NOW NowVertical Group Inc

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.

Deal Terms:

The $12.5 million of consideration for the transaction consists of $7.5 million in cash received on closing, $1.0 million pursuant to a secured promissory note issued to NOW at closing and payable in installments within 18 months of closing (the “Note”) and up to $4.0 million as an earn-out (the “Earn-Out”) payable on Allegient achieving certain revenue milestones. The amount of cash received at closing exceeds 2023 Free Cash Flows from the Allegient business unit by eleven times (11x), providing NOW with significantly enhanced financial flexibility.

Benefits to NOW:

• Debt Reduction: The Disposition clears $3.8 million of debt from NOW’s balance sheet, significantly reducing overall debt liabilities.
• Deferred Liabilities: The sale helps reduce deferred liabilities, improving NOW's financial health.
• Growth Facilitation: Proceeds from the Disposition support NOW's growth plans for its integrated business, enabling strategic investments in core areas.

Following the Disposition, the Company will continue its operations in the government vertical, ensuring consistent service delivery to public sector clients in North America, UK, EMEA and Latam markets.

"We are excited about the partnership with NowVertical through the acquisition of Allegient," said Dr. Alain Williams, CEO of the Purchaser. "This strategic move allows us to execute and build on Allegient's strong opportunity pipeline and backlog. We look forward to leveraging Allegient's expertise and capabilities to further enhance our service offerings and drive growth in the US federal sector."

"I want to extend my genuine thanks to the Allegient team and its leadership, particularly Angel Diaz, for their outstanding contributions to the Company," continued Mr. Mendiratta. "We wish them continued success in their future endeavours."

For more detailed insights about the Disposition, we invite interested parties to watch a video prepared by the Company, available at: bit.ly/NOWDealInsights.

About NowVertical Group Inc.

The Company is a data analytics and AI solutions company offering comprehensive solutions, software and services. As a global provider, we deliver cutting-edge data, technology, and artificial intelligence (AI) applications to private and public enterprises. Our solutions form the bedrock of modern enterprises, converting data investments into business solutions. NOW is growing organically and through strategic acquisitions. For further details about NOW, please visit www.nowvertical.com.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

For further information, please contact:

Andre Garber, Chief Development Officer:IR@nowvertical.com

Glen Nelson, Investor Relations and Communications: glen.nelson@nowvertical.com t: (403) 763-9797

NON-IFRS MEASURES

This news release refers to certain non-International Financial Reporting Standards (“IFRS”) measures. These measures are not recognized under IFRS, do not have a standardized meaning prescribed by IFRS, and are, therefore, unlikely to be comparable to similar measures presented by other companies. Please refer to the section below under the header “NON-IFRS MEASURES”. The non-IFRS financial measures referred to in this news release are defined below.

“EBITDA” adjusts net income (loss) before depreciation and amortization expenses, net interest costs, and provision for income taxes.

“Income from operations margin” is defined as income (loss) from operations as a percentage of revenue.

“Free Cash Flows” is defined as income (loss) from operations less interest and debt principal repayments.

The following table shows the Free Cash Flows from Allegient during the year ended December 31, 2023.

Income from operations	$	1,420,959
Interest payments on long-term debt		(206,754	)
Principal repayments on long-term debt		(554,274	)
Free Cash Flows	$	659,932

Cautionary Note Regarding Non-IFRS Measures

This news release refers to certain non-IFRS measures. These measures are not recognized under IFRS, do not have a standardized meaning prescribed by IFRS, and are, therefore, unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. The Company’s definitions of non-IFRS measures used in this news release may not be the same as the definitions for such measures used by other companies in their reporting. Non-IFRS measures have limitations as analytical tools and should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS. The Company uses non-IFRS financial measures including “EBITDA.”These non-IFRS measures provide investors with supplemental measures of our operating performance and eliminate items that have less bearing on our operational performance or operating conditions and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. The Company believes that securities analysts, investors and other interested parties frequently use non-IFRS financial measures in the evaluation of issuers. The Company’s management also uses non-IFRS financial measures to facilitate operating performance comparisons from period to period and to prepare annual budgets and forecasts.

Forward‐Looking Statements

This news release contains forward-looking information and forward-looking information within the meaning of applicable Canadian securities laws (together “forward-looking statements”), including, without limitation: the aggregate consideration to be received from the Disposition, the payment of the Notes, potential achievement of the revenue requirements for the Earn-Out and the total amount of such Earn-Out, and expectations regarding the potential impact of the Disposition on NOW’s business, finances and operations. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties, and contingencies. Forward-looking statements generally can be identified by the use of forward-looking words such as “may”, “should”, “will”, “could”, “intend”, “estimate”, “plan”, “anticipate”, “expect”, “believe” or “continue”, or the negative thereof or similar variations. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause future results, performance, or achievements to be materially different from the estimated future results, performance or achievements expressed or implied by the forward-looking statements and the forward-looking statements are not guarantees of future performance. Forward-looking statements are qualified in their entirety by inherent risks and uncertainties, including: adverse market conditions; risks inherent in the data analytics and artificial intelligence sectors in general; regulatory and legislative changes; that future results may vary from historical results; inability to obtain any requisite future financing on suitable terms; any inability to realize the expected benefits and synergies of acquisitions or the Disposition; that market competition may affect the business, results and financial condition of the Company and other risk factors identified in documents filed by the Company under its profile at www.sedarplus.com, including the Company’s managements discussion and analysis for the year ended December 31, 2023. Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, the Company assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.