Conference Call Transcript 4Q15 Results T4F (SHOW3 BZ) March 10, Operator:

Transcription

1 Operator: Good morning ladies and gentlemen. At this time we would like to welcome everyone to the T4F s 4Q15 earnings conference call. Today with us, we have Mr. Fernando Alterio, Chief Executive Officer, and Ms. Flabia Helena Schiavon, Finance and Investor Relations Director. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the Company s presentation. After the Company s remarks are completed, there will be a question and answer section for investors and analysts. At that time further instructions will be given. Should any participant need assistance during this call, please press *0 to reach the operator. There will be a replay facility for this call for one week. We would like to inform that questions can only be asked by telephone, so if you are connected through the webcast, you should your questions directly to the IR team at ri@t4f.com.br Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of the Company s management, and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of the Company and could cause results to differ materially from those expressed in such forward-looking statements. Now, I will turn the conference over to Mr. Alterio, T4F s Chief Executive Officer, who will start the presentation. Mr. Alterio, you may begin the conference. Fernando Alterio: Good morning, everyone, and thank you for joining our 4Q15 earnings conference call. I will begin with an analysis of the macroeconomic perspectives and the impact in the live entertainment industry. After that, I will talk about our events pipeline for 2016, and then Flabia will comment on the Company s financial performance. After three years of irrational competition triggered by our successful IPO, 2015 marked the return to normality in our business. We are delivering now again positive results in line with the projections released during our first earnings conference call in March, 2015, despite a very negative macroeconomic environment, with strong currency devaluation in the countries where we operate, and significant GDP contraction in Brazil, resulting in a totally unfavorable business environment. We kept the same level of revenue year on year, even with the discontinuity in the promotion of Cirque du Soleil, which represented net revenues of around R$100 million in In 2015, Live Music revenue grew and, consequently, the other lines of our vertically integrated business model also grew significantly, mainly in ticketing operations. 1

2 The ticket for Rolling Stones, Maroon 5 and Coldplay sold out within a few hours. We believe that, in addition to the quality of our events, the increase in ticket sales has been boosted by the reduction in spending of Brazilians travel abroad, driving it to local leisure. As a consequence, we had a significant portion of our projected revenue in Live Music for 2016 already guaranteed. At the end of last year, for the stadium concerts we will promote in the 1H16 we had already reached revenues higher than the revenue of the entire year of 2015, thus we estimate record net revenue for the Company in 2016, which you can see on slide number four, through our strong pipeline of already hired events. In February, we promoted seven shows of the Rolling Stones tour, three in Buenos Aires and four in Brazil, a blockbuster in terms of tickets sold and box office. Last week we started the Maroon 5 tour, with nine concerts in stadiums. The band has already performed in Buenos Aires, Santiago and Porto Alegre, and will head to Belo Horizonte, Salvador, Fortaleza, São Paulo with two shows, and Rio de Janeiro. Yesterday and tonight, we are promoting Simply Red at Arena Movistar in Santiago, in Chile. In Brazil and Argentina the band will perform in indoor venues. This weekend we will promote the fifth edition of Lollapalooza Brazil, which will feature more than 40 attractions, including Eminem, Florence and the Machine, Jack Ü and Mumford and Sons. In April, we will present the Coldplay tour, with two shows in Buenos Aires and one show in Santiago, São Paulo and Rio de Janeiro. In summary, for the 1H16 we have already scheduled 25 outdoor concerts, versus 11 concerts promoted in the 1H15, and 30 in the entire year of Altogether, to date, we have already sold only in outdoor live music around 1 million tickets, with a box office higher than R$320 million, which represents growth of over 300% in revenue of outdoor concerts compared to the 1H15, and an increase of more than 70% compared to the entire year. In indoor live music we have already scheduled around 30 shows for the 1Q16. In family events and theater, in the beginning of March, at Teatro Renault in São Paulo, we started the performances of the musical Wicked, one of Broadway s greatest blockbusters in the last decade. More than 48 million people have already watched this musical in the world, and it has generated a revenue around US$4 billion. And in April we will promote the ninth season of Disney on Ice, with the show Worlds of Fantasy. In sports events, the races of Copa Stockcar, Copa Petrobras de Marcas, Mercedes Challenge, Formula 3 Brasil and Campeonato Brasileiro de Turismo will remain unified in 12 stages. The first race took place last weekend in Curitiba with the jewel Race. At this time, Flabia will present the financial results of the Company. 2

3 Flabia Helena Schiavon: Good morning, everyone. I will begin with begin with the operating results and its consequences on net revenue for the year and the 4Q15, on slides five and six of the presentation. In 2015, total net revenue was in line with 2014, amounting to R$551 million. Net revenue in events promotions decreased 17% year-on-year. This happened because of the increase of 24% in live music, thanks to the increase in the number of events, tickets sold and growth of 20% in the average ticket price was impacted by the reduction of 77% in family events and theatre, due to the end of the performance of Cirque du Soleil. Regarding tickets, food and beverage and venues operations, net revenues increased in 53% in 2015, due mainly to the successful ticket sales for the outdoor concerts to be held in 1H16, like Rolling Stones, Maroon 5, Coldplay and Lollapalooza Festival. Net revenue for sponsorship was in line year-on-year. Sponsorship related to events promotion increased 16%, but in the segment of tickets, food and beverage and venues operations, sponsorships decreased 41%, due to the greater difficulty in family sponsorship not directly connected to a specific content, like sweets and naming rights, since companies are driving their marketing budgets to action with direct impact in the final sales of their products. Now, looking only at 4Q, total net revenue grew 134%. The increase in all three businesses lines can be briefly explained by the promotion of more outdoor concerts in 4Q15 and significant sales of tickets in advance for Rolling Stones and Coldplay. Regarding gross profit and EBITDA, you can see on slide seven that gross profit reached R$109 million in 2015, up 168% from the same period last year, with growth of 12.4 p.p. in margin. In the 4Q15, gross profit totaled R$35 million, an increase of 322%. The significant improvement in gross profit in 2015 and in the quarter is a result of the better performance in the segment of ticketing, food and beverage and venues operations. Reflecting the growth in gross profit and the nominal reduction of 4% in expenses, EBITDA in 2015 amounted to R$42 million with a margin of 7.6%, reverting the R$68 million the negative EBITDA registered in In 4Q15, EBITDA totaled R$16 million versus a negative EBITDA R$9.5 million in the same period last year. Analyzing financial result in the next slide, we can note that in 2015, expenses amounted to R$5 million versus R$13 million in Net financial income increased 116%, mainly in income over financial investments. However, this did not follow the significant increase in the Company s cash position, because a large portion was applied in USD as cash abroad, which was reflected in the gain with exchange variance. 3

4 Financial expense grew 61% due to the increased interest in financing, because of a higher amount in the debentures and a higher average debt with working capital in Argentina. As a result of what has been said, T4F posted a net income of around R$21 million in 2015, reversing loss of R$70 million in Concluding the presentation, you can see our cash position in the last slide. We generated R$169 million of operating cash, R$102 million of which only in 4Q, due mainly to the advanced sales of tickets for outdoor concerts to be promoted in the 1H16. This operating cash generation in the year corresponds to 4.1x EBITDA in the period, which reinforces our negative working capital model. In investments, we spent nearly R$12 million in the acquisition of operating, services and industrial property rights, equipment, structures, maintenance of venues and software. We generated R$10 million in financing, mainly through issue of debentures in March 2015, amounting to R$50 million. This was partially consumed by R$19 million in the amortization of the last installment of the first issuance, and amortization of R$22 million in the loan for working capital in Argentina. We concluded 2015 with a cash position of R$240 million. Total indebtedness of R$61 million and a net cash of R$179 million, up 149% from the 3Q and more than 500% from Thank you very much and Fernando will conclude our presentation now. Fernando Alterio: In recent years, we have intensively worked in cost reduction and the improvement and simplification of our internal processes. We are today a lighter and more efficient Company, with more assets than in the pre-ipo period. For example, we can highlight the venues Chevrolet Hall and Teatro CETIP, the equipment rental company Auto Lights, the festivals Lollapalooza and Electric Days Carnival and the promotion of Latin artists in Chile, with the incorporation of Eventos Bizarro, which makes us confident in a new cycle of growth in revenue, EBITDA and also in margins. Our expectation for 2016 is for growth of around 50% in net revenue, something between 60% and 70% in EBITDA and 100% in net income. In this scenario, with better results in regular competition, we also see a great opportunity in the consolidation and expansion in Brazil and other South American markets. We are now available for any questions. Operator: Thank you, this concludes today s conference call. We thank you for attending, you may disconnect your line at this time and have a good day. 4

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