Dye & Durham Q1 2027 Earnings Results & Report

Dye & Durham EPS Results

• Actual EPS: -C$0.16
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Dye & Durham Revenue Results

• Actual Revenue: C$94.87 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Dye & Durham (TSE:DND) provides premier practice management solutions empowering legal professionals every day, delivers vital data insights to support critical corporate transactions and enables the essential payments infrastructure trusted by government and financial institutions. The company has operations in Canada, the United Kingdom, Ireland, Australia, and South Africa.

Dye & Durham Q1 2027 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Revenue fell 12% to CAD 94.9 million year over year, or 8% excluding the Credas disposal. Management attributed the decline to weaker market activity, lower real estate transactions, and pricing pressure; it estimated that 70%–75% of the shortfall was market-related.
• Positive Sentiment: Cost reductions supported higher margins: Adjusted EBITDA declined 8% to CAD 46.6 million, but the margin rose to about 49% from 46.6% a year earlier, while combined operating and corporate costs fell CAD 10 million.
• Positive Sentiment: Net loss narrowed to CAD 11.1 million from CAD 38.3 million, primarily because finance costs fell to CAD 19.6 million from CAD 45.9 million, with lower amortization also contributing. The company said it was in compliance with its senior-debt maintenance covenants at quarter-end.
• Negative Sentiment: Management said customer declines are slowing, but noted ongoing dual sourcing and lower transaction volumes; it did not characterize the pressure as widespread customer losses. Banking software and real estate-related activity remain exposed to weak market conditions.
• Neutral Sentiment: Management plans to focus on stabilizing operations, centralizing the business, and using AI and automation to improve efficiency, with the transition expected to continue through fiscal 2027. The permanent CEO search and strategic review remain ongoing, with no timeline or further details provided.

Presentation

[Operator]

Good afternoon and welcome to the Dye & Durham First Quarter Fiscal 2027 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. With me on the call today are Todd Schulte, Dye & Durham's Interim Chief Executive Officer and Chief Operating Officer, and Steve Waszak, Dye & Durham's Interim Chief Financial Officer. Dye & Durham's Q1 Fiscal 2027 earnings press release, quarterly financial statements, and corresponding MD&A are available on SEDAR+. Please note that statements made during this call may include forward-looking statements and information and future-oriented financial information regarding Dye & Durham and its business. Any disclosure regarding possible future events, conditions, or results are based on information currently available to management and indicate management's current expectation of future growth, results of operations, business performance, and business prospects and opportunities.

[Operator]

Such statements are made as of the date hereof, and Dye & 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 or uncertainties could cause results to differ materially from results discussed today. Given these risks and uncertainties, one should not place undue reliance on these statements and information. Please refer to the forward-looking statements section of our public filings, including without limitation our recently filed MD&A and earnings press release, for additional information. In addition, certain financial results discussed on this call are non-IFRS financial measures, namely Adjusted EBITDA and Segment Adjusted EBITDA.

[Operator]

These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS, and are 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 Segment Adjusted EBITDA, and applicable reconciliation of Adjusted EBITDA and Segment Adjusted EBITDA to their most directly comparable IFRS measures. I'll now turn the call over to Steve Waszak. Thank you. Please go ahead.

[Steve Waszak, Interim CFO at Dye & Durham]

Good afternoon, everyone, and thank you for joining us today. As a reminder, all figures are in Canadian dollars, and comparisons are to the prior-year and quarter as applicable, unless noted. I'll start with a snapshot of the key details around our Q1 2027 financials. First quarter revenue was CAD 94.9 million, down approximately CAD 13.4 million or 12%, 8% excluding Credas from Q1 2026. The decrease is driven primarily by market downturn, lower real estate volumes, a decrease in customer transactions, and pricing pressures across several different sections of our business, along with the disposal of Credas in fiscal year 2026. Adjusted EBITDA for the quarter was about CAD 46.6 million, down CAD 3.9 million or 8%, 5% excluding Credas from Q1 2026. While our Adjusted EBITDA margins improved to approximately 49% from 46.6% in fiscal year 2026 Q1. Our cost base is holding.

[Steve Waszak, Interim CFO at Dye & Durham]

Combined technology and operations, general administrative, and sales and marketing costs were approximately CAD 48 million this quarter, down approximately CAD 10 million or 17% from Q1 2026. Let me dive into results from operations for the three months ended September 30th. The CAD 3.9 million or 8% decline in our Adjusted EBITDA between Q1 2027 and Q1 fiscal year 2026 was driven primarily by revenue pressures and lower capitalization rates as we temporarily shifted certain activities and expenditures from development to maintenance expenses, and then professional fees. These expenses were partially offset by planned cost reductions on marketing, entertainment, and IT services for the first quarter of 2027. Our net loss narrowed to CAD 11.1 million from CAD 38.3 million in Q1 fiscal year 2026.

[Steve Waszak, Interim CFO at Dye & Durham]

The largest driver was lower finance costs, which decreased from approximately CAD 45.9 million to CAD 19.6 million, reflecting lower debt and non-cash foreign exchange and fair value items. Lower amortization also added to this improvement. In addition, stock-based compensation fell by CAD 2.7 million to basically CAD 0.01 million between Q1 fiscal year 2027 and from Q1 fiscal year 2026, after unvested awards were forfeited by employees who left the business. Acquisition and restructuring costs were approximately CAD 6.8 million in the quarter, essentially flat with the same period prior fiscal year. These included executive severance costs, which we expect to pay within the fiscal year, and costs related to board changes. Finally, the company was compliant with its financial maintenance covenants under the senior debt agreements as of September 30th, 2026. Let me turn to segment reporting.

[Steve Waszak, Interim CFO at Dye & Durham]

Canada remains the core of our business. Revenue for the first fiscal quarter was CAD 56.3 million, down approximately 10% from Q1 fiscal year 2026 and 14% from Q4 fiscal year 2026, actively reflecting the market downturn and volume and pricing pressures. Our Segment Adjusted EBITDA is down 12% from last year to CAD 31 million. Margin expanded to about 60% from approximately 49% a year ago, which is in line with the 61% margin reported in the fourth quarter of 2026. This shows the results from the efficiency initiatives we described last quarter and following through on. U.K. and Ireland revenue was down 23% to approximately CAD 21 million from Q1 fiscal year 2026, which was driven primarily by the disposal of our U.K. subsidiary, Credas, in fiscal year 2026, along with the market conditions.

[Steve Waszak, Interim CFO at Dye & Durham]

Revenue was essentially flat with fourth quarter, and Segment Adjusted EBITDA of CAD 8.5 million represented a 4% decline from Q1 fiscal year 2026 and down by CAD 8.2 million from the fourth quarter of fiscal year 2026. In Australia, revenue was CAD 17.1 million, down only 3% from Q1 fiscal year 2026, which reflects the softness in our data insight and mortgage service platforms. Segment Adjusted EBITDA was CAD 8.8 million, up 17% from fiscal year 2026 Q1, and margin was approximately 43% of revenue versus approximately 54% in Q1 2026. With revenue only down 3%, the margin decline comes from the higher cost of about CAD 1.7 million. In South Africa, revenue was CAD 0.04 million, a decrease of 63%, mainly due to the timing of certain contract renewals.

[Steve Waszak, Interim CFO at Dye & Durham]

Segment Adjusted EBITDA was a loss of CAD 1.6 million, representing a 60% decline. To summarize, our revenue for the quarter was CAD 94.9 million, which represented a 12% decline, 8% excluding Credas, from what we reported in the first quarter of fiscal 2026, while our net loss narrowed to CAD 11.1 million from CAD 38.3 million, driven primarily by lower finance costs. The pressures on revenues, primarily due to market downturn and lower pricing models for our core product segments. Moving forward, our focus remains on cost discipline, establishing fundamental cash generation, and strengthening our balance sheet. With that, allow me to turn the call over to Todd.

[Todd Schulte, Interim CEO and COO at Dye & Durham]

Thank you, Steve. Q1 was a difficult quarter in our markets, and our revenue reflects that. We remain focused on stabilizing and optimizing the business. Our plan has three parts, and we are working in parallel. First, stabilize. That goes for our customers, our product, and our company. Second, centralize, bringing our products, tools, and operating structure together so we serve customers consistently and run the company more efficiently. Third, operationalize, building AI and automation into our products and into how we work to take out costs and to speed up customer workflows. We intend to keep reinvesting our savings into our people, process, and technology. We have valuable products, deep customer relationships, and critical market positions. As these market conditions improve and transaction volumes recover, we expect a greater share of incremental revenue to translate into increased Adjusted EBITDA and cash flow.

[Todd Schulte, Interim CEO and COO at Dye & Durham]

Earlier this month, we announced support agreements with two of our largest shareholders, Plantro and EdgePoint. Their backing will help us drive these goals forward, and we are aligned on building a stronger Dye & Durham for the future. There is more work ahead, and we expect this transition to continue through fiscal 2027. I want to thank our employees around the world for their work this quarter and our customers and shareholders for their continued support. With that, we would be happy to take your questions. Operator?

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Thank you. And your first question comes from the line of Stephen Machielsen from BMO Capital Markets. Please go ahead.

[Stephen Machielsen, Analyst at BMO Capital Markets]

Hi. Thanks for taking my question. I am just on the line for Thanos. With the recent change in the Board, what do you think we can expect with respect to changes in strategy or approaches to the company's current leverage? With that, can we get an update on the status of the strategic review and the hunt for a permanent CEO?

[Todd Schulte, Interim CEO and COO at Dye & Durham]

Yeah. I will take the second part of that question first. This is Todd Schulte, by the way. The hunt for a permanent CEO is still ongoing, so that is still a process, and we do not have an end date on that right now. But it does not mean we are not still progressing with what we are doing. Your comments around the financial services, the strategic process is still ongoing, and that is about what we can say on that. We cannot get into too much more detail in that particular area at this time. The first part of your question, can you repeat the first part again? I am sorry.

[Stephen Machielsen, Analyst at BMO Capital Markets]

Yeah. Just with the two additional Board members, including one who has a long history with the company, what can we expect in terms of changes to the strategy? Will there be a review of the strategy in the near-term, or is it just going to be status quo for the next few quarters?

[Todd Schulte, Interim CEO and COO at Dye & Durham]

I think it is more along the lines of the status quo for the next few quarters. This is a situation where we have been working on strategy and are going to continue forward with this. The new Board members are behind it and going in the correct direction. I think one of the things we have maybe lacked at this company to some extent is some stability and consistency in what we are doing from a strategic perspective. We are always looking at it and always refining how we are operating, where we are operating, what we are doing, what are our next directions to go. But as far as an overall strategy change, no, I do not foresee anything like that.

[Stephen Machielsen, Analyst at BMO Capital Markets]

Okay. I'll look forward to that. I guess if we dig into some of the segments, let's just start with banking software. It's another quarter of year-over-year declines. Can you give us some context or insight into what's happening with that business?

[Todd Schulte, Interim CEO and COO at Dye & Durham]

Steve, do you want to take the specific on that one? I'm sorry.

[Steve Waszak, Interim CFO at Dye & Durham]

Yeah, guys. I think in terms of the banking software, it really relates to the market conditions, right? Where the market goes in terms of some of the real estate activities and volumes, you're seeing a direct reflection of that. We're still very bullish and feeling good about it relative to what we're doing internally and how we're supporting our customers in that regard, but the market's got to recover for us.

[Stephen Machielsen, Analyst at BMO Capital Markets]

That's in the banking business, so some of the weakness in real estate is bleeding into that business.

[Steve Waszak, Interim CFO at Dye & Durham]

No question. Yeah. We're really The company in total is dependent on it. It's certainly in the Canada space as well.

[Todd Schulte, Interim CEO and COO at Dye & Durham]

Yeah, I would say that actually exists in all regions to some extent. There are things we can do as a company, and we're putting those things in place, but we are definitely seeing headwinds just with the macroeconomic environment.

[Stephen Machielsen, Analyst at BMO Capital Markets]

Okay. And just in the Canadian real estate business, how much of the weakness there would you attribute to market softness versus working through some contract renegotiations that would have happened early last year versus working through additional churn? Can you give us a breakdown on how those various factors impacted the year-over-year or even quarter-over-quarter comps?

[Todd Schulte, Interim CEO and COO at Dye & Durham]

Yeah. We actually did some math around that. We think 70%-75% of what we are seeing from a miss point of view is market-related and macro-related.

[Stephen Machielsen, Analyst at BMO Capital Markets]

Okay. I'll pass the line. Thanks.

[Steve Waszak, Interim CFO at Dye & Durham]

Thanks, Stephen.

[Operator]

Thank you. Your next question comes from the line of Stephen Boland from Raymond James. Please go ahead.

[Stephen Boland, Analyst at Raymond James]

It's just following-up a little bit on contract renewals. Are you seeing a stabilization in customer base? We certainly hear that there's competitors circling around your customer base, so I'm just wondering if you can comment on if the stabilization is occurring.

[Todd Schulte, Interim CEO and COO at Dye & Durham]

I would say yes, stabilization is occurring. Are we to a point where we are totally stable yet? No. I would say the decline is slowing in what we've actually experienced in general. I think more of this is around a decrease in transactions, which is kind of what I referred to a little bit earlier, as opposed to true customer churn that you might experience.

[Stephen Boland, Analyst at Raymond James]

Okay. The second question is, recently, I think when we spoke, we were talking about the alignment between sales, technology, looking at the product lineup. Is it early days there, or is that starting to occur and be passed on to the customer base?

[Todd Schulte, Interim CEO and COO at Dye & Durham]

It's ongoing, but as you might imagine, it's a pretty big lift to do a lot of that. I would say we're in two different work streams at this point. One is, really goes back to that stabilization. What are we doing to make sure what we have is operating and functional and working for our customers? The other is defining and delivering, I should say, what the future is going to be within our particular markets around the software and tech-enabled services that we provide.

[Stephen Boland, Analyst at Raymond James]

Okay. Maybe just another thing on churn. I mean, it's been a difficult, I can imagine it's been a difficult to be an employee there over the past several years with the management changes and vision changes. Is your employee base stable now? I don't want to go too much detail there. I'm just curious if there is a positive outlook in terms of the employee base.

[Todd Schulte, Interim CEO and COO at Dye & Durham]

Yeah. Not to again get into too much detail. We do have some attrition, but it was not attrition that has really stood out one way or another from a positive or a negative perspective. It does not seem to be attrition in one particular region over another. I would just call it normal. We have not actually seen anything where we have had a mass exodus or a lot of disruption with our employees. I would actually say our employees seem to be a little more stable in general, because I think we are doing a better job in general of talking to them, including them, and having internal transparency, which I think is important in running a company.

[Steve Waszak, Interim CFO at Dye & Durham]

Hey, Stephen, what I would say too, this is Steve, the CFO. What I would say is, by changing the company's operation to make it more globalized by function, John has global sales, Jason has global development technology strategy. By doing that, I think it is engaging people much deeper, and these guys are making some real inroads by going and visiting these sites and soliciting employees' inputs. We have got some really good engagement happening with the employee group. I think that is really maturing and starting to show its value in terms of what we are doing to support customers, our customer assurance, things of that nature. We are pretty excited about it actually, in terms of how Todd has reorganized the company in this global sense, so that it is one team as opposed to any silos at this point. I think we are seeing that.

[Steve Waszak, Interim CFO at Dye & Durham]

It is more qualitative today, but I think the excitement and the energy has certainly picked up.

[Todd Schulte, Interim CEO and COO at Dye & Durham]

Steve brought up the topic of silos. One big push we have internally and we talk a lot about is tearing down silos in this organization, geographically, product-wise, practice area-wise. We are one unit, and we will operate in that manner.

[Stephen Boland, Analyst at Raymond James]

Okay, that's helpful. Last one for me, this is winter season coming in. Housing volumes are pretty bad right now, but tends to be the lowest amount of volume over the winter months. There's probably an expectation of even lower transactions, lower revenue. I just want to make sure that you think you're going to be comfortable with your covenants by the end of next quarter.

[Steve Waszak, Interim CFO at Dye & Durham]

Yeah, we don't really speak prospectively on that, but you can see by the past two quarters how we've managed our covenants, how we've managed our cash flows, has really transitioned to where we have good control. Part of this is by bringing the organization together globally. We have very good control visibility on cash flows both directions. You can see part of it is, we've reduced the expenses by CAD 10 million year-over-year, same quarter. It's a mix of things, but we feel we have good visibility, good control, and do some scenario planning to certainly be prepared should we have some surprises, as you comment on volumes and things of that nature around transactions. In terms of how we're running the business, we're feeling very good about the model we have and the visibility we have.

[Stephen Boland, Analyst at Raymond James]

Okay. That's it for me. Thanks, guys.

[Steve Waszak, Interim CFO at Dye & Durham]

Thank you, Stephen.

[Operator]

Thank you. Your next question comes from the line of Peter Youssef from Morgan Stanley. Please go ahead.

[Peter Youssef, Analyst at Morgan Stanley]

Hey, thank you for taking the questions. Not to harp too much on the churn side of things, but I was curious if you guys quantify that in any way in terms of splitting out the actual churn number. If not, do you have a sense for the split of your revenue that's coming from new contracts in terms of ones that weren't being renewed in terms of completely new customers as opposed to the percent of your contracts that are being renewed?

[Todd Schulte, Interim CEO and COO at Dye & Durham]

Yeah, I'll start with that, and Steve may be able to add some. I would say churn, the way I define churn, and I've always defined churn, is losing a specific customer. While some customers have gone away, it's not to the extent that you would think. This is more of a situation of dual sourcing or just a decrease in transaction, and that's what drives a decent amount of our revenue. So, that is what we're seeing as opposed to a total situation where we're losing a customer or anything like that. So, that kind of addresses the churn side of your question.

[Peter Youssef, Analyst at Morgan Stanley]

Okay. In terms of your existing contracts, what's the average length for those?

[Steve Waszak, Interim CFO at Dye & Durham]

Yeah, it's probably a metric that we do not report on today. But I would say that the average length of those contracts is, it's really around repetitive business with the customer as opposed to longer-term contracts in terms of what the market tells us today. We don't really run our business on long-term contracts per se. It's more about the customers, what transactions are they driving with us, what applications are they using, what platforms are they using, is really what drives the customer's business and the stickiness of that business as opposed to long-term contracts, if that makes sense.

[Todd Schulte, Interim CEO and COO at Dye & Durham]

I would also say we have variability on a product-by-product basis. Some of our products are a bit more sticky, and that goes with more of a typical software life cycle that you might see. So, a life cycle might be, and again, we don't have exact numbers on this, but might be in the 8-10 year range on a back office piece of software that we run.

[Peter Youssef, Analyst at Morgan Stanley]

Okay. That's very helpful. Thank you.

[Steve Waszak, Interim CFO at Dye & Durham]

Thank you very much.

[Operator]

Thank you. Our last question comes from the line of Sean Mulroy from Redwood. Please go ahead.

[Sean Mulroy, Analyst at Redwood]

Hey, guys. Thanks for taking our questions. I was just wondering if you can comment if there has been any churn within the financial services business.

[Todd Schulte, Interim CEO and COO at Dye & Durham]

Churn? Are we talking specific customer churn or employee churn, or?

[Sean Mulroy, Analyst at Redwood]

Yeah, customer churn on the banking technology.

[Todd Schulte, Interim CEO and COO at Dye & Durham]

We've seen a decrease from a particular customer in that area for financial services in the Q1 time period.

[Sean Mulroy, Analyst at Redwood]

Is that customer in Canada? Was that a material reduction in revenue from them?

[Steve Waszak, Interim CFO at Dye & Durham]

Well, I think, Sean, you probably know our business as well as anybody from your closeness to us. All of our customers in that space, they're all material in terms of what they contribute to the business. So they all have material contributions. So, I would say that it's no different than any other customer. We're just seeing, as Todd referenced to earlier, we're seeing some customers where they're doing some dual sourcing relative to actually moving away from the company or anything of that nature.

[Todd Schulte, Interim CEO and COO at Dye & Durham]

That's kind of where I was going to go, because you mentioned churn, and I don't know if I'd totally define it as a churn. It's more of a dual sourcing situation.

[Sean Mulroy, Analyst at Redwood]

Okay, that's helpful. My last one was, I was just wondering if you can help us quantify if the magnitude of the contracts on the legal side of the business that might still be priced too high or have minimums that are ambitious relative to the current market volumes. Thank you.

[Steve Waszak, Interim CFO at Dye & Durham]

Yeah. Hey, Sean, I think this is Steve again. We're really moving away from the minimums for that perspective. As we renew new contracts and as you look out, the minimum is not as much there on a straight minimum. The way John is doing the contracting, I think, is part of it's just being, how do you capture the mind share of people? It's really volume thresholds. As people achieve certain volumes, they're going to get different pricing as they get to those volume levels as opposed to straight minimums. Make sense?

[Sean Mulroy, Analyst at Redwood]

Yeah, understood. I was just wondering if there's a lot of minimum revenue that's still flowing through the current numbers.

[Steve Waszak, Interim CFO at Dye & Durham]

No, it's not a material matter anymore. It's not what it was, let's say, a couple years ago. Part of it is just pure accounting, how we recognize revenue, and what it takes to do that relative to these minimum contracts and things of that nature. So, some of it's commercial, some of it's just straight-up accounting and how we do rev rec and all that. So, it's a combination of those that move this further away from straight minimum contracts and more into this perspective volume-based contracts.

[Sean Mulroy, Analyst at Redwood]

Understood, and thanks for taking the questions.

[Steve Waszak, Interim CFO at Dye & Durham]

Thanks, Sean.

[Operator]

Thank you. That ends our question and answer session. I will now hand the call back to Todd Schulte for any closing remarks.

[Todd Schulte, Interim CEO and COO at Dye & Durham]

Thank you very much. Appreciate that. I want to take just a few minutes to say thank you to everybody who joined the call, and your questions. Hopefully we were able to expand on some of the information that we have already put out, and happy to do so. So, thank you again very much, and we look forward to a good quarter coming up here. So, have a good rest of your day. Goodbye.

[Operator]

This concludes today's call. Thank you for participating. You may all disconnect.

Participants

Executives

• Steve Waszak, Interim CFO
• Todd Schulte, Interim CEO and COO

Analysts

• Stephen Machielsen, Analyst at BMO Capital Markets
• Stephen Boland, Analyst at Raymond James
• Peter Youssef, Analyst at Morgan Stanley
• Sean Mulroy, Analyst at Redwood