Greetings, and welcome to the Cajun Group's First Quarter 2021 Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Kevin Ford, CEO of Callion Group.
Thank you. You may begin.
Thank you, Daryl, and good morning, ladies and gentlemen. With me this morning is Patrick Houston, our CFO, and we'd like to welcome you to Calyen's Q1 2021 conference call. Please note that certain information discussed today is forward looking and subject to important risks and uncertainties. The results predicted in these statements may be materially different from actual results. I'm pleased to announce another strong quarter that continues our trend of quarterly revenue over $100,000,000 for the 4 straight quarters.
Our Q1 consolidated revenue was a record for Q1 at $116,000,000 up 17% from the same period last year. The results demonstrate that our growth framework and specifically embracing our diversity continues to keep Talion on a growth trajectory. In the previous quarter, we spoke about growing our non government revenues by entering new commercial sectors. In the current quarter, we not only continued with this trend, have also seen increase in our revenues internationally. Revenues in Europe have grown by 2 53% when compared to the previous year.
This is a result of progress in our Learning and Advanced Technology segments over the last year. Revenue in Europe represented 11% of our consolidated revenue in the quarter. The quarter also marked our 77th consecutive profitable quarter, Highlighting that we continue to remain profitability as we execute our growth plan. The ongoing public health crisis has had some continued short term impacts on some of our segments, while others have seen this as a new upmarket opportunity, wish they've been able to capitalize upon. This continues to demonstrate the strength of our diverse business.
Where costs and execution difficulties have impacted the results in certain elements of Advanced Technologies, we have been expanding the scope of services with both existing and new customers in our Health segment and winning new contracts in response to COVID-nineteen. I'd like to spend a moment to provide an update on each of our segments. Our Health segment saw another quarter of tremendous growth in the Q1 continuing strong demand from last fiscal year. Revenue has increased by 57% compared to the previous year. This has been the result of multiple initiatives, the first being our growth in pharmaceutical services Through acquisition of AlioHealth, which has seen strong early returns, continued growth and scope expansion with new customers.
And finally, we continue to win new contracts and deliver products and services in response to COVID-nineteen. Calyen Health has become a trusted partner who is able to deliver in challenging times while maintaining Calyen's reputation and quality. Our Learning segment has seen growth of 19% in the current quarter. This is a direct result of the acquisitions of CTS and Cadence, both located in Europe. Their early success has us very optimistic about our larger ambitions to establish our Cali and Learning brand in Europe.
The impacts that were experienced in the Learning segment due to COVID-nineteen and the stay at home orders that have been predominantly addressed through return of work arrangements with our customers to ensure continuity of service are now in place. Our Advanced Technologies segment slowed in the Q1 of 2021. Revenues declined by 7% when compared to the same period of the previous year. This was a result of lower pace In our large North American ground system project, which is now in deployment stage and lower revenue from our wireless products division. This was offset by our recent acquisition of Talisman, which has shown strong early performance as they continue to expand their presence in the GNSS antenna market.
Finally, our Information Technology Group saw a slight decline in revenue this quarter. This is a result of lower project revenue in the quarter completed existing projects and saw a decrease in demand in some of our core customers. Our recent acquisition of MSEK has begun to contribute, and we look forward to the synergies this acquisition will add to our cyber practice. I will now ask Patrick to review the quarterly numbers. Over to you, Patrick.
Thank you, Kevin. We're pleased with our financial performance this quarter. Our revenue momentum has continued Despite Q1 generally being our most seasonal quarter due to holidays and associated time off. This speaks to how much we have diversified our sources of revenue over the last 12 months. With consolidated revenue growth of 17%, we continue to see the results of our investments both organically through R and D and our recent M and A investments.
Organic growth for the Q1 was 2% and acquisitive growth contributed 15%. We also completed the acquisition of Cadence partway through our Q1 as well as Intertronics in early January. These two acquisitions will contribute additional revenue growth in the coming quarters. Our ability to win new contracts with existing and new customers continued with new signings of $122,000,000 in the quarter. Our realizable backlog at the end of our quarter remains at over $1,300,000,000 We saw good progress among many key performance indicators, including revenue, gross margins, EBITDA and adjusted net income this quarter.
Gross margins ended the quarter at 23%, which has increased by 3% from the same quarter of the previous year. Our inquisitive strategy has demonstrated the ability for M and A to contribute and meaningfully impact our consolidated gross margins. EBITDA for the Q1 of 2021 was up 24% when compared to the same period of the previous year. This brings our EBITDA percentage of revenues to 9% can compare to the last year. Our balance sheet remains a strength.
Cash was up $6,000,000 in the quarter. We also closed a new debt facility in early January, which provides us with additional liquidity. This facility has a term of 3 years with availability of $80,000,000 and an additional accordion of $40,000,000 This leaves our total liquidity on hand at over $110,000,000 to deploy on our strategic growth objectives. I'll now turn the call back over to Ken.
Thank you, Patrick. I'd like to spend a moment to talk about the acquisitions we have completed since our last update. We've continued our growth in the quarter and subsequent to the quarter with acquisitions in both periods. Cadence, who was acquired in November of 2020, grows our learning footprint in the UK and across Europe with their strong track record and work with NATO. Entertronic, who was acquired in early January, provide state of the art high precision antenna solutions that include high accuracy, high speed motion systems.
Their customer base primarily located in North America span military, scientific and commercial verticals. Applications of their innovation solutions include radio astronomy, radar, in Electronic Warfare, Deep Space and Satellite Communications. We're excited about the synergies that we've already begun to see in working together with Electronic and our existing Advanced Technologies business. We welcome these acquisitions to Calyen and are excited to grow together in the coming years. Lastly, while the traditional markets which Callion operates are managing through this pandemic, management expects organic revenue and earnings growth opportunities in most or all of our segments through the successful execution of our growth strategy.
However, we must caution that revenues realized are ultimately dependent on the and timing of future contract awards, customer utilization of existing contract vehicles and any impacts due to COVID-nineteen, specifically government regulations related to social distancing, stay at home orders and broader global travel restrictions. Based on currently available information of contract backlog, sales opportunities and our assessment of the marketplace, We expect to continue our growth posture in the coming year. Our guidance does not incorporate any additional M and A activity. And should we close on any new M and A opportunities, their contributions would be incremental. We've updated and increased our guidance for the fiscal year to reflect the acquisition of Medtronics, our continued momentum in our Health segment and slower intake in some areas of our Advanced Technology segment.
I believe our diversified segments with a mix of domestic and global customers continues to position us well for a strong year. We expect revenues in the range of $460,000,000 to $500,000,000 adjusted EBITDA in the range of $42,300,000 are $45,800,000 and adjusted net profit in the range of $27,500,000 to $30,100,000 please see our press release and MD and A for detailed reconciliation of our guidance. So with that, Daryl, I'd like to open up the call to questions.
To remove your questions from the queue. Our first questions come from the line of Doug Taylor with Canaccord Genuity. Please proceed with your questions.
Thank you. Good morning, Kevin and Patrick. Regarding the Advanced Technologies unit, understanding this segment has some variability given the large contracts and deployments, can you talk a little bit about The bid pipeline and the deal funnel, specifically, maybe you could shed some light on whether the sales forecast some of the newer products that you've launched related to DOCSIS or otherwise? And then last question as Part of that would be, has the recent enthusiasm for sort of all things space related translated into anything material in terms of your pipeline of opportunities for ground station equipment or other components.
Yes. Thanks Doug for the question. And A few elements with regard to our Advanced Technologies business. So number 1, to your point, I was going to start where you finished. On the space side, You're right.
We do see continued pipeline, whether for legacy infrastructure upgrades or new infrastructure opportunities in our Ground in the system segment, both in the context of MEO and GEO satellites, but also the LEO Constellations. Clearly, with our acquisition of Indertronic, we became even more relevant, frankly, in the LEO constellations with With regard to the antennas and the safe antennas and ground systems they build. So actually, we see the pipeline is quite strong in our legacy in that ground system, LEO, MEO, GEO orbit, satellite capability and have numerous bids out right now, frankly, that we're waiting to hear on. So still very confident in that area. As far as the new innovations on DOCSIS, again, working with organizations like DCT Delta to Europe, we do see some uptake on that.
COVID has slowed down the pace have implementation, but it has not negated the opportunity. So we're still very optimistic that as we move out of COVID that the DOCSIS becomes Something that is going to be a positive impact to our growth trajectory. And then just generally, I would say, Our Advanced Technologies Group has got quite a few elements in there. We have nuclear engineering, we have a legacy Test Aerospace and Defense Business. All of them are running very strong.
I did some recent review with Patrick and the team and Pat Thera and the team. I was very impressed by just how much work there is ongoing with funnel in every one of those Components, so I'm still very optimistic in our Advanced Technologies Group. I don't look at this as a long term trend at all. I think this is just a reality of timing, as you said. And now with Talisman, Entertronic, Sat Service, which is frankly a review last week was very, very strong, strongest they've ever been as they grow their footprint in Europe.
So very, very positive that that technology is moving forward.
Okay. I'll switch gears to the health which was a standout this quarter. First, could you just talk a little bit about the $5,000,000 new contract in that business, A little more detail there and perhaps an update on where we stand with the MRCU contract and and potential with that type of business as well.
Yes. Thanks. So what we're seeing in our Health business right now is really a combination of 2 things. Number 1 is, Despite COVID, we're still growing our health footprints outside of COVID and more customers, more capability. We have Strong demand right now with our health services contract with National Defense, Veterans Affairs RCMP, we're continuing to see increased demand there.
And then as far as new business, the COVID response, definitely we have been engaged in numerous areas, whether it's Screening, airports, Northern Immunizations, Nunavut, we are getting asked to deploy In very short time periods, and I think that's the change we're finding from a government perspective, the procurement cycles are quite can be quite long normally, But just shortened procurement cycles where from phone calls to contract, we're talking weeks, if not a month. So very, very strong and that $5,000,000 really represents a few contracts that we've now put in to support a few contracts that we've now put in to support COVID response in different areas. As far as the SNC And the MRCU contract, the mobile hospitals, we have worked to have ready to roll, I understand there are 2 are in the hospitals and we're just waiting for the call. And there's lots of discussions going on, as you know, in capacity right now for the healthcare system as to where These potentially could be implemented. So we're just standing by on that.
We're not confident yet that there's going to be more, But we're standing by and again, that could change depending on the intensity of the virus.
Okay. Last question for me then. I mean, a lot of puts and takes related to COVID here, could you provide us any kind of view qualitatively and perhaps quantitatively, if you can, On to what the degree the net impact of this has been on your guidance and perhaps versus the last update that you provided?
Hi, Doug, it's Patrick. I mean, we reflected, obviously, electronics, which is a significant contributor for us in the guidance. I think All the other elements, I think we're ahead of where we were at the last quarter when we spoke to you. I think we've we had some risks that we've been able to retire. We've seen some momentum on deals.
So I think we're ahead of where we were 3 months ago. And obviously, Neuritronics is a good contributor to the guidance, which is why we felt comfortable increasing it, and we still think there's upside opportunity here as we go finish this year.
Yes. And Mike yes, go ahead, Doug.
I was going to say, just to be crystal clear, what you're saying is that even without the M and A you've announced since. You think your guidance would have moved to the right a little regardless?
Yes.
Okay. Yes. And my viewpoint too, Doug, on COVID is the with after almost a year now, We've been able to really work through alternative work arrangements. Our learning business took a hit last year just because it took time to re platform are learning from in person to virtual, and I think the team has done an amazing job of working with our customers to do that. Healthcare really saying, just deployment of PPE, getting people out there, getting protocols in place.
Our Advanced Technologies Group, the biggest challenge we continue to have is the travel. We're implementing ground in the U. S, as you can imagine, logistically now with the new guidelines, new restrictions on both sides of the border, my credit to that team that continues to work hard to get that done. In our IT business, frankly, we're just seeing that was not very much it wasn't affected either last year, and we continue to work there. Obviously, we're seeing right now some customers are showing a bit of demand as they continue to work with this COVID challenge.
Okay. Thank you. I'll pass the line and look forward to have more fulsome update tomorrow as well.
Thanks. Thanks, Doug.
Thank you. Our next questions come from the line of Amar Azat with Echelon Partners. Please proceed with your questions.
Good morning, Kevin and Patrick. Congrats on the quarter. I've got a couple of follow ups on the health segments. First on Alio, it looks extremely positive. You guys are are adjusting the earnouts upwards again.
I'm just looking to understand what is driving that outperformance relative to last quarter To warrant another earn out event. Then also on Alio, can you speak to the launching of your first Patient Support Program in Europe and what the opportunity looks like there relative to Canada.
Sure. Good morning, Aaron. Yes, I think, obviously, the 1st year of earnout for Alio ends on January 31, so we're just coming are in the end here, but they've been on a pretty aggressive growth path. If you think of the revenue from the year before he bought into the 1st year with us, Their growth is going to be close to 100%. So love to see businesses that can grow that quickly.
Every month, it continues to scale up have brought on new customers with new programs. So really, we're seeing excellent momentum on that business. And congrats to the team there. They've really worked hard to scale our business over the last 12 months, and we're really glad to have them as part of Calgon. With respect to Europe, this is an interesting opportunity.
It's an existing customer of ours that we service in Canada. They're doing a drug trial in Canada get approval. They decide to go ahead and get the same approval across Europe, and they came to us because they were impressed with our case study in Canada and have asked us to run their patient support program for this medication in Europe. So we're launching in 6 countries this year, and it's an exciting opportunity for us to extend our health services, which traditionally was all in Canada to new countries. So I'm really excited about this opportunity.
So in Europe, are you guys going to be targeting like organically opportunities there? Or it's always going to be a case of like a client that's sort of taking you there?
Well, it's nice when the clients take you there and makes it a lot easier. But certainly, we're looking at Europe to say, okay, how do we get in front of and the set of clients that we're interested in there and explain to them kind of our value proposition and why were effective at delivering these programs on their behalf. And I think this new opportunity will be a proof point for us that we can go around and show other customers were able to do it efficiently in Europe.
Great, great. Okay. Again, on the Health segment, on the gross margin side, It looks like a record quarter. I know there's probably a bump from last quarter on revenue mix with less mobile respiratory care units, is it fair to assume that The rest of the outperformance is really coming from Alio? Or is there anything else driving these margins up like that?
Ali was certainly a contributor. I mean, we've seen because of as Kevin mentioned, the short cycle, I think the margin opportunity is higher in terms are the people who can respond quickly to opportunities. So we've seen some margin improvement there. And I think our efficiency, as we keep getting larger and larger, were able to do deliver these programs much more efficiently because we're reusing the same teams and delivery platforms that we have. So I think there's an efficiency there as we just keep growing that business, which a year ago was under $100,000,000 and now we're pushing 150,000,000
Okay. Dennis, I know you guys don't give guidance on segment margins, but because I'm trying to get a sense of what the long term gross margin potential is here like, let's say, 2 or 3 years out. Can you guys like provide like a high level sort of range? Like has got 23% as high as it gets or can we see you guys like north of 25%, 26%, 27%?
Yes, it's Kevin. So I think for me, if you look at our 4 pillar growth framework, both on customer diversification and innovation Specifically, the goal of our innovation pillar is to continue to bring more differentiation through innovation as far as Technology enablement, so you think about the Alio All Phase acquisition, we're excited by that because they brought a software platform that allowed us not only be more efficient, but differentiate our services, Which allows us in turn to drive higher margin opportunities. So right now, the clear message I want to send, it's about increasing our margins, both at gross margins and EBITDA margins. And our whole strategy is about whether it's through organic investment, through R and D or through acquisition is to move those up. So Yes, to your point, we have a large contract with National Defense, so it's hard to move consolidated margins in Health up drastically, because we're dragging through the we're working through that contract, but the goal is definitely to increase So I think a single point here and there over the next couple of years for sure, but rest assured our M and A engine is all about finding opportunities to push that continue to push that higher.
Fantastic. And then maybe one last housekeeping item. On your advanced tech, on the G and A expense, it came in at $2,000,000 for the quarter. You guys typically ran it at $1,500,000 $1,600,000 I know there's the addition of Talisman, But I'm just looking to understand if there's anything else in that number, any exceptionals for the quarter?
No, it's mostly talisman related. They're much higher margin business, so they do have some OpEx, but they're generally driving gross margins in excess of 50%. That was the driver on the OpEx increase.
Great. Thanks. Look forward to your update tomorrow.
Thanks, Emma.
Thank you. Our next question comes from the line of Benoit Poirier with Desjardins. Please proceed with your question.
Hey, good morning, Patrick. Good morning, Kevin, and congratulations for the quarter. Could you maybe come back a little bit on the large ground system contract? I know you were expecting to recognize about $25,000,000 of revenues in fiscal 2021. Just wondering whether in Q1 there was Some revenues that were recognized and whether it's pushed a little bit further throughout fiscal 2021.
Yes, we've recognized I mean, our plan is still to try to finish that project in this fiscal year and recognize that entire 25,000,000 and the project, so I think we're still on that pace. So I don't think that's changed. The environment that we talked about last quarter where It's just hard to do this and increase cost. I don't think it has changed. And the restriction on flights and things like that has made it even more difficult for us to deliver this contract.
But The team is committed to doing it, and I think we're still on track to finish it this year.
Okay. And Kevin, you mentioned that the pipeline for advanced tech is quite strong, still very confident about that. How do you feel about the opportunity to replace this contract with other opportunities for I'm looking here at fiscal 'twenty two, how confident are you to replace that in over the next, let's say 12 months, 18 months?
Actually, still very confident. I think to me the confidence is really borne from Benoit. Two things. Number 1, as I said, there is a quite a lot of activity right now in our Grant Systems segment with regard to proposals either in process or out for evaluation. Number 2 is that with the combined SaaS service, Talisman, Intertronic acquisitions, we're seeing Frankly, quite a few synergies coming out of the gates on those three opportunities working with our legacy Advanced Technology business.
So I'm still very confident. And actually, if you think about Benoit last year, we had a very high ground segment project revenue base last year. And coming into this year, we're still showing growth as a company and you know us better than anyone, Benoit. Historically, when we've had these ground systems, the large ones go through, we kind of take a step back. We're not going to take a step back.
We're going to keep moving forward here, and I'm still very confident in our ability to backfill that both with new RF ground system projects and as well as the contributions of listen to acquisitions.
Okay. That's great color. And when we look on the IT side, the slight decrease came from a large one time product sales that happened almost a year ago and a slight reduction in the service delivery for some services. So could you quantify a little bit what was the one time product sale a year ago? And maybe quantify the scale back in the budget reduction and the opportunity maybe to get back this those delays delay projects.
Yes. I mean, we had some product sales last year in Q1 related to our cyber business. We're still confident in those, and we're trying to lock those down again in Q2 here coming up, so I think we're still pretty optimistic about our cyber business and IT. Some of the bigger IT projects that we had last year, obviously, some of them concluded, and we've been bidding on a lot of projects to start up. But the award of those have been delayed a little bit.
A lot of these either provincial or municipal businesses, have been extremely taxed with responding to COVID and some of these IT projects have slid to the right of it. But we still have a lot of opportunities there, and we're hoping to close those this year and get going. So I think it's more of a timing issue right now than a trend.
Okay. And looking at the Entertronic, I was wondering, are there some synergies with are integrating. And maybe if you could expand also about the opportunity to tap the European defense market with your latest acquisition, if you would maybe quantify the market, the strategy and maybe the timing to kind of tap this European defense market, now that you have beefed up your product offering.
Yes. Thanks, Benoit. As far as Intertronic and Integraein, Not as much synergies in the context of technology platform. At Integra Grain, we continue to evolve our product base. We did a review recently looking to how do we re platform, continue to platform that into more of a SaaS based model with that team and very excited by Tanner and the crew out there, the work that they're doing.
With the Entertronic piece now and Satservice and the question of military in Europe, We're really excited about that opportunity. We haven't done formal market research as far as the size of them while it's in progress, but I can tell you coming out of the gates right now and I look at the current contracts that's at service and the wins, they'd really never focused on the military market in Europe. And were seeing great success because now they can bring the Calient story into Europe. So our legacy with Defense is very strong across everything that we do. So that's resonating.
The Canadian brand is very well regarded and recognized globally. And it's something as Canadians, I think sometimes we forget. But it is something that we believe that the combination of our defense business, our stories, The capability to harvest assets from Canada and go into Europe, we're seeing that working very, very well. So, while I can't give you a specific number, I can tell you for Sat Service, it's they're winning business that they've never won before. In defense, Intertronic only strengthens that because of the fact Their platforms and antenna capability, then you tie that to our legacy Test Aerospace and Defense business based out of Saskatoon.
We're very excited about the European marketplace, both NATO and the nations that form Europe in the context of their military offerings and capabilities. So, stand by. We're going to continue to double down in Europe, and we think longer term, it's going to continue to be a great growth pillar for us going forward.
Okay. And Patrick, a quick one. In terms of corporate costs, I think you were close to $5,800,000 in Q1. Is it kind of a good number to use going forward, and I assume this number went up because of the latest acquisition.
Yes. I mean, we've been continuing to invest, obviously, in M and A and other activities. We secured the credit lines as we're are planning on using that and deploying that capital. So but I think from a going forward basis, I think it's a good planning number.
Okay. And last question for me, when we look at the dividend policy, obviously, with the earnings growing up over the last years, the payout ratio came down. So how should we be thinking about the dividend policy? Are you looking at the policy on the adjusted net profit basis or net profit basis, how should we be thinking about will have the opportunity to revisit the dividend at one point in time.
Yes. When we looked at this a couple of years ago, We believe our payout was too high. It was constraining some of our growth. We decided to hold the dividend and reinvest the capital to drive the growth, and I think we've seen the results of that over the last couple of years. I think our plan right now is to hold the dividend at least for this year and continue to reinvest We're getting, we believe, excellent returns on the deployment of that capital, and then we'll look at it again.
But I think we're looking at it from how much Cash earnings do we have at the end of the day and how much do we want to put towards dividend. They used to be over 50%, which we believe was too high. And I think we've grown into it, so I think we just continue on that path for now.
Okay. That's great. Congrats, and thanks for the time. Looking forward to tomorrow.
Thanks, Benoit.
That's great. Thanks, Benoit.
Thank you. Our next question comes from the line of Deepak Kaushal with Stifel. Please proceed with your questions.
Hi, good morning guys. Thanks for taking my questions. I've just got a couple of follow ups, if I may. First, on the Learning business, a clarification, it looks like you got a lot of Growth in Europe. But if we strip out the European side, can you just kind of clarify what the core Canadian Learning Business segment is, are we back at pre COVID levels yet or is that expectation for the coming quarters?
Just hope you can clarify that for me, please.
Yes. Thanks, Deepak. So interesting, as you think about how this year and you think about Q1, so if you kind of rewind a year ago, In our Q1 last year, the COVID impact really had not been felt in our learning business. We had it really started in our Q2, Q3, Where we had to scale back learning as we had to readjust delivery platform. So right now from a learning business in Canada, if you look at the core business, it's actually right back to where we were last year at this time.
And I really want to credit National Defense and our partners are working with us to create an environment that we can do this, continue to deliver training safely. So we're right back to where we started and knock on wood here, any other COVID restrictions, we're expecting that to continue for the year As a military, obviously, mission critical that they continue training. So I really am positive on our Canadian business this year. And also our funnel of opportunities for learning continues to grow. We continue to invest in our business development.
As you know, we've launched products are all in response ready that are really taking the intellectual capital we have on learning and giving opportunities for organizations to license that intellectual capital in a software platform. And as well new customers coming on board every day in our emergency management side with First Nations, municipalities. So very, very optimistic in where our learning is going both in Canada and obviously now in Europe as we really start to put our shoulder into the European marketplace.
Great. That's helpful. Thank you. And then just on the advanced technology side, you talked a bit about the DOCSIS side, but I
was wondering if you could
give us update on the wireless opportunities there. I know you had a big contract that you're deploying. What stage of that deployment or what inning are you are not. And what does the pipeline look like for that new product segment for you guys?
Yes, we had a strong start last year and good contribution from that project. We've seen the order intake slow down a little bit as their deployment schedule for this Tier 1 mobile carrier in the U. S. Has changed during COVID. Obviously, they've redeployed capital into different spaces.
So we've seen slowed down a little bit, but we're pretty optimistic still about this product and the life it has to contribute. So we're are still positive, but we've seen a slight reduction here in Q1 on the order intake.
And has I mean, is the pipeline for broader customer opportunities beyond the first one, are you still there? Or how is that what's the outlook for that?
Yes. I mean, we've taken that technology. We're looking at other places we can deploy. We've gotten we're doing some R and D on that right now and trying have to turn that into more than just a product to one customer, and we're seeing some early returns there. So I think we'll continue to invest in that this year.
Okay, great. And then my last question, Kevin, more of a big picture question. Obviously, Europe is a big growth driver for you guys and a big focus. What's your longer term thinking about rinsing and repeating in the U. S.
Market? You've had some success with that wireless product there in the U. S. You were in the U. S.
In the past, maybe you can help us think a bit in the future on that.
Yes. No, great question, Deepak. Clearly, with the change in administration, we're looking at our U. S. Strategy and just understanding The dynamics of the U.
S. Marketplace, the reality is right now, if you look at the think about our Advanced Technologies segment, we do work in the U. S. We mentioned this large ground system project that we're dealing with, Intertronics, majority of the Intertronics customers are U. S.-based customers, whether it's in space or defense, so we definitely will continue to go after the U.
S. Marketplace in the context of customer base. As far as the physical presence, we're going through that analysis right now. Patrick mentioned earlier that the trial that we're doing in the PSP program from Europe, well that customer has also asked us about U. S.
And we're looking into that as we speak, a couple of states where we could potentially run that program. Clearly, with our Engitronics acquisition now and in the U. S. Base of customers they have, does it make sense for us to reestablish a presence for Calian in the U. S?
My gut is saying yes, and we're working through the dynamics of that now. So I'm glad you asked this question because as we talked about our core market in Canada, we talked about Europe. U. S. Is clearly on our agenda.
We are continuing to focus on what's the right pace of investment in our U. S. Footprint. But I expect over the next 12 months, 24 months, it will continue to get stronger just as the reality is we have just so many customers there to ignore that any longer.
Got it. And it sounds like most of your presence there and the opportunity is commercial related. I know the government, U. S. Government industry and the defense industry down is really hard to tap, but you've seen some progress in Europe.
Is there an opportunity there to establish a differentiated presence or is that still turning down the road map?
Yes, I think so. I think if you think about if you think about the 2 kind of markets the healthcare market in the U. S. With our healthcare businesses is our logical extension of our PSP, Patient Support Program capability because what we do here in Canada is definitely transferable into other countries. The defense marketplace with regard to our Advanced Technologies business, learning clearly is an opportunity.
Intertronic brings customers in that area today. And as a reminder, today in our Advanced Technologies Group, we're in global supply chains for a good part of Many OEMs, we built components in Saskatoon for organizations based out of the U. S. And have been part of their supply chains for years. So all these things are connecting back.
When we exited the U. S. Last time, it was just because the size of the business at that time didn't warrant the overheads that we are dealing with as far as foreign owned controlled interest. But I think as you grow that presence, that becomes that overhead becomes makes a bit more sense for us to adjust and attack that again. So I expect, as I said, in the next 12 months, 24 months, we'll reestablish our presence in the U.
S. And we'll do it at a pace that makes sense for the opportunity base
Okay, great. That's helpful. Thank you for taking my questions and looking forward to meeting you in tomorrow.
Okay. Thanks Deepak. Good to hear from you.
Thank you. Our next question has come from the line of Jesse Pytlak with Cormark Securities. Please proceed with your questions.
Hey, good morning, gentlemen. Just one quick question for me, more of a housekeeping one. Just given now that the Ground since project is moving into the deployment phase, but understand you have a number of bidding opportunities and obviously you're working M and A into the picture in Advanced Technologies. But
How should we kind of
think about the potential around working capital release?
Yes. So we did some progress on working capital in the orders that contributed to sort of the cash increase that you saw. We still stand on that one about close to $50,000,000 of working capital on that project, so that still needs to unwind here over the end of the deployment stage. So are still expecting good contribution on working capital as we complete that and hand over to the customer.
Okay. Thank you.
Thanks, Justin.
Thank you. There are no further questions at time, I would like to turn the call back over to management for any closing remarks.
Okay. Well, listen, thanks, Daryl, and thanks all for attending and the questions, it's appreciated. We do have our AGM tomorrow. So if you don't have the details, please reach out. We'll have to do that.
So we're going to do our formal AGM Procedures and is followed by just a bit more color to borrow a Benoit's term. I'll send you a quarter for that Benoit To add some color to just the overall state of the business and where we continue to focus as a company. So I I want to thank everyone for their time today. I really also want to thank my team at Calian for another great quarter. It is not easy working in COVID environment and I can tell you, as I mentioned last call, the team is rising to the challenge.
So it would be remiss for me not to mention The incredible people and our staff at Gallium for another awesome, awesome quarter. So thank you for that. With that, Daryl, we can end the call. Look forward to the update tomorrow. Thanks, everyone.
Have a good day. Stay safe.
Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time.