Revenue & EBITDA Growth Continues to Benefit from MCC Acquisition; Deal Synergies Now Targeting up to $35M
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, data & content management, labels & asset tracking, location-specific marketing, and multimedia campaign management. (1.0) COMPANY UPDATE: (1.1) DCM reported Q3/2023 financial results with Revenue up 93.6% to $122.7M but slightly lower than our estimate of $129.1M due to seasonality. Adjusted EBITDA in the quarter was $11.8M, an increase of 28.2% from $9.2M in the same quarter last year. The Revenue and EBITDA growth were mainly attributable to the acquisition of Moore Canada Corporation (MCC), which closed in Q2/2023. (1.2) DCM has revised its forecast for anticipated merger synergies to between $30M to $35M over the next 18 to 24 months, up from the previous range of $25M to $30M with annualized savings of $17.5M expected in 2024. (1.3) We maintain that this transaction significantly bolsters DCM's growth potential and capabilities, offering economies of scale along with an expanded range of products, services, and technological advancements. (1.4) We estimate DCM could generate over $60M of EBITDA in 2024, which could be allocated towards debt reduction, dividend distribution, or exploring further acquisition opportunities. (2.0) FINANCIAL ANALYSIS & VALUATION: (2.1) We updated our model with the DCM’s recent financials and adjusted our model to include further deal synergies but slightly lower margins. (2.2) We estimate an equal-weighted price target of $6.90 based on a DCF valuation ($9.31/share), a Revenue Multiple valuation ($6.17/share), and an EBITDA Multiple valuation ($5.10/share). (2.3) We are maintaining a Buy rating and a one-year price target of $6.90.Data Communications Management is an unincorporated, open-ended, limited purpose trust. Through its subsidiaries, Co. is engaged in the provision of total document management solutions including printed products. Co. offers a variety of print and electronic products and related services, which include traditional business forms, labels, direct mail products, security documents, commercial print, and facility and print management.
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