Professional Documents
Culture Documents
KPDS 157528
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Contents
Report on review of Interim Financial Information - ITR
10
11
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
Operations .......................................................................................................................................... 11
Significant accounting practices ........................................................................................................ 12
Consolidated interim financial information ....................................................................................... 13
Cash and cash equivalents .................................................................................................................. 15
Trade receivables ............................................................................................................................... 15
Income tax and social contribution .................................................................................................... 16
Investments ........................................................................................................................................ 18
Property and equipment ..................................................................................................................... 22
Intangible assets ................................................................................................................................. 24
Prepayment of receivables from card-issuing banks .......................................................................... 27
Payables to merchants ........................................................................................................................ 27
Borrowings......................................................................................................................................... 28
Taxes payable..................................................................................................................................... 29
Other payables ................................................................................................................................... 29
Provision for tax, civil and labor risks and escrow deposits .............................................................. 30
Equity ................................................................................................................................................. 33
Earnings per share .............................................................................................................................. 36
Net revenue ........................................................................................................................................ 37
Expenses by nature ............................................................................................................................ 37
Other operating expenses, net ............................................................................................................ 38
Commitments ..................................................................................................................................... 38
Employee benefits .............................................................................................................................. 39
Profit sharing ...................................................................................................................................... 39
Compensation of key management personnel .................................................................................... 40
Stock option plan and restricted shares .............................................................................................. 40
Finance income .................................................................................................................................. 41
Financial instruments ......................................................................................................................... 42
Related-party balances and transactions ............................................................................................ 48
Segment information .......................................................................................................................... 54
Noncash transactions ......................................................................................................................... 56
Insurance ............................................................................................................................................ 56
Approval of interim financial information ......................................................................................... 56
Introduction
We have reviewed the accompanying individual and consolidated interim financial information
of Cielo S.A. (Company), included in the Interim Financial Information Form (ITR) for the
quarter ended June 30, 2016, which comprise the balance sheet as of June 30, 2016 and related
statements of income and comprehensive income for the three and six month periods then ended
and the changes in shareholders' equity and cash flows for the six month period then ended,
including the explanatory notes.
Company's Management is responsible for the preparation and fair presentation of the individual
and consolidated interim financial information in accordance with CPC 21 (R1) - Demonstrao
Intermediria and IAS 34 - Interim Financial Reporting, issued by the International Accounting
Standards Board (IASB), as well as for the presentation of such information in accordance with
the standards issued by Brazilian Securities Commission (CVM), applicable to the preparation
of Interim Financial Information (ITR). Our responsibility is to express a conclusion on this
interim financial information based on our review.
Scope of the review
We conducted our review in accordance with Brazilian and International Standards on Review
of Interim Financial Information (NBC TR 2410 - Reviso de Informaes Intermedirias
Executada pelo Auditor da Entidade and ISRE 2410 - Review of Interim Financial Information
Performed by the Independent Auditor of the Entity, respectively). A review of interim financial
information consists of making inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with auditing standards and
consequently does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Therefore, we do not express an audit
opinion.
Cielo S.A.
Statements of Financial Position at June 30, 2016 and December 31, 2015
(In thousand of Brazilian Reais - R$)
Parent Company
Assets
Current Assets
Cash and cash equivalents
Trade receivables
Trade receivables from related parties
Prepaid and recoverable taxes
Prepaid expenses
Derivative financial instruments
Other receivables
Notes
4
5
28
27
06/30/2016
Consolidated
12/31/2015
06/30/2016
Parent Company
12/31/2015
10,846
8,829,436
2,890
22,968
12,347
44,487
10,153,664
1,587
10,369
213,314
16,736
1,228,552
9,765,395
656
2,549
35,472
62,062
1,249,524
11,151,905
459
1,814
17,350
213,314
41,488
8,878,487
10,440,157
11,094,686
12,675,854
06/30/2016
12/31/2015
06/30/2016
12/31/2015
585,445
183,000
3,002,468
603,914
576,177
19,673
612,365
1,606
142,657
891,898
1,269,190
3,290,353
554,834
158,192
17,808
540,938
176,256
1,052,524
183,000
3,003,162
739,185
586,607
2,856
612,365
1,606
514,190
1,503,254
1,269,190
3,291,228
663,214
275,733
398
540,938
519,999
5,727,305
6,899,469
6,695,495
8,063,954
6,518,669
1,514,371
15,213
8,437,535
1,401,073
11,804
7,810,497
1,539,482
238,182
16,572
10,008,265
1,420,270
303,678
17,667
8,048,253
9,850,412
9,604,733
11,749,880
3,500,000
61,983
(133,365)
10,700
4,455,809
2,500,000
64,305
(140,648)
13,401
4,083,619
3,500,000
61,983
(133,365)
10,701
4,455,808
2,500,000
64,305
(140,648)
13,401
4,083,619
Attributable to:
Owners of the Parent Company
Noncontrolling interests
7,895,127
-
6,520,677
-
7,895,127
3,651,151
6,520,677
3,643,290
Total equity
7,895,127
6,520,677
11,546,278
10,163,967
21,670,685
23,270,558
27,846,506
29,977,801
Current Liabilities
Payables to merchants
Prepayment of receivables from card-issuing banks
Borrowings
Trade payables
Taxes payable
Payables to related parties
Dividends payable
Derivative financial instruments
Other payables
Notes
11
10
12
13
28
16.g)
27
14
12
6.a)
15.b)
7
8
9
Total assets
70,613
833,250
1,404,516
8,913
9,706,210
592,511
176,185
12,792,198
21,670,685
66,124
650,169
1,296,203
11,766
9,934,761
720,204
151,174
12,830,401
23,270,558
70,613
940,910
1,411,937
32,837
94,831
628,976
13,571,716
16,751,820
27,846,506
66,124
744,893
1,302,455
41,352
105,108
751,517
14,290,498
17,301,947
29,977,801
Consolidated
Noncurrent liabilities
Borrowings
Provision for tax, civil and labor risks
Deferred income tax and social contribuition
Other payables
12
15.a)
6.b)
14
The accompanying notes are an integral part of these interim financial statements
16.a)
16.b)
16.c)
16.d)
16.e) and f)
Cielo S.A.
Interim statements of profit or loss
For the three- and six-month periods ended June 30, 2016 and 2015
(In thousand of Brazilian Reais - R$, except earnings per share)
Parent Company
Three-month period
Note
Net revenue
18
19
Gross profit
Operating income (expenses)
Personnel
General and administrative
Sales and marketing
Share of profit of investees
Other operating expenses, net
Operating profit
Finance income
Finance income
Finance costs
Revenue from purchase of receivables
Exchange differences, net
6.b)
6.b)
Three-month period
Six-month period
06/30/2015
06/30/2016
06/30/2015
06/30/2016
06/30/2015
06/30/2016
06/30/2015
1,799,217
1,716,806
3,625,572
3,419,191
3,069,024
2,795,781
6,116,922
5,147,545
(1,093,341)
(1,018,478)
(1,516,907)
(1,302,763)
(2,979,840)
(2,296,133)
2,532,231
2,400,713
1,552,117
1,493,018
3,137,082
2,851,412
(548,920)
(73,412)
(98,505)
(82,332)
88,199
(62,090)
1,022,157
26
26
26
26
Six-month period
06/30/2016
1,250,297
19
19
19
7
19 and 20
Consolidated
(512,088)
1,204,718
(61,579)
(95,886)
(67,512)
104,466
(54,835)
(141,045)
(200,190)
(140,625)
156,309
(114,328)
1,029,372
2,092,352
(124,278)
(186,583)
(121,638)
147,164
(108,983)
2,006,395
(135,159)
(141,331)
(85,596)
2,496
(84,640)
1,107,887
(115,563)
(121,320)
(70,346)
3,642
(59,630)
1,129,801
(261,612)
(287,844)
(146,644)
4,480
(177,536)
2,267,926
(222,052)
(236,184)
(125,387)
7,353
(115,218)
2,159,924
7,855
(275,946)
604,306
(3,114)
3,280
(292,702)
493,620
1,344
35,806
(598,910)
1,228,342
(5,241)
54,613
(468,841)
956,534
3,568
41,250
(289,954)
603,571
(3,037)
23,880
(301,500)
493,620
1,354
100,010
(628,729)
1,226,964
(5,159)
76,971
(489,750)
956,534
3,594
333,101
205,542
659,997
545,874
351,830
217,354
693,086
547,349
1,355,258
1,234,914
2,752,349
2,552,269
1,459,717
1,347,155
2,961,012
2,707,273
(490,994)
124,903
(348,017)
(17,449)
989,167
869,448
(950,874)
183,081
1,984,556
(752,955)
(18,017)
1,781,297
Attributable to:
Owners of the Company
Noncontrolling interests
(565,211)
135,198
(453,759)
14,160
(1,105,751)
212,698
(930,880)
57,329
1,029,704
907,556
2,067,959
1,833,722
989,167
40,537
869,448
38,108
1,984,556
83,403
1,781,297
52,425
1,029,704
907,556
2,067,959
1,833,722
17
0.43799
0.38526
0.87860
0.78883
0.43799
0.38526
0.87860
0.78883
17
0.43709
0.38423
0.87680
0.78671
0.43709
0.38423
0.87680
0.78671
The accompanying notes are an integral part of these interim financial statements
Cielo S.A.
Interim statements of comprehensive income
For the three- and six-month periods ended June 30, 2016 and 2015
(In thousands of Brazilian Reais - R$)
Parent Company
Three-month period
06/30/2016
Profit for the period
Comprehensive income
Exchange differences on translating of foreign operations:
Exchange differences on foreign investments
Gains and losses from hedging instruments of foreign operations, net of taxes
Changes for the period
Total comprehensive income for the period
06/30/2015
Consolidated
Six-month period
Three-month period
06/30/2016
06/30/2015
06/30/2016
1,984,556
1,781,297
1,029,704
06/30/2015
06/30/2016
06/30/2015
2,067,959
1,833,722
989,167
869,448
(109,395)
108,291
(33,089)
28,921
(218,290)
215,589
139,994
(142,247)
(109,395)
108,291
(33,089)
28,921
(218,290)
215,589
139,994
(142,247)
(1,104)
(4,168)
(2,701)
(2,253)
(1,104)
(4,168)
(2,701)
(2,253)
988,063
865,280
1,981,855
1,779,044
907,556
Six-month period
1,028,600
903,388
2,065,258
1,831,469
Attributable to:
Owners of the Company
988,063
865,280
1,981,855
1,779,044
Noncontrolling interests
40,537
38,108
83,403
52,425
The accompanying notes are an integral part of these interim financial statements
Cielo S.A.
Interim statements of changes in equity
For the six-month periods ended June 30, 2016 and 2015
(In thousands of Brazilian Reais - R$)
Issued
capital
Balance as at January 1, 2015
Dividends paid in addition to the minimum mandatory dividends in 2014
Capital increase
Stock options granted
Sale of treasury shares under the stock option plan
Profit for the six-month period
Allocation of profit for the six-month period:
Legal reserve
Interest on capital
Mandatory minimum dividends
Effect of noncontrolling interests on consolidated entities
2,000,000
16g)
16.a)
25
25 and 16.c)
Treasury
shares
75,854
(194,478)
11,530
(14,145)
-
Legal
reserve
360,992
Capital
budget
1,776,914
(500,000)
Additional
dividends
Earnings
retention
Total
Comprehensive
owners of the
income Parent Company
283,859
5,969
(283,859)
-
1,781,297
21,336
-
4,309,110
15,290
4,324,400
(283,859)
11,530
7,191
1,781,297
52,425
(283,859)
11,530
7,191
1,833,722
(114,100)
(410,685)
-
3,590,688
(114,100)
(410,685)
3,590,688
139,994
(142,247)
139,994
(142,247)
89,065
-
2,500,000
73,239
(173,142)
450,057
1,276,914
1,167,447
3,716
5,298,231
3,658,403
8,956,634
2,500,000
64,305
(140,648)
500,000
3,583,619
13,401
6,520,677
3,643,289
10,163,966
1,000,000
-
16,325
(18,647)
-
(24,904)
32,187
-
(1,000,000)
-
1,984,556
(24,904)
16,325
13,540
1,984,556
83,403
(24,904)
16,325
13,540
2,067,959
(238,000)
(374,366)
-
(75,541)
(238,000)
(374,366)
(75,541)
Capital increase
Acquisition of treasury shares
Stock options granted
Sale of treasury shares under the stock option plan
Profit for the six-month period
Allocation of profit for the six-month period:
Legal reserve
Interest on capital
Mandatory minimum dividends
Effect of noncontrolling interests on consolidated entities
Comprehensive income:
Exchange differences on translating foreign operations:
Exchange differences on net foreign investments
Gains and losses on hedging instruments on foreign operations, net of taxes
Balances as at June 30, 2016
16.a)
25
25 and 16.c)
16.e)
16.g)
16.g)
99,228
-
16.d)
16.d)
3,500,000
61,983
599,228
2,583,619
1,272,962
(133,365)
The accompanying notes are an integral part of these interim financial statements
(99,228)
(238,000)
(374,366)
-
Total
equity
16.d)
16.d)
(89,065)
(114,100)
(410,685)
-
Noncontrolling
interests
Comprehensive income:
Exchange differences on translating foreign operations:
Exchange differences on net foreign investments
Gains and losses on hedging instruments on foreign operations, net of taxes
16.e)
16.g)
16.g)
500,000
-
Capital
reserve
139,994
(142,247)
(218,290)
215,589
10,700
(218,290)
215,589
7,895,127
3,651,151
(218,290)
215,589
11,546,278
Cielo S.A.
Interim statements of cash flows
For the six-month periods ended June 30, 2016 and 2015
(In thousands of Brazilian Reais - R$)
Parent Company
Note
Cash flows from operating activities
Profit before income tax and social contribution
Adjustments to reconcile profit before income tax and social contribution
To net cash generated by operating activities:
Depreciation and amortization
Recognition of provision for losses on property and equipment and intangible assets
Residual value of property and equipment and intangible assets disposed of
Stock option granted
Losses on non-performing loans and chargebacks
Provision for tax, civil and labor risks
Unearned revenue from purchase of receivables
Noncontrolling interests
Exchange differences relating to interest on foreign borrowings
Result on financial instruments
Interest on borrowings
Provision for losses on investments
Share of profit (loss) of investees
(Increase) decrease in operating assets:
Trade receivables
Receivables from related parties
Prepaid and recoverable taxes
Other receivables (current and noncurrent)
Escrow deposits
Prepaid expenses
06/30/2016
06/30/2015
06/30/2016
06/30/2015
2,752,349
2,552,269
2,961,012
2,707,273
8 and 9
215,321
199,007
488,751
382,412
8 and 9
25
20
15.a)
5
21,305
22,983
16,325
56,190
119,223
(37,376)
12
(220,661)
213,314
590,058
11,128
8,285
11,530
82,974
95,827
44,391
5,781
325,178
11,128
8,824
11,530
91,059
97,298
44,391
52,425
5,781
344,264
(156,309)
(147,164)
21,305
24,962
16,325
84,236
125,137
(37,376)
83,403
(220,661)
213,314
618,967
23,997
(4,480)
1,361,604
(1,303)
2,751
(108,313)
(12,599)
234,475
(2,225)
(309)
(95,757)
(2,636)
1,423,885
(197)
11,418
(16,548)
(109,482)
(18,122)
(237,117)
308
268
(11,435)
(96,230)
(4,263)
(1,448,833)
49,080
(9,848)
1,865
(28,584)
(5,925)
3,392,617
(628,127)
(634,103)
(354,194)
(64,146)
(5,802)
3,763
(71,358)
(4,510)
2,826,507
(38,486)
(972,827)
(1,621,156)
75,971
(25,493)
2,458
(88,701)
(5,925)
4,027,000
(654,736)
(880,444)
16,386
(50,183)
6,663
65,997
(5,257)
3,434,169
(61,270)
(1,071,632)
2,130,387
1,815,194
2,491,820
2,301,267
15.b)
15.a)
12
7
7
9
8 and 9
16.c)
12
12
16.g)
16.g)
(8,422,930)
15,132
-
(9,240)
-
(18,263)
(14,467)
(156,926)
(306,858)
(194,608)
(8,314,607)
(8,714,656)
(203,848)
(8,347,337)
(24,904)
13,540
32,495
(1,653,865)
(20,910)
(520,028)
7,191
8,839,422
(4,846,219)
(10,020)
(759,660)
(24,904)
13,540
32,495
(1,653,865)
(20,910)
(595,570)
7,191
8,839,422
(4,846,219)
(10,020)
(759,660)
(2,173,672)
3,230,714
(2,249,214)
3,230,714
(59,730)
24,913
4
4
The accompanying notes are an integral part of these interim financial statements
(7,353)
(9,540)
176,110
-
9,644
Consolidated
(33,641)
(3,668,748)
10,846
44,487
89,289
3,758,037
(33,641)
(3,668,748)
(20,972)
1,228,552
1,249,524
(20,972)
(2,790,443)
1,208,278
3,998,721
(2,790,443)
Cielo S.A.
Interim statements of value added
For the six-month periods ended June 30, 2016 and 2015
Parent Company
Revenues
Sales of services
Losses on non-performing loans and chargebacks
Note
06/30/2016
06/30/2015
06/30/2016
06/30/2015
18
20
4,032,324
(56,190)
3,802,578
(82,974)
6,727,416
(84,236)
5,665,173
(91,059)
3,976,134
3,719,604
6,643,181
5,574,114
(751,500)
(290,872)
(7,142)
(18,867)
(2,505,536)
(298,944)
(49,945)
(43,356)
(1,903,276)
(252,592)
(8,243)
(18,966)
(1,196,150)
(1,068,381)
(2,897,780)
(2,183,077)
2,779,984
2,651,223
3,745,401
3,391,037
(199,007)
(488,751)
(382,412)
2,564,663
2,452,216
3,256,650
156,309
-
147,164
-
4,480
83,403
26
1,396,837
1,014,715
1,462,863
1,037,099
1,553,146
1,161,879
1,550,745
992,027
4,117,809
3,614,095
4,807,396
4,000,652
(159,032)
(34,853)
(1,268,846)
(670,522)
(612,366)
(1,372,190)
(145,524)
(32,977)
(1,182,872)
(471,425)
(524,785)
(1,256,512)
(288,259)
(44,744)
(1,616,410)
(706,621)
(612,366)
(1,538,995)
(247,641)
(42,956)
(1,430,548)
(498,210)
(524,785)
(1,256,512)
(4,117,809)
(3,614,095)
(4,807,396)
(4,000,652)
(813,571)
(324,442)
(14,853)
(43,284)
(215,321)
8 and 9
Consolidated
23
Wealth distributed
The accompanying notes are an integral part of these interim financial statements
10
3,008,625
7,353
(52,425)
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Operations
Cielo S.A. (the Company or Cielo) was established in Brazil on November 23, 1995, and is
primarily engaged in providing services related to credit and debit cards and other means of
payment, including signing up of merchants and service providers, rental, installation and
maintenance of POS (point-of-sale) terminals, data capture and processing of electronic and
manual transactions.
Cielo is a corporation headquartered in Barueri, State of So Paulo. Cielos shares are traded on
BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros, under ticker symbol
CIEL3, and its subsidiaries comprise Banco do Brasil and Bradesco conglomerates.
The Companys direct and indirect subsidiaries, joint ventures and associate that, together with
Cielo, are also referred to as "Group" throughout this report, provide services related to means
of payment or complementary to the acquiring services, such as provision of services in
processing means of payments that involve cards, maintenance services and contacts with
merchants for acceptance of credit and debit cards, data transmission services to load fixed or
mobile phone credits, software development and licensing of computer programs, electronic
transation's processing, IT services for collection and management of accounts payable and
receivable using the Internet, data processing services and support services to medical
companies.
Increase in Cielos profit by R$119,719 or 13.8% when comparing to the quarters ended
June 30, 2016 and 2015;
On April 8, 2016, the capital increase of the Company in the amount of R$ 1,000,000, with the
partial use of the balance from the capital budget reserve, was approved;
On April 13, 2016, a partial payment was made of the balance related to public debentures
amounting to R$1,863,828, of which R$1,533,331 refers to the principal and R$330,497 to
interest;
Approval of the payment of dividends and interest on capital in the amount of R$612,366
related to profit earned in the first half of 2016;
11
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
2
2.1
2.2
12
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
2.3
2.4
New and revised standards and interpretations issued and not yet adopted
The new IFRSs issued by the IASB and not yet effective are:
IFRS 15 - Revenue from Contracts with Customers - introduces new requirements to recognize
revenue from sales of goods and services (effective for annual periods beginning on or after
January 1, 2018). The Company does not expect significant effects of adopting this standard on
the Financial Statements.
IFRS 16 - Leases - Requires recognition of operating leases in the same formats of finance
leases (effective for annual periods beginning on or after January 1, 2019). The Company is
evaluating the effects of adopting this standard on the Financial Statements.
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
The consolidated interim financial information includes the following direct and indirect
subsidiaries, joint ventures and associate:
Companies
Direct subsidiaries:
Servinet Servios Ltda. (Servinet)
Main activities
99.99
99.99
70.00
70.00
100.00
100.00
50.10
50.10
99.99
99.99
99.99
99.99
100.00
100.00
Indirect subsidiaries:
M4Produtos e Servios S.A. (M4Produtos)
50.10
50.10
100.00
100.00
40.95
40.95
50.00
50.00
40.95
40.95
40.95
40.95
30.00
30.00
14
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Parent Company
06/30/2016
12/31/2015
06/30/2016
12/31/2015
2,369
1,297
4,258
30,581
6,247
259,402
5,669
384,697
6,999
181
-
6,558
170
2,920
952,781
10,122
-
837,228
19,010
2,920
10,846
44,487
1,228,552
1,249,524
100.99% of DI
100.92% of DI
0.25%
Total
Consolidated
The balances in line item Cash and banks consist of cash on hand and cash available in bank
accounts in Brazil and abroad, derived primarily from deposits made by credit and debit
cardissuing banks, in the case of the Company, and by card association members, in the case of
Me-S, and such amounts are used to settle transactions with merchants.
These short-term investments are highly liquid and their carrying amounts do not differ from
their fair values.
Trade receivables
Parent Company
06/30/2016
Consolidated
12/31/2015 06/30/2016
12/31/2015
8,786,771
358,074
139,065
316,413
4,864
13,387
116,356
20,444
10,021
10,094,141
461,030
149,585
292,376
6,645
20,948
85,502
28,175
13,503
9,765,395
11,151,905
8,786,771
4,864
13,387
20,444
3,970
10,094,141
6,645
20,948
28,175
3,755
Total
8,829,436
10,153,664
(a)
The balance corresponds to purchase of receivables made by the Company from merchants, relating to card transactions that will be received from the
card-issuing banks within 360 days after the date receivables. As at June 30, 2016, this amount is net of the revenue from purchase of receivables, to be
recognized to the maturity dates of the transactions, totaling R$ 349,346 (R$ 386,722 as at December 31, 2015), since it is related to the purchase of
receivables for credit and installment sales with original maturity after the date of the reporting periods.
(b)
Refers to the receivables recognized by the subsidiary Me-S. These correspond to amounts due from card association members for processed
transactions that were authorized but not yet received by Me-S by the end of the reporting periods. These amounts receivable are usually received on
the business day following the transaction capture date. The card associations send to Me-S the amounts due to merchants for processing, net of the
interchange fee withheld by the card-issuing banks.
(c)
Refer to the interchange fees prepaid by the subsidiary Me-S to merchants during the month. These interchange fees, as well as the commission on
services provided by Me-S, are received at the beginning of the month subsequent to the transaction month.
(d)
The balance refers to commissions earned by the subsidiary Cateno resulting from payment accounts management services under the Ourocard
Payment Arrangement. In general, fees resulting from credit card transactions are settled in 28 days and those arising from debit card transactions are
settled one business day following the transaction.
(e)
The Company offers to card-issuing banks account lock services upon prior approval from merchants to block any transfer of receivables from such
merchants to another bank. For these services, the Company receives a commission, which is paid in the month subsequent to the request of the bank
account lock by the issuing banks.
15
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
(f)
Receivables from Companhia Brasileira de Solues e Servios (Alelo) arising from the provision of meal and transportation voucher capture and
processing services.
(g)
Receivables for electronic payment services provided by subsidiaries M4Produtos and Multidisplay through mobile phones and sale of phone credits
with credit and debit cards.
(h)
Refer substantially to receivables for transactions challenged by credit card holders (chargeback).
Current
Up to 45 days past-due
Total
Consolidated
06/30/2016
12/31/2015
06/30/2016
12/31/2015
8,808,992
20,444
10,125,489
28,175
9,744,951
20,444
11,123,730
28,175
8,829,436
10,153,664
9,765,395
11,151,905
a.
Temporary differences:
Provision for tax, labor and civil risks
Accrual for sundry expenses
Allowance for losses on POS equipment and
doubtful debts
Total
Consolidated
06/30/2016
12/31/2015
06/30/2016
12/31/2015
508,775
302,893
470,254
166,512
516,850
402,478
476,164
255,326
21,582
13,403
21,582
13,403
833,250
650,169
940,910
744,893
16
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
b.
12/31/2015
Temporary differences:
Fair value of Me-Ss intangible assets, acquired in 2012
Other temporary diferences
220,611
17,571
288,752
14,926
Total
238,182
303,678
Deferred income and social contribution tax assets as at June 30, 2016, as shown in note 6(a),
were recognized on temporary differences. According to Management's best estimate, tax
credits recognized on the accrual for sundry expenses, allowance for losses on POS equipment
and doubtful debts, in the amount of R$ 324,475 (R$ 424,060 - consolidated) will be realized
mainly during 2016. The portion of tax credits on the provision for tax, labor and civil risks, in
the amount of R$ 508,775 (R$ 516,850 - consolidated), will be realized upon the final outcome
of each lawsuit, partially estimated at up to 5 years, except for 46% of the provision for labor
risks which is estimated to be realized in up to 10 years, according to the development of the
lawsuit described in note 15.
Consolidated
Six-month period
06/30/2015
06/30/2016
06/30/2015
1,355,258
34%
1,234,914
34%
2,752,349
34%
2,552,269
34%
(460,788)
(419,871)
(935,799)
54,060
3,024
20,264
-
29,988
06/30/2016
06/30/2015
1,459,717
34%
1,347,155
34%
2,961,012
34%
2,707,273
34%
(867,771)
(496,304)
(458,033)
(1,006,744)
(920,473)
80,920
16,058
38,794
14,331
54,060
3,024
20,264
-
80,920
16,058
38,794
14,331
35,518
53,145
50,036
849
1,238
1,523
2,500
7,625
(1,377)
17,883
(6,362)
8,358
(3,068)
15,190
(8,703)
(366,091)
(365,466)
(767,793)
(770,972)
(430,013)
(439,599)
(893,053)
(873,551)
Current
Deferred
(490,994)
124,903
(348,017)
(17,449)
(950,874)
183,081
(752,955)
(18,017)
(565,211)
135,198
(453,759)
14,160
(1,105,751)
212,698
(930,880)
57,329
17
06/30/2016
Six-month period
06/30/2015
06/30/2016
Three-month period
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Incentives to Cultural and Artistic Activities (Lei Rouanet), Sports, Pronas activities, Child
and Adolescent Rights Fund and Elderly Fund are recorded in line item income tax expenses current. Tax incentives recorded as income tax expense - current, in the Parent Company and
Consolidated, totaled R$20,769 in the six-month period ended June 30, 2016 (R$7,220 in the
six-month period ended June 30, 2015). In the three-month period ended June 30, 2016, tax
incentives recorded as income tax expenses - current, Parent Company and Consolidated,
totaled R$11,205 (R$5,350 in the three-month period ended June 30, 2015).
Investments
Parent Company
(a)
Consolidated
06/30/2016
12/31/2015
06/30/2016
12/31/2015
Subsidiaries
Joint ventures
Associate
Goodwill on acquisition of investments (a)
9,564,363
85,048
56,799
9,801,843
76,119
56,799
78,048
6,640
10,143
69,119
10,847
25,142
Total
9,706,210
9,934,761
94,831
105,108
The goodwill arising from investments in subsidiaries, associate and joint ventures are included in the carrying amount of the investment in the
individual financial information. In the consolidated financial information, the goodwill arising from the acquisition of subsidiaries is recognized in
intangible assets.
The main information on direct and indirect subsidiaries, joint ventures and associate relating to
the investment amounts and the share of profit (loss) of investees recorded in the individual and
consolidated interim financial information is shown in the table below:
18
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
06/30/2016
Ownership
interest - %
Subsidiaries:
Servinet
Multidisplay
Braspag
Cielo USA
Cateno
Aliana
Assets
Liabilities
Equity
Investments
99.99
50.10
99.99
100.00
70.00
99.99
68,897
128,242
38,177
2,517,138
12,379,631
7,318
15,139,403
46,473
69,648
8,064
1,513,133
289,246
324
1,926,888
22,424
74,967
30,113
1,004,005
12,090,385
6,994
13,228,888
22,424
37,559
30,112
1,004,005
8,463,270
6,993
9,564,363
40.95
50.00
237,985
308
238,293
16,060
209
16,269
221,925
99
222,024
84,998
50
85,048
Total
Joint ventures:
Orizon (*)
Paggo
12/31/2015
Total
Ownership
interest - %
Assets
Liabilities
Equity
Investments
99.99
50.10
99.99
100.00
70.00
99.99
68,288
79,520
37,112
3,096,353
12,437,546
25,845
15,744,664
49,225
33,340
6,892
1,860,357
352,716
2,302,530
19,063
62,554
30,220
1,235,996
12,084,830
25,845
13,458,508
19,063
31,338
30,220
1,235,996
8,459,381
25,845
9,801,843
40.95
50.00
219,046
336
219,382
18,962
209
19,171
200,084
127
200,211
76,055
64
76,119
Associate:
30.00
79,305
27,180
52,125
6,640
30.00
51,747
15,595
36,152
10,846
Stelo
(*) The amount of R$5,880 is not reflected in the investment because it refers to the unrealized gain on capital contribution with goodwill, initially reflected in CBGS Ltda. and transferred to the indirect subsidiary CBGS as a result of the
merger. In November 2009, CBGS was merged into its then subsidiary Orizon.
06/30/2016
Three-month period
Subsidiaries:
Servinet
Multidisplay
Braspag
Cielo USA Inc.
Cateno
Aliana
Total
Joint ventures:
Orizon
Paggo
Total
Associate:
Stelo
Profit (loss)
before
income tax and
social
contribution
Profit (loss)
for the
quarter
Share of profit
(loss) of investes
for the quarter
Six-month period
Share of
profit (loss) of
Profit (loss)
investes for
for the six- the six-month
month period
period
06/30/2015
Three-month period
Six-month period
Share of
Share of
profit (loss)
Profit (loss)
profit (loss)
of investes
for the sixof investes
Profit (loss) for
for the
month
for the sixthe quarter
quarter
period monh period
Net
revenue
Gross
profit
(loss)
Operating profit
(loss) before
finance
income (costs)
72,124
349,620
19,447
1,202,473
1,147
1,644,811
70,508
17,855
7,529
(49,192)
382,495
1,156
430,351
4,017
13,522
(2,206)
(14,710)
327,844
(28,387)
300,080
5,024
12,499
(1,223)
(43,622)
389,337
(28,382)
333,633
1,769
3,379
(403)
(8,038)
129,501
(2,569)
123,639
1,769
1,693
(403)
(8,038)
90,651
(2,569)
83,103
3,362
12,646
(107)
(13,701)
256,974
(28,391)
230,783
3,362
6,336
(107)
(13,701)
179,882
(28,391)
147,381
1,589
2,287
1,285
10,548
123,224
138,933
1,589
1,146
1,285
10,548
86,257
100,824
3,012
6,460
2,352
16,406
164,007
192,237
3,012
3,236
2,352
16,406
114,805
139,811
72,851
72,851
33,552
33,552
19,863
(28)
19,835
27,520
(28)
27,492
12,462
(14)
12,448
5,103
(7)
5,096
21,836
(28)
21,808
8,942
(14)
8,928
8,911
(14)
8,897
3,649
(7)
3,642
17,990
(27)
17,963
7,367
(14)
7,353
20
(6,923)
(22,311)
(22,467)
(8,667)
(2,600)
(14,827)
(4,448)
19
Cielo S.A.
Individual and Consolidated Interim Financial Information
for the Three- and Six-month Periods ended June 30, 2016 and
Report on Review of Interim Financial Information - ITR
The main financial information relating to indirect subsidiaries and indirect joint ventures is as follows:
12/31/2015
06/30/2016
Ownership
interest - %
Indirect subsidiaries
M4Produtos
Me-S
Indirect joint ventures:
Prevsade
Guilher
Assets
Liabilities
Ownership
interest - %
Equity
Assets
Indirect joint
ventures:
Prevsade
Guilher
Equity
50.10
110,558
92,572
17,986
50.10
108,108
88,391
19,717
100.00
1,048,873
534,673
514,200
100.00
1,317,182
709,628
607,554
40.95
40.95
26,293
14,190
1,446
11,970
24,847
2,220
40.95
40.95
22,218
14,601
1,472
13,307
20,746
1,294
06/30/2016
Indirect
subsidiaries:
M4Produtos
Me-S
Liabilities
06/30/2015
Net
revenue
Gross
profit
Operating profit
before finance
income
51,77
900,972
28,988
242,355
13,995
55,971
14,26
55,241
3,984
15,027
12,608
34,482
2,702
23,404
6,174
46,914
6,022
3,547
4,327
753
3,886
527
5,252
1,375
2,049
421
4,102
926
1,784
55
3,7
291
20
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
The consolidation of the interim financial information, for direct subsidiaries Multidisplay,
Braspag and Cielo USA, as well as for indirect subsidiaries M4Produtos and Me-S, was based
on the financial information as at May 31, 2016 to calculate the investments as at June
30, 2016. Accordingly, the share of profit (loss) of investees refers to the six-month period
ended May 31, 2016.
The Company has investments in foreign subsidiaries whose interim financial information was
originally prepared in accordance with generally accepted accounting principles in the United
States (U.S. GAAP). No adjustments are made to the interim financial information of foreign
subsidiaries, given that there are no significant differences in relation to Brazilian accounting
practices.
As at June 30, 2016 and December 31, 2015, the goodwill arising on the acquisition of
investments in the individual statement of financial position and the goodwill arising on the
acquisition of investments in joint ventures and associate in the consolidated statement of
financial position are recognized in line item Investments, as shown in the breakdown below:
Parent Company
Consolidated
06/30/2016
12/31/2015
06/30/2016
12/31/2015
Multidisplay
Braspag
Orizon
Stelo (*)
20,690
25,966
10,143
-
20,690
25,966
10,143
-
10,143
-
10,143
14,999
Total
56,799
56,799
10,143
25,142
(*) The Company recognized a provision for impairment related to the goodwill established during the initial
investment in Stelo because it is not possible to predict the beginning of cash generation in this operation.
The details of the nature of the goodwill arising on the acquisition of investments recognized in
line item Investments have not changed in relation to those disclosed in note 09 - Goodwill on
acquisition of investments of the Company's financial statements as of December 31, 2015.
21
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Changes in investments for the six-month period ended June 30, 2016 and 2015 are as follows:
Parent
Company
Consolidated
1,025,856
69,010
8,390,200
32,730
139,994
17,731
14,999
-
(5,132)
(10,000)
147,164
7,353
9,720,812
109,093
9,934,761
105,108
9,540
(218,290)
9,240
(23,997)
-
(117)
(175,993)
156,309
4,480
9,706,210
94,831
POS equipment
Data processing equipment
Machinery and equipment
Facilities
Furniture and fixtures
Vehicles
Total
12/31/2015
Annual
depreciation
rate - %
Cost
Accumulated
depreciation
Net
Net
33
20
10 - 20
10
10
20
1,535,091
147,284
47,099
46,131
11,188
1,350
(1,064,419)
(81,352)
(41,077)
(3,864)
(3,806)
(1,114)
470,672
65,932
6,022
42,267
7,382
236
589,838
72,480
6,856
43,015
7,558
457
1,788,143
(1,195,632)
592,511
720,204
22
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Consolidated
06/30/2016
POS equipment
Data processing equipment
Machinery and equipment
Facilities
Furniture and fixtures
Vehicles
Total
12/31/2015
Annual
depreciation
rate - %
Cost
Accumulated
depreciation
Net
Net
33
20
10 - 20
10
10
20
1,536,279
180,786
61,461
69,681
15,914
1,448
(1,065,152)
(101,104)
(50,238)
(12,920)
(6,029)
(1,150)
471,127
79,682
11,223
56,761
9,885
298
590,593
86,669
9,522
54,949
9,255
529
1,865,569
(1,236,593)
628,976
751,517
Changes in property and equipment for the six-month periods ended June 30, 2016 and 2015 are
as follows:
Parent Company
12/31/2015
Disposals and
Allowance for
Additions
losses
Depreciation
06/30/2016
POS equipment
Data processing equipment
Machinery and equipment
Facilities
Furniture and fixtures
Vehicles
589,838
72,480
6,856
43,015
7,558
457
100,298
5,462
1,485
318
-
(44,163)
(125)
(175,301)
(12,010)
(834)
(2,233)
(494)
(96)
470,672
65,932
6,022
42,267
7,382
236
Total
720,204
107,563
(44,288)
(190,968)
592,511
Disposals
and
Allowance for
Additions
losses
Depreciation
06/30/2015
(181,337)
781,586
12/31/2014
Total
701,274
23
281,063
(19,414)
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
12/31/2015 Additions
Consolidated
Disposals
and
Allowance
for losses
Depreciation
Exchange
differences
06/30/2016
POS equipment
Data processing equipment
Machinery and equipment
Facilities
Furniture and fixtures
Vehicles
590,593
86,669
9,522
54,949
9,255
529
100,331
10,174
3,844
4,888
1,345
-
(44,249)
(1)
(1)
(125)
(175,495)
(14,586)
(1,637)
(3,076)
(660)
(106)
(53)
(2,574)
(506)
(54)
-
471,127
79,683
11,223
56,760
9,885
298
Total
751,517
120,581
(44,376)
(195,560)
(3,187)
628,976
12/31/2014 Additions
Disposals
and
Allowance
for losses
Depreciation
Exchange
differences
06/30/2015
(19,443)
(184,922)
(1,424)
807,506
Total
723,915
289,380
As at June 30, 2016 and December 31, 2015, an allowance for impairment of POS equipment of
R$47,024 and R$25,719, respectively, is recorded. Additionally, as at those dates, the Company
had borrowing agreements with the National Bank for Economic and Social Development
(BNDES - Finame) to acquire new POS equipment and did not have finance leases payable.
Intangible assets
Parent Company
a.
Consolidated
06/30/2016
12/31/2015
06/30/2016
12/31/2015
176,185
151,174
1,557,724
12,013,992
1,884,977
12,405,521
Total
176,185
151,254
13,571,716
14,290,498
Multidisplay
Braspag
Me-S
Total
24
06/30/2016
12/31/2015
30,772
35,583
1,491,369
1,557,724
31,348
39,343
1,814,286
1,884,977
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Changes in goodwill in the six-month periods ended June 30, 2016 and 2015 are as follows:
Consolidated
Balance as at December 31, 2014
Exchange differences
Reclassification of goodwill of Me-S
Balance as at June 30, 2015
1,112,623
207,364
191,938
1,511,925
1,884,977
(322,917)
(4,336)
1,557,724
a.
There were no changes in the Parent Company goodwill balance in the periods presented.
b.
Software
Project development
Relationship with customers
Non-compete agreement
Service agreements
12/31/2015
Annual
amortization
rate - %
Cost
Accumulated
amortization
Net
Net
20
20
10
7.5
20
334,649
35,771
953
10,284
11,994
(177,914)
(18,647)
(707)
(8,204)
(11,994)
156,735
17,124
246
2,080
-
140,056
8,075
270
2,773
-
393,651
(217,466)
176,185
151,174
Total
Consolidated
06/30/2016
Software
Project development
Relationship with customers
Non-compete agreement
Service agreements
Trademarks
Exploitation Rights-Ourocard
Arrangements
Total
12/31/2015
Annual
amortization
rate - %
Cost
Accumulated
amortization
Net
Net
6.66 - 20
20
4 - 20
7.5 - 50
8 - 20
10
792,753
306,375
505,905
138,344
31,963
3,211
(345,661)
(205,656)
(167,674)
(82,486)
(17,561)
(3,211)
447,092
100,720
338,231
55,858
14,402
-
503,946
113,614
440,756
74,923
21,726
-
3.33
11,572,000
(514,311)
11,057,689
11,250,556
13,350,551
(1,336,560)
12,013,992
12,405,521
25
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Changes in intangible assets for the six-month periods ended June 30, 2016 and 2015 are as
follows:
Parent Company
12/31/2015
Additions
Amortizations
06/30/2016
Software
Project development
Relationship with customers
Non-compete agreement
140,056
8,075
270
2,773
38,647
10,717
-
(21,968)
(1,668)
(24)
(693)
156,735
17,124
246
2,080
Total
151,174
49,364
(24,353)
176,185
12/31/2014
Additions
Amortizations
06/30/2015
126,672
25,796
(17,670)
134,798
Total
Consolidated
Granting
of rights Disposals
12/31/2015
Additions
503,946
113,614
56,492
17,534
440,756
74,923
21,726
Transfers
Amortizations
Exchange
differences
06/30/2016
(1,892)
-
(49,686)
(13,430)
(61,768)
(16,998)
447,092
100,720
(27,774)
(8,577)
(858)
(74,751)
(10,488)
(6,466)
338,231
55,858
14,402
Software
Project development
Relationship with
customers
Non-compete agreement
Service agreements
Trademarks Exploitation
Right-Ourocard (b)
11,250,556
(192,867)
11,057,689
Total
12,405,521
74,026
(1,892)
(293,192)
(170,471)
12,013,992
12/31/2014
Additions
Granting
of rights Disposals
Transfers (a)
Amortizations
Exchange
differences
06/30/2015
1,206,992
49,028
(301,998)
(197,490)
125,157
12,453,179
Total
11,572,000
(510)
(a)
On June 30, 2015, other intangible assets balance was transferred to goodwill, related to the acquisition of Me-S and
recorded in subsidiary Cielo USA.
(b)
In the association between the Company and BB Elo Cartes, a wholly-owned subsidiary of Banco do Brasil, BB Elo
Cartes granted to Cateno the right to operate the payment account management activity of the Ourocard Payment
Arrangement which, based on a valuation study conducted by independente auditors, was appraised at R$11,572
million with definite useful life of 30 years. The amortization is recorded on a straight-line basis at the rate of 3.33%
per year.
Expenses on depreciation of property and equipment and amortization of intangible assets were
recognized in Cost of services provided and General and administrative expenses in the
statement of profit or loss.
The additional information in this note has not changed in relation to that disclosed in the
Company's financial statements as of December 31, 2015 and is being presented in note 9 and
10 to those financial statements.
26
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
10
11
Payables to merchants
Parent Company
Payables to merchants
Receivables from issuing banks
Transactions pending transfer (a)
Payables to merchants (b)
Merchant deposits (c)
Total
Consolidated
06/30/2016
12/31/2015
06/30/2016
12/31/2015
51,132,776
(50,547,331)
585,445
-
58,685,347
(57,793,449)
891,898
-
51,132,776
(50,547,331)
585,445
394,955
72,124
58,685,347
(57,793,449)
891,898
491,684
119,672
585,445
891,898
1,052,524
1,503,254
(a)
Transactions pending transfer - Transactions pending transfer refer to the difference between the amounts received
from cardholders relating to transactions made by cardholders and the amounts to be transferred to merchants. In
general, the settlement term for credit card issuers with the Company is 28 days, while the Companys average
settlement term with merchants is 30 days. Therefore, the balance payable as at June 30, 2016 and December 31,
2015 refers to a float of approximately two days.
(b)
Payables to merchants - Represented by amounts due to merchants by the subsidiary Me-S relating to transactions
captured and processed until the end of the reporting period. Such amounts are settled on the business day following
the date on which transactions are captured.
(c)
Merchant deposits - The subsidiary Me-S requires deposits from customers in order to hedge against the potential risk
of complaints from credit card holders due to fraud in the transaction or bankruptcy of the merchant.
In addition to the provision of services consisting of the transfer of credit and debit card
transaction amounts between the card-issuing banks and the merchants, the Company also
guarantees accredited merchants that they will unconditionally receive the amounts of
transactions paid using credit cards. As described in note 27(c), the Company adopts a strategy
to mitigate card-issuing banks credit risk itself against the risk of default by such financial
institutions. Based on the insignificant historical amount of Companys losses due to default
from card-issuing banks and the current credit risks of these financial institutions, the Company
estimates that the fair value of the guarantees provided to merchants is immaterial and,
therefore, is not recognized as a liability.
27
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
12
Borrowings
Interest rate
per year
Parent Company
06/30/2016
12/31/2015
Consolidated
06/30/2016
12/31/2015
FINAME
6.90%
296,182
384,431
296,182
384,431
3.75%
1,507,392
1,835,003
2,799,915
3,406,608
Private debentures
100% to 111% of DI
3,506,415
3,506,434
3,506,415
3,506,434
Public debentures
105.8% of DI
3,151,207
4,729,805
3,151,206
4,729,805
4.0%
100% of Libor and
spread of 0.73% to 1%
58,656
58,663
58,656
58,663
1,001,285
1,213,552
1,001,285
1,213,552
Total
9,521,137
11,727,888
10,813,659
13,299,493
Current
Noncurrent
3,002,468
6,518,669
3,290,353
8,437,535
3,003,162
7,810,497
3,291,228
10,008,265
Total
9,521,137
11,727,888
10,813,659
13,299,493
(*) The Company has financial investments, recognized at amortized cost in noncurrent assets, remunerated at
101.00% of the Interbank Deposit (DI) rate in the amount of R$70,613 (R$66,124 as at December 31, 2015), pledged
as collateral for the borrowing.
The debt structure as well as the information related to borrowings and their covenants have not
changed in relation to the information disclosed in note 13 - Borrowings of the Company's
Consolidated
6,268,518
7,339,742
New borrowings
Payment of principal
Exchange differences (principal and interest)
Accrued interest and charges
Interest paid
8,839,422
(4,846,219)
215,542
325,178
(38,486)
8,839,422
(4,846,219)
395,787
344,264
(61,270)
10,763,955
12,011,726
11,727,888
13,299,493
New borrowings
Payment of principal
Exchange differences (principal and interest)
Mark-to-market
Accrued interest and charges
Interest paid
32,495
(1,653,865)
(547,311)
5,775
584,282
(628,127)
32,495
(1.653,865)
(828,695)
5,775
613,192
(654,736)
9,521,137
10,813,659
28
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
13
Year of maturity
Parent
Company
Consolidated
2017
2018
2019
2020
2021
2022
2023
2024
Total
52,734
1,575,394
7,457
6,925
6,975
1,515,526
3,345,392
8,266
6,518,669
51,959
1,573,991
5,998
5,409
5,400
2,814,082
3,345,392
8,266
7,810,497
Taxes payable
Parent Company
14
Consolidated
06/30/2016
12/31/2015
06/30/2016 12/31/2015
531,595
19,259
6,541
7,340
11,442
103,762
26,899
7,233
9,136
11,162
529,167
21,712
13,313
7,971
14,444
192,799
41,883
14,375
12,495
14,181
Total
576,177
158,192
586,607
275,733
Other payables
Parent Company
Current liabilities:
Accrual for sundry expenses
Accrual for vacation and related charges
Profit-sharing
Other payables
Total
Noncurrent liabilities:
Other payables
Total
Consolidated
06/30/2016
12/31/2015
06/30/2016
12/31/2015
73,677
34,127
34,853
-
82,102
25,465
68,689
-
235,627
80,108
48,549
149,906
222,644
42,809
93,643
160,903
142,657
176,256
514,190
519,999
15,213
11,804
16,572
17,667
157,870
188,060
530,762
537,666
29
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
15
Provision for tax, civil and labor risks and escrow deposits
a.
12/31/2015
Additions (i)
Write-offs/
reversals
Inflation
adjustment
Payments
06/30/2016
Tax
Civil
Labor
1,292,010
25,918
83,145
99,078
13,998
5,475
(275)
(2,267)
509
2,463
242
(5,495)
(430)
1,391,322
36,884
86,165
Total
1,401,073
118,551
(2,542)
3,214
(5,925)
1,514,371
12/31/2014
Additions (i)
Write-offs/
reversals
Inflation
adjustment
Payments
06/30/2015
1,205,427
109,759
(16,100)
2,168
(4,510)
1,296,744
Total
Consolidated
12/31/2015
Additions (i)
Write-offs/
reversals
Inflation
adjustment
Payments
06/30/2016
Tax
Civil
Labor
1,292,010
27,626
100,634
99,078
13,998
14,811
(275)
(452)
(5,278)
509
2,463
283
(5,495)
(430)
1,391,322
38,140
110,020
Total
1,420,270
127,887
(6,005)
3,255
(5,925)
1,539,482
12/31/2014
Additions (i)
Write-offs/
reversals
Inflation
adjustment
Payments
06/30/2015
1,223,633
112,361
(17,243)
2,180
(5,257)
1,315,674
Total
(i)
Refer mainly to the increase in the provision for tax risks for the six-month periods ended June 30, 2016 and 2015, relating to taxes with suspended
payment, recorded as an offsetting entry to Taxes on services and Other operating expenses, net, and other additions to the provision for civil and
labor risks, represented by new lawsuits and changes in the assessment of the likelihood of losses made by the legal counsel, which were recorded as an
offsetting entry to Other operating expenses, net, in the statement of profit or loss.
Tax lawsuits
The balances below refer to the provision for tax risks, arising from differences in
interpretation by tax authorities, and related escrow deposits:
30
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Escrow deposits
(Consolidated)
06/30/2016
12/31/2015
Noncumulative Cofins
Amazon Investment Fund (FINAM)
Social contribution (CSLL) 2002
Negative Balance of IRPJ of the calendar year 2008
Others
1,356,050
16,298
10,895
7,045
1,034
1,257,102
15,835
10,895
7,045
1,133
1,339,421
10,895
7,045
19,949
1,239,776
10,895
7,045
11,638
Total
1,391,322
1,292,010
1,377,310
1,269,354
(ii) The status of such tax lawsuits has not changed in the six-month period ended June 30, 2016 when compared with the 2015 Financial Statements
approved and published on February 1, 2016.
Based on the opinion of its legal counsel, the Management of the Company and its subsidiaries
estimates that the actual disbursement of the provision for tax risks will occur within 5 years and
understands that the development of the lawsuits will depend on external factors not under the
Companys control.
Civil lawsuits
Refer basically to collection of transactions made through the Companys system that were not
transferred to merchants in view of noncompliance with clauses of the affiliation contract, and
compensation for losses caused by transactions not transferred at that time.
Based on the opinion of its legal counsel, the management of the Company and its subsidiaries
estimates that the actual disbursement of the mentioned provision for civil risks will occur
within 5 years and understands that the development of the lawsuits will depend on external
factors not under the Companys control.
Additionally, as at June 30, 2016, the Company is a party to public civil lawsuits, most of
them filed by the Public Prosecution Office or professional organizations, whose intention is to
defend collective interests (such as consumers rights and labor rights). Court decisions may
grant rights to groups of people (even without their consent). In many situations, the groups
decision on availing a favorable outcome will only be made after the final decision.
Labor lawsuits
Refer to labor lawsuits that, as at June 30, 2016, included 318 claims against the Company
and 72 against the subsidiaries, totaling 390 claims. Of these claims, 143 were filed by former
employees, and the other remaining 247 claims were filed by subcontractors, some of whom
claiming the recognition of an employment relationship.
The risk of loss on labor claims, when these are started, is assessed as possible. As a general
rule, only after the decisions of the higher or lower courts are issued, the lawsuits are
reclassified to probable or remote loss, depending on the decision and based on the history of
losses on similar lawsuits. In general, labor lawsuits are related to salary equalization, overtime
and effects of annual bonus, rights guaranteed by agreements between the employer and the
labor union, recognition of employment relationship, and pain and suffering.
31
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Based on the opinion of its legal counsel, the Management of the Company and its subsidiaries
estimates that the actual disbursement of 53.8% of the mentioned provision for labor risks will
occur within 5 years, and 46.2% within 10 years, and understands that the development of the
lawsuits will depend on external factors not under the Companys control.
Additionally, as at June 30, 2016, the Company and its subsidiaries are parties to tax, civil
and labor lawsuits assessed by their legal counsel as possible likelihood of losses, for which no
provision was recognized, as follows:
Parent Company
b.
Consolidated
06/30/2016
12/31/2015
06/30/2016
12/31/2015
Tax
Civil
Labor
85,708
94,689
84,403
83,534
83,260
81,725
90,004
94,689
110,305
113,939
83,260
102,147
Total
264,800
248,519
294,998
299,346
Escrow deposits
In the six-month periods ended June 30, 2016 and 2015, the Company and its subsidiaries have
escrow deposits related to the provision for tax, labor and civil risks, broken down as follows:
Parent Company
Tax
Civil
Labor
Total
Total
12/31/2015
Addition
Write-off
06/30/2016
1,266,231
5,991
23,981
1,296,203
108,255
83
2,293
110,631
(274)
(1,590)
(454)
(2,318)
1,374,212
4,484
25,820
1,404,516
12/31/2014
Addition
Write-off
06/30/2015
1,103,037
96,643
(886)
1,198,794
Consolidated
12/31/2015
Addition
Write-off
06/30/2016
Tax
Civil
Labor
1,269,354
6,043
27,058
108,255
83
3,605
(298)
(1,590)
(573)
1,377,311
4,536
30,090
Total
1,302,455
111,943
(2,461)
1,411,937
12/31/2014
Addition
Write-off
06/30/2015
1,108,475
97,221
(991)
1,204,705
Total
32
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
16
a.
Equity
Share capital
Capital as at June 30, 2016 is R$ 3,500,000 represented by 2,264,012,551 common shares (R$
2,500,000 represented by 1,886,677,126 as at December 31, 2015),
fully subscribed and paid in.
As mentioned in note 17, the number of shares, net of treasury shares as at June 30, 2016 is
2,258,567,830 (1,881,830,814 shares as at December 31, 2015).
Share capital can be increased by up to 2,400,000,000 additional common shares, regardless of
any amendments to bylaws, at the discretion of the Board of Directors, which has the power to
establish the share issue price, the terms and conditions for subscription and payment of shares
up to the authorized capital limit. Except in the cases described below, according to the number
of shares already held, shareholders will have the preemptive right to subscribe for shares issued
in a capital increase, which shall be exercised until 30 days as from the publication of the
minutes of the Board of Director's meeting thatapproved the capital increase. The Board of
Directors may exclude the preemptive right or reduce the term for exercising such right in the
issuance of shares, debentures convertible into shares or subscription bonus whose placement
shall be made upon trade on stock exchanges, public subscription or upon exchange for shares,
in public offering for acquisition of control, within the authorized capital limit. The Board of
Directors may also resolve on any shares that remained unsubscribed in the capital
increaseduring the term for exercising the preemptive right and establish, prior to their sale on
stock exchanges to the benefit of the Company, the apportionment, proportional to the amounts
subscribed, among the shareholders that have indicated, in the subscription bulletin or list,
interest in subscribing possible remaining shares.
b.
Capital reserve
Represents share-based payment costs and goodwill on the subscription of shares related to
capital contributions by shareholders exceeding the amount allocated to capital formation.
The capital reserve as at June 30, 2016 is R$61,983 (R$64,305 as at December 31, 2015).
c.
Treasury shares
On February 26, 2016, the Company's Board of Directors, pursuant to article 8, paragraph 3 of
CVM Instruction No. 567/15, approved the acquisition of up to 1,000,000 common shares,
without par value, issued by the Company itself, equivalent to approximately 0.13% of the
outstanding shares of the Company, to allow the exercise of the option or shares to be granted
under the Company's Stock Option Plan (Plan), approved and adopted in the Annual and
Extraordinary General Meetings held on 06/01/2009 and 04/29/2011, respectively, and for the
statutory directors and non statutory eligible according to the rules set out in the Plan, within
365 days from the disclosure of the significant event of the offering which communicated the
approval of the repurchase program. Moreover, these acquisitions of shares issued by the
Company itself are limited to the balance available in line item "Capital reserve" calculated
during the fiscal year, in compliance with articles 1 and 12 of Instruction 10/80.
33
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
The Company's Management is responsible for deciding when and what number of shares to
buy, within authorized limits.
Changes in treasury shares are as follows:
Parent Company and Consolidated
Shares
Amount
(4,846,312)
32,966
255,158
(394,350)
(394,355)
113,005
5,491
(5,228,397)
(140,648)
957
7,405
(12,263)
(12,641)
3,322
161
(153,707)
29.02
29.02
29.02
29.19
29.40
29.40
29.40
29.40
(1,046,778)
147,468
653,943
29,043
3,613
16,018
711
24.49
24.49
24.49
(5,444,721)
(133,365)
24.49
(*)
Bonus: New common shates were issued and one new common share for each lot of five common shares was freely
assigned to shareholders , as bonus, generating total effect of 1,046,778 new shares.
d.
Comprehensive income
Represent cumulative translation adjustments for translation into the foreign currency of the
foreign investments and gains or losses on instruments designed to hedge foreign investments,
net of taxes. The balances below reflect accumulated adjustments at the end of the reporting
period, as follows:
Parent Company and
Consolidated
e.
06/30/2016
12/31/2015
374,540
(353,195)
(10,645)
592,829
(568,783)
(10,645)
10,700
13,401
34
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
f.
g.
35
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
17
(*)
Shares issued
Common
1,881,830,814
Total
2,258,567,830
32,966
255,158
(394,350)
(394,355)
113,005
5,491
376,288,648
147,467
653,943
29,043
Bonus: New common shates were issued and one new common share for each lot of five common shares was freely
assigned to shareholders, as bonus, generating total effect of 1,046,778 new common shares.
Six-month period
06/30/2016
06/30/2015
06/30/2016
06/30/2015
989,167
869,448
1,984,556
1,781,297
2,258,401
2,256,756
2,258,771
2,258,160
0.43799
0.38526
0.8786
0.78883
989,167
869,448
1,984,556
1,781,297
2,258,401
4,647
2,256,756
6,076
2,258,771
4,647
2,258,160
6,076
2,263,048
2,262,832
2,263,418
2,264,236
0.43709
0.38423
0.87680
0.78671
36
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
18
Net revenue
Parent Company
Three-month period
Consolidated
Six-month period
Three-month period
Six-month period
06/30/2016
06/30/2015
06/30/2016
06/30/2015
06/30/2016
06/30/2015
06/30/2016
06/30/2015
Taxes on services
2,001,471
(202,254)
1,909,308
(192,502)
4,032,324
(406,752)
3,802,578
(383,387)
3,377,657
(308,633)
3,078,642
(282,861)
6,727,416
(610,494)
5,665,173
(517,628)
Total
1,799,217
1,716,806
3,625,572
3,419,191
3,069,024
2,795,781
6,116,922
5,147,545
The gross operating revenue is derived from the capture, transmission, processing and financial
settlement of the transactions made with credit and debit cards, management of payment
accounts related to Ourocard Payment Arrangement, rental of POS equipment, and provision of
services for using the network.
19
Expenses by nature
The Company elected to present the consolidated statement of profit or loss by function.
The breakdown of cost of services provided and net operating expenses by nature is as follows:
Parent Company
Three-month period
Six-month period
Consolidated
Three-month period
Six-month period
110,695
100,016
217,085
201,842
187,921
167,590
370,003
324,941
105,939
105,414
440,432
82,333
102,610
87,687
408,171
67,512
215,321
208,260
867,316
140,625
199,007
170,288
807,116
121,638
241,147
120,722
1,118,824
85,596
225,964
87,832
975,589
70,346
488,751
241,135
2,197,295
146,644
382,412
174,930
1,706,977
125,387
20,446
25,904
40,922
60,069
190,217
19,206
104,234
38,067
332,907
76,741
191,654
88,673
Total
865,259
791,900
1,689,529
1,559,960
1,963,633
1,669,622
3,853,476
2,994,974
548,920
73,412
512,088
61,579
1,093,341
141,045
1,018,478
124,278
1,516,907
135,159
1,302,763
115,563
2,979,840
261,612
2,296,133
222,052
98,505
82,332
95,886
67,512
200,190
140,625
186,583
121,638
141,331
85,596
121,320
70,346
287,844
146,644
236,184
125,387
62,090
54,835
114,328
108,983
84,640
59,630
177,536
115,218
865,259
791,900
1,689,529
1,559,960
1,963,633
1,669,622
3,853,476
2,994,974
Classified as:
Cost of services provided
Personnel expenses
General and administrative
expenses
Sales and marketing
Other operating expenses,
net
Total
(a)
Acquiring costs are mainly represented by expenses on logistics and maintenance of POS equipment, supplies to merchants, customer registration and service,
telecommunication services, and capture and processing of transactions.
(b)
Sales and marketing and sales expenses include campaigns for trademark development, advertising and marketing, internal marketing and sales
incentives to partners and issuing banks.
(c)
Refer to the cost of the product sold related to the credit minutes for cell phones sold by the direct subsidiary Multidisplay.
37
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
20
Consolidated
Six-month period
Three-month period
Six-month period
06/30/2016
06/30/2015
06/30/2016
06/30/2015
06/30/2016
06/30/2015
06/30/2016
06/30/2015
(28,531)
(41,902)
(56,190)
(82,974)
(45,605)
(49,988)
(84,236)
(91,059)
(8,325)
(152)
(17,206)
(426)
(12,800)
3,133
(23,531)
2,425
(26,669)
(13,167)
(43,284)
(18,867)
(26,670)
(13,167)
(43,285)
(18,966)
(23,997)
(7,839)
(392)
(7,839)
(392)
1,435
778
2,352
1,123
435
784
(2,487)
221
(62,090)
(54,835)
(114,328)
(108,983)
(84,640)
(59,630)
(177,536)
(115,218)
(a)
In the six-month period ended June 30, 2016, the Company recognized a provision for impairment loss related to the
investment in Stelo, through its subsidiary Aliana.
(b)
Expenses on investment banks and attorneys fees related to the strategic project of creating Cateno in association
with BB ELO Cartes, a wholly-owned subsidiary of Banco do Brasil S.A.
21
Commitments
The Company is engaged in the capture, transmission, processing and financial settlement of
transactions made using credit and debit cards. In order to conduct said activities, the Company
entered into the following agreements:
a. Lease agreements
As at June 30, 2016, future annual payments under lease agreements in effect are
estimated as follows:
Consolidated
Up to 1 year
1 year to 5 years
14,979
33,551
Total
48,530
Most agreements specify a penalty for termination equivalent to three-month rent, and a partial
return can be negotiated for each case.
38
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Consolidated
Up to 1 year
1 year to 5 years
212,598
599,644
Total
812,242
The call center contracts contain penalties for termination in the amount of R$11,053. The
transaction capture and processing contracts, as well as the telecom contracts and back office,
do not provide for penalty for termination.
22
Employee benefits
Pension plan
The Company and its subsidiary Servinet contribute monthly to a defined contribution pension
plan (PGBL) for their employees, and contributions made during the six-month period ended
June 30, 2016 amounted to R$4,323 (R$5,544 during the six-month period ended June 30,
2015), recognized in line items Cost of services provided and Personnel expenses.
Others benefits
Besides the benefit of pension plan the Company and its subsidiaries offer their employees,
health insurance, dental care, life and personal accident insurance and professional training, the
amount of these expenses totaled R$27,311 in the six-month period ended June 30, 2016
(R$23,463 in the six-month period ended June 30, 2015).
The Company has a Corporate Education Program that aims to leverage learning, ensuring the
mapping and the dissemination of key knowledge through practical and educational activities
that encourage the creation, acquisition, dissemination, use and sharing of knowledge, focusing
on business results. In addition, in the Company, there is development of actions for all
employees, for example, leadership development, e-learning, contract training, on-demand
training, continuing education and languages. The costs related to the actions described are
recognized in profit or loss when incurred.
23
Profit sharing
The Company and its subsidiaries pay profit sharing to their employees and officers, subject to
the achievement of operational goals and specific objectives established and approved at the
beginning of each fiscal year.
The shares of employees and managers in profit for the six-month periods ended June 30, 2016
and 2015 were recorded under "Personnel expenses" in the statement of profit or loss and are
presented as follows:
Parent Company
Three-month period
Six-month period
Employees
Statutory Directors
Total
Consolidated
Three-month period
Six-month period
06/30/2016
06/30/2015
06/30/2016
06/30/2015
06/30/2016
06/30/2015
06/30/2016
06/30/2015
13,829
13,428
27,786
26,294
18,716
18,597
37,265
35,788
3,651
3,537
7,067
6,683
3,899
3,780
7,479
7,168
17,480
16,965
34,853
32,977
22,615
22,377
44,744
42,956
39
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
24
Statutory Directors
Board of Directors
Total
Three-month period
06/30/2016
Fixed Variable (*)
Total
Six-month period
06/30/2016
Fixed Variable (*)
2,706
515
3,221
4,510
975
5,485
2,728
2,728
5,434
515
5,949
Three-month period
Statutory Directors
Board of Directors
Total
(*)
5,774
5,774
Total
10,284
975
11,259
Six-month period
Fixed
06/30/2015
Variable (*)
Total
Fixed
06/30/2015
Variable (*)
Total
1,586
487
2,073
2,764
2,764
4,350
487
4,837
3,450
897
4,347
5,468
5,468
8,918
897
9,815
Management (Executive Committee and Board of Directors) and the Fiscal Council overall
compensation in 2016, set by the Annual General Meeting held on April 8,
2016, was R$46,458, plus related taxes and contributions thereon, as prescribed by the
prevailing laws.
For the Fiscal Council, annual compensation approved for the year ended December 31, 2016
and 2015 was R$515 and R$547, respectively.
25
July 2011
July 2012
July 2013
July 2014
March 2015
July 2015
March 2016
(*)
Total
Granted
Canceled
Exercised
Bonus
Balance
2012
2013
2014
2015
2016
Exercise
price
(R$ per
share)
Fair value
of options
(R$ per
share)
1,315,854
986,475
1,049,141
1,561,552
178,492
557,354
(276,942)
(183,624)
(266,809)
(171,667)
(27,516)
(2,409,103)
(2,002,462)
(1,137,964)
(244,939)
(27,135)
(41,823)
262,413
-
273,433
188,945
-
836,145
1,047,455
989,734
-
54,395
254,514
370,317
303,607
-
25,785
107,483
263,000
311,729
34,971
105,050
81,980
398,786
1,267,419
1,760,282
186,328
593,065
7.54
12.87
15.03
22.65
-
3.01
5.29
7.00
10.44
23.49
34.59
235,535
5,885,415
(914,329)
(24,250)
(5,894,756))
262,413
462,579
2,866,756
983,049
47,109
895,127
258,394
4,546,254
26.48
(*) In a meeting of the Board of Directors held on January 27, 2016, the plan Scio Cielo 2016 - "Restricted shares", granted in
March of the same year, was approved.
40
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
In the six-month period ended June 30, 2016, a provision of R$16,325 was recognized, net of
charges (R$11,530 in the six-month period ended June 30, 2015), with an offsetting entry to line
item Personnel expenses. These amounts correspond to the portion of Statutory Directors in
the amount of R$9,949 net of charges (R$4,883 as at June 30, 2015).
1,237,073 shares were exercised, in amount of R$18,647 for the six-month period ended June
30, 2016 (690,498 shares amounting to R$14,145 for the six-month period ended June 30,
2015), and the total stock options granted which was recorded in line item Capital reserve in
equity, as at June 30, 2016, in the amount of R$2,322 (R$2,615 as at June 30,
2015).
26
Finance income
Parent Company
Three-month period
Consolidated
Six-month period
Three-month period
Six-month period
06/30/2016
06/30/2015
06/30/2016
06/30/2015
06/30/2016
06/30/2015
06/30/2016
06/30/2015
Finance income:
Interest on short-term investments
Other finance income
Pis and Cofins on finance income (b)
7,171
1,070
(386)
2,641
639
-
36,020
1,535
(1,749)
53,365
1,248
-
42,030
1,234
(2,014)
23,165
715
-
102,929
1,947
(4,866)
75,628
1,343
-
Total
7,855
3,280
35,806
54,613
41,250
23,880
100,010
76,971
Finance costs:
Late payment interest and fines
Provision for risks fines and interest
Withholding income tax on interest
remittance abroad
Interest on borrowings
Other finance costs
(28)
(1,353)
(24)
(363)
(54)
(3,260)
(116)
(1,482)
(31)
(1,377)
(53)
(369)
(78)
(3,301)
(171)
(1,494)
(2,703)
(266,510)
(5,352)
(2,735)
(283,902)
(5,678)
(6,257)
(579,106)
(10,233)
(5,002)
(452,462)
(9,779)
(2,703)
(280,212)
(5,631)
(2,735)
(291,825)
(6,518)
(6,257)
(608,017)
(11,076)
(5,002)
(471,547)
(11,536)
Total
(275,946)
(292,702)
(598,910)
(468,841)
(289,954)
(301,500)
(628,729)
(489,750)
678,986
(31,529)
(43,151)
561,697
(68,077)
1,364,523
(62,848)
(73,333)
1,085,811
(129,277)
678,252
(31,530)
(43,151)
561,697
(68,077)
1,363,146
(62,848)
(73,333)
1,085,811
(129,277)
Total
604,306
493,620
1,228,342
956,534
603,571
493,620
1,226,964
956,534
(3,114)
1,344
(5,241)
3,568
(3,037)
1,354
(5,159)
3,594
333,101
205,542
659,997
545,874
351,830
217,354
693,086
547,349
Revenue from purchase of receivables net of pro rata temporis adjustment for the three and six-month periods ended June 30, 2016 and 2015
comprises revenue from the purchased volume of transactions with credit in cash and installment sales, recognized according to the maturity dates of
the transactions.
(b)
Expenses on Pis and Cofins on finance income earned by the Group companies, subject to the non-cumulative taxation regime, at the rates of 0.65%
and 4%, respectively, as laid down in Decree 8426/15, effective July 1, 2015. The expenses incurred in the period were recognized as Finance
Income and Income from Purchase of Receivables, in the proportion of their levy, for better presentation of the line items.
(c)
Financial charges arising from funding with third parties to undertake transactions related to purchase of receivables. Funding for the six-month period
ended June 30, 2015 was partially in the form of Promissory Notes issued on December 29, 2014 and fully redeemed on April 13, 2015, funds from
Bank of Tokyo-Mitsubishi UFJ, Ltd. and transactions related to advances on the flow of receivables with issuers. Cost of funding with third parties was
recognized in line item Revenue from Purchase of Receivables in order to reflect better the net effect of purchase of receivables in the individual and
consolidated interim financial information.
(d)
Derives substantially from the exchange variation related to two borrowings in U.S. dollars in the amounts of US$204,625 thousand and US$109,016
thousand, equivalent to R$630,000 and R$370,000 at the contracting dates respectively, both maturing on December 19, 2016 taken from Bank of
Tokyo-Mitsubishi UFJ, Ltd and variation of financial instruments contracted to hedge these transacations, represented by:
41
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Parent Company
Three-month period
27
Consolidated
Six-month period
Three-month period
Six-month period
06/30/2016
06/30/2015
06/30/2016
06/30/2015
06/30/2016
06/30/2015
06/30/2016
06/30/2015
45,221
(48,335)
1,344
-
88,950
(94,191)
3,568
-
45,313
(48,350)
1,362
(8)
89,051
(94,210)
3,607
(13)
(3,114)
1,344
(5,241)
3,568
(3,037)
1,354
(5,159)
3,594
Financial instruments
The estimated fair values of the Groups financial assets and financial liabilities were
determined using available market inputs and appropriate valuation methodologies. However,
considerable judgment was required to interpret market input and then develop the most
appropriate fair value estimates. Accordingly, estimates presented herein are not necessarily
indicative of the amounts that could be realized in the market. The use of different market
methodologies may have a significant effect on the estimated realizable values.
These financial instruments are managed through operating strategies that aim at obtaining
liquidity, profitability and security. The control policy consists of permanent monitoring of the
contracted rates compared to market rates. The Group does not make investments for
speculative purposes, either in derivatives or either in other risk assets.
42
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Consolidated
06/30/2016
12/31/2015
06/30/2016
12/31/2015
Debt (i)
Derivative financial instruments (ii)
Cash and cash equivalentes
Financial investments
(9,521,137)
(1,606)
10,846
70,613
(11,727,888)
213,314
44,487
66,124
(10,813,659)
(1,606)
1,228,552
70,613
(13,299,493)
213,314
1,249,524
66,124
Net debt
(9,441,284)
(11,403,963)
(9,516,100)
(11,770,531)
7,895,127
6,520,677
11,546,278
10,163,967
119.58%
174.89%
82.42%
115.81%
Equity (iii)
Indebtdness ratio net
(i)
(ii)
Derivative financial instruments comprise the position of the swap contracts, mentioned in item g - Fair value hedge.
(iii)
Equity includes the entire share capital and the Groups reserves, managed as capital.
Type
Cash and cash equivalents
Trade receivables
Receivables from related parties
Escrow deposits
Financial investments
Trade payables
Payables to merchants
Payables to related parties
Derivative financial instruments (Swap)
Borrowings
Borrowings
Consolidated
Carrying
amount
Fair
value
Carrying
amount
Fair
value
10,846
8,829,436
2,890
1,404,516
70,613
603,914
585,445
19,673
1,606
8,519,852
1,001,285
10,846
8,829,436
2,890
1,404,516
70,613
603,914
585,445
19,673
1,606
8,699,220
1,001,285
1,228,552
9,765,395
656
1,411,937
70,613
739,185
1,052,524
2,856
1,606
9,812,373
1,001,285
1,228,552
9,765,395
656
1,411,937
70,613
739,185
1,052,524
2,856
1,606
9,958,482
1,001,285
The fair value of financial assets and financial liabilities and short- and long-term borrowings
was determined, when applicable, by using current interest rates available for transactions
conducted under similar conditions and with similar maturity dates.
The Company applies CPC 40 for financial instruments measured at fair value in the statement
of financial position, which requires disclosure of fair value measurements at the following fair
value measurement hierarchy:
43
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
Inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).
Inputs for the asset or liability that are not based on data adopted by the market (that is,
unobservable inputs) (Level 3).
The following table presents the Groups assets and liabilities as at June 30, 2016:
Parent Company
Consolidated
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
10,846
-
70,613
10,236,842
1,228,552
-
70,613
11,177,988
Liabilities:
Borrowings
9,521,137
10,813,658
1,209,032
1,606
1,794,565
1,606
Assets:
Cash and cash equivalentes
Derivative financial instrument (swap)
Financial investments
Others (loans and receivables)
c. Credit risk
In Cielos operations of merchant acquiring, the primary risk refers to the possibility of default
of card issuers, which are required to transfer to Cielo the amounts charged relating to
transactions carried out by holders of the cards issued by them, so that Cielo can then transfer
these amounts to its affiliated establishments. This primary risk is substantially mitigated by the
very legal-financial model of transferring amounts adopted by Cielo, since the amounts already
paid by the holders to an issuer that may become in default will always be treated as third-party
funds and, as such, should be transferred to Cielo and, then, from Cielo to the commercial
establishment - the end creditor of the transaction.
Cielos model of transferring amounts substantially mitigates the risk of default of the card
issuers, also remaining a residual risk to Cielo relating to the possible default of cardholders to
the issuer in a situation of default. This residual risk may or may not exist for Cielo depending
on the risk/guarantee model adopted by the card Brand on its operation with the card issuers and
acquirers.
Each branch has its own guarantee system, which is specified in its regulations. Considering the
variation of the guarantee model and the risk level of the accrediting entities, the Company
assesses and manages such risks according to the model of each brand, requiring or waiving the
provision of guarantees.
Note that even with this model of hedging provided by the Brand, in any situation of default of
any card issuer, Cielo will always resort primarily to its legal-financial model of transferring
amounts for the prompt recovery of amounts received or that come to be received from
cardholders by the card issuer.
44
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
The Company has rights subject to credit risk with financial institutions recorded in line items
of cash and cash equivalents, financial investments, derivative financial instruments and
receivables from issuing banks, totaling R$8,910,895 in the Parent Company and
R$11,064,560 in Consolidated.
d. Fraud risk
The Company uses an antifraud system to monitor transactions with credit and debit cards,
which detects and identifies suspected fraud at the time of the authorization and sends an alert
message to the card-issuing bank for it to contact the cardholder.
45
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
12/31/2015
Fair value
(market)
Amount
receivable/
(payable)
Amount
receivable/
(payable)
Maturity
date
Notional
R$
Long
position
12/19/2016
630,000
27,064
(2,633)
(3,330)
21,101
160,789
12/19/2016
370,000
(19,911)
(1,546)
(1,250)
(22,707)
52,525
1,000,000
7,153
(4,179)
(4,580)
(1,606)
213,314
(1,606)
213,314
Total
Current assets
Short
MTM
position Adjustment
Fair value
(market)
The terms of the borrowing and swap agreements were entered into so that the comparison
between the swaps long position (Companys accounts receivable) and the borrowing balance
(Companys accounts payable), both adjusted at fair value, does not present losses or gains
deriving from contracted foreign exchange and interest rate variation for hedged item.
Accordingly, the Company remains exposed only to swaps short position, which has notional
value in reais in the amount of R$1,000,000 remunerated at 99.4% of the daily average interest
rate of the DI - Interbank Deposits.
In order to document the adopted designation strategy and the effectiveness of the derivative
financial instrument, the Company used the hypothetical derivative method, which is based on a
comparison of change in the fair value of a hypothetical derivative with terms identical to the
critical terms of the variable-rate liability, and this change in the fair value is considered a
representation of the present value of the cumulative change in the future cash flow expected for
the hedged liability. Accordingly, gains and losses on the hedging instrument and the hedged
item are recognized at fair value in profit or loss for the period in which they arise.
The method used by the Company to determine the market value consists in calculating the
future value based on contracted conditions and determine the present value based on market
curves extracted from BM&F BOVESPA.
As at June 30, 2016, the hedging relationships established by the Company were effective,
according to prospective tests conducted. Thus, no reversal for hedge accounting ineffectiveness
was recognized.
46
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Consolidated
Assets:
Cash and cash equivalents
Trade receivables
Other assets
Investments in foreign currency
Property and equipment
Intangible assets, including goodwill
1,296
312,794
-
81,708
154,882
4,767
5,251
708,745
Total
314,090
955,353
Liabilities:
Payables to merchants
Other liabilities
Foreign borrowings - principal
Foreign borrowings - interest
Foreign borrowings - charges
Deferred income tax
Tax effect on hedging instruments - bonds designated as hedge of the net foreign investment
(218)
(470,000)
(2,203)
159,800
(145,734)
(15,585)
(875,000)
(2,831)
2,948
(77,482)
159,800
Total
(312,621)
(953,884)
1,469
1,469
The Company enters into forward exchange transactions for US dollars to hedge against
fluctuations in exchange rates, which reduces significantly potential currency risks.
Problable
scenario
10%
Possible
scenario
25%
Remote
scenario
50%
361
(471)
902
(1,179)
1,805
(2,357)
(i) Refers mainly to the exposure of trade receivables and trade payables in US dollars at the end of each reporting
period.
47
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
j. Liquidity risk
The Group manages the liquidity risk by maintaining proper reserves, bank and other credit
facilities to raise new borrowings that it considers appropriate, based on the continuous
monitoring of budgeted and actual cash flows, and the combination of the maturity profiles of
financial assets and financial liabilities.
Financial investments
Borrowings
28
Consolidated
Probable
Scenario
10%
Possible
Scenario
25%
Remote
Scenario
50%
Probable
Scenario
10%
Possible
Scenario
25%
Remote
Scenario
50%
3,602
57,911
9,005
144,776
18,010
289,553
10,293
60,802
25,732
152,004
51,464
304,008
48
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Parent Company
06/30/2016
Shareholders
12/31/2015
Banco
Bradesco
Banco do
Brasil
Servinet
Orizon
Multidisplay
M4Produtos
Paggo
Braspag
Cateno
1,070
7,583
8,653
13,550
3,278
-
1,780
(3,506,415)
-
(15,144)
34
-
1,221
-
906
(978)
9
-
69
(481)
38
-
613
(2,856)
(214)
5,058
(3,506,415)
2,890
(19,673)
5,892
(3,506,434)
1,587
(17,808)
Assets (Liabilities):
Cash and cash
equivalents (a)
Trade receivables
Borrowings (f)
Receivables from related parties
Payables to related parties
Stelo
Aliana
Total
Total
Consolidated
06/30/2016
Shareholders
Assets (Liabilities):
Cash and cash equivalents (a)
Trade receivables
Borrowings (f)
Receivables from related
parties
Payables to related
parties
12/31/2015
Banco Bradesco
Banco do Brasil
Servinet
Orizon
Multidisplay
M4Produtos
Paggo
Braspag
Cateno
7,358
3,278
-
8,784
1,780
(3,506,415)
34
49
Stelo
Aliana
Total
Total
16,142
5,058
(3,506,415)
289,631
5,892
(3,506,434)
613
656
459
(2,856)
(2,856)
(398)
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Parent Company
Six-month
period ended
June 30, 2015
06/30/2016
Shareholders
Revenues:
Income from financial investments (a)
Revenue from other services (b)
Revenue from rental of POS equipment
Expenses:
Other operating expenses - membership commission
Other operating expenses (c)
Service agreement with Servinet and Aliana (d)
Data processing services (e)
Finance costs (f)
Promissory notes placement service provision
Banco
Bradesco
Banco do
Brasil
2,953
19,938
-
11,753
11,784
-
8
28
4,857
-
4,080
-
120
-
14,706
40,787
28
48,214
32,815
63
(1,927)
(14,760)
-
(1,550)
(1,327)
(246,805)
-
(83,959)
-
(7,310)
-
(4,106)
(1,795)
-
(1,338)
-
(3,477)
(27,503)
(85,297)
(1,795)
(246,805)
-
(3,866)
(22,055)
(73,724)
(282)
(150,436)
(4,360)
Servinet
Orizon
Multidisplay
50
M4Produtos
Paggo
Braspag
Cateno
Stelo
Aliana
Total
Total
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Consolidated
Six-month
period ended
June 30, 2015
06/30/2016
Shareholders
Revenues:
Income from financial investments (a)
Revenue from other services (b)
Revenue from the rental of POS equipment
Expenses:
Other operating expenses - membership commission
Other operating expenses (c)
Finance costs (f)
Payment management service provision (g)
Promissory notes placement service provision
Banco
Bradesco
Banco do
Brasil
Servinet
Orizon
2,953
19,938
-
76,294
11,784
-
8
28
(1,927)
(14,760)
-
(1,550)
(1,327)
(246,805)
(11,579)
-
Multidisplay
M4Produtos
Paggo
Braspag
Cateno
Stelo
Aliana
Total
Total
79,247
31,730
28
68,401
27,547
63
(3,477)
(16,087)
(246,805)
(11,579)
-
(3,866)
(15,213)
(150,436)
(6,975)
(4,360)
(a)
(b)
Balances corresponding to the amounts held in current account and short-term investments whose terms, charges and interest rates were agreed under conditions similar to those applicable to unrelated parties.
Correspond to services of fraud prevention and receivables-based financing provided by the Company to the shareholder banks, commission on processing of transactions for the companies M4Produtos, Multidisplay and Orizon, provision
of financial, administrative, procurement, legal, and HR services for the company Braspag and purchase of receivables from the company Multidisplay. These related-party transactions are carried out at prices and conditions similar to those
practiced with other issuing banks.
(c)
Services contracted with shareholder banks, relating to: (i) corporate collective life insurance; (ii) health and dental insurance; and (iii) private pension agreement. Development of mobile capture solution services to company M4Produtos
and transactions pre-processing services to Braspag. The Company understands that the financial conditions adopted by the shareholders in respect of prices, terms and other conditions were applied under conditions similar to those adopted
with respect to third parties.
(d)
Provision of accreditation and maintenance services by the subsidiaries Servinet and Aliana with commercial establishments and service provider entities for the acceptance of credit and debit cards, as well as other means of payment.
Foreseen remuneration for provided services is established based on costs incurred by Servinet and Aliana upon provision of said services, plus taxes and contributions, as well as remuneration margin.
(e)
(f)
Refer to the balances of the Private Debenture issuance maintained by BB Elo Cartes, a company of the Banco do Brasil conglomerate.
(g)
Service provision by Banco do Brasil to Cateno in order to operate as Payment Institution in the management of post-paid accounts and purchase functions by charging the Ourocard Payment Arrangement while Cateno's Granted Rights are
not exercised by it.
51
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
52
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
53
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Cateno project
On February 27, 2015, the Company entered into an association with BB Elo Cartes
Participaes S.A., a wholly owned subsidiary of Banco do Brasil S.A., for the creation of
Cateno.
29
Segment information
Information by operating segments is presented consistently with the internal reports provided
to the Chief Operating Decision-Maker - CODM
As of the association closing process with BB Elo Cartes, when Cateno was established on
February 27, 2015, with operating activities that refer substantially to managing payment
accounts within the scope of the Ourocard Payment Arrangement, the Group now holds two
types of business: (i) service provision related to capturing and processing of credit and debit
card transactions, other means of payment, accreditation of merchants and related services, and
(ii) management of transactions arising from credit and debit card transactions, among which
issuing cards, managing payment accounts, support to management and control of security in
transactions, payments of fees to the brands and payment arrangements, and other services
related to managing payment accounts.
Therefore, as of 2015, Management started separately monitoring the operating profit or loss
of its business units in order to make decisions on allocation of resources and performance
evaluation. Performance of segments is assessed based on several metrics, such as net revenue,
profit before taxes, profit for the year, among others that in many cases are measured differently
from operating profit or loss in the consolidated interim financial information. Additionally,
financial information presented in the segment performance does not correspond to the profit or
loss of any Groups company individually.
54
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
Regarding operations in different geographical areas, the Company carries out transactions in
Brazil and the United States of America through its subsidiaries Me-S and Cielo USA.
Three-month period ended June 30, 2016
Capturing and
processing of
transactions
Management of
payment
accounts
Domestic market
Foreign market
Net operating revenue
Cost of services provided
Depreciation and amortization
Gross profit
Operating expenses
Depreciation and amortization
Operating profit
Finance income (costs)
Profit (loss) before taxes
Income tax and social contribution
Profit (loss)
2,017,585
441,992
2,459,577
(976,318)
(126,363)
1,356,896
(394,648)
(18,322)
943,926
563,868
1,507,794
(446,381)
1,061,413
Attributable to:
Owners of the Company
Noncontrolling interests
1,059,726
1,687
Consolidated
Capturing and
processing of
transactions
Management of
payment
accounts
Consolidated
609,447
609,447
(317,764)
(96,462)
195,221
(31,260)
163,961
(212,038)
(48,077)
16,368
(31,709)
2,627,032
441,992
3,069,024
(1,294,082)
(222,825)
1,552,117
(425,908)
(18,322)
1,107,887
351,830
1,459,717
(430,013)
1,029,704
1,843,440
380,688
2,224,128
(799,561)
(115,415)
1,309,152
(332,369)
(14,115)
962,668
460,669
1,423,337
(465,508)
957,829
571,653
571,653
(291,354)
(96,433)
183,866
(16,733)
167,133
(243,316)
(76,183)
25,908
(50,275)
2,415,093
380,688
2,795,781
(1,090,914)
(211,849)
1,493,018
(349,102)
(14,115)
1,129,801
217,354
1,347,155
(439,599)
907,556
(70,559)
38,850
989,167
40,537
956,688
1,141
(87,242)
36,967
869,448
38,108
Domestic market
Foreign market
Net operating revenue
Cost of services provided
Depreciation and amortization
Gross profit
Operating expenses
Depreciation and amortization
Operating profit
Finance income (costs)
Profit (loss) before taxes
Income tax and social contribution
Profit (loss)
Attributable to:
Owners of the Company
Noncontrolling interests
Capturing and
processing of
transactions
Management of
payment
accounts
4,013,477
900,972
4,914,449
(1,900,885)
(258,976)
2,754,588
(777,629)
(36,876)
1,940,083
1,163,628
3,103,711
(941,582)
2,162,129
2,155,818
6,311
Consolidated
Capturing and
processing of
transactions
Management of
payment
accounts
Consolidated
1,202,473
1,202,473
(627,081)
(192,898)
382,494
(54,650)
(1)
327,843
(470,542)
142,699
48,529
(94,170)
5,215,950
900,972
6,116,922
(2,527,966)
(451,874)
3,137,082
(832,279)
(36,877)
2,267,926
693,086
2,961,012
(893,053)
2,067,959
3,658,749
709,805
4,368,554
(1,542,383)
(226,226)
2,599,945
(640,733)
27,608
1,931,604
884,023
2,815,627
(910,400)
1,905,227
778,991
778,991
(398,946)
(128,578)
251,467
(23,147)
228,320
(336,675)
(108,355)
36,848
(71,507)
4,437,740
709,805
5,147,545
(1,941,329)
(354,804)
2,851,412
(663,880)
(27,608)
2,159,924
547,349
2,707,273
(873,551)
1,833,722
(171,262)
77,092
1,984,556
83,403
1,902,005
3,222
(120,710)
49,203
1,781,297
52,425
In order to start operating in the Management of Payment Accounts business segment, the
Ourocards Payment Arrangement exploitation rights were granted to the subsidiary Cateno, in
February 2015, in the amount of R$11,572 million.
The balances by segment as at June 30, 2016 and December 31, 2015 are as follows:
55
Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim
15,466,875
12,379,631
27,846,506
172,421
94,830
882
-
173,303
94,830
30
Consolidated
17,540,255
12,437,546
29,977,801
553,463
105,108
11,601,343
-
12,154,806
105,108
Noncash transactions
Parent Company
31
Consolidated
Consolidated
06/30/2016
218,290
326,650
612,366
06/30/2015
139,994
213,566
524,785
06/30/2016
218,290
608,034
612,366
06/30/2015
139,994
393,811
524,785
117
-
2,159
-
3,590,688
Insurance
As at June 30, 2016, the Company has the following insurance agreements:
Insured
amount
Type
Civil liability of Directors and Officers
Named perils (fire, windstorm and smoke, electrical damages, electronic equipment, theft
and flood)
Loss of profits
Vehicles
POS equipment warehousing
POS equipment transportation
POS equipment FINAME
32
265,000
264,035
18,977
511
221,028
2,097,091
918,699
56
DEAR SHAREHOLDERS:
We present the performance report and interim financial information of Cielo S.A. (Companys or
Cielo), subsidiaries and associated company (Group), presented as part of quarter statement forms
ITR, for the quarter ended June 30, 2016, and the Independent Auditors Report on Review of Interim
Financial Information.
The individual (Company) and consolidated interim financial information has been prepared in accordance
with the international standard IAS 34 - Interim Financial Reporting and other International Financial
Reporting Standards - IFRSs issued by the International Accounting Standards Board - IASB and accounting
practices adopted in Brazil which includes those established in the Brazilian Corporate Law, as well as the
technical pronouncements, instructions and interpretations issued by the Accounting Pronouncements
Committee ("CPC") and approved by the Brazilian Securities and Exchange Commission ("CVM").
The consolidated financial information includes the balances of Cielo's accounts (parent company), its direct
subsidiaries Multidisplay, Servinet, Braspag, Cielo USA, Cateno and Aliana, as well as indirect subsidiaries
Me-S and M4Produtos. The result of joint ventures Orizon and Paggo and associated Stelo is accounted for
under the equity method in interim financial information. The results of subsidiaries acquired during the year
are included in the consolidated statement of income from the date of acquisition. When necessary,
adjustments are made to the financial statements of subsidiaries to bring the accounting policies adopted in
line with those adopted by the Group. All intercompany transactions, balances, income and expenses are
eliminated in the consolidation process.
HIGHLIGHTS 2Q16
Transaction financial volume totaled R$142.6 billion, up 9.9% compared to 2Q15, or R$12.9 billion, and
up 2.2% compared to 1Q16, or R$3.1 billion;
Net operating revenue totaled R$3,069.0 million, up 9.8% year-on-year, or R$273.2 million, and up 0.7%
compared to 1Q16, or R$21.1 million;
Accounting result with purchase of receivables totaled R$603.6 million, up 22.3% year-on-year, or
R$110.0 million, and down 3.2% quarter-on-quarter, or R$19.8 million. Purchase of receivables reached
20.4% over the financial credit volume, up 1.9 p.p. compared to 2Q15 and up 0.3 p.p. compared to 1Q16;
Total expenditure totaled R$1,961.1 million, up 17.7% year-on-year, or R$295.2 million, and up 3.9%
compared to 1Q16, or R$73.3 million;
Cielos net income totaled R$989.2 million, up 13.8% year-on-year, or R$119.8 million, and down 0.6%
quarter-on-quarter, or R$6.2 million;
EBITDA of R$1,349.0 million, down 0.5% year-on-year, or R$6.8 million, and down 4.2% quarter-onquarter, or R$58.6 million.
OPERATING PERFORMANCE
In 2Q16, the transaction financial volume totaled R$142.6 billion, an expansion of 9.9% compared to
R$129.7 billion in the same period in 2015, and up 2.2% compared to R$139.5 billion recorded in 1Q16.
Specifically with credit cards, financial volume totaled R$81.0 billion in 2Q16, up 4.5% compared to 2Q15
and up 1.7% quarter-on-quarter.
With debit cards, financial volume totaled R$61.6 billion in 2Q16, an increase of 17.9% compared to 2Q15
and up 2.8% quarter-on-quarter.
In addition, Cielo captured 1.631 billion transactions in 2Q16, an increase of 9.1% compared to 2Q15 and up
0.5% over 1Q16.
Cielos consolidated net revenue totaled R$3,069.0 million in 2Q16, increased by R$21.1 million or 0.7%,
compared to R$3,047.9 million in 1Q16. Such growth derives from increased revenue from subsidiaries due
to ongoing business expansion, partially offset by the average dollar depreciation in the quarter, applied in
the consolidation of foreign investments.
The cost of services provided totaled R$1,516.9 million in 2Q16, increased R$54.0 million, or 3.7%
compared in 1Q16. This increase was mainly due to the following:
(i)
Increase of R$39.9 million related to the subsidiaries M4U and Merchant e-Solutions, due to
ongoing business expansion, chiefly related to an increase of mobile credit sales, partially
reduced by the average dollar depreciation in the quarter, which impacts the costs of foreign
subsidiaries;
(ii)
Increase of R$8.5 million in costs related to the management of the Ourocard Arrangement, such
as cards issuing and management, supplies and call centers, due to ongoing business expansion
of subisidiary Cateno;
(iii)
Net increase of R$5.6 million in costs related to the acquiring business, mostly represented by:
(a) Increase of R$9.5 million in transaction costs, such as capture and processing, telecom
services, call centers, brands fees and expenditures with merchants, basically due to the
increased volume and number of captured transactions in 2Q16; and
(b) Decrease of R$3.9 million in costs related to equipment, chiefly due to reduced maintenance
volumetry and activation of POS terminals compared to the previous quarter.
Operating expenses totaled R$444.2 million in 2Q16, increased R$19.3 million or 4.5%, compared in 1Q16.
The increase is chiefly due to the following factors:
Personnel Expenses Personnel expenses increased R$8.7 million or 6.9%, to R$135.2 million in 2Q16,
compared to R$126.5 million in 1Q16. This increase is chiefly due to higher expenditures related to
executives retirement and severance pay in 2Q16.
General and Administrative Expenses General and administrative expenses, excluding depreciation,
decreased R$5.0 million or 3.9%, to R$123.0 million in 2Q16, compared to R$128.0 million in 1Q16. The
decrease is basically due to the result of several initiatives to streamline administrative expenses at the
Company, partially offset by expenses with business partners (partnership fees) in subsidiary Me-S and
other measures to accredit and activate parent companys clients.
Sales and Marketing Expenses Sales and marketing expenses increased R$24.5 million or 40.2%, to
R$85.6 million in 2Q16, compared to R$61.0 million in 1Q16. The increase is chiefly due to the scheduling
of expenditures related to institutional campaigns advertisements and higher expenses with marketing actions
executed with issuing banks by parent company in 2Q16, in the Q-o-Q comparison.
Equity Interest The equity interest result increased R$0.5 million to R$2.5 million in revenues in 2Q16,
compared to R$2.0 million in revenues in 1Q16. The increase is related to higher profits from the jointlyowned subsidiary Orizon, partially decreased by losses in Stelo associated company in 2Q16.
Other Net Operating Expenses Other net operating expenses decreased by R$8.3 million or 8.9%, to
R$84.6 million in 2Q16, compared to R$92.9 million in 1Q16. The decrease is chiefly due to the recognition
of a provision for impairment in investments and goodwill in Stelo no 1Q16, partially offset by higher
expectations of losses with POS terminals and bad debts.
The financial income totaled R$351.8 million in 2Q16, up 3.1% or R$10.5 million. The main variations are
the following:
Financial Revenues Financial revenues decreased R$17.5 million or 29.8%, to R$41.3 million in 2Q16,
compared to R$58.8 million in 1Q16. The reduction is chiefly related to the decrease in average balance of
financial investments in 2Q16 when compared to the previous quarter, due to the use of available funds to
pay dividends in March 2016, as well as the payment of the first tranche of public debentures in April 2016.
Financial Expenses Financial expenses decreased R$48.8 million or 14.4%, to R$290.0 million in 2Q16,
compared to R$338.8 million in 1Q16. The reduction is chiefly due to the decrease in average indebtedness
with third parties, when compared to the previous quarter.
Purchase of receivables accounting results Accounting revenue from purchase of receivables, net of
funding with third parties and the taxes on financial revenues decreased R$19.8 million or 3.2%, to R$603.6
million in 2Q16, compared to R$623.4 million in 1Q16. The decrease is primarily related to higher funding
volume with third parties to finance the purchase of receivables (ARV), as well as the reduction of the
average term of operations, in spite of product ongoing business expansion.
COMPARISON FOR THE QUARTERS ENDED JUNE 30, 2016 AND 2015
Cielos consolidated net revenue totaled R$3,069.0 million in 2Q16, increased 9.8% or R$273.2 million,
compared to R$2,795.8 million in 2Q15. The increase in net revenue is chiefly related to the ongoing
business expansion of Cielo, including revenues from Ourocard Arrangement in Cateno, M4Us mobile
credit sales and the dollar appreciation effect over the revenues in U.S. from subsidiary Me-S, partially
impacted by a decrease of gross MDR of the parent company.
The cost of services provided totaled R$1,516.9 million in 2Q16, increased R$214.1 million or 16.4%,
compared in R$1,302.8 million year-on-year. The increase was chiefly due to the following:
(i)
Increase of R$149.9 million related to the subsidiaries Merchant e-Solutions, due to the average
dollar appreciation in the quarter and ongoing business expansion; and M4U, due to the increase
of mobile credit sales;
(ii)
Increase of R$26.4 million related to the management of the Ourocard Arrangement, such as
brands fees, supplies, cards issuing and management, due to ongoing business expansion of
subsidiary Cateno;
(iii)
Net increase of R$37.8 million in the costs related to the acquiring business, mostly represented
by:
(a) Increase of R$25.4 million in transaction costs, such as capture and processing, telecom
services, call centers, brands fees and expenditures with merchants, chiefly due to the
increased volume and number of transactions, when compared to the same quarter of the prior
period;
(b) Increase of R$7.3 million related to equipment costs, including installation, uninstallation,
POS terminals maintenance and activation, chiefly due to higher volumetry, when compared
to 2Q15; and
(c) Increase of R$5.1 million in other costs related to acquiring activities, as well as the hiring of
professional services related to strategic projects, operational systems support and
maintenance.
Operating expenses totaled R$444.2 million in 2Q16, increased R$81.0 million or 22.3%, compared to
R$363.2 million in 2Q15. The main variations are described below:
Personnel Expenses Personnel expenses increased R$19.6 million or 17.0%, to R$135.2 million in 2Q16,
compared to R$115.6 million in 2Q15. Such increase is mainly due to higher expenditures related to
executives retirement and severance pay in 2Q16, the increase in personnel expenses at subsidiaries Cateno
and Me-S, this last one as a result of the average dollar appreciation in the quarter, as well as the 8.2%
average adjustment over wages established in Collective Agreement in 3Q15 and related effects on the
parent companys charges.
General and Administrative Expenses - General and administrative expenses, excluding depreciation,
increased R$15.8 million or 14.7%, to R$123.0 million in 2Q16, compared to R$107.2 million in 2Q15. The
increase is mainly related to the expenses with business partners ("partnership fees") in subsidiary Merchant
e-Solutions, also impacted by the average dollar appreciation in the quarter, as well as expenditures related to
the accreditation and activation of Cielos clients.
Sales and Marketing Expenses Sales and marketing expenses increased R$15.3 million or 21.7%, to
R$85.6 million in 2Q16, compared to R$70.3 million in 2Q15. The increase is substantially related to higher
expenses incurred for marketing activities held in conjunction with issuing banks by parent company in
2Q16, when compared to same period last year.
Equity Interest The Equity Interest result decreased R$1.1 million or 31.5%, to R$2.5 million in revenues
in 2Q16, compared to R$3.6 million in revenues in 2Q15. The reduction is chiefly due to the loss at Stelo
associated company in 2Q16.
Other Net Operating Expenses Other net operating expenses increased R$25.0 million or 41.9%, to
R$84.6 million in 2Q16, compared to R$59.6 million in 2Q15. This increase is mainly related to higher
provision for losses with POS terminals in 2Q16 and higher provision for civil and labor risks, in the Q-o-Q
comparison.
The financial income totaled R$351.8 million in 2Q16, up R$134.4 million or 61.9% compared to 2Q15,
which presented a figure of R$217.4 million. The main variations are described as follows:
Financial Revenues Financial revenues increased R$17.4 million or 72.7%, to R$41.3 million in 2Q16,
compared to R$23.9 million in 2Q15. The increase is chiefly due to higher average balance of financial
investments held by subsidiary Cateno, due to minimum prudential capital.
Financial Expenses Financial expenses decreased R$11.5 million or 3.8%, to R$290.0 million in 2Q16,
compared to R$301.5 million in 2Q15. The decrease is chiefly due to the lower average indebtedness with
third parties, partially offset by the increase in DI rate and average dollar appreciation in the period when
compared to same period last year.
Purchase of Receivables Accounting Results Accounting revenue from purchase of receivables, net of
funding with third parties and of taxes on financial revenues increased R$110,0 million, to R$603.6 million
in 2Q16, compared to R$493.6 million in 2Q15. The increase is chiefly due to the growth in the financial
volume of purchased receivables, in line with ongoing product expansion; higher average spread in the
quarter (increase in DI rate), reduced funding volume with third parties to finance the purchase of receivables
(ARV), partially offset by the beginning of PIS and COFINS over financial income from the second half of
2015.
EBITDA totaled R$1,349.0 million in 2Q16, down 0.5% compared to 2Q15 and down 4.2% over 1Q16, as
follows:
EBITDA (R$ million)
Cielo Net Income
Noncontrolling interests
Financial Income (Expenses)
Tax and Social Contribution
Depreciation and Amortization
EBITDA
% EBITDA Margin
2Q16
989.2
40.5
(351.8)
430.0
241.1
1,349.0
44.0%
2Q15
869.4
38.1
(217.4)
439.6
226.1
1,355.8
48.5%
1Q16
995.4
42.9
(341.3)
463.0
247.6
1,407.6
46.2%
EBITDA consists of net income, plus income tax and social contribution, financial income (expenses) and
depreciation and amortization. It should be noted that, for this calculation, the share of non-controlling
shareholders is added to the parent company's net income.
Management believes that the EBITDA is an important parameter for the investors because it provides
relevant information about our operating results and the profitability.
The EBITDA is not an accounting measurement used in the accounting practices adopted in Brazil. It does
not represent the cash flow for the presented periods and it should not be considered as an alternative to net
income as an operating performance measure or as an alternative to operating cash flow or as a measurement
of liquidity. Additionally, the EBITDA has limitations that may harm its use as an indicator of the
profitability of the Company and its subsidiaries, since costs related to the business are not considered, and
could deeply impact the income, e.g., financial expenses, taxes, depreciation, equity expenses and other
related charges.
CORPORATE GOVERNANCE
Corporate Governance is a priority for Cielo, where a key goal is continuous improvement to support
sustainable, long-term corporate performance. In this spirit, Cielo voluntarily adopts the best corporate
governance practices beyond those required for companies listed on BM&FBovespa Novo Mercado.
Our commitment to corporate efficiency and long-term value creation is explained, for instance, through (a)
the adoption of appropriate decision-making systems and its monitoring by Cielo; (b) the establishment of a
Corporate Governance Office, which aims to support management agencies and committees/advisory
committees of the Company and its subsidiaries, as well as ensuring the monitoring of the best practices of
corporate governance; (c) adoption of ethics and sustainable practices; (d) the formal annual performance
assessment of the Board of Directors members on an individual and group basis; (e) the variation of
personnel who hold the Chairman of the Board of Directors and Chief Executive Officer positions; (f) the
creation of an annual calendar for the Board of Directors, covering the subjects likely to be discussed over
the year; (g) restricting the flow of internal company information exclusively to the Corporate Governance
Electronic Portal; (h) maintaining the Related Party Transactions Policy as well as situations involving
Conflicts of Interest; and (i) the existence of a Code of Ethics which establishes rules of conduct when
communicating to stakeholders.
The Board of Directors of the Company is composed of 11 (eleven) members, who do not perform
management activities, out of which 3 (three) are independent, where their independence aims to serve the
best interests of the Company and its minority shareholders. The Board of Directors shall determine the
general direction of the Companys business, elect members of Management and supervise its management,
among others. The Management is composed of 5 (five) members and performs general management of the
company, respecting the guidelines defined by the Board of Directors. In addition to demonstration of
Cielos adherence to the best Corporate Governance practices, the Board of Directors has 5 (five) support
committees, which are: Audit Committee, Finance Committee, Corporate Governance Committee, People
Management Committee and Sustainability Committee. The Management has 9 (nine) assistance forums:
Issuer Risk Forum, Earnings Release Forum, Ethics Forum, Expenses Forum, Management of Continuous
Business Expansion Forum, Social Investments Forum, Pricing Forum, Projects Forum and Diversity Forum.
The Fiscal Council of Cielo is an independent management body, installed to supervise management
activities, and is composed of 5 (five) members, of which 1 (one) is an independent member.
Regarding Sustainability, the company maintains structured practices, such as: (a) establishment of a climate
strategy, including the conduction and dissemination of a Greenhouse Gas (GHG) Inventory and offsetting
emissions through the purchase of carbon credits; (B) support for social projects that contribute to the
improvement of child and adolescent education, empower young people for work, promoting child health,
developing cancer research and new treatments, and implementing the inclusion of people with disabilities;
(C) the implementation of several policies that address important issues such as ethics, anti-corruption
practices and the environment, in order to guide the Company's practices aimed at contributing to a healthy
environment and the economic and social development of Brazil.
Since 2011, Cielo is listed at OTCQX, with a Level 1 American Depositary Receipts (ADR) Program,.
Since 2014, Cielo joined the BM&FBOVESPA Corporate Sustainability Index (ISE) and has also been
included in the Euronext-Vigeo EM70 Sustainability Index since 2015.
On April 29, 2016, the Company published its 2015 Sustainability Report, which was prepared based on the
Global Reporting Initiative (GRI), G4 version, providing information on the Companys performance
regarding the most material aspects for the sustainability of its business, seeking to demonstrate its ability to
generate long-term, sustainable value to all its stakeholders.