Calian Group Ltd.

Greetings. Welcome to the Callion first quarter 2023 conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to your host, Jennifer McCaughey, Callion's Director of Investor Relations. You may begin.

Thank you, Kelly, and good morning, everyone. Thank you for joining us for Callion's Q1 2023 conference call. Presenting this morning are Kevin Ford, Chief Executive Officer, and Patrick Houston, Chief Financial Officer. As noted on slide two, please be advised that certain information discussed today is forward-looking and subject to important risks and uncertainties. The results predicted in these statements may be materially different from actual results. As a reminder, all amounts are expressed in Canadian dollars, except as otherwise specified. With that, let me turn the call over to Kevin.

Thank you, Jennifer, and good morning. Let me start with an overview of our Q1 results. We continued our momentum of double-digit growth in the quarter. Q1 revenues reached $148 million, up 14% compared to the same period last year, and represents a record level of revenues for the first quarter. This impressive growth was driven by a strong performance of our recent acquisitions, coupled with our ITCS and learning segments, which both posted double-digit organic growth. This growth was partially offset by delays in new business in our health and advanced tech segments, as well as the temporary impact of parts shortages preventing us from fulfilling orders in our advanced tech and ITCS segments. Supply chain issues resulted in a revenue impact of approximately $10 million and gross margin of $3 million and a quarter. We believe we will recapture this in the balance of fiscal year 23 as components can become available. Our gross profit reached $45 million, up 30% compared to the same period last year, and also represents a record level for a first quarter. Gross margins surpassed the 30% mark for a third consecutive quarter, increased four basis points from the first quarter last year, despite the fact that we're dealing with challenging macro environment, inflationary pressures, and ongoing supply chain issues. Similarly, EBITDA reached $14 million, up 2% year-over-year. That also represents a record level for our first quarter. However, our margin was down slightly as we continued to invest for future growth. These solid results translated in strong cash flow from operations, as Patrick will discuss in a moment, and demonstrate once more the power of our diverse operating model. I'd also like to highlight our continued push to win new customers and extend our relationship with existing clients. This quarter we recorded $126 million in new contract signings, with approximately $45 million from contract renewals and extensions, and $81 million from new customers. We exited the quarter with a robust backlog of $1.3 billion, of which $340 million is planned to be realized in fiscal year 23. With these new contract signings, a healthy backlog, and improvements in the supply chain environment, we are confident in our ability to post our sixth consecutive record year and as such have reiterated our full year guidance. For now, let me provide an update of our results by business segment. Let's begin with the IT and cyber group. In the first quarter, ITCS doubled its revenues to 46 million driven primarily by our expansion in the US market with the acquisition of Computex in March 2022. This growth was compounded by double-digit organic growth in our overall cyber practice as we continue to win new customers in Canada for our cybersecurity offerings. This growth was partially offset by lower product sales as a result of significant deliveries in the final weeks of the fourth quarter, and part shortages resulting in orders of about $5 million not being delivered. Gross margins increased significantly from 26% in the first quarter last year to 37% due to acquisitive revenue at higher margins, coupled with the expansion of our cybersecurity offerings in Canada. Similarly, EBITDA nearly doubled to $7 million, or a margin of 15%. In the quarter, we invested in Field Effect Software, a simulation-based cybersecurity training platform used to grow individual skills, rehearse incident response, and train teams. We see the investment in Field Effect as a way to enhance our solution set and begin to address the cybersecurity skills gap for a growing customer base, including governments and defense agencies. In addition, in the quarter, iSecurity achieved Service Organization Control Type 2 compliance, a gold standard of industry recognition, and we were awarded a cybersecurity contract with the Ontario Health For the balance of the year, we expect this momentum to continue. We believe product sales will increase as we continue to see robust demand and address the remainder of the consumer backlog due to supply chain shortages. Turning to our health segment, in the first quarter, revenue declined 5% due to a slower pace of awards for new business and ongoing lower COVID-related business, which accounted for about 3% of this decline compared to the same quarter a year ago. In order to deal with the evolving healthcare landscape and the shortage of specific skill sets, we are investing in multiple initiatives to recruit new professionals, to realize unfulfilled demand on existing customer contracts, and to drive new business. Furthermore, our existing contract vehicles and services continue to track more to normal run rates. Gross margins and EBITDA margins decreased to 24% and 16% respectively. In the quarter, we achieved our strongest revenue performance for our Contract Research Organization Division. With strong signings in our pharmaceutical business of 25 million, we see good momentum in this segment for our business. Total signings in the quarter were 34 million. This is a good indicator of renewed momentum on the new business front. These contracts will start in the coming quarters as capacity is brought on in what continues to be a difficult environment in obtaining healthcare capacity. Our three-pronged approach of healthcare professional services, pharmaceutical industry solutions, and in-store health clients will provide multiple growth avenues while we continue to develop our health technologies. Last week, we announced the appointment of Derek Clark as the new president of the health segment. He will take over the leadership of Callion Health from Jordan McDonald, who is retiring at the end of March after a long and successful career in health and health services. Derek Clark is a strong leader with a deep understanding of the multifaceted health segment. He has a passion for teaching, mentoring, and coaching leaders, a quality that we value here at Callion. His experience leading teams through the commercialization journey, change management, and acquisitions will benefit the entire Callion Health team and I'm delighted to welcome him at such an exciting time in our growth. I'd also like to thank Gordon for his years of service to Callion, leading the Callion Health team through the important transitions that have brought us to this point. Turning to our advanced technology segment, in the first quarter, revenue decreased 17% to $34 million due to delays in the award of new grant system projects, large-scale projects rolling off, and ongoing supply chain issues, which resulted in parts delay that slowed our ability to deliver products. In fact, This temporary part shortage impacted the realization of customer backlog of about 5 million in the quarter. We expect these orders to be fulfilled in the remainder of fiscal year 23, as parts are forecasted to arrive in the coming months. These factors were partially offset by a strong performance of our GNSS antenna business, which was up 38% compared to the same quarter last year. We can continue to experience momentum in this business, driven by current customers, where antennas are designed into their product increasing demand, as well as new customer wins. We have continued to invest in incremental manufacturing and delivery capacity to meet strong demand. Although our revenue is down, gross margins improved significantly from 26% to 35% due to a better mix of higher margin business. The shift into our own products and software solutions over the last several years is showing its impact this quarter. These verticals deliver high gross margins than traditional ground-based antenna business and are becoming a larger proportion of our revenue mix. In the quarter, we announced the Natural Resources Canada Center for Mapping and Earth Observation once again entrusted us to provide three high-performance antennas for Nubik and Gatineau valued at $12 million, a solid win for us. As a leader in ground station design and implementation, our technology and our know-how will improve them to a significant additional capacity, enabling them to support their Earth observation customers. Recall that this contract comes on the heels of the NASA contract signed in August and is a testament to our brand of excellence in the space exploration market. Although we had a slow start in fiscal 23, we expect a return to organic growth in the second half of the year. With new contract wins of $42 million, the supply chain coming back in line, and strong demand in our software engineering for satellite communication customers, as well as demand for precision location services for our GNSS products, we are well positioned to drive revenue in the coming quarters. Turning to our learning segment. In the first quarter, revenues increased 16% to $26 million, driven entirely by organic growth. It was generated by increased demand and ongoing projects, along with new real programs that have been implemented for long-standing customers. Our ability to bring proven solutions in short order is key in this rapidly changing environment and is valued by existing customers. We have continued to expand to new nations in Europe based on the work with NATO, and we are seeing robust activity in Europe as nations look to evolve their military training practices. While gross profit was up to $7 million, gross margin was down slightly to 25%. This is a result of adjustments to rates in our contractual staff before customer contractual increases kick in. Similarly, EBITDA margin was down to 16%. Our expansion outside Canada has continued. We delivered two large NATO exercises in Europe, delivered seminars to military students from 13 Latin American countries, and continued development of features of our command and control software in cooperation with NATO. For the balance of the year, we see continued demand for our services and technology in the military training space in Canada and in Europe. We will continue to invest to make sure we are well positioned to continue to capitalize on the macro environment where military training has become mission critical. This should put us on track to break the $100 million revenue mark for the first time in our learning segment. With that, I will now turn it over to Patrick to discuss cash flow balance sheet and our guidance. Over to you, Patrick.