Data Communications Management Corp.

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Data Communications Corp. Second Quarter Fiscal 2026 Financial Results Conference Call. My name is James Lorimer, CFO of DCM, and I'm pleased to host today's call. Joining me is Richard Kellam, President and Chief Executive Officer, and Lee Berger, Managing Director of Octocom. After our prepared remarks, we will open the call for Q&A. As a reminder, this conference call is being broadcast live and recorded. Richard and I can also be available after the call for any follow-up questions. Before we begin, I'll remind everyone that today's call will include forward-looking information. This information is subject to risks and uncertainties described in our press release and in our public disclosure filings on CDAR+. We will also be referring to non-IFRS standards measures The details and reconciliations of which to IFRS measures can be found in our most recent public disclosure which is also filed on CDAR+. Presentation, recording and transcript will be available on our website following the call. Additional information relating to DCM is available on our website and on CDAR+. We also invite you to follow DCM on LinkedIn for updates on our business developments and I'll now turn the call over to Richard.

Thank you James and good morning and good afternoon and good evening to any shareholders joining us from other markets or other time zones. As many on the call have likely already reviewed the press release, our second quarter results were generally in line with what we expected. Well, revenue remains slightly below prior levels. Our sales activity did remain very robust. We generated strong free cash flows. We continued to pay down debt quite significantly on the quarter. And we completed, of course, this very strategic acquisition of Octocom. And we're going to spend a majority of our time on the call today reviewing that acquisition. So I'll move pretty quickly through the quarter. As noted on our press release, moving through the third quarter and into the second half of the year, we are seeing very encouraging signs, including an expected return to positive year-over-year revenue growth, a more favorable business mix contributing to improved gross profit, a continued momentum in new business development which I'll talk to you on the next page and then of course continued strong free cash flows. In addition of course the Octocom acquisition is going to deliver enhanced revenue and earnings contribution through the balance of the year and we'll talk a little more detail as we progress through the call here today. So again I'm going to move fairly quickly on the numbers for the quarter because I do want to spend the majority of our time with Lee on this fantastic acquisition of So as I said, kind of in line with what we expected revenue decelerating on the quarter and we're seeing that continue to stabilize and we'll see that obviously stability as we progress into quarter threes and quarter four. From a new business development standpoint, our revenue from new logo wins did accelerate quite significantly, actually. Much higher rate than a year ago, and plus the average value per client is considerably higher. Obviously, this positions as well, and while we're confident we're going to see that return to growth in quarter three and quarter four. Our tech enabled service hardware and revenue from software continues to grow up 10.4% of the quarter. We're now about 7.3% of total revenue. Gross profit was in line with what we expected on the quarter and our SG&A, we continue to build a better business and you can see that our SG&A continues to decrease over a year ago and adjusted EBITDA in line just under 13% of total revenue. and again we'll see that we'll see that that progress as we move into quarter three and quarter four with the base business as well as the addition of Octocom. Free cash flow is extremely strong up 15.7 million in the first half of 2026 and it's about a 16.3 million dollar swing versus a year ago so very solid free cash flow delivery Net debt, we're very pleased with our continued progress on reducing debt. Obviously, this is prior to the Octocom acquisition, which we'll see included into our quarter three results. We're down 26% of the year, and it's the lowest leverage we've seen in three years. So real good progress on continuing to pay down debt. And then, of course, we returned a solid amount of capital to shareholders, about $3.4 million in the quarter. So again, in line with what we expected and kind of decent progress through the quarter. So as I said at the top of the call, we do want to spend a majority of this call with reviewing the OctaCom acquisition. Leah Berger sitting beside me here, our new managing director managing the OctaCom division of DCM. and Lee is going to provide you with an update of the Octocom business, so a good overview of the Octocom business. He's going to talk about the intelligent document processing market, the size and growth of that market, why the market's growing so quickly. He's going to also talk about opportunities for Octocom and IDP as now being part of DCM. So we're, listen, we're very excited about the acquisition. You know, you read the press release and you can hear my excitement in the call today. It's just a month ago. It's actually a month and two days since we completed the acquisition and we're already off to a great start. But I want to be clear to shareholders that the IDP or Intelligent Document Processing market is not new to DCM. We started down the path about two years ago with very serious intentions to build a business here in IDP. We saw lots of kind of inbound coming from clients and we've already built a small, much smaller obviously than Octocomp, but a small piece of business at IDP. that is a fast growing piece of business. So it's not new to us. And the addition of Octocom obviously just allowed us to get there a lot faster, buying versus building and buying one of the fastest growing IDP companies in Canada. So we're very excited and it certainly makes us a much stronger competitor in this space right from day one. So I'm gonna turn the call over now to Lee So Lee, welcome to your first earnings call here and excited to hear about Octocom.

Excellent. Thanks. Thanks, Richard. Thanks, James. Glad to be here with everybody on today's call. And what I plan to do is provide an introduction on Octocom, an introduction to the IDP market as it is probably a relatively new market for some investors here on the call. as well as talk a little bit about how we're collaborating already with DCM in the acceleration of our go-to-market plans now that we're united here. From an investment standpoint, there's some highlights you'll see there on the slides. Ultimately, Opticom is a scaled operation. In the trailing 12-month period, we've generated just over $23 million of revenue. We would be one of the leading IDP players here in Canada. and we deliver our solutions through a combination of different technology platforms largely built in house that allow us to deliver really efficient automated end-to-end solutions for our customers and what that results in is very high recurring revenue, high churn, the ability to augment our solutions over time and drive strength and margins and ultimately drive strong free cash flow. Octogom has been in this market for the last 50 years. I've been with the company for the last 10, driving the latest stage of growth, and we see a tremendous amount of opportunity ahead as we join the DCM team and accelerate our go-to-market plans. So takeaway here, really profitable growth, fast-growing business, sticky customer base, proprietary technology that we continue to augment and intend to augment even faster with the strength of DCM behind us. Moving to the next slide, a little bit of an overview of what IDP is. So there's really a couple different use cases for, many use cases for IDP, but there's a couple different solutions that land in the IDP sphere. And the most comprehensive of those solutions is a workflow that you'll see up on your screen right now, which really entails automating complex document intensive processes, which are the backbone have a large number of large enterprise and government customers and prospects that exist out there. So this is really leveraging a multi-step process to intake, extract, classify, and feed downstream systems with relevant data that's been extracted and validated in the document-intensive workflow. And so that involves a capture stage, a classification stage, an extraction stage, A validation stage, typically some form of workflow automation, whether it be within our Otis platform, our proprietary web-based platform where clients can interact with documents, workflow them, drive automated rules, and ultimately through system integration between Otis and multiple different types of downstream systems. In our process, we use a combination of different innovative tools to drive automation. we use OCR, ICR, we use AI, we use machine learning, we use natural language processing, we use a series of different intelligent tools and really AI augmented tools to allow us to deliver our solutions both efficiently from a delivery time perspective as well as from a cost perspective. With a little bit of a background on what it is that we do and we're sort of that that solution provider behind the scenes within lots of organizations that we would all be familiar with. It's important to understand what does this market look like? And as we've displayed over the last nine years, nine or 10 years of ownership, we're able to grow at a very rapid rate, taking advantage of both a rise in tide in this IDP market as well as this ultimate digitization wave that we're seeing from a lot of our clients. And so as we look at the market looking forward, we're seeing that 30% plus compound annual growth rate continuing. There's a number of drivers for that. There's AI drivers and sort of richness and value and legacy information should it be not yet digitized. there's rising rates in digital adoption in terms of taking physical processes, converting them to digital or bridging the gap, having hybrid environments where there's both digital input and physical input. And ultimately we do stand out in the field of data sovereignty and our services being performed in Canada in secure facilities across both the OctaCom and the DCM network. And we're gonna talk a little bit more about that in the next few slides. From a market driver standpoint, cost is probably what matters most to investors. Manual data entry is generally expensive for large enterprise and government. There's a lot of automation opportunity that exists within these specific spheres that are our target market. IDP can cut the cost of that entry from $5 to $25 a document down to much more diminished rates of between pennies and a dollar per document. And so it allows us to go into new opportunities with a cost lens or an ROI lens that is rather accelerated. And that has been part of what has helped us in our growth trajectory to this point. But ultimately, there's lots of market drivers. presented to you up on screen there, but lots of unstructured data that clients are looking to structure, extract, validate, and use for inputs to data models or otherwise. We're able to leverage in our environments, various different AI models to augment our processing that has been a boon for us and an area in which we've been able to take advantage of AI innovation and changes that are taking place in the market. and building a rather modular platform that allows us to plug and play different models for different use cases to be that compliance layer while delivering value to our clients. And there's a series of other drivers. I mean, I mentioned a few moments ago, general digital transformation. When we look at the government of Canada, the provincial government and municipalities, for instance, we see massive archives of physical information. The same holds true in the healthcare space as well. We see massive archives of historical information that once did not have the value that it does today. And we're seeing budgets coming to bear and opening up, allowing us to digitize that information and leverage that information for use cases and feeding certain models to enable these clients to get more value out of the documents and the data that exist and free up that storage space, physical storage space that that once occupied buildings and buildings worth of space. So just looking at where IDP is relevant, it really is across all industries and all verticals, more so at the large enterprise, mid-market enterprise, less so at sort of the startup level, as you can imagine. and so as we look at industries with the highest opportunity set and the largest addressable market, we're looking primarily to continue to focus on the government sphere. Good examples would be general records modernization, benefits processing, citizen correspondence, application forms for passports, et cetera, et cetera. In the healthcare sphere, we do a fair amount of work in this space. Medical Record Digitization and Data Extraction, Claims Processing, Referral Routing is another great example that you'll see up on screen there. On the BFSI side, Financial Services, we see a host of opportunities, probably the largest opportunity set second to government, in my opinion, exists in the financial services space. And this is a space that DCM has a really strong footing in. and was really one of the drivers for our collaboration and how we're going to market. Octocom had very little exposure to VFSI, DCM holds tremendous relationships with really all of the, or most of the financial services organizations in Canada. And so taking our platform and our solution suite over to assist with things like new account opening, loan and mortgage processing, compliance archiving. These are valuable use cases. Digital mailrooms are another good example. And we talked a little bit in a press release, we talked a little bit about a recent announcement that we'll mention on the next slide. These are really high value, sticky use cases that we anticipate growing across the prospect base that we do have. and finally, Transportation Logistics. OCTECOM is pretty active in this space already, have a really solid solution from a proof of delivery management standpoint. This is managing bills of lading, extensive data extraction off of them, receipt and packing slip gathering. We have quite a comprehensive proof of delivery documentation process and solution that's in place and we see tremendous amount of opportunity scaling that out across the DCM world.

I've gotten the question a few times, why DCM?

And I think it really can be distilled to a couple key drivers. Octocom really brings a platform, a team, and an incredibly strong base of blue chip business. This is a business that's strengthened over the years. We've invested as we've profitably grown the business in our technology and our team. And we hit an inflection point where we felt that and another organization and it's an institution almost with a broad enterprise client base could help us accelerate the growth of Octocom into this next stage. And so DCM really brings the commercial reach, those enterprise and government relationships that we don't already have, the know-how and the ability to drive outbound pipeline generation at a more scaled, in a more scaled manner, and a national infrastructure. And when I talk national infrastructure, I'm really talking about leveraging existing DCM premises to broaden the IDP footprint and service offering. There is somewhat of a local element to some of the IDP services that are provided. And so the ability to have, with relative ease, a new facility added and low cap X, a relatively new a new facility added in several new locations allows us to both drive margin as well as drive top-line growth through new customers in those respective geographies. And then between the two organizations, there really is a tremendous fit culturally and a tremendous moat from a go-to-market standpoint, and that is, you know, We have top tier security compliance and privacy standards across both organizations. So the fit has been incredibly smooth. We also hold between the two organizations over 70 MSAs with over 70 of the top 100 large enterprise and government organizations in Canada, which gives us a great pool of prospective customers to continue to push our use cases into.

And that's really exciting.

The last note that I'll throw in there before passing it back or opening it up is we really are off to a strong start. We closed, as Richard mentioned, July 8th, so not that long ago. Lots of integration activities underway, lots of sales and marketing collaboration opportunities that we're deep in pursuit on already, which is fantastic. and as just one case study or case in point was a recent announcement of a schedule one Canadian bank that we are now onboarding and have signed on with for a large broad-based digital mailroom operation that is currently in implementation and we're incredibly excited about taking our platform into an existing DCM customer and having collaborated on a very quick execution point here that we anticipate replicating going forward. And maybe last point, lots of cross-sell opportunity. I think you probably picked that up for me throughout the discussion over the last 10 or 15 minutes, but ultimately there's active collaboration with the sales and marketing team here at DCM and across DCM's 2,500 plus customers, we should see a tremendous amount of opportunity to sustain and potentially accelerate the Opticom growth rate looking forward. So I'm incredibly excited about that. I'm excited about being invested alongside you all and the team here in helping drive the future of the business.

Thank you, Lee. And I'll just add one other point to what Lee said, if we don't need to go back to the chart. But if you think about government, BFSI, healthcare and transportation, and you think about the physical element, when I say physical, the physical paper or forms that are now converted through the OctaCom IDP process into intelligence, we actually print a significant percentage of those physical forms. So Thank you. Thank you. Thank you. The slide here, clearly, Octicom and DCM, we've got a very bright future together. It truly allows us to accelerate our IDP leadership in a market that's growing and expanding very quickly. We've got built-in operating leverage with the existing facilities that are fully compliant and very low capex. The revenue and the margin of profitability of Octocomp coming into DCM World, very strong to build off of. Very new complementary business building on the point that I said earlier, serving large regulated enterprises and government. And again, we can now offer that value added service on top of the forms and paper we're producing for these clients. You read in the original release that we have an enhanced credit facility and lots of bandwidth to grow. And then obviously, we're going to continue the commitment to shareholders with quarterly cash dividends. So very strong acquisition and certainly a stronger DCM right from day one. Okay, I'm going to close on our priorities for 2026. Obviously, the top left box here, we're going to maintain high revenue retention and drive new business development. Again, we've been off to a really good run recently on new business and we're moving from strength to strength there. We'll see that continue through the balance of the year. We're going to continue to focus on improved gross margins, and those gross margins will flow through, obviously, with the addition of the Octocom acquisition, but importantly, as well as that base business stabilizes and starts to grow, and we see better utilization of our assets, then that obviously naturally improves gross margin, and then we've been improving mix quite considerably as well. We're going to generate robust cash flow to support our debt reduction. And finally, if you look at that top box there, our main strategy in addition to obviously driving that base business and that growth and continue to build a better and bigger base business is to fuel the Octocom's growth by leveraging the DCM commercial reach and the supply chain that we've got. And our team is just there to kind of assist Lee and his team on continuing to accelerate As said, we're off to, at least said, we're off to a very good start in the first four weeks. Oh, look, I'll just close on this page. We'll turn over to Q&A. Building momentum in the second half. Lots of new logos that we've won. A good, healthy pipeline. We're seeing that market stabilize. Obviously, Octocom contributes to the quarter and quarter three. Strong cash flow and liquidity to find growth. and certainly well positioned, as I said, to deliver this expanded IDP opportunity, the operational discipline and profitable growth that we're committed to deliver. We're still committed obviously to that quarterly dividend program and then we will continue as we always have to monitor any trade policy or tariffs or macro uncertainty. We're not having any headwinds right now with the recent announcement from from south of the border, but we'll continue to monitor that. So that's the outlook and we'll now turn it over to questions.

Thanks, Richard. We'll now take questions from the audience. If you are joining through Teams, please use the raise your hand feature and we'll queue up questions. You may also submit questions through the chat bar. When called on, please unmute and introduce yourself before asking your question. We have some questions here. Why don't we take Noel Atkinson, please? Hi, guys.

It's Noel Atkinson from Clare Securities. Good morning, Richard and James, and welcome, Lee. Thanks for taking your questions. Okay, first off just on Octocom and sort of the overall IDP division for DCM. Can you guys talk a little bit about kind of what you've seen for momentum within that division so far in 2026? For me?

Sure.

Yeah, we really came into the deal on strength and so Our pipeline has been robust through the entire duration of 2026 to date and continues to be rather robust. The DCM opportunity set that's coming in is really augmenting our pipeline and we're working on how to scale our ability to manage that pipeline and so that's where some of our focus has been. It's A, educating the DCM team on the IDP solution set to help drive opportunities and then B, to be able to intake, manage and ultimately execute on those opportunities from the Octocom execution standpoint. So I would say we've come in strong. We've continued to be strong. We're seeing substantial growth year over year in 2026 over 2025. With Octocom, we do have a fiscal year change. And so we're moving from a May fiscal year to a December fiscal year as we join the DCM team. And so we're working through syncing up all of our KPIs to be able to report that in a way that's valuable to you.

Great. And in terms of like building the sales funnel on, and this is both for like the DCM guys and for Lee, like on the Octocom side. So have you been building your sales funnel? Has it been, you know, you've been outbound marketing through your sales teams or has it been, you know, inbounds and go pursuing RFPs?

Maybe I'll talk first from the Octocom side, pre-DCM. The vast majority of OctaCom's business has come through what I'll call inbounds, a combination of quite literally inbound into the website from content that we have out there from RFPs and from referrals. So those have really been the core drivers of the OctaCom pipeline historically. We have had a candidly little to no outbound targeted effort historically. and that was a function of our lack of scaling our commercial go-to-market team and one of the reasons for this particular partnership for us believing that there's a tremendous amount of upside here. So yeah, Noel, I'd say it's largely been inbound from the Octocom side. There are certain pockets, certain industries, certain use cases where we've had some marked success. And in those scenarios, we do sort of build a bit of a consultant network for referrals. And at times we have done outbound campaigns, but we're talking incredibly sparse. and so this is a lot of the value add that is currently being actioned from the DCM side to help augment that funnel.

Yeah maybe just building on that the first thing we did as well Noel and shareholders is as said IDP is not new to DCM. We had a leader that was actually reporting directly to me Andrew Varga who was our IDP subject matter expert and commercial leader. First thing he did was put him directly into Lee and Lee's team so we have that conduit now between calling the DCM commercial team and the Octocom team. So that's already been implemented. We obviously brought, we didn't come with an empty funnel either, right? So Andrew was working on a pretty active funnel for the last several months over the last, well, actually over the last year. So that funnel is now part of the Octocom world. and then we're just actually preparing for all the marketing optimization and outbound programming so we got you know the marketing team working on that so you'll see a lot of activity as we as we move in you know progress into quarter three and certainly you know September, October you see a lot of a lot of activity. If you actually went you googled intelligent document processing Canada you'd see that DCM comes up ranked as number one or number two. And, you know, we're much smaller than Octocon, right? So we know how to kind of optimize and drive marketing optimization. So you'll see that all kind of shift to the Octocon world. And I said the marketing team is very active on that right now. Great.

And then just lastly for me, going back to the printing segment, can you guys talk a little bit about how the revenue activity progressed through the quarter? Like were you seeing improved momentum as you got through the Q2?

Yeah, I'd say generally through the second quarter, Noel, we were tracking quite well. We had a bit of a blip in one of the months, but overall I'd say we were tracking well. and you know early stages but you know kind of optimistic about Q3 and the balance of the year. As Richard mentioned the kind of new logo call it maybe value and number of opportunities is helping contribute to that. It seems to have accelerated this year compared to last year and some of the Vertical markets that were challenged last year have shown some improvements. We talked about that in our MD&A. So particularly, you know, kind of manufacturing, lottery, and a couple of others. And then other vertical markets, you know, largely kind of stabilized and have positive outlook for the balance of the year. You know, the one kind of vertical that has been a little bit tougher for us is the financial services market. but we're hard at work in that market. And as you can imagine, a lot of the IDP opportunities that we had in our pipeline DCM alone were in the financial services market. So we're optimistic there that we'll have good conversion rates. Okay, great. All right. Thanks very much.

Thanks, Noel.

Thanks, Noel. Next question we have is from Daniel Rosenberg at Paradigm.

Good morning, Daniel.

Hi, good morning, guys. Thanks for taking my question. My first one goes to Richard and Lee. I'm curious, on the roadmap for integration, are there any milestones, key targets that you guys are hoping to achieve? Is there much work on the integration front? So just any color there would be helpful.

Yeah, maybe we'll just kick that off and then turn over to Lee. To be clear, Octocom is a division of DCM, so we're not physically integrating Octocom into the DCM world for obvious reasons, right? They're a rocket ship in terms of growth. We just want to help fuel the growth and provide the services, the commercial services, supply chain services, the financial services. HR services that we have at DCM into the OctaCom organization. And a lot of those will be kind of shared services as opposed to embedded services.

Yeah, no, I think that's spot on and good to meet you, first of all. We really are looking at a few specific shared services. Some elements include infrastructure and security, IT infrastructure and security, and finance are sort of the two sort of biggest bang areas to help alleviate some of our bottlenecks and allow us to focus on the commercial side of the equation. That's probably all that's worth noting at this point, quite candidly. We continue to operate independently. There's a lot of collaboration going on across the organization. If we want to call that integration, we can, but it's very much sort of collaboration and supporting the OctaCom team and continuing to hit certain internal milestones and revenue milestones that we have set for ourselves.

Yeah, I would just add this is very different than the Moore Canada Corporation acquisition, which was really a synergy deal. And it was direct integration. We consolidated four facilities, had to bring a sales force together, had to bring two ERP solutions together. So massive amount of integration, also a massive amount of disruption to the business as well as we went through that heavy integration process. So now that obviously happening on the Octocom side, we're just there to kind of fuel and help Lee and his team kind of accelerate their growth agenda.

Thank you for that. And then just turning to the sales cycle at OctaCom. I was curious about what the lead times look like from, you know, an introduction to a customer, standing them up. Obviously, there's a various amount of solutions, but just to generalize. And then I was a bit surprised to hear that a lot of it came from inbound referrals. So I was curious, how does that to come about, you know, the customer or other customers. Is there some network effects in terms of what you're doing? If you could speak to that, please.

Yeah, sure. Maybe I'll speak to that. I'll speak to that first. There's a lot of, these are highly embedded solutions to a large extent. About 95, 90% of our revenue comes from what we call day forward services. highly embedded, typically technically integrated solutions with our clients. And we've become sort of relied upon as an integrated partner to our clients under our service model. And so from a referral standpoint, we do see a tremendous amount of referrals, whether it's folks that have left one company and moved to another and given us a call to say, hey, you've done a good job with us. At the last organization, here's the problems that we're having. Can you help us? It's also some use cases are pretty particular, I would say. And so as the prospect is poking around for vendors that may be able to support them, oftentimes they'll find some of our content online, perhaps ask around about us and then give us a call. And so, yeah, I mean, when I talk inbound, I'm genuinely talking, you know, we're filling a need that exists in a particular use case, we're identified, and then there's outreach that occurs. I don't want to underweight though, you know, there is RFP activity. and those are public boards. Generally, we're often invited to different bids, but often from a government standpoint, there's often boards that these bids are posted on. We do attend conferences as well. And we've seen opportunity flow open from conferences and networking and so forth. But that hopefully gives you a flavor that when I talk inbound, I'm really just excluding targeted outbound, pick up the phone and call or email campaigns. That's not the type of activity that we've all of those have been pursued historically. It's usually been a use case driven or divisional specific driven entry point. And we do have a little bit of a land and expand opportunity that we've opened up over the years. large enterprise A with department A, oftentimes there's opportunities to broaden what we do to other departments within the organization that are also struggling with document intensive process and challenges. The first, if you don't mind just repeating the first part of the question, that would be great.

I think you kind of covered it, but just, it was the sales function, you know, from first introduction to- Oh, got it, yeah.

Apologies, yeah. It varies, so I'll generalize. On the government side, we see anywhere between 6 and 18 months. On the enterprise side, we see anywhere between really the quickest to revenue post-implementation is 2 to 3 months, and at times that can extend to 9 to 12 months. So that hopefully gives you a general sense that a lot of the work that we're doing now with the DCM team is obviously there was an existing pipeline. We're fostering that pipeline and that will turn to revenue quicker because those opportunities are chunky and have been in the works for some time already. But we do anticipate more of those opportunities, the cross-sell opportunities crystallizing at a later point. I don't believe that we'll see revenue coming from those opportunities in this calendar year. And so it just gives you a sense with the time to revenue that I mentioned a few moments ago and the pipeline that did exist as to what the next quarter or two should look like.

Makes sense. Thanks for that. And last question, I was curious about Overall for DCM, I know you spoke to gross profit margin likely improving here in the near term, but balancing that idea of, okay, cross-sell and the impacts on the bottom line. Any thoughts, whether, you know, just directionally, somewhat timing on when, how that margin profile looks like as a combined entity on an EBITDA basis, whether it be next year or what have you? and then I'll pass the line. Thank you.

Sure. I think, as you recall, typically the third quarter is kind of a wider quarter for us with some of the growth profiles. We see that moderating and returning to a bit of growth compared to last year. We're just in our kind of natural business. I'd call it maybe modest margin improvement but you know we'll have almost three months of the Octocom acquisition when we report Q3 included in that and their gross profit margins and EBITDA margins are you know a fair bit higher than ours Daniel so we will start to see a little bit of benefit from that and then I'd say particularly as we get into kind of the are all in the fourth quarter, which tends to be a bit stronger quarter for us anyways. Octocom doesn't really have the same kind of seasonality just given their growth profile. They're kind of growing, you know, every year and don't quite have the, you know, they don't seem to at least at this point have the kind of seasonality that we've historically had. So, you know, we'll really see some of the improvements probably with the benefit of some of these Bigger kind of cross-selling opportunities given the sales cycle and onboarding and I would really expect to see those in kind of first half of 2027.

Thanks for taking my questions.

Thanks Daniel.

Next question is from Chris Thompson at eResearch. Can you hear me now? Yeah. Hey, Chris.

Hey, thanks. I'm Chris Thompson from eResearch. Thanks for taking my call. I just wanted to ask you a question about the restructuring and acquisition costs. You had about 2.3 million in the first half of the year and about 1.3 of restructuring and about 1.3 in this quarter. How is this going to sort of go forward for the rest of the year?

Yeah, from a restructuring perspective, Chris, we'll see that come down in the second half of the year. Really, some of that was a little bit of the kind of the echo from the more Canada acquisition as we got the benefit of further kind of systems alignment and finance team alignment and some other kind of fine tuning. The acquisition and integration costs you saw in the second quarter were related to the Octacom acquisition, so kind of pre-closing costs, you know, kind of legal and advisors. So we'll see a little bit more of that in the third quarter and then we won't see any, we're not expecting any restructuring charges at all from the Octacom acquisition. As Richard described earlier, you know, this is really a but an opportunity for growth as opposed to synergies. So we'll see those, you know, we're not expecting any restructuring charges from the Opticom acquisition itself and the ECM charges are largely done.

Okay, great. My second question is, can you just sort of review your capital allocation strategies for the rest of the year? considering you have a much larger debt load and I'm assuming you're going to keep the dividend going forward and also how you're going to factor in your debt covenants.

Yeah, sure. Good question. You know, from a kind of capital allocation, you know, our priority is really, I guess, maybe twofold. One, continuing the dividend that we have. and secondly, paying down debt. We put a new credit facility in place, which I think you've seen the details on. We're within the kind of debt EBITDA and fixed charge coverage ratios for that. Given the kind of nice free cash flow generating are all in a position that not only DCM is in, but also that Octacom is in. We expect to see our net debt debita decline nicely over the next year to year and a half to levels that we were before the acquisition. So we set Debt repayment is going to be a real priority. We're going to focus less on M&A, particularly in the traditional print space. We're still seeing lots of interesting opportunities, but I'd say at this point, our real focus is continuing to build out and support the IDP business here and also continue to feed, I guess, or harvest the traditional kind of DCM business.

Great, thanks. My last question is about your tech side, and I guess it's going to be really impacted by the acquisition. But although it was kind of up year over year, it was sort of down quarter over quarter. How much of that is seasonality? And then how much of the focus is really going to be on the acquisition when it comes to sort of your tech plan?

Yeah, there was some seasonality in that. A large proportion of what we report is tech enabled services, relates to programming services. And last year, some of those services kind of continued in the second quarter. They're typically kind of largely focused on the first quarter of the year, but they do happen throughout the year. And sometimes things happen a little bit earlier, let's say in the fourth quarter compared to the first quarter. a little bit later in the second quarter as opposed to the first quarter. So that's really kind of largely that, Chris. And yes, going forward, we expect to report the OctaCon results in that tech enabled services bundle. So you should see an increase in that segment.

That's it for all of my questions. Thanks for your time.

Thanks, Chris.

Chris?

Yeah, we have no further questions. Did you have any closing comments?

Yeah, no, my closing comments, thank you. Thank you to our shareholders. Thanks for listening today. We certainly appreciate your support and commitment. You can hear that we're very excited about the Octocom acquisition. Great company that Lee and his team have built. Tremendous success. So thank you, Lee. And we're just there to fuel growth. As I said, we're starting to see stabilization in our core business, in our base business. And we're going to leverage that from a client perspective to drive leads and to help Lee continue to accelerate the growth of IDP. I also like to thank the DCM associates and our new associates from Opticon. Thank you for a good solid quarter. We look forward to continuing the progress through the balance of the year. And I would say that maybe in summary, we're only getting started. We're four weeks in and we're only getting started and we're looking forward to reporting the success of quarter three to shareholders a few months from now.

Thank you. Thanks, Richard. This concludes the Q&A portion of today's call. Thank you everyone for joining us and your continued interest in DCM. As a reminder, Richard and I can be available after the call for any follow-up questions. And this concludes our call. Have a great day. Thank you.