Cielo S.A.

Thank you. Thank you all for joining us today.

As you see we have changed the conference procedures just for optimizing the meeting here together with you today in the morning. We provide the speech in the presentation on our site.

It's available over there. And now we are going to the Q&A.

Thank you. We can go to the first question.

Can we go down a little bit into the cadence that you're seeing in payment volume right now. I guess what we're trying to understand is, maybe you could give us a sense of the trajectory coming out of March into April and what might be reasonable to anticipate, over the next call it six to nine months, any color you can give us there would be great?

Thanks very much.

Hi, Jeff. Gustavo here.

Thank you for your question. Well, first of all, let me please ask you and the participants that if you want to follow up on the comments that I'm going to make, please take a look at page four from our presentation there you'll see the TPV from Cielo that's the second graph, second chart in the top, where you see the year-over-year growth of TPV.

As you can see, we started the year with a January and a February that were as close to normal as one could expect given the pandemic. However, given the increase of the impacts of the COVID in the Brazilian economy in March, we felt a decrease of TPV in March.

So far Jeff, in April, we are on a similar trend on what we given what we saw in March, April is on a similar path, which is lower than January and February in terms of TPV for this year. It's hard to forecast what we're going to see in terms of activity in the next month because it has everything to do with economic activity given the impact of the COVID in the country, okay.

But I can give you some color on what happens, what is related to the impact of COVID on TPV. So what we saw in March and we also see in April is a lower TPV versus the beginning of the year, but also a shift of concentration of activity in larger clients.

We also saw that on the months that were most impacted by the pandemic crisis last year, whenever we have an increase impact in the economy, we see a concentration of volume in larger accounts. Naturally, those larger accounts have a lower margin.

We also see a concentration on debit cards, we see an increase in debit cards participation versus the historical trends. So Jeff, I'm sorry to not answer your question directly, because it's very hard for me to point out what's going to happen in terms of economic activity.

But I can tell you that what we've seen in April is similar to what we saw in March, both in terms of lower volume, and also a concentration in debit in larger accounts. Okay?

Yes. That's very helpful.

And I understood maybe as a related follow up to that. Is there any discussion right now about mix and the reason that I ask is, if we look back to last quarter, the past several quarters, you've been very consistent in terms of moving strategically into the SMB, portion of the pyramid.

And what we're trying to do is put together what the mix and try to anticipate what mix might look like, over time, given all these different macro economic and strategic variables that we're trying to contemplate right now. So if there's any kind of color you could give us there in terms of mix impacts, as you're anticipating them going forward?

That would be great as well, thanks very much.

Thank you for that, Jeff. You're correct.

Our absolute focus is on SMBs. That's why we added 500 new employees to our sales force.

And that happened late December and also in the beginning of this year. It is our aim to reach a balance in our TPV of 50% of larger accounts and 50% of SMBs plus entrepreneurs.

Given the impact of COVID in the economy and the increase in participation of large accounts, when that happens, it's hard to say if we will be able to achieve that this year, but it is our aim to achieve a balanced portfolio, 50% of large accounts and 50% of the other segments, okay?

Understood. And then, my last one, and this is in reference to Slide three of the presentation.

Can you tell us a little bit about the WhatsApp partnership? I guess, I'm trying to figure out to what extent you can talk about that in terms of customer base for Cielo?

Does it open up that buy back funnel? And increase your addressable market for your customer base?

Should there be a certain mix of volume that you can sort of foresee at this juncture? I know, it's very early days, but maybe could you talk to us a little bit about that partnership and give us a little bit of color?

That'd be greatly appreciated.

I have to talk in very broad terms, Jeff, because Cielo is a service provider for WhatsApp. And WhatsApp is the face before the central bank, right.

So what we have received is an approval for the transfers, possibilities -- transfers function in WhatsApp. What we are still waiting approval for is for the P2M transactions.

Once we get there, we will have a great offering for our client base over a million clients that can use this functionality. But so far, that's all I can say I can't talk because we're still pending regulatory approval for the P2M function of disagreements with WhatsApp.

There's not a lot that I can say in terms of timing and the impact of that, okay.

Gustavo, if that may add something. The question is we are evolving in both situations in B2B solutions and P2M between as well solution.

We got the authorization from bank central related to B2B and we hope that soon perhaps next month, you can start with the B2B solution. Cielo is supporting WhatsApp, Facebook pay in these services, okay.

And perhaps till the end of the year in the second semester, we can have the authorization related to the P2M. It's important to reinforce that the P2M there is no , Cielo, perhaps we will start with these kinds of services.

But in fact, we can have the other competitors together with us. The main thing that was -- we were selected only us, we were selected by the WhatsApp, Facebook and now perhaps, we can have another kind of competitors and another kind of acquires together with us in these services.

But it's impossible from now to establish some kind of revenues related to this, because you don't know when we start with the P2M solution. Thank you.

Given your focus on the retail segment and especially the middle market, the SMB clients, how would you compare the products, the wide range of products that Cielo has, as well as the service offerings of Cielo with your main competitors in this segment? And then I'll go to my next question.

Neha, Gustavo, here. Thank you for your question.

Well, I'm going to try to split my answer in two. So on the traditional acquiring products, we have a very competitive offering, we have a complete portfolio of equipment, products and pricing for our clients, okay.

What we are expanding on and we made a point about that in our presentation is in our value added services. Specifically this quarter, we talked about in our presentation, our investment in convertible debentures , which is a company dedicated to servicing the restaurant market.

We also announced an agreement with Google in better ads to provide services for our SMBs. We went over this on the last question, which was, WhatsApp received the approval from the central bank for the transfers function.

And we also did in agreement with Payface for face recognition payments and also in agreement with Focus Energia, which is an energy company in Brazil to offer energy contracts with a lower price for our client base. So both in traditional acquiring products and in value added services, we have a competitive offering and still expanding in value added services.

This is very clear. But given the fact that most of the acquirers are now offering the working capital credit as well to the merchants, do you think that is the factor in a merchant choosing, you are not choosing you in the offering?

I don't think that's the key points for choosing an acquirer, but it is definitely an important product and one that Cielo will expand on. We'll talk about this product and the development of that in upcoming quarters but it is a product of strategic importance and Cielo is developing a competitive alternative for its clients.

Okay. I believe you have been looking to diversify taking MeS anything that we can expect in the short-term regarding MeS?

What I can say about that is that for the third consecutive quarter Merchant e has presented an improvement in its bottom-line. If we look at Merchant e standalone, the operation company and not Cielo USA, which is a holding company that has the investment and Merchant e, but also the bond that was issued to finance that investment.

So if we look at Merchant e alone, again for the third consecutive quarter, we have an improvement in performance and they are very close to breakeven, even with an important impact of the COVID in the American economy in the first quarter and also still with some restructuring costs at Merchant e. What I can tell you is that Merchant e is at the very end of the turnaround process that we have designed alongside management over there, okay.

Understood. Last question I want to touch upon is, is the agreement with Caixa?

You mentioned that TPV is over 5% of total Cielo's TPV. And you mentioned that there are some rebates that you paid to Caixa which you don't have to pay anymore?

Could you give us more sense of the impact on your income statement from this agreement with Caixa? And how are you trying to retain these clients that you currently serve?

And who are Caixa's clients?

Thank you for the question, Neha. So I'm sorry to give you a broad answer, but it's important to clarify a few points about Caixa.

Okay, so first of all, I cannot get into the details of economics with Caixa because our agreement with them, which is still a valid agreement, as clauses about commercial confidentiality. As I said in the Portuguese conference call Caixa has over 5% of Cielo's TPV.

And Caixa is the fourth bank in terms of volume inside of Cielo. So and when we talk about those four banks, inside of Cielo, naturally, two of them are controlling shareholders that have commercial agreements with Cielo just like Caixa.

And one of them is another big retail bank in Brazil, but that does not have a contract with Cielo that demonstrates that Cielo given its size and presence throughout the country has a fair share of acquiring it with any given bank in the country.

Perfect. And can you just tell us when does the contract expire so that you can stop paying rebates?

We are still waiting on the notices related to that we know that there was one successful bidder, the next steps are still pending.

So should be in the coming months. Not too long.

I would expect that.

Thank you everyone for participating. I hope you have enjoyed this format of submitting the presentation with the video and the audio beforehand so that the market has more time to elaborate the questions.

So we will follow up with you to see if you have any suggestions for the next quarter and Cielo and its IR team are available for any questions you may have. Thank you very much.