D+H Announces Second Quarter 2015 Earnings including results from acquisition of leading payments solutions provider, Fundtech

TORONTO, July 28, 2015 /CNW/ - DH Corporation (TSX:DH) ("D+H" or the "Company"), a leading provider of technology solutions to domestic and global financial institutions, today reported its financial results for the three and six months ended June 30, 2015, including results from the acquisition of Fundtech from April 30, 2015.

"We are very excited to add global capability with a market leading payment hub and cash management solution with the addition of Fundtech to D+H this quarter.We performed well across all of our businesses in Canada in the second quarter, and had solid momentum in bookings in our U.S. lending solutions," said D+H Chief Executive Officer Gerrard Schmid.  "While the Fundtech acquisition only contributed partial results to our second quarter, the integration is proceeding as planned and we are continuing to see strong sales booking activities overall."

Second Quarter Highlights 

The quarter results, in comparison to the same prior year period, include the impacts of Fundtech, the new debt and equity financings related to the acquisition, which created additional interest costs, acquisition costs, organic growth in the Canadian business, Lending Solutions in the Lending and Integrated Core Segment, and the appreciation of the U.S. dollar.

  • Revenues increased 30% to $372.4 million from $286.0 million in the same quarter in 2014. Adjusted revenues(1) totalled $375.2 million, an increase of $83.0 million, or 28%, over the same quarter in 2014.
  • Adjusted EBITDA(1) increased 18% to $110.2 million (29% margin) from $93.0 million (32% margin) compared to the same quarter in 2014.
  • Net income decreased to $6.0 million ($0.06 per share, basic and diluted), from $29.9 million ($0.37 per share, basic and diluted) in the same quarter in 2014 due to acquisition related costs ($19.2 million in the quarter compared to $1.8 million in the same quarter in 2014), increased amortization of intangible assets from the acquisition ($44.7 million in the quarter compared to $28.3 million in the same quarter in 2014), and increased interest expense from issuance of additional loans and convertible debentures to finance the Fundtech acquisition. Common shares were also issued to finance the acquisition, bringing the weighted average shares outstanding to 99.5 million at June 30, 2015, an increase from 80.8 million at June 30, 2014. Adjusted net income(1), which removes acquisition related costs and certain other non-cash amounts including amortization of intangibles, increased by 16% to $59.6 million from $51.5 million in the same quarter in 2014.
  • Adjusted net income per share(1) of $0.60 compares to $0.64 in the same quarter in 2014.
  • Total equity increased to $2.2 billion (shares outstanding = 105.9 million) at June 30, 2015 from $1.1 billion (shares outstanding = 80.8 million) at June 30, 2014.
  • Loans, borrowings, and convertible debentures increased to $2.0 billion at June 30, 2015 from $1.1 billion at June 30, 2014.
  • The net debt to EBITDA(1) ratio was 3.39 at June 30, 2015 as compared to 3.45 at April 30, 2015 (Fundtech acquisition closing) and 2.79 at June 30, 2014.
  • Enterprise value(4) totalled $6.2 billion at June 30, 2015 and $3.7 billion at June 30, 2014

Second Quarter and Year to Date 2015 Highlights

The selected financial information included in this press release is qualified in its entirety by, and should be read together with the Unaudited Condensed Interim Consolidated Financial Statements for the three months and six months ended June 30, 2015, and the MD&A for the three and six months ended June 30, 2015, which can be found at dh.com and in the disclosure documents filed by the Company with the securities regulatory authorities at sedar.com.

Note:

  • The acquisition of Fundtech is reported as a segment called Global Transaction Banking Solutions ("GTBS") Segment.
  • The D+H U.S. segment has been renamed and is now reported as the Lending & Integrated Core ("L&IC") Segment.

Selected Financial Information
(C$ millions unless otherwise indicated, unaudited)  
 Three months ended 
June 30
 Six months ended 
June 30
2015 2014 2015 2014
Revenues $372.4 $286.0 $667.4 $552.2
Adjusted revenues1 $375.2 $292.2 $671.7 $567.9
EBITDA1 $86.4 $87.8 $180.3 $156.8
Adjusted EBITDA1 $110.2 $93.0 $197.1 $171.7
Adjusted EBITDA margin1 29% 32% 29% 30%
Net income $6.0 $29.9 $40.0 $41.9
Adjusted net income1 $59.6 $51.5 $107.0 $90.3
Net income per share, basic and diluted (C$) $0.06 $0.37 $0.43 $0.52
Adjusted net income per share1 (C$) $0.60 $0.64 $1.15 $1.12

Revenues by Segment
and Service Area2, 3 
(C$ millions, unaudited)
Three months ended June 30
Canadian
Segment
Lending &
Integrated Core
Segment
Global
Transaction
Banking
Solutions
Segment
Consolidated
2015 2014 2015 2014 2015  2014  2015 2014
Lending solutions $96.1 $92.5 $76.0 $61.7 - n/a $172.1 $154.3
Payments solutions 81.3 76.2 - - - n/a 81.3 76.2
Integrated core solutions - - 63.9 55.4 - n/a 63.9 55.4
Global transaction banking solutions  - - - - $55.1 n/a 55.1 n/a
Total Revenues  $177.4   $168.8   $139.8   $117.2   $55.1  n/a  $372.4   $286.0 

Adjusted revenues1 by
Segment and Service Area2,3
(C$ millions, unaudited)
Three months ended June 30
Canadian
Segment
Lending
& Integrated
Core Segment
Global
Transaction
Banking
Solutions
Segment
Consolidated
2015 2014 2015 2014 2015  2014  2015 2014
Lending solutions $96.1 $92.5 $77.1 $67.3 - n/a $173.2 $159.8
Payments solutions 81.3 76.2 - - - n/a 81.3 76.2
Integrated core solutions - - 64.0 56.1 - n/a 64.0 56.1
Global transaction banking solutions - - - - $56.6 n/a $56.6 n/a
Total Adjusted revenues1  $177.4   $168.8   $141.2   $123.4   $56.6  n/a  $375.2   $292.2 

Revenues by Segment
and Service Area2, 3 
(C$ millions, unaudited)
Six months ended June 30
Canadian
Segment
Lending
& Integrated
Core Segment
Global
Transaction
Banking
Solutions
Segment
Consolidated
2015 2014 2015 2014 2015  2014  2015 2014
Lending solutions $179.6 $167.9 $150.5 $122.2 - n/a $330.2 $290.1
Payments solutions 155.1 150.9 - - - n/a 155.1 150.9
Integrated core solutions - - 127.1 111.2 - n/a 127.1 111.2
Global transaction banking solutions - - - - $55.1 n/a $55.1 n/a
Total Revenues  $334.7   $318.9   $277.6   $233.4   $55.1  n/a  $667.4   $552.2 

Adjusted revenues1 by
Segment and Service
Area2,3
(C$ millions, unaudited)
Six months ended June 30
Canadian
Segment
Lending
& Integrated
Core Segment
Global
Transaction
Banking
Solutions
Segment
Consolidated
2015 2014 2015 2014 2015  2014  2015 2014
Lending solutions $179.6 $167.9 $153.1 $136.0 - n/a $332.7 $303.9
Payments solutions 155.1 150.9 - - - n/a 155.1 150.9
Integrated core solutions - - 127.4 113.0 - n/a 127.4 113.0
Global transaction banking solutions - - - - $56.6 n/a 56.6 n/a
Total Adjusted revenues1  $334.7   $318.9   $280.4   $249.1   $56.6  n/a  $671.7   $567.9 

L&IC Segment revenues2,3
(US$ millions, unaudited)
 Three months ended 
June 30
  Six months ended  
June 30
2015 2014 2015 2014
Lending solutions $61.8 $56.7 $121.8 $111.4
Integrated core solutions 52.0 50.9 102.9 101.4
L&IC Segment revenues $113.7 $107.5 $224.7 $212.8

L&IC Segment Adjusted revenues1,2,3
(US$ millions, unaudited)
 Three months ended 
June 30
  Six months ended  
June 30
2015 2014 2015 2014
Lending solutions $62.7 $61.7 $123.9 $124.0
Integrated core solutions 52.1 51.5 103.1 103.0
L&IC Segment Adjusted revenues1 $114.8 $113.2 $227.0 $227.0

GTBS Segment revenues2,3
(US$ millions, unaudited)
 Three months ended 
June 30
  Six months ended  
June 30
2015 2014 2015 2014
GTBS Segment revenues1  $44.8 n/a $44.8 n/a

GTBS Segment Adjusted revenues1,2,3
(US$ millions, unaudited)
 Three months ended 
June 30
  Six months ended  
June 30
2015 2014 2015 2014
GTBS Segment Adjusted revenues1  $46.0 n/a $46.0 n/a

Enterprise Value4 and Outstanding Shares
(Enterprise value in C$ millions, unaudited; shares in millions) 
 June 30, 2015   June 30, 2014 
Enterprise Value 4 $6,177 $3,651
Outstanding Shares 105.9 80.8
Three Months Ended June 30, 2015 June 30, 2014
Weighted Average Shares Outstanding 99.5 80.8

1 Non-IFRS measure.  See the "Use of Non-IFRS Financial Information" section of this press release for further details.
2 Totals may not sum due to rounding.
3 Effective October 1, 2014, revenues reported as 'lending solutions' comprise of 'lending processing solutions' and 'banking technology solutions - lending' as reported in prior periods. Revenues reported as 'Integrated Core Solutions' comprise of 'banking technology solutions - enterprise' as reported in prior periods.
4 Non-IFRS measure.

Dividend Reinvestment Plan

On January 14, 2015, the Company announced the adoption of a Dividend Reinvestment Plan which became effective in the first quarter of 2015. The Dividend Reinvestment Plan participation rate for the second quarter of 2015 was approximately 27% of outstanding D+H shares. The dividend declared by D+H in the third quarter of 2015, as described in the "Dividend" section of this press release below, will also be eligible for the Dividend Reinvestment Plan.

At this time, the Company intends to have these common shares issued from treasury at a 4% discount to the weighted average trading price of the common shares on the TSX during the five trading days immediately preceding the dividend payment date. The 4% discount will remain in effect for all cash dividends that may be declared, if any, by the Company's Board of Directors until otherwise announced. To participate in the Dividend Reinvestment Plan, eligible shareholders should refer to plan information on the D+H website at dh.com.  Eligible shareholders who have not previously registered must register on or before September 16, 2015, the dividend record date, to participate in the program for the dividend payable on September 30, 2015.

SUBSEQUENT EVENTS

Dividend

DH Corporation today announced that its Board of Directors has declared a quarterly dividend of $0.32 per common share payable on September 30, 2015 to shareholders of record at the close of business on September 16, 2015. The dividend is an eligible dividend for Canadian income tax purposes.

OUTLOOK

For further information on trends, management's outlook and corporate priorities in 2015, please refer to section 3 of the Management's Discussion and Analysis ("MD&A") for the three months and six months ended June 30, 2015.

MANAGEMENT CONFERENCE CALL AND WEBCAST

Teleconference:

A conference call to review these financial results, including a presentation, will take place at 10:00 a.m. (EST) on Wednesday, July 29, 2015 hosted by Chief Executive Officer Gerrard Schmid and Chief Financial Officer Karen H. Weaver. To access the call, please dial 647-427-7450 (Local/Int'l) or 1-888-231-8191 (toll-free within North America).  A replay of the call will also be available until August 12, 2015 by dialing 416-849-0833 (Local/Int'l) or 1-855-859-2056 (toll-free within North America), with Encore Password 63335124.

Webcast:

The conference call will also be webcast at http://cnw.ca/bGGaV and will be archived for 90 days after the call. The link to the webcast and an accompanying slide presentation will be posted in the Investors section of the D+H website under Events and Presentations at http://www.dh.com/events/investor-events/2015-second-quarter-earnings-conference-call.

INVESTOR  DAY

D+H will be holding its first Investor Day on September 24, 2015 in New York City. The event will be hosted by D+H Chief Executive Officer Gerrard Schmid and will feature the D+H senior management team for presentations and discussion of the company's business and strategy.  The presentations will be webcast live and also accessible by dial-in. Please refer to the details below regarding the webcast, dial-in, and accessing presentation slides on the D+H website.

Webcast:

The Investor Day presentations will be webcast at http://cnw.ca/DLB89 and will be archived for 90 days after the call. The link to the webcast and accompanying slides will be posted in the Investors section of the D+H website under Events and Presentations at http://www.dh.com/investors/events-and-presentations/conference-calls.

Dial-in:

The event will be accessible by dialing 647-427-7450 (Local/Int'l) or 1-888-231-8191 (toll-free within North America).  Accompanying slides will be posted in the Investors section of the D+H website under Events and Presentations at http://www.dh.com/investors/events-and-presentations/conference-calls.  A replay of the call will also be available until October 8, 2015 by dialing 416-849-0833 (Local/Int'l) or 1-855-859-2056 (toll-free within North America), with Encore Password 65638914.

ABOUT D+H

D+H (TSX: DH) is a leading financial technology provider the world's financial institutions rely on every day to help them grow and succeed. Our lending, payments, enterprise and global transaction banking solutions are trusted by nearly 8,000 banks, specialty lenders, community banks, credit unions, governments and corporations. Headquartered in Toronto, Canada, D+H has more than 5,500 employees worldwide who are passionate about partnering with clients to create forward-thinking solutions that fit their needs. With annual revenues of more than $1 billion, D+H is recognized as one of the world's top FinTech companies on IDC Financial Insights FinTech Rankings and American Banker's FinTech Forward ranking. For more information, visit dh.com

USE OF NON-IFRS FINANCIAL INFORMATION

D+H's financial results are prepared in accordance with International Financial Reporting Standards ("IFRS").  D+H reports several non-IFRS financial measures, including Adjusted revenues, EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, Adjusted net income per share, and Debt to EBITDA.  See "Non-IFRS Financial Measures" in D+H's MD&A for the three months ended June 30, 2015 for a more complete description of these terms and for reconciliations to their most directly comparable IFRS measures, where applicable. Any non-IFRS financial measures should be considered in context with the IFRS financial statement presentation and should not be considered in isolation or as a substitute for IFRS revenues, net income or cash flows. Furthermore, D+H's financial measures may be calculated differently from similarly titled financial measures of other companies.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This press release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Statements concerning D+H's objectives, goals, strategies, priorities, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of D+H are forward-looking statements. The words "believe", "expect", "anticipate", "estimate", "intend", "may", "will", "would", "could", "should", "continue", "goal", "objective", and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Risks related to forward-looking statements include, among other things, increased pricing pressures and competition which could lead to loss of contracts or reduced margins; the Company's ability to deliver products and services in line with the changes in the United States of America ("U.S."), Canadian and global banking and financial services industry; the Company's ability to avoid inherent risks in the technology industry related to cyber-security threats and breaches; the Company's dependence on a limited number of large financial institution customers in Canada and dependence on their acceptance of new programs;  declines in the use of personal and business cheques; strategic initiatives being undertaken to grow our business and increase profitability; stability and growth in the real estate, mortgage and other lending markets; the Company's ability to generate cash to invest in the business and at the same time be able to pay dividends and debt repayments; as well as general market conditions, including economic, foreign exchange and interest rate dynamics.  Risks related to forward looking statements also include the ability of the Company to achieve the expected benefits of the acquisition of Fundtech, including (i) further broadening and diversifying the Company's client base and operational capabilities; (ii) accelerating the Company's global expansion strategy with meaningful exposure to markets outside North America; (iii) diversifying the Company's business in terms of product offerings; (iv) broadening the Company's sources of long-term recurring revenues; (v) benefits from an accretion and cash flow perspective (each of which may be impacted by the realization and timing of any potential synergies and the operating performance of the Company and the GTBS segment); (vi) enhanced revenue generation through cross-selling opportunities; and (vii) high free cash flow conversion rate, which the Company expects will enable, along with the Company's Canadian and Lending and Integrated Core operating cash flows, deleveraging, support dividend payments and fund investment for future growth.

Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The documents referred to herein also identify additional factors that could affect the operating results and performance of the Company. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and D+H does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities laws.

D+H has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements. While D+H considers these factors and assumptions to be reasonable based on information currently available, there can be no assurance that actual results will be consistent with these forward-looking statements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause D+H's actual results, performance or achievements, or developments in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements.

All of the forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements or factors contained herein and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company.

REGULATORY FILINGS AND ADDITIONAL INFORMATION

DH Corporation is listed on the Toronto Stock Exchange under the symbol DH. Further information can be found at dh.com and in the disclosure documents filed by DH Corporation with the securities regulatory authorities at sedar.com.

 

SOURCE DH Corporation

For further information:

Contacts:
Karen H. Weaver, Executive Vice President and Chief Financial Officer, D+H
Richard Colgan, Senior Investor Relations Manager, D+H
(416) 696-7700, investorrelations@dh.com or visit our website at dh.com.


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