Points International, Ltd.
Aug 9, 2017

Points International Ltd. Reports Second Quarter 2017 Financial Results

Record Revenue in Second Quarter

Second Quarter Gross Profit1 increased to $11.4 Million

TORONTO, Aug. 09, 2017 (GLOBE NEWSWIRE) -- Points (TSX:PTS) (Nasdaq:PCOM), the global leader in powering loyalty commerce, today announced results for the second quarter ended June 30, 2017.

"The second quarter of 2017 saw the continued execution of our strategy to leverage our unique capabilities to drive profitable growth while expanding our market opportunity. Our Loyalty Currency Retailing business continued to provide us with stable growth and strong profitability, while our two strategic growth initiatives demonstrated increasing traction in the market," stated Rob MacLean, CEO.  "As such, we remain confident regarding our full year expectations for growth in gross profit and adjusted EBITDA2, and expect this to set us up for meaningful 2018 growth in our key gross profit and adjusted EBITDA metrics." 

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

"We believe that the groundwork we've laid in the first half of this year is setting us up very well to meet our mid-term targets and we are encouraged by the momentum we look to be carrying into 2018," commented MacLean.

____________________________

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, August 23, 2017, by dialing (844) 512-2921 in the U.S. and Canada and (412) 317-6671 internationally and entering the passcode 13667184.

Normal Course Issuer Bid with Automatic Share Purchase Plan

Points announced today that the Toronto Stock Exchange ("TSX") has accepted its notice of intention to make a normal course issuer bid to repurchase up to 743,468 of its common shares (the "Repurchase"), representing approximately 5% of its 14,869,374 common shares issued and outstanding as of July 31, 2017.  Points has entered into an automatic share purchase plan with a broker in order to facilitate the Repurchase.

The primary purpose of the Repurchase is for cancellation.  Under the automatic share purchase plan, Points' broker may repurchase shares at times when Points would ordinarily not be permitted to due to regulatory restrictions or self-imposed blackout periods.  Repurchases will be made from time-to-time at the broker's discretion based upon parameters prescribed by the parties' written agreement.  Repurchases may be effected through the facilities of the TSX, the NASDAQ Capital Market ("NASDAQ") or other alternative trading systems in the United States and Canada.

All purchases of common shares will be made in accordance with applicable securities laws and stock exchange rules of the United States and Canada.  Repurchases on NASDAQ will be at the market price at the time of purchase in compliance with applicable securities laws of the United States and Repurchases on the TSX will be at the market price at the time of purchase in accordance with the rules and policies of the TSX.  Purchases may also be made through other alternative trading systems in the United States and Canada, or by such other means as may be permitted by the TSX, NASDAQ and applicable law.  As a result of certain rules and policies of the TSX, subject to certain permitted exceptions, the maximum number of shares which can be repurchased per day on the TSX is 1,488 based on 25% of the average daily trading volume on the TSX for the prior six months (being 5,955 shares per day).  Subject to regulatory requirements, the actual number of common shares purchased and the timing of such purchases, if any, will be determined by Points' broker having regard to future price movements and other factors, including the parameters prescribed by the parties' written agreement.

The Repurchase will commence on August 14, 2017 and will terminate on August 13, 2018.  Under its previous normal course issuer bid, Points purchased a total of 429,728 common shares with a weighted average price of Cdn.$9.81 per share through the facilities of the TSX, NASDAQ and other alternative trading systems in the United States and Canada.  Points' previous normal course issuer bid commenced on March 9, 2016 and terminated on March 8, 2017.

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 almost 60 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 and car 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 Profit4 Information

Expressed in thousands of United States dollars                 
  For the three months ended 
  June 30, 2017
 June 30, 2016 
      
Total Revenue  $85,767 $83,864 
Direct cost of revenue  74,374  72,704 
Gross Profit $   11,393 $11,160 
Gross Margin  13%
  13% 
 

Reconciliation of Net Income to Adjusted EBITDA5

Expressed in thousands of United States dollars              
   For the three months ended 
   June 30, 2017
   June 30, 2016 
           
Net Income $732  $931 
Income tax expense  395   220 
Depreciation and amortization  998   1,297 
Foreign exchange loss (gain)  (102)   88 
Stock-based compensation  1,063   690 
Adjusted EBITDA $3,086  $3,226 

Reconciliation of Total Expenses to Adjusted Operating Expenses6

Expressed in thousands of United States dollars       
  For the three months ended 
  June 30, 2017
 June 30, 2016 
        
Total Expenses $84,640 $82,713 
Subtract (add):       
Direct cost of revenue  74,374  72,704 
Depreciation and amortization  998  1,297 
Foreign exchange loss (gain)  (102)  88 
Stock-based compensation  1,063  690 
Adjusted Operating Expenses $8,307 $  7,934 

__________________________

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.

Points International Ltd.  
Condensed Consolidated Interim Statements of Financial Position       

Expressed in thousands of United States dollars
(Unaudited)

As at  

 June 30,
2017
 December 31,
2016
 
ASSETS       
Current assets       
Cash and cash equivalents $  40,512 $46,492 
Short-term investments  10,033  10,033 
Restricted cash  500  500 
Funds receivable from payment processors  11,170  10,461 
Accounts receivable  5,336  4,057 
Prepaid expenses and other assets  2,488  1,475 
Total current assets $  70,039 $73,018 
Non-current assets       
Property and equipment  2,097  1,750 
Intangible assets  15,990  16,896 
Goodwill  7,130  7,130 
Deferred tax assets  1,923  1,725 
Other assets  2,713  2,715 
Total non-current assets $29,853 $30,216 
Total assets $99,892 $103,234 

                                                                                                                    

LIABILITIES       
Current liabilities       
Accounts payable and accrued liabilities $5,382 $6,335 
Income taxes payable  437  1,638 
Payable to loyalty program partners  48,539  53,242 
Current portion of other liabilities  890  771 
Total current liabilities $55,248 $61,986 
        
Non-current liabilities       
Deferred tax liabilities  168  211 
Other liabilities  673  719 
Total non-current liabilities $841 $930 
        
Total liabilities $56,089 $62,916 
        
SHAREHOLDERS' EQUITY       
Share capital  58,414  58,412 
Contributed surplus  11,349  9,881 
Accumulated other comprehensive income (loss)  304  (127)
Accumulated deficit  (26,264) (27,848)
Total shareholders' equity $43,803 $40,318 
Total liabilities and shareholders' equity  $99,892 $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 six months
ended
 
  June 30,
2017
June 30,
2016
June 30,
2017
June 30,
2016
 
REVENUE      
Principal $81,861 $80,529 $161,349 $151,270  
Other partner revenue  3,836  3,288  7,189  6,061  
Interest  70  47  87  93  
Total Revenue $ 85,767 $83,864 $ 168,625  $157,424  
       
EXPENSES      
Direct cost of principal revenue  74,374  72,704  146,156  136,069  
Employment costs  6,190  6,214  12,071  12,117  
Marketing and communications  640  461  1,165  787  
Technology services    469  416  901  790  
Depreciation and amortization  998  1,297  1,988  2,227  
Foreign exchange (gain) loss  (102)  88  (108)  168  
Operating expenses  2,071  1,533  4,082  2,826  
Total Expenses $ 84,640 $82,713 $ 166,255  $154,984  
       
OPERATING INCOME BEFORE INCOME TAXES $  1,127 $1,151 $  2,370 $2,440  
       
Income tax expense  395  220  786  616  
NET INCOME $  732 $931 $  1,584 $1,824  
       
OTHER COMPREHENSIVE INCOME       
Items that will subsequently be reclassified to profit or loss:              
Unrealized gain on foreign exchange derivative designated as cash flow hedges  378  135  528  955  
Income tax effect  (101)  (36)  (141)  (253)  
Reclassification to net income of loss on foreign exchange derivatives designated as cash flow hedges    130  29  60  337  
Income tax effect  (34)  (7)  (16)  (89)  
Other comprehensive income for the period, net of income tax $  373   $121 $  431   $950  
TOTAL COMPREHENSIVE INCOME  $ 1,105   $1,052 $  2,015   $2,774  
  
EARNINGS PER SHARE              
Basic earnings per share $0.05 $0.06 $0.11 $0.12  
Diluted earnings per share $0.05 $0.06 $0.11 $0.12  


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
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 lncome  -  -  -  -  1,584  1,584  
Other comprehensive income, net of tax -  -  -  431  -  431  
Total comprehensive income -  -  -  431  1,584  2,015  
Effect of share option compensation plan -  -  144  -  -  144  
Effect of RSU compensation plan -  -  1,592  -  -  1,592  
Share issuances — RSUs -  234  (234) -  -    -  
Share capital held in trust -  (196)  -  -  -  (196)  
Shares repurchased (9,300)  (36)  (34)  -  -  (70)  
Balance at June 30, 2017  14,869,374 $  58,414 $  11,349 $  304 $  (26,264) $  43,803  


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 

                         


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,
2017
June 30,
  2016
June  30,
2017
June 30,
2016
 
       
Cash flows from operating activities      
Net income for the period $  732   $    931  $  1,584   $  1,824  
Adjustments for:  
Depreciation of property and equipment  211     356  411  592  
Amortization of intangible assets  787  941  1,577  1,635  
Unrealized foreign exchange loss (gain)  540   (759)  709  (535)  
Equity-settled share-based payment transactions  1,063  690  1,736  1,358  
Deferred income tax expense (recovery)  (234)  (15)  (398)  (2)  
Net loss on derivative contracts designated as cash flow hedges  508  164  588  1,292  
Changes in non-cash balances related to operations   (4,127)  7,132  (9,783)  (1,094)  
Net cash provided by (used in) operating activities $  (520) $ 9,440 $  (3,576) $   5,070  
       
Cash flows from investing activities      
Acquisition of property and equipment  (455)  (239)  (758)  (355)  
Additions to intangible assets  (411)  (393)  (671)  (1,075)  
Changes in restricted cash  -  500  -  500  
Net cash provided by (used in) investing activities $  (866) $  (132) $ (1,429) $ (930)  
       
Cash flows from financing activities       
Proceeds from exercise of share options  -  5  -  5  
Purchase of share capital held in trust  (196)  -  (196)  -  
Shares repurchased  -  (405)  (70)  (675)  
Net cash provided by (used in) financing activities $  (196) $   (400) $  (266) $  (670)  
       
Effect of exchange rate fluctuations on cash held  (540)  760  (709)  537  
Net increase (decrease) in cash and cash equivalents $ (2,122) $9,668 $  (5,980) $   4,007  
Cash and cash equivalents at beginning of the period $ 42,634 $45,703 $  46,492 $  51,364  
Cash and cash equivalents at end of the period $ 40,512 $55,371 $  40,512 $  55,371  


Interest Received                       $   25   $   37 $  48   $   74 
Taxes Paid $  (732) $   (34) $  (2,505) $   (300) 
Taxes Received $  114 $   - $   114 $   - 

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