btg pactual ceo conference presentation
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CSU CardSystem – 3Q10
CSU: leader in technology and BPO services in Brazil
The largest independent electronic payment processor in Latin America
Business model: Full BPO (Business Process Outsourcing) for issuers and acquirers of electronic payment transactions
Relaunching of contact center infrastructure, management and BPO services
The best and most efficient site (Alphaview) in Latin America
Card base of more than 20 million
55% market share among independent vendors
20 years of customization focused on
the Brazilian market
Market intelligence team to maximize clients’ cardholders base profitability
3,500 workstations providing inbound (Customer Care and HelpDesk) and outbound (Telemarketing and Collection) services
R$ 419.3 million
60%
40%
Gross Revenues (last 12 months)
(in % of total revenues)
2
R$ 96
R$ 314
R$ 395
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
IPO
EBITDA
Net Revenue (in R$ million)
Consistent track record of profitable growth
First company to operate with 3 brands
Entry ofPrivate Equity professional investor
Launch of the first Private Label cards CSU develops
electronic voucher
Best of the Century marketing award
Creation of the CSU Institute
15 years with 15 million cards under management
50%+ market share in Brazil
Relaunch of CSU Contact Center: new site
Launch of solution for the acquirer´s market
Innovation and consolidation of the business model
Business and client diversification
Sustainable growth
5x EBITDA and 4x Net Revenue
3
CSU: first independent card processor in Brazil
Start of Contact Center operations
Credit Institutions
ConvergenceInsurance & Healthcare
Retail & Manufacturing
Banking
Renowned customers in each market segment
Net Revenues (last 12 months)
(in % of total revenues)
Banking35%
Credit Institutions
11%
Insurance & Healthcare
9%
Convergence33%
Retail & Manufacturing
12%
4
25%
31%
38%
45%
55%
2010 2013 2017 2020 2025
5
Participation of cards in household consumption
(% of total)
• Brazil's electronic payment industry has experienced significant growth in recent years (CAGR 17%+)
• The penetration of cards in total spending made by Brazilian households rose from 8% in 1999 to 25% in 2010. It is expected to reach 55% by 2025.
Number of Cards (in million of units)
& Number of Transactions (in billion of units)
CAGR 04-10E
17%
CAGR 04-10E
20%
151
183
222
277
336
388
453
514
565
628
1.37
1.63
1.94
2.52
3.16
3.70
4.43
5.32
6.11
7.13
0,00
1,00
2,00
3,00
4,00
5,00
6,00
7,00
8,00
0
100
200
300
400
500
600
700
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*
* Source: ABECS
Electronic payment chain
Issuers(Banks and Retailers)
Cardholders
Card / Billing
Commercial Transactions
Capture of Electronic
Transactions
Request for Approval
Approval Approval
Money Money
Request for Approval
6
Money Money
Brands
Merchants
Acquirers
CSU offers a full range of services to card issuers
7
CSU CardSystem
• Billing• Invoicing• Conflict Resolution• Customer Support
• Authorization • Information System• Contact Center• Accounting• Processing• Fraud Prevention• Operational Control
Brands
Cardholders
CSU plays a central role in Brazil’s electronic transaction industry
• Financial Information• Interchange• Electronic Transaction Processing
Acquirers
Merchants
Issuers (CSU Clients)
Opportunity
Current situationPrevious situation
771700
101215
Cielo Redecard Fidelity Tsys
• Two acquirers dominated the Brazilian market
• Exclusivity agreements with Visa and MasterCard limited competitiveness
• Acquirers generated extraordinary profits
• Market is open to competition
Antitrust authorities forced the end
of the exclusivity agreement
as of July’2010• New operators in Brazil's acquirer market
Source: Companies’ Annual Reports
42.4%45.4%
2.7%12.7%
Source: BIS, Central Banks and ABECS
62.713
6.1108.185
0.851105
210
12
USA Brazil UK Mexico
8
Number of Acquirers (in units)
and of Transactions (in billion of units)Net Income and Net Margin
(in USD million and % of revenues)
• Brazilian acquirer market is under a new regulatory framework:
CSU offers a complete solution for acquirers and merchants
9
CSU CardSystem
Acquirers(CSU Clients)
New Services• Operation management• Authorization• Billing• Network• Accounting• Processing• Back Office• Information System
Issuers (CSU Clients)
Cardholders Merchants
Brands
• Network Capture (POS)• Contact Center• Conflict
Resolution• Billing
• Brazilian market estimated at R$ 12 billion in 2011,with a CAGR of 12/13% p.a. in the upcoming years;
• Growth in demand for customer service;
• Recognition of those providers best able to meetcontracted SLAs;
• Continuous growth in collection, telemarketing andon-site customer services;
• Merger of Dedic into Contax. 34
117
165
208
239
355
424
3.980
6.430
0 2000 4000 6000 8000
10
Market Share
(in % of sales)
Brazilian demand per type of client
(in R$ million)
Contax
21,5%
Atento
18,0%
Tivit
4,5%Dedic
4,0%Algar
2,7%
Teleperfor
mance2.5%
CSU
1,6%
Other Call
Centers
22%
Collection
Agencies
23,0%
Customer
Care
40%
Telemarketing
15%
Other players
7%
Collection
38%
Brazilian demand per type of service
(in % of sales)
Financial Institutions
Convergence
Retail
Manufacturing
Services
Insurance
Utilities
Government
Healthcare
Growth strategy is supported by a differentiated platform
11
• Accelerated time to market to new clients
• Lower operating costs leveraged by scale gains
• Excellent infrastructure and superior operations facilities
TECHNOLOGY
INDEPENDENCE
PERFORMANCE• Flexible, secure and robust infrastructure (mainframe)
• World-class systems and applications, extensively customized for the Brazilian market
• Highly qualified team of professionals
• Innovation and new products, among a complete range of solutions
• Independent shareholding structure with no commercial activity competing with prospects and clients
• Dedicated commercial teams to each business lines
• First vendor to receive MasterCard certification to provide services for acquirers
• Opportunity for various partnerships and M&A
Our strategy prioritizes growth with sustainable profitability
12
Improve and expand contact center/BPO and
increase profitability: self sustainable
Consolidate entry as a vendor into the
acquiring segment: greenfield growth
Keep expanding in the card issuers
segment: organic + inorganic
Continue investing in technology and software
development: competitive advantage
Relaunch market intelligence & CRM
solutions and expand commercial approach: value added service
• Successful launch the first project
• Second flight in commercial expansion
• Serve as strategic partners to global players
• Tap new market segments, beyond financial institutions
• Attract mid-sized banks as funding partners to specific projects
• Serve as strategic partners to global players
• Market repositioning with broader range of services
• Commercial approach outside CSU´s clients base
• Effective turn around of the business unit
• Focus on reaching full capacity
• New offerings in Collections and Telemarketing
Main focus in the short term
13
21.6
59.5
109.195.0
55.5
16.0
2005 2006 2007 2008 2009 9M10
Continuous investments and substantial improvement in net debt
14
• CSU continuously invests in its
technological platform a minimum
of 6/7% of net revenues.
• Significant reduction in
indebtedness over the last 2 years.0.5x
1.5x
3.2x
1.5x0.7x 0.2x
19.3 15.0 25.9 21.1 29.2 18.8
24.4 13.9
21.0
4.3
11.4
2.2
43.7
28.9
46.9
25.4
40.6
21.0
2005 2006 2007 2008 2009 9M10
Software Outros
Investments
(in R$ million)
Net Debt and Net Debt/EBITDA
(in R$ million and ratio)
Consistent recovery in profitability
Recent commercial achievements will present major contribution to revenues as of 2Q11.
Strong cash generation as measured by EBITDA.
Second year of record net income generation:
• Dividend distribution
• Share buy back program
• Consistent investments
• Reduction in indebtedness
15
7 710
13 16
-17-12
7
18 20
6.8%
4,8%
5.7% 5.6%5.1%
-5.0%-3.9%
1.8% .4.5%
6.7%
-8,0%
-4,0%
0,0%
4,0%
8,0%
20,0
10,0
0,0
10,0
20,0
30,0
2001 2002 2003 2004 2005 2006 2007 2008 2009 9M10
Net Revenues
(in R$ million)
Net Income and Net Margin
(in R$ million and % of net revenues)
EBITDA
(in R$ million)
96134
178229
314 318 319364
395
292
2001 2002 2003 2004 2005 2006 2007 2008 2009 9M10
1723
3446
6050
34
64
79
61
2001 2002 2003 2004 2005 2006 2007 2008 2009 9M10
54.4 50.9
71.2
94.3
67.374.9
2006 2007 2008 2009 9M09 9M10
156.7 159.2
213.9253.7
189.5 186.6
2006 2007 2008 2009 9M09 9M10
-> strong and consistent operating performance
16
• Track record of cardbase growth, despite punctual clients leave;
• Constant investment in technology and scale lead to higher margins;
• Operational leverage gains of scale are shared with clients to increase loyalty and discourage competition.
CAGR 06-0920%
CAGR 06-0917%
CAGR 06-0926%
37.7%34.4%
36.0%40.4%
38.6%
43.4%
11
1619
2320
2006 2007 2008 2009 9M10
Cardbase
(in million of units)
Gross Revenue
(in R$ million)
Gross Income and Gross Margin
(in R$ million and % of net revenues)
0.9
-5.4
2.4
11.69.7
8.1
2006 2007 2008 2009 9M09 9M10
197.6174.3 177.2 172.7
132.6 128.4
2006 2007 2008 2009 9M09 9M10
-> positioned for profitable growth
17
• Top 10 among Brazilian contact centers;
• Important structural changes concluded in 2010 to
strengthen repositioning;
• Effective creation of a business unit;
• Dedicated sales team: new offerings and expanded
prospects base;
• Specialized HR professionals: labor intensive activity.
0.5%-3.2%
1.5%
7.7% 7.8%6.7%
Number of Workstations
(in units)
Gross Revenue
(in R$ million)
Gross Income and Gross Margin
(in R$ million and % of net revenues)
4.2834.796
4.2253.494 3.468
2006 2007 2008 2009 3Q10
Consolidated Financial Information
18
(in R$ million and % of net revenues) 2006 2007 2008 2009 9M09 9M10
Net Revenue 317.9 318.6 363.7 394.8 298.4 292.4
Gross Income
Gross Margin
46.3 45.5 73.7 106 76.4 82.9
14.6% 14.3% 20.3% 26.8% 25.8% 28.4%
Gross Margin
54.4 50.9 71.2 94.3 67.3 74.9
37.7% 34.4% 36.0% 40.4% 38.6% 43.4%
Gross Margin
-8.1 -5.4 2.4 11.6 9.6 8.1
0.5% -3.2% 1.5% 7.2% 7.8% 6.7%
EBITDA 39.2 33.9 64.4 78.9 62.3 61.3
Net Income -16.9 -6.3 9.5 17.9 14.8 19.6
Net Debt 59.5 109.1 95.0 55.5 67.2 16.0
Capex 28.9 46.9 25.4 40.6 31.5 21.0
CARD3 is traded at inexpensive levels as compared to peers
19
Company nameNet revenue (US$ million-
12M)
Gross Margin(%)
EBITDA Margin(%)
Net Margin(%)
EV/EBITDA P/E
2,315.2 72.5% 66.3% 46.5% 6.4 9.2
10,235.7 66.7% 17.6% - - -
1,707.3 64.6% 22.3% 10.9% 9.1 19.4
1,535.2 77.6% 65.7% 55.8% 8.6 9.5
1,712.4 - 28.6% 12.1% 6.7 16.3
Financial Services Average 3,501.2 70.4% 40.1% 31.3% 7.7 13.6
1,383.8 17.1% 14.3% 5.9% 5.1 12.6
2,314.6 39.5% 8.1% 5.8% 9.4 15.6
594.6 25.0% 18.2% 7.3% 10.0 23.5
Contact Center Average 1,431.0 27.2% 13.5% 6.3% 8.2 17.2
229.5 28.8% 20.9% 6.0% 3.7 12.4
1. Current data: Last 12 months - Last balance sheet and income statement - reference date Jan. 31, 20112. Methodology for calculating EBITDA standardized by Economática
Awards and Certifications
Award Year and Seal
National Teleservices Award2009
2010
Grupo Padrão 2009
Marketing Best – 20 Years Special Edition 2007
Consumidor Moderno magazine – Quality Standard in Contact Center award
2007
ADVB – Top of Marketing
2007 2006
2005 2004
2003
2000 (2 categ.)
1999
1998 (2 categ.)
1997 1996
ABEMD – Direct Marketing Award
2006
2004
2001
Marketing Best – Social Responsibility2006
2005
2nd rank in ABRASCA Annual Report 2010
Award Year and Seal
Marketing Best
2006 2005 2004
2003 2002 1999
1998 1997 1996
1995
Ernest & Young – Entrepreneur of the Year
2002
Marketing Man of Brazil and São Paulo 2000
Gazeta Mercantil – Highlights of the 90s 2000
Computerworld magazine - 100 Largest in IT
1999
ADVB - Top of Internet 1999
Marketing Best – Best of the 20th
Century1999
Marketing Best – Best of the Decade 1998
Certification Year
PROBARE – Maximum Maturity of Management – Grade 4
Dec 2009 and Dec 2010 (Recertification)
PROBARE – Seal of Ethics 2010
ISO 9001 Certification
Jan 2001 (9001:1994 version)
Jan 2004 and Feb 2007 (9001:2000 version)
May 2010 (ISO 9001:2008 version)
PCI Certification 201020
High level of Corporate Governance
Well structured internal controls
Stock based compensation plan for executives
Solid investor relations cultureInvestment by private equity funds since 1997
Fiscal Council3 members, with 1 appointed by minority shareholders
Majority of independent board members
Novo Mercado (100% tag-along rights; no poison pills)
100% common shares and 44% free float
Active Sustainability Arm (CSU Institute)
21
CEO
Commercial Director CSU CardSystem
Operations Director
Executive Officer of CSU Contact
Chief Financial, Legal, HR Officer and Controller
IR and Corporate Development
Officer
CSU Executive Board Organizational Chart
22
Mônica Hojaij Carvalho Molina
Carlos Montenegro
Investor Relations
Tel: +55 (11) 2106-3821
E-mail: [email protected]
Web Site: www.csu.com.br/ri
This material is the property of CSU CardSystem S.A., and any partial or total reproduction without the Company’s written approval is prohibited. All rights reserved. Opinions expressed in this document are subject to change without prior notice.
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