DATA Communications Management Corp. (TSX: DCM; OTCQX: DCMDF)
(“DCM” or the "Company"), a provider of marketing and business
communication solutions to companies across North America, is
pleased to report continued momentum in the first quarter of 2023
with revenue up +9.8%, and gross profit up +16.3%, compared to the
first quarter of 2022, respectively. Revenue growth has been driven
by a combination of expansion revenue with existing clients, and
new business wins. Gross margin growth exceeded revenue growth,
reflecting the Company’s commitment to operational excellence and
driving higher levels of net income.
FIRST QUARTER 2023 HIGHLIGHTS - BUILDING A BIGGER
BUSINESS
- Revenue for the first quarter of 2023 was up +9.8%, or +$6.8
million, vs. Q1 year ago (YA), for total revenues of $76.1
million;
- Gross profit accelerated +16.3%, or +$3.3 million for a total
of $23.6 million;
- Gross profit as a percentage of revenues grew +1.8 percentage
points to 31.1%, vs. 29.3% YA;
- The 63.4% increase in our share price during the quarter
resulted in a $4.5 million non-cash mark-to-market expense related
to long-term incentive compensation accruals; normalizing for this
adjustment, and accounting for acquisition related costs, Adjusted
EBITDA1 was $12.3 million or 16.2% of revenue vs. $9.4 million and
13.6% of revenues YA;
- No restructuring expenses or any other “adjustments” or
one-time costs, other than $6.1 million in costs related to the
acquisition of Moore Canada Corporation ("MCC") which is now a
wholly-owned subsidiary of DCM;
- Total debt lower by -17.4%, or -$4.7 million, vs. year end 2022
to $22.6 million.
______________________________________________________________________
1 Note: EBITDA, Adjusted EBITDA, Adjusted EBITDA as a
percentage of revenues, Adjusted net income (loss) and Adjusted net
income (loss) as a percentage of revenues are not earnings measures
recognized by International Financial Reporting Standards (IFRS),
do not have any standardized meanings prescribed by IFRS and might
not be comparable to similar financial measures disclosed by other
issuers. EBITDA, Adjusted EBITDA, Adjusted EBITDA as a percentage
of revenues, Adjusted net income (loss) and Adjusted net income
(loss) as a percentage of revenues should not be construed as
alternatives to net income (loss) determined in accordance with
IFRS as an indicator of DCM’s performance. For a description of the
composition of EBITDA, Adjusted EBITDA, Adjusted EBITDA as a
percentage of revenues, Adjusted net income (loss) and Adjusted net
income (loss) as a percentage of revenues, why we believe such
measures are useful to investors and how we use those measures in
our business, together with a quantitative reconciliation of net
income (loss) to EBITDA, Adjusted EBITDA and Adjusted net income
(loss), respectively, see the information under the heading
“Non-IFRS Measures” and the information set forth on Table 2 and
Table 3.
FIRST QUARTER 2023 OPERATIONAL HIGHLIGHTS – BUILDING A BETTER
BUSINESS
- On April 24, 2023, DCM closed the acquisition of MCC for a
total cash purchase price of $130.8 million, subject to final
working capital and other customary post-closing adjustments. With
the completion of the acquisition, MCC is a wholly-owned subsidiary
of DCM. The acquisition was funded through a revolving, floating
rate credit facility from a Canadian chartered bank, which includes
up to $90 million of revolving credit capacity; a $30 million
floating rate term loan facility from the bank; and a new $50
million fixed rate credit facility from Fiera Private Debt.
Commencing in the second quarter of 2023, DCM will begin to report
the financial results of MCC in its consolidated financial
reporting.
- Rael Fisher, formerly President of MCC, is leading our
post-merger integration process as Chief Integration Officer.
MANAGEMENT COMMENTARY
"As we continue our journey building a better and bigger
business, I’m pleased to report a first quarter highlighted by the
continued strong performance of the DCM business and the
substantial progress we made completing the acquisition of the
MCC," said Richard Kellam, CEO and President of DCM.
"In connection with the closing of the MCC acquisition, we
announced our updated five-year strategic financial objectives. We
are now targeting organic annual revenue growth at a compounded
annual growth of 5% per year and Adjusted EBITDA as a percentage of
revenue of more than 14% over the next five years. As a combined
company, we are also focused on driving greater efficiency across
the business, including our organization, operations, and
procurement. We expect to realize total annualized post-merger
synergies in the range of $25 - $30 million over the next 18 to 24
months."
"We are very pleased to have Rael Fisher leading our post-merger
integration process. We are off to a very fast start under Rael’s
leadership with the support of Boston Consulting Group. Our teams
are actively working together serving current customers, pursuing
new opportunities to accelerate our growth agenda, and continuing
our positive momentum building both a better and bigger business.
We look forward to reporting on our consolidated results and
progress in future quarters."
FIRST QUARTER 2023 EARNINGS CALL
The Company will host a conference call and webcast on Thursday,
May 11, 2023, at 9.00 a.m. Eastern time. Mr. Kellam, and James
Lorimer, CFO, will present the first quarter 2023 results followed
by a live Q&A period.
Instructions on how to access both the webcast and telephone
call are available below. For those unable to join live, a replay
of the webcast will be available on the DCM Investor Relations
page.
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: 228 920 117 001 Passcode: ex4x9Y
Or call in (audio only) +1
647-749-9154,,820674274# Canada, Toronto Phone Conference
ID: 820 674 274#
The Company’s full results will be posted on its Investor
Relations page and on www.sedar.com. 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, 2023
and 2022
January 1 to March 31,
2023
January 1 to March 31, 2022
(in thousands of Canadian dollars, except
share and per share amounts, unaudited)
Revenues
$
76,077
$
69,257
Gross profit
23,635
20,324
Gross profit, as a percentage of
revenues
31.1
%
29.3
%
Selling, general and administrative
expenses
18,754
13,644
As a percentage of revenues
24.7
%
19.7
%
Adjusted EBITDA
7,748
9,448
As a percentage of revenues
10.2
%
13.6
%
Net (loss) income for the
period
(2,431
)
3,713
Adjusted net income
2,140
3,713
As a percentage of revenues
2.8
%
5.4
%
Basic earnings per share
$
(0.06
)
$
0.08
Diluted earnings per share
$
(0.06
)
$
0.08
Weighted average number of common
shares outstanding, basic
44,062,831
44,062,831
Weighted average number of common
shares outstanding, diluted
44,062,831
46,748,077
TABLE 2 The following table provides reconciliations of
net (loss) income to EBITDA and of net income to Adjusted EBITDA
for the periods noted.
EBITDA and Adjusted EBITDA reconciliation
For the periods ended March 31, 2023
and 2022
January 1 to March 31,
2023
January 1 to March 31, 2022
(in thousands of Canadian dollars,
unaudited)
Net (loss) income for the period (1)
$
(2,431
)
$
3,713
Interest expense, net
1,083
1,255
Amortization of transaction costs
72
87
Current income tax expense
1,647
1,138
Deferred income tax (recovery) expense
(1,608
)
487
Depreciation of property, plant and
equipment
691
780
Amortization of intangible assets
463
408
Depreciation of the ROU Asset
1,713
1,580
EBITDA
$
1,630
$
9,448
Acquisition and integration costs
6,118
—
Adjusted EBITDA (1)
$
7,748
$
9,448
(1) Net loss (income) for the period includes an amount of
non-cash mark-to-market expense of $4.5 million in the three months
ended March 31, 2023, related to a non-cash increase in
mark-to-market expense for outstanding long-term incentive
compensation RSUs and DSUs. Normalizing for this charge, Adjusted
EBITDA was $12.3 million, or 16.2% of revenues, for the three
months ended March 31, 2023.
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, 2023
and 2022
January 1 to March 31,
2023
January 1 to March 31, 2022
(in thousands of Canadian dollars, except
share and per share amounts, unaudited)
Net (loss) income for the period
$
(2,431
)
$
3,713
Acquisition and integration costs
6,118
—
Tax effect of the above adjustments
$
(1,547
)
—
Adjusted net income
$
2,140
$
3,713
Adjusted net income per share,
basic
0.05
0.08
Adjusted net income per share,
diluted
0.04
0.08
Weighted average number of common
shares outstanding, basic
44,062,831
44,062,831
Weighted average number of common
shares outstanding, diluted
47,650,204
46,748,077
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 over 60 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, transformative tech-enabled
solutions, and end-to-end service offering. Whether we’re 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 the System for Electronic Document Analysis and Retrieval
(SEDAR) at www.sedar.com.
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 and 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. 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, include: our operating
results are sensitive to economic conditions, which can have a
significant impact on us, and uncertain economic conditions may
have a material adverse effect on our business, results of
operations and financial condition; our ability to successfully
integrate the DCM and MCC businesses and realize anticipated
benefits 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
from synergies; there is limited growth in the traditional printing
business, which may impact our ability to grow our sales or even
maintain historical levels of sales of printed business and
marketing communications materials; competition from competitors
supplying similar products and services, some of whom have greater
economic resources than us and are well established suppliers;
increases in the cost of, and supply constraints related to, paper,
ink and other raw material inputs used by DCM, as well as increases
in freight costs, may adversely impact the availability of raw
materials and our production, revenues and profitability; our
ability to meet our revenue and profitability targets; our ability
to comply with our financial covenants under our credit facilities
or to obtain financial covenant waivers from our lenders if
necessary; our ability to complete the proposed sales and
leasebacks of certain properties and substantially reduce our bank
term loan and total indebtedness; we may not be successful in
obtaining capital to fund our business plans on satisfactory terms
(or at all), including, without, limitation, with respect to
investments in digital innovation (such as the development and
successful marketing and sale of new digital capabilities), and
capital expenditures; all of our outstanding indebtedness under our
bank credit facility is subject to floating interest rates, and
therefore is subject to fluctuations in interest rates, an increase
of which would increase our borrowing costs. 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’s discussion and analysis and in DCM’s other
publicly available disclosure documents, as filed by DCM on SEDAR
(www.sedar.com). 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 MEASURES
This press release includes certain non-IFRS measures as
supplementary information. Except as otherwise noted, when used in
this press release, EBITDA means earnings before interest and
finance costs, taxes, depreciation and amortization and Adjusted
EBITDA means EBITDA adjusted for restructuring expenses, and
acquisition costs. Adjusted net income (loss) means net income
(loss) adjusted for restructuring expenses, acquisition costs, and
the tax effects of those items. Adjusted net income (loss) per
share (basic and diluted) is calculated by dividing Adjusted net
income (loss) for the period by the weighted average number of
common shares of DCM (basic and diluted) outstanding during the
period. Adjusted EBITDA as a percentage of revenues means Adjusted
EBITDA divided by revenues and Adjusted net income (loss) as a
percentage of revenues means adjusted net income (loss) divided by
revenues, in each case for the same period. In addition to net
income (loss), DCM uses non-IFRS measures and ratios, including
Adjusted net income (loss), Adjusted net income (loss) per share,
Adjusted net income (loss) as a percentage of revenues, EBITDA,
Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues to
provide investors with supplemental measures of DCM’s operating
performance and thus highlight trends in its core business that may
not otherwise be apparent when relying solely on IFRS financial
measures. DCM also believes that securities analysts, investors,
rating agencies and other interested parties frequently use
non-IFRS measures in the evaluation of issuers. DCM’s management
also uses non-IFRS measures in order to facilitate operating
performance comparisons from period to period, prepare annual
operating budgets and assess its ability to meet future debt
service, capital expenditure and working capital requirements.
Adjusted net income (loss), Adjusted net income (loss) per share,
EBITDA and Adjusted EBITDA are not earnings measures recognized by
IFRS and do not have any standardized meanings prescribed by IFRS.
Therefore, Adjusted net income (loss), Adjusted net income (loss)
per share, EBITDA and Adjusted EBITDA are unlikely to be comparable
to similar measures presented by other issuers.
Investors are cautioned that Adjusted net income (loss),
Adjusted net income (loss) per share, EBITDA and Adjusted EBITDA
should not be construed as alternatives to net income (loss)
determined in accordance with IFRS as an indicator of DCM’s
performance. For a reconciliation of net income (loss) to EBITDA, a
reconciliation of net income (loss) to Adjusted EBITDA,
reconciliation of net income (loss) to Adjusted net income (loss)
and a presentation of Adjusted net income (loss) per share, see
Table 2 and Table 3 above.
Condensed interim consolidated
statements of financial position
(in thousands of Canadian dollars,
unaudited)
March 31, 2023
December 31, 2022
$
$
Assets
Current assets
Cash and cash equivalents
$
2,994
$
4,208
Trade receivables
54,381
54,630
Inventories
18,760
20,220
Prepaid expenses and other current
assets
3,578
2,984
Income taxes receivable
15
15
79,728
82,057
Non-current assets
Other non-current assets
449
466
Deferred income tax assets
6,362
4,830
Property, plant and equipment
6,646
6,779
Right-of-use assets
33,141
33,505
Pension assets
2,793
2,364
Intangible assets
2,058
2,507
Goodwill
16,973
16,973
$
148,150
$
149,481
Liabilities
Current liabilities
Trade payables and accrued liabilities
$
50,795
$
44,133
Current portion of credit facilities
10,228
11,667
Current portion of lease liabilities
6,538
6,791
Provisions
—
1,316
Income taxes payable
1,665
1,630
Deferred revenue
4,386
3,942
73,612
69,479
Non-current liabilities
Credit facilities
12,064
15,380
Lease liabilities
32,832
33,011
Pension obligations
6,101
6,069
Other post-employment benefit plans
2,720
2,695
$
127,329
$
126,634
Equity
Shareholders’ equity
Shares
$
256,478
$
256,478
Shares to be issued
332
—
Warrants
798
869
Contributed surplus
3,051
3,131
Translation Reserve
208
207
Deficit
(240,046
)
(237,838
)
$
20,821
$
22,847
$
148,150
$
149,481
Condensed interim consolidated
statements of operations
(in thousands of Canadian dollars, except
per share amounts, unaudited)
For the three months ended
March 31, 2023
For the three months ended March
31, 2022
$
$
Revenues
$
76,077
$
69,257
Cost of revenues
52,442
48,933
Gross profit
23,635
20,324
Expenses
Selling, commissions and expenses
8,562
7,048
General and administration expenses
10,192
6,596
Acquisition costs
6,118
—
24,872
13,644
(Loss) income before finance costs and
income taxes
(1,237
)
6,680
Finance costs
Interest expense on long term debt and
pensions, net
543
691
Interest expense on lease liabilities
540
564
Amortization of transaction costs
72
87
1,155
1,342
(Loss) Income before income
taxes
(2,392
)
5,338
Income tax expense
Current
1,647
1,138
Deferred
(1,608
)
487
39
1,625
Net (loss) income for the
period
$
(2,431
)
$
3,713
Other comprehensive income:
Items that may be reclassified
subsequently to net income
Foreign currency translation
1
(13
)
1
(13
)
Items that will not be reclassified to
net income
Re-measurements of pension and other
post-employment benefit obligations
299
479
Taxes related to pension and other
post-employment benefit adjustment above
(76
)
(118
)
223
361
Other comprehensive income for the
period, net of tax
$
224
$
348
Comprehensive (loss) income for the
period
$
(2,207
)
$
4,061
Basic (loss) earnings per share
$
(0.06
)
$
0.08
Diluted (loss) earnings per
share
$
(0.06
)
$
0.08
Condensed interim consolidated
statements of cash flows
(in thousands of Canadian dollars,
unaudited)
For the three months ended
March 31, 2023
For the three months ended March
31, 2022
$
$
Cash provided by (used in)
Operating activities
Net (loss) income for the period
$
(2,431
)
$
3,713
Items not affecting cash
Depreciation of property, plant and
equipment
691
780
Amortization of intangible assets
463
408
Depreciation of right-of-use-assets
1,713
1,580
Interest expense on lease liabilities
540
564
Share-based compensation expense
85
56
Pension expense
119
109
Loss on disposal of property, plant and
equipment
—
11
Amortization of transaction costs
72
87
Accretion of non-current liabilities and
accretion of debt modification losses
(78
)
(33
)
Other post-employment benefit plans
expense
68
68
Income tax expense
39
1,625
Changes in working capital
8,238
(1,885
)
Contributions made to pension plans
(215
)
(240
)
Contributions made to other
post-employment benefit plans
(43
)
(43
)
Provisions paid
(1,316
)
(2,094
)
Income taxes (paid) refunded
(1,612
)
16
6,333
4,722
Investing activities
Purchase of property, plant and
equipment
(558
)
(213
)
Purchase of intangible assets
(14
)
—
Proceeds on disposal of property, plant
and equipment
—
31
(572
)
(182
)
Financing activities
Decrease in restricted cash
—
515
Proceeds from credit facilities
—
101
Exercise of warrants
96
—
Repayment of credit facilities
(4,749
)
(2,943
)
Lease payments
(2,324
)
(2,129
)
(6,977
)
(4,456
)
Change in cash and cash equivalents
during the period
(1,216
)
84
Cash and cash equivalents – beginning
of period
$
4,208
$
901
Effects of foreign exchange on cash
balances
2
—
Cash and cash equivalents – end of
period
$
2,994
$
985
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230510006050/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
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