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)
+1 647-749-9154,,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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230321005952/en/
Mr. Richard Kellam President and Chief Executive Officer DATA
Communications Management Corp. Tel: (905) 791-3151
Mr. James E. Lorimer Chief Financial Officer DATA Communications
Management Corp. Tel: (905) 791-3151 ir@datacm.com
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