Points.com Inc.
Q1 2020 Earnings Call Transcript

Published: 14 May 2020

[Operator:]

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Points International's financial results for the first quarter ended March 31, 2020. Delivering today's prepared remarks are Chief Executive Officer, Rob MacLean; President, Christopher Barnard; and Chief Financial Officer, Erick Georgiou. 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 Sean Mansouri of Gateway Investor Relations, Points International's IR Adviser. as he reads the company's safe harbor that provides important questions regarding forward-looking statements. Sean, please go ahead.

[Sean Mansouri:]

Thank you. Please be reminded that the remarks on this conference call may contain or refer to forward-looking statements within the meaning of Canadian and U.S. securities laws. Management may also make additional forward-looking statements in response to your questions. Although management believes these forward-looking statements are reasonable, such statements are not guarantees of future performance or action and are subject to important risks and uncertainties that are difficult to predict.Certain material assumptions are applied in making forward-looking statements and may not prove to be correct. Important factors that could cause actual results to differ materially and the assumptions used in making such statements were included in our 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 Points' Chief Executive Officer, Rob MacLean. Rob?

[Robert MacLean:]

Thank you, Sean, and good afternoon, everyone. Today's call will be a little different than our typical format, giving our pre-release and the unique circumstances we are all facing due to COVID-19. Starting off, I want to reiterate some of the steps we have 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 ahead of broader stay-at-home orders. This transition to remote work has had minimal impact on our operations. The team's response to this unusual time has been exceptional, and we continue our track record of quality deployments, delivering effective offers to loyalty 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 themes, while Erick will cover our financial performance, and Christopher will highlight operational and partner activity. So I'll start with some perspective on trends we are 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 in the broader travel industry challenges. COVID-19 has continued to take a heavy toll on the travel industry, with grounded planes and hotel closures affecting our loyalty partners' revenue streams.We are encouraged by the various travel stimulus and 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. And we are closely monitoring any further developments in that process. In addition, loyalty 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 announced they would presell $1 billion worth of Honors points to their co-brand partner, American Express. Marriott Hotels recently announced a similar initiative as well. We have seen this kind of prepurchase used during other downturns, and we believe it is a very clear indication of not only the immediate value of these programs, but also the bank's long-term view of their prospects. These types of transactions are a quick source of liquidity for travel brands and are 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 a crucial component of their revenue streams, and 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 return to normal. While current health restrictions 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 and miles for future travel needs, especially when they're part of a strong and creative offer. Historically, these types of offers have represented approximately 65% of our LCR transactions and are highly targeted at consumers who see the long-term value in their loyalty programs. During this restricted travel period, while we have obviously seen a very steep drop in transactions aimed at 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 that they will use in the future. In fact, a strong offer marketed with a large partner in the past few weeks had the busiest traffic day in our history. We followed that up last week with a different partner, deploying another strong campaign that delivered another record day of traffic and gross sales activity for any single promotion in Points' history.But let me be perfectly clear is I don't want to come off as sugar coating the current environment. Activity has been significantly down across all 3 lines of our business. Since the beginning of April, we've been averaging roughly 20% to 25% on pre-COVID level activity. But we have also seen promotional bright spots in recent weeks, as I've described earlier. I would characterize 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 partners that quickly wanted to engage their members, and we are continuing to see momentum with various partners as they position 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 this storm, with ample liquidity and ongoing revenues that we believe will continue to grow in coming quarters. So where do we go from here? COVID-19 is reshaping not only the travel industry, but our 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.COVID-19 is not the first crisis we've 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 dot-com bubble and bust, and we were able to build some of our most foundational partnerships during that time. After 9/11, 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 to 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 in these companies, whether the current situation and also as they prepare for a recovery. As in the past, we will be ready to assist our partners in launching new revenue-generating products, reengaging with their members and generating the high-margin performance they have come to expect from working with us.With that, I'll hand it over to Erick to review our financial performance for the first quarter and discuss current financial trends. Erick?

[Erick Georgiou:]

Thank you, Rob, and good afternoon, everyone. I'll start out by providing a brief overview of our consolidated results for the first quarter, which started very strong but quickly degraded in the back half of March as the spread of COVID-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 of our time to the current state of the business and what we're doing in response to COVID-19.Very briefly then, total revenue was $82.7 million in the first quarter of 2020 compared to $95.9 million in Q1 of 2019. Gross profit, which is our more appropriate proxy for our top line, increased 3% to $13.8 million, while adjusted EBITDA in the first quarter was $3.6 million compared to $4.6 million in the first quarter of 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 in LCR and significant growth in our Points Travel segment.In mid-March, we started to experience significant declines in transaction volumes across all 3 of our operating segments, which minimized our gross profit growth in the quarter and was the primary driver of the decrease in adjusted EBITDA. As soon as we saw transaction volumes decrease in mid-March, we focused our efforts to mitigate the financial impact of COVID-19 on our business. These efforts were focused on 2 main areas

[Christopher Barnard:]

Thanks, Erick. Despite the recent extenuating circumstances, we have continued to support our partners with their current programs in place albeit with lower transaction volumes, as we've already discussed. We are 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 as much capacity as possible to accelerate growth when the environment improves. This is reflected by the launch of several new programs even after the widespread lockdowns in March as some of our partners were quick to position themselves for a global recovery.To name a few key launches, on March 24, we launched our LCR services with Aeroplan's -- Air Canada's Aeroplan program. We're excited to expand this partnership with one of North America's leading programs and will be making additional enhancements over the course of this year as they continue to implement the relaunch of the program. As you may have seen last week, we ran our launch promotion with Aeroplan. Even in the midst of a global travel pause, this promotion garnered more interest in traffic than any previous promotion in our company's history. This is an encouraging indication of 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.In Points Travel, on March 5, we launched a multiyear partnership with Quidco, the U.K.'s largest cash back rewards program. Members booking hotels on our white label site found at hotels.quidco.com can earn up to 15% cash back and select from more than 350,000 properties worldwide. This marks our first movement in the global cash back segment and opens Points Travel to additional growth opportunities.And in our Platform Partners segment, in mid-April, we linked up Citibank's ThankYou Points program with the Emirates Skywards program as we continue to build out our impressive network of financial services exchange opportunities. This is on the heels of our March 26 launch, the second exchange service in the Middle East with Aimia's HSBC's My Rewards program, which is now transferable into both Emirates and the Etihad frequent flyer mile program.Our new business pipeline remains very active, and our delivery resources continue to operate at full capacity. The reality is that while stay-at-home orders may lift soon, most seem to agree that we will not return 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 awards and programs to return to the growth in 2021, and what needs to be accomplished 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, be it for new program launches with current partners or adding new partners to our roster. The 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 of end market services given the circumstances, cross-selling to existing partners and signing net new partnerships, both in new verticals and geographies. Furthermore, we continue and investigate corporate development activities, targeted new partnership opportunities across the business.As a closing thought, I want to reiterate a few key points from earlier in the call. 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 altogether.In 2019, LCR accounted for more than 85% of our total gross profit, and this business line didn't even exist until after we stepped up to further support our partners following the 9/11 tragedy. I'm not making a direct comparison, but merely emphasizing that the actions we take today to support our partners can have a lasting impact far beyond the current COVID-19 pandemic. And in the spirit of good partnership, we are fully committed to doing that we can to help our partners during this unprecedented time.With that, I'll turn the call back over to the operator for Q&A. Thanks.

[Operator:]

[Operator Instructions]. Our first question is from Greg Gibas with Northland Securities.

[Gregory Gibas:]

Appreciate all the clarity on your prepared comments. You mentioned that January and February were strong months in the quarter, but I was just wondering if you could maybe further quantify the decline in volume that you saw in March, and maybe how that's trended into April and May.

[Robert MacLean:]

Erick, would you go ahead? I'll hand it over to you.

[Erick Georgiou:]

Sure. Thanks. Yes. So it's certainly fair. We started the year off very strong. We had a record Q4. We saw that going through pretty much Jan and Feb. We really didn't see the volume start to decline until midway through March. I wouldn't want to throw a number on it. I think Rob pointed out our -- we've seen some daily averages going somewhere 20% to 25%. It probably took some time for us to get there, but it 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 was down for the quarter. It was really because that second half was quite down across all 3 segments.

[Gregory Gibas:]

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. So I guess is it safe to assume that nearly -- or most of the guests of these guarantee arrangements have been reduced this year?

[Erick Georgiou:]

Yes. It's Erick here again. So from a guarantee standpoint, we typically don't prebuy points. That's typically settled at the end of the year. In fact, in all cases, when we look across our revenue guarantees, we don't see any risk from an exposure standpoint or any sort of a -- like any cash risk there.

[Gregory Gibas:]

Okay. Sure. And last one for me would just be you previously talked about customers ramping loyalty programs during these periods of stress in the travel industry, which has sometimes benefited you in some of these difficult periods. 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?

[Robert MacLean:]

Yes. So it's Rob here, Greg. Whether it was the great recession or post-9/11 and kind of various ups and downs over the last number of years, we've seen the loyalty programs and basically the airlines and hotels press their loyalty programs to be more aggressive and generate incremental revenues. Frankly, just thinking about those properties, it's just assets that can be utilized in some of these distressed situations.So I think we kind of today, in COVID, we see similar responses. It kind of takes two primary forms. I think some of our partners are remaining active in the market and so are looking for revenue generation. You're seeing Rich and Will [ph] communicated well-designed campaigns that are going out into the market really in an attempt to continue to keep their primary customers engaged through a pretty traumatic time, obviously. But also at the same time to generate very high-margin, low-cost, profitable revenue.And we've seen a number of examples of that here in the last little while, I think in my prepared remarks. I referenced 2 of the highest traffic days in our company's history that have happened in the last couple of weeks as partners have used those loyalty programs to generate revenues both in the near term. Second path that we see a lot of these programs going down is some things that we've been working with them on, pitching them on products and services that we've developed in the market that maybe take a normal kind of cadence of going through the sales cycle. We've got 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 little bit, let's get going on that."And so as a result, we've got a fairly -- we have a very robust pipeline of products and services, both with existing and net new partners that's keeping us quite busy at this time. So overall theme there is really to see the loyalty programs being utilized to generate incremental revenues, both in the short term and as these big programs prepare for recovery.

[Operator:]

Our next question is from Drew McReynolds with RBC Capital Markets.

[Drew McReynolds:]

Yes. Appreciate all the quantitative context, Rob and Erick, in terms of your prepared remarks. Definitely helpful. Just a couple of clarifications. Maybe for you, Erick. I missed the second amount on the government help. I think I got the $1.7 million in funding and then the PPP. How much was that?

[Erick Georgiou:]

That amount was $300,000. So it would be a total of $2 million over the next 12 weeks.

[Drew McReynolds:]

Okay. And is that U.S. or Canadian?

[Erick Georgiou:]

That is all in U.S. currency.

[Drew McReynolds:]

Okay. Perfect. And then on the accounting for this, is this just in your P&L, we're going to see a net amount? Is that kind of simplistically how it works here as you kind of get the payments in?

[Erick Georgiou:]

Yes. It would likely be an offset to employment costs, so it would lower our operating expenses. So we treat it as the government grant, effectively.

[Drew McReynolds:]

Okay. Okay. So nothing -- pretty straightforward, I think, from that standpoint. Maybe over to you, Rob, to kind of bigger picture-ish. I guess first, it sounds like there's been a little bit of sequential improvement here in May, but is it safe to say given that most of the world is still on lockdown largely, not a big bump? And then obviously, into June, it just depends on how the economy comes online.And then second question, tougher to kind of wrap my head around is just on hotel and airline partner consolidation probably will be an outcome here in some way, shape or form. Do you have any thoughts on kind of the potential impact there? I know you guys have always handled industry consolidation extremely well. Just wondering if at all possible to prepare yourself for some of that consolidation looking forward?

[Robert MacLean:]

Yes, sure. Thanks, Drew. I think on the first question, it's probably not surprising. It's very difficult to see too far out with any clarity. I would say, we're pretty tight, feel pretty good about the next 60 to 90 days. And a primary driver on our revenue side of things, as you mentioned, and why May looks like a significant improvement, is that the way we get a handle on kind of promotional or campaign activity that's in the market. And so we have a pretty good sense of what will run here in May and a pretty good sense as well in June. And the campaigns run well. So the kind of very rich offers that you're seeing in the market today as well as kind of strong communications behind them and really interesting constructs. We are seeing very, very good results on it.There's not as many of those in market, as you might expect, as we would normally have in a pre-COVID 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 to May and we look out to June, we can kind of get our heads around all the campaigns that are in motion that are going to go into market.What I would say is our partner teams are spending a tremendous amount of time with our partners globally and really showing and demonstrating to partners that are still trying to figure out when is the right time to kind of get back in the market and reengage. We're out there very actively showing them that there are members with tremendous demand for the currencies. There's a tremendous amount of belief within the memberships that these currencies will be valuable as the recovery comes forward. So don't be shy. Let's 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 message across, that get out there, be active. It's generating real dollars, real revenues for your companies if we're active.So I feel like I've got decent visibility through May, June, July. Harder to see how that all plays out in the second half. My belief is, as we see more and more of this campaign activity driving good results, it will be more likely that more of our partners want to participate and begin that recovery and generating economics. So that would 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 in these kinds of environments. Historically, we've seen some consolidation. Your comments are right. We've historically weathered those situations pretty well. We work with a lot of these big players. And as we've said in the past, the best case is for us is our when our partners are strong. So in cases where consolidation has happened and 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 on the backside of some of these 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 or Europe and specifically in the U.S. So we'll remain optimistic that there is another side to this that most if not all of our partners will exit looking to be hungry and growing revenues and looking to rely on us as they come out the other side.

[Drew McReynolds:]

That's helpful, Rob. And maybe a follow-up. On the programs that are now out there and obviously fewer in volume, but very successful. Is there a characteristic of those kinds of programs? Like why are some being that much more proactive than others? It just looks as if we're all outside of the daily grind, eager to get our minds on other things, and future travel would be one of them. So why wouldn't more -- a broader kind of set of programs be doing this as opposed to sounds like some big ones, but few and far between?

[Robert MacLean:]

Yes, it's a very good question. I think we speak with our partners regularly, as you would expect. And I'd say there's a group that the loyalty programs have kind of free access. They're comfortable -- their brand leaders have been comfortable to allow them to stay active and engaged with their membership base, and those are the ones that are really working closely with us to put these campaigns and these engagement offers out in front of their tens of millions, if not more, members.There's another group. I would say that our -- the loyalty programs are kind of chomping at the bit, if I could describe it that way. They're willing -- 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 the tops of their organizations that their brands feel like they can be out doing these kinds of promotions and communications at this kind of an environment. I think those -- personally, I think those are coming. They're getting close. They see the number of carriers now starting to open up certain routes. There's certainly a little bit more growth from the domestic markets, even some of the international carriers are opening up routes kind of slowly. I think those are the next group that, as they start flying again or opening up hotels and regions, they'll then back that up or bring on promotional activity to support that relight.And then there is another group that are still just at that stage where I think their view is until they're able to get back in the air or open up the hotel properties on Match, they're going to -- they're going to wait until that happens before they get out and be active from a communication standpoint. So those -- that group will likely be a little bit later. But I do think the lineup of what we're getting ready to come in the second kind of wave, if you will, is encouraging. But it really comes down to their own brand strategies and where they are on their return to work, so to speak.

[Drew McReynolds:]

Okay. That's great. And maybe if I can squish in one extra here. From a member behavior standpoint, you're probably doing the full analysis of what happens on the other side of this thing. What changes kind of post-COVID, if there ever is such an era. On the member side, what are your high-level thoughts in terms of how members value loyalty, value the currency? Clearly we see accumulation and rewards as a cost-effective way to get a family back traveling when times are tough. How do you see that somewhat unfolding at the high level?

[Robert MacLean:]

Yes. I mean, a couple of ways I'd answer that. First and foremost, we're seeing programs that are out in market and putting high-value offers in front of their members. Members are snapping them up at truly record levels. And so I think that means members are understanding the value of these currencies. They understand the kind of metrics around the programs. And so a recent, very successful promotion that I think has got lots of coverage here in the Canadian marketplace, Aeroplan. We launched with them last week, and they put out a very interesting offer and the members lined up like no previous time. So I think members have a tremendous amount of confidence in the fact that travel will return. And if there is value in acquiring more currency, they're snapping that up. So I think we're seeing that everywhere. Canada is a recent example, but certainly in the U.K. and in the U.S., we're seeing pockets of that opportunity.When I look back historically as we've come out of some of these troughs in the past, the value -- the frequent flyer members, those engaged members who are, frankly, the members that most of our products are interacting with are usually the first -- first back in the air or back in the hotels and back in travel. And they will have, in our view, they will have a tremendous appetite for getting back on the road, when the time is right. And they'll be using a combination of their assets they've been sitting on for a while. And some of the inevitably very, very rich offers and frequent offers that will be put out in 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 to airplanes. And I think the loyalty component, those free flights, are going to play a huge role in that. So we think there'll be a significant appetite within the frequent flyer base as we've seen in previous dips.

[Operator:]

Our next question is from Jim Byrne with Acumen Capital.

[Jim Byrne:]

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 furloughs? And then maybe some commentary around changes to executive comp or our Board fees. I've seen a number of companies take that route as well. Can you just give me some color? That would be great.

[Robert MacLean:]

Yes. It's Rob. We've taken a -- we knew pretty quickly in terms of expense management, as Erick's prepared remarks indicated, we froze all hiring, all kinds of replacement hiring, all discretionary spending. We've jumped on the wage subsidies to kind of take advantage of that and shore up resources. We've 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 we've been a profitable company for a long time. So the cash on the balance sheet was very strong, aggressively manage expenses, drive 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 facilities that Erick had set up and the finance team had set up and we tapped into. So first thing was to really ensure, on a day-to-day basis, we're maximizing the resources that we have at hand.Second part of that formula is really pretty straightforward. We've reduced expenses where we felt was prudent. We think right now, there's a, as we've described, a tremendous amount of activity going on, which is a bit ironic given 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 to a point where we're -- with 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 these certain ones done." And so we're leaving a little bit of that activity on the table. And so we're staying very busy. So that formula of make sure we've got lots of resources and healthy resources, and then couple that with are we working on high-value activity that's driving in your revenue. So it's a primary focus. So that activity is driving in year 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 2, we feel where we are is prudent.Now look, the third piece that we consider is how long is this trough and how long can that business model and that approach be sustained. And when I look at those 3 components right now, I feel like we're in the right spot. If that changes, if the revenues -- we get into a double dip or the revenues don't recover as we're anticipating recovering, we have a long menu of items that we would do to take advantage of to shore up our resources.So we're -- right now, it doesn't feel like we should be stopping, launching new partners or building new products that are generating economics for the business and our partners. But if that starts to slow down in any way, shape or form, we would just have no choice, but to take that more aggressive steps. So that's really the way we're thinking about it. And I would remind us -- everybody that we came into this COVID-19 situation in an exceptionally healthy spot as a very kind of -- very happy with where our position was, profitable, growing and we fully expect, as we get through this, as travel comes back, we're that same kind of a company.I want to make sure we're in a position to take advantage of the recovery and momentum and all the opportunities that are in front of us right now. So that's not in a position today, but as you would expect in this situation, it's pretty fluid, and we're watching this on a daily basis.

[Operator:]

Our next question is from Ed Woo with Ascendiant Capital.

[Edward Woo:]

Yes. My question is, you're seeing some -- some signs of improvement. Are there specific geographies where you're seeing that more pronounced than others?

[Robert MacLean:]

I would say -- it's Rob again. I'd say it's -- a lot of it's driven by which partners are jumping in and engaging. 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 both those geographies would fall into that, that can't.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 domestic travel will be the first to recover, with a fair amount of visibility and expectation around domestic travel starting to recover here in the summer. And so that probably leans towards more strength in the North America marketplace in the 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 at more of a long-haul international component to it.And so our sense is North America probably comes back a little bit quicker than into Europe, 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. That's kind of currently what we're seeing and hearing back from a number of our partners.

[Edward Woo:]

Great. And then the other question I have is who's really driving these promotions? Is it the travel providers, the loyalty owners? Or is it you guys? Or is it a mix? And also, have you seen the loyalty programs willing to offer really cut rate programs to it possibly allow you to have better margins going forward?

[Robert MacLean:]

Well, I think first part of your question, it's being driven -- we are in partnership with our programs. And it's a critical positioning for us. So we're working with our loyalty programs that -- between ourselves and our loyalty programs are making those decisions. It's primarily driven by when partners are in a position to get out and communicate and if they're interested in this revenue generation right now, then we're there to kind of make that happen.So those are where the decisions are made. I would say we're very, very active in taking these pockets of really positive results and making sure that is readily available to all of our partners, that they understand what the opportunities are and that getting out there and engaging and being in front of members actually does produce really interesting results. So that's a bit of the role we're playing there. And I'm sorry, the second part of the question again?

[Edward Woo:]

In terms of the economics and margins, is it possible that you could be buying these points at a much better price than you were a couple of months ago?

[Robert MacLean:]

Yes, it's a great idea. Maybe we should be pushing on that. But right now, we're not focused on that. At this point, we're very much trying to assist the industry and our partners in getting as much activity as possible. A lot of what we structure generally, Ed, is the more volume we can drive, quite often, that drives more margin for us in our commercial relationships. So for us, it's -- we're on line with the partners to just generate as much high profit, high-margin revenue as possible, and we'll continue on that path on their behalf and on the partnerships' behalf.

[Edward Woo:]

Great. And then the last question I have is you guys always say your biggest competitors is -- in the buy-versus-build model, was the internal workforce of the airlines. There's obviously a lot of airlines are having issues. Do you see that possibly opening up more opportunities for guys to kind of get outsourced loyalty program services for you guys?

[Christopher Barnard:]

Yes. Ed, it's Chris. 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 and hotel, all the programs that we deal with, not only do they have clearly fewer resources now, but they're 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.

[Operator:]

This concludes our question-and-answer session. I would like to turn the call back over to Mr. MacLean for closing remarks.

[Robert MacLean:]

Great. Thank you very much. We'd like to thank everyone for listening to today's call and look forward to speaking with you again when we report our second quarter results. Thanks again for joining us.

[Operator:]

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