What Dye & Durham (DND) Said on Its Q4 Earnings Call

Key Points

• Fourth-quarter performance improved: Revenue excluding the Credas disposal rose 4% to C$104.2 million, while adjusted EBITDA increased 18% and margins expanded to about 53%. Operating cash flow also grew 15% to C$65.6 million.
• Fiscal 2026 reflected a difficult transition: Full-year revenue fell 6% excluding Credas and adjusted EBITDA declined 14%, amid weaker practice-management and data-insight volumes, customer losses and reinvestment in labor and IT. Banking technology revenue grew 5%, partly offsetting the declines.
• Cost reduction and deleveraging remain priorities: Dye & Durham achieved about C$20 million in annualized cost savings and reduced borrowings to approximately C$1.28 billion from C$1.59 billion. The company is also shifting toward more flexible pricing, while permanent CEO and CFO searches and a strategic review remain underway.

Dye & Durham TSE: DND reported fourth-quarter revenue growth excluding the impact of its Credas disposal, alongside margin expansion and higher operating cash flow, as the legal technology and financial software provider continued an operational turnaround centered on automation, artificial intelligence and cost reductions.

For the fourth quarter ended June 30, 2026, revenue was C$104.2 million, down 1% from the prior-year period on a reported basis. Excluding Credas, revenue rose C$3.5 million, or 4%, driven primarily by the company’s practice management and payment infrastructure platforms in Canada.

Adjusted EBITDA increased 15% to C$55.1 million. Excluding Credas, adjusted EBITDA rose 18%, while adjusted EBITDA margin expanded to about 53% from approximately 45% a year earlier. Cash flow from operating activities increased 15% to C$65.6 million.

Full-Year Results Reflect Transition

For fiscal 2026, Dye & Durham recorded revenue of C$410.7 million, down C$30.1 million, or 7%, from fiscal 2025. Excluding the Credas disposal, revenue declined C$24.6 million, or 6%.

Interim Chief Financial Officer Steve Waszak said the annual revenue decline was primarily tied to a market downturn and lower volumes and pricing in the company’s practice management and data insight platforms. He said those factors reflected customer losses and contract renewal terms.

Growth in banking technology partly offset those declines. Banking technology revenue increased C$4.8 million, or 5%, to C$108.3 million during the year, according to Waszak. The company also cited growth from its LexisNexis Affinity platform.

Fiscal-year adjusted EBITDA fell 15% to C$198.8 million, or 14% excluding Credas. Adjusted EBITDA margin was approximately 48%, compared with roughly 53% in fiscal 2025. Waszak attributed the decline to lower revenue, reinvestment in labor and IT infrastructure to stabilize the business, and lower capitalization rates during the first half of the year.

The company reported a fiscal-year net loss of C$38.5 million, narrowing from a C$88 million loss a year earlier. The result included an C$81.5 million gain on the sale of Credas, as well as lower amortization, depreciation, acquisition-related restructuring and other costs. Operating cash flow increased 4% to C$153.4 million.

Automation and Cost Savings Drive Margin Focus

Interim Chief Executive Officer Todd Schulte said the company is working to standardize processes across its regions, automate high-volume operational workflows and use AI to improve customer support and internal efficiency.

“Automation is how we are building a lasting, more efficient cost structure,” Schulte said. He said the company is automating manual fulfillment and operating processes so that repeatable work is handled by systems rather than manually.

Fourth-quarter operating costs—including direct costs, technology and operations, general and administrative expenses, and sales and marketing—were approximately C$49 million, essentially flat from the third quarter, while revenue increased C$13 million sequentially, Schulte said.

Dye & Durham achieved approximately C$20 million in annualized run-rate cost savings during fiscal 2026, ahead of its target for the year. Management said the savings were generated through automation, process standardization and a more efficient global operating model, and that it expects to complete remaining initiatives by the end of fiscal 2027.

Schulte said the company intends to reinvest some savings in product development, automation and customer-facing initiatives. While the company has primarily focused on costs in recent months, he said management has also begun evaluating potential new revenue streams, though he said it was too early to provide details.

Canadian Activity Stabilizes; Contract Practices Shift

Canada revenue increased 9% year over year in the fourth quarter, while Canada segment adjusted EBITDA rose 13%, Schulte said. He attributed the broader quarterly improvement partly to market conditions and seasonality, adding that revenue recognition in some areas was stronger in the fourth quarter than at other times.

Asked about customer churn in the Canadian practice-management business, Schulte said the company was seeing transaction volumes stabilize. “We’re seeing the churn decrease, but we’re seeing transaction volumes stabilize to what they were showing before,” he said.

Management also said it has adjusted contract renewal practices in response to customer feedback. Waszak said the company has moved away from many contractual minimums and is seeking more market-based and value-based pricing arrangements. He said transaction pricing has generally not been reduced, aside from certain customer-specific situations based on factors such as volumes and customer relationships.

Waszak added that the company had not seen an adverse impact on margins from those changes and that margin expansion in the fourth quarter reflected the leverage in its cost structure.

Debt Reduction and Leadership Searches Remain Priorities

The company said it was in compliance with the financial maintenance covenants in its senior credit agreement as of June 30. Dye & Durham had C$29.5 million drawn on its revolving credit facility at year-end, or about 28% of the facility, below the 35% threshold at which its leverage covenant is tested. Its consolidated first-lien leverage ratio was approximately 5.17 times, below the 5.8-times maximum.

Cash and cash equivalents totaled C$41.4 million. During fiscal 2026, the company repaid C$185 million of convertible debentures that matured in March and used C$129.8 million of net proceeds from the Credas sale to prepay portions of its Term Loan B, senior secured notes and revolving facility.

Loans and borrowings, together with convertible debentures, declined to approximately C$1.28 billion at June 30, 2026, from approximately C$1.59 billion a year earlier. Waszak said deleveraging remains “100% a priority.”

Management also disclosed technical corrections recorded in the fourth quarter that related to the third quarter. The adjustments reduced previously reported third-quarter net income by C$32.5 million, including a C$29.9 million stock-based compensation adjustment and a C$2.6 million financing-cost adjustment. The company said the corrections did not affect cash, revenue, operating cash flow or adjusted EBITDA.

Schulte and Waszak remain in interim roles as the company searches for permanent leadership. Schulte said the company’s strategic review had been delayed by management changes but was nearing completion, though he did not provide a specific date.

About Dye & Durham (TSE:DND)

Dye & Durham Ltd is engaged in providing cloud-based software and technology solutions designed to improve efficiency and increase productivity for legal and business professionals. The company has business operations in Canada and the United Kingdom. The customers include law firms, financial service institutions, and government organizations.

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