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Points International Ltd. Reports Third Quarter 2012 Financial Results

-- Revenue of $34.3 million, up 19% year-over-year

-- Gross Margin of $7.0 million, up 11% year-over-year

-- Reiterate 2012 guidance; anticipates 15-20% organic revenue growth over 2011

TORONTO, Nov. 7, 2012 (GLOBE NEWSWIRE) -- Points International Ltd. (TSX:PTS) (Nasdaq:PCOM), owner of the loyalty reward management program platform www.Points.com, today announced results for the third quarter ended September 30, 2012.

"The third quarter represented another period of solid financial progress for Points International, with revenues up 19% and gross margins up 11% year-over-year," said Points Chief Executive Officer Rob MacLean. "Our profitability metrics for the quarter continue to reflect strategic investments to support the long-term growth of our business. Importantly, we are on track to meet our financial objective of 15-20% organic revenue growth in 2012."

MacLean continued, "Critical to the ongoing growth of our platform is adding additional partners as well as enhancing our existing partner relationships. We are pleased to have made progress against both of these objectives since the end of the second quarter of 2012. With that said, we recently welcomed both Wyndham Hotel Group's Wyndham Rewards and Meliá Hotels Mas Rewards to the Points partner platform, further expanding our penetration in the hospitality space. We also extended our Corporate Platform by welcoming leaders in the gasoline loyalty markets, Speedway Speedy Rewards and SVM Fuel Circle, to our platform. We are also proud to announce the expansion of our relationships with current partners Virgin Atlantic, Scandinavian Airlines, Lufthansa, Icelandair, Alitalia and La Quinta Hotels. Each of these partners has added products or applications since the end of Q2 2012."

MacLean concluded, "Further extending our international footprint, we are excited to announce our minority investment, alongside the global loyalty company Aimia, in China Rewards, a retail coalition loyalty program start-up based in Shanghai, China. While the near-term contribution of this minority investment is not expected to be meaningful, given China Rewards' long-term partnership with China Union Pay, one of the world's largest network operators and the only domestic payment card in China, this partnership will offer Points an immediate and credible presence in the rapidly growing Chinese market."

Third Quarter 2012 Financial Results

Total revenue of $34.3 million was up 19% from $28.8 million in the third quarter of 2011 and down 5.5% from $36.3 million in the prior quarter. Principal revenue totaled $32.2 million, up 20% from $26.9 million in the third quarter of 2011 but down 6.0% from $34.2 million in the prior quarter. Other partner revenue was $2.2 million, up 13% from $1.9 million in the third quarter of 2011 and flat with the prior quarter. The accelerated year-over-year increase in revenue was largely due to organic growth of existing partnerships, and, to a lesser extent, the impact of new products and partners launched over the past twelve months.

Gross margin totaled $7.0 million, or 21% of total revenue, a solid 11% increase from $6.3 million, or 22.0% of total revenue, in the third quarter of 2011 and roughly flat with $7.1 million, or 20% of total revenue, in the prior quarter. The year-over-year increase in gross margin was reflective of the organic growth of current partnerships, the impact of new partners and products launched over the past twelve months, and the relative mix of partner and product sales.

The Company has continued to focus on strategic investments and hires for the long-term growth of Points International. In light of these investments, EBITDA was $1.6 million in the third quarter. This compares to $1.9 million in the third quarter of 2011 and $2.1 million in the prior quarter. On a year-to-date basis, EBITDA increased 32% over the prior nine month period, benefitting from incremental gross margin dollars on higher revenue.

Net income was $0.7 million, or $0.05 per share. This compares to net income of $1.7 million, or $0.11 per share in the third quarter of 2011, and net income of $1.3 million, or $0.09 per share, in the prior quarter. The year-over-year decrease in net income was largely due to a combination of lower EBITDA, higher depreciation and amortization charges, and a deferred tax recovery recorded in the prior-year quarter.

As of September 30, 2012, total funds available, comprised of cash and cash equivalents together with security deposits, restricted cash and amounts with payment processors, was $45.5 million, up from $44.0 million at June 30, 2012. The company remains debt free and is pleased with its overall financial position.

Third Quarter 2012 Business Metrics

Q3/12 Q3/11 Q3/12 vs. Q3/11 Q2/12 Q3/12 vs. Q2/12
TOTAL ALL CHANNELS
Points/Miles Transacted (in 000s) 3,496,314 3,337,367 5% 3,455,853 1%
No. of Points/Miles Transactions 345,929 327,640 6% 390,244 (11%)
LOYALTY CURRENCY SERVICES
Points/Miles Transacted (in 000s) 3,067,276 2,979,925 3% 3,056,598 0%
No. of Points/Miles Transactions 325,470 306,195 6% 328,722 (1%)
POINTS.COM CHANNELS
Points/Miles Transacted (in 000s) 429,038 357,442 20% 399,255 7.5%
No. of Points/Miles Transactions 20,459 21,445 (5%) 61,522 (67%)
Cumulative Registered Users 3,356,522 2,837,801 18% 3,235,685 4%

Corporate Development

Subsequent to the quarter end, Points International, along with partner Aimia, entered into an agreement to invest up to $5.0 million each into China Rewards, a retail coalition loyalty program start-up based in Shanghai, China. Despite being one of the world's largest economies, China's loyalty market is still in the very early stages of development. As a result, Points views its minority stake in China Rewards as a long-term investment that offers the Company an early opportunity to partner locally and begin building a presence in one of the world's largest economies.

Investor Conference Call

Points' conference call with investors will be held today at 5:00 p.m. Eastern Time. To participate, investors from the US and Canada should dial (877) 407-0789 ten minutes prior to the start time. International dialers should call (201) 689-8562.

In addition, the call is being webcast and can be accessed at the Company's web site: www.pointsinternational.com and will be archived online upon completion of the call. A telephonic replay of the conference call will be available through November 21, 2012 by dialing (877) 870-5176 in the U.S. or Canada or (858) 384-5517 internationally and entering the conference ID 401228.

About Points International Ltd.

Points International Ltd. (TSX:PTS) (Nasdaq:PCOM), is the owner and operator of Points.com, the global leader in reward currency management providing multiple eCommerce and technology solutions to the world's top loyalty brands. Points.com also manages the largest consumer rewards management platform, allowing more than 3 million users to trade, track, exchange, and redeem their loyalty points, miles, and rewards.

Recently, Points International was the recipient of several prestigious awards; the Company was named the 5th largest Canadian software company and the 40th largest Canadian technology company by the 2012 Branham300 list as well as ranked 40th by PROFIT Magazine's top 200 Canadian companies by five-year revenue growth for 2012.

Points.com's solutions enable the management and monetization of loyalty currencies, including frequent flyer miles, hotel points, retailer rewards and credit card points, as well as enhancing loyalty program consumer offerings and back-end operations for more than 40 partners worldwide. Further, Points.com's SaaS products allow eCommerce merchants to add loyalty solutions to their online stores and reward customers for purchases.

For more information on Points.com, visit www.pointsinternational.com, follow us on Twitter (@pointsadvisor), fan us on Facebook (www.facebook.com/pointsfans) or read our blog (http://blog.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 our guidance for 2012 with respect to organic revenue growth, the size of our pipeline opportunity and our operating leverage. 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 may not prove to be correct. In particular, the financial outlooks herein assume we 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. 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.

Points International Ltd.
Key Financial Measures and Schedule of Non-GAAP Reconciliations
Gross Margin1
Expressed in thousands of United States dollars For the three months ended For the nine months ended
September 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
Total revenue $34,339 $28,807 $98,706 $90,005
Direct cost of principal revenue 27,300 22,491 78,124 72,395
Gross margin $7,039 $6,316 $20,582 $17,610
Gross margin % 21% 22% 21% 20%
Reconciliation of Operating Income to EBITDA2
Expressed in thousands of United States dollars For the three months ended For the nine months ended
September 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
Operating income $856 $1,298 $2,730 $2,068
Depreciation and amortization 715 622 2,075 1,630
Foreign exchange (gain) loss (19) 4 (35) (88)
EBITDA $1,552 $1,924 $4,770 $3,610
1 Gross Margin is considered by Management to be an integral measure of financial performance and is defined as total revenues less the direct cost of principal revenues. However, gross margin is not a recognized measure of profitability under IFRS.
2 EBITDA (Earnings before interest, taxes, depreciation and amortization, and foreign exchange) is considered by management to be a useful supplemental measure of performance. However, EBITDA is not a recognized earnings measure under IFRS.
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, 2012 September 30, 2011 September 30, 2012 September 30, 2011
REVENUE
Principal $32,172 $26,900 $91,720 $84,363
Other partner revenue 2,159 1,903 6,960 5,629
Interest 8 4 26 13
Total Revenue 34,339 28,807 98,706 90,005
EXPENSES
Direct cost of principal revenue 27,300 22,491 78,124 72,395
Employment costs 3,791 3,021 10,995 9,523
Marketing & communications 458 392 1,237 1,019
Technology services 110 146 362 448
Depreciation and amortization 715 622 2,075 1,630
Foreign exchange (gain) loss (19) 4 (35) (88)
Operating expenses 1,128 833 3,218 3,010
Total Expenses 33,483 27,509 95,976 87,937
OPERATING INCOME 856 1,298 2,730 2,068
Interest and other charges (8) (8) (8) (25)
EARNINGS BEFORE INCOME TAX 864 1,306 2,738 2,093
Deferred income tax expense (recovery) 118 (356) 114 119
NET INCOME 746 1,662 2,624 1,974
OTHER COMPREHENSIVE INCOME (LOSS)
Gain (loss) on foreign exchange derivatives designated as cash flow hedges, net of income tax expense of $78 and $93 for the three and nine months ended September 30, 2012 (2011 – recovery of $143 and $93) 216 (364) 257 (237)
Reclassification to net income of gain on foreign exchange derivatives designated as cash flow hedges, net of income tax expense of $18 and $40 for the three and nine months ended September 30, 2012 (2011 – $32 and $124) (50) (81) (113) (315)
Other comprehensive income (loss) for the period, net of income tax 166 (445) 144 (552)
TOTAL COMPREHENSIVE INCOME $912 $1,217 $2,768 $1,422
EARNINGS PER SHARE
Basic earnings per share $0.05 $0.11 $0.17 $0.13
Diluted earnings per share $0.05 $0.11 $0.17 $0.13
Points International Ltd.
Condensed Consolidated Interim Balance Sheets
Expressed in thousands of United States dollars
(Unaudited)
As at September 30, 2012 December 31, 2011
ASSETS
Current assets
Cash and cash equivalents 34,145 34,853
Restricted cash 1,632 1,619
Funds receivable from payment processors 7,126 10,837
Security deposits 2,643 2,461
Accounts receivable 1,682 2,411
Prepaid expenses and other assets 1,161 1,013
Total current assets 48,389 53,194
Non-current assets
Property and equipment 1,818 1,712
Intangible assets 3,424 4,566
Goodwill 2,580 2,580
Deferred tax assets 1,423 1,575
Note receivable 254 --
Other assets 594 658
Total non-current assets 10,093 11,091
Total assets 58,482 64,285
LIABILITIES
Current liabilities
Accounts payables and accrued liabilities 3,002 3,455
Payable to loyalty program partners 31,764 40,048
Provisions 49 98
Current portion of other liabilities 688 765
Total current liabilities 35,503 44,366
Non-current liabilities
Other liabilities 776 877
Total non-current liabilities 776 877
Total liabilities 36,279 45,243
SHAREHOLDERS' EQUITY
Share capital 57,556 57,378
Contributed surplus 9,886 9,671
Accumulated other comprehensive income 187 43
Accumulated deficit (45,426) (48,050)
Total shareholders' equity 22,203 19,042
Total liabilities and shareholders' equity 58,482 64,285
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 Share Capital

Contributed
Surplus
Total Capital

Unrealized
gains/(losses)
on cash flow
h
edges
Accumulated
other
comprehensive
income
(loss)
Accumulated
deficit

Total shareholders'
equity

(Unaudited)
Balance at December 31, 2011 $ 57,378 $ 9,671 $ 67,049 $ 43 $ 43 $ (48,050) $ 19,042
Net income -- -- -- -- -- 2,624 2,624
Other comprehensive income -- -- -- 144 144 -- 144
Total comprehensive income -- -- -- 144 144 2,624 2,768
Effect of share option compensation plan -- 475 475 -- -- -- 475
Effect of RSU compensation plan -- 166 166 -- -- -- 166
Share issuances 1,138 (426) 712 -- -- -- 712
Share capital held in trust (960) -- (960) -- -- -- (960)
Balance at September 30, 2012 $ 57,556 $ 9,886 $ 67,442 $ 187 $ 187 $ (45,426) $ 22,203
Balance at December 31, 2010 $ 56,683 $ 9,255 $ 65,938 $ 297 $ 297 $ (52,082) $ 14,153
Net income -- -- -- -- -- 1,974 1,974
Other comprehensive loss -- -- -- (552) (552) -- (552)
Total comprehensive income -- -- -- (552) (552) 1,974 1,422
Effect of share option compensation plan -- 477 477 -- -- -- 477
Share Issuances 682 (169) 513 -- -- -- 513
Balance at September 30, 2011 $ 57,365 $ 9,563 $ 66,928 $ (255) $ (255) $ (50,108) $ 16,565
CONTACT: Addo Communications Laura Foster / Kimberly Esterkin lauraf@addocommunications.com / kimberlye@addocommunications.com (310) 829-5400Source:Points International Ltd.