(All figures in Canadian dollars unless otherwise noted)
TORONTO, Nov. 9, 2022 /CNW/ - Aimia Inc. (TSX: AIM) reported its financial results for the three months ended September 30, 2022.
Q3 2022 financial highlights:
| HIGHLIGHTS | Three Months Ended September 30, |
| (in millions of Canadian dollars,
except per share amounts) | 2022 | 2021 | YoY %
Change |
| Consolidated | | | |
| Income | 533.9 | 7.0 | ** |
| Expenses* | 15.9 | 3.1 | ** |
| Earnings before income taxes | 518.7 | 4.7 | ** |
| Net earnings | 517.5 | 3.5 | ** |
| Basic Earnings per Common Share | 5.93 | - | ** |
| Distributions received from PLM | - | 6.3 | ** |
| Cash used in Operating Activities | (4.2) | (1.0) | ** |
| *Q3 2022 Expenses include a goodwill impairment charge of $11.4 million and a litigation provision of $4.0 million. | |
| **Information not meaningful. | |
| | |
Phil Mittleman, Chief Executive Officer of Aimia, said: "We are pleased with our third quarter results, the highlights of which included earnings of $5.93 per common share, primarily due to the close of the PLM transaction, whereby Aimia recognized a gain net of tax of $530.6 million. We have repurchased over 8 million shares of our common stock year to date, and we remain actively focused on investing in companies with long track records of free cash flow generation, that will also utilize our $785 million in tax losses. We currently have a robust pipeline of opportunities, some of which are in advanced discussions. We look forward to sharing further information with you in the near future."
Q3 2022 Highlights and Subsequent Events:
- Aimia reported income of $533.9 million mainly related to a $530.6 million gain on the divestiture of PLM. Consolidated net earnings were $517.5 million.
- Aimia closed the PLM transaction on July 15, 2022 and received $537.3 million in proceeds net of tax and transaction costs during the quarter. In addition, an earn out will be payable in cash for approximately $28.2 million on a net basis should the PLM loyalty program achieve certain targeted annual gross billings amounts by 2024.
Use of PLM Proceeds:
- Aimia is pursuing investments in cash generating businesses, which will utilize Aimia's sizeable tax losses.
- Year-to-date November 8, 2022 Aimia has repurchased 8,254,907 million shares for a total of $36.3 million. As of today's date, there are 84,233,305 shares outstanding.
This quarterly earnings release should be read in conjunction with Aimia's condensed interim financial statements and MD&A for the three and nine months ended September 30, 2022, which can be accessed on SEDAR as well as on Aimia's website under Investor Relations.
Holdings segment results for Q3 2022
During the third quarter of 2022, income from investments was $533.6 million, compared to $6.5 million of income in the same quarter last year mainly due to:
- Gain on disposal of equity-accounted investments related to the PLM transaction of $530.6 million;
- Aimia's non-cash equity pick-up of its share of Kognitiv's net loss of $6.5 million in the third quarter, compared to a share of net loss of $1.7 million in the same quarter last year, which also included Aimia's share of equity earnings from PLM in the comparative period;
- Positive net change in fair value of investments of $7.8 million in the third quarter mainly driven by foreign currency strengthening compared to the Canadian dollar on our TRADE X and Clear Media investments, compared to positive net change in fair value of investments of $7.9 million in the same quarter last year, and
- Income, dividend, and other investment income of $1.7 million in the third quarter, compared to $0.3 million in the same quarter last year primarily due to interest income earned on the TRADE X and Kognitiv convertible notes.
Expenses (excluding a goodwill impairment charge of $11.4 million) were $4.1 million, up $1.4 million from last year's quarter, mainly due to:
- An increase of $1.6 million in compensation expenses, driven mainly by a $4.0 million litigation provision, offset in part by a decrease of $2.3 million of share-based compensation and other performance awards mainly due to a larger reduction in price per common share this quarter compared to the same quarter last year, as well as lower vesting expense of the DSUs; and
- A decrease in professional, advisory and service fees as well as insurance, technology, and office related expenses of $0.2 million.
Equity-accounted Investment Performance Summary
KOGNITIV
Aimia owns a 48.8% equity stake in Kognitiv as of September 30, 2022.
Kognitiv's revenues are derived from platform subscriptions and commerce activity to global clients across the financial services, media, telecom, travel and hospitality and retail industries.
Customer retention at Kognitiv continues to be very high as it has renewed contracts with major brands such as HSBC, National Australia Bank and Avis earlier this year.
Kognitiv is undertaking a series of initiatives to reduce costs and drive efficiency as it rolls out its commercial offering, which is expected to drive the company towards positive EBITDA and to secure additional sources of financing as necessary.
The table below summarizes the performance of Kognitiv for the three and nine months ended September 30, 2022 and 2021. A detailed analysis of its performance is available in the MD&A:
| Kognitiv (millions of Canadian dollars) | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 |
| | | | | |
| Revenue(1) | 13.5 | 14.0 | 42.0 | 41.5 |
| Net loss | (10.8) | (9.6) | (40.1) | (36.6) |
| Adjusted EBITDA(1)(2) | (7.9) | (8.5) | (28.9) | (31.9) |
| 1. Kognitiv's financial results are presented on a continuing operations basis, excluding ISS discontinued operations. | | | | | | | | | | | | |
| 2. A non-GAAP measure. Non-GAAP financial measures are defined and reconciled to the most directly comparable GAAP measures in the section "Non-GAAP Financial Measures and Reconciliation to Comparable GAAP Measures" of this earnings release. See caution regarding Non-GAAP financial measures at the end of this earnings release. |
Other Investments
TRADE X
Aimia owns a 10.8% fully diluted equity stake in TRADE X as of September 30, 2022.
TRADE X is a global B2B cross-border automotive trading platform that connects buyers and sellers through an online marketplace powered by the TRADE X 'Brain' platform, a machine-learning, AI-driven technology which aids sellers in finding the world's highest bidders and gives buyers access to the best source markets.
On July 27, 2021, Aimia invested $44.0 million (US$35.0 million) as the lead investor of the convertible preferred shares funding round for TRADE X, at a US$250 million pre-money valuation.
On December 17, 2021, Aimia invested an additional $31.6 million (US$25.0 million) in a convertible note of TRADE X, the proceeds of which were used by TRADE X to continue executing its growth strategy. The convertible note has the option to convert to equity at a discount to the pre-money valuation of TRADE X's next qualified financing.
As of September 30, 2022, the fair value of the preferred shares has been estimated at $47.9 million(US$35.0 million), and the fair value of the convertible note has been estimated at $37.4 million (US$27.3 million).
TRADE X generated gross vehicle sales (GVS) of approximately $176.0 million in the third quarter of 2022, a significant increase from the same period last year, mainly the result of acquisitions closed at the end of the third and into the fourth quarter, but tracking below the full year guidance of approximately $1.0 billion that Aimia provided in its Q4 2021 earnings release as a result of a pullback in the volume and price of vehicles sold, primarily due to the company refocusing its business by reducing inventory risk and associated working capital needs, and focusing more on a transactional model. Aimia now expects TRADE X to generate gross vehicle sales of between $800 to $900 million for the full year in 2022.
CLEAR MEDIA
Aimia owns an indirect 10.85% shareholding in the privatized Clear Media as of September 30, 2022.
Clear Media is the largest operator of bus shelter advertising panels in China, with leading market shares of more than 70% in top-tier cities, including Shanghai, Guangzhou and Beijing, and broad presence in fast growing cities across the country. Clear Media provides one-stop solutions for nationwide advertising campaigns to their customers, through a network of more than 72,000 panels covering twenty-four cities, and 536 digital panels as of December 31, 2021.
In the nine months ended September 30, 2022, facing the resurgence of COVID-19 cases, China continued to apply zero-COVID policy, which has triggered full and partial lockdowns in many Chinese cities, including Shanghai, Beijing, and Guangzhou. These lockdowns are significantly affecting the demand for outdoor advertising and therefore, Clear Media's revenue are lower than in the same period in 2020 when Covid lockdowns began to unwind. Clear Media is in the process of mitigating these impacts via various cost-saving plans and delays in capital expenditures compared to normal course.
As of September 30, 2022, the fair value of the indirect investment in Clear Media Limited has been estimated at $62.3 million. Aimia recognized an unrealized fair value gain of $3.5 million and an unrealized fair value loss of $6.0 million during the three and nine months ended September 30, 2022, respectively, with the year-to-date unrealized fair value loss mainly due to the impacts of COVID-19 related lockdowns in China on demand for outdoor advertising, which have caused delays in the execution of Clear Media's business plan, offset in part by the strengthening of the Hong-Kong dollar versus the Canadian dollar.
Balance sheet and Liquidity
As of September 30, 2022, Aimia had cash and cash equivalents of $521.0 million.
Aimia's liquid portfolio of publicly listed equities had a market value of $36.6 million at the end of the third quarter of 2022 (excluding marketable securities held through Precog, presently valued at $15.9 million).
Aimia is seeking to acquire companies with long track records of free cash flow generation that will also utilize Aimia's sizeable tax assets.
Available Tax Losses
Tax losses approximated $785 million as of September 30, 2022, comprised of $390 million in capital losses and $395 million in net operating losses.
Returns to Shareholders
Normal Course Issuer Bid (NCIB)
On June 17, 2022, Aimia announced it had received approval from the Toronto Stock Exchange for the establishment of a new NCIB to repurchase for cancellation up to 7.8 million common shares during the period from June 21, 2022 to no later than June 20, 2023. On July 29, 2022 in connection with this program, it entered into an automatic share purchase plan.
During the third quarter, Aimia repurchased 7,327,331 common shares at an average price per share of $4.40for a total consideration of $32.3 million.
Subsequent to September 30, 2022, Aimia repurchased 384,300 common shares under its new NCIB at an average price per share of $3.55 for a total consideration of $1.4 million.
Dividends
Dividends of $3.1 million were paid on September 30, 2022 on the two series of outstanding preferred shares.
On November 8, 2022, the Board of Directors declared quarterly dividends of $0.300125 per Series 1 preferred share and $0.375688 per Series 3 preferred share. Dividends on the Series 1 and Series 3 preferred shares will be payable on December 30, 2022, to shareholders of record at the close of business on December 16, 2022.
Quarterly Conference Call and Audio Webcast Information