Release Date: September 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dye & Durham Ltd (DYNDF, Financial) reported the highest revenue quarter in the company's history, excluding the impact of the TM Group divestiture, with $120 million in revenue, representing 15% growth.
- The company generated the second highest level of adjusted EBITDA at $69 million in the fourth quarter.
- Dye & Durham Ltd (DYNDF) achieved approximately $32 million of leveraged free cash flow, marking a record quarter performance since the company's IPO.
- The company's financial technology business grew revenue by more than 20% in fiscal 2024 and is off to an even greater start in fiscal 2025.
- The acquisition strategy has been successful, with recent acquisitions like Credas showing over 30% revenue growth since acquisition and strong performance expected to continue.
Negative Points
- Revenue exposed to real estate transactions globally in Q4 was 50%, indicating a significant reliance on this sector.
- Net finance costs for the quarter were $114 million, a substantial increase from $37 million in the corresponding period of fiscal 2023.
- The company is facing ongoing litigation from activist shareholders, which has resulted in the postponement of a special meeting and added uncertainty.
- Despite strong performance, the company remains committed to reducing its leverage ratio below 4 times, indicating current high debt levels.
- The company incurred higher severance costs in the fourth quarter, which are expected to continue into the first quarter of fiscal 2025.
Q & A Highlights
Q: The organic growth increased sequentially from 4% to 8%, but ARR percentage of revenue declined from 30% to 29%. Can you break that apart and give more insight into where the growth is coming from?
A: The ARR growth did decrease as a percent of total revenue mainly due to an increase in overall transactions in the fourth quarter, particularly in real estate transactions. However, the absolute number did increase. We are also seeing growth in the Canadian market, particularly in due diligence and financial services.
Q: You mentioned two acquisitions post-quarter for $21 million. Was that the cash outflow for both acquisitions in total?
A: Yes, that is correct.
Q: You had to postpone your special meeting. Can you provide an overview of where that process sits?
A: The activist shareholders commenced litigation against us, resulting in court actions that included suspending the meeting. We don't have a new date for the meeting yet and will keep the market posted as we learn more.
Q: From a cost perspective, have you captured all the cost synergies from the restructuring program, or might there be some incremental to come?
A: We have executed on the vast majority of the $26 million cost savings identified earlier this year, primarily people-related. However, there is always more work to do as we continue to manage the business.
Q: Can you clarify if Lexis Affinity was the larger of the two acquisitions and which geography the second one was in?
A: Yes, Lexis Affinity was the larger acquisition, and the second one was also in Australia.
Q: Any specific cash flow dynamics we should think about in the near term?
A: The secured bond interest is paid semiannually, with the next payment in October. We also had higher severance costs in Q4, which will continue into Q1. Other than that, the business momentum is generating strong cash flows.
Q: Can you define what you see as a tuck-in acquisition and what we can expect size-wise looking forward?
A: Both recent acquisitions are considered tuck-ins. We negotiated favorable vendor financing terms, allowing us to pay the remainder interest-free over the coming years. We are focused on driving organic growth and reducing our leverage ratio.
Q: Can you provide an update on the U.K. business and the initiative to bundle search with practice management?
A: The initiative is underway and included in ARR. We have been successful in putting customers on minimum spend contracts for real estate and property searches, and we expect to see the benefits in the coming fiscal year.
Q: Are you seeing a more robust or normalizing refinance line in the Canadian business with rates falling?
A: The revenue related to Canadian real estate transactions remains sluggish. However, other areas like subscription revenue, fintech business, and corporate commercial transactions are picking up significantly. We remain optimistic that real estate transactions will rebound as interest rates come down.
Q: Can you provide expectations around investment in intangibles going into 2025?
A: We are drawing down capitalized intangibles over time, prioritizing projects accordingly. We expect this line item to be lower in the future, targeting roughly $20 million to $25 million annually.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
