NowVertical Sells Allegient Business Unit to Focus on Core Business

TORONTO, May 27, 2024 (GLOBE NEWSWIRE) -- NowVertical Group Inc. (TSX-V: NOW) (“NOW” or the “Company”), a leading data analytics and AI solutions company, today announced the strategic disposition of Allegient Defense, Inc. (“Allegient”), to a subsidiary of BCS, LLC (the “Purchaser”) for a gross consideration of up to $12.5 million (the “Disposition”). All financial information in this press release is reported in United States dollars (USD), unless otherwise indicated.

“The sale of Allegient aligns with our commitment to optimize our core business strategy of integration to build one cohesive business and unified brand,” said Sandeep Mendiratta, CEO of NOW. “This transaction allows us to streamline our integration operations, enhance our overall EBITDA, and allocate resources more effectively towards the growth driven by our integration strategy.”

Strategic Rationale:

The Company acquired Allegient, a technical services support business focused on providing the United States federal government with technical staffing resources for scientific evaluation research and IT, business, financial systems support and administrative support staffing, on April 6, 2022. In 2023, Allegient reported revenue of $17.8 million and an income from operations margin of 8% with $1.4M income from operations. Before undertaking the Disposition, NOW considered multiple factors, including:

• Focusing on Assets that can be Integrated: Allegient specializes in Systems Engineering and Technical Assistance (“SETA”) program staffing support work and derives less than 5% of its revenue from providing AI/ML and data solutions. Additionally, the level of security and confidential nature of Allegient’s work with federal government organisations meant that NOW could not leverage its global capabilities from other parts of the business to support Allegient. This strategic sale to the Purchaser enables Allegient to thrive in its niche while NOW concentrates on its "One Business, One Brand" strategy and vision to commercially focused data solutions using AI.
  
• Opportunities for EBITDA and Margin Enhancement: With its cost-plus-fixed-fee structure, Allegient's focus on SETA work provides consistent income from operations margins typically below 10% with limited opportunity for improvement. However, the rest of the Company's operations benefit from higher scalability and optimization, achieving income from operations margins between 16% and 35% in the year ended December 31, 2023.