Dye & Durham Limited

Good morning. Welcome to the Dye and Durham second quarter fiscal 2026 results conference call. All lines have a place to unmute to prevent background noise. After the speaker's remarks, there will be a question and answer session. With me on the call today are George Seven, Dye and Durham's chief executive officer, and Sandra Bell, interim chief financial officer of Dye and Durham. Q2 fiscal 2026 earnings release Financial statements and MD&A are available on CDER+. Please note that statements made during this call may include forward-looking statements and information and future-orientated financial information regarding Dye and Durham and its business and disclosure regarding possible future events. Conditions or results are based on information currently available to management and indicate management's current expectations of future growth results of operations, business performance, and business prospects and opportunities. Such statements are made as of the date hereof, and Diane Durham assumes no obligation to update or revise them to reflect events, disclosures, or circumstances except as required by applicable securities laws. Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results. A number of these risks and uncertainties could cause results to differ materially from the results discussed today. Given these risks and uncertainties, one should not place reliance on these statements and information. Please refer to the forward-looking statements section of our public filing, including, without limitation, our recently filed MD&A and earnings press release for additional information for Authorized details regarding Diane Durham's cost savings expectations, including relating to annualized EBITDA savings, please refer to the disclaimer in Diane Durham's Q2 fiscal 2026 results. Presentation and Diane Durham's press release dated November 12, 2025 and November 26, 2025. In addition, certain financial results discussed on this call are non-IFRS financial measures, namely adjusted EBITDA, This measure is not recognized. Measure under IFRS does not have a standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. Please refer to the non-IFRS measures section of our public filings, including, without limitation, our recently filed MD&A and earnings press release. For additional information on the company's use of non-IFRS measures, including the company's definition of adjusted EBITDA, and the applicable reconciliation of adjusted EBITDA to its most direct comparable IFRS measures. I'll now turn the call over to George Stevens.

Good morning, and thank you for joining us to review our second quarter Festival 2026 results. When I took on this role in June 2025, it was clear the business had strong assets, but there was meaningful work to be done. Since then, we have focused on three priorities, building the right leadership team, completing a rigorous diagnostic, and defining a disciplined path forward. Let me start with the fundamentals. Dying Durham has a strong core legal software franchise, serving small and mid-sized law firms across essential, high-frequency workflows. We also operate a high-margin financial services business that continues to grow organically. Our products are embedded in daily operations across practice areas, durable relationships, unique data assets, opportunities for AI-enabled efficiency, and meaningful switching costs. Those foundations are solved. What we have lacked is integration, consistency, and operational scalability. Over the past several years, the company expanded rapidly through acquisitions, materially increasing, customer and geographic reach. That expansion created a broad portfolio and global platform potential. It also increased operational complexity and fragmented systems. At the same time, pricing actions, cost reductions, and leadership volatility introduced disruption for customers, employees, and shareholders. The pricing actions the company took in our core product offerings, combined with minimum volume commitments and limited investment in our products, resulted in a disconnect between perceived value and cost for our customers. While improving margins in the near term, these actions also allowed competition to enter the market. Those lossy margins have proven to be unsustainable in the long term. Our responsibility now is to restore balance and discipline. Since joining, we have completed a comprehensive diagnostic. Several priorities became clear. Historically, growth leaned heavily on acquisitions, limiting visibility into underlying organic performance. Portfolio breadth and product fragmentation diluted customer focus and slowed innovation. Reduced customer retention in certain segments reflects a misalignment in our product's price to value. And while prior cost actions supported margins, further structural efficiencies and stronger data infrastructure are required to create operational leverage to allow us to improve margins even in a competitive market. Margin improvement will come from rationalizing products and investing and operational improvements to drive global scale and operating leverage. While our acquisitions added customers and product offerings and opened new markets, which was positive, we now have the hard work to do to rationalize and integrate those platforms to drive growth. We did not get here overnight, and the path forward will also not happen overnight. Our plan will involve reinvestment of margin and cost savings, none of which is without risks that we will need to manage, including the potential loss of certain customers as we transition from legacy products to our new global product offerings. These findings reinforce our conviction in the underlying assets. They also clarify where focus is required. We believe the solution to turning around the business, leveraging the strong underlying assets, and establishing sustainable growth is to execute a multi-year transformation to simplify, modernize, and integrate our legal software portfolio into a unified global operating platform for small and mid-sized legal practices. We want to reduce our skew count significantly and converge our fragmented product portfolio into global product lines. We believe doing so will drive growth in volumes, improvement in margins, and improve shareholder value as a result. The objective is straightforward, an integrated practice management platform, embedded legal workflow applications, API-enabled data and due diligence, and a unified customer experience. For customers, this creates a single source of truth across farm operations, standardized workflows, improved leverage of staff, and real-time insight into performance and risk. For DynDurham, it drives higher retention and average revenue per customer as workflows become embedded. lowers customer acquisition costs through in-platform expansion, diversifies revenue away from cyclical housing through expanded software as a service penetration, and improves capital efficiency through shared infrastructure. Integration and simplification are the growth strategy. It allows us to accelerate innovation, strengthen customer alignment, and create operating leverage that compounds over time. We are already seeing early proof points. The launch of Unity in British Columbia on February 9th demonstrates how modernization and integration improve automation, adoption, and engagement while strengthening retention. It reflects the direction of travel for the broader portfolio. In parallel, we are strengthening the operating foundation of the business. the savings from which we will use to reinvest in our global platform initiative. We have identified 15 to 20 million in annualized EBITDA savings from structural efficiency initiatives with approximately 60% targeted to be actioned by the end of this fiscal year. Approximately 40% will come from consolidating global delivery and service teams, leveraging our international capabilities more effectively and rationalizing our footprint over time. Another 60% will come from automation and process standardization, including reducing manual workflows, eliminating duplicative systems, and improving operational consistency. It has been an active start to fiscal year 2026. We have navigated accounting reviews, addressed regulatory matters, completed the divestiture of the non-core CREDIS business, and used proceeds from the CREDIS sale to reduce debt. At the same time, we have built a new executive leadership team, completed a portfolio review, initiated product rationalization, approved the global platform roadmap, launched cost initiatives, introduced a refreshed sales process, and successfully launched Unity in British Columbia. There is more stabilization work required. Pricing decisions, cost actions, and organizational disruption over the past several years affected trust and operating rhythm. Our focus now is consistency, strengthening governance, and rebuilding credibility through execution. After our AGM next month, we will be aligning with the new board on our detailed strategy. With the board behind a disciplined plan of action to achieve these objectives, we can focus on executing what is needed to deliver on our strategies to drive shareholder value. From that foundation, integration and modernization will drive growth. I would like to sincerely thank our customers, employees, and shareholders as we work through this period of transition. Your patience, professionalism, and partnership are deeply appreciated. We are committed to earning that trust every day through consistent execution and improved performance. I will now turn the call over to Sandra to review the second quarter financial results.

Thank you, George, and good morning, everyone. Thank you for joining us. For the first half of fiscal 2026, Revenue was $215.3 million, representing a decline of $16.8 million, or 7% year-over-year. The decrease was primarily driven by continued market softness and customer turnover affecting legal software platforms, partially offset by growth in banking technology and contributions from Affinity in Australia. Adjusted EBITDA for the six months ended December 31, 2025, was $100.8 million, down 24% year-over-year. The decline reflects revenue pressure in legal software, targeted reinvestment in labor and IT infrastructure, and a lower capitalization rate as certain expenditures were temporarily shifted from capitalized software development to maintenance expense. These reinvestments are deliberate and focus on stabilizing the business, strengthening customer retention, and improving platform resiliency. Looking at the mix of revenue in the first half of fiscal 2026, legal software contributed $161.5 million while banking technology contributed 53.8 million. Banking technology continues to provide stable, recurring, infrastructure-like cash flows, which help offset softer transactional volumes in parts of legal software. From an operating segment perspective, performance varies by segment. In Canada, Revenue declined 10% in the six months ended December 31st, 2025, year over year, driven by the broader market downturn and reduced customer volumes and pricing in practice management and data insights. Segnus adjusted EBITDA declined 25%, reflecting the revenue impact, a lower capitalization rate, and investment in sales, customer service, and IT infrastructure to stabilize the core legal software operation. In the UK and Ireland, revenue declined 6% in the six months ended December 31st due to softness in search platforms. Segment adjusted EBITDA declined 26% year over year. Australia delivered revenue growth of 2% in the six months ended December 31, 2025, year-over-year, primarily driven by the affinity acquisition, partially offset by declines in search and mortgage services. Segment-adjusted EBITDA declined 14%, largely due to higher labor costs. Importantly, operating cash flow remained strong. Net cash provided by operating activities was $73.8 million, the six months ended December 31st, 2025, compared to $62.3 million in the prior year period. The improvement reflects lower cash taxes, lower net interest paid, and favorable working capital movements. We ended the period with $37.8 million of cash on hand, excluding cash held for sale, and the $185 million in investments held in escrow, to settle the outstanding convertible debentures. Capital expenditures for the six months ended December 31st, 2025, were $9 million, reflecting disciplined investment in platform development and maintenance. Subsequent to quarter end, we completed the sale of CREDITS for approximately $146.3 million in gross proceeds. We have already applied a portion of these proceeds to debt reduction. including a $30 million repayment on the revolving facility, reducing utilization below 35%, and a U.S. dollar $27.3 million repayment on the term loan fee. We're using the remaining proceeds in accordance with our debt agreement through an excess proceeds offer, which we launched on February 9th and which will expire on March 9th. These actions are aligned with our clear priority of deleveraging the balance sheet and strengthening financial flexibility. In summary, while legal software revenue remains pressured in certain markets, we are generating solid operating cash flow, reinvesting to stabilize the business, and taking decisive action to reduce leverage and simplify the business. Our focus remains on disciplined execution, operational efficiency, and restoring sustainable, profitable growth. With that, I'll turn the call back to George.