CGY Calian Group Ltd

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, 2024.

Q1-25 Highlights:

• Revenue up 3% to $185 million
• Gross margin at 31.8%, slightly down from 32.5% last year
• Adjusted EBITDA1 of $18 million, down from $21 million last year
• Operating free cash flow1 of $13 million, down from $17 million last year
• Net debt to adjusted EBITDA1 ratio of 0.6x
• Repurchased 101,350 shares in consideration of $4.9 million
• Guidance reiterated
• Announced new U.S. subsidiary to focus on U.S. government and defence

Financial Highlights	Three months ended
(in millions of $, except per share & margins)	December  31,
	2024		20232		%
Revenue	185.0		179.2		3	%
Adjusted EBITDA1	17.8		21.4		(17)	%
Adjusted EBITDA %1	9.6	%	11.9	%	(230)bps
Adjusted Net Profit1	10.5		14.0		(25)	%
Adjusted EPS Diluted1	0.88		1.17		(25)	%
Operating Free Cash Flow1	13.1		17.2		(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.2 Certain comparative figures have been reclassified to align with the current year's presentation. For more information, please see the selected consolidated financial information section of the management discussion and analysis.

Access the full report on the Calian Financials web page. Register for the conference call on Thursday, February 13, 2025, 8:30 a.m. Eastern Time.

“We closed the quarter as expected and are seeing positive momentum across our diverse end markets, while continuing to benefit from the strong contributions of our recent acquisitions in UK, the U.S. and Canada,” said Kevin Ford, Calian CEO. “The accelerating global demand for defence solutions positions Calian’s expanding footprint to play a critical role in the years ahead. Additionally, discussions among Canadian leaders about increasing military investment and accelerating initiatives are a welcome development. We remain on track to deliver another record year and are making progress against our long-term objectives.”

First Quarter Results

Revenues increased 3%, from $179 million to $185 million, representing the highest first quarter revenue on record. Acquisitive growth was 8% and was generated by the acquisitions of Decisive Group, the nuclear assets from MDA Ltd and Mabway. Organic growth was down 5%, as growth generated in global Defence was offset by declines in the pace of domestic Defence training and delays in large projects in its Space and IT infrastructure markets.

Gross margin stood at 31.8% and represents the 11th quarter above the 30% mark. Adjusted EBITDA1 stood at $18 million, down 17% from $21 million last year, primarily impacted by revenue mix and increased investments in our sales and delivery capacity. As a result, adjusted EBITDA1 margin decreased to 9.6%, from 11.9% last year.

Net profit stood at $(1) million, or $(0.08) per diluted share, down from $6 million, or $0.46 per diluted share last year. This decrease in profitability is primarily due to increases in accounting charges related to amortization and deemed compensation expenses from acquisitions as well as increased operating expenses, which was offset by higher gross profit. Adjusted net profit1 was $10 million, or $0.88 per diluted share, down from $14 million, or $1.17 per diluted share last year.

Liquidity and Capital Resources

“In the first quarter we generated $13 million in operating free cash flow1, representing a 73% conversion rate from adjusted EBITDA1,” said Patrick Houston, Calian CFO. “We used our cash and a portion of our credit facility to pay contingent earn out liabilities for $11 million and make capital expenditure investments for $1 million. We also provided a return to shareholders in the form of dividends for $3 million and share buybacks for $5 million. We ended the quarter with a net debt to adjusted EBITDA1 ratio of 0.6x, well-positioned to pursue our growth objectives,” concluded Mr. Houston.

Normal Course Issuer Bid

In the three-month period ended December 31, 2024, the Company repurchased 101,350 shares for cancellation in consideration of $4.9 million.

Announced U.S. Subsidiary to Focus on U.S. Government and Defence

On December 4, 2024, Calian announced the launch of an independent U.S.-focused subsidiary, Calian US, Inc. It is committed to securing U.S. government contracts by ensuring full compliance with all relevant regulations. To facilitate this, Calian US will be established as an independent subsidiary and will pursue the necessary certifications to operate effectively within the U.S. market.

Quarterly Dividend

On February 12, 2025, Calian declared a quarterly dividend of $0.28 per share. The dividend is payable March 12, 2025, to shareholders of record as of February 26, 2025. Dividends paid by the Company are considered “eligible dividend” for tax purposes.

Guidance Reiterated

The table below presents the FY25 guidance based on the new definition of adjusted EBITDA.

	Guidance for the year ended September 30, 2025						FY24 Results		YOY Growth at Midpoint
(in thousands of $)	Low		Midpoint		High
Revenue	800,000		840,000		880,000		746,611		12	%
Adj. EBITDA1	96,000		101,000		106,000		92,159		10	%

This guidance includes the full-year contribution from the Decisive Group acquisition, closed on December 1, 2023, the nuclear asset acquisition from MDA Ltd., closed on March 5, 2024 and the Mabway acquisition, closed on May 9, 2024. It does not include any other further acquisitions that may close within the fiscal year. The guidance reflects another record year for the Company and positions it well to achieve its long-term growth targets.

At the midpoint of the range, this guidance reflects revenue and adjusted EBITDA1 growth of 12% and 10%, respectively, and an adjusted EBITDA1 margin of 12.0%. It would represent the 8th consecutive year of double-digit revenue growth and record revenue and adjusted EBITDA1 levels.

About Calian

www.calian.com

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, respect and teamwork to engineer reliable solutions that solve complex challenges. 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:media@calian.com 613-599-8600

Investor Relations inquiries:ir@calian.com

----------------------------------------------------------------------------- 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 December 31, 2024 and September 30, 2024
(Canadian dollars in thousands, except per share data)
	December 31,				September 30,
	2024				2024
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	61,040			$	51,788
Accounts receivable		157,542				157,376
Work in process		20,205				20,437
Inventory		29,442				23,199
Prepaid expenses		23,805				23,978
Derivative assets		31				32
Total current assets		292,065				276,810
NON-CURRENT ASSETS
Property, plant and equipment		41,234				40,962
Right of use assets		41,746				36,383
Prepaid expenses		7,157				7,820
Deferred tax asset		3,376				3,425
Investments		3,875				3,875
Acquired intangible assets		123,297				128,253
Goodwill		213,925				210,392
Total non-current assets		434,610				431,110
TOTAL ASSETS	$	726,675			$	707,920
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	123,945			$	124,884
Provisions		2,454				3,075
Unearned contract revenue		40,263				41,723
Lease obligations		5,556				5,645
Contingent earn-out		29,709				39,136
Derivative liabilities		169				92
Total current liabilities		202,096				214,555
NON-CURRENT LIABILITIES
Debt facility		115,750				89,750
Lease obligations		39,425				33,798
Unearned contract revenue		17,256				14,503
Contingent earn-out		2,773				2,697
Deferred tax liabilities		23,738				25,862
Total non-current liabilities		198,942				166,610
TOTAL LIABILITIES		401,038				381,165
SHAREHOLDERS’ EQUITY
Issued capital		227,561				225,747
Contributed surplus		4,555				6,019
Retained earnings		84,038				91,268
Accumulated other comprehensive income (loss)		9,483				3,721
TOTAL SHAREHOLDERS’ EQUITY		325,637				326,755
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	726,675			$	707,920
Number of common shares issued and outstanding		11,765,055				11,802,364

CALIAN GROUP LTD.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF NET PROFIT
For the three months ended December 31, 2024 and 2023
(Canadian dollars in thousands, except per share data)
	Three months ended
	December  31,
	2024				2023
Revenue	$	185,047			$	179,179
Cost of revenues		126,246				120,961
Gross profit		58,801				58,218
Selling, general and administrative		38,105				34,145
Research and development		2,896				2,719
Share based compensation		1,091				1,190
Profit before under noted items		16,709				20,164
Restructuring expense		692				—
Depreciation and amortization		11,540				9,006
Mergers and acquisition costs		2,320				1,980
Profit before interest income and income tax expense		2,157				9,178
Interest expense		1,783				1,547
Income tax expense		1,350				2,106
NET PROFIT (LOSS)	$	(976)			$	5,525
Net profit (loss) per share:
Basic	$	(0.08)			$	0.47
Diluted	$	(0.08)			$	0.46

CALIAN GROUP LTD.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended December 31, 2024 and 2023
(Canadian dollars in thousands)
	Three months ended
	December 31,
		2024				2023
CASH FLOWS GENERATED FROM (USED IN) OPERATING ACTIVITIES
Net profit	$	(976	)		$	5,525
Items not affecting cash:
Interest expense		1,295				1,098
Changes in fair value related to contingent earn-out		558				726
Lease obligations interest expense		488				449
Income tax expense		1,350				2,106
Employee share purchase plan expense		174				162
Share based compensation expense		917				1,013
Depreciation and amortization		11,540				9,006
Deemed compensation		1,563				604
		16,909				20,689
Change in non-cash working capital
Accounts receivable		(167	)			(11,189	)
Work in process		232				(898	)
Prepaid expenses and other		(2,739	)			(74	)
Inventory		(6,241	)			(2,590	)
Accounts payable and accrued liabilities		(858	)			15,516
Unearned contract revenue		1,294				206
		8,430				21,660
Interest paid		(1,783	)			(1,547	)
Income tax paid		(2,265	)			(2,575	)
		4,382				17,538
CASH FLOWS GENERATED FROM (USED IN) FINANCING ACTIVITIES
Issuance of common shares net of costs		881				694
Dividends		(3,292	)			(3,314	)
Draw on debt facility		26,000				56,000
Payment of lease obligations		(1,442	)			(1,171	)
Repurchase of common shares		(4,926	)			(1,357	)
		17,221				50,852
CASH FLOWS USED IN INVESTING ACTIVITIES
Business acquisitions		(11,215	)			(47,457	)
Property, plant and equipment		(1,136	)			(2,400	)
		(12,351	)			(49,857	)
NET CASH INFLOW (OUTFLOW)	$	9,252			$	18,533
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		51,788				33,734
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	61,040			$	52,267

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,
		2024				20231
Net profit	$	(976	)		$	5,525
Share based compensation		1,091				1,190
Restructuring expense		692				—
Depreciation and amortization		11,540				9,006
Mergers and acquisition costs		2,320				1,980
Interest expense		1,783				1,547
Income tax		1,350				2,106
Adjusted EBITDA	$	17,800			$	21,354

Adjusted Net Profit and Adjusted EPS

		Three months ended
		December 31,
		2024				20231
Net profit	$	(976	)		$	5,525
Share based compensation		1,091				1,190
Restructuring expense		692				—
Mergers and acquisition costs		2,320				1,980
Amortization of intangibles		7,334				5,325
Adjusted net profit		10,461				14,020
Weighted average number of common shares basic		11,773,465				11,812,574
Adjusted EPS Basic		0.89				1.19
Adjusted EPS Diluted	$	0.88			$	1.17

Operating Free Cash Flow

		Three months ended
		December 31,
		2024				20231
Cash flows generated from operating activities (free cash flow)	$	4,382			$	17,538
Adjustments:
M&A costs included in operating activities		199				650
Change in non-cash working capital		8,479				(971)
Operating free cash flow	$	13,060			$	17,217
Operating free cash flow per share - basic		1.11				1.46
Operating free cash flow per share - diluted		1.10				1.44
Operating free cash flow conversion		73	%			81	%

Net Debt to Adjusted EBITDA

	December 31,				September 30,
		2024				20231
Cash	$	61,040			$	52,267
Debt facility		115,750				93,750
Net debt (net cash)		54,710				41,483
Trailing twelve month adjusted EBITDA		88,602				65,987
Net debt to adjusted EBITDA		0.6				0.6

Operating free cash flow measures the company’s cash profitability after required capital spending when excluding working capital changes. The Company’s ability to convert adjusted EBITDA to operating free cash flow is critical for the long term success of its strategic growth. 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. 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.