CVC Limited

Good afternoon, and thank you for waiting. You're welcome to CBC Corp. teleconference for the fourth quarter of 2020 and the year of 2020 teleconference. Here with us, we have Mr. Leonel Andrade, CEO, and Mauricio Montillo, CFO and Investors Relations Director. We would like to inform that this event is being Recorded and all participants will be in a listen-only mode during the company's presentation. We will then start our Q&A session. At that time, further instructions will be given. Should any participant need any assistance during this area conference, please ask for the assistance of an operator by pressing star zero. This event is also transmitted simultaneously via webcast and may be accessed at www.cvc.com.br slash ri where you can control slide selection. Slides are also available for download. The replay will be available right after the closure of the event. Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of CVC Corp Management and on information currently available to the company. They involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or not occur. Investors should understand that conditions related to the macroeconomic scenario, industry, and other factors could also cause results to differ materially from those expressed in such forward-looking statements. And now, after having concluded the legal announcement, I would like to turn over to Mr. Leonel Andrade, CEO, who will start his presentation. Mr. Andrade, you may proceed. Good afternoon, everyone. It is a pleasure to be here with you. I thank you all for your presence, for being with us. We're here to share news with you and the market on our results and the actions we're taking in the company. I would now like to start the presentation on slide number four. that we've been making changes in the company for the past year. These changes are aimed at having more solid and better governance. Within this context, we have redesigned the values and the purpose of the company. I always like to highlight our values. We have simplified with innovation, operate with transparency, are guided by sustainability, we honor our commitments, and we're proud to serve. Our values guide us towards our purpose to approximate people and their dreams, creating lifetime memories. And therefore, I'd like to reinforce our commitment with transparency and more solid governance with better controls in place. And now moving on to page number five, the next page. We recently had one investor's day. On this day, we talked extensively about the past and the progress of the company. The only aspect I would really like to highlight here with you is something that makes us very happy. We recently renegotiated the debts of the company. And with that, S&P has reviewed our rating. We had an upgrade, which is very healthy. especially taking into account the pandemic and all of the challenges faced by the company. We are happy to see the market looking at us and seeing how we are recovering our credibility. In all fronts and everything we do, credibility comes first so that all of our stakeholders, our employees, shareholders, partners, managers, The whole market in general, the community, the society, our creditors, franchises, distributor can see us as that. We have more and more credibility, and this is what we want to develop for the company. I'm very happy to have seen our rating go up by S&P. We also had a renewal of the board of directors. And with that, we have had strong and solid renovation in the boards of directors and in the management. Everything has been renovated so that we can have a better future, which will be very promising. And from now on, we will see the impact on our decision-making process. Of course, today I would like to highlight that we're a company that has absolutely no pending issues. in regulatory and accounting terms. We have no money, be it in any currency that include delayed payments or due payments. We will be stakeholders of the restart of tourism. I would also like to highlight that we are a company in movement last year to renew our company and especially to change our governors and controls. We also had a significant distraction to regulate all of the accounting issues, recapitalize the company, renegotiate our debts, and of course that took a lot of time. We are today a company that is 100% focused on focusing our future on these renovations with a series of initiatives, as I mentioned. We summarize everything into three pillars. We are a company with a lot of strengths. Today, we have physical distribution, our capacity in our management, including credit, And our employee, our people, they're all being leveraged. We have better expectations for the future while we have revisited all of our weaknesses and opportunities for improvement. Of course, digital transformation is among them, unification of platforms, governance and compliance, clients, and pricing, which are dynamic. partnerships, data like data science, the client experience in our business in Argentina, which definitely should improve dramatically. At the same time, we have developed new initiatives. We have a public commitment to start initiatives which will render the company more robust and innovating they're all taking place and I wanted to share this with you they're all going as expected DHC which started a solid expansion which is already taking place actually self-employed tourism agent which will be starting this year the loyalty program which was launched we have a credit card with itaú this is being distributed and then in the next steps we will conclude april with all the decisions made related to the technology platform and this year we're probably going to have our loyalty program or fidelity program i'd like to remind you that this is not a marketing platform it is a program it will generate assets for our clients our marketplace is also moving on this initiative seems to be good and daring we have made important definitions and within a few months it will be made available regarding the sustainability program it will go live this quarter at the end of may We're going to launch our sustainability program with a commitment, an internal actually, an external commitment. I now invite you to go to page seven. I have good news here. The pandemic challenge is huge, as you all know. Our main point is not losing our clients and make our clients not give up. We have had 810,000 passengers rescheduled, and we are perhaps the only company that has been very proactive in this regard to reschedule. And for clients to travel, we need to have cash. You have to pay with hotels and the trade and also with land travels. We still have 650,000 passengers with credits for rescheduling. It requires a strong operational capacity. In our case, this remains intact. But obviously, it demands intense quality work. The main challenge here for us and for the market is undoubtedly quality. Never before have we had such repressed demand. and so many people to reschedule. Of course, it depends on hotels, airline companies, and our operational ability. We are ahead of the market, but we still have huge quality challenges. On the other hand, with Provisional Measure 1024-2021 delayed to the end of the year, the resources made available to clients this helps the whole sector it's very valuable as the whole sector was strongly affected by the pandemic it is perhaps the economic segment that was hit the harshest our major challenge and thanks to the cash the capital provided by our shareholders, we can move on as expected. And when we concluded our numbers last Friday for the first time since the pandemic started, we have maintained our rating. And this is clearly something that troubled us because there were some concerns about And so today, the statement that was published has led to negotiation of debts, which are now lower than a year ago, thanks to all of you. And the company situation is far more solid today. This provisional measure is very good. Because when we look at the whole trading, this is essential for us to survive. It's no use for us to be alive if we are not healthy. And this is very important for the whole sector, including airlines, small providers, the tourist guides operating in Bahia, for example. And therefore, this provisional measure came just right at the right moment. And I now invite you to move on to page eight. It's important to give a look at what happened in the fourth quarter and how the company had been evolving. I am saying this in the past because we have a new challenge. I am much more optimistic today than I was three months ago, and I will tell you why the company had evolved. and if you see from the point of view of confirmed reservations, we reached the fourth quarter with 1,700,000 of confirmed reservations. But if you look on the right side, you will see that we boarded 2 million passengers. So you can imagine that at the peak of the crisis, under restrictions, We only traveled in the domestic market and still we boarded over 2 million companies. The company has its operational capacity intact and complete. And this is thanks to the work that was done, the credibility that was achieved, which led the company to come to the position we have now with an intact position. We have invested a lot. in improving the profitability of the business. I now invite you to move on to the next page. On the left side, you can see that we had 52% when compared to the previous year. 52% of domestic tourism, it was resumed. And in international, only 16%. The combination of these numbers leads to the amount shared in the previous page. But the best of all is when we look to the right side. We had 52% of reservations confirmed and a net revenue of almost 57%. So, with dynamic pricing, a new pricing model has led to very important achievements. In the Black Friday, we had an excellent week. And even though we had sales that were only 70% of the previous year, the revenue was greater. And this helped us trust that everything that we implemented will take the company to a new level of sustainability. And especially that we have a very healthy company in the future. I am convinced that we are going to be stronger, stronger in terms of representation, stronger in terms of comparison with the market, leading definitely the resumption of the business in Brazil. And the company will be much better. I am much more optimistic. The solution has been given. Nobody doubts that vaccination is a reality that will leave us to a totally different level in September or October. Within six months, our operations will be strong and that will coincide with summer in Brazil and tourism at the end of the year. Coverage is gigantic. And we will have strong recovery ahead of us. We have all of the financial and operational capacity to go through this period to be much stronger when our activities are resumed. I now turn over to Montilia, my colleague who's here with me. And after Montilia and the financial data, we'll open for Q&A. I am totally available, and Montilia, please proceed. Thank you, Lionel. Good afternoon, everyone. It is a pleasure to be here with you today. I will start on page 11 about CBC Corp results. I think that Lionel commented on most of it. We had important results. The company is resuming the impact may be seen on the fourth quarter. It's very important to analyze two aspects, what Lionel mentioned about how strong domestic tourism is, and also the ticket of the company, the average ticket, which is higher than it was in the previous period, and it also has to do with pricing, product mix, and a differentiated commercial strategy. It is very important to generate cash, negotiate debts. Everything is doing very well. At the end of January, we concluded the capitalization of the bonus, which were used to pay our debts. The progression, you can see that the debts are lighter. We will... talk about this later, but it's important to take into account that the effects have guaranteed that we could make two important adjustments. The first one is that we were able to reconstitute tax issues, which will be recovered in the long run. $220 million, the write-off was done early this year and it was based on the audit on the risks of continuation and also we recorded credit of 317 million in the last quarter that had to do with the 2020 losses and therefore with the elimination of the risk the company is once again able to have future cash recover its tax debts. And this is something that was recorded in the last quarter. This is something extremely important for us. And now, talking a little bit about cash generation in the next chat. As mentioned before, the generation of operational cash reached almost 800 million BRLs in this period and of course as we've been discussing and with all of the rescheduling the what we have sold has not been realized yet and that helped us with our operational cash so this quarter was closed with a little bit more than 900 million brls in cash and with everything we are in a comfortable position regarding the future. We're very prepared for the future, actually. Sales conditions are similar to what we had in the past, with some improvements, especially regarding our own funding. Regarding debt, renegotiation of debt, has led to some positive aspects. First of all, in the capitalization process, our gross debt decreased. It decreased in the fourth quarter and will decrease even further because of the capitalization that took place in the first quarter. This is something that is well known. Most of the resources were used for payments of the debentures, which are due in the first quarter. We also had another capitalization which will take place until September and will be partially used to pay the debts of the last quarter. With that, the company will be lighter and will be able to fund any future growth. Another extremely important aspect which was disseminated when we renegotiated our debt is that we have readjusted the covenants for a new curve after the sector is resumed. This is something that we will do. And in the fourth quarter, we had a waiver in the first quarter. And according to the next periods, 21, 22, and 23, We will have new covenants related to the new curves of financial obligations. In other words, we conclude the year with good capitalization, as Lionel mentioned. The company has operational capacity and financial capacity so that we can be important stakeholders in the resumption of tourism in the markets we work at. And now, talking a little bit about Brazil, In slide number 15, we had relevant growth, especially in Brazil. With important boarding, the domestic tourism, which is one of our strengths, especially in B2C, we did very well, both in terms of sales and boarding. This helped us a lot. The new policies and pricing and also the mix that helped us have a superior take road when we compare it to the take rate of the past year. The results evolved well. As the volume grows, we'll have very good coverage of our expenses and we're moving in that direction. It is important to talk a little bit about the net income on page 16. As commented before, the sales and confirmed bookings were pulled by B2C in Brazil. This is where we have our franchise network. Online operations in B2C, they all generated high volumes of income. In B2B, we are lagging behind because the international mix is more relevant than the domestic one. When you look at revenue, revenue in both cases for B2B and B2C were very important. The percentage was also very important. B2C reached almost 70% because of the increase in the take rate, which was superior in B2C when compared to the previous year. We also had improvements in our B2B. Resumption is taking place in a healthy manner in our business with contribution margins and volume, which are all very interesting. Operational expenses. Before we talk about numbers, it's important to highlight that the actions we've taken, especially trying to obtain business synergism, unifying businesses, especially in B2B, where we had four different companies. We revised our structure, what is corporate, what is not. We have eliminated redundancies. In the fourth quarter, we can already see the results, and they are helping us fund part of the investments we are now making to take the company to a totally new net level. Basically, we are investing a lot in technology. in the development of new platforms, which are included in KPSX investments, but also in the organization to support business initiatives to improve processes, information, security, and also operational efficiencies, whose results will be seen throughout 2022. Where we have clients, pricing, data lake, analytics, client, This is something that we have really reinforced because of our strategy to become a more relational company, focusing on federally repeat clients and also with operational margins that are more aligned to the market, pursuing opportunities in the market. Finally, we have invested in the structuring of compliance, investments in our teams and processes in the financial area. And therefore, I would say that we have implemented significant changes. We have an important year ahead of us. We hope that these investments will help us be more efficient as of 2022. Another important aspect, sales with our own funding represents six to 8%. We have separated pre-COVID portfolio. This all had an important impact and everything was reconstituted throughout this time. On the right side, you can see our post COVID portfolio for post COVID sales, where we can see the default rates that are much lower than we saw even in the previous years. Our focus is on the quality of sales. better adjusting payment conditions, commercial conditions, because of the profile of the clients we're selling to. One of the examples is minimum payment of 40% of the sales to guarantee that the sales, even if they are canceled, they will not lead to losses for the company. The business is doing well. It is promising. We have made significant investment in tools and processes, and I'm sure that we will see the benefits in the upcoming periods. Finally, I would like to talk a little bit about Argentina. We have three companies in Argentina. the impact of COVID in Argentina because of all of the restrictions that were imposed for a longer period. There is a mix that is much higher. In Brazil, we have between 30% and 40% in B2C. B2B, close to 50%.

Here we have about 60 to 70.

The resumption in Argentina has been slower. It also has to do with the devaluation of their currency and the difficulty to reduce costs because of local regulatory issues. We continue vaccinating in Argentina.