Q1 2024 Chorus Aviation Inc Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the Chorus First Quarter 2024 Financial Results Conference Call. At this time, all lines are in a listen-only mode.
Good morning, ladies and gentlemen, and welcome to the cores first quarter 2024 financial results Conference call. At this time all lines are in a listen only mode.
During the presentation, we will conduct a question and answer session. If at any time. During this call you need assistance. Please press star zero for you all.
This call is being recorded on Tuesday may seven 2024, I would now like to turn the conference over to Taiwan, Kochi VP Treasurer Investor Relations. Please go ahead.
Operator: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press Star 0 for the operator. This call is being recorded on Tuesday, May 7, 2024. I would now like to turn the conference over to Tyrone Cotie, VP, Treasurer, Investor Relations. Please go ahead.
Kevin Chiang: Thank you Joanna.
Tyrone D. Cotie: Hello, and thank you for joining us today for our first quarter 2024 conference call via audio webcast. With me today from Chorus are Colin Copp, President and Chief Executive Officer, and Gary Osborne, Chief Financial Officer. We will begin today's call with a brief summary of the results, followed by questions from the analyst community. As there may be some forward-looking discussion during the call, I ask that you refer to the caution regarding forward-looking statements and information found in the MD&A.
Kevin Chiang: Hello, and thank you for joining us today for our first quarter 2024 conference call and audio webcast.
Kevin Chiang: With me today from Corsair, Colin Copp, President and Chief Executive Officer, Gary Osborne, Chief Financial Officer.
Speaker Change: We will begin today's call with a brief summary of the results followed by questions from the analyst community.
Kevin Chiang: Is there may be some forward looking discussion during the call and ask that you refer to the caution regarding forward looking statements and information found in the MD&A.
Kevin Chiang: This pertains specifically to the results and operations of course Aviation Inc. For the three months ended March 31, 2024, as well as the outlook section and other sections of our MD&A, where such statements appear. In addition, some of the following discussion involves non-GAAP financial measures, including references to adjusted net income adjusted EBT.
Kevin Chiang: Adjusted EBITDA leverage ratio and free cash flow.
Kevin Chiang: Please refer to our MD&A for a discussion related to the use of sudden such non-GAAP measures.
Tyrone D. Cotie: This pertains specifically to the results and operations of Chorus Aviation Inc. for the three months ended March 31st, 2024, as well as the Outlook section and other sections of our MD&A, where such statements appear. In addition, some of the following discussion involves non-GAAP financial measures, including references to adjusted net income, adjusted EBT, adjusted EBITDA, leverage ratio, and free cash flow. Please refer to our MD&A for discussion related to the use of such non-GAAP measures. I'll now turn the call over to Colin Copp. Good morning, everyone, and thank you, Tyrone.
Kevin Chiang: Now I'll turn the call over to Colin Connolly.
Colin L. Copp: This quarter was marked by solid progress on our plan and key metrics, leading to meaningful improvements on our deleveraging goals and the generation of strong cash flows. Before I get into the first quarter highlights, I want to acknowledge that we are not satisfied with where our share price is trading today, and we recognize that the transition of the leasing business to an asset-light model has been slower than we had planned.
Colin L. Copp: Good morning, everyone and thank you Tyrone this quarter was marked by solid progress on our plan and key metrics, leading to meaningful improvements on our deleveraging goals and generation of strong cash flows.
Colin L. Copp: Before I get into the first quarter highlights I want to acknowledge that we are not satisfied where our share price is trading today and.
Kevin Chiang: And we recognize that the transition of our leasing business to an asset light model has been slower than we had planned.
Colin L. Copp: This is a top priority for us, and we're very focused on improving value for our shareholders. We're working hard to optimize returns while accelerating and monetizing assets in our FELCO leasing business. I am happy to report that since the last quarter, the leasing business has continued to strengthen. Over the past few months, we've seen improvements in both lease renewal rates on key assets and an increase in asset sale opportunities. We remain very confident in the regional leasing space and in our ability to maximize the value of the over 100 owned or majority owned assets under management by Felco.
Kevin Chiang: This is a top priority for us and we're very focused on improving value for our shareholders.
Kevin Chiang: We're working hard to optimize returns, while accelerating and monetizing assets in our felt the leasing business.
Kevin Chiang: I am happy to report that since the last quarter. The leasing business has continued to strengthen over the past few months, we've seen improvements in both lease renewal rates on key assets and an increase in asset sale opportunities.
Kevin Chiang: We remain very confident in the regional leasing space and in our ability to optimize the value of the over 100 owned or majority owned assets under management by telco.
Colin L. Copp: At the same time, we've been active with our NCIB and have cancelled over 5% of our shares since its launch in 2022, including over 900,000 shares this last quarter. And we will continue with our NCIB. Now, turning back to the first quarter results.
Kevin Chiang: At the same time, we've been active with her in CIB and cancelled over 5% of our shares since its launch in 2022, including over 900000 shares this last quarter and.
Kevin Chiang: And we will continue with their end CIB.
Kevin Chiang: Now turning back to the first quarter results.
Colin L. Copp: Throughout the first quarter, we performed well and met our financial targets. As I mentioned earlier, this led to solid outcomes on our debt reduction goals and the generation of cash flows from operations and asset sales. Gary will speak to those details in his update.
Kevin Chiang: Throughout the first quarter, we performed well and met most and met our financial targets.
Kevin Chiang: As I mentioned earlier this led to solid outcomes on our debt reduction goals and generation of cash flows from operations and asset sales.
Kevin Chiang: Gary will speak to those details in his update.
Colin L. Copp: This continued progress of strengthening our balance sheet, reducing our debt servicing costs, and generating solid free cash flows will position us for future growth and underscores our absolute determination to drive shareholder value. Throughout the quarter, all of our businesses rolled up their sleeves to contribute to these results. Jazz generated solid earnings and cash flows under its long-term capacity purchase agreement with Air Canada. Throughout the quarter, Jazz was, and throughout the quarter, it saw pilot recruitment strengthen, with the intake for its pilot classes full several months in advance.
Kevin Chiang: This continued progress strengthening our balance sheet, reducing our debt servicing costs and generating solid free cash flows will position us for future growth and underscores our absolute determination to drive shareholder value.
Kevin Chiang: Throughout the quarter all of our businesses rolled up their sleeves to contribute to these results.
Kevin Chiang: Jazz generated solid earnings and cash flows under its long term capacity purchase agreement with Air Canada.
Kevin Chiang: Throughout the quarter Jeff.
Kevin Chiang: Excuse me throughout the quarter jazz saw pilot recruitment strengthen with the intake for its pilot classes full several months in advance Randolph and his team at jazz have demonstrated exceptional operational performance in Q1 with notable year over year improvements in almost all metrics.
Colin L. Copp: Randolph and his team at Jazz have demonstrated exceptional operational performance in Q1, with notable year-over-year improvements in almost all metrics. Belco executed well on trading activity, with Jeremy and the team concluding 23 aircraft transactions, including the sale of three aircraft and two engines in support of our asset light strategy. And they executed a sale and purchase agreement with Nordic Aviation Capital to acquire a portfolio of 24 Embraer aircraft on behalf of Fund 2.
Kevin Chiang: VAALCO executed well on trading activity with Jeremy and the team, including 23 aircraft transactions, including the sale of three aircraft and two engines in support of our asset light strategy.
Kevin Chiang: And they executed on a sale and purchase agreement with Nordic Aviation capital to acquire a portfolio of 24 Embraer aircraft on behalf of fun too.
Colin L. Copp: Voyager continued to execute on the growth plan, with Corey and the team pursuing several new business development opportunities, making strong progress in key areas of specialty flying, MRO, and USM. Additionally, we're very pleased to announce that Voyager purchased a King Air 350 in the first quarter and leased it to the Canadian Department of National Defense. This represents an expansion of Voyager's existing in-service support contract for the manned Airborne Intelligence Surveillance and Reconnaissance Program, MAISR.
Kevin Chiang: Or does your continued to execute on the growth plan with Korean team pursuing several new business development opportunities, making strong progress in key areas of specialty flying MRO and USA.
Kevin Chiang: Additionally, we're very pleased to announce the voice your purchase to King Air 350 in the first quarter and lease it into the Canadian Department of National Defense.
Kevin Chiang: This represents an expansion of lawyers blasier's existing in service support contract for the manned airborne intelligence surveillance and reconnaissance program Mazer.
Colin L. Copp: Given the strong performance of our operating business, today, I'm pleased to report that we are increasing our 2024 guidance for consolidated adjusted EBITDA and free cash flow, as well as the majority of guidance for RAL, including that for proceeds from asset sales.
Kevin Chiang: Given the strong performance of our operating business.
Kevin Chiang: Today Im pleased to report that we are increasing our 2024 guidance for consolidated adjusted EBITDA and free cash flow.
Kevin Chiang: As well as the majority of guidance for rail including net.
Kevin Chiang: Proceeds from asset sales.
Colin L. Copp: In conclusion, I'd like to reiterate that the fundamentals of our business are strong and that we will continue to improve them. Chorus has the right elements and the right blend of capabilities to be an industry leader within the regional aviation space and to deliver great value to our shareholders. The Chorus team represents the best talent our industry has to offer, and I want to thank each one of them for their focus and contributions throughout the quarter.
Kevin Chiang: In conclusion I'd like to reiterate the fundamentals of our business are strong and that we will continue to improve them.
Kevin Chiang: <unk> has the right elements in the right blend of capabilities to be an industry leader within the regional aviation space and to deliver great value to our shareholders.
Kevin Chiang: And of course team represents the best talent, our industry has to offer and I want to thank each one of them for their focus from contributions throughout the quarter.
Colin L. Copp: And finally, I want to express my thanks to our investors for their ongoing support. As I reiterate our commitment to value creation and to building a resilient industry-leading business, thank you. I'll now pass it over to Gary to take you through the financing. Thank you, Colin, and good morning.
Kevin Chiang: And finally I want to express my thanks to our investors for their ongoing support.
Kevin Chiang: As I reiterate our commitment to value creation and to building a resilient industry leading business.
Speaker Change: Thank you.
Speaker Change: I'll now pass it over to Gary to take you through the financials. Thank.
Gary James Osborne: Thank you Colin and good morning.
Gary James Osborne: Our first quarter results are in line with our target. As Colin mentioned, we are increasing our guidance for the remainder of 2024, primarily reflecting our strengthening asset sales pipeline. As we look at our results for Q1 2024, our Adjusted EBITDA came in at $109.1 million, with our Jazz and Voyager businesses combining to deliver Adjusted EBITDA of $62.4 million and Falco delivering $55 million. Our pre-cash flow was $102.1 million during the quarter, primarily derived from strong operating cash flows and net proceeds of $38 million, primarily related to the sale of two A220
Gary James Osborne: Our first quarter results are in line with our targets as Colin mentioned, we are increasing our guidance for the remainder of 2024, primarily really primarily reflecting our strengthening asset sales pipeline.
Gary James Osborne: As we look at our results for Q1 2024, our adjusted EBITDA came in at $109 1 billion with our jazz and voyageur businesses, combining to deliver adjusted EBITDA of $62 4 million and Falco delivering $55 million.
Gary James Osborne: Our free cash flow was $102 $1 million during the quarter, primarily derived from strong operating cash flows and net proceeds of 38 million primarily related to the sale of two <unk> hundred twenty's.
Gary James Osborne: Our leverage ratio was 3.4 at the end of the quarter, down from 3.6 at December 31st, 2023, and down a full term from 4.4 at the end of December 31st, 2022. This has been accomplished largely through long-term debt reduction, including approximately $594 million of long-term debt repayments in the past 18 months.
Gary James Osborne: Our leverage ratio was three four at the end of the quarter down from $3. Six at December 31, 2023, and down a full turn from four four at the end of December 31 2022.
Gary James Osborne: This has been accomplished largely through long term debt reduction, including approximately $594 million of long term debt repayments in the past 18 months.
Gary James Osborne: We also allocated capital to retire about 10.5 million shares since Q4 2022 for approximately 33 million. As mentioned last quarter, we are pleased to continue positive changes in the airline credit environment. During the quarter, we signed an agreement with Azul, which restructured their aircraft lease arrangements to provide for the recovery of all contracted amounts owed.
Gary James Osborne: We also allocated capital to retire about $10 5 million shares since Q4 2022 for approximately $33 million.
Gary James Osborne: As mentioned last quarter, we are pleased to continue.
Gary James Osborne: Positive change or.
Gary James Osborne: We see continuing positive changes in the airline credit environment.
Gary James Osborne: During the quarter, we signed an agreement with the xul, which restructured their aircraft lease arrangements to provide for the recovery of all contracted amounts owed.
Gary James Osborne: Looking ahead to the remainder of 2024, we have increased our consolidated guidance as follows. Increased adjusted EBITDA guidance by $10 million to $360 to $410 million. Increased free cash flow guidance by $10 million to $300 to $350 million. Increased expected net proceeds from asset sales guidance by $30 million to $60 to $80 million. Segment guidance for both RAS and RAL has been updated to support these changes.
Gary James Osborne: Looking at to the remainder of 2024, we have increased our consolidated guidance as follows increased adjusted EBITDA guidance by 10 million to $360 million to $410 million.
Gary James Osborne: Increased free cash flow guidance by 10 million to $300 million to $350 million.
Gary James Osborne: Increased expected net proceeds from asset sales guidance by $30 million to $60 to $80 million.
Gary James Osborne: Segment guidance for both <unk> and rail had been updated support to support these changes.
Gary James Osborne: With respect to Fund 3, we continue to anticipate closing it by the end of 2024. Finally, we remain active in our NCIB. Purchasing 938,000 shares in the quarter at our current market price, we intend to continue to be active in our NCIB throughout the balance of the year. All noted. With continued improvement in our key metrics and an increase in our financial targets, we are demonstrating progress, both in strengthening our balance sheet and putting us on a path to value creation. We are now ready to take your questions.
Gary James Osborne: With respect to fund III, we continue to anticipate closing it by the end of 2024.
Gary James Osborne: Finally, we remain active in our in CIB purchasing.
Gary James Osborne: Purchasing 938000 shares in the quarter and our current market price, we intend to continue to be active in our in CIB throughout the balance of the year.
Gary James Osborne: As Colin noted.
Gary James Osborne: With continued improvement in our key metrics and an increase in our financial targets. We are demonstrating progress both in strengthening our balance sheet and putting us on a path to value creation.
Speaker Change: Now ready to take your questions.
Gary James Osborne: Okay.
Operator: 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 number on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. If you are using a speakerphone, please lift the handset before pressing any key.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. So do you have a question. Please press the star followed by the one on your Touchtone phone.
Speaker Change: Sweet home farm to acknowledging our quest.
Speaker Change: Using a speaker phone please lift the handset before pressing any Q.
Operator: One moment, please for your first question. The first question comes from James McGaraggle from RBC. Please go ahead.
Gary James Osborne: One moment. Please for your first question.
Gary James Osborne: First question comes from James <unk> from RBC. Please go ahead.
James McGaraggle: Okay, thanks for taking my question, and congrats on a good quarter. Thank you.
James: Hey, Thanks for taking my question and congrats on a good quarter.
Speaker Change: Thank you thanks.
James McGaraggle: Yes, so I just wanted to get a little bit more color on what's driving the acceleration in asset sales. You mentioned that the market is picking up in terms of rates and aircraft values. Can you provide a little bit more color there on how you see the market evolving during the remainder of the year?
James: Yes, so I just wanted to get a little bit more color on what's driving <unk>.
James: Acceleration in asset sales.
James: You mentioned the market is picking up.
James: In terms of rates aircraft values can you just provide a little bit more color there.
Gary James Osborne: You see the market evolving during the remainder of the year.
Colin L. Copp: Yeah, I can give you my perspective, James, and Gary may jump in with his as well. But look, what we've seen in the last little while is a lot more interest in trading activity, and most specifically on the sales side, at reasonable values. So we're pretty excited about that. But these types of things take a long time, and they're never super quick.
Speaker Change: Yes, I can give you my perspective James.
Speaker Change: Harry May jump in with his as well but.
Speaker Change: What we've seen in the last little while it's a lot more interest in trading activity in small specifically on the sales side.
Speaker Change: At reasonable values.
Speaker Change: So we're pretty excited about that these types of things take a long time and they are never Super quick so.
Gary James Osborne: So there's kind of always a bit of a tail to these stuff. As we come out of the last year where it was a little bit sluggish, we're pretty encouraged by all that, and we're encouraged by some of the lease rates we're seeing on key assets improving. Generally, we're seeing an incline, an improvement. Yeah, that's... Yeah, and I think Colin hit it.
Speaker Change: No.
Speaker Change: There's kind of always a bit of a tail to this stuff, but we've certainly seen a good improvement the last several months.
Speaker Change: As we kind of come out of the I guess came out of the last year, there was a little bit sluggish so.
Speaker Change: We're pretty encouraged by all that and we're encouraged by some of the lease rates, we're seeing on key assets improving so generally seeing.
Speaker Change: In incline of an improvement.
Speaker Change: All aspects.
Gary James Osborne: We see a good pipeline moving ahead. We've got a lot of interest in asset sales. We have a trading desk over at Belco that is very active in the market, so we're feeling very confident in that. And back to Colin's point, the lease rates that we've been renewing aircraft at have been slightly better than before.
Speaker Change: Yes, I think Colin column here, we see a good pipe.
Speaker Change: Looking ahead, we've got a lot of interest in asset sales, we have a trading desk over at Balco that is very active in the market. So we're feeling very confident in that and <unk>.
Speaker Change: Lease rates that we've been renewing aircraft that had been at or slightly better than planned.
Colin L. Copp: I appreciate the caller, and I wanted to ask another question on Brookfield and the Castle Lake acquisition. You know, have you spoken to Brookfield at all on that, just trying to get any color on the impact that might have on your relationship with them and any potential impact on Fund 3?
Speaker Change: I appreciate the color.
Speaker Change: Another question on the Brookfield.
Speaker Change: On the cost of like acquisition.
Speaker Change: Have you spoken to Brookfield at all on that.
Speaker Change: Any color on the impact that might have on your relationship with them and.
Speaker Change: Any potential impact on fund III.
Colin L. Copp: Well, I can talk just at a high level about the fact that, you know, look, Brookfield is very close to us. This did not come as a surprise to us, and there's absolutely no impact on us in any way. So we're not, you know, we're not in any way affected by this; this is a transaction that has really nothing to do with us on the aviation side, and Brookfield, as you know, is on our board, fully supportive; they, you know, they talked to us about this. You know, so there's absolutely no issues there at all. It's not really tied in any way to anything for us.
Speaker Change: So I can I can talk just very high level to the fact that look Brookfield is very close to us.
Speaker Change: This did not come as a surprise to us and there is absolutely no impact to us in any way.
Speaker Change: So we're not we're not in any way affected by this this is a transaction that has really nothing to do with us on the aviation side in Brookfield as you know is on our board fully supportive.
Speaker Change: They talk to us about this.
Speaker Change: So there is absolutely no issues there at all it's not really high in any way to anything for us.
James McGaraggle: I appreciate the caller, and I'll turn the line over to her. Thank you.
Speaker Change: Please give me color and I'll turn the line over thank you.
Operator: Thank you. The next question comes from Kevin Chiang at CIBC. Please go ahead.
Speaker Change: Thank you next question comes from Kevin Chiang CIBC. Please go ahead.
Kevin Chiang: Good morning. Thanks for taking my questions here. Maybe if I just look at it simplistically, I know a lot of moving parts here, and as you sell assets and transition to your asset light model, and you're still getting Fund 3 ready to go, there's a little bit of noise in earnings. But I guess if I look at it simplistically, if I look at the midpoint of your full-year guide, and I back out what you did in Q1, it implies a decent sequential decline in the run rate EBITDA from like 109 to 92.
Kevin Chiang: Good morning, Thanks for thanks for taking my questions here.
Kevin Chiang: Maybe if I just look at it Simplistically I know.
Kevin Chiang: A lot of moving parts here and as you sell assets in transition.
Kevin Chiang: To your asset light model and Youre still.
Speaker Change: Yes.
Speaker Change: Getting funds III ready to go here Theres, a little bit of noise in earnings, but I guess, if I look at it Simplistically if I look at the midpoint of your full year guide.
Speaker Change: And I back out.
Speaker Change: What you did in Q1, it implies a decent sequential decline in the run rate EBITDA from like 190 to 92, maybe just if you could just maybe provide some color as to the cadence of EBITDA through the year is there.
Kevin Chiang: Maybe you could just maybe provide some color as to the cadence of EBITDA through the year. Do you think you're kind of tracking towards the upper end of that range, just given how you performed in Q1, and there's some conservatism in your guidance? Are there other puts and takes we should be thinking about?
Speaker Change: Do you think you're kind of tracking towards the upper end of that range. Just given how you performed in Q1 and there is some conservatism in your guidance are there other puts and takes you puts and takes we should be thinking about just given the asset sales and the impact that has on the P&L.
Gary James Osborne: I think on the EBITDA, it's going to be fairly straight through the balance of the year. We do have some lease renewals, but there's not a lot of those coming up, but there are a few. As far as the range goes, we have the range there where we're tracking within it, obviously, but it's going to be a pretty steady year, we would hope, and on the FALCO side, the renewals are coming in at or slightly better than planned, so we're comfortable with where we're at on the guidance, but as you renew aircraft, they do come down a bit in the revenue as we talked about in the last call, and that's reflective in the ranges we gave you.
Speaker Change: Yes, Kevin it's Gary here.
Gary James Osborne: I think on the EBITDA, it's going to it's going to be fairly straight through the balance of the year, we do have some lease renewals but.
Gary James Osborne: Theres not a lot of those coming up but there are a few.
Gary James Osborne: As far as the range goes we have the range here, where we're tracking we're tracking within it obviously.
Gary James Osborne: But it's going to be a pretty steady year, we would hope and.
Gary James Osborne: On the add on the telco side, the renewals are coming in at or slightly better than planned.
Gary James Osborne: We're comfortable with where we're at on the guidance, but as you renew aircrafts they do come down a bit in the revenue as we talked about in the last call and.
Gary James Osborne: That's reflective in the ranges we gave you.
Colin L. Copp: Okay, and then just in terms of some of the commentary around increased transactions and it sounds like lease rates are coming a little bit better for the aircraft that you traffic in, which is primarily regional jets, just wondering, just given some of the issues in the broader narrow body space, whether it's the 737 or some of the engine issues with the 321, is that driving some of the increased activity you're seeing in the regional jet market just is taking longer for airlines to maybe replace their fleet or routes that airlines thought they would high-grade maybe to a larger aircraft, they're now looking at maintaining using a regional jet, just given some of the issues in the narrow body space. Just wondering if you're seeing any of that play out, given some of the activities on the first quarter here.
Gary James Osborne: Okay.
Gary James Osborne: And then just in terms of some of the commentary around inquiries transactions in.
Gary James Osborne: It sounds like lease rates are coming a little bit better for the aircraft that you traffic in which is primarily regional just regional jets. Just just wondering just given some of the issues in the broader narrow body space, whether it's the 737 or for some of the engine issues with the 321 is that is that driving some of the.
Gary James Osborne: The increased activity you're seeing in the regional jet market just is taking longer for airlines to maybe replace their fleet or.
Gary James Osborne: Ross.
Gary James Osborne: That airlines thought they would high grade maybe to a larger aircraft.
Gary James Osborne: Now looking at maintaining.
Gary James Osborne: Using our regional jet just given some of the issues of the narrow bodies, but just wondering if youre seeing any of that play out given some of the activity you saw in the first quarter here.
Colin L. Copp: Hi Kevin. Yeah, it's Colin.
Gary James Osborne: Hey, Kevin Yeah, It's Colin Yes, I think you're probably seeing some impact from that there's no question about that.
Colin L. Copp: Yeah, I think you've probably seen some impact from that. There's no question about that. Yeah, you know, there's that space is tight, and they do have several issues there. So there's probably some, some residual impact, but we're also seeing good renewals, you know, with existing operators on aircraft as well, which, as Gary said, we're seeing good improved lease rates. Let's put it that way. So I think it's probably a combination of both. Certainly, but you know, there's obviously going to be some impact from the fact that they're tight on narrowbody.
Colin: There is that that space is tight and they do have several issues there so theres probably some.
Colin: Some residual impact, but we're also seeing good renewals with existing operators.
Colin: On aircraft as well, which as Gary said, we're seeing good <unk>.
Colin: Proved lease rate, let's put it that way. So I think it's probably a combination certainly, but there's obviously going to be some impact from the fact that they were tight on narrow body.
Speaker Change: For sure.
Colin L. Copp: Okay, and maybe just last one for me, sounds like the pilot situation or cadet situation has gone a little bit better here. I guess, how much of this might be due to links shutting down and maybe that creating supply or maybe a slowdown on the demand side is maybe helping rebalance the pilot shortage issue? Any color there would be helpful.
Speaker Change: Okay, maybe just last one for me.
Gary James Osborne: It sounded like the pilot situation, Okay that situation has gone a little bit better here.
Gary James Osborne: I guess, how much of this might be due to links shutting down and maybe that creating supply or or maybe a slowdown on the on the demand side is maybe helping rebalanced. The pilot shortage issue just any color there would be helpful.
Colin L. Copp: I think in the U.S., the mainlines have seen, you know, kind of a bit of a surplus. I wouldn't call it a surplus, but certainly some extra pilots sitting there on the mainline side due to the recent changes in the industry. So that's going to take some of the pressure off the regionals everywhere, right?
Gary James Osborne: But I think in the U S. The main lines of seeing.
Gary James Osborne: Kind of a.
Gary James Osborne: A bit of a surplus I wouldn't call it a surplus but certainly some extra pilot sitting here on the mainline side due to the recent changes in the industry. So that's going to take some of the pressure off the regionals.
Gary James Osborne: Across everywhere so.
Kevin Chiang: So we are seeing, as a result of several of those things, we're seeing good improvements on the pilot side. We're getting better, you know, higher time candidates. Our classes are all full, you know, three months in advance. There are absolutely no issues with us from a hiring perspective. You know, we've got lots of lots of throughput, and it's just a matter of now starting to regrow and get things back to a little bit larger size than we were this last year. Perfect. Thank you for taking my question.
Gary James Osborne: Are seeing as a result of several of those things we're seeing good improvements on on the pilot side, we're getting better.
Gary James Osborne: Time candidates.
Gary James Osborne: Our classes are all full three months in advance so.
Gary James Osborne: There is absolutely no issues with us from a hiring perspective.
Gary James Osborne: We've got lots of lots of throughput and it's just a matter now are starting to re grow and get things.
Gary James Osborne: Back to a little bit larger size than we were this last year.
Kevin Chiang: Perfect. Thank you for taking my questions this morning.
Speaker Change: Perfect. Thank you for taking my questions. This morning you.
Speaker Change: You bet Thanks, Kevin.
Speaker Change: Okay.
Operator: Thank you. The next question comes from Hillary Cacanando at Deutsche Bank. Please go ahead. Hi, thank you.
Speaker Change: Thank you. The next question comes from Hillary Cat Atondo at Deutsche Bank. Please go ahead.
Hillary Cacanando: Hi, thank you for taking my question. You mentioned some business, new business development opportunities on the Voyager side, you know, with MRO. I was wondering if you could just, you know, provide a little more color there, given the huge demand for MRO and engine, I guess, maintenance work these days. I was wondering if you have any plans to kind of, you know, expand the Voyager side of the business even more, but any additional color would be okay.
Speaker Change: Hello. Thank you for taking my question you mentioned some business new business development opportunity on the Voyager side with MRO.
Speaker Change: Wondering if you could.
Speaker Change: Provide a little more color there Kevin given the huge demand for MRO and again.
Speaker Change: I guess maintenance work.
Speaker Change: Dave I was wondering if you have any plans to kind of.
Speaker Change: And the <unk> side.
Speaker Change: The business even more.
Speaker Change: Any additional color would be appreciated.
Speaker Change: Sure.
Colin L. Copp: Hi Hillary, it's Colin. The Voyager Book of Business, I think we've talked about a little bit. They basically have a growth plan that we've built into our business plan going forward, and they've been hitting that. They've been successfully hitting that the last year and this year. They're very much on track for hitting some decent growth year over year again. The areas of growth that they've seen in the last little while have really been those core areas we focused them on as they exited, as we came out of COVID or the pandemic period, and that's really on the USM side and on the maintenance and in-service support side.
Colin: Hi, Hilary it's Colin.
Colin: The voice your book of business I think we've talked about a little bit.
Colin: They basically have a growth plan that we built into our business plan going forward and they've been hitting that they've been successfully hitting that to last.
Colin: Last year. This year they are very much on track for hitting some decent growth year over year again.
Colin: The areas of growth that <unk> seen this last little while has really been those clear core areas, we focus them on as they exited as we came out of COVID-19 or the pandemic period, and that's really on the <unk> side.
Colin: And on the maintenance.
Colin: And in service support side so.
Colin L. Copp: They've had some growth with Maser, as we said, they've added another aircraft there, which was pretty exciting for us, that was quite meaningful, and they've had a lot of maintenance growth, specialty maintenance type stuff that they've been working on new projects. We're pretty encouraged by them and where they're headed, and we will, as we move forward, think about, How do we continue to push that growth, and can we supercharge it with small investments of any kind? We're excited for them, for sure. They're doing well and tracking well. They fully anticipate that they will continue to produce year-over-year growth for the next several years.
Colin: They've had some growth with mazer as we said they've added another aircraft, there, which was pretty exciting for us that was that was quite meaningful.
Colin: They've had a lot of.
Colin: A lot of maintenance grow specialty maintenance type stuff.
Colin: <unk> been working on new projects so.
Colin: We're pretty encouraged by them and where they're headed.
Colin: And we will as we move forward think about.
Colin: How do we continue to push that growth and Kimberly supercharge it with small investment so anytime so.
Colin: We're excited for them for sure Youre doing well tracking well.
Colin: Sure.
Colin: I fully anticipate that we will continue to produce year over year growth for the next several years.
Hillary Cacanando: Got it, thank you. And then just one follow-up, Falco purchased a portfolio of Embraer aircraft from MAC for the for fun too. Yeah, I was just wondering if you could kind of...
Speaker Change: Got it. Thank you and then just.
Speaker Change: And just one follow up on Costco purchases.
Colin: <unk> of Embraer aircraft.
Colin: Okay.
Speaker Change: Just a quick one.
Speaker Change: Yes, I was just wondering if you can kind of.
Gary James Osborne: If you're seeing a lot of opportunity for additional portfolio acquisition this year and just kind of a competitive landscape with NAC selling off their aircraft, are you seeing any new players coming into the regional space, or are you seeing more and less or, you know, getting out of the regional space? You know, just kind of what you're seeing there in terms of the competitive landscape.
Speaker Change: If you are seeing a lot of opportunity for additional portfolio acquisition, this year and kind of what that competitive landscape with NAC selling off.
Speaker Change: Aercap.
Speaker Change: Seeing any new players coming into the region.
Speaker Change: Sure.
Speaker Change: More or less.
Speaker Change: We're getting out of the retail fee.
Speaker Change: Kind of what Youre seeing there in terms of competitive.
Speaker Change: Yes.
Gary James Osborne: Hillary, it's Gary here. I think there are certainly opportunities to transact out there. I think the aircraft that Felco picked up for fun is going to demonstrate that. So there's certainly activity out there. As far as the aircraft leasing space is concerned, I think Nordic has its plans, and I think it's well known where they're focused. So they haven't really been that active in the market, except for selling. And as far as the landscape goes, it's been fairly stable, generally speaking. So we haven't really seen any real dramatic changes or significant changes within it. So it's pretty stable.
Speaker Change: Hilary it's Gary here I think.
Gary James Osborne: There are certainly opportunities to transact out there I think.
Hillary Cacanando: Got it. Great. Thank you.
Gary James Osborne: The aircraft that telco picked up for fund to kind of demonstrate that so there's a there's certainly activity out there as far as the aircraft leasing space I think Nordic has had its plans and I think it's well known where they're focused so they haven't really been that active in the market, except we're selling and as far as the landscape.
Gary James Osborne: It's been fairly stable generally speaking so we haven't really seen any real dramatic changes.
Gary James Osborne: Significant changes within it so it's pretty stable.
Hillary Cacanando: Got it. Great. Thank you so much.
Speaker Change: Great. Thank you so much.
Gary James Osborne: Thanks.
Operator: Thank you. The next question comes from Cameron Dirksen at National Bank Financial. Please go ahead.
Gary James Osborne: Thank you. The next question comes from camera Kim Dukson at National Bank Financial. Please go ahead.
Cameron Dirksen: Yes, thanks. Good morning.
Kim Dukson: Yes. Thanks. Good morning, just a question on I guess the fund III.
Kim Dukson: It sounds like Youre still feeling confident about.
Kim Dukson: Getting something close by the end of the year here.
Cameron Dirksen: Just a question on Fund 3, you know, it sounds like you're still feeling confident about getting something closed by the end of the year here. Just given what you sort of described earlier as a more positive environment as far as lease rate renewals and things like that and more trading activity, has the, I guess, nature of the conversations with potential investors in Fund 3 changed? Is things getting more serious? Just any update on what you're seeing out there?
Kim Dukson: Just given what you sort of described earlier as I guess, a more positive environment as far as lease rate renewals and things like that and more more trading activity.
Kim Dukson: The I guess the nature of the conversations with potential investors in fund III change is it things getting more serious just any update on what youre seeing out there.
Kim Dukson: Yes.
Colin L. Copp: Yeah, I can give you my views, Cameron. You know, I don't think anything has really significantly changed from the investors that we've been talking to. We're still the same key people that we've been communicating and working with. And, you know, like anything, we remain pretty confident that we will get funds for you there with a bit of time. Unfortunately, it's been a little bit slower than we had originally planned, given, you know, kind of the environment we've been in, but we're seeing not only on the leasing side, but on all sides, really an improving trend there, which in the long run kind of puts focus on, at some point, we're So it's still in the hopper, still moving ahead, not a lot of changes really with who we're talking to.
Speaker Change: Yes, I can give you my views.
Gary James Osborne: Cameron.
Speaker Change: I don't think anything has really significantly changed from the investors that we've been talking to you.
Speaker Change: Still the same key people that we've been communicating and work.
Speaker Change: Sure.
Gary James Osborne: And.
Gary James Osborne: It's like anything we remain pretty confident that we will get funds for you there was a bit of time Unfortunately that.
Gary James Osborne: It's been a little bit slower than we had originally planned given.
Gary James Osborne: Kind of the environment, we've been in but we're seeing not only in the leasing side, but all sides really an improving trend there which.
Gary James Osborne: Which in the long run kind of puts focus on at some point, we're going to get this done here fairly soon so.
Gary James Osborne: Still in the Hopper is still moving ahead not a lot of changes really with who we're talking to.
Cameron Dirksen: Okay, no, that's helpful. And maybe the second question, just trying to understand, I guess, the accounts receivable line item and the potential cash being generated from that. You've got this Azul restructuring. Maybe you can just go into a little bit of detail on how you can, or how, I guess, the timing of how that turns into cash for you ultimately, and then as well as the other, I guess, cash collections from accounts receivable. Just trying to understand what the potential positive cash impact might be in 2024 and heading into 2025. No, that's a good question.
Speaker Change: Okay. No that's helpful and maybe just second question just trying to understand I guess.
Speaker Change: The I guess the accounts receivable line item and the potential cash being generated from that you've got this restructuring, but maybe you can just go into a little bit of detail on how you can how big.
Speaker Change: I guess, the timing of how that turns into into cash for you ultimately.
Speaker Change: And then as well as the other I guess your.
Speaker Change: Cash collections from it from accounts receivable, just trying to understand what the potential positive cash impact might be in.
Speaker Change: In 2024 and heading into 2025.
Gary James Osborne: The receivables have certain timeframes associated with them. If you look at Azul, there's been a restructuring there that they've gone through.
Speaker Change: No good question.
Speaker Change: We have.
Speaker Change: Both have certain time frames associated with them. Obviously, so if you look at zale.
Speaker Change: It's been a restructuring there that they've gone through.
Speaker Change: And what Youre seeing is essentially we've got two elements. One is a longer term note. One is the shorter term piece and basically we've got.
Gary James Osborne: What you're seeing is essentially we have got two elements. One is a longer-term note, and one is a shorter-term piece. That will get collected over the next two to three years, conceptually. Maybe a bit longer than that, I think, with the timing of one of the instruments.
Speaker Change: That'll get collected over the next two to three years.
Speaker Change: Conceptually, maybe a bit longer than that I think that the timing of one one of the instruments. So it will come in gradually over the course of time, our other receivables have different dates associated with them. Some shorter term some longer term so.
Gary James Osborne: It will come in gradually over the course of time. Our other receivables have different dates associated with them, some shorter-term, some longer-term. There's certainly some upside as we see it in the cash going forward as we collect those receivables, but the timing takes a little bit to mature through the state.
Speaker Change: There is certainly some upside as we see it in the cash going forward as we collect those receivables, but the timing is.
Speaker Change: It takes a little bit to mature through the statements.
Speaker Change: Okay.
Cameron Dirksen: All right, that was all for me. Thanks very much.
Speaker Change: Alright that was all for me thanks very much.
Speaker Change: Thank you.
Operator: Thank you. The next question comes from Tim James at DPALEN. Please go ahead.
Speaker Change: Thank you. Our next question comes from Tim James at Deep Helen. Please go ahead.
Tim James: Thanks very much. Good morning.
Tim James: Thanks, very much good morning.
Tim James: Just wanted to turn back to the lease rate environment for a moment in row. So.
Tim James: In the first quarter.
Tim James: I just want to turn back to the lease rate environment for a moment in RAL. So, in the first quarter, the decrease in lease revenue was primarily due to lower market rates on unreleased aircraft. So, am I correct that that is a reflection of simply older aircraft? Obviously, they've aged from the original contract term, and because they're older now, you're securing or contracting at lower lease rates, and that's not a function of the market per se?
Tim James: The decrease in lease revenue was primarily due to lower market.
Tim James: Rates on <unk>.
Tim James: Leased aircrafts, so am I correct that that is a reflection of simply older aircraft as obviously these aged from the original contract term and because they are older now.
Tim James: Youre, securing our contracting at lower lease rates and thats not a function of the market per se.
Gary James Osborne: Yes, Tim, it's Gary here. So in the quarter, two things happened. One is we did have some asset sales, so you had the two A220s and another aircraft, so those did reflect in the revenue during the quarter. But back to your point, as they renew on the second lease, they come down in value, but they're still producing. So that's what you'll start to see moving ahead in there. But when you look at the quarter, those are two fairly significant items, bringing out the A220s and the air also.
Tim James: Yes, Tim it's Gary here, so two things happened in the quarter. One is you did have we did have some asset sales. So you had the two 8% to <unk> and another aircrafts. So those get reflected in the revenue during the quarter, but back to your point as they renew in the second lease they come down in value, but yet there is still producing so that's what you'll start to see moving ahead.
Tim James: In there, but when.
Tim James: When you look at the quarter those are two.
Tim James: Fairly significant items, bringing <unk> in the ear Austral aircrafts okay.
Gary James Osborne: And then you commented earlier that lease rates are perking up a little stronger than expected. Does this mean you're actually seeing them increase on a year-over-year basis, or are they just... not as weak or appear stronger than expected? And again, I'm thinking now, I want to think I'm sort of an apples to apples comparison. So a given aircraft, you know, at a given age, I just want to think about a
Tim James: And then you commented earlier that lease rates are working.
Tim James: Breaking up a little stronger than expected can you just mean youre actually seeing them increase on a year over year basis or are they just.
Tim James: No that is weaker or appear stronger than expected and again I'm thinking now I want to thank and sort of an apples to apples so given aircrafts.
Tim James: Given <unk> just want to say.
Tim James: Common comparison.
Gary James Osborne: So what we're, Tim, what we're looking at there is when we look at our aircraft lease renewals, the ones that are coming up, they're coming in slightly better than where we planned, which is good news. So we've seen a bit of an uptick in some of the lease rates. It's modest, but it's certainly a little bit better.
Tim James: So Tim what were looking at there is when we look at our aircraft lease renewals are the ones that are coming up theyre coming in slightly better than where we planned so which is good news.
Tim James: From that so we've seen a bit of an uptick in some of the lease rates, it's modest, but it's certainly a little bit better.
Tim James: And do you feel, then, for pick any given aircraft?
Tim James: And do you feel then.
Tim James: Pick any given aircrafts.
Tim James: The lease rate that can be secured today higher than the lease rate that can be secured 12 months ago.
Gary James Osborne: I'd say, generally, yes. The market has been improving. I think you can look at a lot of the industry publications, ISCA and others, rates have been coming up in general. We're starting to see that in some of the renewals.
Speaker Change: I'd say generally yes.
Speaker Change: The market has been improving I think you can look at a lot of the industry.
Tim James: Publications issue and others the rates had been coming up in general we're starting to see that in some of the renewables and.
Speaker Change: Yes, I mean, I think generally speaking the market is getting better I think there was a question earlier, both the tightness in the market. There's no question that the manufacturing effects at Airbus or sorry at Boeing and others on the narrow body side has had an impact in the sense that.
Colin L. Copp: And yeah, I mean, I think, generally speaking, the market's getting better. I think there was a question earlier about the tightness in the market. There's no question that the manufacturing effects at Airbus, or sorry, Boeing, and others on the narrow-body side have had an impact in the sense that our airlines out there are trying to secure lift. They're trying to secure lift with aircraft that are coming up for lease renewals, including the E190s and others.
Speaker Change: There are airlines out there trying to secure lift we're trying to skirt lift with aircrafts that are coming up for lease renewals, including the <unk> and others. So youre seeing some demand there and that's having a bit of an impact on the lease rates.
Colin L. Copp: So you're seeing some demand there, and that's having a bit of an impact on the lease rates. A lot of the demand is being tightened up by the fact that these aircraft that were sitting as we came out of the pandemic are being picked up, right? So they are getting picked up and bought up, so the surpluses are drying up. Especially if you start to look at the Q400, and we're seeing some improvements there for sure. There's no question about that. If you look at them like this,
Speaker Change: One of the demand.
Speaker Change: Is being tightened up by the fact that these these aircraft that we're sitting as we came out of the pandemic are being picked up right. So they are getting picked up and bought up so the surpluses are drawing up.
Speaker Change: Especially if you start to look at the Q4 hundred and were seeing some improvements there for sure. There is no question about that if you look at like aircrafts same timeframe renewals. So it's really it's as we've come out of this last year. So we're really seeing things start with tightened slowly.
Speaker Change: Okay.
Tim James: Okay, thank you. And then my last question, just the fact that there was a significant improvement or step up in the revenue build that was collected in the first quarter versus Q4, was there a particular driver of that? I think it went up 10 percentage points, if I'm not mistaken, or roughly that from Q4 to Q1. Is that just due to the normal recovery and the other factors that we've been talking about? Or was there a particular driver of that improvement?
Speaker Change: Okay. Thank you and then my last question just.
Speaker Change: <unk>.
Speaker Change: There was a significant improvement or step up in the in the revenue build that was collected in the first quarter versus Q4.
Speaker Change:
Speaker Change: Is there a particular driver of that I think it went up 10 percentage points, if I'm not mistaken a roughly that from Q4 to Q1 is that just.
Speaker Change: Through the normal recovery and the other factors that we've been talking about or was there a particular driver of that improvement in the.
Gary James Osborne: The particular driver was signing the ZULA agreement in February and then flicked over, and that's where most of the difference was. Perfect. Okay, thank you.
Speaker Change: A particular driver was starting these old agreement in February.
Speaker Change: And then picked over and Thats, where most of that difference was.
Tim James: Perfect. Okay. Thank you very much.
Speaker Change: Perfect. Okay. Thank you very much.
Speaker Change: Thank you.
Operator: Thank you. The next question comes from Konark Gupta at Scotiabank. Please go ahead.
Speaker Change: Thank you next question comes from Cognex Gupta with Scotiabank. Please go ahead.
Konark Gupta: Thanks, and good morning. And I am giving you my congratulations on the quarter. I can ask you about the REL segment first. You know, the gain on asset sales, do you expect that line item to continue producing revenue for the remaining three quarters? It was $3 million in Q1.
Konark Gupta: Thanks, and good morning.
Konark Gupta: I'm asking my congratulations for the quarter.
Konark Gupta: Fixed and ask you on the rail segment first.
Konark Gupta: Gain on asset sales.
Konark Gupta: Do you expect that line item to continue producing revenue for the remaining three quarters cycles, having $3 million in Q1.
Gary James Osborne: It's Gary here. I'm not predicting that at this stage. Those things do come and go, but right now, we're predicting zero, basically break even, and hopefully, we'll see something from it.
Gary James Osborne: Yes, it's Gary here.
Gary James Osborne: I'm not predicting that at this stage.
Gary James Osborne: Those things do come and go but right now we're predicting zero basically breakeven and hopefully we'll see something from it but.
Gary James Osborne: Yeah.
Gary James Osborne: So it's not in the plan, basically, right? No. No, it isn't.
Speaker Change: So it's not in our plan basically right no no it isn't and if you look at the disclosure in the outlook section called Eric We said.
Konark Gupta: No, it isn't. And if you look at the disclosure in the OVALP section, Konark, we said when you go back to last year, we didn't put anything in that particular line, so it's an upside.
Speaker Change: When you go back to last year, we didn't put anything in that particular line. So.
Speaker Change: It's upside.
Gary James Osborne: Perfect. It makes sense. Thank you.
Speaker Change: Okay makes sense. Thank you and then.
Speaker Change: The asset management fee line item, it seems a little bit volatile quarter to quarter. So Q1 was down from last year's Q1, a little bit and then also down slightly from Q4 last year lets see how should we model it before when <unk> comes up.
Konark Gupta: And then the asset management fee line item seems a little bit volatile, quarter to quarter. So Q1 was down from last year's Q1 a little bit, and then also down slightly from Q4 last year. Let's see, like, how should we model it before Fund 3 comes out?
Gary James Osborne: Yeah, I would model it very, for the rest of the quarter, very similar to what you see in Q1. What you're seeing there, Konark, is really, I think the majority of it relates to Fund 2. It's now moving to capital deployed versus committed capital. It's now at the five-year mark. That's when it tips over, and that's what you're seeing. Just a simple function of how the map works
Speaker Change: Yes I.
Speaker Change: I would model it for the rest of the quarter is very similar to what you see in Q1, what youre seeing there cologuard because really I think the majority of it relates to fund III is now moving to capital deployed versus committed capital. It's now at the five year Mark Thats when it tips over and Thats. What you are seeing just a simple function of how the math works.
Gary James Osborne: I see. Okay. Perfect. And then point three will obviously have an impact on this line item as we go forward.
Speaker Change: I see okay. Okay, and then <unk>, obviously have an impact on this line item as you go forward.
Gary James Osborne: That's right. And once Fund 3 gets, you know, solved, and we get that across the line, then you'll see the fees come in for that.
Speaker Change: Alright, and then once fund III.
Speaker Change: Solved and we get that across the line and then Youll see the fees come in for that.
Konark Gupta: Great, thank you. Okay, and then moving on the CPA side, can you remind us why in your outlook for 2025 and 2026, the leasing revenue under CPA is going down in 2026 versus 2025, but the number of aircraft on the lease is the same at, I think, $39,000.
Speaker Change: Great. Thank you, Okay and then.
Speaker Change: Moving on the Cps side, so can you remind us.
Speaker Change: Why in your outlook for 2025 and 26.
Speaker Change: The leasing revenue under the CPA is going down in 2006 was 25.
Speaker Change: However, the number of aircraft under lease same AD I think putting a line.
Speaker Change: Okay.
Gary James Osborne: So, it's Gary here again. So, in 2026, we have a group of 12 aircraft that are extended under the CPA with different lease rates starting in 2026. That's what you're seeing. So, there's a tranche of 12 Q400s, and that's what you're seeing as the step-down goal.
Speaker Change: So as Gerry here again, so in 2026.
Gerry: We have a group of 12 aircrafts that are extended under the CPA with different.
Gerry: A different lease rates starting in 2026, Thats, what youre seeing so there's a tranche of 12 Q4, hundreds and thats, what youre seeing in the step down.
Konark Gupta: I see. And I think you've probably noted before historically that, you know, even with these new lease rates or decline in lease rates, the ROIC on these things is still similar or better, maybe because, you know, you're paying down debt.
Speaker Change: I see okay, and I think you've probably noted core historically that even with the new lease rates of decline in lease rates.
Speaker Change: Our ROIC on these things is still seeing similar or better maybe because you are paying down debt.
Gary James Osborne: Yeah, so those aircraft have no dead arms.
Speaker Change: Yes, so those aircrafts have no debt on them.
Konark Gupta: And last one for me before I turn it over. On the debt side, I think you have some $400 million plus of debt coming due in the next 12 months or so. Any sense on how you plan to repay? You have some cash generation that's pretty good here, solid, obviously, but is there any refinancing opportunity you see as well?
Speaker Change: Right, Okay makes sense and last one from me before.
Speaker Change: On the debt side, I think you have some $400 million plus of debt coming due in the next 12 months or so.
Speaker Change: Any any sense on how do you plan to repay like you have some cash generation thats pretty good solid obviously, but is there any refinancing opportunities CFO.
Gary James Osborne: Yeah, I think the biggest piece within there, if you look at it, Konark is really the Series 8 adventures that come due at the end of the year. They're current. And that's what you're picking up. So we have a $50 million facility with the Bank of Nova Scotia that will enable us to pay 50 of the 86 and then the remainder will be paid out of cash by the end of the year. So that's the big piece that you're seeing within that current portion. The rest of it is generally amortizing debt.
CFO: Yeah, I think the biggest.
CFO: Within there if you look at it.
CFO: <unk> is really the series a debentures that come due at the end of the year. They are current and Thats. What you are picking up so we have a $50 million facility with bank of Nova Scotia.
CFO: That will enable us to pay 50 of the 86 and then the remainder will pay out of cash by the end of the year. So that's the big piece that youre seeing within that current portion the rest of it is generally amortize the debt.
CFO: Yeah.
Konark Gupta: Makes sense. Perfect. Thanks so much, Gary. Thank you.
Speaker Change: Makes sense perfect. Thanks, so much guys. Thank you.
CFO: Okay.
CFO: Okay.
Operator: Thank you. The next question comes from Betty Yang at Canon Continuity. Please go ahead.
CFO: Thank you next question comes from Betty Yang at Canaccord Genuity. Please go ahead.
Betty Yang: Hi, this is Betty on the call for Matt Lee. So, just in terms of the aircraft that are coming out of the CPA in 2025, what would be the plan for those? Are they expected to be moved into a FALCO fund or leased to other customers at the parent company? Just trying to get an understanding of the expectation around them.
Betty Yang: Hi, This is Betty on the call for Matt Lee.
Betty Yang: Thanks.
Betty Yang: So just in terms of the aircrafts that are coming out of the CPA in 2025.
Betty Yang: Will it be the plan for those are they expect it to be move into Osaka phone, where at least one other customer.
Betty Yang: Cool.
Betty Yang: Just trying to kind of understanding of the expectation around that thanks.
Gary James Osborne: Yeah, it's Gary here. Right now, we're working through the expectations around those. They could be sold. They could be released. We could move them into, you know, some other type of activity. We're still working through that. It's about a year and a half out. That's when you start to work on it. But conceptually, we'll do something with the F.
Gary James Osborne: Yes, it's Gary here.
Gary James Osborne: Now we're working through the expectations around those that can be sold that could be released we could move them into.
Gary James Osborne: Some other type of activity.
Gary James Osborne: We're still working through that as about a year and a half out that's when you start to work on it but conceptually we will we'll do something with the asset.
Betty Yang: Thank you. And another question I have is on the guidance. Just wanted to consider the EBITDA and free cash flow guidance raised in Unison. It sounds like you're looking at selling more aircraft in the air but also perhaps showing higher EBITDA. Can you walk through how that works?
Speaker Change: Thank you and other question I have is on the guidance.
Gary James Osborne: Just wanted to consider the EBITDA and free cash flow guidance raise.
Speaker Change: Unison it sounds like Youre looking at selling more aircraft in the air but also perhaps Shirley higher EBITDA can you walk us through how that works.
Gary James Osborne: So when we sell the aircraft, generally speaking, you would reduce your revenue or your EBITDA moving forward, but you get free cash flow after proceeds. So that's what you're seeing reflected. One is, you know, our revenues or EBITDA are coming in a bit stronger than we expected. And secondly, we're expecting 60 to 80 million in net proceeds going through the free cash flow line this year versus what we had published earlier. So those are the two factors that are making their way. Awesome.
Speaker Change: So when we sell the aircraft generally speaking you would reduce your revenue or your EBITDA moving ahead, but you get the free cash flow. After proceeds so thats, what youre seeing reflected one is.
Speaker Change: Our revenues or the EBITDA is coming in a bit stronger than we expected and secondly, we're expecting $60 million to $80 million in net proceeds going through the free cash flow line. This year versus what we had published earlier. So those are the two factors that are making their way through.
Betty Yang: Awesome. Thank you very much.
Speaker Change: Awesome. Thank you very much.
Operator: Thank you, ladies and gentlemen. As a reminder, if you have any questions, please press star 1. The next question comes from David Ocampo at Kormark Securities. Please go ahead.
Speaker Change: Thank you, ladies and gentlemen, as a reminder, should you have any questions. Please press star one.
Speaker Change: Next question comes from David Ocampo at Cormack Securities. Please go ahead.
David Ocampo: Thanks. There are just a couple of follow-up questions. The first one is Kevin's line of questioning about the cadence of profitability for 2024. But I did want to focus a little bit more on the EPS line since there are a bunch of moving parts there. How should we expect that? Is it a sequential step down as we move through the years, or does the debt reduction from lower interest payments offset the decline in EBITDA?
David Ocampo: Thanks, just a couple of follow up questions.
David Ocampo: First one on Kevin's line of questioning about the cadence of profitability for 2024.
David Ocampo: Did want to focus a little bit more on the EPS line since there is a bunch of moving parts there.
David Ocampo: How should we expect that as sequential step down as we move through the years or does the debt reductions from lower interest payments offset the decline in EBITDA.
Gary James Osborne: So, as you go through the course of the year, I think we're, you know, as I said earlier, once you take out the one-timers and that, we're pretty flat. I think that's probably how you should look at it, generally speaking, David. It's pretty flat throughout the rest of the year.
David Ocampo: So as you go through the course of the year I think we're as I said earlier once you take out the one timers that were pretty flat I think thats, probably how you should look at it generally speaking David is pretty flat through the rest of the year.
David Ocampo: I'm sorry, that's flat versus the Q1. Yeah, that's fine.
David Ocampo: I'm, sorry, that's flat versus Q1.
Gary James Osborne: Yeah, that's right. Yeah.
Speaker Change: Yes, that's right yes.
David Ocampo: Similar arena.
David Ocampo: Okay. And when we think about the improvement in lease rates on the renewals that you guys are seeing, are you guys thinking about that as, you know, levels consistent with hitting your IRR targets? I think it was a mid, low team return that you guys were targeting.
David Ocampo: And when we think about the improvement in lease rates on the renewals that you guys are seeing.
David Ocampo: Are you guys thinking about that.
David Ocampo: Levels consistent with hitting your IRR targets I think it was.
David Ocampo: Mid low teens type of return that you guys are targeting.
Gary James Osborne: Yeah, I think everything's been, you know, as expected. I mean, the rates have gone up on the leases.
David Ocampo: Yes.
Speaker Change: Everything has been as <unk>.
Speaker Change: <unk> I mean, the rates have gone up on the leases. So we're seeing some improvements there.
David Ocampo: If you look at the funds in particular those those two pieces fund one was a pre Covid fund so it's a bit different.
David Ocampo: More of a small return.
David Ocampo: IRR side as we've talked about before but fun to right now is still hitting its return targets. So I.
David Ocampo: I would say generally speaking everything is lining up for these lease renewals as expected.
Gary James Osborne: So we're seeing some improvements there. You know, if you look at the funds, in particular, those two pieces, Fund One was a pre-COVID fund. So it's a bit different. It's more of a small return on the IRR side, as we've talked about before, but Fund Two right now is still hitting its return target. So, generally speaking, everything's lining up for these lease renewals as expected.
Speaker Change: Okay, Perfect and then last one for me.
Speaker Change: Look at fund one there is still around I think 375 million U S of aircrafts on the books.
David Ocampo: And then last one for me, take a look at Fund One. There's still around, I think, $375 million US of aircraft on the books, and the Fund's 10-year target date is 2025. So should we expect all these aircraft to be sold by 2025, or is there an ability for the Fund to be extended beyond 2025?
David Ocampo: 10 year target date is 2020 fives. So should we expect all these aircraft to be sold by 2025 or is there an ability for the fund to be extended beyond 2025.
Gary James Osborne: So the fund has the option of two one-year extensions, so that's possible depending on where it's at. We're still targeting to wind it up in 2025.
David Ocampo: So the fund has the option for two one year extension, so that's possible depending on where it's at we're still targeting to wind it up in 2025. The other side too is there are E notes within within the ABS structure, where the fun one structure, which are basically the equity instruments and those are an opportunity to sell to so there's a couple of different ways you can sell aircraft.
David Ocampo: The other side, too, is that there are e-notes within the ABS structure or the Fund One structure, which are basically equity instruments, and those are an opportunity to sell, too. So there are a couple different ways. You can sell aircraft, and you can also sell e-notes. That's another way to do it.
David Ocampo: And you can also sell the notes that's another way to do it.
David Ocampo: Does extending Fund 1 have any impact on your ability to close Fund 3? Uh, no, no; they're independent. Okay, that's all the questions I have, thank you.
David Ocampo: Does extending fund one have any impact on your ability to close on three.
Speaker Change: No no.
Speaker Change: Okay. That's all my questions. Thank you.
Operator: Thank you. We have no further questions. I will turn the call back over to you for closing comments.
Speaker Change: Thank you we have no further questions I will turn the call back over for closing comments.
Colin L. Copp: Thank you, Joanna, and thank you all for taking part in today's call. Have a good day.
Speaker Change: Thank you Joanna and thank you all for taking part in today's call have a good day.
Operator: Ladies and gentlemen, this concludes your conference for today. We thank you for participating, and we ask that you please disconnect your lines.
Speaker Change: Ladies and gentlemen. This concludes your conference for today, we thank you for participating and we ask that you. Please disconnect your lines.