Investor Presentation - October 2014

Investor Presentation October 2014

2

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.

First mover

We are pioneers in this

industry in Brazil and we

already have a strong

partnership network,

highlighting LATAM

Airlines, all local banks

and the joint venture with

our international peer,

AIMIA Group.

2

3

Track record

Multiplus has already 4

years of proven focus on

shareholders return

with high dividend

payouts. Moreover, we are

continuously improving our

governance

structure following the

best market practices.

Early stages

Brazilian loyalty industry

has very low

penetration and

presents solid growth

drivers

1

4

Solid strategy

Our business sustainability

is based on network

diversification,

member engagement

and value delivery to

partners

Four main reasons to be confident in

Multiplus case

First mover





highlighting LATAM




AIMIA Group.

2

3

Track record



shareholders return

with high dividend



governance



Early stages


has very low

penetration and


drivers

1

4

Solid strategy


is based on network

diversification,

member engagement


partners


Multiplus case

Brazilian loyalty industry is still in early stages

53,9%

25,3% 24,2% 20,9% 20,5%

14,4%

7,3% 6,3% 6,1% 4,8% 2,4%

Penetration of loyalty programs in total population (%)

Sources: loyalty programs websites and each country statistic data bureau (Updated in Jan/2014)

High growth potential

Average (ex-Multiplus): 18%

5

Multiple long term growth drivers

Credit Card usage

Expected double digit growth for next 3 years

Only 35% of customers understands that they have

enrolled in a bank loyalty program (vs. 31% in

2011)

Consumption

Possible high single digit growth for next 3 years

Loyalty culture still in the early stages

Air transportation

Latin America is the second fastest growing

region in RPK

Average trips per capita is only 0.5 in

Brazil vs more than 3.0 in mature markets

Wealth distribution

A/B classes expected to reach 15% in 2014 (vs

7% in 2003)

Multiplus network focus on A, B and C+

6

Multiple long term growth drivers

7

1.980 2.249

2.499 2.745

3.017

2009 2010 2011 2012 2013

19,9% 21,7%

24,1% 25,9%

27,7%

2009 2010 2011 2012 2013

2003 2013

Card Expenditure PCE- Private Consumer Expenditure

(R$ billion) (R$ billion)

Card Expenditure over PCE

(%)

Wealth Distribution

A and B

C

D and E

C

D and E

A and B

487 601

710 837

957 1,093

23.6% 23.4% 18.1% 17.9% 14.3% 15.0%

2010 2011 2012 2013 2014E 2015E

R$ bilhões Variação YoY

Source: Abecs / Bain

Source: Abecs / IBGE

Source: Abecs / IBGE

Source: Serasa Experian Data popular

THREE SOURCES OF PROFIT

Sources of profit: coalition

# of months ~10 0 24

3

2

points selling redemption

unit revenue less unit cost

spread 1

CASH IN CASH OUT ~10 months float

interest income

point expiration

breakage

8

First mover





highlighting LATAM




AIMIA Group.

2

3

Track record



shareholders return

with high dividend



governance



Early stages


has very low

penetration and


drivers

1

4

Solid strategy


is based on network

diversification,

member engagement


partners


Multiplus case

10

Consistent network growth

9,4

10,9

12,2

11.6

12.9

2011 2012 2013 2Q13 2Q14

Partners

12.9 mn members can gather

points from several programs in

one single account

477 partners gain a powerful

support acquiring and retaining

clients

Members (mn)

190

369

472 446

477

2011 2012 2013 2Q13 2Q14

Note: based 2Q14

11

1993 Creation of TAM Fidelidade

2009 Spin-off from TAM Fidelidade

Feb/2010 Multiplus’ IPO

Oct/2011 Multiplus presents its new brand

Nov/2011 Announcement of JV with AIMIA

Dez/2012 Multiplus becomes one of TOP 100 most liquid stocks in Bovespa

Aug/2010 New headquarters and IT loyalty platform

Mar/2012 Multiplus reaches 200 partners

Apr/2012 Multiplus reaches 10 mn members

Mai/2013 launched the new‖ campaign on several media vehicles

Jun/2013 Non-air redemptions reached 8% for the first time in a quarter

Oct/2013 Improved corporate governance structure

Created from TAM Fidelidade, Multiplus has already

five years of track record

Mar/2014 Multiplus mobile app for IOS and Android

Sept/2014 Multiplus launches "Points + Money“ and Multiplus Challenge (gamification)

Strong partnership network

Accrual partners Coalition partners Redemption partners

12

Non-air redemptions

11% of

the total redemption in 2Q14

• More affordable redemption options • More competitive portfolio of products and services • Improved members´ experience • Additional liquidity • Better profitability

% o

f t

ota

l red

emp

tio

n

2010 2011 2012 2013 2014

0.4%

2.1%

5.4%

9.2%

13

The first partnership in the automotive industry in the country Multiplus members can use their points to redeem reviews, parts, services and accessories at PEUGEOT dealerships Offer to accumulate up to 100,000 points through the purchase of a new Peugeot automobile

New in 2014

14

Other innovations in 2014

Points calculator

Simulation of annual expenditures Suggestion of redemptions

Purchase Renewal Points transfer

Friendly and intuitive Stimulates members´engagement

New home page

New products

15

16

Strategic long-term agreement with TAM Airlines

15 years agreement automatically renewable for additional 5-year periods

Exclusive relationship

Points per seat vary according to flight fare with 100% availability,

improving Multiplus competitive advantage

up to 360 days before flight date

fee exemptions, lowered points requirement, complimentary

upgrades and up to 100% bonus points

High recognition to premium clients

High flexibility

Superior frequent flyer program

lower earn-to-burn ratios redemptions via TAM, LAN and their airline partners

Wide redemption window

Pricing model methodology with TAM Airlines U

nit

co

st (

R$

)

Jun/2013 ~Oct/2014

Cap

Floor

Previous model Setup period New pricing model

• Multiplus pays discounted

market price per seat

• 5% cap and floor protect margin

and guarantee business

sustainability

• Data gathering of

fares available

at redemption

moment

• Discount

measurement

• Unit cost set according to a

combination of TAM’s

marginal cost and revenue

displacement

• Short term fluctuations due to

TAM’s promotional activity

Average

Air tickets market price

Discounted market price

Long haul and South America flights priced in USD

12 months data gathering

Multiplus` implicit discount

ILLUSTRATIVE

17

• Over 600 VIP rooms

• About 1,000 destinations in 150 countries

• 6 continents

• Possibility to collect and exchange points in

all associated airline companies

Air tickets redemption

• Most desirable airline company in Brasil - TAM

• position of leadership

on its principal international and doemstic routes (NY, MIA, SP, RJ)

more than 15 million airline tickets redeemed during the last five years

• recognized as

offering the best service to its customers

18

New product “Points + Money”

Better experience and more accessible redemption opportunities from 1 thousand points

Additional liquidity to members

Access to all TAM’s promotions

Opportunity for greater penetration in

existing partners of Multiplus

Increased members´ engagement

Product available on Multiplus site

Margins higher than other redemptions (provenient of the amount in points)

• Increases customer engagement

• Increases number of new members

• Enhances brand loyalty

• Helps to gather knowledge of individual preferences

• Allows to direct personalized offers

Challenge

Motivation

Engagement

“Multiplus Challenge“ - gamification

21

Solid relationship with banks

bonus points per each new credit card activated

Targeted redemption offers

1 Activation

bonus points according to the volume of points transferred

segmented offers to engage an specific member group

2 Spending

3 Targeting

First mover





highlighting LATAM




AIMIA Group.

2

3

Track record



shareholders return

with high dividend



governance



Early stages


has very low

penetration and


drivers

1

4

Solid strategy


is based on network

diversification,

member engagement


partners


Multiplus case

1.119

1.525

1.871 2.009

501 472

2010 2011 2012 2013 2Q13 2Q14

23

Gross Billings (BRL mn) Points issued (bn)

53,2

76,2

85,2 83,7

21.0 19.8

2010 2011 2012 2013 2Q13 2Q14

Sales growth: consistent track record

24

Net Revenue (R$ mm) Net income (mm)

Financial Results

470

1.247

1.476

1.651

399 472

2010 2011 2012 2013 2Q13 2Q14

118,4

274,2

224,3 232,1

57.2 80.1

2010 2011 2012 2013 2Q13 2Q14

41.6% 32.5% 25.8% 25.7% 27.6% 31.2%

Gross margin Net margin

25.2% 22.0% 15.2% 14.1% 14.4% 19.2%

25

Cash generation and shareholders’ return

FCF* (BRL mn) Dividends and Interest

on own capital (BRL mn)

589,0

460,6 418,1

452,6

88.6 71.9

2010 2011 2012 2013 2Q13 2Q14

112,3

861,3

222,4 232,0

44.5 70,9

2010 2011 2012 2013 2Q13 2Q14

*Excluding Dividends, Interest on Capital and variations of Prepaid Expenses and Capital (2012 and 2013 are adjusted with R$ 71.3 of anticipated settlement in Accounts Payable)

More than BRL 1.4 billion already distributed since the IPO

*Including a BRL 600 million capital reduction

*

26

High corporate governance standards

If rejected

The proposal needs unanimity Board approval

Special Committee

Independent members

Related Parties Subjects

If approved

The proposal needs majority Board approval

Novo Mercado (New Market) 1

100% tag along rights 2

Ordinary share only 3

30% of independent board members 4

Special Committee 5 Special Committee: Audit, Finance, Governance and Related Parties Committee

First mover





highlighting LATAM




AIMIA Group.

2

3

Track record



shareholders return

with high dividend



governance



Early stages


has very low

penetration and


drivers

1

4

Solid strategy


is based on network

diversification,

member engagement


partners


Multiplus case

Clear prioritization of segments

Network diversification

Anticipate members behaviour

(CRM, analysis of customer

profiles)

Better experience and more members´

engagement

Focus on adding value to comercial

partners

Redemptions diversification,

leading to higher

margins

Solid strategy in force

29

Diversification goals

89% 11%

Current

Air Tickets Others

20%

4%

76%

Current

TAM Retail, Industry and Services Banks

Note: LTM based on 2Q14

Long term target

Long term target

10 to 15%

20 to 25%

Points redeemed

Points sold

Increased retail share will help to sustain margins and improve members engagement

Non-air redemptions growth supports unit cost control and member experience improvement

30

Breakage rate (%)

22.6% 24.1%

21.0%

18.5% 19.6%

17.9%

2010 2011 2012 2013 2Q13 2Q14

Non-air redemptions (%)

Breakage rate: gradual decline as expected while

non-air redemptions becomes robust

0.4%

2.1%

5.4%

9.2%

7.0%

10.7%

2010 2011 2012 2013 2Q13 2Q14

Appendix

32

More than 80% of the costumers prefer to shop in Loyalty Programs

Source: Research made by Technology Advice, in EUA

82.4%

17.6%

Don’t consider relevant

Adding value to partners: sales increase

33

Adding value to partners: vacancy management

34

Adding value to partners: vacancy management

35

Creating a good member experience: fair pricing

Multiplus 69,400

Program B 75,647

Program C 81,800

Program D 98,400

Program E 115,800

32-Inch LED TV

Dec/2012

Program C 71,700

Program B 48,600

Multiplus 35,900

Wine cellar

Dec/2012

36

Segmented offers by a balance of points generates

attractiveness

sending offers increases in

approximately 30% the amount of

points redeemed within 3 days following the sending (vs. average)

And contributes to the

activation rate of members

37

Communication from the amount of points to expire

generates engagement

35% increase in the

number of members who joined the offers vs control group

1

38

Branding a new concept

Emotional as of Oct/2012

Functional Jan/2010 ~ Oct/2012

Strategy

You don't know what you're winning

39

Income statement (1/2)

(R$ thousand)

Income Statement 1H14 1H13 Var %

Gross revenue 460,464 486,698 -5.4% 439,332 4.8% 947,162 851,282 11.3%

Sale of points 384,678 426,042 -9.7% 379,447 1.4% 810,719 739,815 9.6%

TAM Airlines 33,707 36,906 -8.7% 40,838 -17.5% 70,613 81,646 -13.5%

Banks, Retail, Industry and Services 350,970 389,136 -9.8% 338,609 3.7% 740,106 658,170 12.4%

Breakage 80,159 70,333 14.0% 64,532 24.2% 150,493 119,515 25.9%

Hedge (4,373) (9,677) -54.8% (5,457) -19.9% (14,050) (9,668) 45.3%

Other revenues - - - 810 -100.0% - 1,620 -100.0%

Taxes on sales (43,068) (46,014) -6.4% (40,767) 5.6% (89,083) (79,305) 12.3%

Net Revenue 417,395 440,684 -5.3% 398,565 4.7% 858,079 771,978 11.2%

Cost of the points redeemed (285,562) (317,080) -9.9% (286,634) -0.4% (602,642) (561,253) 7.4%

Air tickets (258,364) (296,710) -12.9% (270,388) -4.4% (555,075) (534,464) 3.9%

Other products / services (27,197) (20,370) 33.5% (16,246) 67.4% (47,567) (26,789) 77.6%

Total cost of services rendered (285,562) (317,080) -9.9% (286,634) -0.4% (602,642) (561,253) 7.4%

Equity Share on Results from Investments (1,443) (2,025) -28.7% (1,703) -15.3% (3,468) (4,134) -16.1%

Gross Profit 130,390 121,578 7.2% 110,228 18.3% 251,969 206,591 22.0%

Gross Margin 31.2% 27.6% 3.7p.p. 27.7% 3.6p.p. 29.4% 26.8% 2.6p.p.

Shared services (779) (811) -3.9% (473) 64.5% (1,590) (2,380) -33.2%

Personnel expenses (12,333) (12,415) -0.7% (11,964) 3.1% (24,747) (22,770) 8.7%

Marketing (8,055) (5,172) 55.7% (6,404) 25.8% (13,227) (8,347) 58.5%

Depreciation (4,385) (3,416) 28.3% (1,978) 121.7% (7,801) (3,839) 103.2%

Other (16,662) (14,854) 12.2% (16,738) -0.5% (31,516) (34,574) -8.8%

Total Operating Expenses (42,213) (36,668) 15.1% (37,558) 12.4% (78,881) (71,910) 9.7%

Total Costs and Operating Expenses (329,219) (355,773) -7.5% (325,894) 1.0% (684,991) (637,297) 7.5%

Operating Income 88,177 84,911 3.8% 72,670 21.3% 173,087 134,681 28.5%

Operating Margin 21.1% 19.3% 1.9p.p. 18.2% 2.9p.p. 20.2% 17.4% 2.7p.p.

Financial Income/Expenses 32,773 32,130 2.0% 17,880 83.3% 64,903 29,668 118.8%

Hedge - (2,113) -100.0% (7,972) -100.0% (2,113) (10,912) -80.6%

Income before income tax and social

contribution120,950 114,928 5.2% 82,578 46.5% 235,878 153,436 53.7%

Income tax and social contribution (40,894) (40,326) 1.4% (25,342) 61.4% (81,220) (49,351) 64.6%

Net Income 80,055 74,602 7.3% 57,235 39.9% 154,658 104,085 48.6%

Net Margin 19.2% 16.9% 2.3p.p. 14.4% 4.8p.p. 18.0% 13.5% 4.5p.p.

2Q132Q14 Var %1Q14 Var %

40

Income statement (2/2)

(R$ thousand)


Gross revenue 460,464 486,698 -5.4% 439,332 4.8% 947,162 851,282 11.3%

Sale of points 384,678 426,042 -9.7% 379,447 1.4% 810,719 739,815 9.6%

TAM Airlines 33,707 36,906 -8.7% 40,838 -17.5% 70,613 81,646 -13.5%


Breakage 80,159 70,333 14.0% 64,532 24.2% 150,493 119,515 25.9%

Hedge (4,373) (9,677) -54.8% (5,457) -19.9% (14,050) (9,668) 45.3%

Other revenues - - - 810 -100.0% - 1,620 -100.0%

Taxes on sales (43,068) (46,014) -6.4% (40,767) 5.6% (89,083) (79,305) 12.3%

Net Revenue 417,395 440,684 -5.3% 398,565 4.7% 858,079 771,978 11.2%


Air tickets (258,364) (296,710) -12.9% (270,388) -4.4% (555,075) (534,464) 3.9%




Gross Profit 130,390 121,578 7.2% 110,228 18.3% 251,969 206,591 22.0%


Shared services (779) (811) -3.9% (473) 64.5% (1,590) (2,380) -33.2%


Marketing (8,055) (5,172) 55.7% (6,404) 25.8% (13,227) (8,347) 58.5%

Depreciation (4,385) (3,416) 28.3% (1,978) 121.7% (7,801) (3,839) 103.2%

Other (16,662) (14,854) 12.2% (16,738) -0.5% (31,516) (34,574) -8.8%






Hedge - (2,113) -100.0% (7,972) -100.0% (2,113) (10,912) -80.6%


contribution120,950 114,928 5.2% 82,578 46.5% 235,878 153,436 53.7%


Net Income 80,055 74,602 7.3% 57,235 39.9% 154,658 104,085 48.6%


2Q132Q14 Var %1Q14 Var %

(R$ thousand)


Gross revenue 460,464 486,698 -5.4% 439,332 4.8% 947,162 851,282 11.3%

Sale of points 384,678 426,042 -9.7% 379,447 1.4% 810,719 739,815 9.6%

TAM Airlines 33,707 36,906 -8.7% 40,838 -17.5% 70,613 81,646 -13.5%


Breakage 80,159 70,333 14.0% 64,532 24.2% 150,493 119,515 25.9%

Hedge (4,373) (9,677) -54.8% (5,457) -19.9% (14,050) (9,668) 45.3%

Other revenues - - - 810 -100.0% - 1,620 -100.0%

Taxes on sales (43,068) (46,014) -6.4% (40,767) 5.6% (89,083) (79,305) 12.3%

Net Revenue 417,395 440,684 -5.3% 398,565 4.7% 858,079 771,978 11.2%


Air tickets (258,364) (296,710) -12.9% (270,388) -4.4% (555,075) (534,464) 3.9%




Gross Profit 130,390 121,578 7.2% 110,228 18.3% 251,969 206,591 22.0%


Shared services (779) (811) -3.9% (473) 64.5% (1,590) (2,380) -33.2%


Marketing (8,055) (5,172) 55.7% (6,404) 25.8% (13,227) (8,347) 58.5%

Depreciation (4,385) (3,416) 28.3% (1,978) 121.7% (7,801) (3,839) 103.2%

Other (16,662) (14,854) 12.2% (16,738) -0.5% (31,516) (34,574) -8.8%






Hedge - (2,113) -100.0% (7,972) -100.0% (2,113) (10,912) -80.6%


contribution120,950 114,928 5.2% 82,578 46.5% 235,878 153,436 53.7%


Net Income 80,055 74,602 7.3% 57,235 39.9% 154,658 104,085 48.6%


2Q132Q14 Var %1Q14 Var %

41

Balance sheet: assets

(R$ thousand)

Balance Sheet Var % Var %

Assets 1,593,281 1,615,511 -1.4% 1,529,342 4.2%

Current assets 1,490,189 1,511,757 -1.4% 1,437,166 3.7%

Cash and cash equivalentes 3,127 3,112 0.5% 3,410 -8.3%

Financial assets at fair value through profit and loss 1,290,665 1,288,944 0.1% 747,623 72.6%

Financial assets held-to-maturity - - - 12,782 -100.0%

Accounts receivable 132,259 172,666 -23.4% 215,802 -38.7%

Deferred income tax and social contribution 9,488 10,612 -10.6% 5,269 80.1%

Related Parties 34,875 17,662 97.5% 429,630 -91.9%

Current account - 17,662 -100.0% 19,590 -100.0%

Prepaid expenses - - - 410,040 -100.0%

Derivative instruments - - - - -

Advances to suppliers 6,300 6,376 -1.2% - -

Other receivables 13,475 12,385 8.8% 22,650 -40.5%

Non-current assets 103,092 103,754 -0.6% 92,176 11.8%

Financial assets - bank deposits - - - - -

Financial assets held-to-maturity - - - - -

Deferred income tax 829 1,852 -55.2% 16,008 -94.8%

Derivative financial instruments - - - - -

Other accounts receivable 27 24 12.5% 5,293 -99.5%

Investments 3,615 5,058 -28.5% 11,263 -67.9%

Property, plant and equipment 14,795 9,231 60.3% 3,951 274.4%

Intangible assets 83,826 87,589 -4.3% 55,661 50.6%

Related Parties - - - - -

Liabilities and shareholders' equity 1,593,281 1,615,511 -1.4% 1,529,342 4.2%

Current liabilities 1,382,854 1,418,313 -2.5% 1,378,760 0.3%

Suppliers 123,575 160,053 -22.8% 151,022 -18.2%

Salaries and payroll taxes 11,846 10,345 14.5% 9,509 24.6%

Tax, charges and contributions 2,466 5,423 -54.5% 3,963 -37.8%

Income and social contribution tax 7,583 14,848 -48.9% 12,523 -39.4%

Interest on own capital and dividends - - - - -

Derivative financial instruments - - - 34,870 -100.0%

Deferred revenue 1,066,245 1,072,284 -0.6% 1,022,699 4.3%

Breakage liabilities 165,100 152,329 8.4% 136,676 20.8%

Other liabilities 6,039 3,030 99.3% 7,498 -19.5%

Dividends payable - - - - -

Non-current liabilities 77 83 -7.2% 107 -28.0%

Related parties - - - - -


Deferred revenue 77 83 -7.2% 107 -28.0%

Equity 210,350 197,115 6.7% 150,475 39.8%

Share capital 105,966 105,334 0.6% 102,886 3.0%

Capital reserve 2,350 1,948 20.6% (996) -335.9%

Earnings reserve 104,483 95,300 9.6% 20,577 407.8%

Carrying value adjustments (2,449) (5,467) -55.2% (31,570) -92.2%

Retained Earnings (loss) - - - 59,578 -100.0%

3/31/20136/30/2014 3/31/2014

42

Balance sheet: liabilities and shareholders' equity

(R$ thousand)


Assets 1,593,281 1,615,511 -1.4% 1,529,342 4.2%

Current assets 1,490,189 1,511,757 -1.4% 1,437,166 3.7%






Related Parties 34,875 17,662 97.5% 429,630 -91.9%

Current account - 17,662 -100.0% 19,590 -100.0%











Investments 3,615 5,058 -28.5% 11,263 -67.9%






Suppliers 123,575 160,053 -22.8% 151,022 -18.2%














Equity 210,350 197,115 6.7% 150,475 39.8%

Share capital 105,966 105,334 0.6% 102,886 3.0%

Capital reserve 2,350 1,948 20.6% (996) -335.9%




3/31/20136/30/2014 3/31/2014

(R$ thousand)


Assets 1,593,281 1,615,511 -1.4% 1,529,342 4.2%

Current assets 1,490,189 1,511,757 -1.4% 1,437,166 3.7%






Related Parties 34,875 17,662 97.5% 429,630 -91.9%

Current account - 17,662 -100.0% 19,590 -100.0%











Investments 3,615 5,058 -28.5% 11,263 -67.9%






Suppliers 123,575 160,053 -22.8% 151,022 -18.2%














Equity 210,350 197,115 6.7% 150,475 39.8%

Share capital 105,966 105,334 0.6% 102,886 3.0%

Capital reserve 2,350 1,948 20.6% (996) -335.9%




3/31/20136/30/2014 3/31/2014

Thank you! Contact IR Team +55 11 5105-1847 [email protected] www.pontosmultiplus.com.br/ir

Ronald Domingues Katarzyna Doho

Filipe Scalco

Business

Investor Presentation - October 2014