DATA Communications Management TSE: DCM reported what executives described as a solid first quarter of 2026, with record adjusted EBITDA, improved free cash flow and continued debt reduction, even as revenue declined from a stronger year-earlier comparison.
President and CEO Richard Kellam said the company’s first-quarter results were “pretty much in line” with internal forecasts. Revenue fell 5% year over year, slightly worse than the company’s planned decline of 3% to 4%, but Kellam said the quarter began slowly and improved as it progressed.
“Certainly the declines have decelerated versus a year ago,” Kellam said, adding that the company exited the quarter with “good momentum.”
Adjusted EBITDA reaches recent high
Chief Financial Officer James Lorimer said DCM reported adjusted EBITDA of CAD 19.1 million in the quarter, up about CAD 500,000 from the same period last year. Lorimer said the result marked the company’s strongest EBITDA quarter in recent years.
“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,” Lorimer said.
Adjusted EBITDA margin was 16.3% of revenue, compared with 18.6% a year earlier. Lorimer described the 16.3% margin as a record high for the company. He also noted that the first quarter is typically seasonally stronger for DCM.
Adjusted net income rose 11% year over year to CAD 5.8 million, which Lorimer called a recent record high. Adjusted net margin was 4.9%, also described as a recent record. Kellam said adjusted earnings per share increased 22% on a basic basis and 11% on a fully diluted basis.
Free cash flow swings positive as debt declines
DCM generated CAD 10.7 million of free cash flow in the quarter, compared with negative CAD 7.4 million a year earlier, an improvement of more than CAD 18 million. Lorimer said the improvement reflected stronger cash from operations after changes in working capital, including the timing of collections, receivables and payments.
Net debt fell to approximately CAD 66.4 million, down 27% from a year earlier and 14% from year-end. Lorimer said net debt to adjusted EBITDA declined to about 1.65 times, rounded to 1.7 times in the company’s presentation.
Asked during the call whether the cash flow improvement represented a permanent efficiency gain, Lorimer said DCM benefited from strong collections late in the quarter and may “give a little bit of that back” in the second quarter. He said the company continues to focus on inventory reduction and working capital management, including efforts to extend some payment terms.
New business and technology offerings gain traction
Kellam said DCM had a “record quarter” for new logo wins, adding more than 40 new customers representing about CAD 4 million in expected annualized revenue. He said the company is forecasting between 3.5% and 5% of annual revenue from in-year new business, based on its pipeline, forecast and first-quarter run rate.
Technology-enabled services and hardware were areas of growth. Kellam said the combined technology services and hardware businesses rose 20% to CAD 10 million, representing 8.5% of total revenue, the highest share DCM has reported for those offerings.
- Technology and subscription services grew 7.4%, including platforms such as DCMFlex, contentcloud, Zavy and CCM360.
- Technology hardware solutions rose 64%, supported by momentum with regional healthcare providers in positive patient identification and retailers using mobile devices.
In response to an analyst question, Kellam said DCM saw strong momentum exiting the quarter in retail, transportation, manufacturing, quick-service restaurants and lottery. He said financial institutions had a softer first quarter, while healthcare also started softer but was showing a “very positive return” in the second quarter.
By product category, Kellam cited growth in labels and large-format applications, including in-store media and execution. He said transactional mail was “pretty steady,” while personalized direct communication faced some headwinds, partly because clients were waiting for clarity on Canada Post labor developments.
Cost discipline remains a focus
DCM continued to reduce expenses following its integration work. Kellam said selling, general and administrative expenses were CAD 19.8 million, down CAD 3.7 million, or 15.4%, from a year earlier. SG&A was 16.9% of revenue, compared with 19% a year ago.
Kellam attributed the improvement to productivity efforts, headcount management and the company’s strategy to “do more with less.” Active employee count declined to 1,448, down 22.6% from the time of the MCC acquisition, while revenue per employee was approximately CAD 307,000 to CAD 308,000.
The company also returned CAD 1.7 million to shareholders during the quarter through its quarterly dividend of $0.025 per share and the repurchase of 157,500 shares. Kellam said DCM intends to continue repurchasing shares as the year progresses.
Outlook includes stabilization signs and macro risks
Looking ahead, Kellam said DCM is seeing early signs of market stabilization, with most business units in positive growth or returning to growth. He said the company will focus on revenue retention, new business development, gross margin improvement, operational efficiencies, digital acceleration, cash flow, capital returns and debt repayment.
Executives also said DCM is evaluating opportunistic mergers and acquisitions. Lorimer said the company is seeing opportunities in core print areas, including large format and labels, as well as commercial print and direct mail. Kellam said DCM’s integration of Moore Canada Corp. is now complete, including footprint consolidation, the closure of four factories and the move to one integrated ERP and MRP system.
However, Kellam pointed to several uncertainties, including the Canada Post vote, upcoming CUSMA trade negotiations, elevated fuel costs, raw material pricing and supply chain impacts. He said DCM is prepared to respond to headwinds and has cost discipline and a stronger balance sheet to provide flexibility.
Asked about customer spending, Kellam said DCM is not seeing a significant pullback in budgets, apart from some clients holding back on time-sensitive mail while awaiting clarity on Canada Post. Lorimer added that DCM is seeing price increases across paper, inks and consumables, but has not seen supply disruptions or a significant reduction in client orders or planning.
About DATA Communications Management TSE: DCM
DATA Communications Management 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.
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