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Points International Reports Second Quarter 2019 Results and Increases Full Year Outlook
- Reports Record Quarterly Revenue, Gross Profit and Adjusted EBITDA -
- Progress Across Numerous Long Term Strategic Initiatives -
Unless otherwise noted, 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.
Second Quarter 2019 Financial Highlights (vs. Q2 2018)
- Total revenue increased to a record
$100.2 million compared to$97.9 million . - Gross profit1 increased 49% to
$20.5 million compared to$13.7 million . Excluding the benefit of an approximate$6.0 million tax rebate that was confirmed in the second quarter for claims related to prior periods, gross profit was up 5% to$14.4 million , a quarterly record. - Net income increased to
$6.3 million or$0.45 per diluted share, compared to$1.8 million or$0.12 per diluted share. Excluding the impact of the aforementioned tax rebate related to prior periods, net income was flat compared to the prior year. - Adjusted EBITDA2 increased 13% to a record
$5.2 million compared to$4.6 million .
Recent Operational Highlights
- Launched a new Accelerator service (LCR) with
Emirates Airlines . - Launched, via
Platform Partners , the integration between Hilton and Lyft to power the new relationship that sees users link accounts in order to earn points on each ride. - Entered into multi-year partnership with Home Chef; starting with the United Airlines MileagePlus program, members will now earn frequent flyer miles when they sign up and make Home Chef purchases.
- Added
Wyndham Hotel rewards to the Marathon Fuel,Platform Partners offering. - Initiated deployment work to add Redemptions to an existing
Points Travel partnership, targeted for a Q3 launch. - Commenced regional
Singapore office activities, including initial personnel decisions to capitalize on growth opportunities in the APAC region.
Management Commentary
“We are very pleased to report a record second quarter across all our key operating metrics - gross profit and adjusted EBITDA,” said CEO
“Along with entering new industry verticals, and increased focus on corporate development, our other key growth accelerant is to expand our geographical footprint to more efficiently close and service international partners. During the second quarter, we laid the groundwork to officially launch operations in
“Given our strong performance during the second quarter, the ongoing success of current partnerships, and our pipeline expectations heading into the back half of the year, we are increasing our 2019 outlook. We now expect gross profit to range between
Second Quarter 2019 Financial Results
Total revenue in the second quarter of 2019 increased 2% to
Gross profit in the second quarter increased 49% to
Adjusted operating expenses3 in the second quarter of 2019 were
Net income increased to
Adjusted EBITDA in the second quarter increased 13% to
At
During the second quarter, Points repurchased for cancellation approximately 233,000 common shares at an average price of
___________________________________
1 Gross profit is defined as total revenue less the direct cost of revenue. Gross profit is considered by management to be an integral measure of financial performance and represents the amount of revenues retained by the Company 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, finance costs and equity-settled share-based compensation and other one-time costs or benefits such as a tax rebate related to prior periods) 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 Company’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 consist of employment expenses excluding equity-settled share-based compensation, marketing and communications, technology services and other operating expenses. Adjusted operating expense is not a measure of financial performance under IFRS and should not be considered a substitute for total operating expenses, which we believe to be the most directly comparable IFRS measure.
Increased 2019 Outlook
Points has increased its 2019 outlook and now expects gross profit to range between
Points Announces Renewal of Share Repurchase
Points also announced today that the board of directors has approved a normal course issuer bid to repurchase up to 5% of its issued and outstanding common shares (the “Repurchase”), and that it intends to enter into an automatic share purchase plan with a broker in order to facilitate the Repurchase.
The Repurchase is subject to approval by the TSX, and is expected to commence on
Conference Call
Points will hold a conference call today at
Date:
Time:
Toll-free dial-in number: 1-855-327-6837
International dial-in number: 1-631-891-4304
Conference ID: 10007319
Please call the conference telephone number 5-10 minutes prior to the start time, and an operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 1-949-574-3860.
A replay of the conference call will be available after
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10007319
About
Points (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. The Company has a growing network of nearly 60 global loyalty programs integrated into its unique Loyalty Commerce Platform. Points offers three core private or co-branded services: its Loyalty Currency Retailing service, which retails loyalty points and miles directly to consumers; its
For more information, please 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
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 products and cross-sell existing partners 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.
Non-GAAP Financial Measures
The Company’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 Company’s underlying performance. These measures are reviewed regularly by management and the Company's Board of Directors in assessing the Company’s performance and in making decisions about ongoing operations. In addition, we use certain non-GAAP measures to determine the components of management compensation. We believe that these measures are also used by investors as an indicator of the Company’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.
Investor Relations Contact
Gateway Investor Relations
1-949-574-3860
IR@points.com
Key Financial Measures and Schedule of Non-GAAP Reconciliations | |||||||
Gross Profit Information[1] |
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Expressed in thousands of |
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For the three months ended | |||||||
Total Revenue | $ | 100,230 | $ | 97,859 | |||
Direct cost of revenue | 79,778 | 84,158 | |||||
Gross Profit | $ | 20,452 | $ | 13,701 | |||
Gross Margin | 20 | % | 14 | % | |||
[1] Gross Profit is defined as total revenues less the direct cost of revenue. Gross profit is considered by management to be an integral measure of financial performance and represents the amount of revenues retained by the Company after incurring direct costs. However, gross profit is not a recognized measure of profitability under IFRS. | |||||||
Key Financial Measures and Schedule of Non-GAAP Reconciliations | ||||||||
Reconciliation of Gross Profit to Contribution [2] |
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Expressed in thousands of |
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For the three months ended |
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Gross Profit | $ | 20,452 | $ | 13,701 | ||||
Less: | ||||||||
Direct adjusted operating expenses [3] | 6,072 | 5,737 | ||||||
Contribution | $ | 14,380 | $ | 7,964 | ||||
[2] Contribution is defined as Gross profit less direct adjusted operating expenses. Contribution is considered by Management to be a useful supplemental measure when assessing financial performance. Management believes that Contribution is an important indicator of the Company’s segment profitability. However, Contribution is not a recognized measure of profitability under IFRS. | ||||||||
[3] Direct adjusted operating expenses is defined as expenses which are directly attributable to each operating segment. Direct adjusted operating expenses is not a measure of financial performance under IFRS. | ||||||||
Key Financial Measures and Schedule of Non-GAAP Reconciliations | |||||||
Contribution by Line of Business |
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Expressed in thousands of |
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For the three months ended | |||||||
Loyalty Currency Retailing | |||||||
Revenue | $ | 97,784 | $ | 95,506 | |||
Gross Profit | 18,203 | 11,508 | |||||
Direct adjusted operating expenses | 3,326 | 3,366 | |||||
Contribution | $ | 14,877 | $ | 8,142 | |||
Revenue | $ | 1,901 | $ | 1,906 | |||
Gross Profit | 1,704 | 1,770 | |||||
Direct adjusted operating expenses | 981 | 982 | |||||
Contribution | $ | 723 | $ | 788 | |||
Revenue | $ | 545 | $ | 447 | |||
Gross Profit | 545 | 423 | |||||
Direct adjusted operating expenses | 1,765 | 1,389 | |||||
Contribution | $ | (1,220 | ) | $ | (966 | ) | |
Key Financial Measures and Schedule of Non-GAAP Reconciliations | |||||||
Reconciliation of Net Income to Adjusted EBITDA [4] |
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Expressed in thousands of |
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For the three months ended | |||||||
Net Income | $ | 6,276 | $ | 1,812 | |||
Income tax expense | 2,325 | 684 | |||||
Finance costs | 36 | - | |||||
Depreciation and amortization | 1,126 | 900 | |||||
Foreign exchange loss | 398 | 85 | |||||
Equity-settled share-based payment expense | 1,112 | 1,168 | |||||
Prior years tax rebate, net of fees | (6,027 | ) | - | ||||
Adjusted EBITDA | $ | 5,246 | $ | 4,649 | |||
[4] Adjusted EBITDA (Earnings before income tax expense, finance costs, depreciation and amortization, foreign exchange, equity-settled share-based payment expense and other one-time costs or benefits such as a tax rebate related to prior periods) 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 Company’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. | |||||||
Key Financial Measures and Schedule of Non-GAAP Reconciliations | ||||||||
Reconciliation of Total Operating Expenses to Adjusted Operating Expenses [5] | ||||||||
Expressed in thousands of |
||||||||
For the three months ended | ||||||||
Total Operating Expenses | $ | 12,072 | $ | 11,332 | ||||
Subtract (add): | ||||||||
Depreciation and amortization | 1,126 | 900 | ||||||
Foreign exchange loss | 398 | 85 | ||||||
Equity-settled share-based payment expense | 1,112 | 1,168 | ||||||
Adjusted Operating Expenses | $ | 9,436 | $ | 9,179 | ||||
[5] Adjusted operating expenses consists of employment expenses excluding equity-settled share-based payment expense, marketing & 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 operating expenses, which we believe to be the most directly comparable IFRS measure. | ||||||||
Condensed Consolidated Interim Statements of Financial Position | |||||||
Expressed in thousands of |
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(Unaudited) |
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As at | 2019 |
2018[6] |
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ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 58,301 | $ | 69,131 | |||
Restricted cash | - | 500 | |||||
Funds receivable from payment processors | 9,256 | 13,512 | |||||
Accounts receivable | 18,707 | 9,318 | |||||
Prepaid taxes | 202 | 383 | |||||
Prepaid expenses and other assets | 3,452 | 3,618 | |||||
Total current assets | $ | 89,918 | $ | 96,462 | |||
Non-current assets | |||||||
Property and equipment | 2,441 | 2,351 | |||||
Right-of-use assets | 3,610 | - | |||||
Intangible assets | 13,379 | 13,952 | |||||
7,130 | 7,130 | ||||||
Deferred tax assets | 2,370 | 2,645 | |||||
Total non-current assets | $ | 28,930 | $ | 26,078 | |||
Total assets | $ | 118,848 | $ | 122,540 | |||
LIABILITIES | |||||||
Current liabilities | |||||||
Accounts payable and accrued liabilities | $ | 10,478 | $ | 9,489 | |||
Income taxes payable | 1,270 | 117 | |||||
Payable to loyalty program partners | 59,379 | 69,749 | |||||
Current portion of lease liabilities | 1,260 | - | |||||
Current portion of other liabilities | 801 | 1,680 | |||||
Total current liabilities | $ | 73,188 | $ | 81,035 | |||
Non-current liabilities | |||||||
Lease liabilities | 2,844 | - | |||||
Other liabilities | 87 | 495 | |||||
Deferred tax liabilities | 403 | - | |||||
Total non-current liabilities | $ | 3,334 | $ | 495 | |||
Total liabilities | $ | 76,522 | $ | 81,530 | |||
SHAREHOLDERS’ EQUITY | |||||||
Share capital | 52,057 | 53,886 | |||||
Contributed surplus | - | 4,446 | |||||
Accumulated other comprehensive income (loss) | 28 | (646 | ) | ||||
Accumulated deficit | (9,759 | ) | (16,676 | ) | |||
Total shareholders’ equity | $ | 42,326 | $ | 41,010 | |||
Total liabilities and shareholders’ equity | $ | 118,848 | $ | 122,540 | |||
[6] The Company has initially applied IFRS 16 at |
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Condensed Consolidated Interim Statements of Comprehensive Income | |||||||||||||
Expressed in thousands of |
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(Unaudited) |
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For the three months ended | For the six months ended | ||||||||||||
REVENUE | |||||||||||||
Principal | $ | 94,289 | $ | 91,398 | $ | 184,295 | $ | 174,705 | |||||
Other partner revenue | 5,941 | 6,461 | 11,878 | 12,264 | |||||||||
Total Revenue | 100,230 | 97,859 | 196,173 | 186,969 | |||||||||
Direct cost of revenue | 79,778 | 84,158 | 162,355 | 159,752 | |||||||||
Gross Profit | $ | 20,452 | $ | 13,701 | $ | 33,818 | $ | 27,217 | |||||
OPERATING EXPENSES | |||||||||||||
Employment costs | 7,567 | 7,050 | 15,203 | 13,764 | |||||||||
Marketing and communications | 429 | 385 | 808 | 788 | |||||||||
Technology services | 659 | 552 | 1,276 | 1,047 | |||||||||
Depreciation and amortization | 1,126 | 900 | 2,268 | 1,766 | |||||||||
Foreign exchange loss (gain) | 398 | 85 | 154 | (73 | ) | ||||||||
Other operating expenses | 1,893 | 2,360 | 3,473 | 4,513 | |||||||||
Total Operating Expenses | $ | 12,072 | $ | 11,332 | $ | 23,182 | $ | 21,805 | |||||
Finance income | (257 | ) | (127 | ) | (519 | ) | (204 | ) | |||||
Finance costs | 36 | - | 112 | - | |||||||||
INCOME BEFORE INCOME TAXES | $ | 8,601 | $ | 2,496 | $ | 11,043 | $ | 5,616 | |||||
Income tax expense | 2,325 | 684 | 3,010 | 1,546 | |||||||||
NET INCOME | $ | 6,276 | $ | 1,812 | $ | 8,033 | $ | 4,070 | |||||
OTHER COMPREHENSIVE INCOME (LOSS) | |||||||||||||
Items that will subsequently be reclassified to profit or loss: | |||||||||||||
Unrealized gain (loss) on foreign exchange derivative designated as cash flow hedges | 246 | (320 | ) | 484 | (750 | ) | |||||||
Income tax effect | (65 | ) | 85 | (128 | ) | 198 | |||||||
Reclassification to net income of loss (gain) on foreign exchange derivatives designated as cash flow hedges | 159 | (150 | ) | 408 | (321 | ) | |||||||
Income tax effect | (42 | ) | 40 | (108 | ) | 85 | |||||||
Foreign currency translation adjustment | (6 | ) | - | 18 | - | ||||||||
Other comprehensive income (loss) for the period, net of income tax | $ | 292 | $ | (345 | ) | $ | 674 | $ | (788 | ) | |||
TOTAL COMPREHENSIVE INCOME | $ | 6,568 | $ | 1,467 | $ | 8,707 | $ | 3,282 | |||||
EARNINGS PER SHARE | |||||||||||||
Basic earnings per share | $ | 0.46 | $ | 0.12 | $ | 0.58 | $ | 0.28 | |||||
Diluted earnings per share | $ | 0.45 | $ | 0.12 | $ | 0.57 | $ | 0.28 | |||||
[7] The Company has initially applied IFRS 16 at |
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Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity | ||||||||||||||||||
Attributable to equity holders of the Company | ||||||||||||||||||
Expressed in thousands of except number of shares (Unaudited) |
Share Capital | Contributed Surplus |
Accumulated other comprehensive income (loss) |
Accumulated deficit |
Total shareholders’ equity |
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Number of Shares |
Amount |
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Balance at |
14,111,864 | $ | 53,886 | $ | 4,446 | $ | (646 | ) | $ | (16,676 | ) | $ | 41,010 | |||||
Net income | - | - | - | - | 8,033 | 8,033 | ||||||||||||
Other comprehensive income, net of tax | - | - | - | 674 | - | 674 | ||||||||||||
Total comprehensive income | - | - | - | 674 | 8,033 | 8,707 | ||||||||||||
Effect of share option compensation plan | - | - | 282 | - | - | 282 | ||||||||||||
Effect of RSU compensation plan | - | - | 2,047 | - | - | 2,047 | ||||||||||||
Share issuances – options exercised | 2,338 | 28 | (7 | ) | - | - | 21 | |||||||||||
Settlement of RSUs | - | 1,348 | (4,317 | ) | - | - | (2,969 | ) | ||||||||||
Shares purchased and held in trust | - | (1,460 | ) | - | - | - | (1,460 | ) | ||||||||||
Shares repurchased and cancelled | (452,189 | ) | (1,745 | ) | (2,451 | ) | - | (1,116 | ) | (5,312 | ) | |||||||
Balance at |
13,662,013 | $ | 52,057 | $ | - | $ | 28 | $ | (9,759 | ) | $ | 42,326 | ||||||
Balance at |
14,561,450 | $ | 56,394 | $ | 10,647 | $ | 374 | $ | (24,468 | ) | $ | 42,947 | ||||||
Net income | - | - | - | - | 4,070 | 4,070 | ||||||||||||
Other comprehensive loss, net of tax | - | - | - | (788 | ) | - | (788 | ) | ||||||||||
Total comprehensive income | - | - | - | (788 | ) | 4,070 | 3,282 | |||||||||||
Effect of share option compensation plan | - | - | 36 | - | - | 36 | ||||||||||||
Effect of RSU compensation plan | - | - | 2,107 | - | - | 2,107 | ||||||||||||
Share issuances - options exercised | 74,966 | 1,041 | (690 | ) | - | - | 351 | |||||||||||
Settlement of RSUs | - | 1,244 | (3,780 | ) | - | - | (2,536 | ) | ||||||||||
Shares purchased and held in trust | - | (2,956 | ) | - | - | - | (2,956 | ) | ||||||||||
Shares repurchased and cancelled | (418,556 | ) | (1,633 | ) | (4,168 | ) | - | - | (5,801 | ) | ||||||||
Balance at |
14,217,860 | $ | 54,090 | $ | 4,152 | $ | (414 | ) | $ | (20,398 | ) | $ | 37,430 | |||||
Condensed Consolidated Interim Statements of Cash Flows | |||||||||||||
Expressed in thousands of |
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(Unaudited) |
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For the three months ended | For the six months ended | ||||||||||||
Cash flows from operating activities | |||||||||||||
Net income for the period | $ | 6,276 | $ | 1,812 | $ | 8,033 | $ | 4,070 | |||||
Adjustments for: | |||||||||||||
Depreciation of property and equipment | 290 | 247 | 578 | 468 | |||||||||
Depreciation of right-of-use assets | 295 | - | 578 | - | |||||||||
Amortization of intangible assets | 541 | 653 | 1,112 | 1,298 | |||||||||
Unrealized foreign exchange (gain) loss | 51 | (851 | ) | (72 | ) | (431 | ) | ||||||
Equity-settled share-based payment transactions | 1,112 | 1,168 | 2,329 | 2,143 | |||||||||
Finance costs | 36 | - | 112 | - | |||||||||
Deferred income tax expense (recovery) | 332 | (177 | ) | 442 | (371 | ) | |||||||
Unrealized net gain (loss) on derivative contracts designated as cash flow hedges | 405 | (470 | ) | 892 | (1,071 | ) | |||||||
Changes in non-cash balances related to operations | (14,898 | ) | 3,852 | (13,427 | ) | 12,669 | |||||||
Interest paid | (36 | ) | - | (112 | ) | - | |||||||
Net cash provided by (used in) operating activities | $ | (5,596 | ) | $ | 6,234 | $ | 465 | $ | 18,775 | ||||
Cash flows from investing activities | |||||||||||||
Acquisition of property and equipment | (148 | ) | (424 | ) | (668 | ) | (738 | ) | |||||
Additions to intangible assets | (252 | ) | (226 | ) | (539 | ) | (523 | ) | |||||
Net cash used in investing activities | $ | (400 | ) | $ | (650 | ) | $ | (1,207 | ) | $ | (1,261 | ) | |
Cash flows from financing activities | |||||||||||||
Payment of lease liabilities | (246 | ) | - | (458 | ) | - | |||||||
Proceeds from exercise of share options | - | 351 | 21 | 351 | |||||||||
Shares repurchased and cancelled | (2,856 | ) | (4,357 | ) | (5,312 | ) | (5,801 | ) | |||||
Purchase of share capital held in trust | (861 | ) | (152 | ) | (1,460 | ) | (2,956 | ) | |||||
Taxes paid on net settlement of RSUs | (4 | ) | (2,536 | ) | (2,969 | ) | (2,536 | ) | |||||
Net cash used in financing activities | $ | (3,967 | ) | $ | (6,694 | ) | $ | (10,178 | ) | $ | (10,942 | ) | |
Effect of exchange rate fluctuations on cash held | (57 | ) | 851 | 90 | 431 | ||||||||
Net increase (decrease) in cash and cash equivalents | $ | (10,020 | ) | $ | (259 | ) | $ | (10,830 | ) | $ | 7,003 | ||
Cash and cash equivalents at beginning of the period | $ | 68,321 | $ | 70,776 | $ | 69,131 | $ | 63,514 | |||||
Cash and cash equivalents at end of the period | $ | 58,301 | $ | 70,517 | $ | 58,301 | $ | 70,517 | |||||
Interest Received | $ | 248 | $ | 86 | $ | 510 | $ | 146 | |||||
Taxes Received | $ | - | $ | 110 | $ | - | $ | 110 | |||||
Taxes Paid | $ | (572 | ) | $ | (554 | ) | $ | (1,186 | ) | $ | (1,681 | ) | |
Amounts received and paid for interest and taxes were reflected as operating cash flows in the condensed consolidated interim statements of cash flows. | |||||||||||||
(8) The Corporation has initially applied IFRS 16 at |
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Source: Points International, Ltd.