08
November
2017
|
02:00 PM
Europe/Amsterdam

Points International Ltd. Reports Third Quarter 2017 Financial Results

Record Revenue of $91.2 Million With Gross Profit Increased 14% Year-Over-Year to $11.4 Million

TORONTO, Nov. 08, 2017 (GLOBE NEWSWIRE) -- Points (TSX:PTS) (Nasdaq:PCOM), the global leader in powering loyalty commerce, today announced results for the third quarter ended September 30, 2017.

"Our strong third quarter performance demonstrates continued progress toward our strategic goals and financial targets for 2017," stated Rob MacLean, CEO. "During the third quarter we built on the success of our Loyalty Currency Retailing segment and also saw meaningful strategic and financial gains in our Platform Partners and Points Travel segments. Momentum coming out of this quarter offers increased confidence in our ongoing diversification efforts and positions us for continued success in 2018."

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

  • Revenue increased to a record $91.2 million from $82.4 million. Principal Revenues totaled $87.2 million and Other Partner Revenue was $3.9 million.
  • Gross Profit grew 14% to $11.4 million, compared to $10.1 million.
  • Total Adjusted Operating Expenses2 were $8.2 million, compared to $7.8 million.
  • Net Income totaled $0.6 million, or $0.04 per diluted share, compared to Net Income of $0.3 million, or $0.02 per diluted share.
  • Adjusted EBITDA3 was $3.1 million, compared to $2.3 million.

Recent Business Highlights

  • Recently expanded relationship with Shangri-La Hotels in China, for Loyalty Currency Retailing services.
  • Announced a partnership with Groupon, the leading daily deals service, to incent customers through our Platform Partnerships services with up to 10 points per dollar spent with popular hotel and airline loyalty programs, including Alaska Airlines Mileage Plan, Choice Privileges, IHG Rewards Club, JetBlue TrueBlue, La Quinta Returns and United MileagePlus.
  • During the third quarter, Points repurchased for cancellation 153,047 shares of common stock at an average price of $9.41 per share through its Automatic Share Purchase Plan in conjunction with its Normal Course Issuer Bid.

Outlook

The Company is reiterating financial guidance for the year ending December 31, 2017, as follows:

  • Gross profit is expected to increase up to 10% from 2016
  • Adjusted EBITDA is expected to increase up to 10% from 2016
  • Current expectation is to be near the upper end of the range for both metrics

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: investor.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 15, 2017, by dialing (844) 512-2921 in the U.S. and Canada and (412) 317-6671 internationally and entering the passcode 13672810.

About Points

Points, publicly traded as Points International Ltd. (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. 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 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.

Contact:Points Investor RelationsICR, Inc.Garo Toomajanianir@points.comPoints International Ltd.Key Financial Measures and Schedule of Non-GAAP Reconciliations

Gross Profit4 Information

         
Expressed in thousands of United Statesdollars        
    For the three months ended  
       
    September 30, 2017 September 30, 2016  
         
Total Revenue Direct cost of revenue   $ 91,19879,772   $ 82,44272,380    
Gross Profit4   $ 11,426   $ 10,062    
Gross Margin     13 %   12 %  
   

Reconciliation of Net Income to Adjusted EBITDA5

         
Expressed in thousands of United Statesdollars        
    For the three months ended  
       
    September 30, 2017 September 30, 2016  
         
Net Income   $ 605 $ 335  
Income tax expense   310 301  
Depreciation and amortization   1,029 1,224  
Foreign exchange loss (gain)   (75) 1  
Stock-based compensation   1,321 389  
Adjusted EBITDA5   $ 3,190 $ 2,250  
   

Reconciliation of Total Expenses to Adjusted Operating Expenses6

         
Expressed in thousands of United Statesdollars        
    For the three months ended  
       
    September 30, 2017 September 30, 2016  
         
Total Expenses   $ 90,283 $ 81,806  
Subtract (add):        
Direct cost of revenue   79,772 72,380  
Depreciation and amortization   1,029 1,224  
Foreign exchange loss (gain)   (75) 1  
Stock-based compensation   1,321 389  
Adjusted Operating Expenses6   $ 8,236 $ 7,812  
   

Points International Ltd.Condensed Consolidated Interim Statements of Financial Position

Expressed in thousands of United States dollars (Unaudited)

 
       
       
       
As at   September 30,2017 December 31,2016  
ASSETS        
Current assets        
Cash and cash equivalents   $ 54,949  $ 46,492  
Short-term investments     -   10,033  
Restricted cash     500   500  
Funds receivable from payment processors     11,561   10,461  
Accounts receivable     6,983   4,057  
Prepaid expenses and other assets     3,055   1,475  
Total current assets   $ 77,048 $ 73,018   
Non-current assets        
Property and equipment     2,126   1,750  
Intangible assets     15,557   16,896  
Goodwill     7,130   7,130  
Deferred tax assets     1,999   1,725  
Other assets     2,713   2,715  
Total non-current assets   $  29,525 $ 30,216  
Total assets   $ 106,573 $ 103,234  
   
       
LIABILITIES      
Current liabilities      
Accounts payable and accrued liabilities   $ 6,819   $ 6,335  
Income taxes payable      226     1,638   
Payable to loyalty program partners     54,055     53,242  
Current portion of other liabilities     784     771  
Total current liabilities   $ 61,884   $ 61,986  
       
Non-current liabilities      
Deferred tax liabilities     298     211  
Other liabilities     617     719  
Total non-current liabilities   $ 915   $ 930  
       
Total liabilities   $ 62,799   $ 62,916  
       
SHAREHOLDERS' EQUITY      
Share capital     58,365     58,412  
Contributed surplus     10,483     9,881  
Accumulated other comprehensive income (loss)     585     (127 )
Accumulated deficit     (25,659 )   (27,848 )
Total shareholders' equity   $ 43,774   $ 40,318  
Total liabilities and shareholders' equity   $ 106,573   $ 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 monthsended For the nine monthsended  
         
        September30, 2017     September30, 2016       September30, 2017       September30, 2016    
REVENUE            
Principal   $  87,200   $ 79,671   $ 248,549   $ 230,941    
Other partner revenue     3,927     2,725     11,116     8,786    
Interest     71     46     158     139    
Total Revenue   $  91,198   $ 82,442   $ 259,823   $ 239,866    
 EXPENSES            
Direct cost of principal revenue     79,772     72,380     225,928     208,449    
Employment costs     6,660     5,457     18,731     17,574    
Marketing and communications     422     460     1,587     1,247    
Technology services     489     446     1,390     1,236    
Depreciation and amortization     1,029     1,224     3,017     3,451    
Foreign exchange (gain) loss     (75 )   1     (183 )   169    
Operating expenses     1,986     1,838     6,068     4,664    
Total Expenses   $  90,283   $ 81,806   $ 256,538   $ 236,790    
             
OPERATING INCOME BEFORE INCOME TAXES   $ 915   $ 636   $ 3,285   $ 3,076    
             
Income tax expense     310     301     1,096     917    
NET INCOME   $ 605   $ 335   $ 2,189   $ 2,159    
             
OTHER COMPREHENSIVE INCOME            
Items that will subsequently be reclassified to profit or loss:Unrealized gain on foreign exchange derivative designatedas cash flow hedges     573     (196 )   1,101     759    
Income tax effect     (151 )   52     (292 )   (201 )  
Reclassification to net income of loss on foreign exchangederivatives designated as cash flow hedges     (192 )   (27 )   (132 )   310    
Income tax effect     51     7     35     (82 )  
Other comprehensive income for the period, net of income tax   $ 281   $ (164 ) $ 712   $ 786    
TOTAL COMPREHENSIVE INCOME   $ 886   $ 171   $  2,901   $ 2,945    
             
EARNINGS PER SHARE            
Basic earnings per share   $ 0.04   $     0.02   $     0.15   $     0.14    
Diluted earnings per share   $ 0.04   $     0.02   $     0.15   $     0.14    

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 exceptnumber of shares(Unaudited)   Share Capital   ContributedSurplus     Accumulated othercomprehensiveincome (loss)      Accumulateddeficit     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 income   -     -     -     -     2,189     2,189    
Other comprehensive income, net of tax   -     -     -     712     -     712    
Total comprehensive income   -     -     -     712     2,189     2,901    
Effect of share option compensation plan   -     -     223     -     -     223    
Effect of RSU compensation plan   -     -     2,834     -     -     2,834    
Share issuances — share options   16,988     395     (335 )       60    
Share issuances — RSUs   -     1,255     (1,255 )   -     -     -     
Share capital held in trust   -     (1,053 )   -     -     -     (1,053 )  
Shares repurchased   (162,347 )   (644 )   (865 )   -     -     (1,509 )  
Balance at September 30, 2017   14,733,315   $  58,365   $ 10,483   $ 585   $ (25,659 ) $ 43,774    
                 
     
Balance at December 31, 2015   15,306,402   $  59,293   $  9,859   $ (624 ) $  (26,333 ) $ 42,195    
Net income   -     -     -     -     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    
   

Points International Ltd.

Condensed Consolidated Interim Statements of Cash Flows Expressed in thousands of United States dollars

         
(Unaudited)    For the three monthsended For the nine monthsended  
         
      September30, 2017     September30, 2016     September30, 2017     September30, 2016    
Cash flows from operating activities            
Net income for the period   $ 605   $ 335   $ 2,189   $ 2,159    
Adjustments for:    
Depreciation of property and equipment     238      344     649     936    
Amortization of intangible assets     791     880     2,368     2,515    
Unrealized foreign exchange loss (gain)     716     85     1,425     (450 )  
Equity-settled share-based payment transactions     1,321     389     3,057     1,747    
Deferred income tax expense (recovery)     (46 )   (162 )   (444 )   (164 )  
Net gain (loss) on derivative contracts designated ascash flow hedges     381     (223 )   969     1,069    
Changes in non-cash balances related to operations      3,975     (7,586 )   (5,808 )   (8,680 )  
Net cash provided by (used in) operating activities   $ 7,981   $  (5,938 ) $ 4,405   $ (868 )  
             
Cash flows from investing activities            
Acquisition of property and equipment     (267 )   (762 )   (1,025 )   (1,117 )  
Additions to intangible assets     (358 )   (275 )   (1,029 )   (1,350 )  
Settlement of short-term investments, net of interestreceived     10,033     -     10,033     -    
Changes in restricted cash     -     -     -     500    
Net cash provided by (used in) investing activities   $ 9,408   $ (1,037 ) $  7,979   $ (1,967 )  
             
Cash flows from financing activities            
Proceeds from exercise of share options     60     -     60     5    
Purchase of share capital held in trust     (857 )   -     (1,053 )   -    
Shares repurchased     (1,439 )   (478 )   (1,509 )   (1,153 )  
Net cash provided by (used in) financing activities   $ (2,236 ) $ (478 ) $ (2,502 ) $ (1,148 )  
             
Effect of exchange rate fluctuations on cash held      (716 )   (86 )   (1,425 )   451    
                             
Net increase (decrease) in cash and cash equivalents   $ 14,437   $ (7,539 ) $ 8,457   $ (3,532 )  
Cash and cash equivalents at beginning of the period   $ 40,512   $ 55,371   $ 46,492   $ 51,364    
Cash and cash equivalents at end of the period   $ 54,949   $ 47,832   $ 54,949   $ 47,832    
         
Interest received   $ 156   $ 41   $ 204   $ 115    
Taxes paid   $ (506 ) $ (242 ) $ (3,011 ) $ (542 )  
Taxes received   $ 114   $ -   $ 114   $ -    
                             

Amounts received for interest were reflected as operating cash flows in the condensed consolidated interim statements of cash flows.

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 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.

3 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.

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.