DirectCash Payments Inc. Announces Results of Operations for the Three and Nine Months Ended September 30, 2012
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CALGARY, ALBERTA, Nov 14 (MARKET WIRE) -- DirectCash Payments Inc. ("DirectCash" or the "Company") (TSX:DCI) today announced consolidated financial results for the three and nine months ended September 30, 2012. Financial and Operational Highlights: -- Increased the three month EBITDA 82% to $18.1 million and the nine month EBITDA 34% to $38.2 million -- Increased the three month Revenue 135% to $67.0 million and the nine month Revenue 49% to $127.0 million -- Business continues to generate solid financial results with Funds from Operations payout ratio of 59% -- Gained market share in the United Kingdom, becoming the 2nd largest non- bank ATM deployer with 5,298 ATMs -- Closed acquisition of Customers Limited in Australia and began integration process -- Syndicated and expanded the Company's credit facilities -- Issued 2,800,000 new shares to the public at $23.35 per share for gross proceeds of $65.4 million -- Issued $125 million aggregate principle amount of 7-year senior unsecured notes bearing interest at 8.125% per annum -- Subsequent to the quarter, acquired 100% of the shares of New Zealand ATM Services Limited Management's Commentary "We are pleased with our results in the third quarter which incorporated our transformative acquisitions of Customers and InfoCash. Our initial results have been very promising and we are pleased with our ability to generate synergies in the business and we look forward to driving shareholder value through the operation of our businesses" said Jeffrey Smith, DirectCash's President and Chief Executive Officer. As expected in the early stages of the integration process following the very significant Australian acquisition, SG&A and operating costs incurred in Q3 2012 included non- recurring expenditures. Personnel costs included approximately $1.0 million in severance costs to streamline operations. This is expected to result in annual cost savings of approximately $3.1 million. The Company also internalized technician services during the quarter which will be reflected in lower costs for the balance of the year. Additionally, to address Australian ATM transaction processing costs we recently successfully renegotiated the contract effecting per transaction fee reductions of approximately 50%, representing annual savings in excess of $1.5 million, and extending the term of the contract. DirectCash will continue to seek to increase efficiencies and to pursue growth through additional accretive acquisitions as opportunities arise. DirectCash's stable, contracted revenue stream and dominant market positions 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, 2012 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 (www.sedar.com). Three months ended Nine months ended September 30 September 2012 2011 2012 2011 ---------------------------------------------------------------------------- Summary operating results ---------------------------------------------------------------------------- Number of machines Active ATM terminals(1) 19,423 7,848 19,423 7,848 Number of transactions ATM transactions 27,929,616 9,013,934 47,732,637 25,998,143 Other transactions 4,386,524 4,947,649 13,584,552 14,419,444 ---------------------------------------------------------------------------- Summary financial results (thousands, except for per share amounts) ---------------------------------------------------------------------------- Revenue 67,017 28,466 126,977 85,251 EBITDA(2) 18,095 9,931 38,246 28,634 EBITDA margin(3) 27.0% 34.9% 30.1% 33.6% Net Income (Loss) (2,468) 4,380 4,656 11,774 Net Income (Loss) attributable to common shareholders (2,096) 4,380 5,028 11,774 Per share, basic (0.14) 0.32 0.35 0.86 Per share, diluted (0.14) 0.32 0.35 0.85 Funds from operations(3) 8,704 8,854 25,033 26,163 Funds from operations per share, basic(3) 0.57 0.64 1.75 1.90 Funds from operations per share, diluted(3) 0.56 0.64 1.74 1.89 Dividends declared 5,418 4,775 14,968 14,324 Dividends declared per share(4) 0.35 0.35 1.04 1.04 Funds from operations payout ratio(4) 62.2% 53.9% 59.8% 54.7% Total assets 436,252 157,774 436,252 157,774 Total long-term debt 199,112 - 199,112 - Common shares outstanding, end of period 16,639 13,839 16,639 13,839 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 1. DirectCash has included statistics only for sites that recoded a transaction in the last calendar month of the period indicated. 2. An additional GAAP measure which is defined in the Additional GAAP Measure section of this press release. 3. A non-GAAP measure which is defined in the Non-GAAP Measures section of this press release. 4. See Dividends section of this press release. Customers Limited Acquisition On July 4, 2012 the Company successfully completed its acquisition of Customers Limited ("Customers") (ASX: CUS), whereby DirectCash acquired all of the outstanding shares of Customers for $1.27 Australian dollars per diluted share in cash. As a result of the acquisition of Customers, the largest deployer of ATMs in Australia, a total of approximately 6,600 ATM sites and related contracts were acquired by DirectCash in Australia and New Zealand. The acquisition provides the opportunity to grow the Customers ATM business platform in Australia and capitalize on the less mature Australian market, where transactions and gross profits per ATM are significantly greater than in the mature Canadian ATM market. On August 8, 2012 DirectCash issued $125 million aggregate principal amount of seven year senior unsecured notes (the "Notes"). The Notes are direct senior unsecured obligations ranking pari passu with all other present and future senior unsecured indebtedness of DirectCash and bear interest at 8.125 % per annum, payable semi- annually in arrears. The net proceeds were used to repay the bond bridge loan drawn in respect of the Customers acquisition. On August 9, 2012 DirectCash completed a private placement of 2,800,000 common shares of the Company for $23.35 per common share. The net proceeds from the issue were used to repay the equity bridge loan, drawn in respect of the Customers acquisition, with the remainder of the proceeds added to working capital. Outlook DirectCash believes it is well positioned with a strong balance sheet and a steady cash flow stream based on long term contracts. DirectCash' focus for the balance of 2012 will be to integrate the acquisitions of Customers and InfoCash, as well as to continue to grow the business in a reasonable and sustainable manner by maintaining current customer relationships and managing our cost structures. In the ATM business, emphasis continues to be on the streamlining of DirectCash's operations as well as continuing to pursue quality accretive acquisitions and additional organic growth within DirectCash's international operations. With the completion of regulatory mandated security upgrade changes in Canada, DirectCash will be positioned to refocus its efforts on growth through quality accretive acquisitions and additional organic growth. As a result of the acquisition of Customers, the largest deployer of ATMs in Australia, a total of approximately 6,600 ATM sites and related contracts were acquired by DirectCash in Australia and New Zealand. The acquisition provides the opportunity to grow the Customers ATM business platform in Australia and capitalize on the less mature Australian market, where transactions and gross profits per ATM are significantly greater than in the mature Canadian ATM market. As a result of the acquisition of InfoCash, a total of approximately 4,700 ATM sites and related contracts were acquired by DirectCash in the United Kingdom. Since the acquisition, DirectCash has grown organically, adding 598 ATMs for a total of 5,298 as at September 30, 2012. This growth positions DirectCash as the second largest deployer of ATMs in the 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. In the prepaid products line of business DirectCash will strive to increase diversification, both in terms of product offerings such as MasterCard prepaid cards, bank accounts and related financial services through DirectCash's strategic alliance with DirectCash Bank, and in terms of the number of customers DirectCash serves in order to reduce DirectCash's dependence on a small group of large volume customers. DirectCash will continue to organically grow the debit terminal business via cross selling to existing customers and through the pursuit of new customer relationships. Quality accretive acquisitions will be pursued as opportunities arise. At the time of acquisition by the Company, Customers held a 47.75% interest in New Zealand ATM Services Limited ("NZ ATM"), which represented a control position. The results of NZ ATM have been consolidated with the results of the Company. On November 12, 2012 the founding shareholders of NZ ATM, NZ ATM and DC Payments Pty Limited ("DC Payments") entered into a Deed of Settlement and Release whereby the founding shareholders sold to DC Payments their 52.25% shareholdings in NZ ATM plus shareholder loans for NZ$1.2 million (approximately $1.0 million) effective immediately. As part of this transaction the Put and Call arrangement between the founding shareholders and DC Payments has been eliminated for no consideration. On November 9, 2012, DirectCash in addition to The CashStore Financial Services Inc. ("CashStore") and DC Bank were named in a class action lawsuit as it relates to payday loans and related fees in the province of Manitoba. DirectCash is indemnified by CashStore and in turn has indemnified DC Bank. DirectCash has retained counsel on this matter. Additional GAAP Measure: DirectCash 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 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 (loss) in the Company's MD&A for the three and nine months ended September 30, 2012 and 2011. 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 (loss) plus or minus depreciation, amortization, deferred income taxes and unrealized foreign exchange losses (gains) and after provision for productive capital maintenance capital expenditures (see discussion below). 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 (loss) in the Company's MD&A for the three and nine months ended September 30, 2012 and 2011. 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 as 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 (see "Operational Highlights"), software and hardware upgrades to existing infrastructure, ATM and debit terminal equipment upgrades necessary to meet changing regulatory requirements, contract extension incentives, 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. Dividends: Beginning January 1, 2011 (starting with the January 31, 2011 record date), shareholders of DirectCash have received monthly payments in the form of dividends, with the initial monthly dividend set at $0.115 per Common Share. 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. As of January 1, 2011, 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 MD&A 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, 2011 which is available at www.SEDAR.com and in the "Key Business Risks" section of the Company's MD&A for the three and nine months ended September 30, 2012. The forward-looking information contained in this MD&A 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 MD&A include statements related to DirectCash's projected growth in international operations in the Americas, Australasia and Europe in the ATM business, projected growth in the prepaid and debit terminal business, ability to complete accretive acquisitions on a go forward basis, expansion of DirectCash's merchant base through new and innovative products, impact of acquisitions in United Kingdom and Australia including realizing on expected synergies, 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 and expected increase in capital expenditures due to regulatory mandated security upgrade changes. 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 budget and projections of increased capital expenditure requirements based on our view of the mandated regulatory security upgrade requirements and 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 (www.sedar.com) or DirectCash's website at www.directcash.net. Contacts: DirectCash Payments Inc. Brian B. Kathol Chief Financial Officer (403) 387-2103 (403) 451-3003 (FAX) firstname.lastname@example.org DirectCash Payments Inc. Amanda J. Gallacher Investor Relations (403) 387-2158 (403) 451-3058 (FAX) email@example.com www.directcash.net Copyright 2012, Market Wire, All rights reserved. -0-
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