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Calian betting on defence business as global uncertainty grows

February 13, 2025

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Calian Group’s CEO says the Kanata-based firm is doubling down on its defence business as it projects demand for its cybersecurity, training and space technology to soar in the face of growing geopolitical instability. Kevin Ford told analysts on a conference call Thursday morning Calian sees “significant macro tailwinds” for its growing range of defence-related services that include everything from military training simulations to advanced cybersecurity software. Several factors are driving demand for Calian’s products, Ford explained, including growing U.S. pressure on Canada to boost its defence spending, as well as conflicts such as the war in Ukraine that “are compelling all NATO countries to accelerate their defence efforts, explore wartime measures and adapt to the potential reduction of U.S. contributions to joint operations.” Ford said Calian is already a “significant player in the defence industry,” adding the company continues to expand its presence in Europe through moves such as its acquisition of U.K.-based defence firm Mabway. Ford said Mabway, which specializes in large-scale defence role-playing environments that simulate real-world operational environments and provides technical engineering education for naval and maritime communities, has been “firing on all cylinders” since Calian bought the company last May. Calian recently hired a “U.K. defence industry veteran” to head its operations in Britain, and Ford said the company will keep pushing to beef up its defence business across the Atlantic by adding more services and acquiring new IP. “I think we’ve got a good thing happening,” he said. “I think it’s just going to be the start of growing our presence in the U.K. and Europe for sure.” Ford spoke to analysts after Calian released its first-quarter financial results that showed the company brought in revenues of $185 million for the period ending Dec. 31, a three per cent increase from a year earlier. The firm posted a net loss of $1 million, or eight cents per diluted share, compared with a profit of $6 million, or 46 cents per diluted share, in the same period last year. Calian blamed the deficit on “increases in accounting charges related to amortization and deemed compensation expenses from acquisitions as well as increased operating expenses.” The company reiterated its previous guidance, saying it expects to generate between $800 and $880 million in revenues in fiscal 2025, up from $747 million in fiscal 2024. Calian’s shares ended the day down $4.73, or more than nine per cent, to $44.97 on the Toronto Stock Exchange. Calian’s leadership team used Thursday’s call to tout other recent moves aimed at bolsting the firm’s defence business, including the launch of a new U.S.-based subsidiary that will focus on attracting defence and government clients and the hiring of a new senior executive, retired Canadian major-general Roch Pelletier, who will be responsible for finding new customers and strengthening Calian’s existing business relationships in the defence sector. Chief financial officer Patrick Houston said that while more than 20 per cent of Calian’s revenues now come from U.S. customers, “not a lot of that is in defence.” He said he expects that to change as the new U.S. subsidiary finds its footing. “It’s only been a couple of months, but I think we’re already starting to see some positive momentum there,” Houston said. “This is a longer-term play, but I think the investments we’ve made and the assets we have are much more compelling than they were even three or four years ago.” Calian said Thursday it sold $330 million worth of defence products in fiscal 2024, accounting for 44 per cent of all revenues. “Defence is, and will continue to be, a key market for Calian,” Ford said. “The demand for these solutions has never been greater.” At the same time, the CEO acknowledged Calian is “navigating a period of significant uncertainty” amid the threat of a trade war between Canada and the U.S. and the possibility of more widespread economic upheaval as protectionist measures loom. Asked about the potential impact of U.S. tariffs, Houston said only about five per cent of Calian’s revenues come from goods exported to the U.S. from Canada. He said the company is “proactively making plans to minimize any potential impact” of tariffs, including “alternative sourcing” and delivering more services to American customers from inside the U.S. “Certainly, it’s something we’re aware of and we want to make sure we remain competitive in that space,” Houston added. Ford also said Calian has experienced a “few delays and slowdowns” in securing government contracts as Parliament remains prorogued. He said he has been “proactively engaging” with members of Parliament and other federal officials to stress the need for the government to follow through on procurement agreements. “Despite these challenges, I think Calian is well-positioned to achieve another record year,” Ford said, pointing to the company’s efforts to diversify its product offerings and penetrate new markets through acquisitions. Asked for an update on Calian’s M&A activities, Houston said the firm hasn’t finalized any deals recently because potential acquisitions it looked at didn’t meet its “internal return metrics.” “That being said, we have a strong pipeline of potential targets and we’re engaged in many discussions,” he added. “We’re optimistic we’ll get a few deals done this year.”