Aimia, Inc. (GAPFF) CEO Jeremy Rabe on Q1 2019 Results - Earnings Call Transcript

About: Aimia Inc. (GAPFF)
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Earning Call Audio

Aimia Inc. (OTCPK:GAPFF) Q1 2019 Earnings Conference Call May 14, 2019 8:30 AM ET

Company Participants

Karen Keyes - Head of Investor Relations

Jeremy Rabe - Chief Executive Officer

Steve Leonard - Chief Financial Officer

Conference Call Participants

Drew McReynolds - RBC

Brian Morrison - TD Securities

Tim Casey - BMO


Good morning. My name is James, and I will be your conference operator today. At this time, I’d like to welcome everyone to the Aimia Inc. First Quarter 2019 Results Conference Call. [Operator Instructions] Thank you. I’d now like to turn the call over to Karen Keyes, Head of Investor Relations at Aimia. Please go ahead.

Karen Keyes

Thank you, James, and welcome, everyone, to this morning's call. Today's presentation can be found on our website. Before we get underway, I'd like to remind everyone to review our forward-looking statements and the cautions and risk factors pertaining to the statements, which can be found on Page 2 of the presentation. The presentation today will focus on the results of the continuing operation.

As we mentioned in March, you will see that we have moved away from reporting Gross Billings post the Aeroplan sale and so you will see revenue metrics used in our disclosures. The presentation refers to a number of non-GAAP metrics to help you better understand the results of the business.

In particular, I’d like to draw your attention to the definition of the adjusted EBITDA metrics on Slide 4, which now has few adjustments to better reflect the shift in the business away from coalition loyalty to a more service-based business. For all of our non-GAAP metrics, definition, and the reconciliation to their most comparable GAAP metric can be found on Pages 3 and 4.

As usual, you’ll find a full GAAP income statement of Page 5. And finally, Slide 6 will give you helpful summary to the pro forma financials for continuing operations for the four quarters of 2018, adequate further detail by segment by segment can also be found on our website.

With me on the call today are speakers Jeremy Rabe, our Chief Executive Officer; and Steve Leonard, who [further to our] announcement in March has now assumed the role of Chief Financial Officer. Also, in the room is Tom Tran, Director of Finance. We will aim to run through the highlights of the first quarter in around 20 minutes leaving time for your questions at the end.

And with that, let me hand over to Jeremy.

Jeremy Rabe

Thanks, Karen. Good morning everyone. It’s nice to be back with you and to be sat alongside our new CFO, Steve Leonard. He is new to the role, but nor new to Aimia as many of you know. Steve will take you through the financial details of the quarter in a moment. So, first, let me start with a few highlights of what we’ve been doing since we announced the conclusion of our strategic review six weeks ago.

Further to the announcement in March, we have taken our new strategy as a loyalty and travel consolidator to employees and customers. The reception has been very positive. The strategy has been reassuring to existing clients and exciting to perspective clients and should be helpful as we build our sales pipeline and work on stabilizing our revenue.

A good start has been the renewal of our Avis contract. The new agreement extends our business working with them in over 20 countries over a number of years. We’ve also signed a new contract with HSBC in the Middle East, which will reset how we work with them. I’ll come back to that in a moment. And finally, we’ve had a number of smaller wins with new clients in Asia.

As we had already signaled in March, the highlight of the quarter was the exceptional distribution from PLM of 19 million, which tipped the adjusted EBITDA results into positive territory on a recorded basis, offsetting the revenue and gross margin impact of clients we lost last year.

Aimia’s underlying operating expenses were down 11%, excluding restructuring – excluding the restructuring we’re going to transform the business and the declines were double that if you normalize for certain items in the quarter. Finally, we received 497 million of gross proceeds from the sale of Aeroplan in the quarter and expect to finalize the closing adjustments in the coming weeks.

The gain on disposal was over 1 billion and the combination of the boost from the PLM distribution along with the gain from the Aeroplan transaction resulted in record net earnings and EPS of close to $7 per share. While overall free cash flow continuing operations was still negative, the PLM distribution contributed to a 14 million increase in cash from operating activities.

Cash on the balance sheet was over 600 million and we expect to distribute 150 million or around a quarter of our cash through the substantial issuer bid currently underway, which launched on April 8. Before I hand over to Steve, I wanted to speak briefly to the major transformation we have underway in Loyalty Solutions business, which is a key element of getting Aimia’s existing business to profitability during 2020.

The transformation has been meaningful in terms of the headcount we have taken out. You can already see operating expenses coming down. A further 50 employees have exited the business since we last spoke to you and represents a decrease of around almost 300 since the beginning of 2018 when we had close to 900 employees on a like-for-like basis. With around 590 employees at the end of March, we are already most of the way to our year-end target of 550.

We’ve acted with speed to get savings more quickly, but also importantly our speed of execution is making it easier to clearly communicate our future operating structure to clients and employees. You can see from the chart that our revenue continues to be broadly spread across major operating centers. While we have fewer locations, we continue to be able to serve big clients from a number of key global hubs. This remains a differentiator for Aimia in the market. In matters to clients like Avis and HSBC.

Finally, [last thing] I wanted to speak to was the shift we have made into more of a services-based business, which helps clients design and maintain their own loyalty programs. Under the terms of the renewed contract we have signed with HSBC, we will move to a services-based contract.

Going forward, we will manage HSBC's participation in the Air Miles Middle East program on a fee-for-services basis rather than a pay for points issuance model. HSBC will also [pay Aimia] for rewards when member redemptions occur. To reflect the fact that the contractual obligation to fund the redemption liability will now lie with HSBC, Aimia will make an accelerated payment of 26 million in 2019 to cover the existing points liability, rather than paying that same amount over the coming years. This acceleration would have been payable on any termination.

We’re pleased to see it being made instead in the context of a renewal, which extends our business into 2022, and solidifies the future of the Middle East coalition program, which has enrolled more than 1.6 million members across three countries since it was established in 2001. Importantly, it also sets up a strong base from which we can generate future revenue from additional coalition partners in the region.

And with that, let me turn it over to Steve.

Steve Leonard

Thank you, Jeremy. So, let me start with the headline numbers. As Jeremy mentioned, the first quarter revenue declined reflected lower spend by existing clients, one-time project revenues in 2018, which did not repeat this year and clients lost in 2018. We have made progress in aligning cost to the revenue run rate with an 11% decline in operating expenses, excluding restructuring.

The PLM distribution was 19 million or almost 15 million higher than last year delivering adjusted EBITDA boost on consolidated basis that Jeremy spoke to. It took the reported number two 1 million or closer to 6 million if you exclude 5 million of restructuring in the quarter.

As we go through 2019 and grow revenue with new and existing clients, we expect the impact of those lost clients to roll-off. Combined with taking restructuring in early 2019 should result in stronger results in the second half.

Finally, we saw favorable improvements in free cash flow before dividends paid and excluding restructuring, which improved free cash flow by 23 million, and if we were to back out the PLM distribution, it would have been an improvement of 9 million over the same period last year.

The full-year distribution should be around 37 million from PLM with another 18 million to be distributed over the rest of the year. We expect PLM will continue to generate meaningful cash from the business and we agreed with our partner Aeromexico and it makes little sense to retain more cash in the business then is necessary to fund normal business operations, including coverage of redemption liability.

Turning to the PLM operating results, Gross Billings growth in the quarter was lower as expected short-term macro conditions and capacity headwinds drove slower passenger growth at Aeromexico. Cardholder and member acquisition continues to grow providing a solid long-term base. Member growth was up 13% over the same quarter last year to 6.3 million. There continues to be a longer-term opportunity to grow in a country where the adult population is close to 80 million.

Despite this adjusted EBITDA, margin remained strong. Q1 adjusted EBITDA of 20 million represented a margin of 33%, was 19% over last year's 17 million reflecting the change in breakage on a like-for-like basis.

Turning to the Aimia operating business. Effective this quarter, our Loyalty Solution activities are now grouped into one reporting segment were corporate and other picking up the cause such as board and public company costs. Our distribution from our investments in PLM are reported in corporate as our other investments.

Loyalty Solutions adjusted EBITDA loss for the quarter was 5 million, compared to 3 million last year, as loss revenue and gross margin was partially offset by lower operating expense and we observed 2 million platform development expenses. Our excess platform development cost are increasing this year's expense, while last year the same cost, which totaled 3 million were capitalized.

All of the 5 million in restructuring expense incurred this quarter was incurred in loyalty solutions reflecting the transformation Jeremy spoke to few minutes ago. Normalizing for the operating expenses in the Loyalty Solutions, they were down 15% to 37 million, had platform development expenses been treated in the same way as 2018, the reduction would have been 20% more.

Turning now to the cooperate expense side. On the reported basis, corporate adjusted EBITDA benefited from the PLM distribution ending up $14 million over Q1 last year. Share based comp had a meaningful swing in the quarter. We reported $1 million of share-based compensation in this quarter, whereas last year we had a credit of $2 million.

Corporate expense came down $2 million or 25% in the quarter, if we exclude the impact of restructuring and share based compensation. The decline in operating expense was mainly attributed to lower head count. I also wanted to touch on the implementation of IFRS 16 in the quarter. As you know, the standard requires capitalization of all operating leases, which for Aimia are facility leases.

Given the few leases, operating expense was marginally reduced by $0.5 million in the quarter versus the same period last year. And on consolidated basis, Aimia’s lease liabilities totaled $6 million at the end of quarter. Q1 free cash flow from continuing operations was negative $20 million.

Overall Q1 free cash flow was $17 million better than last year on a reported basis with the incremental PLM distribution and favorable working capital being most significant drivers offsetting revenue decline and restructuring expenses. As noted earlier, we had a rent prepayment for our London office space in Q1 2018; this was the main driver of the favorable working capital.

Net interested impact was an additional outflow of $6 million as we redeemed the outstanding debt in conjunction with the Aeroplan transaction in early January. From Q2, we expect to be [net recipient] interest with no interest expense reflecting our debt free status, which should result in a favorable $20 million swing in 2019.

Moving to the balance sheet. The most substantial balance sheet movement in the quarter related to the Aeroplan transaction, including the recite of $497 million of gross proceeds and the $308 million debt pay down, including interest to $7 million on a completion of the transaction.

The Aeroplan gross proceeds were offset by transaction in termination fees of $16 million, of which we paid $11 million in the quarter. This included $9 million of termination fees paid to Porter, Air Transat, and Flair. We received $10 million in the quarter related to the sale of our investment in Fractal.

In March, we reinstated the payment of quarterly preferred dividends subject to board approval with the Q4 2018 dividend of $4 million paid at the end of the month. We also settled the outstanding common share dividend from June 2017, as well as seven quarters of accrued preferred share dividends from June 2017. In total we paid out $65 million.

We recorded a tax liability of $14 million on the Q1 payment of preferred dividends and we expect to mitigate a portion of this liability against our other Canadian taxable income before we pay the tax in 2020. Any unused tax deductions associated with this liability will be carried forward as an operating tax loss.

We ended the quarter with cash and investment in bonds of over $630 million. Restricted cash remains at $129 million, reflecting $100 million set aside as part of the agreement with Air Canada. While we are yet to receive the formal reassessment related to our CRA tax audit, we expect around $35 million flow from the restricted cash to fund the CRA and revenue [indiscernible] assessments as they are received.

The remaining 65 million should be released to available cash in 2019. Taking that into account, along with the $150 million we expect to return to shareholders when we complete our substantial issuer bid, and the $26 million accelerated payment to HSBC. The proforma available cash should be approximately $400 million.

With that, let me hand it back to Jeremy.

Jeremy Rabe

Thanks Steve. The strategy we’ve set out relies on strong M&A execution and capital allocation capabilities. We are formally in the market for a select number of new hires to strengthen the existing M&A strategy and capital allocation capabilities we and team already bring. The team, we already have in place has also been actively building the pipeline reviewing incoming opportunities and monitoring broader industry developments and trends such as the recent sale of Epsilon to Publicis, which demonstrated the advertising industries appetite to move to a more personalized direct marketing where loyalty can also play a role.

Despite the fact, we’re not at a full run rate capability; we have seen lots of incoming interests. Over the last few weeks, we’ve formally established our investment committee review and finalized our profits for analyzing opportunities against the capital allocation principles we’ve set up. With this process in place, we’ve already turned down a number of opportunities that were outside loyalty and travel spaces or early stage or minority investments or not cash flow positive.

Notwithstanding that the pipeline is relatively robust. While we will not rule out our opportunities to add loyalty and travel assets that dovetail with our strong existing platform and allow us to identify synergies. We will surface more opportunity as we scale up capacity, including in Loyalty Solutions where we are already recognized as a leader.

Loyalty Solutions is a $2.7 billion market where we have less than a 10% stake today and where typically companies operate at 10% margins or above. A successful execution of the strategy would see us grow our share by adding already profitable and cash flow generative business at lower multiples than our own and generating significant value to our shareholders if we can deliver cost synergies and add one to two turns on the multiples.

Our plan is predicated on a view that our financial flexibility in our low cost of capital will be a differentiator for Aimia. We have been clear though that, should we not be able to identify sufficient accretive opportunities to deploy capital through M&A over the coming years, we would consider future returns to shareholders.

Taken together with investments in Cardlytics and our larger investments in PLM and BIG, we have a solid balance sheet and an attractive set of assets and we are returning cash to our shareholders. The substantial issuer bid was launched on April 8 and is expected to close on May 21. And as Steve noted, we’re also delighted to be paying preferred share dividends again.

We expect to pay a total of around $17.5 million in preferred dividends over the course of the year, including the dividend already paid at the end of March and the further dividends of $4 million that we have declared today.

So, to conclude, I came in as CEO a year ago against some tough odds to a drive a resolution to the situation we faced at Aeroplan. The financials we’ve released today and the increase in the share price from around $2 to more than $4 over the last year reflected successful outcome we’ve achieved there.

There was more to do to prove to you that the current share price undervalues the future prospects for the business and we’re working hard to demonstrate that. Already, we’ve made significant strides in refocusing and slimming down the business. The 20% reduction in underlying operating expense in the Q1 numbers is evidence of the substantial progress we’ve made so far. Our short-term priority is getting to profitability in our existing business during 2020 and we’re very much on track to achieve that.

Finally, we’ve setup a clear and accretive longer-term strategy that will see us build on our substantial assets with a growing pipeline of opportunities in the loyalty and travel space. We look forward to updating you on our progress when we report again in August.

And with that, let me turn it over for your questions.

Question-and-Answer Session


[Operator Instructions] And your first question comes from the line of Drew McReynolds from RBC. Go ahead please. Your line is open.

Drew McReynolds

Thanks very much, good morning. Couple of questions on Loyalty Solutions and the M&A strategy. First, Jeremy maybe over to you. If you look at you existing business and everything that’s in that Loyalty Solutions, can you just speak to organic revenue growth, excluding kind of ongoing right sizing of that business, helpful to talk about the addressable market, the margin profile, and what you’re doing on the M&A, but from organic revenue growth perspective, what does it look like today? What does that look like next year, and maybe in a sustained kind of organic growth environment? I'll start there and then follow up.

Jeremy Rabe

Yes, good morning, Drew, thanks for the question. Yes, I mean if we go back, we have to go back a little bit, Drew, a little bit of history on this. So, you know, we, sort of, in the Loyalty Solutions business, you know, Fortune 500 brands around the world where we’re running the loyalty program, right, which means running the relationships with their most important customers. You know, with the uncertainty that existed around the Aeroplan business over the past couple years, you know, as those companies or those Fortune 500 brands were doing RFPs and risk assessments on, kind of, a supplier stability, understandably there were some questions with regards to Aimia, and, you know, we lost a bunch of contracts in that context.

You know I think if you were to look at, kind of, since we’ve announced the Aeroplan transaction, kind of, look at, you know, net new clients won and lost, I think we would see a significant stabilization of the revenue trend there. Now, you know, some of the clients that announced that they were going to be leaving us during the uncertainty of the Aeroplan period, you know, some of those haven’t fully rolled off yet, so, you know, some of those accounts take time before they roll-off.

So, kind of, growth in the near-term will be a bit of a challenge, but certainly again, you know, from a net new perspective, over the past couple of months, I think we are seeing, you know, very significant stabilization there. I think longer term, you know, in the business, this is an industry that’s growing over 20% a year and that’s been, you know, a trend that's been occurring pretty consistently over the past years and expected to continue, and it’s really driven by, you know, two things. One, companies are moving from more mass media types of advertising into more direct targeted personalized marketing methods. And so, loyalty kind of sits squarely within that as a way to, you know, have these marketing tools in a way that you can improve ROI around it.

So, broader, you know, longer-term, we do think this is a really attractive kind of growing industry to be in, and just from a macro perspective, and also, you know, companies I think realize that, you know, they may not be – it may not make sense for them to develop, you know, their own technology, their own, you know, best-in-class capabilities around all the value chain in Loyalty Solutions, and that’s where we are also seeing, I think, you know, strong appetite for outsourcing of those services, and that’s again where we play.

Drew McReynolds

That's great. On the M&A side, and, you know, you brought up the historical context here with Aimia. On the M&A side, clearly, I think what you've done with HSBC, looks like your shifting gears to priority loyalty as opposed to owning the currency and being the loyalty operator. Just wanted to get your thoughts on why that shift. Is it a function of the existing loyalty model just being evolving the economics not there? And I'm just trying to reconcile that shift in the propriety. Loyalty services with clearly an asset in PLM that's going very nicely. So, maybe just talk to that.

Jeremy Rabe

Yes, I mean I think, you know, there's – there are some, let’s say, broader trends that I think you’ll see within the industry of, you know, companies realizing that there's significant value in loyalty programs. If you’ve seen some of the recent renewals, for example, in the airline space in the U.S., you know, some pretty significant financial is associated with that. Of course, the Air Canada, deals they announced with TD and CIBC, you know, and that’s just from the airline space. I think more broadly you’ll also see those types of trends where, you know, increasingly companies are realizing it’s an important marketing tool, but it also can be a pretty important driver of profitability in and of itself.

With that realization, I think, you know, there is also – and you know, we’ve seen in certain clients, you know, that the desire to say okay, we’ll – we want make sure that we’re benefiting from those trends and from those opportunities, and I think that’s what you see in HSBC where, you know, HSBC is and has been, you know, our clear kind of Number 1 anchor partner in that coalition.

The extension of that contract will – you know provides a really strong base so that we can go out and add additional, kind of, coalition partners around that strong anchor relationship over the coming years. And then, in the case of, you know, PLM, you know, we’re – this is again a long-term relationship here. This is not a service contract, but a shareholder’s structure where it’s a joint venture, and of course, you know, Aeromexico gets, you know, more than 50% of the share of the economics from that business, and so, you know, benefits from that relationship.

Drew McReynolds

Okay, that's helpful. And last question from me, Jeremy, just in terms of, you know, back to Loyalty Solutions and what this business kind of could look like in 2020, 2021 both organically and with M&A, just trying to wrap my head around scalability of being in this part of the market. It seems historically, as Aimia expanded internationally, you know, there was the deployment – multi-year deployment of a platform little bit of kind of software-as-a-service model that was trying to be deployed. Not sure kind of ultimately what role or what will be the result of that, but just talk to scalability of what you're trying to accomplish within that proprietary loyalty services space.

Jeremy Rabe

Yes. So, I mean you can think about Loyalty Solutions in kind of services and software. So, on the services side, you know, its, I’d say, less scalable, right, that's more of a, you know, a timing materials type of model. There’s certainly, you know, some scale advantages that you can get from having kind of a broader pool of people and doing some smart kind of allocation in terms of, you know, where those people are located and kind of client facing functions versus back office functions and that kind of thing.

I think where you do see a lot of the scalability advantage is on the technology side. And here, you know, we’re in a situation where Aimia has invested a ton of money and developing, what I would say, are some really best-in-class Loyalty Solution technology solutions. So, we have an enterprise platform; we have a SaaS platform; we have an AIP, which is insights platform for retail analytics. So, all these are now built, and, you know, the economics around adding incremental clients to those platforms are attractive. And so, that's where we’ll really be pushing to build the scale and benefit from those economics going forward.

Drew McReynolds

That’s great. Great color. Thanks Jeremy, bye.


Your next question comes from the line of Brian Morrison from TD Securities. Go ahead please. Your line is open.

Brian Morrison

Thank you, good morning. Hi, Jeremy, just on the M&A, following up on that, you talked about the robust pipeline. Can you maybe just discuss the most active regions, I presume is the U.S.? And then, maybe just highlight, you know, a little bit of a – what you see as your competitive advantages leading to these elevated incomings? Maybe how many of these incomings you see as credible? And I realize it's early, but are you far enough down the road that you expect activity on the M&A front in 2019?

Jeremy Rabe

Yes. So, I think in terms of regions, you know, we’re seeing activity across the globe I’d say. We do have, you know, certain bias or certain preference to try to make use of our tax assets in the U.S., Canada, UK, you know, as we look at and kind of prioritize those. You know having kind of the robustness of the pipeline that we’ve seen so far has allowed us to be pretty selective in how we advance opportunities, and you know, I think that’s a good situation to be in.

You know we don't want to – the last I think we want to do is give ourselves some kind of artificial deadline around deploying a certain amount of capital on a certain timeframe because, you know, the most important thing that we do here is, to do good deals. So, we've been very disciplined about our set-up, our investment committee around a process in which we, you know, review these opportunities, and, you know, we’re not going to do that deal.

So, if you have those artificial deadlines, sometimes that can create additional pressure to do something and, you know, we’re not going to create that additional pressure on ourselves. But, you know, I think we are seeing a robust pipeline, and a lot of that comes from, if you look in Loyalty, there’s not really another I’d say really sophisticated strategic require with kind of scale in the sense that we have right. So, if you look at the platforms that we already have founders who oftentimes – the businesses that we are looking at are founder led still.

They are wanting to be associated with another company that has a strong reputation and can really add to their business and help kind of take care of their baby once it’s incorporated into the company. Global presence it’s obviously our [indiscernible]. I think the cash that we have on hand ready to deploy the fact that we had come out and stated explicitly that our core part of our strategy is this consolidation, you know has attracted a lot of interest. And then beyond that I think we have hundreds of employees around the world who are active in this space and a large alumni network as well through those personal networks has rarely facilitated the conversations and the pipeline.

Brian Morrison

That’s helpful. Thank you. And then just a couple of housekeeping questions, if I can? Steve the free cash flow outlook, I think including restructuring it looks like this improvement was cut in half, is that a good ballpark for the forecast reduction on an annual basis? And then when you talk about returning to profitability in 2020, I assume that remains a target and the profitability metric you’re using as EBITDA?

Steve Leonard

Yes, so answering the back part of your question first. We, the target is on adjusted EBITDA in terms of profitability. On 2019 cash flow, we’re not giving point guidance, but I think we have indicated in our comments and in the slides where you can see some of the improvements that will be coming, we expect to get improvement on the interest line. We were going to get distributions from PLM. We’ve given an indication and you’ll see that those will come in even outside of the larger one we received this quarter.

We expect to receive higher distributions in the balance of the year. CapEx, although now included in our operating expense is coming down versus last year, so that’s lower on the cash burn and then with the backend of the year as the restructuring activities, and some of the transaction activities that we’re doing, transition activities, we expect to have more positive signs in the back end of the year. That’s basically what I can guide you on.

Brian Morrison

Okay. Last question then on the HSBC renewal moving to fee-based versus point, aside from the one-time payment to $26 million, does this have any sort of material impact on your free cash flow profile or no?

Steve Leonard

On a going forward basis, no, I mean other than what you're going to see in the second quarter when you will see the one-time payment run through after that it won't have, as we said in our comments we will – we are moving to a fee-based and that’s basically going to drop down to cash flow.

Brian Morrison

Thank you very much.


[Operator Instructions] And our next question comes from the line of Tim Casey from BMO. Go ahead please. Your line is open.

Tim Casey

Thanks. Couple of ones. Just on the, your goal to reach adjusted EBITDA profitability in 2020, should we, does that include the [$38million or so] from PLM, because that would seem to be not a terribly ambitious target if it does? And two, back on M&A, I mean, are you looking to buy operating assets or would you consider buying in the contracts that you can just sort of flow through your platform as in that definition or when we think about M&A should we think about you specifically buying operating assets? Thanks.

Jeremy Rabe

I'll start on the guidance question and then maybe Steve can compliment. So, one thing I just call out is that 38 million from PLM this year is a bit of an extraordinary number, right, because the key one distribution was probably higher than what we’ll see on a run rate basis. That said, we did achieve profitability already in Q1, you might say, and so there is…

Tim Casey

But not really. I mean, you are including a distribution from the joint venture in that. I mean in terms of the core assets; do you expect them to be EBITDA positive in 2020?

Jeremy Rabe

Yes. So, let me be clear on what exactly the guidance is. So, when we say, adjusted EBITDA positive and during 2020, we are including both the corporate expenses and PLM within that. PLM doesn't run itself even though it is a joint venture, you know, we’re highly involved and supporting that business, and so that specifically what we had guided to. I don’t know Steve; you want to compliment that?

Steve Leonard

So, just, again it’s the three components. So, it would be PLM more on a normalized basis, and you can look at the rest of the year as sort of an indication of what that would be, and our corporate expenses and the Loyalty Solutions business. So, the combination of the three is where the [accrual will] be adjusted EBITDA positive next year.

Jeremy Rabe

And then, I’ll take on your question just also around kind of M&A and operating assets versus contracts. I mean, what we have said is one of our principles as – the investments that we do are places where we think we can add value using our industry expertise and that kind of thing. So, we wouldn't be like a passive investor in some kind of flow through or it will just be a contractual peace, but we are, I would say generally looking for, let me take that. We are absolutely looking for places where we can have a significant input and influence over the asset, which would generally lead us to a place where we're going to be acquiring operating assets, and in most cases, integrating those directly into our existing Loyalty Solutions business.

Tim Casey

Thank you.


And there are no further questions in queue at this time. I turn the call back over to our presenters.

Jeremy Rabe

Thank you, operator, and thanks to all of you for joining the call today. As I said in the presentation, we’ve made I think tremendous progress in reaching our short-term profitability goals. We’ve also, I think launched a new strategy with a really positive reception and we're growing this M&A capability that we spoke to on the call. So, I like to just conclude by thanking all of the Aimia team for all of your effort and delivering our objectives, and we look forward to speaking to you again with our second quarter results in August.


This concludes today's conference. You may now disconnect.