20141003 cielo october
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The THE COMPANY MAKES FORWARD LOOKINGSTATEMENTS THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES
DISCLAIMER
These statements are based on the beliefs and assumptions of our management as well as on information currently available to us. Forward-looking statements
include information regarding our current intent, beliefs or expectations, in addition to those of the members of the Board of Directors and Executive Officers of the
Company.
Forward-looking statements also include information regarding our possible or assumed future operating results, as well as statements preceded or followed by, or
that include, the words ''believes”, ''may”, ''will”, ''continues”, ''expects”, ''anticipates”, ''intends”, ''plans”, ''estimates”, or similar expressions.
Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions, for they relate to future events, thus depending on
circumstances that may or may not occur. Our future results and the creation of value to shareholder s may differ significantly from those expressed in or suggested by these
forward-looking statements. Many factors determining these results and values are beyond Cielo’s ability to control or predict.
#1 MERCHANT ACQUIRER
AND PAYMENT
PROCESSOR IN BRAZIL
AND LATIN AMERICA
OF GDP CAPTURED
THROUGH CIELO´S
NETWORK
MARKET CAP – AMONG
10 LARGEST IN
BM&FBOVESPA
BRL 65 BILLION
9.3%
EXCHANGE RATE: 1USD = BRL2.2
CIELO | LEADING MERCHANT ACQUIRER
3
Copyright © Cielo | Todos os direitos reservados
MULTI-BRAND
MULTICHANNEL
MULTI SERVICE
THE MOST COMPLETE ELECTRONIC
PAYMENTS SOLUTION IN THE
MARKET SO THAT OUR CUSTOMERS
CAN SELL EVEN MORE
CIELO | THE MOST COMPLETE SOLUTION
5
CIELO | A DIFFERENTIATED STORY
Market driven
by powerful
Secular Trends
Leader in a
growing and
unique market
Strongest
market
distribution
Resilient
Growth and
Profitability
Differentiation
and Innovation
Experienced
Management
Team
6
CIELO|MARKET DRIVEN BY POWERFUL SECULAR TRENDS
Source: IBGE,ABECS 6
* Excluding Private Labels
1.787 1.980
2.249 2.499
2.745 3.017
789 799
2008 2009 2010 2011 2012 2013 1Q14 2Q14
PCE - Private Consumption Expenditure (R$ billion)
329 394
487
601
710
837
219 229
2008 2009 2010 2011 2012 2013 1Q14 2Q14
Card Expenditure (R$ billion)*
18,4% 19,9%
21,7% 24,1%
25,9% 27,7% 27,8% 28,7%
2008 2009 2010 2011 2012 2013 1Q14 2Q14
Cards Expenditure over PCE (%)
CIELO | LEADER IN A GROWING AND UNIQUE
MARKET
Unique Credit Product
• Credit in Installments product – monthly payments with no interest to cardholder
Fully Integrated Business Model
• Present in the whole value chain: affiliation, capturing, processing and settlement
Prepayment of Receivables
• Consequence of D+30 days cycle in a credit transaction
Industry Structure
• Strong concentration as a consequence of the few large banks in Brazil
7
CIELO | STRONGEST MARKET DISTRIBUTION
Brazil has a total area of 8,514,876 km
NUMBER OF BRANCHES
Others Total
NORTH 322 276 96 39 176 39 0 0 2 0 0 57 1,007
NORTHEAST 1,186 842 294 196 640 56 3 7 9 0 0 193 3,426
MIDWEST 488 344 293 109 309 103 1 6 7 111 1 106 1,878
SOUTHEAST 2,410 2,413 2,525 1,912 1,588 425 7 103 73 3 2 683 12,144
SOUTH 1,083 777 634 370 644 229 513 10 16 0 2 255 4,533
TOTAL 5,489 4,652 3,842 2,626 3,357 852 524 126 107 114 5 1,293 22,918
Banking distribution is the main barrier to new players
45% of the affiliations occur through Cielo
SOURCE: BRAZILIAN CENTRAL BANK , AUGUST 2014 8
CIELO | EXPERIENCED MANAGEMENT TEAM
Management Team
• Rômulo de Mello Dias CEO
• Clovis Poggetti Jr CFO and IRO
• Eduardo Chedid Simões EVP – Commercial Retail
• Adriano Navarini EVP – Corporate
• Dilson Tadeu Ribeiro EVP – Products and Strategic Planning
• Plínio Cardoso da Costa Patrão COO
• Roberto Menezes Dumani EVP – Organizational Development
A very experienced management team has helped build the payments industry in Brazil
• Net Profit
• Financial Volume Growth
• Customer Satisfaction
Metrics for Management’s Variable Compensation
9 * EVP: Executive Vice President
10
CIELO PROMO
Cielo’s offering is the most comprehensive available including some unique products
CIELO FIDELIDADE
CIELO LINKCI
CIELO CREDIÁRIO
• Loyalty program developed exclusively to merchants
• Largest B2B in Latin America
• Accrual of points based on merchant’s volume with Cielo
• Most flexible and the
easiest to use
promotional
marketing tool in the
market
• Can be offered to
merchants, brands
and issuers
• Allows the merchant to offer check-in solution to its customers and the possibility to develop free advertising
• Allows the cardholder to recommend its favorite locals and redeem rewards
• Additional payment method that allows cardholders to pay in up to 48 installments, accessing a pre-approved credit line from their checking accounts through their bank cards
CIELO| NEW PRODUCTS
CIELO| NEW TECHNOLOGIES
11
Cielo invests in new technologies for capturing devices we make available to our merchants
• Wireless POS terminals (GPRS)
Corresponds to 59% of Cielo’s installed basis (as of 2Q14)
Strong demand from our merchants
• NFC (Near Field Communication)
Up to now, more than 1 million terminals installed with
such technology
• Mobile Chip & Pin
Perfect for professionals and merchants that require
convenience and mobility
Data protected to ensure the integrity of transactions
Sales Receipt may be sent by email to the cardholder
CIELO| STRATEGIC PLANNING
Acquisition of M4U
Acquisition of Braspag
May
2011 January 2010
March 2012
September
2012
Partnership with CyberSource
Acquisition of MeS
August 2010
November
2012
Partnership with Facebook
and Planet Payment
Cielo has been active to be well positioned in eCommerce and mobile payment
12
Launching of Cielo Mobile Chip & Pin
October
2013
April
2014
MoU to participate in Stelo
June
2014
MoU to create a JV between Cielo and Linx
Launching the new e-commerce platform
12,9%
9,7%
13,1% 14,4% 14,0%
10,9%
13,5% 14,4%
12,1%
15,9% 15,9%
13,2%
15,9%
17,4%
9,0%
11,9% 12,5%
8,1% 9,6%
10,2%
6,8%
2,6%
5,7% 6,9%
6,3%
3,7%
6,2% 7,1%
5,1%
8,7% 8,9%
5,7%
8,8%
11,4%
2,2%
4,8% 5,5%
0,5%
3,5% 3,7%
0,1%
2,1%
4,1%
6,1%
8,1%
10,1%
12,1%
14,1%
16,1%
18,1%
20,1%
Source: CIELO
CIELO´S AMPLIFIED RETAIL INDEX (ICVA) NOMINAL REVENUE OF SALES GROWTH (YOY)
DIFFERENTIAL
Territorial coverage of 99% of the
country
Scope sized companies: from small retailers to
large retailers
Based on actual information
and not in sample surveys
Dynamic model, based on the actual mix
of each sector in the economy
Over 20 economic sectors, including services (eg: airlines, restaurants and e-commerce)
Improved disclosure
13
163.941 202.084 244.960 279.617
98.742 118.315
138.368
169.131
Quarterly Evolution (R$ million)
67.246 73.120 75.979
39.039 46.454 49.359
2Q13 2Q14 1Q14
119,574 125,338
106,284
Annual Evolution (R$ million)
2012 2013
448,748
320,399
Credit
Debit
17.9%
4.8%
CAGR: 19.5%
14 The financial volume does not include Merchant E-Solutions transactions, i.e., it comprises the financial volume of the domestic market only.
CIELO| TRANSACTION FINANCIAL VOLUME
2011 2010
383,329
262,683
CIELO| NUMBER OF TRANSACTIONS
Quarterly Evolution (R$ million) 556 592 625
602 727 734
2Q13 1Q14 2Q14
1,318 1,359 1,158
Annual Evolution (R$ million)
2012 2013
4,902
3,317
Credit
Debit
4.8%
15 The number of transactions does not include Merchant E-Solutions transactions, i.e., it comprises the number of transactions of the domestic market only.
17.3%
2010 2011
1,601 1,837 2,062 2,283
1,716 1,964
2,240 2,618
3,801 4,302
CAGR: 13.9%
* Points of Sales Merchants are those that have made at least a single transaction in the last 30 days . The year is measured based on the closing
CIELO| OPERATIONAL INDICATORS
POS Terminals
Points of Sales Merchants (30 days)*
16
2010
1.743 1.867 1.899
1.324 1.435 1.473
2Q13 1Q14 2Q14
Quarterly Evolution (Thousand)
11.3%
9.0%
1.7%
2.6%
1.277
1.484
1.727 1.831
1.069 1.156 1.282
1.426
Annual Evolution (Thousand)
2010 2011 2013
CAGR: 10.1%
CAGR 12.8%
2012
2012 2013
1.619,8
1.817,7 1.840,7
2Q13 1Q14 2Q14
Annual Evolution (R$ million)
CIELO| NET OPERATING REVENUE
NET OPERATING REVENUE
Quarterly Evolution (R$ million)
CAGR: 19.0%
13.6%
17
2011 2010
3.992,5 4.208,7
5.385,3
6.734,2
1.3%
CIELO| COSTS + EXPENSES
2012* 2013
610,4 659,7 703,8
235,5 259,2
285,2
2Q13 1Q14 2Q14
Annual Evolution (R$ million)
Costs + Expenses per transaction
2Q13 1Q14 2Q14
Total (R$ cents)
0.73 0.70 0.73
Costs+ Expenses
per transaction
2010 2011 2012 2013
Total (R$ cents)
0.49 0.54 0.60 0.72
Quarterly Evolution (R$ million)
918.9 989.0
845.8
3,550.2
2,603.3
Costs
Expenses
CAGR: 29.8%
16.9%
7.6%
18
*2012 figures were impacted by Merchant E-Solutions in costs and expenses only in 4Q12
2010 2011
1.180,8 1.425,2 1.807,6
2.549,7 441,0 613,4
795,7
1.000,6
2,038.7
1,621.9
2012 2013
CIELO| PREPAYMENT OF RECEIVABLES
268,1
410,2 439,1
143,1 191,0 218,1
2Q13 1Q14 2Q14
Quarterly Evolution (R$ million)
Gross Revenue of Prepayment of Receivables Net Revenue of Prepayment of Receivables*
52.4%
63.8%
7.0%
14.2%
848.0
1,201.7
524.0 592.8 Annual Evolution (R$ million)
13.1%
41.7%
*Net of Cost od Funding Managerial 19
10.340,1 15.407,5
26.409,3
44.286,2
6,3% 7,6%
10,8%
15,9%
-
5.00 0,0
10.0 00,0
15.0 00,0
20.0 00,0
25.0 00,0
30.0 00,0
35.0 00,0
40.0 00,0
45.0 00,0
50.0 00,0
0,0 %
5,0 %
10, 0%
15, 0%
20, 0%
25, 0%
2012 2013
10.580
13.618 13.566
16,1%
18,7% 17,9%
2Q13 1Q14 2Q14
Annual Evolution (R$ million)
Average Term
2Q13 1Q14 2Q14
# Business Days
41.5 39.5 39.3
# Calendar Days
59.6 58.4 56.9
CIELO| PREPAYMENT OF RECEIVABLES INDICATORS
% Prepayment over Total Credit Volume
Financial Volume of Prepayment
Average Term
2010 2011 2012 2013
# Businesss
Dayss 47.2 39.8 39.9 41.5
# Calendar Days
68.5 57.9 58.7 60.3
Quarterly Evolution (R$ million)
28.2%
-0.4%
CAGR: 62.4%
20
2011 2010
2012* 2013
Annual Evolution (R$ million)
CIELO| EBITDA
Quarterly Evolution (R$ million)
EBITDA MARGIN %
EBITDA
9.3%
CAGR: 11.7%
2Q13 1Q14 2Q14
-4.6%
21
*2012 figures were only impacted by Merchant E-Solutions in 4Q12
2.564,0 2.388,5
3.097,9
3.575,2
64,2% 56,8% 57,5%
53,1%
-
500 ,0
1.00 0,0
1.50 0,0
2.00 0,0
2.50 0,0
3.00 0,0
3.50 0,0
4.00 0,0
0,0 %
10, 0%
20, 0%
30, 0%
40, 0%
50, 0%
60, 0%
70, 0%
80, 0%
90, 0%
100 ,0%
2011 2010
873.9 1,001.4 955.5
54,0% 55,1% 51,9%
2012* 2013
633,1
802,7 796,8
39,1% 44,2%
43,3%
2Q13 1Q14 2Q14
Annual Evolution (R$ million)
CIELO| NET INCOME
Quarterly Evolution (R$ million)
NET MARGIN %
NET INCOME
* 2012 figures were only impacted by Merchant E-Solutions in 4Q12
25.9%
-0.7%
CAGR: 13.5%
22
2011 2010
1.830,9 1.816,9
2.320,6
2.673,6
45,9% 43,2% 43,1%
39,7%
-
500 ,0
1.00 0,0
1.50 0,0
2.00 0,0
2.50 0,0
35, 0%
37, 0%
39, 0%
41, 0%
43, 0%
45, 0%
47, 0%
49, 0%
51, 0%
53, 0%
55, 0%
OUTLOOK | SOME KEY CONSIDERATIONS
23
• Brazilian Central Bank named the official regulator
• Initial guidelines released in November 2013
Regulatory Environment
• New business model adopted by second largest player
• New players gaining market share
Competitive Landscape
• Economic activity remains a question mark
• Moderated increase in inflation benefits the business in the short term
Macroeconomic Scenery
CIELO | INVESTMENT HIGHLIGHTS
Leader in a growing market
Strong balance sheet, high cash generation and low capex requirements
Minimum dividend pay out of 50% of net profit* distributed twice a year
Focus on innovation and continuous growth
* After constitution of legal reserve of 20% of the Company´s capital stock
24
CIELO | ADR
Cielo has a sponsored Level I ADR
Ticker: CIOXY
ADR Ratio (ADR:ORD): 1:1
Depositary bank: Deutsche Bank Trust Company Americas
Depositary bank contacts:
ADR broker helpline:
Tel: +1 212 250 9100 (New York)
Tel: +44 207 547 6500 (London)
Email: [email protected]
ADR website: www.adr.db.com
Depositary bank’s local custodian: Banco Bradesco
* Since December 2013 no IOF charged
25
1995
4 Visa acquirers
2009 2010
June 2009
Single Visa Acquirer
R$ 8.4 billion IPO
+
Multi-brand acquirer
CIELO | TIMELINE
27
28.6%
28.6%
42.3%
0.4%
Banco Bradesco Banco do Brasil
Free-float Treasury
1,572,230,938 common shares
CIELO | CAPITAL OWNERSHIP
28
BRAZIL | ECONOMIC SCHEME
Gross MDR
Net MDR Interchange Fee
The brand defines
the interchange
fee. The acquirer negotiates
the gross MDR with the
merchant.
MERCHANTS
29
BRAZIL | MERCHANT DISCOUNT RATES
Source: Central Bank 30
2,90
2,91
2,93
2,95
2,92
2,97 2,98
2,99
2,96
2,98 2,99 2,98
2,95
2,96
2,94
2,84
2,80 2,80 2,79 2,79
2,76 2,77 2,78 2,78
2,75 2,77
2,75 2,75
MARKET CREDIT GROSS MDR EVOLUTION (%)
Credit
BRAZIL | MERCHANT DISCOUNT RATES
Source: Central Bank 31
1,58 1,57
1,58
1,59
1,59 1,58 1,58
1,60 1,60
1,57 1,57
1,61 1,61
1,59
1,57
1,56
1,57
1,55
1,57
1,59 1,59
1,56
1,58
1,59 1,59 1,59 1,59
1,58
MARKET DEBIT GROSS MDR (%)
Debit
45 -99 -207 12 102 1 22 34 17
-101 35 152 -47 -135 -34 -75 -43 -47
54 61 42 29 29 27 47 5 21
1 3 13 6 5 6 6 4 10
200
16.6%
2 (1.1%)
9 (4.4%)
82 (41.0%)
107 (53.4%)
3Q12
173
16.4%
2 (1.0%)
6 (4.0%)
68 (39.5%)
96 (55.5%)
2Q12
165
17.1%
2 (1.0%)
4 (3.4%)
64 (39.2%)
93 (56.5%)
2Q141
227
16.3%
3 (1.5%)
13
(6.0%)
84
(37.2%)
125
(55.3%)
1Q141
217
18.9%
3
(1.4%)
12
(5.7%)
82
(37.7%)
120 (55.2%)
4Q131
240
20.2%
3 (1.4%)
14 (5.7%)
92 (38.1%)
132 (54.8%)
3Q131
207
19.7%
3 (1.3%)
11 (5.2%)
4Q12 1
113 (54.6%)
2Q131
195
18.3%
2 (1.2%)
10 (5.0%)
76 (39.2%)
81 (38.9%)
1Q131
182
17.0%
2 (1.2%)
9 (4,7%)
74 (40.6%)
98 (53.6%) 106
(54.6%)
Vero
Santander
Rede
Cielo
1) Itaú reported Redecard e Hipercard results blended.
Source: Public information, released by the companies (Cielo, Rede/Itaú, Santander e Banrisul); Cielo Analysis
∆ share qoq
17.9%
10.4%
39.6%
40.5%
yoy [%]
BRAZIL | MARKET SHARE – TOP 4 ACQUIRER Captured volume [R$ Bi], market share [%], market share variation [bps]
32
BRAZIL | TRANSACTION FLOW
MERCHANTS CARD HOLDERS
ISSUER
CARD
HOLDERS MERCHANTS
ISSUER
Credit Transaction Cycle
(in # of average days)
33
One of the specific characteristics of the Brazilian market is the long period for credit
transaction settlement
Debit Transaction Cycle
(in # of average days)
It takes 30 days on average in a credit transaction until the merchant is paid
On debit, the settlement occurs one day after - the international standard
MERCHANT • More sales volume: more than 20 million cardholders from BB
and Bradesco with pre-approved credit lines;
• Additional payment scheme without directly financing the
cardholder;
• Better cash flow as funds are received in D+1;
• Increase in average ticket;
CARDHOLDER • Pre-approved credit line from the bank;
• Attractive interest rates;
• Additional to credit card’s limit;
• Simulation at the point of sale;
CIELO • More sales volume;
• Merchant Discount Rate similar to credit in installments.
CIELO | CREDIÁRIO PRODUCT
34
CIELO | MERCHANT e-SOLUTIONS ACQUISITION
MeS Highlights
• Proprietary, internet-based, next-
generation technology platform with
best-in-class scalability, analytical
capabilities, delivery speeds and cost of
services
• Leading e-Commerce payment
services provider with full range of
merchant acquiring, e-Commerce &
fraud management solutions
• In-house development of products and
services provides superior transaction
economics across the value chain
• Portable platform with upside for
expansion
• Good organic revenue growth, margins
and free cash flow
• Seasoned management team
Rationale
• Enhancement of Technology Platform
– Opportunity to leverage MeS’ technology
to the Brazilian market and Rest of World
– MeS platform designed to achieve
maximum scalability, efficiency and
reliability at a low cost
• E-Commerce Improvement
– E- Commerce is fastest growth merchant
category in payments
– MeS has expertise and proprietary
technology tailored to serving e-
commerce merchants
• Strong MeS Financial Performance
– Organic growth and attractive margins
Cielo acquired 100% of MeS for $670 million
35
CIELO | FACEBOOK PARTNERSHIP
• Partnership is the first step in the development of B2B2C
services with social engagement at the digital world. Innovative in
Brazil and worldwide, this service allows the connection of
shopping experience with the act of payment.
• This innovation allows the merchant to offer the check-in solution
to its customers and also the possibility to develop free
advertising to his own business. In addition, Cielo created two
new features to Facebook, focusing in the cardholders: the
possibility of recommending your favorite locals and also redeem
rewards. All that integrating the physical with the on-line world,
with Facebook, at the act of payment, through Cielo’s equipment.
36
CIELO | PLANET PAYMENT PARTNERSHIP
• An unprecedented initiative in Brazil, the partnership with Planet
Payment, a leader in processing international and multi-currency
payments, will allow Cielo to offer its clients “Pay in Your
Currency” and “Shop in Your Currency” solutions.
• These solutions offer high added-value to Cielo’s clients and
their consumers, especially foreign tourists who will visit Brazil
for the 2014 World Cup and 2016 Olympics. With the new tool,
foreign consumers can easily pay in their local currencies at the
point of sale via Cielo machines
37
CIELO | ORIZON AQUISITION
• Orizon was founded in 2006
• Cielo’s Ownership interest of 40.95%
• Interconnection between healthcare and dental operators and
services providers
38
CIELO | M4U AQUISITION
• M4U was founded in 2000
• Deal announced August 2010
• Total amount of R$ 50.1 million
• Innovation in the development of technological mobility platforms
• Largest mobile top up and mobile payment platforms in the Brazil
• Developed several applications under the most diverse cell phone
standards for a wide range of clients in the financial and telecom
markets
• Founders will continue to head the business 39
CIELO | eCommerce POSITION
Card
Slip
Acquirers
Wallets/ Subacquirers
Gateways
Banks
Debit
Source: Company, Broker reports, Cybersource 40
CIELO | BRASPAG AQUISITION
• Braspag was founded in 2005
• Deal announced May 2011
• Total amount of R$ 40 million
• Leader as a gateway for e-commerce in Brazil, with
approximately 65% market share
• Platform integrates online stores, financial institutions and
acquirers, and is responsible for capturing, routing and
managing payment transactions with cards, collection slips and
online debit
41
CIELO | STELO INICIATIVE
• MoU signed in April 16 with Cia. Brasileira de Soluções e Serviços
(“CBSS”) – controlled by Banco Bradesco S.A. and by Banco do
Brasil S.A. – to hold a stake in Stelo S.A.’s capital stock, a whole
subsidiary of CBSS operating as a facilitator for online payment and
digital wallet, for both the physical world and for eCommerce.
• Consolidation in eCommerce, adding Stelo facilitator to its available
portfolio to merchants and, via Stelo, Cielo will now participate in the
digital wallets business.
• The completion of the transaction is subject to execution of definitive
documents and approval of applicable regulatory authorities. 42
CIELO | DEBT EVOLUTION
43
2009 2010 2011 2012 2013
151
2.114
2.488
0,1 x
0,7 x
0.7 x
0
500
1.000
1.500
2.000
2.500
3.000
0,00
0,10
0,20
0,30
0,40
0,50
0,60
0,70
0,80
2009 2010 2011 2012 2013
Total Debt Evolution (R$ million)
Total Debt Total Debt/ EBITDA
(514) (251) (142)
1.710
2.065
(0,2) x
(0,1) x (0,1) x
0,5 x
0,5 x
-1.000
-500
0
500
1.000
1.500
2.000
2.500
-0,3
-0,2
-0,1
0,0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
Net Debt Evolution (R$million)
Net Debt/Cash Net Debt/EBITDA
CIELO | DEBT AMORTIZATION SCHEDULE
44
R$423
R$3.575
2013Cash EBITDA
R$273 R$145
R$39
R$2.031
2014 2015 2016 2022
Interest and Principal