DCM Data Communications Management Corp

THIRD QUARTER 2024 SUMMARY FINANCIAL RESULTS

• Total revenues were $108.7 million in the third quarter of 2024
• Gross profit as a percentage of revenues improved to 25.8% vs. 24.7% in Q3 2023
• SG&A expenses decreased to $22.4 million vs. $25.1 million in the prior year
• Adjusted EBITDA1 increased +6.6% vs. the prior year to $12.6 million
• Adjusted EBITDA represented 11.6% of revenues, compared to 9.6% in Q3 2023

DATA Communications Management Corp. (TSX: DCM; OTCQX: DCMDF) (“DCM” or the “Company”), a leading Canadian provider of print and digital solutions that help simplify complex marketing communications and workflow, today reported its third quarter 2024 financial results.

MANAGEMENT COMMENTARY

“We maintained our focus in the quarter on building a strong platform for profitable growth following last year’s acquisition of Moore Canada Corporation (“MCC”), while advancing our integration priorities including the planned consolidation of our plant network, migrating legacy MCC systems and completing our restructuring actions,” said Richard Kellam, President & CEO of DCM.

Kellam added, “I am pleased to report that we have now substantially completed the integration of MCC operations into DCM. We are on track to finalize the consolidation of our plant network from 14 to 10 main production facilities later this month and we are in the process of bringing online new state-of-the-art capital equipment that will enhance our production capabilities and position us to drive additional operating efficiencies.”

“The progress of our post-acquisition integration and restructuring initiatives is reflected in the consistent improvement we are seeing in gross profit margin and SG&A expenses. We expect continued improvement in these areas in the fourth quarter and in 2025 marking further progress towards our goal of returning our gross margin to the +30% range and Adjusted EBITDA margins to more than 14%.”

“Revenue in the third quarter was lower than expected due mainly to reduced spending by some of our large enterprise clients which we expect to recover in future quarters along with decisions we made to exit certain lower margin accounts. This contributed to a year-over-year revenue decline of 11.4% although, on a year-to-date basis, revenue is up 14.5% through the first nine months of 2024.”

“We remain confident about the platform we are building for profitable growth and winning in the marketplace as our Commercial team continues to make excellent progress strengthening our presence in key industry verticals, attracting new business and leveraging DCM’s growing suite of product and service offerings,” said Kellam

DCM has recently expanded its portfolio of tech-enabled products and solutions, with the launch of ASMBL in the third quarter of 2024 and the acquisition of Zavy Limited (“Zavy”) earlier this month. ASMBL is a fully AI-enabled digital asset management platform enabling customers to organize, store, manage, retrieve, and distribute their digital assets seamlessly. Zavy is a Software-as-a-Service marketing technology company that helps businesses optimize their social media effectiveness.

THIRD QUARTER 2024 EARNINGS CALL

The Company will host a conference call and webcast on Wednesday, November 13, 2024, at 9:00 a.m. Eastern time. Mr. Kellam and James Lorimer, CFO, will present the third quarter of 2024 results followed by a live Q&A.

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

Register for the webcast prior to the start of the event: Microsoft Virtual Events Powered by Teams

All attendees must register for the webinar prior to the call. Please complete the phone field in the form at the above link (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 September 30, 2024 and 2023

July 1 to September 30, 2024

July 1 to September 30, 2023

January 1 to September 30, 2024

January 1 to September 30, 2023

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

 

 

 

 

 

Revenues

$

108,726

 

$

122,721

 

$

363,731

 

$

317,761

 

 

 

 

 

 

Gross profit

 

28,009

 

 

30,341

 

 

99,654

 

 

86,151

 

 

 

 

 

 

Gross profit, as a percentage of revenues

 

25.8

%

 

24.7

%

 

27.4

%

 

27.1

%

 

 

 

 

 

Selling, general and administrative expenses

 

22,430

 

 

25,065

 

 

71,676

 

 

61,944

 

As a percentage of revenues

 

20.6

%

 

20.4

%

 

19.7

%

 

19.5

%

 

 

 

 

 

Adjusted EBITDA

 

12,567

 

 

11,790

 

 

48,120

 

 

38,378

 

As a percentage of revenues

 

11.6

%

 

9.6

%

 

13.2

%

 

12.1

%

 

 

 

 

 

Net (loss) income for the period

 

(2,668

)

 

(4,185

)

 

2,871

 

 

(9,496

)

 

 

 

 

 

Adjusted net (loss) income

 

(165

)

 

1,778

 

 

8,755

 

 

11,465

 

As a percentage of revenues

 

(0.2

)%

 

1.4

%

 

2.4

%

 

3.6

%

 

 

 

 

 

Basic (loss) earnings per share

$

(0.05

)

$

(0.08

)

$

0.05

 

$

(0.19

)

Diluted (loss) earnings per share

$

(0.05

)

$

(0.08

)

$

0.05

 

$

(0.19

)

Weighted average number of common shares outstanding, basic

 

55,308,952

 

 

55,022,883

 

 

55,192,969

 

 

49,420,414

 

Weighted average number of common shares outstanding, diluted

 

55,308,952

 

 

55,022,883

 

 

57,784,458

 

 

49,420,414

 

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 September 30, 2024 and 2023

July 1 to September 30, 2024

July 1 to September 30, 2023

January 1 to September 30, 2024

January 1 to September 30, 2023

(in thousands of Canadian dollars, unaudited)

 

 

 

 

 

Net (loss) income for the period

$

(2,668

)

$

(4,185

)

$

2,871

 

$

(9,496

)

 

 

 

 

 

Interest expense, net

 

5,273

 

 

5,072

 

 

16,192

 

 

9,654

 

Amortization of transaction costs, net of debt extinguishment gain

 

140

 

 

141

 

 

420

 

 

320

 

Current income tax expense

 

647

 

 

(1,495

)

 

2,005

 

 

842

 

Deferred income tax expense

 

(1,158

)

 

(2,227

)

 

(1,374

)

 

(5,128

)

Depreciation of property, plant, and equipment

 

1,832

 

 

2,051

 

 

5,138

 

 

4,107

 

Amortization of intangible assets

 

482

 

 

888

 

 

1,516

 

 

2,052

 

Depreciation of the ROU Asset

 

4,674

 

 

3,575

 

 

13,488

 

 

8,012

 

EBITDA

$

9,222

 

$

3,820

 

$

40,256

 

$

10,363

 

 

 

 

 

 

Acquisition and integration costs

 

2,077

 

 

244

 

 

2,603

 

 

10,199

 

Restructuring expenses

 

1,160

 

 

7,009

 

 

3,346

 

 

9,738

 

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

 

108

 

 

717

 

 

1,915

 

 

8,078

 

Adjusted EBITDA

 

12,567

 

 

11,790

 

 

48,120

 

 

38,378

 

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 (loss) income reconciliation

For the periods ended September 30, 2024 and 2023

July 1 to September 30, 2024

July 1 to September 30, 2023

January 1 to September 30, 2024

January 1 to September 30, 2023

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

 

 

 

 

 

Net (loss) income for the period

$

(2,668

)

$

(4,185

)

$

2,871

 

$

(9,496

)

 

 

 

 

 

Restructuring expenses

 

1,160

 

 

7,009

 

 

3,346

 

 

9,738

 

Acquisition and integration costs

 

2,077

 

 

244

 

 

2,603

 

 

10,199

 

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

 

108

 

 

717

 

 

1,915

 

 

8,078

 

Tax effect of the above adjustments

 

(842

)

 

(2,007

)

 

(1,980

)

 

(7,054

)

Adjusted net (loss) income

$

(165

)

$

1,778

 

$

8,755

 

$

11,465

 

 

 

 

 

 

Adjusted net income per share, basic

$

—

 

$

0.03

 

$

0.16

 

$

0.23

 

Adjusted net income per share, diluted

$

—

 

$

0.03

 

$

0.15

 

$

0.22

 

Weighted average number of common shares outstanding, basic

 

55,308,952

 

 

55,022,883

 

 

55,192,969

 

 

49,420,414

 

Weighted average number of common shares outstanding, diluted

 

55,308,952

 

 

57,895,056

 

 

57,784,458

 

 

52,084,116

 

About DATA Communications Management Corp.

DCM is a leading Canadian tech-enabled provider of print and digital solutions that help simplify complex marketing communications and operations workflow. DCM serves over 2,500 clients including 70 of the 100 largest Canadian corporations and mange leading government agencies. Our core strength lies in delivering individualized services to our clients that simplify their communications, including customized printing, highly personalized marketing communications, campaign management, digital signage, and digital asset management. From omnichannel marketing campaigns to large-scale print and digital workflows, our goal is to make complex tasks surprisingly simple, allowing our clients to focus on what they do best.

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 nine months ended September 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 nine months ended September 30, 2024 and filed on SEDAR+ at www.sedarplus.ca.

Condensed interim consolidated statements of financial position

 

 

 

 

 

(in thousands of Canadian dollars, unaudited)

September 30, 2024

 

 

December 31, 2023

 

 

$

 

 

$

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

$

8,878

 

 

$

17,652

 

Trade receivables

 

95,933

 

 

 

117,956

 

Inventories

 

25,715

 

 

 

28,840

 

Prepaid expenses and other current assets

 

6,383

 

 

 

5,313

 

Income taxes receivable

 

3,533

 

 

 

2,640

 

Assets held for sale

 

—

 

 

 

8,650

 

 

 

140,442

 

 

 

181,051

 

Non-current assets

 

 

 

 

 

Other non-current assets

 

9,568

 

 

 

2,900

 

Deferred income tax assets

 

8,767

 

 

 

9,801

 

Property, plant, and equipment

 

33,995

 

 

 

30,358

 

Right-of-use assets

 

160,240

 

 

 

159,801

 

Pension assets

 

3,421

 

 

 

1,962

 

Intangible assets

 

9,651

 

 

 

10,616

 

Goodwill

 

22,265

 

 

 

22,265

 

 

$

388,349

 

 

$

418,754

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Current liabilities

 

 

 

 

 

Bank overdraft

$

—

 

 

$

1,564

 

Trade payables and accrued liabilities

 

59,216

 

 

 

75,766

 

Current portion of credit facilities

 

13,359

 

 

 

6,333

 

Current portion of lease liabilities

 

10,974

 

 

 

10,322

 

Provisions

 

9,007

 

 

 

16,325

 

Deferred revenue

 

3,927

 

 

 

6,221

 

 

 

96,483

 

 

 

116,531

 

Non-current liabilities

 

 

 

 

 

Provisions

 

1,907

 

 

 

1,004

 

Credit facilities

 

71,553

 

 

 

93,918

 

Lease liabilities

 

152,727

 

 

 

144,993

 

Pension obligations

 

18,907

 

 

 

26,386

 

Other post-employment benefit plans

 

3,876

 

 

 

3,606

 

Asset retirement obligation

 

3,524

 

 

 

3,552

 

 

$

348,977

 

 

$

389,990

 

 

 

 

 

 

 

Equity

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Shares

$

284,592

 

 

$

283,738

 

Warrants

 

219

 

 

 

219

 

Contributed surplus

 

3,008

 

 

 

3,135

 

Translation Reserve

 

202

 

 

 

177

 

Deficit

 

(248,649

)

 

 

(258,505

)

 

$

39,372

 

 

$

28,764

 

 

$

388,349

 

 

$

418,754

 

Condensed interim consolidated statements of operations

 

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

For the three months ended September 30, 2024

For the three months ended September 30, 2023

For the nine months ended September 30, 2024

For the nine months ended September 30, 2023

 

$

$

$

$

 

 

 

 

 

 

 

 

 

 

Revenues

$

108,726

 

$

122,721

 

$

363,731

 

$

317,761

 

 

 

 

 

 

Cost of revenues

 

80,717

 

 

92,380

 

 

264,077

 

 

231,610

 

 

 

 

 

 

Gross profit

 

28,009

 

 

30,341

 

 

99,654

 

 

86,151

 

 

 

 

 

 

Expenses

 

 

 

 

Selling, commissions and expenses

 

9,930

 

 

10,010

 

 

30,972

 

 

28,181

 

General and administration expenses

 

12,500

 

 

15,055

 

 

40,704

 

 

33,763

 

Restructuring expenses

 

1,160

 

 

7,009

 

 

3,346

 

 

9,738

 

Acquisition and integration costs

 

2,077

 

 

244

 

 

2,603

 

 

10,199

 

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

 

108

 

 

717

 

 

1,915

 

 

8,078

 

 

 

25,775

 

 

33,035

 

 

79,540

 

 

89,959

 

 

 

 

 

 

Income (loss) before finance and other costs and income taxes

 

2,234

 

 

(2,694

)

 

20,114

 

 

(3,808

)

 

 

 

 

 

Finance costs

 

 

 

 

Interest expense on long term debt and pensions, net

 

2,108

 

 

2,550

 

 

6,913

 

 

5,573

 

Interest expense on lease liabilities

 

3,165

 

 

2,522

 

 

9,279

 

 

4,081

 

Amortization of transaction costs

 

140

 

 

141

 

 

420

 

 

320

 

 

 

5,413

 

 

5,213

 

 

16,612

 

 

9,974

 

 

 

 

 

 

(Loss) income before income taxes

 

(3,179

)

 

(7,907

)

 

3,502

 

 

(13,782

)

 

 

 

 

 

Income tax expense

 

 

 

 

Current

 

647

 

 

(1,495

)

 

2,005

 

 

842

 

Deferred

 

(1,158

)

 

(2,227

)

 

(1,374

)

 

(5,128

)

 

 

(511

)

 

(3,722

)

 

631

 

 

(4,286

)

 

 

 

 

 

Net (loss) income for the period

$

(2,668

)

$

(4,185

)

$

2,871

 

$

(9,496

)

Condensed interim consolidated statements of cash flows

 

(in thousands of Canadian dollars, unaudited)

For the nine months ended September 30, 2024

 

For the nine months ended September 30, 2023

 

$

 

$

Cash provided by (used in)

 

 

 

 

 

 

 

Operating activities

 

 

 

Net income (loss) for the period

$

2,871

 

 

$

(9,496

)

Items not affecting cash

 

 

 

Depreciation of property, plant, and equipment

 

5,138

 

 

 

4,107

 

Amortization of intangible assets

 

1,516

 

 

 

2,052

 

Depreciation of right-of-use-assets

 

13,488

 

 

 

8,012

 

Share-based compensation expense

 

390

 

 

 

524

 

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

 

1,915

 

 

 

8,078

 

Pension expense

 

1,415

 

 

 

837

 

Gain on sale and leaseback

 

(11

)

 

 

—

 

Gain on disposal of property, plant, and equipment

 

(54

)

 

 

—

 

Provisions

 

3,346

 

 

 

9,738

 

Amortization of transaction costs, net of debt extinguishment gain

 

421

 

 

 

320

 

Accretion of asset retirement obligations, net of any changes in estimate

 

(28

)

 

 

19

 

Other post-employment benefit plans expense

 

447

 

 

 

385

 

Income tax expense (recovery)

 

631

 

 

 

(4,286

)

Right-of-use assets impairment

 

97

 

 

 

—

 

Changes in working capital

 

3,107

 

 

 

5,710

 

Contributions made to pension plans

 

(960

)

 

 

(837

)

Contributions made to other post-employment benefit plans

 

(177

)

 

 

(207

)

Provisions paid

 

(8,804

)

 

 

(2,580

)

Income taxes paid

 

(2,898

)

 

 

(3,854

)

 

 

21,850

 

 

 

18,522

 

Investing activities

 

 

 

Net cash consideration for acquisition of MCC

 

—

 

 

 

(130,953

)

Proceeds on sale and leaseback transaction

 

10,218

 

 

 

24,091

 

Purchase of property, plant, and equipment

 

(9,709

)

 

 

(2,419

)

Purchase of intangible assets

 

(551

)

 

 

(112

)

Purchase of non-current assets

 

(8,013

)

 

 

0

 

Proceeds on disposal of property, plant and equipment

 

440

 

 

 

242

 

 

 

(7,615

)

 

 

(109,151

)

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

 

58,145

 

 

 

155,640

 

Repayment of credit facilities

 

(73,905

)

 

 

(65,260

)

Decrease in bank overdrafts

 

(1,564

)

 

 

—

 

Transaction costs

 

—

 

 

 

(1,802

)

Principal portion of lease payments

 

(6,055

)

 

 

(5,299

)

 

 

(23,042

)

 

 

108,740

 

 

 

 

 

Change in cash and cash equivalents during the period

 

(8,807

)

 

 

18,111

 

Cash and cash equivalents – beginning of period

$

17,652

 

 

$

4,208

 

Effects of foreign exchange on cash balances

 

33

 

 

 

(9

)

Cash and cash equivalents – end of period

$

8,878

 

 

$

22,310

 

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.

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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