Q1 2026 Data Communications Management Corp Earnings Call

May 12, 2026

James Lorimer: 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 our forward-looking information disclosure in our recent press release, and more fully within our public disclosure filings on SEDAR+. This presentation will be added to our website for your reference, along with the post-view recording and transcript. Our detailed information is also available on our website and SEDAR+. Please follow us on LinkedIn and keep up to date with other business developments. I'll now turn the call over to Richard.

Speaker #1: 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 our forward-looking information disclosure in our recent press release, and more fully within our public disclosure filings on CDAR Plus.

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

James Lorimer: This presentation will be added to our website for your reference, along with the post-view recording and transcript. Our detailed information is also available on our website and SEDAR+. Please follow us on LinkedIn and keep up to date with other business developments. I'll now turn the call over to Richard.

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

Speaker #2: Thank you, James, and good morning. and, I know we have a couple of shareholders joining us from other time zones, so good afternoon, good evening.

Richard Kellam: Thank you, James, good morning. I know we have a couple of shareholders joining us from other time zones, good afternoon, good evening. I want to take you through kind of 10 points in the quarter. Overall, we delivered results that are pretty much in line with what we had forecasted and what our expectations for the quarter were. Point number 1 on revenue, we had some revenue headwinds declined at -5%, although we planned for them because we had a higher comp year ago. We planned for -3%, -4%, pretty much in line with what we planned. As the quarter progressed, we saw the quarter, you know, a slower start and an increase towards the end of the quarter as well.

Speaker #2: okay, I wanna take you through kind of 10 points in the quarter. overall, we delivered, results that are pretty much in line with what we had forecasted and what our expect-expectations for the quarter were.

Speaker #2: point number one on revenue, we had, some revenue headwinds declined at minus 5%, although we planned for them 'cause we had a, a higher comp year ago.

Richard Kellam: Point number one on revenue, we had some revenue headwinds declined at -5%, although we planned for them because we had a higher comp year ago. We planned for -3%, -4% so pretty much in line with what we planned. As the quarter progressed, we saw the quarter, you know, a slower start and an increase towards the end of the quarter as well.

Speaker #2: We planned for minus 3, minus 4, so pretty much in line with what we planned. and as the quarter progressed, we saw the, the quarter, you know, a slower start and a, a-and an increase towards the end of the quarter as well.

Speaker #2: And certainly, the declines have decelerated versus a year ago. So overall, positive in what we planned. On new business development, we had, really a record quarter in terms of bringing in new logos, over 40 new logos on the quarter.

Richard Kellam: Certainly, the declines have decelerated versus a year ago. Overall, positive in what we planned. On new business development, we had really a record quarter in terms of bringing in new logos. Over 40 new logos on the quarter, equivalent to CAD 4 million in annualized revenue. I'll take you through a few details on that in a minute. Our technology services continue to shine, up 7.4%, and technology hardware up 64%. Again, a little bit more detail as we unpack the deck here. Adjusted EBITDA, very, very strong at CAD 19.1 million. If we went back a number of years, and that is a record EBITDA quarter for us. 16.3% of revenues versus 18.6% a year ago.

Speaker #2: equivalent to, 4 million in annualized revenue. And I'll take you through a few details on that in a minute. Our technology services continue to shine, up 7.4%, and technology hardware up 64%.

Richard Kellam: Our technology services continue to shine, up 7.4%, and technology hardware up 64%. Again, a little bit more detail as we unpack the deck here. Adjusted EBITDA, very, very strong at CAD 19.1 million. If we went back a number of years, and that is a record EBITDA quarter for us. 16.3% of revenues versus 18.6% a year ago.

Speaker #2: Again, a little bit more detail as we unpack the deck here. Adjusted EBITDA, very, very strong at 19.1 million. And we went back a number of years, and that is a record EBITDA quarter for us.

Speaker #2: 16.3% of revenues versus 18.6 a year ago. net debt, down down 27% over a year over a year ago, and down 14% versus year-end, so good positive progress there.

Richard Kellam: Net debt down to CAD 66 million, down 27% over year, over a year ago and down 14% versus year-end. Good positive progress there. Again, we'll take you through a little bit more detail. Our adjusted net income up 11% to CAD 5.8 million versus a year ago. Very, very strong free cash flow. You can see in this chart that we were CAD +10.7 million versus CAD -7.4 million a year ago. An just over an CAD 18 million swing on a free cash flow. Very solid momentum there. We continue to drive hard on productivity improvements. You can see that our SG&A was down CAD 3.7 million on the quarter. We're below 17%, you know, at least 1 point below what we forecasted.

Speaker #2: Again, we'll take you through a little bit more detail. Our adjusted net income, up 11% to 5.8 million versus a year ago. flow. You can see in this chart that we were, positive 10.7 million versus negative 7.4 million a year ago, so an 18 just over an 18 million dollar swing on free cash flow, so very solid, solid momentum there.

Richard Kellam: An just over an CAD 18 million swing on a free cash flow. Very solid momentum there. We continue to drive hard on productivity improvements. You can see that our SG&A was down CAD 3.7 million on the quarter. We're below 17%, you know, at least 1 point below what we forecasted.

Speaker #2: We continue to drive hard on productivity improvements. You can see that our SG&A was down 3.7 million. On the quarter, we're below 17%, so, you know, at least, at least a point below what we forecasted.

Speaker #2: 16.9% of revenues versus 19% a year ago. Adjusted earnings per share, basic, at 22%. And diluted—I’ll take you through a little bit more detail on this when we get to slide 9.

Richard Kellam: 16.9% of revenues versus 19% year ago. Adjusted earning for share basic at 22% and diluted. I'll take you through a little more detail on this when we get to slide 9. Up 11%. Return of capital, CAD 1.7 million to shareholders. Again, a little bit more detail. Overall, a very good quarter financially and pretty much what we forecasted from a revenue standpoint with a slower start as planned and a good momentum as we exited the quarter. Okay? Now a little bit more detail as we progress. Total revenues in line, as I said, trending positively as the quarter progressed. We're expecting to see that continue.

Speaker #2: up, 11%. return of capital, 1.7 million shareholders. Again, a little bit more detail. So overall, a very good quarter. Financially, and pretty much what we forecasted from a revenue standpoint with, a slower start as planned and, and a good, a good momentum as we exited the quarter.

Richard Kellam: Overall, a very good quarter financially and pretty much what we forecasted from a revenue standpoint with a slower start as planned and a good momentum as we exited the quarter. Okay? Now a little bit more detail as we progress. Total revenues in line, as I said, trending positively as the quarter progressed. We're expecting to see that continue.

Speaker #2: Okay? So now a little bit more detail as we progress. Total revenues in line, as I said, trending positively as the quarter progressed. And, we're expecting to see that see that continue.

Speaker #2: Point number two, as I mentioned, our team is all in on new business development and what we call horizon one, so in-year new business development.

Richard Kellam: Point number two, as I mentioned, our team is all in on new business development and what we call Horizon One, so in-year new business development. Not that we're not focused on Horizon Two and Horizon Three, so, you know, the next 2, 3 years as well, but lots of focus on in-year. Picked up over 40 new logos all in the quarter. All these landed in the quarter. About CAD 4 million of expected annualized revenue. If we look at our pipeline and our forecast and our run rate, combined with the run rate we had in Q1, we're forecasting somewhere between 3.5% to 5% of revenue, of annual revenue coming from new business in-year. Very positive momentum and a great start.

Speaker #2: Not that we're not focused on horizon two and horizon three, so if, you know, the next two to three years as well, but lots of focus on in-year picked up over 40 new logos.

Speaker #2: All in the quarter, so all, all these landed in the quarter. But 4 million of expected annualized revenue and if we look at our, our pipeline and, and, and our forecast and our run rate, combined with the run rate we had in quarter one, we're forecasting somewhere between 3.5 to 5% of revenue, of annual revenue, coming from new business in-year.

Richard Kellam: All these landed in the quarter. About CAD 4 million of expected annualized revenue. If we look at our pipeline and our forecast and our run rate, combined with the run rate we had in Q1, we're forecasting somewhere between 3.5% to 5% of revenue, of annual revenue coming from new business in-year. Very positive momentum and a great start.

Speaker #2: So very positive momentum and a great start. The team, our commercial team, is doing a fantastic job at, at delivering new business in the marketplace.

Richard Kellam: The team, our commercial team is doing a fantastic job at delivering new business in the marketplace. Point number three, I talked about our tech-enabled services and hardware. If we combine those two business units, we are up 20% in aggregate to CAD 10 million, and this now represents 8.5% of our total revenues. The highest representation of total revenues that we've ever delivered. We split that apart into technology and subscription services. That grew by 7.4%, those consist of things like our DCM Flex platform, our Content Cloud digital asset management solution, our Xavi social media analytics and social media management platform, and our customer communications management platform 360, CCM360. Good momentum on the technology subscription services. On our technology hardware solutions, we're up 64%.

Speaker #2: Point number three, I talked about our tech-enabled services and hardware. If we combine those two business units, we are up 20% in aggregate to $10 million, and this now represents 8.5% of our total revenues.

Speaker #2: So the highest, representation of total revenues that we've ever delivered. And we split that apart into technology, and subscription services, that grew by 7.4%.

Richard Kellam: We split that apart into technology and subscription services. That grew by 7.4%, those consist of things like our DCM Flex platform, our Content Cloud digital asset management solution, our Xavi social media analytics and social media management platform, and our customer communications management platform 360, CCM360. Good momentum on the technology subscription services. On our technology hardware solutions, we're up 64%.

Speaker #2: So those consist of things like our DCM Flex platform, our content cloud digital asset management solution, our Zavi social media analytics and social media management platform, and our customer consumer management platform, 360, CCM 360.

Speaker #2: So good momentum on that technology subscription services. And then on our technology hardware solutions, we are up 64%. a couple of highlights there. We had, some really good momentum, with a couple of regional healthcare providers in the PPI space and the P positive patient ID space.

Richard Kellam: A couple of highlights there. We had some really good momentum with a couple of regional healthcare providers in the PPI space, in the positive patient ID space, as well as a couple of retailers in mobile devices. Some very good momentum there, and we're gonna see that continue as well. Lots of very interesting and solid technology-enabled hardware solutions opportunities in our pipeline right now. Over to James to talk about EBITDA.

Speaker #2: As well as a couple of retailers in mobile devices. So some very good momentum there, and we're gonna see that continue as well. Lots of very, interesting and, and solid, technology-enabled hardware solutions, opportunities in our pipeline right now.

Speaker #2: Over to James to talk about EBITDA.

Speaker #1: Thanks, Richard. in the quarter, we reported 19.1 million dollars of adjusted EBITDA. that was up about half a million dollars compared to what we did last year at this time.

James Lorimer: Thanks, Richard. In the quarter, we reported CAD 19.1 million of adjusted EBITDA. That was up about half a million dollars compared to what we did last year at this time. We went back a number of years and, not only is this kind of the strongest EBITDA quarter we've reported, we don't have to go back too far before the MCC acquisition when we were lucky to do CAD 19 million in a full year. Pleased with that result. Kind of a combination of, you know, managing our overheads and, you know, good kind of management.

Speaker #1: we went back a number of years and, not only was this kind of the strongest, EBITDA quarter we've reported, we don't have to go back too far, before the MCC acquisition when we were lucky to do 19 million dollars in a in a full year.

Speaker #1: So pleased with that, result, kind of a combination of, you know, managing our overheads and, you know, good, good kind of management. We, also want to point out just, I think everyone that follows the company knows, but the first quarter is typically kind of a seasonally stronger, quarter for us is evidenced by this, quarterly chart going back the last couple of years.

James Lorimer: We also want to point out just I think everyone that follows the company knows, the Q1 is typically kind of a seasonally stronger quarter for us, as evidenced by this quarterly chart going back the last couple of years. We also reported 16.3% EBITDA margin, which is also a record high for us. Very pleased with that result. Further, net debt came in at about CAD 66.4 million. Pleased with that. That's down significantly, of course, since the acquisition of Moore Canada, about 3 years ago. Also importantly, our net debt to adjusted EBITDA came down. The actual number's about 1.65x that you'll see in our detailed tables. I've rounded to 1.7x here.

Speaker #1: But we also reported 16.3% EBITDA margin, which is also a record high for us, so very pleased with that result. Further, net debt came in at about $66.4 million.

Speaker #1: pleased with that, that's down significantly, of course, since the acquisition of more Canada, about three years ago. also importantly, our net debt to adjusted EBITDA came down, the actual numbers about 1.65 that you'll see in our detailed tables rounded to 1.7 here.

James Lorimer: Pleased with that. That's down significantly, of course, since the acquisition of Moore Canada, about 3 years ago. Also importantly, our net debt to adjusted EBITDA came down. The actual number's about 1.65x that you'll see in our detailed tables. I've rounded to 1.7x here.

Speaker #1: But that's a full, kind of multiple turn down from the pro forma leverage we had in the business at the time of the Moore acquisition.

James Lorimer: That's a full, kind of multiple turn down from the pro forma, leverage we had in the business at the time of the Moore acquisition. Definitely, you know, positively, positive contributions from free cash flow generation here. Adjusted net income also came in at a recent record high, CAD 5.8 million. That's up about 11% versus a year ago. Our adjusted net margin came in at 4.9%, which is also a recent record high for us as well, so pleased with that. Free cash flow. Last year our cash from operations after changes in working capital was -CAD 4.2 million. We saw a big swing there.

Speaker #1: So, definitely, you know, positively, incli or positive contributions from, free cash flow generation here. adjusted net income, also came in at a recent record high, 5.8 million dollars.

Speaker #1: that's up about 11% versus a year ago. and our adjusted net margin came in at 4.9%, which is also a recent record high for us as well.

James Lorimer: That's up about 11% versus a year ago. Our adjusted net margin came in at 4.9%, which is also a recent record high for us as well, so pleased with that. Free cash flow. Last year our cash from operations after changes in working capital was -CAD 4.2 million. We saw a big swing there.

Speaker #1: So pleased with that. free cash flow, last year, our cash from operations, after changes in working capital was negative 4.2 million dollars. We saw a big swing there, a big contribution was certainly from working capital.

James Lorimer: A big contribution was certainly from working capital, and based on timing of payments and receivables, et cetera, contributed to a strong operating free cash flow in the Q1 of this year compared to last year. As a result, our free cash flow generated in the quarter, which we define as cash from operations after changes in working capital, less capital expenditures and less lease principal payments, came in at CAD 10.7 million. As Richard mentioned, that's over a CAD 18 million swing from last year.

Speaker #1: and based on timing of payments and receivables, etc., contributed to a strong, operating free cash flow in the, first quarter of this year compared to last year.

Speaker #1: And as a result, our free cash flow generated in the quarter, which we define as cash from operations, after changing changes in working capital, less, capital expenditures, and less leased principal payments, came in at 10.7 million dollars.

Speaker #1: And as Richard mentioned, that's over an 18 million dollar swing from, last year.

Speaker #2: Thank you, James. If we look at this chart, we talk about SG&A, our SG&A, is down, 3.7 million versus a year ago. I'm really actually proud of the team.

Richard Kellam: Thank you, James. If you look at this chart, talk about SG&A. Our SG&A is down CAD 3.7 million versus a year ago. I'm really actually proud of the team on how the team continues to drive productivity. You know, do more with less is our strategy. The team's doing a fantastic job. You can see that we're at 16.9% of revenues, matching recent lows. We've had 3 quarters now where we're kind of below that 17 mark, if you look back over the last, you know, 5 or 6 quarters. Great job there.

Speaker #2: On how the team continues to drive productivity, you know, do more with less, which is our strategy and the team's doing a fantastic job.

Speaker #2: You can see that we're at 16.9% of revenues, matching recent lows. So we're, we've had, three quarters now where we're kind of below that 17 mark.

Richard Kellam: The team's doing a fantastic job. You can see that we're at 16.9% of revenues, matching recent lows. We've had 3 quarters now where we're kind of below that 17 mark, if you look back over the last, you know, 5 or 6 quarters. Great job there.

Speaker #2: If you look back, over the last, you know, five or six quarters. so great, great job there. if you look at a chart on the left, our, SG&A expenses were 19.8 million, so down 15.4% versus a year ago.

Richard Kellam: If you look at the chart on the left, our SG&A expenses were CAD 19.8 million, so down 15.4% versus a year ago. That's just, as I said, a result of the team doing more with less, driving productivity, managing headcount effectively, so great job there. If you look at our active employee count, it continues to decrease. We're down to 1,448, and our revenue per head is around CAD 307,000 to CAD 308,000 per head. Good progress. We're down 22.6% in headcount versus the MCC acquisition. Adjusted earnings per share, you know, coming back to my summary slide, up 22%. If we look at basic, so non-diluted, that's 55 million shares in our share count.

Speaker #2: And that's just, as I said, a result of the team, doing more with less, driving productivity, managing headcount effectively. So great job there. And if you look at our active employee count, continues to decrease.

Speaker #2: We're down to 1448. And our revenue per head is around 307, 308 thousand, dollars per head. So good, good progress. We're down 22.6% in headcount versus the MCC acquisition.

Richard Kellam: We're down to 1,448, and our revenue per head is around CAD 307,000 to CAD 308,000 per head. Good progress. We're down 22.6% in headcount versus the MCC acquisition. Adjusted earnings per share, you know, coming back to my summary slide, up 22%. If we look at basic, so non-diluted, that's 55 million shares in our share count.

Speaker #2: Adjusted, earnings per share, you know, coming back to my summary slide, up 22%. If we look at, basic, so non-diluted, that's 55 million shares in our in our share count.

Speaker #2: And if we take any options that are in the money, it's about 56.4 million shares. We're up 11% on EPS, on the fully diluted basis.

Richard Kellam: If we take any options that are in the money, it's about 56.4 million shares. We're up 11% on EPS on a fully diluted basis. Some good progress there given the high earnings that we delivered on the quarter. Looking at return to shareholders, return of capital, we returned CAD 1.7 million. A quarterly dividend of CAD 0.025. That's a 6.2% yield, so a solid yield. We repurchased 157,500 shares in the quarter as well, and we will continue to do that as we progress through the year. Good return for shareholders on the quarter.

Speaker #2: So, some good progress there given the high earnings that we delivered on the quarter. And then, looking at return to shareholders, return of capital, we returned $1.7 million.

Speaker #2: According to dividend of, of, two and a half cents, that's a 6.2% yield. So a solid yield. And we repurchased 157,500 shares in the quarter as well.

Richard Kellam: A quarterly dividend of CAD 0.025. That's a 6.2% yield, so a solid yield. We repurchased 157,500 shares in the quarter as well, and we will continue to do that as we progress through the year. Good return for shareholders on the quarter.

Speaker #2: And we continue to, we will continue to do that as we progress through the year. So good, good return for shareholders on the quarter.

Speaker #2: Okay. So having a look at some priorities and a little bit of an outlook for the rest of 220, 2026. priorities, we are going to continue to maintain high revenue retention rate, which we have, had no material losses in clients.

Richard Kellam: Okay, having a look at some priorities and a little bit of an outlook for the rest of 2026. Priorities, we are going to continue to maintain high revenue retention rate, which we have had no material losses in clients. We've got a great start to the year. We're gonna continue to execute on this new business development initiative, especially focusing on Horizon One or in-year revenue opportunities. Continue to improve gross margin through our business mix. You know, I often say to the team, Business is very simple. Find out where you make the most money and sell more of it. We're, we're certainly focused on that. We're gonna continue to drive operational efficiencies. You saw that in the SG&A, but that's right across our entire operational organization.

Speaker #2: We've had a great start to the year, and we're going to continue to execute on this new business development initiative, especially focusing on Horizon One, or in-year revenue opportunities.

Speaker #2: Going to continue to improve gross margin through our business mix. You know, I often say to the team, business is very simple. Find out where you make the most money and sell more of it.

Richard Kellam: Continue to improve gross margin through our business mix. You know, I often say to the team, Business is very simple. Find out where you make the most money and sell more of it. We're, we're certainly focused on that. We're gonna continue to drive operational efficiencies. You saw that in the SG&A, but that's right across our entire operational organization.

Speaker #2: So we're, we're certainly focused on that. we're going to continue to drive operational efficiencies. You saw that in the SG&A, but that's right across our entire operational, organization.

Speaker #2: And of course, drive, digital acceleration where we have, naturally, a higher margin. So that helps, helps the mix significantly. We're going to continue to focus on strong, cash flow and continue capital returns and, continue to drive that debt repayment as well.

Richard Kellam: Of course, drive digital acceleration where we have naturally a higher margin, so that helps the mix significantly. We're gonna continue to focus on strong cash flow and continued capital returns and continue to drive that debt repayment as well. Finally, we're gonna leverage opportunities in the market for any opportunistic M&A. It's a interesting market right now, so there's certainly things we're looking at, but they've got to be right, and they've got to fit to what our priorities are. Some good opportunities that we're considering. Okay, a little bit of an outlook for 2026. Early signs of market stabilization. We're seeing demand trends that are beginning to stabilize. We certainly saw that as we progressed through the quarter and as we exited last year as well.

Speaker #2: And finally, we're going to leverage opportunities in the market for any opportunistic M&A. It's an interesting market right now, so certainly things we're looking at, but they've got to be right, and they've got to fit with what our priorities are.

Richard Kellam: It's a interesting market right now, so there's certainly things we're looking at, but they've got to be right, and they've got to fit to what our priorities are. Some good opportunities that we're considering. Okay, a little bit of an outlook for 2026. Early signs of market stabilization. We're seeing demand trends that are beginning to stabilize. We certainly saw that as we progressed through the quarter and as we exited last year as well.

Speaker #2: So some good opportunities that we're considering. Okay. A little bit of an outlook for 2026. early signs of market stabilization. We're seeing demand trends that are beginning to stabilize.

Speaker #2: We certainly saw that as we progressed through the quarter. And as we exited last year as well, most of our business units are, in, positive growth.

Richard Kellam: Most of our business units are in positive growth, so are returning to growth. We cut our business by vertical, we cut it by customer, we cut it by operations or factory, and we cut it by leaders. We're seeing majority of those now returning to growth. As I said earlier, our new business activity is outstanding and certainly a solid pipeline. Second outlook, obviously we remain very focused on execution. The macro environment certainly is somewhat uncertain, shall we say. There's a Canada Post vote that is happening now. It was kicked off on 20 April, has to conclude by 30 May. So that is that's still questionable, although we're expecting that will that vote will be favorable, but we don't know.

Speaker #2: So, our returning to growth. We cut our business by vertical, we cut up by customer, we cut up by operations or factory, and we cut up by leaders. We're seeing the majority of those now returning to growth.

Speaker #2: And as I said earlier, our new business activity is outstanding. And, certainly a solid, solid pipeline. second outlook, obviously, we remain very focused on execution.

Speaker #2: The macro environment, certainly is, is somewhat uncertain, shall we say. there's a Canada Post vote that is happening now. It was kicked off on April 20th.

Richard Kellam: Second outlook, obviously we remain very focused on execution. The macro environment certainly is somewhat uncertain, shall we say. There's a Canada Post vote that is happening now. It was kicked off on 20 April, has to conclude by 30 May. So that is that's still questionable, although we're expecting that will that vote will be favorable, but we don't know.

Speaker #2: It has to conclude by May 30th. And, so that is, that's still questionable, although we're, we're expecting that we'll, that vote will be favorable.

Speaker #2: But we don't know. We've obviously got the Kuzma trade negotiations that are—that will be happening this summer. We've got elevated fuel costs. That's certainly affecting freight.

Richard Kellam: We've obviously got the CUSMA trade negotiations that will be happening this summer. We've got elevated fuel costs. That's certainly affecting freight and some key clients, especially in airlines. We've got raw material pricing and supply chain impacts, which are obviously causing raw material increases, price increases that we're having to pass through. We're prepared to respond. We've got a good solid plan. I think we've proven that over the last couple of years. We know how to respond to any headwinds. We do have a good plan. The team's organized for success if we get any of these headwinds.

Speaker #2: And, some key, clients, especially in airlines. we've got raw material pricing and supply chain impacts, which are, obviously causing, raw material increases, price increases that we're having to pass through.

Speaker #2: but we're prepared to respond. We've got a, a good solid plan. I think we've proven that over the last couple of years. We know how to respond to any headwinds.

Richard Kellam: We're prepared to respond. We've got a good solid plan. I think we've proven that over the last couple of years. We know how to respond to any headwinds. We do have a good plan. The team's organized for success if we get any of these headwinds.

Speaker #2: we do have a good plan. The team's, s, the team's, organized for success if we get any of these headwinds. And of course, we've got a strong balance sheet, and we've got some very good cost discipline, to provide any resilience or flexibility if we do get those headwinds or, or any extreme headwinds, at least.

Richard Kellam: Of course, we've got a strong balance sheet, and we've got some very good cost discipline to provide any resilience or flexibility if we do get those headwinds or any extreme headwinds at least. That is our quarter. As I said, you know, a good solid quarter. We're expecting to deliver good momentum as we progress through the year. Now I'll turn it over to any questions.

Speaker #2: Okay. So that, that is our quarter. As I said, you know, a good, a good solid quarter. we're expecting to deliver, good momentum as we progress through the year.

Speaker #2: And now I'll turn it over to any questions.

Speaker #1: All right. Thanks, Richard. we'd now like to take questions from the audience. if you have a question and are accessing the call directly through Teams, you can either use the raise your hand feature in Teams, and we'll queue up questions.

James Lorimer: All right. Thanks, Richard. We'd now like to take questions from the audience. If you have a question and are accessing the call directly through Teams, you can either use the Raise Your Hand feature in Teams, we'll queue up questions, or alternatively, you can also use the chat feature, we will respond to chat questions as well. Please unmute your mic when we let you into the call, or we can help you with that as well if you have troubles with that. Please introduce yourself once you've joined the session, we'll now take some calls. Looks like I have a question from George.

Speaker #1: Or alternatively, you can also use the chat feature, and we will respond to chat questions as well. please, unmute your mic when we let you into the call.

James Lorimer: Please unmute your mic when we let you into the call, or we can help you with that as well if you have troubles with that. Please introduce yourself once you've joined the session, we'll now take some calls. Looks like I have a question from George.

Speaker #1: or we can help you with that as well if, if you have troubles with that. so please introduce yourself once you have joined the session.

Speaker #1: And, we'll now take some calls. it looks like I have a question from, George.

Speaker #2: Yeah. Good morning, guys. This is, George from Claris Securities dialing in on behalf of Noel. just a quick question here. can you, you guys have touched on this, but can you give us some color on which customer verticals have the strongest momentum exiting Q1?

[Analyst] (Clarus Securities): Yeah. Good morning, guys. This is George from Clarus Securities, dialing in on behalf of Noel.

[Analyst] (Clarus Securities): Yeah. Good morning, guys. This is George from Clarus Securities, dialing in on behalf of Noel. Just a quick question here. Can you guys have touched on this, but can you give us some color on which customer verticals have the strongest momentum exiting Q1, and which product or service categories are showing the most strength as you guys move into Q2?

Richard Kellam: George

[Analyst] (Clarus Securities): Just a quick question here. Can you guys have touched on this, but can you give us some color on which customer verticals have the strongest momentum exiting Q1, and which product or service categories are showing the most strength as you guys move into Q2?

Speaker #2: And, which product or service categories are showing the most strength as you guys move into the second quarter?

Speaker #3: Yeah, I can, I can take the first bit of that. Sure. Take up a second. from a vertical standpoint, we're seeing very strong momentum in retail, in transportation, in manufacturing.

Richard Kellam: Yeah, I can take the first bit of that.

James Lorimer: Sure.

Richard Kellam: You pick up the second. From a vertical standpoint, we're seeing very strong momentum in retail, in transportation, in manufacturing, in QSR, and in lottery. We're still seeing a bit of a softer start in FI, and a softer start in Q1 in healthcare, but we're seeing a return, a very positive return in healthcare in Q2. We're certainly working hard to, you know, to turn that, to turn the FI in Q2 and Q3 as well. Majority of our verticals, positive growth. Of course, we've got a couple of big ones. One big one in particular, FI, that had some headwinds in Q1. But we put some new leadership in place, and we're expecting to see that turn. That answers that question.

Speaker #3: in QSR, and in lottery. And we're still seeing a bit of a softer start in FI, and a softer start in Q1 in healthcare.

Speaker #3: But we're seeing a return a very positive return in healthcare in Q2. And we're certainly working hard just to, you know, to, to, to turn the, to turn the, the, the FI in quarter two and quarter three as well.

Speaker #3: So majority of our verticals, positive growth. Of course, we've got a bit, a coup, a couple of big ones. One big one in particular, FI, that had, some headwinds in quarter one.

Richard Kellam: Majority of our verticals, positive growth. Of course, we've got a couple of big ones. One big one in particular, FI, that had some headwinds in Q1. But we put some new leadership in place, and we're expecting to see that turn. That answers that question. Second part of the question, where are we seeing from a product type? James, you can pick up on this if you like.

Speaker #3: but we're, we're, we've, we've put some new leadership in place, and we're expecting to see that turn. So that answers that question. your second part of the question, where are we seeing from a product type?

Richard Kellam: Second part of the question, where are we seeing from a product type? James, you can pick up on this if you like.

Speaker #3: James, you can pick up on this if you like. I mean, solid growth on labels, solid growth on, on, our large format. So think of in-store, in-store media, in-store execution.

Richard Kellam: Solid growth on labels, solid growth on our large format. Think of in-store, in-store media, in-store execution. We showed you the growth on technology. We have pretty steady, kind of flat on what we call our BCS business, so that transactional mail. We still have a few headwinds on personalized direct communication. That's probably due to clients waiting to understand what's going on with the postal strike. Some of the conventional FI forms that we do, we're certainly seeing a little softness there.

Speaker #3: you know, we showed you the growth on technology. we have pretty steady, kind of flat on what we call our BCS business. So that transactional mail, we still have a few headwinds on, personalized direct communication.

Speaker #3: That's probably due to, clients waiting to understand, what's going on with the postal strike. and then, you know, some of the conventional FI, you know, forms that we do, we're certainly seeing, you know, a little softness there.

Richard Kellam: We still have a few headwinds on personalized direct communication. That's probably due to clients waiting to understand what's going on with the postal strike. Some of the conventional FI forms that we do, we're certainly seeing a little softness there.

Speaker #3: Anything I'm missing?

Speaker #1: Yeah. I, I, I think, you, you did mention the lottery vertical is strong in solid. So lottery, so thermal rolls that we produce for the lottery, industry, we're seeing some, positive momentum there as well.

James Lorimer: I think I'm missing. Yeah, I think you did mention the lottery vertical is strong.

Richard Kellam: Lottery, yeah

James Lorimer: Lottery, so thermal rolls that we produce for the lottery industry, we're seeing some positive momentum there as well.

Speaker #1: Got it. Got it. Well, thank you, guys. That, that's helpful. That's it for me.

Richard Kellam: Yep.

Speaker #3: All right. Thanks, George. we have a message, caller, Thomas.

[Analyst] (Clarus Securities): Got it. Got it. Well, thank you, guys. That's helpful. That's it for me.

James Lorimer: Right. Thanks, George. We have a caller, Thomas.

Speaker #4: Hey, good morning, James and Richard. Thomas here calling from Paradigm Capital. my question's just on the cash flow. It's nice to see it, pick up considerably this quarter.

Thomas: Hey, good morning, James and Richard. Thomas here calling from Paradigm Capital. My question is just on the cash flow. It's nice to see it pick up considerably this quarter. We do typically think of, like, Q1 as a working capital outflow quarter. Maybe if you can walk through, you know, how we should think about that as we go forwards. Maybe, is it more of like a permanent efficiency gain there?

[Analyst] (Paradigm Capital): Hey, good morning, James and Richard. Thomas here calling from Paradigm Capital. My question is just on the cash flow. It's nice to see it pick up considerably this quarter. We do typically think of, like, Q1 as a working capital outflow quarter. Maybe if you can walk through, you know, how we should think about that as we go forwards. Maybe, is it more of like a permanent efficiency gain there?

Speaker #4: but we do typically think of, like, Q1 as a working capital outflow quarter. So, maybe if you can think, if you can walk through, you know, how we should think about that, as we, go forwards, maybe, is it more of, like, a permanent efficiency gain there?

Speaker #2: Yeah. Good. good question, Thomas. you know, w-we did benefit in the first quarter, I think, a little bit. Richard talked a little bit about the slope of our revenue through the quarter, and it was, you know, a little weaker in the early month than kind of accelerated through the balance.

James Lorimer: Yeah, good question, Thomas. You know, we did benefit in Q1. I think a little bit Richard talked a little bit about the slope of our revenue through the quarter, and it was, you know, a little weaker in the early month and kind of accelerated through the balance. We actually had some pretty strong collections in the kinda latter part of the quarter, which helped in terms of our ability to pay down our line. You know, we will probably give a little bit of that back in Q2. Other big initiatives that we have are related to inventory reduction. I think you'll see that our inventory levels came down a little bit in the quarter. You know, we're continuing to focus on that.

Speaker #2: We actually had some pretty strong, collections, in the kind of latter part of the quarter. which helped in terms of, our ability to pay down, pay down our, our line.

Speaker #2: You know, we will probably give a little bit of that back in the, in the second quarter, but, other big initiatives that we have, our related to inventory reduction, I think you'll see that our inventory levels came down a little bit, in the quarter.

James Lorimer: You know, we will probably give a little bit of that back in Q2. Other big initiatives that we have are related to inventory reduction. I think you'll see that our inventory levels came down a little bit in the quarter. You know, we're continuing to focus on that.

Speaker #2: you know, we're continuing to focus on that. And, and then, we had a little bit of some, some kind of fluctuations in our, in our payables as well.

James Lorimer: Then, we had a little bit of some kind of fluctuations in our payables as well. We're certainly looking to try and extend some of our terms just to, you know, continue to kinda manage our strong working capital. Overall kind of pleased with the number. You know, our revolving line of credit certainly benefited from the cash inflow, so you'll see that down in the quarter. We will probably see a little bit of increase in that in the Q2. On balance, I think for the year, you know, we're kinda comfortable with, you know, continuing to drive pretty cash flow through the balance of the year.

Speaker #2: we're certainly looking to try and extend some of our terms just to, you know, continue to kind of manage our, our, our, our strong working capital.

Speaker #2: But, overall, kind of pleased with the number. You know, w our, our, our revolving line of credit certainly benefited from the, from the cash inflow, and so you'll see that down.

Speaker #2: in the quarter, we will probably see a little bit of increase in that, and we, in the second quarter. But on, on balance, I think for the year, you know, we're kind of comfortable with, you know, continuing to drive, free cash flow, through the balance of the year.

James Lorimer: We will probably see a little bit of increase in that in the Q2. On balance, I think for the year, you know, we're kinda comfortable with, you know, continuing to drive pretty cash flow through the balance of the year.

Speaker #3: Okay, great. That's very helpful. And then next, just on the M&A front, I'm just curious what you guys are seeing out there. Like, are valuations becoming a little bit more favorable? And just in general, with the integrations complete, how are you thinking about capital allocation priorities?

Thomas: Okay, great. That's very helpful. Next, just on the M&A front, I'm just curious what you guys are seeing out there. Like, are evaluations becoming a little bit more favorable? Just in general, with the integrations complete, how are you thinking about capital allocation priorities?

[Analyst] (Paradigm Capital): Okay, great. That's very helpful. Next, just on the M&A front, I'm just curious what you guys are seeing out there. Like, are evaluations becoming a little bit more favorable? Just in general, with the integrations complete, how are you thinking about capital allocation priorities?

Speaker #2: Sure. yeah. I, I guess two questions. Maybe let me start with the, the environment there. we're seeing a, a number of opportunities, both in kind of our core, print areas.

James Lorimer: Sure. Yeah, I guess 2 questions. Maybe let me start with the environment there. We're seeing a number of opportunities, both in kind of our core print areas. You know, I'd say areas that we're, you know, particularly interested or looking at are 2 of the sectors actually that Richard mentioned, like large format and labels, where, you know, we see good growth profiles in the industry. We're seeing some kind of more opportunistic company opportunities in, you know, commercial print and direct mail, for example. We're also seeing some. I'd say multiples in those areas have I don't know that they've really come down, but there's just a lot of opportunities. We're trying to be very selective in terms of what we focus on.

Speaker #2: So, you know, I'd say areas that were, you know, particularly interested or looking at are, a couple of the sectors actually that Richard mentioned, like, large format and labels, where, you know, we see good growth profiles in the industry.

Speaker #2: we're seeing some kind of more opportunistic, company, opportunities in, in, you know, commercial print and, direct mail, for example. we're also seeing some, and, and, and I'd say multiples in those areas have, I don't know that they've really come down, but there's just a lot of opportunities.

James Lorimer: We're seeing some kind of more opportunistic company opportunities in, you know, commercial print and direct mail, for example. We're also seeing some. I'd say multiples in those areas have I don't know that they've really come down, but there's just a lot of opportunities. We're trying to be very selective in terms of what we focus on.

Speaker #2: So we're trying to be very selective in terms of what we, what we focus on. the, you know, the better companies tend to have a higher multiple, and, in some areas where there might be something that's w you know, particularly strategically might stretch a little bit on the multiple, but, otherwise, we're being pretty, pretty practical in terms of kind of the multiples that we're, that we're looking at.

James Lorimer: The, you know, the better companies tend to have a higher multiple. In some areas where there might be something that's, you know, particularly strategic, we might stretch a little bit on the multiple. Otherwise, we're being pretty practical in terms of kind of the multiples that we're, that we're looking at. Second part of the question. Well, second part is, you know, are we ready for M&A? I think the question is, yes, all of our integration work posts a pretty heavy lift acquiring MCC and integrating Moore Canada Corp. We now are fully integrated. As our shareholders know, we've consolidated our footprint, closed four factories. We now have one integrated ERP and MRP system across our entire network, which was a heavy lift. That's all behind us now.

Speaker #2: Second part of the question, well, second part is, is, you know, are we ready for M&A? And I think the question is yes. All of our integration work post a pretty heavy lift acquiring MCC and integrating more Canada Corp, but we now are fully integrated, as our shareholders know.

James Lorimer: Well, second part is, you know, are we ready for M&A? I think the question is, yes, all of our integration work posts a pretty heavy lift acquiring MCC and integrating Moore Canada Corp. We now are fully integrated. As our shareholders know, we've consolidated our footprint, closed four factories. We now have one integrated ERP and MRP system across our entire network, which was a heavy lift. That's all behind us now.

Speaker #2: We've consolidated our footprint, close four factories, we now have one integrated ERP, and MRP, system, across our entire network, which is a heavy lift.

Speaker #2: That's all behind us now. So we're, in a, in a, in a very good position to, to look for opportunities in the market for, for some acquired growth.

James Lorimer: We're in a very good position to look for opportunities in the market for some acquired growth. At the same time, we work hard to drive that organic growth.

Speaker #2: At the same time, we work hard to drive that organic growth.

Speaker #1: Great. That sounds good. Thank you. and, like, just my last question, on the macro picture. I know everybody's a little bit confused right now.

Thomas: Great. It sounds good. Thank you. Just my last question, on the macro picture. I know everybody's a little bit confused right now, lots of volatility. Just curious what you guys are seeing from customers, and their spending decisions. Is it having an impact at all, especially regarding rising fuel costs? That's it.

[Analyst] (Paradigm Capital): Great. It sounds good. Thank you. Just my last question, on the macro picture. I know everybody's a little bit confused right now, lots of volatility. Just curious what you guys are seeing from customers, and their spending decisions. Is it having an impact at all, especially regarding rising fuel costs? That's it.

Speaker #1: Lots of volatility. just curious what you guys are seeing from customers, and their spending decisions. I-is it having an impact at all, especially regarding rising fuel costs?

Speaker #1: that's it.

Speaker #3: Yeah, it's a good—it's a great question. We're actually not seeing any significant pullback in budgets at this point, other than, you know, as I mentioned, a little bit of waiting to see what's happening with Canada Post.

Richard Kellam: Yeah, it's a great question. We're actually not seeing any significant pullback in budgets at this point. Other than, you know, as I mentioned, a little bit of waiting to see what's happening with Canada Post. Clients not producing mail that may be timestamped rather that they can't mail. Other than that, we're not seeing any pullback. We're seeing pretty positive sentiment in the market, you know, at retail, at QSR, at manufacturing. Transportation, of course, you know, we're getting some fuel surcharges that we're successfully passing through to clients. Yeah, no real uncertainty.

Speaker #3: So, you know, clients not producing mail that may be time spent timestamped, rather, that they can't mail. Other than that, we're not seeing any, any, any pullback.

Speaker #3: we're seeing pretty positive sentiment in the, in, in, in the market. You know, at retail, at QSR, at manufacturing, transportation, of course, you know, we're, we're getting, some fuel surcharges that were, successfully passing through to clients.

Richard Kellam: Other than that, we're not seeing any pullback. We're seeing pretty positive sentiment in the market, you know, at retail, at QSR, at manufacturing. Transportation, of course, you know, we're getting some fuel surcharges that we're successfully passing through to clients. Yeah, no real uncertainty.

Speaker #3: But, yeah, no, no real, uncertainty. And, you know, back to a point I made earlier, lots of opportunities for new business development in the marketplace now that we can focus on that, given our, our, all of our integration.

Richard Kellam: You know, back to a point I made earlier, lots of opportunities for new business development in the marketplace now that we can focus on that given our all of our integration and heavy, you know, kind of work is behind us, and we're delivering good results there. Even if there are some minor, you know, economic impacts, we, you know, we feel we've got a good new business pipeline now. Major, of course. You know, anything catastrophic, if, you know, CUSMA is not settled, if the Canada Post strike actually happens, you know, those are sizable impacts to a business like ours that does a lot of mailing and, you know, moves a lot of packages and labels through a Canada Post network, as an example.

Speaker #3: And, and heavy, you know, kind of work is behind us, and we're delivering good results there. So even if there are some minor, you know, economic impacts, we, we, we, you know, we feel we've got a good new business pipeline now.

Richard Kellam: Even if there are some minor, you know, economic impacts, we, you know, we feel we've got a good new business pipeline now. Major, of course. You know, anything catastrophic, if, you know, CUSMA is not settled, if the Canada Post strike actually happens, you know, those are sizable impacts to a business like ours that does a lot of mailing and, you know, moves a lot of packages and labels through a Canada Post network, as an example.

Speaker #3: Major, of course, you know, anything catastrophic, if, you know, Kuzma is not, you know, settled, if the Canada Post strike actually happens, you know, that's, those are, those are you know, sizable impacts to a business like ours that does a lot of mailing and, you know, moves a lot of packages and labels through, a Canada Post network, as an example.

Speaker #1: And, and, and, and I might add, you know, Richard alluded earlier in his kind of closing remarks, in the presentation that we are seeing, price increases, pretty much right across the supply chain.

James Lorimer: I might add, you know, Richard alluded earlier in his kind of closing remarks, in the presentation that we are seeing, price increases, pretty much right across the supply chain, both in paper, inks, and consumables, and largely that's related to, you know, oil price, et cetera, as and kind of byproducts that end up in some of the material that we use. We haven't seen at this point any supply disruptions or challenges. You know, we're certainly monitoring the situation very closely, but we're also preparing our clients for price increases across kind of the product spectrum that we have. To Richard's point earlier, you know, despite that, we haven't really seen any significant pullback in orders or planning from our clients.

Speaker #1: both in paper, inks, and consumables. And largely, that's related to, you know, oil price and, etc., as, and kind of byproducts that end up in, in some of the material that we use.

Speaker #1: we haven't seen at this point any supply disruptions or, or challenges. we'll, we're certainly monitoring the situation very closely, but, we're also preparing our, our clients for, for price increases across kind of the, the product spectrum that we have.

James Lorimer: We haven't seen at this point any supply disruptions or challenges. You know, we're certainly monitoring the situation very closely, but we're also preparing our clients for price increases across kind of the product spectrum that we have. To Richard's point earlier, you know, despite that, we haven't really seen any significant pullback in orders or planning from our clients.

Speaker #1: but to Richard's point earlier, you know, despite that, we haven't really seen any significant pullback in, in orders or, planning from a, from our clients.

Speaker #3: Sounds good. congrats on the quarter and, I'll pass the line.

Speaker #1: Thank you.

Thomas: Sounds good. Congrats on the quarter and I'll pass along.

[Analyst] (Paradigm Capital): Sounds good. Congrats on the quarter and I'll pass along.

James Lorimer: Thank you. Okay, thanks. It appears we don't have any further questions. Thank you everyone for joining our call and your interest in DCM. As a reminder, Richard and I can be available after the call if you have any follow-up questions. That concludes our call this morning. Hope everyone enjoys the rest of your day. You may now disconnect your line. I just want to say one thing before we close the call. I just want to thank all of our associates at DCM for an outstanding job, great, incredible engagement, and appreciate the efforts that everybody puts into to delivering this success. Thank you, thanks to the support of our shareholders, ongoing support as well. Thank you.

Richard Kellam: Thank you.

Speaker #2: Okay. Thanks. It, appears we don't have any further questions. So thank you, everyone, for joining our call and your interest in DCM. As a reminder, Richard and I can be available after the call if you have any follow-up questions.

James Lorimer: Okay, thanks. It appears we don't have any further questions. Thank you everyone for joining our call and your interest in DCM. As a reminder, Richard and I can be available after the call if you have any follow-up questions. That concludes our call this morning. Hope everyone enjoys the rest of your day. You may now disconnect your line.

Speaker #2: that concludes our call this morning. Hope everyone enjoys the rest of your day, and you may now disconnect your lines.

Speaker #3: I just want to say one thing before we close the call. I just want to thank all of our associates at DCM for an outstanding job—great, incredible engagement.

Richard Kellam: I just want to say one thing before we close the call. I just want to thank all of our associates at DCM for an outstanding job, great, incredible engagement, and appreciate the efforts that everybody puts into to delivering this success. Thank you, thanks to the support of our shareholders, ongoing support as well. Thank you.

Speaker #3: And, appreciate the, the efforts that everybody put, everybody puts into. to, delivering this success. So thank you, and thanks, to the support of our shareholders, ongoing support as well.