Provided by Aimia Inc/CNW
MONTREAL, Oct. 28, 2019 /CNW Telbec/ – Aimia Inc. (TSX: AIM) today reported its financial results for the quarter ended September 30, 2019. During the quarter, the company delivered on improved financial performance from continuing operations highlighted by:
- Positive EPS from continuing operations, up $0.12 to $0.11 per share
- Substantial improvement in Q3 2019 Free Cash Flow generation, up 95% QoQ and improved 73% YoY to $(3.1) million
- Operating expenses down 16% YoY to $42.2 million from cost transformation
- Operating loss narrowed, improving by 25% YoY to $(12.1) million
- Adjusted EBITDA loss narrowed, improving by 39% YoY to $(4.4) million
The company has sold its entire stake in Cardlytics (including 1.3 million shares sold after September 30th) for net proceeds of $131.5 million.
Chief Executive Officer, Jeremy Rabe, commented on the improved performance of the company: “As demonstrated by our third quarter results, including the positive EBITDA for the Loyalty Solutions business, the company is making meaningful progress enhancing our current business and investments. We are building a stronger company and our cost transformation plans are improving operations and financial performance. We remain on track to deliver profitability and substantially improving free cash flow during 2020.”
Mr. Rabe continued: “We are pleased with Aimia’s strong assets and solid prospects to accelerate the company’s growth through a combination of organic growth and sector-focused M&A as a leading consolidator in the vast and growing loyalty and travel markets.”
Q3 2019 financial highlights – continuing operations(2), unless otherwise noted:
| HIGHLIGHTS (1) | Three Months Ended September 30, | |||
| (in millions of Canadian dollars, except per share amounts) | 2019 | 2018 | YoY % Change | YoY % Constant Currency (C.C.) |
| Continuing operations(2) | ||||
| Total Revenue | 33.3 | 42.5 | (21.6) | (20.9) |
| Operating Loss | (12.1) | (16.1) | 24.8 | 21.7 |
| Adjusted EBITDA | (4.4) | (7.2) | 38.9 | 31.9 |
| Net Earnings(3) | 17.2 | 3.2 | ** | ** |
| Earnings (loss) per Common Share(3) | 0.11 | (0.01) | ** | ** |
| Cash used in Operating Activities | (2.8) | (8.3) | 66.3 | ** |
| Free Cash Flow before Dividends Paid | (3.1) | (11.3) | 72.6 | ** |
| Consolidated | ||||
| Net Earnings(3) | 16.9 | 21.7 | (22.1) | ** |
| Earnings per Common Share(3) | 0.11 | 0.11 | ** | ** |
| Cash from (used in) Operating Activities | (2.9) | 45.6 | ** | ** |
| Free Cash Flow before Dividends Paid | (3.2) | 37.5 | ** | ** |
| Free Cash Flow before Dividends Paid per Common Share | (0.07) | 0.25 | ** | ** |
| ** Information not meaningful |
This quarterly earnings release should be read in conjunction with the consolidated financial statements and the MD&A which can be accessed on SEDAR as well as at: https://www.corp.aimia.com/investors/quarterly–reports/
Please refer to “Notes” for details on notations that appear in this Press Release.
Strategic update
The company has made substantial headway executing on its strategic plan. Significant changes have been made in fiscal 2019 to strengthen and align the Board with the company’s strategic direction and capital allocation priorities. Aimia continues to apply its capital allocation framework and review capital allocation opportunities, including potential returns of capital. Senior management’s long-term incentives have also been aligned with shareholder value creation.
Building on Aimia’s strong existing assets and investments, unparalleled industry expertise and ability to drive operational improvement, the company continues to evolve its positioning within the growing loyalty and travel markets through a combination of organic growth and sector-focused M&A.
The company is progressing well in improving the operating business through its cost transformation plan. In its Loyalty Solutions segment, the company is seeing good momentum with a new contract win in the U.S. expanding the company’s work with a leading global consumer goods client to support their full portfolio of brands. In addition, the company renewed professional services contracts in the U.S. with a leading airline partner, a global payments provider, as well as with a worldwide entertainment company and leading telecommunication service provider in the Middle East.
In the third quarter of 2019, operating expenses declined by 16%, as the company implemented its transformation plan. Total headcount was 520 as at September 30, 2019, down from 560 as at June 30, 2019 and from 780 as at September 30, 2018, as a result of ongoing cost transformation. During the quarter, the company executed on its new long-term technology contracts to decouple its joint-IT environment with Aeroplan, as well as begin insourcing its enterprise loyalty platform application development activities expected to reduce run-rate costs beginning in 2020. The sub-lease of the Sydney office and relocations of our Toronto office at the end of September and the UK by year-end 2019 will contribute towards achieving a lower real estate footprint and cost beginning in 2020.
Returns to shareholders
Earlier this year, Aimia completed a $150 million substantial issuer bid, under which it purchased for cancellation 34.9 million common shares at a price of $4.30 per share.
Following the substantial issuer bid, the company commenced and completed a normal course issuer bid, under which it purchased for cancellation 8.9 million shares for an aggregate repurchase price of $32.7 million at an average price of $3.67 per share.
Operational Performance (Continuing Operations) for the quarter ended September 30, 2019
With effect from January 1, 2019, the bulk of Aimia’s activities fall into a single reportable and operating segment (Loyalty Solutions). Other costs, along with distributions from its equity-accounted investments (PLM and BIGLIFE), are being reported under “Corporate and Other”.
Continuing Operations(2)
The improvement in Operating loss from $(16.1) million to $(12.1) million was mainly explained by a $8.1 million reduction in operating expenses as Aimia continued to execute on the significant business transformation, which more than offset revenue and gross margin declines from Loyalty Solutions. The decline in operating expenses was mostly driven by reduced headcount and lower share-based compensation and lower rent from the favourable impact of IFRS 16, and a gain on a sublease of office space, partially offset by IT decoupling and transition costs, as well as higher professional and advisory fees.
Adjusted EBITDA was $(4.4) million, compared to $(7.2) million, with a positive $3.8 million variance from Loyalty Solutions, partially offset by a $1.0 million decrease in Corporate and Other.
Net earnings from continuing operations was $17.2 million, compared to $3.2 million, mostly due to the improvement in operating loss and a $23.8 million fair value gains, which includes $11.3 million of gain realized from the sale of 1.7 million common shares in Cardlytics during the third quarter of 2019.
Loyalty Solutions
Revenue from Loyalty Solutions was $33.3 million, a decrease of $(9.2) million from the same period in the prior year. The decline in Loyalty Services revenue was mainly attributable to client attrition, lower customer spend and lower one-time project revenue. Lower revenue from loyalty units from the Air Miles Middle East program was mainly due to lower yield.
Operating expenses were down by $10.4 million in the quarter to $30.7 million, mostly reflecting reduced headcount, lower share-based compensation and reduced rent, and a gain on a sublease of office space.
Operating loss was $(0.6) million, compared to $(6.8) million in the same quarter last year as lower gross margin was more than offset by lower depreciation and amortization and reduced operating expenses.
Adjusted EBITDA was $1.3 million, compared to $(2.5) million in the third quarter of the prior year mostly due to a $2.7 million gain from a subleased office space.
Corporate and Other
Corporate and Other Adjusted EBITDA amounted to $(5.7) million, a decline of $(1.0) million from higher operating expenses due to technology decoupling and transition costs and higher professional and advisory fees partially offset by a higher PLM distribution of $1.3 million. Total PLM distributions for full year 2019 are expected to be approximately $35 million, compared to $17.9 million in 2018.
Membership in Club Premier, the Mexican coalition loyalty program, continued to grow, with enrolled members up 11.9% YoY totaling 6.6 million at the end of September 2019. Increased Gross Billings growth in the third quarter was mainly from promotional activities by the program’s anchor airline partner. PLM Gross Billings from Loyalty Units were up by 9.8% to US$67.3 million and PLM Adjusted EBITDA(4) was US$21.5 million, up 12.6% over last year benefitting from strong top line growth and operating leverage.
Free Cash Flow before Dividends Paid
Free Cash Flow before Dividends Paid from continuing operations was $(3.1) million, compared to $(11.3) million for the same period in the prior year. The $8.2 million improvement was largely due to increased cash from operating activities of $5.5 million and lower capital expenditures of $3.0 million due to previously capitalized costs which are now expensed.
Free Cash Flow before Dividends Paid was $(3.2) million, compared to $37.5 million in the same quarter of the prior year. The variance, mainly explained by the decrease of $48.9 million related to discontinued operations (including Aeroplan and Nectar) offset by the improvement in continuing operations. Free Cash Flow before Dividends Paid per Common Share was $(0.07).
Balance sheet
Cash and cash equivalents (which includes restricted cash and investments in corporate and government bonds) was $437.0 million as at September 30, 2019, of which $73.1 million was set aside as restricted cash in connection with the Aeroplan transaction.
The company’s long-term investments in equity instruments as at September 30, 2019 included its holding of 1.3 million shares in a Nasdaq-listed purchase intelligence company, Cardlytics. In the third quarter of 2019, Aimia sold 1.7 million shares for net proceeds of $71.0 million and recorded fair value gains of $23.8 million, which includes $11.3 million of gain realized from the sale of the common shares. In October, Aimia sold its remaining stake of 1.3 million shares in Cardlytics for additional net proceeds of $60.5 million.
Dividends
Dividends of $4.4 million were paid on September 30, 2019 on the three series of outstanding preferred shares in respect of the third quarter of 2019.
The Board of Directors has also declared a quarterly dividend in respect of its three series of preferred shares for the fourth quarter of 2019. Dividends will be payable on December 31, 2019, to shareholders of record at the close of business on December 24, 2019.
Quarterly Conference Call and Audio Webcast Information
Aimia will host a conference call to discuss its third quarter 2019 financial results at 8:30 a.m. EST on October 29, 2019. The call will be webcast at:
https://event.on24.com/wcc/r/1860385/8CBD1B20D2BEBDBD87A306C4C8236C20
A slide presentation intended for simultaneous viewing with the conference call and an archived audio webcast will be available for 90 days following the original broadcast available at:
This earnings release was reviewed by Aimia’s Audit Committee and was approved by the company’s Board of Directors, on the Audit Committee’s recommendation, prior to its release.
Notes
- Non-GAAP financial measures (Adjusted EBITDA, Free Cash Flow before Dividends Paid and Free Cash Flow before Dividends Paid per Common Share) and constant currency are explained in the section entitled “Non-GAAP Financial Measures”.
- Continuing operations refers to consolidated results excluding discontinued operations.
- Net Earnings from continuing operations, Earnings (loss) from continuing operations per Common Share, Net Earnings and Earnings per Common Share include net fair value gains related to investments in equity instruments of $23.8 million for the three months ended September 30, 2019 and $12.7 million for the three months ended September 30, 2018.
- PLM utilizes a definition of Adjusted EBITDA, which differs from Aimia’s. PLM Adjusted EBITDA refers to operating income adjusted to exclude depreciation, amortization and impairment charges related to non-financial assets, as well as adjusted for certain factors particular to the business, such as changes in deferred revenue and Future Redemption Costs.
Appendix
The highlights for the nine months ended September 30, 2019, are as follows:
| HIGHLIGHTS (1) | Nine Months Ended September 30, | |||
| (in millions of Canadian dollars, except per share amounts) | 2019 | 2018 | YoY % Change | YoY % Constant Currency (C.C.) |
| Continuing operations(2) | ||||
| Total Revenue | 99.0 | 130.3 | (24.0) | (24.2) |
| Operating Loss(8) | (52.8) | (71.0) | 25.6 | 24.4 |
| Adjusted EBITDA | (18.3) | (36.4) | 49.7 | 47.3 |
| Net Earnings (loss)(4)(6)(8) | 38.0 | (17.2) | ** | ** |
| Earnings (loss) per Common Share(4)(6)(8) | 0.19 | (0.20) | ** | ** |
| Cash used in Operating Activities(3) | (78.1) | (68.2) | (14.5) | ** |
| Free Cash Flow before Dividends Paid(3) | (79.1) | (76.1) | (3.9) | ** |
| Consolidated | ||||
| Net Earnings(4)(5)(6)(7)(8) | 1,107.5 | 54.2 | ** | ** |
| Earnings per Common Share(4)(5)(6)(7)(8) | 8.23 | 0.27 | ** | ** |
| Cash from (used in) Operating Activities(3) | (105.8) | 116.8 | ** | ** |
| Free Cash Flow before Dividends Paid(3) | (106.8) | 97.9 | ** | ** |
| Free Cash Flow before Dividends Paid per Common Share(3) | (1.13) | 0.64 | ** | ** |
Notes
- Non-GAAP financial measures (Adjusted EBITDA, Free Cash Flow before Dividends Paid and Free Cash Flow before Dividends Paid per Common Share) and constant currency are explained in the section entitled “Non-GAAP Financial Measures”.
- Continuing operations refers to consolidated results excluding discontinued operations.
- Cash from Operating Activities, Cash used in Operating Activities from continuing operations, Free Cash Flow before Dividends Paid, Free Cash Flow before Dividends Paid from continuing operations and Free Cash Flow before Dividends Paid per Common Share for the nine months ended September 30, 2018 include a rent prepayment of $11.8 million related to a London office space. The prepayment covers the period from February 2018 to December 2019.
- Net Earnings (loss) from continuing operations, Earnings (loss) from continuing operations per Common Share, Net Earnings and Earnings per Common Share include net fair value gains related to investments in equity instruments of $84.0 million for the nine months ended September 30, 2019 and $46.5 million for the nine months ended September 30, 2018.
- Net Earnings and Earnings per Common Share for the nine months ended September 30, 2019 include the impact of the gain of $1,063.1 million on the disposal of the Aeroplan Program and related assets.
- Net Earnings (loss) from continuing operations, Earnings (loss) from continuing operations per Common Share, Net Earnings and Earnings per Common Share for the nine months ended September 30, 2018 include the unfavourable impact of the reversal of the contingent consideration receivable related to the sale of the Canadian Air Miles trademarks of $5.3 million as well as an income tax recovery of $1.3 million.
- Net Earnings and Earnings per Common Share for the nine months ended September 30, 2018 include the impact of the gain of $5.4 million on the disposal of the Nectar Program and related assets.
- Operating Loss, Net Earnings (loss) from continuing operations, Earnings (loss) from continuing operations per Common Share, Net Earnings, Earnings per Common Share for the nine months ended September 30, 2018 include an impairment charge of $8.0 million related to the ISS business.