Individual and Consolidated Quarterly Information - ITR for the quarter ended September 30, 2016 Smiles S.A.

Transcription

1 Individual and Consolidated Quarterly Information - ITR for the quarter ended September 30, 2016 Smiles S.A. September 30, 2016 with Independent Auditors Review

2 Smiles S.A. Individual and consolidated quarterly information - ITR September 30, 2016 Contents Comments on performance Comments on business projection trends Audit Committee s Report Declaration of the officers on the quarterly information form - ITR Declaration of the officers on the independent auditors review report Report on the review of interim financial information Individual quarterly information - ITR Statements of financial position Statements of income Statements of comprehensive income Statements of changes in equity Statements of cash flows Value added statements Consolidated quarterly information - ITR Statements of financial position Statements of income Statements of comprehensive income Statements of changes in equity Statements of cash flows Value added statements Notes to the quarterly information form - ITR... 25

3 Comments on Performance Smiles presented a result with significant growth both in financial and operational indicators, strongly influenced by net revenue evolution and margins improvement. Besides that, Smiles implemented important partnerships and products over the last months aiming the innovation strategy sustainability and the focus on traveler. The first news was the announcement of the changes in the loyalty program, made by Smiles and Gol, that will favor the miles accrual, the category upgrade and propitiate a better user experience of Smiles members. In addition, the partnership with Shell (gas stations), in which the new application Shell Box will allow a new way of interaction with members, is now implemented. From now on the clients would pay for their gas directly from the application, collect and posteriorly redeem Smiles products and participate of exclusive promotions. New Gol s accrual policy. New Gol s accrual policy. Smiles and Gol announced changes in companies loyalty program in order to further improve its customers' experience. The changes will bring exclusive benefits to members by facilitating the category upgrade and the mile collection. One of the main innovations is that the promo fare is also eligible to accrual miles, including promotional campaigns. In addition, clients from Gold category will collect at least 500 miles per flight. For more information, the client can access the website Shell partnership. Smiles clients can from now on easily collect miles through the partnership with Raízen, Shell s authorized licensee in Brazil. The launch of Shell Box new app will facilitate the accrual of Smiles miles as well the redemption of miles in products on the Shell Select convenience stores. In the app s launching period, the Miles Now promotion will allow customers of both companies to earn 10,000 miles on the spot through daily raffles with 100 winners per day until the beginning of January. Wider dissemination of partnership with GPA. Campaign in approximately 800 Pão de Açúcar and Extra stores with better communication and wider dissemination, aiming to reinforce partnership benefits. Smiles members can exchange their miles to gift cards in Grupo Pão de Açúcar stores, favoring the redemption diversification. Soon, members from Pão de Açúcar Mais and Clube Extra loyalty programs will be able to acquire Smiles products (Smiles miles and Smiles Club, among others). New partnership with Emirates. Gol and Emirates announced a codeshare partnership, besides the frequent flyer program agreement, which allows members of Skywards, from Emirates, and Smiles to collect and redeem miles in flights of both companies. Around 30 million members all around the world from the two programs will benefit from the new partnership. Smiles net income presented a 46.8% growth when compared to 3Q15, mainly benefited by the 32.5% increase in operational income allied to the evolution of the financial result. The operational result growth was mostly due to the 14.1% evolution in net revenues and the 6.4% gross margin increase. In the end of the 3Q16, Smiles had 98 employees. We remain excited about the opportunities in the loyalty industry and committed in positioning Smiles as an innovative business platform and a complete travel company. 1

4 Operating Performance Operating Data 1 Unit 3Q16 2Q16 3Q15 3Q16 vs. 2Q16 (%) 3Q16 vs. 3Q15 (%) Members mn % 7.6% Miles Accrual mn 13,815 13,188 13, % 4.2% Gol mn 1,605 1,600 1, % (6.1%) Ex-GOL (Banks and Other) mn 12,210 11,588 11, % 5.7% Smiles' Redemption Program 2 mn 10,999 10,243 10, % 2.2% Airline Redemptions mn 9,919 9,485 9, % 0.2% Non-airline Redemptions mn 1, % 25.4% Program's Burn/Earn mn 79.6% 77.7% 81.1% 1.9 p.p. (1.5 p.p.) Breakage Rate % 16.3% 15.9% 16.2% 0.5 p.p. 0.1 p.p. % New Miles % 99.5% 98.7% 93.2% 0.8 p.p. 6.3 p.p. 1 All relevant miles amounts are net of reimbursement. The data in this table do not reflect financial information. 2 The miles redemption corresponds to miles redeemed under the Smiles Program, including new miles and miles of legacy. Participants and Partners: The program reached 11.8 million customers in 3Q16, a growth of 7.6% compared to 3Q15. In 3Q16, Smiles partnership with Raízen, Shell s authorized licensee, became effective. Through Shell s new app (Shell Box), customers will be able to pay for their gas directly from the application, collect and posteriorly redeem Smiles products and participate of exclusive promotions. Regarding GPA partnership, approximately 800 Pão de Açúcar and Extra stores have been a through a new communication campaign, aiming to reinforce its partnership benefits. Smiles members can exchange their miles to gift cards in Grupo Pão de Açúcar stores, and, soon, members from Pão de Açúcar Mais and Clube Extra loyalty programs will be able to acquire Smiles products (Smiles miles and Smiles Club, among others). Miles Accrual: The program s miles accrual increased 4.2% in the 3Q16 compared to 3Q15, chiefly explained by the 5.7% YoY increase in ex-gol partners accruals. Miles Redemption: The redemption of miles from the program in 3Q16 was 2.2% higher than 3Q15. The burn/earn ratio of the program reached 79.6%, a decrease of 1.5 p.p. when compared to 3Q15, and 2.0 p.p. increase over 2Q16. This evolution was mainly driven by the growth of Program s miles redeemed with international airline partners. 2

5 Program Miles Redemption 1 (Billion Miles) Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Gol Redemptions Other Products Redemptions Intl Partners Redemptions 1 Chart s figures consider redeemed miles net of reimbursement Miles redeemed with international airline partners reached 2.9 billion miles in 3Q16, 59.1% up over 3Q15 and represented 26.4% of the total miles redeemed 9.4 p.p. up over 3Q15. This growth rate contrasts with figures released by Brazilian Central Bank data regarding Brazilian consumers spending abroad, which dropped 6.0% in the same period. Operating Data 1 Unit 3Q16 3Q16 3Q16 3Q16 vs. 3Q16 (%) 3Q16 vs. 3Q16 (%) Smiles' Redemption Program 2 mn 10,999 10,243 10, % 2.2% Gol Tickets mn 7,013 6,494 8, % (13.1%) International Partners Tickets mn 2,906 2,990 1,827 (2.8%) 59.1% Non-airline mn 1, % 25.4% % of miles redeemed Gol Tickets % 63.8% 63.4% 75.0% 0.4 p.p. (11.2 p.p.) International Partners Tickets % 26.4% 29.2% 17.0% (2.8 p.p.) 9.4 p.p. Non-airline % 9.8% 7.4% 8.0% 2.4 p.p. 1.8 p.p. 1 All values corresponding to miles are net of reimbursement. Segregation among redemption types were not reviewed by auditors 2 The miles redemption corresponds to miles redeemed under the Smiles Program, including new miles and miles of legacy. Breakage: The breakage rate posted an increase of 0.1 p.p. when compared to 3Q15, reaching 16.3% rate. 3

6 Business Model Smiles started as a single loyalty program, but has evolved into its current, coalition model, which features several unique characteristics that allow for the accrual and redemption of Miles from GOL flights and its international partner airlines, as well as Brazil's main commercial banks, including co-branded cards issued by Bradesco and Banco do Brasil, and a wide network of retail partners, The current model works through (i) the accrual of Miles by Participants when they purchase airline tickets with GOL or other partner airlines, or products and services from Business and Financial Partners; Smiles Miles being acquired through the loyalty of these customers to those businesses, and (ii) Awards redemptions by Participants when they exchange their Miles for flights on GOL and other partner airlines, or for products and services offered by Commercial and Financial Partners, The main sources of our revenues come from (i) redeemed miles revenues, represented by tickets and awards in its network of airline, commercial and financial partners, (ii) Smiles&Money revenues, and (iii) Breakage revenues if issued miles expire without being redeemed, Glossary Awards: Products or services delivered to Participants from business partners, as result of mileage customers exercising their rights as members of customer loyalty programs, Breakage Estimate: Estimate of miles to expire without being redeemed, it may be expressed as a number of miles, in Brazilian Reals or as a percentage of miles issued, as appropriate to a given context, Burn/Earn Ratio: The ratio between the number of miles redeemed and the number of miles accrued in a given period, Free Float: Shares belonging to non-controlling shareholders, Legacy Miles: Miles earned before the launch of the spin-off program, Miles: The right of redemption of Smiles Program participants traded with Business Partners, New Miles: Miles earned after the launch of the spin-off program, Product Awards: Products or services, other than airline tickets, delivered to Participants from business partners, as result of mileage customers exercising their rights as members of customer loyalty programs, Smiles & Money: A manner by which airline tickets can be issued through the use of a combination of cash and miles, Smiles Program: A multi-brand loyalty program that features several companies, including GOL Linhas Aéreas Inteligentes S,A, This release may contain forward-looking statements concerning business prospects, estimates of operating and financial results, and growth prospects for Smiles, These are merely projections and, as such, are based exclusively on management's expectations for Smiles, Such forward-looking statements depend, substantially, on external factors and risks presented in the disclosure documents filed by Smiles, and are, therefore, subject to change without notice, Independent auditors did not review the Company s non-financial information, 4

7 Comments on business projection trends Until the date of this quarterly information form - ITR, the Company had not disclosed to the market projections or estimates of any kind, whether operating, technical, administrative or financial. 5

8 Audit Committee s Report The SMILES S.A. s Audit Committee, in compliance with its legal and statutory obligations, has reviewed the quarterly information for the quarter ended September 30, On the basis of the procedures we have undertaken, and taking into account the independent auditors review report issued by Ernst & Young Auditores Independentes S.S. on October 28, 2016, and the information and explanations we have received during the period, we consider that these documents are fit to be submitted to the consideration of the Board of Directors. Barueri, October 28, Constantino de Oliveira Junior Member of the Audit Committee Marcos Grodetzky Member of the Audit Committee Natan Szuster Member of the Audit Committee 6

9 Declaration of the officers on the quarterly information form (ITR) In compliance with the provisions of CVM Instruction No. 480/09, the Executive Board declares that it has discussed, reviewed and approved the quarterly information for the quarter ended September 30, Barueri, October 28, Leonel Dias de Andrade Neto Chief Executive Officer Marcos Antônio Pinheiro Filho Chief Financial and Investor Relations Officer 7

10 Declaration of the officers on the review report issued by the independent auditors In compliance with the provisions of CVM Instruction No. 480/09, the Executive Board declares that it has discussed, reviewed and approved the conclusion expressed in the independent auditors report on their review of the quarterly information for the quarter ended September 30, Barueri, October 28, Leonel Dias de Andrade Neto Chief Executive Officer Marcos Antônio Pinheiro Filho Chief Financial and Investor Relations Officer 8

11 (A free translation from the original in Portuguese into English) Report on the review of interim financial information To The Shareholders, Board of Directors and Officers Smiles S.A. Barueri - SP Introduction We have reviewed the accompanying individual and consolidated interim financial information of Smiles S.A. ( Company ), identified as Company and Consolidated, respectively, contained in the Quarterly Information (ITR) for the quarter ended September 30, 2016, which comprises the balance sheet as at September 30, 2016 and the related income statement and statement of comprehensive income for the three and nine-month period then ended, the statement of changes in equity and cash flow statement for the nine-month period then ended, including explanatory notes. Company management is responsible for the preparation of interim individual financial information in accordance with the Technical Pronouncement of the Accounting Pronouncements Committee (CPC) 21 (R1) Interim Financial Reporting and the consolidated interim financial information in accordance with CPC 21 (R1) and IAS 34 Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the presentation of these information in compliance with the rules issued by the Brazilian Securities Commission ( CVM ), applicable to the preparation of Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review We conducted our review in accordance with Brazilian and International Standards on Review Engagements (NBC TR Review of Interim Financial Information Performed by the Independent Auditor of the Entity 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. The scope of a review is significantly narrower than an audit conducted in accordance with Brazilian and International Standards on Auditing and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might have be identified in an audit. Therefore, we do not express an audit opinion. Conclusion on the individual and consolidated interim financial information Based on our review, nothing came to our attention that causes us to believe that the accompanying individual and consolidated interim financial information included in the Quarterly Information referred to above was not prepared, in all material respects, in accordance with CPC 21(R1) and IAS 34 applicable to the preparation of Quarterly Financial Information, consistently with the standards issued by the Brazilian Securities Commission (CVM). 9

12 Other matters Statements of value added We have also reviewed the individual and consolidated statements of value added for the nine-month period ended September 30, 2016, prepared under the responsibility of management, the presentation of which in the interim financial information is required by rules issued by the Brazilian Securities Commission (CVM) applicable to the preparation of Quarterly Financial Information (ITR), and as supplementary information by IFRS, whereby no statement of value added presentation is required. These statements have been subjected to the same review procedures previously described and, based on our review, nothing has come to our attention that causes us to believe that they are not prepared, in all material respects, in accordance with the overall accompanying interim individual and consolidated interim financial information. São Paulo, October 28, ERNST & YOUNG Auditores Independentes S.S. CRC-2SP015199/O-6 Vanessa Martins Bernardi Accountant CRC-1SP244569/O-3 10

13 Statements of financial position - Individual As of September 30, 2016 and December 31, 2015 (In thousands of Brazilian reais - R$) Current Quarter 09/30/2016 Prior Year 12/31/2015 Line code Line item 1 Total assets 1,878,484 1,665, Current assets 1,174,667 1,447, Cash and cash equivalents 35, , Short-term Investments 353, , Accounts receivable 185, , Other current assets 600, , Other 600, , Advances to suppliers 550, , Other credits 4,150 3, Related-party transactions 45,342 50, Noncurrent assets 703, , Long-term assets 651, , Deferred taxes 68,495 73, Other noncurrent assets 583, , Advances to suppliers 576, , Other credits 7, Investments 12,355 15, Property, plant and equipment 1,783 1, Intangible 37,687 13,912 11

14 Statements of financial position - Individual As of September 30, 2016 and December 31, 2015 (In thousands of Brazilian reais - R$) Current Quarter 09/30/2016 Prior Year 12/31/2015 Line code Line item 2 Total liabilities and equity 1,878,484 1,665, Current liabilities 1,041, , Salaries, wages and benefits 11,771 12, Salaries, wages and benefits 11,771 12, Suppliers 102,812 84, Suppliers 102,812 84, Taxes payable 29,639 12, Other liabilities 897, , Other 897, , Interest on capital to be paid 16, Compulsory dividend payable - 65, Advances from customers 78,323 13, Deferred revenue 803, , Noncurrent liabilities 243, , Other liabilities 241, , Others 241, , Deferred revenue 231, , Suppliers 9, Provisions 1,281 1, Provisions tax social security labor and civil 1,281 1, Civil provisions 1,281 1, Shareholder s equity 593, , Issued capital 145, , Capital 181, , Cost of issued shares (36,402) (36,402) Capital reserves Special reserve Share-based payments Revenue reserves Statutory reserve Additional dividends Retained earnings The accompanying notes are an integral part of the quarterly information. 12

15 Line code Statements of income - Individual Periods ended September 30, 2016 and 2015 (In thousands of Brazilian reais - R$, except basic and diluted earnings (loss) per share) Line item Current quarter 07/01/2016 to 09/30/2016 Current year 01/01/2016 to 09/30/2016 Same quarter prior year 07/01/2015 to 09/30/2015 Prior year 01/01/2015 to 09/30/ Sales and services revenue 398,256 1,098, , , Net revenue 398,256 1,098, , , Cost of sales and services (192,728) (565,886) (191,098) (476,178) Cost of services rendered (192,728) (565,886) (191,098) (476,178) 3.03 Gross profit 205, , , , Operating expenses/income (42,924) (117,765) (35,218) (93,660) Selling expenses (20,220) (64,565) (23,600) (61,525) Marketing expenses (20,220) (64,565) (23,600) (61,525) General and administrative expenses (19,518) (46,473) (10,508) (27,824) Others (1,368) (1,368) Equity in subsidiary (1,818) (5,359) (1,110) (4,311) 3.05 Result before income taxes and financial result 162, , , , Financial income/expenses 50, ,032 28,241 89, Financial income 54, ,175 39, , Financial income 54, ,963 39, , Exchange variation gain - 7, Financial expenses (4,760) (143) (10,854) (26,363) Financial expenses (33) (143) (94) (14,926) Exchange variation loss (4,727) - (10,760) (11,437) 3.07 Income before income taxes 212, , , , Income tax (expenses) (67,895) (193,406) (52,431) (132,622) Current (64,669) (188,183) (57,198) (140,014) Deferred (3,226) (5,223) 4,767 7, Income from continuing operations, net 144, ,662 98, , Profit for the period 144, ,662 98, ,600 The accompanying notes are an integral part of the quarterly information. 13

16 Statements of comprehensive income - Individual Periods ended September 30, 2016 and 2015 (In thousands of Brazilian reais - R$) Current quarter 07/01/2016 to 09/30/2016 Current year 01/01/2016 to 09/30/2016 Same quarter prior year 07/01/2015 to 09/30/2015 Prior year 01/01/2015 to 09/30/2015 Line code Line item 4.01 Profit for the period 144, ,662 98, , Comprehensive income for the period 144, ,662 98, ,600 The accompanying notes are an integral part of the quarterly information. 14

17 Statements of changes in equity Individual Periods ended September 30, 2016 and 2015 (In thousands of Brazilian reais - R$) Individual Interim Financial Information / Statements of Changes in Equity From 01/01/2015 to 09/30/2015 (In Thousands of Brazilian Reais) Line code Line item Capital Stock Capital reserves, options granted and treasury shares Income reserves Accumulated profits Total equity 5.01 Opening balance 101,594 77, , , Shareholders capital transactions 8,168 1,416 (202,307) (7,066) (199,789) Distributed dividends - - (202,307) - (202,307) Interests on capital anticipated (7,066) (7,066) Share-based Payments - 1, , Capital increase - Share-based payments 8, , Total comprehensive income/loss , , Net profit for the period , , Closing balance 109,762 78,963 24, , ,848 Individual Interim Financial Information / Statements of Changes in Equity From 01/01/2016 to 09/30/2016 (In Thousands of Brazilian Reais) Line code Line item Capital Stock Capital reserves, options granted and treasury shares Income reserves Accumulated profits Total equity 5.01 Opening balance 109,762 79, , , Shareholders capital transactions 35,477 (28,257) (269,574) (18,839) (281,193) Capital increase 29,177 (29,177) Distributed dividends - - (269,574) - (269,574) Interests on capital anticipated (18,839) (18,839) Share-based Payments Capital increase - Share-based payments 6, , Total comprehensive income/loss , , Net profit for the period , , Closing balance 145,239 51,114 29, , ,409 The accompanying notes are an integral part of the quarterly information. 15

18 Statements of cash flows - Individual Periods ended September 30, 2016 and 2015 (In thousands of Brazilian reais - R$) Line code Line item Current Year 01/01/2016 to 09/30/2016 Current Year 01/01/2015 to 09/30/ Net cash generated in operating activities 125, , Cash flows from operating activities (73,863) (54,845) Deferred taxes 5,223 (7,392) Share-based payments 827 1, Provisions for judicial deposits 1,501 1, Depreciation and amortization 5,887 1, Obtained discounts (99,427) (87,144) Exchange and monetary variations, net (3,006) 13, Allowance for doubtful accounts Provision for profit sharing and results 7,672 5, Equity in subsidiaries 5,359 4, Interest on loans - 11, Change on investment s capital 1, Changes assets and liabilities (187,138) 676, Accounts receivable 5,800 (71,237) Advances to suppliers (313,296) 375, Other credits (7,399) (1,069) Salaries, wages and benefits (8,865) (5,502) Advances from customers 64,864 57, Deferred revenue 47, , Taxes payable 170, , Income tax and social contribution paid (155,440) (107,110) Related-party transactions 5,297 17, Suppliers 5,691 48, Provisions for judicial deposits (1,560) (656) Others 386, , Profit for the period 386, , Net cash used in investing activities 135,264 (260,375) Acquisition of fixed assets (3,771) (1,021) Financial investment 142,474 (317,657) Restricted Cash - 58, Capital increase affiliated companies (3,439) Net cash used by financing activities (329,043) (626,954) Capital increase 6,300 8, Distributed dividends (335,343) (265,414) Interest on capital and dividends paid - (347,484) Interest paid - (15,158) Interests on capital anticipated - (7,066) 6.05 Net decrease in cash and cash equivalents (68,118) (8,274) Cash and cash equivalents at beginning of the period 103,273 80, Cash and cash equivalents at end of the period 35,155 71,825 The accompanying notes are an integral part of the quarterly information. 16

19 Value added statements - Individual Periods ended September 30, 2016 and 2015 (In thousands of Brazilian reais - R$) Line code Line item Current Year 01/01/2016 to Prior year 01/01/2015 to 09/30/ /30/ Revenue 1,211, , Sales of goods, products and services 1,201, , Other revenue 9,337 8, Other operating income 9,337 8, Allowance/reversal for doubtful accounts (21) Acquired from third parties (685,551) (576,673) Cost products, goods and services sold (586,257) (487,232) Material, power, third-party services and other (54,470) (54,038) Others (44,824) (35,403) Sales and advertising (44,824) (35,403) 7.03 Gross value added 525, , Retentions (5,887) (1,783) Depreciation, amortization and exhaustion (5,887) (1,783) 7.05 Added value produced 519, , Value added received in transfer 178, , Equity income (5,359) (4,311) Financial income 183, , Total wealth for distribution 698, , Wealth for distribution 698, , Employees 26,007 22, Salaries 22,904 20, Benefits 1, F.G.T.S. 1,246 1, Taxes 273, , Federal Taxes 273, , Municipal Taxes Third-party capital remuneration 11,879 23, Interest 11,029 22, Rent Other Return on own capital 386, , Interests on capital anticipated 18,839 7, Profit for the period 367, ,534 The accompanying notes are an integral part of the quarterly information. 17

20 Statements of financial position - Consolidated As of September 30, 2016 and December 31, 2015 (In thousands of Brazilian reais - R$) Line code Line item Current Quarter 09/30/2016 Prior Year 12/31/ Total assets 1,878,484 1,665, Current assets 1,174,667 1,447, Cash and cash equivalents 184, , Short-term investments 204, , Accounts receivable 185, , Other current assets 600, , Others 600, , Advances to suppliers 550, , Other credits 4,150 3, Related-party transactions 45,342 50, Noncurrent assets 703, , Long-term assets 651, , Deferred taxes 68,495 73, Other noncurrent assets 583, , Advances to suppliers 576, , Other credits 7, Investments 12,355 15, Property, plant and equipment 1,783 1, Intangible 37,687 13,912 18

21 Statements of financial position - Consolidated As of September 30, 2016 and December 31, 2015 (In thousands of Brazilian reais - R$) Line code Line item Current Quarter 09/30/2016 Prior year 12/31/ Total liabilities and equity 1,878,484 1,665, Current liabilities 1,041, , Salaries, wages and benefits 11,771 12, Salaries, wages and benefits 11,771 12, Suppliers 102,812 84, Suppliers 102,812 84, Taxes payable 29,639 12, Other liabilities 897, , Others 897, , Interest on capital to be paid Compulsory dividend payable - 65, Advances from customers 78,323 13, Deferred revenue 803, , Noncurrent liabilities 243, , Other liabilities 241, , Others 241, , Deferred revenue 231, , Suppliers 9, Provisions 1,281 1, Provisions tax social security labor and civil 1,281 1, Civil provisions 1,281 1, Shareholder s equity 593, , Issued capital Capital Cost of issued shares (36,402) (36,402) Capital reserves 51,114 79, Special reserve 43,765 72, Share-based Payments 7,349 6, Revenue reserves 29, , Statutory reserve 29,233 29, Additional proposed dividend - 269, Retained earnings 367,823-19

22 Statements of income - Consolidated Periods ended September 30, 2016 and 2015 (In thousands of Brazilian reais - R$, except basic and diluted Current quarter 07/01/2016 to 09/30/2016 Current year 01/01/2016 to 09/30/2016 Same quarter prior year 07/01/2015 to 09/30/2015 Prior year 01/01/2015 to 09/30/2015 Line code Line item 3.01 Sales and services revenue 398,256 1,098, , , Net revenue 398,256 1,098, , , Cost of sales and services (192,728) (565,886) (191,098) (476,178) Cost of services rendered (192,728) (565,886) (191,098) (476,178) 3.03 Gross profit 205, , , , Operating expenses/income (41,106) (112,406) (35,218) (93,660) Selling expenses (20,220) (64,565) (23,600) (61,525) Marketing expenses (20,220) (64,565) (23,600) (61,525) General and administrative expenses (19,518) (46,473) (10,508) (27,824) Others (1,368) (1,368) Equity in subsidiary (1,818) (5,359) (1,110) (4,311) 3.05 Result before income taxes and financial result 162, , , , Financial income/expenses 50, ,032 28,241 89, Financial income 54, ,963 39, , Financial income 54, ,963 39, , Exchange variation gain - 7, Financial expenses (4,760) 7,069 (10,854) (26,363) Financial expenses (33) (143) (94) (14,926) Exchange variation loss (4,727) - (10,760) (11,437) 3.07 Income before income taxes 212, , , , Income tax (expenses) (67,895) (193,406) (52,431) (132,622) Current (64,669) (188,183) (57,198) (140,014) Deferred (3,226) (5,223) 4,767 7, Income from continuing operations, net 144, ,662 98, , Profit for the period 144, ,662 98, , Profit for the period 144, ,662 98, ,600 20

23 Statements of comprehensive income Consolidated Periods ended September 30, 2016 and 2015 (In thousands of Brazilian reais - R$) Current quarter 07/01/2016 to 09/30/2016 Current year 01/01/2016 to 09/30/2016 Same quarter prior year 07/01/2015 to 09/30/2015 Prior year 01/01/2015 to 09/30/2015 Line code Line item 4.01 Profit for the period 144, ,662 98, , Comprehensive income for the period 144, ,662 98, , Comprehensive income for the period 144, ,662 98, ,600 21

24 Statements of changes in equity Consolidated Periods ended September 30, 2016 and 2015 (In thousands of Brazilian reais - R$) Consolidated Interim Financial Information / Statements of Changes in Equity From 01/01/2015 to 09/30/2015 (In Thousands of Brazilian Reais) Line code Line item Capital Stock Capital reserves, options granted and treasury shares Income reserves Accumulated profits Total equity 5.01 Opening balance 101,594 77, , , Shareholders capital transactions 8,168 1,416 (202,307) (7,066) (199,789) Distributed dividends - - (202,307) - (202,307) Interests on capital (7,066) (7,066) Share-based Payments - 1, , Capital increase - Share-based payments 8, , Total comprehensive income/loss , , Net loss for the period , , Closing balance 109,762 78,963 24, , ,848 Consolidated Interim Financial Information / Statements of Changes in Equity From 01/01/2016 to 09/30/2016 (In Thousands of Brazilian Reais) Line code Line item Capital Stock Capital reserves, options granted and treasury shares Income reserves Accumulated profits Total equity 5.01 Opening balance 109,762 79, , , Shareholders capital transactions 35,477 (28,257) (269,574) (18,839) (281,193) Capital increase 6, , Distributed dividends - - (269,574) - (269,574) Interest on equity paid in advance (18,839) (18,839) Share-based payments Capital increase special reserve 29,177 (29,177) Total comprehensive income/loss , , Net profit for the period , , Closing balance 145,239 51,114 29, , ,409 The accompanying notes are an integral part of the quarterly information. 22

25 Line code Statements of cash flows - Consolidated Periods ended September 30, 2016 and 2015 (In thousands of Brazilian reais - R$) Line item Current Year 01/01/2016 to 09/30/2016 Current Year 01/01/2015 to 09/30/ Net cash generated (used) in operating activities 125, , Cash flows from operating activities (73,863) (54,845) Deferred taxes 5,223 (7,392) Share-based Payments 827 1, Provisions tax social security labor and civil 1,501 1, Depreciation and amortization 5,887 1, Obtained discounts (99,427) (87,144) Exchange and monetary variations, net (3,006) 13, Allowance for doubtful accounts Provision for profit sharing and results 7,672 5, Equity in subsidiaries 5,359 4, Interest on loans - 11, Change on investments' capital 1, Changes assets and liabilities (187,138) 676, Accounts receivable 5,800 (71,237) Advances to suppliers (313,296) 375, Other Credits (7,399) (1,069) Salaries, Wages and Benefits (8,865) (5,502) Advances from customers 64,864 57, Deferred revenue 47, , Taxes payable 170, , Income tax and social contribution paid (155,440) (107,110) Related-Party Transactions 5,297 17, Suppliers 5,691 48, Provisions for judicial deposits (1,560) (656) Others 386, , Profit for the period 386, , Net cash generated (used) in investing activities 52,644 (62,532) Acquisition of fixed assets (3,771) (1,021) Financial investment 59,854 (119,814) Restricted Cash - 58, Capital increase affiliated companies (3,439) Net cash generated (used) by financing activities (329,043) (626,954) Capital increase 6,300 8, Distributed dividends (335,343) (265,414) Loan and lease payment - (347,484) Interest paid - (15,158) Interests on capital anticipated - (7,066) 6.05 Net increase (decrease) in cash and cash equivalents (68,118) 189, Cash and cash equivalents at beginning of the period 103, , Cash and cash equivalents at end of the period 35, ,737 23

26 Line code Value added statements - Consolidated Periods ended September 30, 2016 and 2015 (In thousands of Brazilian reais - R$) Line item Current Year 01/01/2016 to 09/30/2016 Prior year 0101/2015 to 09/30/ Revenue 1,211, , Sales of goods, products and services 1,201, , Other revenue 9,337 8, Other operating income 9,337 8, Allowance/reversal for doubtful accounts (21) Acquired from third parties (685,551) (576,673) Cost products, goods and services sold (586,257) (487,232) Material, power, third-party services and other (54,470) (54,038) Others (44,824) (35,403) Sales and advertising (44,824) (35,403) 7.03 Gross value added 525, , Retentions (5,887) (1,783) Depreciation, amortization and exhaustion (5,887) (1,783) 7.05 Added value produced 519, , Value added received in transfer 178, , Equity income (5,359) (4,311) Financial income 183, , Total wealth for distribution 698, , Wealth for distribution 698, , Employees 26,007 22, Salaries 22,904 20, Benefits 1, F.G.T.S. 1,246 1, Taxes 273, , Federal Taxes 273, , Municipal Taxes Third-party capital remuneration 11,879 23, Interest 11,029 22, Rent Other Return on own capital 386, , Interest on equity paid in advance 18,839 7, Profit for the period 367, ,534 24

27 1. Operations Notes to the quarterly information - ITR September 30, 2016 (In thousands of Brazilian reais - R$, except when otherwise indicated) Smiles S.A. ( Company ) is a publicly-listed company established in accordance with Brazilian corporate legislation and is a direct subsidiary of Gol Linhas Aéreas Inteligentes ( GLAI ). The Company s main purpose, within the scope of the Smiles customer loyalty program, is to carry out: (a) the development and management of the program; (b) the sale of redemption rights of awards; and (c) the creation and management of an individual and corporate database. The miles issued by the Smiles Program are mainly sold to: (a) Gol Linhas Aéreas S.A. ( GOL ), which delivers them to passengers participating in the Smiles customer loyalty program; (b) financial institutions that deliver them to their customers based on their credit card expenses; (c) retail and entertainment customers; (d) airline partners; and (e) individuals. The Company is headquartered at Alameda Rio Negro, 585, Edifício Padauiri, Bloco B, 2º Andar, Alphaville, Industrial, in the city of Barueri, state of São Paulo, Brazil. The Company s shares are traded on the Securities, Commodities and Futures Exchange - BM&FBOVESPA. The Company adopts corporate governance practices in compliance with the Novo Mercado listing regulations, which, among other provisions, expand shareholders rights and improve the quality of the information provided. On October 21, 2016, the Company announced that GLAI received requests from the IRS under a supervision to provide specific, concrete clarification of certain expenses incurred by GLAI in 2012 and After receiving these requests, GLAI launched an investigation internal and hired an independent external audit to the full investigation and full elucidation of the facts. The Company does not have knowledge of impacts related to such disclosure which could lead to possible impact on their business. 2. Approval and summary of significant accounting policies applied in preparing the quarterly information form (ITR) This quarterly information form was approved by the Company s Board of Directors and had its publication authorized at a meeting held on October 28, Statement of compliance The Company s individual and consolidated quarterly information for the three- and nine-month periods ended September 30, 2016, has been prepared in accordance with International Accounting Standards ( IAS ) No. 34, and Accounting Pronouncement No. 21 (R1) (CPC 21), which deals with interim statements. When preparing the quarterly information form, the Company uses the following disclosure criteria: (i) regulatory requirements; (ii) the relevance and specificity of the information on the Company s operations provided to users; (iii) the information needs of the users of the quarterly information form; and (iv) information from other entities in the same sector, mainly in the international market. Accordingly, Management confirms that all the material information presented in this quarterly information form is being demonstrated and corresponds to the information used by Management in the course of its duties and with the rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of the Quarterly Information - ITR. 25

28 Notes to the quarterly information - ITR September 30, 2016 (In thousands of Brazilian reais - R$, except when otherwise indicated) 2.2. Basis of preparation This quarterly information was prepared based on historical cost, except for certain financial assets and liabilities that are measured at fair value, when applicable, and investments measured using the equity method. This quarterly information does not include all the information or disclosures required in the annual financial statements, and it should therefore be read in conjunction with the financial statements for the year ended December 31, 2015, dated February 26, 2016, which were prepared in accordance with the accounting practices generally accepted in Brazil and the International Financial Reporting Standards ( IFRS ). The Company has not adopted in advance any standard, amendment or interpretation issued but not yet in force. The Company s consolidated quarterly information also includes the following entities: Entity Subsidiary: Date of constitution Location Fundo Sorriso (a) 07/14/2014 Brazil Operational activity Investment fund % equity interest Type 09/30/ /31/2015 Direct control Associate: Netpoints (b) 11/8/2013 Brazil Frequent flyer program Noncontrolling interest (a) (b) Sorriso is an exclusive investment fund and, pursuant to CVM Instructions 247/1996 and 408/2004, the Company consolidates this fund s assets in its quarterly information. Investment not consolidated by the Company accounted by the equity method. This quarterly information form (ITR) was prepared using the Brazilian real as the functional and presentation currency. Figures are rounded to thousands of reais (R$) New standards, amendments and interpretations to existing standards In 2014 IASB issued IFRS15 - Contracts Revenue with Customers, which is effective for years beginning on or after January 1st The IFRS15 (CPC47 - in public hearing process) has revenue recognition principles from a five steps model to apply to all contracts with customers, and according to the entity's performance obligations. The Company is evaluating the impact of this new standard on its financial statements. The Company keeps monitoring the issue or change on other accounting pronouncements and understand that there are no other rules that may result in material changes to its quarterly information - ITR. 3. Cash and cash equivalents Parent Company Consolidated 09/30/ /31/ /30/ /31/2015 Cash and bank deposits 9,158 4,853 9,158 4,853 Cash equivalents Private bonds 25,997 98,420 25,997 98,420 Investment funds , ,716 35, , , ,989 As of September 30, 2016, the private securities were comprised by private bonds (Bank 26

29 Notes to the quarterly information - ITR September 30, 2016 (In thousands of Brazilian reais - R$, except when otherwise indicated) Deposit Certificates - CDBs) and repos remunerated at post fixed rates between 97.4% and 103.0% of the CDI rate (75.0% and 103.0% as of December 31, 2015). The investment funds are represented by private funds with immediate liquidity operated at 100.0% of the CDI weighted average rate (98.8% as of December 31, 2015). 4. Short-term investments Parent Company Consolidated 09/30/ /31/ /30/ /31/2015 Investment funds 351, , , ,737 Fundo Funcine 1,448 1,355 1,448 1, , , , ,092 Short-term investments are instruments with a maturity of more than 90 days and risk of a change in value, which are measured at fair value through profit or loss and remunerated at post-fixed rates ranging between 97.7% and 105.0% of the CDI rate (75.0% and 103.0% as of December 31, 2015). The investment funds are represented by private funds with immediate liquidity, operated at a weighted average of 101.1% of the CDI rate (98.8% as of December 31, 2015). 5. Trade Receivables Parent Company and Consolidated 09/30/ /31/2015 Non-airline partners 73,579 71,742 Airline partner companies (a) 16,900 36,489 Credit card administrators (b) 95,600 84, , ,591 Estimated losses from doubtful accounts (190) (169) 185, ,422 (a) Of the total, R$16,322 (R$35,791 as of December 31, 2015) refers to miles sold to GOL and R$578 (R$698 as of December 31, 2015) to the collection of Smiles program management fees from GOL, pursuant to the operating agreement described in Note 8.1. (b) Balance receivable from the sale of miles through credit card operators, mainly represented by Visa, Mastercard and Amex. Of this amount, R$69,401 (R$71,160 as of December 31, 2015) refers to amounts received from the operators by GOL, which will, in turn, transfer them to the Company, as detailed in the operating agreement described in Note 8.1. All accounts receivable are denominated in reais, and the aging list of trade receivables is as follows: Parent Company and Consolidated 09/30/ /31/2015 Not yet due: Up to 30 days 184, ,056 Overdue: Until 30 days 1, to 60 days to 90 days to 180 days to 360 days Above 360 days Total 186, ,591 The maximum exposure to credit risk is represented by the book value of each type of receivable mentioned above. 27

30 Notes to the quarterly information - ITR September 30, 2016 (In thousands of Brazilian reais - R$, except when otherwise indicated) The changes in allowance for doubtful accounts are as follows: Parent Company and Consolidated 09/30/ /31/2015 Balance at the beginning of the period (169) (380) Additions (733) (697) Recoveries Balance at the end of the period (190) (169) 6. Advances to suppliers As of May 10, 2013, the Company entered into the second advance ticket purchase agreement with GOL for the monthly acquisition of airline tickets. The contract envisages a conditional discount based on the CDI rate applied to four years, as of the date of signature of the agreement. As of February 26, 2016, the Company approved the execution of the advance airline ticket purchase agreement and the agreement of fiduciary assignment of credit rights and rights on accounts and other covenants, which provide for the acquisition, by the Company, of credits to be used in future acquisitions of airline tickets issued by GOL, in the amount of up to R$1.0 billion, subject to certain terms and conditions established between the parties. The amounts were paid in tranches of R$376,000 on the closing date of the transaction, R$200,000 as of May 12, 2016, R$200,000 as of June 30, 2016 and R$160,000 as of September 13, The weighted rate of both agreements is equivalent to 16.54%. As of September 30, 2016, the balance of advances for ticket purchase was R$550,797 (R$601,359 as of December 31, 2015) classified under current assets and R$576,337 (R$113,052 as of December 31, 2015) classified under non-current asset. 7. Deferred taxes Parent Company and Consolidated 09/30/ /31/2015 Temporary differences: Provision for accounts payable and other provisions 34,175 29,440 Other temporary differences 1, Tax incentive for the incorporation of goodwill (*) 32,824 43,765 Total deferred income taxes 68,495 73,718 (*) Refers to the tax incentive generated by the merger of G.A. Smiles Participações on December 31, 2013, which will be realized proportionally to its use in five years. The book value of deferred tax assets is reviewed periodically and projections of future results are reviewed annually, unless the Company identifies indicators that may affect these projections. The Company s Management considers that deferred income and social contribution taxes on temporary differences recognized as of September 30, 2016 will be realized in proportion to the realization of the respective provisions and the tax incentive resulting from incorporation of goodwill. The amounts of income taxes recorded in the statement of income are reconciled at a combined rate, as follows: 28