Dye & Durham (TSE: DND) experienced strong revenue growth in the second quarter but posted a net loss. The company provides cloud-based software solutions to business and legal professionals.
Revenue & Earnings
Dye & Durham’s revenue for Q2 2022 came in at C$109.6 million, an increase of 225% from the prior-year quarter. Growth is mainly attributable to the increase in revenues from recent acquisitions made in the last twelve months and the realization of revenue synergies.
Meanwhile, the company reported a net income of -C$4 million in the quarter ended December 31, an increase of C$17.5 million over the same period last year. Adjusted EBITDA amounted to C$62.6 million in Q2 2022, up 267% from Q2 2021.
Acquisitions
On December 21, 2021, Dye & Durham entered into an agreement to acquire all of the issued and outstanding shares of Link Administration Holdings (Link) for cash consideration of approximately C$3.2 billion or AUD$5.50 per ordinary share of Link. The acquisition is expected to close in the third quarter of calendar year 2022.
On December 6, 2021, Dye & Durham acquired the Financial Solutions Business (TFSB) from TELUS for total cash consideration of C$500 million. TFSB provides state-of-the-art digital infrastructure and technology solutions to the financial community across Canada.
CEO Commentary
Dye & Durham’s CEO Matt Proud said, “We continue to deliver record growth in revenue and Adjusted EBITDA from our digital-infrastructure-like assets. We also continued to execute our “Build to a Billion” growth strategy during the quarter, acquiring high-quality EBITDA in businesses that share the essential nature of our existing technology while building scale and diversity within our business.”
Proud added that the acquisition of Telus Financial Solutions strengthens the company’s real estate business in Canada and adds new technology solutions essential to financial institutions in Canada.
The company’s agreement to acquire Link Administration Holdings of Australia adds significant scale and diversifies revenue, with over 50% of recurring revenue expected on a pro-forma basis.
Wall Street’s Take
Last month, Raymond James analyst Stephen Boland kept a Buy rating on DND and a price target of C$77. This implies 111% upside potential.
The rest of the Street is bullish on DND, with a Strong Buy consensus rating based on three Buys and one Hold.
The average Dye & Durham price target of C$64.25 implies 76% upside potential from current levels.
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