Data Communications Management Corp.

Good morning, ladies and gentlemen. Thank you for standing by and welcome to the DCM third quarter 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 on the call today is Richard Kellum, our president and chief executive officer. 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 are available after the call for any follow-up questions that you may have. Before we begin, I'll 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+. We will post a brief message from Richard along with highlights of our results on Q3 2025 on our website in the form of an infographic. This presentation will also be added to our website for your reference along with a post view recording and transcript. Our detailed information is 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 to our shareholders, any shareholders that are joining us from other markets. Good afternoon, good evening as well. The plan to do today is just hit the highlights of the results. As James said, all the details will be up on our website. Talk a little bit about new business development, have a look at our continued priorities through 2025, and then turn it over to Q&A. So I'm going to look at a A summary or highlights of our quarter, say overall the results are very much in line with what we forecast and what we expected as we continue to manage through some market uncertainty. Looking at this first column on the left here, highlights of our Q3 adjusted EBITDA was in line with what we expected. Margin came in a little higher than a year ago, 11.7% versus 11.6%. And overall EBITDA value was 12.3% versus 12.6%. So pretty much in line, as I said, with what we expected. And our revenue was slightly off versus a year ago, but it was significantly decelerated, shall we say, versus quarter two. Even with the sustained macro headwinds, we were minus 3.1%. So again, pretty much in line with what we had forecasted. Gross margin slightly lower than a year ago, and that's really due to the reduced fixed cost overhead recovery we get in our factories. We'll see that snap back as we get revenue back into our facilities. The market uncertainty continues to remain. Certainly the economic and tariff uncertainty is negatively impacting our business confidence. Several, I'll call it discretionary marketing events or marketing spend has been reduced during the year. Again, we'll see that confidence kind of rebuild as we progress into next year. There's been a direct and an indirect impact from the Canada Post labor disputes. Canada Post is a large client of ours, so that's the direct. The indirect, obviously, are other clients that are using mail as part of their marketing efforts, especially direct mail and personalized direct mail. So the rotating strikes that we're now in are certainly not helping that. Air Canada, another client of ours, obviously that strike impacted some of our workflow, especially on the operational side on the quarter. But what I can tell you is the team has done a fantastic job at managing overhead and really mitigating the impacts of lower client spending. You'll see that in our favorable SG&A. Over to the third column, we are advancing our digital and our AI platforms, our CCM, our customer communication management platform. was named on the Aspire leaderboard. So a lot of confidence in that platform. I'll show a little bit more detail later. We launched our AI-powered content cloud digital asset management solution, and we're getting some good success with that early stage in the market. And then we've picked up a couple of new Flex customers, one significant financial services client that we're just working to onboard now. So some good... Definitely some good momentum in our digital solutions. And then M&A remains a focus for us. The pipeline continues to grow with market activity that remains robust. Certainly the macro uncertainty is creating opportunities and providing some incentive on the sell side. Seeing a lot of that activity in the market right now. and we are uh and james will show you a little later on the deck that we'll capitalize to transact if we see opportunities that uh we want to act on okay so a little bit more detail just kind of unpacking the highlights a little bit you know said revenues uh pretty much in line with what we expected deceleration over the prior quarter from a decline perspective minus 3.1 uh percent uh we were about 3.4 million uh shy of a year ago uh as i said of the air canada the canada post events uh certainly impacted that but um pretty much uh pretty much what we forecasted and certainly the new business development efforts that we have in market you know offset any other headwinds that we experience from other clients and again we're uh we'll talk about that a little bit later in the deck here on the progress we're making on on new business Overall gross profit, as I mentioned, really due to reuse volume in our facilities affected our fixed cost overhead recovery, hence the margin at 23.4 versus 25.8. So again, slightly down versus what we delivered a year ago, but pretty much in line with what we had forecast for the quarter as well. Adjusted EBITDA, 11.7 versus 11.6, as I mentioned earlier. Slightly down over a year ago. Slightly opposite percentage than slightly down over a year ago. So pretty decent EBITDA delivery given some of the headwinds that we experienced on the revenue line.

James, you want to talk about our balance sheet? Sure. Good quarter in terms of free cash flow. Our net debt came down from $87.5 million at the end of quarter two to $80.6 million. Our net debt to EBITDA just below 1.9 times, actually 1.87 times. So nice improvement there. Our excess availability under credit facilities increased nicely as well. We had just about $17 million of excess availability, as well as $3.7 million of cash. um with the accordion facility we have that's undrawn we have over 40 million dollars of total credit available so we believe we're we're well capitalized not only for our operations but also to pursue m a opportunities okay having uh having a look at new business first i'm gonna just talk a little bit about our ccm 360 platform this is customer communication management platform um we've uh