Calian Group Ltd.

Greetings and welcome to Caelian's second quarter 2023 conference call. At this time, all participants are in a listen-only mode and a 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, this conference is being recorded. I will now turn the conference over to your host, Jennifer McCaughey, Director of Investor Relations. Mom, you may begin.

Thank you, Ali, and good morning, everyone. Thank you for joining us for Calion's Q2 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, everybody. I'm going to get right into our Q2 results. We closed another record quarter, generating revenue, growth of 19%, with contributions from both our organic growth initiatives as well as strong performance from recent acquisitions. This impressive performance was the result of double-digit growth in three of our four segments. Our gross profit reached $52 million, up over 30% compared to the same period last year, and also represents a record level for a single quarter. Gross margins surpassed the 30% mark for a fourth consecutive quarter, and margins increased three basis points from the second quarter last year, showing our ability to adapt and deliver consistent performance despite the challenging macro environment, inflationary pressures, and supply chain issues. Adjusted EBITDA reached $17 million in line with the same period last year and represents the highest level for a second quarter. EBITDA margin was down compared to last year due to increased personnel costs as well as strategic investments as we continue to scale Calium towards our $1 billion aspirations. We will continue to monitor the pace of investments to strike the balance between growth and profit margin. During the quarter, we continue to demonstrate our M&A pedigree and consistent deployment of capital with the announcement that we entered into a definitive purchase agreement to acquire the assets of U.S.-based Hawaii Pacific Teleport. This acquisition will bring us blue-chip roster of long-term customers, trusted relationships with satellite operators, and managed service providers that we can leverage for cross-selling, a strong mix of recurring revenues, and accretive margins. We initially expected their transaction to close by the end of our fiscal Q3, but it looks like it may take a little longer. We now anticipate it will close before the end of our fiscal year. I would also like to highlight our continued push to win new customers and extend our relationship with existing clients. This quarter, we recorded $147 million in gross new contract signings, with approximately $78 million from contract renewals and extensions and $69 million for new customers. We exited the quarter with a robust backlog of $1.2 billion, of which $262 million is planned to be realized for the balance of this year. With these new contract signings, a healthy backlog, and a stronger second half expected, we remain 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. And I'll begin with IT and cyber. In the second quarter, ITCS increased its revenues by over 50% to $49 million, driven primarily by our expansion of the U.S. market with the acquisition of Computex in March 2022, coupled with our continued strong performance in our overall cyber practice. In fact, our recurring monthly revenues continue to grow at a steady pace. This revenue growth was partially offset by lower volume from our on-demand talent and government solutions, as we are in the process of backfilling contracts that have recently come to an end. In March, we marked the one-year anniversary of the acquisition of Computex. Looking back at the last 12 months, we have generated revenues of approximately $110 million, greatly surpassing our initial expectations of $75 million, thus making this acquisition highly accretive. Gross margins increased significantly from 33% in the second quarter last year to close at 40% due to acquisitive revenue at higher margins, coupled with higher margin cybersecurity services. Similarly, EBITDA was up over 30% to $7 million, or a margin of 15%. This margin was down compared to the same period last year due to investments in sales and delivery capacity. In the quarter, we signed new contracts valued at $61 million, including GPD Companies, ReSound Networks, and two new customers in the healthcare space, Burlington Ontario Health and Connected Care Halton Ontario. For the balance of the year, we are optimistic that we will see improvements in the supply chain and deliver orders currently in backlog. We expect the momentum on ITCS to continue and are confident to post another record year of double-digit top-line growth. For modeling purposes, note that Q4 revenues will likely be lower than Q4 last year, as we had significant deliveries in the final weeks of the quarter last year. Yesterday, we announced that Sasha Guerra, the president of ITCS, has resigned. Sasha's accepted CEO position of a local software company here in Ottawa, which is a great career opportunity for him. We're disappointed to see him go as he's made valuable contributions to the business in the short time he was here, and Sasha will remain with us until the end of May. We wish him well in his new journey. We will run an official process to find his replacement, and in the interim, the strong leadership team within our ITCS segment will ensure the continuity of our day-to-day operations and maintain momentum in both Canada and the U.S. Turning to our health segment. In the second quarter, revenue declined 4% to $44 million due mainly to lower one-time projects related to COVID-19 last year. These projects alone represented a decrease of $8 million, or 19%, over the same period last year. Excluding this impact, the health segment would have demonstrated double-digit organic growth of 15%. We were able to do this through strong demand from longstanding customers, as well as strong momentum for our contract research service and our pharma division. In fact, our contract research services achieved a stronger quarterly revenue performance for a second consecutive quarter. Gross margins and EBITDA margins decreased slightly to 24% and 16% respectively. In the quarter, we signed new contracts valued at $25 million. Amongst these new signings were some key wins, the first being a multi-year service contract with Immigration, Refugees, and Citizenship Canada, The second is an exciting development in the pharma space by securing our first market access contract, supporting the innovative breast cancer product developed by Syantra. And finally, our solution offer in-person medical service to assist police organizations continue to gain traction in Western Canada. For the balance of the year, we expect to return to positive organic growth as the COVID-19 impact will taper off. Our existing customers are signal of continued demand and our pharmaceutical contract research organization services are gaining increased traction. However, our margins will continue to be temporarily under pressure as we continue to make investments to increase capacity to fully utilize existing customer contracts, as well as investments to drive new business. When we look at our health business today, with the impact from COVID-19 related business behind us, we have a run rate business of approximately $180 million of reoccurring revenues, much higher than our health segment was before COVID. This baseline of business will serve as the solid base as we look to eclipse the $200 million mark. Turning to our advanced technology segment. In the second quarter, we returned to organic growth. Revenue increased 18% to 47 million, primarily driven by the deliveries against ground system projects we've recently won, coupled with seasonal ag tech product deliveries and ongoing robust demand for our GNSS antennas. In fact, GNSS products generate double digit growth again this quarter. This growth comes from new large scale customers, as well as increased demand from existing customers, as they include our products into more of their offerings. Last quarter, I spoke about supply chain issues, which cause orders to be delayed. While we made some progress in the final month of the quarter, we continue to see delays in certain components and weren't able to address it in our Q2. We are optimistic that we can make further progress in the second half as we chip away at our product backlog. Gross margins improved from 28% to 29% due to a better mix of higher margin business. The contribution of more Callion products will continue to drive higher gross margins in the longer term. Conversely, EBITDA margins decreased from 14% to 12% as we continue to invest for growth in various initiatives, including sales and marketing, R&D, and additional capacity. In the quarter, we signed new contracts valued at $48 million. Key wins included contracts for data remediation with the Canadian Forces Support Training Group and more than $6 million in orders for our GNSS antennas. We also announced the appointment of Darrell Wellington to lead our GNSS business at Talisman. For the balance of the year, we expect to continue to improve our top line given the anticipated evening supply chain restrictions, delivery of ground system projects recently won, and strong demand for GNSS products. Turning to our learning segment. In the second quarter, revenues increased 16% to $29 million, driven by recent investments in technology and geographical diversification, which has increased customer share of Wallet and attracting new customers. Gross margins were up to 29% from 27% for the same quarter last year, as we continue to leverage our products to an increasing number of customers and benefit from economies of scale. In contrast, EBITDA margins were down slightly as we invest in growth initiatives, including sales and marketing, international expansion, and R&D to support our internally developed software used in the delivery of our virtual training and learning services. In the quarter, we signed new contracts valued at $13 million, and we delivered complex training exercise projects around the globe. This includes projects in France, Turkey, Netherlands, Philippines, Jamaica, Indonesia, and Jordan. This is a strong indication of our pedigree and our ability to be a global training partner for defense. For the balance of the year, we see continued robust demand for services and technology in the military training space in Canada and Europe. And as a result, we believe we are on track to break the 100 million revenue mark for the first time ever for learning. This continued growth is giving us more confidence to continue to invest, to make sure we're well positioned to capitalize on the macro environment where military training has become mission critical. With that, I'll now turn it over to Patrick to discuss cash flow balance sheet and our guidance. Patrick.