Stock Exchange Symbol: DH
Website: www.dhltd.com
TORONTO, May 7, 2013 /CNW/ - Davis + Henderson Corporation ("D+H" or the
"Corporation" or the "Company") today reported solid financial results
for the three months ended March 31, 2013 that were consistent with its
strategic agenda of becoming a leading financial technology ("FinTech")
provider to the North American financial services marketplace.
"Year-over-year growth in revenues, EBITDA1 and Adjusted EBITDA1 in the first quarter reflected positive progress in building our
customer base in the United States organically and through acquisitions
and efficiently serving our Canadian customers with important enabling
solutions," said Gerrard Schmid, Chief Executive Officer. "As
anticipated, D+H continued to emphasize customer service, technology
development and cost effectiveness in delivering these results."
"We continued to realize meaningful benefits from recent
transformational and integration activities and are deploying savings
to fund growth and innovation," said Brian Kyle, Chief Financial
Officer. "We also took two important steps in the quarter to improve
our FinTech standing. We acquired the remaining shares of Compushare
Inc. on January 29th, giving D+H new cloud computing solutions for the FinTech marketplace
and we reached an agreement to sell non-strategic assets on March 7th to sharpen our FinTech focus. This transaction is scheduled to close
during the second quarter."
First Quarter Highlights
-
Revenue from continuing operations was $171.7 million, an increase of
$6.3 million, or 3.8%, compared to $165.3 million for the same quarter
in 2012 and reflected U.S. Segment revenue growth driven by the
inclusion of revenues from Compushare Inc. ("Compushare") and Avista
Solutions, Inc. ("Avista") and organic growth in Point of Sale ("POS")
Software as a Service ("SaaS") revenues.
-
Income from continuing operations of $16.4 million ( $0.2775 per share)
increased by $1.3 million, or 8.3%, compared to $15.2 million ( $0.2562
per share) for the same period in 2012.
-
Net income of $5.7 million ( $0.0969 per share) decreased by $9.2
million, or, 61.6% compared to $14.9 million ( $0.2521 per share) for
the same quarter in 2012, primarily due to loss from discontinued
operations of $10.7 million, partially offset by a gain of $1.6 million
related to the remeasurement to fair value of the previously held
equity interest in Compushare, recognized upon the acquisition of the
remaining outstanding shares in January 2013.
-
EBITDA was $42.0 million (24.5% margin), compared to $40.2 million (24.3%
margin) for the same quarter in 2012. EBITDA growth reflected the
inclusion of Compushare and Avista, continued growth from other SaaS
businesses and savings realized from integration and transformation
initiatives.
-
Adjusted EBITDA was $43.0 million (25.1% margin), an increase of $2.0
million, or 5.0%, compared to $41.0 million (24.8% margin) for the same
period in 2012.
-
Adjusted net income1 of $23.1 million increased by $1.3 million, or 5.9%, compared to the
same period in 2012. On a per share basis, Adjusted net income
increased to $0.3901 per share, from $0.3682 per share in the first
quarter of 2012.
-
During the first quarter of 2013, D+H paid a dividend of $0.32 per share
to its shareholders. During the same period in 2012, D+H paid $0.31
per share.
-
D+H was recently ranked 24th among the Top 250 Canadian Information and
Communication Technology companies, as well as number one in the
listing of Top 5 Canadian SaaS companies in the 2013 edition of the
Branham300 rankings.
D+H's unaudited condensed interim consolidated financial statements for
the first quarter of 2013, accompanying notes to the financial
statements and management's discussion & analysis ("MD&A") along with
the supplementary financial information will be available today at www.dhltd.com and tomorrow on www.sedar.com.
For a more detailed discussion of the results and management's outlook,
please see the MD&A below.
|
|
|
|
|
|
|
|
|
1
|
D+H's financial results are prepared in accordance with IFRS. D+H
reports several non-IFRS financial measures, including EBITDA, Adjusted
EBITDA and Adjusted net income used above. Adjusted EBITDA is
calculated as EBITDA, adjusted to remove certain items of note such as
acquisition-related and other charges, including transaction costs and
retention expenses related to acquisitions, corporate development
charges related to strategic acquisition initiatives, business
integration charges, and expenses associated with cost-realignment
initiatives ,all of which are not considered to be part of normal
course of operations. Adjusted net income is calculated as net
income, adjusted to remove certain non-cash items and certain items of
note as described above, discontinued operations, gain on remeasurement
of the previously held equity interest in Compushare, and the related
tax effects of these adjustments including tax effects of acquisitions
and corporate conversions. These items are excluded in calculating
Adjusted EBITDA and Adjusted net income as they are not considered
indicative of the underlying business performance for the period being
reviewed and management believes that excluding these adjustments is
more reflective of ongoing operating results. 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 net income or cash flows. Further, D+H's measures
may be calculated differently from similarly titled measures of other
companies. See Non-IFRS Financial Measures for a more complete
description of these terms.
|
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, 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"
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. These
forward-looking statements are subject to important assumptions,
including the following specific assumptions: the ability of D+H to
meet its revenue, "EBITDA", "Adjusted EBITDA" and "Adjusted net income"
targets (see Non-IFRS Financial Measures for a more complete
description of the terms EBITDA, Adjusted EBITDA and Adjusted net
income); general industry and economic conditions; changes in D+H's
relationship with its customers and suppliers; pricing pressures and
other competitive factors; the anticipated effect of acquisitions on
the financial performance of D+H; and the expected benefits arising as
a result of acquisitions. 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.
Risks related to forward-looking statements include, among other things,
challenges presented by declines in the use of personal and business
cheques; the Company's dependence on a limited number of large
financial institution customers and dependence on their acceptance of
new programs; strategic initiatives being undertaken to meet the
Company's financial objective; stability and growth in the real estate,
mortgage and lending markets; increased pricing pressures and increased
competition which could lead to loss of contracts or reduced margins;
as well as general market conditions, including economic and interest
rate dynamics. Given these uncertainties, readers are cautioned not to
place undue reliance on such forward-looking statements. The documents
incorporated by reference 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.
All of the forward-looking statements made in this press release and the
documents incorporated by reference herein 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.
Conference Call
D+H will discuss its financial results for the three months ended March
31, 2013 via conference call at 10:00 a.m. EST (Toronto time) on
Wednesday, May 8, 2013. The number to use for this call is 647-427-7450
for Local / International callers or 1-888-231-8191 for US / Canada
callers. The conference call will be hosted by Gerrard Schmid, Chief
Executive Officer and by Brian Kyle, Chief Financial Officer. The
conference call will also be available on the web by accessing CNW
Group's website www.newswire.ca/en/webcast/detail/1140931/1245367. For anyone unable to listen to the scheduled call, the rebroadcast
number will be: 416-849-0833 for Toronto area callers, or 1-855-859-2056 for all other callers, with
Encore Password 33553731. The rebroadcast will be available until
Wednesday May 22, 2013. An archive recording of the conference call
will also be available at the above noted web address for one month
following the call and a text version of the call will be available at www.dhltd.com.
ADDITIONAL INFORMATION
Additional information relating to the Company, including the Company's
most recently filed Annual Information Form, is available on SEDAR at www.sedar.com.
MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis ("MD&A") of financial
condition and results of operations has been prepared with an effective
date of May 7, 2013 and should be read in conjunction with Davis +
Henderson Corporation's (the "Corporation" or the "Company" or "Davis +
Henderson" or "D+H" or the "Business" or "we" or "our") MD&A in the
Annual Report for the year ended December 31, 2012, dated February 26,
2013, and the unaudited condensed interim consolidated financial
statements for the three months ended March 31, 2013. External
economic and industry factors remain substantially unchanged from those
described in the annual MD&A and the Corporation's most recently filed
Annual Information Form, except as described herein.
NON-IFRS FINANCIAL MEASURES
The information presented within the tables in this MD&A include certain
adjusted financial measures such as "EBITDA" (Income from continuing
operations excluding interest, taxes, depreciation and amortization and
fair value adjustments of interest-rate swaps which are directly
related to interest expense, income from investment in an associate and
gain on remeasurement of previously held equity interest in an
associate), and adjusted financial measures such as "Adjusted EBITDA"
(EBITDA adjusted to remove acquisition-related and other charges,
including expenses incurred in connection with cost-realignment
initiatives, corporate development expenses related to strategic
acquisition initiatives, certain retention and incentive expenses,
transaction costs and business integration costs incurred in connection
with acquisitions, all of which are not considered to be incurred in
the normal course of operations and are not indicative of the
underlying business performance), "Adjusted net income" (net income
before certain non-cash charges such as amortization of intangibles
from acquisitions and fair value adjustments of interest-rate swaps and
certain items of note such as acquisition-related and other charges,
discontinued operations, including tax effects of these items and tax
effects of acquisitions and corporate conversion), and "Adjusted net
income per share", all of which are not defined terms under
International Financial Reporting Standards ("IFRS").
These non-IFRS financial measures should be read in conjunction with the
Consolidated Statements of Income. See the reconciliation of EBITDA,
Adjusted EBITDA and Adjusted net income to the most directly comparable
IFRS measure, "net income", in the "Operating Results" section of this
MD&A.
Management believes these supplementary measures provide useful
additional information related to the operating results of the
Corporation. Management uses these subtotals as measures of financial
performance and as a supplement to the Consolidated Statements of
Income. Investors are cautioned that these measures should not be
construed as an alternative to using net income as a measure of
profitability or as an alternative to the IFRS Consolidated Statements
of Income or other IFRS statements.
Further, these measures do not have any standardized meaning and D+H's
method of calculating each balance may not be comparable to
calculations used by other companies bearing the same description.
EBITDA
In addition to its use by management as an internal measure of financial
performance, EBITDA (with adjustments) is used to measure compliance
with certain financial covenants under the Company's credit facility
and bonds. EBITDA is also used by D+H as a factor in assessing the
performance and the value of a business. EBITDA has limitations as an
analytical tool, and the reader should not consider it in isolation or
as a substitute for analysis of results as reported under IFRS.
Adjusted EBITDA
Adjusted EBITDA is also used by D+H in assessing the performance of its
businesses. Adjusted EBITDA excludes: (i) acquisition-related expenses
such as transaction costs, business integration costs and certain
retention and incentive costs incurred as part of acquisitions; and
(ii) other charges such as corporate development costs related to
strategic acquisition initiatives and costs incurred in connection with
cost-realignment initiatives, all of which are not considered to be
part of the normal course of operations. These items are excluded in
calculating Adjusted EBITDA as they are not considered indicative of
the underlying business performance for the period being reviewed and
management believes that excluding these adjustments is more reflective
of ongoing operating results.
Similar to EBITDA, Adjusted EBITDA also has limitations as an analytical
tool, and the reader should not consider it in isolation or as a
substitute for analysis of results as reported under IFRS.
Adjusted Net Income and Adjusted Net Income per Share
Adjusted net income is used as a measure of internal performance similar
to net income, but is calculated after removing the impacts of certain
items of note such as: acquisition-related and other charges, including
transaction costs, retention and incentive expenses and business
integration costs related to acquisitions; corporate development
charges related to strategic acquisition initiatives and expenses
associated with cost-realignment initiatives, all of which are not
considered to be part of normal course of operations; discontinued
operations; and, certain non-cash items such as amortization of
intangibles from acquisitions, gain on remeasurement of the previously
held equity interest in Compushare and fair value adjustments of
interest-rate swaps. Also excluded from Adjusted net income are the tax
effects of corporate conversion and acquisitions. These items are
excluded in calculating Adjusted net income as they are not considered
indicative of the financial performance of the Business for the periods
being reviewed.
STRATEGY
D+H's goal is to be a leading financial technology ("FinTech") provider
to the North American financial services marketplace. FinTech companies
develop and deliver technology and technology-enabled products and
services to banks, credit unions and other leading financial services
customers who use these solutions to drive growth, improve customer
convenience, streamline operations, reduce infrastructure costs and
enhance compliance.
D+H's strategy is to establish market-leading positions within
well-defined and growing service areas in the financial services
marketplace, and to reinforce these positions with technology solutions
that deliver increasing value to our customers and shareholders. We
expect to advance this strategy through organic initiatives, by
partnering with third parties and making selective acquisitions. By
growing revenue organically and through strategic acquisitions and
maintaining efficient operations, D+H intends to achieve its long-term
financial objective of growing earnings.
Over the past several years, D+H has executed its strategy by evolving
payment solutions, completing several acquisitions including Compushare
in January 2013, enhancing our services and capabilities within all
service areas and achieving new efficiencies.
D+H's advancements on the FinTech 100, a list of the top financial technology firms in the world (according to
their FinTech revenues) prepared by American Banker, Bank Technology
News and IDC Financial Insights and the Branham300 are a reflection of
D+H's increasing technological capabilities and steps taken to provide
a broad spectrum of financial technology products and services to its
customers including ongoing innovation and growth to better serve the
financial services industry.
Within our U.S. Segment, our strategic intent is to build a range of
technology offerings, with an emphasis on SaaS offerings and cloud
computing solutions, to better serve regional banks, community banks
and credit unions. We expect to advance this strategy organically
through adjacent offerings, such as our recent expansion into consumer
loan origination technology, and through further U.S. acquisitions that
will allow us to broaden our capabilities for banks and credit unions.
On a go-forward basis, consistent with its strategy, management is
working to: (i) continue our organic growth initiatives in the U.S and
Canada; (ii) evolve our payment solutions programs; (iii) enhance
customer value and extend our technology-supported services related to
mortgages, auto, personal, student, commercial lending and leasing
markets; and (iv) identify appropriate acquisition targets to support
the strategic direction of D+H.
For a detailed discussion of the results for the quarter ended March 31,
2013 and management's outlook, please see below.
ACCOUNTING PRINCIPLES AND FINANCIAL INFORMATION PRESENTATION
The Company's unaudited condensed interim consolidated financial
statements have been prepared in accordance with IFRS, specifically IAS
34, Interim Financial Reporting, as issued by the International Accounting Standards Board ("IASB").
Results from continuing operations include the performance of acquired
businesses from the respective dates of acquisition and exclude results
from operations classified as discontinued operations.
Effective January 1, 2013, D+H reports its revenues under the following
categories: (i) payment solutions; (ii) lending processing solutions
(previously reported as loan servicing solutions and loan registration
and recovery services) and; (iii) banking technology solutions
(previously reported as lending technology services). For segment
reporting purposes, payment solutions, lending processing solutions and
the banking technology solutions which include banking technology
solutions to the Canadian mortgage market and technology solutions in
the commercial lending, small business lending and leasing areas are
reported as part of the Canadian Segment. The U.S. Segment consists of
banking technology solutions to the U.S. mortgage market, including
results from SaaS POS and LOS as well as Compushare's cloud-based
solutions.
Comparative periods have been conformed to the current period
classification.
All amounts are in Canadian dollars, unless otherwise specified.
ACQUISITION
Compushare
On January 29, 2013, D+H announced that it has purchased the remaining
outstanding shares of Santa Ana, California-based Compushare, a
technology management and cloud computing provider to financial
institutions. Building on its initial minority investment in the
company announced on April 24, 2012, this transaction gives D+H 100%
ownership of Compushare. Compushare offers a full suite of technology
solutions, designed specifically for financial institutions that assist
community banks, credit unions and other financial services providers
with systems management, network security, and application solutions.
The acquisition was financed from D+ H's existing credit facilities.
The results of Compushare have been presented as part of the U.S.
Segment for segment reporting purposes. For additional information on
the acquisition and the allocation of the purchase price, refer to note
4 of the unaudited condensed interim consolidated financial statements
for the three months ended March 31, 2013. The Corporation has not
completed its assessment and valuation of the assets acquired and
liabilities assumed for the acquisition and therefore, the purchase
information disclosed is subject to change.
Upon acquisition of the remaining interest on January 29, 2013, a gain
related to remeasurement of the previously held equity interest was
recognized in accordance with IFRS standards.
DIVESTITURE
On March 7, 2013, D+H announced that it had entered into an agreement to
divest its non-strategic business processing operations, comprised of
credit card services, contact centre services, benefits and
administration, coupon and rebate services and real estate services.
These operations largely served customers comprised of retailers, real
estate boards and packaged goods companies and provided services that
are not considered part of D+H's strategic business of serving
financial institutions as its long-term strategy. This transaction is
scheduled to close during the second quarter of 2013 following receipt
of customary regulatory and customer consents.
The results of operations of these components, which were included as
part of business service solutions and loan servicing solutions in the
Canadian Segment in prior periods, have now been classified as
discontinued operations for all periods presented and the related
assets and liabilities have been classified as assets and liabilities
held for sale on the consolidated statement of financial position for
the three months ended March 31, 2013 in accordance with IFRS. Refer to
note 14 of the unaudited condensed interim consolidated financial
statements for the three months ended March 31, 2013 for further
information related to the impact of these discontinued operations on
the financial statements of the Corporation.
OPERATING RESULTS - FIRST QUARTER OF 2013
The following tables should be read in conjunction with the condensed
interim consolidated statements of income for the three months ended
March 31, 2013 and include non-IFRS financial measures. Management
believes these supplementary disclosures provide useful additional
information. See Non-IFRS Financial Measures section for a description
of non-IFRS terms used.
The consolidated results include those of Compushare effective from the
date of acquisition of January 29, 2013. Revenues and expenses
relating to Compushare have been reported as part of the U.S. Segment.
Overview
Overall, D+H delivered solid operating performance in the first quarter
of 2013 that was consistent with its strategic agenda of becoming a
leading financial technology provider to the North American financial
services marketplace. Year-over-year growth in revenues was
attributable mainly to the U.S. Segment and reflected the inclusion of
Compushare and Avista as well as organic growth in POS SaaS revenues.
Both Canadian and U.S. Segments contributed to year-over-year growth in
EBITDA and Adjusted EBITDA resulting from savings realized from
cost-realignment initiatives in the Canadian Segment and acquisitions
and organic growth in the U.S. Consolidated net income for the first
quarter of 2013 was lower compared to the same period in 2012 primarily
due to loss from discontinued operations related to the divestiture.
Consolidated Adjusted net income, which excluded the loss from
discontinued operations, was higher than the comparative period.
|
(in thousands of Canadian dollars, except per share amounts, unaudited)
|
|
|
Quarter ended March 31,
|
|
|
2013
|
2012
|
|
Revenue
|
$
|
171,661
|
$
|
165,321
|
|
Expenses
|
129,664
|
125,074
|
|
EBITDA 1
|
41,997
|
40,247
|
|
Depreciation of capital assets and amortization of
|
|
|
non-acquisition intangibles
|
6,519
|
6,465
|
|
Amortization of intangibles from acquisitions
|
10,914
|
10,395
|
|
Interest expense
|
4,471
|
4,821
|
|
Income from investment in an associate, net of tax 2
|
(130)
|
-
|
|
Gain on remeasurement of previously-held equity interest 2
|
(1,587)
|
-
|
|
Fair value adjustment of derivative instruments 3
|
(107)
|
(1,645)
|
|
Income tax expense
|
5,480
|
5,034
|
|
Income from continuing operations
|
16,437
|
15,177
|
|
Loss from discontinued operations, net of tax4
|
(10,675)
|
(243)
|
|
Net income
|
$
|
5,742
|
$
|
14,934
|
|
|
|
|
|
|
|
|
Income from continuing operations per share, basic and diluted 5, 6
|
$
|
0.2775
|
$
|
0.2562
|
|
Loss from discontinued operations, per share, basic and diluted, net of
tax4,5,6
|
$
|
(0.1806)
|
$
|
(0.0041)
|
|
Net income per share, basic and diluted 5, 6
|
$
|
0.0969
|
$
|
0.2521
|
|
1
|
EBITDA is a non-IFRS term. See Non-IFRS Financial Measures for a more
complete description of this term.
|
|
2
|
Income from investment in an associate consists of D+H's share of profit
from Compushare, the minority investment purchased on April 24, 2012. Upon acquisition of the remaining interest in January 2013, a gain
related to remeasurement of the previously held equity interest was
recognized in accordance with IFRS standards.
|
|
3
|
Includes mark-to-market adjustments of interest-rate swaps that are not
designated as hedges for hedge accounting purposes, and for which any
change in the fair value of these contracts is recorded through the
Consolidated Statements of Income.
|
|
4
|
On March 7, 2013 D+H announced that it had entered into an agreement to
divest its non-strategic business processing operations. These
operations were reported as part of business service solutions and loan
servicing in prior periods and have now been classified as discontinued
operations for both the current and comparative periods presented.
|
|
5
|
Diluted net income per share reflects the impacts of outstanding
options. If the average market price during the period is below the
option price plus the fair market value of the option, then the options
are not included in the dilution calculation.
|
|
6
|
Weighted average number of shares outstanding during the first quarter
of 2013 was 59,233,373 shares (Q1 2012 - 59,233,373 shares).
|
|
|
|
(in thousands of Canadian dollars, unaudited)
|
|
|
Quarter ended March 31,
|
|
|
2013
|
2012
|
|
Revenue
|
$
|
171,661
|
$
|
165,321
|
|
Expenses
|
129,664
|
125,074
|
|
EBITDA 1
|
41,997
|
40,247
|
|
EBITDA Margin
|
24.5%
|
24.3%
|
|
Adjustments:
|
|
|
|
|
Acquisition-related and other charges 2
|
1,028
|
737
|
|
Adjusted EBITDA 1
|
$
|
43,025
|
$
|
40,984
|
|
Adjusted EBITDA Margin
|
25.1%
|
24.8%
|
|
1
|
EBITDA and Adjusted EBITDA are non-IFRS terms. See Non-IFRS Financial
Measures for a more complete description of these terms.
|
|
2
|
Acquisition-related and other charges for the first quarter of 2013
included transaction costs, certain retention and incentive costs in
connection with the acquisitions of businesses and business integration
costs . Acquisition-related and other charges for the same period in
2012 included certain retention and incentive costs related to the
Mortgagebot and Avista acquisitions.
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2013 vs. 2012
|
|
|
% change
|
|
|
|
|
Revenue
|
3.8%
|
|
EBITDA1
|
4.3%
|
|
Adjusted EBITDA1
|
5.0%
|
|
1 EBITDA and Adjusted EBITDA are non-IFRS terms. See Non-IFRS Financial
Measures for a more complete description of these terms.
|
|
|
|
(in thousands of Canadian dollars, except per share amounts, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31,
|
|
|
|
|
2013
|
2012
|
|
Net income
|
$
|
5,742
|
$
|
14,934
|
|
Adjustments:
|
|
|
|
|
Non-cash items:
|
|
|
|
|
|
Amortization of intangibles from acquisitions
|
10,914
|
10,395
|
|
|
|
Gain on remeasurement of previously-held equity interest 2
|
(1,587)
|
-
|
|
|
|
Fair value adjustment of derivative instruments 3
|
(107)
|
(1,645)
|
|
|
Other items of note:
|
|
|
|
|
|
Acquisition-related and other charges 4
|
1,028
|
737
|
|
|
Tax effect of above adjustments 6
|
(3,578)
|
(2,854)
|
|
|
Loss from discontinued operations, net of tax 5
|
10,695
|
243
|
|
Adjusted net income 1
|
$
|
23,107
|
$
|
21,810
|
|
|
|
|
|
|
|
Adjusted net income per share, basic and diluted 1, 7, 8
|
$
|
0.3901
|
$
|
0.3682
|
|
|
|
|
|
|
Quarter ended March 31,2013 vs. 2012
|
|
|
|
|
|
|
% change
|
|
Adjusted net income per share, basic and diluted 1, 7, 8
|
|
|
|
|
5.9%
|
|
1
|
Adjusted net income and Adjusted net income per share are non-IFRS
terms. See Non-IFRS Financial Measures for a more complete description
of these terms.
|
|
2
|
Upon acquisition of the remaining interest in Compushare in January
2013, a gain related to remeasurement of the previously held equity
interest was recognized in accordance with IFRS standards.
|
|
3
|
Includes mark-to-market adjustments of interest-rate swaps that are not
designated as hedges for hedge accounting purposes, and for which any
change in the fair value of these contracts is recorded through the
Consolidated Statement of Income.
|
|
4
|
Acquisition-related and other charges for the first quarter of 2013
included transaction costs, certain retention and incentive costs and
business integration costs pertaining to the acquisitions.
|
|
5
|
On March 7, 2013 D+H announced that it had entered into an agreement to
divest its non-strategic business processing operations. These
operations were reported as part of business service solutions and loan
servicing in prior periods and have now been classified as discontinued
operations for both the current and comparative periods presented.
|
|
6
|
The following adjustments to net income are tax effected at their
respective tax rates: (i) amortization of acquisition intangibles; (ii)
fair value adjustment of derivative instruments; and (iii)
acquisition-related and other charges.
|
|
7
|
Diluted Adjusted net income per share (non-IFRS term) reflects the
impacts of outstanding options. If the average market price during the
period is below the option price plus the fair market value of the
option, then the options are not included in the dilution calculation.
|
|
8
|
Weighted average number of shares outstanding during the first quarter
of 2013 was 59,233,373 shares (Q1 2012 - 59,233,373 shares).
|
|
|
|
OPERATING RESULTS BY SEGMENT
(in thousands of Canadian dollars, unaudited)
|
|
|
|
Quarter ended March 31,
|
|
|
|
Canadian
Segment
|
|
|
U.S.
Segment
|
|
|
Corporate
|
|
|
Consolidated
|
|
2013
|
2012
|
|
2013
|
2012
|
|
2013
|
2012
|
|
2013
|
2012
|
|
Revenue
|
$
|
152,380
|
$
|
153,730
|
|
$
|
19,281
|
$
|
11,591
|
|
$
|
-
|
$
|
-
|
|
$
|
171,661
|
$
|
165,321
|
|
Expenses
|
117,361
|
118,785
|
|
11,275
|
5,552
|
|
1,028
|
737
|
|
129,664
|
125,074
|
|
EBITDA 1
|
35,019
|
34,945
|
|
8,006
|
6,039
|
|
(1,028)
|
(737)
|
|
41,997
|
40,247
|
|
EBITDA Margin
|
23.0%
|
22.7%
|
|
41.5%
|
52.1%
|
|
-
|
-
|
|
24.5%
|
24.3%
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related and other charges 2
|
-
|
-
|
|
-
|
-
|
|
1,028
|
737
|
|
1,028
|
737
|
|
Adjusted EBITDA 1
|
$
|
35,019
|
$
|
34,945
|
|
$
|
8,006
|
$
|
6,039
|
|
$
|
-
|
$
|
-
|
|
$
|
43,025
|
$
|
40,984
|
|
Adjusted EBITDA Margin
|
23.0%
|
22.7%
|
|
41.5%
|
52.1%
|
|
-
|
-
|
|
25.1%
|
24.8%
|
|
1
|
EBITDA and Adjusted EBITDA are non-IFRS terms. See Non-IFRS Financial
Measures for a more complete description of these terms.
|
|
2
|
Acquisition-related and other charges for the first quarter of 2013
included transaction costs, certain retention and incentive costs in
connection with the acquisitions of businesses and business integration
costs . Acquisition-related and other charges for the same period in
2012 included certain retention and incentive costs related to the
Mortgagebot and Avista acquisitions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian
|
|
U.S.
|
|
|
|
|
|
|
Segment
|
|
Segment
|
|
Consolidated
|
|
|
|
|
2013 vs. 2012
|
|
2013 vs. 2012
|
|
2013 vs. 2012
|
|
|
|
|
% change
|
|
% change
|
|
% change
|
|
Revenue
|
|
|
(0.9%)
|
|
66.3%
|
3.8%
|
|
EBITDA 1
|
|
|
0.2%
|
|
32.6%
|
4.3%
|
|
Adjusted EBITDA 1
|
|
|
0.2%
|
|
32.6%
|
5.0%
|
|
1
|
EBITDA and Adjusted EBITDA are non-IFRS terms. See Non-IFRS Financial
Measures for a more complete description of these terms.
|
REVENUE
Revenue - Consolidated
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31,
|
|
|
|
|
|
2013
|
2012
|
|
Payment solutions
|
|
|
|
$
|
73,679
|
$
|
74,781
|
|
Lending processing solutions 1
|
|
|
|
65,123
|
64,401
|
|
Banking technology solutions 2
|
|
|
|
32,859
|
26,139
|
|
|
|
|
|
$
|
171,661
|
$
|
165,321
|
|
1
|
Reported as loan servicing solutions and loan registration and recovery
services in prior periods.
|
|
2
|
Reported as lending technology services in prior periods.
|
Consolidated revenue for the first quarter of 2013 was $171.7 million,
an increase of $6.3 million, or 3.8%, compared to the same period in
2012. The increase was primarily due to growth within the U.S. Segment
as a result of the inclusion of Compushare effective from January 29,
2013, inclusion of Avista acquired on May 3, 2012 and ongoing organic
growth in Mortgagebot.
Revenue - Canadian Segment
Total revenues in the Canadian Segment for the first quarter of 2013 of
$152.4 million, decreased by $1.4 million, or 0.9%, compared to the
same quarter in 2012.
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March31,
|
|
|
|
|
2013
|
2012
|
|
Payment solutions
|
|
$
|
73,679
|
|
$
|
74,781
|
|
Lending processing solutions 1
|
|
|
65,123
|
|
|
64,401
|
|
Banking technology solutions 2
|
|
|
13,578
|
|
|
14,548
|
|
|
|
$
|
152,380
|
|
$
|
153,730
|
|
1
|
Reported as loan servicing solutions and loan registration and recovery
services in prior periods.
|
|
2
|
Reported as lending technology services in prior periods. Excludes
revenues from Mortgagebot, Avista and Compushare.
|
Payment solutions
Payment solutions include: (i) the cheque supply program which serves
the personal and small business account holders of our financial
services customers; and (ii) various subscription fee-based enhancement
services and other service offerings directed towards the chequing and
credit card programs. These service offerings (excluding the component
of enhancement and identity protection services that are integrated in
the cheque order) currently represent a small component of revenues
within this revenue category. Cheque order volumes are declining as
consumers and small businesses choose other payment methods. These
volume declines have been partially offset by increased average order
values for cheques and growth in service enhancements to the chequing
and credit card programs.
Revenue from payment solutions for the first quarter of 2013 was $73.7
million, a decrease of $1.1 million, or 1.5%, compared to the same
quarter in 2012. For the first quarter of 2013, revenues from payments
solutions reflected volume declines in cheque orders partially offset
by the positive impact of higher average order values and product and
service enhancements in the chequing and credit card programs. Revenues
for the current quarter were also impacted as a result of having two
fewer business days in first quarter of 2013 than the prior year.
Management believes that the downward trend in cheque order volumes is
in the low to mid-single digit range annually, and in recent periods,
there has been more volatility in personal cheque order volumes, while
the decline in business cheque order volumes continues to be in the low
single digit range with comparatively minimal volatility. Management
expects that these trends will continue through 2013. D+H continues to
develop service enhancements to offset this impact and to generate
future growth within this category.
Lending processing solutions
Lending processing solutions consist of two distinct customer solutions
sets: loan registration and recovery and student loan administration
services. Loan registration and recovery services, which is
approximately 55% to 65% of the revenues within this category, support
the personal and commercial lending activities of our financial
services customers with the registration and management of data related
to secured lending for both personal and real property loans as well as
recovery services related to both secured and unsecured lending
activities. Loans relating to vehicle purchases are a significant
driver of activity and as such can be variable. In general,
registration services are affected by both economic cyclicality and
seasonality, while recovery services are, in general, counter-cyclical.
Related services include mortgage discharge services and various
search-related services, both of which we deliver on behalf of our
financial institution customers.
In our student loan administration services area, which is approximately
35% to 45% of the revenues within this category, we manage a $20
billion student loan portfolio encompassing service to 1.7 million
students on behalf of Canadian governments and lenders. Services
include student enrollment, management of funds' disbursement, loan
tracking, student support services, reporting and collections. In
general, student loan servicing volumes have been stable and modestly
growing on higher student loan balances and extended loan durations.
Lending processing revenues for the first quarter of 2013 was $65.1
million, an increase of $0.7 million, or 1.1%, compared to the same
quarter in 2012. This increase was mainly due to higher transaction
volumes in registration services reflecting a continuing recovery
within the auto and auto lending markets, and an increase in automotive
lending recovery services. These increases were partially offset by an
expected reduction in fees from a previously announced consolidation
and integration between two customers within the student loans
program. Volumes in the student loan administration service area are
expected to be relatively stable and modestly growing in the short
term. We expect that the impact on revenue of consolidation and
integration of the two customers discussed above will continue through
the first half of 2013. Activities related to cost management and
improving delivery efficiency are being directed towards lowering the
impact of reduced pricing and fees related to the recent customer
consolidation. The benefits from these cost management initiatives that
we started to realize in 2012 will continue into 2013.
Banking Technology Solutions
Banking technology solutions included as part of the Canadian segment
include services directed towards mortgage markets in Canada. As well,
we offer technology products and services in both Canada and the U.S.
directed towards leasing, commercial lending and small business
lending. For segment reporting purposes, revenues from the lending
technology services to the Canadian mortgage markets and the products
and technology solutions for leasing, commercial lending and small
business lending are reported as part of the Canadian Segment. Revenues
related to mortgage markets currently represent approximately 75% to
85% of revenues within this category with approximately 35% to 45%
attributable to transaction-based fees earned in connection with
Canadian mortgage originations. Mortgage origination fees can be
variable and are impacted by many factors including the economy, the
housing market, interest rates and changes in government regulations
among others.
Revenue from banking technology solutions related to the Canadian
Segment for the first quarter of 2013 was $13.6 million, a decrease of
$1.0 million, or 6.7%, compared to the same quarter in 2012. First
quarter 2013 revenue was impacted by lower mortgage origination fees
due to softening Canadian housing and mortgage market activity and
price modifications compared to the same quarter in 2012. In general,
due to new mortgage rules announced by the Department of Finance in
2012, industry analysts expect the recently observed reduction
in Canadian housing market prices and sales volumes to continue in
major urban areas throughout 2013. Revenues in future periods may
continue to be impacted by price modifications, which are expected to
be offset by potential revenue from the launch of new products in the
Canadian lending market, including extension of our technology
solutions across various areas in the lending value chain.
Revenue - U.S. Segment
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
Quarter ended March 31,
|
|
|
|
2013
|
|
2012
|
|
Banking technology solutions
|
|
$
|
19,281
|
|
$
|
11,591
|
|
|
|
$
|
19,281
|
|
$
|
11,591
|
Revenues from the U.S. SaaS loan origination solutions related to
Mortgagebot and Avista and Compushare's cloud-based services are
reported as part of the U.S. Segment. Within U.S. revenues related to
mortgage markets, 65% to 75% relate to recurring subscription fees and
approximately 15% to 25% relate to transaction-based activity.
Revenue for the first quarter of 2013 was $19.3 million, an increase of
$7.7 million, or 66.3%, compared to $11.6 million for the same period
in 2012. The increase was due to the inclusion of Compushare since its
acquisition of January 29, 2013 and Avista since its acquisition in May
2012 and organic growth in Mortgagebot related to the expansion of our
client base.
EXPENSES
Expenses - Consolidated
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31,
|
|
|
|
2013
|
|
2012
|
|
Employee compensation and benefits 1
|
|
$
|
47,047
|
|
$
|
44,572
|
|
Non-compensation direct expenses 2
|
|
58,042
|
|
56,947
|
|
Other operating expenses 3
|
|
24,575
|
|
23,555
|
|
|
|
$
|
129,664
|
|
$
|
125,074
|
|
1
|
Employee compensation and benefits on a consolidated basis includes
retention and incentive expenses related to acquisitions of businesses
and are net of apprenticeship tax credits and amounts capitalized
related to software product development.
|
|
2
|
Non-compensation direct expenses include materials, shipping, selling
expenses and third party direct disbursements.
|
|
3
|
Other operating expenses include occupancy costs, communication costs,
licensing fees, professional fees, contractor fees, transaction costs
related to acquisitions of businesses and expenses not included in
other categories.
|
Consolidated expenses of $129.7 million for the first quarter of 2013
increased by $4.6 million, or 3.7%, compared to the same quarter in
2012, and included acquisition-related and other charges of $1.0
million which were considered as non-normal course expenses and
recognized as part of Corporate. The inclusion of Compushare and Avista
expenses also contributed to the increase in the first quarter of 2013.
Expenses - Canadian Segment
Total expenses for the Canadian Segment for the first quarter of 2013
were $117.4 million, a decrease of $1.4 million, or 1.2%, compared to
the same quarter in 2012.
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31,
|
|
|
|
|
2013
|
|
2012
|
|
Employee compensation and benefits 1
|
|
|
$
|
39,523
|
|
$
|
40,802
|
|
Non-compensation direct expenses 2
|
|
|
57,469
|
|
|
56,690
|
|
Other operating expenses 3
|
|
|
20,369
|
|
21,293
|
|
|
|
|
$
|
117,361
|
|
$
|
118,785
|
|
1
|
Employee compensation and benefits are net of apprenticeship tax credits
and amounts capitalized related to software product development.
|
|
2
|
Non-compensation direct expenses include materials, shipping, selling
expenses and third party direct disbursements.
|
|
3
|
Other operating expenses include occupancy costs, communication costs,
licensing fees, professional fees, contractor fees and expenses not
included in other categories. Other operating expenses are net of
inter-segment management fees received from the U.S. segment.
|
Employee compensation and benefits costs of $39.5 million for the first
quarter of 2013 for the Canadian Segment were lower by $1.3 million, or
3.1%, compared to the same quarter in 2012, primarily from savings
realized as a result of cost-realignment initiatives executed in 2012.
Non-compensation direct expenses for the Canadian Segment were $57.5
million for the first quarter of 2013, an increase of $0.8 million, or
1.4%, compared to the same quarter in 2012. In general, these expenses
directionally change with revenue changes. An increase in direct costs
associated with the lending processing solutions service area,
consistent with the increase in revenues, was partially offset by a
decrease in direct costs associated with the payment solutions service
area, also consistent with its revenues.
Other operating expenses of $20.4 million for the first quarter of 2013
were lower by $0.9 million, or 4.3%, compared to the same quarter in
2012, primarily due to savings realized from transformation and
integration initiatives.
Expenses - U.S. Segment
Total expenses for the U.S. Segment for the first quarter of 2013 were
$11.3 million, an increase of $5.7 million, or 103.1%, compared to the
same quarter in 2012. This increase was primarily due to the inclusion
of the Compushare and Avista cost base.
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31,
|
|
|
|
2013
|
|
2012
|
|
Employee compensation and benefits 2
|
|
$
|
6,632
|
|
$
|
3,147
|
|
Non-compensation direct expenses
|
|
573
|
|
257
|
|
Other operating expenses 1
|
|
4,070
|
|
2,148
|
|
|
|
$
|
11,275
|
|
$
|
5,55
|
|
1
|
Other operating expenses include inter-segment management fees,
occupancy costs and expenses not included in other categories.
|
|
2
|
Employee compensation and benefits are net of amounts capitalized
related to software product development.
|
Employee compensation and benefits costs of $6.6 million for the first
quarter of 2013 for the U.S. Segment were higher by $3.5 million, or
110.7%, compared to the same quarter in 2012. The increase in the first
quarter of 2013 was primarily due to the inclusion of the Compushare
and Avista cost base and increased costs related to the integration of
Mortgagebot and Avista including alignment of employee benefits as a
result of integration of the businesses.
Non-compensation direct expenses for the U.S. Segment of $0.6 million
for the first quarter of 2013 were higher by $0.3 million compared to the same period in 2012 due to the inclusion of
Compushare.
Other operating expenses of $4.1 million for the first quarter of 2013
were higher by $1.9 million, or 89.5%, compared to the same quarter in
2012 primarily attributable to the inclusion of Compushare and Avista
expenses and expenses associated with cloud-based growth initiatives.
Expenses - Corporate
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31,
|
|
|
|
2013
|
|
2012
|
|
Employee compensation and benefits
|
|
$
|
892
|
|
$
|
623
|
|
Other operating expenses
|
|
136
|
|
114
|
|
|
|
$
|
1,028
|
|
$
|
737
|
Employee compensation and benefits
Employee compensation and benefits expenses for the first quarter of
2013 and 2012 consisted of retention and incentive expenses incurred in
connection with Avista and Mortgagebot acquisitions.
Other expenses
Other expenses for the first quarter of 2013 included transaction costs
incurred in connection with the acquisition of Compushare and business
integration costs. For the same period in 2012, the other operating
expenses related to transaction costs incurred in connection with the
acquisition of Avista.
EBITDA AND EBITDA MARGIN
Consolidated EBITDA during the first quarter of 2013 was $42.0 million,
an increase of $1.8 million, or 4.3%, compared to $40.2 million for the
same quarter in 2012. EBITDA margin of 24.5% on a consolidated basis
for the first quarter of 2013 improved marginally from 24.3% for the
same period in 2012. EBITDA growth in the U.S. Segment was partially
offset by retention and incentive expenses and acquisition transaction
costs in Corporate.
Canadian Segment
Canadian Segment EBITDA for the first quarter of 2013 of $35.0 million
was consistent with the same period a year-ago. EBITDA margin of 23.0%
for the first quarter of 2013 in the Canadian Segment was slightly
higher than the first quarter of 2012 EBITDA margin of 22.7% primarily
due to savings realized from cost-realignment initiatives as well as
transformation and integration initiatives, partially offset by a
decline in revenues in payment solutions and banking technology
solutions service areas. Cost management initiatives continue to focus
on enhancing operational efficiency within the Canadian Segment as
markets mature and to offset expected economic challenges within the
Canadian revenue areas.
U.S. Segment
U.S. Segment EBITDA for the first quarter of 2013 was $8.0 million, an
increase of $2.0 million, compared to the same quarter in 2012,
attributable to the inclusion of Compushare and Avista results and
continued growth in the POS SaaS business. EBITDA margin of 41.5% for
the first quarter of 2013 was lower than the 52.1% a year-ago primarily
due to the inclusion of Compushare.
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
Consolidated Adjusted EBITDA during the first quarter of 2013 was $43.0
million, an increase of $2.0 million, or 5.0%, compared to the same
quarter in 2012. Consolidated Adjusted EBITDA excluded
acquisition-related and other charges of $1.0 million for the first
quarter of 2013, consisting of $0.9 million related to certain
retention and incentive expenses related to the acquisitions and $0.1
million related to transaction costs in connection with the Compushare
acquisition. On a consolidated basis, Adjusted EBITDA margin for the
first quarter of 2013 was 25.1%, up from 24.8% a year ago.
DEPRECIATION OF CAPITAL ASSETS AND AMORTIZATION OF NON-ACQUISITION
INTANGIBLES
Consolidated depreciation of capital assets and amortization of
non-acquisition intangible assets of $6.5 million in the first quarter
of 2013 increased by $0.1 million, or 0.8%, compared to the same period
in 2012. The increase was attributable to the amortization of projects
completed in 2012.
AMORTIZATION OF INTANGIBLES FROM ACQUISITIONS
Consolidated amortization of acquisition intangibles for the first
quarter of 2013 was $10.9 million, an increase of $0.5 million,
compared to the same period in 2012. The increase was attributable to
the amortization resulting from the acquisitions of Compushare in
January 2013 and Avista in May 2012.
INTEREST EXPENSE
Interest expense for the first quarter of 2013 decreased by $0.4
million compared to the same quarter in 2012 as favourable pricing on
the renewed credit facility, due to renegotiated terms, more than
offset an increase in interest expense as a result of long-term,
fixed-rate borrowings related to acquisitions.
INCOME FROM INVESTMENT IN AN ASSOCIATE
Consolidated net income for the first quarter of 2013 included D+H's
share of income related to the minority interest held in Compushare up
to January 28, 2013, after which, the results were consolidated upon
obtaining 100% ownership on January 29, 2013.
Upon acquisition of the remaining outstanding shares of Compushare, a
gain of $1.6 million was recognized on remeasurement of the previously
held equity interest in accordance with IFRS.
FAIR VALUE ADJUSTMENT OF DERIVATIVE INSTRUMENTS
Interest-rate swaps
Compared to a net unrealized gain of $1.6 million in the first quarter
of 2012, a net unrealized gain of $0.1 million on interest-rate swaps
was recognized in the first quarter of 2013 reflecting fair value
adjustments related to changes in market interest rates at March 31,
2013 compared to December 31, 2012.
INCOME TAX EXPENSE
An income tax expense of $5.5 million was recorded in the first quarter
of 2013 compared to an income tax expense of $5.0 million for the same
period in 2012 on increased income from continuing operations before
income tax. For the first quarter of 2013, the current tax expense of
$8.9 million was partially offset by a deferred tax recovery of $3.4
million. The gain on remeasurement of previously held equity interest
was non-taxable. Only a deferred tax expense was recorded in the first
quarter of 2012.
INCOME FROM CONTINUING OPERATIONS
Income from continuing operations for the first quarter of 2013 was
$16.4 million ( $0.2775 per share) compared to $15.2 million ($0.2562
per share) for the same period in 2012. The increase in the current
period was attributable to higher EBITDA and the gain on remeasurement
of the previously held equity interest relating to Compushare,
partially offset by a lower unrealized gain on fair value changes
related to interest-rate swaps.
LOSS FROM DISCONTINUED OPERATIONS
Loss from discontinued operations of $10.7 million ( $0.1806 per share)
for the first quarter of 2013 related to the divestiture of D+H's
non-strategic business processing operations. See Divestiture section
for more details. For the comparative period in 2012, the loss from
discontinued operations was $0.2 million ( $0.0041 per share). The loss
from discontinued operations for the first quarter of 2013 included a
loss of $9.7 million related to measurement to fair value less
estimated costs to sell the assets held for sale, net of taxes.
NET INCOME
Consolidated net income of $5.7 million ($0.0969 per share) for the
first quarter of 2013 was lower by $9.2 million, or 61.6%, compared to
consolidated net income of $14.9 million ( $0.2521 per share) for the
same quarter in 2012, primarily due to the loss from discontinued
operations of $10.7 million described above and fair value changes
related to interest-rate swaps. These impacts were partially offset by
an increase in EBITDA and a gain of $1.6 million related to the
remeasurement to fair value of the previously held equity interest of
Compushare, recognized upon the acquisition of the remaining
outstanding shares in January 2013.
ADJUSTED NET INCOME
Consolidated Adjusted net income of $23.1 million ( $0.3901 per share)
for the first quarter of 2013 was higher by $1.3 million compared to
the $21.8 million ( $0.3682 per share) for the same period in 2012,
mainly due to higher Adjusted EBITDA. Consolidated Adjusted net income
excludes the after-tax impacts of the following items: (i) impacts of
non-cash items such as amortization of intangibles from acquisitions,
gains and losses related to fair value adjustment of derivative
instruments and a gain on remeasurement of previously held equity
interest in Compushare; (ii) other items of note such as
acquisition-related and other charges described earlier as well as the
loss on discontinued operations; and (iii) non-cash tax expense /
recoveries relating to acquisitions.
CONSOLIDATED CASH FLOW AND LIQUIDITY
The following table is derived from, and should be read in conjunction
with, the Consolidated Statements of Cash Flows. Management believes
this disclosure provides useful additional information related to the
cash flows of the Corporation, repayment of debt and other investing
activities.
Consolidated Summary of Cash Flows
(in thousands of Canadian dollars, unaudited)
|
|
Quarter ended March 31,
|
|
|
2013
|
2012
|
|
Cash and cash equivalents provided by (used in):
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
Income from continuing operations
|
$
|
16,437
|
$
|
15,177
|
|
Depreciation and amortization of assets
|
17,433
|
16,860
|
|
Amortization and fair value adjustment of derivative instruments
|
(107)
|
(1,645)
|
|
Income from investment in an associate, net of tax
|
(130)
|
-
|
|
Gain on remeasurement of previously held equity interest
|
(1,587)
|
-
|
|
Difference in interest expense and cash interest paid
|
428
|
600
|
|
Non-cash income tax and options expenses
|
4,247
|
6,952
|
|
|
|
|
|
|
36,721
|
37,944
|
|
Increase in non-cash working capital items
|
(15,148)
|
(14,640)
|
|
Changes in other operating assets and liabilities
|
1,792
|
683
|
|
Cash flows from (used in) discontinued operations
|
(4,731)
|
586
|
|
Net cash from operating activities
|
18,634
|
24,573
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
Net change in long-term indebtedness
|
26,049
|
5,000
|
|
Dividends paid during the period
|
(18,955)
|
(18,362)
|
|
Net cash from (used in) financing activities
|
7,094
|
(13,362)
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
Capital expenditures
|
(6,286)
|
(10,536)
|
|
Acquisition of subsidiary
|
(24,393)
|
-
|
|
Net cash used in investing activities
|
(30,679)
|
(10,536)
|
|
Increase (decrease) in cash and cash equivalents for the period
|
(4,951)
|
675
|
|
Cash and cash equivalents, beginning of period
|
5,719
|
2,213
|
|
Cash and cash equivalents, end of period
|
$
|
768
|
$
|
2,888
|
As at March 31 2013, cash and cash equivalents totalled $0.8 million,
compared to $5.7 million at December 31, 2012.
Operating Activities
Operating activities provided $18.6 million during the quarter ended
March 31, 2013, compared to $24.6 million for the same period in 2012.
The change in net cash from operating activities for the three-month
period ended March 31, 2013 was primarily due to working capital
changes as described below.
Changes in Non-Cash Working Capital and Other Items
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
Quarter ended March 31,
|
|
|
2013
|
2012
|
|
Increase in non-cash working capital
|
$
|
(15,148)
|
$
|
(14,640)
|
|
Change in other operating assets and liabilities
|
1,792
|
683
|
|
Discontinued operations
|
(4,731)
|
586
|
|
Increase in non-cash working capital and other items
|
$
|
(18,087)
|
$
|
(13,371)
|
The net increase in non-cash working capital in the first quarter of
2013 primarily related to an increase in trade receivables attributable
to extended payment terms resulting from contractual negotiations for
technology sales in Canada as well as moving to the more traditional
collection terms and processes associated with the new product
offerings. Also contributing to the increase in working capital was
lower compensation related accruals due to timing of pay periods and
payouts related to compensation arrangements during the first quarter
of 2013.
Cash flows used in discontinued operations of $4.7 million reflects the
segregation of cash related to discontinued operations from cash flows
from operating activities related to continuing operations. Amount
segregated for the current period included cash flows from operating
activities during the period related to discontinued operations as well
as cash on balance sheet as at March 31, 2013 related to discontinued
operations. This is in accordance with IFRS 5,Non-current assets held for sale and discontinued operations, which requires the separation of assets and liabilities relating to
assets held for sale on the balance sheet as at March 31, 2013. The
corresponding $0.6 million as of March 31, 2012 relates to the
segregation of cash flows from operating activities relating to
discontinued operations.
Financing Activities
Net cash from financing activities was $7.1 million during the quarter
ended March 31, 2013, compared to $13.4 million used for the same
period in 2012. The net change during the quarter was primarily due to
the funds drawn from our credit facilities to finance the Compushare
acquisition in January 2013 and an increase in dividend payments
following a dividend increase in the fourth quarter of 2012.
Dividends
During the first quarter of 2013, D+H paid a dividend of $0.32 per share
to its shareholders, following an increase in the target annual
dividend during the fourth quarter of 2012 from $1.24 per share to
$1.28 per share annualized. For the same quarter in 2012, $0.31 per
share was paid to shareholders.
Investing Activities
During the first quarter of 2013, $30.7 million was used by investing
activities, by way of capital expenditures and acquisition of the
remaining outstanding shares of Compushare, compared to $10.5 million
for capital expenditures during the same period in 2012.
Capital Expenditures
Consolidated capital expenditures were $6.3 million for the first
quarter of 2013, $4.3 million lower compared to the same period of
2012. Lower capital expenditures in the current quarter reflected
timing of expenditures.
EIGHT QUARTER CONSOLIDATED STATEMENT OF INCOME - SUMMARY
(in thousands of Canadian dollars, except per share amounts, unaudited)
|
|
2013
|
2012
|
2011
|
|
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
|
Revenue
|
$
|
171,661
|
$
|
172,457
|
$
|
176,689
|
$
|
180,989
|
$
|
165,321
|
$
|
166,580
|
$
|
169,334
|
$
|
167,873
|
|
Expenses1
|
129,664
|
131,082
|
129,405
|
128,289
|
125,074
|
121,865
|
123,655
|
120,295
|
|
EBITDA 1, 3
|
41,997
|
41,375
|
47,284
|
52,700
|
40,247
|
44,715
|
45,679
|
47,578
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Acquisition-related and other charges 1
|
1,028
|
6,558
|
3,265
|
4,378
|
737
|
637
|
610
|
707
|
|
Adjusted EBITDA 3
|
$
|
43,025
|
$
|
47,933
|
$
|
50,549
|
$
|
57,078
|
$
|
40,984
|
$
|
45,352
|
$
|
46,289
|
$
|
48,285
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA 1, 3
|
$
|
41,997
|
$
|
41,375
|
$
|
47,284
|
$
|
52,700
|
$
|
40,247
|
$
|
44,715
|
$
|
45,679
|
$
|
47,578
|
|
Depreciation of capital assets and amortization of non-acquisition
intangibles
|
6,519
|
7,568
|
6,648
|
6,986
|
6,465
|
6,171
|
5,242
|
5,249
|
|
Amortization of intangibles from acquisitions
|
10,914
|
11,292
|
10,597
|
10,706
|
10,395
|
10,465
|
10,496
|
10,046
|
|
Interest expense
|
4,471
|
4,629
|
4,943
|
4,821
|
4,821
|
4,909
|
4,792
|
5,272
|
|
Loss (income) from investment in an associate, net of tax
|
(130)
|
23
|
(53)
|
(38)
|
-
|
-
|
-
|
-
|
|
Gain on remeasurement of previously held equity interest 2
|
(1,587)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Amortization and fair value adjustment of derivative instruments4
|
(107)
|
(542)
|
(445)
|
616
|
(1,645)
|
(145)
|
3,991
|
1,227
|
|
Income tax expense
|
5,480
|
4,165
|
5,987
|
8,345
|
5,034
|
7,758
|
5,685
|
1,887
|
|
Income from continuing operations
|
16,437
|
14,240
|
19,607
|
21,264
|
15,177
|
15,557
|
15,473
|
23,897
|
|
Loss from discontinued operations, net of tax 5
|
(10,695)
|
(529)
|
(2)
|
(377)
|
(243)
|
(188)
|
(413)
|
(433)
|
|
Net income
|
$
|
5,742
|
$
|
13,711
|
$
|
19,605
|
$
|
20,887
|
$
|
14,934
|
$
|
15,369
|
$
|
15,060
|
$
|
23,464
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Non-cash items:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles from acquisitions
|
$
|
10,914
|
$
|
11,292
|
$
|
10,597
|
$
|
10,706
|
$
|
10,395
|
$
|
10,465
|
$
|
10,496
|
$
|
10,046
|
|
|
|
Gain on remeasurement of previously held equity interest 2
|
(1,587)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
Amortization and fair value adjustment of derivative instruments 4
|
(107)
|
(542)
|
(445)
|
616
|
(1,645)
|
(145)
|
3,991
|
1,227
|
|
|
Other items of note:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related and other charges 1
|
1,028
|
6,558
|
3,265
|
4,378
|
737
|
637
|
610
|
707
|
|
|
Tax effect of above adjustments 6
|
(3,578)
|
(5,543)
|
(3,962)
|
(4,615)
|
(2,854)
|
(3,237)
|
(4,311)
|
(3,103)
|
|
|
Loss from discontinued operations, net of tax 5
|
10,695
|
529
|
2
|
377
|
243
|
188
|
413
|
433
|
|
|
Tax effect of acquisitions 7
|
-
|
-
|
(1,156)
|
-
|
-
|
2,080
|
-
|
(3,628)
|
|
Adjusted net income3
|
$
|
23,107
|
$
|
26,005
|
$
|
27,906
|
$
|
32,349
|
$
|
21,810
|
$
|
25,357
|
$
|
26,259
|
$
|
29,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income per share, basic and diluted 3, 8, 9
|
$
|
0.3901
|
$
|
0.4390
|
$
|
0.4711
|
$
|
0.5461
|
$
|
0.3682
|
$
|
0.4281
|
$
|
0.4433
|
$
|
0.4982
|
|
Income from continuing operations per share, basic and diluted 8,9
|
$
|
0.2775
|
$
|
0.2404
|
$
|
0.3310
|
$
|
0.3590
|
$
|
0.2562
|
$
|
0.2626
|
$
|
0.2612
|
$
|
0.4084
|
|
Loss from discontinued operations per share, basic and diluted 8,9
|
$
|
(0.1806)
|
$
|
(0.0089)
|
$
|
-
|
$
|
(0.0064)
|
$
|
(0.0041)
|
$
|
(0.0032)
|
$
|
(0.0070)
|
$
|
(0.0074)
|
|
Net income per share, basic and diluted 8,9
|
$
|
0.0969
|
$
|
0.2315
|
$
|
0.3310
|
$
|
0.3526
|
$
|
0.2521
|
$
|
0.2595
|
$
|
0.2542
|
$
|
0.4010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Acquisition-related and other charges for the first quarter of 2013
included transaction costs, certain retention and incentive costs and
business integration costs pertaining to the acquisitions.
|
|
2
|
Upon acquisition of the remaining interest in January 2013, a gain
related to remeasurement of the previously held equity interest was
recognized in accordance with IFRS standards.
|
|
3
|
EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted net income per
share are non-IFRS terms. See Non-IFRS Financial Measures for a more
complete description of these terms.
|
|
4
|
Includes mark-to-market adjustments of interest-rate swaps that are not
designated as hedges for hedge accounting purposes, and for which any
change in the fair value of these contracts is recorded through the
Consolidated Statement of Income.
|
|
5
|
On March 7, 2013 D+H announced that it had entered into an agreement to
divest its non-strategic business processing operations. These
operations were reported as part of business service solutions and loan
servicing in prior periods and have now been classified as discontinued
operations for both the current and comparative periods presented.
|
|
6
|
The following adjustments to net income are tax effected at their
respective tax rates: (i) amortization of acquisition intangibles; (ii)
amortization and fair value adjustment of derivative instruments; and
(iii) acquisition-related and other charges.
|
|
7
|
Adjustments for the third quarter of 2012 included a non-cash tax
recovery related to liabilities recognized in connection with the
acquisition of Mortgagebot. Adjustments for the second quarter of 2011
included non-cash income tax recoveries recorded in connection with the
acquisitions. Adjustments for the fourth quarter of 2011 related to
de-recognition of previously recognized tax attributes.
|
|
8
|
Diluted Adjusted net income per share (non-IFRS term) reflects the
impacts of outstanding options. If the average market price during the
period is below the option price plus the fair market value of the
option, then the options are not included in the dilution calculation.
|
|
9
|
Weighted average number of shares outstanding during the first quarter
of 2013 was 59,233,373 shares (Q1 2012 - 59,233,373 shares).
|
D+H has generally reported quarterly revenues that are relatively stable
and growing when measured on a year-over-year basis. More recent
changes in the economic environment, specifically the housing and
mortgage markets and the auto lending markets, have increased
volatility. Also, there has been more volatility in personal cheque
order volumes. Measured on a sequential quarter-to-quarter basis,
revenues can also vary due to seasonality. Fees earned in connection
with mortgage origination services and automobile loan registration
services are typically stronger in the second and third quarters than
in the first and fourth quarters. The acquisitions of Avista on May 3,
2012 and Compushare on January 29, 2013 increased revenues and
expenses. EBITDA was impacted by acquisition-related and other charges
during the quarters, including transaction costs, business integration
costs and certain retention and incentive costs related to acquisitions
as well as other charges attributable to cost-realignment initiatives
and strategic acquisition initiatives that are not considered to be
incurred in the normal course of operations. Adjusted EBITDA removes
the impacts of these charges as these are not indicative of the
underlying business performance and management believes that excluding
these items is more reflective of ongoing operating results.
Per share amounts were also impacted by the issuance of 6,000,000
additional shares of Davis + Henderson Corporation in April 2011 to
partially fund the acquisition of Mortgagebot.
Net income has been more variable as it has been affected by non-cash
items such as fair value adjustments of interest-rate swaps,
amortization of intangibles from acquisitions, acquisition-related and
other charges, discontinued operations, gain on remeasurement of the
equity-interest held in Compushare and changes in other non-cash tax
items.
Common Shares Outstanding
As at March 31, 2013, and May 7, 2013, common shares outstanding were
59,233,373, the same as at December 31, 2012.
Normal Course Issuer Bid ("NCIB")
As of March 31, 2013 and May 7, 2013, no shares were purchased under the
NCIB.
Financial Instruments
The Company utilizes interest-rate swaps to hedge interest rate exposure
and foreign exchange forward contracts to hedge foreign currency.
Interest-rate swaps
In respect of interest-rate swap contracts with its lenders, as of March
31, 2013, the Company's borrowing rates on 47.8% of outstanding
long-term indebtedness under the Seventh Amended and Restated Credit
Agreement ("Credit Agreement") are effectively fixed at the interest
rates and for the time periods ending as outlined in the following
table:
(in thousands of Canadian dollars, unaudited)
|
|
|
Fair value of interest-rate
swaps
|
|
|
Maturity Date
|
|
Notional amount
|
Asset
|
Liability
|
Interest Rate ¹
|
|
December 18, 2014
|
$
|
25,000
|
$
|
-
|
$
|
617
|
2.720%
|
|
March 18, 2015
|
25,000
|
-
|
800
|
2.940%
|
|
March 18, 2017
|
25,000
|
-
|
1,750
|
3.350%
|
|
March 20, 2017
|
20,000
|
-
|
1,412
|
3.366%
|
|
|
|
$
|
95,000
|
$
|
-
|
$
|
4,579
|
|
|
|
|
|
|
|
|
|
|
|
1
|
The listed interest rates exclude bankers' acceptance fees and
prime-rate spreads currently in effect. Such fees and spreads could
increase or decrease depending on the Company's financial leverage
compared to certain levels specified in the Credit Agreement. Based on
the financial leverage as at March 31, 2013, the Company's long-term
bank indebtedness will be subject to bankers' acceptance fees of 1.50%
over the applicable BA rate and prime rate spreads of 0.50% over the
prime rate.
|
Foreign exchange forward contracts
The Company had no foreign exchange forward contracts in place as at
March 31, 2013.
Long-Term Indebtedness
Long-term indebtedness is recorded on the Consolidated Statement of
Financial Position, net of unamortized deferred financing fees.
Long-term indebtedness as at March 31, 2013, before deducting
unamortized deferred finance fees of $5.4 million, was $374.8 million,
compared to $346.3 million at December 31, 2012.
As at March 31, 2013, the Company had $531.0 million of committed funds
consisting of $355.0 million under the credit facility (of which $198.8
million was drawn as at March 31, 2013) and $176.0 million drawn from
bonds. The Company also had $282.6 million of additional uncommitted
arrangements available, subject to prior approval of the relevant
lenders with any fees, spreads and other additional terms to be
negotiated at that time, of which $150.0 million was under the credit
facility and $132.6 million from the bonds.
The Company has historically hedged against increases in market interest
rates on certain of its debt by utilizing interest-rate swaps and by
issuing fixed rate long-term bonds as described above. As at March 31,
2013, the average effective interest rate on the Corporation's total
indebtedness was approximately 4.3%, compared to 4.5% as at December
31, 2012.
The MD&A included in the 2012 Annual Report contains further details on
the credit facility, bonds and hedging policies.
BUSINESS RISKS
A comprehensive discussion of the risks that impact the Business can be
found on the Corporation's most recently filed Annual Information Form
and the most recently filed annual MD&A, available on SEDAR at www.sedar.com. Risks and uncertainties related to the Corporation have not changed
since the filing of the 2012 Annual Information Form and the 2012
annual MD&A.
OUTLOOK
D+H's long-term financial objective is to deliver sustainable and
growing earnings through continued organic revenue growth and by way of
strategic acquisitions. Recent acquisitions continue to: (i) strengthen
our ability to deliver on our goal of being a leading FinTech provider
to the North American financial services industry; (ii) provide revenue
diversification; (iii) deliver strong and sustainable cash flows to
fund future growth and distributions; and (iv) support our long-term
strategy.
Going forward, we will focus on executing our organic growth initiatives
and continuing to diligently identify efficiency opportunities to
better serve customers as our businesses evolve. Cost-realignment
initiatives executed in 2012 continue to result in annualized savings
benefitting both current and future periods, and will be used to offset
an increase in expenses to support future growth. Beyond the immediate
term, we believe that our market leadership and combined capabilities
will solidly position D+H in the markets we serve and allow us to grow,
consistent with our long-term objectives.
As set out in our statement of strategy, we look to grow through a
combination of organic initiatives, partnering with third parties and
by way of selective acquisitions. Our organic initiatives include: (i)
continuing to expand our customer base of SaaS mortgage POS, LOS and
cloud-based offerings in the U.S.; (ii) the ongoing advancement of
payment solutions through growth in value-added consumer and business
services to financial institution customers; (iii) expanding our
current technology-enabled offerings within the mortgage, auto,
personal, student lending, commercial and leasing markets; and (iv)
selling and delivering our lending technology solutions to new
customers.
Our acquisition strategy focuses on acquiring companies that extend or
add to the services that we provide within the financial services
marketplace, with a bias for companies that have strong SaaS cloud
capabilities, defensible business models, growing revenues and strong
cash flows, capable management and offer an extension to our existing
businesses.
With the inclusion of several new service areas over the last several
years, we expect to continue to experience some increase in variability
in year-over-year quarterly revenues, earnings and cash flows, due to,
among other items: (i) volatility in personal cheque order volume
declines; (ii) competitive dynamics in the Canadian lending
environment; (iii) volume variances within the mortgage origination and
lien registration markets; (iv) timing differences and variability in
professional services work; and (v) fees and expenses associated with
acquisitions and related integration activities. Within the Canadian
Segment, D+H believes that revenues from banking technology solutions
in 2013 may be impacted by more moderate housing prices and lower real
estate activity compared to the previous years and potential price
adjustments, which are expected to be offset by potential revenue from
the launch of new products in the Canadian lending market, including
extension of our technology solutions across various areas in the
lending value chain. In the U.S. Segment, a slight recovery in the
U.S. housing market is expected to somewhat offset a reduction in
refinancing activity in 2013.
For 2013, capital spending of approximately $35 million is currently
anticipated, which may vary based on spending in support of new growth
opportunities if and as they arise.
As described earlier, the Corporation does not expect to pay any
significant cash taxes until after 2013.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This MD&A 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, 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"
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. These
forward-looking statements are subject to important assumptions,
including the following specific assumptions: the ability of D+H to
meet its revenue, "EBITDA", "Adjusted EBITDA" and "Adjusted net income"
targets (see Non-IFRS Financial Measures for a more complete
description of the terms EBITDA, Adjusted EBITDA and Adjusted net
income); general industry and economic conditions; changes in D+H's
relationship with its customers and suppliers; pricing pressures and
other competitive factors; the anticipated effect of acquisitions on
the financial performance of D+H; and the expected benefits arising as
a result of acquisitions. 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.
Risks related to forward-looking statements include, among other things,
challenges presented by declines in the use of personal and business
cheques; the Company's dependence on a limited number of large
financial institution customers and dependence on their acceptance of
new programs; strategic initiatives being undertaken to meet the
Company's financial objective; stability and growth in the real estate,
mortgage and lending markets; increased pricing pressures and increased
competition which could lead to loss of contracts or reduced margins;
as well as general market conditions, including economic and interest
rate dynamics. Given these uncertainties, readers are cautioned not to
place undue reliance on such forward-looking statements. The documents
incorporated by reference 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.
All of the forward-looking statements made in this MD&A and the
documents incorporated by reference herein 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.
ADDITIONAL INFORMATION
Additional information relating to the Company, including the Company's
most recently filed Annual Information Form, is available on SEDAR at www.sedar.com.
|
Consolidated Statements of Financial Position
|
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
March 31, 2013
|
|
December 31, 2012
|
|
ASSETS
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
768
|
|
$
|
5,719
|
|
Trade and other receivables
|
|
74,556
|
|
84,996
|
|
Prepayments
|
|
11,853
|
|
14,104
|
|
Inventories
|
|
3,389
|
|
4,181
|
|
Assets held for sale
|
|
24,051
|
|
-
|
|
Total current assets
|
|
114,617
|
|
109,000
|
|
Deferred tax assets
|
|
28,805
|
|
28,095
|
|
Property, plant and equipment
|
|
27,660
|
|
30,201
|
|
Investment in an associate
|
|
-
|
|
10,145
|
|
Intangible assets
|
|
421,988
|
|
421,366
|
|
Goodwill
|
|
717,555
|
|
690,583
|
|
Total non-current assets
|
|
1,196,008
|
|
1,180,390
|
|
Total assets
|
|
$
|
1,310,625
|
|
$
|
1,289,390
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Trade payables, accrued and other liabilities
|
|
$
|
79,269
|
|
$
|
99,910
|
|
Deferred revenue
|
|
15,712
|
|
12,586
|
|
Current tax liabilities
|
|
7,953
|
|
697
|
|
Liabilities held for sale
|
|
11,795
|
|
-
|
|
Total current liabilities
|
|
114,729
|
|
113,193
|
|
Deferred revenue
|
|
9,113
|
|
9,419
|
|
Derivative liabilities held for risk management
|
|
4,579
|
|
4,686
|
|
Loans and borrowings
|
|
369,340
|
|
340,577
|
|
Deferred tax liabilities
|
|
112,758
|
|
113,291
|
|
Other long-term liabilities
|
|
7,939
|
|
6,116
|
|
Total non-current liabilities
|
|
503,729
|
|
474,089
|
|
Total liabilities
|
|
618,458
|
|
587,282
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Capital
|
|
673,791
|
|
673,680
|
|
Retained earnings
|
|
8,946
|
|
22,544
|
|
Accumulated other comprehensive income
|
|
9,430
|
|
5,884
|
|
Total equity
|
|
692,167
|
|
702,108
|
|
Total liabilities and equity
|
|
$
|
1,310,625
|
|
$
|
1,289,390
|
|
Consolidated Statements of Income
|
|
(in thousands of Canadian dollars, except per share amounts, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
March 31, 2013
|
|
March 31, 2012
|
|
Revenue
|
|
$
|
171,661
|
|
$
|
165,321
|
|
Employee compensation and benefits
|
|
47,047
|
|
44,572
|
|
Other expenses
|
|
82,617
|
|
80,502
|
|
Income from operating activities before depreciation and amortization
|
|
41,997
|
|
40,247
|
|
Depreciation of property, plant and equipment
|
|
1,936
|
|
1,893
|
|
Amortization of intangible assets
|
|
15,497
|
|
14,967
|
|
Income from operating activities
|
|
24,564
|
|
23,387
|
|
Finance expenses:
|
|
|
|
|
|
|
Fair value adjustment of derivative instruments
|
|
(107)
|
|
(1,645)
|
|
|
Interest expense
|
|
4,471
|
|
4,821
|
|
Gain on remeasurement of previously held equity interest
|
|
(1,587)
|
|
-
|
|
Income from investment in an associate, net of income tax
|
|
(130)
|
|
-
|
|
Income from continuing operations before income tax
|
|
21,917
|
|
20,211
|
|
Income tax expense
|
|
5,480
|
|
5,034
|
|
Income from continuing operations
|
|
16,437
|
|
15,177
|
|
Loss from discontinued operations, net of income tax
|
|
(10,695)
|
|
(243)
|
|
Net income
|
|
$
|
5,742
|
|
$
|
14,934
|
|
Net income per share from continuing operations, basic and diluted
|
|
$
|
0.2775
|
|
$
|
0.2562
|
|
Loss per share from discontinued operations, basic and diluted
|
|
$
|
(0.1806)
|
|
$
|
(0.0041)
|
|
Net income per share, basic and diluted
|
|
$
|
0.0969
|
|
$
|
0.2521
|
|
Consolidated Statements of Comprehensive Income
|
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
Three months ended
|
|
|
March 31, 2013
|
|
March 31, 2012
|
|
Net income
|
$
|
5,742
|
|
$
|
14,934
|
|
The following items may be reclassified subsequently to profit or loss:
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
Effective portion of changes in fair value
|
-
|
|
170
|
|
|
|
Net amount transferred to profit or loss
|
-
|
|
(281)
|
|
|
Foreign currency translation
|
3,546
|
|
(2,937)
|
|
Total comprehensive income
|
$
|
9,288
|
|
$
|
11,886
|
|
Consolidated Statements of Changes in Equity
|
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2013
|
|
|
|
Accumulated other
comprehensive income (loss)
|
|
|
|
|
Share capital
|
Foreign
currency
translation
reserve
|
Hedging
reserve
|
Retained
earnings
|
Total equity
|
|
Balance at January 1, 2013
|
$
|
673,680
|
$
|
5,884
|
$
|
-
|
$
|
22,544
|
$
|
702,108
|
|
Impact of transition to IAS 19R
|
-
|
-
|
-
|
(385)
|
(385)
|
|
Net income for the period
|
-
|
-
|
-
|
5,742
|
5,742
|
|
Foreign currency translation
|
-
|
3,546
|
-
|
-
|
3,546
|
|
Dividends
|
-
|
-
|
-
|
(18,955)
|
(18,955)
|
|
Options
|
111
|
-
|
-
|
-
|
111
|
|
Balance at March 31, 2013
|
$
|
673,791
|
$
|
9,430
|
$
|
-
|
$
|
8,946
|
$
|
692,167
|
|
|
|
|
|
Three months ended March 31, 2012
|
|
|
|
Accumulated other
comprehensive income (loss)
|
|
|
|
|
Share capital
|
Foreign
currency
translation
reserve
|
Hedging
reserve
|
Retained
earnings
|
Total equity
|
|
Balance at January 1, 2012
|
$
|
673,163
|
$
|
9,326
|
$
|
(240)
|
|
$
|
27,449
|
$
|
709,698
|
|
Net income for the period
|
-
|
-
|
-
|
14,934
|
14,934
|
|
Cash flow hedges
|
-
|
-
|
(111)
|
-
|
(111)
|
|
Foreign currency translation
|
-
|
(2,937)
|
-
|
-
|
(2,937)
|
|
Dividends
|
-
|
-
|
-
|
(18,362)
|
(18,362)
|
|
Options
|
189
|
-
|
-
|
-
|
189
|
|
Balance at March 31, 2012
|
$
|
673,352
|
$
|
6,389
|
$
|
(351)
|
|
$
|
24,021
|
$
|
703,411
|
|
Consolidated Statements of Cash Flows
|
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
March 31, 2013
|
|
March 31, 2012
|
|
Cash and cash equivalents provided by (used in):
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
16,437
|
|
$
|
15,177
|
|
Adjustments for:
|
|
|
|
|
|
|
Depreciation of property, plant and equipment
|
|
1,936
|
|
1,893
|
|
|
Amortization of intangible assets
|
|
15,497
|
|
14,967
|
|
|
Fair value adjustment of derivative instruments
|
|
(107)
|
|
(1,645)
|
|
|
Interest expense
|
|
4,471
|
|
4,821
|
|
|
Income tax expense
|
|
5,480
|
|
6,763
|
|
|
Options expense
|
|
111
|
|
189
|
|
|
Income from investment in an associate, net of income tax
|
|
(130)
|
|
-
|
|
|
Gain on remeasurement of previously held equity interest
|
|
(1,587)
|
|
-
|
|
|
Changes in non-cash working capital items
|
|
|
(15,148)
|
|
(14,640)
|
|
|
Changes in other operating assets and liabilities
|
|
|
1,792
|
|
683
|
|
|
Cash flows from (used in) discontinued operations
|
|
(4,731)
|
|
586
|
|
Cash generated from operating activities
|
|
24,021
|
|
28,794
|
|
|
Interest paid
|
|
(4,043)
|
|
(4,221)
|
|
|
Income taxes paid
|
|
(1,344)
|
|
-
|
|
Net cash from operating activities
|
|
18,634
|
|
24,573
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
Repayment of long-term indebtedness
|
|
(1,016)
|
|
(5,000)
|
|
Proceeds from long-term indebtedness
|
|
27,065
|
|
10,000
|
|
Dividends paid
|
|
(18,955)
|
|
(18,362)
|
|
Net cash from (used in) financing activities
|
|
7,094
|
|
(13,362)
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
Acquisition of property, plant and equipment
|
|
(1,923)
|
|
(3,685)
|
|
Acquisition of intangible assets
|
|
(4,363)
|
|
(6,851)
|
|
Acquisition of subsidiary
|
|
(24,393)
|
|
-
|
|
Net cash used in investing activities
|
|
(30,679)
|
|
(10,536)
|
|
Increase (decrease) in cash and cash equivalents for the period
|
|
(4,951)
|
|
675
|
|
Cash and cash equivalents, beginning of period
|
|
5,719
|
|
2,213
|
|
Cash and cash equivalents, end of period
|
|
$
|
768
|
|
$
|
2,888
|
About D+H
D+H is a leading provider of secure and reliable technology solutions to
North American financial institutions. With a long history as a trusted
partner to banks, credit unions and other financial services providers,
D+H's solutions allow our customers to focus on serving their
customers. And, as the financial services marketplace continues to
evolve, so do we. D+H offers a wide spectrum of technologies and
services that are designed to help financial institutions stay
competitive by supporting specific areas of their business as well as
overall operations. D+H's diverse and growing portfolio includes
banking technology solutions, lending administration solutions, and
payments solutions including cheque and value-added membership
marketing programs. In 2012, D+H rose to 35th on the FinTech 100, a
ranking of the top technology providers to the global financial
services industry and is ranked 24th on the 2013 Branham300, a listing
of the top Canadian ICT companies .
Davis + Henderson Corporation is listed on the Toronto Stock Exchange
under the symbol DH. Further information can be found in the disclosure
documents filed by Davis + Henderson Corporation with the securities
regulatory authorities, available at www.sedar.com.
SOURCE: Davis + Henderson Corporation
Brian Kyle, Executive Vice President and Chief Financial Officer, Davis + Henderson Corporation, (416) 696-7700, investorrelations@dhltd.com or visit our website at www.dhltd.com.
