DATA Communications Management Q1 2026 Earnings Report

DATA Communications Management EPS Results

• Actual EPS: C$0.10
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

DATA Communications Management Revenue Results

• Actual Revenue: $117.44 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

DATA Communications Management Announcement Details

• Quarter: Q1 2026
• Date: 5/11/2026
• Time: After Market Closes
• Conference Call Date: Tuesday, May 12, 2026
• Conference Call Time: 9:00AM ET

DATA Communications Management (TSE:DCM) Corp is a communication solutions partner that adds value for major companies across North America by creating more meaningful connections with their customers. It pairs customer insights and thought leadership with cutting-edge products, modular enabling technology and services to power its clients' go-to market strategies. The company helps its clients manage how their brands come to life, determine which channels are right for them, manage multimedia campaigns, deploy location-specific and 1:1 marketing, execute custom loyalty programs, and fulfill their commercial printing needs all in one place.

DATA Communications Management Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: DCM said Q1 results were broadly in line with expectations, with adjusted EBITDA of CAD 19.1 million and a record-high 16.3% EBITDA margin for the company.
• Positive Sentiment: The company generated a strong quarter of free cash flow of CAD 10.7 million, a swing of more than CAD 18 million versus last year, helped by stronger collections and working capital improvements.
• Positive Sentiment: New business momentum was a highlight, with over 40 new logos added in the quarter, representing about CAD 4 million in annualized revenue and supporting management’s 2026 growth outlook.
• Positive Sentiment: DCM’s tech-enabled businesses continued to outperform, with technology services up 7.4% and technology hardware up 64%, pushing these offerings to a record 8.5% of total revenue.
• Neutral Sentiment: Management sees early signs of market stabilization, but flagged risks from a potential Canada Post disruption, CUSMA trade talks, elevated fuel costs, and raw material price increases that could affect future demand and margins.

Presentation

[James Lorimer, CFO at DCM]

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the DATA Communications Management Corp first quarter 2026 financial results conference call. My name is James Lorimer, the CFO of DCM, and I'm pleased to be hosting today's call. Joining me today is Richard Kellam, our President and Chief Executive Officer. Following our prepared remarks, we will be holding a Q&A session. As a reminder, this conference call is being broadcast live and recorded. We'd also like to remind everyone that Richard and I will be available after the call for any follow-up questions that you might have. Before we begin, I'll remind everyone that we will be referring to forward-looking information on today's call. This information is subject to certain risks and uncertainties as outlined in our forward-looking information disclosure in our recent press release, and more fully within our public disclosure filings on SEDAR+.

[James Lorimer, CFO at DCM]

This presentation will be added to our website for your reference, along with a post-view recording and transcript. Our detailed information is also available on our website and SEDAR+. Please follow us on LinkedIn and keep up to date with other business developments. I'll now turn the call over to Richard.

[Richard Kellam, President and CEO at DCM]

Thank you, James, and good morning. I know we have a couple shareholders joining us from other time zones, so good afternoon, good evening. Okay. I want to take you through kind of 10 points in the quarter. Overall, we delivered results that are pretty much in line with what we had forecasted and what our expectations for the quarter were. Point number one on revenue, we had some revenue headwinds declined at -5%, although we planned for them 'cause we had a higher comp year ago. We planned for -3% to -4%, so pretty much in line with what we planned. As the quarter progressed, we saw the quarter, you know, a slower start and an increase towards the end of the quarter as well.

[Richard Kellam, President and CEO at DCM]

Certainly the declines have decelerated versus a year ago. Overall, positive in what we planned. On new business development, we had really a record quarter in terms of bringing in new logos. Over 40 new logos on the quarter, equivalent to CAD 4 million in annualized revenue. I'll take you through a few details on that in a minute. Our technology services continued to shine, up 7.4%, and technology hardware up 64%. Again, a little bit more detail as we unpack the deck here. Adjusted EBITDA, very, very strong at CAD 19.1 million. If we went back a number of years, that is a record EBITDA quarter for us. 16.3% of revenues versus 18.6% a year ago.

[Richard Kellam, President and CEO at DCM]

Net debt down to CAD 66 million, down 27% over a year, over a year ago and down 14% versus year-end. Good positive progress there. Again, we'll take you through a little bit more detail. Our adjusted net income up 11% to CAD 5.8 million versus a year ago. Very, very strong free cash flow. You can see in this chart that we were +CAD 10.7 million versus -CAD 7.4 million a year ago. Just over a CAD 18 million swing on free cash flow, so very solid momentum there. We continue to drive hard on productivity improvements. You can see that our SG&A was down CAD 3.7 million.

[Richard Kellam, President and CEO at DCM]

On the quarter, we're below 17%, so you know, at least a point below what we forecasted, 16.9% of revenues versus 19% year ago. Adjusted earnings per share basic at 22% and diluted. I'll take you through a little more detail on this when we get to slide nine up 11%. Return of capital, CAD 1.7 million to shareholders. Again, a little bit more detail. Overall, a very good quarter financially and pretty much what we forecasted from a revenue standpoint with a slower start as planned and a good momentum as we exited the quarter. Okay? Now a little bit more detail as we progress. Total revenues in line, as I said, trending positively as the quarter progressed, we're expecting to see that continue.

[Richard Kellam, President and CEO at DCM]

Point number two, as I mentioned, our team is all in on new business development and what we call Horizon One, so in-year new business development. Not that we're not focused on Horizon Two and Horizon Three, sort of, you know, the next two to three years as well, lots of focus on in year. Picked up over 40 new logos all in the quarter. All these landed in the quarter. About CAD 4 million of expected annualized revenue. If we look at our pipeline and our forecast and our run rate, combined with the run rate we had in Q1, we're forecasting somewhere between 3.5%-5% of revenue, of annual revenue coming from new business in year. Very positive momentum and a great start.

[Richard Kellam, President and CEO at DCM]

Our commercial team is doing a fantastic job at delivering new business in the marketplace. Point number three, I talked about our tech-enabled services and hardware. If we combine those two business units, we are up 20% in aggregate to CAD 10 million, and this now represents 8.5% of our total revenues. The highest representation of total revenues that we've ever delivered. We split that apart into technology and subscription services. That grew by 7.4%, so those consist of things like our DCMFlex platform, our contentcloud Digital Asset Management solution, our Zavy social media analytics and social media management platform, and our Customer Communication Management platform 360, CCM360. Good momentum on the technology subscription services. On our technology hardware solutions, we're up 64%.

[Richard Kellam, President and CEO at DCM]

A couple highlights there. We had some really good momentum with a couple of regional healthcare providers in the PPID space and the positive patient ID space, as well as a couple of retailers in mobile devices. Some very good momentum there, and we're gonna see that continue as well. Lots of very interesting and solid technology-enabled hardware solutions opportunities in our pipeline right now. Over to James to talk about EBITDA.

[James Lorimer, CFO at DCM]

Thanks, Richard. In the quarter, we reported CAD 19.1 million of adjusted EBITDA. That was up about CAD 500,000 compared to what we did last year at this time. We went back a number of years and, not only is this kind of the strongest EBITDA quarter we've reported, we don't have to go back too far before the MCC acquisition when we were lucky to do CAD 19 million in a full year. Pleased with that result. Kind of a combination of, you know, managing our overheads and, you know, good kinda management.

[James Lorimer, CFO at DCM]

We also want to point out just, I think everyone that follows the company knows, the first quarter is typically kind of a seasonally stronger quarter for us, as evidenced by this quarterly chart going back the last couple of years. We also reported 16.3% EBITDA margin, which is also a record high for us. Very pleased with that result. Further, net debt came in at about CAD 66.4 million. Pleased with that. That's down significantly, of course, since the acquisition of Moore Canada, about three years ago. Also importantly, our net debt to adjusted EBITDA came down. The actual number's about 1.65x that you'll see in our detailed tables, rounded to 1.7x here.

[James Lorimer, CFO at DCM]

That's a full, kinda multiple turn down from the pro forma leverage we had in the business at the time of the Moore acquisition. Definitely, you know, positively, positive contributions from free cash flow generation here. Adjusted net income also came in at a recent record high, CAD 5.8 million. That's up about 11% versus a year ago. Our adjusted net margin came in at 4.9%, which is also a recent record high for us as well. Pleased with that. Free cash flow. Last year, our cash from operations after changes in working capital was -CAD 4.2 million. We saw a big swing there.

[James Lorimer, CFO at DCM]

A big contribution was certainly from working capital, based on timing of payments and receivables, et cetera, contributed to a strong operating free cash flow in the first quarter of this year compared to last year. Our free cash flow generated in the quarter, which we define as cash from operations after changes in working capital, less capital expenditures, and less lease principal payments, came in at CAD 10.7 million. As Richard mentioned, that's over a CAD 18 million swing from last year.

[Richard Kellam, President and CEO at DCM]

Thank you, James. If you look at this chart, talk about SG&A. Our SG&A is down CAD 3.7 million versus a year ago. I'm really actually proud of the team on how the team continues to drive productivity. You know, do more with less, which is our strategy, and the team's doing a fantastic job. You can see that we're at 16.9% of revenues, matching recent lows. We've had three quarters now where we're kind of below that 17 mark, if you look back over the last, you know, five or six quarters. Great job there. If you look at the chart on the left, our SG&A expenses were CAD 19.8 million, down 15.4% versus a year ago.

[Richard Kellam, President and CEO at DCM]

That's just, as I said, a result of the team doing more with less, driving productivity, managing headcount effectively, so great job there. If you look at our active employee count, continues to decrease. We're down to 1,448, and our revenue per head is around CAD 307,000-CAD 308,000 per head. Good, good progress. We're down 22.6% in headcount versus the MCC acquisition. Adjusted earnings per share, you know, coming back to my summary slide, up 22%. If we look at basic, so non-diluted, that's 55 million shares in our share count. If we take any options that are in the money, it's about 56.4 million shares. We're up 11% on EPS on a fully diluted basis.

[Richard Kellam, President and CEO at DCM]

Some good progress there, given the high earnings that we delivered on the quarter. Then, looking at return to shareholders and return of capital, we returned CAD 1.7 million. A quarterly dividend of $0.025. That's a 6.2% yield, so a solid yield, and we repurchased 157,500 shares in the quarter as well, and we will continue to do that as we progress through the year. Good, good return for shareholders on the quarter. Having a look at some priorities and a little bit of an outlook for the rest of 2026. Priorities, we are going to continue to maintain high revenue retention rate, which we have had no material losses in clients. We've had a great start to the year.

[Richard Kellam, President and CEO at DCM]

We're gonna continue to execute on this new business development initiative, especially focusing on Horizon One or in-year revenue opportunities. Gonna continue to improve gross margin through our business mix. You know, I often say to the team, "Business is very simple. Find out where you make the most money and sell more of it." We're certainly focused on that. We're gonna continue to drive operational efficiencies. You saw that in the SG&A, but that's right across our entire operational organization. Of course, drive digital acceleration where we have naturally a higher margin, that helps the mix significantly. We're gonna continue to focus on strong cash flow and continued capital returns and continue to drive that debt repayment as well.

[Richard Kellam, President and CEO at DCM]

Finally, we're gonna leverage opportunities in the market for any opportunistic M&A. It's a interesting market right now, there's certainly things we're looking at, but they've gotta be right, and they've gotta fit to what our priorities are. Some good opportunities that we're considering. A little bit of an outlook for 2026. Early signs of market stabilization. We're seeing demand trends that are beginning to stabilize. We certainly saw that as we progressed through the quarter and as we exited last year as well. Most of our business units are in positive growth, are returning to growth. We cut our business by vertical, we cut it by customer, we cut it by operations or factory, and we cut it by leaders. We're seeing the majority of those now returning to growth.

[Richard Kellam, President and CEO at DCM]

As I said earlier, our new business activity is outstanding, and certainly a solid pipeline. Second outlook, obviously we remain very focused on execution. The macro environment certainly is somewhat uncertain, shall we say. There's a Canada Post vote that is happening now. It was kicked off on April 20th. It has to conclude by May 30th. That is that's still questionable, although we're expecting that will that vote will be favorable, but we don't know. We've obviously got the CUSMA trade negotiations that are, that will be happening this summer. We've got elevated fuel costs. That's certainly affecting freight and some key clients, especially in airlines.

[Richard Kellam, President and CEO at DCM]

We've got raw material pricing and supply chain impacts, which are obviously causing raw material increases, price increases that we're having to pass through. We're prepared to respond. We've got a good solid plan, and we've proven that over the last couple of years. We know how to respond to any headwinds. We do have a good plan. The teams organize for success if we get any of these headwinds. Of course, we've got a strong balance sheet, and we've got some very good cost discipline to provide any resilience or flexibility if we do get those headwinds or any extreme headwinds at least. That is our quarter. As I said, you know, a good solid quarter. We're expecting to deliver a good momentum as we progress through the year.

[Richard Kellam, President and CEO at DCM]

Now I'll turn it over to any questions.

[James Lorimer, CFO at DCM]

All right. Thanks, Richard. We'd now like to take questions from the audience. If you have a question and are accessing the call directly through Teams, you can either use the Raise Your Hand feature in Teams, and we'll queue up questions, or alternatively, you can also use the chat feature, and we will respond to chat questions as well. Please unmute your mic when we let you into the call, or we can help you with that as well if you have troubles with that. Please introduce yourself once you've joined the session, and we'll now take some calls. Looks like I have a question from George.

[George Anghelache, Analyst at Clarus Securities]

Yeah. Good morning, guys. This is George from Clarus Securities, dialing in on behalf of Noel.

[James Lorimer, CFO at DCM]

Sure.

[George Anghelache, Analyst at Clarus Securities]

Just a quick question here. You guys have touched on this, but can you give us some color on which customer verticals have the strongest momentum exiting Q1, and which product or service categories are showing the most strength as you guys move into the second quarter?

[Richard Kellam, President and CEO at DCM]

Yeah, I can take the first bit of that.

[James Lorimer, CFO at DCM]

Sure.

[Richard Kellam, President and CEO at DCM]

You pick up the second. From a vertical standpoint, we're seeing very strong momentum in retail, in transportation, in manufacturing, in QSR, and in lottery. We're still seeing a bit of a softer start in FI, and a softer start in Q1 in healthcare, but we're seeing a return, a very positive return in healthcare in Q2. We're certainly working hard, you know, to turn the FI in Q2 and Q3 as well. Majority of our verticals, positive growth. Of course, we've got a couple of big ones. One big one in particular, FI, that had some headwinds in Q1. But we've put some new leadership in place, and we're expecting to see that turn. That answers that question.

[Richard Kellam, President and CEO at DCM]

Your second part of the question, where are we seeing from a product type? James, you can pick up on this if you like. I mean, solid growth on labels, solid growth on our large format. So think of in-store, in-store media, in-store execution. You know, we showed you the growth on technology. We have pretty steady, kind of flat on what we call our BCS business, so that transactional mail. We still have a few headwinds on personalized direct communication. That's probably due to clients waiting to understand what's going on with the postal strike. You know, some of the conventional FI, you know, forms that we do, we're certainly seeing, you know, a little softness there. Anything I'm missing?

[James Lorimer, CFO at DCM]

I think you did mention the lottery vertical is strong.

[Richard Kellam, President and CEO at DCM]

Lottery, yes. Yeah.

[James Lorimer, CFO at DCM]

Thermal rolls that we produce for the lottery industry, we're seeing some positive momentum there as well.

[Richard Kellam, President and CEO at DCM]

Yep.

[George Anghelache, Analyst at Clarus Securities]

Got it. Got it. Well, thank you, guys. That, that's helpful. That's it for me.

[James Lorimer, CFO at DCM]

Right. Thanks, George. We have a message caller, Thomas.

[Analyst at Paradigm Capital]

Hey, good morning, James and Richard. Thomas here calling from Paradigm Capital. My question's just on the cash flow. It's nice to see it pick up considerably this quarter. We do typically think of, like, Q1 as a working capital outflow quarter. Maybe if you can walk through, you know, how we should think about that as we go forward. Maybe, is it more of, like, a permanent efficiency gain there?

[James Lorimer, CFO at DCM]

Good question, Thomas. You know, we did benefit in the first quarter. I think a little bit, Richard talked a little bit about the slope of our revenue through the quarter. It was, you know, a little weaker in the early month and kind of accelerated through the balance. We actually had some pretty strong collections in the kind of latter part of the quarter, which helped in terms of our ability to pay down our line. You know, we will probably give a little bit of that back in the second quarter. Other big initiatives that we have are related to inventory reduction. I think you'll see that our inventory levels came down a little bit in the quarter. You know, we're continuing to focus on that.

[James Lorimer, CFO at DCM]

We had a little bit of some kind of fluctuations in our payables as well. We're certainly looking to try and extend some of our terms just to, you know, continue to kind of manage our strong working capital. Overall kind of pleased with the number. You know, our revolving line of credit certainly benefited from the cash inflow, and so you'll see that down in the quarter. We will probably see a little bit of increase in that in the second quarter. On balance, I think for the year, you know, we're kind of comfortable with, you know, continuing to drive free cash flow through the balance of the year.

[Analyst at Paradigm Capital]

Okay, great. That's very helpful. Next, just on the M&A front, I'm just curious what you guys are seeing out there. Like, are evaluations becoming a little bit more favorable? Just in general, with the integrations complete, how are you thinking about capital allocation priorities?

[James Lorimer, CFO at DCM]

Sure. Two questions. Maybe let me start with the environment there. We're seeing a number of opportunities, both in kind of our core print areas. You know, I'd say areas that we're, you know, particularly interested or looking at are a couple of the sectors actually that Richard mentioned, like large format and labels, where, you know, we see good growth profiles in the industry. We're seeing some kind of more opportunistic company opportunities in, you know, commercial print and direct mail, for example. We're also seeing some and I'd say multiples in those areas have, I don't know that they've really come down, but there's just a lot of opportunities, we're trying to be very selective in terms of what we focus on.

[James Lorimer, CFO at DCM]

The, you know, the better companies tend to have a higher multiple, and in some areas where there might be something that's, you know, particularly strategic, we might stretch a little bit on the multiple. Otherwise we're being pretty practical in terms of kind of the multiples that we're, that we're looking at. Second part of the question?

[Richard Kellam, President and CEO at DCM]

Well, second part is, you know, are we ready for M&A? I think the question is, yes, all of our integration work posed a pretty heavy lift acquiring MCC and integrating Moore Canada Corp. We now are fully integrated. As our shareholders know, we've consolidated our footprint, closed four factories. We now have one integrated ERP and MRP system across our entire network, which was a heavy lift. That's all behind us now. We're in a very good position to look for opportunities in the market for some acquired growth. At the same time, we work hard to drive that organic growth.

[Analyst at Paradigm Capital]

Great. It sounds good. Thank you. Just my last question on the macro picture. I know everybody's a little bit confused right now, lots of volatility. Just curious what you guys are seeing from customers and their spending decisions. Is it having an impact at all, especially regarding rising fuel costs? That's it.

[Richard Kellam, President and CEO at DCM]

It's a great question. We're actually not seeing any significant pullback in budgets at this point, other than, you know, as I mentioned, a little bit of waiting to see what's happening with Canada Post. You know, clients not producing mail that may be time spent, time stamped rather, that they can't mail. Other than that, we're not seeing any pullback. We're seeing pretty positive sentiment in the market, you know, at retail, at QSR, at manufacturing. Transportation, of course, you know, we're getting some fuel surcharges that we're successfully passing through to clients. No real uncertainty.

[Richard Kellam, President and CEO at DCM]

You know, back to a point I made earlier, lots of opportunities for new business development in the marketplace now that we can focus on that given all of our integration and heavy, you know, kind of work is behind us, and we're delivering good results there. Even if there are some minor, you know, economic impacts, you know, we feel we've got a good new business pipeline now. Major, of course, you know, anything catastrophic, if, you know, CUSMA is not you know, settled, if the Canada Post strike actually happens, you know, that's, those are, you know, sizable impacts to a business like ours that does a lot of mailing, and, you know, moves a lot of packages and labels through a Canada Post network as an example.

[James Lorimer, CFO at DCM]

I might add, you know, Richard alluded earlier in his kind of closing remarks, in the presentation that we are seeing, price increases. Pretty much right across the supply chain, both in paper, inks, and consumables, and largely that's related to, you know, oil price et cetera, as and kind of byproducts that end up in some of the material that we use. We haven't seen at this point any supply disruptions or challenges. We'll, we're certainly monitoring the situation very closely, but we're also preparing our clients for price increases across kind of the product spectrum that we have. To Richard's point earlier, you know, despite that, we haven't really seen any significant pullback in orders or planning from our clients.

[Analyst at Paradigm Capital]

Sounds good. Congrats on the quarter and, I'll pass it along.

[Richard Kellam, President and CEO at DCM]

Thank you.

[James Lorimer, CFO at DCM]

Okay, thanks. It appears we don't have any further questions. Thank you everyone for joining our call and your interest in DCM. As a reminder, Richard and I can be available after the call if you have any follow-up questions. That concludes our call this morning. Hope everyone enjoys the rest of your day. You may now disconnect your lines.

[Richard Kellam, President and CEO at DCM]

I just wanna say one thing before we close the call. I just wanna thank all of our associates at DCM for an outstanding job, great, incredible engagement, and appreciate the efforts that everybody puts into delivering this success. Thank you, and thanks to the support of our shareholders' ongoing support as well. Thank you.

Participants

Analysts

• George Anghelache, Analyst at Clarus Securities
• James Lorimer, CFO at DCM
• Richard Kellam, President and CEO at DCM
• Analyst at Paradigm Capital