Calian Group’s stock price plummeted Wednesday after the Kanata-based company said its second-quarter revenues declined amid a slowdown in federal government spending and fallout from the global trade war. Calian shares ended the day at $40 on the Toronto Stock Exchange, down nearly 18 per cent from the previous day’s closing price and not far […]
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Calian Group’s stock price plummeted Wednesday after the Kanata-based company said its second-quarter revenues declined amid a slowdown in federal government spending and fallout from the global trade war.
Calian shares ended the day at $40 on the Toronto Stock Exchange, down nearly 18 per cent from the previous day’s closing price and not far off the company’s 52-week low of $38.91.
The steep drop came in the wake of a second-quarter earnings report that CEO Kevin Ford conceded “fell short of expectations” and prompted Calian to withdraw its fiscal 2025 guidance.
The company reported revenues of $193.7 million for the three-month period ending March 31, a decrease of four per cent from a year earlier.
Calian posted a net profit of $300,000, or two cents per diluted share, down from $4.9 million, or 41 cents per diluted share, a year ago. Meanwhile, its adjusted EBITDA fell 36 per cent year-over-year to $17 million.
The company said the drop in profitability was primarily due to investments in “selling capacity”, amortization and deemed compensation expenses related to acquisitions.
It was a particularly rough three-month stretch for Calian’s IT and cybersecurity division, where revenues fell to $51.1 million from $68.2 million in the second quarter of 2024.
The company blamed the drop largely on procurement delays from key government customers as new contract signings were put on hold during the recent federal election.
“While we had anticipated some slowdown with the pending election, the impact was more significant than anticipated,” Ford told analysts during a conference call Wednesday morning to announce Calian’s latest earnings.
“The good news is that we believe this is a timing issue, and we will recapture these opportunities in the back half of the year.”
But the company said it was also facing headwinds on a number of other fronts, including a pause on new IT and cyber deals in the United States as customers south of the border assess the potential impact of U.S. President Donald Trump’s new tariffs as well as higher costs as Calian transitions clients from its own in-house cybersecurity platform to a new one powered by Microsoft.
Still, Ford said he remained upbeat about the firm’s IT and cyber business, telling analysts he believes new deals with partners such as Microsoft and Calian’s investments in “AI-driven innovation” and other new technology bode well for the future.
“The fundamentals of the ITCS business remain strong,” he said. “While we are in the early stages of our transformation, we are highly confident in the long-term outlook for ITCS.
“I think in a couple of quarters, we’ll be very excited about where this thing is going.”
Nonetheless, the IT division’s tepid performance has forced Calian to rethink its sales projections for the rest of the year.
The firm previously said it expected to generate between $800 and $880 million in revenues in fiscal 2025, up from $747 million in fiscal 2024. But Calian said Wednesday it was withdrawing its guidance due to the potential impact of lower ITCS revenues.
Ford tried to put a positive spin on the situation, stressing that Calian’s other divisions – advanced technologies, health and learning – are still “performing to expectations” as revenues rose year-over-year in all three segments.
$250M in new contracts
Noting that the company signed nearly $250 million in new contracts in the quarter, he said Calian still expects to produce record revenues in 2025.
“It is important to emphasize that this decision (to withdraw guidance) does not alter our confidence in Calian’s long-term growth trajectory,” Ford said.
Defence customers now account for nearly half of the company’s overall revenues, and Ford said that ratio is poised to grow under a new Liberal government that has pledged to boost military spending and buy more defence-related products and services from Canadian companies.
“While the timing of the contract awards is difficult to predict, the tailwind is undeniable,” he said. “Calian is one of a handful of Canadian companies with the breadth and depth to manufacture mission-critical military equipment when failure is not an option. Despite some headwinds, we believe the company is well-positioned for growth in the years ahead.”
Ford said Calian is also seeing “growing momentum” for its training software and other products from military customers in Europe and keeps expanding its presence in the U.S. even as it remains “maniacally focused” on landing additional contracts with Canada’s Department of National Defence.
“We have a good relationship (with the federal government), but we’re not taking it for granted,” he added.
Calian expects to get an additional revenue boost from remote health-care services provider Advanced Medical Solutions, a Yellowknife-based company it acquired for $21.5 million in a deal that closed Wednesday morning.
Founded in 1995, Advanced Medical Solutions provides health care as well as air ambulance, emergency medical evacuation and other services to residents in the Yukon, Northwest Territories, Nunavut and northern parts of several provinces.
The company, which employs more than 300 people, has a contract backlog of roughly $250 million. Ford said the deal gives Calian “a strategic footprint in the North at a time when the federal government is making a substantial investment in the region.”
“When you think about the discussions that are happening in this country right now about the North, we saw this as a fantastic opportunity for us to strengthen our presence,” he said.
Ford did not address an analyst’s question about whether he still expects Calian to reach its previously stated goal of generating $1 billion in annual revenues by 2026.
However, he did say the company is going full speed ahead with plans to launch an independent U.S.-based subsidiary in a bid to attract more defence and government clients south of the border.
“I think we’re all just trying to work through the current macro environment there and understand how a Canadian company can compete in that market,” Ford explained. “We still believe the U.S. is a good long-term market for Calian.”
