Points International, Ltd.
Aug 10, 2016

Points International Ltd. Reports Second Quarter 2016 Financial Results

Second Quarter Record Revenue of $83.9 million, increases 24% year-over-year

TORONTO, Aug. 10, 2016 (GLOBE NEWSWIRE) -- Points (TSX:PTS) (NASDAQ:PCOM), the global leader in loyalty currency management, today announced results for the second quarter and six months ended June 30, 2016.

"We delivered strong revenue growth of 24% in the second quarter," said Points' CEO, Rob MacLean. "This performance was driven by the expansion of existing loyalty program partnerships, leveraging our ongoing investments in the Loyalty Commerce Platform. We are excited about advancing new Buy, Gift, and Transfer relationships, as well as two further Points Travel wins and additional Points Wallet relationships that we anticipate launching in the second half of the year. Our momentum across multiple businesses makes us confident that our successfully evolving platform strategy now enables us to both grow current relationships while also advancing the successful launch of our two new services, Points Travel and the Loyalty Wallet."

Second Quarter 2016 Financial Results
(Unless otherwise stated, all comparisons for the second quarter of 2016 are on a year-over-year basis)

Second Quarter 2016 Business Metrics

 Q2/16Q2/15Q2/16 vs. Q2/15Q1/16Q2/16 vs. Q1/16
Total All Channels     
Points/Miles Transacted (in 000s)6,633,6245,366,496 24%5,664,856 17%
No. of Points/Miles Transactions630,489591,647 7%638,569 -1%

Recent Business Highlights

Share Buyback
In the second quarter, the Company repurchased approximately 43,682 shares of its common stock for a total of $0.4 million at an average price of $9.27 per share.

Outlook
The Company is maintaining financial guidance for the year ending December 31, 2016, as follows:

As previously announced, beginning in 2016, the Company updated its calculation of Adjusted EBITDA to adjust for the impact of share-based compensation, to be more in-line with peer and industry standards. Figures for prior periods have been adjusted to reflect this in comparisons.

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, August 24, 2016, by dialing (877) 870-5176 in the U.S. and Canada and (858) 384-5517 internationally and entering the passcode 13642147.

About Points
Points, publicly traded as Points International Ltd. (TSX:PTS)(Nasdaq:PCOM), provides 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 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 on Points, visit company.points.com, follow us on Twitter @PointLoyalty 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 2016 with respect to revenue growth 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 Profit Information1
      
Expressed in thousands of United States dollars     
  For the three months ended 

For the six months ended
 

 
 June 30, 2016
 June 30, 2015  June 30, 2016
 June 30, 2015 
Total Revenue
Direct cost of principal revenue
 

$

  83,864
72,704
 $

67,898
56,577
  $

  157,424
136,069
 $

135,015
112,393
 
Gross Profit $  11,160 $11,321  $  21,355 $22,622 
Gross Margin  13% 17%  14% 17%
               


Reconciliation of Net Income to Adjusted EBITDA2
 
Expressed in thousands of United States dollars     
  For the three months ended For the six months ended
 

 
 June 30, 2016
 June 30, 2015  June 30, 2016
 June 30, 2015 
               
Net Income $931 $1,721  $  1,824 $3,436 
Adjustments:              
Income tax expense  220  820   616  1,671 
Depreciation and Amortization  1,297  883   2,227  1,760 
Total adjustments    1,517  1,703     2,843  3,431 
EBITDA  2,448  3,424   4,667  6,867 
Foreign Exchange loss (gain)  88  (141)  168  (5)
Share-based compensation  690  570   1,358  1,071 
Adjusted EBITDA $  3,226 $3,853  $  6,193 $7,933 

1 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.

2 Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization, stock-based compensation and foreign exchange) 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.

Points International Ltd.
Condensed Consolidated Interim Statements of Financial Positions
   
Expressed in thousands of United States dollars
(Unaudited)
   
As at  June 30,
2016
 December 31,
2015
 
ASSETS  
Current assets  
Cash and cash equivalents$  55,371 $51,364 
Restricted cash 500  1,000 
Funds receivable from payment processors 5,791  6,588 
Accounts receivable 3,596  2,988 
Prepaid expenses and other assets 2,553  1,256 
Total current assets$  67,811   $63,196 
Non-current assets  
Property and equipment 1,229  1,466 
Intangible assets 18,056  18,616 
Goodwill 7,130  7,130 
Deferred tax assets 1,433  1,755 
Long-term investment 5,000  5,000 
Other assets 2,721  2,765 
Total non-current assets$35,569 $36,732 
Total assets$103,380 $99,928 
       
LIABILITIES      
Current liabilities      
Accounts payable and accrued liabilities$5,356 $5,808 
Payable to loyalty program partners 50,841  49,526 
Current portion of other liabilities 833  1,852 
Total current liabilities$
57,030 $57,186 
       
Non-current liabilities      
Deferred tax liabilities 445  425 
Other liabilities 228  122 
Total non-current liabilities$693 $547 
       
Total liabilities$  57,723  $57,733 
       
SHAREHOLDERS' EQUITY      
Share capital 59,313  59,293 
Contributed surplus 10,527  9,859 
Accumulated other comprehensive income (loss) 326  (624)
Accumulated deficit (24,509) (26,333)
Total shareholders' equity$ 45,657  42,195 
Total liabilities and shareholders' equity$ 103,380  99,928 
       


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 six months
ended
 June 30,
2016

 June 30,
2015
 June 30,
2016

 June 30,
2015
 
REVENUE    
Principal
$
  80,529
 $
64,930
 $
151,270
 $
127,555
 
Other partner revenue 3,288  2,951  6,061  7,427 
Interest 47  17  93  33 
Total Revenue$  83,864 $67,898 $ 157,424  $135,015 

EXPENSES
    
Direct cost of principal revenue 72,704  56,577  136,069  112,393 
Employment costs 6,214  5,823  12,117  11,747 
Marketing and communications 461  399  787  674 
Technology services 416  361  790  631 
Depreciation and amortization 1,297  883  2,227  1,760 
Foreign exchange (gain) loss 88  (141) 168  (5)
Operating expenses 1,533  1,455  2,826  2,708 
Total Expenses$82,713 $65,357 $ 154,984  $129,908 
     
OPERATING INCOME BEFORE INCOME TAXES$1,151 $2,541 $2,440 $5,107 
     
Income tax expense 220  820  616  1,671 
NET INCOME$   931 $1,721 $  1,824  $3,436 
     
OTHER COMPREHENSIVE INCOME     
Items that will subsequently be reclassified to profit or loss:
Unrealized gain (loss) on foreign exchange derivative  designated as cash flow hedges
 135  156  955  (606)
Income tax effect (36) (41) (253) 161 
Reclassification to net income of loss on foreign exchange derivatives designated as cash flow hedges 29  321  337  653 
Income tax effect (7) (85) (89) (173)
Other comprehensive income for the period,
net of income tax
$121 $351 $950 $35 
TOTAL COMPREHENSIVE INCOME $1,052 $2,072 $2,774 $3,471 
             
EARNINGS PER SHARE            
Basic earnings per share$0.06 $0.11 $0.12 $0.22 
Diluted earnings per share$ 0.06 $0.11 $0.12 $0.22 
             

                                                                                                                                                                                                               

Points International Ltd.
Condensed Consolidated Interim Statements of Changes in 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, 2015   15,306,402 $  59,293 $  9,859 $(624)$  (26,333)$  42,195  
Net lncome  -  -  -  -  1,824  1,824  
Other comprehensive income, net of tax -  -  -  950  -  950  
Total comprehensive income -  -  -  950  1,824  2,774  
Effect of share option compensation plan -  -  352  -  -  352  
Effect of RSU compensation plan -  -  1,006  -  -  1,006  
Share issuances — share options   500  7  (2) -  -    5  
Share issuances — RSUs -  315  (315) -  -    -  
Shares repurchased (77,482) (302) (373) -  -  (675) 
Balance at June 30, 2016 15,229,420 $ 59,313 $  10,527 $326 $  (24,509)$  45,657  
                    
Balance at December 31, 2014 15,649,085 $61,084 $11,985 $(354)$(31,498)$41,217  
Net lncome -  -  -  -  3,436  3,436  
Other comprehensive income, net of tax -  -  -  35  -  35  
Total comprehensive income -  -  -  35  3,436  3,471  
Effect of share option compensation plan -  -  503  -  -  503  
Effect of RSU and PSU compensation plan -  -  568  -  -  568  
Share issuances — share options 93,014  574  (303) -  -  271  
Share issuances — RSUs -  416  (416) -  -  -  
Share capital held in trust -  (1,106) -  -  -  (1,106) 
Shares repurchased (182,015) (710) (1,253) -  -  (1,963) 
Balance at June 30, 2015 15,560,084 $60,258 $11,084 $(319)$(28,062)$42,961  
                    


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 six months
ended
 June 30,
2016

 June 30,
2015
 June 30,
2016

 June 30,
2015
 
Cash flows from operating activities    
Net income for the period$  931 $1,721 $  1,824 $3,436 
Adjustments for: 
Depreciation of property and equipment 356  281  592  550 
Amortization of intangible assets 941  602  1,635  1,210 
Unrealized foreign exchange loss (gain) (759) 579  (535) (417)
Equity-settled share-based payment transactions 690  570  1,358  1,071 
Deferred income tax expense (recovery) (15) 710  (2) 1,527 
Net (gain) loss on derivative contracts designated as cash flow hedges 164  477  1,292  47 
Changes in non-cash balances related to operations 7,132  (7,840) (1,094) (119)
Net cash provided by (used in) operating activities$  9,440 $(2,900)$  5,070 $7,305 
     
Cash flows from investing activities    
Acquisition of property and equipment (239) (148) (355) (264)
Additions to intangible assets (393) (799) (1,075) (1,263)
Changes in restricted cash 500  1,000  500  250 
Net cash provided by (used in) investing activities$  (132)$53 $  (930)$(1,277)
     
Cash flows from financing activities     
Proceeds from exercise of share options 5  40  5  271 
Shares repurchased (405) (1,095) (675) (1,963)
Purchases of share capital held in trust -  (1,106) -  (1,106)
Net cash provided by (used in) financing activities$  (400)$( 2,161)$  (670)$(2,798)
     
Net increase (decrease) in cash and cash equivalents$8,908 $(5,008)$3,470 $3,230 
Cash and cash equivalents at beginning of the period$45,703 $46,128 $51,364 $36,868 
Effect of exchange rate fluctuations on cash held 760  (585) 537  437 
Cash and cash equivalents at end of the period$55,371 $40,535 $55,371 $40,535 
             
Interest Received$37 $17 $74 $33 
Taxes Paid$(34)$- $(300)$(176)
             
Amounts received for interest were reflected as operating cash flows in the condensed consolidated interim statements of cash flows.
 
Contact:
Points Investor Relations
ICR
Garo Toomajanian
ir@points.com