Q1 2022 Loyalty Ventures Inc Earnings Call
Okay.
Good afternoon, and welcome to loyalty ventures first quarter 2022 earnings conference call. At this time all parties have been placed on a listen only mode. Following today's presentation. The floor will be opened for your questions to ask a question. During the session you will need to press.
Star one on your telephone please be advised that this call is being recorded if you require any further assistance. Please press star zero.
It is now my pleasure to introduce MS. Lynn Morgen of advisory partner Mr. Morgan. The floor is yours you may begin.
Thank you operator copies of the slides, we will be reviewing in the earnings release can be found on the Investor Relations section of our website.
Hosting today's call Charles Cowen President and Chief Executive Officer of loyalty that Josh and Jeff Chesnut, Executive Vice President and Chief Financial Officer.
Before we begin I would like to remind you that some of the comments made on today's call and some of the responses to your questions.
Contain forward looking statements.
These statements are subject to the risks and uncertainties described in the company's earnings release and other filings with the SEC loyalty ventures has no obligation to update the information presented on the call.
Also on today's call our speakers will reference certain non-GAAP financial measures, which we believe will provide useful information for investors reconciliation of those measures to GAAP will be posted on the investor relations website at royalty benches that come with.
With that I would like to turn the call over to Charles Horn.
Yes.
Thank you Lynn and thank you all for joining us today to review our first quarter results.
Start with page three.
Our consolidated performance was in line with our internal expectations for what has historically been a seasonally slow periods in our business as anticipated air miles redemption patterns begin to normalize through the pick up in postpaid in the travel aided by the launch of Phase one of our next generation travel platform at the end of 2021.
<unk> continued to expand its client base, which has positioned us to execute on the greater number of contracted programs. We are scheduled for later in 2022.
Additionally, I am very pleased to welcome both Sean Stuart and Rick Newman to the Earmarks leadership team Shannon Richter accomplished executives from leading Canadian retailers with deep knowledge of the local landscape in Canada.
And what this means to air miles at the moment.
Finally, we remain committed to the capital allocation priorities that we outlined earlier this year, which are designed to deliver stronger marketing ROI. Some top line growth, where sponsors and partners and in turn drive growth in both air miles and brand loyalty.
Slide four highlights the key financial metrics for the first quarter.
Total revenue for the quarter was $155 million and adjusted EBITDA was $25 million.
Consistent with our internal forecast, both air miles and brand loyalty posted lower year over year comparisons at.
At Air miles revenue decreased due to a decline in miles issued over the prior two years as well as from the increase in the collective value proposition implemented in late 2021.
And adjusted EBITDA declined due to lower revenue, but also from key additions to the business development and technology teams Brandon.
Brand loyalties revenue adjusted EBITDA were each down compared to the year ago quarter due to the timing of programs and market or said another way our larger programs are scheduled for later in 2022.
For the quarter, we reported net income per share for which.
Which included our first full quarter of interest expense.
Slide five provides more detail on the experience and capabilities. The Cheyenne Ric are bringing to our team at air miles.
Sean is rejoining their models from Canadian tire, which is a $16 billion revenue multi brand retailer with over 700 stores nationwide.
<unk> latest in house loyalty program triangle rewards, which use first party data to develop deeper insights into shopper behavior stronger consumer engagement and personalization at scale.
Since our founding in 1992 Air miles has pioneered the strategy of leveraging the power of first party data to deepen the relationship between the retailers and consumers Sean focus on analytics and personalization will be the perfect complement to our data assets and partner relationships.
In addition to sean's industry knowledge and technical capabilities is authentic and collaborative leadership style and ability to be a change agent will be further remarks transformation.
Rick comes to US most recently from flip and before that Walmart, Canada, and he served as Chief Technology Officer and Bill.
Is there a mile CTO, Rick is a critical leadership role in developing implementing and managing our technology strategy and roadmap.
His experience with companies undergoing digital transformation will help air miles move forward quickly and efficiently Richardson thoughtful and decisive and we're delighted to have them as part of our team.
Both Rick and show insurer commitment to the strategy, we've outlined which is built on near term investments to drive long term growth through innovation for our sponsors and personalization for our collectors the.
Their expertise will help us to accelerate our initiatives by delivering quick wins, while getting the longer term investments that will differentiate us in the market.
Slide six provides an update on several key developments at Aramark since the start of the year.
First we're pleased to announce we renewed our partnership with American Express a longtime member of the program for more than 25 years American Express as a top box lunch for air malls, and we are excited about partnering with their team to develop new ways to spur a cardholder acquisition growth.
This quarter, we also added retailers like H&R block to MRO shops about C. A R e-commerce shopping portal, where collectors can earn air miles reward miles for shopping online.
Looking ahead, we are devoting significant organizational energy and towards business development efforts. The anshan enrich we've recently added talent with strong industry relationships and deep knowledge of key verticals, our new team members and a compelling set of investments we are making bring a renewed momentum behind our partnership discussions.
Sean addition is a clear signal to the Canadian market that air miles, just thinking differently and creatively about how we work with our partners to help improve their marketing ROI and accelerate the growth.
Recently hear them all celebrated its 30 <unk> anniversary.
Since its founding 1992 air masses issued over 100 billion miles and provided about 1200 flat rewards per day for 30 years and along the way earmarks, we become a fabric of the Canadian culture as part of our ongoing celebration, we're doing more of what we've always done rewarding Canadians for shopping with their sponsors through promotions.
Including three miles epic trips and merchandise from top brands.
Moving to slide seven let's discuss the collector activity for the first quarter.
As we discussed last quarter, we made a strategic decision to invest 20% to 25 million towards improving the collector value proposition as a bridge to engage consumers until the Capex investments come online next year, we communicated that investment to existing and prospective collectors through national campaigns on both traditional and digital channels.
A portion of that messaging is being delivered through our partnership with Canada's got talent.
As CGT sufficient travel partner, we are using that national platform to emphasize the travel opportunities available to collectors through our program.
Importantly, this channel will help us reach collectors and potential collectors of all ages and demographics.
The CGT tie in is aligned well with our collectors renewed interest in redeeming for travel rewards as Canada and other key destinations are reopened we've seen a surge in demand for travel related redemptions.
In the year ago quarter travel represented a single digit percentage of total redemptions. This quarter, we've seen travel return to traditional levels of about half of all redemptions Quakers had been focused on destinations, including Vancouver, Las Vegas, and London internationally.
While we are continuing to monitor COVID-19 related restrictions in different jurisdictions based on current visibility. We expect travel will continue to be a clicker preference going forward.
Page eight highlights the air miles reward miles issuance redemption trends over the past nine quarters.
Fair enough reward miles issued in the first quarter were consistent with the year ago quarter. After adjusting for non renewals and redemptions were flat with Q4, 2021 and slightly higher than the first quarter of 2020, which was impacted by the start of the pandemic.
The burn rate appears elevated partly due to lower issuance level in Q1, driven by non renewals I. Just mentioned, we expect the burn rate to revert to a normalized level is the pent up demand for travel subsides and as we add new partners and earnings opportunities for our collectors.
This period of elevated redemptions is a natural offset to the last few quarters. When we saw historically low redemptions due to pandemic related limitations on travel.
<unk> settlement assets account has a balance of 700 million at quarter end funded by cash we routinely set aside for redemptions. We are confident that the redemption settlement assets will cover periods of elevated redemptions without an impact to our liquidity position or operating cash flow.
Turning to slide nine let's review the key developments for brand loyalty in the first quarter.
Loyalty continues to compete and innovate.
Most recently, we launched a pilot program to make personalized offers for consumers when they are logged into our grocery partners app environments, a regular anonymised this would represent.
Resent the groceries normal content, but under this pilot program a logged in visit will highlight to the consumer a curated list of offers that will help us sharper accelerates reward opportunity with that retailer during the campaign.
This approach was designed to be GDP are compliant and we're looking forward to successful pilot. It helps us learn refine and optimize the program for all of our retail partners.
I'm also pleased to share the brand loyalty has continued to invest in this toolkit for running campaigns with virtual rather than physical rewards. This campaigns are independent of the physical supply chain as well as environmentally friendly and we're planning to be in market with the Disney anchored program later this year.
The conflict between Russia, and Ukraine resulted in our decision to pause operations in Russia after existing campaigns to conclude.
We are now soliciting new business in Russia, and we've stopped shipping reward merchandise into the country.
We estimate that this will result in $16 million reduction in <unk> projected revenue for 2022.
Our approach on conducting business in Russia is shared by our key partners and suppliers and we collectively hope that there is a peaceful resolution in the near future.
Slide 10 illustrates the broad geographic area that ran multi serves as well as the selection of the campaigns currently underway.
Geographically EMEA continues to beat represent the largest market for brand loyalty followed by the Asia Pacific region.
Our team is working to expand our footprint in the Americas as we believe this area represents an important growth opportunity for the company over time.
In terms of active campaigns in the first quarter, our selection as Hollywood here.
At Albert Hein atop Roche in the Netherlands brand loyalty rental program featuring ready.
Core foreign prints featured a campaign with SAB materialize in Germany, we leveraged our Disney relationship to rent a <unk> branded camping gear Arabia Andy.
In the Asia Pacific Region, we partnered with Zoomy and mentor program, featuring Zwilling kitchen Ware rewards brand royalties combination of global grocery relationships and exclusive supplier partnerships results and compelling rewards and sustainable growth for its clients.
On slide 11, we provide a progress update on the investment roadmap, we introduced last quarter.
Wanted to drive accelerated growth in 2023 and beyond.
In particular, we are focused on engaging our collectors through the enhancements we've made to the collective value proposition is what listed the upgrades we've made for travel redemption program.
Given the heightened consumer interest in travel opportunities. We believe this initiative as well time to capitalize on the markets expectations.
Our digital innovation efforts are focused on both how and why our factors interact with US are most core platform is how consumers interact with us and this represents the look and feel features functionality and the security for the website App and mobile web experience West collectors. Along then we start to address the reason why theyre looking through our content optimization didn't.
It's just they're typically looking for relevant experiences self service objectives and personalized offers.
These upgrades represent a welcome leap forward and capabilities to serve our collectors better.
Finally, our investments in data and analytics will help our sponsors identify their best customers and their highest performing promotions, meaning they can drive stronger rois from their marketing dollars.
But with our new approach and data access our partners can leverage the data directly and rely upon our delivery capabilities across a variety of communication channels.
Collectively we believe these investments will strengthen our standing as a leading coalition loyalty platform in Canada and position <unk> for a strong and vibrant future.
While the investment focus in 2022 will be concentrated on the air miles, we will remain vigilant for opportunistic acquisitions that would help brand loyalty at clients suppliers and capabilities to spur sustainable growth.
As we move to slide 12, we provide more specifics on the enhanced which we've made toward travel program what is on the drawing board.
Over the past year, we have already made a number of meaningful changes to the air miles redemption process. We expanded the number of airline partners in cabin classed as available for booking we retired the prior zone based pricing model in favor of dynamic market. They could approach that reflects sales and promotions on a timely basis and we added payment options is stretched beyond Myles.
Only redemptions at.
Those changes are just the beginning we're entering new features functionality self collectors find their next trip rather than just to book their next trip with our unique perspective on consumer behaviors liquid served.
We can offer personalized recommendations and experienced tendered on an individual basis.
With those recommendations were working to become a one stop shop for flight hotel transportation and destination reservations.
<unk> self service options and the intent experience will draw perspective travelers for programming to our site and represent an opportunity for travel providers to reach that audience and the very moment that are evaluating destinations and travel options.
And as we invite new center collectors to share their post trip travel stories that will inspire other players as they research and book their own upcoming travel plans.
On slide 13, let's explore how our digital innovation elevating the experience for the air miles reward program or.
Our new CTO, Rick Newman is working with both internal and external teams to reassess our core mobile platform, which represents how collectors interact with air miles on their phones, either through the app or the mobile device Rick and his team are focused on removing friction from common task upgrading existing capabilities and adding next generation features and security.
More specifically this includes improving our mobile enrollment process, adding a more comprehensive clicker dashboard and building out more self service capabilities for tash like profile changes and missing air miles reward miles inquiries.
These represent two of the top reasons collectors call our care center, so often the ability to handle these SaaS correctly, not only improved collector satisfaction, but also reduce the call volume sit her care centers.
And finally these upgrades will also unlock the ability to deliver more personalized offers to collectors directly.
Driving recurring usage repeat visits and stronger engagement with the program.
This content optimization represents the key reasons for our collectors.
With us and our research indicates that active mobile app users from nearly three times more likely to earn air miles reward miles is non mobile app users.
Moving to slide 14, let's discuss the areas of investment in our data analytics capabilities as.
As we noted last quarter earmarks as always use first party data and insights from consumers behavior to deliver personalized offers on behalf of our partners and sponsors.
The investments, we're making now will enable our sponsors to leverage this data in their own marketing platforms as well.
The air miles data Lake houses all of the Petro genomes and historically, we've analyzed the genomes for patterns and insights to power marketing campaigns for our partners.
Recently, though we've added secure front towards the data lake by leveraging <unk>, leading data share platform called Snowflake.
No matter, what marketing platform, our CRM our clients are using snowflake represents a common interface that enables them to securely access collector data without creating complicated expensive or customer access channels.
However, there were some sponsors that may not want to actively import collected data into their own systems, but they are interested in reviewing the core data directly with snowflake and other data visualization tools, our air miles data analytics team.
We can offer them a way to review the data without actually pulling it over this makes it easier for analytics teams work directly with our sponsors when reviewing the insights from our data <unk> analytics work and once we are aligned on the opportunities. We are collectively mined from the data we are ready to put those insights to work through personalized communications with our collectors.
On Slide 15, you can see how this work comes together is charged with the gathering profile and demographic information from collectors and adding the SKU level a category level data that we received from both online and in store shopping activity.
Embedded within those shopping patterns or marketing signals about the consumers' lifestyle and life stage.
Our data scientists look for those signals and translate them into personalized messages, so where sponsors can make targeted highly relevant offers to shoppers in the moment.
We will deliver automated communications through Adobe's real time customer data platform or CDP, which integrates within our data warehouse enables air mass reach collectors with the right message at the right time.
And because we are leveraging AI and machine learning in concert with Adobe CDP, we can deploy and refine those messages in real time and that our scale across millions of collectors.
These personalized highly relevant offers give collectors more opportunities to be rewarded and provide partners with more ways to help their shoppers experience brand in a way that fits their lifestyle.
As you can see we are fully committed to elevating the collector experienced within the coalition and building our capability to support real time personalization at scale for sponsors. We believe this is the way to drive sustainable growth going forward.
I will now turn it over to CFO , Jeff Chesnut for the financial review.
Thanks Charles.
Slide 16 presents our results for the first quarter of 2022 compared to the corresponding period of 2021.
Revenue in the quarter was down 12% due to a 6% decrease at air miles and a 16% decrease at brand loyalty.
Net income and diluted EPS were both down quarter over quarter as a result of the margin loss from revenue declines investment and our employee base and a full quarter of interest expense.
I'll provide more details on our results on the next slide.
Slide 17 presents our segment level results for the first quarter of 2022.
In the first quarter revenue for both air miles and brand loyalty declined from the year ago period Air miles revenue declined approximately $5 million with about half driven by a decline in service revenue representing the flow through impact of lower miles issuance in 2020 and 2021 the balance of the decline was associated with higher cost of redemptions.
Netted out from gross revenues to arrive at our revenue presentation.
The margins on redemptions contracted in connection with the enhancements, we made last quarter to the collector value proposition.
Brand loyalties revenue declined by $17 million due to the timing of larger campaigns, which can vary significantly year over year.
Air miles adjusted EBITDA declined, 19% or <unk> 7 million as compared to the first quarter of 2021 due to the revenue impact combined with the addition of key hires to help advance our business development and technical capabilities. These costs were partially offset by savings in occupancy and marketing costs and we will remain cost conscious as we invest thoughtfully in the REIT.
Areas to drive growth.
Brand loyalty is adjusted EBITDA in the first quarter declined from a year ago period, due primarily to the decrease in revenue.
We continue to project that brand loyalties topline performance will strengthen across the year and provide more scale to offset the fixed cost base at the business.
Slide 18 provides our financial outlook for the year, which we originally presented last quarter based on our current visibility and due to developments in Russia. We expect full year 2022 revenue to be at the lower end of our 775 million to $800 million guidance range. This incorporates the increased investment we have outlined for 2020.
Two to drive accelerated growth in 2023 and beyond.
Similar to last year, and we expect air miles quarterly revenue and adjusted EBITDA to be fairly consistent across 2022 subject to foreign exchange developments.
Our outlook for brand loyalty sees a sequential pickup in the second quarter as we progress towards the fourth quarter, which is seasonally our strongest based on the number of campaigns planned and the associated rewards mix.
For brand loyalties U S. Dollar forecast, we're closely monitoring the impact of the current geopolitical circumstances on the euro to USD FX rate.
And we have the ability to flex, our marketing and capital investment dollars up or down as needed to align with market conditions and our outlook at this time, given our cautious optimism on a continued recovery we are maintaining our investment plan across the coming quarters.
In fiscal year 2022, we expect the tax rates for the two segments to range from about 25% to about 28%. After considering the currently nondeductible U S expenses, we expect cash taxes for 2022 to range from $30 million to $37 million.
We're focused on reducing the consolidated tax rate and initiatives are underway to leverage will redistribute. The currently nondeductible U S expenses.
As we undertake the investments discussed today, we're mindful of our liquidity and our capital structure Slide 19 highlights that our liquidity is strong at over $270 million at quarter end exclusive of the redemption settlement assets.
We ended the first quarter with no borrowings on our revolver and we reduced our gross debt by $13 million consistent with our focus on deleveraging on a net debt basis, we finished the quarter at about $520 million.
Besides debt reduction, we prioritize investing in the business through our strategic capital projects. Our Capex spending reflects the initial stage of our strategic investments, which has been focused on the planning phase as we transitioned to subsequent stages, including development and deployment, we anticipate that our capex spend will increase in line with our prior guidance.
Overall, we have ample liquidity to support the strategic objectives with outlined with capacity to react quickly on inorganic opportunities as appropriate.
As we move to the last page, we're confident that the strategic priorities. We outlined today will enable us to strengthen the leadership positions of both air miles and brand loyalty by building upon our relationships with existing clients, attracting new sponsors and clients and driving enhanced collector and consumer engagement with our loyalty programs.
Ultimately these initiatives will transform air miles and brand loyalty and will help us continue to drive sustained profitable growth for our clients and for loyalty ventures.
Operator, we're now ready to open the lines for questions.
And thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
And our first question comes from Toni Kaplan from Morgan Stanley .
Your line is now open.
Thank you so much.
I wanted to ask about you talked about revenue being at the low end of the guidance range, but I.
Adjusted EBITDA guidance.
Reiterated.
Are you expecting that you can sort of flex the investment down.
Say more towards the middle of that range or do you just have reduced cushion here or.
Is there something offsetting is that maybe I'm not appreciating.
Hey, Toni it's Jeff.
We reiterated the guidance range that we put out towards the lower end of course because of the impact in particular of the Russian developments from an EBITDA standpoint.
Similar expectation there.
As we mentioned on the call we have the opportunity to flex those investment dollars.
As we move through the year.
Okay.
Got it.
And for brand loyalty.
You talked about.
The sequential increase.
Two Q and continuing through the year, just given for Q is going to be the strongest.
And one I guess is that because of the number of programs that are being launched then.
And also I guess previously you had expected double digit growth for brand loyalty.
For the year do you have an update on that as well.
And from a brand loyalty standpoint, you're right we are expecting to see.
A leg up in the second quarter as we as we come off what's typically are.
One of our smallest quarters in Q1 and then.
The mix of programs, we have a little different shift or a different mix of programs. This year relative to last year, where last year, we started off with.
Some of the larger programs. So this year those are going to be.
Scheduled for later in the year and then to your point in Q4.
We do have larger programs and more program scheduled for Q4 in particular, because thats the holiday season.
Got it.
And last one from me.
Can you just give us an update on supply chain and how.
How much of an impact that's having on on brand loyalty.
Yes, that's continues to be an issue for us.
What's going on in the South China ports, and you see how youre shanghai's gone into Lockdown youre not seeing in Beijing. So one of the things Youll see in our cash flows we did order our inventory early to make sure we get it in for Brian . The programs later in the year. So it's put a little squeezed in our working capital early this year, but it basically was prudent on our part to go and start shipping inventory.
Ahead of its even though return a little bit more inventory than we'd like right now we needed to get ahead of the fourth quarter. So it's still there, but we anticipated and we just got ahead of it.
Alright, thank you.
And thank you.
And our next question comes from Kyle Peterson from Needham.
Your line is now open.
Hey, good afternoon, guys. Thanks for taking the question.
Just wanted to touch a little bit on your thoughts on kind of a normalization, especially I'd like to.
Burn rate in air miles I appreciate the pent up demand and some noise with.
Consumer spending on the issuance side.
Do you guys have any visibility on how long.
The normalization process.
Should take or would normally take it in a period like this is that.
One or two quarters is it the rest of the year like I guess, how should we handicap.
When the especially on the air miles side starts to look a little more.
Normal post COVID-19 .
Hey, Kyle it's Jeff so.
So if you think back to 2020, we saw a burn rate at that point of around 63% moving to 75% last year. So this elevated burn rate our expectation is we will see that occur.
Across the balance of this year.
As we and then we will start normalizing into next year.
Yeah.
Okay.
That's helpful. And then I guess just a follow up did you guys see any.
Notable headwinds, particularly in Canada.
The omicron outbreak kind of an <unk> I know there were some some restrictions, particularly with things like sporting event attendance and such.
During the first quarter in Canada, just wanted to see if you guys noticed that and particularly if that might've been.
Part of the headwinds on some of the issuance.
Of the miles.
Yes.
Nicole This is Charles I would say I really don't think it was much of a headwind for us.
We are comping against two programs that are no longer with us and so it makes it look like it's a little bit weaker than what it is.
But I'd say nothing from Amazon.
That's fair and then I guess just last housekeeping one for me.
Kelly on the run.
Russia. The headwind appreciate you guys, calling out the revenue impact from those campaigns is it fair to assume that the EBITDA margin on that business is comparable to the rest of brain loyalty.
It is so from a go forward perspective, we would we would expect to see that lineup with the balance of the business over there.
Alright, thanks, guys.
Thanks Scott.
And thank you and our next question comes from Marc Riddick from Sidoti.
Line is now open.
Hi, good evening everyone.
Hey, Mark Hey, Mark though.
So I was wondering if you could start with around some of the things that youre working on to some of the introductions and maybe maybe we'll start on the digital side. So I Wonder if you could talk a little bit about some of the early learnings that you've had with the digital reward.
Campaign.
Is there anything that you've seen so far there that are surprising positive or negative and then sort of how that unfolded.
The tweaks that you've had so far if any.
Yes, you bet you bet Mark is as we indicated we're rolling this out on a on a pilot program basis, we want to make sure that we have.
The.
The technical integration with our clients.
And then we want to make sure that the offers that we're putting through there are going to be compelling enough to continue to draw.
Our shoppers and consumers are back to the App the way that they would normally be physically in the store and so we continue to.
Continue to monitor.
The activation rates and the usage rates and optimize the offers that we're putting in there to try to drive.
The maximum amount of engagement that we can and I think once of course once you have that figured out for one market you got to see if it works then in other markets and we'll be focused on that across the next couple of quarters.
Okay, I can imagine thats, a moving target here.
I was wondering if you could maybe as you said.
I'd like to touch on this a little bit around brand loyalty I was wondering if you could talk a bit about the type of visibility that you have with the programs on brand loyalty I understand that you made mention of.
Obviously, the fourth quarter is the largest I was wondering as far as your communications with customers, maybe the kind of feedback that you're getting from them has their seasonality change at all and maybe what.
The visibility it looks like for you maybe versus prior years. So maybe prior year it might not be a great comparison, but if you could talk a little bit about that and the feedback that you're getting from customers there.
Yes, so the visibility is pretty good we have the ability usually from a sales cycle of about six months to know what programs go run by quarter with at least support view of six months.
Two things that create a little bit of flexibility to it number one our programs are success based meaning if we get 90% success rate versus 70% success rate that's going to drive a difference in the revenue recognize the second point is there is some discretion with the clients to push it out of the quarter. It depends on mix you expect in they don't see the need for in a particular quarter. They can defer it for a quarter.
Or too so there is some flexibility the way these programs work for the client to deferred out so we'd say goods good visibility into it but there are some variables that can come into play.
Okay got you and then.
I'm, sorry, what was that there.
But that's somebody else's site.
So not us.
Okay. So.
I wanted to go back a little bit I think one of the prior question I was asked a little bit around the supply chain and what have you just wonder if you could talk a little bit about the adjustments that you made last year.
And maybe how those prior adjustments in the prior challenges, maybe either helped or how those might play into what we're seeing going forward given the current shutdowns are there any things that you could share there whether its particular learnings or.
Some of the benefits that you saw in the past with prior adjustments on that might help you know or vice versa.
Yes.
So mark if you think back to.
Our last call we highlighted a couple of things one was <unk>.
One was pre booking container capacity.
Early rather than trying to secure it on the spot market of course back then spot market prices were six times, what the traditional rate had been and that was if you could find capacity so for us not only booking the containers and booking the routes.
Gave us more certainty that we could get the <unk>.
Awards to our retailers and time to run the programs and then the other.
The other initiative that we took to Derisk the supply chain last year was standing up more local sourcing so rather than going.
Predominantly out of southeast Asia, especially given the zero COVID-19 .
Policy that's in place today instead of those.
Those incremental.
Local and regional sourcing options and again, then youre going over the road instead of over the water for delivery. So you've got more reliability, although the course of the.
The conflict in the Ukraine has introduced has introduced a new element of.
Variability into that.
To the.
Regional sourcing that we established.
The only point I'd add to that would be learning from last year, we know we need longer lead times coming out of Asia, China ports, and so forth. That's why you saw more of the inventory bump in the first quarter and one historically you would see us do.
Trying to get ahead of an expansion of us coming out of the Asian ports.
Right that makes sense.
Wondering if you could talk a little bit about some of the given some of the changes and investments that youre, making.
On both sides of the house.
Just wondering you talked a little bit about.
The timing and visibility.
Rollouts because it seems as though you've kind of got laid out quite a.
Quite a few things going forward.
So does that pretty much take you through the remainder of this year or.
Should we expect sort of new introductions to be announced throughout the year that could.
Still begin to be implemented this year or are we now beginning to get into next year is to do new products and projects and strategic ideas.
Yes, Mark Charles highlighted.
On our last call that.
As we as we started off on that process for the investments we started with the analysis and assessment phase in Q1, and then you would start to see the capex ramp across the course of the year as we moved into the development.
Development and the deployment phases, but you're spot on that.
Those campaigns won't all be delivered simultaneously and in fact, we've got.
Our focus on quick wins.
Right now that we want to have in the market over the next call. It eight to 10 weeks to show immediate progress not only to our collectors, but also tour sponsors and then the balance of those.
Some of those more substantial investments will come online towards the end of the year and the beginning of next year.
Okay, Great and then the last thing for me today I was wondering if could talk a little bit about maybe what your views are on us.
Pending and budgeting appetite within <unk> and this is.
More of the brand will I'll, just talk about spending and budgeting appetite of your customers, maybe it's kind of a bigger broader sort of AD spending growth kind of question, but I was wondering if you've got sort of a general view as to the willingness and appetite of the customers to do to to invest more to drive revenue growth on their own.
Yes, what's unique about the brand loyalty program again goes back to as primarily success based if we're not delivering top line growth for the retailer, we're not really getting paid and the projects coming back to us. So it really derisk the programs for our clients and Thats why good times Bad times, if you're trying to drive traffic in store online where nice fit form if we succeed.
We get paid if we don't succeed we generally don't get paid so it's really a derisk program for our clients.
Okay, great. Thank you very much.
EBIT and <unk>.
Thank you.
Im showing no further questions I would now like to turn the call back over to Charles Horn for closing remarks.
Thanks, Jason.
And appreciate all of you taking the time today to listen to us and to go over a quarter.
We think that Theres a lot of good things on the horizon for us as Jeff said, we're looking for small quick ones show that we're taking this seriously.
We in this program, we're taking it to the next level and that's what we're committed to show our clients our collectors as well as you as investors as we're taking this program and we're evolving it from more of a cash cow that over time, we rose to a top line growth business and that's going to take a period of time. So every quarter, we're going to look in some ways to show how were made.
Some progress.
And that's a commitment we are making to you. So appreciate your time today.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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