CVC Limited

Good afternoon. Thank you for waiting. Welcome to the CBC Corp conference call for the second quarter of 2021 earnings results. Today with us are Mr. Leonel Andrade, CEO, and Mr. Mauricio Monchilia, CFO and Investor Relations Officer. We would like to inform that this event is being recorded and that all participants will be on listen-only mode during the CBC Corp conference call. After the presentation, we will have a Q&A session and will provide you instructions at the given moment. Should you need assistance during the conference call, please request the help of an operator by pressing star zero. This event is being simultaneously broadcasted over the internet via www.cbc.com.br. Through the webcast, you will be able to control the slides and can also download the slide, the file. The replay of this event will be available shortly after the end. Before we continue, we would like to highlight that forward-looking statements made during this event regarding CBC Corp's business outlook as well as operating and financial projections and financial targets are no guarantee of the company's performance as they are based on the management's current expectations. Investors and analysts should understand that general industry and operating conditions may affect CVC Corp's future results and therefore the company may present results that differ materially from those indicated in this presentation. In other words, the achievement of such results is a consequence of the risk environment and uncertainties in which CVC Corp is inserted in. Also, the data and information here presented pertain to the company and the economic scenario of the second quarter of 2021, which are based on facts, news, and available projections to CVC Corp. having concluded this legal notice now i give the floor to mr leonel andrade our ceo that will start his presentation mr leonel you may have the floor good afternoon it's a pleasure to have all of you here to discuss our earnings results of the second quarter of 2021 to talk about our projections. We had a hard second quarter because of the second wave of the pandemic, but the company has evolved. and if the pandemic was strong that affected our bookings and boardings and dropped our we had a drop in take rate because after one year we had to reimburse our customer this was built up this year but i will explain this On the other hand, the vaccination has provided us good prospects, showing us a strong recovery of businesses, even stronger and faster than what we imagined months ago. Please let's go to page four. Basically is what I'm saying here. so let's go to page five is showing what we're doing right now i am going to try to accelerate so we have plenty of time for q a session so i can clarify questions we launched the new cvc brand cvc is a traditional company that had been using this brand for a long period of time and this brand didn't reflect the new market new technologies and the digital world and did not provide you the image of innovation with this new brand we have a new store model it is a highly sustainable store and 100 digital there is no paper This will be an extremely modern store in communication. It has a digital shop window and all the businesses in the store are 100% digital. The fourth store will be opened at the end of September, beginning of October, and we will initiate the rollout this year so we can accelerate the transformation process further. of the company and our store is connected now to the modern world. Now on page six, I believe that the main focus and our main investment has been to create a digital relationship with our customer, a dynamic relationship 100% based on contact and with the ability to influence We are creating a data lake with CRM that is modeled mainly a business influencer. We totaled 22 million customers. This was a major leap from last year up to the date. We doubled the amount of customers that we contacted digitally and I believe that we will continue growing strongly and we are pursuing 40 million customers customers that travel customers that we know analyzing all of our businesses we total 22 million customers just analyzing b2c we did not embark and now we will get to know the b2b customers our end customers This is a business as big as B2C, and now we're embarking in Argentina with this model. So our growth in the future is feasible and will allow us to become a tech company. I don't know what name you want to give it, and I believe that we will have future opportunities for new businesses. We have also invested in dynamic pricing, And we are seeing sustainable results. We ended all the dynamic pricing and the algorithms for charter businesses. And now we're building hotels. And the good news is that next year we will start with our hotel business 100% within our pricing platform. And therefore... in in real time and with algorithms we will have 85 of the best-selling hotels so now we have an intelligent price re in function of demand channel customer and also the existing agreement with each one of the hotels knowing what is best for the company and for our clients. So this has been great progress to have a sustainable margin. We also started our loyalty program. We have already defined our technology service provider program. Our card, we have a co-branded card with Itaú, and it's being sold. And as we promised, next year we will have a loyalty program implemented with clubs, services, and 100% of our hotels and our air partners will be part, one of the biggest loyalty travel programs in Brazil. now on the next slide i would just like to highlight something when we have our customer customer base and the great ability of doing business and knowledge and when we mix this with a loyalty program And with dynamic pricing it is clear that we definitely are within an intelligent world that will give us great ability to do business with high margin and as of this create the world of omni-channel reaching the customer wherever they are through any channels with high investment in digital channels. On the next page, you can see some of this. We continue with a consistent process of transformation. We are strongly investing in new apps. All our apps are part of our platform that allow us. This is the most modern platform that we have. And within this model, we have launched a B2B platform of remote sales. to our stores. I'm sorry, not our stores, to our partners. white label or to the multi-brand agency so that they're able to sell remotely all of our businesses with a highly modern app today we bought a hundred percent of vhc vhc is is a home rental business. It's the only tourism business that has grown a lot during the pandemic. Perhaps it was driven by the pandemic. These are vacation homes and now we have a company that is 100% ours based in Florida and Mauricio Monchillo is managing it and Mauricio was in charge of organizing CVC, and now he is dedicated to this startup. We have the pleasure now to have Marcelo Coppa that is an excellent CFO in the market that has great experience in the digital world and in the payment world, and he will help us with the future. We also would like to highlight that our B2B business is growing strongly. And it is adding more value to our business because of our digital business. Currently, we have over 7,000 active stores working during the past month. We had 7,200 active stores. We had never reached this number after the pandemic started. And with the growth of 1,000 stores from one month to the other, the market is recovering and we are making progress in this area. But our CVC stores, we have 1,200 stores. For three months, we haven't closed stores. So we are opening new stores. Therefore, our channels are growing strongly. We would also like to highlight that in terms of sustainability, we launched a program. We created our CVC Institute. We launched a diversity program. We assumed Targets and all our targets have been developed and our priority is to turn this organization in a sustainable company focused on diversity, focused on environment so we have good business in the future that are sustainable. Well, I would like to show you that we have a strong and consistent recovery. Month on month, we are growing. In April, we were talking about bookings and sales within the domestic market. Well, from 42%, this is what we had in April when we compare it. To the pre-pandemic days, this is just the domestic market and we totaled 86% of July. During the first days of August, we have 90%. So sales are strong because of the new markets. Now the international market with the restrictions that we have. Of course, sales aren't thriving. But during the second quarter, we had a recovery or a strong recovery of the national domestic tourism. Well, the corporate market still presents restrictions. And during the next slide, you can see that there we were affected in terms of bookings. Now bookings are starting and people are starting to travel. The airports are full. The airlines are reorganizing their schemes. So I strongly believe. that we will have a good second semester and CVC Corp is ready to lead the market. Now I will give the floor to Munchilia and he will show you the take rate and I'm at your disposal at the end to answer questions. but I can guarantee that I'm 100 percent optimistic. This was a harsh quarter. Our take rate was impacted, but we will explain this. But in the future, I believe that we will have an excellent future. I continue 100 percent optimistic regarding our organization. Monchillo, you have the floor and then we can proceed with our Q&A session. Thank you very much, Lionel. Well, good afternoon to everyone. It's a pleasure to be here with you. Now we will go to slide 10. I will talk about the results of CVC Corp. As Lionel mentioned, we were strongly hit in this quarter because of the second wave. And another fact is now these books and boardings of B2C, now this is B2C. These impacted our margins because bookings and boarders were low. And we also had to reimburse the airlines. And we've started this process now. And I will explain this in a couple of minutes. I would like to highlight two points and something that you must have bear in mind. Well, and now we are trying to reschedule bookings and boardings, something that is important. We issued a credit card. And the credit letters, the third and fourth quarter of last year, we had $130 million per quarter. And these credits were travels that were rescheduled for the future. In brief, in three quarters, if things continue at the pace that they're following with lower restrictions, we will have all the travels rescheduled and reorganized, and this problem will have been resolved. Another thing to bear in mind, When you see our balance, we have $150 million of disbursement for our customers, and we're waiting for the reimbursement of the airlines. And we are offering new boarding options for our customers to use this. So according to our profile, we believe that these problems will be resolved in the upcoming three or four months. And during this quarter, we had a loss. Because of reimbursement that started now, the legal framework gave the airlines a good term. As of April, we received the reimbursements, and the reimbursement has been received by the customers. And we had other operating expenses that were $40 million raised. These are costs that are part of our balance, anticipated costs that are not recovered. And 50% of this value are values of different prices of the air ticket that were bookings. There is a part that is not recovered and also fines.

These are nonrecoverable expenses.

And this is mainly due to disbursements. We believe that they will continue until things go back to normal. And this is something that we expect to happen in the upcoming quarters. I believe that we will end the disbursements in the upcoming quarters. And we believe that we will no longer have cancellations. If you pay attention, they're not even significant amounts. On our next page, in financial terms, within what we expected, our cash flow was slightly negative as we expected. As Lionel mentioned, we started selling again. Therefore, we had more working capital. And we are 100% within the expectations. And we continue with our investments in digital transformation and our initiatives, like the loyalty program. As Lionel mentioned, the next page, our indebtedness, our net debt continues low. And we have included the ongoing capitalization that until next week totaled $454 million, and they are not here. So the company has a sound financial situation. to support the growth as we had already mentioned in the past now focusing on Brazil as I mentioned Brazil is where we had b2c cancellations and pressures on expenses due to reimbursements And also there were adjustments and fines. So these are the main drivers. And another important driver you can see on page 16 regarding the V to C margin was strongly affected during the quarter because of two reasons. The first reason is that we had 35% of sales that were carried out before the pandemic, and this is a take rate that is much lower than what we see today. And I believe that we will see this during two or three quarters of And the other effect is we had a $15 million readjustment. This is a one-off event because we started to receive the airlines and we started receiving the disbursement amounts that were executed during the quarter. They're already part of the result that is the difference of the reimbursed value. We have accounts received. In our accounts receivable, we expect to receive this. This is an adjustment of an accounts receivable of an asset of 15 million reais that... If this wouldn't have happened, our B2C would have been $10.2 million, but that would have been a good result. Nonetheless, it was impacted by the cancellation of bookings and boardings. Now, Argentina had an excellent quarter from the sales point of view. the hot sale of may was excellent argentina opened its borders to the united states there was they had the vaccination tourism so this was this was a good quarter and our results were positive Now, during the third quarter, during the first quarter, the traveling restrictions were strong. But during the second quarter, things were loosened a little bit. Now we're on the last page of our second semester. Thank you. I think it's important to start a Q&A session. I would just like to say that we are resuming a number of businesses focusing on very good products. Today, the governor announced 100% of capacity in the Formula One racetrack. thanks to the vaccination. And we are benefited by this because we're the company that sells the ticket for this business. So we have exclusiveness like the World Cup, Rock in Rio. And these are sales that will position us in a competitive fashion in the market. So thanks to the vaccination program, we will have a new environment. And also, as we are a company that has its financial and operational capacity sound, I believe that because of this, we will see the benefits. I would like to initiate our Q&A session, and I am open. We are at your availability or at your disposal to answer questions. In order to pose a question, please press star 1. To withdraw your question from the list, please press star 2.