Few Ottawa companies have undergone the dramatic metamorphosis Calian Group has experienced since the firm was launched 40 years ago.
The enterprise that started out as a one-man tech consulting agency helmed by Larry O’Brien in 1982 has evolved into a multifaceted organization that now sees a “clear path” to a billion dollars in annual revenues, due largely to its increasingly diversified product lines that range from military training simulations to cybersecurity software.
That “diversity is strength” approach paid off handsomely for Calian in fiscal 2022.
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In financial documents released late Thursday, the Kanata-based company reported big gains in its rapidly growing IT/cyber solutions and training segments that more than offset year-over-year declines in its other two main market segments, advanced technologies and health.
As a result, Calian generated record revenues of $161 million in the fourth quarter ending Sept. 30 as the company moved closer to its goal of becoming a billion-dollar revenue-producer.
Calian posted full-year fiscal 2022 revenues of $582 million, up 12 per cent from 2021 and at the high end of its projected guidance.
It marked the fifth consecutive year that Calian posted double-digit revenue growth. The firm expects that trend to continue in 2023, projecting revenues of between $630 million and $680 million as it looks to extend an impressive run that’s seen its revenues nearly double from $305 million in 2018.
“I think our diversity’s been good, because anywhere where we face any kind of headwinds, we’ve had other (business lines) that have outpaced the market,” chief financial officer Patrick Houston told Techopia on Friday morning.
“When you put it all together, it’s kept the momentum going. Where other companies maybe have one thing, where it’s kind of hot or not, we’ve been able to use the diversity to help us. I think that’s been huge.”
Calian officials have often conceded that the company’s story isn’t the easiest sell in the public market because the wide spectrum of industries and verticals it’s involved in makes its mission hard to sum up in a sound bite.
Still, investors have remained relatively bullish on the Kanata firm over the past 12 months despite widespread selloffs in the tech sector.
While a raft of other leading firms have seen their valuations plummet in 2022, Calian has held its own. It was trading at $61.22 on the Toronto Stock Exchange Friday afternoon, up more than six per cent since last November.
“Lots of fund managers we talk with, we’re their best-performing stock the last year, even though we were kind of flat to slightly up,” Houston said. “I think in this market, that’s a big win these days.
“You just have to look at what we’ve delivered. People will say, ‘OK, there’s something there even if I don’t understand it in 10 seconds or less.’ You have to pay attention to the performance. You just can’t ignore it. I think that’s been a huge door-opener for us.”
Calian’s calling card in the past decade – growth through acquisitions – had a lot to do with its record-breaking year.
The firm’s two purchases in fiscal 2022, Ottawa-based virtual-reality and training-simulation software maker SimFront and U.S. IT and cybersecurity firm Computex, performed “above expectations,” Houston said.
Calian’s IT and cybersecurity revenues tripled to $69 million in the fourth quarter compared with the previous year as Computex delivered hundreds of new customers in the oil and gas, financial services, health-care and retail sectors.
The Houston-based company brought in more than $70 million in just its first seven months under the Calian umbrella – almost equal to the $75 million in revenues Calian expected its newest subsidiary to generate over a full year.
Meanwhile, SimFront won contracts with the Canadian military as well as defence customers in Europe, helping push Calian’s training revenues up 24 per cent year-over-year to $22 million. Calian expects its learning segment revenues to surpass $100 million for the first time in fiscal 2023.
Landing customers in new geographies and verticals helped Calian further diversify its revenue base in 2022.
Private-sector clients accounted for 53 per cent of Calian’s revenues on the year, up from 32 per cent in 2018. Meanwhile, almost 30 per cent of its sales in the past 12 months came from foreign customers, reflecting its growing presence in the U.S. and Europe.
Houston, who heads Calian’s M&A efforts, said the company plans to keep adding to its stable of companies in 2023.
“We’re talking to lots of great candidates right now, so we’re really hoping to get a couple of deals done,” he said.
The firm posted a fourth-quarter net profit of $1 million, or 10 cents per share, up from $900,000 a year earlier. It marked the 84th consecutive profitable quarter for Calian, which posted a net profit of $13.6 million in fiscal 2022, or $1.20 per share, up from $11.1 million the previous year.
Calian’s adjusted net profits – which take into account the one-time impact of charges related to acquisitions – were $44 million for the year. That’s up from $37 million in fiscal 2021 and nearly 150 per cent higher than the $18-million adjusted net profit Calian recorded in 2018.
All that is good news to Houston and Calian’s executive team, as is the company’s growing order backlog. The firm booked a record $700 million worth of new contracts in fiscal 2022, the third consecutive year that new deal signings outpaced revenues as its backlog grew to $1.3 billion.
“We’re feeling pretty good,” Houston said. “We’ve got a good backlog; we’ve got some good momentum. So I think it’s just maintaining that and continuing to execute. If we keep executing here, it shouldn’t be too long until we can actually say that we’re a (billion-dollar revenue company).”