Data Communications Management Corp.

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Data Communications Management Corp. First Quarter 2026 Financial Results Conference Call. My name is James Warmer, the CFO of DCM, and I'm pleased to be hosting today's call. Joining me today is Richard Kellum, our President and Chief Executive Officer. Following our prepared remarks, we will be holding 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 will be available after the call for any follow-up questions that you might 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 our forward-looking information disclosure in our recent press release, and more fully within our public disclosure filings on CDAR+. 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+. Please follow us on LinkedIn and keep up to date with other business developments. I'll now turn the call over to Richard.

Thank you, James, and good morning. and I know we have a couple shareholders joining us from other time zones, so good afternoon, good evening. Okay, I want to take you through kind of ten points in the quarter. Overall, we delivered results that are pretty much in line with what we had forecast and what our expectations for the quarter were. Point number one on revenue, we had some revenue headwinds declined at minus 5%, although we planned for them because we had a higher comp year ago. We planned for minus 3, minus 4, so pretty much in line with what we planned. And as the quarter progressed, we saw the quarter, you know, a slower start and an increase towards the end of the quarter as well. 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, equivalent to $4 million in annualized revenue. I'll take you through a few details of 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 $19.1 million. 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. Net debt down to $66 million, so down 27% over a year ago and down 14% versus year end, so good positive progress there. 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. Very, very strong free cash flow. You can see in this chart that we were positive $10.7 million versus negative $7.4 million a year ago, so just over an $18 million swing on free cash flow, so very solid momentum there. We continue to drive hard on productivity improvements. You can see that our SG&A is down 3.7 million on the quarter. We're below 17%. So, you know, at least a point below what we forecasted. 16.9% of revenues versus 19% a year ago. Adjusted earnings for Share Basic at 22%. And diluted, I think you threw a little more detail on this when we get to slide nine, 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 a good momentum as we exited the quarter. 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 continue. Point number two, as I mentioned, our team is all in on new business development and what we call Horizon 1, so in-year new business development. Not that we're not focused on Horizon 2 and Horizon 3, so, you know, the next two, three years as well, but lots of focus on in-year. Picked up over 40 new logos all in the quarter, so all these landed in the quarter. but $4 million of expected annualized revenue. And if we look at our pipeline 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. So very positive momentum and a great start. 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 $10 million, and this now represents 8.5% of our total revenues, 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%, so 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 consumer management platform 360, CCM 360. So, good momentum on the technology subscription services. And then, on our technology hardware solutions, we're up 64%. 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. So some very good momentum there, and we're going to 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.

Thanks, Richard. In the quarter, we reported $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 NCC acquisition when we're lucky to do $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. 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. Quarter for us is evidenced by this quarterly chart going back the last couple of years. 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. Pleased with that. That's down significantly, of course, since the acquisition of Moore Canada about three years ago. Also importantly, our net debt to adjusted EBITDA came down. The actual number is about 1.65 that you'll see in our detailed tables. It rounded to 1.7 here. 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. So definitely, you know, positive contributions from free cash flow generation here. Adjusted net income also came in at a recent record high, $5.8 million. 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. So pleased with that. Free cash flow. Last year, our cash from operations after changes in working capital was negative $4.2 million. We saw a big swing there. 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 first quarter of this year compared to last year. And 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 $10.7 million. And as Richard mentioned, that's over an $18 million swing from last year. Thank you, James.