DATA Communications Management Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 20, 2024

There are 5 speakers on the call.

Operator

Good morning, ladies and gentlemen. Thank you for standing by and welcome to the Data Communications Management Corp. Fiscal 2023 Q4 2023 financial results Conference Call. My name is James Lorimer, CFO of DCM, and I'm pleased to be hosting today's call. Joining me on the call today is Richard Kellum, our President and CEO.

Operator

Following our prepared remarks, we will be moderating a Q and A session. As a reminder, this conference call is being broadcast live and recorded. We'd also like to remind everyone that Richard and I can be available after the call for any follow-up questions that you might have. Before we begin, I will remind everyone that we will be referring to forward looking information on today's call. This information is subject to certain risks and uncertainties as outlined in the forward looking information disclosure in our press release and more fully within our public disclosure filings on SEDAR Plus.

Operator

Our financial statements at MD and A are in the process of being uploaded right now to SEDAR Plus and should be available following the call. We have posted a brief video message from Richard along with a summary of our results and key initiatives for the quarter on our website in the form of an infographic. Our detailed information will also be available on our website as well as of course on SEDAR Plus. Please follow us on LinkedIn to keep up to date with any other business developments throughout the year. I'd now like to turn the call over to Richard.

Speaker 1

Thank you, James, and good morning, everyone. And for folks and other time zones, good afternoon and good evening. Objectives of the call today, I'm going to start by reviewing some of the highlights of 2023, quite a successful year. Get into details of our year end results. We'll have a quick look at the quarter as well, the quarter 4, and we'll talk about some priorities and we'll turn it over to Q and A.

Speaker 1

So highlights of the year, obviously a pretty transformative year. We completed the acquisition of Moore Canada Corp on the 24th April, so very successfully completed that acquisition and closed that acquisition. We quickly integrated our teams and we really prioritized our sales and operations groups and really kind of leaned in hard to ensure that we were delivering against our client needs and client momentum. We certainly maintain very good commercial momentum and we focused on current clients and new logos. We announced our footprint consolidation moving from 14 facilities to 10.

Speaker 1

We'll talk a little bit more detail about that, really good progress to date. We actually completed our Edmonton closure and moved that production into our Calgary facility and that was all completed by December. We also completed the sale and leaseback of 3 MCC facilities that came as part of the deal And you'll see that we had net proceeds of $38,000,000 or just north of $38,000,000 And we delivered over 63% growth, and we're very pleased with the underlying organic growth of just around 2% on the year. And we're pleased with that given the amount of change that we went through, we still maintain momentum in the marketplace. So overall, you know, very good results in 2023.

Speaker 1

So getting into a few details, first of all looking at revenue on the year. Our revenue came in at 63.5% increase over a year ago, but a $174,000,000 increase, so a very sizable increase obviously as a result of the transaction. And just under $450,000,000 in revenue at $447,000,000 Again, the acquisition contributed significantly to that top line growth, so we maintained momentum with that acquisition. And as I mentioned, underlying performance, which we're very happy with, at 2% on the year. If we look at our reported segments, we've got 6 reported segments that you'll find in our filing.

Speaker 1

And this is the first time I've actually talked in detail about these segments. So let me just unpack the detail here. Our product sales, so think of that as most of our printed product, $396,000,000 so just under $400,000,000 up 66% over a year ago. Our technology services, so those are a combination of program management fees for some of the technology we bring to clients, as well as recurring fees on the platforms, the technology platforms that we have, the digital services we have. Just under $15,000,000 177% growth over a year ago.

Speaker 1

And that growth over a year ago, a lot of that obviously came from the acquisition, but good organic growth as well within our the DCM digital portfolio. Freight of $13,300,000 up close to 60% over a year ago. Warehousing, which obviously we do a lot of warehousing for clients and freight and fulfillment for clients as well. So the warehousing component up over 60% over a year ago at $12,200,000 And then you look at that middle reference there, tech enabled hardware. This is where we buy hardware and we resell it.

Speaker 1

So $8,500,000 in revenue. It's actually down 30% versus a year ago. And the reason it's down 30% versus a year ago is we have a very large healthcare client that we supply, we call it PPI, Positive Patient ID. And we supply that entire ecosystem. So think of the bracelet that you get when you walk into a hospital or a clinic, the printer that prints that bracelet, and the scanner that scans that as you move through your hospital journey.

Speaker 1

We supply obviously the consumable, the paper, and we supply the hardware for that ecosystem, the scanner and the printer. And this particular client refreshes their equipment every 2 years. So you know, we saw that in 2022. 2023 is an off year, and we'll see that increase again in 2024. So that's our tech enabled hardware solutions we bring to clients.

Speaker 1

We do quite a lot of that in healthcare and other sectors as well. And then on the final reported segment is our marketing other. So think of those as marketing services. And you can see we had a good increase in our services revenue last year at 87%. Okay.

Speaker 1

So good growth across 5 of the 6 key reported segments. Looking at new business success, and this is what we call new logos, okay. This is not expansion revenues within existing clients, which we were quite successful at. These are actually new logos that we brought into the business last year. And you can see we brought in 74 new logos, just over $8,000,000 in revenue.

Speaker 1

So some of these obviously start small, and we have a phrase we call lend and expand. So we bring a client in and then we obviously work to expand that revenue over time by bringing new services and product into that client. So many of these are already quite successful in terms of expanding in 2024. But good news, we've won a lot of new business in 2023, even with the integration we did. And all of these are new.

Speaker 1

These are not acquired businesses as a result of the deal. These are new logos that our commercial teams, our sales teams have brought in due to their fantastic hunting skills in the marketplace. Okay, so we're very pleased with the new business success that we delivered. From a digital perspective, our digital revenue was just under $15,000,000 as I mentioned earlier, 177% growth. And a lot of that is through the tech enabled subscription service fees that we charge our clients as well as programming fees and a lot of those programming fees were benefited as a result of the acquisition where we do some, we call it BCF, so Business Communication Services for clients that have a lot of programming fees, digital fees that support that print workflow.

Speaker 1

So very good success overall in digital and a good we've got a good kind of underlying momentum in our business there. Moving on to digital signage, this is a and we haven't reported this to shareholders because it's a new, a whole new territory for us, a whole new segment for us. We're actually in the digital signage display business. We entered that in August of 2023. We're in what we call a crawl, walk, run phase.

Speaker 1

So really kind of understanding the market and selling unique solutions into the marketplace. We were very successful learning about this new entry in 2023. We delivered $350,000 revenue for a couple of key clients. And already year to date 2024, when I say year to date, within the 1st 2 months of 2024, we've sold $1,300,000 of digital signage to new clients. Okay.

Speaker 1

So we're quite excited about the space and the opportunities through 2024 and onward. If we look at gross profit, gross profit grew 41.2 percent 118 $900,000 in gross profit. And if we look at gross profit as a percent of revenue, we came in at 26.6 This is down from 30.8 year ago, but this is exactly what we anticipated and quite frankly what we liked about the deal. We acquired a business that had a much lower gross margin and the opportunity obviously is to improve that gross margin over time, which we're very committed to. So very much in line with expectations at 26.6 and we'll see that improve over time as we've got a lot of focus on getting back to pre acquisition levels.

Speaker 1

If we look at the next slide, our objective is to return to 30% gross margin. And again we've got active programs on that. We'll do that through what we call strategic revenue management and mix, as well as all the integration efforts that we're completing. And if you look at the chart on the left, you can see that the blue line is the legacy DCM gross margin, pretty consistent north of 30 quarter by quarter. And you can see the acquired business, a little bit lumpy, starts off higher in quarter 1 with a lot of business communication services, drops down in quarter 3 and then back up, You can see the spike back up in quarter 1, 2023 as well.

Speaker 1

So lots of opportunities to create more consistency in that gross margin that will come through operational excellence. So really kind of sweating our assets and the consolidation of the facilities, the plant closures. And as I said, it will come from mix and strategic revenue management as well. So we're quite comfortable with committing to that 30% or that return of 30% over time, over the next couple of years at the outside. Okay.

Speaker 1

So lots of really good work happening to improve margin in the acquired business. Moving on to adjusted EBITDA. Adjusted EBITDA came in at $53,400,000 up 30% over a year ago and that's just under 12% of revenues and in line with exactly what we expected from a plan perspective on the year. And synergy realizations commenced in 2023 and obviously we expect those to contribute to significant profitability improvements over time as well. Okay.

Speaker 1

So James over to you in terms of talking about our one time restructuring costs.

Operator

Thanks, Richard. For the year, we took a total of $20,300,000 in restructuring expenses and $10,900,000 in acquisition and integration related expenses. These acquisition and integration expenses are one time and non recurring all really well, they are all related to the acquisition of Moore and the post acquisition consolidation efforts that we've been undertaking. In the restructuring expenses, we did take an unusual charge in the Q4 of this year, and that was related to the planned closure of our Trenton and Fergus plants. And even though those plants will not be closed until period over the next 12 months, We took the charge in the Q4 because the estimated costs of restructuring were substantially determinable.

Operator

So the good news is those charges are now largely behind us even though the cash expense hasn't commenced. The cash expense will commence once those plants are actually be closed. But the good news is that our restructuring expenses in 2024 will be substantially lower. Most of the heavy lifting now, although there's still execution to happen, most of the planning and execution is kind of well, well in hand. In terms of synergies, we're maintaining our outlook in terms of $30,000,000 to $35,000,000 in annualized synergies.

Operator

With the passage of time, we last updated this guidance in November, that was about 4 months ago. We're now confirming that we expect to realize those synergies substantially within the next 12 months from today. So most of those most of the heavy lifting will be completed by the end of, I guess, March of 2025. From a free cash flow perspective, in 2023, we generated about $16,500,000 of free cash flow. That's up from $15,300,000 in 2022 or about 8.5%.

Operator

I will remind shareholders, as Richard mentioned earlier, this excludes the Q1 of MCC results. And given the strength that you saw in the margins on an earlier slide, the Q1 is really a period where that business generates kind of outsized profit margins, but also EBITDA as well. So we look forward this year in 2024 to capturing the full 12 months of the MCC results in our free cash flow. From a total debt perspective, you'll see at the closing of the acquisition, we had approximately $145,000,000 of total debt after a very strong track record of reducing debt over the past 4 or 5 years before that. Given the activities that we've undertaken since the acquisition closed, our total debt is now down 30% at the end of the year.

Operator

And net debt as well is down almost 40% compared to the acquisition. The key initiatives that we certainly reported on to shareholders include the equity offering we did back in May of last year, the sale and leaseback of both Oshawa and Fergus and then additional working capital improvements over that period. Subsequent to the end of the year, as everyone will know, we did close the sale of the Trenton facility. And so that generated approximately another $8,500,000 of net proceeds. So we're continuing to be comfortable that we're on a good glide path with regards to our total net debt.

Speaker 1

Having a look at SG and A, our SG and A came at $87,200,000 It was obviously increased over a year ago as a result of essentially doubling the size of our headcount. 19.5 percent of revenue versus 19.9%. As James mentioned, kind of similar to cash flow, remember, we picked up all the headcount but we didn't have the full year of revenue. So you'll see that decline as a percent of revenue in 2024 as well as all the productivity improvements that we've initiated. So we will be 2024 at, we call it NOG, so negative overhead growth.

Speaker 1

Okay. Looking at revenue per associate, we've got just under 18 100 associates in our business right now and we sort of committed to crossing that $300,000 per head and you can see the number off the far right, 302,000 dollars per associate at on or through 2023. Okay, so really good productivity improvements here and revenue associated per productivity or per headcount. So good progress there and we'll have a quick look at capital.

Operator

In terms of capital expenditures in 2023, we incurred about $4,200,000 Most of that was invested in plant and equipment. And frankly, most of that was really plant related as we're getting ready for moves, everything from HVAC to electrical, so investing in our kind of physical plant. That's up significantly from $1,500,000 in 2022. But given the combined business, which almost doubled, certainly we think a reasonable number. In terms of 2024 outlook, we will be making continued investment in our physical plant and we're also making strategic investments in equipment.

Operator

And the objectives really this year are to drive operating efficiencies and ensure that we can keep up with demand from our production capabilities right across the full spectrum. We also generated approximately $30,000,000 in the year from the sale of the 2 facilities that I mentioned earlier. And we also generated $1,300,000 from the sale of some redundant equipment. And we do expect some additional kind of redundant equipment sales over the next year. It won't be a material number though.

Speaker 1

All right. Having a look at our client or our customer engagement, every year we go out and we do a survey. And we go out and ask our clients what they think of DCM and our services and our teams. We use a company called Apex Scoring System. This is the 3rd year we have done it.

Speaker 1

And we actually went into market in December after we completed the commercial integration. So the integration of our sales teams, which was roughly a 40% decrease in commercial leadership, so in headcount. So we purposely timed it to go out to market and ask our clients what they're feeling about our services. And we were very pleased that, we got very strong results even post integration. And we're what's called, I won't take you through all the details in terms of how the Apex scoring system works, but, we're what's called engagement experts.

Speaker 1

And that means that we proactively and instinctively fuel engagement by consistently reflecting on the desires of customers. And you can see some of the quotes here. We just pulled reference. We had a lot of very positive quotes about how great our team was, proactive, very focused on customer service, always there when you need them, etcetera. So very pleased actually with positive feedback from our customers post integration, post acquisition.

Speaker 1

And that sets us up well as we progressed and as we move into 2024 here. ESG, lots of efforts happening on ESG, reminding shareholders that we are what we call a sustainable Green Printing Partnership certified. We still have some certification across a couple of acquired facilities. We were an active subscriber or participant in Science Based Targets. Of course, we're FSC certified.

Speaker 1

And then maybe flipping to the next page, one thing we're very pleased with is our sustainability commitment, our reforestation commitment. In 2023, we reforested 716,000 trees. So essentially, 100 percent of the paper we used, we reforested with the equivalent tree. So £59,000,000 of paper we used in our work flow, 716,000 trees reforested. Great client momentum with this program.

Speaker 1

And we're just north of 1,500,000 trees since we started this program the end of 2022, right? So good progress. And we are now fully reforesting all of the acquired paper use, so the MCC paper use in our business as well and that started in October, November of 2023. Okay. So great progress from an ESG and specifically sustainability perspective.

Operator

I'll provide a brief overview of our 4th quarter results. Revenue came in at $130,000,000 in the quarter that, of course, was benefiting from the MCC results. Gross profit margin came in at 25.2%, which was down from a very strong quarter we had in the Q4 of 2022. 2020's quarter was very strong on not only a revenue but also a margin perspective. And as Richard says, we've got very intentional plans in place to get back to those kind of plus 30% margins.

Operator

SG and A came in at about $25,000,000 During the quarter, I guess in really September, October, we did kind of complete a rationalization of our sales team. And so we started to get a little bit of the benefit of that starting in, I guess, October and then kind of the full benefit of that in October November. So we'll see some improved benefits in SG and A going forward this year in 2024. Talked about the restructuring expenses earlier. Of that $10,600,000 in the quarter, about $7,500,000 of that related to the Fergus and Trenton, kind of advanced restructuring charges that we took, some kind of puts and takes on the fair value gains on our RSUs and DSUs.

Operator

That was related to a small price decrease in our share price during the quarter and we marked that to market every single quarter. Adjusted EBITDA came in at $15,000,000 was 11.6% of revenue compared to a very strong percentage last year of 17.2%. We have talked about our 5 year guidance and we're comfortable that we will be able to return to kind of plus 14% EBITDA margins in the next couple of years. So optimistic in terms of all the kind of heavy lifting we're doing on the restructuring in terms of the direction of the financial performance for the business.

Speaker 1

Okay. Thank you, James. Just having a quick look at our priorities for 2024, 4 key priorities. Obviously, completing the integration of MCC. So the plant consolidation that we spoke of that those 14 plants into 10, one complete, 3 to go, but very, very good progress against that.

Speaker 1

And then also, harmonizing continue to harmonize back office, so SG and A and workflow improvements. 2nd, I already referenced our relentless commitment to improve gross margin, gross profit. That will be through Strategic Revenue Management. We've got a very active program in that right now. Obviously, the continued lowering of overheads and operating costs.

Speaker 1

Some of the investment in new capital, which will improve our production capabilities quite significantly, and then obviously, the operational efficiencies that the team working to deliver. So big focus on growing our gross profit, improving that gross profit in 2024 and onward. 3rd is growing our business. So continue to expand revenue and we'll do that through additional service offerings and also penetrator entering new verticals. We've been quite successful in building presence in some new verticals, automotive especially, we've gotten off to a great start there.

Speaker 1

Leveraging our combined capabilities, we're a much better company together. So incredible capabilities that we've acquired. Lots of opportunities to cross sell and up sell. And then we'll continue our digital acceleration as well, where we see lots of opportunities, remarkable momentum. And then finally, generating higher levels of free cash flow and that will come from margin improvements and overhead controls And then of course, prudent capital allocation.

Speaker 1

So those are our priorities for 2024. And I can tell the entire organization is focused against delivering against these priorities. And that concludes our results of the year, results of the quarter and a little outlook for 2024. We'll turn it over to Q and A now. James,

Speaker 2

all right?

Operator

Yes, please. Thanks, Richard. We'll now like to take some questions from the audience. If you have a question and are accessing the call directly through Teams, you can use the raise your hand feature in Teams and we will tee up questions. Alternatively, you can also use the chat feature star 5 to raise or lower your hand and pressing star 6 will mute or unmute your microphone.

Operator

That's And the first question I have is from Nick Corcoran. Nick from Acumen. Nick, I think I've enabled your mic.

Speaker 2

Good morning. Can you hear me?

Operator

Yes.

Speaker 2

Congrats on the strong finish of the year. I guess the first question I have is just on the competitive wins that you might have had in the quarter maybe in conventional print space or new products like digital signage? Is there anything to call out there?

Operator

Sure. I'd say in terms of new wins, pretty much across most of our vertical markets, There's we had a very intentional kind of growth obsession as Richard likes to call it. And in our vertical strategic leadership teams, a couple of segments that we're particularly pleased that we're making some good track record would be or some good progress would be in the automotive sector. But I'd say in the quarter, financials, retail, kind of broadly health care, were all pretty solid. So we're not really we're kind of seeing good momentum across all vertical markets, Nik.

Speaker 2

Good. And I think you previously noted that there is $18,000,000 of new business from the combined company. Do you have an updated number for that?

Operator

Yes, that was a number that we put out, I think it was last quarter in terms of kind of new business wins. I don't have we don't have an updated number at this point, but we've certainly continued to see continued positive momentum across the business. We're also seeing some positive momentum in terms of opportunities to pass some continued price increases on to clients. And we're also seeing really good momentum from 2 commercial teams coming together and working very collaboratively.

Speaker 2

That's good to hear. And then maybe think about the organic growth, it was 2% for the year. Do you think you're on track for that 5% target? And maybe just talk about the segments that might be driving them up.

Speaker 1

Yes, we're certainly committed to the 5% target. We went through a lot of changes on the year with bringing 2 commercial teams or 2 sales teams together. And we're actually very pleased with the 2% growth given all the changes that we experienced. Remember, we had to take client books of business and merge them across our new commercial team. We see good momentum in the market.

Speaker 1

The market is still very strong. The profit pools that we play into, those being kind of highly personalized communication, the labels business and frankly, even some of the forms work that we do. We see lots of opportunities for continued expansion with the existing clients and then new business development as well. As James said, we work across 8 key verticals and we're expanding now into a couple of additional verticals. Automotive is one where we which is quite attractive.

Speaker 1

And it's well positioned for what we deliver, right? It's highly complex dealer structure. And as you know, we love to simplify complexity and help clients that have a lot of complexity in their workflow. So we're getting some good traction in a couple of new verticals as well. So yes, we're very optimistic about growth through 2024.

Speaker 1

They'll get some changes, obviously, to complete with the consolidation of our facilities, but I think we're well positioned. It's a good market, strong market. We understand where to win and how to win. But I think really importantly as well is we're not going to win at any expense. We are we like to create value for our clients and we like to ensure that we get value as a result of creating value.

Speaker 1

In other words, ensuring that we're getting the right gross margin for the product and services that we're delivering. So we will not go after revenue at any expense. It's important that we get our margin back up north of 30 and that's what we're very focused on as well.

Speaker 2

Great. And maybe one last question for me. I know in the past you talked about Martech as being a potential driver of growth. How is that business performing?

Speaker 1

Yes. So we've reported 177% growth in digital that includes some of our Martech solutions. We've gotten great traction with our Flex platform. In fact, all of the new revenue we brought on is tech enabled. So it starts with Flex and the workflow is optimized through Flex.

Speaker 1

So very good traction there. We will be in a position to be launching our digital asset management platform called Assemble.

Operator

This is

Speaker 1

a platform that we've built internally and that will be launching in the summer of this year and we're expecting good traction behind that as well. In addition to many of the other digital solutions that we've got in our portfolio. So we expect that we put a number out to the street of 60% growth in Martech over the course of 5 years and we're still committed to that number.

Speaker 2

Thanks. I'll pass the line.

Operator

Thanks. Next question I have is from Noel Atkinson at Clarus Securities. Noel, I think I've enabled your mic here.

Speaker 3

Hi, guys. Can you hear me?

Operator

Yes. Yes, I know.

Speaker 3

Hi, Richard and James. Well done in Q4 and thanks for taking our questions. Maybe first off, maybe could you talk about how business activity progressed through Q4 and how it's gone so far in Q1?

Operator

Yes, sure. We probably were a little slower in the kind of late summer months, early kind of October, but certainly saw acceleration in November December in the quarter. And we had a very strong finish to the year. Start to this year, January is a little slower, but we've certainly seen some very positive momentum through February and into March. And so I think a little bit of that momentum is so far in the Q1 at least very preliminarily seems to be solid.

Speaker 3

Okay, great. In terms of the cost synergies, so you're still talking about getting this all done by March of next year, which is great. Can you just talk a bit about how the timeline is for flowing those cost savings onto the income statement? Is it still largely you see it in Q4, Q1, Q2 next year?

Operator

Sure. Some of the kind of organizational savings, so particularly kind of in our sales force reduction, that was completed in September time frame, a couple of sessions, but probably the biggest one would be September. And so from a kind of an overhead, so think about SG and A expenses, That run rate should be pretty steady through this year. Most of those changes were done in the kind of third quarter, trailed a little bit into the Q4. From a kind of a cost of goods sold and kind of an overheads perspective at that level.

Operator

The Edmonton plant was closed in November, small relative plant in terms of the kind of the broader footprint, but we'll see the full benefit of that starting in the Q1 of this year. The next kind of major plant consolidation we have is our bond and thistle commercial print plants, and those are on track for the middle of this year. We don't see a material savings from that, but there will be some. So we'll start to see those kind of feather in probably in Q3 and get full benefit of those in

Speaker 2

the Q4.

Operator

The biggest changes are going to come from the Trenton and Fergus plant closures and those are kind of planned for later this year.

Speaker 3

Okay, great. And then maybe could you talk a bit about the digital signage? So you haven't really talked about that before. Can you talk about the type of signage you're offering? What's the gross margins like versus the corporate average?

Speaker 3

And do you have any sort of recurring revenue component there?

Speaker 1

Yes. The reason we haven't talked too much about it is we wanted to I said, Noel, we wanted to sort of crawl, walk, run, right? So we wanted to build some experience before we went public, and we did that starting as I mentioned, we started in August of last year, and we really know the market now. We know the product that we're selling. I don't think I want to really comment on gross margin too much, given the competitive position in the marketplace, but let's just say it's at or above, our targeted number.

Speaker 1

And there is a recurring revenue component. Obviously, we sell the hardware and then there's a content management platform or content management solution to be able to render or to be able to distribute content to the screens. And that's a recurring revenue, a monthly fee per screen that is a nice kind of recurring revenue. So you think of more screens, more recurring revenue. We're fully committed.

Speaker 1

We think it's a big opportunity for in the market. It's a sizable market. There's a lot of move to digital right now, so there's certainly demand. And I think our solution is quite a unique offering, very kind of bespoke. We don't want to be all things to everybody.

Speaker 1

We've entered the market with a very kind of unique solution. And you'll see a lot more of that as we progress in 2024. And we'll be reporting more on that as we continue to move from crawl to walk. I'd say we're in the walk stage now and probably getting closer to run as we progress through 2024. And I might add just

Operator

in terms of sorry, Noel. I might just add just in terms of kind of vertical markets, it's an offering that really is complementary to our retail clients and our financial services clients, which are often very retail focused themselves. And so we see it as a complementary add on to our capabilities.

Speaker 1

Yes. And that's that $1,300,000 that we reported that we've sold year to date is an automotive client, a health care client and an alternative lending client, all right, so an FI client. And, so, yeah, we we, we've got a team that's committed to it. We actually moved a great sort of young leader into, into this role, moved him from Ottawa, and he's off to a fantastic start. And we've got lots of top of funnel and mid funnel conversations happening right now.

Speaker 3

Okay, great. And then just lastly there with the digital signage, is that Canada only? Or are you also looking at other markets?

Speaker 1

We're playing to our strengths right now. It's Canada currently focused on Canadian clients. I mean, think about it. We work with 400 enterprise clients, and most of those 400, if they don't have some digital screens or digital services, they're certainly looking at it. So perfect.

Speaker 1

We kind of have that pre established route to market.

Speaker 3

Okay, great. That's it for me. Thanks.

Operator

Thanks, Noel. And then we have a call from Chris Thompson here. Chris, I'm just turning on your microphone.

Speaker 4

Sorry, can you hear me, James? Yes. Great. Congrats on a great quarter and thanks for taking my call. Just a couple of questions on the restructuring charges from 2024 that happened in Q4, I had sort of in my model that there was going to be about $16,000,000 sort of $1,000,000 in 2024 happening and you moved, was it about $7,500,000 of that that you sort of move back into Q4 of 2023?

Operator

Yes, that's right, Chris. We had, and it primarily related to the Fergus and Trenton plant closures. And with our collective bargaining agreements there, we have substantially kind of substantially know what the costs are going to be for restructuring, Although we haven't completed those and we haven't given any notices out to individuals yet, from an accounting perspective, it was appropriate to take that charge in the Q4. So that kind of charge if you will is behind us. We have not actually completed the restructuring yet, but that's planned for later this year.

Speaker 4

So from a quarter to quarter basis for next year, are you sort of now looking at more like $2,000,000 a quarter in restructuring charges on average for 2024?

Operator

Yes. We'll actually probably be down quite a bit from that, Chris. I would say somewhere in the kind of $3,000,000 to $4,000,000 would be probably a good range for the full year.

Speaker 4

Okay. And is that why on your balance sheet your provisions went up substantially?

Operator

Yes, exactly.

Speaker 4

Okay. Looking at CapEx, you were mentioning that from a standpoint, I think we discussed or maybe one of your presentations from last year, I had a pretty big number for CapEx sort of north of $2,500,000 a quarter, probably with some refurbishing going on and then more steady state in 2025. Is that sort of when you're talking about that slide, you didn't have any numbers in there for CapEx, but is it a pretty big number that you're going to be looking at doing the refurbishments for 2024?

Operator

Yes, I think from a pure CapEx perspective, probably be in the 6,000,000 ish range for the year. We've historically kind of talked about a broad range of kind of $5,000,000 to $6,000,000 this year and 2024 will be at the high end of that. Most of that is going to be related to kind of getting plants ready to receive equipment. So it's more kind of physical investment. We are also kind of separately looking at some incremental leased CapEx, which should be some digital equipment.

Operator

And as we're consolidating our plants, it's kind of the right opportunity to make those investments in new equipment. And so yes, so there will certainly be some kind of incremental capital on top of that related to driving further operating efficiencies. But most of that will be leases. So you'll see kind of middle of this year our kind of lease expense will start to creep up.

Speaker 4

Okay, great. And one last question just on run rate for your sales and marketing, your G and A. Is Q4 a good indication of what sort of will sort of carry forward into 2024? So sort of $10,000,000 to $11,000,000 in sales and marketing and about $14,000,000 in G and A. Is that sort of the run rate that we should be looking at?

Operator

Yes, that's I think that's a pretty good range, Chris, to be thinking about.

Speaker 4

Okay. Thanks a lot. Congrats again, and thanks for taking my questions.

Operator

Thanks, Chris. Okay. Thanks, Chris. It appears that we don't have any further questions. So thanks everyone for attending.

Operator

And as a reminder, Richard and I can certainly be available for any follow-up questions that you might have.

Speaker 1

Yeah, thank you, everybody. And also a big shout out and thanks to the entire DCM team for delivering a fantastic 2023, certainly a year with a ton of change, probably unexpected for most given we did that sizable transaction completed in April. Really appreciate the entire team and the momentum we have as a team as well, and we're certainly looking forward to a very successful 2024. Some hard work to complete the final integration, but some very good momentum in the marketplace. So thanks to the entire team.

Operator

Thanks. You may now disconnect your lines.

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Earnings Conference Call
DATA Communications Management Q4 2023
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