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

Ladies and gentlemen, my name is Kingsley Ward, and I am the Chair of the Board of Directors of DCM. I would like to call this Annual and Special Meeting of DATA Communications Corp to order. For those of you who are shareholders, thank you very much for joining us today. We welcome all other guests attending either in person or virtually. I'd also like to introduce each of the directors who are attending today in person. In addition to myself and Richard, we have Merri Jones, Greg Cochrane, Jim Murray, Alison Simpson, Merri Jones and Derek Watchorn here with us. And remotely, we have Michael Sifton online. We've decided to hold this meeting as a quasi-hybrid meeting. 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 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. We'll try to answer all your questions once the formal portion of the meeting is complete. As we look forward to the coming year, we remain focused on the opportunities DCM has in terms of its business, its successful integration of recently acquired RRD Canada, shareholder value creation and the positive impacts the company can have on our communities. Our engagement with shareholders is not limited to this meeting. Throughout the year, our Board and management consider the shareholder feedback we received from a variety of sources. What we learn helps us prioritize our efforts and identify areas of emerging interest for the Board to consider. 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 the shareholders using the notice and access provisions of the applicable Canadian securities laws. I will refer to these provisions in this meeting as the notice and assessment provisions. With the consent of the meeting, I'll serve as the Chair of the meeting, call meeting to order, ask our CFO, James Lorimer, in attendance with us here today to act as secretary of the meeting. I've appointed Louise Waltenbury of Computershare to act as the scrutineer. 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. EST on June 13, 2023. The proxies so deposited are now in custody of the scrutineers and reflected in the preliminary scrutineers' report. This report has confirmed that the proxies represented today are approximately 24.3 million common shares of the company, approximately 53 of the outstanding -- 53% of the outstanding common shares. The scrutineers have also confirmed that a quorum is present. A final scrutineers' report will be available after the conclusion of this meeting, and will be kept with the records of this meeting. As notice of the meeting has been given as required, and a quorum is present, I declare the meeting has been regularly called, and is properly constituted for transaction of business. The agenda for motions with respect to the business that is to be dealt with here today is contained in the notice of meeting you received prior to this meeting. A number of shareholders or proxyholders present have agreed to assist with the presentation of these motions. At the conclusion of the formal part of the meeting, DCM's CEO, Richard Kellam will provide some remarks about our business. And following that, we'll have an opportunity for everybody to ask questions. When submitting your questions, please provide your name for records of the meeting. There are 4 matters set out in the notice of the meeting to be voted on here today by shareholders. Unless there's any objection, I'll dispense with the reading of that 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, reconfirming of the DCM long-term incentive plan and reconfirmation of DCM's shareholder rights plan will all be done by ballot. I should make it clear 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 these votes. If you are a proxyholder, ballots for each member to be voted on are available from the scrutineers, and those ballots will be used to conduct the votes on those matters. Please fill out the information requested in the ballot form and cast your votes as each matter is put to a vote. If you are a nonregistered shareholder, you will have already had the opportunity to cast your votes on the matters to be considered at today's meeting by providing voting instructions to your intermediary, provided you comply with all the voting instructions and materials, your votes on those matters have already been received, and will be counted by the scrutineers. In order to expedite the voting process, the results of the votes to be conducted by ballot will be publicly announced following the meeting once the scrutineers have received all the results. I am tabling at this meeting the annual -- 2022 annual consolidated financial statements of the company, and these will be filed on SEDAR. On behalf of your Board, I now place before the meeting the consolidated financial statements of the company and the report of the auditors on those statements for the year ended December 31, 2022. Our first item of business today is the appointment of auditors. I believe that Mr. Lorimer has a motion in connection with this.

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 the motion.

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

Contrary? [Voting]

None. 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 to director nominations, and I ask James again to present the motion.

I nominate the following: Gregory Cochrane, Merri Jones, Richard Kellam, James Murray, Michael Sifton, Alison Simpson, Kingsley Ward, Derek 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.

Thanks, James. 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 at meetings of shareholders where directors are to be elected. In addition, pursuant to the company's advance notice bylaw, only persons nominated in accordance with the procedures set out in that bylaw will be eligible for election to the Board of Directors. The company did not receive any director nominations containing the information prescribed by the company's bylaws prior to the deadline of 5 p.m. May 15, 2023. Are there any further nominations? Okay, hearing none, I'll now entertain a motion respecting the election of each of the nominees as directors of the company. James, will you have that, please?

Mr. Chair, I'm a proxyholder and I move that each of Gregory Cochrane, Merri Jones, Richard Kellam, James Murray, Michael Sifton, Alison Simpson, Kingsley Ward and Derek 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 the motion.

Thank you very much, Richard. We will conduct the vote on this matter by way of ballot. The next item of business is to consider a resolution approving and reconfirming DCM's long-term incentive plan. Pursuant to the policies of the Toronto Stock Exchange, the long-term incentive plan must be approved and reconfirmed by shareholders every 3 years. The full text of the long-term incentive plan resolution and a copy of the plan are set out in appendix B to the management information circular for this meeting. The long-term incentive plan resolution must be passed by greater than 50% of the votes cast by shareholders present in person or represented by proxy at this meeting. I believe that Mr. Lorimer has another motion.

Mr. Chair, I'm a proxyholder and I move that [indiscernible].

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

Thanks very much, gentlemen. Any discussion? Hearing none. We will conduct this vote on this matter by way of ballot. The last item of business to consider is a resolution approving and reconfirming the company's shareholder rights plan. Pursuant to the terms of the shareholder rights plan, the plan must be approved and reconfirmed by shareholders every 3 years. The full text of the shareholder rights plan resolution is set out in Appendix C to the management information circular. The shareholder rights plan resolution must also be passed by greater than 50% of the votes cast by shareholders present in person or represented by proxy at this meeting. I believe James has another motion.

Mr. Chair, I'm a proxyholder, and I move that the shareholder rights plan resolution set out in Appendix C to the management information circular of the corporation in May 10, 2023, be approved.

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

Thank you, gentlemen. Any discussion? Hearing none. Again, we will conduct the vote on this by way of ballot. As I indicated earlier, the company will publicly announce the results of each of the votes held here today following the conclusion of this meeting. If there is no further business to be brought before the formal part of this meeting, I'd like to ask for a motion to terminate the formal part of the meeting.

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

Seconded?

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

All in favor, please raise your hand? [Voting]

Thank you. I now declare the meeting terminated. And before turning the meeting over to Richard, I have 3 items to address. The first is a [indiscernible]. If you are participating directly through Teams, you can use the Raise your Hand feature in Teams, and we'll queue up questions. Alternatively, you can also use the chat feature in Teams, and we will respond to chat questions as well. [Operator Instructions]. Second item. I'll remind everyone that we will be referring to forward-looking information. As such, 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. The last item is -- well, on behalf of all DCM stakeholders, I want to take a moment here to express my truly heartfelt gratitude to a team of people who delivered exceptional efforts and dedicated work over this last year. This team logged 80-hour plus weeks per month, essentially doing 2 jobs, running our core business and managing a major acquisition of companies of size, which they were able to complete earlier this year. A lot of personal sacrifice, family time was taken off the table as this team moved us ahead. We are truly, truly fortunate to have these exceptional leaders as part of our team. They are all responsible for a lot of the success achieved to date. This team includes Richard Kellam, James Lorimer, [Indiscernible], Christine Custodio, Jason Sharpe, [Indiscernible] . I hope I got that right, always mess French up -- [Indiscernible] and a couple of new team members, Rael Fisher and Lisa [Indiscernible]. Just want to thank you all folks for the incredible effort to get us to where we are today. And without further ado, I'd like to turn this over to the captain of our team, Mr. Richard Kellam.

Right. So good morning, everybody, and good afternoon. I see folks on from overseas, and good evening. Thanks for people here, thanks for joining us today, and people virtually, thanks for dialing in as well. Our Chairman already talked about forward-looking statements. I will probably provide some numbers today, but please don't [indiscernible] on them, I guess. And look, this is an interesting time. It's always interesting times during AGM because we presented our year-end, we presented our first quarter, and we can't talk about our second quarter, right? So how do you prepare for an AGM, and what I can't really talk a lot about is numbers here. But what I can talk about is our strategy of building a better and a bigger business and how we're doing that. So to give some context to how we're delivering the outstanding results we've delivered over the last couple of years. Okay. So a little bit of detail, a little bit of context sharing with our investors how we're doing what we are doing, okay? I'm going to start off with better, some of the work that we're doing to build a better business now and how we're doing that, okay? First is -- and I'm purposely starting with this, right? Having a highly engaged workforce drives and delivers results. And we spent a lot of time working on building a highly engaged team. We'd like to say people that want to come to work every day are going to be a lot more effective versus people that have to come to work, right? So moving that have to come to work to want to come to work. So a lot of time really understanding engagement and then making sure we're driving action plans around that engagement. We actually use a tool called Gallup. It's 12 questions, and we used this in my prior company, so we introduced it into DCM about 2 years ago. It's 12 questions to audit engagement of every single associate in the company. And then every team later gets a report on how engaged their teams are. And it's not a report just to audit engagement. It's a report to create action plans, to create a higher level engaged team, okay? So what happens, it's not just a number that I get at the top level, I obviously get an understanding of how engaged my team is. My teams get an understanding how engaged their teams are and all the way down to the organization. And we have a very clear action plan to drive engagement through the enterprise, and we've had significant improvement over the last couple of years. We will be doing a wave in September again with obviously our entire acquired companies. So lots of work happening on driving an engaged workforce, okay? The second is, look, you don't build a great business without really focusing on leadership. So at the end of the day, leaders are responsible for the entire -- right leaders are responsible for their teams. And I certainly can't do that from the top, right? I can set the tone from the top, but the leaders are responsible for delivering engagement with their teams, delivering productivity, delivering results. So we spent a lot of time on leadership development. We have a very effective -- we used FYI for [indiscernible]. We've got clear leadership [Indiscernible] we assess on a regular or an annual basis how we're performing against each one of those leadership capabilities and [indiscernible]. Are we losing the screen? So lots of work on leadership and leadership development. Put in perspective, we have roughly, I guess, with the acquired business kind of 100 leaders in our business now that are direct people profitability. So a lot of time spent on leadership development. [Technical Difficulty] So let's go to the next screen. So the third thing, so I hope we were clear on associate engagement, on leadership development. The other focus here on building a better business, we call commercial acceleration, right? If you're not growing your business, right? You're not going to be a healthy company. So a lot of focus on commercial acceleration. We created what we call the DCM Growth Academy. Can you see that on this slide? And we've got a lot of curriculum that we deliver out to our commercial team. And a good example of that is we have run [Indiscernible] . I've lost count of how many programs, but dozens of programs now under our DCM Growth Academy commercial acceleration to get all of our acquired commercial leaders understanding the full capabilities of DCM. And equally, all of our DCM legacy understanding the full capabilities of the acquired MCC. So it's been an incredible way for us to quickly drive that learning and acceleration across our teams. So really great work happening on commercial acceleration. And then again, you can't see the slide, but it's a beautiful slide, let me tell you, is our marketing initiatives. And I'm sure you see a lot in the market with B2B, and we understood and really kind of dialed up our capabilities on B2B marketing over the last couple of years. So a lot of active programs in marketing our services and marketing our solutions, a lot in digital and digital marketing as well. But even our conventional solutions, we've got an active program out there right now if you look in the financial post on a platform called Optichannel, which is optimizing collateral and [indiscernible] for large, highly distributed banks or retailers or QSRs, et cetera. So we're in active campaign in market right now. We have an active campaign going to market around our direct mail capabilities as well, so that -- we've got anybody that is doing direct mail understands the value that we deliver as a company. So very active on the marketing side as well, and that's all laddering up to build a better business. Are there any progress on slides, guys? Okay. All right, because I really want to show you this one. We'll go back to it. And then we also have an active program on -- we call it voice of the customer, going out and listening to our clients. Just like we listen to our associates to understand how engaged our associates are, what we've introduced over the last couple of years is a voice of the client or voice of the customer program. So we go out and we ask, we use a company called Apex. We go, we ask our clients a number of questions to get feedback from them to understand how we can improve our client leadership model, and we create action plans around that. So we thank our clients for their feedback. We create full action plans at a macro level, and we either had a client and customer [indiscernible] as well. So a lot of client listening and client leadership. So we are kind of well guided. We're not just flying blind to it. We understand exactly what's working and what's not working, what we'll need to invest, how we need to improve. And it's a great model for -- it's a nice kind of 360 model. It's a great model for us to really kind of improve that client leadership. And I can tell you that is also delivering a lot of results within our client base and helping us to, frankly, as I said, a better company. The other thing we've done and focused a lot on is we call operational excellence. So Christine Custodio, who runs our operations, and the balance of the team has done an exceptional job just delivering a better organization, a better operational organization and lots of work happening around optimizing our footprint, making sure we're getting the best out of our capital. We like to say we like to sweat our assets hard. And I know we got approval on our compensation model, a big part of our compensation is, we call return on total assets. And that's a combination of a fixed asset turnover ratio and a current asset turnover ratio. So making sure that our fixed assets are working hard, and making sure any assets we bring in and introduce into our environment have high productivity. We've got some great examples of buying some digital kit, a $1.3 million investment that can generate $50 million of revenue. So lots of focus on [Indiscernible] return to assets, both fixed as well as current assets. So really driving hard on operational excellence and some good improvement there. And again, once you see my slides, a lot of work on -- and I've talked to shareholders on this before, we love complexity. So the more complexity in a client's workflow, the more value we can bring to that workflow. We like to say we eat complexity for breakfast. And a lot of work from an operations standpoint on that short run complexity, a lot of investment in getting our capital kit perfect to be able to deal with that level of complexity. And we all know the higher the complexity, the higher the margin because we're delivering more value, right? So that's where we pride, and that's where we've guided our whole commercial model over the last couple of years and continue to guide it. And we'll guide it there with the acquisition as well, okay? Right. Another thing we're very proud of in terms of building a better business is the commitment we've made to ESG. We hear a lot about ESG. And there's maybe some green wash you hear from some companies. I can tell you there's no green wash here at DCM. We've got clear commitments. We've made commitments around waste reduction, sustainable forestry, carbon footprint and renewable energy. And I'll give you an example of a couple. Our carbon footprint reduction, we said we want to deliver a 30% carbon footprint reduction by 2030 and net zero by 2050. We have detailed carbon footprint and carbon details on every one of our facilities and our entire operation right now using a company called SGP, Sustainable Green Printers, and a fantastic team has done that audit. We've got incredible plans to be able to deliver against that target or even beat that target. Renewable energy transition, we want to be 100% renewable energy by 2050, and we've got plans to deliver against that. And then on sustainable forestry, I think shareholders know we had a big commitment about 1.5 years ago to reforest 100% of our paper use. Since we made that commitment, it was in November of 2021, we have used 72,354,800 pounds of paper, okay? So 72.3 million pounds of paper since we made that commitment. We have reforested 100% of that. And we have put 870,545 trees in the ground. Every 83 pounds of paper we use, we put one tree in the ground. And that's been an incredible program. We give that product through to our clients. So if you're a large client, you can take that credit into your ESG commitment. So it's a great -- what we call kind of a great virtuous model for us, right? Because clients love this, and it allows a lot of kind of retention and a lot of -- for our key stakeholders that actually have the ESG commitment to allow them, to be able to capture that credit in your paper use, okay? All right, guys. I guess the people online couldn't see the slide. So there's an example I said 72 million pounds of paper, 870,000 trees since its inception. And we made a commitment we want to replant or to reforest 500,000 trees a year. Obviously, we'll be well above that with the acquisition of MCC, okay? So great progress there. And I'm only going to go back 2 slides here because I do want to show you this beautiful marketing slide. There's a good example of a bunch of marketing that we've been executing. So very active in the market. I think we've really learned a lot about B2B marketing over the last couple of years. And our productivity and effectiveness in all campaigns increased quite considerably, okay? So I will move to -- so that was in there to hopefully shareholders understand how we're building a better business, right? So that's the narrative on building a better business. Now let's talk about how we're building a bigger business. And first of all, and mostly lot of numbers in my deck for the reasons I said earlier, but this is an important one because that shows some products that we've actually made over the last kind of 1.5 years. And we've got a turn -- I joined the business in March 2020 -- March 2021, right? And we sort of turned the business around in quarter 3, especially quarter 4. And you can see that quarter 4 performance. There is first half of the quarter coming after -- but we were still in the pandemic at that point, quite honestly. And then you see the acceleration based on our relentless focus on being growth obsessed. You can see how we've kind of turned that through each quarter in 2022 and then into the first quarter of 2023 with a -- we kind of turned from that plus 1 into plus 11. We had a -- I think [Indiscernible] called it a monster quarter, a 23% growth in quarter 2 last year. But you see we've got continuity of performance here. And as I said, as an organization, we're very much relentlessly focused on growth, but that [indiscernible] expense, right? We've got to be -- growth that also fits within the model, right? Our margin and profit model. So which is what we've done. We really kind of understand the market well. We understand exactly the areas we want to play. We call it the profit pools and margin pools that we want to play in. Those generally are the high complex areas where we can create value for clients. And that's how we've kind of tuned our commercial model and our operation model. As I said, we focused a lot on new business development. The last quarter, I -- or sorry, the end of the year, I said we brought in $35 million worth of new business, a lot of new clients, a lot of logos, some small, some large. We don't mind bringing some smaller -- some large logos with a small bit of business because we land and expand. And we've got great success on driving expansion revenue with large clients. Every commercial person in our organization -- and when I say commercial person, I'm talking about our sales reps, okay? We call them commercial leaders -- has 2 jobs. They've got to run their existing book, and they also sit on our vertical strategic team, which is kind of a new business development team. So everybody has dual responsibility to both manage their existing clients and then grow new opportunities in the market. Lots of work happening on new business development and commercial acceleration. And then, of course, I'd be remiss if I didn't talk about the acquired growth. And of course, everything I've talked about today is now being applied to the acquired growth as well. So we acquired $250 million -- just over $250 million in revenue, so almost doubling the size of our business. We closed that transaction on the 24th of April. It was a great transaction. It came with 250 enterprise clients, very little crossover from clients. And where we do have some crossover, we're selling different capabilities. And we may be selling different solutions versus what MCC or RRD is selling. So lots of opportunity here from a revenue acceleration standpoint. Couldn't be happier, honestly, with the acquisition. I know I've had some shareholders ask me, have we discovered anything negative in the acquisition? And sometimes you do deals like this, and you find some big skeletons in the closet, and you may find smaller ones as well. And honestly, it's a great deal. It's a great partnership and a great fit. And we haven't discovered anything at all, quite honestly. In fact, if anything, we just see more positives than we even understood when we did due diligence. We've gotten off to a great start in terms of how we work together as well. This is how we sort of go to clients and how we show up internally as well across the areas. How are we better together? We're better together because we have obviously expanded product offerings. We can now bring superior service. We really ratcheted up our execution capabilities with both great executors. Now we're even better together, right? From an execution standpoint. Our speed to market, in fact, we've already won some new business, and we can turn that business super quickly. We've got a great client leadership model. Obviously, we talked a lot about our people. And we've acquired and merged fantastic people as well. Lots of work on innovation, really kind of understanding our innovation pipeline. And believe it or not, [indiscernible] is not dead, a $10 billion market growing at -- depending what data you look at 1%, 2%, 3%, some profit pools and margin pools and categories growing fast than others, lot of innovation in direct mails, lot of innovation in digital and accelerating workflow optimization through digital, a lot of innovation around the whole kind of digital to print integration. So lots of work there. And then, of course, another benefit of the deal is the scale to invest. So we're off to a great start. We closed the transaction only 24th of April at 8:30 in the evening. We had 120 commercial leaders, 120 salespeople, our entire sales team together at 9:00 on the 25th with a full program for 2 days to move from competitors to collaborators. So straight out of the gate on day 1 after close, the guys were worried a little bit, we got to close. We've got people flying in for the meeting. But day after we closed, we had our entire teams together to move from competitors to collaborators. And that was an incredible start, and we've got some really good momentum. And the teams are working very, very well together, okay? So again, talk about how we build a bigger business. And then also, we were and have been well prepared for integration. I think I told shareholders we use Boston Consulting Group. I had done a lot of work with them on prior integrations and prior deals. It was so important that we were prepared for execution from day 1 with excellence. And we are off to a great start, given how well prepared we were. We have 4 areas that we're focusing on for integration synergies, integration opportunities. We've obviously got operational, organization, procurement and revenue. One of the stuff I talked about, how we can grow our revenue by building a bigger business. We put a target to -- we put a number rather to The Street and said we see a sight line and have plans actually deliver to be $25 million and $30 million in annualized synergies. And we're off to a great start. We're -- I think it's -- we're at week 8 now, and we're making fantastic progress against all 4 of those areas. Obviously, we started the revenue acceleration synergies on day 1 by bringing those sales leaders across both businesses together, okay? So on day 1, we start to lean into growth opportunities. And obviously, we've got a lot of plans to deliver against that target. So we're very comfortable in delivering that target to The Street. And we've also done quite a lot. We talked a lot about digital. We're not forgetting about digital, by the way. We've got a -- we don't talk as much about it because we've been focused on the acquisition. We've got a whole team that's focused on our digital journey led by Steve Livingstone, who works on my team, and we've got a very nice portfolio. I talked about Optichannel. We're also in the personal video space right now. We've got our digital asset management solution that's playing through a $5 billion market. That platform, our own platform goes live. It's already been beta, goes live in September. We've got our workflow optimization platform with Flex, and we've got a marketing workflow platform where we're using this with a large electronic retailer. You can see smaller numbers, but did well, 27% growth in quarter 1. And we're kind of hitting that tipping point, and we'll talk about it in quarter 2, some successes that we're having in the marketplace. But we're seeing good progress on our digital solutions and digital portfolio. Just want to make sure that for investors that we haven't forgotten about this. It's a very important part of our strategy, okay? Very important part. And then finally, before we turn over any questions, I just wanted to let shareholders know that we have just completed our new 5-year strategic plan. We had a 5-year strat plan that we developed when I joined, and that was to get us to $300 million in revenue in 5 years. Obviously, we're well ahead of that with the acquisition. So we need to rewrite our 5-year plan. We have a plan that is going to drive a comfortable kind of north of 5% organic growth over the next 5 years, right? On a CAGR basis. I talked about digital, our digital solutions. We see easily kind of north of 60% growth in our Martech -- in our digital solutions. We will be working very fast to deleverage the cash flow business, right? We're going to be focused hard on cash flow and working capital and deleverage quickly. We see a path of north of 14% EBITDA. And obviously, we're going to continue to look at opportunities for tuck-in acquisitions. We see a path to $1 billion over 5 years, organic growth, you guys can do the math, will get us to a 5% growth, will get us to $700 million, an 8%, 8.5% growth will get us to $800 million. If we want to get to $1 billion, obviously, you can see what we have to do from an acquisition standpoint. And the market is good right now if we're looking for opportunities. Obviously, our focus right now is to [indiscernible] the acquisition we just made and deliver that with excellence, but there's still opportunities in the market as we move forward as well. So more details on our 5-year plan, just kind of a high level. But we've got a very, very detailed plan that we scale up to our entire team with very good focus across a bunch of different workflow areas, okay? So that completes my presentation today, explaining how we're building a better business and put some context to that and then how we're focused on building that bigger business as well. So I'll pause there and see if there are any questions from audience here or audience that is virtually on the line. Chris?

Chris Thompson for the record. Just you guys control a lot or [Indiscernible] think a lot [indiscernible] natural -- but there's also been on sort of the knowledge base that companies are creating [Indiscernible] I don't know if you can [Indiscernible] using AI to access knowledge base on corporate content help with the company get access to the content they can find. Is there any news your company [Indiscernible] increasing your digital asset management platform, including the functionality of the knowledge base and be able to wrap things down, finding content faster and getting that knowledge back to the [indiscernible]?

Yes. And I think if I understand your question correctly, outside of a digital asset management solution or inside the solution?

Part of.

So to answer, outside of our digital asset management solution, no, not yet. And we have been having some conversations. Inside our solutions, so managing an organization that has high distributed assets and now you assemble them in one place instead of multiple SharePoint files or multiple hard drives. Once they're in that one place, we have AI capability for searching and meta tagging already built into our platform, right? So we have those learning capabilities because we're using Microsoft Azure, and Microsoft Azure has AI capabilities built into reserves, and it's changing quickly. And it's changing quickly, as you know. One of the great things about developing capability now by building our own asset platform now, our DAM now is the access to technology. Digital technology is very different than if we started building 5 or 6 or 10 years ago. So a lot of those capabilities come by being a Microsoft Azure partner. But outside, no. Entire kind of using AI to help find stuff to the entire organization, no. Inside, sure. So hopefully answered your question. By the way, we are using -- building on your question, we are using ChatGPT for content generation today. It is an incredible machine, an incredible tool for us to accelerate copywriting, accelerate even writing job descriptions. Somebody may take a couple of days to write or a day to write. We are writing them using technology today. Content and content creation, how do we, I don't know, how do we sell or what's the benefit for a health care provider to use the digital asset management solution? We use ChatGPT to create content around that. So internally, we're using it a lot now, especially over the last kind of 1 month, 1.5 months for us to be a better company, right? Using technology, and learning from it as well, right? Learning how we bring that benefit across the clients too. I use it every day for a multiple -- as James knows, right? I send [Indiscernible] every day morning on ChatGPT. But great question. Okay. So the question was for people who didn't hear it, were there -- for the acquisition, were there any other competing bids? The answer is no. We entered into an exclusive arrangement with RD U.S. And we were the perfect buyer in Canada because this really required a strategic buyer, and we were very similar in terms of capabilities. And certainly, the seller or the corporate was confident enough that we were the perfect fit. There wasn't -- it doesn't need to kind of enter into competing bid to do business.

[indiscernible] 5 years?

No. So the question is the $25 million to $30 billion in synergies annualized. So again, we have 4 areas that we're going after: organization, operations, procurement and revenue. Organization, we'll be a little fast in operation. But within 2 years, all of those synergy capture will be completed, and then we'll start realizing annualized between $25 million and $30 million. So not after 5 years, within 2 years. Yes, within 2 years.

[indiscernible]

Right.

[Indiscernible]

Correct.

So [indiscernible].

Correct. Well, it's going to come from 2 areas. It's a great question. It's going to come from synergies. It's also going to come from gross margin improvements, right? And gross margin improvements will also come from synergies as well. So as we improve operations, as we improve mix, as we improve pricing, there's lots of opportunities. So what you will see, to be clear, we're at a -- DCM reported quarter 1, 31% margin, right? We've been very clear with The Street that the average margin on the acquired companies is in the low 20s, right? So [indiscernible] obviously, our margins are going to go down, and then we're going to work to increase it back up over time. And that's all through focusing on margin pools, focusing on mix, focusing on pricing, focusing on operational excellence. But yes.

[indiscernible]

Right. Yes. Certainly, the RR Donnelley or MCC team had some digital and still has some digital capabilities to manage workflow, but not -- some of them is advanced or are those advances what we have in our portfolio. And the team, the acquired commercial team is already fully aware and has been trained on those digital tools and are already having conversations with clients. So there are some active conversions to technology that Donnelley sort of -- so that DCM has now going into acquired companies as well. So yes, it's a big opportunity for us to continue to expand our digital penetration with the entire organization, the acquired organization. Yes. James do you want to comment on that? So the question is, will our leverage, which is sitting at roughly kind of 2.7 right now, 2.8, and getting below 1 in our 5-year goals? You want to talk about timing on that?

Yes. And this actually coincides with a question that came in on the chat and talk about our current debt position. So as everyone knows, we usually [indiscernible] and we'd be able 3.25x debt-to-EBITDA after we close the deal. And then we had a $30 million term loan with Chartered Bank. We've paid down $23 million of that with the closing of the Oshawa warehouse sale in [indiscernible]. So our debt has already come down by $23 million. And just about a week before that, we announced an equity rate, and we closed on a little over $26 million. So net proceeds were $24 million, $24.5 million. And with that, we also -- we paid down a little bit of a kind of a stub end of some of our Fiera Private Debt funding at $5 million. And then the balance in the short term meant to pay down our revolving line of credit. As I think shareholders know, we have a revolving line of credit. We don't keep a large cash balance. We have cash to pay down debt. And so we're very hopeful with kind of the debt acceleration plan that we have in place right now.

So the more [indiscernible].

Yes, probably 2.5x. Yes, yes, yes. And that's pre-synergies.

[indiscernible]

Yes.

[indiscernible]

They'll be done over time as we sort of implement and make the change. And we've mapped it out just to be clear, and we told shareholders because we've used BCG, and we've actually mapped that out across the entire organization. It's a one-to-one relationship. So $25 million cost and $25 million in synergies, which is a nice return, by the way. Yes, it'll be lumpy through the quarters depending on the [indiscernible] happens. Yes.

[indiscernible]. Just curious [Indiscernible] tell us that the physical footprint of the 2 organizations kind of coming together. I know this movement on the [indiscernible]. Help us understand over maybe the next 2 or 3 years the kind of synergies or what you expect to get at the 2 physical footprint [indiscernible]?

I'm going to turn that -- I only answer, but I turn it to James.

Yes. We're in the process of double checking the analysis we did in kind of pre-merger integration planning. And we expect to be able to announce some things over the next couple of months in terms of how we see our footprint optimization. If you look back at the DCM history, pre-acquisition of MCC, really starting in 2015, we consolidated a number of manufacturing facilities and warehousing facilities. And we have a pretty successful track record in moving the work to the right place where it makes sense to really drive efficiencies. So we'll be announcing things over the coming kind of 6 months and 12 months.

Yes. And another real kind of benefit of this deal is -- it doesn't happen often on deals. Rael Fisher who's sitting in the back of the room here today, was the President of RR Donnelley in Canada. And happy to report, and I've always told shareholders this, but if you may not remember is, now part of the new DCM team and is running our integration management office. So a lot of stuff is in -- obviously, we did the work leading up to the deal to understand the deal structure. All of us know with the innovation office, we'd be hearing a lot more in terms of progress that we're making against some of these efforts under Rael and his team's leadership.

Just maybe a follow-up on the -- any early feedback from your corporate enterprise clients on the deal? And maybe also touch on your sales team's approach, maybe some of the changes that the commercial team has made looking at using more of a gross margin spend on [indiscernible] any pushback from existing clients? And how should we think it'll help if they would?

I'll answer your last question first. [Indiscernible] pipeline is very good. In fact, there's more opportunities coming in the funnel over the last 8 weeks. I showed you that slide. We came together on day 1 to move from competitors to collaborators. A week following that, for our top 80 accounts, we did account reviews every day, 6 a day, where the account teams came together and presented whether it was an MCC or a Donnelley account, whether it was a DCM account or whether it was a combined account or crossover. So where there is crossover, 2 account teams came together, and presented their account plans for the next year of how we're going to be better and bigger together for those clients -- for top 80 clients, a very detailed process, fantastic. And every day from 12 until 2, we have these sessions, Monday to Friday and all of our commercial leaders [indiscernible]. So another way of driving that [Indiscernible] -- understanding we're highly collaborative. I can tell you that all of our clients see value in this deal because they see us being a better company and a bigger company. And especially for those large enterprise clients, they want a company like ours that can satisfy their enterprise needs. And they want a sustainable company in the marketplace. If you're working with a large financial institution, they want to make sure that, that company is going to be around and the company can even provide more services to them. So actually for [indiscernible], I don't know if you want to comment, but I don't think there's been any negatives from any clients at this point.

Yes, I fully agree. It's been positive all around.

Yes. So off to a great start on the kind of commercial side of integration. Sometimes when you do deals like this, the hardest group to integrate is the sales force. And it's been very effective because of [indiscernible] intention from day 1. The team has a great attitude. They love working together, and again, kind of embracing that whole collaborative experience. Yes.

[indiscernible]

Sure. Let me handle that. Yes. So the question was with regards to any analyst coverage and research coverage. Chris Thompson from eResearch is the first analyst to cover us. Chris [Indiscernible], you're welcome to have a chat with him later. We also have coverage from Noel Atkinson, who's at Clarus. And they've been big supporters of ours. They led our financing, as you know. Yes. We also has Canaccord and Acumen in the financing. And they can't [indiscernible]. Now they can't officially commit to coverage, but we expect that we should have some additional coverage on that. Yes. And also, I think it's important for the shareholders to appreciate given the increased scale and size of our business and market cap, we've attracted a lot more attention from other folks on The Street. And so we are getting a lot more attention now from other investment banks, still kind of boutique and midsize, but we haven't had the odd kind of large [indiscernible]. So we're hopeful, yes. We have another question from the chat from Michael. The question is, over the course of your 5-year strat plan targets, are you forecasting any material growth in relative importance for the U.S. portion of your business? Yes. So an interesting part of this deal, we actually acquired a large-format printer called [indiscernible]. It's kind of separately branded from RR Donnelley. And about 75% of the revenue is done in the U.S. and call it $30 million running, 75% from the U.S. So it kind of gives us a natural entry in the U.S. And we're certainly going to -- sort of look at opportunities there. I can tell you that our 5% CAGR is built on pretty much a Canadian-focused model right now, so play our strengths. We're great at helping large enterprise clients in Canada to simplify their solutions. The Canadian market alone, as I said, is north of a $10 billion market. We're $525 million of $10 billion. So before we go south, there's a lot more opportunities for us to play in an area we know how to play, play to our strength, and to folks in the Canadian market. So a majority of our plans are there. Yes, there could be some opportunities south of the border, but we're not going to let that distract us. We're going to play to our strengths and again, large complex enterprises that we can help them simplify the complexity with primary focus on the [indiscernible]. Okay. All right. So any other questions? We'll probably get [indiscernible]. Okay. So thank you very much for the opportunity. Thank you, shareholders, for being here and all shareholders online. And we're going to keep doing what we're doing, building a better and a bigger business and drive and delivering results. We're -- as I said, fantastic acquisition. We're off to a great start. And I guess we're back in August to report on our quarter 2. Thank you.