Data Communications Management Corp.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Data Communications Management Corp. first quarter of fiscal 2025 financial results conference call. My name is James Lorimer, the CFO of DCM, and I'm pleased to be hosting today's call. Joining me today is Richard Kellum, our president and CEO. Following our prepared remarks, we will be moderating a Q&A session. As a reminder, this conference call is being broadcast live and recorded. 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 will remind everyone that we will be referring to forward-looking information on this 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 have posted a brief video message from Richard along with highlights of our results on the first quarter on our website in the form of an infographic. This presentation will also 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 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.

Good morning. everybody joining us from other time zones. Having a look at today's agenda, we're going to review highlights and results of quarter one 2025. Talk a little bit about some new business development. Have a look at our priorities for this year and then turn it over for Q&A. So we've got a summary of our of our progress and highlights of 2025 on this page. Q1 2025 results were in line with what we expected, almost exactly in line. Our adjusted EBITDA margin of 15% was up over quarter one year ago. We were 15% versus 14.4. Gross margin continued to improve. We delivered 29.3% and certainly approaching our goal of 30. We delivered on our commitment of no one-time charges. So EBITDA and adjusted EBITDA were the exact same. And our year-over-year growth in net income and adjusted net income certainly was positive. We did experience market uncertainty, which we had to manage through. We obviously closely monitored market sentiment, the tariffs, kind of the on-again and off-again tariffs. We have a great team that manages through those challenging times. Raw material price increases, we haven't had any material increases yet, but we have had on-again, off-again tariff threats, obviously the latest one being China, 145% down to 30% now, and you may think, You know, we don't have a lot of product imported from China. We actually don't, but there are some raw materials that we source from the U.S., specifically labels and thermal paper that have chemical components to them that come from China. So that obviously would have resulted in a price increase, but that's now been mitigated as a result of this decrease in tariffs over the course of the last couple of days. So lots of... lots of dynamics obviously that our team has done a great job managing through and this last one there is a potential canada post labor disruption that we're kind of managing and mitigating through right now we won't know uh i guess until next week right james 22nd if that uh if that will develop uh we've got a lot of new business development uh happening right now we'll talk a little bit more later in the presentation Our pipeline remains strong and probably the strongest that I've certainly seen in recent history. We've got several new logo wins and increased wallet share with existing clients and new verticals. And this is going to be key to achieving our goal of returning to revenue growth in the second half of 2025. So I'm really pleased with the new business development activity we've got. And then we've got some really good success leveraging our AI capabilities online. assemble we've had some new logo wins in retail we've got a healthy pipeline of opportunities in retail and financial and government and other sectors as well we actually displaced an incumbent schedule one bank with assemble so with a new dam so a great success there very pleased with the uh with the product and then we've gotten some good early traction in uh in the domestic market with uh with zabi the This is what we acquired late last year. We also delivered a special dividend of 20 cents for common share, which was certainly exciting for us in the quarter. And we made the commitment to commence regularly quarter lead dividends. And you saw that announcement for quarter two in the press yesterday. So those are highlights for the quarter. Moving on to revenue. Our revenue on the quarter was $123.7 million. Again, almost exactly in line with consensus and up sequentially over the last quarter and down slightly versus a year ago. Our quarter one revenue was primarily impacted by some larger order activity from a few larger enterprise clients that were kind of rebalancing inventory. But pleased with the quarter. And having a look at gross profit, James, you want to talk us through gross profit?

Sure. Gross profit was $36.3 million, really kind of the second highest that we've seen in our recent history, just down about a million dollars from that that we achieved in quarter one. We also reported our fourth consecutive quarter of growth in gross margin. On a year-over-year basis, we exceeded what we did last year at this time by about 40 basis points, and we reported a gross profit margin of 29.3%. So we continue to strive towards our pre-acquisition gross profit margin levels of more than 30%. On an adjusted EBITDA basis, we were less than $100,000 off the high-water mark in the first quarter of 2024. Likewise, we reported the fourth consecutive quarter of year-over-year beats on EBITDA margin. We showed 15% EBITDA margin in the quarter, which is certainly on track to our total objective of more than 14% EBITDA margins on an annualized basis. I will remind everyone that quarter one is typically our seasonally strongest quarter, as you can see from some of the bar charts on not only EBITDA, but gross profit and revenue.