(All amounts in release are in Canadian dollars)

OTTAWA, August 7, 2024 – 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, 2024.

Financial Highlights	Three months ended			Nine months ended
(in millions of $, except per share & margins)	June 30,			June 30,
	2024	2023	%	2024	2023	%
Revenue	185.0	166.6	11 %	565.4	482.6	17 %
Adjusted EBITDA1	17.7	14.5	22 %	62.9	45.6	38 %
Adjusted EBITDA %1	9.5 %	8.7 %	83bps	11.1 %	9.4 %	167bps
Net Profit	1.3	4.7	(72) %	11.7	13.8	(15) %
EPS Diluted	0.11	0.40	(73) %	0.98	1.17	(16) %
Operating Free Cash Flow1	10.0	11.3	(12) %	42.0	34.1	23%

Access the full report on the Calian Financials web page.

Register for the conference call on Thursday, August 8, 2024, 8:30 a.m. Eastern Time.

“In the third quarter, we continued our growth journey towards becoming a global business with over $1 billion in revenues,” said Kevin Ford, Calian Chief Executive Officer. “We completed the strategic acquisition of Mabway, signed and acquired new contracts valued at over $300 million and reported revenue and adjusted EBITDA¹ growth of 11% and 22%, respectively. We did encounter some headwinds as the result of short-term budget reductions from the Canadian Armed Forces, and we expect this to persist for a few quarters. Despite this, after nine months, our revenues are up 17%, adjusted EBITDA is up 38%, and  we are on track for our seventh consecutive record year,” stated Mr. Ford.

Third Quarter Results

Revenues increased 11%, from $167 million to $185 million. This represents the highest third quarter revenue in the Company’s history. Acquisitive growth was 11% and was generated by the acquisitions of Hawaii Pacific Teleport (“HPT”), Decisive, the nuclear assets from MDA Ltd and Mabway. Organic growth was flat as double-digit growth generated in the Health segment was offset by declines in the other segments.

Gross margin reached 33.4%, representing its 9^th consecutive quarter above 30%. Adjusted EBITDA¹ reached $17.7 million, up 22% from the same period last year, driven by the higher margin contribution from acquisitions, revenue growth across all segments and progress to expand geographically and increase share of product revenue. Adjusted EBITDA¹ margin reached 9.5%, up from 8.7% in the same period last year, as a result of a favorable revenue mix and increased volume.

Net profit reached $1.3 million, or $0.11 per diluted share, down from $4.7 million, or $0.40 per diluted share for the same period last year. This decrease in profitability is primarily due to increased amortization and interest expenses related to acquisitions, partially offset by higher adjusted EBITDA¹ and lower income tax expense.

Liquidity and Capital Resources

“In the third quarter we generated $10.0 million in operating free cash flow¹, representing a 57% 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 acquisition of Mabway for $29.6 million and capital expenditures of $4.1 million. We also provided a return to shareholders in the form of dividends of $3.3 million and share buybacks of $1.5 million. We ended the quarter with $132 million in net liquidity, well-positioned to pursue our growth objectives,” concluded Mr. Houston.

Mabway Acquisition

On May 9, 2024 Calian agreed to acquire U.K.-based Mabway for up to $47.0 million, including $37.8 million of cash upfront on closing and $8.6 million of earnouts. Mabway is a leader in the management of large-scale defence role-playing environments that simulate real-world operational environments and provides technical engineering education for naval and maritime communities. The company has been a prime supplier to the British Army since 2012. Mabway has several offices across the U.K., a workforce of more than 1,000 ex-military and civilian permanent staff and contractors, and services reaching into Europe and the Middle East. Mabway will be integrated in Calian’s Learning segment.

Contract Signings – Renewing and Winning New Customers

Calian renewed and won several contracts during the third quarter including:

On May 7, 2024 Calian renewed a contract worth $10 million to provide military training support for the Canadian Defence Academy (CDA) and Military Personnel Generation Group (MPGG).

On May 1, 2024 Calian was awarded a major new contract valued up to $90 million over six years with General Dynamics Mission Systems – Canada (GDMS-C) to enhance the Canadian Army’s capabilities through advanced land command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) systems.

On April 25, 2024 Calian was awarded a significant contract by the Canadian Armed Forces’ Canadian Forces Health Services Group (CFHSG), valued at $17 million for three years with an option to extend for a fourth year, potentially increasing the total value to $23 million.

Normal Course Issuer Bid

In the three-month period ended June 30, 2024, as part of its Normal Course Issuer Bid, the Company repurchased 26,600 shares for cancellation in consideration of $1.5 million. Since the launch of the Normal Course Issuer Bid on September 1, 2023, the Company repurchased 85,920 common shares for cancellation in consideration of $4.5 million.

The Company intends to renew its NCIB in August 2024, subject to TSX approval.

Quarterly Dividend

Today, Calian declared a quarterly dividend of $0.28 per share. The dividend is payable September 4, 2024, to shareholders of record as of August 21, 2024. Dividends paid by the Company are considered “eligible dividend” for tax purposes.

Guidance

Calian’s guidance, which was raised last quarter and marks its seventh consecutive record year of revenue and adjusted EBITDA¹ growth, is now anticipated to be at the bottom of its guidance range. This adjustment is due to short-term operating budget cuts from the Canadian Armed Forces, which have affected the latter half of its third quarter and are expected to continue into the fourth quarter.

This guidance includes the full-year contribution from the Hawaii Pacific Teleport acquisition, 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 also includes one-time transaction and integration costs related to these acquisitions of approximately $2 million. The guidance reflects another record year for the Company and positions it well to achieve its long-term growth targets.

At the bottom of the range, this guidance reflects revenue and adjusted EBITDA¹ growth of 14% and 30%, respectively, and an adjusted EBITDA¹ margin of 11.5%. It would represent the 7^th consecutive year of double-digit growth and record levels.