Q2 2020 Exchange Income Corp Earnings Call
That's including the M. DNA and financial statements were issued on August 12, 2020, and are currently available the companys website or seat our before turning the call over to management listeners are cautioned that today's presentation and the responses to questions may contain forward looking statements.
With 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 statement certain material factors or assumptions are applied it making forward looking statements.
Actual results may differ materially from those expressed or implied instead such statements for additional information about factors that may cause actual results to differ materially from expectation and about material factors or assumptions applied it making forward looking statements. Please consult the m. DNA for this quarter the risk factor section of the annual information form and the exchanges.
Filings with the 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 of the date made listeners are 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 and I'd like to turn the call over to the CEO of Exchange income Corporation, Mike Piles. Please go ahead Mr. Pablo.
Thank you operator, and good morning, everyone. Joining me. This morning are Carmel, Peter Yes, She's president Daryl Byrd, our CFO, David White, our VP of aviation.
Our first quarter results call in May we followed a unique form out where we had several of our subsidiary speak about the impact of cold it on their operations and what plans have been made to deal with it this quarter marks a shotgun report since the onset of the pandemic and we will return to a more traditional formats, which includes commentary for myself.
Our president and our CFO.
On the Q1 call Indian our Q1 report, we laid out we're planning to managing the cold Barb.
Plan included the safety of our customers our employees at all stakeholders. It also included adopted her service offerings to meet the changing needs of the public.
It included monitoring or cash resources to the challenging period to ensure we had the resources to take advantage of opportunities for long term growth that are uncovered and finally, we prepared for increased demand. There's a pandemic was better controlled in the future.
The second quarter was lots of all planning and more about execution, putting the plans in the options and we're very pleased with the progress that we have made.
The majority of our revenue and earnings are driven by the aerospace in aviation segment.
So there's been a tendency would hit the market give you yeah I see as this.
As a similar to traditional North American air carriers, such as Air Canada or don't.
This compares to this fundamentally flawed as even within the aerospace aviation segment, our operations are very diverse.
Batibot freight trip freight flight training maritime surveillance.
Sales of equipment leasing in addition to the passenger business.
In addition to this diversity within the segment, we have our manufacturing businesses with operate in other diverse marketplaces.
Well you have this diversification strategy has never been more apparent the during this quarter.
The airline Comparatives are dealing with ongoing passenger declines over 80% and their describing their business in terms of how many millions of cost per day that is being lost.
Our lines experienced passenger declines of over 90% at the beginning of the pad Doug.
But the essential nature of the service, we provide the scene volumes recover to 40% to 60%.
Normal depending on the geography of the operation.
We expect these levels to recover quickly would travel restrictions are reduced or less.
Our returned to pre cold levels will be described weeks or months not years, what the pandemic is finally brought under control.
Our revenues decreased 25% year over year to 244 million EBITDA fell by 29% to 62 million.
We remain profitable was adjusted net earnings or 16 cents per share.
Well the pandemic began we chose to maintain our dividend of 19 cents per month to our shareholders, which made us it out why are the aviation business as most cost.
Or cancelled their dividend its entirety, however, not where do we keep the dip in the previous levels, we committed to funded and all sustaining capital investments from operations without increasing our dot levels I'm pleased to report that we not only back that commitment we have significantly exceeded.
Our payout ratio for the quarter was 78% or the free cash flow less maintenance capital expenditure basis.
Much stronger.
On the breakeven, 100% payout ratio commitment.
Tight management of both maintenance and growth initiatives together with strong working capital management, a stronger Canadian dollar have enabled us to reduce our secured debt net of Josh by $40 million, we paid our dividend funded our capital investment and pay down debt.
Our focus whoever was not just on surviving the pandemic, but rather was focused on returning to expansion. When do you have done that gives longer control.
Subsequent to quarter I noticed the closing of windows window installation systems or with a window easier located on the west coast of the United States.
We said served as the installer quest windows since you've entered the but this market a decade ago. The acquisition of this company is very similar to the purchase of E.W. why the follows last year, either your wise installer quest products on the eastern half of the United States.
These two transitions transactions I'm sorry in addition to big significantly accretive to our shareholders our strategic that's quest as in Canada, well now how I'll.
Right and single point of contact for all customers for both the designed to purchase a windows and for their installation.
Installation makes up a significant portion of the window budget. It by internalizing this function westell benefits from the entire project on future contracts.
[laughter] provincial aerospace together with his Parker local partner Jot support was selected as the best bid in the Netherlands Maritime surveillance contract the opportunity cost for two adopted dashi the aircraft.
The contract when executed well have a 10 year term together with two one year options the contractors material financially and is expected to contribute immediately upon the planes going into service in late 2021.
The award is also highly strategic as its pals first major surveillance contract in Europe.
Decreases pals profile of the surrounds community and extends the streak of newer expanded contracts.
The company work on me two dash eight aircraft is expected to begin later this year, where the aircraft earmarked for the enhanced covering the Kansas Fisheries contractor completed and put into service.
Im pleased to report that as of today. The 20 day a response period for this contract is another wants US passed and we will now proceed to negotiating final terms of the contract with the government.
The various components of our aerospace and aviation segment of fared quite differently Jordan Cove, It and I will speak briefly on each of them Carmelo out a little color on the future for closing remarks.
I'm not about business both it due to that where we have the sole provider of service and in many provinces, where we are one of several licensed operators saw significant decline the demand of approximately one third early the bad debt.
Many matters that are used to transport patients were not healthy enough to fly the scheduled flight so for medical diagnostic appointments.
Early in the pandemic all but the most urgent of these trips were postponed and as such demand declined significantly over ensuing months. The demand for service has returned to do your pandemic levels.
Our maritime surveillance contracts were largely unaffected by the kind of data.
Lumbar to see some pressures from a cost from safety initiatives put in place to protect our employees answers right prevent were pre workplace spread of the buyers small delays at the start of the fisheries contract and the ramp up fixed wing search and rescue contracts have experienced.
But they're not material I'm gonna material issue the forced multiplier did not fly during the second quarter is governments focus on other pandemic issues.
Prior to the pandemic discussions were underway with a number of countries for deployments in the second quarter beyond some of these discussions will be restarted and some shorter term deployments have already been scheduled for the third and fourth quarters.
Our freight business has been largely unaffected by the pandemic and in fact in some markets. It has led to an increase of victory Andy members have remained at home.
Traveled to southern centers to shop, some of the Sprague has delivered on combination aircraft with both passengers and freight on board. The dramatic decline in passenger revenue led to were doctrine frequency of service to northern communities, which in turn resulted in altered freight delivery mechanisms big.
Clark.
We're afraid aircraft have lower margin on combination flights and this did put some pressure on margins in spite of increased volumes recent increases and passenger loads. However has facilitated increased frequency, which has now alleviated this concern.
[noise] Monkton flight College was closed for a period during the second quarter as it was not considered essential service by the provincial government is back in service, albeit at less than full capacity.
The demand for international students training remained strong but.
But there could be some dislocation later this year if international travel as dawn available to take graduates how are bringing the new students here.
[noise] passenger volumes were very dramatically impacted by pandemic following by 90% in early April.
We've always opposed to sexual travel being alone in an attempt to keep the virus outcome remote communities.
As the pandemic has become much better control volumes have increased although not evenly across the country.
We're now operating at 40% to 60% of normal volumes.
Uhhuh restrictions and core antivirus requirements remain in place in some markets.
But for example requires a 14 day quarantine for anyone who is returning to the territory from a trip to the sub.
As these restrictions or last it go removed passenger volumes are expected to rise very quickly.
Regional while our aftermarket parts of leasing company has been the harvested of our subsidiaries are one specializes in regional job at large turboprop aircraft, which are operated by carriers around the world is very well publicized that airlines around the growth have dramatically reduced operations.
And our flight far less which is a direct and immediate impact on the need for parts and just an aircraft sales as well as Lisa.
We had begun to see an uptick late in the second quarter, but the resurgence of that pieces of the United States has neutered. This short term improvement.
Carbo will come back to the outlook for regional one in her comments.
Material improvement your regional ones results will not be seen until 2021, when regional jet volumes and degrees.
Our manufacturing sector was impacted by the virus as the process changes required to keep employee safe and perhaps the spread of cold it impacted margins.
A man was surprisingly strong across the segment with the exception of our Albert NBC operations, where demand was well below normal. These operations to west is most provinces make up a very small part of the I see is total less than 3% and as such the impact was small LD.
Control, then brushy and stainless fabrication all performed strongly through the quarter and the outlook remains positive.
Question also performed well during the period, but dealt with the most dislocation as the result of the pad.
Covidien different parts of the continents at different times and this resulted in structured job sites opening and closing at different times throughout the quarter.
We also dealt with production employees, becoming ill with Cowen <unk> Co. bid.
Contact outside of our plant.
Our first job was to reconfigure our production facilities to socially distance our employees to the greatest extent possible.
This was simply weren't Dallas because of the size of new plant.
And much more challenging in Toronto, where we didn't know how does the extra space to spread into.
We actually chose to close the trial applied briefly on three separate occasions in order to ensure the safety of RTT.
Our order book remains robust and we continue to be bullish on the short medium and long term outlook for west as evidenced by our recent acquisition the west.
We expect there to be continued efficiency from the adjustments to project schedules and Colgate plax configuration in the near term, which will subside with bad debt.
One last topic before I hand, the call the Darryl for a more detailed looked at the numbers, we received approximately $29 billion ensues payments from the federal government.
We've utilized these funds to maintain employees, who would otherwise have had to lay off or terminate it also enabled us to maintain a higher level of service in certain communities. So what are the possible without the program.
It enabled us to do a better job is looking after our people and our customers I'll now hand, the call off to Daryl who will walk you through the second quarter financials.
Thank you Mike good morning, everyone.
Within the quarter that was Martin with the unprecedented challenges of having to deal with a continuing cobot 19 pandemic. The corporation through the actions of management and staff across all very IC companies.
Are you able to maintain positive cash flow after capital requirements and payment of dividends and reduced net debt and the most challenging quarter. The corporation has ever faced.
This in turn is a testament that are distinct business model is sound even in the most difficult times.
The financial results for Q2, 2020 that I will summarize your to follow were negatively impacted by the comment 19 pandemic.
I'll caution that the comparability of current results better prior periods as materially impacted due to this unprecedented effect and then.
Conclusions taking into account any compare ability should be made carefully given this current circumstances affecting results.
Before turning to the discussion on Q2 2020 financial results I will leave my comments regarding the corporations balance sheet and liquidity.
To be get it is noteworthy to reiterate that the size of our corporations credit facility as at June Thirtyth was approximately 1.3 billion. An addition to that corporation can access another 300 million in an accordion feature should we choose to exercise it.
Utilization of the corporate credit facility was 802 million at the ended the quarter.
This is the reduction of approximately 90 million from the quarter and Q1 2020.
Which is comprised of a repayment of debt within the quarter and changes in foreign exchange on the us denominated debt.
With the more long term debt and 66 million in cash on hand, net debt decreased by approximately 40 million in the quarter to 736 million, giving the corporation near term asset to 564 million in liquidity, excluding the accordion.
As Mike noted tight management of both maintenance and growth initiatives together with strong working capital management and a stronger Canadian dollar have enabled us to reduce our net debt.
In addition, it should be and should be noted that the company has no long term debt coming due before December 2022.
At the end of Q2 2020, our leverage ratio ratios remain well within our covenant with lenders.
Even with the current challenging environment, we're committed to the supporting principle of our business model, which is always being a strong focus on our balance sheet with modest leverage and good liquidity.
Subsequent to the quarter.
As a corporation amended it.
Leverage ratio from a maximum of four times to five times for the fiscal quarters ending December 30, Onest 2020 through September Thirtyth 2021. The amendment was unanimously supported by our syndicate of lenders, reflecting a strong support for and confidence in the corporation.
Given the corporation opportunistic DNA the increase in the Covenant was solely intended to provide the corporation with flexibility under the credit facility to drop further capital in the future to take advantage of opportunities that meet our proven investment criteria as they present themselves.
Inclusive of the impact of all announcements today management continues to expect to be within the original four times covenant.
Management has also not changed just attitude towards or appetite for debt.
Further on our balance sheet. We ended Q2 2020 with working capital of 339 million, which represents a current ratio of 2.28. This compares to working capital of 308 million and a current ratio of 2.1 at the end of 2019.
I will turn to summarize discussion on financial results and we're all some explanation of results can be found in our Q2 2020 M. DNA.
In Q2, we generated revenue of 244 million, which is a decrease of 82 million or 25% from Q2 2019.
Aerospace and aviation segment revenue was down 41% from the comparative quarter in 2019 to 140 million.
Revenue from the legacy Airlines and Preventional decreased by 61 million.
Passenger volumes in the airlines were down as much as 90% early in the quarter stemming from the reduced demand as a result of covert 19.
And your volumes gradually improve throughout the second quarter operating at 40% to 60% of normal volumes with scale of improvement vary by geographic region, depending on travel restrictions and quarantine periods specific to the region.
Cargo volumes remained strong after the onset of coven 19 strength can largely be attributed to the communities that we serve us continuing to need essential goods and supplies.
Medivac in charter operations were also impacted by Cobot 19 factors early in the quarter the gradually normalize to pre cobot 19 levels towards the end of the corridor.
The impact of covert 19 on the aerospace segment was minimal into the Qatar contractual nature of the work except for the force multiplier aircraft, which was idle during the second quarter White governments globally, we're focused on the pandemic.
For regional wine revenue decreased in the quarter compared to the same period last year by 39 million.
Regional ones operations have greatly being impacted by coven 19 regional one business is dependent on traditional regional air carriers and lower travel throughout the world has put pressure on all of its lines of business, including part sales aircraft in engine sales and lease revenues.
The sales and service revenue stream decreased by 49% in the quarter compared to the same quarter last year.
Level of sales bottomed out at the beginning of the quarter gradually improved throughout the quarter and installed at the later stages of the quarter with a resurgence of the pandemic.
Aircraft in engine sales were down significantly from prior period as the airline look to defer large purchases.
Lease revenue decreased by $17 million or 71% in the current period due to a significant drop off in customer dumb customer demand and utilization of Corp corporations leased assets.
Turning now to our manufacturing segment revenue grew by 17 million over the prior period. The total revenue for this segment was 104 million.
[noise] quest was higher than the prior period, reflecting the acquisition of ADW why in the fourth quarter of 2019 with no comparative in the prior period and increased production at its Texas plant.
And Wi has consistently outperformed our expectations since acquisition, including outperforming free covert 19 forecast during the second quarter of 2020.
The balance of this segment collectively experienced an increase due to the acquisition LD control in the fourth quarter 2019.
It should be noted that all of the IC subsidiaries within the manufacturing segment were deemed essential businesses at the onset of the common 19 pan but pandemic and have continued to operate.
That said management measures were implemented to ensure that health and safety of staff because of the impacts of Kobe 19 have reduced efficiency and throughput despite robust demand.
Moving to EBITDA consolidated EBITDA was 62 million down, 29% or 25 million for the quarter compared to Q2 2019.
The primary contributing factor to the decrease can be attributed to the impact of covert 19 on both segments.
4 million of the reduction in EBITDA was caused by a pending reassessment of certain input tax claims that related to several years for which a charge was booked in the second quarter of 2020.
While we have conservatively accounted for the reassessment in the quarter. The Corporation does plan to pursue an appeal.
EBITDA in the aerospace segment in the quarter was 47 million a decrease of 41% compared to the prior year.
EBITDA generated by legacy Airlines and provincial decreased by 11 million.
Corporation quickly adopted its operations to mitigate the impacts of covert 19 travel restrictions and implemented cost reduction measures through scheduled frequency reductions labor rationalize rationalizations and various reduction strategies and qualified for the Canadian emergency waves subsidy Sues program.
EBITDA for regional one decreased by 21 million from the prior year contributing to the lower comparable is a decrease in revenue across all lines of business with the most significant being the 17 million reduction in high margin lease revenue.
And the manufacturing segment EBITDA was 22 million an increase of 6 million compared to the same quarter last year. The increase was driven by the same factors I noted for revenue.
Margins in the manufacturing segment continued to be impacted by lower efficiencies from social dispensing protocols implemented in the plant and higher cost from Sanitization and personal protective equipment.
Turning to earnings and Q2 2020 in the net earnings was $3 million, a decrease of 19 million compared to the prior period.
Corporation generated lower EBITDA compared to the prior period as previously discussed.
And which mostly explains the earnings variance from the prior period.
Net earnings per share decreased from 68 cents per share in the prior parenting eight cents per share and for the current period and should also be noted that in the period. The weighted average number of shares increased 8% over the prior period, which has impacted the per share amounts in the current period.
Adjusted net earnings was 6 million a decrease of 21 million from the prior period adjusted net earnings per share was 16 cents per share down from 83 cents for the prior period.
In Q2, 2020 free cash flow was 42 million or one dollar and 21 cents per share a decrease of 23 million from the prior quarter. The main reason for the decrease as the decrease in EBITDA.
Free cash flow less maintenance capital expenditures per share decreased by 30.
Five cents per share to 73 cents per share in the quarter.
The corporations payout ratios in the quarter were negatively impacted by covert 19, the payout ratio for the quarter was 78%, which is much stronger than our 100% payout ratio can commitment and given that it occurred at the height of the pandemic Lockdowns management believes it is a testament to the resilience of our.
Business model and our subsidiary operations.
We were able to generate sufficient positive cash flow to fund our capital needs, our dividends and paying down debt at the same time.
To allow for variations due to seasonality in the business. We continue to utilize the calculation of payout ratios on a 12 month trailing basis, the free cash flow less maintenance capital.
Now, let less maintenance capital expenditure payout ratio on a 12 month trailing basis increased to 76% from 54%.
Before I pass the call onto Carmel I would like to note that within the quarter. The corporation reviewed all available programs and government aid and each jurisdiction in which it operates.
In addition to the Cws, which might noted in the quarter for the Corporation.
Also received modest support from the government Nunavut in the form over revenue guarantee which allowed for the corporation to continue to provide a level of vital services to our none of it customers Corporation chose not to participate in the payroll protection program in the United States.
Without the subsidies and aid received the corporation would have sought to offset a significant portion of the subsidies received by way of cost reductions through other means such as significant reductions in workforce or as it pertains to our Lehrer airlines and frequency of service.
The federal government has recently announced new bilateral program with the provinces in territories to support Air service into isolated communities. We expect you guys. The airlines to qualify this for this program, but no details details have been released on how to qualify for if the relevant provinces will choose to participate.
We look forward to the details of this program being announced.
That concludes my review of our financial results and comments I will now turn the call over to Carmel.
Thanks, Daryl and good morning, everyone I'm going to focus my comments on the outlook here for a various lines of business any I see the whole.
No one can predict with any degree its certainty what the net after the Kobin virus will bring looking forward to the balance of 2020, we expect sequential quarterly improvement in our consolidated results even as the CW subsidy is phased out.
A level of recovery, however will vary between business line and geography.
As Mike indicated our schedule passenger volumes are currently about 40% to 60% of normal as many of the communities. We service still have travel restrictions in corn seed period in place.
As these restrictions or east passenger volumes will rebound quickly historical levels as there is pent up demand.
Just a man is driven by the fact that the underlying reason for movement in and out of the community is essential or near essential travel medical travel movement of healthcare workers trades people and resource sector workers.
The recovery, we have seen today, where we have rebounded from being 90% below normal in April when problem restrictions were the most severe to where we are now at about 40% to 60% of normal with only some of the communities opening up or eating restrictions provide a sense. The speedy recovery we expect.
The slowdown in passenger travel has meant an increase in demand for freight for the reasons might explain.
This increase demand is expected to be sustained for the balance of the year, even if communities open up although the mix of Carlo will likely revert back to more historical norms.
During the height of the pandemic almost all the cargo we moved was essential goods like groceries and mail.
As people start traveling out of their community there is likely to be some reduction and essential good freight, but an increase in the movement of discretionary items and construction materials.
Turning to work is nearing normal levels and in some regions exceeding historical volumes assisted by the work we secured from indigenous services, Canada to move health care workers into the north in all 10 provinces and the resumption of various resource project recurring movement workers in and out of the cash.
Similarly, our men are back business has returned more historical levels as governments resume moving non urgent medical patients who cannot problem for medical treatment arms against flights.
We expect both of these trends to continue.
The Aerospace Division will continue to perform materially unaffected by cold made for the balance of 2020 and will be assisted by the resumption of operation to force multiplier after being idling contain and the started a new the full contract towards the ended the year.
The resiliency of the aerospace sector is perhaps most evident from the fact that the Netherlands surveillance contract tendering process was completed Pell aerospace together with its partner jet support holdings were selected as the successful better and a contract will all be concluded in the middle that pandemic.
This contract solidifies, how aerospace as the leader in international is our solutions and builds on expertise in operation in Canada. The Caribbean, you AG and now in the European Aerospace markets.
So one is the since injury that has been hit the hardest and will be the slowest recover and as it is dependent on the improvement of traditional regional carriers.
The regional jet market is expected to return to service sooner than larger body aircrafts.
For mainline carriers trying to restore their networks and the week of a pandemic passenger volumes will be very low to begin with minimal minimize those losses during low demand mainline carriers will look to utilize regional aircraft.
The role of regional aircraft in the recovery of the airline industry will create increased the men in regional aircraft parts and engines as customers look for economic parts solutions and ways to avoid expensive shop visits we still want is well positioned can be that solutions provider.
With the recent research.
Surgeons have new Kobin cases throughout the world the commencement of the recovery at the regional jet industry has stalled.
We anticipate a measured recovery for the balance of 2020 with no material improvement until 2021.
However, with challenge comes opportunity.
Regional one data driven knowledge and discipline has always enabled it to acquire assets that are in the money since the end of asset value is greater than the acquisition value.
However, the might be created by Cobiz 19 provide even greater opportunities to access assets at favorable values.
The lower acquisition prices enhance potentially carats, providing greater cushion of time and flexibility to monetize the asset and create new opportunities for regional ones customers to step up into aircraft that they could not previously a for these investment opportunities will drive future growth.
We expect demand overall in our manufacturing segment remains strong, but with continued reduced demand in some project deferrals you'd the impact of Kelway, our manufacturers to settle into that new norm of operating any Coleman environment and are focused on finding different ways to mitigate the impact from the buyers. This is.
Including for example, overhauling shift structures to retain social distancing, but increase overall production hours.
Also the recent acquisition of with together with the purchase of ADW.
Late in 2019, now vertically integrate quest in all of its market and provides a strong foundation for further growth.
Turning now to our Capex outlook.
Our maintenance Capex is primarily driven by higher aerospace maybe Asian segment. It moves in line with their scope of operation.
As flight hour decrease as they get executed so good or maintenance Capex. This level of maintenance Capex is expected to gradually increase over the balance of the year as our flight hours increase.
Material growth capital expenditures for the balance of 2020 are comprised of completion of the deal flow aircraft, which will be operational by the ended the year and the acquisition in the third the Miss NIGC Mitch Mr nicely.
Let's see that weren't mission nation are the two dash eight aircraft required for the start of the Netherlands Coast Guard contract, which are required to be completed in about 17 months no. Other material growth Capex is expected. However, we will take advantage of opportunities if they arrive.
Although there is much uncertainty in the world constant has been our business model and our execution of it.
Our business model has developed to achieve has been developed achieved three objectives, which we have set out in each and every mdna since our inception since the best predictor of the features the path I thought it useful to conclude this outlook section by seeing how we ferry in achieving our objectives in the.
Time, how this bodes for the future of VIP.
Yes, he first objective.
Do you provide shareholders with stable and growing dividends.
Q2 was undoubtedly the most challenging quarter in our history, yet we were able to generate free cash flow from our operations and manage our working capital to not only paid all of our capital expenditures are different end, but also pay down our GAAP by more than $10 million and we're just getting stronger as is our confidence in our ability to continue paying.
The dividend.
Our second objective is to maximize shareholder value through ongoing active monitoring all been investment in our operating subsidiary what did we do in the midst of a pandemic, we secured and a new long term maritime surveillance contract in the Nevertheless, Netherlands, we invested in Q4 hundred aircraft to meet the growing demand in a customer we modify.
Hi to dashing aircraft increased cargo capacity just to name a few examples.
The strength of our balance sheet allows us to not simply focus on cost cutting to manage through the pandemic. It allows us to capture opportunities to add shareholder value income of this crisis well positioned for growth and we will continue to invest in or companies to create shareholder value. For example, we're assessing the void left by other Eric.
For years, the opportunities to access new revenue streams with larger gauge turboprop aircraft and investigating providing alternative service delivery model in the aerospace sector as governments loves to outsource services to lower cost.
And where do you yes.
An objective is to continue to acquire additional businesses or interest there and to expand and diversify Yankees investments. We have done exactly that as is evidenced by our acquisition of with at the end of July.
Endemic will not stop us from pursuing additional acquisitions, whether that be standalone businesses tuck ins or asset purchase opportunities at regional ones.
So what can you expect in the future.
For the same continue to nasty and the execution of our business model and achievement of our objectives.
Finally, before moving on to questions I want to thank all customers shareholders and stakeholders for their ongoing support and all the people who put themselves at risk to look after the rest of US would now like to open the call for questions operator.
Thank you even that now conduct the question answer session. If you do have a question. Please press the star followed by the number one on your Touchtone phone, you'll hear a tone acknowledging your request your questions will be pulled in the or did they are received please ensure you left the handset if you're using a speaker felt before pressing any key.
First question comes from Chris Murray with Eightd capital markets.
Thank you good morning folks.
Good morning.
Good morning.
Just maybe turning back to the government accounted support announcement for.
For remote communities.
As part of that announced but they also put out a I guess they call background document and just sort of connecting the dots.
It really does look to impact a lot of your operations in Manitoba, Ontario and Newfoundland.
I also will get the impression that.
The the Nunavut program that you've been running.
Or participating in is maybe tied to this somehow can you give us some more color on what you think that they're proposing and I mean is intended to be calling a direct subsidy or is it more to treat the I guess the services that utility and just.
Kind of give you a minimum guaranteed return.
I think.
First of all your.
Got to admit that we've seen precise details. This is from discussions we've had over the last three or four months. So this was put in place with a concept is the I understand that we can't stop flying into certain communities because it's the central service and they know that you can always lose money for so long flying to those communities. So the.
Ideas to provide some revenue will factor with guarantees to make sure that you can afford to continue to provide the service.
The.
Plan, we had Nunavut was similar to that in the past that peers program expired at the end of the corridor, where they made sure that if we met a certain schedule. They would buy a certain number of ticket said, we did get some modest supported by the two or $3 million talking about program, we expect it to do program.
We will be similar but the challenge is going to be is that it's meant as a bilateral prop.
Program with each province, so they've got to lay down these parameters with the province that we have to negotiate with each province, so while we're very excited to see this.
We view this as we're just kind of getting started we got to talk to the government's how it's going to work and I think it'll be very important should we face a second wave and we see a declined at volumes again, having this is a backstop will be very valuable hopefully if we don't see that will outgrow this program very quickly.
Because volumes will be such that we will require.
All right and the activity level would apply essentially a lot of ways. It's almost like you're running a SCPA on behalf of them because you'd probably be in different to passenger cargo is just maintain the supports the communities as a way to think about it.
Yeah, exactly I mean that as much as a powder and passenger is about the same as a powder freight the beauty of the passenger as they go south and north, whereas freight largely goes just south to north of the planes aren't as Paul said for more active passenger business is good more efficient.
Businesses, Okay fair enough.
And then my other questions just on the quarterly cash flow you made the comment about you are able to manage your working capital and cash flows and such a way that you're going to fund the dividend in your and your maintenance capital expenditures.
A couple of questions about that I mean first of all you received the accuse payment in the quarter.
And just just any thoughts around what that might do to Q3.
But as well certain companies have been telling us that they've received other benefits tax deferrals things like that so I guess trying to think about the rest of the year, how should we be thinking about call. It an unusual quarter of leveraged pull to manage working capital and how that might unwind through the back half of it.
Well I think if we start with working capital as the business grows will undoubtedly have for growth in receivables because we're doing more business.
I wouldn't expect to see any more funds generated from declines in working capital, but we will stay on top of out to make sure that build in working capital to extent. There is one reason a bare minimum.
As it relates to other support.
We really haven't taken advantage of many deferrals, we paid those.
We'll sort of as their do.
We have taken advantage of disused pro ramp up it helped us being team more employees than we otherwise cleared out the skilled employees that you don't want to lose and that's helped us not do that.
We certainly expect to see that sees out over this quarter or certainly phase down dramatically all but the growth of the business is expected to more than offset that and we're expecting sequential improvement so.
We're bullish on that and I think the final thing I'd like to point out is there were other programs, we have the option of tapping into.
The most obvious one being the PPP program in the us and we qualified be song the up.
The pure rules of the program, we chose not to access it because the program was intended to support businesses.
Not has been able to get through the period without the support that was dead. We're in the case, we lost that we thought it was disingenuous to draw those funds and as a result, we chose not to and so as we exit this.
The weight support program is.
Yes, he program sized program material T I see right.
Relationship with the government is due to business has been awesome they've been a great partner.
That's a big part of how cobs been able to do what they do but at sea level, that's a very modest size program.
And just just a follow up so just if I understand correctly. So the staffing levels that you maintained in Q2, which were offset by the cute program your expectation as the activity levels in Q3 will probably be able to absorb all that staffing.
Kind of in a normal fashion.
Think about it.
The data would be the shortest answers the day, yes, okay, alright, thanks folks stay safe. Thanks.
Next question comes from Cameron Doerksen with National Bank financial.
Good morning, Ken.
Good morning, sorting, so I guess maybe.
A question on.
The restrictions that are still preventing a fair amount of the ramp up in the flying activity do you have any sense of when somebody thing is going to be eastlake in Nunavut for instance, and you know I guess, there's even individual communities in Manitoba for insensitive funeral restricted access what's your sense on when some of these things are going to start to today.
Yup.
Oh discussions with the government of new nuclear ongoing we believe they're going to go to a model in the near future. So that we.
Short our bonds.
Where they will test when people.
Returned as a community and that well and then no.
Quarantine within the community as opposed to quarantined again the sound.
Which will have a dramatic impact from the number of people flying.
Sometime I mean, it depends on what happens with a number of cases, but the government tends to move forward without our understanding is over the next 60 day kind of thing again I'm speaking on behalf of somebody else and there is always a huge risk in doing not in terms of Manitoba.
He is highly during that same on Terrence highly variable based on the commuted his experiences of the past northwestern Ontario, as an example of experienced a very difficult time with the Sars outbreak a decade ago and as a result.
Strictures at northwestern Ontario would be far higher than they arent, Manitoba and so ones at the high end to that range once at the low end, having said that as.
As is.
Governments have come to grips with the fact that this is going to be about managing coded Dod eliminating it I think you're going to see programs be chose to travel more simply because the medical needs that those people are traveling for whether it's to give you see the orthopedic surgical both their help work well see the cardiologists are going to see that gives you doctor.
Those aren't going away and you can only defer those for a period of time and so we expect that those volumes will continue to rise over the Q the third quarter.
They likely plateaus somewhat less than 100% of normal because some of the pure discretionary stop the dot some back fill various things like fishing launches and those kinds of things may not return.
Until next year I'm talking about but we anticipate.
Continued growth of those passenger loads sort of on a progressive basis over the ensuing period with the big gastric Dennis something else options with told me that could change.
Okay No. That's that's helpful.
My second question relates to regional one specifically on the aircraft leasing revenue meet obviously down significantly year over year I'm just wondering how your how your accounting for that I mean, it looks to me like you know if you've got a airline that leasing one of your aircraft from lead to read the one that if they're not paying you you're not recording that as the revenue have I got that right are you.
Actually building some receivables in there somewhere from deferred payments or anything like that.
The short answer is no. We're not we are only recording.
Revenue that we expect to receive and in fact.
Our receivables if I were to look over Q1 in Q2.
I'd say two thirds of those have already been collected just to give you a sense of how we're dealing with it but even deferred does not get recorded.
Okay. Okay. That's helpful.
Maybe just squeeze quickly your third question just on the I guess the manufacturing.
Merge and in the quarter I mean, obviously there was some I guess some benefit from government subsidies in there, but I'm just wondering what kind of a more normalized margin are sustainable margin might look like as you've acquired some businesses here that I think are in the last six months or so that are.
Probably positively contributing to margin. So just any commentary around sort of go forward manufacturing merging would be helpful.
Product mix is a huge part of that issue.
The when you look at our manufacturing stuff, where we make things in factories, so whether it's been machine or quest storing stainless fabrication those tend to be higher margins. Some of the stuff we do in the field, where we're doing service work.
West Tower for example would be lower margins. So product mix is a large driver of this.
As we bought recently would tend to be towards the higher end simple margin structure, whether it be very glazers or.
Uh huh.
We just tools.
And you're right to the extent there is up a benefit.
The bottom line of the CW would be at the manufacturers because the demand remained strong for those who we did have some benefit of CDW is there. So that helped the margin profile it in manufacturing in the quarter.
We would expect from a big picture point of view that as things stabilize.
We would we see an improvement in margins over time from from margins from operations simply because the amount of work the way I need to keeping our people save shutting down plants.
Colin proofing for a lot to a better term is significant and I don't want to give anybody that this information that that somehow changing that's exactly where we're saying we put a lot of effort to get to where we are but in the future as we get this nasty pandemic under control.
We'll be able to see some improvements in margins as we put more people into our factories. That's Dod expected in the near future. However, and in the second quarter, we didn't experience local some ebbing and flowing in particular it quest as we had some of those job site shutting down because cold in the real ban and they shut down again, so that was.
Ill see challenging.
And the comments I need wanted to point.
Was it were settled into how we need to operate or manufacturing.
Factory and as such our focus now is actually an improving efficiency. So this is the new norm, but how do we get better and we're starting to see some changes that are driving some increased efficiencies for us.
Okay. That's great. Thanks, Thanks very much.
Next question comes from Steve Hansen with Raymond James.
Worthy.
Just a couple from me can you might you referenced the opportunity set the near term medium and long request in your remarks I'm. Just wondering if you could speak to the near term.
Demand profile.
You see it right now just trying to get a sense of how much dislocation might still be out there there have been a number of public companies reported the U.S. recently on the building product side not perfect comps admittedly, but they all seem to have very strong.
Rebound built into their profiles and even through the quarter. So just trying to get a sense for how that business is performing today relative to normal answer what you're seeing here in the balance here.
Oh, so in the near term.
Our biggest challenge is simply just changes is the timing of certain projects that had been delayed or not delayed and making sure. We can get those delivered on time.
So it's really just shifting of capacity.
We were booked to a very high level of capacity before this happened and so just keeping up is the challenge.
In the medium term.
Our order book strong.
The completion of new projects.
I'll.
[noise] Gors delays in in terms of the final award to some of those so you may see pockets in the next couple of years, where.
As we.
Push out.
We're seeing a bid up.
What is a little more challenging Italy looking a median term it's really just pulling new work, which was an easier task a year ago. So allies, we saw us move production previously.
Extend something gets pushed harder to feel so you might in the medium term see a little bit of some pockets of.
As not being having the throughput that we had in the past, but the demand long term very strong we're still definitely quoting a lot. We don't see any reduction in that regard so still fairly optimistic in this space.
And diabetes.
Long term part of its Steve is driven quite simply by Densification of markets and we've seen this through dislocation before in 2008 2009.
It wasn't a hiccup in travel as an example in terms of our building.
The simple fact isn't people on a live at major centers, it's too expensive to build up low level housing. So its high rise buildings, which are our.
Strike, so we're very bullish I'd be.
I don't think there's any greater are evidence of that that investing $40 million plus you assay in the purchase of Wes.
That's a good that's a good segue, Mike just wanted to ask about the capability profile there now you've got.
You I previously and now you've got with I mean, do you need that done like do you have to complement.
The service profile.
For the U.S. or do you need additional capabilities on the service right of return.
No.
That covers everything off in Canada, we always looked after our own installation. The U.S. We use these two third party companies and the beauty of this is as we expand into new cities, you'll you'll recall, we're in a relatively limited number of markets with glass, the western seaboard and a little bit in the northeast as we move into the Dallas is at Houston Miami reasonable.
World are our window installers will move with us our experts are eight Wi and with will continue so as we move into those markets will no longer have just the.
Procurement part of the project, but was the installation part of the project. So each project will be worth more money.
Okay rail guys I'll jump back into queue. Thanks.
Thanks next question comes from Mona Nazir with Laurentian Bank.
Ordering Mona.
Good morning, how are you.
That's a good day.
Congratulations on the corner.
Thank you.
My first question. It just maybe another way of asking a prior line of questioning and that would be what would be what we'd reasonable expectation b. If I'm thinking about can you guys receiving aid in Q3 in Q4 typically in regard to the Canadian emergency wage subsidy I understand that you're expecting already seeing a pick.
I think demand, which would ultimately reduce that but is the bigger perhaps five or 10 million versus 29 million in Q2, I'm just trying to get.
Hi, My head around that thank you.
The calculation for CDW is such advanced math, we're still running different models on exactly how to qualify because you can claim at all individual company basis as you could climb as on a consolidated basis, if you could claim and under the old program and the new program.
I think it's safe to assume you'll see a decline in the range of half.
And.
My controllers glaring have the right now for giving you a number.
Because it's really hard to determine exactly how it's going to work with the rules at where that number shake out, but there will be a material declined in Q3 and what's left in Q4 will be quite small.
Hey.
So Tom we get to Q4, the amount is not material.
No that's very helpful. That's great.
Secondly, Justin was tied to the Beacon acquisition.
Pendleton, the leasing company.
Press release, you provided the purchase price, but I would just wondering if you could give revenue EBITDA contribution or what we could expect I'm I'm, just I understand that vertical integration complementary nature of acquisition versus class can easily life, but you know just wondering if you.
Talking about your thought process of why purchase now, especially when you were huh.
Looking to bring in spending.
Okay.
No I'm not telling you is huge.
I will tell you that when we released a Wi we told you those transactions were accretive on a pure equity basis this transaction different.
It's a very low end of the multiples we pay because of the.
The symbiotic nature of the two businesses were the natural buyer so.
You can work backwards off that it get a pretty good RASK event. The other thing, we said, where we bought a wi which isn't much different here that backlog of of about three years pays for the majority of the company.
So those are two sorghum batches of the right direction in terms of why now.
We were way down the road with this before Kogut.
We Tobin hit we literally pause because we were so busy trying to juggle balls of this job. This can't as close to strong result, but hurry up and catch up on this job slowdown on this drop and as we got that under control.
We gave a little third party due diligence to confirm what they thought the market would look like it in months in years to calm and it was directly in line with our thoughts and so because we knew the people because we've negotiated a deal.
Largely going into account and because we could do the due diligence because we do that we do the order book There was no reason.
Dot take advantage of the profitability of the projects has not closed the deal now it strengthens yet.
Well, it's a very unique deal Mona in that it's highly accretive from a financial point of view, but it's also highly strategic in terms of allowing us to grow into future internalized processes and quite frankly make it easier for our customers. They know single point of contact and if the windows aren't.
Installed on the right time, there's no debatable, whether all the installers later the production was light it's our fault no matter what didn't send it makes it easier for the customer easier for us and up makes it easier to pay the dividend with the returns.
Also I guess showcases the IC business model quite well in my view.
There's a couple different ways you can deal with in a pandemic input your head down focus on cost and use that is your soul tool to manage through it that's not our view.
We haven't balance sheet got stronger enables us to seize opportunities in for the reasons. Mike stated, we felt comfortable we were able to build and do due diligence on on this deal and we knew we can be very credo. So it was an opportunity that we took advantage of and if other opportunities like that arise. We will continue to take advantage of those OCC.
Is it because that will continue to propel our growth going forward.
Perfect, that's great and I want to be cognizant of the time, but if you could you share perhaps the biggest takeaway or most significant upright.
Working through the pandemic.
Yes.
Oh, and what do they have different answers your but I'll go first to me, it's our people without a doubt how they stepped up how they've effectively almost on the impossible and managing operations and putting themselves on front lines given the nature of all the things that we do and products, we make it was coming up with ideal to.
Able to take care of needs that we had as a society, whether that's the manufacturer phase Shields. Your IP calls every one stepped up and we acted as a big family and we got through the successfully as these quarterly results show and we contribute into is trying to minimize the impact.
Endemic.
Yes, I have to agree with Carmel I think the biggest sense of pride ticking away is the cross collaboration within the organization as well and just that overall effect of a family and get it making sure that as an overall company or health is strong going forward.
That's great. Thank you.
Next question comes some Konark Gupta with Scotiabank.
Hi wins.
Yes.
I would like Brazil at what good morning, I would like to know what level of capacity on load factor to the legacy Airlines breakeven on cash flow in the current fuel price environment.
Oh, that's impossible question to answer because you got were profitable we were profitable in the airlines in the last quarter.
With the very low levels because of the diversity of our product with doesn't matter pacsun the charters and the other things we do.
On a pure schedule basis, we're profitable now with the load factors we have.
In aggregate.
But in certain markets, we are significantly losing money, where the load factors are it's not as simple as saying at 48% of capacity.
We make binding be just talking about more freight than others. Some out in our businesses is two different ted to simplify than that way, but as as.
Load factors Clive over 50%.
We start to getting closer to making money on appears scheduled basis, we're big money in aggregate now because of our diversity.
Thank you I do have another question.
What do you expect to cash flow before working capital and growth capex to be for the next two quarters.
We don't provide specific guidance like that we have said sequentially we expect.
Recent results to improve in the third quarter increases in EBITDA with maintenance Capex remaining modest by historical standards carve outlined we growth capex profile being essentially being limited to the.
The two aerospace products. So we expect continued improvement to not to look to Q4 is difficult with Kobe, maybe the changes so fast.
But all things being equal we'd expect continued improvement.
Thank you don't have any question.
Next question comes from Scott Thompson with RBC.
Folks.
Couple of questions on regional one.
I guess, it's three questions.
Part.
Can you give some color on the current operating situations that are carrier customers particular skywest.
Do you anticipate.
Just to the partnership.
As well what strategy changes and cost measures can you take should corporate team.
When you to hit those regional airline customers.
Oh, Okay. We're skywest, we've maintained a strong partnership the.
The conversion of seven hundreds to 550 is what has been slowed by this but the main airlines underlying airlines.
We're looking to that strategy are still looking to that strategy. So the implementation of the baby slowed but the ultimate.
Deployment of those aircraft I don't believe is in jeopardy.
Skywest like all carriers is is.
Reducing its fleet mallow, some impact on some of the older aircraft, we have with them, but it's not a material material issue.
In terms of the strategies, we can deploy.
Beauty in the regional one model is as sales slow and amount of capital what needs to go into it declined dramatically because we have the assets available. There is generated positive cash flow in the quarter, even though the regional airlines were very very slow.
We fully anticipate that there's going to be a supply and demand in balance over the next couple of quarters in terms of people trying to liquidate assets because of financial difficulty.
We look forward to that because we understand the value of those assets better than anybody else and what we could buy that Matt.
Prices that are advantageous.
We will do that we have small deal where we bought from Q4 hundreds at a price that was materially less.
Now that we would have paid six months ago.
We've already Bob FAOD homes for a significant portion of the of the planes we were purchasing so.
Regional one is going to go through a period, where its smaller theres absolutely no question about that but there's also regional carriers are not going away there may be insolvencies in the business, but if you're going to fly from Cincinnati to Cleveland, you're still going to do it on a regional jet if you're going to go from Toronto.
No to Montreal, you're still going to do it on a regional jet or turbo prop and as those recover sold out business and it will recover faster than widebody Jot service. So we are any way could circle for.
The long term health and this even the medium term ALP, but in the short term it doesn't it doesn't absorbed cash it's not a cash sleep and.
We will we will ride through it and we'll look for opportunities to make a stronger when we come out.
I can add a little bit more color sure sorry, Scott.
Thanks.
Okay like the by 50 program, we are still receiving lease payments just to put some kind of reality to your question and expect regardless of whether it's from the existing carriers or where the program may shift that program for United will remain.
I'll see time will tell but that's what kind of industry thoughts are at the moment.
On the cost side, I mean with pretty nimble our cost infrastructure.
Our one so we can adjust that have adjusted that accordingly.
And when I look out in kind of see potential opportunity I mean, when a regional carrier start to fly again, they're going to be looking for.
Affective cost ways to deal with maintenance accessing card engines, they're not going to want to spend a million dollars into overhaul and engine, but they might lease something in a short term until they are being able to build up their maintenance reserves again those are all things that that's.
What we do it regional one and you know skirt schedule charter is actually growing some momentum in the sense that people look to perhaps will want to travel on the typical scheduled service airline where you go to a major airport again, there's obviously lots of other people there that they want to go to private appeal.
Where they can get to the places they need to go is on aircraft that have a fewer people. Then you would typically see and so people are looking at maybe buying at here Jay 900 Bucks stripping out a number see again, we're there to fight solutions because that's what regional one does its not run less or not just the parts provider.
As a solution provider. So we're in discussion with many of our customers to be little kids nature, where there for them to provide thoughts and options as to what they can do to be able to access to market. The does exist.
That's a that's great that's.
Yes.
Just.
Another question on.
A little bit.
Related to.
No one.
And aerospace how does cobot 19 in their lift deterioration how does that change your longer term acquisition focus is that going to be more manufacturing focus the companies that are directly related to your current for portfolio and.
They could making manufacturing allergic part of the asset portfolio well aviation.
Aerospace or.
Paired.
I think.
Part of your question I think if we start with the manufacturing piece first I think it's likely that you see more opportunities on outside simply because we're a bigger portion of the aviation market already and the number of companies that meet our criteria are smaller so overtime, yes, I think.
A reasonable assumption that you would see more acquisition on the manufacturing front.
The one part of that the underlying question I would challenge, though are the aviation front, we've seen that some parts of this business has done very well through the pandemic and in fact actually increase our diversity, so whether it be maritime surveillance matter that some learnings we love those businesses and.
David has probably made us like them even more.
And so we're not scared away of investing in that segment.
Having said that there is probably less opportunities to do and so if we get something that fits.
Augment our as an example, our surveillance business with new technology or something we would jump at that opportunity.
But practically speaking I think it's realistic that there's more opportunities on the manufacturing Todd.
Okay. Thanks Bye.
Just a couple of housekeeping questions. What's included in growth Capex for the first half of two.
2020, and I apologize if I've missed it to your disclosure is more than detailed.
Incurred capex for the two Netherlands that shades.
No not yet we just want to contract and you may see a touch of that is all at the end of Q3, but more likely that begins in Q4.
Most of the growth capex relate to finishing the fisheries contract, that's where the lions share of the growth Capex.
We have not again said, let's start a part of it has been delayed a couple months by coven, but that still goes into into service. What late Q4, correct. Yes. So no material impact on the start date, but most of the money. We've spent is getting ready for that contract.
Okay. Thanks, and just final question has the quest sales backlog, how and how long is going to take.
Revenue synergies with the was acquisition.
Soon that part of the and includes expansion into new markets.
Yes.
We obviously the new markets, we're going to wait till we get through a little bit of this coded stuff and things normalize the order book would probably be down marginally quarter over quarter simply because people aren't finalizing projects in terms of the inquiry book into it.
10 basis that is actually up so it's really the just variations in times of closing of that.
The synergies.
In a struggle with the word synergies on this because we're buying a service we did do before so it's really mostly additive, but essentially now every job new job. We book we book at.
30, 40, 50% more than it was before because we have the of the installation part of that job and so that but with you.
Nature of the order book being what help year carve out 18.
24 months out yes, you the new jobs, we bought don't show up till that till then it's the order book, we purchased as part of this didn't show up so it instantly in our results and the organic improvement up it helps as we booked new jobs it because of the order cycle that's pro.
We 2022, some time before you see.
Sure. That's that's 18 to 24 months for with.
The whole Wes.
They're all this they're all the same thing like the order profile, we get a job booked.
Yes.
That's a very shorted the year in advance as a longer in two years so did that.
So.
Well, we're booking for now is it until 2022.
Okay. Thank you terms revenue quarter, that's why the order book is so significant.
Okay, great. Thanks, Mike Carmel that's.
We'll detail.
Thanks Scott.
Once again, if you'd like to ask a question. Please press star one on your telephone Keypad next question comes from Steve Hansen with Raymond James.
Yeah, Hi, guys, sorry, just one quick follow up on the force multiplier like you'd mentioned that didn't drive period, but you had some short term duration contracts set up for the back half of the year, you're trying to get a sense for how much activity. There is in through the the option there for that that aircraft.
Into the back half your you still booking additional.
Deployments at this point fill up the back half or even touch we think it but that is incremental to what we saw it keeps you went from zero.
Sure Steve It's kinda I can take that question. So we're actually book now to the ended the year Awfully book.
With the government Canadian government. So we're now looking into 2021, we're in discussion with a couple of different governments for its use that we'd be longer term.
As we work through those details, but we're very comfortable obviously with having it to fully utilize the balance the year.
Okay, Great that's very helpful. Thanks.
Hi.
Once again, if you'd like to ask a question. Please press star one on your telephone keypad.
And we do not have any telephone questions. At this time I will turn the call over to the presenters.
[noise] no further questions I'd like to thank everyone for.
For participating in today's call non too soon on a go lost the ability to speak so never great day and look forward to speaking to you. When we report Q3 in November.
This concludes todays conference call you may now disconnect.
[noise] night vision.
Well those we have a half dozen former leaders of the environmental.
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