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Calian Reports Record Gross Margins and Achieves First-ever $150M Revenue Quarter - Q3 FY22 Results

Wednesday, August 10, 2022 5:01 PM
Calian Group Ltd.
Topic:
Earnings

(All amounts in release are in Canadian dollars)

OTTAWA, ON / ACCESSWIRE / August 10, 2022 / 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, 2022. Calian reports consolidated revenues of $150 million for its four operating segments, which is a 10% increase over the same quarter in the previous year.

Third quarter highlights:

  • Revenue of $150 million, a 10% increase over Q3 FY21
  • Gross margin of 30%, a new record for the Company and up from 25% in Q3 FY21
  • Adjusted EBITDA of $16.1 million, an 8% increase over Q3 FY21
  • Net cash up $10 million from the previous quarter on operating cash flow of $19.8 million
  • New contract signings of $190 million
  • Revenues outside Canada increased to 33% of total revenues

Access the full report on the Calian Financial Results web page.

Register for the conference call on Thursday, August 11, 2022, 8:30 a.m. Eastern Time

"Many of our concerted efforts to diversify our customer base beyond Canada and enter new markets with more differentiated offerings demonstrated some of their early returns," said Kevin Ford, Calian CEO. "Our track record of deploying capital to drive long-term growth, margin expansion and profitability remains our focus. This quarter's record results across revenues and margins only strengthens our position to continue on our various growth initiatives."

The third quarter of 2022 carried on the Company's continued growth through acquisition and margin expansion. Revenues year to date were $421 million compared to $390 million in FY21 and $309 million in FY20. Gross margins year to date were 28% compared to 24% in FY21 and 21% in FY20. The Company signed an additional $190 million in new contracts during the quarter and exited with a strong backlog of $1.3 billion.

"This was a strong quarter across many fronts. Our ability to continue to expand gross margins and EBITDA while maintaining top-line growth was impressive. We also continued our strong track record of converting this performance into cash flow," said Patrick Houston, Calian Chief Financial Officer. "We posted operating cash flow of nearly $12 million and working capital contributed an additional $8 million in the quarter."

"Our four piston segment model once again demonstrated the value of Calian's diversity. While Advanced Technologies and Health faced some headwinds in year over year performance, our Learning and IT Cyber business units had strong performance to keep Calian group consolidated results on record pace," said Kevin Ford. "We have adjusted our revenue guidance for the final quarter of our fiscal year to reflect timing around larger revenue opportunities in the Advanced Technologies segment and slower sales in Health as the industry rebounds from COVID, which has been offset by better margin performance across the business allowing us to maintain our EBITDA and net profit guidance."

Guidance

CAD '000s

Guidance as of August 10, 2022Guidance as of May 11, 2022
RevenueLow $560,000; High $585,000Low $580,000; High $625,000
Adjusted EBITDALow $61,000; High $65,500Low $61,000; High $65,500
Adjusted Net ProfitLow $44,000; High $48,000Low $41,500; High $45,500

About Calian

We keep the world moving forward. Calian® helps others communicate, innovate, learn, stay safe and lead healthy lives with confidence. 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.

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 GROUP LTD.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at June 30, 2022 and September 30, 2021
(Canadian dollars in thousands, except per share data)


June 30, September 30,

2022 2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$51,435 $78,611
Accounts receivable
130,328 111,138
Work in process
53,650 55,307
Inventory
19,324 6,617
Prepaid expenses
20,352 9,891
Derivative assets
167 610
Total current assets
275,256 262,174
NON-CURRENT ASSETS
Capitalized research and development
2,494 3,217
Equipment
16,496 12,411
Application software
10,357 8,015
Right of use asset
17,144 15,383
Investments
670 670
Acquired intangible assets
55,118 54,519
Deferred tax asset
1,306 1,477
Goodwill
151,128 100,103
Total non-current assets
254,713 195,795
TOTAL ASSETS
$529,969 $457,969
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt facility
$7,500 $-
Accounts payable and accrued liabilities
104,693 68,093
Contingent earn-out
34,789 25,038
Provisions
1,269 1,541
Unearned contract revenue
45,807 23,321
Derivative liabilities
25 158
Lease obligations
3,860 3,029
Total current liabilities
197,943 121,180
NON-CURRENT LIABILITIES
Lease obligations
15,437 14,449
Contingent earn-out
2,742 13,224
Deferred tax liabilities
16,808 16,756
Total non-current liabilities
34,987 44,429
TOTAL LIABILITIES
232,930 165,609

SHAREHOLDERS' EQUITY
Issued capital
198,511 194,960
Contributed surplus
5,556 5,224
Retained earnings
94,252 91,359
Accumulated other comprehensive income (loss)
(1,280) 817
TOTAL SHAREHOLDERS' EQUITY
297,039 292,360
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$529,969 $457,969
Number of common shares issued and outstanding
11,353,877 11,285,828

CALIAN GROUP LTD.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF NET PROFIT
For the three and nine months periods ended June 30, 2022 and 2021
(Canadian dollars in thousands, except per share data)


Three months ended Nine months ended

June 30, June 30,

2022 2021 2022 2021
Revenue
Advanced Technologies
$39,152 $43,802 $119,881 $123,862
Health
39,841 50,800 127,671 150,770
Learning
22,259 18,113 69,869 57,061
ITCS
48,766 23,379 104,201 59,072
Total Revenue
150,018 136,094 421,622 390,765

Cost of revenues
104,515 102,197 302,546 297,132
Gross profit
45,503 33,897 119,076 93,633

Selling and marketing
9,554 4,484 19,450 11,883
General and administration
17,994 13,256 48,404 39,230
Research and development
1,819 1,208 4,357 3,013
Profit before under noted items
16,136 14,949 46,865 39,507

Depreciation of equipment, application software and research and development
2,237 1,126 4,666 3,172
Depreciation of right of use asset
978 770 2,679 2,273
Amortization of acquired intangible assets
3,351 3,200 17,071 8,359
Deemed compensation
- 750 1,000 3,100
Changes in fair value related to contingent earn-out
651 5,130 3,266 6,780
Profit before interest income and income tax expense
8,919 3,973 18,183 15,823

Lease obligations interest expense
94 112 308 343
Interest expense (income)
142 52 288 297
Profit before income tax expense
8,683 3,809 17,587 15,183

Income tax expense - current
2,172 2,433 8,657 6,647
Income tax recovery - deferred
(325) (687) (3,479) (1,526)
Total income tax expense
1,847 1,746 5,178 5,121
NET PROFIT
$6,836 $2,063 $12,409 $10,062

Net profit per share:
Basic
$0.60 $0.18 $1.10 $0.97
Diluted
$0.60 $0.18 $1.09 $0.97

CALIAN GROUP LTD.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three and nine month periods ended June 30, 2022 and 2021
(Canadian dollars in thousands)


Three months ended Nine months ended

June 30, June 30,

2022 2021 2022 2021
CASH FLOWS GENERATED FROM OPERATING ACTIVITIES
Net profit
$6,836 $2,063 $12,409 $10,062
Items not affecting cash:
Interest expense
142 52 288 297
Changes in fair value related to contingent earn-out
651 5,130 3,266 6,780
Lease obligations interest expense
94 112 308 343
Income tax expense
1,847 1,746 5,178 5,121
Employee share purchase plan expense
131 106 393 354
Share based compensation expense
484 484 1,356 1,507
Depreciation, amortization, and impairment
6,565 5,095 24,416 13,803
Deemed compensation
- 750 1,000 3,100

16,750 15,538 48,614 41,367
Change in non-cash working capital
Accounts receivable
29,715 (2,298) 12,933 (23,730)
Work in process
(1,812) (8,923) 1,659 1,882
Prepaid expenses and other
(3,744) (2,862) (9,694) (4,265)
Inventory
(3,044) 480 (5,021) 50
Accounts payable and accrued liabilities
(9,202) 934 (5,820) 3,641
Unearned contract revenue
(3,961) 862 10,930 10,078
24,702 3,731 53,601 29,023
Interest received (paid)
(237) (164) (597) (640)
Income tax recovered (paid)
(4,690) (2,408) (9,851) (9,507)

19,775 1,159 43,153 18,876
CASH FLOWS GENERATED FROM FINANCING ACTIVITIES
Issuance of common shares net of costs
336 397 2,134 78,294
Dividends
(3,179) (3,150) (9,516) (8,670)
Draw (repayment) on debt facility
(17,896) (55,000) 7,500 -
Payment of lease obligations
(966) (771) (2,726) (2,251)

(21,705) (58,524) (2,608) 67,373
CASH FLOWS USED IN INVESTING ACTIVITIES
Business acquisitions
(4,416) (3,616) (62,638) (49,108)
Capitalized research and development
(25) (125) (175) (337)
Equipment and application software
(1,585) (2,771) (4,908) (4,989)

(6,026) (6,512) (67,721) (54,434)

NET CASH (OUTFLOW) INFLOW
$(7,956) $(63,877) $(27,176) $31,815
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
59,391 119,927 78,611 24,235
CASH AND CASH EQUIVALENTS, END OF PERIOD
$51,435 $56,050 $51,435 $56,050

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,

2022 2021 2022 2021
Net profit
$6,836 $2,063 $12,409 $10,062
Depreciation of equipment and application software
2,237 1,126 4,666 3,172
Depreciation of right of use asset
978 770 2,679 2,273
Amortization of acquired intangible assets
3,351 3,200 17,071 8,359
Lease interest expense
94 112 308 343
Changes in fair value related to contingent earn-out
651 5,130 3,266 6,780
Interest expense (income)
142 52 288 297
Deemed Compensation
- 750 1,000 3,100
Income tax
1,847 1,746 5,178 5,121
Adjusted EBITDA
$16,136 $14,949 $46,865 $39,507

Adjusted Net Profit and Adjusted EPS


Three months ended Nine months ended

June 30, June 30, June 30, June 30,

2022 2021 2022 2021
Net profit
$6,836 $2,063 $12,409 $10,062
Changes in fair value related to contingent earn-out
651 5,130 3,266 6,780
Deemed Compensation
- 750 1,000 3,100
Amortization of intangibles
3,351 3,200 17,071 8,359
Adjusted net profit
10,838 11,143 $33,746 $28,301
Weighted average number of common shares basic
11,350,214 11,251,483 11,325,096 10,375,745
Adjusted EPS Basic
0.95 0.99 2.98 2.73
Adjusted EPS Diluted
0.95 0.98 2.97 2.71

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. 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 the International Financial Reporting Standards. 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 International Financial Reporting Standards. 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 International Financial Reporting Standards financial measures. The Company has reconciled adjusted profit to the most comparable International Financial Reporting Standards financial measure as shown above.

SOURCE: Calian Group Ltd.

Topic:
Earnings
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