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Brazil 2011
XII CEO Conference
February/2011
Brazil 2011 XII CEO
Conference
February/2011
DISCLAIMER
The Company makes forward looking statements that are subject to risks and uncertainties.
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
Agenda
Our market Our performance Our positioning
Agenda
Our marketWho we are Our performance Our positioning
5.7
3.2
4.0
6.1
5.1
-0.2
7.3
4.5
2004 2005 2006 2007 2008 2009 2010(E)2011(E)
GDP Growth (%)
Source: IBGE(E) Market Estimate - Inflation Report - BCB
9.9
0
2
4
6
8
10
12
14
16
18Retail Sales (%)
Source: IBGE
1 2
3 4
5
6
7
8
9
10
11
12Unemployment Rate (%)
Source: IBGE
41% 44% 45% 46% 43% 44% 40%59%56%
55%
54%
57%56%
60%
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
45,0
0
200
400
600
800
1.000
1.200
1.400
1.600
2004 2005 2006 2007 2008 2009 dec/10
Credit/GDP (%)Credit (R$ million)
Credit Evolution
Individuals Legal Entities Credit/GDP
499607
733
936
1,227
1,414
1,704
Source: BCB
MACROECONOMIC SCENARIO
02
5.3
Agenda
Our marketWho we are Our performance Our positioning
245
302
375
444
539
131158
2006 2007 2008 2009 2010 4Q09 4Q10*
Volume Growth (R$ billion)
Source: ABECS (*) ABECS Estimates
03
4
21
388
453
514565
628
565
628
2006 2007 2008 2009 2010 4Q09 4Q10*
Number of Cards Issued (million)
Source: ABECS (*) ABECS Estimates
69.0 71.974.9 77.5 81.3 80.1 83.8
2006 2007 2008 2009 2010 4Q09 4Q10*
Average Ticket (R$/Transaction)
(*) ABECS Estimates (credit and debit only)
CARDS INDUSTRY
17.1%18.9%
20.7%22.5%
23.9%
2006 2007 2008 2009 2010
Penetration Of Cards as Means of Payment in the Private Consumption Expenditure (PCE)
Source: ABECS e IBGE (data available until 3Q10)
3
Agenda
Our market Our performance Our positioning
Agenda
Our marketWho we are Our performance Our positioning
CIELO – FINANCIAL AND OPERATING HIGHLIGHTS
05
Financial Highlights 4Q10 4Q09 4Q10 X 4Q09 2010 2009 2010 x 2009
Financial Transaction Volume (R$ million) 74,079.9 61,553.3 20.4% 261,957.6 213,957.6 22.4%
Number of Transactions (million) 1,108.3 962.7 15.1% 4,038.7 3,426.8 17.9%
Net Operating Revenue (R$ million) 1,147.9 1,027.2 11.8% 4,354.4 3,627.8 20.0%
Total Cost of Services (R$ million) (354.6) (251.4) 41.1% (1,180.8) (936.3) 26.1%
(318.3) (245.1) 29.9% (1,118.5) (917.4) 21.9%
Operating Expenses (R$ million) (130.4) (118.7) 9.8% (441.0) (401.1) 10.0%
Adjusted EBITDA (R$ million) 716.0 700.6 2.2% 2,925.9 2,450.7 19.4%
Net Income (R$ million) 444.5 442.0 0.6% 1,830.9 1,536.7 19.1%
Total Net MDR (bps) 110 125 (15) 119 124 (5)
Credit Net MDR (bps) 132 150 (18) 142 149 (7)
Debit Net MDR (bps) 77 84 (7) 80 81 (1)
Operating Highligths 4Q10 4Q09 4Q10 X 4Q09
Active Merchants in 60 Days (thousand) 1,140 1,133 0.6%
Active Merchants in 180 Days (thousand) 1,586 1,207 31.4%
Total POS (thousand) 1,619 1,630 -0.7%
Installed POS (thousand) 1,277 1,343 -4.9%
Total Cost of Services ex- Subsidiaries and
Additional brands fee (R$ million)
Agenda
Our marketWho we are Our performance Our positioning
71.197 87.966
110.897 134.792
162.933
37.961 44.917
39.552 48.534
64.655
79.166
98.742
23.592 29.163
2006 2007 2008 2009 2010 4Q09 4Q10
Cielo Transactions - Financial Volume (R$ million)
Credit cards Debit cards
110,749136,500
175,552
213,958
61,55374,080
261,675
1,142 1,4021,720 2,003
2,333
549 621
836987
1.232
1.424
1.716
414 487
2006 2007 2008 2009 2010 4Q09 4Q10
Cielo- Number of Transactions (million)
Credit Debit
1,9782,389
2,952
3,427
963 1,108
4,039
06
1 2
3
716872
1,055
1,207
1,586
679
824996
1,133 1,140
2006 2007 2008 2009 2010
Cielo - Number of Active Merchants ( thousand)
Active Merchants (transactions in the last 180 days)
Active Merchants (transactions in the last 60 days)
CIELO – OPERATING PERFORMANCE
Agenda
Our marketWho we are Our performance Our positioning
1 2
3 4
07
3,3% 4,6% 3,9% 3,4% 3,9% 3,0% 5,5%0.5% 4,5% 7,5% 5,2%
8,6%27,6% 27,8% 27,9% 26,4% 24,3% 24,7%
21,7%
14,7% 15,0% 16,0% 15,8% 16,3% 17,4% 17,7%
54,4% 52,6% 51,6% 49,9% 48,1% 49,8% 46,5%
2006 2007 2008 2009 2010 4Q09 4Q10
Revenue Breakdown (%)
Other revenues Prepayment of Receivables POS Rental Debit cards Credit cards
1.945,1
2.402,2
2.892,9
3.627,8
4.354,4
1.027,2 1.147,9
2006 2007 2008 2009 2010 4Q09 4Q10
Net Revenue (R$ million)
596,0
745,9
903,1
1.067,1 1.169,9
282,0 275,5
2006 2007 2008 2009 2010 4Q09 4Q10
Equipment Rental Revenue (R$ million)
1.175,91.409,3
1.666,92.012,0
2.317,8
569,2 590,8
317,1401,3
517,9
637,9
785,4
198,4 225,1
2006 2007 2008 2009 2010 4Q09 4Q10
Commissions Revenue (R$ million)
Credit Debit
1,493.0
1,810.7
2,184.8
2,649.9
3,103.3
767.613.4%
3.8%
815.8
CIELO – REVENUE
Agenda
Our marketWho we are Our performance Our positioning
61.8
66.1
69.7
72.0
66.1
4Q09 1Q10 2Q10 3Q10 4Q10
Average Term (days)
65.5 73.3
97.1
113.3119.4
4Q09 1Q10 2Q10 3Q10 4Q10
Revenue of Prepayment of Receivables ex Adjustments (R$ million)
08
1
23
2.009,402.193,30
2.460,402.669,60
3.016,70
5.3%5.8% 6.3%
6.4%6.7%
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
6,0%
7,0%
8,0%
9,0%
10,0%
-
500,0
1.000,0
1.500,0
2.000,0
2.500,0
3.000,0
3.500,0
4Q09 1Q10 2Q10 3Q10 4Q10
Prepayment of Receivables (R$ billion)
Financial prepayment volume
% Prepayment over Credit Financial Volume
CIELO – PREPAYMENT OF RECEIVABLES
Agenda
Our marketWho we are Our performance Our positioning
09
1
690.2771.0
851.1936,3
1,180.8
251.4354.6
2006 2007 2008 2009 2010 4Q09 4Q10
Total Costs of Service (R$ million)
351,5 353,9
427,4 401,1441,0
118,7 130,4
2006 2007 2008 2009 2010 4Q09 4Q10
Operating Expenses (R$ million) 3
2
354.6 300.6
251.4
31.6 22.4
4Q10 Reported Costs Related to Subsidiary
( Orizon and M4U)
Additional brands fee
4Q10 Adjusted 4Q09
Costs (R$ million)
CIELO - TOTAL COSTS OF SERVICES AND OPERATING EXPENSES
Unit Cost 4Q10 4Q09 3Q10 4Q10 X 4Q09 4Q10 X 3Q10
Unit Cost Reported (0.320) (0.261) (0.306) 22.5% 4.7%
Unit Cost excluding subsidiaries (Orizon and M4U) (0.291) (0.255) (0.291) 14.5% 0.3%
Unit Cost excluding subsidiaries and Additional brands fee* (0.271) (0.255) (0.276) 6.6% -1.5%
* Considering 4Q09 as comparison
Agenda
Our marketWho we are Our performance Our positioning
10
Adjusted EBITDA (R$ million) 1 2Net Income (R$ million)
657,9
883,9
1.115,3
1.536,7
1,830.9
34%37%
39%
42% 42%
25,00%
30,00%
35,00%
40,00%
45,00%
50,00%
55,00%
60,00%
0,0
200,0
400,0
600,0
800,0
1.000,0
1.200,0
1.400,0
1.600,0
1.800,0
2.000,0
2006 2007 2008 2009 2010
Net Income
1.038,8
1.409,5
1.764,3
2.450,7
2,925.9
53%
59%
61%
68%67%
52,00%
57,00%
62,00%
67,00%
72,00%
0,0
500,0
1.000,0
1.500,0
2.000,0
2.500,0
3.000,0
3.500,0
2006 2007 2008 2009 2010
Adjusted EBITDA
CIELO – FINANCIAL PERFORMANCE
700,6 714,8
68%
62%
50,00%
55,00%
60,00%
65,00%
70,00%
0,0
500,0
1.000,0
1.500,0
2.000,0
2.500,0
3.000,0
4Q09 4Q10
Adjusted EBITDA Margin
442,0 443,3
43%
39%
25,00%
30,00%
35,00%
40,00%
45,00%
50,00%
55,00%
60,00%
0,0
200,0
400,0
600,0
800,0
1.000,0
1.200,0
1.400,0
1.600,0
1.800,0
2.000,0
4Q09 4Q10
Net Income Margin
Agenda
Our market Our performance Our positioning
Agenda
Our marketWho we are Our performance Our positioning
12
Alternative Transaction Services
Healthcare Transportation Loyalty
Emerging Payment Technologies
Traditional Card Transactions
eCommerce Mobile Payments
Credit Debit Prepaid Commercial
Cielo will continue to create new products and drive merchant acceptance by fostering card usage and non-payment transactions
Emerging Payment Transactions: Extend card usage of the traditional POS equipment to emerging technologies. e.g. Visa Mobile Pay and joint venture with Oi
Traditional Card Transactions: Increase the penetration, activation and usage of cards at the point-of-sale. e.g. debit activation, B2B transactions, etc.
Alternative Transaction Services: Leverage processing infrastructure and customer base to process other types of transactions. e.g. Orizon
STRATEGIC APPROACH
Agenda
Our marketWho we are Our performance Our positioning
13
1999
2007
2008
2009
2010
With chip
technology comes
a new level of
cardholder
security and
convenience
Transaction
capture solution
with J2ME
application
installed on the
cell phone setting
No contact
between card and
terminal. Faster
transactions for
low-value tickets
The consumer
makes payment
with a NFC Nokia
phone at retail
outlets
Merchant cell
phone becomes a
POS device, with
agility and
security, using
SMS for sending
transactions
Launch
iPhone
payment
app
CHIP / EMV
Smart Client
Contactless
NFC
Mobile POS
2003 EMV FULL
INNOVATIVE POINT OF SALES SOLUTIONS
Agenda
Our marketWho we are Our performance Our positioning
TRANSACTION STEP BY STEP
14
Main Menu
Select
“ Pay with Card”
Agenda
Our marketWho we are Our performance Our positioning
15
Screen: purchase
conditions
1. Type purchase
amount2. Choose Regular
Credit or Credit in
Installments
TRANSACTION STEP BY STEP
Agenda
Our marketWho we are Our performance Our positioning
16
3. Type card number
4. Type expiring date
and code
Screen: purchase
conditions
TRANSACTION STEP BY STEP
Agenda
Our marketWho we are Our performance Our positioning
17
5. Type additional
information to
identify transaction
(client name, ...)
Optional Field
TRANSACTION STEP BY STEP
Agenda
Our marketWho we are Our performance Our positioning
18
Screen: Transaction
confirmation
6. Check information
and confirm
TRANSACTION STEP BY STEP
Agenda
Our marketWho we are Our performance Our positioning
19
Screen: Merchant slip
TRANSACTION STEP BY STEP
Agenda
Our marketWho we are Our performance Our positioning
CIELO – KEY MESSAGE
20
• Market will continue to grow
• Despite the decrease in market share, still leader
• Stick to our strategy:
• Distribution via partnership with banks and own
sales force
• Portfolio of brands
• Innovation / differentiated products
• Differentiated relationship with merchants
• Negotiations with large merchants well advanced
• Discipline on costs and expenses
• Prepayment presenting continuous growth
