Calian Group Ltd

TSX:CGY

Earnings Call Transcript 2021-Q1

[Operator]

Greetings, and welcome to the Calian Group's First Quarter 2021 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Kevin Ford, CEO of Calian Group. Thank you. You may begin.

[Kevin Ford, President, CEO & Director]

Thank you, Darryl, and good morning, ladies and gentlemen. With me this morning is Patrick Houston, our CFO, and we'd like to welcome you to Calian's First Quarter 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 million for the 4 straight quarters. Our first quarter consolidated revenue was a record for Q1 at $116 million, up 17% from the same period last year. The results demonstrate that our growth framework and specifically embracing our diversity continues to keep Calian on a growth trajectory. In the previous quarter, we spoke about growing our nongovernment revenues by entering new commercial sectors. In the current quarter, we not only continued with this trend but has also seen an increase in our revenues internationally. Revenues in Europe have grown by 253% when compared to the previous year. This is a result of progress in our Learning and Advanced Technologies 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 op market opportunity, which 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-19. 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, and the first quarter 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 our acquisition of Alio Health, 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-19. Calian Health has become a trusted partner who is able to deliver in challenging times while maintaining Calian's reputation of 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 a Calian Learning brand in Europe. The impacts that were experienced in the Learning segment due to COVID-19 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 first quarter 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 Tallysman, which has shown strong early performance as they continue to expand their presence in the GNSS antenna market. Finally, our Information Technologies group saw a slight decline in revenue this quarter. This is a result of lower project revenue in the quarter as we completed existing projects and saw a decrease in demand in some of our core customers. Our recent acquisition of EMSEC 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.

[Patrick Houston, CFO & Corporate Secretary]

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&D, and our recent M&A investments. Organic growth for the first quarter was 2% and acquisitive growth contributed 15%. We also completed the acquisition of Cadence partway through our first quarter as well as InterTronic in early January. These 2 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 $112 million (sic) [ $112 million ]in the quarter. Our realizable backlog at the end of our quarter remains at over $1.3 billion. 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 acquisitive strategy has demonstrated the ability for M&A to contribute and meaningfully impact our consolidated gross margins. EBITDA for the first quarter of 2021 was up 24% when compared to the same period of the previous year. This brings our EBITDA percentage of revenues to 9% for the quarter. Adjusted net income, which reflects the impact of depreciation, IFRS 16 lease accounting and income taxes was up 28% compared to the last year. Our balance sheet remains a strength. Cash was up $6 million 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 million and an additional accordion of $40 million. This leaves our total liquidity on hand at over $110 million to deploy on our strategic growth objectives. I'll now turn the call back over to Kevin.

[Kevin Ford, President, CEO & Director]

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 U.K. and across Europe with their strong track record and work with NATO. InterTronic, who was acquired in early January, provides 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, electronic warfare, deep space and satellite communications. We're excited about the synergies that we've already begun to see in working together with InterTronic in our existing Advanced Technologies business. We welcome these acquisitions to Calian and are excited to grow together in the coming years. Lastly, while the traditional markets which Calian operates are managing through the pandemic, management expects organic revenue and earnings growth opportunities in most or all of our segments due to the successful execution of our growth strategy. However, we must caution that revenues realized are ultimately dependent on the extent and timing of future contract awards, customer utilization of existing contract vehicles and any impact due to COVID-19, 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&A activity, and should we close on any new M&A opportunities, their contributions would be incremental. We've updated and increased our guidance for the fiscal year to reflect the acquisition of InterTronics, our continued momentum in our Health segment and slower intake in some areas of our Advanced Technology segment. I believe our diversified segments with the mix of domestic and global customers continues to position us well for a strong year. We expect revenues in the range of $460 million to $500 million. Adjusted EBITDA in the range of $42.3 million to $45.8 million. And adjusted net profit in the range of $27.5 million to $30.1 million (sic) [ $30.5 million ].Please see our press release and MD&A for detailed reconciliation of our guidance.So with that, Darryl, I'd like to open up the call to questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Doug Taylor with Canaccord Genuity.

[Douglas Taylor, Director]

Regarding the Advanced Technologies unit, understanding this segment has some variability given the large contract 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 for 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?

[Kevin Ford, President, CEO & Director]

A few elements with regard to our Advanced Technologies business. So number one, to your point, I'll just kind of start where we 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 systems segment. Both in the context of MEO and GEO satellite, but also the LEO constellations. Clearly, with our acquisition of InterTronic, we became even more relevant, frankly, in the LEO constellations with regard to the 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 at Europe. We do see some uptake on that. COVID has slowed down the pace of 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. My 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 in the funnel in every one of those components. So 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 Tallysman, InterTronic, SatService, which is -- frankly, our review last week was very, very strong, strongest they've ever been, as they grow their footprint in Europe, still very, very positive in Advanced Technologies moving forward.

[Douglas Taylor, Director]

Okay. I'll switch gears to the Health unit, which was a standout this quarter. First, could you just talk a little bit about the 5 million new contract in that business, a little more detail there. And perhaps an update on where we stand with the MRCU contract and potential with that type of business as well?

[Kevin Ford, President, CEO & Director]

Yes. Thanks. So what we're seeing in our Health business right now is really a combination of 2 things. Number one is despite COVID, we still -- we're still growing our Health footprint outside of COVID, and more customers and more capability. We have strong demand right now with our Health services contract with National Defense, Veterans Affairs RCMP, we're seeing -- continue 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 were from phone called contract, we're talking weeks, if not a month. So very, very strong. And that 5 million really represents 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 hospitals. And we're just waiting for the call. And there's lots of discussions going on, as you know, and capacity running out for the health care 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.

[Douglas Taylor, Director]

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?

[Patrick Houston, CFO & Corporate Secretary]

Doug, it's Patrick. I mean, we reflected, obviously, InterTronic, 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 had some risk 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, InterTronics 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 and finish this year.

[Kevin Ford, President, CEO & Director]

Yes. And actually -- yes, go ahead, Doug.

[Douglas Taylor, Director]

I was going to say, just to be crystal clear, what you're saying is that even without -- the M&A you've announced since, you think your guidance would have moved to the right a little regardless?

[Patrick Houston, CFO & Corporate Secretary]

Yes. Yes.

[Kevin Ford, President, CEO & Director]

Yes. And from 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 replatform Learning from in-person to virtual. And I think the team has done an amazing job of working with our customers to do that. Health care, really same, 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 systems in the U.S., as you can imagine, logistically now with the new guidelines, new restrictions on both sides of the border. And 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 highly last year. And we continue to work through. Obviously you're seeing right now, some customers are slowing a bit of demand as they continue to work with this COVID challenge.

[Operator]

Our next questions come from the line of Amr Ezzat with Echelon Partners.

[Amr Ezzat, Analyst]

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 adjusting the earn-outs upwards again. I'm just looking to understand what is driving that outperformance relative to last quarter to warrant another earnout to bump? 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?

[Patrick Houston, CFO & Corporate Secretary]

Sure. Yes. I think, obviously, the first year of earn-out for Alio ends on January 31. So we're just coming to the end here. But they've been on a pretty aggressive growth path. If you think of the revenue from the year before we bought them to the first year with us, their growth is going to be close to 100%. So love to see businesses that can grow that quickly, and every month continued to scale up as they brought on new customers with new programs. So really, we're seeing excellent momentum on that business. So -- and congrats to the team there that really worked hard to scale that business over the last 12 months. And we're really glad that Alio is part of Calian. 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 to get approval. They decided to go ahead and get the same approval across Europe, and they came to us because they were impressed with our capability 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 entries. So I'm really excited about this opportunity.

[Amr Ezzat, Analyst]

Then 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 so that's sort of taking you there?

[Patrick Houston, CFO & Corporate Secretary]

Well, it's nice when the clients take you there, makes it a lot easier. But certainly, we're looking at Europe to say, okay, how do we get in front of the set of clients that we're interested in there and explain to them kind of our value proposition and why we're 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 that we're able to do it efficiently in Europe.

[Amr Ezzat, Analyst]

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?

[Patrick Houston, CFO & Corporate Secretary]

Alio is 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 of 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, we're able to 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, it's under $100 million, and now we're pushing $150 million.

[Amr Ezzat, Analyst]

Great. Then if -- I know you guys don't give guidance on segment margins, but if I'm trying to get a sense of what your 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 we've got 23% as high as it gets. Or can we see you guys like north of 25%, 26%, 27%?

[Kevin Ford, President, CEO & Director]

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, you think about the Alio/Allphase acquisition. We're excited by that because they brought a software platform to allow us to 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&D or through acquisition as to move those up. So to your point, we have a large contract with national defense. So it's hard to move -- consolidate margins in Health up drastically because we're dragging through the -- we're working through that contract. But the goal is definitely to increase, Amr. so I think a single point here and there over the next couple of years for sure. But rest assured, our M&A engine is all about finding opportunities to push that -- continue to push that higher.

[Amr Ezzat, Analyst]

Fantastic. And then maybe one last housekeeping item. On your Advanced Tech, on the G&A expense, it came in at $2 million for the quarter. You guys typically ran it at $1.5 million, $1.6 million. I know there's the addition of Tallysman, but I'm just looking to understand if there's anything else in that number, any exceptionals for the quarter?

[Patrick Houston, CFO & Corporate Secretary]

No, it's mostly Tallysman related. They're much higher-margin business. So they do have some OpEx, but generally driving gross margins in excess of 50%. So that was the driver on the OpEx increase.

[Operator]

Our next questions come from the line of Benoit Poirier with Desjardins.

[Benoit Poirier]

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 million of revenues in fiscal '21. Just wondering whether in Q1, there was some revenues that were recognized and whether it's pushed a little bit further throughout fiscal '21.

[Patrick Houston, CFO & Corporate Secretary]

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 million to end of the project. So I think we're still on that pace. So I don't think that's changed. The environment we talked about last quarter, where it's just hard to do this and increase cost. I don't think has changed. And the restrictions on flights and things like that have made it even more difficult for us to deliver this contract. But the team is committed to doing it. I think we're still on track to finish it this year.

[Benoit Poirier]

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 '22, how confident are you to replace that over the next, let's say, 12, 18 months?

[Kevin Ford, President, CEO & Director]

Actually, still very confident. I think to me, the confidence is really born from, Benoit, 2 things. Number one, as I said, there's a quite a lot of activity right now in our ground systems segment. With regard to proposals, either in process or out for evaluation. Number two is that with the combined SatService, Tallysman and InterTronic acquisitions. We're seeing, frankly, quite a few synergies coming out of the gates on those 3 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 this ground system, 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 recent acquisitions.

[Benoit Poirier]

Okay. That's great color. And when we look on the IT side, the slight decrease came from a large onetime product sale 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 onetime product sale a year ago? And maybe quantify the scale back in the budget reduction and the opportunity maybe to get back those delay projects.

[Patrick Houston, CFO & Corporate Secretary]

Yes. I mean we had some product sales last year in Q1 relating 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 in 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 tasked with responding to COVID. And some of these IT projects have slimmed 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.

[Benoit Poirier]

Okay. And looking at InterTronic, I was wondering, are there some synergies with IntraGrain? 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 offerings?

[Kevin Ford, President, CEO & Director]

Yes. Thanks, Benoit. As far as InterTronic and IntraGrain, not as much synergies in the context of technology platform. With IntraGrain, we continue to evolve our product base. We did a review recently, looking to how do we replatform, continue to platform that into more of a SaaS-based model with that team. And very excited about [indiscernible] and the crew out there, the work that they're doing. With the InterTronic 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, Benoit. it's in progress. But I can tell you, coming in the gates right now, and I look at the current contract at SatService and the wins, they really never focused on the military market in Europe. And we're seeing great success because now they can bring the Calian 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 if something is 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 SatService, they're winning business that they've never won before in defense. InterTronic only strengthens that because of the fact of their platforms and antenna capability, then you tie that to our legacy test aerospace and defense business, based at Saskatoon, we're very excited with the European marketplace, both NATO and the nations that form Europe in the context of their military offerings and capabilities. So standby, 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.

[Benoit Poirier]

Okay. And Patrick, a quick one. In terms of corporate costs, I think you were close to $5.8 million 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?

[Patrick Houston, CFO & Corporate Secretary]

Yes. I mean we continue to invest, obviously, in M&A and other activities. We secured the credit line as we're 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.

[Benoit Poirier]

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 the opportunity to revisit the dividend at one point in time?

[Patrick Houston, CFO & Corporate Secretary]

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. And 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 dividends. 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.

[Operator]

[Operator Instructions] Our next question comes from the line of Deepak Kaushal with Stifel.

[Deepak Kaushal, Director and Technology & Communications Analyst]

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.

[Kevin Ford, President, CEO & Director]

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 our 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 on 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, are there 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, Maestro and Response Ready, that are really taking the intellectual capital we have on Learning and giving opportunities for organizations to license that intellectual capital in the software platform. And as well, new customers coming onboard every day in our Emergency Management side with First Nations, municipalities. So very, very optimistic in where Learning is going, both in Canada and obviously, now in Europe as we really start to put our shoulder into the European marketplace.

[Deepak Kaushal, Director and Technology & Communications Analyst]

Great. That's helpful. 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 an 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 at in that? And what does the pipeline look like for that new product segment for you guys?

[Patrick Houston, CFO & Corporate Secretary]

Yes. We had a strong start last year and good contribution from that project. We've seen the order intake slowed down a little bit as their deployment schedule for this tier 1 mobile carrier in the U.S. That has changed during COVID. Obviously, they've redeployed capital into different spaces. So we've seen it slow down a little bit, but we're pretty optimistic still about this product and the life it has to contribute. So still positive, but we've seen a slight reduction here in Q1 on the order intake.

[Deepak Kaushal, Director and Technology & Communications Analyst]

And I mean, is the pipeline for broader customer opportunities beyond the first one still there? Or how is that -- what's the outlook for that?

[Patrick Houston, CFO & Corporate Secretary]

Yes. I mean we've taken that technology. We're looking at other places we can deploy. We've gotten -- reduce some R&D on that right now and trying to turn that into more than just the product to one customer. And we're seeing some early returns there. So I think we'll continue to invest in that this year.

[Deepak Kaushal, Director and Technology & Communications Analyst]

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 here 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.

[Kevin Ford, President, CEO & Director]

Yes. No, a great question, Deepak. Clearly, with the change of administration, we're looking at our U.S. strategy and just understanding the dynamics in the U.S. marketplace. The reality is right now, if you look at about -- if you 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 InterTronic. Majority of the InterTronic 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 InterTronic acquisition now and 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, 24 months, it will continue to get stronger just as -- the reality is we have just so many customers that are to ignore that any longer.

[Deepak Kaushal, Director and Technology & Communications Analyst]

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 further down the roadmap?

[Kevin Ford, President, CEO & Director]

Yes. I think so. I think if you think about the 2 kind of markets, the health care market in the U.S. with our health care businesses is our logical extension of our PSP, Patients 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 into the U.S. and have been part of their supply chain 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, the next 12, 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 at that time.

[Operator]

Our next question comes from the line of Jesse Pytlak with Cormark Securities.

[Jesse Pytlak, Analyst of Institutional Equity Research]

Just one quick question for me, more of a housekeeping one. Just given now that the ground systems project is moving into the deployment phase, but I understand you have a number of bidding opportunities, and obviously, you're working M&A into the picture in Advanced Technologies. But how should we kind of think about the potential around working capital release?

[Patrick Houston, CFO & Corporate Secretary]

Yes. So we did some progress on working capital in the quarter. So that contributed to sort of the cash increase that you saw. We still stand on that one, about -- close to $50 million of working capital on that project. So that still need to unwind here over the end of the deployment stage. So we're still expecting good contribution on working capital as we complete that and hand over to the customer.

[Operator]

There are no further questions at this time. I would like to turn the call back over to management for any closing remarks.

[Kevin Ford, President, CEO & Director]

Okay. Well, listen, thanks, Darryl, 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're happy to do that. So we're going to do our formal AGM procedures. And as follow that by just a bit more color to borrow 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 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 in last call, the team is rising to the challenge. So it would be remiss for me not to mention the incredible people on our staff at Calian for another awesome, awesome quarter. So thank you for that. With that, Darryl, we can end the call. Look forward to the update tomorrow. Thanks, everyone. Have a good day. Stay safe.

[Operator]

Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.