Dye & Durham Reports Third Quarter Fiscal 2023 Financial Results and Announces New Substantial Issuer Bid

• Contracted annual recurring revenue was 18% of total revenue, more than doubling year-over-year
• Percentage of revenue exposed to real estate transactions reduced to 50% globally and 26% from Canada
• Operating expense reductions significantly exceeding target of 10% compared to the same period in FY22
• Substantial issuer bid offers to buy back up to $15 million of outstanding common shares

TORONTO, May 10, 2023 /CNW/ - Dye & Durham Limited ("Dye & Durham" or the "Company") (TSX: DND), one of the world's largest providers of cloud-based legal practice management software, today announced its financial results for the three months ("Q3 FY23") ended March 31, 2023.

"After a challenging start to the year, we are seeing concrete signs that seasonal real estate transaction volumes are starting to accelerate and recover. Given our strong and sustainable earnings and cashflow profile, as well as our organic and M&A growth pipeline, we believe our stock is significantly undervalued and represents one of the best opportunities in the market. The $15 million substantial issuer bid reflects our confidence in our business and while we don't typically provide quarterly guidance, we have decided to offer it for next quarter so that investors can make a fully informed decision about whether to participate. For the fourth quarter of fiscal 2023, we expect our adjusted EBITDA¹ to be in the range of $65-70 million," said Dye & Durham CEO Matt Proud. "During the third quarter, we continued to grow, optimize and diversify our global business, despite a difficult operating environment. As a result of our strong, long-term client relationships and a refreshed sales strategy, contracted annual recurring revenue reached 18% of total revenue this quarter, more than double from last year, reducing our exposure to depressed real estate transaction levels. At the same time, we cut our cost base by an annualized $42 million, or 19%, significantly exceeding our initial target of 10% and positioning our business on an even stronger footing going forward."

Third Quarter Fiscal 2023 Highlights

• As of March 31, 2023, the Company has achieved Operating Expenses¹ savings of $42 million, or 19% on an annualized basis compared to Q3 FY22, exceeding its targeted 10% cost reduction plan announced in November 2022.
• The Company has commenced a substantial issuer bid under which the Company will offer to repurchase for cancellation up to $15 million of its outstanding common shares.
• Revenue of $104.1 million, a decrease of $18.8 million, or 15%, from the same period in the prior year.
• Net loss of $(35.2) million, a decrease of $28.1 million, from the same period in the prior year.
• Adjusted EBITDA¹ of $56.1 million, a decrease of $10.7 million, or 16%, from the same period in the prior year.

Fourth Quarter Fiscal 2023 Outlook

Dye & Durham provided its outlook for Revenue and Adjusted EBITDA for the three-month period ended June 30, 2023, which are anticipated to be in the following ranges:

• Revenue of $115 - $120 million; and
• Adjusted EBITDA¹ of $65 - $70 million.

Quarterly Dividend

The Board of Directors declared a quarterly dividend of [$0.01875] per share to shareholders of record on May 17, 2023, payable on or about May 24, 2023.

Substantial Issuer Bid

This afternoon, the Company announced that the board of directors has approved the commencement of a substantial issuer bid (the "Offer") under which the Company will offer to repurchase for cancellation up to $15,000,000 of its outstanding common shares ("Common Shares"). The purchase price per Common Share will be determined by the Company in accordance with the terms of the Offer, but will be no less than $17.00 and not more than $20.00.

The Offer is expected to proceed by way of a modified Dutch auction, which will allow shareholders who choose to participate in the Offer to select the price, within a price range, to tender their Common Shares. Upon expiry of the Offer, the Company will determine the lowest purchase price within the range that will allow the Company to purchase the maximum number of Common Shares properly tendered to the Offer, having an aggregate purchase price not exceeding $15,000,000. The Company expects to announce the terms of the Offer and commence the Offer on May 12, 2023.

The Offer will not be conditional upon any minimum number of Common Shares being tendered. The Offer will, however, be subject to other conditions and the Company will reserve the right, subject to applicable laws, to withdraw or amend the Offer, if, at any time prior to the payment of deposited Common Shares, certain events occur.

The Company has engaged Canaccord Genuity Inc. as dealer manager for the Offer and TSX Trust Company to act as the depositary for the Offer.

The formal offer to purchase and issuer bid circular, letter of transmittal and notice of guaranteed delivery (collectively, the "Offer Documents") containing the terms and conditions of the Offer and instructions for tendering Common Shares will be filed with the applicable securities regulators and mailed to registered shareholders. The Offer Documents will be available under the Company's SEDAR profile at www.sedar.com.

Neither the Company nor its board of directors makes any recommendation to shareholders as to whether to tender or refrain from tendering any or all of their Common Shares to the Offer. This press release is neither an offer to purchase nor a solicitation of an offer to sell any Common Shares. The solicitation and the offer to purchase Common Shares by the Company is being made only pursuant to the Offer Documents. Shareholders of the Company are urged to read the Offer Documents carefully and to consult with their own financial, tax and legal advisors prior to making any decision with respect to the Offer.

Conference Call Notification 

The Company will hold a conference call to discuss its business later today, Wednesday, May 10, 2023, at 4:30 p.m. ET hosted by senior management. A question-and-answer session will follow the corporate update.

DATE: Wednesday, May 10, 2023
TIME: 4:30 p.m. ET
RAPIDCONNECT: To instantly join the conference call by phone, please use the following URL to easily register and be connected into the conference call automatically: https://emportal.ink/3LbJyt6  
TRADITIONAL DIAL-IN NUMBER: [phone] or [phone]
REFERENCE NUMBER: 11745439
TAPED REPLAY: [phone] or [phone]
REPLAY CODE: 745439#

This call is being webcast and can be accessed by going to:
https://app.webinar.net/4eqRJQrj7dm

1)

Represents a non-IFRS measure. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. For the relevant definition, see the "Non-IFRS Financial Measures" section of this press release. Management believes non-IFRS measures, including Operating Expense, EBITDA, and Adjusted EBITDA, provide supplementary information to IFRS measures used in assessing the performance of the business by providing further understanding of the Company's results of operations from management's perspective. Please see "Cautionary Note Regarding Non-IFRS Measures", "Select Information and Reconciliation of Non-IFRS Measures", and "Outlook" in the Company's most recent Management's Discussion and Analysis, which is available on the Company's profile on SEDAR at www.sedar.com, for further details on certain non-IFRS measures, including the relevant reconciliations of Adjusted EBITDA to its most directly comparable IFRS measure, and for a comparison of the Company's fourth quarter fiscal 2023 outlook for Revenue and Adjusted EBITDA to the Q3 FY23 results, including an explanation of the quarter over quarter differences, which information is incorporated by reference herein.

 

About Dye & Durham

Dye & Durham Limited provides premiere practice management solutions empowering legal professionals every day, delivers vital data insights to support critical corporate transactions and enables the essential payments infrastructure trusted by government and financial institutions. The company has operations in Canada, the United Kingdom, Ireland, and Australia.

Additional information can be found at www.dyedurham.com.

Non-IFRS Measures

This press release makes reference to certain non-IFRS measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies.

Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company's results of operations from management's perspective and to discuss Dye & Durham's financial outlook. The Company's definitions of non-IFRS measures may not be the same as the definitions for such measures used by other companies in their reporting. Non-IFRS measures have limitations as analytical tools. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of Dye & Durham's financial information reported under IFRS. The Company uses non-IFRS measures, including "Operating Expenses", "EBITDA", and "Adjusted EBITDA", (each as defined below), to provide investors with supplemental measures of its operating performance and to eliminate items that have less bearing on operating performance or operating conditions and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. The Company's management also uses non-IFRS financial measures in order to facilitate operating performance comparisons from period to period. The Company believes that securities analysts, investors, and other interested parties frequently use non-IFRS financial measures in the evaluation of issues.

Please see "Cautionary Note Regarding Non-IFRS Measures" and "Select Information and Reconciliation of Non-IFRS Measures" in the Company's most recent Management's Discussion and Analysis, which is available on the Company's profile on SEDAR at www.sedar.com, for further details on certain non-IFRS measures, including relevant reconciliations of each non-IFRS measure to its most directly comparable IFRS measure, which information is incorporated by reference herein.

Operating Expenses

Operating Expenses means the sum of direct costs, technology and operations, general and administrative, and sales and marketing expenses.

EBITDA

EBITDA means net income (loss) before amortization and depreciation expenses, finance and interest costs, and provision for income taxes. 

Adjusted EBITDA

Adjusted EBITDA adjusts EBITDA for stock-based compensation expense, asset impairment charges, loss on settlement of loans and borrowings, gains or losses from changes in fair value of derivative financial instruments and contingent consideration liabilities measured at fair value through profit or loss, specific transaction related expenses related to acquisitions, IPO and capital structure reorganization, operational restructuring costs, restructuring costs includes impact to the full year of cost synergies related to the reduction of employees in relation to acquisitions.

Forward-looking Statements

This press release may contain forward-looking information and forward-looking statements within the meaning of applicable securities laws, which reflects the Company's current expectations regarding future events, including with respect to the Company's financial outlook and business strategy. In some cases, but not necessarily in all cases, forward-looking statements can be identified by the use of forward looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "is positioned", "estimates", "intends", "assumes", "anticipates" or "does not anticipate" or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might", "will" or "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking statements. Forward-looking statements are not historical facts, nor guarantees or assurances of future performance but instead represent management's current beliefs, expectations, estimates and projections regarding future events and operating performance.

Specifically, statements regarding Dye & Durham's forecast on Revenue and Adjusted EBITDA, expectations of future results, performance, prospects, the markets in which we operate, the substantial issuer bid, or about the any future intention with regard to its business and acquisition strategies are considered forward-looking information. The foregoing demonstrates Dye & Durham's objectives, which are not forecasts or estimates of its financial position, but are based on the implementation of its strategic goals, growth prospects, and growth initiatives. The forward-looking information, including management's assessments of, and outlook for, Revenue and Adjusted EBITDA, are based on management's opinions, estimates and assumptions, including, but not limited to: (i) Dye & Durham's results of operations will continue as expected, (ii) the Company will continue to effectively execute against its key strategic growth priorities, (iii) the Company will continue to retain and grow its existing customer base and market share, (iv) the Company will be able to take advantage of future prospects and opportunities, and realize on synergies, including with respect of acquisitions, (v) there will be no changes in legislative or regulatory matters that negatively impact the Company's business, (vi) current tax laws will remain in effect and will not be materially changed, (vii) economic conditions will remain relatively stable throughout the period, (vii) the industries Dye & Durham operates in will continue to grow consistent with past experience, and (ix) the seasonal trends in real estate transaction volume will continue as expected, * the Company's expectations for increases to the average rate per user on its platforms, contractual revenues, and incremental earnings from its latest asset-based acquisition will be met, and (xi) those assumptions described under the heading "Caution Regarding Forward-Looking Information" in the Company's Management's Discussion and Analysis for the third quarter ended March 31, 2023. While these opinions, estimates and assumptions are considered by Dye & Durham to be appropriate and reasonable in the circumstances as of the date of this press release, they are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, levels of activity, performance, or achievements to be materially different from those expressed or implied by such forward-looking information.

The forward looking information, including the achievement of target Adjusted EBITDA set out above, is subject to significant risks including, without limitation: that the Company will be unable to effectively execute against its key strategic growth priorities, including in respect of acquisitions; the Company will be unable to continue to retain and grow its existing customer base and market share; risks related to the Company's business and financial position; that Dye & Durham may not be able to accurately predict its rate of growth and profitability; risks related to economic and political uncertainty; income tax related risks; and those risk factors discussed in greater detail under the "Risk Factors" section of the Company's most recent annual information form and under the heading "Risks and Uncertainties" in the Company's most recent Management's Discussion and Analysis, which are available under Dye & Durham's profile on SEDAR at www.sedar.com.  Many of these risks are beyond the Company's control.

If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. Although the Company has attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to the Company or that the Company presently believes are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information.

Although the Company bases these forward-looking statements on assumptions that it believes are reasonable when made, the Company cautions investors that forward-looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the industry in which it operates may differ materially from those made in or suggested by the forward-looking statements contained in this press release. In addition, even if the Company's results of operations, financial condition and liquidity and the development of the industry in which it operates are consistent with the forward-looking statements contained in this press release, those results of developments may not be indicative of results or developments in subsequent periods.

There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. No forward-looking statement is a guarantee of future results. Accordingly, you should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this press release represents Dye & Durham's expectations as of the date specified herein, and are subject to change after such date. However, the Company disclaims any intention or obligation or undertaking to update or revise any forward-looking information or to publicly announce the results of any revisions to any of those statements, whether as a result of new information, future events or otherwise, except as required under applicable securities laws. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.

All of the forward-looking information contained in this press release is expressly qualified by the foregoing cautionary statements.

SOURCE Dye & Durham Limited

For investor inquiries, please contact: Ross Marshall, LodeRock Advisors Inc., [email protected], 416.526.1563