institutional presentation 2010
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Institutional Presentation – 2010
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
3,757 workstations providing inbound (Customer Care and HelpDesk) and outbound (Telemarketing and Collection) services
Gross Revenues (2010)
(in % of total revenues)
2
Composição da Receita 2010
(% do faturamento)
R$ 96
R$ 314
R$ 395
R$ 383IPO
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 (2010)
(in % of total revenues)
Banking37%
Credit Institutions
11%Insurance & Healthcare
8%
Convergence32%
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
• 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 ReportsSource: 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:
1098
840
405
194
45.8 53.5
7.7
11.3
Cielo Redecard Fidelity TSYS
Net Income Net Margin
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%Dedic4,0%Algar
2,7%
Teleperform
ance
2.5%
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
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;
• 2011 investment plan may require
debt expansion and capital
structure optimization, adding
more value to the business.0.5x
1.5x
3.2x
1.5x0.7x
Investments
(in R$ million)
Net Debt and Net Debt/EBITDA
(in R$ million and ratio)
19.3 15.0 25.9 21.1 29.2 26.3
24.4 13.9
21.0
4.3
11.4
2.2
43.7
28.9
46.9
25.4
40.6
28.5
2005 2006 2007 2008 2009 2010
Software and Hardware Others
21.6
59.5
109.1
95.0
55.5
23.8
0,4x
1.5x
3.2x
1.5x 0.7x
0.3x
2005 2006 2007 2008 2009 2010
Cash Generation
• Decrease in net debt from R$ 55.5 million to R$ 23.8 million;
• Long-term debt represents 52.3% of the gross amount;
• Cash balance: R$ 30.1 million (R$ 11.0 million in 2009)
• Earnings distribution to shareholders equivalent to 50% payout and 5% yield:
• R$ 7.8 million interest on shareholders’ equity paid in January
• Dividends of R$ 8.0 million to be approved at the ASM in April’ 2011
15
Operating cash generation: R$ 69.5 million
Consistent recovery in profitability
• Recent commercial achievements will present major contribution to revenues as of 2Q11.
• Increase in gross profit
• 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
16
Net Revenues
(in R$ million)
96,1134,3
177,8
229
314 318 319
364395 383
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
46.3 45.5
73.7
106.0 114.6
-11.1 -6.3
6.7
17.0 33.139.3 33.9
64.4
78.978.1
2006 2007 2008 2009 2010
Gross Income Net Income EBTIDA
Profitability Evolution
(in R$ million)
-> strong and consistent operating performance
17
• 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 06-1020%
CAGR 06-1017%
Average Cardbase
(in million of units)
Gross Revenue
(in R$ million)
Gross Income and Gross Margin
(in R$ million and % of net revenues)
156.7 159.2
213.9
253.7240.8
2006 2007 2008 2009 2010
54.450.9
71.2
94.3103.3
37.7%34.4% 36.0%
40.4%
46.3%
2006 2007 2008 2009 2010
15.4
19.0 19.918.5
22.123.4
2008 2009 2010
Billed cards Registered Cards
-> positioned for profitable growth
18
• 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.
Number of Workstations
(in units)
Gross Revenue
(in R$ million)
Gross Income and Gross Margin
(in R$ million and % of net revenues)
198174 177 173 172
2006 2007 2008 2009 2010
4.2834.796
4.225
3.4943.757
2006 2007 2008 2009 2010
0.9
-5.4
2.4
11.6 11.3
0.5%
-3,2%
1.5%7.2% 7.0%
2006 2007 2008 2009 2010
Consolidated Financial Information
19
(in R$ million and % of net revenues) 2006 2007 2008 2009 2010
Net Revenue 317.9 318.6 363.7 394.8 383.3
Gross Income
Gross Margin
46.3 45.5 73.7 106 114.6
14.6% 14.3% 20.3% 26.8% 29.9%
Gross Margin
54.4 50.9 71.2 94.3 103.3
37.7% 34.4% 36.0% 40.4% 46.3%
Gross Margin
-8.1 -5.4 2.4 11.6 11.3
0.5% -3.2% 1.5% 7.2% 7.0%
EBITDA 39.2 33.9 64.4 78.9 78.1
Net Income -16.9 -6.3 9.5 17.9 33.1
Net Debt 59.5 109.1 95.0 55.5 23.8
Capex 28.9 46.9 25.4 40.6 28.5
CARD3 is traded at inexpensive levels as compared to the market
20
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
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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