Q4 2025 Data Communications Management Corp Earnings Call

March 12, 2026

Speaker #1: And welcome to the Data Communications Management Corp fiscal 2025 financial results conference call. I'm James Lorimer, CFO of DCM, and I'm pleased to be hosting today's call.

Speaker #1: Joining me on the call today is Richard Kellam, our President and Chief Executive Officer. Following our prepared remarks, we will be moderating a Q&A session.

Speaker #1: As a reminder, this conference call is being broadcast live, and recorded. We'd also like to remind everyone that Richard and I could be available after the call for any follow-up questions that you might have.

Speaker #1: Before we begin, I will remind everyone that we will be referring to forward-looking information on today's call. This information is subject to certain risks and uncertainties, as outlined in the forward-looking information disclosure in our press release, and more fully within our public disclosure filings on Cedar Plus.

Speaker #1: This presentation will be added to our website for your reference, along with a post-view recording and transcript. For detailed information is also available on our website, and Cedar Plus.

Speaker #1: Please follow us on LinkedIn to keep up to date with other business developments. And I'll now turn the call over to Richard.

Speaker #2: Good morning and good afternoon, good evening to anybody joining from other time zones. Our agenda this morning is very clear. We're just going to hit the highlights of '25, talk about some capital allocation, look at our priorities, and turn it over to Q&A.

Speaker #2: So thank you, James. First, I've got a summary of our highlights and, let's say, anybody looking at this slide, our key theme on the year was controlling the controllables, and there was a lot of controllables, we need to control.

Speaker #2: Looking at revenue results, everybody saw that our release came out last night, the revenue decline was pretty much in line with consensus at minus 0.6.2% on the year, and that really was reflecting lower spend on several large enterprise accounts.

Speaker #2: As shareholders know about 93%, 94% of our revenue comes from large enterprise, so a lot of those large enterprise accounts obviously had some headwinds.

Speaker #2: And we did not offset that with new customers, given although we did bring in several new customers, just given time to revenue. Which, as you know, is long in our business.

Speaker #2: With that said, we did a very good job controlling the controllables, and our adjusted EBITDA came in at 60.4 million. And 13.4% margin, and that was really due to the spending discipline mitigating the declines in some of the gross profit, and obviously the revenue headwinds we experienced.

Richard Kellam: Our business. With that said, we did a very good job controlling the controllables, and our adjusted EBITDA came in at CAD 60.4 million and 13.4% margin. That was really due to the spending discipline mitigating the declines in some of the gross profit and obviously the revenue, you know, headwinds we experienced. We also generated strong free cash flow, well up over a year ago, and you'll see that in a chart coming up shortly, of CAD 13.4 million. We've done a, I'd say, very good job returning capital to shareholders. Again, you'll see a chart coming up. Our capital return to shareholders is about CAD 17.6 million in the year.

Richard Kellam: Our business. With that said, we did a very good job controlling the controllables, and our Adjusted EBITDA came in at CAD 60.4 million and 13.4% margin. That was really due to the spending discipline mitigating the declines in some of the gross profit and obviously the revenue, you know, headwinds we experienced. We also generated strong Free Cash Flow, well up over a year ago, and you'll see that in a chart coming up shortly, of CAD 13.4 million. We've done a, I'd say, very good job returning capital to shareholders. Again, you'll see a chart coming up. Our capital return to shareholders is about CAD 17.6 million in the year.

Speaker #1: Our business. with, with that said, we did a very good job controlling the controllables, and our adjusted EBITDA came in at 60.4 million. And, 13.4% margin, and that was really due to the spending discipline mitigating the declines in some of the gross profit, and, obviously, the revenue, you know, headwinds we experienced.

Speaker #2: We also generated strong free cash flow, well up over a year ago, and you'll see that in a chart coming up shortly. Of 13.4 million, and we've done a, I'd say, a very good job returning capital to shareholders.

Speaker #1: We also generated strong free cash flow, well up over a year ago, and you'll see that in a chart coming up shortly. Of 13.4 million, and we've done a, I'd say, a very good job returning capital to shareholders.

Speaker #2: And again, you'll see a chart coming up, our capital return to shareholders is about 17.6 million in the year. On the uncertainty side, again, we worked hard to manage through some market uncertainty, and you saw that through the quarters.

Speaker #1: And again, you'll see a chart coming up. Our capital return to shareholders is about 6 17.6 million dollars in the year. on the uncertainty side, again, we worked hard to manage through some market uncertainty, and, you know, you saw that through the quarters.

Speaker #2: The tariff uncertainty and that impacting budgets in large enterprise accounts, we obviously had the uncertainty and the unpredicted or unexpected, rather, headwind from the Canada Post labor disruption.

Richard Kellam: On the uncertainty side, again, we worked hard to manage through some market uncertainty, and, you know, you saw that through the quarters. The tariff uncertainty and, you know, that impacting budgets in large enterprise accounts. We obviously had the uncertainty and the unexpected headwind from the Canada Post labor disruption. Canada Post is a large client of DCM's, as well as the knock-on effect to all the other clients we service from a mailing perspective. So that certainly impacted our year. Thankfully that's behind us as we'll talk about in the 2026 outlook. We did a very good job, as I said earlier, of managing and mitigating some of the revenue headwinds with operational efficiencies and driving SG&A productivity.

Speaker #1: the tariff uncertainty, and, you know, that, impacting budgets in, in large enterprise accounts, we obviously had the uncertainty and the unpredicted, or unexpected, rather, headwind from the Canada Post labor disruption.

Speaker #2: Canada Post is a large client of DCMs, as well as the knock-on effect to all the other clients we service from a mailing perspective, so that certainly impacted our year.

Speaker #1: Canada Post is a large client of DCMs, as well as the knock-on effect to all the other clients we service from a mailing perspective, so that certainly impacted our year.

Speaker #2: Thankfully, that's behind us, as we'll talk about in the '26 outlook. And we did a very good job, as I said earlier, managing and mitigating some of the revenue headwinds with operational efficiencies and driving SG&A productivity.

Speaker #1: thankfully, that's behind us, as we'll talk about in the 26 outlook. And, we did a, a very good job, as I said earlier, managing and mitigating some of the revenue headwinds with, operational efficiencies and, and driving SG&A productivity.

Speaker #2: And you'll see in a chart coming up that we actually reduced SG&A by 7.8 million in the year. On the digital and AI activities that we're delivering to the business, we've had some very good success in the year.

Speaker #1: And you'll see in a chart coming up that we actually reduced SG&A by 7.8 million dollars in the year. On the, on the digital and, AI, activities that were delivering to the business, we've had some very good success in the year.

Richard Kellam: You'll see in a chart coming up that we actually reduced SG&A by CAD 7.8 million in the year. On the digital and AI activities that we're delivering to the business, we've had some very good success in the year. We actually grew our tech services revenues by 4.2%. You know, obviously well above what we experienced on our core print business. We're now about CAD 21 million in tech services revenues, and that's almost 5% of total revenue. Shareholders may remember that we launched Content Cloud, our AI-powered digital asset management solution. We're proud of getting that to market, the success we're delivering. We've got good momentum with several verticals, but one in particular are the government and municipal services.

Speaker #2: We actually grew our tech services revenues by 4.2%, so obviously well above what we experienced on our core print business. We're now about 21 million in tech services revenues, and that's almost 5% of total revenue.

Speaker #1: We actually grew our tech services revenues by 4.2%, so you know, obviously, well above what we experienced on our, on our core, print business.

Speaker #2: Shareholders may remember that we launched content cloud, our AI-powered digital asset management solutions, so we're proud of getting that to market and the success we're delivering.

Speaker #1: we're now about 21 million dollars in tech services revenues, and that's almost 5% of total revenue. shareholders may remember that we launched, Content Cloud, our AI-powered digital asset management solution, so we're proud of getting that to market and the success we're delivering.

Speaker #2: We've got good momentum with several verticals, but one in particular are the government and municipal services, and we were just up against a pretty large RFP and pretty large competitive shootout, and we secured a good piece of business there on government, so we're kind of coming we're finding our lane, and securing some good wins there.

Speaker #1: We've got good momentum with several verticals, but one in particular is the government and municipal services. We were just up against a pretty large RFP and a pretty large competitive shootout, and we secured a good piece of business there on government, so we're kind of coming, we're finding our lane, and securing some good wins there.

Richard Kellam: We were just up against a pretty large RFP and pretty large competitive shootout, and we secured a good piece of business there on government. We're finding our lane and securing some good wins there. From an operational perspective and from a commercial perspective, we're using a lot of AI in our workflows today to drive productivity improvements. I'd say we're all in on AI from an operational perspective and from a commercial perspective as well. We've been building a good solid M&A pipeline now that all of our restructuring integration, IT integration is behind us. We can now look to opportunities for M&A, and we've been building that pipeline. The market is good.

Speaker #2: And then from an operational perspective, and from a commercial perspective, we're using a lot of AI in our workflows today to drive productivity improvements so I'd say we're all in on AI from an operational perspective and from a commercial perspective as well.

Speaker #1: And then from an operational perspective, and from a commercial perspective, we're using, a lot of AI in our, in our workflows today to drive productivity improvements, so I'd say we're all in on AI from an operational perspective and from a, a commercial spec perspective as well.

Speaker #2: And finally, we've been building a good solid M&A pipeline now that all of our restructuring integration, IT integration is behind us. We can now look to opportunities for M&A, and we've been building that pipeline.

Speaker #1: And finally, we've been building a good, solid M&A pipeline. Now that all of our restructuring and IT integration is behind us, we can now look to opportunities for M&A, and we've been building that pipeline.

Speaker #2: The market is good. Certainly, the macro uncertainty is creating some opportunities on the sell side, and we're well capitalized to consider any M&A as we work through 2026.

Speaker #1: The market is good. Certainly, the macro uncertainty is creating some opportunities on the sell side, and we're well capitalized to consider any M&A as we work through, 2026.

Speaker #2: So overall, we managed well through the market uncertainty we experienced. Team did an excellent job to kind of manage those headwinds. And maintain profitability while also returning significant cash to shareholders.

Richard Kellam: Certainly the macro uncertainty is creating some opportunities on the sell side, and we're well capitalized to consider any M&A as we work through 2026. Overall, we managed well through the market uncertainty we experienced. Team did an excellent job to kinda manage those headwinds and maintain profitability while also returning significant cash to shareholders. It's kinda the overall highlights, and we'll get into a few details as we flip through the file here. James? Okay. From a revenue perspective, as I said, minus 6.2% for all the reasons I said. If you do look at this chart and you look over five years, you can

Speaker #1: So overall, we managed well through the market uncertainty we experienced. team did a, an excellent job to kinda manage those headwinds. And maintain profitability, while also returning significant cash to shareholders.

Speaker #2: It's kind of the overall highlights, and we'll get into a few details as we flip through the file here. James? Okay. From a revenue perspective, as I said, minus 6.2% for all the reasons I said.

Speaker #1: It's kinda the overall, highlights, and we'll get into a few details as we flip through the file here. James? Okay. From a revenue perspective, as I said, minus 6.2% for all the reasons I said, but if you do look at this chart and you look over five years, you can you do see, you know, despite the revenue headwinds we experienced in 2025, we're still managing a business that is twice the size, almost twice the size of what it was in 2023.

Speaker #2: But if you do look at this chart and you look over five years, you do see despite the revenue headwinds we experienced in 2025, we're still managing a business that is twice the size, almost twice the size of what it was in 2023.

Richard Kellam: You do see, you know, despite the revenue headwinds we experienced in 2025, we're still managing a business that is twice the size, almost twice the size of what it was in 2023, and managing it quite successfully. Obviously, you know, we'll see those revenue headwinds turn to tailwinds, and then we'll have a nice, you know, kinda virtuous circle over time as well. Business is still solid. There's been no material losses in clients. Again, you can see from this chart that we're still managing a very sizable business north of CAD 450 million in revenue. Gross profit, obviously with factory overhead recoveries and utilization, was impacted.

Speaker #2: And managing it quite successfully. So obviously, we'll see those revenue headwinds turn to tailwinds, and then we'll have a nice kind of virtual circle over time as well, but business is still solid.

Speaker #1: and, and, and managing it quite successfully. So, so obviously, you know, we'll see those, those revenue headwinds turn to tailwinds, and then we'll have a nice, you know, kinda virtual circle over time as well, but business is still solid.

Speaker #2: There's been no material losses in clients, and again, you can see from this chart that we're still managing a very sizable business north of 450 million in revenue.

Speaker #1: We've—there's been no material losses in clients, and again, you can see from this chart that we're still managing a very sizable business, north of $450 million in revenue.

Speaker #2: Gross profit, obviously, with factory overhead recoveries and utilization was impacted. And you can see that just around 117 million in gross profit. Gross margin of around 26%.

Speaker #1: Gross profit, obviously, with, factory, overhead, recoveries and utilization was impacted. and, and you can see that just around 117 million dollars in gross, in gross profit.

Speaker #2: And again, we'll see that come back as revenue growth returns. We've built a perfect footprint operational footprint to now grow from, and we'll see that naturally kind of return to historical levels as we have revenue come back into our business, or revenue growth come back into our business.

Richard Kellam: You can see that just around CAD 117 million in gross profit. Gross margin of around 26%. We'll see that come back as revenue growth returns. We've built a perfect footprint, operational footprint to now grow from, and we'll see that naturally kinda return to historical levels as we have revenue come back into our business, or revenue growth come back into our business. Okay? Adjusted EBITDA, as I said earlier, we're happy with the delivery of CAD 60 million. It's pretty much in line with consensus. Still slightly down versus a year ago. A year ago was our high watermark, of course. Down for all the reasons I said due to the headwinds.

Speaker #1: Gross margin of around 26%. And again, we'll see that come back as revenue growth returns. We've built a perfect operational footprint to now grow from, and we'll see that naturally kind of return to historical levels as we have revenue come back into our business, or revenue growth come back into our business.

Speaker #2: Okay? Adjusted EBITDA, as I said earlier, we're happy with the delivery of 60 million. It's pretty much in line with consensus. Still slightly down versus a year ago.

Speaker #1: Okay? just adjusted EBITDA, as I said earlier, you know, we're, we're happy with the delivery of 60 million. It's, pretty much in line with consensus.

Speaker #2: A year ago was our high watermark, of course. And down for all the reasons I said, due to the headwinds, but again, if you look at over the course of the last five years, we're up 70% over that horizon.

Speaker #1: Still slightly down versus a year ago. A year ago was our high watermark, of course. and, and down for all the reasons I said due to the headwinds, but again, if you look at, over the over the course of the last five years, we're up 70% over that horizon, and, as I said earlier with the operational efficiencies, the consolidation of our network that we've completed, and the return to revenue, you'll see that turn into a nice kinda virtuous circle as we call it.

Speaker #2: And as I said earlier with the operational efficiencies, the consolidation of our network that we've completed, and the return to revenue, you'll see that turn into a nice kind of virtuous circle as we call it, where margins will improve.

Richard Kellam: Again, if you look at over the course of the last five years, we're up 70% over that horizon. As I said earlier, with the operational efficiencies, the consolidation of our network that we've completed, and the return to revenue, you'll see that turn into a nice kind of virtuous circle, as we call it, where margins will improve. Not a lot of restructuring in our plans, so you'll see a natural improvement in EBITDA as that revenue comes back into our mix. James, free cash flow.

Speaker #2: Not a lot of restructuring in our plans, so you'll see a natural improvement in EBITDA as that revenue comes back into our mix. James, free cash flow?

Speaker #1: We're margins will improve. not a lot of, restructuring in our plans, so you'll see a natural, improvement in, in, EBITDA as, as that revenue comes back into our into our mix.

Speaker #2: We had a solid year in terms of free cash flow. We delivered 13.4 million up about 145% over last year. A lot of the CapEx that we invested in, particularly in 2024, to modernize and upgrade some facilities, following the MCC acquisition and integration, is largely behind us, so we see CapEx kind of being in similar levels to what we saw in 2025 going forward.

Speaker #1: James, free cash flow? We, we had a solid year in terms of free cash flow, we delivered 13.4 million dollars, up, about 145% over last year.

James Lorimer: We had a solid year in terms of free cash flow. We delivered CAD 13.4 million, up about 145% over last year. A lot of the CapEx that we invested in, particularly in 2024 to modernize and upgrade some facilities following the MCC acquisition and integration, is largely behind us. We see CapEx kind of being in similar levels to what we saw in 2025 going forward. On our balance sheet, we continued to pay down debts. Our leverage just below 2x net debt to EBITDA at the end of the year. That's down 2.2% on a net debt basis compared to last year, and significantly almost 50% since the MCC acquisition.

James Lorimer: We had a solid year in terms of Free Cash Flow. We delivered CAD 13.4 million, up about 145% over last year. A lot of the CapEx that we invested in, particularly in 2024 to modernize and upgrade some facilities following the MCC acquisition and integration, is largely behind us. We see CapEx kind of being in similar levels to what we saw in 2025 going forward. On our balance sheet, we continued to pay down debts. Our leverage just below 2x net debt to EBITDA at the end of the year. That's down 2.2% on a net debt basis compared to last year, and significantly almost 50% since the MCC acquisition.

Speaker #1: a lot of the CapEx, that we, invested in, particularly in 2024, to modernize and, and upgrade some facilities, following the MCC acquisition and, and integration, is largely behind us, so we see, CapEx kinda being in similar levels to what we saw in 2025 going forward.

Speaker #2: Solid balance sheet. We continue to pay down debt. Our leverage just below two times net debt to EBITDA at the end of the year.

Speaker #2: And that's down 2.2% on a net debt basis compared to last year. And significantly almost 50% since the MCC acquisition. And this is despite the returns to shareholders that we or in addition, I guess, complementing the returns to shareholders that we completed last year.

Speaker #1: solid balance sheet, we continue to pay down debt. Our leverage, just below two times, net debt to EBITDA at the end of the year.

Speaker #1: and that's down 2.2% on a net debt basis compared to last year. And significantly almost 50% since the MCC acquisition. and this is despite, the returns to shareholders that we, or, or in addition, I guess, complimenting the returns to shareholders that we completed last year.

James Lorimer: This is despite the returns to shareholders that we or in addition, I guess, complementing the returns to shareholders that we completed last year. Credit facility, we have solid lines and certainly a good balance sheet to pursue M&A activity and continue our capital return plans.

Speaker #2: Credit facility, we have solid lines and certainly a good balance sheet to pursue M&A activity. And continue our capital return plans. So supporting a common that I mentioned earlier about our productivity improvements and our headcount kind of rigorous headcount management, you can see in this chart productivity has improved considerably.

Speaker #1: credit facility, we have, solid lines and, certainly a, a good balance sheet to, pursue M&A activity. And continue our capital return plans. So supporting a common that I mentioned earlier about our, our productivity improvements and our and our headcount, you know, Greg kinda rigorous headcount management.

Richard Kellam: Supporting a comment that I made earlier about our productivity improvements and our headcount, you know, great kind of rigorous headcount management. You can see in this chart, you know, productivity has improved considerably. Our headcount was down 4% this year, and our headcount is down 22% over the last three years. You can see that our SG&A, as I mentioned earlier, down 9% or CAD 7.8 million. Good job controlling the controllables and continue to manage, you know, productivity, effectiveness, and efficiency of our teams. Really, you know, pleased with the progress we made there as an organization. You can see that our percentage on SG&A is down below 18 now, which is so what we put in plan a couple of years ago.

Speaker #2: Headcount was down 4% this year, and our headcount is down 22% over the last three years. And you can see that our SG&A, as I mentioned earlier, down 9% or 7.8 million.

Speaker #1: you can see in this chart, you know, productivity has improved considerably. headcount was down 4% this year, and, our headcount is down 22% over the last three years.

Speaker #2: So a good job controlling the controllables, and continue to manage productivity effectiveness and efficiency of our teams. So really pleased with the progress we made there as an organization.

Speaker #1: And, you can see that our, our, SG&A, as I mentioned earlier, down 9% or 7.8 million. So good job controlling the controllables, and continue to manage, you know, productivity effectiveness and efficiency of our teams.

Speaker #2: You can see that our percentage on SG&A is down below 18 now, which is sort of what we put in plan a couple of years ago.

Speaker #1: So, really, you know, pleased with the progress we made there as an organization. You can see that our percentage on SG&A is down below 18 now, which is what we put in plan a couple of years ago.

Speaker #2: From a capital allocation perspective, we deployed a little over 21, 21.8 million of capital last year. That included special dividend that we announced in the first quarter of last year, as well as regular recurring 2.5 cent per share dividend.

Speaker #1: From a capital allocation perspective, we deployed a little over $21, $21.8 million of capital last year. That included the special dividend that we announced in the first quarter of last year, as well as the regular recurring 2.5 cent per share dividend.

James Lorimer: From a capital allocation perspective, we deployed a little over CAD 21.8 million of capital last year. That included a special dividend that we announced in the Q1 of last year, as well as regular recurring 2.5-cent per share dividend. You can see that the total capital deployed of CAD 21.8 million is up over last year, but a big portion of that is dividends. We commenced a normal course issuer bid last year in June. On aggregate, we did return approximately CAD 17.6 million of capital through the special dividend and the quarterly dividend paid out last year, as well as about CAD 1 million worth of share repurchases.

Speaker #2: You can see that the total capital deployed of 21.8 million is up over last year, but a big portion of that is dividends. And we commenced a normal course issuer bid last year in June.

Speaker #1: you can see that the, total capital, deployed of 21.8 million dollars is up over last year, but, big portion of that is, dividends, and, we we commenced a normal course issuer bid last year in, June.

Speaker #2: When aggregate, we did return approximately 17.6 million of capital. Through the special dividend and the quarterly dividend paid out last year, as well as about a million dollars' worth of share repurchases.

Speaker #1: On aggregate, we did return approximately 17.6 million dollars of capital. Through the special dividend and the quarterly dividend paid out last year, as well as about a million dollars' worth of share p share repurchases.

Speaker #2: Current kind of trading levels, we're trading about a 6.8% dividend yield. Okay. Moving on to 2026, which we're well into now, obviously. Some of the outlook early signs there's certainly some early signs of market stabilization.

Speaker #1: current, kinda trading levels, we're trading about a 6.8% dividend yield. Okay. Moving on to 2026, which we're well into now, obviously. some of the outlook early signs, there's certainly some early signs of market stabilization.

James Lorimer: Current kind of trading levels, we're trading about a 6.8% dividend yield.

Richard Kellam: Okay, moving on to 2026, which we're well into now, obviously. Some of the outlook, early signs, certainly some early signs of market stabilization. Demand trends are beginning to stabilize. Obviously, the Canada Post disruption is behind us and we're starting to see clients now returning to some of the discretionary mailings that they were doing. You know, the personalized direct mail as an example, we're starting to see that return into the business mix this year. Then we've got a lot of new business activity.

Speaker #2: Demand trends are beginning to stabilize. Obviously, the post-disruption is behind us, and we're starting to see clients now returning to some of the discretionary mailings that they were doing.

Speaker #1: Demand trends are beginning to stabilize. Obviously, the Canada post-disruption is behind us, and we're starting to see clients now returning to some of the discretionary mailings that they were doing.

Speaker #2: The personalized direct mail is an example. We're starting to see that return. Into the business mix this year. And then we've got a lot of new business activity some of the work that we did last year that I said is longer term and longer time to revenue.

Speaker #1: you know, the, the personalized, direct mail is an example. We're starting to see that return. Into the business mix this year. and then, and then we've got a lot of new business activity, some of the work that we did last year that I said is longer term and longer time to revenue.

Speaker #2: We'll start flowing through into our business this year. As well as some good what we call horizon one, so kind of in-year revenue opportunities that the team is working to deliver as well.

Richard Kellam: Some of the work that we did last year that I said is longer term and longer time to revenue will start flowing through into our business this year, as well as some good, you know, what we call Horizon One, so kind of in-year revenue opportunities that the team is working to deliver as well. We like to say that execution is a strategy, so we will stay relentlessly focused on execution. Still a little uncertainty around tariffs, but we know how to mitigate and manage through that. As James mentioned earlier, we do have a very strong balance sheet, and cost discipline to provide us that resiliency and flexibility as we progress through the year.

Speaker #1: We'll start flowing through into our business this year. As well as some good, you know, what we call horizon one, so kinda in-year revenue opportunities that, that the team is, is working to deliver as well.

Speaker #2: We like to say that execution is a strategy. So we will stay relentlessly focused on execution. Still a little uncertainty around tariffs. But we know how to mitigate and manage through that.

Speaker #1: We, we w-we like to say that execution is a strategy, so, we will stay relentlessly focused on execution. still a little uncertainty around tariffs.

Speaker #2: And then as James mentioned earlier, we do have a very strong balance sheet and cost discipline to provide us that resiliency and flexibility as we progress through the year.

Speaker #1: but, but we, we know how to mitigate and manage through that. And then, as James mentioned earlier, we do have a very strong balance sheet, and, and cost discipline, to provide us that resiliency and, and flexibility as we progress through the year.

Speaker #2: Our priorities for 2026 these are four key priorities for us throughout the business. One is to maintain high revenue retention high revenue retention rate I said there's no regrettable losses in our business.

Speaker #1: Our priorities for 2026, these are four key priorities for us throughout the business. One is to maintain high revenue retention, high revenue retention rate you know, I said there's no regrettable losses in our business.

Richard Kellam: Our priorities for 2026, these are four key priorities for us throughout the business. One is to maintain high revenue retention, high revenue retention rate. You know, I said there's no regrettable losses in our business, and execute on new customer development initiatives, as well as opportunities to kind of land and expand some new clients as well. Second is to improve gross margin through business mix, through our operational efficiencies, which we've done a great job at, and there's still even more levers we can pull. Obviously that gross margin will improve as we see revenue growth come back into our mix, as well as drive our digital acceleration. You saw the over 4% growth last year. We see a lot more growth opportunity in our business there.

Speaker #2: And execute on new customer development initiatives. As well as opportunities to kind of land and expand some new clients as well. Second is to improve gross margin through business mix.

Speaker #1: And, and execute on new, customer development initiatives. As well as opportunities to kinda land and expand some new clients as well. second is to improve gross margin through business mix.

Speaker #2: Through our operational efficiencies, which we've done a great job at, and there's still even more levers we can pull. And obviously, that gross margin will improve as we see revenue come back revenue growth come back into our mix.

Speaker #1: Through our operational efficiencies, which we've done a great job at, and there's still even more levers we can pull. and obviously, that gross margin will improve as we see revenue come back, revenue growth come back into our mix.

Speaker #2: As well as drive our digital acceleration. You saw the over 4% growth last year. We see a lot more growth opportunity in our business there.

Speaker #1: As well as drive our digital acceleration. You saw the, over 4% growth last year. We see, we see a, a lot more growth opportunity in our business there.

Speaker #2: And that digital portfolio is at a higher margin as well. So that obviously improves our mix. The third is to generate strong cash flow and continue to deliver capital returns to shareholders and continue on our debt payment.

Speaker #1: And, and that, that digital portfolio is, is at a higher a higher margin as well. So that obviously improves our mix. The third is to generate strong, cash flow and continue to, deliver, capital, returns to shareholders and continue on our, our debt payment.

Richard Kellam: That digital portfolio is at a higher margin as well, so that obviously improves our mix. The third is to generate strong cash flow and continue to deliver capital returns to shareholders and continue on our debt repayment. Finally, as I mentioned earlier, leverage the current market environment to be opportunistic on M&A, and we've got a good pipeline that we're working through right now. There's some interesting opportunities that we're certainly considering. Our key theme really focus on profitability, on cash flow generation, and continue to work on leadership opportunities in this sector, and obviously business development, business growth, and opportunistic M&A to summarize. A lot of priorities. We're well-positioned in the current environment.

Speaker #2: Debt repayment. And then finally, as I mentioned earlier, leverage the current market environment to be opportunistic on M&A. And we've got a good pipeline that we're working through right now.

Speaker #1: Debt repayment. And then finally, as I mentioned earlier, leverage the current market environment to be opportunistic on M&A. And we've got a, a good pipeline, that, that we're working through right now.

Speaker #2: So there's some interesting opportunities that we're certainly considering. And our key theme really focus on profitability, on cash flow generation, and continue to work on leadership opportunities in the sector.

Speaker #1: So there's some interesting, opportunities that we're, we're certainly considering. And our, you know, our key theme really focus on, on profitability, on cash flow generation, and, and continue to, to work on leadership, opportunities in the sector.

Speaker #2: And obviously, business development and business growth and opportunistic M&A to summarize. So a lot of priorities. We're well positioned in the current environment. As James said, and I've said a couple of times, we've got strong operating performance, certainly in uncertain and unpredictable environments.

Speaker #1: and obviously, business development and business growth and opportunistic M&A to summarize. So, a lot of priorities. we're well positioned in the current environment. As James said, and I've said a couple times, we've got strong operating performance, certainly in uncertain and unpredictable environments.

Speaker #2: Seen a little bit more predictability this year. We've got solid cash flow generation. We've got very good new business development activity levels and pleased with horizon one, horizon two activities that are in the funnel right now.

Richard Kellam: As James said, and I've said a couple times, we've got strong operating performance, certainly in uncertain and unpredictable environments. Seeing a little bit more predictability this year. We've got solid cash flow generation. We've got very good new business development activity levels and pleased with Horizon One and Horizon Two activities that are in the funnel right now. We certainly have a solid track record of execution. We know how to integrate, restructure, manage overheads, and we do know how to manage revenue acceleration in positive environments, of course. We're certainly gonna be seeing that this year. M&A, we already talked about. We've got a very good and experienced leadership team. It's been around for a while. I'm five years as of a couple of days ago.

Speaker #1: Seen a little bit more predictability this year. we've got solid cash flow generation. We've got very good new business development activity levels and pleased with, horizon one, horizon two activities that are in the funnel right now.

Speaker #2: We certainly have a solid track record of execution. We know how to integrate restructure, manage overheads, and we do know how to manage revenue acceleration and positive environments, of course.

Speaker #1: We, we certainly have a, a solid track record of execution. we know how to integrate restructure, manage overheads, and we do know how to manage, revenue acceleration and positive environments, of course.

Speaker #2: And we're certainly going to be seeing that this year. M&A, we already talked about. We've got a very good and experienced leadership team that's been around for a while.

Speaker #1: and, and we're certainly gonna be seeing that this year. M&A, we already talked about. We've got a, a very good, and experienced leadership team.

Speaker #2: I'm five years as of a couple of days ago. So certainly experienced team around me as well with many more years. And we're well capitalized for any excess available capital.

Speaker #1: It's been, around for a while. I'm five years as of a couple of days ago. so, so certainly experienced team, around me as well, with many more years.

Speaker #2: With excess available capital rather. To pursue opportunities in the market. So that is where we're going in 2026. And the year '25 is behind us.

Richard Kellam: Certainly experienced team around me as well with many more years. We're well capitalized for any excess available capital, or with excess available capital rather, to pursue opportunities in the market. That's where we're going in 2026, and, you know, the year 2025 is behind us. We'll now turn it over to Q&A.

Speaker #1: And we're well capitalized for any, e-excess, available capital, with excess available capital rather. to pursue, opportunities in the market. So that is, that's where we're going in 2026.

Speaker #2: We'll now turn it over to Q&A. Thanks, Richard. We'll now take questions from the audience. If you have a question and are accessing the call through Teams, you can use the raise your hand feature and we will queue up questions.

Speaker #1: And, you know, the year '25 is behind us. We'll now turn it over to Q&A. Thanks, Richard. we'll now take questions from the audience.

Speaker #2: Alternatively, you can also use the chat feature and we'll respond to chat questions as well. We will unmute your mic when we queue you into the call.

James Lorimer: Thanks, Richard. We'll now take questions from the audience. If you have a question and are accessing the call through Teams, you can use the raise your hand feature, and we will queue up questions. Alternatively, you can also use the chat feature, and we'll respond to chat questions as well. We will unmute your mic when we queue you into the call. We have a first call from Noel Atkinson.

Speaker #1: If you have a question and are accessing the call through Teams, you can use the raise your hand feature, and we will, queue up questions.

Speaker #1: Alternatively, you can also use the chat feature, and we'll respond to chat questions as well. we will unmute your mic when we, queue you into the call.

Speaker #2: We have a first call from Noel Atkinson. Hello. Hi. It's, yeah, Noel Atkinson from Claris. Good morning, Richard and James. Thanks for taking our questions.

Speaker #1: we have, first call from, Noel Atkinson. Hello.

Speaker #2: That's a good overview. Just in terms of your 2026 outlook, that sounds a little more rosy than perhaps what you were talking about six months ago.

Speaker #2: Hi. It's, yeah, Noel Atkinson from Claris. good morning, Richard and James. thanks for taking our questions. it's a good overview. just in terms of your 2026 outlook, that sounds a little more rosy than perhaps what you were talking about six months ago.

Richard Kellam: Hello.

Noel Atkinson [Vice President and Research Analyst: Hi. It's Noel Atkinson from Clarus. Good morning, Richard and James. Thanks for taking our questions. That's a good overview. Just in terms of your 2026 outlook, that sounds a little more rosy than perhaps what you were talking about six months ago for 2025. You know, we're most of the way through Q1. How is sort of business activity or sentiment been so far Q1?

Noel Atkinson: Hi. It's Noel Atkinson from Clarus. Good morning, Richard and James. Thanks for taking our questions. That's a good overview. Just in terms of your 2026 outlook, that sounds a little more rosy than perhaps what you were talking about six months ago for 2025. You know, we're most of the way through Q1. How is sort of business activity or sentiment been so far Q1?

Speaker #2: For '25, we're most of the way through Q1. How is sort of business activity or sentiment been so far Q1? Yeah, we can't talk specifically to Q1, Noel, just because we're pretty well advanced there.

Speaker #2: For '25, you know, we're most of the way through Q1. How is sort of business activity or sentiment been so far Q1?

Speaker #2: But overall, we are seeing a little bit of a stabilization. We are still seeing some headwinds in the economy. But a lot of the kind of key macro things that Richard talked about, we're optimistic that as we kind of get through the year, we'll start to see a little bit of a bounce back.

Speaker #3: Yeah. We can't we can't talk specifically to Q1, Noel, just 'cause we're, you know, pretty, pretty well advanced there. But, overall, you know, we are seeing a little bit of a stabilization.

James Lorimer: Yeah, we can't talk specifically to Q1, Noel, just 'cause we're, you know, pretty well advanced there. Overall, you know, we are seeing a little bit of a stabilization. We are still, you know, seeing some headwinds in the economy. A lot of the kinda key macro things that Richard talked about, we're optimistic that as we kinda get through the year, we'll start to see a little bit of a bounce back. Canada Post, which Richard alluded to, their unions are voting over the next short little while. The kind of proposals have been presented to the union, so we're optimistic that that'll be supported.

Speaker #3: We are still, you know, seeing some headwinds in the economy. But a lot of the kind of key macro things that Richard talked about, we're optimistic that as we kind of get through the year, we'll start to see a little bit of a bounce back.

Speaker #2: Canada Post, which Richard alluded to, they're the unions are voting over the next short little while. So the kind of proposals have been sent out to the unions.

Speaker #3: Canada Post, which Richard alluded to, their, the unions are voting over the next, short little while. So, the kinda proposals have been sent out to the unions, so we're optimistic that that'll be, supported.

Speaker #2: So we're optimistic that that will be supported. And certainly, expect some kind of bounce back there. As well as in some other sectors that were a little bit quieter last year.

Speaker #3: And, you know, certainly expect some, some kind of bounce-back there, as well as in some other sectors that were a little bit quieter last year.

Speaker #2: We've also had some recent we've secured some recent RFP wins, Noel, that will come into our business later in the year. But we've been quite successful recently on securing some recent wins in the marketplace.

James Lorimer: You know, certainly expect some kind of bounce back there, as well as in some other sectors that were a little bit quieter last year.

Speaker #3: We've also had some recent we've secu-secured some recent, RFP wins. Noel, that, will come into our, business later in the year. but we've been quite successful recently on, on securing, some, some recent wins in the marketplace.

Richard Kellam: We've secured some recent RFP wins, Noel, that will come into our business later in the year. We've been quite successful recently on securing some recent wins in the marketplace.

Speaker #2: Okay. Great. Segue to my next question. So transcontinental in their most recent quarter, they were talking about price concessions that they've had to eat in their sort of remaining printed publishing business.

Speaker #2: Okay, great. Segue to my next question. So, Transcontinental, in their most recent quarter, they were talking about price concessions that they've had to eat in their sort of remaining print and publishing business.

Noel Atkinson [Vice President and Research Analyst: Okay. Great segue to my next question. TC Transcontinental in their most recent quarter, they were talking about price concessions that they've had to eat in their sort of remaining print and publishing business. Are you guys also having to compete more aggressively on price, or are you seeing existing clients being more price sensitive as we go into 2026?

Noel Atkinson: Okay. Great segue to my next question. TC Transcontinental in their most recent quarter, they were talking about price concessions that they've had to eat in their sort of remaining print and publishing business. Are you guys also having to compete more aggressively on price, or are you seeing existing clients being more price sensitive as we go into 2026?

Speaker #2: Are you guys also having to compete more aggressively on price, or are you seeing existing clients being more price sensitive as we go into '26?

Speaker #2: are you guys also having to compete more aggressively on price, or are you seeing existing clients being more price sensitive as we go into '26?

Speaker #2: There was definitely a lot of price sensitivity in the market even in 2025, Noel. And especially on the commercial print side, where there's capacity and capability in the marketplace.

Speaker #3: There, there was definitely a lot of price sensitivity in the market even in 2025, Noel. And, especially on the commercial print side where there's, you know, capacity and capability in the marketplace.

Speaker #2: So we had to compete more aggressively on commercial print. When I say commercial print, think of some of the low SKU long run business.

Richard Kellam: There was definitely a lot of price sensitivity in the market, even in 2025, Noel, and especially on the commercial print side where there's, you know, capacity and capability in the marketplace, so we had to compete more aggressively on commercial print. When I say commercial print, think of, you know, some of the low SKU long run business. But certainly, yeah, certainly there is some pressure on price, but more, you know, it's more acute, I'd say, on that commercial print area. Where we bring value, obviously, where there's digital solutions that manage workflow for a client or we're well embedded in tech-enabled solutions, that isn't under the same margin pressure, obviously.

Speaker #3: So we had to compete more aggressively on commercial print. When I say commercial print, think of, you know, some of the low SKU long run, business.

Speaker #2: But certainly, yeah, certainly there are some there are some there is some pressure on price, but more it's more acute, I'd say, on that commercial print area.

Speaker #3: but certainly, yeah, certainly there are some there, there are some there is some pressure on price, but more, you know, it's more acute, I'd say, on that commercial print area.

Speaker #2: Where we bring value obviously where there's digital solutions that manage workflow for a client or we're well embedded in tech-enabled solutions, that isn't under the same margin pressure, obviously.

Speaker #3: Where we bring value, obviously, is where there are digital solutions that manage workflow for a client, or where we're well embedded in tech-enabled solutions. That isn't under the same margin pressure, obviously.

Speaker #2: Okay. Great. And then one more quick one. Okay. So you mentioned AI, and you're using it for productivity internally, and that's great. We've seen media reports of sort of dislocations in search engine marketing and paid search and organic from having AI agents in which in the search engine results.

Speaker #2: Okay. great. then one more quick one. Just okay. So you, you mentioned AI, and you, you're using it for productivity internally, and that's great.

Noel Atkinson [Vice President and Research Analyst: Okay. Great. One more quick one. Okay, so you mentioned AI, and you're using it for productivity internally, and that's great. You know, we've seen media reports of sort of dislocations in search engine marketing and, like, paid search and organic from, you know, it having AI agents within the search engine results, such as Google Gemini. Are you seeing any clients that are kind of responding to this by moving more budget back into print or other solutions that you guys offer?

Noel Atkinson: Okay. Great. One more quick one. Okay, so you mentioned AI, and you're using it for productivity internally, and that's great. You know, we've seen media reports of sort of dislocations in search engine marketing and, like, paid search and organic from, you know, it having AI agents within the search engine results, such as Google Gemini. Are you seeing any clients that are kind of responding to this by moving more budget back into print or other solutions that you guys offer?

Speaker #2: You know, we've seen media reports of sort of dislocations in search engine marketing and, like, paid search and organic from, you know, it having AI agents in—which in the search engine results.

Speaker #2: Such as Google Gemini. So are you seeing any clients that are kind of responding to this by moving more budget back into print or other solutions that you guys offer?

Speaker #2: …such as Google Gemini. So, are you seeing any clients that are kind of responding to this by moving more budget back into print or other solutions that you guys offer?

Speaker #2: You want to talk to that, James? Yeah. Look, we're not seeing that yet. Certainly, on personalized I say personalized loyalty or personalized direct mail.

Speaker #3: You wanna talk to that, James? Any, any?

Speaker #4: Yeah. Look, we're not we're, we're not seeing that yet. certainly, y-you know, certainly on, on, on personalized let's say personalized, loyalty or personalized direct mail.

Richard Kellam: You wanna talk to that, James? I mean.

Richard Kellam: Yeah. Look, we're not seeing that yet. Certainly, you know, certainly on personalized, let's say personalized, loyalty or personalized direct mail. Certainly, you know, there was a move to digital during the postal strike, but we know that digital doesn't convert at the same level as physical. You know, physical is tough to ignore. You know, we're now seeing clients kinda move some of their budget back into the physical. That isn't necessarily related to AI. I think what you're referring to really is kind of on the search side, right? On the

Speaker #2: Certainly, there was a move to digital during the postal strike. But we know that digital doesn't convert at the same level as physical. Physical is tough to ignore.

Speaker #4: Certainly, you know, there was a move to digital during the postal strike. But we know that digital doesn't convert at the same level as physical.

Speaker #2: And we're now seeing clients kind of move some of their budget back into the physical. That isn't necessarily related to AI. So on the I think what you're referring to really is kind of on the search side, right?

Speaker #4: You know, physical's tough to ignore. And, you know, we're, we're now seeing clients kinda move some of their budget back into the physical. That isn't necessarily related to AI.

Speaker #4: so, on the on the on the I think what you're referring to really is kind of the on the on the search side, right?

Speaker #2: On the marketing automation side. Look, we've learned a lot about marketing automation and search automation. If you go to our website right now, datacm.com, you can see we have a whole new site we put to market.

Speaker #4: On the. marketing automation side, you know, look, we-we've learned a lot about marketing automation and search automation. If you go to our, our, our website right now, dot SCM dot com, you can see we have a whole new site we put to market.

Noel Atkinson [Vice President and Research Analyst: Yes. Yeah.

Noel Atkinson: Yes. Yeah.

Noel Atkinson [Vice President and Research Analyst: ... on marketing automation side. You know, look, we've learned a lot about marketing automation and search automation. If you go to our website right now, datacm.com, you can see we have a whole new site we put to market. That site was generated using AI. All the imagery is AI-generated imagery, and all the copy was developed using AI. We optimized that for search, Gemini search, for AI search, essentially. We're delivering a lot more natural leads as a result of the optimization we did on our site. You know, we've certainly learned a lot about, you know, how to optimize in AI. I know I'm...

Noel Atkinson: ... on marketing automation side. You know, look, we've learned a lot about marketing automation and search automation. If you go to our website right now, datacm.com, you can see we have a whole new site we put to market. That site was generated using AI. All the imagery is AI-generated imagery, and all the copy was developed using AI. We optimized that for search, Gemini search, for AI search, essentially. We're delivering a lot more natural leads as a result of the optimization we did on our site. You know, we've certainly learned a lot about, you know, how to optimize in AI. I know I'm...

Speaker #2: That site was generated using AI, all the imagery is AI-generated imagery, and all the copy was developed using AI. And we optimized that for search Gemini search, for AI search, essentially.

Speaker #4: That site was generated using AI. All the imagery is AI-generated imagery, and all the copy was developed using AI. And we optimized that for search, Gemini search, for AI search, essentially.

Speaker #2: So we've actually delivered we're delivering a lot more natural leads as a result of the optimization we did on our site. So we've certainly learned a lot about how to optimize an AI.

Speaker #4: So we've actually delivered, we're delivering a lot more natural leads as a result of, of the optimization we did on our site. So we've, you know, certainly learned a lot about, you know, how to how to optimize an AI.

Speaker #2: I know I'm not answering your question clearly because we're not experiencing what you're saying is if you're not getting noticed in search, you start redirecting some of your budget back into print.

Speaker #4: I know I'm you know, I'm not I'm not answering your question clearly 'cause we're not experiencing what you're saying is, you know, if you're not getting noticed in search, you start redirecting some of your, your, your, your budget back into print.

Speaker #2: Hard for us to account for that, Noel. That's fine. I just wanted to see if there's any other indications on that. Okay. That's it for me.

Richard Kellam: You know, I know I'm not answering your question clearly 'cause we're not experiencing what you're saying is, you know, if you're not getting noticed in search, you start redirecting some of your budget back into print. Hard for us to account for that, Noel.

Speaker #4: Hard for us to, to account for that, Noel.

Speaker #2: Thank you so much. Great. Thanks, Noel. We have a question from Daniel Rosenberg, please. Go ahead, Daniel. Hi. Good morning. Can you hear me all right?

Speaker #2: That's fine. Just I just wanted to see if there's any other indications on that. So okay. That's it for me. Thank you so much.

Noel Atkinson [Vice President and Research Analyst: No, that's fine. Just, I just wanted to see if there was any early indications on that.

Noel Atkinson: No, that's fine. Just, I just wanted to see if there was any early indications on that.

Noel Atkinson [Vice President and Research Analyst: Okay.

Noel Atkinson: Okay.

Noel Atkinson [Vice President and Research Analyst: That's it for me. Thank you so much. Great. Thanks, Noel. We have a question from, Daniel Rosenberg, please. Go ahead, Daniel.

Noel Atkinson: That's it for me. Thank you so much. Great. Thanks, Noel. We have a question from, Daniel Rosenberg, please. Go ahead, Daniel.

Speaker #3: Great, thanks, Noel. We have a question from Daniel Rosenberg, please. Go ahead, Daniel.

Speaker #2: Yeah. Yeah, Daniel. Okay. Great. Thanks for taking my questions. So the first one I was just curious around your various revenue lines. Kind of what do you view as the opportunities that around these lines from a growth perspective?

Speaker #5: Hi. Good morning. Can you hear me all right?

Speaker #3: Yeah.

Speaker #2: Yeah, Daniel.

Daniel Rosenberg: Hi. Good morning. Can you hear me all right?

Speaker #5: Okay. Great. thanks for taking my questions. so the first one I was just curious around your various revenue lines. Kind of what do you view as the, opportunities that, around these lines from a growth perspective?

James Lorimer: Yep.

Richard Kellam: Yeah, Dan.

Daniel Rosenberg: Okay, great. Thanks for taking my questions. So the first one, I was just curious around your various revenue lines. Kind of what do you view as the opportunity set around these lines from a growth perspective? Like, where are you allocating your resources from a segmented basis when you think about, you know, the potential returns you could garner for the overall business?

Speaker #2: Where are you allocating your resources from a segmented basis when you think about the potential returns you could garner for the overall business? Yeah.

Speaker #5: Like, where are you allocating your resources? from a segmented basis, when you think about, you know, the potential returns you could garner for the overall business?

Speaker #2: I guess if you look at our segments as we report them in our financial notes, Daniel, you'll see that the kind of declines we saw in overall in our business were kind of led by our product sales.

Speaker #3: Yeah. I guess if you look at our segments as we report them in our financial notes, Daniel, you know, you'll see that the, you know, kinda declines we saw overall in our business were kinda led by our product sales.

James Lorimer: Yeah. I guess if you look at our segments as we report them in our financial notes, Daniel, you know, you'll see that the you know kinda declines we saw in overall in our business were kinda led by our product sales. That's for the most part printed material. That's certainly a big area where we see opportunities to kinda stabilize and see some return to growth. You know, warehousing and freight were kind of directly kinda tied to lower volumes there, and some of the larger client declines that we saw last year are also clients that use freight and warehousing services. As we expect to see product sales improve, we should also see some declines there.

Speaker #2: So that's for the most part printed material. So that's certainly a big area where we see opportunities to kind of stabilize and see some return to growth.

Speaker #3: So that's, for the most part, you know, printed material. So that's certainly a big area where we see opportunities to kind of stabilize and see some return to growth.

Speaker #2: Warehousing and freight were kind of directly kind of tied to lower volumes there in some of the larger client declines that we saw last year.

Speaker #3: you know, warehousing and, and freight were kind of directly kinda tied to lower volumes there in some of the larger, client declines that we saw last year, are also clients that use freight and warehousing services.

Speaker #2: Are also clients that use freight and warehousing services. So as we expect to see product sales recline, improve, we should also see some declines there or sorry, as we see expect to see product sales improve we should also see a little bit of an uptick in warehousing and freight as well.

Speaker #3: So, as, we expect to see product sales recline, you know, i-in-improve, we, we should also see some declines there or, sorry, a-as we see expect to see product sales improve we should also see a little bit of an uptick in, in warehousing and freight as well.

Speaker #2: And there's a lot of kind of kitting and fulfillment type projects that are kind of using our warehousing space and we're fulfilling products on a regular basis to most of our large clients.

James Lorimer: Or sorry, expect to see product sales improve, we should also see a little bit of an uptick in warehousing and freight as well. There's a lot of kinda kitting and fulfillment type projects that are, you know, kind of using, you know, our warehousing space and we're fulfilling products on a regular basis to most of our large clients. You know, another area, technology hardware, that's an area that can be a little bit lumpy. We have some interesting projects that are in the pipeline right now, so not always easy to predict that because they can be kinda lumpy in terms of when programs run. We see opportunities there in kind of our tech hardware.

Speaker #3: And there's a lot of kinda kidding and fulfillment-type projects that are, you know, kind of using, you know, our warehousing space and, we're fulfilling products on a on a regular basis to, to ma most of our, our large clients.

Speaker #2: Another area technology hardware that's an area that can be a little bit lumpy. We have some interesting projects that are in the pipeline right now.

Speaker #3: you know, another area, technology hardware, that's an area that, that can be a little bit lumpy. We have some interesting projects that are in the pipeline right now.

Speaker #2: So not always easy to predict that because they can be kind of lumpy in terms of when programs run. But we see opportunities there in kind of our tech hardware traditional hardware has been printers, scanners, different applications used primarily in the healthcare sector and distribution centers.

Speaker #3: So, not always easy to predict that because they can be kind of lumpy in terms of when programs run. But we see opportunities there in kind of our tech hardware—traditional hardware has been, you know, printers, scanners, different applications used primarily in the healthcare sector and distribution centers.

James Lorimer: Traditional hardware has been, you know, printers, scanners, different applications used primarily in the healthcare sector and distribution centers for our clients. You know, we see that market as having good opportunity. The new market that we've kind of included and had some success in that rolls into tech hardware would also be digital screens. You know, we've got a couple interesting programs that we're working on in that area as well. I guess the other kind of big bucket, tech services. Richard talked about that earlier. That was up, I guess about 4% year-over-year, while, you know, the product sales were down, so nice to see some kinda continued strength in that sector. Does that help?

Speaker #2: For our clients. So we see that market as having good opportunity. The new market that we've kind of included and had some success in that rolls into tech hardware would also be digital screens.

Speaker #3: For, for our clients. So, you know, we, we, we see that market as having good opportunity. The new market that we've, kind of included in, in had some success in that rolls into tech hardware would also be digital screens.

Speaker #2: And we've got a couple of interesting programs that we're working on in that area as well. And then I guess the other kind of big bucket tech services Richard talked about that earlier that was up I guess about 4% year over year.

Speaker #3: And, and, you know, we, we, we've got a couple interesting programs that we're working on in that area as well. And then, I guess the other kinda big bucket, tech services, Richard talked about that earlier.

Speaker #2: While the product sales were down. So nice to see some kind of continued strength in that sector. Does that help? Yeah. That's great. Thanks for that color.

Speaker #3: That was up, I guess about 4% year over year.

Speaker #2: Mm-hmm.

Speaker #3: while, you know, the product sales were down. So nice to see some, some, some kinda continued, strength in that in that sector. Does that help?

Speaker #2: So I guess in that answer, I'm to understand I'm just looking at your inventory levels. They came down quite a bit when we think about kind of multi-year view.

Speaker #5: Yeah. That's great. Thanks for that color. so, I guess, in that answer, and to understand like, I'm just looking at your inventory levels. They came down, quite a bit when we think about kind of, multi-year view.

Daniel Rosenberg: Yeah. That's great. Thanks for that color. So I guess in that answer to understand. Like, I'm just looking at your inventory levels. They came down quite a bit when we think about kind of a multi-year view, but that's just tied to the macro product sales. Maybe could you talk through some of the working capital changes that may not repeat next year versus 2025?

Speaker #2: But that's just tied to the macro product sales and maybe could you talk through some of the working capital changes that may not repeat next year versus the '25?

Speaker #5: But that's just tied to the macro product sales and maybe could you talk through some of the working capital changes that may not repeat next year versus the '25?

Speaker #2: Yeah. Sure. We had a very strong focus on inventory management throughout the year. Certainly part of it declined was due to kind of lower sales.

Speaker #3: Yeah. Sure. Sure. We had a, a very strong focus on, on inventory management throughout the year. certainly part of it declined was due to kinda lower sales.

James Lorimer: Yeah, sure. We had a very strong focus on inventory management throughout the year. Certainly part of the decline was due to kinda lower sales.

Speaker #2: And but another part of it was due to kind of better management and procurement teams done a great job kind of in a couple of cases we've entered into some consignment type opportunity or consignment inventory relationships with some vendors.

Speaker #3: and, but, but another part of it was due to, to kinda better management and procurement teams done a great job kinda, you know, in a couple cases, we, we, we've entered into some consignment-type opportunity or consignment inventory relationships with, with some vendors.

Richard Kellam: Another part of it was due to kind of better management and our procurement team's done a great job kind of, you know, in a couple of cases we've entered into some consignment type opportunity or consignment inventory relationships with some vendors, where we just have faster, better access to inventory kind of on hand, and it's not on our books. We've also done a you know pretty focused effort across all our plants in reducing inventory that's held there. You know, we'll probably see some continued, you know, tweaks to inventory over this year. Definitely some kind of intentional improvements there, not just the unintentional through the lower sales.

Speaker #2: Where we just have faster, better access to inventory kind of on hand and it's not on our books. We've also done a pretty focused effort across all our plants in reducing inventory that's held there.

Speaker #3: where, we just have faster better access to inventory kind of on-hand, and it's not on our, on our books. we've also done a, you know, pretty focused effort across all our plants in reducing, inventory that, that, that's held there.

Speaker #2: So we'll probably see some continued tweaks to inventory over this year. But definitely some kind of intentional improvements there. Not just the unintentional through the lower sales.

Speaker #3: So, you know, we'll probably see some continued, you know, tweaks to inventory over this year. But definitely some kind of intentional improvements there, not just the unintentional through the, through the lower—

Speaker #2: Okay. So then looking forward a consequence of some of these moves you've made historically is improving cash generation profile. So maybe Richard, could you speak to kind of what excites you about when you think about the coming 12 months having that added capital and where you could put it to use?

Speaker #5: Okay. So then, you know, looking forward, a consequence of some of these moves you've made historically is the improving cash generation profile. so, you know, maybe Richard, could you speak to kinda what excites you about, when you think about the coming 12 months having that added capital and, and where you could put it to use?

Daniel Rosenberg: Okay. You know, looking forward, a consequence of some of these moves you've made historically is improving cash generation profile. You know, maybe Richard, could you speak to kind of what excites you about, when you think about the coming 12 months having that added capital and where you could put it to use?

Speaker #2: Yeah. I mentioned M&A. There's some interesting opportunities in the marketplace that we're looking at or considering in the in-store marketing space and in the labeling space and packaging space as well.

Speaker #3: Yeah. You know, I mentioned M&A. There are some interesting opportunities in the marketplace that we're looking at or considering in the in-store marketing space, and in the labeling space and packaging space as well, which all kind of play to our strengths.

Richard Kellam: Yeah. You know, I mentioned M&A. There's some interesting opportunities in the marketplace that we're looking at or considering in the in-store marketing space, in the labeling space, and packaging space as well, which all kind of play to our strengths. So that's where, you know, capital could go to good use. Obviously, we wanna prove to the market, to ourselves that we can return this business organically to growth, but at the same time, obviously consider some strategic M&A opportunities to continue to accelerate our position in the marketplace.

Speaker #2: Which all kind of play to our strengths so that's where capital could go to good use. Obviously, we want to prove to the market, to ourselves, that we can return this business organically to growth but at the same time obviously consider some strategic M&A opportunities to continue to accelerate our position in the marketplace.

Speaker #3: so that's where, you know, capital could go to good use. Obviously, we wanna prove to the market, to ourselves, that, we can return this, this business organically to growth, but at the same time, obviously consider some some strategic M&A opportunities to, to continue to, to accelerate our position in the marketplace.

Speaker #2: Okay. Great. Thanks for taking my questions. I'll pass the line. All right. Thank you. Thanks, Daniel. We have a call from Chris Thompson. Can you let him in, please?

Speaker #5: Okay, great. Thanks for taking my questions. I'll pass the line.

Speaker #3: All right. Thank you.

Daniel Rosenberg: Okay, great. Thanks for taking my questions. I'll pass the line.

Speaker #2: Thanks, Daniel.

Speaker #3: we have a call from, Chris, Thompson. Can you let him in, please?

Richard Kellam: All right. Thank you.

Speaker #2: Hi, Chris. I think you should be good now. Chris, do you want to try? There we go. Can you hear me now? Yeah. Good morning, Chris.

James Lorimer: Thanks, Daniel. We have a call from Chris Thompson. Can you let him in, please? Hi, Chris. You should be good now. Chris, you wanna try it?

Speaker #2: Hi, Chris. I think you should be good now.

Speaker #3: Chris, you wanna try? There we go.

Speaker #2: Oh, great. Thanks. I just wanted to most of my questions have been answered. Sorry, it's Chris Thompson from E-Research. Thanks. For taking my question.

Speaker #2: The micro can you hear me now? Good morning, Chris.

Speaker #3: Yeah, oh, great. Thanks. I just wanted to—most of my questions have been answered. Sorry. It's Chris Thompson from E-Research. Thanks for taking my question.

Chris Thompson: Just down.

James Lorimer: There we go.

Chris Thompson: Can you hear me now?

James Lorimer: Yeah. Good morning, Chris.

Speaker #2: Just wanted to talk a little bit about your margin compression in relation to the content your new AI platform to see how we should expect that sort of margin it's come down a bit and how it will react to your new software which should be a higher margin business.

Chris Thompson: Oh, great. Thanks. I just wanted to, most of my questions have been answered. Sorry, it's Chris Thompson from eResearch. Thanks, for taking my question. Just wanted to talk a little bit about your margin compression, in relation to contentcloud.ai to see how, you know, we should expect that sort of margin, to come down a bit, and how it will react to your new software, which should be a higher margin business.

Speaker #3: Just wanted to talk a little bit about your margin compression in relation to the content, your new AI platform, to see how, you know, we should expect that sort of margin.

Speaker #3: it's come down a bit. and how it will react to your new software, which should be a higher margin business.

Speaker #2: Yeah. So the margin the gross margin compression that we experienced in 2025 was directly related to that revenue headwind. So as we see that revenue headwind turn into a tailwind, we see revenue come back into growth.

Speaker #2: Yeah. So the margin, the gross margin compression that we experienced in, 2025 was directly related to that revenue headwind. So as we see that revenue headwind turn into a tailwind, we see revenue come back into growth.

Richard Kellam: Yeah. The margin, the gross margin compression that we experienced in 2025 was directly related to that revenue headwind. As we see that revenue headwind turn into a tailwind, we see revenue come back into growth, we'll see that margin naturally increase. We've also done a very good job from a procurement perspective to look at and discover lower cost raw materials globally. Tariffs kind of push us into that opportunity. We'll see that. Those raw materials flow into our business as well. You know, depending on the vertical or the product type, you know, raw materials can be anywhere from 20% to 80% of cost of goods, obviously. You know, improving and securing better and cheaper raw materials obviously have a direct impact. Then you're absolutely right.

Speaker #2: We'll see that margin naturally increase. We've also done a very good job from a procurement perspective to look at and discover lower-cost raw materials globally.

Speaker #2: We'll see that margin naturally, naturally increase. We've also done a very good job from a procurement perspective to look at, and, and discover, lower cost raw materials globally.

Speaker #2: Tariffs kind of push us into that opportunity. So we'll see that. So those raw materials flow into our business as well. Depending on the vertical or the product type, raw materials can be anywhere from 20% to 80% of cost of goods, obviously.

Speaker #2: Tariffs kinda push us into that opportunity. So we'll see that. So those raw materials flow into our business as well. you know, depending on the vertical or the product type, you know, raw materials can be anywhere from 20% to 80% of cost of goods, obviously.

Speaker #2: So improving and securing better and cheaper raw materials. Obviously, have a direct impact. And then you're absolutely right. As we continue to expand our mix on digital, digital is a higher much higher margin business than conventional print.

Speaker #2: So, you know, improving and, and, and, securing better and cheaper raw materials, obviously, have a direct impact. And then you're absolutely right. You know, as we continue to expand our mix on digital, digital is a higher much higher margin, business than conventional print.

Richard Kellam: You know, as we continue to expand our mix on digital is a higher, much higher margin business than conventional print, as well as, you know, when I say digital, pure play digital, so some of our SaaS solutions, as well as when we enable print workflow with technology, that print workflow is a higher margin business because it's supported with technology. That's absolutely our strategy, tech-enabled solutions and, you know, pure play kind of SaaS solutions for clients as well, as well as, you know, driving that core margin with better raw material purchasing, operational efficiencies, and we've got, you know, kind of clear pricing methodology in the marketplace as well.

Speaker #2: As well as when I say digital, pure-play digital. So if some of our SaaS solutions as well as when we enable print workflow with technology, that print workflow is a higher margin business because it's supported with technology.

Speaker #2: as well as what, you know, when I say digital, pure play digital. So some of our SaaS solutions, as well as when we enable print workflow with technology, that print workflow is a higher margin business because it's supported with technology.

Speaker #2: So that's our absolutely our strategy tech-enabled solutions and pure-play kind of SaaS solutions for clients as well. As well as driving that core margin with better raw material purchasing, operational efficiencies, and we've got kind of clear pricing methodology in the marketplace as well.

Speaker #2: So that's our absolutely our strategy, tech-enabled solutions, and, and, you know, p-pure play kinda SaaS solutions for clients as well. as well as, you know, driving that core margin, with, with, you know, better raw material purchasing, operational efficiencies, and we've got, you know, kinda clear pricing methodology in the marketplace as well.

Speaker #2: Okay. Thanks. That's great. Yeah. The rest of my questions were answered. So thanks. Okay. Great. Great. Thanks, Chris. We have a question in the chat here from Sahil Jain.

Speaker #3: Okay. Thanks. That's great. Yeah. The rest of my questions were answered. So thanks. I'll.

Speaker #2: Okay. Great. Great.

Chris Thompson: Okay, that's great. Yeah, the rest of my questions were answered. Thanks.

Speaker #3: Thanks, Chris.

Speaker #2: With the recent financial performance, is management considering any additional shareholder returns such as a potential special dividend? Yeah. Sure. So Sahil, at the present time, no.

Speaker #2: We have a, question in the chat here from, Sahil Jain. with the recent financial performance, is management considering any additional shareholder returns such as a potential special dividend?

Richard Kellam: Okay. Right.

James Lorimer: Thanks, Chris. We have a question in the chat here from Sahil Jain. With the recent financial performance, is management considering any additional shareholder returns such as a potential special dividend?

Speaker #2: The board is always kind of open and assessing opportunities. But our kind of current dividend policy is you saw the 2.5 cent per share dividend that we declared last night.

Speaker #2: Yeah. Sure. so Sahil, at the present time, no. you know, the board is always kind of open and, and assessing, opportunities. but our, you know, kinda current dividend policy is, you saw the, two and a half cent per share, dividend that we declared, last night.

Richard Kellam: Yeah, sure. Sahil, at the present time, no. You know, the board is always kind of open and assessing opportunities. Our, you know, kind of current dividend policy is, you saw the CAD 0.025 per share dividend that we declared last night. The plan would be to continue that on. Certainly as we get through this year and next year, our board will consider different capital alternatives. Certainly in the mix there is also M&A as possible opportunities for capital deployment.

Speaker #2: And the plan would be to continue that on. And certainly, as our as we get through this year and next year, our board will consider different capital alternatives.

Speaker #2: And the plan would be to continue that on. And, certainly, as our, you know, as we, you know, get through this year and next year, our board will consider different capital alternatives.

Speaker #2: And certainly, in the mix, there is also M&A as possible opportunities for capital deployment. I believe that's one second. Yep. The end of any questions.

Speaker #2: And, certainly, in, in, in the mix, there is also M&A as, as possible opportunities for capital deployment. I believe that's, just a second. Yep.

Speaker #2: So thanks, everyone, for dialing in today and joining our call. And for your continued interest in DCM, Richard and I are certainly available after the call for any follow-up questions that you might have.

Speaker #2: The end of any, questions. So, thanks, everyone, for, dialing in today and joining our call. And for your continued interest in, DCM, Richard and I are certainly available after the call for any follow-up questions that you might have.

James Lorimer: I believe that's one second. Yep. The end of any questions. Thanks everyone for dialing in today and joining our call, and for your continued interest in DCM. Richard and I are certainly available after the call for any follow-up questions that you might have. That concludes our call this morning, and I hope everyone enjoys the rest of your day. You may now disconnect your lines. Thank you.

Speaker #2: that concludes our call this morning. And I hope everyone enjoys the rest of your day. You may now disconnect your lines.

Q4 2025 Data Communications Management Corp Earnings Call

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