DATA Communications Management Corp. Announces Second Quarter 2022 Financial Results

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, is pleased to report accelerated momentum in the second quarter of 2022 with revenue up +23.4%, gross profit up +29.0%, net income up +490.7% and EBITDA¹ up +48.7%, compared to the second quarter of 2021, respectively. Through the first half of fiscal 2022, revenue is up +16.8%, gross profit is up +17.7%, net income is up +211.8%, and EBITDA is up +38.1%, compared to the first half of 2021, respectively. Strong client demand for the Company's solutions and services is leading this growth.

SECOND QUARTER 2022 HIGHLIGHTS - BUILDING A BIGGER BUSINESS

• Revenue for Q2 2022 was up 23.4%, or +$12.9 million, vs. Q2 year ago (YA), for total revenues of $68.1 million;

• Gross profit accelerated 29.0%, or +$4.6 million, vs. YA to $20.4 million;

• Net income increased 490.7%, or +$3.1 million, vs. YA to $3.8 million;

• EBITDA grew 48.7%, or +$3.1 million, vs. YA to $9.5 million;

• Adjusted EBITDA¹ grew 30.0%, or +$2.2 million, vs. YA to $9.5 million;

• No restructuring expenses or other “adjustments” to EBITDA in the second quarter of 2022. The Company’s current outlook anticipates no restructuring charges in the balance of fiscal 2022;

• SG&A expenses decreased by 3.8%, or -$0.5 million, vs. YA to $13.8 million;

• Term debt lower by 17.4%, or -$5.9 million, vs. year end 2021 to $28.1 million;

• Basic and diluted EPS of $0.09 and $0.08, respectively, compared with $0.01 in second quarter of 2021.

SECOND QUARTER 2022 OPERATIONAL HIGHLIGHTS – BUILDING A BETTER BUSINESS

• We have been awarded more than $22 million of new business year to date, from both existing and new clients, and our tech-enabled services pipeline remains strong at +$10 million;

• Thirteen change management projects in place, with the objective to accelerate attainment of our 5-year strategic goals;

• Our first-ever digital lead generation program was introduced, with the intent to help drive commercial sales;

• More than 40 of our clients are now engaged with our PrintReleaf program; and we have reforested over 332,000 trees through this innovative sustainability program, since its introduction last fall.

MANAGEMENT COMMENTARY

"Our second quarter results are further evidence that our unrelenting focus on building both a better and a bigger business is paying off," says Richard Kellam, CEO and President of DCM. "Our positive momentum that started in the second half of 2021 continues – and as you’ve heard me say multiple times before: “momentum builds momentum.” We continue to focus on our strategic shift from a “print first” to a “digital first” company. New client wins, as well as expansion revenues from existing clients are driving this momentum; almost all of which are attributed to our tech-enabled workflow solutions."

“The biggest challenge we currently face in our business is access to raw materials. This has resulted in longer lead times and increased inventory, having an impact on our working capital line of credit. However, our +23.4% revenue growth, +48.7% increase in EBITDA and +490.7% increase in net income, is evidence that this has been a good investment.”

"Our pipeline of business remains strong, and we expect this positive momentum to continue through the balance of 2022. We are seeing ongoing benefits from the operational initiatives we implemented last year, and our constant focus on cost controls continues to help us build a better business."

SECOND QUARTER 2022 EARNINGS CALL

The Company will host a conference call and webcast on Wednesday, August 10, 2022, at 9.00 a.m. Eastern time. Mr. Kellam, and James Lorimer, CFO, will present the second 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:

Join on your computer or mobile app
Click here to join the meeting

Or call in (audio only)
[phone], 914477492# Canada, Toronto

Phone Conference ID: 914 477 492#

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 June 30, 2022 and 2021	April 1 to June 30, 2022			April 1 to June 30, 2021			January 1 to June 30, 2022			January 1 to June 30, 2021
(in thousands of Canadian dollars, except share and per share amounts, unaudited)
				(Restated)						(Restated)
Revenues	$	68,103		$	55,207		$	137,360		$	117,568
Gross profit		20,442			15,842			40,766			34,635
Gross profit, as a percentage of revenues		30.0 %			28.7 %			29.7 %			29.5 %
Selling, general and administrative expenses (1)		13,781			14,323			27,425			29,227
As a percentage of revenues		20.2 %			25.9 %			20.0 %			24.9 %
Adjusted EBITDA		9,478			7,292			18,926			16,579
As a percentage of revenues		13.9 %			13.2 %			13.8 %			14.1 %
Net income for the period		3,757			636			7,470			2,396
Adjusted net income		3,757			1,319			7,470			4,534
As a percentage of revenues		5.5 %			2.4 %			5.4 %			3.9 %
Basic earnings per share	$	0.09		$	0.01		$	0.17		$	0.05
Diluted earnings per share	$	0.08		$	0.01		$	0.16		$	0.05
Adjusted net income per share, basic	$	0.09		$	0.03		$	0.17		$	0.10
Adjusted net income per share, diluted	$	0.08		$	0.03		$	0.16		$	0.10
Weighted average number of common shares outstanding, basic		44,062,831			43,926,019			44,062,831			43,926,019
Weighted average number of common shares outstanding, diluted		46,501,606			46,174,209			46,529,426			45,750,869

(1) SG&A and deferred income tax expense include the impact of the IFRS Interpretations Committee’s agenda decision regarding configuration or customization costs in a cloud computing arrangement. Prior periods have been retrospectively restated to derecognize previously capitalized costs in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to note 3 of the condensed interim consolidated financial statements for the period ended June 30, 2022 for further details on the impact of the amended accounting standard.

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 June 30, 2022 and 2021		April 1 to June 30, 2022		April 1 to June 30, 2021		January 1 to June 30, 2022		January 1 to June 30, 2021
(in thousands of Canadian dollars, unaudited)
				(Restated)				(Restated)
Net income for the period (1)		$	3,757	$	636	$	7,470	$	2,396
Interest expense, net			1,343		1,716		2,598		3,128
Amortization of transaction costs			86		176		173		321
Current income tax expense			1,522		1,126		2,660		1,672
Deferred income tax (recovery) expense (1)			(47)		(642)		440		(663)
Depreciation of property, plant and equipment			781		776		1,561		1,582
Amortization of intangible assets (1)			403		418		811		863
Depreciation of the ROU Asset			1,633		2,168		3,213		4,407
EBITDA		$	9,478	$	6,374	$	18,926	$	13,706
Restructuring expenses			—		918		—		4,325
Other income			—		—		—		(1,452)
Adjusted EBITDA		$	9,478	$	7,292	$	18,926	$	16,579

(1) SG&A and deferred income tax expense include the impact of the IFRS Interpretations Committee’s agenda decision regarding configuration or customization costs in a cloud computing arrangement. Prior periods have been retrospectively restated to derecognize previously capitalized costs in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to note 3 of the condensed interim consolidated financial statements for the period ended June 30, 2022 for further details on the impact of the amended accounting standard.

TABLE 3 The following table provides reconciliations of net (loss) income to Adjusted net (loss) income and a presentation of Adjusted net (loss) income per share for the periods noted.
Adjusted net income reconciliation
For the periods ended June 30, 2022 and 2021		April 1 to June 30, 2022		April 1 to June 30, 2021		January 1 to June 30, 2022		January 1 to June 30, 2021
(in thousands of Canadian dollars, except share and per share amounts, unaudited)
				(Restated)				(Restated)
Net income for the period (1)		$	3,757	$	636	$	7,470	$	2,396
Restructuring expenses			—		918		—		4,325
Other income			—		—		—		(1,452)
Tax effect of the above adjustments			—		(235)		—		(735)
Adjusted net income		$	3,757	$	1,319	$	7,470	$	4,534
Adjusted net income per share, basic		$	0.09	$	0.03	$	0.17	$	0.10
Adjusted net income per share, diluted		$	0.08	$	0.03	$	0.16	$	0.10

(1) SG&A and deferred income tax expense include the impact of the IFRS Interpretations Committee’s agenda decision regarding configuration or customization costs in a cloud computing arrangement. Prior periods have been retrospectively restated to derecognize previously capitalized costs in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to note 3 of the condensed interim consolidated financial statements for the period ended June 30, 2022 for further details on the impact of the amended accounting standard.

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: the COVID-19 Pandemic has adversely affected, and may continue to adversely effect, our business, operating results and financial condition and this continuing adverse effect could be material; 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. 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.

Condensed interim consolidated statements of financial position
(in thousands of Canadian dollars, unaudited)	June 30, 2022			December 31, 2021
	$			$
				(Restated)
Assets
Current assets
Cash and cash equivalents	$	775		$	901
Trade receivables		56,812			51,567
Inventories		17,182			12,133
Prepaid expenses and other current assets		2,324			2,580
Income taxes receivable		318			860
		77,411			68,041
Non-current assets
Other non-current assets		582			625
Deferred income tax assets		4,906			5,465
Restricted cash		—			515
Property, plant and equipment		7,209			8,416
Right-of-use assets		34,694			33,476
Pension assets		1,864			2,531
Intangible assets		3,231			4,042
Goodwill		16,973			16,973
	$	146,870		$	140,084
Liabilities
Current liabilities
Trade payables and accrued liabilities	$	35,570		$	37,589
Current portion of credit facilities		15,656			11,743
Current portion of lease liabilities		6,800			6,123
Provisions		788			3,280
Income taxes payable		2,591			841
Deferred revenue		2,756			3,269
		64,161			62,845
Non-current liabilities
Provisions		1,055			1,196
Credit facilities		22,818			24,556
Lease liabilities		33,696			32,976
Pension obligations		6,086			7,499
Other post-employment benefit plans		3,019			2,971
	$	130,835		$	132,043
Equity
Shareholders’ equity / (Deficiency)
Shares	$	256,478		$	256,478
Warrants		869			881
Contributed surplus		2,951			2,791
Translation reserve		186			173
Deficit		(244,449)			(252,282)
	$	16,035		$	8,041
	$	146,870		$	140,084

Condensed interim consolidated statements of operations
(in thousands of Canadian dollars, except per share amounts, unaudited)	For the three months ended June 30, 2022			For the three months ended June 30, 2021
	$			$
				(Restated)
Revenues	$	68,103		$	55,207
Cost of revenues		47,661			39,365
Gross profit		20,442			15,842
Expenses
Selling, commissions and expenses		7,244			6,137
General and administration expenses		6,537			8,186
Restructuring expenses		—			918
		13,781			15,241
Income before finance costs, other income and income taxes		6,661			601
Finance costs
Interest expense on long term debt and pensions, net		779			1,088
Interest expense on lease liabilities		564			628
Amortization of transaction costs		86			176
		1,429			1,892
Other income
Government grant income		—			2,411
Income before income taxes		5,232			1,120
Income tax expense
Current		1,522			1,126
Deferred		(47)			(642)
		1,475			484
Net Income for the period	$	3,757		$	636
Other comprehensive income:
Items that may be reclassified subsequently to net income
Foreign currency translation		26			(28)
		26			(28)
Items that will not be reclassified to net income
Re-measurements of pension and other post-employment benefit obligations		3			205
Taxes related to pension and other post-employment benefit adjustment above		(1)			(44)
		2			161
Other comprehensive income for the period, net of tax	$	28		$	133
Comprehensive income for the period	$	3,785		$	769
Basic earnings per share	$	0.09		$	0.01
Diluted earnings per share	$	0.08		$	0.01

Condensed interim consolidated statements of operations
(in thousands of Canadian dollars, except per share amounts, unaudited)	For the six months ended June 30, 2022			For the six months ended June 30, 2021
	$			$
				(Restated)
Revenues	$	137,360		$	117,568
Cost of revenues		96,594			82,933
Gross profit		40,766			34,635
Expenses
Selling, commissions and expenses		14,292			12,803
General and administration expenses		13,133			16,424
Restructuring expenses		—			4,325
		27,425			33,552
Income before finance costs, other income and income taxes		13,341			1,083
Finance costs
Interest expense on long term debt and pensions, net		1,470			1,806
Interest expense on lease liabilities		1,128			1,322
Amortization of transaction costs		173			321
		2,771			3,449
Other income
Government grant income		—			4,319
Other income		—			1,452
Income before income taxes		10,570			3,405
Income tax expense
Current		2,660			1,672
Deferred		440			(663)
		3,100			1,009
Net income for the period	$	7,470		$	2,396
Other comprehensive income:
Items that may be reclassified subsequently to net income
Foreign currency translation		13			(51)
		13			(51)
Items that will not be reclassified to net income
Re-measurements of pension and other post-employment benefit obligations		482			1,461
Taxes related to pension and other post-employment benefit adjustment above		(119)			(362)
		363			1,099
Other comprehensive income for the period, net of tax	$	376		$	1,048
Comprehensive income for the period	$	7,846		$	3,444
Basic earnings per share	$	0.17		$	0.05
Diluted earnings per share	$	0.16		$	0.05

Condensed interim consolidated statements of cash flows
(in thousands of Canadian dollars, unaudited)	For the six months ended June 30, 2022			For the six months ended June 30, 2021
	$			$
				(Restated)
Cash provided by (used in)
Operating activities
Net income for the period	$	7,470		$	2,396
Items not affecting cash
Depreciation of property, plant and equipment		1,561			1,582
Amortization of intangible assets		811			863
Depreciation of right-of-use-assets		3,213			4,407
Interest expense on lease liabilities		1,128			1,322
Share-based compensation expense		148			352
Pension expense		218			239
Loss on disposal of property, plant and equipment		9			—
Provisions		—			4,325
Amortization of transaction costs		173			291
Accretion of non-current liabilities, capitalized interest expense and accretion of debt modification losses		120			(35)
Other post-employment benefit plans expense		136			70
Income tax expense		3,100			1,009
		18,087			16,821
Changes in working capital		(12,415)			3,989
Contributions made to pension plans		(482)			(483)
Contributions made to other post-employment benefit plans		(88)			—
Provisions paid		(2,633)			(2,974)
Income taxes paid		(368)			(996)
		2,101			16,357
Investing activities
Purchase of property, plant and equipment		(419)			(357)
Purchase of intangible assets		—			(1,045)
Proceeds on disposal of property, plant and equipment		56			—
		(363)			(1,402)
Financing activities
Exercise of warrants		—			10
Decrease in restricted cash		515			—
Proceeds from credit facilities		7,800			—
Repayment of credit facilities		(5,918)			(7,355)
Repayment of promissory notes		—			(2,185)
Lease payments		(4,265)			(5,868)
		(1,868)			(15,398)
Change in Cash and cash equivalents during the period		(130)			(443)
Cash and cash equivalents – beginning of period	$	901		$	578
Effects of foreign exchange on cash balances		4			28
Cash and cash equivalents – end of period	$	775		$	163

______________________________

1Note: 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 August 9, 2022 for the period ended June 30, 2022.

 

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The DATA Communications Management Stock at the time of publication of the news with a raise of +2,63 % to 1,170CAD on Toronto stock exchange (09. August 2022, 21:59 Uhr).