DATA Communications Management (DCM) Q1 2025 earnings summary

Executive summary

• Q1 2025 revenue was $123.7 million, down 4.3% year-over-year but up 6.4% sequentially, mainly due to lower order activity from large enterprise clients; new business activity is expected to contribute in the second half of the year.

• Gross profit margin improved to 29.3% from 28.9% in Q1 2024, with adjusted EBITDA margin rising to 15.0% from 14.4% year-over-year.

• Net income rose to $5.1 million from $1.5 million in Q1 2024, and adjusted net income increased to $5.2 million (4.2% of revenue) from $4.9 million (3.8%).

• No restructuring or one-time charges were incurred in Q1 2025.

• Special dividend of $0.20 per share paid, and a regular quarterly dividend of $0.025 per share was initiated.

Financial highlights

• Gross profit was $36.3 million (29.3% margin), the second highest in recent history.

• Adjusted EBITDA was $18.6 million (15.0% margin), nearly unchanged year-over-year.

• Net income: $5.1 million, up from $1.5 million in Q1 2024.

• Free cash flow was negative $7.4 million, mainly due to working capital changes.

• Net debt to adjusted EBITDA was 2.10x as of March 31, 2025, up from 1.81x at year-end 2024.

Outlook and guidance

• Management expects revenue growth to return in the second half of 2025, supported by a strong business development pipeline and new client wins.

• Priorities include driving organic growth, improving margins, and leveraging technology-enabled offerings.

• Long-term objectives reaffirmed: 5% revenue CAGR, gross profit margin above 30%, adjusted EBITDA margin above 14%, and net debt to adjusted EBITDA below 1.0x.

• No further integration costs related to the MCC acquisition are expected.

• Free cash flow is expected to reduce net debt through the year.