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Calian on track to become a ‘multibillion-dollar global company,’ CEO says

November 26, 2024

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Kanata-based Calian Group is laying the groundwork to become a “multibillion-dollar global company,” CEO Kevin Ford told analysts on Tuesday morning after the firm reported its seventh consecutive year of double-digit revenue growth. Calian, a diversified company that builds products ranging from satellite components to cybersecurity software, earned revenue of $747 million for the fiscal year ending Sept. 30, up 13 per cent from the previous year. Its fourth-quarter revenues were $181 million, an increase of three per cent from a year earlier. Fuelled by acquisitions and rising demand for products in areas such as health care, military training and cybersecurity, Calian is predicting double-digit growth again for 2025. Its forecasts call for revenues of between $800 million and $880 million in the current fiscal year, which equates to 12 per cent year-over-year growth in the midpoint of the range. The firm is projecting adjusted EBITDA in the range of $96 million to $106 million, an increase of 10 per cent over 2024 at the midpoint of the guidance. Calian’s most recent three-year plan set a goal of reaching $1 billion in annual revenues by 2026. On Thursday, Ford told analysts Calian won’t rest on its laurels as it gets closer to achieving its objective. “I want to be clear here. The $1-billion (target) is not where we stop the company,” he said. “The key element to me is that … $1 billion is a goalpost. And I believe that we have all the ingredients to continue to grow not just to a billion, but to a multibillion-dollar global company.” Still, Calian faced a few headwinds in fiscal 2024 – particularly cuts in Canadian government defence spending that softened revenues in its training division and affected the company’s overall performance. Year-over-year revenue growth came in slightly below the firm’s five-year average of 15 per cent. Calian’s profits were also down, falling to $11.2 million, or 93 cents per diluted share, from $18.9 million, or $1.61 per diluted share, in fiscal 2023. Calian posted a net loss of $568,000, or five cents per diluted share, in the fourth quarter, compared with a profit of $5.1 million, or 43 cents per diluted share, in the same period a year earlier. The company attributed the drop to increased amortization and interest expenses related to acquisitions. Markets reacted tepidly to the latest earnings report. Calian shares fell 37 cents to $47.65 in early afternoon trading on the Toronto Stock Exchange. Ford said Calian remains on track to hit the targets set out in its three-year growth strategy as recent acquisitions continue to expand its customer base and its geographic footprint in the United States and Europe. Customers from outside Canada accounted for 32 per cent of Calian’s revenues in 2024, up from 25 per cent four years ago. Meanwhile, revenue from commercial clients rose to $366 million from $203 million in the same time frame. Acquisitions have been a key plank in Ford’s growth strategy since he was hired as CEO in 2015. Nearly 85 per cent of Calian’s revenue growth in 2024 came from newly acquired companies, and Ford clearly wants to keep that momentum going. Calian has created a new position – vice-president of mergers and acquisitions – to spearhead its M&A strategy and will announce who’s filling that role in the near future, Ford said. “We are going to continue to lean in on our M&A agenda, because we believe it is working,” he said. “It’s helping us to innovate, it’s helping us to diversify, and the companies we are bringing in are excellent. “When I came to Calian, I’m not sure people viewed us as a growth company. I hope we’re putting that to bed. We’re not a company that’s talking about growing – we’re a company that’s growing, and doing it the right way.” Later in the call, Ford conceded Calian still struggles to articulate its value proposition to some customers due to its diversified product lines that are the basis of what the CEO often calls its “four-piston engine” – advanced technologies, health, learning, and IT and cybersecurity solutions. The company needs to do a better job of identifying and capitalizing on cross-selling opportunities that result from its breadth of service offerings, Ford added. “We have to move away from talking about this company as four distinct, separate segments and start talking about the unique opportunity Calian has to take those capabilities to customers and offer comprehensive solutions,” he explained. For example, Ford argued that few companies can match Calian’s capacity to “knit together” a bunch of different services for military customers, such as training simulations, cybersecurity software, engineering know-how and health-care solutions. “Who does all of that? We do. And we’ve got to celebrate that,” he said. The mid-range of Calian’s 2025 guidance calls for year-over-year growth of 12 per cent, below its five-year average. Ford told analysts he believes the company made a prudent forecast. “A lot of moving parts right now – I think we have opportunities across all of our business,” he said. “I’m optimistic, but we’re also trying to be conservative coming out of the blocks with regard … to expectations.” Calian’s earnings call came a day after U.S. president-elect Donald Trump threatened to impose a 25 per cent tariff on all Canadian goods once he takes office in January. In response to a question about the potential impact of higher tariffs on Calian’s business south of the border, chief financial officer Patrick Houston said only a small portion of the company’s revenues from U.S.-based customers actually come from products made in Canada. “The investments we made in (U.S. companies) have given us a platform to deliver there,” Houston said. “I think we’ll continue to look at how we use the M&A agenda to invest and get a base in the U.S., and I think that will help us kind of avoid any issues with tariffs.”