DCM Balances Softer Q4 Revenue by Returning Cash to Shareholders with New Dividend Program

DATA Communications Management Corp. (“DCM” or “the Company”) is a Canadian-based provider of marketing and business communication solutions to companies in North America. Its technology-enabled content and workflow management capabilities solve the complex branding, communications, logistics, and regulatory requirements of leading enterprises so its customers can accomplish more in less time. Its services include printing, content management, digital asset management (DAM), labels & asset tracking, location-specific marketing, social media analytics, and multimedia campaign management. (1.0) REPORT HIGHLIGHTS (1.1) F2024 Preliminary Financial Results: DCM announced preliminary financial results for the fiscal year ended December 31, 2024. It expects revenue between $478 million and $480 million, slightly below the estimate of $484.7 million. Gross profit margin is projected at 27%, in line with our estimate. Adj. EBITDA between $62M and $64M, consistent with our prior estimate, and total net debt is expected to be approximately $79M, in line with our estimate. (1.2) Key Operational Developments: DCM’s revenue was impacted by project timing shifts, the exit from low-margin accounts, and the Canada Post strike. However, the completion of the Moore Canada Corporation (MCC) integration ahead of schedule and within budget contributed positively to profitability. Management continues to target gross profit margins above 30%. (1.3) Outlook: With MCC integration and restructuring complete, DCM is focused on profitable growth, product mix expansion, and cash flow improvement. (1.4) Dividend Program: DCM announced a $0.20 per share special dividend payable on March 25, 2025, and a regular quarterly dividend of $0.025 per share, beginning April 4, 2025. (1.5) Financial Strategy: The Company has allocated $12.4M for shareholder distributions, signaling confidence in its free cash flow and a shift toward capital return strategies. (2.0) FINANCIAL ANALYSIS & VALUATION: (2.1) We have adjusted our model based on the Q4/2024 preview financials and slightly reduced revenue projection in 2025 accordingly. (2.2) We estimate an equal-weighted price target of $6.58 based on a DCF valuation ($10.00/share), a Revenue Multiple valuation ($4.94/share), and an EBITDA Multiple valuation ($4.80/share). (2.2) We are maintaining our Buy rating and our one-year price target of $6.55.