Advantex Marketing International Inc.
CNSX : ADX

Advantex Marketing International Inc.

November 21, 2014 08:30 ET

Advantex Returns to Profitability in First Quarter of Fiscal 2015

Highlights:

- EDITDA(i) of $616,268 in the three months to September 30, 2014 and a return to profitability.

- 18% growth in revenue in the Aeroplan program and a renewal of the partnership to 2019.

- Corporate restructuring centered on affinity partnerships.

- Effective management of marketing expenses and other costs.

TORONTO, ONTARIO--(Marketwired - Nov. 21, 2014) - Advantex Marketing International Inc. (CSE:ADX), a specialist in marketing loyalty-reward programs, today reported net income of $19,807 for the three months ended September 30, 2014.

The improved performance, which follows losses in the previous two quarters, is due mainly to disciplined and effective cost management. Advantex posted net income of $55,882 in the first quarter of fiscal 2014, ended September 30, 2013.

"We are encouraged by our progress", Kelly Ambrose, Advantex's president and CEO, said. "At the same time, we recognize that time, patience and commitment are needed to realize the full potential of our business model."

Advantex made further progress in implementing its renewal program during the latest quarter. Highlights included:

  • A presence in the U.S. under a new partnership with Caesars Entertainment. Members of Caesars' Total Rewards program now have more ways of earning rewards when they use their cards at participating retailers in select cities.
  • The launch of Advantex's partnership with Toronto-Dominion Bank, which enables TD Aeroplan credit cardholders to earn incremental bonus Aeroplan Miles.
  • An internal restructuring that focuses operations more sharply on each of Advantex's three main business groups, namely, the CIBC/TD program, Aeroplan and Caesars Entertainment.

Since the end of the quarter, Advantex has renewed its agreement with Aimia Inc., owner of the Aeroplan program, for five years to April 30, 2019. Under the renewed agreement, Advantex can market Aeroplan to merchants in all business segments. Under the original 2010 agreement, Advantex was restricted to certain retail sectors.

Below is a summary of results for the three months ended September 30, 2014, comprising the first quarter of fiscal 2015:

(All currency amounts are in Canadian dollars.)

Q1 Fiscal 2015 Q1 Fiscal 2014 Q1 Fiscal 2015 Q1 Fiscal 2014
$ $ % of Revenues % of Revenues
Revenues
CIBC/TD program 2,992,856 4,098,582
Aeroplan program 528,882 449,585
Miscellaneous 7,859 45
Total Revenue 3,529,597 4,548,212
Direct expenses 949,498 1,604,096
Gross profit 2,580,099 2,944,116 73.1% 64.7%
Earnings from operations before depreciation, amortization and interest (EBITDA(i)) 616,268 823,691 17.5% 18.1%
Net income 19,807 55,882

(i) 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 months ended September 30, 2014 and 2013, per consolidated financial statements for three months ended September 30, 2014, Earnings from operations before depreciation, amortization and interest is the nearest equivalent to EBITDA.

The 27 percent decline in revenues from the CIBC/TD program mainly reflects a drop in merchant participation in early 2014. Canadian Imperial Bank of Commerce, one of Advantex's main partners, has acknowledged an erosion in its credit card business over the past year.

The 18 percent improvement in Aeroplan revenues is partly due to growing merchant interest in that program.

"Our initiatives over the past year have laid the groundwork for renewed growth", Mr. Ambrose said. "Our task in the months ahead is to fulfill our commitments to the almost 1,700 merchants that participate in our programs, and to our valued affinity partners and their customers."

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 about 1,700 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: ability, and its expectations of time required, to realize the full potential of its business model; expectation for renewed growth 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 quarter ended September 30, 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.
Consolidated Statements of Financial Position (unaudited)
(expressed in Canadian dollars)
September 30, 2014 June 30, 2014
Assets
Current assets
Cash and cash equivalents 2,048,171 1,815,805
Accounts receivable 1,015,224 809,189
Transaction credits (note 5) 9,336,617 10,278,706
Inventory (note 6) 90,242 90,425
Prepaid expenses and sundry assets 225,462 179,412
$12,715,716 $13,173,537
Non-current assets
Property, plant and equipment (note 7a) 217,367 237,420
Intangible assets (note 7b) 585,205 529,892
802,572 767,312
Total assets $13,518,288 $13,940,849
Liabilities
Current liabilities
Loan payable (note 8) 5,602,945 6,454,174
Accounts payable and accrued liabilities 4,594,202 4,219,904
$10,197,147 $10,674,078
Non-current liabilities
12% Non-convertible debentures payable (note 10) 4,696,396 4,661,833
$4,696,396 $ 4,661,833
Total Liabilities $14,893,543 $15,335,911
Shareholders' deficiency
Share capital (note 11) 24,530,555 24,530,555
Contributed surplus (note 12) 4,090,382 4,090,382
Accumulated other comprehensive income (47,383 ) (47,383)
Deficit (29,948,809 ) (29,968,616)
Total deficiency $(1,375,255 ) $(1,395,062)
Total liabilities and deficiency $13,518,288 $13,940,849

Economic and Financial dependence (note 2), Commitments and contingencies (note 14)

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.
Consolidated Statements of Income and Comprehensive Income (unaudited)
For the three months ended September 30, 2014 and 2013
(expressed in Canadian dollars)
2014 2013
$ $
Consolidated Statements of Income
Revenues 3,529,597 4,548,212
Direct expenses 949,498 1,604,096
2,580,099 2,944,116
Operating Expenses
Selling and marketing 832,123 1,001,977
General and administrative 1,131,708 1,118,448
Earnings from operations before depreciation, amortization and interest 616,268 823,691
Interest expense:
Stated interest expense - loan payable, and debentures 444,462 513,265
Non-cash interest expense on debentures 58,769 104,333
113,037 206,093
Depreciation of property, plant and equipment, and amortization of intangible assets 93,230 150,211
Net income 19,807 55,882
Earnings per share:
Basic and Diluted (note 15) 0.00 0.00
Consolidated Statements of Comprehensive Income
Net income 19,807 55,882
Other comprehensive income / (loss)
Translation adjustment - -
Comprehensive income 19,807 55,882

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

Advantex Marketing International Inc.
Consolidated Statements of Changes in Deficiency (unaudited)
For the three months ended September 30, 2014 and 2013
(expressed in Canadian dollars)
Class A preference shares
$
Common shares
$
Contributed surplus
$
Equity portion of debentures
$
Warrants
$
Deficit
$
Accumulated Other comprehensive 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 and comprehensive income for the period 55,882 - 55,882
Balance - September 30, 2013 3,815 24,106,281 808,167 2,114,341 1,167,874 (29,197,489 ) - (997,011 )
Balance - July 1, 2014 3,815 24,526,740 4,090,382 - - (29,968,616 ) (47,383 ) (1,395,062 )
Net income and comprehensive income for the period 19,807 - 19,807
Balance - September 30, 2014 3,815 24,526,740 4,090,382 - - (29,948,809 ) (47,383 ) (1,375,255 )

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

Advantex Marketing International Inc.
Consolidated Statements of Cash Flow (unaudited)
For the three months ended September 30, 2014 and 2013
(expressed in Canadian dollars)
2014
$
2013
$
Cash flow provided by / (used in) Operating activities
Net income for the period $19,807 $55,882
Adjustments for:
Depreciation of property, plant and equipment, and amortization of intangible assets 93,230 150,211
Accretion charge for debentures 58,769 104,333
171,806 310,426
Changes in items of working capital
Accounts receivable (206,035 ) (217,542 )
Transaction credits 942,089 370,318
Inventory 183 (25,714 )
Prepaid expenses and sundry assets (46,050 ) (89,773 )
Accounts payable and accrued liabilities 374,298 128,202
1,064,485 165,491
Net cash provided by / (used in) operating activities 1,236,291 475,917
Investing activities
Purchase of property, plant and equipment, and intangible assets (128,490 ) (114,237 )
Net cash (used in) investing activities (128,490 ) (114,237 )
Financing activities
Proceeds from loan payable (851,229 ) (450,659 )
Transaction costs, debenture refinancing (note 10) (24,206 ) -
Net cash generated from / (used in) financing activities (875,435 ) (450,659 )
Effect of exchange rate changes on cash and cash equivalents - -
Increase (decrease) in cash and cash equivalents during the period $232,366 $(88,979 )
From continuing operations 232,366 (8,790 )
From discontinued operations (note 18) - (80,189 )
Increase in cash and cash equivalents $232,366 $(88,979 )
Cash and cash equivalents - Beginning of period 1,815,805 1,773,672
Cash and cash equivalents - End of period 2,048,171 1,684,693

Additional Information

Interest paid $249,420 $699.401
For purposes of the cash flow statement, cash comprises:
Cash $2,043,171 $1,679,693
Term deposits $5,000 $5,000
$2,048,171 $1,684,693

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

Contact Information

  • Advantex Marketing International Inc.
    Mukesh Sabharwal
    Vice-President and Chief Financial Officer
    905-470-9558 ext. 249
    mukesh.sabharwal@advantex.com