Calian Group Ltd.

Good day and welcome to the Callion Group third quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would like to turn the call over to Jennifer McCauley, Director of Investor Relations. Please go ahead.

Thank you, Michelle, and good morning, everyone. Thank you for joining us for Callion's Q3 2024 conference call. Presenting this morning are Kevin Ford, Chief Executive Officer, and Patrick Houston, Chief Financial Officer. They will present financial highlights on our consolidated performance and key business highlights. As noted on slide 2, 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, everyone. Before we get on to the business of our third quarter results, I want to give you an update on our progress to reach our three-year plan objectives. For those of you who joined us on our last Investor Day, you recall we laid out an ambitious target to grow revenues 50% over the next three years and double our EBITDA. Not only would this get this to the one billion level, but would position CalAIM to take advantage of greater scale and establish us leaders in all that we do in Canada, United States, and Europe. We don't take these objectives lightly. We have delivered and surpassed in the last two, three year plans we've put in place, and our plan is to do the same here again. Our diverse business with strong proven fundamentals will be the tailwind that will propel us to this target. So how are we tracking? We are delivering organic growth in line with our estimates, and our M&A efforts are going faster than anticipated. I will provide some more color on our progress at the end of the call. Now let's turn to our recent quarter. We reported record results for the third quarter with revenues, gross profit, and adjusted EBITDA up year over year. Revenues were up 11%, with all segments contributing to the growth, particularly our health and advanced tech, which demonstrated double-digit growth. In terms of profitability, gross profit was up 21%, and adjusted EBITDA was up 22%, with their respective margins all up year over year. Again, this quarter, profitability growth surpassed top-line growth, a testament to the strength of our business model a pivot to higher margin businesses, and the successful start of our three-year strategic plan. We completed the strategic acquisition of Mabway, expanding our military training and simulation solutions globally, signed and acquired new contracts valued at over $300 million, growing our backlog to $1.2 billion, and furthered our innovation agenda more specifically in our GNSS Corolla virtual care and our exercise management tool for global military training. Turning briefly to our segments, we had two segments this quarter that demonstrated double-digit revenue and EBITDA growth, advanced tech, and health. Advanced tech revenues were up 17%, and EBITDA was up an amazing 47%. These results reflect the strong performance from our acquisitions of Hawaii Pacific Teleport and nuclear assets from MDA, and organically our transition to increased product revenue. You may have noticed that recently we increased our product catalog with the addition of the dedicated DOCSIS test products from Rohde and Schwartz. Similarly, health revenues and EBITDA were both up 14%, all from organic sources. Health continued its growth momentum and hit the second highest revenue since the peak of COVID. It is now officially on a $200 million revenue run rate, with our past four quarters above $50 million. Despite these strong results, we did encounter some temporary headwinds in the quarter in two of our other segments. First, as we mentioned last quarter, the Canadian government had announced increases in defense spending for the long term with an objective of spending 2% of GUP by 2030, which should be positive for CAI in the long run. But in the short term, they're actually asking the Canadian enforcement to deliver short-term reductions in certain areas as they allocate budget to other economic initiatives. As of last quarter, it was difficult to forecast the timing and magnitude of any impact on Callion. In June, we began to see some reductions in activity, and despite winning new contracts, the ramping up of those activities has been significantly slower than in our past experience. So far, we have seen impacts on our ITCS and advanced tech segments and more significant impacts on our earnings segments. Our health services has not been affected. We expect some of these short-term reductions to continue to impact us in Q4 while we work with the customer to realign their capacity to their mission-critical needs. We have been a trusted vendor of the Canadian Amphibious Resources for over 20 years and have managed demand variability in these long-term contracts. In our experience, while there can be a reallocation of demand from quarter to quarter, we expect the majority of the services over the length of the contracts. As a result, we see this as a timing issue, nothing more. What we provide the Canadian Armed Forces are critical solutions and services needed to generate broad force capabilities, and the demand on the men and women of the military are only increasing due to global uncertainties. Our efforts to diversify our business into Europe will help offset some of the short-term domestic environments. Our European and UK military training operations perform well in the quarter, and my recent visits to the region have only reinforced my conclusions that the urgency in Europe is significantly greater than here in Canada. I also want to briefly comment on the ITCS performance as looking at the results at face value may lead to misinterpretations. ITCS was impacted by a few external factors and internal decisions this quarter. First, the macro environment is characterized with the elongated procurement cycle cycles and lower government spending. Second, we've made the decision to increase investments as Mike Trombley is positioning the segment for the future. And third, and most importantly, the quarter variability. Recall that ITCS had a very high EBITDA on Q2 at $12 million as a result of a pull forward from Q3 and the decisive seasonality. When you take quarter variability as the equation, on a year-to-date basis, ITCS revenues are up 19% and EBITDA is up 25%. In the face of a broader slowdown, our business is maintaining its position and ready to capitalize on the initiatives we begin putting in place. To conclude, despite some short-term headwinds, we remain on track to deliver our seventh consecutive year of double-digit revenue growth and one step closer to the objective of reaching $1 billion in revenue by the end of FY26. Now, I'll turn the call over to Patrick to discuss consolidated results and guidance for FY24. Over to you, Patrick. Thank you, Kevin, and good morning.