Loyalty Ventures Inc.

Thank you, operator. Copies of the slides we will be reviewing and the earnings release can be found on the Investor Relations section of our website.

Hosting today's call are Charles Horn, President and Chief Executive Officer of Loyalty Ventures; and Jeff Chesnut, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements.

These statements are subject to the risks and uncertainties described in the company's earnings release and other filings with the SEC. Loyalty Ventures has no obligation to update the information presented on the call.

Also on today's call, our speakers will reference certain non-GAAP financial measures, which we believe will provide useful information for investors. Reconciliation of those measures to GAAP will be posted on the Investor Relations website at loyaltyventures.com.

With that, I would like to turn the call over to Charles Horn. Charles?

Thank you, Lynn, and thank you all for joining us today to review our first quarter results. Let's start with Page 3.

Our consolidated performance was in line with our internal expectations for what has historically been a seasonally slow period in our business. As anticipated, AIR MILES redemption patterns began to normalize with the pickup in post-pandemic travel, aided by the launch of Phase 1 of our next-generation travel platform at the end of 2021.

BrandLoyalty continued to expand its client base, which has positioned us to execute on the greater number of contracted programs we have scheduled for later in 2022. Additionally, I'm very pleased to welcome both Shawn Stewart and Rick Neuman to the AIR MILES leadership team.

Shawn and Rick are accomplished executives from leading Canadian retailers with deep knowledge of the local landscape in Canada, more on what this means to AIR MILES in a moment. Finally, we remain committed to the capital allocation priorities that we outlined earlier this year, which are designed to deliver stronger marketing ROIs and top-line growth for our sponsors and partners and, in turn, drive growth in both AIR MILES and BrandLoyalty.

Slide 4 highlights the key financial metrics for the first quarter. Total revenue for the quarter was $155 million and adjusted EBITDA was $25 million.

Consistent with our internal forecast, both AIR MILES and BrandLoyalty posted lower year-over-year comparisons. At AIR MILES, revenue decreased due to a decline in miles issued over the prior two years as well as from the increase in the collector value proposition implemented in late 2021.

And adjusted EBITDA declined due to lower revenue, but also from key additions to the business development and technology teams. BrandLoyalty's revenue and adjusted EBITDA were each down compared to the year ago quarter due to the timing of programs in the market, or said another way, our larger programs are scheduled for later in 2022.

For the quarter, we reported net income per share of $0.04, which included our first full quarter of interest expense. Slide 5 provides more detail on the experience and capabilities that Shawn and Rick are bringing to our team at AIR MILES.

Shawn is rejoining AIR MILES from Canadian Tire, which is a $16 billion revenue multi-brand retailer with over 1,700 stores nationwide. Shawn led its in-house loyalty program, Triangle Rewards, which use first-party data to develop deeper insights into shopper behavior, stronger consumer engagement and personalization at scale.

Since our founding in 1992, AIR MILES has pioneered the strategy of leveraging the power of first-party data to deepen the relationship between the retailers and consumers. Shawn's focus on analytics and personalization will be the perfect complement to our data assets and partner relationships.

In addition to Shawn's industry knowledge and technical capabilities, his authentic and collaborative leadership style and ability to be a change agent will be further AIR MILES transformation. Rick comes to us most recently from Flipp and before that, Walmart Canada, and he served as Chief Technology Officer at both.

As AIR MILES CTO, Rick has a critical leadership role in developing, implementing and managing our technology strategy and roadmap. His experience with companies undergoing digital transformation will help AIR MILES move forward quickly and efficiently.

Rick is insightful and decisive, and we're delighted to have him as part of our team. Both Rick and Shawn share a commitment to the strategy we've outlined, which is built on near-term investments to drive long-term growth through innovation for our sponsors and personalization for our collectors.

Their expertise will help us accelerate our initiatives by delivering quick wins while guiding the longer-term investments that will differentiate us in the market. Slide 6 provides an update on several key developments at AIR MILES since the start of the year.

First, we're pleased to announce that we renewed our partnership with American Express, a longtime member of the program for more than 25 years. American Express is a top five sponsor for AIR MILES, and we are excited about partnering with their team to develop new ways to spur cardholder acquisition growth.

This quarter, we also added retailers like H&R Block to airmilesshops.ca, our e-commerce shopping portal, where collectors can earn AIR MILES reward miles for shopping online. Looking ahead, we are devoting significant organizational energy into our business development efforts.

Beyond Shawn and Rick, we have recently added talent with strong industry relationships and deep knowledge of key verticals. Our new team members and the competitive investments we are making bringing renewed momentum behind our partnership discussions.

Further, Shawn's addition is a clear signal to the Canadian market that AIR MILES is thinking differently and creatively about how we work with our partners to help improve their marketing ROIs and accelerate the growth. Recently, AIR MILES celebrated its 30th anniversary.

Since its founding in 1992, AIR MILES has issued over 100 billion miles and provided about 1,200 flight rewards per day for 30 years. Along the way, AIR MILES has become a fabric of the Canadian culture.

As part of our ongoing celebration, we are doing more of what we've always done: rewarding Canadians for shopping with our sponsors through promotions, including free miles, epic trips and merchandise from top brands. Moving to Slide 7.

Let's discuss the collector activity for the first quarter. As we discussed last quarter, we made a strategic decision to invest $20 million to $25 million towards improving the collector value proposition as a bridge to engage consumers until the CapEx investments come online next year.

We communicated that investment to existing and prospective collectors through national campaigns on both traditional and digital channels. A portion of that messaging is being delivered through our partnership with Canada's Got Talent.

As CGT's official travel partner, we are using that national platform to emphasize the travel opportunities available to collectors through our program. Importantly, this channel will help us reach collectors and potential collectors of all ages and demographics.

The CGT tie-in is aligned well with our collectors renewed interest in redeeming for travel awards. As Canada and other key destinations have reopened, we have seen a surge in demand for travel-related redemptions.

In the year ago quarter, travel represented a single-digit percentage of total redemptions. This quarter, we've seen travel return traditional levels of about half of all redemptions.

Collectors have been focused on destinations, including Vancouver, Las Vegas and London internationally. While we are continuing to monitor COVID-related restrictions in different jurisdictions based on current visibility, we expect travel will continue to be a collector preference going forward.

Page 8 highlights the AIR MILES reward miles issuance and redemption trends over the past nine quarters. AIR MILES reward miles issued in the first quarter were consistent with the year ago quarter after adjusting for non-renewals, and redemptions were flat with Q4 of 2021 and slightly higher than the first quarter of 2020, which was impacted by the start of the pandemic.

The burn rate appears elevated partly due to lower issuance levels in Q1, driven by non-renewals I just mentioned. We expect the burn rate to revert to a normalized level as the pent-up demand for travel subsides and as we add new partners and earnings opportunities for our collectors.

This period of elevated redemptions is the natural offset to the last few quarters when we saw historically low redemptions due to pandemic-related limitations on travel. Our redemption settlement assets account has a balance of $700 million at quarter end, funded by cash, we routinely set aside for redemptions.

We are confident that the redemption settlement assets will cover periods of elevated redemptions without an impact to our liquidity position or operating cash flow. Turning to Slide 9.

Let's review the key developments for BrandLoyalty in the first quarter. BrandLoyalty continues to compete and innovate.

Most recently, we launched a pilot program to make personalized offers for consumers when they were logged into our grocery partners' app environments. A regular anonymized visit would represent – will present the grocer's normal content.

But under this pilot program, a logged-in visit will highlight to the consumer a curated list of offers that will help as shopper accelerate through reward opportunity with that retailer during the campaign. This approach was designed to be GDPR-compliant, and we're looking forward to a successful pilot that helps us learn, refine and optimize the program for all of our retail partners.

I'm also pleased to share that BrandLoyalty continued to invest in this toolkit for running campaigns with virtual rather than physical rewards. These campaigns are independent of the physical supply chain as well as environmentally friendly, and we're planning to be in market with a Disney-anchored program later this year.

The conflict between Russia and Ukraine resulted in our decision to pause operations in Russia after existing campaigns concluded. We're not soliciting new business in Russia, and we have stopped shipping reward merchandise into the country.

We estimate that this will result in a $16 million reduction in BrandLoyalty's projected revenue for 2022. Our approach on conducting business in Russia is shared by our key partners and suppliers, and we collectively hope that there's a peaceful resolution in the near future.

Slide 10 illustrates the broad geographic area that BrandLoyalty serves as well as the selection of the campaigns currently underway. Geographically, EMEA continues to be – represents the largest market for BrandLoyalty followed by the Asia Pacific region.

Our team is working to expand our footprint in the Americas as we believe this area represents an important growth opportunity for the company over time. In terms of active campaigns in the first quarter, a selection is highlighted here.

At Albert Heijn, a top grocer in the Netherlands, BrandLoyalty run a program featuring Boretti knives, for foreign prints featured a campaign with Sabatier Knives. In Germany, we leveraged our Disney relationship to run a program in branded camping gear at REWE.

In the Asia Pacific region, we partnered with Izumi and run a program featuring the Zwilling Kitchenware rewards. BrandLoyalty's combination of global grocer relationships and exclusive supplier partnerships results in compelling rewards and sustainable growth for its clients.

On Slide 11, we provide a progress update on the investment road map we introduced last quarter that is designed to drive accelerated growth in 2023 and beyond. In particular, we are focused on engaging our collectors through the enhancements we made to the collector value proposition as well as to the upgrades we've made to our travel redemption program.

Given the hot consumer interest and travel opportunities, we believe this initiative is well timed to capitalize on the market's expectations. Our digital innovation efforts are focused on both how and why our collectors interact with us.

AIR MILES core platform is how consumers interact with us and this represents the look and feel, features, functionality and the securities of the website app and Mobile World experienced. Once collectors are logged in, we start to address the reasons why they're looking through our content optimization initiatives.

They're typically looking for relevant experiences, self-service objectives and personalized offers. These upgrades represent a welcome leap forward and capabilities to serve our collectors better.

Finally, our investments in data and analytics will help our sponsors identify their best customers and their highest-performing promotions, meaning they can drive stronger ROIs from their marketing dollars. And with our new approach on data access, our partners can leverage the data directly and rely upon our enhanced delivery capabilities across a variety of communication channels.

Collectively, we believe these investments will strengthen our standing as a leading coalition loyalty platform in Canada and position AIR MILES for a strong and vibrant future. While the investment focus in 2022 will be concentrated on AIR MILES, we will remain vigilant for opportunistic acquisitions that would help BrandLoyalty add clients, suppliers and capabilities to spur sustainable growth.

As we move to Slide 12, we provide more specifics on the enhancements we made to our travel program and what is on the drawing board. Over the past year, we've already made a number of meaningful changes to the AIR MILES spot redemption process.

We expanded the number of airline partners and cabin classes available for booking. We retired the prior zone-based pricing model in favor of dynamic, market-based approach that reflects sales and promotions on a timely basis.

And we added payment options that stretched beyond miles-only redemptions. Those changes are just the beginning.

We're having new features, functionality, self-collectors find their next trip rather than just book their next trip. With our unique perspective on consumer behaviors, both observed and deferred, we can offer personalized recommendations and experience tailored on an individual basis.

And with those recommendations, we're working to become a one-stop shop for flight, hotel, transportation and destination reservations. These self-service options and the intent experience will draw prospective travelers to our program and to our site and represent an opportunity for travel providers to reach that audience in the very moment they're evaluating destinations and travel options, and as we invite and incent our collectors to share their post-trip travel stories that will inspire other collectors as they research and book their own upcoming travel plans.

On Slide 13, let's explore how our digital innovations are elevating the collector experience for the AIR MILES reward program. Our new CTO, Rick Neuman, is working with both internal and external teams to reassess our core mobile platform, which represents how collectors interact with AIR MILES on their phones, either through the app or the mobile device.

Rick and his team are focused on removing friction from common task of creating existing capabilities and adding next-generation features and security. More specifically, this includes improving our mobile enrollment process, adding a more comprehensive collector dashboard and building out more self-service capabilities for tasks like profile changes and missing AIR MILES reward miles inquiries.

These represent two of the top reasons collectors call our care center. So offering the ability to handle these tasks directly will not only improve collector satisfaction but also reduce the call volumes at our care centers.

And finally, these upgrades will also unlock the ability to deliver more personalized offers to collectors directly through the app, driving return usage, repeat visits and stronger engagements with the program. This content optimization represents the key reasons why our collectors interact with us.

And our research indicates that active mobile app users are nearly 3x more likely to earn AIR MILES reward miles as non-mobile app users. Moving to Slide 14.

Let's discuss the areas of investment in our data analytics capabilities. As we noted last quarter, AIR MILES has always used first-party data in assessing consumers' behavior to deliver personalized offers on behalf of our partners and sponsors.

The investments we are making now will enable our sponsors to leverage this data in their own marketing platforms as well. The AIR MILES data lake house is all the collector genome.

And historically, we've analyzed each genomes for patterns and insights to power marketing campaigns for our partners. Recently though, we have added secure front door to the data lake, by leveraging a leading data share platform called Snowflake.

No matter what marketing platform or CRM our clients are using, Snowflake represents a common interface that enables them to securely access collector data without creating complicated, expensive or custom access channels. However, there are some sponsors that may not want to actively import collector data into their own systems, but they're interested in reviewing the core data directly.

With Snowflake and other data visualization tools, our AIR MILES data analytics team can offer them a way to review the data without actually pulling it over. This makes it easier for analytics team to work directly with our sponsors when reviewing the insights from our data safety and analytics work.

And once we're aligned on the opportunities we have collectively mined from the data, we are ready to put those insights to work through personalized communications with our collectors. On Slide 15, you can see all this work comes together.

It starts with gathering profile and demographic information from collectors then adding the skew level or category level data that we received from both online and in-store shopping activity, embedded within those shopping patterns are marketing signals about the consumers' lifestyle and life stage. Our data scientists look for those signals and translate them into personalized messages, so our sponsors can make targeted, highly relevant offers to those shoppers in the moment.

We will deliver automated communications through Adobe's real-time customer data platform or CDP, which integrates within our data warehouse and enables AIR MILES to reach collectors with the right message at the right time. And because we are leveraging AI and machine learning in concert with Adobe CDP, we can deploy and refine those messages in real time and at a scale across millions of collectors.

These personalized, highly relevant offers give collectors more opportunities to be rewarded and provide partners with more ways to help their shoppers experience the brand in a way that fit their lifestyle. As you can see, we're fully committed to elevating the collector experience within the coalition and building our capabilities to support real-time personalization at scale for sponsors.

We believe this is the way to drive sustainable growth going forward. I will now turn it over to CFO, Jeff Chesnut, for the financial review.

Thanks, Charles. Slide 16 presents our results for the first quarter of 2022 compared to the corresponding period of 2021.

Revenue in the quarter was down 12% due to a 6% decrease at AIR MILES and a 16% decrease at BrandLoyalty. Net income and diluted EPS were both down quarter-over-quarter as a result of the margin loss from revenue declines, investment in our employee base and a full quarter of interest expense.

I'll provide more details on our results on the next slide. Slide 17 presents our segment level results for the first quarter of 2022.

In the first quarter, revenue for both AIR MILES and BrandLoyalty declined from the year ago period. AIR MILES revenue declined approximately $5 million, with about half driven by a decline in service revenue, representing the flow-through impact of lower miles issuance in 2020 and 2021.

The balance of the decline was associated with higher cost of redemptions, which are netted out from gross revenues to arrive at our revenue presentation. The margins on redemptions contracted in connection with the enhancements we made last quarter to the collector value proposition.

BrandLoyalty's revenue declined by $17 million due to the timing of larger campaigns, which can vary significantly year-over-year. AIR MILES adjusted EBITDA declined 19% or $7 million as compared to the first quarter of 2021 due to the revenue impact, combined with the addition of key hires to help advance our business development and technical capabilities.

These costs were partially offset by savings in occupancy and marketing costs, and we will remain cost-conscious as we invest thoughtfully in the right areas to drive growth. BrandLoyalty's adjusted EBITDA in the first quarter declined from the year ago period due primarily to the decrease in revenue.

We continue to project that BrandLoyalty's top-line performance will strengthen across the year and provide more scale to offset the fixed cost base at the business. Slide 18 provides our financial outlook for the year, which we originally presented last quarter.

Based on our current visibility and due to developments in Russia, we expect full year 2022 revenue to be at the lower end of our $775 million to $800 million guidance range. This incorporates the increased investment we have outlined for 2022 to drive accelerated growth in 2023 and beyond.

Similar to last year, we expect AIR MILES quarterly revenue and adjusted EBITDA to be fairly consistent across 2022, subject to foreign exchange developments. Our outlook for BrandLoyalty sees a sequential pickup in the second quarter as we progress towards the fourth quarter, which is seasonally our strongest based on the number of campaigns planned and the associated rewards mix.

For BrandLoyalty's U.S. dollar forecast, we're closely monitoring the impact of the current geopolitical circumstances on the euro to USD FX rate.

We have the ability to flex our marketing and capital investment dollars up or down as needed to align with market conditions and our outlook. At this time, given our cautious optimism on a continued recovery, we're maintaining our investment plan across the coming quarters.

In fiscal year 2022, we expect the tax rates for the two segments to range from about 25% to about 28%. After considering the currently non-deductible U.S.

expenses, we expect cash taxes for 2022 to range from $30 million to $37 million. We're focused on reducing the consolidated tax rate and initiatives that are underway to leverage or redistribute the currently nondeductible U.S.

expenses. As we undertake the investments discussed today, we're mindful of our liquidity and our capital structure.

Slide 19 highlights that our liquidity is strong at over $270 million at quarter end, exclusive of the redemption settlement assets. We ended the first quarter with no borrowings on our revolver, and we reduced our gross debt by $13 million, consistent with our focus on deleveraging.

On a net debt basis, we finished the quarter at about $520 million. Besides debt reduction, we prioritized investing in the business through our strategic capital projects.

Our CapEx spending reflects the initial stage of our strategic investments, which has been focused on the planning phase. As we transition to subsequent stages, including development and deployment, we anticipate that our CapEx spend will increase in line with our prior guidance.

Overall, we have ample liquidity to support the strategic objectives we've outlined with capacity to react quickly on inorganic opportunities as appropriate. As we move to the last page, we're confident that the strategic priorities we outlined today will enable us to strengthen the leadership positions of both AIR MILES and BrandLoyalty, by building upon our relationships with existing clients, attracting new sponsors and clients and driving enhanced collector and consumer engagement with our loyalty programs.

Ultimately, these initiatives will transform AIR MILES and BrandLoyalty and will help us continue to drive sustained profitable growth for our clients and for Loyalty Ventures. Operator, we're now ready to open the lines for questions.

Thank you so much. Wanted to ask about – you talked about revenue being at the low end of the guidance range, but adjusted EBITDA guidance was reiterated.

Are you expecting that you can sort of flex the investment down to stay more towards the middle of that range? Or do you just have reduced cushion here?

Or is there something offsetting it that maybe I'm not appreciating?

Hi, Toni. It's Jeff.

Yes. So we reiterated the guidance range that we put out towards the lower end, of course, because of the impact, in particular, of the Russian developments from an EBITDA standpoint similar expectation there.

But as we mentioned on the call, we have the opportunity to flex those investment dollars as we move through the year.

Okay. Got it.

And for BrandLoyalty, you talked about the sequential increase into 2Q and continuing through the year, just given 4Q is going to be the strongest. And one, I guess, is that because of the number of programs that are being launched then.

And also, I guess, previously, you had expected double-digit growth for brand loyalty for the year. Do you have an update on that as well?

From a brand loyalty standpoint, you're right, we are expecting to see a leg up in the second quarter as we come off what's typically our – one of our smallest quarters in Q1 and then the mix of programs – we had a little different shift or a different mix of programs this year relative to last year, where last year, we started off with some of the larger programs. So this year, those are going to be scheduled for later in the year.

And then to your point, Q4, we do have larger programs and more programs scheduled for Q4, in particular, because that's the holiday season.

Got it. And last one from me.

Could you just give us an update on supply chain and how much of an impact that's having on BrandLoyalty?

Yes, that continues to be an issue for us. You see what's going on in the South China ports.

And you see Shanghai has gone into lockdown, you're not seeing Beijing. So one of the things you'll see in our cash flow is we did order inventory early to make sure we get it in for running the programs later in the year.

So it put a little squeeze in our working capital earlier this year, but it basically was prudent on our part to go and start shipping the inventory, get ahead of it, even though we're turning a little bit more inventory than we'd like right now. We needed to get ahead of the fourth quarter.

So it's still there, but we anticipated and we just got ahead of it.

All right, thank you.

Hi. Good afternoon guys.

Thanks for taking the question. Just wanted to touch a little bit kind of on your thoughts on kind of the normalization, especially like with the burn rate in AIR MILES, I appreciate the pent-up demand and some noise with consumer spending on the issuance side.

Do you guys have any visibility on how long the normalization process should take or would normally take it in a period like this? Is it one or two quarters?

Is it the rest of the year? Like I guess, how should we handicap when the – especially on the AIR MILES side starts to look a little more normal post-COVID?

Yes. Hi, Kyle.

It's Jeff. So if you think back to 2020, we saw a burn rate at that point of around 63%, moving to 75% last year.

So this elevated burn rate, our expectation is we'll see that across the balance of this year as we – and then we'll start normalizing into next year.

Okay. That's helpful.

And then I guess just a follow-up. Did you guys see any notable headwinds, particularly in Canada from the Omicron outbreak kind of in 1Q?

I know there were some restrictions, particularly things like sporting event attendance and such kind of during the first quarter in Canada. I just wanted to see if you guys noticed that, in particular if that might have been part of the headwinds on some of the issuance of new miles with AIR MILES?

Kyle, this is Charles. I'd say I really don't think it was much of a headwind for us.

I think you should be more confident against two programs that are no longer with us, and so it makes it look like it's a little bit weaker than what it is, but I'd say nothing from Omicron.

That's fair. And then, I guess, just last housekeeping one for me.

Particularly on the Russia, the headwind, I appreciate you guys calling out the revenue impact from those campaigns. Is it fair to assume that the EBITDA margin on that business is comparable to the rest of BrandLoyalty?

It is, yes. So from a go-forward perspective, we would expect to see that line up with the balance of the business over there.

All right. Thanks guys.

Thanks, Kyle.

Hi, good evening everyone.

Hi, Marc.

Hi, Marc.

So I was wondering if you could start with around some of the things that you're working on and some of the introductions and actually, maybe we'll start on the digital side. So I was wondering if you could talk a little bit about some of the early learnings that you've had with the digital reward campaign.

Are there any things that you've seen so far there that are surprising, positive or negative? And then sort of how that can sort of – what kind of tweaks that you had so far, if any?

Yes, you bet, Marc. As we indicated, we're rolling this out on a pilot program basis.

We want to make sure that we have the technical integration with our clients, and then we want to make sure that the offers that we're putting through there are going to be compelling enough to continue to draw our shoppers and consumers back to the app the way that they would normally be physically in the store. And so, we continue to monitor the activation rates and the usage rates and optimize the offers that we're putting in there to try to drive the maximum amount of engagement that we can.

And I think once – of course, once you have that figured out for one market, you've got to see if it works in other markets, and we'll be focused on that across the next couple of quarters.

Okay. I can imagine that's a moving target here and there, so that's understandable.

I was wondering if you could maybe – you started to touch on this a little bit around BrandLoyalty, but I was wondering if we could talk a bit about the type of visibility that you have with the programs on BrandLoyalty. I understand that you made mention of – obviously, the fourth quarter is the largest.

But I was wondering as far as your communications with customers, maybe the kind of feedback that you're getting from them, has there seasonality changed at all? And maybe what the visibility looks like for you maybe versus prior years, though, maybe prior year it might not be a great comparison given the pandemic, but I just wonder if you could talk a little bit about that and the feedback that you're getting from customers there.

Yes. So the visibility is pretty good.

We have the ability usually from a sales cycle of about six months to know what program is going to run by the quarter with at least a quarter view of six months. Now there's two things that create a little bit of flexibility to it.

Number one, our programs are success-based, meaning if we get 90% success rate versus 70% success rate, that's going to drive a difference in the revenue recognized. The second point is there's some discretion with the clients to push it out of a quarter if the pandemic kicks back in.

They don't see the need for it in a particular quarter, they can defer for a quarter or two. So there is some flexibility on the way these programs work for the clients to defer it out.

So we'd say good visibility into it, but there are some variables that can come into play.

Okay. Got you.

And then – I'm sorry, what was that there? I thought somebody said something.

Okay.

It's not us.

So I want to go back a little bit. I think one of the prior questions asked a little bit around the supply chain and what have you.

I just wonder if you could talk a little bit about the adjustments that you made last year and maybe how those prior adjustments and the prior challenges have maybe either helped or how those might play into what we're seeing going forward given the current shutdowns. Are there any things that you could share there, whether it's particular learnings or some of the benefits that you saw in the past with prior adjustments that might help you now or vice versa?

Yes. So Marc, if you think back to our last call, we highlighted a couple of things.

One was prebooking container capacity early rather than trying to secure it on the spot market. And of course, back then, spot market prices were 6x what the traditional rate had been.

And that was if you could find capacity. So for us, not only booking the containers and booking the routes, gave us more certainty that we could get the rewards to our retailers in time to run the programs.

And then the other initiative that we took to derisk the supply chain last year was standing up more local sourcing. So rather than going predominantly out of Southeast Asia, especially given the zero COVID policy that's in place today, we stood up those incremental local and regional sourcing options.

And again, then you're going over the road instead of over the water for delivery. So you've got more reliability, although the – of course, the conflict in the Ukraine has introduced a new element of variability into that – into the regional sourcing that we established.

Yes. The only point I'd add to that would be learning from last year, we know we need longer lead times coming out of Asia, so China ports and so forth.

That's why you saw more of the inventory about – in the first quarter and what historically you see is we're just trying to get ahead of an expansion that is coming out of the Asian ports.

Right. That makes sense.

I wondered if you could talk a little bit about some of the – given some of the changes in investments that you're making on both sides of the house through the year, so I just wonder if you could talk a little bit about the timing and visibility of those rollouts because it seems as though you've kind of got laid out quite a few things going forward. So does that pretty much take you through the remainder of this year?

Or should we expect sort of new introductions to be announced throughout the year that could still begin to be implemented this year? Or are we now beginning to get into next year as to new products and projects and strategic ideas?

Yes. Marc, Charles highlighted on our last call that as we started off on that process for the investments, we started with the analysis and assessment phase in Q1, and then you would start to see the CapEx ramp across the course of the year as we moved into the development and the deployment phases.

But you're – yes, you're spot on that those campaigns won't all be delivered simultaneously. And in fact, we've got focus on quick wins right now that we want to have in the market over the next, call it, 8 to 10 weeks, to show immediate progress not only to our collectors, but also to our sponsors.

And then the balance of those – some of those more substantial investments will come online towards the end of the year and the beginning of next year.

Okay, great. And then the last thing for me today.

I was wondering if you could talk a little bit about maybe what your views are on spending and budgeting appetite within – and this is more on the BrandLoyalty side, but spending and budgeting appetite of your customers and maybe it's kind of a bigger, broader sort of ad spending growth kind of question. But I was wondering if you've got sort of a general view as to the willingness and appetite of customers to invest more to drive revenue growth on their end.

Yes. What's unique about the brand loyalty program, again, goes back to is primarily success-based.

If we're not delivering top line growth for the retailer, we're not really getting paid and the product is coming back to us. So it really derisk the programs for our clients.

And that's why good times, bad times, if they're trying to drive traffic in store online, we're nice fit for them. If we succeed, we get paid.

And if we don't succeed, we generally don't get paid. So it's really a derisk program for our clients.

Great. Thank you very much.

You bet Marc.

Thanks, Justin. And appreciate all of you taking the time today to listen to us and to go over a quarter.

We think that there is a lot of good things on the horizon for us. As Jeff said, we're looking for small quick wins, show that we're taking it serious that we're evolving this program.

We're taking it to the next level. And that's where we're committed to show our clients, our collectors as well as you as investors is we're taking this program and we're evolving it from more of a cash cow that over time we rose to a top-line growth business, and that's going to take a period of time.

So every quarter, we're going to look to some ways to show how we're making progress. And that's a commitment we're making to you.

So I appreciate your time today.