- Engine plans to interrupt the Company's momentum while it
learns about the business and spends over a year implementing its
plan
- Engine's proposed Chair and Interim CEO has made
disqualifying public statements, and brings dated and irrelevant
experience
- Engine attempting to hijack independent CEO selection
process even before the new Board is constituted
- Dye & Durham's Board recommends a vote FOR all
seven of the Company's nominees on the GOLD Proxy or
GOLD VIF
Toronto, Dec. 4, 2024
/CNW/ - Dye & Durham Limited ("Dye & Durham" or the
"Company") (TSX: DND) today refuted the deliberate
falsehoods, blatant mischaracterizations, and bizarre
contradictions contained in Engine Capital LP's (together with
affiliates, "Engine") presentation and updated proxy
materials, filed on December 3, 2024.
Engine's materials were filed in furtherance of its attempt to
elect its six nominees to the board of directors of Dye &
Durham (the "Board") at the upcoming annual and special
meeting of shareholders (the "Annual Meeting") scheduled for
December 17, 2024.
Dye & Durham wishes to highlight the following critical
considerations for shareholders which decisively refute Engine's
'fact-pattern' in its error-riddled presentation. The Company
intends to release a more fulsome response but wanted to ensure
shareholders had the facts before casting their votes:
'Multiple Expansion' is Not a Plan and Aspirations Are Not
Execution
Engine, having over a year to develop its own value creation
plan for shareholders, and seeking a control slate of directors,
fails to deliver. Shareholders are forced to wade through 95 pages
of smears and personal attacks, before Engine finally reveals a
thin and aspirational "plan" that borrows from Dye & Durham's
Value Creation Plan and lacks specificity. Engine's claim that it
will drive a 3x return for shareholders is predicated on "multiple
expansion", a factor that is entirely arbitrary.
Engine Attacks Dye & Durham for Utilizing its Access
to Capital to Grow the Company into a Canadian Success
Story
Engine repeatedly and confusingly attacks Dye & Durham for
setting ambitious targets and driving towards them. If the Company
had followed Engine's prescriptions during its early scale-up
period, it would still be a $20
million revenue company. Dye & Durham grew rapidly and
opportunistically, marrying access to capital with a deliberate
M&A strategy. As market conditions changed, the Company adapted
its capital allocation approach, and is transitioning its business
model, reducing leverage and driving organic growth. With the
Company repositioned, it is leading an orderly CEO succession
process.
Engine Plans to Interrupt a Record Quarter and Tremendous
Momentum with a 100-Day Listening Tour and then take up to a Year
to Implement its Still to be Formulated Plan
Shareholders (and Engine's own investors) will be shocked to
learn that Engine openly admitted that it still doesn't have
an understanding of the Company's "business fundamentals" or
"current issues" nor does it have a "strategy and plan". Running
Dye & Durham is not something you learn on the job – nor should
the Company stand still while Engine figures out its plan. The
election of Engine's nominees will be value destructive for the
Company and shareholders.
Engine Finally Turns its Attention to Integration and
Cross-Selling Opportunities After its First Year of Figuring Things
Out – Something the Company is Already Executing on and Driving
Tangible Results
Engine's understanding of the business is not just weak but
dated. As detailed in the Company's Value Creation Plan, and
demonstrated by the Company's record ARR and Q2 FY2025 Guidance,
the management team is delivering on the organic growth
opportunities driven by Dye & Durham's integrated product
suite. That Engine plans to wait a year before turning its
attention to the key organic growth drivers for the Company,
exemplifies its lack of urgency and poor understanding of the
business.
Engine wants Dye & Durham to Go Down Market and Lower its Pricing to Try to
Drive Customer Volumes
Engine's simplistic and pessimistic view of the business has led
it to draw erroneous conclusions. Dye & Durham has competed by
driving customer experience and product improvements – not by
reverting to cheap, disjointed and cumbersome products which had
previously plagued the industry. Engine appears to be suggesting
that Dye & Durham offer budget pricing and then to try and make
up the difference in volume. This is a ridiculous and failing
strategy in the market for professional legal tools. In fact, Dye
& Durham's market share in real estate transactions in
Canada, by way of example, has
been growing, and the Company supports 82% of Canadian real estate
transactions up from 73% in FY20231.
Engine Had to Backtrack on its Earlier Irresponsible
Representations that it Would Replace the Management Team and then
Again Reaffirmed its Intention to Do Just That
Just one month ago, Engine's Arnaud Adjler represented that he
intended to "recruit a world class management team". Engine
now claims on slide 28 of its presentation, that it has no
intention of doing so. As recently as two weeks ago he was boasting
about walking multiple executives out of the building the day after
he won. Yet later, on slide 105, Engine again says it intends to
hire an executive team and "hold the new leadership team
accountable". The loss of the senior leadership team who is
successfully executing on the Value Creation Plan would be value
destructive. Engine would put Dye & Durham's business
continuity at risk.
Mr. Adjler is not even capable of managing the portfolio of
falsehoods he is spinning to shareholders – let alone managing a
real business.
Engine's Proposed Chair and Interim CEO Hans Gieskes
Brings Pre-Internet Era Experience, a Checkered Work History, and
Lacks the Professionalism to be the Company's CEO
Mr. Gieskes' social media posts, including professional sites
like LinkedIn, demonstrate a lack of prudence, professionalism, and
are disqualifying for a public company CEO. Mr. Gieskes has made
inflammatory and unprintable comments about a public company
executive, political candidates and even the President of
the United States2.
In addition, Mr. Gieskes' experience at Elsevier and Lexis-Nexis
was at a time when the Company still printed physical books to
distribute its data. Media reports at the time suggested he had
been pushed out of the Company in 2000. He then had series of short
tenured positions, none of which appear to be relevant to Dye &
Durham's sophisticated legal technology business.
Engine's selection of Mr. Gieskes as its candidate for Chair and
Interim CEO is demonstrative of its lack of due diligence and good
business judgement.
Engine's Other Nominees Bring Big Logos but Mid-Level
Experience
Engine constructed a "slate" (to use its words) of individuals
who lack the senior level experience and backgrounds required to
act as independent fiduciaries in the boardroom. Engine's nominees
appear to have been recruited for the big names on their resumes,
rather than actual executive or business building experience. This
slate is intended to allow Engine and Mr. Adjler, a free hand to
run the Company as it sees fit.
Engine's Anonymous CEO Candidates are Illusory, and the
Search Should be Led by the New Board, Not Engine
Engine purports to have identified three CEO candidates through
a search firm retained by Engine and provides nameless profiles for
shareholders. While the provision of these "straw men" is a clever
fiction, it lays bare Engine's plan to drive the CEO search. Engine
is attempting to influence the CEO search by setting its own
criteria and generating a list of candidates to present to the new
Board, without allowing the new Board the chance to set its own
criteria and conduct an independent search.
Dye & Durham's Board has committed to allowing the
independent members of the new Board to lead the search and
recruitment for the successor CEO.
Engine has Advanced Several Falsehoods,
Mischaracterizations, and Contradictions in its Presentation and
Proxy Materials and Dye & Durham Would Like to Set the Record
Straight
Shareholder Returns: Dye & Durham has outperformed the vast
majority of its peer set and all relevant benchmarks with a 173%
share price performance since IPO[3]. This is based on a more
appropriate measure of share price performance based on the IPO
offer price. See December 2, 2024
presentation, "Simple Choice for Shareholders".
Engine's Operating Plan: It isn't a plan at all. Engine has not
advanced any new meaningful suggestions that Dye & Durham has
not already achieved or is focused on achieving in the near term,
per the Value Creation Plan.
People & Culture: The Company's 2024 employee survey, with a
response rate of 70%, had a trust index score in line with the 2024
Average Workplace scores as defined by Great Places to Work.
See slide 37 of the Value Creation Plan. Engine likes to cite
Glassdoor, which is not a reflective indicator of broader employee
satisfaction rates and largely represents terminated or former
employees. Furthermore, there have only been four CFOs in Dye &
Durham's existence, contrary to Engine's claims. Dennis Barnhart is currently the Managing
Director of our APAC business and has not left the Company as
Engine claims. In addition, Wojtek
Dabrowski, another executive, remains a consultant to the
Company, and multiple other individuals have retired from the
workforce.
M&A: Only 12% of capital deployed on acquisitions was
outlaid during the past nine quarters. In addition, the past two
years have featured much smaller acquisitions at a significantly
slower pace. See slide 13 of the Value Creation Plan.
Free Cash Flow Conversion: The Company's recent refinancing is
expected to save the Company approximately $20 million annualized in net interest
costs4, the Company's stated guidance of $90-110 million of Leveraged Free Cash
Flow4,[5] per annum in the near term.
Engine's AUM and Returns: Only Engine can set the record
straight here. Engine inconsistently claims to manage approximately
$1 billion and in other instances
$1.5 billion. While Engine quotes IRR
figures, the Company's own analysis suggests Engine is poor
deployer of capital. Details matter.
The Board and management team are executing against the
Value Creation Plan, and delivering results now – not a year from
now.
Additional information is available in the Company's recently
filed Letter to Shareholders, Management Information Circular,
presentation, and press releases, can be found on SEDAR+ under the
Company's profile at www.sedarplus.ca and on the Dye & Durham's
website.
Your vote is very
important.
|
|
Vote FOR all Dye
& Durham's nominees on the GOLD Proxy or GOLD VIF to protect
and
maximize shareholder value.
|
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If you have any
questions or need help voting your shares, please contact Carson
Proxy,
at Toll Free: 1-800-530-5189 Local and Text: 416-751-2066 or
Email: info@carsonproxy.com.
|
Advisors
Dye & Durham has retained Goldman Sachs, as its strategic
advisor, Goodmans LLP and Groia & Company as its legal
advisors, Gagnier Communications LLC and Sovereign Advisory Inc. as
its strategic communications advisors, and Carson Proxy as its
proxy solicitor.
About Dye & Durham Limited
Dye & Durham Limited provides premier practice management
solutions empowering legal professionals every day, delivers vital
data insights to support critical corporate transactions and
enables the essential payments infrastructure trusted by government
and financial institutions. The company has operations in
Canada, the United Kingdom, Ireland, Australia, and South
Africa.
Additional information can be found
at www.dyedurham.com.
Non-IFRS Measures
This press release makes reference to Leveraged Free Cash Flow,
which is a non-IFRS measure. This is not a recognized measure under
IFRS, does not have a standardized meaning prescribed by IFRS and
is therefore unlikely to be comparable to similar measures
presented by other companies.
Rather, this measure is provided as additional information to
complement those IFRS measures by providing further understanding
of the Company's results of operations from management's
perspective and to discuss Dye & Durham's financial outlook.
The Company's definitions of non-IFRS measures may not be the same
as the definitions for such measures used by other companies in
their reporting. Non-IFRS measures have limitations as analytical
tools. Accordingly, these measures should not be considered in
isolation nor as a substitute for analysis of Dye & Durham's
financial information reported under IFRS. The Company uses
non-IFRS measures, including "Leveraged Free Cash Flow" (as defined
below), to provide investors with supplemental measures of its
operating performance and to eliminate items that have less bearing
on operating performance or operating conditions and thus highlight
trends in its core business that may not otherwise be apparent when
relying solely on IFRS financial measures. The Company's management
also uses non-IFRS financial measures in order to facilitate
operating performance comparisons from period to period. The
Company believes that securities analysts, investors, and other
interested parties frequently use non-IFRS financial measures in
the evaluation of issues.
Please see "Cautionary Note Regarding Non-IFRS Measures" and
"Select Information and Reconciliation of Non-IFRS Measures" in the
Company's most recent Management's Discussion and Analysis, which
is available on the Company's profile on SEDAR+ at
www.sedarplus.ca, for further details on certain non-IFRS measures,
including relevant reconciliations of each non-IFRS measure to its
most directly comparable IFRS measure, which information is
incorporated by reference herein.
Leveraged Free Cash Flow
"Leveraged Free Cash Flow" means net cash provided by operating
activities less additions to intangible assets and property
(including capitalized software) less net interest paid and
payments under lease arrangements.
Leveraged Free Cash Flow Reconciliation
|
Q1 FY2025
|
Q1 FY2024
|
Net Cash Provided by Operating
Activities
|
47.7
|
42.6
|
Additions to Intangible Assets
|
(4.1)
|
(11.1)
|
Purchases of Property and
Equipment
|
(1.7)
|
(0.5)
|
Net Interest Paid
|
(11.9)
|
(36.1)
|
Payments for Lease Obligations
|
(1.7)
|
(1.2)
|
Leveraged Free Cash
Flow5
|
28.2
|
(6.3)
|
Forward-Looking Statements
This press release may contain forward-looking information and
forward-looking statements within the meaning of applicable
securities laws, which reflects the Company's current expectations
regarding future events, including with respect to the Company's
financial outlook and expected Q2 FY2025 results. In some cases,
but not necessarily in all cases, forward-looking statements can be
identified by the use of forward looking terminology such as
"plans", "targets", "expects" or "does not expect", "is expected",
"an opportunity exists", "is positioned", "estimates", "intends",
"assumes", "anticipates" or "does not anticipate" or "believes", or
variations of such words and phrases or state that certain actions,
events or results "may", "could", "would", "might", "will" or "will
be taken", "occur" or "be achieved". In addition, any statements
that refer to guidance, expectations, projections or other
characterizations of future events or circumstances contain
forward-looking statements. Forward-looking statements are not
historical facts, nor guarantees or assurances of future
performance but instead represent management's current beliefs,
expectations, estimates and projections regarding future events and
operating performance.
Specifically, statements regarding Dye & Durham's
expectations of future results, performance, prospects, the markets
in which we operate, or about any future intention with regard to
its business, acquisition strategies and debt reduction strategy
are forward-looking information. The foregoing demonstrates Dye
& Durham's objectives, which are not forecasts or estimates of
its financial position, but are based on the implementation of its
strategic goals, growth prospectus, and growth initiatives. The
forward-looking information is based on management's opinions,
estimates and assumptions, including, but not limited to: (i) the
Company's results of operations will continue as expected, (ii) the
Company will continue to effectively execute against its key
strategic growth priorities, (iii) the Company will continue to
retain and grow its existing customer base and market share, (iv)
the Company will be able to take advantage of future prospects and
opportunities, and realize on synergies, including with respect of
acquisitions, (v) there will be no changes in legislative or
regulatory matters that negatively impact the Company's business,
(vi) current tax laws will remain in effect and will not be
materially changed, (vii) economic conditions will remain
relatively stable throughout the period, (viii) the industries the
Company operates in will continue to grow consistent with past
experience, (ix) exchange rates being approximately consistent with
current levels, * the seasonal trends in real estate transaction
volume will continue as expected, (xi) the Company's expectations
for increases to the average rate per user on its platforms,
contractual revenues, and incremental earnings from its latest
asset-based acquisition will be met, (xii) the Company being able
to effectively upsell and cross-sell between practice management
and data insights & due diligence customers, (xiii) the
Company's expectations regarding its debt reduction strategy will
be met, (xiv) to calculate annualized net interest savings, which
includes estimated returns from the restricted cash held for
retirement of the Company's outstanding convertible senior
unsecured debentures due March 1,
2026 (the "2026 Debentures"), the interest costs on
the Company's debt were estimated based on swapped interest rates
entered into, which included assuming a variable interest rate of
5.32% over its senior secured term loan B facility and this
estimate was added to the stated fixed interest costs of the its
aggregate principal amount of 8.625% senior secured notes due 2029
and the 2026 Debentures, and the total net interest cost,
calculated based on the foregoing, was then compared to the
annualized cost of interest actuals from the first half of fiscal
2024, and (xv) those assumptions described under the heading
"Caution Regarding Forward-Looking Information" in the Company's
most recent Management's Discussion and Analysis.
While these opinions, estimates and assumptions are considered
by Dye & Durham to be appropriate and reasonable in the
circumstances as of the date of this press release, they are
subject to known and unknown risks, uncertainties, assumptions and
other factors that may cause the actual results, levels of
activity, performance, or achievements to be materially different
from those expressed or implied by such forward-looking
information. Such risks and uncertainties include, but are not
limited to: the Company will be unable to effectively execute
against its key strategic growth priorities, including in respect
of acquisitions; the Company will be unable to continue to retain
and grow its existing customer base and market share; risks related
to the Company's business and financial position; the Company may
not be able to accurately predict its rate of growth and
profitability; risks related to economic and political uncertainty;
income tax related risks; and the factors discussed under "Risk
Factors" in the Company's most recent Annual Information Form and
under the heading "Risks and Uncertainties" in the Company's most
recent Management's Discussion and Analysis, which are available on
the Company's profile on SEDAR+ at www.sedarplus.ca.
If any of these risks or uncertainties materialize, or if the
opinions, estimates or assumptions underlying the forward-looking
information prove incorrect, actual results or future events might
vary materially from those anticipated in the forward-looking
information. Although the Company has attempted to identify
important risk factors that could cause actual results to differ
materially from those contained in forward-looking information,
there may be other risk factors not presently known to the Company
or that the Company presently believes are not material that could
also cause actual results or future events to differ materially
from those expressed in such forward-looking information.
Although the Company bases these forward-looking statements on
assumptions that it believes are reasonable when made, the Company
cautions investors that forward-looking statements are not
guarantees of future performance and that its actual results of
operations, financial condition and liquidity and the development
of the industry in which it operates may differ materially from
those made in or suggested by the forward-looking statements
contained in this press release. In addition, even if the Company's
results of operations, financial condition and liquidity and the
development of the industry in which it operates are consistent
with the forward-looking statements contained in this press
release, those results of developments may not be indicative of
results or developments in subsequent periods.
There can be no assurance that such information will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such information. No
forward-looking statement is a guarantee of future results.
Accordingly, you should not place undue reliance on forward-looking
information, which speaks only as of the date made. The
forward-looking information contained in this press release
represents Dye & Durham's expectations as of the date specified
herein, and are subject to change after such date. However, the
Company disclaims any intention or obligation or undertaking to
update or revise any forward-looking information or to publicly
announce the results of any revisions to any of those statements,
whether as a result of new information, future events or otherwise,
except as required under applicable securities laws. Comparisons of
results for current and any prior periods are not intended to
express any future trends or indications of future performance,
unless specifically expressed as such, and should only be viewed as
historical data.
All of the forward-looking information contained in this press
release is expressly qualified by the foregoing cautionary
statements.
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1
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Based on Company
analysis, driven from Unity Platform, which is not present in
British Columbia and Quebec.
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2
|
https://www.linkedin.com/posts/hansgieskes_hey-linkedin-wtf-is-wrong-with-you-ive-activity-7026614064852164608-_evm/
https://www.linkedin.com/posts/hansgieskes_money-isnt-everything-in-the-great-re-evaluation-activity-6850418330789056512-_1dO/
https://www.linkedin.com/feed/update/urn:li:activity:7186715958034485249/
https://www.linkedin.com/posts/hansgieskes_the-best-people-are-staying-so-im-not-activity-6999504981540143104-UbbF/
https://www.linkedin.com/feed/update/urn:li:activity:7210263430681784320/
https://www.threads.net/@hgieskes/post/DA3fRAxPgon?hl=en
https://www.threads.net/@hgieskes/post/DAvnQQNPXbh?hl=en
https://www.threads.net/@hgieskes/post/DBBmOMVvwd_?hl=en
https://www.threads.net/@hgieskes/post/C1dAjO8P94h?xmt=AQGzhT2dr527oAN-
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3
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Sources: Company
filings, street research, FactSet as of November 28, 2024.
Current based on closing price as at November 28, 2024 . Share
performance measured from July 17, 2020 to current.
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4
|
This may constitute
forward-looking information and/or forward-looking statements.
Please see "Forward-Looking Statements".
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5
|
Leveraged Free Cash
Flow is a non-IFRS measure. Please see "Non-IFRS
Measures".
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SOURCE Dye & Durham Limited