DATA Communications Management Corp. (DCM) Earnings Call Transcript & Summary

Good morning, everybody, and welcome. My name is Kingsley Ward, I'm the Chairman of the Board of DCM, and I would like to call this meeting of DATA Communications Management Corp, or DCM, to order. For those of you who are shareholders, thank you for joining us today. We also welcome other guests attending whether in person or virtually. Also present at the meeting today are Richard Kellam, DCM's Chief Executive Officer; and James Lorimer, the company's Chief Financial Officer. I'd also like to introduce each of our directors who are attending today in person, in addition to Richard and myself, who are Greg Cochrane, Merri Jones, Jim Murray, and remotely, we have Michael Sifton and Derek Watchorn with us today. I'd also like to formally introduce Alison Simpson and extend a warm welcome to her. Alison has agreed to stand for nomination as Director of DCM, for first time here today. And Alison brings an extensive background of marketing, technology and corporate governance to our Board. We very much look forward to her joining our team. Before we begin, I'll remind everyone that we will be referring to forward-looking information during today's meeting, and this information is subject to certain risks and uncertainties as outlined in the forward-looking information disclosure in our public filings on SEDAR. We have decided to hold this meeting as a quasi-hybrid meeting today, and this format has provided all shareholders with the opportunity to vote their shares in advance of the meeting by submitting a completed form of proxy or voting instruction form and allows those present in person at the meeting here today to vote on the applicable resolutions. For those of you who are joining us online through the webcast, you can submit your questions after the formal part of the meeting using the Chat or Raise Your Hand feature in Microsoft Teams, and we will try to answer all of your questions during the formal -- once the formal portion of the meeting is over. As we look forward to the coming year, we remain focused on the exciting opportunities DCM has in its current business, it's focus on shareholder value creation and the positive impacts the company can have within the community. Our engagement with shareholders is not limited to this meeting. Throughout the year, our Board and management consider the shareholder feedback we receive from a variety of sources. What we learn helps us prioritize our efforts and identify areas of emerging interest for the Board's consideration. Thank you for the trust you place in us and the opportunity to serve you and our company as a Director. DCM elected to send out proxy-related materials for this meeting to shareholders using the notice and access provisions under National Instrument 51-102 and National Instrument 54-101. I will refer to these provisions in this meeting as the notice and access provisions. With the consent of the meeting, I will serve as the Chair of this meeting and call meeting to order. I will ask our Chief Executive Officer, James Lorimer, to act as Secretary of the meeting. And I have appointed Kate Stevens and Connor Brazeau of Computershare to act as scrutineers. Computershare has deposited with me a statutory declaration confirming the sending of the notice of this meeting to each shareholder entitled to vote at the meeting and to each director and to the auditors of the company. The notice calling this meeting requires that shareholders intending to vote by proxy must have deposited their proxies with Computershare no later than 11 a.m. on June 14, 2022. The proxies are so deposited and are now in the custody of the scrutineers and reflected in the preliminary scrutineers' report. The scrutineers have confirmed that these proxies represent approximately 25.5 million common shares of the company or roughly 58% of the outstanding common shares. The scrutineers have also confirmed that a quorum is present. A final scrutineer's report will be available after the conclusion of this meeting and will be kept with the records of this meeting. As the notice of the meeting has been given and required and a quorum is present today, I declare that the meeting has been readily called and is properly constituted for transaction of business. The agenda for motions with respect to the business that is to be dealt with at this meeting is contained in the notice of the meeting we received prior to this meeting. A number of shareholders or proxyholders present have agreed to assist with the presentation of the motions. At the conclusion of the formal part of this meeting, our CEO, Richard Kellam, will provide some remarks. Following that, we will provide an opportunity for you all to ask questions. When submitting questions, please provide your name for the records of the meeting. There are 2 matters set out in the notice of meeting to be voted on by shareholders. Unless there is an objection, I will dispense with the reading of the notice. The appointment of auditors will be voted on by a show of hands unless it is determined that a ballot is appropriate. The election of directors will be voted on by ballot. I should make it clear that -- at this point that only registered shareholders who have not previously voted by proxy or duly appointed proxyholders are permitted to fill out a ballot on those votes. If you are a proxyholder, ballots for each matter to be voted on are available from our scrutineers. Please fill out the information requested in this ballot form and cast your votes as the election of directors is put to a vote. A Computershare representative will be collecting the ballots in order to have the ballots reviewed and recorded by the scrutineers. If you are a nonregistered shareholder, you will have already had the opportunity to cast your vote on the matters to be considered at today's meeting by providing voting instructions to your intermediary. Provided you completed those forms and the voting instructions in the material has been sent to your intermediary, your votes on those matters have already been received and will be counted by the scrutineers. In order to expedite the voting process here today, the results of the votes to be conducted by ballot will be publicly announced following the meeting once the scrutineers have received all the tabulated results. Moving on to the first order of business today. On behalf of the Board of Directors, I would like to place before the meeting the consolidated financial statements of the corporation and the report to the auditors on those statements for the year ended December 31, 2021. These statements are available on SEDAR. Our next item of business is the appointment of auditors. I believe James Lorimer has a motion in connection with this matter. James?

Mr. Chair, I am a proxyholder, and I move that PricewaterhouseCoopers LLP be and they are hereby appointed auditors of the corporation to hold office until the close of the next Annual Meeting of Shareholders or until their successors are appointed, and the Board of Directors be and it is hereby authorized to fix their remuneration.

Mr. Chair, I'm a proxyholder and I second that motion.

Thank you. All in favor, please signify by raising your hand. [Voting]

Contrary? [Voting]

All right. I declare the motion carried. The next item of business is the election of 8 directors. Each director is to be elected to hold office for a term commencing at the close of this meeting and ending at the close of the next Annual Meeting of Shareholders or until his or her successor is elected or appointed. I now declare the meeting open for director nominations. James, would you please present this motion?

Mr. Chair, I am a proxyholder, and I nominate each of the following: Gregory J. Cochrane, Merri L. Jones, Richard C. Kellam, James J. Murray, Michael G. Sifton, Alison Simpson, J.R. Kingsley Ward and Derek J. Watchorn, for election as directors of the corporation to serve until the close of the next Annual Meeting of Shareholders or until their successors are elected or appointed.

Thank you. Before I ask whether there are any further nominations, I wish to note that the corporation has adopted a majority voting policy applicable to uncontested director elections. Among other things, this policy enables shareholders to vote separately for each director nominee. And in addition, pursuant to the corporation's advance notice bylaw, only persons nominated in accordance with these procedures set out in the bylaw will be eligible for election to the Board of Directors. The corporation did not receive notice of any director nomination containing the information prescribed by the company's bylaws prior to the deadline of 5:00 p.m. on May 17, 2022. Are there any further nominations? Hearing none, I'll now entertain a motion with respect to the election of each of the nominees as directors of the company. James, over to you.

Mr. Chair, I am a proxyholder, and I move that each of Gregory J. Cochrane, Merri L. Jones, Richard C. Kellam, James J. Murray, Michael G. Sifton, Alison Simpson, J.R. Kingsley Ward and Derek J. Watchorn be elected as a director of the corporation to hold office until the close of the next Annual Meeting of Shareholders or until his or her successor is elected or appointed.

Mr. Chair, I'm a proxyholder and I second that motion.

Thank you. We will conduct the vote on this matter by way of a ballot. Since we have a limited number of folks here, we'll just continue to move on then, James, that's all right. Each of the nominees has received the requested or required number of votes for his or her election as a director of at least 50% of the votes cast by shareholders present in person or represented by proxy at this meeting. The results of the election of directors will be made publicly available as required by securities law. I declare the motion respecting the election of directors carried. If there are no further business items to be brought before this meeting, I would ask James for a motion to terminate the formal portion of the meeting.

Mr. Chair, I am a proxyholder and I move that this meeting be terminated.

Do we have a seconder?

Mr. Chair, I'm a proxyholder and I second the motion.

All in favor, please signify by raising your hand. [Voting]

Thank you. Contrary, if any? [Voting]

Thank you. I now declare this meeting terminated. I now will ask Richard Kellam to make a few remarks. [Operator Instructions] Please introduce yourself once you've been introduced to the session. We'll endeavor to answer all questions here today once Richard has finished with providing a business overview. Rich, over to you.

Great. Thank you, Kingsley. Good morning, everybody. And for those joining us online, I see some international folks. So good afternoon and good evening. And welcome to the shareholders and the Board that are joining us here in our office. Welcome to our fantastic downtown cool Adelaide office. And for those joining remotely, welcome. Look, you heard me talking about momentum as we exited 2021 and we entered 2022 and then we also exited first quarter of 2022. You heard me use the word a lot. We've got great momentum in our business, right? We really have good momentum in our business. And you're going to hear me use that word a lot today as I talk about progress we're making as a team here. I'm going to start off, you're not going to see a lot of numbers, intentionally. You're not going to see a lot of numbers in my presentation today. But I'm going to talk to you about how we're achieving this momentum. Click on the next slide, please. So just a quick glance. This is where I will get into a few numbers. And again, you've heard me use this phrase, "the momentum builds momentum." If you look at the average kind of CAGR that we were achieving last year or the last 5 quarters, minus 10, and you saw the second half of 2021, we actually exited positively. And we certainly entered quarter 1 2022 very strong as well from a minus 10 to a plus 11, okay? So a minus 10 to a plus 11. So very good momentum exiting '21 and entering into 2022. And what I want to talk about over the course of the next kind of 20, 25 minutes is how we're achieving this momentum. And I love this definition, right? I love this definition that momentum is the strength gained by a series of events, right, the strength gained by a series of events. And what I want to talk to you today about are events that are happening in our business that have delivered that quarter 1 strength and will deliver continued momentum as we progress through the year. Now it's kind of a weird time right now because we're 2/3 of the way through quarter 2, but I can't talk to you about quarter 2, okay? That will happen on the 10th or 11th of August. But I can talk to you about events that are driving performance in our business. That's what I want to talk to you about today. So there's 14 events. These are not just one and done events. These are well embedded into our business, and these are just the 14 that I'm going to talk about today. There are more than 14, okay? So first event is -- and this happened in July-August of last summer. We worked with the Boston Consulting Group on a clear 5-year strategy, a very clear 5-year strategy. And this is a strategy that we're now executing against, moving from a print company to a digital-first company. And also on the print side, really understanding where we make money, where the value pools are, how we deliver value to clients, right? So we have a very clear 5-year strategy. That was a very important event for us to accelerate momentum, right? And I can tell you the momentum we've got in our business is -- a lot of it is as a result of this event. And BCG, I've worked with a lot in the past, great, obviously, consulting organization to help companies like ours discover the opportunities and discover the possibilities. So that was a very important event that we delivered back in the summer of last year that is well embedded into our business today. And many shareholders have seen me present these numbers in the past, but this also came out of that 5-year strategy work. We put some very clear objectives on -- into the street, if you will, right? And these are the objectives. Moving from a print-first to a digital-first company. You'll hear more of that in my delivery today. But there are some numeric objectives. We want to grow our business between 5% and 10% over the course of the next 5 years. By the way, that gets us north of $300 million in revenue. We were north of $300 million of revenue a few years ago. So it gets us back into where we were a few years ago, but with much better shape from a margin standpoint. So we see a path to between 35% and 40% gross margin, and we'll do that by really understanding margin pools and profit pools and how we bring value to the market, how we bring value to our clients. So we can see a clear path to between 35% and 40%, also with the digital capabilities we're bringing to clients will help us get into that strong gross margin. From an SG&A standpoint, we operate and we will continue to operate at ZOG, that's zero overhead growth. We obviously operated at NOG last year, that's negative overhead growth. And that will get us into the range of 18% to 20%. You may have seen in quarter -- or to remind you, if you didn't see it in quarter 1, we were actually 19.7%. So we're already in range. We've already got momentum there, right? And remember, in quarter 1, we grew 11% growth. So we're already in or above that projected CAGR. From an earnings or an adjusted earnings perspective, our range is between 18% and 25%. And from a debt reduction, we want to be less than 1x leverage and you may -- shareholders may remember from James' presentation that we have a very good debt payment schedule right now. We're going to pay off between $12 million and $13 million this year. And our current glide path gets us debt-free by 2026. So we got some very manageable targets -- aggressive targets with manageable targets to be debt-free or certainly pay down some of that leverage, very low leverage today. And then the final number on the chart here is the 60% growth in our martech, so on our digital growth. And that digital growth is worth a margin of north of 80% margin. Okay. So those were the outcome -- numeric outcome of our 5-year strategic work. Second very important of that linked to the strategy work that we did, directly linked to strategy work that we did. We have 13 change management projects in our business, all coming out of that strategy, 13 change management projects that are resourced by our leadership team and teams that are working with our leadership team, okay? 13. You'll see some of them in the presentation today, but we have very significant strategic change management projects that are delivering momentum as well, okay? So that's an important event. And again, it's not a one and done event. It's well embedded into our business. That's what's contributing to our continuous or continued momentum, okay? Another important event. So another very important event. And again, it is every day in our business, is associate engagement. So employee engagement. How do we really ensure that we have people that wants to come to work every day versus feeling they have to come to work every day, right? If you've got people that want to come to work every day and they really want to be -- participate and engage and deliver outstanding results versus people that just feel they have to come to work every day. That's a simple way of kind of understanding associate engagement. So what we've done is we've created a very active associate engagement program by going on and listening. It may sound simple, but not all companies do it. By going on and listening to our associates. We call it the voice associate program. We use Gallup. Many shareholders may know about Gallup, Gallup Q12 program. Gallup is best-in-class in associate listening. And we go out and we listen to our associates, 12 questions, real simple, right, and understand their voices. And then we have clear action plans that we create based on what we've heard, and those action plans don't happen just at my level. Those action plans happen through all of our team leaders. All of our team leaders work with action plans to build better engagement with their teams, okay? So we've done that through our entire business. We've had 2 waves of Gallup right now. It's not just listening, but it's also creating clear actions, okay? So that was a very important event. Another very important event to drive engagement is to improve our social communication and social connections with our associates. We actually lit up Yammer shortly after I arrived. For those who don't know Yammer, it's kind of the Facebook of enterprise. And we have over 700 daily users on Yammer that are yammering, that are socializing wins and socializing learnings across the enterprise. So we've become a very great kind of well-oiled social organization as well as sharing opportunities. And the other we've done, we've made a very clear commitment to share the journey with all associates, make sure we upped our communication. We have a program we call All Hands, and it's once a quarter that we go out and we deliver business updates and any significant knowledge transfer we need to those teams through our business. So real active programs around really driving associate engagement. An important event that I can tell you that it's the associates that drive momentum in our business, okay? Without a highly engaged team, it's going to be tough to deliver accelerated momentum. So not an event that's one and done, an event that's well embedded into our business. I'm really proud of the team. We've got -- by the way, we've got about 84 team leaders that worked this program with the entire 912 associates in our company. So great progress on associate engagement. Another important event that drives and is delivering momentum in our business and will continue to deliver momentum in our business is really working with our leadership teams, okay? Working with, some companies call them line managers, some companies call them team leaders, we call them team leaders. Those 84 or 85 people in our business that have people that report to them, okay? Those are team leaders, right? Those are critically important to drive engagement, to drive performance, to drive accelerated momentum with all associates. So we've created a very clear, well-structured leadership development program, which starts off with clear competency framework for all of our team leaders with clear, we call it 70-20-10 learning; learning on the job, learning from others from mentoring and some professional learning as well. We use Patrick Lencioni for building high-performance teams, and we use his book called FYI, For Your Improvement, which is a list of 35 competencies to be able to assess the competencies and capabilities of all of those team leaders and, importantly, all the people that work with those team leaders. So a very well-designed and well-delivered leadership development program, okay? Again, that's another event that we've created that is well embedded and continuously improving, of course, but it's well embedded into our organization. And it's another contributor, I'd say a significant contributor of momentum we're delivering today. The fifth and I'm proud of all this stuff, but I'm really proud of this, the new brand strategy and positioning we have as a company. When I joined the company, people asked me what we do? And it was very hard for me to articulate what we do because we do a lot. We do a lot of stuff here at DCM, but very hard for me to simply articulate that. Yes, we do print, we do digital work. So now with this whole brand strategy and repositioning, it's very clear what we do. And we've got 912 -- 916 associates that can tell their friends and tell our clients what we do as a company, which is, we help simplify complexity in marketing workflow. In fact, I often say, not just to associates, I said it to clients as well, the more complex your business, the more value you can bring, right? If you've got a business that is super simple, you know what, here's a recommendation for a company that can support that down the street here, right? We deliver value by simplifying that highly complex marketing workflow. That's our tagline and surprisingly simple, okay? That is super easy for us to communicate, all associates to communicate and communicate to clients, communicate internally. And by the way, it's quite a unique positioning in the marketplace. One thing about having a brand is you need a unique selling proposition. This is quite a unique selling proposition in the marketplace that we eat complexity for breakfast, okay? We eat complexity for breakfast. This is a -- and to me, this is a -- this is a very defining point for us as a company to clarify this unique selling proposition, to clarify what we do so we can clarify the communication to clients. And I can tell you this is also another strong contributor to the momentum we are achieving. The sixth of 14, right? Again, it's more than 14, but 14 I'm going to share with you today. Event is not only clarifying our positioning and our strategy but also how do we communicate that, right? So what are our marketing initiatives? And we have a lot of marketing initiatives in the market right now, aside from obviously changing our website and making our website work hard on lead gen and hard on conversion. We've got a lot of activities. This is just a quick visual, if you will, of some of the activities we have in the market right now. And I can tell you, these activities are driving high level of engagement, high level of interest and a high level of conversion, which I will come to in a minute when we talk about new business development. So another event. Office strategy may be able to effectively execute strategy and communication. Proud of the work that the team has done here to get out and get very active on lead gen and communicating our message and communicating our unique selling proposition. Okay. So our seventh event that is delivering momentum. And by the way, I should say that these are not sequential. These are all equally important, okay? These are all -- right, this isn't the seventh of the most important. I wish we can present them all as #1, is we call our commercial capabilities. Now to be clear for shareholders, we call commercial, those are our salespeople. We have 60, 61 salespeople across Canada, 61 commercial leaders across Canada and they're responsible for, obviously, working with our clients across Canada. And we have very high skilled, and I said this to shareholders before, right, I've worked in sales and commercial leadership through my career. We've got one of the best commercial teams that I've ever worked with. Highly skilled team. We created a very clear program for that team. We call it our DCM commercial program or commercial development program to be able to understand how we continue to build the skill, the capability of that team. And we created a very clear commercial evaluation program on 7 core commercial competencies, okay? So all those 60 leaders we have across the country, we know exactly -- on those 7 competencies, what we need to develop, right? Are we advanced or are we essential or are we skilled across the 7 competencies. This is an important event because now we know what we're building for across our commercial team. So we like to say ready for today, fit for the future. So how do we make sure we continue to build our fitness level with our commercial team for the future, right, our commercial fitness level. And then what we need to buy, what are we buying for, right? So what are we building? What are we buying? So a very important event to really ensure that we're not just ready for today, but we're, as I said, getting fit for the future. And this is the lifeblood of our business, making sure that we're out there supporting clients, okay? And I can tell you, this is another important event that is driving the momentum in our business, and we'll continue to deliver dividends, okay. So lots of work happening in this space. Then on the building of the commercial development and commercial acceleration is client leadership. And look, there's a ton of stuff we're doing with our clients right now, clarifying what we do as a company and looking for expansion revenue, and I'll talk about new business development in a second. But the one that I want to talk to here is very similar to what we did with our associates. We had a very important event, which is -- and it may sound obvious, we went and actually used a well-structured listening program to listen to our clients. We have 250 clients who represent 93% of our revenue. We have 2,500 clients in our book. Why don't we listen to all 2,500 clients? So a very structured way of listening. And then with that listening, we then created engagement plans to improve our capabilities, right? Listen -- you listen, develop plans, engage and create a better client leadership organization. So you see it in the center there. We used what was called an Apex scoring system. This, again, is not one and done. It's part of our continuous development. We will have active client listening programs and active engagement programs to improve our client leadership model, right? Client leadership, thing about client leadership is you got to continuously improve, right? You're not -- it never ends, okay? The world is changing so quickly. So another very important event across our business. And I can tell you the way we're showing up the clients as a result of the commercial leadership, as a result of the marketing, as a result of listening, as a result of creating these engagement with clients is incredible, right? We have -- we'll talk about us in digital in a minute. We have our own DAM, digital asset management solution, here, right, that every single client presentation goes into our DAM. And the great thing that I can do and anybody can do in the company is, every morning, I can go into our DAM and I can look at what's -- how our team is showing up to clients and the presentations they are taking to clients. And I can tell you, we're showing up incredibly well, best I've ever seen. Incredibly well, as a result of the commercial leadership journey that we're on, as a result of listening and acting and driving engagement programs, as a result of the marketing. So some really, really great progress there as well, okay? And another contributor to that momentum that we're delivering. So 9th is new business development, kind of leading to what I said earlier on the commercial -- that commercial acceleration, that client leadership. We're very active on new business development. I want to put it in perspective for you. In 2021, about 3% of our business -- 3% of our revenue came from new business. We're tracking to be north of 10% this year. So we're very active on new business development. For a company like ours, it should be kind of 10% to 15%. So it's a muscle that we have -- that we're building, right? And it's a muscle you need to continuously build actually, right? A new business muscle. If you don't work it out, it's not going to continue to develop. So we have a very active program in new business development. We signed -- in quarter 1, I announced that we have $12 million in new client -- in new client -- new logo, new client development, and that continues. And we've got a focused effort across our entire business. So again, without talking strategically a lot of detail about our program here, I can tell you that we have developed a very, very solid muscle for new business development, and it's delivering momentum in the business right now. The 9th (sic) [ 10th ] is -- and we talked a lot about this to shareholders, is digital acceleration. You saw the slide I had earlier about moving from a print-first company to a digital-first company. Not that print is bad. Print is actually really good. We can make a lot of money in it, but there's a lot of opportunities for us to accelerate our digital journey. Digital is not new to us as a company. Again, I've talked this to shareholders many a times. We have -- we've built digital capabilities over the last kind of 20 years. Every single day, we're touching tens of thousands of digital assets. That's how client work flows, that means those assets need to be converted to physical. And we do that through our -- in many respects, we do that through our Flex platform. We also bring our Flex platform to clients to help them optimize their workflow, okay? Again, shareholders have heard me say this many times, about 35% of our revenue is, we call, tech enabled. So those are clients that are using our Flex platform. We generate about $5 million, not exactly $5 million, in annual recurring revenue from clients that are using that platform. And we have 2 opportunities with Flex; continue to drive penetration, take it from 35% of clients to, we think, the opportunity is around 75% of clients; and then also make sure we're getting a return on the investment we're making as we help them with their digital journey, right? Simplify the complexity with our digital platform. And that's the opportunity for us to continue to drive that ARR, right? And there's a lot of opportunities for expansion revenue with the existing clients and then, of course, continuing to deliver that acceleration with new clients. On the assemble around the far right, camera right, that's our new platform for digital asset management solutioning. As I said, we use that internally. We have north of $10 million in new business opportunities, clients that are looking for digital asset management solutioning. As I told shareholders in our Q1 report, we hired a guy named Steve Livingstone, who is our Senior Vice President, Digital, to help us move opportunities through the funnel and we're making some very good progress. We've got very good momentum with our assembled journey. And the way I'd like to think about our digital acceleration and, again, some shareholders may have heard me say this before, is we're in a very envious position relative to a lot of other digital companies out there because one is we've got, we call it, 3 Cs. One is we've got clients -- real clients. We're working with 70 of the top 100 corporations in Canada, 3 of the top 5 government agencies, 250 clients represent 93% of our revenue and they're all enterprise clients. Name a client and we've got a business with them. So we've got clients. We don't need to invest in commercial capabilities to accelerate our digital journey. We've got that, right, 60 commercial leaders, 61 commercial leaders. We've got capabilities. We've got -- digital is not new for us, right? It's been part of our -- we've got 26 people that kind of work in our development team. And we've had to develop because the whole kind of market has moved to digital, but it's been kind of buried under print, right? We've unearthed it. But we've got the capabilities, so real capabilities. We don't have to go out and acquire them. We've got real capabilities. And the third is we've got cash flow. So we've got clients, we've got capabilities, we've got cash flow. Name some early stage digital companies, start-up companies that actually have those 3 Cs? So quite an envious position. We see this as a fantastic opportunity as we continue to accelerate that digital-first journey. And that is delivering momentum, right? We just started this journey a year ago, it is delivering momentum. Number 11 of 14. Our ESG strategy, so environmental, social and governance strategy, is very clear. We have a cross-functional team as part of our ESG team that I lead, and we do 2 things. One is we wanted to clarify who we are as a company and more importantly what we want to stand for over time and we have a clear strategy for future. I'll just give you some of the highlights from -- listen, from a governance standpoint, we've got Alison joining the Board, that was very intentional, right? Diversity is an important governance initiative for us on ESG. From different associations we're involved with, WBE is the women-owned business association; CAMSC is the supplier certification for Aboriginal and minority suppliers, we're active in that association; the CGLCC is a supplier diversity for LGBTQ2S+ community. We're very active in our FSC; in fact, 100% of what we use is FSC-certified. Very active with sustainable green printing partnership. All of our facilities have been honored. So a lot of work on ESG. And down here, Habitat for Humanity. We're -- we help them with strategy. We're actively engaged in helping them build a better and a bigger business. Love the relationship and they're a real partner of ours as well, not just a pro bono partner, but they're a client partner of ours as well. So a lot of work on defining and clarifying our ESG strategy. You can see [ probably ] down here as well. In fact, you can see it through a graphic [indiscernible] month, and we're representing that and the importance of that in our organization. I do want to take you through a little bit more detail on PrintReleaf because it's a new program. Well, they're all kind of new programs. But this is a very important program for us, which is every piece of paper we use in our production is replanted, okay? If you put it in perspective, about 83 pounds of paper equal 1 tree. So every 83 pounds of paper, we're putting a tree back in the ground. So 100% of our use is replanted. It's reforested. You can see here, anybody who has got a phone, you can scan that QR code, if you like, anybody online, that will take you through the numbers here. We've used 24 million pounds of paper in production since we started this program in October of last year, and we've replanted just under 300,000 trees, okay? Now the great thing about this program is it feels good, right? Feels great. But it's not just for us as a company, our clients are engaged in this. And we now have 40 clients that represent 45%, so there are big clients, 45% of our paper use that actually have full identification to how much offset they're having in their workflow, okay? So clients can use it in their ESG strategy, if you will. So this flows through directly to clients. There's 40 clients, 45% of our use. We think we can go up to about 75% of our use flowing right directly into our clients' sustainability efforts, if you will, and making them communicate that onward. So we do this on behalf of our clients. By the way, it's a great program. We have exclusivity in -- or with this association, and it's a great, what I call, tech-enabled, right, because you can -- on any given month, you can click on that QR code and know what we've -- we or our clients have reforested as a result of paper use. So lots of activity on ESG, a real defining program for us. And I can tell you that it is another contributor to momentum. We've actually picked up new business as a result of this sustainability effort that we have here. So a real defining moment for us with good momentum as a result. The 12th is what we call operational excellence, and shareholders have heard me talk about this many times in the past. We took our Mississauga facility, we put it into Brampton. We took our Edmonton facility, we put it into Calgary. We consolidated offices, and we've done a phenomenal job in terms of driving executional excellence on our operations. And we delivered or we committed to $14 million of savings, and I can tell you that we're delivering those savings as we speak, right? Fantastic -- team did a fantastic job on execution. And under Christine Custodio's leadership and the entire operations team, there's a great operational excellence journey that we're on. And the team -- it's well architected and the team has executed against that flawlessly, okay? Number 13 is, we call, procurement excellence. I did mention this a little bit during quarter 1. The market in -- the paper market has disrupted supply chain like any other supply chain. For a lot of reasons, I won't bore shareholders with the reasons, but just the whole supply chain is significantly disrupted. And getting paper is probably one of the most challenging things we have today. But I can tell you, we have a best-in-class procurement team. And the fact that we were up 11%, we've got good momentum in our business means that we can procure paper. We got paper coming in from all corners of the world. So we've not missed an order as a result of some supply chain headwinds. So we really do have what I call procurement excellence in our business for now. We're well prepared for these headwinds, we're well prepared for the market. And we've been able to kind of offset some of that pressure and we've got a lot of inventory. Obviously, we've got enough to be able to satisfy continued momentum and continued growth. So we're very pleased with the progress we're making here, high-scale procurement team. In fact, we've been picking up some business from others as a result of our procurement excellence, okay? It is a tough market. I won't tell shareholders it's not, but I can tell you that we are more than well prepared. We've been executing very well on ensuring we're meeting the demands of our clients right now and keeping up with the -- some of the challenges in the marketplace. Fourteen is the last one I have, which we call financial excellence. And I want to put it in perspective for shareholders. This -- we talked about simplifying complexity. This is a very complex business. On average, we produce, sell, warehouse, distribute 50,000 SKUs a month. So 50,000 SKUs need to be accounted for, right? You need to understand the gross margin, the operational inputs, the paper we're using, the gross margin, the cost of warehouse and the cost of distribution for 50,000 SKUs. A lot of complexity. You cannot manage that complexity without a fantastic financial team and a system that supports that financial team. So we invested in ERP back in 2019. Last year, we put a data warehouse in front or on top of our ERP solution, and we're using Microsoft Power BI to pull intelligence on that data warehouse and we're getting incredible intelligence. We've really significantly improved our financial excellence over the last year. Again, a very important event for us to continue to deliver momentum in the business. So I can go on and talk a lot about the financial excellence that we've built, but it's a muscle that we built and it's a well-developed muscle. So great progress there as well. So I'm right on time, actually. So again, not a lot of numbers in my presentation because we're kind of 2/3 of the way through quarter 2, but we've got very good momentum in our business. And hopefully, you all can understand how we're delivering that momentum through these series of events. Again, I only shared 14 with you today. There's many more. But these series of events are what allowed us to exit strong in 2021, enter strong -- very strong, 11% growth, best growth we've had in 17 quarters in quarter 1 and, obviously, we're expecting continuous momentum as a result of these events as we progress through 2022. So I just want to personally thank before we move into Q&A. I want to thank the entire team -- leadership team, the entire 912, 913, 914 associates we have. Without you, there's no way we can be delivering this momentum. So good -- a very good and solid progress. So with that said, we've got kind of 5, 10 minutes for any Q&A. And James, for anybody online, is there a script to dial-in if...

Yes, there's a way to dial in online. [Operator Instructions].

Okay. Great. So any questions online or offline from the people that are attending today? Nothing online?

Nothing.

Okay.

Rich, you mentioned previous disclosure in your chat here about 0 restructuring costs. Maybe you could expand a little bit on that for all our shareholders?

Sure Yes. So what we reported in Q1 is we had 0 restructuring, and we reported clearly that our plan is to have 0 restructuring for the year, okay? We have done a lot of heavy lifting over the last few years to right size the operation, so the operation is fit for future. What I mean by that is on the people side as well as on the operating side. I mentioned the consolidation of factories in my delivery earlier. That is behind us now, okay? We have the perfect footprint. We actually have the perfect footprint right now. So thanks for the hard work the team has done over the last couple of years. Made my job easier. We have a perfect footprint. We have the perfect number of associates as well to be able to run our business, right? Get that business back to $300 million. So there is no need for us to have any restructuring as we progress through our next chapter, right? That's kind of 4- or 5-year journey that we're on. So yes, so we're committed to what we call clean EBITDA, net income and clean EBITDA. We've invested a lot in restructuring. And you know what, now -- and by the way, we've gotten returns, it's paid dividends. Now it's a really important time for us to get that return, and I'm not sure we're committed to and we're well on track. Won't be any restructuring. You've got my commitment there won't be any restructuring this year. We've got the perfect footprint. We've got the perfect organization. We've got highly engaged. We'll continue to build engagement of that skill base, of that talent and now it's about delivering performance over time.

Rich, maybe you can share with others that you said -- you talked to us earlier on the upcoming economic recession, things of that nature and how you have the confidence in our credit quality of our client base and our business going forward in this very turbulent time.

Well, certainly, there's a couple of questions in there. Certainly, the credit quality of our client base, no question, 250 clients, 93% of our revenue, all blue chip clients. No issues, okay? On the inflationary pressure, we're not experiencing any of that yet, okay? When I say -- I'm talking about from a revenue perspective. Obviously, we have an inflation in paper, but we're offsetting that through price increases and many of our contracts have raw material indexes built in, okay? So we're offsetting that. You'll see that in our margins. We're offsetting our markets, we're not deteriorating. You saw it in quarter 1. We're not deteriorating margins. Now is that going to impact revenue flow, right? Will clients start pulling back? Again, we're not experiencing it right now. And even if we did have a client or 2 that we're starting to pull back, our new business development, our growth, the muscle we built our new business on, there are endless opportunities in the marketplace for us. So we don't -- we're not forecasting that this will have an impact or a headwind for us from a revenue perspective.

Yes, we've got the measures in place.

We've got all the metrics. We've got all the measures in place. Obviously, we're picking up some tailwinds right now from the economy reopening as well. So if there's an offset, we've got tailwinds. There might be some marginal headwinds. Again, we're not experiencing them. We're not forecasting them. If we do experience some, because of this new growth muscle that we built or that we are building, there's more than -- more opportunities -- there's endless opportunities to offset.

I thought it was interesting this morning when you mentioned at the time for paper and how our clients are paying for the inventory -- and previously, it was [indiscernible].

Sure.

I think maybe the group would be interested in that because that would be a part where you would worry.

Yes. I think what [ Mary ] is referring to is, in the past, prior to supply chain disruptions, we could receive paper in the morning and put it on the press in the afternoon. In today's world, you have to buy paper today that's going in the press 3 months from now because it may have to come in from other parts of the world, where we have to buy a high allocation of paper for a client today and pay for it today and arrived 3 months ago, we're looking to make sure that client pays for that paper upfront. That's [indiscernible] the market has changed so dramatically. And -- as I said, we've got a fantastic procurement team and a fantastic operation team for us to keep pace with the changes that are happening in the market. This will settle, okay? This will settle. We're projecting it'll settle sometime in 2023. But it's volatile and it's dynamic, and you need to have right people that are highly skilled to be able to manage that dynamic environment, that's what we've got right now. So great question.

There's 1 online from Spencer Adamson. Question, you mentioned something about building and buying. Is there any M&A planned for the upcoming year? And if so, what areas would you be focused on?

Yes. We'll always look for opportunities to strategically buy if we can't build. So right now, we're building -- our digital asset management solution, we're building that because quite frankly, if we were to go and buy that in the market, the cost to buy would be much higher than the cost to build. In today's world, right, especially with the markets the way they are, if there are some capabilities that we could go out and buy, right, some companies that we could go out and buy, this would all be in the digital space, okay? Not talking about print, all kind of in our new world. And the valuation was right that we would certainly look at it. Is there anything active right now? No. But would we look at and take some opportunities to buy if we could buy cheaper than build, especially to help us accelerate that digital journey? For sure, absolutely. Yes, but nothing that's active as we say.

There's another question from Spencer. Can you please provide an update on the debt repayment? Is this still on schedule outlined in previous presentations?

Short answer is yes, on schedule. We've got, James, $12 million to $15 million that we'll repay this year. So James, what's the number? Will that be down to $22 million, $23 million?

Yes. On that schedule, our fixed-term debt should be in the $22 million, $23 million range.

Yes. So fixed term $22 million, $23 million. And then our glide path would be down to, I think, it's like $9.6 million or $10 million in 2023. And then as said by -- we're just -- by 2026, we're debt-free. So yes, there's no change in terms of that glide path. If anything, potentially, there could be an opportunity to accelerate if our business continues with the momentum that we've got. So -- yes.

There's another question from Chris Thompson. How is the cannabis printing business in Canada and U.S. progressing? Are there any other niche industries that you are targeting such as organic or nutritional supplements?

Well, we've got Shelly here. Do you want to go, Shelly? Come on down here for a second. Let's get Shelly to answer the question about -- I mean I can answer, but given Shelly is here, let's get her in front of some shareholders here. Tell us about the cannabis business, how we...

Yes. So here in Canada, we are ahead versus a year ago by about 4%. We saw some flatness to growth in 2021, but we're really excited with the improvement that we're seeing right now. We've signed on 8 new clients year-to-date this year with a projection for about 4 or 5 more before we close the year. We've got 5 new U.S. specific clients, multistate operators throughout the U.S. Few of them are simply tap enabled, others are using our front-end tap with the manufacturing and label and packaging capabilities. The industry itself is projected to continue on a 10% CAGR over the next 2 years. So we will certainly take advantage of that growth with a lot of focus on the U.S. and continuing to leverage the consolidation that's happening here in Canada, where we own about 85% of that label packaging business.

And there was a question linked to it about opportunities to penetrate pharmaceuticals and nutraceuticals.

Yes. Yes. So we're really starting to expand that. We're looking at the nutraceuticals. We're looking at supplements and some of those near industries that would have similar business models to what we provide in the cannabis industry and starting to earmark those as we evolve throughout this calendar year.

Yes. Chris, just building on your question with Shelly, there is a massive amount of complexity in nutraceuticals and -- nutraceuticals and...

Yes. And the online supplements.

On the supplements, yes, I'm just going to say pharmaceuticals and so that's a massive amount of complexity, right? And what we've designed from a platform standpoint, the platform that enables and simplifies the complexity for cannabis can easily be lifted and shifted to those 2 other verticals, right, to those 2 other businesses. And that's really what the team is intentional on now. And there's -- when I talk about new business development, there's a ton of new business development opportunities there through our tech-enabled strategy -- through our strategy of simplifying complexity of that workflow.

Yes.

Thanks, Shelly. Is that it? So unless there's any other questions, we're exactly at time. And thank you, everybody, for listening and look forward to continuing momentum we have on our business. Thank you.

Thank you.