Slide 1: Aimia: Inspiring Loyalty
/\IMI/A INSPIRING LOYALTY
Slide 2: Q3 2017 Highlights
Q3 2017 HIGHLIGHTS November 8, 2017
Slide 3: Forward-Looking and Cautionary Statements
FORWARD-LOOKING AND CAUTIONARY STATEMENTS Forward-looking statements are included in this presentation. These forward-looking statements are typically identified by the use of terms such as “outlook”, “guidance”, “target”, “forecast”, “assumption” and other similar expressions or future or condition
Slide 4: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES Aimia uses the following non-GAAP financial measures which it believes provides investors and analysts with additional information to better understand results as well as assess its potential. GAAP means generally accepted accounting principles in Canada and represents In
Slide 5: GAAP to Non-GAAP Reconciliation
GAAP TO NON-GAAP RECONCILIATION* Three months ended Nine months ended Sept 30, Sept 30, 2017 2016 2017 2016 Operating income (loss) (19.6) (13.9) (49.0) (39.9) Depreciation and amortization 11.2 14.1 34.7 42.2 Amortization of Accumulation Partners' contracts, customer 41.2 31.9 103.2 97.2 relationsh
Slide 6: Q3 and YTD 2017 Income Statement
Q3 AND YTD 2017 INCOME STATEMENT Three Months Ended Nine Months Ended September 30, September 30, (in millions of Canadian dollars, except per share 2017 2016 2017 2016 amounts) Revenue 452.1 503.6 1,447.4 1,599.1 Cost of sales Cost of rewards and direct costs 286.3 311.9 918.4 1,012.7 Depreciation
Slide 7: ROIC Reconciliation
ROIC RECONCILIATION* Twelve Months Ended September 30, (in millions of Canadian dollars unless otherwise noted) 2017 2016 Calculation of adjusted operating income after taxes Operating loss (95.5) (58.1) Depreciation, amortization & impairment charges 247.6 206.5 Operating income excluding depreciat
Slide 8: Q3 2017 Financial Highlights
Q3 2017 FINANCIAL HIGHLIGHTS* (in millions of Canadian dollars) As Reported Q3 2017 Q3 2016 Gross $496.8 $558.5 Billings (11.0%)(1) (1)(2) (10.0%) in c.c. Operating $133.0 $159.6 Expenses Adjusted $60.3 $60.5 EBITDA 12.1% margin 10.8% margin Capital $11.2 $16.1 expenditures FCF before Dividends Paid
Slide 9: Today's Speakers
TODAY’S SPEAKERS • David Johnston, Group Chief Executive • Mark Grafton, Chief Financial Officer 9
Slide 10: Agenda
AGENDA • Introductions • Quarterly highlights & strategic update • Financial highlights 10
Slide 11: Quarterly Highlights & Strategic Update
QUARTERLY HIGHLIGHTS & STRATEGIC UPDATE DAVID JOHNSTON
Slide 12: Q3 2017 Financial Highlights
Q3 2017 FINANCIAL HIGHLIGHTS* (in millions of Canadian dollars) Q3 2017 Q3 2016 Coalition Gross Billings(7) growth Gross $496.8 $521.6 of 1% on a Billings(3) (4.8%)(1) constant currency (1)(2) (3.6%) in c.c. basis Adjusted EBITDA Operating margin benefiting Expenses(4) $118.8 $126.1 from operational
Slide 13: Returns to Shareholders
RETURNS TO SHAREHOLDERS* FCF per Common Share before Dividends Paid(1) Return on Invested Capital(5) $1.60 $0.07 $1.40 $0.06 6.3% 6.1% $1.20 5.9% $0.05 $1.00 112% increase $0.04 $0.80 in Free Cash $0.03 $0.60 Flow per share $0.40 $0.02 $0.20 $0.01 $0.55 $0.66 $1.40 $0.00 $0.00 (3) (4) Q3 2015(2) Q3
Slide 14: Key Areas of Focus
KEY AREAS OF FOCUS • Ongoing business simplification and acceleration of cost savings • Progressing key strategic and commercial partnership Delivering on discussions and Aeroplan member strategic offering priorities and 2017 guidance • Preserving a strong cash and liquidity position 14
Slide 15: Business Simplification Driving Lower Opex
BUSINESS SIMPLIFICATION DRIVING LOWER OPEX* Operating expenses** (in millions of Canadian dollars) YTD $472.5 2016 Down 14% YoY YTD $405.2 2017 10% cost reduction Focus of cost Reducing to zero further achieved across optimization in to completion of coalitions Q4 2017 & 2018 disposals AMCO INCO GLS
Slide 16: Engaging Aeroplan Members
ENGAGING AEROPLAN MEMBERS 16
Slide 17: Aeroplan Redemption Trends
AEROPLAN REDEMPTION TRENDS (in millions of Canadian dollars) Weekly redemptions cash impact vs. prior year Cumulative cash impact of $21 million* above prior year represents 3% of total annual redemption 4-Jun-17 expense in 2016 1-Jan-17 8-Jan-17 2-Apr-17 9-Apr-17 7-May-17 25-Jun-17 5-Mar-17 15-Jan-
Slide 18: Aeroplan Cost of Rewards Trends
AEROPLAN COST OF REWARDS TRENDS (in millions of Canadian dollars) FY 2016: $807 million Up $21 million* (or 3%) YTD, 9M 2016: $612 million 9M 2017: $633 million with around $17m increase since May Air Canada $218 $225 $207 capacity growth $202 $192 $195 $201 and successful conversion campaigns accou
Slide 19: Building Financial Flexibility
BUILDING FINANCIAL FLEXIBILITY (in millions of Canadian dollars) Total cash and $800 investments Increasing cash $669M balance since Total Cash + investments $700 Q4 2016 debt Average $600 cash and repayment of $500 investments $200 million $649 $400 $300 $200 Close to $670 $100 million of cash + in
Slide 20: Key Takeaways
KEY TAKEAWAYS ➢ 2017 guidance: • 2017 FCF guidance maintained, with increased Adjusted EBITDA margin expected on core business Gross Billings of between $2.0 to $2.1 billion • Q4 2017 expected to be a strong cash generative quarter ➢ Ongoing business simplification: • Q4 2017 cost savings anticipate
Slide 21: Operating and Financial Highlights
OPERATING AND FINANCIAL HIGHLIGHTS MARK GRAFTON
Slide 22: Q3 2017 Gross Billings and Operational Highlights
Q3 2017 GROSS BILLINGS AND OPERATIONAL HIGHLIGHTS* (in millions of Canadian dollars and Q3 operational highlights reported YoY variance (%) ) Americas Coalitions $338.5 • Aeroplan Gross Billings up 3%(2), 68% of core +1.0% Gross Billings growth driven by non-air travel, 24.9% AE financial, and airli
Slide 23: Q3 2017 Consolidated Gross Billings
Q3 2017 CONSOLIDATED GROSS BILLINGS* (in millions of Canadian dollars) Down (4.8)% $3.4 ($16.5) ($11.4) Americas International Coalitions Global Coalitions Loyalty Solutions • Around a third of • Aeroplan Loyalty Units decline attributable to Gross Billings up 3%; • New Zealand each of: • $8M gross-
Slide 24: Aeroplan Gross Billings
AEROPLAN GROSS BILLINGS* Gross Billings (millions of Canadian dollars) +3% 340.0 35.0 Aeroplan GBs up $329.9 3% YoY driven by 330.0 $319.6 30.0 strong 320.0 performance in the non-air travel, 310.0 25.0 +2.0% YoY financial and Aeroplan Gross Billings Growth airline sectors 300.0 (billion miles) 20.0
Slide 25: Aeroplan Financial Card Trends
AEROPLAN FINANCIAL CARD TRENDS One month average actives (1) (Aeroplan TD + CIBC credit cardholders) 2013-2017 CAGR = 5% 2010 to 2013 CAGR = 1% Active base up 3% YOY in the quarter(3) as a result of lower attrition in the last 12 months 2010 2011 2012 2013 2014 2015 2016 Q3 2017 Notes: (1) One-month
Slide 26: Aeroplan Accumulation Pattern
AEROPLAN ACCUMULATION PATTERN Q3 2017: 2.0% Miles accumulated y/y% Accumulation 6.8% grew in the 5.4% 4.1% 4.8% quarter by 2% 0.8% 1.2% 1.0% year over year -0.1% with August -1.9% driven by non air -5.6% campaigns -10.0%-10.5% -9.7% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Jul-17 Aug-17 Sep-17 2015 2015 2015 2
Slide 27: International Coalitions Gross Billings
INTERNATIONAL COALITIONS GROSS BILLINGS* (in millions of Canadian dollars) Positive first quarter of Daily 250.0 30,000 Mail contribution; (12.6)% YoY; (8.9)% YoY in c.c** 7% YoY Nectar 25,000 issuance declines 200.0 $130.5 from Sainsbury’s, $114.0 20,000 as well as 150.0 15,000 Homebase exit 100.0
Slide 28: Phasing of Sainsbury's Campaigns
PHASING OF SAINSBURY’S CAMPAIGNS Q4 strongest quarter for issuance but promotional campaigns expected Sainsbury’s points issuance to be below prior year Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 2016A 2017A 2016A 2017A 2016A 2017A 2016A 2017E 28
Slide 29: Global Loyalty Solutions Gross Billings
GLOBAL LOYALTY SOLUTIONS GROSS BILLINGS* (in millions of Canadian dollars) (20.3)% YoY; (18.5)% YoY in c.c.** $56.1 $10 million $44.7 of decline attributable to New Zealand divestiture Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 *THIS SLIDE CONTAINS NON-GA
Slide 30: Club Premier Overview
CLUB PREMIER OVERVIEW • Aimia owns 48.9% of PLM Premier, S.A.P.I. de C.V (PLM), which operates Club Premier. • Club Premier is the leading coalition program in Mexico with a growing member base and over 100 partners, and the operator of Aeromexico's frequent flyer program. • Long term 20 year CPSA a
Slide 31: Q3 2017 Consolidated Adjusted EBITDA
Q3 2017 CONSOLIDATED ADJUSTED EBITDA* (in millions of Canadian dollars) Core business Adjusted EBITDA up 15% YoY $1.3(2) ($2.0)(2) ($0.5)(2) ($11.1) $10.5(2) International Global ($0.7) Coalitions Loyalty Corporate Americas Solutions Coalitions Severance Non-core Lower divisional Higher $62.8(1) ope
Slide 32: Q3 2017 Progress on Operating Expenses
Q3 2017 PROGRESS ON OPERATING EXPENSES* (in millions of Canadian dollars) Core business operating expenses** down 6% YoY $2.4 $0.7 ($2.9)(3) $11.1 ($6.5)(3) $1.8(3) $0.5(3) Non-core Americas Share Coalitions Severance based International Global Corporate compensation Coalitions Loyalty Solutions • O
Slide 33: Aeroplan Redemption and Unit Cost Trends
AEROPLAN REDEMPTION AND UNIT COST TRENDS Favourable cost per mile trend Mileage burn and unit cost 1.06 1.05 1.05 0.98 Mileage burn up 1.04 0.98 1.03 1.03 5.0% 1.02 1.01 1.02 4.7% YoY in-line with last year 3.0% 4.9% 4.7% 3.6% 4.2% 3.9% 1.0% 2.1% 1.8% -1.3% -0.7% -1.0% -1.6% -3.6% -3.0% Average unit
Slide 34: Aeroplan Burn/Earn Ratio
AEROPLAN BURN/EARN RATIO Burn/earn ratio* Improving accumulation trend Seasonally normal burn earn 9M 2015: B/E 90% 9M 2016: B/E 88% 9M 2017: B/E 89% 105% 102% 100% 98% 97% 95% 89% (inverse of 90% 11% breakage) 84% 86% 84% 84% 84% 85% 83% 80% 80% 79% 75% 70% 65% 60% Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q
Slide 35: Free Cash Flow in Line with Seasonal Patterns
FREE CASH FLOW IN LINE WITH SEASONAL PATTERNS* (in millions of Canadian dollars) Normalized FCF before Dividends Paid(1) 130.1 (6) Reduced OPEX, interest paid, 59.2 58.4 (8) 59.0 59.5 (9) 62.7 (2) working capital 49.1 (4) 38.9 (5) improvement, and lower CAPEX driving higher Q3 2017 FCF (3) (15.2)(1)
Slide 36: Capital Expenditures
CAPITAL EXPENDITURES (in millions of Canadian dollars) FY 2015: $93.6 Capex down FY 2016: $68.2 30% YoY in the quarter 9M 2017: $36.1 $29.4 $23.7 $20.5 $20.0 $19.5 $18.2 $16.1 Aeroplan capex $14.4 focused on $12.1 $12.8 $11.2 new travel platforms and 1:1 marketing Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1
Slide 37: Working Capital Quarterly Trends
WORKING CAPITAL QUARTERLY TRENDS (in millions of Canadian dollars) 122.7 76.4 22.9 Unfavourable 20.4 7.4 working capital due to timing (15.6) (22.0) (33.0) (31.4) (63.0) (58.8) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 Change in operating assets and liab
Slide 38: Cash Position
CASH POSITION (in millions of Canadian dollars) As of Sept 30, 2017 Cash $375 Common Restricted cash $20 dividends Investments $274 suspension has increased Total Cash, Restricted cash and Investments $669 retained cash Restricted cash ($20) Aeroplan reserve ($300) Other reserve ($208) Proceeds from
Slide 39: Puts and Takes to 2017 FCF Guidance
PUTS AND TAKES TO 2017 FCF GUIDANCE * Sources of mitigations: Gross Lower • OPEX savings of $9 Billings Incremental Nectar redemptions million in Q4 2017 Aeroplan Sale of Capex redemption Canadian savings • Capital expenditures Above cost Air Miles OPEX Above originally at $220.0 trademarks savings
Slide 40: Implied Q4 Based on Full Year 2017 Guidance
† IMPLIED Q4 BASED ON FULL YEAR 2017 GUIDANCE* (in millions of Canadian dollars) Gross Billings Q4 Accumulation 2017 historically fourth Q4 $592.4(1) quarter weighted, 2016 but building in disposal and Adjusted EBITDA margin campaign timing impacts Q4 2017 Q4 10.7%(2) 2016 Free Cash Flow before Divi
Slide 41: Concluding Remarks
CONCLUDING REMARKS DAVID JOHNSTON
Slide 42: Conclusion
CONCLUSION Key strategic priorities remain: • Ongoing business simplification Focused on a simpler and acceleration of cost savings business with an streamlined operating model, a supportive • Progressing key strategic and balance sheet and a commercial partnership reimagined Aeroplan discussions an
Slide 43: Aimia: Inspiring Loyalty
AIMIA INSPIRING LOYALTY
Slide 44: Revised 2017 Guidance at Q3 2017
REVISED 2017 GUIDANCE AT Q3 2017* (in millions of Canadian dollars) 2017 Guidance(2) (1) Core business between Gross Billings (core business) $2.0 to $2.1 billion Gross Billings (previously “broadly stable at $2.1 billion”) (1) Adjusted EBITDA Core business around 13.0% and margin (previously “aroun
Slide 45: Balance Sheet
BALANCE SHEET DEBT Interest Sept CASH & INVESTMENTS Sept (in millions of Canadian Rate Maturing 30, 2017 (in millions of Canadian dollars) 30, 2017 dollars) Revolving Facility(1) 3.58%(5) Apr. 23, 2020 200.0 Cash and cash equivalents 375 Senior Secured Notes 4 6.85%(6) May 17, 2019 250.0 Restricted
Slide 46: YTD 2017 Consolidated Gross Billings
YTD 2017 CONSOLIDATED GROSS BILLINGS* (in millions of Canadian dollars) (4.6)% YoY $17.5 ($68.3) ($20.5) $44.2 Americas International Global Coalitions Non-core Coalitions Loyalty Solutions • Aeroplan • $33M FX impact Loyalty Units • Nectar Loyalty Units • Decreased Gross Billings down $22M due to r
Slide 47: YTD 2017 Consolidated Adjusted EBITDA
YTD 2017 CONSOLIDATED ADJUSTED EBITDA* (in millions of Canadian dollars) 17.9% YoY $26.3(2) $1.3(2) ($7.7)(2) $10.2(2) ($0.1) ($20.3) ($17.5) International Non-core Global Corporate Coalitions Onerous Americas Loyalty Solutions contract Severance Coalitions • Lower provision $168.2(1) • Lower share
Slide 48: YTD 2017 Progress on Operating Expenses
YTD 2017 PROGRESS ON OPERATING EXPENSES* (in millions of Canadian dollars) (5.0)% YoY $20.3 $35.9 ($6.6)(3) $17.5 ($20.1)(3) $6.8(3) $0.8(3) ($2.9) Onerous Americas Non-core contract Coalitions International Global Corporate Share Severance provision Coalitions Loyalty based Solutions compensation $
Slide 49: Quarterly Consolidated Cost of Rewards Trend
QUARTERLY CONSOLIDATED COST OF REWARDS TREND (in millions of Canadian dollars) $200 $287 $258 $152 $106 $145 $129 $144 $94 $120 $85 $231 $218 $225 $201 $202 $207 $197 $192 $201 $196 $195 Q1 Q1 Q1 Q2 Q2 Q2 Q3 Q3 Q3 Q4 Q4 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 Aeroplan Cost of Rewards
Slide 50: Increasing Adjusted EBITDA Margin
INCREASING ADJUSTED EBITDA MARGIN* EXCLUDING SEVERANCE COSTS AND NON-CORE (in millions of Canadian dollars, except percentages) YTD 2017: 13.2%(3) 120.0 16.0% FY 2016: 11.0%(2) 14.5% FY 2015: 9.7%(1) 13.1% 14.0% 100.0 12.1% 12.0% 11.1% 12.0% 10.7% 10.5% 10.2% 80.0 9.7% 9.1% 9.1% 10.0% 60.0 8.0% 6.0%
Slide 51: Q3 2017 Adjusted EBITDA to Free Cash Flow Bridge
Q3 2017 ADJUSTED EBITDA TO FREE CASH FLOW** BRIDGE* (in millions of Canadian dollars) $2.4 ($0.9) $0.6 ($11.2) $22.7 ($22.0) $60.3 $51.9 Non-cash items Adjusted Change in Stock-based Cash Net cash Capex Working capital Free Cash EBITDA FRC compensation taxes interest and other Flow** received (paid)
Slide 52: YTD 2017 Adjusted EBITDA to Free Cash Flow Bridge
YTD 2017 ADJUSTED EBITDA TO FREE CASH FLOW** BRIDGE* (in millions of Canadian dollars) $43.7 ($2.9) ($6.3) ($16.2) ($36.1) ($60.4) $160.4 Non-cash items $82.2 Adjusted Change in Stock-based Cash Net cash Capex Working capital Free Cash EBITDA FRC compensation taxes interest and other Flow** received
Slide 53: Q3 & YTD 2017 Gross Billings to Free Cash Flow Walk
Q3 & YTD 2017 GROSS BILLINGS TO FREE CASH FLOW WALK* (in millions of Canadian dollars) Q3 2017 Q3 2016 9M 2017 9M 2016 Gross Billings 496.8 558.5 1,542.3 1,692.2 Less: Cost of rewards and direct costs (286.3) (311.9) (918.4) (1,012.7) Less: Operating expenses (excluding share-based (130.6) (155.6) (
Slide 54: Drivers Impacting Gross Billings and Redemptions
DRIVERS IMPACTING GROSS BILLINGS AND REDEMPTIONS Consumer debt continues to rise Canadian Household Consumption Expenditure Final (HCE)* 4.8% and impact 5.0% 4.6% spend through 4.0% the year 3.0% 3.0% 3.0% 2.4% 2.3% 2.3% 2.0% 1.7% 1.5% 1.0% Canadian FX 0.0% Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17
Slide 55: Q3 and YTD 2017 Financial Highlights – Americas Coalitions
Q3 AND YTD 2017 FINANCIAL HIGHLIGHTS – AMERICAS COALITIONS* Periods Ended September 30, Three Months Ended Nine Months Ended (in millions of Canadian dollars) 2017 2016 2017 2016 Reported Reported Reported Reported Gross Billings Aeroplan 329.9 319.6 969.5 934.7 Loyalty Services & Other 15.1 33.0 49
Slide 56: Aeroplan Revenue
AEROPLAN REVENUE (in millions of Canadian dollars) Q3 2017 Q3 2016 Miles Revenue $265.4 $250.3 Breakage Revenue $32.9 $31.0 Other Revenue $9.1 $9.2 Total Revenue $307.4 $290.5 56
Slide 57: Gross Billings from Sale of Loyalty Units by Major Partner
GROSS BILLINGS FROM SALE OF LOYALTY UNITS BY MAJOR PARTNER Other CIBC Other CIBC Other CIBC 17.7% 15.7% 17.2% 15.9% Air Sainsbury’s Air Sainsbury’s Sainsbury’s Canada Canada 13.4% 14.7% Air Canada Q3 2016 15.5% Q3 2017 15.6% $418.5M $418.4 AMEX AMEX AMEX TD 12.4% TD 12.2% TD 25.4% 24.3% 57
Slide 58: Gross Billings from Sale of Loyalty Units by Major Partner
GROSS BILLINGS FROM SALE OF LOYALTY UNITS BY MAJOR PARTNER Other CIBC Other CIBC Other CIBC 16.5% 15.5% 17.8% 15.5% Air Sainsbury’s Air Sainsbury’s Sainsbury’s Canada Canada 14.8% Air Canada 14.5% 9M 2016 17.3% 15.8% 9M 2017 $1,262.8M $1,243.4M AMEX AMEX AMEX TD 12.2% TD TD 12.4% 22.7% 25.0% 58
Slide 59: Accounting: Key Things to Remember
ACCOUNTING: KEY THINGS TO REMEMBER* Gross Billings from the sale of Loyalty Units: Revenue Recognition: ▪ Recognize upon redemption of Loyalty Units ▪ Recognize upon issuance of Loyalty Units ▪ Key indicator of top line growth Breakage Recognition: ▪ Recognize upon redemption of Loyalty Units Liabil