Calian’s ongoing acquisition spree is translating into gains on the balance sheet as the Kanata company started its new fiscal year with a bang, cracking the $100-million revenue barrier for the fourth straight quarter while boosting its income and profit projections for 2021.
Calian (TSX:CGY) reported revenues of $116.2 million for the three-month period ending Dec. 31, 2020, the first quarter of its 2021 fiscal year.
That’s up 17 per cent from a year earlier, a spike fuelled by a spate of acquisitions that has continued unabated throughout the COVID-19 crisis. The Kanata firm bought five companies in fiscal 2020, adding new product lines that accounted for nearly 90 per cent of the company’s revenue growth in the last quarter.
Calian also stretched its impressive streak of consecutive profitable quarters to 77 with a net profit of $2.4 million. That’s down from $4.3 million a year ago, a drop the company blamed on higher amortization of intangible assets and compensation expenses from recent acquisitions.
Coming off a year in which it posted record revenues of more than $430 million, Calian expects that momentum to continue on the strength of a string of buys that have bolstered its presence in Europe and added new customers in its burgeoning health-care division.
Boosting profit projections
This week, the company altered its guidance for fiscal 2021, saying it’s now projecting revenues of between $460 million and $500 million – up from a top end of $480 million in its previous outlook.
In addition, Calian says it now expects to turn an adjusted net profit in the range of $27.5 million to $30.6 million, an increase of nearly 10 per cent over previous projections.
One of Calian's key strengths continues to be the diversity of its product offerings.
With services ranging from medical clinics to military training exercises in four main business segments, the Kanata firm has seen massive growth in some areas that has helped offset declines in other business lines.
Take health care, for example. Calian’s revenues jumped 57 per cent in that segment in its first quarter, from $30 million to more than $47 million, as demand rose sharply for nursing and treatment programs provided by Ottawa’s Alio Health Services, a company Calian acquired last January.
“Every month they continue to scale up,” chief financial officer Patrick Houston said of Alio during a call with analysts on Wednesday. “We’re seeing excellent momentum in that business.”
Meanwhile, another local firm Calian bought early last year, Allphase Clinical Research Services, is partnering with a major pharmaceutical company to help manage clinical drug trials in Europe. The same drug-maker is also looking at bringing in Allphase to help it conduct trials in the United States.
Those gains helped Calian weather downturns in its IT and cybersecurity division, as well as its advanced technology operations.
The Saskatoon-based advanced technology division, which makes satellite and communications equipment, saw its revenues fall seven per cent year-over-year, partly due to project delays in the wake of COVID-19. IT and cybersecurity revenues were down two per cent.
But Calian executives said Wednesday they remain “very confident” both segments will bounce back quickly.
CEO Kevin Ford pointed to the rapid development of low-Earth orbit satellite projects – such as Telesat’s Lightspeed constellation designed to deliver high-speed internet to remote areas – as a source of potential new opportunities for the company.
The recent acquisition of Quebec-based antenna systems provider InterTronic has made Calian “even more relevant” in the satellite space, he said.
“I don’t look at (the drop in first-quarter technology revenues) as a long-term trend,” Ford said. “We see the pipeline as quite strong.”
The CEO sees big potential in the American market, noting InterTronic already has a solid customer base south of the border with more contract wins likely to come.
“The U.S. is clearly on our agenda,” he said, adding he expects Calian to set up an office in the country within the next two years. “The reality is we have just too many customers there to ignore that any longer.”
"The U.S. is clearly on our agenda. The reality is we have just too many customers there to ignore that any longer."
Meanwhile, he said Calian is also gaining traction in Europe thanks to SatService, a company it acquired in 2019. The German firm, which provides turnkey satellite solutions and develops software and hardware systems for satellite installation, communications, switching and other services, is now making inroads with military clients.
“They're winning business that they’ve never won before in defence,” Ford said, adding Calian aims to “double down” on its efforts to expand its customer base across the Atlantic. “We’re very excited about the European marketplace.”
Houston said he also expects the firm’s IT and cybersecurity business to rebound after several projects were put on hold earlier in the pandemic.
“We still have a lot of opportunities there and we’re hoping to close those this year,” he said. “It’s more of a timing issue right now than a trend.”
Calian shares were up $1.75 to $60.81 in late-afternoon trading on the Toronto Stock Exchange.