Toronto,
05
March
2014
|
12:00 AM
Europe/Amsterdam

Points International Ltd. Reports Fourth Quarter and Full Year 2013 Financial Results

March 5, 2014 (GLOBE NEWSWIRE) -- Points (TSX:PTS) (Nasdaq:PCOM), global leader in loyalty currency management, today announced results for the fourth quarter and full-year ended December 31, 2013.

"2013 was another record year for Points," said Chief Executive Officer, Rob MacLean. "We finished the year on-target, with revenues increasing roughly 45% to $202 million and Adjusted EBITDA1 growing steadily during this aggressive growth period. Our performance reflects the contribution from new products and partners launched over the last twelve months as well as increased transactional activity among existing partners. In 2013, Points launched 15 new products with 5 new partners, most notably welcoming Southwest Airlines, Speedway, Finnair, and SVM Fuel Circle to our growing loyalty network."

"2013 was also an investment year for Points, in which we added key product functionality as well as began to set the groundwork for Points' open platform strategy. The opportunities that we are investing against are diverse - spanning from enhancing our mobile capabilities to broadening our payments functionality, improved data analytics capabilities and innovative enhancements to our white label products that we believe will create value within the loyalty landscape."

"Importantly, our positive momentum has continued into 2014. In February, we announced a new partnership with MasterCard Worldwide, where we will partner with their Loyalty Division to add value to the dozens of bank loyalty programs around the world that leverage the MasterCard Loyalty Platform. This partnership will dramatically expand our exposure to the Financial Services sector and will benefit not only those new relationships, but also many of our existing partnerships already in place. Additionally we recently launched Spirit Airlines on our network providing FREE SPIRIT members the ability to buy and gift their miles. And today, we are excited to announce the addition of Hilton Worldwide and the Hilton HHonors program to our partner network. Further details on the Hilton relationship will be shared at the launch of services."

"Our performance in 2013 and early results in 2014 translate into strong forecasted growth in 2014. Revenues are anticipated to grow from 25%-40%, led by growth in our organic business, as well as the contribution from new partners and products launched or announced over the last twelve months. With respect to profitability, we expect the business to demonstrate meaningful leverage, as we continue to drive oversized top-line growth across our increasingly efficient Loyalty Commerce Platform. As a result, we expect full-year Adjusted EBITDA to be in the range of $16-20 million, prior to making strategic investments."

Fourth Quarter 2013 Financial Results

(Unless otherwise stated, all comparisons for the fourth quarter of 2013 are on a year-over-year basis)

Revenues totaled $69.1 million up 69% from $40.8 million. Principal revenues totaled $66.9 million, up 75% from $38.1 million. The year-over-year increase in principal revenues was largely due to the impact of new partners launched over the last twelve months.

Gross margin2 dollars totaled $10.3 million, or 14.9% of total revenue, compared to $8.0 million, or 19.6% of total revenue. The increase in gross margin dollars was largely driven by the impact of new partnerships launched over the last twelve months. As a percentage of revenue, gross margin reflects the relative mix of partner and product activity during the quarter.

Adjusted EBITDA totaled $3.4 million up 118% from $1.6 million. Record revenue and gross margin dollars in the quarter combined with a steady total operating cost structure have resulted in the more than doubling of Adjusted EBITDA in the fourth quarter.

The Company reported net income of $2.3 million, or $0.15 per diluted share, compared to net income of $5.6 million, or $0.37 per share, in the fourth quarter of 2012. In the fourth quarter of 2012, the Company benefited from approximately $4.9 million in previously unrecognized deferred tax assets.

Fourth Quarter 2013 Business Metrics

 
  Q4/13 Q4/12 Q4/13 vs. Q4/12 Q3/13 Q4/13 vs. Q3/13
Total All Channels          
Points/Miles Transacted (in 000s) 5,348,320 4,411,123 21.2% 4,249,170 25.9%
No. of Points/Miles Transactions 500,782 371,399 34.8% 500,204 0.1%

Full Year 2013 Results

Revenues were $202.4 million, up 45% from $139.5 million in 2012.

Gross margin dollars totaled $33.1 million, or 16.4% of revenue, compared to $28.6 million, or 20.5% of revenue, in 2012.

Adjusted EBITDA totaled $7.4 million, up 17% from $6.3 million in 2012.

Net income was $3.6 million, or $0.23 per diluted share, compared to net income of $8.3 million, or $0.54 per share, in 2012. Net income in 2012 benefited from the recognition of previously unrecognized deferred tax assets, which resulted in a recovery of $4.8 million for the year.

As of December 31, 2013, total funds available, comprised of cash and cash equivalents together with security deposits, restricted cash, and amounts with payment processors was $74.9 million. The Company remains debt free and is pleased with its overall financial position.

Outlook

The Company is initiating financial guidance for the year ending December 31, 2014, as follows:

  • Revenue is expected to grow in the range of 25% - 40% over 2013. This revenue range contemplates organic growth within Points' existing business as well as the contribution from partners and products announced or launched since 2013.
  • Adjusted EBITDA is expected to be in the range of $16 - $20 million, prior to making strategic investments.
  • Strategic investments are expected to be in the range of $5-6 million for 2014.

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 dialers should call (201) 689-8560.

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 March 19, 2014 by dialing (877) 870-5176 in the U.S. or Canada or (858) 384-5517 internationally and entering the conference ID 13574701.

Summary

 

- Revenues of $202.4 million, an increase of 45% year-over-year

- 8 new partners announced or launched since the start of 2013

- Initiates 2014 revenue guidance of 25%-40% year-over-year growth

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 on Points, please visit www.Points.com, follow us on Twitter (@PointsLoyalty) or read the Points company 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, our guidance for 2014 with respect to revenue growth, Adjusted EBITDA expectations and reinvestment plans. 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
 
Reconciliation of Net Income to Adjusted EBITDA1    
     
Expressed in thousands of United States dollars For the three months ended For the twelve months ended
  December 31, 2013 December 31, 2012 December 31, 2013 December 31, 2012
Net incomeInterest and other income $ 2,291-- $ 5,6381 $ 3,606-- $ 8,262(7)
Income tax expense (recovery) 474 (4,883) 666 (4,769)
Depreciation and amortization 715 728 3,285 2,803
Foreign exchange (gain) (77) (33) (123) (68)
Impairment of long-lived assets -- 110 -- 110
Adjusted EBITDA $ 3,403 $ 1,561 $ 7,434 $ 6,331
         
 
 
Gross Margin Information2
     
Expressed in thousands of United States dollars For the three months ended For the twelve months ended
   December 31,2013 December 31, 2012 December 31, 2013 December 31, 2012
Total Revenue Direct cost of principal revenue $ 69,08758,785 $ 40,80332,825 $ 202,370 169,266 $ 139,509110,949
Gross Margin $ 10,302  $ 7,978  $ 33,104 $ 28,560
Gross Margin % 15% 20% 16% 20%
 
1 Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization, foreign exchange, and impairment) 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.
2 Gross Margin is defined as total revenues less the direct cost of principal revenues. Gross Margin 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 margin is not a recognized measure of profitability under IFRS.
     
Points International Ltd.
Consolidated Balance Sheets 
 
As at December 31 2013  2012
     
ASSETS    
Current assets    
Cash and cash equivalents $ 64,188 $ 45,108
Restricted cash 1,602 3,202
Funds receivable from payment processors 9,071 10,057
Security deposits -- 2,780
Accounts receivable 1,401 1,912
Prepaid expenses and other assets 2,210 940
Total current assets $ 78,472 $ 63,999
Non-current assets    
Property and equipment 2,092 2,207
Intangible assets 1,855 2,856
Goodwill 2,580 2,580
Deferred tax assets 5,966 6,485
Long-term Investment 3,500 --
Other assets 547 617
Total non-current assets $ 16,540 $ 14,745
Total assets $ 95,012 $ 78,744
     
LIABILITIES    
Current liabilities    
Accounts payables and accrued liabilities 4,783 4,673
Payable to loyalty program partners 56,111 44,912
Current portion of other liabilities 1,134 594
Total current liabilities $ 62,028 $ 50,179
     
Non-current liabilities    
Other liabilities 437 738
Total non-current liabilities $ 437 $ 738
     
Total liabilities $ 62,465 $ 50,917
     
SHAREHOLDERS' EQUITY    
Share capital 58,693 57,564
Contributed surplus 10,381 10,105
Accumulated other comprehensive loss (345) (54)
Accumulated deficit (36,182) (39,788)
Total shareholders' equity $ 32,547 $ 27,827
Total liabilities and shareholders' equity $ 95,012 $ 78,744
     
 
Points International Ltd.
Consolidated Statements of Comprehensive Income
     
Expressed in thousands of United States dollars, except per share amounts For the three months ended For the twelve months ended
  December 31, 2013 December 31, 2012 December 31, 2013 December 31, 2012
REVENUE        
Principal Other partner revenue $ 66,9102,157  $ 38,139 2,657 $ 193,8808,431 $ 129,859 9,617
Interest 20  7 59 33
Total Revenue 69,087  40,803 202,370 139,509
 EXPENSES        
Direct cost of principal revenue 58,785  32,825  169,266  110,949
Employment costs 5,201  4,373 18,934  15,368 
Marketing & communications 223  439 1,066 1,520 
Technology services 241  159 1,013 677
Depreciation and amortization 715  728 3,285 2,803
Foreign exchange (gain) loss (77)  (33) (123) (68)
Operating expenses 1,234  1,446   4,657  4,664 
Impairment of long-lived assets --  110 -- 110
Total Expenses 66,322  40,047  198,098  136,023
         
OPERATING INCOME 2,765 756 4,272  3,486 
         
Interest and other charges (income) --  1 -- (7)
EARNINGS BEFORE INCOME TAXES 2,765  755 4,272 3,493
         
Income tax recovery 474 (4,883) 666 (4,769)
NET INCOME 2,291  5,638 3,606 8,262
         
OTHER COMPREHENSIVE (LOSS) INCOME        
(Loss) gain on foreign exchange derivatives designated as cash flow hedges, net of income tax recovery of $222 (2012 - expense of $41) (308)  (144) (616) 113
Reclassification to net income of (loss) gain on foreign exchange derivatives designated as cash flow hedges, net of income tax recovery of $117 (2012 - expense of $75)  157   (97)  325  (210)
Other comprehensive (loss) income for the period, net of income tax (151) (241) (291) (97)
TOTAL COMPREHENSIVE INCOME $ 2,140  $ 5,397 $ 3,315 $ 8,165
           
EARNINGS PER SHARE          
Basic earnings per share $ 0.15  $ 0.37 $ 0.24 $ 0.55  
Diluted earnings per share $ 0.15  $ 0.37 $ 0.23 $ 0.54  
               
             
Points International Ltd.            
Consolidated Statements of Changes in Equity          
        Attributable to equity holders of the Corporation
Expressed in thousands of United States dollars Share Capital Contributed Surplus Total Capital Unrealizedgains/(losses)on cash flowhedges Accumulatedother comprehensive(loss) income Accumulated deficit Total shareholders' equity
               
Balance at December 31, 2012 $ 57,564 $ 10,105 $ 67,669 $ (54) $ (54) $ (39,788) $ 27,827
Net income -- -- -- -- -- 3,606 3,606
Other comprehensive loss -- -- -- (291) (291) -- (291)
Total comprehensive income -- -- -- (291) (291) 3,606 3,315
Effect of share option compensation plan -- 767 767 -- -- -- 767
Effect of RSU compensation plan -- 497 497 -- -- -- 497
Share issuances 1,724 (988) 736 -- -- -- 736
Share capital held in trust (595) -- (595) -- -- -- (595)
Balance at December 31, 2013 $ 58,693 $ 10,381 $ 69,074 $ (345) $ (345) $ (36,182) $ 32,547
               
        Attributable to equity holders of the Corporation
Expressed in thousands of United States dollars Share Capital Contributed Surplus Total Capital Unrealizedgains/(losses)on cash flowhedges Accumulatedother comprehensive(loss) income Accumulated deficit Total shareholders'equity
               
Balance at December 31, 2011 $ 57,378 $ 9,671 $ 67,049 $ 43 $ 43 $ (48,050) $ 19,042
Net income -- -- -- -- -- 8,262 8,262
Other comprehensive loss -- -- -- (97) (97) -- (97)
Total comprehensive income -- -- -- (97) (97) 8,262 8,165
Effect of share option compensation plan -- 607 607 -- -- -- 607
Effect of RSU compensation plan -- 256 256 -- -- -- 256
Share issuances 1,146 (429) 717 -- -- -- 717
Share capital held in trust (960) -- (960) -- -- -- (960)
Balance at December 31, 2012 $ 57,564 $ 10,105 $ 67,669 $ (54) $ (54) $ (39,788) $ 27,827
               
         
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, 2013 December 31, 2012 December 31, 2013 December 31, 2012
         
Cash flows from operating activities        
Net income for the period $ 2,291 $ 5,638 $ 3,606 $ 8,262
Adjustments for:        
Depreciation of property and equipment 202 159 1,094 583
Amortization of intangible assets 513 569 2,191 2,220
Unrealized foreign exchange loss (gain) 117 145 282 227
Equity-settled share-based payment transactions 444 222 1,264 863
Deferred income tax recovery 532 (4,976) 624 (4,876)
Impairment of long-lived assets -- 110 -- 110
Unrealized net (gain) loss on derivative contracts designated as cash flow hedges (205) (327) (396) (131)
Changes in non-cash balances related to operations 11,336 11,538 14,625 6,748
Net cash provided by operating activities 15,230 13,078 23,290 14,006
         
Cash flows from investing activities        
Acquisition of property and equipment (238) (547) (980) (1,078)
Additions to intangible assets (701) (111) (1,190) (620)
Purchase of convertible debenture -- 255 -- --
Long-term investment (1,000) -- (3,500) --
Changes in restricted cash -- (1,575) 1,575 (1,575)
Net cash used in investing activities (1,939) (1,978) (4,095) (3,273)
         
Cash flows from financing activities        
Proceeds from exercise of share options 126 5 736 717
Share purchases -- -- (595) (960)
Net cash provided by (used in) financing activities 126 5 141 (243)
         
Net increase in cash and cash equivalents 13,417 11,105 19,336 10,490
Cash and cash equivalents at beginning of the period 50,875 34,145 45,108 34,853
Effect of exchange rate fluctuations on cash held (104) (142) (256) (235)
Cash and cash equivalents at end of the period $ 64,188 $ 45,108 $ 64,188 $ 45,108
         
Interest Received 19 15 61 31
Interest Paid -- 2 -- (7)