DirectCash Income Fund announces results of operations for the three and nine months ended September 30, 2007 and change of director



    TSX: DCI.UN

    CALGARY, Nov. 12 /CNW/ - DirectCash Income Fund ("DirectCash" or the
"Fund") today announced consolidated financial results for the three and nine
months ended September 30, 2007. The Fund's unaudited consolidated financial
statements for the three and nine months ended September 30, 2007 and
Management's Discussion & Analysis, as well as additional information about
the Fund are available on SEDAR (www.sedar.com).

    Management's Commentary

    "The third quarter represented operational steps forward for DirectCash
on a number of fronts" said Jeffrey Smith, DirectCash's President and Chief
Executive Officer. "On a year over year basis, we were able to increase the
number of ATMs, debit terminals and prepaid product relationships, as well as
the number of transactions associated with each line of business. Overall
gross profits improved during the quarter and year to date by approximately 2%
and 9% respectively. On a year to date basis, distributable cash flow(1)
continues to track higher than during the prior year. Distributable cash flow
and EBITDA(1) were down for the quarter on a year over year basis, due to a
one time adjustment to our Long-term incentive plan during 2006, which
resulted in a claw back of LTIP expenses during the prior year period. We have
succeeded in adding new customers and product offerings, which has offset the
impact of the change in business practices and ultimate loss of a large
customer in the prepaid products line of business.
    2007 has so far been a year of many successes, during which we spent much
of our efforts solidifying existing cash flows, ensuring our cost structure is
competitive, and introducing new initiatives from which we believe we will
reap the rewards in 2008 and beyond. An example of these initiatives includes
the rollout of our Prepaid MasterCard product, which is just now ramping up
fully. We continue to focus our efforts on sustainable growth across all lines
of business via organic means and through additional accretive acquisitions as
opportunities arise. Our diversified, stable and contracted revenue stream
will continue to provide consistent returns with reasonable long term growth
prospects for our Unitholders."

    Change of Director

    On November 7, 2007 Mr. Jeff Lawson resigned from the Board of DirectCash
Management Inc., the manager of the Fund, in order to pursue his new role as
Managing Director, Investment Banking with Blackmont Capital Inc. Blackmont
Capital Inc. provides research coverage on DirectCash. Mr. Lawson's position
on the Board and Audit Committee will be filled by Mr. Brad Hurtubise, who
most recently held the position of Managing Director, Investment Banking, at
Tristone Capital Inc. DirectCash would like to thank Mr. Lawson for his past
service and contribution to DirectCash's governance and wishes him success in
his new role. We look forward to the contribution to be provided by Mr.
Hurtubise.

    
    For purposes of comparison, we have provided the following operational
    and financial data:

    Selected financial information
    -------------------------------------------------------------------------
    (thousands of Canadian
     dollars, except per     Three months ended         Nine months ended
     unit amounts)               September 30              September 30
                              2007         2006         2007         2006
    -------------------------------------------------------------------------
    Financial Highlights   (unaudited)  (unaudited)  (unaudited)  (unaudited)

    Revenue
      Recurring services
       revenue            $    14,204  $    12,592  $    40,983  $    35,243
      Products revenue          6,381        7,199       19,062       19,522
      Interest income             263           89          557          229
    -------------------------------------------------------------------------
    Total revenue         $    20,848  $    19,880  $    60,602  $    54,994
    -------------------------------------------------------------------------

    Gross profit -
     Recurring services
     and interest         $     8,707  $     8,256  $    25,376  $    23,055
      Gross profit
       margin                   60.2%        65.1%        61.1%        65.0%
    Gross profit -
     products                     430          684        1,749        1,855
      Gross profit
       margin                    6.7%         9.5%         9.2%         9.5%
    -------------------------------------------------------------------------
    Total gross profit    $     9,137  $     8,941  $    27,126  $    24,910
      Total gross
       profit margin            43.8%        45.0%        44.8%        45.3%

    Selling, general
     & administrative           2,663        2,442        8,454        6,935
    Long-term
     incentive plan               457          (17)       1,129        1,129
    Interest                      580          446        1,595        1,016
    -------------------------------------------------------------------------

    EBITDA                $     6,018  $     6,516  $    17,543  $    16,846
      EBITDA margin             28.9%        32.8%        28.9%        30.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings          $       246  $     1,101  $       663  $     1,902
    Net earnings
     per unit             $      0.02  $      0.11  $      0.05  $      0.19
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total assets at
     September 30         $   127,531  $   136,949  $   127,531  $   136,949
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total debt at
     September 30         $    32,090  $    25,964  $    32,090  $    25,964
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total debt net
     of cash at
     September 30         $    20,498  $    15,004  $    20,498  $    15,004
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                             Three months ended         Nine months ended
                                 September 30              September 30
                              2007         2006         2007         2006
    -------------------------------------------------------------------------
    Operational
     Highlights            (unaudited)  (unaudited)  (unaudited)  (unaudited)
    Number of machines
     - end of period
      ATM terminals             5,569        5,017        5,569        5,017
      ATM terminals -
       active in past
       30 days(2)               5,369        4,921        5,369        4,921
      Debit terminals           2,846        2,142        2,846        2,142
      Debit terminals -
       active in past
       30 days(2)               2,765        2,072        2,765        2,072

    Number of
     transactions
     for the period
      ATM transactions      7,662,842    7,490,092   21,889,479   20,848,101
    Debit terminal
       transactions         2,080,212    1,179,580    5,311,000    3,147,373
      Prepaid cash
       card activations       536,036      472,651    1,621,426    1,369,497
      Prepaid cash
       card transactions    1,173,983      980,017    3,651,306    2,827,677
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (2) In addition to total ATM and Debit terminal counts, DirectCash has
        included statistics for sites that only recorded a transaction in the
        past calendar month in order to provide comparison to other industry
        players in the financial transaction processing business, who record
        sites as active in this manner. This has the impact of eliminating
        some seasonal sites or sites temporarily dormant for a number of
        reasons from the count, resulting in a net decrease in ATM and Debit
        terminal totals of 200 and 81 respectively.
    

    On a year over year basis, the number of ATMs under contract increased by
552, of which 127 were added via acquisition, and 425 were added via organic
means. The year over year increase in debit terminal count of 704 units is
primarily due to organic growth, although 189 debit terminals were added via
acquisition on March 30, 2007.
    The respective 13% and 18% respective growth in cash card activations for
the three and nine months ended September 30, 2007 is a result of new customer
relationships and growth within existing relationships. The prepaid MasterCard
program, introduced near the end of the second quarter is continuing to ramp
up and displace some debit card activations. Activation figures include both
prepaid debit and prepaid credit numbers. The respective 20% and 29% increases
in prepaid cash card transactions for the three and nine months ended
September 30, 2007 is due to the same reasons noted above for the increase in
prepaid cash card activations as well as an increase in transactions per card
as prepaid products continue to gain consumer acceptance and confidence.

    Results of Operations for the three and nine months ended
    September 30, 2007

    Revenue

    On an aggregate basis, revenues have increased by 4.9% and 10.2%
respectively for the three and nine months ended September 30, 2007, as
compared to the prior year. Revenue by line of business, which includes both
recurring services and products revenue, is as follows:

    
    -------------------------------------------------------------------------
                               Three months ended          Nine months ended
                                     September 30               September 30
    Revenue by
     LOB (thousands):      2007  % change    2006     2007  % change    2006
    -------------------------------------------------------------------------
    (unaudited)

    ATM Business        $ 9,819     9.2%  $ 8,991  $28,278    12.7%  $25,100
    Prepaid products
     business            10,654     1.1%   10,537   31,114     8.1%   28,786
    Debit terminal
     business               375     6.2%      353    1,210     9.2%    1,108
    -------------------------------------------------------------------------
    Total Revenue       $20,848     4.9%  $19,880  $60,602    10.2%  $54,994
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Revenue by type
     (thousands)
    Recurring
     services           $14,204    12.8%  $12,592  $40,983    16.3%  $35,243
    Products              6,381   -11.4%    7,199   19,062    -2.4%   19,522
    Interest                263   194.7%       89      557   143.5%      229
    -------------------------------------------------------------------------
    Total Revenue       $20,848     4.9%  $19,880  $60,602    10.2%  $54,994
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Revenue - Recurring Services

    Recurring services revenue relates to revenue earned from transaction
processing activities, including ATM, debit terminal and prepaid product
transactions. DirectCash does not break down recurring service revenues by
line of business. For the three and nine months ended September 30, 2007
recurring services revenue rose by $1.6 million (12.8%) and $5.7 million
(16.3%) respectively over the prior year. For the current quarter,
approximately 53% of the increase is attributable to ATM services, with the
balance primarily attributable to increases in prepaid products revenue, and
to a lesser extent, debit terminal revenues. The increase in ATM revenues is
attributable to a combination of acquisitions and organic growth with
acquisitions accounting for 23% of the additional ATMs in the network on a
year over year basis.
    The year to date improvement in revenues related to prepaid product
transactions is split between card activation revenues and related transaction
revenues due to increases in cards activated and a higher corresponding number
of related transactions. The increase is primarily attributable to the first
quarter, which was a result of an increase in business from relatively newer
customer relationships as well as a substantial increase in the seasonal usage
of prepaid cash cards associated with tax refunds. In addition, the prepaid
MasterCard program continued to ramp up during the third quarter, although
much of the revenue displaces existing prepaid debit card revenues. During the
third quarter, increased transactions were partially offset by a decline in
revenues due to the loss of a large customer, as well as a shift in business
and product mix.
    Debit terminal revenues rose during the quarter, due to the acquisition
of debit terminals in the first quarter as well as continued strong organic
growth.
    There is historic seasonality of processing transaction volumes, with the
highest ATM transaction activity typically occurring in the months of March,
April, July and August, and the lowest activity typically occurring in the
months of November, December, January and February. The first and fourth
quarters are traditionally DirectCash's weakest quarters in terms of
processing transactions and gross profitability. The Fund has eliminated the
impact of seasonal fluctuations in cash flows to Unitholders by equalizing
monthly cash distributions. This seasonality is considered when determining
levels of available cash at the end of each reporting period.

    Revenue - Products

    Product revenue includes sales of ATMs and related parts, Debit terminals
and related parts, and prepaid products, which includes the sale of cash cards
and prepaid telecommunications products, both physical ("hard cards") and
electronic ("virtual vouchers"). For the three months ended September 30, 2007
revenue from product sales declined $818 thousand, or 11.4% from the prior
year. The decline is due primarily to a drop in the sales of both hard cards
and virtual vouchers, with lower ATM sales also contributing. ATM sales were
lower than during the prior year due to lower volumes and selling prices,
resulting from lower costs from suppliers, which was largely passed on to
customers, as well as an increased focus on the placement of DirectCash ATMs
versus selling ATMs to merchants. The hard card and virtual voucher decline in
revenues are due to a rationalization of customers to higher margin accounts.
Cash card sales were also reduced as some customers make the transition from
prepaid debit cards to prepaid credit cards. There is currently a backlog of
prepaid MasterCard orders, which will be shipped during the fourth quarter.
    On a year to date basis, revenues declined $461 thousand or 2.4% over the
prior year period. The year to date decline is less pronounced than that for
the most recent quarter and is attributable to a full nine months of hard card
sales as opposed to a partial period in the prior year, as hard cards were not
sold by DirectCash until March 1, 2006. Partially offsetting the improved hard
card sales were lower virtual voucher and ATM sales for the reasons noted
above.

    Gross Profits

    On an aggregate basis, gross profits have increased by 2.2% and 8.9%
respectively for the three and nine months ended September 30, 2007, as
compared to the prior year. Gross profit by line of business, which includes
both recurring services and products revenue, is as follows:

    
    -------------------------------------------------------------------------
                               Three months ended          Nine months ended
                                     September 30               September 30
    Gross profit
     by LOB (thousands):   2007  % change    2006     2007  % change    2006
    -------------------------------------------------------------------------
    (unaudited)

    ATM Business        $ 5,977     6.1%  $ 5,632  $17,270    12.2%  $15,399
      gross profit
       margin             60.9%             62.6%    61.1%             61.3%
    Prepaid products
     business             2,938    -4.6%    3,081    9,067     2.7%    8,832
      gross profit
       margin             27.6%             29.2%    29.1%             30.7%
    Debit terminal
     business               223    -1.8%      227      789    16.2%      679
      gross profit
       margin             59.4%             64.4%    65.2%             61.3%
    -------------------------------------------------------------------------
    Total Gross
     Profit             $ 9,137     2.2%  $ 8,941  $27,126     8.9%  $24,910
      gross profit
       margin             43.8%             45.0%    44.8%             45.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Gross profit by
     type (thousands)
    Recurring services
     and interest       $ 8,707     5.5%  $ 8,256  $25,376    10.1%  $23,055
      gross profit
       margin             60.2%             65.1%    61.1%             65.0%
    Products                430   -37.2%      685    1,749    -5.7%    1,855
      gross profit
       margin              6.7%              9.5%     9.2%              9.5%
    -------------------------------------------------------------------------
    Total gross profit  $ 9,137     2.2%  $ 8,941  $27,126     8.9%  $24,910
      gross profit
       margin             43.8%             45.0%    44.8%             45.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Gross Profitability - Recurring Services

    Gross profit from recurring service and interest revenues for the three
and nine months ended September 30, 2007 was 5.5% and 10.1% respectively
higher than the prior year, due to acquisitions and strong organic growth,
which was partially tempered by higher costs of goods sold. The loss of a
large customer in the prepaid products business resulted in the loss of gross
profits related to prepaid product revenues. The customer in question had
shifted their business practices early in the current year, which resulted in
a partial loss of business, and later terminated their contract with
DirectCash, which is now the subject of litigation in regards to the return of
funds held by DirectCash as security. Management believes DirectCash's net
income risk related to the litigation is immaterial. The loss of gross profits
related to this customer has been largely replaced by DirectCash through solid
growth related to new customer relationships and products. The lower gross
profit margins on a quarterly and YTD basis are primarily attributable to the
prepaid products line of business as a result of a product mix shift towards
lower margin transactions, including a shift in the business practices and
elimination of a large customer as noted above. Additional revenues added in
the debit terminal business via acquisition were also at lower margins than
existing DirectCash terminal accounts.

    Gross Profitability - Products

    Gross profit from product revenues for the three and nine months ended
September 30, 2007 was 37.2% and 5.7% respectively lower than during the prior
year, as a result of a decline in revenues and gross profit margins related to
product mix. Gross profit margins from product revenues for the three months
ended September 30, 2007 were 6.7% versus 9.5% in the prior year. The decline
in margins for the quarter is primarily due to a write off of approximately
$110 thousand of ATM and debit terminal equipment due to obsolescence. In
addition, the decline in high margin cash card sales in the prepaid products
business, as merchants make the transition to prepaid credit cards also
contributed to the lower margins. Lower virtual voucher sales, which are sold
at very low margins, resulted in reduced gross profits, but helped partially
offset the decline in gross profit margins. On a year to date basis, gross
profit margins were 9.2% versus 9.5% in the prior year.
    DirectCash has a strategic focus of keeping ATM and debit terminal prices
as low as possible in order to maximize the number of machines placed in
customer locations. By maintaining relatively low margins on this business, we
believe we will maximize the number of long-term revenue generating processing
and recurring service contracts.

    Selling, General & Administrative expenses ("SG&A")

    For the three and nine months ended September 30, 2007 SG&A expenses
increased 10.8% and 22.5% respectively over the prior year, which is a higher
rate of increase than our revenue growth. Upwards salary and other cost
pressures, particularly in the highly inflationary Alberta marketplace are
primarily responsible for the cost increases over and above those commensurate
with DirectCash's overall growth. As a percentage of gross profits, SG&A
increased during the three months ended September 30, 2007 to 27.6% (YTD -
30.6%) from 27.3% (YTD - 27.8%) during the prior year.

    Long-term incentive plan

    Pursuant to the LTIP, DirectCash sets aside a pool of funds based upon
the amount by which the Fund's per Unit distributable cash flow exceed certain
defined threshold amounts. For the three and nine months ended September 30,
2007, total LTIP expense was $456,627 (2006 - $(17,023)), and $1,128,732
respectively (2006 - $1,129,113). The LTIP expense for the nine months ended
September 30, 2007 is net of proceeds of $11,654 (2006 - nil) from unvested
Units sold in the open market. No unvested Units were reallocated to other
participants. DirectCash calculates the current period LTIP expenditure by
annualizing the year to date financial results over the course of the year and
then pro-rating and accruing the resultant annualized LTIP expenditure in the
current period.
    On September 14, 2006 the base threshold was raised to $1.20 per unit per
fiscal year from $0.95 per unit per fiscal year, resulting in a one time
reversal of LTIP expense for the three months ended September 30, 2006 as
compared to the current year.

    EBITDA

    For the three months ended September 30, 2007, EBITDA decreased by 7.6%
from prior year levels, due to the change in the LTIP calculation undertaken
during the third quarter of 2006. Excluding the impact of the LTIP adjustment,
EBITDA during the current quarter is consistent with the prior year period. On
a year to date basis, EBITDA is 4.1% higher than the prior year, which is
lower than the year over year 8.9% increase in gross profits as a result of
higher SG&A costs. As a percentage of revenue EBITDA has declined to 28.9%
during the third quarter, as compared to 32.8% during the prior year, again
due to higher long term incentive plan expenditures resulting from the one
time adjustment in 2006, and higher SG&A costs as discussed above. On a year
to date basis, EBITDA as a percentage of revenue was 28.9% versus 30.6% for
the same reasons as noted for the most recent quarter with the exception of
LTIP expenditures which are directly comparable on a year to date basis.

    Interest expense

    For the three and nine months ended September 30, 2007 interest expense
has increased 30.0% and 56.9% respectively over 2006 levels due to increased
usage of our acquisition and revolving credit facilities (See "Liquidity and
Capital Resources"). The increase in our revolving credit facility usage is
primarily due to the increase in cash in circulation, resulting from a higher
proportion of DirectCash owned ATMs in our network. This is the result of
placement contracts purchased during the past year, as well as an increased
emphasis during 2006 on organic placement contracts, which often require the
use of DirectCash's cash versus ATMs sold to, and loaded, by merchants. The
increase in the use of our acquisition credit facility is the result of
acquisitions undertaken in 2006 and early 2007. The relatively higher year to
date increase relates to the acquisitions completed in the first quarter of
2007. All DirectCash debt is currently on floating interest rates. A one
percent change in interest rates would result in an approximate $320 thousand
change in interest expense based upon current debt levels.

    Net Earnings

    Net earnings before minority interest for the three and nine months ended
September 30, 2007 were $246,120 and $662,533 respectively, versus $1,376,820
and $2,377,976 during the prior year. Minority interest represents earnings
attributable to holders of Class B Subordinated Partnership Units and
represented 20% of the outstanding units of the Fund on a diluted basis, which
is only relevant for the prior period since all Class B Subordinated
Partnership Units were converted to Exchangeable Partnership Units on
December 31, 2006. The disparity between net earnings and cash distributions
is primarily due to amortization of intangible assets.

    
    Standardized Distributable Cash Flow and Distributable Cash Flow

    -------------------------------------------------------------------------
                              Three months ended           Nine months ended
                                    September 30                September 30
                              2007          2006         2007           2006
    -------------------------------------------------------------------------
    Per consolidated
     financial
     statements:

    Net earnings       $   246,120   $ 1,101,456   $   662,533   $ 1,902,381
    Add/(Deduct):
    Minority interest            -       275,364             -       475,595
    Depreciation
     of equipment          570,278       472,685     1,767,135     1,281,689
    Amortization of
     intangible and
     other assets        4,621,124     4,220,072    13,518,130    12,170,229
    Changes in
     non-cash working
     capital             1,642,390      (640,201)     (892,943)     (974,277)
    -------------------------------------------------------------------------
    Cash provided by
     operations:       $ 7,079,912   $ 5,429,376   $15,054,855   $14,855,617
    Productive
     capacity
     maintenance          (175,801)     (190,504)     (709,776)     (661,359)
    -------------------------------------------------------------------------
    Standardized
     distributable
     cash flow         $ 6,904,111   $ 5,238,872   $14,345,079   $14,194,258
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Per unit           $    0.5536   $    0.4201   $    1.1502   $    1.1381
    Changes in
     non-cash working
     capital            (1,642,390)      640,201       892,943       974,277
    Deferred rent
     expense                (6,625)            -       (19,875)            -
    -------------------------------------------------------------------------
    Distributable
     Cash Flow         $ 5,255,096   $ 5,879,073   $15,218,147   $15,168,535
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Per Unit           $    0.4214   $    0.4714   $    1.2202   $    1.2162
    Distributions
     declared          $ 4,302,695   $ 4,115,621   $12,908,085   $11,598,568
    Distributions
     declared per unit $    0.3450   $    0.3300   $    1.0350   $    0.9300
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Standardized
     Distributable
     Cash Flow
     Payout ratio            62.3%         78.6%         90.0%         81.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributable
     Cash Flow
     Payout Ratio            81.9%         70.0%         84.8%         76.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------


                      Cumulative(3)
    -------------------------------
    Per consolidated
     financial
     statements:

    Net earnings       $ 4,016,017
    Add/(Deduct):
    Minority interest      838,372
    Depreciation
     of equipment        4,702,013
    Amortization of
     intangible and
     other assets       44,416,065
    Changes in
     non-cash working
     capital            (2,650,256)
    -------------------------------
    Cash provided by
     operations:       $51,322,211
    Productive
     capacity
     maintenance        (2,451,394)
    -------------------------------
    Standardized
     distributable
     cash flow         $48,870,817
    -------------------------------
    -------------------------------
    Per unit           $    3.9186
    Changes in
     non-cash working
     capital             2,650,256
    Deferred rent
     expense               (19,875)
    -------------------------------
    Distributable
     Cash Flow         $51,501,198
    -------------------------------
    -------------------------------
    Per Unit           $    4.1295
    Distributions
     declared          $42,187,611
    Distributions
     declared per unit $    3.3827
    -------------------------------
    -------------------------------

    Standardized
     Distributable
     Cash Flow
     Payout ratio            86.3%
    -------------------------------
    -------------------------------

    Distributable
     Cash Flow
     Payout Ratio            81.9%
    -------------------------------
    -------------------------------
    (3)Since the Fund's initial public offering in December, 2004.
    

    Distributions typically exceed net earnings as a result of non-cash
expenses, such as depreciation of equipment and amortization of intangible
assets. These non-cash expenses result in a reduction to net earnings, with no
impact on cash flow from operating activities. DirectCash's policy is to
distribute all available cash from operations after cash required to maintain
productive capacity, working capital reserves and other reserves as considered
advisable by DirectCash's Board, which reflects the difference between
distributions declared and distributable cash flow. The higher distributable
cash flow payout ratio in 2007 versus 2006 reflects higher year to date
distribution levels in 2007 as compared to the prior year. Due to seasonality
considerations, first and fourth quarter payout ratios are typically the
highest, excluding future changes to distribution levels. Since inception, the
Fund has distributed 81.9% of its distributable cash flow to holders of units,
exchangeable partnership units and Class B subordinated partnership units.
    Cash distributions and maintenance capital programs have been
historically funded via cash from operations, while increases to productive
capital maintenance have primarily been funded with debt. Over time,
additional borrowings and equity issues may be required to increase productive
capacity.
    Neither standardized distributable cash flow nor distributable cash flow
can be assured. See Key Business Risks for a list of factors which could
negatively impact cash flows. The Fund intends to utilize its credit
facilities as part of its capital structure in order to fund future capital
growth, operating within the covenants of its credit facility, thus enhancing
distributable cash flow from operations.
    Since inception, 100% of the Fund's distributions declared are considered
other income. The consolidated excess of the carrying value of the Fund's
equipment, intangible and other assets over their tax basis is approximately
$14.6 million.

    
    Non-Cash Working Capital

    The change in year to date 2007 non-cash working capital is as follows:

    -------------------------------------------------------------------------
                                    September 30,  December 31,
    As of:                              2007           2006         Change
    -------------------------------------------------------------------------
    Accounts receivable              $ 2,515,987   $ 2,788,505   $  (272,518)
    Loans receivable                     626,684       590,049        36,635
    Inventories                        4,482,732     3,975,700       507,032
    Prepaid expenses                   1,025,862       846,752       179,110
    Accounts payable and
     accrued liabilities              (5,487,582)   (5,943,572)      455,990
    -------------------------------------------------------------------------
                                       3,163,683     2,257,434       906,249
    Acquisitions and other                                           (13,306)
    -------------------------------------------------------------------------
    Change in non-cash
     working capital                                             $   892,943
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Non-cash working capital is volatile between periods and is dependant
upon factors such as short term inventory requirements, the timing of bulk
inventory shipments, and the timing of accounts receivable collections and
payment of liabilities. In addition prepaid expenses can vary dependant upon
the requirement for deposits and the timing of prepaid interest on bankers
acceptances related to the acquisition credit facility. The year to date
increase in inventory relates to additional inventory held resulting from a
new location in Winnipeg and a periodic build up. Inventory levels are
expected to gradually subside from current levels. The reduction in accounts
payable is due primarily to the funding of the 2006 long term incentive plan
and timing of vendor payments.
    Since the Fund's inception in December, 2004 non-cash working capital has
grown by approximately $2.7 million for the reasons noted above as well as the
requirement for additional working capital as the Fund has grown its
operations. In addition, there were considerable accrued costs of going public
that were part of the Fund's initial working capital calculation, with the
subsequent payment resulting in an increase in non-cash working capital.
Fluctuations in the Fund's non-cash working capital requirements are funded
with DirectCash's revolving credit facility.

    
    Capital Expenditures

    -------------------------------------------------------------------------
                             Three months ended         Nine months ended
                                 September 30              September 30
                              2007         2006         2007         2006
    -------------------------------------------------------------------------
    Per consolidated
     financial statements:
    Acquisitions -
     net of cash          $   205,000  $   837,500  $ 5,458,383  $12,461,737
    Other capital
     expenditures             390,676      552,812    1,509,741    1,751,870
    Other intangible
     expenditures             243,470      134,477      672,052      206,464
    -------------------------------------------------------------------------
                          $   839,146  $ 1,524,789  $ 7,640,176  $14,420,071
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Split between growth
     and maintenance:
    Growth capital        $   663,345  $ 1,334,285  $ 6,930,400  $13,758,712
    Productive capital
     maintenance              175,801      190,504      709,776      661,359
    -------------------------------------------------------------------------
                          $   839,146  $ 1,524,789  $ 7,640,176  $14,420,071
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Growth capital expenditures relate to acquisitions and other expenditures
that increase DirectCash's productive capacity, while productive capital
maintenance expenditures maintain productive capacity at existing levels. Full
year maintenance capital expenditures are reasonably predictable with large
lead times typically provided for project completion; however, inter-period
expenditures vary significantly depending upon project timing. Growth capital
expenditures vary widely between periods due to the volatility of acquisition
opportunities.

    Acquisitions

    During the quarter ended September 30, 2007 there was very little
acquisition activity. The only acquisition activity pertained to the buyout of
an independent contractor's right to ongoing revenue streams associated from
ATM contracts for cash consideration of $205,000.
    On February 23, 2007 DirectCash indirectly acquired the ATM and debit
terminal assets of Selectech Inc. ("Selectech") operating out of Winnipeg,
Manitoba for cash consideration of approximately $3.2 million subject to
normal course purchase adjustments. Selectech was an ATM and debit terminal
distributor of DirectCash which operated 399 ATMs and 15 debit terminals under
the DirectCash banner. DirectCash took over the leased premises of Selectech
and will operate the Winnipeg location as a DirectCash regional service
centre.
    On March 30, 2007, DirectCash acquired the ATM and Debit terminal assets
from Toronto, Ontario based NetConnect Services Inc. ("NetConnect") for cash
consideration of approximately $1.6 million subject to normal course purchase
adjustments. Acquired assets included 106 ATM transaction processing contracts
and 189 debit terminal transaction processing contracts previously operating
under the NetConnect banner.

    
    Summary of Quarterly Results

    -------------------------------------------------------------------------
    (thousands of
     Canadian dollars,                             2007                2006
     except per unit amounts)             Q3        Q2        Q1        Q4
    -------------------------------------------------------------------------
    Revenues
      ATM business                    $  9,819  $  9,589  $  8,870  $  8,633
      Prepaid products business         10,654    10,024    10,435     9,925
      Debit terminal business              375       456       379       363
    -------------------------------------------------------------------------
                                      $ 20,848  $ 20,070  $ 19,684  $ 18,921
    Gross Profit
      ATM business                    $  5,977  $  5,994  $  5,299  $  4,986
                                         60.9%     62.5%     59.7%     57.8%
      Prepaid products business          2,938     2,906     3,223     3,210
                                         27.6%     29.0%     30.9%     32.3%
      Debit terminal business              223       313       253       279
                                         59.4%     68.6%     66.8%     76.9%
    -------------------------------------------------------------------------
    Total Gross Profit                $  9,137  $  9,214  $  8,775  $  8,475
                                         43.8%     45.9%     44.6%     44.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    EBITDA                            $  6,018  $  5,918  $  5,607  $  5,788
      EBITDA margin                      28.9%     29.5%     28.5%     30.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings before minority interest      246       191       226       580
    Minority interest                        -         -         -      (115)
    -------------------------------------------------------------------------
    Net earnings                      $    246  $    191  $    226  $    465
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings per unit,
      basic and diluted               $   0.02  $   0.02  $   0.02  $   0.05
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributions declared
      Trust units                     $  2,492  $  2,271  $  1,936  $  1,936
      Exchangeable partnership units     1,811     2,032     2,367     1,506
      Class B subordinated
       partnership units                     -         -         -       860
    -------------------------------------------------------------------------
                                      $  4,303  $  4,303  $  4,303  $  4,303
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributions declared
     per unit, basic and diluted      $ 0.3450  $ 0.3450  $ 0.3450  $ 0.3450
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    (thousands of
     Canadian dollars,                            2006                 2005
     except per unit amounts)             Q3        Q2        Q1        Q4
    -------------------------------------------------------------------------
    Revenues
      ATM business                    $  8,991  $  9,012  $  7,097  $  7,429
      Prepaid products business         10,537    10,311     7,939     5,331
      Debit terminal business              352       403       352       291
    -------------------------------------------------------------------------
                                      $ 19,880  $ 19,726  $ 15,388  $ 13,051
    Gross Profit
      ATM business                    $  5,631  $  5,394  $  4,370  $  4,281
                                         62.6%     59.9%     61.6%     57.6%
      Prepaid products business          3,078     3,011     2,730     2,112
                                         29.2%     29.2%     34.4%     39.6%
      Debit terminal business              227       250       201       133
                                         64.5%     62.0%     57.1%     45.7%
    -------------------------------------------------------------------------
    Total Gross Profit                $  8,936  $  8,655  $  7,301  $  6,526
                                         44.9%     43.9%     47.4%     50.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    EBITDA                            $  6,516  $  5,583  $  4,747  $  4,239
      EBITDA margin                      32.8%     28.3%     30.8%     32.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings before minority interest    1,377       572       429       304
    Minority interest                     (275)     (114)      (86)      (61)
    -------------------------------------------------------------------------
    Net earnings                      $  1,101  $    457  $    343  $    243
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings per unit,
      basic and diluted               $   0.11  $   0.05  $   0.03  $   0.02
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributions declared
      Trust units                     $  1,852  $  1,740  $  1,628  $  1,543
      Exchangeable partnership units     1,440     1,353     1,266     1,200
      Class B subordinated
       partnership units                   824       773       723       686
    -------------------------------------------------------------------------
                                      $  4,116  $  3,866  $  3,617  $  3,429
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributions declared
     per unit, basic and diluted      $ 0.3300  $ 0.3100  $ 0.2900  $ 0.2750
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Liquidity and Capital Resources

    Management believes that the funds generated from operations will be
sufficient to allow it to meet ongoing requirements for working capital,
maintenance capital expenditures including investments in technology capital,
interest expense, and cash distributions to Unitholders. DirectCash's actual
cash generated from operations will be dependent upon future financial
performance, which in turn will be subject to financial, tax, business and
other factors.
    As of September 30, 2007, DirectCash utilized approximately $33.1 million
of a total available credit facility of $58.0 million. A summary of
DirectCash's available credit at September 30, 2007 is as follows:

    
    -------------------------------------------------------------------------
                                      Utilized        Limit       Available
    -------------------------------------------------------------------------
    Revolving credit facility        $ 9,097,131   $18,000,000   $ 8,902,869
    Acquisition credit facility       23,989,324    40,000,000    16,010,676
    -------------------------------------------------------------------------
                                     $33,086,455   $58,000,000   $24,913,545
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Included in the revolving credit facility utilization is a $US
1.0 million (CDN$ 996,300) letter of credit in favour of MasterCard
International paid on behalf of All Trans Credit Union Ltd., pertaining to
DirectCash's prepaid MasterCard program. The revolving credit facility is
demand in nature and is utilized for ATM cash machine loading, working capital
requirements and commercial letters of credit. The revolving credit facility
bears interest at the Bank's prime lending rate.

    (1)Non-GAAP measures
    --------------------
    There are a number of financial calculations that are not defined
performance measurements under Canadian generally accepted accounting
principles ("GAAP") but which Management believes are useful and accepted
performance measurements utilized by the investing public in assessing the
overall financial performance of Income Trusts.

    EBITDA

    EBITDA represents gross profits less selling, general and administrative
expenses ("SG&A) and long-term incentive plan expenses, and is not a defined
performance measure under GAAP. EBITDA specifically excludes depreciation,
amortization, income taxes and interest expense. The Fund'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.

    Standardized distributable cash flow and standardized distributable cash
    flow per unit

    On July 6, 2007, the Canadian Securities Administrators ("CSA") published
revised National Policy Statement 41-201 Income Trusts and Other Direct
Offerings that includes guidance around distributable cash flow measures and
their related disclosure. In accordance with the interpretive release issued
by the Canadian Institute of Chartered Accountants ("CICA"), we have
calculated a distributable cash flow measure called Standardized Distributable
Cash Flow and have included it as an additional disclosure. Standardized
Distributable Cash Flow is calculated as cash flow from operations including
the effect of changes in non-cash working capital less total capital
expenditures required to preserve productive capacity, and restrictions on
distributions resulting from compliance covenants and minority interests. Due
to normal course changes of non-cash working capital between periods,
Standardized Distributable Cash Flow has the potential to be volatile between
periods compared to the Fund's existing measure of Distributable Cash Flow,
which is calculated as cash flow from operations excluding the impact of
non-cash working capital changes less productive capital maintenance
requirements (See discussion below) and changes in deferred rent expense. In
order to reconcile the two measures, we have calculated Standardized
Distributable Cash Flow and reconciled it to Distributable Cash Flow.

    Distributable cash flow and distributable cash flow per unit

    Distributable cash flow and distributable cash flow per unit are non-GAAP
measures generally used by Canadian open-ended income funds as an indicator of
financial performance. Readers are cautioned that distributable cash flow is
not a defined performance measure under GAAP, and that distributable cash flow
cannot be assured. The Fund calculates distributable cash flow as equal to the
consolidated funds flow from operations before changes in non-cash working
capital, after provision for productive capital maintenance capital
expenditures (See discussion below). The Fund's distributable cash flow and
distributable cash flow per unit may differ from similar computations as
reported by other issuers and, accordingly, may not be comparable to
distributable cash flow and distributable cash flow per unit as reported by
such issuers.
    Unitholders receive cash distributions sourced from distributions made by
DirectCash LP indirectly to the Fund. The Fund's policy is to distribute, to
the maximum extent possible, the cash earned from operations to Unitholders,
less amounts estimated to be required for expenses, productive capital
maintenance, cash redemptions or repurchases of Units, any current tax
liability, or other obligations and any reasonable reserves established. The
Fund makes monthly cash distributions to Unitholders on the last business day
of each month to Unitholders of record on the last business day of the
preceding month. Currently distributions are set at $0.115 per Unit per month
($1.38 per Unit annualized). Distributions are funded from cash flows
generated by the operation of the business.

    Productive capital maintenance expenditures

    DirectCash differentiates capital expenditures between growth and
productive capital maintenance ("maintenance capital"). There is no such
distinction under GAAP, however Management believes it is important to
differentiate between them as maintenance capital expenditures represent a
discretionary adjustment to distributable cash flow while growth capital does
not. Maintenance capital expenditures are defined as expenditures required to
service and maintain our existing productive capacity, while growth capital is
expended to increase our 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"). Additional measures are being developed and
quantified. 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 are some examples of maintenance capital expenditures. 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 productive capital maintenance expenditure is
not a defined performance measure under GAAP. The Fund's computation of
productive maintenance capital expenditure may differ from similar
computations as reported by other issuers and, accordingly, may not be
comparable to maintenance capital expenditures as reported by such issuers.

    Forward Looking Statements

    Except for the historical and present factual information, certain
statements contained herein are forward-looking. Such forward-looking
statements are not guarantees of future performance and involve a number of
known and unknown risks and uncertainties which may cause the actual results
of the Fund in future periods to differ materially from any projections
expressed or implied by such forward-looking statements and therefore should
not be relied upon. Any forward-looking statements are made as of the date
hereof and the Fund does not undertake any obligation to publicly update or
revise such statements to reflect new information, subsequent events or
otherwise, except as required pursuant to applicable securities laws.
    Additional information about the Fund is available on SEDAR
(www.sedar.com) or the Fund's website at www.directcash.net.





For further information:

For further information: Arie Prins, Chief Financial Officer, DirectCash
Management Inc., Manager of DirectCash Income Fund, Direct: (403) 387-2103,
e-mail: arie@directcash.net

Organization Profile

DIRECTCASH INCOME FUND

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