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São Paulo, November 9, 2016 – T4F Entretenimento S.A. (“T4F” or “Company”) (BMF&BOVESPA: SHOW3), leading live entertainment company in South America, announces the revised results for the third quarter of 2016 (3Q16). The financial and operational information herein were prepared according to International Financial Reporting Standards (IFRS) and the accounting practices adopted in Brazil.
3Q16 Highlights
324 thousand tickets sold (+83% versus 3Q15);
Net revenue of R$100.5 million (+17% versus 3Q15);
Reduction of 24% in SG&A compared to 3Q15;
EBITDA of R$11.2million (+1% versus 3Q15);
Net income of R$6.1 million (-31% versus 3Q15);
In 9M16, net revenue, EBITDA and net income more than doubled compared to 9M15; and
T4F was nominated to the main category of the Billboard Touring Awards as Top Promoter of 2016, competing with Live Nation Entertainment and AEG Live.
We report below comments on the financial statements related to the quarter ended on September 30, 2016 (3Q16). We recommend reading this material together with the Quarterly Financial Statements (“ITR”).
Comments on the Consolidated Financial Performance
Operating Indicators
In 3Q16, we promoted 158 live music, theater and family events with 324 thousand tickets sold. Compared to 3Q15, we posted growth in both indicators, of, respectively, 3% and 83%.
In live music, we promoted 73 concerts with 248 thousand tickets sold. The increase of 59% in the number of events and 91% in tickets sold is a result of the promotion of more indoor concerts with greater attractiveness to the audience, since we did not hold outdoor concerts in either 3Q16 or 3Q15. In 3Q16, we highlight the promotion of the indoor tours of Whitesnake, Scorpions, Laura Pausini, Tom Jones, Novos Baianos and Caetano & Gil.
In family and theater, the number of events decreased 21%, but the number of tickets sold increased 60%. This is a reflection of the good performance of the musical Wicked, which we have been presenting at Teatro Renault. For comparison purposes, in 3Q15 we presented the musicals (i) Nice Work If You Can Get It (adapted musical) at Teatro Cetip and (ii) Sister Act (original musical) at Teatro Renault
We have continued experiencing a very heated scenario in ticket sales, which we believe is based on the
quality of our events and leveraged by lower expenses of Brazilians traveling abroad, driving those to local
entertainment.
46
129107
48
73
248
85 77
# Events Tickets Sold (000) # Events Tickets Sold (000)
Live Music Family Events & Theater
3Q15
3Q16
+91%
-21%
+60% +59%
3Q16 Earnings Release
4
Net Revenue
Net revenue in 3Q16 totaled R$100.5 million and R$658.0 million in 9M16, up 105% from 9M15 and 19% higher than the full year 2015 (R$551.0 million). Net revenue in events promotion amounted to R$55.6 million in 3Q16. All business lines registered absolute growth, especially live music. The promotion of a higher number of events (+3%) with significant growth in tickets sold year-on-year (+83%) combined with an increase of 18% in the average ticket price resulted in 96% growth in net revenue in 3Q16 versus 3Q15.
Net revenue of ticketing, F&B and venues operations decreased 31% in 3Q16 compared to 3Q15, mainly in ticketing operation. While in 3Q15 we recognized revenue of convenience fee through the early ticket sales for 5 shows of Muse, 4 shows of Ariana Grande and 9 shows of Maroon 5, in 3Q16 we opened ticket sales only for Black Sabbath’s show in Porto Alegre.
Net revenue of sponsorship totaled R$19.2 million in the quarter, down 7% from 3Q15. In 9M16, net revenue of sponsorship corresponded to 12% of total net revenue, versus 20% in 9M15, due mainly to the unfavorable macroeconomic environment in Brazil with a consequent reduction in marketing budgets of companies.
Gross profit reached R$24.4 million in 3Q16, down 17% from 3Q15. The better performance in event promotion by an increase in the occupancy rate of events in the period was offset by (i) lower results in ticketing, F&B and venues operations (-86%), as we did not start sales for major events this quarter, and (ii) the reduction of 7% in sponsorship. In 9M16, gross profit came to R$103.5 million, up 41% from 9M15.
Operating Expenses (Revenue)
Operating expenses decreased 24% in the quarter year-on-year, reflecting the continuous efforts in expense reduction. In 9M16, total expenses rose 5% versus higher inflation in the last 12 months in Brazil, our largest market segment. EBITDA
EBITDA in 3Q16 amounted to R$11.2 million, in line with 3Q15. EBITDA in 9M16 came to R$52.7 million with margin of 8.0%. In absolute figures, EBITDA grew 108% compared to 9M15 and 27% compared to the full year 2015 (R$41.7 million).
Financial Result
In 3Q16, net financial result was positive in R$334 thousand versus R$4.8 million in 3Q15. The lower result is a reflection of exchange rate changes on cash position in US Dollar with hedging contracts made in foreign currency, given that we raised income from financial investments and we reduced financial expenses due to the lower indebtedness in the period. Net Income
In 3Q16, net income totaled R$6.1 million, down 31% from 3Q15. In 9M16, net income reached R$19.7 million, 94% of the net income of the full year 2015, and up 128% from 9M15.
Tax on Financial Transactions (2.4) (5.0) 113% (1.0) (2.1) 101%
Taxes and Others (3.4) (0.9) -74% (0.8) 0.3 n.a.
Exchange Variance 7.7 (7.9) n.a. 8.5 0.4 -95%
Net Financial Result (4.1) (7.5) 85% 4.8 0.3 -93%
Net Income (R$ million) 9M15 9M16 Chg. % 3Q15 3Q16 Chg. %
Result Before Taxes 13.0 36.5 181% 13.3 8.8 -33%
(-) Income Tax and Social Contribution (4.3) (16.8) 288% (4.4) (2.8) -38%
Net Income 8.7 19.7 128% 8.8 6.1 -31%Net Margin (%) 2.7% 3.0% 0.3 p.p. 10.2% 6.1% -4.2 p.p.
8.8 6.1
3Q15 3Q16
Net ProfitR$ mn
-31%
3Q16 Earnings Release
7
Working Capital
In 3Q16, we registered negative working capital of R$24.2 million versus R$35.6 million in 2Q16. The maintenance of negative working capital is a consequence mainly of our business model in which we register early sales of tickets and sponsorship (in advances from clients) while payments to suppliers are mostly concentrated near the dates of the respective events. Cash and Indebtedness
We ended 3Q16 with R$113.0 million in cash (R$115.1 million including restricted cash) versus R$141.3 million in 3Q15:
Operating cash: we generated R$507 thousand in 3Q16. We did not promote and we did not start sales for major events this quarter.
Investments: we spent R$832 thousand mainly in the maintenance of our venues.
Financing: we expended R$8.3 million with our financing activities due to the amortization of the first installment of debentures in the amount of R$8.3 million and the payment of interest of R$4.1 million, offset by R$4.1 million received from related parties.
We thus concluded the quarter with: (i) total indebtedness of R$41.9 million, down 40% from 3Q15, and (ii) net cash of R$71.0 million.
Working Capital (R$ million) 3Q15 2Q16 3Q16 Chg. %
(3Q16/2Q16)
Assets 172.4 117.6 120.4 2%
Accounts Receivable 111.9 68.7 74.6 9%
Inventories 1.7 2.3 2.1 -11%
Advances to Suppliers and Anticipated Costs 58.8 46.6 43.8 -6%
Increase (Reduction) in Cash and Equivalents 68.0 (126.1) n.a. 54.9 (8.1) n.a.
Balance in Cash and Financial Investments 141.3 113.0 -20% 141.3 113.0 -20%
Borrowings and Financing - Short Term 27.7 16.9 -39% 27.7 16.9 -39%
Borrowings and Financing - Long Term 41.8 25.1 -40% 41.8 25.1 -40%
Total Indebtedness 69.5 41.9 -40% 69.5 41.9 -40%
Net Cash (Debt) 71.8 71.0 -1% 71.8 71.0 -1%
3Q16 Earnings Release
8
Events Pipeline
Live Music Outdoor In 4Q16, we will present the last tour of Black Sabbath in the cities of Sao Paulo, Rio de Janeiro, Curitiba and Porto Alegre. In March 2017, we will hold the sixth edition of the Lollapalooza Festival – Brazil at the Interlagos Circuit, with more than 40 attractions, which include Metallica, The Strokes, The XX, The Weekend, Martin Garrix, The Chainsmokers, Duran Duran, among many others. Between March and April 2017, we will promote Justin Bieber’s tour in the cities of Sao Paulo and Rio de Janeiro. We started ticket sales in late October and early November, which sold out in a few hours of sales to the general public. Indoor In indoor music, we have already scheduled around 85 presentations for 4Q16, including international and local artists, like: Disclosure, Chris Cornell, The Kooks, Simple Plan, Roberto Carlos, O Grande Encontro (Elba Ramalho, Geraldo Azevedo and Alceu Valença), Nando Reis, Roupa Nova, Zé Ramalho and Skank.
Family and Theater Events In 4Q16, we will continue to promote the musical Wicked at Teatro Renault, which continues to post higher results than our projections. In January, we will promote the show Fuerza Bruta, which brings unique 360o experience using music, dance, acrobatics and interactivity with the audience. Performances will take place at Metropolitan – Rio de Janeiro until the end of February 2017.
Sports Events In 4Q16, we will promote 4 of the 12 stages of Stock Car and 3 of 8 races of Copa Petrobras de Marcas, Mercedes-Benz Challenge, Campeonato Brasileiro de Turismo and Fórmula 3 Brasil.
Guidance On March 11, 2016, the Company released Material Fact to its shareholders and the market in general with the projections for 2016 fiscal year, as below:
Net Revenue: growth of 50% (fifty per cent) compared to 2015; Net Profit: growth of 100% (one hundred per cent) compared to 2015; and Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): growth of 60% (sixty per
cent) compared to 2015.
3Q16 Earnings Release
9
We remain confident on the achievement of the guidance for net revenue and EBITDA based on the results obtained in 9M16 and on the sales already registered for the events of 4Q16 and 1Q17. Net income will be lower than the guidance due mainly to the effect of exchange rate changes. In 9M16, the performance of net revenue and EBITDA beats full year 2015:
Net Revenue of R$658.0 million, +19% vs. 2015 (R$551.0 million);
EBITDA of R$52.7 million, +27% vs. 2015 (R$41.7 million); and Net Income of R$19.7 million, 94% of achievement in relation to 2015 (R$20.9 million)
SHOW3 Performance Closing price of SHOW3 on November 9th, 2016 was R$5.90, which represents growth of 91% YTD and 80% in 12 months.