2023 Annual Report
DATA Communications Management Corp.
REFILED 2023 ANNUAL REPORT
NOTE TO READER: The management’s discussion and analysis of financial condition and results of operations of
DATA Communications Management Corp. for the year ended December 31, 2023 (“MD&A”) and the consolidated
audited annual financial statements of DATA Communications Management Corp. for the years ended December 31,
2023 and 2022 (“Annual Financial Statements”) have been refiled to correct and replace the versions inadvertently
filed earlier on March 20, 2024, which contained certain typographical errors. Accordingly, the 2023 annual report of
DATA Communications Management Corp. (the “Annual Report”), which contains the MD&A and Annual Financial
Statements, has been refiled to correct and replace the version inadvertently filed earlier on March 20, 2024. This
Annual Report contains corrections to the following typographical errors in the MD&A:
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in Table 1 (free cash flow reconciliation) for the year ended December 31, 2022:
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“Total cash generated from operating activities” has been corrected from “25,386” to “22,675”; and
“Free cash flow” has been corrected from “15,251” to “12,540”.
Under the heading “Cash Flow From Operations”:
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cash flows generated from operating activities during the year ended December 31, 2022 have
been corrected from “$25.4 million” to “$22.7 million”; and
changes in working capital during the year ended December 31, 2022 have been corrected from
“$3.6 million” to “$6.3 million”.
No other changes have been made to the MD&A.
This Annual Report also contains corrections to the following typographical errors in the Annual Financial Statements:
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in the “consolidated statements of cash flows” table for the year ended December 31, 2022:
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“Changes in non cash working capital (note 19)” have been corrected from “(3,632)” to “(6,343)”;
“Total cash generated from operating activities” has been corrected from “25,386” to “22,675”;
“change in cash and cash equivalents during the year” has been corrected from “5,979” to “3,268”;
and
“cash and cash equivalents - end of year” has been corrected from “6,919” to “4,208”.
within the Note 17 “Shares and warrants”, the table for change in number of issued and outstanding
common shares during the year:
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Amount for “Exercise of warrants – April 3, 2023” have been corrected from “167,000” to “167”;
Amount for “Exercise of warrants – April 21, 2023” have been corrected from “1,191,000” to “1,191”;
and
Amount for “Exercise of options – May 25, 2023” have been corrected from “1,422,000” to “1,422”.
within the Note 19 “Changes in working capital” table for the year ended December 31, 2022:
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“Trade and accrued liabilities” have been corrected from “6,888” to “4,177”; and
the total has been corrected from “(3,632)” to “(6,343)”.
No other changes have been made to the Annual Financial Statements.
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DATA Communications Management Corp.
Letter to shareholders
Dear Fellow Shareholders,
We are pleased to report on the results of our performance in 2023. This was a transformative year for DCM
highlighted by the completion of our acquisition of Moore Canada Corporation (“MCC”) and the significant progress
we made in our post-acquisition planning and execution.
Our focus throughout the year was to build on the positive momentum we experienced in our business prior to the
announcement of the MCC acquisition and to set a clear direction for our entire team beginning on Day 1 of the
combined business in late April. We moved quickly to bring our teams together, design our new organization and
select key leadership to take us forward, prioritizing our large Commercial and Operations teams. We completed this
effort within the first six months of Day 1.
We also moved quickly to complete a thorough analysis of our manufacturing footprint and announced a decision in
early July to consolidate our plant network from 14 to 10 facilities to drive greater efficiencies in producing and
delivering our products and services. We completed the closure of the first of these facilities in Edmonton, Alberta
before the end of the year and are on track with our detailed plan to close the remaining three plants and transfer
production to other facilities in our network.
Our Commercial team delivered solid performance throughout the year, expanding revenue with existing clients,
winning new logos, and building a strong new business pipeline focused on the value we can deliver to clients with
our combined product and service offerings. We are pleased to report that in a year of significant change, the team
delivered organic year over year revenue growth of 2%, which we believe is a great start for this new team!
Turning to our financial performance for the full year:
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Revenues of $447.7 million were up +63.5%, or +$173.9 million vs. 2022.
Gross profit of $118.9 million increased +41.2% or $34.7 million.
Gross profit as a percentage of revenues came in at 26.6%, compared to 30.8% last year reflecting lower
MCC gross profit margin contributions. As a reminder, the opportunity to enhance MCC gross profit margins
was one of the key attributes of the MCC acquisition deal logic and improving our consolidated gross profit
margins remains a strategic focus of our business.
SG&A expenses were $87.2 million for the full year or 19.5% of revenues, compared to 19.9% of revenues
in 2022.
Adjusted EBITDA was $53.4 million for the full year, an increase of +30.3% vs. the prior year. Adjusted
EBITDA represented 11.9% of revenues for the full year, compared to 15.0% for 2022. Our strong Adjusted
EBITDA performance was driven by the addition of the MCC business, continuing our focus on improving
gross profit margins, and controlling our SG&A expenses.
Looking at our performance in the fourth quarter, we delivered:
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Reported revenues of $130.0 million up +77.9%, or +$56.9 million, compared to the fourth quarter of 2022.
Gross profit of $32.8 million, an increase of +39.1%, or +$9.2 million compared to the same period last year.
Gross profit as a percentage of revenues of 25.2%, compared to 32.2% for DCM for the same period last
year.
SG&A expenses of 19.5% of revenues or $25.3 million, up modestly from 18.7% in the year-ago quarter,
Adjusted EBITDA of $15.0 million, up +19.5% compared to the fourth quarter of 2022. This represented
11.6% of revenues compared to 17.2% of revenues last year.
As a reminder, the fourth quarter represents the second full quarter of consolidated “one company” results since the
completion of the MCC acquisition on April 24, 2023.
In connection with the MCC acquisition, we incurred $0.7 million of one-time, non-recurring transaction expenses in
the fourth quarter, bringing the full year total to $10.9 million. We recorded $10.6 million of restructuring expenses in
the fourth quarter primarily associated with our future plans to close our Trenton and Fergus, Ontario facilities. For
the full year, restructuring expenses were $20.3 million.
Our commitment to paying down debt remains a key priority. Total indebtedness outstanding under our credit facilities
at year end was $101.9 million, down approximately -30.0% since the MCC acquisition. Net debt, after deducting a
$16.1 million cash balance (net of bank overdraft), was $84.2 million, down -39.0% since that time.
As previously announced, we have completed the planned sale and leaseback of three facilities in Oshawa, Trenton
and Fergus, Ontario, which were acquired in the MCC acquisition. These transactions generated a total of $39.8
million in gross proceeds and approximately $37.8 million in total net proceeds, which have been used to pay down
acquisition-related financing.
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For a full description of our financial results for fiscal 2023, please refer to our consolidated financial statements for
the year ended December 31, 2023, and related management’s discussion and analysis (“MD&A”), copies of which
are available at www.sedarplus.ca.
Certain statements in this letter constitute “forward-looking” statements that involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance, objectives or achievements of DCM,
or industry results, to be materially different from any future results, performance, objectives, or achievements
expressed or implied by such forward-looking statements. See “Forward-Looking Statements” in our MD&A. This
letter also includes certain non-IFRS Accounting Standards measures and ratios as supplementary information. See
“Non-IFRS Accounting Standards measures” and Tables 1, 3, 4 and 5 in our MD&A, each of which is incorporated by
reference in this document.
Yours truly,
(Signed) "Richard Kellam"
Richard C. Kellam
President & CEO
DATA Communications Management Corp.
March 2024
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DATA Communications Management Corp.
Management’s discussion and analysis of financial condition and results of operations
The following management’s discussion and analysis (“MD&A”) is intended to assist readers in understanding the
business environment, strategies, performance and risk factors of DATA Communications Management Corp. (TSX:
DCM; OTCQX: DCMDF) and its subsidiaries (referred to herein as “DCM” or the “Company”) for the years ended
December 31, 2023 and 2022. This MD&A should be read in conjunction with the audited consolidated financial
statements and accompanying notes of DCM for the years ended December 31, 2023 and 2022. Additional
information about the Company, including its most recently filed audited consolidated financial statements, Annual
Information Form and Management Information Circular, may also be obtained on SEDAR+ (www.sedarplus.ca).
Unless otherwise indicated, all amounts are expressed in Canadian dollars.
The Company's Board of Directors (“Board”), on the recommendation of its Audit Committee, approved the contents
of this MD&A on March 20, 2024. This MD&A reflects information as of March 20, 2024.
Basis of presentation
DCM prepares its consolidated financial statements in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board (“IFRS Accounting Standards”). The accounting policies
applied in these consolidated financial statements are based on IFRS Accounting Standards effective for the year
ending December 31, 2023, as issued and outstanding as of March 20, 2024 the date the Board approved these
financial statements.
Forward-looking statements
Certain statements in this MD&A constitute “forward-looking” statements that involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance, objectives or achievements of DCM,
or industry results, to be materially different from any future results, performance, objectives or achievements
expressed or implied by such forward-looking statements. When used in this MD&A, words such as “may”, “would”,
“could”, “will”, “expect”, “anticipate”, “estimate”, “believe”, “intend”, “plan”, and other similar expressions are intended
to identify forward-looking statements. These statements reflect DCM’s current views regarding future events and
operating performance, are based on information currently available to DCM, and speak only as of the date of this
MD&A.
These forward-looking statements involve a number of risks, uncertainties, and assumptions. They should not be
read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not
such performance or results will be achieved. Many factors could cause the actual results, performance, objectives
or achievements of DCM to be materially different from any future results, performance, objectives or achievements
that may be expressed or implied by such forward-looking statements. We caution readers of this MD&A not to place
undue reliance on our forward-looking statements since a number of factors could cause actual future results,
conditions, actions, or events to differ materially from the targets, expectations, estimates or intentions expressed in
these forward-looking statements.
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The principal factors, assumptions and risks that DCM made or took into account in the preparation of these forward-
looking statements and which could cause our actual results and financial condition to differ materially from those
indicated in the forward-looking statements include but are not limited to the following:
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Our operating results are sensitive to economic conditions, which can have a significant impact on us, and
uncertain economic conditions may have a material adverse effect on our business, results of operations
and financial condition;
Our ability to successfully integrate the DCM and MCC businesses and realize anticipated synergies from
the combination of those businesses, including revenue and profitability growth from an enhanced offering of
products and services, larger customer base and cost reductions;
The expected annualized synergies that the Company expects to derive from the MCC acquisition have
been estimated by the Company based on its experience integrating previously acquired businesses, other
facilities and completing previous restructuring initiatives, and includes estimated benefits expected to be
derived from the acquisition, including those related to facility sales and consolidations, operational
improvements, eliminating redundant positions, and purchasing synergies;
•
Our expected total annualized synergies estimates are principally based upon the following material factors
and assumptions: (a) given the significant overlap in the nature of the two businesses, DCM will be able to
eliminate duplication of overhead expenses across the combined DCM and MCC businesses in its SG&A
functions; (b) given significant overlap in the nature of DCM’s and MCC’s production processes and
available combined excess capacity, DCM will be able to consolidate manufacturing plants; (c) further
operational and SG&A costs savings will be achievable once the above-noted initiatives are completed; (d)
the combined business will achieve more favourable purchasing terms by virtue of the fact it is
approximately twice the size of each of DCM and MCC pre-acquisition, and therefore able to command
lower pricing from vendors based on larger volumes, and its expected ability to better harmonize purchasing
strategies to leverage more favourable purchasing terms than each company had individually for similar
goods or services; and (e) the combined business will be able to generate certain revenue synergies from
cross-selling each other’s broader, combined, suite of capabilities;
•
Such expected annualized cost savings have not been prepared in accordance with IFRS Accounting
Standards, nor has a reconciliation to IFRS Accounting Standards been provided, and the Company
evaluates its financial performance on the basis of these non-IFRS Accounting Standards measures.
Therefore, the Company does not consider their most comparable IFRS Accounting Standards measures
when evaluating prospective acquisitions;
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The acquisition of MCC involves a number of risks, including:
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the possibility that DCM paid more than the acquired assets are worth;
the Company may fail to realize the expected benefits and anticipated annualized synergies from
the acquisition;
there may be additional unexpected expenses, capital investment, and management resources
required to complete and integrate the MCC acquisition and amortizing any acquired intangible
assets than anticipated;
the integration and consolidation of the operations of the MCC business is complex, and achieving
improved operational efficiencies from such integration may not be realized as expected;
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DATA Communications Management Corp.
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the challenge of implementing uniform standards, controls procedures, systems, and policies
throughout the business;
the potential disruption of the Company’s ongoing business and the distraction of management
from its day-to-day operations;
the challenge of integrating, training, retaining and motivating key personnel of the MCC business;
and
the potential impairment of relationships with the Company’s employees, clients, suppliers and
strategic partners;
There is limited growth in the traditional printing business, which may impact our ability to grow our sales or
even maintain historical levels of sales of printed business and marketing communications materials;
Competition from competitors supplying similar products and services, some of whom have greater
economic resources than us and are well established suppliers;
Increases in the cost of, and supply constraints related to, paper, ink and other raw material inputs used by
DCM, as well as increases in freight costs, may adversely impact the availability of raw materials and our
production, revenues and profitability;
Our ability to meet our revenue, profitability and debt reduction targets;
Our ability to comply with our financial covenants under our credit facilities or to obtain financial covenant
waivers from our lenders if necessary;
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• We may not be successful in obtaining capital to fund our business plans on satisfactory terms (or at all),
including, without, limitation, with respect to investments in digital innovation (such as the development and
successful marketing and sale of new digital capabilities), and capital expenditures;
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All of our outstanding indebtedness under our bank credit facility is subject to floating interest rates, and
therefore is subject to fluctuations in interest rates, an increase of which has in the past 24 months, and
could in the future, increase our borrowing costs.
Additional factors are discussed elsewhere in this MD&A under the headings “Liquidity and capital resources” and
“Risks and Uncertainties” and in DCM’s publicly available disclosure documents, as filed by DCM on SEDAR+
(www.sedarplus.ca). Should one or more of these risks or uncertainties materialize, or should assumptions
underlying the forward-looking statements prove incorrect, actual results may vary materially from those described in
this MD&A as intended, planned, anticipated, believed, estimated or expected. Unless required by applicable
securities law, DCM does not intend and does not assume any obligation to update these forward-looking statements.
Non-IFRS Accounting Standards measures
NON-IFRS ACCOUNTING STANDARDS AND OTHER FINANCIAL MEASURES
This MD&A includes certain non-IFRS Accounting Standards measures, ratios and other financial measures as
supplementary information. This supplementary information does not represent earnings measures recognized by
IFRS Accounting Standards and does not have any standardized meanings prescribed by IFRS Accounting
Standards. Therefore, these non-IFRS Accounting Standards measures, ratios and other financial measures are
unlikely to be comparable to similar measures presented by other issuers. Investors are cautioned that this
supplementary information should not be construed as alternatives to net income (loss) determined in accordance
with IFRS Accounting Standards as an indicator of DCM’s performance.
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DEFINITIONS OF NON-IFRS ACCOUNTING STANDARDS, FINANCIAL MEASURES AND RATIOS
We use adjusted financial measures because we believe they are useful for providing investors with supplemental
measures of DCM’s operating performance and highlight trends in our business that may not otherwise be apparent
when relying solely on IFRS Accounting Standards financial measures. DCM also believes that securities analysts,
investors, rating agencies and other interested parties frequently use such information in the evaluation of issuers.
Further, DCM’s management uses such adjusted information to facilitate operating performance comparisons from
period to period, prepare annual operating budgets, assess its ability to meet future debt service, capital expenditure
and working capital requirements and to evaluate potential acquisitions and the subsequent performance of
completed acquisitions.
EBITDA means earnings before interest and finance costs, taxes, depreciation and amortization. The most
comparable IFRS Accounting Standards measure for EBITDA is net income (loss). For a reconciliation of net income
(loss) to EBITDA, see Table 5 below.
Adjusted EBITDA represents EBITDA, adjusted for acquisition and integration costs, restructuring expenses, the net
fair value (gains) losses on financial liabilities at fair value through profit or loss for restricted share units (“RSUs”) and
deferred shared units (“DSUs”) and other adjustments for other specific items that may be significant but are not
reflective of our underlying operations, all on an after-tax basis. Specific items are subjective; however, we use our
judgement and informed decision-making when identifying items to be excluded in calculating our adjusted measures.
We use Adjusted EBITDA as a measure of pre-tax operating cash flow. The most comparable IFRS Accounting
Standards measure of Adjusted EBITDA is net income (loss). For a reconciliation of net income (loss) to Adjusted
EBITDA, see Table 6 below.
Adjusted net income (loss) represents net income (loss) before acquisition and integration costs, restructuring
expenses, the net fair value (gains) losses on financial liabilities at fair value through profit or loss for RSUs and
DSUs and other adjustments for other specific items that may be significant but are not reflective of our underlying
operations, all on an after-tax basis. Specific items are subjective; however, we use our judgement and informed
decision-making when identifying items to be excluded in calculating our adjusted net income (loss). We use
adjusted net income (loss) as a measure of overall profitability. The most comparable IFRS Accounting Standards
measure of adjusted net income is net income (loss). For a reconciliation of net income (loss) to Adjusted net income
(loss), see Table 6 below.
Adjusted net income (loss) per share (EPS) (basic and diluted) is a non-IFRS Accounting Standards ratio
calculated by dividing Adjusted net income (loss) (defined above) for a given period by the weighted average number
of common shares of DCM (basic and diluted) outstanding, respectively, during the period.
Margin is calculated as a percentage of revenues, which is itself an IFRS Accounting Standards financial measure,
and we monitor margins in comparison to our internal targets. Margin is a non-IFRS Accounting Standards ratio
when applied to non-IFRS Accounting Standards financial measures.
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Free cash flow is used to monitor the availability of discretionary cash as part of our capital management. It is
defined as total cash generated from operating activities, less net capital expenditures (comprised of purchases of
property, plant and equipment less proceeds on disposal of property, plant and equipment), less lease payments. A
reconciliation of free cash flow to its most comparable IFRS Accounting Standards measure, total cash generated
from operating activities, is included in “Additional Reconciliations of Non-IFRS Accounting Standards Financial
Measures” in Table 1.
SUPPLEMENTARY FINANCIAL MEASURES
Annualized synergies is a non-IFRS Accounting Standards financial measure we use to evaluate the integration
progress of our acquisition of MCC. These represent annualized operating savings management expects to derive
from its post-acquisition integration activities relating to the acquisition. We believe these synergy estimates are
important to investors and other stakeholders to inform on our potential and evaluate our progress on initiatives
relating to management’s cost reduction and synergy objectives. These metrics were initially determined based on
management’s own pre- and post-acquisition due diligence of the MCC business prior to closing and the advice of its
external integration consultants and have subsequently been refined and tracked based on actual progress against
such preliminary objectives. These are primarily based on expectations relating to (1) organizational savings through
eliminating duplicative positions, (2) operational savings from initiatives including planned plant closures and
optimization initiatives, and (3) procurement savings anticipated from a larger purchasing base and are expected by
management to be achieved through the combination and integration of the two companies. From time to time, we
also quantify the impacts of certain unusual, non-recurring events to provide useful information to investors to help
better understand our financial outlook. Also see “Forward-looking statements”.
Compound Annual Growth Rate (CAGR) is a supplementary financial measure when applied to IFRS Accounting
Standards financial measures.
Revenue per associate is a metric we use to evaluate the productivity of our employees, who we refer to as
“associates”, and is a non-IFRS Accounting Standards financial measure. It is determined by taking revenues, an
IFRS Accounting Standards financial measure, for a specific twelve-month period, typically being a fiscal year, or four
consecutive fiscal quarters, divided by the total number of associates at the end of that period. Where the pro forma
acquisition of MCC is referred to, revenues may not be representative of an IFRS Accounting Standards financial
measure but are based on management’s informed analysis of the pro forma combined revenues as if MCC had been
owned by DCM during the full respective period.
Margin (defined above) is a supplementary financial measure when applied to IFRS Accounting Standards
measures.
Net Debt to Adjusted EBITDA (net of Lease Payments) is a non-IFRS Accounting Standards ratio used as part of
our assessment of our capital structure. It is defined as the sum of (1) the total balance of our credit facilities less
cash and equivalents at a given period (net of bank overdraft), divided by (2) adjusted EBITDA less lease payments
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for the four quarters then ended. Net debt to adjusted EBITDA (net of Lease Payments) is quantified in “Additional
Reconciliations of Non-IFRS Accounting Standards Financial Measures” in Table 2.
Working capital is a supplementary financial measure that we use as a measure for assessing overall liquidity. It is
calculated by subtracting current liabilities from current assets.
ADDITIONAL RECONCILIATIONS OF NON-IFRS ACCOUNTING STANDARDS FINANCIAL MEASURES
TABLE 1
The following table sets out free cash flow for the periods noted.
Free Cash Flow reconciliation
(in thousands of Canadian dollars, unaudited)
Total cash generated from operating activities
Less: Purchase of property, plant and equipment
(Net of): Proceeds on disposal of property, plant and equipment
Less: Lease payments
Free cash flow
For the year ended
December 31, 2023
For the year ended
December 31, 2022
32,803
(4,222)
1,282
(13,321)
16,542 $
22,675
(1,475)
70
(8,730)
12,540
$
TABLE 2
The following table sets out net debt to adjusted EBITDA for the periods noted.
Net debt to adjusted EBITDA
(in thousands of Canadian dollars, except net Debt to Adjusted EBITDA,
unaudited)
For the year ended
December 31, 2023
For the year ended
December 31, 2022
Total credit facilities
Less: Cash and equivalents (net of bank overdraft)
Net Debt
Adjusted EBITDA
Less: Lease payments
Adjusted EBITDA (net of Lease Payments)
101,866
(16,088)
85,778 $
53,390
(13,321)
40,069 $
$
$
Net Debt to Adjusted EBITDA (net of Lease Payments)
2.14x
27,318
(4,208)
23,110
40,965
(8,730)
32,235
0.72x
Business of DCM
OVERVIEW
DCM is a marketing and business communications partner that helps companies simplify the complex ways they
communicate and operate, so they can accomplish more with fewer steps and less effort. For over 60 years, DCM
has been serving major brands in vertical markets, including financial services, retail, healthcare, energy, other
regulated industries, and the public sector. We integrate seamlessly into our clients’ businesses thanks to our deep
understanding of their needs, our technology-enabled solutions, and our end-to-end service offering. Whether we are
running technology platforms, sending marketing messages, or managing print workflows, our goal is to make
everything surprisingly simple.
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DCM’s manufacturing operations are characterized by a high degree of complexity, as our products and services are
customized to meet the unique requirements of each customer. The end products are derived through integrated
production processes spanning multiple product categories and revenue streams. These processes typically involve
various stages of work across multiple plants, culminating in the delivery of a finished product. As a result of the
complex nature of this production landscape, conventional metrics such as selling prices and the volume or quantity
of products or services are challenging to discern and are not relevant other than in the aggregate in management’s
view.
Customer agreements and terms typically include provisions consistent with industry practice, which allow DCM to
pass along increases in the cost of paper and other raw materials used to manufacture products.
DCM’s revenue is subject to the mailing patterns of certain customers. Typically, higher revenues and profit are
generated in the first quarter relative to the other three quarters, however this can vary from time to time due to
changes in customers’ purchasing decisions throughout the year. As a result, DCM’s revenue and financial
performance for any single quarter may not be indicative of revenue and financial performance, which may be
expected for the full year.
DCM has approximately 1,800 employees in Canada and the United States and had revenues of $447.7 million in
2023.
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RECENT DEVELOPMENTS
MOORE CANADA CORPORATION (“MCC”) ACQUISITION
On April 24, 2023, DCM acquired all of the outstanding shares of MCC, an Ontario corporation, for a total cash
purchase price of $130.8 million and a total of $135.8 million after post-closing working capital and other customary
adjustments. Upon completion of the acquisition, MCC became a wholly-owned subsidiary of DCM. MCC’s business
is substantially similar to the business carried on by DCM. The MCC acquisition was funded through (i) a revolving,
floating rate credit facility from a Canadian chartered bank (the “Bank”), which includes up to $90 million of revolving
credit capacity; (ii) a $30 million floating rate term loan from the Bank; and (iii) a new $50 million fixed rate credit
facility from Fiera Private Debt Fund VI, as described in further detail under “Credit Facilities”. The identifiable assets
acquired and liabilities assumed, with limited exceptions are measured at their fair values at the acquisition date with
the excess of the consideration transferred over the fair value of the identifiable assets acquired and liabilities
assumed being recognized as goodwill. The fair value of the identifiable assets acquired included $41.4 million
related to properties (including $25.8 million classified as assets held for sale, which was the subject of a sale and
leaseback agreement) and $26.1 million related to presses and printing equipment, office furniture and equipment
and leasehold improvements. Management applied significant judgment in estimating the fair value of the acquired
properties, plant and equipment.
The year ended December 31, 2023 represents the first year of consolidated DCM and MCC financial results,
commencing from the acquisition date of April 24, 2023.
Management to date has focused on four key areas of post-merger integration in connection with the MCC
acquisition:
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Operational initiatives primarily intended to drive higher levels of gross profit as a percentage of revenues by
reducing our overall cost of goods sold and implementing operating efficiencies, including the planned
consolidation of four plants;
Organizational initiatives primarily intended to drive both higher levels of gross profit as a percentage of
revenues and lower levels of SG&A expenses as a percentage of revenues, including the integration of key
functional teams, particularly our Commercial and Operations teams, and reducing duplicative positions;
Procurement initiatives, primarily intended to lower our consolidated purchasing costs and secure improved
purchasing terms; and
Revenue growth focus, primarily through aligning our commercial selling efforts, including expanding and
leveraging our combined print and communications workflow solutions and our digital offerings.
DCM currently expects to realize total annualized synergies from the MCC acquisition of between $30 million to $35
million from integration initiatives related to a reduction in our operational and organizational expenses and improved
purchasing practices, to be substantially realized over the next 12 months.
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RESTRUCTURING INITIATIVES
Following the completion of the MCC acquisition, DCM commenced its planned initiatives to drive synergies in
connection with the acquisition, including initiatives to align its organizational structure and optimize its operational
footprint. During the year ended December 31, 2023, the total head count of DCM and MCC was reduced by
approximately 95 individuals, which resulted in a total restructuring expense of $12.8 million. These workforce
initiatives primarily related to reductions in our Commercial team, following a comprehensive re-alignment of account
coverage, and operational reductions related to the closure of our Edmonton facility. Additionally, a restructuring
expense amounting to $7.5 million is associated with the anticipated closure costs for our Fergus and Trenton plants.
While the closures of the Fergus and Trenton plants are still pending completion, the restructuring expense has been
substantially determined. In total, $20.3 million of restructuring expenses were taken in 2023. In addition to these
restructuring initiatives, DCM continues to evaluate its business for opportunities to enhance productivity and reduce
its cost of operations.
PRIVATE PLACEMENT
On May 25, 2023, DCM completed a private placement of common shares (the “Offering”), pursuant to which it
issued 8,707,200 common shares at a price per share of $3.00 for gross proceeds of $26.1 million. The net proceeds
of the Offering were used for general corporate and working capital purposes. Insiders of DCM, including senior
members of the Company’s leadership team, subscribed for $0.4 million of the Offering. Also, in connection with the
Offering, the Company issued broker warrants entitling the agents who participated in the Offering to acquire, in the
aggregate, up to 261,216 common shares of the Company at a price of $3.16 per share for a period of two years
following the closing of the Offering.
PLANT CONSOLIDATION EDMONTON FACILITY
DCM announced its strategic plan in July 2023 to close its Edmonton facility and shift production operations to the
Company’s Calgary facility by the end of 2023. During the year ended December 31, 2023, the Edmonton plant was
successfully closed, and its operations were substantially consolidated into our Calgary facility. In response to this
consolidation, new production orders are now being redirected primarily to our Calgary facility, which is staffed and
equipped to efficiently handle the additional volume previously managed by the Edmonton facility.
SALE AND LEASEBACK OF OSHAWA AND FERGUS FACILITIES
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In June 2023 and December 2023, DCM completed the sale and leaseback of its Oshawa, Ontario warehouse facility
and its Fergus, Ontario manufacturing facility, respectively, each of which was acquired as part of the Company’s
acquisition of MCC. The total gross proceeds from these transactions amounted to $30.5 million and after deducting
closing commissions, rent deposit, and other associated expenses, total net proceeds were $29.5 million. These
proceeds were utilized to re-pay the term loan obtained from Canadian chartered bank to finance a portion of the
MCC acquisition. In addition, $1.5 million in proceeds is being held in escrow by the landlord of the Oshawa, Ontario
warehouse facility to secure the completion of specific building maintenance, repairs, and capital improvements
outlined by DCM. The leaseback terms differ for the two facilities. The Oshawa, Ontario warehouse facility has a
lease term of twenty years, encompassing an initial lease term of ten years with two additional five year extension
options. In contrast, the Fergus, Ontario manufacturing facility leaseback spans two years, including an initial lease
term of one year with two additional six month extension options to allow the Company sufficient time to complete the
closure of this facility.
SALE AND LEASEBACK OF TRENTON FACILITY
On January 11, 2024, DCM completed the sale and leaseback of its Trenton, Ontario manufacturing facility, which
was acquired as part of the Company’s acquisition of MCC. DCM realized gross proceeds on the sale of $9 million,
and, after deducting closing commissions, rent deposit, and other expenses, net proceeds of $8.5 million have been
applied towards paying down the New Bank Credit Facility (defined below). DCM intends to close the Trenton,
Ontario facility and to move production to other DCM plants. In connection with the sale transaction, the Company
entered into a one-year lease of the facility. Under the terms of the lease, the Company has two options to extend the
lease term, each in three-month increments, for a total additional term of up to six months to allow the Company
sufficient time to complete the closure of this facility.
STRATEGIC PLANS
Following the close of the MCC acquisition, in May 2023 we announced the following updated five-year strategic
financial objectives:
•
•
•
•
•
Grow organic revenue at a CAGR of +5% per year;
Achieve Adjusted EBITDA margins of +14%;
Grow our marketing technology solutions revenue at a CAGR of +60%;
Total net debt of less than 1.0x Adjusted EBITDA (net of lease payments); and
Realize total annualized post-acquisition synergies in the range of $25 to $30 million over the next 18 – 24
months.
We believe we are substantially on track to achieve these objectives.
•
Our consolidated revenue grew +63.5% in 2023 compared to 2022, which was largely attributable to the
acquisition of MCC in April 2023. Our organic revenue, assuming we owned MCC for the full 2023 fiscal
year, grew approximately 2% year over year. While organic growth was below our +5% CAGR target, given
the significant demands on management in connection with the integration of the MCC business, we are
pleased with this performance of the combined business. We anticipate lower organic revenue growth rates
in the first 12 to 24 months following the completion of the MCC acquisition, as we intend to focus heavily on
margin improvement in the MCC business during this initial period and we expect that organic revenue will
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DATA Communications Management Corp.
accelerate at a CAGR that is more consistent with our organic revenue growth target in the latter part of our
five-year plan. During the latter parts of this five-year period, we anticipate revenue synergies, as further
discussed below, to accelerate, and together with an organic revenue growth focus, enable us to meet our
five-year target.
• We achieved an Adjusted EBITDA margin of 11.9% in fiscal 2023, and 9.6% and 11.6% in the third and
fourth quarters, respectively, which represent the first full quarters with MCC results. Our fourth quarter
financial results indicated positive trends with respect to Adjusted EBITDA margin objectives. We currently
expect to achieve the +14% Adjusted EBITDA margin within the next two years, primarily as a result of our
synergies target plan, as further described below. This compares favourably with the 15.0% Adjusted
EBITDA margin DCM achieved in 2022 prior to our acquisition of MCC.
•
•
Our technology-enabled subscription services fee revenue grew 176.9% in the year compared to the same
period in 2022, with contributions from MCC’s professional services revenue. We have an active new
product development pipeline which we expect will contribute to further growth in this category.
Total net debt to Adjusted EBITDA (net of lease payments) was 2.14x at the end of 2023. Following the
year, we applied the net proceeds from the sale of our Trenton facility to repay outstanding debt. This year,
the repayment of our FPD VI acquisition facility will commence and, together with expected free cash flow
contributions and anticipated Adjusted EBITDA margin growth, as further described below, we believe we will
achieve this target in the near term.
•
In November 2023, we updated our expected annualized post-acquisition synergies to a range of $30 to $35
million over the next 18 - 24 months, and that we had implemented initiatives expected to deliver annualized
savings of approximately $17.5 million in 2024. We are updating that outlook. Based on initiatives
implemented to date, we currently expect implemented synergy initiatives to generate annualized savings of
approximately $22 million on an annualized basis, and continue to expect to realize total annualized
synergies in a range of $30 to $35 million over the next twelve months. A significant proportion of the
balance of our annualized synergies are expected to come from the planned closure of our Fergus and
Trenton plants towards the end of this twelve month period.
Our expected annual organic revenue growth objectives, total annualized synergies estimates, and Adjusted EBITDA
margin objectives, are principally based on the following material factors and assumptions: (1) given the significant
overlap of the two businesses, DCM will be able to eliminate duplication of overhead expenses across the combined
DCM and MCC businesses in its SG&A functions; (2) given significant overlap in the nature of DCM’s and MCC’s
production processes and combined excess capacity, DCM will be able to consolidate manufacturing plants; (3)
further operational and SG&A costs savings will be achievable once the above-noted initiatives are completed; (4) the
combined business will achieve more favourable purchasing terms by virtue of the fact it is approximately twice the
size of each of DCM and MCC pre-acquisition, and therefore able to command lower pricing from vendors based on
larger volumes, and its expected ability to harmonize purchasing strategies to leverage more favourable purchasing
terms than each company had individually for similar goods or services; and (5) the combined business will be able to
generate certain revenue synergies from cross-selling each other’s broader, combined, suite of capabilities; and (6)
the risks set forth in this MD&A under the heading “Forward-Looking Statements”.
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DATA Communications Management Corp.
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REVENUE RECOGNITION POLICY
DCM recognizes revenue when control of the products or services it provides to its customers has been transferred.
The recent acquisition of MCC did not affect this policy as their products and services are similar to those of DCM.
The following is a description of the principal activities from which DCM generates its revenue, along with the
corresponding revenue recognition accounting policies.
PRODUCT SALES
DCM manufactures customized products based on specifications pre-approved by its customers. At its customers’
request, DCM will also purchase product from third-party vendors and resell that product to its customers, including
technology-enabled hardware solutions (see “Technology-enabled hardware solutions” below). For products that
DCM purchases and resells to its customers, DCM is typically a principal in these arrangements and is responsible
for making key decisions over the purchasing of product and has the economic risks and rewards that are customary
with control. Accordingly, third-party product revenue is typically presented on a gross basis in revenue with the
corresponding product purchase cost and associated costs recognized in costs of revenue. DCM recognizes revenue
when control over the product transfers to the customer, which effectively occurs upon the completion of production or
when a resale product is purchased from a third-party vendor and inducted into DCM’s warehouses or shipped
directly by the vendor to the DCM customers due to the custom nature of the product. In the case of custom third-
party products that do not have an alternative use to DCM, DCM is entitled to payment once the quantity of product
pursuant to an individual purchase order is produced or purchased from a third-party vendor and inducted into
warehouses. Given the fact that DCM’s manufactured products are customized or purchased specifically at the
customer’s request, product returns are insignificant.
In some instances, DCM’s customers obtain the product directly from DCM following the completion of production or
directly from third-party vendors. In other instances, DCM’s contracts involve the provision of warehousing and
shipment services, in addition to manufacturing or purchasing of third-party products. Certain of DCM’s contractual
arrangements with its customers related to product, include the provision of warehousing, freight and financing
services, in addition to manufacturing or purchase from third parties of customized products based on specifications
pre-approved by its customers. For bundled pricing arrangements, DCM allocates the transaction price to each
performance obligation based on their relative stand-alone selling prices. Management applies judgment and
assumptions when determining stand-alone selling prices and allocating revenue between the various performance
obligations based on non-bundled pricing arrangements and comparable market data, where applicable. In some
cases, DCM stores customized or purchased product at the request of the customer; the product is identifiable as the
customer’s product; the product is ready for transfer to the customer upon the customer’s request; and DCM cannot
re-direct the product nor use the product to fulfill another customer’s product order under the contract. Deferred
revenue represents amounts that have been invoiced to the customer but not yet recognized as revenue, including
advance payments and billings in excess of revenue. Deferred revenue is recognized as revenue when DCM
completes the production of product or upon receipt of third-party product in its warehouses or when warehousing
and freight services are provided (see “Warehousing Services” and “Freight Services” below).
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DATA Communications Management Corp.
WAREHOUSING SERVICES
DCM provides custodial services to store customer product in its warehouse over a specified agreed upon period of
time. For non-bundled pricing arrangements, warehousing revenues are recognized over the period that
warehousing services are provided to the customer. For bundled pricing arrangements, DCM allocates a portion of
the initial transaction price for warehousing services and recognizes revenue on a straight-line basis over the agreed
period of the warehousing as it best represents the pattern of performance. Amounts are typically invoiced as
warehousing services are performed in accordance with agreed upon contractual terms at periodic intervals. When
DCM receives advance payments or issues billings in excess of revenue, these are recognized as deferred revenue
in the statement of financial position. Deferred revenue is recognized as revenue when or as DCM provides custodial
services over the agreed upon warehouse term.
FREIGHT SERVICES
DCM frequently contracts with third parties to deliver product to its customers. DCM is typically a principal for such
shipment services as it is responsible for making key decisions over the shipment arrangements and has the
economic risks and rewards associated with such control as a principal. In those cases where DCM has identified it
has a distinct performance obligation to arrange product shipment services and control of the product has been
transferred to the customer prior to shipment, DCM recognizes shipment revenues when the performance of the
shipping service has occurred as products are shipped.
MARKETING AND OTHER SERVICES
Marketing services include fee-for-service marketing strategy, creative and other marketing services fees, and other
ancillary services include fees related to financing charges associated with customers where DCM stores customer
product in the warehouse over a period of time and invoices the customer when the product is dispatched from
DCM's warehouse. Revenue from marketing services is recognized over time as the services are performed.
Revenue for other ancillary services is recognized upon completion of the performance obligations to its customers.
Financing income is recognized as DCM provides custodial services to its customers over the agreed upon
warehouse term.
TECHNOLOGY-ENABLED HARDWARE SOLUTIONS
DCM procure certain products and services from third-party providers to ensure that our clients’ complete business
and marketing communications needs are met while providing comprehensive vendor management strategies.
Technology-enabled hardware solutions include scanners, printers, tablets, and other technology applications, often
with barcoding and RFID functionality, and digital signage applications. Such products typically complement our
product sales, and other services, and are sold to clients as part of an integrated offering. Technology-enabled
hardware solutions represent a distinct performance obligation from our “Product Sales” and “Marketing and Other
Services”, and revenue is recognized when the product is shipped from the vendor or inducted into DCM’s
warehouse.
TECHNOLOGY-ENABLED SUBSCRIPTION SERVICES AND FEES
DCM’s technology-enabled subscription services and fees include the provision of marketing technology workflow
applications and digital asset management (“DAM”) solutions, software subscription fees, managed technology
services, program management services, professional services fees, content management fees, and implementation
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DATA Communications Management Corp.
. . M D & A . .
and development fees. Typically, these services and fees are contracted on either a project basis in the case of
professional services, implementation, and development services fees or for periods of three to five-year terms, with
one to two-year renewal options in the case of software subscription fees and managed technology services.
Revenue is measured based on the consideration DCM expects to be entitled to in exchange for providing services
as they are delivered, or ratably over the term of the contract, and represents a distinct performance obligation.
COST OF REVENUES AND OTHER EXPENSES
DCM’s cost of revenues primarily consists of raw materials, manufacturing salaries and health benefits, occupancy
costs, depreciation of owned equipment, and depreciation of the right-of-use asset (“ROU Asset”) for property leases
and equipment leases. DCM’s raw material costs consist primarily of paper, carbon and ink. Manufacturing salaries
and benefits costs primarily consist of employee salaries and health benefits at DCM’s printing and warehousing
facilities. Occupancy costs consist primarily of depreciation of the ROU Asset for property leases, and costs related
to utilities, insurance and building maintenance. DCM’s other expenses primarily consist of selling, depreciation and
amortization, and general and administration expenses. Selling expenses consist primarily of employee salaries,
health benefits and commissions, and include related costs for travel, corporate communications, trade shows, and
marketing programs. Depreciation and amortization represent the allocation to income of the cost of property, plant
and equipment, the ROU Asset, and intangible assets over their estimated useful lives. General and administration
expenses consist primarily of employee salaries, health benefits, and other personnel related expenses for executive,
financial and administrative personnel, as well as the depreciation of the ROU Asset for property leases,
telecommunications, pension plan expenses and professional service fees.
Selected Consolidated Financial Information
The following tables set out a summary of consolidated financial information and supplemental information for the
periods indicated. The summary annual financial information for each of fiscal 2023, fiscal 2022 and fiscal 2021 has
been derived from DCM’s audited consolidated financial statements, prepared in accordance with IFRS Accounting
Standards. The unaudited financial information presented has been prepared on a basis consistent with our audited
consolidated financial statements. In the opinion of management, such unaudited financial data reflects all
adjustments, consisting of normal and non-recurring adjustments, necessary for a fair presentation of the results for
those periods.
The principal factors that caused period to period variations in the financial information set forth in Table 3 below are
as follows:
Increases in revenues, cost of revenues, gross profit and SG&A expenses in 2023, primarily attributed to the
acquisition of MCC in April 2023;
Increases in revenues, cost of revenues, gross profit and SG&A expenses in 2022, primarily attributed to the
strong performance of the Company following the return to more normal levels of operations following the
easing of restrictions in travel, retail store operations, gatherings, and otherwise which were implemented to
combat COVID-19;
•
•
14
. . M D & A . .
DATA Communications Management Corp.
•
•
•
•
Acquisition costs in 2023 and 2022, along with the return of restructuring expenses in 2023 related to the
acquisition of MCC and subsequent initiatives intended to derive post-merger integration synergies;
Restructuring initiatives in 2021, initiated in response to the negative impacts from COVID-19 on the
business in 2020 and which continued into 2021;
Debt modification losses and prepayment fees in 2021 related to credit agreement amendments and
repayment of certain credit facilities following the Company’s significant improvement in financial liquidity in
2020;
Increases in the Canadian prime interest rate commencing in March 2022, in concert with a general global
tightening of policy by central banks, which subsequently increased the cost of our borrowing of floating rate
debt and our overall cost of new capital;
• Market concerns about recessionary pressures as a result of such monetary policies, which, however, did
not materially negatively impact the Company; such monetary tightening and recessionary concerns appear
to be moderating currently as they relate to our business;
•
•
•
•
Unusually high inflationary trends in North America, and related supply chain disruptions, following the
economic recovery post- COVID-19 as related restrictions eased in late 2021 and into 2022, which
particularly negatively impacted pricing and availability of raw materials such as paper, ink and freight, and
which subsequently provided an opportunity for the Company to pass price increases on to its clients; these
inflationary and availability restrictions substantially subsided in 2023, however we have experienced, and
expect to receive, further raw material pricing increases early in 2024, particularly with regards to specialty
product substrates, albeit at more modest levels than experienced in 2022;
Net fair value losses on financial liabilities at fair value through profit or loss in 2021, 2022 and 2023
attributed to increases in the common share price of DCM in each of the periods;
Other income in 2021 from one-time benefits from (1) the termination of an option agreement previously
entered into by the Company and (2) the settlement of outstanding litigation; and
Government grant income related to CEWS and CERS grants received in recognition of the significant
negative business impacts of COVID-19 commencing in 2020 which continued in 2021.
There have been no material changes in accounting principles in our financial reporting over the three most recently
completed financial years.
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DATA Communications Management Corp.
. . M D & A . .
TABLE 3
The following table sets out selected historical consolidated financial information for the periods noted.
(Loss) income before income taxes
(22,444)
19,895
For the years ended December 31,
2023, 2022 and 2021
(in thousands of Canadian dollars,
except share and per share
amounts, unaudited)
Revenues
Cost of revenues
Gross profit
$
Selling, general and administrative
expenses
Restructuring expenses
Acquisition and integration costs
Net fair value losses on financial
liabilities at fair value through profit
or loss
(Loss) income before finance costs,
other income, and income taxes
Finance costs
Interest expense, net
Debt modification losses and
prepayment fees
Amortization of transaction costs
Other Income
Other income
Government grant income
Income tax (recovery) expense
Current
Deferred
Net (loss) income for the year
Basic earnings per share
Diluted earnings per share
Weighted average number of
common shares outstanding, basic
Weighted average number of
common shares outstanding,
diluted
As at December 31, 2023 and 2022
(in thousands of Canadian dollars,
unaudited)
Current assets
Current liabilities
Total assets
Total non-current liabilities
Shareholders’ equity
$
$
$
$
$
$
$
$
16
January 1 to
December 31, 2023
January 1 to December
31, 2022
January 1 to December
31, 2021
447,725 $
328,814
118,911
87,244
20,308
10,903
7,122
125,577
(6,666)
15,321
—
457
15,778
—
—
273,804 $
189,580
84,224
54,439
—
1,870
2,711
59,020
25,204
4,965
—
344
5,309
—
—
1,209
(7,799)
(6,590)
(15,854) $
(0.31) $
(0.31) $
5,456
473
5,929
13,966 $
0.32 $
0.30 $
235,331
165,796
69,535
53,655
9,691
—
2,302
65,648
3,887
5,839
473
941
7,253
1,452
4,558
2,644
2,238
(1,159)
1,079
1,565
0.04
0.03
50,832,543
44,062,831
43,993,494
50,832,543
46,572,066
46,136,507
As at December 31,
2023
As at December 31,
2022
As at December 31,
2021
181,051 $
116,531 $
418,754 $
273,459 $
28,764 $
82,057 $
69,479 $
149,481 $
57,155 $
22,847 $
68,041
62,845
140,084
69,198
8,041
. . M D & A . .
DATA Communications Management Corp.
TABLE 4
The following table sets out selected historical consolidated financial information for the periods noted.
See the “Non-IFRS Accounting Standards Measures” section above for more details and Tables 3 and 4
below for reconciliations of net income to Adjusted EBITDA and net income to Adjusted net income.
For the years ended December 31,
2023, 2022 and 2021
(in thousands of Canadian dollars, except
percentage amounts, unaudited)
January 1 to December
31, 2023
January 1 to December
31, 2022
January 1 to December
31, 2021
Revenues
Gross profit
As a percentage of revenues
Selling, general and administrative
expenses
As a percentage of revenues
Adjusted EBITDA (see Table 5)
As a percentage of revenues
Net income (loss) for the year
Adjusted net income (see Table 6)
As a percentage of revenues
$
$
$
$
$
$
273,804
$
235,331
447,725
118,911
26.6 %
$
$
84,224
$
30.8 %
87,244
$
54,439
$
19.5 %
19.9 %
53,390
$
11.9 %
40,965
$
15.0 %
(15,854)
$
13,966
12,827
$
2.9 %
17,388
6.4 %
$
$
69,535
29.5 %
53,655
23.8 %
35,588
14.1 %
1,565
9,394
3.3 %
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DATA Communications Management Corp.
. . M D & A . .
TABLE 5
The following table provides reconciliations of net income to EBITDA and of net income to Adjusted
EBITDA for the periods noted. See “Non-IFRS Accounting Standards Measures” section above for
more details.
EBITDA and Adjusted EBITDA reconciliation
For the years ended December 31,
2023, 2022 and 2021
(in thousands of Canadian dollars,
unaudited)
January 1 to December
31, 2023
January 1 to December
31, 2022
January 1 to December
31, 2021
Net income for the year
$
(15,854) $
13,966 $
Interest expense, net
Debt modification losses and
prepayment fees
Amortization of transaction costs
Current income tax expense
Deferred income tax expense (recovery)
Depreciation of property, plant and
equipment
Amortization of intangible assets
Depreciation of the ROU Asset
EBITDA
Acquisition and integration costs
Restructuring expenses
Net fair value (gains) losses on financial
liabilities at fair value through profit or
loss
Other income
Adjusted EBITDA
15,321
—
457
1,209
(7,799)
6,165
2,881
12,677
15,057 $
10,903
20,308
7,122
—
4,965
—
344
5,456
473
2,965
1,606
6,609
36,384 $
1,870
—
2,711
—
$
$
53,390 $
40,965 $
1,565
5,839
473
941
2,238
(1,159)
3,133
3,589
8,428
25,047
—
9,691
2,302
(1,452)
35,588
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DATA Communications Management Corp.
TABLE 6
The following table provides reconciliations of net income to Adjusted net income and a presentation of
Adjusted net income per share for the periods noted. See “Non-IFRS Accounting Standards Measures”
section above for more details.
Adjusted net income reconciliation
For the years ended December 31,
2023, 2022 and 2021
(in thousands of Canadian dollars,
except share and per share amounts,
unaudited)
January 1 to
December 31, 2023
January 1 to December
31, 2022
January 1 to December
31, 2021
Net income for the year
$
(15,854) $
13,966 $
10,903
20,308
7,122
—
(9,652)
12,827 $
0.25 $
0.25 $
1,870
—
2,711
—
(1,159)
17,388 $
0.39 $
0.37 $
1,565
—
9,691
2,302
(1,452)
(2,712)
9,394
0.21
0.20
50,832,543
44,062,831
43,993,494
50,832,543
46,572,066
46,136,507
55,022,883
44,062,831
44,062,831
50,832,543
46,572,066
46,205,844
Acquisition and integration costs
Restructuring expenses
Net fair value (gains) losses on
financial liabilities at fair value
through profit or loss
Other Income
Tax effect of the above adjustments
Adjusted net income for the year
Adjusted net income per share,
basic
Adjusted net income per share,
diluted
Weighted average number of
common shares outstanding,
basic
Weighted average number of
common shares outstanding,
diluted
Number of common shares
outstanding, basic
Number of common shares
outstanding, diluted
$
$
$
Results of operations
REVENUES
For the year ended December 31, 2023, DCM recorded revenues of $447.7 million, an increase of $173.9 million or
63.5% compared with the same period in 2022. The revenue
increase primarily reflects the MCC acquisition,
which contributed $173.6 million in revenues in 2023. Excluding the MCC acquisition, DCM organic revenue
increased by $0.3 million compared to the same period in 2022. This increase is due to expansion revenue from
existing clients, new business wins, and aligning the commercial sales teams under common leadership. However,
this increase was offset by particularly strong comparable revenues in 2022, which were 16.3% higher than in 2021,
and which benefited from renewed levels of client purchases post-COVID-19, and clients seeking to advance product
purchases, given a challenging supply chain environment to offset risks securing available raw materials and finished
goods.
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DCM revenue is comprised of six revenue streams: product sales, technology-enabled subscription service fees,
freight services, warehousing services, technology-enabled hardware solutions, and marketing and other services.
Product sales
Technology-enabled subscription services and fees
Freight services
Warehousing services
Technology-enabled hardware solutions
Marketing and other services
January 1 to December
31, 2023
January 1 to December
31, 2022
$
396,316 $
239,355
14,721
13,247
12,173
8,516
2,752
$
447,725 $
5,317
8,402
7,325
12,156
1,249
273,804
For fiscal 2023, in aggregate, revenue grew by 63.5%, compared to fiscal 2022. The primary driver behind this
substantial growth was the acquisition of MCC, with its results being included in DCM’s financial results from April 24,
2023. Notably, product sales grew 65.6% year over year, primarily due to the MCC acquisition. The larger
operational footprint enabled us to better meet customer demands and orders than would have been feasible as
separate entities and to remove certain production bottlenecks. Inter-company and inter-plant production of finished
goods accelerated through the year, allowing us to more efficiently allocate production, begin to insource production
that was previously outsourced, and reduce backlog at certain MCC plants. Accordingly, management does not
distinguish between “DCM” and “MCC” production, rather focusing on individual plant and related revenue streams on
a consolidated basis. Additionally, technology-enabled subscription services and fees grew 176.9% year over year,
primarily due to the MCC acquisition and its higher levels of professional services fees associated with its
transactional print services, which are charged separately from product sales on a fee-for-service basis. Freight
Services and Warehousing Services grew by 57.7% and 66.2%, respectively, year over year, generally performing in
line with growth in product sales. These categories support the overall business of the Company, providing
distribution and logistics services to our clients. Marketing and other services grew 120.3% year over year, primarily
due to organic growth in marketing services revenue. MCC typically did not offer marketing services on a fee-for-
services basis.
COST OF REVENUES AND GROSS PROFIT
For the year ended December 31, 2023, DCM recorded cost of revenues of $328.8 million, an increase of $139.2
million or 73.4% from $189.6 million for the same period in 2022.
Gross profit for the year ended December 31, 2023 was $118.9 million, an increase of $34.7 million or 41.2% from
$84.2 million for the same period in 2022. Gross profit as a percentage of revenues decreased to 26.6% for the year
ended December 31, 2023, compared to 30.8% for the same period in 2022.
The increase in cost of revenues on a year-over-year basis was primarily a result of the acquisition of MCC in April
2023 and the inclusion of its operations from the date of acquisition in DCM’s consolidated financial results. Inflation
increases experienced in 2022, as well as supply chain challenges, significantly moderated in 2023. As a result,
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more modest levels of inflationary impact were experienced on raw materials and freight, along with planned wage
increases in line with recent years.
Gross profit as a percentage of revenues for the year ended December 31, 2023 decreased from the prior period due
to the acquisition of MCC as its average gross profit as a percentage of revenues has typically been lower than that of
DCM’s historical business. This is primarily attributed to relatively higher raw material costs as a percent of revenues,
and lower relative sell prices for finished goods, at MCC, as well as higher relative fixed overhead expenses. DCM
has commenced its planned initiatives to drive operating efficiencies in connection with the acquisition of MCC to
optimize its operational footprint, and harmonize pricing strategies, which are intended to improve consolidated gross
profit margins. The decrease in gross profit as a percentage of revenues was partially offset by higher levels of client
demand, favourable product mix (higher margin resales revenue realized), increased margins for freight and
warehousing revenue, procurement synergies derived through improved purchasing practices including more
favourable pricing, and further progress passing on paper price increases to our customers.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2023 were $87.2 million, or
19.5% of total revenues, an increase of $32.8 million or 60.3%, from $54.4 million, or 19.9% of total revenues, for the
same period in 2022.
SG&A expenses for the year ended December 31, 2023 increased from the prior period, however SG&A as a
percentage of revenues declined. The increase in SG&A (in dollars) was primarily attributable to the addition of
MCC’s SG&A expenses. The decrease in SG&A as a percentage of revenues was primarily driven by the lower
relative SG&A expense of MCC’s business as a percentage of revenues compared to that of DCM's historical
business. Notably, selling expenses saw a decline in the latter half of the year, as a result of a strategic
reorganization of the sales team. This decline benefited from certain restructuring initiatives related to SG&A
completed to date and was partially offset by merit-based salary increases and higher consulting fees related to a
one-time project.
ACQUISITION AND INTEGRATION COSTS
DCM incurred $10.9 million for one-time, non-recurring acquisition and integration costs related to the MCC
acquisition. Of those amounts, a total of $5.6 million related specifically to acquisition costs, including fees related to
due diligence costs of its operational, legal and financial advisors and other direct acquisition costs, including fees to
our senior lenders for the year ended December 31, 2023. The remaining $5.3 million was related to one-time, non-
recurring integration fees, including additional audit support, plant closure, asset valuation analysis, equipment
moves, strategic advisory fees and other post-transaction integration consulting.
RESTRUCTURING EXPENSES
DCM incurred total one-time, non-recurring restructuring expenses of $20.3 million for the year ended December 31,
2023 compared to nil for the same periods in 2022, all of which related to post-acquisition integration initiatives
following the MCC acquisition. DCM commenced its planned initiatives to drive synergies in connection with the
acquisition of MCC in the second quarter of 2023 and accelerated those initiatives in the third and fourth quarters of
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2023, including initiatives to reduce headcount while aligning its organizational structure and optimizing its operational
footprint. The restructuring expenses include headcount reductions in various functions, including operations, senior
executive management, sales and other SG&A functional roles, and costs to move equipment and inventory from the
closed facilities. Additionally, these one-time charges account for the closure of the Edmonton facility, accompanying
facility closure costs and the associated expenses incurred in relocating equipment and inventory from the closed
facilities. Restructuring costs of $7.5 million for the year ended December 31, 2023 related primarily to the Fergus
and Trenton facilities provision for anticipated plant closure costs. This provision was established as the expected
severance costs for these employees became substantially determinable in the fourth quarter of 2023.
NET FAIR VALUE (GAINS) LOSSES ON FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT AND
LOSS
The trading price of our common share increased by 80.7% during the year ended 2023, from $1.45 as of January
01, 2023 to $2.62 as of December 31, 2023. Accordingly, we incurred an expense of $7.1 million for the year ended
December 31, 2023, compared to $2.7 million for the same periods in 2022. DCM recorded these non-cash accruals
for mark-to-market expense and the normal vesting expense for outstanding long-term incentive compensation in the
form of RSUs and DSUs.
EBITDA AND ADJUSTED EBITDA
For the year ended December 31, 2023, EBITDA was $15.1 million or 11.7% of revenues compared to $36.4 million
or 13.3% of revenues in the same period in 2022. For the year ended December 31, 2023, Adjusted EBITDA was
$53.4 million or 11.9% of revenues after adjusting EBITDA for $20.3 million of restructuring costs, $10.9 million in
acquisition costs and integration costs and $7.1 million of net fair value (gains) losses on financial liabilities at fair
value through profit or loss, compared to $41.0 million or 15.0% of revenues after adjusting EBITDA for acquisition
costs and integration costs of $1.9 million and $2.7 million of net fair value (gains) losses on financial liabilities at fair
value through profit or loss for the same period in 2022.
The increase in Adjusted EBITDA for the year ended December 31, 2023 compared to the prior two years in 2022
was due to an increase in overall revenues and gross profit contributions from the operations of MCC in DCM’s
consolidated financial results from the date of completion of the MCC acquisition, and MCC’s lower relative SG&A as
a percentage of revenue. Adjusted EBITDA margin declined for the year ended December 31, 2023 due to the lower
average gross margins of MCC. DCM believes it is well-advanced on its planned initiatives to drive synergies in
connection with the acquisition of MCC to optimize its operational footprint, which we expect will improve Adjusted
EBITDA margin. For a description of the material factors and assumptions on which we have based our expected
total annualized synergies estimates, see “Forward-looking statements” and “Recent Developments – Moore Canada
Corporation (MCC) Acquisition”.
FINANCE AND OTHER COSTS
Finance costs include interest on debt outstanding under DCM’s credit facilities, interest accretion expense related to
certain debt obligations discounts/ premiums, interest on pension obligations, debt extinguishment gains, amortization
of debt transaction costs, loss on accounting sale and leaseback and interest expense on lease liabilities under IFRS
16. For the year ended December 31, 2023, DCM incurred $15.8 million of finance costs compared to $5.3 million for
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the same period in 2022. The increase in finance costs on a year-over-year basis was largely attributable to the
indebtedness DCM incurred in April 2023 to fund the acquisition of MCC.
Interest expense for the year ended December 31, 2023 increased due to additional debt incurred by DCM to finance
the acquisition of MCC. The additional debt bears interest at higher rates than DCM’s other outstanding debt, which,
together with increases in the prime rate applicable to DCM’s floating rate debt, contributed to the increase in interest
expense. This was offset by a decrease in interest expense from the extinguishment of DCM's former bank term loan
and repayment of the FPD IV and FPD V loans.
INCOME TAXES
DCM reported a loss before income taxes of $22.4 million and a net income tax recovery of $6.6 million for the year
ended December 31, 2023 compared to income before income taxes of $19.9 million and net income tax expense of
$5.9 million for the same period in 2022.
The deferred income tax expense was adjusted for any changes in estimates of future reversals of temporary
differences.
NET (LOSS) INCOME
Net loss for the year ended December 31, 2023 was $15.9 million compared to a net income of $14.0 million for the
same period in 2022.
The decrease in comparable profitability for the year ended December 31, 2023 to the previous year ended
December 31, 2022 was due to restructuring costs of $20.3 million, one-time acquisition and integration costs of
$10.9 million, net fair value losses on financial liabilities at fair value through profit or loss of $7.1 million, and
increased interest expense from higher levels of debt incurred to finance the MCC acquisition.
ADJUSTED NET INCOME
Adjusted net income for the year ended December 31, 2023 was $12.8 million compared to $17.4 million for the same
period in 2022. For a reconciliation of net income (loss) to Adjusted net income for the periods noted, see Table 6
above.
The decrease in comparable profitability for the year ended December 31, 2023 was primarily due to the restructuring
costs, one-time acquisition and integration costs associated with the integration of the MCC business, and increased
interest expense from higher levels of debt incurred to finance the MCC acquisition. This was offset by an increase in
overall revenues and gross margin dollars from the acquisition of MCC.
Liquidity and capital resources
LIQUIDITY
DCM's strategic allocation of funds has been guided by a comprehensive approach encompassing various financial
priorities. The primary focus areas for fund utilization have encompassed working capital needs, capital investments,
business acquisitions, organic growth initiatives, and the repayment of outstanding indebtedness. DCM has funded
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these liquidity requirements primarily with cash generated from operating activities and funds drawn from its unused
committed credit facilities and long-term debt. Additionally, the Company has supplemented its financial resources
through the net proceeds derived from asset sales.
In assessing its ongoing liquidity requirements, DCM conducts a comprehensive analysis, considering its current cash
position, anticipated cash inflows from operational activities, projected availability of funds from unused credit
facilities, cash from investing activities such as sales of real estate acquired with the acquisition of MCC and of
redundant assets, access to the capital markets and expected reductions resulting from existing restructuring
activities, as well as its ongoing cash needs for its existing operations.
DCM’s working capital requirements consist primarily of the costs associated with manufacturing and delivering its
products and services. These include expenditures related to wages, facility operations, payments to suppliers for
raw materials, debt repayments, and other operational necessities. DCM’s working capital requirements are primarily
affected by the level of operating activities, including the length of the Company’s operating cycles, printed products
inventory turnover, and collection of accounts receivable.
Looking ahead, DCM anticipates that a combination of cash reserves, future operational cash flows, and access to
committed credit facilities will enable the Company to meet its projected operating requirements for the next 12
months. This includes generating adequate levels of working capital, funding expenditures related to its growth
strategy, expenses related to ongoing restructuring initiatives (particularly related to severance payments),
investments in productivity improvement initiatives, contributions to its pension plans, payment of income tax
liabilities, financing of planned capital expenditures, and fulfilling debt repayment obligations. To the extent required,
the Company also believes it has access to equity markets to fund additional capital needs.
DCM believes the following factors could adversely impact cash flows from operations, primary sources of liquidity
and operational capabilities in the future: diminished demand for the Company’s products and services, including, in
particular, decreased demand for traditional business forms and print-related products; pricing pressures from both
existing and new customers; competition; rising manufacturing, distribution and other operating costs, including
increases in the costs of freight, paper, ink, and other raw material inputs used by DCM in the conduct of its business,
including as a result of continued inflationary pressures, and higher wages; interest rate increases, which have, and
may in the future, adversely affect the borrowing costs associated with DCM’s floating rate indebtedness; supply
chain disruptions; seasonal variations in customer spending; and higher wage costs; and restructuring expenses.
CREDIT AGREEMENTS
BANK FACILITIES
DCM has established a revolving credit facility (the “New Bank Credit Facility”) pursuant to a third amended and
restated credit agreement (the “Bank Credit Agreement”) with a Canadian chartered bank (the “Bank”) as part of the
financing of the acquisition of MCC on April 24, 2023. Under the terms of the amended Bank Credit Agreement, the
maximum principal amount available under the New Bank Credit Facility was increased from $15.0 million to $90.0
million. The New Bank Credit Facility also includes an “accordion” feature, which can provide up to an additional $20
million of capacity under the revolving facility. The New Bank Credit Facility matures on April 24, 2026. The New
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Bank Credit Facility is available to be drawn by way of either Prime Rate loans, Base Rate loans, Canadian Dollar
Offered Rate (“CDOR”) loans, Secured Overnight Financing Rate (“SOFR loans”), and/or Letters of Credit. Prime
rate loans charge interest based on the prime rate plus a margin whereby the prime rate is the greater of the Bank’s
published reference rate on Canadian Dollar denominated commercial loans and the CDOR rate for a period of 30
days plus 100 basis points per annum. Under the Bank Credit Agreement, the Canadian Overnight Repo Rate
Average (“CORRA”) plus 0.3% will replace the CDOR rate when the CDOR rate ceases at the end of June 2024.
Currently, advances under the New Bank Credit Facility may not, at any time, exceed the lesser of $90.0 million and a
fixed percentage of DCM’s aggregate accounts receivable and inventory (less certain amounts). Advances under the
New Bank Credit Facility are subject to floating interest rates based upon the Canadian prime rate plus an applicable
margin of 1.25% for a rate of 8.45% as at December 31, 2023. The amendment to the revolving credit facility was
accounted for as an extinguishment of the previous facility which was derecognized along with the remaining
unamortized balance of prior transaction costs and unamortized debt premium and the new debt was then recorded
at fair value along with associated transaction costs of $1.1 million.
As part of the refinancing of the MCC acquisition, DCM also established a $30.0 million, one-year committed senior
secured credit facility (the “Real Estate Bridge Loan”). The Real Estate Bridge Loan was available by way of Prime
Rate loans and CDOR loans and was subject to a floating interest rate based upon the Canadian prime rate plus an
applicable margin of 1.5% increasing to 1.75% by the time the loan was fully repaid in December from the proceeds
of the sale and leaseback of the Oshawa and Fergus properties.
Subsequent to fiscal 2023, DCM also entered into a sale and leaseback agreement of its Trenton, Ontario facility,
which was completed in January 2024 (note 27) and the proceeds from the sale of $8.5 million were applied towards
paying down the New Bank Credit Facility.
On November 8, 2021, DCM established a term loan (“Bank Term Loan”) with the Bank for $10.0 million as part of a
refinancing of a credit facility previously with Crown Credit Partners. The Bank Term Loan was subject to a floating
interest rate based upon the Canadian prime rate plus an applicable margin of 3.50% and was repaid as part of the
acquisition.
As at December 31, 2023, DCM had access to $26.2 million of available credit under the New Bank Credit Facility
and had cash and cash equivalents, net of bank overdraft, of $16.1 million as shown on the consolidated statement of
financial position as at December 31, 2023.
FPD FACILITIES
DCM has two amortizing term loan facilities (the “FPD VI Credit Facilities”) with Fiera Private Debt VI L.P. (“FPD VI”),
which is a fund managed by Fiera Private Debt Fund GP Inc. (“FPD”) pursuant to an amended and restated credit
agreement dated as of April 24, 2023 (the “FPD Credit Agreement”).
DCM established a new $50.0 million committed term loan with FPD VI (“FPD VI New Term Loan” and, together with
the New Bank Credit Facility and the Bank Term Loan, the “Credit Facilities”) at an interest rate of 8.08% to partially
finance the acquisition of MCC. 71.5% of the FPD VI New Term Loan must be repaid in fifty-nine (59) equal monthly
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payments of principal plus accrued interest on the outstanding principal amount and the remaining 28.5%, together
with accrued interest, must be repaid on the maturity date on April 21, 2028. DCM elected to defer principal
payments on this facility for the first twelve months following the closing of the MCC acquisition. The associated
transaction costs of this new loan were $0.7 million.
As part of the MCC acquisition, in April 2023, the maturity dates of pre-existing loans with FPD IV and FPD V, two
other funds managed by Fiera Private Debt GP Inc. were extended to December 31, 2023 at an interest rate of
8.08%. These loans were fully repaid during the year using the proceeds from the Offering.
COVENANT REQUIREMENTS
Each of the Bank Credit Agreement and the FPD Credit Agreement contains customary representations and
warranties, certain financial covenant requirements, as well as certain restrictive covenants which limit the discretion
of the Board and management with respect to certain business matters, including the declaration or payment of
dividends on the common shares of DCM without the consent of the Bank and FPD VI, as applicable. As of
December 31, 2023, DCM was in compliance with all of its financial covenants.
The continued ability to comply with financial covenants under the Company’s credit facilities for at least the next
twelve months is contingent on management’s ability to meet budgeted revenue, profitability and working capital
targets. The estimate of future cash flows in the Company’s 2024 budget and forecasts through to March 31, 2025
includes a number of key assumptions to support the financial covenant calculations, specifically related to forecast
revenues and gross margins (which in turn impact earnings before interest, income taxes, depreciation and
amortization (EBITDA)). Management is satisfied that the Company’s forecasts and projections, taking account of
reasonably possible changes in results and other uncertainties will not result in any breach of the financial covenants
on its credit facilities within the next fifteen months.
For purposes of the Bank Credit Agreement, the FPD Credit Agreements, “EBITDA” means net income or net loss for
the relevant period, calculated on a consolidated basis, plus amounts deducted, or minus amounts added, in
calculating net income or net loss in respect of: (a) the aggregate expense incurred for interest on debt and other
costs of obtaining credit; (b) income taxes, whether or not deferred; (c) depreciation and amortization; non-cash
expenses resulting from employee or management compensation, including the grant of stock options or restricted
options to employees; any gain or loss attributable to the sale, conversion or other disposition of property out of the
ordinary course of business; interest or dividend income; foreign exchange gain or loss; gains resulting from the write-
up of property and losses resulting from the write-down of property (except allowances for doubtful accounts
receivable and non-cash reserves for obsolete inventory); any gain or loss on the repurchase or redemption of any
securities (including in connection with the early retirement or defeasance of any debt); goodwill and other intangible
asset write-downs; lease payments to convert on a pre-IFRS 16 basis; and any other extraordinary, nonrecurring or
unusual items such as restructuring costs (as agreed to by the lender) provided the amounts added back pursuant to
clause (c) above in respect of cash expenses (other than acquisition, integration and restructuring costs related to the
MCC acquisition) are capped at 15% of unadjusted EBITDA. The pro forma financial results from any acquisitions
completed by DCM during a given year are included on a trailing twelve month basis effective as of the closing date
of the acquisitions for the purposes of DCM’s covenant calculations.
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A failure by DCM to comply with its obligations under the Bank Credit Agreement or the FPD Credit Agreement,
together with certain other events, including a change of control of DCM and a change in DCM’s Chief Executive
Officer, President or Chief Financial Officer (unless a replacement officer acceptable to FPD, acting reasonably, is
appointed within 60 days of the effective date of such officer’s resignation), could result in an event of default which, if
not cured or waived, could permit acceleration of the indebtedness outstanding under each of those agreements.
INTER-CREDITOR AGREEMENT
DCM’s obligations under the New Bank Credit Facility and the FPD VI Credit Facility are secured by conventional
security, charging all of the property and assets of DCM and its subsidiaries. DCM has entered into an inter-creditor
agreement between the Bank and FPD VI, which, among other things, establishes the rights and priorities of the
respective liens of the Bank and FPD VI on the present and after-acquired property of DCM and its subsidiaries.
CASH FLOW FROM OPERATIONS
During the year ended December 31, 2023, cash flows generated by operating activities were $32.8 million compared
to cash flows generated by operating activities of $22.7 million during the same period in 2022. The current period
cash flow from operations, before adjusting for changes in working capital, generated a total of $26.9 million
compared with $29.0 million for the same period last year. The change in the current period cash flow from
operations is primarily related to the net loss incurred during the period, the net fair value (gains) losses on financial
liabilities at fair value through profit or loss, restructuring costs, higher depreciation and amortization expense due to
MCC acquisition, one-time acquisition and integration costs, and increased interest expense from higher levels of
debt to finance the MCC acquisition.
Changes in working capital, excluding the purchase price accounting of MCC during the year ended December 31,
2023 generated $5.9 million in cash compared with $6.3 million of cash used in the prior year. During the year ended
December 31, 2023, DCM had a cash outflow of $3.6 million from trade receivables compared to an outflow of $3.1
million for the same period in 2022. Changes in working capital further increased by a cash inflow of $14.4 million
from inventories compared to an outflow of $8.1 million for the same period in 2022. Lower inventory levels were
achieved as the availability of, and access to, paper and other raw material inputs improved, strong production levels
consumed inventory, and an improving supply chain environment has meant lower stocks are required to be
maintained.
INVESTING ACTIVITIES
For the year ended December 31, 2023, $104.5 million in cash flows were used for investing activities compared with
$1.5 million during the same period in 2022. Total cash consideration for the acquisition of MCC was $131.0 million,
net of $4.8 million of cash acquired. This was offset by an inflow of $29.5 million realized in connection with the sale
and leaseback of its Oshawa, Ontario and Fergus, Ontario facilities, which were acquired as part of the MCC
acquisition. The remaining balance relates to $4.2 million in purchases of new equipment.
FINANCING ACTIVITIES
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For the year ended December 31, 2023, the cash flow generated by financing activities was $85.2 million compared
with $17.9 million used during the same period in 2022.
A total of $87.6 million was repaid in the year ended December 31, 2023 on DCM's credit facilities compared to a
repayment of $12.6 million during the same period in 2022. In total, DCM borrowed $162.1 million under its Credit
Facilities, of which $132.2 million was related to the acquisition of MCC and associated transaction costs. During the
same period, DCM repaid $87.6 million of outstanding debt, of which $44.0 million was related to repayments on the
New Bank Credit Facility and the prior credit facility with the Bank, $30 million were repayments on the Real Estate
Bridge Loan using proceeds of $29.5 million from the sale and leaseback transaction of Oshawa, Ontario and Fergus,
Ontario facilities and $0.5 million from working capital, $6.1 million were full repayments on the FPD IV and FPD V
term loans, with the remaining balance for regular principal repayments on term loans. This was offset by $24.2
million of net proceeds realized from a private placement of common shares of the Company completed during the
second quarter of 2023.
Lease payments increased from $8.7 million to $13.3 million in the current period as a result of the MCC acquisition
and as a result of the sale and leaseback transaction of Oshawa, Ontario and Fergus, Ontario facilities. Lastly, an
exercise of warrants to purchase common shares of the Company resulted in a cash inflow of $0.5 million, while an
exercise of options to purchase common shares of the Company resulted in a cash inflow of $0.8 million.
Outstanding share data
At March 20, 2024 and December 31, 2023, there were 55,022,883 and 55,022,883 common shares of DCM
outstanding, respectively. At December 31, 2022, there were 44,062,831 common shares of the Company
outstanding.
At March 20, 2024 and December 31, 2023, there were options outstanding to purchase up to 4,529,000 and
4,529,000 common shares of the Company, respectively. At December 31, 2022, there were options outstanding to
purchase up to 4,700,886 common shares of the Company.
During the year ended December 31, 2023, options to purchase up to 750,000 common shares were awarded to a
member of management. Once vested, the options are exercisable for a period of seven years from the grant date at
an exercise price of $3.42 per share, representing the fair value of the common shares of the Company on the date of
grant. 250,000 of these options were forfeited during the year and the remaining 500,000 options vest at a rate of 1/2
each year beginning on April 27, 2024.
At March 20, 2024 and December 31, 2023, there were warrants outstanding to purchase up to 261,216 and 261,216
common shares of the Company, respectively. At December 31, 2022, there were warrants outstanding to purchase
up to 1,648,156 common shares, all of which were exercised during fiscal 2023.
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Financial instruments and Risk management
DCM’s financial instruments consist of cash, trade receivables, bank overdraft, trade payables and accrued liabilities,
credit facilities, and lease liabilities. All of DCM's financial instruments are non-derivative in nature and DCM does not
enter into financial instruments for trading or speculative purposes.
FAIR VALUE
DCM's non-derivative financial instruments are comprised of cash, trade receivables, bank overdraft, trade payables
and accrued liabilities, credit facilities, and lease liabilities. Non-derivative financial instruments are recognized
initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction
costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below.
Non-derivative financial instruments at fair value through the profit and loss include restricted share units and director
share units, which are recorded as a liability at fair value on the grant date and are subsequently adjusted for
changes in the price of DCM's common shares through the consolidated statements of operations.
The fair value for other non-derivative financial instruments such as cash, trade receivables, bank overdraft, trade
payables and accrued liabilities approximates their carrying value because of the short-term maturity of these
instruments. Credit facilities are initially recognized at the discounted present value of the amounts required to be
paid to derive their fair value and are then measured at amortized costs using the effective interest method. The fair
values are not materially different from their carrying amounts since the interest payable on these borrowings is close
to market rates.
CREDIT RISK
Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its
contractual obligations. Financial instruments that potentially subjected DCM to credit risk consisted of cash and
trade receivables.
DCM grants credit to customers in the normal course of business. DCM typically does not require collateral or other
security from customers; however, credit evaluations are performed prior to the initial granting of credit terms when
warranted and periodically thereafter. Normal credit terms for amounts due from customers call for payment within 0
to 60 days.
DCM has trade receivables from clients engaged in various industries, including financial institutions, insurance,
healthcare, lottery and gaming, retailing, not-for-profit, energy and governmental agencies that are not concentrated
in any specific geographic area. DCM does not believe that any single industry or geographic region represents
significant credit risk. DCM’s large client base mitigates credit risk concentration with respect to trade receivables.
To measure the estimated credit losses (“ECL”), trade receivables, including unbilled receivables, have been grouped
based on similar credit risk characteristics, past due status and other relevant factors. The expected default rates are
calculated based on management’s estimate as well as historical credit losses. The historical loss rates are adjusted
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to reflect current and forward-looking information on economic factors affecting the ability of the customers to settle
the trade receivable.
On that basis, the loss allowance as at December 31, 2023 was determined using default rates under the provision
matrix for an amount of $1.7 million (2022 – $1.6 million), of which $1.2 million (2022 – $1.2 million) relates to unbilled
receivables.
The following default rates are used to calculate the ECLs on billed receivables as at December 31, 2023 and
December 31, 2022, respectively:
December 31, 2023 (in thousands of
Canadian dollars, except percentage
amounts)
Default rates
Billed receivables balance
Billed receivables ECL
December 31, 2022 (in thousands of
Canadian dollars, except percentage
amounts)
Default rates
Billed receivables balance
Billed receivables ECL
December 31, 2021 (in thousands of
Canadian dollars, except percentage
amounts)
Default rates
Billed receivables balance
Billed receivables ECL
Total
Current
period
Over 30
days
Over 60
days
Over 90
days
$85,989
$523
0.11%
$49,828
$54
0.22%
$23,055
$50
0.30%
$9,048
$27
9.66%
$4,058
$392
Total
Current
period
Over 30
days
Over 60
days
Over 90
days
$41,554
$415
0.13%
$26,316
$34
0.13%
$10,369
$13
0.33%
$3,291
$11
22.60%
$1,578
$357
Total
Current
period
Over 30
days
Over 60
days
Over 90
days
$35,643
$533
0.32%
$19,351
$61
0.57%
$10,429
$59
0.65%
$2,863
$19
13.14%
$3,000
$394
The following default rates are used to calculate the ECLs on unbilled receivables as at December 31, 2023 and
December 31, 2022, respectively:
December 31, 2023 (in thousands of Canadian
dollars, except percentage amounts)
Unbilled receivables
Unbilled receivables balance
Unbilled receivables ECL
Total
Less than
30 days
Over 30
days
Over 60
days
Over 90
days
$33,687
$1,197
0.81%
22,308
$181
0.91%
2,753
$25
1.03%
1,358
$14
13.44%
7,268
$977
December 31, 2022 (in thousands of Canadian
dollars, except percentage amounts)
Total
Current
period
Over 30
days
Over 60
days
Over 90
days
Default rates
Unbilled receivables balance
Unbilled receivables ECL
$14,641
$1,150
0.86%
$3,840
$33
1.56%
$2,765
$43
1.28%
$1,327
$17
15.75%
$6,709
$1,057
30
. . M D & A . .
DATA Communications Management Corp.
December 31, 2021 (in thousands of Canadian
dollars, except percentage amounts)
Total
Current
period
Over 30
days
Over 60
days
Over 90
days
Default rates
Unbilled receivables balance
Unbilled receivables ECL
$17,207
$750
0.22%
$5,111
$11
0.47%
$2,245
$11
1.07%
$2,138
$23
9.14%
$7,713
$705
At the end of each reporting period, management reassesses the default rates. Default rates are applied to the billed
and unbilled receivable balances to calculate the credit default reserve. Management assesses the adequacy of this
reserve quarterly, taking into account historical experience, current collection trends, the age of receivables and,
when warranted and available, the financial condition of specific counterparties. When collection efforts have been
reasonably exhausted, specific balances are written off. As at December 31, 2023 the Company has $4.1 million
(5%) of its billed receivables that are over 90 days old (2022 - $1.6 million or 4%). The increase in billed receivables
is primarily driven by the timing issue, as most of the billed receivables were collected after the year end.
Judgment by management is required to determine both (a) the revenue and billed receivables to be recognized,
where price concessions may need to be given to encourage customers to settle older amounts promptly as a result
of billing issues under IFRS 15 (as revenue can only be recognized to the extent that it is highly probable that a
significant reversal in the amount of revenue will not occur when the uncertainty associated with the variable
consideration is subsequently resolved), and (b) ECL provisions required under IFRS 9 to reflect impairments of its
trace receivables as a result of customers inability to settle the billed receivables.
LIQUIDITY RISK
In assessing DCM’s liquidity requirements, DCM takes into account its level of cash, together with currently projected
cash to be provided by operating activities, cash available from its unused credit facilities, cash from investing
activities such as sales of redundant assets, access to the capital markets and anticipated reductions in operating
costs projected to result from existing restructuring activities, as well as its ongoing cash needs for its existing
operations.
The continued ability to comply with financial covenants on the Company’s credit facilities for at least the next twelve
months is contingent on management’s ability to meet budgeted revenue, profitability and working capital targets. The
estimate of future cash flows in the Company’s 2024 budget include a number of key assumptions to support the
financial covenant calculations, specifically related to forecast revenues and gross margins (which in turn impact
earnings before interest, income taxes, depreciation and amortization (EBITDA)). Management is satisfied that the
Company’s forecasts and projections, taking account of reasonably possible changes in results and other
uncertainties, will not result in any breach of the financial covenants on its credit facilities within the next year.
There can be no assurances that DCM will be successful in meeting its financial covenants for at least the next twelve
months or that future waivers will be provided by the lenders if the covenants are not met.
Liquidity risk is the risk that DCM may encounter difficulties in meeting obligations associated with financial liabilities
as they become due. DCM believes that the currently projected cash flow from operations and cash on hand will be
sufficient to fund its currently projected operating requirements, including expenditures related to its growth strategy,
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DATA Communications Management Corp.
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payments associated with provisions as a result of on-going productivity improvement initiatives, payment of income
tax liabilities, contributions to its pension plans, maintenance or investment in new capital expenditures, and interest
and scheduled repayments of borrowings under its credit facilities. See “Contractual obligations” section below,
which contains additional information on the contractual undiscounted cash flows of DCM’s significant financial
liabilities and the future commitments of the Company.
While estimated forecast compliance with financial covenants is sensitive to key assumptions used for forecast
revenues, gross margins and expenses (which in turn impact earnings before interest, income taxes, depreciation
and amortization (EBITDA)), management are satisfied that the Company’s forecasts and projections through to
March 31, 2025 taking account of reasonably possible changes in results and other uncertainties will not result in any
breach of the financial covenants on its credit facilities. As a result, the Company has concluded that it will have
adequate access to liquidity to satisfy its obligations within the next fifteen months.
MARKET RISK
INTEREST RATE RISK
Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the financial
instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from interest bearing
financial assets and liabilities. DCM’s interest rate risk arises from credit facilities issuances at floating interest rates.
At December 31, 2023, $44.0 million of DCM’s indebtedness outstanding was subject to floating interest rates of
8.45% per annum; a 1% increase/decrease in interest rates would have resulted in an increase/decrease in the loss
by $0.4 million for the year ended December 31, 2023 (2022 – $0.1 million), respectively. At December 31, 2023,
$7.9 million was subject to a fixed interest rate of 5.95% per annum, and $50 million was subject to a fixed interest
rate of 8.08 per annum.
CURRENCY RISK
Currency risk is the risk that the fair value of future cash flows arising from a financial instrument will fluctuate
because of changes in foreign currency exchange rates. In the normal course of business, DCM does not have
significant foreign exchange transactions, and accordingly, the amounts and currency risk are not expected to have
an adverse material impact on the operations of DCM. Management considers the currency risk to be low and does
not hedge its currency risk; therefore, sensitivity analysis is not presented.
Contractual obligations
DCM believes it will have sufficient resources from its operating cash flow, existing cash resources and borrowing
under available credit facilities to meet its projected contractual obligations as they become due. Contractual
obligations have been defined as contractual commitments in existence but not paid for as at December 31, 2023.
Short-term commitments such as month-to-month office leases, which are easily cancelled, are excluded from this
definition.
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DATA Communications Management Corp.
DCM believes that its existing cash resources and projected cash flows from operations will be sufficient to fund its
currently projected operating requirements and that it will continue to remain compliant with its covenants and other
obligations under its credit facilities.
TABLE 7
The following table sets out DCM’s significant contractual obligations and commitments as of
December 31, 2023.
(in thousands of Canadian dollars, unaudited)
Total
Less than
a year
1 to 3 years 4 to 5 years
5 years and
greater
Pension funding contributions (1)
Lease liabilities
Termination (Severance) Obligations
Long-term debt (2)
Total
$ 23,249 $
$ 281,045
$ 17,329
$ 125,643
$ 447,266 $
1,254 $
16,578
16,325
14,440
5,703
49,079
1,004
86,467
8,933
17,057
—
24,736
7,359
198,331
—
—
48,597 $
142,253 $
50,726 $
205,690
(1) DCM is required under applicable pension legislation to make monthly, annual and/or one-time cash
contributions to its defined benefit pension plans to fund current or future funding deficiencies which may emerge
in the defined benefit provision of those plans. See “Liquidity and capital resources – Pension funding
obligations” above. The table above includes amounts payable under DCM's SERP plans. DCM’s obligations
under the SERPs consist of benefits payable as a single life annuity with a five to fifteen year guarantee. The
duration of these payments is dependent on the length of each participant's life and, in certain cases, that of their
designated beneficiary, and their age in any given year.
(2) Credit facilities as at December 31, 2023 subject to floating interest rates consisting of the Bank Credit Facility,
expiring on April 24, 2026. As at December 31, 2023, the outstanding balances totaled $44.0 million and bore
interest at a floating rate of 8.45% per annum. The amounts at December 31, 2023 include estimated interest
totaling $3.7 million for 2024, $3.7 million for 2025. The estimated interest was calculated based on the total
borrowings outstanding at the end of the year and the annual floating interest rate in effect as at December 31,
2023. Credit facilities at December 31, 2023 subject to fixed interest rates consisting of the FPD VI Credit
Facility, expiring on December 17, 2026 and the FPD VI New Credit Facility expiring on April 21, 2028. As at
December 31, 2023, the outstanding balances totaled $57.9 million, of which $7.9 million bore interest at a fixed
rate of 5.95% and $50.0 million bore interest at a fixed rate of 8.08% per annum. The amounts at December 31,
2023 include estimated interest totaling $4,388 for 2024, $3,778 for 2025, $3,105 for 2026 and $3,210 for
2027/2028.
DCM has experienced significant growth in contractual obligations and commitments due to various factors. The
principal factors that caused DCM’s significant contractual obligations and commitments to grow are as follows:
•
•
•
•
The increase in contractual obligations from pension funding contributions in 2023 is primarily attributed to
the pension obligations of MCC acquired in April 2023 in connection with the MCC acquisition.
The long-term debt increased considerably, mainly due to the indebtedness DCM incurred in April 2023 to
fund the acquisition of MCC. Additionally, the additional debt carries a higher interest rate than DCM's other
outstanding debt, which, coupled with increases in the prime rate applicable to DCM's floating rate debt,
contributed to the increase in interest expense.
The increase in termination obligations is primarily due to restructuring initiatives related to post-merger
integration initiatives following the MCC acquisition.
The increase in contractual obligations from lease liabilities was due to the incremental facilities acquired as
part of the MCC acquisition and the sale leaseback of Oshawa, Ontario, and Fergus, Ontario facilities, as
well as lease extensions recorded for its Brampton, Ontario and Toronto, Ontario facilities.
33
DATA Communications Management Corp.
. . M D & A . .
Transactions with related parties
During the year ended December 31, 2023, there were regular inter-company activities between DCM and its
subsidiaries during the normal course of business. These transactions and balances are eliminated in DCM’s
consolidated financial statements. Related parties are defined as individuals who can influence the direction or
management of DCM or any of its subsidiaries and therefore, the directors and officers of DCM’s subsidiaries are
considered related parties.
On March 15, 2018, DCM entered into a loan agreement with a key member of management, of $0.1 million to
finance the purchase of common shares of the Company. Initially set to expire on March 15, 2023, the loan term was
subsequently extended by an additional three years. Interest accrues at a rate of 3% per annum on the unpaid
balance of the loan. The loan is unsecured and repayable upon maturity. At December 31, 2023, the balance owing
on the loan was $0.1 million.
COMPENSATION OF KEY MANAGEMENT
Key management personnel are deemed to be Directors on DCM's Board, the CEO, the President, the Chief
Financial Officer and other members of the senior executive team. Compensation awarded to key management
personnel, excluding compensation awarded to Directors, which are described below, included:
The following table sets out DCM's compensation awarded to key management personnel, excluding compensation
awarded to Directors as of December 31, 2023.
(in thousands of Canadian dollars, unaudited)
Salaries and other short-term employee benefits
Termination and retirement benefits
Post-employment benefits
Share-based compensation expense
Total
For the year ended
December 31, 2023
For the year ended
December 31, 2022
$
$
3,473 $
1,567
10
2,978
8,028 $
4,227
—
14
1,055
5,296
For the year ended December 31, 2023, DCM recorded share-based compensation awards expense of $3.0 million,
an increase of $1.9 million or 182% compared with the same period in 2022. For the year ended December 31, 2023,
DCM granted 252,260 RSUs to key management personnel (excluding compensation awarded to Directors)
compared to 707,333 RSUs granted in 2022. Additionally, key management personnel (excluding compensation
awarded to Directors) were also issued 750,000 options to purchase common shares of the Company in 2023.
250,000 of these options were forfeited during the year, and the remaining 500,000 options vest at a rate of 1/2 each
year beginning on April 27, 2024. No options were issued for the same period in 2022.
For the year ended December 31, 2023, DCM’s recorded general and administration expenses for DSU’s issued to
directors for the duties performed by DCM’s Board of $3.4 million an increase of 2,389 or 246% for the same period in
2022.
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DATA Communications Management Corp.
Operating results for the fourth quarter of 2023, 2022 and 2021
TABLE 9
The following table sets out selected consolidated quarterly financial information for the periods noted.
(in thousands of Canadian dollars, except
share and per share amounts, unaudited)
October 1 to
December 31, 2023
October 1 to December
31, 2022
October 1 to December
31, 2021
Revenues
Cost of revenues
Gross profit
Selling, general and administrative
expenses
Restructuring expenses
Acquisition and integration costs
Net fair value (gains) losses on
financial liabilities at fair value through
profit or loss
Income before finance costs, other
income and income taxes
Finance costs
Interest expense, net
Debt modification losses
Amortization of transaction costs
Other Income
Government grant income
$
129,964 $
97,204
32,760
25,300
10,570
704
(956)
35,618
(2,858)
5,667
—
137
5,804
—
(Loss) income before income taxes
(8,662)
Income tax expense (recovery)
Current
Deferred
367
(2,671)
(2,304)
73,045 $
49,491
23,554
13,636
—
1,870
1,225
16,731
6,823
1,134
—
87
1,221
—
5,602
1,653
269
1,922
Net (loss) income for the period
$
(6,358) $
3,680 $
Basic earnings per share
Diluted earnings per share
Weighted average number of
common shares outstanding, basic
Weighted average number of
common shares outstanding,
diluted
60,871
43,158
17,713
13,344
2,282
—
2,087
17,713
—
1,124
473
503
2,100
55
(2,045)
183
(371)
(188)
(1,857)
(0.04)
(0.04)
(0.12)
(0.12)
0.08
0.08
55,022,883
44,062,831
44,062,831
55,022,883
46,796,407
46,439,445
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DATA Communications Management Corp.
. . M D & A . .
TABLE 10 The following table provides reconciliations of net income to EBITDA and of net income to Adjusted
EBITDA for the periods noted. See “Non-IFRS Accounting Standards Measures” section above for
more details.
EBITDA and Adjusted EBITDA reconciliation
(in thousands of Canadian dollars, unaudited)
October 1 to
December 31,
2023
October 1 to
December 31,
2022
October 1 to
December 31,
2021
Net income (loss) for the period
$
(6,358) $
3,680 $
(1,857)
Interest expense, net
Debt modification losses and prepayment fees
Amortization of transaction costs
Current income tax expense
Deferred income tax expense (recovery)
Depreciation of property, plant and equipment
Amortization of intangible assets
Depreciation of the ROU Asset
5,667
—
137
367
(2,671)
2,058
829
4,665
1,134
—
87
1,653
269
644
393
1,610
EBITDA
$
4,694 $
9,470 $
Acquisition and integration costs
Restructuring expenses
704
10,570
1,870
—
Net fair value (gains) losses on financial liabilities at fair value
through profit or loss
Adjusted EBITDA
(956)
1,225
$
15,012 $
12,565 $
1,124
473
503
183
(371)
731
2,282
1,920
4,988
—
2,282
2,087
9,357
TABLE 11 The following table provides reconciliations of net income (loss) to Adjusted net income (loss). See
“Non-IFRS Accounting Standards Measures” section above for more details.
Adjusted net income (loss) reconciliation
(in thousands of Canadian dollars, unaudited)
October 1 to
December 31,
2023
October 1 to
December 31,
2022
October 1 to
December 31,
2021
Net income (loss) for the period
$
(6,358) $
3,680 $
(1,857)
Acquisition and integration costs
Restructuring expenses
Net fair value (gains) losses on financial liabilities at fair value
through profit or loss
Tax effect of above adjustments
Adjusted net income (loss)
Adjusted net income per share, basic
Adjusted net income per share, diluted
Weighted average number of common shares
outstanding, basic
Weighted average number of common shares
outstanding, diluted
704
10,570
(956)
(2,598)
1,362 $
0.02 $
0.02 $
$
$
$
1,870
—
1,225
(473)
6,302 $
0.14 $
0.13 $
—
2,282
2,087
(1,197)
1,315
0.03
0.03
55,022,883
44,062,831
44,062,831
55,022,883
46,796,407
46,439,445
36
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DATA Communications Management Corp.
REVENUES
For the quarter ended December 31, 2023, DCM recorded revenues of $130.0 million, an increase of $56.9 million or
77.9% compared with the same period in 2022. For the quarter ended December 31, 2023, the increase in revenues
is primarily driven by additional revenues from the operations of MCC, which contributed $62.7 million in revenues.
Excluding the MCC acquisition, DCM organic revenue decreased by $5.8 million compared to the same period in
2022. This decrease is due to particularly strong comparable revenues in 2022, resulting from certain clients
accelerating production planning in the year. However, this decrease was partially offset by expansion revenue from
existing clients, new business wins, and aligning the commercial sales teams under common leadership and early
wins harmonizing pricing between common MCC and DCM clients. Given significant shifting of work between DCM
and MCC plants, revenue and margins between the entities have become less meaningful, and management focuses
on consolidated financial results for analysis of reporting metrics.
COST OF REVENUES AND GROSS PROFIT
For the quarter ended December 31, 2023, DCM recorded cost of revenues of $97.2 million, an increase of $47.7
million or 96.4% from $49.5 million for the same period in 2022. Gross profit for the quarter ended December 31,
2023 was $32.8 million, an increase of $9.2 million or 39.1% from $23.6 million for the same period in 2022.
Gross profit as a percentage of revenues for the quarter ended December 31, 2023 was 25.2%, a decrease from the
prior period of 32.2%. Gross profit as a percentage of revenues for the quarter ended December 31, 2023 decreased
from the prior period due to the acquisition of MCC as its average gross profit as a percentage of revenues is typically
lower than that of DCM's historical business. DCM has commenced its planned initiatives to drive operating
efficiencies in connection with the acquisition of MCC to optimize its operational footprint, and harmonize pricing
strategies, which are intended to improve consolidated gross margins. The decrease in gross profit as a percentage
of revenues was partially offset by higher levels of client demand, favourable product mix (higher margin resales
revenue realized), increased margins for freight and warehousing revenue, procurement synergies derived through
improved purchasing practices including more favourable pricing, and further progress passing on paper price
increases to our customers.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A expenses for the quarter ended December 31, 2023 were $25.3 million or 19.5% of total revenues, an increase
of $11.7 million or 86%, from $13.6 million, or 18.7% of total revenues, in the same period in 2022. The increase in
SG&A expenses for the quarter ended December 31, 2023 was primarily attributable to the addition of MCC's SG&A
expenses. The decrease in SG&A as a percentage of revenues was primarily driven by the lower relative SG&A
expense of MCC's business as a percentage of revenue compared to that of DCM's historical business. Notably,
selling expenses declined as a result of a strategic reorganization of the sales team. This decline benefited from
certain restructuring initiatives related to SG&A completed to date and offset by merit-based salary increases and
higher consulting fees related to a one-time project.
RESTRUCTURING EXPENSES
For the quarter ended December 31, 2022, DCM incurred restructuring expenses of $10.6 million compared to nil in
the same period in 2022. DCM accelerated its planned initiatives to drive synergies in connection with the acquisition
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DATA Communications Management Corp.
. . M D & A . .
of MCC during the fourth quarter of 2023, including initiatives to align its organizational structure and optimize its
operational footprint. The restructuring expenses include headcount reductions in various functions, including
operations, senior executive management, sales and other SG&A functional roles. Additionally, these one-time
charges account for the closure of the Edmonton facility, encompassing facility closure costs and the associated
expenses incurred in relocating equipment and inventory from the closed facilities. The restructuring costs of $7.5
million for the quarter ended December 31, 2023, related primarily to the Fergus and Trenton provision for anticipated
plant closure costs. This provision was established as the expected severance costs for these employees became
substantially determinable in the fourth quarter of 2023.
DCM will continue to evaluate its operating costs for further efficiencies as part of its commitment to improving its
gross margins and lowering its selling, general and administration expenses.
ACQUISITION COSTS AND INTEGRATION COSTS
DCM incurred $0.7 million for the quarter ended December 31, 2023 for one-time, non-recurring acquisition and
integration costs related to the MCC acquisition compared to $1.9 million for acquisition costs incurred in the same
period in 2022.
EBITDA AND ADJUSTED EBITDA
For the quarter ended December 31, 2023, EBITDA was $4.7 million or 3.6% of revenues compared to $9.5 million or
13.0% of revenues in the same period in 2022. For the quarter ended December 31, 2023, Adjusted EBITDA was
$15.0 million or 9.7% of revenues after adjusting EBITDA for $0.7 million in acquisition and integration costs, $10.6
million in restructuring costs and $1.0 million in Net fair value (gains) losses on financial liabilities at fair value through
profit or loss compared to $12.6 million or 15.5% of revenues after adjusting EBITDA for $1.9 million in acquisition
costs and $1.2 million Net fair value (gains) losses on financial liabilities at fair value through profit or loss.
The increase in Adjusted EBITDA for the quarter ended December 31, 2023 over the prior period in 2022 was due to
an increase in overall revenues and gross profit contributions from the operations of MCC in DCM’s consolidated
financial results from the date of completion of the MCC acquisition, and MCC's lower relative SG&A as a percentage
of revenue. Adjusted EBITDA margin declined for the quarter ended December 31, 2023 due to the lower average
gross margins of MCC. DCM believes it is well-advanced on its planned initiatives to drive synergies in connection
with the acquisition of MCC to optimize its operational footprint, which we expect will improve Adjusted EBITDA
margin. Notably, the closure of DCM's Edmonton plant was completed, which resulted in additional operational
savings.
FINANCE COSTS
Finance costs include interest on debt outstanding under DCM’s credit facilities, interest accretion expense related to
certain debt obligations discounts/ premiums, interest on pension obligations, debt modification losses, amortization
of debt transaction costs and interest expense on lease liabilities under IFRS 16. For the quarter ended December
31, 2023, finance costs were $5.8 million compared to $1.2 million for the same period in 2022. Interest expense for
the quarter ended December 31, 2023 increased from the prior period due to additional debt incurred by DCM to
finance the acquisition of MCC. The additional debt bears interest at higher rates than DCM's other outstanding debt,
38
. . M D & A . .
DATA Communications Management Corp.
which, together with increases in the prime rate applicable to DCM's floating rate debt, contributed to the increase in
interest expense. This was offset by a decrease in interest expense from the extinguishment of DCM's former Bank
term loan and repayment of the Real Estate Bridge Loan, FPD IV and FPD V loans.
INCOME TAXES
DCM reported a loss before income taxes of $8.7 million and a net income tax expense of $2.3 million for the quarter
ended December 31, 2023 compared to income before income taxes of $5.6 million and a net income tax recovery of
$1.9 million for the quarter ended December 31, 2022.
NET INCOME (LOSS)
The net loss for the quarter ended December 31, 2023 was $6.4 million compared to net income of $3.7 million for
the quarter ended December 31, 2022. The decrease in comparable profitability for the quarter ended December 31,
2023 was primarily due to restructuring costs of $10.6 million, one-time acquisition and integration costs of $0.7
million, and increased interest expense from higher levels of debt incurred to finance the MCC acquisition.
ADJUSTED NET INCOME (LOSS)
Adjusted net income for the quarter ended December 31, 2023 was $1.4 million compared to adjusted net income of
$6.3 million for the same period in 2022. The decrease in comparable profitability for the quarter ended December
31, 2022 was due to the restructuring costs, one-time acquisition and integration costs, and increased interest
expense from higher levels of debt to finance the MCC acquisition.
Summary of eight quarter results
TABLE 12
The following table summarizes quarterly financial information for the past eight quarters.
(in thousands of Canadian dollars, except per share amounts, unaudited)
Q4
2023
Q3
Q2
Q1
Revenues
$
129,964 $
122,721 $ 118,963 $
76,077
Net income (loss) attributable to shareholders
(6,358)
(4,185)
(2,879)
(2,431)
Basic earnings (loss) per share
(0.12)
(0.08)
(0.06)
(0.06)
Diluted earnings (loss) per share
(0.14)
(0.08)
(0.06)
(0.06)
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DATA Communications Management Corp.
. . M D & A . .
Q4
2022
Q3
Q2
Q1
Revenues
$
73,045 $
63,399 $
68,103 $
69,257
Net income (loss) attributable to shareholders
3,680
2,816
3,757
3,713
Basic earnings (loss) per share
0.08
0.06
0.09
Diluted earnings (loss) per share
0.08
0.06
0.08
0.08
0.08
The variations in DCM’s quarterly revenues and net income (loss) over the eight quarters ended December 31, 2023
can be attributed to several principal factors: the post-recovery impact of COVID-19 commenced in 2022; the
acquisition of MCC as of April 24, 2023; increases in the costs of freight, paper, ink, and other raw material inputs
used by DCM in the conduct of its business; supply chain disruptions from COVID-19 in 2020 which began to abate in
2022; seasonal variations in customer spending; refinement of DCM's pricing discipline; the impact of paper and other
raw materials price increases and compressed margins on contracts with certain existing customers; fair value (gains)
losses on financial liabilities at fair value through profit or loss for RSUs and DSUs; acquisition and integration costs;
and restructuring expenses related to DCM’s ongoing productivity improvement and cost reduction initiatives.
DCM’s net loss for the fourth quarter of 2023 included higher revenues and gross profits due to: the acquisition of
MCC; one-time costs related to restructuring expenses of $10.6 million and acquisition and integration costs of $0.7
million; and fair value (gains) losses on financial liabilities at fair value through profit or loss for RSUs and DSUs of
approximately $1.0 million. However, DCM’s net income for the fourth quarter of 2022 included a higher gross margin
as a percentage of revenues, and one-time costs related to acquisition integration for $1.9 million.
DCM's net loss for the third quarter of 2023 included higher revenues and gross margins in dollars due to the
acquisition of MCC, one-time costs related to restructuring expenses of $7.0 million and acquisition and integration
costs of $0.2 million, and fair value (gains) losses on financial liabilities at fair value through profit or loss for RSUs
and DSUs of approximately $0.7 million. However, DCM’s net income for the third quarter of 2022 included a higher
gross margin as a percentage of revenues, and no one-time costs.
DCM's net loss for the second quarter of 2023 included higher revenues and gross margins in dollars due to the
acquisition of MCC, acquisition and integration costs of $3.8 million, one-time net fair value (gains) losses on financial
liabilities at fair value through profit or loss for RSUs and DSUs of approximately $2.3 million and restructuring
expenses of $2.7 million. However, DCM’s net income for the second quarter of 2022 included a higher gross margin
as a percentage of revenues, and no one-time costs.
DCM's net loss for the first quarter of 2023 included improved revenues and margins, acquisition and integration
costs of $6.1 million, one-time net fair value (gains) losses on financial liabilities at fair value through profit or loss for
RSUs and DSUs of approximately $5.0 million included in cost of sales and SG&A and no restructuring expenses.
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DATA Communications Management Corp.
However, DCM’s net income for the first quarter of 2022 included improved revenues and gross margin as a
percentage of revenues, and no one-time costs.
Accounting policies
CHANGES IN ACCOUNTING POLICIES
The accounting policies used in the preparation of the consolidated financial statements are outlined in notes 2 and 3
of the Notes to the consolidated financial statements of DCM for the year ended December 31, 2023.
NEW AND AMENDED STANDARDS ADOPTED
IFRS 7 NET FAIR VALUE (GAINS) LOSSES ON FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR
LOSS
In accordance with IAS 8, to provide more reliable and relevant information about the effects of transactions, other
events or conditions on the entity’s financial position, financial performance or cash flows, DCM applied IFRS 7
paragraph 20 to disclose net gains or net losses on financial assets or financial liabilities measured at fair value
through profit or loss separately on the consolidated statement of operations.
The following table summarizes the impact on DCM’s consolidated statement of operations for the year ended
December 31, 2022:
Period ended
December 31, 2022
prior to the adoption
Impact
Period ended
December 31, 2022
after the adoption
Selling, commissions and expenses
General and administration expenses
Net fair value (gains) losses on financial
liabilities at fair value through profit or loss
$
29,198 $
27,952
—
(157) $
(2,554)
2,711
29,041
25,398
2,711
AMENDMENTS TO IAS 1, PRESENTATION OF FINANCIAL STATEMENTS AND IAS 8, ACCOUNTING POLICIES,
CHANGES IN ACCOUNTING ESTIMATES AND ERRORS
These standards were amended to introduce the definition of an accounting estimate and include other amendments
to IAS 8 to help entities distinguish changes in accounting estimates from changes in accounting policies. The
amendments were adopted effective January 1, 2023 and did not have an impact on the consolidated financial
statements.
AMENDMENTS TO IAS 12, DEFERRED TAXES: RELATED TO ASSETS AND LIABILITIES ARISING FROM A
SINGLE TRANSACTION
This standard was amended to require companies to recognize deferred tax on particular transactions that, on initial
recognition, give rise to equal amounts of taxable and deductible temporary differences. The amendments were
adopted effective January 1, 2023 and did not have an impact on the consolidated financial statements.
FUTURE ACCOUNTING STANDARDS NOT YET ADOPTED
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DATA Communications Management Corp.
. . M D & A . .
IAS 1 PRESENTATION OF FINANCIAL STATEMENTS: CLASSIFICATION OF LIABILITIES AS CURRENT OR NON-
CURRENT
In January 2020, the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1). The
amendments aim to promote consistency in applying the requirements by helping companies determine whether debt
and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be
settled within one year) or non-current. The amendments include clarifying the classification requirements for debt a
company might settle by converting it into equity. On October 31, 2022, the IASB published an amendment to clarify
how conditions with which an entity must comply within twelve months after the reporting period affect the
classification of a liability. The amendments are effective for reporting periods beginning on or after January 1, 2024.
DCM is currently evaluating the impact on the consolidated financial statements.
AMENDMENTS TO IFRS 16 LEASES: LEASE LIABILITY IN A SALE AND LEASEBACK
The IASB has issued narrow-scope amendments to the requirements for sale and leaseback transactions in IFRS 16
explaining how a seller-lessee accounts for a sale and leaseback after the date of the transaction. Sale and
leaseback transactions where some or all the lease payments are variable lease payments that do not depend on an
index or a rate are most likely to be impacted. The amendments are effective from January 1, 2024. DCM does not
expect these amendments to have any significant impact on the consolidated financial statements.
AMENDMENTS TO IAS 7 STATEMENT OF CASH FLOWS AND IFRS 7 FINANCIAL INSTRUMENTS: SUPPLIER
FINANCING AGREEMENTS
In May 2023, the IASB issued amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures, addressing the presentation of liabilities and the associated cash flows arising out of supplier finance
arrangements. The disclosure requirements in the amendments enhance the current requirements and are intended
to assist users of financial statements in understanding the effects of supplier finance arrangements on an entity’s
liabilities, cash flows and exposure to liquidity risk. The amendments are effective for annual reporting periods
beginning on or after January 1, 2024. DCM does not expect these amendments to have any significant impact on
the consolidated financial statements.
There are no other IFRS Accounting Standards or International Financial Reporting Interpretations Committee
(‘IFRIC’) interpretations that are not yet effective that would be expected to have a significant impact on DCM.
Critical accounting estimates and judgments
The preparation of financial statements requires management to make judgments, estimates and assumptions that
are not readily apparent from other sources about the carrying amounts of assets and liabilities, and reporting income
and expenses. The estimates and associated assumptions are based on historical experience and other factors that
are considered to be relevant. Actual results may differ materially from these estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized during
the period in which the estimate is revised if the revision affects only that period or in the period of the revision and
future periods if the revision affects both current and future periods.
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BUSINESS COMBINATIONS
The fair value of the properties acquired was estimated with the assistance of a third-party appraiser (management’s
property expert) using a combination of the income (direct capitalization) method and market (direct comparison)
method. Significant assumptions related to the direct comparison method included the sales values of comparable
properties, and subsequent sale and leaseback transactions (including market rental rates and incremental borrowing
rates). Significant assumptions related to the direct capitalization approach included capitalization rates and
comparable market rental rates.
The fair value of the plant and equipment assets acquired was estimated with the assistance of a third-party appraiser
(management’s plant and equipment expert) using a combination of the market and cost (direct and indirect)
approaches. Significant assumptions related to the cost approach included inflation adjustments, replacement cost
new, physical depreciation, useful lives and functional obsolescence. Significant assumptions related to the market
approach included resale values.
IMPAIRMENT OF GOODWILL
Goodwill is tested for impairment annually at the end of each fiscal year or more frequently if events or changes in
circumstances indicate there may be impairment. The determination of the impairment of goodwill is impacted by the
determination of the CGUs, estimates of the recoverable value of those CGUs, assumptions of future cash flows, and
achieving forecasted business results.
The acquisition of MCC brought together two similar sized businesses with similar economic characteristics
particularly in terms of the nature of the products and services, production processes, types of customers and
methods used to provide these product and services to customers. These businesses have been integrated into one
consolidated operation and senior management team under the leadership of the Chief Executive Officer ("CEO") as
the Company operates as an integrated marketing communications and business solutions provider to its customers.
Consequently in management’s judgment DCM has a single goodwill CGU, being the Company as a whole, reflecting
the manner in which the operating results are being reviewed by the chief operating decision maker ("CODM") to
make decisions about resources to be allocated and to assess the Company's performance as an integrated
marketing and business solutions provider to its customers. This is the level at which goodwill is monitored for
internal management purposes.
The recoverable amount of this CGU was determined based on its estimated fair value less the cost of disposal using
a discounted cash flow model. Management applied considerable judgment in estimating the recoverable amounts of
the Company, which included the use of significant assumptions relating to revenue growth rates, gross margins and
the discount rate. While the recoverable amount from the discounted cash flow model is sensitive to key assumptions
used for forecast revenues, gross margins and the discount rate, management is satisfied that the Company’s
forecasts and assumptions, taking account of reasonably possible changes in results and other uncertainties, will not
change the result of DCM's impairment analysis.
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. . M D & A . .
Management’s report on internal controls over financial reporting
DISCLOSURE CONTROLS AND PROCEDURES
DCM maintains a set of disclosure controls and procedures (as defined in National Instrument 52-109) (“DC&P”)
designed to provide reasonable assurance that information required to be disclosed in its public filings or otherwise
under securities legislation is recorded, processed, summarized and reported on a timely basis and that such controls
and procedures are designed to ensure that information required to be so disclosed is accumulated and
communicated to its management, including its certifying officers, as appropriate to allow timely decisions regarding
required disclosure. With the supervision and participation of DCM’s senior management team, the Chief Executive
Officer of DCM and the Chief Financial Officer (“CFO”) of DCM are responsible for designing disclosure controls and
procedures of DCM to provide reasonable assurance that (i) material information relating to DCM was made known to
management, and (ii) information required to be disclosed by DCM in its annual filings, interim filings or other reports
filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time
periods specified in the securities legislation.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING
National Instrument 52-109 requires the CEO and CFO to certify they are responsible for establishing and
maintaining internal control over financial reporting (“ICFR”) for the Company and that ICFR has been designed and
is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements in accordance with IFRS Accounting Standard. The CEO and CFO are also responsible for
disclosing any changes to the Company’s internal controls during the most recent period that have materially affected,
or are reasonably likely to materially affect, its internal controls over financial reporting. DCM’s internal control over
financial reporting is a process designed by, or under the supervision of, the CEO and CFO, or persons performing
similar functions, and effected by DCM's Board of Directors, management and other personnel. DCM’s internal
control over financial reporting includes those policies and procedures that pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with IFRS Accounting Standards and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors; and provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that
could have a material effect on the financial statements. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Furthermore, projections of any evaluation of
effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in
conditions or that the degree of compliance with the policies or procedures may deteriorate. A material weakness is a
deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of DCM’s annual or interim financial statements will not be prevented or
detected on a timely basis.
Based on management’s assessment, DCM’s CEO and CFO have certified that, based on their knowledge, the
Company’s internal controls over financial reporting are effective and the financial statements fairly present in all
material respects the financial condition, results of operations and cash flows of the Company as of, and for, the year
ended December 31, 2023.
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DATA Communications Management Corp.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
As at December 31, 2023, except as set forth below in the immediately following sentence, there were no changes in
the Company’s internal control over financial reporting that occurred during the twelve months ended December 31,
2023 that have materially affected, or are reasonably likely to materially affect, DCM’s internal control over financial
reporting. The CEO and CFO have limited the scope of their assessment of the design and effectiveness of DC&P
and ICFR to exclude control, policies and procedures of MCC for the current year. Set forth below is a summary of
financial information about MCC that has been consolidated in the Company’s financial statements for the year ended
December 31, 2023.
The revenue and net loss contributed by MCC for the year ended December 31, 2023 were $173.6 million and $20.5
million (inclusive of $18,328 of restructuring expenses), respectively. If the acquisition had occurred on January 1,
2023, the estimated proforma consolidated revenue and net loss for the year ended December 31, 2023 would have
been approximately $538.1 million and $9.0 million, respectively, adjusting net income for additional depreciation and
amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and
intangible assets had applied from January 1, 2023 together with the consequential tax effect.
Outlook
For 2024, we have four strategic priorities. First, we plan to substantially complete the integration of MCC by moving
ahead with our plant consolidation plans and harmonizing our back-office systems. We are on track to complete the
consolidation of our Toronto-based Thistle and Bond Avenue plants by mid-year 2024. In addition, we are in the
advanced stages of planning the consolidation of our Fergus, Ontario factory into our Drummondville, Quebec factory
and our Trenton, Ontario facility into our Brampton, Ontario facility, and expect to complete this work within the next
twelve months. We are simultaneously advancing the integration of our financial and manufacturing systems and our
client-facing applications on similar time frames.
Second, we are focused on driving improvements in our gross profit margins, particularly in the legacy MCC
business. As we consolidate facilities, we expect that lower overheads and operating costs will result in more efficient
operations, and, together with investments in new capital equipment, result in operating efficiencies and improved
gross profit margins. While increases in raw material prices significantly moderated in 2023, we have experienced
increases in certain specialty materials in 2024 and expect additional increases in other raw materials during the year.
The Company seeks to pass price increases driven by inflation along to our customers as contractually entitled.
Third, we are focused on growing our business, by taking advantage of our larger scale, expanding our product and
service offerings, and leveraging the capabilities of our combined team. With the integration of our commercial sales
team completed in 2023, our focus in 2024 includes pursuing cross selling opportunities, enhancing our product mix
and strengthening our presence in key industry verticals.
Fourth, we are focused on generating continued higher levels of free cash flow, which will enable us to reduce our net
debt further and allow us to consider further strategic opportunities for investment in the business and capital
allocation.
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Risks and uncertainties
An investment in DCM’s securities involves risks. In addition to the other information contained in this report,
investors should carefully consider the risks described in DCM’s most recent Annual Information Form and other
continuous disclosure filings made by DCM with Canadian securities regulatory authorities before investing in the
securities of DCM. The risks described in this report, the Annual Information Form and those other filings are not the
only ones facing DCM. Additional risks not currently known to DCM or that DCM currently believes are immaterial
may also impair the business, results of operations, financial condition and liquidity of DCM.
46
DATA Communications Management Corp.
Financial reporting responsibility of management
The accompanying consolidated financial statements of DATA Communications Management Corp. (“DCM”) have
been prepared by management and approved by the Board of Directors of DCM. Management of DCM is
responsible for the preparation and presentation of the consolidated financial statements and all the financial
information contained within this Annual Report within reasonable limits of materiality. The consolidated financial
statements have been prepared in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board ("IFRS Accounting Standards"). In the preparation of the consolidated
financial statements, estimates are sometimes necessary because a precise determination of certain assets and
liabilities is dependent on future events. Management believes such estimates have been based on available
information and careful judgements and have been properly reflected in the accompanying consolidated financial
statements. The financial information throughout the text of this Annual Report is consistent with that in the
consolidated financial statements.
To assist management in discharging these responsibilities, DCM maintains a system of internal controls which are
designed to provide reasonable assurance that DCM’s consolidated assets are safeguarded, that transactions are
executed in accordance with management’s authorization and that the financial records form a reliable base for the
preparation of accurate and timely financial information.
Management recognizes its responsibilities for conducting DCM’s affairs in compliance with established financial
standards and applicable laws, and for the maintenance of proper standards of conduct in its activities.
PricewaterhouseCoopers LLP are appointed by the shareholders and have audited the consolidated financial
statements of DCM in accordance with Canadian generally accepted auditing standards. Their report outlines the
nature of their audit and expresses their opinion on the consolidated financial statements of DCM.
The Board of Directors has appointed an Audit Committee composed of three directors who are not members of
management of DCM. The Audit Committee meets periodically with management and the auditors to discuss internal
controls over the financial reporting process, auditing matters and financial reporting issues. It is responsible for
reviewing DCM’s annual and interim consolidated financial statements and the report of the auditors. The Audit
Committee reports the results of such reviews to the Board of Directors and makes recommendations with respect to
the appointment of DCM’s auditors. In addition, the Board of Directors may refer to the Audit Committee other
matters and questions relating to the financial position of DCM.
The Board of Directors are responsible for ensuring that management fulfills its responsibilities for financial reporting,
and are responsible for approving the consolidated financial statements of DCM.
47
DATA Communications Management Corp.
(Signed) "Richard Kellam"
(Signed) "James E. Lorimer"
Richard Kellam
James E. Lorimer
President and Chief Executive Officer
Chief Financial Officer
DATA Communications Management Corp.
DATA Communications Management Corp.
March 20, 2024
Brampton, Ontario
48
Independent auditor’s report
To the Shareholders of DATA Communications Management Corp.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of DATA Communications Management Corp. and its subsidiaries (together, the
Company) as at December 31, 2023 and 2022, and its financial performance and its cash flows for the
years then ended in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board (IFRS Accounting Standards).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated statements of financial position as at December 31, 2023 and 2022;
the consolidated statements of operations for the years then ended;
the consolidated statements of comprehensive (loss) income for the years then ended;
the consolidated statements of changes in shareholders’ equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, comprising material accounting policy information
and other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
PricewaterhouseCoopers LLP
PwC Tower, 18 York Street, Suite 2500, Toronto, Ontario, Canada M5J 0B2
T.: +1 416 863 1133, F.: +1 416 365 8215, Fax to mail: ca_toronto_18_york_fax@pwc.com
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2023. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Valuation of property, plant and equipment and
assets held for sale acquired in the Moore
Canada Corporation (MCC) business acquisition
Our approach to addressing the matter included the
following procedures, among others:
Refer to note 2 – Material accounting policies,
note 4 – Business acquisition, note 7 – Property,
plant and equipment and note 20 – Assets held for
sale to the consolidated financial statements.
In April 2023, the Company acquired MCC for total
cash consideration of $135.7 million. The fair value
of the identifiable assets acquired included $41.4
million related to properties (including $25.8 million
classified as assets held for sale, which was the
subject of a sale and leaseback agreement) and
$26.1 million related to presses and printing
equipment, office furniture and equipment, and
leasehold improvements (together plant and
equipment). Management applied significant
judgment in estimating the fair values of the
acquired properties, plant and equipment.
The fair value of the properties acquired was
estimated with the assistance of a third-party
appraiser (management’s property expert) using a
combination of the income (direct capitalization)
method and market (direct comparison) method.
Significant assumptions related to the direct
comparison method included the sales values of
comparable properties, and subsequent sale and
leaseback transactions (including market rental
rates and incremental borrowing rates). Significant
assumptions related to the direct capitalization
Read the purchase agreement and sale and
leaseback agreement to understand the terms
and conditions of the acquisition agreement and
sale and leaseback transaction.
Tested how management determined the fair
values of the properties, plant and equipment
on a sample basis, which included the
following:
– Evaluating the work of management and
management’s experts with the assistance
of professionals with specialized skill and
knowledge in the field of real estate and
equipment valuations, which included:
o assessing the qualifications,
competence, capabilities and objectivity
of management’s experts;
o understanding the work performed by
management’s experts and evaluating
the appropriateness of the work as
audit evidence;
o checking the mathematical accuracy of
management’s experts’ valuation
analyses;
o assessing the appropriateness of the
valuation methods used;
o
testing the underlying data used in the
appraisals;
Key audit matter
How our audit addressed the key audit matter
approach included capitalization rates and
comparable market rental rates.
The fair value of the plant and equipment acquired
was estimated with the assistance of a third-party
appraiser (management’s plant and equipment
expert) using a combination of the market and cost
(direct and indirect) approaches. Significant
assumptions related to the cost approach included
inflation adjustments, replacement cost new,
physical depreciation, useful lives and functional
obsolescence. Significant assumptions related to
the market approach included resale values.
We considered this a key audit matter due to (i) the
magnitude of the acquired property, plant and
equipment and assets held for sale; (ii) the
significant judgment used by management,
including the use of management’s property expert
and management’s plant and equipment expert
(together, management’s experts), when
determining the fair values of the properties, plant
and equipment acquired; and (iii) the high degree of
auditor judgment, subjectivity and effort in
performing procedures to evaluate the
reasonableness of management’s significant
assumptions. Professionals with specialized skill
and knowledge in the field of real estate and
equipment valuations assisted us in performing our
procedures.
o benchmarking capitalization rates,
comparable market rental rates, sales
values of comparable properties and
incremental borrowing rates with
external market data;
o developing an independent range of
value expectations for the plant and
equipment based on external market
data for inflation adjustments,
replacement cost new, physical
depreciation, useful lives, functional
obsolescence and resale values; and
o compared the independent range of
value expectations for the plant and
equipment to management’s estimate
to evaluate the reasonableness of
management’s estimate.
Tested management’s reconciliation of the
equipment assets to the MCC property, plant
and equipment asset subledger.
Assessed the disclosures in the consolidated
financial statements in relation to the valuation
of the properties, plant and equipment acquired
in the MCC business combination.
Goodwill impairment assessment
Our approach to addressing the matter included the
following procedures, among others:
Refer to note 2 – Material accounting policies and
note 10 – Goodwill to the consolidated financial
statements.
The carrying value of the Company’s goodwill was
$22.3 million as at December 31, 2023. The
Company has a single operating segment being the
Evaluated how management determined the
level at which goodwill is monitored for
impairment by considering the Company’s
internal organizational structure and
management reporting.
Key audit matter
How our audit addressed the key audit matter
Company as a whole, which is the level at which
goodwill is monitored for internal management
purposes reflecting the way the Company manages
its operations.
Management performs a goodwill impairment
assessment annually at the end of each fiscal year
or more frequently if events or changes in
circumstances indicate that the carrying value of
goodwill may be impaired. Impairment is
determined by assessing if the carrying value of the
Company exceeds its recoverable amount. The
recoverable amount of the Company was
determined based on its estimated fair value less
cost of disposal using a discounted cash flow
model.
Management applied considerable judgment in
estimating the recoverable amount of the
Company, which included the use of significant
assumptions relating to revenue growth rates,
gross margins and the discount rate. Management
concluded that there was no impairment of the
Company’s goodwill carrying value as at
December 31, 2023.
We considered this a key audit matter due to the
magnitude of the goodwill balance and the
considerable judgment by management in
estimating the recoverable amount of the
Company. This led to a high degree of auditor
judgment, subjectivity and effort in performing
procedures and evaluating management’s
significant assumptions. Professionals with
specialized skill and knowledge in the field of
valuation assisted us in performing our procedures.
Evaluated how management determined the
recoverable amount of the Company, which
included the following:
– Tested the mathematical accuracy of the
discounted cash flow model.
– Tested the underlying data used in the
discounted cash flow model.
– Evaluated the reasonableness of significant
assumptions used by management related
to revenue growth rates and gross margins
by considering (i) the current and past
performance of the Company; (ii) the
consistency with external industry data; and
(iii) whether these assumptions were
consistent with evidence obtained in other
areas of the audit.
– Professionals with specialized skill and
knowledge in the field of valuation assisted
in evaluating the appropriateness of
management’s discounted cash flow model
and in testing the reasonableness of the
discount rate used by management.
Assessed the disclosures in the consolidated
financial statements, including management’s
sensitivity disclosures on significant
assumptions related to revenue growth rates,
gross margins and the discount rate.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis and the information in the annual report, other than the consolidated financial
statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS Accounting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Simon Kent.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario
March 20, 2024
FINANCIAL STATEMENTS
DATA Communications Management Corp.
Consolidated statements of financial position
(in thousands of Canadian dollars)
December 31, 2023
December 31, 2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade receivables (note 5)
Inventories (note 6)
Prepaid expenses and other current assets
Income taxes receivable
Assets held for sale (note 20)
NON-CURRENT ASSETS
Other non-current assets
Deferred income tax assets (note 14)
Property, plant and equipment (note 7)
Right-of-use assets (note 8)
Pension assets (note 15)
Intangible assets (note 9)
Goodwill (note 10)
LIABILITIES
CURRENT LIABILITIES
Bank overdraft
Trade payables and accrued liabilities
Current portion of credit facilities (notes 1 and 13)
Current portion of lease liabilities (note 12)
Provisions (note 11)
Income taxes payable (note 14)
Deferred revenue
NON-CURRENT LIABILITIES
Provisions (note 11)
Credit facilities (notes 1 and 13)
Lease liabilities (note 12)
Pension obligations (note 15)
Other post-employment benefit plans (note 16)
Asset retirement obligation
EQUITY
SHAREHOLDERS’ EQUITY
Shares (note 17)
Warrants (note 17)
Contributed surplus
Translation reserve
Deficit
$
17,652 $
117,956
28,840
5,313
2,640
8,650
181,051
2,900
9,801
30,358
159,801
1,962
10,616
22,265
418,754 $
1,564 $
75,766 $
6,333
10,322
16,325
—
6,221
116,531
1,004
93,918
144,993
26,386
3,606
3,552
389,990 $
283,738 $
219
3,135
177
(258,505)
28,764 $
418,754 $
$
$
$
$
$
$
$
Commitments and Contingencies (note 21); Subsequent events (note 27)
Approved by Board of Directors
(Signed) "J.R. Kingsley Ward"
Director (Signed) "Richard Kellam"
Director
4,208
54,630
20,220
2,984
15
—
82,057
466
4,830
6,779
33,505
2,364
2,507
16,973
149,481
—
44,133
11,667
6,791
1,316
1,630
3,942
69,479
—
15,380
33,011
6,069
2,695
—
126,634
256,478
869
3,131
207
(237,838)
22,847
149,481
56
DATA Communications Management Corp.
FINANCIAL STATEMENTS
Consolidated statements of operations
(in thousands of Canadian dollars, except per share amounts)
REVENUES (note 25)
COST OF REVENUES
GROSS PROFIT
EXPENSES
Selling, commissions and expenses
General and administration expenses
Restructuring expenses (note 11)
Acquisition and integration costs (notes 4, 8 and 24)
Net fair value losses on financial liabilities at fair value through
profit or loss (notes 3 and 17)
(LOSS) INCOME BEFORE FINANCE COSTS, OTHER INCOME,
AND INCOME TAXES
FINANCE COSTS
Interest expense on long term debt and pensions, net
Interest expense on lease liabilities (note 12)
Amortization of transaction costs net of debt extinguishment gain
(note 13)
For the year ended
December 31, 2023
For the year ended
December 31, 2022
(Restated - Note 3)
$
447,725 $
273,804
328,814
118,911
39,195
48,049
20,308
10,903
7,122
125,577
(6,666)
8,315
7,006
457
15,778
189,580
84,224
29,041
25,398
—
1,870
2,711
59,020
25,204
2,742
2,223
344
5,309
(LOSS) INCOME BEFORE INCOME TAXES
(22,444)
19,895
INCOME TAX (RECOVERY) EXPENSE
Current (note 14)
Deferred (note 14)
NET (LOSS) INCOME FOR THE YEAR
BASIC (LOSS) EARNINGS PER SHARE (note 18)
DILUTED (LOSS) EARNINGS PER SHARE (note 18)
$
$
$
1,209
(7,799)
(6,590)
(15,854) $
(0.31) $
(0.31) $
5,456
473
5,929
13,966
0.32
0.30
57
FINANCIAL STATEMENTS
DATA Communications Management Corp.
Consolidated statements of comprehensive (loss) income
(in thousands of Canadian dollars)
For the year ended
December 31, 2023
For the year ended
December 31, 2022
NET (LOSS) INCOME FOR THE YEAR
$
(15,854) $
13,966
OTHER COMPREHENSIVE (LOSS) INCOME:
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO
NET (LOSS) INCOME
Foreign currency translation
ITEMS THAT WILL NOT BE RECLASSIFIED TO NET (LOSS)
INCOME
Re-measurements of pension and other post-employment benefit
obligations (note 15)
Taxes related to pension and other post-employment benefit
adjustment above (note 14)
(30)
(30)
(6,525)
1,712
(4,813)
34
34
640
(162)
478
OTHER COMPREHENSIVE (LOSS) INCOME FOR THE YEAR,
NET OF TAX
COMPREHENSIVE (LOSS) INCOME FOR THE YEAR
$
$
(4,843) $
512
(20,697) $
14,478
58
DATA Communications Management Corp.
FINANCIAL STATEMENTS
Consolidated statements of changes in shareholders' equity
(in thousands of Canadian
dollars)
BALANCE AS AT
DECEMBER 31, 2021
Net income for the year
Other comprehensive income
for the year
Total comprehensive loss for
the year
Expiration of warrants (note
17)
Share-based compensation
expense (note 17)
Balance as at December 31,
2022
BALANCE AS AT
DECEMBER 31, 2022
Net loss for the year
Other comprehensive loss for
the year
Total comprehensive loss for
the year
Issuance of common shares
and
broker warrants, net (note 17)
Exercise of warrants (note 17)
Exercise of options (note 17)
1,422
Share-based compensation
expense (note 17)
BALANCE AS AT
DECEMBER 31, 2023
Shares
Warrants
Contributed
surplus
Translation
reserve
Deficit
Total equity
$
256,478 $
881 $
2,791 $
173 $
(252,282) $
8,041
—
—
—
—
—
—
—
—
—
—
—
—
(12)
12
—
328
34
34
—
—
13,966
13,966
478
512
14,444
14,478
—
—
—
328
$
256,478 $
869 $
3,131 $
207 $
(237,838) $
22,847
$
256,478 $
869 $
3,131 $
207 $
(237,838) $
22,847
—
—
—
24,480
1,358
—
—
—
—
219
(869)
—
—
—
—
—
—
—
(671)
675
—
(30)
(30)
—
—
—
—
(15,854)
(15,854)
(4,813)
(4,843)
(20,667)
(20,697)
—
—
—
—
24,699
489
751
675
$
283,738 $
219 $
3,135 $
177 $
(258,505) $
28,764
59
FINANCIAL STATEMENTS
DATA Communications Management Corp.
Consolidated statements of cash flows
(in thousands of Canadian dollars)
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net (loss) income for the year
Items not affecting cash
Depreciation of property, plant and equipment (note 7)
Amortization of intangible assets (note 9)
Depreciation of right-of-use-assets (note 8)
Interest expense on lease liabilities (note 12)
Share-based compensation expense (note 17)
Net fair value losses on financial liabilities at fair value through
profit or loss (notes 3 and 17)
Pension expense (note 15)
(Gain)/ loss on disposal of property, plant and equipment
Provisions (note 11)
Amortization of transaction costs, accretion of debt premium/
discount, net of debt extinguishment gain (note 13)
Accretion of non-current liabilities (note 13)
Accretion of asset retirement obligation
Other post-employment benefit plan expense (note 16)
Right-of-use assets impairment (note 8)
Income tax (recovery) expense (note 14)
Changes in non cash working capital (note 19)
Contributions made to pension plans (note 15)
Contributions made to other post-employment benefit plans (note 16)
Provisions paid (note 11)
Income taxes paid (note 14)
Total cash generated from operating activities
INVESTING ACTIVITIES
Net cash consideration for acquisition of MCC (note 4)
Purchase of property, plant and equipment (note 7)
Proceeds on sale and leaseback transactions (note 20)
Purchase of intangible assets (note 9)
Proceeds on disposal of property, plant and equipment
Total cash used in investing activities
FINANCING ACTIVITIES
Issuance of common shares and warrants, net (note 17)
Decrease in restricted cash
Proceeds from credit facilities (note 13)
Repayment of credit facilities (note 13)
Proceeds from exercise of warrants (note 17)
Increase in bank overdrafts
Proceeds from exercise of options (note 17)
Transaction costs (note 13)
Lease payments (note 12)
Total cash provided by financing activities
For the year ended
December 31, 2023
For the year ended
December 31, 2022
$
(15,854) $
13,966
6,165
2,881
12,677
7,006
675
7,122
1,245
487
20,308
457
—
24
515
464
(6,590)
5,863
(1,124)
(471)
(4,975)
(4,072)
32,803
(130,953)
(4,222)
29,533
(127)
1,282
(104,487)
24,221
—
162,140
(87,592)
489
282
751
(1,801)
(13,321)
85,169
2,965
1,606
6,609
2,223
328
2,711
351
98
—
344
120
—
(16)
—
5,929
(6,343)
(869)
(365)
(3,160)
(3,822)
22,675
—
(1,475)
—
(71)
70
(1,476)
—
515
2,900
(12,616)
—
—
—
—
(8,730)
(17,931)
CHANGE IN CASH AND CASH EQUIVALENTS DURING THE
YEAR
13,485
3,268
60
DATA Communications Management Corp.
FINANCIAL STATEMENTS
CASH AND CASH EQUIVALENTS – BEGINNING OF YEAR
EFFECTS OF FOREIGN EXCHANGE ON CASH BALANCES
CASH AND CASH EQUIVALENTS – END OF YEAR
$
$
4,208 $
(41)
17,652 $
901
39
4,208
61
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
1 General information and basis of preparation
DATA Communications Management Corp ("DCM" or the "Company") is a marketing and business communications
partner that helps companies simplify the complex ways they communicate and operate so they can accomplish more
with fewer steps and less effort. For over 60 years, DCM has been serving major brands in vertical markets,
including financial services, retail, healthcare, energy, other regulated industries, and the public sector. On April 24,
2023, DCM completed the acquisition of Moore Canada Corporation (“MCC”) (see note 4 for further details).
These financial statements have been prepared using International Financial Reporting Standards as issued by the
International Accounting Standards Board ("IFRS Accounting Standards") applicable to a going concern, which
contemplates the realization of assets and settlement of liabilities in the normal course of business as they become
due. The Company's ability to continue as a going concern is dependent upon management’s ability to meet forecast
revenue and profitability targets for at least the next twelve months in order to comply with its financial covenants on
its credit facilities or to obtain financial covenant waivers from its lenders if necessary. While estimated forecast
compliance with financial covenants is sensitive to key assumptions used for forecast revenues, gross margins and
expenses (which in turn impact earnings before interest, income taxes, depreciation and amortization (EBITDA)),
management is satisfied that the Company’s forecasts and projections through to March 31, 2025, taking account of
reasonably possible changes in results and other uncertainties will not result in any breach of the financial covenants
on its credit facilities. For this reason, management continues to believe that there is no material uncertainty
regarding the ability of the Company to continue as a going concern.
The common shares of DCM are listed on the Toronto Stock Exchange (“TSX”) under the symbol “DCM” and on OTC
Markets Group (“OTCQX”) under the symbol "DCMDF". The address of the registered office of DCM is 9195 Torbram
Road, Brampton, Ontario. These consolidated financial statements were approved by the Board of Directors ("Board")
of DCM, on March 20, 2024.
2 Material accounting policies
The material accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements.
BASIS OF MEASUREMENT
The consolidated financial statements have been prepared under the historical cost convention, except for the
revaluation of certain financial assets, financial liabilities and employee future benefits to fair value (notes 3, 15, 16
and 17).
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or liability, DCM takes into
account the characteristics of the asset or liability if market participants would take those characteristics into account
when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes
in these consolidated financial statements is determined on such a basis, except for share-based payment
transactions that are within the scope of IFRS 2 Share based-payments, IFRS 16 Leases (as IFRS 7 does not require
fair value disclosures for lease liabilities), and measurements that have some similarities to fair value but are not fair
value, such as net realizable value in IAS 2 Inventories or value in use in IAS 36 Impairment of assets.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on
the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the
fair value measurements in its entirety, which are described as follows:
•
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
62
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
•
•
Level 2 inputs are inputs, other than quoted prices included within Level 1; that are observable for the asset or
liability; either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of DCM and its subsidiaries. All intercompany
transactions, balances and unrealized gains and losses from intercompany transactions are eliminated upon
consolidation.
i.Subsidiaries
Subsidiaries are all entities (including structured entities) over which DCM has control. Control exists when DCM is
exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully consolidated from the date which control is obtained.
They are unconsolidated from the date that control ceases. DCM has two wholly owned subsidiaries, being MCC and
Data Communications Management (US) Corp. ("DCM USA").
ii.Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions
– that is, as transactions with the owners in their capacity as owners. The difference between fair value of any
consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in
equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
iii.Disposal of subsidiaries
When DCM ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when
control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying
amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or
financial asset. In addition, any amounts previously recognized in other comprehensive loss in respect of that entity
are accounted for as if DCM had directly disposed of the related assets or liabilities. This may mean that amounts
previously recognized in other comprehensive income (loss) are reclassified to the statement of operations.
BUSINESS COMBINATIONS
Business combinations are accounted for using the acquisition method, and their operating results are included in the
consolidated financial statements as of the acquisition date. The consideration transferred is the total fair value of the
assets transferred, equity instruments issued, liabilities incurred to the former owners of the acquired business and
contingent considerations on the acquisition date in exchange for control of the acquired entity. The excess of the
consideration transferred over the fair value of the identifiable assets acquired and liabilities assumed is recognized
as goodwill. The transaction costs attributable to the acquisition are recognized in the statement of operations when
they are incurred.
If the agreement includes a contingent consideration, it is measured at fair value as of the acquisition date and added
to the consideration transferred, and a liability for the same amount is recognized. Any subsequent change to the fair
value of the contingent consideration will be recognized in the statement of operations.
If the initial recognition of the business combination is incomplete when the financial statements are issued for the
period during which the acquisition occurred, DCM records a provisional amount for the items for which measurement
is incomplete. Adjustments to the original recognition of the business combination will be recorded as an adjustment
to the assets acquired and liabilities assumed during the measurement period, and the adjustments must be applied
retroactively. The measurement period is the period from the acquisition date to the date on which DCM has received
complete information on the facts and circumstances that existed as of the acquisition date.
63
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
If a business combination is achieved in stages, DCM reassesses the share it held previously in the acquiree at fair
value at the acquisition date and includes the gain or loss resulting, if any, to the statement of operations.
In the case of a business combination of less than 100%, a non-controlling interest is measured, either at fair value or
at the non-controlling interest's share of the net identifiable assets of the acquiree. The basis of measurement is
determined on a transaction-by-transaction basis.
FOREIGN CURRENCY TRANSLATION
Items included in the financial statements of each entity within DCM are measured using the currency of the primary
economic environment in which the entity operates (the “functional currency”). These consolidated financial
statements are presented in Canadian dollars, which is DCM’s functional currency. The functional currency of DCM’s
United States operations is U.S. dollars.
Monetary assets and liabilities denominated in foreign currencies are translated into each entity's functional currency
at rates of exchange in effect at the statement of financial position date. Revenues and expenses denominated in
foreign currencies are translated into each entity's functional currency at rates prevailing on the transaction dates.
Gains and losses resulting from the translation of monetary assets and liabilities denominated in currencies other
than each entity's functional currency are included in the determination of income for the year.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisitions,
are translated to Canadian dollars at exchange rates at the reporting date. The income and expenses of foreign
operations are translated to Canadian dollars at the average exchange rate during the period. Foreign currency
differences are recognized in other comprehensive income (loss) in the foreign currency translation reserve account.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand, deposits held with banks and bank overdraft and highly liquid
short-term interest-bearing securities with maturities of three months or less at the date of purchase.
TRADE RECEIVABLES
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business. They are generally due for settlement within 30 days and are therefore all classified as current. Trade
receivables are recognized initially at the amount of consideration that is unconditional unless they contain significant
financing components when they are recognized at fair value. DCM holds trade receivables with the objective of
collecting the contractual cashflows and therefore measures them subsequently at amortized cost using the effective
interest method, less loss allowance. See note 23 for a description of the Company’s impairment policies and the
calculation of the loss allowance.
INVENTORIES
Raw materials inventories, base stock finished goods and work-in-progress are recorded at the lower of cost and net
realizable value. Raw materials are recorded at standard cost. The cost of finished goods and work-in-process are
determined using the first-in, first-out method. Inventory manufactured includes the cost of materials, labour and
production overheads (based on normal operating capacity), including applicable depreciation on property, plant and
equipment. Net realizable value is the estimated selling price less cost to complete and applicable selling expenses.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost less accumulated depreciation and impairments. Costs include
expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s
carrying value or recognized as a separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to DCM and the cost can be measured reliably. The carrying value of a
64
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
replaced asset is derecognized when replaced. Maintenance and repairs are expensed as incurred. Property, plant
and equipment are depreciated from the point at which the asset is ready for use. Depreciation is computed using
the methods and rates based on the estimated useful lives of the property, plant and equipment as outlined below:
Leasehold improvements
Office furniture and equipment
Presses and printing equipment
Computer hardware
Vehicles
Basis
straight-line
straight-line
straight-line
straight-line
straight-line
Rate
Shorter of life or
lease term
5 years
3 to 10 years
2 to 5 years
3 years
DCM allocates the amount initially recognized with respect to an item of property, plant, and equipment to its
significant parts and depreciates each such part separately. Residual values, the method of depreciation and the
useful lives of the assets are reviewed annually and adjusted if appropriate.
Gains and losses on disposals of property, plant and equipment are determined by comparing the proceeds with the
carrying amount of the asset and are included in general and administration expenses in the statement of operations.
INTANGIBLE ASSETS
Separately acquired intangible assets are initially measured at cost. Customer relationships, trade names,
trademarks and non-compete agreements acquired in a business combination are recognized at fair value at the
acquisition date, which is their deemed cost. Where these assets have a finite life, they are subsequently carried at
cost less accumulated amortization and impairment losses.
Research costs are recognized as an expense as incurred. Development costs that are directly attributable to the
design and testing of identifiable and unique software products controlled by DCM are recognized as intangible
assets when the following criteria are met:
•
it is technically feasible to complete the software so that it will be available for use
• management intends to complete the software and use or sell it
•
•
•
•
there is an ability to use or sell the software
it can be demonstrated how the software will generate probable future economic benefits
adequate technical, financial and other resources to complete the development and to use or sell the
software are available, and
the expenditure attributable to the software during its development can be reliably measured.
Certain configuration and customization activities undertaken in implementing a cloud computing arrangement may
give rise to a separate asset in limited circumstances where DCM controls the intellectual property of the underlying
software code (e.g. the development of bridging modules to existing on-premise systems or bespoke additional
software capability). In all other instances, configuration and customization costs are expensed as incurred. Directly
attributable costs that are capitalized as part of the software include employee costs and an appropriate portion of
relevant overheads. Capitalized development costs are recorded as intangible assets and amortized from the point at
which the asset is ready for use.
Management’s judgment is required to determine the useful lives of intangible assets, including reviewing the length
of customer relationships and other factors. These finite life assets are amortized over their estimated useful lives, as
outlined below.
65
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
Customer relationships
Software and technology
Basis
straight-line
straight-line
Trademarks, trade names and non-compete agreements
straight-line
Rate
1.5 to 12 years
1 to 7 years
2 to 10 years
Residual values, the method of amortization and the useful lives of the assets are reviewed annually and adjusted if
appropriate.
GOODWILL
Goodwill represents the excess of the aggregate of consideration transferred in a business combination and the non-
controlling interest in the acquired business over the fair value of net identifiable assets and liabilities acquired.
Adjustments to fair value assessments are recorded to goodwill over the measurement period, not exceeding one
year from the date of acquisition. Goodwill is allocated to the cash generating unit (“CGU”) or a group of CGUs to
which it relates. A CGU is an identifiable group of assets that are largely independent of the cash flows from other
assets or group of assets, which is not higher than an operating segment.
Goodwill is not amortized but is evaluated for impairment annually or more frequently if events or changes in
circumstances indicate there may be impairment. Impairment is determined for goodwill by assessing if the carrying
value of a cash generating unit, including the allocated goodwill, exceeds its recoverable amount, determined as the
greater of the estimated fair value less costs to sell or the value in use. Impairment losses recognized in respect of a
CGU are first allocated to the carrying value of goodwill and any excess is allocated to the carrying amount of assets
in the CGU. Any goodwill impairment is charged to the consolidated statement of operations in the period in which
the impairment is identified. Impairment losses on goodwill are not subsequently reversed.
IMPAIRMENT OF NON-FINANCIAL ASSETS
Goodwill and indefinite life intangible assets are not subject to amortization and are tested annually for impairment or
more frequently if events or changes in circumstances indicate that they might be impaired. Other assets (property,
plant and equipment, right-of-use assets and definite life intangible assets) are tested for impairment when events or
changes in circumstances indicate that the carrying amount may not be recoverable. For the purpose of measuring
recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash flows
(CGUs). The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use (being
the present value of the expected future cash flows of the relevant asset or CGU). The projections of future cash
flows take into account the relevant operating plans and management’s best estimate of the most probable set of
conditions anticipated to prevail, including a number of estimates and assumptions such as projected revenue growth
rates, gross margin and discount rates.
An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable
amount. Impairment losses are recorded as impairment provisions within accumulated depreciation for depreciable
assets. DCM evaluates impairment losses, other than goodwill impairment, for potential reversals when events or
circumstances warrant such consideration. Where an impairment loss subsequently reverses the carrying amount of
the asset or CGU is increased to the lesser of the revised estimate of recoverable amount and the carrying amount
that would have been recorded had no impairment loss been recognized previously.
TRADE PAYABLES AND ACCRUED LIABILITIES
The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are
presented as current liabilities unless payment is not due within 12 months after the reporting period. They are
recognized initially at their fair value and subsequently measured at amortized cost using the effective interest
method.
66
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
BORROWINGS
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognized in the consolidated statement of operations over the period of the borrowings using the
effective interest method. Fees paid on the establishment of loan facilities are recognized as transaction costs of the
loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred
until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a prepayment for liquidity services and amortized over the period of the facility
to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled
or expired. The difference between the carrying amount of a financial liability that has been extinguished or
transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities
assumed, is recognized in the consolidated statement of operations as other income or finance costs.
Borrowings are classified as current liabilities unless DCM has an unconditional right to defer settlement of the liability
for at least twelve months after the reporting period.
SHARE-BASED COMPENSATION
DCM has share-based compensation plans as part of DCM’s long-term incentive plan, as described in note 17. All
transactions involving share-based payments are recognized as an expense in the statement of operations over the
vesting period.
Equity-settled share-based payment transactions, such as stock option awards, are measured at the grant date at the
fair value of employee services received in exchange for the grant of options or share awards and, for non-employee
transactions, at the fair value of the goods or services received at the date on which the entity recognizes the goods
or services. The total amount of the expense recognized in the statement of operations is determined by reference to
the fair value of the share awards or options granted, which factors in the number of options expected to vest. Equity-
settled share-based payment transactions are not remeasured once the grant date fair value has been determined.
Cash-settled share-based payment transactions are measured at the fair value of the liability. The liability is
remeasured at each reporting date and at the date of settlement, with changes in fair value recognized in the
statement of operations.
EMPLOYEE BENEFITS
DCM maintains a hybrid defined benefit and defined contribution pension plan (the “DATA Communications
Management Pension Plan”) and a defined benefit plan (the “Moore Canada Corporation Pension Plan”) for some of
its employees. Defined benefit pension benefits are primarily based on years of service, compensation and accrued
contributions with investment earnings. DCM's funding policy is to fund the annual amount required to meet or
exceed the minimum statutory requirements. Actuarial valuations are required to be completed every three years.
DCM also contributes to a multi-employer defined benefit plan, the Québec Graphic Communication Pension Plan
(the “GCPP”) for certain employees at its Drummondville plant in Québec and a number of Unifor Local 591G union
administered defined benefit employee pension and non-pension benefit plans for the unionized hourly employees of
its Thistle division and Tristar division ("Unifor Pension & Benefit Plans"). The GCPP and Unifor Pension & Benefit
Plans provide post-employment benefits to unionized employees in the printing industry jointly-trusteed by
representatives of the employers and the unions. DCM's obligation to the GCPP and Unifor Pension & Benefit Plans
are limited to the amounts agreed to in the respective collective bargaining agreements of each plan.
Certain former senior executives of a predecessor corporation and certain current and former employees of DCM
participate in Supplementary Executive Retirement Plans (“SERPs”). The former executives of a predecessor
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DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
corporation are provided with pension benefits payable as a single life annuity with a five-year guarantee. In addition,
certain current and former employees of MCC, who are members of the Moore Canada Corporation Pension Plan,
are provided defined benefits that are in excess of the maximum benefits allowed in accordance with the income tax
act of Canada and pension regulations.
DCM also contributes to various Registered Retirement Saving Plan matching plans ("RRSP Matching Plans") which
are similar to defined contribution pension plans.
DCM provides non-pension post-employment benefits, including health care and life insurance benefits on retirement
to certain former employees, their beneficiaries and covered dependents ("DCM OPEB Plan"). DCM also provides
other long-term employee benefit plans including pension, health care and dental care benefits for certain employees
on long-term disability ("DCM OPEB LTD Plan"). Similarly, MCC provides other long-term employee benefit plans,
including health care and dental care benefits for certain employees on long-term disability ("MCC OPEB LTD Plan").
Together, these plans are collectively referred to as ("OPEB LTD Plans").
(a)
Defined contribution pension plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a
separate entity and has no legal or constructive obligation to pay further amounts. Pension benefits for defined
contribution formula are based on the accrued contributions with investment earnings. DCM’s annual pension
expense is based on the amounts contributed in respect of eligible employees when they are due.
(b)
Defined benefit pension plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Pension benefits for
the defined benefit formula are generally calculated based on the number of years of service and the maximum
average eligible earnings of each employee during any period of five consecutive years. DCM accrues its obligations
for the defined benefit provision and related costs, net of plan assets, where applicable. The cost of pensions earned
by employees covered by these plans are actuarially determined using the projected unit credit method taking into
account management’s best estimate of salary escalation, retirement ages and longevity of employees, where
applicable. When the calculation results in a benefit to DCM, the recognized asset is limited to the present value of
economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the
plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding
requirements that apply to any plan in DCM. An economic benefit is available to DCM if it is realizable during the life
of the plan, or on settlement of the plan liabilities.
Improvements to the pension plans are recognized as past service costs in the period of the plan amendment.
Current service costs are expensed in the period that the benefits are accrued. Current service costs, administration
costs and past services costs are recognized as period costs in general and administration expenses in the statement
of operations. Net interest is calculated by applying the discount rate at the beginning of the period to the net benefit
liability or asset and is recognized in finance costs (income) in the statement of operations.
The discount rate used to determine the accrued benefit obligation is determined by reference to yields on high
quality corporate bonds and that have terms to maturity approximating the terms of the related pension liability.
Actuarial gains and losses arise from the difference between actual rate of return on plan assets and the discount rate
for that period, from changes in actuarial assumptions used to determine the accrued benefit obligation and from
changes to accrued benefit obligation resulting from actual experience differing from long-term assumptions used to
determine the accrued benefit obligation. Re-measurements, comprising actuarial gains and losses, the effect of the
changes to the asset ceiling (if applicable) and the actual return on plan assets (excluding interest), is reflected
immediately in the statement of financial position with a charge or credit recognized in other comprehensive income
(loss) in the period in which they occur. Re-measurements recognized in other comprehensive income (loss) are
reflected immediately in retained earnings (deficit) and will not be reclassified to the statement of operations.
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DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
The retirement benefit obligation recognized in the statement of financial position represents the actual deficit or
surplus in the DCM’s defined benefit plans. When the payment in the future of minimum funding requirements related
to past service would result in a net defined benefit surplus or an increase in a surplus, the minimum funding
requirements are recognized as a liability to the extent that the surplus would not be fully available as a refund or a
reduction in future contributions to the plans.
A liability for termination benefits is recognized at the earlier of when the entity can no longer withdraw the offer of the
termination benefit and when the entity recognizes any related restructuring provisions. Termination benefits that
require future services are required to be recognized over the periods the future services are provided.
The SERPs are unfunded.
The GCPP and the Unifor Pension & Benefit Plans are negotiated contribution, defined benefit plans, however, the
trustees of these plans are not able to provide sufficient information for DCM to account for these plans as a defined
benefit plan. Notably, GCPP is a multi-employer plan, while Unifor Pension & Benefit Plans are subject to a union
agreement rather than being categorized as a multi-employer plans. DCM has accounted for these plans on a
defined contribution basis as DCM does not believe there is sufficient information to recognize participation on a
defined benefit basis.
(c)
Other post-employment and long-term employee benefit plans
DCM’s net obligation in respect of its DCM OPEB Plan is the amount of future benefit that employees have earned in
return for their service in the current and prior periods; that benefit is discounted to determine its present value. The
calculation is performed using the projected unit credit method. Any actuarial gains and losses related to non-pension
post-employment benefit plans are recognized in other comprehensive loss in the period in which they arise and will
not be reclassified to statement of operations.
DCM’s net obligation in respect of its OPEB LTD Plans is the actuarial present value of all future projected benefits
determined as at the valuation date. Any actuarial gains and losses related to other long-term employee benefit plans
are recognized in the statement of operations in the period in which they arise.
The discount rate is the yield at the reporting date on yields on high quality corporate bonds that have maturity dates
approximating the terms of DCM’s obligations. The DCM OPEB Plan and OPEB LTD Plans are funded on a pay-as-
you-go basis.
PROVISIONS
Provisions are liabilities of uncertain timing or amount. A provision is recognized if, as a result of a past event, DCM
has a present legal or constructive obligation for which the amount can be estimated reliably, and it is probable that
an outflow of economic benefits will be required to settle the obligation. Provisions are measured at management’s
best estimate of the expenditure required to settle the obligation. When the effect of discounting is significant, the
amount of the provision is determined by discounting the expected cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and the risks specific to the liability. Provisions are reviewed at each
reporting date and any changes to estimates are reflected in the statement of operations. The unwinding of the
discount is recognized as a finance cost. A provision for restructuring is recognized when DCM has approved a
detailed and formal restructuring plan, and has raised a valid expectation in those affected that it will carry out the
restructuring by starting to implement the plan or announcing its main features to those affected by it. Future
operating losses associated with plant closures are not provided for.
INCOME TAXES
Income tax expense comprises current and deferred tax. Current income tax and deferred income tax are recognized
in the statement of operations except to the extent that it relates to a business combination or items recognized
69
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
directly in equity or in other comprehensive income (loss), in which case the current and/or deferred tax is also
recognized directly in equity or other comprehensive income (loss).
Current income taxes are the expected tax payable or receivable on the taxable income or loss for the year, using tax
rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
years that are expected to be paid. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. DCM establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognized in
respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred income tax is not recognized for the following
temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination
and that affects neither accounting nor taxable profit or loss, and temporary differences relating to investments in
subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable
future. In addition, deferred income tax is not recognized for taxable temporary differences arising on the initial
recognition of goodwill. Deferred income tax is measured on a non-discounted basis at the tax rates that are
expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or
substantively enacted by the reporting date.
A deferred income tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to
the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred
income tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that
the related tax benefit will be realized in the foreseeable future.
Deferred income tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities
and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity or on different
tax entities but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will
be realized simultaneously.
Deferred income tax assets and liabilities are presented as non-current.
LEASES
DCM leases various offices, manufacturing facilities, warehouses and machinery and office equipment. Rental
contracts are typically made for fixed periods of 1 to 15 years but may have extension options. Lease terms are
negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements
do not impose any covenants, but leased assets may not be used as security for borrowing purposes. DCM has
options to purchase certain manufacturing equipment for a nominal amount or the then fair market value, to extend
the term, or to return the equipment at the end of the lease term. The obligations are secured by the lessors’ title to
the leased asset for such leases. DCM also occasionally enters into sub-leases as an intermediate lessor.
The accounting policies for leases are as follows:
AS A LESSEE
DCM assesses, at the inception of a contract, whether a contract is, or contains, a lease. A lease is a contract in
which the right to control the use of an identified asset is granted for an agreed upon period of time in exchange for
consideration. DCM assesses whether a contract conveys the right to control the use of an identified asset when
there is both the right to direct the use of the asset and obtain substantially all the economic benefits from that use.
At the commencement of a lease contract:
(i) a lease liability is initially measured at the present value of the non-cancellable lease payments over the lease
term and discounted at DCM's incremental borrowing rate, which represents the rate DCM would pay to borrow
funds to obtain the underlying asset over a similar term and with similar security. Lease payments include fixed
payments and such variable payments that depend on an index or a rate; less any lease incentives receivable. In
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DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
determining the lease term, management considers all facts and circumstances that create an economic
incentive to exercise an extension option or not exercise a termination option. Extension options (or periods after
termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not
terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs
which affects this assessment and that is within the control of the lessee.
(ii) a right-of-use asset ("ROU Asset") is initially measured at cost, which comprises the initial lease liability, lease
payments made at or before the lease commencement date, initial direct costs and restoration obligations less
lease incentives.
The ROU Asset is depreciated in subsequent periods over the shorter of the asset's useful life and the lease term on
a straight-line basis. The lease term includes periods covered by an option to extend if DCM is reasonably certain to
exercise that option. The ROU Asset is assessed for impairment in accordance with the requirements of IAS 36
Impairment of Assets.
The lease liability is measured in subsequent periods at amortized cost using the effective interest method. Lease
payments are allocated between principal and interest cost. The interest cost is charged to the consolidated
statement of operations over the lease term so as to produce a constant periodic rate of interest on the remaining
balance of the liability each period. The lease liability is remeasured when there is a change in future lease payments
arising from a change in an index or rate, if there is a change in DCM’s estimate of the amount expected to be
payable under a residual value guarantee, or if DCM changes its assessment of whether it will exercise a purchase,
extension or termination option. When the lease liability is remeasured, a corresponding adjustment is made to the
carrying amount of the ROU Asset, with any difference recorded in the consolidated statement of operations. When a
lease contract is modified to increase the scope of the lease and the change to the lease payments is commensurate
with the stand-alone price for the increased scope the modification is accounted for as a separate lease contract. In
all other cases the lease liability is remeasured using a revised discount rate for the remainder of the lease term and
the ROU asset is adjusted either downwards in the case of scope decreases to reflect the partial or full termination of
the lease (with any gain or loss recognized in the consolidated statement of operations) or upwards by the same
adjustment to the lease liability for scope increases.
On a lease by lease basis, DCM also exercises the option available for contracts comprising lease components as
well as non-lease components, not to separate these components. Payments to the lessor for variable costs
associated with the lease, including variable payments to the lessor related to non-lease components, are not
included in the measurement of the lease liability and are expensed as incurred in the consolidated statement of
operations.
Extension and termination options exist for DCM’s property leases. DCM remeasures the lease liability when there is
a change in the assessment of the inclusion of the extension option in the lease term, resulting from a change in facts
and circumstances.
Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as
an expense in the consolidated statement of operations. Short-term leases are leases with a lease term of twelve
months or less. Low value assets comprise IT equipment and small items of office furniture.
AS AN INTERMEDIATE LESSOR
For sub-leases where DCM is an intermediate lessor, the head lease and sub-lease interest are accounted for
separately. DCM assesses the lease classification of a sub-lease as either an operating lease or a finance lease with
reference to the ROU Asset arising from the head lease.
GOVERNMENT GRANTS
Grants from the government are recognized at their fair value when there is reasonable assurance that the grant will
be received and DCM will comply with all attached conditions. The Company has elected to present government
grants related to income as "other income" in the consolidated statement of operations.
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DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
SHARE CAPITAL AND WARRANTS
Common shares and warrants are classified as equity instruments. Incremental costs directly attributable to the issue
of common shares and warrants are recognized as a deduction from equity, net of any tax effects.
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares
outstanding during the period. Diluted earnings (loss) per share is calculated by adjusting net income (loss) and
weighted average number of shares outstanding during the period for the effects of dilutive potential shares, which
includes any options granted.
REVENUE RECOGNITION
DCM recognizes revenue when control of the goods or services has been transferred. Revenue is measured at the
amount of consideration to which DCM expects to be entitled to, net of incentives given to its customers, including
volume-based incentives, price concessions and cash discounts.
The following is a description of the principal activities from which DCM generates its revenue, along with the
corresponding revenue recognition accounting policies applied:
(a) Product sales - DCM manufactures customized products based on specifications pre-approved by its customers.
At its customers' request, DCM will also purchase product from third-party vendors and resell that to its
customers (including technology-enabled hardware solutions - see (e) below). For products that DCM purchases
and resells to its customers, DCM is typically a principal in these arrangements as it is responsible for making
key decisions over the purchasing of product and has the economic risks and rewards that are customary with
control. Accordingly, third-party product revenue is typically presented on a gross basis in revenue with the
corresponding product purchase cost and associated costs recognized in costs of revenue. DCM recognizes
revenue when control over the product transfers to the customer, which is effectively transferred upon the
completion of production or when a resale product is purchased from a third-party vendor and inducted into
DCM's warehouses or shipped directly to customers from third-party vendors due to the custom nature of the
product, as it does not have an alternative use to DCM, such that DCM is entitled to payment once the quantity of
product pursuant to an individual purchase order is produced or purchased from a third-party vendor and
inducted into its warehouses. Given the manufactured products are customized or purchased specifically at the
customer’s request, product returns are insignificant.
In some instances, DCM's customers obtain the product directly from DCM following the completion of production
or directly from third-party vendors. In other instances, DCM’s contracts involve the provision of warehousing
and shipment services, in addition to manufacturing or purchasing of third-party products. Based on DCM's
contractual arrangements with its customers related to product, certain of DCM's contracts with customers
include the provision of warehousing, freight and financing services, in addition to manufacturing or purchase
from third-parties of customized products based on specifications pre-approved by its customers. For bundled
pricing arrangements, DCM allocates the transaction price to each performance obligation based on their relative
stand-alone selling prices. Management applied judgment and assumptions in determining the stand-alone
selling prices in allocating revenue between the various performance obligations based on non-bundled pricing
arrangements and comparable market data, where applicable. DCM stores customized or purchased product at
the request of the customer; the product is identifiable as the customer’s product; the product is ready for transfer
to the customer upon the customer’s request; and DCM cannot re-direct the product nor use the product to fulfill
another customer’s product order under the contract. DCM recognizes product revenues when control has
transferred over the product upon product manufacture by DCM or upon receipt of third-party product into DCM's
warehouses. Based on the contractual terms with its customers, DCM either issues an invoice when product that
is manufactured by DCM or purchased from third-party vendors is inducted into DCM's warehouse, or
alternatively, the invoice is issued for some customers when the product is dispatched from its warehouses. In
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DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
instances where DCM issues an invoice on dispatch of product from its warehouses, rather than at the date of
transfer of control, DCM is still entitled to payment for the purchased or manufactured product. Accordingly,
revenue is recognized for the product manufactured by DCM or purchased from third parties and a
corresponding balance for “unbilled receivables” are recognized within trade receivables in the consolidated
statement of financial position. Unbilled receivables are transferred to accounts receivables when the invoices
are issued to the customers. Deferred revenue represents amounts that have been invoiced to the customer but
not yet recognized as revenue, including advance payments and billings in excess of revenue. Deferred revenue
is recognized as revenue when DCM completes the production of product or upon receipt of third-party product in
its warehouses or when warehousing and freight services are provided (see (b) and (c) below).
(b) Warehousing services - DCM provides custodial services to store customer product in its warehouse over a
specified agreed upon period of time. For non-bundled pricing arrangements, warehousing revenues are
recognized over the period that warehousing services are provided to the customer. For bundled pricing
arrangements, DCM allocates a portion of the initial transaction price for warehousing services and recognizes
revenue on a straight-line basis over the agreed period of the warehousing as it best represents the pattern of
performance. Amounts are typically invoiced as warehousing services are performed in accordance with agreed
upon contractual terms at periodic intervals. When DCM receives advance payments or issues billings in excess
of revenue, these are recognized as deferred revenue in the statement of financial position. Deferred revenue is
recognized as revenue when or as DCM provides custodial services over the agreed upon warehouse term.
(c) Freight services - DCM has identified it has a distinct performance obligation for the shipment of product for
certain contracts where it has an obligation to arrange shipment services where control of the product has been
transferred to the customer prior to shipment. DCM frequently contracts with third parties to deliver product.
DCM is typically a principal for such shipment services as it is responsible for making key decisions over the
shipment arrangements and has the economic risks and rewards associated with such control as a principal
DCM recognizes shipment revenues when the performance of the shipping service has occurred as products are
shipped.
(d) Marketing and other services - Marketing services include fee-for-service marketing strategy, creative and other
marketing services fees, and other ancillary services include fees related to financing charges associated with
customers where DCM stores customer product in the warehouse over a period of time and invoices the
customer when the product is dispatched from DCM's warehouse. Revenue from marketing services is
recognized over time as the services are performed. Revenue for other ancillary services is recognized upon
completion of the performance obligations to its customers. Financing income is recognized as DCM provides
custodial services to its customers over the agreed upon warehouse term.
(e) Technology-enabled hardware solutions - We procure certain products and services from third-party providers to
ensure that our clients’ complete business and marketing communications needs are met while providing
comprehensive vendor management strategies. Technology-enabled hardware solutions include scanners,
printers, tablets, and other technology applications, often with barcoding and RFID functionality, and digital
signage applications. Such products typically complement our product sales, and other services, and are sold to
clients as part of an integrated offering. Technology-enabled hardware solutions represent a distinct performance
obligation (from our product sales and other services), and revenue is recognized when the product is shipped
from the vendor or inducted into DCM's warehouse.
(f) Technology-enabled subscription services and fees - Our technology-enabled subscription services and fees
include the provision of marketing technology workflow applications and digital asset management (“DAM”)
solutions, software subscription
technology services, program management services,
professional services fees, content management fees, and implementation and development fees. Typically,
these services and fees are contracted on either a project basis in the case of professional services,
implementation, and development services fees or for periods of three to five-year terms, with one to two-year
renewal options in the case of software subscription fees and managed technology services. Revenue is
measured based on the consideration DCM expects to be entitled to in exchange for providing services as they
are delivered, or ratably over the term of the contract, and represent a distinct performance obligation.
fees, managed
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DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
VARIABLE CONSIDERATION
Some contracts with customers provide volume-based incentives specific to product sales. In addition, price
concessions (adjustments to the amount charged to a customer made outside of the initial contact terms) are
sometimes provided to customers if there are billing disputes or customers have experienced some level of
dissatisfaction in order to encourage customers to pay for previous purchases and continue making future purchases.
Such incentive offerings and price concessions give rise to variable consideration and are required to be estimated at
contract inception by using either the expected value or the most likely amount, depending on which method better
predicts the amount of consideration to which the customer will be entitled. The estimates are based on various
assumptions, including past experience with customers and other relevant factors. DCM uses the most likely amount
when determining the expected amount of volume-based incentives and price concessions it will give to its customers
and records these as a reduction to revenue in the consolidated statement of operations. DCM reduces the
transaction price for any price concessions expected to be provided to customers, as revenue can only be recognized
to the extent that it is highly probable that a significant reversal in the amount of revenue will not occur when the
uncertainty associated with the variable consideration is subsequently resolved.
CONTRACT COSTS
Contract costs represent incremental costs incurred, such as sales commissions for sales made to certain customers.
Contract costs are deferred and included within prepaid expenses and other assets for contracts expected to be
delivered after more than one year and then amortized over their estimated useful lives. Contract costs are carried at
cost less accumulated amortization. For the years ended December 31, 2023 and 2022, DCM did not have any
significant contract cost balances or transactions.
FINANCIAL INSTRUMENTS
CLASSIFICATION AND MEASUREMENT
Financial assets are classified and measured based on these categories: amortized cost, fair value through other
comprehensive income ("FVTOCI"), and fair value through profit and loss (“FVTPL”).
Financial liabilities are classified and measured based on two categories: amortized cost or FVTPL. Derivatives
embedded in contracts where the host is a financial asset in the scope of the standard are not separated, but the
hybrid financial instrument as a whole is assessed for classification. DCM currently has no derivatives.
Financial assets and liabilities at FVTPL: A financial asset or liability is classified in this category if acquired principally
for the purpose of selling or repurchasing in the short-term. Derivatives are also included in this category unless they
are designated as hedges. Financial instruments in this category are recognized initially and subsequently at fair
value. Transaction costs are expensed in the consolidated statement of operations and are included in finance costs.
Gains and losses arising from changes in fair value are presented in the consolidated statement of operations within
expenses in the period in which they arise. Financial assets and liabilities at FVTPL are classified as current except
for the portion expected to be realized or paid beyond twelve months of the statement of financial position date, which
is classified as non-current.
Financial assets and liabilities at amortized cost: Financial assets and liabilities at amortized cost are initially
recognized at fair value, except for trade receivables that do not contain a significant financing component which are
measured at the transaction price, plus or minus transaction costs, respectively, and subsequently carried at
amortized cost less any impairment.
Financial assets through other comprehensive income: Financial assets carried at FVOCI are measured at fair value.
Interest, dividends and impairment gains and losses are recognized in the consolidated statement of operations on
the same basis as for amortized cost assets. Changes in fair value are recognized initially in other comprehensive
income. When the assets are derecognized or reclassified, the cumulative changes in fair value are reclassified to
the consolidated statement of operations (except where they relate to investments in equity instruments). DCM
currently has no financial instruments measured at fair value through other comprehensive loss.
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DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
DCM determines the classification of financial assets and liabilities at initial recognition. The classification of DCM's
financial assets and liabilities is disclosed in note 23.
IMPAIRMENT OF FINANCIAL ASSETS
DCM applies the 'expected credit loss' ("ECL") model to assess the impairment of its financial assets at each balance
sheet date. The ECL model requires considerable judgment, including consideration of how changes in economic
factors affect ECLs, which are determined on a probability-weighted basis. DCM measures loss allowance at an
amount equal to lifetime ECLs.
DCM applies the simplified approach to determine ECLs on trade receivables by using a provision matrix based on
historical credit loss experiences. The historical results were used to calculate the run rates of default, which were
then applied over the expected life of the trade receivables, adjusted for forward looking information of economic and
other factors. Trade receivables are written off when there is no reasonable expectation of recovering the asset or a
portion thereof.
Impairment losses are recorded in general and administration expenses in the consolidated statements of operations.
Where there is a change that will cause a significant reduction in the loss, the impairment loss previously recognized
is reversed through the consolidated statements of operations.
DERECOGNITION
Financial Assets: The Company derecognizes financial assets only when the contractual rights to cash flows from the
financial assets expire or when it transfers the financial assets and substantially all of the associated risks and
rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the
consolidated statements of operations.
Financial liabilities: The Company derecognizes financial liabilities only when its obligations under the financial
liabilities are discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial
liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities
assumed, is recognized in the consolidated statements of operations.
ASSETS HELD FOR SALE
Pursuant to IFRS 5, non-current assets are classified as held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through continuing use. This condition is regarded as met only
when the asset or disposal group is available for immediate sale in its present condition, subject only to terms that are
usual and customary for sales of such an asset, the appropriate level of management must be committed to a plan to
sell the asset and an active program to locate a buyer and complete the plan must have been initiated. Further, the
asset must be actively marketed for sale at a price that is reasonable in relation to its current fair value, and the sale
is highly probable to complete within one year from the date of classification, except as permitted under certain
events and circumstances. If the aforesaid criteria are no longer met, DCM ceases to classify the asset as held for
sale.
Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount
and fair value less costs to sell and are presented separately in the Statement of Financial Position. DCM does not
depreciate or amortize a non-current asset while it is classified as held for sale. Immediately before the initial
classification of the assets as held for sale, the carrying amounts of the asset are measured in accordance with
applicable IFRS Accounting Standard. Non-current assets are not classified as held for sale within the comparative
period presented for the Statement of Financial Position.
75
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
USE OF ESTIMATES, MEASUREMENT UNCERTAINTY AND JUDGMENTS
The preparation of consolidated financial statements requires management to make critical judgments, estimates and
assumptions that affect the reported amount of certain assets and liabilities and the disclosure of the contingent
assets and liabilities at the date of the consolidated financial statements and revenues and expenses for the period
reported. Management must also make estimates and judgments about future results of operations, related specific
elements of the business and operations in assessing the recoverability of assets and recorded value of liabilities.
Significant areas of estimates, measurement uncertainty and judgments are summarized below. For each item,
actual results could differ from estimates and judgments made by management.
BUSINESS COMBINATIONS
On April 24, 2023, DCM acquired MCC for a total purchase price of $135,757 after adjusting for the post-closing
working capital adjustments. The identifiable assets acquired and liabilities assumed, with limited exceptions are
measured at their fair values at the acquisition date with the excess of the consideration transferred over the fair
value of the identifiable assets acquired and liabilities assumed being recognized as goodwill. The fair value of the
identifiable assets acquired included $41,385 related to properties (including $25,800 classified as assets held for
sale) and $26,139 related to plant, equipment, presses and printing equipment, office furniture and equipment and
leasehold improvements (notes 4, 7 and 20). Management applied significant judgment in estimating the fair values
of the acquired properties, plant and equipment.
The fair value of the properties acquired was estimated with the assistance of a third-party appraiser (management’s
property expert) using a combination of the income (direct capitalization) method and market (direct comparison)
method. Significant assumptions related to the direct comparison method included the sales values of comparable
properties, and subsequent sale and leaseback transactions (including market rental rates and incremental borrowing
rates). Significant assumptions related to the direct capitalization approach included capitalization rates and
comparable market rental rates.
The fair value of the plant and equipment assets acquired was estimated with the assistance of a third-party appraiser
(management’s plant and equipment expert) using a combination of the market and cost (direct and indirect)
approaches. Significant assumptions related to the cost approach included inflation adjustments, replacement cost
new, physical depreciation, useful lives and functional obsolescence. Significant assumptions related to the market
approach included resale values.
IMPAIRMENT OF GOODWILL
Goodwill is tested for impairment annually at the end of each fiscal year or more frequently if events or changes in
circumstances indicate there may be impairment. The determination of the impairment of goodwill is impacted by the
determination of the CGUs, estimates of the recoverable value of those CGUs, assumptions of future cash flows, and
achieving forecasted business results.
The acquisition of MCC brought together two similar sized businesses with similar economic characteristics
particularly in terms of the nature of the products and services, production processes, types of customers and
methods used to provide these product and services to customers. These businesses have been integrated into one
consolidated operation and senior management team under the leadership of the Chief Executive Officer ("CEO") as
the Company operates as an integrated marketing communications and business solutions provider to its customers.
Consequently in management’s judgment DCM has a single goodwill CGU, being the Company as a whole, reflecting
the manner in which the operating results are being reviewed by the chief operating decision maker ("CODM") to
make decisions about resources to be allocated and to assess the Company's performance as an integrated
marketing and business solutions provider to its customers. This is the level at which goodwill is monitored for
internal management purposes.
The recoverable amount of this CGU was determined based on its estimated fair value less the cost of disposal using
a discounted cash flow model. Management applied considerable judgment in estimating the recoverable amounts of
76
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
the Company, which included the use of significant assumptions relating to revenue growth rates, gross margins and
the discount rate. While the recoverable amount from the discounted cash flow model is sensitive to key assumptions
used for forecast revenues, gross margins and the discount rate, management is satisfied that the Company’s
forecasts and assumptions, taking account of reasonably possible changes in results and other uncertainties, will not
change the result of DCM's impairment analysis (see also note 10 for the sensitivity of the model to changes in these
significant assumptions).
3 Change in accounting policies
(a) New and amended standards adopted
IFRS 7 NET FAIR VALUE (GAINS) LOSSES ON FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT
OR LOSS
In accordance with IAS 8, to provide more reliable and relevant information about the effects of transactions, other
events or conditions on the entity’s financial position, financial performance or cash flows, DCM applied IFRS 7
paragraph 20 to disclose net gains or net losses on financial assets or financial liabilities measured at fair value
through profit or loss separately on the consolidated statement of operations.
The following table summarizes the impact on DCM’s consolidated statement of operations for the year ended
December 31, 2022:
Year ended
December 31, 2022
prior to the adoption
Impact
Year ended
December 31, 2022
after the adoption
Selling, commissions and expenses
General and administration expenses
Net fair value losses on financial liabilities at
fair value through profit or loss
$
29,198 $
27,952
—
(157) $
(2,554)
2,711
29,041
25,398
2,711
AMENDMENTS TO IAS 1, PRESENTATION OF FINANCIAL STATEMENTS AND IAS 8, ACCOUNTING
POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS
These standards were amended to introduce the definition of an accounting estimate and include other amendments
to IAS 8 to help entities distinguish changes in accounting estimates from changes in accounting policies. The
amendments were adopted effective January 1, 2023 and did not have an impact on the consolidated financial
statements.
AMENDMENTS TO IAS 12, DEFERRED TAXES: RELATED TO ASSETS AND LIABILITIES ARISING FROM A
SINGLE TRANSACTION
This standard was amended to require companies to recognize deferred tax on particular transactions that, on initial
recognition, give rise to equal amounts of taxable and deductible temporary differences. The amendments were
adopted effective January 1, 2023 and did not have an impact on the consolidated financial statements.
77
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
(b) Future accounting standards not yet adopted
IAS 1 PRESENTATION OF FINANCIAL STATEMENTS: CLASSIFICATION OF LIABILITIES AS CURRENT OR
NON-CURRENT
In January 2020, the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1). The
amendments aim to promote consistency in applying the requirements by helping companies determine whether debt
and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be
settled within one year) or non-current. The amendments include clarifying the classification requirements for debt a
company might settle by converting it into equity. On October 31, 2022, the IASB published an amendment to clarify
how conditions with which an entity must comply within twelve months after the reporting period affect the
classification of a liability. The amendments are effective for reporting periods beginning on or after January 1, 2024.
DCM is currently evaluating the impact on the consolidated financial statements.
AMENDMENTS TO IFRS 16 LEASES: LEASE LIABILITY IN A SALE AND LEASEBACK
The IASB has issued narrow-scope amendments to the requirements for sale and leaseback transactions in IFRS 16
explaining how a seller-lessee accounts for a sale and leaseback after the date of the transaction. Sale and
leaseback transactions where some or all the lease payments are variable lease payments that do not depend on an
index or a rate are most likely to be impacted. The amendments are effective from January 1, 2024. DCM does not
expect these amendments to have any significant impact on the consolidated financial statements.
AMENDMENTS TO IAS 7 STATEMENT OF CASH FLOWS AND IFRS 7 FINANCIAL INSTRUMENTS: SUPPLIER
FINANCING AGREEMENTS
In May 2023, the IASB issued amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures, addressing the presentation of liabilities and the associated cash flows arising out of supplier finance
arrangements. The disclosure requirements in the amendments enhance the current requirements and are intended
to assist users of financial statements in understanding the effects of supplier finance arrangements on an entity’s
liabilities, cash flows and exposure to liquidity risk. The amendments are effective for annual reporting periods
beginning on or after January 1, 2024. DCM does not expect these amendments to have any significant impact on
the consolidated financial statements.
There are no other IFRS Accounting Standards or International Financial Reporting Interpretations Committee
(‘IFRIC’) interpretations that are not yet effective that would be expected to have a significant impact on DCM.
4 Business Acquisition
ACQUISITION OF MOORE CANADA CORPORATION (MCC)
78
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
On April 24, 2023 (the "Closing Date"), DCM acquired 100% of the share capital of MCC for a total cash purchase
price of $130,835, subject to post-closing working capital adjustments. During the year ended December 31, 2023,
the post-closing working capital adjustments to the purchase price were $4,922 for a total cash purchase price of
$135,757. With the completion of the acquisition, MCC is a wholly-owned subsidiary of DCM. The acquisition of
MCC provides a strategic opportunity to accelerate DCM's growth plans. Bringing together two similar sized
businesses, DCM has a significantly larger presence in the Canadian market, an enhanced portfolio of products and
services, and an expanded customer base across a broad range of industry vertical markets. The acquisition was
funded through an expanded revolving, floating rate credit facility from a Canadian chartered bank, which includes up
to $90,000 of revolving credit capacity; a $30,000 floating rate bridge facility from the bank; and a new $50,000 fixed
rate credit facility from Fiera Private Debt (see note 13 for further information).
The acquisition is being accounted for as a business combination using the acquisition method and the consideration
paid and the allocation of the consideration to the fair values of the assets acquired and liabilities assumed in the
acquisition as of the Closing Date were as follows:
Recognized amounts of identifiable assets acquired and liabilities assumed Total as at December 31, 2023
Cash and cash equivalents
Trade receivables
Inventories
Prepaid expenses and other assets
Other non-current assets
Property, plant and equipment
Assets held for sale (note 20)
Right-of-use assets
Intangible assets
Income taxes receivable
Trade payables and accrued liabilities
Bank overdraft
Deferred revenue
Lease liabilities
Provisions
Deferred income tax liabilities
Pension obligations
Other post-employment benefits plans
Asset retirement obligation
Total identifiable net assets
Goodwill
Total
$
$
4,804
58,240
22,981
1,542
704
41,724
25,800
45,525
10,863
1,391
(28,016)
(1,282)
(1,688)
(30,034)
(680)
(5,018)
(14,092)
(848)
(1,451)
130,465
5,292
135,757
The accounting for the business combination was finalised during the fourth quarter. The significant adjustments to
the previously disclosed in the third quarter of 2023 purchase price allocations ware a $5,321 reduction to the
provisional valuation of the acquired property, plant and equipment assets (and reclassification of $25,800 to assets
held for sale relating to the Oshawa warehouse facility for which a planned sale and lease-back agreement was
completed on June 8, 2023), a $1,837 reduction to the provisional valuation of intangible assets, and the deferred tax
impact thereon.
79
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
The fair value of trade receivables acquired is $58,240. The gross contractual amount of trade receivables due is
$59,011, of which $771 was deemed uncollectible. The identifiable intangible assets acquired primarily relate to
customer relationships and trademarks, which will be amortized over an expected useful life of nine to ten years.
Acquisition and integration costs recognized during the year ended December 31, 2023 were $10,903 (year ended
December 31, 2022 – $1,870). Of this $10,903 of acquisition and integration costs incurred during the year ended
December 31, 2023, $5,640 relates specifically to acquisition costs. Goodwill of $5,292 arising from the acquisition is
attributable to the company's workforce and is not deductible for tax purposes.
The revenue and net loss contributed by MCC and included in the consolidated statement of operations for the year
ended December 31, 2023, were $173,600 and $28,359 (inclusive of $18,328 of restructuring expenses),
respectively.
If the acquisition had occurred on January 1, 2023, the estimated proforma consolidated revenue and net loss for the
year ended December 31, 2023 would have been approximately $538,149 and $9,023, respectively, adjusting net
income for additional depreciation and amortization that would have been charged assuming the fair value
adjustments to property, plant and equipment and intangible assets had applied from January 1, 2023 together with
the consequential tax effect.
5 Trade receivables
Trade receivables
Provision for expected credit losses (note 23)
December 31,
2023
December 31,
2022
$
$
119,676 $
(1,720)
117,956 $
56,195
(1,565)
54,630
As at December 31, 2023, trade receivables include unbilled receivables of $32,490 (2022 – $13,491), net of an
expected credit loss allowance of $1,197 (2022 – $1,150).
6 Inventories
Raw materials
Work-in-progress
Finished goods
December 31,
2023
December 31,
2022
$
$
22,051 $
4,392
2,397
28,840 $
14,719
2,827
2,674
20,220
Raw materials inventory amount is net of obsolescence reserves of $1,040 (2022 – $629). Finished goods consist of
base stock items.
80
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
7 Property, plant and equipment
The following tables present changes in property, plant and equipment for the years ended December 31, 2023 and
2022:
Leasehold
improvements
Office
furniture
and
equipment
Presses
and
printing
equipment
Computer
hardware Vehicles
Land and
Building
Year ended December 31, 2023
Opening net book value
Acquisition of MCC (note 4)
Additions
Sales and Leasebacks
Other disposals
Assets classified as held for sale
(note 20)
Effect of movement in exchange
rates
2,541
1,171
1,502
—
(28)
—
—
60
453
1,627
—
3,664
24,515
872
—
(39)
(1,126)
—
—
—
(2)
Total
6,779
41,724
4,222
6,342
504
—
221
—
(17)
10
—
—
—
—
15,585
—
6,342
—
(1,210)
—
—
(8,650)
(8,650)
2
—
(3)
—
—
(593)
(6,165)
Depreciation for the year
(1,032)
(244)
(4,146)
(147)
Closing net book value
$
4,154 $
1,857 $ 23,777 $
563 $
7 $
12,684 $
43,042
At December 31, 2023
Cost
Accumulated depreciation
15,321
(11,167)
3,418
(1,561)
58,162
(34,385)
3,078
(2,515)
16
(9)
Net book value
$
4,154 $
1,857 $ 23,777 $
563 $
7 $
— $
—
— $
79,995
(49,637)
30,358
Leasehold
improvements
Office
furniture
and
equipment
Presses
and
printing
equipment
Computer
hardware Vehicles
Land and
Building
Total
Year ended December 31, 2022
Opening net book value
Additions
Effect of movement in exchange rates
Disposals
Depreciation for the year
Closing net book value
At December 31, 2022
Cost
Accumulated depreciation
Net book value
$
$
$
$
2,595 $
957
—
(1)
(1,010)
94 $
31
—
(15)
(50)
5,129 $
302
15
(152)
582 $
185
6
—
(1,630)
(269)
16
—
—
(6)
—
—
—
—
—
8,416
1,475
21
(168)
(2,965)
2,541 $
60 $
3,664 $
504 $
10 $
— $ 6,779
13,878 $
(11,337)
1,476 $ 33,971 $
(1,416)
(30,307)
3,028 $
(2,524)
2,541 $
60 $
3,664 $
504 $
31 $
(21)
10 $
0 $ 52,384
0 (45,605)
— $ 6,779
81
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
8 Right-of-use asset
The following tables present changes in the right-of-use assets for the years ended December 31, 2023 and 2022:
Year ended December 31, 2023
Opening net book value
Acquisition of MCC (note 4)
$
Impairment
Sales and Leasebacks
Additions
Modifications
Depreciation for the period
Effect of movement in exchange
rates
Closing net book value
At December 31, 2023
Cost
Accumulated depreciation
Net book value
Year ended December 31, 2022
Opening net book value
Additions
Modifications
Depreciation for the year
Derecognition of subleased asset
Effect of movement in exchange
rates
Closing net book value
At December 31, 2022
Cost
Accumulated depreciation
Net book value
$
$
$
$
$
$
$
Property
Office
Equipment
Production
Equipment
26,834 $
45,059
(464)
24,357
66,618
(8,923)
3,084 $
—
45
(841)
3,587 $
466
1,968
940
(2,913)
Total
33,505
45,525
(464)
24,357
1,968
67,603
(12,677)
(16)
153,465 $
—
2,288 $
—
4,048 $
(16)
159,801
178,231 $
(24,766)
153,465 $
6,541 $
(4,253)
2,288 $
20,046 $
(15,998)
4,048 $
204,818
(45,017)
159,801
Property
Office
Equipment
Production
Equipment
28,308 $
1,814
340
(3,398)
(202)
(28)
26,834 $
141 $
3,448
241
(746)
—
—
3,084 $
5,027 $
821 $
194 $
(2,465) $
— $
10
3,587 $
Total
33,476
6,083
775
(6,609)
(202)
(18)
33,505
42,677 $
(15,843)
26,834 $
6,496 $
(3,412)
3,084 $
16,672 $
(13,085)
3,587 $
65,845
(32,340)
33,505
During the year ended December 31, 2023, DCM modified certain leases by entering into renewal and/or amending
agreements to extend a lease term and/or increase/reduce the lease payments.
During the year ended December 31, 2023, DCM executed renewal agreements for its Brampton and Toronto
facilities. The lease term for the Brampton facility, set to expire on December 31, 2025, was extended by an
additional 15 years. This extension includes 10 years of the lease term and an additional 5 years of an extension
option, now expiring on December 31, 2040. Similarly, the lease terms for the Toronto facility, originally set to expire
on December 18, 2026, was also extended by an additional 10 years, now expiring on December 18, 2036.
82
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
In June 2023 and December 2023, DCM completed sale and leaseback transactions of its Oshawa, Ontario
warehouse facility and Fergus, Ontario manufacturing facility, respectively, that were acquired as part of the
Company’s acquisition of MCC (note 4). Gross proceeds received on the sale of these properties were $30.5 million,
and, after deducting closing commissions, rent deposit, and other expenses, net proceeds of $29.5 million were
applied towards the $30 million Real Estate Bridge Loan with a Canadian chartered bank (note 13). In addition,
proceeds of $1.5 million are being held in escrow by the landlord of the Oshawa, Ontario warehouse facility (which is
included in other non-current assets on the consolidated statement of financial position) to secure the completion by
DCM of certain identified building maintenance, repairs and capital improvements that are to be completed by DCM
within 3 years of the lease commencement date. The Oshawa, Ontario warehouse facility leaseback has a lease
term of 20 years (an initial lease term of 10 years and two additional 5 year extension options). The Fergus, Ontario
manufacturing facility leaseback has a lease term of 2 years (an initial lease term of 1 year and two additional 6
month extension options) to allow the Company sufficient time to complete the closure of this facility (see also note
11). No gain or loss was recognized on these sale and leaseback transactions. The related closing costs and other
expenses associated with these transactions of $859 were reflected in general and administrative expenses in the
consolidated statement of operations for the year ended December 31, 2023.
In the fourth quarter of 2023, DCM closed the Edmonton, Alberta manufacturing facility (see note 11) which is subject
to a long-term lease arrangement ending in September 2027. A $464 impairment provision has been recorded
against the carrying amount of the right of use asset for this leased facility The impairment charge is recorded in
acquisition and integration costs in the consolidated statement of operations. DCM is seeking to sublease the
property for the remaining lease term.
During the year ended December 31, 2022, DCM entered into a sublease agreement and recognized an asset which
is recorded under prepaid expenses and other current assets on the statement of financial position.
83
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
9 Intangible assets
The following tables present changes in intangible assets for the years ended December 31, 2023 and 2022:
Year ended December 31, 2023
Opening net book value
Acquisition of MCC (note 4)
Additions
Amortization for the year
Closing net book value
At December 31, 2023
Cost
Accumulated amortization
Net book value
Year ended December 31, 2022
Opening net book value
Additions
Amortization for the year
Closing net book value
At December 31, 2022
Cost
Accumulated amortization
Net book value
Customer
relationships
Software and
technology
Trademarks,
trade names
and non-
compete
agreements
2,397 $
9,100
—
(2,666)
8,831 $
66 $
443
127
(140)
44 $
1,320
—
(75)
496 $
1,289 $
Total
2,507
10,863
127
(2,881)
10,616
96,833 $
12,522 $
10,017 $
119,372
(88,002)
(12,026)
(8,728)
(108,756)
8,831 $
496 $
1,289 $
10,616
Customer
relationships
Software and
technology
Trademarks,
trade names and
non-compete
agreements
3,872 $
—
(1,475)
2,397 $
113 $
71
(118)
66 $
57 $
—
(13)
44 $
Total
4,042
71
(1,606)
2,507
87,733 $
11,952 $
8,697 $
108,382
(85,336)
(11,886)
(8,653)
(105,875)
2,397 $
66 $
44 $
2,507
$
$
$
$
$
$
$
$
The estimated remaining useful lives of the customer relationships are between 1 and 10 years.
84
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
10 Goodwill
Opening balance
Acquisition of MCC (note 4)
Ending balance
December 31,
2023
December 31,
2022
16,973 $
5,292
22,265 $
16,973
—
16,973
$
$
DCM has a single operating segment, being the Company as a whole, which is the level at which goodwill is
monitored for internal management purposes reflecting the way DCM manages its operations. As at January 1, 2023,
there was $16,973 goodwill in the DCM CGU. However, during the year ended December 31, 2023, DCM recognized
an additional $5,292 of goodwill which was derived from the acquisition of MCC.
At December 31, 2023, DCM performed its annual review for impairment of goodwill to determine if the carrying
amount of the Company exceeds its recoverable amount. DCM did not make any changes to the valuation
methodology used to assess for impairment since its last annual impairment test. The recoverable amount of its CGU
has been determined based on the fair value less cost of disposal. DCM uses the income approach to estimate the
recoverable amount of its CGU considering estimated cash flows from the perspective of an independent market
participant, which would be classified within Level 3 of the fair value hierarchy. The income approach is predicated on
the value of the future cash flows that a business will generate going forward. A discounted cash flow model was used
which involves projecting cash flows and converting them into a present value through discounting. The discounting
uses a rate of return that is commensurate with the risk associated with the business and the time value of money.
This approach required significant assumptions about projected revenue growth rates, gross margins and discount
rate.
Revenue growth rates and gross margins were based on the 2024 budget internally approved and presented to the
Board and further projected over a five-year forecast period. The average annual cumulative revenue growth rates
over the forecast period of 2.4% (2022 – 2.9%) was applied to revenue over the forecast period in consideration of
the current economic conditions that existed as at December 31, 2023 and the specific trends of the business
services and marketing solutions industries. A perpetual long-term growth rate of 0% (2022 – 0%) was used thereafter
to derive the recoverable amount of the CGU. The forecasted gross margin over the five-year forecast period is
27.8% (2022 – 31.8%).
Furthermore, DCM derived an after-tax discount rate to calculate the present value of the projected cash flows using
a weighted average cost of capital (“WACC”). This represents an estimate of the total overall required rate of return
on an investment for both debt and equity owners. Determination of the WACC requires separate analysis of cost of
equity and debt, and considers a risk premium based on the assessment of risks related to the projected cash flows.
A discount rate of 14.5% was used (2022 – 13.5%). The change in discount rate reflect management’s judgment as to
the specific risks relating to the CGU and industry in which it operates.
The estimated recoverable amount exceeded its carrying value by $204,891 (2022 – $143,004). While the
recoverable amount from the discounted cash flow model is sensitive to key assumptions used for forecast revenues,
gross margins and discount rate, management are satisfied that the Company’s forecasts and assumptions, taking
account of reasonably possible changes in results and other uncertainties will not change the result of DCM's
impairment analysis. As a result of these tests, it was concluded that there was no impairment of goodwill during the
year.
The recoverable amount would equal its carrying value if the key assumptions were changed to the following (in each
case with all other assumptions remaining unchanged).
85
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
Discount rate
Revenue growth rate over 5-year forecast period and in perpetuity
Gross Margin
11 Provisions
Balance – December 31, 2022
Acquisition of MCC
Additional charge during the year
Utilized during the year
Balance – December 31, 2023
Less: Current portion of provisions
As at December 31, 2023
Balance – December 31, 2021
Utilized during the year
Balance – December 31, 2022
Less: Current portion of provisions
As at December 31, 2022
TERMINATION PROVISIONS
December 31,
2023
December 31,
2022
31.5 %
(2.5) %
22.3 %
44.4 %
(4.4) %
23.9 %
Termination
provisions Plant Closure
1,316
680
19,788
(4,975)
16,809 $
(15,805)
1,004 $
— $
—
520
—
520 $
(520)
— $
Termination
provisions
Plant Closure
3,926 $
(2,610)
1,316 $
(1,316) $
— $
550 $
(550)
— $
—
— $
$
$
$
$
$
$
Total
1,316
680
20,308
(4,975)
17,329
(16,325)
1,004
Total
4,476
(3,160)
1,316
(1,316)
—
During the year ended December 31, 2023, DCM commenced initiatives to drive synergies in connection with the
acquisition of MCC, including initiatives to align its organizational structure and optimize its operational footprint (note
4), and announced its decision to close MCC’s manufacturing facilities in Edmonton, Alberta, Fergus, Ontario and
Trenton, Ontario (and transfer the production to its other manufacturing facilities in Calgary, Alberta, Drummondville,
Quebec and Brampton, Ontario respectively) and to close DCM’s Thistle manufacturing facility in North York, Toronto.
Ontario (and transfer the employees and production to MCC’s nearby manufacturing facility in North York, Toronto,
Ontario).
In the fourth quarter of 2023 DCM closed the Edmonton, Alberta manufacturing facility, completed the sale of the
Fergus property and entered into an agreement to sell the Trenton property that closed in January 2024 (notes 20
and 27). Both of these sales transactions included a one-year leaseback agreement with extension options for up to
an additional six to twelve months to allow DCM sufficient time to complete the closure of these facilities (note 8).
The Edmonton property is subject to a long-term lease arrangement ending in September 2027. A $464 impairment
provision has been recorded again the carrying amount of the right of use asset for this leased facility (note 8). DCM
is seeking to sublease the property for the remaining lease term. The Fergus, Trenton and Thistle facilities are
expected to close in 2024-2025.
During the year ended December 31, 2023, these initiatives resulted in $19,788 of termination provisions due to
expected headcount reduction across DCM’s operations and $520 of plant closure costs for costs associated with
86
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
closure of Edmonton manufacturing facility. These costs are included in the restructuring expenses in the
consolidated statement of operations. During the year ended December 31, 2023, cash payments of $4,975 (2022 -
$3,160) were made to former employees for severances and other restructuring costs. The remaining severance and
restructuring accruals of $16,809 at December 31, 2023 are expected to be paid in 2024, 2025 and 2026.
12 Lease liabilities
(i) LEASE LIABILITIES
DCM currently leases manufacturing, warehouse and office space, office equipment and production equipment. A
lease liability has been recognized equal to the present value of remaining lease payments discounted at the interest
rate implicit in the lease, or if that rate cannot be readily determined, DCM’s weighted average incremental borrowing
rate.
Balance - January 1, 2023
Acquisition of MCC
Additions
Modifications
Payments during the year
Interest charge for the year
Effects of movement in FX rates
Balance - December 31, 2023
Balance - January 1, 2022
Additions
Modifications
Payments during the year
Interest charge for the year
Effects of movement in FX rates
Balance - December 31, 2022
$
$
$
Property
32,648 $
29,568
24,257
64,596
(9,032)
6,643
(11)
148,669 $
Property
34,359 $
2,159
183
(5,919)
1,868
(2)
Office
Equipment
Production
Equipment
3,311 $
—
—
45
(889)
108
—
2,575 $
3,843 $
466
1,968
940
(3,400)
255
(1)
4,071 $
Office
Equipment
Production
Equipment
116 $
3,448
421
(783)
106
3
4,624 $
821
171
(2,028)
249
6
3,843 $
$
32,648 $
3,311 $
Total
39,802
30,034
26,225
65,581
(13,321)
7,006
(12)
155,315
Total
39,099
6,428
775
(8,730)
2,223
7
39,802
The contractual undiscounted cash flows of DCM’s lease liabilities are as follows:
Contractual
Cash Flows
Extension
Options
Not later than one year
Later than one and not later than five years
Later than five years
Total undiscounted lease liabilities
$
$
Discounted using the incremental borrowing rate
Lease liabilities
Current
Non-current
16,551 $
58,494
85,703
Total December
31, 2023
16,578
66,136
198,331
27 $
7,642
112,628
160,748 $
120,297 $
$
$
281,045
(125,730)
155,315
10,322
144,993
87
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
(ii) AMOUNTS RECOGNIZED IN THE STATEMENT OF OPERATIONS
Variable lease payments not included in the measurement of
lease liabilities
Income from sub-leasing right-of-use assets
Expenses relating to short-term leases and leases of low value
assets
$
$
$
11,859 $
712 $
728 $
5,670
29
487
For the year ended
December 31, 2023
For the year ended
December 31, 2022
All extension options that are reasonably certain to be exercised have been included in the measurement of the lease
obligation. The Company reassesses the likelihood of extension options to be exercised when there was a significant
event or change in circumstances. During the year ended December 31, 2023, extension options that are not
reflected in the measurement of the lease liability total $7,834 (2022 - $650).
88
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
13 Credit facilities
December 31,
2023
December 31,
2022
Term loans
- 6.95% term debt, matured June 08, 2023 (FPD IV Credit
Facility)
- 6.95% term debt, matured June 08, 2023 (FPD V Credit
Facility)
- 5.95% term debt, maturing December 17, 2026 (FPD VI
Credit facility)
- 8.08% term debt, maturing April 21, 2028 (FPD VI New
Credit facility)
- floating rate debt, repaid April 24, 2024 (Bank Term
Loan)
Revolving facilities
- floating rate debt, maturing April 24, 2026 (Bank Credit
Facility)
Credit facilities
Unamortized debt premiums and discount
Unamortized transaction costs
Less: Current portion of Credit facilities
Credit facilities
CREDIT AGREEMENTS
$
$
$
$
— $
—
7,857
50,000
—
44,009
101,866 $
—
(1,615)
100,251 $
(6,333)
93,918 $
4,882
1,225
9,429
—
5,913
5,869
27,318
260
(531)
27,047
(11,667)
15,380
BANK FACILITIES
DCM has established a revolving credit facility (the “New Bank Credit Facility”) pursuant to a third amended and
restated credit agreement (the “Bank Credit Agreement”) with a Canadian chartered bank (the “Bank”) as part of the
financing of the acquisition of MCC on April 24, 2023. Under the terms of the amended Bank Credit Agreement, the
maximum principal amount available under the New Bank Credit Facility was increased from $15,000 to $90,000.
The New Bank Credit Facility also includes an “accordion” feature, which can provide up to an additional $20,000 of
capacity under the revolving facility. The New Bank Credit Facility matures on April 24, 2026. The New Bank Credit
Facility is available to be drawn by way of either Prime Rate loans, Base Rate loans, Canadian Dollar Offered Rate
(“CDOR”) loans, Secured Overnight Financing Rate (“SOFR loans”), and/or Letters of Credit. Prime rate loans
charge interest based on the prime rate plus a margin whereby the prime rate is the greater of the Bank’s published
reference rate on Canadian Dollar denominated commercial loans and the CDOR rate for a period of 30 days plus
100 basis points per annum. Under the Bank Credit Agreement, the Canadian Overnight Repo Rate Average
(“CORRA”) plus 0.3% will replace the CDOR rate when the CDOR rate ceases at the end of June 2024. Currently,
advances under the New Bank Credit Facility may not, at any time, exceed the lesser of $90,000 and a fixed
percentage of DCM’s aggregate accounts receivable and inventory (less certain amounts). Advances under the New
Bank Credit Facility are subject to floating interest rates based upon the Canadian prime rate plus an applicable
margin of 1.25% for a rate of 8.45% as at December 31, 2023. The amendment to the revolving credit facility was
accounted for as an extinguishment of the previous facility which was derecognized along with the remaining
unamortized balance of prior transaction costs and unamortized debt premium and the new debt was then recorded
at fair value along with associated transaction costs of $1,087.
89
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
As part of the refinancing of the MCC acquisition, DCM also established a $30,000, one-year committed senior
secured credit facility (the “Real Estate Bridge Loan”). The Real Estate Bridge Loan was available by way of Prime
Rate loans and CDOR loans and was subject to a floating interest rate based upon the Canadian prime rate plus an
applicable margin of 1.5% increasing to 1.75% by the time the loan was fully repaid in December from the proceeds
of the sale and leaseback of the Oshawa and Fergus properties.
DCM also entered into a sale and leaseback agreement of its Trenton, Ontario facility, which was completed in
January 2024 (note 27) and the proceeds from the sale of $8,500 were applied towards paying down the New Bank
Credit Facility.
On November 8, 2021, DCM established a term loan (“Bank Term Loan”) with the Bank for $10,000 as part of a
refinancing of a credit facility previously with Crown Credit Partners. The Bank Term Loan was subject to a floating
interest rate based upon the Canadian prime rate plus an applicable margin of 3.50% and was repaid as part of the
acquisition (note 4).
As at December 31, 2023, DCM had access to $26,188 of available credit under the New Bank Credit Facility and
had cash and cash equivalents, of $17,652 as shown on the consolidated statement of financial position as at
December 31, 2023.
FPD FACILITIES
DCM has two amortizing term loan facilities (the “FPD VI Credit Facilities”) with Fiera Private Debt VI L.P. (“FPD VI”),
which is a fund managed by Fiera Private Debt Fund GP Inc. (“FPD”) pursuant to an amended and restated credit
agreement dated as of April 24, 2023 (the “FPD Credit Agreement”).
DCM established a new $50,000 committed term loan with FPD VI (“FPD VI New Term Loan” and, together with the
New Bank Credit Facility and the Bank Term Loan, the “Credit Facilities”) at an interest rate of 8.08% to partially
finance the acquisition of MCC (see note 4). 71.5% of the FPD VI New Term Loan must be repaid in fifty-nine (59)
equal monthly payments of principal plus accrued interest on the outstanding principal amount and the remaining
28.5%, together with accrued interest, must be repaid on the maturity date on April 21, 2028. DCM elected to defer
principal payments on this facility for the first twelve months following the closing of the MCC acquisition. The
associated transaction costs of this new loan was $714.
As part of the MCC acquisition, in April 2023, the maturity dates of pre-existing loans with FPD IV and FPD V, two
other funds managed by Fiera Private Debt GP Inc. were extended to December 31, 2023 at an interest rate of
8.08%. These loans were fully repaid during the year using the proceeds from the Offering (as defined in note 17).
COVENANT REQUIREMENTS
Each of the Bank Credit Agreement and the FPD Credit Agreement contains customary representations and
warranties, certain financial covenant requirements, as well as certain restrictive covenants which limit the discretion
of the Board and management with respect to certain business matters, including the declaration or payment of
dividends on the common shares of DCM without the consent of the Bank and FPD VI, as applicable. As of
December 31, 2023, DCM was in compliance with all of its financial covenants.
The continued ability to comply with financial covenants under the Company’s credit facilities for at least the next
twelve months is contingent on management’s ability to meet budgeted revenue, profitability and working capital
targets. The estimate of future cash flows in the Company’s 2024 budget and forecasts through to March 31, 2025
include a number of key assumptions to support the financial covenant calculations, specifically related to forecast
revenues and gross margins (which in turn impact earnings before interest, income taxes, depreciation and
amortization (EBITDA)). Management are satisfied that the Company’s forecasts and projections, taking account of
reasonably possible changes in results and other uncertainties will not result in any breach of the financial covenants
on its credit facilities within the next fifteen months.
90
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
For purposes of the Bank Credit Agreement, the FPD Credit Agreements, “EBITDA” means net income or net loss for
the relevant period, calculated on a consolidated basis, plus amounts deducted, or minus amounts added, in
calculating net income or net loss in respect of: (a) the aggregate expense incurred for interest on debt and other
costs of obtaining credit; (b) income taxes, whether or not deferred; (c) depreciation and amortization; non-cash
expenses resulting from employee or management compensation, including the grant of stock options or restricted
options to employees; any gain or loss attributable to the sale, conversion or other disposition of property out of the
ordinary course of business; interest or dividend income; foreign exchange gain or loss; gains resulting from the write-
up of property and losses resulting from the write-down of property (except allowances for doubtful accounts
receivable and non-cash reserves for obsolete inventory); any gain or loss on the repurchase or redemption of any
securities (including in connection with the early retirement or defeasance of any debt); goodwill and other intangible
asset write-downs; lease payments to convert on a pre-IFRS 16 basis; and any other extraordinary, nonrecurring or
unusual items such as restructuring costs (as agreed to by the lender) provided the amounts added back pursuant to
clause (c) above in respect of cash expenses (other than acquisition, integration and restructuring costs related to the
MCC acquisition) are capped at 15% of unadjusted EBITDA. The pro forma financial results from any acquisitions
completed by DCM during a given year are included on a trailing twelve month basis effective as of the closing date
of the acquisitions for the purposes of DCM’s covenant calculations.
A failure by DCM to comply with its obligations under the Bank Credit Agreement or the FPD Credit Agreement,
together with certain other events, including a change of control of DCM and a change in DCM’s Chief Executive
Officer, President or Chief Financial Officer (unless a replacement officer acceptable to FPD, acting reasonably, is
appointed within 60 days of the effective date of such officer’s resignation), could result in an event of default which, if
not cured or waived, could permit acceleration of the indebtedness outstanding under each of those agreements.
INTER-CREDITOR AGREEMENT
DCM’s obligations under the New Bank Credit Facility and the FPD VI Credit Facility are secured by conventional
security charging all of the property and assets of DCM and its subsidiaries. DCM has entered into an inter-creditor
agreement between the Bank and FPD VI, which, among other things, establishes the rights and priorities of the
respective liens of the Bank and FPD VI on the present and after-acquired property of DCM and its subsidiaries.
The movement in credit facilities during the years ended December 31, 2023 and 2022 are as follows:
Balance - Beginning of year, net of transaction costs and debt
premiums and discounts
Changes from financing cash flows
Proceeds from credit facilities
Repayment of credit facilities
Transaction costs
Total change from financing cash flows
Non-cash movements
Amortization of transaction costs and debt modification gain, net
Accretion of premium and discount
Balance - End of year, net of transaction costs and debt
premiums and discounts
$
$
December 31,
2023
December 31,
2022
27,047 $
36,299
162,140
(87,592)
(1,801)
99,794
457
—
2,900
(12,616)
—
26,583
344
120
$
100,251 $
27,047
91
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
The scheduled principal repayments on the long-term debt are as follows:
December 31,
2023
6,333
8,714
55,867
7,143
23,809
101,866
$
$
2024
2025
2026
2027
2028
92
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
14 Income taxes
Significant components of DCM’s deferred income tax assets and liabilities as of December 31, 2023 and 2022 are as
follows:
December 31, 2023
Assets
Liabilities
Net
Pension obligations and other post-employment benefit plans
$
7,320 $
— $
7,320
Property, plant and equipment, ROU assets and lease liabilities
—
(5,327)
(5,327)
Deferred finance fees and debt premiums
Deductible reserves
Intangible assets
Other
1,304
5,793
973
—
—
—
(262)
1,304
5,793
973
(262)
Total deferred income tax assets (liabilities)
$
15,390 $
(5,589) $
9,801
Set-off of deferred income tax assets (liabilities) pursuant to set off
provisions
Net deferred income tax assets (liabilities)
(5,589)
5,589
—
$
9,801 $
— $
9,801
December 31, 2022
Assets
Liabilities
Pension obligations and other post-employment benefit plans
$
1,618 $
— $
Property, plant and equipment, ROU assets and lease liabilities
Benefit of income tax loss and other carry-forwards
Deferred finance fees and debt premiums
Deductible reserves
Intangible assets
Other
1,071
65
144
1,408
543
—
—
—
—
—
—
(19)
Net
1,618
1,071
65
144
1,408
543
(19)
Total deferred income tax assets (liabilities)
$
4,849
(19) $
4,830
Set-off of deferred income tax assets (liabilities) pursuant to set off
provisions
Net deferred income tax assets (liabilities)
(19)
$
4,830
19 $
— $
—
4,830
As at December 31, 2023, DCM recorded net deferred income tax assets of $9,801 (2022 – $4,830) and net deferred
income tax liabilities of nil (2022 – nil) in its consolidated statements of financial position. The deferred income tax
assets are only offset against deferred income tax liabilities where DCM has a legally enforceable right to offset these
amounts, and the deferred income tax assets and deferred income tax liabilities are related to income taxes levied by
the same taxation authority.
93
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
Changes in deferred income tax assets and liabilities during the years ended December 31, 2023 and 2022 are as
follows:
Balance at
January 1,
2023
Acquisition
of MCC
(note 4)
Recognized
in statement
operations
Recognized in
comprehensive
income
Recognized
in equity
(note 17)
Balance at
December
31,
2023
$
Pension obligations
and other post-
employment benefit
plans
Property, plant and
equipment, ROU
assets and lease
liabilities
Benefit of income tax
loss and other carry-
forwards
Deferred finance fees
and debt premiums
Deductible reserves
Intangible assets
Other
Deferred income tax
assets (liabilities), net $
1,618 $
3,946 $
44 $
1,712 $
— $
7,320
1,071
(9,915)
3,517
—
— $
(5,327)
65
—
(65)
144
1,408
543
(19)
383
558
(53)
63
299
3,827
483
(306)
—
—
—
—
—
— $
—
478 $
— $
— $
— $
1,304
5,793
973
(262)
4,830 $
(5,018) $
7,799 $
1,712 $
478 $
9,801
Balance at
January 1,
2022
Recognized
in statement
operations
Recognized in
comprehensive
income
Recognized in
other
comprehensive
income
Recognized
in equity
Balance at
December
31,
2022
$
1,957 $
(177) $
(162) $
— $
— $
1,618
646
425
579
(514)
139
1,394
561
189
5
14
(18)
(208)
—
—
—
—
—
—
—
— $
1,071
—
—
—
—
—
— $
65
— $
— $
— $
— $
144
1,408
543
(19)
$
5,465 $
(473) $
(162) $
— $
— $
4,830
Pension obligations
and other post-
employment benefit
plans
Property, plant and
equipment, ROU
assets and lease
liabilities
Benefit of income tax
loss and other carry-
forwards
Deferred finance fees
and debt premiums
Deductible reserves
Intangible assets
Other
Deferred income tax
assets (liabilities), net
The realization of the deferred income tax assets is dependent on the generation of future taxable income during the
years in which those temporary differences become deductible. Based on management's projections of future
taxable income and tax planning strategies, management expects to realize these net deferred income tax assets in
advance of expiry. As at December 31, 2023, DCM has US Federal tax loss carryforwards of $623 and US state tax
loss carryforwards of $1,293 for which no deferred tax asset has been recognized. The loss carryforwards expire in
varying amounts starting in 2039 (2023 – 2039).
94
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
In the ordinary course of business, DCM and its subsidiaries and predecessors have entered into transactions where
the ultimate tax determination may be uncertain. These uncertainties require management to make estimates of the
ultimate tax liabilities and, accordingly, the provision for income taxes. Since there are inherent uncertainties,
additional tax liabilities may result if tax matters are ultimately resolved or settled at amounts different from those
estimates. As at December 31, 2022, DCM had provided for $1,407 included in income taxes payable related to past
transactions where the ultimate tax determination is unclear. During 2023, that balance became statute barred and
the amount was reversed through the current income tax balance during the year.
The major components of income tax expense (recovery) for the years ended December 31, 2023 and 2022 are set
out below:
Current income tax expense:
Current tax on profits for the year
Adjustment for current tax of prior periods
Total current income tax expense
Total deferred income tax expense (recovery)
Total income tax expense for the year
For the year ended
December 31, 2023
For the year ended
December 31, 2022
$
$
$
2,616 $
(1,407)
1,209 $
(7,799)
(6,590) $
5,456
—
5,456
473
5,929
For the year ended December 31, 2023, deferred income tax expense (recovery) on the recognition of actuarial gains
(losses) related to DCM's defined benefit plans of $1,712 (2022 – $162) were recognized in the statements of
comprehensive income.
The following are reconciliations of income tax expense (recovery) calculated at the statutory rate of Canadian
corporate income taxes to the income tax expense (recovery) for the years ended December 31, 2023 and 2022.
For the year ended
December 31, 2023
For the year ended
December 31, 2022
Income before income taxes
$
(22,444) $
Expected income tax expense calculated at statutory income
tax rate (1)
Adjustment to income taxes resulting from:
Difference between Canadian rates and rates applicable to
subsidiary in another country or rates applicable to wholly
owned Canadian subsidiaries
Unrecognized tax losses and temporary differences
Adjustment for current tax of prior periods and other
Non-deductible expenses and other items
Total income tax expense for the year
$
(5,652)
(223)
(256)
(1,407)
948
(6,590) $
19,895
5,028
9
248
35
609
5,929
(1) The calculation of the current income tax is based on a combined federal and provincial statutory income tax rate
of 25.18% (2022 – 25.28%).
The combined federal and provincial statutory income tax rate for the current year is 0.10% lower than 2022 due to
the effect of changes in statutory tax rates and the allocation of taxable income between provinces. Deferred income
tax assets and liabilities are measured at tax rates that are expected to apply to the period when the asset is realized
or the liability is settled. Deferred income tax assets and liabilities have been measured using an expected average
95
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
combined statutory income tax rate of 25.18% (2022 – 25.28%) based on the tax rates in years when the temporary
differences are expected to reverse.
15 Pension obligations, assets and expenses
DCM sponsors defined benefit and defined contribution pension plans for its employees, including the employees of
MCC. Certain employees and former employees are provided defined benefit pensions under the DATA
Communications Management Pension Plan or are provided defined benefit pensions and in some cases an
unfunded Supplementary Executive Retirement Plan (“SERP”) under the Moore Canada Corporation Pension Plan.
Certain former senior executives of a predecessor corporation participated in a SERP, which provides for pension
benefits payable as a single life annuity with a five-year guarantee.
Both the DATA Communications Management Pension Plan and Moore Canada Corporation Pension Plan are frozen
and no further service credits are accruing under the defined benefit provision of the DATA Communications
Management Pension Plan and under the Moore Canada Corporation Pension Plan, respectively.
Actuarial valuations are typically performed at least every three years. Based on those valuations, the annual cash
contributions in respect of the defined benefit provision of these pension plans are dependent on the plan’s
investment performance and changes in long-term interest rates, estimates of the price of annuities, and other
elements of pension plan experience such as demographic changes and administration expenses, among others.
Under applicable pension regulations, the plan’s solvency deficiency can be funded over a maximum period of five
years.
During the year ended December 31, 2022, DCM engaged actuaries to complete an updated actuarial valuation of
the defined benefit provision of the DATA Communications Management Pension Plan, which confirmed that, as at
December 31, 2021, the solvency position of the defined benefit provision of the DATA Communications Management
Pension Plan had improved since the previous valuation. Based upon the December 31, 2021 actuarial report, DCM's
annual minimum funding obligation for the defined benefit provision of the DATA Communications Management
Pension Plan for 2023 and 2024 is $322 each year.
During the year ended December 31, 2023, DCM engaged actuaries to complete an updated actuarial valuation of
the Moore Canada Corporation Pension Plan, which confirmed that, as at January 1, 2023, the solvency position of
the Moore Canada Corporation Pension Plan had improved since the previous valuation. Based upon the January 1,
2023 actuarial report, DCM's annual minimum funding obligation for the Moore Canada Corporation Pension Plan for
2023 to 2025 is $nil each year.
The following is a summary of DCM’s net pension obligations for the defined benefit provisions and unfunded SERPs,
including plans assumed on the acquisition of Moore Canada Corporation:
DCM
MCC
Total December
31, 2023
December 31,
2022
Present value of funded obligations
$
47,459 $
173,185 $
Less: Fair value of plan assets
(49,421)
(158,091)
(1,962)
6,167
15,094
5,125
220,644 $
(207,512)
13,132
11,292
45,062
(47,426)
(2,364)
6,069
4,205 $
20,219 $
24,424 $
3,705
Deficit (surplus) of funded plans
Present value of unfunded obligations
Defined benefit pension obligations,
net
$
96
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
Defined benefit pension plan obligations
Less: Defined benefit pension assets
Defined benefit pension obligations, net
Total December
31, 2023
December 31,
2022
$
$
26,386 $
(1,962)
24,424 $
6,069
(2,364)
3,705
CHANGE IN THE PRESENT VALUE OF DEFINED BENEFIT PLAN OBLIGATIONS
The following is a summary of the change in DCM’s net pension obligations for the defined benefit provisions of the
funded DATA Communications Management Pension Plan, Moore Canada Corporation Pension Plan and their
respective unfunded SERPs:
Balance – Beginning of year
Interest expense
Benefits paid
Balance - Acquired from acquisition of MCC
Re-measurements:
- Loss (gain) from change in financial assumptions
- Experience (gains) losses
Funded
Unfunded
$
45,062 $
6,069 $
7,553
(10,412)
167,560
6,224
4,657
462
(801)
5,130
380
52
December 31,
2023
51,131
8,015
(11,213)
172,690
6,604
4,709
Balance – End of year
$
220,644 $
11,292 $
231,936
Balance – Beginning of year
Interest expense
Benefits paid
Re-measurements:
- Gain from change in demographic assumptions
- Loss from change in financial assumptions
- Experience (gains) losses
Funded
Unfunded
$
61,137 $
7,499 $
1,763
(2,906)
(523)
(12,115)
(2,294)
217
(546)
—
(1,182)
81
Balance – End of year
$
45,062 $
6,069 $
December 31,
2022
68,636
1,980
(3,452)
(523)
(13,297)
(2,213)
51,131
97
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
CHANGE IN THE FAIR VALUE OF PLAN ASSETS
The following is a summary of the change in the fair value of the plan assets for the defined benefit provisions of the
DCM and MCC pension plans and unfunded SERPs:
Funded
Unfunded
December 31,
2023
Balance – Beginning of year
$
47,426 $
Interest income
Employer contributions
Benefits paid
Administrative expenses paid from plan assets
Balance - Acquired from acquisition of MCC
Re-measurements:
- Gain (loss) on plan assets, excluding amounts included in
interest income
Balance – End of year
Balance – Beginning of year
$
63,668 $
7,387
323
(10,412)
(617)
158,598
— $
—
801
(801)
—
—
47,426
7,387
1,124
(11,213)
(617)
158,598
4,807
$
207,512 $
—
— $
4,807
207,512
Funded
Unfunded
December 31,
2022
1,929
323
(2,906)
(300)
— $
—
546
(546)
—
63,668
1,929
869
(3,452)
(300)
(15,288)
$
47,426 $
—
— $
(15,288)
47,426
Interest income
Employer contributions
Benefits paid
Administrative expenses paid from plan assets
Re-measurements:
- Loss on plan assets, excluding amounts included in
interest income
Balance – End of year
98
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
DEFINED BENEFIT PENSION PLAN ASSET COMPOSITION
The following is a summary of the composition in plan assets of the defined benefit provisions of the DCM and MCC
pension plans:
For the year ended
December 31, 2023
For the year ended
December 31, 2022
DCM Plan MCC Plan
Quoted
Percentage
of plan
assets
Quoted
Percentage
of plan
assets
Domestic equities
Foreign equities
Equity instruments
$
485 $ 21,681 $
9,718
39,874
$ 10,203 $ 61,555 $
22,166
49,592
71,758
$
473
9,838
35 % $
10,311
22 %
Short and mid-term bonds $
Long-term bonds
Commercial mortgages
6,967 $ 11,456 $
18,423
$
25,121
6,715
82,988
108,109
—
6,715
Debt instruments
$ 38,803 $ 94,444 $
133,247
64 % $
6,352
24,056
6,268
36,676
Cash and cash equivalents $
416 $
2,091 $
2,507
1 % $
439
Total
$ 49,422 $ 158,090 $
207,512
100 % $
47,426
77 %
1 %
100 %
ELEMENTS OF DEFINED BENEFIT EXPENSE RECOGNIZED IN THE STATEMENTS OF OPERATIONS
The following is a summary of the expense recognized for the defined benefit provisions and unfunded SERPs of the
DCM and MCC pension plans:
Administration expenses
$
617 $
— $
617
Funded
Unfunded
December 31,
2023
Interest expense
Interest income
Total net interest expenses (income)
Defined benefit expense recognized
Administration expenses
Interest expense
Interest income
Total net interest expense (income)
7,553
(7,387)
166
462
—
462
8,015
(7,387)
628
783 $
462 $
1,245
Funded
Unfunded
December 31,
2022
300 $
— $
300
$
$
1,763
(1,929)
(166)
217
—
217
Defined benefit expense recognized
$
134 $
217 $
1,980
(1,929)
51
351
99
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
AMOUNTS RECOGNIZED IN THE STATEMENT OF COMPREHENSIVE INCOME
The following is a summary of the amounts recognized in the statement of comprehensive income (loss) for the
defined benefit provisions of the DCM and MCC pension plans and unfunded SERPs:
Funded
Unfunded
December 31,
2023
Re-measurements:
- Gain from change in financial assumptions
- Experience (gains) losses
- Loss on plan assets, excluding amounts included in
interest income
$
6,224 $
4,657
(4,807)
6,074
380 $
52
—
432
Deferred income tax effect
(1,597)
(110)
6,604
4,709
(4,807)
6,506
(1,707)
Defined benefit recovery recognized
$
4,477 $
322 $
4,799
Funded
Unfunded
December 31,
2022
Re-measurements:
- Loss from change in demographic assumptions
- Gain from change in financial assumptions
- Experience (gains) losses
- Loss on plan assets, excluding amounts included in
interest income
Deferred income tax effect
$
(523) $
— $
(12,115)
(2,294)
15,288
(1,182)
81
—
356
(1,101)
(90)
278
Defined benefit expense recognized
$
266 $
(823) $
(523)
(13,297)
(2,213)
15,288
(745)
188
(557)
DCM manages its pension plans by meeting with an actuarial consultant and the fund managers on a regular basis
and reviews periodic reports outlining changes in the plan liabilities and the return on pension assets relative to the
market. Assumptions are reviewed on an ongoing basis and adjustments are made whenever management believes
that conditions have materially changed.
SIGNIFICANT ACTUARIAL ASSUMPTIONS ADOPTED IN MEASURING DCM’S DEFINED BENEFIT
OBLIGATIONS
Defined Benefit Pension Plans
Discount rate
Rate of compensation increase
SERPs
Discount rate
December 31,
2023
December 31,
2022
4.60 %
3.00 %
5.30 %
3.00 %
4.60 %
5.20 %
DCM decreased the discount rate that was used to calculate its defined benefit obligations as at December 31, 2023
to reflect current Canadian economic conditions and long-term interest rates. The salary increase assumption
remained unchanged at December 31, 2023.
100
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and
experience in Canada. These assumptions translate into an average life expectancy in years for a pensioner retiring
at age 65:
Retiring at the end of the reporting period:
Male
Female
Retiring in 25 years after the end of the reporting period:
Male
Female
December 31,
2023
December 31,
2022
22.0-21.9
24.4-24.6
23.3-23.7
25.5-26.2
22.0
24.3
23.2
25.5
Through its defined benefit plans, DCM is exposed to a number of risks, the most significant of which are detailed
below:
ASSET VOLATILITY
For a defined benefit pension plan, fluctuations in the value of plan assets are assessed in the context of fluctuations
in the plan liabilities. The plan liabilities are calculated using a discount rate set with reference to high quality
corporate bond yields. As discount rates change, the value of the plan liabilities will fluctuate, if the growth of plan
liabilities exceeds that of plan assets a deficit will result.
The defined benefit provision of the DATA Communications Management Pension Plan and Moore Canada
Corporation Pension Plan are closed to new membership, which means the investment time horizon is shrinking as
the plans matures.
The defined benefit provision of the DATA Communications Management Pension Plan currently holds a small
proportion of equities, approximately 21% of total assets, which are expected to outperform corporate bonds in the
long-term while providing volatility and risk in the short-term. The defined benefit provision of the DATA
Communications Management Pension Plan’s investment time horizon and financial position are key inputs in
deciding on the proportion of equities held.
The investment strategy for the DATA Communications Management Pension Plan reflects an ongoing (rather than
solvency) focus following a duration matching strategy using pooled funds in an attempt to match the interest rate
sensitivity of plan assets to plan liabilities. The equity and bond target allocations are 20% and 80%, respectively, and
the equity portfolio structure did not change relative to the previous year.
Prior to the acquisition by DCM, the Moore Canada Corporation Pension Plan funded ratio was in the 90% funded
target category and 50% of the plan's assets were invested 50% in a growth portfolio and the other 50% of the plan's
assets were invested in a liability hedging portfolio. During the remainder of 2023, the plan's funded ratio improved to
the 95% funded target category and the plan's assets allocation was revised to be 45% invested in a growth portfolio
and 55% invested in a liability hedging portfolio. During the fourth quarter of 2023, DCM developed an alternative
derisking strategy to enhance the plan's asset return while reducing interest rate risk. Beginning in 2024 and as the
plan matured, the Moore Canada Corporation Pension Plan Pension Plan’s level of investment risk will reduced by
lowering the proportion of equities and increasing the proportion of bonds which are a better match to the plan
liabilities. This de-risking glide path will dynamically shift the plan's assets from equities to bonds to better match
liabilities commenced and will be concluded when the solvency ratio reaches 105%.
Through the derisking schedule, the Moore Canada Corporation Pension Plan is expected to lower its interest rate
risk, inflation risk and equity risk. In 2024, the Moore Canada Corporation Pension Plan will have 45% equities and
55% bonds. When the solvency ratio reaches 105%, the Moore Canada Corporation Pension Plan is expected to
101
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
have 20% equities and 80% bonds. This derisking strategy is reviewed annually to consider the current environment
and may be revised at any point in time.
CHANGES IN BOND YIELDS
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in
the value of the plan’s bond holdings.
SALARY RISK
The present value of the pension benefit obligations is calculated by reference to the future salaries of plan
participants, so salary increases of the plan participants greater than assumed will increase plan liabilities.
LIFE EXPECTANCY
The majority of the plans’ obligations provide benefits for the life of the member, so increases in life expectancy will
result in an increase in the plans’ liabilities.
The sensitivity of the defined benefit obligations for the DATA Communications Management Pension Plan, Moore
Canada Corporation Pension Plan and their respective SERPs to changes in assumptions at December 31, 2023 and
at December 31, 2022 are set out below. The effects on each plan of a change in an assumption are weighted
proportionately to the total plan obligations to determine the total impact for each assumption presented.
December 31, 2023
Impact on defined benefit obligations
Change in assumption
Increase in assumption Decrease in assumption
Discount rate
Salary growth rate
0.25%
0.25%
Life expectancy
$
$
(5,759) $
612
6,019
(595)
Increase by 1 year in
assumption
Decrease by 1 year in
assumption
6,123 $
(5,763)
December 31, 2022
Impact on defined benefit obligations
Change in assumption
Increase in assumption
Decrease in assumption
Discount rate
Salary growth rate
0.25%
0.25%
Life expectancy
$
$
(1,207) $
113
1,261
(106)
Increase by 1 year in
assumption
Decrease by 1 year in
assumption
1,301 $
(1,331)
Each sensitivity analysis disclosed in this note is based on changing one assumption while holding all other
assumptions constant. In practice, this is unlikely to occur and changes in some of the assumptions may be
correlated. When calculating the sensitivity of the defined benefit obligations to variations in significant actuarial
assumptions, the same method (present value of the defined benefit obligations calculated with the projected unit
credit method at the end of the reporting period) has been applied as for calculating the liability recognized in the
statements of financial position.
The weighted average duration of the defined benefit obligations is 10.62 years (2022 – 9.65 years).
Expected maturity analysis of undiscounted pension benefits:
102
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
Less than
a year
Between 1 to 2
years
Between 3 to 5
years
Between 5 to 10
years
At December 31, 2023
At December 31, 2022
$
$
15,033 $
3,498 $
15,274 $
3,533 $
47,106 $
10,983 $
79,836
19,197
The annual pension expense for the defined contribution provision of the DATA Communications Management
Pension Plan and RRSP Matching Plans are based on the amounts contributed in respect of eligible employees. The
annual pension expense for the GCCP and Unifor Pension & Benefit Plans, which are accounted for as a defined
contribution plan, is based on amounts contributed based on a percentage of wages of unionized employees who are
covered by the respective collective bargaining agreements, all of whom are employed at DCM facilities located in the
Province of Québec and Ontario.
DCM’s pension expense related to DCM’s defined contribution plans are as follows:
Defined contribution plan
Defined benefit multi-employer plans
For the year ended
December 31, 2023
$
$
1,350 $
395 $
For the year ended
December 31, 2022
948
372
DCM expects that, in 2024, contributions to the defined benefit provision of the DATA Communications Management
Pension Plan will be approximately $322, contributions to the defined contribution provision of the DATA
Communications Management Pension Plan and RRSP Matching Plans will be approximately $1,700, contributions
to the SERPs will be approximately $932, contributions to the GCPP will be approximately $445 and contributions to
the Unifor Pension & Benefit Plans will be approximately $171.
16 Other post-employment benefit plans
Costs related to the DCM OPEB Plan and the OPEB LTD Plans are actuarially determined using the projected unit
credit method. The actuarial present value of all future projected benefits determined as at the valuation date and
management’s best assumptions.
The following summarizes the change in the obligations related to the DCM OPEB Plan and OPEB LTD Plans,
including the plan assumed on the acquisition of Moore Canada Corporation:
December 31,
2023
December 31,
2022
Balance – Beginning of year
$
2,695 $
Current service cost
Interest expense
Benefits paid
Balance - Acquired from acquisition of MCC
Re-measurements:
- Loss from change in demographic assumptions
- Loss (gain) from change in financial assumptions
- Experience losses (gains)
Balance – End of year
$
385
176
(471)
848
36
109
(172)
3,606 $
2,971
179
92
(365)
—
21
(312)
109
2,695
ELEMENTS OF OTHER POST EMPLOYMENT BENEFIT EXPENSE RECOGNIZED IN THE STATEMENTS OF
OPERATIONS
103
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
The following summarizes the elements of the benefit expense related to the DCM OPEB Plan and OPEB LTD Plans:
Current service cost
Interest expense
Re-measurements:
- Loss (gain) from change in demographic assumptions
- Gain from change in financial assumptions
- Experience losses (gains)
Benefit (recovery) recognized
AMOUNTS RECOGNIZED IN THE COMPREHENSIVE INCOME
December 31,
2023
December 31,
2022
$
$
385 $
176
36
72
(154)
515 $
179
92
(127)
(170)
10
(16)
The following summarizes the amounts recognized in the statement of comprehensive income (loss) related to the
DCM OPEB Plan:
Re-measurements:
- Loss from change in demographic assumptions
- Loss (gain) from change in financial assumptions
- Experience losses (gains)
Deferred income tax effect
Benefit expense (recovery) recognized
$
$
December 31,
2023
December 31,
2022
— $
37
(18)
19
(5)
14 $
148
(142)
99
105
(26)
79
SIGNIFICANT ACTUARIAL ASSUMPTIONS ADOPTED IN MEASURING DCM’S OTHER POST-EMPLOYMENT
BENEFIT OBLIGATIONS
DCM OPEB Plan
Discount rate
Health care cost trend rate – Initial
Health care cost trend rate declines by 2040 (2022 – 2040)
OPEB LTD Plans
Discount rate
Health care cost trend rate – Initial
Health care cost trend rate declines by 2040 (2022 – 2040)
December 31,
2023
December 31,
2022
4.60 %
5.78 %
4.00 %
5.30 %
6.11 %
4.00 %
December 31,
2023
December 31,
2022
4.60 %
5.23 %
4.00 %
5.30 %
5.31 %
4.00 %
104
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
SENSITIVITY ANALYSIS ON OTHER POST-EMPLOYMENT BENEFIT OBLIGATIONS
The effects on the DCM OPEB Plan and OPEB LTD Plans of a change in an assumption are weighted proportionately
to the total plan obligations to determine the total impact for each assumption presented.
At December 31, 2023
Discount rate
Health care cost trend rates
Life expectancy
At December 31, 2022
Discount rate
Health care cost trend rates
Life expectancy
Impact on other post-employment benefit obligations
Change in assumption
Increase in
assumption
Decrease in
assumption
0.25%
1.00%
$
(52) $
198
54
(180)
Increase by 1 year in
assumption
Decrease by 1 year in
assumption
$
50 $
(49)
Impact on other post-employment benefit obligations
Change in assumption
Increase in assumption Decrease in assumption
0.25%
1.00%
$
(39) $
144
41
(131)
Increase by 1 year in
assumption
Decrease by 1 year in
assumption
$
(47) $
49
Expected maturity analysis of undiscounted other post-employment benefits:
Less than
a year
Between 1 to
2 years
Between 3 to
5 years
Between 5 to
10 years
At December 31, 2023
At December 31, 2022
$
$
502 $
390 $
474 $
329 $
1,309 $
804 $
2,326
1,025
DCM expects that, in 2024, contributions to its DCM OPEB Plan and OPEB LTD Plans will be approximately $502.
17 Shares and warrants
SHARES
DCM is authorized to issue an unlimited number of common shares. The common shares have a stated capital of
one dollar. Each common share is entitled to one vote at any meeting of shareholders. Each holder of the common
shares will be entitled to receive dividends if, as and when declared by the Board. In the event of the liquidation,
dissolution, winding up of DCM or other distribution of assets of DCM among its shareholders for the purpose of
winding up its affairs, the holders of the common shares will be entitled to receive assets of DCM upon such a
distribution. Such distribution will be made in equal amounts per share on all the common shares at the time
outstanding without preference or distinction.
105
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
The following summarizes the change in number of issued and outstanding common shares during the year:
Balance – January 1, 2022 and December 31, 2022
Exercise of warrants – April 3, 2023
Exercise of warrants – April 21, 2023
Exercise of options – May 23, 2023
Shares issued – May 25, 2023
Balance – December 31, 2023
Number of
Common shares
44,062,831 $
138,157
1,510,000
604,695
8,707,200 $
55,022,883 $
Amount
256,478
167
1,191
1,422
24,480
283,738
During the year ended December 31, 2023, DCM completed a private placement (the “Offering”) of common shares
of the Company (“Common Shares”). Upon closing of the Offering, the Company issued 8,707,200 Common Shares
at a price per share of $3.00 for gross proceeds of $26,121 (or $24,221 after closing costs). A total of $478 was
recorded in equity as the deferred tax impact on the share issue costs. In connection with the Offering, the Company
issued Agent broker warrants (see further discussion below).
WARRANTS
A summary of warrant activities for the year ended December 31, 2023 and the year ended December 31, 2022 is as
follows:
Warrants outstanding - beginning of
year
Granted
Expired
Exercised
Warrants outstanding - end of year
2023
2022
Number of
Warrants
Weighted
average
Exercise Price
Number of
Warrants
Weighted
average Exercise
Price
1,648,157 $
261,216
(1,648,157)
261,216 $
0.30
3.16
—
0.30
3.16
1,863,607 $
—
(215,450)
—
1,648,157 $
0.28
—
0.19
—
0.30
The outstanding warrants had an exercise price range as follows:
$3.16
$0.99
$0.32
$0.26
Warrants outstanding
December 31, 2023
December 31, 2022
Number of Warrants
Number of Warrants
261,216
—
—
—
261,216
—
77,078
61,079
1,510,000
1,648,157
During the year ended December 31, 2023, 1,648,157 warrants were exercised for total proceeds of $489.
106
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
In connection with the Offering, DCM issued 261,216 broker warrants. Each warrant entitles the holder to acquire
one Common Share at an exercise price of $3.16 for a period of 2 years, commencing on May 25, 2023. The total
fair value of the warrants issued was estimated to be $219 using the Black-Scholes option-pricing model, assuming a
risk-free interest of 4.23%, a weighted average life of 2.0 years, a dividend yield of nil and an expected volatility of
55.95% based on comparable companies.
SHARE-BASED COMPENSATION
DCM has adopted a Long-Term Incentive Plan ("LTIP") to: recruit and retain highly qualified directors, officers,
employees and consultants (the "Participants"); provide Participants with an incentive for productivity and an
opportunity to share in the growth and the value of DCM; and, align the interests of Participants with those of the
shareholders of DCM. Awards to Participants are primarily based on the financial results of DCM and services
provided. The aggregate maximum number of common shares available for issuance from DCM's treasury under the
LTIP is 5,502,288 common shares, or 10% of the issued and outstanding common shares of DCM. The shares to be
awarded will be authorized and unissued shares.
DCM's share-based compensation plan consists of five types of awards: restricted share unit ("RSUs"), options,
deferred share unit ("DSUs"), restricted shares or stock appreciation right ("SARs") awards. No restricted shares or
SARs have been granted to date.
(a)
Restricted share unit (“RSU”)
Under the RSU portion of the LTIP, selected employees are granted RSUs where each RSU represents the right to
receive a distribution from DCM in an amount equal to the fair value of one DCM common share. RSUs granted are
performance and non-performance based. The performance component is based on Company specific financial
targets approved by the Board, and the non-performance component is based on continued employment. RSUs
generally vest over three years, require continued employment with DCM for the duration of the vesting period and
settle in cash upon final vesting.
A liability for RSUs is measured at fair value on the grant date and is subsequently adjusted for changes in fair value.
The liability is recognized on a graded vesting basis over the vesting period, with a corresponding charge to
compensation expense as a component of costs of revenues, selling, commissions and expenses, and general and
administration expenses. The RSUs payable are included in trade payables and accrued liabilities. Compensation
expenses for RSUs incorporate an estimate for expected forfeiture rates based on which the fair value is adjusted.
Balance - beginning of year
Units granted
Units forfeited
Units paid out
Balance - end of year
December 31,
2023
December 31,
2022
Number of RSUs
Number of RSUs
3,154,305
348,110
(115,920)
(1,188,558)
2,197,937
2,400,715
904,207
—
(150,617)
3,154,305
During the year ended December 31, 2023, the CEO and President of DCM was granted 143,506 RSUs (2022 –
357,985 RSUs) and a total of 204,604 RSUs (2022 – 546,222 RSUs) were awarded to other members of DCM's
management.
107
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
Of the total outstanding RSUs at December 31, 2023, nil (December 31, 2022 – nil) have vested and are payable.
The carrying amount of the liability relating to the RSUs at December 31, 2023 included in accounts payable and
accruals was $4,814 (2022 – $3,501).
During the year ended December 31, 2023, compensation expense of $3,762 (2022 – $1,740) was recognized in the
consolidated statement of operations related to vesting of RSUs granted, and fair value adjustments. RSUs and
DSUs are categorized as level 2 inputs in the fair value hierarchy given their valuations include inputs other than
quoted prices for which all significant inputs are observable, either directly or indirectly. There were no transfers
between levels 1, 2 or 3 during the period.
Options (“Options”)
(b)
A summary of Options activities for the year ended December 31, 2023 and the year ended December 31, 2022 is as
follows:
2023
2022
Number of
Options
Weighted
average
Exercise Price
Number of
Options
Weighted
average Exercise
Price
Options outstanding - beginning of year
4,700,886 $
Granted
Forfeited
Exercised
750,000
(250,000)
(671,886)
Options outstanding - end of year
4,529,000 $
0.97
3.42
3.42
1.38
1.18
3,950,886 $
750,000
—
—
4,700,886 $
Exercisable
2,987,333 $
0.89
2,867,553 $
The outstanding Options had an exercise price range as follows:
0.91
1.30
—
—
0.97
0.99
$0.69
$0.85
$1.29
$1.30
$1.38
$3.42
Options outstanding
December 31, 2023
December 31, 2022
Number of Options
Number of Options
2,500,000
2,500,000
125,000
654,000
750,000
—
500,000
4,529,000
125,000
654,000
750,000
671,886
—
4,700,886
The Black-Scholes option-pricing model inputs used to compute compensation expense for the options granted under
the fair value-based method are as follows:
Expected life (years)
Expected volatility
Dividend yield
Risk free rate of return
Weighted average fair value of options granted
Forfeiture rate
$
April 27, 2023
April 4, 2022
7.0
60 %
— %
2.92 %
2.09
$
10 %
7.0
40 %
— %
2.41 %
0.58
10 %
108
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
On April 27, 2023, options to purchase up to 750,000 common shares were awarded to a member of key
management. Once vested, the options are exercisable for a period of seven years from the grant date at an exercise
price of $3.42 per share, representing the fair value of the Common Shares on the date of grant. 250,000 of these
options were forfeited during the year and the remaining 500,000 options vest at a rate of 1/2 each year beginning on
April 27, 2024.
During the year ended December 31, 2023, 671,886 options were exercised in exchange for 604,695 common shares
(as a result of the net settlement of certain options) for total proceeds of $751.
During the year ended December 31, 2023, compensation expense of $675 (2022 – $328) was recognized in the
consolidated statement of operations related to the vesting of options granted.
(c) Deferred share unit (“DSU”)
Each director is required to receive at least half of his or her annual retainer in DSUs and has the option to elect to
receive all or any other part of his or her other compensation in DSUs.
Each DSU represents the right to receive a distribution from DCM in an amount equal to the fair value of one DCM
common share on the date of the termination of service of the respective director. The number of DSUs payable to
each director is determined by multiplying the total Director Fees payable by the percent elected to be paid in DSUs
and dividing the product by the Fair Value of one DCM common share on the grant date. A liability for DSUs is
measured at fair value on the grant date and is subsequently adjusted for changes in fair value. The DSUs payable is
included in trade payables and accrued liabilities.
During the year ended December 31, 2023, 195,701 DSUs (2022 – 358,582 DSUs) were granted, and nil DSUs were
paid out (2022 – nil). The carrying amount of the liability included in accounts payable and accruals relating to the
2,629,404 DSUs outstanding at December 31, 2023 was $6,889 (December 31, 2022 – $3,529 and 2,433,703 DSUs
outstanding).
During the year ended December 31, 2023, an expense of $3,360 (2022 – $971) was recognized in the consolidated
statement of operations related to DSUs granted of $492 (2022 - $573), and fair value adjustments of $2,821 (2022 -
$398).
109
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
18 Earnings per share
BASIC EARNINGS PER SHARE
Net (loss) income for the year attributable to common
shareholders
Weighted average number of shares
Basic (loss) earnings per share
DILUTED EARNINGS PER SHARE
Net (loss) income for the year attributable to common
shareholders
Weighted average number of shares
Adjustments for calculation of diluted earnings per share:
Options
Warrants
Weighted average number of shares in calculating diluted
earnings per share
Diluted (loss) earnings per share
$
$
$
$
For the year ended
December 31, 2023
For the year ended
December 31, 2022
(15,854) $
50,832,543
(0.31) $
13,966
44,062,831
0.32
(15,854) $
50,832,543
—
—
50,832,543
(0.31) $
13,966
44,062,831
1,235,008
1,274,227
46,572,066
0.30
For the year ended December 31, 2023, options to purchase up to 4,029,000 common shares were excluded from
the computation of diluted earnings per share as their effect would have been anti-dilutive. Options to purchase up to
500,000 common shares and warrants to purchase up to 261,216 common shares were excluded from the
computation of diluted earnings per share as they were out-of-the-money as of December 31, 2023.
During the year ended December 31, 2022, options to purchase up to 671,886 common shares and warrants to
purchase up to nil common shares were excluded from the computation of diluted earnings per share as their effect
would have been anti-dilutive.
19 Changes in working capital
Trade receivables
Inventories
Prepaid expenses and other current and non-current assets
Trade and accrued liabilities
Deferred revenue
For the year ended
December 31, 2023
For the year ended
December 31, 2022
$
$
(3,586) $
14,361
(2,051)
(3,452)
591
5,863 $
(3,063)
(8,087)
(43)
4,177
673
(6,343)
110
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
20 Assets Held for Sale
At December 31, 2022
Acquisition of MCC (note 4)
Disposal
Reclassification from property, plant and equipment (note 7)
Trenton, Ontario
$
$
0
25,800
(25,800)
8,650
8,650
On March 30, 2023 DCM entered into a sale and leaseback agreement to sell the MCC Oshawa warehouse facility
subject to closing the acquisition. The transaction closed on June 8, 2023 (see notes 4 and 8).
As mentioned in note 11, during the year ended December 31, 2023, DCM announced its decision to close the
Trenton, Ontario manufacturing facility and transfer production to its Brampton, Ontario manufacturing facility. In
October 2023, DCM entered into an agreement to sell the facility subject to customary closing conditions and
completed the sale in January 2024 (note 27). This sales transaction includes a one year leaseback arrangement
with extension options for up to an additional six months to allow the Company sufficient time to complete the closure
of this facility.
A summary of cost and accumulated depreciation of the Trenton facility as of December 31, 2023 is as follows:
Cost
Accumulated Depreciation
Trenton, Ontario
$
$
8,928
(278)
8,650
As the carrying amounts of this facility will be recovered through a sale transaction, this facility has been classified as
an asset held for sale as of December 31, 2023. As of December 31, 2023, DCM measured the asset held for sale at
the lower of its carrying amount and estimated fair value less cost to sell (level 3 fair value) of $8,650.
21 Commitments and Contingencies
DCM and its subsidiaries are subject to various claims, potential claims and lawsuits. While the outcome of these
matters is not determinable, DCM’s management does not believe that the ultimate resolution of such matters will
have a material adverse impact on DCM’s financial position.
Directors and officers are indemnified by the Company for various items including, but not limited to, costs to settle
lawsuits or actions due to their association with the Company, subject to certain restrictions. DCM has purchased
directors’ and officers’ liability insurance to mitigate the costs of any potential future lawsuits or actions. The term of
the indemnification covers the period during which the indemnified party served as a director or officer of the
Company.
In the normal course of business, DCM has entered into agreements that include indemnities in favour of third parties,
such as purchase and sale agreements, confidentiality agreements, engagement letters with advisors and
consultants, leasing contracts and license agreements. These indemnification arrangements may sometimes require
111
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
such third parties to compensate counterparties for losses as a result of breaches in representations, covenants and
warranties provided by the Company or as a result of litigation or other third-party claims or statutory sanctions that
may be suffered by the counterparties as a consequence of the relevant transaction. In some instances, the terms of
these indemnities are not explicitly defined. No accruals have been required to be made as at December 31, 2023
with respect to these agreements.
Executive employment agreements allow for additional payments of approximately $4,940 if the individuals are
terminated without cause, and approximately $4,940 in the event of a change in control.
DCM makes contributions to the Québec Graphic Communication Pension Plan (the “GCPP”), based on a
percentage of the wages of its unionized employees covered by the respective collective bargaining agreements, all
of whom are employed at DCM facilities located in the Province of Québec.
The GCPP is a negotiated contribution defined benefit multi-employer pension plan which provides retirement
benefits to unionized employees in the printing industry. The GCPP is administered by a joint Board of Trustees
composed of representatives of participating employers and of the unions representing plan members in collective
bargaining. Based upon the terms of those applicable collective agreements, DCM’s estimated annual negotiated
contribution to the GCPP for 2024 is $445.
The GCPP’s most recent funding actuarial report (as at December 31, 2022) disclosed a going concern surplus of
107.3% and that negotiated contributions are in excess of the current service cost of the plan. On a solvency basis (or
wind up basis) the valuation shows a deficit on a solvency or wind up basis of 11.2%.
Bill 34 was adopted by Québec in April 2015 to clarify Québec pension legislation for negotiated contribution defined
benefit multi-employer pension plans to, among other things:
•
•
•
limit required employer contributions only to those amounts specified in the applicable collective agreements
negotiated with the relevant unions;
eliminate the employer's obligation to fund deficiencies; and
require the Board of Trustees to develop and implement a recovery plan when the negotiated contributions
are not sufficient to fund the plan, including the reduction of accrued benefits of all members.
22 Capital structure
DCM’s objectives when managing its capital structure are:
▪ To seek to ensure sufficient liquidity to safeguard DCM’s ability to continue as a going concern;
▪ To maintain a strong capital base so as to maintain shareholders’, creditors’, customers', suppliers' and market
confidence; and
▪ To deploy capital to provide an appropriate investment return to its shareholders
DCM’s capital structure consists of long-term debt (including the current portion) and shareholders’ equity. DCM’s
primary uses of capital are to finance increases in working capital, make payments towards its long-term obligations,
and fund investments in capital expenditures and business acquisitions.
DCM manages its capital structure and makes adjustments to it in light of changes in economic conditions and the
risk characteristics of the underlying assets. In order to maintain or adjust the capital structure in line with its present
strategic plan, DCM may issue new shares. Management anticipates that any major acquisition or significant growth
initiatives would be financed in part with additional equity and debt.
112
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
DCM is not subject to any externally imposed capital requirements other than the covenants and restrictions under
the terms of its Credit Facilities, including the requirement to meet certain financial ratios and financial conditions
pertaining to permitted investments, acquisitions, lease agreements, dividends and subordinated debt.
DCM’s capital structure is as follows:
Credit facilities (note 13)
Lease liabilities (note 12)
Total long-term debt
Total equity
23 Financial instruments
December 31,
2023
December 31,
2022
$
$
$
100,251 $
155,315
255,566 $
28,764 $
27,047
39,802
66,849
22,847
DCM’s financial instruments consist of cash, trade receivables, bank overdraft, trade payables and accrued liabilities,
credit facilities, and lease liabilities, as indicated in DCM’s statements of consolidated financial position as at
December 31, 2023 and 2022. DCM does not enter into financial instruments for trading or speculative purposes.
FAIR VALUE OF FINANCIAL INSTRUMENTS
DCM's non-derivative financial instruments are comprised of cash, trade receivables, bank overdraft, trade payables
and accrued liabilities, credit facilities, and lease liabilities. Non-derivative financial instruments are recognized
initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction
costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below.
Non-derivative financial instruments at fair value through the profit and loss include restricted share units and director
share units, which are recorded as a liability at fair value on the grant date and are subsequently adjusted for
changes in the price of DCM's common shares through the consolidated statements of operations.
The fair value for other non-derivative financial instruments such as cash, trade receivables, bank overdraft, trade
payables and accrued liabilities approximates their carrying value because of the short-term maturity of these
instruments. Credit facilities are initially recognized at the discounted present value of the amounts required to be
paid to derive their fair value and are then measured at amortized costs using the effective interest method. The fair
values are not materially different from their carrying amounts since the interest payable on these borrowings is close
to market rates.
CATEGORIES OF FINANCIAL ASSETS AND LIABILITIES
The carrying values and the fair values of DCM’s financial instruments are classified into the categories listed below
in accordance with IFRS 9.
113
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
December 31, 2023
Financial assets at amortized cost (1)
Financial liabilities at amortized cost (2)
Financial liabilities FVTPL (3)
December 31, 2022
Financial assets at amortized cost (1)
Financial liabilities at amortized cost (2)
Financial liabilities FVTPL(3)
Carrying Value
$135,608
317,592
11,703
Carrying Value
$58,838
102,193
7,030
Fair Value
$135,608
319,207
11,703
Fair Value
$58,838
102,724
7,030
(1)
(2)
(3)
Includes cash and cash equivalents, and trade receivables.
Includes trade payables and accrued liabilities (excluding financial liabilities related to commodity taxes that are
not contractual and that arise as a result of statutory requirements imposed by governments and, therefore, do
not meet the definition of financial assets or financial liabilities), bank overdrafts, credit facilities, and lease
liabilities (as IFRS 7 does not require disclosure of the fair value of leases, the fair value column in the table
above reflects their carrying value).
Includes RSUs and DSUs.
Credit facilities are categorized as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs
including own credit risk. RSUs and DSUs are categorized as level 2 inputs in the fair value hierarchy, given their
valuations include inputs other than quoted prices for which all significant inputs are observable, either directly or
indirectly. There were no transfers between levels 1, 2 or 3 during the year.
RISKS ARISING FROM FINANCIAL INSTRUMENTS
DCM is exposed to various risks as it relates to financial instruments. These risks and the processes for managing
the risk are set out below.
CREDIT RISK
Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its
contractual obligations. Financial instruments that potentially subjected DCM to credit risk consisted of cash and
trade receivables. The carrying amount of assets included in the consolidated statements of financial position
represents the maximum credit exposure.
DCM grants credit to customers in the normal course of business. DCM typically does not require collateral or other
security from customers; however, credit evaluations are performed prior to the initial granting of credit terms when
warranted and periodically thereafter. Normal credit terms for amounts due from customers call for payment within 0
to 60 days.
DCM has trade receivables from clients engaged in various industries, including financial institutions, insurance,
healthcare, lottery and gaming, retailing, not-for-profit, energy and governmental agencies that are not concentrated
in any specific geographic area. DCM does not believe that any single industry or geographic region represents
significant credit risk. Credit risk concentration with respect to trade receivables is mitigated by DCM’s large client
base.
To measure the ECLs, trade receivables, including unbilled receivables, have been grouped based on similar credit
risk characteristics, past due status and other relevant factors. The expected default rates are calculated based on
management’s estimate as well as historical credit losses. The historical loss rates are adjusted to reflect current and
forward-looking information on economic factors affecting the ability of the customers to settle the trade receivable.
114
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
On that basis, the loss allowance as at December 31, 2023 was determined using default rates under the provision
matrix for an amount of $1,720 (2022 – $1,565), of which $1,197 (2022 – $1,150) relates to unbilled receivables.
The following default rates are used to calculate the ECLs on billed receivables as at December 31, 2023 and
December 31, 2022, respectively:
December 31, 2023
Default rates
Billed receivables balance
Billed receivables ECL (1)
December 31, 2022
Default rates
Billed receivables balance
Billed receivables ECL
Total
Less than 30
days
Over 30
days
Over 60
days
Over 90
days
$85,989
$523
0.11%
$49,828
$54
0.22%
$23,055
$50
0.30%
$9,048
$27
9.66%
$4,058
$392
Total
Less than 30
days
Over 30 days Over 60 days Over 90 days
$41,554
$415
0.13%
$26,316
$34
0.13%
$10,369
$13
0.33%
$3,291
$11
22.60%
$1,578
$357
The following default rates are used to calculate the ECLs on unbilled receivables as at December 31, 2023 and
December 31, 2022, respectively:
December 31, 2023
Default rates
Unbilled receivables balance
Unbilled receivables ECL
December 31, 2022
Default rates
Unbilled receivables balance
Unbilled receivables ECL
Total
Less than 30
days
Over 30
days
Over 60
days
Over 90
days
$33,687
$1,197
0.81%
$22,308
$181
0.91%
$2,753
$25
1.03%
$1,358
$14
13.44%
$7,268
$977
Total
Less than 30
days
Over 30 days Over 60 days Over 90 days
$14,641
$1,150
0.86%
$3,840
$33
1.56%
$2,765
$43
1.28%
$1,327
$17
15.75%
$6,709
$1,057
At the end of each reporting period, management reassesses the default rates. Default rates are applied to the billed
and unbilled receivable balances to calculate the credit default reserve. Management assesses the adequacy of this
reserve quarterly, taking into account historical experience, current collection trends, the age of receivables and,
when warranted and available, the financial condition of specific counterparties. When collection efforts have been
reasonably exhausted, specific balances are written off. As at December 31, 2023 the Company has $4,058 (5%) of
its billed receivables that are over 90 days old (2022 - $1,578 or 5%).
Judgment by management is required to determine both (a) the revenue and billed receivables to be recognized,
where price concessions may need to be given to encourage customers to settle older amounts promptly as a result
of billing issues under IFRS 15 (as revenue can only be recognized to the extent that it is highly probable that a
significant reversal in the amount of revenue will not occur when the uncertainty associated with the variable
consideration is subsequently resolved), and (b) ECL provisions required under IFRS 9 to reflect impairments of its
trace receivables as a result of customers inability to settle the billed receivables. DCM has recorded a provision of
$400 within the billed receivable balance (and against revenue) for potential price concessions that may need to be
given to customers, separately from the expected credit losses in the table above.
115
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
The movement in DCM’s expected credit loss provision for 2023 and 2022 are as follows:
For the year ended
December 31, 2023
For the year ended
December 31, 2022
Balance – Beginning of year
Acquisition of MCC
Net reversals (write offs) of receivables during the year
Increase (decrease) in loan loss allowance
Balance – End of year
$
$
1,565 $
384
861
(1,090)
1,720 $
1,283
—
648
(366)
1,565
LIQUIDITY RISK
Liquidity risk is the risk that DCM may encounter difficulties in meeting obligations associated with financial liabilities
as they become due.
The contractual undiscounted cash flows of DCM’s significant financial liabilities are as follows:
Total
75,766
281,045
125,643
482,454
Total
44,133
56,531
30,347
December 31, 2023
Less than
a year
1 to 3 years
4 years and
greater
Trade payables and accrued liabilities
$
75,766 $
— $
— $
Lease liabilities (note 12)
Credit facilities (note 13) (1)
16,578
14,440
66,136
86,467
198,331
24,736
Total
$
106,784 $
152,603 $
223,067 $
December 31, 2022
Less than
a year
1 to 3 years
4 years and
greater
Trade payables and accrued liabilities
$
44,133 $
— $
— $
Lease liabilities
Credit facilities (1)
Total
9,094
13,183
21,245
17,164
26,192
—
$
66,410 $
38,409 $
26,192 $
131,011
(1) Credit facilities as at December 31, 2023 subject to floating interest rates consisting of the Bank Credit Facility,
expiring on April 24, 2026. As at December 31, 2023, the outstanding balances totaled $44,009 and bore interest
at a floating rate of 8.45% per annum. The amounts at December 31, 2023 include estimated interest totaling
$3,719 for 2024, $3,719 for 2025 and $1,859 for 2026. The estimated interest was calculated based on the total
borrowings outstanding at the end of the year and the annual floating interest rate in effect as at December 31,
2023. Credit facilities at December 31, 2023 subject to fixed interest rates consisting of the FPD VI Credit
Facility, expiring on December 17, 2026 and the FPD VI New Credit Facility expiring on April 21, 2028. As at
December 31, 2023, the outstanding balances totaled $57,857, of which $7,857 bore interest at a fixed rate of
5.95% and $50,000 bore interest at a fixed rate of 8.08% per annum. The amounts at December 31, 2023 include
estimated interest totaling $4,388 for 2024, $3,778 for 2025, $3,105 for 2026 and $3,210 for 2027/2028.
(2) Credit facilities at December 31, 2022 subject to floating interest rates consisting of the Bank Credit Facility,
expiring on November 8, 2024, and the Bank Term Loan, expiring on May 8, 2024. As at December 31, 2022,
the outstanding balance totaled $5,869 for 2023 and $5,913 for 2024, respectively, and bore interest at a floating
rate of 6.95% and 9.95%, respectively, per annum. The amounts at December 31, 2022 include estimated
interest totaling $875 for 2023, and $494 for 2024. The estimated interest was calculated based on the total
borrowings outstanding at the end of the year and the annual floating interest rate in effect as at December 31,
2022. Credit facilities at December 31, 2022 subject to fixed interest rates consisting of the FPD IV Credit
Facility, expiring on March 10, 2023, the FPD V Credit Facility, the FPD V Credit Facility expiring on May 15,
116
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
2023 and the FPD VI Facility expiring on December 15, 2026. As at December 31, 2022, the outstanding
balances totaled $15,536, of $6,107 bore interest at a fixed rate of 6.95% per annum and $9,429 bore interest at
a fixed rate of 5.95% per annum. Monthly blended principal and interest payments of $422 and of $91, are due
on the FPD IV and FPD V facilities respectively, and $131 on the FPD VI facility. The amounts at December 31,
2022 include estimated interest totaling $647 for 2023, $432 for 2024, $338 for 2025 and $244 for 2026.
DCM also has contingent obligations in the form of letters of credit. DCM believes that the currently projected cash
flow from operations and cash on hand will be sufficient to fund its currently projected operating requirements,
including expenditures related to its growth strategy, payments associated with provisions as a result of on-going
productivity improvement initiatives, payment of income tax liabilities, contributions to its pension plans, maintenance
or investment in new capital expenditures, and interest and scheduled repayments of borrowings under its credit
facilities.
While estimated forecast compliance with financial covenants is sensitive to key assumptions used for forecast
revenues, gross margins and expenses (which in turn impact earnings before interest, income taxes, depreciation
and amortization (EBITDA)), management are satisfied that the Company’s forecasts and projections through to
March 31, 2025 taking account of reasonably possible changes in results and other uncertainties will not result in any
breach of the financial covenants on its credit facilities. As a result, the Company has concluded that it will have
adequate access to liquidity to satisfy its obligations within the next fifteen months (note 1).
MARKET RISK
INTEREST RATE RISK
Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the financial
instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from interest bearing
financial assets and liabilities. DCM’s interest rate risk arises from credit facilities issuances at floating interest rates.
At December 31, 2023, $44,009 of DCM’s indebtedness outstanding was subject to floating interest rates of 8.45%
per annum; a 1% increase/decrease in interest rates would have resulted in an increase/decrease in the loss by $440
for the year ended December 31, 2023 (2022 – $118), respectively. At December 31, 2023, $7,857 was subject to a
fixed interest rate of 5.95% per annum and $50,000 was subject to a fixed interest rate of 8.08 per annum.
CURRENCY RISK
Currency risk is the risk that the fair value of future cash flows arising from a financial instrument will fluctuate
because of changes in foreign currency exchange rates. In the normal course of business, DCM does not have
significant foreign exchange transactions, and accordingly, the amounts and currency risk are not expected to have
an adverse material impact on the operations of DCM. Management considers the currency risk to be low and does
not hedge its currency risk; therefore, sensitivity analysis is not presented.
117
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
24 Expenses by nature
For the year ended
December 31, 2023
For the year ended
December 31, 2022
Raw materials and other purchases
$
Wages and benefits*
Occupancy costs
Restructuring expenses
Depreciation and amortization
Technology-enabled subscription expenses
Acquisition and integration costs (excluding ROU asset
impairments)
Right-of-use asset impairment (note 8)
Research and development
Other expenses
Net fair value (gains) losses on financial liabilities at fair value
through profit or loss*
Total cost of revenues and operating expenses
$
210,458 $
136,339
19,719
20,308
21,723
4,131
10,439
464
3,804
19,885
7,122
454,392
123,929
88,329
8,088
—
11,160
854
1,870
1,015
10,644
2,711
248,600
* The net fair value (gains) losses on financial liabilities at fair value through profit or loss (RSUs and DSUs) was
previously presented within wages and benefits in the prior years financial statements and has been disclosed
separately this year in the table above (see also note 3).
25 Segmented information
The CEO of DCM is the CODM.
DCM has a single operating segment, being the Company as a whole, reflecting the manner in which the operating
results are being reviewed by the CODM to make decisions about resources to be allocated and to assess the
Company's performance. The recently acquired MCC business brought together two similar sized businesses with
similar economic characteristics, particularly in terms of the nature of the products and services, production
processes, type of customers and methods used to provide these products and services to customers.
Management evaluates the performance of its reportable segment based on income before finance costs, other
income and income taxes. Certain corporate expenses, certain non-recurring expenses, interest expense, finance
costs and income taxes are not taken into account in the evaluation of the performance of the reporting segment.
Revenue by geographical location of our customers is set out below:
118
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
Canada
United States
For the year ended
December 31, 2023
For the year ended
December 31, 2022
$
$
419,893 $
27,832
447,725 $
260,874
12,930
273,804
DCM has disclosed revenue on a disaggregated basis based on the nature of the major products and services it
provides to its customers as follows:
Product sales
Technology-enabled subscription services and fees
Freight services
Warehousing services
Technology-enabled hardware solutions
Marketing and other services
26 Related party transactions
For the year ended
December 31, 2023
For the year ended
December 31, 2022
$
396,316 $
239,355
14,721
13,247
12,173
8,516
2,752
$
447,725 $
5,317
8,402
7,325
12,156
1,249
273,804
On March 15, 2018, DCM entered into a loan agreement with a key member of management, of $107 to finance the
purchase of Common Shares. The original maturity date was March 15, 2023, the loan term was subsequently
extended by an additional three years. Interest will accrue at a rate of 3% per annum on the unpaid balance. The
loan is unsecured and repayable upon maturity. As at December 31, 2023, the balance owing of $114 (2022 – $110)
was included within other non-current assets in the consolidated statement of financial position.
COMPENSATION OF KEY MANAGEMENT
Key management personnel are deemed to be Directors on DCM's Board, the CEO, the President, the Chief
Financial Officer and other members of the senior executive team. Compensation awarded to key management
personnel, excluding compensation awarded to Directors, which are described below, included:
Salaries and other short-term employee benefits
Termination and retirement benefits
Post-employment benefits
Share-based compensation expense
Total
For the year ended
December 31, 2023
For the year ended
December 31, 2022
$
$
3,473 $
1,567
10
2,978
8,028 $
4,227
—
14
1,055
5,296
During the year ended December 31, 2023, key management personnel (excluding compensation awarded to
Directors) were granted 252,260 RSUs (2022 – 707,333 RSUs). Key management personnel (excluding
compensation awarded to Directors) were issued 750,000 options to purchase Common Shares in 2023 (2022 - nil).
119
DATA Communications Management Corp.
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except percentages, shares and per share amounts)
During the year ended December 31, 2023, DCM’s general and administration expenses included an expense of
$2,978 (2022 – $1,055) for these share-based compensation awards.
During the year ended December 31, 2023, DCM’s general and administration expenses include a charge of $3,360
(2022 – $971) for DSU’s issued to directors for the duties performed by DCM’s Board, of which $2,715 (2022 – $398)
relates to a fair value adjustment (note 17).
27 Subsequent event
On January 11, 2024, DCM completed the sale and leaseback of its Trenton, Ontario manufacturing facility, which
was acquired as part of the Company's acquisition of MCC (note 4) and was classified on the consolidated balance
sheet as an asset held for sale at the year end (note 20). Gross proceeds realized on the sale were $9 million, and
after deducting closing commissions, rent deposit, and other expenses, net proceeds were $8.5 million.
120
Corporate Information
Officers
Richard Kellam
President & Chief
Executive Officer
James E. Lorimer
Chief Financial Officer &
Corporate Secretary
Christine Custodio
Senior Vice President, Operations
Jason Sharpe
Senior Vice President,
Commercial Leadership
Corporate Information
Auditors
PricewaterhouseCoopers LLP
Transfer Agent
Computershare Investor
Services Inc.
Corporate Counsel
McCarthy Tétrault LLP
Corporate Office
9195 Torbram Road
Brampton, Ontario L6S 6H2
Telephone: 905-791-3151
Facsimile: 905-791-1713
Website
datacm.com
Toronto Stock
Exchange Symbol
DCM
OTCQX Symbol
DCMDF
Directors
J.R. Kingsley Ward 3
Chairman, Director
Gregory J. Cochrane 3
Vice Chairman, Director
Merri L. Jones 1, 3
Director
James J. Murray O.Ont., SIOR 2
Director
Michael G. Sifton 1, 2
Director
Alison Simpson 3
Director
Derek J. Watchorn 1, 2
Director
Richard Kellam
Director
1
2
3
Member, Audit Committee
(Chairperson is Michael G. Sifton)
Member, Corporate
Governance Committee
(Chairperson is Derek J.Watchorn)
Member, Human Resources &
Compensation Committee
(Chairperson is J.R. Kingsley Ward)
DATA Communications Management Corp. | 9195 Torbram Road | Brampton, Ontario L6S 6H2