Mr. Richard Kellam reports

DATA COMMUNICATIONS MANAGEMENT CORP. ANNOUNCES THIRD QUARTER 2023 FINANCIAL RESULTS

Data Communications Management Corp. has released its third quarter 2023 financial results.

"We are pleased with our continued progress building a better and a bigger business as reflected in our third quarter results and the positive momentum of our integration efforts since completing the acquisition of Moore Canada Corp. (MCC) six months ago," said Richard Kellam, chief executive officer and president of Data Communications. "The combined business delivered solid performance building value with existing customers, securing new client wins and optimizing strategic revenue opportunities."

Continued Mr. Kellam: "Our postmerger initiatives are progressing ahead of plan and, given our success to date driving savings and efficiency improvements, we are revising our guidance for expected total annualized synergies to a range between $30- and $35-million over the next 18 to 24 months, from a previous range of $25- to $30-million. We are excited about the opportunities in front of us to build on our strong start as a combined company focusing on driving growth and value creation."

Building a better business

The following is an update on the four areas of focus in Data Communications' postmerger integration planning.

Operations

Data Communications has announced plans to consolidate its footprint from 14 to 10 facilities over the next two years to take advantage of open capacity in its network, enhance its asset utilization and drive operational efficiencies. The closure of one of these facilities in Edmonton, Alta., will be finalized by December, 2023. Data Communications expects this action, along with other head count reductions in operations completed to date, to result in annualized operational savings next year of approximately $3.75-million; expected savings from the consolidation of Data Communications' three other facilities will be announced in future quarters. Data Communications has also entered into purchase and sale agreements for its Fergus and Trenton, Ont., facilities, which are expected to generate net proceeds of approximately $15-million.

Organizational

The integration of key functions such as Data Communications' commercial and operations teams is completed, with new leadership teams in place and simplified reporting structures; with head count reductions completed in Data Communications' SG&A (selling, general and administrative) functions to date, the company expects annualized SG&A savings next year of approximately $9-million.

Procurement

The centralization of purchasing is progressing on plan, and Data Communications is leveraging its expanded scale to deliver anticipated savings and reduce outsourcing of products; with initiatives completed to date, Data Communications expects annualized procurement savings next year of approximately $4.75-million.

Revenue growth

Data Communications' combined commercial teams are focused on expanding services with existing clients and winning new business. Since closing the MCC acquisition, the company is pleased to report its collective sales pipeline has shown strong growth and importantly Data Communications has secured a total of $18-million of expansion revenue from existing customers and new business.

Collectively, operations, organizational and procurement initiatives Data Communications has initiated to date are expected to generate annualized savings of approximately $17.5-million next year, representing plus 53 per cent of the midpoint of the company's revised total synergy target.

Building a bigger business:

• Revenue for the third quarter of 2023 was up 93.6 per cent, or $59.3-million, versus Q3 a year ago, for total revenue of $122.7-million, reflecting additional business from the MCC acquisition.
• Gross profit accelerated 52.4 per cent, or $10.4-million, for a total of $30.3-million; gross profit as a percentage of revenue was 24.7 per cent for the third quarter of 2023 versus 31.4 per cent a year ago. As expected, the lower average gross profit margins of MCC contributed to lower overall gross profit as a percentage of revenue. Data Communications has a clear plan intended to return the combined gross profit margins to preacquisition levels going forward.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) (1) increased 28.2 per cent compared with last year and was $11.8-million, or 9.6 per cent of revenue, versus $9.2-million, or 14.5 per cent of revenue, a year ago. Adjusted EBITDA as a percentage of revenue declined due to the lower average MCC gross margins.
• Data Communications recorded one-time adjustments in the quarter of $200,000 related to the acquisition and integration of MCC, along with restructuring costs of $7.0-million.

The balance of Data Communications' total credit facilities at the end of the third quarter of 2023, after deducting cash on hand of $22.3-million, was $95.4-million (total net debt), down 32 per cent since closing the MCC acquisition.

Third quarter 2023 earnings call

The company will host a conference call and webcast on Thursday, Nov. 9, 2023, at 9 a.m. Eastern Time. Mr. Kellam and James Lorimer, chief financial officer, will present the third quarter 2023 results followed by a live question-and-answer (Q&A) period.

Instructions on how to access both the webcast and call are available below. For those unable to join live, a replay of the webcast will be available on the Data Communications investor relations page.

Data Communications will be using Microsoft Teams to broadcast its earnings call, which will be accessible via the options below.

Meeting ID:  24252341322

Passcode:  XtHDYT

Or call in (audio only):  1-647-749-9154 in Toronto, Canada

Phone conference ID No.:  126841512 followed by the pound key

The company's full results will be posted on its investor relations page and on SEDAR+. A video message from Mr. Kellam will also be posted on the company's website.

About Data Communications Management Corp.

Data Communications 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, Data Communications has been serving major brands in vertical markets, including financial services, retail, health care, energy, other regulated industries and the public sector. Data Communications integrates seamlessly into its clients' businesses thanks to its deep understanding of their needs, transformative tech-enabled solutions and end-to-end service offering. Whether Data Communications is running technology platforms, sending marketing messages or managing print workflows, the company's goal is to make everything surprisingly simple.

(1) EBITDA, adjusted EBITDA, adjusted EBITDA as a percentage of revenues, adjusted net income (loss) and adjusted net income (loss) as a percentage of revenues 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 with similar financial measures disclosed by other issuers. EBITDA, adjusted EBITDA, adjusted EBITDA as a percentage of revenues, adjusted net income (loss) and adjusted net income (loss) as a percentage of revenues should not be construed as alternatives to net income (loss) determined in accordance with IFRS as an indicator of Data Communications' performance.

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