Earnings call transcript: Calian Technologies Q3 2025 results show strong defense growth

Calian Technologies Ltd reported its Q3 2025 earnings, revealing a mixed financial performance. The company achieved an earnings per share (EPS) of CAD 1, slightly exceeding the forecast of 0.9921 USD, while revenue fell short at CAD 192 million against a forecast of CAD 206.26 million. The stock saw a modest increase of 0.34%, closing at CAD 50.68. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculation, with a beta of 0.51 indicating lower volatility than the broader market. The company maintains a solid financial health score of FAIR, supported by 24 consecutive years of dividend payments.

Key Takeaways

• Calian reported a 4% increase in Q3 revenues to CAD 192 million.
• The defense sector now accounts for 50% of total revenues.
• Gross margin improved to 35% from 33% last year.
• ITCS segment revenues decreased by 10%.

Company Performance

Calian Technologies demonstrated resilience in Q3 2025 with a 4% revenue increase, driven by strong growth in the defense sector, which now constitutes half of the company’s total revenues. Despite challenges in the ITCS segment, the company maintained its focus on strategic growth areas such as defense and space.

Financial Highlights

• Revenue: CAD 192 million, a 4% increase year-over-year.
• Earnings per share: CAD 1, slightly above forecast.
• Gross margin: 35%, up from 33% last year.
• Adjusted EBITDA: CAD 19 million, a 5% decrease.

Earnings vs. Forecast

Calian Technologies slightly exceeded EPS expectations with a CAD 1 per share, compared to a forecast of 0.9921 USD. However, the revenue of CAD 192 million did not meet the forecast of CAD 206.26 million, indicating challenges in certain segments.

Market Reaction

The stock price of Calian Technologies rose by 0.34% following the earnings release, closing at CAD 50.68. This moderate increase suggests a stable market response, with investors likely focusing on the company’s strong performance in the defense sector.

Outlook & Guidance

Looking forward, Calian Technologies is prioritizing opportunities in its defense and space portfolio. The company expects more clarity on Canadian defense spending in the upcoming fall budget and aims to continue its growth through both organic means and acquisitions. With a market capitalization of $430 million and an Altman Z-Score of 6.43 indicating strong financial stability, the company is well-positioned for future growth. InvestingPro subscribers can access detailed growth forecasts and comprehensive analysis in the Pro Research Report, available for over 1,400 top stocks.

Executive Commentary

CEO Kevin Ford highlighted the company’s strategic focus: "We are seeing a once in a lifetime opportunity in areas such as defense in Canada, defense globally, space." CFO Patrick Houston emphasized the company’s commitment to shareholder value: "We continue to believe that Calian shares are undervalued and plan on continuing to deploy capital towards repurchasing shares."

Risks and Challenges

• Declining revenues in the ITCS segment pose a challenge.
• The company’s reliance on defense spending could be impacted by changes in government budgets.
• Supply chain disruptions could affect manufacturing and delivery timelines.

Q&A

During the earnings call, analysts inquired about the stabilization of the ITCS segment, with management expressing confidence in improvements over the next few quarters. Questions also focused on the potential benefits from Canadian Armed Forces recruitment expansion and opportunities in Arctic sovereignty solutions.

Full transcript - Calian Technologies Ltd (CGY) Q3 2025:

Olivia, Conference Call Operator: Good day, everyone. Thank you for standing by. Welcome to Kallian Group Third Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session.

Please note that today’s conference is being recorded. I will now hand the conference over to your speaker host, Jennifer McCaughey, Director of Investor Relations. Please go ahead.

Jennifer McCaughey, Director of Investor Relations, Calion Group: Thank you, Olivia, and good morning, everyone. Thank you for joining us for Calion’s Q3 twenty twenty five conference call. Presenting this morning are Kevin Ford, Chief Executive Officer and Patrick Houston, Chief Financial Officer. They will present our increasing opportunities in defense and space as well as financial highlights of our Q3 consolidated results. 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.

Kevin Ford, Chief Executive Officer, Calion Group: Thank you Jennifer and good morning everyone. From my viewpoint, we had a mixed quarter. Despite ongoing headwinds in certain aspects of our ITCS business, we experienced significant positive developments. Notably, our defense business is thriving with growth continuing at a robust double digit rate. Additionally, we are witnessing a return to organic growth in the majority of our businesses.

A testament to our progress is a substantial increase in our signed backlog, which grew by $640,000,000 during the quarter. We also announced the arrival of Chris Pogue to lead our newly formed defense and space business unit as we look to capitalize on global tailwinds in the defense and space markets. Overall defense business, which now represents 50% of our revenues continues to grow. In fact, trailing twelve months revenues reached $373,000,000 up from $330,000,000 in fiscal twenty four. On a trailing twelve month basis, defense revenues are up 19%.

Of this amount, 12% represents organic growth as demand in Canada and Europe is ramping up for our mission critical defense solutions, including health care, manufacturing, engineering, cyber and military training. In Europe, there’s strong momentum supported by idea pipeline exceeding 1,000,000,000. Although we have secured several new contracts, we are unable to disclose the details of these contracts due to security sensitivities. This demand highlights the strategic impact of expanding our footprint in Europe with acquisitions such as Mabway and leveraging them to propel growth. With the promising developments anticipated in the coming year, we plan on making further investments our European and UK operations, sales and marketing efforts to capitalize on the expanding market opportunities and securing longer term market share.

In Canada, we’re beginning to observe promising signs of momentum. We’re actively engaging in discussions with Canadian Armed Forces and members of parliament in an effort to become a strategic partner. The Cansec trade show in Ottawa this past May provided an excellent platform for us to showcase our strong range of solutions, significantly enhancing our brand presence in the marketplace. The recent $250,000,000 defense health increase we announced is an early indicator of more opportunities on the horizon. With current discussions focusing on significantly increasing defense spending to two to 5% of GDP, alongside the Buy Canadian movement and the federal government’s investment plans for the North, we are strategically positioned to capitalize on these favorable conditions.

The timing for the initiation of the new defense contracts remains uncertain at the present. However, we anticipate gaining clear insights in our fourth quarter following the unveiling of the federal budget in the fall. This budget announcement is expected to provide information regarding renewed defense plans, including aspects such as scale, implementation, speed, and strategic priorities. By then we should have a more comprehensive understanding of how these factors will influence our contract opportunities and timelines. Just a reminder that defense is not only air, ground and sea, but increasingly space and cyber as well.

The space and cyber industries are set to be a major growth driver in the future as investments increase, and we see promising opportunities for Calient in these areas. To maximize our potential in the global defense and space opportunity, we recently announced the merger of our advanced technologies and learning segments. This strategic move aims to harness the synergies between our communications and manufacturing solutions and our expertise in both the defense domain and specifically immersive training and simulation, thereby accelerating mission success for our defense and space clients. Chris Pogue will lead this new combined business. Chris is one of Canada’s most accomplished leaders in defense and space innovation.

He recently served as president and CEO of Talos Canada, where he expanded naval support services, reestablished land force capabilities, and guided key AI and digital transformation initiatives. Prior to Talos, he led MDA’s government defense portfolio and held leadership roles at General Dynamics Mission Systems Canada and CAE Professional Services. His track record gives him the vision and operational rigor to power Calion’s next generation defense and space capabilities. We’re excited to welcome him on board, and we are confident in his ability to lead Calion into becoming a defense leading OEM. On that note, let’s turn to our Q3 results.

As we stated last quarter, ITCS continues to face headwinds, but the majority of our business is growing. Our consolidated revenues were up 4%, reflecting a 10% decrease in the ITCS segment, which was offset by a robust growth of 9% in the rest of our business. Excluding ITCS, organic growth was 4%, demonstrating an improvement over the past few quarters. Adjusted EBITDA was down 5% reflecting a significant downturn in the ITCS segment profitability, partially offset by 10% growth in the rest of our business. In Q3, ITCS continued to face headwinds from a cybersecurity platform transition to Microsoft and lower sales from its US customers.

In response, we have continued to implement strategic measures to optimize the business that will require time to translate these efforts into significant improvements in profitability. It’s important to note, however, that the Canadian defense and government solutions business continues to meet expectations and provides a strong footprint to capitalize on the macro environment. Last week, Mike Trombley served as president of the ITS segment, announced his resignation from his role. We extend our gratitude to Mike for his contributions during his tenure at Calion, and we wish him success in future endeavors. In collaboration with the current team, we will be actively involved in developing a seamless transition plan leading up to his departure in early September.

I’ll ask our CITO, Mike Mullner, to work with the existing team as they continue to work diligently to reverse the current situation and regain momentum. Encouragingly, we are beginning to see positive indicators highlighted by several key wins that demonstrate our potential for recovery and growth. These key wins reflect the team’s commitments and resilience, and we’re optimistic about the path forward as we strive to achieve our strategic objectives and enhance our market position. As I mentioned, the rest of our business combined, our core space, defense and health and other strategic growth areas footprint has demonstrated robust revenue and the adjusted EBITDA growth in the quarter, and we are committed to building on this momentum. Our recent contract signings and backlog figures highlight the positive trajectory of our business.

This quarter we achieved a significant milestone by securing over $640,000,000 in contracts. A substantial portion of these contracts is attributed to the health segment, particularly through our EMS acquisition and the expanded HEPR contract, which together added close to half a billion dollars. Year to date our contract signings have surpassed 1,000,000,000 and our backlog stands at an impressive 1,500,000,000.0 with two thirds concentrated in the defense sector. I believe we are among a handful of companies in Canada with the defense backlog exceeding 1,000,000,000, complemented by strong national footprint underscoring our strong position in this marketplace. On that note, I’ll now ask Patrick to discuss Q3 consolidated results.

Patrick?

Patrick Houston, Chief Financial Officer, Calion Group: Thank you, Kevin, and good morning. Q3 revenues increased 4% to 192,000,000 as the combined growth of 9% from advanced tech, learning and health was offset by ITCS, which saw revenues down 10%. Equisitive growth was 4% and was generated by the contributions of partial quarters for Mavway completed last year and AMS closed this May. Organic growth was flat, primarily impacted by the ITCS segment, as Kevin explained earlier. Excluding ITCS, organic growth would have been 4%, demonstrating an improvement since the start of the year.

We continue to have high performing assets in our portfolio, such as our global navigation satellite system antennas, which increased 49% quarter over quarter. We continue to grow outside of Canada with 44% of total revenues coming from international customers in Q3. This is the highest quarter of international revenues both in terms of revenue dollars and as a percentage of overall revenues. On a last twelve month basis, revenue stood at CAD752 million, up slightly from FY24. Gross margin was 35%, up from 33% for the same period last year, driven by revenue growth, increased utilization across our engineering teams and revenue mix.

It represents the thirteenth consecutive quarter above 30%. This consistent performance demonstrates we can sustain this level on an ongoing basis. Adjusted EBITDA decreased 5% to CAD19 million from CAD20 million last year, mainly as a result of the ITTS segment. Excluding ITCS, adjusted EBITDA increased 10%, demonstrating that our core business in Space, Defense, Healthcare and Strategic Growth areas remained resilient. As a result, adjusted EBITDA margin stood at 9.9%, down from 10.7 for the same period last year.

On a trailing twelve month basis, adjusted EBITDA stood at CAD78 million reflecting a margin of 10.4%. A result of our lower adjusted EBITDA, adjusted net profit stood at CAD12 million for the quarter or CAD1 per diluted share, down from CAD13 million or CAD1.06 per share in the prior year. In the quarter, we posted only a small net profit mainly due to non cash accounting charges related to acquisitions. Turning to cash flow and capital deployment. Cash flow from operations was $25,000,000 this quarter compared to $14,000,000 in the same period last year, mainly reflecting the recapture of working capital.

We maintain our working capital efficiency level in Q3 by using 8% of revenue. It’s at a similar level from FY ’twenty four, but down slightly from FY ’twenty three where we stood at 14%. Operating free cash flow stood at CAD12 million, representing a 63% conversion from adjusted EBITDA. On a trailing twelve month basis, operating free cash flow stood at $54,000,000 reflecting a conversion rate of 69%, in line with our target of 70%. Turning to capital deployment.

In Q3, we used our cash and a portion of our credit facility to make CapEx investments of $4,000,000 We also completed the acquisition of AMS and paid an earn out for MatWay for a combined outlay of 27,000,000 We also provided a return to shareholders in the form of dividends of $3,000,000 and continued buying back shares to the tune of $16,000,000 In the last twelve months, we’ve invested $13,000,000 in dividends and $28,000,000 in share buybacks for a total of $41,000,000 We continue to believe that Talion shares are undervalued and plan on continuing to deploy capital towards repurchasing shares in order to deliver long term value to our shareholders. Year to date, we’ve purchased 556,000 shares or 5% of the shares outstanding. As stated last quarter, we plan on repurchasing approximately 6% of shares outstanding through a combination of daily repurchases and block trades under the NCIB this fiscal year. We also plan on renewing our NCIB when it comes due at the end of the month, subject to TSX approval. We continue to spend considerable time evaluating opportunities in defense, space, healthcare and growth markets and plan on continuing to deploy capital towards M and A alongside our activities on the NCIB.

In terms of our M and A agenda, we have good pipeline of targets. We’re having many discussions or are optimistic to close some transactions by the end of the calendar year. In the meantime, we are continuing to buy back our shares as we believe it presents a good investment. Let’s take a look at the balance sheet and cash availability. As of June 30, we had drawn $141,000,000 on our debt facility.

During Q3, we drew an additional $20,000,000 on our facility to fund the AMS acquisition as well as buying back shares. We ended the quarter with net debt of CAD83 million, representing a net debt to adjusted EBITDA of 1.1. This is well below our threshold of 2.5 times, meaning we have ample capacity on the balance sheet to pursue our growth with over CAD170 million in available funds. Having said this, we are in the process of renewing and expanding our debt facility, which is due in 2026. Our last twelve months adjusted EBITDA yield, operating free cash flow yield and adjusted EPS yield were approximately 13%, 98%, respectively.

This demonstrates our ability to generate solid returns and reflects our focus on operational efficiency, robust cash generation and profitability, positioning us well for sustained growth. With that, I’ll now turn it back over to Kevin for his closing remarks. Kevin? Thank you, Patrick. So as

Kevin Ford, Chief Executive Officer, Calion Group: we wrap up, as a reminder, our goal is to continue to build a sustainable double digit growth company through both organic and acquisitive growth. In the upcoming quarters, we’ll prioritize capitalizing on substantial opportunities within our defense and space portfolio, which are experiencing significant market tailwinds. With Chris at the helm, we’ll reorganize strategically, execute our market strategy, and harness our top assets for organic growth. In health, we’ll also leverage the recent acquisition of AMS and growth in demand for a health contract. These market tailwinds offer a prime opportunity for Calliant, and it is imperative that we execute effectively to create substantial value for all of our shareholders.

Revitalizing the ITCS segment and steering it towards growth is also crucial. We’ll transition to the Microsoft cyber platform, whose sales efforts and adjust the cost structure to fit the new revenue model. The cyber sector is set for major growth in both commercial and government markets and Calendron must be ready to seize the opportunity. Cyber security is linked to national security and defense where we excel is a strong is a strength we must leverage. We’ll expedite our portfolio review to focus on core mission critical solutions.

Our ongoing process with the board involves categorizing businesses by growth potential, cash generation and strategic importance, then deciding how to manage non core assets that will continue to add value. This is a comprehensive process that will take some time to execute. However, the recent amalgamation of our learning and advanced technologies business into a combined defense and space business unit is in support of our portfolio review and focused efforts. Finally, we will use our strong balance sheet to pursue acquisitions that enhance capabilities within key mission critical solutions, expand practice area expertise, or provide access to new markets and regions and to further drive growth and synergies. We are optimistic about our future prospects given the end markets we are targeting.

The defense and space sectors are now experiencing significant tailwinds as are other strategic areas where we are targeting such as health, especially with our recent AMS acquisition, nuclear, cyber, and energy. With a solid backlog of 1,500,000,000.0, new leadership of both the management and board levels, a robust a robust m and a pipeline, and a solid balance sheet, we’re strategically positioned for growth and success. In summary, our focus over the next twelve months are to capitalize on the defense momentum, evaluate core assets and invest the funds and synergistic M and A that further propels our position in Canada, Europe and The United States and drive long term organic growth. So with that Olivia, we’d like to now open the call to questions.

Olivia, Conference Call Operator: Your line is now open.

Paul, Analyst: Well, thanks so much and good morning. Just a question on ITCS and the trajectory of that business. Obviously, going through management changes will be a focus in the short term. But when do you see that the revenues there stabilizing related to that the segment returning back to historical profitability levels?

Kevin Ford, Chief Executive Officer, Calion Group: Yeah, good morning Paul, it’s Kevin. So from my viewpoint what we’re seeing right now is we’re seeing some positive signs of that turnaround and returning to the levels that we would expect from ITCS, some exciting wins recently. But I still believe it’s going to take a couple quarters to get it back to where we would like to have it. We are continuing to work with the team on both prioritizing you know key opportunities, know cost structure, marketing and sales efforts. So it’s all hands on deck right now with ITCS.

The team is dedicated, they’re doing great work and I’m confident over the next couple of quarters we’ll get that back. So I want to reiterate as well the importance of that defense and cyber capability within our ITS segment as we look at defense longer term as well. So I think a couple of quarters we’ll get this back but in the same context all hands on deck as I said with focus right now on many elements of our ITCS business.

Paul, Analyst: Thanks for that. At defense, where are you seeing the greatest momentum in terms of the product segments? Is it mostly on the learning side or is it also advanced tech? And then how do you think about capacity to deliver against these contracts? Meaning will you need to proportionally expand your employee base to deliver it or with the existing cost structure, there’s a lot of capacity available?

Kevin Ford, Chief Executive Officer, Calion Group: Yeah, great question. As a reminder, defence consumes all of Calient services. Healthcare, manufacturing, engineering, training, cyber, IT, our largest segment both in Canada and now growing in Europe. So from my viewpoint, currently we’re seeing a strong demand obviously in Europe as I mentioned on our training portfolio. In Canada, we’re seeing strong demand in healthcare with the recent announcement, obviously the increase in scope of our healthcare contract.

We’re seeing it across the training. We’re seeing now an exciting pipeline of engineering and manufacturing capabilities. As a reminder, we probably don’t talk enough about that Paul with regard to we’re one of the few companies that has a complex engineering manufacturing presence here in Canada. Defense grade, we manufacture components today for defense equipment. So we see it right across the portfolio, clearly training and capacity building in the short term healthcare, but we are seeing some exciting opportunities emerge on leveraging our defense and manufacturing footprints as well as space and cyber.

So again, almost uniquely so in Canada we’re a company that can support many elements of defence spend as they now focus on increasing defence spending to that 2%. So exciting times for us in the defence.

Paul, Analyst: And just lastly, could you elaborate a bit more on the M and A pipeline within defense, specifically around valuations? Have you seen valuation multiples increase just as the market has become more enthusiastic about the growth potential of defense businesses? And then strategically, what sub segments within defense do you see as the most attractive for you from an M and A perspective?

Patrick Houston, Chief Financial Officer, Calion Group: Good question, Paul. I don’t think we’ve seen a significant change yet, because I still think it’s early. But I think your question is a valid one. I think where we’ve been focusing is what would be smaller to mid sized defense companies, which can really add synergistically to ours. So in one way, I think we’ll still be able to buy them at with a decent valuation.

But then the combination of them as well as Calient’s footprint and relationships both in Europe and Canada can really kind of propel their growth and we’ll share that as we go. So I think that’s a way we’re looking at it in order to maintain a discipline we’ve shown in the past, but also be able to do M and A in this environment.

Kevin Ford, Chief Executive Officer, Calion Group: Paul, it’s Kevin. Chris has been on board a couple months now and talking to him even the board update that he provided formulating a strategy on Calion as I mentioned, I think we had the opportunity to become a defense OEM from a Canadian viewpoint, but also the strength in our European business right now. So both organically and M and A we’re focused in on differentiation where we have moats around our business and where we see strong growth potential for Calliant to differentiate. So standby we’ll give an update once we see the defense budget we’ll give an update to our shareholders and we’re and give Chris a chance frankly to present his vision on where he wants to take our defense and space segment.

Paul, Analyst: Thanks for taking the questions.

Kevin Ford, Chief Executive Officer, Calion Group: Thanks, Paul.

Olivia, Conference Call Operator: Thank you. Our next question coming from the line of Scott Fletcher with CIBC. Your line is now open.

Sam Schmidt, Analyst, CIBC: Hi there. It’s Sam Schmidt on for Scott Fletcher. I just wanted to dig a little bit more into the ITCS segment. Can you share some details on the macro headwinds that you’re seeing? And how much of the impact that you’re seeing relates to the Canadian government side of the business versus The US side?

Patrick Houston, Chief Financial Officer, Calion Group: Hi, good morning, We did see some delays like the budget is not out in Canada yet. So, I think that’s taken some of the larger projects that we would usually be doing in IP for defense customers. But I think that’s more of a timing issue, like if the budget is still coming out in the fall. And it’ll be a short year, we’re expecting to see momentum there. And we’re certainly in place to capitalize on it.

I think in The US, it’s been a you know, we’ve been working on that one. I think the team is seeing a bit better visibility, but you know, it’s been a slow year for that team. But I think, know, there’s promising opportunities on the horizon there. I think, you know, next year should look better.

Sam Schmidt, Analyst, CIBC: Thank you. And then one more from me. The new President of Defence and Space, you noted a focus on leveraging synergies between advanced technologies and learning. Can you share some color on what those synergies might look like and opportunities to bring those cross segment offerings to market?

Kevin Ford, Chief Executive Officer, Calion Group: Yeah, great question. Know, first and foremost, know, the domain expertise we have in defense and space and support of defense is significant. So number one, what we’re doing bringing those teams together, we have years of experience of both ex military veterans capability. So number one, it’s going to give us an opportunity to leverage that domain expertise that we have with personnel right now on identifying those solution areas that we can differentiate scale for both Canada, Europe and global defense. So number one, just the synergies on our domain expertise.

Number two is when you look at the defense opportunity funnel, a lot of it is coming from new solution sets. For example, NORAD modernization will require equipment, it will require healthcare, it’s going to require connectivity, it’s going to require many elements of the capabilities Calium brings to market. So what we’re trying to do now is quit talking about this company as ingredients but look at where we can actually and uniquely build solutions for things like the North, for sovereignty, for things like Europe and what we’re trying to do there in training and capacity building. So that’s really what we’re trying to do here is.

Sam Schmidt, Analyst, CIBC: Great, thank you very much. I’ll pass the line.

Kevin Ford, Chief Executive Officer, Calion Group: Look at the synergies that we see now in defense and space and our engineering manufacturing, health care learning, and go to market as a strong defense prime. That’s what we’re trying

Paul, Analyst: to do.

Sam Schmidt, Analyst, CIBC: Great. Thank you. I’ll pass the line.

Kevin Ford, Chief Executive Officer, Calion Group: Thanks, Anne.

Olivia, Conference Call Operator: Thank you. Our next question coming from the line of Jesse Pitlak with Cormark Securities. Your line is now open.

Jesse Pitlak, Analyst, Cormark Securities: Hey, good morning. Just hoping you can maybe provide a little bit more detail on where you are in the business review process. Any information on maybe some initial learnings from that and just finally when we can maybe expect some outcomes or decisions from that process? Thank you.

Kevin Ford, Chief Executive Officer, Calion Group: Yeah, we continue to work with our board on even this quarter, we’re having discussions on how do we ensure that we have focus on our strong growth assets, the assets that align to our strategic the update to our strategy that we presented in May. So that’s ongoing. And as I mentioned, even the reorgative defense creating a defense and space business unit is really an alignment on this strategic review on where we want to focus. So ongoing dialogue right now with our board, looking at our assets on different categories of strategic importance and continue to work with our teams day to day frankly on delivering for our customers which is critical as we go through this process. So standby we’re expecting this we’ll have some initial results of this in the fall.

We’ll look forward to give an update in the fall timeframe on any decisions we’re making there. But right now it’s all hands on deck frankly on our growth agenda as well as aligning on those tailwinds we see in the market. Standby.

Jesse Pitlak, Analyst, Cormark Securities: All right, understood. And then maybe just as a second question, if I remember correctly, I think the DND went through some changes within their kind of procurement department maybe over the past year. Can you comment on just maybe how you feel that their capacity sits now to really accelerate their procurement as defence budget ramps up?

Kevin Ford, Chief Executive Officer, Calion Group: Yeah, great question. We’re watching this very closely. There was an announcement with Stephen Feuer looking at know defense procurement. What we haven’t seen yet is the outcome of the analysis from a government perspective. There’s been speculation, there’s been discussions whether or not there’s a defense procurement agency.

Nothing’s been formally announced and again I expect that with the fall budget we’re going to see some more clarity on both priorities for defence spending as well as how to your point they’re going to expedite procurement capability with the government to match the pace of the spending targets that they’ve set in place. So nothing specific yet. We’re seeing lots of discussions. We see some industry engagement on this and I expect in the fall, when I’m talking about Q4 results I’m hoping that we’ll be able to talk a bit more with a bit more clarity on the pace of that procurement, how they’re doing, how they’re going to do it and to your point and also what are the opportunities for Callian to participate in that increased spend.

Jesse Pitlak, Analyst, Cormark Securities: Got it. And then just a final question, more of a housekeeping question. Can you just remind us within the ITCS business, the customer mix, just Canadian defense and government versus U. S. Commercial customers?

Patrick Houston, Chief Financial Officer, Calion Group: Yeah. The US is about a third. Canadian defense is about a third, and the other third is Canadian commercial hospitals and other kind of government organizations.

Jesse Pitlak, Analyst, Cormark Securities: Got it. Thank you.

Kevin Ford, Chief Executive Officer, Calion Group: Thanks. Thank

Olivia, Conference Call Operator: you. Our next question coming from the line of Benoit Poirier with Desjardins. Your line is now open.

Benoit Poirier, Analyst, Desjardins: Yes. Thank you very much. Good morning, Kevin. Good morning, Pat. Yeah, with the Canadian Armed Forces now accelerating recruitment stating that 13,000 additional service members are needed.

Can you speak to how specifically this increased spending and recruitment pace could benefit your health and learning segments?

Kevin Ford, Chief Executive Officer, Calion Group: Yeah, from our viewpoint, and again, I think where Calion is uniquely positioned, the capacity building that the military and the forces are on will be expedited to your point Benoit. And all of it will require training and support in healthcare. As you saw, we’ve got an increase in our healthcare contract, which is a precursor to increased demand. And on the training side now, a year ago, I know we’re talking about cuts to training, but what we’re seeing now is discussions on ramping up training and capacity as they get specific on the recruiting targets. So I think there’s going to be a good opportunity for us to participate and support our largest customer on their capacity building across training and healthcare.

But also, as I mentioned, equipment, connectivity, satcom, cyber, all of that I think is going to come with a stronger increase in demand for industry support. So we’re feeling pretty good. Just need to see the specifics and I think that’s coming soon.

Benoit Poirier, Analyst, Desjardins: Okay. And when we look, Kevin, at the new defense spending plan, also mentioned Arctic Sovereignty at several occasion. Obviously, you did the acquisition of AMS. So can you tie this into this recent acquisition and how you could potentially benefit from this new plan? Any thoughts on potential synergies of AMS with the rest of your platform?

Kevin Ford, Chief Executive Officer, Calion Group: Yeah, question. You know, why we’re excited about AMS is number one, on our healthcare business and looking at that, you know, this is not easy in the North and what we accelerate as Cayenne is things that are not easy. So working with that team, which is a great team as we get to integrate them now, it’s just a very strong team. We see capability and potential there that your point, Benoit, can be leveraged on looking at Arctic sovereignty. It’s one of the reasons that we’re so interested in AMS both in strengthening our healthcare business but also our defense footprint for the North.

Again, when I think about companies and Canadian companies that can support Northern sovereignty, Again, I believe we’re uniquely positioned whether it’s again the Satcom, the healthcare, the training, remote medicine. You think of all the different areas we participate right now. What we’re doing is working on solution sets that will actually support Arctic sovereignty and leveraging assets such as AMS. So we’re excited by the opportunity. We are having lots of discussions around this.

Our team is building solutions that we think can help respond to the increased demand for Arctic support Again, and so standby, we look forward to give an update as soon as we get the specifics from the federal government.

Benoit Poirier, Analyst, Desjardins: Okay. And Pat, starting in Q4, you’ll be begin lapping negative organic growth quarters. So could you maybe speak about the expectation or cadence of organic growth through the balance of the year and what it means in terms of EBITDA generation?

Patrick Houston, Chief Financial Officer, Calion Group: Yes, think we posted positive organic growth outside ITTS this quarter. So I think that was a positive indicator. I think the signings is another one like over a billion in signings. The majority of that is in future years. So I think that’s going to certainly help us going to next year in terms of just entering the year with strong backlog and able to post kind of positive organic growth.

So I think, you know, we did post to your point for a couple quarters there, but I think we’re starting to see the turnaround and we’re optimistic about, you know, getting back to where we were in the last several years next year.

Benoit Poirier, Analyst, Desjardins: Okay. And maybe last one, you recently appointed three new board members that have all solid public markets experience. Given any early tidbits you can share from your discussion with these new board members?

Kevin Ford, Chief Executive Officer, Calion Group: Yeah Benoit, think the board is listening to this call so I’m going be very positive as you can imagine. All joking aside, what we’ve heard and I want to reiterate this, we are a company that continues to evolve and continues to strengthen our board and continues to strengthen our management team and align to our strategy. So initial feedback from me is, you know, you take a great base of board members who’ve had experience with Calion over years and now we’ve added some new ideas, some new thought processes with regards to how we move forward as a company with demonstrated capability and experience in other companies that have done what we’ve been trying to do here. I’m enjoying it actually. Think it’s great.

We’re having great dialogue on strategy, great dialogue on growth, great dialogue on focus, the portfolio review. And I’ve been hearing from shareholders for years on just continuing to evolve and making sure we’re aligning competencies on board, competencies on management to strategic growth and shareholder value. So I think we’ve made some great changes. I’m excited to work with the folks that are on the board. And I think it’s just a sign hopefully the market recognizes this is our commitment to ensure that we continue to inject new thought process and competencies to support our growth objectives.

Far so good and I’m not saying that just because they’re listening to this call Benoit.

Benoit Poirier, Analyst, Desjardins: Okay thanks for the color.

Kevin Ford, Chief Executive Officer, Calion Group: Thanks Benoit. Thanks Benoit.

Olivia, Conference Call Operator: Thank you. And there are no further questions in the Q and A queue at this time. I will now turn the call back over to Mr. Kevin Ford for any closing remarks.

Kevin Ford, Chief Executive Officer, Calion Group: Thank you Olivia again for facilitating the call. Do appreciate it. So as I close here, hope that people are sensing my excitement with our defence and space capabilities. What we’re seeing is I think frankly I’ve done this a long time, a once in a lifetime opportunity in areas such as both defence in Canada, defence in globally space. While we have headwinds in certain parts of our business, you can’t look at a billion dollars in signings to date, the 1,500,000,000.0 in backlog, the growth we’re seeing now on organic growth across the majority of our business and a committed team to resolve some of the headwinds that we’re facing.

So I’m very optimistic about our future, looking forward to providing an update in Q4, hopefully with bit more specifics around Canadian government’s plans and also an update just on strategy. So thanks for your time today, the questions, your support and look forward to talking to you after our Q4 results are out. So with that Olivia we can end the call.

Olivia, Conference Call Operator: For today’s conference call. Thank you for your participation and you may now disconnect.

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