Loyalty Ventures Inc. (Nasdaq: LYLT), a leading provider of
tech-enabled, data-driven consumer loyalty solutions today
announced financial results for the first quarter ended March 31,
2022.
Commenting on the results, Charles Horn, Chief Executive Officer
said, “First quarter performance was in line with our expectations
during what is traditionally our seasonally slowest quarter. As
anticipated, the AIR MILES® Reward Program redemption patterns
began to normalize with the return of post-pandemic leisure travel,
which coincided with the launch of the first phase of our next
generation travel platform. BrandLoyalty expanded its local
sourcing and took actions to mitigate logistical issues as it
prepares to deliver more campaigns in 2022.
“In the first quarter, AIR MILES renewed top five Sponsor,
American Express, and added new brands, including Uniqlo, H&R
Block and QE Home to airmilesshops.ca, its portal where consumers
can earn AIR MILES reward miles for shopping online. Concurrently,
we activated a national marketing campaign to drive greater
Collector enrollment and engagement and have launched several
additional marketing campaigns in conjunction with AIR MILES’ 30th
anniversary. At BrandLoyalty, we continue to compete effectively
for new business and to innovate, most recently launching a pilot
program that makes personalized offers to consumers when they are
logged into our partners’ mobile apps. Also, we decided to pause
future business in Russia in light of the Russia/Ukraine conflict
but will honor commitments to current programs with Russian grocery
chain clients in fulfillment of contractual obligations.
“A key development recently announced was the change in
leadership at our AIR MILES Reward Program. We are thrilled that
Shawn Stewart has agreed to re-join the company as President of the
AIR MILES Reward Program. His proven track record and passion for
building new capabilities and transforming organizations and brands
align with our strategic objectives. He brings excellent
credentials to the AIR MILES Reward Program as well as a deep
understanding of Sponsor needs, Collector behaviors, and our
business development opportunities. Rick Neuman also joined the AIR
MILES Reward Program as Chief Technology Officer, where he will
leverage his experience in creating product and technology
strategies for global merchants to develop, implement and oversee
the program’s technology strategy and roadmap. These new additions
to the AIR MILES Reward Program leadership team are inspired to
build upon our 30-year history as a premier Canadian loyalty
program.”
First Quarter 2022 Consolidated Financial
Results
Total revenue for the first quarter was $155 million, down 12%
from the first quarter of 2021. Adjusted EBITDA of $25 million was
down 36% year over year. Net income was $1 million, or $0.04 per
diluted share.
First Quarter Segment Financial Results
AIR MILES Reward Program: Revenue decreased 6%
to $66 million, compared to $70 million in the first quarter of
2021, primarily due to the increase in the Collector value
proposition implemented in late 2021, and the impact of the decline
in AIR MILES reward miles issued during the pandemic in 2020 and
2021. Adjusted EBITDA decreased 19% to $29 million, compared to the
first quarter of 2021, due to lower revenue and additions to our
business development and technology teams.
The 4% year over year decrease in AIR MILES reward miles
issuance related to the non-renewal of two Sponsors in the first
quarter of 2021; adjusting for non-renewals, issuance was
consistent with the prior year quarter. AIR MILES reward miles
redeemed increased 43% compared to the first quarter of 2021,
primarily reflecting pent-up demand for travel as COVID-related
restrictions abated.
BrandLoyalty: Revenue decreased 16% to $89
million, compared to $106 million in the first quarter of 2021,
primarily resulting from the timing of larger programs. Adjusted
EBITDA of $236,000 was down year over year due to the lost margin
from the decline in revenue but was consistent with
expectations.
Summary & Outlook
“2022 is a year of transition for Loyalty Ventures, as we move
forward with significant investments to capitalize on the market
leadership positions of both the AIR MILES Reward Program and
BrandLoyalty. We are engaging with Sponsors as we embark on
programs to accelerate digital innovation, enhance content
personalization, and increase program value at the AIR MILES Reward
Program to ensure that our investments will yield meaningful
long-term returns. At BrandLoyalty, we are closely watching
consumer trends in the more than 40 countries in which we operate
and are taking into consideration our decision to pause our
programs in Russia. Based on our current visibility, and due to
developments in Russia, we expect full year 2022 revenue to be at
the lower end of our $775 million to $800 million guidance
range.
“Our resources are fully focused on accelerating long term
growth in ways that will benefit our Collectors, Sponsors and
Clients including enhancing the value proposition and upgrading the
Collector experience at the AIR MILES Reward Program and expanding
choices at BrandLoyalty. In addition to our 2022 investments and
initiatives underway, we see opportunities to take our data-driven
loyalty solutions to the next level by integrating and leveraging
the unique capabilities resident in each of these businesses,” Mr.
Horn concluded.
First Quarter 2022 Conference Call and Webcast
Information
Loyalty Ventures Inc. will hold a conference call to discuss its
results and business outlook at 4 p.m. CT on Thursday, April 28,
2022. The live webcast of the conference call can be accessed here.
The webcast replay will be available on the Company’s investor
relations website for up to one year.
About Loyalty Ventures Inc.Loyalty Ventures
Inc. (Nasdaq: LYLT), an S&P SmallCap 600 company, is a leading
provider of tech-enabled, data-driven consumer loyalty solutions.
We help partners achieve their strategic and financial objectives
including increased consumer basket size, shopper traffic,
frequency, digital reach and enhanced program reporting and
analytics.
We help financial services providers, retailers and other
consumer-facing businesses create and increase customer loyalty
across multiple touch points from traditional to digital to mobile
and emerging technologies. We own and operate the AIR MILES® Reward
Program, Canada’s most recognized loyalty program, and
Netherlands-based BrandLoyalty, a global provider of
purpose-driven, tailor-made, campaign-based loyalty solutions for
grocers and other high-frequency retailers.
At our AIR MILES Reward Program, AIR MILES Collectors earn AIR
MILES at more than 300 leading Canadian, global and online brands
and at thousands of retail and service locations across the
country. This activity powers an unmatched data asset which along
with world-class analytics and marketing capabilities, enables
clients to accelerate their marketing activities and ROI. AIR MILES
provides Collectors the flexibility and choice to use AIR MILES on
aspirational rewards such as merchandise, travel, events or
attractions or, instantly, in-store or online, through AIR MILES
Cash at participating Partner locations. For more information,
visit: airmiles.ca. Having celebrated the issuance of its 100
Billionth Mile in 2021, AIR MILES invites Canadians to visit the
Program on Facebook, Instagram and Twitter.
BrandLoyalty provides winning loyalty campaigns by connecting
high-frequency retailers, brand partners, and shoppers.
BrandLoyalty changes shoppers’ behavior in high-frequency retail
worldwide - both on a transactional and emotional level. Find out
more via brandloyalty.com or on LinkedIn and YouTube.
More information about Loyalty Ventures can be found at
loyaltyventures.com.
Caution Regarding Forward-Looking
StatementsThis release contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements give our expectations or
forecasts of future events and can generally be identified by the
use of words such as “believe,” “expect,” “anticipate,” “estimate,”
“intend,” “project,” “plan,” “likely,” “may,” “should” or other
words or phrases of similar import. Similarly, statements that
describe our business strategy, outlook, objectives, plans,
intentions or goals also are forward-looking statements. Examples
of forward-looking statements include, but are not limited to,
statements we make regarding, and the guidance we give with respect
to, our anticipated operating or financial results and future
economic conditions, including, but not limited to, changes in
geopolitical conditions, fluctuation in currency exchange rates,
market conditions and COVID-19 or other impacts related to
reduction in demand from clients, supply chain disruption with
respect to our rewards, disruptions in the airline or travel
industries and labor shortages due to quarantine.
We believe that our expectations are based on reasonable
assumptions. Forward-looking statements, however, are subject to a
number of risks and uncertainties that could cause actual results
to differ materially from the projections, anticipated results or
other expectations expressed in this release, and no assurances can
be given that our expectations will prove to have been correct.
These risks and uncertainties include, but are not limited to,
factors set forth in the Risk Factors section of both (1) our Form
10-K for the most recently ended fiscal year and (2) any updates in
Item 1A, or elsewhere, in our Quarterly Reports on Form 10-Q filed
for periods subsequent to such Form 10-K or any updates thereto.
Our forward-looking statements speak only as of the date made, and
we undertake no obligation, other than as required by applicable
law, to update or revise any forward-looking statements, whether as
a result of new information, subsequent events, anticipated or
unanticipated circumstances or otherwise.
Financial MeasuresIn addition to the results
presented in accordance with generally accepted accounting
principles, or GAAP, the Company may present financial measures
that are non-GAAP measures, adjusted EBITDA and adjusted EBITDA
margin. The Company believes that these non-GAAP financial
measures, viewed in addition to and not in lieu of the Company’s
reported GAAP results, provide useful information to investors
regarding the Company’s performance, liquidity and overall results
of operations. The Company uses adjusted EBITDA as an integral part
of internal reporting to measure the performance and operational
strength of reportable segments and to evaluate the performance of
senior management. Adjusted EBITDA eliminates the uneven effect
across all reportable segments of non-cash depreciation of tangible
assets and amortization of intangible assets, including certain
intangible assets that were recognized in business combinations,
and the non-cash effect of stock compensation expense. In addition,
adjusted EBITDA eliminates strategic transaction costs, which
represent costs related to the separation. Adjusted EBITDA margin
represents adjusted EBITDA divided by revenue.
Reconciliation of Non-GAAP Financial
MeasuresReconciliations to comparable GAAP financial
measures are available in the accompanying schedules, which are
posted as part of this earnings release in both the Press Releases
and Investor Relations sections on the Company’s website
(www.loyaltyventures.com). No reconciliation is provided with
respect to forward looking annual guidance as we cannot reliably
predict all necessary components or their impact to reconcile these
non-GAAP measures without unreasonable effort. The events
necessitating a non-GAAP adjustment are inherently unpredictable
and may have a material impact on the Company’s future results.
The financial measures presented are consistent with the
Company’s historical financial reporting practices. The non-GAAP
financial measures presented herein may not be comparable to
similarly titled measures presented by other companies and are not
identical to corresponding measures used in other various
agreements or public filings.
Investor Contact:Lynn MorgenADVISIRY
PARTNERS lynn.morgen@advisiry.com+1.212.750.5800
LOYALTY VENTURES
INC.UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
STATEMENTS OF INCOME
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
2022 |
|
2021 |
|
|
(in thousands, except per share amounts) |
Revenues |
|
|
|
|
|
Redemption, net |
$ |
84,976 |
|
$ |
104,864 |
|
Services |
|
63,783 |
|
|
66,223 |
|
Other |
|
6,186 |
|
|
5,467 |
|
Total revenue |
|
154,945 |
|
|
176,554 |
|
Operating expenses |
|
|
|
|
|
Cost of operations (exclusive of depreciation and amortization
disclosed separately below) |
|
127,878 |
|
|
135,846 |
|
General and administrative |
|
6,209 |
|
|
3,685 |
|
Depreciation and other amortization |
|
9,125 |
|
|
8,595 |
|
Amortization of purchased intangibles |
|
288 |
|
|
439 |
|
Total operating expenses |
|
143,500 |
|
|
148,565 |
|
Operating income |
|
11,445 |
|
|
27,989 |
|
Interest expense (income),
net |
|
9,052 |
|
|
(69 |
) |
Income before income taxes and
loss from investment in unconsolidated subsidiary |
|
2,393 |
|
|
28,058 |
|
Provision for income
taxes |
|
1,375 |
|
|
8,984 |
|
Loss from investment in
unconsolidated subsidiary – related party, net of tax |
|
— |
|
|
36 |
|
Net income |
$ |
1,018 |
|
$ |
19,038 |
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
Basic |
$ |
0.04 |
|
$ |
0.77 |
|
Diluted |
$ |
0.04 |
|
$ |
0.77 |
|
|
|
|
|
|
|
Weighted average shares: |
|
|
|
|
|
Basic |
|
24,598 |
|
|
24,585 |
|
Diluted |
|
24,626 |
|
|
24,585 |
|
LOYALTY VENTURES
INC.UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
2022 |
|
|
2021 |
|
|
(in thousands, except per share amounts) |
ASSETS |
|
|
|
|
|
Cash and cash equivalents |
$ |
139,724 |
|
|
$ |
167,601 |
|
Accounts receivable, net |
|
271,084 |
|
|
|
288,251 |
|
Inventories, net |
|
213,183 |
|
|
|
188,577 |
|
Redemption settlement assets,
restricted |
|
699,531 |
|
|
|
735,131 |
|
Other current assets |
|
28,653 |
|
|
|
28,627 |
|
Total current assets |
|
1,352,175 |
|
|
|
1,408,187 |
|
Property and equipment,
net |
|
74,563 |
|
|
|
79,959 |
|
Right of use assets -
operating |
|
96,459 |
|
|
|
99,515 |
|
Deferred tax asset, net |
|
58,363 |
|
|
|
58,128 |
|
Intangible assets, net |
|
2,729 |
|
|
|
3,095 |
|
Goodwill |
|
639,947 |
|
|
|
649,958 |
|
Other non-current assets |
|
24,739 |
|
|
|
24,885 |
|
Total assets |
$ |
2,248,975 |
|
|
$ |
2,323,727 |
|
LIABILITIES AND EQUITY |
|
|
|
|
|
Accounts payable |
$ |
81,149 |
|
|
$ |
103,482 |
|
Accrued expenses |
|
136,660 |
|
|
|
144,997 |
|
Deferred revenue |
|
916,679 |
|
|
|
924,789 |
|
Current operating lease
liabilities |
|
9,414 |
|
|
|
10,055 |
|
Current debt |
|
50,625 |
|
|
|
50,625 |
|
Other current liabilities |
|
133,527 |
|
|
|
118,444 |
|
Total current liabilities |
|
1,328,054 |
|
|
|
1,352,392 |
|
Deferred revenue |
|
95,443 |
|
|
|
97,167 |
|
Long-term operating lease
liabilities |
|
100,422 |
|
|
|
103,242 |
|
Long-term debt |
|
591,714 |
|
|
|
603,488 |
|
Other liabilities |
|
20,676 |
|
|
|
20,874 |
|
Total liabilities |
|
2,136,309 |
|
|
|
2,177,163 |
|
Common stock, $0.01 par value;
authorized, 200,000 shares; issued, 24,612 shares and 24,585 shares
at March 31, 2022 and December 31, 2021, respectively |
|
246 |
|
|
|
246 |
|
Additional
paid-in-capital |
|
269,847 |
|
|
|
266,775 |
|
Accumulated deficit |
|
(54,365 |
) |
|
|
(55,383 |
) |
Accumulated other
comprehensive loss |
|
(103,062 |
) |
|
|
(65,074 |
) |
Total equity |
|
112,666 |
|
|
|
146,564 |
|
Total liabilities and
equity |
$ |
2,248,975 |
|
|
$ |
2,323,727 |
|
LOYALTY VENTURES
INC.UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
March 31, |
|
2022 |
|
|
2021 |
|
|
(in thousands) |
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
Net income |
$ |
1,018 |
|
|
$ |
19,038 |
|
Adjustments to reconcile net
income to net cash (used in) provided by operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
9,413 |
|
|
|
9,034 |
|
Deferred income tax benefit |
|
(1,054 |
) |
|
|
(478 |
) |
Non-cash stock compensation |
|
2,328 |
|
|
|
1,853 |
|
Change in other operating
assets and liabilities |
|
(43,789 |
) |
|
|
62,488 |
|
Other |
|
3,366 |
|
|
|
4,922 |
|
Net cash (used in) provided by operating activities |
|
(28,718 |
) |
|
|
96,857 |
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
Change in redemption
settlement assets, restricted |
|
(8,324 |
) |
|
|
(13,109 |
) |
Capital expenditures |
|
(3,698 |
) |
|
|
(4,548 |
) |
Distributions from investment
in unconsolidated subsidiary – related party |
|
— |
|
|
|
795 |
|
Net cash used in investing activities |
|
(12,022 |
) |
|
|
(16,862 |
) |
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
Borrowings under debt
agreements |
|
1,000 |
|
|
|
— |
|
Repayments of borrowings |
|
(13,656 |
) |
|
|
— |
|
Dividends paid to former
Parent |
|
— |
|
|
|
(120,000 |
) |
Net transfers to former
Parent |
|
— |
|
|
|
(3,514 |
) |
Net transfers from former
Parent for Separation-related transactions |
|
1,569 |
|
|
|
— |
|
Other |
|
(579 |
) |
|
|
— |
|
Net cash used in financing activities |
|
(11,666 |
) |
|
|
(123,514 |
) |
|
|
|
|
|
|
Effect of exchange rate
changes on cash, cash equivalents and restricted cash |
|
(662 |
) |
|
|
(1,571 |
) |
|
|
|
|
|
|
Change in cash, cash
equivalents and restricted cash |
|
(53,068 |
) |
|
|
(45,090 |
) |
Cash, cash equivalents and
restricted cash at beginning of year |
|
232,602 |
|
|
|
337,525 |
|
Cash, cash equivalents and restricted cash at end of year |
$ |
179,534 |
|
|
$ |
292,435 |
|
LOYALTY VENTURES
INC.UNAUDITED SUMMARY OF FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
(in thousands, except percentages) |
|
Segment
Revenue: |
|
|
|
|
|
|
|
|
AIR MILES Reward Program |
$ |
65,708 |
|
|
$ |
70,257 |
|
|
(6 |
) |
% |
BrandLoyalty |
|
89,281 |
|
|
|
106,297 |
|
|
(16 |
) |
|
Corporate/Other |
|
— |
|
|
|
— |
|
|
— |
|
|
Eliminations |
|
(44 |
) |
|
|
— |
|
|
nm* |
|
Total |
$ |
154,945 |
|
|
$ |
176,554 |
|
|
(12 |
) |
% |
|
|
|
|
|
|
|
|
|
Segment Adjusted
EBITDA: |
|
|
|
|
|
|
|
|
AIR MILES Reward Program |
$ |
29,405 |
|
|
$ |
36,451 |
|
|
(19 |
) |
% |
BrandLoyalty |
|
236 |
|
|
|
5,706 |
|
|
(96 |
) |
|
Corporate/Other |
|
(4,942 |
) |
|
|
(3,281 |
) |
|
51 |
|
|
Total |
$ |
24,699 |
|
|
$ |
38,876 |
|
|
(36 |
) |
% |
|
|
|
|
|
|
|
|
|
Key Performance
Indicators (in millions): |
|
|
|
|
|
|
|
|
AIR MILES reward miles issued |
|
1,064.7 |
|
|
|
1,111.6 |
|
|
(4 |
) |
% |
AIR MILES reward miles redeemed |
|
1,057.1 |
|
|
|
739.4 |
|
|
43 |
|
% |
* not meaningful
LOYALTY VENTURES
INC.UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
2022 |
|
2021 |
|
|
(in thousands) |
Adjusted
EBITDA: |
|
|
|
|
|
Net income |
$ |
1,018 |
|
$ |
19,038 |
|
Loss from investment in unconsolidated subsidiary – related party,
net of tax |
|
— |
|
|
36 |
|
Provision for income taxes |
|
1,375 |
|
|
8,984 |
|
Interest expense (income), net |
|
9,052 |
|
|
(69 |
) |
Depreciation and other amortization |
|
9,125 |
|
|
8,595 |
|
Amortization of purchased intangibles |
|
288 |
|
|
439 |
|
Stock compensation expense |
|
2,328 |
|
|
1,853 |
|
Strategic transaction costs (1) |
|
1,513 |
|
|
— |
|
Adjusted EBITDA |
$ |
24,699 |
|
$ |
38,876 |
|
(1) |
Represents costs associated with the separation, which were
comprised of amounts associated with the employee matters
agreement. |
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