“Points reported a solid second quarter driving 23% growth in total revenue and a 36% increase in principal revenue year-over-year, despite ongoing challenges in the economic environment,” said CEO Rob MacLean. “We saw business trends improve this quarter as the total number of points and miles transacted increased sequentially. Our new partnership with AirFrance-KLM, Europe’s largest carrier, went live and we added Continental Airlines and AirTran to the growing list of participating programs on our peer-to-peer trading platform. We expect both to contribute to our results moving forward. Looking ahead, our focused investment strategy will drive efficiencies, enabling us to reduce costs, both in terms of personnel and technology infrastructure. We are very focused on improving our overall profit margins moving forward and driving leverage through our model resulting in long-term corporate profitability.”
“Today, we agreed to a restructured relationship with Delta Air Lines for the remainder of our current contract as it continues to consolidate aspects of its loyalty program post a recently completed merger. As a result, we are revising our full year revenue guidance to the range of $70 million to $80 million. This recast relationship will see Points continue to generate revenue from this partner by providing a variety of services. Combined with a solid base of transactions from existing and newly signed partners and the terms of the restructured relationship with this partner, and despite a continued challenging environment, assuming current foreign exchange rates, we are able to reaffirm our guidance of positive EBITDA for 2009, our third consecutive year,” added MacLean.
Second Quarter 2009 Financial Results
Total revenue was $21.3 million for the second quarter of 2009. Revenue grew 23% over the $17.3 million reported in the second quarter of 2008, and up from $21.1 million in the first quarter of 2009. Principal revenue grew sharply to $19.6 million, up 36% over $14.4 million in the same period last year, and up from $19.4 million in the first quarter of 2009. Commission revenue was $1.7 million, down from $2.7 million reported in the same period of last year and down from $1.8 million in the first quarter of 2009. Interest revenue was $9,600, a decrease from $219,000 reported in the same period last year and $35,400 in the first quarter of 2009.
Points reported a net loss for the second quarter of 2009 of $471,000, or ($0.00) per share. This compares to a net income of $43,500, or $0.00 per share in the same period in the previous year, and a net loss of $1.1 million or ($0.01) per share, in the first quarter of 2009.
During the second quarter of 2009, Points reported an EBITDA loss of $566,000, compared to positive EBITDA of $474,000 in the same period of 2008 and an EBITDA loss of $580,000 in the first quarter of 2009.
As of June 30, 2009, Points’ total cash, comprised of cash and cash equivalents together with security deposits and amounts with payment processors, was $29.4 million, down from $32.9 million at the end of the first quarter of 2009. The Company carries no debt.
Second Quarter 2009 Business Metrics
Total All Channels:
—————————-
- Total points/miles transacted during the second quarter was 2.8 billion, bringing the total cumulative points/miles transacted to 51.4 billion, a 29% increase over the second quarter of 2008
- The total number of transactions decreased 11% versus the same quarter last year to approximately 302,000
Ecommerce Services:
—————————-
- Total points/miles transacted on products distributed through Points’ partner channels decreased 12% from the second quarter of 2008 to 2.5 billion bringing the cumulative total to 46.1 billion
Points.com Channel:
—————————-
- Cumulative points/miles transacted reached approximately 5.2 billion during the second quarter of 2009 on Points.com, a 32% increase versus 2008
- Cumulative registered users on Points.com increased 15% year-over-year to 2.3 million
Q2/09 Q2/09
vs. vs.
Q2/09 Q1/09 Q1/09 Q2/08 Q2/08
TOTAL ALL
CHANNELS*
Points/Miles
Transacted 2,830,429,997 2,727,601,671 4% 3,125,608,038 -9%
# of
Points/Miles
Transactions 302,419 320,390 -6% 340,294 -11%
Cumulative
Points/Miles
Transacted 51,366,498,684 48,536,068,687 6% 39,699,151,161 29%
PRIVATE BRANDED
CHANNELS
Points/Miles
Transacted 2,542,915,477 2,456,850,552 4% 2,895,769,039 -12%
# of
Points/Miles
Transactions 279,311 298,101 -6% 322,912 -14%
Cumulative
Points/Miles
Transacted 46,147,425,848 43,604,510,371 6% 35,751,042,610 29%
POINTS.COM
CHANNELS
Points/Miles
Transacted 287,514,520 270,751,119 6% 229,838,999 25%
# of
Points/Miles
Transactions 23,108 22,289 4% 17,382 33%
Cumulative
Points/Miles
Transacted 5,219,072,836 4,931,558,316 6% 3,948,108,552 32%
Cumulative
Registered
Users 2,252,404 2,189,814 3% 1,962,883 15%
Note:
* Points/Miles transacted were restated in Q1 2008 to normalize activity from a loyalty program whose loyalty program currency is valued differently than other programs. This resulted in a decrease in overall metrics for those products.
Restructured Relationship with Delta
On August 12th, 2009, the Company agreed to a restructured relationship with Delta Air Lines in conjunction with the planned Delta SkyMiles(R) and Northwest Worldperks(R) unification into a single frequent flier program. Commencing on or about October 1, 2009, Delta has elected to leverage existing internal capabilities to provide the retail mileage sale and transfer programs currently being operated by Points.
In the first quarter of 2010, Points will re-launch its retail sale and transfer of SkyMiles services through a new distribution channel of sites not controlled by Delta and including the Company’s consumer portal www.points.com. This will offer Delta members increased access to these services and is a growing strategic focus of the Company. Points will continue to operate a number of other services for Delta, including the corporate mileage wholesaling platform, auction service, pooling service, magazine and newspaper subscription service, as well as Points’ AirIncentives(TM) and offerings on the Points.com portal.
“Points has been a great partner for both SkyMiles and Northwest for many years,” says Jeff Robertson, Vice President, Delta SkyMiles. “We anticipate the continuation of this significant partnership into to the future, and plan to work with Points on a number of fronts as we drive innovation with the goal of making SkyMiles the most successful frequent flyer program in the world.”
“We continue to enjoy a long and mutually beneficial working relationship with both Delta and Northwest. Delta remains a large and important partner to Points. While taking advantage of its unique in-house assets as it consolidates its frequent flyer programs during its massive post merger integration efforts Delta, has also renewed its commitment to leverage Points’ capabilities and industry expertise to ensure continued success in growing its program. While this change will materially impact our revenues, the new terms provide for a series of payments over the fourth quarter that will allow Points to maintain our expected 2009 earnings associated with this relationship,” added MacLean. “Furthermore, with a full pipeline, increasing traction of newer partnerships, and our recast potential with Delta, we expect to be able to mitigate the negative earnings impact of this change and improve our margins through 2010.”
In 2008 and for 2009 to date on an annualized basis, the programs affected by this restructuring represented approximately 60% of the Company’s revenue. The Company anticipates no effect on the overall working capital as the partner currently accounts for approximately 30% of cash and cash equivalents as well as approximately 30% of amounts payable to loyalty partners.
Business Outlook
Ecommerce Services: A major focus of the Company’s investment strategy for 2009 is to substantially enhance its technology platform to more efficiently drive and increase synergies between Points’ private-branded Ecommerce solutions and the Points.com consumer portal. The current platform, which has evolved since the Company’s inception, has served Points exceptionally well, now handling more than $250 million in annual transactions. Based on the successful expansion of the Company’s business, it has now reached the scale to start to deploy a new platform over the second half of 2009. To this end, Points has recently launched “Project Epoch”, focused on delivering an upgraded platform, the first phase of which is expected to launch during the fourth quarter of 2009, which will materially enhance the Company’s capabilities, including:
- Expanded scale to support a new level of transactions;
- Increased customer integration speed thereby accelerating the pace of new partner launches;
- The deployment of new innovations including mobile and social networking applications for the loyalty industry;
- Significantly enhanced functionality;
- Meaningful efficiency improvements that are designed to decrease the Company’s overall operating expenses and go-forward technology costs.
Progress already achieved by its focused investments has enabled Points to begin to restructure its operating expenses in anticipation of next year’s expected efficiencies. Accordingly, the Company expects to reduce full-time equivalents (contractors and staff) by 20% over the next two quarters. As a result of these activities, Points expects to take appropriate restructuring charges in its third quarter results. In addition, Points has reduced its expected investment program and now anticipates allocating between $4 million and $6 million of planned 2009 operating costs (lower than prior expectations of $5 million to $7 million) on growth focused initiatives during fiscal 2009.
Points.com Consumer Services:
As Points is developing the new platform for its Ecommerce business, it is simultaneously re-architecting the consumer side of the business on Points.com. The platform is being designed with an entirely new user interface focused on managing enhanced content, integrating numerous new partners and augmenting transaction functionality. Some key strategies that the Company is pursuing include:
- Partnering with Y&R Interactive along with its affiliates VML Inc. (recently ranked by Forrester as the leading US interactive agency) and Compass 360 to assist in redesigning the consumer experience. This redesign will affect all aspects of the consumer proposition from brand positioning, look and feel, user interface, transaction flows, and product functionality. These changes are all expected to be in market by the end of the first quarter of 2010.
- Rolling out enhanced distribution capability and social media functionality through the third and fourth quarters of 2009. On August 7, 2009, Points launched its first iGoogle(TM) application that allows Points.com users access to core functionality through their personalized iGoogle(TM) page. Additionally, a new user forum will be established at Points.com to enable greater interaction and feedback that the company will leverage as part of the ongoing redesign process.
- Deployment of a mobile application accessible via both iPhone(TM) and Blackberry(TM) smart phones, allowing users access to Points.com functionality when and where they desire.
- Increasing the use of social media promotional channels like Twitter and Facebook in order to highlight these new initiatives. Points’ activity can always be followed via Twitter at www.twitter.com/pointsadvisor
“We are making strong progress on enhancements to Points.com that will include the delivery of mobile and social media applications to our users. The focus of this initiative is to create a hub where consumers can manage all of their loyalty activity, explore rich content and freely interact with other users anytime, anywhere. By the first quarter of 2010, it will also feature the next iteration of Points’ unique peer-to-peer trading platform (GPX) and with the addition of Continental and AirTran now includes 13 partners launched or announced. A core aspect of our strategy is to ensure that we are making all these changes as part of our ongoing investment plan and as such we do not anticipate an increase in operating or capital expenditures associated with enhancing our consumer business. Our ongoing efforts are focused on designing a host of services that will attract millions of consumers and substantially contribute to the revenue mix of our company,” said Christopher Barnard, President.
“Our investment activities are paying off, in terms of new business, improvements in our platform and reducing our go-forward operating costs. The addition of AirFrance-KLM to our growing roster of blue-chip partners is the latest indication of Points’ leadership in our industry. Our new business pipeline remains robust and we have only begun to tap the potential membership bases of our loyalty program partners. We are building a business that can scale dramatically as Points is uniquely positioned to help an increasing number of partners drive revenue and profit from their loyalty programs while helping consumers monetize the billions of miles banked in their accounts. Looking ahead to the second half of 2009, we expect to start recognizing lower operating costs as we implement widespread technology enhancements and decrease expenses, resulting in positive EBITDA for the year as well as significantly improved margins by the fourth quarter. Furthermore, new functionality will enable us to more quickly drive revenues via new services on both sides of our business. This forecast is a strong indication that we are seeing leverage in our model and are focused on profitably growing our company through the rest of 2009 and into 2010,” concluded MacLean.
Investor Conference Call
Points’ quarterly conference call with Stephen K. Bannon, Chairman, 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 U.S. and Canada should dial 877-941-2068 ten minutes prior to the scheduled start time. International callers should dial 480-629-9712. Points will also offer a live and archived webcast of the conference call, 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 30 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”). All statements, other than statements of historical fact are forward-looking statements. These forward-looking statements include statements relating to our guidance for 2009 with respect to revenue and EBITDA, our ability to mitigate the negative earnings impact of the restructured relationship with Delta Air Lines, our ability to improve our margins, our anticipated cost reductions, and our objectives, strategic plans and business development goals, including our planned investment in the business for 2009 and timing of the enhancements to our technology platforms. Such forward-looking statements can generally be identified by words such as “will,” “may,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” or similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. 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, the forward-looking 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, our revenue and EBITDA guidance, our ability to mitigate the negative earnings impact of the restructured relationship with Delta Air Lines, our ability to improve our margins and our planned investment in the business for 2009, assume that we will be able to generate new business from our pipeline, we will be successful in implementing new distribution channels for Delta, Points’ in-market products and services will continue to perform along historical growth curves and that 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. In addition, known and unknown factors could cause actual results to differ materially from those expressed or implied in such statements. Important factors that could cause actual results to differ materially are referred to in the body of this news release and also include the risks and uncertainties discussed herein and the risk factors detailed in Points’ other filings with applicable securities regulators, including the factors detailed in Points’ Annual Information Form, 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.
———————————
(1) EBITDA (Earnings (loss) before interest, taxes, amortization and foreign exchange) 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)
June 30, December 31,
AS AT 2009 2008
————————————————————————————————————-
ASSETS
————-
CURRENT
Cash and cash equivalents $ 23,693,562 $ 22,854,494
Funds receivable from payment processors 2,734,918 5,065,722
Short-term investments 831,575 791,880
Security deposits 2,183,966 2,249,582
Accounts receivable 1,555,152 2,447,525
Future income tax assets 382,000 600,815
Current portion of deferred costs 158,466 246,772
Prepaid and sundry assets 1,180,105 1,548,329
——————- ——————-
32,719,744 35,805,119
——————- ——————-
PROPERTY AND EQUIPMENT 843,666 808,648
INTANGIBLE ASSETS 1,000,577 997,716
GOODWILL 4,204,755 4,204,755
DEFERRED COSTS 94,037 146,391
OTHER ASSETS 718,102 751,843
——————- ——————-
6,861,137 6,909,353
——————- ——————-
$ 39,580,881 $ 42,714,472
——————- ——————-
——————-——————-
LIABILITIES
—————-
CURRENT
Accounts payable and accrued liabilities $ 1,666,086 $ 3,217,409
Current portion of deferred revenue 1,013,676 1,087,059
Payable to loyalty program partners 25,756,614 25,966,589
——————- ——————-
28,436,376 30,271,057
DEFERRED REVENUE 206,756 259,220
——————-——————-
$ 28,643,132 $ 30,530,277
——————-——————-
SHAREHOLDERS’ EQUITY
——————————
ACCUMULATED OTHER COMPREHENSIVE LOSS (2,566,230) (2,566,230)
ACCUMULATED DEFICIT (51,097,261) (49,527,082)
——————-——————-
(53,663,491) (52,093,312)
CAPITAL STOCK 56,662,421 56,662,421
CONTRIBUTED SURPLUS 7,938,819 7,615,086
——————- ——————-
10,937,749 12,184,195
——————- ——————-
$ 39,580,881 $ 42,714,472
——————- ——————-
——————- ——————-
APPROVED ON BEHALF OF THE BOARD:
—————————- Director
—————————- Director
POINTS INTERNATIONAL LTD.
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(Expressed in United States dollars)
FOR THE PERIODS
ENDED JUNE 30, Three Month Period Six Month Period
————————————————————————————————————-
2009 2008 2009 2008
————————————————————————————————————-
REVENUE
Principal $ 19,639,660 $ 14,425,604 $ 38,999,257 $ 27,466,629
Commission 1,675,043 2,655,232 3,426,054 5,548,043
Interest 9,643 218,988 45,018 495,904
——————- ——————- ——————- ——————-
21,324,346 17,299,824 42,470,329 33,510,576
——————- ——————- ——————- ——————-
GENERAL AND ADMINISTRATION EXPENSES
Direct cost of
principal
revenue 17,415,672 12,166,227 34,356,177 22,901,161
Employment
costs 2,685,358 2,653,565 5,456,015 5,400,399
Processing fees
and related
charges 609,299 774,631 1,194,835 1,597,181
Marketing and
communications 263,121 203,652 730,998 565,310
Technology
services 234,833 238,679 441,751 440,350
Amortization of
property and
equipment 91,756 118,414 174,459 229,801
Amortization of
intangible
assets 85,520 136,098 174,398 269,953
Amortization of
deferred costs - 120,360 1,629 240,720
Foreign
exchange gain (360,507) (190,740) (168,701) (1,075,524)
Operating
expenses 681,590 789,226 1,436,095 1,548,611
——————- ——————- ——————- ——————-
21,706,642 17,010,112 43,797,656 32,117,962
——————- ——————- ——————- ——————-
OPERATING (LOSS)/
INCOME - before
undernoted (382,296) 289,712 (1,327,327) 1,392,614
——————- ——————- ——————- ——————-
OTHER EXPENSES
Interest on
preferred shares - 225,516 - 516,577
Interest and
other charges 10,757 20,712 24,037 30,793
——————- ——————- ——————- ——————-
10,757 246,228 24,037 547,370
——————- ——————- ——————- ——————-
(LOSS)/INCOME
BEFORE INCOME
TAXES (393,053) 43,484 (1,351,364) 845,244
Provision for
future income
taxes 78,000 - 18,815 -
——————- ——————- ——————- ——————-
NET (LOSS)/
INCOME $ (471,053) $ 43,484 $ (1,570,179) $ 845,244
——————- ——————- ——————- ——————-
——————- ——————- ——————- ——————-
(LOSS)/INCOME PER
SHARE
Basic ($0.00) $0.00 ($0.01) $0.01
Diluted ($0.00) $0.00 ($0.01) $0.01
DEFICIT -
Beginning of
period $(50,626,208) $(45,170,284) $(49,527,082) $(45,972,044)
Net (loss)
income for the
period (471,053) 43,484 (1,570,179) 845,244
——————- ——————- ——————- ——————-
DEFICIT - End
of period $(51,097,261) $(45,126,800) $(51,097,261) $(45,126,800)
——————- ——————- ——————- ——————-
——————-——————-——————-——————-
POINTS INTERNATIONAL LTD.
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS
(Expressed in United States dollars)
FOR THE PERIODS
ENDED JUNE 30, Three Month Period Six Month Period
————————————————————————————————————-
2009 2008 2009 2008
————————————————————————————————————-
COMPREHENSIVE
(LOSS)/INCOME
Net (loss)/
income for the
period $ (471,053) $ 43,484 $ (1,570,179) $ 845,244
——————- ——————- ——————- ——————-
Comprehensive
(loss)/income $ (471,053) $ 43,484 $ (1,570,179) $ 845,244
——————- ——————- ——————- ——————-
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 JUNE 30, Three Month Period Six Month Period
————————————————————————————————————-
2009 2008 2009 2008
————————————————————————————————————-
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)/income $ (471,053) $ 43,484 $ (1,570,179) $ 845,244
Items not affecting cash
Amortization of
property and
equipment 91,756 118,414 174,459 229,801
Amortization of
intangible assets 85,520 136,098 174,398 269,953
Amortization of
deferred costs - 120,360 1,629 240,720
Future income
taxes 78,000 218,815
Unrealized
foreign exchange
gain (729,492) (81,609) (412,310) (962,340)
Employee stock
option expense 166,468 165,356 323,733 327,363
Interest on
Series Two and
Four Preferred
Shares - 225,516 - 516,577
Changes in non-cash
balances related
to operations (1,139,054) (366,424) 1,942,644 5,931,625
——————- ——————- ——————- ——————-
CASH FLOWS (USED IN) PROVIDED BY OPERATING
ACTIVITIES (1,917,855) 361,195 853,189 7,398,943
——————- ——————- ——————- ——————-
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to
property and
equipment (87,639) (54,735) (209,477) (147,640)
Additions to
intangible
assets (166,890) (141,689) (177,259) (217,942)
Sale of
short-term
investments - 7,537,903 - 7,537,903
Purchase of
short-term
investments - - - (4,975,494)
——————- ——————- ——————- ——————-
CASH FLOWS (USED IN) PROVIDED BY INVESTING
ACTIVITIES (254,529) 7,341,479 (386,736) 2,196,827
——————- ——————- ——————- ——————-
CASH FLOWS FROM FINANCING ACTIVITIES
Loan repayments - - - (5,927)
Share issuance
on capital
transaction - 1,799,041 - 1,799,041
Issuance of
capital stock
on exercise of
stock options
and warrants - 168,715 - 262,011
——————- ——————- ——————- ——————-
CASH FLOWS PROVIDED
BY FINANCING
ACTIVITIES - 1,967,756 - 2,055,125
——————- ——————- ——————- ——————-
EFFECT OF EXCHANGE
RATE CHANGES ON
CASH HELD IN
FOREIGN CURRENCY 674,996 23,613 372,615 109,865
——————-——————- ——————- ——————-
(DECREASE) INCREASE
IN CASH AND CASH
EQUIVALENTS (1,497,388) 9,694,043 839,068 11,760,760
CASH AND CASH EQUIVALENTS -
Beginning of the
period 25,190,950 23,602,695 22,854,494 21,535,978
——————- ——————- ——————- ——————-
CASH AND CASH EQUIVALENTS -
End of the
period $ 23,693,562 $ 33,296,738 $ 23,693,562 $ 33,296,738
——————- ——————- ——————- ——————-
——————- ——————- ——————- ——————-
Supplemental
——————
Information
—————-
Interest
received $ 8,931 $ 169,973 $ 57,170 $ 443,905
Interest paid $ 76 $ 87 $ 3,562 $ 1,164
SOURCE Points International Ltd.