Earnings call transcript: Calian Technologies reports Q2 2025 earnings decline, stock drops 17%

Calian Technologies Ltd. reported a second-quarter revenue decrease of 4% to $194 million, with notable challenges in the ITCS segment impacting overall performance. The adjusted EBITDA fell significantly from $27 million to $17 million, and the adjusted EBITDA margin declined to 9% from 13.5%. Following the earnings announcement, Calian’s stock price plummeted 17.27%, closing at $40.25, down from its previous close of $48.65. According to InvestingPro data, the stock is now trading near its 52-week low of $28.29, potentially presenting value for investors as the company’s Fair Value analysis suggests undervaluation. This decline comes amid a backdrop of market uncertainty and the company’s withdrawal of full-year guidance.

Key Takeaways

• Q2 revenues fell 4% to $194 million, with a 25% decline in the ITCS segment.
• Adjusted EBITDA decreased to $17 million, with a margin drop to 9%.
• Calian’s stock fell 17.27% post-earnings announcement.
• The company withdrew full-year guidance citing market uncertainty.
• Strategic focus remains on defense, healthcare, and space sectors.

Company Performance

Calian Technologies faced a challenging quarter, with revenue declining by 4% year-over-year to $194 million. The ITCS segment saw a significant 25% decrease in revenues, overshadowing growth in other segments such as Advanced Tech, Learning, and Health, which collectively grew by 7%. Despite these hurdles, the company maintained a slight organic growth excluding the ITCS segment.

Financial Highlights

• Revenue: $194 million, down 4% year-over-year
• Adjusted EBITDA: $17 million, down from $27 million
• Adjusted EBITDA margin: 9%, down from 13.5%
• ITCS segment revenue: down 25%
• Growth in Advanced Tech, Learning, Health segments: up 7%

Outlook & Guidance

Calian withdrew its full-year guidance due to prevailing market uncertainties but remains optimistic about achieving record-breaking revenues. The company is targeting a 6% share buyback in FY2025 and continues to explore mergers and acquisitions, particularly in defense, healthcare, and space sectors.

Executive Commentary

CEO Kevin Ford acknowledged the quarter’s challenges, stating, "While our Q2 results came in short of our expectations, they’re essentially isolated to headwinds in the ITCS segment." He emphasized the company’s commitment to innovation and growth, saying, "We are a company focused on innovation, increasing our R&D investment year after year."

Risks and Challenges

• Continued weakness in the ITCS segment could affect future revenues.
• Market uncertainties may impact the company’s strategic initiatives.
• Potential integration challenges with the AMS healthcare services acquisition.
• Fluctuations in defense and space markets could affect growth projections.
• Economic conditions and geopolitical tensions may influence international operations.

Q&A

During the earnings call, analysts inquired about the timeline for resolving ITCS segment challenges, to which the company responded with expectations of improvement in the coming quarters. Questions also focused on the costs associated with platform conversions and the strategic benefits of the AMS acquisition in enhancing healthcare services in Northern Canada.

Full transcript - Calian Technologies Ltd (CGY) Q2 2025:

Victor, Conference Call Operator: Good day and thank you for standing by. Welcome to the Calient Group Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, we will open up for questions. To ask a question during the session, you will need to press 11 on your telephone.

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today’s call is being recorded. I would now like to hand it over to your first speaker today, Jennifer McCaughey, Director of Investor Relations. Please go ahead.

Jennifer McCaughey, Director of Investor Relations, Caliant Group: Thank you, Victor, and good morning, everyone. Thank you for joining us for Calliant’s Q2 twenty twenty five conference call. Presenting this morning are Kevin Ford, Chief Executive Officer and Patrick Houston, Chief Financial Officer. They will review our Q2 results and discuss future growth opportunities for Calliant. 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, Caliant Group: Thank you, Jennifer, and good morning. Let me begin by recognizing that our Q2 results fell short of expectations. While this is disappointing, it’s important to highlight that the shortfall is primarily limited to headwinds in our ITCS segments. The rest of the business continues to demonstrate resilience and performance in uncertain times. Notably, our overall defense business, which remains a high growth area and a strategic priority for us, is performing well giving us confidence on the broader trajectory of the company.

Let me start with our ITCS segment. Year to date we’ve experienced a 15% decline in revenue but a significantly sharper drop in EBITDA compared to the same period last year. This indicates that the core challenges are more cost related than revenue driven and importantly several of these cost pressures are temporary and should start to unwind in coming quarters. Let me take a moment to clarify what occurred during the quarter. First, delayed procurement decisions by the Canadian government due to the elections affected our decisive business unit in a stronger strongest quarter of the year.

While we had anticipated some slowdown with the pending election, the impact was more significant than anticipated. The good news is that we believe this is a timing issue and and we will recapture these opportunities in the back half of the year. Second, delayed procurement decisions by The US commercial customers due to longer than anticipated refresh cycles coupled with tariffs. The market uncertainty surrounding tariffs led customers in our US business to delay investments as they assess the impact of the on their respective businesses. We expect that this uncertainty will continue while businesses absorb the new policies and adjust their operating models.

Third, we are incurring increased costs due to our cybersecurity platform transition from our in house version to the Microsoft platform. Essentially, are supporting two platforms until the transition is complete, which is expected to be finished at the end of this year. Over in just six months, we’ve made meaningful progress across our North American market. We are seeing strong momentum with a growing number of clients with over 30 customers now migrating to our next generation AI infused platform powered by Microsoft technologies. Concurrently, our data and AI practices accelerate its pipeline growth, now exceeding 20,000,000.

Some of these customers we have recently actively engaged with include La Vie en Rose, Crescent Energy, and Select Waters. Finally, we are actively investing in future growth by accelerating our pivot towards a services led organization. Our strategic focus is on delivering AI driven innovation across cybersecurity, data and AI, application modernization and business applications. This shift is already creating strong momentum with key customers like Apache Industries who are leveraging expertise to modernize and scale their digital capabilities. As we support our customers through their transformation journeys, we’re seeing longer sales cycles than initially forecasted and these are natural consultative engagements that drive deeper impacts.

While this has resulted in a temporary higher cost base, we are confident that our investments in talent, solutions and delivery capacity will translate into long term value creation and sustainable profitable growth. To summarize, ITCS faced headwinds from macroeconomic conditions, the ongoing transition of our cybersecurity business to a new platform, and the challenges of repositioning towards a higher end margin managed services model. That said, it’s important to note that the impact was not uniform across the segments as our on demand services for example have remained stable and continue to perform reliably. The underlying fundamentals of the ITCS business remain strong. The market opportunities in cybersecurity and management services are substantial and we’re firmly focused on positioning the company to fully capitalize on them.

While the market is increasingly competitive, we believe partnerships with Microsoft and the recent investments we are making, combined with our proven mission critical solution capabilities, are positioning us well to gain market share. While we’re in the early stages of our transformation, we are highly confident in the long term outlook for ITCS. A key part of our strategic plan is to improve our margin mix with greater percentage of business stemming from our cyber and a data and AI practices, And we believe this transition will create a stronger, more resilient and higher value ITCS well positioned to lead in mission critical industries. Achieving this requires ensuring the business is appropriately structured and operationally prepared to capture this growth. And that’s exactly where our capable team of leaders are driving their efforts.

Overall we’ve made meaningful progress but given the evolving dynamics of broader market uncertainty it’s clear that ITCS will need a few more quarters to complete its transformation and return to sustainable growth path. In the meantime, we expect continued volatility and pressure in this segment. Elsewhere our other three segments have felt some impact of the federal election and tariff related uncertainty though to a much lesser extent. Despite these challenges they continue to demonstrate resilience and remain steady in a still uncertain operating environment. While we have challenges we are supported by a solid backlog of 1,100,000,000.0 and I’m happy to report that’s now 1,400,000,000.0 with the closure of the AMS acquisition.

Patrick will share more details on our Q2 results shortly. Let me provide you an update on our defense opportunity. Last quarter, we provided you with an overview of our new go to market strategy for defense, which we are currently executing. Our overall defense business which represents close to 50% of our revenues continues to grow. In fact, trailing twelve month revenues reached $363,000,000 up 10% from FY24.

More specifically, year over year, our international learning business has grown 395%. Our health business has grown 10%, and our advanced technologies business has grown 19% in this area. We’re seeing growing momentum in defense, particularly in Europe, where we’ve recently secured several net new contracts. While we are unable to disclose the details such as deal size, duration, or customer names due to security sensitivities, what matters most is the strength of our current pipeline now exceeding $1,000,000,000 which highlights sustained demand for mission critical defense solutions. We are positioning the company to capture this growing demand by assembling a strategic leadership team with the experience networks and track record needed to drive results.

As you may recall last quarter we appointed a regional VP of global defense and security and a managing director for UK defense which has strengthened our bench. With this team in place we’re confident in our ability to turn high potential opportunities into concrete outcomes. In The US we continue to strengthen our brand presence and expand our commercial footprint in defense. We’ve begun generating incremental revenue by successfully cross selling our existing products and services to US commercial customers. At the same time we’re actively progressing towards full cloud compliance which is a key milestone.

Once achieved it will position us to begin marketing our defense products and services to the US government an important step in our long term growth strategy. Turning to Canada with the Canadian Armed Forces budget costs starting to taper off in the third quarter and the federal election behind us, we expect investments in defense to gradually increase. A major driver is Prime Minister Riccardi’s defense spending plan, which is expected to reach 2% of GDP by 02/1930. In fact, the liberal election platform promised an additional $30,900,000,000 in new defense spending over the next four years with a commitment to buy Canadian where possible and prioritize Canadian raw materials. The plan includes filling this cash shortage of 14,500 members who inevitably will require training and healthcare.

While the timing of the contract awards is difficult to predict, the tailwind is undeniable. As we have said many times, defense is a marathon not a sprint. Overall the defense segment continues to act as a strong tailwind for the company. The global need for defense capabilities aligns with guidance defense operational readiness platform which delivers a comprehensive suite of services backed by decades of proven experience. These include training, IT infrastructure, health services, cyber security, space communications, and manufacturing.

With all of these defense opportunities in the works, we strongly believe we’re set up to participate in a meaningful way as the activity racks up. Besides defense, we believe space and health are backed by strong fundamentals and favorable tailwinds. In line with our strategy to sharpen KIND’s focus and drive sustainable value creation, we are taking steps to simplify our operating model and align the business with high potential mission critical markets. Recent cost based adjustments and the launch of a portfolio review aligned to our growth markets will better position us to capitalize on strong industry tailwinds. These measures reinforce our commitment to operational excellence and long term shareholder value.

We are actively reviewing our assets, investments and business lines to ensure alignment with our long term strategic growth objectives. This portfolio review may include exploring options for non core assets, refining our go to market approach, doubling down in high growth areas, optimizing our cost structure, and reassessing capital allocation priorities. Our goal is to focus resources where we see the greatest potential for greatest value and creation and value creation. Earlier today we announced the acquisition of AMS, a provider of healthcare services to the Canadian North including the Northwest Territories, Yukon, Nunavut and parts of Canadian Northern provinces. AMS is a great fit for Calian Health for a number of reasons.

It broadens our healthcare solution service offering into primary care, paramedicine and air and ground ambulance, expands and strengthens our geographic footprint and competitive position in Northern and Canada, and it will enable cross selling opportunities for both government and industrial customers. Its established brand in Northern Healthcare, its contract backlog of roughly $250,000,000 combined with its key partnerships with indigenous communities will be an asset as we work to scale the business over the next several years. AMS provides KIND with a strategic footprint in the North at a time when the federal government is making substantial investments in the region. Our presence in North coupled with our strength strengthened relationships with provincial and territory governments will position us favorably to secure new contracts as Northern investments are rolled out. In the coming years we believe there will be increased demand for health and defense products and services in Canada’s Northern strategy and planned federal investments.

Our portfolio review will position us well to gain from this. Now I’ll turn the call over to Patrick to discuss consolidated results for Q2 and our outlook for FY 2025.

Patrick Houston, Chief Financial Officer, Caliant Group: Patrick. Thank you Kevin. Q2 revenues decreased 4% to £194,000,000 as the combined growth of 7% from advanced tech learning and health was more than offset by the ITCS underperformance with revenues down 25%. QUISIT growth was 4% and was generated by the contributions of the nuclear assets acquired from MBA and Mavoy. Organic growth was down 8%, primarily impacted by the ITCS segment.

As Kevin explained earlier, excluding ITCS, growth would have been 1%. Despite these levels, we continue to have high performing assets in our portfolio, such as our nuclear services, which increased 91%, and our GNSS antennas, which increased 22%. We continue to grow outside Canada with 42% of total revenues coming from international customers in Q2. It’s the highest quarter of international revenues both in terms of revenue dollars and as a percentage of overall revenues. On a trailing twelve month basis, revenues stand at seven forty five million dollars in line with FY ’twenty four.

Gross margin was 33%, slightly below the same period last year due to revenue mix. It represents a twelfth straight quarter above the 30% mark. Adjusted EBITDA decreased $10,000,000 from $27,000,000 last year to 17,000,000 Of the $10,000,000 decrease, 8,000,000 was attributable to ICCS for the same reasons explained earlier. As a result, adjusted EBITDA margin decreased to 9% from 13.5% last year. On a trailing twelve month basis, adjusted EBITDA stood at CAD79 million, reflecting a margin of 10.6%.

While our Q2 shortfall was largely confined to the ITCS segment, we took proactive steps in April in light of broader market uncertainty, including concerns around tariffs and increasing recessionary signals. We implemented targeted reductions in overhead and discretionary spending and temporarily paused select investments. These measures are designed to enhance our operational resilience and help mitigate potential economic headwinds in the quarters ahead. As a result of our lower adjusted EBITDA, adjusted net profit stood at CAD 11,000,000 or CAD $0.09 3 per share, down from CAD19 million in the prior year. In the quarter, we posted only a small net profit mainly due to non cash accounting charges, which we amortized over approximately five years post acquisition.

Let’s take a look at our cash flow and capital deployment metrics. Cash flow from operations was CAD 10,000,000 this quarter compared to CAD 36,000,000 in the same period last year. It is impacted by lower net profit and working capital usage in the quarter versus positive working capital last year. We maintain our working capital efficiency level in Q2 by using 9% of revenues. This is a similar level from FY ’twenty four, but down significantly from FY ’twenty three when we stood at 14%.

Offering free cash flow stood at CAD10 million, representing a 56% conversion from adjusted EBITDA. On a trailing twelve month basis, operating free cash flow stood at CAD57 million, reflecting a conversion rate of 72% above our target of 70%. Turning to capital deployment. In Q2, used our cash and a portion of our credit facility to make CapEx investments of CAD2 million. We also provided a return to shareholders in the form of dividends of CAD3 million and continued buying back shares to the tune of CAD4 million.

In the last twelve months, we’ve invested $13,000,000 in dividends and $14,000,000 in share buybacks for a total of $27,000,000 We continue to believe that Calion shares are undervalued and plan on continuing to deploy capital towards repurchasing shares in order to deliver long term value to our shareholders. We plan on repurchasing approximately 6% of shares outstanding in FY 2025 through a combination of daily purchases and block trades under our NCIB. As Kevin mentioned, we completed the acquisition of AMS earlier today. This demonstrates our continued ability to identify strategic assets that fit into our growth initiatives and acquire them at attractive valuations. We paid $21,500,000 at closing for 100% of the shares and have an earn out payment of up to $5,000,000 in the first year.

We continue to spend considerable time evaluating opportunities in defense, space, health care and growth markets and plan to continue to deploy capital towards M and A alongside our activities on the NCIB. Now let’s take a look at the balance sheet and cash availability. As of March 31, we had drawn $120,000,000 on our debt facility. During Q2, drew an additional $5,000,000 on our facility to support our current operations and buy back shares. We ended the quarter with net debt of $57,000,000 representing a net debt to adjusted EBITDA ratio of 0.7.

This is well below our threshold of 2.5 times and we have ample capacity on the balance sheet to pursue our growth with close to $200,000,000 in available funds. Despite a more challenging quarter, last twelve months adjusted EBITDA yield, operating free cash flow yield and adjusted EPS yields were approximately 15%, eleven % and nine % 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 sustainable growth. Now let’s turn to our FY ’twenty five outlook. Given ongoing economic and geopolitical uncertainty, as well as limited visibility and timing to key opportunities in the IPCS segment, we’ve made the decision to withdraw our guidance.

The current market environment remains uncertain and is rapidly changing with many moving variables, making it difficult to provide a reliable and meaningful forecast at this time. In addition, we have a concrete plan to address the issues in IPCS. It will take some time. It’s important to emphasize that this decision does not alter our confidence in CALLON’s long term growth trajectory. While we have withdrawn guidance, we can offer a few data points to assist with modeling as our other three segments are performing to expectations.

Excluding ITCS, we expect combined adjusted EBITDA from our Health, Learning and Advanced Technology segments, inclusive of corporate costs, to grow over FY ’twenty four levels in line with previous expectations. The primary variable remains the performance of the ITCS segment. Our confidence is underpinned by strong momentum in Sightings. We secured approximately CAD248 million in new business during the quarter with both new and existing customers. Our backlog remains robust at CAD1.1 billion and will further increase by roughly CAD250 million with the addition of AMS today.

Turning to capital deployment for FY 2025. We are targeting neutral to slightly negative working capital for the year. We anticipate to have an earn out payment of about approximately AUD 5,000,000 with respect to the acquisition of Mavway in Q3. We expect to maintain our CapEx investments for the year at approximately 8,000,000 to $10,000,000 We expect to maintain our current dividend of $1.12 per share. And we plan to accelerate our share buyback program by combining our daily purchases with block trades.

Again, we intend to repurchase up to 6% of our public float under the NCIE. I’ll now turn it back over to Kevin for his closing remarks. Kevin? Thank you, Patrick.

Kevin Ford, Chief Executive Officer, Caliant Group: In closing, I want to leave you with a few thoughts. While our Q2 results came in short of our expectations, they’re essentially isolated to headwinds in the ITCS segment. The rest of the business remain resilient and is expected to close out the year as expected. In fact, although we have withdrawn guidance, we still believe that we will end the year with record breaking revenues and showing positive year over year EBITDA progress when combining the learning health and advanced tech segments together and factoring in our corporate costs. Our goal remains to continue to build a purpose driven organization growing 10 to 15% per year through a combination of organic growth and acquisitions and creating value for our shareholders.

Over the past year, we have engaged with numerous shareholders who have shared valuable perspectives on ways to enhance shareholder value. Suggestions have included refining our strategic focus on key growth markets, increasing share buybacks and finding efficiencies among others. I want to assure you that your voices have been heard and we are actively working to address these priorities. As you heard Patrick say today, we will maximize our share buybacks with the objective of repurchasing up to six percent of our float in order to deliver long term value. In addition, we began a portfolio review to better position the company to capitalize on the significant tailwinds that are emerging defense health space and emerging markets.

The strategic shift will involve the realigning of our overall approach, looking at options for non core assets and doubling down in high conviction growth areas, all supported by clear and actionable execution plan. To help support us with this exercise we’ve been actively refreshing our board in the past few months to align with the evolving needs of the business. We are pleased to welcome three outstanding new directors each bringing deep public company expertise and valuable perspectives. Lisa Greatrichs had strengthened financial acumen and capital markets expertise that will support our focus on operational excellence. Josh Blair brings a proven track record across AI data services and healthcare industries closely aligned with our growth ambitions.

And we just recently announced and welcomed Eric Demirian, chair and board of the board of Descartes Systems Group. His extensive experience in finance and M and A across diverse markets makes him a key strategic asset as we pursue scale and transformation. In terms of doubling down on growth initiatives, let me say a few words on defense and space. A few years ago we made a strategic decision to position Cali for growth in the European defense sector through targeted investments and acquisitions including our recent acquisition of Mavway. This foresight is now paying off.

Our international learning defense business has grown by 39575% organically. With global defense budgets on the rise, are well positioned to secure upcoming contracts. What’s more, the global space economy is poised for significant expansion in the coming years. This growth is driven by advancements in satellite technology, lower launch costs, and increasing integration of space based services across various industries, including communications, transportation, and defense. Right now we are seeing a lot of activity in our space sector.

We have numerous RFPs currently pending responses amid rising demand for space in Europe and growing attention in Canada given the Buy Canada movement. In fact, there’s significant growth and opportunity across both defense and space sectors and Calion is uniquely positioned at the intersection of both. With shared technologies, overlapping capabilities, and common demands for precision and reliability, the synergy between these sectors allows us to deleverage our experience and drive innovation across these domains. We are a company focused on innovation, increasing our R and D investment year after year. Artificial intelligence is transforming industry and our company is actively embracing this change.

We’re investing in AI and embedding it across our products and services. And as a result, we are driving innovation, improving performance and delivering smarter, more efficient solutions for our customers. From automation to advanced analytics, AI is helping us stay ahead in a rapidly changing technology landscape. Moreover, we are also encouraged by the growing Buy Canada movement, which is gaining momentum across both public and private sectors. As a Canadian company, we are well positioned to benefit from the shift especially as customers and government entities increase and prioritize local suppliers who understand domestic needs, comply with Canadian standards and contribute to national economic resilience.

This trend aligns well with our capabilities and footprints, and we believe it will create a new opportunity to expand our presence and deepen our relationships within the Canadian market. For example, in the Canadian defense sector, we not only want to capitalize on growing demand in training and health care, but also the OEM opportunity. Downing is one of a handful of Canadian companies with the breadth and depth to manufacture mission critical military equipment when failure is not an option. We design build and test custom components to meet or exceed military performance standards across our plants located in Ontario, Quebec, South Saskatchewan and Germany. And we want to drive growth here even further.

Collectively these actions position us well to navigate the path ahead, take the company to its next stage of growth and enhance shareholder value. Having said all of this, I am optimistic about the future growth because our company is built on a solid foundation. We maintain a strong balance sheet that gives us flexibility to invest strategically, a proven track record of execution and a successful M and A strategy supported by a robust pipeline. With a healthy backlog of now 1,400,000,000 and a high free cash flow conversion, we are well positioned to capitalize on favorable trends in our end markets an encouraging combination that sets the stage for continued success. In Q2, we grew some businesses as I mentioned like international learning and defense, GNSS antennas and nuclear services by 395%, twenty two % and ninety one % respectively.

We signed $248,000,000 of new contracts representing a book to bill ratio of 1.3 and stepped up our share repurchases. More recently we refreshed our board and completed the acquisition of AMS which will position us for growth in the North. In closing despite some headwinds we believe the company is well positioned for growth in the years ahead. Our strong fundamentals, strategic focus and disciplined execution gives us confidence in our ability to navigate challenges and seize emerging market opportunities. Above all, we remain committed to creating long term value for our shareholders by building a more resilient, focused, and future ready business.

And with that Victor, I’d like to now open the call to questions.

Victor, Conference Call Operator: Thank you. One moment for our first question. Our first question will come from the line of Doug Taylor from Canaccord Genuity. Your line is open.

Doug Taylor, Analyst, Canaccord Genuity: Yeah. Thank you. Good morning. I guess I’ll start by asking some questions about the ITCS unit, which I’m sure will be the focus. It sounds like you’ve taken some steps already to buffer margins, understanding top line visibility isn’t what you’d like for the reasons you’ve mentioned.

But should we be thinking of Q2 as the floor here for that unit? Or is it too early to say that in terms of profitability based on what you can see in the expectation of some second half catch up on some Canadian government stuff?

Kevin Ford, Chief Executive Officer, Caliant Group: Yeah, perspective question. From my viewpoint when I look at ITCS Doug, I really see kind of a three step process here from moving forward. So number one as I mentioned, the platform conversion that we’re working on right now I think is going to take a couple of quarters to finalize into the calendar year. Our expectation will be well pretty well done that so that’s going to help reduce some costs. Converting the funnel that we have which is growing you know it’s quite strong.

That again is a timing issue and then just the macro environment we’re dealing with the federal election getting coming on board The US commercial environment. So in answering your question I think the next couple of quarters is what it’s going to take to get this thing back on a solid growth trajectory. And I want to reiterate my confidence in the strategy that the team has in doing exactly that. So it’s not a quarter by quarter discussion. Think it’s a couple of quarters we’ll continue to see some variability there.

But the trajectory is strong. The trajectory is built on a solid strategy and I’m confident in our ability to move that into the growth goal.

Doug Taylor, Analyst, Canaccord Genuity: Maybe one more question on that. I mean the duplicate platform cost issue that you mentioned given the pressure we’ve seen on the margins in that unit. You know, can you quantify what that part of, you know, the calculus is here versus the demand side?

Patrick Houston, Chief Financial Officer, Caliant Group: Yeah, right now it’s $7,000,000 like from a cost perspective, Doug. So that’s certainly something We just had to do that to, you know, put ourselves in a better position to grow. But that is obviously a, you know, a onetime thing. And once we’re able to complete it, as Kevin mentioned, that should significantly help margins.

Doug Taylor, Analyst, Canaccord Genuity: A million in the quarter, or is this an annualized figure?

Patrick Houston, Chief Financial Officer, Caliant Group: A couple million for the year.

Doug Taylor, Analyst, Canaccord Genuity: Okay. That’s great context. And then I mean, do want to ask a question on the AMS acquisition, which is one of the highlights here. You talked about the backlog that, that business bringing in, think, just from my understanding is $250,000,000 which is appears pretty substantial relative to the revenue profile of that company. Is that so could you maybe expand, is that a single long term contract?

Is there growth anticipated for that business based on the contracts that you’ve got in hand? And I believe there’s an earn out. Can you speak to what that’s tied to?

Patrick Houston, Chief Financial Officer, Caliant Group: Yeah, great questions. Backlog really is a combination of several relationships they have with many of the provinces in the North. So I think it just speaks to AMS has been there for almost twenty years delivering healthcare. They’re probably the strongest delivery partner in the North on healthcare for paramedicine. And that was really the reason why we thought it’d a great fit to Calient.

So, you know, long term visibility. I think the growth is really going to be combining the two together and going after as you know, becomes more important for Canada, there’s going to be a lot of new opportunities. I think the combination of Calient and AMS, I think positions us well to be the leader in that space. There are now just tied to kind of EBITDA performance over the first year and that’s kind of pretty traditional for us and we anticipate them meeting those numbers.

Doug Taylor, Analyst, Canaccord Genuity: Okay, I’ll cede the floor. Thank you.

Kevin Ford, Chief Executive Officer, Caliant Group: Thanks, Doug.

Victor, Conference Call Operator: One moment for our next question. Our next question comes from the line of Rob Goff from Ventum Financial. Your line is open.

Rob Goff, Analyst, Ventum Financial: Good morning, and thank you for taking my question. My question is actually a bit more of a follow-up on Doug’s. And with respect to the ITCS, what will it take for you to have the confidence and the visibility that revenues will return to growth? You did talk about the pipeline, but we don’t know the term of that pipeline. So just sort of asking what triggers will give you that confidence.

Patrick Houston, Chief Financial Officer, Caliant Group: I think to me,

Kevin Ford, Chief Executive Officer, Caliant Group: good morning, Rob. I think for me right now, as you mentioned, the confidence is really going to I want to reiterate, I have confidence in the team. Number one, I want to reiterate that. And know it’s in a tough quarter. It may feel that that’s not necessarily needed to be said, I want to say it.

Know, I have confidence in the team. I have confidence in our leader, confidence in the team’s ability. So number one, I have confidence in where we’re positioning ITCS and the trajectory and the transformation we’re under. The visibility I think will come in as we look at that funnel as you talk about the conversion of that funnel. Some of the macro areas I expect the election will take you know another we’ll see what the the budget has for the Canadian federal election.

We’ll see if there’s any you know confusion still with regard to priorities which I don’t think there will be. So I think the macro factors such as the Canadian government will start to unwind here now. We’ll get a better sense of this government’s priorities and spending. The macro environment in The US is the question mark for me right now as to just where that goes in the next couple of quarters. And as well you know the platform conversion.

So the confidence is going be a combination of those elements where we’ve converted the platform, we have our customers on it, we see the macro environment in some of our key markets unwinding and then basically converting that sales funnel. And we have a big push right now from our marketing engine to continue to work with our team on creating a very strong funnel. We’re seeing some success there. So I think it’s gonna be a combination of factors Robin only is one thing. I want to reiterate I am confident in their team’s ability and trajectory and I know the numbers may not show that this quarter but I think a couple quarters out we’ll very excited about where this segment is going.

Rob Goff, Analyst, Ventum Financial: Thank you very much and good luck.

Kevin Ford, Chief Executive Officer, Caliant Group: Thanks. Appreciate that.

Victor, Conference Call Operator: Thank you. One moment for our next question. Next question comes from the line of Scott Fletcher from CIBC. Your line is open.

Scott Fletcher, Analyst, CIBC: Good morning. I will stick with the ICCS for my first question here. You gave us some good details on underperformance, whether it was related to decisive or The US markets. Is there anything you can any more detail you can share on how much of the decline was maybe on The US side versus on the Canadian side, whether it was similar between the two or if one was maybe worse than the other?

Patrick Houston, Chief Financial Officer, Caliant Group: Yeah, I’d say probably about a third of it was in The US. I think, you know, we did end the quarter with some backlog. So I think we are seeing some signs. But again, it’s hard to decipher exactly. So I think we could see some delays.

I think in Canada, we did see some delays certainly around the election, but the team’s working hard to try to recapture those in the next year. So some of this is temporary and the team’s working hard to try to recapture.

Scott Fletcher, Analyst, CIBC: Great. And then on those temporary delays, I mean, are pretty established relationships you have with the Canadian government. Are they giving you any type of signal that this is a timing difference that you can expect some of those seasonal Q2 strength to recur in the back half of the year? Or like have these folks just anything that they’ve given you on that would be helpful.

Patrick Houston, Chief Financial Officer, Caliant Group: Yeah, you’re right. The relationships are deep. I think these are key projects for them. So I think there is confidence that those projects will happen eventually. Think a lot of it is getting reset with the new government, everyone getting their new budgets and then reassigning kind of the projects of high confidence.

But I think the team’s confident that those projects that we were working on will still be

Kevin Ford, Chief Executive Officer, Caliant Group: Yeah and it’s Kevin. Think for me another thing that we’re doing here is we’re having a very proactive government relations campaign that I’m working with my team on right now. I’m spending a lot of time with this. Basically ensuring that as the government assesses priorities, spend opportunities, 2% GDP opportunities, that they are very cognizant of carrying capabilities. We are uniquely positioned.

There’s no other company like us that can handle a multitude of missions or capability. I’ve talked about the North, we’ve talked about NORAD modernization. So from my viewpoint, a good relationship but we’re not taking it for granted. We are going to go hard at government with regard to our value proposition across all of the you know priority areas. So I think that’s a I didn’t mention that in my speech but I want to reiterate to our shareholders that this is an opportunity opportunistic time and we’re going to capitalize that on our Canadian footprints and ensuring our government understands that we are ready to take on more.

Scott Fletcher, Analyst, CIBC: Okay, thank you. And then I’ll ask one more on the portfolio review that you mentioned. You discussed non core assets. You guys have a diverse set of assets here. Is there anything you can share as to what may be considered non core?

Would it be sort of outside of defense? It sounds like that would make some sense. Then would the IPCS business for those be considered in the review? Thanks.

Kevin Ford, Chief Executive Officer, Caliant Group: Yeah, I think I prefer not to comment on specifics with regard to areas of what we consider non core. The discussion, we’re in the middle of board meetings right now and as I leave this call the next discussion I’m having with our board is just on our strategy update, where we think the opportunity is from a growth perspective. So prefer not to comment on specifics right now but I want to reiterate and reconfirm to the market to our shareholders. This isn’t a business as usual environment. We recognize that.

We’ve had many great discussions with our shareholders on the simplification of Calion. I believe we’re a mission critical solutions company when you look at what we do and from my viewpoint what we want to do is take that capability and point it, continue to point it at markets that value that and that’s where I’m looking at core non core is who values the capability for non fail solutions and that’s the discussion I’m about to walk into with our board with regard to some of the work we’ve been doing to ensure that we are aligned to these markets. So standby and nothing to comment on specifics right now but we have lots of discussions happening on exactly that question.

Scott Fletcher, Analyst, CIBC: Okay thank you. I’ll pass along.

Kevin Ford, Chief Executive Officer, Caliant Group: Thanks Scott.

Victor, Conference Call Operator: One moment for our next question. Our next question will come from the line of Paul Treiber from RBC Capital Markets. Your line is open.

Paul Treiber, Analyst, RBC Capital Markets: Thanks very much and good morning. Just a question on visibility in the near term and in medium term. And specifically, you comment on RPO and then also backlog and the timing for conversions on both of those? Because I think RPO the next twenty four months is up 36%. So how do you see that?

What’s your expectation of the timing of the ramp or conversion of that RPO to revenue?

Patrick Houston, Chief Financial Officer, Caliant Group: Yeah, I’d refer to the NDA, Paul, there’s a disclosure on what we think the backlog that will burn off in the rest of the year. So I think we’ve got decent coverage, especially in our health learning businesses. We’ve got good coverage. Think ATB are certainly for some orders we’re trying to book in the second half. So those will be important.

And then the backlog is strong, like we talked about this morning, up to $1,400,000,000 So going into next year, I think we’re going to have as high as coverage we’ve had in many years.

Paul Treiber, Analyst, RBC Capital Markets: And secondly, just on Nuclear, seeing really strong growth in that segment. How should we think about the size of Nuclear in terms of quarterly revenue? And then just given that the bookings in the quarter, what’s the typical duration of nuclear bookings and how quickly do they convert to revenue?

Patrick Houston, Chief Financial Officer, Caliant Group: Good question. I mean, nuclear overall for the year, should be well past $30,000,000 this year in that business and that’s a huge increase. Know, if you think when we started this journey four or five years ago, that was a couple million dollar business. So huge growth from that team and I think there’s still a lot of upside, lots of investment in Ontario and across Canada really on nuclear. Strong signings this quarter, we had almost 20,000,000 in signings in nuclear.

Think usually those are, think of it, Paul, probably about a year to deliver that. So I think these signings sets us up for another strong year next year.

Paul Treiber, Analyst, RBC Capital Markets: And then just lastly, just on the comment about looking at non core assets, and without getting into specifics, but at the Investor you laid out good returns on acquisitions over time. So what would you define at a high level in terms of non core, non performing assets among acquisitions you’ve made or even organic businesses?

Kevin Ford, Chief Executive Officer, Caliant Group: Yeah, I think right now where we see the opportunity from our viewpoint right now with defence, as we’ve talked about defence based healthcare as being primary focus, again, that we feel there are segments that have tailwinds, there’s spending, as well as the ability to sell our mission critical solutions capability into them both domestically and globally. So those clearly are going to take focus. We also have emerging markets that we’re looking at things in energy for example. You know look at our nuclear business. It was a couple weeks ago I was crawling around the nuclear reactor, meeting with their executive team on the value that we’re providing.

So for us right now we want to capitalize on what I think are definitely you know mid to longer term tailwinds in areas of space defense and health. We also want to continue to position the company for long term growth in emerging markets that we believe will value and consume mission critical solutions. So that’s areas such as energy. So this is all areas and non core for me Paul will be something we’re going to continue to assess. It doesn’t necessarily mean non core is something that we would you know shut down.

I think it’s more a matter of areas that we just want to make sure that our investment is pushed into those growth assets. That’s the focus right now. Make sure that we get those right And with those being right, you know, the trajectory of accounting remains very strong.

Paul Treiber, Analyst, RBC Capital Markets: Alright. Thanks. That’s helpful. I’ll pass on.

Victor, Conference Call Operator: One moment for our next question. Our next question comes from the line of Jesse Pytlak from Cormark Securities. Your line is open.

Patrick Houston, Chief Financial Officer, Caliant Group: Hey, good morning. Just on the $1,000,000,000 pipeline in Europe for defense opportunities, can you just speak to the composition of that pipeline? Is it a few large potential deals or a larger collection of smaller opportunities?

Kevin Ford, Chief Executive Officer, Caliant Group: Yeah, great question. It really is, it’s exciting actually because it’s a combination of when I look at the portfolio in Europe right now and as I mentioned, you know, we’ve hired Major General, Roc Peltier. He’s come on board now. I had a briefing from him recently on the opportunity, the strong team we have in Europe already. We’ve decided that managing director.

So number one, the pipeline is right across Europe and The UK. It includes NATO, European countries and UK opportunity based opportunities. Number two is the funnel is on a combination of I would say transformational opportunities for Calion with regard to larger opportunities, long term programs and a combination of smaller opportunities that establish our presence and allow us to continue to grow in that region. So it’s exciting, it’s good to see it, it’s validated. You tie that in with the Canadian opportunity that we think will emerge as the government gets organized now around its 2% of GDP.

Let’s be clear, you know, defence will be a focus for Italian moving forward and these are validated pipeline opportunities that our team is now maniacally focused ensuring we have our highest bid to go after and close.

Patrick Houston, Chief Financial Officer, Caliant Group: That’s helpful. And then maybe just moving over to your comments you made on the opportunities that you’re seeing in space. Can you just speak to what maybe service or product areas you’re seeing the majority of that activity in?

Kevin Ford, Chief Executive Officer, Caliant Group: Yeah, great question. You know, from my viewpoint and probably one of the areas that we’ve to continue to work from an accounting perspective, to be honest, on our brand is we are a center of excellence in space for everything ground based to the sky. So you know we talk about our strategy of wanting to own the ground to the sky. Our ground infrastructure, our software solutions, our in orbit solutions, our communication products are all about connecting the ground to the sky. We’ve been doing this for over fifty years and I don’t think we’re recognized enough globally as a center of excellence.

That’s something we’re working on with Valerie and our team there, our great space team. So number one, we want to own the ground to the sky. We will not build satellites, we’re not a satellite operator, but we will own the integration and the solutions required for those networks to work whether it’s LEO, MEO, GEO. We are well advanced now in talking to many companies about whether it’s our teleports, whether it’s our software solutions, our ground based antennas, we are uniquely positioned to grow in that marketplace as a global leader in ground based solutions. So that’s our role and frankly we stand by.

We’re going to get more aggressive on this with our tone as well as our market presence in that. So very exciting times there as well.

Patrick Houston, Chief Financial Officer, Caliant Group: That’s all for me. I’ll pass the line.

Kevin Ford, Chief Executive Officer, Caliant Group: Thank you. Thanks for the questions.

Victor, Conference Call Operator: Thank you. As a reminder that’s star one one for questions star one one. Our next question will come from the line of Benoit Poirier from Desjardins. Your line is open.

Benoit Poirier, Analyst, Desjardins: Yes. Good morning, everyone. First question, in terms of revenue growth, you broke down the revenue growth between ITCS and the rest of the business, so minus 25% versus plus 7%. So if you would look at organic growth, could you maybe break down the same? I’m just trying to see what would be the implied organic growth excluding ITCS.

So I don’t know if you can share those numbers.

Patrick Houston, Chief Financial Officer, Caliant Group: Yeah, think for non ITCS it was slightly positive. I think it was one or 2% for organic. I think that’ll should increase here in a second.

Benoit Poirier, Analyst, Desjardins: Perfect. In terms of SG and A, when you mentioned the potential to optimize your cost structure, so you mentioned some color about the platform conversion, but when I look at the SG and A, it was mostly up from $40,000,000 to $45,000,000 So could you quantify what’s kind of the potential to reduce SG and A going forward? And also when we look inside the corporate costs, what we call shared services, also reached CHF 11,600,000.0. So I was just wondering whether there was something non recurring or is 11,600,000.0 a sustainable number going forward?

Patrick Houston, Chief Financial Officer, Caliant Group: Good question. Mentioned, I think in my remarks that we did some reductions. So we are looking at everything like I think when you’re in these moments, like just on us to go through all of our expenses, make sure we’re investing in the deal drive growth. We’ve made some adjustments. So I think that’ll help kind of get the margin back up.

Kevin Ford, Chief Executive Officer, Caliant Group: It’s Kevin. We continue to invest as well with our Mike Mulder and his team on process efficiencies, technology, leveraging AI even in our own internal processes. So we continue to focus on scaling efficiency on corporate operations. So I just want to reaffirm that that it’s not business as usual. It’s nice sense of word.

The team is both on cost reductions but also cost efficiencies is where we continue to focus.

Benoit Poirier, Analyst, Desjardins: Okay. And with respect to the acquisition of AMS, could you talk maybe about the historical growth profile at AMS and maybe more detail about the cross selling opportunities? You made a few comments in the opening remarks, but I was curious to maybe get a little bit more granularity on those cross selling opportunities.

Patrick Houston, Chief Financial Officer, Caliant Group: Yes, think there’s certainly consistent organic growth. I mean, the big step functions has been when they’ve been able to expand into new territories and secure those long term contracts. I think that’s really what’s driven the growth. And I think going forward, that’s going to be similar. Like, we’re going to try to expand, get more footprint.

And that should be significant step functions in the growth.

Kevin Ford, Chief Executive Officer, Caliant Group: Yeah and I think Benoit, it’s Kevin. This is an exciting acquisition for us. Number one, we haven’t done acquisition in twelve months and I just want to reiterate I think that demonstrates our disciplined M and A engine. Know we’ve been looking at a lot of different opportunities and you know closing on this one met all of our criteria as far as not just the financial metrics but strategic metrics. So we’re excited to have AMS as part of the Calion family.

If anyone’s listening for MS welcome, we’ll have our welcome in the next couple of days here. But when you think about the discussions that are happening in this country right now about the North, we saw this as a fantastic opportunity for us to strengthen our presence for our health business for sure because we have been working in that area but this will strengthen it. Our relationship with indigenous communities is strengthened and we’re excited about that. And now as I talk about our you know discussions with government in areas such as North and NORAD modernization and defence, how better positioned are we now as Gowning to talk about our ability to support the growth in the North for whatever the purpose may be. So I think it’s exciting, it’s not just for a health business, it’s for our health, it’s for our defence footprint and in a value Canadian mindset, I think this is just so well timed for us to strengthen that message to the current government.

Benoit Poirier, Analyst, Desjardins: Okay, in terms of capital allocation, you mentioned in the presentation that you want to reassess priorities. Obviously you’ve been active on buyback, M and A, So any thoughts about potential scenarios that you’re looking at right now?

Patrick Houston, Chief Financial Officer, Caliant Group: No, think for the balance of the year, think it’s going be both of those Benoit. So the M and A, if we still have lots in the pipeline, so we’re still working to close our next deal now that we’ve got AMS closed. And I mentioned the buyback, we will be accelerating that. We plan on buying up to 6% of the shares here this year. And then we’ll reassess going into the next year.

Benoit Poirier, Analyst, Desjardins: Okay. And given today’s announcement, do you still plan on expanding in The U. S. As announced earlier? And I understand the guidance is when drawn, but any thoughts about whether the fiscal year twenty twenty six targets mentioned earlier at the Investor Day, so $1,000,000,000 in revenue and $125,000,000 in EBITDA still achievable?

Patrick Houston, Chief Financial Officer, Caliant Group: Yes, on The U. S, we’re still going ahead. I think there’s still some we’ve got some really interesting products that have some interesting opportunities in The US that we’re still going at specifically in our space segment. So I think those are still opportunities that we’re pursuing.

Kevin Ford, Chief Executive Officer, Caliant Group: Yeah, think from my viewpoint Benoit, the US you know clearly right now if you look at our you know geographic footprint between Canada, Europe and US you know we’re seeing obviously very strong opportunities in Canada, very strong options in Europe as I mentioned, but also very strong opportunities in The US and I think we’re all just trying to work through the current macro environment there and understanding how a Canadian company can compete in that market. That being said, our team in The US continues to find and close exciting opportunities whether it’s our teleports based in Hawaii in Guam, our space discussions, our positioning in the defense marketplace and then our commercial focus now as we re pivot into more of that Microsoft cyber capability. We still believe The US is a good long term market for Kalyan. We obviously are working through what many companies are working through right now just on the macro turbulence that may be in that market but frankly our team is still committed and we still see opportunities there. So we will invest, we will continue to invest but we want to make sure in the short term though that we’re really operationally focused on those areas that have the short term you know tailwinds that we’ve talked about in defense space in those areas.

So absolutely we’ll continue to be in The US, we’ll continue to focus in The US and we’ll make sure that we’re prioritizing investments in all our geographies based on the opportunity funnel.

Benoit Poirier, Analyst, Desjardins: Okay thank you very much for the time.

Kevin Ford, Chief Executive Officer, Caliant Group: Thanks Benoit appreciate that.

Victor, Conference Call Operator: Thank you. I’m not showing any further questions in the queue. I would now like to turn it back over Kevin for closing remarks.

Kevin Ford, Chief Executive Officer, Caliant Group: Thank you, Victor. I appreciate you facilitating today’s call and I want to thank everyone for attending. We look forward to providing an update in the next quarterly call. You have the CEO of that area that’s excited, obviously a tough quarter, but in the same construct very excited about the position we have going forward, very excited about our footprint, very excited about our foundation and I know that I speak on behalf of 5,000 people that are committed to continue to take this company to new heights. So looking forward to giving you that update next quarter and appreciate the time today.

And with that Victor, we can close the call.

Victor, Conference Call Operator: Thank you for participation in today’s conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

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