CIELO S A : Dados Econômico-Financeiros

Management

Report

2022

1. Difference in accounting practice in recognition of goodwill. Under IFRS, goodwill is maintained at historical value and under COSIF, it is amortized over the estimated period of the benefit. For the year 2022, the impact on profit is related to the realization of goodwill after the sale of MerchantE.
2. Third parties' interests in FIDCs and FICs, previously presented in current and non-current liabilities, according to BCB Normative Instruction No. 272/22, are now directly recognized in equity, specifically under the line item "Non-controlling shareholders" in COSIF.

MESSAGE FROM MANAGEMENT

Cielo's management is pleased to present the financial statements and the results reported by Cielo in 2022. The past year was a milestone in our transformation process, with widespread improvements in operations, acceleration in the recovery of results and advances in the quality of services provided to our customers.

The year began with challenging prospects. Market expectations, released by the Central Bank's FOCUS bulletin at the beginning of the year, projected economic growth close to zero, reflection of uncertainties related to the recovery of local and global economies in the post-COVID period.

However, the Brazilian economy showed a capacity for recovery. Higher than expected growth and recovery in the services sector were reported, as well as a decrease in unemployment rates. As we write this message, market prospects point to GDP growth of around 3% for the year.

In our main market, the cards industry followed its tendency to increase its participation in consumption. It should even exceed the market expectations announced at the beginning of the year.

Cielo's result was driven by the context of the cards market and, mainly, by the benefits related to the broad transformation agenda that we have implemented at Cielo.

Over the last few years, Cielo has strengthened its ability to compete in the disputed Brazilian payments market, made possible by improvements in channels, operations and analytical intelligence. In 2022, we processed R$872 billion in credit and debit card (TPV) transactions, the highest historical level, and with 22% growth over the previous year. We recorded sequential market share gains between the fourth quarter of 2021 and the third quarter of 2022, according to the most recent available card market data from ABECS (Brazilian Association of Credit Card and Service Companies).

We also made progress in expanding our business with term products, solutions that allow our customers to better manage their cash flow and receive the amounts from their credit card sales within two business days. The capital allocated by Cielo to these businesses reached R$18.6 billion at the end of 2022, an increase of 51% compared to last year.

We implemented a strong cost discipline, which allowed Cielo to assume a differentiated position in the market in terms of operational efficiency. Even with investments made in the transformation of the business and, recently, in the commercial expansion, the ratio between total expenses and TPV was 0.56% in the year, the lowest level in the historical series, and a prominent position in relation to our exchange-listed pairs.

In 2022, we concluded a successful divestment strategy. In this way, we simplified Cielo's structure, which allowed us to channel management's focus to the payments business in Brazil, an addition of R$1.3 billion in cash resources.

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The combination of operational improvements and the divestment agenda also allowed Cielo to present an important improvement in financial indicators such as the recurring EBITDA margin, which reached 35%, and the recurring net margin, which reached 14%, against 7% in 2021.

Profit for the year was R$1.6 billion, a 62% growth over 2021. This is highest result since 2018. On a recurring basis, we reported a profit of R$1.5 billion, up 79% over the previous year.

The resumption of growth took place on solid bases. There were improvements in operations, directly reflected in the quality of service perceived by our customers. We reduced time for delivery and maintenance of terminals, increased the penetration of digital channels and improved satisfaction with the service provided by our contact center. During the year, Cielo invested R$274 million in initiatives of its transformation program, with a focus on improving the quality of services provided.

Advances in the transformation process have been recognized by different stakeholders. Cielo's shares showed the highest appreciation on the IBOVESPA in the year. Additionally, we raised R$3 billion through debentures, in one of the lower spreads on the DI rate of the year in Brazil, which shows the solidity of Cielo and how it is perceived by market agents. On the other hand, the strength of our brand was acknowledged by Top of Mind, in partnership with "Folha de São Paulo". Cielo is the most remembered in Brazil in the category of "payment machine".

It would not be possible to obtain so many achievements without the team's dedication and engagement all over the country. We seek to value people, the basis of our organization, and this has translated into results. There were improvements in the e-NPS and we were elected by Great Place to Work (GPTW) as one of the best companies to work for in the country.

In ESG, Cielo was recognized by different actors, with highlight to the increase in the CDP - Carbon Disclosure Project - score from C to B, in line with our efforts to neutralize our direct emissions and improve climate risks management.

These facts show the solidity of the company and its brand, as well as the commitment of everyone in the organization to the business sustainability, with the best governance practices and responsibility with people and the environment.

Motivated by what we achieved in 2022, we started 2023 aware of the challenges faced by the payments market and committed to our purpose of building an increasingly better company.

We appreciate the dedication of our team, and the trust placed in us by our customers, shareholders and partners.

HIGHLIGHTS 2022

• The financial volume of transactions captured by Cielo totaled R$ 872.0 billion, an increase of 22.2% or R$ 158.6 billion compared to 2021.
• Consolidated net revenue totaled R$ 10,693.1 million, a decrease of 8.5% or R$ 992.4 million compared to 2021. Not considering, for purposes of comparability, the consolidation of subsidiaries disposed of - MerchantE (April 2022) and M4U (November 2021) - there was an increase of R$ 1,925.7 million or 22.0%.

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• Consolidated revenues from purchase of receivables (ARV) totaled R$ 938.5 million, an increase of 130.8% and R$ 531.9 million compared to 2021.
• Total consolidated expenditures (costs and expenses, not considering the effects from share of profit (loss) of investees) totaled R$ 7,852.1 million, a decrease of 22.3% or R$ 2,258.1 million compared to 2021. Not considering, for purposes of comparability, the consolidation of subsidiaries disposed of - MerchantE (April 2022) and M4U (November 2021) - there was an increase of 632.1 million or 8.8%.
• Cielo's profit for the year totaled R$ 1,569.5 million, an increase of 61.7% or R$ 599.0 million compared to 2021. Recurring profit for the year totaled R$1,479.7, an increase of 78.6% or R$ 651.4 million compared to R$ 828.3 million in 2021 (as per Note 27).
• Consolidated EBITDA totaled R$ 3,815.6 million, an increase of 42.6% or R$ 1,139.0 million compared to 2021. Recurring EBITDA totaled R$3,724.8, an increase of 47.8% or R$ 1,205.3 million compared to 2021.

OPERATIONAL PERFORMANCE 2022

Financial Volume of Transactions

Cielo's financial volume of transactions in 2022 totaled R$ 872.0 billion, an increase of 22.2% or R$ 158.6 billion compared to 2021.

Specifically with credit cards (lump sum and installment payments), the financial volume of transactions totaled R$ 517.2 billion in 2022, an increase of 27.2% compared to 2021. In debit cards, the financial volume of transactions totaled R$ 354.8 billion in 2022, an increase of 15.7% compared to 2021.

In addition, Cielo captured 8.3 billion in transactions in 2022, an increase of 22.3% compared to 2021.

FINANCIAL PERFORMANCE 2022

COMPARISON OF THE YEARS ENDED DECEMBER 31, 2022 AND 2021

Net Revenue

Net revenue totaled R$ 10,693.1 million in 2022, a decrease of 8.5% or R$ 992.4 million compared to 2021.Not considering the impact of the non-consolidation after the sale of MerchantE (April 2022) and M4U (November 2021), there was an increase of R$1,925.7 million or 22.0%.

The main impact of the increase is related to the growth of the volume captured which impacts (i) revenue from capture, transmission, processing and financial settlement of transactions, (ii) revenue from the 2-day Payment service at Cielo and (iii) interchange revenue of the Ourocard arrangement at Cateno. There was also repositioning of prices at Cielo, due to macroeconomic and competitive environment changes.

Cost of Services Rendered

Consolidated cost of services rendered totaled R$ 6,268.8 million in 2022, a decrease of R$ 2,018.5 million or 24.4% compared to 2021. However, not considering the non-consolidation of subsidiaries MerchantE and M4U, there was an increase of R$ 501.6 million or 8.7%. This change was mainly due to the following events:

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