Points International, Ltd.
Mar 8, 2017

Points International Ltd. Reports Fourth Quarter and Full Year 2016 Financial Results

Full Year Revenue of $321.8 Million Increases 9% and Gross Profit of $43.3 Million Increases 2% Year-over-year

Full Year Net Income of $3.5 Million, before the impact of an impairment loss of $5.0 Million, Decreases 33% Year-over-year

TORONTO, March 08, 2017 (GLOBE NEWSWIRE) -- Points (TSX:PTS) (Nasdaq:PCOM), the global leader in powering loyalty commerce, today announced results for the fourth quarter and full year ended December 31, 2016.

"Our strong fourth quarter operating performance, with a 67% increase in Adjusted EBITDA1 and a 20% increase in Gross Profit2, our ability to grow net operating cash by 51% year-over-year and our recent multiple announcements on new business activity, clearly indicate that during 2016 we made important progress across the entire business, and we are optimistic that we will extend our track record of success as we look ahead," stated Rob MacLean, CEO.  "We produced strong strategic results in 2016. Based upon our prudent investment strategy, our core Currency Retailing, or Buy, Gift and Transfer, business has been highly profitable, now generating baseline economics of approximately $20 million of annual Adjusted EBITDA1 enabling us to invest in longer-term opportunities. Our Platform Partners initiative, where our Loyalty Wallet plays a key role in bringing third parties onto the Loyalty Commerce Platform, will represent approximately 15% of our Gross Profit2 and approach breakeven on an Adjusted EBITDA basis and therefore is a very compelling option for the Company.  Finally, our unique market position, tremendous early traction on business development, growing ties with strategic industry players and a large, proven, high margin market in the online travel booking space all support our belief that our ongoing investment in the Points Travel service is clearly one of the most compelling ways we can build long-term shareholder value."  

Fourth Quarter 2016 Financial Results

(Unless otherwise stated, all comparisons are on a year-over-year basis and all amounts are in USD$)

Fourth Quarter 2016 Business Metrics

 Q4/16Q4/15Q4/16 vs.
Q4/15
Q3/16Q4/16 vs.
Q3/16
Total All Channels     
  Points/Miles Transacted (in 000s)6,775,3125,879,01315%6,100,50011%
  No. of Points/Miles Transactions624,684581,8617%606,5553%
        

Full Year 2016 Financial Highlights

(Unless otherwise stated, all comparisons are on a year-over-year basis and all amounts are in USD$)

1 Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization, foreign exchange, share-based compensation, and impairment of long-term investment) 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 (Loss), which we believe to be the most directly comparable IFRS measure. 

2 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. 

Recent Business Highlights

Share Buyback

In the fourth quarter, the Company repurchased 293,970 shares of its common stock for a total of $2.0 million at an average price of $6.90 per share.  The Board of Directors has approved the renewal of the Corporation's normal course issuer bid for an additional year.  The renewal of the issuer bid, and any purchases made thereunder, is and will be subject to compliance with the requirements of the Toronto Stock Exchange and applicable Canadian and United States laws.

Outlook

"As we lay the foundation for stronger growth from newer, high-margin products, the contribution from these products to gross profit will be disproportionately larger than their impact on total revenue," commented MacLean, "Given our ultimate goal of increasing profitability, we are increasingly focused on total gross profit and adjusted EBITDA, as reflected in our guidance to these metrics."

The Company is initiating 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, March 22, 2017, by dialing (844) 512-2921 in the U.S. and Canada and (412) 317-6671 internationally and entering the passcode 13655904.

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, 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 Profit3 Information

Expressed in thousands of United States dollars  
  For the three months ended For the twelve months ended
     
  December 31, 2016
 December 31, 2015  December 31, 2016
 December 31, 2015 
Total Revenue
 $81,955 $80,228  $321,821 $296,376 
Direct cost of principal revenue 
 70,034  70,264   278,483  253,710 
Gross Profit $  11,921 $9,964  $  43,338 $42,666 
Gross Margin  15%  12%   13%  14% 
               

Reconciliation of Net Income (loss) to Adjusted EBITDA4

Expressed in thousands of United States dollars
  For the three months ended
 For the twelve months ended
     
  December 31, 2016 December 31, 2015
  December 31, 2016 December 31, 2015 
Net Income (loss) $(3,674) $961  $(1,515) $5,165 
Share-based compensation  570  6   2,317  1,588 
Income tax expense (recovery)  628  451   1,545  2,474 
Depreciation and Amortization  1,078  895   4,529  3,546 
Foreign Exchange loss (gain)
  61  (117)   230  (131) 
Impairment of long-term investments  5,000  -   5,000  - 
Adjusted EBITDA $3,663 $2,196  $12,106 $12,642 
               

3 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.

4 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 (Loss), which we believe to be the most directly comparable IFRS measure.

    
Points International Ltd. 
Consolidated Statements of Financial Position 
    
Expressed in thousands of United States dollars 
    
As at December 31  2016  2015 
    
ASSETS   
Current assets   
Cash and cash equivalents $46,492 $51,364 
Short-term investments  10,033  - 
Restricted cash  500  1,000 
Funds receivable from payment processors  10,461  6,588 
Accounts receivable  4,057  2,988 
Prepaid expenses and other assets  1,475  1,256 
Total current assets  73,018  63,196 
        
Non-current assets       
Property and equipment  1,750  1,466 
Intangible assets  16,896  18,616 
Goodwill  7,130  7,130 
Deferred tax assets  1,725  1,755 
Long-term investment  -  5,000 
Other assets  2,715  2,765 
Total non-current assets  30,216  36,732 
Total assets $103,234 $99,928 
        
LIABILITIES       
Current liabilities       
Accounts payable and accrued liabilities $6,335 $5,530 
Income taxes payable  1,638  278 
Payable to loyalty program partners  53,242  49,526 
Current portion of other liabilities  771  1,852 
Total current liabilities  61,986  57,186 
        
Non-current liabilities       
Deferred tax liabilities  211  425 
Other liabilities  719  122 
Total non-current liabilities  930  547 
        
Total liabilities $62,916 $57,733 
        
SHAREHOLDERS' EQUITY       
Share capital  58,412  59,293 
Contributed surplus  9,881  9,859 
Accumulated other comprehensive loss  (127)  (624) 
Accumulated deficit  (27,848)  (26,333) 
Total shareholders' equity $40,318 $42,195 
Total liabilities and shareholders' equity  $103,234 $99,928 
        


 

Points International Ltd. 
Consolidated Statements of Comprehensive Income (Loss) 
  
Expressed in thousands of United States dollars, except per share amounts 
 For the three months
ended
For the twelve months
ended
 
 December
31, 2016
December
31, 2015
December
31, 2016
December
31, 2015
 
REVENUE     
Principal$78,023 $77,045 $308,964 $283,409  
Other partner revenue 3,862  3,143  12,648  12,871  
Interest 70  40  209  96  
Total Revenue$  81,955 $80,228 $321,821 $296,376  
              
EXPENSES             
Direct cost of principal revenue 70,034  70,264  278,483  253,710  
Employment costs 5,646  5,220  23,220  22,699  
Marketing and communications 973  531  2,220  1,704  
Technology services 455  355  1,691  1,343  
Depreciation and amortization 1,078  895  4,529  3,546  
Foreign exchange (gain) loss 61  (117)  230  (131)  
Operating expenses 1,754  1,668  6,418  5,866  
Impairment of long-term investments 5,000  -  5,000  -  
Total Expenses$  85,001 $78,816 $321,791 $288,737  
              
INCOME (LOSS) BEFORE INCOME TAXES$  (3,046) $1,412 $  30 $7,639  
              
Income tax expense 628  451  1,545  2,474  
NET INCOME (LOSS)$  (3,674) $961 $  (1,515) $5,165  
              
OTHER COMPREHENSIVE INCOME (LOSS)             
Items that will subsequently be reclassified to profit or loss:             
Unrealized gain (loss) on foreign exchange derivatives designated as cash flow hedges (358)  (418)  401  (1,796)  
Income tax effect 95  111  (106)  476  
Reclassification to net income of loss (gain) on foreign exchange derivatives designated as cash flow hedges (41)  447  269  1,428  
Income tax effect 15  (218)  (67)  (378)  
Other comprehensive income (loss) for the period,
net of income tax
$  (289) $(78) $ 497 $(270)  
              
TOTAL COMPREHENSIVE INCOME (LOSS)$(3,963) $883 $  (1,018) $4,895  
              
EARNINGS (LOSS) PER SHARE             
Basic earnings (loss) per share$(0.24) $0.06 $(0.10) $0.33  
Diluted earnings (loss) per share$(0.24) $0.06 $(0.10) $ 0.33  


Points International Ltd.         
Consolidated Statements of Changes in Shareholders' Equity       
         Attributable to equity holders of the Company
 
Expressed in thousands of United States dollars except number of shares    Share CapitalContributed
Surplus
Accumulated
other
comprehensive
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 loss  -  -  -  -  (1,515)  (1,515)  
Other comprehensive income  -  -  -  497  -  497  
Total comprehensive loss  -  -  -  497  (1,515)  (1,018)  
Effect of share option compensation plan  -  -  540  -  -  540  
Effect of RSU compensation plan  -  -  1,777  -  -  1,777  
Share issuances — share options  500  7  (2)  -  -  5  
Share issuances — RSUs  -  791  (791)  -  -  -  
Shares repurchased   (428,228)  (1,679)  (1,502)  -  -  (3,181)  
Balance at December 31, 2016  14,878,674 $58,412 $9,881 $   (127) $   (27,848) $40,318  
          
Balance at December 31, 2014  15,649,085 $61,084 $11,985 $(354) $(31,498) $41,217  
Net income  -  -  -  -  5,165  5,165  
Other comprehensive loss  -  -  -  (270)  -  (270)  
Total comprehensive income  -  -  -  (270)  5,165  4,895  
Effect of share option compensation plan  -  -  934  -  -  934  
Effect of RSU and PSU compensation plan  -  -  654  -  -  654  
Share issuances — share options  96,411  615  (338)  -  -  277  
Share issuances — RSUs  -  513  (513)  -  -  -  
Share capital held in trust  -  (1,215)  -  -  -  (1,215)  
Shares repurchased  (439,094)  (1,704)  (2,863)  -  -  (4,567)  
Balance at December 31, 2015  15,306,402 $59,293 $9,859 $(624) $(26,333) $42,195  
                     


Points International Ltd. 
Consolidated Statements of Cash Flows 
Expressed in thousands of United States dollars 
  
 
 
For the three months
ended
 For the twelve months
ended
 
 December 31,
2016

 December 31,
2015
 December 31,
2016

 December
31, 2015
 
Cash flows from operating activities       
  
Net income (loss) for the period$  (3,674) $961 $  (1,515) $ 5,165  
Adjustments for:                 
Depreciation of property and equipment 191  231  1,127  1,037  
Amortization of intangible assets 887  664  3,402  2,509  
Unrealized foreign exchange loss (gain) (638)  (226)  (1,088)  (949)  
Equity-settled share-based payment transactions 570  6  2,317  1,588  
Impairment of long-term investments 5,000  -  5,000  -  
Deferred income tax expense (recovery) (181)  804  (345)  2,261  
Net (gain) loss on derivative contracts designated as cash flow hedges (399)  (107)  670  (368)  
Changes in non-cash balances related to operations 8,966  11,531  286  10,689  
Net cash provided by operating activities$  10,722 $13,864 $  9,854 $21,932  
      
Cash flows from investing activities     
Acquisition of property and equipment (294)  (115)  (1,411)  (647)  
Additions to intangible assets (332)  (842)  (1,682)  (2,805)  
Changes in short-term investments (10,033)  -  (10,033)  -  
Changes in restricted cash -  280  500  530  
Net cash used in investing activities$(10,659) $(677 ) $(12,626) $(2,922)  
      
Cash flows from financing activities     
Proceeds from exercise of share options -  5  5  277  
Shares repurchased (2,028)  (902)  (3,181)  (4,567)  
Purchases of share capital held in trust -  -  -  (1,215)  
Net cash used in financing activities$  (2,028) $(897) $  (3,176) $(5,505)  
      
Net increase (decrease) in cash and cash equivalents$  (1,965) $12,290 $  (5,948) $13,505  
Cash and cash equivalents at beginning of the period$  47,832 $38,847 $  51,364 $36,868  
Effect of exchange rate fluctuations on cash held 625  227  1,076  991  
Cash and cash equivalents at end of the period$  46,492 $51,364 $  46,492 $51,364  
              
Interest Received$38 $34 $153 $89  
Interest Paid -  -  -  -  
              
Taxes Received -  -  -  -  
Taxes Paid$- $(9) $(542) $(435)  

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

Contact

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