(All figures in Canadian dollars unless otherwise noted)
TORONTO, Nov. 11, 2021 /CNW/ - Aimia Inc. (TSX: AIM) reported its financial results for the three and nine months ended September 30, 2021.
Q3 2021 Highlights:
- Aimia reported income of $7.0 million and net earnings from continuing operations of $3.5 million.
- PLM generated net earnings of $10.0 million and adjusted EBITDA of $17.7 million; Aimia received a $6.3 million distribution from PLM.
- Aimia invested $44.0 million (US$35.0 million) in TRADE X, a global B2B automotive cross-border trading platform, at a pre-money valuation of $314 million (US$250 million), representing a 12.3% equity stake on a fully diluted basis.
- The privatization of Clear Media Limited was completed following the acquisition of all the remaining shares by the consortium of investors through their special purpose vehicle.
Subsequent to the end of the quarter:
- Aimia announced that it is in discussions with Aeromexico and its Debtors regarding a potential transaction whereby Aimia would divest its 48.9% equity stake in PLM which would become a wholly-owned subsidiary of Aeromexico.
- Aimia invested $12.4 million in a new special purpose vehicle created to pursue a leveraged buyout strategy.
Q3 2021 financial highlights – continuing operations, unless otherwise noted:
| | | |
| HIGHLIGHTS | Three Months Ended September 30, | |
| (in millions of Canadian dollars,
except per share amounts) | 2021 | 2020 | YoY %
Change | |
| Continuing operations(1) | | | | |
| Income | 7.0 | (1.1) | ** | |
| Expenses | 3.1 | 8.8 | -64.8% | |
| Earnings (loss) before income taxes | 4.7 | (9.9) | ** | |
| Net Earnings (loss) | 3.5 | (10.7) | ** | |
| Loss per Common Share | - | (0.15) | ** | |
| Distributions received from PLM | 6.3 | - | ** | |
| Cash used in Operating Activities | (1.0) | (7.7) | -87.0% | |
| Consolidated | | | | |
| Net Earnings (loss) | 3.5 | (10.8) | ** | |
| Loss per Common Share | - | (0.15) | ** | |
| Cash used in Operating Activities | (1.0) | (7.7) | -87.0% | |
| | | | | |
| ** Information not meaningful | | | | |
| 1. Continuing operations refers to consolidated results excluding discontinued operations. | |
| | | | | |
This quarterly earnings release should be read in conjunction with Aimia's consolidated financial statements and MD&A which can be accessed on SEDAR as well as the company's website under Investor Relations.
Phil Mittleman, Chief Executive Officer, commented: "We are very pleased with our third quarter results. Aimia has an exciting portfolio of assets, including our new investment in TRADE X, a business which generated $87 million in gross vehicle sales and positive EBITDA in the third quarter of 2021. With regard to PLM, our discussions with Aeromexico in respect to a potential transaction are ongoing, and we look forward to providing an update at the appropriate time. We will continue to pursue our strategy of maximizing the value of our existing holdings while seeking out new investment opportunities to deliver strong returns to our stakeholders."
Segment Highlights for Q3 2021
The Holdings segment includes Aimia's equity-accounted investments in PLM, Kognitiv, and investments in Clear Media Limited, TRADE X, a special purpose vehicle, and minority investments in various public securities and investments in limited partnerships. Also included are holding company operating costs related to public company disclosure and Board costs, executive leadership, finance and administration.
The Investment Management segment consists of the discretionary portfolio management services provided to institutional investors and high net worth individuals operated under Mittleman Investment Management, LLC ("MIM").
Holdings segment results
During the third quarter of 2021, total income was $6.5 million, mostly due to the $6.3 million unrealized fair value gain of Aimia's investment in AirAsia.
Expenses were $2.7 million, down from $8.3 million in the same quarter last year, mainly due to a decrease in compensation and benefits expense driven by a decrease of $2.7 million of share-based compensation and other performance awards. Excluding share-based compensation and other compensation awards, expenses were $2.9 million, a decrease of $2.9 million from $5.8 million last year.
Investment Management segment results
During the third quarter of 2021, revenue from investment management fees were $0.7 million, and earnings before income taxes were $0.1 million.
Assets under management were $199.8 million as of September 30, 2021. This represents a 0.8% decrease from the $201.4 million assets under management as of September 30, 2020.
Equity-accounted Investment Performance Summary
PLM
Our 48.9% equity stake in PLM, owner and operator of Club Premier, the coalition loyalty program in Mexicothat operates the Aeromexico frequent flyer program, delivered the following financial results for the three and nine months ended September 30, 2021 and 2020. A detailed analysis of its financial performance is available in the MD&A:
| PLM operating metric (millions) | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
| | | | | |
| Enrolled members | 7.3 | 6.9 | 7.3 | 6.9 |
| PLM financial metric (millions of Canadian dollars) | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
| | | | | |
| Revenue | 57.1 | 36.0 | 153.1 | 142.0 |
| Net earnings(2) | 10.0 | 11.5 | 30.7 | 4.1 |
| Gross Billings | 62.4 | 35.0 | 162.0 | 149.0 |
| Adjusted EBITDA(1)(3) | 17.7 | 13.7 | 47.6 | 39.2 |
| Cash from (used in) operating activities(4)(5) | 30.1 | 8.5 | 85.4 | (67.0) |
| Free Cash Flow(1)(4)(5) | 29.7 | 8.3 | 84.2 | (67.5) |
| Cash and cash equivalents | 128.2 | 63.6 | 128.2 | 63.6 |
| | | | | |
| 1. A non-GAAP measurement. Non-GAAP financial measures are defined and reconciled to the most comparable IFRS 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. |
| 2. 9M 2020 includes the impact of a $13.2 million (US$9.8 million) related to the provision on certain Aeromexico unsecured receivables. |
| 3. 9M 2020 includes the impact of $7.6 million (US$5.5 million) related to the provision on certain Aeromexico unsecured receivables. |
| 4. Q3 and 9M 2021 include the benefit of $12.3 million (Q3 2020: $13.1 million) and $32.7 million (9M 2020: $15.4 million) from the usage of the prepaid rewards tickets. |
| 5. 9M 2020 includes the impact of $20.1 million (US$15.0 million) pre-purchase of award tickets in Q1 2020, and the impact of $69.3 million (US$50.0 million) pre-purchase of award tickets in Q2 2020. |
KOGNITIV
Aimia owns a 48.8% stake in Kognitiv, a B2B technology company that enables collaborative commerce for global clients across the financial services, media, telecom, hospitality and retail sectors. Clients including banks, major retailers, and loyalty program providers can collaborate in safe, peer-to-peer networks with hotels, airlines and other industries with perishable inventory, to increase their yield on assets, significantly reduce distribution costs, and leverage zero-party data to create hyper-personalized offers that drive customer lifetime value.
The table below summarizes the performance of Kognitiv for the three and nine months ended September 30, 2021 and 2020. A detailed analysis of its performance is available in the MD&A:
| | | | | |
| Kognitiv (millions of Canadian dollars) | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020(2) |
| | | | | |
| Revenue(1) | 14.0 | 21.3 | 41.5 | 25.3 |
| Net loss | (9.6) | (8.5) | (36.6) | (8.7) |
| Adjusted EBITDA(1)(3) | (8.5) | (5.7) | (31.9) | (6.2) |
| | | | | |
| 1. Kognitiv's financial results are presented on a continuing operations basis, excluding ISS discontinued operations. |
| 2. Aimia closed the Kognitiv transaction on June 18, 2020. |
| 3. A non-GAAP measurement. Non-GAAP financial measures are defined and reconciled to the most comparable IFRS 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
On July 27, 2021, Aimia announced that it had invested $44.0 million (US$35.0 million) as the lead investor of the convertible preferred shares funding round for TRADE X, a global B2B cross-border automotive trading platform, at a US$250 million pre-money valuation.
Following Aimia's announcement of this transaction, an additional US$10.0 million of convertible preferred shares were issued by TRADE X to other strategic investors in a subsequent closing, bringing Aimia's fully diluted stake in TRADE X to 12.3%.
The TRADE X 'Brain' platform is a machine-learning, AI-driven technology that connects buyers and sellers through a transparent and compliant marketplace to aid sellers in finding the world's highest bidders and gives buyers access to the best source markets. TRADE X enables users to seamlessly transact online in a quick and secure environment with all the complexities of international trade – compliance, anti-money laundering regulations, vehicle inspection, currency exchange, digital trade documentation, payments and financing – all managed by TRADE X.
TRADE X boasts a blue-chip client base and is growing at a remarkable rate as it expands its market reach to other countries through organic growth and strategic acquisitions.
The following are news releases issued by TRADE X in the quarter:
- B2B Automotive Trading Platform TRADE X Secures C$44 Million in New Equity Financing for Global Expansion (Click link)
- TRADE X Announces US$10 Million in Equity Funding to Continue Global Expansion (Click link)
- TRADE X Announces Acquisition of Automotive Export Company Techlantic Ltd. (Click link)
- TRADE X Announces Data Integration Agreement with Leading Automotive Data Provider Canadian Black Book (Click link)
CLEAR MEDIA
Aimia owns an indirect 10.85% shareholding in the privatized Clear Media, one of the largest outdoor advertising firms in China with a network of over 61,000 display panels covering 24 cities, including key cities of Shanghai, Guangzhou and Beijing, as of June 30, 2021.
The planned privatization of Clear Media Limited was completed on September 27, 2021 following the acquisition of all of the outstanding shares of Clear Media Limited by the consortium of investors through their special purpose vehicle. The consortium owns an 89.15% indirect shareholding in the privatized Clear Media which is comprised of Mr. Han Zi Jing, Chief Executive Officer of Clear Media ("Forward Elite") at 40%, Ant Fin (Hong Kong) Holding Limited ("Antfin") at 30%, JCDecaux Innovate (a wholly owned subsidiary of JCDecaux SA) at 23% and China Wealth Growth Fund III L.P. ("CWG Fund") at 7%.
Aimia expects Clear Media's management team to continue executing its growth-oriented plan of expanding and digitizing its bus shelter advertising panel network across select cities in China to grow their advertising revenue and clientele.
As of September 30, 2021, the fair value of Clear Media was $68.4 million, up from $66.9 million as of June 30, 2021 and down from $72.2 million as of September 30, 2020, mostly reflecting the movements in exchange rates of the Canadian dollar versus the Hong Kong dollar.
SPECIAL PURPOSE VEHICLES
In November 2020, Aimia announced an initial commitment of $6.4 million (US$5.0 million) to a special purpose vehicle created to pursue a leveraged buyout of a target. As of September 30, 2021, the fair value of the special purpose vehicle increased to $8.1 million.
The special purpose vehicle continues to accumulate shares of the publicly listed target company, and has engaged the target company's management to explore strategic options that can potentially surface value to its shareholders. If a leveraged buyout is consummated, Aimia also has the option to purchase up to a total of 25% of the potential acquisition in an industry leader expected to generate attractive returns for Aimia stakeholders.
In November 2021, Aimia invested $12.4 million (US$10.0 million) in a second special purpose vehicle created to pursue a similar leveraged buyout strategy.
Balance sheet
As of September 30, 2021, the company had cash and cash equivalents of $70.1 million, excluding cash held at Precog of $0.1 million which is now consolidated in Aimia's financial statements.
Aimia's liquid portfolio of publicly listed equities had a market value of $65.9 million at the end of the third quarter of 2021, with unrealized gains totalling $16.9 million up until the end of the third quarter of 2021.
Subsequent to the end of the third quarter of 2021, Aimia received total net proceeds of $18.7 million, resulting in a gain of $9.7 million from the sale of the company's entire stake in Newmark Group, Inc (Nasdaq: NMRK). Aimia also invested $12.4 million (US$10.0 million) in a second special purpose vehicle.
Aligned with the corporate strategy, the company's investment committee will seek the best investment opportunities, on a global basis, to deploy its cash, and potentially utilize its tax losses, on acquisitions of free cash flow generating businesses with taxable income that can upstream distributions to the holding company.
The company will also invest in public equities that have been identified as significantly undervalued businesses with discernible catalysts to surface stakeholder value.
Returns to Shareholders
Normal Course Issuer Bid (NCIB)
On June 17, 2021, Aimia announced it had received approval from the Toronto Stock Exchange for the establishment of a new NCIB to repurchase for cancellation up to 7.3 million common shares during the period from June 21, 2021 to no later than June 20, 2022.
Aimia did not make any purchases under its NCIB in the three and nine months ended September 30, 2021.
Dividends
Dividends of $3.1 million were paid on September 30, 2021 on the two series of outstanding preferred shares.
On November 10, 2021, 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 31, 2021, to shareholders of record at the close of business on November 18, 2021.
Quarterly Conference Call and Audio Webcast Information
Aimia will host a conference call to discuss its third quarter 2021 financial results at 9:00 a.m. EDT on November 11, 2021. The call will be webcast at the following URL link.