Aimia Inc. (AIM) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Aimia Inc. Annual Meeting. My name is David Rosenkrantz and I'm Chairman of the Board. Today's meeting will begin with a business presentation by members of Aimia's executive team, followed by the formal business of the meeting. After that, we will conduct a question period where all inquiries of a general nature will be dealt with at that time. Although we are disappointed that we can't see each of you today, our thoughts are with you, your families and the communities you 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 an electronic meeting in light of the circumstances. Instructions on how to ask questions and the voting procedure will appear on your screens. 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 will ask Olivier Busque of Borden Ladner Gervais, our external counsel, to act as Secretary of the meeting; and Francine Beauséjour and Isabelle Vachon of AST Trust Company, Canada to act as scrutineers. The scrutineers have provided proof of mailing of the notice of the meeting, the forms of proxy, the proxy circular and the 2020 annual report. I directed a copy of the notice, together with the proof of mailing, be kept with the minutes of this meeting. The Corporation's Bylaws provide a quorum of shareholders present at 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 about 130 persons or proxy holders have voted and about 60% of the shares have been voted, and therefore, we have such a quorum. Notice of this meeting having 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. This morning, I'm accompanied on the webcast by Philip Mittleman, Chief Executive Officer of Aimia, and Michael Lehmann, President of the company. Also joining us virtually are our directors and members of senior management. I will now invite Phil Mittleman to begin the business update of the meeting. Phil?

Thanks, David, and good morning, everyone, on the phone and webcast today. I'm excited to share the significant progress that we've made at the company in 2020. And I'm pleased to have Michael Lehmann, Aimia's President, to speak to you about the company's priorities for 2021. Before we get underway, I'd like to remind everyone to review our forward-looking statements and the cautions and the risk factors pertaining to the statements, which can be found in front of you on your screen. 2020 was a transformative year for Aimia with significant progress achieved to drive future growth. Under the leadership of a reconstituted Board and a new management team, which was established less than a year ago, we delivered against what we set out to achieve, to transform Aimia into a lean, nimble, opportunistic holding company poised to create value for Aimia stakeholders for many years to come. We announced a new strategy as a holding company to provide a broader and more balanced mandate, enabling greater flexibility for Aimia to capitalize on the best possible investment opportunities globally. To help execute our new corporate strategy, we acquired Mittleman Investment Management, and we further enhanced the executive team with the addition of Michael Lehmann as President of the company. We rapidly cut costs and rightsized the corporate expenses. Excluding severance, our holding company corporate cash flow was neutral in 2020. We combined our operating loyalty subsidiaries into Kognitiv, concurrent with an investment by Kognitiv shareholders and Board members as well as an investment by Aimia and retained a significant stake in an exciting technology company, while at the same time, limiting future risk to the Holdco. Kognitiv continues to be focused on the commercialization of its business and its transition towards a subscription-based platform-as-a-service offering. We believe Kognitiv has the potential for a liquidity event similar to our previously successful investment in Cardlytics. At PLM, we signed an enhanced shareholder agreement with a buyout option and extended the commercial contract between Aeromexico and PLM to 2050, which incorporated amendments that strengthen the loyalty program. These amended agreements are being honored by Aeromexico during its bankruptcy process, and we expect it to be formally assumed by Aeromexico. We also made a significant investment in Clear Media, the largest outdoor advertising firm in China, which we purchased at a very attractive valuation at an opportunistic time participating alongside a blue-chip consortium of growth-oriented investors. As a result of our opportunistic investing activities in 2020, we generated $12.9 million in realized gains from our public investment portfolio. Additionally, we invested alongside highly qualified partners and committed an initial $6.4 million to a special purpose vehicle to pursue the leverage buyout of a target company, with the option for Aimia to increase our ownership to 25% of the target if the LBO is consummated. We received $67 million previously held in a restricted cash account established at the time of the Aeroplan sale, and we are attempting to recover an additional $33 million deposit related to a tax assessment when we held the Aeroplan business. Last and by no means least, we repurchased 4.4 million shares at an average cost of $3.31 after fees, a significant discount to the current market price. Over the past 2 years, we have repurchased more than 40% of our outstanding shares. In addition, management and directors have personally bought more than 1 million shares in the open market during a tumultuous year demonstrating our unwavering confidence in Aimia's value and future prospects. Overall, 2020 was a great year, and we entered 2021 with strong momentum. I will now turn it over to Michael to discuss our priorities for 2021. And after that, I'll wrap up with a business update -- business update with concluding remarks. Mike?

Thanks, Phil, and good morning to everyone. Aimia's priorities in 2021 are centered on 3 strategic objectives. The first strategic objective is to continue growing the value of our existing assets and investments. Within our current portfolio mix, we're focused on the ongoing enhancement of our existing investments. When possible, we employ an active owners mentality to growing our investments through board representation, and leveraging our deep network of professional contacts to assist our portfolio companies grow their business. The second strategic objective is to remain casual and neutral at the Holdco. With cash operating expenses, preferred dividends and taxes covered by the resumption of PLM distributions and other investment activities. And the final strategic objective is to pursue new investments. Our strategic vision is to continue to build our portfolio of investments that we can deliver sustainable value to stakeholders, uniquely accessible to investors through Aimia's stock. As a permanent capital vehicles with over $175 million in cash and liquid investments, no debt and over $700 million in operating and capital tax losses, we have the unique ability to hold investments for long durations of time, allowing for the greatest value to be realized with maximum tax efficiency. The company's capital allocation priorities are to deploy its cash into long-term investments in public and private companies on a global basis, through controlling and minority stakes. We focus on companies that exhibit durable economic advantages, evidenced by a well-established track record of substantial free cash flow generation over complete business cycles, guided by strong experienced management teams with a focus on assets that can generate additional free cash flow and distributions to upstream to the holding company. Any potential investment will be structured as a ring-fenced stand-alone entity. If we deem it necessary to use leverage for an investment, it will only be incurred at the subsidiary level. We remain patient and disciplined in identifying and capitalizing on the best investment opportunities we can find globally. We have an attractive pipeline of investments, and we look forward to sharing more details with you as soon as we can. I'll now turn it back over to Phil to wrap up with closing remarks. Phil?

Thanks, Mike. This is an exciting time for Aimia, and 2020 was a transformative year. The significant progress made in executing our new strategy and the many positive developments in our various holdings and potential new investments we are evaluating represent exciting opportunities to deliver enduring value for Aimia's stakeholders. Thank you for joining Aimia as AGM. I look forward to updating you on next year on all of our progress. I will now turn the session over to David to begin the formal business of the meeting. David?

Thanks, Phil. Before commencing, we would like to provide instructions for how shareholders and duly appointed proxy holders may vote using the online platform. To the extent you have voted in advance of the meeting, and do not wish to change your vote, you do not need to do anything. As we proceed through each item of business, those that join the meeting using their control number, we'll see the resolutions to be voted on, displayed on the screen as the item of business is being discussed. To vote, click one of the voting options available. Your vote will be automatically submitted for our scrutineers to include in the vote tabulation. Votes may be changed until the voting is closed on the matter. Once voting for a particular matter is closed, and we move on to the next item of business, the screen will change to show the next item of business, and you will no longer be able to vote on the previous matter. If you do not press 4, withheld or against as applicable when voting is open, your vote will not be recorded, and you will be regarded as having abstained from voting. Preliminary results will be announced after voting closes for all our matters, and final results will be publicly available on our website in SEDAR. A simple majority of the votes cast during this meeting or by proxy is required to approve matters voted on at this meeting. The annual meeting was called to consider 4 matters. We will conduct the votes on the matters before us via 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. 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. Now let's move to the first item of business. The consolidated financial statements for the years ended December 31, 2020, and 2019, together with the auditor's report 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 item of business on our agenda, the election of directors. Our proxy circular sets out a list of 8 directors for election as directors of Aimia until the end of the next annual shareholder meeting or until his or her successor is appointed. 7 of the 8 directors are currently members of the Board with the addition of 1 new candidate for election as an independent director. The nominees to be elected as Directors are: Karen Basian, Sandra Hanington, Michael Lehmann, John Matson, Christopher Mittleman, Philip Mittleman, Jordan Teramo and myself, David Rosenkrantz. Biographies were included in the management information circular. 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 a director, move to elect each of the nominees as directors.

Mr. Chair, I so move.

Thank you, Sandra. Is there any discussion of this motion?

Mr. Chair, there is no discussion at this motion.

Thank you, Tom. As there's no discussion, I will now call for a vote on the motion before the meeting. Please enter your votes on the voting platform. Again, if you voted in advance and do not wish to change your vote, there's no further action required. [Voting]

Voting is now closed for the election of the directors of the corporation. The next item of business is the appointment of the auditors. I will now ask that Sandra Hanington, a shareholder and a director moved that a resolution appointing PricewaterhouseCoopers LLP as the independent auditors of the corporation, and authorizing the directors to fix the auditors remuneration be approved.

Mr. Chair, I so move.

Thank you, Sandra. Would Steven Leonard, the company's Chief Financial Officer and a shareholder and member of our executive team second this motion?

Mr. Chair, I second the motion.

Thank you, Steven. Is there any discussion of this motion?

Mr. Chair. There is no discussion of this motion?

As there is no discussion, I'll now call for a vote on the motion before the meeting. Again, please enter your votes on the voting platform. If you voted it in advance and do not wish to change your vote, there's no further action required. Voting is now closed for the appointment of the auditors. The last item on our agenda today is an 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 consider 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 move to approve the advisory vote on executive compensation as more fully set out in the proxy circular.

Mr. Chair, I so move.

Thank you, Sandra. Would Steven Leonard second this motion?

Mr. Chair, I am pleased to second the motion.

Thank you, Steven. Is there any discussion of this motion?

Mr. Chair, there is no discussion of this motion.

As there's 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]

Voting is now closed as it relates to the approval of the advisory resolution on the corporation's approach to executive compensation. We will now wait for the scrutineers to tabulate the votes. We appreciate your patience. It may take a minute or 2. So I -- scrutineers have completed their preliminary report. According to the scrutineers' report, I'm pleased to announce that all 8 nominees named in the circular have been elected with an overwhelming number of votes in favor. PricewaterhouseCoopers was reappointed as our auditor with also an overwhelming number of votes in favor. As mentioned earlier, the final detailed -- sorry, last thing I want to say is that the advisory resolution on the approach to executive compensation was again also passed with an overwhelming number of the votes in favor. As mentioned earlier, the final detailed results will be posted on the company's website and on SEDAR. As the scrutineers have completed their preliminary report, I am pleased to announce that all resolutions have received majority support based on the votes cast during this meeting or by proxy. As mentioned earlier, the final detailed results we posted on website and on SEDAR. As there's no other formal business to come before this meeting, I would ask that Ms. Sandra Hanington, move that the formal part of the meeting be concluded.

Mr. Chair, I so move.

Thank you, Sandra. Would Steven Leonard second this motion?

Mr. Chair, I'm pleased to second the motion.

Thank you, Steven. I declare this motion carried and this concludes the formal part of the meeting. So with that, we will now open the meeting to questions. [Operator Instructions] We have no questions. Ladies and gentlemen, as there are no further questions, that completes our meeting today. Thank you for joining us. We appreciate your ongoing support and confidence in the Board and management team. We look forward to speaking to you again at next year's AGM.