Q4 2023 Exchange Income Corp Earnings Call
Good morning, everyone and welcome to the exchange income Corporation's conference call to discuss the financial results for the three months and 12 months periods ended December 31 2023.
The corporation's results, including the MD&A and financial statements were issued on February 22024, and are currently available via the company's website or SEDAR.
Before turning the call over to management listeners are cautioned that today's presentation and the responses to questions may contain forward looking statements.
Within the meaning of the safe Harbor provisions of Canadian Provincial Securities laws.
Forward looking statements involve risks and uncertainties and undue reliance which should not be placed on such statements.
Certain material factors.
Or.
Assumptions are applied in making forward looking statements and actual results may differ materially from those implied in such statements for additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions.
Applied in making forward looking statements. Please consult the M. G&A for this quarter the risk factors sections in the annual information form.
And I see other filings with Canadian Securities regulators.
Except as required by Canadian Securities Law. He I see it does not undertake to update any forward looking statements such statements speaks only as of the date made.
Listeners are also reminded that today's call is being recorded and broadcast live via the internet for the benefit of individual shareholders.
<unk> and other interested parties.
I would now like to turn the call over to CEO of Exchange income Corporation, Mike Pyle. Please go ahead Sir.
Thank you operator.
Every one and thank you for joining us on today's call yesterday, we released our fourth quarter and annual results for 2023.
Looking at our results we reported several records for annual and Q4 Q4 amounts.
She had an incredible year in 2023, and we have set our foundation for the future.
We have set records with virtually all financial metrics and our public reports, we highlight the 'twenty 'twenty four represents 20 years since the first acquisition of a perimeter in may of 2004, our results demonstrate the success of our strategy.
<unk> proven companies with excellent management teams.
In fact to those companies and nurture their growth.
In doing so we can provide a stable and growing dividend for our shareholders.
That strategy is the blueprint is a blueprint for our success for the past 20 years and is even more relevant today. The secret sauce is the discipline nature of our acquisitions and investments in growth capital of our business and operational execution by our underlying subsidiaries yeah.
Yeah, Yeah. She preserves the cultures at our acquired entities and create an environment, where their management drive those are going to be common themes throughout today's call.
We have a lot to be proud of however in line with our other calls we'll attempt to keep our prepared comments as brief as possible to do a lot of time for questions.
With me today is Richard <unk>, our CFO, who will speak to our financial state our financial results and Carmel, Peter our President who will expand on our outlook for 2024.
I will limit my discussion to the year ended December 31 results for the full year well Richard will focus his remarks on the fourth quarter results.
For our annual results revenue increased 21% to $2 5 billion.
Adjusted EBIT increased by 22% to $556 million.
Net earnings grew to 122 million from 110 billion net earnings were unchanged at $2 72 free cash flow less maintenance capital investments grew by 15% to $202 on a per share basis. It grew by 3% to four.
$4 and 49.
Adjusted net earnings increased to 144 million up 8% and adjusted net earnings per share was down slightly to $3.20.
The payout ratio of free cash flow less maintenance capital expenditure basis was a was very strong from a historical perspective at 57% compared with 55% the previous year the payout ratio on an adjusted net earnings basis was 80% compared to 73%.
These payout at that or any financial metrics.
Were achieved despite a $39 million increase in our annual interest expense.
Lastly, we announced a.
In November a 5% increase in our dividend to $2.64 per hour, our third such increase over the past 19 months.
These remarkable results were partially due to acquisitions of Hudson BV glazing in dry air during the year, all of which were perfect fits for EIC ever accretive immediately and fit our disciplined acquisition strategy.
The other main contributor to the results was continued investment in <unk> as a result of growth in our operating subsidiaries, we will heighten highlight those key investments their impact on the year and how they are expected to impact future periods.
First let me talk about our acquisitions during the year.
Each of the acquisitions is accretive to our bottom line.
Cancer is a custom fabricator of precision metal components and assemblies located at Richard B C. It joins our subsidiary overlap there as it expands our sheet metal to the capabilities of the BC region.
It also diversifies, our revenue streams and capabilities to our customers as handset is receding at high volume staffing capabilities. These capabilities, coupled with overlay the sheet metal casting powder coat capabilities lead to a full service lower mainland precision metal business hazardous already seamless.
Literally fit into our EIC family and has already started working with our other manufacturing subsidiaries.
Our second acquisition was BV glazing PV manufacturers unified unitize, it stick curtain wall systems railing systems. In addition to its core window wall glazing systems similar to those produced request.
<unk> ability to provide curtain wall railing products allows our multi storey window business to offer a complete solution to our customers.
<unk> is a great comfort to quest that makes us one of the largest multi storey window solutia businesses in Canada.
Our C O O Darwin Sparrow has become significantly involved bringing requested b V together and is identifying and executing on synergies and other opportunities.
Furthermore, such entities have been working with our manufacturing subsidiaries to identify opportunities to work together. Examples would include Hansen for certain installation of our components at overlap there's for powder coating capabilities.
The last acquisition completed was dry air dry areas in OEM manufacturer of portable.
<unk> heating systems, they sell their products to the growing rental company industry in North America dry areas for meeting with various manufacturing subsidiaries as we identified several opportunities to work with our other manufacturing entity on existing and new products.
Our existing our acquisition process is very disciplined and we're very excited to welcome. These three companies into our <unk> family of companies. However, equally important is these acquisitions are the growth capital investments in the businesses, we already own we.
We had several contractual wins this year, which will result in accretive growth for the future of both the top and bottom line basis.
The first announcement pertaining to the commercial agreement with Air Canada for the provision of regional services in Eastern Canada.
The agreement commenced in July of 2023 and required the company to invest in.
Additional Q4, what Q4 hundred aircraft to service the contract to date four aircraft are flying the regional routes.
Accounts has been a success.
During the year, we announced two contracts for the provision of fixed wing medevac services for both BC and Manitoba. Both contracts are long term contracts for 10 years with renewal options. In addition.
The BC contracts will require us to purchase 12 brand new King Air aircraft.
First of such modify the aircraft was received in the fourth quarter and is currently undergoing its conversion to a matter of fact configuration.
Since November we are servicing the BC government with existing aircraft in our fleet coupled with the assistance of other legacy providers.
So Manitoba contract requires a fleet of five planes being a combination of jet and turboprop aircraft the turboprop and modified and placed into service during the first quarter of this year with the jets coming on line is a latter part of 2020 for both.
Both of these contracts are important for several reasons firstly, they demonstrate our capabilities.
Capabilities as one of Canada's largest medevac providers secondly, they're all long term contracts and are accretive to the company and lastly, they provide us with opportunities to expand our services with provinces as well as provide opportunities in other regions.
For contracts require significant upfront investment for aircraft interior modifications as additions to our infrastructure. These costs are borne upfront to the full benefit of the contract will be more evident to the latter portion of this year and into 2025, especially with the <unk> contract.
Where the existing key your assets will be redeployed and continued to generate income.
We announced the deployment of the force multiplier with the UK home office for an 18 month period.
The UK home office has issued an RFP for a long term contracted we submitted our proposal in January.
The contract will provide meaningful returns as the force multiplier asset will be fully utilized for the vast majority of this year.
We also announced the acquisition of a full bullshit CAGR simulator, which will be located in Winnipeg, where it'd be tough one of the world's largest operators of King air aircraft.
The football should simulator will allow for the simulation of the exact landscapes environment and runways that our pilots will encounter.
This will enhance our pilot skills and will have a number of benefits, including improved safety reduce travel costs and a corresponding reduced greenhouse gas emissions.
This is investments in our people and will enhance our ESG journey, which will be further discussed it above it.
I will take the remainder of my time to discuss our operating segment performance for this year and some highlights and drivers of these great financial results.
Our aviation subsidiaries are experiencing strong demand across our portfolio, we have made meaningful investments over the last number of years, including adding aircraft to the fleet. These vessels have been a success as our revenues at aviation and aerospace have increased by 12%, while our adjusted EBITDA.
<unk> increased by 23%.
The drivers of the revenue increase and margin expense. It was at all three lines all three business slides firstly the prior year's first and second quarters were impacted by Covid. Therefore results were muted returning to normal volumes drove revenue increases in our essential services.
The return of normal traffic was important however, the real driver was our past fleet investments that bolstered our rotary wing as scheduled and charter businesses. Furthermore, the extension of the East Coast with Air Canada contract was also a significant driver.
More importantly, our barges grew due to the investments in assets.
Higher load factors in fact impacting our bottom line.
Our aircraft sales and leasing business continued on its upward trajectory, our leasing revenue increased by close to $20 million or 59%.
The lease revenue increase has an outsized impact on adjusted EBITDA. The parts of the asset sales component of the business remains strong although they were down from the prior year as last year was exceptional at above historical norms.
Lastly, our aerospace business had a very strong year due to the Netherlands Coast Guard contract that started in the fourth quarter of 2022.
The UK health contract that I just spoke about.
Those increases.
Asset utilization drove a meaningful increase in adjusted EBITDA during the year.
Our manufacturing business also had a great year. It surpassed 1 billion in revenue and generated adjusted EBITDA of $181 billion. When we delve into the components of the increase a little deeper we see that the.
Revenue increased in our environmental asset.
Higher balance of access solutions by 20% as northern bat was acquired.
On may 10th 2022, and therefore, only had a partial year comparative partial year comparative period.
Yeah.
During 2020 to the first quarter of 2023 and Parkway through the second quarter the business experienced.
Nico alignment of price demand supply and weather that drove results far beyond our expectations.
The first part of that second quarter. We're also buoyed by log linear projects winding down in Western Canada the results of that.
Abnormal number of rentals during those winter months.
Fast forward to the third and fourth quarters of 2023, the results of moderated consistent with our acquisition metrics, which that deal was priced upon.
We are happy with those returns and they are accretive to our business looking back we were very fortunate to acquire the business. When we did in 2022 and have experienced abnormally high returns are.
Our multi story.
Windows business continued to improve and was driven by the acquisition of BV glazing adjust.
Adjusted EBITDA expanded by 110%, which was more than the revenue growth in that business line.
Improvement in profitability was driven by enhanced scheduling increased throughput at our facilities and specifically the ramp up of our Texas plant.
And the increased pricing on projects, which flowed to the bottom line following the.
Increases in cost.
We did experience some higher costs in the business, but we feel that the supply chain and inflationary pressure inflationary pressures has started to normalize.
Lastly, our precision metal and engineering business continued to reform.
He has increased 11% and adjusted EBITDA by 26% increase.
The increase in revenues and adjusted EBITDA were partially driven by the Hansen in dry air acquisitions. Another contributor was product mix, resulting in higher margins across several subsidiaries.
Our maintenance capital expenditures during the year were $175 million, an increase of 12%. This was compared to our adjusted EBITDA increase of 22%.
Maintenance capital expenditure increase was driven by an increase in the fleet increased flying area increased flying hours and flush inflationary cost pressures.
Our growth capital expenditures for the year were $303 million compared with 125 million in the previous year.
As previously discussed the gross capital expenditures were primarily related to the contract wins as previously discussed we apply a similar discipline to growth capital expenditure decisions as we do our acquisitions. The only difference is that the certain growth capital expenditures require time to wrap.
Pop for the returns to be obvious in our bottom line.
And looking at our business 2023 was about existing on our existing business executing on our existing businesses, coupled with the investments in the future whether it.
B by way of acquisition or growth capital expenditures, our future is bright and this is driven by our entrepreneurial management teams and disciplined execution.
That has allowed us to deliver a consistent growing dividend to share with you our shareholders.
In order to take advantage of the opportunities we have to make sure we have our finances in order.
I have always ensured that we have capital on hand to capitalize on investment opportunities when they arise we manage our balance sheet with the same discipline, we do when we consider investment returns on acquisitions and growth capital expenditures.
During the year, we amended and extended our existing term facility, resulting in an upsize of the facility to approximately $2 billion of the term was extended to 2027 we.
We don't have any debt coming due until 2018 debentures are due in the June of 2025. Furthermore, we executed a bought deal financing the largest in our history in June of this year.
These proceeds are being utilized to fund the growth capital expenditures related to the medevac and other cap of contractual wins.
Financing activities means that we will be able to be continue continued to be conservatively levered and we have available capital.
To pursue opportunistic acquisitions or further investments in our existing businesses.
On a stakeholder front I wanted to take to talk about our people are the EIC and our customers and the communities we serve.
Our people are what drives this company and our family based culture aligns with us.
I wanted to say, thank you to each and every team member throughout our company, which is now over 8500 people strong.
In relation to people and communities I want to talk briefly about some internally developed programs.
Years ago, we saw at upcoming shortage of pilots that was obviously exacerbated by the pandemic, but we started our journey back in 2019 with the life in flight program.
This was done proactively to address the shortage of pilots and the <unk> of the industry and to create our own EIC solution to a broader issue.
2022, we announced the start of the <unk> Mason indigenous pilot pathway program. As this program continues to grow and has exceeded all of our expectations. We were proud to see six students from a first class return in 2023 and 12, new as digital members commenced their aviation journey in 2023.
Five of those students have either graduated or near graduation, and all five have accepted employment opportunities at either our airlines or at MFC trading for 2024. This is an incredible achievement.
Graduation was held at <unk> this past summer and seeing the joy of several hours of the students coupled with a pride of their extended family demonstrated the importance of this program to our communities.
Because of its event success, we've announced a further expansion of the problem.
The programs I'm, sorry for 2024 at Rankin Inlet.
We're excited to support the extended program and the benefits are worth the financial expenditures that we will incur.
The added benefit for the communities is that it creates raw bottles for use of those communities and opens opportunities for individuals who never thought they had a chance for a career in aviation.
We have also continued our very successful partnership with the little Blue bombers, we celebrated the National day for truth. The reconciliation by collaborating with our indigenous partners and the Winnipeg Blue bomber Football club to host over 1000 digital guests and CFL game in late September.
These guests were flown from across Canada, and the event was a tremendous success by all accounts.
Further last week, we announced the EIC partnered with the burnt pegged Blue bombers on a can you community outreach initiative members of the Blue bombers management coaches and team will travel the 10 northern communities to participate with the youth and the leaders of the communities and the spirit of reconciliation.
We have also continued our journey to ESG reporting in 2022, we published our second sustainability report, we continue to track and monitor our scope one and scope two emissions and have started to undertake a project to understand and measure our scope three emissions.
Sustainability has been top of mind for EIC since our inception in one of our guiding principles to our strategy.
We manage our sustainability efforts the same way, we do with other areas of the business. We are disappointed in our approach manage the short term and focus on the long term.
Yes, Chi and its reporting as a journey as evidenced by the new standard setting bodies in Canada, we support the development of harmonized reporting standards.
Continue to mature and improve our reporting each year and anticipate publishing our 2023 report in the near future.
Carmel will focus on the outlook for our segments for 2024, but firstly I wanted to reiterate our guidance for 2024, we confirm our adjusted EBIT to a range of 600 to 635 billion. We have made significant investments this year and are poised to realize on those investments this upcoming.
A year.
We are excited about our future and intend to keep doing what we're doing because it works.
I'll now hand off the call, Richard who will detail the fourth quarter results.
Thank you, Mike and good morning, everyone as Mike mentioned I will keep my comments to the fourth quarter in the interest of time.
Revenue and adjusted EBITDA in the fourth quarter with both fourth quarter Records revenue increased by $113 million $657 million or 21% and adjusted EBITDA increased by $20 million or 16% to $144 million.
Segment basis adjusted EBITDA.
For our aerospace and aviation segment increased by $21 million to $109 million, while our manufacturing segment adjusted EBIT decreased by 2 million to 45 million.
Our revenues and adjusted EBITDA in the Aerospace and aviation segment were buoyed by the expanded route network related to the Air Canada agreement, coupled with strong demand and realization of returns on past investments in our fleet.
Aircraft leasing business revenues continued to improve with our leasing revenues nearly doubling over the prior year comparator.
Starting to see revenues continued to be strong, although they were slightly down compared to the prior year.
Thanks, you were above historical norms due to large asset and engine sales.
Manufacturing segment experienced revenue increases largely attributable to the acquisitions during the year.
EBITDA, however to quiet.
This is primarily due to the fact that the fourth quarter of 2022 was very strong for the environmental access solutions, there's a slide with a perfect alignment of price.
That's why in weather.
Are there more Q4 2022 and.
We also had the unusual benefit of Madden continuing during the winter months and a couple of long linear projects, which would be abnormal.
And that happens here.
As a result revenues were down about 6% and the business unit adjusted EBITDA was down 38% that being said the returns on the business.
We continue to be in excess of the acquisition metrics on which it was priced.
Fortunately that.
I shouldn't have those unique circumstance.
Revenues and adjusted EBITDA in the multi story with our solutions business continued to improve during the quarter revenues were up primarily due to the acquisition of BZ glazing during the year.
Adjusted EBITDA.
Buying back or in excess of the revenue increase scheduling increased throughput in our facilities and increased pricing on certain projects.
Is it manufacturing engineering right.
<unk> had a solid fourth quarter, primarily due to the acquisition of Hanson and dryer, which drove increases in revenue and adjusted EBITDA.
Overall net earnings and adjusted net earnings increased by 8% and 5%.
Secondly, this was driven by the 60% increase in adjusted EBITDA offset by increased depreciation and interest expense depreciation increased by $10 million over the prior period.
Essence made in growth capital expenditures. The addition of capitalized corporate acquisition and increased like we did by the Corporation.
<unk> decreased by $7 million over the prior period due to the increase in benchmark rates, coupled with credits fully drawn.
With initiatives that Mike discussed earlier.
Free cash flow and free cash flow.
Ventures.
Increased by 24% for both metrics free cash flow reached $102 million during the fourth quarter recap, let's say capital expenditures.
Ventures increased by $10 million $50 million.
Q4 results and results for the year quite remarkable considering the macroeconomic conditions that were all exposed to the year began with Hyatt place generic pressures and central banks.
Interest increased interest rates the decade long lies along the supply chain disruption and tight labor conditions.
The impact on our of our interest rates for the quarter was $7 million.
And in the current year, we made.
The choice to fix interest rates on a portion of our debt.
In prior years, we swapped $190 million of debt and in the current year. We entered into two additional interest rate swaps are one in the amount of 350 million Canadian and one in the amount of 100.
Third 40 million U S dollars.
Without those two interest rate swaps at 123.
Three the interest rate or.
Our interest cost would have been much higher in the swaps or the entered into at a time when there were significant inversion in the corridor.
Even with the significant increase in interest expense, our payout ratio based on free cash flows capital expenditures was 57% at year end with that in context over the past 20 years that is near historic lows as we move throughout the year, the inflationary pressure starting to abate and supply chains are superb.
Yes, great environment still appears to be uncertain timing of rate Patrick Mooney.
At Central Bank.
Placing data on inflation job and wage growth.
Geopolitical uncertainty continues around the globe. This can have an impact on our supply chain services. However, it also creates opportunity.
Of our manufacturing and aerospace aviation.
In light of these uncertainties in our opportunistic and disciplined acquisition strategy. We have ensured that we fortified our balance sheet. This past year, we actively manage our investment in working capital, although our revenues and adjusted EBITDA are all time highs and that's been working capital was $53 million, which can be fully explained by the receipt of a large pay.
In December 2022, with a corresponding outflow occurring.
We had a similar transaction impact this year. However, the amount was only $30 million. Therefore, effected therefore effectively managed our working capital on a relatively flat basis.
What our revenue and adjusted EBITDA were up over 20%.
During the year, we also upsized and extended our credit facility. The amendment the amended credit facility provides us.
Financing.
Ian and extend the maturity out to 2027 last night on the contractual wins that Mike previously spoke about we got executed on our largest bought deal offering in the corporation's history and raised $173 million of capital. These transactions have allowed us to manage a strong balance sheet.
Senior leverage is less than two five times.
They're conservative history, our total leverage ratio will be impacted.
Bellatrix continues to decline and is at five year lows.
We actively manage our balance sheet and leverage to ensure that we have available liquidity to execute on any opportunistic investments whether it be through both capital expenditures or acquisitions by Adam and his team.
In all cases, whether it would be growth capital expenditures or acquisition, we always play a high degree of just before they're making those decisions.
We give to our shareholders. This is evidenced by our 20 year track record our.
Our M&A pipeline remains strong.
But our balance sheet is in a position that allows us to execute on future transactions.
We'll ensure.
But acquisitions in both private as we always have aggressively with consistent and modest levels of leverage.
Fourth quarter, yet you made growth capital expenditures of $102 million. These growth capital expenditures were entirely related to the aerospace and aviation segment and were driven primarily by investment in additional aircraft equipment and.
In infrastructure in Nevada.
That contract.
Manufacturing experience negative gross capital expenditure of $5 billion related to the reduction in size of the environmental access solutions rental fleet.
I'll repeat it before the cash outflows for the contractual ways to seize the returns on those investments that is the reason certain for sure our metrics have decline in its third year.
The bought deal offering and delayed returns on the investments on those bonds.
Invested or to be invested.
Capital expenditures for the fourth quarter were $52 million compared to 42 million in the prior fourth quarter.
This was driven by the aerospace and aviation segment.
We increased vessel supply as a result.
The maintenance events.
That concludes my review of our financial results I will now turn the call over to Carl. Thank you rich we're very proud of the results. We achieved in 2023 and our outlook for 2024 is for continued growth driven by the stability of our business model and the investments we've made in prior periods to build our future.
I wanted to first discuss our outlook for the next fiscal year and provide some insight into our operations as Mike had mentioned, we have reiterated our guidance of adjusted EBITDA of $600 million to $635 million we.
We break out our annual expectations amongst the quarters. We note that our business is exposed to predictable seasonality patterns weather and other factors can somewhat impact lead gen will patterns.
Wherever we usually see the Q1 is our most seasonally challenging.
This is primarily due to our essential air service business as winter roads are usually available transport people and goods into remote communities that are airlines service. Our environmental solutions business is also impacted by the winter season, as we generally see that fewer match required to navigate that frozen three.
However, we did see an anomaly in the first part of 2023, and we had a couple of long linear projects in Western Canada, where the rentals continued through the winter months, which is not the norm.
In terms of the remaining quarters. That's every quarter is the strongest quarter followed by the second quarter.
Fourth quarter is what I would characterize as a simple average quarter compared to the annual results well.
I will now focus my comments on our expectations for Q1.
We anticipate adjusted EBITDA for Q1 of 'twenty 'twenty four to be higher than Q1 of last year driven by growth in the A&H segment are essential air service business will see material growth year over year, driven by a multitude of factors. These include the full quarter deployment of 400 to provide services under our agreement.
With Air Canada.
The additional aircraft capacity added to our passenger and freight business in 2023 and their growth in our <unk> business with the additional medevac aircraft, we added to the Nova Scotia contract in August of last year, and both the 10 year B C. Sorry in the 10 year Bcf and Manitoba Medevac contracts won in 2023.
Starting to contribute to financial results in the quarter.
Offsetting some of these gains as the impact of continued labor shortages and supply chain challenges. Although we are not seeing a worsening of these dynamics and in fact, we are seeing a stabilization of these related costs the challenges still remain.
The aerospace business line is also expected to have growth in Q1, primarily driven by the full engagement of force multiplier doing maritime surveillance work for the U K market.
Space is also bolstered by a high tempo flying in the Netherlands UAE in Curacao.
Our aircraft sales and leasing business will see materially year over year growth. The anticipated growth is driven primarily by increases in leasing revenue. Although we are still a lot of pre pandemic levels. We expect continued improvement throughout 2024 and anticipate being at pre pandemic run rates by the end of the year.
We also expect higher aircraft and engine sales in the quarter compared to Q1 last year with parts sales continuing to be consistent with historical levels now turning to our manufacturing segment.
In Q1 of 2023, our environmental access solutions business had significantly higher results than historically for this period due to too long linear project can be C, where there were significant number of match on rent given species milder weather. These projects were not impacted by the typical winter slowness or shutdowns experienced at most.
In Q1. These two projects were completed in 2023, and hence results in Q1 of this year will not benefit from these rentals and are expected to be more in line with its historical seasonal results for Q1.
The slowest quarter the rest of the year is expected to be similar to the results experienced in 2023 being at or above our acquisition metrics.
The multi storey window business solutions business will see material growth in Q1 over prior year.
The drivers are the acquisition of BV, which does not have a comparative in Q1 2023, and the increasing volumes at quest quoting in Canada and the U S continues to be extremely active but the conversion of those quotes into backlog is being delayed with uncertain economic conditions.
And sustained higher interest rates also in the greater Toronto region, we are seeing a shift in new projects from condos to apartments, we are agnostic, whether multi residential projects are condos or apartments.
We remain bullish on this business line as the fundamentals that drive demand being immigration of lack of affordable housing remain incredibly strong.
Also later in 2020 four we expect to start to see some of the financial benefits of the synergies being captured between quest M. D D.
At precision metal one engineering business is expected to be in line with prior year, although dry dry area does not have that comparative for Q1 seasonality of dry Aaron's business causes its profits to be concentrated in Q3 and Q4. The addition of Hansen in Q2 last year, we'll increase result that will be primarily.
Italy offset by volume decreases at some of the other entities driven by continuing higher interest rates and economic uncertainty.
With respect to maintenance capital changes for Q1, we anticipate levels being higher than Q1 of last year higher flight hours to support increased volumes together with inflation labor shortages and supply chain issues growing fleet size and acquisitions or some of the factors contributing to the increase.
Although maintenance Capex can shift between quarters. We are currently expecting expenditures in 2020 for it to be more front end loaded than what we experienced in 2023, which will also contribute to the year over year increase. However, however, overall, we expect maintenance capital expenditures to increase roughly consists.
With increases in adjusted EBITDA.
Gross investments in Q1 are primarily for the aerospace and aviation segment and include the upgrade of a second aircraft for the renewed curacao contract the first being complete.
The construction of the Gary Fillman indigenous terminal investments in aircraft aircraft and infrastructure for the word NBC in Manitoba, medevac contracts and payment towards the construction of our King Air Simulator also regional one is working on some opportunistic aircraft and engine acquisitions with May resulting girls investments being made in the aircraft.
<unk> sales and leasing business.
Our acquisition pipeline continues to be very strong with capital on hand from the equity raise last year. Yeah. He will continue to be active in the acquisition market.
Although it is early on and Duane 24, we remain confident that we are on track with our 2024 adjusted EBIT guidance is confidence is underpinned by the essential nature of our business is the fact that a significant portion of our revenues are backed by long term contractual arrangements and the growing need for aerospace solutions the recovery of our erk.
Kraft leaching business investments, we have made in prior periods for future growth and our acquisitions of last year. Thank you for your time this morning, and we'd now like to open the call for questions operator.
We will now conduct a question and answer session. If you.
If you do have a question. Please press star followed by the number one when you touched on phone you will hear a tone acknowledging your request.
Questions will be pulled in the order. They are received please ensure that you lift the handset. If you are using a speaker phone before pressing any keys. Please go ahead and press star one now if you have any questions.
And your first question comes from James Mcgarrigle at RBC. Please go ahead James.
Yeah. Thanks, Robin me on and congrats on a good quarter here.
Morning, guys.
Yeah. So my first question's on the underlying macro and company specific assumptions kind of.
Underlying your 2024 guide you know trying to see if you extend it might be conservative or potentially ambitious because kind of through reporting we've seen some companies assume macro stays consistent through the year.
Companies assume macro kind of turns in the back half. So can you walk us through what macro trends are baked into your 2024 guide and then more specifically on our northern Matt in the window business kind of what Youre assuming there.
Sure.
If you are philosophically, because we don't have a ton of exposure to the market as a whole like that.
The growth in GDP in those things so.
Our our forecasts are driven by a continuing the way we see the business today, So we haven't factored in.
Big increases in the economy from cut interest rates or a recession or anything like that it's it's very sort of steady as she goes with adjustments for what we know about each of the businesses. As an example, you brought up.
The window business and our environmental business.
We know that.
When you look at environmental batting whereas compared to 2020.
Three of 2022.
We had a disproportionate amounts of maths on rent in the first quarter, which are normal for the business typically the grounds frozen about it gives it required in a lot of the market. So typically it's a slower period and we'll see a return to that this year now to be clear that's factored into the guidance. We've given you will see that business be more.
More seasonal this year than normal, but we haven't factored into any changes in the economy per se. We do believe in the back half of the year and into next year, we will see an increase in the T. A D part of our business in the electrical transmission business of eastern Canadian market.
So we see that strengthening but it doesn't have a material impact.
On our forecasting as it relates to the window business. We are forecasting based off the work we have in house.
The order cycle odd windows is more than a year.
So while we've got tons of stuff out on bid anyway, I really do expect the conversion to start off that it into hard orders, that's really not gonna have much of an impact in 2024, even if it were to start very quickly.
In summary on that James I would view it as a status quo kind of looking at the economy with specific adjustments for certain businesses.
Amit.
Sorry, Jay just a couple of comments when I think about our business lines.
And break them down so it essential air service not really impacted by kind of your macro economic so pretty steady central service, where we're moving folks in freight regardless of what's happening in the economy aerospace it probably between 80% to 90% of our aerospace revenue is under contract. So again very.
Stable revenues coming in there.
And you might just touched upon the end of.
The window in northern Matt other manufacturing you know what we're seeing are not losing any business, but on larger projects are where we would be suppliers to there is some hesitancy everyone's I think waiting for interest rates to decline, but we built that into our numbers and then leasing or aircraft sales and leasing we do okay.
See the upside that we've seen last year continuing into 2024 and do you expect that we're gonna be back at our pre pandemic run rates by the end of the year.
I appreciate that incremental it good to hear from you I thought you were retiring but it's a it looks like you'll be sticking around for a little longer.
[laughter] I had another question with regards to free cash flow and <unk>.
We saw the working capital investment I know you addressed this in your prepared remarks.
But you know if we back out that.
Adjustment related to the timing of certain payments in 2023.
Working capital was basically flat on the year, you know I guess I kind of thought that would come in a lot higher given the growth we saw on the business. This year, so anything to call out there anything that might is it getting pushed into 2024.
I'm just trying to see how we should be looking at free cash flow and any potential investments.
Working capital.
This year to support those upcoming growth opportunities.
Oh, I'm I'm really proud of the work our team has done on managing our investment in working capital you're Bang on that if you back out the anomaly and without one fuel delivery from the preceding year, our working capital is essentially flat year over year with $300 million of additional sales.
On a go forward basis, we don't see any big changes to that Kevin We will continue to manage it very aggressively.
There's been some stuff in the media about big increases in delays in getting paid in the window business.
Pause at lows, but we don't see any material change or the timing of our payments there.
To the extent, we have any delays the governments are struggling with some systems work in.
Which has delayed some payments for us in our aviation business, but.
That's already reflected in the year end numbers and so we would expect that to improve during the year as the government gets their stuff back to a more normal state. So bottom line is is that we're happy with what we accomplish that I think it was remarkable to 300 million with no investment and we don't see a big change coming this year.
Sure.
I appreciate that and I'll turn it over thank you.
Thank you.
Next question will be from Steve Hansen at Raymond James. Please go ahead.
Morning, Steve.
Hi, good morning.
Look Mike 24 is clearly going to be a pivotal year for your Central services group, you've got your candidate in full swing now B C, Manitoba medevac contracts ramping.
This is a business of course that you secured.
Last year or the year prior even how do you think about the corporate development efforts to secure additional contracts as they're either contracts to go after or is it too much to handle given you've got so much already in progress there, but how do you think about additional growth opportunities for that.
That vertical given how much youre already.
Thank you.
Yeah, that's a really good question.
It's important to understand when we take on these opportunities whether it be the UK home office in.
With power the.
But do you see them out of that contract or that totaled out of that contract. They're handled by specific subsidiary. So they don't really impact eic's ability as a whole to go after other things and I think one of the things that our track record is we're consistently looking for opportunities and there are some new opportunities coming in the matter of oxide.
Contracts that are coming due diligence, we don't service that will be actively looking at the UK opportunity that we got for 18 months. The government has put out a longer term RFP, which is for twice as big a service is what were providing so we have bid on that and where.
We're excited about that potential opportunity, so I wouldn't look for any slowdown yet.
In our organic growth.
Clearly last year was an exception of landing two bad about contracts and they are.
Maritime surveillance contracted the same year, but there are opportunities across all of our market segments.
I think the other piece that's contractual.
Contractual.
The thing that I'm excited about is the.
The construction of high rise buildings has to accelerate.
We are such a shortage of housing in Canada, we've seen in certain pockets of the of the U S, particularly in the northeast where they started to convert.
Existing commercial buildings into residential buildings I believe we're on our fifth or sixth such project in the Washington area and there's reason to believe that will expand as well. So we're by no means done on the organic growth front.
Yeah, Steve.
Things to keep in mind or data points.
You know with the world being the state. It is we continue to see opportunities on our aerospace side in Europe and Southeast Asia.
Under our air a Contra Air Canada contract as we announced we have up to six aircraft to deploy potentially under that contract. We've deployed for as of right now so the opportunity to deploy an additional to add.
And Theres also future aircrew training, where we're part of the team that was named the preferred bidder those negotiations with the prime and the federal government are going on right now, but that would be a contract that we would hope to be part of them and probably see that by the end of the year.
I appreciate that thanks.
Follow up or clarification on the cadence for northern Mats.
You know through the year I think about you know if I caught your commentary correct that Q1 will be the biggest headwind still where you're comping up against the big linear project, but the balance of the year, we'll start to reflect I guess less of a headwind as you were already experiencing some of that declined last year that that's the way to think about it.
Absolutely we have heard of it but most of it to Q1, a little bit in Q2 and then the.
[noise] cycle starts going the other way.
Got it appreciate it and just on that is there is there are opportunities for new projects at Northern Man I mean, we've been all been focused on these large projects seizing out west but are there new opportunities as we look at 224% 25 I guess.
Yeah, absolutely there are the midterm in that business is really good I think we're seeing a little bit more.
2023, and 2022, we're really about the pipeline part of the business I think you see the back half of 'twenty four 'twenty five start to be a little bit more about the transmission business, which is particularly based TV Stern Canada.
Also something we're excited about going into the U S. So.
We are currently looking at ways to build our bats in eastern Canada. That's are so heavy shipping them from D C to Ontario, while it's the only way to do it right now we view as suboptimal and so we're examining opportunities to be able to build those match directly in market.
That hopefully will have some progress to report on that at some point during the year.
There's also opportunities in relation to you know.
Everyone's goal with respect to the environment and looking for zero carbon grids I look at you know carbon capture hydrogen pipelines I think all of those will be other areas, where we can deploy a match as well.
Thanks for the time.
Yeah.
Thank you next question will be from Kamran Derksen <unk> National Bank financial Please go ahead.
Our in cab.
Yes. Good morning, thanks, Thanks very much.
That's my first question is just around the Capex number, but you've indicated on the the maintenance Capex. So we should expect I guess growth in line with EBITDA growth just wanted to try to get a handle on growth growth Capex. I mean, obviously was a big year. In 2023, you still have a fairly big year in 2024, but will 2024 be a higher growth capex.
As it stands today relative to 2023 or two or less.
I would expect it to be somewhat less we are we the Manitoba medevac contract our largest investments were made during the fourth quarter, where we acquired the aircraft.
Rich correct me, but I think the all five of those were paid for during fiscal 2023 of the big part that's going over come forward.
Seem out of that contract, we only had 112.
It delivered by our supplier last year or so that's all for this year, we've got the.
Full motion simulator, which we paid for a portion of last year, but there is more to come on that one and then the completion of the Gary Philbin.
Terminal would be the main drivers of growth Capex.
I always wanted to point out that we're opportunistic a regional ones are hopefully they'll find a fleet Oh I don't think there's much in it for us in the lakes fleet. That's all 730 sevens, but hopefully will uncover an opportunity or two there, but those are based off when we find that the Dod budget and if theyre not.
Easy to predict.
Right makes.
<unk>.
I guess second question, I guess sort of on capital deployment and.
The M&A outlook I mean.
You've indicated that pipeline still looks pretty good just any commentary on what youre seeing out there any changes on the M&A front relative to what you talked about that back in the fall.
So I would say that perhaps theres been a slight decline in the number.
Oh of transactions, we're looking at it's still pretty good but it's not.
Quite often there is a surge of stuff at the start of the year, we haven't seen that this year, but I, but I would reiterate what I said before that the quality of the size of what we're seeing is.
Unequivocally better than the normal.
I am very bullish.
Bullish on the acquisition side of the business.
Maybe not as many opportunities I think people are waiting for interest rates to come off without the multiples will go up.
But we're busy on that front the interesting thing right now for US is most of the things. We're looking at are very tangential to what we're doing.
It's expansion of geographies in aviation or vertical integration in our manufacturing businesses.
We're looking at this stuff, we know quite a lot about.
Okay, that's good to hear.
That was all for me thanks very much.
Thank you next question will be from Matthew Lee of Canaccord. Please go ahead.
Hey, good morning, Thanks for taking my question morning.
So when you want to talk about margin profile as quickly in the quarter and manufacturing it feels like revenue is a bit higher than expected, but lower margin. So it was that related to revenue mix.
Between the businesses or perhaps a mat sales in the quarter or something that kind of change that profile.
If you are paying on that.
Uh huh.
The margins are largely driven by product mix and we talked about the fact that the rental market was softer in the in the bad business and so we shifted gears a little bit and sold a number of bats that we're coming off program. So we saw a use that.
Which.
You see it in a few places in our statements you see increased revenue and rich mentioned about how we had negative growth capex in that business, because we sold off some.
Use that.
The the Mat business. In addition to the end of the of those couple of really big projects.
I was going through a change in the price of what we bought a northern bad word was insanely expensive.
That's double what it normally is in the cost of that and so.
Some of our competitors got caught with a whole bunch of expensive inventory that they can't sell because they're not worth what they paid for them.
We didn't get caught in that problem and we were able to sell the use that a right size the fleet and that you see that in our revenue and in our margins.
Great. That's really helpful. And then maybe on the airline side, it's kind of like a good load factors maybe.
And increasingly seeing both led to a margin beat in the quarter.
When I look forward into 2024, I mean, those factors seem like they would be relatively sustainable even if Q1 is seasonally a little bit softer is that the way everybody. Thank goodness.
Yeah, exactly right I mean, if a cute.
The seasonality is not going to change and in fact, it will probably be more apparent because of that northern Matt stepping in the aviation business. The things that drove our enhanced results are all continuing on higher volumes.
Higher utilizations of the AR in our maritime surveillance business. So there's no reason to expect a stronger margin profile there to decline other than it will move with seasonality as it always does.
And the margin profile of the new contract is kind of similar to what the business already done.
Which contracts are you referring to the battery back on track, Yeah again bear in mind.
The Manitoba one of your answers a lot easier. It's yes. The B C. Wanted it's also yes, but bear in mind, we had a part of that stuff before so we're gonna need to redeploy those aircraft. We had that we were using on that contract before and those were the new medevac aircraft, we have other than the ones. We just bought for.
For Manitoba, So that will you will see the those margins grow over time as we redeploy the assets, we're pulling off of the existing contract.
Okay. That's very helpful I'll pass the line.
Thank you next question will be from Chris Murray at ATB. Please go ahead.
Thanks, Good morning folks.
Maybe the incremental I know you were talking about the.
The leasing business. So I just wanted to delve into that a little bit.
So you made the comment about.
The run rate being back at the 2019 run rate by year end.
Sometimes it is conditional on to mikes comment about what the guys at regional one can find in terms of aircraft, but can you talk a little bit about.
What that growth rate looks like over the next couple of years.
And what the fleet utilization would look like.
And then while I can also touch on the line.
It sounded like you were going to make it kind of a comment about your impending retirement or what's going on there to James's question. So if you can maybe clean that up and give us some color on what the plan is there that would be appreciated.
Sure. So why don't I take your last question first which is yes, I'm still here and will be for the next little bit as we transition my responsibilities over to others here at head office and I finish a project or two that I have on my plate, So you'll probably still see me.
Round for the next quarter or so.
But we'd expect to be retired definitely by the end of the year to give you a kind of some sense of timing as it relates to <unk>.
The your question on leasing so the one thing with with regional one is I know you're aware of tranches.
Because it's short term leasing you we have asked what's going on lease and we have assets coming off lease.
So when we look at our guidance, we obviously consider both together with what's ever in the pipeline on some reasonable expectations on obviously acquisition to add to our leasing portfolio.
We are seeing you know they did bring it down by region a bit like we are seeing actually really good demand in Africa.
Europe is coming back quite nicely not quite there, yet, but trending quite well and the slowest region to come back it's actually North America, but we have a lot of assets in the past we've had them at least outside of North America.
And when I look at where we are today, you know I think there's quite a bit of growth left for if I look at this quarter compared to what our run rate is.
I'd expect there to be you know 30.
35% more to be achieved by a year and incremental growth over the quarter.
Okay.
Okay. That's helpful.
And then the other question is just in terms of the maybe.
Maybe thinking about the <unk> rollout as we go through the year, Mike I think you've talked a little bit about the plan will be that we'll see.
Revenue start to materialize as the aircraft come in can.
Can you give us maybe the pacing or your thoughts around what the expected deliveries of those aircraft are and are you seeing and I think we're seeing this from every every OEM right now any any riskin delay or anything like that that could take.
If I could take those deliveries and push them to the right maybe further into 'twenty five or into 'twenty six.
The the King airs and the order book for a bit but we.
We have seen slight delays in some of these things don't material ones, but moving things a month here I'm unfair and so we could have some that don't get in until 'twenty, five and plus we've added our aircraft to that so.
It moves both things that moves.
The payment for them so it pushes the capex out and it delays the AR as a full rollout in the plan we are however.
Experiencing the higher pricing from the new contract of the work we're already doing so there is some benefit right away and I would suggest that we will have all the planes flying early in 2025, but we will definitely have some deliveries that will cross into next year.
Okay, but nothing we're seeing right now that really really used either as a major risk or pacing item.
Tetra is a little delayed on some stuff, but nothing.
Nothing Earth.
Her shattering.
Yeah, I mean, what I'm, saying is we are seeing a little bit of sliding out so that we're probably at this point expecting more aircrafts than originally expected to slide into 2025.
One's that we originally expected to be in 2024. So I think will go in a little deeper into 2025. Unfortunately on these aircraft deliveries.
Okay. That's helpful. Thank you.
Thank you next question will be from Jonathan Masa.
CIBC. Please go ahead Jonathan.
Good morning, John Good morning.
Morning. Thank you for taking my question, so you've been able to raise prices on your windows business to reflect higher inflation is there still more catching up that needs to be done or are you happy with where you are at.
Oh, well, it's really a contract by contract issue there because in most of them the card.
The pricing is set we've worked through most of the old contracts.
Where they were.
Price before the big inflation in.
Put costs, so we're pretty comfortable with where we are and I would envision that that our position strengthens when the.
Market that start booking some of these orders are so many bids outstanding when they start to go people are going to be very concerned about whether they can get their slots, which is typically good for our margins.
I see thank you and can you speak to the labor environment, both availability and costs across the business not just within aviation.
That while aviation.
I would describe as slightly better, but the the band for pilots and.
The ability to train them. It takes a long time to turn a pilot into up yes, you need them to be Theres lots of co pilots out there were 250 hours.
And flying time with their limited in what they can do so I would envision that the labor supply.
In the pilot side and quite frankly, the maintenance engineer side very closely mirrors, what's going on with pilot. So I'll describe it as better but it's going to be a long time before it is good.
On our manufacturing side, we've definitely seen a.
And improvement to the availability of labor I would describe it is still tight.
And we've made decisions in Windows as an example, where we've kept more people on that we'd probably need to at this point, though I don't want to have to retrain and go find the west These orders start to pop so I.
I guess, it's kind of the same across the board tight but not as a.
Not as bad as it was say 12 months ago carve out would you want to add anything to that.
Yeah, I mean, you're you're right on the crude siding of things so definitely still a shortage, but were better than what we were last year that doesn't mean, you know and as I.
I remarked in my comments, it's still a challenge, but it's less of a challenge and then in our manufacturing segment.
I would describe it as stable we are getting the people that we need EM and so don't really see any significant issues on that front.
Great. Thank you I'll jump back in the queue.
Thank you next question will be from Jonathan Livers.
<unk> Bank. Please go ahead.
Morning, Jonathan.
Good morning, Thanks for taking my question.
Mike We read that air Canada jobs had a very strong holiday season.
I believe this was the first quarter with contribution.
On your Air Canada Express contract.
So so if volumes are strong and demand is strong how would that have benefited.
Your earnings were any new routes out of it.
It really doesn't change our stuff much.
We are providing certain certain flights and sort of as a preset rates, we've got flow throughs on certain costs like fuel, but we arent, we arent taking the ticket RASK that's air Canada. So I.
I can say, though that our performance has been very strong air Canada has been very happy with what we've provided and it's gone up probably more smoothly than even we would have anticipated. So it's off to a great start.
We had announced that it was up to six planes. We've got four that were flying now a reasonable chance that we may get called upon to provide the others in the future.
Good to hear thanks.
On our one we saw a public announcement.
The division had appointed a chief investment officer.
Are you planning to pursue any new types of investments or joint ventures for that business.
I'm not sure that we're in.
And to pursue any different types of investments really regularly invest in and.
Certain lease opportunities with our financial partners. It gives us access to learn about different aircraft without having to make huge financial that but we are definitely in those situations, where we manage the aircraft for someone else, we are making in that equity investments alongside with them.
It's not just for a pure manager, where a manager and an investor.
Thank you and just one last question on BC medevac.
Got.
It sounds like that.
It continues to go well if the contract has expanded would you have an updated.
Total capex budget for us, including all the new planes.
Planes ordered I think we'd estimated that.
There might be $200 million investment in total for the contract.
At the time of the.
Yeah, we can't pinpoint as last year.
For sure Jonathan we can do that in future periods like I say, we've already added one or two to the contract and there's still discussions ongoing. So we can certainly do that in a future period.
Okay. Thanks for your comments.
Thank you next question will be from Carter Gupta at Scotiabank. Please go ahead.
Good morning, Mike and team and good to see you Carmel superb bit of a stretch here.
My first question on Aerospace segment.
A big a lot of that today.
Q4, it seems like the revenue in aerospace was up 13%, but the EBITDA was up only 3%.
There seems to be some reference in the MD&A about a future contract adjustments I just wanted to understand what contract adjustments that are we talking about here.
Okay.
Sure.
Yes.
There were a couple of contracts.
As in prior periods and one in this period.
Increased costs that are going to flow through price escalator adjustments in future periods. So just an impact in Q4 that we don't expect to recur in future periods.
Oh, you say, it's already happened and those costs have been taken.
Got it previously right. So future, that's probably where you are right kind of margins youre studying.
Yes, yes, we don't expect.
Go ahead Mike.
No you go ahead rich that's Pfizer I jumped in you go ahead.
They don't they don't expect.
A similar kind of deterioration.
Revenue and EBIT growth going forward. It just a one quarter a one quarter impact.
Okay that makes sense, Okay, and then just.
So the northern Matt.
From what I've heard today sounds like obviously you had.
A little bit of a kind of a long winded.
No tailwind sort of been in northern match last year, probably until the spring or so so it sounds like that was a Q1 I get a daily.
Q2 expectation at this point I mean are you guys expecting somewhat flattish performance at northern math in Q2, this year or is it still going to be slightly down.
I know I can take that.
Go ahead.
Yeah, I mean, we still have the impact of those long linear projects for the first part of Q2, so probably on a year over year basis slightly down but I.
I wouldn't suggest that it's.
Significantly material and then you know as I indicated for the balance of the year pretty much the same that we saw in 2023.
Okay. Thanks, and then maybe you can get a quickly follow up on northern pass in Las Vegas.
Have you have you right sized to any of the math of rich fleet already or is there a big opportunity.
The fleet's about where it should be as we move.
I see the improvements in the T&D business in Eastern Canada will have to figure out exactly what we want to do with the fleet. There is a longer term some of those contracts are the more we may invest in some there but at this point, we don't we think we've got the the batch size, where we wanted to be.
Okay. That's great. Thanks, Mike I appreciate the time.
Thank you next question will be from Fernando to railcar at core Mark. Please go ahead.
Morning.
Morning, Thanks for taking my question a lot of the questions I had have already been covered so I'm just hoping that maybe you can give us some indication about the potential extension of the U K home office, if he can speak to that at this point or.
Or at least you know maybe closing too as to whether you expect it to maybe.
Or additional aircraft or have similar or different economics to you know the current contract or similar contracts that you already have in place.
Sure that's a good question.
When the government, let the contract last year.
It was to deal with an urgent situation and so they did it without an RFP, which is what led to an 18 month contract, which under U K law was the most they could do without a process.
They are immediately well worked out of the process put a bid out.
And we've already submitted our bed on.
On the longer term RFP.
We believe that the.
The second no longer term contract will be about twice the size, perhaps a little more than that of the initial contract and we would if successful likely need to put a second aircraft into service, but the.
The way the aircraft will be equipped the margins in those kinds of things would all be very similar to what we've had in the 18 months contract.
Gotcha and the contract we expected for three years and are likely to here towards the end of Q2.
Got it. Thank you that's very helpful. And then maybe just a follow up on that.
Just looking here at your leverage metrics and they are they seem to be on the right side of where you want them to be but I'm.
And I'm just wondering are you looking at.
To build a you know, let's say a bit more of a buffer for the rest of 2020 for and if so then how comfortable are you with a funding growth Capex. If you are successful in getting the contract how comfortable are you with funding our growth capex with internal cash flows versus maybe having to.
You know tap the equity markets again.
We.
Barring a adam getting hot and getting us a really big acquisition somewhere we've got all the equity we need our leverage is at a sort of five year lows on an aggregate basis.
And and trending the right way. So we can fund whatever we need to on that growth kind of stuff internally. The only thing that would drive an equity need would be an outsized acquisition and I'm by outsized I'm talking in the.
Two three or $400 million range, the smaller stuff, we can do ourselves.
Got it Switzerland. Thank you so much.
Thank you once again, ladies and gentlemen, if you do have a question. Please press star followed by one on your Touchtone phone.
And your next question will be from Jeff Swoop pains at TD Cowen. Please go ahead.
Good morning.
Good morning, thinking about how the Tianjin today, we have two questions. The first one up for multi story windows was revenue higher in Q4 than in Q3.
Yeah.
Rich I'm going to hand that to you I don't have that.
But just give us a second we'll pull that for you.
Yep.
I'll take the second one while we're digging up the first one yes.
Yeah, Yeah, So and then on the topic of multistory windows.
Have the deferrals or to lead on the condo project orders become more or less significant than six months or a year ago.
Put differently has the uncertainty increased.
I would describe it as consistent.
It's very project specific some of them been delayed some haven't.
Our our backlog is about where it was a year ago and around the $1 billion range. So.
I would describe it as consistent.
Every time the interest rates they talk about them coming off we start to see it a little increase in urgency on some of the big stuff. So.
It's my personal opinion, although not tied to the fact that I think you will see.
The conversion of opportunities into hard orders.
Falloff once we start the.
The rate decline process.
Oh, Thank you and then I guess, if you don't have to.
Yes, Paul So the Q4 was slightly lower than the 10.
Q3, but within 5% relatively consistent.
And most of that would tie into the seasonal nature of where you are the last half of December is a particularly good in manufacturing with the vacation days in the holidays.
Okay.
Perfect. Thank you.
Thank you.
At this time Mr. Pile, we have no other questions registered please proceed.
Well. Thank you everybody for joining us today look forward to chatting with you again in May when we discuss our first quarter.
Have a great day, and we'll talk to you soon.
Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we ask that you. Please disconnect your lines have a good weekend.
[music].
Hum.
Yeah.
Hum.
Hum.
Hmm.
Hum.
[music].
Hum.
Mhm.
[music].
Hum.
[music].
Hum.
[music].
Hmm.
Hum.
[music].
Hum.
Yes.
[music].
Hum.
Yes.
Hum.
[music].
Ooh Ooh.