DirectCash Payments Inc. Announces Results of Operations for the Three and Nine Months Ended September 30, 2012

Wed Nov 14, 2012 7:30am EST

* Reuters is not responsible for the content in this press release.

  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 
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Summary operating results                                                   
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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 
----------------------------------------------------------------------------
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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)
bkathol@directcash.net

DirectCash Payments Inc.
Amanda J. Gallacher
Investor Relations
(403) 387-2158
(403) 451-3058 (FAX)
investorrelations@directcash.net
www.directcash.net

Copyright 2012, Market Wire, All rights reserved.

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