Dye & Durham ( DYNDF ) reported third-quarter financial results on Tuesday. The transcript from the company's third-quarter earnings call has been provided below.

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Summary

DND reported a revenue decline of 12.3% for Q3 fiscal 2026, attributed to market downturns and divestiture impacts, but noted growth in banking technology.

Adjusted EBITDA decreased by 19%, primarily due to revenue impacts and increased professional fees, although cost-saving measures helped stabilize margins.

The company is executing a transformation program focused on Product Innovation, Commercial Excellence, Operations, and Financial Discipline, with significant progress noted.

DND launched new legal technology platforms and secured significant contracts, demonstrating strong momentum in product innovation and customer engagement.

Management emphasized ongoing cost optimization efforts, including global operational streamlining and office footprint reduction, expected to realize $17-19 million in savings over two years.

Future guidance includes continued focus on product development, customer acquisition, and strategic cost management to drive long-term EBITDA growth.

Full Transcript

OPERATOR

Good morning. Welcome to The DND third quarter fiscal 2026 results conference call. All lines have been placed on mute to prevent background noise. With me on the call today are George Sivin, DND's Chief Executive Officer, and Sandra Bell, DND's Interim Chief Financial officer. DND's Q3 fiscal 2026 earnings press release, Financial statements and MDA are available on SEDAR Plus. Please note that statements made during this call may include forward looking statements and information and future oriented financial information regarding DND and its business. Any disclosure regarding possible future events, conditions or results are based on information currently available to management and indicate management's current expectation of future growth, results of operations, business performance, and business prospects and opportunities. Such statements are made as of the date hereof and DND 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 or 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 information. Please refer to the Forward Looking Statements section of our Public filings, including without limitation, our recently filed MDA and Earnings press Release for additional information. In particular, for additional details regarding DND's Run Rate Cost savings expectations, please refer to the section titled update on Q3 2025 forward looking information and Run Rate Cost Savings in DND's Q3 fiscal 2026 MD&A and DND's press releases dated November 12, 2025, November 26, 2025 and May 19, 2026. In addition, certain financial results discussed on this call are non IFRS financial measures, namely Adjusted EBITDA and Segment Adjusted ebitda. These measures are not recognized measures under ifrs, do not have a standardized meaning prescribed by ifrs and are therefore unlikely to be comparable to similar measures presented by other companies. Please refer to the Non IFRS Measures section of our public filings. Included without limitation are recently filed MDA and Earnings Press release for additional information on the Company's use of non IFRS measures, including the Company's definitions of Adjusted EBITDA and Segment Adjusted EBITDA and the applicable reconciliation of Adjusted EBITDA and Segment Adjusted EBITDA to their most directly comparable IFRS measure. Please note that today's call is dedicated strictly to reviewing DND's financial results and operational milestones for the quarter. Because DNDs is currently engaged in an active, ongoing review of strategic alternatives. The company has determined it is prudent not to host a live Q and A session during today's call. They appreciate the continued support and patience of investors, partners and customers as they focus on maximizing value for all.

OPERATOR

DND Stakeholders I'll now turn the call over to George Sivin.

George Sivin (Chief Executive Officer)

Good morning everyone and thank you for joining us in Q3. We made meaningful progress in stabilizing the business. While our results continued to reflect market headwinds and normal seasonality adjusted EBITDA remained resilient, supported by the underlying durability of our revenue base and the operating expense savings we have begun to realize. Sandra Bell, our interim cfo, will review the quarter's financial performance in more detail. Shortly before that, I want to update you on our continued execution of the transformation program we announced in February, which is built on four pillars Product Innovation, Commercial Excellence, World class

George Sivin (Chief Executive Officer)

Operations and Talent and Financial Discipline. We are seeing strong momentum across each pillar. Within the Product Innovation pillar, we officially launched Unity in British Columbia and customer uptake is validating our belief in the differentiated value it provides. Notably, we secured a half million dollar deal with a firm that selected Unity specifically for its national coverage, allowing us to support their offices across Canada. We continue to streamline and enhance our customer workflows through ecosystem integrations.

George Sivin (Chief Executive Officer)

We integrated TreeFort and FCT identity verification programs into Unity in Canada, reinforcing our commitment to security and integrity in the home buying process. We connected Stewart Title's Indemnity Insurance with Unity in the UK and both volume and revenue through this integration continue to grow. We introduced anti money laundering and counterterrorism financing checks in Unity Search in Australia, helping customers manage compliance within their existing workflows. And we integrated our own ECOR and Unity Entity management solutions, providing clients with an end to end entity management and corporate filing workflow nationally backed by our long standing record as a government provider. Speaking of eCorp, we secured a four year contract extension with the Ontario Business Registry, a vote of confidence for our market leading search and filing solution in Canada. And last week we launched new global platforms for legal workflows and due diligence which I'll speak about shortly within the Commercial Excellence pillar. Despite real estate market weakness impacting activity volume across our major markets, we saw momentum with new customer acquisition, customer win backs and and key client renewals. We have shifted from a retention only posture to a proactive acquisition motion in Canada. Additionally, we are seeing bundled packages leading to successful cross sell opportunities including a recent six figure PMS contract with an existing search client in the uk, long standing customer relationships are driving deal velocity on win backs with clients returning after experiencing gaps in competing product capabilities. In Canada, Winback pipeline has grown substantially with several six figure annual deals closed in Q3 driven by our improved commercial flexibility and renewed product confidence. New logo revenue is now approaching parity with churn losses on Unity in Canada, a meaningful inflection point in the business trajectory and for UK search. After migration related disruption in prior quarters, UK retention recovered to high levels in Q3 with the business demonstrating commercial resilience through cross sell campaigns and disciplined account management. We also added new sales and customer success leaders who bring deep experience in high growth software and global teams. The impact on our go to market execution has been immediate and a key contributor to this quarter's results. Within the world class Operations and Talent pillar as disclosed in our public filings, we have identified and are actioning 17 to 19 million of run rate cost savings which we will realize over the next two years. I will share more details later in this call. In line with this, we have continued efforts to streamline and scale the business globally across our organization. Additionally, we are applying AI to both automate processes and augment capabilities internally with significant benefits to product development and operations. Finally, within the financial Discipline pillar, we applied the proceeds from the sale of Credis to our long term borrowings, helping reduce our debt this quarter. Building from this momentum in Q3, last week's launch of our Legal Workflow Platform and Legal Due Diligence and Filing Platform marks an important step towards the unified AI native operating system for law firms we outlined last quarter. The new legal Workflow platform is designed to address the unmet need of law firms today which must assemble their own workflows, templates and precedents on top of administrative burdens. The platform is meant to be a one stop shop for firms with a library of pre built practice area applications authored by DND's domain experts and drawn from the company's long history serving legal practices. Sitting at the center matters, documents, time and billing and financial management serve as the enabling infrastructure around them. The platform will initially support legal professionals with estate planning practices and the creation of wills and matter lifecycle management with standardized intake, flexible matter, data capture, document automation, fee tracking and financial management. The platform will expand beyond this across other practice areas, serving as DND's flagship workflow and practice management solution. Beta testing is now underway with broader availability expected later this summer. The platform will also integrate natively with Unity, our market leading conveyancing software, enabling firms to share matter data seamlessly with work more efficiently, deepen existing client relationships, and capture revenue across adjacent practice areas. The new Legal Due Diligence and Filing Platform brings together our unparalleled store of primary source registry data, land and property intelligence assets, and statutory filing capabilities around the world and makes them available through a single set of pragmatic interfaces. This will enable firms, banks and corporate enterprises to embed public records, risk assessments and filing capabilities directly into their own software applications, automated workflows, and AI agents. The platform is designed to slot directly into the AI tools that firms and enterprises are already adopting, including AI native legal applications and custom agent workflows. By making the system API native, the platform unlocks a critical foundation for the agent era where customer applications and AI agents can act on data, not merely retrieve it. We are bringing the due diligence and filing processes into the future I'm incredibly excited about the launch of the Legal Workflow Platform and the Legal Due Diligence and Filing Platform. Together they reflect our faster pace of execution, our focus on innovation, and our commitment to building smarter, more connected legal technology for the industry. In February, I spoke about our focus being consistency, strengthening governance and rebuilding credibility through execution. As disclosed in our public filings, we conducted a cost assessment and created a plan to reduce expenses in fiscal year 2026 and 2027. The plan has actioned 11 million in run rate savings to be realized in fiscal year 2026 going into fiscal year 2027 and identified an additional 6 to 8 million in run rate savings to be executed in fiscal year 2027 going into fiscal year 2028. Savings come from a few key drivers. First, product and software engineering are now operating as global functions with core development offshore to highly skilled, lower cost fungible resources. With the rapid launch of two new platforms, we are already seeing evidence this will produce faster delivery of better products with improved visibility, global consistency and continuous improvement. Second, we have focused efforts on automation and process standardization, including reducing manual workflows, eliminating duplicative systems and improving operational consistency. We are automating manual processes including billing processes and order fulfillment, which we expect to result in lower run rate costs and greater scalability. We have also eliminated low ROI marketing and sales expenditures as part of our commercial excellence efforts. As a result, we've been able to redeploy capacity into work that produces strong product growth and customer outcomes. Third, we are also consolidating global service delivery teams, leveraging our international capabilities more effectively and rationalizing our footprint over time. We've done this by creating a Global center of Excellence for operations in South Africa to realize cost savings and create a standard for our customer service worldwide. We are also establishing a leadership team in South Africa to enable it to operate and grow successfully. And fourth, we are actioning a plan to optimize our office footprint. Today we have 22 offices across six countries. We are targeting five of the highest cost locations to reduce our footprint by 50 to 100%. These offices have been identified and we are currently working on our plans for alternatives. We have aligned our structure to our priorities and our customers see the potential in our product roadmap. There is still more work ahead, but we have spent these months laying the foundation for our future and beginning execution on our vision. This is a new chapter for Diane Durham, one where we put product innovation and commercial excellence at the forefront of everything we do. I will now turn the call over to Sandra to review the third quarter financial results.

Sandra Bell (Interim Chief Financial Officer)

Thank you George. Good morning everyone. For the three and nine months ended March 31, 2026, revenue was 91.2 million and 306.5 million respectively, representing a decline of 12.2 million or 12.3% compared to the three months ended March 31, 2025. I would like to unpack that decline a bit to help investors understand how our results are being impacted by management actions. Excluding the divestiture of Credis, revenue for the three months ended March 31, 2026 declined by 8.2 million or 8% compared to the prior year period. This was primarily driven by a combination of the market downturn and the greater commercial flexibility we are employing and its impact on lower volumes and pricing in practice management and data insights, partially offset by growth in banking technology. The headwinds from the market decline impacted our revenue as CREA volumes declined 7.2% and 3.8% year over year in the three and nine month periods respectively. And while our commercial flexibility impacted volume and pricing with existing customers, it also opened the door for winbacks new customers. When combined with the product improvements and rollouts George spoke about earlier in the call, adjusted EBITDA for the three months ended March 31, 2026 was 42.9 million, a decrease of 10 million or 19% versus the prior year period. Excluding the impact of the Credis divestiture, adjusted EBITDA declined 8.7 million or 17% compared to the prior year period. The decrease was primarily driven by the impact on revenue described earlier and the increase in costs from professional fees incurred due to relating to audit matters combined with strategic investments necessary to stabilize the business. These cost pressures were partially offset by cost reductions resulting from actions taken to drive operational efficiency. As we noted in our call in Q2, we expect much of our cost savings to be reinvested in product development, automation and process standardization to eliminate manual work and our commercial initiatives, including both pricing actions and refocusing sales and marketing into customer success initiatives such as our global service delivery team. I would also note that our adjusted EBITDA margin has stabilized as our cost saving efforts are offsetting the impact of revenue declines on margins. As we look at quarter over quarter trends, I would like to note a few additional items. The quarter over quarter decrease was primarily driven by three factors: 4.5 million from the divestiture of the Credis business, 9 million from the impact from one-time revenue recognized in December 2025 related to desktop applications for ghost practice, automated civil litigation and conveyancer and continued softness in market conditions which suppressed new contract activity and transaction volumes through the quarter. According to CREA, quarter over quarter real estate volumes were down 10.7%. I would also reiterate that the company's real estate conveyancing and search business product lines experience seasonality. Revenues typically peak in the spring and summer Q4 and Q1 of our fiscal year and slow in winter months Q2 and Q3 of each fiscal year. As a result, the company's first and fourth quarters typically generate higher revenue than other quarters, a trend we would expect to continue to affect our quarter over quarter results. Revenue for the nine months ended March 31, 2026 was 306.5 million, representing a decrease of 29.1 million or 9%, compared to the equivalent period in the prior year. Excluding the impact on revenue of the divestiture of Credis, revenue for the nine months declined 27.8 million or 9% compared to the equivalent period in the prior year. The decrease was due to the factors I mentioned earlier affecting the practice management data insight platforms, partially offset by growth in banking technology and affinity in Australia. For the nine months ended March 31, 2026 and 2025, adjusted EBITDA was 143.7 million and 185.1 million, respectively, a decrease of 41.4 million or 22%. Excluding the impact of the Credis divestiture, adjusted EBITDA decreased by 40.9 million, or 23% for the nine month period ended March 31, 2026 as compared to the prior period. The decrease was primarily driven by the same revenue and cost impacts that impacted the quarter, while the first half experienced lower capitalization rates as the company temporarily shifted certain expenditures from capitalized projects to maintenance expense. We are seeing an improvement in capitalization rates in the third quarter as we now are more focused on building our modernized global technology platform and the product development process George mentioned earlier. We can also see the impact of our cost initiatives as our adjusted EBITDA margins have stabilized at 47%. From an operating perspective, performance varied by segment, but the key drivers were largely consistent across the segment. Namely, revenue decreases were primarily driven by the combination of continued market downturn and the impact of lower volumes and pricing from both from contract renewal terms and while our commercial flexibility impacted volume and pricing with existing customers, it also opened the door for win back and new customers when combined with the product improvements and rollouts. The decreases in adjusted EBITDA were primarily driven by the impact of the aforementioned revenue decline and the same cost impacts I discussed earlier, professional fees incurred related to audit matters and strategic reinvestments necessary to stabilize and grow the business in all segments. We're seeing the benefits of our cost initiatives partially offsetting cost pressures in other areas. In summary, while legal software revenue remains pressured in certain markets, we've been able to maintain stable adjusted EBITDA margins as we begin to realize a portion of the savings related to ongoing cost optimization work. These initiatives will allow the company to maintain margins as we realign our go to market strategy with our strategic plan and position the company for sustained operating leverage.

George Sivin (Chief Executive Officer)

Thanks Sandra. To conclude our remarks, I wanted to underscore a few things. First, we are continuing to execute on the transformation program we shared in February. While this is a multi year effort, we are seeing real progress and impacts across our four pillars today. Second, product investments and a new approach to development have resulted in product improvements and new launches. Real organically developed innovation which in turn are paying off with customer excitement and new customer acquisitions. Third, the more focused, competent and flexible approach we are taking in our commercial activities along with the customer success initiatives are slowing the volume decline. While we remain down year over year, we are seeing quarter over quarter reduction in customer losses. Fourth, margins have stabilized with the impact of our product and commercial efforts alongside cost savings initiatives which we expect to drive greater scalability over time. This sets us up for what we expect to be positive adjusted EBITDA growth over the long term for our legal software business. Finally, none of these achievements would be possible without our amazing team who are committed to a resurgent Diane Durham and doing the hard work every day in developing great products, engaging and supporting customers, and operating with quality and speed to get us there. Thank you everyone. We look forward to speaking again for our Q4 and year end earnings.

OPERATOR

As a reminder, today's call was dedicated strictly to reviewing Diane Durham's financial results and operational milestones for the quarter. Because Diane Durham is currently engaged in an active, ongoing review of strategic alternatives, the company has determined it is prudent not to host a live Q and A session today. They appreciate the continued support and patience of their investors, partners and customers as they focus on maximizing value for all. The call is now ended.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.