Corporate Presentation

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Lenard Ira Ramsey
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1 Corporate Presentation August / September

2 Disclaimer The material that follows is a presentation of general background information about T4F Entretenimento S.A ( T4F ) as of the date of the presentation. It is information in summary form and does not purport to be complete. This material contains confidential information regarding and may not be reproduced or circulated, partially or completely, without the prior written consent of the T4F. Any statements, projections, expectations, estimates and plans contained in this document that do not describe historical facts, and the factors or trends affecting financial condition, liquidity or results of operations, are forward-looking statements and involve several risks and uncertainties. Such statements are based on assumptions and analyses made by the Company based on its experience and the economic climate and on market conditions and expected future events, many of which are beyond the Company s control. No investment decision should be based on validity, accuracy or completeness of the information or opinions contained in this presentation. Under no circumstances, neither the Company nor its subsidiaries, directors, officers, agents or employees be liable to third parties (including investors) for any investment decision based on information and statements in this presentation, or for any damages resulting therefrom, corresponding or specific. This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities. Neither this presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever. 1

3 1. A Strategic View of our Industry 2

4 A strategic View of our Industry A favorable macroeconomic environment in South America and structural changes in the global media and live entertainment industry are the foundations of T4F s sustainable growth 5 out of the 10 largest GDP growths in emerging economies are in South America Global touring became essential for the world s major artists Peru Brazil Top live entertainment contents willing to go on tour in South America Argentina Migration of marketing budgets to sponsorships of live entertainment Chile 3

A strategic View of our Industry Very favorable environment for the live entertainment industry Wide range of quality content for tours in South America The region is definitely in the international

5 A strategic View of our Industry Very favorable environment for the live entertainment industry Wide range of quality content for tours in South America The region is definitely in the international route of the major artists The live entertainment industry in South America keeps its robust growth Strong growth in the number of tickets sold not only in Brazil, Argentina and Chile, as well as in Peru and Colombia According to a study by Nielsen Institute, published in Feb/2012, out-of-home entertainment is the first choice of spending for 39% of Brazilians, ahead of payments of debts... A study made in Jun/2012 by PwC highlighted Brazil as one of the highest-growing markets in global entertainment and media industry in coming years. The projection indicates that spending in this sector in Brazil will register compound annual growth of 10.6% vs. global average of 5.7% p.y...south America will be the region with the greatest development in the period , growing 60% with investments reaching US$ 134 billion... Migration of marketing budgets towards non-traditional media (sponsorships) Research by Jornal Valor Econômico in Jan/2011, a Brazilian leading newspaper, reveals that the sponsorship of shows in Brazil is becoming more expensive. The master sponsorship quotas have been at the R$10 million to R$ 15 million range....those amounts have suffered the greatest increases in the last 5 years... E-Marketer, a leading global media and digital marketing research company, estimates that naming rights and sponsorships should amount US$ 5 billion worldwide in

6 1. Descrição da Companhia 2. Company Overview 5

7 Shareholding Structure Fernando Luiz Alterio Shareholding Structure FA Comércio e 50.1% Participações 49.9% CIE International Shareholders Stake Direct + Indirect 8.4% Fernando Luiz Alterio 31.7% 27.5% 5.5% CIE International 9.7% Gávea Investimentos 6.8% Shareholders Agreement 48.2% Gávea Investimentos 6.8% 51.8% Free-Float Free Float 51.8% IPO Summary Pricing Date - April 7 th 2011; Price - R$16.00 ; Offering Size - R$503 million (US$310 million 1 ) Use of Proceeds (i) Acquisition of companies and venues, (ii) construction of venues and (iii) geographic expansion Bookrunners 1: Assuming the exchange rate of US$1 = R$ as of May 12 th, according to Bacen. 6

Company Overview T4F is the leading live / out-of-home entertainment promoter in South America with a diversified and verticalized business model Leading company in live entertainment in South

8 Company Overview T4F is the leading live / out-of-home entertainment promoter in South America with a diversified and verticalized business model Leading company in live entertainment in South America Our Presence (Net Revenue 2011) Unique Industry Knowledge High Growth and Strong Cash Generation Diversified and Verticalized Model 4 th largest player worldwide by Billboard 1.2 thousand shows promoted in millions tickets sold in 2011 Brazil 76% Argentina 16% Chile 8% 30 years of experience Promotion of the most successful events in Brazil, Chile and Argentina Pioneer in naming rights model in 1999 Net Operation Cash Flow = 87% of EBITDA ( 05-11) Net Revenues CAGR 11% (07-11) EBITDA CAGR 21% (07-11) Sustainable margins going forward Promotion of multicontent events Venues Operation Food & Beverage and Merchandising Ticketing Services ONE AND ONLY INVESTMENT OPPORTUNITY IN THE ENTERTAINMENT INDUSTRY IN SOUTH AMERICA 7

9 A Diversified Portfolio of Entertainment Live Music Sport Events Theatrical Production Performing Arts U2 Madonna Stock Car Marcas The Addams Family The Phantom of the Opera Cirque Du Soleil Stomp Pearl Jam Roger Waters Copa Montana Mini Challenge The Lion King Cats Blue Man Group Bodies Verticalization VENUE OPERATIONS FOOD & BEVERAGE MERCHANDISING TICKETING SERVICES Revenue Sources Box Office Ticketing Services Sponsorships and Naming Rights Suites and Hospitality Centers Food & Beverage, Merchandising, and Parking Private Events 8

Leadership Position in Live Entertainment Industry U2 3 out of the 11 largest shows of 360º World Tour Madonna 3 out of the 5 largest shows of the tour in 2008 Coldplay Promoted the 1 st and 5 th

10 Leadership Position in Live Entertainment Industry U2 3 out of the 11 largest shows of 360º World Tour Madonna 3 out of the 5 largest shows of the tour in 2008 Coldplay Promoted the 1 st and 5 th largest shows of all tours Bon Jovi Promoted the 2 largest shows of the 2010 world tour Pearl Jam 4 out of the 5 largest shows of the world tour in 2011 Guns N Roses Promoted 7 out of the 10 largest shows of the tour 9

11 Leadership Position in Live Entertainment Industry Cirque du Soleil More than 1,450 performances - 12 cities visited - More than 2.5 million tickets sold - Quidam in Sao Paulo was Cirque du Soleil s biggest box office and the 6 th biggest international box office in Corteo will start in Mar/2013 Theatrical Plays 12 different contents The only player that ever promoted authentic Broadway productions in the region More than 3.5 million tickets sold since 1999 Les Misérables, Chicago, Beauty and the Beast, Mamma Mia, Miss Saigon, Phantom of the Opera, The Sound of Music, Cats, Sweet Charity, Cabaret, The Witches of Eastwick, The Addams Family Sports Events 12 races per season in 10 different cities Stock Car is the third largest touring car series worldwide and the largest in South America Broadcasted by TV Globo since

12 3. 2. Investment Tese de Investimento Highlights 11

13 Investment Case Attractive Macroeconomic Environment and Robust Consumption Growth Live Entertainment Industry Growth Compelling business model and Superior Management and Expertise Massive increase in disposable income and expansion of consumer base Expenditure of entertainment is extremely correlated to consumer spending Live music: Touring became essential for artists Aggressive growth in South America in terms of ticket sold and average ticket price Superior business model: higher return with lower risk Credibility with international and domestic agents and privileged access to high quality entertainment providers 12

14 Positive Trends for Expenditures with Entertainment in Emerging Markets 2011E-2016E GDP Growth (1) Expenditure with Entertainment as a % of the Disposable Income vs GDP per Capita China India Indonesia Peru Malaysia Chile Colombia Singapore Argentina Brazil Russia Mexico Australia Sweden United States New Zealand Croatia United Kingdom Canada Venezuela France Japan 17.9% 16.3% 15.0% 15.0% 13.7% 12.5% 12.0% 12.0% 9.9% 9.5% 38.9% 33.3% 28.0% 24.7% 24.5% 22.6% 22.6% 22.0% 21.5% 19.0% 47.0% 56.6% 5 out of the 10 largest growths in GDP are in South America Expenditure with entertaiment as a % of disposable income 12.0% R 2 = 0.66 R 2 (ex Argentina) = 0.81 UK Japan 10.0% Spain Argentina USA New Zeland 8.0% France Portugal Greece 6.0% Croatia Italy Israel 4.0% Brazil Mexico 2.0% Chile China India Colombia Venezuela Peru 0.0% 0 10,000 20,000 30,000 40,000 50,000 GDP per capita in 2009 (US$ '000) (1) In local currency real terms. Source: IMF World Economic Outlook. Source: Euromonitor. Expenditures with entertainment are expected to significantly increase in emerging markets 13

15 Boom of the Live Entertainment Industry Live music has significantly increased importance in the music industry, with touring becoming essential for artists, while recorded music revenues have been shrinking Total Recorded Music Revenues vs. Total Revenues with Tickets Sold in North America (US$ billion) Top Music Acts Sales Breakdown (US$ million) U2 Bruce Springsteen 12% 5% 95% 88% Britney Spears 6% 94% 90 Album sales Tour Gross Total AC/ DC 6% 94% Jonas Brothers 9% 91% 79 Source: Pollstar / IFPI Source: Live Nation (2009) 14

16 Superior Business Model Verticalization Ability to generate revenues from multiple sources in each event Diversification Multi-content platform = reduced risk High Margins and Returns 18% EBITDA margin 31% ROIC 26% ROE Note: FY2011 figures. Low Risk No revenue concentration in specific content Increased control over the entertainment value chain Asset Light Strong Cash Flow Maintenance capex = 1% of net revenues; PP&E represent <5% of total assets Low capex and negative working capital (sponsorships + tickets sold in advance) Strong Cash Conversion 87% of EBITDA in the period was converted to cash 15

Solid Sponsorship Revenues Flow Migration of marketing budgets from traditional media to below-the-line advertising (sponsorship is the largest category within) Content sponsorship, priority

media (about R$500 million per year) Sponsorship corresponded to 23% of T4F s Net Revenue in 2011 Largest Corporate Sponsors North American Annual Growth in Advertisement, Sales Promotion

17 Solid Sponsorship Revenues Flow Migration of marketing budgets from traditional media to below-the-line advertising (sponsorship is the largest category within) Content sponsorship, priority benefit, naming rights sold in our 5 venues Over 100 active clients, including major corporations T4F s contents attract strong media interest, generating a significant amount of spontaneous media (about R$500 million per year) Sponsorship corresponded to 23% of T4F s Net Revenue in 2011 Largest Corporate Sponsors North American Annual Growth in Advertisement, Sales Promotion and Sponsorship 2.0% 0.6% 11.4% 2.0% 3.9% Advertising Sales Promotion Sponsorship 5.5% 4.0% 4.0% 1.7% 2.1% 4.1% -0.6% -4.6% -3.3% -7.1% Naming Rights Source: IEG E 16

18 A Diversified Platform Providing a One-Stop- Shop Marketing Solution to our Sponsors T4F is the only company that can offer a multi content range of platforms that is able to access all target audiences. Adult Male Car Sports Teen Live Music Family Kids Laura Pausini Adult Live Music Exhibitions Broadway Strong Competitive Advantages Positive Scenario for T4F T4F becomes part of the brand s long-term marketing strategy due to the relevance and innovation of its contents Emerging markets high costs of traditional media due to monopolies, encourage companies to pursue other marketing tools Migration from traditional media to the Below the Line marketing Increase in sponsorship revenues 17

19 High Barriers of Entry Guaranteed access to premium content Agreement with Cirque du Soleil valid through 2015 Partnership with Disney Theatrical Group to promote theatrical plays over the next five years Exclusivity and non-compete agreement with Live Nation valid through August 2015 Potential Competitors Privileged access to highquality entertainment providers Long-term agreements and solid relationships with corporate sponsors Exclusive long-term access to premium venues The only totally integrated business model Family Entertainment: Disney, Andrew Lloyd Weber, Cameron Mackintosh and the Blue Man Group Sports: Stock Car, Brazilian TCC, Fórmula Montana and Mini Challenge Music Concerts: CAA, William Morris, ITB International Talent Booking, The Agency Group, among others Naming Rights: Citibank, Credicard, General Motors, Abril, Caixa Econômica Federal, BMW, Petrobras Sponsorships: Bradesco, Credicard, Mastercard, American Express, Citibank, Cielo, Entel, Claro, Sky, AmBev, Renault, Honda, Allianz, Cosan, Vivo Controls 5 of the most important venues in South America Various business lines: Latin Music, Anglo Music, Performing Arts, Venues and Ticketing Possibility to capture economies of scale on the acquisition of content, by operating in four countries Credibility T4F is the most credible producer and promoter in South America, both in execution capability and financial strength 18

20 4. Growth Strategy

T4F s Growth Opportunities T4F is the natural consolidator of the South American live entertainment industry Financial Sources Strong Cash Generation IPO

Expansion, 8% Brazil South America Ticketing Service, 7% 1 in Brazil Start-up in Peru Construction of Venues, 35% Indoor Venues in Brazil (SP & Others)

21 T4F s Growth Opportunities T4F is the natural consolidator of the South American live entertainment industry Financial Sources Strong Cash Generation IPO Proceeds Leverage Capacity Acquisition of Equipment, 5% Lighting Sound Stage & Others Acquisition Opportunities, 45% Venues Festivals Promoters Geographic Expansion, 8% Brazil South America Ticketing Service, 7% 1 in Brazil Start-up in Peru Construction of Venues, 35% Indoor Venues in Brazil (SP & Others) Outdoor Venue in SP (T4F Arena) Indoor venue in Buenos Aires T4F s cash position provides a unique competitive advantage to capture the booming industry prospects 20

Geographic Expansion 80% of T4F s revenues in Brazil come from SP and RJ which represent only 17% of Brazil s GDP Main

Suriname French Guiana Ecuador Manaus Belém Fortaleza Natal Brazil Recife Salvador Brasília Belo Horizonte Campinas Curitiba

Aires 680 presentations/year and 1.5 mm tickets sold/year in SP and RJ Indicates cities in which T4F is currenlty present.

0 mm tickets sold/year in BA and Santiago Potential of 200 presentations/year and 700 thousand tickets sold in other cities

22 Geographic Expansion 80% of T4F s revenues in Brazil come from SP and RJ which represent only 17% of Brazil s GDP Main Cities in Brazil Main Cities in South America New / retrofitted venues to explore Colombia Bogota Caracas Venezuela Guiana Suriname French Guiana Ecuador Manaus Belém Fortaleza Natal Brazil Recife Salvador Brasília Belo Horizonte Campinas Curitiba Rio de Janeiro Sao Paulo Porto Alegre Lima Peru Bolivia Paraguay Chile Mendoza Argentina Santiago Cordoba Uruguay Buenos Aires 680 presentations/year and 1.5 mm tickets sold/year in SP and RJ Indicates cities in which T4F is currenlty present. Potential of 400 presentations/year and 840 thousand tickets sold/year in other cities 300 presentations/year and 1.0 mm tickets sold/year in BA and Santiago Potential of 200 presentations/year and 700 thousand tickets sold in other cities Cities to which T4F plans to expand operations. Still a relevant growth opportunity outside Brazil, representing 40% of South America s GDP 21

T4F Outdoor Venue in São Paulo T4F outdoor venue is

entertainment venues Project overview Designed to

São Paulo metropolitan area Naming rights revenues

of capacity: events from 15,000 to 60,000 people

of 33% Control of the agenda and integrated model

23 T4F Outdoor Venue in São Paulo T4F outdoor venue is expected to be a reference among renowned entertainment venues Project overview Designed to fill a gap in high-level entertainment venues in the São Paulo metropolitan area Naming rights revenues reaching up to R$ 9 million a year Flexible in terms of capacity: events from 15,000 to 60,000 people Capex should reach R$110 million with expected IRR of 33% Control of the agenda and integrated model translate into a strong barrier of entry Foro Sol Mexico City, Mexico 22

24 Outlook for 2012 Guaranteed access to very attractive contents at the box office and sponsorships, plus many contents under negotiation Outdoor Live Music Promotion of tours of top pop/rock music artists Family Entertainment and Theater Cirque du Soleil 12 months of presentations in six cities in Brazil, before heading to Buenos Aires and Santiago with more than 320 performances Disney on Ice, WWE, Sponge Bob The Addams Family in Brazil and Mamma Mia! in Argentina Sport Events In-house contents with track record of recurring revenue Indoor Live Music Recurrent verticalized revenue from shows by local and international artists in venues we operate Dream Theater # 9 Alanis Morissette #8 Yanni #8 Joss Stone # 6 Scorpions #3 Liza Minnelli #4 G3 #5 Simple Plan #4 Snow Patrol #4 Morten Harket #5 Sara Baras #4 among many others...a strong and diversified pipeline allow us to foresee an important growth in year

25 5. Operational and Financial Highlights 24

26 Solid Operational Performance Net Revenues (R$ mm) and Gross Margin (%) EBITDA (R$ mm) and EBITDA Margin (%) 26.7% % 29.2% % % % 16.7% % Net Income (R$ mm) and Net Margin (%) 10.0% 7.9% 7.1% % Operational Cash Flow vs. EBITDA 87% EBITDA - Accumulated Cash Generation - Accumulated Note: Summary of 2009 impacts Global crisis impact of R$16.8 mm Postponement impact of R$4.7 mm H1N1 flu impact of R$21.6 mm 25

27 Historical Financial Information (cont d) ROIC, ROE and indebtness metrics ROIC (1) ROE (2) (%) 38.3% 25.0% 42.0% 30.7% (%) 46.0% 31.7% 25.9% 4.8% Net Debt and Net Debt / EBITDA (R$ million) 92 Net Debt Breakdown (2011) (R$ million) x x (1.2x) 41.9 Net Debt Short Term Debt Long Term Debt Cash and Equivalents (127.6) (128) (1)ROIC calculated as NOPAT / (Net PP&E + current assets non cash) (2)ROE calculated as Net Income/ Average Shareholders Equity.. 26

28 Why Invest in T4F? One and only investment opportunity in the entertainment industry in South America, with longstanding track-record and leadership Strong conversion of EBITDA into cash flow Asset light model, resulting in high returns and dividend payout capacity Verticalization and diversification, resulting in high margins and low risk Unique access to high-quality content Multi-country operations, creating significant economies of scale and barriers of entry 27

T4F Net Income rises 53% in 2Q12

T4F Net Income rises 53% in 2Q12 São Paulo, August 8, 2012 - A T4F Entretenimento S.A. ( T4F, Time for Fun ) (BM&FBovespa: SHOW3), the leader in the live entertainment industry in Latin America, announces