Calian is headed to $80, says Laurentian

Look for more M&A up ahead from Canadian tech company Calian Group (Calian Group Stock Quote, Charts, News, Analysts, Financials TSX:CGY), according to Nick Agostino, analyst for Laurentian Bank Securities, who provided clients with an update on the company on Thursday. Agostino reiterated a “Buy” rating on the stock, saying Calian is on track to hit the $1 billion mark in revenues by fiscal 2025.

Calian Group, which has products, business services and solutions for government and commercial customers, announced its first quarter fiscal 2023 financials on Tuesday for the period ended December 31, 2022. Revenue was up 14 per cent year-over-year to $148 million and adjusted EBITDA was up two per cent to $14 million.

Calian has four business segments and saw its Q1 Information Technology & Cyber Solutions (ITCS) revenues double year-over-year to $46 million, with the company pointing to a strong performance from its Computex acquisition, made last March. In its Learning segment, revenue was up 16 per cent to $26 million, Advanced Technologies was down 17 per cent to $34 million due to supply constraints and delays in the awarding of new ground systems projects and, finally, Calian’s Health segment revenue was down five per cent to $40 million on lower COVID-related business.

Reviewing the numbers, Agostino said Calian’s Q1 total revenue of $147.5 million was better than his estimate at $145.7 million as well as the consensus call at $145.5 million, while adjusted EBITDA at $14.3 million was a little under his estimate at $15.4 million and the Street at $15.7 million.

“Given the in-line results, we leave our forecasted revenues and EBITDA relatively unchanged. We remain confident on company’s path to $1B in revenues by F2025 as reaffirmed by the management and given the progress up to date,” Agostino wrote.

The analyst called Calian’s backlog strong at $1.27 billion compared to $1.29 billion at the end of fiscal Q4 2022, while bookings slumped but remained intact at $126.1 million for the fiscal Q1 and an overall book-to-bill ratio of 0.85x compared to 1.0x for the fourth quarter.

Ending the quarter with $50.7 million in net cash and having an additional $72.5 million available on its revolver, Calian is well positioned for further inorganic growth, Agostino said.

“The company remains active in M&A evaluations across all four of its segments with many targets in its pipeline and key acquisition parameters centred around profitability, strategic fit, cultural fit, and disciplined valuation. That said, CGY expects to transact on two to three deals in F2023,” he wrote.

Agostino left his target price on CGY unchanged at $80.00 per share, which at press time represented a projected one-year return of 33 per cent.