Dye & Durham (DND) AI Stock Analysis

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Dye & Durham

(TSX:DND)

48Neutral

Dye & Durham's overall stock score is impacted by significant financial challenges, including persistent net losses and high leverage. Technical analysis supports a cautious outlook due to bearish trends. While the earnings call provided some positive guidance in revenue growth and debt reduction efforts, the valuation remains unattractive with a negative P/E ratio.

Positive Factors

Governance

Blacksheep has agreed to customary standstill and voting support terms, gaining the right to appoint a new board member, which is seen as positive governance development.

Revenue Growth

DND's banking technology business has been notably strong, with over 20% revenue growth in FY2024.

Negative Factors

Activist Pressure

Activist pressure from Engine Capital is pushing Dye & Durham to optimize return on invested capital and focus on organic growth and disciplined acquisitions.

Dye & Durham (DND) vs. S&P 500 (SPY)

Market Cap

C$565.82M

Dividend Yield0.89%

Average Volume (3M)223.12K

Price to Earnings (P/E)―

Beta (1Y)1.80

Revenue Growth2.97%

EPS Growth25.63%

CountryCA

Employees1,100

SectorTechnology

Sector Strength51

IndustrySoftware - Infrastructure

Share Statistics

EPS (TTM)-2.33

Shares Outstanding67,200,000

10 Day Avg. Volume329,322

30 Day Avg. Volume223,117

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)1.75

Price to Cash Flow (P/CF)12.10

P/FCF Ratio5.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

C$21.33

Price Target Upside153.33% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering3

Dye & Durham Business Overview & Revenue Model

Company DescriptionDye & Durham (DND) is a leading provider of cloud-based software and technology solutions designed for legal and business professionals. The company operates primarily in the legal, financial, and government sectors, offering a suite of products that streamline workflow and increase efficiency through the automation of complex processes. Dye & Durham's core services include practice management solutions, real estate conveyancing software, and court filing services.

How the Company Makes MoneyDye & Durham generates revenue through the sale of its cloud-based software solutions and services to legal, financial, and governmental organizations. The company employs a subscription-based model, where clients pay recurring fees for access to its software platforms. Additionally, Dye & Durham earns revenue through transaction-based fees for certain services, such as real estate conveyancing and court filing. The company may also benefit from strategic partnerships and acquisitions that expand its product offerings and market reach, further contributing to its income streams.

Dye & Durham Financial Statement Overview

Summary

Dye & Durham faces financial challenges with consistent net losses and high leverage. While operational efficiency is moderate and cash management is adept, the company's high debt levels and negative profitability metrics are concerning.

Income Statement

Neutral

Dye & Durham's income statement reflects a challenging environment with persistent net losses. The TTM (Trailing-Twelve-Months) shows a negative net income of -$154 million. The gross profit margin stands at 59.8%, indicating healthy cost management. Revenue growth appears stagnant with minimal increase from the previous year. EBIT and EBITDA margins are at 5.2% and 28.3%, respectively, showing moderate operational efficiency. However, the substantial net loss impacts the overall income statement score.

Balance Sheet

Neutral

The balance sheet reveals a high debt-to-equity ratio of 5.06, indicating significant leverage. The company's equity ratio is 14.3%, reflecting a low proportion of equity financing. Return on equity is negative due to net losses, highlighting profitability challenges. While total assets increased, the high liabilities and low equity position pose financial risks. Overall, the balance sheet indicates financial leverage concerns and equity instability.

Cash Flow

Neutral

Dye & Durham reports positive free cash flow of $92.6 million in the TTM, though lower than previous periods. Operating cash flow is strong at $125 million, showing good cash generation relative to net income. However, free cash flow growth has declined, and the free cash flow to net income ratio is negative due to net losses. The cash flow statement reflects solid cash management but is affected by the company's profitability issues.

TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
468.06M	457.70M	451.11M	474.81M	208.94M	65.51M
	Gross Profit
279.83M	312.90M	304.78M	417.25M	181.02M	58.68M
	EBIT
24.31M	61.64M	63.88M	110.04M	40.85M	19.57M
	EBITDA
132.29M	114.48M	79.04M	232.35M	46.06M	21.53M
	Net Income Common Stockholders
-154.04M	-174.98M	-170.64M	7.67M	-40.85M	-11.24M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
32.33M	80.32M	36.27M	223.62M	429.33M	2.57M
	Total Assets
2.27B	2.24B	2.12B	2.25B	1.56B	166.96M
	Total Debt
1.65B	1.55B	1.35B	1.17B	599.94M	195.56M
	Net Debt
1.62B	1.47B	1.31B	943.67M	170.60M	192.99M
	Total Liabilities
1.94B	1.85B	1.70B	1.49B	807.45M	2.00M
	Stockholders Equity
325.31M	389.34M	423.08M	763.42M	750.92M	-2.00M
Cash Flow		Free Cash Flow
92.59M	141.92M	108.30M	161.63M	69.83M	30.14M
	Operating Cash Flow
124.96M	180.87M	141.40M	185.44M	79.35M	33.17M
	Investing Cash Flow
-269.74M	-40.28M	-158.27M	-923.58M	-790.67M	-11.17M
	Financing Cash Flow
140.51M	90.16M	-164.87M	535.30M	1.14B	-22.98M

Dye & Durham Technical Analysis

Technical Analysis Sentiment

Negative

Last Price8.42

Price Trends

50DMA

12.03

Negative

100DMA

14.95

Negative

200DMA

14.95

Negative

Market Momentum

MACD

-1.20

Positive

RSI

27.59

Positive

STOCH

18.05

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:DND, the sentiment is Negative. The current price of 8.42 is below the 20-day moving average (MA) of 10.27, below the 50-day MA of 12.03, and below the 200-day MA of 14.95, indicating a bearish trend. The MACD of -1.20 indicates Positive momentum. The RSI at 27.59 is Positive, neither overbought nor oversold. The STOCH value of 18.05 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:DND.

Dye & Durham Peers Comparison

Overall Rating

UnderperformOutperform

Sector (58)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ENGH	76 Outperform	$1.32B	15.55	14.76%	4.38%	8.11%	15.83%
SHOP	72 Outperform	$150.70B	53.92	19.58%	―	27.85%	1400.97%
OTEX	69 Neutral	$9.23B	10.35	16.00%	4.04%	-3.59%	432.46%
KXS	68 Neutral	C$4.67B	157.81	-0.10%	―	14.85%	-105.25%
CSU	63 Neutral	C$96.41B	96.28	30.90%	0.12%	21.56%	31.90%
Sector *	58 Neutral	$11.04B	9.83	-6.56%	3.16%	7.59%	-10.43%
DND	48 Neutral	C$565.82M	―	-42.62%	0.89%	2.97%	25.63%

* Technology Sector Average

Performance Comparison

TSE:DND

Dye & Durham

8.44

-6.99

-45.30%

TSE:ENGH

Enghouse Systems

24.52

-4.25

-14.76%

TSE:SHOP

Shopify

117.37

22.45

23.65%

TSE:OTEX

Open Text

35.81

-10.18

-22.13%

TSE:KXS

Kinaxis Inc

172.60

22.29

14.83%

TSE:CSU

Constellation Software

4,664.25

1,019.30

27.96%

Dye & Durham Earnings Call Summary

Earnings Call Date: Feb 13, 2025 | % Change Since: -38.67% | Next Earnings Date: May 7, 2025

Earnings Call Sentiment Neutral

The earnings call reflected a balanced view with positive aspects such as revenue and ARR growth, strong EBITDA margins, and a commitment to debt reduction. However, negative factors included significant one-time expenses impacting cash flow, increased net finance costs, and challenges related to real estate market exposure.

Highlights

Top Line Growth

Dye & Durham reported revenue of $120.7 million, up 10% compared to the corresponding period in fiscal 2024. Organic revenue increased by 6.3%, driven primarily by Canadian practice management software in the Financial Services division.

Increased Annual Recurring Revenue (ARR)

ARR increased to 35% of total revenue, compared to 27% in prior periods. ARR was $152 million, up 36% or $40.3 million year-over-year.

Adjusted EBITDA Growth

Reported adjusted EBITDA of $66.5 million, up 11% from the same period in fiscal 2024, maintaining strong EBITDA margins at 55%.

Debt Reduction Commitment

Net debt reduced by approximately $30 million since December 31, 2023. The company is focused on debt reduction by suspending M&A activities and concentrating on organic growth.

Lowlights

One-Time Expenses Impacting Cash Flow

Leverage free cash flow was negative $39 million for the second quarter, primarily due to payments related to the CEO separation agreement and shareholder engagement costs.

Net Finance Costs Increased

Net finance costs were $66 million in the second quarter, an increase of $17 million compared to the corresponding period in fiscal 2024, driven by factors including unfavorable net unrealized foreign exchange impacts.

Challenges in Real Estate Exposure

Revenue exposed to real estate transactions globally was 41% in Q2, compared to 44% in fiscal 2024, with potential headwinds from contract renewals influencing ARR performance.

Company Guidance

During the Dye & Durham second quarter fiscal 2025 earnings call, several key metrics and guidance points were discussed. The company reported a 10% year-over-year revenue growth to $120.7 million, with organic revenue increasing by 6.3%. Annual recurring revenue (ARR) grew 36% to $152 million, now representing 35% of total revenue, up from 27% the previous year. The company maintained a strong EBITDA margin of 55%, with adjusted EBITDA reaching $66.5 million, an 11% increase. Contracted revenue accounted for 57% of the total, with real estate transaction exposure at 41%. Despite a negative free cash flow of $39 million this quarter, primarily due to one-time costs, the company remains focused on debt reduction, having reduced net debt by approximately $30 million to $1.38 billion by the end of December 2024. Looking ahead, Dye & Durham is aiming for positive organic growth, supported by improving real estate markets and a strategic shift towards developing workflow software solutions, signaling a move away from growth through mergers and acquisitions.

Dye & Durham Corporate Events

M&A Transactions

Dye & Durham Responds to Unsolicited Purchase Proposal

Neutral

Feb 25, 2025

Dye & Durham Limited has confirmed receiving an unsolicited, non-binding proposal to purchase the company at $20 per share, though it lacks material financing details. The company is not engaged in any discussions or negotiations regarding this proposal and does not plan to comment further unless legally required.

Executive/Board ChangesBusiness Operations and Strategy

Dye & Durham Announces New Interim CEO and Board Chair

Positive

Feb 21, 2025

Dye & Durham announced the appointment of Sid Singh as Interim CEO and Arnaud Ajdler as Chair of the Board. Singh, who has extensive experience in technology and corporate turnarounds, aims to strengthen the company’s market position and enhance stakeholder value through strategic initiatives. The leadership changes are expected to drive sustainable growth and improve customer satisfaction.

DividendsBusiness Operations and StrategyFinancial Disclosures

Dye & Durham Achieves 10% Revenue Growth in Q2 FY2025

Neutral

Feb 13, 2025

Dye & Durham reported a 10% increase in revenue to $121 million for Q2 FY2025, aligning with its guidance. The company observed a 36% rise in Annual Recurring Revenue, now constituting 34% of total revenue. With a strategic focus on organic growth and market-leading innovation, Dye & Durham aims to improve customer satisfaction and financial performance. Despite a net loss of $17.6 million, the company remains optimistic about achieving sustainable growth. The board declared a dividend of $0.01875 per share, payable on February 27, 2025.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.