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Points International Reports Third Quarter 2009 Financial Results

Posted on: Thursday, 5 November 2009, 15:35 CST

TORONTO, Nov. 5 /PRNewswire-FirstCall/ - Points International Ltd. ("Points") - (OTCBB: PTSEF, TSX: PTS) - the world's leading loyalty reward solutions provider and owner of the Points.com portal - today announced results for the third quarter ended September 30, 2009. All financial results are in U.S. Dollars.

"Third quarter results and business metrics were on plan and we are highly encouraged by strong contributions from our newest partnerships that launched this year," said CEO Rob MacLean. "Following our recent successful European expansion we are pleased to announce a three-year contract extension of our highly productive Lufthansa partnership. Today we are also publicizing our new partnership agreement with J.P. Morgan Chase, one of the largest financial services companies in the world. Working with Chase's Ultimate Rewards program, we will be leveraging our extensive installed base of partners and providing real-time integration services for this newly launched initiative. This deal is yet another important indicator of the success of both our new business efforts and our diversification strategy. In addition, we are working closely with a number of our partners on a variety of promotional activities for the holiday season and expect to end the year on a positive note. Moreover, strong progress on partner launches and Project ePoch, our technology infrastructure initiative, continues to give us good visibility on lowered expenses and promises exciting new functionality, distribution capabilities and operational flexibility into 2010 and beyond," continued MacLean.

Third Quarter 2009 Financial Results

Total revenue was $20.7 million for the third quarter of 2009. Revenue was up from $20.4 million reported in the third quarter of 2008, and down from $21.3 million in the second quarter of 2009. Principal revenue grew to $18.9 million, up from $18.3 million in the same period last year, and down from $19.6 million in the second quarter of 2009. Commission revenue was $1.8 million, down from $1.9 million reported in the same period of last year and up from $1.7 million in the second quarter of 2009.

Points reported a net loss for the third quarter of 2009 of $265,000, or ($0.00) per share. Net loss narrowed sharply compared to $1.4 million or ($0.01) per share in the same period in the previous year, and a net loss of $471,000 or ($0.00) per share, in the second quarter of 2009.

Third quarter results include restructuring charges of $332,000 incurred during the quarter related to previously announced staff reductions.

Points reported positive EBITDA of $72,000 during the quarter compared to an EBITDA loss of $543,000 in the same period of 2008 and an EBITDA loss of $566,000 in the second quarter of 2009.

As of September 30, 2009, Points' total cash, comprised of cash and cash equivalents together with security deposits, short term investments and amounts with payment processors, was $33.5 million, up from $29.4 million at the end of the second quarter of 2009. The Company carries no debt and Points believes that its strong balance sheet and proven ability to generate positive free cash flow on an ongoing basis establishes a very strong operating position going forward.

Board of Directors and Management Team Update

"We are pleased to announce that Bernay Box, a long-time major shareholder and supporter of the company, has been appointed as Chairman of our Board of Directors following the resignation of Stephen K. Bannon as Chairman. Bernay has already proven to be an important contributor to our Board and we believe he will be a valuable asset to the team as we execute on our long-term strategy to drive growth and profits for our business," added MacLean. "We also would like to thank Steve for his strong leadership and look forward to his ongoing contributions as a Board member."

"The successful launch of the ePoch technology platform in mid-November and the new consumer site in early 2010 will be the foundation that transforms the company into a high-growth high margin business. The strategy is in place; it is imperative for senior management to continue to drive this process aggressively and to articulate this to the public," stated Stephen K. Bannon.

Separately, the Company today announced that Rob Borden, Chief Marketing Officer, has resigned for personal reasons. Points has added strength and resources to its consumer marketing capabilities and has an effective team in place to continue to drive its consumer objectives. Mr. Borden will remain an advisor to the Company.

Third Quarter 2009 Business Metrics Q3/09 Q3/09 vs. vs. Q3/09 Q2/09 Q2/09 Q3/08 Q3/08 TOTAL ALL CHANNELS Points/Miles Transacted 2,977,544,288 2,830,429,997 5% 3,051,397,755 -2% # of Points/Miles Transactions 325,053 302,419 7% 335,742 -3% Cumulative Points/Miles Transacted 54,344,042,972 51,366,498,684 6% 42,750,548,917 27% PRIVATE BRANDED CHANNELS Points/Miles Transacted 2,695,440,443 2,542,915,477 6% 2,752,100,503 -2% # of Points/Miles Transactions 301,041 279,311 8% 310,608 -3% Cumulative Points/Miles Transacted 48,842,866,291 46,147,425,848 6% 38,503,143,113 27% POINTS.COM CHANNELS Points/Miles Transacted 282,103,845 287,514,520 -2% 299,297,252 -6% # of Points/Miles Transactions 24,012 23,108 4% 25,134 -4% Cumulative Points/Miles Transacted 5,501,176,681 5,219,072,836 5% 4,247,405,804 30% Cumulative Registered Users 2,324,611 2,252,404 3% 2,066,919 12%

Business Outlook

"We expect to deliver fourth quarter revenues that will result in the company reaching the high-end of our 2009 revenue range of $70 to $80 million and we are reiterating our outlook for positive annual EBITDA for the third consecutive year," said CFO Anthony Lam. "Looking ahead to 2010 our goal is to replace lower margin business with more attractive and diversified revenues. We plan to accomplish this via a combination of solid growth from our current partners, an improved mix of transactions, strong contributions from new partners and operational efficiencies driven by project ePoch. Our 2010 guidance calls for revenues of $60 million to $70 million and we expect to report net income profitability for the year based on EBITDA margins of approximately three to five percent. Our model calls for continued margin expansion through the rest of 2009 and into 2010 that will drive profitability for our company."

Points has an aggressive 2010 plan that includes the following objectives: - Development and deployment of Project ePoch. This upgraded technology platform is designed to improve efficiencies and support scale for both Points' private-branded e-commerce solutions and the Points.com consumer portal. The e-commerce deployment is on track for launch in the fourth quarter of 2009, followed by a redesigned Points.com consumer destination. ePoch will facilitate the Company's aggressive growth plans and enable Points to develop and launch new innovations, including mobile and social networking applications, for the loyalty industry, while delivering efficiencies that are expected to result in lower operating and maintenance costs. - Continued progress on the Points.com consumer proposition redevelopment. Building on recent new functionality such as Facebook Connect integration, Points.com will see tremendous change over the course of 2010. In coordination with Project ePoch, new branding, user interface, expanded social media integration as well as improved product functionality will be rolled out over the first half of the year and continue throughout 2010 toward a goal of attracting 15 million registered users over the next several years. - Expand and diversify the customer base. Points currently partners with approximately 50 leading companies in the loyalty sector. During 2010 the Company intends to expand the number of total partners as well as the number of services it offers and deploys to its current partners. Points also plans to continue its diversification efforts geographically and across multiple sectors and is establishing a staff presence in Europe in support of this growth. - Drive higher margin revenue and focus on profitability. Points is driving a shift in its revenue mix toward higher margin business that is expected to lead to sustained profitability for the Company. Many of the recent partnership agreements signed by Points have been under the principal model, and the additional consumer services that will be launched on the Points.com portal are expected to be accretive to the Company's current margin profile.

"2010 will be a very exciting year for Points. We are fully engaged with our blue-chip loyalty partners in leveraging our services to help drive revenue and margin for their businesses. We are very pleased that our revenues other than the Delta/NWA business continue to be very robust, growing almost 35% year over year and carrying significantly improved gross margins. Through the year we will be growing our most successful partnerships while benefitting from an ability to leverage the operating efficiencies and expansion capabilities inherent to the deployment of project ePoch. Our new business pipeline is healthy and will contribute to our ability to deliver strong results and improving profitability for our shareholders," concluded MacLean.

Investor Conference Call

Points' quarterly conference call with Rob MacLean, CEO, Christopher Barnard, President and Anthony Lam, CFO, will be held today at 5:00 p.m. Eastern Time. To participate in the conference call, investors from the US and Canada should dial 877-941-1429 ten minutes prior to the scheduled start time. International callers should dial 480-629-9666. Points International will also offer a live and archived webcast, accessible from the "Investor Relations" section of the company's Web site at www.pointsinternational.com.

About Points International Ltd

Points International Ltd. is the owner and operator of Points.com, the world's leading reward program management Web site which was recently named one of the 28 Best Travel Sites by Kiplinger's. At Points.com consumers can Swap, Earn, Buy, Gift, Share and Redeem miles and points from more than 25 of the world's leading reward programs. Participating programs include American Airlines AAdvantage(R) program, Aeroplan(R), AsiaMiles(TM), British Airways Executive Club, Wyndham Rewards(R), Delta SkyMiles(R) and InterContinental Hotels Group's Priority Club(R) Rewards. Redemption partners include Amazon.com(R) and Starbucks. For more information, visit http://www.points.com.

Consumer Website: www.points.com

Corporate Website: www.pointsinternational.com

Caution Regarding Forward-Looking Statements

This press release contains or incorporates forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, as amended, and forward-looking information within the meaning of Canadian securities legislation (collectively "forward-looking statements"). These forward-looking statements include statements relating to our guidance for 2009 and 2010 with respect to revenue, EBITDA and net income profitability, our ability to improve our margins, our anticipated expense reductions, and our objectives, strategic plans and business development goals, including our registered user goal and the timing and efficacy of the upgrade to our technology platform. Such forward-looking statements can generally be identified by words such as "will," "may," "expects," "guidance," "anticipates," "intends," "plans," "believes," "estimates" or similar expressions. These statements represent only Points' expectations, estimates and projections regarding future events and actual results may vary from the forward-looking statements made in this press release.

Although Points believes the expectations reflected in such forward-looking statements are reasonable, the forward-looking statements are not guarantees of future performance and are subject to important risks and uncertainties that are difficult to predict. In addition, certain material assumptions and estimates are applied in making forward-looking statements, and these may not prove to be correct. In particular, our revenue, EBITDA and net income profitability guidance, and our expectation of improved margins, assume that we will be able to generate new business from our pipeline at expected margins, Points' in-market products and services will continue to perform along historical growth curves, transaction rates for newly launched products and services will grow in a manner consistent with the Company's experience with its products in the market, and we will be able to contain costs and realize operational efficiencies from the upgraded technology platform. Important risk and uncertainties that could cause actual results to differ materially include those detailed in Points' other filings with applicable securities regulators, including Points' Annual Information Form, Form 20-F, Annual 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.

(tables to follow)

--------------- (1) EBITDA (Earnings (loss) before interest, taxes, amortization, foreign exchange and restructuring charges) is considered by management to be a useful supplemental measure of performance. However, EBITDA is not a recognized earnings measure under generally accepted accounting principles (GAAP). POINTS INTERNATIONAL LTD. UNAUDITED INTERIM CONSOLIDATED BALANCE SHEETS (Expressed in United States dollars) September 30, December 31, AS AT 2009 2008 ------------------------------------------------------------------------- ASSETS ------ CURRENT Cash and cash equivalents $ 27,144,314 $ 22,854,494 Funds receivable from payment processors 3,075,540 5,065,722 Short-term investments 878,335 791,880 Security deposits 2,417,676 2,249,582 Accounts receivable 1,364,502 2,447,525 Future income tax assets 479,000 600,815 Current portion of deferred costs 249,653 246,772 Prepaid and sundry assets 678,189 1,548,329 ------------- ------------- 36,287,209 35,805,119 ------------- ------------- PROPERTY AND EQUIPMENT 764,476 808,648 INTANGIBLE ASSETS 1,335,774 997,716 GOODWILL 4,204,755 4,204,755 DEFERRED COSTS 84,673 146,391 OTHER ASSETS 1,076,912 751,843 ------------- ------------- 7,466,590 6,909,353 ------------- ------------- $ 43,753,799 $ 42,714,472 ------------- ------------- ------------- ------------- LIABILITIES ----------- CURRENT Accounts payable and accrued liabilities $ 2,467,596 $ 3,217,409 Current portion of deferred revenue 817,202 1,087,059 Payable to loyalty program partners 29,351,228 25,966,589 ------------- ------------- 32,636,026 30,271,057 DEFERRED REVENUE 268,872 259,220 ------------- ------------- 32,904,898 30,530,277 ------------- ------------- SHAREHOLDERS' EQUITY -------------------- ACCUMULATED OTHER COMPREHENSIVE LOSS (2,566,230) (2,566,230) ACCUMULATED DEFICIT (51,362,458) (49,527,082) ------------- ------------- (53,928,688) (52,093,312) CAPITAL STOCK 56,662,421 56,662,421 CONTRIBUTED SURPLUS 8,115,168 7,615,086 ------------- ------------- 10,848,901 12,184,195 ------------- ------------- $ 43,753,799 $ 42,714,472 ------------- ------------- ------------- ------------- POINTS INTERNATIONAL LTD. UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT (Expressed in United States dollars) FOR THE PERIODS ENDED SEPTEMBER 30, Three Month Period Nine Month Period ------------------------------------------------------------------------- 2009 2008 2009 2008 ------------------------------------------------------------------------- REVENUE Principal $ 18,886,179 $ 18,304,129 $ 57,885,436 $ 45,770,758 Commission 1,840,994 1,871,845 5,267,048 7,419,888 Interest 4,925 208,376 49,943 704,280 ------------- ------------- ------------- ------------- 20,732,098 20,384,350 63,202,427 53,894,926 ------------- ------------- ------------- ------------- GENERAL AND ADMINISTRATION EXPENSES Direct cost of principal revenue 16,393,009 15,957,294 50,749,186 38,858,455 Employment costs 2,537,551 2,880,473 7,993,566 8,280,872 Processing fees and related charges 582,103 716,476 1,776,938 2,313,657 Marketing and communications 327,724 395,892 1,058,722 961,202 Technology services 253,129 243,556 694,880 683,906 Amortization of property and equipment 92,800 175,032 267,259 404,833 Amortization of intangible assets 107,618 171,889 282,016 441,842 Amortization of deferred costs - 82,333 1,629 323,053 Foreign exchange (gain) loss (69,773) 390,932 (238,474) (684,592) Operating expenses 566,477 733,321 2,002,572 2,281,932 Restructuring charges 331,997 - 331,997 - ------------- ------------- ------------- ------------- 21,122,635 21,747,198 64,920,291 53,865,160 ------------- ------------- ------------- ------------- OPERATING (LOSS) INCOME - before undernoted (390,537) (1,362,848) (1,717,864) 29,766 ------------- ------------- ------------- ------------- OTHER (INCOME) EXPENSES Interest on preferred shares - - - 516,577 Interest and other (income) charges (28,340) 10,139 (4,303) 40,932 ------------- ------------- ------------- ------------- (28,340) 10,139 (4,303) 557,509 ------------- ------------- ------------- ------------- LOSS BEFORE INCOME TAXES (362,197) (1,372,987) (1,713,561) (527,743) (Recovery) provision for future income taxes (97,000) - 121,815 - ------------- ------------- ------------- ------------- NET LOSS $ (265,197) $ (1,372,987) $ (1,835,376) $ (527,743) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- LOSS PER SHARE Basic ($0.00) ($0.01) ($0.01) ($0.00) Diluted ($0.00) ($0.01) ($0.01) ($0.00) DEFICIT - Beginning of period $(51,097,261) $(45,126,800) $(49,527,082) $(45,972,044) Net loss for the period (265,197) (1,372,987) (1,835,376) (527,743) ------------- ------------- ------------- ------------- DEFICIT - End of period $(51,362,458) $(46,499,787) $(51,362,458) $(46,499,787) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- POINTS INTERNATIONAL LTD. UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS AND ACCUMULATED OTHER COMPREHENSIVE LOSS (Expressed in United States dollars) FOR THE PERIODS ENDED SEPTEMBER 30, Three Month Period Nine Month Period ------------------------------------------------------------------------- 2009 2008 2009 2008 ------------------------------------------------------------------------- COMPREHENSIVE LOSS Net loss for the period $ (265,197) $ (1,372,987) $ (1,835,376) $ (527,743) ------------- ------------- ------------- ------------- Comprehensive loss $ (265,197) $ (1,372,987) $ (1,835,376) $ (527,743) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ACCUMULATED OTHER COMPREHENSIVE LOSS Balance - Beginning of period $ (2,566,230) $ (2,566,230) $ (2,566,230) $ (2,566,230) ------------- ------------- ------------- ------------- Balance - End of period $ (2,566,230) $ (2,566,230) $ (2,566,230) $ (2,566,230) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- POINTS INTERNATIONAL LTD. UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in United States dollars) FOR THE PERIODS ENDED SEPTEMBER 30, Three Month Period Nine Month Period ------------------------------------------------------------------------- 2009 2008 2009 2008 ------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (265,197) $ (1,372,987) $ (1,835,376) $ (527,743) Items not affecting cash Amortization of property and equipment 92,800 175,032 267,259 404,833 Amortization of intangible assets 107,618 171,889 282,016 441,842 Amortization of deferred costs - 82,333 1,629 323,053 Future income taxes (recovery) (97,000) - 121,815 - Unrealized foreign exchange (gain) loss (81,178) 154,252 (493,488) (808,094) Employee stock option expense 176,349 166,692 500,082 494,055 Interest on Series Two and Four Preferred Shares - - - 516,577 Changes in non-cash balances related to operations 3,939,367 (4,222,713) 5,882,011 1,708,917 ------------- ------------- ------------- ------------- CASH FLOWS PROVIDED (USED IN) BY OPERATING ACTIVITIES 3,872,759 (4,845,502) 4,725,948 2,553,440 ------------- ------------- ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment (13,610) (291,856) (223,087) (439,496) Additions to intangible assets (442,815) (61,168) (620,074) (279,109) Sale of short-term investments - 3,932,702 - 11,470,605 Purchase of short-term investments - - - (4,975,494) ------------- ------------- ------------- ------------- CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES (456,425) 3,579,678 (843,161) 5,776,506 ------------- ------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Loan repayments - - - (5,927) Share issuance on capital transaction - (106,980) - 1,692,061 Issuance of capital stock on exercise of stock options and warrants - 7,662 - 269,673 ------------- ------------- ------------- ------------- CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES - (99,318) - 1,955,807 ------------- ------------- ------------- ------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH HELD IN FOREIGN CURRENCY 34,418 (138,672) 407,033 (28,807) ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,450,752 (1,503,814) 4,289,820 10,256,946 CASH AND CASH EQUIVALENTS - Beginning of the period 23,693,562 33,296,738 22,854,494 21,535,978 ------------- ------------- ------------- ------------- CASH AND CASH EQUIVALENTS - End of the period $ 27,144,314 $ 31,792,924 $ 27,144,314 $ 31,792,924 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Supplemental Information ------------------------ Interest received $ 7,350 $ 258,126 $ 64,520 $ 702,031 Interest paid $ 4,763 $ 378 $ 8,325 $ 1,542

SOURCE Points International Ltd.

Source: PR Newswire

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