SOURCE: DirectCash Payments Inc.

DirectCash Payments Inc.

August 12, 2016 01:01 ET

DirectCash Payments Inc. Announces Results of Operations for the Three and Six Months Ended June 30, 2016

CALGARY, AB --(Marketwired - August 12, 2016) - DirectCash Payments Inc. ("DCPayments" or the "Company") (TSX: DCI) today announced consolidated financial results for the three and six months ended June 30, 2016.

Financial and Operational Highlights for the Six Months ended June 30, 2016:

  • ATM transactions of 64.5 million, up 2%
  • Other Services transactions of 172.9 million, up 3%
  • Active ATM terminals of 21,575
  • Revenue of $138.2 million, up 2%
  • Renewal of two major contracts during the period; one managed services agreement in Australia and one financial institution in Canada
  • Subsequent to the quarter, extended vault cash rental agreement in Australia for eighteen months through to the end of December 2017
  • Subsequent to the quarter, extended agreement to acquire DirectCash Bank to December 31, 2016

Management's Commentary
"We are pleased with our performance during the first half of the year and our continued ability to generate consistent cash flow and pay sustainable dividends to our shareholders," said Jeffrey Smith, DCPayments' President and Chief Executive Officer. "We continue to focus on growth and expansion of product offerings in our global payments business during 2016."

Summary financial and operating results for the three and six months ended June 30, 2016 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 (

Summary Operating and Financial Results

   Three months ended
June 30
 Six months ended
June 30
   2016  2015  2016  2015
Summary operating results            
Active ATM terminals(1)  21,575  21,509  21,575  21,509
ATM transactions, thousands  32,859  32,993  64,514  63,431
Other services transactions, thousands(2)  90,439  88,965  172,924  167,611
  Three months ended   Six months ended  
  June 30   June 30  
  2016   2015   2016   2015  
Summary financial results                
($ thousands, except for per share amounts)                
Gross profit $32,609   $33,777   $65,495   $66,592  
Gross profit margin(3)  46.9 %  48.2 %  47.4 %  48.9 %
Adjusted EBITDA(4)  16,419    17,069    32,099    33,667  
 Adjusted EBITDA margin(5)  23.6 %  24.4 %  23.2 %  24.7 %
Net income (loss)  340    473    (1,482 )  (2,433 )
 Per share, basic and diluted  0.02    0.03    (0.09 )  (0.14 )
Funds from operations(5) $8,773   $11,237   $18,368   $21,774  
 Funds from operations per share, basic(5)  0.50    0.64    1.06    1.25  
 Funds from operations per share, diluted(5)  0.50    0.64    1.05    1.24  
Dividends declared  6,313    6,332    12,625    12,664  
 Dividends declared per share  0.36    0.36    0.72    0.72  
Funds from operations payout ratio(5)  72.0 %  56.3 %  68.7 %  58.2 %
Total assets $333,224   $380,371   $333,224   $380,371  
Total debt(6)  223,633    217,511    223,633    217,511  
Cash  (8,927 )  (15,535 )  (8,927 )  (15,535 )
Net debt(7) $214,706   $201,976   $214,706   $201,976  
Common shares outstanding, end of period  17,534    17,589    17,534    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.

The increase in total debt from June 30, 2015 to June 30, 2016 was mainly due to: the 2016 funding of the CashStore Financial Services Inc. ("CashStore") settlement payout of $14.5 million, settling all class action lawsuits related to the CashStore, the OneCash acquisition of A$1.9 million in Q3 2015, the GRG acquisition of A$1.9 million in Q1 2016 and the Canadian acquisition of $4.0 million in Q4 2015. The increase in total debt was partially offset by significant repayments made during the periods demonstrating management's efforts in debt reduction and financing cost control. The net debt for June 30, 2016 increased by $12.7 million to $214.7 million from June 30, 2015 for the reasons described above.

DCPayments is one of Canada's leading independent providers of end-to-end transaction processing and payment solutions, and is one of the three largest deployers of ATMs in Canada, with 7,786 transacting ATMs as at June 30, 2016. 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.

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 continues to diversify this business line with plans to launch payment terminals and a mobile payments platform in 2016 and 2017 respectively.

DCPayments is the largest provider of ATMs in Australia and New Zealand with 7,704 transacting ATMs as at June 30, 2016. 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 was granted and issued by the regulator on March 29, 2016. DCPayments has executed an agreement with an third party issuer Australian Financial Institution, which will enable the Company to commence prepaid card offerings in early 2016, further diversifying its payments business.

On February 18, 2016, DCPayments successfully completed the tuck-in acquisition of the ATM business of GRG International Limited ("GRG") in Australia for a 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 provider of non-bank branded ATMs in the United Kingdom and has added in excess of 1,000 ATMs. As at June 30, 2016 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 Friday, August 12, 2016 at 10:00 a.m. Mountain Standard Time (MST) to review first quarter 2016 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 prior to the conference call.

DCPayments invites participants to listen to the webcast of the conference call by entering: in your web browser.

To participate in the Q&A session, please call the conference operator by dialing toll-free 1-866-225-6564 or locally 1-416-340-2219. A replay of the conference call will be available until Thursday, May 19, 2016 by dialing toll-free 1-800-408-3053 or locally 1-905-694-9451 and entering passcode 7761786.

Additional GAAP Measure:
DCPayments has presented adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") as a subtotal in its condensed consolidated statement of operations and comprehensive income (loss). Adjusted 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 Adjusted EBITDA prior to unrealized foreign exchange gains and losses and non-recurring other gains (loss). The Company utilizes this presentation of Adjusted EBITDA because it is consistent with the definition of EBITDA under DCPayments' credit facility agreement of EBITDA. DCPayments has also presented Adjusted 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 condensed consolidated statement of operations and comprehensive income (loss). The Company's Adjusted EBITDA may differ from similar computations as reported by other issuers and, accordingly, may not be comparable to Adjusted 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 and six months ended June 30, 2016.

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.

Adjusted EBITDA margin:
Adjusted EBITDA margin means Adjusted EBITDA expressed as a percentage of Revenue.

Adjusted EBITDA per share:
Adjusted 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 and six months ended June 30, 2016.

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, minor 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).

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

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 ( or DCPayments' website at

Contact Information

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

    Patrick W. Moriarty
    Chief Financial Officer
    Direct Telephone: (905) 461-2285