DATA Communications Management Corp. Completes Acquisition of Canadian Operations of R.R. Donnelley & Sons

DATA Communications Management Corp. (TSX: DCM; OTCQX: DCMDF) (“DCM” or the "Company"), a leading provider of marketing and business communication solutions, today announced the closing of its previously announced acquisition of the Canadian operations of R.R. Donnelley & Sons (“RRD Canada”) for a total cash purchase price of $130.8 million, subject to final working capital and other customary post-closing adjustments.

“The acquisition of RRD Canada is a significant milestone for DCM and provides an exciting opportunity for us to continue our momentum in building both a better and bigger business,” said Richard Kellam, President & Chief Executive Officer of DCM. “We believe that this is a compelling strategic opportunity to accelerate our growth agenda by leveraging our expanded portfolio of best-in-class products and services, stronger execution capabilities, and enhanced speed to market for new innovations. As one company, we are now focused on driving growth and value creation by delivering consistent and seamless service to our customers and positioning DCM for sustainable and long-term success.”

With the addition of RRD Canada, DCM will have a significantly larger presence in the Canadian market from day one with estimated pro forma revenues of more than $520 million in 2022, an enhanced portfolio of products and services, and an expanded customer base serving more than 400 enterprise clients across a broad range of industry verticals. DCM’s five-year strategic financial objectives are now to grow its annual revenues organically at a compounded annual growth rate of more than 5% per year; achieve Adjusted EBITDA¹ as a percentage of revenues of more than 14%; and reduce its total net debt as a multiple of Adjusted EBITDA to less than 1.0x.

In conjunction with the completion of the acquisition, DCM announced that RRD Canada President Rael Fisher will assume a new role as Chief Integration Officer, reporting directly to Kellam.

“We’re delighted to have Rael join our team in this critical role overseeing the integration of the DCM and RRD Canada businesses,” said Kellam. “Rael has served in key leadership roles with RRD Canada over the last two decades and we expect his deep knowledge of all aspects of the RRD Canada business and trusted relationships with customers to be a great asset to us as we integrate our businesses.”

“I’m excited to have this opportunity to be part of the DCM team in this important role,” said Fisher. “The process of successfully integrating the two businesses will be critical to our future growth in the market and I look forward to contributing to our goal of being “Better Together” as one company.”

TRANSACTION OVERVIEW

With the completion of the acquisition, Moore Canada Corporation, the RRD Canada legal entity, is a wholly-owned subsidiary of DATA Communications Management Corp. The acquisition was funded through an amended revolving credit facility from a Canadian chartered bank, which now provides for up to $90 million of revolving credit capacity; a $30 million floating rate bridge facility from the bank; and a new $50 million fixed rate credit facility from Fiera Private Debt.

Included in the acquisition, DCM has acquired three sites owned by RRD Canada. DCM has entered into a sale and lease-back arrangement with respect to one of the sites, which is located in Oshawa, Ontario. DCM expects to realize net proceeds of approximately $23 million from the sale of the Oshawa site, which is expected to close before the end of the second quarter of 2023, subject to customary closing conditions. Net proceeds from the sale of the Oshawa site will be used to substantially repay the bank bridge facility.

ADVISORS

Boston Consulting Group provided due diligence counsel to DCM on the acquisition and is serving as lead merger integration advisor to DCM. In addition, Clarus Securities Inc. and PricewaterhouseCoopers LLC acted as financial advisors to DCM and McCarthy Tétrault LLP served as legal counsel to DCM.

ABOUT DATA COMMUNICATIONS MANAGEMENT CORP.

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 more than 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, transformative tech-enabled solutions, and end-to-end service offerings. Whether we’re running technology platforms, sending marketing messages, or managing print workflows, our goal is to make everything surprisingly simple.

Additional information relating to DATA Communications Management Corp. is available on www.datacm.com, and in the disclosure documents filed by DATA Communications Management Corp. on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.

FORWARD-LOOKING STATEMENTS

This release and associated material change report contain "forward-looking statements." Forward-looking statements can be identified by words such as: "may," "should," “intend,” “estimates,” and "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements regarding the ability of DCM to successfully integrate the DCM and RRD Canada businesses and realize anticipated benefits from the combination of those businesses; the ability of DCM to successfully complete the proposed sale and leaseback of RRD Canada’s Oshawa site and two other sites and substantially reduce its indebtedness outstanding under the bank bridge facility; and DCM’s ability to achieve its strategic financial objectives in the future.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. 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: 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 RRD Canada businesses and realize anticipated benefits from the combination of those businesses, including revenue and profitability growth from an enhanced offering of products and services, larger customer base and costs reductions from synergies; 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 and profitability targets; our ability to comply with our financial covenants under our credit facilities or to obtain financial covenant waivers from our lenders if necessary; our ability to complete the proposed sales and leasebacks of certain properties and substantially reduce our bank bridge facility and total indebtedness; 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; 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 in which would increase our borrowing costs.

Any forward-looking statement made by us in this release and associated material change report is based only on information currently available to us and speaks only as of the date on which it is made. Except as required by applicable securities laws, we undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

NON-IFRS MEASURES This press release includes certain non-IFRS measures as supplementary information. When used in this press release, EBITDA means earnings before interest and finance costs, taxes and depreciation and amortization; Adjusted EBITDA means EBITDA adjusted for restructuring expenses, and one-time business reorganization costs; Adjusted EBITDA as a percentage of revenues means Adjusted EBITDA as a percentage of total revenues for the relevant periods. In addition to net income(loss), DCM uses non-IFRS measures and ratios, including Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues, to provide investors with supplemental measurers of DCM’s operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS measures. DCM also believes that securities analysts, investors, rating agencies and other interested parties frequently use non-IFRS measures and ratios in the evaluation of issuers. DCM’s management also uses non-IFRS measures and ratios in order to facilitate operating performance comparisons from period to period, prepare annual operating performance comparisons from the period to period, prepare annual operating budgets and assess its ability to meet future debt service, capital expenditure and working capital requirements. EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues are not earnings measures recognized by IFRS and do not have any standardized meaning prescribed by IFRS. Therefore, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues are unlikely to be comparable to similar measurers presented by other issuers.

¹ Note: EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues are not earnings measures recognized by International Financial Reporting Standards (IFRS), do not have any standardized meanings prescribed by IFRS and might not be comparable to similar financial measures disclosed by other issuers. EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues should not be construed as alternatives to net income (loss) determined in accordance with IFRS as an indicator of DCM’s performance. For a description of the composition of EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues, why we believe such measures are useful to investors and how we use those measures in our business, together with a quantitative reconciliation of net income (loss) to EBITDA and Adjusted EBITDA, respectively, see the information under the heading “Non-IFRS Measures” and Table 2 and Table 3 of DCM’s management’s discussion and analysis (MD&A) dated March 21, 2023 for the year ended December 31, 2022, which information is incorporated by reference into this press release. Such MD&A is available on SEDAR at www.sedar.com.

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