Slide 1: Inspiring Loyalty
/\IMI/A INSPIRING LOYALTY
Slide 2: Q2 2017 Highlights
Q2 2017 HIGHLIGHTS August 9, 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 Six months ended June 30, June 30, 2017 2016 2017 2016 Operating income (loss) (34.9) (17.1) (29.4) (26.0) Depreciation and amortization 12.1 15.2 23.5 28.1 Amortization of Accumulation Partners' contracts, customer relationships and 36.2 32.5 62.0
Slide 6: Q2 and YTD 2017 Income Statement
Q2 AND YTD 2017 INCOME STATEMENT Three Months Ended Six Months Ended June 30, June 30, (in millions of Canadian dollars, except per share 2017 2016 2017 2016 amounts) Revenue 470.5 525.4 $ 995.3 $ 1,095.5 Cost of sales Cost of rewards and direct costs 300.7 331.3 632.1 700.8 Depreciation and amortiz
Slide 7: ROIC Reconciliation
ROIC RECONCILIATION* Twelve Months Ended June 30, (in millions of Canadian dollars unless otherwise noted) 2017 2016 Calculation of adjusted operating income after taxes Operating loss (89.8) (76.7) Depreciation, amortization & impairment charges 241.2 209.4 Operating income excluding depreciation,
Slide 8: Q2 2017 Financial Highlights
Q2 2017 FINANCIAL HIGHLIGHTS* (in millions of Canadian dollars) As Reported Q2 2017 Q2 2016 Gross $520.3 $560.7 Billings (7.2%)(1) (1)(2) (6.3%) in c.c. Operating $156.4 $163.5 Expenses Adjusted $41.7 $54.6 EBITDA 8.0% margin 9.7% margin Capital $12.8 $14.4 expenditures FCF before dividends paid $54
Slide 9: Today's Speakers
TODAY’S SPEAKERS • David Johnston, Group Chief Executive • Tor Lønnum, 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: Q2 2017 Financial Highlights
Q2 2017 FINANCIAL HIGHLIGHTS* (in millions of Canadian dollars) Q2 2017 Q2 2016 Coalition Gross Billings(6) growth Gross $509.3 $517.0 of 3% on a Billings(3) (1.5%)(1) constant currency (1)(2) (0.4%) in c.c. basis Adjusted EBITDA Operating margin benefiting Expenses(4) $137.0 $133.3 from operational
Slide 13: Key Takeaways & Areas of Focus
KEY TAKEAWAYS & AREAS OF FOCUS Key Takeaways 1. Actively working on future Aeroplan member offering 2. Aeroplan accumulation up in Q2, with no material change to redemption trends 3. 2017 guidance maintained Key Areas of Focus • Preserving a strong cash and liquidity position • Ongoing business simp
Slide 14: Building Additional Financial Flexibility
BUILDING ADDITIONAL FINANCIAL FLEXIBILITY (in millions of Canadian dollars) Strong financial position with over half a Increasing financial flexibility billion dollars on the balance sheet beyond 2017 Common dividend suspension 1 increases retained cash $567 million in cash and Future FCF generation
Slide 15: Streamlining the Operating Model
STREAMLINING THE OPERATING MODEL Aimia David Johnston, Group Chief Streamlining the Executive business into two operating units will drive significant cost Divisions Functions savings Coalitions Finance Vince Timpano Mark Grafton Sources of savings coming from corporate costs and Talent and Culture
Slide 16: Delivering Operational Savings
DELIVERING OPERATIONAL SAVINGS OPEX savings (in millions of Canadian dollars)(1) • Previously announced $70 million cost savings initiatives have been accelerated with the benefits expected to be delivered earlier than anticipated 31.0 • Savings expected to ramp from FY 2016A FY 2017E FY 2018E FY 20
Slide 17: Aeroplan Fundamentals
AEROPLAN FUNDAMENTALS • Our TD, CIBC credit cards portfolio • On average, members have been with (excluding frequent fliers) the Aeroplan program for 10 years and accounted for 9% of Canadian redeem once every two years, credit purchase volume in 2016, predominantly for flights. Our most and more th
Slide 18: Aeroplan Financial Card Trends
AEROPLAN FINANCIAL CARD TRENDS One month average actives (1) (Aeroplan TD + CIBC credit cardholders) 2013-2017 CAGR = 5% Active base up 2010 to 2013 CAGR = 1% 5% YOY in the quarter(3) Slowing new card acquisition post early campaigns but improved attrition in the quarter 2010 2011 2012 2013 2014 201
Slide 19: Continued Acquisition and Engagement
CONTINUED ACQUISITION AND ENGAGEMENT Monthly gross new card acquisitions (Aeroplan TD + CIBC credit cardholders) Marketing campaign focus on member engagement 6 month average Some slowing in June but broadly reflecting expected campaign phasing Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Q1 2017 Q2 20
Slide 20: Current Aeroplan Offering
CURRENT AEROPLAN OFFERING (2 points per $) Fixed fares Business Class fixed fares Go West 35,000 50,200 25,000 50,000 Availability, value, and 35,000 / 54,400 / 25,000 / 40,000 / flexibility will Go South 55,000 55,900 40,000 60,000 continue to be differentiators 65,000 / 57,400 / 60,000 / 110,000 /
Slide 21: Focus on Alternatives
FOCUS ON ALTERNATIVES Our active discussions with alternative partners are based on: - a reinvented post 2020 redemption offering with improvements to come which - would continue to be multi-airline and - continue to offer access to geographies our members travel - and fulfill our bank commitments w
Slide 22: Operating and Financial Highlights
OPERATING AND FINANCIAL HIGHLIGHTS TOR LØNNUM
Slide 23: Q2 2017 Gross Billings and Operational Highlights
Q2 2017 GROSS BILLINGS AND OPERATIONAL HIGHLIGHTS* (in millions of Canadian dollars and Q2 operational highlights reported YoY variance (%) ) Americas Coalitions $338.5 • Aeroplan Gross Billings up 3%(2), 66% of core +1.2% Gross Billings contributing to divisional AE 19.0% AE margin improvement of 1
Slide 24: Q2 2017 Consolidated Gross Billings
Q2 2017 CONSOLIDATED GROSS BILLINGS (in millions of Canadian dollars) Down 1.5% $3.9 ($6.6) ($4.9) $11.0 Americas International Global Non-core Coalitions Coalitions Loyalty Solutions • Aeroplan Loyalty • $7M currency Units Gross impact; On a • Decreased Billings up 3%; constant rewards • Loyalty Se
Slide 25: Q2 2017 Consolidated Adjusted EBITDA
Q2 2017 CONSOLIDATED ADJUSTED EBITDA* (in millions of Canadian dollars) Up 15.5% YoY $10.9 ($20.1) $4.1 ($1.9) ($4.8) Americas International Coalitions Global Corporate Coalitions Loyalty and Other Solutions Non-core $53.5(1) • Lower • Higher loyalty Aeroplan • Lower $61.8(2) program contribution; •
Slide 26: 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 (10) Higher Q2 FCF reflective of (3) (12) reduced capex $58.4 (2) (6) (8) and working (9) capital benefit (4) (5) (7) (11) (1) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2014 2015 201
Slide 27: Q2 2017 Progress on Operating Expenses
Q2 2017 PROGRESS ON OPERATING EXPENSES* (in millions of Canadian dollars) $28.9 $1.4 ($3.0) $4.5 $0.9 Corporate Non-core Americas International Global Loyalty and Other Coalitions Coalitions Solutions $133.3(1)(2) $165.9(1) • Impact of prior • Increased • Increased • Higher year program severance $1
Slide 28: Working Capital Quarterly Trends
WORKING CAPITAL QUARTERLY TRENDS (in millions of Canadian dollars) $122.7 $76.4 Favourable $35.6 $22.9 working capital $7.4 $20.4 ($19.7) ($15.6) due to timing ($33.0) ($31.4) ($40.2) ($46.1) ($63.0) ($58.8) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016
Slide 29: Capital Expenditures
CAPITAL EXPENDITURES (in millions of Canadian dollars) FY 2015: $93.6 Capex down FY 2014: $81.5 11% YoY in the quarter FY 2013: $54.4 $30.0 $29.4 FY 2016: $68.2 $23.7 1H 2017: $24.9 $21.9 $21.6 $20.5 $20.0 $19.5 $18.1 $18.2 $16.1 Focus on $14.4 delivering $11.2 $12.2 $11.8 $12.1 $12.8 $9.1 improving
Slide 30: Aeroplan Gross Billings
AEROPLAN GROSS BILLINGS Gross Billings (millions of Canadian dollars) 3.0% YoY 340.0 35.0 $321.0 $330.7 330.0 30.0 320.0 Aeroplan GBs up (billion miles) Miles Issued (millions CAD) 25.0 Gross Billings +1.2% 310.0 YoY 3% YoY driven by Growth* strong financial 300.0 20.0 cards and Air +0.2% Canada up
Slide 31: Aeroplan Accumulation Pattern
AEROPLAN ACCUMULATION PATTERN Miles accumulated y/y% Q2 2017: 1.2% Accumulation grew in the quarter up 1.2% 5.4% 4.1% 4.8% 3.8% driven by 0.8% 0.5% 1.0% Financial cards and Air Canada -0.1% -0.5% -5.6% -10.0%-10.5% -9.7% Accumulation trending in-line Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Apr May Jun Jul as exp
Slide 32: Aeroplan Redemption and Unit Cost Trends
AEROPLAN REDEMPTION AND UNIT COST TRENDS Q2 2017: 1.02 Mileage burn and unit cost 1.06 1.05 1.05 1.04 1.03 1.03 1.04 25.0% 1.02 1.01 1.02 1.00 Mileage burn up 0.98 20.0% 1.8% YoY driven Q2 2017: 1.8% 15.0% by higher Market Fare Flight 10.0% rewards and non- 5.0% 2.4% air rewards 3.6% 2.1% 4.9% 4.2%
Slide 33: Aeroplan Burn/Earn Ratio
AEROPLAN BURN/EARN RATIO Improving accumulation trend Seasonally normal burn earn Burn/Earn in Burn/earn ratio line with normal seasonal 102% 98% patterns 97% 93% 89% (inverse of 11% breakage) 83% 84% 84% 84% 84% 80% 79% 77% 74% 72% Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1
Slide 34: Redemption Trends Through June 2017
REDEMPTION TRENDS THROUGH JUNE 2017 Pre AC announcement Post AC announcement Miles Redeemed YoY % Change 12% 6% 5% 2% 2% -3% 4% 1% 4% 0% -2% -9% Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Actual Expected Post the AC announcement in May resulted in an initial increase in redemptions but no Q1 2017 Q2
Slide 35: Redemption Impact Post AC Announcement
REDEMPTION IMPACT POST AC ANNOUNCEMENT (in millions of Canadian dollars) Redemptions cash impact vs. prior year Redemption expense increased in the days post the Cumulative Air Canada non-renewal cash impact of announcement but this has $9 million above since moderated prior year represents 1% of to
Slide 36: Future Redemption Behaviour
FUTURE REDEMPTION BEHAVIOUR Proportion of outstanding miles liabilities Key Considerations to redemptions Supply considerations • Best value Fixed Price fares well utilized and booked in advance • Availability of Market Fare seats limited by available capacity • Non-air rewards provide the most flex
Slide 37: International Coalitions Gross Billings
INTERNATIONAL COALITIONS GROSS BILLINGS (in millions of Canadian dollars) (5.0)% YoY; 0.3% YoY in c.c* 250.0 30,000 $130.7 $124.1 Gross Billings 25,000 stable on a 200.0 constant currency 20,000 basis 150.0 15,000 100.0 8.3% 10,000 YoY 50.0 5,000 Nectar issuance up 8% YoY due to 0.0 0 the phasing of
Slide 38: Phasing of Sainsbury's Campaigns
PHASING OF SAINSBURY’S CAMPAIGNS Sainsbury’s points issuance Strong Sainsbury’s performance in the quarter driven by 10x Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 points event 2016A 2017A 2016A 2017A 2016A 2017E 2016A 2017E Phasing of promotional campaigns expected to be strong in Q4 but below last year 38
Slide 39: Global Loyalty Solutions Gross Billings
GLOBAL LOYALTY SOLUTIONS GROSS BILLINGS (in millions of Canadian dollars) (9.5)% YoY; (12.4)% YoY in c.c.* New Zealand $51.8 $46.9 business divestment of around $6 million driving lower Gross Billings in the quarter Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 * c.
Slide 40: 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. • Members enrolled at June
Slide 41: Cash Position
CASH POSITION (in millions of Canadian dollars) As of June 30, 2017 Cash $273 Suspension of Restricted cash $20 common dividends will Investments $274 increase Total Cash, Restricted cash and Investments $567 retained cash Restricted cash ($20) Aeroplan reserve ($300) Other reserve ($196) Available
Slide 42: Financing
FINANCING Aimia financing structure (in millions of Canadian dollars) Maturity profile Sept 30, 2016 extended to $1,000 2020 with early $900 redemption of $300 2018 senior $800 (undrawn) secured notes $700 Debt/Adjusted June 30, 2017 $600 EBITDA* below 2x $500 $200 Effective interest $400 $300 (1) (
Slide 43: Dividends
DIVIDENDS • As communicated on June 14, 2017, the Company is prohibited from paying dividends declared on May 10, 2017, and originally scheduled to have been paid on June 30, 2017, as well as declaring any further dividends on any of the outstanding Common Shares or Preferred Shares, based on Aimia’
Slide 44: Concluding Remarks
CONCLUDING REMARKS DAVID JOHNSTON
Slide 45: 2017 Guidance
2017 GUIDANCE* (in millions of Canadian dollars) 2016 2017 Guidance(5) (1)(2) (4) Gross Billings (core business) $2,142 Core business broadly stable Gross Billings $2,340 around $2.1 billion (1) Adjusted EBITDA $239 (4) (1) Core business around 12.0% and margin 11.2% margin Free Cash Flow before Div
Slide 46: Conclusion
CONCLUSION • Progressing key strategic and commercial partnership Focused on a simpler discussions and Aeroplan member business with an offering streamlined operating model, a supportive balance sheet and a • Ongoing business simplification reimagined Aeroplan and acceleration of cost savings based
Slide 47: Aimia - Inspiring Loyalty
AIMIA INSPIRING LOYALTY
Slide 48: Returns to Shareholders
RETURNS TO SHAREHOLDERS* FCF per Common Share before Dividends Paid(1) Return on Invested Capital(5) $1.40 $0.07 $1.20 $0.06 6.3% 6.0% 5.9% $1.00 $0.05 $0.80 38% increase $0.04 $0.60 in Free Cash $0.03 Flow per share $0.40 $0.02 $0.20 $0.01 $0.64 $0.90 $1.24 $0.00 $0.00 (3) (4) Q2 2015(2) Q2 2016 Q2
Slide 49: Balance Sheet
BALANCE SHEET DEBT Interest June CASH & INVESTMENTS June (in millions of Canadian Rate Maturing 30, 2017 (in millions of Canadian dollars) 30, 2017 dollars) Revolving Facility(1) 3.08% Apr. 23, 2020 200.0 Cash and cash equivalents 273 Senior Secured Notes 5 4.35% Jan. 22, 2018 - Restricted cash 20 S
Slide 50: H1 2017 Consolidated Gross Billings
H1 2017 CONSOLIDATED GROSS BILLINGS* (in millions of Canadian dollars) (4.5)% YoY $14.1 ($51.8) ($9.1) $44.2 Americas International Global Coalitions Non-core Coalitions Loyalty Solutions • Aeroplan Loyalty Units • Nectar Loyalty • Decreased Gross Billings Units down rewards up 4%; $18M mainly fulfi
Slide 51: H1 2017 Consolidated Adjusted EBITDA
H1 2017 CONSOLIDATED ADJUSTED EBITDA* (in millions of Canadian dollars) 16.9% YoY $17.6 ($19.7) ($1.9) ($5.7) $7.4 International Coalitions Global Corporate Americas Loyalty and Other Coalitions Solutions $102.8(1) • Lower Non-core operating expenses • Lower $120.2(2) • Higher across the • Higher sh
Slide 52: H1 2017 Progress on Operating Expenses
H1 2017 PROGRESS ON OPERATING EXPENSES* (in millions of Canadian dollars) (3.4)% YoY $55.5 ($5.5) $2.3 ($12.2) $6.3 Corporate Non-core Americas International Global Loyalty and Other Coalitions Coalitions Solutions $266.0(1) • Lower • Lower share- $312.4(1) • Increased • Operational marketing effici
Slide 53: Quarterly Consolidated Cost of Rewards Trend
QUARTERLY CONSOLIDATED COST OF REWARDS TREND (in millions of Canadian dollars) $200 $301 $287 $182 $258 $152 $106 $174 $145 $129 $94 $164 $144 $120 $223 $231 $218 $225 $181 $201 $202 $207 $189 $197 $192 $193 $196 $195 Q1 Q1 Q1 Q1 Q2 Q2 Q2 Q2 Q3 Q3 Q3 Q4 Q4 Q4 2014 2015 2016 2017 2014 2015 2016 2017
Slide 54: Increasing Adjusted EBITDA Margin
INCREASING ADJUSTED EBITDA MARGIN* EXCLUDING SEVERANCE COSTS (in millions of Canadian dollars, except percentages) YTD 2017: 12.2%(6) FY 2016: 10.4%(4) 150 FY 2015: 9.5%(2)(3) 12.9%(6) 14.0% FY 2014: 8.1%(1) 130 11.2%(4) 11.4%(5) 12.0% 11.0%(3) 10.5%(4) 10.1% 10.2%(2) 10.0%(4) 110 9.1% 8.5%(3) 8.8%(
Slide 55: Q2 2017 Adjusted EBITDA to Free Cash Flow Bridge
Q2 2017 ADJUSTED EBITDA TO FREE CASH FLOW** BRIDGE* (in millions of Canadian dollars) $80.0 $29.0 ($9.5) $70.0 ($2.0) ($12.7) $60.0 $20.4 $54.1 $50.0 ($12.8) $41.7 $40.0 $30.0 Non-cash $20.0 items $10.0 $0.0 Adjusted Change in Stock-based Cash Net cash Capex Working capital Free Cash EBITDA FRC comp
Slide 56: H1 2017 Adjusted EBITDA to Free Cash Flow Bridge
H1 2017 ADJUSTED EBITDA TO FREE CASH FLOW** BRIDGE* (in millions of Canadian dollars) $20.6 ($5.3) ($5.4) ($16.8) $100.5 ($24.9) ($38.4) Non-cash items $30.3 Adjusted Change in Stock-based Cash Net cash Capex Working capital Free Cash EBITDA FRC compensation taxes interest paid and other Flow H1 201
Slide 57: Q2 & H1 2017 Gross Billings to Free Cash Flow Walk
Q2 & H1 2017 GROSS BILLINGS TO FREE CASH FLOW WALK* (in millions of Canadian dollars) Q2 2017 Q2 2016 H1 2017 H1 2016 Gross Billings 520.3 560.7 1,045.5 1,133.7 Less: Cost of rewards and direct costs (300.7) (331.3) (632.1) (700.8) Less: Operating expenses (excluding share-based (165.9) (161.0) (312
Slide 58: Drivers Impacting Gross Billings and Redemptions
DRIVERS IMPACTING GROSS BILLINGS AND REDEMPTIONS Consumer debt continues to rise Canadian Household Consumption Expenditure Final (HCE)* and impact 3.0% 2.7% 2.6% spend through 2.5% 2.3% 2.1% 2.2% 2.1% 2.0% the year 2.0% 1.7% 1.5% 1.0% 0.5% Canadian FX 0.0% expected to Q1-16 (A) Q2-16 (A) Q3-16 (A)
Slide 59: Q2 and H1 2017 Financial Highlights – Americas
Q2 AND H1 2017 FINANCIAL HIGHLIGHTS – AMERICAS COALITIONS* Periods Ended June 30, Three Months Ended Six Months Ended (in millions of Canadian dollars) 2017 2016 2017 2016 Reported Reported Reported Reported Gross Billings Aeroplan 330.7 321.0 639.6 615.1 Loyalty Services & Other 15.0 32.9 34.8 70.6
Slide 60: Aeroplan Revenue
AEROPLAN REVENUE (in millions of Canadian dollars) Q2 2017 Q2 2016 Miles Revenue $263.1 $255.1 Breakage Revenue $32.5 $31.5 Other Revenue $8.8 $9.0 Total Revenue $304.4 $295.6 60
Slide 61: 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 16.0% 15.5% 18.4% 16.0% Air Sainsbury’s Air Sainsbury’s Sainsbury’s Canada Canada 14.3% 15.4% 15.6% Air Canada Q2 2016 Q2 2017 14.5% $419.1M $427.1 AMEX AMEX AMEX 11.8% TD TD 12.4% TD 24.4% 25.7% 61
Slide 62: 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 16.0% 15.3% 17.9% 15.4% Air Sainsbury’s Air Sainsbury’s Sainsbury’s Canada Canada 15.5% Air Canada 14.4% H1 2016 18.1% 15.9% H1 2017 $844.3M $825.0M AMEX AMEX AMEX TD 12.2% TD TD 12.5% 22.0% 24.8% 62
Slide 63: 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
Slide 64: Reported to Core Figures Reconciliation
REPORTED TO CORE FIGURES RECONCILIATION* Core FY 2017(1) (Guidance) Gross Billings(2) 2,100 (2) Adjusted EBITDA margin 12% FCF before Dividends Paid 220 Q2 2017 Core Non-core Reported Gross Billings 509.3 11.0 520.3 Adjusted EBITDA margin 12.1% 8.0% Adjusted EBITDA(3) 61.8 -20.1 41.7 FCF before Divi