The Company
Corporate Profile
We are the leading company in the merchant acquiring and payment processing industry in Brazil, with a 49% market share in terms of credit and debit card transaction volume. The total credit and debit card transaction volume amounted to R$444,2 billion in 2009, according to the ABECS. We have the largest domestic coverage in the Brazilian merchant acquiring and payment processing industry, with approximately 1.7 million affiliated merchants, according to the joint report prepared by the Payment Card Industry. We are also present in more than 97.6% of Brazilian municipalities.
As of July 1, 2010, the card industry, specifically the acquiring segment, has entered a new competitive landscape. A multi-brand scenario was installed and acquirers began capturing and processing multiple card brands. This change was the compliance with two recommendations of a working group composed of the Central Bank, the Secretariat of Economic Law (SDE) and the Secretariat for Economic Monitoring (SEAE) following a detailed study of the industry: the opening of the merchant acquiring activity and interoperability of POS terminals.
Cielo prepared for the new competitive scenario in the following manner:
CONFIDENCE: we maintain redundancy in our network system and high business monitoring criteria, which gives us 99.995% availability.
DISTRIBUTION: even with the largest commercial establishment base in Brazil, in 2009 we were affiliated with more than 380,000 new establishments.
INNOVATION: we are constantly seeking innovation through launching quality new products, including bank correspondents, contactless payment, payment via cellular phone and promotional platforms.
EXCEPTIONAL CUSTOMER SERVICE: our sales force is more than ever present in the daily routine of the commercial establishment, offering our broad portfolio of products.
Our principal shareholders include entities that are part of the financial groups Banco do Brasil S.A., or Banco do Brasil and Bradesco. They are among the largest retail banks in Brazil in number of branches, according to Central Bank data as of December 2009. We believe that our principal shareholders’ presence in more than 70% of Brazilian municipalities better positions us to offer our services, thereby contributing to our leadership position.
The Company has presented continuous growth throughout its history, with a composite annual growth rate of 21.9% in Financial Trading Volume between 2008 and 2009, from R$175.5 billion in 2008 to R$213.9 billion in 2009. In addition, from 2006 to 2009, the Company posted an Adjusted EBITDA margin gain of 14.2 percentage points, increasing from 53.4% in 2006 to a record of 67.6% in 2009.
|
million R$ |
Year ended December 31, | Three-month period ended June 30, | ||||||
| 2007 | 2008 | 2009 | % Change 2007-2009 |
CAGR (2007-2009) |
2Q09 | 2Q10 | % Change 2Q09-2Q10 |
|
| Net revenue | 2,402.20 | 2,875.50 | 3,627.81 | 51.02% | 22.89% | 862.9 | 1,048.9 | 21.6% |
| Gross profit | 1,631.20 | 1,708.821 | 2,335.501 | 43.18% | 19.66% | 551.6 | 687.2 | 24.6% |
| Net income | 883.9 | 1,342.07 | 1,533.79 | 73.53% | 31.73% | 364.8 | 457.7 | 25.5% |
| Other information: | ||||||||
| Net margin | 36.80% | 48.50% | 42.40% | 5.6 p.p. | - | 42.3% | 43.6% | 1.3 p.p. |
| Adjusted EBITDA | 1,409.50 | 1,764.30 | 2,450.70 | 73.87% | 31.86% | 582.9 | 735.3 | 26.1% |
| Adjusted EBITDA margin | 58.70% | 61.00% | 67.60% | 6.6 p.p. | - | 67.6% | 70.1% | 2.5 p.p. |
| Loans and financing (long term) | 367.5 | 277 | 42.45 | -88.45% | -66.02% | 140.7 | - | - |
| Loans and financing (current) | 1,631.20 | 156.5 | 163.91 | -89.95% | -68.30% | 178.6 | 129.9 | -27.3% |
|
million R$ |
Year ended December 31, | Three-month period ended June 30, | ||||||
| 2007 | 2008 | 2009 | % Change 2007-2009 |
CAGR (2007-2009) |
2Q09 | 2Q10 | % Change 2Q09-2Q10 |
|
| Credit cards: | ||||||||
| Transaction volume | 87,966 | 110,897 | 134,791 | 53.23% | 23.79% | 32,144 | 38,902 | 21.0 % |
| Number of transactions (in millions) | 1,409.50 | 1,719.70 | 2,003.0 | 42.11% | 19.21% | 483.1 | 563.7 | 16.7% |
| Debit cards: | ||||||||
| Financial transaction volume | 48,534 | 64,655 | 79,165 | 63.11% | 27.72% | 18,377 | 22,665 | 23.3% |
| Number of transactions (in millions) | 986.5 | 1,232.40 | 1,423.8 | 44.33% | 20.14% | 331.8 | 401.4 | 21.0% |
| Affiliated merchants (in thousands) | 1,180.10 | 1,407.90 | 1,706.0 | 44.56% | 20.23% | 1,537 | 1,839 | 19.7% |
| Active merchants (in thousands) | 872.2 | 1,055.40 | 1,207.0 | 38.39% | 17.64% | 1,115 | 1,235 | 10.8% |
In addition to the products and services traditionally offered in the electronic payment industry, we have a track record of offering innovative solutions in complementary segments. We were pioneers in Brazil in providing network infrastructure for correspondent banking services, prepaid mobile phone top-ups; electronic vouchers; and cash back (“Troco-Fácil”). We were the first company in Brazil to capture and process electronic non-payment transactions, such as authorization of transactions for healthcare service providers.
We believe the diversity of our portfolio of products and services is a result of our constant efforts to identify new business segments in order to enhance and optimize the use of our network and assets.
History
Our history dates back to 1995, when Visa International, Bradesco, Banco do Brasil, Banco Real and the extinct Banco Nacional founded Companhia Brasileira de Meios de Pagamentos S.A., which later would become VisaNet—our trade name. Until 1995, the credit and debit card business in Brazil, including merchant acquiring business, had been conducted individually by each card issuer, together with Visa International. At that time, each card issuer would issue its own credit and debit cards, develop its own capturing solutions, affiliate its own merchant network and set its own marketing efforts. VisaNet was created to manage the relationship of the Visa system in Brazil with a Visa affiliated merchant network, consolidating and developing new capturing solutions and the settlement of transactions.
In 1996, we began operations with an affiliated merchant network of over 100,000 merchants who already had commercial relationships with our founding banks, and offered capturing, processing and settlement services involving credit cards. In that same year, Visa International created the VisaNet trademark, which was licensed to us through a non-exclusive licensing agreement, and which we began using as our trade name in Brazil.
In the following years, we implemented acceptance for Visa-branded products, such as the Visa Electron debit card, which we believe helped to improve the use of electronic money, the Visa Vale Pedágio (Visa Toll Vouchers) and the Visa Vale benefit cards, which replaced the paper meal tickets used to pay for meals and groceries.
Our incorporation segregated our role as acquirer from the roles of Visa brand card issuers. We believe this increased the credit and debit card market’s growth, the offer of new products to this industry and the safety and efficiency in Visa brand card transactions in Brazil.
The illustration below shows the structure of the credit and debit card business networks in Brazil before and after we began our operations:
We currently manage the Visa merchant acceptance network in Brazil, and develop and facilitate monitoring, capture and processing solutions for (1) Companhia Brasileira de Soluções e Serviços, or CBSS (the issuer of products with the Visa Vale brand), (2) co-branded private label card issuers and (3) healthcare industry companies.
During the international crisis that began in September of 2008, we held our IPO in an operation that raised R$8.4 billion, the largest IPO in Brazilian history. Cielo S.A.’s shares debuted on the BM&FBovespa - Securities, Commodities and Futures Exchange on June 29, 2009 and was listed on the Novo Mercado Special Corporate Governance segment initially under the stock symbol VNET3, with this symbol changed to CIEL3 on December 18, 2009, due to the change in the Company’s corporate name. Cielo stock is currently a component of the Special Corporate Governance Stock Index (IGC) and the Special Tag-Along Stock Index (ITAG). The Company’s capital stock is represented by 1,364,783,800 common shares, 578.2 million of which are outstanding for a free-float of 42.4%.
In november 2009, company announces its new brand and name, Cielo - meaning sky - because it also wants to emphasize the scope of its actions and extension of its network. With this, the company presents a renewed image to the market that includes a new name and visual identity, which goes beyond being a simple change to represent a new positioning.
The project consumed more than a year, involving consulting firms, corporate communication, the Executive Committee and the Company’s shareholders. The value proposal, completely in line with the future of the company as well as the name and visual identity solutions adopted, put Cielo in a unique position of having a clear and distinguished market presence, communicating effective change.
In order to help build this new positioning, the company has consolidated four pillars that summarize the Cielo brand.
Using expertise: developing the technology to come up with solutions that speed up and drive transactions and relationships faster and better. Dominating complex issues and offering robust yet simple solutions. Crossing borders and influencing behavior change.
Earning trust: winning stakeholders’ trust. Employing the most demanding safety protocols in order to ensure the integrity of transactions. Pursuing efficient processes. Preserving information confidentiality with extreme zeal while having transparent relationships and management.
Being comprehensive: covering vast expanses in multiple territories. Meeting the demands of businesses of every size, industry or location. Having a 360-degree outlook to capture moves and identify trends. Living diversity intensely and thus building a unique repertoire that qualifies the delivery.
Getting involved: taking on commitments that have a positive impact on its surroundings and carrying out initiatives that promote sustainable social development. Contributing to and celebrating business success. Offering the right amount of support. Understanding the needs and being ready to provide doable, aligned and creative responses. A On February 23, Cielo, given the potential advantages for increasing the liquidity, visibility and price of its stock, adopted, with Deutsche Bank Trust Company Americas as the depositary institution, a Level 1 ADR Program. The ADRs will trade on the over-the-counter market under the ticker CIOXY. The initiative does not represent a rights offering or issue of new shares.
