rtq..$32.99...a GOLIATH in the making.... A legal technology company
Dye & Durham (TSX:DND) has all the right mix that could help it deliver robust returns in the coming years. The tech-based company provides public records to the legal and business professionals and has delivered exceptional sales and adjusted EBITDA over the past several years.
Its revenues and EBITDA have grown at a breakneck pace, thanks to its large blue-chip client base and low churn rate. Also, its accretive acquisitions have boosted its growth further.
With the ease in lockdown measures and opening of the courthouses, Dye & Durham’s products are likely to witness increased demand, which should drive strong double-digit growth in its revenues and EBITDA. The company projects about 64% growth in its top-line for the second quarter of fiscal 2021, which should support its adjusted EBITDA. DND’s strong fundamentals position it well to deliver double-digit sales and EBITDA growth over the next several years.
The company’s strong customer base, accretive acquisitions, long-term contracts, and high net revenue retention rate suggest that Dye & Durham could deliver multi-fold returns over the next decade.
What does Dye & Durham do?
Dye & Durham provides a cloud-based platform that helps increase workflow efficiency for financial service companies, governmental agencies, and law firms. By using Dye & Durham’s platform, companies can automate the due diligence, document preparation, and electronic filing processes. It has several high-profile companies listed as customers. These include the likes of Bennett Jones and Bank of Nova Scotia.
The company operates in a large and growing industry. Dye & Durham lists Canada, the United States, the United Kingdom, and Australia as being its current addressable market. In 2018, the global legal industry grew to $12.6 billion. This compares to the industry’s estimated $9.2 valuation in the previous year. If Dye & Durham is able to grow its market share in the countries listed above, it could be enough to turn the company into a notable international challenger.
Dye & Durham’s earnings report was very eventful
The company’s earnings report on NOV. 10 2020 first notes a year-over-year increase of $5 million in quarterly revenue. This translates to an increase of 29% when comparing Dye & Durham’s Q1 revenue in fiscal year 2021 (the company’s fiscal year starts in July) to the previous year. Although the company reported an increase in losses, it did show that its margins were improving. Dye & Durham reported that its adjusted EBITDA margin had increased to 57% compared to 53% in the previous year.
As I’ve noted in my previous articles covering this company, one of Dye & Durham’s main growth drivers will come in the form of mergers and acquisitions. In this earnings report, the company reported that it had acquired R-Squared Bidco for $54.5 million. This company provides firms in the United Kingdom with a best-in-class real estate due diligence platform. The acquisition is further evidence of Dye & Durham’s plans to gain significant market share in that region.
The earnings report also indicated that Dye & Durham’s board had approved the company’s first dividend distribution. The dividend is valued at $0.01875 per share and will be payable to shareholders of record at December 7, 2020. The establishment of a dividend by the company reflects the confidence of the board in Dye & Durham’s business.
Dye & Durham’s report ends with its projected guidance for next quarter. The company expects to see quarterly revenues between $27 million and $29 million. If correct, this would translate in a year-over-year growth of 64% in the company’s H1 revenue.