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Good afternoon, everyone, and thank you for participating in today's conference call to discuss Points International's financial results for the fourth quarter and full year ended December 31, 2020. Delivering today's prepared remarks are Chief Executive Officer, Rob MacLean; President, Christopher Barnard; and Chief Financial Officer, Erick Georgiou. Following their prepared remarks, the management team will open the call up for any questions. Before we go further, I would like to turn the call over to Sean Mansouri of Gateway Investor Relations, Points International's IR Advisor, as he reads the company's safe harbor that provides important cautions regarding forward-looking statements. Sean, please go ahead.
Thank you. Please be reminded that the remarks on this conference call may contain or refer to forward-looking statements within the meaning of Canadian and U.S. securities laws. Management may also make additional forward-looking statements in response to your questions. Although management believes these forward-looking statements are reasonable such statements are not guarantees of future performance or action and are subject to important risks and uncertainties that are difficult to predict. Certain material assumptions are applied in making forward-looking statements and may not prove to be correct. Important factors that could cause actual results to differ materially and the assumptions used in making such statements were included in our fourth quarter and full year 2020 financial results press release issued prior to this call, as well as other documents filed with the Canadian and U.S. securities regulators. Except as required by law, the company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. With that, I'll turn the call over to Points' Chief Executive Officer, Rob MacLean. Rob?
Thanks, Sean, and good afternoon, everyone. Even as the pandemic continues to challenge our broader industry, we have closed out 2020 on solid footing. We delivered sequential improvements across all key financial metrics during the fourth quarter, including a 49% sequential increase in gross profit off the back of stronger promotional activity with our partners. Further, we generated positive adjusted EBITDA for the quarter and the full year. Throughout 2020, our team remains focused on creating value for our partners and ensuring that we are optimally positioned for travel's long-term recovery. Our team's dedication has allowed Points to remain resilient within the most difficult market environment imaginable. As our travel and hospitality partners navigate this new landscape, they are leveraging the long-term value inherent in their loyalty programs. In addition to certain travel operators using their loyalty programs as collateral for debt financing through 2020, the Wall Street Journal recently reported that U.S. Airlines are enhancing their loyalty programs to broaden their demographic reach and offer members additional benefits outside of travel. With new program features spanning virtual exercise subscriptions, e-books capabilities and the shifting emphasis from miles traveled to how much member spends, loyalty programs are expanding the ways in which their members can flexibly earn, redeem and spend their miles, particularly among millennial and Gen Z customers. We view these changes, which enhance the overall utility of the world's largest loyalty currencies as favorable for the broader industry, which further strengthens our belief that loyalty will be at the forefront of a travel recovery. Given their size and flexibility, loyalty programs offer tremendous value for travel operators in both the near and long term, even while travel itself remains broadly challenged around the world. As the travel industry evolves during the following -- during and following the pandemic, loyalty programs have an inherent adaptability from which travelers and operators alike can benefit. As we support our partners through this time, we have maintained our focus on leveraging the flexibility of our Loyalty Commerce Platform to grow and support their members' engagement. Our successes in 2020 deepened several long-term partnerships, launched new relationships, broadened our geographic reach and allowed us to optimize the suite of services we already have in market through enhanced and automated merchandising strategies. During Q4 alone, we launched 3 new loyalty program partnerships into market and expanded services for 6 existing partners, spanning not only our core Buy, Gift and Transfer solutions but also new and innovative premium capabilities. This expansion to our network of services includes monthly mileage earnings subscriptions we recently implemented for United Airlines and our new Delta Choice product with Delta Airlines. With the adaptability and resilience of our platform, we have continued to deliver on the strategy we laid out in 2019. And with these new partners and products launched during 2020, we have increased our products deployed footprint more than 10% in the past year alone. This increase in revenue-generating capacity is very encouraging and will help to accelerate the growth of the company as travel recovers. Christopher will provide more detail on our current and upcoming initiatives later in the call. As our company enters its 21st year of operations, I'm confident in the comprehensive platform we've built and in our continued focus on building our business. From the onset of the pandemic last year to where we sit today, we've taken proactive actions to ensure that our workforce remains safe and intact and that we were well capitalized to respond to industry-wide volatility. We've worked diligently to build a resilient operational and financial foundation and enhance our positioning for travel's inevitable recovery. And we look forward to continuing this work into 2021. I'll now hand it over to Erick 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. Erick?
Thanks, Rob, and good afternoon, everyone. Unless noted otherwise, all figures on today's call are in U.S. dollars and presented in accordance with IFRS. Our financial performance and year-over-year comps in the fourth quarter continued to be heavily impacted by COVID-19. With that said, we were pleased with our fourth quarter financial results, given the challenging macro environment, as we drove strong sequential top line growth while generating positive adjusted EBITDA and positive cash flow in the quarter. Top line revenue in the fourth quarter of 2020 increased sequentially to $56.4 million compared to $37.4 million in Q3, but was down from $107 million in the year ago quarter. Gross profit was $8.5 million for the fourth quarter. While this remained down from $17.6 million in the prior year quarter due to the impact of COVID-19, gross profit increased 49% compared to $5.7 million in Q3 2020. This increase reflects the aforementioned strength in our promotional activity and the resulting consumer response throughout the quarter. As Rob noted, we had a busy fourth quarter from a deployment perspective. And while these launches had a relatively small impact during the fourth quarter, we would expect the contribution from these launches to ramp up over time. Adjusted operating expenses in the fourth quarter came in at $8.2 million compared to $6.9 million in Q3 and decreased compared to $10.6 million in Q4 2019 as we continue to aggressively manage costs. In Q4, we recognized $1.2 million related to the Canada Emergency Wage Subsidy Program compared to $1.8 million in the third quarter. As I mentioned on our last conference call, this expected reduction in our Q4 subsidy amount relative to Q3 is largely a reflection of the Canadian Government's funding formula for the program. In addition, the government has officially extended this subsidy program until June 2021, and we expect to remain eligible for funding up to this date. With this as context and excluding the benefit of any wage subsidies, our fourth quarter adjusted operating expenses were slightly elevated relative to Q3 levels, in line with usual quarterly cadence on operating expenses historically. Adjusted EBITDA for the fourth quarter increased sequentially to $360,000 compared to negative $1.1 million in Q3 and $7.2 million in the year ago quarter. The sequential increase was due to the aforementioned increase in our quarterly gross profit. As Rob mentioned earlier, we were adjusted EBITDA positive for the full year and have so far navigated the COVID-19 pandemic at near breakeven levels. While we are encouraged by this performance, we will continue to take a cautious view on our near-term results and recognize the effects of periodic fluctuations in our activity levels quarter-to-quarter. Total funds available, which included borrowings on our credit facility, are approximately $79 million at the end of the fourth quarter compared to approximately $68 million at the end of the third quarter. Our end of Q4 balance includes a $15 million drawdown on our credit facility. From a guidance perspective, we are not in a position to provide an annual outlook at this time, given the current environment and limited visibility. However, we remain committed to prudent cost management across our business and to bolstering our strong financial foundation to support our team and partners. And with that, I'll turn it over to Christopher. Chris?
Thanks, Erick. As we navigated 2020's challenging environment, we maintained focus on our 3 core growth drivers. We've worked to create new relationships with additional loyalty programs around the globe, expand and deepen our current partnerships by launching net new services with many and continue to optimize and expand the services we currently have in market through automated enhanced merchandising efforts. During the year, we made progress on all 3 drivers that have improved our position for future growth as the recovery continues. During the fourth quarter, we officially launched several net new partnerships. In November, we launched a suite of LCR services with Caribbean Airlines, following -- or allowing Caribbean Miles members to Buy, Gift and Transfer their miles through a more personalized user experience. This new partnership was facilitated by our deepening strategic partnership with Amadeus, and we look forward to expanding our Caribbean service over time as we further integrate our offerings with Amadeus' loyalty, reservation and merchandising technologies. In December, we also deployed our Buy, Gift and Transfer LCR Services to Ethiopian Airlines, making our first services launched with an African partner and another joint success with Amadeus. This launch provides members of Ethiopian Airlines ShebaMiles loyalty program with access to benefits, such as ability to purchase miles online, which was previously only available offline and the new option to gift or transfer miles to friends and family members. Further, it builds on the progress we have made this year in deepening and expanding our international presence, first through our previously announced partnership with Qatar Airways and now through solidifying our global presence with partners headquartered on every major continent. We're confident that our focus on successfully launching new services into market throughout 2020 will fuel long-term value, even if they do not initially perform at historical levels. As we deploy these initial services for new partners, we have also continued to advance our existing partnerships. In the fourth quarter, we added our transfer and reinstate capabilities to our existing suite of services for Air Canada's Aeroplan. These launches follow the successful launch of our buy and gift services with Air Canada earlier in the year amid the global travel pause. The initial launch promotion we ran for them in Q2 still serves as our most successful and highly traffic single day promotion in our company's history. Additionally, we expanded our Radisson Hotels partnership with the introduction of a new in line top-up service. We initially launched with this leading hospitality partner back in 2017 when the brand was known as Carlson Hotels. These launches are a couple of great examples of how our core services continue to create incremental value for our loyalty program partners. To further elaborate on a theme that Rob mentioned earlier, we've also been adaptive and innovative with net new service offerings made available on our network. For example, during the fourth quarter, we launched the Delta Choice Platform, our premium customer service program for Delta Airlines. We also deployed a new monthly subscription option for United Airlines, providing loyalty members the ability to earn miles on a recurring basis throughout the year. These were both on the heels of a third quarter launch of our new Accelerate Anything service with Alaska Airlines Mileage Plan, providing members the ability to boost their prior earnings, including miles earned on credit card spend and other retail activity. We are seeing strong interest from our partner network in this innovative new fintech service and look forward to sharing further developments on this initiative over the coming quarters. Looking forward, we continue to focus on expanding the network of services that we have available to help our loyalty programs further engage with their members. Many of these have proven valuable during more robust travel periods. So even though current volumes may be lagging historical performance, we will benefit from having more of these services operational as the industry rebounds and as they revert to proven historical performance. Additionally, we're adding services that offer new ways to engage loyalty program members in today's environment that are not linked to immediate travel but more to ongoing regular member engagement. As the nature of travel and our partners' needs continue to change, we've been able to adapt our services and create new offerings to drive value during both peak and restricted travel periods. On both the corporate and customer level, loyalty programs have tremendous value and expanded optionality as the travel industry works towards long-term recovery. We remain confident in the important role loyalty programs will continue to play in this recovery as well as enduring and comprehensive power, our network of services offers to enhance these programs value even further. As our pipeline grows and we continue to focus on launching new service and adding new partners to our roster in 2021, our long-term growth drivers remain as a core to our strategy. We are committed to maximizing performance over in market services, cross-selling to existing partners and signing new partnerships across new verticals and geographies. We've already made solid progress with executing our strategy and strengthening our network throughout the most difficult year we have faced in our company's history. We look forward to building on this work and further positioning ourselves for accelerated growth in 2021 and beyond. Operator, we'll now open up for questions.
[Operator Instructions] Our first question comes from Gary Prestopino with Barrington Research.
A couple of questions here. Versus Q3, Q4 showed a sequential increase in revenues, and I think one of the comments was that with the new business you signed up with the 3 airlines, it was very little revenue in there. So can we assume that it was just more of a promotional environment or vis-à-vis Q3, did you guys see some kind of sequential pickup in the industry overall the travel industry?
Yes. Sure. Gary, it's Erick here. Yes, I think that's a fair assumption. I think what we're seeing right now from a quarterly cadence standpoint is mostly driven by marketing campaigns. We had a great year in terms of launching net new products and partners into market. I'd say most of those launches are obviously on a COVID dollar basis and on a pre-COVID dollar basis. So there -- impact is still there, although much smaller than what we would have had on a pre-COVID basis.
Okay. And then lastly, and I'll let somebody else jump in. And again, I'm not as familiar with the company as others. Is Q4 seasonally a slow period for new business development as far as signing new airlines or hotels or whatever for new programs?
Q4 -- sorry, Gary, it's Rob. No, I'd say, certainly, in 2020 with COVID, we saw through the course of the year, a pretty steady stream of net new business and net new partners joining. I think as I referenced, we expanded our footprint, our products deployed by well over 10% just in the year alone. So 2020 was very strong from that standpoint. The fourth quarter, I'd say, it's an interesting question. Probably things slow down in a pre-COVID world. Things would slow down from a business development standpoint a little bit in Q4 just because it's an abbreviated period with the holidays, et cetera, but we certainly didn't see that in 2020.
Our next question comes from Greg Gibas with Northland Securities.
Congrats on the pickup that we saw in Q4 relative to Q3. Considering we saw some nice new partnerships with Qatar, Ethiopian, Caribbean Airlines in 2020, lot of those coming kind of late in the year, too. I was just kind of wondering how you're thinking about the business development progress that can be made going forward here? Will it be kind of hard to see similar levels of new partnerships in 2021 or are you pretty confident in the pipeline this year?
Yes. Greg, it's Rob. We've been very pleased with the pipeline through '20, as we've articulated. At the end of the day, the majority of our products and services are really oriented around helping drive profitable revenue for the parent companies and for the various loyalty programs. So we saw, certainly, in the depths of COVID, a renewed interest in products and services and relationships that we're going to drive revenue and profitable revenue in short order, that -- we were able to get a lot of those or a bunch of those across the line, but there's still a very robust pipeline in terms of more partners and more expansions of existing relationships that we're very optimistic. Discussions that happened through 2020 will bear fruit here in 2021. So again, we remain optimistic. There's a tremendous amount of opportunity ahead of us just as a company broadly. So there's no reason why we shouldn't be continuing to expand our partnership footprint and our product deployment footprint going forward.
Okay. Great. Yes, that's helpful, Rob. And good to hear as well. How has -- I apologize if I missed this, if Gary already asked this, but how is promotional activity from your partners trended thus far in Q1, maybe relative to the promotional activity you saw in Q4? And just wondering if you could give an update on kind of the campaign activity that you have for the foreseeable future, whether it's the next couple of months or 60 to 90 days?
Yes. I'd say Q4, as Erick explained, was pretty strong. Obviously, we saw lots of activity there in the fourth quarter, driving 50% sequential growth. We're pretty happy about that. I'd comment, generally, we'll continue to see a fairly steady cadence in terms of campaign activity. Different partners are at different stages of recovery, obviously, and are at different stages of having the capacity to run campaign activity and engage their members. So it will still be a bit choppy. And again, that's not too surprising, given where the travel industry is in general. I do think, overall, one of the things we're dealing with is a shorter-term sense of visibility. So we are still on a -- from a partner engagement standpoint, still not looking too far out. I think our partners are looking to stay engaged with their members. We're working kind of on a month-by-month basis to try and be as aggressive as we possibly can, but it's still hard to look too far out in terms of campaign activity. But you can be certain, given the results we've been able to deliver. We'll continue to see campaign activity through the course of 2021.
Sure. That makes sense. I guess last one for me. Can you remind us the impact that you saw from the Canadian Government Wage Subsidy Program in Q4? And you said it was extended through June. Any sense of how much of a subsidy you would expect in Q1 and Q2?
Yes. It's Erick again. So we had $1.2 million in the fourth quarter and that program has been extended out until June 2021. So what we know right now is the funding formula up until mid-March. I wouldn't want to put a number on the dollar value for us just yet because it is really driven by topline growth rates or decrease rates on a year-over-year basis. So I wouldn't want to put a number out there yet, but the funding formula looks pretty favorable for us in the first quarter. Extending out from March until June, that is still TBD. So they typically announce those details pretty close to when it takes effect. So we are still waiting on that.
Our next question comes from Drew McReynolds with RBC Capital Markets.
Probably 2 for you, Erick. First, the company suspended the buyback earlier in 2020. Just can you give us some updated thoughts on what's required to return to some kind of share repurchase? And obviously, the obvious answer is not at the moment given visibility, but what are the kind of steps that you think the Board kind of look at to reinstitute that one? And fully understandably not providing 2021 guidance. I don't think anybody is at all surprised on that one. Maybe thematically, can you speak to what your objectives could be for 2021, whether it's positive EBITDA, positive cash flow, what kind of financial kind of goalposts are you looking for more thematically than obviously any specific range?
Yes. Sure. So I'll start with the NCIB question, and maybe I'll throw it off to Rob on the second question. So I think you're right in terms of where we started with the NCIB. It is pretty challenging right now to put a date out there in terms of when we would want to restart that. I think our focus right now is obviously preserving capital. It is a pretty challenging macro environment right now. I'd say on a pre-COVID basis, we had our own internal hurdle rates in terms of ideal share price to buy back at. It's not something I would share publicly. So I'd say we're taking that quarter-by-quarter, but I would -- I'd suggest that we're probably ways out from that still.
Yes. And then the second question, rather than specific financial guidance, notwithstanding the request, Drew. Thematically, I think of how we're trying to position the work we did back half of 2020 and what we're kind of focused on right now. I think we have a belief and a sense as we speak to our industry partners around the world. There's a kind of a strengthening optimism around the second half of '21. We're seeing some advanced booking, good advanced booking data in Europe and Middle Eastern markets. We see the domestic activity in the U.S. starting to pick up a little bit. So for us, it's as much as anything. We want to be ready to kind of capture all of that opportunity and that momentum as it appears, this recovery momentum. We felt for a long time it is inevitable that, that will come. The pent-up demand, we're quite convinced is pretty strong and pretty deep. But we're starting to see now the industry partners talk about the second half of the year in a more optimistic way. So a lot of our energy and our effort is to really kind of build our footprint, be ready to capture that momentum, accelerate into the recovery. We continue to be confident that loyalty will be at the front edge of the travel recovery. And so we just want to make sure we're ready to kind of capture that. And so infrastructure activity that we're working on, scale-based activity that we're working on, all are things that should put us in a position to be at the front end of that curve that I think finally starts going in the right direction.
[Operator Instructions] Our next question comes from Ed Woo with Ascendiant Capital.
So congratulations on managing through COVID. My question is more on -- you did mention that you guys had a very good 2020 in terms of getting new partners, expanding products, 10% more products out there. As the industry comes back and your partners become more optimistic, do you think that that's going to accelerate and you have even more products and partners launched in 2021 versus last year?
Ed, it's Chris. Certainly, our goal would be to try to beat 2020 this year. The actual cadence of the launches always vary a little bit quarter-to-quarter. But we're seeing, to Rob's point, the program's focus obviously, an immediate activity potential. But they're also taking a much more expanded view of the program and given the raise profile that they're all getting and figuring out, as things start recovering, then what's next? And that's another place where we're making sure that we're thinking ahead and trying to capitalize on that kind of investment. So I'd say lots of services. I mentioned in my prepared remarks, our new kind of referred to it and here is one of our fintech services, we call Accelerate Anything, which allows a member to basically choose to double or triple their miles or points that they earn during that month, independent of where they earned it. Whether it's on their credit card or through a partnership or if they did some traveling. So things like that are not travel dependent. The partner can offload that entire infrastructure and service operating over to us. And obviously, our platform is very efficient at adding those kind of new services onto the network in a regular basis. So we're trying to see as many of those opportunities are possible to expand the cross-sell potential. And then clearly, the addition of new logos and new partners to our universe is always a focus.
And then on the pipeline, how much of it is focused on travel? I know you guys in the past have focused on other sectors outside of travel.
Yes. For us, particularly, what's interesting when you think about the recovery that's ahead, we have a very good footprint on travel. I think if you see some of the partners that we've added, new partners that we've added here in 2020, have largely been travel oriented. We still think there are really interesting opportunities on the travel side, both with existing partners and with our net new partners. So you'll continue to see us very active in travel for certain. Again, the most sophisticated players out there in terms of monetizing their loyalty programs, in understanding the economic opportunities around their loyalty programs and our products and services fall right in that sweet spot. Having said that, I think progress that we're making around our platform initiatives, where we continue to open up the platform to allow other interesting companies to tap into the travel industry and these massive bases of customers, again, between 800 million and 1 billion customer accounts that are connected to our loyalty platform. There are companies like Lyft that we've been working with for some time that are very interested in tapping into that. So you'll continue to see us broadening the reach of the platform outside of travel, but more from the perspective of tapping into the size and scale of the travel loyalty marketplace.
Our next question comes from Gary Prestopino with Barrington Research.
Yes. You mentioned something about that the back half of the year with your partners, you're starting to -- they're starting to be a lot more optimistic. Have you given any thought to the fact that maybe this recovery comes back a lot stronger than what would be expected just simply because there's probably going to be more personal travel versus business travel. And just because of people being cooped up as much and then the logistics of trying to do some kind of a business meeting now post-COVID, especially with Zoom and things like that, it just may be a lot more difficult on the business side versus the personal side?
Yes. Gary, I mean, it's probably a good question for the CEOs of the airlines and hotels that are reporting here in the next little bit. But what I can tell you is what we're seeing and we're hearing from our colleagues at the airlines and hotels, and I think the way you characterized it is right. We do see and expect leisure travel to be the first. There seems to be consensus that leisure is the first part of the recovery. Domestic or regional travel it's kind of tied into that, so domestic U.S. or regional European, et cetera. We're seeing some good signs and some good indications around transborder. North America activity starting to pick up around this summer. We think -- generally, international travel will lag a little bit, although European -- there seems to be trends that European markets are opening up at least inbound into the European marketplace. A little less so North Asia, a little bit of what we hear is that's a little bit lagging. And then you're absolutely right. I think generally, the commentary in the industry has been that business travel will be a little bit later. So we'll see how that all plays out, but I think that is starting to come in a little bit more into site because the messaging from whether it's senior hotel or senior airline executives seems to be pretty consistent along that story.
Our next question comes from Jim Byrne with Acumen Capital.
I think we've talked about this offline a few times. So I just wanted to touch base on your results kind of down 50% or so. Obviously, airlines and lots of travel companies have been hit much harder, 80%, 90% drops. You've filled a broader base of products and partners, at what point do you feel like you get back to kind of 2019 earnings level or gross profit levels? Is that a 50% rebound in travel? Is that 80% return to 2019 travel levels? I just wanted to get your sense on those.
Yes. I think the short answer is -- I think we all wish we knew. It really is hard to peg when that happens. We've got a number of models, as you might expect that we're running. That peg has recovered up to kind of pre '19 levels at different stages. It really -- we wouldn't be able to give you a firm number or date on that. We're watching very closely for all the signs that you would expect. But just to be very honest, we don't yet know how sharp that recovery curve is going to be. I think our belief, as a company, and certainly our airline partners and hotel partners, generally, I would say there's a stronger belief that when the recovery starts, it will be rapid and it will come back faster than most people expect. Generally, our sense is that the pent-up demand is very, very deep. So we don't know when that trigger happens. But when it starts, our expectation is that it moves pretty quick.
I was just going to add to that. The other thing to consider is you think we exited 2019 with a certain number of partners and services in market. Obviously, if we didn't do anything last year, then we get back to 2019 performance when the whole industry got back to 2019 levels. But as we've talked about, we've been really busy launching new products, new services, cross-selling with current partners. So we have more kind of in place now than we did at the end of 2019 or the beginning of 2020. So we would expect to get back there ahead of when the industry gets back just because we have more pieces of assets kind of at work in the market.
Yes. Okay. That's great. And then maybe just a little on the Amadeus relationship, just remind me if there is a time line associated with that? And then if there's -- it's starting to bear fruit now, and I just wanted to know are you still as excited about that as you were when you first signed it? And what do you see coming out of that over the next 1 year or 2?
Yes. I think we signed a long-term partnership. So we've been working at it 2 years and basically just past 2 years now. Some of the new launches were right off the back of their relationships, as we've talked about. We're now probably more as focused on pipeline, but we're also now really focused on some co-product development with them. And that's where I think some of the flywheel of that relationship will start bearing some fruit in that. Our access to embedded airline systems through their -- in partnership with them is just easier for us to do versus an adhoc one-off every time we kind of present one of our partners is a new idea. It allows us to put in place much more kind of industrial strength solutions out at the gate and then have their whole infrastructure be open to sell it through. So we are -- they're obviously looking to sell valuable things and introduce valuable services to their airline customers and ours happen to be those that generate strong economics for airlines. So it matches up pretty well with their needs and our needs and our airline partner needs. So we're excited about the prospects of some of the new services that we're co-developing right now, which was kind of the second leg of the stool that we always had in mind as we launch that partnership.
Thank you. And at this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. MacLean for closing remarks. Thank you.
Great. Thank you, and thanks to everyone for joining us today. We will look forward to updating you again in May as we report our first quarter results. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you all for your participation.