOVESPA the Securities, Commodities and Futures Exchange. The Company s business purpose is the development and sale of management software, productivity and collaboration platforms, as well as the provision of implementation, consulting, assistance and maintenance services. The solutions offered by the Company are segmented according to the sector of the economy, resulting in applications that are more relevant to the business contexts of our clients, both in terms of backoffice processes and for the specific processes of each business segment. TOTVS parent company and consolidated financial statements were approved at the Board of Directors Meeting held on October 27, All amounts presented in these interim financial statements are expressed in thousands of reais, except where otherwise indicated. Because the figures have been rounded, they may not add up precisely to their respective totals. Non-financial data included in this report, such as the number of clients, average tickets, market share, and other data items, were not reviewed by our independent auditors. 2. Presentation of interim financial information and summary of accounting policies, assumptions and estimates The principal accounting policies applied in the preparation of this interim financial information have been consistently applied to the years presented. This interim financial information does not include all of the information required for annual or complete financial statements, and therefore it should be read together with the Company s complete financial statements for the year ended December 31, To better reflect the results, our business and revenue arrangements, the Company added two new item lines, one for software subscription revenue and another for cost of support. It also changed the nomenclature used in its financial statements from licensing fee costs to cost of software. Because of this change, revenue lines and costs disclosed in the third quarter of 2014 were reclassified in order to maintain comparability between periods Basis of preparation The financial statements were prepared using historical cost as the valuation basis, except for the valuation of certain assets and liabilities, such as financial instruments, which were measured at their fair value. 30

33 (a) Consolidated financial information The consolidated financial statements were prepared in accordance with CPC 21 - R1 (IAS 34), which is applicable to the preparation of interim financial information, and is in accordance with the accounting practices adopted in Brazil, including the standards issued by the Securities and Exchange Commission (CVM) applicable to quarterly information (ITR). (b) Individual financial information The individual financial statements of the Company have been prepared in accordance with CPC 21(R1), applicable to the preparation of interim financial information, and in a manner consistent with the standards issued by the CVM applicable to ITR, and are disclosed in conjunction with the consolidated financial statements. (c) Changes in accounting policies and disclosure requirements There are no new pronouncements or interpretations of CPCs/IFRS effective from 2015 that could have a significant impact on the Company's interim financial information Consolidated interim financial information The consolidated interim financial information includes the Company s operations and those of the following subsidiaries, in which the percentage interests held by the Company on its balance sheet are shown below: Direct Investments: Head Interest % Corporate Name office Abbreviated name 9/30/ /31/2014 TOTVS Serviços Ltda. (before TOTVS Rio) BRA TOTVS Serviços TOTVS Nordeste Software Ltda. BRA TOTVS Nordeste TOTVS Brasília Software Ltda. BRA TOTVS Brasília TQTVD Software Ltda. BRA TQTVD TOTVS Ventures Participações Ltda. BRA TOTVS Ventures TOTVS Soluções em Agroindústria S.A. BRA TOTVS Agroindústria (a) P2RX Soluções em Software S.A. BRA P2RX (a) TOTVS Argentina S.A. ARG TOTVS Argentina Datasul Argentina S.A. ARG Datasul Argentina TOTVS México S.A. MEX TOTVS México Datasul S.A. de CV. MEX Datasul México TOTVS Corporation BVI TOTVS Corporation EuroTOTVS Lda. POR EuroTOTVS (c) TOTVS Incorporation USA TOTVS Inc Virtual Age Soluções em Tecnologia Ltda. BRA Virtual Age Neolog Consultoria e Sistemas S.A. BRA Neolog (a) Ciashop - Soluções para Comércio Eletrônico S.A. BRA Ciashop TOTVS Resultados em Outsourcing Ltda. BRA RO Makira II Empreendimentos e Participações S.A. BRA Makira II

34 Indirect Investments: Head Interest % Corporate Name office Abbreviated name Investor 3/31/ /31/2014 DTS Consulting Partner. SA de CV MEX Partner TOTVS México W&D Participações S.A. BRA W&D TOTVS Brasília PC Informática S.A. BRA PC Informática W&D umov.me S.A. BRA umov.me (b) TOTVS Ventures RMS Software S.A. BRA RMS TOTVS Nordeste Webstrategie Software Ltda. BRA Webstrategie RMS Kerina Software Ltda. BRA Kerina (d) TQTVD (a) Business Combinations in (b) Investment sold in (c) Company closed down in June (d) Established in September On April 2, 2015, TOTVS Ventures, a subsidiary of TOTVS S.A., sold its minority shareholding of 20% in the capital stock of umov.me for R$1,600, rescinding all future investment commitments of TOTVS Ventures established at the time of the acquisition of said interest in umov.me. The results of subsidiaries acquired during the period ended September 30, 2015 are included in the statements of income from the date of their acquisition. Therefore, for the purposes of comparison between the consolidated and parent company results for 2015 and 2014, the dates of acquisition and incorporation of each subsidiary s results must be considered. All intercompany balances and transactions were eliminated upon consolidation Critical accounting estimates and assumptions Accounting estimates and assumptions are continually assessed, and are based on historical experience and other factors, including expected future events, which are considered to be relevant. Accounting estimates will rarely be equal to the actual results. For the period ended September 30, 2015, no changes in estimates and assumptions entailing a significant risk of causing relevant adjustments to the book values of assets and liabilities for the following fiscal year were recognized in addition to the latest annual financial statements. 3. Business combinations The acquisitions made in 2015 were in line with the Company's strategies of specialization and consolidation of its positions in different markets, in addition to offering new solutions to TOTVS customers through portfolio diversification, and offering tailored solutions for specific niches. 32