Q1 2020 Earnings Call

Good morning, everyone. Welcome to exchange income corporations conference call to discuss the financial results for the three month period ended March 31st 2020.

Corporation's results, including me I'm DNA and financial statements were issued on May 12, 2020, and are currently available via the company's website where sadar.

Before turning the call over to management listeners are cautioned that today's presentation and the responses to questions may contain forward looking statements within the meaning of the safe Harbor provisions of Canadian Provincial Securities laws.

Forward looking statements involve risks and uncertainties and undue reliance should not be placed on such statements.

Certain material factors or assumptions are applied in making forward looking statements and actual results may differ materially from those expressed or implied in such statements.

For additional information about factors that may cause actual results to differ materially from expectations and a boat material factors or assumptions applied in making forward looking statements. Please consult the mdna for this quarter the risk factor section of the annual information form and exchanges other filings with Canadian Securities regulators.

Except as required by Canadian Securities Law Exchange does not undertake to update any forward looking statements.

Such statements speak only as a date.

As of the deep made listeners are also reminded that today's call is being recorded and broadcast live via the internet for the benefit of individual shareholders analysts and other interested parties.

I like to turn the call over to the CEO of exchange income corporations, Mike Palmer. Please go ahead Mr. Pablo.

Thank you operator, and good morning, everyone. Joining me are Carmel, Peter Yes, he's precedent Daryl Byrd Benn, our CFO, Dave why our VP of aviation Martin cash the CEO of Quest Windows, and Gibbs said depressed that original one Jake trainer.

For the C O provincial Nick Wagner, President to prevent perimeter aviation and Gary Bell depressed different color Matt.

Well that's the people joining me for this call is much longer than we normally I want our quarter end investor calls.

<unk> 19 pandemic has dramatically changed the world.

I believe there our stakeholders are looking for a different discussion that our historical precedent.

We typically what about otherwise the result in significant detail before examining the then such as acquisitions or new contracts that will affect the subsequent quarters.

Our first quarter results are quite strong for a company with exposure to aviation in the corporate environment, but much about strength was generated in January and February before we experienced the full impact of Goldman 90, as such well the a couple of months ago. They seem like a long time ago, we will therefore change the focus.

This quarter's fault.

I will briefly review the first quarter, Daryl will hit more detailed financials, particularly as it relates to our balance sheet, a strong liquidity position.

And then we will turn it over to call to our boss CEO sure I would call will explain the impact to cope with 19, how we manage the and our outlook for the future.

Carmel will wrap up the scripted part of recall, we will then entertain your questions. We hope this format will give greater insight into our operations and why we believe that we watch it gold the 19th the way we went in a company with a proven strategy to deliver growth the dividends through accretive acquisitions and investments yards.

As the operations.

The first quarter was a tale of two different stories. The first two months were very strong across the company, particularly in aviation the strong demand effective cost control on Mars fuel prices led to increased profitability, our manufacturing businesses, including recently acquired LD control and ADW.

Hi performed as expected.

As expected.

You will recall that the first quarter is always our seasonally slowest period as winter roads provide a temporary alternative to our airline services, particularly as it relates to freight.

Strategically we take advantage of this period to do as much of our heavy aircraft maintenance as possible while demand is lighter to enable capacity as a busier summer months.

This year in particular, we had a number of heavy overhauls and engine overhauls to do and we completed a significant portion of the work during the first quarter before cold in 90 that as we stated here on our fourth quarter conference call Twentytwenty, we have a higher proportion of its annual maintenance capital expenditures in the first few months.

Over the years than we did it in 2010 90.

Where the required maintenance events fell more evenly throughout the year.

Good mid March roughly the same Todd is the NHL would then be a suspended their seasons, we saw a dramatic changes in demand for airline serves as northern communities began to take the pandemic much more seriously and suspect there oh by the central travel and as such our revenues fell dramatically [noise].

Our manufacturing facilities were all deemed to central by governments and continued production.

Well today generally remain strong steps taken to ensuring the safety of our employees reduced capacity and increased cost, thereby reducing profitability.

Surveillance business was not affected nearly as significant leads other operations well negotiations negotiations for the next mission of our forced multiplier slowed as governments dealt with more pressing issues at the pandemic the balance of the operations continue.

Regional wanders a full weight and Dan.

Airlines around the world to see bodes diminish and a reduced or stop fly.

Hi, good detail the picture in this industry, but it's clear the original one faces the longest time period to full recovery, but also as the most exciting opportunities industry weakness combined with poorly capitalized companies will resolve to assets being liquidated and get rid of regional ones demonstrated cable.

Ability and buying at the right right and yeah I see is access to capital. We were believed were up a once in a generation buying opportunity.

Well the true quantum of the pandemic and the risk to our people and the public became apparent our first doctors to re examine how we operate and to execute on a plan that will make sure. We put all of a possible safety mechanisms in place.

I will not detail. These decisions now as depicted Marty will talk about the steps were taken in aviation and manufacturing, respectively, but I wouldn't like to point out. The we took steps long before they required by regulation or before they were implemented by our competitors.

It's a good such I items is having passengers required to fill out a questionnaire, we're having temperatures taken before allowing the board requiring face coverings and actually providing always ask student customers.

Manufacturing settings, we reduced staffing and physically distance where appropriate and the plant as well and limited contact between employees won't work.

Our second step in dealing with the pandemic was to contact our cost.

And make sure we shaped our service offerings to what they required.

Whether a first they shouldnt community in Canada is north or real estate developer in California their needs changed and we need to make sure we're providing a service in a way that meets their new reality.

Third.

We focused on assistant governments on their calls for how we procured certain medical devices, which are expected to be in short supply.

Engineers are aviation and manufacturer work to see if we can design and quickly produce any of the items require.

After multiple prototypes and contributions from many I see subsidiaries, we were able to produce base you know, but use by utilized by provincial governments as well as our own.

And I'd Paul's never been used by at least one products.

If you take away from this is not that we somehow generated the new profit stream because no.

The cost of designs the production exceed the margin up sell the project rather significant wise significant flies in the commitment and the capability to step up and help in a difficult time.

You will see through most of this discussion we view social responsibility is paramount in times like this.

Fourth we examined our liquidity actual to make sure we have the necessary resources to work through the bad debts.

Their old go through this in greater detail shortly but suffice it to say that the actions taken last year to strengthen our balance sheet and lay the foundation for future growth have left us in an enviable position compared to many other public company.

Finally, we turned our attention to the future preparing our companies for the inevitable reopening of the economy and looking for opportunities are Ceos will cover why they feel that our business is more birds quickly and profitably from these prices, we need to be demand as things normalize and to take advantage of our market presence.

And balance sheet to lever situations, where we see an opportunity, but others do not regional one particular, we'll see the jobs to buy assets at distressed prices fueling profitable growth into the future I will stop they stop here and had things often darryl.

Thank you, Mike and good morning, everyone.

The financial results for Q1, 2020 reflected strong start to the or that was abruptly curtailed by the impact to covert 19 pandemic.

The final few weeks on the quarter I will caution that the comparability of current results without a prior periods as materially impacted due to this unprecedented up that.

Conclusions taking into account any comparability.

Should be made carefully given the current circumstances affecting result.

Before turning to a short discussion on Q1 2020 result financial result.

Leave with comments regarding the corporations balance sheet strategy and liquidity.

That's supporting principle to our business model is always being a strong focus on our balance sheet.

<unk> leverage and good liquidity.

Even within that the current environment, we continue to take a disciplined approach to our aggregate leverage.

In 2019, we call we call the convertible debenture that was in the money.

Issued a new convertible debenture with better terms.

Important in equity offering.

And obtained a new debt facility with increased size more interest rate and better terms and conditions.

Outcome at these transactions provides a very strong foundation to support our ability to access capital going forward and whether the impact of the coldest 19 crisis.

The corporations overall access to liquidity remained strong.

It's a new credit agreement entered into in Q4 2019. It is perceived that the corporations cash on hand, and access to available capital is more than adequate to both support operations.

And should the need or.

To take advantage of opportunities to continue to grow the business.

The size of the credit facility at March 31st was approximately 1.3 billion.

And in addition to that the corporation can access another 300 million in an accordion feature should we choose to exercise it.

Utilization at the facility was 900 million at the ended the quarter within the corporation are within the quarter. The Corporation did drive down 100 million to have cash on hand.

The drop was purely a proactive measure and we do not expect an immediate utilization of the cash or expect to material cash burn going forward.

With the available room under the facility plus 100 million of cash on hand, The corporation has near term assets to 500 million and liquidity excluding the accordion.

In addition, it should be noted that the company has no long term debt coming due before December 2022.

At the end of Q1 2020, our leverage ratios remained within our target range and well within our covenant with lenders.

Going forward, we expect our leverage ratio will increase in terms of net debt to EBITDA.

The Corporation is fortunate to have strong in support of lending syndicate.

Lenders continue to be ongoing and ongoing contact with management eager to update and assess the corporation through the crisis.

While we believe we do will not need covenant relief from lenders, we are working proactively to work with them to temporary smooth.

Covenant calculations.

I will now provide a shortened discussion on the financial result, more fulsome explanation results can be found in our Q1 2020 M. DNA.

In Q1, we generated revenue of 307 million, which is up 10 million or 3% over Q1 2019.

Aerospace in aviation segment revenue was down 7% from the comparative quarter in 2019 to 201 million.

Revenue from the legacy Airlines in perpetual increased by 3 million passenger volumes were strong in the first two and a half months in the quarter, but dropped off substantially in the last two weeks due to the Colgate 19 related travel restrictions imposed by governments.

Driven largely by volumes in the first part of the core cargo volumes saw an increase in the quarter over the prior period and remain relatively strong as we continue to provide essential goods and supply to the communities that rely on us.

Offsetting revenue increases were reductions in.

Prudential's operations as a result of the severe blizzard benefactor, Newfoundland and Labrador in January where airports were shut down for more than a week under a state of emergency.

And no revenue was being earned and at Bunker Flight College, which was shut down for the second half of March in response to you ordered closures due to colder 19 by the government of educational facilities, a new Brunswick.

For regional wide revenue decreased in the quarter compared to the same period last year by 19 million.

Sales and service revenue stream decreased by 34% in the quarter compared to the same quarter last year.

Part sales increased by 4 million, but were more than offset by the material impact and covert 19 had on hold aircraft in engine sales, which decreased by 22 million.

Lease revenue decreased in the quarter compared to the same period last year by 1 million did decrease is the result of lower utilization of aircraft within the leasing portfolio due to the impacts of the business.

The impact on the business of Cowen 19, and increasing the number of high value leased assets in the portfolio not on lease compared to the prior year.

Turning now to our manufacturing segment revenue grew by 26 million over the prior period.

The total revenue for this segment was 106 million.

It should be noted that all of the I see subsidiaries within the manufacturing segment have been dnbi central businesses during the cold at 19 pandemic and have been continuing to operate.

Moving to EBITDA consolidated EBITDA was 57 million down, 10% or 7 million for the quarter compared to Q1 2019 <unk>.

The primary contributing factor to the decrease can be attributed to the impact of covert 19 on both segments.

EBITDA in the aerospace and aviation segment in the quarter was 49 million a decrease of 16% compared to the prior year.

Even a generated by the legacy airlines and provincial decreased by 4 million.

We did experience positive results in EBITDA in the first two and a half months of Q1 2020 compared to the prior period that said passenger charter and metal back volumes were materially impacted immediately after air travel restrictions were implemented and negatively offset any previous months gains within the quarter.

EBITDA for regional like decreased by 5 million from the prior year.

And then contributing factor to the decrease in the quarter was due to the impacts of covert 19, which contributed to a significant reduction in engine aircraft sales in the quarter. In addition, Lisa revenues were decreased in the quarter as previously discussed which also contributed to the decrease in EBITDA.

Even so it was also reduced due to increased allowance for doubtful accounts recorded by regional one.

Due to our general uncertainty in the airline industry.

And the manufacturing segment EBITDA was 14 million, an increase of 1 million compared to the same quarter in the prior period.

You bet that question was higher than the same quarter in the prior year as the Q4 to 2019, a Wi acquisition is included in results for the current quarter also contributing to the higher EBITDA question with the continued contribution from the ramp up in the Dallas facility.

The balance of the manufacturing segment collectively experienced an increase increasing even it was driven by the acquisition of Lv control in Q4, 2019, partially offset by headwinds experienced by other subsidiaries.

In Alberta, many companies have delayed or canceled or large capital projects due to low record record low oil prices, which together with the impact of Kogas 19 has negatively impacted EBITDA over Albert operations.

As a result in the quarter Corporation has taken a write down of intangible assets against Albert operations of 6 million.

Turning to earnings in Q1 2020, the net loss was 5 million a decrease of 13 million compared to the prior year.

Corporation generated lower EBITDA compared to the prior period as previously discussed which contributed to the earnings variance from the prior period. In addition increased depreciation on assets purchased through the acquisition and grow capital resulted in a 4 million increase in depreciation expense the impairment loss of 6 million that was.

Reported at the corporations, Alberta operations also negatively affected earnings.

Net earnings per share decreased from 24 cents per share in the prior periods, where net loss of 15% 15 cents per share for the current period.

It is also noted that in the period weighted average number of shares increased 11% over the prior period, which has impacted per share amounts in the current period.

Adjusted net earnings was 2 million a decrease of 11 million from the prior period adjusted net earnings per share was six cents per share down from 41 cents per share in the prior period for.

In Q1, 2020 free cash flow was 39 million a decrease of 5 million from the prior quarter or 29 cents per share. Their main reason for this decrease is the decrease in EBITDA and increase payments on the right abuse lease liabilities, partially offset by decrease in the current tax expense.

Free cash flow less maintenance capital expenditures procedure per share decreased by 50 cents per share to seven cents per share in the quarter.

The corporations payout ratios in the quarter were negatively impacted by cobot 19 to allow for variations due to seasonality in the business. We continue to utilize the calculation that payout ratios on a 12 month trailing basis.

The adjusted net earnings payout ratio on a 12 month trailing basis increased to 82% from 75% and the free cash flow less maintenance capital expenditures payout ratio again on a 12 month trailing basis increased 68% from 56%.

Turning to our balance sheet. We ended Q1 2020 with a cash balance of 118 million and working capital of 419 million, which represents a current ratio of 2.47. This compares to a cash balance of 22 million and working capital of 308 million and the current ratio of 2.10 at the end of 2019.

Before I pass the call back so Mike I would like to make a few concluding comments.

As we navigate our way through these unprecedented times, we're confident that our proven strategies financial resources and most importantly, our people report, but real provide us with the opportunity to come out of this and even stronger company going forward.

A diversified portfolio approach will continue to serve us well and balancing the effects of cold in 19 on our consolidated results through these difficult times.

We entered the crisis with.

Strong liquidity position, a conservative and tested balance sheet strategy and the support of lending syndicate, we remain confident that our balance sheet strategy on liquidity position will support our operational needs and ability to continue to grow the business when we deem appropriate.

That concludes my.

My review of our financial results in comments I will now turn the call back over to Mike. Thanks, Daryl will now trying to do so.

Ormat will hear from our Ceos first off this declawed from Bremner Nick.

It's Mike and good morning, everyone.

I'd like to take a couple of minutes and talk about some other things that we have done and our company in conjunction with our partners to ensure that we are at the forefront of safety in our industry. During this call the 19th.

I think national onset of this pandemic or management teams were able to quickly implemented all.

Passenger health check screening protocol, either implanted in our company van and advance or the transporting mandate.

Furthermore, we had a situation in one of Maryland, where our strict protocol tonight boarding to Pasadena <unk> previous travel so local health authority and the Canadian Paul supported our stance on workers and columns assistance.

We immediately implemented there do you some aircraft and facility Fogging systems, where companies can quickly and safely disinfect at regular intervals.

We prepared special Cobot, 19 aircraft and checking cairn kits, including Matt well sanitizer and ways to keep our employees and customers comfortable.

We also made these kids available and our remote communities, where supplies can be more difficult to find.

I was with everything new safety measures have since been expanded social sentencing guidelines were implemented within all of our facilities, including a revamp of our passenger checking and boarding Prague processes.

We're able we have implemented social distancing on aircraft by altering the seats that are available to the customer.

As part of a regular customer communications during passenger announcements on our ticket itineraries social media postings and things like that we have reminder, speaking about social distancing respiratory hygiene and handwashing.

We have made it mandatory for all of our frontline staff, including please turn to work mass, which is not yet regulatory requirement.

When it's all plexiglas barriers frontline customer base encounters very similar to what you see at the local grocery stores.

We have implemented hi tech thermal cameras for double checking passenger temperatures when boarding from our main basis.

These thermal camera showed and body temperature image as you walk by very accurate and reliable double checked.

We have worked closely with each community and the respective nursing stations to help facilitate travel authorization protocols in most communities passengers must have prior approval from which mean before they can travel.

Throughout this process, we've increased our regular CEO meetings between our sister companies.

What's has helped us leverage our working knowledge and implement best practices are purchasing departments have collaborative.

All in purchasing power, providing ample socket PPD, where others have been John challenge on supply.

One of our manufacturing companies has been assisting us solving.

Hi chain issues, we've even had one of our manufacturing companies makes thousands of space fields that we were able to distribute tour entities and in the third parties.

[noise] a story of opportunity soon after the government mandate lockdowns blocked element.

Communities approached us to expand our recently rolled out grocery supply home delivery program seeing the success of the program in neighboring communities, we are able to.

You are asked to speed up implementation and several other locations.

It is really an expedited rollout of the program and the adoption rate is incredible.

Program allows.

Communities to receive healthy products to their door within a couple of days award.

Thanks for your time I'd now like to handed off Gary Bell, our seasonal calling us.

Thanks, Nick.

Like mainstream airlines and southern Canada in U.S., Yes, the airlines, which consists of comair perimeter aviation individually airlines are off the only linked to outside markets and thereby provide any financial services.

Our airlines do have some discretionary traffic such as leisure travel and tourism you have a disproportionate amount of essential ordinary central travel, including medical stations meal groceries and medical samples.

Results for our niche markets, our recovery period postal Big Nike as you expected to be materially shorter.

Two to three years as suggested by the mainline carriers, we expect a recovery to be in the weeks and not years as those various layers of essential and nearly sense example return.

So I'll provide clarity our passenger and cargo segments can be broken down as follows.

Our first segment or most essential would include medical patients essential support workers such as healthcare professionals.

Cargo and medical supplies.

One segment would include school teachers hydro or power technicians meal, other dry groceries and municipal water samples.

The third level would include all government workers, such as social workers housing and government services trades people miners and resource sector workers industrial freight and posts.

Our last segment, which includes salespeople or product graphs, a growing eco tourism market and visiting family and friends as well as luxury freight we would consider toys and recreational vehicles, such as E and snowmobiles.

As you can see from a different tiers very little of our market is discretionary and instead different levels of essential.

While Kobe 19 has been an effect almost a critical medical patients in the first year have chip I have had traveled deferred but the backlog hasn't stopped accumulating.

Medical patients seeking less urgent treatment they'll have to say requirements and teachers government workers tradespeople and resource workers will all need to resume their work.

We're working closely with the various of employees government agencies and resource development across our vast network to determine what level capacity will be needed during the repatriation phase of the recovery.

Appropriate levels capacity will drive our high level of service to ensure the safety of our staffing customers once we return to business.

We expect our recovery and the repatriation of our customers to be gradually as opposed to all at once.

Do this in various ways, including USIS and charges predominantly in our resource sectors and the increased weekly frequencies in our scheduled service.

We will not go from our current level of reduced frequencies to our former level of hopefully continues in one week, but rather over multiple years.

As outlined in our segments review earlier, the varying levels of extensive travel will happen in order of urgency until they are all integrated.

What we can't be exact in our financial predictions of what our recovery will look like as no. Other airline has ever recovered from a prolonged period of restricted travel such as this before.

Keep in mind travel during the September 2001 terrorist attacks the shutdown so about a week.

But our forecasts are based on discussions with chief medical officers in the various potential and territorial governments are large resource sector customers government officials and residents for without these current services.

I will now handed off to Jay trainer, our CEO of commercial aerospace.

Hey, Thank you very much Gary and I'm pleased to have the opportunity to speak with our stakeholders about the strength of our organization. Some proactive actions, we've taken and why we're confident in our path moving forward.

How does a very diversified set of businesses and our Powell Airlines and air Borealis operations have felt the impact from a reduction in demand for air travel.

But similar to both comment perimeter. We are unique in that we provide a critical link into communities that don't have any road access and we've been working hand in hand, with our indigenous partners to continue providing a central cargo and transportation services. During these times.

So I'd like to speak about our aerospace activities and the strength that its demonstrating during this crisis.

Our operations in the U. AG, which were initially about three weeks ahead of North America in dealing with the coal that crisis gave us a very significant learning advantage early on we accepted that the virus was here with us for the long haul and that we were going to need to harden our operations to minimize the impact when someone and.

Intentionally showed up sick.

We undertook a strategy, we termed compartmentalization steps like fixing crews to fly together segmenting work spaces, eliminating single points a failure sterilizing after flights or work shifts and frequent temperature scans, we implemented this across our organization globally.

This has been effective we have had employees test positive, but in all cases, the impact was limited and weve prevented the potential spread through the operation and I'm happy to report that all of our employees are healthy and back to work.

These preparations and working with our clients to help them understand our preparedness have allowed us to continue operations on an unrestricted basis.

Specifically to speak more broadly about our aerospace businesses.

For the modification and manufacturing operations, we've seen no drop off in demand our contracts are typically long duration ones certainly our production has slowed slightly due to the impacts on the global supply chains, but we are still operating at full capacity. For example, we do expect some relatively minor delays and delivering the de EFO aircraft, but they.

I will be delivered in 2020.

Fixed wing search and rescue support this is continuing as previously forecasted our role of fleet management and the preparation for the stand up of National Defense. This operation is continuing especially at the aircraft continue to roll off the production line.

While there may be some modification in the acceptance schedule of the aircraft, we anticipate no impact to our workflow.

Forced multiplier one area. We're certainly focused focused on is forced multiplier engagement, we were well down the path with two different nations discussing potential long term deployments and unfortunately these have been put on the backburner as attention and turned towards the crisis, but we are optimistic to reengage in these conversations in the latter part of the.

Year, our view is global demand is still high.

Which brings me to looking at our other global surveillance contracts in the UAE in the Caribbean and in Canada, We have seen no slowdown in demand and in fact, we are seeing all operations at or above planned capacity.

We have come up with some unique strategies to limit the need for our customers to be on the aircraft using real time data services and I must admit our carton up group has been key to our ability and being reactive to various customers needs and creating unique solutions for them on the fly.

[noise] Monkton flight College in speaking about MFC operation under the terms of the state of emergency New Brunswick have been particularly challenging, forcing the suspension of flying at MFC for the latter part of March and April.

The restrictions gradually lift we are resuming our international program first as we actually have all of our students on hand in New Brunswick, we will look to reopen the domestic program as we move forward and I'd like to point out one encouraging note is that we do not see a slowdown in international demand. In fact, we have our next three classes committed in lined up and ready.

To relocate to Canada once the international travel restrictions lift.

And just to close off your final statement on global business development, we see no slowdown in opportunities globally. In fact, we see a greater potential for our services given some of the key geopolitical drivers like security concerns in southeast Asia.

Instability in the Gulf region mass human migration as well as illegal activity in the Caribbean.

In addition, we also believe given the exceptional costs that are currently being experienced by governments at all levels that there will be a move towards alternate service arrangements in outsourcing as they reduce core activities looking for cost savings in the years ahead. This plays very well to our core capabilities as we move through this crisis, we see many opportunities to leverage.

Our strengths.

Im now going to turn the discussion over to hate Gibson, the president of regional one.

Thank you Jake good morning, everyone. I would also like to start by thanking Mike and I see team for allocating time for me to speak with our investors in the shareholders community today.

As many of you know during the early part of my career I spent several years on Wall Street in New York City in October of 1987, I was in the center of the stock market crash and witnessed firsthand the devastating impact what has come to be known as black Monday, a sudden severe and largely unexpected downfall in the stock market the devastating aftermath.

That event still resonates with me to this day.

It's a frequent reminder of how quickly life can change for many youre Black Monday will actually be a Wednesday on Wednesday March 11, two whrrl, formerly confirmed the pandemic, which has led to the atmosphere. We were all currently experiencing.

Of course, there have been a number of economic downturns and significant world events since my Black Monday experience each of these events in their own unique way has challenged the resolve of people communities and businesses and each instance, well not immediately easy to appreciate you uncertainty of recovery has of course proven true overtime often much.

Quicker than most of all possible. The aviation industry is a critical component of the global infrastructure, an unnecessary component to the world economy recovery will certainly happen people will fly again very soon.

I would like to provide some insight into regional ones business and some unique characteristics that Mike has often shared with you since the company's acquisition in 2013.

Regional one is often mischaracterizes traditional aircraft leasing company or simply a parts company. In fact, we are an opportunistic buy side asset management company, Yes, we certainly generate revenue from aircraft in engine leasing and ultimately end of life acid part outs, but along the way we systematically maximize the available green Tom and these assets.

No meaningful deterioration of expected yields at the time of part out as it so often the case details matter.

Regional ones operating framework can simply be defined into words opportunistic and disciplined we do not chase topline revenue instead, we focus on executing to our disciplines in data management market intelligence and customer service, we are proven leader in market intelligence.

As our global network of resources employees and infrastructure provides us with a constant flow of real time information, we focus on assets, we know intimately and leverage the experience of our team with the data to support our decisions to that end, we initiated the collection analysis of data years before any investments or me.

Our portfolio of assets and its precise composition is very intentional and managed quite comprehensively.

The acquisition strategy strategy region, one just only acquire assets that are materially in the money in other words were highly confident that our end of life asset value always exceeds our acquisition cost.

It is distinctly different than a traditional leasing company and sustains our performance even during difficult market environments. We have the ability to extract revenue from aircraft leases engine leases component exchanges and component sales, we move in and out of these revenue sources as we manage the portfolios heal.

I would like to share with you. Some specific Q1 context about how we execute this strategy to a broad customer base in multiple ways. As many of you know regional one has a joint venture with Skywest, which has been successful in expanding our north American strategy and allows us to align with the largest operator open Marty a crj aircraft in the world We continue to.

To see direct and indirect benefits of the partnership.

Providing additional assets in the JV relationship to support our joint customers with leased assets. In addition, we sold for Cfthirty four dash eight engine cores to the OEM for third party MRO services.

Finally, we dismantle to see if 30 40 dashi engine cores in order to support our customers with piece parts.

As you can see we generate revenue in multiple ways with real time demand as a result of the current market conditions were expecting increased demand from engine leases as our customers avoid expensive shop visits.

Regional one has a long proven foundation with regional aircraft. Our company is rich with employee knowledge and has over 15 years of data and hundreds of years of experience across a deep talent pool to help guide as to the market changes similar to what we're experiencing today.

The Cfthirty four to asked three and see if 34 dashi engine variance on a backbone of our portfolio. The dash eight engine is manufactured by GE GE and is still in production today and widely used on both the Marty and Embraer next generation regional Jets.

The Embraer dash Oneseventy a popular aircraft of choice is expected to remain in production for the foreseeable future. The engine is commonly referred to as a module engine, which has four main modules. This structure provides a highly versatile asset with the ability to do field work and avoid expensive shop visits regional on intimately manages the life remaining.

Each module to maximize the economics of our portfolio regional ones asset management decisions are driven by a comprehensive data management system that supplements. Our ERP system. This proprietary system in conjunction with our Wall Street style trading floor makes for a data driven sales environment does it operating in real time with empirical information.

We didn't want as a global and diverse customer base for all our record revenue segments, we have more than 1500 active accounts and typically shift to multiple countries in a given trading day as we continue to operate in this challenging environment, we feel our platform data management and asset classes are well positioned to the market. In addition, we continue to grow.

Our third party fee income management services business at the end of Q1 region. One had over 100 million us with assets under management that are owned by banks investors financial institutions and airlines that we manage on their behalf.

In closing many aviation analysts have recently opined with narrow body and regional jets will be well position to lead the recovery of Airlines service capacity, we will certainly be ready to participate in this activity.

I sincerely believe this period has already been a good test of our strategy and our ability to move quickly and decisively and dramatic market conditions I am confident region, one will be an active part of the market recovery.

Emission has not changed we look forward to identify new opportunities and deploy capital within our proven strategy and continuing to grow as we execute with discipline.

Thank you for your time and I'd like now hand, the call over to Marty cash CEO Quest windows.

Thank you Hank.

This morning, I'll be providing you an update on question Canadian and Us operations.

We are deeply saddened by the health of economic impact to cope with 19 crisis has had on the people across the world that question, we've had to deal with cope with 19 throughout our operations that have done everything possible that are due to date management efforts to prioritize the health and safety of our employees.

And Mr. Saga, we had two employees test positive both were away from the workplace for more than two weeks prior to their positive diagnosis and we've had no evidence of the workplace transmission within the one month period that has passed.

On the Canadian construction sites installation management employees, and subcontractors have been able to manage through health and safety policies as well as our own critical policies that are now in effect.

Production efficiencies and scheduling and our plans have been challenging due to summer Radek project pauses during this pad them.

This along with greater distancing at a reduction in workforce has resulted in reduced production overall.

These challenges so certainly created bumps along the way and text or production efficiencies.

And agreements with several customers, we've managed to pre build products that store them and transfer drillers to allow these projects to remain in Q.

Initially policies procedures and enforcements put in place to deal with Coke were implemented when we quickly realized that it will become necessary for us to do even better.

As we almost recognize that the landscape is evolving as we are provided with information and government took place during the spend Devon.

He I see provided us with that much anticipated appreciated help within our organization, specifically propel providing us with significant resources of team leaders, what's your experience to help us implement strict employee separation attendance policy, including temperature monitoring PPD policing.

Attracting procedures to ensure the safety of our employers.

These efforts will provide our people with the confidence they require in the workplace.

Our employers are at work in a safe environment I want to think Chick Fil and the Pal team for their unprecedented support.

To highlight some of the areas that we've implemented a mississauga, we've added additional time clocks portable walk throughs extra wash there.

Theory, or trailers that aquas employee change rooms, as well as best best methods of Hadley products within the factory.

Moreover, we've implemented a bentall buck strategy within the four walls of each of our buildings to ensure there will be no cross contamination lists.

We've taken these policies enforcement apply them to all the cold would efforts in our Dallas facility.

Yes, we have the good fortune of having more space to deal with these matters, therefore, social distancing procedures and diligence are much simpler to deal with.

On a separate note, we're very pleased with the ramp up of our production in Dallas contributing significantly to our business you assistance that we've had from the pellets human Canada has been implemented in Dallas as well as our a Wi operations shifting data will be why are the U.S., we have been experiencing coal would cases of multiple construe.

Auction sites.

System strategies for dealing with cold route that we have gained from the policy and Canada, specifically as it relates to job sites has been implemented at all or Eagleview operations in DC Metro area.

They will be why is that at each location.

Their old portable toilets wash stations of pp to deal with their own front and center risks.

To wrap up.

We continue to monitor our customer base across all North American markets remain cautiously optimistic moving forward. Our order book is stable that has increased from historic benchmarks as we move forward in 2020, we will continue to provide hands on management throughout our operations to ensure the best possible results. During these Chuck.

Wondering times.

I'll now hand things over to Carmel, the president of the V. I see who will conclude our scripted comments before we move onto questions Cardinal.

Thank you Marty as you've heard from the President and CEO is of our larger subsidiaries are entities are resilient adept at making needed changes of core products and services that are essential businesses, and our entrepreneurial and addressing the issues trading but by the index, which is no surprises one of the strength remodel in mind.

Diversified company with solid businesses, a niche markets that have strong entrepreneurial management team.

Only have these characteristics driven Yankees performance over a 15 year history. There also the characteristics that allow he I see whether this unprecedented prices and come out stronger than ever.

Our diversification keeps a strong so while regional one has been materially impacted by the sharp decline in global air travel and will be slower to recover.

This is usual for aerospace operations and over manufacturing SGS continue to operate albeit with reduced efficiencies as we social distance or employees, but with no lack of the men and a strong order book.

Are these markets give us an advantage so well major carriers are estimating tree your recovery armies airlines, which provide service into remote northern communities or travel is nondiscretionary. It is essential are expecting to rebound quickly measured in weeks not years from when traveling social distances.

Restrictions Ari.

Our strong entrepreneurial management team set us apart so well businesses faced tremendous challenges. During these difficult time, our management teams are finding innovative ways to sell them and create opportunity. This has allowed us to be first movers and implementing Colgate 19.

Hi Nation protocol protections for our employees customers and their community.

On the hunt for distressed asset to fuel future growth.

Engine design and manufacture I'd Poles and me usable face masks to help fill a shortfall on each critical products for health care providers.

Oh, no one knows how long the pandemic Willa I am.

Thats the characteristics of our company together with the strength of our balance sheet wont get it's true the difficult times ahead and will enable us to continue to provide value to our shareholders for years to calm.

Before I close I would like to discuss two items, social responsibility and the amazing people into Yankee failing.

So as responsibility the concept that as much discussed in county, do you see social responsibility is not about words, but rather actions.

I see the characters best tested in the worst of times well some might describe the current pandemic as doors. The time, how he responded to the Cobiz 19 pandemic well, let me answer that question by going through two examples.

In travel restrictions were implemented in mid March our passenger volumes dramatically drop to the point that we were carrying only a handful of passengers the communities, we serve and even with significant reductions in frequency we were incurring losses.

The logical response would have been to start flying on those on economical routes, which is what many carriers have done.

However, our customers end comedians depend on our airlines to provide essential travel food medical supplies and other necessity.

As a service that we have provided for decades. So for US there was no debate as to whether to continue to fly. It was simple is what we had to do and what we are doing.

On the presence of Colby 19, which is starting to become a reality in Canada. We made the decision to invest in state of the art isolation pause to enable our met him back carrier to transfer Cobiz 19 patients safely.

Hi, we organize upon we did not know what extent or spread of Colgate 19 would be we wanted to ensure we could provide a superior level of care and you can easily service and ensure our employee would be protected.

So the cold mid 19 pandemic will not defined.

But how we reacted will social responsibilities in our DNA, we don't see coal total opposite attempt to showcase our commitment to social responsibility. We just let our actions speak for themselves doing the right thing for the rate, resulting in a difficult situation.

There was a saying that tough time don't laugh because people do as you've seen from the leaders you've spoken this morning. The leadership Patterson's injury is resilient resourceful and driven they will lead our operations successfully through call with 19, and our subsidiaries will come out the other side parties for future growth. Thank you for your leader.

Ship and commitment.

Sure employees and the frontline and there are many such as employees and our manufacturing facility a customer service agents pilots flight attendants route handlers and mechanics without you, we would not be able to provide a vital services and products that our customers need. Thank you for all you did to the rest of the I see family of employees, who are can you.

Permitting and countless ways, whether it be true temporary lay all wage reduction having to do work at home or working under stressful circumstances. Thank you for your sacrifice.

Customers. Thank you for continuing to believe and we will continue to be there for you to our shareholders. We are in unsettling times with turbulent market, but he or she is strong and we will persevered. Thank you for your continued loyalty.

Lastly on behalf of over employees and the board of directors of VIP I would like to thank all the people put themselves at risk to look after the rest of US you were truly here else would now like to open the call for questions operator.

Thank you we will now conduct the question and answer session. If you do have a question. Please press the star followed by the number one on your Touchtone phone you will hear tone acknowledging your request your questions will be pulled in the order that they are received.

Please ensure that you lift your handset if you're using speakerphone.

Before pressing any keys, Mona Nazir with Laurentian Bank. Your line is open.

Thank you for taking my questions.

My question is good morning on my first question is just on the back of your commentary in the Mdna. You stated that you want to be cash flow neutral in phase, one and Thats dulko discussion in there I have no cash burn I'm. Just wondering what's included in your definition of cash burn and does that factor.

In growth Capex. Thank you.

The no cash burn would you conclude.

On the maintenance reinvestment were required in our businesses.

So the Tyrol number you said in a slower time in aviation and also includes the payment of dividends.

Does not include growth Capex, which are expected to be bogard in this period largely the only things were aware of at this point.

Would be the completion Apollo saw fisheries contracted the upgrade and those are crop.

We continue to an additional aircraft is one of our airlines prior to Tobin, which will close in the second or third quarter.

So growth Capex should not expected to be material, but there outside of the no cash for any additional growth capex for an eventual CFO contract will start generating additional income towards the end of this year.

Okay, perfect any ballpark estimate what we could expect from growth Capex I know you said it would be down this year versus last year, but in light of cone, but is that looking like a 50 million number or.

Lower or higher.

Yeah, it would be materially lower than not more oh gosh I've got to the exact number the we're prepared to share, but it it would be materially less than 50.

Okay perfect that's very helpful.

And I think we'll just take advantage of some of the division has been on the call on you know in some of the parent commentary you spoke about.

Demand in revenue declines on the back of Cobot I'm just wondering if.

You know there with anyway to quantify the magnitude of declines in the last two weeks of March or why you're seeing in April and then what's also factored into your outlook and when you're expecting that pivot.

Oh, that's a very tricky land tried to get me to give you guidance mono, which were not going to do but I can tell you that added peaking in the passenger partisan aviation we saw a some someones declined 90%.

That's improved a little bit now.

But it's still it's still really hot all I think the key you'll see it.

Gary touched on it I could maybe had this to guarantee or debt or or Jake for that matter, but.

When the communities are allowed to travel there's a backlog of medical centers are going to need to come out and so you'll see those.

Metered, yes.

The southern medical Kipp.

Capacity is available so where they're coming down for whether it be MRI is our CAD scansource visits to the cardiologist your feet surgeon, there's a little bit or dental work there, there's a limit as to how much there could be so you'll see that ramp up fairly quickly, but you won't see.

Its search beyond historical numbers simply because there isn't.

Capacity in the medical system in the South.

Uh huh.

I think Thats Labite, Gary your neck, either you got something to add to that sounds about right. Yes, that's correct.

And the one thing.

When we start taking the repatriation Empire mining.

Here's where we do slow traffic in and out it's real basis in particular in the Pell Airlines group.

That will also provide an uptick in volume.

Yes. That's helpful. Thank you and I would just wondering if you could.

The combined impact of your cost cutting measures.

[noise], the combined impact of cost cutting measures.

It's hard to.

I was watching how to quantify that were going to could you maybe give us a little a little more color on what you're looking for yeah, just even.

You know you I think in Mdna dates that.

Executive as a board have taken 25% to 30% cuts there been 30 or one third the aviation.

Vertical has been laid off so just.

Combining all of those you know items of what would that speaker look like or.

No I don't think about how good for you now when you take your job aligning it soon as this started.

It was our belief that I see that we're whereas we're going into a tough time. The first thing leaders do is they lead and so the first pay cuts taken were at the executive level.

We had became known within our subsidiaries voluntary stop began right across our company we've had reduced workforces.

Now.

Oh.

We've.

Applied to the for the government wage support programs and we can keep as many people employed as we can.

And then we read region, our wrote structures and we worked with governments to make sure we're providing the level of service the minimum level it's possible.

Wow.

And work from their loan and that's how we get to that so on.

We're still generating positive EBITDA paid to pay for our capex into pays for our.

Interest and to pay for our.

Evident and we've also been fairly reduce their capex spend obviously as you.

We reduced frequency in the U.S rare topic.

Likewise reduced maintenance Capex we.

Nature were in stepped down moment proportionately.

Okay perfect.

They all kind of range and bear in mind just to be all over the place because I really hesitant to provide hard numbers for these things simply because you get a job sites that down they could shutdown NFC again tomorrow, but I would expect that revenues in the in Q2.

You are going to be down somewhere in the.

20% to 40% range.

Probably our best guess is in the middle of that.

The aggregate revenues across the board.

Okay, No that's very helpful and that had any on the head [noise].

And just lastly from me I don't know as Marty from Quest on the line.

Yes, good morning, Mono, yes, hi, how are you.

Very well. Thank you good I would just wondering if you could touch a little bit on your order book and what Youre seeing on your discussions from customers in my coverage of the engineering from all of them have attracted guidance on the back of uncertainty and even if looking at the architectural billings index.

Which is a leading indicator of construction, it's fallen off 36% sequentially. So I'm just wondering on.

Your outlook and what kind of decline have you factored in if at all thank you.

Yes, Mona we we are as we as you know we have the geographical base across our markets in North America.

Current or most of our distance from these major markets, albeit in Canada. We reserve was more of a call into industry in the U.S., that's almost a 100%.

Rental purpose built rental bench.

Well, we don't see at the current stages.

A major declines we do have some progress that has been put on hold whether they've been on put on hold for the corporate issues and or a pause for financings.

We largely feel that these projects are simply delayed we don't see any any cancellations just kind of a push forward.

Stall to these projects are we believe that they will all come forward demand for multi level residential demand for housing as a whole the still there and we feel that moving forward. There will be a continued pent up demand and at some point those instructions on those in order to recover and shorter periods I hope that answers your question.

Yes. It does thank you.

That.

[noise] Cameron Doerksen with National Bank financial your line is open.

Good morning. Thanks.

Thanks, Good morning, Thanks for the of the rundown various businesses. So it was helpful.

Maybe I'll just stick to two questions just related to a to regional one obviously a significant decline in revenue in Q1 I'm. Just wondering if you could maybe talk a bit about where things have maybe stabilized in the last August six weeks or so you'd always are sort of a base level of demand there and I guess.

Related to that.

That's sort of lower level or stability you do you still think you're able to generate positive cash flow out of the regional one business.

We believe it's going to generate positive cash flow in virtually all of our businesses.

Over this period again before growth Capex, we invested growing the business that would not be included in those calculations.

I think it's pretty early for us to see wheel base level I'll hand it.

Hey to answer it but the.

The the business is a different places it different spots around the world Hank maybe you could give a little law, although insight into where we what we see.

Certainly Mike I think it's interesting that reflection on Q1, right I think over the years, Mike has alluded to sometimes the choppiness of our vision is related to the potential sale of the heavy significant asset in a particular quarter in other words, if we sell a 70 or 90 cedar versus if it.

Tc or it can have a material difference in the.

In the revenue and I think part of that's what's reflected in the year on year comparison for Q1.

As it relates to there was some.

Some shortfall in the lease forecasting that was related to timing of placement of aircraft that came off lease from a customer that defaulted in 2019.

Interestingly you know our vision is obviously very broad right we deal with the Skywest. They are counted as of the World Delta Airlines in their Peters.

We also have a very broad network of.

Very niche airlines.

Very hard working aggressive people like Nick carrying Jake scattered around the world operating to support their communities and their customers.

Obviously, there's fleet variance of freight variants of our aircraft types. There's MRO activity continue from Q1 to Q2. So we really look at Q2 as a transition linking the passed to the future. Many of our customers you literally put their pencils down.

Went home under the instructions of their government.

There's been that pause in the lease revenue, where our lease portfolio is idle at the moment.

But unlike a.

Independent bankruptcy, where you have a long lead time of deterioration of a particular operator. This is literally kind of a pencils down.

It will get picked up here at the end of Q2 Q3 from what we're hearing from our primary lease customers in Europe, and hopefully that summer travel in the confidence of passengers will pick up quickly and we'll get back to business here.

Okay as it's hard to tell you exactly when it ramps back up it really depends on what travel as safe, but having said that.

We still are supplying parts and stuff for.

The guys that are flying into guys were flying or time to living hand to mouth. So that's likely to continue over the period.

Yes, I think that given some season most airlines are receiving throughout the world is going to assist we'll probably see parts come back first because of that but we still one has been if they see diversified almost in half itself on what it does because their asset managers. So I mean as I said parts will come back first but on that.

But she side of things, we're actually seeing that be more significant than we had anticipated obviously lots of finance companies banks et cetera, how you deal with significant fleet. We have the expertise to do that should we actually think that will be a growing revenue stream as we move.

Really the crisis years, so different parts makes a strong.

Okay, and maybe just to follow up but just on the I guess the leasing up you within a regional one I mean, presumably a lot of the airlines reducing aircraft to its kind of deferred.

There are their payments to you I presume, that's still being recorded as revenue, but perhaps you expect to collect those receivables at some point to future. So I'm just wondering maybe it's more about accounting question that anything, but just wondering how that how that kind of close to the income statement here, you're generating lease revenue, but perhaps the receivables are gonna grow as a result of some.

Deferrals of of lease payments is that how we should look at it.

You won't be some of that's for sure there'll be some places that are our amended from like out straight diesel powered by the hour, where we build them based on how much they use until they return.

To a more normal funding and we did take it and enhance a allowance to allow for the factor that notably we will have some companies sale through this process.

Ultimately the aircraft are going to be required to service those areas and the first plays backed off we're going to be the smaller jobs, because there will be smaller volumes to begin with so.

We do see that there will be up.

A ramp up period, but with the leases were locked in a record revenue or less we're confident it's kind of its collectible.

Okay.

According to our revenue and then I'll stick to write it off.

Okay No. That's a that's helpful I'll pass along thanks very much.

Thanks.

Steve Hansen with Raymond James Your line is open.

[music].

Yeah. Good morning, guys just two for me if I may.

First one is just one clarification for the medivac passengers in the cadence, which the return.

I'm thinking Manitoba has laid out a stays reopening plan and I think some of the non urgent surgery and diagnostic procedures restore beginning may 4th it is that the timeframe in which we should start to see the medical type passenger start to return or do you have any greater clarity on that that's helpful. Thanks.

First of all that we will see we have seen the small increment. So that they just started to book Rosada appointments for later this month and so you'll see that slowly creep up I think you're good that need to see sort in the phase two.

I was hoping to stuff that's even for June to see that that's the next round of that Oh.

Yes, good capacity you still limited in the medical centers. So it's not going to go back to up to full levels Bicker, Gary you got to talk to the Chief Medical officers, maybe want to you guys can take on the diagnostics in Manitoba, So thats a lot of Manitoba, some northwestern Ontario traffic and.

Central Nunavut.

Those are all started may 11, and the surgeries are starting may twentyth bet. So most of the traffic that you're going to see from US is going to start ramping up at the end of may but mostly in June.

Great very helpful.

In keeping with that Stephen just there's two parts, there's a medical stuff and then the first day should see feeling say, probably we worked with each with each a government to each community to set the rules for when people can travel in those communities, we're very careful not to.

The overstep our position maybe you could talk what I would get without with communities.

Yeah, So hey, Steve its next year.

We have a different protocols in place for each community that we serve a majority of them are requiring prior approval, which is actually lock step with the Manitoba reopening so as you pointed out.

May 4th Manitoba started to reopen and that was the start of some flow as some passenger movement or some increase passenger movement and we see the next opening as Mike mentioned to be even greater flow and the elective surgeries in the gentle appointments and all that stuff that's now being opened up.

Turning to flow through as well so we do believe it will lock step with.

With the government mandates as they lose an OCC and then and the upcoming days and weeks.

Great, Thanks, and maybe to solve for Marty if I may on the ramp up of the Dallas facility, just trying to get a sense for where you're at.

On the ramp up maybe in terms of utilization rates and.

And whether or not the plan has been impacted all by Cove, It and some of the maybe shifting in the in the order book or potential pushing out some projects just any color on when we expect to get a facility up and running thanks.

Yes. Thank you we we certainly have been the on schedule with our planned ramp up there.

So the initial delays.

On on that and they push forward a couple of lunch to the extensive.

If we moved again church forward into the kept the same cadence. It just just moved forward a little bit. Since then we've been on a steady ramp up choosing a daily weekly and monthly goals.

Trading has been really at the forefront a focus on quality and Uh huh.

Customer satisfaction.

We're very pleased with what they're trading or staffing and our and our continued ramp up in Dallas I hope that answers your question.

A couple of pieces just in addition to that Steve Robb.

We were profitable for the first time in Dallas, Q1, which was exciting.

The frustration. This is we were really starting to move there before kobin one but the advantage Dallas has provided US is because most of you saw it so much bigger there what the guys have to deal with it Mississauga and sort of Mississauga, we had to take employees out to make it a safe workplace in Dallas Theres a lot more flexible.

Let me because of the size of the facility and.

That the ramp up of Dallas is it couldn't covenant better time, given the cold and stuff because we can generate as much product to Toronto, where we certainly on material upside to continue to grow.

You know.

In Dallas.

Mike if I could add to that we did utilize some of the Dallas facility. We were a tax with production and then Mississauga in Canada and the that proved to be quite a good effort for us and balance sheet production across the two facilities. So we haven't been successful on that matter I can go continue to look at that rebalance chickens.

Hello, Good start stop in Washington, and in our markets.

Alright, thanks with different color.

Reveal off so with Canaccord your line is open.

Good morning, guys take any Robert Good morning, first off can you speak a little bit on the flexibility that you have with respect to freight and passenger load. So you can.

The switch them up in order to.

Maximize methanex nice profitability.

I'm going to give this to gary's, Nick but Dave the fundamental thing is is what's changed in our business right. Now is the freight businesses the same or maybe in certain places a little bit banner, but the pastors are down. So we reconfigured planes, maybe each of you could talk about how thats in your markets.

It's Gary Bell here, some color I'll start and then handed off to Nixon parameter.

So we have the flexibility of having some different aircraft sizes. So.

No we have the ability to flex up or down in particular markets, depending on what those passenger.

Load factors are we also have the ability with our aircraft to go between different configurations. So for us the our 42.

Going from 42 passengers to 34 to 22 the 10, so what's happened in most of our Nunavut communities as we move those frequencies down to 10 and 22 passenger configurations that we can take more cargo and so for US we do have a great amount reflects.

Bovie and as Mike said all of that cargo is still operating close to 100%. So.

It allows us to continue to operate with some sort of.

Minimum passenger frequency and reduce those freighter hours by moving onto the Columbia places that.

Yeah, I think the only thing I would add to us its next year.

Yes.

We've significantly reduced our flight hours and our freight volumes have stayed relatively the same the aircraft we operate allow us to the flexibility to replace passenger component to them and put freights inside the aircraft. So.

We've been able to maintain the freight business level on the reduced flight hours and still to provide the appropriate customer service.

It's currently the one thing actually would add is in addition to the flexibility we have within each of the airlines is also flexibility amongst our airline so if passenger needs. Your sense, we can try it king air on a particular route given the metro here and do an AG ourselves that allows additional flexibility as a whole.

Perfect. Thank your for diagnostic.

It is as we start to see a ramp up mostly in our hydro and our resource sector as Carmel said will be utilizing capacity from various airlines. So as we see some manitoba hydro developments coming back out we're using a lot of the perimeter aircraft to team up would be.

Tom aircraft to get everybody back into those communities. So as terminal says we can't look at it somebody just an individual airline we have to look at it across our entire network because it's really a comprehensive solution.

That sounds great. Thank you guys. Thank you for that and then just moving on to the extent possible can you speak a little bit about the government govern pool of programs in place Oh, all that are being discussed at the moment to support the northern aviation compete.

Okay, Yes, sure. There's there's there's a lot of different programs out there.

No program that's the most.

Useful for US is the 75% weighed support program for companies were revenues were down 30%.

A number of our larger companies particular airlines qualify for that so that helps us significantly.

The.

Particularly in the far north they do the government sometimes government in Canada.

Oh look to guarantees and be sure theres certain levels of service combined were in discussions but hasn't been finalized yet we're working on a sort of minimum revenue approach that don't make sure at least certain number of tickets are sold so that we can afford to continue to fly on the schedule they've worked with us to put together and we are in disc.

Fashions in other.

Territories and province is on the similar concept, although not quite as far advanced in terms of the most recent government announcement, while deal sales are still fairly scare saw the large companies assistance program, it's not something well, we'll continue to obviously look at the details it's not something we think we're going to be.

Indeed, we have more than enough capital, we don't require emergency funding those things so well that baby helpful. For some has a bigger airlines.

Again, our liquidity and our Oh lochinvar cash burn put us in a position where that's not particular they needed blast.

That sounds great. Thank you guys I'll get back into queue.

[noise], Chris Marine with Altacorp capital Your line is open.

Thanks folks just.

Maybe following on on that.

You don't just which is one of the concerns that we have as for some of these government programs.

That there could be some strings attached to them that could could impact dividends and things like that.

Anything you're seeing around that that could cause any issues in the future.

We have not agreed as dot calls on any programs.

That restrict our flexibility on things like dividends.

I think a good example of our decision to now would be the U.S. I'm going to get the acronym wrong.

DPP program, a couple of our US subsidiaries qualified for the program on the economic basis on that we chose not to participate because.

We have access to capital, we didnt want to take it away from either businesses in the United States and possibly did want to be in a position, where we were going to be have someone commenting on our ability to pair dividends. So while we could have access those we chose not to same thing in Canada, where we're really just tapping into the wage subsidies and to the extent of.

Beyond that it's really just to make sure we maintain a a level of service we've chosen not to follow the big airline plan, which cuts markets and does that we're looking after the other than we're working with the government because they need the resources in those communities. So.

We're not really getting any.

Dan low money, we're just getting things where governments are working with us to make sure we provide the service.

Okay Fair enough and then in terms of some of the discussions you're having with governments would that be on a kind of a retrospective basis. So like something that would happen in terms of Q1 or is that would be I kind of on a future go forward basis in terms of being able to support minimums for flights.

I need to break that into two things, Chris D wave subsidy program and I'm going to admit that the logic of this is beyond my ability to understand but and drive our asked because the program wasn't working in a row sent during the period any wage subsidies are related to Q1.

We will show up in Q2.

We did a crew anything because that's not apparently appropriate accounting. So there will be a bit of a pickup of that in Q2 for the two weeks a barge somewhere in that program as it relates to the other programs.

There is no support for Q1 anything would be Q2 Q2 forward.

Okay Fair enough and then the other question and I know you've you've talked about you know not wanting to get to head of yourself on growth capital but.

Certain seems like it's a kind of a unique opportunity for original one.

There's going to be a lot of aircraft on the ground a lot of aircraft available not only in the regional classes, but in some of the larger aircraft I know you talked previously, but maybe looking at different aircraft classes. It certainly seems that there's going to be some some really neat opportunities that are out there any any thoughts around.

Maybe using this is a bit of a growth opportunity I'm strategically to to find new opportunities.

Yeah. This this is one of the most tempting things there is because there is on a quickly going to be opportunities in aircraft. Pos is we're not in one of Hanks and his teams greatest strengths is the fact that we tend to stay in areas, where we have knowledge, so perhaps when they partner with somebody else to sizes the opportunities someone else.

Who has expertise and some of those we've made partner on some other aircraft types I think our preliminary a focus will be it well, we do now, but there's definitely an opportunity to dip our toe into other aircraft types.

When the opportunity presents itself I think theres going to be an inevitable over reaction to some long.

Alliance kept their fleets, but once people get back to healthy traveling the world still just a small place people are going to travel around the trick is to to buy the things they're going to value in the future and if regional ones proved it does anything while it's not I would point to the our Jays, we bought a couple of years.

As we go a fleet of correct me, but 25 number or something that was on the ground to bank could figure out what's doing if we bought them at a great pricing, we basically monetized all of them.

Okay. So I mean, those are the kind of things, we do well, we'll be cautious with capital until we know where this is going but this is going to fuel our tank for who refer for years to come when we.

Take advantages from the opportunities we see.

Alright, thanks folks.

Countercoups with Scotiabank. Your line is open money called arc.

Let me Mike Thanks for taking time.

The first one thing is for you or maybe though.

How does the balance how does how does the declining methods solutions, particularly in aviation subsidiary.

Let us increase bad debt allowance at regional one impact your ability to manage liquidity and covenants.

You talked about our bank covenants Uh huh.

Yeah, the bank covenants as well as Nick I think a if you have any kind of secured.

Secret dilution of any of those assets or and love doing another excellent here we have.

Joined ticket Darryl, yes, actually cornered under our credit agreement, none of our it's basis for all intents and purposes and unsecured facility.

The bank basically has just a general GSK, but we don't have any specific security against any specific assets and the covenants are all debt to EBITDA covenants. We mentioned earlier, we think we will not need relief, but we will we will get relief just to make sure. We don't know how long this loss exactly what the issues are.

In terms of asset values.

The the turboprops, we're using we have no reason to believe our overvalued on the balance sheet, well, obviously continue to watch that see aligned give us with those been those planes and that type of business with gravel kits and the things we put on them. So hard to find if you could go replacement now if you wanted to so we don't see any.

The apparent when do those volumes and in terms of the covenant, while we're going to two we've had an ongoing discussions with our lenders and potentially.

Expanding the coveted for a period of time, Oh, we don't view that has a big issue.

Very supportive they've been very supportive and there's multiple alternatives on how to address it. So we're going to have the ability to sort of.

Hopefully thats what works best for Us.

Okay that makes sense, thanks, and then.

Maybe one for a Hank to regional one Hank.

You mentioned market intelligence can you share any insights into rich aircraft types and and your customer geography, so showing a rebound at this point and which ones that on a casino don't then don't Trent.

Yes. Good morning. Thanks for the question I think this goes to the heart of regional one strategy I think to extend on what Mike said earlier, we're certainly exploring we've had a number of opportunities over the years to get into some of the larger aircraft the narrow bodies and to some extent the wide bodies, we have not in any real way.

Stepped off the curve to do that but in fact, we have started to to compiled data and this would be demand supply demand data repair data Assembly data meantime between the room removals highly technical data in terms of the fit form and function of these components in anticipation of some future investments where.

We see opportunity more immediately with respect to our core business is the Q4 hundred and a 190. These are two kind of in production aircraft that we've talked a lot about over the years. We made the first investment with a financial investor in the one ninetys about a year and a half ago with a portfolio on lease to area.

Europa.

This was our entry point in part of our strategy of managing assets on behalf of others.

So we really see in the near term with the state of the Q4 hundred market and the RJ, one ninetys and specifically the Cfthirty four dash 10 engines.

Because.

Very material way at the end of the day our assets are really.

Founded on engine values and if you take the Cfthirty four dash eight which is still in production engine, we get the benefit of a typical price escalation from the OEM on a year on year basis of which market prices are generally based against so I think as Mike said, we'll stick to our net income for the time being we'll explore.

Opportunities, but I think any near term opportunities.

We'll be related to our existing portfolio assets and or and those that are more eminent like Q4 hundred 190.

And any sense on geographic regions or Hank indefinitely beat Europe, Asia, and North America already some more opportunities at this point.

Yes. Another good question, we have identified Africa in the last couple of quarters as a real growth opportunity for us.

Even in this.

Difficult environment of suspending pay and Furloughing stuff, we actually made the decision to go ahead and proceed with the engagement of an employee that has a high degree of experience in Africa. We.

We have boots on the ground there we've been in South Africa, we've got customer in Ecuador, and the Guinea in Ethiopia. So we do have the baseline experience.

Many of us within the company that have been doing business in Africa for a number of years.

But to take the RJ example, that Mike use that you already won 45 has become a very popular aircraft in Africa.

Crj two hundreds there as well there's some 700 to nine hundreds obviously the turboprops daschle t. ours.

So it is a.

A target for us well continue to see demand and places like the Paul in India.

For more linear growth, but we really see Africa in the future as being a place for us to further invest in additional resources.

Thanks, So <unk>. Thank you.

Jeff Fenwick with Cormark Securities. Your line is open.

Hi, good morning, everyone.

It's been a long haul try to keep my and my question short for you.

You gave a lot of good color there on some of the mitigating factors across the various airline operations and I'm just trying to get a sense of the feel here about the ability to manage to that to profitability or cash flow profitability.

Thinking about the split between contracted revenue versus a as you mentioned the passenger drop off.

Indeed, you feel looking at Pat.

Legacy Airlines and Powell and excluding our won like.

When you talk about cash flow breakeven, that's still looking that sort of group of companies.

Something you feel pretty confident confident you're gonna be able to achieve through the second quarter here, even under all the pressure that you can either.

Based on everything we know now yes, Jeff we're pretty comfortable that we cover off our maintenance costs.

Out of our operations so yes.

Okay, and I I'm, just trying to hang up how to get a mental math around and when I look at that that specific segment, you probably did a little under $30 million. So EBITDA in the swing down to something pretty minimal you were thinking and then you get the rebound the gas presumably cute about half of your or.

It's really about or when you assume a ramp up starts we've looked at this internally and I'm going to be terrible years, I'm not going to give our model because we've done a whole bunch of them, but basically what we've assumed is that we see fairly flat revenues at these low levels for most of the second quarter and we start to see.

The improvements towards the end of the corner, hopefully and a move towards normalization in Q3 Q4.

We see a big fairly flat and then the other thing that I think it's important to understand and our ability to get the cash flow breakeven is our guys have been really smart on scheduling our maintenance reinvestment in the plans. So if I were flying last so we're not using up the last hours on the engines were.

Putting the right engines on the writing planes to make sure that we're not pay for all bunch of stock before we need to pay for it and then as revenue ramp so our maintenance Capex I think you'll see a decline in the range of 50% or more from what you saw the first quarter.

In the second quarter.

That's helpful. Thanks, and I guess, maybe one thing we just didnt ask about yet at the dividend.

Hi, good watching that.

Is it something that your lender gets involved in the discussions on there I think let the dividend.

Oh, we're thinking about the dividend every month, we have a track record that we're really proud of with the dividend. It's something we take very seriously and something our investors look to us four cents.

We're not going to do anything to apparel the company or the safety is a company or its future viability to pay a dividend.

But as long as we're in a position where we are relatively cash flow neutral we look at it every month and.

It's something that's a core value and we will do everything we tend to preserve the dividend.

We don't have any issues with our lenders are building some dividend.

Okay, Great. That's all I had thanks.

And our final question comes from a line of Tim James with TD Securities. Your line is open.

Good morning chip.

Good morning, everyone. Thank you.

I just want to confirm and its plus what may have missed this earlier on when you talk about reduced maintenance Capex and I'm thinking about 2020 in total was that relative to plan Where's that relative to 2019, and if it's not relative to 2019.

Could you comment on where we'll be.

On a year over year basis.

Well it depends on how fast we ramp up timber we were talking about relative.

To plan, which we gave the market which was in line with our growth in EBITDA. So.

Takes a longer from last year I don't have the exact 29 key number in front of the take your growth of EBITDA by these 10%, 15% add that to the maintenance Capex I was tied to the plan for this year. We stated that that was going to be very frontend loaded. This year on our Q4 conference call and you can see it with 36.

Million I think it was in Q1 of maintenance Capex, Daryl correct me, if I got that wrong.

Good that he was a big number there, but with the as soon as the.

The revenue started to decline mid March my team started to reschedule when reviewing things and time it out so we envision that to be in the next couple of quarters less than half of Q1's number.

And then the ramp up in Q4, there on Whoa Whoa, Laura will tied to revenue.

Okay. Okay. That's helpful. Thank you.

Capex if the airlines is directly proportional to how much reply.

You are using up the aircraft [noise].

Okay.

Then just turning to actually kind of want to revisit that the previous question on the dividend speaks in your commentary that if we want to kind of.

Provider own thoughts on the dividend and its its future here at least what we get through the pandemic is that the re cash flow less maintenance capex.

Relationship to the dividend that we should be looking at closely in terms of.

Looking at decision on when Theres, a possibility of it being reduced or eliminated is not the right way to think about it.

Right I mean, it's more complicated than did one ratio for one period, it's about outlook, it's about longer periods of time, it's about sustainability clearly our ability to fund funded.

Without borrowing it is important.

You saw that in our history, we bumped over 100% before when we had the challenge with saw less tower in the U.S. in late 2013 early 2014.

For short period of time were slightly over 100% barrel ratio, but no way we had that a solution underway is that we kept thank you.

Very quickly normalized thereafter, and so it's not as I don't want to bake. It sounds like there is some mathematical matrix that the second the payout ratio, it's actually not going to do it it's part of a longer term issue and if we didnt see a return to normal as we saw Oh, the current level pandemic up.

Shutdown for going on for a long term period of time I think just to factor were cash flow breakeven wouldn't be enough to keep the dividends. It's a boat. That's a portion of a longer term analysis and we have very adept discussions with our board each month of both died before we authorized the dividend.

But we take it very seriously we know people.

Rely on that dividends from the extent that.

We're confident in our long term prospects, our liquidity or ability to pay the dividend.

We remain positive about.

Okay that but the ratio you talked about above EBITDA less maintenance capex or free cash flow as maintenance Capex is the key way to look out.

Okay. That's helpful. And then just a final question.

Two regional one should we think about the year over year change and cash flow coming.

In 2020 from regional one is somewhat similar to what we assume or forecast for.

The year over year change in EBITDA at regional one where will the cash impact and this goes back actually to Ken's question, where the cash impact.

More negative than the actual year over year changes in EBITDA there.

No it won't be more into the reason being you know.

Maintenance Capex in regional wander directly tied to the burn up as the Green times of the lease fleet. So the extent the lease fleet is not flying revenues go down even debt goes down so does your deed to reinvest an athlete and so and the same thing with parts.

Great inventories are the things we need if sales are slower will buy last of the outside piece of that as if we find something that's at a price. So we think fuels future growth that will be outside of that calculation, Tim but in terms of core operations have maintained it now the beauty of regional one is that.

Its cost of sales of its cash outflows are directly tied to its revenues.

Okay. So.

Or.

For whatever you know if we think regional one EBITDA is going to go down I'm just using round numbers just illustrate the point your 10% year over year.

The cash flow decline should be not wildly different from that again I really don't despite I mean, we're solving some fixed costs in terms of your rents at some of your salaries, but even that we've adjusted staffing levels no kind of those kinds of things. So when you look at cash flow frequencies.

The reinvestment, whether it be it new inventory or maintenance capex or different aircraft is going to tie directly to the revenue so that.

Subject to period to period variations and timing of transactions those should move in lock step with the exception. The fact is that your salary costs effects.

And do not is there no risk that cash receipts in the door at regional one over the course of the year are less than revenue recorded again, just because of you know the environment and receivables going up and and that.

There is absolutely you at least in the near term you'll see some some increase in receivables but.

We're proactively managing that we took an additional reserve as a corner as brew launching in on a regular basis, but yes, I mean with aviation is a world. It's it yes, there are risks that Oh.

Receivables will climb over the period.

Okay. That's all I had the thanks, a lot of lot of great information there.

Thanks, Tim.

[noise] there no further questions at this time I would now like to turn the call back over to <unk> presenters.

Thank you for your patience today, both there was a much longer call normal we wanted to provide as much perspective, as we could as we enter this brave new world of the Colvin pandemic.

We're confident in where we said we.

Proactively managed our balance sheet put ourselves in a great position going into this.

Our team has managed to expenses managed our operations. So they can save for our employees and save for our customers and.

Sure we aren't burning cash so oh, we're excited about our ability to get through this and we've got very resilient businesses that when the economy I went up.

We're going to allow us to open up you'll see our ROE revenues respond accordingly.

Thanks for your support thank you to the frontline workers and keep the rest of all season fan and I look forward to speaking to you again following our second quarter report in August stay safe everyone.

Ladies and gentlemen, this concludes todays conference call you may now disconnect.