Calian Reports Third Quarter Results

Rhea-AI Summary

Calian Group Ltd. (TSX:CGY) released its Q3 2023 results, reporting an 11% increase in revenue to $167 million. Gross margin remained above 30% for the fifth consecutive quarter. Adjusted EBITDA was $15 million, down 10% compared to Q3 last year. The company completed the acquisition of Hawaii Pacific Teleport and closed a $250 million debt agreement. Calian also implemented a restructuring plan for annualized savings of $8 million.

Positive

• Revenue increased by 11% to $167 million in Q3 2023.
• Gross margin remained above 30% for the fifth consecutive quarter.
• Calian completed the acquisition of Hawaii Pacific Teleport.
• The company closed a $250 million debt agreement.
• Implemented restructuring plan for annualized savings of $8 million.

Negative

• None.

(All amounts in release are in Canadian dollars)

OTTAWA, ON / ACCESSWIRE / August 10, 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 third quarter ended June 30, 2023.

Third quarter highlights:

• Revenue up 11% to $167 million
• Gross margin above 30% for the fifth consecutive quarter
• Adjusted EBITDA¹ at $15 million, down 10% compared to Q3 last year
• Operating free cash flow of $11 million
• Cash on hand of $41 million and net liquidity of $221 million
• New contract signings of $131 million
• Completed the acquisition of Hawaii Pacific Teleport on August 1, 2023
• Closed $250 million debt agreement on July 24, 2023
• Implemented restructuring plan for annualized savings of $8 million
• Updated FY23 guidance

Financial Highlights		Three months ended											Nine months ended
(in millions of $, except per share & margins)		June 30,											June 30,
		2023				2022				%			2023					2022				%
Revenue			166.6				150.0				11%				482.6				421.6				14%
Adjusted EBITDA1			14.5				16.1				(10%)				45.6				46.9				(3%)
Adjusted EBITDA %1			8.7%				10.8%			(210bps)					9.4%				11.1%			(170bps)
Net Profit			4.7				6.8				(32%)				13.8				12.4				11%
EPS Diluted			$ 0.40				$ 0.60				(33%)				$ 1.17				$ 1.09				7%
Adjusted Net Profit1			8.4				10.8				(22%)				27.8				33.7				(18%)
Adjusted EPS Diluted1			$ 0.71				$ 0.95				(25%)				$ 2.37				$ 2.97				(20%)
Operating Free Cash Flow1			11.3				10.2				11%				34.1				33.1				3%

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 Friday, August 11, 2023, 8:30 a.m. Eastern Time.

"Our third quarter results were mixed. While we generated 11% revenue growth, and continued to drive gross margin performance above 30%, our Adjusted EBITDA and related margin decreased due to various investments we made at the end of our last fiscal year," said Kevin Ford, Calian Chief Executive Officer. "We believe it is prudent at this time to proactively rebalance our investment levels in certain areas of our business in order to drive a more optimal level of growth and profitability."

"Subsequent to quarter end, we underwent a complete review of our delivery capacity and overhead costs and already started to initiate cuts in targeted areas. This restructuring plan is expected to generate annual savings of approximately $8 million once implemented. Despite these adjustments, the fundamentals of our four business segments are strong and we are confident that we can maintain our recent pace of organic growth and return to double-digit EBITDA margins in the near term. However, we have updated our FY23 guidance to reflect the weaker EBITDA performance in our third quarter," stated Mr. Ford.

"Shortly after the quarter, we continued to make progress on our M&A agenda. We completed the acquisition of Hawaii Pacific Teleport, which will provide us with a high margin business with recurring revenue streams," said Patrick Houston, Calian Chief Financial Officer. "We also closed a $250 million debt agreement with a lending syndicate which will give us access to additional liquidity to fuel our growth strategy."

Third Quarter Results

Revenues increased 11%, from $150 million to $167 million, driven by growth in Health, Learning and Advanced Technologies. This growth was partially offset by a revenue decrease in the ITCS segment.

• Health: Revenues increased 23% to $49 million driven by existing customers increasing their requirements for healthcare services, as well as new programs being launched across Canada.
• Learning: Revenues grew 20% to $27 million driven by its recent investments into technology and geographical diversification. These investments are proving to be very valuable for both existing and new customers across Canada and European markets.
• Advanced Technologies: Revenues increased 14% to $45 million driven by stronger telecom product sales with existing customers and increased demand for GNSS products.
• ITCS: Revenues decreased 6% to $46 million mainly due to lower shipments in its product resale business based in the US.

Gross margin remained stable over 30% but Adjusted EBITDA and related margin decreased to $14.5 million and 8.7%, respectively, due to operating expense investments.

Liquidity and Capital Resources

Calian generated $11 million in operating free cash flows in the third quarter. The Company used its cash primarily to pay dividends, invest in capex and fund a temporary working capital need. The Company ended the quarter with net cash of $41 million, and with the new expanded credit facility put in place in July, now has total liquidity of $221 million.

Implemented a Restructuring Plan

On August 10, 2023, Calian implemented a restructuring plan to rebalance its investment levels in certain areas of its business in order to drive a more optimal level of growth and profitability. It is expected to generate annualized cost savings of approximately $8 million. Total one-time costs for implementing this restructuring are approximately $2 million. Benefits from this plan should start to materialize in Q4-23 with a full impact expected in Q1-24. See Q3-23 Management's Discussion and Analysis (MD&A) for further details.

Completed the Acquisition of Hawaii Pacific Teleport

On August 1, 2023, Calian completed the acquisition of US-based Hawaii Pacific Teleport (HPT) for up to CAD$62M (US$46M). The acquisition marks Calian's further move into the US following its acquisition of Computex in March 2022. It will also expand the Calian Advanced Technologies portfolio further into global markets. See press release for further details.

Debt Agreement

On July 24, 2023, Calian closed a $180 million debt facility with a lending syndicate. This new three-year term revolving credit facility includes an uncommitted accordion of $70 million for total availability of up to $250 million and replaces the existing debt facility. See press release for further details.

Quarterly Dividend

Today, Calian declared a quarterly dividend of $0.28 per share. The dividend is payable September 7, 2023, to shareholders of record as of August 24, 2023. Dividends paid by the Corporation are considered "eligible dividend" for tax purposes.

Updated Guidance

"We are updating our FY23 guidance in light of our third quarter results. Although we have a strong order book for our fourth quarter, the range reflects the timing of deliveries of products in our Advanced Technologies and ITCS segments," said Mr. Ford. "The cost reduction measures we have taken will restore EBITDA levels in-line with recent performance levels as we enter FY24. This along with our organic growth momentum, the recent acquisition of Hawaii Pacific Teleport, and our M&A pipeline gives us confidence that we are still on pace to post strong results in the short term and achieve our longer-term target of reaching $1 billion in revenue in FY26," said Mr. Ford.

		Guidance for the year ended Sept. 30, 2023
(in thousands of Canadian $)		Low				High
Revenue			630,000				680,000
Adjusted EBITDA			60,000				65,000
Adjusted Net Profit			36,000				40,000

Note: This guidance includes Hawaii Pacific Teleport effective on August 1^st, and benefits from the restructuring plan, but excludes the one-time restructuring cost of approximately $2 million to be recorded in Q4.

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:
pr@calian.com
613-599-8600 x 2298

Investor Relations inquiries:
ir@calian.com

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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: info@calian.com

CALIAN GROUP LTD.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at June 30, 2023 and September 30, 2022

(Canadian dollars in thousands, except per share data)

		June 30,				September 30,
		2023				2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	40,988			$	42,646
Accounts receivable			161,090				171,453
Work in process			22,746				39,865
Inventory			23,857				18,643
Prepaid expenses			15,949				23,780
Derivative assets			39				123
Total current assets			264,669				296,510
NON-CURRENT ASSETS
Capitalized research and development			1,369				2,186
Equipment			17,259				16,623
Application software			9,676				10,395
Right of use assets			15,519				16,678
Investments			3,359				670
Acquired intangible assets			46,129				57,087
Prepaid expenses			8,031				-
Deferred tax asset			735				1,054
Goodwill			145,198				145,959
Total non-current assets			247,275				250,652
TOTAL ASSETS		$	511,944			$	547,162
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt facility		$	-			$	7,500
Accounts payable and accrued liabilities			98,113				126,096
Contingent earn-out			21,968				25,676
Provisions			1,222				1,249
Unearned contract revenue			29,653				46,210
Derivative liabilities			158				812
Lease obligations			4,313				4,115
Total current liabilities			155,427				211,658
NON-CURRENT LIABILITIES
Lease obligations			13,591				14,920
Contingent earn-out			-				2,874
Unearned contract revenue			12,567				-
Deferred tax liabilities			11,708				12,524
Total non-current liabilities			37,866				30,318
TOTAL LIABILITIES			193,293				241,976
SHAREHOLDERS' EQUITY
Issued capital			220,400				213,277
Contributed surplus			3,462				3,479
Retained earnings			96,136				92,198
Accumulated other comprehensive loss			(1,347)				(3,768)
TOTAL SHAREHOLDERS' EQUITY			318,651				305,186
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	511,944			$	547,162
Number of common shares issued and outstanding			11,740,099				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 and nine month periods ended June 30, 2023 and 2022

(Canadian dollars in thousands, except per share data)

		Three months ended								Nine months ended
		June 30,								June 30,
		2023				2022				2023				2022
Revenue
Advanced Technologies		$	44,777			$	39,152			$	125,842			$	119,881
Health			49,152				39,841				133,288				127,671
Learning			26,741				22,259				81,964				69,869
ITCS			45,880				48,766				141,541				104,201
Total Revenue			166,550				150,018				482,635				421,622
Cost of revenues			115,443				104,515				334,219				302,546
Gross profit			51,107				45,503				148,416				119,076
Selling and marketing			11,891				9,554				34,865				19,450
General and administration			21,437				17,994				59,329				48,404
Research and development			3,273				1,819				8,616				4,357
Profit before under noted items			14,506				16,136				45,606				46,865
Depreciation of equipment, application software and capitalized research and development			2,361				2,237				6,910				4,666
Depreciation of right of use assets			1,127				978				3,149				2,679
Amortization of acquired intangible assets			3,603				3,351				10,414				17,071
Deemed compensation			-				-				147				1,000
Changes in fair value related to contingent earn-out			138				651				3,442				3,266
Profit before interest and income tax expense			7,277				8,919				21,544				18,183
Lease obligations interest expense			139				94				372				308
Interest expense (income)			(254)				142				(269)				288
Profit before income tax expense			7,392				8,683				21,441				17,587
Income tax expense - current			2,930				2,172				9,143				8,657
Income tax recovery - deferred			(211)				(325)				(1,468)				(3,479)
Total income tax expense			2,719				1,847				7,675				5,178
NET PROFIT		$	4,673			$	6,836			$	13,766			$	12,409
Net profit per share:
Basic		$	0.40			$	0.60			$	1.18			$	1.10
Diluted		$	0.40			$	0.60			$	1.17			$	1.09

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 and nine month periods ended June 30, 2023 and 2022

(Canadian dollars in thousands)

		Three months ended								Nine months ended
		June 30,								June 30,
		2023				2022				2023				2022
CASH FLOWS GENERATED FROM (USED IN) OPERATING ACTIVITIES
Net profit		$	4,673			$	6,836			$	13,766			$	12,409
Items not affecting cash:
Interest expense (income)			(254)				142				(269)				288
Changes in fair value related to contingent earn-out			138				651				3,442				3,266
Lease obligations interest expense			139				94				372				308
Income tax expense			2,719				1,847				7,675				5,178
Employee share purchase plan expense			166				131				467				393
Share based compensation expense			673				484				1,655				1,356
Depreciation and amortization			7,091				6,565				20,473				24,416
Deemed compensation			-				-				147				1,000
			15,345				16,750				47,728				48,614
Change in non-cash working capital
Accounts receivable			3,105				29,715				10,364				12,933
Work in process			9,536				(1,812)				17,119				1,659
Prepaid expenses and other			2,234				(3,744)				3,019				(9,694)
Inventory			(190)				(3,044)				(5,213)				(5,021)
Accounts payable and accrued liabilities			(19,883)				(9,202)				(27,422)				(5,820)
Unearned contract revenue			(6,891)				(3,961)				(3,990)				10,930
			3,256				24,702				41,605				53,601
Interest paid			114				(237)				(104)				(597)
Income tax paid			(825)				(4,690)				(7,430)				(9,851)
			2,545				19,775				34,071				43,153
CASH FLOWS GENERATED FROM (USED IN) FINANCING ACTIVITIES
Issuance of common shares net of costs			366				336				2,141				2,134
Dividends			(3,286)				(3,179)				(9,828)				(9,516)
Draw (repayment) on debt facility			-				(17,896)				(7,500)				7,500
Payment of lease obligations			(1,199)				(966)				(3,121)				(2,726)
			(4,119)				(21,705)				(18,308)				(2,608)
CASH FLOWS USED IN INVESTING ACTIVITIES
Investments			-				-				(2,689)				-
Business acquisitions			-				(4,416)				(8,660)				(62,638)
Capitalized research and development			-				(25)				(86)				(175)
Equipment, building and application software			(3,341)				(1,585)				(5,986)				(4,908)
			(3,341)				(6,026)				(17,421)				(67,721)
NET CASH OUTFLOW		$	(4,915)			$	(7,956)			$	(1,658)			$	(27,176)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			45,903				59,391				42,646				78,611
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	40,988			$	51,435			$	40,988			$	51,435

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								Nine months ended
		June 30,				June 30,				June 30,				June 30,
		2023				2022				2023				2022
Net profit		$	4,673			$	6,836			$	13,766			$	12,409
Depreciation of equipment and application software			2,361				2,237				6,910				4,666
Depreciation of right of use asset			1,127				978				3,149				2,679
Amortization of acquired intangible assets			3,603				3,351				10,414				17,071
Lease interest expense			139				94				372				308
Changes in fair value related to contingent earn-out			138				651				3,442				3,266
Interest expense (income)			(254)				142				(269)				288
Deemed Compensation			-				-				147				1,000
Income tax			2,719				1,847				7,675				5,178
Adjusted EBITDA		$	14,506			$	16,136			$	45,606			$	46,865

Adjusted Net Profit and Adjusted EPS

		Three months ended								Nine months ended
		June 30,				June 30,				June 30,				June 30,
		2023				2022				2023				2022
Net profit		$	4,673			$	6,836			$	13,766			$	12,409
Changes in fair value related to contingent earn-out			138				651				3,442				3,266
Deemed Compensation			-				-				147				1,000
Amortization of intangibles			3,603				3,351				10,414				17,071
Adjusted net profit		$	8,414			$	10,838			$	27,769			$	33,746
Weighted average number of common shares basic			11,732,711				11,350,214				11,689,528				11,325,096
Adjusted EPS Basic			0.72				0.95				2.38				2.98
Adjusted EPS Diluted			0.71				0.95				2.37				2.97

Operating Free Cash Flow

		Three months ended								Nine months ended
		June 30,				June 30,				June 30,				June 30,
		2023				2022				2023				2022
Cash flows generated from operating activities		$	2,545			$	19,775			$	34,071			$	. 43,153
Capitalized research and development			-				(25)				(86)				(175)
Equipment and application software			(3,341)				(1,585)				(5,986)				(4,908)
Free cash flow		$	(796)			$	18,165			$	27,999			$	38,070
Free cash flow		$	(796)			$	18,165			$	27,999			$	38,070
Adjustments:
Change in non-cash working capital			12,089				(7,952)				6,123				(4,987)
Operating free cash flow		$	11,293			$	10,213			$	34,122			$	33,083
Operating free cash flow per share			0.96				0.90				2.92				2.92

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.

View source version on accesswire.com:
https://www.accesswire.com/773638/Calian-Reports-Third-Quarter-Results

FAQ

What is the ticker symbol of Calian Group Ltd.?

The ticker symbol of Calian Group Ltd. is CGY.

What was the revenue growth in Q3 2023?

The revenue growth in Q3 2023 was 11%.

What was the adjusted EBITDA in Q3 2023?

The adjusted EBITDA in Q3 2023 was $15 million.

What was the purpose of the restructuring plan?

The purpose of the restructuring plan was to rebalance investment levels and drive a more optimal level of growth and profitability.

What is the total liquidity of Calian Group Ltd.?

The total liquidity of Calian Group Ltd. is $221 million.

What was the purpose of the acquisition of Hawaii Pacific Teleport?

The acquisition of Hawaii Pacific Teleport will provide a high margin business with recurring revenue streams.

What was the value of the debt agreement closed by Calian Group Ltd.?

Calian Group Ltd. closed a $250 million debt agreement.