Calian Reports Third Quarter Results

(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

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.

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)

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)

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)

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

Adjusted Net Profit and Adjusted EPS

Operating Free Cash Flow

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.