In response to your questions....To those that messaged me with questions lately, instead of repeating my responses, I will cover the two main questions on this board.
1. Forward Estimate of Declines?
DCI is facing two negative influences in regards to revenues. The first is the historical decline in use of cash, which manifests into the gradual decline in transactions that has been experienced by all ATM companies. From the INTERAC website, Canadian ATM transactions have decreased 20% from 2008-2014.....DCI is not immune, and this decrease will likely continue at the current rate of 2-3% annually. However, it might be sped up by the policy of increasing ATM fees as DCI has suggested it is currently implementing. I think at best, an increase in fees will be revenue neutral, as the increase in fees will be offset by in increase in the decrease of ATM transactions in response.
The second negative influence is DCI itself. I have stated this in previous posts. DCI is like old Ma Bell, or old Air Canada - A company its customers loved to hate. DCI nickles and dimes its customers (meaning the owners of the ATMs) in such as way as they are 'ripe' for picking when their contract comes to an end. I am aware of many 'contract expiries' in both Canada and Australia in the recent past. Some larger companies decide they don't need a third party, and they purchase their own ATMs and connect directly to a processing switch. Others deal with smaller companies that offer free maintenance, no fees, and friendly, local service.
In theory, DCI should be able to combat the transaction losses by employing an effective sales team, however, as evidenced by past results, the sales staff for DCI are unable to keep up with ongoing losses.
Therefore.....barring any new acquisitions made using borrowed money, I expect DCI's ATM revenue to decrease at least 5-7% annually. If one views the Canadian landscape, DCI seems to have already purchased many of the logical targets, leaving only slim pickins'. Of course, there may be a blockbuster deal in the works involving Cardtronics or Ezee ATM, but I doubt it.
2. Are dividends safe?
I believe they are, in the short term of, say, the next 18 months. The Cash Store saga is almost over, and they only represent 2% of DCI's Gross Profit - likely reduced to zero by the end of the year.
On the plus side, revenue is stable, and declines are going to be steady and predictable. Even the loss of any single major contract, of which there have been a few lately, isn't going to cause massive surprising quarterly drops. As well, there is always fat to cut.
I think the concern should be, if DCI is unable to acquire any significant company in the next year, and EBITDA continues to show a regular decline each quarter, even if the dividends are safe in the near term, how many investors are going to jump ship well in advance of a possible drop? Perception is everything.
It's certainly a game of chicken. In the face of declining revenue, even if Jeff is able to maintain the dividend through various measures, how many will sell off in anticipation of a drop?
If DCI had been true to it's word, and through a strong sales effort, simply maintained it's transaction volumes at existing levels, there would be no concern. I'd be happy holding a no growth company that paid 9%. The problem, however, is that DCI has proven incapable of internal growth. They rely soly on acquistions using borrowed money to either grow the business and/or maintain the status quo. As an example, even with the new Australian acquisition, EzeATM, DCI's Australian numbers are still less than two years prior.
Finally....one major dark cloud on the horizon. We all saw what happend out West. Alberta, to the surprise of all, did the unthinkable and elected an NDP governement. With a Federal Election coming on October 19th, and with the NDP currently tied in the polls, a NDP government, or a coalition government with the Liberals, seems a possibility. A long standing NDP policiy has been the elimination of ATM Surcharges. Even if there policy excluded White Label ATMs like DCI's, the effect would be devastating.
Currently, the surcharge rate for a bank ATM and a DCI ATM are roughly equal. Now, if the bank ATMs suddenly were at zero, who would still use a DCI ATM? Only the desperate, drunk or financial illiterate.
Just food for thought.