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Ezeatm Clinches 5 Year ATM Processing Agreement With First Data

Ezeatm (ASX: EZA) has signed a five year services agreement with First Data for the provision of ATM related services - which are expected to deliver cost savings.

The company is now the #1 Australian owned Independent ATM Deployer and also a Switch and Distributor of ATM Products.

The five year agreement with First Data will provide management, switching, driving and operational support of Ezeatm's 1800+ ATM devices in Australia.

Importantly the direct relationship with First Data will enhance the company's service delivery to clients while delivering costs savings for the business.

Todd Zani, chief executive officer for Ezeatm, commented: "prior to our iCash acquisition, Ezeatm had non-exclusive processing agreements with both iCash and Indue, who in turn had ATM processing agreements with First Data."

The iCash acquisition enabled Ezeatm to become it's "own switch", so Ezeatm is now a deployer, switch and distributor.

Zani added, "For more than ten years, we have had an indirect relationship with First Data and I am extremely proud that this is now a direct relationship which has now been extended for another five years."

The existing agreement with First Data was scheduled to cease on 14 January 2014 but negotiations were commenced in good faith in relation to the extension and re-negotiation of key terms of the existing agreement.

First Data processing 1.5 billion transactions annually

First Data have close to three decades experience in the Australian payments market, and process more than 1.5 billion transactions per year on the company's wholly owned switching infrastructure, while leading the industry with 100% scheduled switch uptime over the last 10 years.

John Tait, managing director of First Data, Australia and New Zealand, added: "We are pleased to leverage this experience in transaction and payment solutions to provide Ezeatm with industry leading services and reliability."

Additional Revenue Streams for Ezeatm

- ATM advertising opportunities
- ATM maintenance contracts
- Pre-paid phone services
- Loyalty cards
- Pre-paid debit cards
- Potential international opportunities

Analysis

Today's deal with First Data will deliver costs savings for the business.

Ezeatm is now the #1 Australian owned Independent ATM Deployer and also a Switch and Distributor of ATM Products.

It is also one of the best performing IPO's on the Australian Stock Exchange over the past year, with the company currently trading at $0.40 - which is double the $0.20 IPO price. The company listed in October 2011 after raising $3.5 million.

Ezeatm is the exclusive distributor of the cashPod ATM range and has customised ATMs for the Australian and Indonesian markets, with the company recently announcing a historic deal to supply 16,000 ATMs to Indonesia.

In Australia the company generates revenue each time a consumer uses an Ezeatm, where a $2 Direct Charge is paid. A $0.20 fee is paid for "switching" the funds between the consumer's financial institution and depositing the funds into the bank account of Ezeatm and/or Ezeatm's cash fulfilment partner.

Then a $0.30 - $1.00 fee is paid by Ezeatm to the Site Owner or Cash fulfilment partner for "cash fulfilment". This rebate is site dependant and is largely transactional volume based. A gross profit of between $0.80 to $1.50 per transaction is made.

Therefore the more ATM's the company has in the field, the more revenue will be generated. Ezeatm is currently undertaking an aggressive growth strategy.

Highlighting the roll-out, there was a 50% increase in owned and operated ATMs in first six months of CY2011, with the National Sales Network delivering 200+ new sites since 1 Jan 2012 - representing more than a 15% increase.

The Direct Cash acquisition valued the Customers ATMs at approx. $42,000 each.

Ezeatm had revenues of $9.4 million for FY12 (official quotation on the ASX was 7 October 2011), with EBITDA of $2.46 million and a Net Profit after tax of $1.56 million.

One of the advantages of the business model is that revenue security is generally 5 to 7 year contracts.

Growth will also come from a recently announced deal in July to supply and install 16,000 automated teller machines to a client in Indonesia. The agreement is expected to generate gross revenues of $85 million.

However, this is likely to be the tip of the iceberg given that Australia has around 40,000 ATM's whereas Indonesia has around 60,000 for a population of 250 million. Early estimates are the Indonesia will have 200,000 ATM's by 2015, whereEzeatm is well placed to participate in that growth.

It is also worth noting that the Ezeatm stock is very tightly held, with a small retail investor base. This is a stock for the value investor leveraging growth in Australia, Indonesia and other Asian markets.

Ezeatm also has flagged it anticipates making a dividend payment in 2013 providing potentially strong returns for investors looking for dividend paying growth stocks.

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