GlobeNewswire Inc | Nov 11, 2020 04:05PM EST

November 11, 2020

Launched Two New Loyalty Programs Through Strategic Partnership with Amadeus

Strong Pipeline Positions Company Well for Industry Recovery

TORONTO, Nov. 11, 2020 (GLOBE NEWSWIRE) -- Points International Ltd. (TSX: PTS) (Nasdaq: PCOM) (Points or the Company), the global leader in powering loyalty commerce, is reporting financial results for the third quarter ended September 30, 2020.

Unless otherwise noted, all comparisons are on a year-over-year basis and all amounts are in USD. The complete third quarter Condensed Consolidated Interim Financial Statements and Managements Discussion & Analysis, including segmented results, are available at www.sedar.com and www.sec.gov.

Third Quarter 2020 Financial Summary

For the three months ended(in millions of USD) September 30, June 30, September 30, 2019 2020 2020Total Revenue $37.4 $40.9 $98.0Gross Profit $5.7 $7.0 $14.0Net (Loss) Income ($2.5) ($3.3) $1.1Adjusted EBITDA^1 ($1.1) $0.3 $4.4

Recent Operational Highlights

-- Expanded Partnerships: Launched new Subscription service with United Airlines allowing select Mileage Plus members the opportunity to subscribe to a monthly buy miles plan.Expanded long-term partnership with Delta Air Lines with the launch of Delta Choice, a state-of-the-art customer service program that enhances the way customers are compensated for travel issues.Deployed a new program between GetYourGuide, a leading tours and activity website, and Alaska Airlines Mileage Plan. Users can now earn miles when they shop at GetYourGuide.Launched new capability with Chase Bank Ultimate Rewards that allows cardholders to double their points when they transfer bank-branded points into select travel program rewards currencies.Launched new Transfer and Reinstate services for Air Canadas new Aeroplan program, offering additional options for members to utilize their Aeroplan miles.

-- New Partnerships: Launched Buy, Gift and Transfer services with Caribbean Airlines loyalty program, Caribbean Miles, to provide a personalized experience for members to become more engaged in their program. This new partnership, which was initiated by Amadeus, went live in early November.Signed a new LCR contract with Ethiopian Airlines to take over the existing Buy, Gift and Transfer services currently managed by Amadeus, while adding new options that will generate both significant revenue and increased engagement for Ethiopian Airlines loyalty members.

Management Commentary

During the third quarter, we continued to navigate a challenging market environment for travel and hospitality, said Rob MacLean, CEO of Points. As we have often stated, the timing of new loyalty program deployments and promotional activity can fluctuate quarter to quarter, and these fluctuations have only been exacerbated by the pandemic. As a result, our transaction volumes have remained down from pre-COVID levels. Despite these challenges, our teams have been active with business development to drive new programs and partnerships, and our pipeline remains even stronger now than it was before the pandemic. I am proud of our teams dedication to driving these opportunities and supporting our partners across all three lines of business.

In an environment that has placed unprecedented pressure on our travel partners, loyalty programs have proven to be a resilient source of value as our partners work to stabilize their businesses in the near-term and prepare for the return of strong consumer travel demand in the long-term. Several airlines have leveraged their frequent flyer program assets as collateral for debt financings, and operators across the industry have extended membership status and lowered redemption requirements to stimulate near-term travel activity. Our industry leading loyalty commerce solutions make our partners offerings more comprehensive and efficient, and this has enabled us to recently expand several key partnershipssuch as United and Delta Airlineswhile expanding our Amadeus relationship to sign new partnerships with operators like Caribbean Airlines and Ethiopian Airlines. This progress, in addition to important launches with Qatar and Air Canada earlier in the year, has continued the very strong trend of new business development during the pandemic that will help accelerate our performance as the industry recovers.

Across our organization, our long-term growth drivers remain at the core of our strategy. We will continue to maximize the performance of our in-market services, cross-sell to existing partners and sign new partnerships across new verticals and geographies. As we look to the remainder of the year, we are expecting to see growth over the third quarter of 2020 and expect to generate positive Adjusted EBITDA1 for 2020, which demonstrates our continued organizational and financial strength. While we cannot predict the timing of recovery for travel and hospitality demand, we remain dedicated to helping our partners see through this challenging period.

Third Quarter 2020 Financial Results

Total revenue in the third quarter was $37.4 million compared to $98.0 million in the prior year quarter. Principal revenue was $33.9 million compared to $92.0 million, and other partner revenue was $3.5 million compared to $6.0 million.

Gross profit in the third quarter was $5.7 million compared to $14.0 million in the prior year quarter. The decrease in gross profit was primarily driven by the continued impacts of COVID-19 across all three operating segments.

Adjusted operating expenses2 in the third quarter decreased to $6.9 million compared to $9.9 million in the prior year quarter. During the third quarter, Points recognized $1.8 million in wage subsidies under the Canada Emergency Wage Subsidy program, which was recorded as an offset to employment costs. The funds in respect of these wage subsidies were received after the quarter end. In addition, reduced discretionary spending and cost management in response to the pandemic also contributed to lower adjusted operating expenses2 during the quarter.

Net loss in the third quarter was $2.5 million or $(0.19) per share, compared to net income of $1.1 million or $0.08 per share in the prior year quarter.

Adjusted EBITDA1 in the third quarter was $(1.1) million compared to $4.4 million in the prior year quarter. The decline was primarily due to continued lower transaction volumes as a result of COVID-19.

At September 30, 2020, total funds available3 were $68.2 million compared to $86.8 million at December 31, 2019, with the decrease attributable to the impact of COVID-19 on overall sales activity, as well as the timing of promotional activity and partner payables. The Company elected to pay down $5 million on its credit facility during the third quarter, and the outstanding $30 million balance on the facility is reflected in the September 30, 2020 cash balance.

_____________________1 Adjusted EBITDA (Earnings before income tax expense, depreciation and amortization, foreign exchange, finance costs, equity-settled share-based compensation and other one-time costs or benefits such as impairment charges and a tax rebate related to prior periods) is considered by management to be a useful supplemental measure when assessing financial performance. Management also believes that Adjusted EBITDA is an important indicator of the Companys ability to generate liquidity through operating cash flow to fund future capital expenditures and working capital needs. However, Adjusted EBITDA is not a measure of financial performance under IFRS and should not be considered a substitute for Net Income, which we believe to be the most directly comparable IFRS measure. See Performance Indicators and Non-GAAP Financial Measures section of Managements Discussion and Analysis.2 Adjusted operating expenses consist of employment expenses excluding equity-settled share-based compensation, marketing and communications, technology services and other operating expenses. Adjusted operating expense is not a measure of financial performance under IFRS and should not be considered a substitute for total operating expenses, which we believe to be the most directly comparable IFRS measure. See Non-GAAP Financial Measures.3Total funds available is defined as cash and cash equivalents, cash held in trust, and funds receivable from payment processors.

Conference Call

Points will hold a conference call today at 4:30 p.m. Eastern time to discuss its third quarter 2020 results, followed by a question-and-answer session.

Date: Wednesday, November 11, 2020Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time)Toll-free dial-in number: 1-877-407-0784International dial-in number: 1-201-689-8560Conference ID: 13712315

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 1-949-574-3860.

A replay of the conference call will be available after 7:30 p.m. Eastern time on the same day through November 25, 2020.

Toll-free replay number: 1-844-512-2921International replay number: 1-412-317-6671Replay ID: 13712315

About Points International Ltd.

Points, (TSX: PTS) (Nasdaq: PCOM) is a trusted partner to the worlds leading loyalty programs, leveraging its unique Loyalty Commerce Platform to build, power, and grow a network of ways members can get and use their favourite loyalty currency. Our platform combines insights, technology, and resources to make the movement of loyalty currency simpler and more intelligent for nearly 60 reward programs worldwide. Founded in 2000, Points is headquartered in Toronto with teams operating around the globe.

For more information, visit points.com.

Caution Regarding Forward-Looking Statements

This press release contains or incorporates forward-looking statements within the meaning of United States securities legislation, and forward-looking information within the meaning of Canadian securities legislation (collectively, "forward-looking statements"). These forward-looking statements include or relate to but are not limited to, among other things, our ability to be Adjusted EBITDA positive in fiscal 2020, our financial performance in Q4 2020, statements relating to plans we have implemented in response to the COVID-19 pandemic and its expected impact on us (including with respect to efforts to mitigate degradation in transaction volumes, our liquidity and capitalization and our cost mitigation efforts, our business pipeline and ability to sign and launch new loyalty program partnerships, our ability to sell additional products and services to existing loyalty program partners, and our growth strategies). 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 actual results may differ materially from those expressed or implied in such statements. Undue reliance should not be placed on such statements. In particular, uncertainty around the duration and scope of the COVID-19 pandemic and the impact of the pandemic and actions taken in response on global and regional economies, economic activity, and all elements of the travel and hospitality industry may have a significant and materially adverse impact on our business. In addition, the risks, uncertainties and other factors that may impact the results expressed or implied in such forward-looking statements include, but are not limited to: (i) airline or travel industry disruptions, such as an airline insolvency and continued airline consolidation; (ii) our dependence on a limited number of large clients for a significant portion of our consolidated revenue; (iii) our reliance on contractual relationships with loyalty program partners that are subject to termination and renegotiation; (iv) our exposure to significant liquidity risk if we fail to meet contractual performance commitments; (v) our ability to convert our pipeline of prospective partners or launch new products with new or existing partners as expected or planned; (vi) our dependence on various third-parties that provide certain solutions in our Platform Partners segment that we market to loyalty program partners; (vii) the fact that our operations are conducted in multiple jurisdictions and in multiple currencies and as such dramatic fluctuations in exchange rates of the foreign currencies can have a dramatic effect on our financial results and (viii) the risk of an event of default under our senior secured credit facility. These and other important risk factors that could cause actual results to differ materially are discussed in Points' annual information form, Form 40-F, annual and interim management's discussion and analysis (MD&A), 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.

Non-GAAP Financial Measures

The Companys financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). Management uses certain non-GAAP measures, which are defined in the appropriate sections of this press release, to better assess the Companys underlying performance. These measures are reviewed regularly by management and the Company's Board of Directors in assessing the Companys performance and in making decisions about ongoing operations. In addition, we use certain non-GAAP measures to determine the components of management compensation. We believe that these measures are also used by investors as an indicator of the Companys operating performance. Readers are cautioned that these terms are not recognized GAAP measures and do not have a standardized GAAP meaning under IFRS and should not be construed as alternatives to IFRS terms, such as net income. Refer to Performance Indicators and Non-GAAP Financial Measures section of the Companys Q3 2020 MD&A for reconciliation to, and description of the Companys non-GAAP financial measures.

Investor Relations Contact

Sean Mansouri, CFA or Cody SlachGateway Investor Relations 1-949-574-3860IR@points.com

Points International Ltd. Key Financial Measures and Schedule of Non-GAAP Reconciliations Reconciliation of Gross Profit to Contribution ^[1] Expressed in thousands of United States dollars For the three months ended September September 30, 30, 2020 2019 Gross Profit $ 5,704 $ 14,048 Less: Direct adjusted operating expenses ^[2] 3,721 6,269 Contribution $ 1,983 $ 7,779 ^[1] Contribution is defined as Gross profit less direct adjusted operatingexpenses. Contribution is considered by Management to be a usefulsupplemental measure when assessing financial performance. Management believes that Contribution is an important indicator of the Company?s segmentprofitability. However, Contribution is not a recognized measure ofprofitability under IFRS. ^[2] Direct adjusted operating expenses is defined as expenses which aredirectly attributable to each operating segment. Direct adjusted operating expenses is not a measure of financial performance under IFRS.

Contribution by Line of Business Expressed in thousands of United States dollars For the three months ended September 30, 2020 September 30, 2019 Loyalty Currency Retailing Revenue $ 36,165 $ 95,677 Gross Profit 4,644 11,879 Direct adjusted operating 2,312 3,605 expensesContribution $ 2,332 $ 8,274 Platform Partners Revenue $ 1,045 $ 1,782 Gross Profit 850 1,631 Direct adjusted operating 411 964 expensesContribution $ 439 $ 667 Points Travel Revenue $ 239 $ 538 Gross Profit 210 538 Direct adjusted operating 998 1,700 expensesContribution $ (788 ) $ (1,162 )

Reconciliation of Net Income to Adjusted EBITDA ^[3] Expressed in thousands of United States dollars For the three months ended September 30, 2020 September 30, 2019 Net (loss) income $ (2,467 ) $ 1,098Income tax (recovery) expense (863 ) 670Finance costs 223 51Depreciation and amortization 1,173 1,131Foreign exchange (gain) loss (178 ) 254Equity-settled share-based payment expense 987 1,193Adjusted EBITDA $ (1,125 ) $ 4,397 ^[3] Adjusted EBITDA is a non-GAAP financial measure, which is defined asearnings before income tax expense, finance costs, depreciation andamortization, equity-settled share-based payment expense and foreign exchange.Management believes that adjusted EBITDA is an important indicator of theCompany?s ability to generate liquidity through operating cash flow to fundfuture capital expenditures and working capital needs. However, adjusted EBITDAis not a measure of financial performance under IFRS and should not beconsidered a substitute for Net Income, which we believe to be the mostdirectly comparable IFRS measure.

Reconciliation of Total Operating Expenses to Adjusted Operating Expenses ^[4] Expressed in thousands of United States dollars For the three months ended September 30, September 30, 2020 2019 Total Operating Expenses $ 8,838 $ 12,437Subtract (add): Depreciation and amortization 1,173 1,131 Foreign exchange (gain) loss (178 ) 254 Equity-settled share-based payment 987 1,193 expenseAdjusted Operating Expenses $ 6,856 $ 9,859 ^[4] Adjusted operating expenses consists of employment expenses excludingequity-settled share-based payment expense, marketing & communications,technology services, and other operating expenses. Adjusted operating expensesis not a measure of financial performance under IFRS and should not beconsidered a substitute for total operating expenses, which we believe to bethe most directly comparable IFRS measure.

Points International Ltd. Condensed Consolidated Interim Statements of Financial Position Expressed in thousands of United States dollars(Unaudited) As at September 30, December 31, 2020 2019 ASSETS Current assets Cash and cash equivalents $ 64,016 $ 69,965 Cash held in trust 640 2,534 Funds receivable from payment 3,584 14,302 processors Accounts receivable 8,721 21,864 Prepaid taxes 622 194 Prepaid expenses and other assets 1,846 2,153 Total current assets $ 79,429 $ 111,012 Non-current assets Property and equipment 1,712 2,371 Right-of-use assets 2,071 3,060 Intangible assets 12,608 12,806 Goodwill 5,681 7,130 Deferred tax assets 3,017 2,105 Other assets 213 216 Total non-current assets $ 25,302 $ 27,688 Total assets $ 104,731 $ 138,700 LIABILITIES Current liabilities Accounts payable and accrued $ 4,713 $ 13,766 liabilities Income taxes payable 411 2,326 Payable to loyalty program partners 30,246 78,270 Current portion of lease liabilities 1,153 1,323 Current portion of other liabilities 1,018 797 Total current liabilities $ 37,541 $ 96,482 Non-current liabilities Long term debt 30,000 - Lease liabilities 1,336 2,209 Other liabilities 67 95 Deferred tax liabilities 986 722 Total non-current liabilities $ 32,389 $ 3,026 Total liabilities $ 69,930 $ 99,508 SHAREHOLDERS? EQUITY Share capital 49,107 45,799 Contributed surplus 1,490 - Accumulated other comprehensive (loss) (29 ) 184 income Accumulated deficit (15,767 ) (6,791 )Total shareholders? equity $ 34,801 $ 39,192 Total liabilities and shareholders? $ 104,731 $ 138,700 equity

Points International Ltd. Condensed Consolidated Interim Statements of Comprehensive Income Expressed in thousands of UnitedStates dollars, except per share amounts(Unaudited) For the three months For the nine months ended ended September September September September 30, 2020 30, 2019 30, 2020 30, 2019 REVENUE Principal $ 33,977 $ 92,035 $ 145,648 $ 276,330 Other partner revenue 3,472 5,962 15,381 17,840 Total Revenue $ 37,449 $ 97,997 $ 161,029 $ 294,170 Direct cost of revenue 31,745 83,949 134,510 246,304 Gross Profit $ 5,704 $ 14,048 $ 26,519 $ 47,866 OPERATING EXPENSES Employment costs 5,447 7,887 18,079 23,090 Marketing and 255 429 922 1,237 communications Technology services 656 652 2,140 1,928 Depreciation and 1,173 1,131 3,681 3,399 amortization Foreign exchange (178 ) 254 (296 ) 408 (gain) loss Other operating 1,485 2,084 5,525 5,557 expenses Impairment charges - - 1,798 - Total Operating Expenses $ 8,838 $ 12,437 $ 31,849 $ 35,619 Finance income (27 ) (208 ) (273 ) (727 ) Finance costs 223 51 591 163 (LOSS) INCOME BEFORE $ (3,330 ) $ 1,768 $ (5,648 ) $ 12,811 INCOME TAXES Income tax (recovery) (863 ) 670 (974 ) 3,680 expenseNET (LOSS) INCOME $ (2,467 ) $ 1,098 $ (4,674 ) $ 9,131 OTHER COMPREHENSIVE INCOME (LOSS) Items that will subsequently be reclassified to profit or loss: Unrealized gain (loss) on foreign exchange 242 (259 ) (724 ) 225 derivatives designated as cash flow hedges Income tax effect (64 ) 68 192 (60 ) Reclassification to net income of loss on foreign exchange 79 117 438 525 derivatives designated as cash flow hedges Income tax effect (21 ) (31 ) (116 ) (139 ) Foreign currency (8 ) 3 (3 ) 21 translation adjustment Other comprehensiveincome (loss) for the $ 228 $ (102 ) $ (213 ) $ 572 period, net of income taxTOTAL COMPREHENSIVE $ (2,239 ) $ 996 $ (4,887 ) $ 9,703 (LOSS) INCOME (LOSS) EARNINGS PER SHARE Basic (loss) earnings $ (0.19 ) $ 0.08 $ (0.35 ) $ 0.66 per share Diluted (loss) $ (0.19 ) $ 0.08 $ (0.35 ) $ 0.66 earnings per share

Points International Ltd. Condensed Consolidated Interim Statements of Changes in Shareholders? Equity Attributable to equity holders of the Company Expressed in thousands of Accumulated United States Contributed other Accumulated Total dollars Share Capital surplus comprehensive deficit shareholders? except number of (loss) income equity shares (Unaudited) Number Amount of Shares Balance at 13,241,516 $ 45,799 $ $ 184 $ (6,791 ) $ 39,192 December 31, 2019 - Net loss ) ) - - - - (4,674 (4,674 Other comprehensive - - - (213 ) - (213 ) loss, net of tax Total comprehensive - - - (213 ) (4,674 ) (4,887 ) loss Effect of equity-settled share-based - - 2,653 - - 2,653 payments Share issuances ? 53,374 ) options exercised 483 (416 - - 67 Settlement of ) ) RSUs - 3,063 (4,245 - - (1,182 Shares repurchased and (67,483 ) (238 ) (804 ) - - (1,042 ) cancelled Reclassification within equity ^ - - 4,302 - (4,302 ) - [5] Balance at September 30, 13,227,407 $ 49,107 $ 1,490 $ (29 ) $ (15,767 ) $ 34,801 2020 Balance at 14,111,864 $ 53,886 $ 4,446 $ (646 ) $ (16,676 ) $ 41,010 December 31, 2018 Net income - - - - 9,131 9,131 Other comprehensive income, net of - - - 572 - 572 tax Total comprehensive - - - 572 9,131 9,703 income Effect of equity-settled share-based - - 3,522 - - 3,522 payments Share issuances - ) options exercised 2,338 28 (7 - - 21 Settlement of ) ) RSUs - 1,431 (4,534 - - (3,103 Shares purchased ) ) and held in trust - (3,636 - - - (3,636 Shares repurchased and (664,884 ) (2,533 ) (3,427 ) - (1,825 ) (7,785 ) cancelled Balance at September 30, 13,449,318 $ 49,176 $ - $ (74 ) $ (9,370 ) $ 39,732 2019 ^[5] The Corporation has adopted a policy that when contributed surplus is in debit balance, the amount is reclassified to accumulated deficit for financial statement presentation purposes.

Points International Ltd. Condensed Consolidated Interim Statements of Cash Flows Expressed in thousands of United States dollars (Unaudited) For the three months ended For the nine months ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Cash flows from operating activities Net (loss) income for the period $ (2,467 ) $ 1,098 $ (4,674 ) $ 9,131 Adjustments for: Depreciation of property and equipment 332 316 1,008 894 Depreciation of right-of-use assets 242 290 839 868 Amortization of intangible assets 599 525 1,834 1,637 Unrealized foreign exchange loss (gain) 800 (542 ) (66 ) (614 ) Equity-settled share-based payment 987 1,193 2,653 3,522 transactions Finance costs 223 51 591 163 Deferred income tax (recovery) expense (448 ) (572 ) 448 6 Impairment charges 1,798 - - - Derivative contracts designated as cash flow 322 (142 ) (285 ) 750 hedges Changes in cash held in trust (144 ) 1,894 500 - Changes in non-cash balances related to (28,157 ) (1,940 ) (35,268 ) (15,867 ) operations Interest paid (233 ) (51 ) (551 ) (163 ) Net cash (used in) provided by operating $ (27,944 ) $ 804 $ (30,799 ) $ 1,269 activities Cash flows from investing activities Acquisition of property and equipment (21 ) (130 ) (349 ) (798 ) Additions to intangible assets (547 ) (61 ) (1,663 ) (600 ) Net cash used in investing activities $ (568 ) $ (191 ) $ (2,012 ) $ (1,398 ) Cash flows from financing activities Net (repayments to) proceeds from long term debt (5,000 ) 30,000 - - Payment of lease liabilities (314 ) (350 ) (951 ) (808 ) Proceeds from exercise of share options - - 67 21 Shares repurchased and cancelled (2,473 ) (1,042 ) (7,785 ) - Purchase of share capital held in trust (2,176 ) (3,636 ) - - Taxes paid on net settlement of RSUs ) (134 ) (1,182 ) (3,103 ) (2 Net cash (used in) provided by financing $ (5,316 ) $ (5,133 ) $ 26,892 $ (15,311 ) activities Effect of exchange rate fluctuations on cash (747 ) 545 (30 ) 635 held Net decrease in cash and cash equivalents $ (34,575 ) $ (3,975 ) $ (5,949 ) $ (14,805 ) Cash and cash equivalents at beginning of the $ 98,591 $ 58,301 $ 69,965 $ 69,131 period Cash and cash equivalents at end of the period $ 64,016 $ 54,326 $ 64,016 $ 54,326 Interest Received $ 35 $ 235 $ 335 $ 745 Taxes Paid $ (9 ) $ (27 ) $ (1,851 ) $ (1,213 ) Amounts received in interest and paid in taxes were reflected as operating cash flows in the condensed consolidated interim statements of cash flows.