Aimia Inc. (AIM) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Aimia Inc. Annual Meeting. My name is Charlie Frischer, and I am Chairman of the Board. Once we are through the formal part of the meeting, I will provide a business update and invite Phil Mittleman, Aimia's newly appointed interim CEO, and Director of the Corporation; Mr. Bruce Kerr of Kognitiv; and Cindy Faust of Aimia Loyalty Solutions to speak to you about a very exciting transaction we announced earlier today. Although we are disappointed that we can't see each of you today, our thoughts are with you, your families and the communities we serve. We want to thank you for your patience as we navigate through this unprecedented situation and hope that you agree, we did the right thing by moving to electronic meeting in light of the circumstances. Instructions on how to ask questions and the voting process will appear on your screen. As with any new technology, unexpected glitches may occur, but we will do our best to ensure that the meeting runs as smoothly as possible. The meeting will now come to order. In accordance with Aimia's bylaws, I, as Chairman of the Board, will act as Chair of the meeting. I ask Eddie Vo-Quang, our General Counsel and Corporate Secretary to act as secretary of the meeting, and Francine Beauséjour of AST Trust company to act as scrutineer. The scrutineers have provided proof of mailing of the Notice of the Meeting, the forms of proxy, the Proxy Circular and the 2019 Annual Report. I direct that a copy of the notice, together with the proof of mailing, be kept with the minutes of this meeting. The corporation's bylaws provide that a quorum of shareholders is present in a meeting of shareholders if 2 or more persons holding not less than 25% of the shares entitled to vote at the meeting are present in person or represented by proxy. The scrutineers have advised me that we have such quorum. Notice of this meeting have been duly given and a quorum of shareholders being present, I declare that the meeting is properly convened and constituted for the transaction of business. The annual meeting was called to consider 6 matters. We will conduct the vote on the matters before us by a poll. On a poll, every shareholder entitled to vote on the matter has 1 vote in respect of each share entitled to be voted on the matter and held by that shareholder. The poll will be open for all resolutions at the same time. This will allow you to choose to vote on each resolution immediately or wait until conclusion of discussion on all resolutions prior to casting your vote. If you voted in advance, and do not wish to change your vote, there is no further action required. You should note that while each of the votes cast today will be accounted for in the final results, proxies lodged with our registrar and transfer agent before this meeting allow me as proxy holder to determine the outcome of each of the motions that will go to a vote today. The detailed results will be publicly available on sedar.com in the coming days. Certain shareholders or proxy holders have agreed in advance to introduce the motions on the agenda. I will invite them to do so at the appropriate time. As mentioned earlier, we have set aside time following the business presentation for a question period. All inquiries of a general nature will be dealt with at that time. Now let's move to the first item of business. The consolidated financial statements for the years ended December 31, 2019, and 2018, together with the auditor's report thereon, were sent to the shareholders who requested them and are available on the corporation's website and on sedar.com. I direct the Secretary to file a copy of the financial statements with the minutes of this meeting. Moving now to the next line of business on our agenda, the election of directors. I would like to start by highlighting that at the end of February, the Board was largely reconstituted with 6 of the 8 directors stepping down and replaced with 6 new directors. In addition, of the 8 current directors, Mr. Jeremy Rabe, will not be standing for reelection. Our Proxy Circular, therefore, sets out a list of 7 directors for election as directors of Aimia until the end of the next Annual Shareholder Meeting or until his or her successor is appointed. Our nominees are currently members of the Board of Directors -- all nominees, excuse me. The nominees to be elected as director are: Karen Basian; myself, Charlie Frischer; Sandra Hanington; Michael Lehmann; Philip Mittleman; David Rosenkrantz; and Jordan Teramo. Biographies were included in the Notice of the Meeting. Each of the persons nominated has confirmed that he or she is prepared to serve as a director of the corporation, and all nominees meet the qualification requirements for directors under the corporation's bylaws. I would also note that pursuant to the terms of the corporation's advance notice bylaw, no other nominations have been received and that nominations are thus closed. I will now ask that Sandra Hanington, a shareholder and Director, move to elect each of the nominees as directors.

Mr. Chair, I so move.

Thank you, Sandra. Is there a discussion of this motion? As there is no discussion, I now call a vote on the motion before the meeting. Please enter your votes on the voting platform. If you voted in advance and do not wish to change your vote, there is no further action required. As I mentioned earlier, proxies received by our transfer agent before this meeting by mail or electronically allow me as proxy holder to determine the outcome of each of the motions that will go to the vote today. [Voting]

I therefore declare the motion carried, and I declare each of the 7 nominees to the Board duly elected to hold office until the end of the next Annual Shareholder Meeting or until his or her successor is appointed. The next item of business is the appointment of the auditors . I will now ask that Sandra Hanington, a shareholder and Director, move that a resolution appointing PricewaterhouseCoopers LLP as the independent auditors of the corporation and authorizing the directors to fix the auditor's remuneration be approved.

Mr. Chair, I so move.

Thank you, Sandra. Would Eddie Vo-Quang, a shareholder and member of the executive team, second this motion?

Mr. Chair, I second the motion.

Thank you, Eddie. Is there any discussion of this motion? As there is no discussion, I now call for a vote on the motion before the meeting. Please enter your votes on the voting platform. If you voted in advance and do not wish to change your vote, there is no further action required. [Voting]

The motion is carried, and I hereby declare our auditors duly appointed. The next item of business is the amendment of the articles of incorporation -- of the corporation to change the province of the registered office of the corporation from Québec to Ontario. I will now ask that Sandra Hanington move to approve the change of registered office resolution as more fully set out in the Notice of the Meeting and in the Proxy Circular.

Mr. Chair, I so move.

Thank you, Sandra. Would Eddie Vo-Quang second this motion?

Mr. Chair, I second the motion.

Thank you, Eddie. Is there any discussion of this motion? As there is no discussion, I now call for a vote on the motion before the meeting. Please enter your vote on the voting platform. If you voted in advance and do not wish to change your vote, there is no further action required. [Voting]

The motion is carried, and I hereby declare the change of registered office resolution duly adopted. The next item of business is the approval of the share consolidation resolution, authorizing the Board to effect at such time as it does, as it deems appropriate, but in any event, before December 31, 2020, a share consolidation as more fully set out in the Notice of the Meeting and in the Proxy Circular. I now ask that Sandra Hanington move to approve the share of consolidation resolution as more fully set out in the Notice of the Meeting and in the Proxy Circular.

Mr. Chair, I so move.

Thank you, Sandra. Would Eddie Vo-Quang second this motion?

Mr. Chair, I second the motion.

Thank you, Eddie. Is there any discussion of this motion? As there is no discussion, I now call for a vote on the motion before the meeting. Please enter your votes on the voting platform. If you voted in advance and do not wish to change your vote, there is no further action required. [Voting]

The motion is carried, and I hereby declare the share consolidation resolution duly adopted. The last item on our agenda today is the consideration of the nonbinding advisory resolution on the corporation's approach to executive compensation. The statement of Executive Compensation section of the corporation's Proxy Circular discloses in detail such approach. The results of the vote will not be binding on the Board. However, the Board will take into account the results of the vote together with other pertinent information or comments from shareholders when considering the corporation's approach to executive compensation. The full text of this resolution is reproduced in the Proxy Circular. I will now ask that Sandra Hanington move to approve the advisory vote on executive compensation, as more fully set out in the Notice of the Meeting and in the Proxy Circular.

Mr. Chair, I so move.

Thank you, Sandra. Would Eddie Vo-Quang second this motion?

Mr. Chair, I second the motion.

Thank you, Eddie. Is there any discussion on this motion? As there is no discussion, I now call for a vote on the motion before the meeting. Please enter your votes on the voting platform. If you voted in advance and do not wish to change your vote, there is no further action required. [Voting]

As I described earlier, and based on the preliminary tabulations of our scrutineers, I declare this motion carried and the resolution to accept the corporation's approach to executive compensation duly approved. As there is no other formal business to come before this meeting, I now ask Sandra to move that the formal part of the meeting be concluded.

Mr. Chair, I so move.

Thank you, Sandra. Would Eddie Vo-Quang second this motion?

Mr. Chair, I second the motion.

Thank you, Eddie. I declare this motion carried, and this concludes the formal part of our meeting. I will now provide an update on our business. Before we get underway, I'd like to remind everyone to review our forward-looking statements and the cautions and risk factors pertained to the statements, which can be found on Slide 11 in front of you on your screen. And with that, we'll begin with the business update. 2019 was a transformative year for Aimia with tremendous progress achieved towards building a stronger company. The organization put in place an ambitious plan to radically simplify the operating model and reduce expenses in order to strengthen its foundation. It also demonstrated fiscal prudence in paying down debt and preserving a solid financial position while opportunistically returning capital back to shareholders throughout the year. 2019, Aimia returned a record high amount of capital to shareholders through spot buyback and dividend, totaling around $390 million, reducing the common shares outstanding from 152.3 million to 93.8 million, and we also reduced outstanding preferred shares from 12.9 million to 9.4 million. Also, working closely with the PLM management team, and our joint venture partner, Aeromexico, we agreed to make a distribution from PLM to its shareholders leading to distributions of $35 million, which is double the amount received in 2018. Lastly, the comprehensive settlement reached with the shareholders is also a significant and positive development for the company, allowing the corporation to move forward with a reconstituted Board with substantial ownership in Aimia and align interests with all stakeholders to create long-term value. The Board has been very active since it was reconstituted in late February. In the short period of time, it has taken immediate and significant action to positively alter the fundamental aspects of Aimia's business strategy, investment policies and organization to create value for all stakeholders. In early March, the Board formed a special committee to evaluate future strategic direction for the company. Members of the Strategic Special Committee included David Rosenkrantz, Chair of the special -- of the Strategic Committee; Karen Basian, Sandra Hanington and myself. A thorough and comprehensive process was undertaken by a committee of these independent directors that evaluated all strategic options for Aimia to generate the most attractive long-term return. After long and careful deliberation, this special committee recommended to the Board of Directors to change the company's corporate strategy to become an investment holding company. The company will focus on deploying its cash and tax assets towards acquisition of free cash flow generating businesses in diverse industries. Aimia will seek to make long-term investment in public and private companies on a global basis through controlling or minority stakes. We will target companies that exhibit durable economic advantages evidenced by a well-established track record of substantial free cash flow generation over a complete business cycle, guided by strong experienced management teams. Aimia is now positioned to invest wherever suitable opportunity can be identified, thus diversifying the corporation away from its prior loyalty-only investment mandate into a more broad and balanced investment holding company. In particular, the corporation will consider investments that may efficiently utilize the company's nearly $700 million in operating and capital losses carryforward to further enhance stakeholder value. We think this is the best strategy that will guide the company on a sustainable path of value creation for stakeholders. We believe that leveraging the skills of a world-class Board to oversee our new management team's effort is the right combination to unlock the future value of the company's substantial assets and investments and deploy its capital. To support the corporation's new strategic focus, this morning, we announced 2 transactions that are aligned with our vision and direction for the company. Aimia will acquire Mittleman Brothers in an accretive transaction, and Aimia's Loyalty Solutions segment will merge with Kognitiv, an innovative technology company, redefining the loyalty industry, the details of which Phil Mittleman, Bruce Kerr of Kognitiv and Cindy Faust of Aimia Loyalty Solutions, will share with you shortly. Mittleman Investment Management is an SEC-registered investment adviser that provides discretionary portfolio management to institutional investors and high net worth individuals, and is a well-respected value investment manager with a composite track record that ranks its performance in the top 1% of global equity managers over the last 17 years. As a part of this acquisition, Aimia will employ key personnel for Mittleman Brothers to deepen the company's investment expertise and M&A capabilities. Chris Mittleman will be joining Aimia's Board and will also become the Chief Investment Officer of the corporation. Phil Mittleman has been appointed as interim CEO of Aimia to replace Jeremy Rabe, effective immediately, and is expected to be appointed permanently upon closing of the Mittleman Brothers transaction. Phil has been a valuable asset to the Board, bringing innovative and value-enhancing ideas to the team and has been instrumental in improving our relationships with key partners. We are confident in his ability to lead and execute Aimia's new vision and we look forward to working closely with him and the team to execute on our new and promising core strategy. As announced earlier this month, the Board also formed an ad hoc investment committee to oversee the company's significant cash and investments on hand. Current members include: Michael Lehmann, Chair of the Investment Committee; Jordan Teramo; Phil Mittleman; and myself. Chris Mittleman will also be joining the Investment Committee upon the closing of the Mittleman Brothers transaction. Members of this committee are highly skilled in capital allocation, with decades of experience as professional investment managers with discernible track record of success. COVID-19 has resulted in significant disruption and economic damage to the global economy and has led to significant volatility in the stock market. For a company like Aimia that has no debt and is cash rich, these unprecedented times are providing opportunistic moments. To capitalize on the short-term dislocations in the stock market, the ad hoc committee quickly began assembling a diversified portfolio of high-quality investments, purchasing approximately $21 million on a targeted selection of publicly traded company securities across various industries and market cap. The portfolio is just -- is up just over $3 million as of yesterday's closing prices. It is our intention to wind down this portfolio as it nears fair value to focus all of our efforts and resources on our core strategy, which is to deploy cash and tax assets towards the acquisition of free cash flow generating businesses in diverse industries through long-term investments in public and private companies on a global basis through controlling or minority stakes. Now that we have covered the strategic direction and investment policy of the company, let me share with you some additional updates. The Board has worked with management to dramatically reduce corporate costs, leading to a leaner corporate structure. These reductions create significant shareholder value through a substantial reduction in the annualized operating run rate expenses from $27 million in 2019 to approximately $15 million in 2020. In conjunction with these savings and following the close of the Loyalty Solutions in Kognitiv merger, Aimia's total employee count will be reduced from 450 to 20. With those changes will also come substantially reduced operating complexity. This business simplification will also help investors better understand the go-forward Aimia's story that will consist of a leaner corporate team, guided by a highly-skilled Board, to grow the value of its 4 core holdings and the newly merged Kognitiv, PLM, BIGLIFE as well as Mittleman Brothers. In addition, Aimia will retain over $265 million on a pro forma basis in cash and liquid investments after closing these transactions. This is an historic moment for Aimia with an exciting and promising future. Our corporate transformation, including a refreshed strategy that's led by a new and leaner management team overseen by a world-class board, will contribute to the long-term sustainability of the company and deliver compelling value to all stakeholders. I will now invite Bruce and Phil to share with you more details on today's exciting announcement, after which I will then come back and we will wrap up with a few concluding comments. Phil?

Thanks, Charles, and good morning everyone. I would like to say a few words before we dive into the details of today's exciting merger announcement, covering the background of the transaction and the strategic rationale for the merger. I'm extremely proud to be speaking to you as Aimia's interim CEO and of all the work this reconstituted Board has achieved in such a short period of time. As Charlie mentioned, we have significantly cut costs and rightsized the corporate expenses while immediately moving to catalyze stakeholder value in our operating subsidiaries and refresh and improve our relationship with key partners. We've announced a new corporate strategy, overseen by new management and a new Board of Directors with long track records of creating stakeholder value, highlighted by a new ownership mentality at the Board level, with each board member having purchased significant amounts of stock in the open market. So let me share with you how we are catalyzing stakeholder value and loyalty solutions with today's merger announcement. Aimia's stakeholders have experienced years of negative cash flow from the Loyalty Solutions entities, over $80 million in the past 2 years alone. After recently completing a successful turnaround in that business, which was poised to become EBITDA positive this year on a stand-alone basis, Aimia was presented with an exciting opportunity in Kognitiv, whose proprietary AI, peer-to-peer technology allows their partners to distribute and apply rewards via the loyalty capital network to maximize yield and consumer lifetime value. The decision to merge Loyalty Solutions and Kognitiv, each gaining traction in different markets with strong cost and business synergies, represents an outstanding opportunity and highlights the significant value that has been created in the Loyalty Solutions business while greatly simplifying Aimia's corporate structure. Kognitiv's extensive investment in technology will enhance and further enable the Loyalty Solutions platform and represents a significant acceleration of our combined business models, which are fully funded with the likely potential to become EBITDA and cash flow positive in 2021, with accelerating growth in that period and beyond that far exceeds our previous internal guidance for our Loyalty Services division. Importantly, Kognitiv's management and Board of Directors bring an invaluable array of talent and business acumen of the newly merged entity. This transaction is structured similarly to our highly successful investment in Cardlytics, where Aimia contributed certain IP, international operating expertise and board presence along with funding into a tech-forward company, which is subsequently brought public in an IPO. We believe this merged entity has a potential for a monetization event that would provide a similar positive outcome. Over the past few decades, Aimia Loyalty Solutions has built up a formidable reputation as a well-recognized global full-service provider of loyalty technology platforms and services for the world's leading brands. Having recently completed a successful transformation, which has led to significant improvement in its operating performance, Loyalty Solutions is now well positioned to accelerate its growth with Kognitiv. This merger not only forces the realization of cost synergies, but it fosters business synergies that we expect to turbocharge the growth of both entities. Concurrent with this merger, Aimia and Kognitiv investors will contribute CAD 35 million in exchange for 12% yielding convertible preferred shares in the newly merged entity, of which Aimia will be contributing CAD 21 million and existing cognitive investors and board members will fund the remaining CAD 14 million. This investment signals a strong vote of confidence in the future potential of the newly merged and finance business with a healthy equity valuation of $525 million, which represents an initial ownership stake for Aimia of $257 million as 49% owner of the new entity. It also greatly simplifies Aimia's holding company structure and ring fences these operations outside of the parent company at Aimia and into an external holding that it will be -- that we will a minority owner of, providing significant upside to Aimia stakeholders while limiting future risk. More importantly, the investment allows all shareholders to benefit in the future upside of the merged company, which will be governed by a highly skilled board and -- of -- comprised of tech-savvy sector experts and complemented by Aimia's oriented -- investment-oriented board representatives. We are confident that the strength of the combined leadership team will lead to great success for all stakeholders. The strategic rationale for this merger is compelling. We are excited about this opportunity as the merger provides many immediate benefits that leverage the strength and capabilities contributed by each partner. This is a sound strategic decision that will contribute to the long-term sustainability of the newly merged company, providing greater scale and agility. Loyalty Solutions brings to the partnership its extensive brand recognition and deep industry knowledge from decades of experience as an operator. With 80 years of loyalty heritage in its DNA, it has built a strong base of over 200 million customer profiles and global footprint supporting over 40 markets. These distinguishing qualities will serve the combined entity well to create a stronger company with global scale, enhanced capabilities and superior competitive differentiation that can drive business synergies for cross-selling opportunities as well as enhance our new products and service offerings to existing and new clients. Also with complementary front- and back-end capabilities that combine Loyalty Solutions' full suite loyalty management with Kognitiv's transformative peer-to-peer loyalty capital network, the new business should be well positioned to increase revenue and rapidly accelerate their path to profitability. And now I'll hand it over to Bruce, Chief Commercial Officer of Kognitiv to discuss the value that Kognitiv will add to the partnership and the benefits and opportunities that he sees for the combined entity. Bruce?

Thank you for the introduction. Good morning, ladies and gentlemen, members of the Aimia shareholder community. On behalf of both the executive team and the Board of Directors of Kognitiv Corporation, I appreciate the opportunity to join you on this very exciting day when our 2 organizations can announce our merger. As Phil mentioned, my name is Bruce Kerr, I'm the Chief Commercial Officer of Kognitiv. Please allow me a brief moment to provide some career background, and then let's discuss why the merger is such a game changer in the loyalty space and will, I'm confident, do more than just transform the Loyalty landscape, it will redefine it. I've spent 25 years in the loyalty industry, many of those working within the Air Miles business here in Canada, following the acquisition by Alliance Data, working as North American President of Brand Loyalty. While at Air Miles, I had always admired how well the Aimia organization was run, the depth of your talent and the success you're able to deliver to your clients. Arriving at this state is always a culmination of many weeks of meaningful discussions and debates. The past several weeks have been particularly collaborative as representatives from both our firms, with the guidance from the team at Jefferies, have been engaged in due diligence and integration work to fully prepare for this opportunity, and that our go-to-market efforts will be both effective and impactful. I'd like to take a moment to thank the members of the Aimia and Kognitiv deal teams for their many hours, late nights spent bringing this deal to fruition. It was an incredible offer exacerbated by the constraints of trying to do this by video conferences and e-mail during this current pandemic. Beyond the work required to bring a deal of this type together, I wanted to commend the team for their professionalism, the collaboration and the growing comradery that we've exhibited during this period. Both of our organizations place a tremendous value on the spirited cultures we've created and it fills me with enthusiasm to see that culture already blossoming between our respective teams. That's an incredible encouraging sign at this stage. Personally, I will -- I continue to be impressed by the customer roster and the depth of the relationships that Aimia Loyalty Solutions has created. When I consider the CAD 1.3 billion that flowed through Kognitiv's loyalty capital network last year alone and then I add the roster of Aimia with the immediate and obvious prospects like HSBC, Wegmans, Procter & Gamble and Shell, just to name a few, or the 200 million unique customer profiles already engaged with Aimia's programs, the immense potential in terms of revenue growth and market impact is truly staggering. Many of you have likely reviewed the presentation uploaded to our respective websites earlier today. In that presentation, we show the new organization being EBITDA positive by 2021. That's not just a bold and achievable projection, that's the mark of this confidence that the executive team has in the incredible solutions this merger has created and the incredible talent this merger has now brought together. Now let me tell you a little bit more about Kognitiv, our history, our view of the world and the tremendous opportunity that we see before us. An opportunity that, coupled with the incredible expertise within the Aimia organization, has the potential to truly redefine the loyalty space. Kognitiv is a brainchild of our Founder and Executive Chairman, Peter Schwartz. Peter is Canadian-born, lives in Waterloo, Ontario, and is the personification of a serial entrepreneur and technology visionary. His success as a founder and CEO of Descartes Systems, which he took from a scrappy start-up to a global success and a public IPO. In addition to Kognitiv, Peter also funded Laurence Capital in 2004, which continues to invest in many Canadian entrepreneurs and several well-known late-stage technology ventures. When I was first introduced to Peter, we spoke at length about. Driven by his experiences at Descartes Systems, he wanted to create more efficient and more effective business systems by removing unnecessary inefficiencies so prevalent in many market sectors today. For Peter, these inefficiencies spell the opportunity for Kognitiv. And if we could solve them for a segment of the market and use the experience to hone and redefine our value proposition, then we could truly be onto something game changing. A professor of mine once said, "If you're going to solve a problem, start with a problem that is significant. And the number of people you're solving it for is significant, too, then you know you're on to something." Kognitiv began with a focus on the hospitality and travel sector for two reasons: Reason number one, it was a sector beleaguered with those inefficient market factors Kognitiv had identified. A sector where hotel owners and airlines were desperately looking to improve their yield, but were hampered by large faceless intermediaries. Second reason, it's an almost $900 billion annual market. So if Kognitiv could solve a challenge in the heart of that sector, we knew we were on to something. Not only have we made 6 strategic acquisitions in the last decade, we've also invested over CAD 176 million in R&D and proprietary AI and machine learning technology. We've also refined our business model significantly. Today, we describe what we do in the following way: We're in a business of rewarding loyalty by providing a higher value dividend than existing value propositions, such as discounts or cash back offered to consumers. We do this via the peer-to-peer loyalty capital network, which is a combination of our business model and our technology. This allows banks and retailers with membership programs to drive acquisition and engagement and allows hotels, airlines and retailers to better utilize their excess capacity to fund higher value rewards for potential and existing customers. Ultimately, these activities enhance membership, deepen existing relationships and create improved customer lifetime value, which all organizations, particularly at this time, in the midst of COVID, desperately need. Through these value exchanges, both clients and consumers are rewarded and Kognitiv receives reoccurring subscription and performance-based success fees. That's the what and how of how Kognitiv does business. The peer-to-peer component is such a principal part of our model, our philosophy because we believe there are a few more efficient systems than the alignment of organizations tackling a common problem together, unobstructed by intermediaries that add little or no value. A more efficient system is also one where the currencies and the capital these organizations have already created can be redeployed to attract, convert and nurture a new generation of loyal customers. Let me walk you through a simple theoretical example using HSBC, an existing Aimia client, in the Air Miles program in the Middle East. Kognitiv could now allow HSBC to reward its existing and potential customers with a value proposition of up to 10x the benefit that they may be currently offering for activities such as new card acquisition or upgrade to a premium card. The value in the loyalty capital network allows for this high-value dividend and can be used either on its own as a reward offering or in conjunction with existing currencies such as Air Miles. We frequently talk about win-win-win at Kognitiv, not because it's a piffy term that rolls off the tongue, but because it's a philosophy that's built into our model. In the presentation shared earlier, we show some materials that break out how all participating parties win in our model. The participating organizations, whether they're retailers like Exxon or Wegmans, our loyalty program like Air Miles in the Middle East win, because, one, we're able to provide them with higher returns on their assets and their currencies; two, we can give them access to richer, deeper and more personalized customer data; and three, because through peer-to-peer collaboration, they now have access to billions of additional dollars to drive and augment their loyalty programs. The consumer wins, first and foremost, because they receive a high-value dividend that hasn't before been possible to deliver. They also win because they see richer, more personalized interactions with the brands that they trust. And for our organization, we also win in several important ways. Firstly, we earn revenue in 3 distinct ways: subscription fees from our trading partners; trading margins from each interaction; and importantly, performance fees when we are able with our clients' objectives like acquiring a new card or a subscription fee or a renewal. We win because our collaborative peer-to-peer model creates a classic network that grows at an exponential rate and the more participants that we bring into it. Today, this is a merger where we have the opportunity to add another 200 new participants. This is an unprecedented opportunity. In closing, I wanted to reiterate the enthusiasm and the energy that the Kognitiv organization sees for this next journey. It's truly been contagious as we work together with Aimia. We have found a partner who shares our passion for delivering value to our customers, a partner that has a similar view of creating incredible rewards for consumers that build genuine loyalty, and finally, a partner with the ambition and dedication to take on the global loyalty business and not just make an impact on it, but to redefine it. That is an enormously motivating challenge and an aspiration we firmly feel is within our grasp. Thank you, Phil, ladies and gentlemen, for your time today. And I'd like to hand it over to my colleague, Cindy Faust, the Chief Commercial Officer at Aimia Loyalty Solutions.

Thank you, Bruce, and good morning to everyone on the webcast. As Bruce shared, I'm Cindy Faust, Chief Commercial Officer for Aimia Loyalty Solutions. We are very excited about the partnership with Kognitiv and the promising opportunities that are made possible by this merger for both our clients and investors. For our clients, this merger provides enhanced capabilities to improve their customer relationships and increase revenue. By merging with Kognitiv, we will add broad knowledge and experience across multiple sectors to complement our incredibly talented team, and an innovative peer-to-peer platform that will redefine loyalty with the loyalty capital network. Combining this with our world-class client roster, SmartJourney methodology and services paired with data-rich customer loyalty and analytics platforms that are also powered by the latest AI and machine learning technology to predict customer behavior, creates a combination that will truly set us apart in the loyalty marketplace. And for our investors, this is an incredible opportunity to combine 2 complementary businesses with a strong leadership team of technology and loyalty experts. And this will result in a new company with significant global scale, strengthen our offering for clients to grow our business and rapidly accelerates our path to profitability. Thank you for the opportunity to share this exciting news with you today, and I'll now hand this back over to Charlie. Charlie?

Yes. Thanks, Cindy. This is an exciting day for Aimia's stakeholders, and 2020 is shaping up to be very promising. The Board has already set in motion, positive and fundamental changes to the way the business will be managed with a new and value-enhancing core strategy to ensure the corporation is well positioned to thrive when we bounce back from this health crisis. We have assembled a terrific Board of Directors to oversee our new management team's efforts to create significant value for Aimia stakeholders. We have successfully executed major cost reductions and restructuring that allows us to move forward as a lean organization, focused entirely on creating value. The Loyalty Solutions and Kognitiv merger is the first example on how we plan on unlocking value at Aimia as we did with our Cardlytics investment. And as Phil and Bruce and Cindy just shared with you, we expect to help shepherd this exciting merger to what we hope will be an eventual success for all stakeholders. We are also equally excited about our accretive acquisition of Mittleman Brothers, which will add a solid investment management platform for the company that complements our core strategy. Significant work still lies ahead to realize the unique opportunity, and the Aimia team is very focused on executing the core strategy. The Board is excited to lead the company forward to capitalize on the tremendous growth opportunities that lie ahead. Thank you for joining Aimia's 2020 AGM. I look forward to updating you next year on all of our progress. So with that, we will now open the meeting to questions. If you have any questions, please submit them through the chat function on the website -- webcast. Thank you so far. And Tom, you'll advise how the questions are coming in.

Mr. Chairman, we have a question. The first question is, "How has the strategy shifted within PLM given the current capacity reductions?"

I think that the strategy has not shifted. I think that obviously, COVID has affected the airline industry and their loyalty partners, but we expect this to be a transient business event. And for anybody that follows Aeromexico, they've handled their costs really well. They're managing that airline really well. And so while we're experiencing a dip in gross billings that will come associated with that drop in their travel, we think it will rebound relatively quickly. And PLM is an amazing business that should return to generating a lot of free cash flow in a relatively short period of time.

Mr. Chairman, we have another question. The question is, "Does the Board wish to encourage shareholders to hold their shares for the long term? And if so, how would you seek to accomplish that?"

I think Charlie is probably muted, so I'll take that for him. I think one of the things that we've done, that has changed at the company is the ownership mentality. We -- this group that's sitting before you controls approximately 35% of the outstanding shares of Aimia. So for the first time in memory of this company, you have a Board completely aligned with your ownership interest. We -- all we care about is creating stakeholder value. So that's our focus. You can see the proof is in the pudding. Within 2 months of being here, we have dramatically cut costs. And we've made major strategic moves to create and enhance shareholder value. So if you're going to be inspired to hold your stock, you should just look at what we're doing, which is every board member has been insider buying in the open market. We hold huge amounts of stock. And we obviously believe in what we're doing because we're holding our stock for the long term. And the only way that we're going to make money is to increase that holding in value. So you would do well to watch as the days unfold and months unfold and see how we continue to perform. I think the first 2 months should be a very strong indicator to you of what's to come.

Yes. Let me add, Phil. And thinking about Aimia, I think the way the Board is thinking about it, some of the metrics and some of the guidelines we're using is we want to have a company that has reasonable executive pay. We want to have strict expense control on the money we spend. We want to have a strong respect and appreciation for the capital and for the capital allocation decisions that we make. We want to have a strong governance process where what we do is open and fair for all of our stakeholders, especially our shareholders. We want a Board aligned with shareholders and stakeholders and as Phil mentioned, the share ownership in Aimia is really terrific, and a strong focus on the share price over the medium and long-term because that's going to be how we're all going to make money and how we're going to largely grade our performance. Tom, we can go to the next question.

The next question is, "Do you think the stock is fairly valued?"

I think the answer to that comment, as the Chairman of the Board, I'm almost always going to say it is undervalued and the stock should be higher. But I think more importantly, you should look at our actions. And I think in the last couple of months, while we had an open period, we were buying shares as directors. And I think we've got a lot of potential here. And between our tax assets and the assets we own and the cash, I think the future is incredibly bright. I'm sorry that COVID is going on right now. We would much rather it go away, but I think the idea of having $265 million in cash in a world, unfortunately, that may be affected by COVID, our capital is more valuable. Actually, it's far more valuable than it was just 90 days ago. Phil, do you have any more thoughts about that question?

I mean, I think you have to, obviously, do your own research and create your own valuation. But if you look at just the actions we've recently taken, the corporate expenses we cut by most analysts, calculations would add about $1 share in equity value today. The transaction with Kognitiv created $250 million in stock in another company, which face value is worth over $2 a share to our shareholders. So you start adding these up, you add to it, our holding PLM, our holding BIGLIFE, our cash and you just track out the preferred, you see that by almost any measure, we are very undervalued. Now to add to the mix, what are we going to do with the capital? We have a very smart group of investors together for the first time. And this capital is going to be deployed as if it's our own. And it's going to be deployed very wisely. And it's going to be deployed in a way that takes as much advantage as possible of an opportunity. We're not just swinging for singles and doubles. We're really waiting for the right pitch. And so I think you -- when you're looking at this from a shareholder perspective, and we put our money where our mouth is by insider buying, I think there is a humongous margin of safety here in terms of what you're paying and what the current value is and then add to that, the upside.

Mr. Chairman, our next question is, "What are you seeing in M&A this year for Aimia?"

Well, where we are, Tom, is that we have spent the last 60 days solely laser-focused on really the operations of the company. We have not really put our efforts yet at all to the M&A environment. We've had some feelers out. We've spoken to some different people about some potential deals, nothing at all that will come to fruition right now. I think that like I said earlier, unfortunately, with COVID, businesses have more stress on the capital. There's more opportunities. So I think we'll have a wider area and more opportunities, unfortunately, than we would have, we stand to benefit from those. And I think we'll do our best, we'll be honest. And I think it's going to work out pretty well. Phil?

Our next question from investors is, "What is the company's thoughts about using debt for growth or acquisitions?"

Where we are on that -- and I'll have Phil comment after I speak, is that we would prefer to, at this point, limit debt to a very small de minimis amount at the holding company. We would prefer to have debt held at lower entities, subsidiary entities that not come up to the holding company. But look, we've got $265 million in cash, which is a fair chunk of capital. If we were to do an acquisition and we use some leverage on that, it would not be at the holding company, it would be below at subsidiary level. Phil?

I think we would use leverage opportunistically and for transactions only. So if we're going to do a transaction, for example, of a U.S. company, and we put a modest amount of leverage on it and use our tax losses to shelter the gains, you would have a very strong return for shareholders. So that would be our goal. You don't -- you want to use that, obviously, but you only want to put it on companies that generate free cash flow during all business cycles. You don't want to ever jeopardize the asset. So we would be very cautious about that. And it would be reflected in the type of businesses we buy that can sustain even a recession, keep generating free cash and use modest leverage.

Mr. Chairman, our next question is, "Will the Board be candid in discussing the performance of the company and the challenges that it faces?"

I think that's really an excellent question. We plan to be incredibly honest with ourselves and our stakeholders. We are large shareholders, and we plan on being open and available. We want to grade ourselves in how we are doing. We want to be judged on the medium and the long term. We can't be judged in the next couple of weeks, but we want to be judged on months and years of the performance of the company. And primarily, the share price, because I think as a group, we think that the share price, while not the only judge, is probably the best judge and the most important judge to shareholders. At the end of the day, like whether it's a year or 2 or 5 years from now, you sell your shares, and that's kind of the profit loss, you don't really sell net asset value or book value. It's really the transaction and the shares really represent the effective gain as an owner that you can get. Phil, you want to comment anything further?

And I think that, obviously, we're going to operate at the highest level of transparency. And I think that we're available to any shareholder that wants to contact us any time, 24/7, 7 days a week. We're available. We're open books. We have a very broad group of people that we're entertaining potential transactions from, and we want to hear everyone's ideas, and we're happy to discuss ours. And I think you'll see going forward an exciting, and as Charlie said, transparent way that we're going to be doing business.

Mr. Chairman, there are no further questions at this time.

Okay. Well, as there are no further questions, I think we shall wrap up the meeting. And let me get my notes here. Thank you for all joining today. We wish you a return to good health and normalcy in the coming weeks and months. We endeavor to do the same. I just want to say one quick thing about Jeremy. Jeremy, with this transaction, is no longer at the company. We wish Jeremy the best in the future and the best of luck with his business endeavors and with his family. So thank you very much for your hard work in the past. And with that, I'd like to thank everyone for joining us today. Thank you very much.