Data Communications Management Corp. Announces Fiscal 2022 and Fourth Quarter 2022 Financial Results

BRAMPTON, Ontario--(BUSINESS WIRE)--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 fourth quarter of 2022 with revenue up +20.0%, gross profit up +33.0%, and EBITDA¹ up +89.9%, compared to the fourth quarter of 2021, respectively. For the year ended December 31, 2022, revenue is up +16.3%, gross profit is up +21.1%, net income is up +792.4%, and EBITDA is up +45.3%, compared to 2021, 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 success and driving higher levels of net income.

FISCAL 2022 AND FOURTH QUARTER 2022 HIGHLIGHTS - BUILDING A BIGGER BUSINESS

• Revenue for fiscal 2022 was up +16.3%, or +$38.5 million, vs. 2021 (YA), for total revenues of $273.8 million;

• Gross profit accelerated +21.1%, or +$14.7 million, vs. YA to $84.2 million;

• Gross profit as a percentage of revenues grew +1.3 percentage points to 30.8%, vs. 29.5% YA;

• Net income was up +792.4%, or +$12.4 million, vs. YA to $14.0 million;

• EBITDA grew +45.3%, or +$11.3 million, vs. YA to $36.4 million;

• No restructuring expenses or any other “adjustments” or one-time costs, other than one-time add backs of $1.9 million in Q4 for costs related to the planned acquisition of RRD Canada;

• Total debt lower by 26%, or -$9.7 million, vs. year end 2021 to $27.3 million;

• Basic and diluted EPS of $0.32 and $0.30, respectively, compared with $0.04 and $0.03, respectively, in fiscal 2021.

• Revenue for the fourth quarter of 2022 was up +20.0%, or +$12.2 million, vs. Q4 2021, for total revenues of $73.0 million;

• Gross profit accelerated +33.0%, or +$5.8 million, vs. Q4 2021 to $23.6 million;

• Gross profit as a percentage of revenues grew +3.1 percentage points to 32.2%, vs. Q4 2021;

• EBITDA grew +89.9%, or +$4.5 million, vs. Q4 2021 to $9.5 million;

• Basic and diluted EPS of $0.08 compared with $(0.04) in Q4 2021.

2022 OPERATIONAL HIGHLIGHTS – BUILDING A BETTER BUSINESS

• We are pleased to announce the planned acquisition of the Canadian operations of R.R. Donnelley & Sons (“RRD Canada”);

• Successfully onboarded 35 new enterprise clients in fiscal 2022;

• We completed our second “Voice of the Customer” survey, and our Apex Score measuring overall client engagement was up 14% from a year ago;

• We completed our third employee engagement survey in the past year, and our Gallup scores for “mean engagement levels” are up 8%, while our overall percentile ranking grew 18 points;

• With regards to our sustainability initiatives, we are pleased to report we have reforested almost 700,000 trees in connection with our PrintReleaf initiative, offsetting one hundred percent of our clients’ paper usage;

• Productivity improvements continued, with revenue per associate reaching our year-end target of $300,000, up a full +18% compared to year end 2021.

MANAGEMENT COMMENTARY

"We are pleased to report on our success in 2022, which demonstrates our continued progress building both a better and a bigger business. With our recent announcement of the planned acquisition of RRD Canada, we believe we are well-positioned to further accelerate our positive momentum," says Richard Kellam, CEO and President of DCM.

"We are confident that RRD Canada will be an excellent strategic fit with our business and that the acquisition will enable us to better serve our customers by adding new capabilities to our existing offerings and accelerating our speed to market for new innovations. Importantly, we believe that combining DCM and RRD Canada will better position our business for sustainable and long-term success serving customers across North America. We believe the transaction also represents a compelling strategic opportunity for shareholders, as we expect the combined company to benefit from accelerated sales growth, reduced costs, enhanced financial performance, further operational efficiencies, and ultimately value creation."

"I would like to thank the entire DCM team for a strong finish to 2022, and a special thanks to the team’s continued, relentless focus on building both a better and a bigger business. Results like these only come when everyone is moving forward together. We look forward to reporting on continued positive momentum through fiscal 2023."

FISCAL 2022 AND FOURTH QUARTER 2022 EARNINGS CALL

The Company will host a conference call and webcast on Wednesday, March 22, 2023, at 9.00 a.m. Eastern time. Mr. Kellam, and James Lorimer, CFO, will present the fiscal 2022 and fourth quarter 2022 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: 262 426 723 179
Passcode: vg8BJ8

Or call in (audio only)

[phone],,998937139# Canada, Toronto
Phone Conference ID: 998 937 139#

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 December 31, 2022 and 2021	October 1 to December 31, 2022		October 1 to December 31, 2021		January 1 to December 31, 2022		January 1 to December 31, 2021
(in thousands of Canadian dollars, except share and per share amounts, unaudited
Revenues	$	73,045	$	60,871	$	273,804	$	235,331
Gross profit		23,554		17,713		84,224		69,535
Gross profit, as a percentage of revenues		32.2 %		29.1 %		30.8 %		29.5 %
Selling, general and administrative expenses		14,861		15,431		57,150		55,957
As a percentage of revenues		20.3 %		25.4 %		20.9 %		23.8 %
Adjusted EBITDA		11,340		7,270		38,254		33,286
As a percentage of revenues		15.5 %		11.9 %		14.0 %		14.1 %
Net income for the period		3,680		(1,857)		13,966		1,565
Adjusted net income		5,077		(200)		15,363		7,684
As a percentage of revenues		7.0 %		(0.3) %		5.6 %		3.3 %
Basic earnings per share	$	0.08	$	(0.04)	$	0.32	$	0.04
Diluted earnings per share	$	0.08	$	(0.04)	$	0.30	$	0.03
Weighted average number of common shares outstanding, basic		44,062,831		44,062,831		44,062,831		43,993,494
Weighted average number of common shares outstanding, diluted		46,796,407		46,439,445		46,572,066		46,136,507

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

EBITDA and Adjusted EBITDA reconciliation

For the periods ended December 31, 2022 and 2021	October 1 to December 31, 2022		October 1 to December 31, 2021		January 1 to December 31, 2022		January 1 to December 31, 2021
(in thousands of Canadian dollars, unaudited)
Net income for the period	$	3,680	$	(1,857)	$	13,966	$	1,565
Interest expense, net		1,134		1,124		4,965		5,839
Debt modification losses and prepayment fees		—		473		—		473
Amortization of transaction costs		87		503		344		941
Current income tax expense		1,653		183		5,456		2,238
Deferred income tax expense (recovery)		269		(371)		473		(1,159)
Depreciation of property, plant and equipment		644		731		2,965		3,133
Amortization of intangible assets		393		2,282		1,606		3,589
Depreciation of the ROU Asset		1,610		1,920		6,609		8,428
EBITDA	$	9,470	$	4,988	$	36,384	$	25,047
Acquisition costs		1,870		—		1,870		—
Restructuring expenses		—		2,282		—		9,691
Other income		—		—		—		(1,452)
Adjusted EBITDA	$	11,340	$	7,270	$	38,254	$	33,286

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

Adjusted net income reconciliation

For the periods ended December 31, 2022 and 2021	October 1 to December 31, 2022		October 1 to December 31, 2021		January 1 to December 31, 2022		January 1 to December 31, 2021
(in thousands of Canadian dollars, except share and per share amounts, unaudited)
Net income (loss) for the period	$	3,680	$	(1,857)	$	13,966	$	1,565
Acquisition costs		1,870		—		1,870		—
Restructuring expenses		—		2,282		—		9,691
Other income		—		—		—		(1,452)
Tax effect of the above adjustments		(473)		(625)		(473)		(2,120)
Adjusted net income (loss)	$	5,077	$	(200)	$	15,363	$	7,684
Adjusted net income per share, basic	$	0.12	$	0.00	$	0.35	$	0.17
Adjusted net income per share, diluted	$	0.11	$	0.00	$	0.33	$	0.17
Weighted average number of common shares outstanding, basic		44,062,831		44,062,831		44,062,831		43,993,494
Weighted average number of common shares outstanding, diluted		46,796,407		46,439,445		46,572,066		46,136,507

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 include: 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 communications documents; 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 continue as a going concern is dependent upon management’s ability to meet forecast revenue and profitability targets for at least the next twelve months in order to comply with our financial covenants under its credit facilities or to obtain financial covenant waivers from our lenders if necessary; 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), capital expenditures, and potential acquisitions; 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; our credit agreements governing our senior indebtedness contain numerous restrictive covenants that limit us with respect to certain business matters, including, without limitation, our ability to incur additional indebtedness, re-pay certain indebtedness, pay dividends, make investments, sell or otherwise dispose of assets and merge or consolidate with another entity; we may not be able to successfully implement our digital growth strategy on a timely basis or at all; competition from competitors supplying similar products and services, some of whom have greater economic resources than us and are well-established suppliers; and 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, including, without limitation, our ability to realize the benefits expected from restructuring and business reorganization initiatives, reducing costs, and reducing and paying our long-term debt; the ability of DCM to obtain the applicable regulatory approvals of the acquisition; the ability of the combined company to realize anticipated benefits from the combination of DCM and RRD Canada; the ability of DCM to complete the proposed sales and leasebacks of certain properties'; and our success in integrating RRD Canada. 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 one-time business reorganization costs. Adjusted net income (loss) means net income (loss) adjusted for restructuring expenses, onetime business reorganization 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 revenue, 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 and a reconciliation of net income (loss) to Adjusted EBITDA, see Table 3 in the most recent Management's Discussion & Analysis filed on www.sedar.com. For a reconciliation of net income (loss) to Adjusted net income (loss) and a presentation of Adjusted net income (loss) per share, see Table 4 in the Company's most recent Management's Discussion & Analysis filed on www.sedar.com.

Consolidated statements of financial position
(in thousands of Canadian dollars, unaudited)	December 31, 2022		December 31, 2021
	$		$
Assets
Current assets
Cash and cash equivalents	$	4,208	$	901
Trade receivables		54,630		51,567
Inventories		20,220		12,133
Prepaid expenses and other current assets		2,984		2,580
Income taxes receivable		15		860
		82,057		68,041
Non-current assets
Other non-current assets		466		625
Deferred income tax assets		4,830		5,465
Restricted cash		—		515
Property, plant and equipment		6,779		8,416
Right-of-use assets		33,505		33,476
Pension assets		2,364		2,531
Intangible assets		2,507		4,042
Goodwill		16,973		16,973
	$	149,481	$	140,084
Liabilities
Current liabilities
Trade payables and accrued liabilities	$	44,133	$	37,589
Current portion of credit facilities		11,667		11,743
Current portion of lease liabilities		6,791		6,123
Provisions		1,316		3,280
Income taxes payable		1,630		841
Deferred revenue		3,942		3,269
		69,479		62,845
Non-current liabilities
Provisions		—		1,196
Credit facilities		15,380		24,556
Lease liabilities		33,011		32,976
Pension obligations		6,069		7,499
Other post-employment benefit plans		2,695		2,971
	$	126,634	$	132,043
Equity
Shareholders’ equity
Shares	$	256,478	$	256,478
Warrants		869		881
Contributed surplus		3,131		2,791
Translation Reserve		207		173
Deficit		(237,838)		(252,282)
	$	22,847	$	8,041
	$	149,481	$	140,084

Consolidated statements of operations
(in thousands of Canadian dollars, except per share amounts, unaudited)	For the three months ended December 31, 2022		For the three months ended December 31, 2021
	$		$
Revenues	$	73,045	$	60,871
Cost of revenues		49,491		43,158
Gross profit		23,554		17,713
Expenses
Selling, commissions and expenses		7,731		6,569
General and administration expenses		7,130		8,862
Restructuring expenses		—		2,282
Acquisition costs		1,870		—
		16,731		17,713
Income before finance costs, other income and income taxes		6,823		—
Finance costs
Interest expense on long term debt and pensions, net		596		1,124
Interest expense on lease liabilities		538		473
Amortization of transaction costs		87		503
		1,221		2,100
Other income
Government grant income		—		55
Income (loss) before income taxes		5,602		(2,045)
Income tax expense
Current		1,653		183
Deferred		269		(371)
		1,922		(188)
Net Income (loss) for the period	$	3,680	$	(1,857)

Consolidated statements of operations
(in thousands of Canadian dollars, except per share amounts, unaudited)	For the year ended December 31, 2022		For the year ended December 31, 2021
	$		$
Revenues	$	273,804	$	235,331
Cost of revenues		189,580		165,796
Gross profit		84,224		69,535
Expenses
Selling, commissions and expenses		29,198		24,888
General and administration expenses		27,952		31,069
Restructuring expenses		—		9,691
Acquisition costs		1,870		—
		59,020		65,648
Income before finance costs, other income and income taxes		25,204		3,887
Finance costs
Interest expense on long term debt and pensions, net		2,742		3,318
Interest expense on lease liabilities		2,223		2,521
Debt modification losses and prepayment fees		—		473
Amortization of transaction costs		344		941
		5,309		7,253
Other income
Government grant income		—		4,558
Other income		—		1,452
Income before income taxes		19,895		2,644
Income tax expense
Current		5,456		2,238
Deferred		473		(1,159)
		5,929		1,079
Net income for the period	$	13,966	$	1,565
Other comprehensive income:
Items that may be reclassified subsequently to net income
Foreign currency translation		34		(19)
		34		(19)
Items that will not be reclassified to net income
Re-measurements of pension and other post-employment benefit obligations		640		2,643
Taxes related to pension and other post-employment benefit adjustment above		(162)		(648)
		478		1,995
Other comprehensive income for the period, net of tax	$	512	$	1,976
Comprehensive income for the period	$	14,478	$	3,541
Basic earnings per share	$	0.32	$	0.04
Diluted earnings per share	$	0.30	$	0.03

Consolidated statements of cash flows
(in thousands of Canadian dollars, unaudited)	For the year ended December 31, 2022		For the year ended December 31, 2021
	$		$
Cash provided by (used in)
Operating activities
Net income for the year	$	13,966	$	1,565
Items not affecting cash
Depreciation of property, plant and equipment		2,965		3,133
Amortization of intangible assets		1,606		3,589
Depreciation of right-of-use-assets		6,609		8,428
Interest expense on lease liabilities		2,223		2,521
Share-based compensation expense		328		488
Shares issued as payment for services		—		40
Pension expense		351		480
Loss on disposal of property, plant and equipment		98		66
(Gain) on disposal of leases		—		(196)
Provisions		—		9,691
Amortization of transaction costs		344		1,201
Accretion of non-current liabilities, capitalized interest expense and accretion of debt modification losses		120		(441)
Other post-employment benefit plans expense		(16)		(118)
Income tax expense (note 14)		5,929		1,079
Changes in working capital		(3,632)		7,135
Contributions made to pension plans		(869)		(970)
Contributions made to other post-employment benefit plans		(365)		(390)
Provisions paid		(3,160)		(6,491)
Income taxes paid (note 14)		(3,822)		(3,865)
		22,675		26,945
Investing activities
Purchase of property, plant and equipment		(1,475)		(1,832)
Purchase of intangible assets		(71)		(1,390)
Proceeds on disposal of property, plant and equipment		70		—
		(1,476)		(3,222)
Financing activities
Decrease in restricted cash		515		—
Proceeds from credit facilities		2,900		21,000
Repayment of credit facilities		(12,616)		(30,696)
Exercise of warrants		—		118
Repayment of promissory notes		—		(2,144)
Transaction costs		—		(489)
Lease payments		(8,730)		(11,202)
		(17,931)		(23,413)
Change in cash and cash equivalents during the period		3,268		310
Cash and cash equivalents – beginning of period	$	901	$	578
Effects of foreign exchange on cash balances		39		13
Cash and cash equivalents – end of period	$	4,208	$	901

_______________________________

^1 Note: EBITDA and Adjusted EBITDA 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 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 description of the composition of EBITDA and Adjusted EBITDA, 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 and Adjusted EBITDA, respectively, see the information under the heading “Non-IFRS Measures” and Table 3 of DCM’s management’s discussion and analysis (MD&A) dated March 21, 2023 for the period ended December 31, 2022.