Q4 2022 Chorus Aviation Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the course Aviation, Inc. Fourth quarter and year end 2022 financial results conference call.
At this time all lines are in a listen only mode.
Following the presentation, we will conduct a question and answer session.
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This call is being recorded on Thursday February 16th 2023.
I would now like to turn the call over to Tyrone Cody. Please go ahead.
Thank you Michelle.
Hello, and thank you for joining us today for our fourth quarter 2022 conference call and audio webcast with me today from course are Joe Randell, President and Chief Executive Officer, Colin Copp, incoming President and Chief Executive Officer, and Gary Osborne, Chief Financial Officer.
We will start today by giving a brief overview of the results and then go on to questions from the analyst community.
Because some of the discussion in this call may be forward looking I direct your attention to the caution regarding forward looking statements and information that is included and referenced in our MD&A.
In addition, some of the following discussion involves non-GAAP financial measures, including references to adjusted net income adjusted EBT adjusted EBITDA net debt to adjusted EBITDA and free cash flows formally adjusted cash flow provided by operating activities. Please refer to our MD&A for a discussion relating to the use of such non-GAAP measures.
I'll now turn the call over to Joe Randall.
Thank you Tyrone and good morning, everyone.
So 2022 was truly transformational for courts.
With the acquisition of focal course became the world's largest aircraft lessor focused on regional aviation and we further diversified earnings through the addition of asset management services.
This includes fund management on behalf of third party investors.
Fund management is a far more efficient approach for our leasing business and allows course to deleverage its balance sheet and free up embedded capital, thereby improving shareholder return.
In addition, bulker does provide a proven aircraft trading platform, which enables us to more readily monetize our on balance sheet assets.
Finally, the investment by Brookfield and of course, as an endorsement of our strategy by an experienced and sophisticated investor.
Our transition to an asset light leasing model continued in the fourth quarter as we executed on several opportunistic aircraft sales.
The incremental cash flows generated from the aircraft dispositions.
Allowed us to complete the early redemption of $115 million in 6% debentures to accelerate our deleveraging.
We also announced a normal course issuer bid in the fourth quarter, allowing the purchase for cancellation of up to 10% of the public float of common shares with over one 7 million shares being purchased and canceled by year end.
The aviation industry recovery is evident and continuing as we see the return of strong travel demand worldwide.
The chorus group of companies are all performing well.
<unk> continues to successfully operate on behalf of Air Canada and received yet another recognition as Canada's safest employers in the public transportation category.
Voyager continues to grow its specialty aviation offerings and had a record year in sales.
Falko did an exemplary job capitalizing on the strengthening environment to place aircraft and trade assets.
All in all we have a great team of industry, leading professionals. Our team has delivered in our culture is strong.
Today's call.
Mark for me the completion of over 70 analyst call since the company went public in 2006.
And also marks the end of my time of course after over 37 years at the helm.
I'm very pleased to hand, it to Colin Copp, whom I've worked with for over 22 years, we've been working closely through the transition over the past few months and I am more impressed than ever with Collins talent and capabilities. He.
He possesses a depth of knowledge across all aspects of our business. This will serve him well as he leads course through 2023 and beyond.
I also offer my sincerest appreciation to all employees for their continued hard work and dedication.
<unk> is extremely well positioned for the future.
And with that I'd now like to turn the call over to call him cough.
Thank you Joe and good morning, everyone.
I'd like to start today by commenting on our strategy going forward.
Of course, as a global leader in regional aviation and specialty solutions.
Our industry, leading expertise and complementary business capabilities combined to build shareholder value.
With our recently completed <unk> acquisition in the second quarter of 2022.
We are transitioning our regional aircraft leasing business to an asset light model.
Where we invest alongside third parties in aircraft funds and earn asset management fees and incentives from managing third party capital.
In addition to growing telcos funds business, we have significant value in our wholly owned or a majority owned aviation assets and are working to opportunistically monetize these assets to reduce debt return of capital to common shareholders and generate future growth through accretive investments.
<unk>.
Our strong and predictable core earnings from the Res segment provide us the opportunity and the ability to grow and expand into new complementary businesses with our industry, leading specialty aviation expertise.
Turning to telcos funds III interest continues to be robust and we have continued to hold discussions with significant anchor investors Inc.
Including investors and existing funds.
Financial markets have shown some signs of improvement and we still expect an initial closing of fund three and the first half of 2023.
Okay.
On the topic of pilots.
The industry is expecting a high demand and experiencing a high demand of airline pilot.
And we expect the demand to continue in the years ahead.
<unk> is well positioned as a very attractive employer for airline pilots with the pilot flow agreement between jazz and Air Canada and has successfully training all.
Successfully.
Filling all training classes with qualified airline pilot candidates.
We have the resources in place and we expect to complete a significant amount of training in this upcoming year given the flow of pilots to air Canada, and the training required to accommodate those pilot movements.
Lastly, I'd like to confirm that we will be doing our first ever Investor day in Toronto on March 29th presenting the cores growth strategy and vision moving forward.
And I look forward to an opportunity to talk with many of you then.
I'll now turn the call over to Gary.
Take you through the highlights of our fourth quarter financial results and outlook for 2023.
Thank you Colin and good morning.
Of course reported fourth quarter 2022, adjusted EBIDTA of $129 5 million, an increase of $39 1 million over the fourth quarter of 2021.
The rail segment adjusted EBITDA was $67 5 million, an increase of $36 3 million, primarily due to the inclusion of earnings from Falco inclusive of our net gain on asset sales.
As well as increased lease revenue from castle's re leased aircrafts.
In the fourth quarter of 2022, we began disclosing corporate head office expenses separate from bras, enabling a clearer assessment or rather its operating performance.
The RASM segment's adjusted EBITDA was $67 5 million, an increase of $4 6 million fourth quarter results were impacted by an increase in other revenue of $5 5 billion.
Due to an increase in part sales and contract flying.
Offset by a decrease in third party MRO activity.
And an increase in aircraft leasing revenue under the CPA of $2 7 million, primarily due to a higher U S dollar exchange rate.
Offset by a decrease in capitalization of major maintenance overhauls and an increase in general and administrative expenses attributable to increased operations.
Adjusted net income was $31 8 million for the quarter, an increase of $10 4 million over the fourth quarter of 2021, primarily due to the $39 $1 million increase in adjusted EBITDA I previously described.
Partially offset by an increase in depreciation expense of $14 9 million, primarily attributable to VAALCO and.
An increase of $7 4 million in income tax expense.
An increase in net interest costs of $4 2 million.
Net income increased $35 7 million over the fourth quarter of 2021, primarily due to the previously noted increase in adjusted net income of $10 4 million an increase in net unrealized foreign exchange gains of $14 6 million and a decrease in impairment provisions of $14 6 million.
This fourth quarter contributed to strong annual results for chorus is disclosed in our news release and MD&A.
In 2022 chorus generated free cash flow of $371 3 million, an increase of $208 6 million from the prior year, primarily related to strong operating cash flows the inclusion of earnings from Falco and an improvement in Ras as operating income as well as net proceeds on asset sales.
Partially offset by capital expenditures.
To December 31, 2022, we have repurchased and canceled $1 7 million common shares under the under courses normal course, issuer bid, which commenced on November 14th 2022.
Finally, our leverage improved to $4 four at December 31, 2022 from $5. Four at December 31, 2021, our second consecutive quarter of improvement, which is reflective of our strategy to move to an asset light leasing model.
And now onto our outlook.
Joan Collins spoke earlier about our transition to an asset light model and how of course is the key elements to execute on our strategy.
As part of this asset light transformation, we are targeting asset sales, including Opportunistically trading routes wholly owned or majority owned aircrafts inclusive of the expected wind up of our 67, 45% ownership in Ravelin Holdings L. P by its 10th anniversary in <unk>.
<unk> thousand 25.
For the 2023 year.
We're targeting between 50 and $100 million U S to generate between 25 and $50 million U S in free cash flow.
We are also targeting to reduce the leverage ratio for net debt to adjusted EBITDA.
Two.
Two five to $3 five which we expected to achieve by December 31 24.
Given the variability in asset sales the amount of deleveraging will vary from quarter to quarter.
Finally, we are targeting growth, including the expansion of <unk> managed funds in the <unk> business into adjacent and complementary specialty aviation business lines.
In the fiscal year 2023, we expect on a consolidated basis revenue between one five and $1 7 billion adjusted EBITDA of between 410 and $450 million.
Adjusted EBT of between $1 35, and $1 65 billion.
Net debt to adjusted EBITDA of between three six and four.
And finally free cash flow of between 260 and $330 million.
Other key elements of our guidance for 2023 are contained in the outlook section of the MD&A.
Finally, we plan to review these and other measures in more detail on our Investor day on Wednesday March 29.
We are now ready to take questions.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone.
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The first question comes from Hillary <unk> of Deutsche Bank. Please go ahead.
Hi, Thanks for the time.
It looks like you are still on track to launch the new investment fund.
Half of the year, what would be the gating factors that would impact your ability to meet that timeline.
Sorry, it's Gary here. Thanks Hillary.
I think it's really.
The target for the fund is institutional type of investors pension funds large pension funds high net worth individuals. So what's happening right now as the markets have settled down a bit.
Everybody is looking at your capital allocations that I think things are looking better and I think that's what Colin.
Yeah, It was alluding to earlier.
So I think those are really the factors, which are the capital allocations of those those are.
Individuals and we do see the first half of this year, it's settling down and people moving ahead.
Got it. Thank you and then if I could just.
Another question so in terms of selling assets Opportunistically you know.
Could you just tactical but like what the timing I.
I guess with that.
Nick.
I guess ATI 72 make up the largest component of <unk>.
Yeah.
It looks like in general in the past.
<unk> facing some challenges in the market like do you do you consider like market demand in terms of selling terminals.
Termination relationship is it based on something else what ultimately I guess can you tell me.
It's Gary here again.
There's a few things are determined and obviously the demand in the market from both the lessees and if you look at this year. The aircraft we sold were back to lessees.
Also demand in the market with other lessors and other investors.
Investors so on the demand side, we look at that the other piece that we do look at is the return we did have some gains as you note. This year on aircraft sales that is one thing we looked at we also look at the returns we expect or how it will impact our return on equity and our free cash flow in the in the year.
So there's a number of factors, but one is demand and secondly is to make sure that you know the return we're receiving is good.
Great. Thank you so much.
Thank you. The next question comes from David Ocampo of Cormack Securities. Please go ahead.
Thanks, Good morning, everyone.
Good morning.
Carrier culinary or even gel I was wondering if you can comment on the current lease rate environment, we've seen articles in and day out there that lease rates have gone.
Got up significantly from the pandemic lows, particularly for some of the large aircraft, but curious how that that lease rate environment is looking for the regional aircraft as well.
Hey, David It's Joe Yes.
Certainly the market is firming up there's no question about that as demand comes back. So we are seeing some increase with that demand of course.
Increased lease factors, especially for newer aircraft.
That were grounded during the pandemic and are being renewed et cetera. So.
There is no question that.
Scott it's heading upward.
Somewhat tempered in some cases by pilot availability, but that pilot availability issue only exists in a couple of jurisdictions more in North America than elsewhere.
But but generally firming up and generally an increase in lease rate factors.
I can add.
Calling David that when we look at the older fleet in the Middle Middle Light fleet, we're seeing coming out of Covid. Some really good strong returns there.
Especially on lease rates, if we just think about rates.
So theres definitely a improvement when we look at kind of the mid life side of.
The aircraft fleet for sure.
How does that compare to pre pandemic levels or maybe even in context too.
Where interest rates are today as the spreads still.
Got it.
Mid teens IRR total return, yes, sorry, it's Gary here, we still target that mid teens IRR within our business model and where we're sticking firm with that and as I said on other calls in and that we do have other we have levers to pull on that lease rate factors, one return conditions or another.
Security around the asset is also another piece so when we put it all together we target that mid teens return.
Back to what Joe and Colin said lease rate factors are improving I think when you look at.
I have to separate the two fleet types, new and used if you want to call it that.
New aircraft are going to be.
Factoring in the interest rate environment, and the asset values of those lease rate returns are back to those mid teens, you've got the target that otherwise it doesn't make any sense due to the deal and we want and then on the older assets. They have started to recover would I say, they're at the 2019 levels I don't think so at this stage, but they had been recovering as the used inventory or the surplus inventories.
Been used up and we're starting to see some improvements.
Got it and then last one for me.
Are you guys.
Debating internally between keeping the assets and selling assets outright per game because.
Essentially you are losing future lease revenue.
But I guess, what's your thought process there on on how youre managing that in terms of your IRR and potentially reducing leverage.
Question. So we are focused on a number of things one is the deleveraging process as you saw in our outlook, we are targeting two and a half to three and a half.
Net debt to EBITDA, our adjusted EBITDA. So we're marching towards that and we're very focused on getting that down to.
A nice level, we feel thats a great level for us moving ahead, it certainly will derisk and deleverage the balance sheet. The next part that we look at and it's back to an earlier question. We look at the demand in the market and we start to target our free cash flow return on equity is a big one we've added that if you noted in the statement. So we're very much folk.
Just on that piece moving ahead.
And just remember when you do sell an aircraft what youre doing is youre harvesting that IRR or that return earlier. So what you are trying to do is better your IRR of your forecasted IRR or bring it forward and that's what we're attempting to do with the sales and that's what we are going to do.
Okay. That's that's helpful I'll hop back in queue. Thanks, everyone.
Okay.
Thank you. The next question comes from Matthew Lee of Canaccord Genuity. Please go ahead.
Hey, good morning, guys and thanks for everything Joe.
Just in your press release, you mentioned the idea.
Expanding into adjacent and complementary specialty aviation businesses.
Can you maybe give us a bit of color as to what areas in particular interest you and whether it would be organic growth or something that would be acquisition.
Hi, Matthew it's Colin.
Certainly there is.
When we talk about expansion and we look and we're looking at opportunities. We're looking at businesses that align with us and that are adjacent to us essentially different disciplines. So.
When you look across north.
North America today, you could think about aerial firefighting you could think about parts you could think about you know air ambulance specially type aviation special mission. Those are the generally the type of areas that we're focused on today.
Got it and then just maybe on the guidance and how the numbers break down, particularly on the valve side.
I think about the revenue run rate excluding the gain in Q4 Youre at like 75 million and that implies revenues of 300 million for F. 'twenty three so I know youre selling potentially $100 million U S of aircraft in 2023, and you sold $80 million in Q4.
Does that bring the revenue down by that $30 million to $40 million or are there other factors that we need to consider relative to your guidance.
It's Gary again, yes, we do we have factored in aircraft sales, but it also takes into account what transpired here just in the last eight months since we.
Purchased out Falco, where there isn't investment we had sold off some assets. It reflects that we also have assets that come that will come back in some cases and get sold off over the next bit. So it reflects a lot of movement and that's why you're seeing that that guidance that we have there. So it was a way to start to it.
At least give some fence posts around where we see this playing out in 2023, but it takes into account what's happened in 'twenty, two and what's anticipated in 'twenty three based on that section.
And if I could just sneak one last one and then the assets you're selling.
These factors are the lease rates on them around 10% or how should we think about the revenue impact of selling a $100 million of aircraft.
I think when you when you move forward I would just look at the averages we have there. So you know we look at the net book value.
Look at the average you don't take the revenue over the average net book value and use that as a proxy that's going to be roughly in the range. It will be plus or minus based on the asset that we have at that point in time, but it would be your best proxy.
Alright, thanks, so much.
So you're just one one more comment I didn't mentioned on your first question. There was another area that we are heavily focused on and working on with Voyager is the defense area. So that's that's another one for you list.
Perfect. Thank you.
Thank you. The next question comes from Tim James of TD Securities. Please go ahead.
Thank you for your time and good morning, everyone. Good.
Morning.
My first question I, just wanted to return to the discussion around the asset sales.
There was a comment in the report that says it's material asset sales are executed in 2023. This may reduce expected revenue in row.
Is it is that it does that indicate if there were asset sales.
Above and beyond the $50 million to $100 million that you discussed or indicated that there is.
Obviously be additional downside pressure on revenues or is that a reflection of the $50 million to $100 million that you've already talked I guess my question should be is the $50 million to $100 million do you already removed. Some revenue from your 2023 guidance related to that $50 million to $100 million in revenue.
Alright asset sales, yes, it's Gary here, so our outlook reflects that expectation of $50 million to $100 million.
Asset sales you could take that as being included in there I guess the next piece would be look if we are able to sell.
Sell assets faster than that and depending on the timing and the.
Quantum and whatnot.
It could impact that forecast as we move ahead, we are monetizing assets in right.
Right now the market is good and we're looking at it.
So the reality is if we're able to achieve faster asset sales faster deleveraging, which is really our team.
<unk> improved the quality of our earnings and free cash flows we're going to take opportunity to do that provided it's accretive to our shareholders. It produces returns on equity and free cash flow, we will take that opportunity so that type of.
Situation could impact that that guidance. So that's what we're pointing to a bit faster obviously it could have an impact.
Okay. Okay. That's perfect. That's helpful. Thank you.
Ralph revenue overall key you know, even if you deduct out the $2 million I think it wasn't asset sales in Q4 row revenue for the year was still a touch higher than the top end of your guidance range.
Maybe I'm reading too much into it but was there anything that you would point to that was actually a little bit better than expected over the course of the year that maybe Q4 in particular I guess since you were maintaining that guidance heading into Q4 was there anything in particular that you would point to that caused.
Surprising strength, if I can call it that.
A little bit on the foreign exchange rate.
Our Canadian denominated company and these are U S lease rates are for the most part so theres a little bit in there. We also had.
We had a good.
Here with the Falcon acquisition, we bought them in May we had eight months, there's a little bit of Lumpiness in some of the fees, we got maybe a million or two for the year that was in there that may not repeat necessarily moving ahead on a monthly quarterly basis.
Except with the exception of win fund III comes in we would expect some fees from that so theres a little bit of Lumpiness, there, but it wasn't.
It was really not a lot different than those two items that I talked about.
It's producing well.
Okay. Thank you and then my last question just returning to the discussion around lease rates in.
The firming up of the market and the way forward.
Is it possible to.
Sort of help us think about how much of the firming and increasing lease rates as a function of the interest rate environment versus demand I mean, you mentioned with new aircraft, obviously interest rates come into play but.
What's the more important factor there and in your mind or is it possible even for you to kind of tell which is which is a bigger driver.
The rising lease rate factors.
So I guess back to the point.
Look at new aircraft the interest rate has a direct impact to it because when you put the lease rate factor together, there's a direct relationship with that it is an actual input into the rate. So I would say on new aircraft. That's a primary piece also you got to remember.
New aircraft are seeing some inflationary pressure given what we've seen out there so combination of the metal value on the lease rate factor or are certainly pushing them up and then you'll have less high quality that can have some impact to it but generally those two factors would be a quite significant on the used market.
The lease rate, what we're seeing is a lot of.
The surplus aircraft are being used up so that's helping firm that piece up.
From a lease rate factor side, we're also seeing the inflationary environment as those new aircraft go up in value of the relative value of used aircraft looks a little better so it's a.
It's kind of an indirect exposure that way.
Yes, the only thing I'd add to what Gary said, there Tim is that.
Financing costs are going up generally of course because of the higher interest rate. So.
When airlines look to finance it itself or through other types of financing generally those costs have increased. So therefore, you can expect that lease rates as well would go more or less in tandem with those with those increase in costs.
Okay. That's very helpful. Thank you very much.
Thank you.
Yes.
Thank you. The next question comes from the corner.
Of Scotiabank. Please go ahead.
Hey, good morning, everybody.
Good morning.
So.
Last question is just a clarification.
On the guidance.
If I look at the guidance it implies relatively stable or a slight decline.
EBIT in 2013 versus 2022, how should we think about the interest cost and taxes due to get to the EPS.
It's Gary here on the on the interest costs you certainly the direct asset related costs, you can look back at our disclosure and you can probably use a good proxy from that we'd give the average interest rates and and we do break it out by division. So I think or segment. So you can look at that.
And then as far as Corporately goes we did pay off the Fairfax debenture at the end of the year. So that had a 6% coupon on it. So you could factor that piece in so that's how you can certainly model the interest and I think if you go back to the taxes you can look at where we added we were where we ended up for the end of the year, but also if you go back to Q last year.
Our disclosure around the taxes, you can get some rough proxies from the outlook section there that.
We provided by division so that'll give you a pretty good idea.
Thanks, Gary.
And then are you also assuming any buybacks share buybacks in 2020.
We have an active in CIB program as you know we've got that with the we've.
We've announced that back in November we purchased one 7 million shares at the end of the year.
And we you know that program is still there so.
We're not commenting on what we've allocated but.
If you look at our disclosure I think there was another million shares that were repurchased since the end of the year. If you just look at the average shares outstanding in the MD&A.
Great and.
In terms of asset sales that you anticipate in 2023.
What would be.
Have a good proxy for gain on those asset sales in this guidance.
We have not put any material gain or loss in with those asset sales.
In our guidance so.
That's the best way to put it we will see where we end up as we transact, but we are looking for return to our shareholders free cash flow and whatnot. So.
Great and last one for me.
So kind of like a high level.
Broad based question.
Light strategy.
The sales that youre expecting the asset sales are expecting through 2025.
Reach your targeted leverage ratio is that intended to kind of reach to a certain level on leverage ratio before.
You would stabilize and grow the asset base and hence we are.
Yes, so our plan is to get to our leverage target by the end of 2024, and we hope with any luck a bit earlier, but by the end of 'twenty four is the latest.
And then as we continue on this path of deleveraging, we are going to look at accretive.
Investment opportunities as Colin and Joe alluded to earlier.
And we don't have to be exactly in that range before we do it but it's certainly approaching it is where we would see it and we're going to go back to more of a growth path once we get to that stage.
That's great and all the best to Joanne Colin with respect to growth. Thank you. Thank.
Thank you Kirk.
Thank you. The next question comes from Kamran Duerksen of National Bank Financial. Please go ahead.
Sure.
Yes, thanks, very much and congratulations Joe on not having to deal with the the analyst anymore herself to be happy about that that's always been a pleasure camry.
Yes.
So I guess just a couple of questions from me maybe just sticking.
Thinking about again, the transition to kind of the asset light model.
Just wondering if it ultimately makes sense here or do you.
In the.
I guess legacy chorus aviation capital business to ultimately kind of roll that in those assets into the asset light model and does that potential.
I guess potential assets that might get rolled into the into the new fund, but just wondering what are your thoughts around around that.
Yeah.
On the previous castle assets or that we had on the balance sheet.
We're certainly in a monetization mood and those were are certainly assets that are available for that.
As far as transferring them to the funds I would say, it's a very remote possibility generally speaking.
Only because of the nature of the fund and the fact that we are custodians through Falco of those funds and whatnot, it's not impossible, but I wouldn't.
I wouldn't factor that into a lot of the analysis Youre doing I think the funds will be the funds and we are going to grow them, we're gonna grow through through third party capital.
Through assets in the marketplace. If there was an opportunity to put it in there that's fine, but I think its remote and I don't think we should be assuming that.
At this stage, but we are very confident of the one three and certainly filling up.
That pipeline.
Okay.
Linda.
Just on the I guess, the your equity component into the into the fund three.
I'm just wondering how you are how you would expect to finance that that contribution.
Yes, so it's Gary again, we would finance that through cash flows from operations.
And I think one thing to note with the fund III and all of the funds.
The capital commitments come over a period of time, they're not immediately.
Immediate they take anywhere from one to three years to really go through and.
The way the funds work they typically usually come in with some type of subscription subscription line upfront. So that the equity draws for a lot of the folks are on the low end to start but then they accelerate so it will take anywhere from one to three years before you fully go through.
Youre drawing more likely in the back end of that two to three years. So we will finance that through cash from operations and our free cash flow.
Okay that makes sense I believe that were those were all the questions I had so thanks very much. Thank you.
Thank you. The next question comes from Kevin Chiang.
CIBC. Please go ahead.
Good morning, guys. This is Jeff filling in for Kevin.
I guess just one from me I know, there's been a lot of leverage questions, but I was wondering.
You anticipate.
Leverage ratio getting to two and a half and half by end of 2024.
Is it the way you want to sit around essentially or do you have even lower leverage target and I guess the other one is is there any trigger for let's say by the time you get to three times would you be open should re evaluating reinstating a dividend.
Okay.
Gary here.
We expect our targeted range to be two and a half to three and a half that will operate with it I think if you look at where we're going in and how we can get there we certainly through the high amortize the debt that we have and some opportunistic monetization of assets.
We certainly can get within that range.
In the next couple of years, and we expect to operate within it.
As we continue to pay down our debt, we will see some deleveraging naturally we're just leaving room for accretive investments.
And indicated to the market we plan as a group to operate within that range.
On the.
The dividend we are we believe a return of capital to shareholders is an important part of our value proposition.
We started that already with the NCI program buying back one 7 million shares.
At the end of last year, and we believe at this point in time, it's the best return for our shareholders in the future when considering a dividend we would expect the board to contemplate it as we make progress towards the targeted leverage levels any.
Any dividend would take into account our stock price would be set at something that is sustainable based on the expected future free cash flows and allow for continued investment and growth of the company.
Okay perfect.
Helpful and I guess another one for me.
So the guidance of <unk>.
It's 50 to 100 million asset sale should we should we see this as a good annual Blackberry in the future.
And John do you have any visibility on completing these asset sales or is this just that assumption as a function of historical trends that you're seeing like how do you have active discussions right now yes.
Question I think it's a good proxy for this year. If you look at fund one though that we have given some.
Guidance on that that's around that's got about 400 billion in asset so.
The reality is we're guiding to 50 to 100. This year, we would expect over the next two to three years that you know if you.
Hopefully to accelerate that a little bit, but certainly for this year that's the guidance.
Okay, perfect and just last one for me I know you guys introduced.
Corporate segment.
Thank you and good run rate for looking at that corporate costs.
It's Gary here I think.
If you look at it there's a couple of things if you look at the interest the interest is going to come down for sure.
Given Gibson paying off the Fairfax desk, and we are focused on deleveraging. So I think a factor in the Fairfax that at the very least secondly, we did have some costs in there. This year, if you look through the disclosure.
As we took VAALCO onboard and that so we'd expect it to come down a bit and if you look through this flows you'll probably get a decent proxy of some some reduction.
Okay perfect well. Thank you so much time for questions from me.
Okay.
Thank you once again, ladies and gentlemen, if you do have a question. Please press star one at this time.
The next question comes from Renato <unk> of BMO capital markets. Please go ahead.
Good morning, and thank you for taking my question.
Congratulations what a great journey.
And Kelly, congratulations as well on the new role.
Thank you.
I guess my first question is probably related to every other questions but.
Yeah.
I was wondering whether you could provide more color so.
Well in 2022, you made.
$441 million and adjusted EBITDA now the guidance with a midpoint of the guidance is around.
430.
What does the EBITDA bridge between those two numbers.
Look like it.
It seems we can expect an acceleration in aircraft sales in 2023.
Which could be one of the important drivers for a slightly lower EBITDA next year, but I suppose.
Said earlier.
These sheets should be motivated also bi.
Lower leverage ratios.
But if you could provide more color on how that EBITDA bridge would look like.
It will be great yes.
It's Gary here I think it's reflective of the asset sales remember we did have some asset sales and morale division. This year. So it reflects some of that the other thing to keep in mind is when you start to have Bridget we did use a 130, a foreign exchange rate in this year I think.
Don't have it in front of me, but it's been a bit higher than that particularly in the back half of the year. So you may if you look at those two things those are probably your biggest bridges that.
That you would see.
Okay great.
Bond on 2024.
You're targeting a leverage ratio between two five to three.
But what would be the levers to achieve.
The ratio of 2.5 are we talking about maybe.
Hip hop in adjusted EBITDA in 2024 compared to 2023.
Its Gary again on on that there's there's a few things obviously asset sales they are going to be lumpy as we move ahead and we've disclosed that section so depending on the timing and when it happens you could see.
Those ratios moving on the lower end.
And then as time moves on it's a range and we expect the company to be within that range and into it gives an idea of where the risk tolerances and where we see our leverage but as we sell down our assets on the on the rail sized monetizing those.
Taking the funds to pay down debt. We are as we said earlier going to return back to accretive growth here as we approach our debt targets and what were intimating to everybody is that we expect to operate in this range as a group of companies, which will include future growth in adjacent industries and specialty aviation.
Okay, great. Thank you Gary.
Thank you.
Thank you.
No further questions at this time I'll turn the call back to you for closing remarks.
Thank you Michelle and thank you everyone for taking part in today's call have a nice day.
Ladies and gentlemen, this does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.
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