Earnings call transcript: Data Communications Q4 2024 misses EPS forecast

Data Communications Management Corp. (DCM), with a market capitalization of $75 million, reported its earnings for the fourth quarter of 2024, revealing a notable miss on earnings per share (EPS) compared to analysts’ expectations. The company’s EPS came in at $0.04, falling short of the forecasted $0.0846. Revenue also lagged behind projections, reaching $116.23 million against an anticipated $124.69 million. Following the announcement, DCM’s stock price saw a decline of 1.52% in after-hours trading. According to InvestingPro analysis, DCM is currently trading near its Fair Value, with additional insights available through their comprehensive Pro Research Report.

Key Takeaways

• DCM’s EPS of $0.04 missed the forecast of $0.0846.
• Revenue for Q4 2024 was $116.23 million, below the expected $124.69 million.
• The company’s stock fell by 1.52% in after-hours trading.
• Technology services revenue grew significantly, contributing to overall performance.
• The company is focusing on organic growth and margin improvements in 2025.

Company Performance

Data Communications Management Corp. demonstrated robust growth in several areas despite missing earnings forecasts. The company reported a 7.2% increase in revenue, reaching $480 million for the year, which marks a doubling from 2021 levels. InvestingPro data shows impressive revenue growth of 26.33% over the last twelve months, with a healthy current ratio of 1.46 indicating strong liquidity. Gross profit also reached record highs, with a 9.4% year-over-year increase, and gross margin stood at 30.8%. The company’s strategic focus on technology-enabled solutions has led to a significant increase in technology services revenue, which grew from $5.3 million in 2022 to $20 million in 2024.

Financial Highlights

• Revenue: $480 million, up 7.2% year-over-year
• Gross Profit: Increased by 9.4% year-over-year
• Gross Margin: 30.8%
• Adjusted EBITDA: Record $63.9 million, up 19%
• Revenue per Employee: $337,000, up from $255,000 in 2021

Earnings vs. Forecast

Data Communications Management Corp. reported an EPS of $0.04, missing the forecast of $0.0846 by 52.7%. Revenue also did not meet expectations, coming in at $116.23 million compared to the projected $124.69 million. This shortfall marks a significant miss compared to previous quarters, where the company had generally met or exceeded expectations.

Market Reaction

Following the earnings announcement, DCM’s stock price fell by 1.52% in after-hours trading, reflecting investor disappointment with the earnings miss. The stock is currently trading near its 52-week low of $1.71, well below the high of $3.79. InvestingPro analysis reveals the stock’s high beta of 3.21, indicating significant volatility. InvestingPro subscribers have access to 7 additional key insights about DCM’s market performance and valuation metrics. This movement contrasts with broader market trends, where many sector peers have shown resilience despite economic uncertainties.

Outlook & Guidance

Looking ahead, Data Communications Management Corp. has set ambitious long-term financial objectives, including a 5% compound annual growth rate (CAGR) and gross profit improvements exceeding 30%. Analysts maintain a Strong Buy consensus on the stock, with target prices ranging from $2.78 to $4.56, suggesting significant upside potential. The company’s Financial Health Score is rated as GOOD by InvestingPro’s comprehensive analysis framework. For 2025, the company aims to drive profitable organic growth, deliver returns on new capital investments, and continue enhancing gross margins. Despite the recent earnings miss, DCM remains committed to its strategic priorities and adaptability in uncertain economic conditions.

Executive Commentary

CEO Richard Kellum emphasized the company’s focus on margin improvements and organic growth. "Gross margin is your best friend," Kellum stated, highlighting the importance of maintaining strong profit margins. He also noted, "We’re now back to kind of where we were in 2020, 2022, and we’ve built a great growth muscle," underscoring the company’s resilience and growth potential.

Risks and Challenges

• Potential tariff impacts on US revenue could pose challenges.
• The Canada Post strike is estimated to impact Q4 revenues by $3-$4 million.
• Economic uncertainties may affect consumer spending and demand.
• The company’s reliance on a diverse client base, with no single client representing more than 6% of revenue, helps mitigate concentration risk.
• Achieving targeted synergies and cost reductions remains crucial for future profitability.

Q&A

During the earnings call, analysts questioned the potential impacts of tariffs on US revenue and the company’s strategies for mitigating these risks. Management confirmed that there has been no significant customer pullback due to tariff concerns. Additionally, the impact of the Canada Post strike was discussed, with an estimated $3-$4 million revenue hit in Q4. The focus for 2025 remains on organic growth and leveraging technology-enabled solutions for competitive advantage.

Full transcript - Data Communications Management Ltd (DCM) Q4 2024:

James Lorimer, CFO, Data Communications Management Corp.: Good morning, ladies and gentlemen, and thank you for standing by, and welcome to the Data Communications Management Corp. Fiscal twenty twenty four Financial Results Conference Call. My name is James Lorimer, CFO of DCM and I’m pleased to be hosting today’s call. Joining me today is Richard Kellum, our President and Chief Executive Officer. 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 may have. Before we begin, I will remind everyone that we will be referring to forward looking information on today’s 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 a summary of our results and key achievements in 2024 on our website in the form of an infographic.

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

Richard Kellum, President and CEO, Data Communications Management Corp.: Thank you, James. So here’s what we want to accomplish in the next half hour. I want to talk about our special and recurring dividend, have a look at the achievements and highlights of 2024, our financial results, talk about the platform we’ve built for profitable growth and we’ll turn it over to Q and A. James? So kicking off with our returning capital to shareholders, I want to say that the hard work on integration is behind us and happy to report that we are about half a year ahead of schedule and we’re on budget from a restructuring perspective, and we’re on the $30,000,000 to $35,000,000 synergy capture, as we’ll see a little later on in the presentation.

Also want to thank, all of our shareholders who have stuck with us through this journey. Twenty twenty four was a big year for us in terms of bringing these two sizable businesses together. So thank you for sticking with us. And we are very confident in our plans for future as we move into ’25 and onward. And as such, you saw the announcement we put up to the street a couple of weeks ago.

As such, we have, put the special dividend in place, at 20¢ per share and committed to quarterly dividends of $0.025 a share in cash and that would imply a dividend yield of about 4.5% at the current share price. So we’re very, very pleased with where we are. The, as I said, the heavy work and the restructuring is behind us and now it’s, now is the opportunity to move forward and grow this business and we’re happy to return, this capital to shareholders. So having a look at our achievements or accomplishments in 2024, I’m going to spend a little bit of time on this page. I think it’s important how we unpack the results.

First, the first pillar here, anybody look at the slides? Our 2024 results, record levels of revenue as you’ll see in a minute, gross profit and adjusted EBITDA and positive outlook provides opportunities, as I said, to return capital to shareholders. On the integration side, the integration of Moore Canada Corp or RR Donnelley Canada, the plant consolidation is complete. We went from 14 facilities to 10. That all was complete by the end of twenty twenty four.

As I said, about a half a year ahead of schedule and on budget. We have now moved all of our clients onto the DCM client workflow, client digital platform, so a lot of client migration. Hundreds of clients need to be moved between legacy MCC systems to the DCM systems, so that is all complete. Our technology infrastructure migration, and I’m sure a lot of shareholders have been through this in your own companies where you’ve had to take ERP systems and move from two or three to one, that is complete. We moved, SAP, which was a legacy MCC system into D three sixty five, and that is complete.

It was completed by end of year, so we now have one invoice for all clients, all customers. And, finally, as we think about stepping into 2025 there will be little to no adjustment between EBITDA and adjusted EBITDA because all of our restructuring integration charges are behind us. So happy that that is all done, as I said, about a half a year ahead of schedule. We’ve had profitability improvements, we’ve reduced fixed cost overhead, we exited all of our low margin businesses that came through the acquisition, we leaned in hard to strategic revenue management process, looking at all of our lines of business and all of our clients, And we reduced outsourcing significantly, and this is a product that was put up to third parties, most of it through the acquired company, and we’ve moved all of that production into our own facilities. And finally, pleased with the capital investments that we’ve made.

New state of the art equipment with very high ROI. I’ll give you an example. Our label business, we used to have seven label presses in the Trenton facility, obviously that was one of the facilities that was closed, we replaced that with three new state of the art, presses in Brampton, our Torbrand facilities, we went from seven to three and our production capability and capacity is much higher than these seven originals. So there’s one example, there’s several I could provide. We’ve also put some new product and some new market activities into the market.

Significant facility improvements in know, we’ll talk a little bit later as well. We introduced two new AI enabled SaaS offerings, Assemble as well as the acquired Zavvi platform. So lots accomplished and achieved in 2024 and, and built the platform for success for 2025. Okay. Having a look at our results in 2024, I’m going to start off with revenues and then James will take you through gross margin and EBITDA.

Revenues up 7.2% versus 2023. And if you look at this chart, you go back to 2021, our revenues are actually double what they were in 2021. You see 2021, we were two thirty five, now we’re four eighty. Now I will say that if you look at that four eighty, the pro form a or underlying or organic underlying growth certainly was impacted. We expected a number slightly higher than the April and it was impacted for a few reasons.

One is we exited some lower margin unprofitable businesses, probably a little bit more than we expected through due diligence. But that is all behind us and those are exited businesses now. We obviously closed, facilities and we closed them faster than we planned. And that certainly had some impact on workflow, which is fine because I’d rather have the impact captured. So we have a clean year in 2025.

Obviously, the consolidation of ERP impacted some of that underlying organic growth as well. And then, of course, we hit we got hit by a postal strike and, Canada Post is a large client of ours. You know, we service and provide services to 58 or 5,900 post offices across Canada. So that went on longer than we expected and, and obviously some cancellation of direct mail. So you take that all into consideration, obviously it affected our underlying performance a little bit more than we expected.

But I’m happy to say that we’re still 7.2 growth and we built a nice clean and clear platform for growth moving forward into 2025 and onward. And I do want to point to this chart as well because I don’t think shareholders have a lot of opportunities to study this, but we do, of course. If you look back to 2021 and 2022, ’20 ’20 ’1 and 2022, this is when we were a standalone business pre acquisition. And you can see we added $38,000,000 of organic growth into our business between 2021 and 2022. So we know how to grow the business.

And as I said, for all the reasons I already said, you know, it obviously interrupted some of that underlying performance in 2024. But we’re now back to kind of where we were in twenty twenty, twenty twenty two, and we’ve built a great growth muscle. So we will see that performance improve now that the hard work is behind us, if you will. Okay? So moving on to gross profit.

James?

James Lorimer, CFO, Data Communications Management Corp.: Thanks, Richard. Gross profit hit record levels in January and that was up 9.4% from the prior year. As we say, we like to see gross profit growing at a faster rate than revenue, and that compares to the 7.2% revenue growth we saw. Gross margin also improved over last year, and that was as we completed a lot of the facility integration. Our mine shareholders that the two largest facility consolidations happened in the kind of the end of the third quarter and really in and were fully completed in the fourth quarter.

So with those, facility closures behind us, you know, we’re optimistic in terms of continued margin growth going into 2025. You’ll see the 30.8% gross margin that we achieved in 2022. We believe we’re well on track to getting back to north of 30 gross margins as we continue to grow the business. Adjusted EBITDA hit also a record $63,900,000 in the year and that was up 19%, almost 20% compared to the prior year. And again, the accelerated growth there, higher than the growth rate in revenue and also higher than the growth rate in gross profit.

And that was because of a lot of the synergy realization that we achieved in the SG and A line. Again, you’ll see that prior to the acquisition, we were in the 15% gross EBITDA margin range. We believe we’re tracking north back to that kind of 14% to 15% EBITDA target over the next near term.

Richard Kellum, President and CEO, Data Communications Management Corp.: Having a look at our revenue by reported segment, on this chart, you can see I’ll point to three things here. One is our products sales are up 5.6% over a year ago. Number two is our warehousing is up significantly. We’ve done a lot more kitting and fulfillment and providing services, out to retailers as well as large, large FIs that have branch locations. So let’s say a new service or an extended or, a fast growing service for us.

And then the third thing I’ll point to is our technology services. You can see that we’re now at $20,000,000 in revenue from technology services. That includes programming, project management, SAS, and software licenses. So very good growth there. And you can see that on the next slide, James, if you jump to the next slide.

On our software solutions or our technology solutions, we’ve gone from 5,300,000.0 in 2022 up to 20,000,000 in 2024. And that is certainly a higher margin revenue for us. So our tech enabled and SaaS solutions and the technology we’re bringing to clients is certainly being recognized. And it’s about 4.2% of revenue up from 1.9% in 2022. And lots of room to continue to grow that as we move through ’twenty five and onward.

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

Richard Kellum, President and CEO, Data Communications Management Corp.: Also we continue to have a lot of diversity between verticals and between clients. And you can see on the chart on the left, lots of, you know, kind of 10 key verticals that we focus on. And from a client perspective, not a single client that is more than 6% of revenue, but 250 clients represent 89% of total revenue. And, beyond the two fifty, we’ve got a lot of large enterprise clients where we can, we call it expand revenues, so deliver expansion revenue opportunities. So again, lots of diversity and this diversity sets us up well for growth in 2025 at Armour.

James Lorimer, CFO, Data Communications Management Corp.: We also delivered record levels of productivity. A measure that we use is revenue per employee. That grew to 337,000 per employee in 2024. I think what’s really important to call out here is the total headcount reductions. Since the acquisition, we’ve taken out over four thirty five individuals as we’ve consolidated our footprint and streamlined the organization.

So you can see considerable growth even from our pre acquisition levels where we are at about $300,000 per employee. But particularly, from 2021 when we’re about $255,000 per employee. In terms of synergies, we’re pleased to announce that we did achieve our targeted $30,000,000 to $35,000,000 in annualized synergies. So as we exited 2024, all those synergy achievements are now behind us and we expect to realize the full benefit in 2025 and going forward.

Richard Kellum, President and CEO, Data Communications Management Corp.: Okay. Thank you, James. So, we have built a solid base for profitable growth. Our integration initiatives, as I’ve already mentioned a few times, are fully complete and behind us. Large market opportunities exist within our product portfolio.

We’ve got a great platform for MarTech and AI enabled digital capabilities. In fact, all the new business that we secure starts with some type of technology and that’s certainly our unique selling proposition in the marketplace. So really pleased with the progress we’re making there. We’ve got targeted new market opportunities and upsized growth opportunities as well, especially with some new verticals that we’re penetrating. We’re well capitalized, as you’ll see in a minute, and positioned to deliver shareholder returns and execute M and A.

We certainly have a track record of execution. We’ve proved that we can consolidate and deliver efficiency and productivity, and deliver synergies. And we’ve certainly proved that we can grow as well and you’ll see that delivered in 2025. And we’ve got a very growth obsessed, not just senior leadership team, but growth obsessed organization throughout the organization. So very, I’d say we’ve got a great platform for profitable growth as we move forward here.

James Lorimer, CFO, Data Communications Management Corp.: We wanted to call out our strong balance sheet. As you can see, we’ve improved significantly from a total leverage perspective when we made the acquisition about two years ago. And we’ve declined from about 2.7 times net debt to EBITDA on a pro form a basis to about 1.8 times. And so that net debt number has come down nicely. We also have significant opportunities within our balance sheet to grow.

At the end of the year, we had almost $6,000,000 in cash, net of our bank overdraft. We had excess availability on our revolving line of credit of almost $35,000,000 And we have an undrawn accordion revolving line of credit that is there should we have the opportunity to draw upon that. So at the end of the year, we had a little over $60,000,000 of kinda total credit availability. So we believe we’ve got a strong balance sheet to execute on our growth plans. This also was behind our rationale to initiate the special dividend and the recurring quarterly dividend.

Richard Kellum, President and CEO, Data Communications Management Corp.: Okay, turning to our 2025 priorities, I’ll just close out on this slide before we get into Q and A. You’ve heard me say many a times that our number one priority is to drive profitable organic growth, and we will do that by leveraging our expanded suite of tech enabled offerings and really strengthening our presence in key verticals and securing new business wins. And lots of great, lots of great activity in our funnel right now. Second is to deliver return on new capital investments focused on enhancing our production capabilities. The capital investment we made last year, you know, I used to reference on our label, presses.

We’ve also made some large format investments and investments in litho as well. So we’re going to sweat those assets hard and deliver great growth and efficiency off those new assets. Third is to continue to drive gross margin. You know, we’re certainly, we’ve been very growth margin obsessed. I’d like to say gross margin is your best friend.

And continue to drive improvements through top line revenue, operating efficiencies as well as our strategic revenue management initiatives that we put in place last year. And then number four, I think really important in today’s world is to demonstrate, the agility and adaptability to be, to be able to navigate some of the uncertain economic conditions and geopolitical environment that we’re in today. And I’m sure we’ll get some of those in the Q and A, but we’re certainly well prepared. And adaptability is one of our core values here and we’re certainly agile and we’ll live that value very strongly in these uncertain times. Those are our priorities for this year, super clear, well distributed through the organization, okay?

And then our long term financial objectives, we’re just, now that restructuring is complete, we’re reconfirming our long term objectives. Those being a CAGR of 5%. Gross profit improvements north of 30, and adjusted EBITDA of over 14% on an annual basis. So we’re just reconfirming those. We haven’t talked to them in a while, but now that, ’24 is behind us and we’ve got this platform for successful, profitable growth, we’re reconfirming that growth agenda and the gross profit and earnings agenda.

Okay, so over to, Q and A.

James Lorimer, CFO, Data Communications Management Corp.: Hey, Richard. We’d now like to 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 in Teams and we will queue up questions. Alternatively, please also use the chat feature and we will respond to chat questions as well. We have a couple of questions, teed up already.

Martin, we have, looks like Max Ingram. If you could let him into the call, please.

Max Ingram, Analyst: Hey, guys. Can you hear me?

Richard Kellum, President and CEO, Data Communications Management Corp.: Yes. Hi, Max. Yeah. Hey, Max. Good morning.

Max Ingram, Analyst: Hey, James. Hey, Richard. Thanks for taking my questions. My first one, Richard, you sort of predicted is gonna be on tariffs. I was wondering if you could just expand a bit on where the biggest risks would be.

I assume it’s on raw input costs, but, any color you

Richard Kellum, President and CEO, Data Communications Management Corp.: could provide would be helpful. Yeah. Sure. Okay, Greg. Yeah, two things, right?

One is just for clarity, but 96 percent of our revenue is generated in Canada, sorry, 94% of our revenue is generated in Canada and 6% is generated in The U. S. So call that about $30,000,000 max of revenue that we generate in The U. S. About 50% of that revenue is we call large format lithography.

So think of large, you know, sheets of paper that are printed in Canada and shipped to The US and converted into large format packaging. And the other 50% is a mix of a whole bunch of stuff, kitting fulfillment that we do for some large FIs, and some labels that we ship south of the border as well. Of that 30,000,000, about 50% of it, call it $15,000,000 is somewhat protected even if tariffs are initiated because we add a lot of value to that 15 mil, okay. So that’s hard to kind of lift and shift elsewhere. And we’d be able to, in most cases, be able to price for that.

The 15,000,000 on the large format talk sheet business, That is a little bit more commoditized, Max. So we’re going to have to compete and we’re going to have to take some concessions on pricing, if we got hit by a tariff. But we’ve already got that forecasted into our model for this year. So not a lot of exposure on the product that flows kind of north to south. I think your question is a good one.

What about raw material inputs? So the paper market is kind of like the auto market. Okay? It’s been optimized for free trading. So you got pulp that flows south and you’ve got paper, finished paper that flows north.

So a large percentage of our finished paper actually comes from The U. S. Today. Now there’s a few things happening in preparation to prepare for any uncertainty. One is the paper mills in Canada are load balancing.

So they may be producing paper here in Canada and shipping it south or shipping it overseas. They’re load balancing to keep that paper in Canada. Obviously, that’s a benefit for us because it’s an immuno tariff. The second would be, and we learned this during the pandemic as we looked at alternative supply chains given the interruption in supply, we’re, we got an incredible procurement team that’s scouring the world right now for alternative, alternative paper sources, looking out to Europe, out to, out to Southeast Asia, to China, etcetera. So, I don’t think we’ll be able to offset 100% of it, to be clear.

There’s still, you know, a lot of people are gonna need from the South. And, and we’ll have the opportunity, obviously, to price that up in Canada if everybody’s facing the same headwind. So, yeah, we’re well prepared. We’ve got a team on it. We meet every day.

And, you know, you heard you saw my fourth point about adaptability, and we’re certainly agile and adaptable and staying on top of it. But, we’re working to mitigate any, any headwinds or any risks. So hopefully that answers your question. Maybe a little bit more detail than you even needed, but hopefully that gives you clarity.

Max Ingram, Analyst: Yeah. No. That’s great. The detail is appreciated. And then my last question would be, given that we’re almost at the end of Q1, can you just talk a bit generally about the demand environment, how conversations with customers are going?

Any color would be great. Thanks.

James Lorimer, CFO, Data Communications Management Corp.: Okay. Yeah. You wanna talk to customers? Yeah. You go ahead.

Yeah. Yeah. You know, we’re yeah. As as you said, Max, we’re, I guess, almost two months into the end of the quarter. You know, good discussions, with clients on some of the enhanced capabilities we have, and that’s kind of a function of some of the new equipment that we put into place, particularly in the end end of the third and fourth quarter, as well as, the label presses that Richard One of them was installed in December, the other two in January, and those are up and running and operational.

So we’re seeing some new opportunities in markets like prime labels, for example, that we haven’t had a lot of exposure to historically. We’re also seeing some markets, other market opportunities, opening up because of kind of a combination of our two capabilities that we’ve kind of put together from the integration results. And so we’re seeing some positive discussions and opportunities in the pipeline.

Max Ingram, Analyst: Great. Thanks, James. I’ll pass the line.

Richard Kellum, President and CEO, Data Communications Management Corp.: Yep. Thanks, Max.

James Lorimer, CFO, Data Communications Management Corp.: Martin, we have a question from Noel Atkinson. Do you wanna let him in?

Noel Atkinson, Analyst: Hi, Richard and James. Thanks for taking my call.

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

Noel Atkinson, Analyst: Hi. Great to see that my I can actually talk this time. It’s

James Lorimer, CFO, Data Communications Management Corp.: perfect. Technology works.

Noel Atkinson, Analyst: Okay. A few for me. Just a couple follow ons to Max’s questions here. So in terms of the tariff considerations, do you see that impacting your customer’s outlook on marketing projects so far this year? Have they been saying, you know, we want to throttle back at all?

Richard Kellum, President and CEO, Data Communications Management Corp.: No, there’s nothing yet. The only questions we have are the clients that we’re supplying, you know, the 15,000,000 that I said that we supply south of the border, that’s a north south flow. But the domestic clients, there’s been no, you know, there’s been no sort of, well, I’d say comments that they may be cutting back on, you know, marketing investment as a result of tariffs, not at this point.

Noel Atkinson, Analyst: Okay. And then the second one related to tariffs. Have you been building up inventories of paper so far or other inputs so far in Q1?

James Lorimer, CFO, Data Communications Management Corp.: Mhmm. Yeah. We have not been building up, inventories of paper. You know, we’re in very close dialogue with, as Richard mentioned, with our key paper suppliers, and they’re doing their best to kinda load balance production so that, as tariffs potentially accelerate here, we’ll be able to kind of source more domestically. And, you know, our sense from kind of the first round of Canadian retaliatory tariffs that’s been implemented should have a very modest impact on our sourcing.

And it’s not just paper. It might also be some of the technology hardware, for example, that we sell. And some of that isn’t coming from The US, it might be coming from Asia through The US. But, on balance, we think we’ve got a pretty diversified supply chain.

Noel Atkinson, Analyst: Okay. And you still are having that ability to pass through with some lag any increased costs and inputs?

James Lorimer, CFO, Data Communications Management Corp.: Yes. We did see early in the year some raw material price increases just even before the talk of tariffs. And some of those started in January and February. Nothing material, but some price increases, but we’ve gone pretty, pretty, we’ve got a pretty well oiled machine in terms of how to manage that.

Noel Atkinson, Analyst: Okay. And just a couple quick more. Could you kind of quantify the size of the impact of the Canada Post strike on your Q4 revenues?

James Lorimer, CFO, Data Communications Management Corp.: Yeah, sure. I’d say kind of broadly, probably in the $3,000,000 to $4,000,000 range, in kind of direct business that we can kind of attribute it to that. There’s probably a little bit of direct mail and a few other things that got delayed as well in the quarter. You know, we think some of that will kind of push into Q1. There were some campaigns that had been printed with a delivery or a kind of a target date on them and some of that’s had to be reprinted.

But, you know, it was probably in that kind of magnitude, you know, the low end, three, high end, four to five.

Richard Kellum, President and CEO, Data Communications Management Corp.: Okay. Yeah, and our, I mean, as I said earlier, our impact would have been higher, say, than competitive impact because of the fact that Canada Post is a client of ours, right? And with post office being, post offices being closed, we obviously couldn’t service those post offices.

Noel Atkinson, Analyst: Great. Okay. And then just the last one, in terms of M and A outlook. So you you talked in Zavvi, last year. Are you focused entirely on organic sales growth for 2025?

Are you also looking at more tuck ins?

Richard Kellum, President and CEO, Data Communications Management Corp.: We, our priority is to drive organic growth, profitable organic growth in 2025. That’s not to say that we don’t look at opportunities, Noel, if there’s attractive opportunities, but our main focus right now is to deliver organic growth and organic profit growth in ’25. That’s where we’re, that’s where all of our energy is focused on. Okay, great.

Noel Atkinson, Analyst: Thank you very much.

Richard Kellum, President and CEO, Data Communications Management Corp.: Okay, thanks,

James Lorimer, CFO, Data Communications Management Corp.: Phil. Thanks. So we have a question in the chat from Alan. How come 30% is our gross margin target, which is about 3% higher than in 2024, but EBITDA target margin of 14% is only 1% higher than ’24 adjusted number, especially given the cost reductions and synergies.

Richard Kellum, President and CEO, Data Communications Management Corp.: What?

James Lorimer, CFO, Data Communications Management Corp.: Yeah. I think, you know, we’re being prudent on our overall kind of margining assumptions there. We’re trending nicely towards the 30% level on the top line. And, you know, we think that both that and our 14% adjusted EBITDA margin will be achievable in the near term. At such time, we’ll kind of assess and revise our targets.

Richard Kellum, President and CEO, Data Communications Management Corp.: Yeah, and you’ll note on that chart there was a plus in front of the 14, right? So, we’re certainly not going to stop at 14, but 30% is gross margin is a margin you need to be successful, sustainable and profitable in this industry and that’s what we need to achieve.

James Lorimer, CFO, Data Communications Management Corp.: Thanks, Alan. We have a caller on the line, Martin Thomas

Noel Atkinson, Analyst: Boyd.

Bruce, Analyst: Hey, Richard and James. Thank you for taking my question. Can you hear me okay?

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

Richard Kellum, President and CEO, Data Communications Management Corp.: Yes, we got it.

Bruce, Analyst: Okay, great. My question is just on the 5% CAGR long term growth rate that you guys are communicating here. To my knowledge, that’s a little bit faster than the industry growth rate. And I was just wondering if you guys can touch on what gives you guys the confidence to drive those results in the long term. Thank you, Bruce.

Richard Kellum, President and CEO, Data Communications Management Corp.: Yes. And great question. Depends on how you look at the industry or what, what kind of we call them profit pools, what segments of the industry you look at. Some are flat, slightly declining and some are growing at 7%, eight %, nine %. So we certainly are a structure of this is to play in the high margin growth pools.

And if you look at those on average kind of 2%, maybe 3% at the high end, so call it 2%, so the delta is 3%. And that 3% delta’s gonna come from securing, business from some of our competitors out there. We’re, you know, we’re bringing technology solutions to help simplify complexity and bring a much more kinda integrated and effective solution through to our client base. So we feel there’s opportunities for us to win a lot of new business away from our our competitors as a result of, call it our our our model, our business model, which again is supported with technology enabled solutions. So, yeah, great question.

Hopefully that answers it for you. We certainly will have to secure some revenue from some of our competitors that are out there.

James Lorimer, CFO, Data Communications Management Corp.: Okay. And it looks like, we don’t have any further questions. So I’d like to thank everyone for joining our call and your interest in GCM. As a reminder, Richard and I can be available after the call for any follow-up questions.

Richard Kellum, President and CEO, Data Communications Management Corp.: It’s great. Thank you, James, and thank you all of our shareholders for all your support. I said really, kind of appreciate the ongoing support. We’re all glad that 2024 is behind us and the restructuring and integration is now complete and we can focus on our organic growth agenda. And I can tell you that that is our priority for this year.

Also want to thank all of our associates for the hard work and the heavy lifting that went into getting to where we got to the successful exit in 2024 and completing all of our heavy restructuring, half a year ahead of schedule kind of on budget and on synergy targets. So thank you to the entire team. And look forward to reporting our results in quarter one, a couple of months from now. Okay, thank you. Thanks, everyone.

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