SOURCE: DirectCash Payments Inc.

DirectCash Payments Inc.

November 12, 2015 21:10 ET

DirectCash Payments Inc. Announces Results of Operations for the Three and Nine Months Ended September 30, 2015

CALGARY, AB--(Marketwired - November 12, 2015) - DirectCash Payments Inc. (TSX: DCI)("DCPayments" or the "Company") today announced consolidated financial results for the three and nine months ended September 30, 2015.

Financial and Operational Highlights:

  • Improved EBITDA for the three months ended September 30, 2015 to $18.6 million, an increase of 9% and 3% from Q2 2015 and Q3 2014 respectively
  • Improved Funds from Operations payout ratio to 48.5% for the three months ended September 30, 2015, compared to 56.3% and 52.2% for Q2 2015 and Q3 2014 respectively
  • Reduced Net Debt by 5% to $186.1 million for the three and nine months ended September 30, 2015 compared to the prior year periods
  • Growth in transaction volumes in all business segments for the three and nine months ended September 30, 2015 compared to the prior year periods
    • Increase in ATM transactions of 11% and 7% respectively
    • Increase in Other Services transactions of 3%
  • Highest number of ATMs in DCPayments' history, with 21,824 active as at September 30, 2015, a growth of 8% from the prior year
  • During the quarter, reached an agreement to settle all class action lawsuits filed against the Company
  • Completed transition of the Morrison's ATM fleet, adding approximately 220 ATMs in total to the United Kingdom fleet
  • Acquired A$1.9 million of ATM assets, including processing contracts for approximately 250 ATM locations in Australia
  • During the quarter, re-purchased and cancelled 33,700 common shares under the Company's current Normal Course Issuer Bid
  • Successfully completed refinancing and amendments to increase the Australian dollar sublimit on the Company's credit facility, improving cash flow management and creating a natural hedge between the Australian and Canadian currencies
  • Executed a long-term renewal of the Company's service and marketing agreements with DirectCash Bank
  • Extended agreement to acquire DirectCash Bank to August 15, 2016 to accommodate ongoing Office of the Superintendent of Financial Institutions review
  • Increased the Canadian vault cash rental agreement limit from $100 million to $150 million, reflecting business growth and improving operational flexibility

Management's Commentary

"We are very pleased with another quarter of strong performance coupled with growth in our business, continued execution of our business plan worldwide and to have negotiated a settlement agreement for all class action lawsuits related to Cash Store. We are focused on growth and expansion of product offerings in our payments business." said Jeffrey Smith, DCPayments' President and Chief Executive Officer

Summary financial and operating results for the three and nine months ended September 30, 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 Nine months ended
   September 30  September 30
   2015  2014  2015  2014
Summary operating results            
Number of machines            
Active ATM terminals(1)  21,824  20,231  21,824  20,231
ATM transactions, thousands  35,195  31,637  98,626  91,838
Other services transactions, thousands(2)  89,842  86,988  257,453  249,877
             
   Three months ended  Nine months ended
   September 30  September 30
   2015  2014  2015  2014
Summary financial results            
($ thousands, except for per share amounts)            
Gross profit  $35,586  $35,715  $102,178  $108,078
Gross profit margin(3)  47.1%  49.8%  48.3%  51.7%
EBITDA(4)  18,626  18,042  52,293  56,203
 EBITDA margin(5)  24.7%  25.1%  24.7%  26.9%
Net income (loss)  (3,601)  2,318  (6,034)  2,552
             
Per share, basic and diluted  (0.21)  0.13  (0.35)  0.15
Per share, diluted            
Funds from operations(5)  $13,037  $11,958  $34,811  $38,482
 Funds from operations per share, basic(5)  0.75  0.68  1.99  2.20
 Funds from operations per share, diluted(5)  0.74  0.68  1.98  2.19
Dividends declared  6,324  6,245  18,988  18,382
 Dividends declared per share  0.36  0.36  1.08  1.05
Funds from operations payout ratio(5)  48.5%  52.2%  54.5%  47.8%
Total assets  $364,369  $390,523  $364,369  $390,523
Total debt(6)  214,223  202,913  214,223  202,913
Cash  (28,078)  (7,917)  (28,078)  (7,917)
Net debt(7)  $186,145  $194,996  $186,145  $194,996
Common shares outstanding, end of period  17,556  17,589  17,556  17,589
         

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

For the nine months ended September 30, 2014, gross profit was positively impacted by non-recurring GST gains in Australia. Excluding this unusual gain, the gross profit for the nine months ended September 30, 2014 would have been $105.8 million compared to gross profit of $102.2 million for the nine months ended September 30, 2015.

   Three months ended  Nine months ended
   September 30  September 30
   2015  2014  2015  2014
Number of machines            
Gross profit  $35,586  $35,715  $102,178  $108,078
Non-recurring GST gains(1)  -  -  -  (2,304)
Gross profit before GST gain  $35,586  $35,715  102,178  105,774

1included the portion impacting gross profit only

Funds from operations for the nine months ended September 30, 2014 was positively impacted by the after tax non-recurring GST gain in Australia. Excluding this unusual gain, the funds from operations payout ratio was 53.9% for the nine months ended September 30, 2014.

   Three months ended  Nine months ended
   September 30  September 30
   2015  2014  2015  2014
Number of machines            
Funds from operations(1)  $13,037  $11,958  $34,811  $38,482
Non-recurring GST gains(2)  -  -  -  (4,391)
Funds from operation before GST gain  $35,586  $35,715  102,178  34,091
Dividends declared  6,324  6,245  18,988  18,382
Funds from operation ratio(1)before GST gain  48.5%  52.2%  54.5%  53.9%

1non-GAAP measure - see definition under "Non-GAAP Measures".
2included the total non-recurring GST gains after tax

The increase in total debt was due to the funding of the additional BMO branded ATMs and the increased vault cash rental facility limit was not yet finalized until late August, 2015. The increase in total debt was offset by the increase in cash and cash equivalents, resulting in a decrease in net debt compared to the prior year period. This was done on a temporary basis while we completed the conversion to utilize the increased vault cash rental facility limit in Canada. Net debt decreased by $9 million to $186 million.

Outlook

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

DCPayments is the largest deployer of ATMs in Canada, with 7,915 transacting ATMs as at September 30, 2015, and is one of Canada's leading independent providers of end-to-end transaction processing and payment solutions. 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.

DCPayments is the largest deployer of ATMs in Australia and New Zealand with 7,729 transacting ATMs as at September 30, 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.

On October 31, 2014 the Company announced that it had successfully completed the acquisition of Ezeatm Services Pty Ltd. ("Eze"). This tuck-in acquisition offered significant economies of scale, cost savings and bolstered DCPayments existing position in the Australian marketplace as the largest independent network of branded ATMs. The acquisition of Eze added approximately 1,325 ATM sites and related contracts to DCPayments' Australian network. Integration is underway and we expect this acquisition to be accretive to funds from operations per share in the first fiscal year following the transaction.

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.

Since the acquisition 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 1,100 ATMs. As at September 30, 2015 DCPayments had 5,839 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 as we increase the number of ATMs with DCC enabled.

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. 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. The Company is focused on diversification in the Australian market, and during the first three quarters of 2015 has progressed the Company's application for an Australian Financial Services License, which will enable DCPayments to launch prepaid offerings, including DC TAG, in Australia.

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, geographically diversity and across a number of industries to drive long term shareholder value.

Conference Call

A conference call will be held on Friday, November 13, 2015 at 10:00 a.m. Mountain Standard Time (MST) to review third quarter 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.

DCPayments invites participants to listen to the conference call by calling toll-free 1-800-355-4959 or locally 1-416-340-8527. A replay of the conference call will be available until Friday, November 20, 2015 by dialing toll-free 1-800-408-3053 or locally 1-905-694-9451 and entering passcode 1663929.

Additional GAAP Measure:

DCPayments has presented earnings before interest, taxes, depreciation and amortization ("EBITDA") as a subtotal in its condensed consolidated interim statement of operations. 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 4 to the condensed consolidated interim financial statements, in calculating financial covenants. The Company has presented EBITDA prior to unrealized foreign exchange gains and losses and non-recurring other gains. 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. 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) in the MD&A for the three and nine months ended September 30, 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 (benefit), non-cash finance costs, unrealized foreign exchange gains and losses 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 and nine months ended September 30, 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 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 for our technicians.

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, 2014 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' projected growth in business and operations in our various business segments in the Americas, Australasia and Europe, 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 dynamic currency conversion 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 settle the class action lawsuits filed against the Company, 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 expectation that the Eze acquisition and the Onecash acquisition will be accretive to funds from operations per share in the first fiscal year following the transaction, or at all, the expectation that DCPayments will realize positive results from launching dynamic currency conversion in international markets, the costs of the Calgary office upgrades and the possible increase in capital expenditures for technology and infrastructure or due to regulatory mandated security upgrade changes in markets in which we operate, including the EMV upgrades in Australia, 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 MD&A, 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

    or

    Jeffrey J. Smith
    President & Chief Executive Officer
    Direct Telephone: (403) 387-2101
    e-mail: jeff@directcash.net