DCM’s Revenue & EBITDA Growth Continues to Benefit from MCC Acquisition with Deal Synergies Now Targeting up to $35M

December 28, 2023 - Baystreet.ca


Equity Research firm eResearch Corp. (www.eresearch.com), recently published a 15-page update Equity Research Report on DATA Communications Management Corp. (TSX: DCM | OTCQX: DCMDF) as the company released third quarter financial results with a 94% increase in revenue due to the acquisition of Moore Canada Corporation (MCC), which closed in Q2/2023.

DCM is a Canadian-based provider of marketing and business communication solutions to companies in North America. Its technology-enabled content and workflow management capabilities, and data asset management (DAM) solution solve the complex branding, communications, logistics, and regulatory requirements of leading enterprises, so its clients can accomplish more in less time.

DCM's financial results for Q3/2023 showed revenue almost doubling to $122.7 million, attributed mainly to the strategic acquisition of MCC, with adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) rising by 28.2% to $11.8 million compared to the same quarter last year.

The report highlights DCM's revised forecast of merger synergies, now targeting between $30 million to $35 million over the next 18 to 24 months, an increase from the previous estimate of $25 million to $30 million. These synergies are expected to contribute significantly to the company's financial strength and operational efficiency.

The report discusses DCM's operational efficiency measures, including the consolidation of operational facilities and workforce reductions, which are projected to yield significant cost savings. DCM's strategic initiatives, including the alignment of commercial sales teams and implementation of a "one company" account coverage strategy, have been instrumental in driving revenue growth and enhancing client engagement.

In his analysis, Christopher P. Thompson, Director of Equity Research at eResearch, stated, "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." He further emphasized the company's strategic focus on enhancing gross margins and controlling SG&A expenses as key drivers of its financial performance.

The report provides an updated financial model for DCM, incorporating the latest financials and adjusting for further deal synergies and margin projections. The model estimates that DCM could generate over $60 million of EBITDA in 2024, which could be allocated towards debt reduction, dividend distribution, or exploring further acquisition opportunities

Even with DCM’s recent share price increase and based on eResearch’s model estimates, DCM has a low valuation multiple compared to its peers. The company is currently trading at 0.9x 2023 Enterprise Value to Revenue (“EV/Revenue”) compared with printer comps trading at 0.9x EV/Revenue but well below the Digital Asset Management (DAM) and Tech-Enabled Workflow providers trading at 3.1x and 2.1x EV/Revenue, respectively.

For more information about eResearch's 15-page update Equity Research Report on DCM, please visit www.eresearch.com.

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