Calian scales back guidance as Q3 revenues hit record $150M

Kevin Ford
Kevin Ford is CEO of Calian Group. File photo

Calian Group continued its push to become a billion-dollar company with record revenues in the third quarter – but the company also warned investors it’s scaling back its full-year sales projections due to supply-chain disruptions that have stalled orders in key markets.

The Kanata-based firm brought in $150 million in revenues in the three-month period ending June 30, up 10 per cent from the previous year. It marked the first time Calian has reached the $150-million sales threshold.

The firm not only blew past its previous high-water revenue total of $142.1 million set in the previous quarter, it also stretched its streak of profitable quarters to 83 with net income of $6.8 million. 

For CEO Kevin Ford – who’s made no secret of his desire to see Calian one day surpass $1 billion in annual revenues – the latest financial results marked one more step toward that ultimate goal.

“It’s another milestone on our journey to a billion,” he said in an interview Thursday afternoon. “It just reiterates that we’re on the right path.”

Calian closed trading at $62.28 on the Toronto Stock Exchange Thursday, down $3.72 on the day.

Ford has long argued that Calian’s greatest strength is its diversity. Its “four-piston engine” that includes advanced technologies, health, learning and IT divisions means it isn’t overly reliant on any one industry or customer base.

IT revenues double

He emphasized that message once again on Thursday.

While Calian’s health and advanced technology segments took major hitsa in the third quarter – health revenues, for example, fell more than $10 million year-over-year as customers cut back spending on programs such as COVID-19 vaccination clinics – the firm was able to offset those losses with massive gains in its IT segment, which more than doubled its revenues to $49 million. 

“We’ve deployed capital in what we see as a high-growth area,” Ford said, referring to Calian’s acquisitions of U.S. IT firm Computex and Toronto-based cybersecurity firms Dapasoft and iSecurity over the past 18 months.   

"If you think about two years ago, we had no presence, really, in Europe. Now, through acquisitions, we’ve got a presence, and we’re getting some organic growth opportunities."

“IT, cyber continues to be hot. People continue to invest in cyber infrastructure. Even in economic downturns, it’s something that’s on the radar. It’s a big market. We’re just really getting going on this.”

Meanwhile, Calian’s learning segment that specializes in military training simulations also saw an uptick in revenues, from $18 million last year to $22 million. 

Ford said the acquisitions of several European training organizations over the past two and a half years have given the company a beachhead across the Atlantic it never had before. 

“If you think about two years ago, we had no presence, really, in Europe,” he said. “Now, through acquisitions, we’ve got a presence, and we’re getting some organic growth opportunities.”

Foreign customers accounted for a third of the company’s revenues in the third quarter, a new high, as European defence clients and Computex’s growing U.S. customer base boosted Calian’s non-Canadian sales totals. 

In another first, Calian brought in more revenue from commercial clients than from government contracts.  

“What we’ve been doing constantly is diversifying,” Ford explained. “Even though we’ve grown our government business, we’ve outpaced that growth with commercial, non-government entities.”

Still, Calian is facing headwinds due to supply-chain issues that have stalled orders of satellite equipment and other cutting-edge tech to some of its advanced technologies customers. 

Revenues in that segment were down nearly $5 million to about $39 million year-over-year, and Ford said the order backlog will likely continue through at least the end of 2022. As a result, Calian has scaled back its full-year revenue guidance to a high of $585 million, down from its previous projection of up to $625 million.

The CEO said Calian has a backlog of tens of millions of dollars worth of technology orders, and revising the firm’s guidance was the prudent thing to do.

“We just can’t get the product, and I’m worried that that (revenue) won’t come in before the end of the year,” he said. “I don’t want to show up and surprise everyone with lower revenues. We just wanted to tune (the guidance) up a bit to reflect some of the realities we’re dealing with.”

Ford said Calian should be able to offset the loss in revenues with higher gross profit margins than previously anticipated. 

The firm’s gross margin of 30 per cent last quarter was a new record high. Calian is now projecting a net profit of up to $48 million for fiscal 2022, up from its previous top-end prediction of $45.5 million.

“Ideally, we can get all four pistons running hot,” Ford said. “That’s where we’re focused. I’m still very optimistic about our growth trajectory.”