Cielo S.A.

Welcome to Cielo’s early release for the First Quarter of 2022. My name is Filipe Oliveira and I am CFO of the company and I will take you through the slides in this presentation.

On slide number 4, we would like to show you few quarter highlights. Recurring net income totaled R$185 million in the first quarter of 2022 which is an increase of 36% year-over-year.

TPV has grown 24% year-over-year, now reaching R$198 billion for this quarter, which is the largest TPV for first quarter in Cielo's history. In this quarter, we had an expansion of prepayment products with a highlight to ARV in large accounts, with a record allocated capital of R$14.5 billion in both ARV and Recebe Rápido product, which represents a growth of 41% year-over-year.

The process of repositioning price due to macroeconomic conditions has proven to be effective with a low impact insurance so far. Operating efficiency has again been a highlight for the company's quarter with Cielo Brasil's normalized total expenditures decreasing at 0.5% year-over-year even with investments and transformation initiatives that total in 34 million has an additional OpEx year-over-year.

A final highlight is the end of the divestment cycle with the closing of the MerchantE sales transaction in the beginning of April. This divestment is not included in this result as it has happened after at the end of this quarter.

But we would like to highlight this as an achievement that the company has delivered in the last couple of months. Now on slide number 5, both Cielo and Cateno has shown strong operational performance with TPV of Cielo growing 23.9% and Cateno 21.8%.

Total cost and expenses of both companies have grown 4.8% which is way below TPV and is also way below inflation, which is an important indicator for us to measure our efficiency. Total net revenues for Cielo and Cateno has grown 19% and EBITDA has grown 59.2% for Cielo and Cateno.

Now on slide number 6. Our recurring results have reached R$185 million which is an increase of 35.8% compared to last year, which again showing the consistency of improving results the Cielo has been delivering over the last quarters.

Cielo Brasil’s net income in an acquiring standpoint, which excludes non-recurring items and also exclusive effects of financial expenses of debts related to the acquisition of subsidiaries, especially Cateno and MerchantE. In this view Cielo Brasil's net income has presented us 6% year-over-year growth.

The recurring EBITDA of both Cielo and Cateno has shown robust growth with Cielo growing 38.7% and Cateno growing 81.5%, totaling 52.1% in the core company. Now on slide number 7.

Cielo has shown again, a strong operational efficiency in this quarter. Particularly in this quarter, we had a reduction of normalized total cost and expenses of 0.5% compared to last year and when we compare that to inflation of 11.3% in a period we understand that this was a very strong operational efficiency performance of the company again has shown with discipline in spending and allocating resources.

Now moving to slide number 8. Some operational metrics for Cielo Brasil.

TPV has grown 23.9% reaching R$198 billion has the best first quarter ever in terms of volume for Cielo Brasil. Prepayment volume has grown 30.9% which is R$26.4 billion and the active merchant base had slight reduction, particularly focused on the Long-Tail clients.

Now zooming in on the SMB and Long-Tail segments. TPV has won 15% which is a strong growth even though we had a slight reduction in client base which shows and reinforces the company's strategy in acquiring better clients, more profitable clients that concentrate most of their sales with Cielo.

In prepayment products, ARV plus Recebe Rápido SMB Long-Tail segments have grown 51.7% now reaching 44% penetration with zoomed products. Now moving to slide number 10.

We zoom in on the company's revenue yield. This quarter's revenue yield was 0.67%, which is an increase of one basis points over the last quarter and a decrease of six basis points over the last year.

One thing that's important to mention is that the last week of April has shown a revenue yield of 0.76%, which is an increase of nine basis points over this quarter. This is mainly because the company has taken repositioning actions over the last few months that are only now maturing in reaching this level of revenue yield.

Now comparing this quarter's revenue to the last year's revenue yield. We have a decrease of six basis points.

This decrease is decomposed here in three different elements. The first one is positive with pricing in Recebe Rápido prepayment penetration increases contributing positively with six basis points, client and product mix contributing negatively in seven basis points.

So here it's basically the difference of penetration for participation of large accounts and by the over the last year that has changed a little bit with a huge success that we had recovering some of the large accounts that we've lost over the last few years. And the last element that contributes negatively is volume, which basically contributes with five basis points negatively.

Here's the effect of basically POS rental fees being diluted by higher TPV of the same clients. And that's just a mathematical effect that takes us here to the 0.67% revenue yield.

Now on the right side of the slide, we zoom in on SMB Long-Tail. Readjustments that have been made in pricing positions over the last few months.

So here we see that the revenue yield of the SMB Long-Tail segments have increased over the last month by about 28 basis points which is quite an increase, a significant increase of this segment over the last month. Now on slide number 11, we focus on the SMB Long-Tail pricing positioning strategy that the company has deployed over the last few months.

First of all, it's important to remind you that the company has decided at the end of 2021 not to impact client in December. We understand that December is a critical month for some of our clients and where to send the repricing at the time of the year will have a negative impact for the relationship we have with our customers.

With that we started in January pricing repositioning strategy aiming at best in class increases due to economic variables, especially interest rates, specifically on the Recebe Rápido product. So what we did is that we basically reposition the prices of around 600,000 customers in an average of 30 basis points in the average adjustments Recebe Rápido.

So far, we have seen no change in churn, which is illustrated by the graphs on the right side of this slide. So there we have a comparison of the control group and the treatment group.

The control group is a group that's selected and not impacted by the action in order to provide comparable metrics to the group the has actually been treated and has actually suffered changes over the last few months. So the pre-actions levels of churn or active merchants of both groups have basically compared almost completely two, three months later here described by M2 which we see only a decrease of 0.2% in total active merchants of those two bases.

On the other hand, when we look at net revenue for Recebe Rápido which is the product has been impacted has shown an increase of 46% of the treated group compared to the control group which shows that it is possible to reprice, if done correctly, if done targeted to the right clients, if done in the right communication and with respect to the customer to achieve good results with minimal attrition with the clients. Now moving to slide number 12.

We talk a little bit more about the positioning in large accounts. In larger accounts initiatives on profitability and repositioning the pricing point of the segment have begun in 2020 with the objective of adjusting the contribution margin of the segment to more acceptable and attractive levels for the company.

And while doing that, we had the retention of approximately 80% of the accounts negotiating during those years. So what we mean by that is 80% of the customers that have been repositioned in terms of pricing have remained with the company.

And now we have the good news that some of those accounts that weren't in those 80% or meaning that they left the company, they're now starting to return to Cielo mainly due to the quality of service that the company provides for large accounts. So this is another good example that it's possible to capture even larger volumes in which it did here in a comparison to 2020 where we had an increase of 24% in volumes with a 40% increase in revenues.

Now on slide number 13, we zoom in on prepayment products and liquidity. As mentioned in a few slides back total capital allocated to ARV in Recebe Rápido have totaled R$14.5 billion which is a growth of 41% compared to last year.

It's also historical record in terms of capital allocation to those two products. Liquidity in ineptness are completely controlled.

We have a cash balance of R$3.5 billion in March with R$14.5 billion more allocating prepayments with short term allocations obligations of R$2.4 billion relative to the bond of merchandise acquisition. Now on slide number 15, we talk a little bit about our strategy.

We particularly focus on the operation transformation which has again shown good results. Our commercial productivity which is the indicator of new client activations, divided by the number of consultants per business days has grown 71% compared to last year and it's reaching best in class levels.

Our installations in two business days of our new POS has shown an increase of 20 percentage points compared to last year. It's already reaching the 2022 goals of 90%, which we had for the end of the year.

Recebe Rápido penetration, the SMB Long-Tail have reached 40% which is an increase of eight percentage points compared to last year. Now on slide number 16.

We show the completion of our divestment program. Over the course of the last year and a half Cielo has divested of its non-core operations and namely Orizon, ELO Platform, Bitz Platform, M4U and MerchantE with total proceeds of R$1.3 billion without considering possible earnouts that are included in the M4U and MerchantE transactions.

What does that mean? That means more focus on the management and the company and what really matters and operational excellence on launching new products and innovating and also optimize financial resources in order to achieve our goals.

Now, slide number 17. We have the pleasure to announce that the company has included representativeness goals of gender, race and ethnicity in its policies.

We are also pleased to pronounce that in other groups here listed on this slide, we're going to have increases of representativeness and inclusion that shall lead the company towards a more diverse and inclusive company. With this, we end our presentation and we thank you for your attention and wish you a good day.