Earnings call transcript: Data Communications Management’s Q1 2025 results fall short of expectations

Data Communications Management Corp (DCM) reported its financial results for the first quarter of 2025, revealing earnings per share (EPS) of $0.09, slightly below the forecasted $0.0967. The company’s revenue also fell short, coming in at $123.7 million compared to the anticipated $127.46 million. Despite these misses, DCM’s stock price saw a modest increase of 2.56%, closing at $2.00 in the latest trading session. According to InvestingPro analysis, DCM is currently undervalued, with a "GOOD" overall financial health score of 2.9 out of 5. For deeper insights, investors can access DCM’s comprehensive Pro Research Report, one of 1,400+ detailed company analyses available on InvestingPro.

Key Takeaways

• DCM’s Q1 2025 EPS and revenue both missed forecasts.
• The company’s stock price increased by 2.56% despite the earnings miss.
• DCM declared a special dividend of 20¢ per share, yielding 5.8%.
• Gross margin improved for the fourth consecutive quarter.
• The company experienced market uncertainty and tariff fluctuations.

Company Performance

Data Communications Management demonstrated resilience in Q1 2025 despite falling short of earnings expectations. The company reported a revenue of $123.7 million and a gross profit of $36.3 million, which translates to a 29.3% gross margin. This marks the fourth consecutive quarter of year-over-year gross margin improvement. The company also achieved a 15% adjusted EBITDA margin, up from 14.4% in the previous year. InvestingPro data shows a robust 5-year revenue CAGR of 11%, with a return on invested capital of 9% in the last twelve months, indicating sustained operational efficiency.

Financial Highlights

• Revenue: $123.7 million (missed forecast of $127.46 million)
• Earnings per share: $0.09 (missed forecast of $0.0967)
• Gross profit: $36.3 million (29.3% gross margin)
• Adjusted EBITDA Margin: 15%
• Special Dividend: 20¢ per share (5.8% yield)

Earnings vs. Forecast

Data Communications Management’s Q1 2025 EPS of $0.09 fell short of the forecasted $0.0967, marking a minor miss of approximately 7%. The revenue also missed expectations by nearly $3.78 million, reflecting challenges in meeting market forecasts.

Market Reaction

Despite the earnings miss, DCM’s stock price rose by 2.56%, closing at $2.00. This movement places the stock in the mid-range of its 52-week span of $1.52 to $3.04. The stock’s performance, in contrast to the earnings miss, suggests positive investor sentiment, possibly influenced by the company’s strong dividend yield and operational improvements. InvestingPro reveals the stock’s high beta of 2.76, indicating significant volatility compared to the market. InvestingPro Tips highlight strong recent returns and significant dividend payments to shareholders, with 8 additional exclusive insights available to subscribers.

Outlook & Guidance

Looking forward, Data Communications Management aims for a 5% revenue compound annual growth rate (CAGR) over the next five years, with a target gross profit margin exceeding 30% and EBITDA over 14% of revenue. The company anticipates revenue growth in the second half of 2025, focusing on profitable organic growth and operational efficiency. Analyst consensus tracked by InvestingPro strongly recommends buying the stock, with revenue growth forecast at 2% for FY2025 and expected EPS of $0.18.

Executive Commentary

CEO Richard Kellam emphasized the company’s growth ambitions, stating, "We are all in on growth." He also highlighted the company’s strong financial position: "We’re well capitalized, have solid cash flow generation, and no material restructuring costs." CFO James Lorimer added, "We do continue to recognize revenue on a lot of that transactional work."

Risks and Challenges

• Market uncertainty and tariff fluctuations, particularly with China.
• Potential labor disruptions at Canada Post.
• Inventory rebalancing by large enterprise clients.
• Competition in the AI-enabled product space.
• Dependence on existing client wallet share expansion.

Q&A

During the earnings call, analysts inquired about the success of DCM’s Assemble product, which recently displaced an incumbent solution at a major bank. Questions also focused on Zavvy’s market entry strategy and the potential impact of a Canada Post strike on operations. Analysts were interested in DCM’s capital investments aimed at improving efficiency and the company’s approach to working capital management.

Full transcript - Data Communications Management Ltd (DCM) Q1 2025:

James Lorimer, CFO, Data Communications Management Corp: Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Data Communications Management Corp First Quarter of Fiscal twenty twenty five Financial Results Conference Call. My name is James Lorimer, the CFO of DCM, and I’m pleased to be hosting today’s call. Joining me today is Richard Kellam, our President and CEO. Following our prepared remarks, we will be moderating a Q and A session.

As a reminder, this conference call is being broadcast live and recorded. We’d also like to remind everyone that Richard and I can be available after the call for any follow-up questions that you might have. Before we begin, I will remind everyone that we will be referring to forward looking information on this call. This information is subject to certain risks and uncertainties as outlined in the forward looking information disclosure in our press release and more fully within our public disclosure filings on SEDAR plus We have posted a brief video message from Richard along with highlights of our results on the first quarter on our website in the form of an infographic. This presentation will also be added to our website for your reference along with the post view recording and transcript.

Our detailed information is also available on our website and SEDAR. Please follow us on LinkedIn to keep up to date with other business developments. And I’ll now turn the call over to Richard.

Richard Kellam, President and CEO, Data Communications Management Corp: Good morning, and but yet joining us from other time zones. A look at today’s agenda, we’re gonna review highlights and results of quarter one twenty twenty five, talk a little bit about some new business development, have a look at our priorities for this year, and then turn it over for q and a. So we’ve got a summary of our of our progress and highlights of 2025 in this page. Q one twenty twenty five results were in line with what we expected, almost exactly in line. Our adjusted EBITDA margin of 15% was up over quarter one year ago.

We were 15% versus 14.4. Gross margin continued to improve. We delivered 29.3% and certainly approaching our goal of 30. We, we delivered on our commitment of no one time charges, so EBITDA and adjusted EBITDA were the exact same. And our year over year growth to net income and adjusted net income certainly was positive.

We we did experience market uncertainty, which we had to manage through. We obviously closely monitored market sentiment. The the the tariffs, you know, kind of the on again and off again tariffs, we have a great team that that manages through those through those challenging times. Raw material price increases, we haven’t had any material increases yet, but we have had on again, off again tariff tariff threats. Obviously, latest one being China, a 45% down to 30 now.

And you may think, you know, we don’t have a lot of product imported from China. We actually don’t, but there are some raw materials that we source from The US, specifically labels and thermal paper that have chemical components to them that come from China. So that obviously would have resulted in a in a price increase, but that’s, that’s now been mitigated as a result of this, this decrease in tariffs over the course of the last couple of days. So lots of, lots of dynamics, obviously, that our team has done a great job managing through. And this last one, there is a potential Canada Post labor disruption that we’re, you know, kinda managing and mitigating through right now.

We won’t know, I guess, until next week. Right, James? Twenty second if that if that will develop. We got a lot of new business development happening right now. We’ll talk a little bit more later in the presentation.

Our pipeline remains strong and probably the strongest that I’ve certainly seen in recent history. We’ve got several new logo wins and increased wallet share with existing clients and new verticals. And this is gonna be key to achieving our goal of returning to revenue growth in the second half of twenty twenty five. So I’m really pleased with the new business development activity we’ve got. And then we’ve got some really good success leveraging our AI capabilities.

Assemble, we’ve had some new logo wins in retail. We’ve got a healthy pipeline of opportunities in retail, in financial, in government, and other sectors as well. We actually displaced an incumbent schedule one bank with Assemble, so with the new GAM. So a great success there. Very pleased with the with the product.

And then we’ve gotten some good early traction in in the domestic market with with Zavvy, the brand that we acquired this is what we acquired late last year. We also delivered a special dividend of 20¢ per common share, which was certainly exciting for us in the quarter. And we made a commitment to commence regularly quarterly dividends. You saw that announcement for quarter two in the press yesterday. So those are highlights for the quarter.

Just moving on to revenue. Our revenue in the quarter was a hundred and $23,700,000. Again, almost exactly in line with consensus and up sequentially over last quarter quarter and down slightly versus year ago. Our quarter one revenue was primarily impacted by some larger order activity from a few larger enterprise clients that were kinda rebalancing inventory. But but pleased with the pleased with the quarter.

And having a look at gross profit, James, you wanna talk to gross profit?

James Lorimer, CFO, Data Communications Management Corp: Sure. Gross profit was 36,300,000.0, really kind of the second highest that we’ve seen in our recent history, just down about a million dollars from that that we achieved in quarter one. We also reported our fourth consecutive quarter of growth in gross margin on a year over year basis. We exceeded what we did last year at this time by about 40 basis points, and we reported gross profit margin of 23 sorry, 29.3%. So we continue to strive towards our pre acquisition gross profit margin levels of more than 30%.

On an adjusted EBITDA basis, we were less than $100,000 off the high watermark in the first quarter of twenty twenty four. Likewise, we reported the fourth consecutive quarter of year over year beats on EBITDA margin. We showed 15% gross or EBITDA margin in the quarter, which is certainly on track to our total objective of more than 14% EBITDA margins on an annualized basis. We’ll remind everyone that quarter one is typically our seasonally strongest quarter as you can see from some of the bar charts on, not only EBITDA, but gross profit and revenue.

Richard Kellam, President and CEO, Data Communications Management Corp: Okay. Having a look at our revenue by reported segment, our product sales were pretty similar to the number we put up earlier, about minus 4.7% over a year ago. Our technology and marketing, we combine those two. We’re at 2.8% growth over a year ago. And then logistics, which is a combination of warehousing and freight, distribution of freight, our freight was up slightly about a hundred thousand, and our warehousing was down about 700.

So that made up a majority of that 9.3% decrease or all of it. And really, it was really less warehousing fees in the quarter as we saw some larger customers manage their working capital and take some inventory out of the system. So we’ll see that. It obviously contributed to some of that product sales decline as well, but we’ll see that kind of return in the second half. Productivity in the enterprise continues to improve.

You can see that we’re up to 323,300.0 per associate, eleven point one percent. Post the MCC acquisition, about 2.8 on the quarter or on the year rather. And we’re down about 342 associates as a result of the integration and the restructuring. And as I said earlier and we’ve said the last quarter, restructuring’s now behind us, so you can expect that that number to kinda stay in the fifteen twenty five, 15 30 range.

James Lorimer, CFO, Data Communications Management Corp: Our balance sheet remains strong and, you know, well positioned to achieve our growth objectives. Net debt to EBITDA was a little above two times at the end of the quarter. A little bit of growth in our net debt that was largely attributed to the special dividend, was paid in the first quarter. We expect to see free cash flow through the year continue to reduce net debt levels from where they were at the end of this quarter. Total credit availability was over 45,000,000 We had a little over $7,000,000 in cash on hand and excess availability under our credit facilities of about, $18,000,000.

And we also have an ex, accordion, which is undrawn, a facility that, should we, have the working capital to support it, we can draw upon. So we’re very comfortable with our plan on on a debt repayment and our net debt to EBITDA at this time.

Richard Kellam, President and CEO, Data Communications Management Corp: Okay. Thank you, James. We we also recently published our 2024 sustainability report. Some key highlights in that report, scope one and scope two greenhouse gas emissions down 33% since 2020, so great progress there. We’ve now reforested just over 2,000,000 trees since we started our program in 2021.

We’ve re upped our long term relationship with the Sustainable Green Printing Partnership, which is a great partnership that we have. And then we’ve recently signed on with the UN Global Compact Sustainability Initiative, which is a great kind of alignment aligned initiative, across the UN. We’re actually very proud of our industry leading, ESG and sustainability efforts. And you can get our report, is very professional, well done report. So congrats to the team.

It’s up on our website now, so please go and and have a look. Okay. Moving on to a quick look at new business development. What I can say, and we started talking about this at the end of twenty twenty five in the last quarter, is we are all in on growth. In 2025, really the beginning of twenty twenty five, our team shifted from integration, so managing the integration and the shift of all that work between two companies to one, and really shifted to to growth and new business development.

We’ve got a very active pipeline that is trying to contribute to growth in the second half as long as we don’t have any significant market headwinds. So very, very healthy pipeline, solid double digit growth over a year ago and active pipeline and new revenue opportunities. We’ve got a detailed kind of CRM that we review on a consistent regular basis to weekly review. 22% of our new business wins are from new logos, including financial government and health care. About 78% are coming from expansion revenues, we call it, or wallet share wallet share increases, which is very positive.

That means your, you know, your current client base, we’re able to work with and and and do more with. So about 78% of those new business ones are coming from that. And then we’ve got, as I mentioned already, some really good momentum in the funnel for our DCM, AI enabled offerings, which include assemble, Saudi, and DCM flights. So pleased with our Huawei growth initiatives, and we’ll see those materialize as we progress through the year. I mean, look at priorities for 2025.

Same priorities that we talked about in the last quarter, driving profitable organic growth by leveraging our expanded suite of tech enabled offerings and really strengthening our presence in key industry verticals. Delivering a return to new capital investments, obviously focusing on the production capabilities and driving operational efficiencies. We we are going to relentlessly continue to drive gross margin improvements through top line revenues and operational efficiencies, and we’ve got we call it our SRM activities with strategic revenue management initiatives. And then and then, of course, we need to demonstrate. I think we did well in the first quarter, our agility and adaptability to effectively navigate these uncertain economic geopolitical environment that we’re in.

In 2025, we plan to leverage our larger scale, the incremental capacity we have, and the expanded product mix, and we’ve got incredible skills of our team to drive that profitable growth through the year. We we did commit to return earning capital to shareholders. You saw that commitment with dividend. You saw it with the dividend in quarter quarter one. And and that dividend continues, and the dividend yield as of a couple of days ago was 5.8%.

Okay. And my closing slide here before we look at our long term financial objectives is just talking about how well we are positioned, and we strongly believe we’re well positioned in this current environment. We’re well capitalized as James James mentioned earlier. We’ve got solid cash flow generation and really no material restructuring costs at all. That restructuring is behind us.

We’re very well prepared for any revenue impact from the with the new that we have in place. We do have the ability to pass through material cost inflation if that does if that does occur. Again, we’re only seeing well, we were seeing a lot of it in some some chemicals that are part of our paper product that those have been, you know, obviously pulled back as a result of change a couple of days ago. We’re, we’re very well positioned for any opportunistic m and a that may be available. We’re certainly active and and looking and considering.

We’ve got a track record of execution and we’ve approved that acquisition and integration of MCC, and we have a very experienced and diverse senior leadership team. Okay. And finally, long term financial objectives. We’re just reiterating these. We’ve shared these with shareholders several times now.

Revenues, we are committing to 5% CAGR on a on a five year basis. Our gross profit of north of 30%, again, we’re relentlessly focused on driving that gross mark gross profit improvement, which will result in EBITDA, percentage percentage of revenue of north of 14%. So we’re maintaining those long term objectives for growth. Okay. So that’s the, that’s the deck and we will now turn it over to, q and a.

James Lorimer, CFO, Data Communications Management Corp: Thanks, Richard. We will now take questions from the audience. If you have a question and are accessing the call directly through Teams, you can use the raise your hand feature, and we’ll queue up questions. Alternatively, you can also use the chat feature and we’ll respond to chat questions as well. If you have dialed in, you can press 5 to raise or lower your hand.

Pressing 6 will mute or unmute your microphone. And please introduce yourself once you’re introduced to the session. I have a question from Daniel Rosenblatt. Martin, if you could let Daniel into the call.

Daniel Rosenblatt, Analyst, Paradigm Capital: Hi. Good morning, Richard and James. Daniel Rosenberg here from Paradigm Capital. Your first question was around the Assemble product. It was great to hear that you had a key win with the Schedule one bank.

I was wondering wondering if you could please speak to, just how that came to be, what crystallized the sale, just the success you had there, please.

James Lorimer, CFO, Data Communications Management Corp: Sure. We’ve been working with, as as you know, Daniel, a number of schedule one banks in Canada are are clients. We had a legacy application in one of the banks that provided a lot of campaign management applications and other value added services. That product was coming up for renewal. We introduced our assemble dam as part of a new solution, and, you know, the kind of result of that is gonna be significantly higher margins from that product and, you know, long term, you know, continuing long term relationship there.

So very very pleased with that.

Richard Kellam, President and CEO, Data Communications Management Corp: It’s it’s a little

James Lorimer, CFO, Data Communications Management Corp: bit different than the typical assemble sale. Typical assemble sales are kinda much lower kind of ARR, but this is a this is kind

Richard Kellam, President and CEO, Data Communications Management Corp: of a nice nice nice healthy one. Yeah. And the legacy solution, to be clear, was not ours. It was a competitive solution. Yeah.

Daniel Rosenblatt, Analyst, Paradigm Capital: Great to hear. And then on the recently acquired Zavvy product, I was just wondering about the sales dynamic, now that you have kind of a increasing, you know, portfolio of digital prod products. Are you know, the focus is obviously cross selling opportunities. It’s easier said than done. But what what’s the opportunity of kinda going greenfield and having these products lead as kind of, you know, small wins with new client logos?

Richard Kellam, President and CEO, Data Communications Management Corp: Yeah. We actually hired great question. So as you know, we acquired this business out of New Zealand. There’s a team that came with it that’s New Zealand based. So they kinda cover the Asia Pacific markets.

We actually hired a woman named Mutesy Nusinga who came out of Pinterest, and prior to that, she was at LinkedIn. So she’s a skilled digital digital leader, and she’s now representing the the brand and the product on this side of the world. And there’s two our route to market is kinda two two pronged. One is, I’ll call it marketing automation. So, you know, using using outreach and using marketing tools to to find people that are in market for social media, social listening, social media management.

The other is using the 63 sales client salespeople that we have, and Mitesse works directly with them. They identify the leads and then hand them across to Mitesse who works to convert those leads. Similar route to market that we have for Assemble, by the way. So it’s actually quite complementary to our team. It’s a we get the best out of both worlds here.

Daniel Rosenblatt, Analyst, Paradigm Capital: And with Sky, for the guy I appreciate that. And then, you know, we’ve seen the headlines around Canada Post. Just curious what what you’re hearing on on front lines and, you know, what kind of things are you planning for. Not the first time we’ve heard about issues from Canada Post, but just curious to hear what what you’re planning for the to mitigate any any potential impacts.

James Lorimer, CFO, Data Communications Management Corp: Sure. You know, we we are staying as close to the negotiations as we can, Daniel. You know, a lot of what we see is is is also reported in the press. We do believe the sides are fairly far apart, but we’re hopeful that a resolution will come to bear. I think May 22 is kind of the deadline or maybe not the deadline, but I guess the opportunity that the labor union can issue a strike notice and whether that’s, you know, initially a rotating strike or or a full strike remains to be seen.

You know, we’re we’re hopeful that if there were a strike to happen that the federal government would mandate folks back to work fairly quickly, but, you know, they’re not, not totally close to the inner workings of the government at this point. That being said, you know, the, Canada Post is, itself is a large customer, and as as we saw and and discussed after the strike that happened in December or actually November and carried into November oh, sorry. November and carried into December, we did have a have an impact on our revenue from Canada Post direct revenues. You know, more difficult to kinda quantify is direct mail campaigns that that the clients may be kind of pausing or holding off until a little bit of a resolution there. We are hopeful that things come to quick resolution.

And, you know, we have in our you know, I think it’s probably a fifty plus year with Canada Post as a as a client of ours. We have weathered strikes before, and, you know, we think we continue to offer a valuable service that will continue to be in demand once things get resolved.

Daniel Rosenblatt, Analyst, Paradigm Capital: Good. For taking my questions. I’ll go back in queue.

James Lorimer, CFO, Data Communications Management Corp: Thanks, Daniel. We have a question from Max Ingram.

Max Ingram, Analyst: Hey, James. Hey, Richard. Thanks for taking my questions. My first one is on capital investments. Can you just talk a little bit about the capital investments you made?

In the release, you had touched on better efficiency, so it would be helpful just to have a brief recap of of the investments that you’ve done.

James Lorimer, CFO, Data Communications Management Corp: Sure. Do wanna have one? Go ahead. Yeah. I guess we we made a number of investments in the second half of twenty twenty four, things that were installed in the second half of twenty twenty four.

We we installed some new large format equipment that’s located in two of our facilities, one in Calgary and one in Burlington, Ontario. With the consolidation of the Thistle and Bond factories in June of last year, We put in a new Heidelberg commercial press, very efficient machine, loves to run, you know, 99.9% of the time. We also invested in some IT equipment, upgraded IT security and IT infrastructure equipment. In the first quarter, it was kind of December and into January, February in terms of when some of this equipment got commissioned, But we added some new label presses into our Torbram Brampton facility, and that was following the consolidation of our Trenton label plant. We needed an upgrade in some in some equipment, so we’ve got three new OMIT presses.

They’re all up and running very efficiently. We’ve been able to shift work to those, you know, kind of the latest and greatest technology. We also introduced a

Max Ingram, Analyst: That’s really helpful. Thank you. And then you’d mentioned some large enterprise client order patterns had had impacted q one. Can you just talk a bit about whether these are just timing or if you’re seeing a broader pullback in demand?

Richard Kellam, President and CEO, Data Communications Management Corp: Yeah. The we think they’re timing. Okay? But certainly, there’s some uncertainty in the market right now, Max. So we don’t know if if a couple of the activities that were that were were not run will run again.

You know, if if you think of a a large kind of direct mail activity from an FI, it could be, you know, kinda north of a million dollars. And those could potentially be rescheduled And, you know but we don’t that’s not in our sight line at this point, to be clear. Right? We’re we’re looking to offset any potential headwinds that we experienced in quarter one as a result of some shift either shifting or or, you know, completely out of the calendar or out of the program with new business development. That’s what we’re all in on at this point, which we’re confident we’ll be able to offset, by the way.

And then you’ve got some just kinda inventory. You saw the warehousing number. Right? Some kinda inventory rebalancing, which, certainly will be back in. A lot of that was actually lot of, interestingly enough, where, you know, the shift, to reduce some inventory, and we will certainly see that come back in quarter three and some forecasting for quarter four at this point.

And then I you know, I wanna I wanna comment on the, the postal strike as well, that we have seen a little bit of pullback, on activity because of the uncertainty if there will be a strike or not a strike. You know, if you’ve got mail that is dated mail, so you’re running a direct mail program and it expires in June, you definitely don’t wanna print that now if there’s gonna be a mail strike. So we certainly certainly see a little bit of impact there as well, You know? And and that kind of work typically would come back into a schedule even if there were a strike, you know, the the activity would come back in the schedule later in the year.

James Lorimer, CFO, Data Communications Management Corp: And and and maybe I’ll also elaborate there as well, Max, on the transactional print that we do. So think about statements and tax forms. That that work needs to continue to be produced. And so, what we did in November and December was stockpile production. And once the strike was completed, all we literally had five or six tractor trailers show up under dock and take that printed product.

So we do continue to recognize revenue on a lot of that transactional well.

Max Ingram, Analyst: That’s all very helpful. Thanks for taking my questions and I’ll pass the line.

James Lorimer, CFO, Data Communications Management Corp: Thanks, Max. Thanks, Max. We have a question from Noel Atkinson.

Noel Atkinson, Analyst: Good morning, Richard and James. Thanks very much for, taking our calls this morning. Well done in q one. Just sort of following on some of the other questions here. You know, you you mentioned you’ve got a really strong pipeline of, business development for the second half of the year.

Can you talk about how you’re seeing sort of conversion of the funnel versus sort of past quarters. Is it getting a little more slower, or is it still sort of moving along from funnel into contracted projects?

Richard Kellam, President and CEO, Data Communications Management Corp: There’s definitely been an acceleration as a result of the team leaning into, you know, I’ll call it advanced new business development or accelerated new business development. So we’re certainly seeing a lot more activity in the funnel and, you know, conversion of activity into into real business as well. But as you know, you know, in this business, especially if you want a large you know, it’s a large enterprise client, time to revenue is long because you have to displace the competitor, and it may be displacing some workflow some digital workflow that supports supports that that process or that product as well. So that’s why we’re you know, even if you look at the active activities in our funnel that are already converted, some of that won’t show up until quarter three, quarter ’4.

James Lorimer, CFO, Data Communications Management Corp: Okay.

Noel Atkinson, Analyst: And then So secondly

Richard Kellam, President and CEO, Data Communications Management Corp: In other words, we can’t in other words, it’s rare that we convert, you know. We get a sale, we convert today, and we start producing tomorrow. That’s that’s rare for large enterprise that we play in. Okay?

Noel Atkinson, Analyst: Okay. Gotcha. But does that give you does that increase the risk that they, you know, push out or anything if if there is sort of an increased risk of recession or further decline in sort of overall sentiment?

Richard Kellam, President and CEO, Data Communications Management Corp: I guess there’s always a risk of that. And, you know, our our main focus is get as much converted into the pipeline to offset that. And that’s where, you know, every, like, every week we’re seeing new, know, bigger more and bigger opportunities come into our funnel. So that’s we just gotta keep filling the funnel to ensure that if there is, we’ve got enough new business activity to offset that.

Noel Atkinson, Analyst: Okay. And then just secondly, you’d mentioned in prior quarters that you’ve been looking for offshore sources to diversify your supply chain for raw materials. Are you making progress with that? Are you still looking into doing that?

James Lorimer, CFO, Data Communications Management Corp: Yes. We’re still still kind of active on that front, Noel. We’ve done some testing and sampling of product, so we certainly have that available. To date, we haven’t had material challenges with our kind of North American supply chain. But, you know, given the dynamic environment regarding tariffs, we’re continuing to keep those initiatives active.

We’ve also seen a little bit of there’s one substrate that I think the last producer in North America recently closed their plant, and so we’ve successfully, been able to secure, offshore supply for that.

Noel Atkinson, Analyst: Okay. Great. Alright. That’s it for me. Thanks.

James Lorimer, CFO, Data Communications Management Corp: Okay. Have a a question in the q and a from, Raymond Williams, who’s a shareholder. Hi, Raymond. He’s asking, are we able to elaborate on the reasons for the increase in debt this quarter? I believe in 2024, DCM had committed to pay down more debt, but there was quite an increase in Q1.

Yes, Raymond. I think kind of two questions or two kind of main reasons for the increase. The largest would be the special dividend, in the quarter. As you know, our revolving line of credit kind of fluctuates with working capital. We had, kind of a bit of

Richard Kellam, President and CEO, Data Communications Management Corp: a working

James Lorimer, CFO, Data Communications Management Corp: capital requirement in the quarter just as our business grew. I think we’re up about 6.5% from the fourth quarter, so there’s a little bit of working capital need there. And then the dividend payment also resulted in that, so increase in the total debt. So we do expect that that will come down through the balance of the year through free cash flow. And as we get into kind of quarter two, quarter ’3, our working capital will contribute to paying down the revolver.

K. And we have a question from Nick Corcoran.

Nick Corcoran, Analyst: Good morning, guys. Congrats on the, the strong quarter.

James Lorimer, CFO, Data Communications Management Corp: Thanks, Nick. Good morning.

Nick Corcoran, Analyst: I think you might have just touched on it, but there’s a large working capital build in the quarter. Maybe can you speak to the seasonality behind that and, and how you expect it to unwind through the back half of the year?

James Lorimer, CFO, Data Communications Management Corp: Yeah. Sure. A big part of that kind of, growth in our revenue that, you know, kind of the reason quarter one is typically seasonally stronger is because of the transactional print business that we have or that we acquired with the Moore transaction. And, you know, we have to source a lot of a lot of paper. It’s kind of a paper intensive business.

And so that that’s kind of the big bulk of that. And then, you know, just generally, you know, some other growth in in revenue in the quarter as well. So we do expect to see that kind of improve through q two and q three.

Nick Corcoran, Analyst: Thanks. That’s good color. I’ll pass along.

James Lorimer, CFO, Data Communications Management Corp: Okay. Great. Okay. It looks like that’s the end of the questions. I’d like to thank everyone for joining the call and your interest in DCM.

As a reminder, Richard and I can be available for any follow-up questions that you might have. And, we’ll return it over to Richard. Any closing comments? No.

Richard Kellam, President and CEO, Data Communications Management Corp: I just want to, thank our team, our associates across our enterprise. You know, great great job in the quarter. Certainly, a lot of dynamics in the marketplace right now. And, you know, think our our results kinda proved the our capabilities to be agile and and manage through these uncertain times. As I said to shareholders earlier, we do have incredible new business development efforts that are in place, and we’re pretty confident and comfortable that we’ll see those deliver, you know, significant results in the in the second half of the year as we manage through some choppy waters right now.

But we will certainly keep you posted on progress, and thanks to the support of all our shareholders as well. Thank you.

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