Catherine O Brien, Deutsche Bank: Good morning. Just a couple of questions on the banks. Is your pricing of the banks, if you are working with the banks partners, which are mostly locked-in for 2017 and in your discussions with the bank, do they seem to be optimistic about credit card spending, with the currently situation over there, with the Brazilian economics outlook? I do not think they are very optimistic about credit card spending, however, one thing I caution you is to continue to be, the migration from cash and check to both credit card and debit card. I think, on a pure card basis, I do not see them being very optimistic about credit card spending, however, in terms of increasing penetration for both debit and credit card, I think the answer will be: yes, they are optimistic in that perspective. Did I answer your question? Yes. Do you have your prices locked in with most of the banks for this year or is it open for negotiation throughout the year? It is pretty much done and some of the banks, as it happened last year, they pre-paid and/or booked the entire year or the entire semester, depending on what kind of negotiation we have gone through. Pretty much all set up at this point. I guess I have one more on the Multiplus Club, how much more on average Multiplus Club member accumulates versus a non-member and how big a driver of points accumulation could increase in this year? I am having a hard time to hear you. Could you be so kind and repeat the question? Of course. The question on the Multiplus Club, how many more points on average a Multiplus Club member accumulate in the year versus a non-member, and how did the driver of accumulation could be in 2017, if we see Club membership continue to increase? OK, thank you. We are not disclosing the Multiplus co-branded card expenditure, however, I can tell you that, in average, what we have seen so far and taken into consideration that the card has been launched in January 24, so we do not have much time to have a general statement here, but what we have been seeing so far, in average, the Multiplus co-branded card expenditures averages higher than what we were seeing in other cards. 1
What about on the Multiplus members? Will they join the Multiplus Club? Is that only for the clients or is it a separate program? On the Multiplus Club, what we see is a more engaged member, if you will, because of the recent promotions for both the Multiplus card holder and the Multiplus Club member, what we have seen is a growth in terms of members and also a growth in accruing more points coming from other sources, other than backend of the airline. OK, thank you. Gabriel Guzman, Bradesco: Good morning, everyone. I have a couple of questions. The first one is about billings, campaigns and the competitive environment. We saw billings prices fall and the indication of successful campaigns for Dia da Mulher, Dia do Consumidor. So, after the 3Q and 4Q and the bonus campaigns, my question is: would users be addicted to the bonus campaigns and not transferring otherwise? Also, the confirmation of strong campaigns could lead to an escalation of bonus from your competition. How do you see these points? Then I come back with my next question. The billing prices falling is a function of the USD conversion to the BRL and, as much as we have seen in the past, billing prices went up when the conversion was most favorable and now you see it coming down because of a less favorable conversion. If you compare the billing prices in the 1Q17 to 1Q16, it is pretty much the FX effect, more than anything else. There was a slight drop in USD just because of the volume of this quarter, but other than that, we see no billing prices coming down. In terms of the campaigns, if you notice some of our campaigns, the bonuses were not simply extra points which, by the way, in our case, has a two-year valid period for the bonus, but sometimes extra discounts within our partnerships or specific products with discounts, and all these discounts are given by our partners. No effect in our prices whatsoever. In terms of members being addicted to promotions, what can I tell you? We have not started this bonus, all our competitors have been doing that, and some of them with 150% bonus, even though it is six months valid points only, but still, 150% is very high for us, we will not do that. 100% has been pretty common in some of our competitors. More than a couple of our competitors are giving 100% bonus. We are not going into that as well. The highest we have gone is 50% and this would be International Women s Day, which is pretty much what we have done, but more and more, what you are going to see are campaigns that leverage our existing network with our partners and more and more you will see campaigns using Multiplus Club and the co-branded card. 2
Did I answer your question? Gabriel Guzman: Yes, you did. Perfectly, thank you. My second question will be about the breakage revenues. We saw a jump in the quarter compared to the previous quarter, 2Q and 3Q as well. I would like to understand a bit better what was the driver of that magnitude of adjustment and the breakage revenues. Thank you. Hello. Thank you for your question. With the new methodology, the breakage revenue is much more a function of gross billings, as we sell the points and then we make the breakage provision with the confidence level we have in our specific models and we leave the provisions of all breakage we believe will help regarding that, so that point is pretty much a function of gross billing. Gabriel Guzman: Perfect. And this is a new methodology, since when has it been in place? We closed the methodology details on the 4Q results, we implemented on December 1 st and there are some details on the 4Q earnings release. Gabriel Guzman: OK, perfect. Thank you. Victor Sanchez, Morgan Stanley: Good morning everyone. I have a couple of questions here. I am not sure if you touched on that, but could you provide us with the number of bonus points you gave away this 1Q? Also, if you think this strategy of giving away more bonus points could imply maybe a higher breakage revenue going forward. That is my first question, thank you. We do not disclose the amount of points that were actually given as a bonus. What was the second question? If maybe a strategy of giving away more bonus points with current campaigns and everything else, if that could imply higher breakage revenues going forward. I do not think there is any correlation between breakage and bonus given to our members. 3
Perfect. Also, I was just wondering what drove your good performance in profitability and how a stronger BRL helped in cost. Shareholders would always ask for more, therefore, we will continue to drive all our efforts to deliver more and, again, taking into consideration the fact that our focus at this point, and it has always been like this, is to make sure we deliver the best value to our 17.1 million members and that is what drives all our decisions. Here, at Multiplus, your points are worth more than anywhere else. Whenever you compare what you are going to redeem within the market, we should always be more competitive. That is what is compelling to us and what drives all our decision making process within the Company. With that, we have been delivering the results as we did this 1Q. I cannot give you guidance at this point. OK, but in terms of profitability, is there any reason why you had a good performance this quarter, maybe the stronger BRL helped a lag effect in your international ticket redemption or is it a recurring level of profitability and we should expect that going forward as well? The stronger BRL helped in terms of lower unit costs and international redemptions, however, we had a very strong international redemption mix. The release was 41%, international redemptions compared to 24% a year ago of 33% in the previous quarters. I think the stronger BRL was offset by the push of members redeeming international tickets at this moment. What we cannot say is if the new mix will be the new mix or change, as the demand of people redeeming international flights is gone and then it will be back to normal. Perfect. Thank you. Catherine O Brien, Deutsche Bank: Hi. Thank you for the follow up. Just as a follow up to one of your previous answers to another question. On the redemption where you offered discount, such as the one on domestic travel about TAM, am I getting this right about TAM, the one who offered the discount on the redemption and your margin on those points redeemed is the same? Our margins within LATAM are based on three different kinds of flight: one is a low sector of flight, therefore we have higher margins, medium-low sector flight and we 4
have somewhat medium margins and then we have high-load factor flights and that is where our margins are not as good as the low-load factor. One thing I want to clarify here: different from any other competitor, we have access to 100% of the inventory, LATAM inventory on a per flight basis. You will fly whenever you want as long as there is a seat available. Even if there is one seat available, you will fly. So if you go to an airport right now and if you want to fly as you get there, you will spend, of course, more points than compared to that effect a year from today. What we try to share with our members is: if you plan ahead, most likely you will redeem less points, same margin, same destination, same time compared to if you go to the airport right now. It is good because as long as you have points you will fly and of course, our margin, the better you plan, better options there will be. No wonder, we have a team of people here that work on algorithms that will give you and send you whether through email or through pushing our app or whether is through social network, it will provide you with the best alternative to where you would fly based on the number of points you have. Did I answer your question? Yes, that was great. Thank you for all that color. And then, just to clarify, one more quick follow-up, thank you for the time, again. On the 50% card redemption on domestic air tickets, it s LATAM that offers you that opportunity to give 50% less points. Is that correct? Or those bonus points you have to get back? That is correct. On the LATAM mega promo, for example, it is actually LATAM given to that specific apply the opportunity for you to redeem at, for example, 250 points compared to where you had before. This is based on LATAM decision on a frequent basis whenever they think is worthwhile reducing the amount of points. No correlation with our margins what so ever. Great, thank you so much. One quicker question on the cobranded credit card. Are your margins on the points accumulating on your cobranded credit cards similar to other credit cards or are they better? They are pretty much similar. The difference here is that we have from the issuer a commitment of volume on a year basis, which is substantially higher than the vast majority of our partners. Great. Thank you so much for your time. 5
Samuel Alves, BTG Pactual: Good morning everyone. My question is also regarding unit costs. Can you, please, give us an update on your works for dynamic pricing implementation instead for next year? Do you believe that there is further room for unit of cost reduction looking forward? Thank you. That is a good question. If you are talking about cost of airline tickets, I think we are pretty much where we would like to be. If you are talking about non-airlines redemption, I think there is room for improvement. Samuel Alves: Perfect, thank you. Henrique Navarro, Santander: Good morning. Congratulations for the results. I remember when you started the JV with Expedia and also the insurance broker. You were all very excited about it. I would like to do a catch up with that, assets has been implemented. My question is if those two businesses have met your expectation or if it has suppressed your expectation. And looking forward, how much could be the relevance of those two businesses, Expedia and the insurance broker, for your business? Thanks, Navarro, for your question and thanks for congratulating us. We are very happy with our 1Q results as well. In terms of Expedia relationship, we are happy where we are, pretty much as forecasted. With the insurance broker we are better off than we expected in some of the products and we are ramping up our insurance at this point. So we have a tremendous expectation in terms of car insurance because at this point, in Brazil, we have not seen any other insurance broker that would give any advantage to their costumers other than us, so we are very excited about it, but we are still ramping up. Did I answer your question? Henrique Navarro: Yes. And one more thing: if you could just give us some color on Vivo Valoriza, that would be very welcomed. Vivo is much as Ipiranga, our exclusive contracts, we have exclusive relationship, we have with them. We are very happy. Actually, Vivo is substantially above expectation, even though we thought that would be a way of points coming from Vivo and then that way would be gone. We continue to receive, that is the same level so we are very happy, substantially above expectation. As much as Ipiranga, that continues to grow. 6
Henrique Navarro: Do you believe Vivo Valoriza has the potential to reach the similar level of the one you have with Ipiranga Quilômetros de Vantagem? Yes, pretty much. They are similar levels. And by the way, Vivo Valoriza was contrived points that we turn not only from the mobile customers, but also broadband, TV, fixed wire, so it is pretty much all the services they have. We are happy and Vivo is very happy with all these implementations as well. Henrique Navarro: OK, thank you. Operator: This concludes today s question and answer session. I would like to turn the conference back to the Company management for the final remarks. Once again I would like to thank you all for participating in this call. We are very confident that the company is on the right track, offering our members promotions and new opportunities to encourage them to earn points and providing unique, one of a kind offer for the redemption on airline tickets and for redemption of our retailer partner s product, while also answering strategic partnerships adding value to the most network as proved by Xpedia affiliated network and Vivo. We continued the hard work to make our protagonist experience the best possible. I would like to thank our members for choosing our network, after all, all we here, most of us have points, was substantially more than anywhere else and we will continue to work tirelessly so that our experience is the best possible for our members. I would like to thank all of our Multiplus employees, without whom none of this outstanding 1Q results would be possible. Thank you. See you next quarter. Operator: Thank you. This concludes today s presentation. You may disconnect your line at this time. Have a nice day. This document is a transcript produced by MZ. MZ uses its best efforts to guarantee the quality (current, accurate and complete) of the transcript. However, it is not responsible for possible flaws, as outputs depend on the quality of the audio and on the clarity of speech of participants. Therefore, MZ is not responsible or liable, contingent or otherwise, for any injury or damages, arising in connection with the use, access, security, maintenance, distribution or transmission of this transcript. This document is a simple transcript and does not reflect any investment opinion of MZ. The entire content of this document is sole and total responsibility of the company hosting this event, which was transcribed by MZ. Please, refer to the company s Investor Relations (and/or institutional) website for further specific and important terms and conditions related to the usage of this transcript. 7