Points.com Inc.
Q2 2019 Earnings Call Transcript

Published: 3 Aug 2019

[Operator:]

Good afternoon, everyone, and thank you for participating in today’s conference call to discuss Points International’s Financial Results for the Second Quarter ended June 30, 2019. Delivering today’s prepared remarks are Chief Executive Officer, Rob MacLean; President, Christopher Barnard; and Chief Financial Officer, Erick Georgiou. After their prepared remarks, the management team will take your questions and will also address questions from investors received via e-mail over the last few weeks.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 cautions 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 or included in our second 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 said, I’ll turn the call over to Points’ Chief Executive Officer, Rob MacLean. Rob?

[Rob MacLean:]

Thank you, Sean, and good afternoon, everyone. We continue to execute on our three core growth drivers during the second quarter, while making solid progress on our three accelerants introduced earlier this year. As a reminder, we are focused on signing new partnerships, cross-selling new services to current partners and growing existing services that are already in market. All three growth drivers benefit from our geographic expansion, continued development of new verticals and targeted corporate development, which make up our three growth accelerants.Overall, we were pleased to generate strong second quarter results. Despite events from late last year that impacted our year-over-year growth rates in the first half of 2019, namely the departure of Saudi Airlines and a merger affecting two of our hotel partners, we generated record revenue, gross profit and adjusted EBITDA in the second quarter. As we progress through the year and past the impact of these first half headwinds, we are very well positioned to drive significantly stronger growth in the back half of 2019, led by our loyalty currency retailing business, which is performing well, and pipeline deals with both current and new partners firming up.Given this strength, and as noted in the press release we issued earlier today, we are raising our 2019 outlook and now expect gross profit to range between $58.5 million to $64.5 million with adjusted EBITDA ranging between $20.5 million to $23.5 million. Our strong results largely reflect the continued execution against our primary growth drivers, including our ability to grow in-market services, demonstrating the leverage created by our data-led marketing investments. I’m also excited about the health of our pipeline as we are advancing several discussions with new and existing loyalty programs. With all that said, our focus remains on the long-term, and I’m encouraged by the momentum we are generating on our growth strategy.To highlight some of these recent accomplishments. This month, we launched our Singapore presence, ahead of schedule with the hiring of multiple new personnel. This new team will be focused on expanding our efforts in the APAC region by more effectively servicing our existing relationships in this region, and importantly, expanding our business development presence to bring in new loyalty program partners. Our new hires on this team bring a wealth of loyalty- and travel-related experience, and we are excited about leveraging the regional and business knowledge they bring to the table.Geographic expansion is a key element of our longer-term growth outlook, and we’re thrilled to execute on this first leg of the initiative, and we believe the market opportunity in the APAC region could be one of the strongest across the globe with plenty of runway ahead. From a corporate development perspective, we continue to build on our new strategic partnership with Amadeus, particularly as it relates to our pipeline of new business. We continue to be in market together and have had joint pitches on several active files that span various geographic regions. We are only six months in, but are encouraged by our progress so far, and Christopher will highlight some of our joint progress to date.As you can see, our core business is performing strongly, and we are well positioned to deliver on both our raised 2019 guidance and long-term corporate goals, which have us growing gross profit to the high $19 million range and more than doubling adjusted EBITDA to mid-$40 million by 2022. Chris will elaborate on some recent accomplishments.But first, I’d like to turn the call over to our Chief Financial Officer, Erick Georgiou, who will provide more color on our financial results for the quarter. Erick?

[Erick Georgiou:]

Thank you, Rob, and good afternoon, everyone. As a reminder, unless otherwise noted, all figures on today’s calls are in U.S. dollars and presented in accordance with IFRS. As I dive into our financial performance, I wanted to start by highlighting one significant item that you will notice flowing through our financials and certain performance metrics. Over the past number of quarters, we have been working with consultants in an effort to minimize our tax exposure and have now been successful in recovering some taxes paid in prior years.In the second quarter, we recorded a $6 million net benefit from a rebate that was accepted by the relevant tax authorities. We anticipate receiving the cash sometime in the third quarter, which will bolster our already strong balance sheet. When assessing our financial performance for the second quarter of this year, we feel it is appropriate to exclude the benefit of this item since it relates to prior periods.On that note, my upcoming references on this call to consolidated gross profit, net income, earnings per share and effective margin as well as contribution and gross profit line of business metrics, will exclude the benefit of this rebate.So now on to our second quarter financial highlights. Total revenue increased 2% to a record $100.2 million. And despite the aforementioned headwinds mentioned by Rob, we were pleased to generate record quarterly gross profit of $14.4 million in the second quarter, an increase of 5%. This was largely the result of continued strong performance in the LCR segment, which increased 6%, driven by underlying growth from end-market deployments and a full quarter impact of our Emirates partnership, which we launched in late April of last year.Our Platform Partners segment, gross profit was down slightly year-over-year due largely to the impact of a contract renewal with a larger partner in this segment. This renewal took effect in the first quarter, resulting in a slight decline in the short term, but with longer-term upside. In Points Travel, gross profit was up 29% compared to the second quarter of 2018, with increases across several partnerships. Similar to the first quarter, we continue to see improvements across our transactional metrics with double-digit growth in overall transactions and gross booking values across this segment.Total adjusted operating expenses increased slightly to $9.4 million in the second quarter. The majority of this increase was primarily driven by personnel-related expenses due to additional resources added over the last 12 months that are focused on growth. We ended the second quarter with 254 employees, which includes contract and part-time resources, up from 229 one year ago. The increase from employment costs was partially offset by lower other operating expenses that resulted from the impact of IFRS 60, a new lease accounting standard, which came into effect at the start of this year. The new standard has reduced our second quarter rent expense by approximately $300,000 while increasing interest and amortization charges.Adjusted EBITDA in the second quarter increased 13% to $5.2 million, representing a quarterly record. And our effective margin, which we calculate as adjusted EBITDA as a percentage of gross profit, increased 250 basis points to 36.4%, which remains in our expected range. And lastly, total net income, excluding the impact of the aforementioned prior year tax rebate, was $1.8 million, flat with the prior year quarter. From the contribution perspective, the LCR segment continued to be a strong contributor to bottom line performance, generating positive contribution of $8.9 million, up 9% over the prior year period.Platform Partners contribution was $723,000 for the second quarter, a slight decline from last year, largely resulting from the decline in gross profit. And Points Travel contribution was a loss of $1.2 million compared to a loss of $966,000 in the second quarter of last year, largely due to increased research and development costs.Turning to our balance sheet. Total funds available were $67.6 million at the end of the second quarter compared to $831 million at the end of the fourth quarter 2018. The expected decline in cash was largely the result of normal ebbs and flows of our sales activity, which can fluctuate with the timing of marketing activity across our partner base. In the second quarter, we repurchased approximately 233,000 shares under the NCIB program at an aggregate cost of $2.9 million.As of June 30, we have repurchased almost 85% of the authorized amount under the NCIB program and expect to complete the full buyback by the end of the NCIB program when expires on August 13. And today, our board approved the renewal of our normal course issuer bid to repurchase up to 5% of our common shares, which is subject to the approval by the TSX and is expected to commence on August 14, 2019.With that, I’ll turn it over to Christopher to provide more details on our growth strategy. Chris?

[Christopher Barnard:]

Thank you, Erick, and good afternoon, everyone. It’s an exciting time for us at Points as we’re beginning to see the benefit of our various initiatives take hold. As Rob mentioned, we have increased our 2019 outlook and now expect gross profit to range between $58.5 million and $64.5 million, with adjusted EBITDA coming in between $20.5 million and $23.5 million. This new outlook is largely a result of the strong performance from our end-market partnerships, which have benefited from our investment in marketing and automation, coupled with the pipeline launches, launched as planned for the second half.In fact, excluding the former Saudia partnership and hotel merger dynamics, we grew gross profit with 9 out of our top 10 partners during the second quarter. We also have a growing pipeline of new loyalty program partners, new services for existing partners as well as the newly targeted verticals that we expect to come online in the back half of this year.I’ll highlight some of our recent successes by business line. In the Loyalty Currency Retailing segment, we continue to add our full breadth of LCR services in support of one of our newest partners, Emirates Airlines, and recently launched our Accelerator service so that Skywards members now have a valuable new tool to increased our miles journey potential on every flight. We continue to have good success in the region and expect to launch our full suite of LCR services with another leading Middle Eastern Carrier in second half of 2019.This progress is notable as it will likely represent the first deal closed under our new Amadeus partnership. We’ll obviously make more details available once the new loyalty partnership is launched. As we mentioned on our last call, in our Platform Partners’ segment, we’re also working with the Middle Eastern division of a leading international bank to power the new exchange service for transferring miles into a number of airline programs. So as our traction in the Middle East is apparent, it’s also a clear indication of our experience that regional focus can lead to accelerated growth over time.Sticking with Platform Partners. During the quarter, we launched integration between Hilton Honors program and the ride-sharing company, Lyft, to power a new relationship that sees users link accounts in order to earn points on each drive. This exciting new initiative demonstrates the power of our loyalty commerce platform to efficiently link strong retail brands with leading loyalty programs worldwide. Building on this trend, we not only added Wyndham Hotel program to our Marathon Fuel offering, but we also signed a multi-year agreement that sees a leading whole-meal-box-delivery service, Home Chef, offer frequent flyer miles when consumers sign up and make ongoing purchases.All of these launches show both progress on our diversification strategy and our continuing focus on building our presence in the retail and financial services verticals. In fact, the foundation of our financial services experience is our relationship with JP Morgan Chase and its leading Ultimate Rewards program. We’re excited to be renewing this important partnership by signing a launching extension as we continue to help them grow and improve their points transfer offering with more than 15 travel programs around the world.Finally, in our Points Travel segment, we are adding hotel and car redemptions to complement our current partners offering. Ensuring that all our Point Travel partners are leveraging our service’s full capabilities is an important goal for this segment. Additionally, this new service launch will be replacing the existing offering. So not only are we gaining an existing book of business at the gate, but solution is once again proving to be a market leader. And we are confident that given our access to inventory and our growing base of marketing data, we’ll be able to successfully grow this new offering. Added to this, we fully expect more launches in this segment in the coming quarters as our business development activities continue to bear fruit in this competitive market.In summary, you can see that the momentum in our business is evident. Between our increased 2019 guidance and our out performance during the second quarter, the ongoing success of end market partnerships, Amadeus, our new APAC presence and a solid pipeline heading into the back half of the year, we have every expectations of accelerating growth into 2020 and achieving our aggressive long-term targets set for 2022.With that, I’ll turn the call back over to Sean at Gateway to address some of your mailed-in questions. Sean?

[Sean Mansouri:]

Thanks, Chris. As Chris mentioned, before we pull for questions, we’d like to review and respond to some of the questions we received from investors over the last few weeks. While we’re appreciative of all the questions that came in, please understand that we cannot address every single one in a sufficient amount of time. So we went ahead and group them into a few relevant themes. With that, I’ll kick it off with our first question.Erick, this is probably best for you. We often get questions about our restricted share unit plan. Can you maybe describe that in more detail?

[Erick Georgiou:]

Yes. Thanks, Sean. And so maybe as a quick starting point. So we do grant restricted stock units to employees. And it really is a key part of our executive compensation program here at Point. Most companies who operate an RSU Plan tend to have a treasury-settled RSU plan, which really means companies issue net new shares out of treasury when an RSU vest, and so that ends up being dilutive to shareholders. Our RSU plan is a bit less common, but certainly not unique. It’s a market-settled plan. So we have to go out into the market, buy our own stock through a trust to fund that RSU.Now we consider that plan to be very shareholder-friendly, and that we’re not issuing a net new share, so it’s certainly not dilutive to shareholders. What it does mean though is that, it is a use of cash for Point. So as I said, we have to go out on the open market, buy the shares, put it in trust. Ultimately, when those RSUs vest, we’ll issue them out of trust to the end employees. I think the last comment I would add is, investors can find the amount of cash used to purchase shares or the cash used to pay any of the tax requirements for RSUs when they settle straight off of our cash flow statement.

[Sean Mansouri:]

Great. And when are we going to see a pickup in Points Travel? Are you guys still confident in the prospects for that segment?

[Rob MacLean:]

Hey Sean, it’s Rob. I’ll take that one. So no question, we expected to be a bit further ahead in this segment at this point in its development. I think, generally, I’d say that the overall cost to build and operate this segment has been a bit higher than I had anticipated, and that’s delayed us reaching our profitability targets versus our initial thinking. However, from my standpoint, I continue to see some really positive signs that we’re headed in the right direction on this segment.I think, as Chris mentioned in his prepared remarks, we’ll be adding a significant new book of business to one of our existing deployments here in the next week or so, and we believe that will be – very quickly will be a significant contributor to the overall segment’s economics. So that’s very positive. I think, in addition, we expect to launch two new deployments over and above that with sizable programs here in the second half of 2019.I’d say, on top of that, the overall economics of this segment continue to be pretty strong. The product itself without question for us is the best customer proposition we have in our suite of products. It has fantastic economics for our partners and continues to deliver excellent individual unit economics for us at Points. So while I – I’d like to see more overall volume in the business at this stage, really as an offset to the cost to operate, I do see great unit economics for all key stakeholders. I continue to see the products selling really well with our industry partners. And ultimately, I expect to see a big existing book of business moving on to our platform this year. So at this stage, I certainly see a path to profitability in this segment.Lastly, I’d probably comment that Points Travel remains a key arrow in our quiver as we target new loyalty programs around the world and expand in the current partnerships. We’ve seen previously and continue to see that this product has been a late entry point into new relationships, and in particular, into new verticals, such as retail, and that’s very aligned to our long-term growth strategy. So overall, I feel pretty good that we’re headed in the right direction.

[Sean Mansouri:]

Thanks, Rob. This wraps up our e-mail Q&A session for today. I’ll go ahead and turn it back over to the operator.

[Operator:]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Drew McReynolds of RBC. Please go ahead.

[Drew McReynolds:]

Yes. Thanks very much. Good afternoon to everyone. A few follow-ups here. Maybe I’ll just start with you, Erick, on the financial side. With respect to the tax benefit, can you just remind us then what kind of effective tax rate or cash tax rate we should be modeling going forward here?

[Erick Georgiou:]

Yes. Simply from an income tax perspective, at the bottom of the P&L, 26%, 27% would be the rate for that.

[Drew McReynolds:]

Okay. And would you be fully cash taxable then, just based on where your status is going forward?

[Erick Georgiou:]

Yes. We burned through a lot of our losses. So yes, we do have some tax planning opportunities for us that we’re looking at next year. So should have some savings there, but we do pay cash taxes.

[Drew McReynolds:]

Okay, okay. No, that’s great. Maybe just shifting gears here to the APAC region with Singapore getting off the ground. I don’t know, maybe a question for you, Rob. In terms of penetrating APAC, how does that kind of compare to what you’ve already done in Europe and what you’ve done in North America? Can you just kind of put some context around where you are and what that opportunity looks like?

[Rob MacLean:]

Yes. For us, we’ve always thought – I think you heard me describe in the past that we look at the Asia marketplace and the APAC marketplace as being a few years behind Europe in terms of monetizing their databases and the loyalty programs, that’s changing fairly rapidly. We’ve had some success doing business with the ANA, with Singapore Airlines, Virgin Australia, Shangri-La, all kind of in region, a number of other files that we’re working on. So we really thought it was the right time kind of following what we’ve done in the UK with our offices on the ground in the UK to now put some folks on the ground in the Asia Pacific.So we set that office up in Singapore, which is really what we designed to accelerate the existing deployments that we have in place by the service that drive some of the growth that we’re seeing in other areas of the globe. And in addition having more resources on the ground from a business development standpoint, that will really help us to be a little more aggressive in the APAC region. So very much following the model we see or saw in the UK, which has been very successful for us. And we’ll just go more aggressively after what we think is a pretty sizable market opportunity in Asia Pacific.

[Drew McReynolds:]

Okay. And with respect to – just maybe back to you, Erick, in terms of the OpEx base, nice, I guess, uptick in employees year-over-year. Obviously, you’re seeing very good growth in the business. So the two go together, maybe talk a little bit about the operating leverage here. And obviously, it’s there given the updated 2019 guidance. And then some of your corporate goals for 2022? But maybe just talk about kind of the ebb and flow of that leverage over the next one to two years, maybe?

[Erick Georgiou:]

Yes. Sure. So I mean, we kind of define leverage more as effective margin, so adjusted EBITDA on GP, and we came in at around 35% last year. So we expect that to grow and that should be implied in our 2019 guidance. I don’t want to throw a number out on a two-year time horizon. What I would say is, when I think of our four-year financial targets, there’s certainly an implied kind of plus 40% effective margin rate over that kind of four-year time frame. So that’s really what we’re targeting internally. In terms of just adjusted OpEx throughout the year, we’ve been managing that pretty tightly. I wouldn’t expect something like Singapore to add anything material to the cost base in 2019.

[Drew McReynolds:]

Okay, okay, fantastic. And then maybe a final one for me was, I think, addressed in some of the opening remarks, but just wanted kind of drill down a little bit more, just so I’m clear. Nice to see the increase in guidance, obviously. And I think by the sounds of things, it really sounds like there’s good momentum in the business. Relative to when you did your Investor Day back in late March, what kind of changed here in terms of that initial provision of guidance to where we are today? Is there kind of one or two things that stick out? Or is it really kind of a combination of kind of the existing base and in pipeline. But is there one or two that’s really driving this?

[Christopher Barnard:]

Yes. Hey, Drew, it’s Chris. It’s the latter. I think the business is really growing across the board. We’re getting leverage on our three-core growth drivers. And again, just not to be too repetitive, but want to make sure everyone gets how we are focused on growing the business. We – when we did the Investor Day earlier, we certainly had some pipeline expectations. So our first quarter growth driver is launching new partnerships. And as you know, being a student of our business for a while now, we always say around here, it’s not if, it’s when we close these new partnerships.So it’s hard to nail down a month or two or a quarter or two, when we’re going to close a new partnership, but we know we’re going to get them across the line eventually. So at the beginning of every year, we have an expectation for new pipeline closes on net new brands. And those come in over the course of the year and firm up.The second is the cross selling and up selling. So I think, if you look at some of our recent business announcements, a number of the new inclusions are up selling current partnerships. Even just this quarter, I’d highlight something like the Accelerator Service for Emirates Airline. So a new product or service put into a current partnership. So again, those are kind of staggered over the year, and we have expectations at the beginning, and then they start firming up as we get deeper into the year.And then the third, and this is a really important one for us based on a lot of the investments we’ve made over the last few years in our platform and technology as well as hiring on the marketing side, is just the current performance of end-market services. And that’s really strong across the board. And that really gives us some confidence when we look at the calendar for the back half of the year in the strength of the business. And I think the combination of all those three allow us to move up the range at this time.

[Drew McReynolds:]

And just on that last one, Chris, for just – it was strong across the board. What – is it just, again, the combination of an operating environment there that’s very positive. Or are you doing something internally with the existing contracts to really accelerate this? Just maybe a little bit more color there?

[Christopher Barnard:]

Yes. I think the majority of our partners, we’ve been able to implement marketing programs and promotional calendars that have been focused on growth. And we’ve been increasingly able to deliver that for the partnerships. And in some cases, actually, we’re taking less marketing capacity out of their channels, which is an increase in bonus to them. And we just found that through the data analytics and the analysis that we can do across all of our partnerships, benefiting each individual promotional calendar. We’re starting to see more and more leverage on the marketing side. And that’s filtering into all three segments of the business.

[Drew McReynolds:]

Okay. That’s helpful. One last one for me. On the – on your capital return program as a company, clearly, right now, the focus being on share repurchases, and I know your management team, and I’m sure the board would agree that the stock continues to look undervalued relative to certainly some of the targets you’ve thrown out there. Is dividend off the table or other ways to return capital? Or do you just certainly intend to remain very active on the NCIB?

[Christopher Barnard:]

Yes. And I think what – if we refer back to our Investor Relations deck, there is a slide there, that’s been pretty consistent on our capital allocation theory. The first is, we just want to make sure we have capital around the business, have a strong balance sheet. We think that’s one of our competitive advantages. And certainly, puts us in good stead as a relatively speaking smaller company dealing with multibillion-dollar international corporation. So that’s number one.Number two, and Erick mentioned on the RSU program, there is some capital required on the RSU program that we’re buying in the open market. So it’s not the same as buying back our shares, but there’s a portion of it because we’re buying in the open market. And then the third is the NCIB, so the stock buyback. We have bought back our maximum in the last couple of years. I think over the last four years, we probably retired to almost 2.5 million shares.So that’s, I think, a pretty significant benefit to shareholders. That kind of almost 10% outstanding. So the – sorry, the dividend is probably not on the table for the next little while. I think those two aspects running the business and the share buyback. The rest is really looking at some corporate development activities, when and if it comes down the pipe, we want to be – make sure we’re ready for that kind of opportunity, and to add to the base of the business.

[Drew McReynolds:]

Okay. That’s all very good. Thank you very much.

[Christopher Barnard:]

Thanks, Drew.

[Operator:]

The next question comes from Edward Woo of Ascendiant Capital. Please go ahead sir.

[Edward Woo:]

Yes. Congratulations on the quarter. I had clarifying questions. So the stock you buy for your RSU that is not included in your stock buyback numbers?

[Erick Georgiou:]

Hey, Ed. It’s Erick here. That’s correct. So I’d say both programs are very separate. The stock buyback program or the NCIB is really a form of capital allocation. So we are buying back stock and canceling those shares. The RSUs themselves are not net new shares. We go out on the market, we put them in trust, so we never retire those shares in any way. They are rewarded to employees over a period of a three-year estimate.

[Edward Woo:]

Great. And then going back to the APAC flow that you guys expected. How much of that is focused on China?

[Rob MacLean:]

Yes. Ed, it’s Rob. I think if we look at the Asia Pacific more broadly. I think China is proving to be a more difficult market to tap into, just the complexity of doing business in that market. We think, eventually, that will play a role in the Asia Pacific. Near term, we think the opportunities are really pretty significant outside of the Chinese – the Mainland Chinese opportunities. Certainly, Hong Kong has always been interesting for us, notwithstanding some of the activity right now. But most of what you’ll see in the next 6 to 12 months will be focused on markets outside of China.

[Edward Woo:]

Great. And then the next question I have is, what do you see out there in terms of competition? Have you noticed any particular change?

[Rob MacLean:]

Yes, Ed, our competitive environment is – has not changed in any significant way over the last number of years. It continues to be on our core business, really buy versus build discussion with the industry’s leading programs. And again, I think even the growth you’re seeing in the pretty steady knockdown of relationships, I feel very good about that. Points Travel, as we said, when we entered into that marketplace is a much more competitive environment. And when some of the big OTAs that play around in this market. I think we feel good about the niche that we’ve carved out, and where the upside is and our path to profitability, particularly with a focus on the loyalty side of the Points Travel proposition.And then from the third segment around Platform Partnerships, really, we’re the most efficient and most unique game in town with all of those relationships that we have in place, opening up our technology and our APIs to really smart companies that are tapping into that now and feels like a pretty unique offering. So not much change in the competitive marketplace. Really, for us, it’s building out of the mould we’ve built around the business and try to accelerate the scale and profitability of Points.

[Edward Woo:]

Great. Thank you and good luck.

[Rob MacLean:]

Thanks, Ed.

[Operator:]

The next question comes from Rick Teller, Private Investor. Please go ahead sir.

[Rick Teller:]

Good afternoon. Just one quick question for me. I was wondering about the impact on the company’s business of the Boeing Airplane groundings, whether that’s been negative at all as yet? And assuming that it does continue into next year, could that change either for the better or the worse?

[Rob MacLean:]

Yes. Rick, it’s Rob. I know you’ve been an investor follower for some time. The interesting thing with the 737 MAX issue is, it’s clearly beginning to impact some of our partners and just the industry broadly. But one of the interesting pieces of our business model is that we’re seeing many of our partners as they see some of that pressure and impact – negative impact on their kind of core business. They’re really looking at us and their royalty assets as an opportunity to really fill some of the gap there.So much as you’ve seen over the years where the airline business goes in or hotel business goes into a bit of a down cycle, I think we see really interesting opportunities there to step up and be a good financial partner with our loyalty programs that help them generate incremental profitability and economics. So we are starting to see some of that, to be very honest. It is a situation where we’re getting some of our partners, recognizing there’s some headwinds for them due to the 737 MAX. And they are spending time in Toronto with us to look at ways that we can accelerate and grow their respective businesses. So you never look for too many good things that have a difficult situation like that, but probably net positive for Points as a result of some of the turbulence there.

[Rick Teller:]

All right. That’s good to hear. Thank you.

[Rob MacLean:]

Thanks, Rick.

[Operator:]

This concludes the question-and-answer session. I would now like to turn the conference back over to Rob McLean for any closing remarks.

[Rob MacLean:]

Thanks, everyone, for listening to today’s call, and we look forward to speaking with you when we report our third quarter results in November. Thanks, again, for joining us.

[Operator:]

Ladies and gentlemen, this does conclude today’s teleconference call. You may disconnect your lines at this time. Thank you for your participation.