eResearch | In this short video, Chris Thompson of eResearch talks about DCM and eResearch’s 14-page Equity Research Report that covers an in-depth analysis of DCM, its acquisition of Moore Canada Corporation (MCC), and a detailed overview of DCM’s Q2/2023 financial results.
You can download our 14-page Equity Research Report by clicking on the following link: eR-DCM-2023_08_17_UR-2023-Q2_FINAL
Company Overview
DCM is a Canadian-based provider of marketing and business communication solutions to companies in North America. Its technology-enabled content and workflow management capabilities solve the complex branding, communications, logistics, and regulatory requirements of leading enterprises so its customers can accomplish more in less time. Its services include printing, data & content management, labels & asset tracking, location-specific marketing, and multimedia campaign management.
Company Update:
- Strong Financial Performance in Q2/2023:
- DCM reported Q2/2023 revenue of $119.0 million, up by 74.7% compared to the previous year.
- Unadjusted EBITDA for Q2/2023 increased by 33.2% to reach $10.6 million.
- Impact of MCC Acquisition on Growth:
- The significant revenue and EBITDA growth were primarily driven by the acquisition of MCC, which was completed during the quarter.
- The acquisition is expected to boost DCM’s capabilities, growth potential, and introduce new products, services, and technology.
- Gross Margin and Debt Situation:
- Gross Margin was 26.9%, slightly lower than the estimated 27.0% due to MCC’s lower average Gross Margin.
- Despite increased debt ($112.7 million) resulting from the acquisition, DCM undertook measures to reduce it, including repayments and an equity raise of $26.1 million.
- Expenses, Net Income, and Adjustments:
- SG&A expenses for Q2/2023 were $23.0 million, up by 66.9% YoY, but represented a slightly lower percentage of total revenue compared to the previous year.
- The reported Net Loss in Q2/2023 was $2.9 million, largely attributed to one-time adjustments related to the MCC acquisition and restructuring costs.
- Adjusted Net Income for Q2/2023, excluding these one-time costs, was $3.8 million, with no change in Adjusted Basic and Diluted EPS compared to Q2/2022.
- The company is targeting synergies from various areas, including operations, organization, procurement, and revenue, and acknowledges that restructuring costs might continue as an expense in the upcoming quarters during the integration process.
Financial Analysis & Valuation:
- We updated our model with the Company’s recent financials and adjusted our model to incorporate the merger with MCC.
- We estimate an equal-weighted price target of $6.90 based on a DCF valuation ($11.69/share), a Revenue Multiple valuation ($4.34/share), and an EBITDA Multiple valuation ($4.60/share).
We are maintaining a Buy rating and a one-year price target of $6.90.
You can download our 14-page Equity Research Report by clicking on the following link: eR-DCM-2023_08_17_UR-2023-Q2_FINAL
Notes: All numbers in CAD unless otherwise stated. The author of this report, and employees, consultants, and family of eResearch may own stock positions in companies mentioned in this article and may have been paid by a company mentioned in the article or research report. eResearch offers no representations or warranties that any of the information contained in this article is accurate or complete. Articles on eresearch.com are provided for general informational purposes only and do not constitute financial, investment, tax, legal, or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this information should consult with a financial advisor. The article may contain “forward-looking statements” within the meaning of applicable securities legislation. Forward-looking statements are based on the opinions and assumptions of the Company’s management as of the date made. They are inherently susceptible to uncertainty and other factors that could cause actual events/results to differ materially from these forward-looking statements. Additional risks and uncertainties, including those that the Company does not know about now or that it currently deems immaterial, may also adversely affect the Company’s business or any investment therein. Any projections given are principally intended for use as objectives and are not intended, and should not be taken, as assurances that the projected results will be obtained by the Company. The assumptions used may not prove to be accurate and a potential decline in the Company’s financial condition or results of operations may negatively impact the value of its securities. Please read eResearch’s full disclaimer.
