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Points International Reports Third Quarter 2010 Financial Results

November 3, 2010

-   Revenue of $23.5 million increased 8.5% sequentially

- Gross Margin(1) expanded 228 basis points sequentially to 22.2%

- EBITDA(2) of $1.2 million increased 391% sequentially; marks fifth consecutive
quarter of positive EBITDA

-   Net income of $1.1 million increases over ten-fold sequentially;
marks fourth consecutive quarter of net income profitability

TORONTO, Nov. 3 /PRNewswire-FirstCall/ – Points International Ltd. (TSX: PTS; OTCBB:
PTSEF), the owner and operator of Points.com, the world’s leading
reward program management web site, today announced results for the
third quarter ended September 30, 2010. All financial results are in US
Dollars.

“We are pleased to deliver another quarter of strong operating and
financial performance,” said CEO Rob MacLean. “Through the ongoing
execution of our business strategy, we delivered another quarter of
improved financial performance marked by sequential revenue growth,
expanding margins and improved profitability.  We believe our
performance reflects not only the value proposition Points’ proprietary
technology platform offers to current and prospective loyalty program
partners, but also the growing consumer interest in, and demand for a
platform to build, manage and transact points.”

MacLean continued, “Importantly, we continue to recognize organic
revenue growth derived from increased involvement and engagement levels
among existing partners as well as incremental revenue contribution
from new partners to the Points Partner Network. During the third
quarter, we expanded several strategic relationships including
welcoming Jet Blue as one of Points.com’s newest trading partners and
enabling Continental One Pass members’ additional opportunities to
exchange and redeem miles.  In addition, we continued to extend the
global reach of our platform with the addition of Qatar Airways’
Privilege Club frequent flyer program to the Points network, marking
our expansion into the Middle East.  We are also pleased with the
positive response to the re-launch of Points.com, which has resulted in
increased interest levels and participation among current and
prospective loyalty program partners.”

Third Quarter 2010 Financial Results

Total revenue for the third quarter of 2010 was $23.5 million.  Revenue
was up 13.4% over $20.7 million reported in the third quarter of 2009,
and up 8.5% over $21.7 million reported in the second quarter of 2010.

Gross margin for the third quarter of 2010 was $5.2 million, or 22.2% of
revenue, compared to gross margin of $3.8 million, or 18.1% of revenue
in the third quarter of 2009.  Gross margin for the second quarter of
2010 was $4.3 million, or 19.9% of revenue.

Points reported net income for the third quarter of 2010 of $1,081,000.
This compares to a net loss in the third quarter of 2009 of $265,000,
and to net income in the second quarter of 2010 of $92,000.

During the third quarter of 2010, Points reported EBITDA of $1,164,000
compared to EBITDA of $72,000 in the same period of 2009 and EBITDA of
$237,000 in the second quarter of 2010.

As of September 30, 2010, total funds available, comprised of cash and
cash equivalents together with security deposits, restricted cash, and
amounts with payment processors was $28.7 million.  The sequential
decline is attributable to traditional seasonal cash flows, and, to a
lesser degree, investment in capital expenditures.  The Company remains
debt-free.   The Company is pleased with its overall financial position
and its ability to leverage its strong cash position and positive free
cash flow to fund capital expenditures internally. 

_________________________________

(1) Gross Margin (total revenues less direct cost of principal revenue) is
considered by management to be an integral measure of performance.
Gross Margin is not a recognized measure under generally accepted
accounting principles.
(2) EBITDA (Earnings (loss) before interest, taxes, amortization, foreign
exchange, impairment and restructuring) is considered by management to
be an integral measure of performance. EBITDA is not a recognized
measure under generally accepted accounting principles.

Third Quarter 2010 Business Metrics

  Q3/10 Q2/10 Q3/10

vs.

Q2/10

Q3/09 Q3/10

vs.

Q3/09

TOTAL ALL CHANNELS(*)          
  Points/Miles Transacted (in 000s) 2,553,133 2,724,245 -6% 2,395,492 7%
  # of Points/Miles Transactions 292,295 286,953 2% 255,233 15%
LOYALTY CURRENCY SERVICES(*)          
  Points/Miles Transacted (in 000s) 2,349,167 2,484,218 -5% 2,113,388 11%
  # of Points/Miles Transactions 278,805 271,374 3% 231,221 21%
  Cumulative Points/Miles Transacted (in 000s) 49,259,005 46,909,838 5% 39,110,256 26%
POINTS.COM CHANNELS          
  Points/Miles Transacted (in 000s) 203,966 240,027 -15%  282,104 -28%
  # of Points/Miles Transactions 13,490 15,579 -13% 24,012 -44%
  Cumulative Registered Users 2,499,802 2,525,059 -1% 2,324,611 8%

* For comparative purposes, Buy, Gift and Transfer activity for Delta
has been excluded from the 2009 metrics presented.

Business Outlook

The Company is reiterating its financial guidance for the year ended
December 31, 2010, as follows:

  • Revenue is expected to be in the range of $85 million to $95 million,
    representing a 7% to 19% increase over 2009 revenue
  • EBITDA, as a percentage of revenue, is expected to be in the range of 3%
    to 5%
  • Net Income is expected to be positive on a full year basis

MacLean continued, “Looking to the remainder of 2010, we are on track to
meet our strategic and financial goals. As such, we are reiterating our
2010 full year guidance which reflects solid year-over-year revenue
growth and expansion in EBITDA profitability.  Our ongoing ability to
drive expansion of the Points Partner Network across our white label
and branded Points.com platforms, grow revenues and deliver improved
margins and strengthened profitability, provide us increased confidence
in our business strategy and growth prospects for the remainder of 2010
and beyond.”

Special Shareholders’ Meeting Results

As previously announced, at the Special Meeting of its shareholders held
on October 26, 2010, the following proposals were overwhelmingly
approved by the Company’s shareholders:

  • Authorized the Company’s Board of Directors to affect a share
    consolidation through a reverse stock split in the range of
    one-for-eight to one-for-twelve; and
  • Authorized the Company’s Board of Directors to amend the Company’s
    incentive stock option plan to increase the maximum number of
    pre-consolidation common shares that may be issued thereunder by an
    additional 4,500,000

Implementation of the Share Consolidation and Option Plan Amendment are
now at the discretion of the Company’s Board of Directors, which may
choose to do so at any time prior to October 26, 2011.  The Share
Consolidation and Option Plan Amendment are also subject to the
approval of the Toronto Stock Exchange.

Investor Conference Call

Points’ quarterly conference call with investors will be held today at
4:30 PM Eastern Time. To participate in the conference call, investors
from the US and Canada should dial 877-941-2069 ten minutes prior to
the scheduled start time. International callers should dial
480-629-9713. 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.  A telephonic replay
of the conference call will also be available until 11:59 pm ET on
Wednesday, November 10, 2010 by dialing 877-870-5176 and entering
passcode: 4374761.

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, Delta SkyMiles(R) and
InterContinental Hotels Group’s Priority Club(R) Rewards. Redemption
partners include Amazon.com(R) and Starbucks. For more information,
visit 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
our guidance for 2010 with respect to revenue, net income and EBITDA.
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 and
realize operational efficiencies from our upgraded technology platform.
Other important risk factors that could cause actual results to differ
materially include the risk factors discussed in Points’ annual
information form, Form-20-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.
CONSOLIDATED BALANCE SHEETS

    As at
(United States $ in thousands)   (Unaudited)

September 30, 2010

(Audited)

December 31, 2009

       
ASSETS      
Current Assets      
  Cash and cash equivalents   $      21,313 $      26,414
  Restricted cash   1,761                          802
  Funds receivable from payment processors   3,026                       5,855
  Security deposits   2,624                    2,463
  Accounts receivable   1,518              1,907
  Future income tax assets   1,233 945
  Current portion of deferred costs   102 139
  Prepaid expenses and other assets   1,051 759
      32,628   39,284
Deferred costs   65 82
Other assets   666 951
Property and equipment   1,669 607
Intangible assets   5,150 2,014
Goodwill   4,205 4,205
      11,755 7,859
      $      44,383 $      47,143
         
LIABILITIES      
Current Liabilities      
  Accounts payable and accrued liabilities   $        3,055 $     3,087
  Current portion of other liabilities   764 609
  Payable to loyalty program partners   24,450 30,215
      28,269 33,911
Other liabilities   997 301
      29,266 34,212
           
SHAREHOLDERS’ EQUITY      
Accumulated other comprehensive loss   (2,445) (2,566)
Accumulated deficit   (47,830) (49,463)
      (50,275) (52,029)
Capital stock   56,668 56,662
Contributed surplus   8,724 8,298
       15,117 12,931
       $      44,383 $      47,143
Points International Ltd.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

 
(Unaudited) (United States $ in thousands, except per share amounts) For the three months ended For the nine months ended
    September 30,

2010

September 30,

2009

September

  30,

2010

September 30,

2009

REVENUE          
  Principal   $      22,038 $      18,886 $        63,938 $      57,886
  Other partner revenue                1,468  1,841                   4,727 5,267
  Interest   3 5 9 49
      23,509 20,732 68,674 63,202
GENERAL AND ADMINISTRATION EXPENSES          
  Direct cost of principal revenue   18,300 16,975 54,943 52,527
  Employment costs   2,480 2,538 7,790 7,994
  Marketing & communications   376 328 920 1,057
  Technology services   270 253 705 695
  Amortization   158 200 445 550
  Foreign exchange gain   (77) (70) (112) (239)
  Operating expenses   919 566 2,669 2,003
  Restructuring   - 332 - 332
      22,426 21,122 67,360 64,919
OPERATING INCOME (LOSS) – before undernoted   1,083 (390) 1,314 (1,717)
  Interest and other charges   2 (28) 23 (4)
INCOME (LOSS) BEFORE INCOME TAXES   1,081 (362) 1,291 (1,713)
  Future income taxes (recovery) expense   - (97) (342) 122
NET INCOME (LOSS)   $      1,081 $        (265) $         1,633 $     (1,835)
OTHER COMPREHENSIVE LOSS:          
  Gain on foreign exchange derivatives designated as cash flow hedges, net
of income taxes expense of $87 and $95
  194 - 210
  Reclassification to net income of gain on foreign exchange derivatives
designated as cash flow hedges, net of income taxes expense of $14 and
$40
  (32) - (89)
OTHER COMPREHENSIVE INCOME   162 - 121 -
COMPREHENSIVE INCOME (LOSS)   $       1,243 $        (265) $        1,754 $     (1,835)
Basic and diluted earnings (loss) per share   $         0.01 $          0.00 $         0.01 $       (0.01)

CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICIT

AND ACCUMULATED OTHER COMPREHENSIVE LOSS

    For the three months ended For the nine months ended
(Unaudited) (United States $ in thousands, except per share amounts)   September 30,

2010

September 30,

2009

September 30,

2010

September  30,

2009

ACCUMULATED DEFICIT – Beginning of period   $    (48,911) $   (51,097) $    (49,463) $   (49,527)
  NET INCOME (LOSS)   1,081 (265) 1,633 (1,835)
ACCUMULATED DEFICIT – End of period   $    (47,830) $   (51,362) $    (47,830) $   (51,362)
             
ACCUMULATED OTHER COMPREHENSIVE LOSS – Beginning of period   $      (2,607) $     (2,566) $      (2,566) $     (2,566)
  Other comprehensive income   162 - 121 -
ACCUMULATED OTHER COMPREHENSIVE LOSS – End of period   $      (2,445) $     (2,566) $      (2,445) $     (2,566)
       
       
Points International Ltd.

CONSOLIDATED STATEMENTS OF CASH FLOWS

             
(Unaudited) (United States $ in

thousands)

  For the three months ended For the nine months ended
      September  30, 2010 September 30, 2009 September 30, 2010 September 30, 2009
             
Net income (loss)   $           1,081 $           (265) $          1,633 $        (1,835)
Items not affecting cash          
  Amortization of property and equipment                      104                       92                    251                    266
  Amortization of deferred costs                           -                           -                           -                          2
  Amortization of intangible assets                       54                  108                   194                    282
  Future income tax (recovery) expense                           -                      (97)                  (342)                   122
  Unrealized foreign exchange (gain) loss                   (389)                    (80)                   104                 (491)
  Employee stock option expense                      133                   176                  427                   499
  Unrealized gain on derivative contracts designated as

cash flow hedges

                    236                       -                     176                       -  
Changes in non-cash balances related to operations               (1,221)              3,939             (1,842)               5,882
CASH FLOWS (USED IN) PROVIDED BY OPERATING ACTIVITIES                     (2)              3,873                  601              4,727
             
  Additions to property and equipment                  (432)                  (14)             (1,313)                (224)
  Additions to intangible assets               (1,081)                  (443)             (3,330)                  (620)
  Changes in restricted cash                           6                        -                   (944)                         -  
CASH FLOWS USED IN INVESTING ACTIVITIES                (1,507) (457) (5,587) (844)
  Issuance of capital stock on exercise of stock options                   3                    -                           5                     -  
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES                          3                     -                         5                       -  
EFFECT OF EXCHANGE RATE CHANGES ON CASH HELD IN FOREIGN CURRENCY                  433                       34                  (120)                    407
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS              (1,073)              3,450            (5,101)                4,290
CASH AND CASH EQUIVALENTS – Beginning of period          22,386            23,694          26,414              22,854
CASH AND CASH EQUIVALENTS – End of period   $         21,313 $         27,144 $         21,313 $         27,144
           

Points International Ltd.
SCHEDULE OF NON-GAAP RECONCILIATIONS

Gross Margin Information For the three months ended For the nine months ended
     
(In thousands of US dollars) September

30, 2010

June 30,

2010

September

30, 2009

September

30, 2010

September

30, 2009

Total revenue $      23,509 $   21,663 $      20,732 $       68,674 $      63,202
Direct cost of principal revenue         18,300    17,356 16,975           54,943       52,527
Gross margin $        5,209 $    4,307 $       3,757 $       13,731 $      10,675
Gross margin % 22% 20% 18% 20% 17%

Reconciliation of Operating Income (Loss) to EBITDA

          For the three months ended For the nine months ended
(In thousands of US dollars)         Sept. 30,

2010

       June 30,

2010

Sept. 30,

2009

Sept. 30,

2010

  Sept. 30,

2009

Operating income (loss)         $  1,083 $        98 $      (390) $       1,314 $      (1,717)
Amortization         158 152 200 445 550
Foreign exchange gain         (77) (13) (70) (112) (239)
Restructuring charges         - - 332 - 332
EBITDA         $  1,164 $      237 $      72 $       1,647 $      (1,074)

SOURCE Points International Ltd.


Source: newswire



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