Advantex Marketing International Inc.
CNSX : ADX

Advantex Marketing International Inc.

March 02, 2015 16:05 ET

Advantex Reports Financial Results for the Second Quarter of Fiscal 2015

TORONTO, ONTARIO--(Marketwired - March 2, 2015) - Advantex Marketing International Inc. (CSE:ADX), a specialist in marketing loyalty-reward programs, today reported a net loss of $144,079 for the three months ended December 31, 2014, compared with net income of $74,983 for the same period a year earlier.

Revenues for the latest quarter totaled $3,799,990, a drop of 17.6 per cent from a year earlier.

The net loss for the six months to December 31, 2014, was $124,273, compared with net income of $130,864 a year earlier. First-half revenues were $7,329,587, down 20 per cent from the first six months of fiscal 2014.

The decline in revenues and earnings is due largely to economic pressures and uncertainties facing many merchants, which resulted in lower participation in key Advantex programs.

"Our merchants have not been immune to sluggish business conditions throughout the Canadian economy," Kelly Ambrose, Advantex's president and CEO, said.

Mr Ambrose added: "We are responding vigorously to these challenges. We have adjusted our business model, and our financial situation has stabilized. We remain confident that our performance will improve over time, and that long-term prospects are bright."

Measures taken in recent months include:

  • Advantex announced on January 28, 2015 that it would reduce its workforce by roughly 10 per cent, and implement a modest pay cut across the entire company. These measures have already yielded significant cost savings.
  • Two affinity partners, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank, continued to invest during the first half of fiscal 2015 to strengthen Advantex's marketing resources.
  • The Caesars program was launched in February 2015 in the Philadelphia area. About 60 merchants currently participate in the program, and the goal is to raise that number substantially over the next 12 months.

"Our focus in the months ahead will be to cement the loyalty of our existing merchants, and to rebuild our merchant base," Mr. Ambrose said. "Our proprietary technology and long term contracts with CIBC, TD, Aeroplan and Caesars give us the tools to accomplish these goals. We have taken steps to enhance the competitiveness of the CIBC/TD program, and are in talks to identify new growth opportunities for the Aeroplan program."

Below is a summary of results for the three- and six-month periods ended December 31, 2014, comprising the second quarter (Q2) and first half (H1) respectively of the 2015 fiscal year.

(All currency amounts are in Canadian dollars.)

Q2 Fiscal
2015
Q2 Fiscal
2014
H1 Fiscal
2015
H1 Fiscal
2014
$ $ $ $
Revenues
CIBC/TD program 3,089,353 3,943,117 6,082,209 8,041,699
Aeroplan program 702,774 665,757 1,231,656 1,115,342
Caesars program 7,863 15,677
Retail programs 3,799,990 4,608,874 7,329,542 9,157,041
Miscellaneous income 45
Total Revenue 3,799,990 4,608,874 7,329,587 9,157,041
Gross profit 2,590,926 2,872,967 5,171,025 5,817,038
Earnings from operations before interest, depreciation and amortization (EBITDA 1) 419,239 733,893 1,035,506 1,557,583
Net income (loss) (144,079) 74,983 (124,273) 130,864
1 EBITDA is a non-GAAP financial measure which does not have any standardized meaning prescribed by the issuer's GAAP and is unlikely to be comparable to similar measures presented by other issuers. It is provided as additional information to assist readers in understanding a component of Advantex's financial performance. In case of Advantex, for three and six months ended December 31, 2014 and 2013, per consolidated financial statements for three and six months ended December 31, 2014, Earnings from operations before depreciation, amortization and interest is the nearest equivalent to EBITDA.

About Advantex:

Advantex provides specialized marketing programs that enable members of affinity groups to earn frequent-flyer miles and other loyalty rewards through purchases at participating merchants.

Through our partnerships with Aeroplan, Canadian Imperial Bank of Commerce, Toronto-Dominion Bank and Caesars Entertainment, we have contractual access to millions of consumers with above-average personal and household income. We also have partnerships with more than 1,600 merchants in Canada and the US.

Advantex shares trade on the Canadian Securities Exchange under the symbol ADX. For more information, go to www.advantex.com.

Forward-Looking Information

This press release contains certain forward-looking information. All information, other than information comprised of historical fact, that addresses activities, events or developments that Advantex believes, expects or anticipates will or may occur in the future constitutes forward-looking information. Forward- looking information is typically identified by words such as: anticipate, believe, expect, goal, intend, plan, will, may, should, could and other similar expressions. Such forward-looking information relates to, without limitation, information regarding Advantex's: expectations of improvement in its performance and its long term prospects; belief that proprietary technology and long-term contracts give it the tools to rebuild its merchant base; and other information regarding Advantex's financial and business prospects and financial outlook is forward-looking information.

Forward-looking information reflects the current expectations or beliefs of Advantex based on information currently available to Advantex.

Forward-looking information is subject to a number of risks, uncertainties and assumptions that may cause the actual results of Advantex to differ materially from those discussed in the forward-looking information, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on Advantex. Factors that could cause actual results or events to differ materially from current expectations include, among other things, those listed under General Risks and Uncertainties and Economic Dependence in the management discussion and analysis for the three and six months ended December 31, 2014.

All forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, Advantex disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise. Although Advantex believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein

Advantex Marketing International Inc.
Interim Condensed Consolidated Statements of Financial Position - (unaudited)
(expressed in Canadian dollars)
December 31,
2014
June 30,
2014
Assets
Current assets
Cash and cash equivalents $ 1,041,535 $ 1,815,805
Accounts receivable 723,130 809,189
Transaction credits (note 5) 9,389,420 10,278,706
Inventory 152,965 90,425
Prepaid expenses and sundry assets 262,073 179,412
$11,569,123 $13,173,537
Non-current assets
Property, plant and equipment $ 212,418 $ 237,420
Intangible assets 588,970 529,892
$ 801,388 $ 767,312
Total assets $12,370,511 $13,940,849
Liabilities
Current liabilities
Loan payable (note 6) $ 5,493,390 $ 6,454,174
Accounts payable and accrued liabilities 3,644,583 4,219,904
$ 9,137,973 $10,674,078
Non-current Liabilities
12% Non-convertible debentures payable (note 8) $ 4,751,873 $ 4,661,833
Total Liabilities $13,889,846 $15,335,911
Shareholders' deficiency
Share capital (note 9) $24,530,555 $24,530,555
Contributed surplus 4,090,382 4,090,382
Accumulated other comprehensive income (47,383 ) (47,383 )
Deficit (30,092,889 ) (29,968,616 )
Total deficiency $ (1,519,335 ) $(1,395,062 )
Total liabilities and deficiency $12,370,511 $13,940,849

Economic and Financial dependence (note 2)

Commitments and contingencies (note 12)

The accompanying notes are an integral part of these consolidated financial statements.

Approved by the Board:

Director: Signed "William Polley" Director: Signed "Kelly Ambrose"
William Polley Kelly E. Ambrose
Advantex Marketing International Inc.
Interim Condensed Consolidated Statements of Income and Comprehensive Income - (unaudited)
For the three and six months ended December 31, 2014 and December 31, 2013
(expressed in Canadian dollars)
Three months ended Six months ended
December 31 December 31
2014 2013 2014 2013
$ $ $ $
Revenues 3,799,990 4,608,874 7,329,587 9,157,041
Direct expenses 1,209,064 1,735,907 2,158,562 3,340,003
2,590,926 2,872,967 5,171,025 5,817,038
Operating Expenses
Selling and marketing 990,814 945,469 1,822,937 1,947,447
General and administrative 1,180,873 1,193,605 2,312,582 2,312,008
Earnings from operations before depreciation, amortization and interest 419,239 733,893 1,035,506 1,557,583
Interest expense:
Stated interest expense - loan payable, and debentures 397,612 514,383 842,074 1,027,648
Non-cash interest expense on debentures 55,477 - 114,246 104,333
(33,850 ) 219,510 79,186 425,602
Depreciation of property, plant and equipment, and amortization of intangible assets 110,229 144,527 203,459 294,738
Net income / (loss) and comprehensive income/(loss) $(144,079 ) $74,983 $(124,273 ) $130,864
Earnings per share
Basic and Diluted (note 13) $0.00 $0.00 $0.00 $0.00

The accompanying notes are an integral part of these consolidated financial statements.

Advantex Marketing International Inc.
Interim Condensed Consolidated Statements of Changes in Deficiency - (unaudited)
For the six months ended December 31, 2014 and December 31, 2013
(expressed in Canadian dollars)
Class A
preference
shares
$
Common
shares
$
Contri-
buted
surplus
$
Equity
portion of
debentures
$
Warrants
$
Deficit
$
Accumulated
Other
compre-
hensive
income/
(loss)
Total
$
Balance - July 1, 2013 3,815 24,106,281 808,167 2,114,341 1,167,874 (29,253,371 ) - (1,052,893 )
Net income/(loss) and comprehensive income/(loss) for the period 130,864 130,864
Transfer to Contributed surplus 3,282,215 (2,114,341 ) (1,167,874 ) -
Issue of common shares as part of refinancing of debentures (note 7 and 8) 420,459 420,459
Balance - December 31, 2013 3,815 24,526,740 4,090,382 - - (29,122,507 ) - (501,570 )
Balance - July 1, 2014 3,815 24,526,740 4,090,382 - - (29,968,616 ) (47,383 ) (1,395,062 )
Net income/(loss) and comprehensive income/(loss) for the period (124,273 ) (124,273 )
Balance - December 31, 2014 3,815 24,526,740 4,090,382 - - (30,092,889 ) (47,383 ) (1,519,335 )

The accompanying notes are an integral part of these consolidated financial statements.

Advantex Marketing International Inc.
Interim Condensed Consolidated Statements of Cash Flow - (unaudited)
For the six months ended December 31, 2014 and December 31, 2013
(expressed in Canadian dollars)
31-12-2014 31-12-2013
$ $
Cash flow provided by (used in)
Operating activities
Net income/(loss) for the period $(124,273 ) $130,864
Adjustments for:
Depreciation of property, plant & equipment, and amortization of intangible assets 203,459 294,738
Accretion charge for debentures 114,246 104,333
193,432 529,935
Changes in items of working capital
Accounts receivable 86,059 (796,173 )
Transaction credits 889,286 1,535,705
Inventory (62,540 ) 27,761
Prepaid expenses and sundry assets (82,661 ) (33,479 )
Accounts payable and accrued liabilities (575,321 ) 829,130
254,823 1,562,944
Net cash provided by operating activities 448,255 2,092,879
Investing activities
Purchase of property, plant and equipment, and intangible assets (237,535 ) (185,226 )
Net cash (used in) investing activities (237,535 ) (185,226 )
Financing activities
(Repayments)/Proceeds from loan payable (960,784 ) 54,246
Payments on maturity / retirement of debentures (notes 7 and 8) - (7,895,967 )
Proceeds from refinancing debentures (note 8) - 5,159,000
Transaction costs to close debenture refinancing (note 8) (24,206 ) (150,000 )
Net cash (used in) financing activities (984,990 ) (2,832,721 )
Decrease in cash and cash equivalents during the period $(774,270 ) $(925,068 )
From continuing operations (774,270 ) (782,414 )
From discontinued operations (note 16) - (142,654 )
Increase (decrease) in cash and cash equivalents during the period $(774,270 ) $(925,068 )
Cash and cash equivalents - Beginning of period 1,815,805 1,773,672
Cash and cash equivalents - End of period 1,041,535 848,604
Additional Information
Interest paid $660,334 $699,401
For purposes of the cash flow statement, cash comprises:
Cash $1,036,535 $843,604
Term deposits $5,000 $5,000
$1,041,535 $848,604

The accompanying notes are an integral part of these consolidated financial statements.

Contact Information