BRAMPTON, Ontario–(BUSINESS WIRE)–DATA Communications Management Corp. (TSX:DCM) (“DCM” or the “Company”), a leading provider of marketing and business communication solutions to companies across North America, announces its consolidated financial results for the three and six months ended June 30, 2021.
SECOND QUARTER HIGHLIGHTS
Cash flow from operations year to date of $16.4 million, up 7% compared to $15.3 million in the prior year. Continued strong cash flow from operations allowed DCM to reduce its’ debt by 19% to $39.1 million as of June 30, 2021 from $48.2 million as of December 31, 2020. SG&A expenses in the quarter were $14.9 million, down 3% from $15.4 million in the second quarter of 2020, despite a charge of approximately $2.0 million for mark-to market adjustments related to long-term incentive plan compensation in the current period. If the one-time charge for deferred compensation is excluded, the SG&A was down $2.6 million or 16% versus both last year and the prior quarter. Total headcount now of approximately 950 associates, a reduction of more than 130 since the end of 2020. A continued focus on building a better business resulting in average revenue per head of approximately $260,000 vs. $213,000 in 2015, a full 22% productivity improvement. Cost reductions and other operational effectiveness efforts, including closure of our Edmonton, Alberta facility (completed) and our Mississauga, Ontario facility (in progress), position the Company well for expected economic recovery in the second half of 2021. With consumer movements in the economy still restricted outside of essential retail, revenues were 13.7% lower in Q2 2021 compared to Q2 2020, at $55.2 million, compared to $63.9 million in the second quarter of 2020. However, product shipments were at similar levels to Q2 2020, and exceeded production revenues in Q2 2021, leading to reduced finished goods inventories. Revenue in Q2 2020 was only starting to feel the effects of COVID-19 and had also been positively impacted from non-core sales of COVID-19 related PPE products. Gross margin was 28.7% of revenue, and gross profit was $15.8 million, down from 30.7% and $19.6 million, respectively, from the second quarter of 2020. Product mix continued to be strong, however revenue headwinds and shortfalls in production revenue vs. shipments, impacted gross margin. Net income was $0.2 million compared with a net income of $4.2 million in the second quarter of 2020. Adjusted EBITDA was $7.3 million or 13.2% of revenue, compared to $13.5 million or 21.1% of revenue in the second quarter of 2020. However, $2.0 million of the gap is explained by the higher mark-to-market compensation expenses and $2.1 million is explained by lower government grant income compared to last year. Basic and diluted EPS of $0.00 compared with $0.10; basic and diluted adjusted EPS of $0.02 compared with $0.11. MANAGEMENT COMMENTARY
“In my first full quarter with DCM, our leadership team was focused on establishing plans to accelerate our transition from a ‘print first’ to a ‘digital first’ company. While consumer movements during the second quarter were slow to return to normal, we continued to stay focused on building a better business. As we look out through the second half of the year, as long as the economy continues to open with the current pace, and consumer movements follow, we are extremely optimistic of building a bigger business. Our pipeline of new opportunities and RFPs that we capture in our forecast and CRM system is currently up over 25% compared to the same time last year,” said Richard Kellam, President and CEO of DCM.
The Company continued to accelerate the pace of digital development in the second quarter, including to enhance its current offering of tech-enabled services and marketing workflow capabilities. This includes continued development of the DCM | Flex platform, plus development of its enterprise-level digital asset management solution.
“While we are still early in our evolution to a ‘digital first’ organization, our commercial team has already built a strong client penetration pipeline with more than $20 million of tech-enabled marketing workflow opportunities. I am personally pleased with our accelerated pace to digital,” Mr. Kellam continued.
SECOND QUARTER EARNINGS CALL
The Company will host a conference call and webcast to review Q2 2021 results on Wednesday, August 11, 2021 at 9.00 a.m. Eastern time. DCM will be using Microsoft Teams to broadcast the 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)
+1 647-749-9154, 526 995 97# Canada, Toronto
Phone Conference ID: 526 995 97#
Find a local number |
Website URL
https://bit.ly/3xt8Euw
A replay of the call will also be available on the Company’s website following the call.
For the periods ended June 30, 2021 and 2020
April 1 to
June 30, 2021
April 1 to
June 30, 2020
January 1 to
June 30, 2021
January 1 to
June 30, 2020
(in thousands of Canadian dollars, except share and per share amounts, unaudited)
Revenues
$
55,207
$
63,936
$
117,568
$
141,351
Gross profit
15,842
19,630
34,635
41,271
Gross profit, as a percentage of revenues
28.7
%
30.7
%
29.5
%
29.2
%
Selling, general and administrative expenses
14,924
15,441
30,429
32,626
As a percentage of revenues
27.0
%
24.2
%
25.9
%
23.1
%
Adjusted EBITDA
7,292
13,459
16,579
23,938
As a percentage of revenues
13.2
%
21.1
%
14.1
%
16.9
%
Net income for the period
187
4,232
1,499
6,442
Adjusted net income
870
4,686
3,637
7,450
As a percentage of revenues
1.6
%
7.3
%
3.1
%
5.3
%
Basic and diluted earnings per share
$
0.00
$
0.10
$
0.03
$
0.15
Adjusted net income per share, basic and diluted
$
0.02
$
0.11
$
0.08
$
0.17
Weighted average number of common shares outstanding, basic
43,926,019
43,047,030
43,926,019
43,047,030
Weighted average number of common shares outstanding, diluted
46,174,209
43,047,030
45,750,869
43,047,030
About DATA Communications Management Corp.
DCM is a communication solutions partner that adds value for large enterprises by creating more meaningful connections with their customers. Our technology-enabled content and workflow management capabilities solve the complex branding, communications, logistics and regulatory requirements of Canada’s leading enterprises. We pair customer insights and thought leadership with cutting-edge products, modular enabling technology, and services to power our clients’ go-to-market strategies. We help our clients manage how their brands come to life, determine which channels are right for them, manage multimedia campaigns, deploy location-specific and 1:1 marketing, execute custom loyalty programs, and fulfill their commercial printing needs all in one place.
Our extensive experience has positioned us as experts at providing communication solutions across many verticals, including the financial, retail, healthcare, cannabis, energy, and public sectors. Thanks to our locations throughout Canada and in the United States, we meet our clients’ varying needs with scale, speed, and efficiency – no matter how large or complex the ask – delivered through our technology-enabled service model.
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: risks relating to the continuing impact of the COVID-19 pandemic, the impact of which could be material on DCM’s business, liquidity and results of operations; DCM’s ability to continue as a going concern is dependent upon its ability to comply with its financial covenants for at least the next twelve months which is contingent on management’s ability to meet forecast revenue, profitability and cash collection targets; risks relating to DCM’s ability to access sufficient capital, including, without limitation, under its existing revolving credit facility, on favourable terms to fund its liquidity and business plans from internal and external sources; the risk that DCM will not be successful in negotiating amendments to the terms of its existing credit facilities including, without limitation, the financial covenants of DCM under these facilities; the limited growth in the traditional printing industry and the potential for further declines in sales of DCM’s printed business documents relative to historical sales levels for those products; the risk that changes in the mix of products and services sold by DCM will adversely affect DCM’s financial results; the risk that DCM may not be successful in reducing the size of its legacy print business, realizing the benefits expected from restructuring and business reorganization initiatives, reducing costs, reducing and repaying its long term debt, and growing its digital and marketing communications businesses; the risk that DCM may not be successful in managing its organic growth; DCM’s ability to invest in, develop and successfully market new digital and other products and services; competition from competitors supplying similar products and services, some of whom have greater economic resources than DCM and are well-established suppliers; DCM’s ability to grow its sales or even maintain historical levels of its sales of printed business documents; the impact of economic conditions on DCM’s businesses; risks associated with acquisitions and/or investments in joint ventures by DCM; the failure to realize the expected benefits from the acquisitions it has made and risks associated with the integration and growth of such businesses; increases in the costs of paper and other raw materials used by DCM; and DCM’s ability to maintain relationships with its customers and suppliers. 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, other income, and one-time business reorganization costs. Adjusted net income (loss) means net income (loss) adjusted for restructuring expenses, other income, one-time 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. In addition to net income (loss), DCM uses non-IFRS measures including Adjusted net income (loss), Adjusted net income (loss) per share, EBITDA and Adjusted EBITDA 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 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, 2021
December 31, 2020
$
$
Assets
Current assets
Cash and cash equivalents
163
578
Trade receivables
55,257
65,290
Inventories
9,054
8,514
Prepaid expenses and other current assets
1,419
1,521
Income taxes receivable
870
—
66,763
75,903
Non-current assets
Other non-current assets
561
581
Deferred income tax assets
3,588
3,163
Restricted cash
515
515
Property, plant and equipment
8,558
9,783
Right-of-use assets
37,012
42,341
Pension assets
1,284
203
Intangible assets
13,439
14,459
Goodwill
16,973
16,973
148,693
163,921
Liabilities
Current liabilities
Trade payables and accrued liabilities
34,906
39,999
Current portion of credit facilities
6,385
6,172
Current portion of promissory notes
—
1,154
Current portion of lease liabilities
7,178
8,032
Provisions
2,627
1,186
Income taxes payable
3,154
1,608
Deferred revenue
2,334
2,798
56,584
60,949
Non-current liabilities
Provisions
—
90
Credit facilities
32,199
39,567
Promissory notes
—
975
Lease liabilities
35,637
40,321
Deferred income tax liabilities
101
282
Pension obligations
7,647
8,271
Other post-employment benefit plans
3,577
3,507
135,745
153,962
Equity
Shareholders’ equity / (Deficit)
Shares
256,321
256,260
Warrants
879
850
Contributed surplus
2,706
2,354
Translation reserve
141
192
Deficit
(247,099
)
(249,697
)
12,948
9,959
148,693
163,921
Condensed interim consolidated statements of operations
(in thousands of Canadian dollars, except per share amounts, unaudited)
For the three months
ended June 30, 2021
For the three months
ended June 30, 2020
$
$
Revenues
55,207
63,936
Cost of revenues
39,365
44,306
Gross profit
15,842
19,630
Expenses
Selling, commissions and expenses
6,137
6,841
General and administration expenses
8,787
8,600
Restructuring expenses
918
265
15,842
15,706
Income before finance costs, other income and income taxes
—
3,924
Finance costs
Interest expense on long term debt and pensions, net
1,088
1,097
Interest expense on lease liabilities
628
814
Debt modification losses
—
629
Amortization of transaction costs
176
151
1,892
2,691
Other income
Government grant income
2,411
4,547
Income before income taxes
519
5,780
Income tax expense
Current
1,126
590
Deferred
(794
)
958
332
1,548
Net Income for the period
187
4,232
Other comprehensive income:
Items that may be reclassified subsequently to net income
Foreign currency translation
(28
)
(64
)
(28
)
(64
)
Items that will not be reclassified to net income
Re-measurements of pension and other post-employment benefit obligations
205
(4,419
)
Taxes related to pension and other post-employment benefit adjustment above
(44
)
1,116
161
(3,303
)
Other comprehensive income (loss) for the period, net of tax
133
(3,367
)
Comprehensive income for the period
320
865
Basic earnings per share
—
0.10
Diluted earnings per share
—
0.10
Condensed interim consolidated statements of operations
(in thousands of Canadian dollars, except per share amounts, unaudited)
For the six months
ended June 30, 2021
For the six months
ended June 30, 2020
$
$
Revenues
117,568
141,351
Cost of revenues
82,933
100,080
Gross profit
34,635
41,271
Expenses
Selling, commissions and expenses
12,803
14,456
General and administration expenses
17,626
18,170
Restructuring expenses
4,325
1,008
34,754
33,634
(Loss) income before finance costs, other income and income taxes
(119
)
7,637
Finance costs
Interest expense on long term debt and pensions, net
1,806
2,308
Interest expense on lease liabilities
1,322
1,704
Debt modification losses
—
625
Amortization of transaction costs
321
261
3,449
4,898
Other income
Government grant income
4,319
6,169
Other income
1,452
—
Income before income taxes
2,203
8,908
Income tax expense
Current
1,672
590
Deferred
(968
)
1,876
704
2,466
Net income for the period
1,499
6,442
Other comprehensive income:
Items that may be reclassified subsequently to net income
Foreign currency translation
(51
)
(42
)
(51
)
(42
)
Items that will not be reclassified to net income
Re-measurements of pension and other post-employment benefit obligations
1,461
88
Taxes related to pension and other post-employment benefit adjustment above
(362
)
(22
)
1,099
66
Other comprehensive income for the period, net of tax
1,048
24
Comprehensive income for the period
2,547
6,466
Basic earnings per share
0.03
0.15
Diluted earnings per share
0.03
0.15
Condensed interim consolidated statements of cash flows
(in thousands of Canadian dollars, unaudited)
For the six months
ended June 30, 2021
For the six months
ended June 30, 2020
$
$
Cash provided by (used in)
Operating activities
Net income for the period
1,499
6,442
Items not affecting cash
Depreciation of property, plant and equipment
1,582
1,869
Amortization of intangible assets
2,065
2,111
Depreciation of right-of-use-assets
4,407
4,796
Interest expense on lease liabilities
1,322
1,704
Share-based compensation expense
352
38
Pension expense
239
261
Provisions
4,325
1,008
Amortization of transaction costs and debt modification losses
291
886
Accretion of non-current liabilities and capitalized interest expense
(35
)
372
Other post-employment benefit plans, net
70
69
Income tax expense
704
2,466
16,821
22,022
Changes in working capital
3,989
(3,373
)
Contributions made to pension plans, net
(483
)
(518
)
Provisions paid
(2,974
)
(2,684
)
Income taxes paid
(996
)
(149
)
16,357
15,298
Investing activities
Purchase of property, plant and equipment
(357
)
(105
)
Purchase of intangible assets
(1,045
)
—
(1,402
)
(105
)
Financing activities
Exercise of warrants
10
—
Repayment of credit facilities
(7,355
)
(8,167
)
Repayment of other liabilities
—
(200
)
Repayment of promissory notes
(2,185
)
(535
)
Transaction costs
—
(227
)
Lease payments
(5,868
)
(5,435
)
(15,398
)
(14,564
)
Change in Cash (Bank overdraft) during the period
(443
)
629
Cash and cash equivalents (Bank overdraft) – beginning of period
578
(1,093
)
Effects of foreign exchange on cash balances
28
(13
)
Cash and cash equivalents (Bank overdraft) – end of period
163
(477
)