Calian Group’s aggressive M&A push continued to pay off in the second quarter of fiscal 2022 as the firm rode a growth surge in its IT and cybersecurity solutions business to record sales.
The Kanata-based firm said Thursday it posted revenues of $142.1 million in the three-month period ending March 31, a three per cent increase from its previous all-time high of $138 million in the same quarter a year earlier.
In addition to posting record revenues, Calian stretched its streak of consecutive profitable quarters to 82 straight with a net profit of $1.3 million, down from $5.5 million a year earlier.
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While net profits are down, Calian’s adjusted net profit – a metric the company likes to highlight because it takes factors such as amortization and gains from its many recent acquisitions out of the equation – rose 28 per cent year-over-year to $13.3 million.
That increase, along with record gross margins of 28 per cent and record adjusted earnings before taxes, depreciation and amortization of $16.5 million, had Calian executives in a buoyant mood during Thursday morning’s call with financial analysts.
“I believe we are a stronger company than before this pandemic,” CEO Kevin Ford said. “The financial results are a clear indicator – but beyond the numbers, we now have more technology assets, talented employees and a footprint in new global markets that didn’t exist for Calian in 2019.”
“I believe we are a stronger company than before this pandemic.”
Calian shares were down $1.35, or about two per cent, to $64.70 in early afternoon trading on the Toronto Stock Exchange. The Ottawa company has been a notable outlier during what’s been a rough stretch for most tech firms, as its stock price has risen more than 11 per cent over the past six months and nearly 16 per cent in the past year.
Calian – whose products and services include everything from rapid COVID testing and health-care clinics, to satellite antenna systems and military training simulations – can thank its burgeoning IT business for much of its recent run of success.
In a quarter that saw revenues in the firm’s two largest business segments, health and advanced technologies, decline from the previous year, Calian’s IT and cyber revenues jumped 47 per cent to $32.3 million.
Ford attributed the sales surge largely to the company’s acquisitions of Toronto-based digital health-care and cybersecurity provider Dapasoft in February 2021 and Texas-headquartered IT and cyber firm Computex earlier this year.
“I’m getting win announcements almost weekly from that team,” he said of Computex, which has more than 1,100 customers in the oil and gas, financial services, health-care and retail sectors and generates annual sales north of $75 million. “I think we’re just at the tip of the iceberg here.”
OBJ’s 2017 CEO of the Year told analysts that one of Calian’s bread-and-butter customer segments – the defence sector – is also making cybersecurity a bigger priority as global conflicts such as the war in Ukraine escalate and threats to online defence systems grow more sophisticated.
“I think we’re going to see continued increasing demand in the historic elements of land, sea and air … and an increased focus on cyber and space,” he said. “This is going to be a growth pillar for Calian for the foreseeable future.”
Cyber business ‘running red hot’
Chief financial officer Patrick Houston said the sales pipeline suggests the segment is on pace to set another new record in the third quarter as both public- and private-sector customers flock to beef up their cyber defences.
“Our cyber business is running red hot right now,” he said. “We have a huge backlog of customers. Right now, our biggest issue is getting the people to supply it. It’s a good problem to have, but we’re working hard to try to build up our capacity.”
Calian’s learning segment also posted a hefty revenue increase of nearly 20 per cent as sales in that business approached the $25-million mark in Q2.
Ford said Calian’s move to acquire Kanata-based virtual-reality and training-simulation software providers SimFront and SimWave last fall is opening doors to emerging European and Asian markets in a field the company is just beginning to explore.
“This team has been knocking it out of the park, frankly, from the day we acquired them,” he said.
Revenues in Calian’s health segment dipped 14 per cent year-over-year to $45.5 million, a decline the company blamed largely on a drop in demand for COVID-related services such as rapid testing. Sales in its Saskatoon-based advanced technology division that provides satellite components and other sophisticated equipment fell seven per cent to $39.6 million as supply chain disruptions delayed the rollout of a major ground-systems project in the U.S.
But Ford said he expects both sectors to bounce back quickly, noting the health segment signed $26 million worth of new contracts last quarter, while the advanced technology division continues to develop new software and hardware systems for satellites and other related equipment.
“While there’s some ups and downs, I’m still very excited about AT because we just have so many moving parts right now that I believe will kick back into a growth posture very soon,” he said.
Calian reiterated its revenue guidance of between $580 million and $625 million for the fiscal year ending Sept. 30. The firm is projecting an adjusted net profit in the range of $41.5 million to $45.5 million.
Ford said that while rising inflation and ongoing supply chain bottlenecks are causing headaches for many customers, he doesn’t expect those issues to turn into major obstacles to Calian’s goal of becoming a billion-dollar-revenue company.
“I don’t really see a long-term effect here,” he said. “I think our customers are anxious to get going on a bunch of the initiatives. What we do is important and will not be constrained in a major way by any external factors for the foreseeable future. I’m still pretty excited about where we are.”
