Calian Group Q3 Earnings Call Highlights

Calian Group (TSE:CGY) reported record third-quarter fiscal 2026 results, with revenue rising 20% year over year to CAD 230 million and adjusted EBITDA increasing 35% to CAD 26 million. The company said organic growth reached 16%, its highest level in several years, while adjusted EBITDA margin improved to 11.1% from 9.9% a year earlier.

Chief Executive Officer Patrick Houston said the quarter benefited from strength in the company’s defense and space portfolio as well as improved performance in its essential industries segment. “Revenue grew 20% year-over-year, including 16% organically,” Houston said, adding that the company secured CAD 168 million in new contract signings during the quarter, bringing year-to-date signings to CAD 660 million.

Calian said its pro forma backlog is approaching CAD 1.6 billion, including approximately CAD 1.3 billion related to defense. Houston said the company is on track for a second consecutive year of bookings above CAD 1 billion.

Defense and Space Growth, Raytheon Agreement

Defense and space revenue increased 20% in the quarter, almost entirely through organic growth, while segment adjusted EBITDA grew 25%. About half of the segment’s organic growth came from technology solutions across defense and space, according to Houston.

The company also announced a 15-year agreement with Raytheon UK to support the British Army’s collective training program. The agreement is scheduled to begin in October 2026 after the current Project NUMIDIAN contract concludes and includes nearly CAD 300 million of contracted base revenue over its term.

Houston said the agreement also has a variable component that is expected to be “approximately the same size as the base level,” potentially bringing the total value to roughly double the CAD 296 million base amount, depending on annual activity planning.

The contract builds on Calian’s acquisition of Mabway roughly three and a half years ago and extends its work supporting U.K. Ministry of Defence land-force training. Houston said the renewal reflects the consolidation of training platforms by the ministry and Calian’s partnership with Raytheon UK.

Calian also highlighted several initiatives intended to broaden its role in defense technology:

• The launch of ATHORA, a sovereign interoperability and orchestration platform for C5ISRT environments.
• A cooperation agreement with Cohere to evaluate and integrate sovereign artificial intelligence solutions for defense settings.
• The formation of an Arctic maritime security consortium involving six Atlantic organizations.

During the question-and-answer session, Houston said the company is seeing larger programs in Canada, driven in part by defense investments and the inclusion of space in those programs. He also said Calian is investing in Europe through business-development resources and new geographic coverage, building on several years of acquisitions and double-digit organic growth in the region.

Essential Industries Profitability Improves

Revenue in Calian’s essential industries segment rose 20%, supported by organic growth in U.S. commercial operations and nuclear services, as well as contributions from acquired businesses. Segment adjusted EBITDA increased 46%, with margins approaching 8%.

Houston said the U.S. commercial business recorded year-over-year growth for a third consecutive quarter, while demand for nuclear services also increased. The company acquired Advanced Medical Solutions in May 2025, and Houston said the business has expanded Calian’s presence in the Arctic.

Management cited Canadian government recruitment initiatives involving the RCMP, Canada Border Services Agency and other public-safety organizations as potential long-term demand drivers for its health-services business. It also pointed to the federal government’s nuclear energy strategy, which contemplates developing as many as 10 new reactors over 15 years, as a potential opportunity for Calian’s nuclear-services operations.

Houston said the company expects essential industries adjusted EBITDA margins to exit fiscal 2026 in the high single digits.

Cash Flow, Working Capital and Galaxy Acquisition

Operating cash flow was CAD 24 million in the third quarter, compared with CAD 25 million a year earlier. Acting Chief Financial Officer Will Majic said the modest decline reflected higher working-capital requirements, particularly accounts receivable, as Calian continued to address strong technology-solutions demand.

Majic characterized the working-capital movement as a revenue-growth and timing issue rather than a structural concern, noting that the company’s days sales outstanding and customer credit quality remained healthy. Operating free cash flow increased 46% to CAD 18 million, representing 69% cash conversion from adjusted EBITDA.

As of June 30, Calian had CAD 141 million drawn on its debt facility, down CAD 26 million from the prior quarter. Net debt was CAD 95 million, or 0.9 times adjusted EBITDA.

The company expects to close its acquisition of Galaxy Broadband Communications within two weeks, subject to remaining closing conditions, for an upfront payment of CAD 24 million. Galaxy provides satellite communications and remote-connectivity services to government, defense, critical industries and remote Canadian communities. Calian expects Galaxy’s contribution to fourth-quarter results to be modest because of the expected closing timing.

Majic said Calian expects to deploy about CAD 35 million in upfront acquisition capital during fiscal 2026, or approximately CAD 50 million including earn-outs, when combined with the earlier acquisition of InField Scientific. Management said it is seeking to accelerate its acquisition pace over the next 12 months, concentrating on complementary assets in Canada, the United States and Europe.

Outlook Raised as Investments Continue

Calian raised its fiscal 2026 outlook and now expects revenue growth in the mid-teens and adjusted EBITDA growth in the low 20% range. Its long-term target remains annual revenue growth of 10% to 15%, supported by organic expansion and acquisitions.

Majic said part of the third-quarter organic growth reflected activity originally expected in the fourth quarter that was accelerated into the third quarter. He added that certain technology-solutions demand has been less predictable and should not be assumed to recur annually. The company continues to target organic growth in the mid-single digits over the longer term.

Management expects working-capital usage for the full year to be in the CAD 15 million to CAD 17 million range and capital expenditures to be slightly above CAD 10 million. Calian plans to accelerate investments in Europe and Canada during the fourth quarter and into fiscal 2027 to support product portfolios, business-development efforts and larger contract opportunities.

The company said it intends to renew its normal course issuer bid when it expires, subject to Toronto Stock Exchange approval, though share repurchases were not a priority in the third quarter. Management also said it is reviewing its capital structure to preserve flexibility for growth investments and acquisitions.

About Calian Group (TSE:CGY)

Calian Group Ltd operates through four segments namely Advanced Technologies, Health, Learning, and Information Technology. It generates maximum revenue from the Health segment. The company serves health, defence, security, aerospace, engineering, AgTech, and IT industries. Its Health segment includes Clinical Services; Nursing Services; Psychological Services and Medical Property Management. The Advanced Technologies segment includes Engineering Solutions and Services; Nuclear and Environmental Services; Satcom; DOCSIS; Electronics Design and Manufacturing and Agricultural Technology.

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