T4F Entretenimento S.A. (SHOW3) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to our 2021 results call. We would like to thank you for your presence here today. After almost 2 years of restrictions imposed on our sector to contain the effects caused by the COVID-19 pandemic, the second semester of 2021 was marked by the comeback of live entertainment. This resumption was enabled by the advance of vaccination and also the successive decrease of numbers related to the pandemic. Finally, we can affirm we are again promoting the meaning of our audience with their favorite artists. We had 3 more waves of infections during the year. One, after the holidays and 2 caused by new strains. Still, while the Delta one led to a significant increase in deaths, Omicron variant caused a shifting within the number of cases without a proportional increase in deaths. As observed in other countries, the highly continuous strain killed less than the previous one, which was also favored by the high vaccination coverage in the countries we operate. As a result of the better scenario, on March 17, 2022, the state government of São Paulo withdrew the obligation to wear masks, both indoor and outdoor public places. The easing of restrictions has been occurring also in other parts of the country, at least 20 states have already relaxed their restrictions. Argentina also faced this waves of infections, resulting in the prohibition to operate our Theatre Renault between mid-April and June. However, since the third quarter of 2021, this operation has shown positive results. This is due to the highest demand of producers for dates to rent the theater as well as ticket sales through Ticketek, the leader company in the country. Additionally, INTI has been recording all-time high results. These results are driven by the building up of cultural events and the expansion of the customer base. The expansion relates with the entry into the live music segment counting on T4F as a showcase. Among the countries we operate, Chile imposed the stronger restrictions, allowing the promotion of events only in 2022. The milestone of this resumption was -- Chile, held on March 18 to 20, the same weekend of the Argentinian edition. In Brazil, the evolution of the pandemic number allowed us to resume announcements and promotions of new cult. I will detail it at the end after Diego, our IR Manager, presents the financial and operational results.

Thank you, Fernando, for the introduction. As previously mentioned, during 2021, we had restrictions to promote our events due to the pandemic of the new coronavirus. Given this scenario, the company recorded total net revenue of BRL 31.3 million, which means a reduction of 22% compared to 2020, as highlighted on Slide 5. Part of this number, BRL 2.5 million, regards to even promotion generated by participation in events in our theater in Buenos Aires. In ticketing, food and beverage and venues operation, we recorded an increase of 57% compared to the previous year, reaching BRL 24.5 million against BRL 15.6 million in 2020. This number is composed mostly of revenue in the fourth quarter of '21. At this quarter, besides the sale of tickets for third-party events in Brazil and Argentina, we went back on sales of Lollapalooza and had the musical Charlie and the Chocolate Factory. Sponsorship revenue decreased by 74% in 2021. Given we suspended the recognition of this revenue during the pandemic, 2021 revenue was mostly due to the reopening of the Lollapalooza sales in fourth quarter '21. On Slide 6, it is possible to visualize the positive effects of the actions taken to reduce costs during the period without events or with restrictions along 2021. Gross profits in 2021 reached BRL 9.1 million compared to negative BRL 15.1 million in 2020. This result was mainly due to ticketing, food and beverage and venues operation, which reversed the loss of 2020 with the reopening of theaters in Argentina and Brazil and the ceasing of the operations of our venues in São Paulo, Rio de Janeiro and Belo Horizonte, which represented high fixed costs. Here, we highlight that until September, we had a gross loss of BRL 2.9 million. And only in fourth quarter '21, we recorded a gross profit of BRL 12 million. On the same slide, we analyzed the SG&A of 2021, which decreased by 12% to BRL 43.8 million from BRL 49.7 million recorded in 2020. These decrease is due, among other factors, to the reduction of personalized structures in Brazil and Argentina. It is important to point out that within the value of this quarter, there are one-off effects in the amount of BRL 6.9 million comprising the sum of BRL 5.1 million referring to the write-off of assets for the venue in São Paulo, which operations we ceased in March. Also, BRL 1.8 million of adjustments in the last installment received by the sale of Vicar. Excluding these adjustments, we would have a total SG&A of BRL 36.9 million, which represents a reduction of 26% when compared to 2020. In other expenses, the negative amount of BRL 21.4 million in 2021 is mainly composed by provisions for contingency and the results of legal proceedings. Here, we highlight the renegotiation of tax liabilities with the municipality of São Paulo, with an impact of BRL 10.5 million. Moving to Slide 7. We see that in the official view, the EBITDA in 2021 was negative by BRL 54.1 million, better than the BRL 62.1 million, also negative, in the previous year. In the same slide, we also detailed the EBITDA in fourth quarter '21, negative by BRL 8.6 million against a negative BRL 35.9 million in fourth quarter '20. In the adjusted view, we have a negative EBITDA of BRL 26.1 million in 2021 against BRL 45.1 million negative recorded in 2020, which represents an improvement of 43% in this indicator. Between quarters, we have positive BRL 3.1 million against negative BRL 10.3 million in the last year. We would like to point out that this EBITDA topped by 18% the one registered in fourth quarter '19, the last quarter before the pandemic. This improvement directly reflects the company's efforts to pivot to an asset-light demand-driven structure. On Slide 8, we detailed the adjustments that were applied to the result. In the adjusted view of 2021, BRL 7.5 million referring to the write-off of assets for the venue in São Paulo, BRL 1.8 million adjustments in the sale of Vicar and the negative results of BRL 18.6 million related to agreements for decisions and contingency provisions. In the adjusted view of fourth quarter '21 only the result of BRL 11.6 million referring to agreements decisions and contingency provisions is excluded. The adjustments in net income were similar to those related to EBITDA, highlighting that, in 2021, no provision was made for impairment resulting from the return of our operations. On the next slide, we describe the financial result, negative by BRL 10.7 million, which represents an improvement of 29% compared to the amount recorded in 2020 of BRL 15.2 million, also negative. This improvement comes mainly from exchange rate variation in the amount of BRL 8.8 million, resulting from the appreciation of 7.5% of the dollar quoted on December 31, 2020, at BRL 5.19 and as of December 31, 2021, at BRL 5.58. These positive results partially offset by BRL 9.3 million increase in interest on debentures due to 7.25 percentage points increase on the Brazilian basic interest rates, which indexes our debentures. This rate went from 2% per annum at the end of 2020 to 9.25% per annum at the end of 2021, added to the higher cost of debentures with its reprofiling in November 2020. As a result of the effects previously mentioned, we see on Slide 10 that the net loss for 2021 of BRL 64.5 million was 41% lower than the amount recorded in 2020, excluding our recurring factors and adjusted net loss of BRL 29.7 million was obtained in 2021, 62% better than the BRL 79 million loss recorded in the previous year. In fourth quarter '21, net loss was BRL 19.7 million, 65% better than in fourth quarter '20. In the adjusted view, we reached positive BRL 1.7 million, upturn in the loss of BRL 17.2 million recorded in fourth quarter '20. Referring to cash flow on Slide 11, we ended 2021 with BRL 229.1 million in gross cash balance versus BRL 200.7 million in 2020. The main effects on fourth quarter '21 were, in operating cash flow, we made BRL 30.2 million in fourth quarter '21, upturning consumptions of BRL 5.6 million in the third quarter '21, and BRL 14.4 million in the fourth quarter '20. This generation is due to not only the reopening of sales of Lollapalooza, but also for the musical Charlie and the Chocolate Factory, and receiving sponsorship revenues for the Adams Family. The cash flow from investments was BRL 600,000, resulting from investments in management software and development of INTI. This result was in line with previous periods if we disregard the receipts of installments from the sale of Vicar that summed up here. Cash flow from financing activities consumption topped the third quarter '21 by 472% due to the payment of interest on debentures paid in November in the amount of BRL 4.9 million. Finally, there was a positive exchange rate variation of BRL 4.5 million in the last quarter of 2021 due to a 2.4% variation of the dollar from September 30 to December 31, impacting our assets held in foreign currency. Thank you all for your attention. Now I give back the floor to Fernando, who will conclude presenting our pipeline on the last slide.

Thanks, Diego. As we mentioned at the beginning of this presentation, with the easing of restrictions added to the decrease in the number of COVID-19 cases, we resumed the announcement of new cost. In November 2020, we went back on sales of Lollapalooza Brazil, with high demand for the remaining tickets. The first one takes place this weekend after the postponement in 2020 and the rescheduling in 2021. The realization of this event represents the milestone of the resumption of major festivals in Brazil. This addition will feature about 70 artists, such as Miley Cyrus, The Strokes, Foo Fighters, A$AP Rocky, Doja Cat, Machine Gun Kelly, Black Pumas, Alessia Cara and Alok, among other national and international artists. Also, we went on sales for a first edition of Turá Festival, which will take place on July 2 and 3 this year. There will be more than 20 attractions, presenting 20 hours of Brazilian music to the patrons. Among the already announced lineup, the festival will have artists, such as also Alceu Valença, BaianaSystem, Emicida, Marina Sena, Xamã and Zeca Pagodinho. Lastly, the new production of the musical, the Adams Family, brings back the greatest broader productions to the Renault Theatre. The play premiered on March 10 and the great success of public and critics of the first staging 2012 justifies our choice for this content to put back the theater to operate. We are committed to bring the best content to our audience in the best geographies, and we are sure that the actions taken during the pandemic prepare this to do so. Our Investor Relations team is now available to answer any questions. Thank you very much again, and a good day to everyone.