Q1 2022 ECN Capital Corp Earnings Call
Thank you for standing by this is the conference operator welcome to the E. C. N capital first quarter 2022 results Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded after.
The presentation, there will be an opportunity to ask question.
To join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, an operator by pressing star and zero.
I would now like to turn the meeting over to Mr. John website.
Please go ahead Mr Wimsatt.
Thank you operator, good afternoon, everyone.
First I want to thank everyone for joining this call.
Joining us today are Steven Hudson, Chief Executive Officer, Michael <unk>, Chief Financial Officer.
A news release summarizing. These results was issued this afternoon financial statements and MD&A for the three months period ended March 31, 2022 have been filed with SEDAR.
Documents are available on our website at Www Dot <unk> capital Corp Dot com.
Presentation slides to be referenced during the call are accessible in the webcast as well as in PDF format under the presentations section of the company's website.
Before we begin I want to remind our listeners that some of the information. We are sharing with you. Today includes forward looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties I refer you to the cautionary statements section of the MD&A for a description of such risks uncertainties and assumptions.
Although management believes that the expectations reflected in these statements are reasonable we can obviously give no assurance that the expectations of any forward looking statements will prove to be correct.
So note that the company's earnings release financial statements MD&A and today's call include references to a number of non <unk> measures, which we believe help to present the company and its operations in ways that are useful to investors. A reconciliation of these non <unk> measures to ifr S measures can be found in R&D.
Yours are presented in U S dollars unless explicitly noted.
These introductory remarks complete I'll now turn the call over to Steven Hudson Chief Executive Officer.
Jonathon and good evening to our shareholders and our analysts turning to slide seven.
We've seen the slide before just to quickly recap the three key business components of ECS.
First and foremost is our proven prime credit origination platforms with deep bulks surrounding those platforms second is our committed funding partnerships with large institutional investors.
That focus on Prime credit has led to superior credit performance, which I'll speak to in a second as well as we have continued strong demand and grow.
From new investors, who would like to join the program.
Unfortunately, I'm not able to unable to accommodate OLED demand is currently.
Turning to slide eight.
We continue to actively pursue tuck in acquisitions of private credit originators as you know source, one we announced.
It's been very successful at the time of announcement there was a 15% increase in EPS is actually tracking higher than that.
We have a series of criteria that have to divest when we look at these transaction size.
Itemize those for you six points out of the third bullet accretive transactions asset light.
More importantly, prime credit assets in demand by our existing partners, we don't acquire something that our partners don't want.
Limited integration risk and high visibility on driving growth through our existing business actually on that point.
We're in Jacksonville. This afternoon, we've celebrated our fifth year in a fifth year of.
Only tri Ed as you know $6 million or invest invested in systems and products with people over that five year period, and that's allowing us to take try its extensive infrastructure in the form of funding partners in the form of flagged lower floorplan and servicing and leveraging that infrastructure that these tuck in acquisitions.
And I think commenting on the current environment, we are seeing a number of opportunities for private credit origination platforms with very attractive values.
Turning to slide nine with respect to the first quarter. We're pleased to announce <unk> of earnings per share, which is ahead of our 4% to <unk>, which we guided in February at our Investor day as.
As referenced in late February with increased confidence reiterating our 'twenty two 'twenty three guidance based upon the results of Q1 and the forward visibility that I know will have for the rest of the year.
Turning to triad very strong results, 57% originations above.
Over to bump in Q1 approvals, which began originations up 47% those approvals will turn into fundings origination for the next nine months. So that allows me to have an increased confidence I just referred to industry backlogs continue at over nine months and we are fully funded.
Able to accommodate new partners at this point and Keystone funding arrangements.
Previously announced partnership with Blackstone.
Turning to source, one originations were at 33% above approvals at 83% exceptional number.
Were those approvals again, we get originations, which will try to hit those originations in a six to nine months period, which gives me increased confidence, which I referred to earlier.
And we're actively pursuing modest sized tuck ins, which will be very accretive on the prime asset originators within this space.
Kessler group came in light.
At budget at $13 6 million and the growth momentum continues across partnership credit card investment management.
Marketing I think very good results for the first quarter turning to slide 11 with respect to the highlights of Tri Ed.
Pretax operating income up 78% year over year at $12 6 million originations up year over year at 57%.
Floorplan and stood at $221 million at the end of March 31, actually 250 at the end of April we try it had a very strong April as you know those floorplan assets are the foundation of our prime retail loans, a dealer who uses our floorplan produces three times, the retail loan or someone who does it.
Critical component of our prime retail platform.
We're fully funded for 'twenty two 'twenty three we're actually turning away institutional investors looking to participate.
Yet our loan investor programs.
All of that as I mentioned earlier gives me increased confidence to guide you towards the top end of not just earnings but also originations.
Turning to Q1 program update if you look to approvals in the topline focusing on the right hand side, you see the increasing momentum and approvals.
Percent Q3, 21, 24% in Q4 dollars 21 at 47 three.
'twenty two.
The turbulence that's occurring in the traditional housing market, which I'll speak to the second has created unprecedented demand for manufactured housing.
Turning to the expanded.
What's leading to this increased share gets or expanded funding partners. It's our low menu at our flow proud all three of those are driving results. We're pleased that we added 400, new MH communities in the first quarter, that's 15% growth.
In the quarter over quarter, that's exceptional foundation that growth in communities combined with our growth at Floorplan speaks strongly to the to the remaining part of 'twenty two and into 'twenty three.
These increased originations have also accelerated the growth in our managed portfolio, which is increasing our service revenue.
Turning to slide 13, you have seen this before but we have completed the full menu of offerings for our dealers and manufacturers.
Proud of this program and we're quite proud that we offer this on behalf of 100 institutional investors I'll be banks credit unions insurance companies gse's rates and credit funds.
Speaking to a bit of turbulence in the marketplace of 14, there is no doubt that the traditional housing market is going through some rough times.
That's an opportunity for us if you look to affordability on page 14, you saw on February that price increases were up 20%, which is very significant.
You combine that is actually a little more color on page 15.
You look at the increase in mortgage payments, which has reached record highs on average of 1800, which was up 70% since COVID-19.
Payment to income, which is a important credit matrix is at 32, 5% is approaching the all time high 30 $34 one.
Black Knight, which is a provider of software significant player in the mortgage area.
Estimated another 50 basis points of rates were up 5% increase in housing prices would push affordability to the worst level on record.
Turning to 2016, what's the solution to traditional manufactured housing sorry traditional built homes. It's manufactured homes. We are the affordable solution for traditional housing I wanted to have your focus for a second on two items monthly payments that you look to the monthly payments at triad pre COVID-19 at $611 per month.
At 760, that's an increase of $149 traditional mortgage has gone from 1094% to 884. So it is up 790.
Manufactured housing at Triad is only 40% the level of that of traditional mortgage that is what's driving.
Our exceptionally strong origination numbers and our backlog of.
<unk>.
Of loans and mortgages waiting awaiting delivery evolves.
If you look at PCI currently we're at 14, 1% up a little bit from $12 three but as I mentioned earlier, the traditional mortgage ptas preaching all time all time levels.
It's a great time to be in manufactured housing.
Youll see as I referenced a couple of our partners on the manufacturing side and their comments on recent recent public releases.
And the credit.
And <unk> when you think about monthly payments of PCI. The credit performance of manufactured housing over 50 year period versus traditional mortgages is three times better than the mortgages in that sector. That's one of the reasons why exceptionally strong demand from institutional investors for our products.
Turning to slide 17 impact on interest rates every 25 basis point increase in rates increases monthly payments of $100000 home at about above $15, just not material to the average consumer buying our homes 75 basis points of cruises at just under $45 a month.
Also as we increase interest rates, our origination fee goes up as well 25 basis points increase by $90.
Some commentary that I alluded to earlier on page 18 Skyline champion is the second largest manufacturer second largest manufacturer of manufactured homes. So recent commentary I'd highlight two items in their commentary.
Which is a combination of housing shortage interest rates and inflationary pressure are all favorable to the manufactured housing community.
Also comment on the third comment which is inflationary times manufactured housing becomes a far more effective cost solution.
<unk>, which is the number three provider of manufactured homes look at three of their commentary we're in a mode, where we're turning away business. At this point were taking meaningful share a share away from traditional holes into manufactured homes.
Basically the wins that they are back.
Rising interest rate market has had a very muted muted impact I would say a positive impact on manufactured housing.
Turning to our credit performance on 19 extremely strong.
Our delinquencies and net charge offs and this is driving.
<unk> demand.
The advanced four for our credit assets.
<unk> is just the month by months review of the originations I referred to earlier.
Turning to page 21 on guidance.
Again, reiterating with increased confidence to high end of our guidance for 'twenty two at $1 6 billion of originations over $70 billion.
Of operating earnings.
We have outsized performance in Q1, and we have strong visibility into Q2 Q3 and Q4.
John .
Thanks, Steve.
Turning on page 22, we're thrilled to reporting our first operating quarter for <unk>.
Adjusted operating earnings were $2 1 million, which was ahead of our internal forecast with origination Q1 origination growth exceeding budget by more than 16% of $111 million.
We've been active in adding new funding partners at source, one we added four in the quarter, including empty, but the three <unk>, including three credit unions and <unk> three credit unions.
<unk>.
I am sorry, including a team, which is a very important strategic 100 space and a longtime partner of Etfs, We made strong progress on the expansion initiatives that we discussed at Investor day, and we are reiterating our guidance for origination lease, which will expected to be between $525 million to $595 million.
On the next page.
We highlighted Q1 approval growth of 83%, which as Steve mentioned earlier is really an exceptional number and should lead to some fantastic growth for later in the year in origination growth of 33% year over year.
Both are well ahead of plan continue to be very strong post quarter. In fact to date, we are not seeing any changes in demand and volume looks to be tracking easily its previously announced guidance.
As mentioned before we did add four new funding partners, including three credit unions with over $150 million in capacity.
As well as <unk> now <unk> is a very strategic lender in the boat and RV space.
And actually it's a very long term relationship of ECS their syndicate member in our senior line and ECS relationship really enabled source wanted to close.
And then T as a funding partner.
On the next page with a bit of an update on our national expansion plans, which we really highlighted in took you guys through at Investor Day, We've added sales personnel in the critical Florida market as well as in the southwest we anticipate having full coverage across the country in the northwest and the northeast by year end.
And servicing and licensing projects are fully underway and will be largely completed by year end as well.
Through triad, we launched our floor plan inventory finance effort in Q1 to date, we have hired nine dedicated professionals management sales underwriting and operations are now up and running with several large customers.
Finally, we have added additional back office processing personnel as a result of increased volumes, we've been seeing across.
Cros.
In the quarter.
Just like it.
We tried to find some industry and industry commentary here.
These are some comments from from Brunswick, one water for and RV EIA, which is.
And RV.
Industry group.
So so both manufacturers dealers as well as as well as an industry group marine inventory levels remain quite low with large amounts of pre sales and demand and demand remains very very high with no signs of slowing down RV inventories have rebounded to almost pre COVID-19 levels with <unk>.
Sales backlogs are at all time high in demand has continued to be quite strong.
The impact of fuel prices appears to be quite manageable for both marine and RV with Brunswick estimating that the average voter will see an annual fuel bill rise of just $200. As a result of school price changes since the beginning of 2021. According to RV EIA fuel prices would need to double to make RV travel on affordable and more than 80% of our view on.
Say RV vacation still cost less in other cost travel.
Interestingly most of these companies.
Companies have recently raised guidance as a result of their continued robust with continued robust marine and RV market.
On page 26, we discuss some of the impacts from rising rates on our source. One first source one bears no interest rate risk as all of the loans are originated on behalf of our partners and all rate increases are pass through to customers and consumers.
To show the effects of rate changes on both consumers and source one as you can see interest rate changes and minimal impact on short films consumers only a $5 increase in monthly payments on average for each 25 basis point increase in rates.
So everyone's affordable RV and marine products have low ticket low ticket size is around $40000 nightclubs payments.
Importantly source, one makes more money as well as just like triad does with higher rates with an additional $25 in fees prolonged with each 25 basis point increase.
Yes.
On page 27, we just had a quick review of originations.
And then finally, we are reiterating our guidance from Investor day of 525 million to $595 million of originations and adjusted operating income before tax of 12 months to 14 months.
Moving on to page 29, we will talk about kg <unk> reported adjusted operating income of $13 6 million up more than 20% year to year revenues increased by 28% growth across each of the businesses EBITDA margin remains a strong 55%, which is slightly ahead of.
Our guidance from Investor day.
And just to reiterate we launched a strategic relationship with SLC in Q4.
We closed on a $450 million portfolio.
Page 30, we present some highlights for the quarter and partnership services, we closed the transaction with our new bank partner in Canada Security eight important closing fee importantly, <unk> was able to secure a two year agreement to help manage the portfolio transition and grow the business.
In addition, <unk>.
Close to renewal of a major retail our credit card portfolio program in Q1.
<unk> results were ahead of plan in Q1, and we continue to anticipate $1 billion to $3 billion in transactions annually with the SFC.
<unk> chip and additional opportunistic transactions over time.
Finally marketing continues to be on track for the year one of our customers moved a significant campaign from Q1 to a bit later in the year. We continue to anticipate increased marketing spend for all of 2022.
Part of the service also remains on track our launch customer is well ahead of plan and our new customers are in the process of ramping and we hope to have a good year and with that I'll turn it over to Michael to run through.
For the quarter.
Thanks, John turning to page 33, and the Q1 consolidated operating results total originations were 319 $398 million compared to $182 2 million in Q1 2021.
Which reflected a 57% year over year increase of Tri, Ed $286, 7 million and $111 3 million and loan originations at source one.
Strong loan origination growth and strong performance by kg resulted in Q1, adjusted net income applicable to common shareholders of $19 3 million or <unk> <unk> per share.
$8 6 million or <unk> <unk> per share in the prior year quarter.
As noted by Steve earlier. This is above our Q1 guidance range of four to five per share so great start to the year.
Turning to page 34 of the balance sheet key highlights.
Include total assets.
Over $46 million as compared to December 31, primarily driven by the increase in triad finance assets.
That was approximately $91 million, which is primarily driven by the increase in finance assets.
Note, our senior unsecured debentures debentures at fixed rate and our used as long term capital to finance acquisitions, our senior line revolver as floating rate debt and is generally used to finance our on balance sheet triad finance assets.
They are primarily comprised of floorplan loans at a short duration and floating rate.
Currently they are a natural hedge against the impact of rising interest rates on our senior line.
Our balance sheet management advisory assets of approximately $31 3 billion.
Priced at $3 2 billion in managed loans at triad, and approximately 28 billion and advisory assets are kg.
Turning to page 35, and the income statement.
Total revenues of $59 9 million were up 40% compared to Q1 2021, and total operating expenses were up 22%.
Demonstrating the strong operating leverage inherent in our business model.
Increased revenues were largely driven by higher origination revenues due to higher loan originations higher asset management and servicing revenues driven by higher servicing.
Revenue of Tri, Ed and higher partnership revenue at kg.
Higher marketing revenues at kg and higher interest income with triad due to increased floorplan balances.
Strong operating performance drove an increase in adjusted EBITDA of 72% to $27 5 million in the 224% increase in adjusted operating income before tax to a total of $19 3 million.
And as noted this resulted in Q1 adjusted EPS of <unk> <unk> per share compared to <unk> in the same prior year quarter.
Turning to page 36, and operating expenses.
It's a business segment operating expenses, primarily driven by the growth in originations and manage assets and new products at Tri Ed higher revenues at kg and the inclusion of <unk> operating results.
Operating expenses increased by approximately 22% year over year compared to total revenue growth of 40% as noted earlier.
Finally, corporate operating expenses of $4 1 million compared to $6 2 million in the same prior year quarter and reflect the cost reduction efforts post the sale of service finance, including reductions in senior executive cash compensation.
That I will pass it back to Joe.
Actually I will ask Steve.
Thanks, Phil.
On the final slide let me make a few highlights before opening the call for questions.
The first is our strong originations of Tri Ed.
Windows that are back in the industry for all the challenges that are occurring in the traditional housing markets. The approvals at 47% combined with the backlog of nine months gives us strong confidence and has very strong momentum going into the final part of this year at the mid part of this year vital as well as 'twenty three we just closed the books on April and they were very strong.
Wrong as well.
And traditional.
We reduced traditional housing availability combined with affordability crisis has created unprecedented manufactured housing demand.
We are fully funded for 'twenty two 'twenty three source, one as Jon mentioned up 33% of originations more importantly, approvals, which we get future originations are up 83%, indicating.
Indicating strong momentum into <unk> 'twenty, two which gives those combined with the results of kg, we might increased confidence.
Focusing on the high end, we're reiterating my comfort on the high end of our guidance for 'twenty two.
23.
<unk> has been a very successful accrete.
Accretive tuck in transactions that we posted a 50% accretion at the time of announcement, we're actually running ahead of that <unk> results were above budget.
<unk> business.
In this environment, our prime credit our credit focus matters, which has driven strong credit performance and continued strong funding demand from all of our partners. In fact, we are sold out for 'twenty two 'twenty three.
With those highlights operator, we'd like to open the call for questions.
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The first question comes from Nik Priebe, Inc.
With CIBC capital markets. Please go ahead.
Okay. Thanks.
So you called out the strong appetite from funding partners for the credits that you're originating.
And that you haven't been able to accommodate all of the interest you received would that give you some flexibility or latitude to negotiate better commercial terms and.
How resilient would you expect that demand to be if the.
Macroeconomic backdrops start to deteriorate as many are expecting.
Yeah look I think we've taken the opportunity to we're happy with the pricing we've improved as I mentioned in Q1, we're happy with the improvements we are now focusing on longer terms. So it's pushing out the term of the commitment.
There are these credit assets are unique we spent by case 35 years fundings platforms.
The demand is strong in fact that youll see deterioration in other.
Asset categories helped by the fact that probably going to lighten up they will lighten up on those and look for more votes.
Yes.
I think I think we've got great economic terms from the right partners as you know we moved from some of the smaller partners. The larger partners, we pushed out term.
We improved the economics of Q1.
And I don't see any changes in demand in fact, the deterioration in other credit assets if that comes.
Increases of demands from our investors and as you know that we do so with our tuck in strategy. We don't we don't do those deals without our funding partners at the table.
Committing to take volume.
Yes, Okay, that's helpful and.
<unk> been open about exploring the potential for further.
Bolt on acquisitions to build and expand that origination platform does the did the volatile market environment change.
Calculates at all they're either in a favorable direction by Nicky targets less expensive or in an unfavorable direction by making your own stock less effective as a form of currency I'm just wondering if.
That has any influence on your efforts on the M&A side.
Sure Let me, let me start and then Joe will pick it up.
These are owner operator business as they are relatively small so if youre an owner operator in your 60 65 years of age I think the current environment makes the platform, we'd get better value.
Your options for exiting our or limited you won't be exiting at the IPO you won't be exiting.
In our private equity transactions. So I think that we are we're in a great spot to do the right deal.
At a better value.
In terms of sources of capital common equity is one source, but we're in good shape with our balance sheet.
We have lots of liquidity cycles, wanting us to adhere CFO lots of liquidity and our credit facilities, we have putting our balance sheet. So.
I think we're adequately funded to begin this tuck in process.
So if we don't have to rely upon common equity to do that.
So I think where our common equity today is that you didn't ask this question <unk> jump into it I think our common equity as a buying opportunity, we'll probably see management base of software once we come out of blackout.
Yes, I was just can add Nick.
Especially in the sort of RV and marine space one of the things we found since acquiring source. One is that it really is quite fragmented. There is lots of very interesting operators that are generating a significant amount of volume.
Across the space and sort of a very fragmented way one of the stats I saw the other day that there's over 902.
Dancing brokers of boats and Rvs in Florida alone.
Just to give you an idea of how fragmented. This is in addition to that just Florida.
Loan or lease space has been at least on the financing side as has been behind the times when you compare it to auto or some other places. So there is some real efficiencies.
But most of the kind of things that we're looking at are great owner, operator type type franchises.
I think in this environment you are talking about sort of mid to mid low mid high single.
Single digit type multiples.
Multiples on current year or even prior year earnings so.
Quite quite attractive from a financial deal perspective, and really could be additive to the franchise value over time so.
We'll see how it goes I think like Steve said, we're quite excited about some of the opportunities. We're seeing I do think we are probably getting a little better value than we would have 12 or 18 months ago.
Okay very good that's great color I will pass the line to allow others to participate thank you.
Thanks, Nick.
The next question comes from Josh Kwan with RBC capital. Please go ahead.
Hi, Good evening I guess.
On <unk>, so it sounds like from what Youre, saying is there.
No change in demand Youre seeing right now for the R&D at the boats, but just was wondering like historically like what would have happened to drive a decline in industry originations or had choice one and do you think like those would be reasons that.
But if it does happen in the near future or if we do see a decline in the near future like what do you think would be what.
What drives the decline.
Hi, Jeff.
<unk>.
This discussion about volatility.
Prior year, Brian conversation Super private Prime credits are in great shape their personal balance sheet, all time high liquidity they want to travel they want to experience life.
See that evidenced in the Brunswick numbers are so low for 'twenty two into 'twenty three.
But.
Not in this as you know we're not in the subprime market I mentioned will be subprime borrowers that would have bought some RV or marine but thats not us.
We're in great shape.
Yes.
Volatility is focused on.
<unk> focus on the subprime market.
But I would think though at some point wouldn't there be something that these prime and Super Prime borrowers.
That demand may temper somewhat.
Jeff I see no evidence of the sub private or private or having any challenges nor demand.
Okay.
Yes.
And then just on the customer side and again like everything it sounds like everything is going fine right. Now. It just was wondering if again with the volatility that we're seeing in the markets is that changing how linked care institutional investor clients are thinking about the opportunities in space, but also to from credit card.
The program managers around their willingness to transact in this type of environment.
Yes, once again to date.
We haven't seen any real change in demand I mean, if anything we're seeing some.
Excellent opportunities across CCA him another other spaces within within Kgs I mean, we gave you guys an update right right at the beginning of March we reported last quarter in February was Investor day, So not a huge amount happened in just the month of March and we had a very solid Q1, but we've got a great pipeline here going through.
The rest of the year.
We just haven't we just haven't seen any real demand pull back and in fact, you see credit card balances sort of rebound to.
Above kind of where they were pre COVID-19 here over the last quarter or so so.
Like anything else, we're going to have to wait and see but to date everything looks pretty solid.
Okay and sorry go ahead.
My last question was just going back there was that.
Okay.
Marketing campaign from Q1 into Q2 excuse me I'm, sorry did you say what kind of what the reason for that was there.
Now they just decided to change the timing on basically a checking marketing campaign. So it was like we're going to do in the first quarter, they decided to spread it out into the second and third quarter.
For that particular customer, we actually we're going to have pretty significantly up spend year over year. It's just just we moved campaign from the first quarter and second quarter.
Okay great.
Great. Thank you.
The next question comes from Jamie Cohen with National Bank.
Please go ahead.
Yes. Thanks.
First question is on the four partners that were out of that first one are these all cross selling partners from from triad or.
Other relationships or is there anything new here.
Well, we got.
One is it direct.
Were all from from Triad.
Another one also does business with Tri Ed a source one had been talking to prior but it helps given given the pre existing relationship with triad.
And then the other two were sourced one sourced.
Credit unions that.
We talked.
Talk to you prior to us acquiring the company we've got three more in the pipeline credit unions that we're working with today to try to try and bring them on board I think two of those come from triad and one.
The previous and then MNT I sort of view separately because.
It's a much larger potential relationship at $150 million I referenced is really just referencing the credit unions that have been added <unk> as kind of a limited as long as we can make that mean you could do.
You can.
Meet their credit criteria et cetera, but.
And the team as a direct result of ECM long term relationship with 17, we stepped in and brought in a <unk> or two.
The source, one and get them signed up very quickly and very excited about that relationship going forward.
Thank you.
<unk>.
The <unk> relationship is hugely important because they are at our senior line for them to sign up.
It is important to go back to history. There was a conversation back in time, there was a conversation between <unk>, one and Tri Ed about combining their companies before we invested in Tri Ed. So there was agreement six years ago that there was commonality there.
They are prime and Super Prime credit agreement debt.
Our loan investors with funding partners with carbon.
And the systems Floorplan was comments. So there was a sense that whether to come as the other things. They were just both private lack the capital to get it done.
But.
It's a powerful analysis was six years.
Okay great.
As we're thinking about the M&A outlook $550 million.
I guess, it's accessible.
Debt and liquidity are there any <unk>.
<unk> on debt to equity that we need to think about or is that $550 should we think about that as dry powder.
Hi, Jamie Yes, there is.
There's you can think of think of that as dry powder.
Okay.
In terms of the deals that.
Youre looking at today.
I get the sense that it's a lot of.
There were several smaller deals are much smaller in scale.
Then source one or are there other deals of similar scale in similar accretion.
Well I guess the question is is it going to be a handful of transactions to get similar accretion or do you have a couple.
A couple or two or three that are of similar size.
Well, we have a whole pipeline of different opportunities and I would say they range in scale from size that looks something closer close to source one to some that are smaller.
The smaller ones that are out there are not like when I'm, saying that really smaller ones out there not really a priority at this point you'd rather spend your time on things that theres more bang for the Buck.
There are some unique properties out there that have really been around for a long time and do quite a nice job, where we think we could you could add some value and help them to help them grow quite a bit but yes.
I think that.
I think.
We really like the idea of looking at some of these ones that are there are a little bit bigger add a little more have to the business but.
Youre still not talking about multi $100 million type.
Type transactions. These are these are more like source alarm or something like that.
Thank you.
These transactions will matter. However, we're not losing our focus on Super private Prime credit. This was not the time to go down scale in credit. So we're staying exactly where we're at.
Equally as important we're using all of the infrastructure, we built over the last five years that Tri Ed and power of these businesses were not having to integrate them.
Speaking of large business with a large business integrating all the risk that goes with it. So we're using triad's floorplan reusing transponders were using a proven processes and systems licensing and servicing.
We are seeing us as shareholders.
Spent $6 million to business.
Box and Thats tied to use it in a prudent and approved.
Okay.
Yes got it.
Kind of getting that.
Whether should we be thinking about a.
A couple of S. One type deals that generate 10% plus accretion each or several deals that accumulate aggregate to something along those lines.
I think it's safe to say that we'll be revisiting 'twenty three guidance in a positive way.
On an industry future.
Okay, Great last one for me then just.
On the Sky.
Sky cap.
Conversations I appreciate including that in the deck.
Wondering if there's something a little bit more updated from from your conversations with them and what they are seeing more recently.
Granted they haven't reported but.
Wondering if you have any insight that's a little bit more recent than their previous quarter.
I can.
They are both of those manufacturers are important partners to us.
Sure. It's all public information I would say that I've met with the management changes recently.
The demand is strong.
They are still seeing the same level of backlog. So we are.
It all both of those companies overstock has that impacted because they've got group difficult traditional whole manufacturers I think that's with an unfair grouping, but it is for this.
No.
Our numbers reflect their growth.
And just just remember agenda.
Recent move up in rates from the fed.
Absolutely pushed U S housing to be the least affordable it's ever been in history.
Manufactured housing is divest affordability solutions look in most markets around the country, it's not just against mortgages against rent.
You want to rent a single family apartment or single family home manufactured home is far more affordable in most markets around the country.
In addition to that we've got a pretty sizable migration thats happening from a lot of areas around the country that don't really feature manufactured housing to the areas that do.
So.
Quite a bit of demand.
You can see from those quotes from Capcom champion, it's effectively what were saying Thats certainly what were seeing in the numbers.
Understood Thanks very much.
Sure.
Once again, if you have a question. Please press Star then one.
The next question comes from Tom Mackinnon with BMO capital. Please go ahead.
Yes, thanks, and good afternoon.
First question is with respect to Kessler group EBITA margin, 55%.
I think you had guided to something like 50% for the year. So.
Just wondering what may have been a little bit more.
Yes.
What was driving the higher EBITDA margin.
For Kessler group in the quarter and the $25 million in revenue.
How does that sort of compare to your plan just given I think you are looking at $114 million to $123 million in.
And revenue guidance for Kessler group going forward.
Hi, Tom It's Michael.
So I'd say overall kgs right on plan, maybe a little ahead of plan.
In terms of the margin.
As John noted we did close.
Two important partner transactions in the quarter, so revenue will be slightly higher in Q1 that would drive the margin slightly higher.
Overall for Q1, we still expect for the year to be around the 50%.
Level.
Good start of the year.
Close to transactions.
Just timing in terms of.
The margins, but overall, we still expect around 6% for the year.
Slightly less than 25% of what you want in revenue for the year is there any kind of seasonality here or is it just you know.
No.
The timing of.
I don't know.
It's not it's not a specific seasonality like you see in rvs or marine or manufactured housing.
There is lumpiness.
To Kessler catches earnings I mean, we typically have but the fourth quarter typically tends to be the biggest biggest quarter of the year as we end up closing a lot of stuff that they've been working on first quarter tends to be a little bit a little bit lighter, it's not specific seasonality or as easy to track as say manufactured housing, but we do see some lumpiness quarter over quarter.
The numbers we saw in Q1, they are actually ahead of our budget, thus far on the air.
In line with budget. So we're not we don't think that there's any issue whatsoever, we feel pretty good about the pipeline.
Okay, that's great and then.
Just more of a.
A conceptual question I think possibly for Steve.
It's been lots of chatter about more and more tuck ins.
So how do you feel about continuing to do smaller tuck ins and then you sort of become a bit of a roll up play you've got lots of little businesses. Then you have a holdco kind of discount perhaps ascribed to you as well and.
Theres that story, you could do or why not just take this $5 15, dry powder and sort of.
Buy back your stock and Youll, probably by almost 30% of your shares back. So I'm just throwing that one out there to see what kind of response you would get.
Yes.
I think Tom we're not looking at several tuck ins, we're looking at a few strategic that couple of manufacturing relationships.
These are all being integrated into Tri Ed So we're not rolling up into that.
Digital desperate companies, where we're putting a little bit of Tri Ed.
So thats all share of that character I'm not sure I agree with that characterization.
This was.
Less than a handful for sure.
We have specific targets on manufacturer relationships that we want to plug into Australia system.
At $5 50 buyback of stock maybe I wanted bioactive itself.
We'll sort that out.
Sure.
A lot going on in the marketplace right now.
At a macro sense I think we've delivered exceptional results.
Guidance due to a strong strong 'twenty, two maybe even a better 'twenty three.
Let's get that information the marketplace, we have in CIB, we'll be active.
Let's leave it at that.
Yeah, Okay. So I guess the takeaway here is when you do tuck ins as you get.
Synergies through relationships, so they're not really all it is not like a rollout with the series of independent companies is that.
Conceptually you.
Okay, that's great okay. Thanks for that.
Just wanted to throw that one out there to see what yet thanks.
Its manufacturing relationships, we pick up a lot of business per se.
Mhm.
Okay.
Yes.
There are no further questions registered this concludes today's conference call you may do.
Disconnect your lines. Thank you for participating and have a great day.
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