Data Communications Management Corp

TSX:DCM

Earnings Call Transcript 2023-Q1

[Richard Kellam, executive]

As we continue our journey building a better and a bigger business, I'm pleased to report a very eventful first quarter of 2023. The quarter was highlighted by the continued strong performance of the DCM business and the great progress we made completing the acquisition of RRD Canada.

Total revenue was $76.1 million in the quarter, an increase of just under 10% versus last year. Importantly, this marked our sixth sequential quarter of year-over-year revenue growth. Gross profit increased by 16.3% compared to the prior year, marking the fourth consecutive quarter that gross profit grew at a faster pace than revenue. This helped us deliver a gross profit margin of 31.1% in the quarter, up nearly 2 percentage points versus 2022.

We are also pleased with our strong adjusted EBITDA performance in the quarter, driven by higher revenues, improvement in gross margin and controlling SG&A expenses. While DCM and RRD Canada operated as separate and competing businesses throughout the first quarter, I'm pleased to report that RRD Canada also posted strong business momentum with total revenues up 10% versus last year.

We were excited to complete the acquisition of RRD Canada on the 24th of April and to begin doing business as one company. We have updated our 5-year financial objectives to include the RRD Canada business and are now targeting organic revenue growth of greater than 5% and adjusted EBITDA of greater than 14% of revenue. We are also focused on driving greater efficiency across the combined business, in our organization, operations and procurement.

We expect to realize total annual post-merger synergies in the range of $25 million to $30 million over the next 18 to 24 months. Our post-merger integration process is being led by former RRD Canada President, Rael Fisher, in his new role as Chief Integration Officer.

We are off to a fantastic start with our teams actively working together, serving current customers, pursuing new business and continue to build on our positive momentum.

I would like to thank the DCM and RRD teams for maintaining their focus on the business and delivering strong results as we work to close this transaction. And I would also like to thank our clients for continuing to trust DCM with their complex communication and workflow needs.

We look forward to reporting the financial results of our combined company beginning in the second quarter and continue to drive our growth agenda going forward.

We are excited about the future of the new DCM and the opportunities in front of us to build a better and a bigger business together. Thank you.