Data Communications Management Corp.

Good day and thank you for standing by. Welcome to the Data Communications Earnings Call for Q1 2021 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised, today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to James Lorimer. Please go ahead.

Thank you, Tabitha, and good morning, everyone, and thank you for joining us today for our first quarter of 2021 conference call. Speaking on the call this morning will be Richard Kellum, President and CEO, and myself, James Lorimer, CFO. The prepared remarks on today's call will be followed by a question and answer period. We'd also like to remind everyone that Richard and I can be available after the call for any follow-up questions that you might have. Before we begin, I'll remind everyone that we will refer 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. We will be adding a brief video from Richard along with a summary of our results and key initiatives for 2021 onto our website following the call. Our detailed information will be published on our website and on CDAR. You can also follow us on LinkedIn to review some of our business insights on relevant market trends and customer case studies. With that, I'd like to introduce Richard Kellam, President and CEO, and turn the call over to him.

Thank you, James, and good morning, everyone. We're generally pleased with our performance in the first quarter of 2021, which was a tough comparative to last year. COVID-19 had little impact to the market and our business until late March 2020. The first quarter of 2021, of course, was a very different environment compared to last year with extended lockdowns and stay-at-home orders in effect. Despite the headwinds that lockdowns created in revenue flows, we continued to deliver improved mix and operational excellence, positively impacting our gross margin overall financial performance. Given our continued strength and partnerships with enterprise clients, we are well-positioned for revenue recovery as vaccinations roll out and consumer movements return to some level of normalcy. Despite revenue declines compared a year ago in what we call the non-COVID quarter, first quarter 2021 revenues of $62.4 million were slightly ahead, about 3% ahead of the average last three in-COVID quarters. Gross margin dollars of $18.8 million were the strongest since the second quarter of 2020, as was gross margin percentage at 30.1% up from 28% a year ago. SG&A expenses of $15.5 million were down 10% from $17.2 million in the first quarter of 2020. With these improvements in mix, gross margin, and SG&A, we delivered adjusted EBITDA of $9.4 million, or 14.9% of revenue, up from 13.5% in quarter one 2020. Today marks exactly 65 days into my new role with DCM, and I'd like to provide some further thoughts on our team, our position in the market, where we've been, and where we're going. I have five key themes I'd like to touch on today. First, exceptional talent. On our last earnings call, I talked about the exceptional talent within DCM. We have a great mix of high performers, high professionals, and high potentials. I recently formed a senior leadership team comprised of 12 highly engaged and experienced individuals. If you'd like to meet the team virtually, please visit our website under the About Us Leadership tab. I made some significant changes two days after joining the company on leadership transitions. I'm happy to report that this new leadership team has been entirely built from within, with no external hires having to be recruited. The team is also characterized by its diversity, client focus, and experience in delivering operational excellence to our clients, and reflective of my belief in having an organization with wide spans of control and fewer management layers. Diversity in many forms is represented on this leadership team, including diversity of gender and culture plus internal and external experience. This breadth of diversity will be important to help us think outside the box as we plan for the future. So far, I've been quite impressed with the passion and collaborative approach of the team and the team is taking, identifying and tackling a number of important projects we've been working on to further shape and focus the direction of our business in the future. Also, over the last 65 days, I've had the opportunity to connect and work with many of the 1,100 associates at DCM across all functions and business units. I continue to be very impressed with the talented teams and the individuals that I've had the pleasure of working with. The results in the past year bear witness to what the DCM team has been able to accomplish. We will continue to improve decision-making and workflow for reducing layers and increasing spans of control. The second area I want to touch on is our strong client engagement. Importantly, there is strong commercial representation on the leadership team with at least five team members focused full-time on leading our client strategy and development efforts. We've had some good success in the first quarter securing new business and renewals. Recent wins in the financial services lottery, cannabis, and retail sector speak to the value we bring to our clients. We track our success in new business wins, and it's very impressive. Last year, we won more than 80% of RFPs we submitted. We renewed almost 95% of our existing business. And we're also chipping away at new business opportunities. These stats really speak to the trust our clients have in DCM and the value and solutions we bring to our businesses. A big part of why we're winning business is because of our digital technology that streamlines client workflows. We recently rebranded our technology platform to DCM Flex and have added some important client-facing functionality over the past year. More than 30% of our revenue is currently tech-enabled, with DCM Flex at the heart of that. We are focused on significantly driving technology penetration with our enterprise clients moving forward. The third is operational excellence. The team has proven adapt at driving operational efficiencies, rightsizing operations, and managing costs through a difficult period, as you've seen over the past year in our financial results. Expect this to be a continued focus going forward, and we are setting ambitious goals for continued gross margin improvements. One of the projects I've referred to earlier is focused on how we can grow gross margins to 35% to 40% over the next three to five years. In the near term, we are consolidating our footprint. We previously announced the plan integration of our Mississauga facility into our Brampton plant. That's a major move and is progressing on plan to be completed by the end of the year. Brampton is already our largest and one of the more profitable production sites. We're also announcing today that we will be closing our Edmonton facility and consolidating its print on demand and warehouse into our Calgary plant. This will be completed by the end of June and we will start realizing the benefits from this closure in the second half of the year. We're also looking to rationalize some of our smaller offices given what we've learned through remote working over this past year. The fourth area I want to touch upon is business intelligence. We have a small but agile multidisciplinary team that is focused on enhancing our data aggregation and business intelligence capabilities with the objective to pull together insights out of our new ERP system. The focus here is on leveraging the investment we made in consolidating all of our legacy systems by analyzing and segmenting clients and products, drive revenue and margin improvements, and ultimately improve profitability. This project will accelerate through the second half of the year, and we expect to report back on some quick wins. A number of the key leadership projects we're working on will benefit from the work this group is doing. And finally, digital proficiency. The DCM team has strong experience delivering innovative solutions to our clients. I mentioned DCM Flex earlier. While its roots are in managing the complexities of digital asset management and print from our first clients almost 40 years ago, we've consistently invested in its development, adding unique and expanded capabilities for digital asset management, direct-to-press production, logistics management, marketing workflow, and other enterprise capabilities. Flex today is deeply embedded in over 100 of our clients' workflows and business processes. The capabilities of this platform and our tech-enabled service model is why we're winning and retaining businesses. Expect to hear more about this as we accelerate our commercial strategies around this key platform and DCM digital capabilities. I will now turn the call back over to James, who will take you through more financial details on the quarter. James?