Data Group Posts Full Year and 4th Quarter Results for 2012 [Professional Services Close - Up]
(Professional Services Close - Up Via Acquire Media NewsEdge) DATA Group Inc. announced its financial and operating results for the fourth quarter ("Q4") and the year ended December 31, 2012, which include the operating results of its subsidiaries DATA Group, The Fulfillment Solutions Advantage Inc. ("FSA") and FSA Datalytics Canada Inc.
"DATA Group made strong progress on our growth strategy in the fourth quarter. Our Q4 2012 Adjusted EBITDA was ahead of the fourth quarter 2011 by 5.1 percent as we signed significant new client agreements, launched two important new products and initiated a new program to accelerate our rate of cost saving reductions in 2013 and beyond. We incurred a net loss during the quarter and year to date due to a change in the valuation of our goodwill in Q4. This was a non-cash adjustment which does not impact current or future cash flows and more closely aligns our book value per share with our current market value per share" said Michael Suksi, President and Chief Executive Officer. "During the fourth quarter, we announced a change in our dividend policy effective January 1, which improves the allocation of our available cash among dividends on our common shares, our debt reduction plans and investment in our growth initiatives. Consistent with that announcement, in a separate press release issued this morning we confirmed a quarterly dividend of $0.075 per share ($0.30 annualized) payable on April 15, to holders of record on March 28. As evidence of the sustainability of our dividend, if we had paid the $0.075 per share in Q4 of 2012, we would have had a 30.5 percent payout of free cash flow. Based on our current business outlook, we expect to continue with this dividend per share rate for the balance of 2013, while also continuing to reduce our debt and invest in new revenue generating activities. We believe this strategy will position DATA Group for sustainable profit growth, enterprise value appreciation and a consistent dividend payout to our shareholders over the longer term."
In a release on March 6, the Company noted that it continues to expand its capabilities with new electronic communications oriented solutions, in order to position the company for sustainable, long term growth. The company's growth strategy is to meet its client's evolving requirements by bundling its new e-communication services with its traditional print services into a single, holistic communications management solution. Clients will enter into multi- year outsourcing contracts with DATA Group for this bundled solution. DATA Group refers to this set of services as Managed Business Communications Services. This growth strategy also includes selectively expanding into the United States with its existing clients who have U.S. operations and making acquisitions that accelerate its expansion into new products and services. DATA Group is also focused on continuously reducing costs in its traditional business in order to offset investment in its growth strategy and to improve profitability. DATA Group believes this strategy provides it with substantial opportunities to offset revenue declines in traditional print services due to technological change, resulting in revenue and profitability growth through expanded market share in its traditional business and from new revenue streams. DATA Group remains focused on the successful, ongoing execution of this plan in a prudent, well managed fashion, balancing its investment in the growth plan with its financial strategy.
During the fourth quarter and throughout 2012, DATA Group made material progress on this strategy. Revenues and gross profit both grew during the year. Adjusted EBITDA for the year was down due to the Company's investment in its growth strategy but increased in the fourth quarter by 5.1 percent. The growth in revenues and gross profit was due to increased new business wins and the acquisition of FSA and Datalytics late in 2011. DATA Group also won a number of new customer agreements that will take material effect in 2013, in which its bundled Managed Business Communications Services ("MBCS") played a key role. More specifically, DATA Group recently signed a letter of intent for one of the largest single source, multi-year, customer agreements in its history. This is an expansion of a current agreement with a significant client, and includes management and provision of administrative documents as well as marketing print and communications services in Canada and the U.S. The new agreement took effect in December of 2012 and has required DATA Group to make modest investments in people and technology throughout the fourth quarter, including the establishment of operations in Niles, Illinois. Two additional significant new agreements, based on the MBCS approach will begin in the first half of 2013. Partially offsetting this, DATA Group experienced some losses of business during the fourth quarter due to technological change and competitive activity, which will take effect in 2013. DATA Group expects the net impact of these wins and losses will be positive to revenues and Adjusted EBITDA in the future.
DATA Group launched two new technology-oriented services in the fourth quarter of 2012. Marketing Campaign Management, a software- based service enhances the effectiveness of the Company's client's marketing departments by creating collaborative, automated workflows between the clients' marketing staff, their agencies and fulfillment of the campaign by DATA Group. This results in faster and more effective marketing campaign planning, creative design, execution and reporting on results. DATA Group also launched Document Process Management ("DPM") services. Rather than just managing the supply of "blank" (or uncompleted) documents which the DATA Group currently does, DPM enables DATA Group to provide services associated with completing and using documents, such as workflow consulting and process automation, scanning and archiving of documents and related data extraction.
In the fourth quarter of 2012, DATA Group achieved approximately $2.0 million in cost saving efficiencies. In 2012, DATA Group generated approximately $5.3 million in cost savings, which is similar to what it have achieved in the previous two years. DATA Group is now initiating a new program that it believes will increase its rate of cost savings in the future.
As previously announced, DATA Group made a change to its dividend policy in November of 2012, which took effect in January of 2013. The Company annualized dividend is now $0.30 per share and will be paid on a quarterly basis. In 2013, it expects to maintain a consistent common share dividend through a 40 percent-60 percent payout of free cash flow.
DATA Group Inc. is a managed business communications services company focusing on customized document management and marketing solutions.
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