Points.com Inc.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss points, financial results for the fourth quarter and full year ended December 31, 2021. Delivering today's prepared remarks are Chief Executive Officer Rob McLean, President Christopher Bernard, and Chief Financial Officer Eric Georgiou. Following their prepared remarks, the management team will open the call up for any questions. Before we go further, I would like to turn the call over to Cody Slack of Gateway Group Points as he reads the company's safe harbor that provides important cautions regarding forward-looking statements. Cody, please go ahead.

Thank you. Please be reminded that the remarks on this 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 fourth quarter and full year 2021 financial results press release issued prior to this call, as well as other documents filed with the Canadian and U.S. securities regulators. Except as required by law, the company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. With that, I'll turn the call over to point to Chief Executive Officer Rob McClain. Rob?

Thanks Cody and good afternoon everyone. We delivered strong growth across our key metrics in the fourth quarter, sustaining the momentum we generated throughout 2021. Our fourth quarter revenue reached the record and we generated not only our fifth straight quarter of sequential gross profit growth, but also our highest level of gross profit in the past eight quarters. Despite the onset of the Omicron variant late in the fourth quarter, we continued to generate transaction growth across our platform, both on a year-over-year and sequential basis. Similar to what we saw with the Delta variant during the third quarter, the impact from Omicron is proving to be temporary rather than a longer-term pattern, and our performance so far in the first quarter of 2022 has also been very strong. Even as we continue to operate in a dynamic industry environment, we believe that our partners' newfound appetite for even more growth within their loyalty programs is strengthening both our current performance and the long-term potential of our own business. As broader recovery trends continue, we believe that our partners' visibility for their businesses and the evolving new normal for today's travelers will continue to improve. While many of our hotel partners and some airline partners are already exceeding pre-pandemic performance, each of our partners still has significant room to grow. As travel restrictions continue to ease globally and more carriers gradually expand their international routes, we believe the current trends will create additional opportunities for us as we enter our next phase of growth. Whether they have already returned to pre-COVID levels or still have a long road ahead towards full recovery, travel and hospitality operators recognize the immense value and flexibility that loyalty programs have offered their businesses throughout these past two years. Loyalty programs not only outperformed the broader travel and hospitality industries throughout the pandemic, but they've also served as a source of financial collateral and a vital medium for engaging customers in times where global travel activity was at an all-time low. We've continued to see evidence throughout the pandemic that loyalty programs remain among many operators' most valuable assets. This was most recently demonstrated by Aeromexico's announced plans to repurchase its loyalty programs. By making strategic use of their loyalty programs, operators are strengthening a foundational element of their recovery efforts as well as the next phase of their growth strategies. Accordingly, many of our loyalty program partners have continued to adopt a more aggressive posture towards enhancing their offerings and leveraging our robust platform. As I reflect back on our performance since the onset of the pandemic, I'm pleased with the resiliency of our business and our ability to steadily execute on our growth drivers of launching new global partnerships, identifying cross-sell opportunities with current partners, and enhancing our marketing and merchandising capabilities to drive maximum performance of our existing in-market product deployments. Our loyalty commerce platform positioned us well to take advantage of a business development pipeline that strengthened significantly throughout the pandemic with both new partners and existing partners, and this continued in the fourth quarter of 2021. From a new partnership perspective, our new relationship with Eva Air that we launched in the fourth quarter represents our most comprehensive relationship with an APAC carrier. This partnership helped strengthen our presence in the APAC region, which is a key growth area for us over the long term. Importantly, we also renewed our long-term partnership with Air France KLM to a multi-year extension in the fourth quarter, another partner that is looking for outsized growth as we emerge from the pandemic. Christopher will provide more details on that in a few moments. On a broader operational level, we also announced a collaboration with Rocket Travel, a booking holdings company, which will maximize the efficiency of our platform for bookings customers and allow us to strengthen our focus on our core competencies. Booking joins a growing list of blue-chip third-party companies now leveraging our loyalty commerce platform to efficiently access the loyalty industry. The strides we're making with adding new partners complement the new deployments and enhanced services we've continued delivering to our existing partners. During the fourth quarter, we launched our Accelerate Anything capability with two new carriers and added additional exchange options across the platforms. With this strong fourth quarter, we finished 2021 with one of our strongest business expansion periods in our history, adding three new loyalty program partnerships and launching a full 32 product and service deployments into the market. These excellent results have both broadened the number of loyalty program partners that we've added to our loyalty commerce network and also deepened our relationships with the world's most successful loyalty programs by adding new products and services to grow our respective businesses. Exiting 2021, we now have a product and services footprint that is 15% larger than when we entered the pandemic. And we are excited about the prospects of leveraging this to drive even more value to the loyalty industry in 2022 and beyond. While 2021 delivered one of our strongest periods of business expansion, we're very excited to see that this success is continuing here in the early days of 2021, sorry, 2022. As you saw last week, we renewed and extended our relationship with the Marriott Bonvoy Program. Marriott is one of our largest and most successful relationships, and we're thrilled to be working together during this multi-year extension. This extension comes with a significantly expanded mandate for growth, and we're seeing great early results on this enhanced partnership. The new partnership and expanded relationships we've built throughout 2021 have leveraged the strength of our loyalty commerce platform while deepening our footprint in new geographies and verticals. We have moved quickly and decisively to support our partners in today's rapidly evolving environment, and I'm very pleased of the continued progress our team has made. We will work to further execute on these opportunities throughout 2022. The travel and hospitality industries look very different today from where they stood this time in 2020. The pandemic certainly created unprecedented turbulence in the global travel industry, and as we navigated the past two years, we saw various spikes in that turbulence with the appearance of Delta and later the Omicron variants. Throughout this period, each time the travel industry faced these challenges, the loyalty programs were increasingly relied on to engage travelers and to drive strong financial results. The current violent invasion of Ukraine has presented another terrible situation, and we are actively responding to this event as well. We do not do any business with Russian airlines or hospitality companies today, and we have removed those companies from our pipeline so that we do not expect to operate in that market in the future. And while this could present another period of turbulence for the industry, we are confident we can continue to demonstrate our increasing value proposition during another challenging time for our loyalty programs partnerships. The journey from then to now was difficult for all of us in the industry. Yet within our business, our strategy remained intact, and we believe it has positioned us to meet our partners' increasing mandate for outsized growth. As we continue to develop and introduce loyalty products, implement meaningful product extensions, and further ramp up our marketing and merchandising efforts, we believe the long-term financial growth targets we established before the pandemic remain achievable. With that confidence in the longer-term opportunity and with a very positive start to the year, we expect to deliver strong growth in our key metrics throughout 2022. We work tirelessly to accelerate our execution on our core growth drivers through the end of 2021, and we will continue ramping up efforts on these fronts and supporting the powerful role loyalty programs are playing in the new normal of travel and hospitality industries. I will now hand it over to Eric to review our financial performance for the fourth quarter and full year, and then Christopher will provide some additional highlights and perspective on our partner activity. Eric? Thanks, Rob, and thanks for joining, everyone. As always, all figures on today's call are in U.S. dollars. I'll start by providing some color on our fourth quarter financial results I then provide some early thoughts on 2022. Fourth quarter results demonstrate the strengthening momentum we generated in our business throughout 2021 and were in line with our preliminary ranges provided in January. Total revenue in the fourth quarter of 2021 increased significantly to a quarterly record of $115.1 million, a 104% increase over the year-ago quarter and a 33% increase over the third quarter. Revenue was underscored by increased transaction volumes across our platform, reflecting strong performance from our marketing activity and aided by the benefits of recovery tailings, which benefited transactional activity that is more closely tied to near-term redemption activity. And despite the Omicron wave, which started late in the fourth quarter, we did not see our performance metric meaningfully affected, as the impact seems to be less severe and of a shorter duration than previous waves. Gross profit in the fourth quarter of 2021 was $17.1 million, a 38% increase over the third quarter, and up more than double from $8.5 million in the year-ago quarter. We were pleased to see strong organic growth from the majority of our partners in the fourth quarter, with several ending the year above their 2019 performance levels. Geographically, the U.S. market has remained our strongest market, particularly with our hospitality and domestic airlines in this region. Amid the strengthening transaction volumes we generated across our existing partner base in Q4, we also benefited from the impact of new partners and services we have brought to market over the last two years, as these new additions have continued to ramp through the pandemic and become a more meaningful portion of our quarterly performance. In addition, gross profit in the fourth quarter also benefited from our tier status product, which was reintroduced during the fourth quarter on a limited basis. As a reminder, this product, which is seasonal in nature and generally offered during the fourth quarter, was not in market in the year-over-quarter as airlines extended status to members free of charge due to the impact of COVID-19. Given the excellent results we saw with the limited reintroduction, we would expect to see more of these services moved into market later in 2022. Operating expenses in the fourth quarter of 2021 were $15.2 million, an increase from $9.9 million in the year-ago quarter. The increases were a result of the gradual easing of spending restrictions implemented at the onset of the pandemic, higher stock-based compensation, and the impact of wage subsidies reported in the prior year period. We recognized $1.2 million in subsidies from the Canada Emergency Wage Subsidy Program in Q4 2020 and ceased participation in this program during the second quarter of 2021. Adjusted EBITDA for the fourth quarter of 2021 came in at $5.5 million, up significantly from roughly $400,000 in the year-ago quarter and $2 million in Q3 2021. The sequential and year-over-year increases were primarily driven by the high levels of gross profit I mentioned earlier. Turning to our balance sheet, our liquidity position remains strong and positions us well to deliver on our growth drives. Total funds available of approximately 109 million at the end of Q4 represented a significant increase from approximately 79 million at the end of 2020. To summarize 2021, we generated strong improvements across our key financial metrics, which were bolstered by strong marketing activity, the impact of new partnerships and products, and aided by recovery-related tailwinds. As we look ahead to 2022, we are encouraged by a very positive start to the first quarter, with activity across our platform looking very strong. We remain optimistic about 2022, but continue to operate in a volatile macro environment. The impacts of COVID-19 still remain in certain markets, and while we have seen positive signs of recovery over the last several months, the extent of recovery varies globally and is evolving. And as Rob mentioned, We are continuing to monitor the developing situation in Eastern Europe, which could cause further disruptions for travel. While our economic exposure to this region is low, and we have not seen any impact so far, the situation is obviously quite fluid. While we are not yet initiating annual guidance for 2022, I'll provide some color and early thoughts on the year ahead. Overall, we are optimistic about our ability to grow in 2022. Based on current trends we are seeing, we expect travel to continue to recover through the year and we'll work with our partners to capture their outsized world targets. Accordingly, our expectation is to drive meaningful year-over-year growth in revenue and gross profit in 2022. From an expense standpoint, we're taking a long view on where we invest. As we think about the significant opportunity in front of us and the growth mandates from our partners, we plan to make investments in marketing, data analytics, and engineering resources in 2023. These additional resources will be focused on supporting our partners' aggressive growth mandates, as well as adding scale to our platform to more efficiently facilitate this growth. Notwithstanding our plans for ongoing investments in our business, our expectation for strong top-line growth is expected to deliver material growth to our bottom line in 2022 and improve our effective margin or operating leverage, and to grow that metric even more in 2023. To be clear, the global environment presents risks that will be difficult to predict at this stage, and our expectations for 2022 are being made assuming no substantial disruptions. As always, we will provide updates and incremental color on our progress throughout the year as we gain further visibility and continue to monitor trends in our industry. And with that, I'll turn it over to Christopher. Thanks, Eric. Our progress on our growth drivers throughout 2021 highlights the resilience of our strategy and our dedication to providing flexible, high-quality loyalty commerce services to our current and prospective partners around the world. With many of our loyalty program partners pursuing more aggressive, long-term growth mandates coming out of the pandemic, our loyalty commerce platform, suite of services, and broad partner base makes us well-positioned to continue delivering on these objectives. To review the progress we made in Q4, we expanded the reach of Marriott Bonvoy's existing buy service in October by adding top-up capability directly in their booking flow. We now power Marriott's buy activity directly in the redemption flow, having moved this existing channel onto our loyalty commerce platform. This product represents a substantial channel expansion for us and the partnership, and will enable us to deliver significantly more revenue to Marriott over the long term. In addition, the new top-up solution enables Marriott to enhance its personalized loyalty marketing campaigns with a variety of promotional constructs, providing Marriott Envoy members with a wider range of new offers. We place a strong priority on proving the depth and breadth of our deployments for our long-term partners, ensuring that our loyalty solution represents an efficient, tailored experience to our program partners and their customers. While subsequent to year-end, I'd also like to highlight last week's announcement of a multi-year extension to our partnership with Marriott. Started in 2006, our relationship with Marriott is now well into its second decade. After its merger with the very popular FPG program and successful relaunch of the combined Bonvoy program, we have been proud to play our part in continuing to steadily grow our performance and successfully increase member engagement while driving significant economics in the partnership with this leading hospitality brand. We've seen this sector become an increasingly important one for us as it is being fastest to recover from the pandemic lows. We're very encouraged by the prospects of our newly expanded in-booking path service and look forward to continuing our focus on data-driven personalized growth initiatives with Marriott. In the fourth quarter, We're also pleased to renew our long-term partnership with one of Europe's largest frequent flyer programs, Air France KLM's Flying Blue, to a multi-year extension. The enduring support of our long-standing travel hospitality partners is a testament to the strong results and high quality of service that our team has worked to preserve across our partner base. Building upon the support we've provided the Flying Blue program throughout our partnership, we added our Accelerate Anything capability to their existing service suite in the fourth quarter. During this time, we also launched Accelerate Anything for Copa Airlines, a prominent Latin American carrier. After retooling our traditional travel-dependent accelerator product into this more flexible option during the pandemic, we have swiftly expanded its reach in less than two years after introducing it. Quality partners and customers alike have benefited from this product's optionality whether customers use it to accumulate loyalty currency for future travel use or leverage additional earning options to support near-term travel needs. We launched this new service in the spring of 2020, and now, with these two launches, have seven total deployments in market. We continue to expand deployments and integrations of some of our legacy product offerings throughout the fourth quarter. In particular, we continue to make strong progress with our exchange service, as we added both the Wyndham Rewards Program and Choice Privilege Program as exchange options for City Thank You Rewards. In addition, we enabled Air Canada's Aero Plan, Virgin Red, and Turkish Airlines Miles and Smiles exchange options with BILT Rewards, a newly launched rent rewards program. Having just launched our partnership with BILT in Q2 2021, we are pleased to be rapidly advancing our progress with this new type of loyalty program partner and to be doing so in a way that is mutually beneficial to many of our existing carrier and hospitality partners. Subsequent to year end, we continued our exchange services momentum by enabling Turkish Airlines Miles and Smiles as an additional Citibank thank you points transfer option, as well as linking Qatar Airways program to our AirMiles Middle East Exchange offering. Now turning to our progress with some of our newer partners launched during Q4, We launched several contract exclusions for APAC carrier EVA Air. We launched EVA's purchase miles offering at the inception of the partnership in November, allowing EVA's Infinity Mileage Lands customers to get their rewards sooner by buying additional miles at a preferential rate. EVA Air is also leveraging our industry-leading loyalty marketing expertise and data-driven insights to develop personalized campaigns for their infinite Infinity mileage lands membership base, which is expected to drive additional growth for the program. We track towards launching a series of additional solutions expected to follow later this year. We have created a strong foundation for both this comprehensive partnership and our continued efforts to expand our APAC footprint. Lastly, we announced a collaboration with Rocket Travel, the industry-leading provider of bespoke white-label travel booking platforms. that aims to enhance the overall booking experience offered to our loyalty program partners. Under the collaboration agreement, Rocca Travel's white label loyalty hotel and car booking service will replace the services previously provided by the points travel solution. This process will still leverage the capabilities of our loyalty commerce platform as we will continue to manage the loyalty program relationships and process the miles and points portion of each transaction. In addition, PointSound.com became a rocket miles channel provider, which will facilitate accelerated rewards and streamlined user journey for loyalty customers across an even greater selection of global loyalty partners. This new initiative allows us to continue building on our deep and longstanding loyalty program relationships, as well as deepen our focus on the core competencies and unique transaction capabilities of our loyalty commerce platforms. In fact, the collaboration is already off to a strong start as we expect one of our forthcoming service launches for EVA Air to include the first deployment of a travel booking service under this Rocket Travel partnership. Together with Rocket Travel, we will continue to seek additional opportunities to enhance our loyalty partners' and customers' experience and further complement each other's offerings. As you've heard us express throughout 2021, our commitment to our core growth drivers did not waver during the lows of the pandemic, and this resiliency enabled us to drive increasingly strong financial and operational results as we progressed through the year. Our Q4 performance reflects the high quality of service and support we have continuously delivered to our partners, as well as our execution on our pipeline of new partnership opportunities. We have moved into 2022 with a renewed confidence in our long-term growth prospects. And while we do not have a perfect visibility on how the broader recovery will play out over the coming quarters, we have proven our ability to move swiftly and aggressively in support of our loyalty industry's ramping growth expectations. As we progress further into 2022, we will work to continue creating new partnerships with global loyalty programs, deepening our current partnerships through launching net new service deployments, and enhancing the services we currently have in market. With our robust foundation and business development pipeline, we are well positioned to continue advancing our growth initiatives and supporting the essential role that loyalty programs are now playing in the travel and hospitality industry's recovery. Operator, we can now open the call up for questions.