Interim Financial Information

Transcription

1 Interim Financial Information Multiplus S.A. With Independent Auditor s Report Mplu 1

2 MANAGEMENT DISCUSSION In the first quarter of 2018, we maintained a growth trend in our base of members, which reached 19.9 million people, an increase of 16.3% in relation to the same prior-year period. The engagement of our members also continued to rise, with a record of 26.5 billion points issued, a growth of 7.8% in relation to 1Q17, and for the first time, 38.1% of accumulated points came from sectors not related to the airline or financial industry. The number of points redeemed was 22.4 billion, another record, i.e. an increase of 15.9% in relation to 1Q17. In January, we celebrated one year of the launching of Multiplus Itaucard card, and during this period we focused on constantly improving the product to achieve the best point card system of the market, through a regular platform of promotions and benefits. In the first quarter, for example, we launched promotions such as double points on bills issued until June 2018 for new purchases and up to 80% extra points for customers who own Multiplus Itaucard Mastercard Black and Citi MasterCard Black cards on bills for May and June. Our partnership with Vivo Valoriza also reached one year, full of good results for both companies and, especially, for program members. We were the first loyalty program network to launch a partnership with a mobile, landline and broadband company at the end of January During that time, more than 100,000 air tickets were issued with Vivo Valoriza points transferred to Multiplus. The customers of this mobile operator prefer the airline segment and the most sought out destinations were domestic, accounting for 62.8% of the tickets issued. In this quarter, our hotel booking platform in partnership with Hoteis.com recorded a significant 214% growth in the number of accumulated points compared to 1Q17, as a result of the improvements in experience and expansion of the portfolio of hotels and hostels at the end of The destinations most sought out by our members were Orlando, New York, Santiago, Buenos Aires and Rio de Janeiro. We have improved our entertainment platform by expanding the portfolio of concerts and performances available for point redemption. Through the partnership with Easy Live, Multiplus members can use their points to watch the main national and international attractions in Brazil. We always strive to prioritize the members experience and in this context we understand that cultural events, as well as travel, contribute positively to people's lives; we thus envision a great potential in this front and will continue to invest in it in In this period, we also continued the international expansion plan, boosting our actions in Paraguay and launching actions in the United States, Europe and Mexico, focusing on the destinations most sought out by Brazilians. As part of our strategy, sustainability and business competitiveness planning, we have conducted the annual, restatement of cost per seat and point redemption tables, jointly with LATAM. The new agreement represents, on average, a reduction in the cost per seat of 5% for domestic flights and 2% for international flights, starting January In addition, due to the synergy and close relationship with LATAM, we were able to obtain additional cost reductions to these percentages in the first quarter, as a result of joint actions. Mplu 2

3 MANAGEMENT DISCUSSION--Continued As part of our strategy to deliver the best experience to our members, we have once again brought an innovation to the loyalty industry by launching the Members Board. The main objective of this Board is to make us stronger as a company focused on delivering the best experience to our members, and to supplement the actions we have already implemented in this area. The actions and results above are a proof of our focus on being the best loyalty program network, following the strategy plan of offering the most diverse point accumulation methods and the best redemption options, so that our members fly more and go further. Mplu 3

4 Interim Financial Information Contents Review report on the interim financials information...1 Statement of financial position...3 Statement of profit or loss...5 Statement of comprehensive income...6 Statement of changes in equity...7 Statement of cash flows indirect method...9 Statement of value added...10 Notes to the interim financial information...11 Mplu 4

5 A free translation from Portuguese into English of independent auditor s review report on interim financial information prepared in Brazilian currency in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards. Review report on the interim financial information The Shareholders, Board of Directors and Officers Multiplus S.A. Barueri - SP Introduction We have reviewed the interim financial information of Multiplus S.A. ( Company ), contained in the Quarterly Information Form (ITR) for the quarter ended, which comprises the financial position as at and the related statements of profit or loss, of comprehensive income, of changes in equity, and of cash flows for quarter then ended, including other explanatory information. Management is responsible for preparation of the interim financial information in accordance with Accounting Pronouncement CPC 21 (R1) and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the presentation of this financial information in accordance with the rules issued by the Brazilian Securities and Exchange 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 2410 and ISRE Review of Interim Financial Information Performed by the Independent Auditor of the Entity). 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. Accordingly, we do not express an audit opinion. Mplu 1

6 Conclusion on the interim financial information Based on our review, nothing has come to our attention that causes us to believe that the 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 Information (ITR), and presented consistently with the rules issued by the CVM. Emphasis of a matter As mentioned in Notes 2 and 3, as a result of adoption of the new accounting pronouncement related to revenue recognition IFRS 15 (Revenue from Contracts with Customers), issued by the International Accounting Standards Board (IASB) (CPC 47 - Revenue from Contracts with Customers), and of reclassification adjustments, the corresponding amounts of the interim financial information related to the statements of profit or loss and of value added (supplementary information) for the quarter ended March 31, 2017, presented for comparison purposes, were adjusted and are being restated, as provided for in CPC 23 - Accounting Policies, Changes in Accounting Estimates and Errors and in CPC 26 (R1) - Presentation of Financial Information. Our conclusion does not contain a modification in respect of this matter. Other matters Statement of value added We have also reviewed Statement of Value Added (SVA) for the three-month period ended March 31, 2018, prepared under the responsibility of management, whose presentation in the interim information is required according to the rules issued by the CVM applicable to the preparation of Quarterly Information (ITR), and considered supplementary information under the IFRS, which do not require SVA presentation. This statement has been subject to the same review procedures previously described and, based on our review, nothing has come to our attention that causes us to believe that it was not prepared, in all material respects, consistently with the overall interim financial information. São Paulo, May 8, ERNST & YOUNG Auditores Independentes S.S. CRC-2SP034519/O-6 Clinton Leandro Fernandes Contador CRC-1SP205541/O-2 Mplu 2

7 A free translation from Portuguese into English of on interim financial information prepared in Brazilian currency in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards. Multiplus S.A. Statement of financial position and December 31, 2017 (In thousands of reais) March 31, 2018 December 31, 2017 Assets Cash and cash equivalents 1, Short-term investments (Note 5) 1,691,874 1,322,185 Accounts receivable (Note 6) 367, ,709 Taxes recoverable (Note 8) 34,100 50,188 Advances to suppliers 43,242 6,833 Total current assets 2,138,035 1,617,884 Noncurrent assets Judicial deposits Investments (Note 10) 474 1,142 Property and equipment 6,688 7,907 Intangible assets (Note 11) 91,423 94,251 Total noncurrent assets 98, ,616 Total assets 2,236,937 1,721,500 Mplu 3

8 Statement of financial position and December 31, 2017 (In thousands of reais) March 31, 2018 December 31, 2017 Liabilities Trade accounts payable (Note 12) 239, ,692 Salaries and social charges 16,945 22,107 Taxes, rates and contributions 1, Reward redemption rights (Note 13) 1,157,129 1,179,897 Advances from customers (Note 14) 474,975 27,066 Other accounts payable 114,748 - Total current liabilities 2,004,854 1,468,074 Noncurrent liabilities Contingencies 1,283 1,219 Deferred income and social contributions taxes (Note 9) 14,516 12,450 Total noncurrent liabilities 15,799 13,669 Equity (Note 15) Capital 107, ,300 Treasury shares (7,910) (4,096) Share issue cost (23,322) (23,322) Shared-based payments (Note 16) 20,414 22,666 Retained earnings 119, ,209 Total equity 216, ,757 Total liabilities and equity 2,236,937 1,721,500 See the accompanying notes Mplu 4

9 Statement of profit or loss Three-month period ended and 2017 (In thousands of reais) For the three-month period ended March 31, (Restated) Net revenue (Note 17) 172, ,622 Operating costs (Note 18) (6,340) (4,915) Gross profit 165, ,707 Selling expenses (Note 18) (10,904) (8,946) General and administrative expenses (Note 18) (34,619) (34,337) Equity pickup (Note 10) (726) (811) (46,249) (44,093) Income before net finance income (expenses) and income and social contribution taxes 119, ,613 Finance income (Note 20) 25,553 43,548 Finance expenses (Note 20) (370) (216) Finance income (expenses) 25,183 43,332 Income before income and social contribution taxes 144, ,945 Income and social contribution taxes (Note 9) (46,491) (65,526) Net income for the period 98, ,419 Earnings per share BRL Basic earnings per share - (Note 21) Diluted earnings per share - (Note 21) See the accompanying notes Mplu 5

10 Statement of comprehensive income Three-month period ended and 2017 (In thousands of reais) For the three-month period ended March 31, Net income for the period 98, ,419 Other comprehensive income - - Total comprehensive income 98, ,419 See the accompanying notes Mplu 6

11 Statement of changes in equity Three-month period ended (In thousands of reais) Capital Share issue cost For the three-month period ended Retained earnings Share-based Legal Retained Retained payments reserve profit earnings Treasury shares Total December 31, ,300 (23,322) 22,666 21, ,749 - (4,096) 239,757 Net income for the period ,188-98,188 Other comprehensive income Total comprehensive income ,188-98,188 Contributions and distribution Dividends and IOE as per BDM* at 07/3/ (115,595) - - (115,595) Total of dividends and IOE for the period (115,595) - - (115,595) Repurchasing of own shares at 3/9/2018 (Note 15) (8,717) (8,717) Share-based payments Redemption of stock option plan at 1/23/ (229) (229) Restricted stock plan redemption as approved at the SGM at 2/13/ (998) (998) Restricted stock plan redemption as approved at the SGM at 3/8/ (635) (635) Restricted stock plan redemption as approved at the SGM at 2/14/ (808) (808) Stock option and restricted stock plan redemption ,903 4,903 Retained earnings to be distributed Total transactions with owners - - (2,252) - (115,595) - (3,814) (121,661) 107,300 (23,322) 20,414 21, ,188 (7,910) 216,284 * BDM Board of Director s meeting See the accompanying notes Mplu 7

12 Statement of changes in equity Three-month period ended March 31, 2017 (In thousands of reais) Capital Share issue cost For the three-month period ended March 31, 2017 Retained earnings Share-based Legal Retained Retained payments reserve profit earnings Treasury shares Total December 31, ,300 (23,322) 22,472 21, ,249 - (8,060) 256,099 Net income for the period , ,419 Other comprehensive income Total comprehensive income , ,419 Contributions and distribution Dividends and IOE paid as per BDM at 3/20/ (136,097) - - (136,097) Total of dividends and IOE paid for the period (136,097) - - (136,097) Share-based payments Stock option and restricted stock plan redemption as approved at the SGM at 11/20/ (218) (218) Stock option and restricted stock plan redemption as approved at the SGM at 2/13/ (998) (998) Stock option and restricted stock plan redemption ,460 3,460 Total transactions with owners - - (839) ,460 2,621 March 31, ,300 (23,322) 21,633 21, ,419 (4,600) 257,042 See the accompanying notes Mplu 8

13 Statement of cash flows - indirect method Three-month period ended March 31,2018 and 2017 (In thousands of reais) For the three-month period ended March 31, Cash flows from operating activities Net income for the period 98, ,419 Adjustments to reconcile net income to cash and cash equivalents Provision for profit sharing 3,550 3,285 Deferred income and social contribution taxes (Note 9) 2,066 2,866, Depreciation and amortization 6,907 6,375 Disposal of property and equipment and intangible assets Share-based payments Provision for costs to be incurred - (96) Allowance for doubtful accounts - 39 Equity pickup (Note 10) Income and social contribution taxes for the period (Note 9) 44,425 62,660 Foreign exchange variation from customers - (38) 156, ,796 Changes in assets and liabilities Short-term investments (369,689) (58,854) Accounts receivable (130,029) (119,801) Taxes recoverable 834 8,759 Advances to suppliers (36,409) (2.161) Judicial deposits (1) 5 Other accounts receivable - 43 Trade accounts payable 1,202 33,037 Salaries and social charges (8,712) (8,623) Federal taxes (3,242) (8,933) Taxes, rates and contributions Reward redemption rights (22,768) 3,584 Advances from customers 447, ,840 Other accounts payable 64 - Income and social contribution taxes paid (26,889) (42,741) Net cash from operating activities 9, ,993 Cash flows from investing activities Acquisition of investments - (935) Acquisition of intangible assets (3,149) (372) Exercise of stock options and restricted shares plan 2,233 2,244 Net cash from (used in) investing activities (916) 937 Cash flows from financing activities Repurchase of own shares (8,717) - Dividends paid - (129,540) Interest on equity paid - (6,557) Net cash used in financing activities (8,717) (136,097) Increase (decrease) in cash and cash equivalents 58 (1,167) Opening balance 969 1,196 Closing balance 1, Increase (decrease) in cash and cash equivalents 58 (1,167) See the accompanying notes Mplu 9

14 Statement of value added Three-month period ended March 31,2018 and 2017 (In thousands of reais) For the three-month period ended March 31, (Restated) Revenue Reward redemption rights and Breakage (Note 17) 190, ,120 Allowance for doubtful accounts (Note 6) - (39) 190, ,081 Inputs acquired from third parties Operating costs (5,235) (3,776) Materials, energy, third-party services and other expenses (17,767) (18,334) (23,002) (22,110) Gross value added 167, ,971 Reductions Depreciation and amortization (6,907) (6,375) Net value added produced 160, ,596 Value added received in transfer Equity pickup (Note 10) (726) (811) Finance income (Note 20) 27,073 45,672 Total value added to be distributed 186, ,457 Personnel Direct compensation, benefits and FGTS (Note 19) (21,979) (19,504) Taxes, charges and contributions Federal (65,797) (88,677) Debt remuneration Interest Rentals (370) (216) (408) (489) Equity remuneration Retained profits for the period (98,188) (134,571) Value added distributed (186,742) (243,457) See the accompanying notes Mplu 10

15 1. Operations, approval and summary of significant accounting practices adopted in the preparation of the interim financial information Multiplus S.A (Multiplus or Company) is a publicly traded company based in Barueri, São Paulo, on Alameda Xingu, 350, listed on the São Paulo Stock Exchange (Bovespa BM&F) under ticker "MPLU3". The Company s stated primary business purpose under the customer loyalty programs is to: (i) conduct and manage programs (ii) sell reward redemption rights, (iii) create databases for individuals and corporate entities among other activities. The issuance of this interim financial information was authorized by Company management on May 8, The interim financial information was prepared and is presented in accordance with technical standard CPC 21 (R1) - Interim Financial Reporting, and IAS 34 - Interim Financial Reporting issued by the International Accounting Standards Board (IASB), and in a manner consistent with the standards issued by the Securities and Exchange Commission, applicable to the preparation of the Interim Financial Information Basis of preparation This financial information was prepared on a historical cost basis, except for certain financial assets and liabilities that are measured at fair value. The fair value of financial assets and liabilities is very close to their carrying amount, therefore, comparisons between fair value and book value are not disclosed. This interim financial information has been prepared using the Brazilian Real as the functional and reporting currency. In addition, the preparation of financial information requires the use of certain critical accounting estimates and also the exercise of judgment by the Company management. Areas deemed significant and that require a higher level of judgment include: recognition of sales, estimating the breakage revenue provision, deferred income and social contribution taxes, assessment of useful lives of intangible assets and allowance for doubtful accounts. Mplu 11

16 1. Operations, approval and summary of significant accounting practices adopted in the preparation of the interim financial information--continued 1.1. Basis of preparation--continued The interim financial information does not include all the information and disclosures required for the annual financial information, therefore it should be read jointly with the financial information for the year ended December 31, 2017, published on March 8, 2018 in the newspapers Valor Econômico and Diário Oficial and on the following websites: and Except for the changes disclosed in Notes 2 and 17, there were no changes in the accounting practices adopted from December 31, 2017 to, and the Company did not early adopt any standards, amendments to standards or interpretations that have been issued, but are not yet effective. 2. New accounting standards and pronouncements issued, but not yet effective at 2.1. New accounting pronouncements - recently adopted IFRS 15 Revenue from Contracts with Customers (CPC 47) In May 2014, the International Accounting Standard Board (IASB) issued IFRS 15 Revenue from contracts with customers (CPC 47), which requires an entity to recognize a revenue amount that reflects the consideration that it expects to receive in exchange for goods and services transferred to a customer. IFRS 15 supersedes all current requirements for revenue recognition and measurement, which were in accordance with pronouncement CPC 30 and its appendix (including IFRIC 13), and CPC 17. For all annual periods after January 1, 2018, the new standard brings all aspects related to transition method models to be applied at the initial adoption of such pronouncement, including all requirements regarding the full retrospective method or modified retrospective method. The Company adopted this standard on January 1st, 2018 using the full retrospective transition method. Mplu 12

17 2. New accounting standards and pronouncements issued, but not yet effective at --Continued 2.1. New accounting pronouncements - recently adopted--continued IFRS 15 Revenue from Contracts with Customers (CPC 47)--Continued Impacts of adoption Although this new standard did not significantly impact the Company s current approach for recognizing its revenue, the main modification was in the presentation of the statement of profit or loss and statement of value added, since the Company changed its accounting classification from Principal to Agent, consequently, revenue from Reward redemption rights is now measured and disclosed net of the respective expenses incurred in the acquisition of reward redemptions (air tickets, goods and services). The financial impacts of this change are disclosed in notes 3 and 17. IFRS 9 Financial Instruments IFRS 9 Financial Instruments (CPC 48) supersedes IAS 39-Financial instruments: Recognition and Measurement and all prior draft versions of IFRS 9. IFRS 9 brings together all three aspects of accounting for financial instruments for the project: classification/ measurement, impairment loss and hedge accounting. IFRS 9 should be applied for all reporting periods after January 1st, The Company adopted IFRS 9 after January 1st, 2018; and such adoption did not significantly impact the interim financial information. Mplu 13

18 2. New accounting standards and pronouncements issued, but not yet effective at --Continued 2.1. New accounting pronouncements - recently adopted --Continued IFRS 2 Classification and Measurement of Share-based Payment Transactions Amendments to IFRS 2 IASB issued amendments to IFRS 2 Share-based Payment (CPC 10) that address three main areas: (i) the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; (ii) the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and (iii) accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled. On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods after January 1st, The Company adopted the IFRS 2 after January 1st, 2018; and such adoption did not significantly impact the interim financial information, since the main modifications brought by this standard did not cover the share-based payment plans as of Pronouncements issued, but not yet effective at IFRS 16 Leases IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires that lessees account for all leases under a single model in the statement of financial position, similarly to accounting for financial leases under IAS 17. This standard includes two exemptions for recognition by lessees of "low value" assets (for example, personal computers) and short-term leases (i.e., with lease term of 12 months or less). IFRS 16 is effective from January 1, Management does not expect that the adoption of this standard will have a significant impact on the Company s financial information or disclosures. Mplu 14

19 3. Restatement of prior periods As a result of the initial adoption of IFRS 15, the Company reviewed its interim financial information as of March 31, 2017 as though the new standard had been effective in that period. Besides, as previously disclosed in the annual report at December 31, 2017, the Company made reclassifications regarding IT expenses and the amortization of certain software that were previously presented in the general and administrative expenses group under Operating costs. The following items of the interim financial information for the three-month period ended March 31, 2017 were affected: 3.1. Statement of profit or loss As originally reported For the three-month period ended March 31, 2017 IFRS 15 adjustments Reclassification Restated Net revenue 597,922 (392,300) - 205,622 Operating costs (393,284) 392,300 (3,931) (4,915) Gross profit 204,638 - (3,931) 200,707 Selling expenses (8,946) - - (8,946) General and administrative expenses (38,268) - 3,931 (34,337) Equity pickup (811) - - (811) Income before net finance income (expenses) and income and social contribution taxes 156, ,613 Finance income 43, ,548 Finance expenses (216) - - (216) Finance income (expenses) 43, ,332 Income before income and social contribution taxes 199, ,945 Income and social contribution taxes (65,526) - - (65,526) Net income for the period 134, ,419 Earnings per share BRL Basic earnings per share Diluted earnings per share Mplu 15

20 3. Restatement of prior periods--continued 3.2. Statement of value added For the three-month period ended March 31, 2017 As originally reported IFRS 15 adjustments Reclassification Restated Revenue Reward redemption rights and Breakage 659,406 (432,286) - 227,120 Allowance for doubtful accounts (39) - - (39) 659,367 (432,286) - 227,081 Inputs acquired from third parties Operating cost (433,270) 432,286 (2,792) (3,776) Materials, energy, third-party services and other expenses (21,126) - 2,792 (18,334) (454,396) 432,286 - (22,110) Gross value added 204, ,971 Reductions Depreciation and amortization (6,375) - - (6,375) Net value added produced 198, ,596 Value added received in transfer Equity pickup (811) - - (811) Financial income 45, ,672 Total value added to be distributed 243, ,457 Personnel Direct compensation, benefits and FGTS (19,504) - - (19,504) Taxes, charges and contributions Federal (88,677) - - (88,677) Debt remuneration Interest (216) - - (216) Rentals (489) - - (489) Equity remuneration Retained profit for the period (134,571) - - (134,571) Value added distributed (243,457) - - (243,457) Mplu 16

21 4. Financial instruments Financial assets and liabilities are measured at amortized cost and their book value is close to the fair value due to their nature and the short-term maturity date. The breakdown of financial instruments recorded in the Company's statement of financial position under assets as at and December 31, 2017, is as follows: March 31, 2018 December 31, 2017 Loans and receivables Cash and cash equivalents 1, Accounts receivable 367, , , ,678 Assets measured at fair value through profit or loss Short-term investments 1,691,874 1,322,185 1,691,874 1,322,185 Liabilities measured at amortized cost Trade accounts payable 239, , , ,692 The fair value of financial instruments traded in active markets is based on the quoted market prices as at the statement of financial position date. A market is considered active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent current and regularly occurring market transactions on an arm's length basis. These instruments are included in Level 1 and comprise restricted investment funds. Each of these investments funds has a clear investment policy, with limits for risk concentration in the corresponding investments. The determination of the fair value of financial assets and liabilities is presented below: Government bonds - refer to highly liquid bonds issued by the Brazilian government, the prices of which are quoted and based on current transactions in actively traded markets. Corporate bonds - usually refer to debt securities, the fair value of which is determined based on current transactions in an actively traded market (when there is liquidity) or by the discounted cash flow, based on prevailing interest curves, when no active trading is observable. Deposit certificates and other deposits - fair value determined based on current interest rate curves and recent similar issues. Mplu 17

22 4. Financial instruments--continued From December 31, 2017 through, the Company did not conduct any hedging or other transactions involving derivative financial instruments. The company does not operate or trade derivative financial instruments for speculative purposes. The risk to which the Company is exposed stems from the sale of redemption right agreements and the cost of redemption which are pegged to the US Dollar and are characterized by the possibility that future cash flows will be lower than those projected due to foreign exchange rate fluctuation. However, this risk is monitored by management and the Company s exposure to such risk is minimized by the net effect between the amounts received from sale of redemption rights and the redemption cost. The Company is exposed to assets recorded in foreign currency, as follows: Assets March 31, 2018 December 31, 2017 Short-term investments 109, ,684 Accounts receivable 1,109 1, , ,009 Total foreign exchange exposure BRL 110, ,009 Total foreign exchange exposure USD 33,377 37,790 Exchange rate (BRL/USD) The table below summarizes the sensitivity of financial instruments exposed to foreign currency fluctuation: Parity - BRL x USD Exposed item Risk factor Current scenario Scenario 1 25% Scenario 2 50% Scenario 3-25% Scenario 4-50% Short-term investments (i) Accounts receivable Foreign exchange Foreign exchange (i) Exposed to foreign exchange fluctuation, these short-term investments are made through investment funds, with a defined loss limit and partial gains due to exchange difference. The loss limit calculated on March 31,2018 is BRL for the scenarios (-25% and -50%). 5. Short-term investments The Company manages its capital to ensure its ability to continue as a going concern, while maximizing returns to all stakeholders or parties involved in its operations. The Company is not subject to any externally imposed capital requirement. Mplu 18

23 5. Short-term investments--continued The Company holds the greater part of its cash in short-term investments linked to Interbank Deposit Certificates (CDIs). Short-term investments are held primarily in open ended, restricted or exclusive investment funds, which are under the discretionary management of third parties. The custody and administration of the funds vary in accordance with each example and in the case of restricted investment funds, are independent of managers. The average liquidity for redemptions is daily (D0). Furthermore, the funds are independently audited and are overseen by the CVM. The profitability was 1.64% for the quarter ended (3.13% for the quarter ended March 31, 2017), comprising open ended mutual funds and exclusive investment funds. The Company's financial instruments at and December 31, 2017 are as follows: March 31, 2018 December 31, 2017 Open ended investment funds 310, ,521 Exclusive investment funds (i) 1,271,709 1,002,980 Foreign exchange / structured funds 109, ,684 1,691,874 1,322,185 (i) Exclusive investment fund: funds that invest in shares of investment funds intended to qualified investors and set up to receive investments from a single shareholder. Interest income generated by cash balances and short-term investments is exposed to interest rate fluctuation, since the Company retains most of its cash in short-term investments tied to the Interbank Deposit Certificate ("CDI"). The sensitivity analysis regarding the CDI fluctuation for the next 12 months is as follows: Exposed item Risk factor Current scenario Scenario 1 25% Scenario 2 50% Scenario 3-25% Scenario 4-50% Short-term investments Changes in CDI (6.39%) in the year 1,582,070 1,708,438 1,733,711 1,657,891 1,632,617 Mplu 19

24 6. Accounts receivable March 31, 2018 December 31, 2017 Trade accounts receivable: Third parties 339, ,280 Related parties 28,150 21,429 (-) Allowance for doubtful accounts , ,709 The aging list is as follows: March 31, 2018 December 31, 2017 Falling due 359, ,563 Past due: Within 60 days 8,235 19,991 From 61 to 90 days From 91 to 180 days From 181 to 360 days , , Related parties 7.1. Agreements Balances and transactions with related parties substantially affect the agreements entered into between the company and LATAM, which are summarized below: a) Operating agreement This agreement establishes the terms and conditions governing the relationship between the Company and LATAM, as regards: (i) continued use by LATAM customers participating in the program of the benefits of the Program through use of the points granted by it and (ii) redemption of points by members of the program through the Multiplus Network. It also established the conditions for the sale of reward redemption rights, the purchase and sale of airline tickets, the use of the database, management of the LATAM Travel Program and respective remuneration. The Operating Agreement between Multiplus and LATAM approximates market conditions for transactions of this nature. Mplu 20

25 7. Related parties--continued 7.1. Agreements--Continued a) Operating agreement--continued The Company is highly dependent on LATAM, given that a significant portion of its operations regarding reward redemption rights of loyalty program members is contingent upon full compliance with the operating agreement entered into by the two companies. Any decrease in redemptions by loyalty program members stemming from this partnership could adversely affect Multiplus income. On September 28, 2017, an agreement was executed and announced as a Material News Release for the expansion of international operations, with unrestricted access to the flights of the airlines that make up the LATAM group, and the right to operate exclusively in: Brazil, Paraguay, Mexico, United States and all European countries. The implementation of the operation is expected for the first half of 2018 and it will maximize growth opportunities in several markets and regions. b) Shared services agreement This agreement establishes the terms, conditions and consideration payable by the Company to LATAM for use of administrative services (IT services). As of March 31, 2018, the Company recognized expenses in P&L totaling BRL233 (BRL175 as of March 31, 2017) for the use of administrative services. c) Commitment to pay in advance for the purchase and sale of airline tickets On August 9, 2016, upon recommendation of the Audit, Finance and Related Parties Committee, the Company s Board of Directors approved an increase in the prepayment limit for the purchase of air tickets from TAM Linhas Aéreas SA, from BRL500 million to BRL640 million, without any change in the other conditions in force. This advance is undertaken at market interest rates and funds can only be used for the purchase of air tickets redeemed by members in accordance with the conditions set out in the operating agreement. Mplu 21

26 7. Related parties--continued 7.1. Agreements--Continued c) Commitment to pay in advance for the purchase and sale of airline tickets --Continued 7.2. Balances As of, there is no prepayment recorded in the financial information regarding air tickets from LATAM. LATAM Travel Multiplus Corretora Comprei Pontuei LATAM Total At Current assets Accounts receivable 18,178 2,418 1,155 6,399 28,150 18,178 2,418 1,155 6,399 28,150 Current liabilities Trade accounts payable (i) 146,704 8, ,405 Reward redemption rights (ii) 37,901 8,221 2,351 4,216 52, ,605 16,922 2,351 4, ,094 At December 31, 2017 Current assets Accounts receivable 18,296 1, ,426 21,429 18,296 1, ,426 21,429 Current liabilities Trade accounts payable (i) 99,318 19, ,962 Reward redemption rights (ii) 40,144 7, ,274 49, ,462 27, , ,778 (i) (ii) Refers to the purchase of tickets from LATAM as well as tour packages by Multiplus on a monthly basis. Balance of deferred revenue arising from the sale of Multiplus points to LATAM and LATAM Travel, Multiplus Corretora and Comprei Pontuei. Mplu 22

27 7. Related parties--continued 7.3. Transactions Transactions with related parties that affected P&L are as follows: LATAM LATAM Travel Multiplus Corretora Comprei Pontuei Total At Reward redemption rights (i) 36,124 4, ,979 Breakage revenue 18, ,912 Reward redemption expenses (ii) (426,579) (1,874) - - (428,453) General and administrative expenses (iii) (233) (233) At March 31, 2017 Reward redemption rights (i) 42, ,773 Breakage revenue 19, ,258 Reward redemption expenses (ii) (374,560) (1,640) - - (376,200) General and administrative expenses (iii) (175) (175) (i) (ii) (iii) This amount refers to the recognition of reward redemption rights from sale of Multiplus points to LATAM and LATAM Travel allocated to P&L for the year, Multiplus Corretora and Comprei Pontuei. Gross amount for the purchase of air tickets and LATAM Travel packages as a reward for members. This amount refers to compensation paid to LATAM for provision of shared services under the shared services agreement Key management personnel compensation Key management personnel include members of the Board of Directors, the Chief Executive Officer and Statutory Officers. The compensation paid or payable to key management for their services is shown below: For the three-month period ended March Fringe benefits Board of Directors fees Salaries and profit sharing/bonus 3,694 3,007 Defined contribution pension plan Taxes, charges and social contributions ,753 3,863 Share-based compensation ,171 4,240 No other long-term post-employment benefits were offered to key members of management at. Mplu 23

28 8. Taxes recoverable As of, the financial position of federal taxes (IRPJ, CSLL, PIS and COFINS) are broken down as follows: March 31, 2018 December 31, 2017 Federal taxes recoverable 92,242 89,182 Federal taxes payable (58,142) (38,994) 34,100 50, Deferred and current income and social contribution taxes As of, the changes in deferred income and social contribution tax assets and liabilities, not taking into consideration the offset of balances within the same jurisdiction, are as follows: Mplu 24

29 9. Deferred and current income and social contribution taxes--continued December 31, 2017 (Debit) credit to statement of profit or loss March 31, 2018 Provision for profit sharing (PLR) 4,680 (4,680) - Breakage revenue provision (19,023) 4,071 (14,952) Provision for costs to be incurred 1,478 (1,478) - Others Deferred income and social contribution taxes (12,450) (2,066) (14,516) December 31, 2016 (Debit) credit to statement of profit or loss March 31, 2017 Provision for profit sharing (PLR) 4,538 (3,066) 1,472 Allowance for doubtful accounts (PCLD) (1) Breakage revenue provision (19,236) 218 (19,018) Provision for costs to be incurred 109 (32) 77 Others Deferred income and social contribution taxes (14,203) (2,866) (17,069) Mplu 25

30 9. Deferred and current income and social contribution taxes--continued For the three-month period ended March 31, Current taxes 44,425 62,660 Deferred taxes 2,066 2,866 46,491 65,526 Income and social contribution taxes stated in the statement of profit or loss are reconciled to the statutory tax rates, as follows: For the three-month period ended March 31, Income before income and social contribution taxes 144, ,945 Statutory income tax rate - % 34% 34% Income and social contribution taxes at nominal rate (49,191) (67,981) Nondeductible (income) expense Share-based payment plan Tax credits on IOE paid 2,173 2,229 Tax incentive cultural projects Equity pickup (247) (276) Others 117 (275) Income and social contribution tax expenses (46,491) (65,526) Current taxes (44,425) (62,660) Deferred taxes (2,066) (2,866) Effective rate - % 32.1% 32.8% 10. Investments Amounts recorded as investments are represented by transactions carried out in the following companies: Prismah Fidelidade ( Comprei, Pontuei ) and Multiplus Corretora The company Prismah Fidelidade was established in 2012, having terminated its activities in On September 15, 2017, the investee restarted its operations and launched the new Marketplace of the Group, "Comprei, Pontuei" [buy and score], whose main purpose is to offer the best experience of accumulation of points, innovation and a practical approach toward purchases of products of the main national and international brands. Mplu 26

31 10. Investments--Continued The purpose of the investee "Multiplus Corretora de Seguros Ltda." is the development of business relating to insurance brokerage services officially known as Multiplus Corretora. a. Changes in investments Comprei Pontuei Multiplus Corretora Total At December 31, Capital contribution 1,340 2,236 3,576 Advances for future capital contribution Equity pickup (1,099) (1,950) (3,049) At December 31, ,142 Equity pickup (318) (408) (726) Others (54) - (54) 474 (112) 362 At Investments Provision for investment losses - (112) (112) b. Information on investee Multiplus Corretora Investee figures March 31, 2018 December 31, 2017 Current assets 1,387 1,273 Total assets 1,387 1,273 Current liabilities 1, Total liabilities 1, Equity (112) 296 Revenues for the period 1,187 2,682 Expenses for the period (1,621) (4,632) Loss for the period (434) (1,950) Mplu 27

32 10. Investments--Continued b. Information on investee--continued Comprei Pontuei Investee figures March 31, 2018 December 31, 2017 Current assets 4,265 2,008 Noncurrent assets Total assets 4,894 2,647 Current liabilities 4,434 1,801 Total liabilities 4,434 1,801 Equity Revenues for the period 4,222 1,508 Expenses for the period (4,540) (2,609) Loss for the period (318) (1,099) c. Relevant financial information for consolidation purposes The Company decided not to proceed with the consolidation process of its investees, since the revenues and expenses presented by Prismah and Multiplus Corretora are immaterial as of and Intangible assets The assets generated internally can be summarized as software and new products developed by the Company, and the other assets are primarily software licenses purchased by the Company from its suppliers. Capitalization is based on cost incurred; amortization is calculated over the estimated useful lives of the assets, ranging from three to ten years. Expenses with software maintenance are recognized in P&L for the year as incurred. Mplu 28

33 11. Intangible assets a. Changes in intangible assets Other Generated internally intangible assets Total At December 31, ,305 66,946 94,251 Carrying amount 76, , ,871 Accumulated amortization (48,771) (49,849) (98,620) At December 31, ,305 66,946 94,251 Additions 567 2,582 3,149 Disposals (117) - (117) Transfers 2,267 (2,267) - Amortization (3,828) (2,032) (5,860) At 26,194 65,229 91,423 Carrying amount 78, , ,903 Accumulated amortization (52,599) (51,881) (104,480) At 26,194 65,229 91, Trade accounts payable March 31, 2018 December 31, 2017 Trade accounts payable: Third parties 84, ,730 Related parties 155, , , , Reward redemption rights The Company sells reward redemption rights by issuing Multiplus points to its partners. Initially, the transactions are recorded as reward redemption rights under current liabilities matched against accounts receivable. Mplu 29

34 13. Reward redemption rights--continued The points awarded to the members, entitled to redeem, them may be redeemed by exchanging them for products or services acquired in the network of partners within the Multiplus Market Place. When members decide to exercise their redemption rights, by exchanging accumulated points for goods or services offered by the network of partners, this obligation is deducted from the expenses incurred in the purchase of goods or services from such partners to be delivered to members, and then the Company recognizes revenue. The amounts recorded in the Reward redemption rights group are measured at their fair value at the time the points are sold to the partners, and recognized as the price of the performance obligation at the time the members exercise their rights, i.e. the reward redemption rights. This loyalty program liability is recorded based on the number of outstanding points and an estimate of the points that will expire without being used by members. At Multiplus, the points expire within two years from the issue date, although for some members this deadline could be longer, according to the Program's regulations. The balance is as follows: March 31, 2018 December 31, 2017 Reward redemption rights 1,018,652 1,028,077 Breakage revenue provision 138, ,820 1,157,129 1,179, Advances from customers March 31, 2018 December 31, 2017 Advances from customers: Financial institutions 452,135 - Other advances from customers 22,840 27, ,975 27,065 Mplu 30

35 15. Equity a) Capital March 31, 2018 December 31, 2017 Capital (registered and paid in) 107, ,300 Total common shares (number) 162,246, ,246,573 LATAM Airlines 72.74% 72.74% Others 27.26% 27.26% % % b) Cost of share issue The transaction costs incurred in the public offer held on February 5, 2010, totaled BRL23,322, net of taxes. c) Share-based compensation The cumulative amount recognized in equity relating to expenses incurred with the share based compensation plan totaled BRL20,414 as at (BRL22,666 as at December 31, 2017). d) Income reserve Income reserve comprises the following reserves: (i) legal reserve in accordance with the percentages provided for in the Brazilian legislation and (ii) retained profits, in accordance with management's proposal to the Annual General Meeting. e) Dividends and interest on equity (IOE) On March 7,2018, a proposal submitted by the Executive Board, whose publication was waived, was approved for payment of dividends amounting to BRL109,205, interest on equity amounting to BRL6,390,083.24, or BRL5,431,010.77, net of withholding income tax, in accordance with the minutes and notice to shareholders. The Company paid such dividends and interest on equity on April 3, f) Treasury shares On March 9, 2018, the Company announced the repurchase of 264,261 shares, totaling of BRL8,717, in a Material News Release. The Company acquired its own shares to be held in treasury or to fulfill the share-based compensation plan, approved by the Board of Directors on May 21, 2014, when restricted shares were granted to Company executives. The repurchase of shares did not reduce capital and this transaction follow the requirements described in the CVM Rule No 10/80. Mplu 31

36 15. Equity--Continued f) Treasury shares--continued As a result of the changes made in the share-based compensation plan throughout the quarter, as disclosed in Note 16, the Company held in treasury 239,777 shares as of (113,974 shares as of December 31, 2017) for the amount of BRL32.99 per share, totaling BRL7,910 (BRL4,096 as of December 31, 2017). 16. Share-based compensation plan The share-based compensation plan is measured at the fair value of equity instruments at the granting date. The expense is recognized in profit and loss for the year during the vesting year, based on estimates of the prices for which stock options will be acquired and matched against equity. The Company has the following share-based compensation agreement: i) Stock option program (payable in equity securities) At the Special General Meeting (SGM) held on October 4, 2010, Company shareholders approved a maximum dilution of 3% for the number of outstanding shares that could be used by the Board of Directors to grant stock options to employees. Number of outstanding shares Average exercise price At December 31, , Exercised (i) (68,525) At 247, (i) Comprises the 4th extraordinary grant of January 23, This plan, therefore, ended on and there are no other options to be exercised by the members. The stock options are valued by the Black-Scholes pricing model. Variations in the stock options, together with the variables used for valuation of stock options granted are described below. The exercise price is adjusted by the General Market Price Index (IGP- M), from the option granting date to the date the options are exercised. Mplu 32