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GuestLogix Was In the Right Place With the Wrong Solution

@denschaal

Skift Take

GuestLogix has some heavy-lifting ahead as it restructures to downplay its reliance on low-margin hardware sales for use in the onboard sale of ancillary services. The company has long-standing airline relationships, and new partnerships with in-flight entertainment companies such as Golden Eagle Entertainment, but it is going to be very tough going.

— Dennis Schaal

Toronto-based GuestLogix, which crunches ancillary transactions for airlines and other travel partners, is in the midst of restructuring the business and laid off 14 employees in the fourth quarter, about 11% of the workforce, the company said.

GuestLogix released its fourth quarter financial results March 24, and the company narrowed its fourth quarter losses to $2 million, compared with a $10.2 million loss in the last four months of 2012. (Because of a change in its fiscal year, 2012 included 13 calendar months.)

The $2 million loss was impacted by some $1 million in one-time charges, the company said.

Revenue in the fourth quarter came in at $8.3 million, a 28% year over year jump.

Founded in 2002, GuestLogix, which saw its stock close at $1.44 (Canadian) per share on March 24, fell on hard times because its business has been dominated by hardware sales  retail devices for use by flight attendants and other staff.

In a great position to capitalize on the ancillary revolution over the last few years, GuestLogix found its hardware supplanted by ancillary sales through the use of airline setbacks, and travelers using their own portable/mobile devices onboard.

GuestLogix CEO Brett Proud says the company is therefore carrying out a “major transition” from a pure, hardware-based transaction processor into a software-based transaction processor using devices from third party companies and passengers’ own devices.

While GuestLogix generated more than 5% of revenue from software services in 2013, it forecasts that number will reach 15% in 2014. GuestLogix’s margin for software-based transaction-processing is double the margin of its hardware services, officials said.

The company is also branching out into partnerships with rail companies, inflight entertainment outfits such as Golden Eagle Entertainment, Panasonic, and airport kiosk vendor NCR.

Working with airlines is expected to remain the core of the GuestLogix business, and it forecasts that it will notch $7 million in incremental revenue in 2014 through upcoming deployments of its services. Despite the layoffs, GuestLoxic officials said the company is ramping up for pending deals.

Asked about profitability during the company’s fourth quarter earnings call on March 24, CEO Proud said: “It’s definitely on the horizon. No question.”

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