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Calian Reports Unaudited Results for the Fourth Quarter and FY23

(All amounts in release are in Canadian dollars)

OTTAWA, Nov. 27, 2023 (GLOBE NEWSWIRE) -- Calian® Group Ltd. (TSX:CGY), a diverse products and services company providing innovative healthcare, communications, learning and cybersecurity solutions, today released its unaudited results for the fourth quarter and FY23 ended September 30, 2023.

Highlights of record performance in Q4:

  • Revenue up 10% to $176 million
  • Gross margin at 31.7%, above 30% for the sixth consecutive quarter
  • Adjusted EBITDA1 at $20 million, up 7%

Highlights of FY23:

  • Revenue up 13% to $659 million
  • Gross margin at 31.0%, up from 29.1% last year
  • Adjusted EBITDA1 at $66 million, in line with last year
  • Operating free cash flow of $45 million
  • Net liquidity of $176 million
  • Repurchased 32,094 shares for consideration of $1.7 million
  • Acquired Hawaii Pacific Teleport on August 1st, 2023
  • Appointed President, IT & Cyber Solutions
  • Entered definitive purchase agreement to acquire Decisive Group

The Company will file the audited financial statements and annual report in early December 2023.

 
Financial HighlightsUnaudited
Three months ended
Unaudited
Twelve months ended
(in millions of $, except per share & margins)September 30,September 30,
 2023 2022   %2023 2022   %
Revenue 175.9  160.6  10% 658.6  582.2  13%
Adjusted EBITDA1 20.4  19.1  7% 66.0  65.9  -%
Adjusted EBITDA %1 11.6% 11.8% (20bps) 10.0% 11.3% (130bps)
Net Profit 5.1  1.2  328% 18.8  13.6  39%
EPS Diluted$0.43 $0.10  330%$1.61 $1.19  35%
Adjusted Net Profit1 12.7  10.3  24% 40.4  44.0  (8%)
Adjusted EPS Diluted1$1.07 $0.90  20%$3.45 $3.87  (11%)
Operating Free Cash Flow1 10.7  14.1  (24%) 44.8  47.2  (5%)
        

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 Tuesday, November 28, 2023, 8:30 a.m. Eastern Time.

“We finished the year with a record quarter as revenues, gross margin and adjusted EBITDA reached new historical highs,” said Kevin Ford, Calian Chief Executive Officer. “In FY23 we generated double-digit revenue growth with all four segments contributing. Our adjusted EBITDA remained flat. With two recent acquisitions, and adjustments in our operating costs, we are poised to see continued increase in our profitability.”

“Given the ongoing robust demand for our products and services, the contribution from recent acquisitions and the benefits from our restructuring plan, we are confident in our ability to post another record year. At the midpoint of our guidance range this translates into revenue and adjusted EBITDA growth of 15% and 32%, respectively, over FY23,” concluded Mr. Ford.

Fourth Quarter Results

Revenues increased 10%, from $161 million to $176 million, driven by double-digit growth in Advanced Technologies, Health and Learning.

  • Advanced Technologies: Revenues increased 72% to $53 million driven by product sales, the contribution from the Hawaii Pacific Teleport acquisition and the unwinding of backlog due to ongoing easing of supply chains.

  • Health: Revenues increased 31% to $52 million driven by significantly increased demand with our long-standing customers as well as short-term health response demand.

  • Learning: Revenues grew 11% to $24 million driven by strong demand for military training with existing Canadian customers as well as demand for new products and technologies for NATO customers due to geo-political issues and renewed focus on readiness.

  • ITCS: Revenues decreased 31% to $48 million as expected, mainly due to lower shipments in its product resale business based in the U.S., as the fourth quarter last year saw a disproportionate amount of product shipments due to the easing of supply chain issues.

Gross margin reached a record 31.7%, representing its 6th consecutive quarter above 30%. Adjusted EBITDA reached a record $20 million and adjusted EBITDA margin returned to double digits from Q3 levels to reach 11.6%.

Liquidity and Capital Resources

“In FY23 we generated $45 million in operating free cash flow, representing a 68% conversion rate from adjusted EBITDA,” said Patrick Houston, Calian CFO. “We continued to have a disciplined approach to capital deployment with the view of maximizing return on investments. We used our cash to invest in the business with acquisitions and earnout payments of $68 million and capex of $8 million and provide a return to shareholders in the form of dividends of $13 million and share buybacks of $2 million. We ended the year with $176 million in net liquidity, well-positioned to pursue our growth objectives,” concluded Mr. Houston.

Normal Course Issuer Bid

In the three-month period ended September 30, 2023, as part of its Normal Course Issuer Bid, the Company repurchased 32,094 shares for cancellation in consideration of $1.7 million. Since the launch of the Normal Course Issuer Bid on September 1, 2023, the Company repurchased 59,320 common shares for cancellation in consideration of $3.0 million.

Entered into a Definitive Purchase Agreement to Acquire Decisive Group

On November 9, 2023, Calian entered into a definitive purchase agreement to acquire 100% of the shares of Ottawa-based Decisive Group Inc. for up to CAD$74.7 million. This includes the amount to be paid in cash at closing of CAD$50.0 million. The definitive purchase agreement is effective immediately. Calian anticipates the transaction to close on December 1, 2023. See press release for further details.

Appointed President, IT and Cyber Solutions

On November 6, 2023, Calian appointed Michael Tremblay to the position of President, IT and Cyber Solutions effective December 1, 2023. With 38 years of sales, marketing, operations, general management experience, coupled with considerable knowledge of public sector clients, Mike has held senior executive positions with Microsoft, SAP, Fujitsu Consulting, JDS Uniphase, EDS Systemhouse and Digital Equipment Corporation. See press release for further details.

Quarterly Dividend

Today, Calian declared a quarterly dividend of $0.28 per share. The dividend is payable December 27, 2023, to shareholders of record as of December 11, 2023. Dividends paid by the Corporation are considered “eligible dividend” for tax purposes.

Guidance

     
  Guidance for the year ended Sept. 30, 2024
     
(in thousands of Canadian $) Low High
Revenue 730,000 790,000
Adjusted EBITDA 83,000 89,000


This guidance includes the full-year contribution from the Hawaii Pacific Teleport acquisition and assumes the closing of the Decisive Group acquisition on December 1st, 2023. It also includes the benefits from the restructuring plan announced in August 2023.

About Calian

We keep the world moving forward. Calian® helps people communicate, innovate, learn and lead safe and healthy lives. 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, European and international markets.

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

Product or service names mentioned herein may be the trademarks of their respective owners.

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 September 30, 2023 and 2022
(Canadian dollars in thousands, except per share data)
 
  September 30, September 30,
  2023 2022
ASSETS      
CURRENT ASSETS      
Cash and cash equivalents $33,734 $42,646 
Accounts receivable  173,052  171,453 
Work in process  16,580  39,865 
Inventory  21,983  18,643 
Prepaid expenses  19,040  23,780 
Derivative assets  155  123 
Total current assets  264,544  296,510 
NON-CURRENT ASSETS      
Capitalized research and development  1,068  2,186 
Equipment  26,709  16,623 
Application software  9,446  10,395 
Right of use assets  34,637  16,678 
Investments  3,673  670 
Acquired intangible assets  75,160  57,087 
Prepaid expenses  10,386  - 
Deferred tax asset  967  1,054 
Goodwill  159,133  145,959 
Total non-current assets  321,179  250,652 
TOTAL ASSETS $585,723 $547,162 
LIABILITIES AND SHAREHOLDERS’ EQUITY      
CURRENT LIABILITIES      
Debt facility $37,750 $7,500 
Accounts payable and accrued liabilities  105,550  126,096 
Contingent earn-out  11,263  25,676 
Provisions  2,848  1,249 
Unearned contract revenue  32,423  46,210 
Derivative liabilities  353  812 
Lease obligations  4,949  4,115 
Total current liabilities  195,136  211,658 
NON-CURRENT LIABILITIES      
Lease obligations  32,057  14,920 
Contingent earn-out  2,535  2,874 
Unearned contract revenue  15,592  - 
Deferred tax liabilities  12,031  12,524 
Total non-current liabilities  62,215  30,318 
TOTAL LIABILITIES  257,351  241,976 
       
SHAREHOLDERS’ EQUITY      
Issued capital  225,540  213,277 
Contributed surplus  4,856  3,479 
Retained earnings  96,859  92,198 
Accumulated other comprehensive income (loss)  1,117  (3,768)
TOTAL SHAREHOLDERS’ EQUITY  328,372  305,186 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $585,723 $547,162 
Number of common shares issued and outstanding  11,812,650  11,607,391 


CALIAN GROUP LTD.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF NET PROFIT
For the three and twelve month periods ended September 30, 2023 and 2022
(Canadian dollars in thousands, except per share data)
 
  Three months ended Year ended
  September 30, September 30,
  2023  2022  2023  2022 
Revenue            
Advanced Technologies $52,521  $30,517  $178,363  $150,398 
Health  51,568   39,470   184,856   167,141 
Learning  24,228   21,799   106,192   91,668 
ITCS  47,631   68,764   189,172   172,965 
Total Revenue  175,948   160,550   658,583   582,172 
             
Cost of revenues  120,152   110,400   454,371   412,946 
Gross profit  55,796   50,150   204,212   169,226 
             
Selling and marketing  10,545   13,064   45,410   32,514 
General and administration  22,034   17,004   81,363   65,408 
Research and development  2,836   1,015   11,452   5,372 
Profit before under noted items  20,381   19,067   65,987   65,932 
             
Depreciation of equipment, application software and capitalized research and development  2,133   2,308   9,043   6,974 
Depreciation of right of use assets  1,352   950   4,501   3,629 
Amortization of acquired intangible assets  4,460   3,484   14,874   20,555 
Restructuring expense  2,618   -   2,618   - 
Other changes in fair value  (314)  -   (314)  - 
Deemed compensation  403   3,314   550   4,314 
Changes in fair value related to contingent earn-out  416   2,289   3,858   5,555 
Profit before interest income and income tax expense  9,313   6,722   30,857   24,905 
             
Lease obligations interest expense  159   143   531   451 
Interest expense  634   7   365   295 
Profit before income tax expense  8,520   6,572   29,961   24,159 
             
Income tax expense – current  3,776   5,650   12,919   14,307 
Income tax recovery – deferred  (375)  (273)  (1,843)  (3,752)
Total income tax expense  3,401   5,377   11,076   10,555 
NET PROFIT $5,119  $1,195  $18,885  $13,604 
             
Net profit per share:            
Basic $0.43  $0.10  $1.61  $1.19 
Diluted $0.43  $0.10  $1.61  $1.19 


CALIAN GROUP LTD.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three and twelve month periods ended September 30, 2023 and 2022
(Canadian dollars in thousands)
 
  Three months ended Year ended
  September 30, September 30,
  2023  2022  2023  2022 
CASH FLOWS GENERATED FROM (USED IN) OPERATING ACTIVITIES            
Net profit $5,119  $1,195  $18,885  $13,604 
Items not affecting cash:            
Interest expense  634   7   365   295 
Changes in fair value related to contingent earn-out  416   2,289   3,858   5,555 
Lease obligations interest expense  159   143   531   451 
Income tax expense  3,401   5,377   11,076   10,555 
Employee share purchase plan expense  130   125   597   518 
Share based compensation expense  1,618   571   3,273   1,927 
Depreciation and amortization  7,945   6,742   28,418   31,158 
Deemed compensation  403   3,314   550   4,314 
Other changes in fair value  (314)  -   (314)  - 
   19,511   19,763   67,239   68,377 
Change in non-cash working capital            
Accounts receivable  (8,971)  (41,755)  1,393   (28,822)
Work in process  6,166   13,785   23,285   15,444 
Prepaid expenses and other  (3,848)  (10,443)  (829)  (20,137)
Inventory  1,873   681   (3,340)  (4,340)
Accounts payable and accrued liabilities  9,475   20,962   (17,947)  15,142 
Unearned contract revenue  4,918   403   928   11,333 
   29,124   3,396   70,729   56,997 
Interest paid  (791)  (150)  (895)  (747)
Income tax paid  (5,629)  (3,258)  (13,059)  (13,109)
   22,704   (12)  56,775   43,141 
CASH FLOWS GENERATED FROM (USED IN) FINANCING ACTIVITIES            
Issuance of common shares net of costs  760   571   2,901   2,705 
Dividends  (3,335)  (3,249)  (13,163)  (12,765)
Draw (repayment) on debt facility  37,750   -   30,250   7,500 
Payment of lease obligations  (1,261)  (929)  (4,382)  (3,655)
Repurchase of common shares  (1,670)  -   (1,670)  - 
   32,244   (3,607)  13,936   (6,215)
CASH FLOWS USED IN INVESTING ACTIVITIES            
Investments  -   -   (2,689)  - 
Business acquisitions  (59,834)  (2,928)  (68,494)  (65,566)
Capitalized research and development  -   (2)  (86)  (177)
Equipment and application software  (2,368)  (2,240)  (8,354)  (7,148)
   (62,202)  (5,170)  (79,623)  (72,891)
             
NET CASH OUTFLOW $(7,254) $(8,789) $(8,912) $(35,965)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD  40,988   51,435   42,646   78,611 
CASH AND CASH EQUIVALENTS, END OF PERIOD $33,734  $42,646  $33,734  $42,646 


RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE IFRS MEASURES

The following 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 these 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 Year ended
  September 30, September 30, September 30, September 30,
  2023 2022
 2023 2022
Net profit $5,119  $1,195  $18,885  $13,604 
Depreciation of equipment and application software  2,133   2,308   9,043   6,974 
Depreciation of right of use asset  1,352   950   4,501   3,629 
Amortization of acquired intangible assets  4,460   3,484   14,874   20,555 
Restructuring expense  2,618   -   2,618   - 
Other changes in fair value  (314)  -   (314)  - 
Lease interest expense  159   143   531   451 
Changes in fair value related to contingent earn-out  416   2,289   3,858   5,555 
Interest expense (income)  634   7   365   295 
Deemed Compensation  403   3,314   550   4,314 
Income tax  3,401   5,377   11,076   10,555 
Adjusted EBITDA $20,381  $19,067  $65,987  $65,932 


Adjusted Net Profit and Adjusted EPS

 
  Three months ended Year ended
  September 30, September 30, September 30, September 30,
  2023 2022
 2023 2022
Net profit $5,119  $1,195  $18,885  $13,604 
Restructuring expense  2,618   -   2,618   - 
Other changes in fair value  (314)  -   (314)  - 
Changes in fair value related to contingent earn-out  416   2,289   3,858   5,555 
Deemed Compensation  403   3,314   550   4,314 
Amortization of intangibles  4,460   3,484   14,874   20,555 
Adjusted net profit  12,702   10,282  $40,471  $44,028 
Weighted average number of common shares basic  11,790,964   11,399,172   11,714,887   11,343,615 
Adjusted EPS Basic  1.08   0.90   3.45   3.88 
Adjusted EPS Diluted  1.07   0.90   3.45   3.87 


Operating Free Cash Flow

 
  Three months ended Year ended
  September 30, September 30, September 30, September 30,
  2023 2022 2023 2022
             
Cash flows generated from operating activities $22,704  $(12) $56,775  $43,141 
Capitalized research and development  -   (2)  (86)  (177)
Equipment and application software  (2,368)  (2,240)  (8,354)  (7,148)
Free cash flow $20,336  $(2,254) $48,335  $35,816 
             
Free cash flow $20,336  $(2,254) $48,335  $35,816 
Adjustments:            
Change in non-cash working capital  (9,613)  16,367   (3,490)  11,380 
Operating free cash flow $10,723  $14,113  $44,845  $47,196 
Operating free cash flow per share  0.91   1.24   3.83   4.16 


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 net 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 net profit to the most comparable IFRS financial measure as shown above.


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