SOURCE: DirectCash Payments Inc.

DirectCash Payments Inc.

March 22, 2016 18:31 ET

DirectCash Payments Inc. Announces Results of Operations for the Three Months and Year Ended December 31, 2015

CALGARY, AB--(Marketwired - March 22, 2016) -  DirectCash Payments Inc. ("DCPayments" or the "Company") (TSX: DCI) today announced consolidated financial results for the three months and year ended December 31, 2015.

Financial and Operational Highlights:

  • Improved Funds from Operations payout ratio to 54.4% for the year ended December 31, 2015, compared to 56.9% in the prior year
  • Growth in transaction volumes in all business segments for the three months and year ended December 31, 2015 compared to the prior year periods
    • Increase in ATM transactions of 7%
    • Increase in Other Services transactions of 4% and 3%, respectively
  • Increased the number of active ATMs as at December 31, 2015 to 21,454
  • Reached agreement to settle all class action lawsuits filed against the Company
  • Acquisitions of $3.5 million and A$1.9 million respectively of ATM processing contracts for approximately 195 ATM locations in Canada and approximately 250 ATM locations in Australia
  • Re-purchased and cancelled 55,000 common shares throughout the 2015 year under the Company's current Normal Course Issuer Bid at an average price of $12.04 per common share
  • Refinanced the Company's credit facility to increase the Australian dollar sublimit, improve cash flow management and create a natural hedge between the Australian and Canadian currencies 
  • Increased Canadian vault cash rental agreement limit from $100 million to $150 million, improving operational flexibility
  • Successfully implemented price increases and Dynamic Currency Conversion across global business
  • Executed a long-term renewal of the Company's service and marketing agreements with DirectCash Bank to 2027
  • Extended agreement to acquire DirectCash Bank to August 15, 2016 to accommodate ongoing Office of the Superintendent of Financial Institutions review
  • Subsequent to the quarter, acquired A$1.9 million of ATM processing contracts for approximately 170 ATM locations in Australia

Management's Commentary

"2015 results are in line with our expectations, as we continue to grow our payments and transaction processing business. The fourth quarter was highlighted by a successful tuck-in acquisition in Canada, as we continue to expand our existing Canadian ATM operations, and successfully reaching an agreement to settle all class action lawsuits related to the Cash Store, which enables us to focus on growth and expansion of product offerings worldwide. Our business continues to generate strong cash flow, and we are excited to execute our plans for continued diversification of our global payments business," said Jeffrey Smith, DCPayments' President and Chief Executive Officer

Summary financial and operating results for the three months and year ended December 31, 2015 are set forth below and complete copies of the Company's consolidated Financial Statements and Management's Discussion & Analysis ("MD&A") are available on SEDAR at (www.sedar.com).

Summary Operating and Financial Results

             
             
    Three months ended
December 31
    Year ended
December 31
 
         
    2015     2014     2015     2014  
Summary operating results                                
Active ATM terminals(1)     21,454       21,103       21,454       21,103  
                                 
ATM Transactions, thousands     33,905       31,796       132,531       123,634  
Other services transactions, thousands     89,746       86,064       347,199       335,909  
                                 
Summary financial results                                
($ thousands, except for per share amounts)                                
Gross profit(2)   $ 33,789     $ 33,436     $ 135,967     $ 141,514  
Gross profit margin(3)     46.9 %     49.0 %     47.9 %     51.1 %
EBITDA(4)     16,804       17,836       69,097       74,039  
  EBITDA margin(5)     23.3 %     26.2 %     24.4 %     26.7 %
Net income (loss)     (1,235 )     1,113       (7,269 )     3,665  
  Per share, basic     (0.07 )     0.06       (0.42 )     0.21  
  Per share, diluted     (0.07 )     0.06       (0.42 )     0.21  
Funds from operations(5)   $ 11,673     $ 9,331     $ 46,484     $ 43,423  
  Funds from operations per share, basic(5)     0.67       0.53       2.66       2.48  
  Funds from operations per share, diluted(5)     0.67       0.53       2.64       2.47  
Dividends declared     6,316       6,332       25,304       24,714  
  Dividends declared per share     0.36       0.36       1.44       1.41  
Funds from operations payout ratio(5)     54.1 %     67.9 %     54.4 %     56.9 %
Total assets   $ 364,574     $ 379,427     $ 364,574     $ 379,427  
Total debt(6)     220,182       202,557       220,182       202,557  
Cash     (10,002 )     (4,988 )     (10,002 )     (4,988 )
Net debt(7)   $ 210,180     $ 197,569     $ 210,180     $ 197,569  
Common shares outstanding, end of period     17,534       17,589       17,534       17,589  
                                 
                                 

1 DCPayments has included statistics only for sites that recorded a transaction in the last calendar month of the period indicated.
2 DCPayments has included the Financial Institution customers' transactions, point of sale transactions, debit and credit cards transactions.
3 Gross profit margin means gross profit expressed as a percentage of Revenue.
4 An additional GAAP measure - see definition under "Additional GAAP Measure".
5 A non-GAAP measure - see definition under "Non-GAAP Measures".
6 Total debt is calculated as long-term debt including current portion but excluding unamortized transaction costs, as at the end of the period.
7 Net debt is calculated as total debt less cash.

For the year ended December 31, 2014, gross profit was positively impacted by non-recurring GST gains in Australia. Excluding this non-recurring gain, the gross profit for the year ended December 31, 2014 would have been $139.2 million compared to gross profit of $136.0 million for the year ended December 31, 2015.

       
       
   
 
Year ended
December 31
 
 
    2015   2014  
Number of machines              
Gross profit   $ 135,967   $ 141,514  
Non-recurring GST gains(1)     -     (2,304 )
Gross profit before GST gain   $ 135,967   $ 139,210  
               
               

1 Included the portion impacting gross profit only

The increase in total debt was due to the funding of the CashStore settlement payout, OneCash acquisition as well as the Canadian acquisition at year end. The increase in total debt was offset by the increase in cash and cash equivalents. The net debt was increased by $12.6 million to $210.2 million.

Outlook

DCPayments continues to manage its existing payments business while focusing on adding new products and services.

DCPayments is one of Canada's leading independent providers of end-to-end transaction processing and payment solutions, processing in excess of 347 million transactions during the year ended December 31, 2015, and is one of the three largest deployers of ATMs in Canada, with 7,774 transacting ATMs as at December 31, 2015. DCPayments has a strong strategic position in the payments business and has a significant presence in the highly strategic credit union and financial institution payments processing services segment and ATM outsourcing business. In the ATM business in Canada, emphasis continues to be on maintaining existing customer relationships. With the Other Services line of business we expect to increase our ability to service the existing and acquired customer relationships and increase our sales presence with other clients in Canada.

On December 30, 2015, the Company acquired the assets of a private company in British Columbia for $3.5 million, subject to customary closing adjustments. As part of this acquisition, DCPayments acquired the ATMs, processing contracts and residual contract rights for approximately 195 ATM locations in Canada. The transactions for the acquired ATMs were processed on DCPayments transaction processing platform under agreement with the vendor prior to the time of acquisition, and therefore had no impact on the number of active ATMs reported by the Company.

The Other Services line of business is broadly comprised of transaction processing services, card provisioning, payments processing, reporting and settlement, fraud management, ATM cash and fleet management and project-based consulting services for financial institutions and credit unions as well as managing and processing prepaid card programs and transactions. In this line of business our objective is diversification domestically and expansion internationally, to reduce historical reliance on a small group of large volume customers in certain market segments. In May 2015 the Company launched DC TAG, Canada's first contactless wearable prepaid credit card, with a credit union client in British Columbia. In August 2015, DCPayments launched DC TAG as a direct to consumer product in Canada.

DCPayments is the largest deployer of ATMs in Australia and New Zealand with 7,609 transacting ATMs as at December 31, 2015. The Company actively seeks growth opportunities through the existing ATM business platform and to capitalize on the less mature Australian market, where transactions and gross profits per ATM are significantly greater than in the more mature Canadian ATM market. We have been very successful in managing our costs, integrating the Australian acquisitions, and adding management depth. DCPayments' focus in this market moving forward is to drive growth and improve margins. During 2015, the Company applied for an Australian Financial Services License ("AFSL"), which will enable DCPayments to market and sell customers certain prepaid card products in Australia. The AFSL is subject to regulatory approval. DCPayments has executed an agreement with an third party issuerAustralian Financial Institution, which will enable the Company to commence prepaid card offerings in early 2016, further diversifying its payments business.

On July 23, 2015, DCPayments successfully completed the tuck-in acquisition of the ATM business of OneCash Limited and DSM Connect Pty Ltd. (collectively "OneCash") in Australia for total consideration of approximately A$1.9 million (the "OneCash Acquisition"). A total of approximately 250 ATM locations and related contracts were acquired in Australia.

Subsequent to the year-end on February 18, 2016, DCPayments successfully completed the tuck-in acquisition of the ATM business of GRG International Limited ("GRG") in Australia for total consideration of A$1.9 million (the "GRG Acquisition"). A total of approximately 170 ATM locations and related contracts were acquired in Australia.

Since the acquisition of InfoCash Limited in the United Kingdom in May 2012, DCPayments has grown to be the third largest deployer of non-bank branded ATMs in the United Kingdom and has added in excess of 1,000 ATMs. As at December 31, 2015 DCPayments had 5,714 transacting ATMs in the United Kingdom. DCPayments' focus in this market moving forward is to continue to grow the ATM business in Europe through quality accretive acquisitions and organic growth, adding other product offerings to its Europe division and increasing our margins.

The Company continues to diversify its product offering in the ATM business with the launch of DCC in Australia and the United Kingdom during Q2 2015, which DCPayments expects to see positive results from over the course of 2015 and 2016 as we increase the number of ATMs with DCC enabled.

We continue to focus on the efficient management and operation of our businesses. DCPayments is well positioned with a strong balance sheet and a steady cash flow stream from its payments and transaction processing operations based on long term contracts and industry, and geographically diversity and across a number of industries to drive long term shareholder value.

Conference Call

A conference call will be held on Wednesday, March 23, 2016 at 10:00 a.m. Mountain Daylight Time (MDT) to review 2015 results. Jeffrey J. Smith, President & CEO, Patrick W. Moriarty, Chief Financial Officer, and Amanda J. Gallacher, Vice President, Corporate Strategy & Acquisitions, will host the call. The financial results, and an accompanying presentation, will be available on the Company's website at www.directcash.net prior to the conference call.

DCPayments invites participants to listen to the webcast of the conference call by entering: http://www.gowebcasting.com/7273 in your web browser.

To participate in the Q&A session, please call the conference operator by dialing toll-free 1-800-355-4959 or locally 1-416-340-8527. A replay of the conference call will be available until Wednesday, March 30, 2016 by dialing toll-free 1-800-408-3053 or locally 1-905-694-9451 and entering passcode 5175557.

Additional GAAP Measure:

DCPayments has presented earnings before interest, taxes, depreciation and amortization ("EBITDA") as a subtotal in its consolidated statement of operations and comprehensive income. EBITDA is an important measure utilized by management in assessing the financial performance of the Company relative to its operating plans and budgets. It is also the measurement utilized by the holders of the Company's long-term debt, as described in note 12 to the consolidated financial statements, in calculating financial covenants. The Company has presented EBITDA prior to unrealized foreign exchange gains and losses and non-recurring other gains (loss). The Company utilizes this presentation of EBITDA because it is consistent with the definitions under DCPayments' credit facility agreement. DCPayments has also presented EBITDA prior to the deduction for acquisition-related expenses. These expenses relate only to business combinations which are complex, require the pre-approval of the Company's lenders and are financed utilizing long-term debt or the issue of equity or a combination thereof. Costs incurred on recurring asset acquisitions are not considered acquisition-related expenses and are included with other expenses in the consolidated statement of operations and comprehensive income. The Company's EBITDA may differ from similar computations as reported by other issuers and, accordingly, may not be comparable to EBITDA as reported by such issuers. The Company has provided a reconciliation between EBITDA and net income (loss) which is disclosed in the MD&A for the three months and year ended December 31, 2015.

Non-GAAP Measures:

There are a number of financial calculations that are not defined performance measurements under GAAP but which DCPayments believes are useful and accepted performance measurements utilized by the investing public in assessing the overall financial performance of the Company and to compare cash flows between entities.

EBITDA margin:

EBITDA margin means EBITDA expressed as a percentage of Revenue.

EBITDA per share:

EBITDA per share is calculated on the same basis as net income (loss) per share, utilizing the basic and diluted weighted average number of common shares outstanding during the period presented.

Funds from operations and funds from operations per share:

DCPayments calculates funds from operations as net income (loss) plus or minus depreciation, amortization, deferred income taxes expense (recovery), non-cash finance costs, unrealized foreign exchange gains and losses, non-recurring other gains (loss) and other non-cash charges and after provision for productive capital maintenance expenditures (see discussion below). Funds from operations per share is calculated on the same basis as net income (loss) per share, utilizing the basic and diluted weighted average number of common shares outstanding during the period presented. Readers are cautioned that funds from operations cannot be assured to continue at equivalent levels in the future. DCPayments' funds from operations and funds from operations per share may differ from similar computations as reported by other issuers and, accordingly, may not be comparable to funds from operations and funds from operations per share as reported by such issuers. The reconciliation between funds from operations and net income (loss) is disclosed in the "Funds from Operations" discussion in the MD&A for the three months and year ended December 31, 2015.

Productive capital maintenance expenditures:

DCPayments differentiates capital expenditures between growth and productive capital maintenance. There is no such distinction under GAAP, however DCPayments believes it is important to differentiate between them. Maintenance capital expenditures, excluding non-recurring maintenance capital, represent an adjustment to funds from operations while growth capital does not.

Maintenance capital expenditures are defined as expenditures required to service and maintain DCPayments' existing productive capacity, while growth capital is expended to increase DCPayments' productive capacity by adding additional sources of revenue not currently in existence. Current measures of productive capacity that DCPayments utilizes include ATMs and debit terminals under contract. Maintenance capital expenditures include software and hardware upgrades to existing infrastructure, ATM and debit terminal equipment upgrades necessary to meet changing regulatory requirements, contract extension incentives including replacement of equipment under existing or renewed contracts, and fleet vehicle purchases and upgrades. Examples of growth capital expenditures include the acquisition of a competitor's assets, the cost of an ATM in a new location, or technology costs related to new sources of revenue.

Readers are cautioned that the Company's computation of maintenance capital expenditures may differ from similar computations as reported by other issuers and, accordingly, may not be comparable to productive capital maintenance expenditures as reported by such issuers.

Funds from operations payout ratio:

Funds from operations payout ratio means dividends declared as a percentage of funds from operations.

Non-cash working capital:

Non-cash working capital is not a defined GAAP measure. DCPayments calculates changes in non-cash working capital as changes during a reporting period in current assets (excluding cash, cash in circulation and restricted funds) and current liabilities (excluding bank overdraft, restricted funds and current portion of long-term debt).

Dividends:

Shareholders of DCPayments receive monthly payments in the form of dividends. Dividends are funded by the generation of funds from operations of the business. All of the income generated at the level of the various subsidiaries of the Company is taxed by applicable government authorities with the remaining after-tax funds either being retained by the subsidiary or distributed up to the Company where it can be made available for payment of dividends by DCPayments. Continued future distribution of dividends (and the amount of any dividends) is subject to DCPayments' Board of Directors approval. DCPayments' Board of Directors is not obligated to distribute all net available cash as dividends to shareholders.

Forward Looking Information:

This press release offers our assessment of DCPayments' future plans and operations and contains "forward-looking information" relating to future events as defined under applicable Canadian securities legislation.

The Company's actual results or performance could differ materially from those expressed in, or implied by, this forward-looking information. DCPayments can give no assurance that any of the events anticipated will transpire or occur or, if any of them do, what benefits or costs we will derive from them. Forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond DCPayments' ability to control, including but not limited to general economic conditions, interest rates, foreign currency rates, consumer spending, borrowing trends and regulatory changes to name a few. Additional risks and uncertainties are described in DCPayments' Annual Information Form for the year ended December 31, 2015 which is available at www.SEDAR.com.

The forward-looking information contained in this press release is expressly qualified by this cautionary statement. Certain statements that contain words such as "could", "may", "believe", "should", "expect", "will", "intends", "plan", "anticipates", "potential", "estimates", "continues" or similar words relating to matters that are not historical facts constitute "forward-looking information" within the meaning of applicable Canadian securities legislation. 

Forward-looking information and statements contained in this press release include statements related to DCPayments' anticipated growth in business, operations and product offerings in our various business segments in the Americas, Australasia and Europe, ability to manage its existing business while focusing on adding new products and services, ability to further diversify domestic customer relationships and expand internationally intention and ability to complete quality accretive acquisitions at reasonable multiples on a go forward basis as opportunities arise, ability to provide consistent cash dividends, ability to drive growth, increase our margins and maintain per ATM profitability, expansion of DCPayments' merchant base through new and innovative products and services, the expectation that the Company will realize positive results from launching DCC and implementing surcharge increases in international markets, ability to realize on expected synergies and ability to realize significant economies of scale and cost savings on acquisitions, ability to continue to acquire long-term recurring services contracts and negotiate renewals thereof in advance of their expiry, ability to maintain current customer relationships, ability to add product offerings in the markets we operate in, ability to diversify both domestically and internationally, ability to increase the servicing of customer relationships and increase our sales presence with other clients, the anticipated benefits of acquisitions, the expectation that acquisitions will be accretive to funds from operations per share in the first fiscal year following the transaction, or at all, , and the sufficiency of funds generated from operations to fund the business.

Readers are cautioned that our expectations, estimates, projections and assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. With respect to forward-looking statements contained within this Press Release, expectations are based on our current strategic plan and management forecasts, the historical financial performance and operational data of acquired entities, our existing contracts schedule, forecast and budgeted projections of increased capital expenditures required based on management's view of the age of capital assets currently in use by DCPayments.

The assumptions and estimates relating to the forward-looking information referred to above are updated quarterly and except as required by law, we do not undertake to update any other forward-looking information.

Additional information about DCPayments is available on SEDAR (www.sedar.com) or DCPayments' website at www.directcash.net.

Contact Information

  • For further information please contact:
    Amanda J. Gallacher
    Vice President, Corporate Strategy & Acquisitions
    Direct Telephone: (403) 387-2158
    e-mail: investorrelations@directcash.net

    or

    Patrick W. Moriarty
    Chief Financial Officer
    Direct Telephone: (905) 461-2285
    e-mail: pmoriarty@directcash.net