Everyday People, XTM sign management services deal

Executive Summary

• Everyday People Financial Corp. and XTM Inc. entered into a Management Services and Program Management Agreement (MSA) to integrate XTM's Canadian payments operations into Everyday People Financial's infrastructure via a new joint subsidiary, Everyday People Payments Inc.
• The transaction is immediately accretive to XTM, eliminating its historical operating costs for these programs while allowing it to retain revenue participation, with no shareholder dilution required.
• The agreement establishes a 5-year initial term with automatic renewals, creating a unified fintech ecosystem for earned wage access and digital wallets under the DC Bank Visa platform.

Key Details

• Transaction Structure: A jointly formed subsidiary, Everyday People Payments Inc. (Everyday Payments), will be created. Ownership is initially 90% XTM and 10% Everyday People Financial.
• Equity Upside: Everyday People Financial can earn additional equity up to a maximum of 49.9% based on significant net revenue milestones, with a right-of-first-refusal option to purchase XTM's shares later.
• Operational Control: Everyday People Financial assumes full operational management, compliance oversight, and technology administration of XTM's Canadian-network-branded card and digital wallet programs.
• Cost Elimination: XTM’s historical operating costs (technology support, compliance, reconciliation, program management) are fully eliminated and replaced by Everyday People Financial’s existing infrastructure.
• Headcount Impact: Everyday People Financial will manage the programs with fewer than six incremental team members.
• Financial Impact:
  • XTM’s 2024 net revenues for these programs were $9.1 million.
  • The collaboration is anticipated to generate annualized revenues in line with historical results within 12 months of full transition.
  • The model is capital-light, profit-sharing, and requires no shareholder dilution.
  • Expected to result in immediate improvement to XTM’s cash flow, profitability, and EBITDA due to cost absorption and consolidated operations.
• Technology & Compliance: All programs will operate under Everyday People Financial’s DC Bank Visa platform, ensuring regulatory compliance with Bank of Canada oversight and daily settlement through trust accounts.
• Term: Initial term of five years from the effective date, automatically renewing for successive five-year periods unless terminated earlier.

Notable Quotes

• "This partnership accelerates our strategy to deliver a unified, scalable and compliant payments infrastructure across North America... By combining XTM's client base and technology with EPF's regulatory, operational and banking framework, we are unlocking high-margin recurring revenues and long-term value for both shareholder groups." — Gordon J. Reykdal, Executive Chairman, Everyday People Financial
• "Partnering with EPF ensures that our programs operate on some of the most compliant infrastructure operators in Canada... This transaction is immediately accretive to XTM's financial performance and aligns with its focus on debt reduction, sustainable growth and profitability." — Marilyn Schaffer, CEO, XTM
• "With EPF managing all operational, compliance and technology layers, XTM immediately eliminates significant ongoing costs while maintaining participation in future revenues... The efficiency of this integration... translates directly to higher EBITDA and margin expansion for both companies." — Tyler Hatch, Co-CEO, EP Financial Services