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

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

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You’d be hard-pressed to find a firm more quintessentially Ottawan than Calian, the professional services giant founded 40 years ago by former mayor Larry O’Brien

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Named after Calabogie Lake, the company makes a living supplying nurses, trainers, engineers and researchers to government departments. Kevin Ford, its CEO for six years, was born and raised in Ottawa. The same goes for Sacha Gera, hired last year to head the company’s fast-growing information technology and cyber solutions unit.

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While so many other tech companies have skyrocketed and then disappeared along the way, Calian has been a bastion of stability and profitability.

It was one of 10 Ottawa companies that first issued shares in 1993 on the Toronto Stock Exchange, presaging the tech boom to come. JetForm, Fulcrum, AIT, Mosaid, DY-4 and others have been swallowed up by larger entities. Only one other – Plaintree Systems, now an aerospace manufacturer – remains an independent, publicly traded company, and its $16 million a year business is a far cry from where it started.

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Calian, which held a conference call on Thursday to review its latest quarterly results, has moved on to another league. Revenue jumped 11% year-over-year to $116 million for the first fiscal quarter ended Dec. 31. The company estimates its revenue will grow 24% to around $645 million in fiscal 2022, which ends September 30. announced a $38 million deal to buy U.S.-based Computex that will remove remaining regulatory hurdles, as expected in the next quarter.

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

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Although government contracts are not particularly profitable, they provide a strong underlying foundation of predictable business.

To appreciate Calian’s stability, consider how it has fared as an investment over the years. From the summer of 1993, when it went public at $4.25 a share, to the fall of 2006, when O’Brien stepped down as CEO to become mayor of Ottawa, the stock price of Calian has grown by 7% per year on average. Not exceptional compared to the 9% annual appreciation of the TSX Composite Index, but not bad either.

It’s the second half of Calian’s journey that has proven itself. From 2006 to present, annual stock price gains have exceeded 11% (excluding dividends), nearly triple the increases recorded by the TSX Composite Index.

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Much 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 build a billion-dollar-a-year business by diversifying and strengthening Calian’s four core business units: satellites, training, health services and information technology.

Just before the pandemic, Calian pledged to pay up to $25 million for a pair of Ottawa-based clinical research companies, Allphase and Alio. In the fall of 2020, he paid a similar amount for Ottawa-based Tallysman Wireless, which develops satellite dishes.

The two most recent transactions mark an intensification of Ford’s acquisition strategy. A year ago, he said Calian would pay up to $83 million for Toronto-based digital healthcare company Dapasoft. Calian last month pledged to pay up to $38 million for Houston-based Computex, which employs a few hundred specialists in building and managing data centers and communications networks.

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Assuming the deal goes through, Computex is expected to add $75 million in revenue per year, bringing Calian’s computing and cyber solutions unit to $175 million per year in total sales. Gera is a natural person to lead 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 – but he also has a good knowledge of American Virtual Cloud Technologies, the Atlanta-based company that sells Computex assets to Calian.

Prior to joining Calian, Gera was a senior executive at Ribbon Communications, which purchased voice-over-IP technology from Nortel more than a decade ago through bankruptcy proceedings. A few years ago, Gera orchestrated the sale of part of Ribbon to AVC Technologies, where he met Computex staff.

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

Gera began his tech career as a part-time software developer at Nortel in the late 1990s. He vividly remembers how that tech giant shelled out billions of dollars to tiny optical tech startups that didn’t hadn’t generated a penny of revenue.

“I’ve seen the booms and busts,” he noted. “There are so many opportunities now in technology, but we need to stay focused on what works.”

This is the Calian way.

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

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