D+H Announces First Quarter 2016 Earnings

TORONTO, April 26, 2016 /CNW/ - DH Corporation (TSX:DH) ("D+H" or the "Company"), a leading provider of technology solutions to domestic and global financial institutions, today reported its financial results for the three months ended March 31, 2016.

"We saw solid revenue growth in Global Transaction Banking Solutions, our Canadian segment, as well as our U.S. integrated core solutions," said Gerrard Schmid, CEO.  "Within our U.S. lending business, our existing LaserPro contracts have a lower number of contract renewals in 2016 relative to 2015.  While our renewal rates remain consistently over 95%, the lower number of contracts maturing will dampen LaserPro revenues and EBITDA in 2016, and we expect this will return to normal levels in 2017.  Overall our consolidated Adjusted EBITDA margin for the quarter declined relative to last year due to the timing of the LaserPro renewals, and certain non-recurring revenue and expense onetime items in both periods that make comparability more difficult. We fully expect our margins to improve through 2016 back to our 30% consolidated margin level."

First Quarter 2016 Highlights 

• Revenues in the first quarter were $412.1 million compared with $295.0 million in the first quarter of 2015. Adjusted revenues⁽¹⁾ were $414.2 million in the first quarter compared with $296.5 million in the first quarter of 2015, an increase of 39.7%, led by 7.7% growth in the Canadian segment, 7.4% growth in the L&IC segment which declined 2.8% in constant currency and the inclusion of Fundtech, acquired on April 30, 2015 and operating as the GTBS segment, which grew by 9.2% on a proforma constant currency basis.
  
  
• EBITDA in the first quarter was $92.2 million compared with $94.0 million in the first quarter of 2015. The reduced EBITDA reflects the operating segment results including the addition of GTBS, and the impact of certain non-recurring revenue items in the Canadian segment in the first quarter of 2015 and non-recurring expense items in the L&IC segment in the first quarter of 2016.  EBITDA also includes the impact of a $17.4 million net decrease in Corporate due to a non-cash foreign exchange gain and  a non-recurring gain recorded in the first quarter of 2015, and costs incurred for integration activities and to align our global operations in the first quarter of 2016.
  
  

• Adjusted EBITDA⁽¹⁾ was $103.0 million in the first quarter compared with $87.0 million in the first quarter of 2015, an increase of $16.0 million or 18.4%. Adjusted EBITDA removes the impact of corporate items referenced above. The Adjusted EBITDA margin⁽¹⁾ of 24.9% compares to 29.3% in the comparative period. The reduced margin reflects the inclusion of the GTBS segment where the margin is seasonally lower, reduced margin in the L&IC segment from the LaserPro renewal timing, non-recurring expenses in 2016, and reduced margins in the Canadian segment due to non-recurring revenues in the first quarter of 2015.

• Consolidated net income for the first quarter of 2016 of $4.8 million compares to the prior period net income of $34.0 million. The decrease reflects increased intangible assets amortization and finance expenses related to the acquisition of Fundtech, partially offset by operating segment results and reduced income taxes. Net income per share in the first quarter was $0.04 compared with $0.39 in the first quarter of 2015, reflecting the reduced net income for the quarter and the higher share count primarily related to the issuance of shares in 2015 in conjunction with our acquisition of Fundtech.

• Adjusted net income⁽¹⁾ for the first quarter of 2016 was $45.4 million compared to $47.4 million in the prior period, reflecting operating segment results, increased financing costs and reduced income taxes. Adjusted net income⁽¹⁾ per share of $0.43 was lower by $0.12 per share as a result of higher shares outstanding and the decrease in Adjusted net income⁽¹⁾ of $1.9 million. The weighted average common shares outstanding in the first quarter 2016 and 2015 were 106.5 million and 86.4 million shares, respectively.

• Net cash from operating activities increased to $54.8 million from $9.8 million in the same period in the prior year. Adjusted net cash from operating activities⁽¹⁾ increased to $67.2 million from $19.3 million in the same period in the prior year. Our cash from operations reflects strong cash flow from our business.

• Loans, borrowings, and convertible debentures total $2.0 billion at March 31, 2016 compared to $2.1 billion at December 31, 2015 and $1.1 billion at March 31, 2015, as a result of the financing of the Fundtech acquisition, offset by subsequent debt repayments.

• The total Net Funded Debt to EBITDA⁽¹⁾ ratio was 3.02x at March 31, 2016, as compared to 3.45x at April 30, 2015 (at closing of the acquisition of Fundtech) and 3.19x at December 31, 2015. The Company repaid $20 million of debt during the first quarter of 2016 and a total of $70.0 million since the acquisition of Fundtech. We expect to reduce our net debt to EBITDA⁽¹⁾ ratio to a range of 2.75x to 2.60x by the end of 2016 and below 2.50x in mid 2017, subject to the impacts of foreign exchange.

• Enterprise value⁽¹⁾ totaled $6.1 billion at March 31, 2016 and $5.5 billion at December 31, 2015.

First Quarter 2016 Results

The selected financial information included in this press release is qualified in its entirety by, and should be read together with the unaudited condensed interim consolidated financial statements and the MD&A for the three months ended March 31, 2016, which can be found at dh.com and in the disclosure documents filed by the Company with the securities regulatory authorities at sedar.com.

Selected Consolidated Financial Information^2				Three months ended March 31
(C$ millions unless otherwise indicated, unaudited)				2016		2015
Revenues
Revenues				$412.1		$295.0
	Add: Acquisition accounting adjustments			2.0		1.5
Adjusted revenues^1				$414.2		$296.5
EBITDA
EBITDA^1				$92.2		$94.0
	Add: Acquisition accounting adjustments			(0.6)		(0.9)
	Add: Acquisition-related and other charges			12.4		9.5
	Add: Foreign exchange gain			(1.2)		(15.6)
Adjusted EBITDA^1				$103.0		$87.0
Adjusted EBITDA margin^1				24.9%		29.3%
Net Income
Net income				$4.8		$34.0
	Add: Non-cash items			$56.7		$16.5
	Add: Acquisition-related and other charges			$12.4		$9.5
	Add: Tax effect of above adjustments			($28.5)		($12.6)
Adjusted net income^1				$45.4		$47.4
Net income per share, basic and diluted (C$)				$0.04		$0.39
Adjusted net income per share, basic^1(C$)				$0.43		$0.55
Liquidity
Net cash from operating activities				$54.8		$9.8
	Add: Acquisition-related and other charges			12.4		9.5
Adjusted net cash from operating activities^1				$67.2		$19.3
Uses of Adjusted net cash from operating activities^1:
	Capital expenditures			$21.0		$27.7
	Dividends			$24.8		$20.5
Adjusted net cash from / (used in) operating activities after capital expenditures and cash dividends^1				$21.5		$(28.9)
	Net debt repayment			$20.0		-
Adjusted net cash from / (used in) operating activities after capital expenditures, cash dividends and net debt repayment^1				$1.5		$(28.9)

Revenues and Adjusted revenues by Service Area^2					Three months ended March 31
(C$ millions unless otherwise indicated, unaudited)					2016		2015
Revenues by service area
Lending solutions					$164.6		$158.1
Global transaction banking solutions					94.2		-
Payments solutions					79.6		73.7
Integrated core solutions					73.7		63.2
Total revenues					$412.1		$295.0
Adjusted revenues^1 by service area
Lending solutions					$165.5		159.5
Global transaction banking solutions					95.3		-
Payments solutions					79.6		73.7
Integrated core solutions					73.9		63.3
Total Adjusted revenues^1					$414.2		$296.5

Results by Segment^2					Three months ended March 31
(C$ millions unaudited)	2016	2015	2016	2015	2016	2015	2016	2015	2016	2015
	GTBS		L&IC		Canada		Corporate		Consolidated
Revenues	$94.2	-	$148.6	$137.7	$169.4	$157.3	-	-	$412.1	$295.0
Expenses	72.5	-	106.6	89.3	129.6	117.8	$11.3	$(6.1)	319.9	201.0
EBITDA^1	$21.7	-	$42.0	$48.4	$39.8	$39.4	$(11.3)	$6.1	$92.2	$94.0
EBITDA Margin^1	23.0%	-	28.3%	35.1%	23.5%	25.1%	-	-	22.4%	31.9%
Adjusted revenues^1	$95.3	-	$149.6	$139.3	$169.4	$157.3	-	-	$414.2	$296.5
Adjusted EBITDA^1	$22.1	-	$41.1	$47.5	$39.8	$39.4	-	-	$103.0	$87.0
Adjusted EBITDA margin^1	23.2%	-	27.5%	34.1%	23.5%	25.1%	-	-	24.9%	29.3%

Results by Segment in U.S. dollars^2		Three months ended March 31
(US$ millions, unaudited)		2016		2015
GTBS Segment Revenues, Adjusted revenues^1 and Adjusted EBITDA^1:
Revenues		US$69.0		-
Adjusted revenues^1		US$69.8		-
Adjusted EBITDA^1		US$16.5		-
Adjusted EBITDA margin^1		23.6%		-
L&IC Segment revenues:
Lending solutions – revenues		US$54.6		US$60.0
Integrated core solutions – revenues		53.7		50.9
Total L&IC segment revenues		US$108.4		US$110.9
L&IC Segment Adjusted revenues^1 and Adjusted EBITDA^1:
Lending solutions – Adjusted revenues^1		US$55.2		US$61.1
Integrated core solutions – Adjusted revenues^1		53.8		51.0
Total L&IC segment Adjusted revenues^1		US$109.1		US$112.2
L&IC segment Adjusted EBITDA^1		US$30.0		US$38.3
L&IC segment Adjusted EBITDA margin^1		27.5%		34.1%

^1	Non-IFRS measure.  See the "Use of Non-IFRS Financial Information" section of this press release for further details.
^2	Totals may not add due to rounding.

Dividend

DH Corporation today announced that its Board of Directors has declared a quarterly dividend of $0.32 per common share payable on June 30, 2016 to shareholders of record at the close of business on June 16, 2016. The dividend is an eligible dividend for Canadian income tax purposes.

Outlook

For further information on management's outlook for 2016, please refer to section 3 of the MD&A for the three months ended March 31, 2016.

Dividend Reinvestment Plan

On January 14, 2015, the Company announced the adoption of a Dividend Reinvestment Plan which became effective in the first quarter of 2015. The Dividend Reinvestment Plan participation rate for the first quarter of 2016 was approximately 27% of outstanding D+H shares. The dividend declared by D+H in the second quarter of 2016, as described in the "Dividend" above, will also be eligible for the Dividend Reinvestment Plan. At this time, the Company intends to have these common shares issued from treasury at the weighted average trading price of the common shares on the TSX during the five trading days immediately preceding the dividend payment date. To participate in the Dividend Reinvestment Plan, eligible shareholders should refer to plan information on the D+H website at dh.com.  Eligible shareholders who have not previously registered must register on or before June 16, 2016, the dividend record date, to participate in the program for the dividend payable on June 30, 2016.

MANAGEMENT CONFERENCE CALL AND WEBCAST

Teleconference:

A conference call to review these financial results, including a presentation, will take place at 10:00 a.m. (EDT) on Wednesday, April 27, 2016 hosted by Chief Executive Officer Gerrard Schmid and Chief Financial Officer Karen H. Weaver. To access the call, please dial 647-427-7450 (Local/Int'l) or 1-888-231-8191 (toll-free within North America).  A replay of the call will also be available until May 11, 2016 by dialing 416-849-0833 (Local/Int'l) or 1-855-859-2056 (toll-free within North America), with Encore Password 87422933.

Webcast:

The conference call will also be webcast at http://event.on24.com/r.htm?e=1169920&s=1&k=11581A23589A5851C5220C6CC5D6020C and will be archived for 90 days after the call. The link to the webcast and an accompanying slide presentation will be posted in the Investors section of the D+H website under Events and Presentations at http://www.dh.com/investors/events-and-presentations/conference-calls

ABOUT D+H

D+H (TSX: DH) is a leading financial technology provider the world's financial institutions rely on every day to help them grow and succeed. Our global transaction banking, lending, payments and integrated core solutions are trusted by nearly 8,000 banks, specialty lenders, community banks, credit unions, governments and corporations. Headquartered in Toronto, Canada, D+H has more than 5,500 employees worldwide who are passionate about partnering with clients to create forward-thinking solutions that fit their needs. With annual revenues in excess of $1.5 billion, D+H is recognized as one of the world's top FinTech companies on IDC Financial Insights FinTech Rankings and American Banker's FinTech Forward rankings. For more information, visit dh.com.

USE OF NON-IFRS FINANCIAL INFORMATION

D+H's financial results are prepared in accordance with International Financial Reporting Standards ("IFRS").  D+H reports several non-IFRS financial measures, including "Adjusted revenues", "Constant Currency", "Proforma Adjusted Revenues", "EBITDA", "EBITDA margin" (EBITDA divided by revenues), "Adjusted EBITDA", "Adjusted EBITDA margin" (Adjusted EBITDA divided by Adjusted revenues), "Adjusted net income", "Adjusted net income per share" and "Adjusted net cash from operating activities". D+H also reports "Debt to EBITDA ratio", which is also not a defined term under IFRS.  See "Non-IFRS financial measures and key performance indicators" in D+H's MD&A for the three months ended March 31, 2016 for a more complete description of these terms and for reconciliations to their most directly comparable IFRS measure, where applicable. Any non-IFRS financial measures should be considered in context with the IFRS financial statement presentation and should not be considered in isolation or as a substitute for IFRS revenues, net income or cash flows. Furthermore, D+H's financial measures may be calculated differently from similarly titled financial measures of other companies.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

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

A comprehensive discussion of the risks that impact D+H can be found on the Company's most recently filed Annual Information Form and the most recently filed annual MD&A for the year ended December 31, 2015, available on SEDAR at www.sedar.com. Risks and uncertainties related to the Company have not significantly changed since the filing of the 2015 Annual Information Form and the 2015 annual MD&A.

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

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

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

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

REGULATORY FILINGS AND ADDITIONAL INFORMATION

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

SOURCE DH Corporation

Karen H. Weaver, Executive Vice President and Chief Financial Officer, D+H, Richard Colgan, Senior Investor Relations Manager, D+H, [phone], [email protected] or visit our website at dh.com