MONTREAL, Nov. 13, 2015 /CNW Telbec/ - Data-driven marketing and loyalty analytics company Aimia Inc. (TSX: AIM) today reported its financial results for the quarter ended September 30, 2015. All financial information is in Canadian dollars unless otherwise noted. This earnings release contains Non-GAAP financial measures which are further explained in the "Notes" section at the end of this release.
Highlights(1):
- Gross Billings guidance for 2015 updated to between $2.4 billion and $2.46 billion; return to growth expected in 2016
- On track to deliver 9% Adjusted EBITDA margin in 2015; third quarter Adjusted EBITDA margin was 8.5%
- Implementing cost saving initiatives with annualized impact of $20 million for full year 2016 and a second $20 million of annualized cost savings to be implemented by the end of 2016
- Returns to common shareholders, including $225 million of share repurchases, total $348 million since November 2014
- Free Cash Flow before Dividends Paid per Common Share increased to $0.34 in the third quarter
- Guiding to growth in Gross Billings, double-digit Adjusted EBITDA improvement and a resulting increase in Free Cash Flow before Dividends Paid in 2016
- Names Tor Lønnum as Chief Financial Officer, effective from May 2016
| HIGHLIGHTS (2) |
Three Months Ended September 30, |
|||
| (in millions of Canadian dollars, |
2015 |
2014 |
YoY % |
YoY % |
| Gross Billings |
580.3 |
633.2 |
(8.4) |
(12.3) |
| Total Revenue |
529.3 |
543.4 |
(2.6) |
(6.8) |
| Operating Loss |
(32.5) |
(16.0) |
** |
** |
| Adjusted EBITDA |
46.1 |
63.9 |
(27.9) |
(30.2) |
| Net Loss |
(26.1) |
(24.1) |
(8.3) |
** |
| Loss per Common Share |
(0.20) |
(0.17) |
(17.6) |
** |
| Adjusted Net Earnings per Common Share |
0.14 |
0.18 |
(22.2) |
** |
| Cash from Operating Activities (3) |
79.0 |
68.1 |
16.0 |
** |
| Free Cash Flow before Dividends Paid (3) |
59.0 |
56.3 |
4.8 |
** |
| Free Cash Flow before Dividends Paid per Common Share (3) |
0.34 |
0.29 |
17.2 |
** |
| ** Information not meaningful |
A number of factors contributed to third quarter results which were lower than the company expected. Slower economic growth in Canada contributed to lower Gross Billings from Aeroplan, due to more constrained financial cardholder spend than expected. Aeroplan financial card acquisitions were also suppressed as a result of partners spending less on marketing new cards during the negotiations related to interchange rates earlier in the year. Nectar partner Sainsbury's issued fewer points than expected in the light of continued food price deflation and through its transition to a more bonus-driven strategy. The fourth quarter of 2015 is expected to be a stronger quarter for Nectar bonus points issuance.
Principally as a result of these factors, Aimia is updating its guidance for Gross Billings and Free Cash Flow for 2015. Through 2015, Aimia has been taking action to manage costs and to deliver against its margin guidance. In August, it identified $20 million of annualized savings for full year 2016, which will contribute to a double-digit improvement in Adjusted EBITDA over 2015. Since then, a second $20 million of annualized savings has been identified, which will drive further operating leverage from the end of 2016.
Further to these actions and to accelerate the reallocation of capital to higher margin parts of the business, Aimia has also engaged advisors to consider and evaluate potential disposals of non-core assets.
"We knew that 2015 would be challenging, due to, most significantly, the effects of interchange rate negotiations and the slowing economy," said Rupert Duchesne, Group Chief Executive. "As the impact of some of those issues became clearer, we took decisive action and have identified $40 million of annualized cost savings to be delivered over the next two years, to counter the economic uncertainty we are experiencing. The implementation of the first $20 million of cost savings will contribute to a double-digit improvement in Adjusted EBITDA in 2016.
"Despite a slower economy, we expect this quarter to be an inflection point on the way to topline growth in 2016. Aeroplan should show renewed momentum as new card acquisition campaigns drive growth in new co-branded credit cardholders at TD and CIBC, and Nectar will continue to evolve into a next-generation coalition program that's more flexible for partners, digital at its core and responsive to individual member tastes and preferences. Modest topline growth, strong margin improvement and solid cash flow conversion in 2016 are expected to drive an increase in Free Cash Flow and Free Cash Flow per Share.
"The value embedded in our investments and the financial flexibility provided by a strong balance sheet, together with our improved operating leverage, will be important assets in light of debt maturities and contract renewals as we enter 2017 and will position us well in light of any further economic uncertainty in 2016."
As announced in a separate news release issued today, Aimia has hired Tor Lønnum as Chief Financial Officer, effective May 2, 2016. Lønnum will replace David Adams, who in May announced his intention to retire after eight years with Aimia. Adams will ensure a smooth transition with Lønnum, who will start just before the company reports its 2016 first quarter results and holds its 2015 annual general meeting in May.
Consolidated Financial Highlights(1)
Three Months Ended September 30, 2015 Compared to Three Months Ended September 30, 2014:
- Gross Billings were $580.3 million in the third quarter compared to $633.2 million last year. On a constant currency basis, Gross Billings declined by $77.9 million with a $44.4 million decline in the EMEA region driven by lower base accumulation at Nectar and the loss of the program's anchor partner at Nectar Italia on March 1, 2015. Additionally, a decline of $19.0 million at Aeroplan was primarily due to a $19.4 million promotion offered by the program's main financial partner on the conveyed credit card portfolio in the third quarter of 2014 that did not recur this year. Lower Gross Billings from proprietary loyalty services of $11.8 million, including $11.3 million attributed to a net revenue accounting treatment, also softened Gross Billings in the quarter.
- Adjusted EBITDA was $46.1 million or 7.9% (as a % of Gross Billings) compared to $63.9 million or 10.1% (as a % of Gross Billings) last year. Excluding severance costs of $3 million in the quarter related to organizational changes announced on August 14, 2015, Adjusted EBITDA was $49.1 million or 8.5% of Gross Billings. Growth in the US & APAC region and higher reward fulfillment activities in EMEA were more than offset by the margin impact of the promotion offered on the conveyed credit card portfolio in the prior year, an increase in redemption cost per Aeroplan Mile, a reduction in contribution from proprietary loyalty services in Canada, and decreases in the EMEA region due mostly to lower contribution from Nectar and Nectar Italia. This led to a $19.3 million decrease in Adjusted EBITDA on a constant currency basis.
- Free Cash Flow before Dividends Paid was $59.0 million in the third quarter compared with $56.3 million last year. The increase was driven by higher cash from operating activities primarily due to a $20.7 million deposit made to Revenue Quebec in the third quarter of the prior year, reduced cost of rewards and direct costs, lower net interest paid and working capital improvements offset in part by lower Gross Billings, higher operating expenses, and higher capital expenditures of $8.2 million related to information technology initiatives. Free Cash Flow before Dividends Paid per common share was $0.34 compared to $0.29 in the prior year, which increased as a result of the factors above and a lower number of issued and outstanding common shares due to share repurchases since the fourth quarter of 2014.
Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014:
- Gross Billings were $1,780.8 million compared to $1,998.5 million last year. On a constant currency basis, Gross Billings declined by $264.3 million, with lower Aeroplan Gross Billings due to the $100.0 million contribution made by TD in the first quarter of 2014 and a $19.4 million promotion offered on the conveyed credit card portfolio in the comparative prior year period being the most significant factors. Additionally, lower EMEA Gross Billings of $79.5 million were driven by lower base accumulation at Nectar and the loss of the program's anchor partner at Nectar Italia. Lower other Gross Billings of $55.3 million is primarily the result of lower Gross Billings from proprietary loyalty services, which included $30.9 million attributable to a net revenue accounting treatment, with the remainder being attributable to lost contracts and lower reward fulfillment activity in Canada.
- Adjusted EBITDA was $204.9 million or 11.5% (as a % of Gross Billings) compared to $254.2 million or 12.7% (as a % of Gross Billings) last year. On a constant currency basis, Adjusted EBITDA decreased by $51.6 million, mostly due to the upfront contribution received from TD of $100.0 million in the first quarter of 2014 which was offset in part by a favourable adjustment of $45.7 million related to the reduction of the Card Migration Provision in the second quarter of 2015. The remaining variance, representing an increase of $2.7 million, is primarily due to lower operating expenses in US & APAC and Corporate, and higher distributions from equity accounted investments, offset in part by lower Adjusted EBITDA in Canada and EMEA region. Excluding the $45.7 million reduction to the Card Migration Provision and severance costs of $3 million incurred in the third quarter related to organizational changes announced on August 14, 2015, Adjusted EBITDA was $162.2 million or 9.1% of Gross Billings.
- Free Cash Flow before Dividends Paid was $123.4 million compared with $269.9 million last year. The decline of $146.5 million was mainly the result of a decrease in cash from operating activities which included the $100.0 million upfront TD contribution in the prior period and the receipt of the harmonized sales tax of $22.5 million in the first quarter of 2014, federal tax refund of $83.4 million in the second quarter of 2014, and higher cost of rewards and direct costs and higher capital expenditures of $12.7 million related to information technology initiatives and foreign currency. These items were offset in part by the receipt of $20.4 million from Revenue Quebec in the first quarter of 2015, the $20.7 million deposit made to Revenue Quebec in the third quarter of 2014, lower interest paid of $11.8 million, and working capital improvements. Free Cash Flow before Dividends Paid per common share was $0.65 compared to $1.47 in the prior year, mainly as a result of the decrease in cash from operating activities, partly offset by a lower number of issued and outstanding common shares due to share repurchases since the fourth quarter of 2014 .
2015 Guidance
For the year ending December 31, 2015, Aimia is updating its guidance from that previously issued on February 27, 2015 (and updated on August 14, 2015) to reflect its current expectations for Gross Billings from Aeroplan financial cards and Nectar in the fourth quarter of 2015. This change, alongside expectations for higher capital expenditures due to new product development and currency, is also expected to moderate Free Cash Flow before Dividends Paid. As a result, Aimia's previous guidance with respect to Free Cash Flow before Dividends Paid is also being updated. Guidance for Adjusted EBITDA margin remains unchanged.
Aimia currently expects to report the following:
| (in millions of Canadian dollars) |
2014 Normalized(4) |
2015 Guidance |
2015 Guidance |
| Gross Billings |
$2,586.6 |
Between |
Between |
| Adjusted EBITDA |
$216.4 |
Adjusted EBITDA margin of |
Adjusted EBITDA margin of approximately 9% |
| Free Cash Flow before Dividends Paid |
$94.3 |
Between |
Between |
| Capital Expenditures |
$81.5 |
Between |
Between |
| See "Forward-Looking Statements" below regarding assumptions underlying the above guidance and risks relating thereto, including currency fluctuations and currency risk. |
|||
Current 2016 Expectations(1)
Aimia is also providing a preliminary view of expectations around certain financial metrics for the financial year ending December 31, 2016.
For 2016, Aimia expects modest growth in Gross Billings and double-digit Adjusted EBITDA improvement to result in 2016 Free Cash Flow before Dividends Paid above 2015 levels and a higher Free Cash Flow before Dividends Paid per Common Share. Adjusted EBITDA margin improvement is expected to be underpinned by the $20 million of annualized cost savings resulting from the organizational changes announced on August 14, 2015, which will be partly offset by implementation costs related to the HP outsourcing agreement in the region of $10 million.
Incremental annualized cost savings of $20 million have also been identified, with actions already underway to ensure these are in place by the end of 2016.
This preliminary view of these 2016 metrics excludes any costs to be incurred to deliver the cost savings referred to above. As per usual practice, more specific information with respect to guidance for the 2016 financial year will be provided in February 2016.
Segment Highlights for the Third Quarter of 2015(5)
| Please refer to "Notes" at the end of this release for details on notations that appear in this Press Release. |
Canada – Operational efficiencies being delivered ahead of anticipated top line increases
- Results in the third quarter were affected by the continued deterioration in the Canadian economy, which constrained spending on financial cards. Aeroplan Gross Billings were further affected by slower than anticipated new card acquisition at our financial card partners, as they significantly slowed their marketing plans while awaiting a resolution to the interchange fee issue through the beginning of the third quarter. With that issue resolved and a current expectation both that our partners will increase their focus on new card acquisition, and that the Canadian economy will start to improve in 2016, we expect purchase volumes for 2016 to demonstrate healthy growth.
- Gross Billings were $332.0 million in the third quarter compared to $368.5 million in the same quarter last year. The decrease in Gross Billings was mainly due to the $17.5 million reduction in the financial sector, including a $19.4 million non-recurring promotional campaign offered by Aeroplan's main financial partner in the third quarter of the prior year. The decline in other Gross Billings of $17.5 million was primarily due to lost contracts and lower rewards fulfillment activity. Year to date, Gross Billings were $1,002.6 million compared to $1,166.4 million in the same period last year, with the difference being primarily due to the $100.0 million TD payment received in the first quarter of 2014 and the non-recurring promotional campaign in the third quarter of 2014. The remaining decrease was mainly due to lower Gross Billings from proprietary loyalty services due to lost contracts and lower rewards fulfillment activity.
- Aeroplan miles issued in the quarter and year to date decreased 9.7% and 10.1%, respectively, mainly due to higher promotional mileage and miles issued on the conveyed credit card portfolio promotion in the same periods in the prior year. Excluding promotional mileage, Aeroplan miles issued were down 5.0% in the quarter and 2.8% year to date.
- Aeroplan miles redeemed decreased 0.7% in the quarter and increased 0.4% year to date.
- Adjusted EBITDA was $56.1 million or 16.9% (as a % of Gross Billings) compared to $73.6 million or 20.0% (as a % of Gross Billings) in the same quarter last year. Adjusted EBITDA decreased primarily due to the margin impact of the promotion offered in the prior year, an increase in redemption cost per Aeroplan Mile, and a lower contribution from proprietary loyalty services. Year to date, Adjusted EBITDA was $214.3 million or 21.4% (as a % of Gross Billings) compared to $273.3 million or 23.4% (as a % of Gross Billings) in the prior year. Excluding the reduction in the Card Migration Provision this year and the TD contribution last year, the $4.7 million decrease resulted from a reduction in contribution from proprietary loyalty services of $12.3 million, offset in part by a net improvement of $7.6 million in the Aeroplan Program due to the favourable variance of the Change in Future Redemption Costs and lower operating expenses mostly offset by an increase in redemption cost per Aeroplan Mile, and the margin impact of the promotion in the prior year.
EMEA – Transitioning to a new accumulation structure in the Nectar Program
- Results from the Nectar program were lower than expected, as Sainsbury's transitioned its points issuance strategy to more bonus points, clustered around campaigns, and fewer base points. While it has continued to outperform the market, Sainsbury's has also been affected by persistent food deflation. British Gas lowered its overall points issuance in the face of a regulatory change but signed a multi-year renewal enabling them to continue to use Nectar points differently from 2016. We expect points issuance in Nectar to be notably higher than the third quarter in the fourth quarter of 2015 and the first quarter of 2016, as Sainsbury's launches marketing campaigns related to Christmas and Easter.
- Gross Billings were $161.3 million in the quarter, down $39.8 million or 21.7% on a constant currency basis. Lower Gross Billings at Nectar UK of $30.3 million were mainly attributable to lower base accumulation and timing of bonus activity at our main grocery partner and regulatory restrictions impacting the energy sector. The $13.8 million decrease at Nectar Italia resulted from the loss of the program's anchor partner. Year to date, Gross Billings were $528.3 million, down $69.7 million or 12.3% on a constant currency basis. The decrease was mainly attributable to the $42.3 million decline at the Nectar Program in the grocery and energy sectors and a $33.4 million decrease in the Nectar Italia Program.
- Nectar UK points issued decreased 25.4% in the quarter compared to the same period in the prior year due to changes in accumulation terms and timing of bonus points issuance with the program's main grocery partner and regulatory restrictions impacting the energy sector. Year to date, points issued were down 10.5%. Redemption activity decreased 15.6% in the quarter, driven by fewer points in circulation due to accumulation changes with the program's main partner. Year to date, redemptions were down 4.3%.
- Air Miles Middle East points issued increased 1.1% in the quarter and 1.3% year to date. Redemption activity increased 16.4% in the quarter and 12.1% year to date, driven by an increase in member engagement.
- Nectar Italia points issuance decreased significantly in the third quarter and year to date compared to the prior year period, primarily due to the loss of the program's anchor partner. Redemptions were down significantly in the quarter and increased significantly year to date as the result of the expiry of points on March 1, 2015.
- Adjusted EBITDA was $6.4 million or 4.0% (as a % of Gross Billings) in the third quarter compared to $11.1 million or 6.1% (as a % of Gross Billings) in the prior year, a decrease of $4.7 million or $6.3 million on a constant currency basis. The improved contribution from increased rewards fulfillment activities and lower operating expenses were more than offset by the declines in contribution from Nectar and Nectar Italia. Year to date, Adjusted EBITDA was $45.3 million or 8.6% (as a % of Gross Billings) compared to $45.5 million or 8.0% (as a % of Gross Billings) in the prior year period, a decrease of $0.2 million or $3.3 million on a constant currency basis, mostly due to lower contributions from the loyalty programs in the region, partially offset by increased rewards fulfillment activities and lower operating expenses.
US & APAC – Lower costs driving higher Adjusted EBITDA in the quarter
- A more robust environment in the US & APAC saw Gross Billings up with new and existing clients in the quarter and meant the net revenue accounting treatment in the US had a smaller net impact at the topline than in previous quarters. The transition from a low-margin commoditized rewards fulfilment towards high-margin, subscription-based platforms and strategy saw traction with a win with Optus since the end of the quarter.
- Gross Billings were $87.3 million, down 2.1% on a constant currency basis, with increased rewards volume and a net increase in business from new and existing clients being mostly offset by the $11.3 million net revenue accounting treatment relating to the outsourcing of gift cards in the US region. Year to date, Gross Billings were $250.6 million, down 11.6% on a constant currency basis, mainly relating to the $30.9 million net revenue accounting treatment.
- Adjusted EBITDA for the quarter improved to ($1.0) million compared to ($4.6) million last year resulting from a net increase in contribution from new and existing clients. Adjusted EBITDA margin improved to (1.1%) in the quarter compared to (5.6%) in the prior year. Year to date, Adjusted EBITDA improved to ($7.9) million compared to ($11.7) million in the prior year period, an improvement of $3.8 million or $4.6 million on a constant currency basis due mostly to lower operating expenses. Adjusted EBITDA margin improved to (3.2%) year to date compared to (4.4%) in the prior period.
Corporate
- Adjusted EBITDA was ($15.4) million in the third quarter compared to ($16.2) million in the prior year. The improvement is attributable to lower share-based compensation expense and an increase in distributions from Club Premier due to the favourable impact of foreign currency, offset in part by severance expenses. Year to date, Adjusted EBITDA was ($46.8) million compared to ($52.9) million in the prior year period mainly as a result of the increase in distribution from Club Premier which is partially due to the favourable impact of foreign currency, lower share-based compensation expenses and lower operating expenses as a result of cost saving initiatives, offset in part by severance expenses.
New Divisional Structure and Evaluation of Non-Core Assets
The implementation of the new divisional structure announced previously is well underway and is expected to deliver $20 million in annualized operating expense savings in 2016. Total severance expense related to the organizational changes announced on August 14, 2015 amounted to $3.0 million in the quarter and year-to-date and estimated at between $10 to $15 million in the aggregate for the year ending December 31, 2015. Approximately half of these costs will have a cash impact this year, with the remaining to be funded in 2016. As a result of cost reduction initiatives underway, over 200 employees are expected to exit the business by year-end 2015.
As it has progressed through the implementation of its HP Outsourcing contract and the new divisional structure announced in August 2015, Aimia has identified a second $20 million of annualized cost savings to be delivered by the end of 2016, which will counter any further deterioration in the economic environment.
Further to these actions and to accelerate the reallocation of capital to higher margin parts of the business, Aimia has also engaged advisors to consider and evaluate potential disposals of non-core assets.
Capital Expenditures
Capital expenditures were $20.0 million in the quarter and $64.2 million year to date as a result of information technology investments, including investments in new product development.
Dividends Paid
Total dividends paid in the quarter were $34.4 million, of which $30.2 million were paid to common shareholders and the remainder to preferred shareholders.On a year to date basis, total dividends paid amounted to $105.1 million, of which $91.5 million were paid to common shareholders and the remainder to preferred shareholders
Share Repurchase
Aimia repurchased $28.0 and $187.0 million in common shares in the three and nine months ended September 30, 2015, respectively. Subsequent to September 30, 2015 Aimia repurchased $8.5 million in common shares, taking the total capital of shares repurchased since November 2014 to almost $225 million. This is further evidence of Aimia's ongoing track record of returning surplus cash to shareholders, including almost $560 million in buybacks since 2008. At September 30, 2015, the period end common shares outstanding were 158.3 million, compared to 174.0 million common shares in the prior year.
CDP Climate Disclosure Leadership Index
Aimia has been awarded a position on the CDP Climate Disclosure Leadership Index (CDLI), with a disclosure score of 99B for the quality of climate change related information that it has disclosed to investors and the global market place. Organizations graded within the top 10 percent are placed on the CDLI.
Quarterly Conference Call and Audio Webcast Information
Aimia will host a conference call to discuss its third quarter 2015 financial results at 9:00 a.m. EST on Friday, November 13, 2015. The call can be accessed by dialing 1-888-231-8191 or 647-427-7450 for the Toronto area. The call will be simultaneously audio webcast at: http://event.on24.com/r.htm?e=1059590&s=1&k=7964A29C6623E8AA6FF6E049FAE7FC93
A slide presentation intended for simultaneous viewing with the conference call will be available the morning of November 13, 2015 at: http://aimia.com/en/investors/presentations.html and an archived audio webcast will be available at: http://aimia.com/content/aimiawebsite/global/en/investors/events.html for ninety days following the original broadcast.
The consolidated financial statements and the MD&A will be accessible on the investor relations website at: http://aimia.com/en/investors/quarterly-reports.html
Notes
- References to Adjusted EBITDA margin for Q3 2015 in the Highlights section and 2015 updated guidance and 2016 current expectations provided throughout this release do not take into account severance or other restructuring costs in relation to the organizational changes announced on August 14, 2015 or further cost savings initiatives announced on November 13, 2015. For the three months ended September 30, 2015, severance expense of $3.0 million was incurred. It is expected that the full year 2015 severance expense related to these cost savings initiatives will be between $10 million and $15 million, of which approximately half will be paid in 2016. No further severance or restructuring expenses for 2016 have been identified to date.
- Non-GAAP financial measures (Adjusted EBITDA, Adjusted Net Earnings per common share, Free Cash Flow before Dividends Paid and Free Cash Flow before Dividends Paid per Common Share) and constant currency are explained in the section entitled "Non-GAAP Financial Measures".
- Cash from Operating Activities, Free Cash Flow before Dividends Paid and Free Cash Flow before Dividends Paid per Common Share for the three months ended September 30, 2014 include a deposit of $20.7 million made to Revenue Quebec.
- Gross Billings and Adjusted EBITDA exclude the upfront $100.0 million TD contribution. Free Cash Flow before Dividends Paid excludes the $100.0 million contribution from TD, tax proceeds of $90.9 million related to loss carry back and $22.5 million related to HST, offset by a $20.7 million deposit made to Revenue Quebec.
- Unless otherwise noted, all references to year to date refer to the nine months ended September 30, 2015.
About Aimia
Aimia Inc. (TSX:AIM) is a data-driven marketing and loyalty analytics company. We provide our clients with the customer insights they need to make smarter business decisions and build relevant, rewarding and long-term one-to-one relationships, evolving the value exchange to the mutual benefit of both our clients and consumers.
Aimia partners with groups of companies (coalitions) and individual companies to help generate, collect and analyze customer data and build actionable insights.
We do this through our own coalition loyalty programs such as Aeroplan in Canada and Nectar in the UK, and through provision of loyalty strategy, program development, implementation and management services underpinned by leading products and technology platforms such as the Aimia Loyalty Platform and Smart Button, and through our analytics and insights business, including Intelligent Shopper Solutions. In other markets, we own stakes in loyalty programs, such as Club Premier in Mexico, Air Miles Middle East and Think Big, a partnership with Air Asia and Tune Group. Our clients are diverse, and we have industry-leading expertise in the fast-moving consumer goods, retail, financial services, and travel and airline industries globally to deliver against their unique needs.
For a full list of our partnerships and investments, and more information about Aimia, visit www.aimia.com.
Non-GAAP Financial Measures
Aimia uses the following non-GAAP financial measures which it believes provides investors and analysts with additional information to better understand results as well as assess its potential. GAAP means generally accepted accounting principles in Canada and represents International Financial Reporting Standards ("IFRS").
Adjusted EBITDA
Adjusted EBITDA is not a measurement based on GAAP, is not considered an alternative to operating income or net earnings in measuring performance, and is not comparable to similar measures used by other issuers. We do not believe that Adjusted EBITDA has an appropriate directly comparable GAAP measure. As an alternative, we do however provide a reconciliation to operating income in our MD&A. Adjusted EBITDA is used by management to evaluate performance, and to measure compliance with debt covenants. Management believes Adjusted EBITDA assists investors in comparing the Corporation's performance on a consistent basis without regard to depreciation and amortization and goodwill impairment, which are non-cash in nature and can vary significantly depending on accounting methods and non-operating factors such as historical cost.
Adjusted EBITDA is operating income adjusted to exclude depreciation, amortization and impairment charges, as well as adjusted for certain factors particular to the business, such as changes in deferred revenue and Future Redemption Costs. Adjusted EBITDA also includes distributions and dividends received or receivable from equity-accounted investments. Adjusted EBITDA should not be used as an exclusive measure of cash flow because it does not account for the impact of working capital growth, capital expenditures, debt repayments and other sources and uses of cash, which are disclosed in the statements of cash flows.
Adjusted Net Earnings
Adjusted Net Earnings is not a measurement based on GAAP, is not considered an alternative to net earnings in measuring profitability, and is not comparable to similar measures used by other issuers.
Adjusted Net Earnings provides a measurement of profitability calculated on a basis consistent with Adjusted EBITDA. Net earnings attributable to equity holders of the Corporation are adjusted to exclude Amortization of Accumulation Partners' contracts, customer relationships and technology, share of net earnings (loss) of equity accounted investments and impairment charges. Adjusted Net Earnings includes the Change in deferred revenue and Change in Future Redemption Costs, net of the income tax effect and non-controlling interest effect (where applicable) on these items at an entity level basis. Adjusted Net Earnings also includes distributions and dividends received or receivable from equity-accounted investments.
Adjusted Net Earnings per Common Share
Adjusted Net Earnings per Common Share is not a measurement based on GAAP, is not considered an alternative to Net Earnings per Common Share in measuring profitability per Common Share and is not comparable to similar measures used by other issuers.
Adjusted Net Earnings per Common Share provides a measurement of profitability per Common Share on a basis consistent with Adjusted Net Earnings. Calculated as Adjusted Net Earnings less dividends declared on preferred shares divided by the number of weighted average number of basic and diluted common shares.
Free Cash Flow, Free Cash Flow before Dividends Paid and Free Cash Flow before Dividends paid per Common Share
Free Cash Flow and Free Cash Flow before Dividends Paid are non-GAAP measures and are not comparable to similar measures used by other issuers. They are used in order to provide a consistent and comparable measurement of cash generated from operations and used as indicators of financial strength and performance. Free Cash Flow is defined as cash flows from operating activities, as reported in accordance with GAAP, less adjustments for: (a) total capital expenditures as reported in accordance with GAAP; and (b) dividends paid.
Free Cash Flow before Dividends Paid is defined as cash flows from operating activities as reported in accordance with GAAP, less capital expenditures as reported in accordance with GAAP.
Free Cash Flow before Dividends Paid per Common Share is a measurement of cash flow generated from operations on a per share basis. It is calculated as follows: Free Cash Flow before Dividends Paid minus dividends paid on preferred shares and non-controlling interests over the weighted average number of common shares outstanding.
Reconciliation to GAAP
For a reconciliation of the above Non-GAAP financial measures to GAAP, please refer to the Management Discussion & Analysis for the three and nine months ended September 30, 2015.
Constant Currency
Because exchange rates are an important factor in understanding period to period comparisons, management believes that the presentation of various financial metrics on a constant currency basis or after giving effect to foreign exchange translation, in addition to the reported metrics, helps improve the ability to understand operating results and evaluate performance in comparison to prior periods. Constant currency information compares results between periods as if exchange rates had remained constant over the periods. Constant currency is derived by calculating current-year results using prior-year foreign currency exchange rates. Results calculated on a constant currency basis should be considered in addition to, not as a substitute for, results reported in accordance with GAAP and may not be comparable to similarly titled measures used by other companies.
Forward-Looking Statements
Forward-looking statements are included in this news release. These forward-looking statements are typically identified by the use of terms such as "outlook", "guidance", "target", "forecast", "assumption" and other similar expressions or future or conditional terms such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will", "would", and "should". Such statements may involve but are not limited to comments with respect to strategies, expectations, planned operations or future actions.
The above guidance (including Gross Billings, Adjusted EBITDA and Adjusted EBITDA margin, Free Cash Flow before Dividends Paid, Free Cash Flow before Dividends Paid per Common Share and capital expenditures) constitutes forward-looking statements. Aimia made a number of economic and market assumptions in preparing its above guidance as well as assumptions regarding currencies and the performance of the economies in which the Corporation operates and market competition and tax laws applicable to the Corporation's operations. The Corporation cautions that the assumptions used to prepare the above guidance, although reasonable at the time they were made, may prove to be incorrect or inaccurate. In addition, the above guidance does not reflect the potential impact of any non-recurring or other special items or of any new material commercial agreements, dispositions, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after November 13, 2015. The financial impact of these transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way or in the same way we presently know about the risks affecting our business. Accordingly, our actual results could differ materially from our expectations as set forth in this news release.
Forward-looking statements, by their nature, are based on assumptions and are subject to important risks and uncertainties. Any forecasts, predictions or forward-looking statements cannot be relied upon due to, among other things, changing external events and general uncertainties of the business and its corporate structure. Results indicated in forward-looking statements may differ materially from actual results for a number of reasons, including without limitation, dependency on Significant Accumulation Partners and clients, failure to safeguard databases, cyber security and consumer privacy, changes to the Aeroplan program, reliance on Redemption Partners, conflicts of interest, greater than expected redemptions for rewards, regulatory matters, retail market/economic conditions, industry competition, Air Canada liquidity issues or air travel industry disruptions, airline industry changes and increased airline costs, supply and capacity costs, unfunded future redemption costs, changes to coalition loyalty programs, seasonal nature of the business, other factors and prior performance, foreign operations, legal proceedings, reliance on key personnel, labour relations, pension liability, technological disruptions, inability to use third-party software and outsourcing, failure to protect intellectual property rights, interest rate and currency fluctuations (including currency risk on our foreign operations which are denominated in a currency other than the Canadian dollar, mainly the pound sterling, and subject to fluctuations as a result of foreign exchange rate variations), leverage and restrictive covenants in current and future indebtedness, uncertainty of dividend payments, managing growth, credit ratings, audit by tax authorities, as well as the other factors identified throughout Aimia's public disclosure records on file with the Canadian securities regulatory authorities.
The forward-looking statements contained herein represent Aimia's expectations as of November 13, 2015 and are subject to change after such date. However, Aimia disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.
SOURCE AIMIA
Analysts and Investors: Karen Keyes, 647-428-5280, [email protected]; Media: Cheryl Kim, 647-329-5139, [email protected]
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