Its third quarter numbers are in the books and Clarus Securities analyst Noel Atkinson still thinks there is money to be made on DATA Communications Management Corp. (DATA Communications Management Corp. Stock Quote, Chart, News, Analysts, Financials TSX:DCM).
On November 8, DCM reported its Q3, 2023 results. The company posted Adjusted EBITDA of $11.8-million on revenue of $$122.7–million, a topline that was up 93.6 per cent over the same period last year.
“We are pleased with our continued progress building a better and a bigger business as reflected in our third quarter results and the positive momentum of our integration efforts since completing the acquisition of Moore Canada Corporation (MCC) six months ago,” CEO Richard Kellam said. “The combined business delivered solid performance building value with existing customers, securing new client wins and optimizing strategic revenue opportunities. Our post-merger initiatives are progressing ahead of plan and given our success to date driving savings and efficiency improvements, we are revising our guidance for expected total annualized synergies to a range between $30 and $35-million over the next 18 to 24 months, from a previous range of $25 to $30-million. We are excited about the opportunities in front of us to build on our strong start as a combined company focusing on driving growth and value creation.”
Atkinson said the quarter featured better than expected gross margins.
“Revenues of $122.7MM were fairly close to our $124.3MM estimate,” he said. “We understand the summer was a bit soft, but September came back strongly; management also noted that there was some seasonal product mix effect. Nonetheless, gross profit margin of 24.7% was above our 24.4% outlook. The pro forma business’s revenues were up about +5% Y/o/Y for the first 9 months of 2023. Management remains committed to its target of at least +5% revenue CAGR over the medium term. Adj. EBITDA was $11.8MM, nicely above our $10.3MM forecast.”
In a research update to clients November 9, the analyst maintained his “Buy” rating and one-year price target of $5.50 on DCM, implying a return of 92 per cent at the time of publication.
In fiscal 2023, the analyst has the company posting Adjusted EBITDA of $52.3-million on revenue of $447.9-million. Atkinson thinks DCM will post Adjusted EBITDA of $75.5-million on revenue of $543.6-million in fiscal 2024.
“We continue to expect DCM to become a cash flow machine in 2025e once the cost synergies are realized,” the analyst concluded.
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