Data Communications Management Corp.

Good morning, ladies and gentlemen. Thank you for standing by and welcome to the Data Communications Management Corp First Quarter 2023 Financial Results Conference Call. My name is James Lorimer, CFO of DCM, and I'm pleased to be hosting today's call. Joining me on the call today is Richard Kellam, our CEO and President. Following our prepared remarks, we will be moderating a question and answer session. As a reminder, this conference call is being recorded live and broadcast live. We'd also like to remind everyone that Richard and I can be available for calls afterwards if anyone has any follow-up questions. I'd like to 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 CDAR. have posted a brief video message from richard along with a summary of our results and key initiatives for the quarter on our website in the form of an infographic our presentation today will also 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 please follow us on linkedin to keep up to date with other business developments and i'll now turn the call over to richard

Thank you, James, and good morning and good afternoon, good evening. I see there's some international investors on the call today or shareholders. So good afternoon, good evening to you and good morning to everyone. Here's what we want to accomplish on the call today. I want to take you through an update on our quarter, obviously, then talk a little bit about how we are becoming bigger and better together with the recent close of our transaction acquiring our donnelly canada or more canada corp and then we'll turn it over to any uh questions that uh that attendees will have for today okay so uh first off uh looking at our 2023 results i'm going to break this into uh our theme of of bigger and better business and I'll start off with the bigger side. Happy to report that we had a very, very positive quarter in terms of growth. Growth just under 10% at 9.8% versus a year ago. And to remind shareholders that was off of an 11.1% growth on the quarter last year. So good positive momentum at the start of the year. Great revenue quarter at 76.1 million up from 69.3 million a year ago. That growth of $6.8 million came from a combination of what we call expansion revenues, so growing revenue with existing clients, as well as new business development. We brought in several new logos and lots of new logos that we have the opportunity to land and expand, as we call. So lots of good kind of positive opportunities moving forward to expand that revenue. So really good, solid growth in the quarter. really pleased with the success that our commercial teams are having with our whole client or customer leadership agenda. Looking at that revenue momentum, you can see on this chart, we look at a three-year kind of time horizon, and you can see how we built that over three years. We've actually had six, this is our sixth consecutive quarter of year-over-year growth, so you can certainly see that we've got positive momentum in our business now and you know, if you look at this chart, anybody, uh, you know, it's kind of dialed into our call here, you know, from a, or, or on the, on the team's call, you can see that, uh, that, uh, that 76 one actually is higher than our quarter four and quarter four is generally our strongest quarter. So after a great start in quarter one, 2022 and great momentum, uh, also, uh, please report that our gross profit is growing faster than revenue, which is always positive. That means your gross margin is improving. And as I said to the team, gross margin is our best friend. And you can see our gross margin as a percent of revenue is 31.1%. And we're up a full 3.3 million in gross profit versus a year ago. So continued relentless focus on driving a better business and a bigger business and playing in the right margin pools in the category. You know, not all margin pools are treated equal and certainly the team has done a fantastic job at really kind of driving that margin agenda. And that 31-1 is actually one of our highest quarters ever. So we're certainly very pleased with the progress we're making on that, on that gross margin agenda. Okay, so very, very solid. And you can see the growth that we're achieving on gross profit and gross margin quarter on quarter. And this chart kind of illustrates the progress we've made over the last three years from 18.8 in 2021 up to 23.6 in 2022. So 4.8 million increase over the course of two years on that quarter. uh now uh i'm gonna sort of unpack this the only i'd say i'll call this a positive headwind we experienced in our business was we had to do a mark to market adjustment in our long-term rsus and dsus so there was a non-cash impact of 4.5 million in our ebitda to adjust for that significant appreciation and share value why i call this a positive headwind is We're certainly all shareholders, and we've all benefited from an increase in that share price. At this time in the quarter, it was a 63.4% increase in share price, and that obviously had an impact on that long-term comp, so it's a positive headwind. It's a non-cash accrual, as said, related to that long-term incentive comp. taking that into consideration and adjusting for that as well as, and James will talk to you in a minute, adjusting for what was a planned, very well-planned and very well-architected acquisition costs. Our adjusted EBITDA was up 30.1% of the quarter, so really, really solid progress. You can see that's 12.3 million. also really uh you know positive is as a percent of revenue we're up north of 16 percent we uh we gave some guidance that we saw a path to north of 14. you can see we're at this 16.2 percent of revenue once we adjust for those one time uh that one-time impact of mark to market and the um and of course the acquisition expenses so great positive um Momentum on EBITDA as well, obviously driven through or driven by accelerated revenue and improvement in gross margin, and then obviously operating pretty tightly from an SG&A perspective, which we'll see in a minute. If you look at our adjusted EBITDA progress over the last three years as well, you can see it's certainly very positive at the 12.3 versus 9.4 a year ago.

And James, you just want to talk to this chart? Yeah, just another presentation of some of the information that Richard previously described. You can see the performance on a comparable dollar basis compared to last year in the first quarter, breaking out the mark to market adjustments and the $6.1 million of acquisition and integration costs, which we had planned for. Richard will talk as we talk a little bit more about the acquisition of More Canada in a few minutes, how well prepared we are for closing and how prepared we were literally on day one for closing. So we're very well prepared for the integration and we're making great progress on that. EBITDA as a percentage of revenue, you can see 16.2% when we adjust for the one-time acquisition and integration costs, as well as the Mark to market adjustment. I would also point out the cash flow from operations was very strong in the quarter. We generated $6.3 million of cash from operations compared to $4.7 million last year. OK, thank you James.