DATA Communications Management (TSE:DCM) executives highlighted cost control, cash generation, and growing digital services as key themes during the company’s fiscal 2025 financial results conference call, while pointing to early signs of stabilization heading into 2026.
Fiscal 2025 results: revenue pressure, profitability maintained
Management said fiscal 2025 revenue declined 6.2% year over year, which the company attributed primarily to lower spending from several large enterprise customers. CFO James Lorimer noted that roughly 93%–94% of DCM’s revenue comes from large enterprise accounts, and said the company was not able to fully offset reduced client spending with new customers due to long sales cycles.
Gross profit was approximately CAD 117 million with gross margin around 26%, which management attributed to factory overhead recoveries and utilization impacts tied to lower volumes. Kellam said the company has built an operational footprint positioned for growth and expects gross margin to improve as revenue returns.
Cash flow, leverage, and capital returns
DCM generated free cash flow of CAD 13.4 million, which management said was up about 145% from the prior year. Kellam attributed the improvement in part to capital spending that was heavier in 2024—related to modernizing and upgrading facilities after the MCC acquisition—being “largely behind us.” The company expects capital expenditures to remain at levels similar to 2025 going forward.
The company also continued deleveraging. Management said leverage ended the year just below 2x net debt-to-EBITDA, with net debt down 2.2% versus last year and down nearly 50% since the MCC acquisition. Lorimer added that DCM has solid credit facilities and balance sheet capacity for both M&A and shareholder returns.
On capital allocation, management said DCM deployed a little over CAD 21.8 million during the year, including a special dividend announced in the first quarter of last year and its regular recurring CAD 0.025 per share quarterly dividend. In total, DCM returned approximately CAD 17.6 million to shareholders through dividends and repurchased about CAD 1 million in shares after commencing a Normal Course Issuer Bid in June. Management said the dividend yield at current trading levels was about 6.8%.
Operational productivity and SG&A reductions
Executives emphasized productivity gains and overhead management. Kellam said headcount declined 4% during the year and is down 22% over the last three years. He also highlighted SG&A reductions of CAD 7.8 million, or 9%, bringing SG&A to below 18% of revenue—consistent with management’s plans from prior years.
Digital and AI: tech services growth and workflow improvements
Management pointed to momentum in technology services and broader AI initiatives. Kellam said tech services revenue grew 4.2% in fiscal 2025 to about CAD 21 million, representing nearly 5% of total revenue. The company highlighted the launch of Content Cloud, described as an AI-powered digital asset management solution, and said it is seeing momentum in multiple verticals, particularly government and municipal services. Kellam noted the company recently secured business through a competitive RFP process in the government sector.
Executives also said DCM is using AI within internal workflows to drive productivity improvements, describing the company as “all in” on AI operationally and commercially.
In response to a question about changes in digital marketing and search behavior, management said it has not seen evidence of clients shifting budgets back to print due specifically to AI search results. However, Lorimer noted that some clients moved to digital channels during the Canada Post labor disruption, but that DCM is now seeing a return of discretionary mailings such as personalized direct mail, which management said converts better than purely digital outreach. Kellam also said the company rebuilt its website using AI-generated imagery and AI-developed copy and optimized it for AI-driven search, which he said has increased natural leads.
2026 outlook: stabilization, pricing pressure in commercial print, and M&A pipeline
Looking to fiscal 2026, management said there are early signs of market stabilization and that demand trends are “beginning to stabilize.” Kellam said the Canada Post disruption is behind the company and that DCM is seeing clients resume discretionary mailing programs. He also said new business activity is expected to start flowing through during the year, reflecting prior-year efforts that have a longer time to revenue.
Asked about price competition, management said there was meaningful price sensitivity during 2025, particularly in commercial print where capacity exists across the market. Kellam said DCM had to compete more aggressively on commercial print work—especially “low SKU, long run” business—while noting that technology-enabled solutions and digital workflow offerings have not faced the same degree of margin pressure.
Management outlined four priorities for 2026:
- Maintain high revenue retention and execute on new customer development, including “land and expand” opportunities.
- Improve gross margin through business mix and operational efficiencies, with additional benefit expected as revenue returns.
- Generate strong cash flow, continue capital returns to shareholders, and continue debt repayment.
- Be opportunistic on M&A, leveraging the market environment and DCM’s balance sheet.
In the Q&A, Kellam said the company is evaluating potential acquisitions in areas including in-store marketing, labeling, and packaging, which he said align with DCM’s strengths. Lorimer added that technology hardware remains a potentially “lumpy” category but said the pipeline includes projects in traditional hardware (such as printers and scanners) and digital screens.
Regarding additional shareholder returns, Lorimer said management is not considering another special dividend “at the present time,” adding that the board will continue to assess capital allocation alternatives, including M&A.
About DATA Communications Management (TSE:DCM)
DATA Communications Management Corp is a communication solutions partner that adds value for major companies across North America by creating more meaningful connections with their customers. It pairs customer insights and thought leadership with cutting-edge products, modular enabling technology and services to power its clients’ go-to market strategies. The company helps its clients manage how their brands come to life, determine which channels are right for them, manage multimedia campaigns, deploy location-specific and 1:1 marketing, execute custom loyalty programs, and fulfill their commercial printing needs all in one place.
