TOTVS S.A.ri.totvs.com.br/ptb/2123/TOTVS - 1 ITR 2015_ENG.pdf · (A free translation of the...

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TOTVS S.A. Quarterly information (ITR) at March 31, 2015 and report on review of quarterly information


] Quarterly information (ITR) - 3/31/2015 - 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 7 Statement of cash flow - indirect method 8 Statement of changes in equity 1/1/2015 to 3/31/2015 9 1/1/2014 to 3/31/2014 10 Statement of value added 11

Consolidated financial statements

Balance sheet - assets 12 Balance sheet - liabilities and equity 13 Statement of income 15 Statement of comprehensive income 16 Statement of cash flow - indirect method 17 Statement of changes in equity 1/1/2015 to 3/31/2015 18 1/1/2014 to 3/31/2014 19 Statement of value added 20 Comments on performance 21

Notes 29 Opinions and statements Report on review of interim quarterly financial information 59


1

Quarterly information (ITR) - 3/31/2015 - TOTVS S.A. Version: 1

Company information/capital composition

Number of shares Current quarter

(in units) 3/31/2015

Paid-up capital

Common shares 163,467,071

Preferred shares -

Total 163,467,071 Treasury shares

Common shares 1,305,687

Preferred shares -

Total 1,305,687


2


Company information/dividends

Events Approval Type Early payment Shares Earnings per share

Annual Shareholders’ Meeting 03/30/2015 Dividends 4/15/2015 Common 0.76751


3


Parent company financial statements/balance sheet - assets

(R$ thousand)

Current quarter Previous year

1 – Code 2 - Description 3/31/2015 12/31/2014

1 Total assets 2,126,148 2,054,572

1.01 Current assets 1,082,661 1,038,751

1.01.01 Cash and cash equivalents 685,494 659,236

1.01.02 Financial investments 13,670 10,415

1.01.02.02 Financial investments measured at amortized cost 13,670 10,415

1.01.02.02.01 Securities 13,670 10,415

1.01.03 Trade receivables 364,678 347,177

1.01.03.01 Customer receivables 364,678 347,177

1.01.03.01.01 Trade receivables 423,957 400,829

1.01.03.01.02 Provision for doubtful accounts (59,279) (53,652)

1.01.06 Taxes recoverable - 473

1.01.08 Other current assets 18,819 21,450

1.01.08.03 Other 18,819 21,450

1.01.08.03.02 Other assets 18,819 21,450

1.02 Non-current assets 1,043,487 1,015,821

1.02.01 Long-term receivables 113,704 135,508


1.02.01.02.01 Securities 30,827 38,416

1.02.01.03 Trade receivables 44,825 51,892

1.02.01.03.01 Customer receivables 32,808 39,411

1.02.01.03.02 Other receivables 12,017 12,481

1.02.01.06 Deferred taxes 12,257 22,044

1.02.01.06.01 Deferred income tax and social contribution 12,257 22,044

1.02.01.08 Receivables from related parties 3,139 1,345

1.02.01.08.02 Receivables from subsidiaries 3,139 1,345

1.02.01.09 Other non-current assets 22,656 21,811

1.02.01.09.03 Judicial deposits 22,656 21,811

1.02.02 Investments 442,368 392,211

1.02.02.01 Equity investments 442,368 392,211

1.02.02.01.02 Interests in subsidiaries 442,368 392,211

1.02.03 Property, plant and equipment 70,367 66,724

1.02.03.01 Property, plant and equipment in service 70,367 66,724

1.02.04 Intangible assets 417,048 421,378

1.02.04.01 Intangible assets 417,048 421,378


4


Parent company financial statements / balance sheet - liabilities and equity

(R$ thousand)

Current Quarter

Previous

year


2 Total liabilities 2,126,148 2,054,572

2.01 Current liabilities 398,016 317,060

2.01.01 Social and labor obligations 91,065 95,757

2.01.01.01 Social obligations 6,802 11,627

2.01.01.02 Labor obligations 84,263 84,130

2.01.02 Trade payables 34,231 28,546

2.01.02.01 National supplier payables 34,231 28,546

2.01.03 Tax obligations 9,332 11,791

2.01.03.01 Federal tax obligations 9,332 11,791

2.01.03.01.01 Income tax and social contribution 9,332 11,791

2.01.04 Borrowing 60,350 58,632

2.01.04.01 Borrowing 26,377 24,798

2.01.04.01.01 In local currency 26,377 24,798

2.01.04.02 Debentures 33,973 33,834

2.01.05 Other liabilities 203,038 122,334

2.01.05.02 Other 203,038 122,334

2.01.05.02.01 Dividends and interest on capital payable 125,271 47,071

2.01.05.02.04 Obligations for purchases of investments 19,509 18,417

2.01.05.02.05 Commission payable 57,625 56,131

2.01.05.02.06 Other liabilities 633 715

2.02 Non-current liabilities 623,740 621,138

2.02.01 Borrowing 540,287 536,196

2.02.01.01 Borrowing 457,745 457,176


2.02.01.02 Debentures 82,542 79,020


2.02.02.01 Payables to related parties 10,632 13,216

2.02.02.01.02 Payables to subsidiaries 10,632 13,216

2.02.02.02 Other 62,123 60,578


2.02.02.02.04 Other liabilities - 532

2.02.04 Provision 10,698 11,148 2.02.04.01 Tax, social security, labor and civil provision 9,042 10,854

2.02.04.01.01 Tax provision 77 78

2.02.04.01.02 Social security and labor provision 7,757 9,537

2.02.04.01.04 Civil provision 1,208 1,239 2.02.04.02 Other provision 1,656 294

2.02.04.02.04 Provision for losses on investments 1,656 294

2.03 Equity 1,104,392 1,116,374

2.03.01 Paid-up capital 526,592 526,592

2.03.02 Capital reserves 45,095 40,281

2.03.02.02 Special goodwill reserve on mergers 14,330 14,330

2.03.02.04 Share options 27,670 27,495


5

Parent company financial statements/balance sheet - liabilities and equity

(R$ thousand)

Current Quarter

Previous

year


2.03.02.05 Treasury shares (47,573) (52,212) 2.03.02.07 Goodwill reserves 31,557 31,557 2.03.02.08 Debentures converted into shares 44,629 44,629 2.03.02.09 Goodwill on purchases of non-controlling interests (25,518) (25,518)

2.03.04 Revenue reserves 451,768 549,472

2.03.04.01 Legal reserve 61,961 61,961

2.03.04.05 Profit retention reserve 389,807 389,807

2.03.04.08 Additional proposed dividends - 97,704

2.03.05 Profit/Loss accumulated 71,057 -

2.03.07 Exchange variations on investments abroad 9,880 29


6


Parent company financial statements/statement of income

(R$ thousand)

1 – Code 2 – Description

Current quarter 1/1/2015 to

3/31/2015

Same quarter of prior year

1/1/2014 to 3/31/2014

3.01 Sales and/or service revenue 397,076 377,907 3.01.01 Licensing fees 62,327 67,322 3.01.02 Services 107,599 98,880 3.01.03 Subscriptions 20,565 19,827 3.01.04 Maintenance 206,585 191,878 3.02 Cost of sales and/or services (130,249) (116,531) 3.02.01 Cost of software (15,905) (15,605) 3.02.02 Cost of services (93,385) (82,122) 3.02.03 Cost of support (20,959) (18,804) 3.03 Gross profit 266,827 261,376 3.04 Operating income (expenses) (172,764) (171,416) 3.04.01 Selling expenses (26,229) (23,639) 3.04.02 General and administrative expenses (23,852) (22,848) 3.04.05 Other operating expenses (125,590) (126,160) 3.04.05.01 Research and development (53,865) (50,852) 3.04.05.02 Advertising expenses (6,444) (4,419) 3.04.05.03 Commission (36,459) (39,515) 3.04.05.04 Management fees (4,526) (6,912) 3.04.05.05 Depreciation and amortization (17,348) (17,205) 3.04.05.06 Provision for doubtful accounts (7,436) (7,239) 3.04.05.08 Other operating income and expenses, net 488 (18) 3.04.06 Equity pick-up 2,907 1,231 3.05 Profit before finance results and taxes 94,063 89,960 3.06 Finance results 7,033 (1,306) 3.06.01 Finance income 22,929 15,414 3.06.02 Finance costs (15,896) (16,720) 3.07 Profit before taxes on income 101,096 88,654 3.08 Income tax and social contributions on net income (30,039) (27,156) 3.08.01 Current (25,323) (23,889) 3.08.02 Deferred (4,716) (3,267) 3.09 Profit for the period from continuing operations 71,057 61,498 3.11 Profit for the period 71,057 61,498 3.99 Earnings per share - (Reais/share) 3.99.01 Basic earnings per share 3.99.01.01 Common shares 0.44 0.38 3.99.02 Diluted earnings per share 3.99.02.01 Common shares 0.43 0.37


7


Parent company financial statements/statement of comprehensive income

(R$ thousand)

1 – Code 2 - Description Current quarter

1/1/2015 to 3/31/2015


1/1/2014 to 3/31/2014

4.01 Profit for the period 71,057 61,498 4.02 Other comprehensive income 9,851 (2,411) 4.02.01 Exchange variations on investments abroad 14,924 (3,653) 4.02.02 Deferred income tax (5,073) 1,242 4.03 Comprehensive income for the period 80,908 59,087


8


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 3/31/2015 3/31/2014

6.01 Net cash provided by operating activities 86,203 62,740 6.01.01 Cash provided by operations 120,344 125,661 6.01.01.01 Profit before taxes for the period 101,096 88,654 6.01.01.02 Depreciation and amortization 17,348 17,205 6.01.01.03 Share-based payments 809 876 6.01.01.04 Losses on sales of assets (52) 199 6.01.01.05 Provision for doubtful accounts 7,436 7,239 6.01.01.06 Equity pick-up (2,907) (1,231) 6.01.01.07 Provision for (reversal of) contingencies (1,812) (865) 6.01.01.08 Interest, monetary and exchange variations, net (1,574) 13,584 6.01.02 Changes in assets and liabilities (9,289) (39,679) 6.01.02.01 Trade receivables (18,334) (31,678) 6.01.02.03 Other assets 18,017 (2,685) 6.01.02.04 Judicial deposits (845) (384) 6.01.02.05 Social and labor obligations (4,692) 6,511 6.01.02.06 Trade payables 5,685 (3,768) 6.01.02.07 Commission payable 1,494 3,454 6.01.02.08 Taxes payable (10,473) (12,119) 6.01.02.09 Other payables (614) (486) 6.01.02.10 Taxes recoverable 473 1,476 6.01.03 Other (24,852) (23,242) 6.01.03.01 Interest paid (7,543) (6,535) 6.01.03.02 Income tax and social contribution paid (17,309) (16,707) 6.02 Net cash used in investment activities (40,068) (50,695) 6.02.01 Increase in capital of subsidiaries (1,627) (39,805) 6.02.02 Purchases of intangible assets (29,799) (6,125) 6.02.06 Value of fixed assets sale 200 154 6.02.08 Purchases of property, plant and equipment (8,842) (4,919) 6.03 Net cash used in financing activities (19,877) (48,578) 6.03.01 Bank borrowing - (25,613)

6.03.02 6.03.03

Credit from related companies (4,378) 360 Dividends paid (19,504) (18,315)

6.03.03 Repurchase of treasury shares 4,005 (5,010)

6.05 Increase (decrease) in cash and cash equivalents 26,258 (36,533)

6.05.01 Cash and cash equivalents at the beginning of the period 659,236 506,886

6.05.02 Cash and cash equivalents at the end of the period 685,494 470,353


9


Parent company financial statements/statement of changes in equity - 1/1/2015 to 3/31/2015

(R$ thousand)

1 - Code 2 – Description Paid-up

share capital

Capital reserves, share options and

treasury shares Revenue reserves

Retained earnings

Other comprehensive

income Equity

5.01 Opening balances 526,592 40,281 549,472 - 29 1,116,374

5.03 Adjusted opening balances 526,592 40,281 549,472 - 29 1,116,374

5.04 Capital transactions with owners - 4,814 (97,704) - - (92,890)

5.04.03 Share options recorded - 809 - - - 809

5.04.04 Purchase of treasury shares - - - - - -

5.04.05 Disposal of treasury shares - 4,005 - - - 4,005

5.04.06 Dividends - - (97,704) - - (97,704)

5.04.07 Interest on equity - - - - - -

5.05 Total comprehensive income - - - 71,057 9,851 80,908

5.05.01 Profit for the period - - - 71,057 - 71,057

5.05.02 Other comprehensive income - - - - 9,851 9,851

5.05.02.04 Exchange variations on investments abroad - - - - 9,851 9,851

5.07 Closing balances 526,592 45,095 451,768 71,057 9,880 1,104,392


10


Parent company financial statements/statement of changes in equity - 1/1/2014 to 3/31/2014

(R$ thousand)

1 - Code 2 – Description Paid-up

share capital

Capital reserves, share options and

treasury shares Revenue reserves

Retained earnings

Other comprehensive

income Equity

5.01 Opening balances 526,592 85,367 457,382 - (1,720) 1,067,621

5.03 Adjusted opening balances 526,592 85,367 457,382 - (1,720) 1,067,621

5.04 Capital transactions with owners - (4,134) (102,912) - - (107,046)

5.04.03 Share options recorded - 876 - - - 876

5.04.04 Purchase of treasury shares - (7,424) - - - (7,424)

5.04.05 Disposal of treasury shares - 2,414 - - - 2,414

5.04.06 Dividends - - (102,912) - - (102,912)

5.05 Total comprehensive income - - - 61,498 (2,411) 59,087

5.05.01 Profit for the period - - - 61,498 - 61,498

5.05.02 Other comprehensive income - - - - (2,411) (2,411)

5.05.02.04 Exchange variations on investments abroad - - - - (2,411) (2,411)

5.07 Closing balances 526,592 81,233 354,470 61,498 (4,131) 1,019,662


11


Parent company financial statements/statement of value added

(R$ thousand)

Accumulated

current quarter

3/31/2015

Accumulated same quarter of

previous year 3/31/2014 1 – Code 2 - Description

er

Accumulated same quarter

of previous year

7.01 Revenue 426,198 405,004

7.01.01 Sale of goods and services 433,146 412,263

7.01.02 Other expenses 488 (20)

7.01.04 Provision for (reversal of) doubtful accounts (7,436) (7,239)

7.02 Inputs acquired from third parties (127,702) (115,868)

7.02.01 Cost of sales and services (15,905) (14,206)

7.02.02 Materials, energy, outsourced services and other (111,797) (101,662)

7.03 Gross value added 298,496 289,136

7.04 Retentions (17,348) (17,205)

7.04.01 Depreciation, amortization and depletion (17,348) (17,205)

7.05 Net value added generated 281,148 271,931

7.06 Value added received through transfers 25,836 16,645

7.06.01 Equity in the results of subsidiaries 2,907 1,231

7.06.02 Finance income 22,929 15,414

7.07 Total value added to distribute 306,984 288,576

7.08 Distribution of value added 306,984 288,576

7.08.01 Personnel 140,879 135,596

7.08.01.01 Direct remuneration 114,345 113,524 7.08.01.02 Benefits 16,944 13,053

7.08.01.03 Government Severance Indemnity Fund for Employees (FGTS) 9,590 9,019

7.08.02 Taxes and contributions 73,454 68,554

7.08.02.01 Federal 63,300 58,808

7.08.02.02 State 2 60

7.08.02.03 Municipal 10,152 9,686

7.08.03 Remuneration of third party capital 21,594 22,928

7.08.03.01 Interest 15,896 16,720

7.08.03.02 Rent 5,698 6,208

7.08.04 Remuneration of own capital 71,057 61,498

7.08.04.03 Profits reinvested 71,057 61,498


12


Consolidated financial statements/balance sheet - assets

(R$ thousand)

Current Quarter Previous year

1 - Code 2 – Description 3/31/2015 12/31/2014

1 Total assets 2,219,258 2,143,866

1.01 Current assets 1,221,002 1,156,160

1.01.01 Cash and cash equivalents 733,589 697,901

1.01.02 Financial investments 42,532 35,169


1.01.02.02.01 Securities 42,532 35,169

1.01.03 Trade receivables 412,050 389,496

1.01.03.01 Customer receivables 412,050 389,496

1.01.03.01.01 Trade receivables 476,634 448,360

1.01.03.01.02 Provision for doubtful accounts (64,584) (58,864)

1.01.06 Taxes recoverable 6,876 6,336

1.01.06.01 Current taxes recoverable 6,876 6,336

1.01.08 Other current assets 25,955 27,258

1.01.08.03 Other 25,955 27,258

1.01.08.03.02 Other assets 25,955 27,258

1.02 Non-current assets 998,256 987,706

1.02.01 Long-term receivables 239,820 256,499


1.02.01.02.01 Securities 59,766 70,680

1.02.01.03 Trade receivables 52,837 58,940

1.02.01.03.01 Customer receivables 34,813 40,828

1.02.01.03.02 Other receivables 18,024 18,112

1.02.01.06 Deferred taxes 48,188 57,525

1.02.01.06.01 Deferred income tax and social contribution 48,188 57,525

1.02.01.09 Other non-current assets 79,029 69,354

1.02.01.09.03 Judicial deposits 23,122 22,420

1.02.01.09.04 Financial assets at fair value 55,907 46,934

1.02.03 Property, plant and equipment 83,905 79,121

1.02.03.01 Property, plant and equipment in service 83,905 79,121

1.02.04 Intangible assets 674,531 652,086

1.02.04.01 Intangible assets 228,125 235,016

1.02.04.02 Goodwill 446,406 417,070


13


Consolidated financial statements/balance sheet - liabilities and equity

(R$ thousand)

Current Quarter Previous year


2 Total liabilities 2,219,258 2,143,866 2.01 Current liabilities 463,801 379,611

2.01.01 Social and labor obligations 108,843 111,397

2.01.01.01 Social obligations 9,103 13,836

2.01.01.02 Labor obligations 99,740 97,561 2.01.02 Trade payables 40,048 35,479

2.01.02.01 National supplier payables 40,048 35,479

2.01.03 Tax obligations 12,187 13,739

2.01.03.01 Federal tax obligations 12,187 13,739 2.01.04 Borrowing 60,667 59,148

2.01.04.01 Borrowing 26,694 25,314


2.01.04.02 Debentures 33,973 33,834 2.01.05 Other liabilities 242,056 159,848

2.01.05.02 Other 242,056 159,848

2.01.05.02.01 Dividends and interest on capital payable 125,271 47,071

2.01.05.02.04 Obligations for purchases of investments 53,370 51,499 2.01.05.02.05 Commission payable 60,988 58,571

2.01.05.02.06 Other liabilities 2,427 2,707

2.02 Non-current liabilities 649,222 646,193

2.02.01 Borrowing 540,287 536,196 2.02.01.01 Borrowing 457,745 457,176 2.02.01.01.01 In local currency 457,745 457,176

2.02.01.02 Debentures 82,542 79,020


2.02.02.02 Other 97,115 96,541


2.02.02.02.04 Other liabilities 6,053 7,558

2.02.04 Provision 11,820 13,456

2.02.04.01 Tax, social security, labor and civil provision 10,807 12,518

2.02.04.01.01 Tax provision 77 78

2.02.04.01.02 Social security and labor provision 7,757 9,537

2.02.04.01.04 Civil provision 2,973 2,903

2.02.04.02 Other provision 1,013 938

2.02.04.02.04 Provision for losses on investments 1,013 938

2.03 Equity 1,106,235 1,118,062

2.03.01 Paid-up capital 526,592 526,592

2.03.02 Capital reserves 45,095 40,281


14

Quarterly information (ITR) - 3/31/2015 - TOTVS S.A.

Consolidated financial statements/balance sheet - liabilities and equity

(R$ thousand)

Current Quarter

Previous year


2.03.02.02 Special goodwill reserve on mergers 14,330 14,330

2.03.02.04 Share options 27,670 27,495

2.03.02.05 Treasury shares (47,573) (52,212)

2.03.02.07 Goodwill reserve 31,557 31,557

2.03.02.08 Debentures converted into shares 44,629 44,629

2.03.02.09 Goodwill on purchases of non-controlling interests (25,518) (25,518)

2.03.04 Profit reserve 451,768 549,472

2.03.04.01 Legal reserve 61,961 61,961

2.03.04.05 Profit retention reserve 389,807 389,807

2.03.04.08 Additional proposed dividends - 97,704

2.03.05 Profit/Loss accumulated 71,057 -

2.03.07 Exchange variations on investments abroad 9,880 29

2.03.09 Participation of non-controlling shareholders 1,843 1,688


15


Consolidated financial statements/statement of income

(R$ thousand)

1 – Code 2 – Description Current quarter

3/31/2015


3/31/2014

3.01 Sales and/or service revenue 458,971 431,873 3.01.01 Licensing fees 71,419 79,664 3.01.02 Services 132,408 122,262 3.01.03 Subscriptions 30,611 20,822 3.01.04 Maintenance 224,533 209,125 3.02 Cost of sales and/or services (154,655) (139,180) 3.02.01 Cost of software (17,125) (18,338) 3.02.02 Cost of services (112,675) (101,277) 3.02.03 Cost of support (24,855) (19,565) 3.03 Gross profit 304,316 292,693 3.04 Operating income (expenses) (210,935) (199,481) 3.04.01 Selling expenses (35,305) (31,596) 3.04.02 General and administrative expenses (29,283) (26,903) 3.04.05 Other operating expenses (146,272) (140,681) 3.04.05.01 Research and development (62,911) (57,206) 3.04.05.02 Advertising expenses (8,381) (5,719) 3.04.05.03 Commission (40,316) (40,932) 3.04.05.04 Management fees (5,721) (8,277) 3.04.05.05 Depreciation and amortization (21,485) (20,718) 3.04.05.06 Provision for doubtful accounts (8,098) (7,910) 3.04.05.08 Other net revenue 640 81 3.04.06 Equity pick-up (75) (301) 3.05 Profit before finance results and taxes 93,381 93,212 3.06 Finance results 14,657 (2,078) 3.06.01 Finance income 32,733 17,630 3.06.02 Finance costs (18,076) (19,708) 3.07 Profit before taxes on income 108,038 91,134 3.08 Income tax and social contribution on net income (37,138) (29,515)

3.08.01 Current (32,845) (25,697) 3.08.02 Deferred (4,293) (3,818) 3.09 Profit for the period from continuing operations 70,900 61,619 3.11 Profit for the period 70,900 61,619 3.11.01 Attributable to parent company’s partners 71,057 61,498 3.11.02 Attributable to non-controlling partners (157) 121 3.99 Earnings per share - (Reais/share) 3.99.01 Basic earnings per share 3.99.01.01 Common shares 0.44 0.38 3.99.02 Diluted earnings per share 3.99.02.01 Common shares 0.43 0.37


16


Consolidated financial statements/statement of comprehensive income

(R$ thousand)

1 – Code 2 – Description

Current quarter

3/31/2015


3/31/2014

4.01 Profit for the period 70,900 61,619

4.02 Other comprehensive income 9,851 (2,411)

4.02.01 Exchange variations on investments abroad 14,924 (3,653) 4.02.02 Deferred income tax (5,073) 1,242

4.03 Comprehensive income for the period 80,751 59,208

4.03.01 Attributable to the parent company's partners 80,908 59,087

4.03.02 Attributable to non-controlling partners (157) 121


17


Consolidated financial statements/statement of cash flow - indirect method

(R$ thousand)

Accumulated current quarter


year 3/31/2014

1 – Code 2 - Description 3/31/2015

6.01 Net cash provided by operating activities 84,714 60,363

6.01.01 Cash provided by operations 133,489 132,287

6.01.01.01 Profit before taxes for the period 108,038 91,134

6.01.01.02 Depreciation and amortization 21,485 20,718 6.01.01.03 Share-based payments 809 876

6.01.01.04 Losses on sales of assets (6,279) 367

6.01.01.05 Provision for doubtful accounts 8,098 7,910

6.01.01.06 Equity pick-up 75 301 6.01.01.07 Interest, monetary and exchange variations, net (1,711) 480

6.01.01.08 Provision (reversal) for contingencies 2,974 10,501

6.01.02 Changes in assets and liabilities (16,401) (47,897)

6.01.02.01 Trade receivables (23,632) (31,741) 6.01.02.03 Other assets 16,639 563

6.01.02.04 Judicial deposits (702) (819)

6.01.02.05 Social and labor obligations (3,315) 3,193

6.01.02.06 Taxes recoverable (427) 2,046 6.01.02.07 Trade payables 4,517 (3,437)

6.01.02.08 Commission payable 2,417 3,233

6.01.02.10 Taxes payable (9,844) (13,374)

6.01.02.11 Other payables (2,054) (7,561) 6.01.03 Other (32,374) (24,027)

6.01.03.01 Interest paid (7,543) (6,535)

6.01.03.02 Income tax and social contribution paid (24,831) (17,492)

6.02 Net cash used in investment activities (33,411) (43,734) 6.02.01 Acquisition of investments, net of cash obtained upon acquisition (216) 16

6.02.03 Purchases of intangible assets (30,157) (37,321)

6.02.06 Value of fixed assets sale 200 154

6.02.08 Purchases of property, plant and equipment (10,403) (6,583) 6.02.09 Investment at fair value 7,165 -

6.03 Net cash used in financing activities (15,615) (50,572)

6.03.02 Bank borrowing (199) (26,405)

6.03.03 Dividends paid (19,421) (19,157) 6.03.08 Acquisition of treasury shares 4,005 (5,010)

6.05 Increase (decrease) in cash and cash equivalents 35,688 (33,943)

6.05.01 Cash and cash equivalents at the beginning of the period 697,901 533,063

6.05.02 Cash and cash equivalents at the end of the period 733,589 499,120


18


Consolidated financial statements/statement of changes in equity - 1/1/2015 to 3/31/2015

(R$ thousand)

1 - Code 2 - Description

Paid-up share

capital

Capital reserves, share

options and treasury shares

Revenue reserves

Retained earnings

Other comprehensive

income Equity

Non-controlling interests

Consolidated equity

5.01 Opening balances 526,592 40,281 549,472 - 29 1,116,374 1,688 1,118,062

5.03 Adjusted opening balances 526,592 40,281 549,472 - 29 1,116,374 1,688 1,118,062

5.04 Capital transactions with owners - 4,814 (97,704) - - (92,890) 312 (92,578)

5.04.03 Share options recorded - 809 - - - 809 - 809

5.04.04 Purchase of treasury shares - - - - - - - -

5.04.05 Disposal of treasury shares - 4,005 - - - 4,005 - 4,005

5.04.06 Dividends - - (97,704) - - (97,704) - (97,704)

5.04.07 Interest on equity - - - - - - - -

5.04.08 Acquisions of subsidiaries - - - - - - 312 312

5.05 Total comprehensive income - - - 71,057 9,851 80,908 (157) 80,751

5.05.01 Profit for the period - - - 71,057 - 71,057 (157) 70,900

5.05.02 Other comprehensive income - - - - 9,851 9,851 - 9,851 5.05.02.04 Exchange variations on investments

abroad - - - - 9,851 9,851 - 9,851

5.07 Closing balances 526,592 45,095 451,768 71,057 9,880 1,104,392 1,843 1,106,235


19


Consolidated financial statements/statement of changes in equity - 1/1/2014 to 3/31/2014

(R$ thousand)

1 - Code 2 - Description

Paid-up share

capital

Capital reserves,

share options and treasury

shares Revenue reserves

Retained earnings

Other comprehensive

income Equity

Non-controlling interests

Consolidated equity

5.01 Opening balances 526,592 85,367 457,382 - (1,720) 1,067,621 2,217 1,069,838

5.03 Adjusted opening balances 526,592 85,367 457,382 - (1,720) 1,067,621 2,217 1,069,838

5.04 Capital transactions with owners - (4,134) (102,912) - - (107,046) 52 (106,994)

5.04.03 Share options recorded - 876 - - - 876 - 876

5.04.04 Purchase of treasury shares - (7,424) - - - (7,424) - (7,424)

5.04.05 Disposal of treasury shares - 2,414 - - - 2,414 - 2,414

5.04.06 Dividends - - (102,912) - - (102,912) (315) (103,227)

5.04.08 Acquisition of subsidiaries - - - - - - 367 367 5.05 Total comprehensive income - - - 61,498 (2,411) 59,087 121 59,208

5.05.01 Profit for the period - - - 61,498 - 61,498 121 61,619

5.05.02 Other comprehensive income - - - - (2,411) (2,411) - (2,411)

5.05.02.04 Exchange variations on investments abroad - - - - (2,411) (2,411)

- (2,411)

5.07 Closing balances 526,592 81,233 354,470 61,498 (4,131) 1,019,662 2,390 1,022,052


20


Consolidated financial statements/statement of value added

Accumulated

current quarter


year


7.01 Revenue 492,135 462,177

7.01.01 Sales of goods and services 499,591 470,007

7.01.02 Other expenses 642 80

7.01.04 Provision for (reversal of) doubtful accounts (8,098) (7,910)

7.02 Inputs acquired from third parties (146,366) (131,739)

7.02.01 Cost of sales and services (17,124) (17,670)

7.02.02 Materials, energy, outsourced services and other (129,242) (114,069)

7.03 Gross value added 345,769 330,438

7.04 Retentions (21,485) (20,718)

7.04.01 Depreciation, amortization and depletion (21,485) (20,718)

7.05 Net value added generated 324,284 309,720

7.06 Value added received through transfers 32,658 17,329

7.06.01 Equity pick-up (75) (301)

7.06.02 Finance income 32,733 17,630

7.07 Total value added to distribute 356,942 327,049

7.08 Distribution of value added 356,942 327,049

7.08.01 Personnel 172,987 162,397

7.08.01.01 Direct remuneration 141,337 137,065

7.08.01.02 Benefits 20,335 14,796

7.08.01.03 Government Severance Indemnity Fund for Employees (FGTS) 11,315 10,536

7.08.02 Taxes and contributions 87,246 76,004

7.08.02.01 Federal 75,519 64,689

7.08.02.02 State 183 229

7.08.02.03 Municipal 11,544 11,086

7.08.03 Remuneration of third party capital 25,809 27,029

7.08.03.01 Interest 18,076 19,708

7.08.03.02 Rental 7,735 7,321

7.08.03.03 Other (2) -

7.08.04 Remuneration of own capital 70,900 61,619

7.08.04.03 Profits reinvested 71,057 61,498 7.08.04.04 Non-controlling interest in retained earnings (157) 121


21

COMMENTS ON PERFORMANCE

CONSOLIDATED OPERATING AND FINANCIAL PERFORMANCE

NET REVENUE

The revenue breakdown per business line in 1Q15 shows that software, the core business of the Company, accounted

for 71.2% of the revenue in the quarter. In the last 12 months, revenue from software accounted for 70.8% of total

revenue.

Services in 1Q15 grew in line with the performance of the last 12 months. The 0.6% decrease in comparison with 4Q14

is mainly due to the less working days in the first quarter. Average service revenue per working day grew 1.6%

quarter on quarter and 11.4% year on year.

In terms of nature, note that recurring revenues accounted for 60.7% of total revenue in 1Q15, the highest level of

recurrence ever registered by the Company in a quarter. Of this total, 91.6% is recurring software revenue,

corresponding to 75.0% of total software revenue in 1Q15. In all, recurring software revenue grew 11.0% between

1Q14 and 1Q15, which corresponds to 270 basis points above the growth of the service revenue in the period.

Total Net Revenue

(R$ thousand) 1Q15 1Q14

Change

(1Q15/1Q14) 4Q14

Change

(1Q15/4Q14) LTM-1Q15 LTM-1Q14

LTM Change

(1Q15/1Q14) By Business

Software 326,563 309,611 5.5% 322,493 1.3% 1,274,827 1,184,466 7.6%

Services 132,408 122,262 8.3% 133,213 -0.6% 524,718 484,990 8.2%

Net Revenue 458,971 431,873 6.3% 455,706 0.7% 1,799,545 1,669,456 7.8%

By Nature

Recurring 278,424 250,563 11.1% 270,252 3.0% 1,076,709 973,400 10.6%

Non Recurring 180,547 181,310 -0.4% 185,454 -2.6% 722,836 696,056 3.8%

Net Revenue 458,971 431,873 6.3% 455,706 0.7% 1,799,545 1,669,456 7.8%

Software Revenue


Change

(1Q15/1Q14) 4Q14

Change

(1Q15/4Q14) LTM-1Q15 LTM-1Q14

LTM Change

(1Q15/1Q14) Software Revenue 326,563 309,611 5.5% 322,493 1.3% 1,274,827 1,184,466 7.6%

Non Recurring 71,419 79,664 -10.3% 76,927 -7.2% 290,704 296,231 -1.9%

License Fees 71,419 79,664 -10.3% 76,927 -7.2% 290,704 296,231 -1.9%

Recurring 255,144 229,947 11.0% 245,566 3.9% 984,123 888,235 10.8%

Maintenence 224,533 209,125 7.4% 216,900 3.5% 870,106 808,027 7.7%

Subscription 30,611 20,822 47.0% 28,666 6.8% 114,017 80,208 42.2%


22

Maintenance revenue accounted for 80.6% of total recurring revenue and for 88.0% of recurring revenue from software

in 1Q15. The year on year growth of 7.4% in maintenance revenue in 1Q15 is 1.9 percentage points higher than

the 12 month accumulated IGP-M index (inflation index used in most of the maintenance agreements) average of last

year.

Subscription revenue in 1Q15 grew 47.0% year on year, with 816 new subscription clients added, growing 47.3%

from 1Q14. In 1Q15, subscription revenue already accounted for 12.0% of total recurring revenue from software,

compared to 9.1% in 1Q14. The growth in this revenue line accounted for 38.8% of the growth in recurring revenue from

software between 1Q14 and 1Q15.

The drop of 23.6% in license sales to new clients (see table below) is mainly related to the decline in economic activity

in Brazil and the transfer of TOTVS’ sales pipeline to acquired companies in the last two years, whose proportional

contribution to recurring revenues is higher.

The decrease of 4.6% in revenue from license fees from existing clients in 1Q15 was due to

the lower incremental licenses from the corporate model, which were 12.4% lower in quarter

on quarter comparison, as shown in the chart. Other sales of license fees to existing clients

remained stable in the period.

In the corporate model, clients have unlimited access to management solutions, for which

they pay an incremental license fee at the beginning of each year based on their real growth

(excluding inflation) in the prior year. Thus, this reduction is a consequence of the lower

growth of the clients under the corporate model in 2014.

Revenues from acquired companies, which were not consolidated in 1Q14 (Virtual Age and Neolog), totaled R$10.8

million in 1Q15, of which R$8.5 million are recurring revenues. As mentioned in previous quarters, part of the growth of

License Fees


Change

(1Q15/1Q14) 4Q14

Change

(1Q15/4Q14) LTM-1Q15 LTM-1Q14

LTM Change

(1Q15/1Q14) License Fees Revenue 71,419 79,664 -10.3% 76,927 -7.2% 290,704 296,231 -1.9%

to New Clients Added 18,408 24,104 -23.6% 27,172 -32.3% 92,783 98,293 -5.6%

to Existing Clients 53,011 55,560 -4.6% 49,756 6.5% 197,921 197,939 0.0%

Número de Vendas Realizadas 2,588 2,955 -12.4% 2,581 0.3% 10,496 11,429 -8.2%

to New Clients Added 513 702 -26.9% 746 -31.2% 2,799 3,261 -14.2%

to Existing Clients 2,075 2,253 -7.9% 1,835 13.1% 7,697 8,168 -5.8%

Licensing Average Ticket 27.6 27.0 2.4% 29.8 -6.7% 58.9 54.4 8.3%

of New Clients Added 35.9 34.3 4.5% 36.4 0.0% 33.1 30.1 10.0%

of Existing Clients 25.5 24.7 3.6% 27.1 -3.7% 25.7 24.2 6.1%


23

these acquired companies is organic, since TOTVS transfers opportunities from its sales pipeline to the acquired

companies.

CONTRIBUTION MARGIN BY BUSINESS

The decrease of 140 basis points in software contribution margin between 1Q14 and 1Q15 is mainly concentrated in

cost of support and in research and development expenses. As a ratio of software revenue, these two lines combined

increased from 24.8% in 1Q14 to 26.9% in 1Q15. Said increase was mainly due to: (i) the transition to the subscription

model, given that subscription revenue has a time-deferral effect that does not affect these costs and expenses; (ii) the

inorganic impact of Virtual Age and Neolog; and (iii) wage increases in the period.

Between 4Q14 and 1Q15, software contribution margin increased 140 basis points, mainly due to: (i) higher research

and development expenses in 4Q14, due to additional expenses from layoffs s accumulated throughout 2014; (ii)

retroactive effects on provisions for vacation and Christmas bonus (13th salary) resulting from wage increases in 4Q14;

and (iii) the reduction in software costs due to the lower share of partner solutions in the sales mix in the period.

The decrease of 230 basis points in the services contribution margin between 1Q14 and 1Q15 was mainly due to the

cost of services on account of the wage increases under collective bargaining agreements, already described in the

section on software contribution margin.

The increase of 410 basis points in service contribution margin between 4Q14 and 1Q15, despite the 7.0% wage

increase under the collective bargaining agreement signed in the state of São Paulo in 1Q15, was essentially due to: (i)

additional expenses from layoffs in 4Q14; and (ii) retroactive effects on provisions for vacation and Christmas bonus

(13th salary) resulting from wage increases in 4Q14.

Services Result


Change

(1Q15/1Q14) 4Q14

Change

(1Q15/4Q14) LTM-1Q15 LTM-1Q14

LTM Change

(1Q15/1Q14) Services Revenue 132,408 122,262 8.3% 133,213 -0.6% 524,718 484,990 8.2%

Cost of Services (112,675) (101,277) 11.3% (118,820) -5.2% (443,705) (410,412) 8.1%

Services Result 19,733 20,985 -6.0% 14,393 37.1% 81,013 74,578 8.6%

Services Contibution Margin 14.9% 17.2% -230 bp 10.8% 410 bp 15.4% 15.4% 0 bp

Software Result


Change

(1Q15/1Q14) 4Q14

Change

(1Q15/4Q14) LTM-1Q15 LTM-1Q14

LTM Change

(1Q15/1Q14) Software Revenue 326,563 309,611 5.5% 322,493 1.3% 1,274,827 1,184,466 7.6%

Cost of Software (17,125) (18,338) -6.6% (22,276) -23.1% (81,230) (72,687) 11.8%

Cost of Support (24,855) (19,565) 27.0% (22,450) 10.7% (89,699) (69,325) 29.4%

Research and Development (62,911) (57,206) 10.0% (63,408) -0.8% (246,095) (223,829) 9.9%

Software Result 221,672 214,502 3.3% 214,359 3.4% 857,803 818,625 4.8%

Software Contibution Margin 67.9% 69.3% -140 bp 66.5% 140 bp 67.3% 69.1% -180 bp


24

OTHER OPERATING EXPENSES

As a ratio of net revenue, selling and commission expenses combined decreased 30 basis points between 1Q14 and

1Q15. Compared to 4Q14, these expenses increased 130 basis points, mainly due to: (i) investments in training the

sales team to sell offerings under the subscription model; and (ii) the change in the sales mix, both between franchises

and own branches, and based on size of clients, which have a corresponding impact on commissions.

As a percentage of net revenue, allowance for doubtful accounts grew 40 basis points in 1Q15 compared to 4Q14, to

reach 1.8% of total net revenue, the same level as in 1Q14. In the last year, the Company made amendments to its

credit policy and kept the efforts to recover provisioned credit losses, which led this line to 1.5% in the last 12 months.

The Company will continue these efforts during the course of 2015.

As a percentage of net revenue, advertising and marketing expenses increased 50 basis points year on year and

decreased 50 basis points quarter on quarter. The oscillations in these expenses are mainly due to their atypical

distribution of expenditures in 2014 due to the soccer World Cup in Brazil.

Commercial Expenses


Change

(1Q15/1Q14) 4Q14

Change

(1Q15/4Q14) LTM-1Q15 LTM-1Q14

LTM Change

(1Q15/1Q14) Selling Expenses (35,305) (31,596) 11.7% (32,358) 9.1% (135,450) (113,390) 19.5%

Commissions (40,316) (40,932) -1.5% (37,118) 8.6% (154,370) (157,294) -1.9%

Subtotal (75,621) (72,528) 4.3% (69,476) 8.8% (289,820) (270,684) 7.1%

% of Net Revenue 16.5% 16.8% -30 pb 15.2% 130 pb 16.1% 16.2% -10 pb

Allowance for Doubtful Accounts (8,098) (7,910) 2.4% (6,252) 29.5% (27,753) (28,433) -2.4%

Marketing and Advertising (8,381) (5,719) 46.5% (10,339) -18.9% (44,101) (44,508) -0.9%

Commercial Expenses (92,100) (86,157) 6.9% (86,067) 7.0% (361,674) (343,625) 5.3%

% of Net Revenue 20.1% 19.9% 20 bp 18.9% 120 bp 20.1% 20.6% -50 bp

Allowance for doubtful acc.


25

General and administrative (G&A) expenses increased by 8.8% year on year and 3.7% quarter on quarter, mainly

influenced by the collective bargaining agreement in São Paulo and by the merger of the administrative teams of

companies acquired in the period.

Management Fees decreased by 30.9% year-on-year and 16.7% quarter-on-quarter, mainly due to the provisioning for

bonus linked to financial and individual targets of executives, and to the provisioning for the stock option plan.

The decrease in other expenses compared to 4Q14 is explained by the provision for impairment of R$1.6 million related

to the minority interest in uMove.me, as mentioned in 4Q14. This stake was sold in 1Q15.

Depreciation and amortization totaled R$21.485 million in the quarter, of which R$6.078 million referred to depreciation

of fixed assets and R$15.407 million to amortization of intangible assets.

EBITDA AND NET INCOME

Administrative and Other

Expenses


Change

(1Q15/1Q14) 4Q14

Change

(1Q15/4Q14) LTM-1Q15 LTM-1Q14

LTM Change

(1Q15/1Q14) General and Administrative (29,283) (26,903) 8.8% (28,251) 3.7% (116,756) (100,723) 15.9%

Management Fees (5,721) (8,277) -30.9% (6,870) -16.7% (23,493) (29,793) -21.1%

Other Expenses 640 81 690.1% (1,103) -158.0% 404 (280) -244.3%

Administrative and Other Expenses (34,364) (35,099) -2.1% (36,224) -5.1% (139,845) (130,796) 6.9%

% of Net Revenue 7.5% 8.1% -60 bp 7.9% -40 bp 7.8% 7.8% 0 bp

Depreciation and

Amortization Expenses 1Q15 1Q14

Change

(1Q15/1Q14) 4Q14

Change

(1Q15/4Q14) LTM-1Q15 LTM-1Q14

LTM Change

(1Q15/1Q14) Depreciation (6,078) (5,452) 11.5% (5,648) 7.6% (22,455) (20,037) 12.1%

Amortization (15,407) (15,266) 0.9% (17,875) -13.8% (67,240) (61,677) 9.0%

Depreciation and Amortization (21,485) (20,718) 3.7% (23,523) -8.7% (89,695) (81,714) 9.8%

% of Net Revenue -4.7% -4.8% 10 bp -5.2% 50 bp -5.0% -4.9% -10 bp

EBITDA and Net Income


Change

(1Q15/1Q14) 4Q14

Change

(1Q15/4Q14) LTM-1Q15 LTM-1Q14

LTM Change

(1Q15/1Q14) Net Income 70,900 61,619 15.1% 69,057 2.7% 272,079 232,825 16.9%

Net Margin 15.4% 14.3% 110 pb 15.2% 20 pb 15.1% 13.9% 120 pb

Equity Pickup (75) (301) -75.1% (124) -39.5% (357) (797) -55.2%

Income Tax and Social Contribution (37,138) (29,515) 25.8% (22,698) 63.6% (105,083) (97,426) 7.9%

Financial Result 14,657 (2,078) -805.3% 8,941 63.9% 29,917 (6,020) -597.0%

Depreciation and Amortization (21,485) (20,718) 3.7% (23,523) -8.7% (89,695) (81,714) 9.8%

EBITDA 114,941 114,231 0.6% 106,461 8.0% 437,297 418,782 4.4%

EBITDA Margin 25.0% 26.5% -150 bp 23.4% 160 bp 24.3% 25.1% -80 bp


26

EBITDA margin in 1Q15 came to 25.0%, down 150 basis points from 1Q14. The decrease in EBITDA margin year-on-

year was mainly due to the lower contribution margin from the Software and Services business segments (see

“Contribution Margin by Business”). The increase of 160 basis points of the EBITDA margin when compared to 1Q14 was

mainly due to the recovery of the businesses contribution margins and to the lower representativeness of the administrative

expenses as a percentual of the net revenue.

The EBITDA margin management in this quarter also involved the following additional challenges: (i) cumulative 12-month

average inflation measured by the IGP-M of 3.8% in 1Q15, compared to the average 12-month inflation measured by the

IPC-A of 7.5% in the quarter; (ii) wage increase of 7.0% under the collective bargaining agreement in São Paulo; (iii)

12.4% decline in the incremental license fees of corporate model.

Net income came to R$70.900 million in the quarter, growing 15.1% from the same period in the previous year, with net

margin of 15.4%, an increase of 110 basis points from 1Q14. In the last 12 months, net income grew 16.9%, or 12.5

percentage points above EBITDA growth, with net margin of 15.1%, an increase of 120 basis points from the LTM-1Q14.


27

Net income outgrew EBITDA due to the following factors: (i) positive financial result of R$14.657 million in 1Q15,

compared to a negative financial result of R$2.078 million in 1Q14; and (ii) lower growth of depreciation and amortization

expenses.

The positive financial result was due to a combination of: (i) higher financial revenue, driven by the higher balance of

financial investments; (ii) lower financial expenses year on year, mainly due to the non-recurring adjustment of the

debentures interest on 1Q14, amounting R$2.807 million; and (iii) the result from the sale of minority interest in

ZeroPaper in January 2015.

The increase in the effective tax rate was due to: (i) the adjustment to the provision for income tax of 2014 related to

subsidiaries; and (ii) the smaller share of research and development projects eligible for “Lei do Bem” in relation to EBT

(earnings before taxes).


28

CASH FLOW AND NET DEBT

Net cash position at the end of 1Q15 stood at R$90.501 million, up R$22.557 million from net cash at the end of 4Q14.

Cash and Equivalents position increased R$35.688 million, driven primarily by: (i) operating cash generation of R$84.714

million, equivalent to 119.5% of the net income in the quarter; (ii) investments of R$10.203 million in fixed assets, mainly

in machinery and equipment; (iii) payment of R$23.208 million for acquisitions, including the acquisition of Neolog and

the payment of installments for previous acquisitions; (iv) payment of R$19.421 million of Interest on Equity (IOE) related

to 2014; and (v) proceeds of R$4.005 million from the sale of treasury stock to beneficiaries of the stock option plan.

The R$13.111 million increase in Gross Debt (loans + financing + debentures + net liabilities from investment acquisition)

was mainly due to higher liabilities from acquisitions and the provisioning of interest related to financing lines and

debentures.


29

Notes to the financial statements

1. Operations TOTVS S.A. (reinafter referred to as the parent company, TOTVS or the Company) is a publicly-held corporation, which is headquartered at Av. Braz Leme, 1631 - 2º floor, in the City and State of São Paulo, whose shares are traded on the Novo Mercado 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 plataforms, as well as provision of implementation, consulting, assistance and maintenance services. The solutions by the Company are segmented according to the economic sector of the economy, producing higher relevance of applications within the context of the business of our clients, both in back-office processes and for the specific processes of each segment. TOTVS’ parent company and consolidated financial statements were approved at the Board of Directors’ Meeting held on May 4, 2015. 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 preparing 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 should be read together with the Company’s complete financial statements for the year ended December 31, 2014. To better reflect the results, our business and revenue arrangements, the Company added two new lines, one for the software subscription revenue and other for cost of support, as well as changed the nomenclature of the licensing fee cost to cost of software in its financial statements. Because of this change, revenue lines and costs disclosed in the first quarter 2014 were reclassified to maintain the comparability between periods.


30

2.1. 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. (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 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.

2.2. 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 Denomination 3/31/2015 12/31/2014

TOTVS Rio Software Ltda. BRA TOTVS Rio 100.00 100.00

TOTVS Nordeste Software Ltda. BRA TOTVS Nordeste 100.00 100.00 TOTVS Brasília Software Ltda. BRA TOTVS Brasília 100.00 100.00 TQTVD Software Ltda. BRA TQTVD 100.00 100.00 TOTVS Ventures Participações Ltda. BRA TOTVS Ventures 100.00 100.00 TOTVS Soluções em Agroindústria S.A. BRA TOTVS Agroindústria 60.00 60.00

P2RX Soluções em Software S.A. BRA P2RX 60.00 60.00

TOTVS Argentina S.A. ARG TOTVS Argentina 100.00 100.00 Datasul Argentina S.A. ARG Datasul Argentina 100.00 100.00 TOTVS México S.A. MEX TOTVS México 100.00 100.00 Datasul S.A. de CV. MEX Datasul México 100.00 100.00


31

TOTVS Corporation BVI TOTVS Corporation 100.00 100.00 Eurototvs Lda. POR Eurototvs 100.00 100.00 TOTVS Incorporation USA TOTVS Inc. 100.00 100.00 Virtual Age Soluções em Tecnologia Ltda. BRA Virtual Age 100.00 100.00 Ciashop Soluções para Comércio Eletrônico S.A. BRA Ciashop 70.00 70.00 TOTVS Resultados em Outsourcing Ltda. BRA RO 100.00 100.00 Neolog Consultoria e Sistemas S.A. BRA Neolog (a) 60.00 -

Indirect Investments: Head Interest %

Corporate Name office Denomination Investor 3/31/2015 12/31/2014

DTS Consulting Partner. SA de CV MEX Partner TOTVS México 100.00 100.00 W&D Participações S.A. BRA W&D TOTVS Brasília 100.00 100.00 PC Informática S.A. BRA PC Informática W&D 100.00 100.00 uMov.me S.A. BRA uMov.me TOTVS Ventures 20.00 20.00 RMS Software S.A. BRA RMS TOTVS Nordeste 100.00 100.00 Webstrategie Software Ltda. BRA Webstrategie RMS 100.00 100.00

(a) Business Combinations in 2015.

The results of subsidiaries acquired during the period ended March 31, 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 in the consolidation.

2.3. 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 March 31, 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 acquisition made in 2015 have been in line with the Company's strategies of specialization and consolidation of its positions in different markets, in addition to bringing new solutions to TOTVS´s customers through portfolio diversification, offering tailored solutions for specific niches.


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3.1. Business combinations

Neolog – Consultoria e Sistemas S.A. On February 11, 2015, the Company acquired 60% of the capital of Neolog Consultoria e Sistemas S.A., (Neolog) for R$15,547. This Company is focused on the development of SaaS solutions for the logistics and supply chain management. This Agreement also includes the payment of an additional variable amount, which shall be paid in accordance with metrics defined in the Agreement up until June 30, 2016. The Agreement also foresees a future purchase by the Company of the remaining capital of Neolog, which can be executed between January 2018 and January 2020, by a variable amount based on Neolog’s performance metrics. Due to the being a step acquisition, the Company recorded the estimated amount at R$13,584, concerning the payment for the acquisition of the remaining interest.

3.2. Identifiable assets acquired and goodwill

The amount paid for the acquisition of control of Virtual Age and Neolog is being allocated among the identified assets acquired and liabilities assumed at their fair values at the acquisition date, and this process had not been completed at the time of disclosure of this interim financial information. The fair value, goodwill and the cost of holding interest on the acquisition date of the identificable assets acquiried that impacted this interim financial information ended on March 31, 2015 are presented below:

Preliminar fair value Neolog

Assets 1,421

Cash and Cash equivalents 254 Accounts receivable 1,005 Other current assets 162 Non-current assets 638 Current liabilities 1,090 Non-current liabilities 184 Minority participation 314 Liquid assets and liabilities 471 Acquisition cost 16,223 Contingent Consideration 13,584

Goodwill in the operation 29,336


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4. Financial instruments The Company and its subsidiaries evaluated their financial assets and liabilities based on their market values using the information available and the appropriate evaluation methodologies. In the three-month period ended March 31, 2015 there were no facts or circumstances that would have had an impact on market instruments and the financial risk management of those presented at the end of the Company's last fiscal year ended December 31, 2014.

4.1. Sensitivity analysis of financial assets and liabilities The Company's financial instruments represent cash and cash equivalents, accounts receivable, payables, debentures, loans and financing, and are recorded at cost plus income or charges incurred, which at March 31, 2015 and December 31, 2014 approximated their market values. The main risks on the Company’s transactions are associated with variations in the Interbank Deposit Certificate (CDI), for financial investments, and with variations in the Long-term Interest Rate (TJLP) and the Extended Consumer Price Index (IPCA) for loans obtained from the Brazilian Development Bank (BNDES) and for the debentures issued. a) Financial assets

In order to check the Company’s exposure to index sensitivity for its financial investments at March 31, 2015, three different scenarios were created. Based on forecasts by financial institutions, the average rate for SELIC was projected at 13.00% for fiscal year 2015, which was the most likely scenario; on the basis of this rate, we assessed the sensitivity to variations of 25% and 50%. For each of these scenarios the gross financial revenue was estimated, with taxes on investment returns not included. The reference date for the portfolio was March 31, 2015 with a one-year projection period to check the CDI’s sensitivity to each scenario.

Operation Balances at 3/31/2015 Risk

Most probable

Scenario (I) Scenario

(II) Scenario

(III)

Financial investments R$686,077 CDI 13.00% 9.75% 6.50%

Estimated financial income R$ 89,190 R$ 66,893 R$ 44,595

b) Financial liabilities

In order to check the sensitivity analyis of the debts to which the Company was exposed at March 31, 2015, three different scenarios were created. Based on the TJLP and the IPCA in force as at March 31, 2015, the most probable scenario was determined for 2015 and, from this, variations of 25% and 50% were estimated. For each scenario, the gross financial expenses were calculated, not taking into account the taxes levied and the


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maturities of each agreement scheduled for 2015. The reference date used for the financing and debentures was March 31, 2015, projecting the rates for one year and checking their sensitivity under each scenario.

Operation

Balances at 3/31/2015 Risk

Most probable Scenario I Scenario II Scenario III

Financing R$484,439 TJLP 5.50% 6.88% 8.25% Rate subject to variation R$26,644 R$ 33,329 R$39,966 Debentures R$116,515 IPCA 8.13% 10.16% 12.20% TJLP 5.50% 6.88% 8.25%

Rate/index subject to variation R$11,524 R$12,640 R$13,749

4.2. Financial assets at fair value TOTVS Ventures´ investments in startups, are made in view of a medium-term strategy, with output planned for the moment when the expected financial returns are achieved. As these startups are privately held companies and have no prices quoted in an active market, their fair value is based on discounted cash flow using a rate based on the interest rate and the market risk premium specific to each investment. At the March 31,2015 the total of investments in startups was R$55,907. On January 21,2015, TOTVS Ventures announced the divestment of its noncontrolling interest in ZeroPaper.

5. Cash and cash equivalents Cash equivalents are maintained for the purpose of meeting short-term cash requirements and for investment or other purposes, are redeemable for a period of up to 90 days from the date of the respective transaction.

Company Consolidated

03/31/2015 12/31/2014 03/31/2015 12/31/2014

Cash 16,456 32,518 47,512 61,564

Cash equivalents 669,038 626,718 686,077 636,337

Purchase and sale commitments 668,812 618,429 656,912 598,649

CDB 226 8,289 29,165 37,688

685,494 659,236 733,589 697,901

The Company has financial investment policies, which establish that investments should focus on low-risk securities and the investments in top-tier financial institutions, and are significantly remunerated based on the CDI rate, which averaged 0.93% a month during the three-month period ended on March 31,2015.


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6. Trade accounts receivable

The following are the amounts receivable in national and foreign markets:

Company Consolidated 03/31/2015 12/31/2014 03/31/2015 12/31/2014

National market 456,193 440,240 500,226 478,776

Foreign market 572 - 11,221 10,412

Gross trade accounts receivable 456,765 440,240 511,447 489,188

(-) Allowances for doubtful accounts (59,279) (53,652) (64,584) (58,864)

Net trade accounts receivable 397,486 386,588 446,863 430,324

Current assets 364,678 347,177 412,050 389,496

Non-current assets 32,808 39,411 34,813 40,828

Below are the net receivables in connection with the allowance for doubtful accounts by age, as at March 31, 2015 and December 31, 2014:


03/31/2015 12/31/2014 03/31/2015 12/31/2014

Falling due 353,731 357,106 387,361 388,213

Overdue

1 to 30 days 20,217 13,168 24,933 17,508

31 to 60 days 8,465 5,417 12,905 9,299

61 to 90 days 6,309 4,430 8,863 6,716

91 to 180 days 7,983 5,891 9,885 6,963

181 to 360 days 781 576 1,876 1,367

More than 360 days - - 1,040 258

397,486 386,588 446,863 430,324

Changes in the allowances for doubtful accounts are as follows:

03/31/2015


Balance at the beginning of the year 53,652 58,864 Additional provision during the period 7,436 8,098 Written off from the provision (1,809) (2,378)

Balance as at March 31 59,279 64,584

Management believes that the risk relating to the trade accounts receivable is minimized by the fact that the Company’s customer portfolio is highly diluted. The Company does not require any guarantees on sales in installments.


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7. Taxes recoverable The following are the amounts of taxes recoverable:

Company Consolidated 03/31/2015 12/31/2014 03/31/2015 12/31/2014

Recoverable taxes Withholding income tax - 277 3,710 2,566

Withholding social contribution tax - 156 971 1,186

Withholding PIS and COFINS taxes - 40 275 283

Other - - 1,920 2,301

- 473 6,876 6,336

8. Income and social contribution taxes Income and social contribution taxes, current and deferred, were recorded pursuantat to the current rates in force. Deferred income tax and social contribution tax are calculated over temporary differences and accrued tax losses/negative social contribution base.

8.1. Reconciliation of income tax and social contribution expenses The reconciliation of the expenses calculated by applying the income and social contribution tax rates is as follows:


03/31/2015 12/31/2014 03/31/2015 12/31/2014

Income before taxes 101,096 88,654 108,038 91,134 Income and social contribution taxes at a combined nominal rate of 34% (34,373) (30,142) (36,733) (30,986) Adjustments for the statement of effective rate

Equity pick-up 1,149 419 (26) (102) Law Nº 11,196/05 (incentive for R&D) 3,528 3,489 3,676 3,737 Effect of subsidiaries with different tax rates (*) - - (3,772) (679) Management shares (267) (754) (278) (754) Accounts receivable deemed uncollectible (101) (69) (147) (548) Workers' Food Program 455 429 543 463 Stock options (150) (298) (150) (298) Other (280) (230) (251) (348)

Income tax and social contribution expenses (30,039) (27,156) (37,138) (29,515)

Current income and social contribution tax (25,323) (23,889) (32,845) (25,697)

Deferred income and social contribution tax (4,716) (3,267) (4,293) (3,818)

(30,039) (27,156) (37,138) (29,515)

Effective rate 29.7% 30.6% 34.4% 32.4%

(*) Includes the estimated adjustment of income tax and social contribution in 2014 of the subsidiary Virtual Age.


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8.2. Breakdown of deferred income and social contribution taxes


03/31/2015 12/31/2014 03/31/2015 12/31/2014

Deriving from temporary differences

Difference between fiscal base and book value from goodwill 72,677 77,012 90,998 95,453

Amortization of fiscal benefit (57,277) (55,334) (57,469) (55,511)

Intangible asset allocation (55,245) (58,705) (66,813) (71,077)

Provision for commission 20,164 19,744 20,889 20,590

Anticipated income or revenue (9,957) (4,835) (9,591) (3,869)

Allowance for doubtful accounts 20,155 18,242 21,359 19,375

Provision for contingencies and other liabilities 3,074 3,690 3,074 3,686

Tax losses and social contribution tax losses carried forward - - 26,589 26,075

Provision for premiums due to non-conversion of debentures 11,743 10,546 11,743 10,546

Present value adjustments 1,872 2,520 1,873 2,523

Other 5,051 9,164 5,536 9,734

Net deferred income and social contribution tax 12,257 22,044 48,188 57,525

The Company presents deferred income tax on a net basis in non-current assets.

Changes in deferred income and social contribution tax are presented below:


As at January 1 22,044 57,525

Expenses in the income statement (4,716) (4,293) Tax relating to other comprehensive income

( (5,073) (5,073)

Acquisitions of subsidiaries - 8

Other 2 21

As at March 31 12,257 48,188

9. Related parties Transactions between the Company and its subsidiaries are carried out under market conditions and at prices established by the parties, and are eliminated for purposes of consolidating the financional statements.


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9.1. Receivables from related companies As at March 31, 2015 and December 31, 2014, the balance of transactions with related parties classified as receivables and payables to related parties in non-current assets are presented as follows:

Company

Assets 03/31/2015 12/31/2014

TOTVS Nordeste Software - 211

TOTVS RO 764 -

Ciashop 1,375 1,134

Ventures 1,000 -

3,139 1,345

Liabilities

TOTVS Rio Software (6,614) (6,599)

TQTVD (847) (1,717)

TOTVS Brasília (3,171) (4,900)

(10,632) (13,216)

The amounts relate to accounts payable and receivable among subsidiaries, without remuneration and/or forecast maturity. There was no purchase and sale or provision of services among the subsidiaries or between the subsidiaries and the parent company. Credits are related to loan transactions.

9.2. Transactions or relationships with shareholders and key management personnel

a) Shareholders

The Company maintains property lease agreements with companies, some of which are owned by shareholders of TOTVS. Rental paid was R$2,049 for the period ended March 31, 2015 (R$1,956 for the period ended March 31, 2014), which is in line with market rates. The rental agreements are effective for 60 months, and are adjusted by the General Price Index – Market (IGP-M) rate every 12 months. Some of the Company’s directors directly or indirectly held a total of 17.7% of the Company’s shares as at March 31, 2015 (17.7% as at December 31,2014). The indirect interest is held through LC-EH Empreendimentos e Participações S.A. The Company also has loans and financing operations (Note 14) and debentures (Note 15), transactions which are carried out with BNDES, which held 4.55% of the Company's capital on March 31,2015.


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b) Key management personnel

Itaú Unibanco is a related party to the Company through one of the independent members on its Board of Directors. Amounts and transactions involving the companies of the Itaú Unibanco Group on March 31, 2015 corresponded to R$73,372 (R$68,957 on December 31, 2014) of financial investments, R$529 (R$296 on March 31,2015) related to contracts of bail, stock management and other, and R$2,593 (R$1,446 on March 31,2015) related to contracts for the transfer of the rights to use systems and technical support provided by TOTVS. All contracts are signed in accordance with usual market conditions. On February 24, 2015 the Company entered into a commercial partnership agreement with Rede S.A., payment method company of Itaú Group, to provide a complete management solution, e-commerce and automation of shops and payment systems aimed at micro and small businesses. On March 31, 2015 the amount involved in this partnership was R$ 500 related the structure of supply. The Company has a non-onerous contract relating to the management of it is pension plan with Itaú Vida e Previdência S.A.

9.3. Management fees Expenses relating to the compensation of the senior executives and management of the Company and its subsidiaries are summarized below:


03/31/2015 12/31/2014 03/31/2015 12/31/2014

Short-term benefits to employees Salaries, fees and payroll charges 3,189 3,713 4,312 5,078

Private pension plan 111 104 111 104

Variable bonuses 785 2,219 857 2,219

4,085 6,036 5,280 7,401

Share-based payments 441 876 441 876

4,526 6,912 5,721 8,277


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10. Investments The breakdown of investments in subsidiaries is shown below:

Summarized financial statements of affiliate companies, subsidiaries and associates

as at March 31, 2015

Equity pick-up (parent company) for periods

ended:

Balance of investments as at:

Assets Liabilities Equity Gross

revenue P&L for the

year 03/31/2015 03/31/2014 03/31/2015 12/31/2014

TOTVS Rio 21,419 (5,732) 27,151 5,494 2,217 2,217 1,391 27,151 24,934 TOTVS Argentina 14,600 4,484 10,116 4,891 (143) (143) 12 10,116 8,632 TOTVS México 9,252 9,871 (619) 3,397 (2,134) (2,134) (308) - TOTVS Nordeste 103,326 34,040 69,286 2,451 48 48 (151) 69,286 68,092 TOTVS Brasília 140,084 26,878 113,206 1,796 1,865 1,865 901 113,206 111,341 EuroTOTVS 338 - 338 - - - (31) 338 316 TQTVD 16,388 1,010 15,378 3,156 555 555 1,439 15,378 14,823 TOTVS Inc. 67,286 321 66,965 - (2,000) (2,000) (1,555) 66,965 57,360 Datasul Argentina 388 - 388 - - - 12 388 338 TOTVS Agroindústria 4,747 1,100 3,647 3,408 (89) (53) 225 2,188 2,241 P2RX 1,174 415 759 1,224 75 45 24 456 411 TOTVS Sales - - - - - - (428) - TOTVS RO 2,170 2,663 (493) 3,974 (503) (503) - - - TOTVS Ventures 12,614 1,760 10,854 - 4,734 4,734 (300) 10,854 6,120 Ciashop 1,764 2,542 (778) 1,511 (510) (828) - 14,069 14,541 Virtual Age 11,776 3,649 8,127 10,151 (896) (896) - 82,166 83,062 Neolog 1,848 1,063 785 629 - - - 29,807 -

2,907 1,231 442,368 392,211


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The changes in the investment accounts for the period ended March 31, 2015 were as follows:

12/31/2014 Additions Goodwill Equity

Foreign exchange

Reclassification 03/31/2015

TOTVS Rio 24,934 - - 2,217 - - 27,151 TOTVS Nordeste 68,092 1,146 - 48 - - 69,286 TOTVS Brasília 111,341 - - 1,865 - - 113,206 TQTVD 14,823 - - 555 - - 15,378 TOTVS Argentina 8,632 - - (143) 1,627 - 10,116 TOTVS México - - - (2,134) 1,621 513 - TOTVS Inc. 57,360 - - (2,000) 11,605 - 66,965 EuroTOTVS 316 - - - 22 - 338 Datasul Argentina 338 - - - 50 - 388 TOTVS Ventures 6,120 - - 4,734 - - 10,854 Virtual Age 83,062 - - (896) - - 82,166 Ciashop 14,541 - - (828) - 356 14,069 TOTVS RO - 10 - (503) - 493 - TOTVS Agroindústria 2,241 - - (53) - - 2,188 P2RX 411 - - 45 - - 456 Nelog - 471 29,336 - - - 29,807

Sum of Investiments 392,211 1,627 29,336 2,907 14,925 1,362 442,368

Ciashop (188) - - - - (356) (544)

TOTVS México (106) - - - - (513) (619)

TOTVS RO - - - - - (493) (493)

Sum of provision for losses (294) - - - - (1,362) (1,656)

Net investments 391,917 1,627 29,336 2,907 14,925 - 440,712


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11. Property, plant and equipment A breakdown of the Company’s property, plant and equipment is shown below:

Company

Computers

and software Vehicles

Furniture and

fixtures

Facilities, machinery and

equipment Other

Total property, plant and

equipment

Cost or valuation

Balance as at December 31, 2013 76,479 6,652 11,021 13,695 21,578 129,425

Additions 13,338 1,408 1,595 1,782 7,490 25,613

Write-offs (1,055) (2,012) (69) 12 (41) (3,165)

Balances as at December 31, 2014 88,762 6,048 12,547 15,489 29,027 151,873

Additions 4,557 816 138 8 3,323 8,842

Write-offs (4) (302) (1) - - (307)

Balance as at March 31, 2015 93,315 6,562 12,684 15,497 32,350 160,408

Depreciation Balance as at December 31, 2013 (48,084) (1,825) (5,111) (4,863) (9,149) (69,032) Depreciation during the period (10,826) (1,261) (1,045) (1,309) (3,572) (18,013) Write-offs 1,017 920 10 (25) (26) 1,896

Balance as at December 31, 2014 (57,893) (2,166) (6,146) (6,197) (12,747) (85,149)

Depreciation during the period (2,976) (322) (278) (347) (1,128) (5,051)

Write-offs 2 157 2 1 (3) 159

Balance as at March 31, 2015 (60,867) (2,331) (6,422) (6,543) (13,878) (90,041)

Residual value



Average annual depreciation rate 20% 20% 10% 10% to 20% 4% to

10%


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Consolidated

Computers and software Vehicles

Furniture and

fixtures

Facilities, machinery

and equipment Other

Total property, plant and

equipment Cost or valuation


Additions 15,573 1,649 2,050 2,293 8,844 30,409

Acquisitions of subsidiaries 254 219 167 66 112 818

Write-offs (2,208) (2,381) (384) (157) (358) (5,488)

Exchange variations 1,742 370 533 769 288 3,702


Additions 4,954 1,303 521 283 3,342 10,403

Write-offs (7) (303) (1) (1) - (312)

Exchange rate variations 705 99 190 59 211 1,264


Depreciation

Balance as at December 31, 2013 (52,636) (2,262) (5,881) (5,186) (9,644) (75,609) Depreciation during the year (12,706) (1,615) (1,368) (1,569) (4,571) (21,829)

Write-offs 2,057 1,085 190 94 292 3,718

Exchange variations (1,548) (177) (382) (558) (218) (2,883)


Depreciation during the period (3,481) (444) (366) (424) (1,360) (6,075)

Write-offs 3 157 1 - - 161

Exchange rate variations (439) (43) (106) (24) (45) (657)

Balance as at March 31, 2015 (68,750) (3,299) (7,912) (7,667) (15,546) (103,174)

Residual value



Average annual depreciation rate 20% 20% 10% 10% to 20% 4% to

10%


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12. Intangible assets Intangible assets and changes in the group’s balances are as follows:

Company

Software Trademarks

& patents Client

portfolio Other Goodwill

Total intangible

assets Cost/valuation


Additions 6,957 - 21 - - 6,978

Merger - - - - 15,463 15,463

Allocation of intangible assets - - 1,362 1,257 (1,164) 1,455

Write-offs 32 - - - - 32


Additions 7,967 - - - - 7,967

Transfers - - - - (134,214) (134,214)

Balance as at March 31,2015 204,036 63,149 208,969 16,337 233,811 726,302

Amortization


Amortization in the year (22,064) (4,201) (23,082) (1,889) - (51,236)

Write-offs (17) (1) - 1 - (17)


Amortization during the period (5,377) (1,049) (5,409) (462) - (12,297)

Transfers - - - - 134,214 134,214

Balance as at March 31,2015 (125,705) (28,069) (141,522) (13,958) - (309,254)

Residual value



Average annual amortization rates 10% to 20% 6,7% a 8% 10% to 12,5% 20% to 50%


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The amortization of intangible assets is based on their estimated useful lives. Intangible assests identified, the amounts recognized and useful lives of assets resulting from a business combination are based on a technical study done by an independent specialized company.

The group “Other” in the table above consists basically of the non-competition rights arising from the business combination and the rights to explore geographical areas in Brazil.

Consolidated

Software Trademarks

& patents Client

portfolio Other Goodwill

Total intangible

assets Cost/valuation

Balance as at December 31, 2013 200,683 66,760 219,391 40,306 508,677 1,035,817

Additions 7,299 - 21 - 90,469 97,789

Allocation of intangible assets 6,989 7,806 16,723 3,864 (46,153) (10,771)

Acquisitions of subsidiaries 694 - - - - 694

Write-offs (39) - - - (1,624) (1,663)

Exchange rate variations 1,061 4 (64) 834 - 1,835

Balance as at December 31, 2014 216,687 74,570 236,071 45,004 551,369 1,123,701

Additions 8,323 - - - 29,336 37,659

Transfers (721) - - 721 (134,299) (134,299)

Exchange rate variations 427 2 36 47 - 512

Balance as at March 31,2015 224,716 74,572 236,107 45,772 446,405 1,027,573

Amortization


Amortization during the year (25,828) (7,434) (26,790) (7,047) - (67,099)

Write-offs 52 - - - - 52

Exchange rate variations (371) (2) 47 (332) - (658)


Amortization during the period (6,322) (1,741) (6,204) (1,143) - (15,410)

Transfers 238 - - (238) 134,299 134,299

Exchange rate variations (232) - (36) (48) - (316)

Balance as at March 31,2015 (134,047) (33,197) (150,485) (35,313) - (353,042)

Residual value



Average annual amortization rate 10% a 20% 6,7% a 8%

10% to 12,5%

20% to 50%


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12.1. Changes in goodwill

The composition of goodwill on March 31, 2015 and December 31, 2014 and the movements in the three-month period ended on March 31, 2015 are as follows:

Goodwill 12/31/2014 Additions 03/31/2015

RM 90,992 - 90,992

Logo Center 5,703 - 5,703

TOTVS BMI 2,053 - 2,053

Midbyte 1,765 - 1,765

IOSSTS 2,643 - 2,643

BCS 11,821 - 11,821

Datasul 30,084 - 30,084 Setware 961 - 961

Hery 2,927 - 2,927

TotalBanco 6,008 - 6,008

M2S 12 - 12

SRC 33,688 - 33,688

Mafipa 1,195 - 1,195

Gens FDES 16,340 - 16,340

W&D 64,070 - 64,070

uMov.me 1,437 - 1,437

TOTVS Agroindústria 13,128 - 13,128

RMS 35,740 - 35,740 Seventeen 15,463 - 15,463

Ciashop 7,001 - 7,001

Virtual Age 74,039 - 74,039

Neolog (a) - 29,336 29,336

417,070 29,336 446,406

(a) Business combinations according to Note 3.

12.2. Asset impairment tests The Company assesses the recoverable book value of goodwill by employing the value-in-use concept in the discounted cash flow models for cash-generating units representing the group of tangible and intangible assets used to develop and sell different solutions to customers. The Company's management has not identified any events occurring during the period ended March 31, 2015 that would indicate a need for interim impairment test.


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13. Payroll and labor obligations

Salaries and charges payable balances are broken down as follows:


03/31/2015 12/31/2014 03/31/2015 12/31/2014

Labor liabilities Salaries payable 15,589 23,405 17,764 25,728

Pension plan payables 701 642 746 670

Vacation payables 45,117 47,686 54,209 54,370

Profit sharing and bonuses 4,811 7,636 5,664 9,201

13th month salary 8,838 - 10,700 247

Other 9,207 4,761 10,657 7,345

84,263 84,130 99,740 97,561

Payroll liabilities

FGTS payable 2,633 3,945 3,396 4,712

INSS payable 4,169 7,682 5,707 9,124

6,802 11,627 9,103 13,836

Total 91,065 95,757 108,843 111,397

14. Loans and financing Loans and financing are as follows:


03/31/2015 12/31/2014 03/31/2015 12/31/2014

BNDES (a) 484,122 481,974 484,122 481,974

Secured accounts and other - - 317 516

484,122 481,974 484,439 482,490

Current liabilities 26,377 24,798 26,694 25,314

Non-current liabilities 457,745 457,176 457,745 457,176

Amounts recognized in non-current liabilities as at March 31, 2015 and December 31, 2014 mature as follows: Company and Consolidated

03/31/2015 12/31/2014

2016 119,412 119,412

2017 119,412 119,412

2018 119,412 119,412

2019 99,509 98,940

Non-current liabilities 457,745 457,176


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The changes in loans and financing as at March 31, 2015 are as follows:

03/31/2015


Balance at the beginning of the period 481,974 482,490

Interest rates 8,340 8,340

Payment (6,192) (6,391)

Balance at the end of the period 484,122 484,439

a) BNDES – National Bank for Economic and Social Development In 2013, a new loan from BNDES of R$658,501, was approved with an amortization period of 72 months, including a 24 month grace period over the principal amount, to be released as proof of completion of investments. The loan is divided into three sub-credits, as described below:

Subcredit "A": PROSOFT amounting to R$596,835, which bears interest of 1,5% per year above TJLP, to be invested between 2013 and 2015 in the development of the qualitative solutions offered by TOTVS;

Subcredit "B" Program of Supportive Investments, subprogram for Innovation and Machinery and Efficient Equipment (PSI) amounting to R$58,466, which bears interest of 3,5% per year, to be invested in the development of the platform named "FLUIG";

Subcredit "C" An amount of R$3,300, which bears TJLP, to be invested in the corporate social responsibility projects to be performed by TOTVS.

As at March 31, 2015 R$477,078 was available to the Company.

15. Debentures As at March 31, 2015 and December 31, 2014, the balances were broken down as follows:

Issue Debentures Annual financial charges Unit price

Company and Consolidated

03/31/2015 12/31/2014

Series 1 100,000 IPCA* + 3,5% limited to TJLP + 1,5% 1,00 40,988 40,918

Series 2 100,000 TJLP + 1,5% 1,00 40,988 40,918

Subtotal 81,976 81,836

Premium due to non-conversion 34,539 31,018

Total 116,515 112,854

Current liabilities 33,973 33,834

Non-current liabilities 82,542 79,020 * Extended National Consumer Price Index


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The non-current liabilities have matury dates as shown in the table below:


03/31/2015 12/31/2014

2016 48,002 48,002 2017 17,270 14,927 2018 17,270 16,091

82,542 79,020

The following changes occurred in the periods:

Debentures and premiums on

non-conversion


03/31/2015 12/31/2014

Balance at the beginning of the year 112,854 104,205

Interest rates 5,011 13,279

Amortization (1,350) (4,630)

Balance at the end of the period 116,515 112,854

The operations, issue characteristics, interest paid, conditions and history of the conversion of debentures into shares and the payment of non-conversion premiums are detailed in Note 15 to the financial statements for the year ended December 31, 2014.


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16. Obligations relating to acquisitions These are installments payable due to investment acquisitions carried out by the Company and its subsidiaries, negotiated with payment in installments, recorded in current and non-current liabilities, as follows:


03/31/2015 12/31/2014 03/31/2015 12/31/2014

Datasul MG 2,558 2,470 2,558 2,470

Datasul Saúde MG 641 641 641 641

TotalBanco 90 88 90 88

Hery 587 571 587 571

TQTVD 247 237 247 237

SRC 178 173 178 173

Mafipa 1,065 1,036 1,065 1,036

Gens EDES 5,950 8,764 5,950 8,765

Umov.me - - 752 754

W&D Participações - - 28,939 28,937

Ciashop 1,075 1,345 1,075 1,345

RMS - - 33,109 32,327

TOTVS Agroindústria 11,956 11,809 11,956 11,809

Virtual Age 33,607 42,209 33,607 42,209

Seventeen 8,112 9,120 8,112 9,120

Neolog 15,566 - 15,566 -

81,632 78,463 144,432 140,482

Current liabilities 19,509 18,417 53,370 51,499

Non-current liabilities 62,123 60,046 91,062 88,983

Installments registered in non-current liabilities mature as follows:


Year 03/31/2015 12/31/2014 03/31/2015 12/31/2014

2015 11,849 54,324 35,788 78,260

2016 44,425 5,722 49,425 10,723

2017 on ward 5,849 - 5,849 -

Non-current liabilities

62,123 60,046 91,062 88,983

The amounts recognized in non-current liabilities have been adjusted by 11.2% to their present value.


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On March 31,2015, the liabilities for acquisition of Investments had secured accounts as securities, which consisted of CDB operations in the amounts mentioned below:


03/31/2015 12/31/2014 03/31/2015 12/31/2014

Current securities 13,670 10,415 42,532 35,169 Non-current securities 30,827 38,416 59,766 70,680

Total 44,497 48,831 102,298 105,849

17. Provision for obligations relating to legal proceedings During the regular course of their operations, the Company and its subsidiaries, are parties to various legal proceedings relating to tax, social security, labor and civil matters. Provision for contingencies is set up by management, supported by its legal counsel and an analysis of pending judicial proceedings, at an amount considered sufficient to cover probable losses, as shown below:


Provision for contingencies 03/31/2015 12/31/2014 03/31/2015 12/31/2014

Tax 77 78 77 78

Civil 1,208 1,239 2,973 2,903

Labor 7,757 9,537 7,757 9,537

9,042 10,854 10,807 12,518

Changes in the provision which took place in the three-month period ended March 31, 2015 are as follows:

The breakdown of the main lawsuits ongoing as at March 31, 2015 is as detailed in Note 17 to the financial statements as at December 31, 2014.

Consolidated

Tax Labor Civil Total

Balance as at December 31, 2014 78 9,537 2,903 12,518

(+) Additional provision 1 1,397 - 1,411

(+) Monetary restatement 1 130 165 283

(-) Payment/Reversal of provision (3) (3,307) (95) (3,405)

Balance as at March 31, 2015 77 7,757 2,973 10,807


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The court deposits linked or not to provision for individual lawsuits are stated below and are recorded under non-current assets: Company Consolidated

03/31/2015 12/31/2014 03/31/2015 12/31/2014

Judicial deposits Social security 3,144 3,088 3,144 3,088

Tax 2,085 1,982 2,085 1,982

Labor 12,101 11,625 12,101 11,625

Civil 5,326 5,116 5,792 5,725

22,656 21,811 23,122 22,420

18. Contingent liabilities

The Company and its subsidiaries are involved in other actions, which carry a risk of loss, according to outside counsel and the Company´s management are classified as possible and for which no provision has been recognized, as follows:


Type 03/31/2015 12/31/2014 03/31/2015 12/31/2014

Social Security 22,240 19,916 22,240 19,916

Tax 21,106 20,623 35,525 32,226

Civil 183,725 147,826 184,172 149,076

Labor 30,841 25,534 35,022 29,289

257,912 213,899 276,959 230,507

A breakdown of the main ongoing lawsuits until December 31, 2014 is given in Note 17.b to the financial statements for 2014. No significant changes in ongoing lawsuits for which a risk of loss assessed as “possible” by the Company for the period ended March 31, 2015 have been recognized.


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19. Equity

a) Capital As at March 31, 2015, the Company’s capital was made up of 163,467,071 non-par common shares, issued and fully paid (163,467,071 shares as at December 31, 2014), and held as follows:

03/31/2015 12/31/2014

Shareholder Shares % Shares %

LC EH Participações e Empreendimentos S/A 26,760,990 16.37% 26,760,990 16.37%

Fundação Petrobras de Seguridade Social - Petros 16,042,359 9.81% 16,042,359 9.81%

BNDES Participações S/A 7,444,981 4.55% 7,444,981 4.55%

Genesis Asset Managers LLP 8,436,429 5.16% 4,158,594 2.54%

Laércio José de Lucena Cosentino 1,910,618 1.17% 1,906,947 1.17%

Ernesto Mário Haberkorn 37,587 0.02% 29,710 0.02%

CSHG Senta Pua Fia 43,500 0.03% 43,500 0.03%

Other 101,484,920 62.09% 105,646,980 64.63%

Total shares outstanding 162,161,384 99.20% 162,034,061 99.12%

Treasury shares 1,305,687 0.80% 1,433,010 0.88%

Total shares 163,467,071 100.00% 163,467,071 100.0%

b) Capital reserves

The balances of capital reserves at March 31,2015 and December 31, 2014 are broken down as follows:

03/31/2015 12/31/2014

Goodwill reserve 31,557 31,557

Goodwill reserve for mergers 14,330 14,330

Premium on purchases from non-controlling (25,518) (25,518)

Debentures converted into shares 44,629 44,629

Stock option plans (Note 22) 27,670 27,495

92,668 92,493


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c) Treasury shares

The Company has a repurchase program for the acquisition of shares issued by the Company, without capital reductions for subsequent cancelation, disposal or holding in treasury, for the purpose of maximizing generation for shareholders. On March 31, 2015, the changes in "Treasury Shares" were as follows:

Number of

shares (units) Value

Average price per share (in reais)

Balance at beginning of year 1,433,010 R$ 52,212 R$ 36.44

Acquired - - -

Used (127,323) (R$4,639) R$ 36.44

Balance at end of the period 1,305,687 R$47,573 R$36.44

During the period ended March 31, 2015, the use of 127,323 of treasury shares under the stock options plan incurred R$571 as a capital reserve.

20. Dividends and interest on equity

The Company’s bylaws provide for a minimum mandatory dividend of 25% of the year’s net income, adjusted by the amount of the legal reserve created pursuant to the Brazilian Corporation Law. On March 30, 2015 at the Annual Shareholders’ Meeting the distribution and payment of dividends for the year 2014 amounting to R$124,368 was approved, which was paid as from April 15,2015.

21. Insurance coverage The Company and its subsidiaries, based on the opinions of their advisors, maintain insurance coverage at amounts deemed sufficient to cover risks on their own and leased assets, and civil liability risks. Insured assets include owned and leased vehicles, and the buildings where the Company and its subsidiaries operate.


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22. Stock option plan The main events associated with the stock option plan since December 31, 2014 are described in Note 21 to the financial statements for the year ended December 31, 2014. In the period ended March 31, 2015 two new stock options plans were approved at the meeting of the Board of Directors on November 29,2012:

(i) Regular options, whose strike prices will be the share´s market price at the time of the grant of options, determined based on the avarege of the closing prices of the last five trading days preceding the date of grant; and

(ii) Restricted options, where the strike prices will be established after certain obligation have been met,

which consists in the acquisition of Company shares using 100% of the amount received by the beneficiary in the year prior to profit sharing, net of taxes.

The fair value of these plans were estimated based on grant data using the Black-Scholes model for option pricing, for which the variables and results are shown below:

Date

Premises of fair value Pricing options

Expectancy: Interest rate risk-free

Term to maturity Plan Dividends Volatility

Regular Options 2/20/2015 2.6% 29.61% 12.75% 3 years 11.36 Restricted Options 2/20/2015 2.6% 29.61% 12.75% 3 years 33.34

The breakdown of the options for the period is as follows:


03/31/2015 12/31/2014

Number (units)

Average cost (R$)

Number (units)

Average cost (R$)

Stock option balance at the beginning of the year 1,732,518 32.14 2,770,782 30.00

Breakdown:

Exercised (89,234) 29.68 (1,055,056) 25.71

Granted 251,570 31.90 306,129 29.85

Canceled (18,868) 41.75 (289,337) 32.68

Stock option balance at the end of the year/period 1,875,986 32.13 1,732,518 32.14

The accumulated effect of stock options for the three-month period ended March 31, 2015 was R$809 (R$876 as at March 31, 2014) and was recorded as expenses for the granting of stock options. As at March 31, 2015, there were 754,595 exercisable options, since the 36-month terms of the fourth and fifth grant dates had already elapsed.


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23. Financial income and expenses The financial income earned and expenses incurred in the periods ended March 31, 2015 and 2014 were as follows:


03/31/2015 03/31/2014 03/31/2015 03/31/2014

Financial income Short-term investment yield 19,089 11,913 21,271 13,475

Exchange gains 373 353 566 725

Discounts obtained 1,453 480 1,578 547

Adjustments to market value 1,516 1,230 1,516 1,230

Interest received 353 1,111 457 1,280

Other financial income 145 327 7,345 373

22,929 15,414 32,733 17,630

Financial expenses

Interest rate paid or incurred (14,249) (12,247) (15,119) (13,834)

Exchange losses (190) (14) (279) (281)

Bank commission and expenses (902) (740) (999) (797)

Discounts granted (230) (2,924) (1,270) (3,233)

Other financial expenses (325) (795) (409) (1,563)

(15,896) (16,720) (18,076) (19,708)

Net financial income (expenses) 7,033 (1,306) 14,657 (2,078)

24. Private pension plan – Defined contribution The Company offers the “TOTVS” Private Pension Plan, managed by Itaú Vida e Previdência, which counts on contributions made by the participants and by the Company, as described in the Agreement of Subscription to the Program. The three types of contribution are:

Basic Contribution – corresponds to 2% of the employee’s salary, and, in the case of directors governed by the bylaws, the contribution ranges from 2% to 5%.

Voluntary Contribution – made exclusively by the employees, with no matching contribution by the

Company. Company Contribution – corresponds to 100% of the basic contribution, The Company is allowed to

make extraordinary contributions, at the amounts and frequency it chooses.


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25. Earnings per share The charts below show the earnings and share data used to calculate the basic earnings and diluted earnings per share:


03/31/2015 03/31/2014

Basic earnings per share Numerator Net income for the period assigned to the Company’s shareholders 71,057 61,498 Denominator (in thousands of shares) Weighted average number of common shares outstanding 162,056 163,173

Basic earnings per share 0.44 0.38


03/31/2015 03/31/2014

Diluted earnings per share Numerator Net income for the period assigned to the Company’s

shareholders 71,057 61,498 Denominator (in thousands of shares) Weighted average number of common shares outstanding Dilutive effect 162,056 163,173

Stock options 1,914 2,690

Weighted average number of common shares adjusted according to dilutive effect 163,970 165,863

Diluted earnings per share 0.43 0.37

There were no other transactions involving common shares or potential common shares between the date of the balance sheet and the date when these interim financial statements were concluded.


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26. Expenses by nature Below is information on the nature and function of expenses for the periods ended March 31, 2015 and 2014:


Nature 03/31/2015 03/31/2014 03/31/2015 03/31/2014 Personnel 140,879 135,596 172,987 162,397

Services and other inputs 91,243 76,353 106,050 90,807

Commissions 36,459 39,515 40,316 40,932

Depreciation and amortization 17,348 17,205 21,485 20,718

Rental 5,697 6,208 7,735 7,321

Allowance for doubtful accounts 7,436 7,239 8,098 7,910

Other 6,858 7,062 8,844 8,275

Total 305,920 289,178 365,515 338,360

27. Gross sales revenue The gross revenue and the deductions used for the calculation of the net revenue in the income statement in March 31,2015 and 2014 were as follows:


03/31/2015 03/31/2014 03/31/2015 03/31/2014 Gross revenue 437,008 416,470 503,922 474,717

License fees 69,529 75,613 79,196 88,297

Services 119,641 109,777 146,849 135,763

Subscription 22,158 21,238 32,804 22,293

Maintenance 225,680 209,842 245,073 228,364

Deductions (39,932) (38,563) (44,951) (42,844)

Cancelations of sales (3,862) (4,207) (4,331) (4,709)

Sales tax (36,070) (34,356) (40,620) (38,135)

Net revenue 397,076 377,907 458,971 431,873

28. Subsequent events

On April 2, 2015, TOTVS Ventures, a subsidiary of TOTVS S.A., sold its minoritary shareholding of 20% in the capital stock of uMov.me for the amount of R$1,600, terminating all commitments of future investments established by TOTVS Ventures in the acquisition of the referred minority shareholding position.

*********


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Report on review of quarterly information To the Board of Directors and Stockholders TOTVS S.A. Introduction We have reviewed the accompanying parent company and consolidated interim accounting information of TOTVS S.A., included in the Quarterly Information Form (ITR) for the quarter ended March 31, 2015, comprising the balance sheet as at that date and the statements of income, comprehensive income, changes in equity and cash flows for the quarter then ended, and a summary of significant accounting policies and other explanatory information. Management is responsible for the preparation of the parent company interim accounting information in accordance with the accounting standard CPC 21, Interim Financial Reporting, of the Brazilian Accounting Pronouncements Committee (CPC), and of the consolidated interim accounting information in accordance with CPC 21 and International Accounting Standard (IAS) 34 - Interim Financial Reporting issued by the International Accounting Standards Board (IASB), as well as the presentation of this information in accordance with the standards issued by the Brazilian Securities Commission (CVM), applicable to the preparation of the Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim accounting information based on our review. Scope of review We conducted our review in accordance with Brazilian and International Standards on Reviews of Interim Financial Information (NBC TR 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on the parent company interim information Based on our review, nothing has come to our attention that causes us to believe that the accompanying parent company interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by the CVM.


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Conclusion on the consolidated interim information Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 and IAS 34 applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by the CVM. Other matters Statements of value added We have also reviewed the parent company and consolidated statements of value added for the quarter ended March 31, 2015. These statements are the responsibility of the Company’s management, and are required to be presented in accordance with standards issued by the CVM applicable to the preparation of Quarterly Information (ITR) and are considered supplementary information under IFRS, which do not require the presentation of the statement of value added. These statements have been submitted to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that they have not been prepared, in all material respects, in a manner consistent with the parent company and consolidated interim accounting information taken as a whole. São Paulo May 4, 2015. PricewaterhouseCoopers Auditores Independentes CRC 2SP000160/O-5 Marco Aurélio de Castro e Melo Contador CRC 1SP153070/O-3

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