Points International, Ltd. (PCOM) CEO Rob MacLean on Q2 2018 Results - Earnings Call Transcript

About: Points International, Ltd. (PCOM)
by: SA Transcripts

Points International, Ltd. (NASDAQ:PCOM) Q2 2018 Earnings Conference Call August 8, 2018 4:30 PM ET


Sean Mansouri - Investor Relations, Liolios Group, Inc.

Rob MacLean - Chief Executive Officer

Christopher Barnard - President

Erick Georgiou - Chief Financial Officer


Drew McReynolds - RBC Capital Markets

Ed Woo - Ascendiant Capital


Greetings and welcome to Points International Second Quarter 2018 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Sean Mansouri. Please go ahead.

Sean Mansouri

Thank you. Please be reminded that the remarks on this conference call may contain or refer to forward-looking statements within the meaning of Canadian and U.S. securities laws. Management may also make additional forward-looking statements in response to your questions.

Although management believes these forward-looking statements are reasonable, such statements are not guarantees of future performance or action, and are subject to important risks and uncertainties that are difficult to predict. Certain material assumptions are applied in making forward-looking statements and may not prove to be correct.

Important factors that could cause actual results to differ materially and the assumptions used in making such statements were included in our second quarter 2018 financial results press release issued prior to this call, as well as other documents filed with the Canadian and U.S. security regulators. Except as required by law, the company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

With that said, I’ll turn the call over to Points’ Chief Executive Officer, Rob MacLean. Rob?

Rob MacLean

Thank you, Sean, and good afternoon, everyone. The momentum in our business remain strong and has led to another record performance in quarterly revenue in gross profit and importantly also generated our best adjusted EBITDA ever for the second quarter. This was led by solid growth in our core Loyalty Currency Retailing segment, which saw gross profit increase 25% year-over-year. This growth coupled with improving margins and actively managing our cost structure is demonstrating meaningful leverage in our business.

The global loyalty industry continues to be a very healthy and growing sector across multiple business verticals. We are pleased to be seeing very strong membership growth across our partners programs with million of new members joining annually, continuing to validate our belief in the strength of this market.

We’re also seeing increased detention and discipline being applied to these critical loyalty programs around the world as more and more companies recognize the potential for increased member engagement and the economic rewards that strategy brings. Not surprisingly, we believe this is a great time to be in Loyalty.

As active participants in this market, we continue to benefit from the investments we made to continually enhance our Loyalty Commerce Platform or LCP, which has enabled us to consistently drive growth across our portfolio of existing partners and deployed services.

In addition to benefitting from the ramp of new client wins over the last 12 months, we’ve launched several new programs across each of our business segments during the quarter, including new services with Emirates, LATAM Airlines, Marathon Gas, Singapore Airlines and Air Europa. Christopher and Erick will expand on these developments later on today’s call.

We remain committed to continuously improving our platform operations to ensure that we are able to scale the business effectively and consistently deliver industry leading performance. This enables us to capitalize on the significant opportunities we see across each of our business segments around the world.

It is important to note that these previous investments have been a significant factor in our performance this year, and an increasing focus on data analytics, automated marketing, enhanced segmentation, and machine learning has enabled us to gain better insights into our partners customers base. This has led to increased efficiency in our ability to provide the correct offer at the appropriate time leading to more efficient and productive campaigns in our partners marketing channels.

Additionally, this data capability is being used to more effectively identify customers via other non-partner channels online. Given our experience in transaction volume, this activity has been initially focused on our LCR segments. However, we are confident that the data insights and the processes we are building into our platform will be a significant driver of our entire business going forward and ultimately create increasing value for our Loyalty program partners.

I’d like to briefly touch on the enhanced business segment reporting we’ve initiated today. In our press release, we introduced the new contribution lines item to our financials. This was done in an effort to provide additional insight into the effect each business segment has on our overall performance. We plan to consistently report and speak to this contribution line going forward, as we actively manage to this metric in operating our business.

We also believe it serves as an effective parameter for investors to gauge each segments success and improvement, particularly for our newer Platform Partners and Points Travel segments, as well as more clearly reflecting our shared infrastructure's valuing, operating and efficiently growing our business.

Adjusted EBITDA on a segment basis will continue to be available in our MD&A. Also, during the second quarter, we were very pleased to appoint David Adams, as Chairman of the Board Directors. David bring a wealth of loyalty and data analytics expertise accumulated over a long and prestigious carrier.

David has been a strong voice on the board over the past several years and on behalf of the full board, I welcome his move to this leadership role and look forward to leveraging his valuable insight to enhance growth and profitability across our business.

With that, I like to turn the call over to our Chief Financial Officer, Erick Georgiou, who will provide more color on our new contribution line and the rest of our quarters strong financial results. Erick?

Erick Georgiou

Thank you, Rob, and good afternoon everyone. As I highlight our performance for the second quarter, please not that all numbers mentioned on our call today are in U.S. dollars, and unless otherwise noted are presented in accordance with international financial reporting standards. Also note that as a result of the new IFRS 15 accounting standard, which came into effect for fiscal 2018, we have restated our 2017 figures for comparative purposes to reflect the requirements of the standard. Adjusted EBITDA and net income were not impacted by this new standard.

And now for our quarterly results. Revenue generated in Q2 was a quarterly record reaching almost 98 million, an increase of 14% relative to Q2 of 2017. Gross profit in Q2 was also a quarterly record at 13.7 million, an increase of 23% on a year-over-year basis. Our LCR segment was the primary driver of this record performance as we saw solid organic growth from existing partners across both principal and agency relationships, along with strong contribution from new partners and products we have launched over the last 12 months.

Total adjusted operating expenses increased to 9.2 million in the second quarter, compared to 8.1 million in the prior year quarter. This was largely driven by growth related expense increases in employment costs and professional fees. And to a lesser extent the impact of a strengthening Canadian dollar. As expected, our currency forward contracts, which we enter into the minimized foreign exchange impacts help mitigate the FX impact during the quarter, which saw the Canadian dollars strengthen approximately 4%, relative to the prior year.

From a resourcing perspective, we ended the second quarter with 210 full-time equivalent employees, excluding part-time and contractor roles. This was down slightly from 216 at the end of Q1, and up from 188 one year ago. The majority of these resources added over the last 12 months have been focused on delivering growth, which is further reflected by our record results these last few quarters.

As always, we remain committed to prudently managing cost during this growth period. On that note, adjusted EBITDA, one of the most important metrics in evaluating our ongoing profitability increased 51% to 4.6 million in the second quarter. As a percentage of gross profit, adjusted EBITDA improved more than 600 basis points to approximately 34%, compared to 28% in the year ago quarter, which continues to demonstrate the meaningful leverage in our business. Total net income for the second quarter increased almost 150% to 1.8 million, compared to 732,000 in Q2 2017.

And now look at our segmented performance. As Rob mentioned earlier, we will start to emphasize the contribution line of our three segments in place of adjusted EBITDA as it serves as a more appropriate barometer to gauge to performance of these three lines of business. We also believe, this metric more accurately reflects the value of shared resources in driving our overall company performance.

As outlined in our press release, contribution is calculated by subtracting expenses that can be directly attributed to each segment from the gross profit generated by each line of business. As I mentioned earlier, the LCR segment was the primary driver of our strong year-over-year gross profit growth. Q2 gross profit and LCR increased 2.3 million or 25%, compared to the prior year, which was fueled by two main growth drivers.

One, solid organic growth across existing partners. And two, the impact of the new products and partnerships we have brought to market over the last 12 months. We have been very pleased with the gross profit generated from these new partnerships, including the Etihad Gas and Copa ConnectMiles programs in 2017 and most recently, an expansive partnership with the Emirates Skywards program that was launched in market during Q2.

As expected, LCR generated the highest contribution of all three segments with contribution up 26% to 8.1 million, relative to 6.5 million in the second quarter of 2017. For platform partners, we saw a slight improvement in gross profit in Q2 increasing 2% relative to the prior year. Contribution improved a healthy 24% to positive 788,000, compared to 637,000 in the prior year as costs that were attributed to the segment decreased 10%.

Lastly, Points Travel gross profit in the second quarter of 2018 was 423,000, an increase of 214,000 or 103%, relative to the prior year. This growth was fueled by organic growth, as well as new partnerships we’ve launched over the last 12 months, including new deployments with All Nippon Airways and the Etihad Gas program in 2017 and Singapore and Amtrak in 2018.

From a contribution perspective, this segment generated a contribution loss of 966,000 compared to a loss of 782,000 in the second quarter of 2017. Of particular note in the segment, we experienced a temporary freeze on transactions with one of our larger partners in this segment as they dealt with internal GDPR compliance matters. This temporary freeze started at the end of May and was only recently resolved at the beginning of August.

Needless to say, this incident adversely impacted Points Travel gross profit and contribution in the second quarter, and will likely have an impact on third quarter results as well. We are happy to report that the service has been reintroduced and transaction metrics have been trending nicely so far, based on a more aggressive marketing plan in the back half of 2018.

Moving to our balance sheet. Total funds available, which is comprised of cash and cash equivalents, restricted cash, short-term investments and amounts with our payment processors, totaled 78.6 million at the end of Q2, compared to 77.8 million at the end of the first quarter and 62.2 million at the end of Q2 2017. Our business continues to be a strong cash flow generator, enabling us to fund current operating and capital expenditures in addition to our share buyback activity. We also continued to remain debt-free.

During the quarter, we’re pleased to announce that as per our commitment last year, we fully executed our normal course issuer bid that was initiated last year, which allowed for a buyback and canceling of up to 5% of our common shares outstanding. In Q2, we repurchased approximately 285,000 shares at an average cost of $15.20 per share totaling approximately $4.4 million.

To summarize our fully completed NCIB, we repurchased approximately 743,000 shares at an average cost of $12.29 per share totaling approximately $9.1 million. And today, our Board of Directors authorized a new repurchase program when the prior plan expires in August 13, which continues to reflect the confidence in our prospects for growth and our commitment to building shareholder value through appropriate capital allocation.

With that, I'll turn it over to Christopher to provide some more insight on our quarterly results and sales highlights. Chris?

Christopher Barnard

Thank you, Erick, and good afternoon everyone. As noted throughout the call, and indicated by our financial results, our strong momentum to start the year carried into second quarter as we once again showed great momentum in gross profit and adjusted EBITDA performance. We continue to benefit from strong organic growth with existing customers, as well as new deployments ramping up over the last few quarters.

As mentioned earlier, LCR was the main driver of our record gross profit and strong adjusted EBITDA performance. During the quarter, we expanded our relationship with LATAM Airlines, with a launch of a new accelerator initiative, which has become quite popular in the Latin and South American regions.

Additionally, we continue to fully roll out our Emirates relationship, which will be utilizing most of our LCR suite of services. In fact, subsequent to the quarter-end we launched another new service with Emirates branded extend, allowing the members to extend the life of their mile before they expire.

We also enhanced their existing Buy Miles service, enabling members to conveniently purchase additional miles directly in the booking flow, thereby offering them increased flexibility to redeem flights using cash and miles. Given this momentum, we continue to believe Emirates can soon become one of our top performing loyalty partners.

As Rob mentioned, overall the LCR segment continues to benefit from our ongoing platform investments aimed at marketing efficiency, automation, and intelligence. By leveraging the Point Loyalty Commerce Platform, which creates a unique and powerful vantage point in the member interactions across our Suite of services, Points of valuable insights and the member behavior and purchase motivations.

These insights then leverage to inform marketing decisions, maximizing performance, and driving increased return on marketing investments. Given our experience, coupled with transaction volumes, we are clearly seeing leverage from these investments in the LCR segment, and we continue to focus on transferring this leverage to our other two business segments.

Moving on to Points Travel, we continue to execute well on two of our three strategic focus areas. Integrating new Priceline inventory and improving our service offerings continued during the quarter. As we discussed, our success here is about a strong business development momentum as our primary focus remains bringing on new partners, and ensuring where possible, that each one utilizes a full breadth of our points travel service, both the earned and redemption capabilities we offer.

As reflected by our two latest new partnerships with Singapore Airlines and Air Europa, we continue to do a great job here. Additionally, late last year, we launched a travel redemption service with the Etihad Debt Program, and we're pleased to announce that we’ve recently enhanced this by adding miles earned capabilities. So, the program now has a comprehensive Loyalty travel service to better engage its members.

We feel that our continued success in business development confirms our leading position in this competitive marketplace. Third on our strategic priority list for Points Travel, is to grow each deployment. We continually received better data and are gaining more experience in this segment, allowing us to integrate more attractive and complex offerings into our partners channels.

This is translated into us bookings millions of dollars of every quarter and have bolstered our confidence in this segment potential over the long-term. But we are very confident in the long-term opportunity, as Erick mentioned earlier, we continually work through individual partner dynamics that affect this segments aggregate performance.

Most recently, the headwinds we experienced as one of our largest partners, due to unrelated GDPR impact, resulted in an almost 10-week pause to their service as they work through their internal issues. While this had a negative effect on the second quarter performance, we are currently back in market with this partner and have developed an aggressive marketing plan for the remainder of the year.

Turning to Platform Partners, with an established base of customers and new partnerships added in the last several quarters, we continue to see strong results from this segment. During the second quarter, we successfully launched the Marathon Gas program, which is a perfect example of our ability to attract large non-Loyalty players in this segment are working closely with them as the program rolls-out across thousands of retail locations.

We’re also encouraged to be engaged in multiple business development discussions with several large brands in the retail travel and financial services industries that also have our Loyalty Partners interested. Recently, we agreed on enhanced marketing relationship with Groupon, that sees us offering more access to our segmentation and targeting capabilities, as well as payback to some of our Loyalty Partners Channels in order to bolster the performance of their program with us. While still early days, we’re encouraged by their dear interest in working more closely with us and leverage our unique insights and access to the loyalty industry.

In summary, across all three of our business segments, we have successfully driven organic growth through the integration of our newest partnerships, while expanding other existing client programs. We plan to continue executing across our various business lines and carry this strong momentum through to the second half of 2018 and beyond. Given this momentum and our strong first half of the year, we are maintaining our 10% to 20% gross profit growth expectations.

Further, based on clear operating leverage shown in the first half of the year, we’re pleased to be able to narrow our adjusted EBITDA guidance to between 30% and 40% growth over the last year's level. This concludes our prepared remarks. Thank you for your time and I’ll now turn the call back to the operator for questions.

Question-and-Answer Session


[Operator Instructions] Our first question comes from Drew McReynolds of RBC Capital Markets. Please proceed with your question.

Drew McReynolds

Thanks very much. Good afternoon. Let's just start off on the organic revenue growth or growth rate for LCR. I may have missed it in your opening remarks, but what was that organic growth in the quarter? And then as you look forward, obviously a lot of momentum in the business, to what extent can you sustain this organic growth as we look into 2019?

Erick Georgiou

Sure. It’s Erick here. So, in Q2 for LCR, organic growth was roughly 12%, year-to-date roughly 10%. We expect to be there roughly for the full-year that’s been our track record historically.

Drew McReynolds

And Erick, just – I know you're not going to give specific guidance on 2019. I think in the past, just as a company, you've talked about kind of 10% growth kind of being a sustainable level. The business is getting bigger and bigger. Is that still kind of achievable as you look over the medium-term?

Erick Georgiou

Yes, I mean you are right on not providing any 2019 guidance. I’d say early stage, we feel good about that kind of maintaining that growth rate, but it’s about as much as I would say right now on that.

Drew McReynolds

Okay. Just shifting gears. With respect to the Emirates' impact in Q2, I get the sense that wasn't a full run rate quarterly impact, is that correct? And can you kind of say to what extent that did impact Q2 relative to its full quarterly run rate potential?

Rob MacLean

Sure. It’s a Rob, Drew. Yes, we are obviously pretty pleased to be able to announce that in the last quarter. We launched it in this quarter, but I would say, obviously ramping up very pleased with the way that’s going, you know couple of things for us, one it’s behaving the way we would have expected, I think you asked the question is the last quarter about the size of scale of Emirates, it is – we think it’s a very significant opportunity early days. The other point that I would make that we spoke to in our prepared remarks, we’re already following our normal course strategy in executing with Emirates that we’re adding new functionality and features and products and services to that relationship, even the first quarter into their relationship. So, pretty pleased and expect to see that grow over the next several quarters and kind of going to plan at this stage.

Drew McReynolds

Okay, that's helpful. When you're – kind of shifting gears a little bit, the moving of the contribution versus adjusted EBITDA by segment, maybe just update us, I guess, last year or maybe the year before you provided a few, kind of targets with respect to breakeven adjusted EBITDA for Platform Partners and Points Travel. Just give us an update on whether you're going to stick with those kind of timeframes on an adjusted EBITDA basis or do you shift focus here to contribution?

Christopher Barnard

Hi Drew, it’s Chris. Just first of all, we moved to highlight some increased transparency on adding that contribution metric. It is the way we run the business as we talked about, it’s the piece of information that we’re most focused on of our business unit. And so that was, we felt important to add into the financial statements. It also helps us, you know when we were talking with the investors and the market on explaining the value some of those shared resources and momentum in each business kind of contributing to the platform capabilities that we’re building out. So, on Platform Partners, you can also see, obviously see that contribution is pretty healthy there. We expect that to continue going forward for sure as we lower these new initiatives.

Rob MacLean

It’s Rob. From our Points Travel standpoint, I would say, generally we're looking at this business as similar to what we experienced in the last couple of quarters that very pleased with the business development efforts, very pleased with the – how that product is selling in the marketplace, how that’s coming together. We’re continuing to see expansions on that with Singapore Airlines and Air Europa being launched this quarter, extending and expanding their relationship with Etihad. I would say that a few from a forecasting standpoint there has been a couple of things that we are dealing with on the Points Travel business.

One, I think we indicated in our prepared remarks, this was a fairly major quarter in terms of activity globally around the European privacy regulations that were put in place, GDPR. We were dealing with a situation where one of our larger partners on the Points Travel business had a purely internal issue with their own technology that required us to take down that proposition for about 10 weeks. So, not anything that we could have foreseen or not impacted by us, but the fact that it was down for 10-weeks and just relaunched here in the first of August is certainly impacting the performance in this quarter, and we would expect it to impact the performance in the third quarter as well.

I would say that coupled with, you know a couple of good pieces of business that we fully expect to have landed here in 2018, probably would be a bit delayed from our initial forecasting, still feel good about those deals falling. So, we would say we would push off our profitability expectations for Points Travel. Not particularly concerned about that over the mid-term for the long-term, again feel like the business is hunting pretty well. We're continuing to expand it. I would like to see a little more pace and I would like to have some of these regulatory issues not surprise us, but still think that’s a business that we’re excited about and heads towards profitability as we look a little further out.

Drew McReynolds

Okay, that's very helpful. Rob, thanks for that. Maybe shifting gears, a little bit on free cash flow priorities. You talked about buying back stock. Maybe just update on where you kind of come out on instituting a dividend here for the company and then just anything on the M&A front that you're kind of targeting or you see as a priority, just generically.

Erick Georgiou

Yes. I think you heard, you played basically right up to the full NCIB levels that we were authorized by about 740,000 shares in that NCIB. And also, from a capital allocation standpoint, we felt pretty good about that through the last 12 months. You noted, we have reinstituted that. The board has just approved to re-up that for the next 12 months. So that would be part of our capital allocation strategy. We are a business that has been profitable, continues to be profitable, we're generating cash and so we haven't talked about dividends at this stage, we’ve always felt as more of the return to shareholders through the NCIB process, certainly from our standpoint the business will continue to grow, we are going to continue to see opportunities to build cash and use that cash to drive growth.

We expect to be active on the NCIB and again see this as a pretty positive situation to be in going forward. Your question about acquisitions I think those things we’ve done two or three smaller acquisitions over the years here at Points That's always on our radar screen. We don't historically have or typically have direct line competitors. So, we’re a bit opportunistic in terms of when we get into M&A or acquisitional activity, but it's certainly something we evaluate at the board on a regular basis from a capital allocation. So that really will change going forward from a strategy.

Drew McReynolds

Okay. And one last one for me, you talked a little bit on the data analytics capability within LCR, which has been ongoing for several years, obviously. When you look at a lot of I guess, to use the buzzword, the machine learning/AI capability. I'm just curious to know how that phases into what you do in the data analytics side, is there a project underway where there is a notable kind of step into more of that world? Have you been using a derivative of that technology for years? Just want to kind of better understand how it all kind of gets better as that technology becomes more mainstream.

Rob MacLean

Yes, that’s a great question. I will answer it in a couple of ways and maybe Chris could expand on it. The data analytics piece as you rightly pointed out, we’ve been very conscious of and active with the data analytics for some time. This business has tremendous access to data and to member information. We use that data and I would say not only tremendous access, but very unique access to individual consumer behaviors and information. We’ve been using that data as a significant tool to drive that kind of growth and performance on the business that we’ve been experiencing here over the last number of years.

So that we’re very excited about and we are just literally every day and every new partner we got access to some more data. We see some great results on whether it’s promotional activity, targeting and segmenting that is producing great results that’s allowing us to then just accelerate more and more analysis from that standpoint. The second part of your question, so I would finish that just by saying it’s been an important part of our growth and will continue to be important, and if anything, we’ll accelerate in terms of its importance. Now that leads into the second point you mentioned, I would say we are in early stages of work on some of what you described as the AI or machine learning. We do have some projects in place. I would call them relatively early stage, but we’re pretty convinced that a lot of what we’ve been working on, on a more kind of off-line manual basis and the kind of returns that’s been providing as we automate more of that activity we’re very optimistic about what that does to overall performance. So, characterize it as dipping our toes or in early days of kind of the classic machine learning, but we're going to be there. Chris, do you want to add anything to that?

Christopher Barnard

Yes, Drew, I think I would add a couple of things. One – a few things rarely, one, we are building all of the capability into the base Loyalty Commerce Platform, deploying it currently into the LCR segment, but all that capability will be available to the [indiscernible] business segments going forward. That would be the first one. So, it is very much a platform unit investment on our side.

Secondly, the other part of it is, while we have a lot of data that we generate through our transactions, we are starting to get some results on other data sources getting injected into our platform to help inform some of that segmentation and targeting that Rob talked about. And then the third way we’re also using it is, while we are very good at marketing through our loyalty program partner channels through their email channels and newsletters and whatnot.

We’re starting to also deploy that data to market outside of their channels and so we get at right customer at the right time, where they might be elsewhere online, outside of that [indiscernible] website or the branded experience there. And we're seeing some pretty good results there. So, I think the aggravation of all of that, it’s a platform investment currently being deployed in the LCR because that’s where we have a lot of for transaction and history, but clearly, we are deploying it to the other two segments. And really, we look back to your question to Erick earlier, it is one of the things that bolsters our confidence in the 10%-ish organic growth being a sustainable number.

Drew McReynolds

Okay. That’s really good. Thanks for that. That's it from me.


Our next question comes from Ed Woo of Ascendiant Capital. Please proceed with your question.

Ed Woo

Yes, thank you and congratulations on the quarter. My question is more on just the overall health of the travel industry, it seems that it’s a very strong market, now, how much does that does help your business in terms of being able to facilitate some of your tailwind?

Rob MacLean

Yes, thanks Ed. I think, as I mentioned in my prepared remarks, the loyalty industry globally and we operate largely in Loyalty heavy skew to travel loyalty, but in the loyalty space, it has been very, very robust over the last number of years. We’re seeing, you know with our members, our Loyalty Program Partners, representing today to 700 million to 800 million consumers that we have access to, their adding millions of consumers a month. It is a very, very robust industry we’ve been very, very healthy.

Generally speaking, it’s been a healthy across the board. We’re seeing real significant growth in the U.S. marketplace with some of our big partners. Asia is as we predicted kind of emerging and we're seeing more and more interest in that marketplace. And I think just generally as I mentioned in my prepared remarks, the international markets are now moving more and more to understanding just what a tiger they have by the tail with these loyalty programs, particularly inside the travel environment where getting consumers and their members more engaged, they are obviously adding lots and more consumers, but they get them more engaged, the economic rewards that we’re able to help them surface is really getting a lot of attention.

So, we feel really good about the sector or the industry dynamics. I think inside of that, inside of travel, your travel has been pretty robust as well lately, and for us that’s all positive as really been our experience. I would say, a bit topical on these days, lots of kind of questions around EMEA and Aeroplan, and maybe I will take a moment to just address that. Where Air Canada has put a bit out to re-apply our EMEA and the Aeroplan assets out of the – I think our interpretation is a couple of things on that. We've worked with both of those partners, both Aeroplan and Air Canada. Air Canada from a financial standpoint is actually a larger partner for us. So, in the Loyalty and airline that’s quite a high-profile situation.

Largely no impact on us in 2018, both of those businesses are stable and growing. We do think regardless of how that evolves whether it is an Aeroplan on a standalone reposition loyalty program or Air Canada, acquiring Aeroplan both provide real interesting opportunities for us on a go forward basis. Tied to your question is, a pretty good indication of just how valuable these loyalty assets are to the airlines themselves or the industry when you see multibillion dollar bids being made for Loyalty Programs, and something like that in a market relatively small like Canada. So, all of those metrics, whether it is what we see locally from an EMEA, Aeroplan, Air Canada situations is just overall health of loyalty and overall health of travel, all very positive for us.

Ed Woo

Great. Do you think that what’s going on with Canada or with Air Canada is a very individual specific situation or you are doing this as possibly a sign of consolidation in the group around the world?

Rob MacLean

Yes, it’s pretty specific to this marketplace. Again, EMEA was a pretty unique asset in terms of spinning out of their Air Canada number of years ago as a standalone global loyalty proposition. So, it’s a bit ironic to kind of potentially coming full circle, but that’s very unique to the marketplace and the relationship between Air Canada and EMEA. We don't really see that in any other places, globally. So, I think it’s pretty isolated.

Ed Woo

Great. Well, thank you for your comments and good luck.

Rob MacLean

Thanks a lot.


Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to Rob MacLean for closing remarks.

Rob MacLean

Great. Thank you. Well, we would like to thank everyone for listening to today's call and we look forward to speaking with you when we report our third quarter results in November. Thanks very much.


This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.