Points International, Ltd.
Nov 8, 2017

Points International Ltd. Reports Third Quarter 2017 Financial Results

Record Revenue of $91.2 Million

Gross Profit1 Increased 14% Year-Over-Year to $11.4 Million

TORONTO, Nov. 08, 2017 (GLOBE NEWSWIRE) -- Points (TSX:PTS) (Nasdaq:PCOM), the global leader in powering loyalty commerce, today announced results for the third quarter ended September 30, 2017.

"Our strong third quarter performance demonstrates continued progress toward our strategic goals and financial targets for 2017," stated Rob MacLean, CEO. "During the third quarter we built on the success of our Loyalty Currency Retailing segment and also saw meaningful strategic and financial gains in our Platform Partners and Points Travel segments.  Momentum coming out of this quarter offers increased confidence in our ongoing diversification efforts and positions us for continued success in 2018." 

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

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: investor.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, November 15, 2017, by dialing (844) 512-2921 in the U.S. and Canada and (412) 317-6671 internationally and entering the passcode 13672810.

About Points

Points, publicly traded as Points International Ltd. (TSX:PTS) (Nasdaq:PCOM), provides loyalty e-commerce 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 over 50 global loyalty programs integrated into its unique Loyalty Commerce Platform, Points offers three core private or co-branded services: its Buy Gift and Transfer service retails loyalty points and miles directly to consumers; its Points Loyalty Wallet service offers any developer transactional access to dozens of loyalty programs and their hundreds of millions of members via a package of APIs; and its Points Travel service helps loyalty programs increase program revenue from hotel bookings, and provides more opportunities for members to earn and redeem loyalty rewards more quickly. 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.

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


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 
    
  September 30, 2017September 30, 2016 
     
Total Revenue
Direct cost of revenue
 

$

  91,198
79,772
 $

  82,442
72,380
  
Gross Profit4 $  11,426 $  10,062  
Gross Margin  13% 12% 
  


Reconciliation of Net Income to Adjusted EBITDA5

     
Expressed in thousands of United States
dollars
    
  For the three months ended 
    
  September 30, 2017September 30, 2016 
     
Net Income $605$335 
Income tax expense 310301 
Depreciation and amortization 1,0291,224 
Foreign exchange loss (gain) (75)1 
Stock-based compensation 1,321389 
Adjusted EBITDA5 $  3,190$  2,250 
  


Reconciliation of Total Expenses to Adjusted Operating Expenses6

     
Expressed in thousands of United States
dollars
    
  For the three months ended 
    
 
 September 30, 2017September 30, 2016 
     
Total Expenses $90,283$81,806 
Subtract (add):    
  Direct cost of revenue 79,77272,380 
  Depreciation and amortization 1,0291,224 
  Foreign exchange loss (gain) (75)1 
   Stock-based compensation 1,321389 
Adjusted Operating Expenses6 $  8,236$  7,812 
  


Points International Ltd.
Condensed Consolidated Interim Statements of Financial Position       

Expressed in thousands of United States dollars
(Unaudited)

 
    
    
    
As at

 
September 30,
2017
December 31,
2016
 
ASSETS    
Current assets    
Cash and cash equivalents $  54,949  $46,492 
Short-term investments  - 10,033 
Restricted cash  500 500 
Funds receivable from payment processors  11,561 10,461 
Accounts receivable  6,983 4,057 
Prepaid expenses and other assets  3,055 1,475 
Total current assets $  77,048$    73,018  
Non-current assets    
Property and equipment  2,126 1,750 
Intangible assets  15,557 16,896 
Goodwill  7,130 7,130 
Deferred tax assets  1,999 1,725 
Other assets  2,713 2,715 
Total non-current assets $  29,525$    30,216 
Total assets $   106,573$  103,234 
  

                                                                                                                    

    
LIABILITIES   
Current liabilities   
Accounts payable and accrued liabilities $  6,819 $  6,335 
Income taxes payable   226  1,638  
Payable to loyalty program partners  54,055  53,242 
Current portion of other liabilities  784  771 
Total current liabilities $  61,884 $  61,986 
    
Non-current liabilities   
Deferred tax liabilities  298  211 
Other liabilities  617  719 
Total non-current liabilities $   915 $    930 
    
Total liabilities $  62,799 $  62,916 
    
SHAREHOLDERS' EQUITY   
Share capital  58,365  58,412 
Contributed surplus  10,483  9,881 
Accumulated other comprehensive income (loss)  585  (127)
Accumulated deficit  (25,659) (27,848)
Total shareholders' equity $  43,774 $    40,318 
Total liabilities and shareholders' equity  $  106,573 $  103,234 
 


Points International Ltd.

Condensed Consolidated Interim Statements of Comprehensive Income

Expressed in thousands of United States dollars, except per share amounts
(Unaudited)

     
  For the three months
ended
For the nine months
ended
 
     
 
 
  September
30, 2017
  September
30, 2016
   September
30, 2017
   September
30, 2016
  
REVENUE      
Principal $ 87,200 $79,671 $248,549 $230,941  
Other partner revenue  3,927  2,725  11,116  8,786  
Interest  71  46  158  139  
Total Revenue $  91,198 $  82,442 $ 259,823 $239,866  
 

EXPENSES
      
Direct cost of principal revenue  79,772  72,380  225,928  208,449  
Employment costs  6,660  5,457  18,731  17,574  
Marketing and communications  422  460  1,587  1,247  
Technology services  489  446  1,390  1,236  
Depreciation and amortization  1,029  1,224  3,017  3,451  
Foreign exchange (gain) loss  (75) 1  (183) 169  
Operating expenses  1,986  1,838  6,068  4,664  
Total Expenses $  90,283 $  81,806 $ 256,538 $236,790  
       
OPERATING INCOME BEFORE INCOME TAXES $   915 $   636 $  3,285 $  3,076  
       
Income tax expense  310  301  1,096  917  
NET INCOME $   605 $   335 $  2,189 $  2,159  
       
OTHER COMPREHENSIVE INCOME       
  Items that will subsequently be reclassified to profit or loss:
   Unrealized gain on foreign exchange derivative designated
   as cash flow hedges
  573  (196) 1,101  759  
  Income tax effect  (151) 52  (292) (201) 
  Reclassification to net income of loss on foreign exchange
   derivatives designated as cash flow hedges
 


 (192) (27

)
 (132) 310  
  Income tax effect  51  7  35  (82) 
Other comprehensive income for the period,
net of income tax
 $  281 $  (164)$  712 $  786  
TOTAL COMPREHENSIVE INCOME  $  886 $   171 $  2,901 $  2,945  
       
EARNINGS PER SHARE      
Basic earnings per share $0.04
 $  0.02 $  0.15
 $    0.14  
Diluted earnings per share $0.04
 $  0.02 $  0.15
 $      0.14  


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 Capital Contributed
Surplus
  Accumulated 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 income  -  -  -  -  2,189  2,189  
Other comprehensive income, net of tax -  -  -  712  -  712  
Total comprehensive income -  -  -  712  2,189  2,901  
Effect of share option compensation plan -  -  223  -  -  223  
Effect of RSU compensation plan -  -  2,834  -  -  2,834  
Share issuances — share options 16,988  395  (335)   60  
Share issuances — RSUs -  1,255  (1,255) -  -    -    
Share capital held in trust -  (1,053) -  -  -  (1,053) 
Shares repurchased (162,347) (644) (865) -  -  (1,509) 
Balance at September 30, 2017  14,733,315 $  58,365 $  10,483 $  585 $  (25,659)$  43,774  
         
   
Balance at December 31, 2015 15,306,402 $ 59,293 $ 9,859 $   (624)$ (26,333)$   42,195  
Net income -  -  -  -  2,159  2,159  
Other comprehensive income, net of tax -  -  -  786  -  786  
Total comprehensive income -  -  -  786  2,159  2,945  
Effect of share option compensation plan -  -  431  -  -  431  
Effect of RSU compensation plan -  -  1,316  -  -  1,316  
Share issuances — share options 500  7  (2) -  -  5  
Share issuances — RSUs -  620  (620) -  -  -  
Shares repurchased (134,258) (526) (627) -  -  (1,153) 
Balance at September 30, 2016 15,172,644 $ 59,394 $  10,357 $  162 $  (24,174)$   45,739  
  


Points International Ltd.

Condensed Consolidated Interim Statements of Cash Flows 
Expressed in thousands of United States dollars

     
(Unaudited)
 
 For the three months
ended
For the nine months
ended
 
     
   September
30, 2017
  September
30,  2016
  September
30, 2017
  September
30, 2016
  
Cash flows from operating activities      
Net income for the period $  605 $    335 $  2,189 $  2,159  
Adjustments for:  
Depreciation of property and equipment  238   344  649  936  
Amortization of intangible assets  791  880  2,368  2,515  
Unrealized foreign exchange loss (gain)  716  85  1,425  (450) 
Equity-settled share-based payment transactions  1,321  389  3,057  1,747  
Deferred income tax expense (recovery)  (46) (162) (444) (164) 
Net gain (loss) on derivative contracts designated as
  cash flow hedges

 
 381  (223) 969  1,069  
Changes in non-cash balances related to operations   3,975  (7,586) (5,808) (8,680) 
Net cash provided by (used in) operating activities $  7,981 $ (5,938)$  4,405 $   (868) 
       
Cash flows from investing activities      
Acquisition of property and equipment  (267) (762) (1,025) (1,117) 
Additions to intangible assets  (358) (275) (1,029) (1,350) 
Settlement of short-term investments, net of interest
  received
  10,033  -  10,033  -  
Changes in restricted cash  -  -  -  500  
Net cash provided by (used in) investing activities $   9,408 $  (1,037)$  7,979 $(1,967) 
       
Cash flows from financing activities       
Proceeds from exercise of share options  60  -  60  5  
Purchase of share capital held in trust  (857) -  (1,053) -  
Shares repurchased  (1,439) (478) (1,509) (1,153) 
Net cash provided by (used in) financing activities $ (2,236)$   (478)$ (2,502)$  (1,148) 
       
Effect of exchange rate fluctuations on cash held   (716)
 (86)
 (1,425)
 451  
               
Net increase (decrease) in cash and cash equivalents $ 14,437 $    (7,539)$   8,457  $   (3,532) 
Cash and cash equivalents at beginning of the period $ 40,512 $   55,371 $  46,492 $  51,364  
Cash and cash equivalents at end of the period $ 54,949 $   47,832 $  54,949 $  47,832  
     
Interest received $156 $41 $  204 $  115  
Taxes paid $(506)$(242)$  (3,011)$  (542) 
Taxes received $114 $- $  114 $  -  
               

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


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 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.

3 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.

4 Gross Profit is defined as total revenues less the direct cost of principal 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.

5 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.

6 Adjusted Operating Expenses consists of employment expenses excluding stock based compensation, marketing, technology, 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.