Investor Presentation
November 2011 Disclaimer
• This notice may contain estimates for future events. These estimates merely reflect the expectations of the Company’s management, and involve risks and uncertainties. The Company is not responsible for investment operations or decisions taken based on information contained in this communication. These estimates are subject to changes without prior notice.
• This material has been prepared by Multiplus S.A. (“Multiplus“ or the “Company”) includes certain forward-looking statements that are based principally on Multiplus’ current expectations and on projections of future events and financial trends that currently affect or might affect Multiplus’ business, and are not guarantees of future performance. They are based on management’s expectations that involve a number of business risks and uncertainties, any of each could cause actual financial condition and results of operations to differ materially from those set out in Multiplus’ forward-looking statements. Multiplus undertakes no obligation to publicly update or revise any forward looking statements.
• This material is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Likewise it does not give and should not be treated as giving investment advice. It has no regard to the specific investment objectives, financial situation or particular needs of any recipient. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. It should not be regarded by recipients as a substitute for the exercise of their own judgment.
2 Multiplus is a growing loyalty network
Network connecting people and companies
around 9 mln 20.0 bln almost170 members points sold in 3Q11 partnerships
+17.0% YoY +38.5% YoY +26.3% YoY
points from several programs in positive network effect powerful support for partners to one single account generating strong growth acquire and retain clients
Multiplus Exclusive and Strategic Relationship with TAM 2009: spin-off from TAM’s loyalty program Long term agreement (15 years + additional 5 year periods) 2010: launched as separated business unit and IPO Most desired airline in Brazil (Ibope Research) and Star Alliance member TAM SA holds 73,2% stake Air tickets: most appealing redemption with high value perception
Note: based on 3Q11 3 Innovative business model
Strong cash generation Low CAPEX requirement
Negative working capital Scalable business
Debt free Dividend player
Sources of Profit
outsourcing and CRM points selling redemption $ services unit revenue less unit cost $ spread
point expiration $ breakage # of months 0 ~10 24 CASH IN CASH OUT ~10 months float $ interest income
4 Growing coalition network…
Magazine Air Travel Travel Agency Gas Stations Bookstore Hotels Telecom Pay-TV Apparel Education Suscriptions
Others Stock Exchange
Members can collect and also redeem points in any coalition partner.
Stock Broker Drugstore
Real Estate
Universities e-Commerce
Beauty and Furniture and Gym Food Home Centers Groceries Insurance Car Rental Group Buying Pension Plan Healthy Decoration
Note: blank slots refer to targeted segments
5 … and strong accrual and growing redemption network*
Accrual Redemption
Donation Hotels Financial Institutions
Leisure
Car Rental Retail and others
Other
Magazines and Newspapers
*non exhaustive 6 Strategy: to diversify gross billings and redemptions
Gross billings of points
Current Long term target 26% Strategy: to diversify gross billings and redemptions 3%
15 to 20% 71% why?
TAM Retail, Industry and Services Banks • Average unit price increase • Average unit cost reduction Costs of rewards • Controlled breakage decline, Current Long term target favoring member experience and volume growth 98%
Long term margin expansion 2% 15 to 20%
Air Tickets Others Note: based on 3Q11 7 Diversifying gross billings and redemptions how?
1 Expanding 2 Increasing 3 Improving partnerships network marketing actions client experience
Point-of-sale Mailings Capillarity Some recent partnerships materials project Accrual, Drugstore Group buying balance checking, and redemption (collect points here) at the point-of-sale Pension Plan Car Rental Media investments Videos on board
Newspapers, Magazines, etc. New website
Roadmap TV commercial Groceries, entertainment, Call Center restaurants, beauty, others Radio spots improvements
8 Already a good track record
Growing gross billings Stable breakage rate R$ millions 12 months average in % +32,4% +140 bps +12,1% +70 bps 24,0% 397,3 23,3% 339,9 354,6 23,0% 300,0 325,2 22,6% 22,6%
3Q10 4Q10 1Q11 2Q11 3Q11 3Q10 4Q10 1Q11 2Q11 3Q11
Growing member base Strong cash generation In millions Free Cash Flow to Equity, R$ millions +17,0% +7.7% +3,7% +26.3% 326,6 327,7 304,3 285,5 8,9 8,3 8,6 259,4 7,6 8,0
3Q10 4Q10 1Q11 2Q11 3Q11 2Q10 3Q10 4Q10 1Q11 2Q11 Note: Excluding dividends and capital reduction effects
9 Loyalty market has multiples growth opportunities
Expanding credit card usage in Brazil Increasing domestic consumption Credit Card Transaction Value (R$ billions) Personal Consumption Expenditure (R$ billions) CAGR +22% CAGR +12%
2,226 1,966 1,787 314 1,594 256 1,429 215 174 142
2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Source: ABECS Source: IBGE
Growing passenger traffic (Airline Segment) Improving wealth distribution RPK in Brazil (billions) Social classes in Brazil* (% of the population) 23% Multiplus’ target
70 57 48 44 40
2005 2010 2006 2007 2008 2009 2010 Source: ANAC Source: Research Cetelem- Ipsos 2010
*Note: Average income of classes D and E - R$ 6,126/year; class C - R$13,944/year; and classes A and B - R$ 75,942 /year. 10 Appendix Appendix I: Typical Accrual and Redemption Flows
Accrual flow: cash in due to sales of points to partners
PARTNER WITH STANDALONE PROGRAM POINTS
earns Partner’s A Points accumulates converts to Program
MEMBER buys Products and PARTNER WITH NO STANDALONE PROGRAM (consumer) Services
B earns
Redemption flow: cash out due to purchase of points, products and services from partners and suppliers
POINTS COALITION AND REDEMPTION PARTNERS
converts to Partner’s C Points accumulates earns Program Products and Services MEMBER redeems D earns (consumer)
MULTIPLUS WEBISITE Products and E earns Services
12 Appendix II: Shareholders’ Structure and Stock Performance
Shareholders’ Structure Average Stock Price and Average Daily Trading Volume
Average Daily Trade Volume (R$ million) 29,66 28,85 29,28 Average Stock Price 28,32 27,95 27,40 27,54 27,28 26,29 25,80 TAM S.A. 24,74 25,48 24,99 23,36
19,96 17,48 17,87 15,99 16,58 16,17 14,90 19,4 z z 73,14% 26,86% 15,3 13,3 12,3 11,4 10,5 9,7 9,5 8,8 7,9 7,6 8,2 8,2 6,1 6,6 6,4 5,0 5,6 4,1 2,1 2,4
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
2010 2011
13 Appendix IV: Loyalty Market Penetration
as % of population
Multiplus member base penetration
as % of population
North 52,8 3,6 Northeast 2,5 46,9
Central-West 6,4 Southeast 35,7 5,2
31,0
27,6 27,3 South 4,5 23,7 23,5 21,0 18,0 15,7 13,4 13,0 9,5 9,4
4,4 3,8
2,3
Nectar UK Nectar
Nectar ITA Nectar
AirMiles UK AirMiles
Smiles BRA Smiles
FlyBuys NZL FlyBuys
Velocity AUS Velocity
FlyBuys AUS FlyBuys
AirMiles CAN AirMiles
Multiplus BRA Multiplus
Aeroplan CAN Aeroplan
Sky Miles USA Miles Sky
LANPASS CHL LANPASS
Flying Blue FRA Blue Flying
Miles&More DEU Miles&More
AAdvantage USA AAdvantage
Club Premier MEX Club Premier
Qantas Program AUS Program Qantas JAL Mileage Bank JPN Bank Mileage JAL
Source: Principal Global Indicators and Companies’ website and reports Notes: 1. Programs belonging to airlines: Flying Blue to AirFrance/KLM; Sky Miles to Delta Airlines; AAdvantage to American Airlines; Miles&More to Lufthansa; JAL Mileage Bank to Japan Airlines; Velocity to Virgin Blue; Smiles to Gol Airlines; and Club Premier to AeroMexico 2. Programs associated with airlines: FlyBuys NZL with Air New Zealand; FlyBuys AUS with Jet Set; Aeroplan with AirCanada; AirMiles UK with British Airways; and Multiplus with TAM Airlines. 14 Appendix V: 3Q11 results
Operating highlights
Item 3Q11 YoY QoY
Points issued 20.0 bln +38.5% +7.9%
Points redeemed 12.5 bln +171.7% +14.7%
Breakage rate 24.0% +140bps +70bps
Financial highlights
Item 3Q11 YoY QoY
Gross Billings of points R$ 397.3 mln +32.4% +12.1%
Net Revenue R$ 321.5 mln +147.3% +12.8%
EBITDA R$ 78.1 mln +64.5% -14.6% (margin of 24.3%)
Adjusted EBITDA R$ 82.3 mln -7.0% +1.3% (margin of 22.2%)
Net Income R$ 51.3 mln +15.3% -36.8% (margin of 16.0%)
15 Appendix VI: Income Statement
(R$ thousand) 3Q11 vs 3Q11 vs 3Q10 3Q11 2Q11 Income Statement 3Q10 2Q11 Gross revenue 143,940 353,652 145.7% 314,568 12.4% Sale of points 105,163 249,834 137.6% 224,200 11.4% TAM Airlines - TLA 13,535 54,605 303.4% 44,821 21.8% Banks, Retail, Industry and Services 91,628 195,229 113.1% 179,379 8.8% Breakage 35,962 93,130 159.0% 83,621 11.4% Hedge 0 7,097 N.A. 3,448 105.8% Other revenues 2,815 3,591 27.6% 3,299 8.9% Taxes on sales -13,863 -32,172 132.1% -29,505 9.0% Net Revenue 130,077 321,480 147.1% 285,063 12.8%
Cost of the points redeemed -69,544 -218,818 213.3% -174,085 25.7% Air tickets -69,275 -214,890 210.2% -171,880 25.0% Other products / services -269 -3,928 1360.2% -2,205 78.1% Accounting Adjustments 420 1,209 187.9% 0 N.A. Total cost of services rendered -69,124 -217,609 214.8% -174,085 25.0%
Gross Profit 60,953 103,870 70.4% 110,978 -6.4% Gross Margin 46.9% 32.3% -14.5p.p. 38.9% -6.6p.p.
Shared services -1,482 -1,907 28.7% -1,907 0.0% Personnel expenses -4,619 -8,750 89.4% -6,991 25.2% Marketing -1,025 -6,457 529.9% -4,175 54.7% Depreciation -46 -1,288 2700.0% -1,173 9.8% Other -6,337 -8,612 35.9% -6,399 34.6% Total Operating Expenses -13,509 -27,014 100.0% -20,645 30.8%
Total Costs and Operating Expenses -82,633 -244,623 196.0% -194,730 25.6%
Operating Income 47,444 76,856 62.0% 90,333 -14.9% Operating Margin 36.5% 23.9% -12.6p.p. 31.7% -7.8p.p.
Financial Income/Expenses 12,162 21,286 75.0% 33,825 -37.1% Hedge - -19,347 N.A. - N.A.
Income before income tax and social contribution 59,606 78,796 32.2% 124,158 -36.5%
Income tax and social contribution -15,105 -27,480 81.9% -42,990 -36.1%
Net Income 44,501 51,316 15.3% 81,168 -36.8% Net Margin 34.2% 16.0% -18.2p.p. 28.5% -12.5p.p. 16 Appendix VII: Balance Sheet and Cash Flow
(R$ thousands) 3Q11 vs 3Q11 vs (R$ thousand) 3Q10 3Q11 2Q11 Balance Sheets 3Q10 2Q11 Cash Flow 3Q11 Assets 1,257,006 1,140,986 -9.2% 1,013,420 12.6% Net Income 51.317 Current assets 1,102,918 929,163 -15.8% 830,818 11.8% Cash and cash equivalentes 19,166 5,372 -72.0% 23,820 -77.4% Depreciation/Amortization 1.288 Investments 614,647 474,115 -22.9% 644,884 -26.5% Accounts Receivable -43.954 Accounts Receivable 91,647 175,483 91.5% 131,529 33.4% Related Parties 363,136 267,435 -26.4% 22,320 1098.2% Accounts Payable 418 Current account 30,157 28,916 -4.1% 22,320 29.5% Taxes -24.715 Prepaid expenses 332,979 238,520 -28.4% 0 N.A. Deferred income tax and social contribution 14,115 2,298 -83.7% 1,823 26.1% Related Parties -16.114 Derivative Instruments 0 3,712 N.A. 5540 -33.0% Other receivables 207 747 260.6% 901 -17.0% Prepaid Expenses Increase -400.000 Prepaid Expenses Reduction 161.480 Non-current assets 154,088 211,823 37.5% 182,602 16.0% Prepaid expenses 142,377 0 -100.0% 0 N.A. Deferred Revenue and Breakage liabilities 52.758 Long term investments 0 160,572 N.A. 155,588 3.2% Derivative Instruments 56.107 Deferred income tax and social contribution 755 20,039 2555.0% 268 7371.0% Derivative Instruments 0 36 0.0% 0 0.0% Other assets and liabilities 7.599 Property, plant and equipment 760 1,158 52.3% 1,127 2.7% Intangible 0 16,852 N.A. 17,900 -5.9% Operating Cash Flow -153.815 Intangible assets 10,196 13,166 29.1% 7,720 70.5%
Investiment -5.717 Liabilities and shareholder’s equity 1,257,006 1,140,986 -9.2% 1,013,421 12.6% Cash Flow from Investing Activities -5.717
Current liabilities 541,993 847,427 56.4% 779,941 8.7% Suppliers 5,139 3,569 -30.5% 3,151 13.3% Net proceeds from public offer 0 Taxes and fees payable 20,780 10,996 -47.1% 15,465 -28.9% Deferred revenue 354,302 666,455 88.1% 604,173 10.3% Capital 0 Breakage liabilities 155,162 124,158 -20.0% 133,683 -7.1% Derivative Instruments 0 23,514 N.A. 2,663 782.9% Dividends 0 Other liabilities 6,610 18,734 183.4% 20,806 -10.0% Other -24.701
Non-current liabilities 0 33,464 0.0% 0 0.0% Cash Flow from Financing Activities -24.701 Derivative Instruments 0 33,464 0.0% 0 0.0%
Equity 715,012 260,095 -63.6% 233,479 11.4% Increase (Decrease) in Cash -184.233 Capital 669,063 69,049 -89.7% 69,049 0.0% Hedge 0 -27,231 N.A. 0 N.A. Remuneration Plan 0 8,984 N.A. 6,455 39.2% Cash at beginning of period* 824.292 Reserves 0 5,919 N.A. 5,919 0.0% Retained Earnings (loss) 45,949 203,373 342.6% 152,056 33.7% Cash at end of period* 640.059 17 Strong cash generation Low CAPEX requirement Contact IR team +55 11 5105 1847
Negative working capital Scalable business [email protected]
Debit free Dividend player www.multiplusfidelidade.com.br/ir