Q1 2020 Earnings Call
Delivering todays prepared remarks, I, Chief Executive Officer fraud, Mclean, President, Christopher Barnard and Chief Financial Officer, Eric Eric.
Yeah.
Following their prepared remarks, the management team will open up the call for any questions. Before we go further I would like to turn the call over to show I'm, sorry, I can't wait Investor Relations points International I our advisor.
Given the company's safe Harbor that provides important questions regarding forward looking statements. Sean. Please go ahead. Thank you.
Please be reminded the remarks on this conference call may contain or refer to forward looking statements within the meaning of Canadian and U.S. security laws.
Management May also make additional forward looking statement in response to your question.
Although management believes these forward looking statements a reasonable.
Statements are not guarantees of future performance or action are subject to important risks and uncertainties that are difficult to predict.
Certainly material assumptions are applied and making forward looking statements and may not prove to be correct.
Important factors that could cause actual results could differ materially the assumptions used in making such statements were included in our first quarter financial results press release issued prior to this call as well as other documents filed with the Canadian and U.S. Securities 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 I'll turn the call over to point to Chief Executive Officer, Rob Maclean Rob.
Thank you Shawn and good afternoon, everyone.
Today's call will be a little different than our typical format, giving our pre release and unique circumstances, where all facing due to cold that night team.
Starting off I want to reiterate some of the steps we've taken in response to the global pandemic, which began with ensuring the health and safety of our employees, while continuing to provide our partners with the best possible support during these unprecedented times.
All of our teams have been working from home since mid March, which we proactively mandated to head up broader stay at orders.
Its transition to remote work has had minimal impact on our operations teams response to this unusual time has been exceptional and we continue our track record of quality deployments delivering effect of our first of all the program members as well as progressing our heavy product development pipeline for current and new partners.
On today's call I'll focus on broader industry seems well and Eric will cover our financial performance on Christopher will highlight operational and partner activity.
Well I'll start with some perspective on trends, we're seeing in the loyalty industry at a macro level and how we view our business within that context.
One of the primary inquiries, we've been getting concerns the stability of our loyalty program partners within the broader travel industry challenges.
Covert 19 has continued to take a heavy toll on the travel industry grounded planes and hotel closures affecting our loyalty partners revenue streams.
We are encouraged by the various travel stimulus on loan packages that have been introduced by governments around the world to assist the travel industry.
Many of our key partners in the U.S. and internationally have already received funds from these programs. We're closely monitoring any further developments in that process.
In addition, love the operators are aiming to lever their loyalty assets to drive revenue and cash flow as soon as possible and many of these initiatives are already in motion.
In the hotel industry last month, Hilton and out say with pre sell $1 billion worth of owners points to their co brand partner American Express.
Marriott hotels recently announced a similar initiative as well.
We have seen that's kind of pre purchase used during other downturns and we believe it has a very clear indication I'm not only the immediate value of these programs, but also the bags long term view of their prospects.
These types of transactions are quick source of liquidity for travel brands and our mutually beneficial for both the brands and their partners.
To summarize these events highlight that loyalty programs have a powerful value proposition both during and following difficult periods for the travel and hospitality industries.
For our partners points and miles transactions are crucial component of their revenue streams. We believe they will play an even more pivotal role in their recovery.
We also believe loyalty programs will be a key part of our customers returned to normal.
When current health restrictions or have changed consumer behavior and mobility patterns across the globe those changes still present solid opportunities for our business.
We're continuing to see activity from what we call future use buyers or people, who purchase large amounts of points in miles for future travel needs, especially when they're part of a strong and creative offer.
Historically these types of offers that represented approximately 65% of our LCR transactions are highly targeted at consumers, who see the long term value in their loyalty programs.
During this restricted travel period, while we've obviously seen a very steep drop in transactions aimed at an immediate travel we have nevertheless seen some impressive results with creative offer constructs in recent weeks as consumers continue to engage with their favorite loyalty programs and purchase miles they will use in the future.
In fact strong offer marketed with a large partner in the past few weeks at the busiest traffic day in our history.
We followed that up last week within different partner deploying another strong campaign that delivered another record day of traffic and grow sales activity for any single promotion in points history.
But let me be perfectly clear because I don't want to come off of sugar coating the current environment.
Activity has been significantly down across all three lines our business since the beginning of April we've been averaging roughly 20% to 25% pre cobot level activity.
But we have also seen promotional bright bright spots in recent weeks as I've described earlier.
Characterized the back half of March and early April as somewhat of a shock phase to the industry that halted volumes to a near standstill.
However, loyalty transactions came back with certain partner quickly wanted to engage their members and we're continuing to see momentum with various partners as they positioned themselves to accelerate growth in the global recovery.
Chris will expand on some of this activity in new program launches later in the call.
Let me also be clear about this we believe we are well capitalized to weather the storm with ample liquidity and ongoing revenues that we believe we'll continue to grow in coming quarters.
So where do we go from here.
But 19 is reshaping not only the travel industry butter everyday lives adapting to and working with these changes rather than against them will be an integral part of.
Overcoming challenges today and well into the future.
We may not have a clear picture into how or when normalcy will return, but from our past experience. We believe that loyalty programs will be an asset that our partners lean heavily on as part of that recovery.
[noise] covert 19 is not the first crisis, we faced in our 20 year history. In fact, some of the most defining components of our operating model came from adaptations, we made during difficult times, including how we approached and collaborated with our partners during periods of industry stress.
We launched our company in the wake of the dotcom bubble in Boston.
And we were able to build somewhere most foundational partnerships during that time.
After 911, we innovated with key partners to launch the LCR business and that ability to sell miles directly to consumers helps contribute to the recovery for many of our airline partners.
We have proven our value and successfully adapted to challenging macroeconomic conditions time and time again.
This has been accomplished alongside and in partnership with many of the world's largest and most successful loyalty programs.
As I mentioned earlier, we believe that loyalty programs, particularly in the airline and hotel verticals will be absolutely critical for the recovery of these industries.
We have seen airlines and hotels look to generate high margin low cost revenue from their programs in times of crisis in the past and we fully expect that same behavior is these companies whether the current situation and also as they prepare for a recovery.
And then the path, we will be ready to assist our partners and launching new revenue generating products reengaging with their members in generating the high margin performance they've come to expect from working with us.
With that I'll hand, it over to Eric to review, our financial performance for the first quarter and discuss current financial trends Eric.
Thank you, Rob and good afternoon, everyone.
I'll start out by providing a brief overview of our consolidated results for the first quarter. When it started very strong but quickly integrated in the back half of March as a spread of covert 19 disrupted travel worldwide.
For that reason most of my comments today are not going to be typical of an earnings call.
And I will dedicate most every time for the current state of the business and what we're doing in response to Carbonite channel.
Very briefly then.
Total revenue was 82.7 million in the first quarter of 2020.
Compared to 95.9 million in Q1 to 2019.
Gross profit, which is our more appropriate proxy for our topline increase 3% to 13.8 million, while adjusted EBITDA in the first quarter was 3.6 million compared to 4.6 million and the first quarter 2019.
The increase in gross profit was driven by growth in LCR and to a lesser extent points travel, which benefited from the impact of the air miles hotel redemption product, which launched late last year.
Coming off our record performance in Q4 19, we started the year off very strongly with solid organic growth and LCR and significant growth in our points travel segment.
In mid March we started to experience significant declines and transaction volumes across all three of our operating segments.
Which minimized our gross profit growth in the quarter and it was the primary driver of the decrease in adjusted EBITDA.
As soon as we saw transaction volumes decreased in mid March refocused our efforts to mitigate the financial impact of covert 19 on our business.
These efforts are focused on two main areas.
Maintaining sufficient liquidity and minimizing discretionary expenses.
From an expense standpoint, we took early an aggressive action.
As we started to evaluate all aspects of our cost base.
It's mid March we have limited or see all discretionary spending including a pause on all hiring activity.
In addition, we had been actively pursuing government assistant programs.
Particular note.
I'll highlight two programs, where we have been successful and securing wage subsidies.
First we successfully applied for the candidate emergency wage subsidies.
The government assistance program available to all Canadian companies that covers 75% of employee salaries.
Up to 58700 Canadian per employee.
At this time the grant covers payroll periods for mid March and mid June.
We expect to qualify for the entire 12 week period of this program.
We expect will provide us approximately 1.7 million U.S. and payroll funding for points employees.
The timeframe for this program continues to change quickly with the Canadian government recently, indicating they will extend the program passed its initial June six and eight.
In addition, we secured approximately 300000 in funding under the payroll protection program in the United States.
From a financial statement perspective, our first quarter results do not reflect the benefits of either program.
Our current expectation is for both programs to be reflected in our second quarter financials.
From a balance sheet perspective, we are taking additional steps to maximize our liquidity in the wake of covert 19.
In addition to mitigating expenses and pursuing government grants, we have ceased or limited capital expenditures.
Deferred tax payments in certain jurisdictions.
Suspended share buyback activity under our current NC I'd be program and pause further cash spending such as the funding over our if you program.
Furthermore, we drew down $40 million on our credit facility.
Precautionary move, but one that strengthens our liquidity for that.
In light of this action.
Total funds available for just over $107 million at the end of the first quarter compared to 86.8 million at the end of 29.
Like most companies at this time, we are evaluating the impacts of cobot 19 on a daily basis.
It would be naive to think we can accurately predicting lengths and duration of this crisis and we are planning against multiple recovery scenarios.
We believe we have sufficient liquidity to whether this pandemic based on that planning.
At this time is difficult for us to provide investors with further guidance on our revenue and gross profit metrics.
That said, we have greater control over our expenses, which I will share some perspective on.
From April onwards, we would expect our monthly adjusted operating expenses.
To be reduced to 2.9 million them up which reflects the expense mitigation steps taken to date and current foreign exchange rates.
I would not interpret this as a monthly cash burn rate.
That would be well south of the 2.9 million Mark for two reasons first this run rate does not take into account the benefit of any government, which subsidies, which we expect to save us roughly $2 million and the second quarter.
Also we are still generating transactions, which acts as an offset to our cost base, albeit at a much lower and less predictable rate than our pre covert performance.
As we mentioned in our press release last month, we have suspended our guidance given the uncertainty surrounding the pad.
Which includes our targets for 2020 and our longer term goals for 2022.
We are confident in our ability to return to our previous run rates when the environment normalizes, but for obvious reasons, the timing of that simply isn't predictable, where we stand today.
With that in mind, most scenarios would see that's generating negative adjusted EBITDA for the second quarter of 2020.
For further context, we expect to generate positive cash flow on a monthly basis, when we see transaction volume starting to hit approximately 50% ever pre covert performance.
On that note I will turn it over to Christopher Chris.
Take care.
Despite the recent extenuating circumstances, we continued to support our partners with their current programs in place, albeit with lower transaction volumes as we've already discussed.
Working aggressively to mitigate the transaction volume degradation by actively coordinated as much relevant targeted promotional activity as possible with our program partners.
Several of our loyalty program partners are actively managing the balance between near term headwinds and establishing a much.
As much capacity as possible to accelerate growth when the environment improves.
He is reflected by the launch of several new programs, even after the widespread lockdowns at March some our partners were quick to position themselves for a global recovery.
To name a few key launches on March 24th we launched our LCR services with Arrow plans. They can't Air Canada as Aeroplan program. We're excited expand this partnership with one of North American leading programs and we'll be making additional enhancements over the course of this year as they continue to implement the relaunch of the program.
You may have seen last week, we ran our launch promotion with Aeroplan, even in the mix of a global travel pause. This promotion garnered more interesting traffic than any previous promotion or company's history.
This is encouraging and encouraging indication to not only the strength of our expanded air Canada relationship, but also the ongoing demand for loyalty currency and a clear indication of pent up travel demand that will emerge as the industry recovers.
Points travel on March Fiveth, we launched a multiyear partnership with Quidco UK largest cashback rewards program members booking hotels on our White label site found at hotels Dot Quidco dot com can earn up to 15% cash back and select for more than 350000 properties worldwide.
This marks our first movement in the global Cashback segment and opens points travel to additional growth growth opportunities.
And in our platform partner segment.
In mid April we linkup citibank's. Thank you points program with the Emirates Skywards program as we continue to build or perhaps a network of finished your services exchange opportunities. This is on the heels of our March 26 launch the second exchange service in the Middle East with Amy is Hsbcs My rewards program, which is now transfer bone that both.
Emirates and to be at you add frequent flyer mile program.
Our new business pipeline remains very active and our delivery rebar resources continue the operating at full capacity.
The reality is that well stay at home orders may see it may lift soon most seem to agree that we will not returning to previous levels of travel and hospitality for some time.
For that reason nearly all of our business development and new partner discussions today revolve around how they can utilize loyalty rewards and programs or return to the gross into in 2021.
And what needs to be accomplish this year to ensure that they're ready when strong consumer demand returns.
For ourselves the activity of putting new programs in market. This year will also drive our results in 2021 and thereafter. So we are keen on staying active in our business development discussions.
<unk> for new program launches with current partners or adding new partners to our roster.
Core strategies, we laid out last year remain intact. Although we are doing so with a diligent mindset on operating cost. We will continue to focus on maximizing performance at the end market services, given the circumstances cross selling to existing partners and signing net new partnerships, both in new verticals and geographies for.
Furthermore, we continue in investigate corporate development activities targeted new partnership opportunities across the business.
In closing thought I want to you reiterate a few key points from earlier in the Carl.
During times of crisis for the travel and hospitality sector loyalty rewards programs have been essential in their recovery and how we respond to support our partners can change the trajectory of our business.
[noise] altogether.
In 2019, LCR accounted for more than 85% of our total gross profit and Mis business line didn't even exist until after we stepped up to further support our partners. Following the 911 tragedy.
I'm, not making a direct comparison, but merely emphasizing that the actions we take today to support our partners not a lasting effect far beyond the current cobot 19 pandemic kind of the spirit of good partnership they're fully committed to doing that we can to help our partners. During this unprecedented time.
With that I'll turn the call back over the operator for Q anyway. Thanks.
Thank you.
If you would like to ask your question. Please press star one on your telephone keypad.
Hey, confirmation gel indicate your line is in the question can you.
You May press star to if he would like to remove your question from the Q.
And for participants using speaker equipment, and maybe necessary to pick up your handset before pressing the star he's.
Our first question is from Gray give us with Northland Securities. Please proceed.
Good afternoon, guys. Thanks for taking my questions.
Clarity on your prepared comments you mentioned from January Andrew and report strong month in the quarter. When I was wondering if you could maybe further quantified the decline in volume that you saw in March and maybe how that's trended into April and Matt.
Okay, Eric when you add that went over to you.
Sure. Thanks.
Yeah. So it's it's so certainly fair we started the year off a very strong we had a record Q4.
We saw that going through pretty much Jan and and a bad.
No we really didn't see the volumes start to decline until midway through March.
I wouldn't want to throw a number on it I think you know Rob pointed out are you know we've seen some daily average is going somewhere 20% to 25% probably took some time for us to get there, but it's certainly didn't take too much time, so I would view the back half of March as being a pretty big contributor to why adjusted EBITDA.
<unk> was down for the quarter. It was really because that second half was up quite down across all three segments.
Okay got it and then you previously talked about purchase guarantees with customers being set up to kind of account for any type of significant situation that might arise.
I guess, it's safe to assume that.
Nearly or most of the gas of these guarantee arrangements had been reduced this year.
Yeah, Hey, it's Eric Hagen, so from a a guarantees standpoint, we typically don't prebuy points. That's typically settle that at the end of a year in fact in all cases, you know when we look across our.
Revenue guarantees and don't see any risk you know come exposure standpoint, or any sort of HM.
I think any cash.
Yes there.
Okay sure. Thanks for clearing that up and last one for me would just be you know you previously talked about with customers ramping loyalty programs. During these periods of stress in the travel industry.
Which is sometimes benefited you in some of these difficult theory, but maybe just wondering if you could talk about or at least comment on the general level of ramping that your traveler hospitality based partners have been doing in their loyalty programs and maybe how that's compared to previous periods of stress in the industry.
Yeah, So it's Rob.
Here, Greg you know weve or whether it was the great.
Recession, or post 911 kind of various ups and downs over the last number of years.
We've seen the loyalty programs and basically the airlines and hotels pressed their loyalty programs to be more aggressive and generate incremental.
Yes, the frankly speaking, but those properties, it's just assets that can be.
Utilized and some of these distressed situations I think we kinda today and in coal that we see similar responses kind of takes two primary forms I think some of our partners.
Remaining after that in the market.
So are looking for.
Revenue generation and you're seeing.
Rich and well communicated will design campaigns that are going out into the market really tend to continue to keep their primary customers engage through a pretty dramatic time, obviously, but also at the same time to generate very high margin low cost.
Profitable revenue and we've seen a number of are examples of that here in the last for a while at the in my prepared remarks I referenced there are two of the highest traffic days than our company's history that happened in the last couple of weeks as partners that.
Having use those loyalty programs to generate revenues in the near term second path that we see a lot of these programs going down as you know some things that we've been working with them on.
Pitching them on products and services that we developed a in the market that maybe take a normal kind of cadence going through the the sales cycle that a number of those partners now say hey, we know these products are going to help as we get into the recovery, they're going to help in terms of generating revenue. So we've seen a number of.
Partners approach us either new or existing and say hey, those things we've been talking about for the last a little bit lets get going on that.
As a result, we've got a fairly.
I have a very robust pipeline products and services, both with existing and new partners and that's keeping that's quite busy at this time. So overall thing there is really to see the loyalty programs being utilized to generate.
Incremental revenues, both short term and.
As these big programs prepare for recovery.
Okay. Thanks, a that's helpful. Thanks, guys.
Okay.
Our next question is from drew Mick Reynolds with RBC capital markets. Please proceed.
Yeah, Thanks, very much and good afternoon, and appreciate Oh, all day to the the quantitative context, a robin Eric.
In terms of your prepared remarks, I'd definitely helpful. Just a couple of clarifications.
Maybe for you I missed the second amounts on the government help and I think I got the <unk>.
The 1.7 million in funding them into P.P.P., how much how much was Uh huh.
That amount was 300000, so it wouldn't be a total of 2 million over the next 12 weeks.
Okay and is that U.S. or Canadian.
That is all in a U.S. currency.
Okay, perfect and then on the accounting for four days. He is this just in your P. and now we're gonna see a net amount is that.
Kind of Simplistically, how it works here as you kind of get the get the payments and yeah. It's a it would likely be offset to employment costs. So it would it would lower our operating expenses. So we've treated as a as a government grants effectively.
Okay. Okay. So nothing [laughter] pretty straight forward I think from that standpoint.
Maybe over Q Rob.
To kind of bigger picture ish I guess first.
It sounds like there's been a little bit a sequential improvement here in may, but but is it safe to say given that most of the world is still on locked down largely.
Not a big bump and then obviously into June it just depends on how you know how how the economy comes on online.
And then second question tougher to.
Kind of wrap my head around is just on hotel in airline.
Partner consolidation.
Probably.
We will be an outcome here in some way shape or form didnt give any thoughts on kind of be the potential impact. There I know you guys have always handled a industry consolidation extremely well.
Just wondering if at all possible to prepare yourself for for some of that consolidation looking forward.
Yes sure. Thanks drew I think on on the first question.
You know it's.
Probably not surprising very difficult to see too far out with any clarity.
I would say.
We are we're we're pretty tight feel pretty good about the next 60 to 90 days and primary driver on our revenue side of things a as well as you mentioned.
And why made looks like a a significant improvement is is that our hands. The way we get a handle on kind of promotional campaign activities. It's in the market and so we have a pretty good sense of what will run here in may and are.
Pretty good pretty good sense as well in June.
And the campaigns run.
Well, so that's kind of very rich offers that you're seeing in the market today as well as kind of strong communications behind them and it really interesting contracts constructs. We are seeing very very good results on it theres not as many of those end market as you might expect as we would normally have.
Pre cobot environment, and so that impacts the overall revenue for our company, but the individual performance of promotions has actually had some really kind of bright spots. So when we look out the may and we look out the June when kind of get our heads around all the campaigns that are in motion that are going to go into the market. What I would say is our partner teams.
Our spending and then.
A tremendous amount of time with our partners globally, and early showing and demonstrating to partners that are still trying to figure out you know when is the right times going to get back into market and Reengage. We're out there you know very actively showing them that there are a members that was tremendous demand for the currencies, there's a tremendous amount of at least within the memberships that these.
Currencies will be valuable.
As the recovery comes forward, so don't be shy lets get out there and put some of these offers in place and so I would say every day we're seeing.
Our partner teams have more and more success with more of our partners globally in getting that Matt message across that they'll get up there be active it's generating real dollars real revenues for your company that we're active so I think I feel like I've got decent visibility through May June July and harder to.
The how that all plays out in the second half my belief is as we see more a more of this campaign activity driving good results it'll be more likely that more of our partners want to participate and begin that recovery in generating a economics. So I'd be my answer to the first question second question.
Around consolidation in the industry, we really haven't seen any kind of strong indications of what that's going to look like certainly lots of speculation and these kinds of environments.
Historically, we've seen some consolidation your comments are right. We've we've historically.
You know, whether those situations pretty well we work with a lot of these these big players and as we've said in the past.
And the best cases for us as our winter partners our strong so.
In cases, where consolidation has happened at we've we've had stronger organizations come out of the other end, that's usually led to lots of kind of new opportunities for us.
Kind of other backside of somebody's traumatic events. So I don't really have a ton of visibility on who that might be.
During this past certainly lots of speculation out there, but we are encouraged by a lot of the stimulus packages that have been put forward by the various governments, whether it's in Asia Europe organs, specifically in the U.S.
So we remain optimistic that there is another side to this that most if not all of our partners will.
Exit or looking to be hungry and growing revenues and looking to rely on us.
As they come up the other side.
That's that's helpful. Robin It maybe a follow up on the on the programs that are now there and obviously fewer and in volume, but very successful.
Is there a characteristic of those.
Kinds of programs like what why or something that much more proactive than others. It just looks as if.
No. We're all side as you know the daily grind I'm eager to get our minds on other things in and you know future traveled would be one of them. So why wouldnt more a broader kind of set of programs be doing this as opposed to sounds like some big ones, but a few and far between.
Yes, it's a very good question I think.
We we speak with our partners regularly as you would expect.
And you know there I'd say, there's a there's a group that.
The loyalty programs have kind of free access they're comfortable their brand.
Leaders have been comfortable too.
I was under stay active and engaged with their membership base and that those are the ones that are really working closely with us to put these these campaigns and these engagement offers out in front of their tens of millions if not more members.
Theres another group I would say that are.
You know the loyalty programs are kind of chomping at the best if I could describe it that way there there are willing there.
They're receiving all of our data and all of our information and all of our encouragement about look these are the kinds of results. We would expect to see we're lining up activities with those groups. They just don't yet have the kind of go ahead from there.
Talk to their organizations that their brands feel like they can be out doing these kinds of promotions in communications at this kind of in an environment I think those personally I think those are coming.
They're getting close if they see the number of carriers now starting to.
Open up certain routes Theres certainly.
Little bit more growth from the domestic markets, even some of the international carriers are opening up roots.
Of slowly I think those are the next to group that as they start flying again or opening up hotels in regions, they'll then back that up or bring on.
Promotional activity to support that that relate and then there is another group that are still just at that stage, where I think.
Our view is until they're able to get back in the air or open up.
The hotel.
Properties are unmatched, they're going to they're going to wait until that happens that before they get out and be active from a communication standpoint.
So those are that group will likely be a little bit later, but I do think on line up what we're getting ready to come in the second second kind of wave if you will.
It is encouraging.
But it really comes down to their own brand strategies are where they are on their return to work so to speak.
Okay.
That's great and maybe if I can squeeze in one extra here from an jesper he might from a member be pager standpoint.
You know you're probably doing to the full analysis of what happens on the other side of this thing what changes you know kind of comes Kobe distributors, such an error on the member side you know what are your high level thoughts in terms of how members value loyalty valued occurrence.
I see.
I don't really see see accumulation and rewards as you know a cost effective way to get you know a family back traveling when times are tough I kind of how do you see that.
Somewhat unfolding in the high level.
Yeah I mean.
Well a couple of days I'd answer that first and foremost we're seeing programs.
There are out in market in putting high value offers and part of their members members are snapping them up.
Truly record levels.
So I think that means members our understanding the value of these currencies, they understand kind of metrics around the programs and so.
Our recent very successful promotion that it's got lots of coverage here in the city marketplace in Aero plan, we launched with them last week and they put out.
Very interesting offer.
And remember is lined up like no previous times. So I think members have a tremendous amount of confidence and the fact that travel well return and if there is value in.
In acquiring more currency, there's nothing that up.
So I think we're seeing that everywhere. The Canada is a recent example, but certainly in the UK in the U.S. witnessing pockets of that opportunity.
I look back at historically as we come out of some of these troughs in the past the value.
The frequent flyer members those engaged members were frankly.
The members that most of our products are interacting with our usually the first first.
Back in the air back into hotels and back travel.
And you know they will have in our view they will have a.
A tremendous appetite for getting back on the road when the time is right and they'll be using a combination of their assets sitting on for a while and some of the inevitably very very rich offers.
Frequent offers that we put out into the marketplace at that time, so I'm very very certain that the industry will be actively and aggressively incenting members to reengage acquire more miles get back on the airplanes that I think the loyalty component those free flights.
Are you are going to play a huge.
Huge role that so we think there'll be a.
Significant an appetite.
Frequent flyer base as we've seen a previous.
[noise] dips, Okay got it okay. Thanks, thanks very much for all that's very helpful.
Our next question is from Jim Burn was asking capital. Please proceed.
Hi, Thanks, guys I'll just keep to one question here just on the expense management side.
You mentioned some of the subsidies and programs.
Where are you on layoffs or where are those and then maybe some commentary around in a change it to executive comp or or born Caesars thing. The number of companies take that route as well can you just gave some color that'd be great.
Yeah, it's Rob.
You know, we've we've taken a look pretty quickly in terms of expense management, all as Eric's prepared remarks indicated in the field froze all hiring all at a replacement hiring all discretionary spending.
Weve.
Jumped on the wage subsidies to say how to take advantage that show up resources, we have largely been operating right now under the.
An operating model or a formula of just shore up our resources as much as possible and that really comes down to.
You know we've been a profitable company for a long time, so the cash on the balance sheet was very strong and aggressively manage expenses.
Drives the revenues as aggressively as possible and obviously there was a big dip, but we're optimistic that that's going to improve going forward.
And then tap into.
The lending facility is that that Eric had set up for this team is set up.
And we tapped into so no first thing was to really ensure on a day to day basis, we're maximizing the resources that we have.
That head second part of that Formula is really pretty straightforward.
We've we've reduced expenses, where we felt was prudent we think right now there's a term.
As we've described a tremendous amount of activity going on which is a bit ironic given the the revenue performance and the overall situation in the industry, but for US a lot of the activity in driving these promotional.
Initiatives. These campaigns, coupled with a pipeline that is pretty significant.
Till point, where were you know what the decisions we've made around hiring we're actually kind of drawing a line and saying, we're only going to be able to get all of the these certain when does it so we're leaving a little bit of that activity on the table.
Until we're staying very busy so that formula of make sure. We've got lots of resources and healthy resources and a couple that with our wheel or we working on high value.
Activity, that's driving in year revenue. So it's a primary focus so that activity is driving it in your revenue or is driving.
Productivity or products that we can put into the market in 2020 that will help on the recovery. So when we look at that balance between those two we feel where we are is prudent now.
Look we can do you know the third piece that we consider is how long.
Is this trough and how long that business model.
And that approach be sustained and when I look at those three components right now I feel like we're in the right spot if that changes if the revenues and we get into a double dip or the revenues don't recover as we're anticipating recovery.
We have a long menu of of items that we would do to take advantage of to.
Sure up our resources. So were we right now it doesn't feel like we should be stopping launching new partners are building new products that are generating economics for the for the business at our partners, but if that starts to slow down in any way shape or form that we would just have no choice, but to take a more aggressive steps. So that's really the way where things.
Thing about it and I would remind us everybody that we came into this ur cobot 19 situation.
An exceptionally healthy spot as a very kind of.
You know very happy with where our position was profitable growing.
And we fully expect as we get through this but as travel comes back where that same kind of a company I want to make sure. We're in a position to take advantage of the of the recovery and momentum in all the opportunities that are in front of US right now so that's what kind of position today, but.
You would expect in this situation is pretty fluid and we're watching this oh the daily basis.
Our next question is from Ed Woo with Ascendiant capital. Please proceed.
Yeah. My question is I know you're seeing some.
Sometimes I'll hop improvements are there.
These where you're seeing that more pronounced than others.
I would say, it's Rob again.
I'd say, it's lots of its driven by which partners are jumping in and engaging at two things I'd say on that we have partners in Europe and in North America. Both as an example that are quite active.
In terms of the engagement campaigns and such so those both those geographies would fall into that.
That Ken I think the other thing that's that I think we're expecting and what we're hearing from our airline partners and hotel partners is that.
For the most part expectations are that that domestic travel will be the first to recover a fair amount of visibility.
Expectation around domestic travel starting to recover here in the summer.
And so that probably leans towards strength more strength into North America marketplace in a shorter term I think most.
Speculation is that the international travel will be later to come back and so that obviously means markets like the middle East and Europe are probably you don't have more of a.
A long haul international component to it and so that you know our senses your north American probably comes back a little bit quicker and it's Europe and the in the Middle East really based on the structures of those.
Core partners that we have but again a lot of that.
To be very Frank a lot of that evolves day by day week by week.
The via kind of currently what we're seeing and hearing back from a number of our partners.
Great and then the other question I have is you know.
Who is really driving these promotions is it or you know travel providers them on t. owners or is that you guys. It was a Max and also have you seen that go into programs launch.
All right.
Programs to possibly allow you to have better margins going forward.
Well I think first part of your question it's.
It's being driven.
We are in partnership with our program. So that's that's a critical.
Positioning for Us. So you know, we're working with our our loyalty program.
You mean ourselves that are both programs are making those decisions. It's primarily driven by you know when partners are in a position too.
Go out and communicate and if they're interested in this revenue generation right now that we're there to kind of it'll make that happen. So those are where the decisions are made I would say, we're very very active in taking these.
Pockets of I've really positive results and making sure that is.
Readily available to all of our partners that they understand that the what the but the opportunities are and that getting out there and engaging and the being in front of members actually does produce really interesting results. So you know that's a bit of the role we're playing there and I'm sorry. The second question second part of the quick.
And again.
In terms out you know.
Economic than margins as it possibly the you it could be buying these points at a much better pricing you were you know a couple months ago.
Yeah, it's a great idea.
We should be pushing on that but you know right now we're not focused on that at this point, we're very much tried to assist the industry at our partners and in getting as much activity as possible a lot of what we structure generally added.
The more volume, we can drive quite often that drives more margin for us.
In our commercial relationship. So you know for US it's a word aligned with the partners to just generate as much high high profit I high margin revenue as possible and we'll continue down that path on their behalf and on the partnerships we had.
Great and then last question I haven't as you know you guys always European competitors is.
Hi. This is gone model was done in turn no.
Not ports on the airlines as often lot an airline to having issues do you see that possibly opening up more opportunities for you guys to know how kind of outsourced the multi pronoun services where are you guys.
Yeah, Hey, edits Chris.
You know, we we're obviously not counting on that but certainly the dynamic you. Just described we think is very much going to be the case going forward.
All these airlines in hotel all the programs that we deal with not only do they.
Clearly fewer resources now, but they are even more interested as they get back online and speed to market.
So I think we're pretty well positioned.
With respect to that kind of internal competitive dynamic going forward.
Great well, thanks for answering my questions I wish you guys got good luck.
Thanks.
Thanks.
This concludes our question and answer session I would like to turn the call back over to Mr. Mclean for closing remarks.
Great. Thank you very much a we'd like to thank everyone for listening to todays call and look forward to speak you speaking with you again, when we report our second quarter results. Thanks again for joining us.
This concludes today's conference you may disconnect your lines at this time and thank you for your participation.