TechDogs-"Data Communications Management Corp. Announces Fiscal 2022 And Fourth Quarter 2022 Financial Results"

Data Management

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

By Business Wire

Business Wire
Overall Rating

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)

+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


Contacts

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

Read full story here

First published on Wed, Mar 22, 2023

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