Earnings call transcript: Dye & Durham’s Q3 2025 earnings reveal growth amid challenges

Dye & Durham Ltd. reported its Q3 fiscal 2025 earnings, showcasing a revenue increase to $108.3 million, a $1 million rise year-over-year. Despite facing macroeconomic challenges, the company achieved a 23% increase in annual recurring revenue (ARR) to $154 million. The earnings call highlighted strategic initiatives, including technological advancements and operational improvements, which contributed to a 4.33% rise in stock price post-announcement, closing at $9.47.

Key Takeaways

• Revenue increased by $1 million year-over-year to $108.3 million.
• ARR grew by 23% to $154 million.
• Stock price rose by 4.33% following the earnings call.
• EBITDA margin targeted at 50-55%, with Q3 margin at 51%.
• Focused on organic growth and customer retention.

Company Performance

Dye & Durham Ltd. reported steady growth in Q3 fiscal 2025, with revenues reaching $108.3 million, representing a $1 million increase from the previous year. The company faced a 2% decline in organic revenue, which was offset by a significant 23% rise in ARR, totaling $154 million. Adjusted EBITDA decreased by 8% year-over-year to $55.2 million, maintaining a margin of 51%, within the targeted range of 50-55%.

Financial Highlights

• Revenue: $108.3 million (+$1 million YoY)
• ARR: $154 million (+23% YoY)
• Adjusted EBITDA: $55.2 million (-8% YoY)
• EBITDA Margin: 51%
• Net Debt: $1.35 billion

Market Reaction

Following the earnings release, Dye & Durham’s stock price increased by 4.33%, closing at $9.47. This positive market reaction reflects investor confidence in the company’s strategic initiatives and financial performance. The stock remains within its 52-week range, with a high of $22.59 and a low of $7.85.

Outlook & Guidance

Dye & Durham aims to achieve high single-digit organic growth and maintain EBITDA margins between 50-55%. The company is preparing for potential refinancing opportunities in the Canadian market and expects to complete portfolio optimization by fiscal 2026. Future projections include EPS forecasts of $0.25 for Q4 FY2025 and $0.76 for FY2025.

Executive Commentary

Interim CEO Sid Singh emphasized, "We are actively rebuilding trust and credibility with our customers," highlighting the company’s focus on customer retention and strategic investments. CFO Frank Deliso added, "We are targeting organic growth in the high single digit plus range," underscoring the company’s growth ambitions.

Risks and Challenges

• Macro uncertainty affecting real estate activity.
• Potential impacts of interest rate fluctuations on refinancing.
• Ongoing Competition Bureau investigation.
• High net debt level of $1.35 billion.
• Organic revenue decline of 2%.

Q&A

During the earnings call, analysts inquired about the ongoing CEO search, with Sid Singh serving as interim CEO. Discussions also covered strategies for customer retention, potential refinancing opportunities, and the possibility of non-core asset divestitures. The company is addressing concerns related to the Competition Bureau investigation.

Full transcript - Dye & Durham Ltd (DND) Q3 2025:

Operator: Good afternoon, everybody. My name is Kelsey, and I will be your operator for today. At this time, I would like to welcome everyone to the Dye Endurum Third Quarter Fiscal twenty twenty five Earnings Call. I would now like to turn the call over to Hus Hiraji from VP, Investor Relations of Dyendurum. Mr.

Hiraji, you may begin your conference.

Hus Hiraji, VP, Investor Relations, Dye Endurum: Great. Thank you, and good afternoon. Welcome to the Dyendurum conference call. Before we start, we’d like to remind you that all amounts discussed on this call are denominated in Canadian dollars unless otherwise indicated. Please note that statements made during this call may include forward looking statements and information and future oriented financial information regarding DineDerm and its business and disclosure regarding possible events, conditions or results that are based on information currently available to management, which indicate management’s expectation of future growth, results of operations, business performance, and business prospects and opportunities.

Such statements are made as of this date hereof, and DineDura assumes no obligation to update or revise them to reflect events, disclosures or circumstances, except as required by applicable securities laws. Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results. A number of these risks or uncertainties could cause results to differ materially from the results discussed today. Given these risks and uncertainties, one should not place undue reliance on these statements and information. Please refer to the forward looking statements and information and future oriented financial information section of our public filings, without limitation, our MD and A and our earnings press release issued today for additional information.

Joining us on the call today are Sid Singh, Diodes Durham Interim Chief Executive Officer and Frank Deliso, Diodes Durham Chief Financial Officer. The question and answer period will follow the formal remarks for research analysts. I will now turn the call over to Sid for opening remarks.

Sid Singh, Interim Chief Executive Officer, Dye Endurum: Thank you, Hass. Good afternoon, everyone, and thank you for joining us today. This afternoon, we released our third quarter fiscal twenty twenty five results. The business continues to perform well despite the uncertainty in the broader environment as a result of the tariff and trade negotiations, which are having an impact on real estate activity in Canada. This quarter marks a turning point for Diodaram.

In addition to today’s financial results, which Frank will cover shortly, we have released our go forward operating plan, restoring growth and market leadership, built under the direction of our reconstituted board and new leadership. Since stepping into the interim CEO role in February, I worked closely with the team to assess the state of the business. We found a strong foundation, but also critical issues that needed addressing. We’re tackling those head on with a focused and disciplined approach. I will now outline the three core strategy pillars under this new operating plan.

Number one, customers first. This is our number one and top most priority. We’re actively rebuilding trust and credibility with our customers. Over the past ninety days, our team has engaged thousands of customers. We’ve reinstated Net Promoter Score.

We’ve improved service responsiveness dramatically, including our customer email response times by 75%, our phone response times by 85% in some of our key markets. And we’ve also implemented a regional operating model to create stronger local accountability. This past quarter, I’m pleased to announce that we have named Colin Bohana as Managing Director for our UK business. Colin joined the team last year, and has played a key role in enhancing our global sales function, particularly in new sales. Having a dedicated regional leader in The UK, allows us to deepen our understanding of our customer base and the products we offer, while establishing a strong leadership presence in this key region.

We’re also hyper focused on retention as a key outcome. 23% of our twenty twenty two contracts came up for renewal this quarter. We achieved over 85% gross retention. That is proof that our D and D customer base still values what we deliver, when we show up the right way. Our second pillar in the new strategy is product transformation.

We’re investing in product led customer driven innovation. Our core platform Unity has been redesigned with a hundred plus improvements, and we’re accelerating its launch in the British Columbia market, a major milestone later this calendar year. To be clear, we are not pursuing one global platform for the entire global legal tech market. Instead, we are smartly investing in the region specific product portfolio to drive local innovation. This is both capital efficient and quick to market.

We are also embedding AI into our workflow and practice management solutions, to help customers automate tasks, reduce risk, and improve efficiency. In parallel, we’re executing a cloud first modernization strategy, one that prioritizes usability, scalability, and long term competitiveness. We’re also following a very disciplined investment and execution framework, as it relates to these two pillars. Our investments are very intentional. We have deployed over $4,000,000 to enhance service, sales, and product support, which helps us enable retention, faster delivery, and long term scaling.

We’re also managing our margin profile carefully, balancing short term margin impact with long term growth. EBITDA margins are expected to remain strong in the 50% range, supported by cost control, as well as productivity gains. Lastly, the third pillar of our strategy is portfolio optimization. Frank will expand on this, but I want to underscore, we are no longer pursuing acquisitions. We are laser focused on sharpening the portfolio, and will divest non core assets to reinvest in what matters, which is our customers, our people, and organic growth.

We will focus on driving growth in our core markets, where we are best positioned to win, and as such, this will help improve the long term financial profile of the business. In closing, we are in the simplified phase of our turnaround. We’re cutting complexity, we’re restoring customer trust, and aligning execution. Frank will now address the quarterly performance, our outlook and our portfolio optimization strategy. Frank?

Thank you, Sid,

Frank Deliso, Chief Financial Officer, Dye Endurum: and good afternoon. This afternoon, we reported our third quarter results. Our results continue to demonstrate the underlying strength of our diversified business. ARR continues to grow despite the macroeconomic uncertainty, which has negatively impacted activity in the real estate market. We reported revenues of $108,300,000 an increase of $1,000,000 compared to the corresponding period in fiscal twenty twenty four.

Organic revenue in the third quarter declined by 2%, taking into consideration the revenue adjustments in the prior year period relating to timing impacts of entering into three year contracts. Excluding these revenue impacts, organic growth increased by $1,500,000 while revenues from acquisitions completed in the prior twelve month period were $3,000,000 in the quarter. Annual contracted revenue, or ACR, remains robust at 61% of total revenue compared to 53% at the same point in fiscal twenty twenty four. Contracted revenue includes minimum commitment levels of ARR plus revenue from contracted to overages and other service arrangements, mainly in our financial technology service lines. Sequentially, ACR grew by $10,600,000 to $263,000,000 as of 03/31/2025.

Annual recurring revenue contracted was 36% of total revenues as of 03/31/2025, compared to 30% at the same point in the prior year. AAR

Scott Fletcher, Analyst, CIBC: was $154,000,000

Frank Deliso, Chief Financial Officer, Dye Endurum: up 23% or $28,400,000 as of 03/31/2025, compared to the same point last year. Sequentially, ARR grew by $1,500,000 to $154,000,000 as of 03/31/2025. Looking ahead, two dynamics will influence our ARR exposure to real estate. As the interest rates have moved down in normal periods, one would expect real estate activity would improve. However, given the uncertainty as a result of the global tariff and trade dynamics, real estate activity has softened in the early stages of calendar twenty twenty five.

Structure of our minimum volume contracts in the practice management business enables us to capture a base level of revenues in periods of low activity and capture upside from increased real estate activity. The minimum portion of these contracts are included in ARR. Any over usage is then included in annual contracted revenues. We introduced the minimum volume contracts offerings three years ago. The majority of those contracts were on three year terms, which means calendar 2025 is an important period for renewals.

As of 03/31/2025, ’20 ’3 percent of the three year contracts signed in calendar 2022 have come up for renewal. As Sid mentioned, we are pleased to report that we have achieved more than an 85% gross retention rate on this first tranche of contract renewals as a result of more flexible contract terms and active engagement with our customers. When factoring contract renewals that occurred in April 2025, gross retention rates are now over 90%. Most of the remaining contracts come up for renewal over the next few months. With the implementation of the customer first strategy, which Sid mentioned earlier, the accounting is focused on contract renewals through the remainder of this fiscal period.

We generated adjusted EBITDA of $55,200,000 down 8% or $4,500,000 in the third quarter of fiscal twenty twenty five compared to the previous period. The change was driven by lower revenues after direct costs caused by higher amounts of revenue recognition from executing on multi year contracts in the prior period and lower practice management revenues in Canada driven by the recent macro conditions. This was partially offset by the contributions of acquisitions and higher due diligence in Canadian financial services revenues. Excluding the timing impact of these non cash multi year contract recognitions in the prior year, the year over year performance in adjusted EBITDA would be approximately be flat. Adjusted EBITDA margins was 51% in the current quarter.

With the investment strategy in the product team, we believe EBITDA margins will remain consistently in around 50% to 55% range as compared to the 50% to 60% range under the previous strategy. Total adjusted operating expenses, which includes direct costs, technology costs, G and A, sales and marketing were $53,100,000 in the quarter or 49% of revenues. Direct costs increased by $3,900,000 this quarter, mainly due to new reseller relationship agreements signed, higher than anticipated third party costs in the period and higher revenues. Working towards reducing direct costs from third party vendors with active partner engagements and by replacing these with internal comparable data products. Excluding the impact from acquisitions and direct costs, adjusted operating expenses decreased by $400,000 for the third quarter of twenty twenty five as a result of cost reduction initiatives compared to the prior year.

Adjusted finance costs, which adjust for changes in fair values and contingent consideration was $32,800,000 down $2,600,000 from the prior period. On a year to date basis, adjusted finance costs were down over $15,000,000 from the prior year. The improvement primarily reflects the savings from our refinancing transactions completed in April 2024 and the positive interest spread earned on investments held to retire the 2026 convertible debentures. We expect to see a continued decrease in interest costs from the current lower variable rates on our Term Loan B floating portion and the benefits of a $218,000,000 U. S.

Cross currency swaps that we extended in April 2025, which will further serve to reduce our net effective interest payments moving forward. We anticipate reduced interest payments of between 5,000,000 and $10,000,000 in the next twelve months as compared to the last twelve months ended 03/31/2025. Acquisition restructurings and other costs were $11,000,000 for the quarter compared to $7,100,000 in the prior year. This figure is significantly lower than the sequential period due to the costs related to the shareholder engagement in the lead up to the twenty twenty four EGM. There are no material costs remaining related to that shareholder engagement beyond the third quarter.

We expect this item to normalize below prior year levels, given the focus on organic growth, ongoing completion of integration activities and a suspension of new acquisitions. We anticipate savings more than $40,000,000 on acquisition, restructurings and other costs in the next twelve months, relative to the last twelve months ending March 31. Leverage free cash flow was $24,500,000 up $31,600,000 for the third quarter compared to the negative $7,100,000 in the prior year. This change is primarily a result of higher cash from operating activities, lower capital expenditures, lower cash taxes and lower interest costs paid in the quarter. Normalizing for the accrued semiannual bond interest impact of approximately $16,000,000 in Q3 twenty twenty five, leverage free cash flow is still significantly up in the period.

Our net debt stood at approximately $1,350,000,000 as of March 31, unchanged as compared to 12/31/2024. As I mentioned last quarter, we are now required to classify our 2028 outstanding convertible debt as current. This is to comply with IFRS presentation requirements. This results in a mismatch in our stated current ratio, while no such discrepancy exists in substance. We have sufficient resources to manage our debt and the business generates strong sustaining cash flows.

As Sid mentioned earlier, as part of our one hundred day plan set out under the direction of the new Board, optimization is one of our three core pillars. All M and A activity has been paused. We are actively assessing non core divestitures to sharpen our operational focus. We are taking a pragmatic approach. Unlike the customer first pillar, which extends in the one to three year timeline, and the product transformation pillar of our plan, which will be permanent, we expect to wrap up our portfolio optimization by the end of fiscal twenty twenty six just more than a year from today.

We’ll be measuring our approach to ensure we receive optimal net value for shareholders. Proceeds from any potential devices share will be used to reduce our leverage ratio. All capital allocation decisions will be taken within the aim to unlocking long term value and improving the resiliency of the business. We are actively managing the business to drive key metrics. We are targeting organic growth in the high single digit plus range over the long term compared to 3% we achieved in the last twelve month period.

As I mentioned earlier, adjusted EBITDA margin target is in the range of 50% to 55%. We are targeting EBITDA and cash flow from operation conversion of 85% plus based on the strength of our business model and the recurring nature of our cash flows. Both the material reduction and acquisition restructuring and other charges together with working capital improvements, support us achieving that level of conversion. Organic growth, EBITDA margins, leverage and strong cash flow conversion are the key financial metrics we are measuring the progress of our strategy to restore growth and market leadership. And with that, I’ll turn it back to the operator for the Q and A session.

Operator: Thank you. Ladies and gentlemen, we’ll now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two.

If you are using a speakerphone, please lift the handset before pressing any keys. One moment, for your first question. Your first question is going to come from Robert Young from Canaccord Genuity. Please go ahead.

Robert Young, Analyst, Canaccord Genuity: Hi, good evening. I guess the first question would be just an update on the CEO search. And Sid, if you could confirm whether or not you’re still in contention for that. I think investors are looking at potentially a longer period of maybe reassessment if a new CEO comes and steps into the role. So, anything you can give on timeline and process and where you are in that process.

Sid Singh, Interim Chief Executive Officer, Dye Endurum: Yeah, thanks for the question. So, I would also point you to a letter that our Board of Directors has released directly addressing the specific point. We know it’s top of mind for many of our analysts and stakeholders. So as it stands today, we are nearing the completion of our search for a permanent CEO. Obviously, the search has lasted longer than expected, but as you can imagine, the board wants the right individual who can lead Diane Durham during this transformative period.

In the letter, you’d also see the priorities that the board has laid out in partnership with the management team. So again, I’ll I’ll point us towards what really drives the company forward as an operating plan. It’s customers first. There’s clear things we’re doing under that pillar. It’s product transformation, there’s a lot of innovation happening inside of that pillar, and then there’s portfolio optimization.

So we don’t expect major changes to the strategy, and rest assured the organization is by no means at a standstill while the CEO search is being finalized.

Robert Young, Analyst, Canaccord Genuity: Okay. And then I guess, are you still in contention for the role? I’m sorry to ask that question but I mean the potential for the business to continue forward under interrupted versus a new CEO stepping in and maybe changing things. Mean that’s material information.

Sid Singh, Interim Chief Executive Officer, Dye Endurum: Yeah, like I said, the strategies and the priorities are being agreed between the board and the management team. So, those don’t expect any changes there. I think there are always going to be tweaks and even the current management team will continue to tweak, you know, the finer points of the strategy, but the broad pillars are pretty much as we’ve outlined. These are part of the operating plan, there’s a lot of work happening under these. So, I want to make sure you all understand that these unlock really good strong revenue growth potential for D and D.

It has a good portfolio of products, and by allocating capital towards the most important aspects of our business, which is customers, you know, the product innovation that’s been starved for many many months and quarters, I think will unlock value. And I think that’s where I would encourage our analysts and shareholders to look towards, which is organic growth going forward.

Robert Young, Analyst, Canaccord Genuity: Okay. And then in the subsequent notes in the financials, says that you increased the debt by $13,000,000 you generated cash this quarter even after a contingent payment. So I’m just curious like what was the decision to increase the debt like if EBITDA is declined and or flat and debt is higher than leverage would have necessarily increased. So I’m curious about that decision and why you did that. And then the five to ten million reduction in net interest payment.

Is that mostly due to the swap extension or was there some sort of a debt reduction that we would expect after the quarter or after the Thanks

Frank Deliso, Chief Financial Officer, Dye Endurum: for the question, Rob. The subsequent event of the 13,000,000 drawdown, that was really of a timing basis, you know, as we have the semiannual bond interest due in mid April. So that was done from a timing perspective to facilitate that payment. You’re right to point out that we had some big payments on contingent considerations in the quarter that used up most of the free cash flow. And your second question relating to, you know, where we expect the 5 to $10,000,000 it’s a combination of both the swap extensions, so extending longer into the term, given the lower interest rate curves that we’re seeing in Canada and The US, as well as the current lower variable rates that we’re experiencing on our variable flow.

Robert Young, Analyst, Canaccord Genuity: Okay. Last question. I’ll pass the line after. You said that renewals, I think you said 23% of the 2022 vintage contracts renewed. You had 85% gross retention.

Is that customer retention or dollar retention? And then I think you said it was 90% after the quarter so the retention has improved after March 31. If you just clarify those churn statements and then I’ll pass the line.

Frank Deliso, Chief Financial Officer, Dye Endurum: Yeah, Rob, that’s correct. So through our March 31 results, which is our Q3 quarter, we had achieved a gross retention of 85%. And when you now include April into that metric, so the call it a calendar year to date basis, that has now increased to over 90%. And that is on a customer basis, measuring the number of deals that have renewed with with a contract.

Robert Young, Analyst, Canaccord Genuity: If I were to if you were to consider dollar retention, would it be better or worse than the 85?

Frank Deliso, Chief Financial Officer, Dye Endurum: Yeah, we’re we’re obviously we’re not providing that metric externally right now, Rob, but right now, we’re focused on measuring on a gross retention basis. And as part of my script, we are flex we are begin we are becoming more flexible with some of the ARR minimums that we provide given the macro economy, but we are focused on just providing that metric on a gross retention basis now.

Robert Young, Analyst, Canaccord Genuity: Okay. Thank you. I’ll hop back in the queue.

Operator: Thank you. And your next question comes from a Thanos Moschopoulos from BMO Capital Markets. Please go ahead.

Thanos Moschopoulos, Analyst, BMO Capital Markets: Hi, good afternoon. Can you provide some more color just in terms of the nature of the client discussions you had around renewals and your approach securing those renewals? Was it primarily a function of more flexibility in contract terms? What were the concerns here from clients and what was your strategy in addressing those to secure the renewals?

Frank Deliso, Chief Financial Officer, Dye Endurum: Yeah, so Rob, sorry, Thanos. I mean, as I mentioned in the script, we are looking at all terms in the contract, whether it be contract length is one of them, actual amounts of commitments know, that on a go forward basis, as well as, you know, the appropriate tiering. So obviously, the more, volumes that customer commits, the the the bigger discount that they would get. So those are the primary three factors that basically are allowing us to achieve such a high retention ratio.

Thanos Moschopoulos, Analyst, BMO Capital Markets: Okay. Can you clarify your comment regarding the prior period recognition impact that affects the revenue comparability year over year? What exactly does that pertain to?

Frank Deliso, Chief Financial Officer, Dye Endurum: Yeah, so it’s similar instance in what we reported in Q1 Thanos. So we had just basically on from various after massive acquisitions and the timing of our our desktop applications, they are renewed periodically. And so in the in the prior year of twenty twenty four q three, we had renewed some of those desktop applications for multiyear periods, which essentially recognized the revenue based on the the service provided all, in that current quarter. So it really is a function of the timing of these three year deals and when they actually, get renewed that impacts that that adjustment that you saw in the in the, in the results.

Thanos Moschopoulos, Analyst, BMO Capital Markets: Okay, so term license revenue in the prior period.

Sid Singh, Interim Chief Executive Officer, Dye Endurum: Got it. Sorry.

Thanos Moschopoulos, Analyst, BMO Capital Markets: Is basically, it was term license revenue, like, you’re recognizing a term license for a three year period. Yeah. Yeah. Okay. And then 11,000,000 acquisition restructuring other costs was higher than I would have thought.

Just maybe clarify what the bulk of that pertains to. Is that the shareholder engagement activities? Was it kind of more focused on restructuring internally? Just what does that pertain to?

Frank Deliso, Chief Financial Officer, Dye Endurum: Yeah, there So the 11,000,000 that you saw in the current quarter is a combination of a few factors. We Obviously, we are spending some money on the Competition Bureau investigation, which we think would be nonrecurring. There has been some some restructuring charges from changes in our leader senior leadership team that essentially eliminated some of the positions and some further integration work with a third party IT provider. Those were the three main factors.

Thanos Moschopoulos, Analyst, BMO Capital Markets: Okay. I’ll pass the line. Thank you.

Operator: Thank you. And your next question comes from Kevin Krishnarat from Scotiabank. Please go ahead.

Kevin Krishnarat, Analyst, Scotiabank: Hey, there. Good afternoon. I have a question as well on the renewal activity so far. So I think you said 23% of the way through Q1, how like what’s the what are the months where you’ve got the biggest level of activity remaining? Is it right now?

Is it sort of like, April, May, May, June? Just remind us there of, you know, how much, you know, big chunk is when that’s up for renewal.

Frank Deliso, Chief Financial Officer, Dye Endurum: Yeah. The majority of the renewals will happen, this quarter, it could be in q four, Kevin. So that would be through the, the next couple of months. April was a pretty big month as well. So we’d be anticipating that we’d be done two thirds of the deals through June.

Kevin Krishnarat, Analyst, Scotiabank: Got it. And this is and I know you’re not going to you’re not willing to provide the, you know, your views on revenue retention, but do you you have a bunch of big, you know, big clients up for renewal, and you’re pretty confident of at least maintaining them as as customers. Is that how you’re thinking about when you talk about 90 over 90% renewal? It’s just the fact that you’re gonna be, you know, not losing them altogether. But, you know, trying to get any any kind of color you can provide us on what you’re doing to sort of preserve preserve revenue.

And I I I don’t think you can do pricing as easily, but is it are you are you gonna be selling them more services, different parts of your bundle? Just trying to get a bit more more help here on how to think think about your ability to preserve revenue.

Frank Deliso, Chief Financial Officer, Dye Endurum: Yeah. And the I mean, you gotta remember, Kevin, a lot of these renewals are still multiyear deals, and

Scott Fletcher, Analyst, CIBC: a lot of

Frank Deliso, Chief Financial Officer, Dye Endurum: them have various legal practice management wants and needs. So in many of the deals, it’s not just the conversation around conveyancing. It’s a conversation amongst, you know, all facets of their of their business. So we will we’re able to bundle in other products and services as part of the renewals that would essentially lift the net revenue retention ratio along with that. So we’re not just focused obviously on, you know, transactions of conveyancing going forward.

We’re we’re still focused on providing an all encompassing solution to the customers that that we’re actively renewing.

Kevin Krishnarat, Analyst, Scotiabank: Okay. Okay. That’s helpful. A question on appreciate the description on the three year sort of plan, strategic plan. When ENGIN had put out their, you know, value creation plan, I think is what they called it back in December.

I think they were calling for a view of 10% organic growth split between 3% transaction, 3% pricing, 4% cross sell, upsell. So now you’ve landed on sort of high single digits. So I’m just wondering if you can update us there on sort of what went into that decision and sort of how you think about your target on the growth algorithm for organic growth.

Frank Deliso, Chief Financial Officer, Dye Endurum: Yeah, it’s the same components that made up that high single digit plus range. So we’re giving ourselves a bit more of a range there, Kevin. So, you know, obviously, we’re looking at market growth, we’re looking at pricing levers, the ability to track new logos, the ability to cross sell, upsell, as well as win backs. Right? So we’re looking at all of that, and net of obviously current churn that we’ve that we have been experiencing.

So those are all the relevant factors that made up that long term target. But we’re not in a position to disclose the individual elements at this time.

Kevin Krishnarat, Analyst, Scotiabank: Okay. The last one for me as well. So I know you’ve given, you know, the target for EBITDA margin 50% to 55%. Frank, I think you may have mentioned towards the 50% range in the near term. I don’t know if I’m just if I misheard you, but just how do we think about what the margin profile might look like in Q4 and Q1 as you’re going through some of these CSR and product?

I know the product investment is an ongoing one, but you know, are are you confident that you’re gonna stick around, like, at 50%? Is there a potential it can go lower? Just, know, how do we think about just the very near term on the model? Thanks.

Frank Deliso, Chief Financial Officer, Dye Endurum: Yeah. So we’ve already been making investments, right, as as we speak in in q three. So some of that’s trickled into into q three, Kevin. The comment I made before around 50 to 60, that was the the previous guidance range, and and we’re just essentially fine tuning that to a more tighter range of 50 to 55. And I mean, gotta look at that over a rolling a rolling period of time.

Mean, you know, certain quarters are going to be lower and certain quarters will be higher based on obviously the profile of our revenues, Q3 being one of our seasonally lower periods. So it really is going to be more of a rolling four quarter amount. In terms of the next quarter or so, I mean, obviously, we’re heading into our seasonally high period. So but we are still making more investments as Sid alluded to. So we’re confident that we’re going to be in that range.

Hus Hiraji, VP, Investor Relations, Dye Endurum: Okay. Thanks a lot. I’ll pass the line. Thank you.

Operator: Thank you. And your next question comes from Gavin Fairweather from Cormark. Please go ahead.

Gavin Fairweather, Analyst, Cormark: Hey, thanks for taking my questions. Maybe just to start on the upcoming BC rollout of Unity. Can you just describe how the user experience will change versus conveyancer, which I think is your product in that market? And generally, how you’re kind of approaching that rollout and whether we should think about, you know, some some type of pricing left associated with this.

Sid Singh, Interim Chief Executive Officer, Dye Endurum: I can start there and Frank

Hus Hiraji, VP, Investor Relations, Dye Endurum: can chime in. You know,

Sid Singh, Interim Chief Executive Officer, Dye Endurum: one thing we’ve done is we’ve spent a ton of time with our customers in the BC market, and there’s one consistent feedback we get. They love the D and D product set. They’re very well managed in terms of workflow. They’re really connected from an ecosystem perspective in terms of how data exchange take place. So there’s a lot lot to offer them with the new platform.

And one of the things we are focused on is incorporating a ton of innovation, but without dramatically changing the day to day workflow of these customers. So, it’s a it’s a balance that we are taking and the way we’re validating that is going through an alpha, which, you know, gets us early feedback from customers. We’re launching our beta, which then expands the number of users to a larger pool of customers that give us even more feedback. So, we’re working hand in hand with these customers to make sure the launch is actually accretive to their business.

Gavin Fairweather, Analyst, Cormark: Frank, did you wanna jump in on on the pricing side? Should we should we think about ARPU moving up, or is it mostly just a switchover?

Frank Deliso, Chief Financial Officer, Dye Endurum: Yeah. No. It’s I mean, I think we’re we’re competitively priced today in the market. Part of our ARR growth in the quarter is continuing to attract new new clients and and conversions to existing transactional. So, you know, the the current pricing, we believe, is adequate, and we’re looking this more of a functionality play as opposed to a pricing play at the current time.

Sid Singh, Interim Chief Executive Officer, Dye Endurum: Yeah. One thing we are not doing one thing we’re not doing, just to add a finer point, is forcing any customer migrations. So, we will offer this platform and we will make sure customers see the value on it, and and we’ll work with them to make sure that they move from this platform or their existing platform to to Unity PC. But we’re by no means shutting down our existing platforms. This gives customers more optionality and gives them time to manage their workflows and operations.

So this is a very positive move for our customer base in the PC market.

Gavin Fairweather, Analyst, Cormark: Appreciate that. That that color is quite helpful. And then maybe on the macro, we can all see that the Canadian home sales numbers. But, you know, one area that we can’t really see is is the refinancing transactions in the market, and there’s obviously been a lot of, you know, news articles about the kind of upcoming refinancing wave. So curious if you could just put kind of your expectations into context, for us in terms of how many refi transactions have you seen moving through the platform in recent years?

And how are you thinking about is a potential upside in in calendar twenty five and ’26?

Frank Deliso, Chief Financial Officer, Dye Endurum: Yeah. I mean, obviously, Gavin, the the five year, we’re approaching the five year mark since COVID. And that’ll hit us over the next twelve months. So a lot of a lot of people would have taken those those five year deals on their mortgages, just after COVID when when it was super low on the fixed side. Our our percentage of refinancing transactions has remained consistent, as roughly quarter of of the volumes.

And, you know, we’re also optimistic as you are on, you know, some of the refinancing that are coming our way in the Canadian market over the next twelve months. So that, you know, that is something that we’re gonna be ready for as it hits.

Gavin Fairweather, Analyst, Cormark: Thanks so much. I’ll pass the line.

Operator: Thank you. And your next question comes from Scott Fletcher from CIBC. Please go ahead.

Scott Fletcher, Analyst, CIBC: Hi, good evening. There was some more concrete language around non core asset divestitures. Just wondering if you could share anything, any incremental details on what that might be, whether that’s geography, assets, then, yeah, maybe I’ll just leave it there.

Sid Singh, Interim Chief Executive Officer, Dye Endurum: Yeah, I appreciate the question. This stage, unfortunately, we cannot go into that level of detail, but I can tell you that there’s a tremendous amount of portfolio analysis we’ve undertaken. We’ve looked at more than 60 different product applications that are within Dia and Durham globally. We’ve looked at the assets which we believe we can grow, and we’ve looked at the assets which we believe don’t belong inside of D and D. Like, we’re not the best owners.

So we are actively working to to figure out the the right market, the right value for these assets, and we’ll keep you all updated as those conversations progress into something more definitive. The one thing I I do wanna call out is that you fast forward twelve months from now, as Frank alluded to in his comments, we would not be operating with the same number of software assets as we have today.

Scott Fletcher, Analyst, CIBC: Okay. Thank you. That that helps. And then, you know, mentioned earlier in the call the some costs related to the Competition Bureau investigation. Is there anything you can share update wise on on the timing of that, or how it’s progressing?

Frank Deliso, Chief Financial Officer, Dye Endurum: Well, yeah, we’re required to deliver the first set of documents, Scott, in at the February. And, and so all the effort there has been devoted towards getting to that that to that deadline, and we’ve met that. And so moving forward now, we’re we’re, you know, obviously, fielding some some q and a back, but no meaningful update to share at this point.

Scott Fletcher, Analyst, CIBC: Okay. Thanks for that. I’ll I’ll leave you there. Thank you.

Operator: And just as a reminder, if you wish to have a question, please press 1. And your last question comes from Steven Bohlen from Raymond James. Please go ahead.

Scott Fletcher, Analyst, CIBC: Alright. Always last. That’s okay. I guess I want this is beaten to death, but I I I wanna just kinda go back to the retention. It it seems like again, I appreciate the company’s gone through a lot of turmoil over the last eighteen months, but, you know, 85%, ninety % retention.

You know, like, why are these customers leaving? It seems like it’s being celebrated as good number, but like any company that loses 10% of their customers, there wouldn’t be a lot of panic and maybe that’s kind of why the stock is where it is. But where are these customers going and why are they leaving? Is it service? Is it the pricing?

I’m just trying to get a better idea why you’re losing 10% or 15% depending on when the measurement takes place.

Sid Singh, Interim Chief Executive Officer, Dye Endurum: Yeah. So, it’s a good question. What I would point you towards, you know, if you look at industry benchmarks in industry specific software or vertical SaaS, especially in the typical average customer size that we deal with, 90% gross retention is considered reasonably good. I think in the context of what you just outlined, the company has gone through, especially, and you all have seen the customer reports, the news publications, etcetera, around sentiment in general, of how the company has increased prices over the last two or three years. I think there is a sentiment that has to be overcome.

Now, I’m seeing across hundreds of customer conversations, and me, as well as the executive leadership team are actively having direct customer conversations, is that customers actually like our workflow product. It manages a ton of complexity. There’s a lot of training and retraining required of their staff to learn a new platform. We have very clear indication from our customers that the new platforms are nowhere close to D and D from a functionality perspective. At the same time, we have also unlocked new resources to continue to innovate on the platform.

So, considering all of those factors, I think these metrics are very encouraging. Although we are early in the innings, right? We’re like less than a third of our way in. But these metrics in a vertical SaaS business at our size of ARR, I would say these are reasonably good numbers.

Scott Fletcher, Analyst, CIBC: And and would you say, like, they leave like, when a customer goes in and you’re, you know, maybe it was convinced that they they had purchased in a couple of other services. Are they, like, leaving all products or some products Or, you know, are they getting unbundled? Or I’m just trying to get a better idea of that.

Sid Singh, Interim Chief Executive Officer, Dye Endurum: Yeah. I mean, we’re we’re referencing specifically the convincing products when we talk about these renewals. Although, I’m sure, you know, when you go across hundreds of contracts, there’s gonna be a lot of variation in there where customers do have other products from us, and and they’re part of a multiyear deal. What what we definitely see in in these negotiations is that customers don’t want to leave D and D. And if anything, what we’re hearing from the customers is that this is a new chapter in the company.

We’re focused on the right priorities. And most of them, as you can imagine, 90 plus actually want to work with us and want to continue to buy more products and services from us. And we are actually confident that with increased investments in our go to market motion, which is sales and marketing, we do expect in fiscal twenty six to actually start winning back some of the customers we have lost. So expect more updates on win backs as we progress through, you know, the next quarterly updates as well.

Scott Fletcher, Analyst, CIBC: Okay. Second second question is, you know, in MD and A, you say you’re rehiring employees. You know, is this indicate, you know, like, I’m not trying to we’re trying to figure out, like, number of people cost and and are these mid, you know, account managers, senior, like, senior partly senior leaderships, vice presidents, you know, and and, you know, rehiring these these people that were laid off and or fired or, you know, coming back to work? I’m just trying to get an idea of the the churn there.

Frank Deliso, Chief Financial Officer, Dye Endurum: Yeah. I think you’re referring to the the board letter to shareholders where we had that statement in there, Steven. Yeah. Okay. So, I mean, there is no, you know, specific positions or class.

I mean, it’s it’s across the board. You know, I think we’re seeing you know, we have a as Sid mentioned, we have a a rich product suite of products that require a lot of institutional knowledge. And as we’re actively developing those products, we have, you know, invited some employees to come back to fill some of those vacancies or to fill some of those incremental investments. And obviously, we’re always gonna pick the best the best candidate for the given position. And in many cases, these have been former employees.

Scott Fletcher, Analyst, CIBC: Okay. And then last question, just on the on the banking technology revenue. Thank you for splitting that up. That was great. I don’t remember and I haven’t had time to go back and check, what would you say the revenue was at acquisition a few years ago when you bought that business?

I don’t know if that’s is it higher, lower, similar, I don’t know if or margin. Can you provide anything on on that business now?

Frank Deliso, Chief Financial Officer, Dye Endurum: Yeah. We’ve seen we’ve seen some good growth on the financial services side, Steven. So I don’t have the numbers handy, you know, four years ago or three years ago when we acquired that. But

Scott Fletcher, Analyst, CIBC: a

Frank Deliso, Chief Financial Officer, Dye Endurum: lot of the the organic growth is coming from Canadian financial services, mainly in the mortgage instruction and discharge business, where we have a substantial share across Canada, including Quebec. And if you look at the Korea data, it’s Quebec market is still net positive year over year from that perspective. So I know it’s been ticking up over the last several quarters, but I would imagine we were lower when we first acquired that business.

Sid Singh, Interim Chief Executive Officer, Dye Endurum: Okay. Thanks very much, guys.

Operator: Thank you. And there are no further questions at this time. I would now like to turn the call back over to Mr. Hirji. Please continue.

Hus Hiraji, VP, Investor Relations, Dye Endurum: Great. Thanks for all who attended, and we look forward to connecting with you for our Q4 full year ’twenty five results to be communicated later in the near future. Until then, have a great day. Thank you.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you very much for your participation and ask that you do please disconnect. Have a great day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.