SOURCE: DirectCash Payments Inc.

DirectCash Payments Inc.

August 13, 2015 21:37 ET

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

CALGARY, AB--(Marketwired - August 13, 2015) - DirectCash Payments Inc. ("DCPayments" or the "Company") (TSX: DCI) today announced consolidated financial results for the three and six months ended June 30, 2015.

Financial and Operational Highlights:

  • Improved EBITDA for the three months ended June 30, 2015 to $17.1 million
  • Improved funds from operations payout ratio for the three months ended June 30, 2015 to 56.3% from 60.1% during Q1 2015
  • Reduced Net Debt by 7% from Q1 2015 to $186.2 million
  • Increased ATM transactions by 8% and 5% respectively for the three and six months ended June 30, 2015 compared to the prior year periods
  • Increased the number of active ATMs as at June 30, 2015 by 6% to 21,509 as compared to the prior year
  • Successfully implemented consumer direct charge increases across the network in Australia and Canada over the course of the three months ended June 30, 2015
  • Implemented Dynamic Currency Conversion ("DCC") in Australia and the United Kingdom
  • Successfully launched DC TAG with credit union client in British Columbia
  • Subsequent to the quarter, acquired A$1.84 million of ATM assets, including processing contracts for approximately 250 ATM locations in Australia
  • Subsequent to the quarter, announced a Normal Course Issuer Bid commencing on August 4, 2015 to purchase up to 879,464 common shares

Management's Commentary
"We are pleased with the strong performance seen in the Americas and European segments, as well as the progress management has made in integrating the Eze ATM business, increasing our consumer direct charge fees and launching new products. We continue to focus on growth and expansion of product offerings worldwide. Our payments business continues to provide consistent cash flow and opportunities for growth and diversification," said Jeffrey Smith, DCPayments' President and Chief Executive Officer.

Summary financial and operating results for the three and six months ended June 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   Six months ended  
   June 30   June 30  
   2015   2014   2015   2014  
Summary operating results                 
Active ATM terminals(1)   21,509    20,232    21,509    20,232  
ATM transactions, thousands   32,993    30,660    63,431    60,201  
Other services transactions, thousands(2)   88,965    86,344    167,611    162,888  
                      
    Three months ended    Six months ended  
    June 30    June 30  
    2015    2014    2015    2014  
Summary financial results                    
($ thousands, except for per share amounts)                    
Gross profit  $33,777   $36,310   $66,592   $72,363  
Gross profit margin(3)   48.2%    51.9%    48.9%    52.8%  
EBITDA(4)   17,069    18,813    33,667    38,160  
 EBITDA margin(5)   24.4%    26.9%    24.7%    27.8%  
Net income (loss)   473    1,918    (2,433 )  233  
 Per share, basic and diluted   0.03    0.11    (0.14 )  0.01  
Funds from operations(5)  $11,237   $12,590   $21,774   $26,524  
 Funds from operations per share, basic(5)   0.64    0.72    1.25    1.52  
 Funds from operations per share, diluted(5)   0.64    0.72    1.24    1.51  
Dividends declared   6,332    6,069    12,664    12,137  
 Dividends declared per share   0.36    0.35    0.72    0.69  
Funds from operations payout ratio(5)   56.3%    48.2%    58.2%    45.8%  
Total assets  $380,371   $400,506   $380,371   $400,506  
Total debt(6)   217,511    198,125    217,511    198,125  
Cash   (31,271 )  (2,217 )  (31,271 )  (2,217 )
Net debt(7)  $186,240   $195,908   $186,240   $195,908  
Common shares outstanding, end of period   17,589    17,589    17,589    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, and debit and credit card 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 three and six months ended June 30, 2014, gross profit was positively impacted by non-recurring GST gains in Australia of $0.8 million and $2.4 million, respectively. Excluding this unusual gain, the gross profit for the three and six months ended June 30, 2014 would have been $35.5 million and $70.0 million compared to gross profit of $33.8 million and $66.6 million for the three and six months ended June 30, 2015, respectively.

Funds from operations for the three and six months ended June 30, 2014 was positively impacted by the $1.4 million and $4.5 million after tax non-recurring GST gain in Australia, respectively. Excluding this unusual gain, the funds from operations payout ratio was 54.2% and 54.8% for the three and six months ended June 30, 2014, respectively.

The increase in total debt was due to the funding of the additional BMO branded ATMs and temporary event terminals during the period. 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 the Company rapidly deployed these ATMs.

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 7,858 transacting ATMs as at June 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 7,446 transacting ATMs as at June 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$1.84 million, subject to customary closing purchase price adjustments (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 840 ATMs. As at June 30, 2015 DCPayments had 5,863 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.

During the first quarter of 2015, Cash Store Financial Services Inc. ("CashStore"), a significant customer that was granted protection from its creditors under the Companies' Creditors Arrangement Act ("CCAA") during 2014, sold a large number of its locations to National Money Mart Company ("Money Mart"). Effective February 6, 2015, DCPayments has a transitional service agreement with Money Mart to provide processing and ATM services in approximately 150 Money Mart locations. The contract is currently operating on a month to month basis unless terminated with 30 days prior written notice.

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. During the three months ended June 30, 2015, DCPayments piloted DC TAG as a direct to consumer product and has fully launched this version of the product as of August 2015 in Canada. The Company is focused on diversification in the Australian market, and during the first half 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, August 14, 2015 at 10:00 a.m. Mountain Standard Time (MST) to review first 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, August 21, 2015 by dialing toll-free 1-800-408-3053 or locally 1-905-694-9451 and entering passcode 4807383.

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 six months ended June 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 Company has provided a reconciliation between funds from operations and net income (loss) in the MD&A for the three and six months ended June 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 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