ADVANTEX ANNOUNCES FISCAL 2008 SECOND-QUARTER RESULTS
2/14/2008 12:00:00 AM

 

NEWS RELEASE

Advantex Announces Fiscal Second-Quarter Results

 Company continuing to make steady progress in core areas on which it is focusing for future growth in revenue and profitability

• Financings completed late in second quarter and in January will enable a doubling of the Transaction Credits on the Balance Sheet and growth of Advance Purchase Marketing Program
• Expects future revenue growth to result from higher Transaction Credits deployed as more merchants are enrolled in Advance Purchase Marketing Program
• Conference call and webcast on Friday, February 15 at 8:30 a.m. (eastern)

Toronto, February 14, 2008 – Advantex Marketing International Inc. (TSX:ADX), a leading specialist in merchant funding and loyalty marketing programs, today announced its results for the fiscal second quarter and six months ended December 31, 2007. All references to quarters or years are for the fiscal periods and all currency amounts are in Canadian dollars unless otherwise noted.

Financial Performance – Highlights

(millions of $s, except per share amounts)

-----------------------------------------------------------------------------------------------------------------
                                             Three months    Three months  Six months   Six months 
                                             Ended           Ended         Ended        Ended
                                             December 31,    December 31   December 31, December 31,
                                             2007            2006          2007         2006
------------------------------------------------------------------------------------------------------------------
Revenue                                      3.2             3.4           6.1          5.7
------------------------------------------------------------------------------------------------------------------
Direct expenses                              1.4             1.2           2.6          2.0 

-------------------------------------------------------------------------------------------------------------------
Gross profit                                 1.8             2.2           3.5          3.7
-------------------------------------------------------------------------------------------------------------------
Sales, general, and 
 administrative expenses                     1.8             1.7           3.5          3.4
-------------------------------------------------------------------------------------------------------------------
Contribution from operations                 0.0             0.5           0.0          0.3
-------------------------------------------------------------------------------------------------------------------
Earnings (loss) before 
 amortization and interest                   0.0            (0.7)         (0.1)        (0.8)
-------------------------------------------------------------------------------------------------------------------
Net earnings (loss)                         (0.3)           (1.0)         (0.7)        (1.3)
-------------------------------------------------------------------------------------------------------------------
Net earnings (loss) per
 common share                              ($0.00)         ($0.01)       ($0.01)       $0.02)

 

“Through the second quarter, we continued to make steady progress in the core areas on which Advantex is focusing to achieve future growth and profitability,” said Kelly E. Ambrose, President and Chief Executive Officer. “The extent of the progress that we are making is not fully evident in the reported financial results.

“For example, revenue from our popular Advance Purchase Marketing Program was down in the 2008 second quarter at $1.1 million, compared with $1.7 million a year earlier,” Mr. Ambrose continued. “This decline is partially due to our initiative to move merchants already enrolled to either a Marketing Only program or to the Advance Purchase Marketing program with larger advances. This realignment resulted in more of the enrolled merchants being in the Marketing Only program, for which revenue increased 41.0 percent in the quarter compared with a year ago. The second factor for the decline in the Advance Purchase Marketing Program was the funding constraints that we had to manage prior to completing additional financing agreements in December. We continued to attract merchants to our Advance Purchase Marketing program, but these funding constraints meant we were unable to activate them which created a significant backlog of merchants.   

“Since completing in late December our new financing for the Advance Purchase Marketing Program, we have been addressing this backlog and a ramp-up in revenue should become evident in future quarters,” Mr. Ambrose said. “In addition to our progress in securing financing to grow the Advance Purchase Marketing Program, revenue for our Online operations grew 43.3 percent (in U.S. dollars, the currency of the program; 32.3 percent in Canadian dollars) in the second quarter, compared with a year ago. The growth is mainly the result of increased marketing support and stronger awards promotions offered to online shoppers.

“We operated at approximately breakeven for the quarter and first half of 2008 in terms of Contribution from Operations,” Mr. Ambrose noted. “Our profitability was however affected by higher direct expenses which rose 15.1 percent in the second quarter because of higher award costs for the CIBC Advantex business as we increased award levels in selected categories and increased merchant marketing to improve our value proposition and support merchant retention. The special award promotions that helped to increase the Online business were another cost factor. Selling, general and administrative (SG&A) increases were related to our efforts to strength the company’s business processes and information technology infrastructure. Apart from focused expenses to support the core programs, we are continuing to control our costs.”

On December 18, 2007, the company announced a three-year agreement with Montcap Financial Corporation under which Advantex will be able to draw on at least $1.5 million for immediate deployment as cash advances to merchants participating in the Advance Purchase Marketing Program.  Advantex also will have access to up to an additional $3.5 million as it expands the program by offering participation to retailers across Canada.  Advantex estimates that there are about 100,000 retailers in Canada that would qualify for the program. 

 

On December 24, 2007 and January 31, 2008, Advantex announced the completion of two tranches, respectively, of a further financing that raised gross proceeds on $2.665 million through the sale Units comprising of $1,000 face value secured non-convertible debentures and a total of 1,975 common share purchase warrants of Advantex. Each warrant is exercisable to acquire one common share of Advantex at $0.06 per share during a three-year period. The debentures will yield 14.0 percent annually, payable quarterly, and mature on December 31, 2010. 

“With these financings, the strength of the relationships that we have forged with our business partners, and the positive response that we are continuing to receive from merchants across Canada, we feel confident about the outlook for Advantex. One measure of this should be growth in revenue as the funding enables us to double the level of Transaction Credits on our Balance Sheet with the increasing number of merchants enrolling in our program,” Mr. Ambrose said.

Conference Call and Webcast

Advantex will hold a conference call for analysts and investors to discuss its second-quarter results on February 15, 2008 at 8:30 a.m. (Eastern). 

Kelly Ambrose, President and Chief Executive Officer, and Mukesh Sabharwal, Vice-President and Chief Financial Officer, will be available to answer questions during the call.

To participate in the call, please dial 416-644-3419 or 1-800-731-6941 at least five minutes prior to the start of the call.

A live audio webcast of the conference call will be available at www.newswire.ca and www.advantex.com.

An archived recording of the call will be available at 416-640-1917 or 1-877-289-8525 (Passcode 21262985#) from noon on February 15 to 11:59 p.m. on February 22. An archived recording of the webcast will also be available at Advantex’s website.

Advantex will file its fiscal 2008 second-quarter statements and management’s discussion and analysis with SEDAR and they will be posted on the company’s website.

About Advantex Marketing International Inc.

Advantex is a specialist in the marketing services industry, managing white-labeled rewards accelerator programs for major affinity groups through which their members earn bonus frequent flyer miles and/or other rewards on purchases at participating merchants. Under the umbrella of each program, Advantex provides merchants with marketing, customer incentives, and secured future sales through its Advance Purchase Marketing model. Advantex partners include more than 700 restaurants, online retailers, golf courses, small inns and resorts, and major organizations, including CIBC, United Airlines, Delta Airlines, Alaska Airlines, and Lufthansa Airlines. Advantex is traded on the Toronto Stock Exchange under the symbol "ADX".  For additional information on Advantex, please visit www.advantex.com.

This press release contains certain "forward-looking statements". All statements, other than statements of historical fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future (including, without limitation, statements regarding financial and business prospects and financial outlook) are forward-looking statements. These forward-looking statements reflect the current expectations or beliefs of the Company based on information currently available to the Company. Forward-looking statements are subject to a number of risks, uncertainties and assumptions that may cause the actual results of the Company to differ materially from those discussed in the forward-looking statements, 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 the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things, changes in general economic and market conditions, changes to regulations affecting the Company's activities , uncertainties relating to the availability and costs of financing needed in the future, and delays in finalizing retail contract with CIBC. Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein. 

 

For further information please contact:

Mukesh Sabharwal

Vice-President and Chief Financial Officer

Tel: (416) 481-5657, ext. 249

E-mail: Mukesh.sabharwal@advantex.com