Investor Presentation
August 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 About Multiplus
TAM’s Loyalty Program Launched in 1993 The first airline loyalty program in Brazil More than 1,000 destinations worldwide
Multiplus Powerful support for partners to acquire and Established as separated business unit in 2009 retain clients Beginning of operations and IPO in 2010 Members can gather all points from several programs in one single account
Broad portfolio of rewards
More than 8 million members
More than 160 commercial partnerships
• Scalable business
• Low CAPEX requirement
• Recurring Free Cash Flow
• Market Cap of R$ 4.2 billion*
*based on August 3rd 2011
3 Flexible Business Model
AcúmuloAccrual Redemption Coalition Outsourcing CRM
Partners
Partners Partners Partners
Partners buy Multiplus buys Two-way flow: Multiplus Multiplus points from points, products exchange of manages the leverages the Multiplus to award or services from points, products loyalty program of database from its its customers partners to deliver and services (buy the partner network and to its members and sell) between (systems and offers CRM Multiplus and operations) services coalition partners
4 Coalition Partnerships Network (members can earn and redeem points)
Magazine Air Travel Travel Agency Gas Stations Bookstore Hotels Telecom Pay-TV Apparel Education Suscriptions
Universities Stock Exchange
Gym Drugstore
Food
Beauty and Furniture and Home Centers Groceries Car Rental Insurance Group buying Pension Plan e-Commerce Healthy Decoration
Note: blank slots refer to targeted segments 5 Accrual and Redemption Partnerships*
Accrual Redemption
Financial Institutions
*non exhaustive 6 Business Model
Gross Billings of points Multiplus sells points … Costs of rewards
TAM Air Tickets Retail, Industry and Services …and buys rewards Others Banks Current Current 26% Sources of Profit
98% Spread Margin between point price and 3% cost of rewards 2%
71% Breakage z Points expiring without being redeemed
Long Term Target Interest income on the float Long Term Target Gap between sales and redemptions of points
Cross-selling of services Outsourcing and CRM
15 to 20% 15 to 20%
Note: based on 2Q11
7 Growth Opportunities
Credit Card Usage 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
Passenger Traffic (Airline Segment) Wealth Distribution Social classes* (% of the population) RPK in Brazil (billions) 23%
70
57
48 44 40
2006 2007 2008 2009 2010 2005 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. 8 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. 9 Main Strategic Objectives
User-friendly Interface (new website, new tools, etc.)
New Partners Customer (and partnerships of higher added value) New redemption options Experience (coalition) Operational Efficiency
Shareholder Brand Return Publicity
New members Breakage Management Cash Management Publicity of new concept New services Actions at sales outlet (CRM and outsourcing) Costs sharing with partner Appendix Appendix I: 2Q11 Highlights
OPERATING HIGHLIGHTS
• 18.5 bln points issued, a growth of 51.4% versus 2Q10 and of 9.2% versus 1Q11
• 10.9 bln points redeemed, compared to 3.2 bln points in 2Q10 and 9.0 bln points in 1Q11
• Average Breakage rate (12 months) of 23.3%, versus 23.0% in both periods 2Q10 and 1Q11
FINANCIAL HIGHLIGHTS
• Gross Billings of points of R$ 354.6 mln, an growth of 34.3% versus 2Q10 and of 4.3% compared to 1Q11
• Net Revenue of R$ 285.1 mln, compared to R$ 93.5 mln in 2Q10 and R$ 242.0 mln in 1Q11
• Net Income of R$ 81.2 mln, versus R$ 23.1 mln in the 2Q10 and R$ 70.9 mln in 1Q11 (margin of 28.5%)
• Adjusted EBITDA of R$ 81.2 mln, 2.8% higher than 2Q10 and 7.9% lower than 1Q11 (margin of 24.8%)
12 Appendix II: Exclusive and Strategic Relationship with TAM
Operational Agreement Assures the Most Appealing Products to the Members = Air Tickets
Airlines
● Leading airline in the Brazilian market and largest airline in Latin America ● Only Brazilian company with long haul flights ● Most Desired Airline in Brazil – Ibope Research ● High penetration in South American flights ● There is no restriction to redeem points in domestic and within South America flights ● Access to Star Alliance benefits
● 15 years tenor Operational Agreement (automatically extended for additional five-year periods )
Detachment from cost and perceived value with the most appealing product to the public
13 Appendix III: 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
14 Appendix IV: Income Statement
(R$ thousand) 2Q10 2Q11 2Q11 vs 2Q10 1Q11 2Q11 vs 1Q11 Income Statement
Gross revenue 102.951 314.567 205,6% 266.104 18,2%
Sale of points 75.250 224.200 197,9% 191.749 16,9%
TAM Airlines - TLA 7.312 44.821 513,0% 35.883 24,9%
Banks, Retail, Industry and Services 67.938 179.379 164,0% 155.866 15,1%
Breakage 24.239 83.621 245,0% 71.145 17,5%
Hedge 0 3.448 N.A. 0 N.A.
Other revenues 3.462 3.299 -4,7% 3.210 2,8%
Taxes on sales -9.482 -29.505 211,2% -24.124 22,3%
Net Revenue 93.469 285.063 205,0% 241.980 17,8%
Cost of the points redeemed -51.205 -174.085 240,0% -136.226 27,8%
Air tickets -51.087 -171.880 236,4% -135.621 26,7%
Other products / services -118 -2.205 1762,2% -605 264,4%
Accounting Adjustments -20 - -100,0% 0 N.A.
Total cost of services rendered -51.225 -174.085 239,8% -136.226 27,8%
Gross Profit 42.244 110.978 162,7% 105.754 4,9%
Gross Margin 45,2% 38,9% -6,3p.p. 43,7% -4,8p.p.
Shared services -2.012 -1.907 -5,2% -1.907 0,0%
Personnel expenses -3.257 -6.991 114,6% -9.256 -24,5%
Marketing -269 -4.175 1449,5% -2.052 103,4%
Depreciation 0 -1.173 N.A. -1.032 13,7%
Other -5.532 -6.399 15,7% -7.948 -19,5%
Total Operating Expenses -11.070 -20.645 86,5% -22.194 -7,0%
Total Costs and Operating Expenses -62.295 -194.730 212,6% -158.420 22,9%
Operating Income 31.174 90.333 189,8% 83.560 8,1%
Operating Margin 33,4% 31,7% -1,7p.p. 34,5% -2,8p.p.
Financial Income/Expenses 3.853 33.825 778,0% 25.184 34,3%
Income before income tax and social contribution 35.027 124.158 254,5% 108.744 14,2%
Income tax and social contribution -11.898 -42.990 261,3% -37.857 13,6%
Net Income 23.129 81.168 250,9% 70.887 14,5%
Net Margin 24,7% 28,5% 3,7p.p. 29,3% -0,8p.p. 15 Appendix V: Balance Sheet and Cash Flow
(R$ thousands) 2Q11 vs 2Q11 vs 2Q10 2Q11 1Q11 (R$ thousand) Balance Sheets 2Q10 1Q11 Cash Flow 2Q11 Assets 1.062.523 1.013.420 -4,6% 1.482.205 -31,6%
Net Income 81.168 Current assets 789.208 830.818 5,3% 1.306.111 -36,4% Cash and cash equivalentes 2.403 23.820 891,3% 16.868 41,2% Depreciation/Amortization 1.173 Investments 333.862 644.884 93,2% 928.663 -30,6% Accounts Receivable -10.208 Accounts Receivable 64.638 131.529 103,5% 121.321 8,4% Related Parties 382.919 22.320 -94,2% 236.848 -90,6% Accounts Payable -14.712 Current account 95.127 22.320 -76,5% 57.149 -60,9% Taxes 5.412 Prepaid expenses 287.792 0 -100,0% 179.699 -100,0% Deferred income tax and social contribution 5.025 1.823 -63,7% 1.858 -1,9% Related Parties 45.821 Derivative Instruments 0 5.540 N.A. 0 N.A. Prepaid Expenses 179.699 Other receivables 361 901 149,2% 553 62,8% Deferred Revenue and Breakage liabilities 46.301 Non-current assets 273.315 182.602 -33,2% 176.094 3,7% Other assets and liabilities -5.591 Prepaid expenses 265.610 0 -100,0% 0 N.A. Long term investments 0 155.588 N.A. 151.083 3,0% Operating Cash Flow 329.062 Deferred income tax and social contribution 568 268 -52,8% 763 -64,9%
Property, plant and equipment 0 1.127 N.A. 1.156 -2,5% Intangible 0 17.900 N.A. 17.995 -0,5% Capex -3.672 Intangible assets 7.137 7.720 8,2% 5.097 51,5% Cash Flow from Investing Activities -3.672
Liabilities and shareholder’s equity 1.062.523 1.013.420 -4,6% 1.482.205 -31,6% 0 Net proceeds from public offer Current liabilities 362.979 779.941 114,9% 732.181 6,5% Capital -600.014 Suppliers 1.766 3.151 78,5% 17.863 -82,4% 0 Taxes and fees payable 6.003 15.465 157,6% 10.583 46,1% Dividends Deferred revenue 239.671 604.173 152,1% 551.709 9,5% Capital Reserve 2.300 Breakage liabilities 110.938 133.683 20,5% 139.846 -4,4% Derivative Instruments 0 2.663 N.A. 0 N.A. Cash Flow from Financing Activities -597.714 Other liabilities 4.602 20.806 352,1% 12.180 70,8%
-272.324 Equity 699.544 233.479 -66,6% 750.025 -68,9% Increase (Decrease) in Cash Capital 669.063 69.049 -89,7% 669.063 -89,7% Remuneration Plan 0 6.455 N.A. 4.155 55,4% Cash at beginning of period* 1.096.614 Reserves 0 5.919 N.A. 5.919 0,0% Retained Earnings (loss) 30.481 152.056 398,9% 70.887 114,5% Cash at end of period* 824.292
16 Appendix VI: Adjusted EBITDA
(R$ thousand) 2Q11 vs 2Q11 vs 2Q10 2Q11 1Q11 Adjusted EBITDA 2Q10 1Q11
Operating Income 31.174 90.333 189,8% 83.560 8,1% Depreciation and Amortization 0 1.173 N.A. 1.032 13,7% EBITDA 31.174 91.506 193,5% 84.592 8,2% Margin 33,4% 32,1% -1,3p.p. 35,0% -2,9p.p.
Gross Billings of points 263.968 354.554 34,3% 339.885 4,3% Other Revenues in the period 3.462 6.746 94,8% 3.210 110,2% Tax on Gross Billings -24.737 -33.420 35,1% -31.736 5,3% Net Billings 242.693 327.880 35,1% 311.359 5,3%
Revenue from the sale of points -99.489 -307.821 209,4% -262.894 17,1% Other Revenues in the period -3.462 -6.746 94,8% -3.210 110,2% Tax on Revenue 9.523 29.097 205,6% 24.615 18,2% Net Revenue -93.428 -285.470 205,6% -241.490 18,2%
Future redemptions costs: Balance of points to be redeemed variation -101.514 -52.601 -48,2% -65.312 -19,5%
Adjusted EBITDA 78.926 81.316 3,0% 89.150 -8,8% Margin 32,5% 24,8% -7,7p.p. 28,6% -3,8p.p.
Future redemptions costs: Breakage ratio variation 706 3.383 378,9% 3513 -3,7% Average cost per 10,000 points variation 2.456 24 -99,0% 10.630 -99,8%
Adjusted EBITDA w/ previous period adjustments 82.088 84.722 3,2% 103.293 -18,0% Margin 33,8% 25,8% -8,0p.p. 33,2% -7,3p.p.
Note: A spreadsheet with a calculation log of the cost of future redemptions is available on the Company’s IR website (www.multiplusfidelidade.com.br/ri). Below is a short description of the main lines: • Change in the breakage ratio: represents the impact of the breakage ratio on total number of points issued in the previous 24 months (Multiplus points mature in 2 years). • Change in the balance of points to be redeemed: the impact of the change in the balance of points to be redeemed (excluding points already redeemed and breakage points) considering the average cost in the last 12 months. • Average cost per 1,000 points variation: the impact of variation of average cost on the balance of points to be redeemed in the previous period. 17 Appendix VII: Shareholders’ Structure and Stock Performance
Shareholders’ Structure Average Stock Price and Average Daily Trading Volume
Average Daily Trade Volume (R$ million)
29,66 29,28 Average Stock Price 28,85 28,32 27,95 27,40 TAM S.A. 26,29 24,74 25,48 24,99 23,36
19,96 17,48 17,87 15,99 16,58 16,17 14,90 z z 19,4 73,17% 26,83% 15,3 13,3 10,5 9,7 9,5 8,8 7,9 7,6 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
2010 2011
18 Appendix VIII: Comunication Material in the Point of Sale and Mobile Aplication
Partner’s Finder
19 Thank you. Investor Relations +55 11 5105 1847 [email protected] www.multiplusfidelidade.com.br/ir