TORONTO, May 15, 2015 /CNW/ - Posera-HDX Ltd. (TSX: HDX) (the "Company" or "Posera-HDX") announced today its financial results for the three-months ended March 31st, 2015. Posera-HDX is listed on the TSX under the symbol "HDX".
Paul Howell, Chief Executive Officer, reports:
The Company's consolidated recurring revenues for the three-months ended March 31, 2015 was $1,951,564, which represents an increase of $201,251 (11.1%) from $1,750,313 for the three-months ended March 31, 2014. The Company continues to build on our recurring revenue model of stable, predictable recurring revenue streams. Recurring revenue will continue to benefit the business as we focus on enhancing and growing these revenue streams.
Recurring revenue continues to be an increasing component of total revenue. Total revenue was $4,746,061 for the three-months ended March 31, 2015, an increase of $24,437 (0.5%) compared to $4,721,624 for the three-months ended March 31, 2014.
The Company's merchant portfolio processed $268,000,558 in transactions for the three-months ended March 31, 2015, an increase of $95,018,904 (54.9%) compared to $172,981,654 for the three-months ended March 31, 2014. The Company and its sales agent's continue to target higher volume customers during the three-months ended March 31, 2015 when compared to the three-months ended March 31, 2014, which has resulted in the processing volumes increasing, and processing revenue per merchant increasing.
The processing revenue per merchant for the three-months ended March 31, 2015 was $151.96 compared to $132.17 for the three-months ended March 31, 2014, representing an increase of $19.79 (15.0%) per merchant during the comparable periods. Aside from the increase in fees paid to sales agents, the increase in processing revenue per merchant will result in increased margins for the Company, as the costs associated with servicing each merchant are relatively fixed.
Finally, during the latter half of fiscal 2014, the Company's processing partner became a first market mover in the processing industry to require merchants to adhere to Payment Card Industry ("PCI") security standards. As a result the Zomaron division and its agents spent a significant amount of time training up existing merchants to allow them to become PCI compliant. As a result the sales agents focus for a period of time was on customer support rather than new customer acquisitions. Additionally, certain smaller merchants chose to change providers so as to avoid the PCI requirements until mandated by other processors in the industry, which will likely take place in fiscal 2015 and 2016. Therefore new merchant acquisitions continues to grow consistently with past growth, whereas merchant attrition for the three-months ended March 31, 2015 was higher than in the past as a result of PCI. The Company believes that the attrition of merchants due to PCI will not persist to any great extent in the future and when PCI becomes the industry standard the Company with its PCI experience will be properly positioned to transition many new merchants through the PCI compliance process.
The Company continues to focus on integrating the Zomaron business unit, building and acquiring technologies to round out the Company's product and service offering, identifying and negotiating to acquire organizations complimentary to the Company's growth strategy. For Zomaron, gross payment processing fess represents the total payment processing fees that are earned by Zomaron's third party processors, of which Zomaron receives a percentage of these fees.
The Company has stated an objective to recognize the gross payment processing fees as payments processing revenue through future acquisitions. Had the Company recorded the gross payment processing fees as payment processing revenue the Company would have achieved adjusted total revenue of $8,519,361 for the three-months-ended March 31, 2015, an increase of $1,430,75 (20.2%) compared to $7,088,646 for the three-months ended March 31, 2014.(1)
On December 31st 2014 the Company completed the acquisition of Terminal Management Services Ltd. ("TMC"). TMC provides wireless EMV Chip and PIN "pay-at-the-table" ("PATT") credit and debit card processing software and hardware solutions to Canadian merchants nationwide. Based in Markham, Ontario, TMC has deployed its payment software solutions through direct sales and strategic partnerships with the world's largest payment terminal manufacturers. TMC's solutions and services integrate directly with most of the leading restaurant POS applications world-wide. Because TMC's middle-ware product is POS solution agnostic, payment processing relationships can be achieved regardless of the POS solution employed by a particular restaurant.
TMC's solutions will be marketed and deployed in the United States where the requirement for pay-at-the-table solutions is becoming a necessary part of restaurant operations due to the introduction of EMV Chip and PIN requirements. The credit card / merchant liability shift due to take place in October of 2015 will result in merchants needing to upgrade their current payment terminals that are currently purely magnetic stripe readers. There are over 900,000 restaurants in the United States and very few offer pay-at-the-table today.
TMC's product offering will be marketed through Posera-HDX Ltd.'s direct sales team, through the Company's 95 software reseller partners, and through Zomaron's 175 sales agents. Furthermore, the Company intends to offer licence agreements for TMC pay-at-the-table products to large American payment processors as the vast majority currently do not have a PATT solution to offer to their merchant base.
On October 1st 2014 the Company announced that it had signed a letter of intent to acquire Premier Payments Systems Inc. ("Premier") of Oak Brook, Illinois, USA. Founded in 2010, Premier Payment Systems Inc. provides payment processing solutions for debit and credit transactions to clients throughout the United States. Based in the Western Suburbs of Chicago, Illinois Premier is superbly situated to fuel HDX's growth strategy in the United States. The combined company will ramp quickly to offer merchants best-in-breed payment and point-of-sale solutions in time for the upcoming Liability Shift for EMV Chip and PIN slated for October 2015. HDX has developed and deployed EMV Chip and PIN enabled solutions at thousands of merchant locations throughout Europe and Canada over many years and is well prepared to scale the combined organization for the coming opportunity in the USA. Premier has established its own BIN ("Bank Identification Number"), maintains multiple front-end authorization network agreements, holds its payment processing agreements directly with its merchants, performs its own ongoing risk monitoring and underwriting, and has the ability to transfer its merchant processing base from one back-end settlement network and Sponsor Bank to another if necessary.
The Company continues to pursue acquisitions within the point of sale and payments industries although none are specifically named at this time.
Quarterly Highlights and Summary
- The Company's consolidated recurring revenues for the three-months ended March 31, 2015 was $1,951,564, which represents an increase of $201,251 (11.1%) from $1,750,313 for the three-months ended March 31, 2014.
- Total revenue was $4,746,061 for the three-months ended March 31, 2015, up $24,437 (0.5%) from $4,721,624 for the three-months ended March 31, 2014 and down ($618,470) (11.5%) from $5,364,531 for the three-months ended December 31, 2014;
- Total point-of-sale revenue was $4,277,878 for the three-months ended March 31, 2015, down $70,892 (1.6%) from $4,348,770 for the three-months ended March 31, 2014 and down $891,241 (17.2%) from $5,169,119 for the three-months ended December 31, 2014;
- Total payment processing revenue was $468,183 for the three-months ended March 31, 2015, up $95,329 (25.6%) from $372,854 for the three-months ended March 31, 2014 and up $272,771 (139.6%) from $195,412 for the three-months ended December 31, 2014;
- Total gross payment processing fees was $4,241,483 for the three-months ended March 31, 2015, up $1,501,607 (54.8%) from $2,739,876 for the three-months ended March 31, 2014 and down $309,879 (6.8%) from $4,551,362 for the three-months ended December 31, 2014;
- Net loss for the three-months ended March 31, 2015 was a loss of $1,118,878, an increase of $679,893 from a loss of $438,985 for the three-months ended March 31, 2014, and a increase of $525,090 from a loss of $593,788 for the three-months ended December 31, 2014;
- EBITDA loss for the three-months ended March 31, 2015, was $648,020, an increase in the loss by $493,680 from an EBITDA loss of $154,340 for the three-months ended March 31, 2014, and an increase in the loss by $206,944 from an EBITDA loss of $441,076 for the three-months ended December 31, 2014;
- Normalized EBITDA loss for the three-months ended March 31, 2015 was $563,221, an increase in the loss by $353,380 from a Normalized EBITDA loss of $209,841 for the three-months ended March 31, 2014, and an increase in the loss by $628,235 from a Normalized EBITDA income of $65,014 for the three-months ended December 31, 2014;
- Operating expenses were $2,754,202 for the three-months ended March 31, 2015, up $163,554 (6.3%) from $2,590,648 for the three-months ended March 31, 2014, and down $98,801 (3.5%) from $2,853,003 for the three-months ended December 31, 2014; and
- Included in cost of sales and operating expenses for the three-months ended March 31, 2015, March 31, 2014 and December 31, 2014 were certain one-time non-recurring expenditures, one-time revenue adjustment, investment tax credit reassessment, non-cash amortization of intangible assets and property plant and equipment, non-cash stock-based compensation expense totaling $84,799, ($55,501) and $506,090 respectively.
(1) The Company's ability to recognize the gross payment processing fees as payment process revenue for the calculation of adjusted total revenue, would have resulted in a similar increase in the Company's costs of sales resulting in a minimal impact to earnings for the comparative periods.
Non-GAAP Reporting Measures:
Management reports on certain non-GAAP measures to evaluate performance of the Company. EBITDA is a measure commonly reported and widely used by investors as an indicator of a company's operating performance and ability to incur and service debt, and as a valuation metric. While EBITDA has been disclosed herein to permit a more complete comparative analysis of the Company's operating performance and debt servicing ability relative to other companies, investors are cautioned that EBITDA as reported by Posera-HDX may not be comparable in all instances to EBITDA as reported by other companies. For definitions of other Non-GAAP measures, refer to the Company's annual management discussion and analysis for the three and twelve-months ended December 31, 2014 and management discussion and analysis for the three-months ended March 31, 2015.
Additional information on HDX's first quarter 2015 financial results will be available in the financial reports filed by the Company with Sedar at www.sedar.com.
About the Company
HDX is in the business of managing merchant transactions with consumers and facilitating payment. The Company develops and deploys touch screen POS system software and associated enterprise management tools and has developed and deployed numerous POS applications. HDX also provides system hardware integration services, merchant staff training, system installation services, and post-sale software and hardware support services.
HDX leading edge technology also includes prepaid stored value payments solutions, customer self-serve kiosks and "line buster" mobile POS terminals. These products have been designed to dramatically enhance customer throughput and drastically reduce customer queues. These technologies are especially effective in high foot traffic environments that have limited cash register counter space, limited retail square footage, and the absence of a drive through.
HDX develops, deploys, and supports a restaurant POS software known as "Maître 'D" which has been deployed in over 20,000 locations worldwide in eight different languages. The Company sells and services its clients directly, as well as through a network of approximately 79 value added reseller partners in 25 countries with approximately 550 reseller representatives selling, supporting & installing its software.
This discussion includes certain forward-looking statements that are based upon current expectations, which involve risks and uncertainties associated with our business and the environment in which the business operates. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking, including those identified by the expressions "anticipate", "believe", "plan", "estimate", "expect", "intend", and similar expressions to the extent they relate to the Company or its management. The forward-looking statements are not historical facts, but reflect HDX's current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including the matters discussed under "Risks and Uncertainties" in the Annual Information Form to be filed on March 31st 2015 with the regulatory authorities. HDX assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward-looking statements.
For further information: Paul K. Howell, Chief Executive Officer, Posera-HDX Ltd. (HDX), 350 Bay Street, Suite 700, Toronto, Ontario M5H 2S6, (416) 703-6462 ext. 2263