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 fourth quarter and FY24 ended September 30, 2024.

Highlights of Q4-24:

• Revenue up 3% to $181 million
• Gross margin at 35.3%, up from 31.7% last year
• Adjusted EBITDA1 of $23 million (margin of 12.5%) an increase of 11% from the prior year
• Announced collaborations with Microsoft and Walmart Canada

Highlights of record performance in FY24:

• Revenue up 13% to $747 million
• Gross margin at 34.0%, up from 31.0% last year
• Adjusted EBITDA1 at $86 million, up 30% from last year
• Operating free cash flow1 of $58 million, up from $45 million last year
• Net debt to adjusted EBITDA1 ratio of 0.4x
• Repurchased 115,248 shares in consideration of $6 million

Financial Highlights	Three months ended						Year ended
(in millions of $, except per share & margins)	September 30,						September 30,
	2024		2023		%		2024		2023		%
Revenue	181.2		175.9		3	%	746.6		658.6		13	%
Adjusted EBITDA1	22.7		20.4		11	%	85.5		66.0		30	%
Adjusted EBITDA %1	12.5	%	11.6	%	90bps		11.5	%	10.0	%	150bps
Adjusted Net Profit1	11.5		12.7		(10) %		51.7		40.5		28	%
Adjusted EPS Diluted1	0.96		1.07		(11) %		4.33		3.45		26	%
Operating Free Cash Flow1	16.3		10.7		52	%	58.2		44.8		30	%

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 video webcast on Tuesday, November 26, 2024, 8:30 a.m. Eastern Time.

“We capped off FY24 with a record quarter,” said Kevin Ford, Calian CEO. “Revenues, gross margin and adjusted EBITDA all hit historical highs for the fourth quarter and the full year. During the year, we completed three strategic acquisitions, signed and acquired contracts valued at $785 million and expanded our product and service offering in new markets. We finished the year with revenues and adjusted EBITDA up 13% and 30%, respectively, on track with our three-year strategic plan of doubling our Adjusted EBITDA1 by the end of FY26. With tailwinds in our growth markets, a solid balance sheet and a strong pipeline of acquisitions, we are on track to achieve another record year in FY25,” stated Mr. Ford.

FY24 Results

Revenues increased 13%, from $659 million to $747 million. This represents the highest revenue for the Company on record and the 7th consecutive year of double-digit growth. Acquisitive growth was 11% and was generated by the acquisitions of Hawaii Pacific Teleport (“HPT”), Decisive Group, the nuclear assets from MDA Ltd and Mabway. Organic growth was 2% and was driven by double-digit growth in the Health segment.

Gross margin reached 34.0% and represents the highest annual gross margin for the Company on record. Adjusted EBITDA1 reached $86 million, up 30% from $66 million last year, driven by the higher margin contribution from acquisitions and increased product revenue. Adjusted EBITDA1 margin reached 11.5%, up from 10.0% last year, as a result of a favorable revenue mix and increased volume.

Net profit reached $11 million, or $0.93 per diluted share, down from $19 million, or $1.61 per diluted share last year. This decrease in profitability is primarily due to increased amortization and interest expenses related to acquisitions, partially offset by higher adjusted EBITDA1. Adjusted net profit1 reached $52 million, or $4.33 per diluted share, up from $40 million, or $3.45 per diluted share last year.

Liquidity and Capital Resources

“In FY24 we generated $58 million in operating free cash flow1, representing a 68% conversion rate from adjusted EBITDA1,” said Patrick Houston, Calian CFO. “We used our cash and a portion of our credit facility to invest in our business with the acquisitions of Decisive Group, the nuclear assets from MDA and Mabway, coupled with earn-outs for $88 million and capital expenditures of $12 million. We also provided a return to shareholders in the form of dividends of $13 million and share buybacks of $6 million. We ended the year with a net debt to adjusted EBITDA1 ratio of 0.4x, well-positioned to pursue our growth objectives,” concluded Mr. Houston.

Normal Course Issuer Bid

On August 28, 2024, the TSX accepted Calian’s Notice of Intention to Make a Normal Course Issuer Bid (“NCIB”) to purchase for cancellation up to 995,904 common shares during the 12-month period commencing September 1, 2024 and ending August 31, 2025, representing approximately 10% of the public float of its common shares as at August 16, 2024.

On August 30, 2023, the TSX accepted Calian’s Notice of Intention to Make a NCIB to purchase for cancellation up to 1,044,012 common shares during the 12-month period commencing September 1, 2023 and ending August 31, 2024, representing approximately 10% of the public float of its common shares as at August 22, 2023.

In the three-month period ended September 30, 2024, the Company repurchased 61,422 shares for cancellation in consideration of $3 million. For the twelve-month period ended September 30, 2024, the Company repurchased 115,248 shares for cancellation in consideration of $6 million.

Announced Collaborations with Microsoft and Walmart Canada

On October 1, 2024, Calian announced it agreed to collaborate with Walmart Canada to expand the retailer's specialty pharmacy capabilities through licensing Calian's custom-built digital health platform NexiTM.

On September 27, 2024, Calian announced a collaboration with Microsoft to offer scalable cloud-native cybersecurity solutions through the adoption of Microsoft Sentinel.

Quarterly Dividend

On November 25, 2024, Calian declared a quarterly dividend of $0.28 per share. The dividend is payable December 23, 2024, to shareholders of record as of December 9, 2024. Dividends paid by the Company are considered “eligible dividend” for tax purposes.

Guidance

Aligning with industry practice, the Company has decided to change its definition of adjusted EBITDA1 starting in FY25. The table below reconciles the previously reported definition of adjusted EBITDA1 for fiscal years 2023 and 2024 to the new definition of adjusted EBITDA1 that will be used going forward. The new definition of adjusted EBITDA1 adds back stock based compensation expense as well as one-time integration/M&A costs.

(in thousands of $)	FY2024		FY2023
Adj. EBITDA (previously reported)	85,535		66,548
Stock based compensation expense	4,373		3,870
Integration/M&A costs	2,251		545
Adj. EBITDA (going forward)	92,159		70,963

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 atMidpoint
(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.

Calian Adopts an Advance Notice By-law and Amends and Restates its Operating By-law

Calian Group Ltd. (“Calian” or the “Company”) announces the adoption by its board of directors (the “Board”) of an advance notice by-law (the “Advance Notice By-law”) and an amended and restated operating by-law (the “Operating By-law”).

The Advance Notice By-law establishes procedures for shareholders giving advance notice to the Company of nominations for directors at any meeting of shareholders where directors are being elected in order to facilitate an orderly and efficient meeting process and allow all shareholders a reasonable opportunity to evaluate all proposed nominees and make an informed voting decision. The Advance Notice By-law is similar to the advance notice by-laws adopted by many other Canadian companies.

Under the Advance Notice By-law, shareholders seeking to nominate a candidate for a Board seat are generally required to provide notice to the Company in the event of:

1. an annual meeting of the shareholders, not less than 30 days before the date of the meeting, or 40 days before if the Company uses notice-and-access provisions under National Instrument 54-101 -Communication with Beneficial Owners of Securities of a Reporting Issuer for delivery of proxy related materials; or
2. a special meeting where directors are being elected, not later than the close of business on the 15th day after the announcement of the meeting.

As the Operating By-law was initially adopted in 2002, it has been amended and restated to align with current laws and governance practices. The amendments include, among other things, to allow the Chief Executive Officer to delegate signing authority, to remove deviations from the Canada Business Corporations Act with respect to conflicts of interest and the inspection of corporate records, to remove the discretion for the board to revise the quorum for a meeting of the directors, to allow the board to appoint from among its members its chair, to reflect the current committees, to remove reference to specific officer duties and powers and to clarify the term of office, to allow for dividends to be paid electronically, to allow the board to call for a shareholder meeting by entirely electronic means only if there is a compelling reason to not hold the meeting in person, to allow the board discretion to accept proxies after the deadline, and to increase the quorum for a meeting of the shareholders to two persons present and holding or representing by proxy at least 25% of the votes attached to all shares entitled to vote at the meeting. 

In accordance with the Canada Business Corporations Act, both the Operating By-law and the Advance Notice By-law are currently in effect and the Company will submit them to the shareholders at the next annual meeting. Provided the shareholders confirm the Operating By-law and the Advance Notice By-law at the meeting, each will continue in effect in the form it was confirmed.

The foregoing descriptions are only summaries and copies of the Operating By-law and Advance Notice By-law have been filed under the Company’s profile on SEDAR+ at www.sedarplus.ca.

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.AUDITED ANNUAL CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONAs at September 30, 2024 and 2023(Canadian dollars in thousands, except per share data)
	September 30,				September 30,
	2024				2023
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	51,788			$	33,734
Accounts receivable		157,376				173,052
Work in process		20,437				16,580
Inventory		23,199				21,983
Prepaid expenses		23,978				19,040
Derivative assets		32				155
Total current assets		276,810				264,544
NON-CURRENT ASSETS
Property, plant and equipment		40,962				37,223
Right of use assets		36,383				34,637
Prepaid expenses		7,820				10,386
Deferred tax asset		3,425				967
Investments		3,875				3,673
Acquired intangible assets		128,253				75,160
Goodwill		210,392				159,133
Total non-current assets		431,110				321,179
TOTAL ASSETS	$	707,920			$	585,723
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Debt facility	$	—			$	37,750
Accounts payable and accrued liabilities		124,884				105,550
Provisions		3,075				2,848
Unearned contract revenue		41,723				32,423
Lease obligations		5,645				4,949
Contingent earn-out		39,136				11,263
Derivative liabilities		92				353
Total current liabilities		214,555				195,136
NON-CURRENT LIABILITIES
Debt facility		89,750				—
Lease obligations		33,798				32,057
Unearned contract revenue		14,503				15,592
Contingent earn-out		2,697				2,535
Deferred tax liabilities		25,862				12,031
Total non-current liabilities		166,610				62,215
TOTAL LIABILITIES		381,165				257,351
SHAREHOLDERS’ EQUITY
Issued capital		225,747				225,540
Contributed surplus		6,019				4,856
Retained earnings		91,268				96,859
Accumulated other comprehensive income (loss)		3,721				1,117
TOTAL SHAREHOLDERS’ EQUITY		326,755				328,372
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	707,920			$	585,723
Number of common shares issued and outstanding		11,802,364				11,812,650

CALIAN GROUP LTD. AUDITED ANNUAL CONDENSED CONSOLIDATED STATEMENTS OF NET PROFITFor the three and twelve month periods ended September 30, 2024 and 2023(Canadian dollars in thousands, except per share data)
	Three months ended								Year ended
	September 30,								September 30,
	2024				2023				2024				2023
Revenue	$	181,166			$	175,948			$	746,611			$	658,583
Cost of revenues		117,242				120,152				492,597				454,371
Gross profit		63,924				55,796				254,014				204,212
Selling and marketing		13,466				10,545				55,115				45,410
General and administration		24,734				22,034				101,397				81,363
Research and development		3,047				2,836				11,967				11,452
Profit before under noted items		22,677				20,381				85,535				65,987
Depreciation of property, plant and equipment		2,750				2,133				10,048				9,043
Depreciation of right of use assets		1,587				1,352				6,043				4,501
Amortization of acquired intangible assets		7,577				4,460				25,738				14,874
Restructuring expense		368				2,618				1,864				2,618
Other changes in fair value		(202	)			(314	)			(202	)			(314	)
Deemed compensation		1,797				403				4,322				550
Changes in fair value related to contingent earn-out		2,495				416				8,767				3,858
Profit before interest income and income tax expense		6,305				9,313				28,955				30,857
Interest expense		1,988				793				6,635				896
Income tax expense - current		4,623				3,776				15,442				12,919
Income tax expense (recovery) - deferred		262				(375	)			(4,302	)			(1,843	)
NET PROFIT	$	(568	)		$	5,119			$	11,180			$	18,885
Net profit per share:
Basic	$	(0.05	)		$	0.43			$	0.95			$	1.61
Diluted	$	(0.05	)		$	0.43			$	0.93			$	1.61

CALIAN GROUP LTD. AUDITED ANNUAL CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFor the three and twelve month periods ended ended September 30, 2024 and 2023 (Canadian dollars in thousands)
	Three months ended								Year ended
	September 30,								September 30,
	2024				2023				2024				2023
CASH FLOWS GENERATED FROM (USED IN) OPERATING ACTIVITIES
Net profit	$	(568	)		$	5,119			$	11,180			$	18,885
Items not affecting cash:
Interest expense		1,410				634				4,826				365
Changes in fair value related to contingent earn-out		2,495				416				8,767				3,858
Lease obligations interest expense		578				159				1,809				531
Income tax expense		4,885				3,401				11,140				11,076
Employee share purchase plan expense		122				130				549				597
Share based compensation expense		562				1,618				3,824				3,273
Depreciation and amortization		11,914				7,945				41,829				28,418
Deemed compensation		1,797				403				4,322				550
Other changes in fair value		(202	)			(314	)			(202	)			(314	)
		22,993				19,511				88,044				67,239
Change in non-cash working capital
Accounts receivable		(9,631	)			(8,971	)			17,625				1,393
Work in process		(1,123	)			6,166				(2,509	)			23,285
Prepaid expenses and other		3,007				(3,849	)			337				(829	)
Inventory		1,002				1,873				2,795				(3,340	)
Accounts payable and accrued liabilities		9,133				9,476				(1,064	)			(17,947	)
Unearned contract revenue		(1,687	)			4,918				(6	)			928
		23,694				29,124				105,222				70,729
Interest paid		(1,988	)			(791	)			(6,635	)			(895	)
Income tax paid		(2,289	)			(5,629	)			(11,366	)			(13,059	)
		19,417				22,704				87,221				56,775
CASH FLOWS GENERATED FROM (USED IN) FINANCING ACTIVITIES
Issuance of common shares net of costs		618				760				2,786				2,901
Dividends		(3,397	)			(3,335	)			(13,351	)			(13,163	)
Draw on debt facility		(4,250	)			37,750				52,000				30,250
Payment of lease obligations		(1,318	)			(1,261	)			(5,289	)			(4,382	)
Repurchase of common shares		(2,819	)			(1,670	)			(5,648	)			(1,670	)
		(11,166	)			32,244				30,498				13,936
CASH FLOWS USED IN INVESTING ACTIVITIES
Investments		—				—				—				(2,689	)
Business acquisitions		—				(59,834	)			(87,862	)			(68,494	)
Property, plant and equipment		(2,462	)			(2,368	)			(11,803	)			(8,440	)
		(2,462	)			(62,202	)			(99,665	)			(79,623	)
NET CASH INFLOW (OUTFLOW)	$	5,789			$	(7,254	)		$	18,054			$	(8,912	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		45,999				40,988				33,734				42,646
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	51,788			$	33,734			$	51,788			$	33,734

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								Year ended
			September 30,								September 30,
		2024				2023				2024				2023
Net profit		$	(568	)		$	5,119			$	11,180			$	18,885
Depreciation of equipment and application software			2,750				2,133				10,048				9,043
Depreciation of right of use asset			1,587				1,352				6,043				4,501
Amortization of acquired intangible assets			7,577				4,460				25,738				14,874
Restructuring expense			368				2,618				1,864				2,618
Other changes in fair value			(202	)			(314	)			(202	)			(314	)
Interest expense			1,988				793				6,635				896
Changes in fair value related to contingent earn-out			2,495				416				8,767				3,858
Deemed Compensation			1,797				403				4,322				550
Income tax			4,885				3,401				11,140				11,076
Adjusted EBITDA		$	22,677			$	20,381			$	85,535			$	65,987

Adjusted Net Profit and Adjusted EPS

			Three months ended								Year ended
			September 30,								September 30,
		2024				2023				2024				2023
Net profit		$	(568	)		$	5,119			$	11,180			$	18,885
Restructuring expense			368				2,618				1,864				2,618
Other changes in fair value			(202	)			(314	)			(202	)			(314	)
Changes in fair value related to contingent earn-out			2,495				416				8,767				3,858
Deemed Compensation			1,797				403				4,322				550
Amortization of intangibles			7,577				4,460				25,738				14,874
Adjusted net profit			11,467				12,702				51,669				40,471
Weighted average number of common shares basic			11,835,037				11,790,964				11,837,520				11,714,887
Adjusted EPS Basic			0.97				1.08				4.36				3.45
Adjusted EPS Diluted		$	0.96			$	1.07			$	4.33			$	3.45

Operating Free Cash Flow

			Three months ended								Year ended
			September 30,								September 30,
		2024				2023				2024				2023
Cash flows generated from operating activities		$	19,417			$	22,704			$	87,221			$	56,775
Property, plant and equipment			(2,462	)			(2,368	)			(11,803	)			(8,440	)
Free cash flow		$	16,955			$	20,336			$	75,418			$	48,335
Free cash flow		$	16,955			$	20,336			$	75,418			$	48,335
Adjustments:
Change in non-cash working capital			(701	)			(9,613	)			(17,178	)			(3,490	)
Operating free cash flow		$	16,254			$	10,723			$	58,240			$	44,845
Operating free cash flow per share - basic			1.37				0.91				4.92				3.83
Operating free cash flow per share - diluted			1.35				0.91				4.86				3.81
Operating free cash flow conversion			72	%			53	%			68	%			68	%

Net Debt to Adjusted EBITDA

		September 30,				September 30,
		2024				2023
Cash		$	51,788			$	33,734
Debt facility			89,750				37,750
Net debt (net cash)			37,962				4,016
Trailing twelve month adjusted EBITDA			85,535				65,987
Net debt to adjusted EBITDA			0.4				0.1

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.