Caisse-backed delivery company Intelcom expanding from Canada to Australia on strength of Amazon partnership

Open this photo in gallery:

When Jean-Sébastien Joly became vice-president of finance at the age of 30 for a small, declining and financially challenged Montreal courier company called Intelcom Courrier Canada Inc., he figured he’d stick it out for two years, get some experience and get out.

Fifteen years later, he’s still there. Now he’s the boss, majority owner and driving force behind a strategy that has transformed Intelcom into one of Canada’s fastest-growing companies. Intelcom revenues topped $315-million in 2020 after doubling on average over the previous three years and are forecast to surpass $500-million in 2021. The profitable company no longer operates vehicles. Instead, it builds and runs digital tools to optimize logistics for 470 courier companies which process 400,000 “last-mile” ecommerce package deliveries a day utilizing 60 sorting stations across Canada.

“Technology has been Intelcom’s key differentiator,” said Tom Birch, managing director, global venture capital and technology with the Caisse de dépôt et placement du Québec, which financed Mr. Joly’s buyout of his employer in 2017. “We essentially invested in a software-data science company that is – oh, by the way – a shipping company.”

Now, following a strong pandemic-fuelled year for ecommerce, Intelcom is going global, thanks to a close relationship it’s fostered with a key client: Amazon.com . On Tuesday, Intelcom is announcing an expansion to Australia with a service called Dragonfly Shipping. It plans to cover 80 per cent of the country within two years and reach $100-million in revenues by 2025. After that, it hopes to expand across Latin America, where markets are similar to Canada.

“We’ve had a really good relationship with Amazon and they’ve been instrumental to our success and they’ve never let us down,” Mr. Joly said. “The fact they approached us to open in in Australia is a big statement.”

Having built a national network because of Amazon, Intelcom now has to diversify its customer base away from the ecommerce behemoth, which accounts for more than half its revenue. “We feel by the end of 2022 we won’t be dependent on any one customer,” Mr. Joly said. “We need to show that to the market.”

That’s a key message he took from an abandoned process this year to raise $100-million in growth equity. Offers valued Intelcom at $350-million to $550 million, which suggested it “might still be a little undervalued,” Intelcom director Rick Gaetz said. “For all the common sense reasons you want to keep diversifying your customer base. It makes your company more valuable.”

Intelcom works with Pitney Bowes and Landmark Global, which handle logistics and shipping out of the United States for ecommerce marketplaces Etsy and Ebay. Both those firms use Intelcom in Canada. “We need partners with the agility and capacity to grow with us,” said Pitney Bowes spokesman Brett Cody. “Intelcom has been an important and trusted partner to Pitney Bowes in demonstrating that ability.”

Intelcom started out 35 years ago. At one point Canada Post, now a major competitor, owned half the company. Mr. Joly joined in 2006 and did not receive bonuses for five years in exchange for a minority stake. In 2012, as head of sales, he landed a contract to do last-mile deliveries for FedEx in northern Alberta. It was a challenging undertaking: Trucks often ran mostly empty over sparsely travelled territory.

So he took an idea to an old friend who had developed a routing program to help Canadian Forces move through hostile territory: Was it possible to build software to optimize Intelcom’s delivery business? Mr. Joly discovered he could not only run fuller trucks using the program, but use smaller vehicles too, thus decreasing costs. After persuading Amazon to test out Intelcom in 2015 in Montreal, the Seattle giant signed on to expand the relationship across the country. (Amazon declined to comment for this article.) Mr. Joly sold his company’s delivery truck business and began signing up hundreds of regional couriers with Intelcom’s service. Intelcom now has 2,460 employees, up from 350 when the Caisse and Business Development Bank of Canada funded his buyout.

Mr. Joly isn’t plussed about turning down so-so private equity offers: Intelcom generates cash and has access to $120-million in debt facilities. “We want to show the market we can repeat the same thing in Australia and we think the valuation will be much bigger,” he said.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.