Points International Ltd. Reports Fourth Quarter And Record Full Year 2012 Financial Results

  • 8 new partners announced or launched since start of 2012 and anticipated to contribute over $100 million in annualized revenues
  • Initiates 2013 revenue guidance of $200 - $220 million, representing year-over-year growth of 42% - 57%
  • Expects to exit 2013 at approximately $300 million annualized revenue run rate

TORONTO, March 6, 2013 (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 fourth quarter and full year ended December 31, 2012.

"2012 was a transformational year for Points International," said Chief Executive Officer Rob MacLean. "We made significant strides this past year in expanding current partner relationships, launching innovative products and bringing additional marquee loyalty programs onto our platform. At the beginning of 2012, we highlighted an addressable pipeline, that when annualized, could contribute approximately $50 million in incremental revenue. Since that time, we've announced or launched relationships with Southwest Airlines, Wyndham Hotels, Melia Hotels, Aeroméxico, SVM, Speedway, and SUBA Games. We also kicked off 2013 with a strong start and are pleased to announce today a partnership with Finnair, whose loyalty members as of the end of this month will have the ability to buy and gift their Finnair Plus points.  Thus, since the start of 2012, Points has announced or launched 25 new products with 8 new partners that collectively are expected to contribute well over $100 million in annualized revenues."

"Ultimately, our success in 2012 has set the foundation for accelerated growth in 2013. Total 2013 revenues are forecasted to be in the range of $200 - $220 million, an increase of approximately 50% year-over-year. Driving this acceleration in top-line growth is continued organic growth within our existing business as well as the partial-year contribution from currently signed or announced new business slated to launch in 2013. While on a pre-investments basis, we would expect to deliver approximately $10-$13 million of EBITDA, we have made the strategic decision to re-invest a portion of our incremental profitability, in the range of $2-$3 million, to continue to drive innovation and expansion of our core business.  Notably, we will look to add enhanced mobile capabilities to our platform, expand our payment functionality, boost our data analytics, and invest in our open platform efforts."

"We are confident that our progress in 2012 coupled with the strategic investments slated for 2013 will position the platform for growth in both revenues and profitability in 2014 and beyond. Based on the expected growth of existing business we have in market today, coupled with the annualized performance of partners and products announced to-date and slated to launch in 2013, we'll exit 2013 with an annualized revenue run-rate of approximately $300 million. On a pre-investment basis we would expect this run rate to generate over $20 million in EBITDA. As is evident, we expect our model to show demonstrable leverage in the back half of 2013 and into 2014, as we recognize the revenue impact from several large partner launches."

Fourth Quarter 2012 Financial Results

Revenues for the fourth quarter of 2012 totaled $40.8 million, up 19% from $34.3 million in the third quarter of 2012 and up 24% from $32.9 million in the prior-year period. Principal revenue totaled $38.1 million, up 18.6% sequentially from $32.2 million and up 25% year-over-year from $30.5 million. Other partner revenue was $2.7 million, up 23% from $2.2 million in the third quarter of 2012 and up 9.8% from $2.4 million in the prior-year period. The year-over-year increase in revenue was largely driven by new partnerships launched in 2011 and 2012 along with stronger promotional activity.

Gross margin dollars totaled $8.0 million, or 19.6% of total revenue. This represents a 13% increase from $7.0 million, or 21% of total revenue, in the third quarter of 2012 and a 17% increase from $6.8 million, or 21% of total revenue, in the prior-year period. The year-over-year increase in gross margin was primarily due to the addition of new Buy, Gift and Transfer partnerships launched during 2012 as well as stronger promotional activity.

The Company has continued to focus on strategic investments and hires to support the long-term growth of Points International. In light of these investments and certain one-time expenses, EBITDA was $1.6 million for fourth quarter of 2012. This compares to EBITDA of $1.6 million in the third quarter of 2012 and $2.1 million in the fourth quarter of 2011. 

Net income was $5.6 million, or $0.37 per diluted share compared to net income of $0.7 million, or $0.05 per share, in the third quarter of 2012, and net income of $2.1 million, or $0.13 per diluted share, in the fourth quarter 2011. The increase in net income and earnings per diluted share over the prior year period can be primarily attributed to the benefit of approximately $4.9 million in previously unrecognized deferred tax assets.

Fourth Quarter 2012 Business Metrics
           
  Q4/12 Q4/11 Q4/12 vs. Q4/11 Q3/12 Q4/12 vs. Q3/12
TOTAL ALL CHANNELS          
 Points/Miles Transacted (in 000s) 4,411,123 3,953,087 11.6% 3,496,314 26.2%
 No. of Points/Miles Transactions 371,399 336,252 10.5% 345,929 7.4%
LOYALTY CURRENCY SERVICES          
 Points/Miles Transacted (in 000s) 3,799,974 3,305,358 15.0% 3,067,276 23.9%
 No. of Points/Miles Transactions 340,992 302,848 12.6% 325,470 4.8%
POINTS.COM CHANNELS          
 Points/Miles Transacted (in 000s) 611,150 647,729 (5.6)% 429,038 42.4%
 No. of Points/Miles Transactions 30,407 33,404 (9.0)% 20,459 48.6%
 Cumulative Registered Users 3,451,773 2,971,267 16.2% 3,356,522 2.8%

Full Year 2012 Results

Revenues for 2012 were $139.5 million, up 13% from $123 million in 2011.

Gross margin for 2012 totaled $28.6 million, or 21% of revenue, up 17% from $24.4 million, or 20% of revenue, in 2011.

EBITDA for 2012 totaled $6.3 million, up 10% from $5.8 million in 2011. The increase over the prior year is primarily due to gross margin growth outpacing the growth in ongoing operating costs.

Net income for 2012 was $8.3 million, or $0.54 per diluted share, compared to net income of $4.0 million, or $0.26 per share, in 2011. As noted, 2012 results benefited from the recognition of previously unrecognized deferred tax assets which resulted in a recovery of $4.8 million for the year, compared to a recovery of $487,000 in 2011.

As of December 31, 2012, total funds available, comprised of cash and cash equivalents together with security deposits, restricted cash, and amounts with payment processors was $61.0 million. The company remains debt free and is pleased with its overall financial position.

Outlook

The Company is initiating its financial guidance for the year ended December 31, 2013, as follows:
  • The Company expects revenue to be in the range of $200 million to $220 million, an increase of 42% – 57% over 2012
  • The Company expects EBITDA to be in the range of $10 million to $13 million prior to strategic investments
  • The Company plans to re-invest a portion of its incremental profitability in 2013 in the range of $2-$3 million
  • Based on business in market today combined with deals announced to-date, the Company expects to exit 2013 at approximately $300 million annualized revenue run rate.

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 March 20, 2012 by dialing (877) 870-5176 in the U.S. or Canada or (858) 384-5517 internationally and entering the conference ID 408282.

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 45 partners worldwide. Further, Points.com's SaaS products allow eCommerce merchants to add loyalty solutions to their online stores and reward customers for purchases.

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 2013 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 our in-market and newly launched products and services will perform in a manner consistent with the Company's past experience and in accordance with our operating plans. The timing of new product or partner launches is not wholly within our control and there can be no assurance that we will launch new partners or products 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 Margin Information 1
         
Expressed in thousands of United States dollars For the three months ended For the twelve months ended
  December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011
         
Total Revenue  $40,803 $32,929 $139,509 $122,934
Direct cost of principal revenue 32,825 26,106 110,949 98,501
Gross Margin $7,978 $6,823 $28,560 $24,433
Gross Margin % 20% 21% 20% 20%
         
         
Reconciliation of Operating Income to EBITDA 2
         
Expressed in thousands of United States dollars For the three months ended For the twelve months ended
  December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011
         
Operating income  $756 $1,452 $3,486 $3,520
Depreciation and amortization 728 668 2,803 2,298
Foreign exchange (gain) loss  (33)  25  (68)  (63)
Impairment of long-lived assets 110 -- 110 --
EBITDA $1,561 $2,145 $6,331 $5,755
 
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, foreign exchange, and impairment) 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.
Consolidated Balance Sheets
 
Expressed in thousands of United States dollars
     
As at December 31 2012  2011
  ASSETS        
Current assets    
Cash and cash equivalents $ 45,108 $ 34,853
Restricted cash 3,202 1,619
Funds receivable from payment processors 10,057 10,837
Security deposits 2,780 2,461
Accounts receivable 1,912 2,411
Prepaid expenses and other assets 940 1,013
Total current assets $ 63,999 $ 53,194
     
Non-current assets    
Property and equipment 2,207 1,712
Intangible assets 2,856 4,566
Goodwill 2,580 2,580
Deferred tax assets 6,485 1,575
Other assets 617 658
Total non-current assets $ 14,745 $ 11,091
Total assets $ 78,744 $ 64,285

                                                                                                                    
LIABILITIES    
Current liabilities    
Accounts payables and accrued liabilities 4,673 3,553
Payable to loyalty program partners 44,912 40,048
Current portion of other liabilities 594 765
Total current liabilities $ 50,179 $ 44,366
     
Non-current liabilities    
Other liabilities 738 877
Total non-current liabilities $ 738 $ 877
     
Total liabilities $ 50,917 $ 45,243
     
SHAREHOLDERS' EQUITY    
Share capital 57,564 57,378
Contributed surplus 10,105 9,671
Accumulated other comprehensive (loss) income (54) 43
Accumulated deficit (39,788) (48,050)
Total shareholders' equity $ 27,827 $ 19,042
Total liabilities and shareholders' equity $ 78,744 $ 64,285
 
 
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, 2012 December 31, 2011 December 31, 2012 December 31, 2011
         
REVENUE        
 Principal  $38,139 $30,502 $129,859 $114,865
 Other partner revenue 2,657 2,419 9,617 8,048
 Interest 7 8 33 21
Total Revenue 40,803 32,929 139,509 122,934
         
EXPENSES        
 Direct cost of principal revenue 32,825 26,106 110,949 98,501
 Employment costs 4,373 3,256  15,368   12,779 
 Marketing & communications 439 361 1,676 1,380 
 Technology services 159 125 521 573
 Depreciation and amortization 728 668 2,803 2,298
 Foreign exchange (gain) loss  (33)  25  (68)  (63)
 Operating expenses 1,446 936 4,664 3,946
 Impairment of long-lived assets 110 -- 110 --
Total Expenses 40,047 31,477 136,023 119,414
         
OPERATING INCOME 756 1,452 3,486 3,520
         
 Interest and other charges (income)  1  --   (7)  (25)
EARNINGS BEFORE INCOME TAXES  755  1,452  3,493  3,545
         
 Income tax recovery   (4,883)  (606)  (4,769)  (487)
NET INCOME  5,638  2,058  8,262  4,032
         
OTHER COMPREHENSIVE (LOSS) INCOME        
(Loss) gain on foreign exchange derivatives designated as cash flow hedges, net of income tax recovery of $52 and expense of $41 (2011 – expense of $120 and $27)  (144)  310  113  73
Reclassification to net income of gain on foreign exchange derivatives designated as cash flow hedges, net of income tax expense of $35 and $75 (2011 – $5 and $129)  (97)  (12)  (210)  (327)
Other comprehensive (loss) income for the period, net of income tax  (241)  298  (97)  (254)
TOTAL COMPREHENSIVE INCOME $5,397 $2,356 $8,165 $3,778
         
EARNINGS PER SHARE        
Basic earnings per share $0.37 $0.14 $0.55 $0.27
Diluted earnings per share $0.37 $0.13 $0.54 $0.26
 
 
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 Unrealized gains/(losses) on cash flow hedges Accumulated other 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
               
               
               
Balance at December 31, 2010  $ 56,683  $ 9,255  $ 65,938  $ 297  $ 297  $ (52,082)  $ 14,153
Net income   --   --   --   --   --   4,032  4,032
Other comprehensive loss  --   --   --   (254)  (254)  --   (254)
Total comprehensive income  --   --   --   (254)  (254)  4,032  3,778
Effect of share option compensation plan  --   587  587  --   --   --   587
Share issuances   695  (171)  524  --   --   --   524
Balance at December 31, 2011   $ 57,378  $ 9,671  $ 67,049  $ 43  $ 43  $ (48,050)  $ 19,042
 
 
Points International Ltd.
Consolidated Statements of Cash Flows
For the year ended December 31
         
Expressed in thousands of United States dollars For the three months ended For the twelve months ended
  December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011
         
Cash flows from operating activities        
Net income for the period $5,638 $2,058 $8,262 $4,032
Adjustments for:        
Depreciation of property and equipment  159  141  583  510
Amortization of intangible assets  569  527  2,220  1,788
Unrealized foreign exchange loss (gain)  145  (271)  227  (225)
Equity-settled share-based payment transactions  222  110  863  587
Deferred income tax recovery  (4,976)  (605)  (4,876)  (489)
Impairment of long-lived assets  110  --   110  -- 
Unrealized net (gain) loss on derivative contracts designated as cash flow hedges  (327)  413  (131)  (357)
Changes in non-cash balances related to operations  11,538  (1,599)  6,748  1,760
Net cash provided by operating activities  13,078  774  14,006  7,606
         
Cash flows from investing activities        
Acquisition of property and equipment  (547)  (58)  (1,078)  (611)
Additions to intangible assets  (111)  (253)  (620)  (1,510)
Purchase of convertible debenture  255  --   --   -- 
Changes in restricted cash  (1,575)  --   (1,575)  157
Net cash used in investing activities  (1,978)  (311)  (3,273)  (1,964)
         
         
Cash flows from financing activities         
Proceeds from exercise of share options  5  10  717  524
Share purchases  --   --   (960)  -- 
Net cash provided by (used in) financing activities  5  10  (243)  524
         
Net increase in cash and cash equivalents  11,105  473  10,490  6,166
Cash and cash equivalents at beginning of the period  34,145  34,113  34,853  28,463
Effect of exchange rate fluctuations on cash held  (142)  267  (235)  224
Cash and cash equivalents at end of the period $45,108 $34,853 $45,108 $34,853
         
Interest Received 15 5 31 19
Interest Paid 2 --  (7)  (1)
CONTACT: Addo Communications         Laura Foster / Kimberly Esterkin          lauraf@addocommunications.com /          kimberlye@addocommunications.com

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