DCM Data Communications Management Corp

FIRST QUARTER 2024 HIGHLIGHTS

• Revenues of $129.3 million were up +69.9%, or +$76.1 million vs. Q1 2023
• Gross profit of $37.3 million increased +57.9% or $13.7 million
• Gross profit as a percentage of revenues of 28.9%, a sequential improvement that shows our progress towards our goal of returning our gross margin to the +30% range
• SG&A expenses were $25.4 million or 19.6% of revenues in Q1 2024, compared to 18.1% of revenues in Q1 2023. Higher relative SG&A expenses in the quarter primarily related to a one-time consulting project
• Adjusted EBITDA1 was $18.7 million, an increase of +46.2% vs. the prior year
• Adjusted EBITDA represented 14.4% of revenues, compared to 16.8% for 2023, consistent with our planned objectives to improve Adjusted EBITDA margins to more than 14%
• Net income was $1.5 million compared to a net loss of $2.4 million last year; Adjusted net income was $4.9 million compared to $5.9 million last year
• Net debt at the end of Q1 2024 was $78.3 million, down -$66.9 million or -46.1% since the closing of the MCC acquisition. The Company ended the quarter with a net debt to trailing 12 months Adjusted EBITDA (net of lease payments) ratio of 1.8x. Our commitment to paying down debt remains a key priority

DATA Communications Management Corp. (TSX: DCM; OTCQX: DCMDF) (“DCM” or the "Company"), a leading provider of marketing and business communication solutions to companies across North America, today reported its first quarter 2024 financial results.

MANAGEMENT COMMENTARY

“I am pleased to report on the continued progress of our business in the first quarter of 2024, following a transformative year in 2023 when we completed our acquisition of Moore Canada Corporation (“MCC”) and made substantial progress in our post-acquisition integration,” said Richard Kellam, President & CEO of DCM.

“Our focus in the first quarter and for the balance of the year is on delivering our post-acquisition integration commitments. These priorities include consolidating our plant network, integrating legacy MCC systems, completing our restructuring plans, focusing on profitable growth, and realizing total annualized post-acquisition synergies of between $30 and $35 million within the next year.”

“We are optimistic about our full year outlook based on order trends we are seeing, new logo wins, and progress on our initiatives to drive improved operating performance, including strategic revenue management opportunities, improving product mix, and leveraging our expanded suite of product and service offerings.”

FIRST QUARTER 2024 EARNINGS CALL

The Company will host a conference call and webcast on Tuesday, May 14,2024, at 9:00 a.m. Eastern time. Mr. Kellam, and James Lorimer, CFO, will present the first quarter of 2024 results followed by a live Q&A period.

Instructions on how to access both the webcast and call are available below.

DCM will be using Microsoft Teams to broadcast our earnings call, which will be accessible via the options below:

Click here to join the meeting

Meeting ID: 284 159 172 699 Passcode: rVeV5u Download Teams | Join on the web

Or call in (audio only)

+1 647-749-9154,,174293459# Canada, Toronto Phone Conference ID: 174 293 459#

The Company’s full results will be posted on its Investor Relations page and on www.sedarplus.ca. A video message from Mr. Kellam will also be posted on the Company’s website.

TABLE 1 The following table sets out selected historical consolidated financial information for the periods noted.

For the periods ended March 31, 2024 and 2023

January 1 to March 31, 2024

January 1 to March 31, 2023

(in thousands of Canadian dollars, except share and per share amounts, unaudited)

 

 

 

Revenues

$

129,254

 

$

76,077

 

 

 

 

Gross profit

 

37,311

 

 

23,635

 

 

 

 

Gross profit, as a percentage of revenues

 

28.9

%

 

31.1

%

 

 

 

Selling, general and administrative expenses

 

25,382

 

 

13,736

 

As a percentage of revenues

 

19.6

%

 

18.1

%

 

 

 

Adjusted EBITDA

 

18,665

 

 

12,766

 

As a percentage of revenues

 

14.4

%

 

16.8

%

 

 

 

Net income (loss) for the period

 

1,475

 

 

(2,431

)

 

 

 

Adjusted net income

 

4,903

 

 

5,890

 

As a percentage of revenues

 

3.8

%

 

7.7

%

 

 

 

Basic (loss) earnings per share

$

0.03

 

$

(0.06

)

Diluted (loss) earnings per share

$

0.02

 

$

(0.06

)

Weighted average number of common shares outstanding, basic

 

55,022,883

 

 

44,062,831

 

Weighted average number of common shares outstanding, diluted

 

59,051,883

 

 

44,062,831

 

TABLE 2 The following table provides reconciliations of net (loss) income to EBITDA and of net (loss) income to Adjusted EBITDA for the periods noted.

EBITDA and Adjusted EBITDA reconciliation

For the periods ended March 31, 2024 and 2023

January 1 to March 31, 2024

January 1 to March 31, 2023

(in thousands of Canadian dollars, unaudited)

 

 

 

Net income (loss) for the period

$

1,475

$

(2,431)

 

 

 

Interest expense, net

 

5,553

 

1,083

Amortization of transaction costs and debt extinguishment gain, net

 

140

 

72

Current income tax expense

 

1,342

 

1,647

Deferred income tax (recovery) expense

 

(1,163)

 

(1,608)

Depreciation of property, plant and equipment

 

1,523

 

691

Amortization of intangible assets

 

728

 

463

Depreciation of the ROU Asset

 

4,485

 

1,713

EBITDA

$

14,083

$

1,630

Acquisition and integration costs

 

283

 

6,118

Restructuring expenses

 

1,085

 

—

Net fair value (gains) losses on financial liabilities at fair value through profit or loss

 

3,214

 

5,018

Adjusted EBITDA

$

18,665

$

12,766

TABLE 3 The following table provides reconciliations of net (loss) income to Adjusted net income and a presentation of Adjusted net income per share for the periods noted.

Adjusted net income reconciliation

For the periods ended March 31, 2024 and 2023

January 1 to March 31, 2024

January 1 to March 31, 2023

(in thousands of Canadian dollars, except share and per share amounts, unaudited)

 

 

 

Net income (loss) for the period

$

1,475

$

(2,431)

 

 

 

Acquisition and integration costs

 

283

 

6,118

Restructuring expenses

 

1,085

 

—

Net fair value (gains) losses on financial liabilities at fair value through profit or loss

 

3,214

 

5,018

Tax effect of the above adjustments

 

(1,154)

 

(2,815)

Adjusted net income

$

4,903

$

5,890

 

 

 

Adjusted net income per share, basic

$

0.09

$

0.13

Adjusted net income per share, diluted

$

0.08

$

0.12

Weighted average number of common shares outstanding, basic

 

55,022,883

 

44,062,831

Weighted average number of common shares outstanding, diluted

 

59,051,883

 

47,650,204

About DATA Communications Management Corp.

DCM is a marketing and business communications partner that helps companies simplify the complex ways they communicate and operate, so they can accomplish more with fewer steps and less effort. For 65 years, DCM has been serving major brands in vertical markets including financial services, retail, healthcare, energy, other regulated industries, and the public sector. We integrate seamlessly into our clients’ businesses thanks to our deep understanding of their needs, our technology-enabled solutions, and our end-to-end service offering. Whether we are running technology platforms, sending marketing messages, or managing print workflows, our goal is to make everything surprisingly simple.

Additional information relating to DATA Communications Management Corp. is available on www.datacm.com, and in the disclosure documents filed by DATA Communications Management Corp. on SEDAR+ at www.sedarplus.ca.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release constitute “forward-looking” statements that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, objectives or achievements of DCM, or industry results, to be materially different from any future results, performance, objectives or achievements expressed or implied by such forward-looking statements. When used in this press release, words such as “may”, “would”, “could”, “will”, “expect”, “anticipate”, “estimate”, “believe”, “intend”, “plan”, and other similar expressions are intended to identify forward-looking statements. These statements reflect DCM’s current views regarding future events and operating performance, are based on information currently available to DCM, and speak only as of the date of this press release.

These forward-looking statements involve a number of risks, uncertainties, and assumptions. They should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not such performance or results will be achieved. Many factors could cause the actual results, performance, objectives or achievements of DCM to be materially different from any future results, performance, objectives or achievements that may be expressed or implied by such forward-looking statements. We caution readers of this press release not to place undue reliance on our forward-looking statements since a number of factors could cause actual future results, conditions, actions, or events to differ materially from the targets, expectations, estimates or intentions expressed in these forward-looking statements.

The principal factors, assumptions and risks that DCM made or took into account in the preparation of these forward-looking statements and which could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements are described in further detail in our Management Discussion and Analysis for the three months ended March 31, 2024, and include but are not limited to the following:

• Our ability to successfully integrate the DCM and MCC businesses and realize anticipated synergies from the combination of those businesses, including revenue and profitability growth from an enhanced offering of products and services, larger customer base and cost reductions;

• The expected annualized synergies that the Company expects to derive from the MCC acquisition have been estimated by the Company based on its experience integrating previously acquired businesses, other facilities and completing previous restructuring initiatives, and includes estimated benefits expected to be derived from the acquisition, including those related to facility sales and consolidations, operational improvements, eliminating redundant positions, and purchasing synergies;

• Our expected total annualized synergies estimates are principally based upon the following material factors and assumptions: (a) given the significant overlap in the nature of the two businesses, DCM will be able to eliminate duplication of overhead expenses across the combined DCM and MCC businesses in its SG&A functions; (b) given significant overlap in the nature of DCM’s and MCC’s production processes and available combined excess capacity, DCM will be able to consolidate manufacturing plants; (c) further operational and SG&A costs savings will be achievable once the above-noted initiatives are completed; (d) the combined business will achieve more favourable purchasing terms by virtue of the fact it is approximately twice the size of each of DCM and MCC pre-acquisition, and therefore able to command lower pricing from vendors based on larger volumes, and its expected ability to better harmonize purchasing strategies to leverage more favourable purchasing terms than each company had individually for similar goods or services; and (e) the combined business will be able to generate certain revenue synergies from cross-selling each other’s broader, combined, suite of capabilities; and

• Such expected annualized cost savings have not been prepared in accordance with IFRS Accounting Standards, nor has a reconciliation to IFRS Accounting Standards been provided, and the Company evaluates its financial performance on the basis of these non-IFRS Accounting Standards measures. Therefore, the Company does not consider their most comparable IFRS Accounting Standards measures when evaluating prospective acquisitions.

Additional factors are discussed elsewhere in this press release and under the headings "Liquidity and capital resources" and “Risks and Uncertainties” in DCM’s Management Discussion and Analysis and in DCM’s other publicly available disclosure documents, as filed by DCM on SEDAR+ (www.sedarplus.ca). Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated or expected. Unless required by applicable securities law, DCM does not intend and does not assume any obligation to update these forward-looking statements.

NON-IFRS ACCOUNTING STANDARDS MEASURES

NON-IFRS ACCOUNTING STANDARDS AND OTHER FINANCIAL MEASURES

This press release includes certain non-IFRS Accounting Standards measures, ratios and other financial measures as supplementary information. This supplementary information does not represent earnings measures recognized by IFRS Accounting Standards and does not have any standardized meanings prescribed by IFRS Accounting Standards. Therefore, these non-IFRS Accounting Standards measures, ratios and other financial measures are unlikely to be comparable to similar measures presented by other issuers. Investors are cautioned that this supplementary information should not be construed as alternatives to net income (loss) determined in accordance with IFRS Accounting Standards as an indicator of DCM’s performance. Definitions of such supplementary information, together with a reconciliation of net income (loss) to such supplementary financial measures, can be found in Table 4 and Table 5 of our Management Discussion and Analysis for the three months ended March 31, 2024 and filed on SEDAR+ at www.sedarplus.ca.

Condensed interim consolidated statements of financial position

 

 

(in thousands of Canadian dollars, unaudited)

March 31, 2024

December 31, 2023

 

$

$

 

 

 

Assets

 

 

Current assets

 

 

Cash and cash equivalents

$

19,842

$

17,652

Trade receivables

 

107,154

 

117,956

Inventories

 

32,286

 

28,840

Prepaid expenses and other current assets

 

5,827

 

5,313

Income taxes receivable

 

1,248

 

2,640

Assets held for sale

 

—

 

8,650

 

 

166,357

 

181,051

Non-current assets

 

 

Other non-current assets

 

7,096

 

2,900

Deferred income tax assets

 

9,122

 

9,801

Property, plant and equipment

 

31,088

 

30,358

Right-of-use assets

 

157,556

 

159,801

Pension assets

 

2,724

 

1,962

Intangible assets

 

9,888

 

10,616

Goodwill

 

22,265

 

22,265

 

$

406,096

$

418,754

 

 

 

Liabilities

 

 

Current liabilities

 

 

Bank overdraft

 

199

 

1,564

Trade payables and accrued liabilities

$

69,963

$

75,766

Current portion of credit facilities

 

8,119

 

6,333

Current portion of lease liabilities

 

11,820

 

10,322

Provisions

 

13,395

 

16,325

Deferred revenue

 

6,032

 

6,221

 

 

109,528

 

116,531

Non-current liabilities

 

 

Provisions

 

914

 

1,004

Credit facilities

 

88,379

 

93,918

Lease liabilities

 

144,049

 

144,993

Pension obligations

 

20,288

 

26,386

Other post-employment benefit plans

 

3,704

 

3,606

Asset retirement obligation

 

3,583

 

3,552

 

$

370,445

$

389,990

 

 

 

Equity

 

 

Shareholders’ equity

 

 

Shares

$

283,738

$

283,738

Warrants

 

219

 

219

Contributed surplus

 

3,346

 

3,135

Translation Reserve

 

207

 

177

Deficit

 

(251,859)

 

(258,505)

 

$

35,651

$

28,764

 

$

406,096

$

418,754

Condensed interim consolidated statements of operations

 

(in thousands of Canadian dollars, except per share amounts, unaudited)

For the three months ended March 31, 2024

For the three months ended March 31, 2024

 

$

$

 

 

 

 

 

 

Revenues

129,254

76,077

 

 

 

Cost of revenues

91,943

52,442

 

 

 

Gross profit

37,311

23,635

 

 

 

Expenses

 

 

Selling, commissions and expenses

10,864

8,322

General and administration expenses

14,518

5,414

Restructuring expenses

1,085

—

Acquisition and integration costs

283

6,118

Net fair value (gains) losses on financial liabilities at fair value through profit or loss

3,214

5,018

 

29,964

24,872

 

 

 

Income before finance and other costs, and income taxes

7,347

(1,237)

 

 

 

Finance costs

 

 

Interest expense on long term debt and pensions, net

2,498

543

Interest expense on lease liabilities

3,055

540

Amortization of transaction costs net of debt extinguishment gain

140

72

 

5,693

1,155

 

 

 

Income (loss) before income taxes

1,654

(2,392)

 

 

 

Income tax expense

 

 

Current

1,342

1,647

Deferred

(1,163)

(1,608)

 

179

39

 

 

 

Net Income (loss) for the period

1,475

(2,431)

Condensed interim consolidated statements of cash flows

 

(in thousands of Canadian dollars, unaudited)

For the three months ended March 31, 2024

For the three months ended March 31, 2023

 

$

$

 

 

 

Cash provided by (used in)

 

 

Operating activities

 

 

Net income (loss) for the period

$

1,475

$

(2,431)

Items not affecting cash

 

 

Depreciation of property, plant and equipment

 

1,523

 

691

Amortization of intangible assets

 

728

 

463

Depreciation of right-of-use-assets

 

4,485

 

1,713

Interest expense on lease liabilities

 

3,055

 

540

Share-based compensation expense

 

211

 

85

Net fair value losses on financial liabilities at fair value through

profit or loss

 

3,214

 

5,018

Pension expense

 

472

 

119

(Gain) loss on sale and leaseback

 

(11)

 

—

(Gain) loss on disposal of property, plant and equipment

 

(22)

 

—

Provisions

 

1,085

 

—

Amortization of transaction costs, accretion of debt premium/discount, net of debt extinguishment gain

 

140

 

(6)

Accretion of non-current liabilities

 

31

 

—

Other post-employment benefit plans expense

 

149

 

68

Income tax expense

 

179

 

39

Changes in working capital

 

(6,560)

 

3,220

Contributions made to pension plans

 

(319)

 

(215)

Contributions made to other post-employment benefit plans

 

(51)

 

(43)

Provisions paid

 

(4,105)

 

(1,316)

Income taxes received (paid)

 

50

 

(1,612)

 

 

5,729

 

6,333

 

 

 

Investing activities

 

 

Proceeds on sale and leaseback transaction

 

8,661

 

—

Purchase of property, plant and equipment

 

(2,766)

 

(558)

Purchase of intangible assets

 

—

 

(14)

Proceeds on disposal of property, plant and equipment

 

535

 

—

 

 

6,430

 

(572)

 

 

 

Financing activities

 

 

Exercise of warrants

 

—

 

96

Proceeds from credit facilities

 

21,000

 

—

Repayment of credit facilities

 

(24,893)

 

(4,749)

Decrease in bank overdrafts

 

(1,365)

 

—

Lease payments

 

(4,730)

 

(2,324)

 

 

(9,988)

 

(7,073)

 

 

 

Change in cash and cash equivalents during the period

 

2,171

 

(1,216)

Cash and cash equivalents – beginning of period

$

17,652

$

4,208

Effects of foreign exchange on cash balances

 

19

 

2

Cash and cash equivalents – end of period

$

19,842

$

2,994

____________________________

1 Adjusted EBITDA, Adjusted EBITDA as a percentage of revenues, Adjusted net income (loss) and Adjusted net income (loss) as a percentage of revenues are non-IFRS Accounting Standards measures. For a description of the composition of these and other non-IFRS Accounting Standards measures used in this press release, and a reconciliation to their most comparable IFRS Accounting Standards measure, where applicable, see the information under the heading “Non-IFRS Accounting Standards Measures”, the information set forth on Table 2 and Table 3 herein, and our most recent Management Discussion & Analysis filed on www.sedarplus.ca.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240513715319/en/

Mr. Richard Kellam President and Chief Executive Officer DATA Communications Management Corp. Tel: (905) 791-3151

Mr. James E. Lorimer Chief Financial Officer DATA Communications Management Corp. Tel: (905) 791-3151 ir@datacm.com