Points International Reports Second Quarter 2010 Financial Results
- 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 /CNW/ - 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
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Q2/10 Q2/10
vs. vs.
Q2/10 Q1/10 Q1/10 Q2/09 Q2/09
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TOTAL ALL
CHANNELS(*)
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Points/Miles
Transacted (in
000s) 2,724,245 2,770,973 -2% 1,999,246 36%
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No. of
Points/Miles
Transactions 286,953 285,191 1% 224,999 28%
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LOYALTY CURRENCY
SERVICES(*)
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Points/Miles
Transacted
(in 000s) 2,484,218 2,485,539 0% 1,711,731 45%
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No. of
Points/Miles
Transactions 271,374 266,992 2% 201,891 34%
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Cumulative
Points/Miles
Transacted
(in 000s) 46,909,838 44,425,619 6% 37,093,584 26%
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POINTS.COM
CHANNELS
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Points/Miles
Transacted
(in 000s) 240,027 285,434 -16% 287,515 -17%
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No. of
Points/Miles
Transactions 15,579 18,199 -14% 23,108 -33%
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Cumulative
Registered
Users 2,525,059 2,467,663 2% 2,252,404 12%
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* 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
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(Unaudited) (United June 30, December 31,
States $ in thousands) 2010 2009
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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
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32,696 39,284
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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
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10,619 7,859
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$ 43,315 $ 47,143
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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
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28,866 33,911
Long-term portion of other liabilities 710 301
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29,576 34,212
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SHAREHOLDERS' EQUITY
Accumulated other comprehensive loss (2,607) (2,566)
Accumulated deficit (48,911) (49,463)
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(51,518) (52,029)
Capital stock 56,665 56,662
Contributed surplus 8,592 8,298
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13,739 12,931
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$ 43,315 $ 47,143
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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
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June 30, June 30, June 30, June 30,
2010 2009 2010 2009
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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
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21,663 21,324 45,165 42,470
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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
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21,565 21,706 44,934 43,797
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OPERATING INCOME (LOSS) -
before undernoted 98 (382) 231 (1,327)
Interest and other charges 6 11 21 24
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INCOME (LOSS) BEFORE INCOME
TAXES 92 (393) 210 (1,351)
Future income taxes (recovery)
expense - 78 (342) 219
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NET INCOME (LOSS) $ 92 $ (471) $ 552 $ (1,570)
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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) -
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OTHER COMPREHENSIVE LOSS (251) - (41) -
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COMPREHENSIVE INCOME (LOSS) $ (159) $ (471) $ 511 $ (1,570)
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Basic and diluted earnings
(loss) per share $ 0.00 $ 0.00 $ 0.01 $ (0.01)
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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
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ACCUMULATED DEFICIT -
Beginning of period $(49,003) $(50,626) $(49,463) $(49,527)
NET INCOME (LOSS) 92 (471) 552 (1,570)
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ACCUMULATED DEFICIT - End
of period $(48,911) $(51,097) $(48,911) $(51,097)
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ACCUMULATED OTHER
COMPREHENSIVE LOSS -
Beginning of period $ (2,356) $ (2,566) $ (2,566) $ (2,566)
Other comprehensive loss (251) - (41) -
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ACCUMULATED OTHER
COMPREHENSIVE LOSS - End
of period $ (2,607) $ (2,566) $ (2,607) $ (2,566)
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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
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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
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CASH FLOWS (USED) PROVIDED
BY OPERATING ACTIVITIES (3,074) (1,917) 605 853
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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) -
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CASH FLOWS USED IN INVESTING
ACTIVITIES (2,097) (255) (4,080) (386)
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EFFECT OF EXCHANGE RATE
CHANGES ON CASH HELD IN
FOREIGN CURRENCY (300) 675 (553) 373
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(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
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CASH AND CASH EQUIVALENTS -
End of period $ 22,386 $ 23,694 $ 22,386 $ 23,694
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(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.
For further information: Points International, Christopher Barnard, President, [email protected], (416) 596-6381; Addo Communications, Andrew Greenebaum/Laura Foster, [email protected], [email protected], (310) 829-5400
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