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Points International Reports Second Quarter 2010 Financial Results
Aug 10, 2010 (04:08 PM EDT)


                         - Revenue of $21.7 Million
       - Gross Margin(1) expands 200 basis points sequentially to 19.9%
    - Achieves fourth consecutive quarter of positive EBITDA(2) and third
               consecutive quarter of net income profitability
      - Expanded Points Partner Network through increased transactional
              activity and new product and partnership launches
                     - Announced re-launch of Points.com

TORONTO, Aug. 10 /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 second quarter ended June 30, 2010. All financial results are in US Dollars.

"We are pleased to report that our second quarter marked a continuation of the positive momentum we experienced in the first quarter of 2010 as evidenced by our strengthened financial position, our expanded partner network and our improved competitive positioning," said CEO Rob MacLean. "Despite a slight sequential revenue decline, attributable to traditional second quarter seasonality, we drove sequential gross margin improvement through the addition of higher margin partnerships and held the line on operating expenses. As a result, we posted our fourth consecutive quarter of positive EBITDA and third consecutive quarter of net income profitability. Importantly, our solid financial position enabled us to internally fund capital expenditures, including the ongoing rollout of our ePOCH platform and the re-launch of our Points.com consumer portal, while maintaining a strong cash position."

MacLean continued, "During the second quarter, we expanded the Points Partner Network with a 36% year-over-year increase in transactional activity across our platform. This performance has enabled us to effectively offset the significant revenue that Delta contributed during the same period last year. Key to delivering this achievement has been our ongoing progress in driving more activity among existing partners and the addition of three new leading loyalty programs including Virgin America's Elevate, La Quinta Inns and Suites' Returns and UK Airmiles' Travel Rewards. More recently, we announced a new partnership with Alitalia, a leading Italian airline, which builds upon our international footprint and extends the scope of our offering in Europe. Notably, the ongoing rollout of Project ePOCH continues to generate significant cost savings to Points as we integrate new partners and upgrade existing partners onto the new e-commerce platform. Subsequent to quarter-end, we completed the successful re-launch of our new Points.com consumer website. We believe our new Points.com consumer portal will play an integral role in increasing loyalty program engagement by enabling new and unique ways for consumers to transact loyalty currency in a manner that is profitable to our loyalty program partners. While it is still early in the launch, the initial response from our participating partners has been encouraging and we have developed a strong backlog of partners interested in participating on the new site."

Second Quarter 2010 Financial Results

Total revenue for the second quarter of 2010 was $21.7 million. Revenue was up 2% over $21.3 million reported in the second quarter of 2009, and down 8% over $23.5 million reported in the first quarter of 2010. Principal revenue totaled $20.1 million, an increase of 2% over $19.6 million in the same period last year, and a decrease of 8% over $21.8 million in the first quarter of 2010. Other partner revenue was $1.6 million, a decrease from $1.7 million reported in the same period of last year and $1.7 million in the first quarter of 2010.

Gross margin for the second quarter of 2010 was $4.3 million, or 19.9% of revenue, compared to gross margin of $3.3 million, or 15.5% of revenue in the second quarter of 2009. Gross margin for the first quarter of 2010 was $4.2 million, or 17.9% of revenue.

Points reported net income for the second quarter of 2010 of $92,000. This compares to a net loss in the second quarter of 2009 of $471,000, and to net income in the first quarter of 2010 of $460,000.

During the second quarter of 2010, Points reported positive EBITDA of $237,000 compared to an EBITDA loss of $566,000 in the same period of 2009 and positive EBITDA of $246,000 in the first quarter of 2010.

As of June 30, 2010, total funds available, comprised of cash and cash equivalents together with security deposits, restricted cash, short-term investments and amounts with payment processors was $29.3 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.

Second Quarter 2010 Business Metrics

    -------------------------------------------------------------------------
                                                 Q2/10                 Q2/10
                                                  vs.                   vs.
                           Q2/10      Q1/10      Q1/10      Q2/09      Q2/09
    -------------------------------------------------------------------------
    TOTAL ALL
     CHANNELS(*)
    -------------------------------------------------------------------------
      Points/Miles
       Transacted (in
       000s)           2,724,245  2,770,973        -2%  1,999,246        36%
    -------------------------------------------------------------------------
       # of
        Points/Miles
        Transactions     286,953    285,191         1%    224,999        28%
    -------------------------------------------------------------------------
    LOYALTY CURRENCY
     SERVICES(*)
    -------------------------------------------------------------------------
      Points/Miles
       Transacted
       (in 000s)       2,484,218  2,485,539         0%  1,711,731        45%
    -------------------------------------------------------------------------
      # of
       Points/Miles
       Transactions      271,374    266,992         2%    201,891        34%
    -------------------------------------------------------------------------
      Cumulative
       Points/Miles
       Transacted
       (in 000s)      46,909,838 44,425,619         6% 37,093,584        26%
    -------------------------------------------------------------------------
    POINTS.COM
     CHANNELS
    -------------------------------------------------------------------------
      Points/Miles
       Transacted
       (in 000s)         240,027    285,434       -16%    287,515       -17%
    -------------------------------------------------------------------------
      # of
       Points/Miles
       Transactions       15,579     18,199       -14%     23,108       -33%
    -------------------------------------------------------------------------
      Cumulative
       Registered
       Users           2,525,059  2,467,663         2%  2,252,404        12%
    -------------------------------------------------------------------------
    * 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
    -   Adjusted EBITDA, as a percent 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 added, "We are very pleased with our strong performance in the first half of 2010 and remain optimistic about our prospects for the balance of the year. Given our first half momentum, we are reiterating our full year guidance which implies a continued acceleration in revenue and a marked improvement in EBITDA profitability. Key to driving increased revenues and profitability on a go-forward basis will be adding new products and higher-margin partnerships to our scalable e-commerce platform. Longer-term, we believe our consumer portal will offer significant growth and profitability opportunities by promoting brand awareness, increased user engagement and the ability to cross merchandise all of our services to a large and targeted database. We are increasingly confident in our business strategy and growth prospects and believe our improving fundamentals will continue to contribute to our strong competitive positioning."

Investor Conference Call

Points' quarterly conference call with investors will be held today at 5:00 PM Eastern Time. To participate in the conference call, investors from the US and Canada should dial 877-941-8418 ten minutes prior to the scheduled start time. International callers should dial 480-629-9809. 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, August 17, 2010 by dialing 877-870-5176 and entering passcode: 4330527.

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
                                                     ------------------------
    (Unaudited) (United                                 June 30, December 31,
    States $ in thousands)                                 2010         2009
    -------------------------------------------------------------------------

    ASSETS
    Current Assets
      Cash and cash equivalents                        $ 22,386     $ 26,414
      Restricted cash                                     1,752          802
      Funds receivable from payment processors            2,496        5,855
      Security deposits                                   2,646        2,463
      Accounts receivable                                 1,288        1,907
      Current portion of future income tax assets         1,306          945
      Current portion of deferred costs                     138          139
      Prepaid expenses and other assets                     684          759
    -------------------------------------------------------------------------
                                                         32,696       39,284
    -------------------------------------------------------------------------
    Deferred costs                                           76           82
    Other assets                                            874          951
    Property and equipment                                1,341          607
    Intangible assets                                     4,123        2,014
    Goodwill                                              4,205        4,205
    -------------------------------------------------------------------------
                                                         10,619        7,859
    -------------------------------------------------------------------------
                                                       $ 43,315     $ 47,143
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current Liabilities
      Accounts payable and accrued liabilities         $  2,671     $  3,087
      Current portion of other liabilities                  758          609
      Payable to loyalty program partners                25,437       30,215
    -------------------------------------------------------------------------
                                                         28,866       33,911
    Long-term portion of other liabilities                  710          301
    -------------------------------------------------------------------------
                                                         29,576       34,212
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Accumulated other comprehensive loss                 (2,607)      (2,566)
    Accumulated deficit                                 (48,911)     (49,463)
    -------------------------------------------------------------------------
                                                        (51,518)     (52,029)
    Capital stock                                        56,665       56,662
    Contributed surplus                                   8,592        8,298
    -------------------------------------------------------------------------
                                                         13,739       12,931
    -------------------------------------------------------------------------
                                                       $ 43,315     $ 47,143
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Points International Ltd.
    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

    (Unaudited) (United States
    $ in thousands, except           For the three           For the six
    per share amounts)                months ended          months ended
    -------------------------------------------------------------------------
                                    June 30,   June 30,   June 30,   June 30,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------
    REVENUE
      Principal                    $ 20,063   $ 19,640   $ 41,900   $ 39,000
      Other partner revenue           1,595      1,675      3,259      3,426
      Interest                            5          9          6         44
    -------------------------------------------------------------------------
                                     21,663     21,324     45,165     42,470
    -------------------------------------------------------------------------
    GENERAL AND ADMINISTRATION
     EXPENSES
      Direct cost of principal
       revenue                       17,356     18,025     36,643     35,551
      Employment costs                2,646      2,685      5,310      5,456
      Marketing & communications        282        263        544        731
      Technology services               224        235        435        442
      Amortization                      152        177        287        350
      Foreign exchange gain             (13)      (361)       (35)      (169)
      Operating expenses                918        682      1,750      1,436
    -------------------------------------------------------------------------
                                     21,565     21,706     44,934     43,797
    -------------------------------------------------------------------------
    OPERATING INCOME (LOSS) -
     before undernoted                   98       (382)       231     (1,327)
      Interest and other charges          6         11         21         24
    -------------------------------------------------------------------------
    INCOME (LOSS) BEFORE INCOME
     TAXES                               92       (393)       210     (1,351)
      Future income taxes (recovery)
       expense                            -         78       (342)       219
    -------------------------------------------------------------------------
    NET INCOME (LOSS)              $     92   $   (471)  $    552   $ (1,570)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    OTHER COMPREHENSIVE LOSS:
      (Loss) gain on foreign
       exchange derivatives
       designated as cash flow
       hedges, net of income
       taxes expense of $95 and
       recovery of $7                  (212)         -         16          -
      Reclassification to net
       income of gain on foreign
       exchange derivatives
       designated as cash flow
       hedges, net of income
       taxes expense of $18
       and $26                          (39)         -        (57)         -
    -------------------------------------------------------------------------
    OTHER COMPREHENSIVE LOSS           (251)         -        (41)         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME (LOSS)    $   (159)  $   (471)  $    511   $ (1,570)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted earnings
     (loss) per share              $   0.00   $   0.00   $   0.01   $  (0.01)
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICIT AND ACCUMULATED OTHER
    COMPREHENSIVE LOSS

                                     For the three           For the six
                                      months ended          months ended
    (Unaudited) (United States    -------------------------------------------
    $ in thousands, except          June 30,   June 30,   June 30,   June 30,
    per share amounts)                 2010       2009       2010       2009
    -------------------------------------------------------------------------
    ACCUMULATED DEFICIT -
     Beginning of period           $(49,003)  $(50,626)  $(49,463)  $(49,527)
      NET INCOME (LOSS)                  92       (471)       552     (1,570)
    -------------------------------------------------------------------------
    ACCUMULATED DEFICIT - End
     of period                     $(48,911)  $(51,097)  $(48,911)  $(51,097)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    ACCUMULATED OTHER
     COMPREHENSIVE LOSS -
     Beginning of period           $ (2,356)  $ (2,566)  $ (2,566)  $ (2,566)
      Other comprehensive loss         (251)         -        (41)         -
    -------------------------------------------------------------------------
    ACCUMULATED OTHER
     COMPREHENSIVE LOSS - End
     of period                     $ (2,607)  $ (2,566)  $ (2,607)  $ (2,566)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Points International Ltd.
    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                     For the three           For the six
                                      months ended          months ended
                                  -------------------------------------------
    (Unaudited) (United States      June 30,   June 30,   June 30,   June 30,
    $ in thousands)                    2010       2009       2010       2009
    -------------------------------------------------------------------------

    Net income (loss)              $     92   $   (471)  $    552   $ (1,570)
    Items not affecting cash
      Amortization of property
       and equipment                     82         92        147        174
      Amortization of deferred
       costs                              -          -          -          2
      Amortization of intangible
       assets                            70         85        140        174
      Future income taxes (recovery)
       expense                            -         78       (342)       219
      Unrealized foreign exchange
       loss (gain)                      242       (728)       496       (413)
      Employee stock option expense     149        166        294        324
      Net loss on derivative
       contracts designated as
       cash flow hedges                (365)         -        (60)         -
    Changes in non-cash balances
     related to operations           (3,344)    (1,139)      (622)     1,943
    -------------------------------------------------------------------------
    CASH FLOWS (USED) PROVIDED
     BY OPERATING ACTIVITIES         (3,074)    (1,917)       605        853
    -------------------------------------------------------------------------
      Additions to property and
       equipment                       (836)       (88)      (881)      (209)
      Additions to intangible
       assets                        (1,732)      (167)    (2,249)      (177)
      Changes in restricted cash,
       sale (purchase) of
       investments                      471          -       (950)         -
    -------------------------------------------------------------------------
    CASH FLOWS USED IN INVESTING
     ACTIVITIES                      (2,097)      (255)    (4,080)      (386)
    -------------------------------------------------------------------------
    EFFECT OF EXCHANGE RATE
     CHANGES ON CASH HELD IN
     FOREIGN CURRENCY                  (300)       675       (553)       373
    -------------------------------------------------------------------------
    (DECREASE) INCREASE IN CASH
     AND CASH EQUIVALENTS            (5,471)    (1,497)    (4,028)       840
    CASH AND CASH EQUIVALENTS -
     Beginning of period             27,857     25,191     26,414     22,854
    -------------------------------------------------------------------------
    CASH AND CASH EQUIVALENTS -
     End of period                 $ 22,386   $ 23,694   $ 22,386   $ 23,694
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    --------------
    (1) Gross Margin (total revenues less direct cost of principal revenue)
        is considered by management to be an integral measure of financial
        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 a useful measure of performance. EBITDA is not a recognized
        measure under generally accepted accounting principles.

SOURCE Points International Ltd.