Calian Group Ltd.

Greetings and welcome to the CALIAN second 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. If anyone should require operator assistance during today's conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. Kevin Ford, CEO of CALIAN Group. Thank you, sir. You may begin.

Thank you, Laura. Good morning, ladies and gentlemen. With me this morning is Patrick Houston, our CFO, and we'd like to welcome you to Callion's second 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 material different from actual results. It is my pleasure to announce the highest quarterly revenue in the company's history. Calian's second quarter consolidated revenue was $138 million, a new record result in the company's history and represents an increase of 33% from the same period last year. I believe these results demonstrate the company's continued strength in a quickly evolving environment and showcases our four-piston engine running in all cylinders. Our efforts to further diversify our sources of revenue continue this quarter. Revenues from Canadian government customers were 53% of total revenues on a year-to-date basis. And you can see the progress that we've made in just over a year, where revenues from the Canadian government represented 69% of our total revenues. A diversification has seen strong results from entering new market verticals as a result of acquisitions that operate in new sectors and international growth. Europe has been a particular highlight in the past quarters, European revenues have increased by 167% for the six-month period due to strong contributions from our learning and advanced technology segments. We also increased our profitability ratios this quarter, posting higher gross margins and EBITDA margins. And as a reminder, this quarter marks our 78th consecutive profitable quarter. That's over 19 years. All four of our segments delivered growth this quarter when compared to the same time last year, which at the time represented a new record high revenue performance. The ongoing public health crisis has created challenges and opportunities. As CEO, I must acknowledge my team who have risen to the challenge to maintain our manufacturing capabilities through health measures and a very challenging supply environment, continued travel to customer sites to deploy satellite ground systems, and support our customers virtually. This acknowledgement extends to our health professionals as well. For example, over 200 nurses are working across five clinics located in GTA hotspots and will vaccinate over 26,000 individuals. In Northern Ontario and Musinee, our nurses vaccinated 25,000 residents of First Nations elder care homes and members of Indigenous communities. The team has also embraced the opportunities presented by increased demand from existing and brand new customers and delivered county's traditional high quality. Their efforts have been the driving force of our performance. 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. Revenue has increased by 64% compared to the previous year. This is the result of multiple initiatives, the first being the tremendous demand for our services across Canada. Having the ability to deliver high-quality healthcare services has become paramount in this environment. Our expertise and reach have allowed us to respond quickly to our customers' evolving needs. This includes varied mandates, including screening, vaccine delivery, procurement of healthcare products, and primary care. The demand in this sector is coming to us quickly, and often with very little notice. Second, our continued growth in pharmaceutical services through our fiscal year 20 acquisition of AlioHealth. This division has been part of Calium for just over a year, and we continue to show growth in Canada, and more recently in Europe and the United States. Our information technology group achieved growth of 46% in revenues this quarter when compared to the previous quarter. Our acquisition of Deposoft midway through the quarter was a major contributor. Additional contributions from MSEC resulted in total acquisitive growth of 30%. Yearly contributions from both entities are enabling our information technology segment to grow into new markets and reach new customer segments. Our learning segment has seen growth of 21% in the current quarter. Our acquisitions of CTS and Cadence, both located in Europe, continue to contribute strong revenue in EBITDA and provide revenues outside our Canadian military specialty. Our historical footprint of customers have resumed operations, and we have seen limited interruptions since we adopted our various delivery models this time last year. We expect demand to remain strong as these customers try to make up for some of the interruptions in their programs during 2020. Finally, our advanced technology segment demonstrated growth of 7% overall, which highlights the strength and diversity of the advanced technologies portfolio. Acquisitive growth was 11% in the quarter, and contributions from Talisman continue to be strong. We are very excited about the direct relationship they have formed with new customers, in addition to the well-established global distribution network. Revenues in our traditional ground system satellite business has decreased year over year, as we are in the final quarters of deployment of our large North American deployment. I will now ask Patrick to review the quarterly numbers. Over to you, Patrick.

Thank you, Kevin. Our performance across revenue growth, increased margins, and increased profitability are important achievements. We have strived to do this consistently over the last few years, and this quarter's profitability performance is particularly impressive given the 33% revenue growth. Organic growth for the first quarter was 21%, and acquisitive growth contributed 12%. We also completed the largest acquisition in the company's history with Davis Soft partway through our second quarter, as well as Inertronics in early January. We are already seeing strong results from Davisoft and Inertronics has a pipeline of significant projects that we are very excited about. Our ability to win new contracts with existing and new customers continued with new signings of 138 million in the quarter. Our realizable backlog at the end of our quarter now stands at over $1.4 billion. We saw good progress among many key performance indicators, including revenue, gross margins, EBITDA, and adjusted net income. Gross margins ended the quarter at 24%, which was increased by 2% 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 39% when compared to the same period of the previous year. which also includes one-time operating expenses from M&A costs of approximately $2 million. This brings our EBITDA percentage above 10% for the quarter. Adjusted net income, which reflects the impact of depreciation, IFRS 16 lease accounting and income taxes was up 52% when compared to last year. Our balance sheet remains a strength with net cash at $65 million. Between the cash on hand and our $80 million credit facility, our total liquidity position now stands at $145 million. We continue to see this as a strength as we continue to execute our strategy of investing for consistent organic growth and accretive M&A transactions. I'll now turn the call back over to Kevin.

Thank you, Patrick. I'd like to spend a moment to talk about the acquisitions we completed since our last update. With now our fifth acquisition in the last 12 months, we continue to demonstrate we can do disciplined M&A transactions in each of our segments while ensuring we integrate and deliver good performance right out of the gate. This quarter included our largest acquisition to date in Dapersoft, and we are pleased to have the company as part of the Callion family. Their capabilities in cyber, healthcare, and IT services are a crucial building block for our IT segment. We also welcomed Indertronics into our advanced technology segment this quarter. We've seen excellent synergies with our existing satellite ground system business in South Katoon in Germany, and have collaborated to jointly bid on new business in the first few months together. We continue to see M&A as a key growth driver for Kalyan, and we will continue to seek both large and small transactions in each and all of our core segments. Lastly, while the traditional markets in which Callion operates are managing through this pandemic, management expects organic revenue and earnings growth opportunities in most or all of its segments through 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 the existing contract vehicles, and any impacts due to COVID-19, and 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 had last updated and increased our guidance in late February following the acquisition of DataSoft. We reiterate this guidance, which would represent our fourth consecutive year of double-digit revenue growth and significantly higher EBITDA margins. 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 $476 million to $516 million, adjusted EBITDA in the range of $45 million to $49 million, and adjusted net profit in the range of $29.4 million to $32.7 million. Please see our press release in MDA for detailed reconciliation of our guidance. So with that, Laura, I'd like to now open the call to questions.

At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. for participants using speaker equipment. It may be necessary for you to pick up your handset before pressing the start keys. One moment while we poll for questions. Our first question comes from the line of Amir Asat with Echelon Partners. You may proceed with your question.

Kevin Patrick, good morning, and congrats on a very strong quarter.

Thank you. Thanks, Emma.

I've got a couple of questions. First, on the health segment, there are a lot of moving parts, and you spoke to some of them during your prepared remarks. I'm not sure if you could quantify it or maybe give us more color on how much of the growth is COVID-19 related, i.e., testing, screening, vaccinations, even MRCUs. I'm trying to determine how much of that growth might be a temporary and a welcome upward blip versus a sustainable plateau for you guys to go from in the coming years?

Hi, Amber. It's Patrick. You know, I think we've seen – what we've seen really is three things. One, you know, our existing customers where we, you know, had kind of entrenched relationships have actually increased their demand for this throughout. It's been a combination of, you know, just higher needs. We've seen growth there. Our Alio business has continued to grow pretty aggressively. And then we've kind of added on top this very short, fused kind of demand from COVID. I think it's held for sure this quarter. We expect it should continue to some extent. It's hard to have visibility into this because it is such short notice. We're deploying people on 24, 48 hours notice to respond to these things. but credit to the teams who have been able to do that and recognize the revenue this quickly. So I think it's been a good part, but I'd say the rest of the business, even despite that, has very strong growth aspects this quarter.

Yeah, and for me, Amherst, Kevin, the thing that's interesting is the opportunity from a customer diversification piece here has been fantastic. I'm seeing two things, really. I'm seeing the Calian Health brand continue to get stronger where people are seeking us out now. to support them. And frankly, these are customers we had not any relationship with prior to COVID. So in the short term, it definitely creates some tailwinds. In longer term, we're getting a lot of new customers in our health segments, as well as a much stronger healthcare brand, which I've been focused on, as you know, for years. So I think longer term, yeah, maybe it comes down a bit, but I think it's all full steam ahead with our health. And as I mentioned, you know, we're now doing, you know, some trials now with our Alio business in Europe and the United States. So I'm still very optimistic on our healthcare trajectory.

Okay, that's good color. I didn't get a number out of you, but it's still good color. Okay, if we speak to the advanced tech, like you said, you know, like we're seeing the value of your diversification and that unlike health, the segment is impacted by COVID. You guys mentioned in your MD&A an impact on the delivery volumes of the mobile wireless products than on ground systems, although I'm not sure how much. Can you maybe like quantify how much of an impact COVID is having, like how much lost revenues are there? Then the second part of that question is obviously we're seeing parts of the U.S. reopening. When can we see you guys recoup these sales?

Yes, on the mobile wireless product, you know, we have seen that deployment slow down a bit this year. You know, it started last year and it was a big contributor for us. You know, it's probably in that $5 million to $10 million range revenue impact this year from that deployment slowdown. We're still optimistic that that picks back up here and starts to contribute maybe by the end of the year or probably earlier next year. So still very optimistic about that, and that was a good development that we had done internally. So I don't think it's gone away. It's just been a bit slow this year. And on the ground system, you know, we've spoken to that quite a lot. We're still deploying. We're in the final – 25% of the sites we're deploying and we're plowing ahead despite any challenges, COVID or travel or shipping or anything. I mean, the team's just totally focused on getting it done and handing it over to the customer.

It's getting easier to deploy?

I think it has been. I mean, some of our people in the U.S. have gotten vaccines, which has been good, which has given them comfort to continue to work. So that's been a positive. And, you know, every time they take on a challenge and beat it, they figure out how to do it, right? So I think, you know, the more we knock down with these challenges, the easier it gets. But it certainly has been an interesting environment to do this over the last 24 months.

And just, Kevin, just comments on your question about, you know, backfill from a U.S. perspective. So we do have quite a few opportunities in the segment in the U.S. markets, whether it's defense markets. You know, radio astronomy, whether intronomics acquisition, or frankly, even our talisman acquisition as well, when we look at GNSS attendance. So we expect the U.S. market to continue to be a strong contributor to us. And as we unwind this large project, we do see quite a few opportunities to backfill and actually continue to grow in the U.S. and also global markets.

Okay, maybe one last one. On your guidance, you chose to maintain it despite the strong performance year-to-date. I mean, year-to-date, we're at $25 million of EBITDA, and it seems like you might recoup some lost sales by year-ends, and you've got two full quarter contributions from DataSoft coming up. Is that you guys like being cautious or should I read something into that guidance for the second half of the year?

No, I think, I mean, I read your point. I mean, really strong first half performance from us and the team. I think that sets us up to have a really strong year. You know, we should, you know, last year was a record year on every level for us and we should beat every one of those this year again. So I think, you know, we're still very positive about the second half. A lot of the demand we've talked about is coming at us very quickly. We don't have great visibility into it, but the team's responding well. So I think to the extent that momentum continues, we certainly could see us pushing up towards the top end or up the guys or beyond that. But I think, you know, we need to find that out here in the next five months.

Yeah, Amber, I think with COVID as well, frankly, you know, our team's doing very well to manage through it. But, again, we're really being cautious in the sense that, you know, we're one wave away or one variant away from maybe something changing here that was on nobody's radar. So we're very confident. You know, we've upped our guidance twice now this year. And reiterating our guidance now, I think, should be to send a clear message to the markets that we're confident in our growth profile and, as Patrick said, to achieve another record revenue and even top performance for the company this year, despite the conditions we're operating in.

Understood. That's very helpful. Congrats again. Thanks, guys.

Thank you. Thanks for the question, Emma.

Our next question comes from the line of Benoit Poirier with Disjardins. You may proceed with your question.

Hey, good morning, Kevin. Good morning, Patrick, and congrats for the very good quarter.

Thanks, Benoit. Nice to hear from you.

Yes. If we look at organic growth, 21% year over year, so very strong. Could you maybe, Pat, break down this performance for each segment?

Yeah, I think we had organic growth in three of the four segments, so that was good to see. I think VanSec was the only one with slightly negative organic growth, but obviously health, the big organic growth driver. I have to pull up the numbers. It's the but health certainly had the highest. Learning was kind of in that 12% to 15% organic growth, and IT posted some good organic growth as well, despite, you know, Davis Austin and MSEC being the big stories there this quarter. They still were able to have kind of single-digit organic growth, so that was very positive.

Okay, that's great, Collar. And looking specifically at Advanced Tech, the large grant system contractor, Could you talk about the remaining portion that needs to be delivered? And from a working cap standpoint, when I look at work in process, working capital movement, would it be fair that there's still 50 million of work in process to recover by the end of the completion?

Yeah, we've got probably about $15 million of revenue left on that project to deliver over the second half of the year here. And yeah, you're correct. We didn't make as much progress on the working capital this quarter. So it still stands in that $50 million range at the end of the quarter.

Okay, still $50 million. Okay. And could you talk about the timing for starting the other one? the other opportunity that you were awarded. I know it's coming. I think it's the beginning of fiscal 22 or Q4. If you could talk about the timing and also about the overall opportunities in the ground system business.

Yeah, so that European carry did award us business. That was great. We started on it a little this year, but we haven't booked any significant revenue. I think that the majority of the revenue is going to start towards the end of Q4 or into Q1. So that one's pushed a bit, but obviously we still have the contract and we've been kind of doing planning with the customer.

And on the pipeline, Kevin? Yeah, I think the pipeline, it's interesting, Benoit, you know, a lot of people ask me about how the satellite business is going. And I can say now, with the combination of Intertronic, SatService, and our advanced technologies legacy business in Saskatoon, we're bidding. We're very busy right now. The proposals are going out the door. Some of them smaller, some of them larger opportunities. And quite a few of them are for new customers to us. Through the Intertronic acquisition, for example, a lot of U.S.-based customer opportunities. SatService, we're winning in bidding deals now in the European market with a much stronger footprint there locally. and advanced technologies, and also with Talisman now, we're talking about whole new segments for Calian in areas like autonomous vehicles, precision agriculture, because those GNSS antennas are definitely relevant and required in any kind of, you know, autonomous mode. And so, to be honest, I don't think I've ever seen the pipeline so diversified and very excited about the opportunity, both domestically and globally. Thank you. So I'm pretty confident we're going to continue on a good trajectory on that advanced tech group. And the only thing we're dealing with, frankly, in the short term has just been some delays in the programs on getting through proposals or RFPs just due to COVID. But those opportunities haven't gone away. The affinity bill should be coming back, I'd say, at the end of this year, early next year.

Okay. And looking at the mix for advanced techs between product and services, If I look at product revenue, it's about stable at $29 million. Service side, it has been improving year over year. Given all those bidding opportunities, where would you expect the mix between product and service to evolve for advanced tech, let's say, in the next 12 to 24 months?

I mean, I still think as we win some of these bigger projects, that drives a lot of product revenue for us as we deliver the ground systems. So, you know, those are big swingers in terms of that. But from a service perspective, you know, we've got a very consistent business in engineering services, software development, that those ones have been continuing to grow kind of on an organic basis, 5% to 10% per year. So we're really – and they're a good contributor from a bottom line perspective. So I think those – Certainly, you shouldn't see any going backwards on the services, but rather a consistent growth.

Okay, that's great. And the last one for me, obviously, when we look at dry powder, the fact that work in process for the large ground system contract will contribute positively. Obviously, a lot of dry powder. Could you maybe provide an update on the M&A opportunities? How does it compare versus the Q1?

I think, you know, we continue to see M&A opportunities, Ben Juan, every one of our segments for sure. I think we appreciate, you know, between the last 12 months with quite a few acquisitions done, we want to continue to ensure not only acquiring but integrating. And so a lot of the focus right now is integrating the current acquisitions that we've done and done, again, over the last 12 months quite a few, including our largest at Davisoft. So the pipeline is good. We continue to really look for – we're picky buyers. We continue to look for – Good value. You know, as we've talked in the past, if you look at the last group of acquisitions, you know, our average multiple, you know, five and a half times EBITDA, I think it's actually in today's market that's fantastic. And these are great companies. And as well, we do believe that there are other opportunities, but we just want to make sure that we're getting that right mix of cultural alignment, financial, you know, performance, as well as strategic performance. alignment in the sense where we're trying to move with our company. So we definitely see opportunities, definitely see opportunities in each of our segments. Pipeline's still good, but to be honest, I'm not in a rush to continue to acquire just because I want to make sure we integrate what we've got, and I also want to make sure we're looking at good companies moving forward here. So we will continue to push forward with this and hopefully see a few more deals over the next little while, but right now it's really a real focus on integration of the capital we've deployed to date. Okay, that's great.

Good job, and thanks for the time.

Thanks, Ben. Nice to hear from you.

Our next question comes from the line of Deepak Kashwal. But, Sifu, you may proceed with your question.

Hi, thanks. Good morning, guys. Thanks for taking my questions. You know, I just have a couple quick ones. On the margins, it's nice to see EBITDA margins in double digits. It's the first time I've seen it on record. And when I go through the segments, It looks like IT is still in single-digit range. Everything else is in double-digit, you know, excluding corporate overhead. I know that you've got, you know, MSEC and Dapisoft that you're integrating now. What's the outlook for the IT business margins, and when do you think that you can see that, you know, firmly in the double-digit range where the other segments are?

Yeah, hi, good morning, Deepak. Yeah, we did have a bit of a, you know, we did have the one-time acquisition expenses in the IT segment this quarter with the closing of the Datasoft and MSEC transactions. I think that was about $1.6 million charged to that one. So if you normalize for that, their margins are closer to that 10%. And I do expect, as Datasoft increases the proportion of revenue, they're going to represent about a third of the business in IT going forward, and they're at much higher margins. So, you know, I think... As you check back in, you're going to see consistent growth on the margin profile for IT here in the coming quarters.

Okay, and so the $1.6 million charged in IT, I think you said that was out of a total of two or something for the entire company?

Yeah, we had some in electronics as well that would have been in advanced technologies.

And just to reiterate, we charged those costs to the segments. You know, I think it's important that people understand that, that those charges... Yeah, you don't adjust them out of your EBITDA. Yeah, we charge the segment. We don't take it as a corporate overhead number.

Okay. Okay, excellent. And then, you know, when I think about all the segments and I think about the path to even higher margins, I think, okay, software is obviously a good path to get there. When I think of kind of pure software acquisitions or IP developments, what's kind of the leading horse, like which of the segments is the leading horse in terms of software development, IP development, or even M&A opportunities for pure software tuck-ins to drive margins higher? Yeah, I think to me – If you can make sense of that big, long-winded question.

Yeah, no, no, no, it's good. It's good, Deepak. It's all good. So I think a few things. Number one, it's important to reiterate our software capability today. You know, we have a very deep software group in Saskatoon – our legacy through our division there that we do software development. So we have a strong software pedigree with software methodology, the whole kit. Then you layer that into acquisitions we've completed now with the, you know, the Indertronics, the Talismans, the Alio all phase with the health outcomes management engine, which actually is a software platform. We're now looking at how to evolve and offer it. We've been using it primarily for our own services, but can we evolve that as a platform to to actually offer to customers because we're actually using it in a lot of the COVID assignments we've been given. Customers have asked us to bring a whole solution to the table. So we think there's opportunities there in the healthcare side for sure. And then Sean Hamer, who's our CTO, and he's, you know, I've created that position for the first time in company history, is really looking at those organic opportunities with the team right now to look at where we have software capability. And so if you have Alio Home, we have the Coroller product that we bought through Dapesoft now, and they're Microsoft virtual care platform that we're working with them on now in pilots. So I think we have lots of current organic opportunities, in fact, to look at software more as a service, as more as a platform. So stay tuned on that. And then on through M&A, to your point, clearly one of our priorities, as I've mentioned in the past, is more technology enablement in all that we do. And a priority for us will continue to be looking for those companies that bring that IP, that bring that software capability and potentially a platform for us in either one of our segments to continue to scale this company. So it's going to be a combination of both organic and harvesting the assets we have today, as well as M&A looking for some good opportunity there. And we think those exist, by the way. We believe at some point in time we'll see a major shift here in Calium as we continue to evolve our services into more of a technology-based platform. So stand by, but it's definitely on our radar.

Okay, that's great, Collar. I appreciate it. And congrats to Sean Tamer on the appointment to CTO.

Thanks. I'll pass it on. Thanks, Deepak.

Our next question comes from the line of Nick Agostino with Laurentian Bank. You may proceed with your question.

Good morning. This is Salman Rana on behalf of Nick Agostino. First of all, congratulations on the very strong quarter. Thank you. So my first question was about the company's focus on cross-integration. We saw that... that cross-integration effort is paying off with initial signs through the data soft acquisition with the alignment with the health and IT services. Is the company seeing any other opportunities right now which indicate to further signs of such cross-integration?

You know, great question. And I think for us, as we look at what I call convergence across the company, so As everyone's heard me talk before, my four kids at home, my four kids at the office, right, all have grown up. Now it's talking about how we're going to play in the sandbox together nicer in the context of how do we help our customers now as a consolidated unit. To your point, a healthcare customer now, we could go to a healthcare institution now and talk about whether or not they need access to our largest national network of medical practitioners. We can ask whether or not they need a virtual care platform. We can talk to them whether or not they need cyber services, whether it's an assessment or actually managed cyber services. So as we look at, to your point on that case, healthcare and IT coming together, I don't want our customers having to worry about how we're organized. I want them to see the potential capability of emerging these segments together, to your point. If you think about business resiliency, which is another topic, obviously coming through pandemics and business resiliency as a highlight with regard to how do you ensure you stay resilient in these times? Well, we can talk to customers now about their virtual platform, in other words, their cyber platform. We can also talk to them about their physical infrastructure. In other words, do you want to look at your emergency management business continuity plans? Do you want to do an exercise to actually put them through their paces? And that's what we're doing for the military. That's what we're doing for a lot of critical infrastructure organizations around the world. You know, I've talked before about, you know, simulating tornadoes hitting nuclear reactors. So it gives us an opportunity. There's another example where we can talk to a customer about business resiliency and not even tell them about how we're organized for sure. When you think about all the other capabilities now, learning and healthcare, IT and healthcare we've done. What about learning and advanced technologies? We do believe those conversions opportunities exist, and we definitely will continue to focus on them. as we grow each of the segments independently. So great question. You know, I think if Callion really figures out and we work through that with my business unit leaders, those convergence opportunities, it's only going to be a new opportunity for us to grow. So pretty excited by that. I'm excited about the segments independently, but I'm also very excited about the convergence opportunities as we get deeper in each of our segments.

Yeah, it shows great promise and a lot of good color on that. Secondly, any update on the interest in nursing services beyond Canada? I believe we've heard in the past how it's gathering some momentum and interest in Europe as well. So, any updates there?

Yeah, absolutely. So, what we've been doing is we've been supporting a customer with our LAO organization in LPH, and basically we've They've just been so happy with what we're doing in Canada. They've asked us to extend that footprint into Europe, and now I believe we're in five or six different countries in Europe as well as U.S. pilots. So we are piloting, so we're going to walk before we run, so it's going well. As you can imagine in health care, we have to ensure we understand local regulations or rules, so we want to make sure that as we do this, we do this right. So it is growing. It is an opportunity, and so far with everything we've been doing for this customer, it's going very well. So as we get, you know, a good understanding of the environment and all the different requirements we have, we will definitely continue to invest in that diversification. So right now it's a walk before you run, but I do believe we're learning and we see great opportunity there, which is very interesting. You saw my notes in my comments, you know, our European revenue is, When you think about where it was even a year ago, you know, it's very strong performance now with SAT service, CTS cadence. Now we have healthcare pilots happening in Europe. And then now we think about the U.S. marketplace with the intertronic acquisition and deep customer base there. Our customer diversification opportunities here across all that we do is very strong. And in healthcare specifically, we're pretty confident we can continue to grow globally, but we will walk the floor to run there to make sure we get it right.

Great. And just one last question from my side. So as it regards to the primacy division, so the MD&A highlighted that the company continues to expand its SRP work with the military as it relates to the primacy division. Are there any plans of further expansion with Loblaw? We know that, you know, there are 150 facilities that primacy is running right now. What are the plans there?

Well, right now with... With Loblaw, we basically support their agenda with regard to their retail clinic program. I would say what I'm seeing right now is obviously a lot of focus with integration of shoppers, continued focus on the shopper platform, those type things. So I'm not sure we're going to see lots of growth in our current clinic count with regard to Loblaw. But what we're trying to do is work with our broader healthcare capability, talking to, you know, how we help organizations like Loblaws, not just about the clinic platform, but now we've got healthcare integration platforms. We've got virtual teams platforms or virtual care platforms. We have cyber platforms. And as you know, Loblaws and Shoppers is very, very focused on health. So we're hoping to find more opportunities on top of that primacy relationship that we can bring the full scope of Calient into that and strengthen our you know, role as a strategic partner in the healthcare business is really what we're trying to get to.

Okay, that's great, Kalar. Thank you again for your time, and congrats on a strong quarter again.

Well, thank you. Appreciate that. Thanks for the questions.

Our next question comes from a line of Jesse Hyplek with Cormark. You may proceed with your question.

Hey, good morning, guys. Just one question for me, and I want to come back to the conversions topic. Just wondering if you can maybe more specifically elaborate on any of the opportunities that you're starting to see or unlock, just kind of given all the acquisitions that you've done in the past 18 months, and more specifically within the segments that those businesses have been integrated into.

Yeah, no, great question. I think for me the greatest example of this is our advanced tech group now with our Intertronic SaaS service and our legacy division, Saskatoon. So what we've done, obviously a combination of two elements of our growth framework. So obviously customer diversification. So we have, through those acquisitions, taking those core competencies of complex engineering, complex manufacturing, software engineering, applying them now to different use cases in the context of customer challenges. So by definition, that's been an opportunity from a convergence perspective, just doing what we do for new customers that really need that high execution on solution. But if you look at it as well with Intertronic and their mobile antennas, SAP Service with some of their infrastructure, we just have become a stronger player globally now through the opportunity to have those three entities work together in a global marketplace. And I think that's being recognized, frankly, both by our customers and our competition. So there is a convergence opportunity, not necessarily in the context of convergence across the segments, conversion within the segments and convergence within the segments and strengthening our capabilities there. In the Davosoft scenario, why we love that acquisition is the point we've talked about, is now in the healthcare sector, as I mentioned earlier, we can take now both the practitioner side as well as the technology side of healthcare and go to talk to customers about a stronger opportunity for sure. And the next area I want to really focus with our team is also looking at that learning business. Learning, I've seen some IPOs come to the table recently in learning. I think a lot of people are trying to figure out how to now, you know, keep their staff engaged, how to keep educating staff in a virtual environment. So we think that virtual learning platforms, those type of things, would be something that we can definitely focus on, continue to grow our business in NATO. So stand by for that. That's what we're trying to find next is those convergent opportunities to bring learning into healthcare, learning into advanced technology, learning into cyber, because we do believe those opportunities exist.

Thank you. That's great commentary.

Thank you. Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn this call back over to Mr. Kevin Ford for closing remarks.

Thank you, Laurie, and thank you for everyone for attending today. As I mentioned, very, very proud CEO at this end of the line to be able to get records in this environment. I just want to reiterate my thanks to our team, to our staff, the over 4,000 people that comprise this company domestically and globally.

I can't thank them enough.

This is not about my performance.

It's about their performance.

And again, I want to highlight that and thank them because without that, we're just not sitting here with the results that we've had. So we're looking forward to giving you an update next quarter. And again, thanks for the time. Thanks for the questions. And with that, Laura, we can end the call today.

This concludes today's conference. You may disconnect your line at this time. Thank you for your participation. Enjoy the rest of your day.