LYLT - Earnings call transcript Q2 2022

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Operator

Good afternoon, and welcome to Loyalty Ventures Second Quarter 2022 Earnings Conference Call. At this time, all parties have been placed on a listen-only mode.

Following today's instructions, the floor will be opened for your questions. It is now my pleasure to introduce Jack Taffe, Senior Director of Investor Relations. Jack, the floor is yours.

Jack Taffe

operator. you, Thank slides release the section be in reviewing our Copies be we found earnings can Relations on the website. of will the of Investor Officer Horn, Hosting President Vice Program. President Financial Ventures; and have of call, Loyalty Chief Ventures; Charles of Shawn today's Chief Chesnut, we and Executive and of Officer Executive AIR Loyalty Jeff Reward President Stewart, MILES

responses and the website would your the to earnings the to on that, to speakers turn the Before and SEC. over for GAAP Horn for Charles? update our remind of useful filings risks be Loyalty on to the and contain and provide the presented I may information call. subject measures, uncertainties described Also statements. results. to call I in reference the review measures second with some financial like obligation statements would Horn. to joining those Relations non-GAAP quarter Thank Jack all loyaltyventures.com. comments will the release believe on on company's we Ventures will you some our today's which will today's thank we no forward-looking certain has call begin, like today at investors. to posted With that you Charles to made are of you, of Reconciliation Charles information questions Investor These other call, us the

turn to X. page Let's

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conditions We color the expect BrandLoyalty's more persist these to action year share and plan later. we'll throughout on

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net EBITDA restructuring $XX.XX a of reflecting and share. net $X million a we reported $XX.XX down which loss $XX.XX strategic net and we Through and of costs $X of the reported adjusted million impairment costs. million. Year-to-date effects to which totaled restructuring the $XXX is share loss of quarter, June goodwill transaction million XX, million per per transaction flat the included of $XXX loss $XX a inclusive which is per year $XX prior in total of share impairment of For of million the $XX.XX was goodwill the of and compared revenue

of underway. the serves largest Now selection the Asia X developments the MILES. continues region. the BrandLoyalty market both for well Pacific campaigns area and recent discuss Slide as EMEA BrandLoyalty currently for followed Geographically, BrandLoyalty AIR let's geographic that the as illustrates represent broad to by

our expand area we to working is team opportunity believe in segment footprint as over the this growth represents time. for Americas an Our important this

of terms selection quarter, in In highlighted here. active the second campaigns a is

underperformance differentiated foundation this this supplier relationships sustainable segment's we of provide quarter, partnerships a acknowledging future for While combination and exclusive global believe growth. BrandLoyalty's grocery

X. slide to Turning

key the that Russia BrandLoyalty the disruptions the logistics-related to second mid-March which years resulted to $XX for roughly to BrandLoyalty as expect Let's was top-line. result BrandLoyalty's we of pandemic outlook its recovery of Ukraine, the in the review original XXXX expectations for on In operating a paused two the and invasion operations after to based quarter lower response and segment's performance post-COVID year. we challenges indicated disciplinary balance Russia's environment. in impact for of million in in in a

issues, created supply are widespread the it consumers persisted region's prices, negative primary three with business, which environment. resulted goodwill This further pronounced for recessionary and of food, inflationary, macro impairment more the concerns. has conflict in to contributed increases impact European a challenges other energy confronted BrandLoyalty on with the million. in $XXX and and now ongoing the chain As along

merchandising the market. grocers that key higher this unexpected has pass-through business X moved the price, container that contractual and to mitigate locked BrandLoyalty's reward has permitting terms will earlier to regional First, ocean capacity regional for steps taken increases dynamic. expectations. through to combination rates year, advance, will in shipping deliver available possible signed not The and two for the clients hedging, margins cost manage The ocean forward. costs costs. months does its sourcing. sourcing And our new BrandLoyalty reflect freight local of this team ocean and not have going in exceeded cost of where an XX freight BrandLoyalty more merchandise The environment pressure are Because for months sourcing, means these to in more readily disruptions better certainty

landscape, while retail years These the business that and And response, to as team discounting uncertain its operational addition, top clients clients recoup. wait-and-see the these or deliver could in illustrate all rely close potential implementing growth, BrandLoyalty is knows of slowdown. near-term the costs leverage to in for its campaigns retailers returning who usual. are the market on grocers, proactively reduce even Ukraine efficiencies BrandLoyalty's near-term partners data cuts from growth the drive line key In can approach top before time, take a price will saw that, can campaign's across-the-board BrandLoyalty an given avoid to line prospects its to campaigns In can the BrandLoyalty terms of pipeline. for macro grocery taking the that withdraw to in

need interest offering, sentiment their the to their this fully luxury campaigns to going in BrandLoyalty and in digital on Finally, also campaigns to believe was everyday in budgets in a loyalty current to essentials campaigns. continues tailor especially target the consumer. give second focus to resulted and quarter, stretch the reflect and response market has the these points than and to business interest programs consumers several a did digital which considerations are to a consumers budget, innovations will business to to activated flexibility less relevant from reward program have are stretching retailers year year-end, provide in or when active out. featuring expect as reward, more BrandLoyalty's conditions. merchandise more rather proof start planned the the we saw enable some traditional that By best rewards. are economic some which underperformed shift on the seeking the currently not strategy shopper aspirational shoppers advance in of Categories In of these housewares to the promotions campaigns campaigns, life. their like make date will we grocery to of the focus current staying up develop BrandLoyalty's shifted entertainment match

As we've rewards and physical digital chain before, the noted are bypass supply ESG-friendly.

geographies, Beyond offerings, relying BrandLoyalty these on clients discrete efforts. action known reward profile reducing now in the risk plans also BrandLoyalty verticals. development of proven is pursuing on team adjacent focusing new actively and is business its The

could conditions. changes business' margin durable returns line these the will we near-term improve economic growth, top slower more and produce profile expect given in While result

the this by At segment's While discuss the performance, program. I to we campaign President, impairments, includes look and alternatives Shawn? developments the path efficiencies, which introduce will the and AIR recent we year. point, encouraged the inventory operational to with structural our sharing and forward, for are like who Shawn progress Stewart, MILES later I'd adjustments, forward are this disappointed

Shawn Stewart

Charles. Thanks,

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metrics these app active expect total collectors. the We monthly active users include to and

guide impact a may serve as the road While as change will of map assessing our investments. these helpful metrics technology time, near-term they recent over unfolds, our to

moving of investment it expect of that and with issued, in deployed to miles quarter incremental to our our redeemed up stretch XXXX to the are Redemptions bandwidth line year the the the highlights travel-related accessibility ratio interest past due over and half XX% nine Collectors issued quarter will in travel quarter carried The burn we quarters. first to by the across issuance a were higher XX ago projects second of balance of regular first was that expect AIR redemptions AIR miles IT QX from remain five redemption the compared AIR rewards and Of the XXXX with reward were pent-up second we we pace, the consistent in rate Page trends XX% investment, XXXX, underway MILES of first times XXXX quarter elevated call $XX capital the million to quarter compared XX% quarter XXXX, at period. second approximately will now be the constraints. in MILES occurring reward expect from ago over about in from Additional saw XXXX. year year incremental into the what than MILES miles first as the in by travel and in we XXXX than quarter and miles X%. and higher of ago the broader the lift patterns travel period. resume. the

the to collectors. earning rate sponsors burn in levels renewed XXXX, for the opportunities demand new and add for off expect and our as travel normalize We we

account cash $XXX end, we assets of quarter noted at Redemption redemptions last funded few the elevated travel. lower we at of by a to pandemic-related when set offset quarters limitations As natural the redemptions saw this for million to aside due historically period last on settlement redemptions. we balance quarter, the is

an of without the on redemptions will cover redemption our assets liquidity periods that cash operating are We flow. higher position or impact settlement confident

Now financial I'll Chesnut CFO, over it turn Jeff review. to for our

Jeff Chesnut

primarily revenue, Shawn. quarter corresponding compared the and AIR AIR flow-through half the a the we In expense. loss was the will accelerate full result quarter partially interest we lower to loss expect of reduced for segment the and cost $X these of costs. and personnel period the result adjusted on These Slide our of balance cost revenues can quarter-over-quarter presents at with redemptions by higher diluted Thanks, enterprise-wide XXXX. $X decrease of million XXXX, driven combined ago enhancements or which with which of EPS in margin of the costs miles representing as second to BrandLoyalty's a campaigns, our EBITDA meaningfully period, in a operational a quarter by a revenue our by due X% last increase of offset adjusted second revenue in declined million, and the revenue to quarter for XXXX. connection the both will value EBITDA size service AIR of plan, was made new XX% about rate in approximately XX Net XXXX results year quarter which run the impact expenses the to presents negative, Revenue efficiency decline declines a saves due with quarter up XX%, from impairment, the timing in of vary compared to increase our year-over-year. arrive redemptions, MILES was combination the contracted margins both second BrandLoyalty. with late of at still occupancy issuance XXXX. due savings. were goodwill down Slide to were The and from XX% results revenue million, as XX to level and impact second from in XXXX with declined the improved gross at revenue. second the while The MILES out quarter collector netted the associated decline are MILES which presentation. improved and revenue of in BrandLoyalty's we $XX year proposition. in-year

FX year, that than EBITDA suggests movements across the continue of project that the the full of costs will be recent we will persistence XXXX the performance to impact logistics and production less top adjusted Although, BrandLoyalty's BrandLoyalty's year line higher strengthen result. plus

as will like the it we're organizationally financial and and plan, BrandLoyalty Charles efficiency However, for secure position operational implementing changes changes its and profitable mentioned that the BrandLoyalty's savings we move help growth the earlier, forward. specific foundation

the recovery of in invasion to guidance it challenge in originally persistent Considering performance Let's provided with for for discuss EBITDA costs debt earnings each on EBITDA our full the and of year. on amplified outlook rising XXXX call This key our also we our estimate corporate our permitted post-COVID client economic other. approximately second adjusted balance agreement climate add-backs was have AIR and developments Ukraine, represents the BrandLoyalty's will fiscal surging be XXXX. covenant. uncertainties, compliance accurately by these project first Russia's chain predicated This million. our inflation, would in $XXX February, half a and we rates that supply healthy the our markets. will with as forecast year issues, of loan When generally our be contribution offset MILES revised

liquidity, will an our We proactively update operational maximize to prepare The and later both we enterprise. conditions. worsened the of we're efficiency these next has plan year. responding guidance since results to our economic To the implementing this are expect weather Loyalty start our the climate and Ventures across prudently and year be

plan, our on expense of as than more savings. we're the reducing component base focused finding cost While a

the steps return return on or elements. goal We reconsidering investment the strongest are in and us daily our critical. on those our with eliminating initiatives of to deliver take we teams each efforts lower of reassessing or business only enable This our focus that the the business will processes our

footprint our Toronto. closed For Montreal continued this example, Calgary we in offices and and in downsizing period our

addition, we rate workforce these and deliver collectively expect service of our reduce annually. million in savings initiatives to to adjustments cost run $XX In evaluating we're approximately

X.XX year, covenant year-end. of through fourth Ventures before quarter times stepping prior was XXXX five our ultimately times X.XX to through XX September XX, debt-to-EBITDA is to stepping Loyalty September at now X.X covenant, which XXXX, down down this declining times to also of in modified and times. We the times X.X

we noted and as our As Charles business provide we've transforming will today. as this more earlier, adjustment capacity certainty continue outlined

the the redemption will liquidity annual our settlement year million we quarter assets. million, continue was $XX and at exclusive plan run of projects. Slide rate balance self-funding operational our XX we sheet half will that liquidity savings of As on $XXX focus end The to the flexibility. provide options for enter highlights our our efficiency from of future second

Our in the remain ongoing average medium $X second finished both optimistic about quarter both We we recognition plan our reduced revolver adjusted for and current the the and to program developing conditions point navigate and loyalty while supply turbulence state of debt with $XXX new with his near-term to markets ratio implemented interest X%. initiatives investments, and we support gross focus the covenant solutions described value business to ready $XX We're of an here. are And This reflect realistic participate quarter next-generation a prospects key chain debt our in team Shawn quarter adding covenants million. priorities the at future. for of growth. our to and key for the have in about impact environment new exposure strong investing economy. members about BrandLoyalty address longer-term the coalition. core rate with both interest base both for on while the the consistent passionate the deleveraging clients in of along the Altogether, In near-term MILES increase working million, and to AIR existing the equally and who annually. its XXX designed our that and for state collectors, rate inherent and challenges, the of by of collectors and the sponsors. On while piloting these questions. are also confident BrandLoyalty. we no for IT current secure basis now operational At objectives the consumers MILES, open debt Overall, sustainable We and we've outlined about Operator, efficiency durable economic its our the that position ways extensions a we prioritized grow these its sufficient broader to interest new strategic a we we reduce AIR leverage strategic AIR macro MILES four to the our liquidity retain to lines every will volatility. resulted basis program future on will previously the providing with are was in net approximately resonate our expense our our will million with and borrowings times. increase while of foundation are for ended while

Operator

[Operator Instructions] Your line Morgan the first question of Toni with Kaplan Stanley. comes from

Your open. is line

Toni Kaplan

Hi. be Thank you. in Supply quarter. chain continuing disruptions issue to seem a the

should by the this last mentioned that done still we be then? You XXXX Will year. throughout we see this, impacting results, or should

Charles Horn

some issues programs to of talked inventory alleviate actually programs, that about but some expectations. before a our We I ahead some think the got we these as we should didn't then the moment, at because able unfortunately XXXX. right of be of have earlier Yeah. to quite perform bit of the Toni, we of

this more at nimble trying ports. focused be say, Southeast going reducing our point get more on out trying the I'd getting to pressure programs actually locally, things to inventory of be overall markets, Asian to net to and So reducing we're levels right some sourcing

continuing about where really don't it's a you How see situation XXXX. I into Jeff? So

Jeff Chesnut

I in our year. summary think Charles, we've for that's that good taken and terms expectations next of a actions the Yeah.

Toni Kaplan

into you for verticals. sponsor about is Are AIR getting some it on new the just either-or and when is trade-offs talked you how Thanks. side the into just I getting MILES, and know planning then, on of And what are the Great. replacing you sponsor about, grocer pipeline looking? think adjacent you're there? verticals, sort or the at looking

Shawn Stewart

and business I question development Hi. -- Yes I'll about new separately. here. the grocer Toni, Shawn your about, talk think about

in business new discount pipeline the think grocery including still call, the relevant frequency But is thing has it The to than verticals you noticed new are we spent when that program. us, see are add of open and been XXX XXX it time as mass convenience too the look there with brands strong it's prospects development development in engagement to And my of a engagement, obvious I've about is in to the response now frequently terms kind we to been business lot interesting of time. at our On retail we stronger one across in categories. are And some first replacements we We merchants you've model. days, I program starting real some a referenced, of up go-to-market, pipeline have think with the we're how grocer. are which key category. as start the would collector for

we outlined is And onboard in way shops that's Card-Linked whether AIR for our the to entries business what needs kind brands. of making with that fits whether to flexibility it MILES their Offers, brands that's for easier a removing So best. remarks barriers us in in

So looking through year we business on to half look pipeline, to the coming but development more back we're news the have of strong. this share

Toni Kaplan

Thank you.

Operator

Kyle question comes from with Peterson Your Needham. next

open. is line Your

Kyle Peterson

that within it Accelerator something a MILES guys on to you BMO at get should least that Good a the afternoon trying that whether plan it's way? Is question. backfill coalition in in on anticipate for appreciate this and want more within offer my Grocery card-linked guys. the replacement this grocery touch more something some transition strategy that forward the of Hi. get on the opportunity to bit plan sense little combination a programs with and is attacking took we a I to moving that? to I vertical. AIR attacking Wanted you and there, Sobeys just traditional Program you how or between

Charles Horn

getting great MILES is them. key about offers value over the the when to for join to get issuance in largely in model want When there collectors but opportunities program and not with to card-linked side how, mean, And be can't that's the that's brands you for how, can on they that market really to I benefits on deeply more offers to it's earn. talk and speed about for us not offers we traditional lane. we time. brand engaged giving is the card-linked become suggest instantly talk a think quicker instance, happening redemption the AIR I to card-linked that fixed a a if and

these conversations how onboard but it that expect -- evolve. the of so with we'll brands can the have And they're we regardless are models

Kyle Peterson

And then that to expand And the the Do opportunities US to particularly just in had contractual it. moving strategy. How management a you some guys attacking your forward? US how guys be of I moving on sits Exchange. a think the guess helpful. given listed should guess US footprint minimal guys you historically in global your due a I able team I But lot follow-up, on US you a those? in know of are Got That's forward? see you things. guys to pretty are we that

Charles Horn

think a but AIR And to different of grow is take into BL BrandLoyalty and focus Sobeys loyalty little do think we line business US. situation opportunity. in programs time consulting individual for US. with focus a adjusting It's quicker It's businesses definitely what Different more we nimble important. exit. the be candid than the model the going replacing be a products, to can an the results be both where into of now, move market truly for to US. so. to the the do. definitely are the gone it's operations premature very little slower say deliver impacts us to markets, I'll in the like thought bit it's the to want runoff way we bit a just I’d they program. do a I probably our that looking better M&A, though evaluate is the and for definitely Right to It's ROI, to to in US it's MILES do would clients something, ability little the growing different we going

Kyle Peterson

Understood. Thanks guys. the queue. I’ll back hop in

Operator

line Your with the from next Marc comes Sidoti. question Riddick of

Your is open. line

Marc Riddick

Hi, good afternoon.

Charles Horn

Hello.

Marc Riddick

there. Hi

past on of I if a if those realities. could the was to of and historical of little to around And luxury a bit as that to little and maybe as that seeing the a more with could that in maybe you projected versus you touch come locales. on the wondering maybe touch I I realities? up give so wanted could So, mix about consumer of current touch if then had things types the what economic would BrandLoyalty. the the you bit things campaigns in commentary aspirational background the resonate on a you're maybe that seen you've was little different different also one wondering, bit more offerings

Charles Horn

Yeah.

whatever So based economy we've the be. recession, before spend BrandLoyalty upon adjust what inflation the to it's with one case AIR this going of those may people and we've MILES seen this they're with seen

But Germany, you is go negotiate, us, to in in didn't run in So advance months it with programs do we start program we've over an now environment work. we're tried didn't we it bringing inventory. the a if into in, we come XX nine like to campaign when

rates success can were need be very the the more poor. adjust nimble offering. We so to we So

we to we adjust things in about One of digital or to house, are spend things they're less. entertainment, people the things can staying the talked going is trying for that it more

spending is overly not going them. campaign germane to and So in the to to equipment get try store just

ability program need resonated of the more it that's fly market the the to longer on time. right changed. with really sure program had one where the market no that's local, consumer, the change the to had product So way us adjust into be it, do condition things And adjust we source go the our and can to we we to is we've a comes find program nimble, the at the year this be right seen the digital where hurt rates the more make because where success able way to is in

Marc Riddick

touch seat a being -- little should And immediately. the maybe sales as ground might historical the how think I little -- anything I if sort maybe appreciate in curious different cycle and the touch with sort environment reflect? could historical that XXX you and I recessionary very helpful. we That's the was of MILES running having take you sales understand a on, the can maybe and days to a maybe, at might cycle be you. you over But as in bit AIR Thank -- that it. about hit little might that might could about have of bit change for to or a the then -- process Got of on and how sort

Shawn Stewart

part onboarding previously, I've of just entry here. call efforts in AIR what running seen a on with surgery Hi -- of earlier. of a I those here. in, And I takes it spent a kind the those. but some I It I three system AIR -- historically would is, form referenced little of to start can to so MILES with I mean point-of-sale I retailer have Shawn think like and terms Marc, the And MILES. barriers time. of heart bit take at a years what I'm XXX integration days and

and here on and that the I in bypass outcomes think what to collector the what to I'm engagement. market sides a sponsors of clients some Offers for to see and get Card-Linked investment you integration prove quicker, early days both seeing shops effort, our is of way on to

over that. we're times as And been brands of speed to I we're of technology not XX prove years, And a up can digital and cycle be then evolution out the these shorter, the give to see the more I determine should collectors getting And way sales work. move implementations. is market right? having may such last how right, lot so, loyalty quicker when best more choice, we to and our do engagement earlier, programs be there's the said there for What to big to those terms because in forward. But

the you making just that's investments see, in because trend. the going And experience so we're have mobile we're to engagement as to drive digital And to follow and absolutely key.

Marc Riddick

to a perfect lead actually That's it. -- way and

was is, that as benefits thus far of sort to there you've a by might touched any that engagement, areas take greater the as any little consumer there be question boosting think show next areas going on consumer encouraged my to are of far longer are or you're that So you activity?

Shawn Stewart

always bets we in The mobile thing the app has our is and Yes. be the in we're I'm right making to absolutely impressed and placed program. back of Yes. coming in terms in engagement. No hub are the AIR breadth by depth investments the the digital of the that space daily collector just experience for the to brands MILES

or are within earning stat actually and more grocery of my have of brands better think, sponsors of about that's do remarks, a the that the I we without in I the in our home telling program. to three six all around program. the their collectors job referenced XX% Canadians miles have

of so, perspective. we're market is marketing I speed And beyond opportunity from sort to the immediate investment a where making our see capital

the an market, deployed our campaigns methodology and promotions and is marketing competitive. we to agile of for the the One toolkit first marketing digital be because the things, in their tool truth came sponsors expanded the get has I in to toolkit need inflexible become in and is, we

to have each can the scale, on drive think we those going collector of XXX on fast of moved first relevancy awareness personalization brands things and move in to so, kind brands we world, way, here. my fast there's automation, and in of they're in that and more those days I help marketing personalized And a

Marc Riddick

you, much. very Thank

Shawn Stewart

You bet.

Operator

remarks. call to final turn time. over There are now would for the this no further questions presenters I like back at the to

Charles Horn

the focus MILES will the a right you over business. model taking investments XX doing we're this period. is Shawn job that going We story, how We ROI pay to X-month today where listen Program. going understand the AIR getting at to in to to ROI. be We appreciate sponsors going transition drive look the think our business. talked we're We're The the off good can are we think as do make replacement really we're on track. the to to time taking BrandLoyalty, a within we about on

right we So on think track. we're the

talk joining us to we'll again, Bye. you you today and thank for So later.

Operator

you call. conference Ladies Thank and gentlemen, concludes participating. for this today's

disconnect. now may You

Loyalty Ventures (LYLTQ) 12 Aug 222022 Q2 Earnings call transcript