Catuity, Inc. announced that it expects to achieve profitability for at least one month in the fourth quarter 2001, positive cash flow for the fourth quarter and continues to project operating profitability for the full fiscal year 2002. Catuity projects fourth quarter 2001 gross revenues to be approximately $1.1 million. The gross revenue projection represents an increase of 132% over third quarter gross revenues of $475,000, which was an increase of 190% over second quarter gross revenues of $164,000.
The fourth quarter gross revenue projection excludes a non-refundable license fee payment expected in the fourth quarter 2001. This license fee will be recorded as deferred revenue on the Balance Sheet until the license fee can be recognized, which is planned for second quarter 2002.
On-going operating costs are expected to be consistent and in line with previous quarterly results. These operating results are projected to be approximately $1.5 million in the fourth quarter.
All projections and figures referred to in this release are subject to non-cash adjustments for U.S. GAAP treatment of stock warrants issued by the company in the fourth quarter and stock compensation as previously reported (“non-cash adjustments”). Overall, Catuity expects to report a quarterly operating loss of $1.1 million before non-cash adjustments in the third quarter 2001 and expects to significantly improve its bottom line excluding non-cash adjustments in the fourth quarter as a result of its increased revenue growth. Catuity expects to generate positive cash flows from operating activities for the fourth quarter 2001. Cash at the end of the third quarter 2001 is in excess of $4 million.
Catuity revenue is generated from product development services, training, technical consulting, license fees and maintenance fees. The license fees Catuity charges are based on: per card issued, per card issued activated to a loyalty program, per transaction, per POS terminal or Internet POS deployed, or a flat fee for access to certain intellectual property rights. The basis of the fees, the fee rates and the number of cards, terminals and/or transactions to which these fee rates apply for any customer are confidential at the request of these customers.
As of October 31, 2001, Catuity has signed agreements with customers from which it expects to receive more than $4 million from operations in the period from October 1, 2001 to December 30, 2002. A number of these existing agreements have significant potential for additional revenue in 2002 and beyond in the form of additional license and maintenance fees as well as from additional system development and technical consulting fees requested by our clients. Catuity is currently finalizing its strategic business plans and budget for 2002 and beyond. Management continues to anticipate a modest operating profit for the full fiscal year 2002. Development work, integration and customer customization will continue to precede additional on-going license fee revenue.
As a result, revenue is expected to grow quarterly in 2002. Further details of Catuity’s plans and forward projections will be released when these plans are finalized.
Michael Howe, President and CEO of Catuity, commented, “We set a plan in place more than a year ago and we believe we are delivering on this plan. We have demonstrated our products and our service are superior to other offerings in our market. We have won the most strategically important loyalty contracts awarded to date in the smart card loyalty software business. As the world rolls out new card systems, Catuity will become an increasingly important player. With the growth of smart cards and the development of new loyalty software systems to assist merchants, many new opportunities are emerging in the U.S. market. We are confident our market leadership position, our relationships with Visa and other leading payment industry stakeholders will lead to more business with retail merchants, card associations, card issuers and transaction processors in the U.S. and around the world.”
Catuity, Inc. ([www.catuity.com]) is a leading provider of loyalty software systems. The Catuity software includes an integrated suite of applications that provide loyalty, ticketing, access control and membership. The Catuity Loyalty System is ubiquitous in that it can operate on any device, any card program and with any payment process, including stored value, smart cards and wireless applications. Catuity unites the brick-and-mortar retailer with the Internet to enable cross-sell capabilities with consistent brand imaging across all channels.