DATA Communications Management Q3 2026 Earnings Results & Report

DATA Communications Management EPS Results

• Actual EPS: C$0.02
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A
• EPS Beat Rate: 4 of last 7 quarters

DATA Communications Management Revenue Results

• Actual Revenue: C$114.00 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

DCM is a leading Canadian tech-enabled provider of print and digital solutions that help simplify complex marketing communications and operations workflow. DCM serves over 2,500 clients including 70 of the 100 largest Canadian corporations and leading government agencies. Our core strength lies in delivering individualized services to our clients that simplify their communications, including customized printing, highly personalized marketing communications, campaign management, digital signage, and digital asset management. From omnichannel marketing campaigns to large-scale print and digital workflows, our goal is to make complex tasks surprisingly simple, allowing our clients to focus on what they do best.

DATA Communications Management Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: DCM returned to organic growth in Q3, with revenue up 8.2% year over year and organic revenue up 2.9%. Adjusted EBITDA rose to CAD 15.9 million from CAD 12.3 million, while its margin increased to 13.9% from 11.7%.
• Positive Sentiment: Profitability and cash generation improved: gross margin increased to 26.5% from 23.4%, and year-to-date free cash flow reached CAD 15.5 million, compared with CAD 8.2 million a year earlier.
• Positive Sentiment: Management said Octacom has retained its customer base, secured new and expanded business, and already won two cross-selling opportunities through DCM relationships. The companies are expanding IDP’s reach through DCM’s sales team and facilities, though management noted that sales cycles can take six to 12 months.
• Positive Sentiment: Management expects positive momentum and organic growth to continue into Q4, which will include a full quarter of Octacom’s results. It also reported minimal tariff exposure and said it does not currently expect tariffs to have a material impact.

Presentation

[James Lorimer, CFO at DATA Communications Management]

Good day, and welcome to the DATA Communications Management Corp third quarter fiscal 2026 financial results conference call. My name is James Lorimer, CFO of DCM, and I am pleased to join today's call. Joining me today are Richard Kellam, President and CEO, and Lee Berger, Managing Director of our IDP division. 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 you may have. Before we begin, I will 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 SEDAR+. We will also be referring to non-IFRS measures.

[James Lorimer, CFO at DATA Communications Management]

Details on these and reconciliations to the most relevant IFRS measures can be found in our most recent public disclosure filings on SEDAR+ as well. Presentation, recording, and transcript will be available on our website following the call. Additional information relating to DCM is also available on our website and on SEDAR+. We also invite you to follow DCM on LinkedIn for updates on business developments. I will now turn the call over to Richard.

[Richard Kellam, President and CEO at DATA Communications Management]

Thank you, James, and good morning, everyone. Anybody joining from other time zones, good afternoon and good evening. Happy to report our quarter three, and some highlights here, and we will do a double click on some of these as we progress through the deck here. Plan for the call is we are going to do about 10 minutes of DCM. Lee is going to join and give us about 10 minutes on progress at Octacom, and then we will use the final 10 minutes for any Q&A. So we will move fairly swiftly through the deck today. Certainly, point number one, as you can see on the screen, DCM core is back to growth. We have had some incredible new logo wins. We have got a very good pipeline that we converted, and our core market is certainly showing signs of stabilization.

[Richard Kellam, President and CEO at DATA Communications Management]

We have had a strong financial contribution from Octacom, and you will see that in the numbers due to the higher margin mix that adds to our profitability. Our revenue overall, very solid at +8.2% versus the same quarter a year ago. Happy to report, given all the great work that the team has done, we are finally back to organic growth and solid organic growth of +2.9%. That, as you will see in the numbers below, is extremely profitable growth at the same time. So, organic growing at 2.9, so very strong performance in the marketplace. Gross profit of CAD 30.2 million, that is 26.5% of revenue, and you can see that gross profit growing faster than revenue at 22.7% versus we were up, obviously, well up over a year ago.

[Richard Kellam, President and CEO at DATA Communications Management]

Adjusted EBITDA also extremely strong at CAD 15.9 million versus CAD 12.3 million a year ago, up 11.7%, and coming in at 13.9% of revenue. All lines, revenue up, gross profit up, Adjusted EBITDA up. Free cash flow also very strong at CAD 15.5 million on a year-to-date basis versus CAD 8.2 million last year. So up over CAD 7.3 million over a year ago. Adjusted net income, we'll do a double click on this as we get into the deck at CAD 1.3 million, well up over a year ago. We were about CAD 100,000 in adjusted net income a year ago. Happy to also report, you see number eight here, that tariff update. We've had minimal impact crossing any tariff impact, and that really is due to a lot of the work we did to procure raw materials from different markets around the world.

[Richard Kellam, President and CEO at DATA Communications Management]

Our procurement team did a fantastic job, so we really have no impact at all, immaterial impact from a tariff perspective. We also have very positive momentum that we expect to continue through Q4. Organic growth is expected to continue, and obviously, we'll have a full quarter of Octacom. These numbers for Octacom are a quarter less a week because we didn't close the deal until the end of the first week of July. So these are one quarter less a week, to be clear to all shareholders. You'll hear from Lee, a great start with Octacom, and lots of good work happening there, and I'll let Lee take you through those details. So there's a summary. We'll just do a double click on this pretty quickly as we progress through.

[Richard Kellam, President and CEO at DATA Communications Management]

There's the revenue number, and you can see +8.2%, CAD 114 million, up from CAD 105 million a year ago. If you look at that line graph below, you can see the +2.9%. We did guide to that low single digit in the quarter, and you can see we delivered against that, and you can see the improvement from quarter one to quarter two to quarter three in our underlying business, and obviously, the contribution of Octacom, a very solid quarter overall. Gross margin, as I mentioned in the highlights and the summary, growing faster, well faster than revenue, 22.7% growth in gross margin. That is not just due to the contribution of Octacom. The gross margin on the underlying business is well up over the net sales growth as well. So not only growing organically, but growing profitably organically as well.

[Richard Kellam, President and CEO at DATA Communications Management]

You can see the gross margin at 26.5%, up from 23.4% a year ago. Combination of better mix and more profitable growth on the core, and obviously bringing the higher margin Octacom business into the mix as well. So very solid there. James is going to talk about EBITDA on the next page. James?

[James Lorimer, CFO at DATA Communications Management]

Thanks, Richard. As a result of the factors that Richard mentioned, revenue and higher gross profit margins, we delivered CAD 15.9 million of Adjusted EBITDA, which was up from CAD 12.3 million last year, and came in at 13.9% of revenues, up nicely from 11.7% last year. You will see that we also improved on a sequential basis compared to the second quarter.

[Richard Kellam, President and CEO at DATA Communications Management]

This is in my many years in my prior company, this is what we called a very virtuous circle from a business perspective. I wanted to put this all in context. When your revenue is growing at a solid number of 8.2% and your gross profit growing much faster than revenue, you can see it is 14.5% greater than revenue, and Adjusted EBITDA growing at 6.3% greater than gross profit. This is what we call a virtuous circle in business, and we certainly delivered against that on this quarter and expect to continue this delivery over time as well. Very solid quarter in all areas of the business.

[James Lorimer, CFO at DATA Communications Management]

This is also reflected in strong free cash flow, which was up 90% compared to this point last year, really led by strong cash from operations of about CAD 27.3 million, which was up from CAD 16.8 million last year. CapEx was actually kind of similar levels to last year on a year-to-date basis. We did have some modest increases in our principal payments on leases, so as a result, we delivered free cash flow on a year-to-date basis of CAD 15.5 million compared to CAD 8.2 million last year.

[Richard Kellam, President and CEO at DATA Communications Management]

Thank you, James.

[James Lorimer, CFO at DATA Communications Management]

Yeah, we also delivered improved adjusted net income, which was up CAD 1.3 million compared to last year. Couple kind of one-time adjustments here related to the repayment of our Fiera debt, which we did when we acquired Octacom. There is some other debt modification charges, so about CAD 2.9 million there of kind of add-backs. We had about CAD 800,000 of one-time restructuring and acquisition integration costs, and about CAD 1.9 million of net fair value gains, and that is related to our compensation expense.

[Richard Kellam, President and CEO at DATA Communications Management]

Great. I am sure there may be a few questions on that during the Q&A, but very clear. As I mentioned, minimal tariff impact on either side of the border. I mentioned that we had a lot of diversification in our sourcing, and the team has done a great job finding materials from Europe and from Asia. The U.S. imports impacted by September 2026 counter tariffs have been mitigated by any continued supply chain diversification. Again, our procurement team is best in class. Any outbound tariff exposure is minimal. We have roughly a little less than 10% of our total revenue that goes from north to south, and the product that we ship is non-tariffed, thankfully. So minimal to no tariff impact at all. I think we got, what, James, like a CAD 100 invoice or something like that, so nothing, which is great.

[Richard Kellam, President and CEO at DATA Communications Management]

We are well-positioned for any threats, and thanks to the team for that. Okay, so we are exactly on 10 minutes as planned. I am going to turn it over to Lee to give us an update on the first kind of 90 to 100 days of Octacom being part of the DCM group. Lee.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

Perfect. Thanks, Richard. Good morning, everyone. As Richard mentioned, it has been about 120 days since we closed. We have got almost the full Q3 in the numbers that you are seeing, and our thesis is largely playing out as we hoped. What I will do today is really take you through what we have done commercially, how we are going to market, and a little bit about the operating platform. This slide really talks to how hard we have been hitting the ground running, and we really have been hustling to put all the pieces in place, integrate the two organizations from a commercial standpoint in order to deliver more value for shareholders. So, priority one was really ensuring that no client felt this change and that the only changes felt were improvements, in fact.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

We were successful in retaining our customer base, securing many key renewals, and really that tells us a lot about the relationships that we have, the service model that we have built, and just how strong the fit Octacom and DCM are from a service provision standpoint. We have also been able to secure new and expanded relationships across a number of key verticals. There was a press release that had been out over the last couple weeks about some new wins in the utility space, on the healthcare side, on the municipal government side, and also in the lottery and sweepstakes business. We are quite pleased about the progress commercially that we have seen.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

We are winning in verticals really where secure compliance document processing matters most, and we are being relied upon as a critical vendor, really an integrated vendor to our clients, and that is quite important to us from a values perspective. We talked a little bit about cross-selling. It is happening in a big way. We had two wins coming from DCM relationships already, including a comprehensive digital mailroom for a Schedule I bank that we had put out there. Really, as everyone knows, a core part of the deal thesis for DCM was combining DCM's enterprise relationships with our IDP capability, and we are seeing that really play through.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

We have also mapped, done quite a few exercises, but amongst the client bases, mapped dozens of shared government and pseudo-government or Crown corporation accounts across DCM and Octacom, and we are working towards running a larger number of joint discovery sessions, and ultimately with the ambition to grow our wallet share amongst these existing clients. Again, the proof points are already there in that respect, and we are seeing some really strong success. Then just generally, both organically and through the DCM network, our IDP pipeline is growing. We have had a number of new contracts signed, a number of net new contracts in negotiation at this stage. This market continues to grow at attractive rates. We are really positioned to capture a larger and larger share of it.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

Then, of course, it comes down to execution and operations and innovation, where DCM is adding a tremendous amount of value as well, which I will get into on the next slide. One of our key goals that we had set out in our strategic planning between DCM and Octacom is growing our federal and provincial government services business. We do have a federal standing offer. We are an Ontario Vendor of Record, and DCM has a tremendous number of government contracts in place as well. The goal is to leverage these agreements to transact as quickly as we can with a broader set of government buyers. We are specifically focused on the federal government with a number of campaigns on the go at this time. In order to support this broader government focus, we are also broadening the geography in which we can cover these clients.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

That entails using a number of additional facilities within the DCM network to grow our physical footprint and processing services capabilities, both nationally and into the U.S. From a marketing perspective, just yesterday, brand new, we relaunched our corporate website at octacom.ca. This augments Octacom's image and the IDP messaging. Please do check it out. The team has done a fantastic job getting that site live, and the messaging is crystal clear. It brings our solutions, security credentials, and our customer stories together in one place. We are seeing improved rankings already, great performance from a site speed and messaging perspective, and expect it to lead to a greater amount of inbound opportunity, as well as being a catalyst for our increased digital ad spend, which we have been holding off actually until we have had the new website and new messaging ready.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

Very pleased that we are there at this point. Also, over the past quarter, a lot on the go. We have trained the DCM sales team and senior leaders on IDP solutions, which means every DCM account manager is a new channel for us. We are really leading with tailored use cases and customer stories. We are booking discovery meetings, and then the Octacom commercial team, and myself included, are getting involved in discussions with DCM clients to talk about the opportunities that exist in the IDP space and how we can help them solve internal business process challenges. What we are really doing is working to build a flywheel. We have a 60+ person strong DCM go-to-market team augmenting the existing Octacom organic growth engine that we have built and on top of the technology that we have built. We are incredibly excited about what is to come.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

Maybe the last point on marketing is we did, over the last two months, go live with an outbound BDR team, and we are seeing tremendous success from a meeting bookings standpoint. This is a very strong leading indicator. As we talked about on the last call, sales cycles can be six months, they can be 12 months, and so filling that top of funnel at this early stage is incredibly important and is showing positive signs. So we are quite excited about that. If we could just flip to the next slide, we come to the operational footprint. I have talked a little bit about the commercial and the marketing side of things, where a lot of focus is going in, but equally on the operations and technology side of house, there is a tremendous amount of work on the go amongst both the DCM and Octacom teams.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

We, over the quarter, now officially lead the DCM Montreal and Mississauga digitization operations. This gives us complete control of the IDP business under the Octacom leadership team and allows us to apply our operating playbook and our technology to the complete solution delivery across the full network. With that in mind, in 2027, we will migrate DCM's existing IDP services onto the Octacom platform, and what that will do is it will help drive efficiency, lift productivity, and improve gross margin on some of that work. There is some sort of added cost that is borne by the Mississauga and Montreal operations based on some of the technology stack that is being used. We will have the ability to both put in our efficiency, but also cut out some costs in the process.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

As we would have press released about a month ago, we launched a U.S. operation center for IDP in the Chicago area within a DCM site, a similar approach that we're using across several other DCM sites to grow our national footprint here in Canada, specifically growing the Western Canadian footprint. That U.S. facility in Chicago went live in October, gives us a great footprint to serve U.S. clients as we continue to see growth in the U.S., and is a perfect proof point of how we're leveraging the DCM physical footprint. What allows us to sort of do that is DCM obviously has this national footprint, 1,600 team members across 18 Canadian locations. As we look to scale up, we're incredibly well-supported.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

The messaging that Richard and James and Christine and Jason and the rest of the team have passed on to the teams across the country have been nothing short of spectacular and given us all of the support that we need to grow in the DCM environment, which is fantastic. Then finally, from an IT security and compliance standpoint, obviously not a commercial driver, but absolutely critical and of paramount importance to our clients. We are actively partnering with the DCM security and compliance teams to augment for certifications, to add additional sites to those certifications, and working with the DCM IT infrastructure team to really set us up successfully with the expertise and bandwidth needed to manage this multi-site operation with ease and in a secure way.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

Once again, thank you to the technical team for engaging so deeply and so quickly and supporting us in a number of these initiatives. Maybe last point is we are accelerating now investments in our IDP roadmap. We've found our feet commercially and operationally. We're now accelerating investments on the AI-driven capture and redaction side of house. One thing I'll say in particular for government, legal, healthcare, and other large enterprise clients is we are focused on data sovereignty, and all data stays hosted in Canada, which has been a real advantage for our public sector and regulated clients. In summary, I'd say, so far so good. Business is performing well. The team is collaborating incredibly well. We're leaning in and finding our rhythm and look forward to sharing more updates as we go. With that, Richard, I'll hand it back over to you.

[Richard Kellam, President and CEO at DATA Communications Management]

Thank you, Lee. Appreciate it. Thanks to the entire Octacom team. We wanted to be transparent to shareholders. At the last quarter, we just announced the acquisition. Now we just wanted to let shareholders know the progress that's being made over the first kind of 120 days. You can see a lot of progress, so we're off to a great start and lots of opportunities moving forward. Thank you, Lee and team. Okay, I'm going to look at our priorities, and then we'll turn it over to Q&A. Priorities kind of pretty similar to what we presented the last couple of quarters, maintaining our high revenue retention and really continue to focus on new business development. Our team is all over that, and we've had really good progress on new biz. Continue to drive gross margin improvements through strong mix and operational efficiencies.

[Richard Kellam, President and CEO at DATA Communications Management]

As I said in the last quarter, our strategy is to fuel the Octacom growth, really bring kind of all the resources from DCM into Lee and his team, and hopefully you saw that in the last 10 minutes. I think the team's done a fantastic job to kind of support this acquisition. Then obviously, we're going to continue to look at some opportunistic M&A opportunities as well. Then finally, generate robust cash flow. You saw the cash flow in the quarter that we fully expect that to continue, and reduce our debt and deliver shareholder returns as well. So those are our priorities. Then we got one last slide, James, before we turn it to Q&A, which is our outlook. Positive business momentum, as I said earlier, we expect it to continue. We've got a very healthy pipeline. Our core is stabilized.

[Richard Kellam, President and CEO at DATA Communications Management]

We will have a full quarter of Octacom in Q4, so the full quarter, not like this one, which was less a week. Again, strong free cash flows and liquidity to fund our growth. We're well-positioned to deliver, you heard from Lee, the tech-enabled capabilities within the IDP market. It's a growing market, and we're certainly well-positioned to take advantage of that. Say arguably, the best company in the market to take advantage of that. We've got operational discipline that will support our growth, and we certainly proved that in many quarters. Our quarterly dividend program obviously continues, fully committed to that. Then we are constantly watching and monitoring trade policy. As I said, no tariff impact now. Do not expect any, but we monitor that on a consistent regular basis. Okay, so that's the outlook, and I'm now going to turn it over to Q&A.

[James Lorimer, CFO at DATA Communications Management]

Thanks, Richard, and thank you, Lee. We'll now take questions from the audience. If you have a question and you're on Teams here, please use the raise your hand feature, and we'll queue up questions. You may also submit questions through the chat feature. When called upon, please unmute and introduce yourself before asking your question. First question is from Noel. Can you unmute, Noel? Noel, we're going to unmute you on this end. You should be good now, Noel.

[Noel Atkinson, Analyst at Clarus Securities]

Yeah, hi. It's Noel Atkinson from Clarus Securities.

[James Lorimer, CFO at DATA Communications Management]

Hi, Noel.

[Noel Atkinson, Analyst at Clarus Securities]

Yeah, good morning, guys. Well done in Q3, and thanks for taking our questions this morning. If I could direct the first one to Lee or the group in terms of Octacom. You were talking about government as an exciting potential vertical for building your pipeline. I note that Iron Mountain's doing, I think, CAD 140 million a year just in one IDP contract with the IRS and the state. So yeah, I agree that it seems like an exciting vertical. Is the government side in Canada, is it primarily responding to RFP, or are you guys able to go and work through some sort of master service agreements that you guys have with government?

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

Yeah, I can take that. I'll take that, Richard. And thanks, Noel. Good to hear from you. So, we do have a federal, what's called a standing offer. It's a National Master Standing Offer. It's a procurement vehicle that a large number of federal, provincial, and municipal groups can use to purchase from Octacom. And so, we're making the availability of that procurement vehicle better known, along with the post-DCM acquisition. I would say a large proportion of government services do come through competitive tender, so through RFP processes. And so, we're very active now, over the last six or nine months, very active in those tenders. We're experienced with them, and we position ourselves really well, especially with previously three processing sites, and now much more within the DCM network. They come to market generally in smaller increments, I'll say.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

In the U.S., the IRS may have come out with one broad-based IRS procurement requirement, and what we see in Canada is more what I'll call departmental or divisional solutions coming out. Some of the work that we're doing in Ottawa, I'll say, is educating on just how much more we can do under the DCM roof for these organizations. We're probably eight weeks, 10 weeks into really pushing that agenda, and are seeing some pretty positive results coming out of it. Although, keep in mind that sales cycles do take time in the space. The only other thing that I'll say is, we do service a large number of government organizations already. We work with over 100 municipalities in Ontario. We're looking to broaden that outside of Ontario. But over 100 municipalities inside of Ontario.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

We work with a number of Ontario provincial ministries, and then we do some federal government work, but it is an area we're looking to push hard into and expect to see some strong results in the next coming quarters, I'll say.

[Noel Atkinson, Analyst at Clarus Securities]

Okay, great. That's a good segue. Maybe you guys could talk a bit about CapEx outlook for 2027 and how many additional facilities you're thinking about outfitting for IDP?

[James Lorimer, CFO at DATA Communications Management]

Yeah, sure. I'll maybe handle that, Lee.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

Sure.

[James Lorimer, CFO at DATA Communications Management]

CapEx is, I think most of the audience knows, for the IDP business, is pretty modest. In our CapEx that we have seen in the last quarter, really, we stood up our Chicago facility for IDP digitization. We have also done some work in our Vipond and Mississauga site and our Montreal site. As we explore opportunities to continue that across other areas, we are certainly focused on using kind of DCM sites to offer and use existing physical footprint. It is pretty modest. I think our CapEx this year through third quarter is about CAD 3.5 million. We will probably have about another CAD 1 million or so in the fourth quarter. That is across our whole business.

[James Lorimer, CFO at DATA Communications Management]

Next year, we will see our probably CapEx grow a little bit, but it is fairly modest from the Octacom side and a little bit more on the kind of maintenance and growth capital for the DCM side.

[Noel Atkinson, Analyst at Clarus Securities]

Okay, great. Maybe one more for me. Going back to the core business, Richard, you mentioned positive momentum entering Q4. The filings show that there was pretty good results out of the tech-enabled hardware side of the business in Q3. As you guys come into Q4 here, are you expecting product sales or tech hardware to be kind of the main growth driver in the core business?

[Richard Kellam, President and CEO at DATA Communications Management]

It would be a combination of both. We are seeing good momentum on kind of the core physical print coming into quarter four. We have also had good momentum on the resale side of our business as well. When you talk about that technology, some of that is part of a bundle. Think of, I will give you an example, positive patient ID, PPI. We are selling the hardware solution, the scanners, the printers, as well as the consumable, the bracelet, which is a label. It is part of an ecosystem. We have been quite successful. There are opportunities that we will see play into this quarter and the next one there as well. But certainly the underlying business, the kind of core print business, we have seen some good wins, new business wins, and expansion, I mean, with existing clients.

[Noel Atkinson, Analyst at Clarus Securities]

Okay, great. That is it for me. Thanks. I will get back in the queue.

[James Lorimer, CFO at DATA Communications Management]

Okay, thanks, Noel. We have a question from Chris Thompson.

[Richard Kellam, President and CEO at DATA Communications Management]

Has to unmute.

[James Lorimer, CFO at DATA Communications Management]

Oh, Chris, I think you have to unmute. There we go. Yeah.

[Chris Thompson, Analyst at eResearch]

Can you hear me now?

[James Lorimer, CFO at DATA Communications Management]

Yes.

[Chris Thompson, Analyst at eResearch]

Congrats on a great quarter. Just a couple of questions. On the sales you mentioned for the, sorry, it's Chris Thompson from eResearch. The sales going forward, was any of the revenue pull forward or one-time project work in Q3, or are you seeing just a real change in the actual business lines?

[Richard Kellam, President and CEO at DATA Communications Management]

No, there's nothing.

[Chris Thompson, Analyst at eResearch]

Yeah.

[Richard Kellam, President and CEO at DATA Communications Management]

When you say pulled forward, pulled forward from quarter four into quarter three?

[Chris Thompson, Analyst at eResearch]

Yeah.

[Richard Kellam, President and CEO at DATA Communications Management]

No, it's all real revenue in the quarter. Nothing pulled forward at all. In fact, if anything, there's probably some stuff that went from Q3 into Q4, just given the utilization of our facilities.

[Chris Thompson, Analyst at eResearch]

Oh, great. Okay. I know there's a little bit of seasonality in the core DCM revenue. What sort of seasonality is in Octacom's revenue?

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

There's not much, if at all, Chris. Completely immaterial is what I would say.

[Chris Thompson, Analyst at eResearch]

Okay.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

Yeah.

[Chris Thompson, Analyst at eResearch]

Great. Just a question on your SG&A. It was sort of trended higher, I guess, because of the inclusion of Octacom in that grouping. Is that you're still sort of expense reduction mandate in that whole line? Was it mostly made up of the acquisition?

[James Lorimer, CFO at DATA Communications Management]

Yeah, I think most of the change you saw in that was related to the acquisition, Chris.

[Chris Thompson, Analyst at eResearch]

Okay.

[James Lorimer, CFO at DATA Communications Management]

No material kind of one-time SG&A expenses. That is probably not a bad run rate to use for quarter four.

[Chris Thompson, Analyst at eResearch]

Okay. Just a last question. Can you just provide a little more color on your CAD 25 million acquisition accordion that you mentioned?

[James Lorimer, CFO at DATA Communications Management]

Sure. As part of our new credit agreement, we have kind of baked into the credit agreement, we have the ability to draw on another CAD 25 million for acquisitions. That would have to be approved by the lenders, so we would have to go back to them and say, "Okay, we have got an acquisition facility or an acquisition opportunity here," pitch them on that, and get their support for it. But it is already kind of papered into our credit agreement, so that makes it a little bit easier if and when we find the right opportunity.

[Chris Thompson, Analyst at eResearch]

Okay, great. Those are my questions. Thanks for taking my questions.

[James Lorimer, CFO at DATA Communications Management]

Thanks, Chris. Okay. Thanks, Chris. We have a call or hand up from Daniel Rosenberg.

[Richard Kellam, President and CEO at DATA Communications Management]

Daniel, please unmute.

[James Lorimer, CFO at DATA Communications Management]

Yeah, Daniel, can you unmute on your end?

[Analyst]

Yeah. Yep. I'm here. Good morning.

[James Lorimer, CFO at DATA Communications Management]

There we go.

[Analyst]

Thanks for taking my question.

[James Lorimer, CFO at DATA Communications Management]

Morning.

[Analyst]

Hi, guys. First one, I was just curious to mention migrating DCM's IDP to Octacom. I was just curious around the investment required to do that. Is it people, is it tech, or otherwise? Can you just walk us through a little bit what that investment entails?

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

Yeah, good question, Daniel. There will be a modest amount of human capital invested in that transition. There's some minor modifications to our core IDP processing software that we'll have to make in order to facilitate that transition. This is all people time as opposed to technology, and it will be relatively modest. In the scheme of our technical team budget, it will just be absorbed in the existing team. There's no incremental spend or hires specifically for this initiative.

[Analyst]

And maybe another one for you, Lee. Just curious about your go-to-market understanding. Still early days under the DCM umbrella, but could you kind of contrast your experience, how the benefits of going to market as a team together, timelines? Close rates or any color there in terms of the advantages you're seeing so far in your early wins?

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

Yeah, I'd say there's quite a few benefits in leveraging the DCM relationships. There's more than 2,500 DCM customers. Obviously, there's some overlap, but Octacom's a much smaller organization than DCM, and so we are really leveraging those relationships as inroads to accelerate the number of, I'll call them discovery meetings, but oftentimes clients already have use cases and pain points that they're coming to those discussions with, and/or large-scale digitization initiatives to bring documents and data into the modern day, whether it be for training models or for archival and compliance, or there's multiple drivers, I'll say.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

It's early to report on win rates based on those discussions, but there's a large number, and Richard, I'll leave it to you if you want to comment on exact numbers, but there's a large number of ongoing discussions and client pursuits with specific use cases that are ongoing at this very moment amongst the team. So there's been a lot of value in the DCM go-to-market channel because these are net for Octacom, these are largely net new relationships that we're able to form in an accelerated fashion. I think on the last call, we had articulated most of our go-to-market was RFP and inbound-driven prior to the DCM acquisition, so this is a little bit of an exciting pivot for us to more, what I'll call, outbound, proactive, and more aggressive, if you will, to really grow our commercial footprint.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

It is a little bit of a vague answer, Daniel, but just to say that we can probably start to report on some data in the coming quarters. But given it has been three, four months since we have been active on the commercial side, it is probably early to comment on win rates that are coming through the DCM channel just because there are so many that are in the queue now, either qualified or active or in negotiation, but not yet closed, if you will.

[Richard Kellam, President and CEO at DATA Communications Management]

Yeah, and Lee, I would just also add the national reach that DCM has, so a lot of activity happening in Western Canada, Eastern Canada, Quebec as well, whereas Octacom was more of an Ontario-based targeted company, U.S. as well. So we now have a lot of activity happening in multiple provinces right now as well. Is that fair to say, Lee?

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

Yeah, absolutely. Big push in Western Canada, a number of very strong deals that are late stage, and then as James mentioned, sort of outfitting existing DCM sites for at least the front-end digitization capabilities, and then our core operations can take on the IDP and capture and integration and so on. So that comment sort of goes both operationally and commercially.

[Richard Kellam, President and CEO at DATA Communications Management]

Yeah, and I just had maybe one last piece of color as well, because I think this is important, is we have not switched on true kind of marketing automation on the outbound side because we are waiting to get the refreshed and the renewed website to market. It went live yesterday. So you will see a lot of activity moving forward from a marketing automation standpoint to drive that lever, that sort of client development lever as well.

[Analyst]

Okay, great. In terms of, I guess, markets, I know you have a small presence in the U.S., and you mentioned the Chicago work that you've been doing. Does your thinking change at all in terms of geographic focus? I guess it does sound like you have a lot of opportunity right here in Canada, but just curious if your thoughts maybe longer term have changed around that.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

The focus is certainly Ontario, Quebec, Alberta, B.C., and Canadian-centric, but we do have a good slice of U.S. business, and we wanted to be able to service that business internally as opposed to through a subcontractor network going forward. So this was the including some sort of meaty, sort of higher margin opportunities. So we wanted to stand up that facility in Chicago within the DCM footprint so there's no incremental sort of real estate costs, lease costs, and so on to optimize that work and be able to tackle new work going forward in the U.S. But I will say, like, go-to-market-wise, Daniel, I think is your question, we're focused in Canada as a primary avenue.

[Analyst]

I was curious, Richard, actually, I was curious your thoughts on that specifically. I know a long-term thought here, but has it changed at all in terms of what is possible now with Octacom under the umbrella?

[Richard Kellam, President and CEO at DATA Communications Management]

In terms of I'm not clear on the question.

[Analyst]

Geographies.

[Richard Kellam, President and CEO at DATA Communications Management]

Oh, yeah. Look, we're going to play to our strength. As you know, we have north of 2,500 clients across Canada that we're going to play to right now. But there's clearly opportunity south of the border. I mean, these services have no borders, essentially. We have clients anywhere in the world and use the Octacom processing methodology to create value and intelligence off that data. Certainly, the step that we took to set up an operation in the U.S. to service the existing clients that Lee and the Octacom team are already providing to those clients, there's tremendous opportunities there. But we're going to crawl, walk, run. Right now, I'd say we're in the walk stage, as we continue to drive hard across the Canadian market. And certainly, we're well-positioned to take advantage of the U.S. at some point. Yeah.

[Analyst]

Great. Thanks for taking my questions. I'll pass the line.

[Richard Kellam, President and CEO at DATA Communications Management]

That's it.

[James Lorimer, CFO at DATA Communications Management]

All right. It doesn't appear we have any questions. Maybe I'll pause for a minute in case anyone else has a question they'd like to ask. All right. It appears we have no more questions. Richard, would you like to provide some closing remarks?

[Richard Kellam, President and CEO at DATA Communications Management]

Yeah. I just want to thank all of our shareholders for the interest and the support that you provide to DCM. I want to also thank all of our associates, all of our team members, the Octacom and DCM team members. Thank you for everything that this team does every day to deliver results and to support our client base out there. I also thank you to our clients for your continued support of our services. We are here to deliver, and hopefully you can see that on the quarter and many to come. Thank you, everybody, for your listening and engagement today on the call.

[James Lorimer, CFO at DATA Communications Management]

All right. Thanks, everyone, for joining us. That concludes our call today. Thanks, everyone, and have a great day.

[Richard Kellam, President and CEO at DATA Communications Management]

Thank you.

[Lee Berger, Managing Director of IDP Division at DATA Communications Management]

Thank you.

Participants

Executives

• James Lorimer, CFO
• Richard Kellam, President and CEO
• Lee Berger, Managing Director of IDP Division

Analysts

• Noel Atkinson, Analyst at Clarus Securities
• Chris Thompson, Analyst at eResearch
• Analyst