GlobeNewswire Inc | Aug 12, 2020 04:05PM EDT

August 12, 2020

- Achieves Positive Adjusted EBITDA for the Quarter -- Total Funds Available Remains at Approximately $107 Million -

TORONTO, Aug. 12, 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 second quarter ended June 30, 2020.

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

Second Quarter 2020 Financial Summary (vs. Q2 2019)

-- Total revenue was $40.9 million compared to $100.2 million. -- Gross profit was $7.0 million compared to $14.4 million1 -- Net loss was $3.3 million or $(0.25) per share, compared to net income of $6.3 million or $0.45 per share. -- Adjusted EBITDA2 was $0.3 million compared to $5.2 million. -- At June 30, 2020, total funds available3 stood at approximately $107 million, including a $35 million drawdown on the Companys revolving credit facility.

Recent Operational Highlights

-- Loyalty Currency Retailing (LCR): Launched a new partnership with leading international airline Qatar Airways Privilege Club, deploying Buy, Gift and Transfer services into market with additional LCR services expected later this year. -- Points Travel: Restarted promotional campaigns with Miles & More, Europes largest frequent flyer and rewards program. -- Platform Partners: Entered into new partnership with GetYourGuide, a leading tours and activities site; starting with Alaska Airlines Mileage Plan, members can now earn when they shop on GetYourGuide.

Management Commentary

The trends in our business and industry are steadily moving in the right direction, even as we continue to operate in an uncertain environment amid the COVID-19 pandemic, said Rob MacLean, CEO of Points International. During the second quarter, our results gradually improved each month across most financial metrics, and we made progress with new program deployments for both new and existing partners around the world. Further, we generated strong momentum in our pipeline, which is even more robust now than it was at the start of 2020.

The travel and hospitality market remains volatile due to on-and-off again lockdowns and stay-at-home recommendations, which have restricted mobility patterns and transactions related to immediate travel. Within this environment, marketing campaigns have become a crucial point of focus for both customers and loyalty operators. This is especially important as loyalty customers have proven to be comfortable buying ahead for future travel needs. As a result, nearly all discussions with our partners revolve around utilizing loyalty rewards and promotions ahead of the return of travel and hospitality demand. We are optimistic about the opportunity set in our pipeline, as we recognize that the wins from this year will drive our results in 2021 and well after.

In the months ahead, we will continue to closely monitor the industry landscape, along with the financial and strategic positions of our partners. Based on current trends in our business, we continue to believe that Points is well-positioned to weather the storm ahead and will remain adjusted EBITDA2 positive for the year. While we cant fully predict how our journey will progress, our deep and growing client relationships, strong balance sheet, record pipeline, and twenty-year track record of high-quality deployments provide us with a strong operational foundation to navigate our recovery.

Second Quarter 2020 Financial Results

Total revenue in the second quarter of 2020 was $40.9 million compared to $100.2 million in the prior year quarter. Principal revenue was $35.8 million compared to $94.3 million, and other partner revenue was $5.1 million compared to $5.9 million.

Gross profit in the second quarter was $7.0 million compared to $14.4 million1 in the prior year quarter. The decrease in gross profit was primarily driven by the impact of COVID-19, which had a significant adverse impact on all three operating segments.

Adjusted operating expenses4 in the second quarter of 2020 decreased to $6.7 million compared to $9.4 million in the prior year quarter. During the second quarter, Points recognized $2.3 million in wage subsidies under the Canadian Emergency Wage Subsidy program, which was recorded as an offset to employment costs. In addition, reduced discretionary spending and cost management in response to the pandemic also contributed to reduced adjusted operating expenses during the quarter.

Net loss in the second quarter was $3.3 million or $(0.25) per share, compared to net income of $6.3 million or $0.45 per share in the prior year quarter. Net loss in the second quarter of 2020 included a one-time impairment charge of $1.8 million related to the Companys Points Travel Segment due to COVID-19 related impacts on the travel industry.

Adjusted EBITDA2 in the second quarter was $0.3 million compared to $5.2 million in the prior year quarter. Effective margin5, which is defined as adjusted EBITDA as a percentage of gross profit, was 4.3% compared to 25.7% in the prior year period. Both declines were due to lower transaction volumes across all operating segments as a result of COVID-19.

At June 30, 2020, total funds available3, comprised of cash and cash equivalents, funds receivable from payment processors, and cash held in trust were $106.8 million compared to $86.8 million at December 31, 2019. The Company drew down $40 million on its credit facility in the first quarter of 2020 and elected to pay down $5 million in June. The outstanding $35 million balance on the facility is reflected in the June 30, 2020 cash balance.

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1 Q2 2019 Gross Profit adjusted for $6.0 million tax rebate related to prior periods recorded in direct cost of revenue in the second quarter of 2019.2 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 Non-GAAP Financial Measures.3 Total funds available is defined as cash and cash equivalents, cash held in trust, and funds receivable from payment processors.4 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.5 Effective margin measures our ability to generate profitability after we have funded operating expenses and is used by Management as a key internal measure of operating efficiency. Effective margin is not a measure of financial performance under IFRS. See Non-GAAP Financial Measures.

Points Announces Renewal of Share Repurchase

Points also announced today that the board of directors has approved a normal course issuer bid to repurchase up to 5% of its issued and outstanding common shares (the Repurchase), and that it intends to enter into an automatic share purchase plan with a broker in order to facilitate the Repurchase.

The Repurchase is subject to approval by the TSX, and is expected to commence in August 2020. Points previous normal course issuer bid commenced on August 14, 2019 and will terminate on August 13, 2020.

Conference Call

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

Date: Wednesday, August 12, 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: 13707859

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 August 26, 2020.

Toll-free replay number: 1-844-512-2921International replay number: 1-412-317-6671Replay ID: 13707859

About Points International Ltd.

Points (TSX: PTS)(NASDAQ: PCOM) is a trusted partner to the worlds leading loyalty programs, using a unique Loyalty Commerce Platform to build, power, and grow new ways for members to 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 around the world. Founded in 2000, Points is headquartered in Toronto with teams operating around the globe.

For more information, visit company.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, 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 Q2 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 June 30, 2020 June 30, 2019 Gross Profit $ 6,988 $ 20,452 Less: Direct adjusted operating 3,578 6,072 expenses ^[2]Contribution $ 3,410 $ 14,380 ^[1] Contribution is defined as Gross profit less direct adjusted operating expenses. 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 of profitability under IFRS.^[2] Direct adjusted operating expenses is defined as expenses which are directly attributable to each operating segment. Direct adjusted operatingexpenses 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 June 30, 2020 June 30, 2019 Loyalty Currency Retailing Revenue $ 39,776 $ 97,784 Gross Profit 5,978 18,203 Direct adjusted operating expenses 2,177 3,326 Contribution $ 3,801 $ 14,877 Platform Partners Revenue $ 1,091 $ 1,901 Gross Profit 977 1,704 Direct adjusted operating expenses 477 981 Contribution $ 500 $ 723 Points Travel Revenue $ 40 $ 545 Gross Profit 33 545 Direct adjusted operating expenses 924 1,765 Contribution $ (891 ) $ (1,220 )

Reconciliation of Net Income to Adjusted EBITDA ^[3] Expressed in thousands of United States dollars For the three months ended June 30, 2020 June 30, 2019 Net (loss) income $ (3,325 ) $ 6,276 Income tax (recovery) expense (420 ) 2,325 Finance costs 280 36 Depreciation and amortization 1,259 1,126 Foreign exchange (gain) loss (80 ) 398 Equity-settledshare-based payment 787 1,112 expenseImpairment charges 1,798 - Prior years tax rebate, net - (6,027 ) of feesAdjusted EBITDA $ 299 $ 5,246

^[3] Adjusted EBITDA is a non-GAAP financial measure, which is defined as earnings before income tax expense, finance costs, depreciation andamortization, equity-settled share-based payment expense, foreign exchangeand other one-time costs or benefits such as impairment charges and a taxrebate related to prior periods. Management believes that adjusted EBITDA is an important indicator of the Company?s ability to generate liquiditythrough operating cash flow to fund future capital expenditures and workingcapital needs. However, adjusted EBITDA is not a measure of financialperformance under IFRS and should not be considered a substitute for Net Income, which we believe to be the most directly 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 June 30, June 30, 2020 2019 Total Operating Expenses $ 10,510 $ 12,072 Subtract (add): Depreciation and amortization 1,259 1,126 Foreign exchange (gain) loss (80 ) 398 Equity-settled share-based 787 1,112 payment expense Impairment charges 1,798 - Adjusted Operating Expenses $ 6,746 $ 9,436 ^[4] Adjusted operating expenses consists of employment expenses excluding equity-settled share-based payment expense, marketing & communications,technology services, and other operating expenses. Adjusted operating expenses is not a measure of financial performance under IFRS and should notbe considered a substitute for total operating expenses, which we believe to be the 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 June 30, 2020 December 31, 2019 ASSETS Current assets Cash and cash equivalents $ 98,591 $ 69,965 Cash held in trust 496 2,534 Funds receivable from payment processors 7,726 14,302 Accounts receivable 9,282 21,864 Prepaid taxes 196 194 Prepaid expenses and other assets 1,498 2,153 Total current assets $ 117,789 $ 111,012 Non-current assets Property and equipment 2,023 2,371 Right-of-use assets 2,313 3,060 Intangible assets 12,660 12,806 Goodwill 5,681 7,130 Deferred tax assets 2,653 2,105 Other assets 216 216 Total non-current assets $ 25,546 $ 27,688 Total assets $ 143,335 $ 138,700 LIABILITIES Current liabilities Accounts payable and accrued liabilities $ 7,084 $ 13,766 Income taxes payable 447 2,326 Payable to loyalty program partners 59,640 78,270 Current portion of lease liabilities 1,180 1,323 Current portion of other liabilities 1,307 797 Total current liabilities $ 69,658 $ 96,482 Non-current liabilities Long term debt 35,000 - Lease liabilities 1,562 2,209 Other liabilities 76 95 Deferred tax liabilities 984 722 Total non-current liabilities $ 37,622 $ 3,026 Total liabilities $ 107,280 $ 99,508 SHAREHOLDERS? EQUITY Share capital 48,938 45,799 Contributed surplus 674 - Accumulated other comprehensive (loss) (257) 184 income Accumulated deficit (13,300) (6,791) Total shareholders? equity $ 36,055 $ 39,192 Total liabilities and shareholders? equity $ 143,335 $ 138,700

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 ended For the six months ended June June June June 30, 30, 30, 30, 2020 2019 2020 2019 REVENUE Principal $ 35,801 $ 94,289 $ 111,671 $ 184,295 Other partner 5,106 5,941 11,909 11,878 revenueTotal Revenue $ 40,907 $ 100,230 $ 123,580 $ 196,173 Direct cost of 33,919 79,778 102,765 162,355 revenueGross Profit $ 6,988 $ 20,452 $ 20,815 $ 33,818 OPERATING EXPENSES Employment costs 4,924 7,567 12,632 15,203 Marketing and 245 429 667 808 communications Technology 732 659 1,484 1,276 services Depreciation and 1,259 1,126 2,508 2,268 amortization Foreign exchange (80 ) 398 (118 ) 154 (gain) loss Other operating 1,632 1,893 4,040 3,473 expenses Impairment charges 1,798 - 1,798 - Total Operating $ 10,510 $ 12,072 $ 23,011 $ 23,182 Expenses Finance income (57 ) (257 ) (246 ) (519 ) Finance costs 280 36 368 112 (LOSS) INCOME BEFORE $ (3,745 ) $ 8,601 $ (2,318 ) $ 11,043 INCOME TAXES Income tax (420 ) 2,325 (111 ) 3,010 (recovery) expenseNET (LOSS) INCOME $ (3,325 ) $ 6,276 $ (2,207 ) $ 8,033 OTHER COMPREHENSIVE (LOSS) INCOME Items that will subsequently be reclassified to profit or loss: Unrealized gain (loss) on foreign exchange 519 246 (966 ) 484 derivatives designated as cash flow hedges Income tax effect (137 ) (65 ) 256 (128 ) Reclassification to net income of loss on foreign exchange 260 159 359 408 derivatives designated as cash flow hedges Income tax effect (69 ) (42 ) (95 ) (108 ) Foreign currency translation (12 ) (6 ) 5 18 adjustmentOther comprehensive income (loss) for theperiod, net of income $ 561 $ 292 $ (441 ) $ 674 taxTOTAL COMPREHENSIVE $ (2,764 ) $ 6,568 $ (2,648 ) $ 8,707 (LOSS) INCOME (LOSS) EARNINGS PER SHARE Basic (loss) $ (0.25 ) $ 0.46 $ (0.17 ) $ 0.58 earnings per share Diluted (loss) $ (0.25 ) $ 0.45 $ (0.17 ) $ 0.57 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 Total United States Share Capital Contributed other Accumulated shareholders? dollars except surplus comprehensive deficit equity number of shares (loss) income (Unaudited) Number of Amount Shares Balance at 13,241,516 $ $ - $ 184 $ (6,791) $ 39,192 December 31, 2019 45,799 Net loss - - - - (2,207) (2,207) Other comprehensive - - - (441) - (441) loss, net of tax Total comprehensive - - - (441) (2,207) (2,648) loss Effect of equity-settled - - 1,666 - - 1,666 share-based payments Share issuances ? 50,299 457 (390) - - 67 options exercised Settlement of - 2,920 (4,100) - - (1,180) RSUs Shares repurchased and (67,483) (238) (804) - - (1,042) cancelled Reclassification within equity ^ - - 4,302 - (4,302) - [5] Balance at June 13,224,332 $ $ 674 $ (257) $ (13,300) $ 36,055 30, 2020 48,938 Balance at 14,111,864 $ $ 4,446 $ (646) $ (16,676) $ 41,010 December 31, 2018 53,886 Net income - - - - 8,033 8,033 Other comprehensive - - - 674 - 674 income, net of tax Total comprehensive - - - 674 8,033 8,707 income Effect of equity-settled - - 2,329 - - 2,329 share-based payments Share issuances - 2,338 28 (7) - - 21 options exercised Settlement of - 1,348 (4,317) - - (2,969) RSUs Shares purchased - (1,460) - - - (1,460) and held in trust Shares repurchased and (452,189) (1,745) (2,451) - (1,116) (5,312) cancelled Balance at June 13,662,013 $ $ - $ 28 $ (9,759) $ 42,326 30, 2019 52,057 ^[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 FlowsExpressed in thousandsof United States dollars(Unaudited) For the three months For the six months ended ended June June June June 30, 30, 30, 30, 2020 2019 2020 2019 Cash flows from operating activitiesNet (loss) income for $ (3,325 ) $ 6,276 $ ) $ 8,033 the period (2,207Adjustments for: Depreciation of 337 290 676 578 property and equipmentDepreciation of 298 295 597 578 right-of-use assetsAmortization of 624 541 1,235 1,112 intangible assetsUnrealized foreign 221 51 (866 ) (72 )exchange loss (gain)Equity-settledshare-based payment 787 1,112 1,666 2,329 transactionsFinance costs 280 36 368 112 Deferred income tax (294 ) 332 (124 ) 442 (recovery) expenseImpairment charges 1,798 - 1,798 - Derivative contractsdesignated as cash flow 779 405 (607 ) 892 hedgesChanges in cash held in 658 500 2,038 500 trustChanges in non-cash )balances related to (1,829 ) (15,398 ) (7,111 ) (13,927 operationsInterest paid (275 ) (36 ) (318 ) (112 ) Net cash provided by(used in) operating $ 59 $ (5,596 ) $ (2,855 ) $ 465 activities Cash flows from investing activitiesAcquisition of property (25 ) (148 ) (328 ) (668 )and equipment Additions to intangible (512 ) (252 ) (1,116 ) (539 )assets Net cash used in $ (537 ) $ (400 ) $ (1,444 ) $ (1,207 )investing activities Cash flows from financing activitiesNet (repayments to)proceeds from long term (5,000 ) - 35,000 - debtPayment of lease (311 ) (246 ) (637 ) (458 )liabilities Proceeds from exercise - - 67 21 of share optionsShares repurchased and - (2,856 ) (1,042 ) (5,312 )cancelled Purchase of share - (861 ) - (1,460 )capital held in trust Taxes paid on net (1 ) (4 ) (1,180 ) (2,969 )settlement of RSUs Net cash (used in) )provided by financing $ (5,312 ) $ (3,967 ) $ 32,208 $ (10,178 activities Effect of exchange ratefluctuations on cash (136 ) (57 ) 717 90 held Net (decrease) increase )in cash and cash $ (5,926 ) $ (10,020 ) $ 28,626 $ (10,830 equivalentsCash and cashequivalents at $ 104,517 $ 68,321 $ 69,965 $ 69,131 beginning of the periodCash and cashequivalents at end of $ 98,591 $ 58,301 $ 98,591 $ 58,301 the period Interest Received $ 87 $ 248 $ $ 300 $ 510 Taxes Paid $ - $ (572 ) $ (1,842 ) $ (1,186 ) Amounts received in interest and paid in taxes were reflected as operating cash flows in thecondensed consolidated interim statements of cash flows.