Points International, Ltd.
May 3, 2017

Points International Ltd. Reports First Quarter 2017 Financial Results

First Quarter Gross Profit1 of $11.1 Million Increased 9% year-over-year

First Quarter Net Income of $0.9 Million and Adjusted EBITDA2 of $2.9 Million, Consistent with Prior Year

TORONTO, May 03, 2017 (GLOBE NEWSWIRE) -- Points (TSX:PTS) (Nasdaq:PCOM), the global leader in powering loyalty commerce, today announced results for the first quarter ended March 31, 2017.

"2017 is off to a good start in executing our diversification strategy as we look to the future. Our core business shows no signs of abatement, with strong organic growth coupled with both expansion of current and additions of new partnerships.  Built off this foundation, our two growth initiatives are indicating strong financial and strategic momentum that points to accretive Adjusted EBITDA in 2018 and beyond," stated Rob MacLean, CEO.  "Importantly, for each of our three business segments: Loyalty Currency Retailing, where our Buy, Gift & Transfer services represent the bulk of the activity, Points Travel and Platform Partners, we saw first quarter gross profit increase year-over-year. As we leverage our unique position in the market, we remain optimistic in both the continued success of our core business and that our newer businesses are on track to become meaningful financial and strategic contributors to our long term growth." 

First Quarter 2017 Financial Results
(Unless otherwise stated, all comparisons are on a year-over-year basis and all amounts are in USD$. The complete first quarter Condensed Consolidated Interim Financial Statements and Management Discussion & Analysis, including segmented results, are available at www.sedar.com and www.sec.gov.)

1 Gross profit is defined as total revenues less the direct cost of revenues. Gross profit is considered by Management to be an integral measure of financial performance and represents the amount of revenues retained by the Corporation after incurring direct costs. However, gross profit is not a recognized measure of profitability under IFRS.

2 Adjusted EBITDA (Earnings before income tax expense, depreciation and amortization, foreign exchange, share-based compensation and impairment of long-term investments) is considered by Management to be a useful supplemental measure when assessing financial performance. Management believes that Adjusted EBITDA is an important indicator of the Corporation's ability to generate liquidity through operating cash flow to fund future capital expenditures and working capital needs. However, Adjusted EBITDA is not a measure of financial performance under IFRS and should not be considered a substitute for Net Income, which we believe to be the most directly comparable IFRS measure.

3 Adjusted Operating Expenses consists of employment expenses excluding stock based compensation, marketing and communications, technology services, and other operating expenses. Adjusted Operating Expenses is not a measure of financial performance under IFRS and should not be considered a substitute for total expenses, which we believe to be the most directly comparable IFRS measure.

Recent Business Highlights

Outlook

The Company is reiterating financial guidance for the year ending December 31, 2017, as follows:

Investor Conference Call

Points' conference call with investors will be held today at 4:30 p.m. Eastern Time.  To participate, investors from the US and Canada should dial (877) 407-0784 ten minutes prior to the start time. International callers should dial (201) 689-8560.

In addition, the call is being webcast and can be accessed at the Company's web site: www.points.com and will be archived online upon completion of the call. A telephonic replay of the conference call will also be available until 11:59 p.m. Eastern Time on Wednesday, May 17, 2017, by dialing (844) 512-2921 in the U.S. and Canada and (412) 317-6671 internationally and entering the passcode 13660715.

About Points

Points, publicly traded as Points International Ltd. (TSX:PTS) (Nasdaq:PCOM), is the global leader in providing loyalty eCommerce and technology solutions to the world's top brands to power innovative services that drive increased loyalty program revenue and member engagement.  With a growing network of almost 60 global loyalty programs integrated into its unique Loyalty Commerce Platform, Points offers three core private or co-branded services: Loyalty Currency Retailing, which includes the Buy, Gift & Transfer services, retails loyalty points and miles directly to consumers; Points Travel, which helps loyalty programs increase program revenue from hotel and car bookings, providing more opportunities for members to earn and redeem loyalty rewards more quickly; and Platform Partners, a multi-channel service offering which provides developers transactional access to dozens of loyalty programs and their hundreds of millions of members via a package of APIs. Points is headquartered in Toronto with offices in San Francisco and London.

For more information, visit company.points.com, follow Points on Twitter (@PointsLoyalty) or read the Points blog. For Points' financial information, visit investor.points.com.

Caution Regarding Forward-Looking Statements

This press release contains or incorporates forward-looking statements within the meaning of United States securities legislation, and forward-looking information within the meaning of Canadian securities legislation (collectively, "forward-looking statements"). These forward-looking statements include, among other things, opportunities for new products and partners and incremental revenue, potential for growth in revenue and gross margin and our guidance for 2017 with respect to gross profit and adjusted EBITDA expectations. These statements are not historical facts but instead represent only Points' expectations, estimates and projections regarding future events.

Although Points believes the expectations reflected in such forward-looking statements are reasonable, such statements are not guarantees of future performance and are subject to important risks and uncertainties that are difficult to predict. Certain material assumptions or estimates are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. Undue reliance should not be placed on such statements. In particular, the financial outlooks herein assume Points will be able to maintain its existing contractual relationships and products, that such products continue to perform in a manner consistent with Points' past experience, that Points will be able to generate new business from our pipeline at expected margins, our in-market and newly launched products and services will perform in a manner consistent with the Company's past experience and we will be able to contain costs. Our ability to convert our pipeline of prospective partners and product launches is subject to significant risk and there can be no assurance that we will launch new partners or new products with existing partners as expected or planned nor can there be any assurance that Points will be successful in maintaining its existing contractual relationships or maintaining existing products with existing partners.  Other important risk factors that could cause actual results to differ materially include the risk factors discussed in Points' annual information form, Form-40-F, annual and interim management's discussion and analysis, and annual and interim financial statements and the notes thereto. These documents are available at www.sedar.com and www.sec.gov.

The forward-looking statements contained in this press release are made as at the date of this release and, accordingly, are subject to change after such date. Except as required by law, Points does not undertake any obligation to update or revise any forward-looking statements made or incorporated in this press release, whether as a result of new information, future events or otherwise.

Use of Non-GAAP Measures

The Corporation's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). Management uses certain non-GAAP measures, which are defined in the appropriate sections of this press release, to better assess the Corporation's underlying performance. These measures are reviewed regularly by management and the Corporation's Board of Director's in assessing the Corporation's performance and in making decisions about ongoing operations. These measures are also used by investors as an indicator of the Corporation's operating performance. Readers are cautioned that these terms are not recognized GAAP measures and do not have a standardized GAAP meaning under IFRS and should not be construed as alternatives to IFRS terms, such as net income.

Points International Ltd.
Key Financial Measures and Schedule of Non-GAAP Reconciliations

Gross Profit4 Information

Expressed in thousands of United States dollars    
  For the three months ended 
 

 
 March 31, 2017March 31, 2016 
Total Revenue $ 82,858 $73,560  
Direct cost of revenue  71,782  63,365  
Gross Profit $  11,076 $  10,195  
Gross Margin  13% 14% 
         


Reconciliation of Net Income to Adjusted EBITDA5

Expressed in thousands of United States dollars    
  For the three months ended 
 

 
 March 31, 2017March 31, 2016 
Net Income $  852$893 
Income tax expense 391396 
Depreciation and amortization 990930 
Foreign exchange loss (gain) (6)80 
Stock-based compensation 673668 
Adjusted EBITDA $2,900$2,967 

Gross Profit is defined as total revenues less the direct cost of revenues. Gross profit is considered by Management to be an integral measure of financial performance and represents the amount of revenues retained by the Corporation after incurring direct costs. However, gross profit is not a recognized measure of profitability under IFRS.

5Adjusted EBITDA (Earnings before income tax expense, depreciation and amortization, foreign exchange, share-based compensation and impairment of long-term investments) is considered by Management to be a useful supplemental measure when assessing financial performance. Management believes that Adjusted EBITDA is an important indicator of the Corporation's ability to generate liquidity through operating cash flow to fund future capital expenditures and working capital needs. However, Adjusted EBITDA is not a measure of financial performance under IFRS and should not be considered a substitute for Net Income, which we believe to be the most directly comparable IFRS measure.


Reconciliation of Total Expenses to Adjusted Operating Expenses6

Expressed in thousands of United States dollars    
  For the three months ended 
 

 
 March 31, 2017March 31, 2016 
Total Expenses 81,615  72,271  
 Subtract (add):      
 Direct cost of revenue  71,782  63,365  
 Depreciation and amortization  990  930  
 Foreign exchange loss (gain)  (6)  80  
Stock-based compensation  673 668 
Adjusted Operating Expenses $  8,176$  7,228 

Adjusted Operating Expenses consists of employment expenses excluding stock based compensation, marketing and communications, technology services, and other operating expenses. Adjusted Operating Expenses is not a measure of financial performance under IFRS and should not be considered a substitute for total expenses, which we believe to be the most directly comparable IFRS measure. 


Points International Ltd.
Condensed Consolidated Interim Statements of Financial Position       

Expressed in thousands of United States dollars
    
(Unaudited)    
    March 31, December 31,
As at 2017 2016
    
ASSETS   
Current assets   
Cash and cash equivalents $  42,634  $  46,492
Short-term investments  10,033 10,033
Restricted cash  500 500
Funds receivable from payment processors  4,848 10,461
Accounts receivable  5,784 4,057
Prepaid expenses and other assets  1,431 1,475
Total current assets $  65,230  $   73,018
Non-current assets   
Property and equipment  1,853 1,750
Intangible assets  16,366 16,896
Goodwill  7,130 7,130
Deferred tax assets  1,797 1,725
Other assets  2,715 2,715
Total non-current assets $  29,861  $   30,216
Total assets $  95,091  $  103,234

                                                                                                                    

LIABILITIES   
Current liabilities   
Accounts payable and accrued liabilities $  5,295 $  6,335 
Income taxes payable  365  1,638 
Payable to loyalty program partners  45,683  53,242 
Current portion of other liabilities  1,117  771 
Total current liabilities $  52,460 $ 61,986 
    
Non-current liabilities   
Deferred tax liabilities  141    211 
Other liabilities  659  719 
Total non-current liabilities $  800 $   930 
    
Total liabilities $  53,260 $  62,916 
    
SHAREHOLDERS' EQUITY   
Share capital  58,586  58,412 
Contributed surplus  10,310  9,881 
Accumulated other comprehensive income (loss)  (69) (127)
Accumulated deficit  (26,996) (27,848)
Total shareholders' equity $  41,831   $  40,318 
Total liabilities and shareholders' equity  $  95,091   $  103,234 
    


Condensed Consolidated Interim Statements of Comprehensive Income

     
Expressed in thousands of United States dollars, except per share amounts    
(Unaudited)    
     
For the three months ended March 31,    
   2017  2016  
REVENUE        
Principal $79,488 $70,741  
Other partner revenue     3,353       2,773  
Interest  17  46  
Total Revenue $  82,858   $  73,560   
         
 EXPENSES        
Direct cost of revenue  71,782  63,365  
Employment costs  5,881  5,903  
Marketing and communications  525  326  
Technology services  432  374  
Depreciation and amortization  990  930  
Foreign exchange (gain) loss  (6) 80  
Operating expenses  2,011  1,293  
Total Expenses $  81,615   $  72,271   
     
OPERATING INCOME BEFORE INCOME TAXES $  1,243   $  1,289   
     
Income tax expense  391  396  
NET INCOME $  852   $  893   
     
OTHER COMPREHENSIVE INCOME    
Items that will subsequently be reclassified to profit or loss:        
Unrealized gain on foreign exchange derivatives designated as cash flow hedges  150  820  
Income tax effect  (40) (217) 
Reclassification to net income of loss (gain) on foreign exchange derivatives designated as cash flow hedges  (70) 308  
Income tax effect  18  (82) 
Other comprehensive income for the period, net of income tax $  58 $   829  
TOTAL COMPREHENSIVE INCOME  $  910  $ 1,722  
         
EARNINGS PER SHARE        
Basic earnings per share $ 0.06  0.06  
Diluted earnings per share $ 0.06  0.06  
         


Points International Ltd.
Condensed Consolidated Interim Statements of Changes in Shareholders' Equity                                                                                                                                                                                       

  Attributable to equity holders of the Company
Expressed in thousands of United States dollars except number of shares
(Unaudited)
 Share CapitalContributed SurplusAccumulated other
comprehensive income (loss)
Accumulated deficit Total shareholders' equity  
  Number of Shares  Amount     
            
Balance at December 31, 2016 14,878,674   $  58,412 $  9,881 $  (127)$  (27,848)$  40,318  
Net lncome  -  -  -  -  852  852  
Other comprehensive income, net of tax -  -  -  58  -  58  
Total comprehensive income -  -  -  58  852  910  
Effect of share option compensation plan -  -  107  -  -  107  
Effect of RSU compensation plan -  -  566  -  -  566  
Share issuances — RSUs -  210  (210) -  -    -  
Shares repurchased (9,300) (36) (34) -  -  (70) 
Balance at March 31, 2017 14,869,374   $58,586 $  10,310 $  (69)$  (26,996)$  41,831  


Balance at December 31, 2015   15,306,402 $  59,293 $  9,859 $  (624)$  (26,333)$  42,195 
Net lncome -  -  -  -  893  893 
Other comprehensive loss, net of tax -  -  -  829  -  829 
Total comprehensive income -  -  -  829  893  1,722 
Effect of share option compensation plan -  -  204  -  -  204 
Effect of RSU compensation plan -  -  464  -  -  464 
Share issuances — RSUs -  296  (296) -  -    - 
Shares repurchased (33,800) (132) (138) -  -  (270)
Balance at March 31, 2016 15,272,602 $  59,457 $  10,093 $  205 $  (25,440)$  44,315 
                   


Points International Ltd.
Condensed Consolidated Interim Statements of Cash Flows

Expressed in thousands of United States dollars       
(Unaudited)       
        
For the three months ended March 31,   2017  2016 
        
Cash flows from operating activities         
Net income for the period $   852 $   893 
Adjustments for: 
Depreciation of property and equipment  200  236 
Amortization of intangible assets  790  694 
Unrealized foreign exchange loss  169  224 
Equity-settled share-based payment expense  673  668 
Deferred income tax expense (recovery)  (164) 13 
Unrealized net gain on derivative contracts designated as cash flow hedges  80  1,128 
Changes in non-cash balances related to operations   (5,656) (8,226)
Net cash used in operating activities $  (3,056)$  (4,370)
    
Cash flows from investing activities   
Acquisition of property and equipment  (303) (116)
Additions to intangible assets  (260) (682)
Net cash used in investing activities $  (563)$   (798)
    
Cash flows from financing activities    
Shares repurchased  (70) (270)
Net cash used in financing activities $  (70)$  (270)
    
Effect of exchange rate fluctuations on cash held  (169) (223)
    
Net decrease in cash and cash equivalents $  (3,858)$  (5,661)
Cash and cash equivalents at beginning of the period $  46,492 $  51,364 
Cash and cash equivalents at end of the period $  42,634 $  45,703 
        
Interest Received $23 $37 
        
Taxes Paid $(1,773)$(266)

Amounts received for interest were reflected as operating cash flows in the condensed consolidated interim statements of cash flows.

Contact :                                              

Points Investor Relations
ICR, Inc.
Garo Toomajanian
ir@points.com