Total expenditure totaled R$1,724.2 million, decrease 8.8% year-on-year, or R$165.6 million, and down 12.6% compared to 4Q16, or R$247.

Transcription

1 DEAR SHAREHOLDERS: We present the performance report and interim financial information of Cielo S.A. ( Company s or Cielo ), subsidiaries and associated company ( Group ), presented as part of quarter statement forms ITR, for the quarter ended March 31, 2017, and the Independent Auditor s 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 Aliança, its 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 1Q17 Transaction financial volume totaled R$144.6 billion, up 3.7% compared to 1Q16, or R$5.1 billion; and decrease 9.2% compared to 4Q16, or R$14.7 billion; Net Operating Revenue totaled R$2,801.3 million, decrease 8.1% year-on-year, or R$246.6 million, and down 10.2% compared to 4Q16, or R$319.2 million; Net Product of Purchase of Receivables totaled R$575.5 million, decrease 7.7% year-on-year and decrease 0.7% compared to 4Q16. Purchase of receivables reached 20.3% over the financial credit volume, up 0.2 p.p. compared to 1Q16 and up 0.9 p.p. compared to 4Q16; Total expenditure totaled R$1,724.2 million, decrease 8.8% year-on-year, or R$165.6 million, and down 12.6% compared to 4Q16, or R$247.8 million; Cielo s Net Income totaled R$1,001.8 million, up 0,6% year-on-year, or R$6.4 million, and down 1.0% quarter-on-quarter, or R$9.8 million; and EBITDA of R$1,322.1 million, decrease 6.1% year-on-year, or R$85.5 million, and down 5.3% quarteron-quarter, or R$73.8 million.

2 OPERATING PERFORMANCE 1Q17 In 1Q17, the transaction financial volume totaled R$144.6 billion, an increase of 3.7% or R$5.1 billion compared to R$139.5 billion in the same period of the prior year and decrease 9.2% or R$14.7 billion compared to R$159.3 billion recorded in 4Q16. Specifically with credit cards, financial volume totaled R$79.6 billion in 1Q17, in line with recorded in 1Q16 and down 8,9% quarter-on-quarter. With debit cards, financial volume totaled R$65.0 billion in 1Q17, an increase of 8.5% compared to 1Q16 and decrease 9.6% quarter-on-quarter. In addition, Cielo captured billion transactions in 1Q17, an increase of 6.0% compared to 1Q16 and decrease 5.2% over 4Q16. FINANCIAL PERFORMANCE 1Q17 COMPARISON FOR THE QUARTERS ENDED MARCH 31, 2017 AND DECEMBER 31, 2016 Cielo s consolidated net revenue totaled R$ 2,801.3 million in 1Q17, decreased by R$319.2 million or 10.2%, compared to R$3,120.5 million in 4Q16. Such decrease is substantially related to the seasonality of business of the Company and its subsidiaries (including Cateno) in 4Q16, especially due to year-end festivities. In addition, revenues from capture, transmission, processing and financial settlement of credit and debit card transactions and rental revenue decreased, mostly related to lower prices and decreased installed POS base.

3 The cost of services provided totaled R$1,367.6 million in 1Q17, decreased R$145.1 million, or 9.6% compared to 4Q16. The decrease was chiefly due to the following: (i) Net decrease of R$90.7 million in the costs related to the acquiring business, mostly represented by: a) Decrease of R$57.3 million in transaction costs, such as call centers, brand fees, processing and telecommunications services, chiefly due to decreased volume and lower number of captured transactions; b) Decrease of R$17.8 million in the costs related to equipment, basically due to lower demand of installation, repair and maintenance of POS terminals, in view of decreased installed POS base, as well as the seasonality of expenditures in 4Q16 (preparation for year-end festivities); and c) Decrease of R$15.6 million in other costs, mainly related to the contracting of professional services connected with strategic projects and operating systems development. (ii) Decrease of R$28.7 million in the costs related to the management of the Ourocard Arrangement, especially card management and brand fees, due to 4Q16 seasonality and cost-savings initiatives results; and (iii) Decrease of R$25.7 million in the costs of subsidiaries Merchant e-solutions, chiefly due to the average US dollar depreciation in the quarter; and M4U, due to the change in the remuneration model of certain products during 4Q16, which were changed from resale to sales commission, partially offset by the growth of mobile credit sales in the period. Operating expenses totaled R$352.1 million in 1Q17, decreased R$98.7 million or 21.9%, compared to 4Q16. The decrease is chiefly due to the following factors: Personnel Expenses Personnel expenses increased R$2.3 million or 1.7%, to R$139.7 million in 1Q17, compared to R$137.4 million in 4Q16. Such increase is chiefly due to executive s severance pay expenses incurred in 1Q17, partially offset by reversal of surplus provision for 2016 profit sharing. General and Administrative Expenses - General and administrative expenses, excluding depreciation, decreased R$24.7 million or 19.2%, to R$104.3 million in 1Q17, compared to R$129.0 million in 4Q16. The decrease is chiefly due to lower expenditures with corporate projects, as well as the concentration of expenditures with advisory and professional services in 4Q16.

4 Sales and Marketing Expenses Sales and marketing expenses decreased R$47.8 million or 55.7%, to R$38.1 million in 1Q17, compared to R$85.9 million in 4Q16. The decrease is chiefly due to the scheduling Measuresof institutional campaigns and the media acquisition concentrated in 4Q16, as well as reduced marketing expenses with issuing banks and sales partners and measures related to client loyalty. Other Net Operating Expenses Other net operating expenses decreased R$31.2 million or 35.3%, to R$57.1 million in 1Q17, compared to R$88.3 million in 4Q16. This decrease is mainly related to the lower expectations of losses with bad debts at Cielo and Cateno, in estimated losses and disposals of POS equipment, partially offset by increased provisions for labor and civil contingencies at Cielo. The financial income totaled R$404.0 million in 1Q17, up 4.2% or R$16.4 million compared to R$387.6 million presented in 4Q16. The main variations are described as follows: Financial Revenues Financial revenues increased R$28.0 million or 33.9%, to R$110.6 million in 1Q17, compared to R$82.6 million in 4Q16. The increase is chiefly due to higher average balance of financial investments held by Cielo and subsidiary Cateno in 1Q17, arising from cash generated in their operations. Financial Expenses Financial expenses increased R$10.0 million or 3.7%, to R$281.8 million in 1Q17, compared to R$271.8 million in 4Q16. Such increase mainly derives from higher debt cost with third parties, when compared to the previous quarter. Net Product of Purchase of Receivables Purchase of receivables, performed by Cielo or via FIDC, net of funding with third parties and taxes totaled R$575.5 million in 1Q17, decreased R$3.8 million or 0.7%, compared to R$579.3 million in 4Q16. The decrease is chiefly due to the lower financial volume of purchased receivables, due to 4Q16 seasonality, the drop of average DI interest rate, as well as higher percentage from single payment credit, which decreases the average term of operations. COMPARISON FOR THE QUARTERS ENDED MARCH 31, 2017 AND 2016 Cielo's consolidated net revenue totaled R$ 2,801.3 million in 1Q17, decreased 8.1% or R$246.6 million, compared to R$3,047.9 million in 1Q16. Lower net revenues from capture, transmission, processing and financial settlement of credit and debit transactions is mainly related to the average price drop, mostly due to higher percentage from debit card product, concentration of clients in Large Accounts segment and competitive environment, as well as lower revenues from rental of POS equipment due to decreased installed

5 POS base and lower revenue from the US subsidiary Merchant E-Solutions, chiefly due to the effect of average US dollar depreciation in the quarter. The cost of services provided totated R$1,367.6 million in 1Q17, decreased R$95.3 million or 6.5%, compared to R$1,462.9 million in 1Q16. The decrease was chiefly due to the following: (i) Decrease of R$82.7 million in the costs of subsidiaries Merchant e-solutions, due to the average US dollar depreciation in the quarter, partially offset by higher expenditures incurred in the period; and M4U, due to the change in the remuneration model of certain products, which were altered from resale to sales commission, partially offset by the growth of mobile credit sales; (ii) Decrease of R$18.5 million in the costs related to the management of the Ourocard Arrangement, such as brand fees and expenditures with banks, chiefly due to the effect of US dollar depreciation over trade payables and cost-savings initiatives results; (iii) Net increase of R$5.9 million in the costs of acquiring activities, mostly represented by: a) Increase of R$20.3 million in transactions costs, such as higher expenditures incurred with settlement fees, brand fees and transaction processing services, chiefly due to increased volume and higher number of transactions when compared to the same quarter of previous year; b) Decrease of R$11.8 million in the costs related to equipment, connected with lower demand of installation, repair and maintenance of POS terminals, basically due to decreased installed POS base; and c) Decrease of R$2.6 million in the costs related to the contracting of professional services, chiefly due to cost-savings initiatives results. Operating expenses totaled R$352.1 million in 1Q17, decreased R$72.8 million or 17.1%, compared to R$424.9 million in 1Q16. The main variations are described below: Personnel Expenses Personnel expenses increased R$13.2 million or 10.5%, to R$139.7 million in 1Q17, compared to R$126.5 million in 1Q16. Such increase is chiefly due to the average adjustment over wages established in Collective Agreement (8.56%), in August 2016, and effects on provision for 13 rd -month pay, profit sharing, vacation and related charges.

6 General and Administrative Expenses - General and administrative expenses, excluding depreciation, decreased R$23.7 million or 18.5%, to R$104.3 million in 1Q17, compared to R$128.0 million in 1Q16. The decrease is chiefly related to lower expenses with internal projects, reduced administrative expenses (due to the move of Merchant E-Solutions headquarters from California to Atlanta in 1Q16) and partnership fees in subsdiiary Merchant E-Solutions, both also impacted by average US dollar depreciation in the quarters. Sales and Marketing Expenses- Sales and marketing expenses decreased R$23.0 million or 37.7%, to R$38.1 million in 1Q17, compared to R$61.0 million in 1Q16. The decrease is chiefly due to reduced expenses with institutional campaigns and marketing actions, as well as measures related to client loyalty at Cielo. Other Net Operating Expenses Other net operating expenses decreased R$35.8 million or 38.5%, to R$57.1 million in 1Q17, compared to R$92.9 million in 1Q16. Such decrease is mainly related to lower losses with POS equipment and the recognition of provision for investment loss and goodwill impairment in associated company in 1Q16. These impacts were partially offset by higher expectation of losses with bad debts in 1Q17. The financial income totaled R$404.0 million in 1Q17, up R$62.7 million or 18.4% compared to 1Q16, which presented a figure of R$341.3 million. The main variations are described as follows: Financial Revenues Financial revenues increased R$51.8 million or 88.2%, to R$110.6 million in 1Q17, compared to R$58.8 million in 1Q16. The increase is chiefly due to higher average balance of financial investments held by Cielo and subsidiary Cateno in 1Q17. Financial Expenses Financial expenses decreased R$56.9 million or 16.8%, to R$281.8 million in 1Q17, compared to R$338.8 million in 1Q16. The decrease mainly derives from the lower average indebtedness with third parties, basically due to the amortization of the first tranche and payment of public debentures interest rates, in April 2016, totaling R$1.9 billion. Net Product of Purchase of Receivables Purchase of receivables, performed by Cielo or via FIDC, net of funding with third parties and of taxes decreased R$47.9 million or 7.7%, to R$575.5 million in 1Q17, compared to R$623.4 million in 1Q16. Despite higher financial volume of purchased receivables, such decrease is chiefly due to the drop of average DI interest rate, as well as higher percentage from single payment credit, which decreases the average term of operations, also impacted by higher funding with third parties expenses.

7 EBITDA totaled R$1,322.1 million in 1Q17, a decreased of 6.1% compared to 1Q16 and down 5.3% over 4Q16, as shown below: EBITDA (R$ million) 1Q17 1Q16 4Q16 Cielo Net Income 1, ,011.6 Noncontrolling interests Financial Income (Expenses) (404.0) (341.3) (387.6) Tax and Social Contribution Depreciation and Amortization EBITDA 1, , ,395.9 % EBITDA Margin 47.2% 46.2% 44.7% 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, capital expenditures and other related charges. CORPORATE GOVERNANCE Corporate Governance is a priority for the Company, which has as one of its goals its continuous improvement to support sustainable, long-term corporate performance. In this spirit, the Company voluntarily adopts the best corporate governance practices other than those required for companies listed on BM&FBovespa Novo Mercado, evidencing the commitment of the Company and its Management with the interest of its shareholders and investors. The maximization of its efficiency and creation of long-term value translate, for example, into: (a) the adoption of appropriate decision-making system and the monitoring of its compliance by the system; (b) the maintenance of a Corporate Governance Office, which aims to support management agencies and committees/advisory forums of the Company and its subsidiaries, as well as to ensure the compliance with the best corporate governance practices; (c) the adoption of ethical and sustainable conduct; (d) the formal performance assessment of the Board of Directors members on an individual and group basis; (e) the

8 presence of distinct personnel holding the positions of Chairman of the Board of Directors and Chief Executive Officer; (f) the existence of an annual calendar and minimum agenda for the Board of Directors, covering the subjects to be discussed over the year in meetings previously scheduled; (g) the exchange of information through the Corporate Governance Electronic Portal; (h) the existence of a Policy on Related Party Transactions and situations involving Conflicts of Interest; and (i) the existence of a Code of Ethics mandatorily adhered by all employees and Management, which establishes rules of conduct in relationships with all stakeholders. It is worth pointing out that since 2013 the Company has been adopting a Policy on Related Party Transactions and other situations concerned with conflict of interests ( Policy ), which aims at consolidating the procedures to be observed in the Company s businesses involving related parties, as well as other situations involving potential conflict of interests, conferring transparent procedures to its shareholders and the market in general, ensuring its strict alignment with the Company s interests, always in compliance with the best Corporate Governance practices. The issues referring to conflict of interests/related parties shall be addressed to the Corporate Governance Committee so that by means of assumptions, filters and mechanisms defined in the Policy, such committee may direct them for the Board of Directors resolution. When referring to the issues concerned with conflict of interests/related parties between shareholders composing the controlling interest and the Company, the Corporate Governance Committee, exceptionally, will be composed of two independent members, and the second member shall be summoned to analyze the matter as ad hoc member of the Corporate Governance Committee, in replacement of Controlling Shareholders representatives. As practical examples, we have (a) the incentive policy to banks exclusively approved by independent members of the Board of Directors and (b) Cateno incorporation (a result of association between Cielo and Banco do Brasil) exclusively approved by independent members and by members of the Board of Directors appointed by Banco Bradesco. Referring to the Company s corporate governance bodies, the Board of Directors is composed of 11 (eleven) members, who do not perform management activities, out of which 3 (three) are independent, where their independence aims to protect the interests of the Company and its minority shareholders. The Board of Directors is responsible, among other attributions, for setting the general direction of the Company s business, electing the members of the Executive Board and overssee its management. Currently, the Company Statutory Board is composed of five (5) members and performs the general management of the Company, respecting the guidelines defined by the Board of Directors. Moreover, as another evidence of the Company s adherence to the best Corporate Governance practices, the Board of Directors has five (5) advisory committees, namely: Audit Committee, Finance Committee, Corporate Governance Committee, People Management Committee and Sustainability Committee; and the Executive Board has 10 (ten) advisory forums: Risk Forum, Issuer Risk Forum, Earnings Release Forum, Ethics Forum, Expenses Forum, Business Continuity Management Forum, Social Investments Forum, Pricing Forum, Projects Forum, and Diversity Forum. The Company s Supervisory Board, an independent management body, is currently set up to oversee management activities, and is composed of 5 (five) members, of which 1 (one) is an independent member. Cielo is committed to the inclusion of issues related to Sustainability in its practices, aiming at ensuring the successful business in the long term, contributing to a healthy environment, a fairer society and Brazil s social and economic development. Such commitment occurs on the day by day, by means of consistent environmental practices, such as, for example, the establishment of a climate strategy, which includes the conducting and dissemination of a Greenhouse Gas (GHG) Inventory, in line with the best global practices, audited and published in the Public Registry of Emmissions of GHG Protocol Brazilian Program and the compensation of carbon emmissions; the investment in social projects to promote child and adolescent health, the education by means of sports and culture, the access to people with disabilities, qualification of the youth for the labor market and support to the elderly; and business solutions that promote the financial inclusion and ensure the formalization of economy.

9 The generation of value to the Company and the stakeholders with whom we maintain relationship occurs by means of an ethical conduct, assumption which guides and permeates all Cielo s activities. Through the Code of Ethics, Cielo seeks to ensure the best corporate practices in the relationship with all its stakeholders. In accordance with the principle of transparency, on April 29, 2016, the Company published its 2015 Sustainability Report, which was prepared based on the guidelines of the Global Reporting Initiative (GRI), G4 version, providing information on the Company s performance regarding the most significant aspects for the business sustainability, seeking to demonstrate its ability to generate long-term value to all its stakeholders. Such agenda of sustainability promotes business opportunities and enables competitive advantages to Cielo, perceived by the financial market and the entire society. As an example, Cielo, as of 2014 has adhered to the portfolio of the Corporate Sustainability Index (ISE) of BM&FBovespa, an acknowledgment which attests the Company s good management and corporate governance practices. Since 2015, the Company has been joining the Sustainability index Euronext-Vigeo EM70, which encompasses 70 companies with high performance in corporate responsability in emerging markets, launched in 2015 by Vigeo, leading global rating agency focused on sustainability. In September 2016, Cielo joined for the first time the portfolio of the Dow Jones Sustainability Index (DJSI), under the World category. In order to be included, companies go through a strict selection process, which analyzes the economic data, environmental and social performance, corporate governance, risk management, mitigation of climate change, labor practices, among other aspects. And, since 2011, the Company has been issuing the American Depositary Receipts (ADRs), Level I, listed on the international over-the-counter market OTCQX. RELATIONSHIP WITH INDEPENDENT AUDITORS Under CVM Rule 381/03, we inform that during 1Q17 the Company contracted the independent audit services of KPMG. The Company s Policy for contracting independent audit services seeks to ensure that there are no conflicts of interest, loss of independence or objectivity. These principles, based on internationally accepted principles, consist of: (a) the auditor should not audit his own work, (b) the auditor should not exercise management positions at his client, and (c) the auditor should not foster the interests of the client. Cielo declares that the independent auditors has supplied it with services not related to external audit, consisting of issuance of international certificate ISAE-3402, for the subsidiary Merchant e-solutions. The contract met the corporate governance requirements of the company, under which any extraordinary engagement of independent audit that audits the financial directly or indirectly statements need first be reviewed by the Audit Committee and authorized by the Board of Directors. The contract values representing 8.4% of aggregated costs of audit fees of Cielo and its subsidiaries Cateno, Cielo USA and Merchant e- Solutions and associated Stelo s financial statements. Performance reporting information on EBITDA, financial volume and number of transactions, discount rates, industry and sector information, net revenue additions, number of employees, total investments, and managerial revenue was not reviewed by the independent auditors. ***

10 Individual and Interim Financial Information for the Three-month Period ended March 31, 2017 and Report on Review of Interim

11 Individual and consolidated financial information for the Three-month Period ended March 31,2017 and Report on Review of Interim Contents Report on review of Interim 3 Statements of financial position 5 Interim statements of profit or loss 6 Interim statements of comprehensive income 7 Interim statements of changes in equity 8 Interim statements of cash flows 9 Interim statements of value added 10 Notes to the individual and consolidated interim financial information 11 1 Operations Significant accounting practices interim financial information Cash and cash equivalents Trade receivables Investment fund in credit rights Income tax and social contribution Investments Property and equipment Intangible assets Prepayment of receivables from card-issuing banks Payables to merchants Borrowings Taxes payable Other payables Provision for risks and escrow deposits Equity Earnings per share Net revenue Expenses by nature Other operating expenses, net Commitments Employee benefits Profit sharing Compensation of key management personnel Stock option plan and restricted shares Finance income (costs) Financial instruments Related-party balances and transactions Segment information Noncash transactions Insurance Events after the reporting period Approval of interim financial information

12 KPMG Auditores Independentes Av. Dionysia Alves Barreto, º andar - Cj Centro Osasco/SP - Brasil Caixa Postal CEP São Paulo/SP - Brasil Telefone 55 (11) , Fax 55 (11) Report on the review of the Interim Financial Information To The Shareholders and Management Cielo S.A. Barueri-SP 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 March 31, 2017, which comprise the balance sheet as of March 31, 2017 and related statements of income, comprehensive income, changes in shareholders' equity and cash flows for the quarter 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) - Demonstração Intermediária 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 Revisão de Informações Intermediárias Executada pelo Auditor da Entidade and ISRE 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. KPMG Auditores Independentes, uma sociedade simples brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity.

13 Conclusion on the interim financial information Based on our review, nothing has come to our attention that causes us to believe that the accompanying individual and consolidated Interim Financial Information included in the ITR referred to above has not been prepared in all material respects, in accordance with CPC 21(R1) and IAS 34 applicable to the preparation of Interim Financial Information and presented in accordance with the standards issued by CVM. Other matters Interim statements of value added We have also reviewed the individual and consolidated interim statements of value added ( DVA ), for the quarter ended March 31, 2017, which were prepared under Company s Management responsibility, the presentation of which is required by the standards issued by CVM applicable to the preparation of Interim Financial Information (ITR), and is considered as supplemental information for IFRS, which does not require the presentation of a DVA. These statements were subject to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that they have not been prepared, in all material respects consistently with individual and consolidated Interim Financial Information taken as a whole. Osasco, May 02, 2017 KPMG Auditores Independentes CRC 2SP028567/O-1 F-SP Original report in Portuguese signed by André Dala Pola Accountant CRC 1SP214007/O-2 KPMG Auditores Independentes, uma sociedade simples brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity.

14 Statements of Financial Position at March 31, 2017 and December 31, 2016 (In thousands of Brazilian Reais - R$) Assets Notes 03/31/ /31/ /31/ /31/2016 Liabilities and Equity Notes 03/31/ /31/ /31/ /31/2016 Current assets Current liabilities Cash and cash equivalents 4 2,594, ,048 4,396,044 2,658,956 Payables to merchants 12 1,451,179 1,196,978 2,083,575 1,924,255 Trade receivables 5 485,434 1,713,425 9,852,181 11,014,048 Prepayment of receivables from card-issuing banks , , , ,604 Receivables from related parties 29 11,441 1,661 4,465 - Borrowings 13 2,857,194 2,920,324 2,869,871 2,921,002 Investment Fund in Credit Rights 6 8,405,202 8,310, Trade payables 619, , , ,583 Prepaid and recoverable taxes ,390 9,416 Taxes payable , , , ,789 Prepaid expenses 29,791 11,838 41,264 23,770 Payables to related parties 29 20,017 21, Other receivables 12,093 13,067 29,906 37,210 Dividends payable 17.h) 165, , , ,560 Derivative financial instruments payable 28 72,104 37,665 72,104 37,665 Total current assets 11,538,554 10,983,497 14,337,250 13,743,400 Other payables , , , ,322 Total current liabilities 6,252,121 6,647,165 7,396,206 7,852,780 Noncurrent assets Noncurrent liabilities Financial investments - 75,481-75,481 Borrowings 13 6,553,353 6,557,747 7,829,512 7,870,107 Deferred income tax and social contribution 7.a) 921, ,720 1,025, ,607 Provision for tax, civil and labor risks 16.a) 1,690,470 1,634,748 1,715,929 1,659,419 Escrow deposits 16.b) 1,565,318 1,514,389 1,573,985 1,522,612 Deferred income tax and social contribuition 7.b) , ,329 Other receivables 18,604 14,967 42,015 39,194 Other payables 15 30,161 33,112 31,470 34,445 Investments 8 9,766,301 9,809, , ,355 Property and equipment 9 550, , , ,099 Total noncurrent liabilities 8,273,984 8,225,607 9,790,386 9,788,300 Intangible assets , ,431 13,249,625 13,442,322 Equity Total noncurrent assets 13,078,353 13,132,676 16,599,956 16,800,670 Issued capital 17.a) 3,500,000 3,500,000 3,500,000 3,500,000 Capital reserve 17.b) 65,780 66,689 65,780 66,689 Capital transactions between shareholders 17.c) (82,284) (82,284) (82,284) (82,284) Treasury shares 17.d) (92,069) (103,967) (92,069) (103,967) Comprehensive income 17.e) 11,137 10,989 11,137 10,989 Earnings reserves 17.f) and g) 6,688,238 5,851,974 6,688,238 5,851,974 Attributable to: Owners of the Company 10,090,802 9,243,401 10,090,802 9,243,401 Noncontrolling interests - - 3,659,812 3,659,589 Total equity 10,090,802 9,243,401 13,750,614 12,902,990 Total Assets 24,616,907 24,116,173 30,937,206 30,544,070 Total Liabilities and Equity 24,616,907 24,116,173 30,937,206 30,544,070 The accompanying notes are an integral part of these interim financial statements. 5

15 Interim statements of profit or loss For the quarters ended March 31, 2017 and 2016 (In thousands of Brazilian Reais - R$, except earnings per share) Note 03/31/ /31/ /31/ /31/2016 Net revenue 19 1,694,441 1,826,355 2,801,303 3,047,898 Cost of services provided 20 (554,681) (544,421) (1,367,628) (1,462,933) Gross profit 1,139,760 1,281,934 1,433,675 1,584,965 Operating income (expenses) Personnel 20 (80,157) (67,633) (139,702) (126,453) General and administrative 20 (87,226) (101,685) (121,670) (146,513) Sales and marketing 20 (35,103) (58,293) (38,054) (61,048) Share of profit of investees 8 95,723 68,110 4,450 1,984 Other operating expenses, net 20 and 21 (42,096) (52,238) (57,144) (92,896) Operating profit 990,901 1,070,195 1,081,555 1,160,039 Finance income (costs) Finance income 27 72,423 27, ,563 58,760 Finance costs 27 (269,284) (322,964) (281,829) (338,775) Income from purchase of receivables and FIDC , , , ,393 Exchange differences, net 27 (119) (2,127) (262) (2,122) 377, , , ,256 Operating profit before income tax and social contribution 1,368,705 1,397,091 1,485,524 1,501,295 Income tax and social contribution Current 7 (417,435) (459,880) (496,009) (540,540) Deferred 7 50,494 58,178 56,319 77,500 Profit for the quarter 1,001, ,389 1,045,834 1,038,255 Attributable to: Owners of the Company 1,001, ,389 Noncontrolling interests 44,070 42,866 1,045,834 1,038,255 Earnings per share (in R$) - Basic Earnings per share (in R$) - Diluted The accompanying notes are an integral part of these interim financial statements. 6

16 Interim statements of comprehensive income For the quarters ended March 31, 2017 and 2016 (In thousands of Brazilian Reais - R$) 03/31/ /31/ /31/ /31/2016 Profit for the quarter 1,001, ,389 1,045,834 1,038,255 Comprehensive income Exchange differences on translating foreign operations: Exchange differences on foreign investments (27,987) (108,895) (27,987) (108,895) Gains and losses from hedging instruments of foreign operations, net of taxes 28, ,298 28, ,298 Changes for the quarter 148 (1,597) 148 (1,597) Total comprehensive income for the quarter 1,001, ,792 1,045,982 1,036,658 Attributable to: Owners of the Company 1,001, ,792 Noncontrolling interests 44,070 42,866 The accompanying notes are an integral part of these interim financial statements. 7

17 Interim statements of changes in equity For the quarters ended March 31, 2017 and 2016 (In thousands of Brazilian Reais - R$) Attributable to owners of the Company Earnings reserves Total Issued Capital Treasury Capital Legal Capital Earnings Comprehensive owners of the Noncontrolling Total capital reserve shares transactions reserve budget retention income Company interests equity Balance at December 31, ,500,000 64,305 (140,648) - 500,000 3,583,619-13,401 6,520,677 3,643,289 10,163,966 Acquisition of treasury shares - - (24,904) (24,904) - (24,904) Stock options granted 26-5, ,903-5,903 Sale of treasury shares under the stock option plan 26 - (9,095) 11, ,589-2,589 Profit for the quarter , ,389 42,866 1,038,255 Allocation of profit for the quarter: Interest on capital proposed (79,000) - (79,000) - (79,000) Effect of noncontrolling interests on consolidated entities (35,758) (35,758) Comprehensive income: Exchange differences on translating foreign operations: Exchange differences on net foreign investments (108,895) (108,895) - (108,895) Gains and losses on hedging instruments of foreign operations, net of taxes , , ,298 Balance at March 31, ,500,000 61,113 (153,868) - 500,000 3,583, ,389 11,804 7,419,057 3,650,397 11,069,454 Balance at December 31, ,500,000 66,689 (103,967) (82,284) 700,000 5,151,974-10,989 9,243,401 3,659,589 12,902,990 Stock options granted 26-9, ,397-9,397 Sale of treasury shares under the stock option plan 26 and 17.d) - (10,306) 11, ,592-1,592 Profit for the quarter ,001,764-1,001,764 44,070 1,045,834 Allocation of profit for the quarter: Interest on capital proposed 17.h) (165,500) - (165,500) - (165,500) Effect of noncontrolling interests on consolidated entities (43,847) (43,847) Comprehensive income: Exchange differences on translating foreign operations: Exchange differences on net foreign investments (27,987) (27,987) - (27,987) Gains and losses on hedging instruments of foreign operations, net of taxes ,135 28,135-28,135 Balance at March 31, ,500,000 65,780 (92,069) (82,284) 700,000 5,151, ,264 11,137 10,090,802 3,659,812 13,750,614 The accompanying notes are an integral part of these interim financial statements. 8

18 Interim statements of cash flows For the quarters ended March 31, 2017 and 2016 (In thousands of Brazilian Reais - R$) Note 03/31/ /31/ /31/ /31/2016 Cash flows from operating activities Profit before income tax and social contribution 1,368,705 1,397,091 1,485,524 1,501,295 Adjustments to reconcile profit before income tax and social contribution to net cash generated by operating activities: Depreciation and amortization 9 and , , , ,603 Recognition of provision for losses on property and equipment (6,250) 4,470 (6,250) 4,470 Residual value of property and equipment and intangible assets disposed of 9 and 10 4,542 7,772 4,833 9,724 Stock options granted 26 9,397 5,903 9,397 5,903 Loss on doubtful debts and fraud 21 37,727 27,659 48,360 38,631 Provision for tax, civil and labor risks 16.a) 58,435 62,178 59,224 64,046 Unearned revenue from purchase of receivables 5 (37,831) (31,111) (11,314) (31,111) Noncontrolling interests ,070 42,866 Exchange differences relating to interest on foreign borrowings (27,069) (110,588) (27,069) (110,588) Gains (losses) on financial instruments 34, ,649 34, ,649 Interest on borrowings , , , ,490 Provision for losses on investments ,997 Share of profit (loss) of investees 8 (95,723) (68,110) (4,450) (1,984) Yield from interest in FIDC 6 (605,627) (Increase) decrease in operating assets: Trade receivables 1,265, ,057 1,173, ,479 Receivables from related parties (9,780) (4,835) (4,465) (4,464) Prepaid and recoverable taxes - - (3,974) 11,842 Other receivables (current and noncurrent) 72,818 (6,920) 79,967 (12,474) Escrow deposits 16.b) (50,929) (60,457) (51,373) (60,581) Prepaid expenses (17,953) (20,386) (17,494) (25,386) Increase (decrease) in operating liabilities: Payables to merchants 193,668 (1,342,570) 88,154 (1,374,928) Trade payables (105,684) 30,350 (78,383) 55,174 Taxes payable (3,077) 218 (12,482) (8,139) Payables to related parties (1,455) (1,121) - 1,627 Other payables (current and noncurrent) (87,891) (56,635) (139,364) (106,959) Payment of tax, civil and labor lawsuits 16.a) (2,714) (2,141) (2,714) (2,142) Cash generated from operations 2,337,539 1,306,135 3,155,645 1,703,040 Interest paid 13 (252,450) (256,858) (252,450) (256,858) Income tax and social contribution paid (412,458) (105,721) (481,656) (261,638) Net cash generated by operating activities 1,672, ,556 2,421,539 1,184,544 Cash flows from investing activities Capital increase in subsidiaries, joint ventures and associate 8 - (9,540) - (9,240) Acquisition of quotas of FIDC (3,128,414) Redemption of quotas of FIDC 3,639, Dividends received from subsidiaries 8 110,722 87,333 4,466 4,050 Additions to property and equipment and intangible assets 9 and 10 (66,333) (74,105) (75,415) (96,335) Net cash used in investing activities 555,271 3,688 (70,949) (101,525) Cash flows from financing activities Acquisition of treasury shares 17.d) - (24,904) - (24,904) Sale of treasury shares under the stock option plan 1,592 2,589 1,592 2,589 Borrowings 13 69,943 23,367 69,943 23,367 Payment of principal, net of derivatives (50,332) (62,320) (50,332) (62,320) Dividends and interest on capital (587,560) (540,938) (630,936) (576,697) Net cash generated by (used in) financing activities (566,357) (602,206) (609,733) (637,965) Effect of exchange rate changes on cash and cash equivalents of foreign subsidiary - - (3,769) (34,053) Increase (decrease) in cash and cash equivalents 1,661, ,038 1,737, ,001 Cash and cash equivalents Closing balance 4 2,594, ,525 4,396,044 1,660,525 Opening balance 4 933,048 44,487 2,658,956 1,249,524 Increase (decrease) in cash and cash equivalents 1,661, ,038 1,737, ,001 The accompanying notes are an integral part of these interim financial statements. 9

19 Interim statements of value added For the quarters ended March 31, 2017 and 2016 (In thousands of Brazilian Reais - R$) Note 03/31/ /31/ /31/ /31/2016 REVENUES Sales of services 19 1,884,194 2,030,853 3,086,230 3,349,760 Loss on doubtful debts and fraud 21 (37,727) (27,659) (48,360) (38,631) 1,846,467 2,003,194 3,037,870 3,311,129 INPUTS PURCHASED FROM THIRD PARTIES Cost of services provided (408,807) (402,013) (1,115,667) (1,219,612) Materials, electric energy, outside services and others (113,022) (151,793) (102,954) (136,057) Other expenses, net (6,847) (7,963) (11,200) (42,495) Impairment of assets 2,477 (16,615) 2,417 (16,692) (526,199) (578,384) (1,227,404) (1,414,856) GROSS VALUE ADDED 1,320,268 1,424,810 1,810,466 1,896,273 Retentions Depreciation and amortization 9 and 10 (108,956) (109,381) (240,576) (247,603) WEALTH CREATED, NET 1,211,312 1,315,429 1,569,890 1,648,670 WEALTH RECEIVED IN TRANSFER Share of profit (loss) of investees 8 95,723 68,110 4,450 1,984 Finance income, including purchase of receivables and exchange differences, net , , , , , , , ,367 TOTAL WEALTH FOR DISTRIBUTION 2,030,797 2,096,264 2,338,671 2,395,037 DISTRIBUTION OF WEALTH Personnel and related taxes (93,250) (77,742) (155,914) (142,037) Profit sharing 24 (16,619) (17,373) (23,152) (22,129) Taxes and contributions (606,352) (653,894) (785,097) (821,747) Interest and rental expenses (312,812) (351,866) (328,674) (370,869) Interest on capital proposed (165,500) (79,000) (165,500) (79,000) Earnings retention (836,264) (916,389) (836,264) (916,389) Noncontrolling interests - - (44,070) (42,866) WEALTH DISTRIBUTED (2,030,797) (2,096,264) (2,338,671) (2,395,037) The accompanying notes are an integral part of these interim financial statements. 10

20 Notes to the individual and consolidated interim financial information (Amounts in thousands of Brazilian Reais - R$, unless otherwise stated) 1 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 São Paulo. Cielo s 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 groups. The Company s 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. Significant events of the quarter In the quarter ended March 31, 2017, the following events occurred, which significantly impacted the Company's financial position: Cielo s profit for the first quarter of 2017 totaled R$1,001,764, 1% higher when comparing with the same quarter of 2016; Payment of dividends and interest on capital in the amount of R$587,560 related to profit earned in the second half of 2016; Payment of interest on private debentures amounting to R$242,

21 2 Significant accounting practices 2.1 Statement of compliance, basis of preparation and presentation The individual (Company) and consolidated interim financial information has been prepared in accordance with the Pronouncemenet CPC 21 (R1) Interim Financial Statements, equivalent to international standard IAS 34 - Interim Financial Reporting and other International Financial Reporting Standards - IFRSs issued by the International Accounting Standards Board IASB, which converge with the accounting practices adopted in Brazil, including those established in the Brazilian Corporate Law, as well as the technical pronouncements, guidance and interpretations issued by the Accounting Pronouncements Committee ("CPC") and approved by the Brazilian Securities and Exchange Commission ("CVM"). The individual and consolidated interim financial information is presented in Brazilian reais (R$), which is the Company s functional and presentation currency, and has been prepared based on the historical cost, unless otherwise stated. The accounting policies applied in preparing the individual and consolidated interim financial information are the same as those used in the previous year, disclosed in Note 2 to the Financial Statements of the Company and its subsidiaries for the year ended December 31, 2016, approved and published on January 30, 2017 and made available on the website of CVM. Therefore, the interim financial information should be read together with the financial statements as of December 31, Main judgements, estimates and accounting assumptions The preparation of individual and consolidated interim financial information requires the Company s and its subsidiaries Management to make estimates that affect certain assets and liabilities, disclosure of contingent liabilities and the reported amounts of revenues and expenses for the reporting period. Significant assets and liabilities subject to these estimates include the residual value of property and equipment and intangible assets, allowance for doubtful accounts (on trade accounts receivable from lease of POS equipment), deferred income tax and social contribution assets, impairment of goodwill, provision for risks and determining the fair value of financial instruments. Since management s judgment involves making estimates concerning the probability of occurrence of future events, actual results could differ from those estimates. The Company and its subsidiaries review estimates and assumptions at least annually. 2.3 New and revised standards and interpretations issued and not yet adopted The new IFRSs issued by the IASB and not yet effective are: IFRS 9 - Financial Instruments - introduces new requirements for classification, mensurement and derecognition of financial assets and liabilities (effective for anual periods beginning on or after January 1, 2018). The Company does not expect significant effects of adopting this standard on the Financial Statements. 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. 12

22 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. 3 interim financial information The consolidated interim financial information includes the interim financial information of the Company and its subsidiaries. When necessary, the subsidiaries interim financial information is adjusted to conform their accounting policies to those set by the Group. For the subsidiaries, the full consolidation concept was applied, intended for investments in subsidiaries entailing the recognition of their assets, liabilities, income and expenses in the parent, thus requiring the recognition of noncontrolling interests. Changes in ownership interest in investments in subsidiaries that do not result in loss of control are accounted for as capital transactions between shareholders, and any differences between the amount by which noncontrolling interests have been adjusted and the fair value of the amount received or paid is recognized directly in equity attributable to the owners of the parent. In the Company s individual interim financial information, the interim financial information on subsidiaries, joint ventures and associates is accounted for under the equity method. In relation to the FIDC, the Company now consolidates the financial information of the FIDC since it believes that it was created with the main purpose of concentrating the operation of purchase of receivables derived from payment transactions made by Cielo acquisition system, and relevant risks and rewards related to the FIDC s yield are linked to the quotas held by the Company. In the process of consolidation of the FIDC, assets and liabilities and gains and losses on transactions between the Company and the FIDC were eliminated. The consolidated interim financial information includes the following direct and indirect subsidiaries, joint ventures, associate and the FIDC: Interest in the capital (%) Companies 03/31/ /31/2016 Main activities Direct subsidiaries and FIDC: Servinet Serviços Ltda. ( Servinet ) Provison of maintenance services and contacts with merchants and service providers for acceptance of credit and debit cards. Cateno Gestão de Contas de Pagamentos S.A. ( Cateno ) Provision of services in processing means of payments that involve credit, debit and multiple cards of private and prepais labels (not including credit card management). Cielo USA, Inc. ( Cielo USA ) Holding ownership interests in other companies as partner or shareholder. Multidisplay Comércio e Serviços Tecnológicos S.A. ( Multidisplay ) Provision of services in data transmission to load fixed or mobile phone credits. Braspag Tecnologia em Pagamento Ltda. ( Braspag ) Development and licensing of software for computer; automated transaction processing; IT services for collection and management of accounts payable and receivable using the Internet. Aliança Pagamentos e Participações Ltda. ( Aliança ) Provision of services of contacts developing and maintenance with merchants and holding of ownership interests in other companies as partner or shareholder. Cielo Cayman Island ( Cielo Cayman ) Holding of ownership interests in other companies as partner or shareholder. Cielo Cayman did not carry out any operational, nonoperational, equity or financial activity up to the 13