Ottawa’s Calian acquires Calgary firm, raises Q3 revenues by 9%

Kanata company raises guidance as it stretches profitability streak to 67 straight quarters
Kevin Ford
Calian Group CEO Kevin Ford. File photo.

Fresh off another quarter that saw its revenues and profits continue to rise, Ottawa’s Calian Group has acquired a Calgary-based company with an eye to expanding its mental health services.

Calian (TSX:CGY) Thursday reported revenues of $73.4 million for the three-month period ending June 30, a nine-per-cent increase over the $67.3 million it posted a year earlier. Revenues in the first nine months of fiscal 2018 were up 11 per cent to $226.2 million compared with the same span in fiscal 2017.

The Kanata-based firm also extended its run of consecutive quarterly profits to 67 with a net income of $3.9 million or 50 cents per share, up from $3.5 million or 46 cents a share in the same period a year earlier. Calian’s year-to-date net profit stood at $11.8 million, slightly ahead of last year’s nine-month total of $11.1 million.

In addition, the firm upgraded its revenue guidance for fiscal 2018 to between $300 and $315 million, up from a range of $290 million to $310 million in the previous quarter.

Shares of Calian were trading around $33.31 at market close on Thursday, an increase of 1.55 per cent on the day.

M&A streak continues

But in keeping with CEO Kevin Ford’s aggressive strategy of growth through acquisitions, Calian’s latest foray into the M&A realm dominated an afternoon conference call with analysts.

Just after announcing its third-quarter results on Thursday morning, the company said it has acquired Calgary-based Priority One, which provides specialized psychological assessments to law enforcement officers to help determine whether they’re fit to carry firearms.

Terms of the deal were not released.

Priority One’s customers include the government of Alberta, Parks Canada and the Canada Border Services Agency, and its annual revenues are in the $2-million range. Ford said the acquisition ​– the company’s seventh in the past six years ​– will add to Calian’s health-care portfolio, which already includes a network of more than 1,800 health-care professionals and 180 clinics that serve more than six million patients a year across Canada.

“We believe the demand in psychological services is only going to increase,” Ford said, adding the transaction, though not large in the grand scheme of things, brings the firm significant “intellectual capital” in addition to a handful of new customers.

“I think for us the ability to scale the service is something we’re definitely going to be looking at.”

Calian’s latest buy comes just over two months after it acquired Ottawa IT security firm Secure Technologies, a move designed to boost its presence in the rapidly expanding cybersecurity market.

"The funnel is very strong."

Touting that deal as well as recent wins such as a multimillion-dollar contract that will see the firm’s systems engineering division install satellite ground systems for an unnamed customer, Ford said Calian’s multiple service lines are poised for more big things in 2019 and beyond. The CEO said the company remains on track to hit his stated target of 10 per cent annual revenue growth.

“The funnel is very strong,” he said. “I’m pretty confident that we can continue to sustain that momentum. With those (contract) wins, with the M&A activity that we’re doing, we’re positioned not only for the short term but frankly longer-term growth.”

Diversification

In response to an analyst’s question about whether Calian – whose major contracts include deals to provide health-care support services to the Canadian military, RCMP and Veterans Affairs Canada – was looking to diversify its client base beyond government, Ford replied that not all its customers are in the public sector, noting its engineering division exports products to private entities around the world.

“We are not just a government service provider,” he said. “I think we are diversifying, if you look at our wins.”

Ford, who stepped away from day-to-day duties after suffering what Calian called a “cardiovascular event” in early April, also gave analysts an update on his health, saying his recovery is “going well” and he expects to be back in his office on a full-time basis next month.

Calian provides a range of business and technology offerings, including health, training, IT and engineering services, out of its Ottawa headquarters. Its Saskatoon-based systems engineering division supplies communications systems for space agencies and satellite firms as well as contract manufacturing services.