DCM Data Communications Management Corp

SECOND QUARTER 2024 HIGHLIGHTS

• Revenues of $125.8 million were up +5.7%, or +$6.8 million vs. Q2 2023
• Gross profit of $34.3 million increased +7.2% or $2.3 million
• Gross profit as a percentage of revenues improved to 27.3%, vs. 26.9% in Q2 2023, marking continued progress towards returning gross profit margins to +30%
• Adjusted EBITDA1 increased 22.2% vs. the prior year to $16.9 million
• Adjusted EBITDA represented 13.4% of revenues, compared to 11.6% for Q2 2023, consistent with objective to improve Adjusted EBITDA margins to more than 14%
• Net income was $4.1 million compared to a net loss of $2.9 million last year; Adjusted net income was $4.0 million vs. $3.8 million last year
• Net debt at the end of Q2 2024 was $75.1 million, down -48.3% or -$70.2 million 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 1.7x. DCM's 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 second quarter 2024 financial results.

MANAGEMENT COMMENTARY

“I am pleased to report on the continued progress of our business in the second quarter of 2024 during which we marked the one-year anniversary of completing our acquisition of Moore Canada Corporation (“MCC”),” said Richard Kellam, President & CEO of DCM.

“During the quarter, we continued to be guided by our commitment to delivering on our key post-acquisition integration priorities including consolidating our plant network, integrating legacy MCC systems, completing our restructuring actions and focusing on profitable growth. Through these actions, we remain on track to realize annualized post-acquisition synergies of $30-35 million which we expect to substantially achieve prior to the end of this fiscal year.”

“Our Commercial team is making progress on several fronts on our path to building a strong platform for profitable growth. The team is leveraging our expanded suite of product and service offerings, led by our tech-enabled solutions, with a focus on continuing to improve our product mix, increasing our wallet share with existing clients, strengthening our presence in key industry verticals, and winning new logos. The team is also delivering on our commitment to drive margin improvement through strategic revenue management initiatives we are implementing across the business."

"Our other post-acquisition priorities remain on track for completion by the end of 2024 including the plant consolidation we initiated last year to increase our operating efficiency by reducing our network from 14 to 10 main production facilities. During June we completed the consolidation of our Thistle and Bond facilities, and we are on track to close our plants in Trenton, Ontario and Fergus, Ontario by year end. During the second quarter, we accelerated production and equipment moves from Trenton and Fergus to our Brampton, Ontario and Drummondville, Quebec factories, respectively while investing in new state-of-the-art equipment to further enhance our production capabilities and position us to drive additional operating efficiencies. These investments are consistent with our commitment to provide high quality solutions for our clients and to invest in markets with strong potential for growth. ”

SECOND QUARTER 2024 EARNINGS CALL

The Company will host a conference call and webcast on Thursday, August 8, 2024, at 9:00 a.m. Eastern time. Mr. Kellam, and James Lorimer, CFO, will present the second quarter of 2024 results followed by a live Q&A.

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:

Register for the webcast prior to the start of the event: Microsoft Virtual Events Powered by Teams Please complete the phone field in the form (prior to the start of the event) if you wish to dial in.

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 June 30, 2024 and 2023

April 1 to June 30, 2024

April 1 to June 30, 2023

January 1 to June 30, 2024

January 1 to June 30, 2023

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

 

 

 

 

 

Revenues

$

125,751

 

$

118,963

 

$

255,005

 

$

195,040

 

 

 

 

 

 

Gross profit

 

34,334

 

 

32,037

 

 

71,645

 

 

55,810

 

 

 

 

 

 

Gross profit, as a percentage of revenues

 

27.3

%

 

26.9

%

 

28.1

%

 

28.6

%

 

 

 

 

 

Selling, general and administrative expenses

 

23,864

 

 

23,004

 

 

49,246

 

 

36,879

 

As a percentage of revenues

 

19.0

%

 

19.3

%

 

19.3

%

 

18.9

%

 

 

 

 

 

Adjusted EBITDA

 

16,888

 

 

13,823

 

 

35,553

 

 

26,588

 

As a percentage of revenues

 

13.4

%

 

11.6

%

 

13.9

%

 

13.6

%

 

 

 

 

 

Net income (loss) for the period

 

4,064

 

 

(2,879

)

 

5,539

 

 

(5,311

)

 

 

 

 

 

Adjusted net income

 

4,017

 

 

3,778

 

 

8,920

 

 

9,667

 

As a percentage of revenues

 

3.2

%

 

3.2

%

 

3.5

%

 

5.0

%

 

 

 

 

 

Basic (loss) earnings per share

$

0.07

 

$

(0.06

)

$

0.10

 

$

(0.11

)

Diluted (loss) earnings per share

$

0.07

 

$

(0.06

)

$

0.10

 

$

(0.11

)

Weighted average number of common shares outstanding, basic

 

55,245,796

 

 

49,055,088

 

 

55,134,340

 

 

46,572,750

 

Weighted average number of common shares outstanding, diluted

 

57,835,179

 

 

49,055,088

 

 

57,746,066

 

 

46,572,750

 

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 June 30, 2024 and 2023

April 1 to June 30, 2024

April 1 to June 30, 2023

January 1 to June 30, 2024

January 1 to June 30, 2023

(in thousands of Canadian dollars, unaudited)

 

 

 

 

 

Net income (loss) for the period

$

4,064

 

$

(2,879

)

$

5,539

 

$

(5,311

)

 

 

 

 

 

Interest expense, net

 

5,366

 

 

3,499

 

 

10,919

 

 

4,582

 

Amortization of transaction costs and debt extinguishment gain, net

 

140

 

 

107

 

 

280

 

 

179

 

Current income tax expense

 

16

 

 

690

 

 

1,358

 

 

2,337

 

Deferred income tax (recovery) expense

 

947

 

 

(1,293

)

 

(216

)

 

(2,901

)

Depreciation of property, plant and equipment

 

1,783

 

 

1,365

 

 

3,306

 

 

2,056

 

Amortization of intangible assets

 

306

 

 

701

 

 

1,034

 

 

1,164

 

Depreciation of the ROU Asset

 

4,329

 

 

2,724

 

 

8,814

 

 

4,437

 

EBITDA

$

16,951

 

$

4,914

 

$

31,034

 

$

6,543

 

 

 

 

 

 

Acquisition and integration costs

 

243

 

 

3,837

 

 

526

 

 

9,955

 

Restructuring expenses

 

1,101

 

 

2,729

 

 

2,186

 

 

2,729

 

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

 

(1,407

)

 

2,343

 

 

1,807

 

 

7,361

 

Adjusted EBITDA

 

16,888

 

 

13,823

 

 

35,553

 

 

26,588

 

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 June 30, 2024 and 2023

April 1 to June 30, 2024

April 1 to June 30, 2023

January 1 to June 30, 2024

January 1 to June 30, 2023

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

 

 

 

 

 

Net income (loss) for the period

$

4,064

 

$

(2,879

)

$

5,539

 

$

(5,311

)

 

 

 

 

 

Restructuring expenses

 

1,101

 

 

2,729

 

 

2,186

 

 

2,729

 

Acquisition and integration costs

 

243

 

 

3,837

 

 

526

 

 

9,955

 

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

 

(1,407

)

 

2,343

 

 

1,807

 

 

7,361

 

Tax effect of the above adjustments

 

16

 

 

(2,252

)

 

(1,138

)

 

(5,067

)

Adjusted net income

$

4,017

 

$

3,778

 

$

8,920

 

$

9,667

 

 

 

 

 

 

Adjusted net income per share, basic

$

0.07

 

$

0.08

 

$

0.16

 

$

0.21

 

Adjusted net income per share, diluted

$

0.07

 

$

0.08

 

$

0.15

 

$

0.21

 

Weighted average number of common shares outstanding, basic

 

55,245,796

 

 

49,055,088

 

 

55,134,340

 

 

46,572,750

 

Weighted average number of common shares outstanding, diluted

 

57,835,179

 

 

49,055,088

 

 

57,746,066

 

 

46,572,750

 

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 through 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 we provide to our clients 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 and six months ended June 30, 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 5 and Table 6 of our Management Discussion and Analysis for the three and six months ended June 30, 2024 and filed on SEDAR+ at www.sedarplus.ca.

 

Condensed interim consolidated statements of financial position

 

(in thousands of Canadian dollars, unaudited)

June 30, 2024

December 31, 2023

 

$

$

 

 

 

Assets

 

 

Current assets

 

 

Cash and cash equivalents

$

12,929

 

$

17,652

 

Trade receivables

 

97,731

 

 

117,956

 

Inventories

 

25,771

 

 

28,840

 

Prepaid expenses and other current assets

 

5,567

 

 

5,313

 

Income taxes receivable

 

2,881

 

 

2,640

 

Assets held for sale

 

—

 

 

8,650

 

 

 

144,879

 

 

181,051

 

Non-current assets

 

 

Other non-current assets

 

9,252

 

 

2,900

 

Deferred income tax assets

 

7,769

 

 

9,801

 

Property, plant and equipment

 

33,461

 

 

30,358

 

Right-of-use assets

 

159,774

 

 

159,801

 

Pension assets

 

3,117

 

 

1,962

 

Intangible assets

 

9,582

 

 

10,616

 

Goodwill

 

22,265

 

 

22,265

 

 

$

390,099

 

$

418,754

 

 

 

 

Liabilities

 

 

Current liabilities

 

 

Bank overdraft

 

—

 

 

1,564

 

Trade payables and accrued liabilities

$

57,576

 

$

75,766

 

Current portion of credit facilities

 

10,899

 

 

6,333

 

Current portion of lease liabilities

 

12,765

 

 

10,322

 

Provisions

 

12,237

 

 

16,325

 

Deferred revenue

 

3,795

 

 

6,221

 

 

 

97,272

 

 

116,531

 

Non-current liabilities

 

 

Provisions

 

752

 

 

1,004

 

Credit facilities

 

76,091

 

 

93,918

 

Lease liabilities

 

147,941

 

 

144,993

 

Pension obligations

 

19,112

 

 

26,386

 

Other post-employment benefit plans

 

3,789

 

 

3,606

 

Asset retirement obligation

 

3,617

 

 

3,552

 

 

$

348,574

 

$

389,990

 

 

 

 

Equity

 

 

Shareholders’ equity

 

 

Shares

$

284,592

 

$

283,738

 

Warrants

 

219

 

 

219

 

Contributed surplus

 

2,939

 

 

3,135

 

Translation Reserve

 

221

 

 

177

 

Deficit

 

(246,446

)

 

(258,505

)

 

$

41,525

 

$

28,764

 

 

$

390,099

 

$

418,754

 

 

Condensed interim consolidated statements of operations

 

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

For the three months ended June 30, 2024

For the three months ended June 30, 2023

For the six months ended June 30, 2024

For the six months ended June 30, 2023

 

$

$

$

$

 

 

 

 

 

 

 

 

 

 

Revenues

$

125,751

 

$

118,963

 

255,005

 

195,040

 

 

 

 

 

 

Cost of revenues

 

91,417

 

 

86,926

 

183,360

 

139,230

 

 

 

 

 

 

Gross profit

 

34,334

 

 

32,037

 

71,645

 

55,810

 

 

 

 

 

 

Expenses

 

 

 

 

Selling, commissions and expenses

 

10,178

 

 

9,850

 

21,042

 

18,171

 

General and administration expenses

 

13,686

 

 

13,154

 

28,204

 

18,708

 

Restructuring expenses

 

1,101

 

 

2,729

 

2,186

 

2,729

 

Acquisition and integration costs

 

243

 

 

3,837

 

526

 

9,955

 

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

 

(1,407

)

 

2,343

 

1,807

 

7,361

 

 

 

23,801

 

 

31,913

 

53,765

 

56,924

 

 

 

 

 

 

Income before finance and other costs, and income taxes

 

10,533

 

 

124

 

17,880

 

(1,114

)

 

 

 

 

 

Finance costs

 

 

 

 

Interest expense on long term debt and pensions, net

 

2,307

 

 

2,480

 

4,805

 

3,023

 

Interest expense on lease liabilities

 

3,059

 

 

1,019

 

6,114

 

1,559

 

Amortization of transaction costs net of debt extinguishment gain

 

140

 

 

107

 

280

 

179

 

 

 

5,506

 

 

3,606

 

11,199

 

4,761

 

 

 

 

 

 

Income (loss) before income taxes

 

5,027

 

 

(3,482

)

6,681

 

(5,875

)

 

 

 

 

 

Income tax expense

 

 

 

 

Current

 

16

 

 

690

 

1,358

 

2,337

 

Deferred

 

947

 

 

(1,293

)

(216

)

(2,901

)

 

 

963

 

 

(603

)

1,142

 

(564

)

 

 

 

 

 

Net Income (loss) for the period

$

4,064

 

$

(2,879

)

5,539

 

(5,311

)

 

Condensed interim consolidated statements of cash flows

 

(in thousands of Canadian dollars, unaudited)

For the six months ended June 30, 2024

 

For the six months ended June 30, 2023

 

$

 

$

Cash provided by (used in)

 

 

 

 

 

 

 

Operating activities

 

 

 

Net income (loss) for the period

$

5,539

 

 

$

(5,311

)

Items not affecting cash

 

 

 

Depreciation of property, plant and equipment

 

3,306

 

 

 

2,056

 

Amortization of intangible assets

 

1,034

 

 

 

1,164

 

Depreciation of right-of-use-assets

 

8,814

 

 

 

4,437

 

Share-based compensation expense

 

321

 

 

 

269

 

Net fair value losses on financial liabilities at fair value through

profit or loss

 

1,807

 

 

 

7,361

 

Pension expense

 

943

 

 

 

430

 

(Gain) loss on sale and leaseback

 

(11

)

 

 

—

 

Loss on disposal of property, plant and equipment

 

149

 

 

 

—

 

Provisions

 

2,186

 

 

 

2,729

 

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

 

280

 

 

 

179

 

Accretion of asset retirement obligation

 

65

 

 

 

6

 

Other post-employment benefit plans expense

 

298

 

 

 

208

 

Income tax expense (recovery)

 

1,142

 

 

 

(564

)

Right-of-use assets impairment

 

97

 

 

 

—

 

Changes in working capital

 

764

 

 

 

5,802

 

Contributions made to pension plans

 

(604

)

 

 

(528

)

Contributions made to other post-employment benefit plans

 

(115

)

 

 

(90

)

Provisions paid

 

(6,526

)

 

 

(1,785

)

Income taxes paid

 

(1,599

)

 

 

(3,305

)

 

 

17,890

 

 

 

13,058

 

 

 

 

 

Investing activities

 

 

 

Net cash consideration for acquisition of MCC

 

—

 

 

 

(126,031

)

Proceeds on sale and leaseback transaction

 

8,661

 

 

 

24,091

 

Purchase of property, plant and equipment

 

(6,989

)

 

 

(1,298

)

Purchase of intangible assets

 

—

 

 

 

(14

)

Purchase of non-current assets

 

(6,499

)

 

 

—

 

Proceeds on disposal of property, plant and equipment

 

431

 

 

 

58

 

 

 

(4,396

)

 

 

(103,194

)

 

 

 

 

Financing activities

 

 

 

Issuance of common shares and broker warrants, net

 

—

 

 

 

24,221

 

Exercise of warrants

 

—

 

 

 

489

 

Exercise of options

 

337

 

 

 

751

 

Proceeds from credit facilities

 

30,185

 

 

 

147,640

 

Repayment of credit facilities

 

(43,726

)

 

 

(60,367

)

Decrease in bank overdrafts

 

(1,564

)

 

 

—

 

Transaction costs

 

—

 

 

 

(1,802

)

Principal portion of lease payments

 

(3,500

)

 

 

(4,009

)

 

 

(18,268

)

 

 

106,923

 

 

 

 

 

Change in cash and cash equivalents during the period

 

(4,774

)

 

 

16,787

 

Cash and cash equivalents – beginning of period

$

17,652

 

 

$

4,208

 

Effects of foreign exchange on cash balances

 

51

 

 

 

(22

)

Cash and cash equivalents – end of period

$

12,929

 

 

$

20,973

 

____________________ 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/20240807693244/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