Calian Reports Results for the First Quarter and Reiterates its FY23 Guidance

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(All amounts in release are in Canadian dollars)

OTTAWA, ON / ACCESSWIRE / February 14, 2023 / Calian® Group Ltd. (TSX:CGY), a diverse products and services company providing innovative healthcare, communications, learning and cybersecurity solutions, today released its results for the first quarter ended December 31, 2022.

First quarter highlights:

Revenue up 14% to $148 million
Gross margin above 30% for the third consecutive quarter
Adjusted EBITDA¹ up 2% to $14 million
Operating Free Cash Flow¹ up 24% to $12 million
Cash on hand of $58 million and net liquidity of $131 million
New contract signings of $126 million
Reiterated FY23 guidance

Financial Highlights	Three months ended
(in millions of $, except per share & margins)	December 31,
	2022			2021			%
Revenue		147.5			129.5			14	%
Adjusted EBITDA¹		14.3			14.0			2	%
Adjusted EBITDA %¹		9.7	%		10.8	%	(110bps)
Net Profit		4.6			4.3			7	%
EPS	$	0.39		$	0.38			3	%
Adjusted Net Profit¹		8.8			9.6			(8	%)
Adjusted EPS Diluted¹	$	0.75		$	0.85			(12	%)
Operating Free Cash Flow¹		12.1			9.8			24	%

1 This is a non-GAAP measure. Please refer to the section “Reconciliation of non-GAAP measures to most comparable IFRS measures” at the end of this press release.

Access the full report on the Calian Financials web page. Register for the conference call on Wednesday, February 15, 2023, 8:00 a.m. Eastern Time.

“The strong performance of our ITCS and Learning segments was impressive. The combination of organic growth and performance from recent acquisitions in these two segments drove our results in the quarter,” said Kevin Ford, Calian CEO. “With $126 million in new signings and improvements in the supply environment we are confident in our ability to post our 6^th consecutive record year.”

First Quarter Results

Revenues increased 14%, from $130 million to $148 million, driven by strong performance in our Information Technology & Cyber Solutions (ITCS) and Learning segments.

ITCS: Revenues doubled to $46 million driven by the company’s strong performance from its expansion into the United States with the acquisition of Computex last March, coupled with double-digit organic growth of 11% in its overall cyber practice.
Learning: Revenues grew 16% to $26 million driven by continued demand in the military learning and preparedness market from its long-standing customers.
Advanced Technologies: Revenues declined 17% to $34 million due to delays in the award of new ground systems projects and ongoing supply chain issues, which result in parts delay that slow its ability to deliver products. This was partially offset by the strong performance of its GNSS antennas business. Gross margins improved significantly from 26% to 35% in the quarter.
Health: Revenues decreased 5% to $40 million due to lower COVID-19 related business coupled with the slower pace of awards for new business.

Liquidity and Capital Resources

“Our cash performance was strong in our first quarter. We generated $12 million in operating free cash flows, an impressive increase of 24% over the prior year,” said Patrick Houston, Chief Financial Officer. “In addition, we were able to recapture a further $12 million in working capital throughout the quarter. This further improves our already strong balance sheet and puts us in an excellent position to continue to invest in our M&A growth agenda.

The Company ended the quarter with net cash of $58 million and an available credit facility resulting in total available liquidity of $131 million which consists of net cash on hand and available debt.

Quarterly Dividend

Today, Calian declared a quarterly dividend of $0.28 per share. The dividend is payable March 14, 2023, to shareholders of record as of February 28, 2023. Dividends paid by the Corporation are considered “eligible dividend” for tax purposes.

Guidance Reiterated

“With new contract signings of $126 million, a robust backlog of $1.3 billion combined with increased recurring revenue streams, we are on pace to deliver another record year in FY23,” said Mr. Ford.

	Guidance for the year ended Sept. 30, 2023

(in thousands of Canadian $)			Low	High
Revenue		630,000			680,000
Adjusted EBITDA		70,000			75,000
Adjusted Net Profit		46,000			50,000

About Calian

www.calian.com

We keep the world moving forward. Calian® helps people communicate, innovate, learn and lead safe and healthy lives-today and tomorrow. Every day, our employees live our values of customer commitment, integrity, innovation and teamwork to engineer reliable solutions that solve complex problems. That’s Confidence. Engineered. A stable and growing 40-year company, we are headquartered in Ottawa with offices and projects spanning North American and International markets.

Visit calian.com to learn about innovative healthcare, communications, learning and cybersecurity solutions.

Media inquiries:
[email protected]
613-599-8600 x 2298

Investor Relations inquiries:
[email protected]

—————————————————————————–

DISCLAIMER

Certain information included in this press release is forward-looking and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Such statements are generally accompanied by words such as “intend”, “anticipate”, “believe”, “estimate”, “expect” or similar statements. Factors which could cause results or events to differ from current expectations include, among other things: the impact of price competition; scarce number of qualified professionals; the impact of rapid technological and market change; loss of business or credit risk with major customers; technical risks on fixed price projects; general industry and market conditions and growth rates; international growth and global economic conditions, and including currency exchange rate fluctuations; and the impact of consolidations in the business services industry. For additional information with respect to certain of these and other factors, please see the Company’s most recent annual report and other reports filed by Calian with the Ontario Securities Commission. Calian disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. No assurance can be given that actual results, performance or achievement expressed in, or implied by, forward-looking statements within this disclosure will occur, or if they do, that any benefits may be derived from them.

Calian · Head Office · 770 Palladium Drive · Ottawa · Ontario · Canada · K2V 1C8

Tel: 613.599.8600 · Fax: 613-592-3664 · General info email: [email protected]

CALIAN GROUP LTD.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at December 31, 2022 and September 30, 2022
(Canadian dollars in thousands, except per share data)

	December 31,			September 30,
	2022			2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	58,194		$	42,646
Accounts receivable		136,739			171,453
Work in process		33,040			39,865
Inventory		26,608			18,643
Prepaid expenses		21,754			23,780
Derivative assets		53			123
Total current assets		276,388			296,510
NON-CURRENT ASSETS
Capitalized research and development		1,958			2,186
Equipment		15,692			16,623
Application software		10,044			10,395
Right of use asset		15,875			16,678
Investments		3,359			670
Acquired intangible assets		53,528			57,087
Deferred tax asset		997			1,054
Goodwill		146,046			145,959
Total non-current assets		247,499			250,652
TOTAL ASSETS	$	523,887		$	547,162
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Debt facility	$	7,500		$	7,500
Accounts payable and accrued liabilities		99,297			126,096
Contingent earn-out		26,464			25,676
Provisions		1,173			1,249
Unearned contract revenue		48,639			46,210
Derivative liabilities		42			812
Lease obligations		3,949			4,115
Total current liabilities		187,064			211,658
NON-CURRENT LIABILITIES
Lease obligations		14,281			14,920
Contingent earn-out		–			2,874
Deferred tax liabilities		12,349			12,524
Total non-current liabilities		26,630			30,318
TOTAL LIABILITIES		213,694			241,976

SHAREHOLDERS’ EQUITY
Issued capital		215,614			213,277
Contributed surplus		2,622			3,479
Retained earnings		93,512			92,198
Accumulated other comprehensive income (loss)		(1,555	)		(3,768	)
TOTAL SHAREHOLDERS’ EQUITY		310,193			305,186
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	523,887		$	547,162
Number of common shares issued and outstanding		11,656,720			11,607,391

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

CALIAN GROUP LTD.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF NET PROFIT

For the three months ended December 31, 2022 and 2021

(Canadian dollars in thousands, except per share data)

	Three months ended
	December 31,
	2022			2021
Revenue
Advanced Technologies	$	34,267		$	41,167
Health		40,455			42,378
Learning		26,440			22,782
ITCS		46,381			23,175
Total Revenue		147,543			129,502

Cost of revenues		102,324			95,848
Gross profit		45,219			33,654

Selling and marketing		11,143			4,554
General and administration		17,400			13,784
Research and development		2,421			1,354
Profit before under noted items		14,255			13,962

Depreciation of equipment, application software and research and development		2,297			1,127
Depreciation of right of use asset		1,007			823
Amortization of acquired intangible assets		3,361			3,592
Deemed compensation		97			750
Changes in fair value related to contingent earn-out		742			999
Profit before interest income and income tax expense		6,751			6,671

Lease obligations interest expense		111			108
Interest expense		12			51
Profit before income tax expense		6,628			6,512

Income tax expense – current		2,712			2,974
Income tax recovery – deferred		(660	)		(768	)
Total income tax expense		2,052			2,206
NET PROFIT	$	4,576		$	4,306

Net profit per share:
Basic	$	0.39		$	0.38
Diluted	$	0.39		$	0.38

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

CALIAN GROUP LTD.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended December 31, 2022 and 2021

(Canadian dollars in thousands)

	Three months ended
	December 31,
	2022			2021
CASH FLOWS GENERATED FROM OPERATING ACTIVITIES
Net profit	$	4,576		$	4,306
Items not affecting cash:
Interest expense		12			51
Changes in fair value related to contingent earn-out		742			999
Lease obligations interest expense		111			108
Income tax expense		2,052			2,206
Employee share purchase plan expense		163			135
Share based compensation expense		407			347
Depreciation and amortization		6,665			5,542
Deemed compensation		97			750
		14,825			14,444
Change in non-cash working capital
Accounts receivable		34,714			2,618
Work in process		6,825			7,778
Prepaid expenses and other		3,664			(68	)
Inventory		(7,965	)		(1,785	)
Accounts payable and accrued liabilities		(27,268	)		(16,015	)
Unearned contract revenue		2,429			424
		27,224			7,396
Interest paid		(123	)		(159	)
Income tax paid		(1,778	)		(3,073	)
		25,323			4,164
CASH FLOWS USED IN FINANCING ACTIVITIES
Issuance of common shares net of costs		910			330
Dividends		(3,262	)		(3,166	)
Payment of lease obligations		(1,009	)		(842	)
		(3,361	)		(3,678	)
CASH FLOWS USED IN INVESTING ACTIVITIES
Investments		(2,689	)		–
Business acquisitions		(2,925	)		(10,298	)
Capitalized research and development		(86	)		(114	)
Equipment and application software		(714	)		(1,330	)
		(6,414	)		(11,742	)

NET CASH (OUTFLOW) INFLOW	$	15,548		$	(11,256	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		42,646			78,611
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	58,194		$	67,355

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures

These non-GAAP measures are mainly derived from the consolidated financial statements, but do not have a standardized meaning prescribed by IFRS; therefore, others using these terms may calculate them differently. The exclusion of certain items from non-GAAP performance measures does not imply that these are necessarily nonrecurring. From time to time, we may exclude additional items if we believe doing so would result in a more transparent and comparable disclosure. Other entities may define the above measures differently than we do. In those cases, it may be difficult to use similarly named non-GAAP measures of other entities to compare performance of those entities to the Company’s performance.

Management believes that providing certain non-GAAP performance measures, in addition to IFRS measures, provides users of the Company’s financial reports with enhanced understanding of the Company’s results and related trends and increases transparency and clarity into the core results of the business. Adjusted EBITDA excludes items that do not reflect, in our opinion, the Company’s core performance and helps users of our MD&A to better analyze our results, enabling comparability of our results from one period to another.

Adjusted EBITDA

	Three months ended
	December 31,		December 31,
	2022		2021
Net profit	$	4,576	$	4,306
Depreciation of equipment and application software		2,297		1,127
Depreciation of right of use asset		1,007		823
Amortization of acquired intangible assets		3,361		3,592
Lease interest expense		111		108
Changes in fair value related to contingent earn-out		742		999
Interest expense		12		51
Deemed Compensation		97		750
Income tax		2,052		2,206
Adjusted EBITDA	$	14,255	$	13,962

Adjusted Net Profit and Adjusted EPS

	Three months ended
	December 31,		December 31,
	2022		2021
Net profit	$	4,576	$	4,306
Changes in fair value related to contingent earn-out		742		999
Deemed Compensation		97		750
Amortization of intangibles		3,361		3,592
Adjusted net profit	$	8,776	$	9,647
Weighted average number of common shares basic		11,630,180		11,299,287
Adjusted EPS Basic		0.75		0.85
Adjusted EPS Diluted		0.75		0.85

Operating Free Cash Flow

	Three months ended
	December 31,			December 31,
	2022			2021

Cash flows generated from operating activities		25,323			4,164
Capitalized research and development		(86	)		(114	)
Equipment and application software		(714	)		(1,330	)
Free cash flow		24,523			2,720

Free cash flow		24,523			2,720
Adjustments:
Change in non-cash working capital		(12,399	)		7,048
Operating free cash flow		12,124			9,768
Operating free cash flow per share		1.04			0.86

The Company uses adjusted net profit, and adjusted earnings per share, which remove the impact of our acquisition amortization and gains, resulting in accounting for acquisitions and changes in fair value to measure our performance. Operating free cash flow measures the company’s cash profitability after required capital spending when excluding working capital changes. These measurements better align the reporting of our results and improve comparability against our peers. We believe that securities analysts, investors and other interested parties frequently use non-GAAP measures in the evaluation of issuers. Management also uses non-GAAP measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our capital expenditure and working capital requirements. Adjusted profit and adjusted earnings per share are not recognized, defined or standardized measures under IFRS. Our definition of adjusted profit and adjusted earnings per share will likely differ from that used by other companies (including our peers) and therefore comparability may be limited. Non-GAAP measures should not be considered a substitute for or be considered in isolation from measures prepared in accordance with IFRS. Investors are encouraged to review our financial statements and disclosures in their entirety and are cautioned not to put undue reliance on non-GAAP measures and view them in conjunction with the most comparable IFRS financial measures. The Company has reconciled adjusted profit to the most comparable IFRS financial measure as shown above.

SOURCE: Calian Group Ltd.