Good morning. My name is Pam, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Dye & Durham's First Qua rter Fiscal 2021 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, simply press star followed by two. Thank you. I'd now like to turn the conference over to Adam Peeler, Investor Relations, on behalf of Dye & Durham. Mr. Peeler, you may begin your conference.
Thank you, Pam, and good morning, everyone. Welcome to Dye & Durham's first quarter results conference call. Before we start, we'd like to remind you that all amounts discussed on this call are denominated in Canadian dollars unless otherwise indicated. Please note that statements made during this call may include forward-looking statements and information and future-oriented financial information regarding Dye & Durham and its business, and disclosure regarding possible events, conditions, or results that are based on information currently available to management, which indicate management's expectation of future growth, results of operations, business performance, and business prospects and opportunities. Such statements are made as of this date hereof, and Dye & Durham assumes no obligation to update or revise them to reflect events, disclosures, or circumstances except as required by applicable securities laws.
Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results. A number of these risks and uncertainties could cause results to differ materially from the results discussed today. Given these risks and uncertainties, one should not place undue reliance on these statements and information. Please refer to the forward-looking statements and information and future-oriented financial information section of our public filings without limitation, our MD&A, and our earnings press release issued today for additional information. Joining us on the call today are Matt Proud, Dye & Durham's Chief Executive Officer, and Jae Cornelssen, Dye & Durham's Chief Financial Officer. I'll now turn the call over to Matt for opening remarks. Matt.
Thank you, Adam, and good morning, everyone. We're pleased to be here with you today to review recent developments at Dye & Durham, as well as our financial and operating results for the three months ended September 30, 2020. In the company's first quarter of 2021, we generated revenue of CAD 21.9 million and adjusted EBITA of CAD 12.5 million, both of which exceeded our expectations. Revenue for the quarter was 29% higher and adjusted EBITA was 41% higher when compared to the three months ended September 30, 2019. We attribute this increase in financial performance to Dye & Durham continuing to deliver on its strategy of acquiring, integrating, and operating businesses in our sector to drive EBITDA. In addition to delivering strong financial results in our first quarter, we executed on our M&A strategy, and we also strengthened our capital structure.
Specifically, on September 23rd, we acquired a business called Property Information Exchange, or as we refer to it, as PIE, for CAD 53 million. PIE is a leading in-market cloud-based real estate due diligence platform. The integration of PIE is proceeding as anticipated, and this includes the near-term achievement of significant synergies. We also entered into a new credit facility for a CAD 140 million revolving term loan facility with an additional uncommitted accordion of up to CAD 25 million. This gives us an aggregate total of CAD 165 million of credit capacity. The interest rate under our new credit facility is expected to be approximately 3% versus our old prior credit facility, which carried an interest rate of 8.5%. We believe this lower interest rate is expected to significantly improve the company's levered-free cash flow. Also, on September 30th, we closed a CAD 50 million bought deal placement.
This morning, as a demonstration of our strong confidence in the cash flows the business produces, the company announced that our board of directors declared a quarterly dividend of CAD 0.001875 per share, which represents CAD 0.075 annually. This declaration of dividend is consistent with the disclosure put forth during our IPO process. Now, as we move into the second quarter, we continue to see the business performing very well on all fronts. As such, this morning, we announced fiscal 2021 Q2 revenue guidance of CAD 27 million-CAD 29 million. I'm excited to say that at the midpoint of this range, this represents revenue growth of 64% compared to the prior year period. Dye & Durham's core business model is to acquire, integrate, and operate businesses in our space.
Because our acquisition pipeline has never been more robust, we've actually expanded our M&A team to support the increased velocity of our pi peline. At present, we're evaluating multiple prospects, and these prospects could really move the needle on our targeted EBITDA for growth. However, it's important to keep in mind every acquisition involves two parties, and as such, there can be no certainty that we'll come to a successful transaction on any potential acquisition. However, we've clearly demonstrated a track record of successful execution on this front, and never has the opportunity in front of the company been so great. We believe that these developments, coupled with our strong first quarter financial results, demonstrate our consistent performance and put us in a very, very good position to continue building Dye & Durham for the remainder of fiscal 2021 and beyond.
Operator will now open the call to questions.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you're using a speakerphone, please lift your hands up before pressing any keys. We do ask that you limit yourself to two questions. One moment for your first question. Your first question comes from Robert Young with Canaccord Genuity. Please go ahead.
Hey, good morning. Maybe I'll start on the M&A pipeline you were just talking about. You said it had never been more robust. Is there some precision we can put around that? Ignoring PIE, would you say that the pipeline has grown, or is it relatively the same as the pipeline at the time of the IPO?
I mean, based on my comment on increased velocity, I think you can take away from that that it has grown because it has. Due to the growth in the pipeline and the number of potential opportunities in front of us, again, they're potential, we've actually increased the size of our M&A function to help deal with some of this volume and velocity.
Okay. That's great to hear. You were careful not to set expectations around timing there, but is it potential to see some additional M&A in the fiscal 2021?
I mean, Rob, M&A is our core business model. You see it every year from us. This is part of an ordinary course of business for us. I would not be surprised by that if I were you. Again, there are always two parties. We cannot commit to anything. I hope that answers your question.
How about I pivot a little bit onto the synergies that you're talking about? You said that PIE had potentially a quick execution on synergies. Maybe if you give a little more context around that. I mean, you'd said that it was a direct in-market competitor, and that might be the expectation. Was there good synergies in the quarter because it closed pretty close to the end?
No. Within our financial results, I believe there was five or six days of financial performance. I mean, there really is hardly any financial performance from PIE factored into our financials, which shows the strength of our core business as well. You'll see PIE in Q2, which obviously the quarter ending for us at the end of December. Look, I think if you just look at our industry, though, Rob, and how we grow and how we realize synergies in the near term, we have revenue synergies that we're able to execute on right away due to the transactional nature of these businesses. By right away, I mean within the first month or two after buying a business. In addition to that, we have cost synergies that when we conclude on these acquisitions, we're very confident in them.
We do a lot of diligence, and we execute right away. As such, you see these synergies falling to EBITDA quickly after close.
Okay. Part of the reason I was asking, it looked as though the U.K. business contribution was stronger than I was expecting. That would suggest maybe Stanley Davis, the synergies there were better than I had expected. Maybe talk a little bit about the synergies you saw there.
Without getting into specific details of particular businesses we have bought, I'll just tell you across the board, our core business is performing very well. That includes the U.K.
Okay. Okay. Last question for me. Maybe in Canada, the litigation solutions business was pretty heavily impacted by COVID. How has that gotten back on track? Have you seen any pent-up demand flow through there? Was it better than expected, or is that still an area that needs to get better?
It was a bit soft. I would not say it came back as strong as I thought. It is definitely back from all the depths of COVID in Q4, the quarter ending June 30th. We have a very diversified business that covers many aspects of the general economy. As you have seen the economy improve dramatically over the last many months, our business is performing well.
Okay. Congrats on a strong quarter. I'll pass the line.
Thanks, Rob.
Ladies and gentlemen, as a reminder, if you do have a question, please press star one. Please limit yourself to two questions. Your next question comes from Paul Steep with Scotia Capital. Please go ahead.
Good morning. Matthew, could you talk a little bit about, if you think on the M&A side of things, if you look outside of your core legal vertical, would you look to move into areas such as financial services or ancillary services in that area? I have got one quick follow-up. Thanks.
We have and continue to explore areas that are adjacent to what we do. In particular, the services that you mentioned do intersect with our core competencies. If you look at what Dye & Durham does, in many cases, it is information services meeting workflow software. That is the need and the niche that we focus on. You do see many banks, many financial service institutions that require these types of services for many different transaction types. Yes, we from time to time do look at companies as potential targets that would cover this space.
Great. The second one would just be on the dividend policy. You gave us a rundown there. Can you just recap maybe both dividend policy and debt policy? I do not know if you actually formalized it at the board level in terms of a specific payout ratio or a specific leverage level, but maybe just where the board came down to and management's comfort on setting the level, which seems sustainable. Thanks.
Yeah. On the dividend policy, I mean, look, we committed to paying a dividend at IPO of CAD 0.075 annually per share. It was very, very important to us to do what we said we were going to do. That is why you saw the board declare the quarterly dividend of CAD 0.01875 per share for this quarter. On the debt side, we do not have a formal debt policy that we make public. Look, we have given a lot of guidance on how we view debt. For the right acquisition, we will flex our balance sheet a bit provided we can delever very quickly, because that can be very accretive to the shareholders of Dye & Durham. Today, debt is a very inexpensive form of capital when compared to equity.
However, it really depends on what we're doing at the time and why we may or may not need to flex our balance sheet. The business also produces and is anticipated to produce a lot of free cash flow that we can deploy to fund our strategy.
Great. Thank you.
Your next question comes from Thanos Moschopoulos with BMO Capital Markets. Please go ahead.
Hi, good morning. You provided revenue guidance for next quarter. Just curious as to why you did not provide EBITDA guidance. Is that because there are some moving parts in terms of the timing of synergies? Just more broadly, how should we think about how margins might trend in the near term?
Look, we're always cautious with guidance. We have a lot of confidence in the numbers we provided as our core business is very much annuity-like in many situations. So we have great visibility in where we're going to end up. In regards to EBITDA, we gave guidance and have continued to give guidance in many of our public disclosure documents that we anticipate the EBITDA margin to be between 50%-60%. I don't see anything changing there.
I guess on a near-term basis, though, I mean, as you have a full quarter of PIE next quarter and as you're still capturing synergies there on the cost side anyway, might it be fair to expect a bit of margin compression relative to what we saw in Q1?
Thanos, can you please ask that question again? It was not clear on me.
Yeah, sorry. Yeah. Next quarter, you're going to have a full quarter of PIE. And just given that and given that you're still in the process of capturing the cost synergy there, presumably, might it be fair to expect a bit of margin compression relative to the margin levels we saw in the September quarter?
I think the best insight I can give you is it will be between 50% and 60%. It could be a little amount. As I said, we have executed on many synergies earlier than anticipated or on track as we thought we would. We will continue throughout the year to execute on more synergies as we bring these two in-market competitors together. I am very confident that you'll see the EBITDA between 50% and 60%.
Okay. Finally, with respect to the Canadian business, outside of litigation solutions, how do transaction volumes in the rest of the Canadian business look like relative to pre-COVID levels? Are they kind of consistent where we were before COVID, or is there still some headwinds there from the pandemic?
No. I mean, as I mentioned, the business continues to perform well on all fronts. Aside from the small amount of softening we mentioned and we talked about on the litigation front, the real estate business in Canada continues to do well as does Business Law Solutions. And Business Law Solutions, as I mentioned in the past, are often driven by GDP. And with increased GDP in Canada, the business is doing well.
Great. Thanks for passing along.
Your next question comes from Stephen Boland with Raymond James. Please go ahead.
Oh, good morning. Thanks for taking my question, Matt.
Yeah, good morning.
First question, maybe we can just drill down maybe into the U.K. a little bit in terms of the integration and some of the synergies. Is the plan in the U.K. now to run this whole country or region under one platform, management, sales, marketing, development, or any other aspects of that business? Is that the plan going forward?
I mean, we have a common set of technologies that we use to manage the business, and that enables us to scale in the way that we have. By way of example, we use a single customer support application, a single development support application, one accounting system across the company. When we buy companies, we put them on our accounting system, etc. This enables us to scale. When you look at the U.K., in particular, we're talking about England and Wales, we always have these common sets of technology. Because we bought two in-market competitors, we will also have two operational applications that over a period of time will come together into one. That will enable us to generate more synergies than we typically would do if it was not an in-market competitor.
As such, we think the PIE acquisition will be highly synergistic over the foreseeable future.
Okay. That's good color. The second question is, when I look at your service offerings by jurisdiction, whether it's business law, whether it's real estate conveyance, a lot of boxes have been ticked. Maybe you could just talk about what you're looking for in terms of acquisitions, whether it's Canada or the U.K. region that you're mentioning. Is it just a combination of customer lists, or is it extra geography? What fills in those boxes for you, Matt, at this point?
It's both, and it's also from time to time technology. We operate in a platform business, which also can be referred to as a network business. Owning more pieces of that network makes it easier for our customers to transact. That's who we want to be. We want to make it so easy for them to do their job that they would never leave. We've been very successful in doing that in each jurisdiction we operate when you segment it by product line. That flows up into the acquisition pipeline. We are consolidating our industry, and that's what we're looking at when we do this.
Okay. In the past, in our conversations, you talked about possibly expanding outside of Canada and the U.K., perhaps other Commonwealth countries. Is your focus right now that there's just so much pipeline in these two regions that that's kind of where your focus is right now?
I would say the majority of our focus is there. We are looking other places, though. We've looked in Australia. We've looked in the U.S. in the past, and we continue to. I would say the U.S. is not on the near-term radar, but other jurisdictions may be.
Okay. That's great color. Thanks, Matt.
There are no further questions at this time. Please proceed.
Great. Thank you, Pam. Thank you, everyone, today for your participation. This concludes our first quarter call.