Earnings Release · · 3 min read

Cielo 1Q22

Cielo's 1Q22 earnings surpassed expectations with significant improvements in net income and cost control. Discover the key metrics and insights behind Cielo's financial performance.

Cielo 1Q22



We were surprised by Cielo’s earnings, which was the 6th beat in a row to market consensus. In addition, Consolidated Net Income reached R$ 184.6mn in 1Q22 (+10% above Street), +35.9% YoY, due to excellent well cost control.

Source: Koyfin, Giro Lino.

Costs and expenses were down 3.4% YoY. If extraordinary effects that reduced the expenditure base of 1Q21 were isolated, the decrease would have been 8.9%, reflecting:

  1. Nominal decrease in Cielo Brasil's normalized expenses, despite the inflation in the period, pressure on expenses from the substantial volume expansion, and investments in the transformation process;
  2. Expenses are under control in Cateno;
  3. Decrease in Other Subsidiaries expenses due to the sale of Multidisplay/M4U to Bemobi.

The consolidated recurring EBITDA recorded an expansion of 52.1% YoY, reflecting significant Cielo Brasil, Cateno, and excellent cost control growth.

Source: Cielo, Giro Lino.

Also, Cielo concluded its divestment agenda from non-core businesses. Although the business turnaround took much longer than expected, we recognize that cost-saving is better than expected.

After the end of the quarter, Cielo announced the closing of MerchantE Solutions sale, a payment company based in the United States.

The company received US$137 million for the deal at the closing date. With the announcement of the sale of MerchantE, the Cielo ends an important divestment cycle, totaling R$ 1.3 billion added to cash from January 2021 to April 2022.

The TPV captured by Cielo Brasil was R$ 198.4 billion in 1Q22, the highest for a 1Q’, growing +23.9% YoY and -4.8% QoQ; despite that, historically, the 4Q seasonality had a more significant impact on the business.

Source: Giro Lino, Cielo.

Pre-payment volume totaled R$ 26 billion in volume, strong growth of 31% YoY, due to a 33.4% expansion in credit card TPV (vs. our 16% expectation).

We highlight that Cielo reported a substantial expansion of the acquisition of the receivables line, which reached 9.3%penetration, compared to 6.0% in 4Q21.

Also, the company reported a better card mix, as credit represented 60% of TPV (vs. 59% in 4Q and 56% in 1Q21). Consequently, Cielo is back on track for its operational momentum.

Source: Cielo, Giro Lino.

Finally, Cielo started to reprice its client base (mainly in the two-day payment modality) in January due to higher policy rates.

According to the company, card yield reached ~0.76% in the last week of Apr-22, vs. 0.67% in 1Q22. In the retail segment, the yield in the last week of April grew by 28bps vs. the previous week of March.

We’ll keep our expectation for card yield at 0.69% in 2Q22E. For 2022, we forecast TPV growth at +10.5%YoY, card yield at 0.69%, and recurring EPS growth of 6%YoY.


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