CVC Limited

the CEO, and Mr. Carlos Wallenberg, CFO and IRO. 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. Once the initial presentation is finished, 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 an operator. This event is also being broadcast simultaneously over the internet via webcast and can be accessed at www.cdc.gov. Once again, where you will be able to control the selection of slides and download the files, the replay of this event will be available shortly after its conclusion. Before proceeding, it's worth bearing in mind that the forward-looking statements made regarding the CBC Corp's business prospects, protections, operational and financial goals are current expectations and assumptions of the company's management as well as on information currently available to the company. operating factors, other factors may impact the future results of CVC Corp. And in the future, the company may present results that differ materially from those expressed in these forward-looking statements. Now, everything will depend on the risk and uncertainty environment in which CVC Corp operates. With the conclusion of this legal notice, I would now like to turn the floor over to Mr. Fabio Coutinho, who will begin the presentation. Mr. Coutinho, you may proceed. Good afternoon to everybody. Thank you for participating in our results conference call for the second quarter 23. begin here with the market highlights, the tourism market continuing on with its growth and gaining share as part of the Brazilian GDP. We have macro and micro dynamics that are quite positive for the sector as well as for CVC. In terms of macro factors, we observe a reduction of inflation in our sector and in the broader consumer price index. And of course, this will benefit us considerably. We have an increase in the capacity of airlines above two digits, both in the domestic and international flights. Since last year, there has been a resumption of levels back to 2019 with a faster growth in the national network throughout this second quarter. We do believe that in 2024, we will return to the levels of 2019 that were quite positive, both domestically and internationally. The hotel occupancy rate reaching the 2019 levels with an increase in the average ticket, as you can observe in the presentation, something that is quite positive, once again, from the viewpoint of airlines as well. We have gotten to the beginning of June. We had the opportunity of holding a wonderful sales convention with our franchisees for realignment for the goal of the company, which is to sell, to sell, to sell evermore. This is our intention. We had more than 1,300 participants with realignment and engagement with the franchisees. and we observe the very positive energy when we think about the future in CVC, which presently is focused on what an operator truly does, a focus on marketing, where thinking a great deal about the sales for the high season and well the sales and after sales operation are important as people return to the offices so that we can have a better service level with relevant NPS levels in our stores, as well as with our independent agents. And of course, focusing on our main suppliers, which are the airlines, the hotels in general, and adjusting our pricing when it comes to margins, always aligned pricing. with the interests of our franchisee base that bring in products so that they can have a better profitability. The second stage was to be able to deliver these results. We are very hopeful and very positive in terms of this. We come back with the B2B brands, Hextour, Advance, under the leadership of Mario, focusing on the profitability of the institution of airline tickets and activating Visual with Hugo, who has broad experience, as well as Marco. Marco has a lot of experience in Visual and has helped us to reassemble Visual going back to the strong margins that it had and making almost one billion reais so we resumed strongly with that positioning it as an upscale operator in the tourism market now Ugo has broad experience in the hotel sector. He's leading the trade. He was our director of domestic products. And now he holds his very important position. He's leading trend marketing. has a deep knowledge of the hotel sector and is our most capable leader to manage this business that has already had a result of more than 1 million reais. Once again, enhancing the company in those areas that have a direct relationship with B2C, especially CBC and our franchises. He has broad knowledge of the business. He was trained by Patriani and is already offering us excellent results. And we have Cecilia in Argentina. who recently has been offering very positive results and continuing on with this work. In the business support areas, we have Madhid, who is his fourth passage with us in the sector. And in CBC, he has been carrying out excellent work in the relationship with suppliers and is now taking on the pricing area. the part of products as a whole, not only the negotiation but the pricing as well in the field of operations in the junction of the operations centre and the shared services centre for the stores and for the land and air travelling as well. We have Paulo, who has broad knowledge of CDC. He was at CDC for 10 years. He worked with us three years in WebJet. He was CIO of Goal for 12 years, and he now returns home with a great deal of experience in the tourism segment, and he's already showing us very significant, considerable results here. And in the back office areas, the corporate areas, we have Carlos, who will continue on with the presentation. Paula in the people area. And in governance, we have Eliani. Good afternoon, everybody. I begin here. Well, I arrived at the company only 60 days ago. We carried out a IPO of shares for 500 million reais, 166 million shares issued with a price of 3.30 cents. Additionally to this, we have a subscription bonus that will be exercised on November 21st. We have 3 million shares issued. where the shareholder that participated in the offer will be entitled to buy shares from cbc with a goodwill in the fortnight the last fortnight of the market it's important to speak and mention that we're back to the shareholder position of CBC through a fund. We now go on to the presentation of our financial results. We're going to Open up the results per business unit, separating B2C, B2B, and Argentina as well to offer the presentation more transparency. We begin with the Brazilian B2C performance. We had 3 million of confirmed results. reserves and we had consumed bookings. Now, this quarter is usually weaker as part of the seasonality of the sector. And that is why we have this mismatch among our reservations. Despite this, we had a growth of 2.5% and 4 and some percent compared to the same period in 2022. Consumed bookings grew 8%. for the half of the year when we look at the take rate there was a relevant drop due to three factors mainly first of all a very aggressive strategy of exclusive products where we were not able to have 100% of occupancy in these exclusive products. And of course, they led to a loss in take rate. We have discontinued these products. Secondly, we embarked on a very strong, aggressive campaign carried out in the fourth quarter of 2022 with an expressive increase in cruises that have a very good take rate rate. So our results were negatively impacted by 7% for the quarter and 12% for the half year. We go on to the next slide to speak about the B2B performance. We had a reduction of 9.5% for the quarter, reaching $1.5 billion. Now, in the second quarter of last year, we had a very strong performance for corporal and corporate traveling because of the lesser restrictions imposed by COVID-19. In the quarter, we had 7.6% higher sales and even with a drop of sales, This ended up impacting the net revenue of the quarter by only 2%. When we look at half of the year, the revenue grew 4%. We go on to speak about the performance of Argentina on slide nine. Argentina delivered point of sales for international traveling. They had a growth of 22% for the half of the year and 40%. for the half year. Now, this reflects the scenario of inflation in Argentina. So in the quarter, Argentina delivered cash of 3 million reais and for the year, 22 million. As a base of comparison, last year, the net revenue for the quarter was 8 million reais, a growth of 8 to 22 million quarter on quarter. In the next slide, here you see the consolidated data. Our net revenue for the quarter totaled $269 million, and for the quarter, $565 million, in line with the same period last year, despite the fact that we had an increase in the shipments during the quarter of 60%. This negative effect of the volume in the number of boardings The revenue had a drop in the take rate of 8.6% down to 7% in the first quarter of this year, basically because of the loss of profitability in B2C, as we have just explained previously. The entire company at present is trying to enhance the take rate, focusing on the growth of the more profitable products and negotiating with strategic partners and enhancing the management of our customer base. on slide number 11 you see the share of our net revenue and the epitaph for the period 50 of our revenues in the quarter come from b2c and the other half is b2b in argentina and the take rate of these two business units Our EBITDA result was marginally negative of 1.5 million below the potential of CBC and corporate and operational expenses that were high. In July, we had a significant cut on stat, especially in the non-core areas, representing an annual savings of 100 million reais. We continue to reduce fixed and variable costs to gain efficiency. Our EBITDA for the quarter was $14 million, $18 million below if we compare this to the same period, $22. Now, this loss is due because during the same period last year, we had a reversal of provisions that ended up improving the EBITDA of the first half of the year in 2022. In slide number 12, you can see the cash balance for the quarter when you look at the right of the page The cash balance stands at $220 million because of the capitalization of $150 million held at the end of June and partially offset by the negotiation for the maturity of the ventures, a disbursement of $178 million, $124 million to pay off the debt, the rest to pay interest rates. Additionally to this, we had an increase in the sales volume without a counterpart in the EBITDA because of a loss of profitability in the first quarter of this year. So our cash flow in the operation was negative by $64 million. Thanks to the measures we have put in place at the end of July, we see a clear improvement in the operating cash of CVC. To the left of the slide, you can see the debenture amortization schedule as was mentioned. We had a tender that is mandatory for a partial reduction of the total balance of debentures for a minimum volume of 75M and considering the carry over rate and CDI rate. This amortization and the reduction that we see in interest rates will reduce the line of financial costs for CVC going forward. With this, I would like to return the floor to Godinho to present the plan for CVC in the coming months. Well, we already have a plan that is quite focused on short run measures that will offer us immediate results in up to three months for the medium term between three and 12 months and structural measures which will aid and abet the business considerably by streamlining and modernizing the CVC business beginning with the first 12 months. Now, these measures can be summarized in 12 pillars. The first, of course, expansion in sales, a focus on products, quality products through our B2B units, B2B brands and CVC stores. experimenting with people from the tourism segment that have deep knowledge of this sector and that are highly seasoned in the sector. And so we will sell these quality products to increase not only the sales in the stores that exist, but also We're going to foster the opening of new stores, the growth of same store sales for products and hiring in specific stores that we are still below the results of 2019. All of this has been carefully mapped and we're working with the franchisees to be able to hire back this personnel and we're working with Milan in an important pipeline this quarter and the coming year to open up new stores. The second pillar, of course, is profitability and increase in our take rate of improvement in mix. uh better b2b where we're going to focus on the profitability and consolidation of the airline sector and through visual the trade we're going to gain share where the take rate tends to be higher in the b2b segment and in cbc In B2C, the priority will be travel packages that do have a better profitability because of our lower working capital needs. This is already being done in the sales that we carried out in July and will have a positive impact in the coming quarters. another point is the reduction of our fixed cost as mentioned by carlos we have a significant problem in terms of readjustment of our contracts and part of our personnel structure and all of this should bring about results in the coming quarters we will be able to have greater visibility preserving the business areas marketing operations and post sales And through the follow on and significant improvement in our capital structure, along with that focus where we have a better working capital dynamic, doubtlessly, all of this will have a positive effect on our working capital and the reduction of our net leverage.

Well, thank you.

Ladies and gentlemen, we will now go on to the question and answer session. If you wish to pose a question, please press star one. If at any point you want to withdraw your question from the queue, press star two. Our first question is from Ruben Cuoto from Santander Bank. You may proceed, sir. Good afternoon. How are you? There are several points that you mentioned during the presentation and in the release, focusing on product offer, and you have given examples, your own products or negotiations with suppliers, a great deal of effort to increase profitability. Could you explain to us how much we can expect in terms of take rate from these efforts? Is it what we saw in the second quarter, or will the best results be in the medium term? Thank you. Well, this is Carlos Rubens. First of all, thank you for the question. Yes, we've put these measures in place, but some time ago, five or six weeks ago, when we look at the month of July and we have concluded July, we already observe an improvement in the take rate, especially in B2C and B2B because of the measures put in place. And the best results are in freighting. Our results had been highly impacted in take rate because of the exclusive products that we had as leases. And they had a significant impact on our results. All of these products have been discontinued and, well, We have products that are the image of CVC. They adhere better to a more adjusted pricing. We have carried out negotiations for partnerships with relevant operators, and the take rate of these products in July were considerably better. And of course, this enhances our combined results. So we already observe a gradual improvement. We still cannot forecast how rapid this resumption will be, nor offer you any guidance. But the fact is that all of these measures have had a positive impact in these first months after the closing of July. Well, that helped a great deal. Thank you. Our next question is from Francois from Citibank. You may proceed, Francois. Well, thank you. Thank you, Carlos, and everybody else. I have two points here where I would like to hear more about. First, about your relationship with the franchisees. You spoke about the sales convention, and you do have an important background with this type of relationship. And regarding the question on the take rate, which will be your relationship with franchisees and how are you going to increase the take rate in B2B and this new alignment towards stability? I would like to better understand this dynamic. Secondly, this is also about take rate, but from the outlook of B2B. How are you bringing together this content going forward? How are you going to increase the take rate in the B2B sector? Good day and thank you for participating in our call and thank you for your questions about the relationship with franchisees. Our relationship with franchisees is of the utmost importance. In CBC, we have a base of franchisees and master franchisees, which is very important for us, at least regionally. And this was our first step to get closer to them. On Friday and Saturday, we announced our sales convention for the CBC franchisees who are the success of our program and they were quite apprehensive and worried at that point and well the entire base was concerned with this new management the changes in the company and well had already been suffering for some years and he brought about this idea this new focus on cbc which truly has allowed the company to be very large to become a leader in latin america in terms of marketing, sales, and cooperation after sales. All of the company areas are there to sustain these four pillars that in truth are the soul of our business, and they are the foundation for the growth of sales and profitability for CBC. with competitive business marketing domestic international regional as well and a sales strategy that combines his motivation and management of enthusiasm of our master franchisees our normal franchisees and our control center the ceo our operations control center now immediately there has been a reflection of this because of this movement first the increase of sales in same store sales we knew that the sales had been improving in that current initially and then through stores that already have a full headcount we have even more details we have stores that continue to be open of course some stores have closed but we do have b2b stores and We know which stores have gaps, which do not have gaps. We're going to enhance those that have gaps. We're going to enhance our hiring based on the year 2019. And all of this has already been improving the same store sales and the opening of new stores. And as of the next 6, 12, or 18 months, we should be able to revert that negative trend of the closing of stores and begin to see a more positive trend when it comes to store openings new stores of course and this of course will improve the take rate because the b2c gets a share on the back of b2c Because in B2B, our strategy, well, is important for take rate, but in B2C, we are going to gain share because this is the most profitable part of our company that comes through the same store sales and the growth of new stores. We have several initiatives that have already been offering positive results at a faster pace. And All of this should happen during the next 18 months. And very slowly, we will be harvesting the results during this specific period. We have a marketing company with a group that came back to marketing and sales. We have a marketing campaign that began in August, and this is the high season, the yellow alert that has impacted more than 30 million consumers. Very, very strong marketing domestically, on television, regionally, and also online. We have only with digital leads more than 1 million leads for the sales in the stores. So all of this is already in place and working very positive to face the high season at the end of the year. Now, regarding the question about take rate for B2B, we have a series of initiatives, but basically it is feasible. It is the lowest take rate in the company. we began to set up a team separately with managers per business unit instead of per brand and we will have this in the experiment as well so that we can segment the part of sales and our service offered to travel agencies And of course, the impact will be completely different with visual. It won't be the same agencies necessarily. This is a highly specialized market. To return to even better results, we have to have this separate management. And that is the role to improve profitability. the profitability has increased through time and the greatest profitability is to gain share preserve margins and improve the take rate through some actions which is already something that is in place and of course the results are higher on average than what we saw in the first half of the year in visual we have an upscale brand that does not compete with the stores of CVC. And as Vizual returns to its operations, the take rate will be much higher, three, four times higher than RA. And of course, they have greater representativity in sales, and they will enhance the margins of the B2B market and thanks to this strategy in our vision this had the contrary result in sales we had diversification of sales And so we're beginning to work separately in trade. And as they recover their sales, their share will have a better take on it. This will enhance the mix for the experimental. So this mix of growth and share where we work more with land packages all of this will generate a b2b take rate that will be higher through time and we will transfer the sale of the cvc brand to the cvc structure that was part of b to c there was an erosion of sales in that channel were back to our original model that had always operated very well under the leadership of Milan and Eugenio. And we already have good results. But the franchisees are once again going back to servicing the regional agencies with a CVC brand structure. And of course, this will take some time while we set up the structures once again. But I have no doubt that until mid-year, we will be able to obtain good results in the coming quarters. Simply a follow-up regarding your brand design nowadays. You're trying to decrease the size of brands, perhaps unify some operations, simply to understand if you see an opportunity in this unification if need be. No, it's the contrary. this efficiency model will be for the services at the agency the i.t strategy the financial strategy the governance strategy the operational strategy shared service center all of this has already been integrated and the operations control center will also change throughout the third and fourth quarter. We're coming back from home office to the brick-and-mortar office, and all of this will have a great deal of synergy and areas that will continue to be separate with the managers of each brand are sales and services. And for the total of headcount, this is 80% that back office structure has been fully consolidated under managers from CBC Corp. And it is sales and service that will be under the leadership of the business unit with different managers with different take rates. And they will have direct contact up with travel agencies and all of this will be separate as the agencies servicing each of the brands are different well thank you very much that was very clear we would like to remind you that should you wish to post a question please press star one to withdraw your question from the queue press start two Our next question is through the web from Vinicius Pedroso Oliveira from VP Capital. The former management invested significantly in technology. Are these technologies being used, for example, more digital stores or dynamic pricing apps? Yes, the company has invested in the last few years very close to half a million BRLs in technology and part of this to avoid hacker attacks. And, of course, the company has maintained this in its security areas, in its digital areas, which continues to be a priority in IT under the leadership of Paulo Palaya, not only for CVC, but for the tourism market. And CVC also has good knowledge and we're continuing on in that issue of digital security what we can remark further on that has given us an excellent result is the physical and digital purchase journey we're one of the few retail companies at present that is able to carry out this sale fully We have a center that connects all of the digital initiatives directly through geolocalization with the stores. So presently, we're generating approximately 1 million leads every month for this. And the stores have customers coming in through the store and concluding everything through the computer. All of this is integrated in the WhatsApp app. and the response level of all of these leads that come to the store, the conversion levels, all of this is operating very well. And we're beginning with that yellow alert, both live and online. We know that the decision-making process, the purchase of vacations, does not take only five minutes. It's a lengthy process, and we're, fully prepared and we're already servicing the customers in this way through our brick and mortar channels as well as through our digital channels and most of the time the same customer will enter different channels to make the purchasing decision through this variety of channels that we offer and all of this is operating with a model of payment to the store If the store has the income tax number of the customer, if they have formally carried out a sale to that customer, they will already receive a commission, for example. So we're highly prepared to do this while servicing the market needs. decision made on vacations is and will continue to be a decision that will oscillate between the brick and mortar world and the digital world well thank you our next question is through telephone from nicholas from baby morgan you may proceed nicholas hey good afternoon thank you for taking my question i would like to ask about the tourism market what is the competitive environment like not only in that segment of population that you normally cater to i would like to know if After having capital restrictions, you have had a change in the competitive environment of the tourism market. Thank you. Hello, Nicolas. This is Fabio Godinho. Thank you for participating and for the question. First, about the tourism market, the market is doing very well after 2022. It's the main contributor to the growth of GDP in Brazil. It represents 7.8% of the GDP of Brazil. Almost a record has been attained as part of the share of economy. One out of every 10 jobs relates to tourism. and it was not different in the first half of this year of course the main movement in 2021 and 2022 was the growth of the domestic network not only in brazil but in all countries now throughout this year and we can see through the guidance of companies in the first quarter in the second quarter the guidance of estate the growth is high single digit or a double digit which is what we were foreseeing but it continues on to be in a very healthy condition. And, well, the domestic market has attained levels above those of 2019. The goal now is the international sector. And we have growth in Azul, in Goal, for example, that launched their air traffic for July. The passengers transported in July by Azul had a growth of 40%. And in another company, 49%. So this is the level of growth we will see in the international network. And this is what we see reflected in other countries as well. Especially in the intercontinental flights, United States, and the main network, which is the network to South America, specifically to Argentina, and the network to Europe. These are the segments that internationally grow more for CVC, but with the United States, we will have a stronger recovery. Now, the domestic market had the main recovery and has attained the levels of 2019. The growth now will be international and throughout 2024, it should go back to the levels we had in 2019. this is our forecast for the future market now when it comes to the competitive environment cbc in these last few years has distanced itself from the tourism market from the trade market as a whole and with the bits of franchisees and master franchisees and suppliers And while we're in this sector for almost 15 years and we are resuming this, reestablishing this quite strongly through negotiations with our suppliers so that we can quickly have more competitive products with more favorable margins for the companies. the regional operators, diverse regional operators are growing. Now, before the pandemic, they invoiced 10, 20% of what they're invoicing now. We have spoken about this often, the company was offering market share to the competition and certainly this is a movement that we are reverting thanks to the entire group that is here now and that has deep knowledge, not only of our franchisee base, but also of the tourism market and the operation of CBC per se. So we are, without a doubt, going to gain more market share in the coming periods. That was very clear. Thank you very much. Once again, should you wish to pose a question, please press star 1. To withdraw your question from the queue, press star 2. Our next question is through the web from Antonio Pedro Tejeda. The level of anticipation of receivables still was high in the second quarter, 23, 746.8 million. Do you still... foresee a need for this or a follow-up or will the subscription bonus resolve the cash needs for the company hello this is thank you for the question this is a very important issue of course to give you an idea We had that average volume of $750 million of anticipation of receivables, basically accounts receivable for credit cards. We entered the quarter above $1 billion, $1.5 billion. We have decreased this by $300 million. the company went through a capitalization process only in interest rates. This represents a savings of $50 million. It's quite relevant. Now, besides this, we have that subscription bonus in November with a price that has been announced by the company, revenues of an additional $250 million. Of course, this will appreciate the share and this amount will increase as well because it accompanies market prices. We issued 83 million subscription bonuses. If you do the calculation with a share price very close to what we have these days, it's a total capitalization of 800 million reais. almost a hundred percent of our growth debt at present so we understand that this would be sufficient it depends on the future growth of the company this could be positive news if we look at our growth levels going forward now this has to be adequate and we use that policy of anticipating credit card receivables and we have a higher savings in financial costs. There are additionally two points that are important. The amortization, thanks to the offer that we made, It is mandatory to have a tender of 75 million. The debenture has a high cost CDI plus 5%. All of this will help us to decrease the cost of our gross debt. That should be a minimum of 85 million and the drop of the interest rate per se. Looking forward, this should reduce our financial expenses that were quite expressive, especially in the first quarter of this year. And we're going to play to favor the enhancement of the company cash going forward. Thank you. We would at this point like to end the question and answer session. I will return the floor to Mr. Fabio Godinho for his closing remarks. You may proceed, Mr. Godinho. Well, this is our first call here. We have been in the company for practically only 60 days. like Carlos and many of the rest of us, we do have a good combination of managers from the team of the former management, the present day management, and there has been a great deal of exchange. Thanks from the. digital world that were implemented that were very important and of course we're now harvesting the results now the first month was the convention enthusiasm for our base of franchisees and secondly we had an injection of capital in the base of the convention and the success in that case was quite positive it went beyond our expectations but when we held the follow-on the second month well we now have 60 actions underway there for the short medium and long run Every Friday, we hold a meeting that begins here, and we speak about the actions that are underway. And they are based on four pillars, sales, the cut of costs, and the injection of working capital, of course. In some actions, the results will be speedier than others. The results will only appear in two years or 18 to 24 months, six to 18 months, and some actions that will only begin to appear as of the 18 months. But we are thinking for the long term for this company, and we're preparing the CVC for another 51 years of success. Now, the market in which the company is in is highly positive. It continues to increase the GDP of Brazil. We want to continue like that and the macro economy of the country has improved significantly. CBC is one of the countries in the stock market that will benefit the most from the drop in interest rates because of the receivables and because it will unharness credit. We have companies that are directly benefited by this dropping interest rate. Secondly, the company's business model is ready, ready to face digital sales. We have the brick and mortar stores. We have the digital stores. Of course, these will go back to growing in the coming 18 months. with an acceleration of sales and acceleration in same-store sales and the penetration of digital sales that represent 40% thanks to the digital leads. And with the separate management of the brands, looking at the needs of each brand so they can go back to being as strong as they were when they were purchased and always in accordance to the needs of our customers who buy the product and with specialists in tourism working with each vertical for the brand working towards the consolidation of air flights and in experimento as well. We have deep knowledge not only of CDC but also of tourism and we know how specialized these verticals are nowadays. And those in our teams are those that are best prepared to manage each of these verticals. A very positive market and the right management to deliver results now.

All we have to do is work in the coming quarters. The earnings result conference for CGC Corp has ended now.

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