Currently have a $76.00 target. GLTA
CALIAN GROUP LTD. Q2/24 First Look: Timing-related Beat, Guidance Increased
Our Conclusion
Calian reported a strong FQ2, with Y/Y revenue growth of 19% (3% organic)
and Y/Y adj. EBITDA growth of 53%. The outperformance was driven by
acquisitions, including seasonally strong results at Decisive and strong
margins at HPT. However, with the revenue guidance range only increased
by the amount we had expected the Mabway/MDA Nuclear acquisitions to
contribute, we believe that the FQ2 beat is largely related to the timing of
revenue recognition at Decisive. Consolidated book-to-bill of 0.8x was
impacted by weakness in Health (0.1x). We will be looking for detail on the
strengths in the quarter and on bookings, on the call at 8:30 a.m. ET
tomorrow.
Key Points
Full-year Guide Increased: Calian increased its full-year guidance to
include its recent Mabway and MDA acquisitions and now expects revenue
of $750MM-$810MM ($730MM-$790MM previously) and adj. EBITDA of
$86MM-$92MM ($83MM-$89MM previously). We had expected Mabway to
contribute ~$28MM of revenue and ~$6MM of adj. EBITDA before
transaction costs. The combination of Mabway (~$28MM) and the better-
than-expected Q2 revenue ($5M above consensus) could potentially have
resulted in a larger increase to guidance, implying that the FQ2 strength may
be timing related or there is some conservatism in the guidance.
Strong FQ2/24 Results: Revenue of $201MM was between the Street and
our estimate ($197MM/$207MM), while adj. EBITDA of $25.7MM was solidly
above consensus/CIBCe ($22.3MM/$23.5MM). Revenue growth of 19% Y/Y
(3% organic) was driven by strength in ITCS and Health. Adj. EBITDA margin
of 12.8% was up ~280 bps Y/Y, driven by Advanced Technologies (AT) and
ITCS. Adj. EBITDA was well above consensus and our estimate as the
company benefitted from higher margin revenue mix and cost saving
initiatives implemented in August. Consolidated book-to-bill of 0.8x was
driven by strength in AT (1.1x) and ITCS (1.1x), offsetting softness in Health
(0.1x), while Learning improved to 1.0x. Backlog was $1.09B, down
sequentially from $1.13B.
Segmented Results: ITCS was the largest outperformer relative to
consensus, with revenue of $68MM 12% above the Street and 5% above
CIBCe and adj. EBITDA 34% above the Street and 25% above CIBCe. The
beat was driven by seasonally strong results at Decisive, with Y/Y ITCS
revenue growth of 38% (-1% organic) and cost reductions. Adj. EBITDA in
Health and AT was also above the Street, driven by higher-margin revenue
mix, the HPT acquisition, and R&D tax credits in AT and short-term response
work in Health. Learning revenue declined 2% Y/Y, below the Street/CIBCe.
Free Cash Flow: FCF was $31.6MM (adjusted for lease payments),
impacted by positive working capital changes of $15MM. Operating FCF
(excluding lease payments and working capital changes) was $17.8MM, or
FCF conversion of 69%, in line with the longer-term average of ~70%.