D+H Announces Third Quarter 2015 Earnings and Addresses Misleading Short Seller Report

TORONTO, October 27, 2015 /CNW/ - DH Corporation (TSX:DH) ("D+H" or the "Company"), a leading provider of technology solutions to domestic and global financial institutions, today reported its financial results for the three and nine months ended September 30, 2015.

"Our results for the third quarter were in line with our expectations and we are pleased with the operational progress in all of our business segments, demonstrating the strength of our solutions," said D+H Chief Executive Officer Gerrard Schmid.  "During the quarter we saw continued sales momentum in Global Transaction Banking Solutions and strong sales results in our Lending & Integrated Core segment, which along with a major contract win in our Collateral Management Solutions with the auto finance division of a large Canadian bank, are building positive organic growth and future revenues.  Also in the third quarter, we announced the global rebranding of our recent Fundtech acquisition as Global Transaction Banking Solutions (GTBS) within D+H."

Third Quarter 2015 Highlights 

The quarter results, in comparison to the prior year, include the first full quarter inclusion of GTBS.

• Revenues increased 44% to $415 million from $289 million in the same quarter in 2014. Adjusted revenues⁽¹⁾ totalled $419 million, an increase of $127 million, or 43%, over the same quarter in 2014.
• Adjusted EBITDA⁽¹⁾ increased 38% to $127 million (30% margin) from $93 million (32% margin) compared to the same quarter in 2014.
• Net income of $31 million ($0.29 per share, basic and diluted), compared to $32 million ($0.40 per share, basic and diluted) in the same quarter in 2014.
• Adjusted net income⁽¹⁾ increased 29% to $65 million from $51 million in the same quarter in 2014.
• Adjusted net income per share⁽¹⁾ of $0.62 compares to $0.63 in the same quarter in 2014.
• Total equity increased to $2.3 billion (shares outstanding = 106.1 million) at September 30, 2015 from $1.4 billion (shares outstanding = 86.4 million) at December 31, 2014.
• Loans, borrowings, and convertible debentures increased to $2.0 billion at September 30, 2015 from $1.0 billion at December 31, 2014.
• The net debt to EBITDA⁽¹⁾ ratio was 3.44 at September 30, 2015 as compared to 3.45 at April 30, 2015 (Fundtech acquisition closing) and 2.11 at December 31, 2014. A debt repayment of $20 million was made in the third quarter, which was offset by an FX impact on USD debt.
• Enterprise value⁽⁴⁾ totalled $6.2 billion at September 30, 2015 and $3.9 billion at September 30, 2014.

Third Quarter and Year to Date 2015 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 for the three and nine months ended September 30, 2015, and the MD&A for the three and nine months ended September 30, 2015, which can be found at dh.com and in the disclosure documents filed by the Company with the securities regulatory authorities at sedar.com.

Note regarding reporting segments, as referenced in Q2, 2015:

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

Selected Consolidated Financial Information (C$ millions unless otherwise indicated, unaudited)	Three months ended September 30		Nine months ended September 30
	2015	2014	2015	2014
Revenues	$415.1	$289.2	$1,082.5	$841.5
Adjusted revenues^1	$418.8	$292.0	$1,090.5	$859.9
EBITDA^1	$127.5	$88.5	$307.9	$245.3
Adjusted EBITDA^1	$127.4	$92.6	$324.5	$264.3
Adjusted EBITDA margin^1	30%	32%	30%	31%
Net income	$30.7	$32.2	$70.7	$74.1
Adjusted net income^1	$65.2	$50.6	$172.2	$140.9
Net income per share, basic and diluted (C$)	$0.29	$0.40	$0.73	$0.92
Adjusted net income per share, basic and diluted^1	$0.62	$0.63	$1.77	$1.74
Net cash from operating activities	$64.7	$43.3	$128.4	$108.4

Revenues by Segment and Service Area^2, 3 (C$ millions, unaudited)	Canadian		L&IC		GTBS		Consolidated
	2015	2014	2015	2014	2015	2014	2015	2014
Three months ended September 30
Lending solutions	$94.3	$92.4	$80.9	$63.2	-	n/a	$175.3	$155.5
Payments solutions	$82.3	$76.4	-	-	-	n/a	$82.3	$76.4
Integrated core solutions	-	-	$69.7	$57.2	-	n/a	$69.7	$57.2
GTBS	-	-	-	-	$87.9	n/a	$87.9^5	n/a
Total Revenues	$176.6	$168.8	$150.6	$120.4	$87.9	n/a	$415.1	$289.2
Nine months ended September 30^5
Lending solutions	$273.9	$260.3	$231.5	$185.3	-	n/a	$505.4	$445.6
Payments solutions	$237.4	$227.4	-	-	-	n/a	$237.4	$227.4
Integrated core solutions	-	-	$196.7	$168.4	-	n/a	$196.7	$168.4
GTBS	-	-	-	-	$143.0^5	n/a	$143.0^5	n/a
Total Revenues	$511.3	$487.7	$428.2	$353.8	$143.0	n/a	$1,082.5	$841.5

Adjusted revenues^1 by Segment and Service Area^2,3 (C$ millions, unaudited)	Canadian		L&IC		GTBS		Consolidated
	2015	2014	2015	2014	2015	2014	2015	2014
Three months ended September 30
Lending solutions	$94.3	$92.4	$82.0	$65.7	-	n/a	$176.3	$158.1
Payments solutions	$82.3	$76.4	-	-	-	n/a	$82.3	$76.4
Integrated core solutions	-	-	$69.8	$57.5	-	n/a	$69.8	$57.5
GTBS	-	-	-	-	$90.4	n/a	$90.4	n/a
Total Adjusted revenues^1	$176.6	$168.8	$151.8	$123.2	$90.4	n/a	$418.8	$292.0
Nine months ended September 30^5
Lending solutions	$273.9	$260.3	$235.1	$201.8	-	n/a	$509.0	$462.1
Payments solutions	$237.4	$227.4	-	-	-	n/a	$237.4	$227.4
Integrated core solutions	-	-	$197.2	$170.5	-	n/a	$197.2	$170.5
GTBS	-	-	-	-	$146.9^5	n/a	$146.9^5	n/a
Total Adjusted revenues^1	$511.3	$487.7	$432.2	$372.2	$146.9	n/a	$1,090.5	$859.9

Operations by Segment and Corporate (C$ millions, unaudited)	Canadian		L&IC		GTBS		Corporate		Consolidated
	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014
Three months ended September 30
Revenues	$176.6	$168.8	$150.6	$120.4	$87.9	n/a	-	-	$415.1	$289.2
Expenses	$129.4	$120.2	$90.1	$76.9	$69.0	n/a	($1.0)	$3.7	$287.5	$200.8
EBITDA^1	$47.2	$48.7	$60.5	$43.5	$18.8	n/a	$1.0	($3.7)	$127.5	$88.5
EBITDA Margin^1	27%	29%	40%	36%	21%	n/a	-	-	31%	31%
Adjusted revenues^1	$176.6	$168.8	$151.8	$123.2	$90.4	n/a	-	-	$418.8	$292.0
Adjusted EBITDA^1	$47.2	$48.9	$59.6	$43.9	$20.7	n/a	-	-	$127.4	$92.6
Adjusted EBITDA margin^1	27%	29%	39%	36%	23%	n/a	-	-	30%	32%
Nine months ended September 30^5
Revenues	$511.3	$487.7	$428.2	$353.8	$143.0	n/a	-	-	$1,082.5	$841.5
Expenses	$371.8	$356.3	$273.4	$230.9	$112.9	n/a	$16.6	$9.0	$774.6	$569.2
EBITDA^1	$139.5	$131.4	$154.8	$122.9	$30.1	n/a	($16.6)	($9.0)	$307.9	$245.3
EBITDA Margin^1	27%	27%	36%	35%	21%	n/a	-	-	28%	29%
Adjusted revenues^1	$511.3	$487.7	$432.2	$372.2	$146.9	n/a	-	- -	$1,090.5	$859.9
Adjusted EBITDA^1	$139.5	$131.4	$152.1	$132.9	$32.9	n/a	-	-	$324.5	$264.3
Adjusted EBITDA margin^1	27%	27%	35%	36%	22%	n/a	-	-	30%	31%

Revenues, Adjusted revenues and Adjusted EBITDA by Segment in US$ (US$ millions, unaudited)	Three months ended September 30		Nine months ended September 30
	2015	2014	2015	2014
L&IC Segment revenues^2,3
Lending solutions	$61.7	$57.9	$183.6	$169.3
Integrated core solutions	$53.2	$52.6	$156.1	$153.9
Total L&IC Segment revenues	$115.0	$110.5	$339.6	$323.2
L&IC Segment Adjusted revenues^1,2,3
Lending solutions	$62.6	$60.3	$186.4	$184.3
Integrated core solutions	$53.3	$52.8	$156.4	$155.8
Total L&IC Segment Adjusted revenues	$115.9	$113.1	$342.8	$340.1
L&IC Segment Adjusted EBITDA^1	$45.4	$40.3	$120.3	$121.5
L&IC Segment Adjusted EBITDA margin^1	39%	36%	35%	36%
GTBS Segment revenues	$67.0	n/a	$111.9^5	n/a
GTBS Segment Adjusted revenues^1	$68.9	n/a	$115.0^5	n/a
GTBS Segment Adjusted EBITDA^1	$15.7	n/a	$25.7^5	n/a
GTBS Segment Adjusted EBITDA margin^1	23%	n/a	22%^5	n/a

Enterprise Value^4and Outstanding Shares (Enterprise value in C$, unaudited; shares in millions)	September 30, 2015	September 30, 2014
Enterprise Value^4	$6.2B	$3.9B
Outstanding Shares	106.1	80.8
Three Months Ended	September 30, 2015	September 30, 2014
Weighted Average Shares Outstanding	105.9	80.8

^1	Non-IFRS measure.  See the "Use of Non-IFRS Financial Information" section of this press release for further details.
^2	Totals may not sum due to rounding.
^3	Effective October 1, 2014, revenues reported as 'lending solutions' comprise of 'lending processing solutions' and 'banking technology solutions - lending' as reported in prior periods. Revenues reported as 'Integrated Core Solutions' comprise of 'banking technology solutions - enterprise' as reported in prior periods.
^4	Non-IFRS measure.
^5	Reported results for GTBS begin as of closing of the Fundtech acquisition on April 30, 2015 and include the period from May 1, 2015 through September 30, 2015

D+H Addresses Misleading Short Seller Report

The Company also announced that it has become aware of a report issued by a hedge fund which the Company believes to be engaged in short selling of its shares and which includes numerous assertions regarding the Company's growth prospects and past performance, including that of its GTBS Segment.

This report contains numerous inaccurate, unsubstantiated and misleading statements, assertions and speculations. D+H recommends that investors review its public filings as providing accurate information regarding the Company and its performance, and not to rely on this report which contains misrepresentations and which may have purposes other than giving investors accurate information and impartial analysis. D+H intends to vigorously defend itself against these false assertions and self-interested attacks.

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 third quarter of 2015 was approximately 29% of outstanding D+H shares. The dividend declared by D+H in the third quarter of 2015, as described in the "Dividend" section of this press release below, will also be eligible for the Dividend Reinvestment Plan.

At this time, the Company intends to have these common shares issued from treasury at a 4% discount to the weighted average trading price of the common shares on the TSX during the five trading days immediately preceding the dividend payment date. The 4% discount will remain in effect for all cash dividends that may be declared, if any, by the Company's Board of Directors until otherwise announced. To participate in the Dividend Reinvestment Plan, eligible shareholders should refer to plan information on the D+H website at dh.com.  Eligible shareholders who have not previously registered must register on or before December 17, 2015, the dividend record date, to participate in the program for the dividend payable on December 31, 2015.

SUBSEQUENT EVENTS

Dividend

DH Corporation today announced that its Board of Directors has declared a quarterly dividend of $0.32 per common share payable on December 31, 2015 to shareholders of record at the close of business on December 17, 2015. The dividend is an eligible dividend for Canadian income tax purposes.

OUTLOOK

For further information on trends, management's outlook and corporate priorities in 2015, please refer to section 3 of the MD&A for the three months and nine months ended September 30, 2015.

MANAGEMENT CONFERENCE CALL AND WEBCAST

Teleconference:

A conference call to review these financial results, including a presentation, will take place at 9:00 a.m. (EST) on Tuesday, October 27, 2015 hosted by Chief Executive Officer Gerrard Schmid and Chief Financial Officer Karen H. Weaver. To access the call, please dial 647-427-7450 (Local/Int'l) or 1-888-231-8191 (toll-free within North America).  A replay of the call will also be available until November 11, 2015 by dialing 416-849-0833 (Local/Int'l) or 1-855-859-2056 (toll-free within North America), with Encore Password 52108349.

Webcast:

The conference call will also be webcast at http://event.on24.com/r.htm?e=1060132&s=1&k=762A8E2E6683040C36E42F9903CAA7FB 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 lending, payments, integrated core and global transaction banking solutions are trusted by nearly 8,000 banks, specialty lenders, community banks, credit unions, governments and corporations. Headquartered in Toronto, Canada, D+H has more than 5,500 employees worldwide who are passionate about partnering with clients to create forward-thinking solutions that fit their needs. With annual revenues well in excess of $1 billion, D+H is recognized as one of the world's top FinTech companies on IDC Financial Insights FinTech Rankings and American Banker's FinTech Forward 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, EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, Adjusted net income per share, and Debt to EBITDA ratio.  See "Non-IFRS financial measures and key performance indicators" in D+H's MD&A for the three and nine months ended September 30, 2015 for a more complete description of these terms and for reconciliations to their most directly comparable IFRS measures, where applicable. Any non-IFRS financial measures should be considered in context with the IFRS financial statement presentation and should not be considered in isolation or as a substitute for IFRS revenues, net income or cash flows. Furthermore, D+H's financial measures may be calculated differently from similarly titled financial measures of other companies.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

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

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

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

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

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

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

REGULATORY FILINGS AND ADDITIONAL INFORMATION

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

SOURCE DH Corporation

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.