Aimia Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 11, 2023

There are 6 speakers on the call.

Operator

Morning, ladies and gentlemen, and welcome to the Aimia Inc. 2nd Quarter 2023 Results Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. I would now like to turn the conference over to Mr.

Operator

Albert Matuszek, Head of Investor Relations and Communications. Please go ahead,

Speaker 1

sir. Thank you, Lara, and welcome everyone to this morning's call. Today's presentation is available on SEDAR and on our website. Before we get underway, I would like to remind everyone to please review our forward looking statements and the cautions and risk factors pertaining to the statements. My name is Albert Matousek, the Head of IR and Communications.

Speaker 1

With me on the call are speakers Phil Mittelman, Aimia's CEO Michael Lehmann, our President and Steve Leonard, our CFO. Bill will begin with our strategic highlights, followed by Michael, who will cover the performance of our investments And I'll hand over the call over to Steve to take you through the results of the quarter. We will have time for your questions at the end. With that, let me hand it over to Phil.

Speaker 2

Thanks, Albert, and good morning to everyone on the phone webcast today. This quarter marks a significant milestone for Aimia as we continue to Our stated investment strategy, we are now the majority owner of 2 operating companies that we expect will provide revenue growth and strong cash flow generation for Aimia shareholders for years to come. After achieving a fully valued exit of PLM in late 2022 with the potential for up to an additional $27,500,000 as an earn out, We have successfully redeployed more than $450,000,000 of capital in 2023. We are excited about our plans to drive further growth for both the Zetta and Tuff Ropes, guiding these businesses to become global leaders in their respective markets. Our management teams are recognizing new opportunities to develop partnerships, Both new and existing that will expand our breadth of products, our wallet share with clients and enter into new markets and geographies.

Speaker 2

As an example, Tuff Rope's recent acquisition of U. S.-based Cortland Industrial significantly enhances Tuff Rope's presence in the high performance synthetic fibers and customized solutions to ropes, slings and tether segments. Let me quickly recap the Bozzetto and Tuffrope businesses. On May 9, Aimia acquired Bizzetto. Founded in 1919 and headquartered in Filago, Italy, AZETO is one of the world's largest ESG focused providers of specialty sustainable chemicals, offering sustainable textile, water and dispersion chemical solutions with applications in several end markets, including the textile, home and personal care, plasterboard and agrochemical markets.

Speaker 2

Under Aimia's ownership, Vazero will seek to substantially expand into the Americas and other geographies organically and through accretive acquisitions, Further diversifying the Zetto's historically European presence. Over the last 5 years, the Zetto has grown revenues organically and through tuck in acquisitions And has more than doubled its EBITDA. The management team responsible for this success has remained with the business and have invested a substantial amount of their personal capital. Aimia invested $206,300,000 for an equity stake of 94% in Pizzetto, investing alongside the management team who purchased Concurrent with the closing, we secured debt financing of 139,500,000 with a weighted average coupon of 8.1%. As part of its growth strategy, Pizetto is currently in late stage negotiations with an Americas based target.

Speaker 2

This and significant add on business synergies. Moreover, it presents promising sales opportunities in the U. S, Mexico and Central America that have otherwise been unavailable. Since we closed the Tephyrhope's acquisition at the end of the Q1 of 2023, The leadership team has been busy working on various commercial and strategic initiatives that we expect will provide significant revenue and EBITDA growth. As part of its strategic plan, Tuff Ropes acquired Cortland on July 11 for $26,600,000 This transaction accelerates Tuff Ropes access to high performance, Heavy industrial and maritime markets that Tuff Ropes has sought to enter.

Speaker 2

Cortland brings valuable design and engineering expertise as well as synergistic opportunities in sales and operations, creating a stronger competitive position for Tuff Ropes in the U. S. And European markets. Cortland provides a highly recognizable brand in the industry. As such, the combined Cortland and Tuff Rose businesses will be rebranded as Cortland.

Speaker 2

Turning to our other investments. Capital A reported strong growth in its Aviation segments in the Q2 of 2023 The company's valuation is beginning to reflect these results with its stock price having recently achieved a new 52 week high. Once the business submits its We closed the sale of a non core business on August 2, 2023, generating $9,400,000 in net cash proceeds with a potential earn out. In addition to the sale, Cognitive has also commenced an equity raise, which we will discuss in more detail next quarter. Aimia will not be participating in this raise.

Speaker 2

The company's expectation of achieving EBITDA profitability in Q4 2023 remains on track. Clear Media, while recovering, continues to face macroeconomic headwinds in China. During the course of the COVID lockdown and up to this point, As TradeX focuses on achieving profitability, Aimia recorded a $25,000,000 unrealized fair value loss on its investments in TradeX. We remain optimistic on the long term opportunities for this business to succeed as it continues to develop its global cross border trading. I would also like to highlight some recent changes to our Board of Directors.

Speaker 2

On July 10, Tom Little joined as a new Independent Director, adding valuable expertise. In addition, Karen Bazian became our Interim Chair of the Board, succeeding David Rosenkrant, who leads after 3 years of distinguished service.

Speaker 3

Thanks, Bill, and good morning to everyone. I'm now going to walk you through the operating performance of each of our businesses. First, let's start with Brizetto. For the sub period from May 9th to June 30th, Brizetto reported revenues of 45,900,000 And an adjusted EBITDA of $8,500,000 generating an adjusted EBITDA margin of 18.5%. At Aimia owned Pizzetto for the entire quarter, revenue would have been $74,300,000 and adjusted EBITDA would have been $12,900,000 generating an adjusted EBITDA margin of 17.4%.

Speaker 3

Zueto achieved these results despite experiencing some macro economic headwinds that are leading to reduced demand, particularly in Europe and parts of Asia, there is also a degree of customer inventory destocking, which is typical during uncertain periods. This was particularly evident within the Textile segment. Despite these near term issues, Pizetto remains steadfast in its commitment to maintaining a premium position in the market without compromising margins. Roseto has navigated the challenging market conditions by strategically leveraging its raw material sourcing as well as its product and segment mix. By carefully adjusting its offerings, Bazzetta aims to achieve a balanced approach that ensures profitability, while continuing to meet the evolving demands of its customers.

Speaker 3

This proactive approach allows Pizzeto to remain resilient during lean times and positions itself for growth once the market conditions improve. Now let me turn to Tuff Ropes. In the Q2, Tuff Ropes had revenue of $28,900,000 on 9,500 metric tons of Ropes and Net Shipped. This compares to 8,200 metric tons shipped in the Q1 of 2023, which resulted in $25,000,000 in revenues. For the Q2, adjusted EBITDA was $4,600,000 representing an adjusted EBITDA margin of 15.9%.

Speaker 3

The margin was slightly lower than we would typically expect due to near term pricing adjustments and to ongoing implementation of operating and growth initiatives across the business. At Tuffrope's been owned from January 1st, It would have contributed revenue of $53,900,000 and adjusted EBITDA of $9,600,000 on a pro form a basis, representing a 17.8 percent adjusted EBITDA margin. Tough ropes revenue and gross margins can be sensitive to changes in polymer pricing. The gross margins tend to revert to historical averages over the long term. Tuff Ropes expects to grow volume of its Product shift sequentially for the remainder of 2023.

Speaker 3

As previously noted, pricing can be influenced by raw materials, But we're confident in achieving adjusted EBITDA margin of 18% over the balance of the year and reaching 20% EBITDA margin within the next Moving on to Clear Media. Clear Media reported revenue of RMB209 1,000,000 for the 2nd quarter, A substantial improvement over RMB122 million reported in the prior year quarter and RMB132 million In the Q1, while growth remains positive, the pace of reaching pre level COVID revenues has been hampered due to the slow economic recovery in China. Clear BD continues to take steps to improve its operating performance, including reducing the number of underperforming outdoor panels within top tier 3 cities. Clear Media expects further revenue improvement in the second half of twenty twenty three as consumer demand strengthens and economic concerns abate. As business levels normalize, so too will the resumption of the digital panel expansion.

Speaker 3

Moving on to TradeX. In the Q2, Tradex generated gross vehicle sales of $193,300,000 a decrease of $29,000,000 or 13% from the same period last year. This decline was primarily due to refocusing on its enhanced asset light higher margin model with a focus on driving towards profitability. TradeX continues to demonstrate improved progress as it refines its auto trading model, Prioritizing profit over volume. Consequently, Aimia recorded an unrealized fair value loss of $22,600,000 on its convertible preferreds and a $2,300,000 unrealized fair value loss on the warrants held in TradeX.

Speaker 3

Moving on to Cognitive. In the 2nd quarter, revenues from continuing operations was $11,700,000 down $200,000 from the prior year. Adjusted EBITDA from continuing operations was a loss of $5,000,000 an improvement of $4,600,000 from the loss of $9,600,000 in the prior year. Cognitive is commercializing its new AI powered product, Cognitive Pulse, which enables global brands to design, build and manage loyalty. This product is generating significant interest from existing clients as well as new commercial opportunities, which could result in revenue growth as early as Q4.

Speaker 3

Next up is Capital A. Capital A, formerly AirAsia, reported strong growth in all segments in the 2nd quarter. Aviation achieved an 88% load factor, carrying 14,200,000 passengers, almost double the amount versus the previous year and is rapidly recovering to pre pandemic levels. And with that, let me turn it over to Steve to take you through the financial results. Steve?

Speaker 4

Thanks, Mike. Before I begin discussing our financial results, I'd like to highlight that we have made changes to the income statement and segmented result Presentation in our financial statements and MD and A due to the recent acquisition of Bazzetta and Tuff Ropes. We think you'll find the information helpful in understanding the performance of these two businesses, as well as following the investment results and operating costs associated with our Holdings segment. As Mike spoke to the operating performance of Bizetto and Tuff Ropes and some of the underlying performance of the investments, I will focus more on the overall cash position as well as the operating expenses at the Holdco. Starting next I'll provide more commentary on the consolidated results.

Speaker 4

We ended the 2nd quarter with $63,900,000 of cash and $53,000,000 in liquid securities. As a reminder, subsequent to the end of the quarter, we deployed $26,600,000 of that cash to acquire Cortland. We also sold a remaining position in Cineplex for $3,000,000 Taking these items into account, the pro form a cash and liquidity position is $93,400,000 We continue to work towards obtaining financing at the Tuff Ropes Courtland combined Business subsidiary level. Efforts have been delayed due to shareholder activism. Now let me turn to the operating costs of the Holdings segment.

Speaker 4

Corporate operating costs were $7,200,000 in

Speaker 2

the quarter, up $3,300,000

Speaker 4

The variance is mainly due to Expenses of $2,900,000 incurred in relation to shareholder activism and legal costs associated with the termination of employment of a former executive from 1 of the Corporation's subsidiaries. In addition, holding costs included 700,000 of Midland Investment Management related expenses as this business is being wound down. This compares to around $700,000 in the same period last year for this business. And with that, let me turn it back over to Phil to wrap it up with a few concluding

Speaker 2

Thanks, Steve. For the first half of twenty twenty three, we continued to execute our strategy After carefully evaluating numerous potential targets worldwide, we acquired Tupperwabs and Bazzetta. Both companies align with our strategic vision, Boasting strong financial track records, significant competitive advantages, strong growth prospects and proven management teams. As we move forward, our focus remains on maximizing the value of our current holdings, while exploring opportunities for organic growth, accretive acquisitions and further utilization of our tax losses. There is momentum across our entire portfolio and we look forward to keeping you updated on our progress for the remainder of 2023.

Speaker 2

We are proud to announce that we are holding our 1st Investor Day on September 27 in Toronto. We will be providing an update on the company's strategy and businesses, including presentations and Q and A with the leadership teams from Vazeto, Tuff Ropes, Cognitive and TradeX. We look forward to seeing you there.

Speaker 1

Operator, that concludes today's prepared remarks. Please go ahead and prompt for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from the line of Surinder Thind from Jefferies. Please go ahead.

Speaker 5

Thank you. I'd like to start with a question with Bizzitto. Can you talk a little bit about the acquisition strategy here and if ultimately that kind of gets you to your target footprint or what's the big picture here?

Speaker 2

I think, Bizetto has been very well managed and they've been great at finding and integrating Accretive acquisitions that are not only standalone good acquisitions, but they've allowed them to expand into other areas. And one of the biggest, I wouldn't say problems, but exciting opportunities has been that they can't Deliver product to the Americas just because of the logistics. They can't manufacture the chemicals they need and where they are and ship them in time For that to be practical. So the first acquisition that they've targeted is not only an accretive acquisition and it makes a lot of sense on a standalone basis, But it provides them with a footprint to expand into the Americas, which can dramatically enhance the sales opportunities. So When we looked at Pizzaro, we didn't count on that as part of our thesis, but it's something that has they have a list of those type of opportunities that they've had internally that they've been working on.

Speaker 2

And we think that we have the opportunity to grow the business further by expanding into other geographies and allowing other customers to have access to their innovative Solutions and obviously high margin products.

Speaker 5

Thank you. And then in terms of just the margin profile for Bozzetto, How much volatility should we generally expect just based on volatility, let's say, in raw material

Speaker 2

I mean the management, the Pizzetto, one other skill set that they have is managing raw materials prices and passing them along really well. You've obviously just saw a very high margin for this passing quarter. We enjoy that. But we would expect margins to normalize where they've been in the past, which is the 15.5% range. So while we'd like to see them maintain this and maybe they do, it's not something that I would count on.

Speaker 2

I think Historically, we would see kind of the return to that 15% kind of area.

Speaker 3

If I could chime in just for a second, Surinder, It's Mike Lehman. Thanks for the question. As Phil said, the resiliency is a hallmark at the Zetto and They have there are several elements that contribute to that. The ability to reengineer and optimize their formulations to Cope with raw material shortages and or price spikes, that's something that they've been exceptional at. It was actually something that was going on during the time that we were conducting our due diligence, very high raw materials pricing, energy Cost spiking due to the war in Europe, fears of recession leading to customers being a little bit more conservative, All of these things, they are able to balance extraordinarily well.

Speaker 3

One of the aspects, that enables to do them This is the flexible industrial footprint. They've got plants in different geographies that allow them to reallocate Production based on things like energy, demand, raw materials, etcetera, that help them allow to allow them to balance out The operating costs and to fully optimize margins.

Speaker 2

And just to add to that, Sundar, just to underscore how well this company is managed. The results you just saw were a result of a period where there was very high uncertainty in the market where customers were destocking. There was a lot of recession fears that I think are starting to abate now and people are getting more bullish and I think the second half of the year Something that both of our companies are optimistic about. But in spite of all that, you saw them generate a significant amount of cash, Very high margin and maintained, very well run company and we're very happy with it.

Speaker 5

Thank you. And then two related questions, on one more on Bazzetta. Just In terms of pricing, pricing power, how should we think about where the economic cycle is and just in light of the earlier comments that you

Speaker 2

made? Bizetto is, I think, on a weekly basis in touch with our customers, and they've managed to pass on And adjust cost based on raw materials pricing almost in real time. So they managed really well and we expect them to

Speaker 5

Got it. And then for Tuff Ropes, you mentioned near term pricing adjustments. Any color there?

Speaker 2

Yes. I mean, Steve will give you a little more detail, but it's just about the Tying to the polymer prices and its customers expect when they see a change in polymer prices, which is a result of oil moving, They kind of expect they expect that either passed on or expect to pay higher prices based on those moves. And again, that's pretty dynamic as well.

Speaker 4

Yes, they kind of hold their margin on the material side, but sometimes you in a quarter, you may get A temporary misalignment, but over the longer term, over in the course of the year, things kind of balance out.

Speaker 5

Okay. That was actually the clarification I was looking for was the lead leg in terms of the pricing. So And then just 2 other really quick questions. In Clear Media, you talked about panels underperforming. And I apologize if I missed this.

Speaker 5

Are we talking about traditional panels? Are we talking about digital panels here? It just seems obviously that the recovery in China has been a bit Lower than anticipated, and that we can see that in kind of the economic numbers that have recently come out.

Speaker 2

Yes. I think we don't mean to say that Clear Media is underperforming. I think what What you mean to say is that just the slower recovery economy has caused a slower recovery in just In general, in the business, but they have not digitized many panels yet because they've kind of been waiting for the Inflection points really start aggressively converting them. It doesn't make a lot of sense to convert panels if no one's paying for them. So it's been all the just kind of the analog panels and just the recovery in that has been tied to the economy and it's gone a little more slowly than it's been It's been a start.

Speaker 2

A couple of months ago, it was kind of a rapid recovery and then things are going to slow down again. So it's kind of in a I would just say as soon as China starts to take off again, you'll see them go from kind of defensive Cost cutting and chugging along to an aggressive digitization of the panels and monetization that way.

Speaker 3

We've actually been really encouraged to see Clear Media Management. They continue to reduce expenses and focus on Operating efficiency of their business and business returns, because not all outdoor panel economics are equal, right? So Each of the agreements kind of stands on its own. Rents are paid for specific panels and advertising dollars are paid On those panels and you net out the expense allocation in each. So during the quarter, they allowed 3,000 panels to lap, Essentially not renewing them as the contracts came due and that was because the economics didn't fit.

Speaker 3

That's a very, very healthy Thanks for the company to be focusing on and we're glad that they're doing

Speaker 5

it. Excellent. And then the final question here just on TradeX. Obviously, it seems like they're at their target operating model. How much seasonality should we expect?

Speaker 5

Obviously, when we think of the various global markets, There's a seasonal component, especially here in the U. S. But when we think about TradeX and where it's focused, How should we think about just the seasonality component of things?

Speaker 2

Yes. I wouldn't we're not really Seeing a lot of seasonality, what we're seeing at TradeX is, I think if you had to summarize, you would say They aggressively expanded and spent much more capital than they should have on kind of focusing on Sales growth versus profitability and they try to expand into a lot of different quarters. And the result of that was figuring out The model they should be focused on. They figured out what are the highest margin corridors, what are the ones that people we see the most continuous Demand and they're focused on that now. So what they've done instead rather than focus on 20 quarters, let's focus on these 3.

Speaker 2

And so what you're seeing is the shift to that and they're in the process now of developing key partnerships and the kind of things that you need to really push forward in those factors. And because of The margin profile of those areas and because of the, obviously the new asset light model, which is only selling pre So there are only going to be selling cars that are already sold in those markets. So that's really what you're seeing here and that's why we The right now just because it's a wait and see until we see that actual execution take place, which we expect it to and we're excited about. We're just taking a conservative approach until we see that. In the meantime, I think you could expect to see in success Some exciting trade quarters that people are not really transacting in around the world that are very high margin And there's a lot of demand for vehicles and certain types of vehicles in these areas that TradeX is trying to facilitate and hopefully will.

Speaker 5

Got it. And just a clarification there. So when I think about the there's a meaningful improvement in terms of the gross vehicle Sales from quarter over quarter from Q2 to Q1. So is that is the indicator if I interpret your comments correctly that This is primarily improvement in the underlying business fundamentals less driven by seasonality. That's kind of

Speaker 2

Yes, we're not seeing A seasonality to it. It's kind of an opportunistic thing for them when they see that people want a certain type of car and a certain type of area, they'll focus on that. You might see higher sales, a blip, but nothing we're not seeing really a correlation to seasonality now.

Speaker 5

Okay, excellent. Thank you. That's all for me.

Speaker 3

Thanks, Rinder.

Operator

Thank you.

Speaker 1

Hi, Lara. As we're waiting for questions, I just wanted to mention that we've introduced a new format for our conference call. So we'll be addressing questions that we received from our investors That was received by e mail. So I'll start with those questions. Mr.

Speaker 1

Mittelman, you've spoken in the past about Cognitive's innovative products, But revenues remain flat. Any insights into why they do not appear to be gaining traction with customers?

Speaker 2

Well, I wouldn't say they're not getting traction. Actually, I would say the opposite. Their new product, which is AI based and it's really exciting, was just launched only recently. And the process that it takes and there's a lead time with customers. And if you know I don't know if you've noticed, The Cogniz customer base is pretty much all blue chip companies.

Speaker 2

And getting products into these large companies is a process, And they're confident enough to expect that significant revenue growth is on the horizon as early as Q4. And we've heard from people that this product is a game changer for loyalty. It happens to have the buzzword AI associated, but it actually is using AI and it's doing it in a really unique way. There's actually 4 new products as part of that. So Cogniv is now run by a very, very strong CEO.

Speaker 2

They've done significant cost cutting as you've seen. And we're seeing a very, very clear and exciting light at the end of this tunnel of a period of after significant losses over many years as a result Merging our Money Losing Loyalty business into Cognitive. We're seeing that come to fruition and we are excited about what's happening there, including the recent Sales for almost $10,000,000 in cash of a non core division, which is obviously helps their financial situation. So we're actually More excited about Conga than we've been ever. So stay tuned.

Speaker 1

Okay. Thank you. Lyra, just wondering if we received any other questions?

Operator

No other questions at this time. Please continue, sir.

Speaker 1

Okay. How are the tax losses being utilized now that you own both Tuff Ropes and Cortland?

Speaker 2

So one of the immediate criticisms that we got When we did the TUF growth, you guys said you're going to use you're only going to be in North America and you're only you're not using your tax losses. And that was something that We understood that reaction, but we had a plan. And the first, the most important part of our strategy is to find the right Obviously, we want to utilize our tax loss as always, but more important is to get a great business with significant growth potential. So when we The first thing we did was planned and immediately redomiciled Canada so that we could utilize our NOLs, Obviously, sheltering it with our capital losses as we would with any investment, but we did meet on the South of Canada utilizing our NOLs there. As a reminder for people, because People sometimes just slip through the cracks.

Speaker 2

We utilized $130,000,000 of our capital losses when we facilitated the PLM transaction. That's $130,000,000 in taxable income that we did not pay our shareholders not endure and that's probably in the range of $30,000,000 in cash that we saved. So we are using those losses And we have a lot more. We as I mentioned, we redone ourselves Petrobras in Canada. We just acquired Cortland, which we expect to allow us to utilize some of our U.

Speaker 2

S. Tax losses, which are sizable. We have almost $200,000,000 in U. S. NOLs available.

Speaker 2

And with regard to Bazzetta, we made a we bought Bazzetta, the entire world was frozen in fear. Nobody was Transacting and M and A, especially in Europe, the debt markets falling apart, raw material prices were skyrocketing, The supply chain was in disarray. No one wanted to touch these businesses. So, Bozzetta was going to be auctioned by a fund that was Shutting down and they would have gotten a much higher price than we paid. We stepped in as the only buyer.

Speaker 2

We came in, we said we'll pay cash, we will close quickly. We quickly created a relationship with management and we're on the same page in terms of the growth strategies. And we decided that that Opportunity and the terms of EBITDA that we paid lower than we probably should have or other would have, far exceeded The inability to utilize NOLs right off the bat. Having said that, we expect to, as we just did with Cortland, To execute on certain types of acquisitions that may allow us to utilize losses going forward with the debt. So we're doing whatever we can to utilize them.

Speaker 2

And as we mentioned, all of our capital gains are sheltered by the capital losses in the event of liquidity events for another $400,000,000 or so.

Speaker 1

Okay. Well, thank you. The next question is, can you update us on the Mittak situation? Are you working towards a resolution?

Speaker 2

The activist situation has been an unfortunate distraction. It's been disruptive and it came really at the wrong time. It's And as we're proving our strategy, we kind of immediately got attacked. And I think it was confusing We've been successfully executing as you can see on the strategy we've stated we would We have put forward for the past few years, we think Tough Rips and Bazzetta proved that. And the majority of our shareholders have been very, very supportive.

Speaker 2

Our preference has always been to resolve that situation as quickly as possible and we're always open to reasonable solutions. But in the meantime, we're just trying to focus on the business. We have responsibility to all of our shareholders, not just one. We see significant opportunities to add value and we're going to continue to do that and hope that the

Speaker 1

Okay. And what is the status of the PLM earnouts? How are they doing?

Speaker 2

Well, first of all, Mexico is doing extremely well. And we are To remind people, as part of the sale of PLM, we also received an earn out Opportunity of up to $27,500,000 based on certain business metrics that they could achieve during a given year. And we're happy to say that during this year, we're seeing a track in such a way that if it continues, we expect to receive A portion of that earn out as a result of this year's results if it continues as they're tracking now. So good news there.

Speaker 1

Okay. Thank you. And how has Cortland's employees reacted so far to the deal? How is the integration coming along?

Speaker 2

We actually it couldn't have been more exciting. Actually, the first day We had a town hall when we acquired Cortland. And the first question that came was from one of their sales team. And he said, I just looked through your catalog, Tough Ropes catalog, you said, can I start selling this today? I have customers that will buy these products today.

Speaker 2

This is amazing. Like they were At Tuff Ropes, they said, are we allowed to sell these Cortland products now? We could just can we get Cortland to help us on this project? It was really, really exciting. So we saw immediate, a very positive immediate Reaction, the integration is going well.

Speaker 2

Obviously, it's early stage, but it's there's a lot of complementary Things in these businesses, especially on the sales side, but even we even see the opportunity to utilize some of our unused capacity in India to produce some of their products at much lower prices. So a lot of opportunities there, very excited about Really good acquisition. That was also a competitive situation that we won by Really primarily convincing them about our strategy going forward and getting the support of management. So very happy with that so far.

Speaker 1

Great. And the last question is how does Capital A fit into your investment strategy?

Speaker 2

So again to remind shareholders that maybe don't recall, when we owned PLM, Aeromexico went went into bankruptcy and it was a very scary time and we utilized PLM's own balance sheet. We lent $100,000,000 to Air Mexico. At the time, we were under a lot of pressure saying, what are you doing? Airlines bankrupted you crazy. That $100,000,000 saved there, we can definitively say save the airline because they went through, If you look at the cash burn they had in the early stages of bankruptcy before they had dip financing, that money was the money that they had to survive.

Speaker 2

So We helped the airline survive and ultimately yielded a tremendous outcome for us once the airline recovered and emerged from bankruptcy. So when Capital A was facing a similar situation, they were teetering there, they were going through A lot of difficulties. We have we own 20% of their loyalty company. So we the loyalty company there is different. It was Not profitable.

Speaker 2

We did not have type of control that we had And shareholder rights that we had in PLM, so we weren't going to be sharing in the cash flows there once they eventually achieve that. So we didn't see that as an asset that we wanted to maintain and had a lot more value to Capital A. So we transacted, I think it was a very smart deal where we sold them that 20% stake for stock. So we've got stock in Capital Lane. At the Same time, we participated in a rights offering alongside management to fund the airline through that period of time.

Speaker 2

So the net result was we monetized that asset. We got liquid stock, and RCU IDs in the airline. We've held them and now we're seeing the fruits As the company roars back and we're seeing the results in those securities. So it's not a core We don't airlines are not something we look to invest in typically. These have been a unique situations in both fronts.

Speaker 2

But this is a it looks like a very successful investment. We're very happy we made it. Incredible management team at Capital A. Tony Fernandez He's not only a great manager, but he put his money where his mouth is and wrote a personal check for almost 30% of that rights offering. We had that confidence level as well.

Speaker 2

So this is something that is not a core part of our strategy. It was an opportunistic move and we're very happy we executed

Speaker 1

Well, great. Thanks for providing all this additional information. It's really helpful. Lyra, do you have any other questions?

Operator

There are no further questions at this time. Please continue, sir.

Speaker 1

Okay. Well, thank you very much. I'd like to thank everyone For joining us on today's call and webcast. Wish you all a great rest of your day. Bye bye.

Speaker 1

Thank you.

Operator

Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a

Powered by Quartr
Earnings Conference Call
Aimia Q2 2023
00:00 / 00:00