One Calian.
Endless
Possibilities.
Annual Report 2023
5-Year Financial Highlights
For the years ended September 30
(in millions of dollars, except per share amounts and percentages)
2023
2022
2021
2020
2019
$
$
$
$
$
OPERATING RESULTS
Revenue
Gross profit
Adjusted EBITDA1
Net profit
Adjusted net profit1
PER SHARE DATA
Adjusted EBITDA per share – basic1
Adjusted EBITDA per share – diluted1
Net profit per share – basic
Net profit per share – diluted
Adjusted EPS – basic1
Adjusted EPS – diluted1
Dividends per share
FINANCIAL RATIOS
Gross profit margin
Adjusted EBITDA margin1
Current ratio
FINANCIAL POSITION
Cash and cash equivalents
Current assets
Total assets
Current liabilities
Shareholders’ equity
CASH FLOW
658.6
204.2
66.0
18.9
40.5
5.63
5.62
1.61
1.61
3.45
3.45
1.12
31.0%
10.0%
1.4
33.7
264.5
585.7
195.1
582.2
169.2
65.9
13.6
44.0
5.82
5.80
1.19
1.19
3.88
3.87
1.12
29.1%
11.3%
1.4
42.6
296.5
547.2
211.7
518.4
126.7
51.9
11.2
37.2
4.89
4.85
1.08
1.07
3.51
3.50
1.12
432.3
343.0
89.2
36.8
20.4
23.5
4.08
4.02
2.25
2.23
2.60
2.59
1.12
74.7
27.1
20.0
19.0
3.46
3.45
2.55
2.54
2.43
2.41
1.12
24.4%
20.6%
21.8%
10.0%
2.2
78.6
262.2
458.0
121.2
8.5%
2.2
24.2
202.6
331.1
92.7
7.9%
1.8
17.1
129.0
195.0
69.8
115.1
13.5
7.4
(25.6)
328.3
305.2
292.4
200.4
Cash flows generated (used) from operating activities
Cash flows generated (used) from financing activities
56.8
13.9
43.1
(6.2)
46.5
64.4
Cash flows generated (used) in investing activities
(79.6)
(72.9)
(56.6)
(2.8)
45.0
(35.2)
One Calian.
Endless Possibilities.
This year’s theme, One Calian. Endless
Possibilities., reflects our new three-year
strategic plan: One Vision, One Purpose,
One Calian 2026.
Our goal is to continue to build a purpose-driven organization
that has a strong values foundation and is growing profitably.
We realize the impact we have on the world through the
mission-critical work that we do every day. We help the world
communicate, innovate, learn and lead safe and healthy lives.
The cover image portrays unity, a tower of four rocks
representing the strength of our four segments working
together to reach our $1 billion revenue goal by the end
of FY26. The ripples in the water symbolize the endless
possibilities that our teamwork can achieve and the
far-reaching impact Calian has on the world.
Kevin Ford, CEO, Calian Group Ltd.
ONE
2026
Vision.
Purpose.
Calian.
Table of Contents
1
2
4
6
8
5-Year Financial Highlights
2023 Calian at a Glance
Message from the Chair
Message from the CEO
IT & Cyber Solutions
10 Health
12
Advanced Technologies
14
Learning
16
Key Performance Indicators
18
Looking Forward
20 Share Information
21
61
Management’s Discussion and
Analysis
Audited Annual Consolidated
Financial Statements
111 Corporate Information
Be advised that certain information contained in this annual report is forward-looking and subject to important risks and uncertainties. The results predicted in these
statements may be materially different from actual results. Please refer to the Forward-Looking Statements section of the Management’s Discussion and Analysis.
1
1
This is a non-GAAP measure mainly derived from the consolidated financial statements, but does not have a standardized meaning prescribed by IFRS.
Please refer to the Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures section of the Management’s Discussion and Analysis.
Annual Report 2023 2023 Calian at a Glance
Key Metrics
$659M
Revenue
4,4001
Workforce
$1.2B
Backlog
$66M
Adjusted EBITDA2
31.0%
Gross Margin
18%
5-Year Revenue CAGR3
$580M
Gross New
Contract Signings
25%
5-Year Adjusted
EBITDA2 CAGR3
1
2
Includes 3,000 employees and 1,400 contractors
This is a non-GAAP measure mainly derived from the consolidated financial
statements, but does not have a standardized meaning prescribed by IFRS. Please
refer to the Reconciliation of Non-GAAP Measures to Most Comparable IFRS
Measures section of the Management’s Discussion and Analysis.
3 Compound annual growth rate
Calian (TSX: CGY) is a diverse
products and services
company providing innovative
healthcare, communications,
learning and cybersecurity &
technology solutions. The
company is headquartered in
Ottawa, Ontario with locations
across Canada and in the U.S.,
the U.K. and Europe. The
company is uniquely
positioned to solve the
significant and complex
problems its customers face so
that they are better able to
succeed and deliver on their
objectives. The company’s
shares are listed on the Toronto
Stock Exchange.
Mission
Calian helps the world
communicate, innovate, learn
and lead safe and healthy lives.
Values
• Customer-First Commitment
• Teamwork
• Integrity
• Innovation
• Respect
Four Pillars of Growth
1. Customer Retention
2. Customer Diversification
3. Innovation
4. Continuous Improvement
2023 Highlights
Balanced Capital Allocation
Pristine Balance Sheet
$68 million
for acquisitions
$255 million
debt agreement
$8 million
for capital
expenditures
$13 million
for dividends
$2 million
for share buybacks
0.1x
net debt to
adjusted EBITDA2
ratio
$176 million
net liquidity to
pursue growth
objectives
Senior Leadership Team and
Board Changes
•
•
•
•
•
Appointed Derek Clark to
President, Health
Appointed Michael Tremblay to
President, ITCS effective
December 1, 2023
Promoted Michael Muldner to
Chief Information and Technology
Officer
Promoted Robin Richardson to
Senior VP, Marketing and
Communications
Promoted Carisa Gordon to
Senior VP, General Counsel and
Privacy Officer
•
Welcomed Lori O’Neill to the board
of directors
Key Developments
• Acquired Hawaii Pacific Teleport
•
•
•
Launched a normal course issuer
bid (NCIB)
Expanded the company’s global
footprint
Made progress on the company’s
ESG journey
Revenue Segmentation
Health 28%
Learning 16%
Service 76%
Canada 71%
Government 48%
Segment
ITCS 29%
Offering
Geography
Customer
Advanced Technologies 27%
Product 24%
International 29%
Commercial 52%
2
3
Annual Report 2023Calian Group Ltd. Message from the Chair
One Calian. Endless Possibilities.
This year our company slogan “stability through diversity, growth through innovation” rings
especially true. We posted solid results despite some increased variability in our quarters and
continued to diversify our revenue streams, invest in innovation and grow globally. We also
bolstered our governance and pursued our environment, social and governance (ESG) journey.
The management team did a remarkable job and successfully positioned Calian for the next level
of growth.
George Weber, Chair of the Board
Ending FY23 with record revenues
Revenues increased 13% to $659 million, marking it the sixth
consecutive year of record revenues at double-digit
growth. Net profit stood at $19 million, reflecting the 22nd
year of profitable growth.
We continued to diversify our revenue streams with
commercial customers surpassing the 50% mark again
this year. With our recent acquisitions in the U.S.,
combined with new customers in the U.S. and Europe, our
total revenues outside Canada reached 29%. Furthermore,
we more than doubled our R&D investments to over $11
million as we position Calian to benefit from higher-margin
product revenues.
Enhancing our governance
Our board bench strength increased with the addition of
Lori O’Neill in February. Lori brings a wealth of experience in
strategic planning, complex financial matters and mergers
and acquisitions, which will be an asset as we execute our
ambitious growth strategy. The total number of board
members now stands at eight, of which seven are
independent and half are women.
During the year, we continued to build on our well-
established corporate governance practices. We put in
place new policies, including a director commitment policy
(dealing with overboarding), an enhanced enterprise risk
management policy and a business continuity policy. The
governance and risk committee oversees all aspects of
governance, risk and compliance, including cybersecurity,
data privacy, risk management and ESG.
On behalf of the board, I would like to reiterate our
utmost confidence in the senior leadership team. Their
ability to respond and take decisive action in response
to global and market challenges ensured we were able
to deliver a solid financial performance. This is a
testament to the resiliency of our leaders, the flexibility
of our business model and the power of teamwork. They
are the right team, led by a very capable and dynamic
CEO, to take Calian to the next level. By working as “One
Calian” we can achieve endless possibilities.
In closing, I would like to thank our shareholders for their
continued support. We recognize that our share price
has been under pressure since the publication of our
third quarter results. We do not believe the current
Calian share price reflects the company’s current value
and future growth prospects. We have put in place a
normal course issuer bid to support our shares while we
work tirelessly to execute our growth plan and regain
market confidence. We will let our results speak for
themselves.
George Weber
Chair of the Board
“ FY23 represents the sixth consecutive
year of record revenues and the 22nd
consecutive year of profitable growth.”
Moving forward on our ESG journey
Building on our ESG strategic framework, we continued
our journey, executing several initiatives. We conducted
our first formal materiality assessment and built action
plans related to our stakeholders’ key priorities, the top
five being customer satisfaction, cybersecurity,
climate-related risks and opportunities, business ethics
and talent. We completed the development of our
Taskforce on Climate-Related Financial Disclosure
(TCFD) roadmap which allowed us to deliver our first
formal TCFD report. We committed to the Canada
Net-Zero Challenge and met the year-one program
requirements which commit us to hitting net-zero by
2050. We made our first submission to the Climate
Disclosure Project (CDP) and were proud to be named
an Indigenous Works Employer of Choice.
In 2024 we will be conducting a climate scenario analysis
to further define metrics and targets, meeting Net-Zero
Challenge milestone two requirements, and launching a
new corporate community investment strategy.
Creating shareholder value
FY23 marks the end of our Imagine 2023 strategic plan.
During the year, we worked with the senior leadership
team to develop the company’s next strategic plan
called One Vision, One Purpose, One Calian 2026 with
the ultimate objective of reaching one billion dollars in
revenues by FY26. Given our solid finish to the year and
our track record of execution, we are confident we can
achieve this ambitious plan.
We are committed to creating shareholder value as we
have done for more than 40 years. This year marked the
30th anniversary of Calian trading on the TSX. Our share
price increased about 800% (2000% including
dividends) since we have been a public company, close
to double the return on the TSX for the same period. In
fact, out of approximately 3,500 companies trading on
the TSX, Calian is the 133rd oldest company and only
one of two companies that went public in the 1990’s in
the greater Ottawa area that is still public today.
4
5
Annual Report 2023Calian Group Ltd. Message from the CEO
One Calian. Endless Possibilities.
Fiscal year 2023 was another record year across several key performance indicators. We reported
record revenues, gross margin and adjusted EBITDA, advanced on our four pillars of growth,
progressed on our M&A agenda, enhanced our bench strength and ended the year in a solid
financial position to pursue our journey to one billion dollars. We are very proud of these results
even though they are not currently reflected in our share price.
Kevin Ford, CEO, Calian Group Ltd.
Financial performance—another record year
Revenues increased 13% to reach a record $659 million,
driven by growth in all four operating segments through a
combination of acquisitions (Computex and Hawaii Pacific
Teleport (HPT)) and organic growth. The Health, Learning and
Advanced Technologies segments all posted double-digit
organic growth while the ITCS segment experienced high
single-digit growth primarily due to the full-year contribution
of the Computex acquisition completed last year.
Gross profit surpassed the $200-million mark for the first
time. Gross margin attained its highest level ever for a single
year at 31.0% driven by an increase in volume and a
favourable revenue mix. Adjusted EBITDA slightly increased
compared to last year as it was impacted by a reduction in
volume from ITCS as well as various growth investments we
made at the end of FY22 that increased operating expenses.
Advanced on our four pillars of growth
We advanced on our four pillars of growth (customer
retention, customer diversification, innovation and
continuous improvement) across the organization.
We had a lot of traction with our customer retention and
diversification objectives. In ITCS, we signed new
customers, such as Shared Services Canada, expanded our
share of wallet with others and earned various partner
recognition awards. In Health, we gained new business with
strategic customers like IRCC1 and Indigenous Services
Canada and launched a new Digital Health portfolio of
products. In Advanced Technologies, we gained new
business with key customers, such as CCMEO2 and MDA,
acquired HPT and had tremendous success with our
products portfolio. In Learning, we experienced strong
demand for military training in Canada and continued to
expand our global footprint in NATO countries.
To support our innovation pillar, we made a $2.7-million
investment in Field Effect Software (ITCS), developed
features for our training software in cooperation with NATO
(Learning), received funding of $520K from the
Canadian Space Agency to further develop RF over IP
technology3 (Advanced Technologies) and became a
member of CDISC4 which aims to improve medical
research and related areas of healthcare (Health).
In terms of continuous improvement, we implemented a
restructuring plan to address certain cost inefficiencies
across the organization. The plan is expected to generate
annual savings of approximately $8 million to drive a more
optimal level of growth and profitability.
Balanced capital allocation and strong financial
position
Driven by our solid financial performance, we
generated $57 million of cash flow from operations. We
used our cash primarily to make acquisitions as they
continue to play a key role in our growth. We acquired
HPT, a U.S. satellite communications provider. In
addition to expanding our footprint in the U.S., HPT
brings a strong mix of recurring revenue streams,
cross-selling opportunities and a high-margin
business. Post year end, we announced the acquisition
of Decisive Group5 which will help strengthen our IT &
Cyber Solutions capacity across our government and
commercial customer base.
We also used our cash to provide a return to
shareholders in the form of dividends and share
buybacks. We launched a normal course issuer bid in
September to enhance shareholder value following the
financial market reaction to our third quarter results.
After closing a new debt facility in July, we ended the year
with $176 million of net liquidity to pursue our growth.
Looking ahead
FY23 successfully capped off our Imagine 2023
three-year strategic plan. We achieved our revenue,
diversification and technology targets. On October 1,
2023, we launched our new three-year strategic plan
called One Vision, One Purpose, One Calian 2026. This
plan builds on Imagine 2023 with the objective of
reaching one billion dollars in revenue by continuing to
deploy capital effectively, invest in innovation, continue
to expand our global operations and invest in our talent.
We are confident that we can achieve this target given
our pristine balance sheet, growth momentum, solid
backlog, robust pipeline of acquisitions and our strong
and incredibly talented team.
In March, following the retirement of Gordon McDonald,
we appointed Derek Clark to the position of President,
Health. In November, we appointed Michael Tremblay
to the position of President, IT and Cyber Solutions,
effective December 1. We have a well-balanced senior
leadership team and I am excited to work with them to
continue to take Calian to new heights.
In closing, I would like to thank our employees for their
hard work and dedication throughout the year. You
continue to rise to challenges and I know you are proud
of Calian living its core purpose of helping the world
innovate, communicate, learn and lead safe and healthy
lives. I would also like to thank our customers for their
loyalty and our suppliers for their collaboration. To our
shareholders who continue to support long-term
growth, we appreciate your trust. And finally, I thank our
board of directors for their confidence, guidance and
support of our growth plans.
Kevin Ford
CEO, Calian Group Ltd.
“ We are confident we can achieve $1
billion in revenues by FY26 given our
pristine balance sheet, growth
momentum, solid backlog, robust
pipeline of acquisitions and our strong
and incredibly talented team.”
1
Immigration, Refugees and Citizenship Canada
2 Canada Centre for Mapping and Earth Observation
3
RF over IP is the ability to digitize and transport radio frequency
signals over an internet protocol network without data loss,
removing many limitations found in analog RF.
4 Clinical Data Interchange Standards Consortium
5
This transaction was completed on December 1, 2023.
6
7
Annual Report 2023Calian Group Ltd. IT & Cyber Solutions
Highlights
Offers IT and cybersecurity solutions to support customers in their digital
transformation from advisory through to implementation, as well as the delivery,
management, monitoring and securing of complex IT infrastructures.
Growth driven by acquisition in the U.S.
Revenues increased by 9% to $189 million in FY23. This growth was primarily driven
by the full-year impact of the Computex acquisition completed last year and
growth in its overall cyber business. It was partially offset by lower shipments in its
U.S. product resale business in the second half of the year.
Realigned costs to run rate level of business
Gross margins increased year-over-year due to the acquisitive revenue coming
in at higher margin. Conversely, adjusted EBITDA5 margin decreased due to lower
revenues relating to its product resale business in the U.S. coupled with a highly
fixed-cost business, as well as growth investments made since the start of the
fiscal year. Cost reductions were implemented in the fourth quarter to realign
sales and marketing and delivery capacity with the run rate level of business.
In FY24 the ITCS segment will focus on integrating the Decisive Group3
acquisition, leverage its new footprint in Canada and the U.S. to cross-sell its
entire portfolio and expand into new geographies and new vertical markets.
“ I am excited to
join Calian and
lead the ITCS team to
new heights
and continued
commitment to
customer success.”
Michael Tremblay4,
President ITCS
2023 Results
$189M
Revenue
36%
Gross margin
$23M
Adj. EBITDA5
12%
Adj. EBITDA margin5
$141M
Backlog
$247M
Gross New
Contract Signings
5-Year Revenue
(in millions of $)
Highlights
189
173
82
55
58
2019
2020
2021
2022
2023
Revenue growth in fiscal year 22 and fiscal
year 23 was propelled by the acquisition of
Computex in March 2022.
• Appointed Michael Tremblay
as new President, ITCS,
subsequent to year end.
• Signed $247 million of new
contracts in FY23 for such
customers as Shared
Services Canada, GDP
Companies and Resound
Networks as well as for one
of the world’s leading
gas companies, a family
entertainment company and
a powersports company.
• Recognized as an Elite 150
on CRN’s1 Managed Service
Provider 500 list for 2023.
• Earned various partner
recognition awards from
CrowdStrike, Cisco,
Microsoft, OECM2,
Proofpoint and Forescout.
Won two contracts with Shared Services Canada
The ITCS segment won two contracts with Shared Services Canada
(SSC). SSC delivers modern, secure and reliable IT and digital
services to Government of Canada organizations who provide
services to Canadians.
The contract is valued at a total estimated cost of $17.57 million
– with options for a potential value up to $43.75 million. Under the
scope of each contract, SSC has engaged Calian to source talent for
five critical categories of Informatics professional services. Calian
will support critical branches of SSC, including Networks and
Security Services and Digital Services. Efforts will also assist in the
establishment of the next generation of Government of Canada
Secret Infrastructure (GCSI) – an SSC managed service security
solution. Calian will help to expand the capabilities of GCSI and
support new and ongoing projects and systems with a high degree
of complexity and spanning many disciplines.
The ITCS segment’s expertise in this area will ensure that SSC receives
the right talent, at the right time, to drive these important initiatives
across their organization. These contracts demonstrate the value that
Calian continues to bring to the Government of Canada.
1 A media brand of The Channel Company
2 Ontario Education Collaborative Marketplace
3 This transaction was completed on December 1, 2023
4 Effective start date December 1, 2023
5 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS
Measures” of this MD&A for an explanation of the non-GAAP measure.
8
9
Annual Report 2023Calian Group Ltd. Health
Highlights
Combines deep domain expertise in healthcare services, pharma solutions and
digital technologies to enable better access to care. With a vast network of over
2,800 healthcare professionals spanning 85 specialties, Calian’s Health segment
improves access to care by connecting patients and providers with service
delivery, clinical knowledge and digital technology.
Successfully backfilled one-time work generated from the pandemic
Revenues increased 11% to $185 million in FY23. This growth was all organic and
was driven by higher customer demand on long-term contracts, new business
wins from clinician services and a solid performance from contract research
organization (CRO) services.
Margins up on revenue mix
Both gross margins and adjusted EBITDA3 margins increased in FY23. This growth
was driven by increased revenues and higher-margin business, partially offset by
increased operating expenses.
In FY24 the Health segment will focus on making strategic acquisitions, ramping up
its digital strategy while trying to maintain a good balance between investments
and growth. Margins are expected to decrease as there will be increased
investments for growth.
“ The Health segment
is currently close
to a $200 million
run-rate business
and represents one
of the largest coast-
to-coast players in
Canada.”
Derek Clark, President Health
2023 Results
$185M
Revenue
26%
Gross margin
$33M
Adj. EBITDA3
18%
Adj. EBITDA margin3
$633M
Backlog
$115M
Gross New
Contract Signings
5-Year Revenue
(in millions of $)
Highlights
195
185
163
167
116
2019
2020
2021
2022
2023
Revenue growth in fiscal 20 and fiscal 21
was driven by one-time contracts from the
COVID-19 pandemic.
• Improved bench strength
with the appointment of
Derek Clark as President,
Health and the additions of a
VP Sales, VP Strategy &
Growth and new Chief
Psychologist to the team.
• Signed $115M million of new
contracts in FY23 with
such customers as IRCC1,
Indigenous Services Canada
and Syantra.
• Launched a Digital Health
portfolio and signed its first
SaaS2 customer for Calian®
Nexi™.
• Continued strong
performance of its
pharmaceutical solutions
business with new and
renewed contracts.
Launched a Digital Health portfolio
In order to leverage increasing demand for health
care services propelled by aging demographics,
the Health segment combined its digital assets
(Corolar™ Interoperability, Corolar Patient Care
Collaboration and Nexi) under one umbrella to create
a suite of technologies that will enable the delivery of
more efficient and effective care. While this new
division only represents a small portion of the overall
Health segment’s revenue, it is the wave of the
future. As a result, the Health segment is now re-
aligned in three divisions: Health Services,
Pharmaceutical Solutions and Digital Health.
1 Immigration and Citizenship Canada (IRCC)
2 Software as a Service
3 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS
Measures” of this MD&A for an explanation of the non-GAAP measure.
10
11
Annual Report 2023Calian Group Ltd. Advanced Technologies
Highlights
Provides comprehensive solutions across the space, defence and terrestrial
sectors. Diverse capabilities encompassing software development, product
design, custom manufacturing, full lifecycle support, project management,
multi-disciplinary system solutions, satellite operations and hosting services.
Strong revenue growth due to product sales
Revenues increased 19% to $178 million in FY23. Acquisitive growth was 3% and
was generated by the acquisition of HPT in the fourth quarter. Organic growth was
16% and was driven by growing demand for products, including satcom, GNSS2
antennas and ag tech3 as well as nuclear consulting services.
Higher-margin business
Gross margins and adjusted EBITDA4 margins were up significantly, driven by a
favourable revenue mix skewed toward higher-margin products and software
offerings as well as the higher-margin contribution from the HPT acquisition. It
was partially offset by investments for the future.
In FY24 the Advanced Technologies segment is expecting to surpass the $200
million revenue mark, driven by strong demand in product sales in terrestrial and
defence as well as the full-year contribution from HPT.
“ Calian is proud to play
a vital role in
the next international
collaboration for lunar
and deep space
exploration through
our partnership with
MDA to support the
development of
Canadarm3.”
Patrick Thera, President
Advanced Technologies
2023 Results
$178M
Revenue
34%
Gross margin
$28M
Adj. EBITDA4
16%
Adj. EBITDA margin4
$149M
Backlog
$192M
Gross New
Contract Signings
5-Year Revenue
(in millions of $)
Highlights
• Acquired Hawaii Pacific
178
Teleport.
167
153
150
110
• Continued to sign new
contracts in the Space
business with
its partnership with MDA on
the Canadarm3
development and with
CCMEO1 for three high-
performance antennas.
• Experienced significant
growth in the Terrestrial
business including over 20%
growth in GNSS2 antennas
and signed record deals for
ag tech3 and Decimator
products.
• Signed multiple contracts
supporting service programs
for Canada and received
multiple new orders
supporting defence
manufacturing projects,
totaling approximately
$29 million in FY23.
2019
2020
2021
2022
2023
Revenue in fiscal 2022 was impacted by the
rolling off of the company’s largest-ever
ground system project.
1 Canada Centre for Mapping and Earth Observation
2 Global Navigation Satellite System
3 Agriculture technology
4 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS
Measures” of this MD&A for an explanation of the non-GAAP measure.
12
Acquired Hawaii Pacific Teleport
in the U.S.
On August 1, 2023, Calian acquired the assets
of U.S.-based Hawaii Pacific Teleport (HPT), a
satellite communications provider. Key highlights of
the transaction:
• Price paid: up to C$62 million, which includes C$47
million upfront and earnouts of up to
C$15 million (multiple in line with historical average).
• Adds annual revenue of C$18 million.
• Accretive on gross margin and EBITDA immediately
(higher margins than Advanced Technologies and
consolidated).
• Strong mix of recurring revenue streams from
roster of international customers.
• Strategic geographic location of teleports
supports the communications bridge between Asia
and the Americas.
• Complements the segment’s ground station
as a service offering.
13
Annual Report 2023Calian Group Ltd. Learning
Highlights
Provides specialized training and immersive learning solutions to defence,
commercial, and higher education clients domestically and in international
markets. The segment continues to grow its footprint in Europe servicing NATO
and NATO member countries with a variety of military training and simulation
technologies and services. It also provides consulting services in emergency
management to federal, provincial and municipal governments, indigenous
communities, academia and the private sector.
Strong demand for military training
Revenues increased 16% to $106 million, surpassing the $100-million mark for the
first time. This growth was all organic and was primarily driven by strong demand
from existing customers.
While demand remains strong in the military training market due to geo-political
issues and renewed focus on readiness, the pace of procurement has not
followed suit. As a result, the segment’s legacy long-term contracts have allowed
it to continue to grow revenues.
Ramped-up R&D investments for future growth
Adjusted EBITDA3 margins were significantly lower in FY23 as the Learning
segment invested in business development and R&D to support its growth both
domestically and in new countries in Europe. The segment will continue to invest
in the global military market as it is a strong long-term growth opportunity.
In FY24 the Learning segment will focus on making tuck-in acquisitions to expand
its service offering and continue to develop the European market.
“ In FY23 we
surpassed the
$100M revenue
mark for the first
time, forged new
relationships and
made technology
investments which
will accelerate our
global growth.”
Don Whitty, President Learning
2023 Results
$106M
Revenue
25%
Gross margin
$17M
Adj. EBITDA3
16%
Adj. EBITDA margin3
$248M
Backlog
$26M
Gross New
Contract Signings
5-Year Revenue
(in millions of $)
Highlights
106
92
75
63
58
2019
2020
2021
2022
2023
Revenue growth over the last three years
was driven by the acquisitions of CTS,
Cadence and SimFront, as well as strong
demand for military training.
• Experienced strong demand
in legacy contracts in Canada
due to the geo-political
environment and a renewed
focus on readiness.
• Expanded the Company’s
global training footprint in
NATO countries with projects
in France, Turkey, Poland,
Germany, the Netherlands,
Australia, the Philippines,
Jamaica, Indonesia, Jordan
and Switzerland.
• Continued to innovate by
bringing new ISTE1 capabilities
online, developing features
for training software and
embedding AI2 in the
Company’s exercise design
capabilities.
• Increased academic clients
with the University of Guelph,
Sault College, Conestoga
College, Centennial College
and McMaster University.
1 Integrated Synthetic Training Environment
2 Artificial Intelligence
3 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS
Measures” of this MD&A for an explanation of the non-GAAP measure.
14
Solidified European presence
Solidified its presence in Europe with major growth in
the NATO 360 contract and engagement to help run
the War Gaming cell at the NATO Joint Warfare Centre
(JWC) in Stavanger. The contract is now running at
more than twice its initial award value.
This expanded presence and exposure has anchored
the Calian brand at the JWC and opened the door to a
number of new opportunities for growth directly with
individual NATO nations. The Learning segment
delivered major exercises in France, Germany and the
Netherlands and was awarded a two-year research
contract with NATO to build an enhanced wargaming
capability.
15
Annual Report 2023Calian Group Ltd. Key Performance Indicators
Revenue
(in millions of $)
Adjusted EBITDA1
& Adjusted EBITDA
Margin1
(in millions of $, except margin)
Net Profit &
Adjusted Net Profit1
(in millions of $)
Backlog and Gross
New Contract
Signings
(in millions of $)
Operating Free Cash
Flow1 & Operating
Free Cash Flow
Conversion1
(in millions of $, except %)
Capital Allocation
(in millions of $)
582
518
432
18%
343
659
66
66
44
41
37
52
37
27
11.3%
10.0%
10.0%
8.5%
7.9%
24
19
91
86
68
1,307
1,270
1,292
1,185
1,170
699
580
442
492
447
47
45
35
28
76%
17
63%
72%
68%
66%
44
36
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Adj. EBITDA1
Adj. EBITDA %1
Net Profit
Adjusted Net Profit1
Backlog
Gross New Contract Signings
OFCF1
OFCF Conversion1
Acquisitions
Dividends
Capex
Share Buyback
Revenues increased 13% to $659 million in
fiscal 2023 when compared to fiscal 2022.
Acquisitive growth was 7% and was
generated from Computex in the first half of
the year and HPT in the fourth quarter.
Organic growth was 6% and was driven by
double-digit growth in the Health, Learning
and Advanced Technologies segments,
partially offset by the ITCS segment.
Adjusted EBITDA1 was $66 million in fiscal
2023, in line with fiscal 2022. The adjusted
EBITDA was impacted by lower volume in its
ITCS segment’s value-added resale business
in the U.S. as well as various growth
investments the company made at the end of
fiscal 2022, which increased operating
expenses in the first nine months of the year.
After the third quarter, the company
underwent a complete review of its delivery
capacity and overhead costs and initiated
targeted cuts. This restructuring plan is
expected to generate annual savings of
approximately $8 million. As a result, the
adjusted EBITDA margin1 decreased to 10.0%
in fiscal 2023 from 11.3% in fiscal 2022.
Adjusted net profit1 decreased 7% to
$41 million, or $3.45 per diluted share, in fiscal
2023, from $44 million, or $3.87 per diluted
share, in fiscal 2022.
In fiscal 2023, Calian signed $580 million in
new contracts to increase realizable backlog
to $1.2 billion which spans over 10 years.
Of this amount $438 million is expected to be
recognized in fiscal 2024, $289 million in fiscal
2025 and the balance beyond fiscal 2025.
We generated $45 million of operating free
cash flow1 in fiscal 2023 compared to $47
million last year. This represents an operating
free cash flow conversion rate from adjusted
EBITDA1 of 68%.
In fiscal 2023, Calian continued to have a
disciplined approach to capital deployment,
with a view of getting maximum return for the
amounts invested. The company invested
$68 million in acquisitions and $8 million in
capital expenditures, as well as returned
capital to shareholders by paying dividends
of $13 million and buying back shares for
$2 million.
1
This is a non-GAAP measure mainly derived from the consolidated financial statements, but does not have a standardized meaning prescribed by IFRS.
Please refer to the Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures section of the Management’s Discussion and Analysis.
16
17
Annual Report 2023Calian Group Ltd. Looking Forward
We are proud that Calian is making a tangible difference in the world every day. Our mission to help
the world communicate, innovate, learn and lead safe and healthy lives is the core of what we do.
Customers trust us when they can’t fail.
Before looking forward to where we are going, it is
important to recognize how far we have come.
Completed the Imagine 2023 Strategic Plan
In FY23 we completed our Imagine 2023 strategic plan
and successfully executed on all our key metrics: we
grew revenues by a CAGR1 of 15%, expanded our gross
margins from 20.6% to 31.0% and increased the pace of
M&A by completing six transactions for a total value of
more than $200 million. In addition, we continued to
diversify our revenue streams by generating more
revenues globally and with commercial customers as well
as grew adjusted EBITDA2 by a CAGR1 of 21%, surpassing
top-line growth. FY23 represents the 22nd consistent
year of profitable growth and it doesn’t stop here. We are
just getting started.
Tailwinds From Market Trends
The world is facing increasing challenges that create
trends in the marketplace. Many of these resulting
market conditions—including climate change, health
care capacity challenges, global conflicts, increasing
cyber activity, demand for bandwidth and the
reinvigoration of the space industry—align to the
company’s capabilities. Calian is well positioned to
respond and support stakeholders in this ever-changing
environment.
Launched New Three-Year Strategic Plan
On October 1, 2023, we launched our new three-year
strategic plan called One Vision, One Purpose, One
Calian 2026, which builds on Imagine 2023. Guided by
our mission and values, the objective of this new plan is to
continue to build a purpose-driven organization that can
achieve one billion dollars in revenues with the four
segments working together as one toward profitable
growth. The focus will be on continuing to diversify the
company by geography, customer and offering, while
improving operational efficiencies, retaining existing
customers and building an effective sales culture. We are
confident we can achieve this target given our strong
team, pristine balance sheet, growth momentum, solid
backlog and robust pipeline of acquisitions.
Forecast Another Record Year for FY24
For FY24, the first year of this ambitious plan, we expect to
generate revenues and adjusted EBITDA2 in the range of
$730 million to $790 million and $83 million to $89 million,
respectively. At the mid-point of the range, it reflects
growth rates of 15% and 30% over last year. Achieving
these results would represent our seventh consecutive
year of double-digit revenue growth and record adjusted
EBITDA2.
Kevin Ford
CEO
Global Footprint Expansion
One Team Working Together
Calian operates across 7 continents and in 44 countries
Senior Leadership Team
10
10
1
1
10
Acquired Hawaii Pacific
Teleport in FY23
Corporate Headquarters (1)
Regional Offices (16)
Business Operations Centres (24)
Established wholly owned
subsidiary in Belgium in FY23
45
Kevin Ford
CEO
Patrick Houston
CFO and Corporate
Secretary
Sue Ivay
CHRO
Michael Muldner
CITO
Robin Richardson
Senior VP, Marketing
and Communications
Derek Clark
President, Health
Patrick Thera
President, Advanced
Technolgies
Michael Tremblay 3
President, IT and
Cyber Solutions
Don Whitty
President, Learning
Carisa Gordon
Senior VP, General
Counsel and Privacy
Officer
1 Compound annual growth rate (CAGR)
2
This is a non-GAAP measure mainly derived from the consolidated financial statements, but does not have a standardized meaning prescribed
by IFRS. Please refer to the Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures section of the Management’s
Discussion and Analysis.
3 Effective December 1, 2023
18
19
Annual Report 2023Calian Group Ltd. 2019
2020
2021
2022
2023
For the three and twelve months ended September 30, 2023
Management’s Discussion and Analysis
Management’s
Discussion and Analysis
Share Information
For the years ended September 30
TRADING DATA ON COMMON SHARES
52-week high ($)1
52-week low ($)1
Closing ($)
Total volume2
Average daily volume2
OTHER STATISTICS
35.75
25.76
35.12
68.50
33.02
67.25
69.95
53.73
61.00
71.58
53.42
55.93
67.00
50.43
51.03
2,778,466
5,371,043
7,657,214
8,221,755
6,199,535
24,050
21,314
30,507
32,756
24,798
Dividends on common shares (in millions $)
Dividends per share ($)
Dividend yield (%)
Shares outstanding (000’s)
Weighted average shares outstanding –
basic (000’s)
Weighted average shares outstanding –
diluted (000’s)
8.8
1.12
3.2%
7,929
7,843
9.9
1.12
1.7%
9,760
9,045
11.8
1.12
1.8%
11,286
10,600
12.8
1.12
2.0%
11,607
11,344
13.2
1.12
2.2%
11,813
11,715
7,863
9,104
10,640
11,383
11,748
Market capitalization (in millions $)
278
656
688
649
603
1 Based on closing price
2
Includes both TSX and ATS volume
Closing Share Price Volume
Share Price
Volume
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$-
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20
21
Annual Report 2023Calian Group Ltd. Basis of Presentation
The following Management’s Discussion and Analysis (MD&A) of the financial condition and results of operations of
Calian Group (“Calian” or the “Company”) is dated December 1, 2023 and should be read in conjunction with the audited
annual consolidated financial statements and related notes of the Company for the twelve month period ended
September 30, 2023.
The Company’s audited consolidated financial statements are reported in Canadian dollars and are prepared in
accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board
(“IFRS”) and Chartered Professional Accountants (“CPA Canada”) Handbook Accounting - Part I. All amounts in this
MD&A are in Canadian dollars unless otherwise indicated.
This MD&A also contains non-GAAP and other financial measures which are not prescribed by IFRS and are not likely to
be comparable to similar measures presented by other issuers. Refer to the section entitled “Reconciliation of Non-
GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the non-GAAP and other
financial measures used and presented by the Company and a reconciliation of non-GAAP financial measures to the
most directly comparable GAAP measures.
This MD&A is the responsibility of management and has been reviewed and approved by the Board of Directors (“the
Board”) of the Company. The Board is responsible for ensuring that management fulfills its responsibilities for financial
reporting and is ultimately responsible for reviewing and approving the MD&A. The Board carries out this responsibility
principally through its Audit Committee.
Additional information, including the Company’s Annual Information Form, quarterly and annual reports, and
supplementary information is available on the SEDAR web site at www.sedarplus.ca. Press releases and other
information are also available in the Investor Relations section of the Company’s website at www.calian.com.
Forward-Looking Statements
The Company cautions that this MD&A contains forward-looking statements. These forward-looking statements are
based on certain assumptions made by the Company that may prove to be inaccurate. Forward-looking statements
include those identified by the expressions “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” and similar
expressions. Forward-looking statements are not historical facts, but reflect the Company’s current intentions, plans,
expectations, and assumptions regarding future results or events. Forward-looking statements are intended to assist
readers in understanding management’s expectations as of the date of this MD&A and may not be suitable for other
purposes.
Forward-looking statements are based on assumptions, including assumptions as to the following factors:
• Customer demand for the Company’s products and services.
• The Company’s ability to maintain and enhance customer relationships.
• Market conditions.
• Levels of government spending.
• The Company’s ability to bring to market products and services.
• The Company’s ability to execute on its acquisition program including successful integration of previously acquired
businesses.
• The Company’s ability to deliver to customers throughout any worldwide conflict zones, and any government
regulations limiting business activities within such areas.
• The Company’s ability to successfully and efficiently manage through supply chain challenges, in sourcing and
procuring goods used in production or for delivery to end customers.
The Company cautions that the forward-looking statements in this MD&A are based on current expectations as at
December 1, 2023, that are subject to change and to risks and uncertainties, including those set out under the heading
“Risks and Uncertainties” below, many of which are outside the Company’s control. Actual results may materially differ
from such forward-looking information due to factors such as customer demand, customer relationships, new service
offerings, delivery schedules, revenue mix, competition, pricing pressure, foreign currency fluctuations, and uncertainty
in the markets in which the Company conducts business. Additional information identifying risks and uncertainties is
contained in the Company’s filings with securities regulators. The Company does not assume any intention or obligation
to publicly update or revise any forward-looking statements or forward-looking information, whether as a result of new
information, future events or otherwise, except as required by applicable law. Readers should not place undue reliance
on the Company’s forward-looking statements.
Calian Profile
Calian is a diverse products and services company
providing innovative healthcare, communications,
learning and cybersecurity and technology solutions.
The Company is headquartered in Ottawa, Ontario with
locations across Canada and in the U.S., the U.K. and
Europe. The Company is uniquely positioned to solve the
significant and complex problems its customers face so
that these companies are better able to succeed and
deliver on their objectives. The Company’s common
shares are listed on the Toronto Stock Exchange under
the symbol CGY.
The Company is organized in four operating segments:
Advanced Technologies, Health, IT and Cyber Solutions
and Learning. This business model provides both diversity
and stability. It enables Calian to capitalize on unique
opportunities during upturns in some markets while
weathering downturns in others.
MISSION
Help the world communicate, innovate, learn, and
lead safe and healthy lives with confidence.
01
MISSION
CULTURE
Every Calian employee brings their “A” game
for every client, works hard and works
together using collaboration to powerful
advantage. Calian attracts and challenges
great people and great partners.
VALUES
• Customer-first Commitment
• Teamwork
• Integrity
• Innovation
• Respect
03
VALUES
02
CULTURE
22
23
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. Strategy
Growth Fundamentals and Track Record
Four Pillars of Growth
Customer
Retention
Customer
Diversification
Through continued delivery
Through continued
excellence, each segment
diversification, each
maintains relationships
segment increases its
with their valued customer
percentage of revenue
bases, thus earning more
derived from winning
Innovation
Through continued
investment in acquisitive
and organic growth, each
segment increases its
differentiation thus
improving gross margins.
revenue through expanded
scopes of existing
contracts.
non-government
contracts, from
commercial activity in
global markets, and from
increasing product
offerings—both acquisitive
and organic.
Continuous
Improvement
Through continued
leverage of innovation, the
Company streamlines
processes and scales its
back-office support
capability.
While the four operating segments are diverse, each is anchored by the Company’s common four-pillar framework for
growth.
5-Year Track Record of Execution
Over the past five years, Calian generated a revenue compound annual growth rate (CAGR) of 18% through organic
growth and acquisitions, surpassing its 10% annual growth objective. The Company also increased its gross profit and
adjusted EBITDA1, which grew at a CAGR of 28% and 25%, respectively, significantly outpacing top line growth.
Furthermore, its gross margin expanded from 21.8% in FY19 to 31.0% in FY23 and its adjusted EBITDA1 margins expanded
Revenues
(in millions of $)
Gross Profit & Margin
Adj. EBITDA1 & Margin1
(in millions of $, except margin)
(in millions of $, except margin)
659
582
518
204
169
66
66
52
432
343
127
31.0%
37
89
29.1%
27
11.3%
75
24.4%
21.8%
20.6%
10.0%
10.0%
8.5%
7.9%
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Gross Profit
Gross Margin
Adj, EBITDA1
Adj. EBITDA1 Margin
from 7.9% to double digits over the same period. This significant profitability growth and margin expansion was driven by
the Company’s revenue diversification by geography, customer and offering.
Over the past five years, Calian successfully diversified its revenue streams by geography, customer and offering.
Revenues generated outside Canada reached 29% of total revenues, up from 19% in FY19. Over this same period,
revenues from commercial customers, typically at higher margins, grew from 31% to 52%. The Company was able to
accomplish this while continuing to grow its legacy Canadian government business characterized by long-term
contracts. A continued balance of both government and commercial customers will provide a balance of longer-term
visibility and stability, with shorter term growth and margins.
24
25
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. Geography
Offering
Customer
19%
25%
22%
29% 29%
20%
33%
25%
27% 24%
31%
More specifically, the financial objective of this strategic plan is to reach one billion dollars in revenues by the end of FY26
through both organic growth and acquisitions. The playbook is to convert a high-level of profitable growth into strong
operating free cash flow1 where the capital generated can then be deployed to maximum shareholder value. All this while
maintaining a healthy balance sheet.
81%
75%
78%
71% 71%
80%
67%
75%
73% 76%
69%
47%
49%
53% 52%
53%
51%
47% 48%
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Canada
International
Service
Product
Government
Commercial
Finally, in FY23, product revenues totaled $157 million, up 124% from $70 million in FY19, demonstrating the Company’s
progressive pivot to a technology company.
New 3-Year Strategic Plan
On October 1, 2023, Calian launched its new three-year strategic plan called One Vision, One Purpose, One Calian 2026.
The objective of the plan is to build a purpose-driven organization that has a strong values foundation and is growing
profitably by geography, customer and offering, while improving operational efficiencies, retaining existing customers
and building an effective sales culture.
Revenue Growth
Strong Cash Flow
Deployment of Capital
Revenue is an important measure
because $1 billion is the key target
the Company aspires to reach at the
end of FY26. It is also the starting
point to generate profitability and
cash flow. Calian must generate on
average 15% revenue growth per
year, with a combination of organic
and acquisitions, to reach its target
of $1 billion at the end of FY26.
Operating free cash flow1 generation
is important because it determines
how much capital Calian will be able
to re-invest into growth
opportunities such as acquisitions,
which represents a significant
portion of the 15% revenue growth
target.
Capital deployment is important
because it is the foundation of
shareholder value creation.
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
26
27
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. Key Performance Indicators
Key Performance Indicators
Calian will measure the success of the execution of its strategic plan by monitoring three key performance indicators
(KPI) on an annual basis: revenue, operating free cash flow1 and capital deployment.
Revenue & Revenue
Growth
(in millions of $, except %)
Operating Free Cash
Flow (OFCF1) & OFCF1
Conversion
(in millions of $, except ratio)
659
47
45
Capital Deployed
(in millions of $)
91
86
69
Dividend/OFCF1
OFCF1/Share
(in %)
51%
(in $)
$4.16
$3.83
36%
35%
$3.27
$3.08
27%
29%
$2.19
582
518
432
343
26%
20%
12%
13%
12%
35
28
76%
17
63%
72% 68%
66%
45
35
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Revenue
Growth
OFCF1
OFCF1/EBITDA
Acquisitions
Dividends
Capex
Share buyback
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of
this MD&A for an explanation of the non-GAAP measure.
28
29
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. The graphs above illustrate the five-year trends of these key performance indicators.
The Company also wants to ensure that it analyzes the success of its execution through shareholder lens. As such, it will
measure return to shareholders with the KPIs outlined below.
Overview - Fourth Quarter of FY23
Revenues increased 10% to $176.0 million, as compared to $160.5 million for the same period last year. This represents
Revenues
(in millions of $)
Gross profit
& Gross margin %
Adj. EBITDA1
& Adj. EBITDA1%
(in millions of $, except margin)
(in millions of $, except margin)
OFCF1
(in millions of $)
Net Debt/
Adj. EBITDA1 Ratio
Net Liquidity
(in millions of $)
14.1
10.7
0.1x
Q4 FY23
Q4 FY22
0x
176
115
161
10%
176
56
50
20
19
31.2%
31.7%
11.9%
11.6%
Q4 FY22
Q4 FY23
Q4 FY22
Q4 FY23
Unsued credit facility
Cash
Q4 FY22
Q4 FY23
Q4 FY22
Q4 FY23
Q4 FY22
Q4 FY23
Gross profit
Gross margin
adj. EBITDA
adj. EBITDA %
the highest revenue quarter in the Company’s history. Acquisitive growth was 3% and was generated by the acquisition
of Hawaii Pacific Teleport (HPT) which closed on August 1, 2023. Organic growth was 7% and was driven by double-digit
growth in the Health, Learning and Advanced Technologies segments. As expected, the ITCS segment posted a
reduction in revenues versus last year, where a disproportionate amount of products were shipped in the fourth quarter
of fiscal 2022 due to the easing of supply chain issues.
Gross profit increased 11% to $55.8 million and gross margin reached 31.7%, representing the sixth consecutive quarter
above the 30% mark. Similarly, adjusted EBITDA1 increased by 7% to $20.3 million driven by strong growth in revenue and
gross margin, coupled with the start of benefits from the restructuring plan implemented midway through the quarter.
Gross profit, gross margin and adjusted EBITDA1 all represented new quarterly highs for Calian. While adjusted EBITDA1
margin returned to double-digits from Q3, it decreased slightly to 11.6%, compared to the same period last year, due to
the reduction in ITCS volume and the realization of only a portion of the benefits from the restructuring plan.
Calian generated $10.7 million of operating free cash flow1. The Company used its cash and drew on its credit line to
primarily invest in its business with the acquisition of HPT, the payment of earnouts and capital expenditures. It also
provided a return to shareholders in the form of dividends and share buybacks in accordance with its recently
announced normal course issuer bid (NCIB). The Company ended the quarter with net debt of $4.0 million, representing
a net debt to adjusted EBITDA1 ratio of 0.1x. With cash on hand of $33.7 million, combined with the unused portion of its
credit facility, Calian ended the quarter with net liquidity of $176.0 million.
Calian signed gross new contracts of $176 million and ended the quarter with a backlog of $1.2 billion, of which $438
million is earmarked for FY24, $289 million for FY25 and $443 million beyond FY25.
Subsequent to quarter end, on November 6, Calian appointed Michael Tremblay to the position of President, ITCS
effective December 1, 2023. In addition, on November 9, Calian entered into a definitive purchase agreement to acquire
Decisive Group. This transaction was completed on December 1, 2023.
FY24 Financial Guidance
The following table presents the Company’s financial guidance for FY24.
Revenue
Adjusted EBITDA1
Guidance
Low
$
730,000
83,000
High
$
790,000
89,000
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
30
31
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd.
This guidance includes the full-year contribution from the Hawaii Pacific Teleport acquisition and assumes the closing of
the Decisive Group acquisition by the end of calendar 2023. It also includes the benefits from the restructuring plan. It
does not include any other acquisitions that may close within the fiscal year.
15%
(mid-range vs FY23)
58%
(of mid-range guidance)
11.3%
(at mid-range)
Revenue growth
Backlog coverage
EBITDA margin
At the midpoint of the range, this guidance reflects revenue and adjusted EBITDA1 growth of 15% and 30%, respectively,
and an adjusted EBITDA1 margin of 11.3%. It would represent the 7th consecutive year of double-digit growth and record
levels.
When taking into account our backlog for FY24 of $438 million, combined with our recurring revenue streams of about
$40 million and deferred revenues of $32 million, 67% of our FY24 revenue guidance (at the midpoint) is covered right
out the gate.
The reader should be advised that revenues and profitability realized are ultimately dependent on the extent and timing
of future contract awards, customer realization of existing contract vehicles and potential recessionary pressures.
Please refer to the forward-looking statement at the beginning of this MD&A.
Backlog
The Company’s estimated realizable backlog at September 30, 2023 was $1,170 with terms extending to fiscal 2030.
Contracted backlog represents maximum potential revenues remaining to be earned on signed contracts, whereas
option renewals represent customers’ options to further extend existing contracts under similar terms and conditions.
During the three-month period ended September 30, 2023 the following contracts and product signings were the
major contributors to the Company’s backlog. These contracts are further described in the business overview section
of this Management Discussion and Analysis.
• $46M of cyber security product and services
• $24M in cyber security design services with a new contract win
• $15M new contract for traditional IT consulting services
• $8M new contract win for Crisis call diversion services in our Health segment
• $8M signing for software defined solutions to a long standing customer in our Advanced Technologies segment
• GNSS product sales book to bill ratio continuing over 1 times
There were no material contracts that were cancelled unexpectedly that would have resulted in a significant decrease in
our backlog.
Most fee-for-service contracts provide the customer with the ability to adjust the timing and level of effort throughout
the contract life and as such the amount actually realized could be materially different from the original contract value.
The following table represents management’s best estimate of the backlog realization for fiscal year 2024, fiscal year
2025 and beyond based on management’s current visibility into customers’ existing requirements.
Management’s estimate of the realizable portion (current utilization rates and known customer requirements) is less than
the total value of signed contracts and related options by approximately $211 million. The Company’s policy is to reduce
the reported contractual backlog once it receives confirmation from the customer that indicates the utilization of the
full contract value may not materialize.
Contract Backlog as of September 30, 2023
Contracted backlog
Option renewals
Management estimate of unrealizable portion
Estimated Realizable Backlog
Estimated Recognition of Estimated Realizable Backlog
Advanced Technologies
Health
Learning
ITCS
Total
October 1, 2023
to September 30,
2024
October 1, 2024
to September
30, 2025
Beyond
September 30,
2025
$
104,568
173,824
84,528
75,153
438,073
$
29,178
167,250
64,877
27,945
289,250
$
15,059
291,758
98,307
37,590
442,714
$
727,484
653,776
1,381,260
(211,223)
1,170,037
Total
$
148,805
632,832
247,712
140,688
1,170,037
32
33
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. Consolidated Results
Selected Consolidated Financial Highlights – Three and Twelve Months of FY23
Three months ended
Year ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
$
175,948
55,796
$
160,550
50,150
$
658,583
204,212
$
582,172
169,226
Revenues
Gross profit
Gross profit margin (%)
32%
31%
31%
29%
Profit before under noted items
(adjusted EBITDA1)
20,381
19,067
65,987
65,932
Adjusted EBITDA1 margin %
12%
12%
10%
11%
Analysis of Consolidated Results – Three and Twelve Months of FY23
Revenue
For the three-month period ended September 30, 2023, revenues increased 10% to $175,948 compared to $160,550
for the same period last year. This represents the highest revenue quarter in the Company’s history. Acquisitive growth
was 3% and was generated by the acquisition of Hawaii Pacific Teleport (HPT) closed on August 1, 2023. Organic growth
was 7% and was driven by double-digit growth in the Health, Learning and Advanced Technologies segments. As
expected, the ITCS segment posted a reduction in revenues versus last year where a disproportionate amount of
products were shipped due to the easing of supply chain issues.
For the year ended September 30, 2023, revenues increased 13% to $658,583 compared to $582,172 for the same
period last year. This represents the sixth consecutive year of record revenues for Calian. Acquisitive growth was 7% and
was generated by the contribution from Computex in the first half of the year and HPT in the fourth quarter. Organic
growth was 6% and was driven by double-digit growth in the Health, Learning and Advanced Technologies segments.
The ITCS segment posted negative organic growth primarily due to the easing of the supply chain in the prior year which
allowed for significant deliveries of our value-added resale (VAR) business in the U.S. at the time.
Note that Calian measures growth through acquisition on a trailing twelve-month basis. Once the acquisition has been
included in results for twelve months, its contribution is included in the organic growth metric.
Depreciation of equipment,
application software and capitalized
research and development
Depreciation of right of use assets
Amortization of acquired intangible
assets
Restructuring expense
Other changes in fair value
Deemed compensation
Changes in fair value related to
contingent earn-out
Profit before interest income and
income tax expense
Lease obligations interest expense
Interest expense (income)
Profit before income tax expense
Total income tax expense
NET PROFIT
EPS - Basic
EPS - Diluted
Adjusted net profit1
Adjusted EPS1 - Basic
Adjusted EPS1 - Diluted
2,133
2,308
9,043
6,974
Gross Profit
1,352
4,460
2,618
(314)
403
416
950
3,484
-
-
3,314
2,289
4,501
14,874
2,618
(314)
550
3,858
3,629
20,555
-
-
4,314
5,555
9,313
6,722
30,857
24,905
159
634
8,520
3,401
5,119
0.43
0.43
12,702
1.08
1.07
143
7
6,572
5,377
1,195
0.10
0.10
10,282
0.90
0.90
531
365
29,961
11,076
18,885
1.61
1.61
41,471
3.45
3.45
451
295
24,159
10,555
13,604
1.19
1.19
44,028
3.88
3.87
For the three-month period ended September 30, 2023, gross profit increased 11% to $55,796 compared to $50,150
for the same period last year. This growth was driven by an increase in volume and a favorable revenue mix. Gross margin
stood at 31.7%, slightly up from 31.4% for the same period last year, and represented the sixth consecutive quarter
above the 30% mark. Both gross profit and gross margin represented new quarterly highs for Calian.
For the year ended September 30, 2023, gross profit increased 21% to $204,212 compared to $169,226 for the same
period last year and gross margin reached 31.0%, versus 29.1% in the prior year. This growth was driven by the same
factors mentioned above. Both gross profit and gross margin represented new annual highs for Calian. It is also the first
time in the Company’s history that gross profit surpasses the $200,000 mark.
Adjusted EBITDA1
For the three-month period ended September 30, 2023, adjusted EBITDA1 increased 6.9% to $20,381 compared to
$19,067 for the same period last year. This growth was driven by strong growth in revenue and gross margin, coupled
with the start of benefits from the restructuring plan implemented midway through the quarter. Adjusted EBITDA1
represented a new quarterly high for Calian. Adjusted EBITDA1 margin decreased slightly to 11.6% compared to 11.9% for
the same period last year due to the reduction in ITCS volume and the realization of only a portion of the benefits from
the restructuring plan.
For the year ended September 30, 2023, adjusted EBITDA1 and related margin stood at $65,987 and 10.0% respectively,
versus $65,932 and 11.3%, respectively, for the same period last year. The adjusted EBITDA1 and related margin were
impacted by various growth investments the Company made at the end of FY22 which increased operating expenses in
the first nine months of the year. After the third quarter, Calian underwent a complete review of its delivery capacity and
overhead costs and initiated targeted cuts. This restructuring plan is expected to generate annual savings of
approximately $8 million.
Depreciation and Amortization
For the three-month period ended September 30, 2023, depreciation of equipment, application software and research
and development stood at $2,133, in line with the same period last year. For the year ended September 30, 2023,
depreciation of equipment, application software and research and development increased $2,069, compared to the
same period last year, due to higher assets resulting from IT investments and recent acquisitions.
For the three-month period and year ended September 30, 2023, depreciation of right of use assets increased $402
and $872 respectively, compared to the same period last year, as a result of new leases signed in the last twelve months
coupled with leases brought on from recent acquisitions.
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
34
35
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. For the three-month period ended September 30, 2023, amortization of acquired intangible assets increased $976,
compared to the same period last year, due to intangible amortization beginning on an asset that was previously
indefinite life coupled with the acquired intangible assets from the HPT amortizing since the acquisition date. For the
year ended September 30, 2023, amortization of acquired intangible assets decreased by $5,681, compared to the
same period last year, due to intangibles acquired from multiple years prior being fully amortized in the prior year along
with amortization incurred from intangibles acquired through Intertronic which would not have current year amortization
as they were written off in the prior year.
Please see note 13 to the financial statements for more information.
Restructuring Expense
For the three-month period and year ended September 30, 2023, the Company recorded a one-time restructuring
charge of $2,618 in line with its restructuring plan announced in the third quarter of FY23. There were no restructuring
charges recorded in the three-month period and year ended September 30, 2022.
Deemed Compensation and Changes in Fair Value Related to Contingent Earn Out
For the three-month period and year ended September 30, 2023, deemed compensation decreased by $2,911 and
$3,764 respectively, compared to the same periods last year. This decrease is due to bonus amounts related to
acquisition earn-out payments being earned and achieved in the prior year that did not exist in the current year.
For the three-month and year ended September 30, 2023, changes in fair value related to contingent earn-out
decreased by $1,873 and $1,697, respectively, compared to the same periods of the previous year.
Interest expense (income)
For the three-month period ended September 30, 2023, interest expense increased to $634, compared to $7 in the
same period last year, as the Company drew on its credit facility to fund the acquisition of HPT.
Income Tax Expense
For the three-month period ended September 30, 2023, the provision for income taxes was $3,401, down from $5,377
for the same period last year. This is primarily due to lower tax expense in the current year from tax assets acquired
through acquisitions.
For the year ended September 30, 2023, the provision for income taxes was $11,076 which is in line with the prior year.
The effective tax rate of the company is 26.5% for the annual period. The difference in effective tax rate to actual tax rate
is primarily due to the increase in non-taxable items in the statement of profit and loss including intangible amortization
and changes in fair value related to contingent earn out amounts which are quite significant to the Company, and
account for significant fluctuations in tax rate where income tax is a percentage of earnings before tax.
Net Profit and Adjusted Net Profit1
For the three-month period ended September 30, 2023, net profit was $5,119 or $0.43 per diluted share, versus $1,195,
or $0.10 per diluted share, for the same period last year. This growth was driven by higher adjusted EBITDA1 and lower
expenses related to acquisitions, partially offset by a one-time restructuring charge and higher interest expenses.
Adjusted net profit1 was $12,702, or $1.07 per diluted share, versus $10,282, or $0.90 per diluted share, in the same
period last year.
For the year ended September 30, 2023, adjusted net profit1 was $41,471, or $3.45 per diluted share, versus $44,028, or
$3.87 per diluted share, for the same period last year. This decrease was primarily driven by higher depreciation of
property assets in the current year.
Segment Results
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
36
37
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd.
services. It was also the result of the successful unwinding of backlog due to ongoing easing of supply chains we are
seeing in this segment.
Note that Calian measures growth through acquisition on a trailing twelve-month basis. Once the acquisition has been
included in results for twelve months, its contribution is included in the organic growth metric.
For the three-month period ended September 30, 2023, adjusted EBITDA1 more than doubled to $11,087, compared to
the same period last year. This significant growth was driven by higher gross margins due to a favorable revenue mix
skewed toward higher margin products and software offerings as well as the higher margin contribution from the HPT
acquisition. This growth was partially offset by higher operating expenses related to various initiatives within ground
systems product development and other product improvements for manufactured products. Adjusted EBITDA1 margin
increased to 21%, from 15% for the same period last year.
In the quarter, Advanced Technologies signed new contracts valued at $52 million.
Twelve-months ended September 30, 2023
For the year ended September 30, 2023, revenues increased 19% to $178,363, compared to the same period last year.
Acquisitive growth was 3% and was generated by the acquisition of HPT in the fourth quarter. Organic growth was 16%
and was driven by growing demand for products including telecom, GNSS antennas and Ag tech as well as consulting
services in nuclear.
For the year ended September 30, 2023, adjusted EBITDA1 increased 37% to $28,275, compared to the same period last
year and adjusted EBITDA1 margin increased to 16% versus 14% last year. This growth was driven by the same factors
mentioned above.
Selected highlights for the year:
• Signed new contracts including with Canada for Mapping and Earth Observation (CCMEO) and MDA
• Acquired Hawaii Pacific Teleport
• Launched Illuminator software to monitor multiple Decimator spectrum analyzers at remote sites
• Appointed Darrell Wellington to Tallysman leadership team
• Received funding from the Canadian Space Agency (CSA) to further develop RF over IP technology
• Received a patent for Bin-Sense agricultural technology
For the year, Advanced Technologies signed new contracts valued at $192 million and ended the year with a solid
realizable backlog of $149 million.
Advanced Technologies (AT)
Advanced Technologies (AT)
Provides comprehensive solutions across the space,
defence and terrestrial sectors. Diverse capabilities
encompassing software development, product design,
custom manufacturing, full lifecycle support, project
management, multi-disciplinary system solutions, satellite
operations and hosting services.
Space
Terrestrial
Defence
27%
of total Revenues
$178M
FY23 Revenues
Three months ended
Year ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Product
Service
Revenues
Gross profit
Gross profit %
Adjusted EBITDA1
Adjusted EBITDA1 Margin%
$
32,367
20,154
52,521
18,676
36%
11,087
21%
$
16,021
14,496
30,517
10,176
33%
4,516
15%
Organic/ Acquisitive Revenue Growth
58% / 14%
-29% / Nil
New contract signings (gross)
Backlog
52,000
148,805
60,000
159,726
$
106,298
72,065
178,363
59,887
34%
28,276
16%
16% / 3%
192,000
148,805
$
93,038
57,360
150,398
43,335
29%
20,657
14%
-10% / Nil
185,000
159,726
Three-months ended September 30, 2023
For the three-month period ended September 30, 2023, revenues increased 72% to $52,521, compared to the same
period last year and represented record quarterly revenues for the segment. Acquisitive growth was 14% and was
generated by the acquisition of Hawaii Pacific Teleport (HPT) which closed on August 1, 2023. Organic growth was 58%
and was driven by strong product sales across all divisions, including GNSS antennas, telecom products and software
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
38
39
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. For the three-month period ended September 30, 2023, adjusted EBITDA1 increased 69% to a record quarterly high of
$10,722, compared to the same period last year. This significant growth was driven by increased revenue and short-term
health response demand, which boasts higher margins due to the nature of the services provided. Adjusted EBITDA1
margin increased to 21%, from 16% for the same period last year.
In the quarter, Health signed new contracts valued at $29 million.
Twelve-months ended September 30, 2023
For the year ended September 30, 2023, revenues increased 11% to $184,856, compared to the same period last year.
This growth was all organic and was driven by higher customer demand on long term contracts, new business wins from
clinician services and a solid performance from Contract Research Organization (CRO) services.
For the year ended September 30, 2023, adjusted EBITDA1 increased 18% to $33,383, compared to the same period last
year and adjusted EBITDA1 margin increased to a record annual high of 18%, versus 17% for the prior year year. This growth
was driven by increased revenues and higher margin business. It was partially offset by increased operating expenses.
Selected highlights for the year:
• Appointed Derek Clark to President, Health
• Signed new contracts including Immigration, Refugees and Citizenship Canada (IRCC), Indigenous Services Canada
and Syantra
• Signed two Software as a Service customers for Nexi
• Launched Digital Health portfolio of products
• Improved its bench strength with the appointment of a new VP Sales, VP Strategy & Growth and Chief Psychologist
For the year, Health signed new contracts valued at $115 million and ended the year with a solid realizable backlog of
$633 million.
Health
Health
Health
Provides comprehensive solutions across the space,
Combines deep domain expertise in healthcare services, pharma
defense, and terrestrial sectors. Diverse capabilities
solutions and digital technologies to enable better access to care.
encompassing software development, product design,
With a vast network of over 2,800 healthcare professionals
spanning 85 specialties, Calian’s Health segment improves
custom manufacturing, full lifecycle support, project
management, multi-disciplinary system solutions, satellite
access to care by connecting patients and providers with service
delivery, clinical knowledge and digital technology.
operations, and hosting services.
Health Service
Health Service
Pharma Solution
Pharma Solution
Digital Health
28%
28%
of total Revenues
of total Revenues
$185M
$185M
FY23 Revenues
FY23 Revenues
Three months ended
Year ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
$
1
51,567
51,568
15,179
29%
10,722
21%
31% / Nil
29,000
632,832
$
5
39,465
39,470
10,030
25%
6,357
16%
-11% / Nil
35,000
707,084
$
1
184,855
184,856
48,684
26%
33,383
18%
11% / Nil
115,000
632,832
$
5
167,136
167,141
41,551
25%
28,334
17%
-14% / Nil
154,000
707,084
Product
Service
Revenues
Gross profit
Gross profit %
Adjusted EBITDA1
Adjusted EBITDA1 Margin%
Organic/ Acquisitive Revenue Growth
New contract signings (gross)
Backlog
Three-months ended September 30, 2023
For the three-month period ended September 30, 2023, revenues increased 31% to $51,568, compared to the same
period last year and represented its highest quarterly revenue for the segment since the peak demands during the
pandemic. This growth is all organic and was driven by significantly increased demand with our long-standing customers
as well as short-term health response demand.
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
40
41
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. customers as well as demand for new products and technologies for NATO customers due to geo-political issues and
renewed focus on readiness.
For the three-month period ended September 30, 2023, adjusted EBITDA1 increased 4% to $3,105, compared to the
same period last year driven by revenue growth and increased gross margins. It was partially offset by increased
research and development expenses to support growth in new countries in Europe. Adjusted EBITDA1 margin declined
slightly to 13% from 14% when compared to the same period of the previous year.
In the quarter, Learning signed new contracts valued at $8 million.
Twelve-months ended September 30, 2023
For the year ended September 30, 2023, revenues increased 16% to $106,192, compared to the same period last year,
surpassing the $100,000 mark for the first time. This growth was all organic and was primarily driven by strong demand
with existing customers.
For the year ended September 30, 2023, adjusted EBITDA1 was $16,560, in line with the same period last year, as
increased research and development expenses of $3,049 offset the growth in revenues and gross profit. As a result,
adjusted EBITDA1 margin decreased to 16%, versus 18% last year.
Selected highlights for the year:
• Experienced strong demand in legacy contracts in Canada due to the geo-political environment and a renewed focus
on readiness
• Expanded the Company’s global training footprint in NATO countries with projects in France, Turkey, Poland, Germany,
the Netherlands, Australia, the Philippines, Jamaica, Indonesia, Jordan and Switzerland
• Continued to innovate by bringing new integrated synthetic training environment capabilities online, developing
features for command-and-control software and embedding artificial intelligence in the Company’s exercise design
capabilities
• Increased academic clients with the University of Guelph, Sault College, Conestoga College, Centennial College and
McMaster University
For the year, Learning signed new contracts valued at $26 million and ended the year with a solid realizable backlog of
$248 million.
Learning
Learning
Provides specialized training and immersive learning solutions to
defence, commercial, and higher education clients domestically and
in international markets. The segment continues to grow its footprint
in Europe servicing NATO and NATO member countries with a variety
of military training and simulation technologies and services. It also
provides consulting services in emergency management to federal,
provincial and municipal governments, indigenous communities,
academia, and the private sector.
$106M
FY23 Revenues
Learning Technologies
and Innovation
Defence Learning
and Training
Emergency Management
Immersive Learning
16%
of total Revenues
Three months ended
Year ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
$
1,567
22,661
24,228
5,600
23%
3,105
13%
11% / Nil
8,000
247,712
$
1,581
20,218
21,799
4,867
22%
2,989
14%
8% / 16%
10,000
328,330
$
6,235
99,957
106,192
26,952
25%
16,560
16%
16% / Nil
26,000
247,712
$
3,670
87,998
91,668
23,271
25%
16,883
18%
7% / 16%
154,000
328,330
Product
Service
Revenues
Gross profit
Gross profit %
Adjusted EBITDA1
Adjusted EBITDA1 Margin%
Organic/ Acquisitive Revenue Growth
New contract signings (gross)
Backlog
Three-months ended September 30, 2023
For the three-month period ended September 30, 2023, revenues increased 11% to $24,228, compared to the same
period last year. This growth is all organic and was driven by strong demand for military training with existing Canadian
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
42
43
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. ITCS
ITCS
Offers IT and cybersecurity solutions to
support customers in their digital
transformation from advisory through to
implementation, as well as the delivery,
management, monitoring and securing of
complex IT infrastructures.
$189M
FY23 Revenues
Cybersecurity
Enterprise Soutions
Digitalization
XaaS
29%
of total Revenues
Three months ended
Year ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Product
Service
Revenues
Gross profit
Gross profit %
Adjusted EBITDA1
Adjusted EBITDA1 Margin %
$
12,856
34,775
47,631
16,341
34%
5,653
12%
$
37,111
31,653
68,764
25,077
36%
12,393
18%
$
44,741
144,431
189,172
68,689
36%
23,459
12%
Organic/ Acquisitive Revenue Growth
-31% / Nil
12% / 185%
-13% / 22%
New contract signings (gross)
Backlog
87,000
140,688
56,000
96,515
247,000
140,688
$
62,542
110,423
172,965
61,069
35%
29,521
17%
8% / 102%
206,000
96,515
Three-months ended September 30, 2023
For the three-month period ended September 30, 2023, revenues decreased 31% to $47,631, compared to the same
period last year where a disproportionate amount of products were shipped due to the easing of supply chain issues.
The decrease is also due to lower revenues from on demand government and managed services due to market
dynamics.
For the three-month period ended September 30, 2023, adjusted EBITDA1 decreased 54% to $5,653, compared to the
same period last year, due to lower revenues in a highly fixed cost business. It was partially offset by the implementation
of the restructuring plan midway through the quarter which saw a reduction in selling and marketing expenses of $2,560.
As a result, adjusted EBITDA1 margin decreased to 12%, from 18% for the same period last year.
In the quarter, ITCS signed new contracts valued at $87 million, implying a book-to-bill ratio of 1.8.
Twelve-months ended September 30, 2023
For the year ended September 30, 2023, revenues increased 9% to $189,172, compared to the same period last year.
Acquisitive growth was 22% which is due to the remainder of the acquisitive contribution from the acquisition of
Computex which was completed in the prior year. Organic growth was negative 13% due to lower revenues in the second
half of the year, primarily as a result of its value-added resale business in the U.S.
Note that Calian measures growth through acquisition on a trailing twelve-month basis. Once the acquisition has been
included in results for twelve months, its contribution is included in the organic growth metric.
For the year ended September 30, 2023, adjusted EBITDA1 decreased 21% to $23,459, compared to the same period
last year and adjusted EBITDA1 margin decreased to 12% versus 17% last year. This performance decline is primarily due
to lower revenues relating to our VAR sales intake in the prior year coupled with a highly fixed cost business, along with
growth investments made since the start of the fiscal year which were addressed in the restructuring plan implemented
midway through the fourth quarter.
Selected highlights for the year:
• Appointed Michael Tremblay as new President, ITCS subsequent to year end
• Signed new contracts including Shared Services Canada, GPD Companies, Resound Networks, Omni-Logistics as
well as for one of the world’s leading gas companies, family entertainment company and powersports company
• Recognized as an Elite 500 on CRN’s Managed Service Provider 500 list for 2023
• Earned various partner recognition awards from CrowdStrike, Cisco, Microsoft, OECM, Proofpoint and Forescout
For the year, ITCS signed new contracts valued at $247 million and ended the year with a solid backlog of $141 million.
Backlog for the segment has increased by $40 million from the third quarter ended amount which suggests that some
delays occurred for product shipments which will push into fiscal 2024.
Shared Services
For the three-month period ended September 30, 2023, shared services expenses increased by $2,998 to $10,186,
compared to the same period last year. This is due to additional costs in relation to M&A activities, additional
investments in information system applications to support the organizations growth, and costs recognized for
performance share units which pertain to long term growth targets of the Company.
For the year ended September 30, 2023, shared services expenses increased by $6,228 to $35,691, compared to the
same period last year. These increased expenses relate to additional headcount to support growth, additional costs for
key functions such as M&A and information systems, additional costs from foreign exchange and costs noted for
performance share units.
Selected Quarterly Financial Data
The Company’s operations are subject to some quarterly seasonality due to the timing of vacation periods, statutory
holidays, industry-specific seasonal cycles and the timing and delivery of milestones for significant projects. Typically,
the Company’s first and fourth quarters will be negatively impacted because of the Christmas season and summer
vacation period. During these periods, the Company can only invoice or recognize revenue for work performed and is
also required to pay for statutory holidays. This seasonality may not be apparent in the overall results of the Company,
depending on the impact of the realized sales mix of its various projects. The following table sets forth selected financial
information for the Company’s past eight quarters.
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
44
45
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. (Canadian dollars in millions, except per share data)
Fourth Quarter Financial Summary
Q4/23
Q3/23
Q2/23
Q1/23
Q4/22
Q3/22
Q2/22
Q1/22
This fourth quarter unaudited interim condensed consolidated financial summary should be read in conjunction with the
annual financial statements along with accompanying notes thereto.
Revenues
Advanced Technologies
Health
Learning
ITCS
Total Revenue
Cost of revenue
Gross profit
Selling and marketing
General and administration
Research and development
Profit before under noted items
Depreciation of equipment,
application software and capitalized
research and development
Depreciation of right of use assets
Amortization of acquired intangible
assets
Other changes in fair value
Restructuring expense
Deemed compensation
Changes in fair value related to
contingent earn-out
Profit before interest and income tax
expense
Lease interest expense
Interest expense (income)
Profit before income tax expense
Income tax expense
Net profit
Weighted average shares
outstanding - Basic
Weighted average shares
outstanding - Diluted
Net profit per share
Basic
Diluted
Adjusted EBITDA1 per share
Basic
Diluted
$
52.5
51.6
24.2
47.6
$
44.8
49.1
26.7
45.9
$
46.8
43.6
28.8
49.3
$
34.3
40.4
26.4
46.4
$
30.5
39.4
21.8
68.8
$
39.2
39.7
22.3
48.8
175.9
166.5
168.5
147.5
160.5
150.0
$
39.6
45.4
24.8
32.3
142.1
102.3
110.4
104.5
102.2
120.2
115.4
55.7
10.5
22.0
2.8
20.4
2.1
1.4
4.5
(0.3)
2.6
0.4
0.4
9.3
0.2
0.6
8.5
3.4
5.1
51.1
11.9
21.4
3.3
14.5
2.4
1.2
3.6
-
-
-
-
7.3
0.1
(0.2)
7.4
2.7
4.7
116.5
52.0
11.8
20.5
2.9
16.8
2.3
1.0
3.4
-
-
0.1
2.5
7.5
0.1
-
7.4
2.9
4.5
45.2
11.1
17.4
2.4
14.3
2.3
1.0
3.4
-
-
0.1
0.7
6.8
0.1
-
6.7
2.1
4.6
50.1
13.1
17.0
1.0
19.0
2.4
1.0
3.5
-
-
3.3
2.3
6.5
0.1
-
6.4
5.4
1.0
45.5
9.6
18.0
1.8
16.1
2.3
1.0
3.4
-
-
-
0.7
8.7
0.1
0.1
8.5
1.8
6.7
$
41.1
42.4
22.8
23.2
129.5
95.8
33.7
4.5
13.8
1.4
14.0
1.2
0.8
3.6
-
-
39.9
5.3
16.6
1.2
16.8
1.4
0.9
10.1
-
-
0.2
0.7
1.6
2.6
0.1
0.1
2.4
1.1
1.3
1.0
6.7
0.1
0.1
6.5
2.2
4.3
11.8M
11.7M
11.7M
11.6M
11.4M
11.3M
11.3M
11.3M
11.8M
11.8M
11.8M
11.7M
11.5M
11.4M
11.4M
11.4M
0.43
0.43
0.40
0.40
0.39
0.38
0.39
0.39
1.73
1.72
1.24
1.23
1.45
1.45
1.23
1.22
0.10
0.10
1.67
1.66
0.60
0.60
1.48
1.47
0.11
0.11
1.24
1.23
0.38
0.38
1.24
1.23
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
46
Consolidated Statements of Net Profit
For the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share data):
Three months ended
Year ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
$
$
$
$
52,521
51,568
24,228
47,631
30,517
39,470
21,799
68,764
178,363
184,856
106,192
189,172
175,948
160,550
658,583
Revenue
Advanced Technologies
Health
Learning
ITCS
Total Revenue
Cost of revenues
Gross profit
Selling and marketing
General and administration
Research and development
Profit before under noted items
Depreciation of equipment, application software
and capitalized research and development
Depreciation of right of use assets
Amortization of acquired intangible assets
Restructuring expense
Other changes in fair value
Deemed compensation
Changes in fair value related to contingent
earn-out
Profit before interest income and income tax
expense
Lease obligations interest expense
Interest expense
Profit before income tax expense
Income tax expense – current
Income tax recovery – deferred
Total income tax expense
NET PROFIT
Net profit per share:
Basic
Diluted
120,152
55,796
10,545
22,034
2,836
20,381
2,133
1,352
4,460
2,618
(314)
403
416
9,313
159
634
8,520
3,776
(375)
3,401
5,119
0.43
0.43
110,400
50,150
13,064
17,004
1,015
19,067
2,308
950
3,484
-
-
3,314
2,289
6,722
143
7
6,572
5,650
(273)
5,377
1,195
0.10
0.10
150,398
167,141
91,668
172,965
582,172
412,946
169,226
32,514
65,408
5,372
65,932
6,974
3,629
20,555
-
-
4,314
5,555
454,371
204,212
45,410
81,363
11,452
65,987
9,043
4,501
14,874
2,618
(314)
550
3,858
30,857
24,905
531
365
29,961
12,919
(1,843)
11,076
18,885
1.61
1.61
451
295
24,159
14,307
(3,752)
10,555
13,604
1.19
1.19
47
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd.
The diluted weighted average number of shares has been calculated as follows:
Three months ended
Year ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Weighted average number of common
shares – basic
Additions to reflect the dilutive effect of
employee stock options and RSUs
Weighted average number of common
shares – diluted
11,790,964
11,399,172
11,714,887
11,343,615
49,575
72,928
25,791
39,725
11,840,539
11,472,100
11,740,678
11,383,340
The following table presents the revenue of the Company for the year ended September 30, 2023 and 2022 (Canadian
dollars in thousands):
Product revenue
Advanced Technologies
Health
Learning
ITCS
Total product revenue
Service revenue
Advanced Technologies
Health
Learning
ITCS
Total service revenue
Three months ended
Year ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
$
$
$
$
32,367
1
1,567
12,856
46,791
20,154
51,567
22,661
34,775
129,157
16,021
5
1,581
37,111
54,718
14,496
39,465
20,218
31,653
105,832
106,298
1
6,235
44,741
157,275
72,065
184,855
99,957
144,431
501,308
93,038
5
3,670
62,542
159,255
57,360
167,136
87,998
110,423
422,917
Total revenue
175,948
160,550
658,583
582,172
Consolidated Statements of Cash Flows
For the years ended September 30, 2023 and 2022 (Canadian dollars in thousands):
CASH FLOWS GENERATED FROM (USED IN)
OPERATING ACTIVITIES
Net profit
Items not affecting cash:
Interest expense
Changes in fair value related to contingent
earn-out
Lease obligations interest expense
Income tax expense
Employee share purchase plan expense
Share based compensation expense
Depreciation and amortization
Deemed compensation
Other changes in fair value
Change in non-cash working capital
Accounts receivable
Work in process
Prepaid expenses and other
Inventory
Accounts payable and accrued liabilities
Unearned contract revenue
Interest paid
Income tax paid
CASH FLOWS GENERATED FROM (USED IN)
FINANCING ACTIVITIES
Issuance of common shares net of costs
Dividends
Draw (repayment) on debt facility
Payment of lease obligations
Repurchase of common shares
CASH FLOWS USED IN INVESTING ACTIVITIES
Investments
Business acquisitions
Capitalized research and development
Equipment and application software
Three months ended
Year ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
$
$
$
$
5,119
1,195
18,885
13,604
634
416
159
3,401
130
1,618
7,945
403
(314)
19,511
(8,971)
6,166
(3,848)
1,873
9,475
4,918
29,124
(791)
(5,629)
22,704
760
(3,335)
37,750
(1,261)
(1,670)
32,244
-
(59,834)
-
(2,368)
(62,202)
7
365
2,289
143
5,377
125
571
6,742
3,314
-
19,763
(41,755)
13,785
(10,443)
681
20,962
403
3,396
(150)
(3,258)
(12)
571
(3,249)
-
(929)
-
(3,607)
-
(2,928)
(2)
(2,240)
(5,170)
3,858
531
11,076
597
3,273
28,418
550
(314)
67,239
1,393
23,285
(829)
(3,340)
(17,947)
928
70,729
(895)
(13,059)
56,775
2,901
(13,163)
30,250
(4,382)
(1,670)
13,936
(2,689)
(68,494)
(86)
(8,354)
(79,623)
295
5,555
451
10,555
518
1,927
31,158
4,314
-
68,377
(28,822)
15,444
(20,137)
(4,340)
15,142
11,333
56,997
(747)
(13,109)
43,141
2,705
(12,765)
7,500
(3,655)
-
(6,215)
-
(65,566)
(177)
(7,148)
(72,891)
NET CASH OUTFLOW
(7,254)
(8,789)
(8,912)
(35,965)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD
CASH AND CASH EQUIVALENTS, END OF PERIOD
40,988
33,734
51,435
42,646
42,646
33,734
78,611
42,646
48
49
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd.
Segmented information is as follows for three months ended September 30, 2023 (Canadian dollars in thousands):
Segmented information is as follows for three months ended September 30, 2022 (Canadian dollars in thousands):
For the three months ended
September 30, 2023
Advanced
Technologies
Health
Learning
ITCS
For the three months ended
September 30, 2022
Advanced
Technologies
Health
Learning
ITCS
Revenue
Cost of revenues
Gross profit
Gross profit %
Selling and marketing
General and administration
Research and development
Profit before under noted
items
Profit before under noted
items %
Depreciation of equipment,
application software and R&D
Depreciation of right of use
asset
Amortization of acquired
intangibles
Other changes in fair value
Restructuring expense
Deemed compensation
Changes in fair value related to
contingent earn-out
Profit before interest income
and income tax expense
Lease interest expense
Interest income
Profit before income tax
expense
Income tax expense – current
Income tax recovery – deferred
Total income tax expense
NET PROFIT FOR THE PERIOD
$
52,521
33,845
18,676
36%
2,649
3,390
1,550
$
51,568
36,389
15,179
29%
914
3,066
477
$
24,228
18,628
5,600
$
47,631
31,290
16,341
Shared
Services
$
-
-
-
Total
$
175,948
120,152
55,796
23%
34%
483
1,217
795
5,733
4,941
14
N/A%
766
9,420
-
32%
10,545
22,034
2,836
11,087
10,722
3,105
5,653
(10,186)
20,381
21%
21%
13%
12%
N/A%
12%
2,133
1,352
4,460
(314)
2,618
403
416
9,313
159
634
8,520
3,776
(375)
3,401
5,119
$
30,517
20,341
10,176
$
39,470
29,440
10,030
$
21,799
16,932
4,867
$
68,764
43,687
25,077
Shared
Services
$
-
-
-
Total
$
160,550
110,400
50,150
33%
25%
22%
36%
N/A%
31%
2,764
2,162
734
749
2,823
101
457
1,421
-
8,293
4,211
180
801
6,387
-
13,064
17,004
1,015
4,516
6,357
2,989
12,393
(7,188)
19,067
15%
16%
14%
18%
N/A%
12%
2,308
950
3,484
3,314
2,289
6,722
143
7
6,572
5,650
(273)
5,377
1,195
Revenue
Cost of revenues
Gross profit
Gross profit %
Selling and marketing
General and administration
Research and development
Profit before under noted
items
Profit before under noted
items %
Depreciation of equipment,
application software and R&D
Depreciation of right of use
asset
Amortization of acquired
intangibles
Deemed compensation
Changes in fair value related to
contingent earn-out
Profit before interest income
and income tax expense
Lease interest expense
Interest income
Profit before income tax
expense
Income tax expense – current
Income tax recovery – deferred
Total income tax expense
NET PROFIT FOR THE PERIOD
Financial Position
Working capital as a percentage of revenue has remained steady at 13.6% at September 30, 2023 versus 13.8% for the
prior year. This is a testament to the Company’s ability to increase growth while managing it’s investments in working
capital. The total working capital for the Company has increased which is primarily a factor of acquisitions made in the
fiscal year, however the cash flow impact from working capital for the three-month period ended September 30, 2023
was positive, returning over $9 million in cash to the Company. Working capital is calculated using the Company’s
current accounts receivable, work in process, inventory and prepaid expenses less the Company’s current accounts
payable and accrued liabilities, provisions and unearned contract revenue.
50
51
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. Assets
Share Capital
As at September 30, 2023, total assets stood at $585,723, versus $547,162 as at September 30, 2022. The increase in
total assets is primarily a result of the acquisition of HPT with the corresponding purchased assets.
As at September 30, 2023, the capital stock issued and outstanding of the Company consisted of 11,812,650 common
shares (11,607,391 as at September 30, 2022).
As at September 30, 2023, cash and cash equivalents were $33,734, compared to $42,646 at September 30, 2022.
The following table presents the outstanding capital stock activity for the twelve-month periods ended September 30,
2023 and September 30, 2022.
Liabilities
As at September 30, 2023, total liabilities stood at $257,351, versus $241,976 as at September 30, 2022. The increase is
primarily a result of the acquisition of HPT.
On July 24, 2023, Calian closed a $180 million debt facility with a lending syndicate. This new three-year term revolving
credit facility includes an uncommitted accordion of $75 million for total availability of up to $255 million. As at
September 30, 2023, the Company had an unused debt facility of $142,250. This facility, combined with cash on hand,
provides Calian with net liquidity of $175,984 to pursue its growth.
As at September 30, 2023, Calian had net debt of $4,016 and its net debt to adjusted EBITDA1 ratio was 0.1x, well below
its maximum target of 2.5x. Net debt is defined as the Company’s cash less its debt balance. As at September 30, 2023,
the Company was in full compliance with its debt covenants.
Management believes that the Company has sufficient cash resources to continue to finance its working capital
requirements and pay a quarterly dividend.
There were no off-balance sheet arrangements as at September 30, 2023.
Shareholders’ Equity
As at September 30, 2023, shareholders’ equity stood at $328,372, compared to $305,186 as at September 30, 2022.
The increase in shareholders’ equity was mainly attributable to net profit of $18,885, a $4,885 increase in accumulated
other comprehensive income and shares issued of $12,871, partially offset by $13,163 million in dividends, share
repurchases of $1,669 and the costs of equity compensation incurred in the year.
On August 30, 2023, the TSX accepted Calian’s Notice of Intention to Make a Normal Course Issuer Bid (“NCIB”) to
purchase for cancellation up to 1,044,012 common shares during the 12-month period commencing September 1, 2023
and ending August 31, 2024, representing approximately 10% of the public float of its common shares as at August 22,
2023.
For the three and twelve month periods ended September 30, 2023, the Company repurchased 32,094 common
shares for cancellation in consideration of $1,669 under its NCIB.
Balance October 1
Shares issued under employee share plans
Shares issued under employee share purchase plan
Shares issued through acquisition
Shares cancelled through NCIB program
Issued capital
Weighted average number of common shares – basic
Weighted average number of common shares – diluted
Twelve-months ended
September 30, 2023
Twelve-months ended
September 30, 2022
11,607,391
11,285,828
60,311
48,620
128,422
(32,094)
11,812,650
11,714,887
11,747,525
45,742
35,147
240,674
-
11,607,391
11,343,615
11,383,340
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
52
53
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. Liquidity and Capital Resources
The following table provides selected information from the cash flow statement.
Three months ended
Year ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
$
5,119
14,392
19,511
9,613
(6,420)
22,704
(3,335)
37,750
(2,171)
$
1,195
18,568
19,763
(16,367)
(3,408)
$
18,885
48,354
67,239
3,490
(13,954)
(12)
56,775
(3,249)
-
(358)
(13,163)
30,250
(3,151)
$
13,604
54,773
68,377
(11,380)
(13,856)
43,141
(12,765)
7,500
(950)
32,244
(3,607)
13,936
(6,215)
-
(59,834)
(2,368)
(62,202)
(7,254)
-
(2,928)
(2,242)
(5,170)
(8,789)
(2,689)
(68,494)
(8,440)
-
(65,566)
(7,325)
(79,623)
(72,891)
(8,912)
(35,965)
40,988
51,435
42,646
78,611
33,734
42,646
33,734
42,646
Net profit
Items not affecting cash:
CASH FLOWS FROM OPERATING
ACTIVITIES BEFORE CHANGES IN
WORKING CAPITAL
Change in non-cash working capital
Interest and income tax paid
CASH FLOWS FROM (USED IN)
OPERATING ACTIVITIES
Dividends
Draw (repayment) on debt facility
Other
CASH FLOWS GENERATED FROM
(USED IN) FINANCING ACTIVITIES
Investments
Business acquisitions
Capital Expenditures
CASH FLOWS USED IN INVESTING
ACTIVITIES
NET CASH OUTFLOW
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS, END
OF PERIOD
Operating Activities
For the three-month period ended September 30, 2023, cash flows generated from operating activities amounted to
$22,704, compared to an outflow of $12 for the same period last year, mainly due to higher profitability and working
capital recapture.
For the year ended September 30, 2023, cash flows generated from operating activities amounted to $56,775,
compared to $43,141 for the same period last year, mainly due to higher profitability and working capital recapture.
Financing Activities
For the three-month period ended September 30, 2023, financing activities increased cash by $32,244 mainly due to
borrowings on the credit facility of $37,750, partially offset by dividend payments of $3,335 and share repurchases of
$1,669. For the three-month period ended September 30, 2022, financing activities decreased cash by $3,607, primarily
as a result of dividend payments of $3,249.
For the year ended September 30, 2023, financing activities increased cash by $13,936, mainly due to borrowings on the
credit facility of $30,250, partially offset by dividend payments of $13,163 and share repurchases of $1,669. For the year
ended September 30, 2022, financing activities decreased cash by $6,215, mainly due to dividend payments of $12,765,
partially offset by borrowings on the credit facility of $7,500.
Note that Calian intends to continue to declare a quarterly dividend in line with its overall financial performance and cash
flow generation. Decisions on dividend payments are made on a quarterly basis by the Board of Directors. There can be
no assurance as to the amount of such dividends in the future.
Investing Activities
For the three-month period ended September 30, 2023, investing activities decreased cash by $62,202, primarily due
to the acquisition of HPT coupled with earn-out payments for previous acquisitions totaling $59,834. For the three-
month period ended September 30, 2022, investing activities decreased cash by $5,170 mainly due to earn-out
payments for previous acquisitions of $2,928 and capital expenditures of $2,242.
For the year ended September 30, 2023, investing activities decreased cash by $79,623, primarily due to the acquisition
of HPT coupled with earn-out payments for previous acquisitions totaling $68,494 and capital expenditures of $8,440.
For the year ended September 30, 2022, investing activities decreased cash by $72,891 mainly due to the acquisition of
Computex and earn-out payments for previous acquisitions of $65,566 and capital expenditures of $7,325.
Subsequent Events
In November 2023, the Company entered into a definitive agreement to acquire all outstanding shares of Decisive
Group Inc. (“Decisive”), an IT infrastructure and cyber security services business, for total cash consideration of
approximately $50,000 including earnouts of up to $24,725 based on the achievement of certain levels of EBITDA
performance over the next 12 months. This transaction was completed on December 1, 2023. Decisive will be reported
as part of the ITCS operating segment.
Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures
The following non-GAAP measures are mainly derived from the consolidated financial statements, but do not have a
standardized meaning prescribed by IFRS; therefore, others using these terms may calculate them differently. The
exclusion of certain items from non-GAAP performance measures does not imply that these are necessarily
nonrecurring. From time to time, we may exclude additional items if we believe doing so would result in a more
transparent and comparable disclosure. Other entities may define these measures differently than we do. In those
cases, it may be difficult to use similarly named non-GAAP measures of other entities to compare performance of those
entities to the Company’s performance.
Management believes that providing certain non-GAAP performance measures, in addition to IFRS measures, provides
users of the Company’s financial reports with enhanced understanding of the Company’s results and related trends and
increases transparency and clarity into the core results of the business. Adjusted EBITDA excludes items that do not
reflect, in our opinion, the Company’s core performance and helps users of our MD&A to better analyze our results,
enabling comparability of our results from one period to another.
1 Refer to the section entitled “Reconciliation of Non-GAAP Measures to Most Comparable IFRS Measures” of this MD&A for an explanation of the
non-GAAP measure.
54
55
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. Adjusted EBITDA
Operating Free Cash Flow
Three months ended
Year ended
Three months ended
Year ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
$
$
Net profit
Depreciation of equipment and
application software
Depreciation of right of use asset
Amortization of acquired intangible
assets
Restructuring expense
Other changes in fair value
Lease interest expense
Changes in fair value related to
contingent earn-out
Interest expense (income)
Deemed Compensation
Income tax
Adjusted EBITDA
5,119
2,133
1,352
4,460
2,618
(314)
159
416
634
403
3,401
20,381
Adjusted Net Profit and Adjusted EPS
1,195
2,308
950
3,484
-
-
143
2,289
7
3,314
5,377
19,067
$
18,885
9,043
4,501
14,874
2,618
(314)
531
3,858
365
550
11,076
65,987
$
13,604
6,974
3,629
20,555
-
-
451
5,555
295
4,314
10,555
65,932
Three months ended
Year ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
$
5,119
2,618
(314)
416
403
4,460
12,702
$
1,195
-
-
2,289
3,314
3,484
10,282
$
18,885
2,618
(314)
3,858
550
14,874
40,471
$
13,604
-
-
5,555
4,314
20,555
44,028
11,790,964
11,399,172
11,714,887
11,343,615
1.08
1.07
0.90
0.90
3.45
3.45
3.88
3.87
Net profit
Restructuring expense
Other changes in fair value
Changes in fair value related to
contingent earn-out
Deemed Compensation
Amortization of intangibles
Adjusted net profit
Weighted average number of
common shares basic
Adjusted EPS Basic
Adjusted EPS Diluted
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
$
$
$
$
22,704
-
(2,368)
20,336
(12)
(2)
(2,240)
(2,254)
56,775
43,141
(86)
(8,354)
48,335
(177)
(7,148)
35,816
20,336
(2,254)
48,335
35,816
Cash flows generated from operating
activities
Capitalized research and
development
Equipment and application software
Free cash flow
Free cash flow
Adjustments:
Change in non-cash working capital
Operating free cash flow
Operating free cash flow per share
(9,613)
10,723
0.91
16,367
14,113
1.24
(3,490)
44,845
3.83
11,380
47,196
4.16
The Company uses adjusted net profit, and adjusted earnings per share, which remove the impact of our acquisition
amortization and gains, resulting in accounting for acquisitions and changes in fair value to measure our performance.
Operating free cash flow measures the company’s cash profitability after required capital spending when excluding
working capital changes. These measurements better align the reporting of our results and improve comparability
against our peers. We believe that securities analysts, investors and other interested parties frequently use non-GAAP
measures in the evaluation of issuers. Management also uses non-GAAP measures in order to facilitate operating
performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our
capital expenditure and working capital requirements. Adjusted profit and adjusted earnings per share are not
recognized, defined or standardized measures under IFRS. Our definition of adjusted net profit and adjusted earnings
per share will likely differ from that used by other companies (including our peers) and therefore comparability may be
limited. Non-GAAP measures should not be considered a substitute for or be considered in isolation from measures
prepared in accordance with IFRS. Investors are encouraged to review our financial statements and disclosures in their
entirety and are cautioned not to put undue reliance on non-GAAP measures and view them in conjunction with the most
comparable IFRS financial measures. The Company has reconciled adjusted net profit to the most comparable IFRS
financial measure as shown above.
56
57
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. Risk and Uncertainties
26. Dependence on Subsidiaries’ Cash Flows
1. Economic uncertainty
27. Reputational and brand risks
28. Errors and defects in technology
2. Sustainability and management of recent growth
29. Tax consequences
3.
Acquisitions (none available, we don’t grow, we don’t
integrate)
30. Privacy concerns
31. Intellectual property infringement and protection
4. Access to Capital
5. Negative covenants in credit facilities
6. Liquidity/cash flow
7. Availability of commodities and inflationary prices
8. Security breaches – cyber attacks
9. Competition within key markets
10. Availability of qualified professionals
11.
Government contracts
12. Defence industry
13. Non-Performance of a key supplier or contractor
14. Senior management personnel and succession
planning
15. Concentration of key revenues
16. Performance on Fixed-Priced Contracts
17.
Rapidly changing technologies and customer
demands
18. Outsourcing/subcontracting
32. Manufacturing limitations
33. Use of open-source software
34. Use of licensed technology
35. Insurance sufficiency
36. Medical malpractice
37. Negotiation of facilities leases
38. Warranty and product liability claims
39. Litigation
40. Climate risks
41. Environmental and Health & Safety risks
43. Fraud
44. Corruption
45. Conflicts of Interest
46. Product obsolesce
19. Historical pricing trends
47. Covid-19 and impact on global markets
20. Customer’s ability to retain market share
48. Changes in Laws, Rules and Regulations
21. Consolidation of customer base
49. SRED or other R&D tax credits
22. Backlog
50. Transfer pricing
23. Accounts Receivable collection risk
51. Investment in R&D
24. Foreign currency
25. Foreign operations
52. Compliance with ESG reporting requirements
A comprehensive discussion of risks, including risks not specifically listed above, can be found in our most recently filed
Annual Information Form. Additional risks and uncertainties not presently known to us or that we currently consider
immaterial also may impair our business and operations and cause the price of our shares to decline. If any of the noted
risks actually occur, our business may be harmed and our financial condition and results of operations may suffer
significantly.
Critical Accounting Judgements and Key Sources of Estimation
Uncertainty
Estimates
The preparation of financial statements in conformity with IFRS requires the Company’s management to make
judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets and liabilities and disclosure of contingent liabilities as at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting periods presented. Actual results could differ from those
estimates.
Project completion for revenue
The Company enters into fixed-price contracts which can extend over more than one reporting period. Revenue from
these fixed-price projects is recognized over time using the input method using management’s best estimate of the
costs and related risks associated with completing the projects. Management’s approach to revenue recognition is
tightly linked to detailed project management processes and controls. The information provided by the project
managers combined with a knowledgeable assessment of technical complexities and risks are used in estimating the
percentage complete. Specifically for the Advanced Technologies fixed-price contracts, there is significant judgement
and estimation uncertainty in determining the estimated costs to complete, including materials, labour and
subcontractor costs.
Impairment of goodwill and intangible assets
Determining whether goodwill or acquired intangible assets are impaired requires an estimation of the value of the
cash-generating units. This was done through the value in use calculation. The value in use calculation requires
management to estimate the future cash flows expected to arise from the cash-generating unit, and a suitable discount
rate in order to calculate the present value.
The Company records deferred income tax assets and liabilities related to deductible or taxable temporary differences.
The Company assesses the value of these assets and liabilities based on the likelihood of the realization as well as the
timing of reversal given management assessments of future taxable income.
Judgments
Business combinations
The consideration transferred for an acquired business is assigned to the identifiable tangible and intangible assets
purchased, along with liabilities assumed on the basis of their acquisition date fair values. The identification of assets
purchased and liabilities assumed and the valuation thereof is specialized and judgmental. Where appropriate, the
Company engages external business valuators to assist in the valuation of tangible and intangible assets acquired.
When a business combination involves contingent consideration, an amount equal to the fair value of the contingent
consideration is recorded as a liability at the time of acquisition and is measured at the estimated fair value at each
reporting period. The key assumptions utilized in determining fair value of contingent consideration may include
probabilities associated with the occurrence of specified future events, financial projections of the acquired business,
the timing of future cash flows, cash flow volatility and the appropriate discount rate.
Deferred income taxes
The Company’s accounting policy with regards to income taxes is described in Note 2. In applying this policy, judgments
are made in determining the probability of whether deductions or tax credits can be utilized and related timing of
such items.
42. Events out of the Company’s control (natural disasters,
war, terrorism, illness, etc.,)
Income taxes
58
59
Annual Report 2023 | Management’s discussion and analysis of financial condition and results of operationsCalian Group Ltd. Audited Annual Consolidated Financial
Statements
Audited Annual Consolidated
Financial Statements
For the year ended September 30, 2023
Disclosure Controls and Internal Controls over Financial Reporting
Management Conclusion on the Effectiveness of Disclosure Controls
The Chief Executive Officer and the Chief Financial Officer of the Company, after evaluating the effectiveness of the
Company’s disclosure controls and procedures as of September 30, 2023, have concluded that the Company’s
disclosure controls and procedures were adequate and effective to ensure that material information relating to the
Company and its consolidated subsidiaries would have been known to them and that information required to be
disclosed by the Company is recorded, processed, summarized and reported within the time periods specified in the
securities legislation.
Management Conclusion on the Effectiveness of Internal Control over Financial Reporting
The Chief Executive Officer and the Chief Financial Officer of the Company, after evaluating the effectiveness of the
Company’s internal control over financial reporting as of September 30, 2023, have concluded that the Company’s
internal controls over financial reporting provide reasonable assurance regarding the reliability of financial reporting for
external purposes in accordance with IFRS.
During the most recent interim quarter ending September 30, 2023, there have been no changes in the design of the
Company’s internal controls over financial reporting that has materially affected, or is reasonably likely to materially
affect, the Company’s internal controls over financial reporting.
On behalf of Management,
Patrick Houston
Chief Financial Officer and Corporate Secretary
December 1, 2023
60
61
Annual Report 2023Calian Group Ltd. Independent Auditor’s Report
To the Shareholders of Calian Group Ltd.
Opinion
We have audited the consolidated financial statements of Calian Group Ltd. (the “Entity”), which comprise:
• the consolidated statement of financial position as at September 30, 2023
• the consolidated statement of net profit for the year then ended
• the consolidated statement of comprehensive income for the year then ended
• the consolidated statement of changes in equity for the year then ended
• the consolidated statement of cash flows for the year then ended
• and notes to the consolidated financial statements, including a summary of significant accounting policies
Why the matter is a key audit matter
We identified the evaluation of the estimated costs to complete for the Advanced Technologies fixed price contracts as
a key audit matter. This matter represents a significant risk of material misstatement due to the magnitude of the balance
and the high degree of judgment in determining the estimated costs to complete. Significant auditor judgment was
required in evaluating the results of our audit procedures over the estimated costs to complete.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the following:
We evaluated the design and tested the operating effectiveness of certain controls over the Entity’s revenue
recognition process. This included a control related to the evaluation of estimated costs to complete fixed price
contracts.
We evaluated the Entity’s ability to estimate costs to complete fixed price contracts by comparing actual costs incurred
for a selection of fixed price contracts completed in the current year against the total contract costs estimated in the
prior year.
(Hereinafter referred to as the “financial statements”).
For a selection of fixed price contracts:
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial
position of the Entity as at September 30, 2023, and its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with IFRS Accounting Standards as issued by the International Accounting
Standards Board.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities
under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial
Statements” section of our auditor’s report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the
financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements for the year ended September 30, 2023.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be communicated in our auditor’s
report.
Evaluation of the estimated costs to complete for the Advanced Technologies fixed price
contracts
Description of the matter
We draw attention to Notes 2(a), 3, and 20 to the financial statements. The Entity enters into fixed-price contracts which
can extend over more than one reporting period. Revenue from these fixed-price projects is recognized over time using
the input method based on management’s best estimate of the costs and related risks associated with completing the
projects. Specifically for the Advanced Technologies fixed-price contracts, there is significant judgement in
determining the estimated costs to complete, including materials, labour and subcontractor costs. The service revenue
in Advanced Technologies is $72,065 thousand, the majority of which is composed of fixed price contracts.
• We evaluated the estimated costs to complete by inspecting the executed contracts, including any significant
amendments, inquiring with the project manager, and obtaining supporting documentation, such as project planning
documents
• We evaluated the materials, labour, and subcontractor costs included in the estimated costs to complete through
inquiring with the project manager and inspecting corroborative evidence, such as correspondence between the
Entity and the customer, suppliers, and subcontractors.
Evaluation of the acquisition-date fair value of customer relationships related to the Hawaiian
Pacific Teleport business acquisition
Description of the matter
We draw attention to Notes 2, 3, 13, and 25 to the financial statements. On August 1, 2023, the Entity acquired the
outstanding shares of Hawaiian Pacific Teleport (“HPT”), for a total purchase price of $57,391 thousand. The acquisition-
date fair value of the customer relationships is $28,553 thousand. The Entity estimates the fair value of the customer
relationships using the multi-period excess earnings method. The valuation involves significant estimation uncertainty,
including assumptions relating to forecasted revenues and forecasted earnings before interest and tax (“EBIT”) margins
attributable to the customer relationships, customer attrition rate, and discount rate.
Why the matter is a key audit matter
We identified the evaluation of the acquisition-date fair value of the customer relationships related to the Hawaiian
Pacific Teleport business acquisition as a key audit matter. This matter represented an area of significant risk of material
misstatement given the magnitude of the fair value and high degree of estimation uncertainty in determining the fair
value of the customer relationships. In addition, significant auditor judgment and specialized skills and knowledge were
required in evaluating the results of our audit procedures due to the sensitivity of the fair value of the customer
relationships to change in the assumptions noted above.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the following:
We evaluated the Entity’s forecasted revenues and EBIT margins by considering historical results, industry data, and
publicly available market data for comparable entities. We took into account changes in conditions and events
affecting the customer relationships to assess the adjustment, or lack of adjustments, made by the Entity to historical
results in arriving at the forecasted amounts.
62
63
Annual Report 2023Calian Group Ltd. We involved valuation professionals with specialized skills and knowledge, who assisted in:
•
Evaluating the customer attrition rate by comparing against publicly available market data from comparable
companies
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit.
•
Evaluating the Entity’s discount rate by comparing against discount rate ranges that were independently developed
using industry data and publicly available market data from comparable companies.
We also:
Other Matter – Comparative Information
The financial statements for the year ended September 30, 2022 were audited by another auditor who expressed an
unmodified opinion on those financial statements on November 24, 2022.
Other Information
Management is responsible for the other information. Other information comprises:
•
the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities
Commissions
•
the information, other than the financial statements and the auditors’ report thereon, included in a document entitled
“Annual Report 2023.”
Our opinion on the financial statements does not cover the other information and we do not and will not express any
form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified
above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially
misstated.
We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian
Securities Commissions and the information, other than the financial statements and the auditor’s report thereon,
included in a document entitled “Annual Report 2023” as at the date of the auditor’s report. If, based on the work we
have performed on this other information, we conclude that there is a material misstatement of this other information,
we are required to report that fact in the auditor’s report.
We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for
the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS
Accounting Standards as issued by the International Accounting Standards Board, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with
Canadian generally accepted auditing standards will always detect a material misstatement when it exists.
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s
internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
•
•
•
•
•
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Entity’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or,
if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue
as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and
whether the financial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
Communicate with those charged with governance regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
Provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence and communicate with them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable, related safeguards.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the group Entity to express an opinion on the financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for our audit opinion.
Determine, from the matters communicated with those charged with governance, those matters that were of most
significance in the audit of the financial statements of the current period and are therefore the key audit matters. We
describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditor’s
report because the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Chartered Professional Accountants, Licensed Public Accountants
The engagement partner on the audit resulting in this auditor’s report is Mahesh Mani.
Ottawa, Canada
December 1, 2023
64
65
Annual Report 2023Calian Group Ltd.
Calian Group Ltd.
Consolidated statements of financial position
As at September 30, 2023 and 2022, (Canadian dollars in thousands, except per share data)
Calian Group Ltd.
Consolidated statements of net profit
For the years ended September 30, 2023 and 2022, (Canadian dollars in thousands, except per share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Accounts receivable
Work in process
Inventory
Prepaid expenses
Derivative assets
Total current assets
NON-CURRENT ASSETS
Capitalized research and development
Equipment
Application software
Right of use asset
Investments
Acquired intangible assets
Prepaid expenses
Deferred tax asset
Goodwill
Total non-current assets
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Debt facility
Accounts payable and accrued liabilities
Contingent earn-out
Provisions
Unearned contract revenue
Derivative liabilities
Lease obligations
Total current liabilities
NON-CURRENT LIABILITIES
Lease obligations
Contingent earn-out
Unearned contract revenue
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
SHAREHOLDERS’ EQUITY
Issued capital
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss)
TOTAL SHAREHOLDERS’ EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
NOTES
$
5
6
9
7
8
24
10
10
10
11
12
13
8
14
17
15
26
16
9
24
11
11
26
9
22
18
September 30,
2023
September 30,
2022
$
$
33,734
173,052
16,580
21,983
19,040
155
264,544
1,068
26,709
9,446
34,637
3,673
75,160
10,386
967
159,133
321,179
585,723
37,750
105,550
11,263
2,848
32,423
353
4,949
195,136
32,057
2,535
15,592
12,031
62,215
257,351
225,540
4,856
96,859
1,117
328,372
585,723
42,646
171,453
39,865
18,643
23,780
123
296,510
2,186
16,623
10,395
16,678
670
57,087
-
1,054
145,959
250,652
547,162
7,500
126,096
25,676
1,249
46,210
812
4,115
211,658
14,920
2,874
-
12,524
30,318
241,976
213,277
3,479
92,198
(3,768)
305,186
547,162
Number of common shares issued and outstanding
18
11,812,650
11,607,391
The accompanying notes are an integral part of the audited annual
consolidated financial statements.
66
George Weber, Chairman
Ray Basler, Director
Revenue
Advanced Technologies
Health
Learning
ITCS
Total Revenue
Cost of revenues
Gross profit
Selling and marketing
General and administration
Research and development
Profit before under noted items
Depreciation of equipment, application software and research
and development
Depreciation of right of use asset
Amortization of acquired intangible assets
Restructuring expense
Other changes in fair value
Deemed compensation
Changes in fair value related to contingent earn-out
Profit before interest income and income tax expense
Lease obligations interest expense
Interest expense
Profit before income tax expense
Income tax expense – current
Income tax recovery – deferred
Total income tax expense
NET PROFIT
Net profit per share:
Basic
Diluted
Year ended
September 30,
NOTES
2023
$
2022
$
178,363
184,856
106,192
189,172
658,583
454,371
204,212
45,410
81,363
11,452
65,987
9,043
4,501
14,874
2,618
(314)
550
3,858
30,857
531
365
150,398
167,141
91,668
172,965
582,172
412,946
169,226
32,514
65,408
5,372
65,932
6,974
3,629
20,555
-
-
4,314
5,555
24,905
451
295
29,961
24,159
12,919
(1,843)
11,076
18,885
14,307
(3,752)
10,555
13,604
1.61
1.61
1.19
1.19
20
10
11
13
12
25, 26
25, 26
11
22
22
21
21
The accompanying notes are an integral part of the audited annual consolidated financial statements.
67
Annual Report 2023Calian Group Ltd.
Calian Group Ltd.
Consolidated statements of comprehensive income
For the years ended September 30, 2023 and 2022, (Canadian dollars in thousands)
Calian Group Ltd.
Consolidated statements of changes in equity
For the years ended September 30, 2023 and 2022, (Canadian dollars in thousands, except per share data)
NET PROFIT
Items that will be reclassified subsequently to net profit
Year ended September 30,
2023
$
2022
$
18,885
13,604
Cumulative translation adjustment
2,528
(711)
Change in deferred gain on derivatives designated as cash flow hedges, net of
tax of $912 (2022 - $1,485)
Other comprehensive income (loss), net of tax
COMPREHENSIVE INCOME
2,357
4,885
23,770
(3,874)
(4,585)
9,019
The accompanying notes are an integral part of the audited annual consolidated financial statements.
Notes
Issued
capital
Contributed
surplus
Retained
earnings
Other
Comprehensive
Income
$
$
$
$
Total
$
Balance October 1, 2022
213,277
3,479
92,198
(3,768)
305,186
Net profit and comprehensive
income
Dividend paid ($1.12 per share)
Share repurchase
Shares issued under employee
share plans
Shares issued through
acquisition
Contingent earn-out
Shares issued under employee
share purchase plan
Share-based compensation
expense
-
-
(609)
-
-
-
18,885
(13,163)
(1,061)
18
26
26
18
19
2,472
(1,524)
3,964
3,511
2,925
-
-
-
-
2,901
-
-
-
-
-
4,885
23,770
-
-
-
-
-
-
-
(13,163)
(1,670)
948
3,964
3,511
2,925
2,901
Balance September 30, 2023
225,540
4,856
96,859
1,117
328,372
Notes
Issued
capital
Contributed
surplus
Retained
earnings
Other
Comprehensive
Income
$
$
$
$
Total
$
Balance October 1, 2021
194,960
5,224
91,359
817
292,360
Net profit and comprehensive
income (loss)
Dividend paid ($1.12 per share)
Shares issued under employee
share plans
Contingent earn-out
Shares issued under employee
share purchase plan
Share-based compensation
expense
Balance September 30, 2022
-
-
-
-
13,604
(12,765)
18
26
18
19
2,047
(1,045)
14,049
(2,627)
2,221
-
-
213,277
1,927
3,479
-
-
-
-
(4,585)
-
-
-
-
-
9,019
(12,765)
1,002
11,422
2,221
1,927
92,198
(3,768)
305,186
68
69
The accompanying notes are an integral part of the audited annual consolidated financial statements.
Annual Report 2023Calian Group Ltd.
Calian Group Ltd.
Consolidated statements of cash flows
For the years ended September 30, 2023 and 2022, (Canadian dollars in thousands)
CASH FLOWS GENERATED FROM (USED IN) OPERATING ACTIVITIES
Net profit
Items not affecting cash:
Interest expense
Changes in fair value related to contingent earn-out
Lease obligations interest expense
Income tax expense
Employee share purchase plan expense
Share based compensation expense
Depreciation, amortization and impairment
Deemed compensation
Other changes in fair value
Change in non-cash working capital
Accounts receivable
Work in process
Prepaid expenses and other
Inventory
Accounts payable and accrued liabilities
Unearned contract revenue
Interest paid
Income tax paid
CASH FLOWS GENERATED FROM (USED IN) FINANCING ACTIVITIES
Issuance of common shares net of costs
Dividends
Draw (repayment) on debt facility
Payment of lease obligations
Repurchase of common sharess
CASH FLOWS USED IN INVESTING ACTIVITIES
Investments
Business acquisitions
Capitalized research and development
Equipment and application software
NET CASH OUTFLOW
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS, END OF PERIOD
Year ended
September 30,
NOTES
2023
$
2022
$
26
11
19
19
10, 11, 13
25, 26
22
18, 19
17
11
12
25
10
10
18,885
13,604
365
3,858
531
11,076
597
3,273
28,418
550
(314)
295
5,555
451
10,555
518
1,927
31,158
4,314
-
67,239
68,377
1,393
(28,822)
23,285
(829)
(3,340)
(17,947)
928
70,729
(895)
(13,059)
56,775
2,901
(13,163)
30,250
(4,382)
(1,670)
13,936
15,444
(20,137)
(4,340)
15,142
11,333
56,997
(747)
(13,109)
43,141
2,705
(12,765)
7,500
(3,655)
-
(6,215)
(2,689)
-
(68,494)
(65,566)
(86)
(8,354)
(79,623)
(177)
(7,148)
(72,891)
(8,912)
(35,965)
42,646
33,734
78,611
42,646
1. Basis of Preparation
Calian Group Ltd. (“the Company”) is incorporated under the Canada Business Corporations Act. The address of its
registered office and principal place of business is 770 Palladium Drive, Ottawa, Ontario K2V 1C8. The Company’s
capabilities are diverse with services and solutions delivered through four segments: Advanced Technologies, Health,
Learning and IT and Cyber Solutions (“ITCS”). Headquartered in Ottawa, Calian provides services and solutions to both
industry and government customers in the areas of health, learning, defence, security, aerospace, engineering, AgTech,
satellite communications (satcom), and IT.
Statement of compliance
These consolidated financial statements are expressed in Canadian dollars and have been prepared in accordance with
International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”)
and in place for September 30, 2023. These consolidated financial statements were prepared using the accounting
policies as described in Note 2 - Summary of significant accounting policies.
These consolidated financial statements were authorized for issuance by the Board of Directors on December 1, 2023.
2. Summary of Significant Accounting Policies
The accounting policies below have been applied consistently to all periods presented in these consolidated financial
statements unless otherwise stated.
Basis of consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Calian
Ltd., located in Ottawa, Ontario, Primacy Management Inc. (“Primacy”), located in Burlington, Ontario, Calian Agriculture
Ltd. (formerly “IntraGrain Technologies Inc.”), located in Regina, Saskatchewan, SatService Gesellschaft für
Kommunikationssysteme mbH (“SatService”), located in Steisslingen, Germany, Calian Contract Research Organization
Ltd. (formerly “Allphase Clinical Research Services Inc.”), located in Ottawa, Ontario, Calian Patient Support Programs
Ltd. (formerly “Alio Health Services Inc.”), located in Ottawa, Ontario, Calian Europe AS (formerly “Comprehensive
Training Solutions AS”), located in Stavanger, Norway, Tallysman Wireless Inc. (“Tallysman”), located in Ottawa, Ontario,
Calian UK Ltd. (formerly “Cadence Consultancy Limited”), located in London, England, InterTronic Solutions Inc.
(“InterTronic”), located in Vaudreuil-Dorion, Quebec, Calian Digital Solutions Ltd. (formerly “Dapasoft Inc.”), located in
Toronto, Ontario, SimFront Simulation Systems Corporation (“Simfront”), located in Ottawa, Ontario, Calian Corp.
located in Houston, Texas, and Hawaiian Pacific Teleport Ltd. (“HPT”), located in Kapolei, Hawaii. All transactions and
balances between these companies have been eliminated on consolidation.
Basis of presentation
The consolidated financial statements are presented at historical cost unless otherwise noted. Historical cost is
generally based on the fair value of the consideration given in exchange for the asset or liability.
Revenue recognition
The Company recognizes revenue from the following sources, although this list is not exhaustive:
Service revenue
• Advanced Technologies support services across a number of industries, and product development
• Healthcare services including clinic management, healthcare practitioner support, rapid response healthcare support
and psychological assessments
• Learning services including Custom Training for the military, emergency preparedness and simulation training
• IT services including IT support, systems implementation services, cyber security consulting and cyber security
The accompanying notes are an integral part of the audited annual consolidated financial statements.
monitoring
70
71
Annual Report 2023Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd.
2. Summary of Significant Accounting Policies (continued)
2. Summary of Significant Accounting Policies (continued)
Product revenue
• Sale of internally developed hardware and software products used in many applications across multiple industries
• Sale of healthcare products
• Resale of IT product which can include hardware and software
• Manufacturing and installation of large satellite antennae ground systems
• Licensing of cyber product solutions
(a) Revenue recognition:
Revenue is recognized in profit or loss in accordance with the pattern of satisfying the Company’s performance
obligations under a contract. This satisfaction occurs when control of a good or service transfers to the customer. In the
majority of the Company’s fixed price contracts, the customer controls the work in process as evidenced by the right to
payment for work performed to date plus a reasonable profit to deliver products or services that do not have an
alternative use to the Company. Based on the nature of these contractual arrangements, control is transferred over time
and revenue is recognized over time.
For the majority of fixed price revenue for the Company, for each performance obligation satisfied over time, the
Company will recognize revenue by measuring progress toward complete satisfaction of that performance obligation
using the input method. In this way, the Company recognizes revenue in a pattern that reflects the transfer of control of
the promised goods or services to the customer. Fixed price contracts are recognized using the input method with
reference to costs incurred. For a select few projects, the Company will recognize revenue by measuring progress
toward complete satisfaction of that performance obligation using the output method. Revenue from cost plus
arrangements is recognized as services are performed and costs are incurred.
Revenue from generic product sales, or product that does not meet criteria for over time recognition is measured at a
point in time following the transfer of control of such products to the customer, which typically occurs upon shipment or
delivery depending on the terms of the underlying contracts. For certain contracts, the Company does not have control
of the product prior to delivery to the customer. In this case, revenue is measured net of cost of sales.
Revenue from contract modifications, commonly referred to as change orders or purchase orders issued on contracts,
will be recognized to the extent that the contract modifications have been approved by the customer and the amount
can be measured reliably.
For a portion of customer arrangements, the customer contracts with the Company to provide a significant service of
integrating a complex set of tasks and components into a single project or capability (even if that single project results in
the delivery of multiple units). The Company therefore considers that the entire contract results in the delivery of a single
performance obligation. For other customer arrangements across the portfolio contracts, the Company may promise
to provide distinct goods or services within a contract in which case the contract is separated into the associated
performance obligations as assessed from the customer’s perspective. If a contract contains multiple performance
obligations, the Company allocates the total transaction price to each performance obligation in an amount based on
the estimated relative standalone selling prices of the promised goods or services underlying each performance
obligation. When the Company is contracted to construct customer specific projects, the budgets and overall
transaction prices are built up using the Company’s best estimate of costs associated to complete the customized
project using the appropriate overhead and subcontractor rates for a given project and location. This approach to
estimate the overall costs and associated revenues is considered the most appropriate assessment of the standalone
selling price for the associated performance obligations.
In certain contracts for products, the Company may agree to provide warranty and maintenance services for periods
that can extend up to 5 years. Warranty and maintenance are often included in the transaction price and is an after–sales
service. Upon expiration, the warranty period may be extended at the customer’s option. Regardless of whether a
renewal option exists in a contract, the Company does not account for a renewal option until this option is agreed upon.
This is subsequently accounted for at the agreed upon price on renewal. Consequently, the option to extend the
renewal period does not provide customers with any advantage when they enter into the initial contract and therefore
no revenue has been deferred relating to this renewal option.
The maintenance or warranty service is considered to be a distinct service when it is both regularly supplied by the
Company to other customers on a stand-alone basis and is available for customers from other providers in the market.
When these criteria are met, the warranty is considered a service type warranty where a portion of the transaction price
is allocated to the maintenance services based on the stand-alone selling price of those services. Revenue relating to
the maintenance services is recognized over time as the service is provided and incurs warranty costs over the
satisfaction of the performance obligation. Assurance type warranties are those that promise to the customer that the
delivered product will function as intended and will comply with agreed-upon specifications. Assurance type warranty
costs are recognized as a provision in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets,
based on the progress of the other performance obligations in the contract, and the provision recognized is reduced as
costs are incurred or reversed if no longer required.
If estimated total costs on any contract, including any inefficient costs, are greater than the net contract revenues,
IFRS15, Revenue from Contracts with Customers indicates IAS37, Provisions, Contingent Liabilities and Contingent
Assets, should be applied as the contract is considered onerous. IAS37 however contains no further requirements as to
the measurement of onerous contracts. All loss provisions for contracts with customers follow the same policy for the
definition of unavoidable costs to fulfilling the contract. The Company defines unavoidable costs as the costs that the
Company cannot avoid because it has the contract (for example, this would include an allocation of overhead costs if
those costs are incurred for activities required to complete the contract).
(b) Contract assets and liabilities
Any excess of costs and estimated earnings over progress billings on construction contracts is carried as a contract
asset in the financial statements. Any excess of progress billings over earned revenue on construction contracts is
carried as a contract liability in the financial statements.
Contract assets and liabilities (or “work in process” and “unearned contract revenue”, respectively) are reported in a net
position on a contract-by-contract basis at the end of each reporting period.
(c) Provisions:
Provisions are recognized when, at the financial statement date, the Company has a present obligation as a result of a
past event, and it is more likely than not that the Company will be required to settle that obligation and the cash outflow
can be estimated reliably. The amount recognized for provisions is the best estimate of the expenditure to be incurred.
Provisions are measured at their present value.
Provisions include:
i.
Provisions for potential warranty claims relating to construction projects. These claims are usually settled during the
project’s warranty period. A provision is recognized when it is more likely than not that a warranty claim will arise. The
amount recognized is the best estimate of the amount required to settle the warranty issue.
ii. Provisions for loss contracts are recorded when costs are determined to be greater than total revenues for the
contract. Losses from any construction contracts are recognized in full in the period the loss becomes apparent. The
loss provision will be net of management’s estimate of probable expected recoveries, which differs from the criterion
used for revenue recognition.
72
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Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 2. Summary of Significant Accounting Policies (continued)
2. Summary of Significant Accounting Policies (continued)
Share-based compensation
The Company has a stock option plan for executives and other key employees. The Company measures and recognizes
compensation expense based on the grant date fair-value of the stock options issued using the Black-Scholes pricing
model. The offsetting credit is recorded in contributed surplus. Each tranche of an award is considered a separate
award with its own vesting period and grant date fair value. Compensation expense for each tranche is recorded on a
straight-line basis over the vesting period based on the Company’s estimate of share options that will ultimately vest. At
each reporting period, the Company revises its estimate of the stock options expected to vest. The impact on the
change in estimate, if any, is recognized over the remaining vesting period. Consideration paid by employees on the
exercise of options and related amounts of contributed surplus are recorded as issued capital when the shares are
issued.
The Company has a restricted share unit plan for executives and other key employees. The Company measures and
recognizes compensation expense based on the grant date fair-value of the units issued using the market value based
on the price at the date preceding the grant. The offsetting credit is recorded in contributed surplus. Each tranche of an
award is considered a separate award with its own vesting period and grant date fair value. Compensation expense for
each tranche is recorded on a straight-line basis over the vesting period based on the Company’s estimate of units that
will ultimately vest. At each reporting period, the Company revises its estimate of the units expected to vest. The impact
on the change in estimate, if any, is recognized over the remaining vesting period.
The Company has an employee stock purchase plan available to all employees of the Company. The plan provides for a
discount to the fair market value at the date the shares are issued. Compensation expense representing the discount is
recorded as general and administration expenses with an offsetting amount to issued capital.
The Company has compensation units that are to be settled in cash but are tied to the value of the share price of the
Company. At each reporting period end the Company values the fair market value of the units outstanding through use
of the Black-Scholes method.
Leases
At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company has elected to apply the practical expedient to account for each lease component and any non-lease
components as a single lease component. The Company recognizes a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured based on the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and
an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which
it is located, less any lease incentives received. The assets are depreciated to the earlier of the end of the useful life of
the right-of-use asset, or the lease term using the straight-line method as this most closely reflects the expected
pattern of consumption of the future economic benefits. The lease term includes periods covered by an option to
extend if the Company is reasonably certain to exercise that option.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the Company’s incremental borrowing rate. Variable lease payments that do not depend on an
index or rate are not included in the measurement of the lease liability. The lease liability is measured at amortized cost
using the effective interest method. It is remeasured when there is a change in future lease payments arising from a
change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a
residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or
termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the
carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset
has been reduced to zero. The Company has elected to apply the practical expedient not to recognize right-of-use
assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value
assets. The lease payments associated with these leases are recognized as an expense on a straight-line basis over the
lease term.
Income taxes
Income tax expense comprises current and deferred tax. Income tax expense is recognized in net profit, except when it
relates to items that are recognized in other comprehensive income or directly in equity, in which case, the current and
deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or
deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for
the business combination.
Current tax
The tax currently payable is based on taxable income for the period using tax rates enacted or substantively enacted as
at each reporting period and any adjustments to tax payable related to previous years. Taxable profit differs from profit
as reported in the consolidated statement of net profit because it excludes items of income or expense that are taxable
or deductible in other years and it further excludes items that are never taxable or deductible.
Deferred tax
Deferred tax is recognized using the balance sheet method, providing for differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the corresponding tax bases used for taxation purposes
calculated using the tax rates in effect when the differences are expected to reverse.
Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are
generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be utilized. Such assets and liabilities are not
recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting
profit.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries,
except where the Company is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary
differences associated with such investments are only recognized to the extent that it is probable that there will be
sufficient taxable profits against which to utilize the benefits of the temporary differences, and they are expected to
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting period and reduced to the extent that it is no
longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered. Deferred
tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is
settled or the asset realized, based on tax rates that have been enacted or substantively enacted at each reporting
period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the
manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets
and liabilities.
74
75
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 2. Summary of Significant Accounting Policies (continued)
2. Summary of Significant Accounting Policies (continued)
Inventory
Application software
Inventories are recorded at the lower of cost or net realizable value. Global Navigation Satellite System (GNSS) inventory
is calculated using the FIFO method. All remaining inventory is calculated using the weighted average cost method.
Write-downs are taken for excess and obsolete inventory and for a reduction in the carrying value of inventory to reflect
realizable value based on current cost, production and sales estimates. Cost comprises all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to their present location and condition.
Capitalized Research and Development (“R&D”)
Research costs are expensed as incurred. Internally developed internal-use asset costs are capitalized once a project
has progressed beyond a conceptual, preliminary stage to that of development. Development costs that are directly
attributable to the design and testing of identifiable assets controlled by the Company are recognized as assets when
the following criteria are met:
• it is technically feasible to complete the asset so that it will be available for use;
• there is an ability and management intends to complete the asset for use or sale;
• it can be demonstrated how the asset will generate probable future economic benefits;
• adequate technical, financial and other resources to complete the development and to use or sell the asset are
available; and
• the expenditure attributable to the asset during its development can be reliably measured.
Costs that qualify for capitalization include both internal and external costs, but are limited to those that are directly
related to the specific project. Capitalized development expenditure is measured at cost less accumulated
amortization and accumulated impairment losses. Amortization is recognized in net profit over the estimated useful life
of the underlying assets.
Capitalized R&D is measured at cost and depreciated over the useful life of the assets which is determined to be five
years. Costs include expenditures that are directly attributable to its construction.
Equipment
Equipment, comprising furniture, computer equipment, along with leasehold improvements, and buildings, are stated
at cost less accumulated depreciation and impairment losses, if any. The carrying value is net of any related government
assistance and investment tax credits. Depreciation is recognized in net profit on a straight-line basis over the estimated
useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the term of the leases. The
estimated useful lives are as follows:
• Equipment:
3 to 13 years
• Building:
20 years
The estimated useful lives, residual values and depreciation methods are reviewed annually, with the effect of any
changes in estimate accounted for on a prospective basis.
Application software is measured at cost less accumulated depreciation and is amortized on a straight-line basis over
its estimated useful life not exceeding ten years. The amortization method and estimate of useful lives are reviewed
annually.
Acquired intangible assets
Acquired intangible assets are measured at cost less accumulated amortization. Amortization is recognized in net profit
over the estimated useful lives of the underlying assets. The estimated useful lives are as follows:
• Customer relationships:
3 to 14 years
• Contracts with customers:
3 to 5 years
• Non-competition agreements:
2 to 5 years
• Technology and Trademarks:
2 to 9 years
Impairment of equipment, application software and intangible assets
At each reporting period, management reviews the carrying amounts of its equipment, application software and
acquired intangible assets to determine whether there is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of
the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset,
management estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual
cash-generating units.
The recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash
flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the
carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is
recognized immediately in profit or loss.
Impairment of goodwill
Goodwill arising on the acquisition of a business represents the excess of the purchase price over the net fair value of
identifiable assets, liabilities and contingent liabilities of the acquired businesses recognized at the date of the
acquisition. Goodwill is initially recognized as an asset at cost and is subsequently measured at cost less any
accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to the cash-generating
units expected to benefit from the synergies of the combination. Cash-generating units or groups of cash generating
units to which goodwill has been allocated are tested for impairment annually or more frequently if events or changes in
circumstances indicate that the unit might be impaired. For purposes of impairment testing of goodwill, cash-
generating units or groups of cash generating units correspond to the Company’s reporting segments as disclosed in
Note 23.
When the recoverable amount of the cash-generating unit is less than the carrying amount of the cash-generating unit,
the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the
other assets of the cash-generating unit on a pro-rata basis. An impairment loss recognized for goodwill is not reversed
in a subsequent period. The Company performs its annual review of goodwill on September 30th each year.
76
77
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 2. Summary of Significant Accounting Policies (continued)
2. Summary of Significant Accounting Policies (continued)
For the years ended September 30, 2023 and 2022, key assumptions were developed to arrive at estimated carrying
values per segment including discount rates, projected cash earnings after tax and projected capital expenditures.
The Company used these key assumptions to develop their estimated carrying values as of September 30, 2023. This
includes the forecasted performance by segment for fiscal 2024 which the Company undertakes annually with review at
various levels of management and is approved by the board of directors, with growth rates on cash flows of 10% for the
subsequent four years. The terminal growth rate was estimated at 3% for each segment which is in line with
management’s best estimate with reference to common practices in the industry, and representative of long term
growth given past experience. When using these assumptions with an anticipated discount rate of 12.4% for 2023, the
Company has concluded that the excess value over the carrying value of assets in each segment ranged from 48% to
518%. At September 30, 2023 and 2022, management assessed the recoverable amount of goodwill and concluded
that a goodwill impairment charge was not required.
As an additional step, the Company evaluated multiple sensitivities using lower growth rates in the forecast period.
Using growth rates of 5% and 3% growth rates while maintaining the discount rate and terminal growth rates, our
estimates still exceeded the carrying values at September 30, 2023. Using a 5% growth rate, excess value over the
carrying value of assets in each segment ranged from 23% to 418%, and at 3% there is excess ranging from 14% to 381%.
Management believes that these sensitivity calculations, along with reasonable changes in other key assumptions used
in the model would not cause the carrying value to exceed the recoverable amount.
that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from
the acquisition date) about facts and circumstances that existed at the acquisition date. Changes in the estimated fair
value of the contingent consideration outside of the measurement period are adjusted prospectively against changes
in fair value in the statement of net profit.
Foreign currency translation
Transactions in currencies other than the Company’s functional currency (foreign currencies) are recorded at the rates
of exchange prevailing at the dates of the transactions. Income and expense items are translated at the average
exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the
exchange rates at the dates of the transactions are used. At each reporting period, monetary items denominated in
foreign currencies are retranslated at the rates prevailing at each reporting period. Non-monetary items which are
measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognized in
net profit in the period in which they arise except for exchange differences on transactions entered into in order to
hedge certain foreign currencies (see note below for hedging policy).
The functional currency of the parent company and its subsidiaries is the Canadian dollar, except for Calian Corp. and
HPT which is in USD, SatService which is in Euro, Calian Europe which is in Norwegian Krone, and Calian UK which is in
Pound Sterling.
Business acquisition
Financial instruments
Acquisition of businesses is accounted for using the acquisition method. The consideration transferred in a business
combination is measured at estimated fair value, which is calculated as the sum of the acquisition-date fair values of the
assets transferred by the Company, and liabilities incurred by the Company to the former owners of the acquiree in
exchange for control of the acquiree. Acquisition-related costs are generally expensed in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired, and the liabilities assumed are recognised at their estimated fair
value, except that deferred tax assets or liabilities are recognised and measured in accordance with IAS 12
Income Taxes.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree, and the estimated fair value of the acquirer’s previously held equity interest in the acquiree (if
any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after
reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed
exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the
estimated fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised
immediately in profit or loss as a bargain purchase gain.
When the consideration transferred by the Company in a business combination includes a payment subject to the
retention of the principal shareholders, the amount is deemed to represent deferred compensation payable to such
shareholders and therefore is excluded from the total consideration of the purchase, and is expensed on a straight-line
basis over the retention period in the Company’s consolidated statement of net profit as deemed compensation
related to acquisitions.
When the consideration transferred by the Company in a business combination includes assets or liabilities resulting
from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date
estimated fair value and included as part of the consideration transferred in a business combination. Changes in the
estimated fair value of the contingent consideration that qualify as measurement period adjustments are adjusted
retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the
instrument.
Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair
value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognized immediately in profit or loss.
Financial assets
All financial assets are recognized and de-recognized on trade date. The classification of financial assets depends on
the business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
A financial asset is measured at amortized cost if it is held within a business model whose objective is to hold assets to
collect contractual cash flows, and its contractual terms give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
The Company’s financial assets are classified as follows:
Cash
Accounts receivable
Investments
Derivative assets
Amortized cost
Amortized cost
Amortized cost
Fair value through profit and loss
Fair value through other comprehensive income (“OCI”)
Subsequent to initial recognition, financial assets at amortized cost are measured using the effective interest method,
less any impairment. Interest income is recognized by applying the effective interest rate except for accounts
receivable, where the interest revenue would be immaterial. Interest income, foreign exchange gains and losses, and
impairment and any gain or loss on de-recognition are recognized in profit and loss.
78
79
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 2. Summary of Significant Accounting Policies (continued)
2. Summary of Significant Accounting Policies (continued)
Impairment of financial assets
Hedge accounting
Management designates its foreign exchange forward contracts as either hedges of the fair value of recognized assets or
liabilities (fair value hedges) or hedges of highly probable forecast transactions and firm commitments (cash flow hedges).
At the inception of the hedge relationship, the Company documents the relationship between the hedging instruments
and the hedged items, as well as its risk management objective and strategy for undertaking various hedge
transactions. Furthermore, both at the hedge’s inception and on an on-going basis, the Company also assesses
whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or
cash flows of hedged items.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in net profit
immediately, together with any changes in the fair value of the hedged item that are attributable to the hedged risk. The
change in the fair value of the hedging instrument and the change in the hedged item attributable to the hedged risk are
recognized in the line of the income statement relating to the hedged item.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are
deferred in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or
loss relating to the ineffective portion is recognized immediately in net profit, and is included in other gains and losses, if
any. Amounts deferred in other comprehensive income are recycled in net profit in the periods when the hedged item is
recognized in net profit, in the same line of the consolidated statement of net profit as the recognized hedged item.
Hedge accounting is discontinued when management revokes the hedging relationship; the hedging instrument is
terminated or no longer qualifies for hedge accounting. For fair value hedges, the adjustment to the carrying amount of
the hedged item arising from the hedged risk is amortized to net profit from that date. For cash flow hedges, any
cumulative gain or loss deferred in other comprehensive income at that time remains in other comprehensive income
and is recognized when the forecast transaction is ultimately recognized in net profit. When a forecast transaction is no
longer expected to occur, the cumulative gain or loss that was deferred in other comprehensive income is recognized
immediately in net profit.
Note 24 sets out details of the fair values of the derivative instruments used for hedging purposes. Movements in the
hedging reserve in equity are also detailed in the consolidated statement of changes in equity.
The company measures a loss allowance based on the lifetime expected credit losses. Lifetime expected credit losses
are estimated based on factors such as the Company’s past experience of collecting payments, observable changes in
national or local economic conditions that correlate with default on receivables, financial difficulties of the borrower,
and it becoming probable that the borrower will enter bankruptcy or financial re-organization. Financial assets are
written off when there is no reasonable expectation of recovery.
Financial liabilities
The Company determines the classification of its financial liabilities at initial recognition. The Company’s financial
liabilities are as follows:
Debt facility
Accounts payable and accrued liabilities
Contingent earn-out
Provisions
Amortized cost
Amortized cost
Fair value through profit and loss
Amortized cost
Derivative liabilities
Fair value hierarchy
Fair value through OCI
The Company’s fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The three
levels of the fair value hierarchy are:
Level 1 values are based on unadjusted quoted prices in active markets that are accessible at the measurement date for
identical assets or liabilities.
Level 2 values are based on quoted prices in markets that are not active or model inputs that are observable either
directly or indirectly for substantially the full term of the asset or liability.
Level 3 values are based on prices or valuation techniques that require inputs that are both unobservable and significant
to the overall fair value measurement.
When the inputs used to measure fair value fall within more than one level of the hierarchy, the level within which the fair
value measurement is categorized is based on the Company’s assessment of the lowest level input that is the most
significant to the fair value measurement.
Derivative financial instruments and risk management
The Company enters into derivative financial instruments, mainly foreign exchange forward contracts to manage its
foreign exchange rate risk. The Company’s policy does not allow management to enter into derivative financial
instruments for trading or speculative purposes. Foreign exchange forward contracts are entered into to manage the
foreign exchange rate risk on foreign denominated financial assets and liabilities and foreign denominated forecasted
transactions.
Derivatives are initially recognized at fair value at the date a derivative contract is entered into with transaction costs
recognized in profit and loss. Derivatives are subsequently re-measured to their fair value at each reporting period. The
resulting gain or loss is recognized in net profit immediately unless the derivative is designated and effective as a
hedging instrument, in which event the effective portion of changes in the fair value of the derivative is recorded in other
comprehensive income and is recognized in net profit when the hedged item affects net profit. The Company expenses
transaction costs related to its foreign exchange contracts. Fair value of the forward exchange contracts reflects the
cash flows due to or from the Company if settlement had taken place at the end of the period. A derivative is presented
as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is
not expected to be realized or settled within 12 months.
80
81
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 3. Critical Accounting Judgments and Key Sources of Estimation Uncertainty
4. Seasonality
Estimates:
The preparation of financial statements in conformity with IFRS requires the Company’s management to make
judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets and liabilities and disclosure of contingent liabilities as at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting periods presented. Actual results could differ from
those estimates.
Project completion for revenue
The Company enters into fixed-price contracts which can extend over more than one reporting period. Revenue from
these fixed-price projects is recognized over time using the input method using management’s best estimate of the
costs and related risks associated with completing the projects. Management’s approach to revenue recognition is
tightly linked to detailed project management processes and controls. The information provided by the project
managers combined with a knowledgeable assessment of technical complexities and risks are used in estimating the
percentage complete. Specifically for the Advanced Technologies fixed-price contracts, there is significant judgement
and estimation uncertainty in determining the estimated costs to complete, including materials, labour and
subcontractor costs.
Impairment of goodwill and intangible assets
Determining whether goodwill or acquired intangible assets are impaired requires an estimation of the value of the
cash-generating units. This was done through the value in use calculation. The value in use calculation requires
management to estimate the future cash flows expected to arise from the cash-generating unit, and a suitable discount
rate in order to calculate the present value.
Income taxes
The Company records deferred income tax assets and liabilities related to deductible or taxable temporary differences.
The Company assesses the value of these assets and liabilities based on the likelihood of the realization as well as the
timing of reversal given management assessments of future taxable income.
Judgments:
Business combinations
The consideration transferred for an acquired business is assigned to the identifiable tangible and intangible assets
purchased, along with liabilities assumed on the basis of their acquisition date estimated fair values. The identification of
assets purchased and liabilities assumed and the valuation thereof is specialized and judgmental. Where appropriate,
the Company engages external business valuators to assist in the valuation of tangible and intangible assets acquired.
When a business combination involves contingent consideration, an amount equal to the estimated fair value of the
contingent consideration is recorded as a liability at the time of acquisition and is measured at the estimated fair value at
each reporting period. The key assumptions utilized in determining estimated fair value of contingent consideration may
include probabilities associated with the occurrence of specified future events, financial projections of the acquired
business, the timing of future cash flows, cash flow volatility and the appropriate discount rate.
Deferred income taxes
The Company’s accounting policy with regards to income taxes is described in Note 2. In applying this policy, judgments are
made in determining the probability of whether deductions or tax credits can be utilized and related timing of such items.
82
The results of operations for the interim periods are not necessarily indicative of the results of operations for the full year.
The Company’s revenues and earnings have historically been subject to quarterly seasonality due to the timing of
vacation periods, statutory holidays, industry specific seasonal cycles and the timing and delivery of milestones for
significant projects.
5. Cash and Cash Equivalents
The following table presents cash and cash equivalents by currency:
Local
Currency
$
Foreign
Exchange
$
Presentation
Currency
$
CAD
USD
GBP
EUR
NOK
Total cash and cash equivalents September 30, 2023
CAD
USD
GBP
EUR
NOK
Total cash and cash equivalents September 30, 2022
6. Accounts Receivable
The following table presents the trade and other receivables as at:
11,598
13,013
167
2,331
7,392
16,719
12,933
388
5,619
723
1.00
1.35
1.65
1.43
0.13
1.00
1.37
1.51
1.34
0.13
11,598
17,567
275
3,333
961
33,734
16,719
17,718
586
7,529
94
42,646
September 30, 2023
September 30, 2022
$
$
Trade and accounts receivable
Tax and Scientific Research and Development receivable
Other
Loss Allowance
164,803
4,394
4,151
173,348
(296)
173,052
Bad debt expense recognized in the year ended September 30, 2023 (2022) is $615 ($427).
168,614
2,235
864
171,713
(260)
171,453
83
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 7. Inventory
9. Contract Assets and Liabilities (continued)
The following table presents changes in net contract assets for the period ended:
Inventories are recorded at the lower of cost or net realizable value. Cost is calculated based on the weighted average
cost and FIFO methods. Write-downs are taken for excess and obsolete inventory and for a reduction in the carrying
value of inventory to reflect realizable value based on current cost, production and sales estimates. Cost comprises all
costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and
condition.
The following table presents inventories as at:
Raw materials
Work in process inventory
Finished goods
September 30, 2023
September 30, 2022
$
$
15,519
3,472
2,992
21,983
12,187
2,717
3,739
18,643
Opening balance, October 1
Net additions
Billings
Acquisitions (Note 25)
Ending balance
10. Equipment
Changes in Net Contract Assets
September 30, 2023
September 30, 2022
$
$
(6,345)
93,592
(117,805)
(877)
(31,435)
31,986
84,000
(110,774)
(11,557)
(6,345)
Inventory recognized as cost of revenues in the year ended is $35,941 ($19,838). Inventory provisions recognized in the
year ended September 30, 2023 (2022) is $517 ($Nil).
A continuity of the equipment, application software and capitalized research and development for the year ended
September 30, 2023 is as follows:
8. Prepaid Expenses
The following table presents prepaid expenses as at:
Prepaid maintenance
Other prepaid expenses
Current
Non-current
9. Contract Assets and Liabilities
The following table presents net contract assets as at:
Work in process
Unearned contract revenue (current)
Unearned contract revenue (non-current)
Net contract liabilities
84
September 30, 2023
September 30, 2022
$
$
20,250
9,176
29,426
19,040
10,386
29,426
18,924
4,856
23,780
23,780
-
23,780
Cost
Depreciation
Carrying Value
Cost
Additions/
Disposals
Acquisitions
(Note 25)
Total
Depreciation
Accumulated
Depreciation
September
30, 2023
September
30, 2022
$
$
$
$
$
$
$
$
Leasehold
improvements
Building
4,382
-
Equipment
43,039
815
1,321
(606)
-
-
5,197
1,321
(664)
(12)
(2,432)
(12)
2,765
1,309
2,477
-
9,217
51,650
(5,764)
(29,015)
22,635
14,146
Total
equipment &
building
Application
software
Capitalized
research and
development
47,421
1,530
9,217
58,168
(6,440)
(31,459)
26,709
16,623
14,809
456
-
15,265
(1,400)
(5,819)
9,446
10,395
5,052
86
-
5,138
(1,203)
(4,070)
1,068
2,186
Net Contract Assets
The Company recognized foreign exchange of $1,173 in the cost and $576 in the depreciation of equipment.
September 30, 2023
September 30, 2022
$
$
16,580
(32,423)
(15,592)
(31,435)
39,865
(46,210)
-
(6,345)
85
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 11. Right-of-Use Assets and Lease Obligations
The following table presents the right-of-use assets for the Company:
Balance October 1
Additions
Disposals and foreign exchange adjustments
Depreciation
Acquisitions (Note 25)
Years ended
September 30, 2023
September 30, 2022
$
$
16,678
2,302
30
(4,501)
20,128
34,637
15,383
2,467
(248)
(3,629)
2,705
16,678
The Company’s leases are for land, office, and manufacturing space. The Company has included renewal options in the
measurement of lease obligations when it is reasonably certain to exercise the renewal option.
The following table presents lease obligations for the Company:
Balance at October 1
Additions
Disposals and foreign exchange adjustments
Principal payments
Acquisitions (Note 25)
Current
Non-current
Total
Years ended
September 30, 2023
September 30, 2022
$
$
19,035
2,403
(71)
(4,382)
20,021
37,006
4,949
32,057
37,006
17,478
2,559
(86)
(3,655)
2,739
19,035
4,115
14,920
19,035
The following table presents the contractual undiscounted cash flows for lease obligations as at September 30, 2023:
Total Undiscounted Lease Obligations
Less than one year
One to five years
More than five years
Total undiscounted lease obligations
$
6,822
17,323
24,850
48,995
Total cash outflow for leases in the year ended September 30, 2023 (2022) is $4,913 ($4,106), including principal
payments relating to lease obligations of $4,382 ($3,655), interest expense on lease obligations is $531 ($451). Expenses
relating to short-term leases recognized in general and administration expenses was $137 ($76) for the year ended
September 30, 2023 (2022).
86
12. Investments
Cliniconex Inc., is an Ottawa-based patient outreach solutions vendor. During the years of 2017 to 2020, the Company
invested a total $569 in common and preferred shares of the Company, representing a minority interest. The Company
recognizes the investment at fair value and has adjusted its common and preferred shares to the most recent fair value,
resulting in a gain of $101 recognized in fiscal 2020.
During the period ended September 30, 2023, the Company invested $2,000 USD ($2,689) to acquire a minority
interest in preferred shares of Field Effect Software Inc. (“Field Effect”). Field Effect is Ottawa based and provides cyber
security solutions. The Company recognizes the investment at fair value and has adjusted its equity to the most recent
fair value, resulting in a gain of $314 recognized in the period ended September 30, 2023.
13. Acquired Intangible Assets
A continuity of the acquired intangible assets for the year ended September 30, 2023 is as follows:
September 30, 2023
Opening
Balance
Additions
(Note 25)
Amortization
Foreign
Exchange
Revaluation
Closing
Balance
$
$
$
$
$
Customer relationships
41,598
28,553
(9,850)
323
60,624
Discrete contracts with
customers & non-
competition agreements
Technology and trademarks
586
14,903
57,087
4,071
-
32,624
(641)
(4,383)
(14,874)
-
-
323
4,016
10,520
75,160
In the year ended September 30, 2023 the Company recorded a foreign currency revaluation of intangible assets held
in foreign subsidiaries which utilize different functional currencies than the Company’s presentation currency. These
foreign exchange revaluations are reflected in comprehensive income.
A continuity of the acquired intangible assets for the year ended September 30, 2022 is as follows:
September 30, 2022
Opening
Balance
Additions
Note (25)
Amortization
Impairment
(Note 23)
Foreign
Exchange
Revaluation
Closing
Balance
$
$
$
$
$
$
Customer relationships
29,611
18,778
(7,889)
717
231
(362)
-
-
1,098
41,598
-
586
Discrete contracts with
customers & non-
competition agreements
Technology and
trademarks
24,191
3,037
(5,827)
(6,477)
(21)
14,903
54,519
22,046
(14,078)
(6,477)
1,077
57,087
87
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 14. Goodwill
16. Provisions
The following table presents the goodwill for the Company for the year ended September 30, 2023:
Changes in provisions for the year ended September 30, 2023 were as follows:
Opening balance, October 1
Additions:
Acquisition of HPT (Note 25)
Adjustments:
Foreign Exchange
September 30, 2023
$
145,959
12,916
258
159,133
Balance at October 1, 2022
Additions
Utilization/Reversals
Balance at September 30, 2023
Product
Warranties
Severance
Other
$
$
$
897
1,184
(746)
1,335
248
2,658
(1,511)
1,395
104
24
(10)
118
Changes in provisions for the year ended September 30, 2022 were as follows:
In the year ended September 30, 2023 the Company recorded a foreign currency revaluation of goodwill held in foreign
subsidiaries which utilize different functional currencies than the Company’s presentation currency. These foreign
exchange revaluations are reflected in comprehensive income.
The following table presents the goodwill for the Company for the year ended September 30, 2022:
Opening balance, October 1
Additions:
Acquisition of SimFront (Note 25)
Acquisition of Computex (Note 25)
Adjustments:
Foreign Exchange
September 30, 2022
$
100,103
8,950
35,621
1,285
145,959
15. Accounts Payable and Accrued Liabilities
The following table presents the accounts payable and accrued liabilities for the Company as at:
Trade accounts payable
Payroll accruals
Income tax payable
Other accruals
September 30,
2023
September 30,
2022
$
$
76,168
22,252
2,150
4,980
91,652
21,960
3,225
9,259
105,550
126,096
Total
$
1,249
3,866
(2,267)
2,848
Total
$
1,541
1,157
(1,449)
1,249
Balance at October 1, 2021
Additions
Utilization/Reversals
Balance at September 30, 2022
17. Debt Agreement
Product
Warranties
Severance
Other
$
$
$
753
681
(537)
897
685
473
(910)
248
103
3
(2)
104
On January 6, 2021, the Company signed a debt facility that provides the Company with the ability to draw up to
$80,000 CAD. The agreement has a three-year term, which will mature on January 5, 2024. At September 30, 2022, the
Company utilized $7,500 of the facility. The balance was repaid by the Company in the fiscal year ended September 30,
2023. The facility is secured against the Company’s assets and is interest bearing at the Royal Bank of Canada’s Prime
Rate plus applicable margin.
On July 21, 2023, the Company signed an amended debt facility that provides the Company with the ability to draw up to
$180,000 CAD and an accordion feature of up to $75,000 CAD. The agreement has a three-year term, which will mature
on July 21, 2026. At September 30, 2023, the Company utilized $37,750 of the facility. The facility is secured against the
Company’s assets and is interest bearing at the Royal Bank of Canada’s Prime Rate plus applicable margin.
18. Issued Capital and Reserves
Issued Capital
The Company is authorized to issue an unlimited number of Common Shares and an unlimited number of preferred
shares. The holders of Common Shares are entitled to dividends if, as and when declared by the Board, to one vote per
share at the meetings of holders of Common Shares and, upon liquidation, to receive such assets of the Company as are
distributable to the holders of the Common Shares. No Preferred Shares are outstanding as of the September 30, 2023.
88
89
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 18. Issued Capital and Reserves (continued)
Common share issued and outstanding:
September 30, 2023
September 30, 2022
Shares
Amount
Shares
Amount
Balance October 1
11,607,391
213,277
11,285,828
$
$
194,960
2,047
2,221
-
45,742
35,147
-
240,674
14,049
-
-
Shares issued under employee share plans
Shares issued under employee share purchase
plan
Shares issued through acquisition
Shares issued through earn-out
Shares repurchased
Issued capital
60,311
48,620
69,094
59,328
(32,094)
2,471
2,925
3,964
3,511
(608)
11,812,650
225,540
11,607,391
213,277
Subsequent to the date of the statement of financial position, on December 1, 2023, the date of issuance of these
consolidated financial statements, the Company declared a dividend of $0.28 per common share payable on
December 27, 2023.
Contributed Surplus
Contributed surplus comprises the value of share-based compensation expense related to options granted that have
not been exercised or have expired unexercised.
19. Share-Based Compensation
Employee Share Purchase Plan
Under the Company’s Employee Share Purchase Plan, shares are issued monthly using the volume weighted average
price for the last 5 days of the month for the contributions made by employees in that month. The Company provides
matching shares at 25% for all employee contributions each month. Pursuant to the plan, 500,000 Common Shares are
reserved for issuance, as of September 30, 2023, the Company can issue 366,052 shares.
During the year ended September 30, 2023 (2022) under the 2020 Employee Share Purchase Plan, the Company issued
48,620 (35,147) shares at an average price of $60.15 ($60.50). The Company received $2,307 ($1,742) in proceeds and
recorded an expense of $597 ($518).
Stock Options
The Company has an established stock option plan. Under the plan, eligible directors and employees are granted the
right to purchase shares of common stock at a price established by the Board of Directors on the date the options are
granted but in no circumstances below fair market value of the shares at the date of grant. Stock options are issued at
market value based on the price at the date preceding the grant, and can have a contractual term of up to ten years and
generally vest over 3 years. The maximum number of common shares reserved for issuance under the plan is equal to an
aggregate 9% (1,063,139) of the Company’s issued and outstanding shares from time to time less the aggregate number
of shares reserved for issuance or issuable under any other security-based compensation arrangement for the
Company.
19. Share-Based Compensation (continued)
As at September 30, 2023, the Company has 403,829 stock options and restricted share units (“RSUs”) outstanding. As
a result, the Company could grant up to 659,310 additional stock options or RSUs pursuant to the plan.
The weighted average fair value of options granted during the year ended September 30, 2023 was $14.26 per option
calculated using the Black-Scholes option pricing model. Where relevant, the expected life of the options was based on
historical data for similar issuances and adjusted based on management’s best estimate for the effects of non-
transferability, exercise restrictions and behavioural considerations. Expected volatility is based on historical price
volatility over the past 5 years. To allow for the effects of early exercise, it was assumed that options would be exercised
on average 2 years after vesting.
The following assumptions were used to determine the fair value of the options granted in the year ended September
30, 2023:
Grant date share price
Exercise price
Expected price volatility
Expected option life
Expected dividend yield
Risk-free interest rate
Forfeiture rate
Weighted Average Options Granted
September 30,
2023
September 30,
2022
$
$
%
yrs
%
%
%
60.44
60.43
31.74
3.33
1.89
3.66
0
$
$
%
yrs
%
%
%
58.96
58.96
28.45
3.18
1.98
1.19
0
September 30, 2023
September 30, 2022
Number of
Options
Weighted Avg.
Exercise Price
Number of
Options
Weighted Avg.
Exercise Price
Outstanding October 1
Exercised
Forfeited
Granted
Outstanding September 30
220,800
(31,000)
(926)
23,542
212,416
$
52.55
30.75
60.43
60.43
56.22
204,913
(24,759)
-
40,646
220,800
$
49.46
40.48
-
58.96
52.55
90
91
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 19. Share-Based Compensation (continued)
19. Share-Based Compensation (continued)
The following share-based payment arrangements are in existence:
The following table summarizes information about the RSUs as of September 30, 2023:
Option series:
Number of
Options
Grant date
Expiry date
(1) Issued November 19, 2018
15,500
November 19, 2018
November 19, 2023
(2) Issued November 25, 2019
15,000
November 25, 2019 November 25, 2024
(3) Issued August 13, 2020
94,615
August 13, 2020
August 13, 2025
(4) Issued November 24, 2020
22,222 November 24, 2020 November 24, 2025
(5) Issued February 9, 2021
1,817
February 9, 2021
February 9, 2026
(6) Issued November 24, 2021
39,110
November 24, 2021 November 24, 2026
(7) Issued March 9, 2022
1,536
March 9, 2022
March 9, 2027
(8) Issued November 24, 2022
21,430 November 24, 2022 November 24, 2027
(9) Issued February 15, 2023
1,186
February 15, 2023
February 15, 2028
Exercise
price
Fair
value at
grant date
$
29.55
36.49
60.30
61.16
60.35
58.90
60.55
60.43
60.44
$
3.96
5.18
8.44
10.24
9.92
10.66
10.33
14.26
14.20
For the options issued on November 24, 2022, vesting occurs through to November 24, 2024. For the options issued on
February 15, 2023, vesting occurs through to February 15, 2024.
At September 30, 2023 (2022) the weighted average remaining contractual life of options outstanding is 1.92 (2.49)
years of which 186,164 (188,301) options are exercisable at a weighted average price of $55.71 ($51.05). The Company has
recorded $339 ($472) of share-based compensation expense in the year ended September 30, 2023 (2022) related to
the options that have been granted. At September 30, 2023 (2022) the Company has total unrecognized compensation
expense of $67 ($97) that will be recorded in the fiscal year.
Restricted Share Units:
Under the Company’s restricted stock unit (“RSU”) plan, the maximum number of common shares reserved for issuance
is equal to 9% of the Company’s issued and outstanding shares from time to time less the aggregate number of shares
reserved for issuance or issuable under any other security-based compensation arrangement for the Company. Share
units may be awarded to any officer or employee of the Company. Each restricted share unit will vest on the date or
dates designated for that unit, conditional on any vesting conditions being met. At the discretion of the Board, the
Company may issue one common share to participants for each whole vested share unit or a cash payment. The cash
amount is equal to the number of vested share units to be redeemed multiplied by the value of the common shares
otherwise issuable on redemption of the share units. Under the above RSU plan, the Company issued performance
share units (“PSUs”) which will vest on the date or dates designated for that unit, conditional on any vesting conditions
being met. Vesting conditions for performance share units are tied to the Company’s performance over time.
September 30, 2023
September 30, 2022
Number of
RSUs
Weighted Avg.
Grant Date
Fair Value
$
Number of
RSUs
Weighted Avg.
Grant Date
Fair Value
$
56,517
(29,311)
(24,425)
188,632
191,413
49.09
47.21
50.92
59.18
59.18
40,824
(20,983)
(525)
37,201
56,517
46.65
42.35
51.54
48.10
49.09
Balance at October 1
Exercised
Forfeited
Granted
Outstanding September 30
Of the units issued in the current year under the RSU plan, $Nil has vested as of September 30, 2023. The Company has
recorded $2,500 ($1,457) of share-based compensation expense in the year ended September 30, 2023 (2022) related
to the RSUs that have been granted. At September 30, 2023 (2022) the Company has total unrecognized compensation
expense of $965 ($966) that will be recorded over the next two years.
The following unvested RSU-based payment arrangements are in existence:
RSU series:
Number of
Units
Grant date
Vest through
(1) Issued November 24, 2020
(2) Issued February 9, 2021
(3) Issued May 12, 2021
(4) Issued August 10, 2021
(5) Issued November 24, 2021
(6) Issued Feb 9, 2022
(7) Issued May 10, 2022
(8) Issued Aug 10, 2022
(9) Issued September 14, 2022
(10) Issued November 24, 2022
RSU
RSU
RSU
RSU
RSU
RSU
RSU
RSU
RSU
RSU
PSU
5,400
November 24, 2020
November 15, 2023
81
194
16
February 9, 2021
November 15, 2023
May 12, 2021
November 15, 2023
August 10, 2021
November 15, 2023
13,320
November 24, 2021
November 15, 2024
53
558
81
February 9, 2022
November 15, 2024
May 10, 2022
November 15, 2024
August 10, 2022
November 15, 2024
647
September 14, 2022
November 15, 2024
28,278
November 24, 2022
November 15, 2025
142,785
November 24, 2022
November 15, 2025
Fair value
at grant date
$
59.35
59.74
56.32
63.25
58.90
57.18
67.34
66.60
56.10
59.18
59.18
92
93
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 19. Share-Based Compensation (continued)
Deferred Share Unit Plan
20. Revenue (continued)
Remaining Performance Obligations
At September 30, 2023 (2022) the Company has 45,345 (17,640) Deferred Share Units (“DSU”) outstanding, of which
20,723 (15,756) have vested, and the remainder will vest until August 2026. The Company recorded share-based
compensation of $1,113 ($637) related to the DSUs in the year ended September 30, 2023 (2022). Each DSU entitles the
participant to receive the value of one Common Share at the time of vesting. Vesting of the share units are based on
service intervals or held until termination of service.
The following table presents the aggregate amount of the revenues expected to be realized in the future from partially
or fully unsatisfied performance obligations as at September 30, 2023 for contracts recognized over time. The amounts
disclosed below represent the value of the firm orders only. Such orders may be subject to future modifications that
might impact the amount and/or timing of revenue recognition. The amounts disclosed below do not include
unexercised options or letters of intent.
There are 20,723 (15,756) vested DSUs outstanding at September 30, 2023 (2022). The fair value of the DSUs
outstanding at September 30, 2023 (2022) was $45.70 ($50.61) per unit using the fair value of a Common Share at
period end.
Revenues expected to be recognized in:
20. Revenue
The following table presents the revenue of the Company for year ended September 30, 2023 and 2022:
Product revenue
Advanced Technologies
Health
Learning
ITCS
Total product revenue
Service revenue
Advanced Technologies
Health
Learning
ITCS
Total service revenue
Total revenue
Year ended
September 30,
2023
September 30,
2022
$
$
106,298
93,038
1
6,235
44,741
157,275
72,065
184,855
99,957
144,431
501,308
5
3,670
62,542
159,255
57,360
167,136
87,998
110,423
422,917
658,583
582,172
Less than 24 months
Thereafter
Total
21. Net Profit per Share
The diluted weighted average number of shares has been calculated as follows:
Weighted average number of common shares – basic
Additions to reflect the dilutive effect of employee
stock options and RSU’s
Weighted average number of common shares – diluted
September 30, 2023
$
540,340
17,640
557,980
Year ended
September 30
2023
2022
11,714,887
11,343,615
25,791
39,725
11,740,678
11,383,340
Options that are anti-dilutive because the exercise price was greater than the average market price of the common
shares are not included in the computation of diluted net profit per share. For the year ended September 30, 2023
(2022), 46,374 (40,646) options and 42,507 (3,776) RSUs were excluded from the above computation.
94
95
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)
22. Income Tax
Current Income Taxes
22. Income Tax (continued)
Deferred Income Taxes
The following table reconciles the difference between the income taxes that would result solely by applying statutory
tax rates to pre-tax income and the reported income tax expenses:
Reconciliation of deferred tax assets and liabilities are shown below:
Profit before income taxes
2023
$
2022
$
29,961
24,159
Tax provision at the combined basic Canadian federal and provincial
income tax rate of 26.5% (2022: 26.9%)
7,940
6,499
Increase (decrease) resulting from:
Effect of expenses that are not deductible in determining taxable profits
Impact of rate reductions on valuation of deferred income tax assets
Other income not taxable in determining net profit
Tax expense relating to prior year
Impact of rate differences of foreign judisdictions
Income tax expense
1,601
83
224
646
582
11,076
1,865
(1,230)
1,082
2,339
-
10,555
Deferred tax assets
(liabilities)
Equipment
and
application
software
Acquired
intangible
assets
Bought
deal costs
Cash flow
hedging
reserve
Other
Total
$
$
$
$
$
$
Deferred tax liability at
September 30, 2021
Current year acquisition
Recovery (expensed) to
statement of net profit
Recovery (expensed) to other
comprehensive income
Deferred tax liability at
September 30, 2022
Current year acquisition
Recovery (expensed) to
statement of net profit
Recovery (expensed) to other
comprehensive income
Other
Deferred tax liability at
September 30, 2023
(2,646)
(360)
(14,463)
(1,450)
1,477
-
(942)
5,237
(423)
(453)
-
-
806
-
(15,279)
(1,810)
(120)
3,752
-
-
-
1,867
-
1,867
(3,948)
(10,676)
1,054
1,414
-
(502)
-
(1,809)
2,478
(429)
-
-
686
-
(11,470)
(502)
1,603
1,843
-
-
-
-
-
-
(950)
(365)
15
365
(935)
-
(5,757)
(8,700)
625
99
2,669
(11,064)
The Company has tax losses $4,933 (2022: $Nil) that are available for offsetting against future taxable profits of the
companies in which the losses arose. These losses start to expire in 2043.
23. Segmented Information
Operating segments are identified as components of an enterprise about which separate discrete financial information
is available for evaluation by the chief operating decision maker, regarding how to allocate resources and assess
performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company’s segments
are categorized as follows: Advanced Technologies, Health, Learning, and ITCS. Shared Services are aggregated and
incurred to support all segments. These include, but are not limited to, the Finance, Human Resources, IT support,
Corporate development, Legal, Corporate marketing and administrative functions, facilities costs, costs of operating a
public company, and other costs.
96
97
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)
23. Segmented Information (continued)
23. Segmented Information (continued)
The Company evaluates performance and allocates resources based on profit before undernoted items.
For the year ended September 30, 2022:
For the year ended September 30, 2023:
For the year ended
September 30, 2023
Advanced
Technologies
Health
Learning
ITCS
Shared
Services
For the year ended
September 30, 2022
Advanced
Technologies
Health
Learning
ITCS
Revenue
Cost of revenues
Gross profit
Gross profit %
Selling and marketing
General and administration
Research and Development
Profit before under noted
items
Profit before under noted
items %
Depreciation of equipment,
application software and R&D
Depreciation of right of use
asset
Amortization of acquired
intangibles
Other changes in fair value
Restructuring expense
Deemed compensation
Changes in fair value related to
contingent earn-out
Profit before interest income
and income tax expense
Lease obligations interest
expense
Interest income
Profit before income tax
expense
Income tax expense – current
Income tax recovery – deferred
Total income tax expense
NET PROFIT FOR THE PERIOD
$
$
$
$
$
178,363
184,856
106,192
189,172
118,476
59,887
136,172
48,684
79,240
120,483
26,952
68,689
-
-
-
Total
$
658,583
454,371
204,212
34%
26%
25%
36%
N/A%
31%
11,568
12,887
7,156
2,455
12,034
812
1,877
5,466
3,049
24,720
20,075
435
4,790
30,901
-
45,410
81,363
11,452
28,276
33,383
16,560
23,459
(35,691)
65,987
16%
18%
16%
12%
N/A%
10%
9,043
4,501
14,874
(314)
2,618
550
3,858
30,857
531
365
29,961
12,919
(1,843)
11,076
18,885
Revenue
Cost of revenues
Gross profit
Gross profit %
Selling and marketing
General and administration
Research and Development
Profit before under noted
items
Profit before under noted
items %
Depreciation of equipment,
application software and R&D
Depreciation of right of use
asset
Amortization of acquired
intangibles
Deemed compensation
Changes in fair value related to
contingent earn-out
Profit before interest income
and income tax expense
Lease obligations interest
expense
Interest expense
Profit before income tax
expense
Income tax expense – current
Income tax recovery – deferred
Total income tax expense
NET PROFIT FOR THE PERIOD
$
$
150,398
167,141
107,063
125,590
43,335
41,551
$
91,668
68,397
23,271
$
172,965
111,896
61,069
Shared
Services
$
-
-
-
Total
$
582,172
412,946
169,226
29%
25%
25%
35%
N/A%
29%
9,224
9,211
4,243
2,479
10,341
397
1,404
4,984
-
15,598
15,218
732
3,809
32,514
25,654
65,408
-
5,372
20,657
28,334
16,883
29,521
(29,463)
65,932
14%
17%
18%
17%
N/A%
11%
6,974
3,629
20,555
4,314
5,555
24,905
451
295
24,159
14,307
(3,752)
10,555
13,604
98
99
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 23. Segmented Information (continued)
24. Financial Instruments and Risk Management (continued)
The Company operates in Canada but provides services to customers in various countries. Revenues from external
customers for the year ended September 30, 2023 (2022) are attributed as follows:
Canada
United States
Europe
Other
September
30, 2023
September
30, 2022
71 %
24 %
4 %
1 %
71 %
16 %
12 %
1 %
Revenues are attributed to foreign countries based on the location of the customer. Revenues from various
departments and agencies of the Canadian federal, provincial and municipal governments for the year ended
September 30, 2023 (2022) represented 48% (47%) of the Company’s total revenues. All four operating segments
conduct business with this category of customer.
24. Financial Instruments and Risk Management
Capital Risk Management
The Company’s objective is to maintain a strong capital base in order to maintain investor, creditor and market
confidence and to sustain future development of the business and provide the ability to continue as a going concern.
Management defines capital as the Company’s shareholders’ equity excluding accumulated other comprehensive
income relating to cash flow hedges. The Company uses both debt and equity to fund working capital and its
investment initiatives. Net profits generated from operations are available to repay debt and reinvestment in the
Company or distribution to the Company’s shareholders. The Board of Directors does not establish quantitative return
on capital criteria for management; but rather promotes year-over-year sustainable profitable growth. The Board of
Directors also reviews on a quarterly basis the level of dividends paid to the Company’s shareholders and monitors the
share repurchase program activities. The Company does not have a defined share repurchase plan and buy and sell
decisions are made on a specific transaction basis and depend on market prices and regulatory restrictions. There were
no changes in the Company’s approach to capital management during the period.
Market risk is the risk that changes in market prices, such as foreign exchange rates, and interest rates will affect the
Company’s income or the value of its holding of financial instruments.
Foreign Currency Risk Related to Contracts
The Company is exposed to foreign currency exchange fluctuations on its cash balance, accounts receivable, accounts
payable and accrued liabilities, contingent earn-out and future cash flows related to contracts denominated in a foreign
currency. Future cash flows will be realized over the life of the contracts. The Company utilizes derivative financial
instruments, principally in the form of forward exchange contracts, in the management of its foreign currency exposures
within entities operating in currencies outside of their functional currencies. The Company’s objective is to manage and
control exposure and secure the Company’s profitability on existing contracts and therefore, the Company’s policy is to
hedge its foreign currency exposure where it is most practical to do so. The Company hedges long term projects in
foreign currencies. Other foreign currency exposure is evaluated on an individual basis to assess the associated risks
and costs to hedge. The Company does not utilize derivative financial instruments for trading or speculative purposes.
The Company applies hedge accounting when appropriate documentation and effectiveness criteria are met.
100
The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk
management objective and strategy for undertaking various hedge transactions. This process includes linking all
derivatives to specific firm contractually related commitments on projects.
The Company also formally assesses, both at the hedge’s inception and on an on-going basis, whether the derivatives
that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged
items. Hedge ineffectiveness has historically been insignificant. The forward foreign exchange contracts primarily
require the Company to purchase or sell certain foreign currencies with or for Canadian dollars at contractual rates.
The functional currency of each of the Company’s entities is determined using the currency of the primary economic
environment in which that entity operates. The Company’s functional currency is the Canadian dollar while the functional
currency of its US subsidiary is the US Dollar (“USD”), the functional currency of its German subsidiary is the European
Euro (“EUR”), the functional currency of its Norwegian subsidiary is the Norwegian Krone (“NOK”), and the functional
currency of its U.K. based subsidiary is the Pound sterling (“GBP”). The presentation currency of these financial
statements is the Canadian dollar.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the rate of exchange prevailing at the dates of the transactions.
At each reporting date, monetary items denominated in foreign currencies are retranslated at rates prevailing at the
reporting dates and are recognized in profit and loss in the period in which they arise. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not retranslated.
For the purpose of preparing consolidated financial statements, the assets and liabilities of the Company’s US
operations, German operations, Norwegian operations, and U.K. operations are first expressed in the Companies’ USD,
EUR, NOK and GBP functional currencies, respectively, using exchange rates prevailing at the reporting date which are
then translated into the Company’s reporting currency using prevailing rates at the reporting date. Income and expense
items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during
that period, in which case the exchange rates at the dates of the transactions are used. Translation differences are
recognized in other comprehensive income and recorded in the “cumulative translation adjustment”.
At September 30, 2023, the Company had the following forward foreign exchange contracts:
Type
SELL
SELL
Derivative assets
BUY
BUY
Derivative liabilities
$
10,208
4,120
45,964
6,125
Notional
Currency
Maturity
Equivalent
Cdn. Dollars
$
13,852
5,918
USD October 2023
EURO October 2023
USD October 2023
EURO October 2023
62,371
8,798
Fair Value
September 30,
2023
$
65
90
155
(292)
(60)
(353)
101
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)
24. Financial Instruments and Risk Management (continued)
24. Financial Instruments and Risk Management (continued)
A 10% strengthening of the Canadian dollar against the following currencies at September 30, 2023 would have
decreased other comprehensive income as related to the forward foreign exchange contracts or subsidiaries operating
outside of the Company’s presentation currency by the amounts shown below.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk
at the reporting date was:
USD
EURO
GBP
NOK
Total
September 30, 2023
$
(2,613)
663
48
193
(1,709)
Cash and cash equivalents
Accounts receivable
Derivative assets
Total
The aging of accounts receivable at the reporting date was:
A 10% strengthening against the Canadian dollar of the currencies to which the Company had exposure that is not
related to forward foreign exchange contracts or subsidiaries operating outside of the Company’s presentation
currency would have increased Net Profit (a 10% weakening against the Canadian dollar would have had the opposite
effect) by the amounts shown below.
USD
GBP
EURO
Total
Credit Risk
September 30, 2023
$
3,221
1
330
3,552
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the Company’s accounts receivable and its foreign exchange
contracts.
The Company’s exposure to credit risk with its customers is influenced mainly by the individual characteristics of each
customer. The Company’s customers are diverse, however a significant portion of them are federal or provincial
government agencies, or large private entities. A significant portion of the Company’s accounts receivable is from
long-time customers. At September 30, 2023 (2022), 33% (33%) of its accounts’ receivable were due from various
departments and agencies of the Canadian federal government. Over the last five years the Company has not incurred
any significant credit related losses.
The Company limits its exposure to credit risks from counterparties to derivative financial instruments by dealing only
with major Canadian financial institutions. Management does not expect any counterparties to fail to meet their
obligations.
September 30,
2023
September 30,
2022
$
33,734
173,052
155
206,941
$
42,646
171,453
123
214,222
September 30,
2023
September 30,
2022
$
161,985
7,905
3,162
173,052
$
159,412
6,378
5,663
171,453
Current
Past due (61-120 days)
Past due (> 120 days)
Total
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. At September
30, 2023, the Company has a secured debt facility that matures on July 21, 2026 that allows the Company to draw up to
$180,000 CAD. As at September 30, 2023, the Company had $33,734 cash on hand and $37,750 was drawn on the
facility for current operations and for temporary use through acquisitions, and $Nil was drawn to issue letters of credit to
meet customer contractual requirements.
Fair Value
The fair value of accounts receivable, accounts payable and accrued liabilities approximate their carrying values due to
their short-term maturity. Fair value of the forward exchange contracts reflects the cash flows due to or from the
Company if settlement had taken place on September 30, 2023 and represents the difference between the hedge rate
and the exchange rate at the end of the reporting period.
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 of the fair value hierarchy based on the degree to which the fair value is observable:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical
assets or liabilities;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data (unobservable inputs). Investments are made in companies that
do not have directly an observable market. These are fair valued when market participant data becomes available or if
financings for the investments are completed. The fair value of contingent earn-out amounts has been determined by
applying a discounted cash flow technique on the expected future value of a settlement amount along with Black-
Scholes if applicable.
102
103
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)
24. Financial Instruments and Risk Management (continued)
25. Acquisitions (continued)
Cash and cash equivalents
Investments
Derivative assets
Debt facility
Contingent earn-out
Derivative liabilities
Total
Cash and cash equivalents
Investments
Derivative assets
Debt facility
Contingent earn-out
Derivative liabilities
Total
September 30, 2023
Level 2
Level 3
$
-
-
155
(37,750)
-
(353)
$
-
3,673
-
-
(13,798)
-
Level 1
$
33,734
-
-
-
-
-
33,734
(37,948)
(10,125)
September 30, 2022
Level 2
Level 3
$
$
-
-
123
(7,500)
-
670
-
-
-
(28,550)
(812)
(8,189)
-
(27,880)
Level 1
$
42,646
-
-
-
-
-
42,646
There were no transfers between Level 1, Level 2 and level 3 during the year ended September 30, 2023.
25. Acquisitions
During the year ended September 30, 2023, the Company renamed several of its wholly-owned subsidiaries for
marketing initiatives. In the disclosure of Note 25 - Acquisitions, the Company will reference these subsidiaries by their
acquired names. For reference, Allphase Clinical Research Services and Alio Health Services Inc (collectively as “Alio/
Allphase”) were renamed to Calian Research Organization and Calian Patient Support Program, respectively. Calian UK
Cadence Consultancy Limited was renamed to Calian UK. Dapasoft Inc. was renamed to Calian Digital Solutions.
Allphase Clinical Research Services Inc. and Alio Health Services Inc. (collectively “Alio/Allphase”)
On January 30, 2020, the Company acquired all the outstanding shares of Alio/Allphase for a purchase price of up to
$25,056. Of this amount, $10,500 was paid in cash on the date of closing, $56 was paid in cash on settlement of net
equity, $2,500 was paid in common shares, and $12,000 is payable contingently, of which $3,000 is included in the
initial accounting of the purchase price. Alio/Allphase provides clinical trial services, specialty medication support and
community care and other services and is reported as a part of the Health operating segment.
Under the contingent consideration arrangement, the Company is required to pay the former shareholders of Alio/
Allphase an additional $3,616, $4,192 and $4,192 if Alio/Allphase attains specified levels of EBITDA for the years ending
January 30, 2021, 2022, 2023, respectively. A portion of the first and second year earn out payable amounts is subject to
the retention of the principal shareholders for a period of two years from the date of acquisition. This amount is deemed
to represent deferred compensation payable to such shareholders and therefore is excluded from the total
consideration of the purchase price and was expensed in the Company’s consolidated statement of net profit as
deemed compensation related to acquisitions on a straight-line basis over the retention period. The Company
recorded deemed compensation expense of $Nil ($1,000) for the fiscal year ended September 30, 2023 (2022). In the
2021 fiscal year, the Company paid $3,616 based on achievement of the first year EBITDA under the agreement. The
second year concluded with full payment of $4,192 in the year ended September 30, 2022 with full achievement of earn
out target. It was forecasted in the prior fiscal year that the third and final year of earn out would be lower than the target
amount, leading to a lower amount payable from the Company. As the earn out closed, achievement was higher than
anticipated, which resulted in an adjustment to the contingent earn out payable in the amount of $2,272 recognized in
changes in fair value of contingent earn out in the year ended September 30, 2023. The third year concluded with
payment of $3,350 in the year ended September 30, 2023.
The Company recognized an additional $59 of expense in the year ended September 30, 2023, related to changes in
fair value of contingent earn out. All amounts are to be settled in the first quarter of 2024.
Tallysman Wireless Inc. (“Tallysman”)
On September 3, 2020, the Company acquired all the outstanding shares of Tallysman for a purchase price of up to
$25,354. Of this amount, $16,654 was paid in cash on the date of closing, and $8,700 is payable contingently. Tallysman
designs, manufactures and sells a very wide range of Global Navigation Satellite System, Iridium and Globalstar
antennas and related products into a market with a broad range of vertical applications that include precision reference
systems, survey, timing, precision agriculture, unmanned and autonomous vehicles, marine and many more. The
company also produces cloud based wireless tracking systems over two-way radio systems and 4G category M cellular
systems, for applications ranging from school buses to municipal public works. Tallysman is reported as part of the
Advanced Technologies operating segment.
Under the contingent consideration arrangement, the Company is required to pay the former shareholders of Tallysman
an additional $3,950 and $4,750 if Tallysman attains specific levels of EBITDA for the years ending August 31, 2021 and
December 31, 2022, respectively. The first year target was achieved and paid in the prior fiscal year.
The second year target was achieved in full as at December 31, 2022, with overachievement. This has resulted in
additional bonus to key individuals involved in the business in the amount of $100 recognized in deemed compensation
in the fiscal year ended September 30, 2023, with an additional $763 recognized in fiscal 2022. The Company also
recognized $102 in the fiscal year ended September 30, 2023, related to changes in fair value of contingent earn out. All
amounts are settled and paid as at September 30, 2023.
Cadence Consultancy Limited (“Cadence”)
On October 30, 2020, the Company acquired the outstanding shares of Cadence for total cash consideration of up to
2,000 Pound Sterling ($3,518 CAD) of which, £1,100 ($1,966 CAD) was paid on closing, and £900 ($1,552 CAD) is payable
contingently. Cadence is a UK based training firm with operations across the NATO with a particular focus on the Joint
Forces Training Centre (JFTC). Cadence was acquired to expand the Company’s work with NATO which was initially won
with the acquisition of CTS in July of fiscal 2020. Cadence is reported as part of the Learning operating segment.
104
105
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 25. Acquisitions (continued)
Under the contingent consideration arrangement, the Company is required to pay the former shareholders of Cadence
an additional $776 and $776 if Cadence attains specific levels of EBITDA for the years ending October 31, 2021 and
October 31, 2022, respectively. In the year ended September 30, 2022 the Company paid $776 relating to the year one
contingent earn out which represented full achievement of targets. At September 30, 2022, it was deemed that the
year 2 earn out amount was not to be achieved and was written off through the consolidated statement of net profit at
that point. In the period ended December 31, 2022, the Company amended the earn out agreement with Cadence to
pay a portion of the year 2 earn out amount in order to retain key management members subsequent to the earn out
period. This has resulted in payment of £100 ($165 CAD) which was recognized in changes in fair value related to
contingent earn-out in the year ended September 30, 2023. Additionally, $47 was recognized as deemed
compensation in the year ended September 30, 2023 relating to special bonus amounts for key management members
earned in the period that were set as part of the share purchase agreement. All amounts are settled and paid as at
September 30, 2023.
Dapasoft Inc. (“Dapasoft”)
On February 22, 2021, the Company acquired all the outstanding shares of Dapasoft for a purchase price of up to
$78,709. Of this amount, $39,209 was paid in cash on the date of closing, $2,500 was placed in escrow, $5,000 was
paid through the issuance of common shares, $2,000 of common shares are to be issued upon expiry of escrow on
February 22, 2022 and $30,000 is payable contingently of which $11,605 was included in the purchase price. Dapasoft
is a provider of innovative systems integration, cloud lifecycle management and cybersecurity solutions, which enable
clients to securely implement digital transformation initiatives. Dapasoft is reported as part of the ITCS operating
segment.
Under the contingent consideration arrangement, the Company is required to pay the former shareholders of Dapasoft
an additional $17,500 and $12,500 if Dapasoft attains specific levels of EBITDA for the years ending February 28, 2022
and February 28, 2023, respectively. A portion of the earn out is payable through issuance of common shares of the
Company. In the year ended September 30, 2022, the Company concluded on the year one earn out with full
achievement. Settlement of the year one earn out resulted in cash payment of $2,861, of which $2,000 was related to
earn out payments, and the additional $861 was recognized in September 30, 2022 in changes in fair value related to
contingent earn out, whereby the Company had agreed to a payment structure in the initial agreement where if
Dapasoft was able to maintain low levels of working capital for the first year after acquisition, that the selling group would
be entitled to additional achievement payments. Further, common shares in the amount of $14,048 were issued in
relation to the payment of the year one earn out in the fiscal year ended September 30, 2022. An additional amount of
$1,511 was issued in the form of common shares to settle the remaining balance of the first year contingent consideration
amount in the fiscal year ended September 30, 2023. Overachievement bonus amounts were expensed in the 2022
fiscal year resulting in additional amounts owing of $2,175. At September 30, 2023, the second year earn out has
concluded and the full achievement of target is met.
The Company recognized $429 in the year ended September 30, 2023, related to changes in fair value of contingent
earn out. All amounts are settled and paid as at September 30, 2023.
25. Acquisitions (continued)
SimFront Simulation Systems Corporation (“SimFront”)
On October 7, 2021, the Company acquired the outstanding shares of SimFront, for total cash consideration of up to
$15,625 of which, $9,646 was paid on closing, and $6,000 is payable contingently. SimFront will enable Calian to provide
end-to-end military training and simulation capabilities and pursue new opportunities with customers seeking
integration and immersive training support. SimFront integration and augmented/virtual/mixed reality solutions elevate
Calian capabilities in this area. SimFront is reported as part of the Learning operating segment.
Under the contingent consideration arrangement, the Company is required to pay the former shareholders of SimFront
an additional $2,760 and $3,240 if SimFront attains specific levels of EBITDA for the years ended September 30, 2022
and September 30, 2023, respectively. In the year ended September 30, 2023 the Company settled and paid the year
one earn out in the amount of $2,760.
The Company recognized $554 in the year ended September 30, 2023 related to changes in fair value of contingent
earn out.
Hawaii Pacific Teleport (“HPT”)
On August 1, 2023, the Company acquired the outstanding shares of HPT, for total cash consideration of up to $50,393
USD ($66,978 CAD) of which, $28,474 USD ($37,845 CAD) was paid in cash on the date of closing, $681 USD ($905 CAD) is
estimated owing back to Calian for the settlement of net working capital, $3,500 USD ($4,562 CAD) was placed in
escrow, $3,000 USD ($3,964 CAD) was paid through the issuance of common shares and $16,100 USD ($21,399 CAD) is
payable contingently, of which $8,905 USD ($11,835 CAD) is included in the purchase price. The difference between the
amount payable contingently that is included in the purchase price to the total potential liability is due to some amounts
being considered deemed compensation and likelihood of achievement of earn out amounts. HPT operates as a
US-based provider of independent teleport and satellite communications solutions. HPT has service locations across
the Hawaiian Islands and Guam, and HPT provides connectivity through the Asia Pacific region. HPT is reported as part of
the Advanced Technologies operating segment. The Company uses the multi-period excess earnings method to value
acquired intangible assets, including the customer relationships. This method calculates the estimated fair value of an
intangible asset based on the estimated future cash flows that the asset can be expected to generate over its remaining
useful life and isolates the cash flows attributable to the customer relationships by utilizing a forecast of expected cash
flows for existing customers alone. The valuation involves significant estimation uncertainty, including assumptions
relating to forecasted revenues and forecasted earnings before interest and tax (“EBIT”) margins attributable to the
customer relationships, customer attrition rate, and discount rate.
Under the contingent consideration arrangement, the Company is required to pay the former shareholders of HPT an
additional $8,050 USD ($10,699 CAD) and $8,050 USD ($10,699 CAD) if HPT attains specific levels of EBITDA for the
years ended July 31, 2024 and July 31, 2025, respectively. $3,816 USD ($5,072 CAD) of the first and second year earn out
payable amounts is subject to the retention of the principal shareholders for a period of two years from the date of
acquisition. This amount is deemed to represent deferred compensation payable to such shareholders and therefore is
excluded from the total consideration of the purchase price and will be expensed in the Company’s consolidated
statement of net profit as deemed compensation related to acquisitions on a straight-line basis over the retention
period. The Company recorded deemed compensation expense of $403 for the fiscal year ended
September 30, 2023.
106
107
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 25. Acquisitions (continued)
Hawaii Pacific Teleport
Cash
Accounts receivable and tax receivable
Prepaid expenses
Equipment and application software
Right of use asset
Other assets
Acquired intangible assets
Goodwill
Accounts payable and accrued liabilities
Lease obligation
Unearned contract revenue
Other liabilities
Deferred tax liability
Net purchase price
Discount on contingent consideration
Total purchase price
Assets
Acquired
$
688
2,086
7
2,781
9,217
20,128
399
-
-
32,525
1,208
20,021
877
864
-
22,970
Goodwill and
Intangibles
Accounting
$
-
-
-
-
-
-
32,624
12,916
45,540
-
-
-
-
502
502
Cash consideration paid for the acquisition activity during the period ended September 30, 2023:
Consideration paid in cash
Less- cash balance acquired
Total
Assets Acquired
$
688
2,086
7
2,781
9,217
20,128
399
32,624
12,916
78,065
1,208
20,021
877
864
502
23,472
54,593
2,798
57, 391
HPT
$
42,497
(688)
41,809
26. Contingent Earn-Out
The following shows the contingent consideration activity for the year ended September 30, 2023:
Company Acquired
Beginning
balance
Acquisition
Payments
Alio/Allphase
Tallysman Wireless
Cadence
Dapasoft
SimFront
HPT
Total
$
1,860
5,411
75
15,758
5,446
-
28,550
$
-
-
-
-
-
9,037
9,037
$
(3,350)
(5,613)
(287)
(16,187)
(2,760)
-
Change in
Fair Value
$
59
102
165
429
554
277
Adjustments
$
2,272
100
47
-
-
403
2,822
Ending
balance
$
841
-
-
-
3,240
9,717
13,798
(28,197)
1,586
As at September 30, 2023, the total gross value of all contingent consideration outstanding is $25,007. Included in the
adjustments column in the table are amounts from deemed compensation, along with changes in estimated payment
amounts to make under contingent earn out estimates.
The following shows the contingent consideration activity for the year ended September 30, 2022:
Company Acquired
Beginning
balance
Acquisition
Payments
Alio/Allphase
Comprehensive Training
Solutions
Tallysman Wireless
Cadence
InterTronic
Dapasoft
SimFront
Total
$
6,941
749
8,104
1,417
3,228
17,823
-
38,262
$
-
-
-
-
-
-
4,914
4,914
Change in
Fair Value
Adjustments
$
$
Ending
balance
$
472
52
493
94
215
1,173
532
(1,361)
1,860
301
956
(660)
(3,443)
11,045
-
-
5,411
75
-
15,758
5,446
$
(4,192)
(1,102)
(4,142)
(776)
-
(14,283)
-
(24,495)
3,031
6,838
28,550
108
109
Annual Report 2023Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts)Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) 27. Related Party Transactions
The compensation for directors and other members of key management during the year was as follows. The
compensation of directors and key executives is determined by the compensation committee having regards to the
performance of individuals and market trends. This amount incorporated the named executive officers of the Company.
Compensation and short-term benefits
Share-based payments
28. Subsequent Events
2023
$
3,249
2,386
5,634
2022
$
3,448
1,306
4,754
In November 2023, the Company entered into a definitive agreement to acquire all outstanding shares of Decisive
Group Inc. (“Decisive”), an IT infrastructure and cyber security services business, for total cash consideration of
approximately $50,000, including earnouts of up to $24,725 based on the achievement of certain levels of EBITDA
performance over the next 12 months. This transaction was completed on December 1, 2023. Decisive will be reported
as part of the ITCS operating segment.
Corporate Information
Additional information about the Company such as the Company’s Annual Information Form and Management Circular
can be found on SEDAR at www.sedarplus.ca
Dated December 1, 2023
Corporate Head Office
Common Share Information
770 Palladium Drive
Ottawa, Ontario, Canada K2V 1C8
Phone: 613.599.8600
Fax: 613.592.3664
Web: www.calian.com
Board of Directors
George Weber
Chair of the Board
Corporate Director, ICD.D
Ray Basler
Corporate Director, CPA, CA
Kevin Ford
CEO, Calian Group Ltd
Lori O’Neill
Corporate Director, FCPA, FCA, ICD.D, CPA
Young Park
Corporate Director, ICD.D
Jo-Anne Poirier
President and CEO, VON Canada, ICD.D
Ronald Richardson
Corporate Director, P. ENG., ICD.D
Valerie Sorbie
Partner and Managing Director, Gibraltar &
Company
The Company’s common shares are listed for
trading on the Toronto Stock Exchange under
the symbol CGY.
Dividend Policy
The Company intends to continue to declare a
quarterly dividend in line with its overall financial
performance and cash flow generation.
Decisions on dividend payments are made on a
quarterly basis by the Board of Directors. There
can be no assurance as to the amount of such
dividends
in the future.
Transfer Agent
Odyssey Trust Company
Trader’s Bank Building 702, 67 Young Street
Toronto, Ontario M5E 1J8
Phone: 1-888-290-1175
Contact Information
Investor Relations inquiries: ir@calian.com
Media inquiries: pr@calian.com
General information inquiries: info@calian.com
110
Annual Report 2023
111
Calian Group Ltd.Calian Group Ltd. Notes to the consolidated financial statementsFor the years ended September 30, 2023 and 2022 (Canadian dollars in thousands, except per share amounts) calian.com
ir@calian.com