Points International Ltd. Reports Second Quarter 2012 Financial Results

Record Revenue of $36.3 million, up 11% year-over-year

Record Gross Margin of $7.1 million, up 15% year-over-year

EBITDA of $2.1 million, up 53% year-over-year

EPS of $0.09 per diluted share, up approximately 200% year-over-year

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

TORONTO, Aug. 8, 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 second quarter ended June 30, 2012.

"We are pleased with our second quarter, which saw improved performance across all key financial metrics.  Revenues, gross margin dollars, EBITDA, and net income are all up sequentially and year over year," said Points Chief Executive Officer Rob MacLean. "Points delivered record revenues and gross margins, and at the same time, saw increased profitability as demonstrated by our improvement in EBITDA and EPS, which increased 53% and 200% year-over-year, respectively.  Contributing to our financial performance is the addition of new partners and products to our platform over the past twelve months as well as the continued growth of our deployed products." 

Mr. MacLean continued, "Looking to the back half of the year, we anticipate continued acceleration in our financial performance led by strong organic growth in our core loyalty currency services business. In addition to driving strong organic growth, we are working diligently to execute against our robust pipeline of new business. Both the value and visibility of our new business pipeline has increased in the past 90 days with several relationships in advanced stages of development.  As a result, we expect meaningful new business launches in the back-half of the year. We look forward to being able to share our successes over the coming quarters and remain confident that we will continue to deliver solid progress for our shareholders."

Second Quarter 2012 Financial Results

Total revenue was $36.3 million for the second quarter of 2012. Revenue was up 11% year-over-year from $32.7 million in the second quarter of 2011 and up 30.0% sequentially from $28.0 million in the first quarter of 2012. Principal revenue totaled $34.2 million, up 11% from $30.8 million in same period last year and up 35% from $25.3 million in the first quarter 2012. Other partner revenue was $2.1 million, up 8.0% from $2.0 million in the second quarter 2011 and down 21.5% from $2.7 million in the first quarter 2012.

Gross margin for the second quarter 2012 totaled $7.1 million, or 19.6% of total revenue. This represents a 15% increase from $6.2 million, or 19.0% of total revenue, in the second quarter 2011 and an 11% increase from $6.4 million, or 22.8% of total revenue, in the first quarter 2012. The sequential change in gross margin percentage is a reflection of the rotation of sales from seasonal Q1 products and higher agency activity to a more typical mix with principal revenue comprising 94% of total revenue.

EBITDA for the second quarter 2012 was $2.1 million, up 53% year-over-year from $1.4 million in the second quarter 2011 and up 88% from $1.1 million in the first quarter 2012. This year-over-year and sequential increase is attributed to strong gross margins combined with minimal increases in operating costs.

Net income for the second quarter of 2012 was $1.3 million, or $0.09 per share. This compares to net income of $0.5 million, or $0.03 per share in the second quarter 2011, and net income of $0.6 million, or $0.04 per share, in the first quarter 2012.

As of June 30, 2012, total funds available, comprised of cash and cash equivalents together with security deposits, restricted cash and amounts with payment processors, was $44.0 million, down from $45.6 million at March 31, 2012. The company remains debt free and is pleased with its overall financial position.
Second Quarter 2012 Business Metrics          
           
  Q2/12 Q2/11 Q2/12 vs. Q2/11 Q1/12 Q2/12 vs. Q1/12
TOTAL ALL CHANNELS          
Points/Miles Transacted (in 000s) 3,455,853 3,641,292 (5%) 3,755,710 (8%)
No. of Points/Miles Transactions 390,244 347,134 12% 364,176 7%
LOYALTY CURRENCY SERVICES          
Points/Miles Transacted (in 000s) 3,056,598 3,319,885 (8%) 3,282,092 (7%)
No. of Points/Miles Transactions 328,722 329,561 (0%) 344,245 (5%)
POINTS.COM CHANNELS          
Points/Miles Transacted (in 000s) 399,255 321,407 24% 473,618 (16%)
No. of Points/Miles Transactions 61,522 17,573 250% 19,931 209%
Cumulative Registered Users 3,235,685 2,724,144 19% 3,087,282 5%

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) 941-1427 ten minutes prior to the start time. International dialers should call (480) 629-9664.

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 August 22, 2012 by dialing (877) 870-5176 in the U.S. or Canada or (858) 384-5517 internationally and entering the conference ID 4548122.

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 40 th 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 six months ended
  June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011
         
Total revenue  $ 36,329 $ 32,725 $ 64,367 $ 61,198
Direct cost of principal revenue 29,192 26,519 50,824 49,904
Gross margin $ 7,137 $ 6,206 $ 13,543 $ 11,294
Gross margin % 20% 19% 21% 18%
         
Reconciliation of Operating Income to EBITDA2        
         
Expressed in thousands of United States dollars For the three months ended For the six months ended
  June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011
         
Operating income  $ 1,373 $ 834 $ 1,874 $ 770
Depreciation and amortization 699 563 1,360 1,008
Foreign exchange loss (gain) 29 (24) (16) (92)
EBITDA $ 2,101 $ 1,373 $ 3,218 $ 1,686
         
 
1Gross 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.
2EBITDA (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 For the three months ended For the six months ended
(Unaudited) June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011
         
REVENUE        
Principal  $ 34,208 $ 30,766 $ 59,548 $ 57,463
Other partner revenue 2,112 1,955 4,801 3,726
Interest 9 4 18 9
Total Revenue 36,329 32,725 64,367 61,198
         
EXPENSES        
Direct cost of principal revenue 29,192 26,519 50,824 49,904
Employment costs 3,610 3,258 7,204 6,502
Marketing & communications 373 348 779 627
Technology services 118 156 252 302
Depreciation and amortization 699 563 1,360 1,008
Foreign exchange loss (gain) 29 (24) (16) (92)
Operating expenses 935 1,071 2,090 2,177
Total Expenses 34,956 31,891 62,493 60,428
         
OPERATING INCOME 1,373 834 1,874 770
Interest and other charges  -- (17) -- (17)
EARNINGS BEFORE INCOME TAX 1,373 851 1,874 787
Deferred income tax expense (recovery)  69 350 (4) 475
NET INCOME 1,304 501 1,878 312
         
OTHER COMPREHENSIVE INCOME (LOSS)        
Gain (loss) on foreign exchange derivatives designated as cash flow hedges, net of income tax expense of $3 and $15 for the three and six months ended June 30, 2012 (2011 – recovery of $10 and expense of $50) 7 (26) 41 127
Reclassification to net income of gain on foreign exchange derivatives designated as cash flow hedges, net of income tax expense of $4 and $22 for the three and six months ended June 30, 2012 (2011 – $46 and $92) (12) (116) (63) (234)
Other comprehensive loss for the period, net of income tax (5) (142) (22) (107)
TOTAL COMPREHENSIVE INCOME  $ 1,299 $ 359 $ 1,856  $205
         
EARNINGS PER SHARE        
Basic earnings per share $ 0.09 $ 0.03 $ 0.12 $ 0.02
Diluted earnings per share $ 0.09 $ 0.03 $ 0.12 $ 0.02
     
Points International Ltd.    
Condensed Consolidated Interim Balance Sheets    
     
Expressed in thousands of United States dollars    
(Unaudited)    
     
As at June 30, 2012 December 31, 2011
     
ASSETS    
Current assets    
Cash and cash equivalents 32,640 34,853
Restricted cash 1,617 1,619
Funds receivable from payment processors 6,759 10,837
Security deposits 2,942 2,461
Accounts receivable 1,615 2,411
Prepaid expenses and other assets 1,006 1,013
Total current assets 46,579 53,194
Non-current assets    
Property and equipment 1,770 1,712
Intangible assets 3,768 4,566
Goodwill 2,580 2,580
Deferred tax assets 1,593 1,575
Note receivable 255 --
Other assets 618 658
Total non-current assets 10,584 11,091
Total assets 57,163 64,285
LIABILITIES    
Current liabilities    
Accounts payables and accrued liabilities 2,822 3,455
Payable to loyalty program partners 31,373 40,048
Provisions 56 98
Current portion of other liabilities 596 765
Total current liabilities 34,847 44,366
     
Non-current liabilities    
Other liabilities 801 877
Total non-current liabilities 801 877
     
Total liabilities 35,648 45,243
     
SHAREHOLDERS' EQUITY    
Share capital 57,992 57,378
Contributed surplus 9,674 9,671
Accumulated other comprehensive income 21 43
Accumulated deficit (46,172) (48,050)
Total shareholders' equity 21,515 19,042
Total liabilities and shareholders' equity  57,163 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 hedges 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  --  --  -- --  --  1,878 1,878
Other comprehensive loss -- -- -- (22) (22) -- (22)
Total comprehensive income -- -- -- (22) (22) 1,878 1,856
Effect of share option compensation plan -- 335 335 -- -- -- 335
Effect of RSU compensation plan   --  84 84  --   --   --  84
Share issuances  1,103 (416) 687  --   --   --  687
Share capital held in trust  (489) -- (489)  --   --   --  (489)
Balance at June 30, 2012  $ 57,992 $ 9,674 $ 67,666 $ 21 $ 21 $ (46,172) $ 21,515
               
               
Balance at December 31, 2010 $ 56,683 $ 9,255 $ 65,938 $ 297 $ 297 $ (52,082) $ 14,153
Net income --  --  -- --  --  312 312
Other comprehensive loss -- -- -- (107) (107) -- (107)
Total comprehensive income -- -- -- (107) (107) 312 205
Effect of share option compensation plan -- 332 332 -- -- -- 332
Share issuances 605 (146) 459 --  --  -- 459
Balance at June 30, 2011 $ 57,288 $ 9,441 $ 66,729 $ 190 $ 190 $ (51,770) $ 15,149
         
Points International Ltd.        
Condensed Consolidated Interim Statements of Cash Flows        
         
Expressed in thousands of United States dollars For the three months Ended For the six months Ended
(Unaudited) June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011
         
Cash flows from operating activities        
Net income for the period $ 1,304 $ 501 $ 1,878 $ 312
Adjustments for:        
Depreciation of property and equipment 138 127 269 230
Amortization of intangible assets 561 436 1,091 778
Unrealized foreign exchange (gain) loss (347) 738 (84) 394
Equity-settled share-based payment transactions 201 163 419 332
Deferred income tax expense (recovery) 73 350 (10) 475
Unrealized net gain on derivative contracts designated as cash flow hedges (6) (198) (29) (150)
Changes in non-cash balances related to operations (6,523) (1,410) (5,155) 981
Net cash (used in) provided by operating activities (4,599) 707 (1,621) 3,352
         
Cash flows from investing activities        
Acquisition of property and equipment (144) (308) (328) (468)
Additions to intangible assets (170) (291) (293) (807)
Issuance of note (255)  -- (255) --
Net cash used in investing activities (569) (599) (876) (1,275)
         
Cash flows from financing activities         
Proceeds from exercise of share options 318 410 687 458
Proceeds used for share purchases (489) -- (489) --
Net cash (used in) provided by financing activities (171) 410 198 458
         
Net (decrease) increase in cash and cash equivalents (5,339) 518 (2,299) 2,535
Cash and cash equivalents at beginning of the period 37,622 30,810 34,853 28,463
Effect of exchange rate fluctuations on cash held 357 (735) 86 (405)
Cash and cash equivalents at end of the period $ 32,640 $ 30,593 $ 32,640 $ 30,593
         
Interest Received 8 4 18 10
Interest Paid  -- --  -- --
CONTACT: Addo Communications         Laura Foster / Kimberly Esterkin         laurf@addocommunications.com /         kimberlye@addocommunications.com         (310) 829-5400

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