DirectCash Payments Inc.

DirectCash Payments Inc.

November 14, 2013 18:57 ET

DirectCash Payments Inc. Announces Results of Operations for the Three and Nine Months Ended September 30, 2013

CALGARY, ALBERTA--(Marketwired - Nov. 14, 2013) - DirectCash Payments Inc. ("DirectCash" or the "Company") (TSX:DCI) today announced consolidated financial results for the three and nine months ended September 30, 2013.

Financial and Operational Highlights:

  • Increased the nine month Revenue 39% to $176 million

  • Increased the nine month Gross Profit 50% to $89 million

  • Increased the nine month EBITDA 30% to $50 million

  • Business continues to generate solid financial results with Funds from Operations payout ratio of 53% and 58% for the three and nine months ended September 30, 2013 respectively

Subsequent to the Quarter Highlights:

  • Successfully completed the acquisition of Threshold Financial Technologies Inc. a full service integrated ATM solution provider of comprehensive and innovative payments processing and ATM managed services solutions in Canada

  • Entered into two Canadian vault cash rental agreements with a major Canadian financial institution for up to $100 million

  • Negotiated amendments existing Credit Agreement to provide greater operational flexibility

  • Have entered into a $15.2 million bought deal equity financing

Management's Commentary

"We are very pleased with our third quarter and year to date results, demonstrating positive returns for our shareholders, and our recent successful completion of the acquisition of Threshold, which has given us the opportunity to expand our existing Canadian operations into the complementary, highly strategic credit union and financial institution ATM outsourcing and payments processing space. We look forward to integrating this business and continuing to grow shareholder value," said Jeffrey Smith, DirectCash's President and Chief Executive Officer.

DirectCash will continue to seek to increase efficiencies and to pursue growth through additional accretive acquisitions as opportunities arise. DirectCash's stable and contracted revenue stream in our various geographic markets will continue to provide consistent cash dividends to DirectCash's Shareholders.™

Summary financial and operating results for the three and nine months ended September 30, 2013 are set forth below and complete copies of the Company's Financial Statements and Management's Discussion & Analysis ("MD&A") are available on SEDAR at (

Summary Operating and Financial Results

Three months ended Nine months ended
September 30 September 30
2013 2012 2013 2012
Summary operating results
Number of machines
Active ATM terminals(1) 19,536 19,423 19,536 19,423
Number of transactions
ATM transactions 28,298,144 27,948,983 81,205,203 47,732,637
Other transactions 3,014,952 4,386,524 10,269,112 13,584,552
Summary financial results
($ thousands, except for per share amounts)
Gross profit(2) $ 29,607 $ 30,932 $ 88,808 $ 59,270
Gross profit margin(3) 50.4 % 46.2 % 50.5 % 46.7 %
EBITDA(4) 17,355 18,095 49,777 38,246
EBITDA margin(5) 29.6 % 27.0 % 28.3 % 30.1 %
Net income (loss) (192 ) (2,468 ) 1,353 4,656
Net income (loss) attributable to common shareholders (205 ) (2,096 ) 1,335 5,028
Per share, basic (0.01 ) (0.14 ) 0.08 0.35
Per share, diluted (0.01 ) (0.14 ) 0.08 0.35
Funds from operations(5) $ 10,745 $ 8,918 $ 29,609 $ 24,396
Funds from operations per share, basic 0.65 0.58 1.79 1.71
Funds from operations per share, diluted 0.65 0.58 1.78 1.70
Dividends declared 5,741 5,418 17,222 14,968
Dividends declared per share 0.35 0.35 0.35 0.35
Funds from operations payout ratio(5) 53.4 % 60.8 % 58.2 % 61.4 %
Total assets 388,226 436,252 388,226 436,252
Total long-term debt $ 184,154 $ 199,113 $ 184,154 $ 199,113
Common shares outstanding, end of period 16,639 16,639 16,639 16,639
1 DirectCash has included statistics only for sites that recorded a transaction in the last calendar month of the period indicated
2 Gross profit is calculated as Revenue less Cost of sales
3 Gross profit margin means gross profit expressed as a percentage of total revenue
4 An additional GAAP measure - see definition under "Additional GAAP Measure"
5 A non-GAAP measure - see definition under "Non-GAAP Measures"


We believe the integration of Threshold's core credit union and financial institution business will strengthen the Company's strategic position in the payments business and position DirectCash as one of Canada's leading independent providers of end-to-end transaction processing and payment solutions. The Threshold Acquisition gives DirectCash a significant presence in the highly strategic credit union and financial institution ATM, payments processing services segment and an ATM outsourcing business. In addition, Threshold's Non-Bank ATM Business segment will add 1,475 ATMs to the DirectCash network in Canada.

The Company's focus for the remainder of 2013 will be to continue to integrate its new businesses and international divisions, driving operating efficiencies as well as to continue to grow the business in a reasonable and sustainable manner.

DirectCash is the largest deployer of ATMs in Australia and New Zealand. As at September 30, 2013 DirectCash had 6,407 transacting ATMs in Australia and New Zealand. The Company actively seeks growth opportunities through the existing ATM business platform and capitalizes on the less mature Australian market, where transactions and gross profits per ATM are significantly greater than in the mature Canadian ATM market.

Since the acquisition in the United Kingdom in May 2012, DirectCash has grown to be the second largest deployer of non bank branded ATMs in the United Kingdom and has added 982 ATMs. As at September 30, 2013 DirectCash had 5,682 ATMs in United Kingdom. DirectCash's focus in this market moving forward is to continue to grow the ATM business in Europe through quality accretive acquisitions and organic growth, while adding other product offerings to its Europe division while increasing our margins.

In the ATM business in Canada, emphasis continues to be on maintaining existing customer relationships. With the addition of Threshold we will be able to capitalize on synergies between the two organizations.

Our Mexico operations although small have been challenging due to a change in our bank sponsor arrangement in Q2 2013. A new bank sponsor was obtained and Mexico operations resumed throughout Q3 2013. Our expectation is that Mexico will improve in Q4 2013 as it transitions to the tourist season.

In the prepaid products line of business our focus is diversification both domestically and internationally, to reduce historical reliance on a small group of large volume customers in certain market segments. In early 2014 the Company expects to launch a Prepaid Visa card offering, adding scale and choice for our clients.

We continue to focus on the management and operation of our businesses. DirectCash believes it is well positioned with a strong balance sheet and a steady cash flow stream based on long term contracts, geographically diversity and across a number of industries.

Conference Call

A conference call will be held on Tuesday, November 19, 2013, at 11:30 a.m. Mountain Standard Time (MST) to review third quarter 2013 results. Jeffrey J. Smith, President & CEO, Brenda G. Hughes, Chief Financial Officer, and Amanda J. Gallacher, Vice President, Investments, will host the call.

DirectCash invites participants to listen to the conference call by calling toll-free 1-800-769-8320 or local dial-in: 1-416-340-8527.

Additional GAAP Measure:

DirectCash has presented earnings before interest, taxes, depreciation and amortization ("EBITDA") as a subtotal in its consolidated 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 primary measurement utilized by the holders of our long term debt. The Company has presented EBITDA prior to the deduction for acquisition-related expenses. These expenses relate to the acquisitions of Customers and InfoCash, which resulted in the expansion of the Company into two new primary geographical segments and are non-recurring expenditures. The Company has also presented EBITDA prior to unrealized foreign exchange gains and losses which is consistent with the Company's financial covenants. 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. EBITDA is reconciled to net income in the Company's MD&A for the three and six months ended June 30, 2013 and 2012.

Non-GAAP Measures:

There are a number of financial calculations that are not defined performance measurements under GAAP but which DirectCash 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 total revenue.

Funds from operations and funds from operations per share: DirectCash calculates funds from operations as net income plus or minus depreciation, amortization, deferred income taxes, non-cash finance costs and unrealized foreign exchange losses (gains) and after provision for productive capital maintenance capital 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 coverage 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. DirectCash's 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. Funds from operations is reconciled to net income in the Company's MD&A for the three and six months ended June 30, 2013 and 2012.

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

Productive capital maintenance expenditures: DirectCash differentiates capital expenditures between growth and productive capital maintenance ("Maintenance capital"). There is no such distinction under GAAP. However, DirectCash 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 DirectCash's existing productive capacity, while growth capital is expended to increase DirectCash's productive capacity by adding additional sources of revenue not currently in existence. Current measures of productive capacity that DirectCash 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 productive maintenance capital expenditure may differ from similar computations as reported by other issuers and, accordingly, may not be comparable to productive maintenance capital expenditures as reported by such issuers.


All dividends are eligible dividends for the purpose of the Income Tax Act (Canada) unless indicated otherwise. 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 DirectCash. Continued future distribution of dividends (and the amount of any dividends) is subject to DirectCash's Board of Directors approval. DirectCash's 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 DirectCash's future plans and operations and contains "forward-looking information" relating to future events as defined under applicable Canadian securities legislation. DirectCash's actual results or performance could differ materially from those expressed in, or implied by, this forward-looking information. DirectCash 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 DirectCash's 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 risk and uncertainties are described in DirectCash's Annual information Form for the year ended December 31, 2012 which is available at

The forward-looking information contained in this Press Release is expressly qualified by this cautionary statement. Certain statements that contain words such as "could", "believe", "expects", "expected", "will", "intends", "projects", "anticipates", "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 and the Company's MD&A include statements related to DirectCash's projected growth in operations in the Americas, Australasia and Europe, ability to complete accretive acquisitions on a go forward basis, ability to grow organically though our sales force, expansion of DirectCash's merchant base through new and innovative products and services, impact of acquisitions including realizing on expected synergies and ability to realize the anticipated benefits of 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 obtain improved supplier terms and manage cost structures internationally, ability to increase our product offerings in Australia and the United Kingdom, ability to diversity into new industry segments or to increase diversification in terms of product offerings and the number of customers we serve, the possible increase in capital expenditures for technology and infrastructure or due to regulatory mandated security upgrade changes and the impact of the vault cash rental agreements on the Company's operations, the timing of closing and the anticipated use of proceeds of the above mentioned financing, the ability to close on and the anticipated benefit of the above mentioned credit facility amendment.

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 expenditure requirements based on our view of the age of capital assets currently in use by DirectCash.

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 DirectCash is available on SEDAR ( or DirectCash's website at

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