CVC Limited

Good afternoon and thank you for standing by. Welcome to the CVC Corp conference call to release results for the first quarter 22. With us today we have Mr. Leonel Andrade, the company CEO, Marcelo Coppel, CFO and IRO, and Mr. Bruno Brazil, Director of Financial Planning and IR Director. we would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company presentation. Ensuing this, we will go on to the question and answer session when further instructions will be provided. Should any of you require assistance during this call, please press star zero to reach the operator. This event is also being broadcast simultaneously over internet via webcast and can be accessed at www.cbc.com.br and you will find the presentation there and also download the file. The replay of this event will be available shortly after its conclusion. Before proceeding, we would like you to bear in mind that the forward-looking statements made during the event relating to CVC Corp's business prospects, projections, operational, and financial goals are current expectations and assumptions of the company's management. Investors and analysts should understand that general conditions, sectoral conditions, could impact the results of CV-Core. And in the future, the company could present results that differ materially from those pointed out in the presentation. Now, all of this will depend on the risk and uncertainty environment within which CVC-Core operates. The data and information presented are from the company and they refer to the economic scenario of the first quarter 2022 based on the news and projections available to the company. With the conclusion of this legal notice, I would like to give the floor over to Mr. Leonel Andrade, who will begin the presentation. You may proceed, sir. Good afternoon. Thank you very much. And it's very good to have you here with us. I would like to thank all of you. And I would like to highlight that once again, we're quite enthusiastic. We had a quarter in our opinion that was quite positive. And I would like to underscore with significant growth that We began the year with Omicron. The month of January was filled with uncertainties as we had ended the year, but the recovery came very strongly. We ended the month of March perhaps as the best month in the company since the pandemic, given the volumes and given the scenario. I would like to invite you to begin the presentation with me on slide number four. I highlight our bookings and our consume bookings. with the movement of the company, a growth of more than 100%, more than double than a year ago, showing you the very strong resumption in our case. And we do have a commitment and a very conservative management when it comes to credit and margins. I always say that margins are more important than the volume although the volume is fundamental we're extremely proud of what was done this quarter in terms of margins the tourist margin sorry the tourist market does not speak about margins they refer to volumes but both are very important We're also very conservative in terms of credit for individual persons and B2B. We could have sold much more and we could have sped up, but we do want to be conservative, well-balanced, with good results. Now, proof of this is our EBITDA, which was positive. It is still a recovery EBITDA. It's nothing that we can simply celebrate, but it does show that the company is evolving in a satisfactory way and under control. Of course, it has been a very good quarter, and what is good is that it is continuing on with this very good pace. And for the first time, we will have two consecutive quarters with growth. Two very strong quarters since the beginning of the pandemic. If nothing happens, if we could go on to the next page, page number 57. We are celebrated in May, a month of heavy investments in the company and 50 years of the company. This is our CBC Top of Mind and in a certain way, We have made heavy investments. Now, this is the right time to do this. In the two years that I have been in the company, we held back investments in advertising precisely because of the pandemic. But now is definitely the right time. We have a very important campaign with Ivete Zangalo that will extend until the end of the year and the results of the first days of the campaign have been extremely positive and of course they will have an impact on our business in the coming weeks and months. The company It has the greatest margin, the greatest visibility. It finds itself in a very special moment. And it has that seal of excellence in franchises. And this will enable us to guarantee better margins, our exclusivity, our differential. And because of this, we have invested ever more in exclusivity. We have more than 250,000 seats that are exclusive for us for sale in the coming 12 months. And the reception of business between Brazil and Argentina causes a great deal of enthusiasm. This has always been a priority for us. We... dominate and have a relationship with all of the larger banks in Brazil and Argentina. We have a recent partnership with Itaú, and Itaú Bank begins to have ever more products with a very positive performance, which means that this is just a beginning. But Itaú Bank is very large in Latin America with credit cards, and it has been growing very much. I will now give the floor to Marcelo Coppo, who will focus more on the figures, on the novelties. And at the end, of course, besides the questions, I will be at your entire disposal. Coppo, please. Thank you, Lionel. A good afternoon to all of you. It is a pleasure to be with you today. I would like to go on to the next slide. On page number seven, here we look at Brazil in greater detail and we see that the first quarter was truly very strong, a growth of 80% compared to the first quarter of 21, despite the effects of Omicron. that impacted January and February, but March appeared very strongly. Now, this growth is due to more flexible measures, the elimination of restrictions, traveling, and of course, the advance of vaccination throughout the month. The month of March represented 40% of our sales during the period. When we look at the graph to the right, we see the representativity of both domestic and international tourism vis-a-vis 2019. We see a progression of reservations that have grown 20%. when we look at the first quarter of 21 and the fourth quarter of 21. This, of course, because of the lifting of restrictions in the countries that are our greatest destinations. And we see that this will continue through time. We look at April and April as March has proven to have an increase in reservations and we believe that this will continue on in May as Leonel mentioned, thanks to the promotional campaign for our 50th anniversary. Besides all of the exclusive products that we are offering, the trend is positive. We go on to the next slide, slide number eight. Here we refer to the consumed bookings, and you can observe that they also have a very strong pace, a growth of 117%, especially for Brazil and Argentina. Brazil growing 88%, and Argentina growing more than fourfold year on year. We do have seasonality in the first quarter. The fourth quarter tends to be stronger because of the beginning of end of the year festivities and school holidays. Even with this, we had a very robust quarter. In Brazil, we see the take rate and the take rate has benefited from the offer of products. We have a base of 11 million clients. Thanks to our work with CRM and we begin to be ever more assertive in the offers that we make to these clients. We have a dynamic pricing model and a more favorable mix. where we begin to have a greater share in terms of the non-air products, land products. Now, basically, all of this is B2C. And in the quarter, this had an increase with a take rate of 1.8 percentage points. B2B continues with a strong pace. This is what we normally expect in an operation that focuses more on air products and has very good growth. We speak of B2B, the consumed bookings grew 139% and the others more than 100% year-on-year. We see Argentina with an evolution in take rate that went up from 6.4 in the fourth quarter to 8.1. This because we have increased the share of non-air products, land products, And the revenues, of course, reflect all of these factors that I have just shared with you. And they are thanks to the focus that we have placed on the clients and on the commercial sector with very healthy margins. We now go on to the next slide to speak about our financial performance. In the previous slides, we spoke about the evolution of reservations, the net revenue, the consumed bookings and the ability to benefit from the resumption of the tourism sector. Now look at the operating leverage of CVC that is benefiting from its ability to distribution the brand and the products of focus on clients and the behavior and recurring operating expenses with a growth of 23% year on year. When we look at the net revenue, We end up showing you once again gains in operating leverage. Now adjusted EBITDA continues to be in recovery with positive results in the last two quarters and we ended the year with a positive result of 13 million highs in adjusted EBITDA. I would like to highlight a novel point, which is the introduction of PERSI, which is an emergency program for the resumption of events. It has brought about some measures, and the main measure is one that has eliminated federal taxes for the coming 60 months. When we speak of federal taxes, we're speaking of fees, cofins, and social contribution. All of this allows us to reap an immediate benefit when it comes to fees and cofins. And as soon as we go back to paying taxes, we will have the benefits of social contribution and income tax. Thanks to this change in the quarter and only in this quarter, we had a reduction of 62 million reais of tax credits that would have been carried out and that is why they were written off. Now, this is a one-time event. It will not be repeated again. And it is due to this taxation change and the benefits will extend throughout the coming quarters. That is why it had an impact and has led to a net loss of 167 million reais. And many of these come from this readjustment due to the adoption of the Percy Law. We go on to slide number 10, where we speak about cash flow. In the first quarter of the year, it continues to reflect the efforts of the company with cash management and the investments with the digitization projects. The board of the company on May 10th yesterday approved the six issuance of debenture to an amount of $995 million. Now, this emission basically brings about an increase in the average term of the debt and in the amortization profile. This will enable us to benefit from the market growth. Now, in this quarter, the working capital was benefited by the operation of receivables anticipation amounting to approximately 600 million reais. But it is important to underscore the issuance of debentures that was approved just yesterday. We go on to slide 11 to speak about our indebtedness. We continue with an indebtedness that is stable. Our debt is, of course, influenced because of the variations of the CDI policy. But thanks to our receivables from credit cards, we have been able to offset this. We have been monitoring and managing this very closely. And this is what will happen because of our average debt and the increase of amortization. And it has allowed us to grow and initiate this resumption. With this, I would like to conclude my part, and I return the floor to Leonel so that he can continue on with his remarks. Thank you, Coppel. I am on page 13. Simply to offer you a summary, we have had a booking acceleration. I don't need to... Dwell on the details. We have been fully benefited and we have made the most of it. We were benefited by the pent up demand, but we're also selling with top quality and quite a bit of conservatism. in terms of credit, and this will aid and abet the sustainability of the business. Now, the resumption of events has also helped us. We have had a growth in our B2B segment, and we have exclusive products, for example, Rock in Rio Festival, where CVC will be the official agency. All of these generate quite a bit of movement. We continue on with our strategy with strong investments. We're presently investing heavily in publicity. Our Fidelity program is about to come out. It is being developed and we will have a highly robust program that considers all of our tourism potential with the help of partners. It won't be only points that have to be redeemed. We will have several other modalities to offer the clients and our stores have a new layout and they have proven to have a very strong productivity. Every week we have a new store. So this is truly expanding our network and our debt that has been restructured will enable us to have a great deal of confidence in our growth, in the feasibility of growth, and to be able to grow in a sustainable way. I would now like to open the floor for questions. And at the end, of course, I will make additional remarks. Thank you again for your attention. Ladies and gentlemen, we will now go on to the question and answer session. Should you wish to pose a question, please press star 1. To withdraw your question from the queue, press star 2. Our first question is from Eric Wong from Santander Bank. Thank you. Good afternoon. Thank you for taking our questions. We have two questions. The first question refers to the competitive environment. You have greater or lesser competitors. And of course, there is an environment of strong resumption. And the second question refers to the price of the debt and the medium term debt.

Thank you very much.

Your microphone is active. You may proceed, sir. I seem to have a technical problem. Now, let us go back to the issue of the take rate. We have had several activities, not only in products and dynamic pricing, and mainly in our assertive work with clients, influence, and all of the commercial policy and incentives, incentives to all employees that are not only based on revenues but also on quality. which means that we can all make the most in terms of margin, and I do not see any risk for the take rate in the coming quarters. Now, the answer I'm going to give you is the same as that of the past quarter. When I look ahead four quarters, I think we will be able to maintain the present day levels Well, in the fourth quarter of 21, the take rate was very good thanks to our B2C performance that has had excellent quality. Therefore, I do not foresee any short-term risk. We should be able to maintain the present-day volumes and the present-day magnitude.