Data Communications Management Corp. (DCM:TSX; DCMDF:OTCQX) summarized its financial and operational achievements in 2023 and its priorities for 2024, in a news release.
"[2023] was a transformative year for DCM, highlighted by the completion of our acquisition of Moore Canada Corp. (MCC) and the significant progress we made in our post-merger planning and execution," Richard Kellam, president and chief executive officer, said in the release.
Data Communications Management attained 2% year-over-year organic growth and increased revenue and gross profit, in 2023. Compared to 2022, revenue was up 63.5% to CA$447.7 million (CA$447.7M), and gross profit was 41.2% higher, coming in at CA$118.9M.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for 2023 was CA$53.4M, 30.3% better than in the prior year. The company attributes growth here to the addition of the MCC business along with unwavering focus on improving gross profit margins and controlling sales, general and administrative expenses.
"Our commercial team delivered solid performance throughout the year, expanding revenue with existing clients, winning new logos and building a strong new business pipeline focused on the value we can deliver to clients with our combined product and service offerings," Kellam added.
During 2023, Data Communications sold its facilities in Oshawa and Fergus, Ontario as part of its plan to consolidate the number to 10 from 14. Divesting these two assets generated CA$30.5M in gross proceeds, CA$29.5M in net. With these funds, the company repaid a credit facility gained in the MCC transaction.
Since combining with MCC, DCM reduced its credit facilities balance by CA$101.9M, or 30%, and lowered its net debt 39%. The company also has worked on four areas of merger integration, operational, organizational and related to procurement and revenue growth. From these efforts, it still expects to realize CA$30–35M worth of synergies over the next 12 months.
As for the last quarter of 2023, it was remarkable for Data Communications having achieved record revenue and record adjusted EBITDA, CA$133.1M and CA$17.7M, respectively.
Looking ahead in the news release, DCM presented its objectives for this year. The firm intends to complete the MCC integration, keep working to improving gross profit margins and capitalize on its larger scale to grow business overall.
A Partner to Large Businesses
Headquartered in Ontario, Canada, Data Communications Management provides digital and print solutions to help large enterprises simplify their marketing and communications operations and workflows, according to its website. Whenever possible, DCM employs digital options before print ones. Its approach, technologies and end-to-end services allow their clients to get more done, efficiently and easily. The companies DCM works with span numerous sectors and include financial services, retail, healthcare, energy, other regulated industries and the public sector.
As a testament to its performance in 2023, DCM earned a place on the 2024 OTCQX Best 50 List of Top Performing Companies, as noted in a news release. It ranked fifth.
Two Hot Markets
Data Communications' business falls into at least two sectors, which, according to research-based reports, are expanding rapidly: marketing technology, or martech, and digital asset management, or DAM.
The global martech industry is forecasted to experience "unprecedented growth" in the coming years, increasing in value by 21% to US$489 billion (US$489B) this year alone, up from US$403B in 2023, according to a 2024 report by The Business Research Co. The factors contributing to this future expansion are digital transformation, artificial intelligence, social media proliferation, automation and personalization, the rise of digital marketing and advancements in managing customer relationships.
Between now and 2028, the report indicated, martech is expected to grow 148% and hit US$1 trillion in value.
As for the global DAM market, The Business Research Co. predicted its size will reach US$12.29B in 2028, expanding at a 16.8% compound annual growth rate. The field of DAM comprises software-based solutions for storing, retrieving and using digital assets.
The Catalyst: More Free Cash Flow
The company aims to increase its free cash flow in 2024 so it may further reduce its net debt and be able to invest in strategic opportunities in the future. Clarus Securities Analyst Noel Atkinson expects Data Communications to be successful in this endeavor.
"We continue to expect Data Communications to become a cash flow machine in 2025 once the cost synergies are realized" from the acquisition of Moore Canada Corp. (MCC), he wrote in a research report.
In fact, Clarus projects Data Communications' future revenue to reach CA$543.6M this year and CA$567.9M in 2025.
Analysts Like the Stock
Atkinson reiterated his Buy rating on Data Communications, in his latest report, of March 21.
He commented, "[Its] shares offer exposure to solid revenue growth, one of the largest and most diversified corporate client bases in Canada, some inflation protection via contractually permitted input cost passthroughs and further potential torque if the company gets traction with new high-margin, subscription-based enterprise cloud offerings now entering the market."
Two other analysts, Christopher Thompson with eResearch and Nick Corcoran with Acumen Capital Partners and, also recommend DCM as a Buy. Their target prices reflect a 107% and 80% potential return for investors, respectively.
Ownership and Share Structure
According to Reuters, 11 strategic entities hold 31.98%, or 17.54 million (17.54M) shares, of Data Communications Management. The three with the largest holdings, from most to least, are KST Industries Inc. with 9.36% or 5.15M shares, Director Michael Sifton with 9.26% or 5.04M shares and Vice Chairman Gregory Cochrane with 6.32% or 3.48M shares.
Six institutions own 6.92% or 3.81M shares. The Top 3 are CI Global Asset Management with 2.73% or 1.5M shares, BMO Asset Management Inc. with 2.45% or 1.35M shares and Timelo Investment Management Inc. with 1.57% or 0.86M shares.
Retail investors own the remaining 61.1%.
Data Communications has 55.02M outstanding shares and 37.48M free float traded shares.
The company's market cap is CA$134.28M and its 52-week trading range is CA$2.01−3.18 per share.
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