Q1 2024 Exchange Income Corp Earnings Call

Unknown Executive: Good morning, everyone. Welcome to the Exchange Income Corporation's conference call to discuss the financial results for the three months ended March 31st, 2016. Corporation's results, including the MD&E and financial statements, were issued on May 7, 2009, and are currently available via the company's website on CDOM. Before turning the call over to management, listeners are cautioned that today's presentation and the responses to questions on today's call will be recorded, and may contain forward-looking statements within the meaning of the safe harbor provision.

Good morning, everyone. Welcome to the exchange income Corporation's conference call to discuss the financial results for the three months ended March 31st 2024, the corporation's results, including the MD&A and financial statements were issued on May seven 2024, and our current.

[noise] available via the company's website on SEDAR plus 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.

Unknown Executive: Canadian Provincial Securities Law, forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on them. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or 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 quarterly and annual MD&E, the risk factor sections of the Annual Information and EI, other filings, and Canadian securities accept as required by Canadian Securities EIC does not under..., to update any forward-looking statements.

Forward looking statements involve risks and uncertainties and undue reliance 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 expressed or implied in such statements for.

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 quarterly and annual M. D. N. A the risk factors section of the annual information form and Ics.

Other filings and Canadian Securities regulators.

As required by Canadian Securities Law.

<unk> does not undertake.

To update any forward looking statements such as statements speaks only as the date mate.

Unknown Executive: Listeners are also reminded that today's call is being recorded and broadcast live via the internet for the benefit of individual shareholders, analysts, and other interested parties, and I would like to turn the call over to the CEO of Exchange Income Corporation. Mike Pyle, please go ahead. Thank you, operator. Good morning, everyone.

Listeners are also reminded that today's call is being recorded and broadcast live via the internet for the benefit of individual shareholders analysts and other interested parties and I would like to turn the call over to the CEO of Exchange income Corporation, Mike Pyle. Please go ahead Sir.

Michael C. Pyle: Thank you operator, good morning, everyone and thank you for joining us on today's call yesterday was the 20th anniversary of our IPO and the completion of our first acquisition of perimeter and I will talk about the history of EIC and what makes us successful shortly.

Michael C. Pyle: And thank you for joining us on today's call. Yesterday was the 20th anniversary of our IPO and the completion of our first acquisition of Perimeter. And I will talk about the history of EIC and what makes us successful shortly. Yesterday, we also released our first quarter results for 2024. In announcing our results, we reported several records for our first quarter financial results, and this set the foundation for the remainder of the year.

Michael C. Pyle: We set records for revenue, adjusted EBITDA, free cash flow, and free cash flow less maintenance capital expenditure. Subsequent to the quarter end, we also completed the extension and upsize of our corporation's credit facility to $2.2 billion, which includes a new $200 million social loan trust. The social loan is one of the first syndicated social loans in Canada and is in alignment with the social loans principally established globally.

Michael C. Pyle: Yesterday, we also released our first quarter results for 2024.

Michael C. Pyle: In announcing our results we reported several records for our first quarter financial results and this sets the foundation for the remainder of the year.

Michael C. Pyle: We set records for revenue.

Michael C. Pyle: Adjusted EBITDA free cash flow and free cash flow less maintenance capital expenditures.

Michael C. Pyle: Subsequent to the quarter end, we also completed the extension and upsize of our corporation's credit facility to $2 $2 billion, which includes a new $200 million social long drawn.

Michael C. Pyle: The social loans is one of the first syndicated social loans in Canada, and Israel alignment with the social loans principally established globally.

Michael C. Pyle: This was a great achievement by Rich and his team, as this provides us with significant liquidity to fuel our growth, whether by organic growth or acquisition, which I will touch on later in today's call. Our results demonstrate the success of our strategy. Firstly, we buy proven companies with excellent management teams.

Michael C. Pyle: This was a great achievement by Richard his team provides us with significant liquidity to fuel our growth whether by organic growth or acquisition, which ray will touch on later in today's call.

Michael C. Pyle: Our results demonstrate the success of our strategy.

Michael C. Pyle: Firstly.

Michael C. Pyle: We by improving companies with excellent management teams secondly, we invested in those companies and nurture their growth and lastly in doing so we can provide stable and growing dividends for our shareholders.

Michael C. Pyle: Secondly, we invest in those companies and nurture their growth. And, lastly, by doing so, we can provide stable and growing dividends for our shareholders. This strategy has been the blueprint for our success for the past 20 years and is even more relevant today. The secret sauce is the disciplined nature of our acquisitions and investment in growth capital in our businesses and operational execution by our underlying subsidiaries. EIC preserves the cultures in our acquired entities and creates an environment where their management and employees can thrive.

Michael C. Pyle: This strategy has been our blueprint for our success for the past 20 years and is even more relevant to that the.

Michael C. Pyle: The secret sauce is the disciplined nature of our acquisitions and investments in growth capital in our businesses and operational execution by our underlying subsidiaries EIC preserves the cultures in our acquired entities and creates an environment, where their management and employees can throw off.

Michael C. Pyle: With me today is Rich Wowryk, our CFO, who will speak to our financial results, and Carmele Peter, our president, who will expand on our outlook for the second quarter and beyond. I will limit my discussion to some of the key consolidated performance indicators, and Rich will delve into the results by segment and provide some further insights on our financial performance. For our first quarter, revenue increased 14% to $602 million; adjusted EBITDA also increased by 14% to $111. Net earnings were $5 million compared to the prior year of $7 million.

Rich: With me today is rich <unk>, our CFO, who will speak to our financial results and carve out Peter our president who will expand on our outlook for the second quarter and beyond.

Michael C. Pyle: I will limit my discussion to some of the key consolidated performance indicators and rich will delve into the results by segment and provide some further insights on our financial performance for our first quarter revenue increased 14% to $602 million adjusted EBITDA.

Michael C. Pyle: <unk> also increased by 14% to 111 billion net earnings were $5 million compared to the prior year of salvage values that earnings per share were <unk> 10 per share compared to 16% in the prior year.

Michael C. Pyle: Net earnings per share were $0.10 per share compared to 16% in the prior year, free cash flow less maintenance capital expenditures grew by 4 million or 19% to $23 million, adjusted net earnings were $10 million compared to $12 million in the prior period, and adjusted net earnings per share were $0.20 compared to $0.27. The payout ratio on a free cash flowless maintenance capital expenditure basis remained very strong from a historical perspective at 58%, even with three dividend increases in the last 20 months.

Michael C. Pyle: Free cash flow less maintenance capital expenditures grew by 4 million or 19%.

Michael C. Pyle: <unk> to 'twenty three belly adjusted net earnings were 10 million compared to $12 million in the prior period and adjusted net earnings per share were <unk> 20, compared to 27 sets the payout ratio on our free cash flow less maintenance capital expenditure basis remained.

Michael C. Pyle: Very strong from a historical perspective at 58%, even with three dividend increases in the last 14 months.

Michael C. Pyle: We are very pleased with these results, and they show the resiliency and the diversification of our business. The main contributor to these results was the continued investment and resulting growth in our operating subsidies. 2023 was a year characterized by several announcements of acquisitions and contractual wins, whether it was our BC and Manitoba Mativac win, our UK home office contract, or our Canada commercial agreement. Speaking of the Air Canada contract, we anticipate the expansion of this contract with additional routes, which will bring the total number of aircraft used for Air Canada from four to six by the end of 2024.

Michael C. Pyle: We are very pleased with these results.

Michael C. Pyle: And they are showing the resiliency and the diversification of our business model. The main contributor to the results was the continued investment and resulting growth in our operating subsidiaries.

Michael C. Pyle: 2023 was a year characterized by several announcements of acquisitions and contractual wins, where they're always RBC and the Manitoba medevac waves are U K hold office contract or our Canada commercial agreement.

Michael C. Pyle: Speaking of the Air Canada contract, we anticipate the expansion from this contract with additional routes, which will bring the total aircraft used for Canada from four to six by the end of 2024.

Michael C. Pyle: We remain hopeful of the prospects of being able to announce further contracts and acquisitions in the second quarter and throughout the remainder of 2024. The positive momentum achieved in 2023 is expected to continue into 2024. Let me delve into some of the opportunities that we are currently seeing. However, to be clear, we have not included any acquisitions or significant contract wins in our 2024 forecast.

Michael C. Pyle: We remain hopeful of the prospects of being able to announce further contracts and acquisitions in the second quarter and throughout the remainder of 2024.

Michael C. Pyle: The positive momentum achieved in 2023 as expected Chinook into 2024.

Michael C. Pyle: Let me delve into some of the opportunities that we're currently see however to be clear. We've got included any acquisitions or significant contract wins in our 2024 forecast as is.

Michael C. Pyle: As discussed in last year's financial reports, contractual wins require upfront investment in capital and do take time to achieve the appropriate returns on this invested capital. There is a ramp-up period required before those investments start hitting the bottom line, as opposed to acquisitions, where the acquisitions are immediately added to the bottom line, of course, excluding any seasonality. Firstly, on the acquisition front, Adam and his team are working on a number of acquisitions.

Michael C. Pyle: Got it and last year's financial reports contractual wins require upfront investments in capital and do take time to achieve the appropriate returns on invested capital. There is a ramp up period required before those investments started hitting the bottom line as opposed to acquisitions, where the acquisitions are immediately accretive.

Michael C. Pyle: So the bottom line of course, excluding any seasonality.

Michael C. Pyle: Firstly on the acquisition front out of his team are working on a number of pursuits in our yearend call dimension, but we're seeing more high quality opportunities that has continued throughout the quarter. We received these opportunities at both the manufacturing and Aero space and aviation segments.

Michael C. Pyle: In our year-end call, I mentioned that we are seeing more high-quality opportunities, and that has continued throughout the quarter. We are seeing these opportunities in both the manufacturing and aerospace and aviation segments. But consistent with our 20-year history, we will only execute on transactions that are both accretive and meet other qualitative acquisition criteria.

Michael C. Pyle: Consistent with our 20 year history.

Michael C. Pyle: We will only execute on transactions that are both accretive and meet other qualitative acquisition criteria.

Michael C. Pyle: Current opportunities are focused in manufacturing and aviation segments where we are already present and represent vertical, geographic, or other expansion opportunities. On contractual opportunities, our teams are waiting for the resolution of submitted bids on a number of fronts. We remain optimistic; however, there is always uncertainty in the award of contracts by government. The first contract relates to the future AirQ trading contract. Skyline was named as the preferred bidder last year, and we were part of the Skyline bid team. However, the contract has not been formally awarded to the prime.

Michael C. Pyle: Current opportunities are focused in manufacturing and aviation segments, where we are already present and represent vertical geographic or other expansion opportunities.

Michael C. Pyle: Oh the contractual.

Michael C. Pyle: Opportunities our teams are waiting the resolution two submitted bids on a number of fronts. We remain optimistic. However, there is always uncertainty in award contracts by governments.

Michael C. Pyle: The first contract relates to the future aircrew training contract Skyline was named as the preferred bidder last year and we were part of the Skyline bid team. The contract has not been formally awarded to the Prime. However, we remain hopeful that announced will occur.

Michael C. Pyle: However, we remain hopeful that an announcement will occur within the next number of months. We have also submitted our proposal to the U.K. Home Office for the continuation and expansion of the services that we are currently performing. The existing contract will continue until November of this year, and a strategic decision to procure a second aircraft that we've started to modify to support the UK Home Office contraction should we win. However, we believe that, based on the geopolitical situation, such aircraft could easily be redeployed to other opportunities should we not be successful as the economy. We would anticipate hearing about the final award in the latter part of the second quarter or perhaps early in the third quarter.

Michael C. Pyle: Number of months, we also submitted our proposal to the UK home office for the continuation and expansion of the services that we are currently performing.

Michael C. Pyle: The existing contract will continue until November of this year.

Michael C. Pyle: The strategic decision to procure a secondary craft that we've started to modify the support the UK home office contraction.

Michael C. Pyle: Should we win however, we believe that based on the geopolitical situation such aircraft could easily redeployed to other opportunities should we not be successful as the incumbent.

Michael C. Pyle: We would anticipate hearing about the final award in the latter part of the second quarter or perhaps early in the third quarter.

Michael C. Pyle: The third opportunity that I wanted to mention is the Newfoundland Fixed-Wing Medevac Project. In partnership with a strategic partner, we have submitted our collective proposal to the government of Newfoundland. Our proposed services would be for the operation of up to six Madovac aircraft in the province. We believe we are one of two proponents to bid on the contract and hope to hear the result of our bid during this second quarter. Lastly, we are seeing significant interest around the world for our aerospace sector.

Michael C. Pyle: The third opportunity I wanted to mention is our Newfoundland fixed rate out of that contract in partnership with a strategic partner, we have submitted our collective proposal to the government are due for launch our proposed services would be for the operation of up to six medevac aircraft in the province, We believe we are one of two proponents.

Michael C. Pyle: To bid on the contract and hope to hear the result of our bid during this second quarter.

Michael C. Pyle: Lastly, we are seeing significant interest around the world for our aerospace services, we see large opportunities in Australia, Europe and expanded opportunities in cancer we.

Michael C. Pyle: We see large opportunities in Australia, Europe, and expanded opportunities in Canada. We are very bullish about future opportunities, and these contracts are right in line with our EIC core capabilities and business model as they generate consistent cash flows throughout the term of the agreement. We brought our analysts to visit our aerospace operations in Newfoundland in April, and I think everyone left with the distinct view that we are a leader both in Canada and around the world with our capability.

Michael C. Pyle: We are very bullish about future opportunities and these contracts are right in line with our core capabilities and business model as they generate consistent cash flows throughout the term of the agreement.

Michael C. Pyle: We brought our analysts to visit our aerospace operations in Newfoundland in April and I think everyone elastic with steak view that we are a leader both in Canada and around the world with our capabilities.

Michael C. Pyle: These opportunities are why we upsized and extended the credit facility so important. It provides us with the liquidity for significant capital expenditures to fund these hopeful contractual wins, along with Adam and his team providing dry powder to them to execute on acquisitions. The social loan component of the credit facility is a new addition.

Michael C. Pyle: These opportunities are why we upsized and extended our credit facility are so important to us. It provides us the liquidity for significant capital expenditures to fund these hopeful contractual wins along with out of his team providing dry powder to them to execute on acquisitions the social loan.

Michael C. Pyle: The component of the credit facility is a new addition for us that load will be used exclusively to fund the acquisition of the King Air aircraft, which are being purchased for the BC medevac contract.

Michael C. Pyle: That loan will be used exclusively to fund the acquisition of the King Air aircraft which are being purchased for the BC Medevac Fund. These new aircraft have improved performance characteristics, lower fuel burn, and provide an essential service to BC's northern, rural, and indigenous communities. In order to define it as a social loan, Rich and his team did have to provide evidence to a third party to attest that we met these social loan criteria.

Michael C. Pyle: These new aircraft have improved performance characteristics lower fuel burn and provided essential service to BCS Northern rural and indigenous communities in order to define it as a social rich and his team did have to provide evidence through a third party do a task that we met these social criteria.

Michael C. Pyle: This provides further recognition of the essential services our aviation entities provide across Canada. Carmele will focus on the outlook for our segments for the second quarter. But first, I wanted to reiterate our guidance for 2024. We confirm that adjusted even down the range of 600 to 635 billion.

Michael C. Pyle: This provides further recognition that the essential services of our aviation entities provide across Canada.

Michael C. Pyle: Carve out will focus on the outlook for our segments for the second quarter, but firstly I wanted to reiterate our guidance for 2024, we confirm that adjusted EBITDA in the range of 600 to 635 billion.

Michael C. Pyle: Our Q1 has set the foundation for the remainder of the year, and we are posed to continue to realize on the growth cap as in previous periods and throughout this year. We're excited about our future and intend to keep doing what we are doing because it works. I will now hand off the call to Richard, who will detail the first quarter results. Thank you, Mike, and good morning, everyone.

Michael C. Pyle: Our Q1 set the foundation for the remainder of the year and we are posed to continue to realize on the growth.

Michael C. Pyle: It's made in previous periods and continue throughout this year.

Michael C. Pyle: We are excited about our future and intend to keep doing what we're doing because it works.

Michael C. Pyle: I'll hand off the call to Richard who will detail our first quarter results.

Richard: Thank you, Mike and good morning, everyone.

Richard Wowryk: Revenue adjusted EBITDA, free cash flow, and free cash flow elect maintenance capital expenditures for all first quarter high watermarks. Mike spoke about our key financial metrics, and I will delve into the segmented results and the remainder of the financial statement. Revenue in our aerospace and aviation segment increased by $43 million, or 13%, to $369 million. Adjusted EBITDA increased by $20 million, or 27%, to $94 million. The results in Margin Expansion were across all business lines.

Richard: The new adjusted EBITDA free cash flow and free cash flow less maintenance capital expenditures were all first quarter high watermarks, Mike spoke about our key financial metrics and I have 1000, the segmented results and the remainder of the financial statements.

Richard: Revenue in the aerospace and aviation segment increased by $43 million or 13% to nine.

Richard: Adjusted EBITDA increased by $20 million or 27% to $94 million.

Richard: The result in margin expansion expansion of our across all business lines.

Richard Wowryk: Looking at our essential air services business line, the improvements were driven by four key factors. First, previous organic growth and capital expenditures in the aviation businesses over the past number of years. Secondly, our average load factors improved, which is a direct improvement on adjusted EBITDA.

Richard: Looking at our Central Air Services business line improvements were driven by four key factors first previously.

Richard: Our organic growth capital expenditures in the aviation business since over the past number of years Secondly, our average load factors improved which is a direct improvement on adjusted EBITDA.

Richard: The impact of raws long on behalf.

Richard: And for the impact of the D C in Manitoba, medevac contracts, which have not been fully implemented at this point.

Richard Wowryk: Third, the impact of routes flown on behalf of Air Canada. And fourth, the impact of the DC and Manitoba Medevac contracts, which have not been fully implemented at this point. Our airspace business line revenues increased over the prior period, while adjusted EBITDA expanded in an accelerated fashion. This is due to two reasons.

Richard: Our aerospace business line revenues increased over the prior while adjusted EBITDA expanded and accelerated fashion businesses.

Richard Wowryk: First, revenues and adjusted EBITDA expanded due to an increase in the ISR business, including the impact of the UK Home Office contract. However, this increase was offset by a decline in revenues within our training business. However, the product shifted, which resulted in a profitability expansion within the training business, even with the revenue declines. This margin expansion in our training business is anticipated to be temporary, however, likely to continue into the second quarter.

Richard: This was due to two reasons first the revenues and adjusted EBITDA expanded due to the increase.

Richard: That's our business, including the impact of the UK home office contract.

Richard: This increase was offset by a decline in revenues within our training business. However, the parkman shifted which resulted in profitability expansion in the training business, even with the revenue declines this margin expansion in our training business.

Richard: Pennsylvania to be temporary however, likely to continue into the second quarter.

Richard Wowryk: Lastly, our aircraft sales and leasing business continued to grow as the leasing component of that business continued to improve. We are still anticipating that the leasing side will continue its gradual improvement until it reaches pre-pandemic levels by the end of the year. The growth within this business line and, specifically, the leasing business resulted in an improvement in the profitability of that business line as leasing margins are much higher than other revenue streams. Revenue in our manufacturing segment increased by $32 million or 16% to $233 million. Adjusted EBITDA decreased by $5 million, or 16%, to $27 million.

Richard: Lastly, our aircraft leasing business continued to grow.

Richard: Well the leasing component of that business continue to improve.

Richard: Anticipating that well leasing side.

Richard: Yes.

Richard: When it reaches pre pandemic levels by the end of the year.

Richard: The growth within this business line and specifically the leasing business, resulting in the possibility on that business line as margins are much higher than other revenue streams.

Richard: Revenue in our manufacturing segment increased by $32 million or 16% to 233, nine adjusted EBITDA decreased by $5 million of 16% to $27 million.

Richard Wowryk: As expected, revenue in EBITDA within the Environmental Access Solutions business line decreased by 35% and 47%, respectively. As previously communicated in our year-end call, the first quarter of the Comparative Period had a number of seasonal anomalies. The first quarter and into the second quarter of 2023 experienced an unusual number of rental maps deployed on long linear projects. This is outside the norm, and weather factors also impacted year-over-year demand. Milder weather in 2023 required greater mat utilization for projects, but this winter experienced very low snowfall and drought conditions, which generally lessened demand. Lastly, the prior comparative contained an unusual number of mats on rent. That's right.

Richard: As expected revenue and EBITDA within the environmental access solution has been fine.

Richard: 35% and 47% respectively as previously communicated in our year end call the first quarter of.

Richard: The comparative period had a number of seasonal along with its first quarter ended the second quarter of 2023 experienced an unusual number of Branco mass deployed a long linear projects. This is outside the norm and weather factors also impacted year over year demand.

Richard: Milder weather in 2020, we require greater Matt utilization for projects. However, this winter experienced very low snowfall winter conditions, which generally lessens demand lastly, the prior year comparative contain an unusual number of math on rent.

Richard Wowryk: Lastly, as the prior year contained an unusual number of mats on rent, the impact on adjusted EBITDA was outsized relative to revenue. Our multi-story Windows Solutions business revenue increased by over 70% due to the acquisition of BV Glazing and adjusted those up by over 300% due to BV Glazing, coupled with improved performance due to increased throughput and increased utilization activities of Windows manufactured by our subsidiaries. Lastly, our precision manufacturing and engineering business experienced relatively similar revenues compared to the prior period, while adjusted EBITDA decreased by 19%.

Richard: Lastly, as the prior year contained an unusual number of mass on rent the impact on adjusted EBIT was outsized related relative to revenue.

Richard: Our multi storey window solutions business revenue increased by almost 70% through the acquisition of beauty glazing and adjusted EBITDA was up by over 300% due to the BV glazing, coupled with improved performance due to increased throughput and increased utilization installation activities windows manufactured by our subsidiaries.

Richard: Lastly, our precision manufacturing and engineering business experienced relatively similar revenues compared to the prior period, while adjusted EBITDA decreased by 19%.

Richard Wowryk: The current year includes the financial results from both Hansen and Dry Air, which were acquired in October and April and October in the prior year. The manufacturing segment companies experienced reduced sales primarily driven by customers delaying large capital projects due to macroeconomic uncertainty.

Richard: Current year includes the financial results from both hands and in dry Air which were acquired in October and April and October in the prior year. The manufacturing segment companies experienced reduced sales, primarily driven by customers delaying large capital projects due to macroeconomic uncertainty. Additionally.

Richard Wowryk: Additionally, the relative, [inaudible] Adjusted EBITDA margins were higher in the aerospace and aviation segment due to three factors. First, leasing revenue at Region 1 continues its trajectory towards 2019 levels, and leasing revenue generates very high adjusted EBITDA margins. Second, Aerospace contributed additional adjusted EBITDA from its own ISR assets, including in the UK, and this revenue stream also generated higher adjusted EBITDA margins. Finally, our central air services experienced higher average load factors, improving margins over the prior period. Adjusted EBIT margins were lower in the manufacturing segment for three reasons.

Richard: Okay.

Richard: Adjusted EBIT decline was expected as dry air experiences significant seasonality are they contribute virtually all of their adjusted EBITDA in the third and fourth quarter and have negative adjusted EBITDA in the first quarter and partway into the second quarter based on historical norms.

Richard: Adjusted it.

Richard: Adjusted EBITDA margins were higher in the aerospace and aviation segment due to three factors first leasing revenue at regional one continues its trajectory towards 2019 lab.

Richard: And leasing revenue generates very high adjusted EBITDA margin second aerospace contributed additional adjusted EBITDA from its own ISR assets, including in the U K and this revenue stream also generate higher adjusted EBITDA margins.

Richard: Finally, our centralized services experienced higher average load factors improving margin over the prior period.

Richard: Adjusted EBITDA margins were lower in the manufacturing segment for three reasons.

Richard Wowryk: First, as we expected, environmental access solutions would turn to more normal seasonality, which resulted in a lower number of masses on rent. In the prior period, a large number of masses were rented on a long linear project. These rentals generated much higher margins, and this was abnormal for the first quarter. In addition, drug conditions in western Canada lessened the need for matting in certain markets.

Richard: First as we expected environmental ACA solutions returned to a more normal seasonality, which resulted in a lower number of mass unrest in the prior period, a large number of masks were rented on a long linear projects. These rentals generate much higher margins and this was abnormal but first quarter. In addition drought conditions in western.

Richard: Canada will lessen the need for mandate on certain markets.

Richard Wowryk: This decline in rental revenue was offset by increased max sales in the current period, which generates lower margins. Second, dry air acquired in the fourth quarter of 2023 generates also adjusted even margins in the third and fourth quarters and, as we expected, generated negative adjusted even margins in the first quarter of 2024. Finally, within our precision manufacturing and engineering business line, business was a little slower than in the prior period due to certain customers deferring capital spending and the impact of general economic uncertainty.

Richard: This decline in rental revenue was offset by increased mat sales in the current period, which generate lower margins.

Richard: Second dry air acquired in the fourth quarter.

Richard: P. J. It's also adjusted EBITDA in the third call third and fourth quarters.

Richard: As we expected generated negative adjusted EBITDA margins in the first quarter of 2024 finally within our precision manufacturing any generic business line business was a little slower than the prior period due to certain customers to Brian capital spending and the impact of general economic uncertainties.

Richard Wowryk: Other items of note during the quarter were that interest costs were higher by approximately $4 million due to increased benchmark borrowing rates compared to the prior period, coupled with increased debt outstanding due to the various growth capital expenditures in the prior year.

Richard: Other items of note during the quarter worried that interest costs were higher by approximately $4 million due to increased benchmark ordinary compared to the partnered coupled with increased debt outstanding due to the various growth capital expenditures in the prior year. However, when looking at our payout ratio consistent with our gearing ratio.

Richard Wowryk: However, when looking at our payout ratio, it remains consistent with our year-end ratio and prior quarter ratio at 57% and 58%, respectively. Dividends increased by 16% when compared to the prior period. Depreciation on capital assets and amortization of intangible assets were also up due to the growth in capital expenditures and acquisition activity in 2023. Lastly, our effective tax rate increased relative to the prior year due to three factors. First, the tax allocation waiting between higher tax jurisdictions. Secondly, the prior period contained a non-taxable contingent consideration gain. And lastly, the implementation of a new minimum tax regime resulted in additional current taxes.

Richard: And prior quarters ratio at 57, and 58 cents definitely dividends.

Richard: Dividends increased by 16% when compared to the prior.

Richard: Depreciation of capital assets and amortization of intangible assets were also up in the growth capital expenditures and acquisition activity in 2023.

Richard: Lastly, our effective tax rate increase was from the prior year due to three factors first being we tacked.

Richard: Tax allocation weighting between higher tax jurisdictions secondly, the prior periods contained in nontaxable contingent consideration gain and.

Richard: And lastly, the implementation of new minimum tax regime resulted in additional.

Richard: Taxes.

Richard Wowryk: The proportion of our earnings by jurisdiction in any given quarter can have a significant impact on our tax rate, but this is particularly true in the first quarter of the year. In addition, the impact of non-deductible items such as acquisition costs and meals has an outsized impact on our tax rate in our seasonally slowest quarter, as we generate our lowest earnings for taxes in this quarter. We would anticipate our effective tax rate to be in the range of 27 to 29% on an annual basis.

Richard: The proportion of our earnings by jurisdiction in any given quarter can have it.

Richard: Impact on our tax rate and this is particularly true in the first quarter of the year. In addition to the impact of nondeductible items, such as acquisition costs and meals have an outsized impact on our tax rate in our seasonally slowest quarter as we generate our lowest earnings before taxes in this quarter.

Richard: We would anticipate our effective tax rate to be in the range of 27% to 29% on an annual basis.

Richard Wowryk: Free cash flow and free cash flow to maintenance capital expenditures increased by 4% and 19%. Free cash flow reached a record $62 million in the first quarter, and free cash flow to maintenance capital expenditures increased by $4 million to $23 million, which is also a Q1 record. Lastly, from a working capital perspective, our working capital remained virtually flat with the prior year end.

Richard: Cash flow and free cash flows capital expenditures increased by 4% and 19%.

Richard: Free cash flow reached a record $62 million in the first quarter and free cash flows capital expenditures increased by 4 million to $23 million, which was also a Q1 record.

Richard: Lastly from a working capital perspective, our working capital remained virtually flat.

Richard Wowryk: The non-cash investment of working capital was $19 million and is fully explained by the collection of a large $30 million receivable prior to December 31st, 2023, with the corresponding payable settled in the first quarter of this year. This is consistent with the prior year's first quarter, which also had a similar transaction. We continue to actively manage our working capital and are proud of the successes amongst our various subsidiaries. As Mike mentioned, we amended and extended our credit facility. The net result was an increase in our facility to approximately $2.2 billion from approximately $2 billion with an extension in maturity to May 2028. This was achieved at consistent prices with the prior facility.

Richard: With the prior year and the noncash investment in working capital was $19 million and is fully explained by the collection of a large $30 million of receivables.

Richard: Prior to December 31st line phase three.

Richard: With a corresponding payable settled in the first quarter of this year. This is consistent with the prior year first quarter also had a similar transactions. We continue to actively manage our working capital and are proud of the success amongst our various subsidiaries.

Richard Wowryk: Included within our new facility is a dedicated $200 million social loan charge, which will be used to fund the purchase of the new King Air aircraft for the BC Medevac contract. This fortifies our balance sheet and provides us with liquidity of approximately $1.1 billion to utilize, and to execute growth capital expenditures and potential acquisitions. The $200 million social loan tranche included within the new facility permits EAC to draw on that portion of the facility as the new aircraft are delivered and modified for medical purposes. As Mike mentioned, as part of the transaction, ISS Corporate provided a second-party opinion and concluded the loan is in alignment with the social loan principles as issued by the Loan Marketing Association.

Richard: As Mike had mentioned, we amended and extended our credit facility. The net result was an increase in our facility to approximately $2 2 billion for approximately 2 billion with an extension inventory to May 2028. This was achieved with consistent pricing with the prior facility included within our new facilities or dedicated to her.

Richard: Our social long charges, which will be used to fund the purchase of the new King Air aircraft from the BC Medevac contract. This border find their balance sheet and provides us with liquidity of approximately $1 1 billion utilized.

Richard: And to execute growth capital expenditures and potential acquisitions, the $200 million social alone tranche included with the move to the permit the AC to draw on that portion of the facility as the new aircraft are delivered and modified for medical purposes, as Mike mentioned as part of the transaction ISS corporate provided a second party opinion and concur.

Richard: The loan is in alignment with the social loan principles as issued by the loan market Association.

Richard Wowryk: Well, the social illness new to EIC is simply a validation of the work our subsidiaries have been doing since their inception. This loan specifically will fund the purchases for Carson Air's BCEHS contract. We also provide essential medical services from coast to coast to coast in Canada across ESE subsidiaries and have done so for decades. We are proud of the work that our subsidiaries do, and to receive recognition of the social benefits that we provide publicly both from our syndicative lenders, who supported the deal, and through the second party opinion was satisfying.

Richard: While the social ones Navy EIC simply a validation of the work our subsidiaries had been doing since their inception.

Richard: This loan specifically will fund the purchases for car scenarios D. C. H S contract. We also provide essential medical services from coast to coast to coast in Canada across E. S. You subsidiaries and have done so for decades, we are proud of the work of our subsidiaries due and to receive recognition of the social social benefits that we provide probably pulls through.

Richard: Our syndicate of lenders, who supported the deal and through the second party opinion, what's satisfying I would like to thank our lending syndicate going to support provided to us on both the overall renewal and the social launch on specifically, which was oversubscribed and above your expectations.

Richard Wowryk: I would like to thank our lending syndicate for the support provided to us in both the overall renewal and the social loan trust, which was oversubscribed and above their expectations. Our total leverage ratio continues to moderate as we continue to generate returns from growth capital expenditures. As previously noted, organic growth results... lag between, So organic growth results result in a lag between the time of the investments are made and when returns become evident through our financial results.

Richard: Our total leverage ratio continues to moderate as we continue to generate returns from growth capital expenditures as previously noted organic growth results.

Richard: Like between.

Richard: So organic growth results results in a lag between the time of the investments are made and when it has become evident through our financial results.

Richard Wowryk: During the first quarter, EIT made growth capital expenditures of $39 million. These growth capital expenditures primarily relate to the aerospace and aviation segment and were driven primarily by investment in aircraft. Our manufacturing segment had negative growth tempo expenditures primarily related to the sales of from the matting fleet within the Environmental Access Solutions Business Fund. Maintenance capital expenditures for the first quarter were $39 million compared to $41 million in the prior period.

Richard: During the first quarter yeah. He made those kind of expenses of 39 million with no capital expenditures, primarily related to the aerospace and aviation segment and were driven primarily by investment in aircrafts.

Richard: Our manufacturing segment had negative gross capital expenditures primarily related to.

Richard: The sales are on the managed fleet within the environmental active solutions business line means templates finished for the first quarter was 9 million compared to 41 million in the prior period.

Richard Wowryk: In our year-end conference call, we indicated that we anticipate maintenance capital expenditures to increase in line with our adjusted EBITDA. However, there were some maintenance events that fell outside of the first quarter and will be funded in later quarters. Carmele will provide more insight in her outlook. With that being said, I now turn the call over to Carmel.

Speaker Change: Our year end conference call, we indicated that we anticipate maintenance capital expenditures to increase in line with our adjusted EBITDA. However, there were some maintenance events that fell outside of the first quarter and will be funded in later quarters, primarily will provide more insight into our outlook, but that being said I'll now turn the call of the carnival. Thank you rich and good morning, we are very proud of that.

Carmele N. Peter: Thank you, Rich, and good morning. We are very proud of the results we achieved in the first quarter, and our outlook for 2024 is for continued growth driven by the diversification and resilience of our business model and the investments we have made in prior periods to build our future. As Mike mentioned, we have reiterated our guidance of 2024 adjusted EBITDA of between $600 to $635 million. I will focus my comments on our expectations for each of the segments and trends we are seeing.

Carnival: Results, we achieved in the first quarter and our outlook for 2024 is for continued growth driven by the diversification and resilience of our business model and the investments we've made in prior periods to build our teacher.

Carnival: As Mike mentioned, we haven't reiterated our guidance our 2024 adjusted EBITDA of between 600 to 635 million I will focus my comments on our expectations for each of the segments and trends we are seeing.

Carmele N. Peter: Firstly, our seasonality in the split amongst quarters is discussed in the Outlook section of the MD&A. Perhaps a couple comments on the seasonality that may exist in Q2. Our environmental access solutions business is always impacted by the winter season, as we generally see that fewer mats are required to navigate the frozen terrain.

Carnival: Firstly, our seasonality and the split amongst quarters is discussed in the outlook section of the MD&A, perhaps a couple of comments on the seasonality that may exist.

Carnival: Our environmental actress solutions business is always impacted by the winter season, as we generally see that fewer matched sprint acquired to navigate the challenging terrain. However, we did see an anomaly in Q1 of 2023 and partly treat through Q2 of 2023, and we had a couple of long linear project in Western Canada.

Carmele N. Peter: However, we did see an anomaly in Q1 of 2023 and partway through Q2 of 2023, as we had a couple of long linear projects in Western Canada where the matting and the rentals continued through the winter months, which is not the norm. We will continue to see that impact when comparing Q2 2024 to the prior year, as those mats came off rent partway through the second quarter. The second factor is our most recent acquisition, Dry Air, which is also seasonally impacted.

Carnival: Where the matting and the rentals continued through the winter months, which is not the norm. We will continue to see that impact when comparing Q2 2024 to the prior year as those match came off rent partway through the second quarter.

Carnival: The second factor is our most recent acquisition dry air which is also seasonally impacted it is of hydronic heating company and the vast majority of its revenues are recognized in the third and fourth quarters. As a result, the adjusted EBITDA is negative to breakeven during the first two quarters based on historical seasonality.

Carmele N. Peter: It is a hydronic heating company, and the vast majority of its revenues are recognized in the third and fourth quarters. As a result, the adjusted EBITDA is negative and will not break even during the first two quarters based on historical seasonality.

Carmele N. Peter: This is the norm for the business and was identified during the due diligence process. We are anticipating a flat to small increase in revenues in our manufacturing segment during the second quarter. We're also anticipating a decline in adjusted EBITDA due to the seasonality factors I just spoke about relating to our environmental access solutions, business line, and dry air. Additionally, all of the businesses within the manufacturing segment are experiencing a strong level of customer inquiries.

Carnival: <unk>. This is the norm for the business. It was identified during the detailed due diligence process.

Carnival: We are anticipating a flat to a small increase in revenues in our manufacturing segment. During the second quarter. We're also anticipating a decline in adjusted EBITDA due to the seasonality factors I just spoke about relating to our environmental axis solutions business line and dry air.

Carnival: All of the businesses within the manufacturing segment are experiencing a strong level of customer inquiries. However, due to macroeconomic uncertainty the closing ratio of increase has been below historical trends. We believe that the businesses are primed for growth when some of the uncertainties debate, particularly interest rates.

Carmele N. Peter: However, due to macroeconomic uncertainty, the closing ratio of inquiries has been below historical trends. We believe that businesses are primed for growth when some of the uncertainties abate, particularly interest rates, specifically looking at the underlying business line. As previously noted, we are anticipating a reduction in revenues in adjusted EBITDA in our environmental access solution business due to the seasonality and the long linear project previously discussed. Furthermore, Western Canada is in the midst of a significant drought to start the spring, and that results in reduced MAT utilization.

Carnival: Specifically looking at the underlying business lines.

Carnival: As previously noted we are anticipating a reduction in revenues and adjusted EBITDA in our environmental axis solution business due to seasonality and a long linear Premier project previously discussed. Furthermore, Western Canada is in the midst of a significant drought to start this spring and that results from reduced Matt utilization, we are continuing to monitor the weather.

Carmele N. Peter: We are continuing to monitor the weather during the quarter and have proactively been reviewing our cost structure, capital expenditures, and MAT fleet. There are a number of opportunities in Western Canada and Eastern Canada for MAT rental and MAT sales, and we anticipate normalization of year-over-year comparatives after Q2. However, it's important to note that the adjusted EBITDA run rates based on projections remain consistent with our original acquisition metrics and remain accretive to shareholders.

Carnival: During the quarter and have proactively been reviewing our cost structure capital expenditures and naturally there.

Carnival: There are a number of opportunities in western Canada, and eastern Canada for Mat rentals and that shelf and we anticipate normalization of year over year compare is after Q2. However, it is important to note that the adjusted EBIT run rates based on projections remain consistent with our original acquisition metrics remain accretive to the shareholders.

Carmele N. Peter: Multi-story window solutions will see moderate growth in Q2 over the prior year. The primary driver is the acquisition of BV, which was acquired partway through the comparative quarter. Quoting in Canada and the U.S. continues to be extremely active, but the conversion of those quotes in the backlog is being delayed with uncertain economic conditions and higher interest rates. We remain bullish on this business line as the longer-term fundamentals driving demand, meaning immigration and lack of affordable housing, remain incredibly strong throughout various regions across Canada and in the U.S. Also, later in 2024, we expect to start to see the financial benefit of syner The precision metal and engineering business is expected to be consistent with the prior year.

Carnival: Story Windows solutions will see moderate growth.

Carnival: In Q2 over prior year. The primary driver is the acquisition of B V, which is acquired part way through the comparative quarters quoting in Canada and the U S continues to be extremely active but the conversion of those calls in the backlog is being delayed but it's uncertain economic conditions and higher interest rates, we remain bullish on this business.

Carnival: Your line is the longer term fundamentals with drive demand being immigration and the lack of affordable housing remain incredibly strong throughout various regions across Canada and in the US Also later in 2024, we expect to start to see the financial benefit of synergies being captured between Quest N D D.

Carnival: The precision precision metal and engineering business is expected to be consistent with prior year, although dry area does not have that comparative for Q2, the seasonality of dry areas business causes its revenue and its profits to be concentrated in Qs three and four stimulus.

Carmele N. Peter: Although dry air does not have a comparable for Q2, the seasonality of dry air's business causes its revenue and its profits to be concentrated in Q3 and Q4. Similar to my comments on the multi-story windows business line, the precision metal and engineering business line is also very active from an interest in quoting perspective. Our essential air service business will see significant growth driven by a multitude of factors compared to the prior period.

Carnival: Similar to my comments on the multi story Windows business line, the precision metal and engineering business line is also very active from an interest in quoting perspective.

Carnival: Our essential Air service business will see significant growth driven by a multitude of factors compared to the prior period. These include the full quarter deployment fortune five hundreds to provide service under our agreement with Air Canada with an additional two aircraft being added by the end of the year. We also expect to continue to see enhanced load factors and growth when comparing to.

Carmele N. Peter: These include the full quarter deployment of 42400s to provide service under our agreement with Air Canada, with an additional two aircraft being added by the end of the year. We also expect to continue to see enhanced load factors and growth when compared to 2023 due to our investments in aircraft throughout our operation. Lastly, we expect continued growth in the MEDEVAC business, with both the 10-year BC and Manitoba MEDEVAC contracts continuing to contribute to financial results in the quarter.

Carnival: 2023 get our investments and aircrafts throughout our operations Lastly, we expect continued growth in the medevac business with both the 10 year, a b C and medical netback contracts continuing to contribute to financial results in the quarter. As a reminder, the D. C. Medevac contract returns are expected to be muted until we redeploy.

Carmele N. Peter: As a reminder, the BC MEDEVAC contract returns are expected to be muted until we redeploy the existing aircraft being used to service the contracts in the interim. Offsetting some of these gains is the impact of the continued labor shortages and supply chain challenges.

Carnival: Existing aircraft being used to service the contracts in the interim.

Carnival: Offsetting some of these gains as the impact of the continued labor shortages and supply chain challenges. Although we are not seeing a worsening of these dynamics and in fact, we are seeing stabilization of these related costs the challenges still remain.

Carmele N. Peter: Although we are not seeing a worsening of these dynamics, and, in fact, we are seeing stabilization of these related costs, the challenges still remain. The aerospace business line is also expected to have adjusted EBITDA growth in Q2, primarily driven by the full engagement of Force Multiplier doing maritime surveillance work for the UK Home Office, which started operations in May of 2023, and the mixed shift in our training business, which will result in higher margins in that business for Q2 this year, compared to last year. Our aircraft sales and leasing business is also expected to experience growth when compared to 2023. This anticipated growth is driven primarily by increases in leasing revenue.

Carnival: The aerospace business line is also expected to have adjusted EBITDA growth in Q2, primarily driven by the full engagement of force multiplier doing maritime surveillance work for the U K home office, which started operations in May of 2023, and the product mix shift in our training business, which will result in higher.

Carnival: Margins in that business for Q2, this year competitor like cheap comparatively to last year.

Carnival: Our aircraft sales and leasing business is also expected to experience growth when comparing to 2023 can paradise.

Carnival: This anticipated growth is driven primarily by increases in leasing revenue. Although we are still off Prem pre pandemic levels. We expect Q2 to continue to build upon the positive momentum we experienced in the first quarter, we anticipate the leasing portfolio to continue its recovery through the latter part of 'twenty 'twenty four.

Carmele N. Peter: Although we are still off pre-pandemic levels, we expect Q2 to continue to build upon the positive momentum we experienced in the first quarter. We anticipate the leasing portfolio to continue its recovery through the latter part of 2024. With respect to maintenance capital expenditures for Q2, we anticipate levels being higher than last quarter. Overall, we expect maintenance capital expenditures to increase roughly consistent with increases and adjusted EBITDA.

Carnival: So with respect to maintenance capital expenditures for Q2, we anticipate levels being higher than last Q2 overall, we expect maintenance capital expenditures to increase roughly consistent with increases in adjusted EBITDA higher flight Irish flight hours to support increased volumes together with inflation labor shortages supply chain issues growing.

Carmele N. Peter: Higher flight hours to support increased volumes, together with inflation, labor shortages, supply chain issues, growing fleet size, and acquisitions, are some of the factors contributing to the expected relative percent increase. Growth investments in Q2 are primarily for the aerospace and aviation segment and include the upgrade of the second surveillance aircraft for the renewed carousel contract, the first being completed, the continued construction of the Gary Filman Indigenous Terminal, investments in aircraft for the BC MEDEVAC contract, and additional aircraft to support the Air Canada Commercial Agreement, and continued construction of the King Air Simulator.

Carnival: <unk> size and acquisitions are similar factors contributing to the expected relative percent increase.

Carnival: Those investments in Q2 are primarily for the aerospace and aviation segment and include the upgrade of the seconds surveillance aircraft for the renewed.

Carnival: So contract the first being completed the continued construction of the Gary film and indigenous terminal.

Carnival: Investments in aircraft for the BC medevac contract and additional aircraft to support the Air Canada commercial agreements and continued construction for the King Air simulator.

Carmele N. Peter: So Regional 1 is working on some more opportunistic aircraft and engine acquisitions which may result in growth investments being made in the aircraft sales and leasing business. As Mike highlighted, our acquisition pipeline continues to be very strong, and with liquidity on hand, EIC will continue to be active in the acquisition market. Overall, we remain confident that we are on track with our 2024 adjusted EBITDA guidance. This confidence is underpinned by the essential nature of our businesses.

Carnival: The original one is working on some opportunistic aircraft and engine acquisitions, which May result in growth investments being made in aircraft sales and leasing business as.

Carnival: As Mike highlighted our acquisition pipeline continues to be very strong with liquidity on hand, EIC will continue to be active in the acquisition market.

Carnival: Overall, we remain confident that we are on track with our 2024 adjusted EBITDA 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 contractual arrangements the growing need for aerospace aerospace solutions.

Carmele N. Peter: The fact that a significant portion of our revenues are backed by long-term contractual arrangements, the growing need for aerospace solutions, the recovery of our aircraft leasing business, and the investments we have made in prior periods for future growth. Thank you for your time this morning. And we would now like to open the call to questions. Operator.

Carnival: The recovery of our aircraft leasing business and the investments we have made in prior periods for future growth.

Speaker Change: You for your time this morning, and we would now like to open the call for questions operator.

Operator: Thank you. We will now conduct a question and answer session. If you have a question, please press star followed by the number 1 on your touch-tone phone.

Speaker Change: We will now conduct a question and answer session. If you have a question. Please press star followed by the number one on your Touchtone phone you will hear a tone acknowledging your request.

Operator: You will hear a tone acknowledging your request. Please note that your questions will be answered in the order that they are received. Please ensure that you lift the handset if you are using a speakerphone before pressing any key.

Speaker Change: Note that your questions will be polled in the order. They are received please ensure that you lift the handset if youre using a speakerphone before pressing any keys.

Steven P. Hansen: And your first question will be from Steve Hansen at Raymond James. Please go ahead. Good morning, Steve. Morning, guys. Thanks for the time. Appreciate it. It sounds like on the matting business, we're going to see a few continued headwinds into Q2. But then we should baseline out. Is that the way to think about it, Mike, from sort of a seasonality standpoint? Like, do you expect any further downside? Or is there room for more downside?

Speaker Change: And your first question will be from Steve Hansen at Raymond James. Please go ahead.

Steven P. Hansen: Good morning.

Michael C. Pyle: I mean, you don't have a perfect set of goggles into the future, but no, we think Q2 is kind of when the inflated comps go away. We've struggled a bit with, particularly at the end of Q1, and beginning of Q2, which is how dry it is in some of our territories, which limits the need for adding. We're starting to see the impact of La Nia with the big rainstorm Alberta had, early Southern Alberta had.

Steven P. Hansen: Morning, guys. Thanks for the time appreciate it it sounds like on the on the battery business. It sounds like we're going to see if you continued headwinds into Q2, but then we should be fine out that's the way to think about it Mike from a from a seasonality standpoint, but do you expect any further downside or is there room for more downside.

Speaker Change: I mean, you don't have a perfect job.

Mike: A set of goggles in the future, but no. We think Q2 is kind of where the inflated comps go away.

Carmele Peter: We've struggled a bit with particular at the end of Q1, beginning of Q2, which is how dry it is I had some of our territories, which limits the need from adding we're starting to see the impact of linear with the big rainstorm, Alberta adds early southern Alberta AD and so with a return to normalcy in that front and then.

Michael C. Pyle: And so with a return to normalcy on that front, and then quite frankly, Steve, we're very bullish on Eastern Canada. Starting later in 2024 and beyond, both Hydro One and Hydro Quebec have announced very ambitious distribution line maintenance and upgrade programs, which drive our business. So we're really quite bullish that we may see a return in future periods to the kind of 21 and 22 performance where we actually generated a bigger percentage of our revenue in Eastern Canada than Western Canada. understood. That's really helpful.

Speaker Change: Frankly, Steve we're very bullish on the eastern Canada.

Michael C. Pyle: Starting later in 2024 and beyond but with hydro wind and hydro, Quebec have announced very ambitious distribution line.

Michael C. Pyle: Maintenance and upgrade programs, which drive our business and so we're really quite bullish that we may see a return in future periods, Chad the kind of 'twenty, one and 'twenty two performance, where we actually generated a bigger percentage of our revenue in eastern Canada and Western Canada.

Michael C. Pyle: And maybe just sticking on the manufacturing side again, it sounds like on the precision side, understandable that the dryer is more seasonal, but even underneath that, some of the core businesses have had some slowdown. Is there any sense for, again, whether that's a trend we're seeing, you described some slower project delivery or for capital projects, but how do you think about that for the back half of the year? I think we received it, we sort of have a...

Speaker Change: Understood. That's really helpful and just maybe just sticking on the manufacturing side again, it sounds like on the precision side I understandable that the dry area is more seasonal but even underneath that some of the core businesses have had some slow down is there any sense for again, whether that's a trend. We're seeing you can describe some slower.

Michael C. Pyle: Delivery or for capital project, but how do you think about that through the back half of the year.

Michael C. Pyle: I think we received it we started our own fiber.

Michael C. Pyle: In quotation marks, normal volumes for that period, our bidding remains quite high. The closing rate is slightly lower, and I think it's because guys are reticent to pull the trigger. We keep getting these false starts on interest rates coming down.

Michael C. Pyle: In quotation marks normal volumes through that period are bidding remains quite high the closing rates slightly lower and I think it's because guys are reticent to pull the trigger when we.

Michael C. Pyle: We keep getting these false starts on interest rates coming down I think youre going to see a cascading of things without actually changes not because a quarter of a point. It makes that much difference to the viability of our project, but more so just the sentiment.

Michael C. Pyle: I think you're going to see a cascading of things when that actually changes, not because a quarter of a point makes that much difference to the viability of a project, but more so just the sentiment will make a difference. The other thing is, I just want to make it clear, we're not losing any work. This is work that's just simply not coming to fruition.

Michael C. Pyle: We will make a difference.

Michael C. Pyle: Other thing I, just want to make it clear we're not losing any work. This is work that just simply not coming to fruition and I think if you start seeing you know interest rates coming down.

Michael C. Pyle: I think if you start seeing interest rates coming down, that will be helpful. I think also the US election, and we've seen this trend before; we're building up to an election. It tends to have larger projects just put on hold until that occurs, and then the letting of those capital projects. From our perspective, it's more timing than whether the projects are going to be let, so we're hopeful towards the back end of the year. Okay, very helpful. Thanks. I'll turn it on. Thank you.

Michael C. Pyle: That would be helpful. I think also the U S election, and we've seen this trend before.

Michael C. Pyle: We're building up to an election, you tend to have larger projects just put on hold until that occurs and then kind of a leading of those capital projects. So from our perspective, it's more timing than whether these things are going to whether the project is going to be let so we're hopeful towards the back end of the year.

Speaker Change: Okay very helpful. Thank you I'll turn it over.

Michael C. Pyle: Thank you next question will be from Kamran Derksen at National Bank Financial. Please go ahead.

Cameron Doerksen: The next question will be from Cameron, at National Bank Financial. Please go ahead. Morning, yeah, morning. Thanks. Thanks very much.

Cameron Doerksen: I just wanted to get an idea on the growth CapEx sort of cadence for the remainder of the year. I mean, obviously, you're still making the investments here in the medevac fleet, and then there's a few other things you've highlighted in the MD&A, but just kind of want to understand sort of over the next several quarters what we should expect from growth CapEx. When we look at the two MEDEVAC contracts, Dave White and his team have largely made all the investments for the Manitoba marketplace.

Cameron Doerksen: Good morning, Kevin Good morning. Thanks, Thanks, very much I just wanted to get an idea on the growth capex sort of cadence for the remainder of the year I mean, obviously, you're still making the investments here in the in the Medevac fleet and in a few of the things you've highlighted in the MD&A, but just kind of want to understand sort of over the next several quarters, what we should expect from a growth Capex perspective.

Cameron Doerksen: Sure.

Cameron Doerksen: Well when you look at the two megawatt contracts, Dave White and his team are largely made all the investments for the Manitoba marketplace, we own all the aircraft.

Michael C. Pyle: We own all the aircraft. The turboprops are flying, and the jets are just finalizing the medical interiors, and they'll be flying towards the end of the summer. So there's not much left to go there.

Michael C. Pyle: Turboprops are flying and the Jets, we're just finalizing the medical interiors and they'll be filing towards the end of summer Ah. So not much left to go there the BC matter of that contract is a little slower than we'd anticipated textron isn't.

Michael C. Pyle: The BC MEDEVAC contract is a little slower than we'd anticipated. Textron isn't quite hitting their delivery promises, so it's extended out the capex on that. I would probably see the balance of that contract being invested kind of over the next four quarters, potentially could sneak in a little bit into Q2 2025, but most of it should be done by the end of Q1 of next year. The simulator project is well underway

Michael C. Pyle: Quite hitting their delivery promises so its extended out.

Michael C. Pyle: The capex on that I would probably see the balance of that contract being invested kind of over the next four quarters potentially could speak in a little bit into Q2 2025, but most of it should be done.

Michael C. Pyle: By the end of Q1 of next year.

Michael C. Pyle: Yeah.

Michael C. Pyle: Hum.

Michael C. Pyle: We envisioned most of that being done in the current year, maybe a little bit into Q1 of next year. And same with Gary Feldman's terminal, we're super ecstatic that the new portion of it is going to open during the very beginning of Q3. And that's, that's a real passion project for us at EIC.

Michael C. Pyle: Our simulator project is well underway, we have visited most of that being done in the current year, maybe a little bit into Q1 of next year and say with Gary Feldman's terminal work Super exotic that the new portion of it is going to open during.

Michael C. Pyle: The very beginning of Q3 and.

Michael C. Pyle: That's that's a real.

Michael C. Pyle: We've more than tripled the size of our terminal for our First Nations customers here in Winnipeg, and the building's been built with our partners within EIC. We're going to be the first airline with Quest windows in it.

Michael C. Pyle: Passion project ferocity, I see we've more than tripled the size of our R. R terminal for our first stations customers here when a bag and the buildings were built with our partners within the IC, we're gonna be the first airline with quest windows.

Michael C. Pyle: So we can't wait to show that off later this year.

Michael C. Pyle: So we can't wait to show that off later this year. In terms of other major projects, they would tend to be more ad hoc. It's really hard for me to predict when Hank and the team are going to find something at Regional One. There's really nothing scheduled at this point for that.

Michael C. Pyle: In terms of other major.

Michael C. Pyle: Major projects, they would tend to be more AD hoc. It gets really hard for me to predict what Hank and the team are going to find something at regional one theres nothing really scheduled at this point on that so what what we've got going forward in Capex growth Capex as it is for us relatively broad.

Michael C. Pyle: So what we've got going forward in CapEx, growth CapEx, is relatively modest for us, other than the VC contract. And we've probably got three quarters of that left to go. And the other kind of two, they're not material in the global sense of what we spend on growth CapEx, but the Curacao upgrades will continue throughout the year. We also have a second aircraft, the Q400, that we're going to acquire later in the year for the Air Canada contract. We're acquiring one, and that's the second one. The first one's in Q2.

Michael C. Pyle: Modest other than the D. C contracted we probably got three quarters of that left to go so.

Michael C. Pyle: Yeah and the other two they are not.

Michael C. Pyle: Material and global center of what we spend on growth Capex, but the carousel upgrades that will continue throughout the year. We also have a second aircraft here for 100 that we're an acquirer later in the year for the Air Canada contract or coring, one and they are that that's the second one the first one in <unk> the.

Michael C. Pyle: The Carson VC contract, you know; my guess is that it might slip a little. I'm probably not as optimistic as Mike on the manufacturer end of things. I think you'll actually see that probably trend out towards all the end of 2025, as far as kind of total spend in that regard. And then, you know, we've got bids in, as Mike spoke about in his comments, that if we're successful, we'll also see some capital expenditures, you know, for instance, the Newfoundland medevac contract and the UK Home Office bid, where we have a second aircraft that we're working on to support either that contract or other opportunities throughout the world.

Michael C. Pyle: Carson D C contract.

Michael C. Pyle: My guess is that might slip a little I'm, probably not as optimistic as Mike on the manufacturer and the thing I think you'll actually see that probably trend out towards all at the end of 2025 as far as kind of the total spend in that regard and then we've got bids in as Mike spoke about in his comments that if we're successful.

Michael C. Pyle: Asphalt well also see some capital expenditures that you know for instance, Spain, Newfoundland medevac contract in the U K home office.

Michael C. Pyle: Where we have a second aircraft that we're working on to support either that contract or other opportunities are throughout the world.

Michael C. Pyle: And both of those that Carmel mentioned are pure new revenue for us; the BC contract, we had part of it. But like the Manitoba Medevac contract where we didn't have any of that work before, we really don't have any material portion of six aircraft. Newfoundland, and the UK, should we win that, the second aircraft will be more than doubling the flying we're doing with the existing first aircraft.

Michael C. Pyle: Both of those that Carl mentioned are pure do are.

Michael C. Pyle: Our revenue for us the BC contract, where you why don't we had part of it but like the Manitoba Medevac contract, where we didn't have any of that work before we really don't have any material portion.

Michael C. Pyle: Of of six aircraft at Newfield.

Michael C. Pyle: Newfoundland and the U K should we win that second aircraft will be more than doubling the flying we're doing it with the existing first aircraft.

Michael C. Pyle: Right, okay, so lots going on there, but all the investments are supporting growth or future growth, so that's good. Just maybe one very quick, additional thing for me, just on the regional one.

Speaker Change: Right, Okay, so lots going on there, but all the investments are supporting growth or future growth. So that's good just maybe one very quick additional thing for me just on regional one I mean, we've seen the leasing revenue continue to trend pretty positively you mean, you're sounding pretty bullish that we'll have kind of a quote unquote full recovery by ended the year I guess could you just talk.

Michael C. Pyle: I guess the visibility you have on the on the leasing side or the regional one business on getting kind of back to pre pandemic levels.

Michael C. Pyle: I mean, we've seen the leasing revenue continue to trend pretty positively. I mean, you're sounding pretty bullish that we'll have kind of a quote unquote, full recovery by the end of the year. Can you just talk about, I guess, the visibility you have on the leasing side of the regional one business on getting kind of back to pre-pandemic levels? Yeah. The pilot crisis hasn't gone away, but it's gotten much better.

Michael C. Pyle: Yeah.

Michael C. Pyle: The the the.

Michael C. Pyle: Posit crisis hasn't gone away, but it's gotten much better and demand in the general aviation space has sort of normalized and so what that's resulted in US Airlines are now trying to put the right plane in the right place as opposed to a plane.

Michael C. Pyle: Demand in the general aviation space has sort of normalized, and so what that's resulted in is airlines are now trying to put the right plane in the right place, as opposed to just a plane in the right place. And so the demand for our regional jets is increasing. We see a lot of change in various airlines' fleets, whether it's plans that some US carriers have to switch from CRJs to ERJs or taking existing CRJs and reducing the number of seats on them and making them a more business-friendly airplane. So we see increased demand. We're in constant conversation, not just in North America but in Europe and, to a growing extent, in Africa.

Michael C. Pyle: In the right place and so the demand for our regional Jets is increasing.

Michael C. Pyle: We see a lot of us see.

Michael C. Pyle: See if various airlines fleets, whether its plans that some of the U S carriers have to switch from C. R. J's to E. R. J's R. T Jake's existing C R j's and reducing the number of seats on them and making them a more business friendly airplanes. So.

Michael C. Pyle: We see increased demand, whereas constant.

Michael C. Pyle: Conversation not just in North America, but in Europe and to a growing extent in Africa.

Michael C. Pyle: The engine leasing has accelerated very quickly, and part of the reasons we're confident about the continuing trend in leasing is because we have contracts for things that are starting, in addition to what's already out. The beauty of leasing is that once it's out, it's out, whereas each time you sell a part, you have got to find another sale to stay at the same place. So it's slightly easier to predict upset, big black swan events like the pandemic was. The other thing I'd like to point out there, as Kamza relates to that, is that I said a lot of times that we expect to get to pre-pandemic levels. We're not happy with that.

Michael C. Pyle: The engine leasing has accelerated very quickly and we have caused part of the reasons. We're contract we're confident.

Michael C. Pyle: Confident about the continuing trend in the leasing is because we have contracts for things that are starting.

Michael C. Pyle: In addition to what's already out the beauty of leasing is that once it's out it's out.

Michael C. Pyle: Whereas each time you sell a part you've got to find another sale to stay at the same place. So it's slightly easier to predict upset big Black Swan events like like the pandemic west.

Michael C. Pyle: The other thing I'd like to point out was there a cam as it relates to that as I said a lot of a number of times that we expect to get to pre pandemic levels. We're not happy with that we've made other investments and we intend by the end of this year and into next year to see us grow past 'twenty 'twenty four levels.

Michael C. Pyle: We've made other investments, and we intend by the end of this year and into next year to see us grow past 2024 levels, or, I'm sorry, 2019 levels. We use 2019 levels as kind of a benchmark or a rule of thumb, but we see growth beyond that. This is the most bullish we've been on regional ones business since the mid-teens, when we made a big investment in assets there. We're very comfortable with our position, the aircraft we have, and where the airlines are going with it.

Michael C. Pyle: Or I'm, sorry, 2019 levels.

Michael C. Pyle: We use a two.

Michael C. Pyle: 2019 levels is kind of a benchmark or a rule of thumb, but we see growth beyond that we're we're this is the most bullish we've been on a regional one's business since the mid teens, when we made a big investment did it assets there so.

Michael C. Pyle: We're very comfortable with our position the aircraft, we have and where the airlines are going with it is it's really it's really the arbitrage created by what airline changing in another airline expand.

Michael C. Pyle: It's really the arbitrage created by one airline changing and another airline expanding that lets us step in the middle and make money. And we're excited about that with respect to Regional One. Okay, no, that's great to hear. I'll pass the line.

Michael C. Pyle: That's a step in the middle it make money and we're excited about that.

Speaker Change: With respect to regional one.

Speaker Change: Okay, No that's great to hear I'll I'll pass along thanks very much.

Michael C. Pyle: Thank you next question will be from James Mcgarrigle at RBC capital markets. Please go ahead.

Cameron Doerksen: Thanks very much. The next question will be from James McGarragle at RBC Capital Market. Thanks for having me on. Good morning, and congratulations on 20 years.

James McGarragle: Chandra from yard.

James McGarragle: Congrats on 20 years that that's often for you guys.

Cameron Doerksen: Okay.

James McGarragle: That's awesome for you guys. Thank you. It was a cool night.

James McGarragle: Thank you exactly where it was a cool night, we had our board dinner last night with a whole bunch of our subsidiary Presidents and there was a lot of all the stories talked about it's amazing how fast 20 years goes.

Michael C. Pyle: We had our board dinner last night with a whole bunch of our subsidiary presidents, and there were a lot of old stories talked about. It's amazing how fast 20 years go by. Yeah, that's good to hear. And on the commentary Carmele made regarding some of the returns not being fully utilized on the medevac contracts until some of those aircraft are redeployed, I'm trying to think about how we should be thinking about the margin impact on the aviation segment here.

James McGarragle: Yeah, Yeah, no that's good to hear and.

Speaker Change: So just on the commentary.

Michael C. Pyle: Hormel made regarding some of the returns not being fully utilized on the medevac contracts until some of those aircraft are redeployed I'm trying to think about how we should be thinking about the margin impact on the aviation segment here again, I don't want to get too far ahead of myself here, but 2025 consensus.

Michael C. Pyle: Again, I don't want to get too far ahead of myself here, but the 2025 consensus is kind of in and around that $695 million level. So we'd now be kind of anticipating a bigger step down in margin in 25 and then a further recovery in 2026. Just want to put some numbers around that commentary. Yeah, no; I wouldn't be stepping anything down.

Michael C. Pyle: In and around that $695 million level.

Michael C. Pyle:

Michael C. Pyle: So we'd be now kind of anticipating a bigger step down in margin in 'twenty five and then a further recovery.

Michael C. Pyle: 2026, I just wanted to put some numbers around that commentary.

Michael C. Pyle: It's more about the full return. When we talk about returns, everything we do is based on our investment and how many dollars are left after maintenance capex or return on that investment. And because we had some of the BC Medevac work, we've replaced all the aircraft. So our return on the work we already had isn't as high because we're already getting paid for part of it with the old aircraft, but we have the old aircraft.

Michael C. Pyle: Yeah, no I wouldn't be stepping anything down it's more about the full return when we're talking about returns. We all everything we do is based on our investment and how many dollars are left after maintenance capex or a return on that investment and because we had some of the D. C. Bad about work we've replaced all of the aircraft So Oh.

Michael C. Pyle: Our return on the work we already had isn't as high because we were already getting paid for part of it with yours aircraft, but we have the old aircraft and I can tell you the opportunities for them are quite good as just as an example.

Michael C. Pyle: And I can tell you, the opportunities for them are quite good, just as an example, not suggesting that this is the only place where we might put them. But the Northwest Territories has just put out an RFP for aircraft, and the aircraft that would be coming from Carson Air would be suitable for that.

Michael C. Pyle: Not suggesting that this is the only place where we might put up but the northwest territories has just put out an RFP.

Michael C. Pyle: For aircraft and the aircraft that will be coming from Dr scenario would be suitable for that so we'd be able to pick up a new contract with virtually no capital investment and so it's redeploying goes to add additional investment I would when you're looking at margins you're looking at a return on sales.

Michael C. Pyle: So we'd be able to pick up a new contract with virtually no capital investment. And so it's redeploying that to add additional investment. When you're looking at margins, you're looking at a return on sales, which isn't impacted by this. It's the return on capital we're talking about, which gives us the opportunity for further accretion out of that investment.

Michael C. Pyle: Which isn't impacted by this it's the return on capital, we're talking about which gives us the opportunity for further accretion out of that investment.

Michael C. Pyle: Yeah, that makes sense. And then on the surveillance deals, you know, I saw you made a purchase of an aircraft to assist with the UK Home Office contract bid. So, this is kind of a two-part thing, I guess.

Michael C. Pyle: Okay.

Speaker Change: Very good.

Michael C. Pyle: Yes.

Michael C. Pyle: That makes sense and then on the surveillance deals.

Michael C. Pyle: I thought you'd be maybe a you made a purchase of a an aircraft to assist with the UK home office contract bid. So just kind of a two part I guess did you typically purchased.

Michael C. Pyle: Did you guys typically purchase aircraft before you won contracts? And then, as a follow-up, you mentioned that, you know, it'd be easy to redeploy these aircraft if you weren't successful. Is there any other types of opportunities you're working on there that you didn't flag in the release that you can provide some color on? Thanks. So, in answer to your first question, do we normally buy assets before we win? I would say this is definitely an anomaly as it relates to that.

Michael C. Pyle: Aircraft before you have won contracts and then as a follow up you mentioned that you know what.

Michael C. Pyle: Easy to redeploy this aircraft if you weren't successful.

Michael C. Pyle: Is there any other types of opportunities you're working on there that you didn't flag in the release that you can provide some color on thanks.

Michael C. Pyle: So the answer to your first question do we normally buy the assets before we win I would say this is definitely an into all the way as it relates to that.

Michael C. Pyle: It's really driven, the decision was driven by two things. One is the timeline to get the second plane up and running is very short. And we don't want to disappoint the customer. We are the incumbent, and so we are cautiously optimistic. We don't know.

Michael C. Pyle: It's driven by it's really driven that seed preserved by two things one is the timeline to get the second plane up and running is very short and we don't want to disappoint. The customer we are the incumbent and so we are cautiously optimistic we don't know there was an RFP process for bidding against other people so I can't.

Michael C. Pyle: There was an RFP process for bidding against other people, so I can't provide any certainty that we're going to win this, but we are cautiously optimistic because we're the incumbent, and we don't want to drop the ball. But the second half of it, and perhaps of equal importance, is the fact that we're in discussions with other European countries. The issue of border security is not diminishing; it's accelerating. We've seen, even in the short period of time we've been with the UK Home Office, that our surveillance has changed how people are sneaking into the country.

Michael C. Pyle: Provided the certainty that we're gonna witnessed but we are cautiously optimistic because we're the incumbent and we don't want to drop the ball, but the second half of visits and perhaps equally I.

Michael C. Pyle: Equally important is the fact that were in discussions with other European countries.

Michael C. Pyle: The issue about border security is not lessening its accelerating.

Michael C. Pyle: We see even in the short period of time, we've been with the UK home office that are surveillance has changed how people are sneaking into the country. They are coming from different places screening different challenges for the government there and what you pay is going through its no different than what France is doing well.

Michael C. Pyle: They're coming from different places, creating different challenges for the government there. And what the UK is going through is no different than what France is dealing with, or Spain is dealing with, or Greece is dealing with. They're all slightly different in how they need to police it.

Michael C. Pyle: With our speed is dealing with or Greece is dealing with they're all slightly different and how they need to policing and so basically we're putting ourselves in the position where when we bought the force multiplier a number of years ago. We said, there's going to be short term demand in the world that we want to be the guys that could step into.

Michael C. Pyle: And so basically, we're putting ourselves in the position where when we bought the force multiplier a number of years ago, we said there would be short-term demand in the world that we wanted to be the guys that could step in. Britain has been the exact example of how that model is supposed to work. That plane's been fully deployed. Quite frankly, if we win, that plane's not going to come back. That plane's going to be permanently put on that.

Michael C. Pyle: Yeah.

Michael C. Pyle: It's been the exact exact example of how that bond was supposed to work that planes when fully deployed quite frankly, if we went that planes not going to come back stopped playing is gonna be permanently put on that so in addition to the the second plane that we bought already it is highly likely you'll see us buy one or two more to replace that.

Michael C. Pyle: So in addition to the second plane that we bought already, it's highly likely you'll see us buy one or two more to replace them as our short-term rental alternative. And so it's really part of a more comprehensive strategy. The decision to do it at this moment was driven by the UK opportunity, but it's a much bigger universe than that.

Michael C. Pyle: As our short term.

Michael C. Pyle: Rental alternatives and so this is it's really part of a more comprehensive strategy.

Michael C. Pyle: It was the decision to do at this moment was driven by the U K opportunity, but it's a much bigger universe to that yet and the interest is not just in Europe, I mean, Canada for instance, I mean, where are flying at very high tempo R. D. F O aircrafts so.

Michael C. Pyle: The interest is not just in Europe, I mean, Canada, for instance, I mean, we're flying at a very high tempo with our DFO aircraft. So, you know, potential opportunities there, Australia, you know, there's opportunities that we spoke about in the past in that region. So, I guess it's a state of our world environment right now.

Michael C. Pyle: Tangible opportunities there Australia.

Michael C. Pyle: There's opportunities that we spoke about in the past in that region. So.

Michael C. Pyle: I guess, it's a state on our Arab World environment.

Michael C. Pyle: Environment right now, but there is lots of areas that could use this type of capability and so that's why we weren't hesitant at all to invest the dollars in advance of the contract to ensure that we're able to seize these opportunities one last comment just before we leave this.

Michael C. Pyle: But there are lots of areas that could use this type of capability. And so that's why we weren't hesitant at all to invest the dollars in advance of the contract to ensure that we were able to seize these opportunities. One last comment just before we leave this. The challenge is that, depending on which equipment we're putting it on, and we use the term surveillance aircraft as if it's homogeneous, and that's really not true. There are a lot of options.

Michael C. Pyle: You can have planes as inexpensive as $40 or $50 million or as expensive as what's in the UAE, north of $200 million. So depending on what kind of equipment you want, but even in the most basic configuration, you're talking close to a year to build those. If you've got the aircraft and you've ordered the parts, it'll take you about a year to put it together. So we have to be ahead of the curve, not behind it. I appreciate it, and I'll turn the line over to you.

Michael C. Pyle: The challenge is that depending on which equipment were putting it on and we use the term surveillance aircraft like it's homogenous and that's really not true. There's a lot of options week, you're gonna Plains has an extensive as 40 or $50 million or it is expense of us whats in UAE north of $200 million. So it's.

Michael C. Pyle: Depending on what sensory equipment, you want but even in the most basic configuration, you're talking close to a year to build those if you've got the aircrafts are devoted the parts it'll take you about a year to put it together. So we gotta be ahead of the curve not behind it.

Speaker Change: I appreciate it and I'll turn the line over.

James McGarragle: Thanks. Thanks, James. The next question will be from Krista Friesen at CIBC. Please go ahead. Morning, Krista.

Speaker Change: Thanks James.

Michael C. Pyle: Next question will be from Christopher Freedom at CIBC. Please go ahead good morning, Justin.

Krista Friesen: Uh huh.

Krista Friesen: Good morning. Congratulations on the quarter. I was just wondering about the Air Canada contract. Obviously, great news, but you have another aircraft added there. What are the conversations like now?

Krista Friesen: Good morning, Congrats on the quarter and I was just wondering on the air Canada contract.

Krista Friesen: Obviously, great news that you have another aircrafts added there.

Michael C. Pyle: You guys have been a great partner for them so far. Are there conversations of being able to increase that further? That's what's going on. We've, one of the things we've been talking about with Air Canada to date, all of our work for them has been purely domestic in the maritime area. They've asked us to look at routes out of Halifax, so the same hub, same thing, but into the northern U.S., which is a new thing for any of our airlines. We've never flown across the border on a scheduled basis.

Krista Friesen: Oh.

Krista Friesen: What are the conversations like now you guys have been a great partner for them. So far are there conversations.

Michael C. Pyle: Being able to increase that further.

Michael C. Pyle: That's what's going on there.

Michael C. Pyle: We Bob one of the things we've been talking about with Air Canada to date all of our working for them has been purely domestic.

Michael C. Pyle: In the maritime area, that's Maritimes area, they've asked us to look at routes out of Halifax. So the same hub same thing, but into the northern U S which is a.

Michael C. Pyle: And so you can see it in the air kind of scheduling later in the year. We will start flying into a couple centers for them. Our relationship with Air Canada is remarkably good.

Michael C. Pyle: A new thing for any of our airlines, we've never flown cross border on a scheduled basis and so you can see it.

Michael C. Pyle: And are kind of scheduling that later in the year.

Michael C. Pyle: Okay.

Michael C. Pyle: We will start flying into a couple of centers for them our relationship with Air Canada is remarkably good them and taking the option on the next two aircraft I think is testament to that and we believe that there's opportunity. If we continue to execute the way we have to do.

Michael C. Pyle: Them taking the option on the next two aircraft, I think, is testament to that. And we believe that there's opportunity if we continue to do things the way we have to do more in that region.

Michael C. Pyle: More in that region, and I want to be clear here.

Michael C. Pyle: Our strategy was stuff centered in the Maritimes and Halifax, in particular, where we have a base. It's consistent with our strategy, and it's consistent with our aircraft type. So while I'm not in a position to say what our talent is going to do in the future, there will be discussions about other opportunities with them, assuming we continue to execute like we have on the first floor, as the remaining two go into service throughout the balance of the year. That's great to hear.

Michael C. Pyle: Strategy was the stuffs centered in the Maritimes and the Halifax in particular, where we have a base it's consistent with our strategy that is consistent with our aircraft type.

Michael C. Pyle: So.

Michael C. Pyle: Well I'm not in a position to say what entertainment who's going to do in the future.

Michael C. Pyle: There will be discussions about other opportunities with them, assuming we continue to execute like we have on the first four.

Michael C. Pyle: The remaining two go into service throughout the balance of the year.

Michael C. Pyle: Okay.

Krista Friesen: And then maybe just on the matting side, we talked a lot about the kind of environmental impact right now. Can you just comment on what's going on in the industry in terms of supply and pricing and what you're seeing there? [inaudible] In Western Canada, because of the dryness, there's more supply than is required. Pricing has stayed reasonably consistent. It really hasn't changed a whole lot.

Speaker Change: Okay. That's that's great to hear and then maybe just on the mining side, we talked a lot about the kind of the environmental impact right. Now can you just comment on on what's going on in the industry in terms of supply and pricing and what you're seeing there.

Krista Friesen: Will be key.

Krista Friesen: Yeah in Western Canada, because of the dryness. There's there's more supply that is required pricing has stayed reasonably reasonably consistent they really hasn't changed a whole lot.

Michael C. Pyle: There's stuff that's going to happen in the oil patch, and a large number of people tend to think of pipelines as the massive ones like we just completed with Trans Mountain and those kinds of things. But there are a lot of smaller pipelines from the oil fields into the bigger pipelines, and there's a bunch of that work that's imminent. Even the long end of the short term or the medium term looks quite good, particularly as soon as we see a little normalization of weather. It's been so dry, and with the forest fires, there aren't even really forest fires, or tundra fires we've had in Alberta in the last year, the number of stuff has been delayed or done without maps.

Krista Friesen: Their stuff that's going to happen in the oil patch. If there's are a large number of people tend to think of pipelines as the bass are ones like we just completed with trans mountain and those kinds of things, but there's a lot of smaller pipelines from the oil fields into the bigger pipeline. So there's a bunch of that work.

Michael C. Pyle: It's imminent and so.

Michael C. Pyle: Even though the long end of the short term or the medium term looks quite good, particularly as soon as we see a little normalization of weather its been so dry with the forest fires started up the range. It really forest fires tundra fires with that Alberta last year those up.

Michael C. Pyle: Our staff has been delayed or done without box that will normalize as we go through and the India and the and then when you get into a back ended the year into 2025, the stuff that's going on in Quebec and.

Michael C. Pyle: That will normalize as we go through La Nia, and then when you get into the back end of the year and into 2025, the stuff that's going on in Quebec and Ontario is very bullish. We've talked about potentially increasing our ability to distribute there and creating a bigger infrastructure, and we're actively looking at opportunities for that. And so I haven't got anything to tell you about for sure yet, but we're very active in those areas. Okay, thanks for the color.

Michael C. Pyle: Ontario is very bullish.

Michael C. Pyle: We've talked about potentially increasing our ability to distribute their and creating a bigger our infrastructure.

Michael C. Pyle: And we're actively looking at opportunities for that not only in eastern Canada, but quite frankly in the eastern half of the United States.

Michael C. Pyle: And so I haven't got anything to telling you about for sure yet, but we're very active in those areas.

Michael C. Pyle: Yeah.

Speaker Change: Okay perfect. Thanks for the color I'll jump back in the queue.

Michael C. Pyle: Okay.

Speaker Change: Thank you.

Krista Friesen: I'll jump back in the queue. Thank you. The next question will be from Matthew Lee at Kennecore Genuity. Please go ahead.

Michael C. Pyle: Next question will be from Matthew Lee of Canaccord Genuity. Please go ahead.

Matthew James Lee: Morning, guys. Thanks for taking my questions. Maybe to start off, just a little bit of an update on the additional aircraft being deployed for AC. Can you just give us an idea of the timing of those entering service and what kind of revenue they add to the airline? Well, if I were, like I said, we don't give specifics, and I don't really like giving my competitors exactly what I make, but I think the way I would look at this is the second one will be in service reasonably soon, the first of the two new ones will be in service very soon, and the other one later this year.

Matthew James Lee: Mortgage banker.

Matthew James Lee: They say my questions maybe to start off just a little bit of update on the additional aircraft being deployed for a C. Can you just give us an idea on the timing of those entering service and what kind of revenue they add to the airline business.

Matthew James Lee: So if I was like I said, we don't give specifics I don't really like giving my competitors exactly when I make but.

Matthew James Lee: The way I would look at this is the second one will be in service reasonable over the first of the two new ones will be in service very soon and the other one later this year. So by the end of this year, we will be fully running the six aircraft in terms of the return on the other two when they're up and running I think it would.

Matthew James Lee: So by the end of this year, we'll be fully running six aircraft. In terms of the return on the other two, when they're up and running, I think what I would do is these are basically $10 million aircraft, give or take in Canadian dollars.

Matthew James Lee: I would do is these are basically $10 million of aircraft give or take in Canadian dollars were pretty clear about what returns we expect.

Michael C. Pyle: We're pretty clear about what returns we expect. So I would work backwards off of that, and then annualize that. Clearly, we're not going to have that in the current year. But when you're looking at the back end of this year and into 2025, I would just come up with a return of the high single digits, $10 million-ish price of those aircraft. Okay, that's really helpful.

Michael C. Pyle: So I would work backwards off of that and then annualize that can be clearly, we're not going to have that as the current year.

Michael C. Pyle: When you're looking at for the back end of this year and into 2025, I would just come up with a return off of her.

Michael C. Pyle: High single digits 10 million ish price of those aircraft.

Matthew James Lee: And then maybe in terms of the manufacturing business as a whole, sounds like for Q1, the letter margin was due primarily to max sales mix, but, you know, maybe help us understand the other moving parts in the overall manufacturing business, and maybe how the margin trajectory looks for the rest Um, well, I think you're, In the short term, I don't think it's a lot changed from like it, it's probably slightly below historical norms because of the lower rental mats in that in northern, as we get to the back end of the year that normalizes in the window business while we're seeing an improvement in the results there. It's nowhere near the improvement that's the potential for there as these jobs are left.

Speaker Change: Okay. That's really helpful. And then maybe in terms of the manufacturing business as a whole it sounds like for Q1, the lighter margin was due primarily to match sales mix, but.

Matthew James Lee: Maybe help us understand the other moving parts in the overall manufacturing business and maybe how the margin trajectory looks for the rest of the year.

Matthew James Lee: Well I think you're.

Matthew James Lee: In the short term I don't think it's a lot changed from like it its probably slightly below historical norms because of the lower rental bots in math.

Matthew James Lee: In northern.

Matthew James Lee: As we get to the back end of the year that normalizes.

Matthew James Lee: In the.

Matthew James Lee: Window business, while we're seeing an improvement in the results start it's nowhere near the improvement that's the potential for there as these jobs are lot and so those tend to be at least 12 months out when we get the so the impact of that on our margins, that's probably a 2025 star.

Matthew James Lee: And so those tend to be at least 12 months out when we get them. So the impact of that on our margins, that's probably a 2025 story. Later in the year, next year, as we do it, it's actually, it's one of the most frustrating things in the world when we're not converting some of these things.

Matthew James Lee: Sorry.

Matthew James Lee: Later in the year next year as we do it we've actually each one of the most frustrating things of the world. When we're not converting some of these things, but we've actually had to hire more engineers and more bidding people to keep up with all of the opportunities our developers are asking us about and so.

Michael C. Pyle: But we've actually had to hire more engineers and more bidding people to keep up with all of the opportunities our developers are asking us about. And so, I might be on the more bullish end of this than other people, but I think that's a dam, and when that bursts, when one or two people step out and say, we're going, I think there's going to be instantly people worried about a supply issue on the window side.

Michael C. Pyle: I might be younger more bullish and of this of other people, but I think that's a dabbing whatnot bursts, where one or two people staff out saying were going I think there's going to be instantly people worried about.

Michael C. Pyle: Supply a supply issue on the window side, and so I think you'll see those margins get better.

Michael C. Pyle: And so I think you'll see those margins get better next year. I don't think you'll see a lot of that this year because even if we get new jobs, they're not going to fall into this year. It's pretty status quo.

Michael C. Pyle: Here I don't see you see a lot of that this year, because even if we get new jobs, they're not going to fall into this year.

Michael C. Pyle: And with the balance of our business, it's pretty status quo, it's slightly softer.

Matthew James Lee: It's slightly softer than it is, but it's almost bang on to what we saw in 2016, where some people held on to the projects with the election coming, especially business-to-business stuff like big expansions of stainless steel tanks and those kinds of things. [inaudible] maritime surveillance businesses, the outlook for that in the medium term is also quite good. The other thing is dry air will assist in margins in Q3 and Q4 as well. Right? So more specifically, I mean, should we be thinking about 2024, with even a margin in manufacturing kind of being like the mid-teens? That's probably reasonable. It's not. I've got to be honest with you.

Matthew James Lee: That it is but it's it's almost bang on to what we saw in 20 and 16, whereas some people held on to the projects with the.

Matthew James Lee: Election U S presidential election, coming, especially as a business to business stuff like big extent, spansion stainless steel tanks and those kinds of things.

Matthew James Lee:

Matthew James Lee: And the closer to the election, we'll see that go and then the other the last piece of it is to the extent, we're exposed to the defense business through a bad machine in and out.

Matthew James Lee: Their business that is bullish and strengthening.

Matthew James Lee: Much like the.

Matthew James Lee: Maritime surveillance business is your outlook for that is a in the medium term is also quite good and the other thing against dry air will assist in margins and at Q3 and four as well.

Matthew James Lee: Right. So more specifically I mean should we be thinking about 2020 for EBIT margin in manufacturing kind of being in the mid teens range.

Michael C. Pyle: It's not how we look at the business. We look at it business-specific, and you get product mixed up. But the team said assuming the rental businesses in what we think they are going to be in that business, that's probably a reasonable estimate. All right, thanks, guys. Thank you. Next question will be from Konark Gupta at Scotiabank. Please go ahead. Thanks. Morning, Konark.

Matthew James Lee: That's that's probably a reasonable it's not I gotta be honest with you. It's not how we look at the business. We look at it our business specific if you get product mix stuff, but.

Konark Gupta: Mid teams is that assuming the the the rental businesses is what we think it's going to be that business, that's probably a reasonable estimate.

Konark Gupta: Alright, thanks, guys.

Konark Gupta: Thank you next question will be from Connor Gupta at Scotia Bank. Please go ahead.

Konark Gupta: Morning, Mike and team, and I echo the congratulations on your Happy 20th, great, great achievements in the last 20 years. So maybe I can, you know, dig into a little bit here, Mike. You know, in terms of Cairns, you're getting 8 to 14% growth for the full year, Q1, you were already at 14%. And, you know, several contracts are ramping up over the next three, four quarters; Northern Met, Coms are easing, but obviously, you're lapping BB and Hansen in Q2 and Dryer in Q4. Would you expect to sustain this kind of 14% growth in each of the next three quarters, would you say, or would there be some variation? I mean, there are slight seasonal variations.

Konark Gupta: Thanks, I'm wondering if monarch I'm wanting Mike and team and I Echo the congratulations on the happy 20 year itself, where you guys are great great achievements in the last 20 years.

Speaker Change: So maybe I can dig into that a little bit to you Mike.

Konark Gupta: So tenants.

Konark Gupta: You're guiding to 214% growth for the full year Q1, youre already at 14% and.

Konark Gupta: Several contracts are ramping up over the next four quarters.

Konark Gupta: Northern math comps are easing, but obviously youre lapping BB enhancement in Q2 and try it in Q4, what do you what do you expect to sustain this kind of 14% growth.

Speaker Change: Each of the next three quarters, what do you say or would there be some variations.

Mike: I mean, there's there's slight seasonal variations and as you mentioned my car the comps change period to period, but we.

Michael C. Pyle: And as you mentioned, like the comps change from period to period, but we don't see a big leap in a given quarter. So when you're looking at that, the 14%, we may be slightly higher than that in Q3, Q4, maybe slightly less than Q2. But it's a fairly straight line over the balance of the year, and then quite frankly, a lot of the stuff we do continues into the next year. Like where you see it with the regional one as an example, the least thing strengthens.

Michael C. Pyle: We don't there's no big leap in a given quarter.

Michael C. Pyle: So when youre looking at that the 14% we may be slightly higher than that in Q3, Q4, maybe slightly less of that in Q2, but.

Speaker Change: It's yes.

Michael C. Pyle: It's fairly straight line over the balance of the year and then quite frankly, a lot of the stuff. We do continues into the next year.

Michael C. Pyle: Yeah.

Michael C. Pyle: Where are you where you see it with regional one as an example, it's at least thing strengthened by the time, we roll out of Q1 next year, we're going to have three more about three more quarters of strengthening the hit next year and so a lot of this growth.

Konark Gupta: By the time we roll off Q1 next year, we're going to have three more months, three more quarters of strengthening to hit next year. And so a lot of this growth, it's 14%, it's not done this year; it rolls organically into 2025. Okay, no, that makes sense. Thanks. And dryer, you know, I understand the seasonality aspect of that, but I don't quite understand why it would be losing money in Q1 and Q2. I'm like, is that it?

Konark Gupta: We're not it's a 14% is not done this year it rules organically into into 2025.

Konark Gupta: Okay.

Konark Gupta: Okay, no that makes sense. Thanks.

Konark Gupta: Try or you know I understand the seasonality aspect of that but I don't quite understand why it would be losing money in Q1, and Q2, I mean, I guess it seems like the only subsidiary you have better because the loss and then a few quarters to can you explain like why are wife's that cost issue in Q1 and Q2.

Michael C. Pyle: It seems like the only subsidiary you have that incurs a loss in a few quarters. Can you explain, like, why there is that cost issue in Q1 and Q2? Yeah, it's really simple.

Michael C. Pyle: What their bill, [inaudible] And so they're used for various projects, whether it be replacing a boiler in a place where you need temporary heating or thawing the ground to dig something out in the winter. It's project-oriented, and it's almost exclusively utilized in the winter. And so when you get into the end of the winter, which is what Q1, the rental companies aren't going to purchase, or the construction companies aren't going to purchase new equipment to have to sit there for the next six months till they need it.

Speaker Change: Yeah, it's really simple up what their build.

Michael C. Pyle: Building and selling our heating capability, so we're selling to construction companies and rental companies and so they're used for various projects, whether it would be replacing a boiler in a place where you need temporary heating or find the ground dig something out in the winter its project.

Michael C. Pyle: Oriented and it's almost exclusively utilized in the winter and so when you get into the.

Michael C. Pyle: The end of the winter, which is what Q1 is the rental companies arent going to purchase or the construction companies aren't going to purchase.

Michael C. Pyle: New equipment doesn't sit there for the next <unk>.

Michael C. Pyle: So the revenue is very seasonal. And I point out, it's exactly what we thought it would be. When you look back, I don't have the number in front of me, and I'll get yelled at for guessing. But the bottom line is, I think we made four or five million dollars in the fourth quarter of this business, and we didn't even have it the whole fourth quarter.

Michael C. Pyle: Six months still they need it. So the revenue is is very seasonal and I'd point out it's exactly where we thought it would be when you look back I don't know if the number in front of me and I'll get yelled at for Gassy, but bottom line is I think we went for a $5 million in the fourth quarter in this business and we didn't even out of the whole fourth quarter.

Michael C. Pyle: And so we say we sell a lot of stuff in the back half of the year; we produce throughout the year, and a lot of our engineering and R&D costs are fixed. And, in fact, they may even be front-end weighted because they've got more time to deal with it at that point in the year. We wouldn't buy a business as seasonal as dry air if it was as big as our airlines or whatever, because that would kick start our working capital needs all over the place. But it's relatively modest in size.

Michael C. Pyle: And so.

Michael C. Pyle: We say, we sell a lot of stuff in the back half of the year, we produced throughout the year and a lot of our engineering and R&D costs are fixed and in fact, they may even be front end weighted because they've got more time to deal with it at that point in the year. So.

Michael C. Pyle: We would buy as business is seasonal as dry air if it was as big as our airlines or whatever because that would kicks are our working capital needs all over the place, but it's relatively modest in size and the aggregate return when you look on it on a 12 month basis.

Michael C. Pyle: And the aggregate return, when you look at it on a 12 month basis, is very strong. So it's really just driven by the demand profile of our customers, that they really don't want to buy these and then have them sit in their yard for six months. They say, okay, we'll take them in July. We'll take them in August. We'll take them in September so that they're ready to go when the frost comes.

Michael C. Pyle: Is very strong so it's really just driven by the demand profile of our customers that they really don't want to buy these and then have considered their yard.

Michael C. Pyle: For six months. They say, okay. We will think of in July we'll take them in August we'll take them in September so that they're ready to go with the Frost drums.

Konark Gupta: Right. Okay. No, that's great. Thanks. And then the last one before I turn it over.

Speaker Change: Right. Okay. No that's great. Thanks, and then last one before I turn it over.

Konark Gupta: Region 1, leasing, obviously, you're expecting it to rebound here, and Q1 was pretty much in line with Q1 of 2019. So that's great. But on the sales side and service side, any incremental opportunities you have today? I think it seems like revenue is pretty stable for now in that business, in both sales and service. You know, last year, you had some big opportunities in Q3, I guess. So any upside here you see in the short term?

Speaker Change: Regional one, leaving obviously youre expecting to rebound here in Q1 was pretty much in line, but Q1 of 2019, so that's great, but on the sales side and service side.

Konark Gupta: Any any incremental opportunities you have today I think it seems like revenues pretty stable Cornell and that business in the sales and service.

Konark Gupta: You know last year, you had some big opportunities in Q3, I guess, so any upside here you see in the short term.

Konark Gupta: Yeah, I would say short to medium. The biggest challenge we have in selling parts, quite frankly, in the regional one is not demand; it's we've got aircraft to part out and the lines to get them into MROs to disassemble the aircraft. We're actually looking at more creative solutions like parking some of these things at our customers and actually taking the parts off as we need them, consigning them that way. We're being creative because of the relatively short labor supply; the ability to get the plates taken apart isn't as fast as we'd like it to be. And Powell, who was supposed to be our ace in the hole on this with MRO, has selfishly gone out and got all these maritime surveillance contracts.

Konark Gupta: Yeah, and I would say in the short to medium the biggest challenge we have in selling parts quite frankly at regional one has got demand.

Konark Gupta: It's we've got aircraft to part out and the lineups to get the bid.

Konark Gupta: Our OS to disassemble the aircraft, we're actually looking at more creative solutions like parking some of these things out of our customers.

Konark Gupta: And actually taking the parts off as we need them.

Konark Gupta: In that way.

Konark Gupta: We're being created because of that relatively short labor supply the ability.

Konark Gupta:

Konark Gupta: To get to play its taken apart isn't as fast as we'd like it to be and Paul who was supposed to be our ace of all of this with MRO selfishly gone out and got all these M. A maritime surveillance contracts. So our internal capacity, we've got what we thought was our backup.

Michael C. Pyle: So our internal capacity, what we thought was our backup, is busy doing other things. So you'll see that it's strengthened over time as we can access more of our own inventory. I think the other thing to point out is just that large aircraft and engine sales can vary from period to period. So when you're talking about that wider, you know, talking about sales and service revenue in totality, when you have kind of the ups and downs of the sales and the large aircraft sales, it can sometimes mask.

Michael C. Pyle: He's busy doing other things so you'll see that that strengthen over time as we can access more of our own inventory.

Michael C. Pyle: And then the other thing to point out is just that.

Michael C. Pyle: Large aircraft and engine sales can vary from period to period, so when you're talking about that wider.

Michael C. Pyle: You know talking about sales and service revenue in totality. When you have kind of the ups and downs of the sales in the large aircraft sales again, sometimes basket and that was the case in Q1, where we have strong parts sales for our sales are up year over year, but they're kind of fluctuating period to period variability in the larger sales make it seem like.

Michael C. Pyle: And that was the case in Q1, where we had strong part sales; part sales were up year over year. But the kind of fluctuating period to period variability in the larger sales makes it seem like we're not generating stronger sales on the part side, which we are, which is coming from previous investments we've made into the portfolio parts for resale. Thanks guys, I appreciate the time as always. The next question will be from Tim James at TD Cowen. Morning, Tim. Good morning.

Tim James: We're not generating.

Tim James: Stronger sales on the parts side, which we are which is coming from previous investments we've made into the portfolio of parts part sales are parts for retail.

Tim James: Okay. Thanks, guys. Appreciate the thing that's always.

Tim James: Thank you.

Michael C. Pyle: Next question will be from Tim James at TD Cowen. Please go ahead.

Tim James: Thank you for the time. I wanted to actually stay on that regional one topic and specifically parting out aircraft. Is it possible to provide a bit of a sense for, you know, on a quarterly basis, the amount or value of parts that are being moved from the fleet into inventory for sales and service. And I guess I'm trying to get a sense for how much of the inventory investment that we're seeing is actually not really requiring any cash because it's just transferring aircraft or parts other than obviously the MRO costs to tear down the aircraft.

Tim James: Good morning, Jim.

Tim James: Good morning, Thank you for the time.

Tim James: I wanted to actually stay on that that regional one topic and specifically parting out the aircraft.

Tim James:

Tim James: Is it possible to provide a bit of a sense for.

Tim James: You know on a quarterly basis, I guess how much.

Tim James: The value of parts that are being.

Tim James: <unk> moved from you know the fleet into into inventory for sales and service and I'm I guess I'm trying to get a sense for how much of the inventory investment that we're seeing is actually not really require any cash because it's just transferring aircraft again or parts other than obviously, the the MRO cost two two to tear down the aircraft, but can you give us.

Tim James: But can you give us a bit of a sense of what the flow of value is from the fleet into inventory, just, you know, or even a range per quarter, or this is all my guys are pulling up numbers, but I think it's important for people who may not understand this as well as you do, Tim. When you look at our business model, and I'm going to simplify it so people understand it, we buy an aircraft that's got So we send it over to Tim Airways, and he leases it for two years. And Then we're at a stage where... the plane needs a big overhaul. So we decided that it's not worth putting the money back into it. So we parted ways.

Tim James: A bit of a sense of what the flow the flow of value adds from the fleet into inventory, just you know or even a range per quarter.

Tim James: This is al I'll tell my guys are pulling up the numbers, but I think it's important for <unk>.

Tim James: People, who may not understand this as long as you do 10 minutes that when you look at.

Tim James: Our business model and I'm going to simplify so people understand it we buy an aircraft. That's got Green time left if we make a decision that we're going to lease it out so we send it over to Tim Airways and he leases after two years and then we're at a stage where.

Tim James: The play need some big overhaul. So we decided that it's not worth putting the money back into it so we parted out.

Michael C. Pyle: And then when the plane will move out of fixed assets and into inventory, and so you've got stuff that goes in and out of our fixed asset category; we'll buy new planes to replace the one that we just used up, and then we move the cost or the net book value of that aircraft into our inventory. And so inventory goes up and down every quarter. And sometimes it's a massive use of capital.

Tim James: And then so when the plane then we'll move out of fixed assets and inventory.

Michael C. Pyle: And so you've got stuff that goes in and out of our fixed asset category, whereby new planes to replace the one that we just used off and then remove the cost or the net book value of that aircraft into our inventory and so inventory goes up in.

Michael C. Pyle: Down every quarter and sometimes that's a massive use of capital and sometimes it's a provider of capital depending on what we do and that gives it the period.

Michael C. Pyle: And sometimes it's a provider of capital, depending on what we do in that given period. So cost of sales has a cash cost, but most of what's done would be something we've bought in, quarters or years previous that we've moved over and become. But the other side of that story is we're going to put something back in fixed assets to replace it because if we don't, we're depleting our long-term ability to generate cash.

Michael C. Pyle: So cost of sales.

Michael C. Pyle: Has a cash cost, but most of what's done would be something we bought in quarters or years previous that was moved over and become but the other side of that story is we're going to put something back in fixed assets to replace it because if we don't we're depleting our long term ability.

Michael C. Pyle: <unk> to generate cash yeah. So it really can make really varies from quarter to quarter. As you would imagine, but you know I'll give you a sense for that quarter. We just had for Q1. It was a couple of million dollars tend to be higher yeah, absolutely, but as Mike indicated we're replenishing our portfolio.

Michael C. Pyle: So it really can it really varies from quarter to quarter, as you would imagine, but, you know, I'll give you a sense for the quarter we just had the Q1. It was a couple million dollars. Can it be higher?

Michael C. Pyle: Fully all with higher kind of cost base assets. These are depreciated them moving into inventory.

Michael C. Pyle: Yeah, absolutely. But as Mike indicated, like, we're replenishing the portfolio with higher-cost, cost-based assets. These are depreciated and moving into inventory. Okay, that's, that's helpful.

Michael C. Pyle: Okay. That's that's helpful and then that that movement out of fixed assets that does get reflected in or correct me if I'm wrong, maybe I am when you report proceeds from disposals of assets that that shows up in that is it not.

Tim James: And then that movement out of fixed assets that does get reflected in, or correct me if I'm wrong, maybe I am. When you report proceeds from disposals of assets, that shows up in that, doesn't it? It shows us a negative capex. It shows us a sale of assets. Right, okay.

Michael C. Pyle: It shows is that what it shows as a negative capex, we chose as a sale of assets.

Tim James: Okay.

Michael C. Pyle: Actually, what it does is we transfer it to the cost of sale. So we reduce, if we transferred a million dollars worth of parts off an airplane, we would reduce our fixed assets by a million dollars, increase our inventory by a million dollars, and then it would flow through the cost of sales. We're taking it out of inventory when we finally swallow the assets. So when we do this, yes, it comes out of fixed assets.

Tim James: It's actually what it does as we transfer it to cost of sales.

Michael C. Pyle: We reduce if we if we transferred a $1 billion worth of parts off an airplane, we would reduce our fixed assets $5 million increase our inventory by $1 million and then it would flow through cost of sales, we're taking it out of inventory when we finally saw the asset so when we do this.

Michael C. Pyle: Yes. It comes out of the fixed assets and then when we report where we've invested it's obviously in that number what went out versus what went in.

Michael C. Pyle: And then when we report what we've invested, it's obviously in that number, what went out versus what went in. And just to kind of give you maybe a more thorough explanation as to why it's variable, I mean, we really look at the marketplace and demand. So we make decisions like, you know, is it worth putting some dollars into the aircraft and continuing to rent it out? Or, you know, is the demand for parts such that it actually makes more sense to part out?

Michael C. Pyle: Right well, we can get to.

Michael C. Pyle: I didn't give you maybe a more fulsome explanation as to why it's variable I mean, we really look at the marketplace and demand. So we make decisions as to what you know is it worth putting some dollars into the aircraft and continuing to rent it out or you know are parts of the man such that it actually makes more sense to part out and there has been limited.

Michael C. Pyle: And hence, we move it to inventory. So those are the types of things that guide us from quarter to quarter as to what we do with the fleet. And quite frankly, that's why we're as good as what we are in that business because it's our knowledge of the demand for the part that drives this business. The leasing is actually a part of the liquidation.

Michael C. Pyle: So those are the types of things that guide us from quarter to quarter as to what we get with the fleet and quite frankly, that's why we're as good as what we are in that business just because it's our knowledge of the demand for the parts that drives this business. The leasing is actually a part of the liquidation we're taking a plane that ultimately is going to be parts. When we're done with it.

Michael C. Pyle: We're taking a plane that, ultimately, is going to be parts when we're done with it. But one of the assets we have to sell is the green time, and so we lease it up to use that.

Michael C. Pyle: But we're one of the assets we have to sell is the green time, and so we lease it up to use that now occasionally we will overhaul at Greenfield agreed time, but most time apart it out and then go buy another one.

Speaker Change: Right right, Yeah, no I'd, just like to have a bit of a sense just because it's a great I mean you did.

Michael C. Pyle: Now, occasionally, we'll overhaul it, refill the green time, but most of the time, we'll part it out, and then go buy another. Yeah, no, I just like to have a bit of a sense just because it's a great way to get inventory without having really a cash outflow for that component of your inventory, which is obviously a great, great model. My next question just returning to kind of the seasonal change from Q4 to Q1. Obviously, comparing this year to last year is tricky, in part because of dry air and other factors, but can you just.., sort of, touch on the key factors when we think about next year from Q4 to Q1, that will be different from this year from Q4 to Q1, if there are any, I mean revenue and, sorry, manufacturing specifically, revenue and manufacturing were What would cause it to be?

Michael C. Pyle: We get inventory without having really a cash outflow for that component inventory, which is obviously great great model.

Michael C. Pyle: My next question, just returning to kind of the seasonal.

Michael C. Pyle: The change from Q4 to Q1.

Michael C. Pyle: Obviously, comparing this year to last year is tricky in part because the dry air and other factors, but can you just.

Michael C. Pyle: Sort of.

Michael C. Pyle: Touch on the key factors when we think about next year from Q4 to Q1 that will be different from this year from Q4 to Q1. If in fact, there are any I mean revenue and I'm thinking sort of manufacturing specifically revenue in manufacturing was down 14% I think sequentially Q4 to Q1, what would cause it to be.

Michael C. Pyle: Different from a decline of 14% next year, if at all or maybe that's a good proxy going forward I don't know again I didn't I don't know get put too fine a point on it but just generally speaking.

Tim James: different from a decline of 14% next year, if at all, or maybe that's a good proxy going forward, again, I get put too fine a point on it, but just generally speaking. Yeah, I don't. I think the only thing you'll see as we go forward that changes the margin profile on the manufacturing side is that as the windows business strengthens from increased demand, the margin profile will be stronger in all the quarters. That business isn't particularly seasonal. There are slight variations, but nothing material. So as we talked about business strengthening, you'll see that affect all quarters. Q1 is always going to be the lightest.

Tim James: Yeah, I don't I think the only thing Youll see as we go forward.

Tim James: That changes the margin profile on the manufacturing as well as the windows are.

Tim James: <unk> strengths from increased demand the margin profile will be stronger in all of our quarters that business isn't particularly seasonal there's slight variations, but nothing material. So as we've talked about that business strengthening you'll see that affect all quarters.

Michael C. Pyle: But what's fascinating in our business, we did a study of this a couple months ago, where we expected what we would expect in Q1 if we looked at the seasonality historically, of what percentage of the annual EBITDA is generated in the first quarter. And within one or two percentage points, it's been the same since we started. And that's really driven by the fact that aviation is always going to be slower in the first quarter because of winter roads in the north. But it's mitigated by the increase in our aerospace business, which isn't seasonal at all. And so that offsets that a bit.

Tim James: The Q1's always going to be the lightest, but what's fascinating yarn business. We did a study of this.

Michael C. Pyle: A couple of months ago, where what do we expect in Q1, if we looked at the seasonality historically of what percentage of the annual EBITDA is generated in the first quarter and within one or two percentage points. It's been the same.

Michael C. Pyle: Since we started and that's really driven by the fact that aviation.

Michael C. Pyle: <unk> is always going to be slower in the first quarter because of winter roads in the north it's.

Michael C. Pyle: It's mitigated by the increase in our aerospace business, which is a seasonal at all and so that offsets that a bit but then we've added some manufacturing at both northern back and to a lesser extent because of its size dry air which is also seasonal so when you add it all up.

Michael C. Pyle: But then we've added some manufacturing in both Northern Matt and, to a lesser extent, because of its size, dry air, which is also seasonal. So when you add it all up, the amount, the relative amount of our business that shows up in Q1 is remarkably consistent year to year. If you're talking about margins, I wouldn't see any reason for things to be materially different a year from now, other than I do expect margins to strengthen in the window business over time, whether we'll have that by Q1 of 2025.

Speaker Change: Yeah about the <unk>.

Michael C. Pyle: Relative about of our business that shows up in Q1 is barcode bleak consistent year to year.

Michael C. Pyle: If you're talking about margins I I wouldn't see any reason for things to be materially different a year from now other than I do expect margins to strengthen in the window business overtime, whether we'll have that by Q1 of 2025, I can't answer that yet but.

Michael C. Pyle: I can't answer that yet. But, on a longer term trend, the strength of the window business will because it'll become a bigger piece of manufacturing, which will, in turn, strengthen those numbers. Outside of that, I don't see a big change. Carmele, am I missing anything?

Michael C. Pyle: Oh I have a longer term trend described to the window business will because it'll become a bigger piece of manufacturing, which will in turn strength took those numbers outside of that I don't see a big change.

Carmele: I'll do my Michigan.

Michael C. Pyle: The only one that comes to mind is just environmental access solutions, and just this year, the severe drought that we've had. And if you had a more normal, well, Q1 is still going to be their slowest period. March, depending on precipitation levels, can be busier for them. So if we had a more normal or, you know, a period of above-normal precipitation next winter and into the early spring in Western Canada, that could positively impact results in 2025 versus 2024.

Carmele: The other one that comes to mind is just environmental access solutions and just this year the severe drought that we've had and if you had a more normal while Q1 is still going to be their slowest period March depending on precipitation levels and easier for them. So if you had a more normal or.

Michael C. Pyle: No.

Michael C. Pyle: A period of above normal precipitation next winter and into the early spring in Western Canada that could positively impact results in 2025 versus 2024, yeah, because their sales mix. This quarter was more actual sales and lease. So you know, obviously impacting margins and that rigor.

Michael C. Pyle: Yeah, because their sales mix this quarter was more actual sales than leases. So, you know, obviously impacting margins in that regard, too. Okay, just a quick follow-on to that then. Are there any drawbacks to the seasonality? I mean, other than it'd be great to have everything evenly distributed, but just from a cost or a planning or a business perspective, and what I'm trying to ask, I guess, Is there enough of a drawback to the seasonality that you would Transcribed by https://otter.ai? Our seasonality has been roughly the same for 20 years.

Michael C. Pyle: Our team.

Speaker Change: Okay, just a quick follow on to that then.

Michael C. Pyle: And was there any drag backs.

Michael C. Pyle: Two the seasonality I mean other than it would be great to have everything evenly distributed but just from a cost or a planning or a business perspective, and what I'm trying to ask I guess is.

Speaker Change: Is there enough of a drawback to the seasonality that you would specifically.

Michael C. Pyle: Specifically target to reduce it or is it is it just kind of a fact of life for the business and you know at the end of 12 months, you've got your numbers and so that spine or or is there any any desire to reduce seasonality or it's not it's not significant enough to have it.

Michael C. Pyle: It is.

Michael C. Pyle: Our seasonality has been roughly the same for 20 years.

Tim James: I mean, in a perfect world, I would continue to find things that are really consistent quarter to quarter. But with our balance sheet, and if something makes more money in Q3 than in Q1, that's okay, as long as it's predictable. We've got a balance sheet that really doesn't affect much. And quite frankly, you see it because our working capital needs always go down in the first quarter because we're slightly less busy, absent that abnormal transaction that Rich described, but our core business need for cash goes down in the first quarter. And then as we accelerate later in the year, it goes up. And so we're well capitalized. It really doesn't preclude us from trying.

Speaker Change: I mean in a perfect world I would find continue to find things that are really consistent quarter to quarter.

Tim James: But with our balance sheet and if something makes more money in Q3 than in Q1, that's okay as long as it's predictable.

Tim James: We've got a balance sheet that that really doesn't affect as much and quite frankly, you see it because our working capital needs always go down in the first quarter, because we're slightly less busy I've sent that abnormal transaction that rich described but our core business our need for cash goes down in the first quarter.

Tim James: And then as Reaccelerate later in the year it goes up and so.

Michael C. Pyle: Now, when I do a $500 million acquisition with Dry Air's seasonality, I'd have to think long and hard about that and see what the impact would be on our capital requirements. But as long as we're talking about modest-sized investments in businesses that we really like, we can withstand the seasonality. Yeah, no, that's great. I'm glad to hear that.

Tim James: We're well capitalized and it really doesn't preclude us now would I do a 500 million dollar acquisition with dryers.

Michael C. Pyle: Seasonality I'd have to think long and hard about that and see what the impact would be on our our capital requirements, but as long as we're talking about auto size investments in businesses that we really like we can withstand the seasonality.

Speaker Change: Yeah, no that's great I'm glad to hear that I mean as long as the economics makes sense. After 12 months after the important thing right.

Tim James: I mean, as long as the economics make sense after 12 months. Um, last quick question, Mike, you made reference to Air Canada. Transcripts provided by Transcription Outsourcing, LLC. Just to confirm, what earnings metric are you using in that? Yeah, on that high single digit. I, If I said that, it's not what I was looking for. We're looking for that 15% free cash flow return on the investment. So just use a notional one.

Tim James: Right.

Tim James: Last quick question, Mike you made reference to the to the year.

Tim James: Air Canada agreement and in flying that's being done and talk about sort of a high single digit returns.

Mike: Just to confirm what earnings metric are you using in that return.

Speaker Change: Yeah, it's not the high single digit I don't know.

Speaker Change: If I send out on you start what I was looking for.

Tim James: Looking for that 15% free cash flow return on investment so.

Mike: Just use a notional widen if I invested $100 million and something I'd expect free cash flow after maintenance reinvestment to be at least $15 million and then to get to an EBITDA number you'd have to add back does that 15 million whatever the maintenance Capex is so it's always going to be something higher than that.

Michael C. Pyle: If I invested $100 million in something, I'd expect free cash flow after maintenance reinvestment to be at least $15 million. And then to get to an EBITDA number, you'd have to add back to that $15 million whatever the maintenance capex is. So it's always going to be something higher than that in terms of an EBITDA return on the investment. The high single digit was in reference to the cost of the asset in terms of millions. Yeah, high single digit millions.

Michael C. Pyle: In terms of an EBITDA return on the investment in the high single digit was in reference to the cost of the asset in terms of high single digit millions high single digit millions right like somewhere eight $910 million of aircraft, depending on which one we bought.

Christopher Allan Murray: Right. Like somewhere $8, $9, $10 million in aircraft, depending on which one we buy. Okay, that's great. Thank you very much. The next question will be from Chris Murray at ATB Capital. Please go ahead. Good morning, Jess.

Christopher Allan Murray: Okay. Okay. That's great. Thank you very much.

Christopher Allan Murray: Okay.

Christopher Allan Murray: Thank you next question will be from Chris Murray at ATB Capital. Please go ahead Martin address it. Thank you.

Michael C. Pyle: Good morning, folks. Hey, Mike, just maybe continuing on with a bit of a theme here. I think you're picking up on some of the seasonality and the variability. You know, as we think about acquisitions, you know, historically, when you guys have done acquisitions, part of the rationale, anyway, was to make the cash flow streams a little more predictable. You know, I think about Regional 1 coming in to help offset some of the maintenance costs and some other U.S. transactions that kind of helped offset currency. You know, dry air is maybe an extreme example of this.

Christopher Allan Murray: Morning, Bulks, Hey, Mike just maybe continuing on with a bit of a theme here I think you're picking up on it on some of the seasonality and the variability.

Michael C. Pyle: Yeah.

Michael C. Pyle: Think about acquisitions, you know historically when you guys have been acquisitions part of the rationale anyway was to make the cash flow streams, a little more predictable you know I think about regional one coming in to help offset some of the maintenance costs and some other U S transactions that kind of helped offset currency I'm no dryers, maybe an extra.

Christopher Allan Murray: But I guess, you know, now that you've got a nice, shiny, you know, couple of billion dollars to go play with, can you maybe talk about what you guys are looking at in the acquisition pipeline? And even if you're, you know, maybe comfortable with your last comment about, you know, maybe picking up something because your balance sheet can absorb it that may be weighted to one half or one quarter of a year more than something else. Is there anything out there that you would think that either would dampen volatility across earnings?

Michael C. Pyle: An example of this but I guess you know now that you've got a nice shiny you know a couple of billion dollars to go play with the can.

Christopher Allan Murray: Can you just maybe talk about what you guys are looking at in the acquisition pipeline.

Christopher Allan Murray: And even if you're you know may be comfortable to your last comment about you know maybe picking up something because your balance sheet can absorb it that may be weighted to one half of one quarter over a year more than something else is there anything out there that you would think that either would dampen volatility across earnings or is this just going to be a function of the size of acquisitions.

Michael C. Pyle: Or is this just going to be a function of the size of the acquisitions you guys have to look at now to move the needle that maybe it's never going to be that kind of fit that you've had in the past? Yeah, I don't think that we see very many transactions that are materially seasonal that we're interested in. The dry air was, I think if we're going to get any more seasonal stuff, I think it will be in my aviation business.

Michael C. Pyle: You guys have to look at now.

Michael C. Pyle: To move the needle that maybe it's never going to be that kind of fit but you've had in the past.

Michael C. Pyle: Yeah, I don't think.

Michael C. Pyle: There, we see very many transactions that are materially sees at all so we're interested in dry air was.

Michael C. Pyle: A rarity in.

Michael C. Pyle: So it was a northern Matt I think where you if if we were going to get any more seasonal stuff I think it will be at my aviation business.

Michael C. Pyle: We haven't conquered the whole North yet, and that's our goal. And so, whether it be medevacs, which aren't seasonal at all, or... Scheduled freight charter business, which is somewhat seasonal. The farther north you go, the less seasonal it is. It's sort of, the Northern part of the provinces, the tent where there are winter roads that it tends to be the most seasonal. So when you look forward, as we grow our map business into the US, that will reduce the seasonality of the business because that seasonal nature isn't the same in the United States. And it's even less in Eastern Canada because it's warmer in the winter and the ground is still soft.

Michael C. Pyle: We haven't conquered the whole north yet.

Michael C. Pyle: And that's our goal and so whether it be batter box, which aren't seasonal at all or.

Michael C. Pyle: Schedule, a free charter business, which is somewhat seasonal the farther north you go into less seasonal it is it's sort of the.

Michael C. Pyle: Northern part of the provinces, the tent, where theres winter roads and it tends to be the most seasonal.

Michael C. Pyle: So when you look forward.

Michael C. Pyle: As we grow our mat business into the U S that will reduce the seasonality of the business because got seasonal nature is it are the same as the United States.

Michael C. Pyle: And it's even last year.

Michael C. Pyle: In Eastern Canada, because it's warmer in the winter and the ground is still soft so there's there's less of a seasonal nature in eastern Canada. There is a western Canada. So if I put on my Nostradamus had three.

Michael C. Pyle: So there's less of a seasonal nature in Eastern Canada than there is in Western Canada. So if I put on my Nostradamus hat three years from now, the percentage of my business, all things being equal, that's in the first quarter will be equal or perhaps somewhat less than it is now. But some of our core businesses, I've been talking about the seasonality of winter roads since 2004, ever since we bought Perimeter.

Michael C. Pyle: Three years from now the percentage of my business, all things being equal.

Michael C. Pyle: In the first quarter will be equal or perhaps somewhat less than it is what it is now.

Michael C. Pyle: But.

Michael C. Pyle: Some of our core businesses I've been talking about seasonality of Winter Road. So it's 2000 and for ever since we bought perimeter and it's actually improved in terms of cash flow, we actually would generate negative distributable cash at certain times. When we were just a small airline.

Michael C. Pyle: And it's actually improved in terms of cash flow. We actually would generate negative distributable cash at certain times when we were just a small airline. 16, 17, 18 years ago in Q1, that's no longer the case because of the diversity of the cash. But I don't see us being able to eliminate that with something that's got a reverse seasonality.

Michael C. Pyle: 16, 17, 18 years ago in Q1, that's no longer the case because of the diversity of the cash flow, but I don't see S being able to eliminate that with something that's got a reverse seasonality I mean, it would be awesome. If we found it but I havent bumped into that yet.

Christopher Allan Murray: I mean, it would be awesome if we found it, but I haven't bumped into that yet. Okay, that's fair. I'll leave it. I'll leave it there. It's just, you know, just, it's interesting to see how, you know, even one acquisition can throw off the earnings pattern a little bit. So, um, the other question, the other question I had for you was just on your core costs. You made the comment that there might be some more variability and slightly higher this year.

Christopher Allan Murray: Okay, That's fair I'll leave it I'll leave it there it's just it's.

Christopher Allan Murray: It's interesting to see how you know even one acquisition can throw around the earnings pattern a little bit so.

Speaker Change: Sure of course.

Christopher Allan Murray: Other question I had for you was just on your corporate costs you made the comment that.

Christopher Allan Murray: There might be some more variability in slightly up this year historically these things to track pretty close.

Christopher Allan Murray: The growth in revenue I'm. So you think about around $10 million. This quarter. You know when you think about a little bit of growth in revenue probably mid.

Christopher Allan Murray: Historically, these things have tracked pretty close to growth in revenue. So, you know, you think about around 10 million this quarter, and you think about a little bit of growth in revenue, probably, you know, mid 40s, full year would normally be what we would think about. Is there something kind of outside of that number that you're trying to highlight or something like that with that commentary? Nope, that's just that it's a reasonable analysis. It grows roughly. It's not directly proportional, but roughly in proportion to the size of the business.

Christopher Allan Murray: Mid forties full year would be normally what we would think about is there something kind of outside of that number.

Christopher Allan Murray: But you're trying to highlight or something like that.

Christopher Allan Murray: With that kilometer.

Christopher Allan Murray: Nope, that's got that that's a reasonable analysis.

Christopher Allan Murray: It grows roughly.

Christopher Allan Murray: It's not directly proportional but roughly in proportion to the size of the business I think in the last two or three years, we've had a maybe a slightly disproportionate increase as it relates to building our cyber security team.

Michael C. Pyle: I think in the last two or three years, we've had maybe a slightly disproportionate increase as it relates to building our IT cybersecurity team. We are very proud of the fact that we're state-of-the-art in cybersecurity. We are authorized and certified at the highest levels of that in Canada, and comparable to much bigger companies like insurance companies and banks. And that's cost. So that's in the historical numbers.

Christopher Allan Murray: But I don't see a delta for that in the future other than as we grow. Okay, I'll leave it there. Thanks guys. Thank you. The next question will be from Yakiyev at Laurentian Bank. Please go ahead. Good morning.

Yakiyev: We are.

Yakiyev: Very proud of the fact that were state of the art.

Yakiyev: In cyber security.

Yakiyev: We are.

Christopher Allan Murray: Yeah.

Yakiyev: Theorized and certified at the highest levels of that in Canada, and comparable to a much bigger companies like insurance companies and banks.

Yakiyev: And that's costs. So that's in the historical numbers, but I don't see a delta for that in the future other than as we grow.

Christopher Allan Murray: Okay.

Yakiyev: Okay I'll leave it there thanks guys.

Yakiyev: Thank you.

Yakiyev: Next question will be from Suez.

Christopher Allan Murray: Yeah.

Yakiyev: At Laurentian Bank. Please go ahead.

Yakiyev: Good morning, Hello. Good morning. Thank you very much I just had one question it's related to the Australian surveillance contract RFP process.

Unknown Caller: Hello, Thank you very much. I just had one question, related to the Australian Surveillance Contractor. I was wondering if there were any updates on that and if the RFP is still likely to happen in the second half of the year. Yes, they have expressions of interest. Transcript by Rev.com Page of We asked, and we're excited about seeing what it looks like because it's going to be very large. How large depends on what aircraft they want to use, how new they are, how much of its jets, and how much of its turboprops.

Unknown Caller: I was wondering if there were any updates on that and the RFP is still likely to happen in the second half of the year.

Unknown Caller: Yes.

Unknown Caller: They had expressions for interest.

Unknown Caller: Cause that late last year, and we moved on we made it through that process now we're one of a limited number of people that will be bidding on an RFP.

Unknown Caller: We asked were excited about seeing what it looks like because it is it's going to be very large how very large depends on what aircraft. They want to use how do they are but how much of it's chat so much of its turboprops and so we're really looking forward to dig in our key.

Michael C. Pyle: And so we're really looking forward to digging our teeth into that. Quite frankly, it's what we're good at. It's big enough that we're going to be competing with some of the biggest people in the world in this segment. We're excited about this opportunity, and we're going to take a good, hard swing at it. Thank you very much. That's very helpful.

Michael C. Pyle: He said there that quite frankly, it's what we're good that it's big enough that we're gonna be competing with some of the biggest people in the world and in this in this world. This segment, but as you've seen with what we've been able to do with Europe going from nothing to a significant player in a couple of years.

Michael C. Pyle: We're excited.

Michael C. Pyle: Cited about this opportunity and we're going to take a good hard swing on it.

Speaker Change: Oh for sure. Thank you very much that's very helpful. Oh, that's the one.

Michael C. Pyle: Thank you next is a follow up from Steve Hansen at Raymond James. Please go ahead.

Unknown Caller: Thank you. Next is a follow-up from Steve Hansen at the Raymond. Yeah, guys, we're running along, so I'll be brief. But I just wanted to go back to your M&A comments around similar or like businesses. Is there anything, are there any assets or capabilities that you might want to acquire that would bolster your chances of winning some of these future contracts you've described? I'm thinking a little bit about the Carson-Eyre playbook here that, obviously, you know, pretty instrumental in the BC contract, but particularly in the international arena, as you think overseas, is there anything that becomes a target or of interest?

Steven P. Hansen: Yeah, guys are wearing off would be I'll be brief, but I just wanted to make go back to your M&A comments around similar or like businesses or is there anything is there are there any assets or capabilities that you might want to acquire that would bolster your chances of winning some of these future contracts, you've described but thinking a little bit about the Carson air playbook.

Unknown Caller: Obviously pretty instrumental in the B C contract, but particularly in the international Arena as you'd think overseas is there anything that becomes.

Steven P. Hansen: Target or are interesting.

Unknown Caller: I think the one thing we'd like to do is when we do our first big jet version of this, we'll have to develop some of the mods and some of the things that we've already developed from a turboprop point of view. But those are more when we do it, as opposed to acquiring it.

Speaker Change: I think the one thing we'd like to do is when we do our first big Jack version of events will have to develop some of the bonds and some of the things that we've already developed for a turboprop point of view.

Steven P. Hansen: I would say, Steve, that the single biggest factor in our capabilities outside of our track record was the decision to acquire CartNav a number of years ago. We have, that is the lifeblood, that's the software that makes all these super-high-tech disparate systems talk to one another. And a lot of what we compete against would be a single manufacturer environment. So SAAB builds, and maritimes is available. But if you buy that, you get Saab's infrared, Saab's ultrasound, Saab's radar, and Saab's computer, and that may or may not be what you want.

Unknown Caller: But those are more organic when we do it as opposed to acquiring it and I would say Steve that the single biggest factor.

Steven P. Hansen: In our capabilities outside of our track record was the decision to acquire carved out a number of years ago. We have that is the lifeblood. That's the software that makes all these super high tagged disparate systems talk to one another and a lot of what we compete against would be a signal Maggie fact.

Steven P. Hansen: <unk> environment, So Saab builds of maritime surveillance aircraft, but if you buy that you get sobs infrared subs ultrasound sobs radar subs computer and that may or may not be what you want I mean, no way criticizing them well what I'm, saying is where we are is if you want the Israeli radar with the <unk>.

Steven P. Hansen: I'm not in any way criticizing them, but what I'm saying is where we are is if you want the Israeli radar with the South African infrared and the American computer system, we've got the piece that makes all of those talk to one another, and it gives us such a competitive advantage. We often have our competitors ask if they could use Cardano software, and you can guess that we're not really that interested in sharing our secret sauce with somebody else.

Steven P. Hansen: South African infrared and the American computer system, we've got the piece that makes all of those talk to one another and it gives us such a competitive advantage. We often have our competitors asked if they could use card now software you could guess, but we're not really that interested in sharing our secret sauce with somebody else.

Steven P. Hansen: But that was the key decision a while ago when we bought it. It stood alone on a testable basis for what it did, but the reason we bought it was to internalize the capability. The other thing we think about the aerospace environment is that oftentimes we look to partner. If it's obviously in a jurisdiction that we don't have a significant presence with a local operator to bolster a bid, or kind of a nationalistic perspective that governments have, or if there's a capability that's looking for that we don't have, like UAV, for instance, those are all examples where we might look to partner and acquisition, perhaps, but we look at both.

Steven P. Hansen: Yes, but that was the key decision a while ago. When we bought that it stood alone on a on a cash flow basis of what it did but the reason we bought it was to internalize.

Steven P. Hansen: Capability.

Steven P. Hansen: The other thing we think about aerospace environment, it's oftentimes they look to partner.

Steven P. Hansen: If it's obviously in a jurisdiction that we don't have a significant presence with a local operator can bolster a bed or kind of a nationalistic perspectives that governments have or if there's a capability. That's looking that theyre looking for that we don't have like UAV for instance, those are all examples where we might look to partner them.

Steven P. Hansen: And acquisition, perhaps but we look at both.

Speaker Change: Okay very helpful. Thanks, guys.

Okay, very helpful. Thank you. And at this time, Mr. Pyle, we have no other questions registered. I want to thank everybody for joining us this morning. I look forward to seeing some of you at our annual meeting in a couple hours at the Winnipeg airport. For those of you who are out of town, we'll speak again at the end of our second quarter. Thanks, and have a great day. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. Next time, we do ask that you please disconnect.

Steven P. Hansen: Thank you and at this time Mr. Pile, we have no other questions registered please proceed.

Steven P. Hansen: I want to thank everybody for joining us. This morning, I look forward to seeing some of you over at our annual meeting.

Steven P. Hansen: A couple of hours over at the Winnipeg airports for those of you were out of town will speak again at the end of our second quarter, Thanks and have a great day.

Speaker Change: 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 do ask that you. Please disconnect your lines.

Steven P. Hansen: 55.

Steven P. Hansen: Hum.

Steven P. Hansen: Yeah.

Steven P. Hansen:

Steven P. Hansen: Hum.

Steven P. Hansen:

Steven P. Hansen:

Steven P. Hansen: Hum.

Steven P. Hansen:

Steven P. Hansen: Yeah.

Steven P. Hansen:

Steven P. Hansen: Hum.

Steven P. Hansen:

Steven P. Hansen: Okay.

Steven P. Hansen: Hmm.

Steven P. Hansen: Hum.

Steven P. Hansen: Yeah.