Pareto announces 2010 second quarter results
Reports 51% revenue growth and a 64% increase in EBITDA
TORONTO, Aug. 6 /CNW/ - Pareto Corporation (TSX: PTO), a leading Shopper Marketing company, today announced its financial results for three-months ended June 30, 2010.
Q2 2010 Financial and Operating Highlights:
- Revenue increased 51% to $25.8 million from $17.0 million in Q2 2009
- Revenue increased organically by 32% or $7.2 million during Q2
- EBITDA increased 64% to $3.5 million from $2.1 million in Q2 2009
- Net earnings increased 65% to $1.8 million from $1.1 million in
Q2 2009
- Earnings per increased 104% to $0.051 per share from $0.025 per share
in Q2 2009
- Signed long-term contract with major new customer
"Our focus on Shopper Marketing and our client-centric account management approach continued to drive strong results during the second quarter as revenue increased by more than 50% and EBITDA grew by 64%," said Kerry Shapansky, Pareto's President and CEO. "While some of our growth was driven by Direct Sales Force ("DSF"), a company that we acquired during the first quarter of this year, I'm extremely pleased with our organic growth rate of 32% in the quarter. We achieved organic growth across all client segments and we signed an unprecedented number of new customers during the quarter. In addition to new client acquisition we were also able to successfully cross-sell a number of new services to our existing customers. Our momentum continued subsequent to quarter end as, just last week, we announced an agreement to provide services for a new retail customer that is expected to eventually generate up to $75 million in revenues over the five year term of the contract."
"The strong growth that we have achieved over the past year is evidence that Shopper Marketing is now recognized across industry segments as a measurable means of driving sales," added Mr. Shapansky. "We expect our recent growth momentum to continue throughout 2010, as a number of new customer wins have not yet begun to contribute to our overall revenues."
Financial Review
Pareto's revenues for the quarter ended June 30, 2010 were $25.8 million, an increase of 51% from $17.0 million in the second quarter of 2009. The increased revenues were driven by organic growth, the return of incentive travel events cancelled in 2009 and the contribution of Direct Sales Force Inc. Adjusting for the impact of the DSF acquisition, revenues increased by $7.2 million or 32% during the quarter.
Operating and administrative expenses were $22.3 million in the second quarter of 2010, an increase of 49% from $14.9 million during the same period last year. As a percentage of revenue, operating and administrative expenses decreased slightly to 86.4% from 87.5% in the second quarter of 2009.
In the first three months of 2010, Pareto generated net earnings of $1.8 million, compared to net earnings of $1.1 million in the same period in 2009. Earnings per share increased by 104%, to $0.051 for the second quarter of 2010, from $0.025 per share in the second quarter of 2009. On a diluted basis, earnings per share increased by 96%, compared to the period ended June 30, 2009.
At June 30, 2010, Pareto had total debt of $17.2 million, compared to debt of $15.8 million at March 31, 2010. The Company generated $2.5 million of cash from operations in the second quarter of 2010, compared to $1.7 million in the second quarter of 2009. The significant increase was largely attributable to increased net earnings during the period.
Pareto currently has 35.2 million common shares issued and outstanding.
* Non-GAAP Measures
Pareto presents EBITDA information as supplemental figures because management believes they provide useful information regarding operating performance. EBITDA (earnings before amortization, net interest and finance charges, share based compensation, non-recurring expenses, and income taxes) is not a recognized measure under Canadian generally accepted accounting principles (GAAP), does not have standardized meaning, and is unlikely to be comparable to similar measures used by other companies. Accordingly, investors are cautioned that EBITDA should not be construed as an alternative to revenue, net earnings or loss determined in accordance with GAAP as an indicator of the financial performance of the Company or as a measure of the Company's liquidity and cash flows.
About Pareto Corporation
Pareto Corporation is a Shopper Marketing company that offers marketing execution solutions to leading companies in a broad range of industry sectors. Pareto provides measurable, quantifiable services that complement our clients' marketing and sales departments. For more information, please visit our website at www.pareto.ca.
This press release contains forward-looking statements related to expected future events and financial operating results of Pareto that involve risks and uncertainties. Actual results may differ materially from management expectations as projected in such forward-looking statements for a variety of reasons, including market and general economic conditions and the risks and uncertainties detailed from time to time in Pareto's SEDAR filings.
Pareto Corporation
Consolidated Balance Sheets
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June 30 December 31
As at 2010 2009
(unaudited) (audited)
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Assets
Current assets
Cash $ 142,104 $ 48,623
Accounts receivable 19,978,048 18,766,352
Inventories 2,350,118 1,684,849
Prepaid expenses 640,976 645,236
Current future income tax assets 2,829 41,982
---------------------------
23,114,075 21,187,042
---------------------------
Loans receivable and other assets 1,720,737 1,570,737
Long-term future income tax assets - 71,243
Capital assets 4,577,819 4,591,668
Intangible assets 1,533,580 1,280,916
Goodwill 25,888,979 21,058,577
---------------------------
$ 56,835,190 $ 49,760,183
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Liabilities and Shareholders' Equity
Current liabilities
Bank indebtedness $ 6,231,356 $ 415,602
Accounts payable and accrued liabilities 11,762,741 11,035,642
Dividends payable 703,910 1,792,129
Deferred revenue 3,235,725 3,044,381
Income taxes payable 1,298,914 2,413,569
Current portion of lease inducements 42,482 42,482
Current portion of long term loan 1,650,000 1,350,000
---------------------------
24,925,125 20,093,805
---------------------------
Long-term future income tax liabilities 340,969 305,985
Deferred lease inducements 279,019 300,260
Long-term loan 9,319,347 10,191,099
---------------------------
Total liabilities 34,864,463 30,891,149
---------------------------
Shareholders' equity
Share capital 15,259,316 12,635,777
Contributed surplus 1,351,601 2,091,495
Retained earnings and accumulated other
comprehensive income 5,359,810 4,141,762
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Total shareholders' equity 21,970,727 18,869,034
---------------------------
$ 56,835,190 $ 49,760,183
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Pareto Corporation
Consolidated Statements of Operations and Retained Earnings
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Three months ended Six months ended
June 30 (unaudited) June 30 (unaudited)
2010 2009 2010 2009
-------------------------------------------------------------------------
Revenue $ 25,755,148 $ 17,048,569 $ 44,930,298 $ 33,231,565
Operating and admin-
itrative expenses 22,258,293 14,914,809 39,531,096 29,686,678
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3,496,855 2,133,760 5,399,202 3,544,887
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Amortization of
capital assets 223,855 156,955 478,716 324,005
Amortization of
intangible assets 52,778 52,778 105,557 105,557
Interest expense 182,345 51,382 378,452 96,368
Interest income (4,983) (26,005) (9,167) (58,582)
Share-based comp-
ensation 182,518 231,274 348,525 420,933
-----------------------------------------------------
636,513 466,384 1,302,083 888,281
Earnings before
income taxes 2,860,342 1,667,376 4,097,119 2,656,606
Income taxes 1,088,864 593,413 1,486,852 925,873
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Net earnings and
comprehensive income
for the period 1,771,478 1,073,963 2,610,267 1,730,733
Retained earnings,
beginning of period 4,292,242 9,329,881 4,141,762 9,317,078
Dividends declared (703,910) (645,159) (1,392,219) (1,289,126)
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Retained earnings,
end of period $ 5,359,810 $ 9,758,685 $ 5,359,810 $ 9,758,685
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Basic and earnings
per share $ 0.051 $ 0.025 $ 0.076 $ 0.040
Diluted earnings
per share $ 0.047 $ 0.024 $ 0.070 $ 0.038
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Weighted average
number of common
shares outstanding:
Basic 34,691,521 42,897,760 34,409,531 42,970,815
Diluted 37,315,352 44,735,332 37,144,269 45,209,205
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Pareto Corporation
Consolidated Statements of Cash Flows
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Three months ended Six months ended
June 30 (unaudited) June 30 (unaudited)
2010 2009 2010 2009
-------------------------------------------------------------------------
Operating activities
Net earnings for the
period $ 1,771,478 $ 1,073,963 $ 2,610,267 $ 1,730,733
Items not involving
cash:
Amortization of
capital assets 223,855 156,955 478,716 324,005
Amortization of
intangible assets 52,778 52,778 105,556 105,557
Amortization of lease
inducement (10,621) (10,620) (21,241) (21,241)
Non-cash interest 11,066 (20,599) 28,248 (48,384)
Share-based comp-
ensation 182,518 231,274 348,525 420,933
Future income tax
provision 111,260 178,619 143,194 132,640
-----------------------------------------------------
2,342,333 1,662,370 3,693,264 2,644,243
Changes in non cash
operating accounts (2,589,491) (704,820) (1,637,163) (1,209,261)
-----------------------------------------------------
(247,158) 957,550 2,056,101 1,434,982
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Investing activities
Capital asset additions (228,695) (208,320) (397,170) (267,841)
Intangible asset
additions (228,924) - (358,217) -
Loans receivable and
other assets - (190,250) (150,000) (190,250)
Acquisitions, net
of cash - - (3,865,509) -
-----------------------------------------------------
(457,619) (398,570) (4,770,896) (458,091)
-----------------------------------------------------
Financing activities
Bank indebtedness 1,666,723 - 5,815,754 -
Repayment of long
term debt (300,000) - (600,000) -
Dividends paid (688,308) (643,977) (2,480,437) (2,361,223)
Repayment of capital
lease obligations - (51,407) - (126,777)
Repayment of loans
receivable - 25,000 - 25,000
Issuance of shares 21,775 - 77,032 -
Share issue costs - (4,074) -
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700,190 (670,384) 2,808,275 (2,463,000)
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Increase (Decrease)
in cash for the
period (4,586) (111,404) 93,481 (1,486,109)
(Bank Indebtedness)
/Cash, beginning of
period 146,690 (2,029,278) 48,623 (654,573)
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(Bank Indebtedness)
/Cash, end of
period $ 142,104 $ (2,140,682) $ 142,104 $ (2,140,682)
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For further information: Kerry Shapansky, President and Chief Executive Officer, Pareto Corporation, (416) 790-2350; Karen Trudell, Chief Financial Officer, Pareto Corporation, (416) 790-2360; Glen Williams, Investor Relations, Equicom Group, (416) 815-0700 ext 272
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