Data Communications Management Corp. Announces First-Quarter 2024 Financial Results

FIRST QUARTER 2024 HIGHLIGHTS

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

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

MANAGEMENT COMMENTARY

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

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

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

FIRST QUARTER 2024 EARNINGS CALL

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

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

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

Click here to join the meeting

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

Or call in (audio only)

[phone],,174293459# Canada, Toronto
Phone Conference ID: 174 293 459#

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

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

For the periods ended March 31, 2024 and 2023	January 1 to March 31, 2024			January 1 to March 31, 2023
(in thousands of Canadian dollars, except share and per share amounts, unaudited)
Revenues	$	129,254		$	76,077
Gross profit		37,311			23,635
Gross profit, as a percentage of revenues		28.9	%		31.1	%
Selling, general and administrative expenses		25,382			13,736
As a percentage of revenues		19.6	%		18.1	%
Adjusted EBITDA		18,665			12,766
As a percentage of revenues		14.4	%		16.8	%
Net income (loss) for the period		1,475			(2,431	)
Adjusted net income		4,903			5,890
As a percentage of revenues		3.8	%		7.7	%
Basic (loss) earnings per share	$	0.03		$	(0.06	)
Diluted (loss) earnings per share	$	0.02		$	(0.06	)
Weighted average number of common shares outstanding, basic		55,022,883			44,062,831
Weighted average number of common shares outstanding, diluted		59,051,883			44,062,831

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

EBITDA and Adjusted EBITDA reconciliation

For the periods ended March 31, 2024 and 2023	January 1 to March 31, 2024		January 1 to March 31, 2023
(in thousands of Canadian dollars, unaudited)
Net income (loss) for the period	$	1,475	$	(2,431)
Interest expense, net		5,553		1,083
Amortization of transaction costs and debt extinguishment gain, net		140		72
Current income tax expense		1,342		1,647
Deferred income tax (recovery) expense		(1,163)		(1,608)
Depreciation of property, plant and equipment		1,523		691
Amortization of intangible assets		728		463
Depreciation of the ROU Asset		4,485		1,713
EBITDA	$	14,083	$	1,630
Acquisition and integration costs		283		6,118
Restructuring expenses		1,085		—
Net fair value (gains) losses on financial liabilities at fair value through profit or loss		3,214		5,018
Adjusted EBITDA	$	18,665	$	12,766

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

Adjusted net income reconciliation

For the periods ended March 31, 2024 and 2023	January 1 to March 31, 2024		January 1 to March 31, 2023
(in thousands of Canadian dollars, except share and per share amounts, unaudited)
Net income (loss) for the period	$	1,475	$	(2,431)
Acquisition and integration costs		283		6,118
Restructuring expenses		1,085		—
Net fair value (gains) losses on financial liabilities at fair value through profit or loss		3,214		5,018
Tax effect of the above adjustments		(1,154)		(2,815)
Adjusted net income	$	4,903	$	5,890
Adjusted net income per share, basic	$	0.09	$	0.13
Adjusted net income per share, diluted	$	0.08	$	0.12
Weighted average number of common shares outstanding, basic		55,022,883		44,062,831
Weighted average number of common shares outstanding, diluted		59,051,883		47,650,204

About DATA Communications Management Corp.

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

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

FORWARD-LOOKING STATEMENTS

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

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

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

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

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

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

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

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

NON-IFRS ACCOUNTING STANDARDS MEASURES

NON-IFRS ACCOUNTING STANDARDS AND OTHER FINANCIAL MEASURES

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

Condensed interim consolidated statements of financial position
(in thousands of Canadian dollars, unaudited)	March 31, 2024		December 31, 2023
	$		$
Assets
Current assets
Cash and cash equivalents	$	19,842	$	17,652
Trade receivables		107,154		117,956
Inventories		32,286		28,840
Prepaid expenses and other current assets		5,827		5,313
Income taxes receivable		1,248		2,640
Assets held for sale		—		8,650
		166,357		181,051
Non-current assets
Other non-current assets		7,096		2,900
Deferred income tax assets		9,122		9,801
Property, plant and equipment		31,088		30,358
Right-of-use assets		157,556		159,801
Pension assets		2,724		1,962
Intangible assets		9,888		10,616
Goodwill		22,265		22,265
	$	406,096	$	418,754
Liabilities
Current liabilities
Bank overdraft		199		1,564
Trade payables and accrued liabilities	$	69,963	$	75,766
Current portion of credit facilities		8,119		6,333
Current portion of lease liabilities		11,820		10,322
Provisions		13,395		16,325
Deferred revenue		6,032		6,221
		109,528		116,531
Non-current liabilities
Provisions		914		1,004
Credit facilities		88,379		93,918
Lease liabilities		144,049		144,993
Pension obligations		20,288		26,386
Other post-employment benefit plans		3,704		3,606
Asset retirement obligation		3,583		3,552
	$	370,445	$	389,990
Equity
Shareholders’ equity
Shares	$	283,738	$	283,738
Warrants		219		219
Contributed surplus		3,346		3,135
Translation Reserve		207		177
Deficit		(251,859)		(258,505)
	$	35,651	$	28,764
	$	406,096	$	418,754

Condensed interim consolidated statements of operations
(in thousands of Canadian dollars, except per share amounts, unaudited)	For the three months ended March 31, 2024	For the three months ended March 31, 2024
	$	$
Revenues	129,254	76,077
Cost of revenues	91,943	52,442
Gross profit	37,311	23,635
Expenses
Selling, commissions and expenses	10,864	8,322
General and administration expenses	14,518	5,414
Restructuring expenses	1,085	—
Acquisition and integration costs	283	6,118
Net fair value (gains) losses on financial liabilities at fair value through profit or loss	3,214	5,018
	29,964	24,872
Income before finance and other costs, and income taxes	7,347	(1,237)
Finance costs
Interest expense on long term debt and pensions, net	2,498	543
Interest expense on lease liabilities	3,055	540
Amortization of transaction costs net of debt extinguishment gain	140	72
	5,693	1,155
Income (loss) before income taxes	1,654	(2,392)
Income tax expense
Current	1,342	1,647
Deferred	(1,163)	(1,608)
	179	39
Net Income (loss) for the period	1,475	(2,431)

Condensed interim consolidated statements of cash flows
(in thousands of Canadian dollars, unaudited)	For the three months ended March 31, 2024		For the three months ended March 31, 2023
	$		$
Cash provided by (used in)
Operating activities
Net income (loss) for the period	$	1,475	$	(2,431)
Items not affecting cash
Depreciation of property, plant and equipment		1,523		691
Amortization of intangible assets		728		463
Depreciation of right-of-use-assets		4,485		1,713
Interest expense on lease liabilities		3,055		540
Share-based compensation expense		211		85
Net fair value losses on financial liabilities at fair value through profit or loss		3,214		5,018
Pension expense		472		119
(Gain) loss on sale and leaseback		(11)		—
(Gain) loss on disposal of property, plant and equipment		(22)		—
Provisions		1,085		—
Amortization of transaction costs, accretion of debt premium/discount, net of debt extinguishment gain		140		(6)
Accretion of non-current liabilities		31		—
Other post-employment benefit plans expense		149		68
Income tax expense		179		39
Changes in working capital		(6,560)		3,220
Contributions made to pension plans		(319)		(215)
Contributions made to other post-employment benefit plans		(51)		(43)
Provisions paid		(4,105)		(1,316)
Income taxes received (paid)		50		(1,612)
		5,729		6,333
Investing activities
Proceeds on sale and leaseback transaction		8,661		—
Purchase of property, plant and equipment		(2,766)		(558)
Purchase of intangible assets		—		(14)
Proceeds on disposal of property, plant and equipment		535		—
		6,430		(572)
Financing activities
Exercise of warrants		—		96
Proceeds from credit facilities		21,000		—
Repayment of credit facilities		(24,893)		(4,749)
Decrease in bank overdrafts		(1,365)		—
Lease payments		(4,730)		(2,324)
		(9,988)		(7,073)
Change in cash and cash equivalents during the period		2,171		(1,216)
Cash and cash equivalents – beginning of period	$	17,652	$	4,208
Effects of foreign exchange on cash balances		19		2
Cash and cash equivalents – end of period	$	19,842	$	2,994

____________________________

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