Calian eyes 'major shift' into software sales in wake of record Q2 revenues

Kevin Ford
Calian CEO Kevin Ford said the company is looking at diversifying into selling its software as standalone products. File photo

With his diversified tech, IT, health-care services and training company “running on all cylinders,” Calian boss Kevin Ford says it’s time for the Kanata-based firm to broaden its offerings into the software space.

Ottawa’s 2017 CEO of the Year was in a buoyant mood on Thursday after his company reported record revenues of $138 million in the second quarter of fiscal 2021, up 33 per cent from a year earlier. 

Sales were up across all four of Calian’s key customer segments ​– advanced technologies, health, learning and IT ​– as the firm continued to reap the rewards of a buying spree that’s seen it acquire five companies in the past 12 months.

But Calian is not about to rest on its laurels despite soaring to record heights during a global pandemic, Ford told analysts on Thursday morning’s conference call.

The longtime tech executive said he and his team see a big opportunity to tap into entirely new revenue streams by taking the software Calian currently uses to deliver services and selling it directly to customers as standalone subscription products.

“We believe at some point in time we’ll see a major shift here at Calian as we continue to evolve our services into more of a technology-based platform,” Ford said, citing workflow automation software developed by Alio Health Services, which Calian acquired early last year, as an example.

“I think we have lots of current organic opportunities to look at software more as a service, so stay tuned on that.”

Diversifying Calian’s service offerings and customer base has been a major point of emphasis for Ford in recent years. A series of recent acquisitions has given the firm a much stronger foothold in Europe, and the firm’s advanced technologies arm is pursuing a growing number of projects south of the border.

As a result, Canadian government customers such as the Department of National Defence, the Canada Border Services Agency and Shared Services Canada now account for just over half of Calian’s revenues, down from nearly 70 per cent a year ago.

Ford pointed to the advanced technologies group as a space where he sees lots of room to broaden Calian’s customer base. He cited Europe as an emerging market in the wake of the firm’s acquisition of German satellite services provider SatService two years ago and touted potential opportunities in cutting-edge fields such as autonomous vehicles and precision agriculture. 

"I don't think I've ever seen the (customer) pipeline so diversified."

“I don’t think I’ve ever seen the pipeline so diversified,” he said. “I’m very excited about the opportunities both domestically and globally.”

The CEO said Calian is also looking at “convergence opportunities” where software used to deliver remote training, for example, could be deployed for customers in its health segment. 

“I think a lot of people are trying to figure out how to now keep their staff engaged, how to keep educating staff in virtual environments,” he explained. “So we think that virtual learning platforms, those types of things will be something that we can definitely focus on.”

Calian stretched its streak of consecutive profitable quarters to 78, posting a net profit of $5.5 million, or 55 cents a share, up from $5.3 million in the same period in 2019. The firm also signed $138 million worth of new contracts in the three-month period ending March 31, pushing its order backlog to nearly $1.4 billion.

While Calian has raised its revenue projections twice already this calendar year – most recently after acquiring Toronto-based digital health-care and cybersecurity firm Dapasoft in late February – the company said Thursday it’s sticking with its previous prediction that sales will total somewhere between $476 million and $516 million in fiscal 2021.

'Clear message to the market'

The company says it expects to turn an adjusted net profit of between $29.4 million and $32.7 million.

“We’ve upped our guidance twice now this year, and reiterating our guidance now should send a clear message to the market that we’re confident in our growth profile … despite the conditions we’re operating in,” Ford said.

As in previous earnings calls, Ford reiterated that Calian will continue to aggressively seek out M&A opportunities. However, he suggested it’s unrealistic to expect the firm to keep up the torrid pace of transactions it set over the past couple of years.

“We’re picky buyers,” he said. “We do believe that there are other opportunities, but we just want to make sure that we’re getting that right mix of cultural alignment, financial performance as well as strategic alignment. 

“To be honest, I’m not in a rush to continue to acquire ​– just because I want to make sure we integrate what we’ve got, and I also want to make sure we’re looking at good companies.” 

Calian shares ended the day up 36 cents to $56.40 in trading on the Toronto Stock Exchange.