Kanata North Economic Impact Analysis 2018 2 This report, Kanata North Economic Impact Analysis 2018, is the second of two reports published by the Kanata North Business Association: • to assess economic indicators in ’s largest technology park The results from the 2018 • to provide a tool for decision-makers in attracting investment and talent report are clear: Kanata North • to understand the contributions of Kanata North to the economies of is a growing economic and , , and Canada innovation powerhouse. • to provide benchmark measurement data to enable community and The contributions to government business leaders to manage and maximize at the municipal, provincial, and federal levels are stronger This economic impact analysis shows Kanata North continues to be an economic and than ever in our 50-year history. innovation powerhouse, exceeding all expectations and growing at an accelerated rate. Kanata North continues to go from strength to strength in Given the excellent statistics from our 2015 report, we were excited to discover that our innovation, market-leading growth trajectory has continued unabated and, in fact, it has increased. Whether it’s jobs, product developments, and net revenues, productivity, or net returns to government at municipal, provincial, and federal in attracting investment and levels, Kanata North continues to live up to its moniker: Canada’s Largest Technology Park. world-class talent.

We have some of the best homegrown tech talent in the world right here in the area. And, at - Amy MacLeod the same time, we are attracting some of the best tech talent and businesses in the world to Chair of the Board of Directors, do business here. Kanata North Business Association

We look forward to continuing this tradition in the years to come, creating jobs and innovation to benefit Canada and the world.

#SeriousTechLivesHere

Kanata North Economic Impact Analysis 2018 3 The Kanata North Business Association (KNBA) undertook an exhaustive review of its economy in 2015 which indicated positive economic impact at the municipal, provincial, and federal levels. Our 2018 report In 2018, KNBA updated the research and its findings are demonstrates Kanata North exceptionally positive: In three years, Kanata North has grown the continues to grow and deliver number of high tech companies and increased both its revenues value at an accelerated rate. The Kanata North Business and employment. The increases in this three-year period far Association is fulfilling its exceed the previous six-year period. The growth curve’s upward mission to advocate for trend is verging on exponential. business success by fostering an environment where the best talent in Canada can innovate, create connections, and make an impact. Working again with respected technology research firm

Doyletech Corporation, KNBA articulated three major objectives: - Jamie Petten Executive Director, 1 Update the economic impact of Kanata North in 2018, Kanata North Business Association using the 2015 data as a baseline

2 Analyze the results to guide investment, outreach/ promotion, and talent attraction decisions

3 Understand the contributions of Kanata North to the economies of Ottawa, Ontario, and Canada

Kanata North Economic Impact Analysis 2018 4 It was imperative that the same • Export: “Export” refers to the methodology used in 2015 was employed companies (usually referred to as the The indicators researched and for 2018 to ensure the results are high tech sector) which contribute to assessed by sector and subsector comparable. The research team used the economic base of Kanata North, include the following: three key elements: i.e., they supply goods and services that earn income from outside the • Total revenues • Database: They built an exhaustive local area. • Employment database of local firms by visiting • Export ratio: revenues derived from every commercial building, conducting • Local: “Local” refers to companies outside Kanata North or Ottawa : email and telephone inquiries, within Kanata North that provide within Kanata North or Ottawa interviews, and web-based research, professional services such as legal, • Productivity: sales per employee and literature reviews. finance/accounting, and marketing minus the proportion of inputs from and other services such as restaurants, outside the region (also known as • Primary research: The team retail, hospitality, and construction/ “leakages”) interviewed 40 people in 34 separate renovation. • Local/regional spending: Earnings, interviews, covering all nine export interest, depreciation and sectors in Kanata North, including amortization, and general and large, medium, and small enterprises. administrative funding

• Econometric impact modeling: Using the proprietary Doyletech EconWin computer model, the research team projected the total impact of Kanata North including direct, indirect, and induced effects.

Kanata North Economic Impact Analysis 2018 5 Kanata North Economic Impact Analysis 2018 6 $13 BILLION $391,000 Net value-add of Average net contribution Kanata North to Canada’s GDP +66% per employee +53% increase over since 2015 $7.8 billion in in Kanata North 2018 2015

Note: $90,000 is the average 2015 contribution per employee in Canada 4x NATIONAL AVERAGE

+18% +12% +9% compared with compared with compared with 19,477 16,513 in 2015 29,376 26,325 in 2015 33,236 30,679 in 2015

Note: 10,000+ indirect and induced jobs have been generated in Ottawa/Eastern Ontario = 29,376 Total Tech/Export Sector region due to the Kanata North success. + 3,860 Total Local Sector

TECH/EXPORT SECTOR TOTAL TECH/EXPORT SECTOR TOTAL JOBS (INCLUDES JOBS IN KANATA NORTH ONLY) (INCLUDES JOBS IN KANATA NORTH AND ACROSS THE REGION) Kanata North Economic Impact Analysis 2018 7 $170.5 MILLION $1.96 BILLION Returns for Ottawa +16% Returns for Ontario +40% municipal government since 2015 provincial government since 2015

$1.99 BILLION Returns for Canada +47% federal government since 2015

Kanata North Economic Impact Analysis 2018 8 KANATA $7.2B +30% +13% NORTH since 2015 543 since 2015 TOTAL $5.6B 481 (Direct Impact) 2018 2015

REVENUES # OF COMPANIES

TECH/ $6.3B +38% +21% EXPORT since 2015 261 since 2015 SECTOR $4.6B 215 (Direct Impacts Only) 2018 2015

DIRECT REVENUE # OF COMPANIES

Kanata North Economic Impact Analysis 2018 9 INNOVATION TALENT Kanata North continues to attract innovators and The research indicates that the requirement to expand entrepreneurs enthusiastic to identify opportunities the talent pool has grown over the past three years. The and create new ventures. Kanata North is also a magnet for need for highly qualified STEM professionals is on a steady, world-class workers at all levels. This powerful combination upward trend. Kanata North will continue to create is one of the major reasons Kanata North has grown into strong community involvement and engagement that an economic and innovation powerhouse, exceeding all will attract, nurture and retain talent. expectations and growing at an accelerated rate.

TECHNOLOGY ECOSYSTEM IMPACT AND GLOBAL LEADERSHIP Kanata North is focused on nurturing a thriving Kanata North is a leader in the pace of strategic technology community through thought leadership innovation globally, allowing Kanata to retain its status and collaborative, strategic partnerships leading as a world-class innovation and technology cluster. to future growth and sustainability. One example of Kanata North companies are driving disruption and such partnerships includes strengthening the connection contributing to emerging fields such as artificial intelligence, between academia and industry. The recent announcement machine learning, connected and autonomous vehicles, that the University of Ottawa will build a campus in Kanata cybersecurity, the Internet of Things, and 5G. North is a step in working with post-secondary Institutions to foster a thriving tech ecosystem.

Kanata North Economic Impact Analysis 2018 10 HALO EFFECT Kanata North’s bustling and growing economy is having a “halo effect” on surrounding areas of the city. On one hand, this has led to issues with public transportation, traffic congestion, and the cost of rental space - all of which are being addressed and solutions worked on within future planning. On the other hand, it means that the indirect economic benefits to neighbouring communities such as Kanata South, Kanata West, Bells Corners, and are strong and could be included in future research.

Kanata North is a powerful economic engine specializing in high impact technology which makes it a great place to learn, to work, and do business.

It is also a great place to live with beautiful green space, excellent schools and recreation facilities, and a rich ecosystem of retail and business services.

Kanata North looks forward to continuing its work with all stakeholders – current members, partners and allies, and all levels of government – to capitalize on Kanata North’s strengths, to leverage their collective impact, and to continue to generate economic opportunities.

In addition, Kanata North welcomes the opportunity to build new partnerships and alliances. We invite all interested parties to be in touch and experience firsthand why Kanata North continues to thrive and be the economic and innovation powerhouse that it is.

#SeriousTechLivesHere

Kanata North Economic Impact Analysis 2018 11 OTHER TECHNOLOGIES

This subsector, the largest in Kanata The second largest by employment and This category includes companies such as North, by both employment and revenues, third in revenues, this subsector is filled consumer electronics, vehicles/driving and is represented by a great many of the with skilled, smart and creative people, of investment strategy research. most illustrious global firms in the sector, which Kanata North has many. the main function is R&D, tapping into Kanata’s legendary innovation.

Represented by a number of large, One of the largest subsectors, in revenues This subsector consists of outsource national firms, this is the third-largest and employment, has a considerable manufacturing firms as well as those firms subsector in Kanata North by total range of functions; R&D, manufacturing, involved in manufacturing, engineering, employment and fifth largest by revenues. services, and sales and support teams. industrial and system design and verification services.

Comparatively small and almost entirely A small but growing subsector This subsector, characterized by inputs foreign-owned, this subsector employs with strengths in water analytics, from outside Canada and then resold to a number of designers and many of decontamination systems, and high tech Canadian (and sometimes global) markets, the other subsectors are clients of applications for R&D and monitoring. is second smallest by revenues and semiconductors companies. smallest by employment.

Note: The only change to the subsectors from the 2015 study is combining Software with Data and Cloud Services into one. Otherwise, classifications and methodology in 2018 are identical to those established in 2015.

Kanata North Economic Impact Analysis 2018 12 Change since 2015

REVENUES $2.49 BILLION +95% This is by far the largest subsector EXPORT RATIO $1.86 BILLION in Kanata North, both in terms of The export ratio at 85% is the revenues and employment. Taking highest of all subsectors with the REVENUE/EMPLOYEE all the elements available together, overwhelming majority of revenues Kanata North has a total capability coming from outside Canada. $298,968 +30% in telecommunications, wireless, and $230,861 photonics, a competitive advantage PRODUCTIVITY it shares with only one of a handful Productivity is estimated at of locations in the world. $299,000 annual sales per employee # OF EMPLOYEES with $2.5 billion in revenues +3% Research and development is and 8,345 workers. 8,345 the key function in this subsector 8,061 in Kanata North. Traditionally, EMPLOYMENT R&D is a function carried out at Wages and salaries are at 60% headquarters. However, many of revenues with 90% of labour # OF FIRMS global companies based here place professional and 10% technical. +10% their trust in the R&D skills and 46 capabilities in Kanata North talent. LOCAL/REGIONAL SPENDING 42 EBITDA is estimated at 10%. EXPORT RATIO 85%

Kanata North Economic Impact Analysis 2018 13 Change since 2015

This is the second-largest subsector PRODUCTIVITY in Kanata North by employment and Productivity by sales-per-employee REVENUES by revenues and it is growing. is $259,000 based on $990.8 million total revenues to the sector with $990 MILLION +57% Many companies in Kanata 3,821 workers. By far, the highest $632 MILLION North are involved in software cost is labour. development to support their primary “product” or “service”. EMPLOYMENT REVENUE/EMPLOYEE However, this subsector represents Wages and salaries are equivalent to +25% companies whose main product 70% of revenues in 2018 with close $259,313 or service is actually software (as to 100% of the staff at professional $207,768 opposed to embedded software). level. Wages and salaries are surprisingly low in this high-growth, This work does not require large- high tech subsector as a result of # OF EMPLOYEES scale capital investment. Rather, the offer of stock options to staff. +25% it requires skilled, smart, and 3,821 creative people. LOCAL/REGIONAL SPENDING 3,046 EBITDA is at about 15% with wide With total revenues from foreign- variance based on the maturity of # OF FIRMS based companies at 40%, this the company and other factors. subsector has one of the lowest Most of the software subsector is 69 +21% proportions of foreign ownership Canadian-owned, though some of 57 in Kanata North’s export sector. the largest firms are foreign-owned.

EXPORT RATIO EXPORT RATIO The export ratio of this subsector is quite high, estimated at 80%, 80% with few sales to other Kanata North companies as the market is global in scope.

Kanata North Economic Impact Analysis 2018 14 Change since 2015

The Other Technology Sector, EMPLOYMENT REVENUES designed to capture firms not readily Labour costs are 50% of total +95% classifiable among other sectors, revenues with 90% professional $936 MILLION includes: consumer electronics; and 10% technical. $480 MILLION high-tech applied to vehicles and driving; and a high-tech, quantitative, LOCAL/REGIONAL SPENDING REVENUE/EMPLOYEE investment strategy research house. EBITDA is at 20% with 30% for purchased inputs. Please note this $468,098 +26% EXPORT RATIO figure takes into account two $371,802 This export ratio for this sector is companies that cause some estimated at 50% as it serves both variance: a very large firm based on local and international markets. a “utility model” of funding and # OF EMPLOYEES a private investment house. PRODUCTIVITY 2,000 +55% Annual sales per employee is 1,291 $468,000 based on $936.2 million in revenues with 2,000 workers. # OF FIRMS 45 +50% 30

EXPORT RATIO 50%

Kanata North Economic Impact Analysis 2018 15 Change since 2015

Defence, Security and Aerospace is the fifth-largest subsector in PRODUCTIVITY REVENUES Kanata North by employment. Productivity by sales-per-employee $569 MILLION +8% The subsector typically provides is $410,000 based on $569.8 million $566 MILLION specialized products and systems. total revenues to the sector with However, those in Kanata are large 1,391 workers. This is larger than by the standards of the global average reflecting the number REVENUE/EMPLOYEE market, with well-known Canadian of comparatively larger firms in +12% and international multinational this sector. $409,609 companies represented in this $397,517 subsector. It has a significant EMPLOYMENT proportion of foreign-owned Wages and salaries are equivalent firms, representing 68% of total to 50% of revenues in 2018. There # OF EMPLOYEES sector revenues. is a high proportion of software and -2% research and development, which is 1,391 EXPORT RATIO not capital intensive. About 80% of 1,425 The export ratio of this subsector the jobs are at the professional level. is conservatively estimated at 50%. With the federal government, LOCAL/REGIONAL SPENDING # OF FIRMS located in Ottawa, as a primary EBITDA is at about 20% and cost of 23 SAME customer, the true export ratio materials (and other expenses) at 23 is likely much higher. However, 30%. The majority of the purchased the estimate of 50% is more truly inputs come from outside Canada. representative of the economic EXPORT RATIO impact as these sales dollars stay in the region. 50%

Kanata North Economic Impact Analysis 2018 16 Change since 2015 Life sciences is a growing sector EMPLOYMENT in Kanata due, in part, to the Wages and salaries are equivalent legalization of recreational to 40% of revenues in 2018. This marijuana in 2018. The sector is comparatively low due to the REVENUES consists of a considerable range of unusually high proportion of input $544 MILLION +26% functions including research and purchases. About 75% of the jobs $432 MILLION development, manufacturing, and are at the professional level and services as well as sales and support 25% at the technical levels. for offshore firms. Many firms make REVENUE/EMPLOYEE or provide medical devices and LOCAL/REGIONAL SPENDING -15% others are involved in therapeutics. EBITDA is at about 25% with another $414,748 Approximately 87% of total sector 35% as input purchases, primarily $485,329 revenues are derived from foreign- for materials such as medical headquartered firms. isotopes, purchases of successive generations of lab equipment, and # OF EMPLOYEES EXPORT RATIO input of drugs and specialized parts. +47% The export ratio of this subsector We estimate half of the inputs are 1,313 is estimated at 80%, reflecting provided from the region. 891 the sales of medical devices, therapeutics, and pharmaceuticals to global or national markets. # OF FIRMS 20 +25% PRODUCTIVITY 16 Productivity by sales-per-employee is $415,000 based on $544.6 million total revenues to the sector with EXPORT RATIO 1,313 workers which is higher than average for Kanata North. 80%

Kanata North Economic Impact Analysis 2018 17 Change since 2015

REVENUES $464 MILLION +35% $343 MILLION

This sector is sixth largest of the EMPLOYMENT REVENUE/EMPLOYEE nine export subsectors in Kanata Wages and salaries are equivalent to -11% North by revenues with many high 50% of revenues in 2018 with 75% $274,018 value jobs. This sector has of the staff at professional level and $306,179 embraced agile production which 25% technical. enables it to respond quickly to changes in the market while LOCAL/REGIONAL SPENDING # OF EMPLOYEES controlling costs and quality. EBITDA is at about 15% within +51% Kanata North and purchase of 1,695 EXPORT RATIO materials and selected components 1,122 The export ratio of this subsector at 35%. Most of the larger firms are is estimated at 50%, in keeping foreign-owned. with the Agile Production # OF FIRMS outsource model. 27 +50% 18 PRODUCTIVITY Productivity by sales-per-employee is $274,000 based on $464.5 million EXPORT RATIO total revenues to the sector with 1,695 workers. Input costs are 50% relatively low.

Kanata North Economic Impact Analysis 2018 18 Change since 2015 The semiconductor subsector is EXPORT RATIO relatively small in Kanata North and The export ratio is relatively is almost entirely foreign owned with low at 35%. no fabrication facilities but with a REVENUES high amount of design work taking PRODUCTIVITY $270 MILLION +18% place here. Productivity is estimated at $436,000 $229 MILLION annual sales per employee with $270.1 million in revenues and 619 workers. REVENUE/EMPLOYEE

EMPLOYMENT $436,374 -7% Labour costs are estimated at $464,541 40% of total revenues with 75% of positions at the professional level 25% technical. # OF EMPLOYEES +26% LOCAL/REGIONAL SPENDING 619 EBITDA is estimated at 20%. 493

# OF FIRMS 14 +17% 12

EXPORT RATIO 35%

Kanata North Economic Impact Analysis 2018 19 Change since 2015 Though it is the second smallest PRODUCTIVITY subsector in Kanata North based Productivity by sales-per-employee on the number of firms in each is $217,000 based on $46.0 million subsector, it has a strong economic total revenues to the subsector with REVENUES impact with employee numbers 211 workers. +146% doubling since 2015. Cleantech $45.9 MILLION $18.6 MILLION also saw a significant increase in EMPLOYMENT revenues of 146%. There are two Wages and salaries are equivalent to firms in the cleantech subsector 50% of revenues in 2018 compared REVENUE/EMPLOYEE new to Kanata since 2015. to 60% in 2015. Of this sum, a +12% majority of the employees are $217,355 Particular strengths include: professional level, at approximately $193,698 • Water analytics and 75%. The balance of 25% are de-contamination systems technical-level qualified. • High tech applications for # OF EMPLOYEES research and development LOCAL/REGIONAL SPENDING +119% and monitoring EBITDA is at about 20% after wages 211 • Clean energy and salaries. 96

EXPORT RATIO The firms in this subsector are The cleantech subsector is predominantly Canadian which # OF FIRMS approximately 70% export-oriented. indicates local and regional 9 +29% This is compared to 60% in 2015 benefits. Operating materials and/or 8 which indicates the growing maturity relevant procurement expenses are of the subsector. The balance equivalent to 30% and much of this represents sales locally would be supplied from outside. EXPORT RATIO and regionally. 70%

Kanata North Economic Impact Analysis 2018 20 Change since 2015

REVENUES $24.3 MILLION -18% This subsector is characterized by EXPORT RATIO $29.7 MILLION inputs from outside Canada and The export ratio is estimated at 50%. then re-sold, often in upgraded REVENUE/EMPLOYEE format, to local, national, or PRODUCTIVITY international markets. The firms The productivity of this subsector is $296,900 -12% are mostly Canadian. This estimated at $297,000 per employee $337,216 subsector is smallest in based on revenues of $24.3 million revenues and employment. and 82 workers. # OF EMPLOYEES EMPLOYMENT Labour costs represent 20-25% of 82 -7% revenues with professional workers 88 staffing 25% of the positions, 20% technical, and 55% in “other”. # OF FIRMS LOCAL/REGIONAL SPENDING -12% EBITDA is estimated at 20% and 55% 8 is input purchases. 9

EXPORT RATIO 50%

Kanata North Economic Impact Analysis 2018 21 The “local economy” is divided into two main subsectors: • Professional services • Other services

PROFESSIONAL SERVICES OTHER SERVICES Professional services includes real estate, legal services, finance Other services include construction, renovation, and other and accounting, health and wellness, government, and other home services, education and daycare, dining, and retail professional services. and hospitality.

PRODUCTIVITY PRODUCTIVITY Annual sales-per-employee is $289,000 based on revenues Annual sales-per-employee is $161,000 based on revenues of $683 million with 2,365 workers. of $214.7 million with 1,330 workers.

EMPLOYMENT EMPLOYMENT Approximately 70% of all revenues are labour costs with Approximately 40% of all revenues are labour costs with 90% professional. 20% professional, 20% technical, and 60% “other”.

$996M

$897M 3,750 282 3,695 266 Direct impacts 2018 2015

EMPLOYMENT REVENUES # OF COMPANIES -1% -10% +6%

Kanata North Economic Impact Analysis 2018 22 The Kanata North Business Association would like to express their gratitude to Doyletech Corporation for their diligence, analysis, and attention to detail in undertaking this research.

We are also grateful to the more than 40 executives across almost every sector in Kanata North who participated in our process. Each interview was at least one hour long, and frequently more. We appreciate the time they took from their inevitably busy schedules to participate in the study. Without their engagement and information, this study would not have been possible.

Thank you to Communicarium for their work to present the highlights of the report.

Kanata North Economic Impact Analysis 2018 23 Kanata North Business Association 613-254-8778 555 Legget Drive, Tower B, Suite 534 Kanata, Ontario [email protected] impact2018.kanatanorthbia.ca kanatanorthbia.ca

© 2018 Kanata North Business Association