4Q17 Earnings Presentation

Transcription

1 4Q17 Earnings Presentation March 2, 2018

2 Forward Looking Statements This presentation may contain certain statements that express the management s expectations, beliefs and assumptions about future events or results. Such statements are not historical fact, being based on currently available competitive, financial and economic data, and on current projections about the industries B3 works in. The verbs anticipate, believe, estimate, expect, forecast, plan, predict, project, target and other similar verbs are intended to identify these forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from those projected in this presentation and do not guarantee any future B3 performance. The factors that might affect performance include, but are not limited to: (i) market acceptance of B3 services; (ii) volatility related to (a) the Brazilian economy and securities markets and (b) the highly-competitive industries in which B3 operates; (iii) changes in (a) domestic and foreign legislation and taxation and (b) government policies related to the financial and securities markets; (iv) increasing competition from new entrants to the Brazilian markets; (v) ability to keep up with rapid changes in technological environment, including the implementation of enhanced functionality demanded by B3 customers; (vi) ability to maintain an ongoing process for introducing competitive new products and services, while maintaining the competitiveness of existing ones; (vii) ability to attract new customers in domestic and foreign jurisdictions; (viii) ability to expand the offer of B3 products in foreign jurisdictions. All forward-looking statements in this presentation are based on information and data available as of the date they were made, and B3 undertakes no obligation to update them in light of new information or future development. This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities where such offer or sale would be unlawful prior to registration or qualification under the securities law. No offering shall be made except by means of a prospectus meeting the requirements of the Brazilian Securities Commission CVM Instruction 400 of 2003, as amended. 2

3 year in summary B3 S BUSINESS ENVIRONMENT OPERATING FIGURES B3 DELIVERS ON SEVERAL FRONTS INTEREST RATE FELL FROM 13.75% TO 7.00%p.a. 1 INITIAL SIGNS OF ECONOMIC RECOVERY: 2.7% GDP growth expected for 2018 and IBOVESPA ROSE 27% 3 RECORD NUMBER OF MESSAGES AND TRADES TESTED B3 S SYSTEMS EQUITIES ADTV GREW 17.6% 7 B3 MERGER APPROVED REORGANIZATION OF CLIENTS AND PRODUCTS FUNCTION WITHIN B3 TO INCREASE CLIENT PROXIMITY AND ACCELERATE PRODUCT DEVELOPMENT POST-MERGER EXPENSE SYNERGIES CAPTURED EARLIER THAN EXPECTED EQUITY ISSUANCES (IPO/FOLLOW ON) OF R$42BN, ~3X AVG OF PREVIOUS YEARS 4 ALL TIME HIGH ADV OF INTEREST RATE CONTRACTS (+13.1%) 7 CONCLUSION OF PHASE TWO OF THE NEW INTEGRATED CLEARINGHOUSE: INNOVATION, CAPITAL EFFICIENCY, IT RESILIENCY AND ADDITIONAL CAPACITY DEBT ISSUANCES OF R$118BN, GROWTH OF 44% VS. AVG OF PREVIOUS YEARS 5 VEHICLE SALES ROSE BY 5.4%, WHILE VEHICLES FINANCED ROSE BY 9.7% 6 10% INCREASE IN THE NUMBER OF RETAIL INVESTORS IN EQUITY RENEWAL OF PUMA TRADING SYSTEM INFRASTRUCTURE ENHANCEMENT TO NOVO MERCADO LISTING RULES FOR CORPORATE GOVERNANCE FINANCIAL DELEVERAGING ON TRACK, COMBINED WITH SIGNIFICANT CASH DISTRIBUTION TO SHAREHOLDERS (R$923MN IN 2017) 1 Benchmark Selic Rate in Dec 16 and Dec 17. ² Central Bank Focus market consensus report Dec 17. ³ 29 Dec 16 to 28 Dec Source: Anbima. Growth of 191% in 2017 vs. average of the last 3 years ( ). 5 Source: Anbima vs. average of the last 3 years ( ). Includes debentures; commercial papers and bank notes. 6 Full year 2016 vs. full year Daily average for 2017 vs

4 Revenue breakdown 2017 Revenue growth in all segments well balanced revenue diversification REVENUE (in R$ millions / % growth YoY) (Combined information; B3) Other Revenues R$ % BM&F Seg. R$1, % +10.8% Cetip Financing Seg. R$ % R$ 4.4bn in 2017 Cetip Securities Seg. R$1, % Bovespa Seg. R$1, % 4

5 4Q17 and 2017 highlights Solid operating performance: growth in all business segments Operating highlights by segment BM&F Cetip Securities 4Q17 4Q17/4Q /2016 4Q17 4Q17/4Q /2016 ADV 3.2mn contracts +15.2% 3.0mn contracts +26.4% RPC R$ 1, % R$ 1, % Maintenance (CSD/Trade Repository) R$6.5tn +7.2% R$6.3tn +5.0% Bovespa Cetip Financing 4Q17 4Q17/4Q /2016 4Q17 4Q17/4Q /2016 ADTV R$10.1bn +16.4% R$8.7bn +17.6% Vehicles financed 1.4mn +11.6% 5.1mn 9.20% Margin bps -2.1% bps -0.9% Contracts (market share) 65.2% bps 71.4% bps 5

6 4Q17 and 2017 highlights (cont.) Bottom line negatively impacted by lower financial results Financial highlights (R$ millions) 4Q17 4Q17/4Q /2016 4Q17 4Q17/4Q /2016 Total revenue: 1, % 4, % Net revenue 1, % 4, % BM&F: % 1, % Adj. expenses % 1, % Bovespa: % 1, % Adj. EBITDA¹ % 2, % Cetip securities % 1, % Adj. EBITDA margin 66.6% +285 bps 67.7% +56 bps Cetip financing % % Financial result (25.2) % % Others: % % Rec. net income² % 2, % Other 4Q17 highlights Expenses related to the combination with Cetip: pre-tax: R$ 43.6mn / after-tax: R$ 28.8mn Reversal of provisions (positive impacts): Health care plan (other revenues): pre-tax: R$ 22.6mn / after-tax: R$ 14.9mn Legal contingencies (other expenses): pre-tax: R$ 26.8mn / after-tax: R$ 17.7mn 1 See reconciliation in the slide 22 in the appendix. ² See reconciliation in the slide 21 in the appendix. 6

7 BM&F segment Higher ADV from all groups of contracts led to revenue growth REVENUE¹ (in R$ millions) +9.6% ADV (in thousand of contracts) CONTRACTS 4Q16 4Q17 YoY Interest rates in BRL 1, , % FX rates % Stock indices % Interest rates in USD % Commodities % TOTAL 2, , % REVENUE PER CONTRACT 2 (in R$) 4Q17 HIGHLIGHTS Stock indices contracts growth driven by HFTs and retail investors Higher share of HFTs and day-trades drove RPC down CONTRACTS 4Q16 4Q17 YoY Interest rates in BRL % FX rates % Stock indices % Interest rates in USD % Commodities % TOTAL % ¹ Revenue does not consider the revenue lines foreign exchange and securities of the BM&F segment, as reported in the financial statements note 20, which totaled R$4.7 million in 4Q17. ² Mini contracts volume were weighted in the respective standard contracts, impacting volumes and RPC of these contracts groups. 7

8 Bovespa segment Revenue growth driven by higher volumes REVENUE¹ (in R$ millions) ADTV (in R$ billions) AND MARGIN (in bps) +10.3% MARKET CAPITALIZATION (in R$ trillions) AND TURNOVER VELOCITY (%) 4Q17 HIGHLIGHTS ADTV growth driven by a 23.1% YoY growth in market capitalization Trading and post-trading margins of bps, 2.1% decrease YoY (from bps in 4Q16) Higher participation of local institutional investors ¹ Revenue does not consider (i) the revenue line others of Bovespa Segment, as reported in the financial statements note 20, which totaled R$11 million in the 4Q17; 8

9 Cetip Securities segment Revenue resilience and recurrence REVENUE (in R$ millions) +0.3% OPERATIONAL FIGURES 4Q16 1Q17 2Q17 3Q17 4Q17 Maintenance (CSD/TR) Monthly avg Volume (in R$ trillions) 4Q17 HIGHLIGHTS Drop of 29.6% in the transaction-related revenue due to resolution 4,527 of Central Bank Banks substituted debentures of leasing companies for other bank funding instruments, mainly CDBs Monthly utilization (in thousands) Avg Price (in R$) Transaction (in millions) Avg Price (in R$) 9

10 Cetip Financing segment Recovery in the vehicles financing activity REVENUE (in R$ millions) OPERATIONAL FIGURES +11.5% 4Q16 1Q17 2Q17 3Q17 4Q17 Number of vehicles sold (in thousand) Number of vehicles financed (in thousand) 4Q17 HIGHLIGHTS Increase in number of vehicles financed and credit penetration Lower market share in the Contracts System due to the interruption of services in Minas Gerais state (Sep 17 onwards) Vehicles financed / vehicles sold Contracts System (market share) 28.3% 30.7% 28.3% 28.2% 30.2% 75.1% 74.4% 74.6% 72.1% 65.2% 10

11 Adjusted expenses Continued focus on expense management ADJUSTED EXPENSES¹ (in R$ millions / % growth YoY) (Combined information; B3) Adjusted personnel² (-4.0%): annual salaries readjustment more than offset by synergy gains Data Processing (-2.0%) decrease in expenses with software maintenance Third party (+88.9%): increase in the expenses directly linked to revenues Others³ (-8.4%) +2.7% (in R$ millions and % of total adjusted expenses) 4Q (50.6%) 53.9 (17.2%) 44.7 (14.3%) 56.0 (17.9%) 4Q (54.1%) 55.1 (18.0%) 23.7 (7.8%) 61.2 (20.1%) ¹ Adjusted to (i) depreciation and amortization; (ii) long-term stock-based compensation (principal + payroll taxes); (iii) integration-related expenses; and (iv) provisions. ² Excluding the long-term stock-based compensation (principal + payroll taxes). ³ Includes expenses with communication, maintenance, taxes, board and committee members compensation and others. 11

12 Expenses reconciliation and tracking of budgets Guidance were accomplished EXPENSES (in R$ millions) (Combined information; B3) Total Expenses: 2,609.1 Other: Combination with Cetip: Provisions: R$199.7mn Stock grant expenses¹: R$108.0mn In line with the budget set for non-recurring expenses related to the business combination with CETIP² D&A: Within the budget of R$710mn to R$750mn (includes R$570.3mn in amortization of intangibles) Adjusted expenses: 1,067.5 Within the budget of R$1,050mn to R$1,100mn; 4.2% YoY growth ¹ Considers only recurring stock grant expenses (principal and payroll taxes). The amount related to payroll taxes provisioned is calculated based on B3 s share price at the end of the period (R$22.78 on 12/27/2017 versus R$16.50 on 12/28/2016, +38% YoY growth). ² The budget range for non-recurring expenses related to the business 12 combination with Cetip was between R$ 615mn - R$ 640mn for period, excluding R$ 65.5mn impairment booked in the 1Q17.

13 Financial highlights Solid cash position is required for clearinghouse safeguards CASH AND FINANCIAL INVESTMENTS (in R$ millions) (Combined information; B3) 4Q17 7,510 B3 s cash position totaled R$4.8bn in 4Q17 R$2.5 - R$3.0 billion to run the business 3Q17 6,884 2Q17 6,874 1Q17 15,657 R$1.1 billion in clearinghouses required safeguards The remaining amount adds to the liquidity that supports the clearinghouse activity and general corporate needs Interest on capital (IoC) payment: Increase in cash position connected to R$533 million in IoC paid in Jan 18 4Q16 14,656 Third-party cash Not considered as B3 s cash Third-party Total Restricted and unrestricted The Company earns interest on most of this cash balance ¹ Includes earnings and rights on securities in custody. ² Includes B3 Bank clients deposits. ³ Does not include investments in Bolsa Mexicana de Valores, Bolsa de Comercio de Santiago, Bolsa de Valores de Colombia and Bolsa de Valores de Lima amounting R$324.7 million at 4Q17, booked as financial investments. See note 4 to the financial statements. 13

14 Financial highlights (cont.) Temporally higher financial leverage DEBT AMORTIZATION SCHEDULE (in R$ billions) Financial deleveraging and payout R$1.5bn in debt amortization scheduled for Dec 18 The Company expects to be able to reduce its financial leverage to 1x Gross Debt / Adj. EBITDA by the end of 2019 FINANCIAL LEVERAGE (in R$ millions) 4Q17 Gross Debt 5,634.7 Adj. EBITDA (LTM) 2,658.1 Financial leverage 2.1x In the FY17, distributions to shareholders totaled R$923.0 million, which represent a payout ratio of 71.2% Payout ratio target for the period between 70% and 80% of the IFRS net income 14

15 Appendix

16 Other revenues Solid performance of depository and impact of non-recurring provision reversal 4Q17 REVENUE BREAKDOWN¹ (in R$ millions / % of the total) (Combined information; B3) Other lines of business 4Q17 YoY Depository % Securities lending % 15.3% Market data (vendors) % Listing % Bank - financial intermediation and bank fees % Market participant access % Other² % Total % ¹ Revenue as reported in the financial statements note 20 of the Financial Statements. ² Includes R$22.6mn in reversal of provision. 16

17 Expense Income Financial highlights Decrease in the financial result due to a lower cash position FINANCIAL RESULT¹ (in R$ millions) (Combined information; B3) Decrease in financial revenue: Payment in Apr 17 of R$8.4 billion related to the cash portion of the combination with Cetip Decrease of Interest rate in Brazil -71.4% -25.1% Decrease in financial expense: Decrease in expenses related to the fair value hedge for the principal amount of the 2020 Notes (Swap) Decrease of Interest rate in Brazil R$8.2 mn of innovation investment impairment ¹ The Company set a cash flow hedge, designating the 1-year foreign currency loan taken in Dec 16 to cover the effects of currency variations on part of the revenues denominated in USD for BM&F segment, therefore reducing the impact of exchange rate variations on revenues for this segment and, at the same time, on the Company s financial results. The Company ceased to use hedging of USD revenues as of March 1,

18 Guidances for B Capex and D&A revised; Adjusted Opex maintained Adjusted OPEX¹ (in R$ millions) 2018 guidance Maintained (Combined information; B3) 2018 guidance: range of R$1,050 million and R$1,100 million YoY growth²: flat CAGR e²: 5.2% Depreciation and Amortization 2018 guidance Revised Depreciation and amortization guidance should range between R$910 million and R$980 million, including depreciation and amortization of intangibles CAPEX³ (in R$ millions) 2018 guidance Revised (Combined information; B3) 2018 guidance: range of R$220 million and R$250 million Continuous enhancement of it infrastructure Products development ¹ Expenses adjusted to the Company s (i) depreciation and amortization; (ii) costs from stock grant plan principal and payroll taxes and stock option; (iii) expenses related to business combination with Cetip; and (iv) provisions. Considers accounting eliminations for the combined Company ² Considering the mid-point of the budget for ³ Does not include Capex related to the business combination with Cetip. 18

19 Combination-related Opex and Capex Budget of business combination-related expenses and investments Estimates on expenses and other impacts arising from the completion of the business combination with Cetip¹ (R$ millions) M17 4Q e Total Contractual commitments and other accounting impact Cetip s LT compensation and retention programs (cancelation of stock options and payroll taxes) Impairment / write-offs / provision for contractual fines Retention / severance programs approved in the AGM of 04/28/17² ~ Advisors, consultants, branding ~ Total ~ ¹ In comparison with the numbers disclosed in 1Q17, some expenses were reclassified between lines in the table and from expenses related to the combination with Cetip to recurring personnel expenses. ² Includes payroll charges on the amount approved at the Annual General Meeting. In addition to the amount described above, approximately R$44 million will be accrued between 2019 and 2021, according to the vesting periods of the stock grant program. The portion referring to payroll taxes on the stocks that will be transferred in future periods can vary significantly, since it will be calculated based on the stock price on the day of the transfer. Estimates on expenses and Capex necessary to capture synergies (R$ millions) M17 4T e Total Severance and services providers expenses 8,5 113,8 37,1 150,9 ~20,0 175,0-190,0 Capex (projects and integration) 4,6 3,7 8,3 ~15,0 20,0-30,0 19

20 Financial statements Summary of income statement (consolidated) SUMMARY OF INCOME STATEMENT (in R$ millions) 4Q17 4Q16 4Q17/4Q16 (%) 4Q17/3Q17 (%) /2016 (%) Net revenues 1, % 1, % 4, , % Expenses (589.4) (438.9) 34.3% (593.40) -0.7% (2,609.1) (1,720.0) 51.7% Financial result (25.2) % % % Income tax and social contribution % % (242.0) (112.4) 115.3% Net income , % % 1, , % Adjusted expenses (313.2) (305.1) 2.7% (252.1) 24.3% (1,067.4) (1,024.3) 4.2% Adj. EBITDA % % 2, , % Adj. EBITDA margin 66.6% 63.7% 285 bps 66.6% -3 bps 67.7% 67.1% 56 bps Recurring net income % % 2, , % 3Q17 20

21 Recurring net income Reconciliation of net income excluding non-recurring items 4Q17 4Q16 4Q17/4Q16 (%) 3Q17 4Q17/3Q17 (%) /2016 (%) Net income (attributable to shareholders) 516,110 1,078, % 336, % 1,224,714 2,018, % (+) Expenses related to the combination with Cetip 28,760 12, % 22, % 325,383 51, % (+) Non-recurring provisions (32,626) (11,216) 190.9% (38,126) -14.4% 17, , % (+) Impairment , (+) Impact related to CME Group - (431,701) ,784 - (+) Amortization of intangibles from combination with Cetip 123, , % 376, (+) Amortization of intangibles from combination with GRV - 8, ,567 34, % (+) Changes on long term stock based compensation program/methodology - 17, ,490 - (+) Taxes Refinancing (REFIS/PERT) , Recurring net income 635, , % 445, % 2,083,986 2,383, % (+) Deferred Tax (goodwill from Bovespa combination) 133, , % 133, % 532, , % (+) Deferred Tax (goodwill from Cetip combination) 119, , , Recurring net income adjusted by goodwill tax benefit 888, , % 697, % 2,855,458 2,924, % 21

22 Financial statements Adjusted expenses and EBITDA reconciliations ADJUSTED EXPENSES RECONCILIATION (in R$ millions) 4Q17 4Q16 4Q17/4Q16 (%) 3Q17 4Q17/3Q17 (%) /2016 (%) Expenses 589, , % 593, % 2,609,112 1,720, % (+) Depreciation and amortization 234,582 52, % 223, % 742, , % (+) Long term stock based compensation 20,618 55, % 30, % 107, , % (+) Expenses related to the combination with Cetip 43,575 18, % 34, % 491,832 78, % (+) Provisions (recurring and non-recurring) (22,558) 7, % 53, % 199, , % Adjusted expenses 313, , % 252, % 1,067,449 1,024, % EBITDA RECONCILIATION (in R$ millions) 4Q17 4Q16 4Q17/4Q16 (%) 3Q17 4Q17/3Q17 (%) /2016 (%) EBITDA 678, , % 690, % 2,139,196 2,090, % (+) Expenses related to the combination with Cetip 43,575 18, % 34, % 491,832 78, % (+) Changes on long term stock based compensation program/methodology - 26, ,500 - (+) Non-recurring provisions (49,434) (16,994) 190.9% (57,767) -14.4% 27, , % Adjusted EBITDA 672, , % 667, % 2,658,080 2,410, % Adjusted EBITDA margin 66.6% 63.7% 285 bps 66.6% -3 bps 67.7% 67.1% 56 bps 22

23 Financial statements Summary of balance sheet (consolidated) ASSETS LIABILITIES AND SHAREHOLDERS EQUITY ASSETS LIABILITIES AND EQUITY Dec 31, 2017 Dec 31, 2016 Dec 31, 2017 Dec 31, 2016 (In R$ thousands) (In R$ thousands) Current assets 6,506,030 11,612,517 Current liabilities 5,494,563 3,657,832 Cash and cash equivalents 711, ,124 Collateral for transactions 2,171,449 1,653,835 Financial investments 4,926,832 10,964,214 Financial instruments for hedge 21, ,971 Others 868, ,179 Loan 43, ,919 Noncurrent assets 31,073,849 19,543,358 Debentures 1,513,167 17,495 Long-term receivables 2,563,595 3,749,282 Others 1,745,370 1,206,612 Financial investments 2,197,268 3,564,243 Noncurrent liabilities 7,775,302 8,421,658 Others 366, ,039 Debt issued abroad 2,012,331 1,987,669 Investments 44,962 29,117 Loan 508,998 33,949 Property and equipment, net 573, ,753 Debenture 1,497,434 2,991,806 Intangible assets 27,891,623 15,302,206 Deferred inc. tax and social contrib. 3,081,088 2,976,125 Goodwill 22,338,876 14,401,628 Others 675, ,109 Software and projects 5,548, ,578 Equity 24,310,014 19,076,385 Others 189,680 - Capital 3,198,655 2,540,239 Capital reserve 18,399,366 14,327,523 Others 2,701,673 2,198,708 Non-controlling interests 10,320 9,915 Total Assets 37,579,879 31,155,875 Total liabilities and equity 37,579,879 31,155,875 23

24 Investor Relations / 4418 / 4207 / 7935 / 7451 ri@b3.com.br