Points International (PCOM $12.50) reported good Q1 results. The company is the leading provider of loyalty and rewards programs for the travel and hotel industries. That segment generates 70% of revenues. New markets like retailing, financial services, and gambling provide 25%. Points also operates its own on-line exchange where consumers can swap points from different programs, i.e., Lufthansa miles for American Air miles. That business delivers the remaining 5% of sales. Promotional activity by airlines and hotels tends to increase in Q2 and Q4, which in turn drives additional volume the company's way. The period just ended was typically slow due to that seasonal influence. Points didn't start any major new programs in the quarter, either. So comparisons were relatively muted. Sales actually declined 2% to $28.0 million. Non-GAAP earnings doubled to $.06 a share.
Points has more than $50 million of new annualized business in its sales pipeline. The company has a high degree of confidence the contracts will be signed this year. But if most are implemented late in 2012 the revenue contribution probably won't become meaningful until the year following. We have reduced our full year sales estimate by $10 million to $150 million, which reflects the amount of volume Points expects to generate with its existing book of contracts. We also have lowered our earnings estimate by a nickel to $.45 a share. Sales could accelerate in 2013 as the new contracts come on line and existing accounts keep expanding. New Internet products launched in mid 2011 could yield further leverage. We estimate sales will hit $200 million to provide income of $.75 a share.
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