Good day, ladies and gentlemen, and welcome to Calyen's Second Quarter Results Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Kevin Ford, Chief Executive Officer. Please go ahead.
Thank you, Paula, and good afternoon, ladies and gentlemen. With me today is Patrick Houston, our CFO and I'm also happy to have joined us this quarter, Patrick Farrell, President of our LCD Systems division. With that to welcome all to Calyxt Q2 2019 conference call. I was very happy with our results this quarter as we demonstrate the impacts of our growth strategy. We again posted Calyxt largest quarter revenues in the company's history, reported solid organic revenue growth and won key contracts with existing customers.
The broader team continues to execute our growth plan innovation and global market opportunities in mind as demonstrated in our recent announcements. First, we announced the acquisition of Genuity based SALT Service, a solid player in the European market for satellite communication systems. Effective April 1st, this is our 1st major international acquisition. That service will support the expansion of our systems engineering division into the European market with turnkey satellite solutions as well as products. The company offers us a geographic footprint in Europe and a talented team to help offer combined products and solutions in the new markets.
The purchase price is approximately €6,500,000 in closing plus 2 additional payments in December 2019 December 2020 based on EBITDA performance. 2nd, in support of our innovation agenda, our Saskatoon Day Systems Engineering division recently announced a new line of carbon fiber antenna products. I'm very excited about these higher performance satellite ground sets and antennas, which are the direct result of several years of R and D work at SED. This type of innovation supports the service line evolution pillar of our growth framework and frankly it is critical to protect our competitors going forward. Now as we go to market with our satellite solutions, we can offer satellite ground systems that are only less expensive and faster to install, but they also offer higher performance and the industry's more commonly used higher frequency ranges.
This is an excellent example of our innovation agenda at work. I'd also like to acknowledge that this is Patrick Houston's first conference call as CFO. We're very happy to have him on board as we tap into his value of experience not only in finance, but also in technology, innovation and global growth. He's also happy that as part of this transition, our former CFO, Jack M. Voce VHA has been able to continue to carry on the full transition on our strategic growth objectives.
And with that, I'd like to ask Patrick now to review the quarterly numbers. Over to you, Patrick. Thank you, Kevin.
I'm happy to report that Talion's profitable growth agenda continued this quarter. For the Q2 of 2019, revenue set a quarterly record of $83,400,000 up 7.8 percent from prior year's $77,000,000 In fact, with today's results, we have now reported record revenues for 3 consecutive quarters. The general business environment in 2019 remains strong for both divisions. With a healthy backlog, strong customer retention and support from our recent acquisitions, we remain on track for a positive year. Strong revenue growth at the BTS division supported Q2 revenue expansion of 14% from the same quarter in the previous year.
This was largely driven by double digit organic growth in our Health business. S and E reported a slower quarter compared to the same period in the prior year due to ramp up of existing ground system projects. Both divisions had an excellent quarter for customer retention with new contract signings and extensions totaling $82,000,000 This reflected business with existing customers across all our service lines. These contract wins are strong signals that our customer retention efforts are working and that our clients trust us to deliver. Gross margin continues to show an overall positive trend with improvement this quarter from both divisions compared to the same period in the prior year.
On a consolidated basis, EBITDA was $6,600,000 in the quarter, down slightly from Q2 in the previous year. This was largely a result of one time cost of $600,000 to support the acquisition of SaaS Service. Operating expenses are up on a year to date basis when compared to the prior year. This is due to the acquisition of Intigrain, investments in our growth agenda and one time costs related to the acquisition of SaaS service. We continue to manage operating expenses while ensuring we invest where required to put the company in position to gross revenue and EBITDA in coming quarters.
Net profit for the quarter was $3,900,000 or $0.50 per share basic consistent with the $3,900,000 or $0.51 in Q2 of the prior year. On a year to date basis, net profit was 7 point $2,000,000 or $0.93 per share, down 11% from $8,100,000 or $1.05 per share in the same period a year earlier. This is a result of increased amortization of intangibles and accretion expense from our acquisitions. Earnings per share in the same quarter in the quarter was $0.50 down slightly from $0.51 in the prior year. On a year to date basis EPS was $0.93 compared to 1.05 dollars at the same point in the prior year.
Our net cash position was $27,800,000 at the end of the quarter, which included an additional draw on our line of credit to fund the SaaS acquisition, which happened shortly after quarter end. GAAP position in the near term will be impacted by additional working capital requirements at FCD and remaining earn out payments due on our recent acquisitions. We continue to maintain our dividend currently at $0.28 per share. Overall, our outlook remains positive for the year. We continue to expect strong performance from both divisions in the remainder of this year with contributions from recent acquisitions Intra Grain and Pet Service.
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. And with that, I'll turn it now back over to Kevin.
Thanks, Roger. I believe CalAon is at a pivot point in the company's history. While our investments remain prudent, it's important to acknowledge the advancements we are making in R and D, innovation and other areas of the company in support of a long term growth. Our M and A agenda also continues to be a focus as we integrate recent acquisitions and continue to proactively search for companies that support our growth objectives as we look to diversify our customer base, develop our services and continue our further into solutions. While the Cowen story is one of our growth, I would not want to establish our stability.
To date we reported Cowen's 70th consecutive profitable quarter, That's over 17 years that this company has been profitable. This journey would not be possible without the dedicated work of our staff. So I'd like to extend a thank you and acknowledgement for all of our collective efforts. With their continued support, I'm confident we'll continue to progress against all elements of our portfolio growth framework. As Patrick stated, we continue to see very positive results in our customer retention of 80 2,000,000 in new business promoting existing customers this quarter.
At Calyum, we take 5 in our service delivery and across our 5 value in our business, it has been consistent with continued customer staff. We are now celebrating 1 year since the initial implementation of our healthcare provider requirements, contract with the Department of National Defense, the RCMP and Veterans Affairs Canada. We won in 2017 with our business partner, Asia Health Care, our single largest contract is running strong as a full term of 12 years including optional extensions. It is a testament to our commitment to exceptional service delivery and what I believe drives our customer retention results. In closing, the strong cash flows, continued focus on our innovation agenda and a dedicated employee base, I'm excited about this company's potential.
Overall, this quarter was a solid demonstration of the execution of our growth plan as we capture our elements of our focus areas, continued organic growth, launching new innovative products and closing our 1st international acquisition. This is a type of client that I want investing public to know of it. We're providing solutions, we're developing products, we're delivering in global markets, we're innovative and growing organically as well through acquisitions. Looking forward, the traditional markets in which Kallian operates are stable and management expects organic revenue and earnings growth at most or all of its service lines through the successful execution of our growth strategy. However, we must caution that revenues realized are ultimately dependent on the expense and timing of future contract awards as well as customer utilization of existing contracting vehicles.
Based on currently available information and our assessment of marketplace, we expect revenues for fiscal 2019 to be in the range of $330,000,000 to $360,000,000 EBITDA per share in the range of $3.60 to $2.90 and net profit in the range of $2.05 to $2.35 per share. We have reduced the EPS range by $0.05 mainly due to an increase in increase in expense related to our acquisitions of Flat Service and Integra. Paula, I'd like to now open the call up for questions.
Thank We'll first go to Benoit Poirier with Desjardins Capital Markets.
Good afternoon, Kevin. Good afternoon, Patrick. Looking back at yes, good afternoon, Ed. Specifically for SCD, gentlemen, could you provide some more color about the unfavorable timing for project completion and the review mix?
I think right now what we're doing with Benoit is, as we reported, we have the largest ground system contract that was signed last year, other product development. So really we're just doing the ramp up in the implementation of this project. So not certainly unfavorable, more just the timing issue. And as you see with our guidance, we believe that Q3 and Q4 are going to be stronger from an SSD perspective as these projects ramp up.
Okay. And mostly if we look at Q3 and Q4, Kevin, is it fair to say that it will be mostly linear between Q3 and Q4 or even greater skew toward Q4 in terms of contribution from this ground system contract?
Yes, I think it will
be continued ramp up. So we'll see some growth again in Q3 and then growth again in Q4. But it just depends also on the timing of these projects, but certainly that's what we're seeing right now.
So this information we have right now, then Juan and the project schedules where they are not just on that ground system project. And as you can imagine, we were running numerous projects at any given time at Calum. Based on the information we have today, we expect again strong trajectory for Q3 and Q4, balance in some ways, but I think stronger Q4 frankly if you look at our information here today.
Perfect. And to come back on the sub service, is there any seasonality in sub service that we should take into account?
Yes, Benoit. This is Pat here. They tend to have a lot of smaller contracts. So and they're spread throughout the year, they're involved in the satellite communication industry. So seasonality is not really a factor in anything that they're doing.
Okay, okay. That's great. Great color. And with respect to Intragrain, given that you're well advanced, could you talk a little bit about the integration also about the potential to expand the business outside of Western Canada. I know that it's a core focus.
So if you could provide some color, that would be great.
Yes. So I'll add some comments and then I'll get to Todd's comments as well. So from our perspective, the reason we acquired Integrin was obviously not as you know Benoit wasn't just a focus on Western Canada, but also the global opportunity, the solutions that they build and manufacture are relevant to and also not frankly just in the agriculture industry, but also in other ancillary industry. So we have reached again from Paul Foech, the President of Intragraine literally yesterday at the Board with regard to the opportunities and where things are positioning. And so we're very confident that the opportunity base for Intragraine is broader than Western Canada and with continued focus on our marketing plans that we can expand not only domestically but potentially globally and Pat and if you have any additional comments on Yes, certainly they're focused on keeping their customers, the current customer base in Western Canada satisfied and supplied with product and we do that a lot through distributor network that they're connected with.
But they've also been beefing up their resources to market their products into other regions, other agricultural regions as well as other industries. So the primary focus is certainly on fulfilling what their promises are right to date, but they've also had a lot of increase in focus on other areas and regions.
Okay, that's great color. And last for me, could you talk a little bit about the additional investment that was required with respect to I know that you've invested a little bit more over the last year, it paid off in terms of bringing growth on the top, but is there any granularity you could provide and whether
generating you look at our financials, we continue to be positive in the sense of the cash we're generating and that we're doing, and what we do very prudent on our organic research engine with regard to where we're investing and as we continue to ensure that we're funding the things appropriately. As I've stated many times, we've invested in Calyen as a company for many years, but it's just been so recently actually started pulling some of the wells and talking about R and D. And I thought it was an important element, because I just didn't believe that the markets in many ways viewed it as innovative. Our recent announcement around carbon fiber was a result of 4 years of hard work by the FCD team in research and development with partners, and there were 1,000,000 of dollars of investment that we've made into this. And I don't see that slowing down frankly.
If anything, I believe, again, going through my reviews with the businesses, a lot of new ideas out there in this company that we will continue to foster and fund as we look at new innovations for accounting moving forward. So from our viewpoint, I don't see this going down and I don't see any impediments to our continued investment in this. And I think it's critical for Algonquin growth that we do so. So my team has the support to bring this forward so we can continue to renovate what we just announced for the Carbon Catalentano.
Okay, that's perfect. Thank you very much for the time.
Thanks, Benoit. We appreciate your questions.
Moving on, we'll go to Deepak Kaushal, GMP Securities.
Hi, good afternoon guys. Thanks for taking my questions. We will do that. I'm going to follow-up on SEB. Kevin, you mentioned the new carbon fiber antennas.
I'm trying to get a better sense of the opportunity with that technology innovation. Can this drive an upgrade cycle through the ground system plant that's already installed throughout the world? Or is this really just an opportunity to get you further ahead on newer satellites that are getting launched high frequency ones?
Hi, Deepak. It's Pat Thore here. We look at it primarily as an inflection point to enter into the can support can support the QNB band initiatives with the large aperture antennas going forward. That will help us sustain our relevance in the industry and keep us at the same growth rates and market rates that we have going through time here. In terms of new opportunities for refurbishment, replenishment, other frequency bands, things like that.
We're going to kind of take it as it comes, but the cycles on those antenna refurbishment or replacement is very long like antennas are built to last 15 to 20 years, right. So that cycle just kind of comes very transactional, very piece by piece as it comes along, nothing major. So I wouldn't have to see that as being any fundamental growth factor in what we do, although it is an opportunity.
Okay, great. And Patrick, now that I have you giving some insight, are you seeing anything from a macro perspective in the satellite industry related to these on again off again, on again apparently trade wars or anything else in terms of macro that might shift attention or focus on CapEx from some of your traditional customers in the space?
I haven't seen much from what you're describing in the trade wars perspective. I mean, there's always been competition amongst competing technologies and competing companies depending on where they're located in the world, but I don't see the other factors of having any impact to us at this point in time. And I think that I just joined Todd from the team in And then Deepak, I guess, during part from the team in Washington when we reached the satellite conferences and I always defend American form that has the CEOs of the larger satellite operators And the time is still very positive. And the very reason we're looking at new satellite launches and we're even looking at new constellations. So I really took away from the conference that I, as you said, a customer base, I didn't really sense any interesting ground right now with regard to their ambitions to the launch of satellites that could have network be prepared for the next wave of capacity bandwidth that's going to be required to support things like Internet of Things Technology, So I think we're very positive with a few of the semiconductors with regards to plans for the future.
Okay, excellent. Thanks Kevin. And Kevin, I think earlier you mentioned double digit for you Patrick, I mean double digit organic growth in BTS on the health side. I mean, you still have quite a diverse health care business. Can you maybe perhaps elaborate on what's driving the growth in particular?
Is it Veterans Affairs or RCMP? Is it the core business? Is it primacy or commercial side? Anything would be
yes, good question. I think right now it's a mix of a few things. Firstly, number 1, the new contract with National Defense, As you know, the script of that contract is expanded into the RCMP and Veterans Affairs. So we're seeing some new opportunity there and working with them on the importance healthcare agenda for all the departments. So we've seen some growth there.
We're definitely seeing some new customers come to the table with regards to our large a large national network of medical practitioners and corrections health facilities, food services, for example. We've had a few wins recently in there, so we're expanding our customer base. And then generally, I would say that our marketing efforts have been very strong at figuring out on the psychological health side as well. Remember last year we acquired QualityOne Healthcare, which is a focus on psychological services, which again is helping to drive our growth as we look at new customer bases in that segment. So it's a combination of those parts, and that's really one thing that some of the parts is driving that trajectory right now.
Okay, thanks. And then just I did have a question on the business response planning. Another year has gone by and we see more flooding in more regions. I'm just trying to understand how these events are impacting that business. Like do the cities and governments do what they need to do to be prepared?
And like what's the gap that you think they need to get to and how do you get this business line to grow? Yes.
So I would say interesting question. I just briefed on this recently. The team showed me that the map of Canada and where we're proactive right now and into response exercises we're helping customers. And it's growing. And to your point, it's municipalities, it's organizations that this is not a consistent trend.
I think I'll take our home base here in the City of Ottawa as a good example. 2 years ago in 2017, we had flooding. We were asked to do a post review of the response to see the response to that. And now we are having flooding again in Ottawa. And one of our thought leaders, Richard Moore, was actually interviewed a few times with regard to the cities applying the lessons learned from our assignment from 2 years ago and we're happy to report that they had applied many of the lessons learned that we work with the city on and a more effective response.
So with the increased occurrences now between flooding and fires, the terrorist attacks, we are still, I think, growing the segment, not only nationally, but also now potentially globally with customers doing this globally on this. So I'm very positive on that segment. And as you said, these customers are now proactively trying to get ahead of an incident and using RMMC management, either RMMC management exercise capability or lesson learned from other areas to apply to make sure they're ready as well. So it is growing. It is growing nationally for sure.
And right now we're seeing lots of international opportunities in that segment because the reality of flooding and terrorist attacks and fires and natural events is not a Canadian and a recurrence that you made.
Okay, thanks. That's helpful. And I just have one last question, more of a maintenance admin question for Patrick. On the OpEx line, I know that you had some non recurring in there, I think $600,000 But is $10,000,000 a quarter generally a reasonable number to think of going forward for the next several quarters?
Yes, I think we'll take on a little bit more with that service as they bring on kind of a whole P and L of their own. So that'll be in Q3, but otherwise I think other than the one time item I think it's been consistent between Q1 and Q2 and that's certainly kind of the level minus one time items in the near future.
Okay, excellent. Well, thanks again. I'll pass the line. Have a great afternoon.
Thanks. Thanks, Yigit.
Flipping on, we'll go to Jeremy Coleman with Private Investor.
Good afternoon, gentlemen. I just have one question regarding the guidance range, which you customarily provide. I compared the 2 debtors of gross revenue EBITDA and net profit per share. Can you of the 3 metrics, 2 were unchanged by comparison with Q1 and net profit was the only one that's already changed, a reduction of $0.05 per share. The range between the top and bottom end of the guidance is almost 10% for both the revenue line and the EBITDA line and almost 15% for the net profit line.
Is there any chance as the company grows and to go on different paths nevertheless? Is there any chance that you can tighten the guidance range early in the reporting cycle as you go through the year?
Yes, on the change, I mean, the reason we changed EPS and not the other two metrics that we report on was as we brought on the 2 acquisitions, there's some accounting expenses that are below the line that are non cash that affected earnings. So although they're contributing positively to revenue and EBITDA, the contribution on an EPS is much smaller because of those charges. So that was the reason we reflected that in the numbers. On tightening, obviously, as we get we made progress throughout the year, If we could do that, we certainly would. But Kevin's earlier point that we have a big second half that's reflected in the guidance and although we have a lot of projects going on, it's really a delivery exercise here in the second half as we try to realize that.
And I'd say as well, Jeremy, the other nuance that's up to a bit wider than normal frankly at this point in the year because we are going through a 1st cycle with integrating, SaaS service as well. So we're trying to be cognizant we do not so much for satservice for inter grain, but more seasonal in the context of the spring and summer. So I'm trying to keep it a bit wider just as we get through the full business cycle at least the organization. So I can ensure that as we reflect guidance going forward, that we have the benefit of that experience and that's because I appreciate your comment. Number we will be tightening it right now, but it was a conscious decision for me right now to just look through the cycle that's been sure we understand the inter grain component because it is a high margin business, so definitely has an impact on us within revenues and EBITDA.
So I wanted to read a bit wider for the end of the quarter and then we'll see where we're sitting at the end of Q3. So just to wait as we get through one full cycle here, but in the period, I appreciate your comments and as always, we'll take it as soon as we can to have a good sense for the year. Thank you. Okay.
There are no further questions.
Okay. Well, thank you, Paula. Okay. So I want to thank you all today for joining us on the call. I really do appreciate the questions.
It's valuable for us to make sure that it's clear and on how the company is performing and any questions you have. So with that, Paul, we will close-up the call and we all look forward to discussing the next quarter results with you in 3 months' time. So thanks for your time today, everyone and we'll talk to you again in 2 months period.