News

Calian’s not-so secret formula for stability: government contracts and buying firms that actually make money


“We look for good, well-run companies that are profitable.”

Article content

It would be difficult to find a more quintessentially Ottawa firm than Calian, the professional services giant founded 40 years ago by former mayor Larry O’Brien

Advertisement

Article content

Named after Lake Calabogie, the company makes its living providing nurses, trainers, engineers and researchers to government departments and private corporations. Kevin Ford, its CEO for the past six years, is Ottawa-born and -raised. So is Sacha Gera, hired just last year as head of the company’s fast-growing information technology and cyber solutions unit.

Article content

During a period when so many other tech firms have soared then disappeared along the way, Calian has been a bastion of stability and profitability.

It was one of 10 Ottawa companies that issued shares for the first time in 1993 on the TSX, presaging the tech boom to come. JetForm, Fulcrum, AIT, Mosaid, DY-4 and others were swallowed up by larger entities. Only one other — Plaintree Systems, now an aerospace manufacturer — remains as an independent, publicly-traded firm, and its $16 million-a-year business is far removed from where it started.

Advertisement

Article content

Calian, which on Thursday hosted a conference call to go over its latest quarterly earnings, has graduated to another league. Revenues jumped 11 per cent year over year to $116 million for the first fiscal quarter ended Dec. 31. The company estimates its revenues will surge 24 per cent to roughly $645 million in fiscal 2022, which ends Sept. 30. This assumes the recently-announced $38 million deal to buy U.S.-based Computex will clear remaining regulatory hurdles, as expected next quarter.

There’s no real mystery to Calian’s steady progress. Last year, it generated more than $200 million in billings from the federal government alone, a good chunk of that from long-term contracts involving the provision of health services and training to the Department of National Defence. Calian’s professionals work on DND’s more than two dozen bases across the country. When these contracts occasionally come up for renewal, Calian retains a considerable advantage because few other competitors are national in scope. About half of Calian’s 5,000-plus employees are in health services.

Advertisement

Article content

While the government contracts aren’t particularly profitable, they do provide a solid underlying base of predictable business.

To appreciate Calian’s steadiness, consider how it has fared as an investment over the years. From the summer of 1993, when it went public at $4.25 per share, to the fall of 2006, when O’Brien stepped down as CEO to become Ottawa’s mayor, Calian’s share price climbed seven per cent per year on average. Not stellar compared to the nine per cent annual appreciation of the TSX composite, but not bad, either.

It’s the second half of Calian’s journey that has proved its value. From 2006 to present, annual share price gains have topped 11 per cent (excluding dividends), nearly triple the increases recorded by the TSX Composite.

Advertisement

Article content

A good chunk of the improvement occurred during Ford’s tenure as CEO, which began nearly seven years ago. Indeed, since 2019 Ford has orchestrated eight acquisitions with the ninth, Computex, about to be added. It’s all part of his longer-term drive to create a $1 billion-a-year enterprise by diversifying and strengthening Calian’s four major units: satellites, training, health services and information technology.

Just before the pandemic, Calian committed to paying up to $25 million for a pair of Ottawa-based clinical research firms, Allphase and Alio. In the fall of 2020, it shelled out a similar amount for Ottawa-based Tallysman Wireless, which develops satellite antennae.

The two most recent deals mark an intensification of Ford’s acquisitions strategy. A year ago, he said Calian would pay up to $83 million for the Toronto-based digital healthcare firm Dapasoft. Last month, Calian committed to paying up to $38 million for Houston-based Computex, which employs a couple of hundred specialists in building and managing data centres and communications networks.

Advertisement

Article content

Assuming the deal clears, Computex is expected to add $75 million a year in revenues, bringing Calian’s IT & cyber solutions unit to $175 million per year in total sales. Gera is a natural to run the group. Not only does he have deep experience in the capital’s tech industry — with stints at IBM, CGI Group and Nortel, among others — he also has good insight into American Virtual Cloud Technologies, the Atlanta firm that is selling the assets of Computex to Calian.

Before he joined Calian, Gera was a senior executive with Ribbon Communications, which more than a decade ago purchased Nortel’s voice-over-IP technology out of bankruptcy proceedings. A couple of years ago, Gera orchestrated the sale of part of Ribbon to AVC Technologies, which is where he ran into Computex personnel.

Advertisement

Article content

After he joined Calian last fall, Gera learned AVC Technologies was considering putting Computex’s assets on the block. “We were looking for an entry into the U.S. market, and this fit Calian’s formula,” he said. “We look for good, well-run companies that are profitable.”

Gera started his tech career as a part-time software developer with Nortel in the late 1990s. He remembers clearly how that tech giant shelled out billions of dollars for tiny optical technology startups that hadn’t generated a penny in revenues.

“I’ve seen the booms and the busts,” he noted. “There is so much opportunity now in tech, but we have to stay focused on what works.”

That’s the Calian way.

Kevin Ford’s tenure as Calian’s CEO began nearly seven years ago. Since 2019, he has orchestrated eight acquisitions with the ninth, Computex, about to be added.
Kevin Ford’s tenure as Calian’s CEO began nearly seven years ago. Since 2019, he has orchestrated eight acquisitions with the ninth, Computex, about to be added. Photo by Errol McGihon /Postmedia

Advertisement

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.



Source link

Leave a Reply

Your email address will not be published.