Transcript An Introduction to Points

An Introduction to Points International
PTS:TSX
PTSEF:OTCBB
Renn Capital
May 2009
Safe Harbor
This presentation 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 referred to as “forward-looking statements").
These forward-looking statements include
statements relating to our guidance for 2009 with respect to revenue and EBITDA, our planned investment in
the business for 2009, the future direction of the Points.com portal and our 2009 business outlook. Forwardlooking statements are not guarantees of future performance, conduct or events. Forward-looking statements
are predictive in nature, and are based on current expectations, estimates, forecasts and assumptions and
involve risks and uncertainties that could cause actual outcomes and results to differ materially from the
forward-looking statements themselves. Points' claims the protection of the safe harbor for forward-looking
statements contained in the U.S. Private Securities Litigation Reform Act of 1995, and in applicable Canadian
securities legislation.
The revenue and EBITDA guidance, and planned investment in the business for 2009, assume that Points’ inmarket products and services will continue to perform along historical growth curves and will be responsive to
optimization, and that newly launched products and services will grow and perform in a manner consistent with
the Points' experience with its existing in-market products.
Important risks and uncertainties that could cause actual results to differ materially from Points' forwardlooking statements include the risks and uncertainties set forth under "Risks and Uncertainties" in
Management's Discussion and Analysis and the risks and uncertainties detailed in Points' Annual Information
Form, annual and interim financial statements and the notes thereto. These documents are filed with U.S. and
Canadian securities regulators and are available at www.sedar.com and www.sec.gov.
The forward-looking statements contained in this presentation are made as at the date of this presentation
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 presentation,
whether as a result of new information, future events or otherwise.
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Our Business
We partner with leading loyalty
programs to add value by driving
new revenues or member benefits
Validation / Authentication
Credit currency into account
We build robust technology that
integrates directly into the
Program’s loyalty platform
Debit currency out of account
Conduct $ transactions
Points.com Consumer
+/- 5% of revenue
E-Commerce Services
+/- 95% of revenue
We package this functionality to
create Services delivered through
two distinct channels
Our branded consumer channel
White label E Commerce services
distributed via partner channels
Helps members get value
from individual programs
Agency: Commission model
Principal: Wholesale/resale model
Services allow members to get
more out of their programs while
driving revenue to Programs
Helps member manage
multiple programs
We earn revenue through
selling/transacting currency for a
margin, service fee or commission
Broker unique transactions
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Financial Highlights
2008
– Record full year 2008 revenue of $75.6
million, above guidance range
– EBITDA of $556,000;
$25,000
– 20 new Partnerships/Products
signed/launched during the year
$20,000
2009
Q109 Highlights:
– Revenue of $21 million, up 30% yoy
– Continental Airlines Partnership
$15,000
$10,000
Business Outlook:
– Revenue of $85 million to $95 million
$5,000
– New partnerships signed in late 2008
will contribute to growth
– Strong business pipeline
Q1/09
Q4/08
Q3/08
Q2/08
Q1/08
Q4/07
Q3/07
Q2/07
Q1/07
Q4/06
Q3/06
Q2/06
Q1/06
$-
– Third straight year of positive EBITDA
– Strong balance sheet, no long term debt
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Loyalty – A Large Untapped Market Opportunity
“Miles are the world’s largest currency”
+1.8 bn individual US memberships
Avg 14 programs / household
International Market
– 100+ frequent flyer/guest programs
– Hundreds of credit card programs
– Thousands of retail programs
• Many run as a profit center
– Especially Airline programs
– Sell loyalty currency as a customer
incentive to 3rd parties
– Growing trend worldwide
• Currency sales estimated at +$12 Bn/yr
– Accrual typically ahead of redemption by
20% to 30%
Trillions of miles/points outstanding
• +1,000 of programs worldwide
Loyalty Currency Industry
20
~ $1Tr
Retail
Value
14
~ $700Bn
Retail
Value
+/- 50% below
redemption hurdle
2004
2005
2006
2007
2008
2009
2010
* Company estimates
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Integrated Partnerships With the Best Programs In World
Over 150 products and services
with over 50 partners worldwide
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E-Commerce Services
Core Business Driver
Global Footprint
Agency or Principal Models
Profitable Today
E-Commerce Services – An Economic Engine for the Loyalty Industry
White labeled technology and services
Buy
Sell miles to members
Gift
Partner Loyalty
System
- Customer data
- Account
balances
- Core
redemptions
Gift miles to members
Transfer
Miles between members
Corporate
Sell miles to companies
Elite
- Tier status
– +/-80 installations with 26 Partners
– >10 billion miles sold
– Average transaction +/- $170
• Gross annualized revenues of +/$220M to partners
– membership penetration currently:
+/- 2%
– Typically 2nd or 3rd largest
currency purchaser
Sell status to members
• Migrating from an Agency model to a
Principal model
Integration
Facilitate bilateral rel’ns
– Points takes on operating
responsibility for retail channel
Custom
– guarantees revenue to make
margin on every mile sold
- Promotions
- Core earning
• Strong demand for Products
Specialized services
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White Labeled Products – Powered by Points.com
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Buy-Gift - Buying the Miles You Need
• Points builds, hosts and manages the websites in the Partner’s look and feel
• + $150MM in annual revenue for the industry
• Principal Model
• Technology + best practices, marketing etc
• Points buys Partner’s loyalty currency at a
wholesale rate and guarantees a certain level of
annual sales
• Points charges loyalty program members a price
for each mile/point they purchase
• Margins vary based on size and / type of Partner
• Converting incumbents : 5-10%
• New partners : 20-50%
• Agency Model
• Typically technology only
• Commission on the value of the transaction
• Margin typically in the 5-15% range
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Reinvesting for Profitable Growth
Baseline Revenue
• Profitable existing business growing naturally
– Our costs to operate this business are composed of:
• Direct cost of miles – variable
• Employment / other op costs – largely static
• Includes overhead ( finance / facilities/ corp costs/ ongoing operations etc)
Growth Activity
• revenue from optimizing products / services that are already installed
– Today, particularly on consumer business we don’t see “in year” returns
– Costs include marketing activity, account management activity, tech costs
Pipeline
• revenue from new relationships and/or new business from existing partners
–
–
–
–
We plan resources based on anticipated sales (+/-25 products in 2009)
Costs in place for the year…tech, sales, travel etc
Rev’s come in as products close/launch…ie some in feb some in dec
All in, don’t typically see payback in year
• However, deals typically are 3+ years long, so we see returns over time
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Reinvesting for Profitable Growth
$5 + million of 2009 operating cost is focused on producing growth
– Expected payback on Year 0 growth investment is 14 -18 months
Sample for illustrative purposes
Revenue
Yr 1
Yr 1-4
Costs
Launch
Direct Ops
$9mm $5mm $7mm
$70mm $5mm $50mm $4mm
Margin
-$3 mm
$11mm
– We have visibility on the investment
• it’s either “in process” now or in our experience, close.
– It has a 'string' on it:
• if the business doesn't show up we can manages costs down
– Investing in longer term growth with +/-18 month payback, and a strong ROI beyond
that, has been a consistent approach
– We manage the amount of opportunity we pursue based on available financial resources
• maintaining and annual positive Ebitda.
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$220M gross revenue through the platform currently
Growth Opportunities are Significant
OPPORTUNITY
$220M
$370M
Currently 60% (by volume) penetrated into
current partners with current products
$220M
<2%
$440M
<4%
$660M
<6%
$880M
<8%
Currently less than 2% of Partners’
membership utilize product suite
$220M
$440M
$660M
+
Currently < 33% penetrated into top potential
Loyalty Programs worldwide
• Continue to expand current
partnerships with new
products implementations
• Focus on marketing
current products to
increase usage penetration
into current member bases
• Continue to aggressively
implement new
partnerships worldwide
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Points.com Consumer Services
Core Strategic Driver
Unique Transactions
High Value User Base
Points.com
•
The world’s leading loyalty management
website
•
+2.2 million users in 200 countries
•
Over 50 program partners
•
Innovative functionality giving members
more ways to earn and redeem
points/miles
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Points.com - Functionality
Get More Miles and Points
Use your Miles and Points
Manage your miles and points
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Points.com – Swap
• Single member direct exchange from one
loyalty program to another
• Programs control exchange rates and
member value
Example:
Swap Amex Points for US Airways Miles
• AMEX pays Points $100
• removes liability from their books
• Points pays $85 to US Airways to acquire the
miles on behalf of the member
• Retains 15% commission for transaction
10,000 points
@ $0.01 per point = $100
Less 15%
$85 @ $0.02 per mile
= 4,250 miles
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Points.com – GPX (Global Points Exchange)
•
Global Points Exchange (GPX) is the first
and only peer-to-peer loyalty currency
trading platform
•
Offers LP operators a strong revenue
stream with no incremental liability
•
Offers LP members strong value per mile
and additional flexibility
•
Based on the proven “Transfer” program
offered by Points.com for many worldwide
LP’s
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GPX - Trading Board
•
Members decide which points/miles
to give and which they want to get
(currency pairs akin to Forex)
•
T&C’s including trade limits, pricing
and number of transactions are set
by Loyalty Program in conjunction
with Points.com
•
Search results are listed on the GPX
Trading Board.
•
Members can accept a trade if they
find one that meets their needs or
post their own
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GPX – A New Marketplace
Retail cost is +/- $300
- Savings of $165 -
User gets 1.5 cents for
each Alaska mile
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GPX Marketing
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Growing Participation
1Q08
2Q08
3Q08
4Q08
•
•
•
•
•
1Q09
2Q09+
Remaining large US programs
European Carriers
Middle Eastern Carriers
Asian Carriers
Hotel Programs
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Points.com : Future Direction
The objectives underpinning the future of Points.com are fourfold:
• Develop an overarching value proposition that drives the goal of supporting
> 15 million members
• Deliver a value proposition that promotes both return
visits and multiple transactions.
 Moving beyond a transaction-heavy business model
to a valued source of information for our members.
• Provide a Partner proposition with which loyalty
programs will aggressively and fully engage.
• Increasing from 30+ to 70+ participating Partners with > 1
million members.
• Create an economic model that produces at least 50% of Points
International’s revenue and net contribution.
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Points.com : Evolution of the Consumer Value Proposition
• Primary users of Points.com are consumers actively engaged in multiple reward
programs.
• Points.com offers members easy to use, convenient and unique services not available
through, or that complement, our Partners’ programs
• Consumers will find the products and services personally-relevant and place significant
value on the information and the transactional functionality that enables them to:
• Manage their multiple reward programs. (Manage)
• Grow their rewards balances. (Get)
• Optimize the utility of their accumulated currencies. (Use)
• Evolving the exprience, utility, and the overall footprint of points.com will be focused on
several key areas
Improved
Transactional
Value
Propositions
Improved
Information
and Content
Personalization
Simplify the
Utility/Improv
e the Flow
Automation
Improved
Access/Wider
Distribution
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2009 Business Outlook: Growing Against the Current
2009 revenue expected to grow to range of $85 million to $95 million
Third straight year of positive EBITDA
– Aggressive growth focused investment strategy continuing
• strong business pipeline will continue track record of new business success
• 2008 Successes are contributing to growth in 2009
– Successful expansion of our Principal model showing strength in a dismal
economy
• Metrics improving through rest of the year
– Aggressive Consumer development underway
• Driving to goal of +15 million users
• Product Development is a priority
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