eResearch is pleased to publish an Update Equity Research Report on DATA Communications Management Corp. (TSX: DCM | OTC: DCMDF).
We are maintaining a Buy rating and one-year price target at $6.55.
You can download our 16-page Equity Research Report by clicking on the following link: eResearch-DCM-2024_11_16_UR-2024-Q3-Financials_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, content management, digital asset management (DAM), labels & asset tracking, location-specific marketing, social media analytics, and multimedia campaign management.
Quarterly Update:
- Revenue Performance: Revenue was $108.7 million in Q3/2024, down 11.4%, and lower than our estimate of $128.9 million. Revenue fell due to reduced enterprise client spending and strategic exits from low-margin accounts. However, YTD Revenue increased 14.5%, driven by the MCC acquisition.
- Gross Profit and Margin: Gross Profit for Q3/2024 was $28.0 million, down 7.7% Y/Y. Gross Margin improved to 25.8%, supported by MCC integration synergies, pricing strategy improvements, and a focus on higher-margin business opportunities, offset by some legacy MCC margin challenges.
- SG&A Expenses: SG&A expenses were $22.4 million in Q3/2024, down 10.5% Y/Y, reflecting restructuring efforts and ongoing cost control measures.
- EBITDA Growth: Adjusted EBITDA for Q3/2024 rose 6.6% to $12.6 million, with a margin of 11.6%. YTD Adjusted EBITDA increased 25.4%, reflecting MCC acquisition benefits and cost reduction initiatives, as the Company continues to target Adjusted EBITDA margins above 14%.
- Strategic Initiatives: DCM continues to diversify revenue streams with tech-enabled solutions, launching the ASMBL platform in Q3/2024 and recently acquiring Zavy Limited. Plant consolidations and investments in new equipment are expected to enhance production efficiency and reduce costs.
- Cash and Debt Management: Cash stood at $8.9 million as of September 30, 2024, while net debt decreased significantly to $77.2 million since the MCC acquisition. Debt reduction remains a priority, with plans to allocate future free cash flow to further deleveraging, acquisitions, or dividends.
FIGURE 1: DCM’s Q3/2024 Financial Results Compared to eResearch Estimates
Financial Analysis & Valuation:
- We updated our model with DCM’s recent financials, shifted the model ahead one quarter, and reduced the revenue in 2024 to reflect the lower third-quarter number and lower Y/Y revenue growth in Q4/2024.
- We estimate an equal-weighted price target of $6.57 based on a DCF valuation ($9.81/share), a Revenue Multiple valuation ($5.20/share), and an EBITDA Multiple valuation ($4.70/share).
We are maintaining our Buy rating and our one-year price target of $6.55.
You can download our 16-page Equity Research Report by clicking on the following link: eResearch-DCM-2024_11_16_UR-2024-Q3-Financials_FINAL
FIGURE 2: One-Year Stock Chart
Other DCM Research Reports over the last year:
- Acquisition Update Report (November 9, 2024): DCM Expands MarTech Offerings with Acquisition of Social Media Analytics Provider Zavy
- Financial Update Report (August 8, 2024): DCM Navigates Integration Challenges with Strategic Focus on H2/2024 Revenue Growth and Margin Improvements
- Video (July 22, 2024): Analyst Chris Thompson Discusses eResearch’s Latest Research Report on DCM and its Q1/2024 Financial Results
- Financial Update Report (May 16, 2024): DCM Reports Strong First Quarter Results as Revenue Grows, Margins Strengthen, and Debt Reduction Continues
- Financial Update Report (March 25, 2024): Record Revenue & EBITDA Growth Highlight MCC Acquisition Synergies and Improving Margins
- Market Update Report (March 1, 2024): MediaValet Acquisition Multiple Bodes Well for DCM’s Valuation as its Pays Down Debt and Focuses on Tech Strategy
- Update Report (November 13, 2023): Revenue & EBITDA Growth Continues to Benefit from MCC Acquisition; Deal Synergies Now Targeting up to $35M
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.
