Points International, Ltd.
Nov 2, 2016

Points International Reports Third Quarter 2016 Financial Results

Core business continues strong growth
Two new Partners launched on Points Travel Service

TORONTO, Nov. 02, 2016 (GLOBE NEWSWIRE) -- Points (TSX:PTS) (Nasdaq:PCOM), the global leader in powering loyalty commerce, today announced financial results for the third quarter and nine months ended September 30, 2016.

"We saw continued business momentum in the third quarter," said Points' CEO, Rob MacLean. "Our core Buy, Gift, and Transfer business continues to contribute to our overall growth and we have made great business development progress in engaging Loyalty Programs with our new services, including Points Travel and the Points Loyalty Wallet. In addition, we have seen very encouraging metrics from deployments to date that reinforce our confidence in the long-term opportunity these services provide. We continue to focus on our deep pipeline and are excited by the progress we expect in the coming months."

Third Quarter 2016 Financial Results

(Unless otherwise stated, all comparisons for the third quarter of 2016 are on a year-over-year basis) 

Third Quarter 2016 Business Metrics

  Q3/16 Q3/15 Q3/16
vs.
Q3/15
 Q2/16 Q3/16
vs.
Q2/16
Total All Channels          
  Points/Miles Transacted (in 000s) 6,100,500 5,432,399  12% 6,633,624  -8%
  No. of Points/Miles Transactions 606,555 594,936  2% 630,489  -4%

Recent Business Highlights

Saw significant momentum with Points Travel, the first private label travel e-commerce service designed specifically for the loyalty industry:

Share Buyback

In the third quarter, the Company repurchased approximately 56,776 shares of its common stock for a total of $0.5 million at an average price of $8.42 per share.

Outlook

"While we continue to expect a more meaningful ramp for Points Travel in 2017," continued MacLean, "We have experienced a slower ramp than the modest expectations we had for 2016 for these newer services as well as one-off initiatives. Given the high-margin profile of these new services, this variability moderates our profitability expectations for this year. However, growing market enthusiasm for our services and an increased focus on monetizing new programs make us optimistic about our longer-term ability to improve profitability."

The Company is updating 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, November 16, 2016, by dialing (877) 870-5176 in the U.S. and Canada and (858) 384-5517 internationally and entering the passcode 13648140.

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 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 nine months ended
 

 
 September 30,
2016
 September 30,
2015
  September 30,
2016
 September 30,
2015
 
           
Total Revenue
Direct cost of principal revenue
 $

  82,442
72,380
 $

  81,133
71,053
  $

  239,866
208,449
 $

  216,148
183,446
 
Gross Profit $  10,062 $10,080  $  31,417 $32,702 
Gross Margin  12% 12%  13% 15%


Reconciliation of Net Income to Adjusted EBITDA2

Expressed in thousands of United States dollars     
  

For the three months ended
  

For the nine months ended
     
  September 30,
2016
 September 30,
2015
  September 30,
2016
 September 30,
2015
 
               
Net Income
$ 335 $768  $2,159  $4,204  
Adjustments:              
Income tax expense  301  352   917  2,023 
Depreciation and Amortization  1224  891   3,451  2,651 
Total adjustments  1,525    1,243     4,368  4,674 
EBITDA  1,860  2,011     6,527    8,878 
Foreign exchange loss (gain)  1  (9)  169  (14)
Share-based compensation  389  511   1,747  1,582 
Adjusted EBITDA
   2,250 $  2,513  $  8,443 $  10,446 
 

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  September 30,
2016
 December 31,
2015
 

ASSETS
  

 
Current assets  
Cash and cash equivalents$  47,832 $  51,364 
Restricted cash 500  1,000 
Funds receivable from payment processors 7,275  6,588 
Accounts receivable 4,140  2,988 
Prepaid expenses and other assets 2,278  1,256 
Total current assets$  62,025 $    63,196 
Non-current assets  
Property and equipment 1,647  1,466 
Intangible assets 17,451  18,616 
Goodwill 7,130  7,130 
Deferred tax assets 1,975  1,755 
Long-term investment 5,000  5,000 
Other assets 2,715  2,765 
Total non-current assets$  35,918 $    36,732 
Total assets$  97,943 $  99,928 

                                                                                                                    

LIABILITIES  
Current liabilities  
Accounts payable and accrued liabilities$  6,195 $ 5,808 
Payable to loyalty program partners 43,720  49,526 
Current portion of other liabilities 731  1,852 
Total current liabilities$  50,646 $  57,186 
   
Non-current liabilities  
Deferred tax liabilities 765  425 
Other liabilities 793  122 
Total non-current liabilities$   1,558 $    547 
   
Total liabilities$  52,204 $  57,733 
   
SHAREHOLDERS' EQUITY  
Share capital 59,394  59,293 
Contributed surplus 10,357  9,859 
Accumulated other comprehensive income (loss) 162  (624)
Accumulated deficit (24,174) (26,333)
Total shareholders' equity$  45,739 $    42,195 
Total liabilities and shareholders' equity$   97,943 $  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 nine months
ended
   
 September
30, 2016
 September
30, 2015
 September
30, 2016
 September
30, 2015
 
REVENUE    
Principal
Other partner revenue
$

  79,671
2,725
 $

78,809
2,301
 $

230,941
8,786
 $

206,364
9,728
 
Interest 46  23  139  56 
Total Revenue$  82,442   $81,133 $ 239,866  $216,148 
 

EXPENSES
    
Direct cost of principal revenue 72,380  71,053  208,449  183,446 
Employment costs 5,457  5,732  17,574  17,479 
Marketing and communications 460  499  1,247  1,173 
Technology services 446  357  1,236  988 
Depreciation and amortization 1,224  891  3,451  2,651 
Foreign exchange (gain) loss 1  (9) 169  (14)
Operating expenses 1,838  1,490  4,664  4,198 
Total Expenses$  81,806 $80,013 $ 236,790  $209,921 
     
OPERATING INCOME BEFORE INCOME TAXES$  636 $1,120 $   3,076 $6,227 
     
Income tax expense 301  352  917  2,023 
NET INCOME$  335 $768 $   2,159  $4,204 
     
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
 (196) (772) 759  (1,378)
  Income tax effect 52  204  (201) 365 
  Reclassification to net income of loss (gain) on foreign
  exchange derivatives designated as cash flow hedges
  

(27


)
 

378
   

310
  981 
  Income tax effect 7  (37) (82) (160)
Other comprehensive income (loss) for the period,
net of income tax
$  (164)$(227)$  786 $(192)
 
TOTAL COMPREHENSIVE INCOME $  171 $541 $  2,945 $4,012 
 
EARNINGS PER SHARE              
Basic earnings per share$0.02 $0.05 $0.14 $0.27 
Diluted earnings per share$0.02 $0.05 $0.14 $    0.27 



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  -  -  -  -  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  
 
Balance at December 31, 2014  15,649,085 $61,084 $11,985 $(354)$(31,498)$41,217  
Net lncome  -  -  -  -  4,204  4,204  
Other comprehensive income, net of tax  -  -  -  (192) -  (192) 
Total comprehensive income  -  -  -  (192) 4,204  4,012  
Effect of share option compensation plan  -  -  738  -  -  738  
Effect of RSU and PSU compensation plan  -  -  844  -  -  844  
Share issuances — share options  94,435  589  (317) -  -  272  
Share issuances — RSUs  -  428  (428) -  -  -  
Share capital held in trust  -  (1,215) -  -  -  (1,215) 
Shares repurchased  (345,710) (1,343) (2,322) -  -  (3,665) 
Balance at September 30, 2015  15,397,810 $59,543 $10,500 $(546)$(27,294)$42,203  


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, 2016
 September
30,  2015
 September
30, 2016
 September
30, 2015
  
 

Cash flows from operating activities
  

 
 

 
 

 
 

 
 
Net income for the period $   335 $768 $  2,159 $4,204  
Adjustments for:  
Depreciation of property and equipment  344  256  936  806  
Amortization of intangible assets  880  635  2,515  1,845  
Unrealized foreign exchange loss (gain)  85  (306) (450) (723) 
Equity-settled share-based payment transactions  389  511  1,747  1,582  
Deferred income tax expense (recovery)  (162) (70) (164) 1,457  
Net (gain) loss on derivative contracts designated as cash flow hedges  (223) (308) 1,069  (261) 
Changes in non-cash balances related to operations   (7,586) (723) (8,680) (842) 
Net cash provided by (used in) operating activities $  (5,938)$763 $  (868)$8,068  
       
Cash flows from investing activities      
Acquisition of property and equipment  (762) (268) (1,117) (532) 
Additions to intangible assets  (275) (700) (1,350) (1,963) 
Changes in restricted cash  -  -  500  250  
Net cash used in investing activities $  (1,037)$(968)$ (1,967)$(2,245) 
       
Cash flows from financing activities       
Proceeds from exercise of share options  -  1  5  272  
Shares repurchased  (478) (1,702) (1,153) (3,665) 
Purchases of share capital held in trust  -  (109) -  (1,215) 
Net cash used in financing activities $  (478)$( 1,810)$  (1,148)$(4,608) 
       
Net increase (decrease) in cash and cash equivalents $  (7,453)$(2,015)$  (3,983)$1,215  
Cash and cash equivalents at beginning of the period $  55,371 $40,535 $  51,364 $36,868  
Effect of exchange rate fluctuations on cash held  (86) 327  451  764  
Cash and cash equivalents at end of the period $  47,832 $38,847 $  47,832 $38,847  
  
 
Interest Received $41 $22 $115 $55  
Taxes Paid $(242)$(250)$(542)$(426) 
               

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