Download - Investor Presentation - October
Investor Presentation October 2013
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 3
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
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 3
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
Brazilian loyalty industry is still in early stages
60,7%
43,8%
37,7%
28,9% 28,6%
24,1% 21,9%
19,5%
14,0% 12,9% 8,9%
5,2% 4,1% 3,5% 2,5%
Penetration of loyalty programs in total population (%)
Sources: loyalty programs websites and each country statistic data bureau (Updated in Dec/2012)
High growth potential
Average (ex-Multiplus): 22.2%
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 2.0 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
Coalition model: an evolution from traditional loyalty
scheme
7
Single Loyalty Scheme Traditional Coalition Loyalty Flexible Coalition Loyalty
Commercial partners • Limited number of partners Members
• Low accumulation power
• Redemption option limited to airline tickets
Commercial partners
• Access to a broader consumer base • Limited capacity to attract new partners (loyalty program managed by Coalition
Co.) Members
• Better accumulation power • More redemption options
Commercial partners
• Access to a broader consumer base • More flexible structure is more
appealing for new partners (especially those who already have an own loyalty program)
Members
• Better accumulation power • More redemption options
Loyalty program managed by Coalition Co Loyalty program managed by Coalition Co
Loyalty program managed by Partner
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
THREE SOURCES OF PROFIT
8
Sources of profit: analytics and proprietary loyalty
9
The consolidation of Prismah’s results is being done by the accounting process called equity method
50% 50%
Design and develop loyalty scheme for third-party
Manage and perform on data analytics services
Create incentive campaigns for third-party
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 3
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
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
three years of track record
* To be voted in EGM
12
Consistent network growth
8,0
9,4
10,9
11,6
2010 2011 2012 2013
Partners
Members, in R$ million 11.6 mn members can gather
points from several programs in
one single account
446 partners gain a powerful
support acquiring and retaining
clients
Members (mn)
151
190
369
446
0
50
100
150
200
250
300
350
400
450
2010 2011 2012 2013
SMEs
Main partners
Total
13
Strong partnership network
Accrual partners Coalition partners Redemption partners
14
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
15
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
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 3
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
17
Gross Billings (BRL mn) Points issued (bn)
1.119
1.525
1.871 1.976
2010 2011 2012 LTM Jun 13
53,2
76,2
85,2 85,9
2010 2011 2012 LTM Jun 13
Sales growth: consistent track record
18
Cash generation and shareholders’ return
FCF* (BRL mn) Dividends and Interest
on own capital (BRL mn)
589,0
460,6 489,4
376,3
2010 2011 2012 LTM Jun 13
112,3
861,3
222,4 166,2
2010 2011 2012 LTM Jun 13
*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 billion already distributed since the IPO
*Including a BRL 600 million capital reduction
*
19
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
* To be voted in EGM
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 3
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
21
Diversification goals
92%
8%
Current
Air Tickets Others
20%
3%
77%
Current
TAM Retail, Industry and Services Banks
Note: based 2Q13
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
22
Breakage rate: gradual decline as expected while
non-air redemptions becomes robust
0,03 0,06 0,07 0,09 0,10
0,25
0,43
0,56 0,61 0,62
1,06
1,25
0,84
1,15
22,6% 23,0% 22,6% 22,6% 23,0% 23,3% 24,0% 24,1% 23,4% 22,5% 22,0% 21,3%
19,9% 19,6%
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Non-air redemptions x breakage rate (bn points & %)
23
Generate value to members and partners will sustain
growth
Branding, Innovation and Knowledge
Sustainable Growth
Adding value to partners
• sales increase • lower retention costs • vacancy management • new business insights based on client
data and behavior • develop loyalty schemes • data analytics services • Incentive campaigns
Creating a good member experience
• broad network • targeted offers • fair pricing • recognition • user friendly e-commerce platform • mobile applications
24
Adding value to partners: sales increase
25
Adding value to partners: vacancy management
26
Adding value to partners: vacancy management
27
Redemptions turn people more interested in
collecting points
Sample A members collect
about 60% more points
than Sample B members during 12 months following
redemption date
Sample A
Sample B
redemption
no redemption
Sample A and B members with same accrual behavior
Measuring accrual gap after redemption date
Note: CRM analysis based on Multiplus‘ 2011-2012 data
28
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
29
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
30
Communication from the amount of points to expire
generates engagement
35% increase in the
number of members who joined the offers vs control group
31
Branding the emotional concept
Using Multiplus you can accumulate points from different loyalty programs
in a single account
Redeem your points to have moments you would never put on sale
Emotional as of Oct/2012
Functional Jan/2010 ~ Oct/2012
Online media
Channels
Strategy
Radio spots Partner channels Press media
32
Campaign: “Points you collect, moments you will
never forget”
Appendix
34
New air-ticket redemption model:
Member experience and business sustainability
4 Attractiveness of the redemption offers 360 days window and more promotional offers
1 Stability of unit cost The cap and floor ensure a maximum variation of 5% in unit cost
3 Natural hedge The international airline tickets are denominated in U.S. dollars
2 Alignment of interests with the airline Number of points per seat based on classes
Effective since June 2013
35
New pricing model methodology U
nit
co
st (
R$
)
Jun/2013 ~Aug/2014
Cap
Floor
Previous model Setup period New pricing model
Today
• 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
36
(R$ thousand)
Income Statement
Gross revenue 352,226 439,332 24.7% 411,951 6.6%
Sale of points 309,715 379,447 22.5% 360,369 5.3%
TAM Airlines 47,138 40,838 -13.4% 40,808 0.1%
Banks, Retail, Industry and
Services262,577 338,609 29.0% 319,561 6.0%
Breakage 42,664 64,532 51.3% 54,983 17.4%
Hedge (963) (5,457) 466.6% (4,211) 29.6%
Other revenues 810 810 0.0% 810 0.0%
Taxes on sales (32,710) (40,767) 24.6% (38,538) 5.8%
Net Revenue 319,515 398,565 24.7% 373,413 6.7%
Cost of the points redeemed (236,592) (286,634) 21.2% (274,619) 4.4%
Air tickets (228,154) (270,388) 18.5% (264,076) 2.4%
Other products / services (8,438) (16,246) 92.5% (10,544) 54.1%
Total cost of services
rendered(236,592) (286,634) 21.2% (274,619) 4.4%
Equity Share on Results from
Investments in JV- (1,703) N.A. (2,431) -29.9%
Gross Profit 82,923 110,228 32.9% 96,363 14.4%
Gross Margin 26.0% 27.7% 1.7p.p. 25.8% 1.9p.p.
2Q12 2Q13
2Q13
vs
2Q12
1Q13
2Q13
vs
1Q13
Income statement (1/2)
37
(R$ thousand)
Income Statement
Gross revenue 352,226 439,332 24.7% 411,951 6.6%
Sale of points 309,715 379,447 22.5% 360,369 5.3%
TAM Airlines 47,138 40,838 -13.4% 40,808 0.1%
Banks, Retail, Industry and
Services262,577 338,609 29.0% 319,561 6.0%
Breakage 42,664 64,532 51.3% 54,983 17.4%
Hedge (963) (5,457) 466.6% (4,211) 29.6%
Other revenues 810 810 0.0% 810 0.0%
Taxes on sales (32,710) (40,767) 24.6% (38,538) 5.8%
Net Revenue 319,515 398,565 24.7% 373,413 6.7%
Cost of the points redeemed (236,592) (286,634) 21.2% (274,619) 4.4%
Air tickets (228,154) (270,388) 18.5% (264,076) 2.4%
Other products / services (8,438) (16,246) 92.5% (10,544) 54.1%
Total cost of services
rendered(236,592) (286,634) 21.2% (274,619) 4.4%
Equity Share on Results from
Investments in JV- (1,703) N.A. (2,431) -29.9%
Gross Profit 82,923 110,228 32.9% 96,363 14.4%
Gross Margin 26.0% 27.7% 1.7p.p. 25.8% 1.9p.p.
2Q12 2Q13
2Q13
vs
2Q12
1Q13
2Q13
vs
1Q13
Shared services (1,907) (473) -75.2% (1,907) -75.2%
Personnel expenses (11,467) (11,964) 4.3% (10,806) 10.7%
Marketing (3,406) (6,404) 88.0% (1,943) 229.6%
Depreciation (2,203) (1,978) -10.2% (1,861) 6.3%
Other (17,089) (16,539) -3.2% (17,836) -7.3%
Total Operating Expenses (36,071) (37,359) 3.6% (34,353) 8.8%
Total Costs and Operating
Expenses(272,663) (325,695) 19.4% (311,403) 4.6%
Operating Income 46,852 72,869 55.5% 62,010 17.5%
Operating Margin 14.7% 18.3% 3.6p.p. 16.6% 1.7p.p.
Financial Income/Expenses 21,032 17,880 -15.0% 11,788 51.7%
Hedge (1,004) (7,972) 694.4% (2,939) 171.2%
Income before income tax
and social contribution66,881 82,777 23.8% 70,859 16.8%
Income tax and social contribution (23,614) (25,342) 7.3% (24,009) 5.6%
Net Income 43,267 57,434 32.7% 46,850 22.6%
Net Margin 13.5% 14.4% 0.9p.p. 12.5% 1.9p.p.
Income statement (2/2)
38
(R$ thousand)
Balance Sheet
Assets 1,324,453 1,529,342 15.5% 1,426,657 7.2%
Current assets 1,224,355 1,437,166 17.4% 1,349,757 6.5%
Cash and cash equivalentes 1,188 3,410 187.0% 3,492 -2.4%
Financial assets at fair value through profit and
loss876,811 747,623 -14.7% 709,964 5.3%
Financial assets held-to-maturity 161,364 12,782 -92.1% - N.A.
Accounts receivable 144,308 215,802 49.5% 170,073 26.9%
Deferred income tax and social contribution 3,388 5,269 55.5% - N.A.
Related Parties 21,928 429,630 1859.3% 433,071 -0.8%
Derivative instruments - - N.A. - N.A.
Prepaid expenses 4,311 - -100.0% - N.A.
Other receivables 11,057 22,650 104.8% 33,156 -31.7%
Non-current assets 100,098 92,176 -7.9% 76,900 19.9%
Financial assets - bank deposits - - N.A. - N.A.
Financial assets held-to-maturity 11,866 - -100.0% - N.A.
Deferred income tax 25,958 16,008 -38.3% 8,625 85.6%
Derivative financial instruments 66 - -100.0% 550 -100.0%
Other accounts receivable 14,256 5,293 -62.9% 6,821 -22.4%
Investments - 11,263 N.A. 1,937 481.3%
Property, plant and equipment 2,312 3,951 70.9% 3,208 23.2%
Intangible assets 45,640 55,661 22.0% 55,758 -0.2%
Related Parties - - N.A. - N.A.
2Q12 2Q13
2Q13
vs
2Q12
1Q13
2Q13
vs
1Q13
Balance sheet: assets
39
Liabilities and shareholders' equity 1,324,453 1,529,342 15.5% 1,426,657 7.2%
Current liabilities 1,137,577 1,378,760 21.2% 1,282,334 7.5%
Suppliers 116,956 151,022 29.1% 122,751 23.0%
Salaries and payroll taxes 5,281 9,509 80.1% 7,979 19.2%
Tax, charges and contributions 4,760 3,963 -16.7% 610 549.9%
Income and social contribution tax 13,393 12,523 -6.5% 23,921 -47.6%
Interest on own capital and dividends - - N.A. - N.A.
Derivative financial instruments 38,498 34,870 -9.4% 14,823 135.2%
Deferred revenue 813,535 1,022,699 25.7% 964,864 6.0%
Breakage liabilities 134,073 136,676 1.9% 137,748 -0.8%
Other liabilities 11,081 7,498 -32.3% 9,639 -22.2%
Dividends payable - - N.A. - N.A.
Non-current liabilities 26,091 107 -99.6% - N.A.
Related parties - - N.A. - N.A.
Derivative financial instruments 26,091 - -100.0% - N.A.
Deferred revenue - 107 N.A. - N.A.
Equity 160,785 150,475 -6.4% 144,323 4.3%
Share capital 93,722 102,886 9.8% 102,887 0.0%
Capital reserve (6,631) (996) -85.0% (2,520) -60.5%
Earnings reserve 18,744 20,577 9.8% 20,577 0.0%
Carrying value adjustments (49,903) (31,570) -36.7% (23,472) 34.5%
Retained Earnings (loss) 104,853 59,578 -43.2% 46,850 27.2%
(R$ thousand)
Balance Sheet
Assets 1,324,453 1,529,342 15.5% 1,426,657 7.2%
Current assets 1,224,355 1,437,166 17.4% 1,349,757 6.5%
Cash and cash equivalentes 1,188 3,410 187.0% 3,492 -2.4%
Financial assets at fair value through profit and
loss876,811 747,623 -14.7% 709,964 5.3%
Financial assets held-to-maturity 161,364 12,782 -92.1% - N.A.
Accounts receivable 144,308 215,802 49.5% 170,073 26.9%
Deferred income tax and social contribution 3,388 5,269 55.5% - N.A.
Related Parties 21,928 429,630 1859.3% 433,071 -0.8%
Derivative instruments - - N.A. - N.A.
Prepaid expenses 4,311 - -100.0% - N.A.
Other receivables 11,057 22,650 104.8% 33,156 -31.7%
Non-current assets 100,098 92,176 -7.9% 76,900 19.9%
Financial assets - bank deposits - - N.A. - N.A.
Financial assets held-to-maturity 11,866 - -100.0% - N.A.
Deferred income tax 25,958 16,008 -38.3% 8,625 85.6%
Derivative financial instruments 66 - -100.0% 550 -100.0%
Other accounts receivable 14,256 5,293 -62.9% 6,821 -22.4%
Investments - 11,263 N.A. 1,937 481.3%
Property, plant and equipment 2,312 3,951 70.9% 3,208 23.2%
Intangible assets 45,640 55,661 22.0% 55,758 -0.2%
Related Parties - - N.A. - N.A.
2Q12 2Q13
2Q13
vs
2Q12
1Q13
2Q13
vs
1Q13
Balance sheet: liabilities and shareholders' equity
Thank you! Contact IR Team +55 11 5105-1847 [email protected] www.pontosmultiplus.com.br/ir
Ronald Domingues Ivan Bonfanti Filipe Scalco
Fernanda Camiña