Good day, ladies and gentlemen, and welcome to your Calian Third Quarter 2021 Conference Call. At this time, it is my pleasure to turn the floor over to your host, Kevin Ford, CEO of Callian Group. Sir, the floor is yours.
Questions. Thank you, Taryn, and good morning, everyone. With me this morning is Patrick Houston, our CFO, and we'd like to welcome you to the Calyen Third Quarter 2020 conference call. Before we start, please note that certain information discussed today is forward looking and subject to important risks questions and uncertainties. The results predicted in these statements may be materially different from the actual results.
It is my pleasure to announce another very strong quarter for Calium. Calium's 3rd quarter consolidated revenue was 136,000,000 an increase of 29% from the same period last year and our 2nd highest quarterly revenue achieved in company history. This puts us well on the way to eclipse $500,000,000 in revenue this year with 1 quarter remaining. This continued revenue growth coming off a record in 2020 demonstrates the company's continued strength in a quickly evolving environment Beyond our strong revenue performance, we were able to mark new milestones across several key indicators. With gross margins crossing 25% and And adjusted EBITDA of $14,900,000 this was a record high quarter.
Our adjusted net profit almost doubled, up 98% from the same quarter a year earlier. These significant improvements were the result of a multitude of initiatives we have been working on for many quarters and the results of the hard work of our dedicated team. COVID-nineteen has raised both challenges and opportunities in how we operate our business. We have had to adapt while meeting COVID-nineteen restrictions, maintaining our manufacturing capabilities, traveling to customer sites to deploy satellite ground systems, operating our healthcare business and supporting customers virtually, all while ensuring the safety of our employees. Our financial performance and the positive feedback we get from our customers is a clear sign that the team is rising to the challenge.
I'd like to share an update on each of our segments. All 4 of our segments delivered revenue growth ranging from 16% to question. Our diversified approach means that the strength of one segment can offset the performance of another. In this particular quarter, all four segments posted impressive revenue growth. Our Learning and IT Cyber Groups both Posted particularly impressive growth due to continued expansion of their footprints and recent acquisitions.
Let's take a look at each segment. Unsurprisingly, demand for high quality healthcare services has increased and customers are reaching out to us on short notice. Our broad expertise has allowed us to respond quickly to our customers' evolving needs, whether it be screening, vaccinations, procurement of healthcare products, primary care or patient support programs. In Q3, Calian Nurses vaccinated over 50,000 Canadians at 19 pop up clinics, all of which use the Calum Patient Support Program Management Software. Prime Minister Trudeau paid a virtual visit to one of these clinics and had the opportunity to thank Calian nurses for their contributions.
As well, Calyen managed 7 rapid testing initiatives across Canada, including for the government of Alberta and Integrated Health Network. Customer retention based on excellent customer delivery is a key strategic focus for Calient and we're pleased to be a partner to our customers to help them through this challenging time. The Advanced Technology segment demonstrated the revenue growth of 22% when compared to the same period last year. This revenue increase was supported by 2 recent acquisitions of Talisman and Intertronic. Early returns on both of these acquisitions looks promising.
And in addition, Advanced Technologies has demonstrated growth in AgTech product sales and continued expansion in growth in European ground system products Supported by our SaaS service acquisition. Notably, the company made a significant expansion in the automotive sector this quarter, Having signed a supply agreement with electric vehicle manufacturer to provide 2 products for their upcoming vehicle range. We adapted and refined our AccuTenna technology for the specific project, resulting in a patented antenna that meets exacting requirements for phase based positioning. This win exemplifies our strategic focus on customer diversification and service line innovation. The IT and Cyber Solutions segment saw revenue growth of 60% compared to the same period last year.
The acquisition of Apesoft and iSecurity has resulted in rapid revenue and margin expansion. ISecurity, a leader in cybersecurity, Saw the addition of 24 new customers to the portfolio, including the City of Toronto and a Tier 1 Canadian Commercial Bank. The IT and Cyber Solutions team also supported the COVID-nineteen response by running instant response for hospitals and supported keeping hospital systems operational. I'm also proud to share that DataSoft was recognized by Microsoft Canada as the winner of the 2021 Healthcare Impact Award, The 3rd consecutive year that DataSoft has been recognized at the annual Microsoft Canada Impact Award ceremony. Through DataSoft, We launched the Corolla Virtual Care solution in 5 healthcare networks, serving more than 5,000,000 people in BC, Ontario and New Brunswick.
Our Learning segment had the most significant revenue growth at 63% compared to the same period last year. Organic growth comes largely from existing customers, where in the prior year, the Learning segment was impacted significantly With government imposed data orders causing shutdowns at customer sites. The segment had to adapt over the last 12 months to deliver services remotely to customers question. As part of our COVID-nineteen efforts, the learning team provided interim after action reports for COVID-nineteen emergency management planning to public sector organizations, including the province of New Brunswick and the City of Nanaimo. Questions.
Learning also continues to expand into Europe with projects for the French Ministry of Defense and NATO Rapid Reaction Forces, The German Ministry of Defense and the NATO Security Force Assistance Center of Excellence. Our growing European presence and network represents customer diversification, a key strategic focus and brings opportunities from NATO member countries. I will now ask Patrick to review the quarterly numbers. Over to you, Patrick.
Thank you, Kevin. Our objective of profitable growth was evident this quarter. The company posted significant growth across the board in revenue, gross margins and EBITDA. The acquisition growth has been led by strong start from We've got an excellent quarter and continue to have impressive momentum. Gross margins have continued to increase quarter over quarter.
This has been the result of our investments in M and A and R and D and being able to deliver differentiated products and services that demand higher prices. Contract signings continue to be strong. We've been able to sign as much work as we deliver for several quarters, which our backlog at over $1,300,000,000 Moving on to our key performance indicators. Revenue grew by 29% when compared to the same period last year. Our gross margin percentage at an all time high sits at 25%.
EBITDA made a significant jump, up 66% from the same period last year. We've seen efficiencies in our models for accelerated growth, leading to EBITDA margins of 11% this quarter. Adjusted net income is up 98% from the same time last year. Our balance sheet continues to be a strength. Our cash and debt facility availability is over $130,000,000 at the end of the quarter, putting us in a strong position to maintain our investment and growth posture.
I'll now pass it over to Kevin for his final comments.
Thanks, Patrick. Questions. It is my pleasure to speak to you this morning as I get to represent a team of almost 5,000 amazing employees who have been living our strategy of profitable growth and high customer satisfaction. Our diversity has shown strength this year and will continue to serve us well in each of our 4 segments. Based on strong results this year to date and our continued momentum, we revised our guidance upwards for fiscal year 2021.
We expect revenues in the range of $500,000,000 to $525,000,000 adjusted EBITDA in the range of $49,000,000 $52,500,000 and adjusted net income in the range of $34,900,000 to $38,200,000 Please see our press release and MD and A for detailed reconciliation of our guidance. In closing, I'd like to highlight the growth that this represents for Calian. Our full year guidance represents growth of up to 21% in revenue, up to 43% growth in adjusted EBITDA questions and up to 62% growth in adjusted net income. So with that Karen, I'd like to now open the call for questions.
We'll take our first question from Amr Azat with Echelon Partners. Please go ahead.
Kevin, Patrick, good morning and congrats on a very strong quarter.
Good morning, Amr.
I've got a couple of questions. First on the Health segment's gross margins were going from record to record. I'm just wondering what is driving that gross margin performance. Then maybe some high level thoughts on how we should expect that to evolve in the next year or 2?
Yes. I mean, the teams are performing Pretty exceptionally, we've been doing most of this growth with the existing team we have. So in one way, we're running a bit hot on the team, but that show is the dedication From our health team to just step up and meet the demand. So I think things will normalize over time as we adjust the capacity. But I think right now it's just a A bit of brute force from our team just delivering.
Okay. So it's fair to assume that some of that is margins on the COVID question.
Yes, I think we just we obviously have quite a large team that manages the delivery across the over 60 customers we have in health. And we've really just relied on that team to as these new customers have come on. So I think we'll need to adjust that capacity over time. But for right now, they're just
question. Great. Okay. Switching gears to your second piston, I guess, like advanced tech seems to be holding up well despite continued COVID impact. Last quarter, I think it was you, Patrick, you mentioned you're hopeful the mobile wireless product would start Pickup
by year
end. Just wondering how your view has evolved since then maybe you could also give us an update on the ground system Project, I think you're into late innings of that?
Yes. The VanSec did have a strong quarter, so credit to that team. The mobile Product hasn't turned back on yet. So we're still hopeful that that's going to be a contributor for us next year. That's probably the likely timeframe right now that it would start.
What we've seen is some of the other elements that we have Talisman, electronics really starting to step up and contribute to the existing strength of advanced question. On the big ground system project, we're still going despite all of the challenges. We were about 75% to 80% done the sites questions. And I think they're scheduled to complete the sites by the end of the calendar year. So I think the team will be focused on finishing back here in the next few months.
Okay. A bit minor, but on MSEK, I think the contingent consideration is down, you're not paying the 1st year earn outs. Can you speak to that?
Yes. So we did reverse that provision. We did see some slowdown. A lot of their business was reliant on in person events to do the emission securities, whether it be at banks or military. So we've seen a slowdown a bit on that this year.
They're starting to see a Back up, but I think it's too late to make the 1st year. So we reversed that, but we're expecting still them to make the 2nd year.
Fantastic. Maybe last one. On the guidance, the math suggests Q4 revenue range of 109 to 134, My math is correct, which is quite wide. Just wondering what is driving that to be wide sort of range or implied range for Q4? Is that like project specific or?
Not really. I mean, I would to be honest, I would advise you to use the middle and I think that will Like we come in close to that, which we generally try to do on our guidance. So I think that's a reasonable expectation. Mine is kind of So unexpected delays, but I wouldn't read more into that than that.
Okay. Awesome. Congrats again on a fantastic quarter. I'll press the link.
Great. Thanks, Adam.
We'll take our next question from Nick Agostino with Laurentian Bank Securities. Please go ahead, sir.
Good morning, Kevin and Patrick. This is Suman Grana on behalf of Nick Agostino. First of all, congratulations on the great quarter. My first question is on the advanced technology. So we saw this quarter how within that segment the company is making great strides By expanding its TAM and moving into new verticals, is there any visibility into what else is doing in the question.
Pipeline now and what other opportunities the company sees there?
Yes, great question. We're really excited about Our advanced technologies, because in our advanced technologies, frankly, we have a bunch of capability, whether it's in ground systems, whether it's now But their Talisman acquisition on GNSS antennas for things like electric vehicles, we have a nuclear group there that's just Continues to win business in areas such as small modular reactors. So our product business continues to be strong as well as our software based business continues to be strong. So what we expect with Advanced Technologies is we'll move past the ground system projects that Patrick mentioned. We're getting to near the end.
We have great pipeline of opportunity across each of the segments within Advanced Technologies, whether it's ground systems, whether nuclear, whether it's our software business, our product business, our Talisman business, our Entertronic business and actually sat service in Germany continues to actually punch way above question. So I talked to you about Calian having a 4 piston engine, our advanced technology group is probably under path as 18 to 20 different pistons running in any given day. And every one of them is doing really well and I'm excited about all the things I'm seeing there both on the innovation of our products, but as well the customer diversification that we're getting As we continue to focus on market expansion.
Great. And then my next question is on the Health segment. So we saw Quite some strong interest in Canada for patient support services in Q3. So any update on how the pickup and interest was in Europe In the quarter?
Yes. Europe was still a pretty small contributor from a dollars per second. We're just getting going there. We're launching in we launched in programs in the U. S.
I think we're just getting going. But hopefully by next year, it should be a solid contributor for them. And I think it's a good question. Entry for us into those markets and now it's how do we expand into other customers in those markets to support already our strong Canadian footprint.
Okay. And my next question is on the bookings. So I believe this quarter, the company signed contracts It's worth around $113,000,000 And by using that figure, I believe the book to bill comes at approximately 0.8x. So Is there any reason why the figure was below the normally the one time historical range? Is there any seasonality involved there?
No, I mean, we're if I look on this year, revenue year to date $390,000,000 I think we signed about 3 $80,000,000 of new contracts. So we're trying to replenish it as quickly as we use it, which historically we hadn't done before we would See the backlog kind of come down over time until we would win larger contracts. But I think with so many more avenues we have now, we're seeing that backlog just I think that's a new strength for us and that we're able to do that consistently.
Okay. That makes sense. And my last question is on the ERP implementation. So I believe it's been going on for a while, At least for the last 3 or 4 years. Is there any update on how that's going on and whether it's set to finish on time?
Questions. It's going well. It's definitely been a key program for us as we look at Our go forward posture, the goal there is obviously to have all of Kallian integrated with regard to our applications, finance, HR, manufacturing. So it's going well. Our CEO, Jerry Johnson and our team is working with our business units to implement.
We've already upgraded The legacy County and East version already had run on SAP. So it's going well. The team continues to make good progress. We're expecting probably by Q1 latest Q2 next year will be going live. So everything is going well, but we are making sure that we do this in a fashion that ensures we have no impact on our operations.
So we are taking our time to make sure we get it right. So it's going very well and we expect by this time next year we'll be up and running on for the first time in the company's history United application for majority of our business.
Okay, great. That's all from my end. Thank you. And again, congrats on a great questions.
Thank you. Appreciate the questions.
We'll take our next question from Benoit Poirier with Desjardins. Please go ahead.
Yes. Good morning, Kevin and Patrick, and congratulations for the strong quarter.
Thanks, Benoit. Yes.
Yes. Just to come back on the Health segment, this was another strong contributor to the performance. I was wondering whether it would be fair to expect a year over year revenue growth decline in Q4 given the tougher year over year conversion. I was just wondering if there's anything that Might be less sustainable given the impact of the pandemic. What is kind of sustainable going forward, especially for the Health segment?
On quarter to quarter for Q4, if you remember last year in Q4, we had that deal with FMC where we were supplying mobile hospitals, which The big quarter for Health. So I think minus that, I think Q4 this year, the momentum has been stopped for Health and I think they'll have another strong quarter. Going into next year, Kevin.
Yes. From my viewpoint, it's been interesting as I just continue to be amazed by healthcare question. Going into next year is the continued momentum. We're not sure obviously, I think anyone is watching COVID now. We're talking about 4th ways, they're talking about potential questions.
So we still believe that there's going to be COVID-nineteen business going into next year. And we're also very excited about the relationships we've built with new healthcare customers questions. Through COVID response and Gordon and his team have been new customers are literally calling us with a couple of days notice to get support. So I think that Ability for us to react, respond and deliver effectively is just increasing our healthcare brand right across the country. So I expect that that's going to pay dividends in the sense of new customers and other mandates post COVID.
So we're expecting between the COVID piece, the continued growth of our question. Patient support programs, contract research organization capability, as well as just increased demand on our core legacy products and projects. We're expecting Gord and the team to keep up momentum for sure going into next year.
Okay. And you recently announced a new contract to supply antennas for fleet of electric consumer and delivery vehicles. The will be of this venture?
Yes. The deliveries start in the fall. So really, we've been designing into So as they start up production, our demand will fluctuate with their end production, but it should be strong. It should be somewhere between $5,000,000 to $10,000,000 next year from a revenue opportunity for us and continue to increase as they scale up their production. So it's exciting space to be in.
And obviously, proud of the team for Abil to develop a product and get acceptance in that market, which is a very Stringent Mark in terms of the demand they have on their suppliers.
Okay. And you recently announced the appointment of Mr. Jira For the IT segment and you made some interesting comments about the expertise with SaaS solution and recurring revenue. So Could you talk about the strategy on that front for the IT segment? And are there any opportunities to leverage his expertise throughout other
segments. Yes, great question. And before I specifically answer that, I want to take that Opportunity and thanks for the question Benoit to thank Sandra Cote for her leadership. Sandra and I have known each other for years And came to Kallion when I asked her to help me transform my IT business and she's done exactly that. And if you look at it, her legacy of doubling the business, So improved margins, the APOS Optiye Security acquisition, we're going to wish her well, but we'll have a couple of months of transition with Sasha.
So number 1, I want Acknowledged and thanks, Andrew, for incredible leadership at Calyen. Number 2 is, we're excited to have Sasha come on board. If you do see his background with regards to cloud, SaaS based capability, the last company is coming from. And you think about that pivot, Benoit, that I've been talking about that innovative global growth company, I think we're about halfway in that pivot. Sasha is going to bring great DNA, great experience for us to look at our DataSoft acquisition specifically questions.
Both in the context of our cloud offerings there, our health tech offerings, as well as our high security team to look at continue how to productize, how to go to market, how to Maybe change our revenue models, and also look at the customer diversification, both domestically and globally. So we're really excited to have Sash on board, where he's actually been Sitting through our board meetings and listen through today as we update our strategy. So looking forward to getting his contribution as well as a successful transition with Sandro over the next few months.
Okay. That's great. And last one for me, just in terms of M and A, it seems that there is more competition in the market for the assets, including Competition from private equity firms. So I was just curious to know whether valuation Multiple valuation has evolved. And if you could comment about the pipeline and whether We should expect you to maybe see acceleration of M and A in the later part of fiscal 2021 or fiscal 2022 given your strong balance sheet.
Yes. So right now, coming out of a year where we did 7 acquisitions in just over 12 months, Clearly, number one focus is on integration. We deploy quite a bit of capital in our M and A strategy, which is all part of our Imagine 2023 goals. We've got some amazing companies, amazing talent in Cali and through those acquisitions. So job number 1 is to ensure we continue to integrate what we've done successfully.
As far as the pipeline, we do see opportunities in each of our segments. We expect there's going to be a combination of maybe Smaller tuck arounders with regard to strategic capability that we need for our strategic plan. And also we continue to look for larger acquisitions as we Continue to grow Calian coming into a $500,000,000 company now. Clearly, you got to continue to assess the right level and size of acquisition. So to your point, Ben, while we're I'm very confident with regard to our ability to continue with the M and A.
We definitely have the balance sheet to do that. But if you look at our last Year and a bit where on average we're in that 5.5 to 6 times multiples on EBITDA. Even though we do See increased valuation expectations. We believe being patient, finding the right companies that will value Calian in the context of our culture People that are looking for amazing home for their staff and longevity, we are still doing very well even in auction type environments Where people recognize the strength of being part of the Calian family. So from my viewpoint, those are the acquisitions we're going to continue to seek out.
We're not going to get into bidding wars or try to overpay for something. We will continue to make sure that we follow our playbook and working with our board and our management team Continue hopefully to deploy capital in a way that continues our growth framework, posture and goals. So I think we're going to keep going here Benoit, but it won't be just because we're doing it just to grow, we're going to do it because it's the right acquisition.
Okay, perfect. And maybe very quick one for you, Patrick. Just in terms of working capital release related to the large ground system contract. Would you maybe give an update about the opportunity to release some working capital and maybe the timing on that? Thanks.
Yes. We didn't make much progress this quarter. It's still around $60,000,000 right now on the balance sheet, and And we're hoping to see some unwinding of that potentially in Q4 and then certainly in Q1 for sure.
Okay, perfect. Thank you very much for the time.
Questions. Thanks, Benoit. Thanks, Benoit.
We'll take our next question from Jesse Pytlak with Cormark Securities. Please go ahead.
Hey, good morning. Obviously, the Health segment has been a big beneficiary from all the COVID work and understanding that things are moving quickly. But as some of this were potentially ramps down in coming quarters, how should we think about the evolution of the margin profile?
Well, I think right now the clearly, as you said, Jesse, the COVID Short term demand, even though I think we all feel it hasn't been that short term, it's been over a year and a bit now, we've all been kind of working through this. Clearly, that's been a major push here. But when I look at the tailwinds on health, COVID-nineteen has been one for sure. But when I look at again, our demand for our legacy contracts, whether it's defense question. It continues to be very strong.
Our continued growth with the Allo Allphase acquisition and patient support programs, contract research organizations. And as I mentioned, now the customer diversification that we've just Gordon and the team have had to deliver with regard to responding to COVID response. So I'm still very optimistic question. Going forward, what we're going to continue to do is look at our core services. As a reminder, I think The biggest assets we've got is the largest national network of medical practitioners in Canada.
So as you think about us growing from that base, Layering on more health technology now with the home application with healthcare, as well as our Davosoft acquisition that brings us virtual care, Healthcare integration capabilities through our crawler platform. The merging of that national network of medical practitioners combined with now our product stack that really I think We can go head to head with any kind of healthcare pure play. I'm pretty excited about the potential because that's the differentiation for us. We not only bring the Technology, we have that network nationally and as we're starting to see now, starting to deploy that globally. So I think the combination of those two things are going to continue to question.
Exciting for our healthcare business and our healthcare brand is only continuing to expand and grow both in domestic and global markets.
Questions. Thanks. That's helpful. And then just maybe a quick one for Patrick. Just there was a bit of a tick up in corporate costs question.
Sequentially, was there anything one time in there or should we kind of think about this as being maybe a new normalized level?
No, I think it's just more investment. Obviously, we're investing across lots of different categories, whether it be our corporate We're seeing still lots of opportunity to the segments to grow. So we're taking it as an opportunity now to make sure we've got the right people there to question. Keep this kind of momentum going year over year. So I think it's just kind of more investments and then there was any particular one time item.
Questions. Yes. And Patrick's point, Jesse, the continued growth, growing from a $200,000,000 company to a $500,000,000 One thing going from $500,000,000 to $1,000,000,000 which is definitely our goal. We're going to continue to invest as Patrick said in areas that we believe that we need capacity whether it's some marketing go to market capability. We continue to play defense with our IT group, making sure that we're upgrading our cyber infrastructure, our ERP implementation, our tools, our collaboration tools.
So I think you're going to see a balance of growth and investment in our corporate costs just to offset the reality that we are growing and we're going to need strategic investments in certain pieces
And there appear to be no further questions at this time.
Okay. Well, thanks again everyone for attending this morning. Again, congratulations to my team, to the team at Calian for all the amazing crazy things you continue to do both in the context of delivering results, but more importantly, The work that we're doing for our customers, I couldn't be prouder as CEO of this company. And as a Canadian company as well You can see our growth posture on the global stage, just so exciting at this time. So with that, Patrick and I look forward to Joining you in November to talk about our full year results and our thoughts about our fiscal 2022.
So appreciate your time today. And with that, Terren, we can close the call.