Catuity, Inc., a U.S. and Australian developer of loyalty software for retailers and their partners, detailed plans for its growth strategy at its annual shareholders meeting. Catuity plans to diversify its products and services for the retail point-of-sale.
During remarks to shareholders, President and CEO Michael V. Howe told shareholders that Catuity intends to leverage its experience in developing POS-focused applications to tap into existing budgets of retailers for loyalty and other applications which are managed from the point of sale.
“Our performance has been typical of a company focused on a narrow emerging market, which is what smart card loyalty remains,” said Howe. “The reality is that our customers – the retailers – are spending significant sums of dollars to maintain and develop applications for many functions at the POS. Our strategy is driven by our desire to leverage our technology skills while serving the existing needs of retailers in a market where application providers are merging to achieve critical mass.”
Howe told shareholders that the company expects to achieve profitability by 2006 and could do so sooner through strategic mergers. Howe’s full shareholder presentation is available at the Catuity website: www.catuity.com. During his remarks Howe noted that Catuity will:
— Introduce an advanced online loyalty platform this July. The platform will support the real-time accumulation and redemption of loyalty points at the point of sale. It will also provide retailers with a migration path from existing batch or paper based rewards and incentive programs. The system is designed to serve retailers who have moved to online POS systems. The new platform is expected to greatly reduce integration and maintenance costs for merchants.
— Expand Catuity’s business beyond licensing their proprietary loyalty software to include custom development, consulting, project management services and hosting solutions. These are services that retailers often buy as an alternative to licensing loyalty and POS management software.
— Accelerate its growth strategy through mergers with other retail POS application and loyalty providers. Subject to market conditions, Catuity hopes to merge with high quality companies during the next two years.
— Continue to prudently manage expenses to provide profitability and improve share value for investors.
“With more than five million points of sale in North America, experts say that retailers spend more than $400 million a year on building, installing and maintaining mission critical applications at the point of sale,” he said. “We believe that by expanding our focus beyond loyalty software licensing to include custom development, consulting and project management, we will have diverse and robust software and services offering that will maximize our revenue.”
Howe said Catuity is evaluating the need to raise new capital for its core business and growth through mergers as well as the specific actions that may be necessary to fully comply with all NASDAQ listing requirements.
Howe told shareholders that Catuity has already implemented over $1,000,000 in expense reductions that will reduce the company’s expense structure by approximately 18 percent from 2003. “As we expand our offerings from licensed software to include custom built software and related services additional expenses will only be incurred as required to accommodate our growth plans.”
Most importantly, Howe stressed the fact that the company’s product offerings will be directed specifically to the “always connected” — or online — retailers, where the system can most cost-effectively be deployed.
Catuity also said that it will begin to either sell or exclusively license its patented offline smart card loyalty technology as the company focuses solely on the growing market for online loyalty and other retail POS software and service solutions.
“Catuity is now focused on serving the majority of retailers that have already or are rapidly moving toward online POS management for their diverse POS applications. The demand for our offline smart card loyalty platform, has been limited,” said Michael V. Howe, President and CEO of Catuity Inc., as he detailed the company’s new strategy today “There are markets where the economic benefit of offline smart card loyalty systems makes sense. We are no longer focused on those markets.”
He added, “The effort to divest of our offline system is intended to allow the company to recoup some of the investment we have made in our offline smart card loyalty system by letting another company focus on these markets.”
Howe said that Catuity will actively consider proposals to acquire its smart card loyalty technology and associated patent rights or to exclusively license the technology, either globally or geographically. Interested parties can contact the company directly.
Catuity Reports First Quarter Results
Catuity reported results for the first quarter of 2004.
For the quarter ending March 31, the company reported revenue of $479,000 with a net loss of $604,000 or ($.05) per share. This compared to first quarter revenue in 2003 of $1,475,000. Approximately $1.1 million of the 2003 revenue was license revenue that had been invoiced and paid in 2002 but was required to be recorded as deferred revenue at December 31,2002 in accordance with U.S. GAAP. The company also reported cash on hand of $5,259,000 at the end of the quarter. Catuity will file its quarterly results on Form 10-Q with the SEC and will post the 10-Q on its website either Thursday, May 13, or Friday May 14,2004 in the U.S.
The company noted that when the deferred revenue is taken out of last year’s first quarter results, first quarter 2004 service and development revenue showed a small increase over service and development revenue in 2003. Most of this revenue was generated from the smart chip initiative of a major customer which is being phased out over the remainder of this year.
Catuity, Inc. is a provider of POS-focused applications, including real-time loyalty management, for retailers and their partners across North America. Catuity’s technology is used on nearly 40,000 points of sale throughout the U.S. More information on Catuity is available at its website: .