Good day, ladies and gentlemen, and welcome to Calian's first quarter 2020 financial results conference call. As a reminder, this call is being recorded. It is now my pleasure to turn the conference over to Mr. Kevin Ford, Chief Executive Officer. Sir, please begin.
Thank you, Chelsea. Good afternoon, ladies and gentlemen. With me today is Patrick Houston, our CFO, and we'd like to welcome you to Calian's first quarter 2020 conference call. I'm very happy with our first quarter results. We again posted a quarterly revenue record of CAD 99.2 million, up from Q4's quarterly record of CAD 90.9 million. While posting our sixth consecutive quarter of record revenue growth, we also reported our 73rd consecutive profitable quarter. The results reflect a continued focus on profitable growth as we successfully execute our organic and acquisitive growth strategy. I once again would like to thank our dedicated team at Calian, all of our staff, employees, for their efforts. It is very much appreciated. I'll now ask Patrick to review the quarterly numbers, and then I'll provide some comments at the end. Over to you, Patrick.
Thank you, Kevin. It's exciting to again post record quarterly results reflecting our continued revenue and earnings growth. First quarter revenue gained 24% year-over-year, while EBITDA growth was 47%. The stability of our diversified business was evident in the quarter as Advanced Technologies, Health, and IT posted solid revenue and EBITDA growth compared to the prior year's first quarter. We continue to believe that Calian's diversified, profitable growth engine is one of the company's unique strengths. Consolidated gross margins in the quarter were 20.4%, compared to 21% in the Q1 of the previous year. The slight decrease was due to project mix in the quarter. Our focus continues to be the introduction of existing and new products and services into new markets in order to increase our margins. Operating expenses in the quarter were CAD 11.8 million.
This compares to CAD 11.2 million in the same quarter of the previous year, a 6% increase. We continue to invest in capabilities to help our growth agenda. This includes augmenting our sales and marketing capabilities, building capacity in our innovation agenda, and strengthening business support to integrate recent acquisitions. Adjusted EBITDA for the quarter was CAD 8.4 million, or CAD 1 per share basic and CAD 1.03 per share diluted. This increased from CAD 5.7 million or CAD 0.73 per share in the same quarter of the previous year. Adjusted EBITDA in Q1 included a favorable impact of CAD 0.7 million from the adoption of IFRS 16. You can see our reconciliation in the financial statements in MD&A explaining the change in the accounting. Net profit for the first quarter was CAD 4.3 million or CAD 0.55 per share.
This was up from CAD 3.4 million, or CAD 0.43 per share in the same period of the prior year. Working capital in the quarter increased by CAD 21 million. This was the result of growth of our business and progress made in our large ground system project. Working capital demand on the large ground system project in the quarter was approximately CAD 16 million. We expect an additional CAD 6 million of working capital demand in Q2 as we reach the peak demand for that project. Our cash balance ended at approximately CAD 14 million, and subsequent to quarter end, we expanded our credit facility with RBC from CAD 40 million- CAD 60 million.
Finally, please note 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. I'll now turn it back over to Kevin for his comments.
Thank you, Patrick. I just wanted to echo Patrick's comments and again, talk about the fact I was pleased with the results in the quarter. With Advanced Technologies posting very positive organic revenue growth, 68% from the same period a year earlier. Obviously, strong contributions from our large ground systems project and the new mobile wireless products that I've now gone live with for Tier 1 North American mobile provider. Our Health revenues rising 10% from a year earlier, and demand increased on our clinician services and psychological assessment services. IT similarly posted 9% revenue growth on stronger sales focus for our cybersecurity practice. Learning revenues declined slightly, reflecting generally a pace of demand on our core training contracts and focus on securing new business going forward. Post to Q1 quarter end, on January 31st, we announced the acquisition of health services companies Allphase Clinical Research Services Inc.
Alio Health Services Inc., which is an exciting announcement for our Health segment in support of our growth objectives. The companies serve the pharmaceutical and medical device industry and the broader healthcare sector with clinical trial services, specialty medication support, community care, and other services, all enabled by an innovative healthcare delivery management software application. This acquisition supports all four pillars of our growth framework and specifically helps diversify our customer base into pharmaceuticals, home care, and hospitals, and supports accounting innovation agenda with services enabled by software. Continued investment in R&D, M&A, and our own internal innovation will be critical to our long-term profitable growth and continue to push into global markets. Our recent filing of a shelf prospectus is an important step in providing flexibility as we continue on our growth agenda.
In closing, I'm pleased to see the Calian growth story continue in Q1 following a record performance in fiscal year 2019. We've received very positive feedback regarding our reporting aligned to the four segments which we introduced at the end of our 2019 Q4 and full-year results. The four segments of Advanced Technologies, Health, Learning, and Information Technology are highlighting our focus going forward and have helped simplify the company for our shareholders. Our focus within the segments continues to be on acquisitive and organic growth, innovation and global markets. I look forward to talking to our shareholders and analysts tomorrow about Calian's diverse business and growth objectives achievements at our AGM and Annual Investor Day being held tomorrow, February 6th, at the TMX Broadcast Centre , Toronto, starting at 9:45. If you're available, please attend.
Lastly, the traditional markets in which Calian operates are stable, and management expects organic revenue and earnings growth in most or all of our segments through the successful execution of our growth strategy. However, we must caution that revenues realized are ultimately dependent on the extent and timing of future contract awards, as well as customer utilization of existing contract vehicles. Based on currently available information and our assessment of the marketplace, we expect revenues for fiscal 2020 to be in the range of CAD 380 million-CAD 410 million, EBITDA per share or adjusted EBITDA per share in the range of CAD 4.25-CAD 4.55, and adjusted net profit in the range of CAD 2.50-CAD 2.80 per share. With that, Chelsea, I'd like to now open the call up to questions.
Yes, sir. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question. Our first question will come from Benoit Poirier with Desjardins.
Yeah. Good morning, gentlemen, and congratulations for the strong quarter. I just wanted to start with the guidance. I just wanted to make sure that the increase to the guidance was, sorry, mostly driven by recent acquisition announced on Friday last week.
Yes, we increased revenue guidance by about CAD 15 million at the bottom and top, Jean-Francois. About three-quarters of that was related to the acquisition, about a quarter is just continued pace of our existing business. We've got a strong Q1, we're expecting that to continue throughout the year.
Okay. It's on the revenue line, but also probably on the EBITDA and the adjusted EPS as well.
Yeah, it was similarly down the three kind of moved up together. We're just expecting continued performance of our existing business as well as the impact of the new acquisition.
Okay, perfect. When we talk about these acquisitions, how should we be thinking, Patrick, in terms of amortization of intangibles and also goodwill for those two acquisitions in the future?
Yeah, we just closed the deal last week, we haven't had the opportunity to do the valuation and at the same point, have the auditors go through it. I'll have to defer to the next quarter, and at that point, I can give you some more color. I would expect it to be similar to our prior acquisitions in terms of ratios of intangibles and goodwill as an initial kind of point.
Okay. No, that's good color. Thank you very much. When we look at Advanced Technologies, the growth was very impressive at about 64%, with only about 7% coming from M&A. I was curious if you could talk a little bit about the key driver of this organic growth. I know there's probably a lot that come from the large satellite contract, but I just wanted to have your view on this one.
Two distinct events really. Obviously, progress on our ground system. We said this was going to be the big year for that one. We're seeing good growth. The other one really is the first shipment of our first wireless product. We put a press release out announcing that. We were able to develop this product over the last couple of years. It's being deployed by a Tier 1 mobile carrier in North America. That's really exciting for us as it's our first foray into that space. Again, shows the capability of our Advanced Technologies. That contributed as well to that organic growth in Q1.
Okay. Would it be fair to assume that about 50% came from the ground system and 50% of the organic growth came from mobile carrier, or the mix was a little bit different?
More weighted towards the large ground system, but good first quarter on our mobile space, and I think that one's going to continue to pick up pace throughout the year.
Okay, great. If we look at the Learning side, the backlog remained extremely solid, the revenue growth was a little bit impacted by the slowdown in demand. How should we be thinking about demand or organic growth in the quarters to come for that division?
Right now, what we're trying to do is across each of those 5% organic growth. We're trying to look at that consistently across each of the segments. Learning is right now with our key defense contracts. We'll move up and down in the quarter depending on demand and scheduling and timing of exercises that we run for the military. We're seeing some good push in our emergency management services. Again, finding a little sort of effective, but I think for modeling purposes, keep it in that 3%-5% range, I think is realistic organically as we now focus on how do we move that Learning segment up to double-digit growth. For modeling, I think 3%-5% is a good way to look at it going forward.
Okay, perfect. Thank you very much. Maybe a last one for me. On the IT side, the margin was very strong at 9.9%. I was wondering, what should we expect there going through fiscal 2020? Should we expect a similar margin? Also, I was curious to know if you could provide a little bit more color around the business mix of this segment. Product versus services, please.
We're really pleased with the increase in margin. It's really been pretty conservative effort between the last couple of years of moving that up in our IT group. Very pleased with the progress that Sandra, who's the VP of that group, has really been doing with her team. On some of the product resale, because we don't recognize the full revenue but just the margin, that's helping us increase. Right now, the product sales is still a small portion, but the margins are much higher than our traditional resource-based contracts. We continue to really look to increase that mix over time, I think as we do that, the margins continue. In the short- term, we're hoping to at least hold the margins we've seen in Q1. Again, objective is to continue to increase that in the future.
That's great, Patrick. Thank you very much.
Thank you. Again, that is star one to ask a question. Our next question comes from Deepak Kaushal with Stifel. Deepak, make sure your phone's not muted. Deepak, I think you're on mute. All right, we'll go to the next question we have from Doug Taylor with Canaccord Genuity.
Yeah, thank you. Good evening. The strength in Advanced Technologies and then the recent acquisitions is taking the spotlight off of IntraGrain and SatService a little bit. I wonder if you can provide a little bit of an update on how those two acquisitions are progressing since last quarter and perhaps comment on how they're tracking towards future earn-out targets.
Both just did a review with SatService a few weeks ago and IntraGrain the same. Both are actually doing very well in the context of performance. Both are seeing orders. They're both coming in from the context of growth that we've seen from last year. As far as earn-out targets, we're going to get another quarter where we assess them, Doug, and how we're feeling about that. We're definitely seeing more positive momentum than we did the year before. Despite earn-outs, I am still very confident in those two companies. Both of them have great teams, and both of them are doing great things, and they're all profitable. Earn-outs aside, we'll see how that plays out, and I'll update that next quarter.
Right now, I'm very happy and impressed with what they're both collectively doing, both in the context of new sales and orders, as well as progression on integration with Advanced Technologies group. Still very positive.
Okay. Thank you. The Advanced Technologies and the large ground system build, you provided a lot of color on the working capital impact into Q2. Should we think as Q2, that being consistent with the peak revenue quarter for this particular build? Do you expect to recover any of the working capital you've invested towards the back half of this year, or will that be a fiscal 2021 event? In relation to that, perhaps you can talk about the prospects of filling the backlog for that type of satellite work in behind this large deal.
Sure. The revenue and working capital aren't completely linked as we're doing the revenue on the percentage of completion of the entire project, but we have certain payments and milestones that we're expecting from the customer. That's why they're not completely linked. I think the revenue will be fairly consistent throughout this year. From a working capital, yeah, there'll be another CAD 6 million in Q2. Then likely slide in Q3. Then Q4 is when it starts to unwind. That'll unwind over another 12 months after that and start coming back in. Then on your second question on backfilling, we're working on several requests. There's lots of activity that we're seeing in the ground system business. We've got some fairly nice projects that we'd like to win. We're hoping to secure those in the short- term.
If we're able to do that would contribute to revenue next year, which would help backfill kind of the reduction on this large ground system. We're hoping to hear about those in the next quarter.
Okay. I don't want to steal any more thunder from your event tomorrow. Next quarter. We'll see you tomorrow.
Thanks, Doug.
Thank you. Our next question comes from Jeff Blay with Desjardins.
Yeah, thank you very much. I just wanted to ask two small questions from a modeling standpoint. On the R&D front, you have spent about CAD 3 million-CAD 4 million in the last two years on that R&D level. How should we be thinking for fiscal year 2020?
Yeah. You saw we've broken out R&D for the first time. I think certainly as we spend more on that, people are getting better visibility. I think for the current year, the Q1 run rate will probably continue for the last three quarters. I think that's what you should model in the short- term. I think it accelerates in future years as we start to identify new projects.
Okay, great. Maybe lastly, on the credit facility, you mentioned in your opening remarks that you increased it from CAD 40 million- CAD 60 million. I just wanted to make sure when you look at the increase, would it be fair to assume that Calian is still on the lookout for more M&A deals despite the recent transaction announced last week?
That's correct. From my perspective, as most are aware, we've staffed now a permanent, basically, M&A office internally, whose job is basically to continue to work with companies out there, whether it's in partnering or M&A opportunities. Yeah, the pace of the 10% growth minimum is something I'm very conservative and modest, and look to keep that going, and that'll be both through organic and M&A. We don't want to slow down M&A, for sure. We're also taking our time to make sure we're taking time to integrate the ones we've done, and we're on the lookout for sure. If you think about our segments right now, we've done two in Advanced Technologies over the last year. We've done one in the Health segments. Our cyber acquisition that we did in Information Technology, that's almost two years ago now.
I think there's capacity there to look at other opportunities because of the capacity for the management team to integrate. Our Learning business is also something I'm looking at with priority as we look to bring in more innovation into our learning services practices. Yeah, we don't think we're slowing down, but in the same spirit, we're making sure, more importantly, that these opportunities are good opportunities for Calian longer- term.
That's great. Thank you very much for the call. See you tomorrow.
Thank you.
Thank you. Again, to ask a question, please press star one. All right, speakers, we have no further questions in the queue at this time.
Okay, that's great, Chelsea, I thank for lots of you on the phone tonight. I'm hoping that I'll be able to say hi in person at our Investor Day and updates. I'm excited about getting an opportunity for other people besides Kevin Ford to speak for a change on the company progress. I just want to reiterate to my team, thanks again for a great quarter, and look forward to providing an update for those that are able to attend tomorrow. If anyone would like any further information, obviously, don't hesitate to reach out. With that, Chelsea, we'll close off this call, and I look forward to giving another update officially over the next quarter results in a couple of months. For those attending tomorrow, we'll see you tomorrow.
Thank you. Ladies and gentlemen, this concludes today's teleconference, and you may now disconnect.