Q2 2025 Exchange Income Corp Earnings Call

Speaker #3: Good morning, everyone. Welcome to Exchange Income Corporation's conference call. To discuss the financial results for the Q3 and Q6 months ended June 30, 2025.

Operator: Good morning, everyone. Welcome to Exchange Income Corporation's conference call to discuss the financial results for the 3 and 6 months ended June 30, 2025. The Corporation's results, including the MD&A and financial statements, were issued on August 11, 2025, and are currently available via the company's website or SEDAR+. Before turning the call over to management, listeners are cautioned that today's presentation and the responses to questions may contain forward-looking statements within the meaning of the Safe Harbor provision of Canadian Provincial Securities Laws. 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.

Speaker #3: The corporation's results, including the MDNA and financial statements, were issued on August 11, 2025, and are currently available via the company's website or CedarPass.

Speaker #3: 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 provision of Canadian provincial securities laws.

Speaker #3: Forward-looking statements involve risks and uncertainties, and ensure 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.

Speaker #3: 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 MDNA, the Risk Factors section of the Annual Information Form, and EIC's other filings with Canadian Securities Regulators.

Operator: 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&A, the Risk Factors section of the Annual Information Form, and EIC's Other Filings with Canadian Securities Regulators. Except as required by Canadian Securities Law, EIC does not undertake the update of any forward-looking statements. Such statements may only have to be made. 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. I would now like to turn the call over to the CEO of Exchange Income Corporation, Mike Pyle. Thank you. Please go ahead, Mr. Pyle.

Speaker #3: Except as required by Canadian Securities Law, EIC does not undertake to update any forward-looking statements, such statements may only be made. 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.

Speaker #3: I would now like to turn the call over to the CEO of Exchange Income Corporation, Mike Pyle. Thank you, please go ahead, Mr. Pyle.

Speaker #4: Thank you, operator. Good morning, and thank you for joining us on today's call. With me today is Richard Wowryk, our CFO, who will speak about our quarterly financial results.

Mike Pyle: Thank you, operator. Good morning, and thank you for joining us on today's call. With me today is Richard Wowryk, our CFO, who will speak about our quarterly financial results, along with Jake Trainor and Travis Muhr, who will speak about our outlook for our two operating segments. Adam Terwin and Dave White are also on the call and will be available to respond to any specific questions on Canadian North and the long-term air services agreement that was announced subsequent to quarter end. Yesterday, we released our second quarter results for 2025. Our performance in the second quarter continued to be very strong for each of our key financial metrics. Once again, we set Q2 high watermarks for each of our key metrics, including revenue, adjusted EBITDA, free cash flow, net earnings, and adjusted net earnings.

Speaker #4: Along with Jake Trainor and Travis Muhr, who will speak about our outlook for our two operating segments. Adam Turwin and Dave White are also on the call, and will be available to respond to any specific questions on Canadian North.

Speaker #4: And the long-term air services agreement that was announced subsequent to quarter-ish. Yesterday, we released our second quarter results for 2025. Our performance in the second quarter continued to be very strong, for each of our key financial metrics.

Speaker #4: Once again, we set Q2 high watermarks for each of our key metrics, including revenue, adjusted EBITDA, free cash flow, net earnings, and adjusted net earnings.

Speaker #4: In fact, our revenues of $720 million were the highest achieved in any quarter in our history. Subsequent to quarter-end, we announced the closing of the Canadian North transaction.

Mike Pyle: In fact, our revenues of $720 million were the highest achieved in any quarter in our history. Subsequent to quarter end, we announced the closing of the Canadian North transaction. Equally important was the signing of the agreement with the Government of Nunavut for our long-term services, whereby Canadian North and ComAir will be the sole provider of air services for all three regions in Nunavut. The Canadian North acquisition is highly strategic for EIC, as adding its infrastructure and assets and management team ensures that EIC has a unique value proposition for our customers and the Government of Canada. Jake will talk further about some of the opportunities that exist for EIC with Canadian North as part of the family. We also updated our 2025 EBITDA guidance and increased the range to $725 million to $765 million, which now includes the financial results of Canadian North.

Speaker #4: Equally important was the signing of the agreement with the Government of Nunavut for a long-term services whereby Canadian North and ComAir will be the sole provider of air services for all three regions in Nunavut.

Speaker #4: The Canadian North acquisition is highly strategic for EIC, as adding its infrastructure and assets and management team ensure that EIC has a unique value proposition for our customers and the Government of Canada.

Speaker #4: Jake will talk further about some of the opportunities that exist for EIC with Canadian North as part of the family. We also updated our 2025 EBITDA guidance and increased the range to $725 million to $765 million, which now includes the financial results of Canadian North.

Speaker #4: The seasonality of Canadian North is relatively consistent, with our other essential air businesses. As a reminder, we previously noted that the returns being free cash flow thus maintenance CapEx will be muted in the short term, but are expected to meet our return or expectations.

Mike Pyle: The seasonality of Canadian North is relatively consistent with our other essential air businesses. As a reminder, we previously noted that the returns, being free cash flow less maintenance CAPEX, will be muted in the short term but are expected to meet our return or expectations by the end of 2026. These record results were generated during a time of uncertainty, with business sentiment being weak at the start of the quarter due to the uncertainty related to trade policies and geopolitical events. This quarter, however, is another example of how diversified and resilient our businesses are in times of uncertainty. EIC continues to generate strong returns even when the world is experiencing difficult times. The impact of tariffs was not material to EIC overall.

Speaker #4: By the end of 2026, these record results were generated during a time of uncertainty, with business sentiment being weak at the start of the quarter due to the uncertainty related to trade policies and geopolitical events.

Speaker #4: This quarter, however, is another example of how diversified and resilient our businesses are in times of uncertainty. EIC continues to generate strong returns, even when the world is experiencing difficult times.

Speaker #4: The impact of tariffs was not material to EIC overall. However, it did negatively impact our multi-story window solution business line. As they more than the tariffs more than offset the productivity and profitability gains we achieved from our integration activities.

Mike Pyle: However, it did negatively impact our multi-story window solutions business line, as the tariffs more than offset the productivity and profitability gains we achieved from our integration activities. We continue to be bullish on the long-term fundamentals within that business line, and we will be reviewing all options to mitigate the tariffs as we move forward through manufacturing decisions and changes in our supply chain. Ultimately, I believe that Canada and the U.S. will come to an agreement and hopefully will reduce tariffs in the longer term as the two economies are so directly intertwined. Our remaining subsidiaries did not experience any direct impact from the tariffs other than reduced business sentiment, which deferred some purchasing decisions from our customers during the quarter. We are still seeing a significant number of inquiries throughout the businesses, especially as we exited the quarter.

Speaker #4: We continue to be bullish on the long-term fundamentals within that business line and we will review all options to mitigate the tariffs as we move forward through manufacturing decisions and changes in our supply chain.

Speaker #4: Ultimately, I believe that Canada and the US will come to an agreement and hopefully will have reduced tariffs in the longer term as the two economies are so directly intertwined.

Speaker #4: Our remaining subsidiaries did not experience any direct impact from the tariffs other than reduced business sentiment, which deferred some purchasing decisions from our customers during the quarter.

Speaker #4: We are still seeing significant number of inquiries throughout the businesses, especially as we exited the quarter. As customers realized that this trade environment is now the new norm, I believe that business sentiment will gradually improve and the number of firm orders will continue with a step-based improvement.

Mike Pyle: As customers realize that this trade environment is now the new norm, I believe that business sentiment will gradually improve and the number of firm orders will continue with a step-based improvement, especially now that legislation has passed in the U.S., which provides accelerated tax deductibility. Subsequent to quarter end, several of our manufacturing entities received purchase orders, including our multi-story window solutions business line, which booked approximately $100 million in new projects. We expect that this positive momentum will continue throughout our various business lines. Our results were also impacted by the forest fires experienced across Canada. Most importantly, my heart goes out to those who have been displaced from their communities and from their homes. EIC was there to help support these communities in evacuation efforts, and we are currently providing capacity to repatriate the community members back home.

Speaker #4: Especially now that legislation has passed in the US, which provides accelerated tax deductibility. Subsequent to quarter-end, several of our manufacturing entities received purchase orders.

Speaker #4: Including our multi-story window solutions business line, which booked approximately $100 million in new projects. We expect that this positive momentum will continue throughout our various business lines.

Speaker #4: Our results were also impacted by the forest fires experienced across Canada. Most importantly, my heart goes out to these who have been displaced from their communities and from their homes.

Speaker #4: EIC was there to help support these communities in evacuation efforts, and we are currently providing capacity to repatriate the community members back home. Our Rotary Wing operations were also very busy in fire suppression work.

Mike Pyle: Our rotary wing operations were also very busy in fire suppression work. The impact on the communities first and foremost on our thoughts. However, it did impact our quarter as well. The evacuation sites provide a short-term improvement to our charter operations. However, it subsequently has a negative impact on our scheduled service and medevac operations to those communities which are no longer populated. I will let Rich focus on the financial results for the operating segments. However, prior to passing off the call, I wanted to provide some context on a couple of items. We will continue to have significant liquidity available to us. We had drawn the funds for the Canadian North acquisition prior to quarter end, which is why the cash balance was in excess of normal amounts.

Speaker #4: The impact on the communities first and foremost on our thoughts. However, it did impact our quarter as well. The evacuation sites provide a short-term improvement to our charter operations, however, it subsequently has a negative impact on our scheduled service and medevac operations to those communities which are no longer populated.

Speaker #4: I will let Rich focus on the financial results for the operating segments. However, prior to passing off the call, I wanted to provide some context on a couple of items.

Speaker #4: We will continue to have significant liquidity available to us. We had drawn the funds for the Canadian North acquisition prior to quarter-end, which is why the cash balance was in excess of normal amounts.

Speaker #4: Our leverage ratios continue to be at the low end of their historical range, and our balance sheet continues to be very strong, which will allow us to execute on organic growth opportunities and/or acquisitions.

Mike Pyle: Our leverage ratios continue to be at the low end of their historical range, and our balance sheet continues to be very strong, which will allow us to execute on organic growth opportunities and/or acquisitions. I also wanted to give my regular update on the status of significant contract proposals that remain outstanding. During the fourth quarter of 2024, we submitted our proposal to the Australian government for their maritime surveillance contract. We previously anticipated hearing the results of the award by July. However, the May election in Australia delayed the bid evaluation process. Therefore, we anticipated hearing on the results sometime in the third quarter. As I previously commented, we believe we put together a very strong bid, and we expect to have as good a chance as any other bidder.

Speaker #4: I also wanted to give my regular update on the status of significant contract proposals that remain outstanding. During the fourth quarter of 2024, we submitted our proposal to the Australian Government for the Maritime Surveillance Contract.

Speaker #4: We previously anticipated hearing the results of the award by July. However, the May election in Australia delayed the bid evaluation process, and therefore we anticipated hearing on the results sometime in the third quarter.

Speaker #4: As I previously commented, we believe we put together a very strong bid, and we expect to have as good a chance as any other bidder.

Speaker #4: Additionally, within the geopolitical climate, we continue to see significant interest from several other countries for additional ISR assets, and we are working with several governments in developing solutions to their needs and have several discussions with those involved in the procurement process.

Mike Pyle: Additionally, within the geopolitical climate, we continue to see significant interest from several other countries for additional ISR assets, and we are working with several governments to develop solutions to their needs and have several discussions with those involved in the procurement process. Our second aircraft for the United Kingdom Home Office contract has been fully modified and is awaiting regulatory certification in the UK and is expected to start flying later this month. We crossed and significantly exceeded another milestone, being the $3 billion equity market capitalization. Our collective team is very proud of this achievement, and it's a recognition of our business model. The year-to-date results are a very strong start to the year and continue to show the strength of our business model, which is starting to be reflected in our share price. The demand for our services and products is very robust.

Speaker #4: Our second aircraft for the UK Home Office contract has been fully modified, and is waiting regulatory certification in the UK and is expected to start flying later this month.

Speaker #4: We crossed and significantly exceeded another milestone being the $3 billion equity market capitalization. Our collective team is very proud of this achievement, and it's a recognition of our business model.

Speaker #4: The year to date results are a very strong start to the year, and continue to show the strength of our business model which is starting to be reflected in our share price.

Speaker #4: The demand for our services and products is very robust. Jake and Travis will focus on the outlook for our segments for the remainder of 2025.

Mike Pyle: Jake Trainor and Travis Muhr will focus on the outlook for our segments for the remainder of 2025. Lastly, we will provide the market with our expected adjusted EBITDA guidance for 2026 at our third quarter conference call in November, consistent with our past practice. I will now pass the call over to Richard Wowryk.

Speaker #4: Lastly, we will provide the market with our expected adjusted EBITDA guidance for 2026 at our third quarter conference call in November. Consistent with our past practice, I will now pass the call over to Rich.

Speaker #5: Thank you, Mike, and good morning. For the second quarter of 2025, revenue of $720 million adjusted EBITDA of $177 million, free cash flow of $123 million, net earnings of $40 million, and adjusted net earnings of $47 million were all second quarter records.

Richard Wowryk: Thank you, Mike. Good morning. For the second quarter of 2025, revenue of $720 million, adjusted EBITDA of $177 million, free cash flow of $123 million, net earnings of $40 million, and adjusted net earnings of $47 million were all second quarter records. Revenue in our aerospace and aviation segment increased by $28 million, or 7%, to $455 million. Adjusted EBITDA increased by $13 million, or 10%, to $148 million. Looking at the Essential Air Services business line, the improvements were driven by a couple of key factors. First, historic organic growth capital expenditures over the past number of years will satisfy increased demand and contract wins in our medevac operations, primarily related to the British Columbia and Manitoba medevac contracts, drove increases in revenue and profitability, including enhanced scope in multiple markets. Second, the quarter experienced strong firefighting activities, which resulted in evacuation flights and rotary wing fire suppression.

Speaker #5: Revenue in our aerospace and aviation segment increased by $28 million, or 7%, to $455 million. Adjusted EBITDA increased by $13 million, or 10%, to $148 million.

Speaker #5: Looking at the essential air services services business line, the improvements were driven by a couple of key factors. First, historic organic growth capital expenditures over the past number of years to both satisfy increased demand and contract wins in our medevac operations, primarily related to the BC and Manitoba medevac contracts, drove increases in revenue and profitability.

Speaker #5: Including enhanced scope in multiple markets. Second, the quarter experienced strong firefighting activities, which resulted in evacuation flights and rotary wing fire suppression. Lastly, while load factors were strong in the first part of the quarter, scheduled service and medevac volumes experienced a decline in the latter part as a result of northern communities being temporarily displaced and not requiring those services.

Richard Wowryk: Lastly, while load factors were strong in the first part of the quarter, scheduled service and medevac volumes experienced a decline in a lot of parts as a result of northern communities being displaced temporarily and not requiring those services. Our aerospace business line revenues and profitability were lower due to the planned wind-down of certain training programs prior to the start of new programs and contracts. Additionally, one of the aerospace contracts changed from a performance-based logistics agreement to a time and materials arrangement, which resulted in more variability when comparing quarters. Our Aircraft Sales and Leasing business line increases were driven by continued improvement in leasing activity and robust parts demand. We are seeing significant demand in our leasing business for the aircraft and even more so on the engine side. Partially offsetting those increases was a reduction in larger asset sales to the prior period.

Speaker #5: Our aerospace business line revenues and profitability were lower due to the planned wind-down of certain training programs prior to the start of new programs and contracts.

Speaker #5: Additionally, one of the aerospace contracts changed from a performance-based logistics agreement to a timely materials arrangement, which results in more variability when comparing quarters.

Speaker #5: Our aircraft sales and leasing business line increases were driven by continued improvement in leasing activity and robust parts demand. We are seeing significant demand in our leasing business for the aircraft and even more so on the engine side.

Speaker #5: Partially offsetting those increases was a reduction in large asset sales compared to the prior period. Those sales are generally lower-margin transactions and more lumpy than our traditional parts and leasing business.

Richard Wowryk: Those sales are generally lower margin transactions and more lumpy than our traditional parts and leasing business. Revenue in our manufacturing segment increased by $31 million, or 13%, to $265 million. Adjusted EBITDA increased by $9 million, or 26%, to $44 million. Our Environmental Access Solutions business line had increased revenues and adjusted EBITDA driven by the acquisition of Spartan, which had significant demand for its composite mats. As previously discussed, the Spartan team is evaluating several existing locations to house our second plant based on the longer-term secular trends. In the Canadian market, we saw a decrease in adjusted EBITDA due to a change in product mix, as we saw greater mat sales compared to rental mats, as certain rental mat projects were deferred into the latter portion of 2025 and into 2026.

Speaker #5: Revenue in our manufacturing segment increased by $31 million or 13% to $265 million. Adjusted EBITDA increased by $9 million or 26% to $44 million.

Speaker #5: Our environmental access solutions business line had increased revenues and adjusted EBITDA driven by the acquisition of Spartan which had significant demand for its composite mats.

Speaker #5: As previously discussed, Spartan team is evaluating several existing locations to house our second plant based on the longer-term secular trends. In the Canadian market, we saw a decrease in adjusted EBITDA due to a change in product mix as we saw a greater amount of sales compared to rental amounts as certain rental mat projects were deferred into the latter portion of 2025 and into 2026.

Speaker #5: As expected, our multi-story window solutions business revenue decreased due to customer deferrals and related to production gaps. Profitability was further negatively impacted in the short term by aluminum tariffs.

Richard Wowryk: As expected, our multi-story window solutions business revenue decreased due to customer deferrals and related production gaps. Profitability was further negatively impacted in the short term by aluminum tariffs. We have taken steps to mitigate the impact of tariffs, including changes in supply chains. However, those take some time to identify and set up new suppliers to meet demand and quality requirements. Subsequent to the end of the quarter, we did see instances of inquiries being converted into bookings, with over $100 million in bookings. We are encouraged that booking trends will continue to improve in the back half of the year due to the geopolitical trade risks becoming more normalized, and businesses will exploit capital. Our precision manufacturing and engineering business line had another solid quarter from a revenue and profitability perspective. It was driven by customer demand across several industries, including telecommunications, technology, resource, and data centers.

Speaker #5: We have taken steps to mitigate the impact of tariffs including changes in supply chain chains. However, those take some time to identify and set up new suppliers to meet demand and quality requirements.

Speaker #5: Subsequent to the end of the quarter, we did see instances of being see instances of inquiries being converted into booking with over $100 million of bookings.

Speaker #5: We are encouraged that booking trends will continue to improve in the back half of the year due to the geopolitical trade risk becoming more normalized and businesses willing to deploy capital.

Speaker #5: Our precision manufacturing and engineering business line had another solid quarter from a revenue and profitability perspective. It was driven by customer demand across several industries including telecommunications, technology, resource, and data centers.

Speaker #5: Overall, net earnings were $40 million for the second quarter, which was an increase of $7 million, or 23%. The higher adjusted EBITDA and reduced interest expense were offset by increased depreciation and amortization due to the acquisition and growth capital investments, as well as increased acquisition costs related to the Canadian North transactions because of their complexity.

Richard Wowryk: Overall net earnings were $40 million for the second quarter, which was an increase of $7 million, or 23%. The higher adjusted EBITDA and reduced interest expense was offset by increased depreciation and amortization through the acquisition and growth capital investments and increased acquisition costs related to the Canadian North transactions because of its complexity. Earnings per share increased to $0.78 per share compared to $0.69 in the prior quarter. Adjusted net earnings were $47 million compared to $38 million in the prior year, with an increase in adjusted net earnings per share from $0.80 to $0.92 per share. Free cash flow was $123 million compared to $101 million in the prior year. Free cash flow per share increased from $2.13 to $2.40 per share, while free cash flow as maintenance capital expenditures was $57 million compared to $52 million, and on a per-share basis, increased from $1.11 to $1.12.

Speaker #5: Earnings per share increased to $78 cents per share compared to $0.69 in the prior quarter. Adjusted net earnings were $47 million compared to $38 million in the prior year, with an increase in adjusted net earnings per share from $0.80 to $0.92 per share.

Speaker #5: Free cash flow was $123 million compared to $101 million in the prior year. Free cash flow per share increased from $2.13 to $2.40 per share, while maintenance capital expenditures totaled $0.57 million compared to $52 million. On a per share basis, this increased from $1.11 to $1.12.

Speaker #5: Maintenance capital expenditures in the second quarter of 2025 were $66 million compared to the prior year of $48 million. On a six-month basis, maintenance capital expenditures were $122 million compared to $88 million in the prior year.

Richard Wowryk: Maintenance capital expenditures in the second quarter of 2025 were $66 million compared to the prior year of $48 million. On a six-month basis, maintenance capital expenditures were $122 million compared to $88 million in the prior year. Q1 in the prior year was an anomaly on the low end due to the timing of maintenance events. The increase in the current year is due to the timing of events coupled with the policy based on utilization of aircraft and engines within Aircraft Sales and Leasing, as discussed in the first quarter. Growth capital expenditures during the second quarter were $5 million compared to $45 million in the prior year. The second quarter was lower than anticipated, as we expect based on current opportunities within Aircraft Sales and Leasing that growth capital expenditures will be incurred in the third quarter, which will reverse the negative second quarter growth capital expenditures.

Speaker #5: Q1 in the prior year was an anomaly on the low end due to the timing of maintenance events. The increase in the current year is due to the timing of events, coupled with the policy based on utilization for aircraft and engines within aircraft sales and leasing, as discussed in the first quarter.

Speaker #5: Growth capital expenditures during the second quarter were $5 million compared to $45 million in the prior year. The second quarter was lower than anticipated, as we expect that based on current opportunities within aircraft sales and leasing, growth capital expenditures will be incurred in the third quarter, which will reverse the negative second quarter growth capital expenditures.

Speaker #5: From our working capital perspective, we had an investment of approximately $40 million; the investment was driven by growth in the business coupled with deposits of approximately $20 million for assets within our aircraft sales and leasing business line.

Richard Wowryk: From a working capital perspective, we had an investment of approximately $40 million. The investment was driven by growth in the business coupled with deposits of approximately $20 million for assets within our Aircraft Sales and Leasing business line. Subsequent to the end of the quarter, we collected a material government receivable of approximately $19 million to bring the aging of government receivables more in line with historical norms. We are actively managing our working capital and are working with each subsidiary team to convert working capital to cash. Exchange Income Corporation's aggregate leverage, including both its senior credit facility and convertible ventures, decreased from 3.36 at December 31st to 3.21 at June 30th. Our aggregate leverage ratio remains near historical norms and well within our target. Our M&A pipeline remains strong along with our liquidity to execute on acquisitions and organic growth initiatives.

Speaker #5: Subsequent to the end of the quarter, we collected a material government receivable of approximately $19 million, bringing the aging of government receivables more in line with historical norms.

Speaker #5: We are actively managing our working capital and are working with each subsidiary team to convert working capital to cash. Corporations aggregate leverage including both its senior credit facility and convertible ventures decreased from $3.36 at December 31st to $3.21 at June 30th.

Speaker #5: Our aggregate leverage ratio remains near historical norms and well within our target. Our M&A pipeline remains strong along with our liquidity to execute on acquisitions and organic growth initiatives.

Speaker #5: Maintaining a strong balance sheet has been a hallmark of EIC and allows us to be opportunistic or organically and through acquisition. When the right opportunities present themselves, that being said, the added liquidity does not change our view on leverage, and we plan to maintain our leverage within historical within our historical range.

Richard Wowryk: Maintaining a strong balance sheet has been a hallmark of Exchange Income Corporation and allows us to be opportunistic organically and through acquisition when the right opportunities present themselves. That being said, the added liquidity does not change our view on leverage, and we plan to maintain our leverage within our historical range. I will now turn the call over to Jake Trainor, who will provide an update for the 2025 remaining outlook for the aerospace and aviation segments.

Speaker #5: I will now turn the call over to Jake who will provide an update for the 2025 remaining outlook for the aerospace and aviation segments.

Speaker #6: Thank you, Rich. Travis and I will once again split up the outlook section, and I'll focus on the aerospace and aviation segment. Travis will provide context on the manufacturing segment.

Jake Trainor: Thank you, Rich. Travis and I will once again split up the outlook section. I will focus on the aerospace and aviation segment. Travis Muhr will provide context on the manufacturing segment. Overall, we are expecting a strong last six months from a revenue and adjusted EBITDA perspective from our aerospace and aviation segment for several key reasons. The most significant will be the inclusion of the operating results of Canadian North due to the completion of the acquisition on July 1st. Taking a step back, the Canadian North seasonality is relatively consistent with our Essential Air Services operations, with their second and fourth quarters being relatively similar, the third quarter being the strongest, and the first quarter is the seasonally weakest due to demand and weather factors.

Speaker #6: Overall, we're expecting a strong last six months from a revenue and adjusted EBITDA perspective from our aerospace and aviation segment for several key reasons.

Speaker #6: The most significant will be the inclusion of the operating results of Canadian North. Due to the completion of the acquisition on July 1st, taking a step back, the Canadian North seasonality is relatively consistent with their essential air services operations with their second and fourth quarters being relatively similar; the third quarter being the strongest, and the first quarter is the seasonally weakest due to demand and weather factors.

Speaker #6: Secondly, we anticipate strengthening results due to growth capital investments made for the contractual wins announced over the past several years. Including contributions from the UK Home Office's second aircraft which is expected to start flying in late August upon regulatory approval.

Jake Trainor: Secondly, we anticipate strengthening results due to growth capital investments made for the contractual wins announced over the past several years, including contributions from the United Kingdom Home Office's second aircraft, which is expected to start flying in late August upon regulatory approval. I will discuss the specific growth factors by business line. Our Essential Air Services will see growth driven by a multitude of factors when compared to the prior period. The first and most significant will be the addition of Canadian North. We also anticipate strong load factors and growth across our legacy networks when compared to 2024. We had experienced strong load factors in Q1 and in early Q2, and then those were replaced by evacuation flights in Manitoba and Northern Ontario due to wildfires.

Speaker #6: I'll discuss the specific growth factors by business line. Our essential air services will see growth driven by a multitude of factors when compared to the prior period.

Speaker #6: The first and most significant will be the addition of Canadian North. We also anticipate strong load factors and growth across our legacy networks when compared to 2024.

Speaker #6: We had experienced strong load factors in Q1 and in early Q2, and then those were replaced by evacuation flights in Manitoba and northern Ontario due to wildfires.

Speaker #6: The load factors specifically in Manitoba were then reduced in the latter portion of the quarter as communities that were displaced and therefore revenue and profitability of scheduled services were negatively impacted.

Jake Trainor: The load factors specifically in Manitoba were then reduced in the latter portion of the quarter as communities that were displaced, and therefore revenue and profitability of scheduled services were negatively impacted. During the last six months of the year, we do anticipate a normalization of results. Lastly, we expect continued growth in our medevac business because of increases in scope compared to the prior year. We anticipate receiving approximately 8 to 10 of the new King Air 360 aircraft under the British Columbia medevac contract by year-end, which will allow us to redeploy the pre-existing aircraft throughout our other operations, including the Newfoundland and Labrador fixed-wing medevac operations. Offsetting some of these gains is the impact of continued labor shortages and supply chain challenges. We are not seeing a worsening of these dynamics.

Speaker #6: During the last six months of the year, we do anticipate a normalization of results. Lastly, we expect continued growth in our medevac business because of increases in scope compared to the prior year.

Speaker #6: We anticipate receiving approximately 8 to 10 of the new King Air 360 aircraft under the BC Medevac contract by year-end. Which will allow us to redeploy the pre-existing aircraft throughout our other operations, including the Newfoundland and Labrador fixed wing medevac operations.

Speaker #6: Offsetting some of these gains is the impact of continued labor shortages and supply chain challenges. We're not seeing a worsening of these dynamics; however, the challenges still remain specifically on aircraft parts and consumables as well as on aircraft maintenance labor.

Jake Trainor: However, the challenges still remain, specifically on aircraft parts or consumables, as well as on aircraft maintenance labor. The aerospace business line's revenue and EBITDA are expected to increase as the prior year comparables in the third and fourth quarters have started to reflect the wind-down of training contracts and the conversion of the aerospace support contract from a performance-based logistics agreement to a time and materials arrangement. These increases are expected to be driven by the second aircraft deployed onto the United Kingdom Home Office contract and continued strong tempo of flying for owned ISR assets. Our Aircraft Sales and Leasing business is also expected to experience growth, as Rich talked about the investment in both working capital for future part sales and investment in aircraft and engines within the leasing portfolio anticipated within the third quarter.

Speaker #6: The aerospace business line's revenue and EBITDA are expected to increase as the prior year comparables in the third and fourth quarters have started to reflect the wind-down of training contracts and the conversion of the aerospace support contract from a performance-based logistics agreement to a timely materials arrangement.

Speaker #6: These increases are expected to be driven by the second aircraft deployed onto the UK Home Office contract and the continued strong tempo of flying for owned ISR assets.

Speaker #6: Our aircraft sales and leasing business is also expected to experience growth as Rich talked about the investment in both working capital for future parts sales and investment in aircraft and engines within the leasing portfolio anticipated within the third quarter.

Speaker #6: We continue to expect growth in the leasing revenues as we place those aircraft and engines on lease. With the increase in inventory, we also anticipate greater parts sales throughout the year, assuming we can access MRO slots.

Jake Trainor: We continue to expect growth in the leasing revenues as we place those aircraft and engines on lease. With the increase in inventory, we also anticipate greater part sales throughout the year, assuming we can access MRO slots. Taking a step back, I wanted to focus on the strategic benefits of the Canadian North transaction for the longer term for EIC as a whole. We believe that the Canadian North infrastructure and aviation assets, coupled with our existing operations, provide us with a unique offering to meet the development needs of the North. As the government of Canada renews its focus on development, security, and sovereignty within the North, EIC's comprehensive portfolio, including advanced aerospace solutions, sovereign Arctic aviation, defense-enabling infrastructure, in-country defense manufacturing, and our extensive network of partnerships with Indigenous communities and businesses, uniquely positioned the company to lead and support these critical initiatives.

Speaker #6: Taking a step back, I wanted to focus on the strategic benefits of the Canadian North transaction for the longer term for EIC as a whole.

Speaker #6: We believe that the Canadian North infrastructure and aviation assets coupled with our existing operations provide us with a unique offering to meet the development needs of the North.

Speaker #6: As the Government of Canada renews its focus on development, security, and sovereignty within the North, EIC's comprehensive portfolio including advanced aerospace solutions, sovereign Arctic aviation, defense-enabling infrastructure, in-country defense manufacturing, and our extensive network of partnerships with indigenous communities and businesses uniquely position the company to lead and support these critical initiatives.

Speaker #6: We will proactively have discussions with the Government and our customers about how EIC can support them in achieving their NATO targets and development in the North.

Jake Trainor: We will proactively have discussions with the government and our customers about how EIC can support them in achieving their NATO targets and development in the North. We expect maintenance CapEx expenditures to increase for a number of reasons. Firstly, due to the addition of Canadian North, we noted that the first-year returns are expected to be muted due to higher-than-normal maintenance CapEx expenditures required. When we negotiated the purchase price, we took into account the projected maintenance CapEx expenditures and negotiated a corresponding reduction in the purchase price. Secondly, maintenance capital expenditures are expected to increase in line with increases in our adjusted EBITDA in our aerospace and aviation segment. Thirdly, increases in maintenance capital expenditures related to our Aircraft Sales and Leasing business due to continued strengthening of utilization within our lease portfolio.

Speaker #6: We expect maintenance CapEx, expenditures to increase for a number of reasons. Firstly, due to the addition of Canadian North, we noticed or we noted that the first-year returns are expected to be muted due to higher-than-normal maintenance CapEx expenditures required.

Speaker #6: When we negotiated the purchase price, we took into account the projected maintenance CapEx expenditures and negotiated a corresponding reduction in the purchase price. Secondly, maintenance capital expenditures are expected to increase in line with increases in our adjusted EBITDA in our aerospace and aviation segment.

Speaker #6: Thirdly, increases in maintenance capital expenditures related to our aircraft and sales and leasing business due to continued strengthening of utilization within our lease portfolio and lastly, this quarter's maintenance capital expenditures in essential air services were below our internal expectations due to a timing of events which are expected to be caught up in subsequent quarters.

Jake Trainor: Lastly, this quarter's maintenance capital expenditures in Essential Air Services were below our internal expectations due to a timing of events which are expected to be caught up in subsequent quarters. Growth investments in the remainder of 2025 include capital expenditures for 8 to 10 new King Air aircraft, which will be used in the BC medevac contract. We have received five of these aircraft by the end of August. Lastly, Regional One has placed deposits on certain aircraft assets and anticipates executing aircraft and engine transactions during the third and fourth quarters. The business had negative growth capital expenditures during the second quarter, which was an anomaly due to the timing of the execution of opportunities.

Speaker #6: Growth investments in the remainder of 2025 include capital expenditures for 8 to 10 new King Air aircraft which will be used in the BC Medevac contract.

Speaker #6: We have received five of these aircraft by the end of August. Lastly, Regional One has placed deposits on certain aircraft assets and anticipates executing aircraft and engine transactions during the third and fourth quarters.

Speaker #6: The business had negative growth capital expenditures during the second quarter which was an anomaly due to the timing of the execution of opportunities. As a reminder, transactions are only executed if they meet the same financial metrics as applied for acquisitions.

Jake Trainor: As a reminder, transactions are only executed if they meet the same financial metrics as applied for acquisitions. I will now pass it off to Travis Muhr to provide some commentary on the manufacturing segment.

Speaker #6: I'll now pass it off to Travis to provide some commentary on the manufacturing segment.

Speaker #7: Thanks, Jake, and good morning. We're anticipating continued growth in our revenues and profitability for our manufacturing segment for the remainder of the year compared to 2024.

Richard Wowryk: Thanks, Jake, and good morning. We are anticipating continued growth in our revenues and profitability for our manufacturing segment for the remainder of the period of 2024. This growth is expected for two reasons. Firstly, we see the normalization of the business environments for many of our segment subsidiaries, coupled with the annualized impact of Spartan in our environmental access solutions business line. All of the businesses within the manufacturing segment experienced a strong level of customer inquiries at the start of 2025, with some softness experienced as the tariffs were implemented. The tariff uncertainty saw a small reduction from a customer booking perspective in the second quarter, but the business sentiment has been gradually improving as customers began to accept the risk landscape.

Speaker #7: This growth is expected for two reasons. Firstly, we see the normalization of the business environments for many of our segments subsidiaries coupled with the annualized impact of Spartan in our environmental access solutions business line.

Speaker #7: All of the businesses within the manufacturing segment were experiencing a strong level of customer inquiries at the start of 2025, with some softness experienced as tariffs were implemented.

Speaker #7: The tariff uncertainty saw a small reduction from a customer booking perspective in the second quarter, but the business sentiment has been gradually improving as customers began to accept the risk landscape.

Speaker #7: Overall, as Mike mentioned, as the tariff situation stands today, we have not been directly impacted by the tariffs, except for the aluminum tariffs impacting the multi-story window solutions business line during the quarter.

Richard Wowryk: Overall, as Mike Pyle had mentioned, as the tariff situation stands today, we have not been directly impacted by the tariffs, except for the aluminum tariffs impacting the multi-story window solutions business line during the quarter. The vast majority of our products that we produce are Canada-U.S.A., Mexico compliant, and therefore the broader risk of tariffs would relate to declining business sentiment and supply chain changes, as Richard Wowryk commented, which do take some time to implement. Our environmental access solutions business line is expected to generate returns higher than the comparative periods for the remainder of the year. Spartan continues to experience very strong demand for its composite mat solutions, and we anticipate that they will continue to sell out their manufacturing capacity based on feedback received from customers and testing on a System 7 XT mat. Also, the FOD's track-out product line is seeing very strong demand.

Speaker #7: The vast majority of our products that we produce are Canada-USA, Mexico compliant, and therefore the broader risk of tariffs would relate to declining business sentiment and supply chain changes as Rich had commented, which do take some time to implement.

Speaker #7: Our environmental access solutions business line is expected to generate returns higher than the comparative periods for the remainder of the year. Spartan continues to experience very strong demand for its composite mat solutions, and we anticipate that they will continue to sell at their manufacturing capacity based on feedback received from customers and and testing on the System 7 XT mat.

Speaker #7: Also, the FOD track-out product line is seeing very strong demand. Due to that demand, we are actively assessing various location alternatives to build a state-of-the-art plant.

Richard Wowryk: Due to that demand, we are actively assessing various location alternatives to build a state-of-the-art class. We see long-term positive trends in the composite mat industry as the geographic and sector usage continues to expand and take market share from the traditional wood mat industry in the U.S. Although we have seen some deferrals in project start dates for our mat and bridge solutions business in Canada, we anticipate those projects commencing in the latter parts of 2025 and into 2026, which should drive an uptick in mat and bridge rentals. We have talked a lot about a bullish view on the transmission and distribution sector as electric grids have to be expanded and hardened for the new electricity demands, whether it be for electric vehicles or data centers. We also see several tailwinds for the traditional oil and gas and pipeline sectors.

Speaker #7: We see long-term positive trends in the composite mat industry as the geographic and sector usage continues to expand and take market share from the traditional wood mat industry in the US.

Speaker #7: Although we've seen some deferrals in project start dates for our mat and bridge solutions business in Canada, we anticipate those projects commencing in the latter parts of 2025 and into 2026 which should drive an uptick in mat and bridge rentals.

Speaker #7: We've talked a lot about our bullish view on the transition and distribution sector, as electric grids have to be expanded and hardened for the new electricity demands, whether it be for electric vehicles or data centers.

Speaker #7: We also see several tailwinds for the traditional oil and gas and pipeline sectors. As expected, our multi-story window solutions business line revenue and adjusted EBITDA is expected to be lower than the comparative periods.

Richard Wowryk: As expected, our multi-story window solutions business line revenue and adjusted EBITDA is expected to be lower than the comparative periods. We have signaled our expectations in the year-end and first quarter call, and the drivers remain the same for the remainder of the year. The period-over-period declines are expected due to, one, the heightened interest rate environments that existed in 2023 and 2024 that resulted in reduced project manufacturing for 2025, as projects' books will be manufactured in 18 to 24 months after the booking date generally. Secondly, for projects scheduled for 2025, we anticipate margin pressures due to the type of projects booked, coupled with production gaps. We have integrated the manufacturing capacity in Canada by combining certain manufacturing facilities and are seeing the fruits of those activities as we did note profitability increase in benefits. However, those are more than offset by the tariffs.

Speaker #7: We had signaled our expectations in the year-end and first quarter call, and the drivers remain the same. For the remainder of the year, the period-over-period declines are expected due to, one, the heightened interest rate environments that existed in 2023 and 2024, which resulted in reduced project manufacturing for 2025, as projects booked will be manufactured 18 to 24 months after the booking date generally.

Speaker #7: Secondly, for projects scheduled for 2025, we anticipate margin pressures due to the type of projects booked, coupled with production gaps. We have integrated the manufacturing capacity in Canada by combining certain manufacturing facilities and are seeing the fruits of those activities, as we did note profitability increase and benefits.

Speaker #7: However, those are more than offset by the tariffs. As discussed in our reporting, we cannot alter our supply chains in the short term, and therefore we're subject to the aluminum tariffs during the quarter.

Richard Wowryk: As discussed in our reporting, we cannot alter our supply chains in the short term, and therefore we are subject to the aluminum tariffs during the quarter. In the longer term, we will be able to mitigate the impact and optimize production. Quoting in Canada and the U.S. continues to be very active, and we are seeing bookings subsequent to year-end. We are successful in booking approximately $100 million of new projects, and we anticipate this trend to continue as developers become more comfortable with the economic environments we are in. We remain very bullish on this business line as the longer-term fundamentals which drive demand, being an acute shortage of affordable housing, remain very strong across several geographic regions in Canada and the U.S.

Speaker #7: In the longer term, we'll be able to mitigate the impact and optimize production. Quoting in Canada and the U.S. continues to be very active, and we are seeing bookings subsequent to year-end.

Speaker #7: We are successful in booking approximately $100 million of new projects and we anticipate this trend to continue as developers become more comfortable with the economic environments we are in.

Speaker #7: We remain very bullish on this business line as the longer-term fundamentals which drive demand being an acute shortage of affordable housing remains very strong across several geographic regions in Canada and the US.

Speaker #7: Our precision manufacturing and engineering business line is expected to improve from our revenue and profitability perspective for the remainder of the year compared to the prior year.

Richard Wowryk: Our precision manufacturing and engineering business line is expected to improve from a revenue and profitability perspective for the remainder of the year compared to the prior year. We are seeing strength across various sectors, including defense, telecommunications, technology, resource, and data centers. We are anticipating growth capital expenditures to be incurred in each of the business lines, but that should be relatively consistent with the prior year. The growth capital expenditures in the environmental access solutions business line will depend on the market dynamics as they continually reassess their fleet based on expected market conditions. We do expect an investment in fleet along with the buildup of mass to realize those opportunities for the latter part of 2025 and into 2026. I will now pass the call back to Mike Pyle.

Speaker #7: We're seeing strength across various sectors, including defense, telecommunications, technology, resource, and data centers. We are anticipating growth capital expenditures to be incurred in each of the business lines, but that should be relatively consistent with the prior year.

Speaker #7: The growth capital expenditures in the environmental access solutions business line will depend on the market dynamics as they continually reassess their fleet based on expected market conditions. However, we do expect an investment in the fleet, along with the build-up of maps, to realize those opportunities for the latter part of 2025 and into 2026.

Speaker #7: I'll now pass the call back to Mike.

Speaker #8: Thanks, Travis. I'm very excited about our future. We are guided by our past values, and our various business lines are set up to realize significant tailwinds for the future.

Mike Pyle: Thanks, Travis. I am very excited about our future. We are guided by our past values, and our various business lines are set up to realize significant tailwinds for the future. We have the right collection of businesses, the right management teams, and our 20-year past provides evidence on our ability to strategically execute on those opportunities. Exchange Income Corporation, as a company, is characterized by resiliency and stability, and our record results and outlook for 2025 is a continuation of those trends. Before we move on to questions, I would like to take a brief moment to thank Carmele Peter for her work at Exchange Income Corporation. Over a year ago, we announced that she would be retiring from management and moving to our board of directors. From that time, along with Adam and our team, she was leading our investigation and negotiation of the Canadian North acquisition.

Speaker #8: We have the right collection of businesses, the right management teams, and our 20-year past provides evidence on our ability to strategically execute on those opportunities.

Speaker #8: As EIC, the company is characterized by resiliency and stability, and our record results and outlook for 2025 are a continuation of those trends.

Speaker #8: Before we move on to questions, I'd like to take a brief moment to thank Carmel Petyr for her work at EIC. Over a year ago, we announced that she would be retiring from management and moving to our Board of Directors.

Speaker #8: From that time along with Adam and our team, she was leading our investigation and negotiation of the Canadian North acquisition. She agreed to stay in her president's role until the deal was completed or abandoned.

Mike Pyle: She agreed to stay in her President's role until the deal was completed or abandoned. The Canadian North acquisition was completed effectively July 1st, along with the negotiation of a long-term contract with the Government of Nunavut shortly thereafter. As per her usual performance, along with Adam and the team, she exceeded all expectations on getting this transaction closed. This acquisition will drive our growth in 2026 and beyond. Carmele, thank you for all you have done for Exchange Income Corporation during your time here as President. Your contributions have been fundamental to our success. Carmele's responsibilities have been absorbed by our senior team, including Jake, Travis, Adam, and Richard.

Speaker #8: The Canadian North acquisition was completed effectively July 1st along with the negotiation of a long-term contract with the Government of New shortly thereafter. As per her usual performance, along with Adam and the team, she all expectations on getting this transaction closed.

Speaker #8: This acquisition will drive our growth in 2026 and beyond. Carmel, thank you for all you have done for EIC during your time here as President.

Speaker #8: Your contributions have been fundamental to our success. Carmel's response responsibilities have been absorbed by our senior team, including Jake, Travis, Adam, Darwin, and Rich.

Speaker #8: I am pleased to announce that Jake, who has served as CEO of Pyle during its period of rapid growth, has moved to EIC as our new president and Calvin Ash, a long-time executive at Pyle, has taken over as the CEO of the Pyle Group.

Mike Pyle: I am pleased to announce that Jake Trainor, who has served as CEO of PAL during its period of rapid growth, has moved to Exchange Income Corporation as our new President, and Calvin Ash, a longtime executive of PAL, has taken over as the CEO of the PAL Group. The strength and depth of our management team are very important during senior management retirements. Our focus on succession planning has served us well. Thank you for your time this morning. We would now like to open the call for questions. Operator?

Speaker #8: The strength and depth of our management team are very important during senior management retirements. Our focus on succession planning has served us well. Thank you for your time this morning, and we'd now like to open the call for questions.

Speaker #8: Operator?

Speaker #2: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star four by the one on your telephone keypad. You will hear a prompt that your hand has been raised. Should you wish to cancel your request, please press star four by the two. If you are using a speakerphone, please raise your hands up before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Steve Hansen from Raymond James. Please go ahead.

Speaker #2: You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star followed by the two.

Speaker #2: If you're using a speakerphone, please place a handset before pressing any keys. One moment, please, for your first question. Thank you. And your first question comes from the line of Steve Hansen from Raymond James.

Speaker #2: Please go ahead.

Speaker #8: Morning, Steve.

Mike Pyle: Morning, Steve.

Speaker #2: Mr. Hansen, your line is now open. Your next question comes from the line of Cameron Borgson from National Bank Financial. Please go ahead.

Operator: Mr. Hansen, your line is now open. Your next question comes from the line of Cameron Brookson from National Bank Financial. Please go ahead.

Speaker #8: Good morning, Cam. Operator, it appears you guys are having problems on your end. Could you please have someone look into this?

Mike Pyle: Good morning, Cam. Operator, it appears you guys are having problems on your end. Could you please have someone look into this?

Speaker #2: Yes, we will check the issue, and Mr. Dawson, can you hear us?

Operator: Yes, we will check the issue. Mr. Dodson, can you hear us?

Speaker #8: Nobody can hear you. I'll hear you, operator. You have a problem on your end.

Mike Pyle: Nobody can hear you. I hear you, Operator. You have a problem on your end.

Speaker #2: Your next question comes from the line of James McGregor from RBC Capital Markets. Please go ahead.

Operator: Your next question comes from the line of James MacGregor from RBC Capital Markets. Please go ahead.

Speaker #9: Hey, are you guys able to hear me?

Analyst (various: James MacGregor, Chris Murray, Cameron Dirksen, Krista Friesen, Conor Gupta, Gary Ho, Andrei/Amir Izzak, Rexy Hessen, etc.): Are you guys able to hear me?

Speaker #8: James, we can hear you. I'm glad someone got through. You can ask lots of questions.

Mike Pyle: James, we can hear you. I am glad someone got through. You can ask lots of questions.

Speaker #9: All All right. Yeah, so congrats on a great quarter, and Jake, congrats on the new role. But yeah, I just wanted to ask on the Canadian North North deal now that it's closed, it needs to give us an update on, you know, the CapEx plans for the rest of the year.

Analyst (various: James MacGregor, Chris Murray, Cameron Dirksen, Krista Friesen, Conor Gupta, Gary Ho, Andrei/Amir Izzak, Rexy Hessen, etc.): Okay. Yeah. So, congrats on a great quarter, and Jake, congrats on the new role. I just wanted to ask on the Canadian North deal now that it is closed. Can you just give us an update on the CapEx plans for the rest of the year? I just want to get a sense of how we should be modeling that for the rest of 2025 and into 2026.

Speaker #9: Just wanted to get a sense of how we should be modeling that for the rest of 2025 and into 2026.

Speaker #8: That's a really good question. Well, we've announced the deal. We said that it was going to take us probably through the end of next year to get to our 15% return threshold, and that was based on three items.

Mike Pyle: is a really good question. When we announced the deal, we said that it was going to take us probably through the end of next year to get to our 15% return threshold. That was based on three items. One was getting the revenues where we needed to get them for the business to be profitable. We are very pleased that we signed the long-term contract with the Government of Nunavut. We have a chicken that popped sooner than we thought we would. The second piece is taking some costs out of the business by utilizing best practices with our aviation businesses. We are underway on that. We have had early wins. Richard Wowryk and his team, for example, have negotiated a new credit card agreement, which will save us $1 million a year.

Speaker #8: One was getting the revenues where we needed them for the business to be profitable. We're very pleased that we signed a long-term contract with the Government of Nunavut, so we have a tick in that box sooner than we thought we would.

Speaker #8: Second piece is taking some costs out of the business by utilizing best practices with our aviation businesses. And we're underway on that. We've had early wins.

Speaker #8: Rich and his team, for example, have negotiated new credit card agreement, which will save us a million dollars a year. So they're not all that fast, but and we're changing things.

Mike Pyle: They are not all that fast, but we are changing things. Travis Muhr and his team are looking at ComAir, looking at how we run our routes. We have a regional one by our part. Over the next year and a half, you will see the costs come down. Finally, the main piece to getting to 15% was we knew going into this transaction that there was a bunch of maintenance capital work, particularly some engines that needed to be overhauled. You will see much higher than normal maintenance CapEx over the next four quarters, in particular. Quite frankly, we thought about how we might even work that into the purchase price by increasing the purchase price and having the vendor do it, but we were not sure we could get the work done in time.

Speaker #8: Calvin and his team are looking at combies, looking at how we run our routes. We have a regional one by our part. So over the next sort of year and a half, you'll see the costs come down.

Speaker #8: And then finally, the main the main piece to getting the 15% was we knew going into this transaction that there was a bunch of maintenance capital work, particularly some engines that needed to be overhauled, and you'll see much higher than normal maintenance CapEx over the next four quarters.

Speaker #8: In particular, quite frankly, we thought about how we might even work that into the purchase price by increasing the purchase price and having the vendor do it, but we weren't sure we could get the work done in time.

Speaker #8: So when we looked at the purchase price, there's effectively part of what we're paying that includes some extra maintenance CapEx in the first part of what we see.

Mike Pyle: When we looked at the purchase price, there is effectively part of what we are paying is some extra maintenance CapEx in the first part of what we see. You will see higher than normal maintenance CapEx for the next year or so. I do not want to say catch up because that implies that Canadian North were not doing their maintenance CapEx, and they most certainly were. Just by happenstance and how things come together, there are a lot of overhauls and engine overhauls that need to be done. You will see that up front, but I am pleased to say that the operating performance is ahead of our modeling significantly because of the early cost savings and the new contract with the government.

Speaker #8: So you'll see higher than normal maintenance CapEx for the next year or so. As I don't want to say catch-up because that implies that Canadian North weren't doing their maintenance CapEx and they most certainly were.

Speaker #8: Just by happenstance and how things come together, there's a lot of overhauls and engine overhauls that need to be done. So you'll see that upfront, but I'm pleased to say that the operating performance is ahead of our modeling significantly because of the early cost savings and the new contract with the Government.

Speaker #9: Hey, I appreciate the caller. And then, you know, you've been flagging the past couple of quarters, some opportunity to redeploy some assets from BC, you know, into the Newfoundland deal at some, you know, to get some of these aircraft.

Analyst (various: James MacGregor, Chris Murray, Cameron Dirksen, Krista Friesen, Conor Gupta, Gary Ho, Andrei/Amir Izzak, Rexy Hessen, etc.): Appreciate the caller. You have been fighting the past couple of quarters some opportunity to redeploy some assets from British Columbia into the Newfoundland deal to get some of these aircraft. It seems like these aircraft are coming in the back half of the year. Should we expect a pretty sizable improvement in margin in the next few quarters? Obviously, for 2025, that is going to be reflected in the updated guide. Is there an opportunity to continue to drive some improvement there into 2026?

Speaker #9: It seems like these aircraft were coming in the back half of the year, so you know, should we expect a pretty sizable improvement in margin in the next few quarters?

Speaker #9: And you know, obviously for 2025, that's going to be reflected in the updated guide, but is there an opportunity to kind of continue to drive some improvement there into 2026?

Speaker #8: Yeah. The your general statement is correct. The with Newfoundland, it's the fact that we're using other planes changes our return on capital more than it changes our margins per se.

Mike Pyle: Your general statement is correct. With Newfoundland, the fact that we are using other planes changes our return on capital more than it changes our margins per se. As that contract goes into effect and we use assets we already own, we are going to earn a return on things without having to expend new capital. That is exactly what we were looking for when we got the contract in British Columbia because the fleet there was perfectly fine. The government wanted new aircraft, Jake Trainor.

Speaker #8: Like as we as that contract goes into effect, and we use assets we already own, we're going to earn a return on things without having to expend new capital.

Speaker #8: So that's exactly when we were looking for when we got the contract in BC because the fleet there was perfectly fine. The government wanted new aircraft, Jake.

Speaker #9: Yeah, and James, just to give you a little more color, there are going to be some aircraft modifications needed just for configuration changes as they come out of service from BC and go into service in Newfoundland.

Jake Trainor: Yeah. James, just to give you a little more color, there is going to be some aircraft modifications needed just for configuration changes as they come out of service from British Columbia and go into service in Newfoundland, which you will not see them start to contribute until early 2026.

Speaker #9: Which you won't see them start to contribute until early '26. All right. I appreciate the color, guys, and I'll turn the line over. Thank you.

Analyst (various: James MacGregor, Chris Murray, Cameron Dirksen, Krista Friesen, Conor Gupta, Gary Ho, Andrei/Amir Izzak, Rexy Hessen, etc.): I appreciate the color, guys. I will turn the line over. Thank you.

Speaker #8: Thanks, James.

Mike Pyle: Thanks, James.

Speaker #2: Thank you. For participants having issues staying connected, please dial +1-289-819-1350 or +1-800-836-8184. Once again, that is +1-289-819-1350 or +1-800-836-8184. Please press star once if you have a question.

Operator: Thank you. For participants having issues staying connected, please dial +1-289-819-1350 or +1-800-836-8184. Once again, that is +1-289-819-1350 or +1-800-836-8184. Once again, please press star one if you have a question. Your next question comes from the line of Chris Murray from ATB Markets. Please go ahead.

Speaker #2: Your next question comes from the line of Chris Murray from ATB Markets. Please go ahead.

Speaker #10: Morning, Chris. Hey, good

Analyst (various: James MacGregor, Chris Murray, Cameron Dirksen, Krista Friesen, Conor Gupta, Gary Ho, Andrei/Amir Izzak, Rexy Hessen, etc.): Morning, Chris. Thanks, folks. Good morning. Hopefully, you can hear me okay.

Speaker #8: Thanks, folks.

Speaker #10: morning. Hopefully you can hear me okay.

Speaker #8: Yeah.

Mike Pyle: Yeah.

Speaker #10: Just so just turning back to the guidance of $35 million increase in the guidance, if you can maybe help us understand, you know, how that comes together, how much of that is the contribution from Canadian North, how much of that it looks like you know some stronger margins in the aviation businesses, maybe offset a little bit by manufacturing.

Analyst (various: James MacGregor, Chris Murray, Cameron Dirksen, Krista Friesen, Conor Gupta, Gary Ho, Andrei/Amir Izzak, Rexy Hessen, etc.): Turning back to the guidance, the $35 million increase in the guidance, if you could maybe help us understand how that comes together. How much of that is the contribution from Canadian North? How much of that looks like stronger margins in the aviation businesses, maybe offset a little bit by manufacturing? Maybe you can just give us some color on how to think about how that stack lines up.

Speaker #10: So maybe you can just give us some color on how to think about how that stack lines up.

Speaker #8: Yeah. Most of the increase would be explained by Canadian North. The number would have been bigger quite frankly, Chris, if it weren't for the continued forest fires.

Mike Pyle: Yeah. Most of the increase would be explained by Canadian North. The number would have been bigger, quite frankly, Chris, if it weren't for the continued forest fires. We've had some of our biggest communities in Northern Manitoba empty for three, four, or five weeks. When that's the case, we aren't flying there. So that $35 million would have been, would have had at least a four as the first number if we had anything remotely close to a normal forest fire year. This is a year like we've never seen before in the 50 years of operating in the North, so 50 years plus. To circle back to your question, it's general strength in our overall business offset by the forest fires, and then most of the growth would be coming from Canadian North.

Speaker #8: We've had some of our biggest communities in northern Manitoba empty for three, four, five weeks. And when that's the case, we aren't flying there.

Speaker #8: So that $35 million would have been had would have had at least a four as the first number if we had anything remotely close to a normal forest fire a year.

Speaker #8: This is a year like we've never seen before. In the 50 years of operating in the North. So 50 years plus. So to circle back to your question, it's general strength in our overall business.

Speaker #8: Offset by the forest fires and then most of the the growth would be coming from Canadian North.

Speaker #10: Okay. That's helpful. Thank you. And then turning back to Canadian North, you know, maybe this is the uncomfortable question, but you know, part of the, you know, the thought process I think or at least, you know, as outside observers when we saw Canadian North merge with FirstAir, you know, there was a bit of a discussion about, you know, how effective that has been.

Analyst (various: James MacGregor, Chris Murray, Cameron Dirksen, Krista Friesen, Conor Gupta, Gary Ho, Andrei/Amir Izzak, Rexy Hessen, etc.): Okay. That is helpful. Thank you. Turning back to Canadian North, maybe this is the uncomfortable question, but part of the thought process, I think, or at least, as outside observers, when we saw Canadian North merge with FirstAir, there was a bit of a discussion about how effective that had been. I know I am kind of thinking about your path forward. I know you talked about some SG&A costs, things like the credit cards. It seems like there is a maintenance bulge in there. Can you talk about streamlining kind of the operation? I appreciate it is sensitive given a lot of the moving parts here. Can you just talk a little bit about your opportunity to drive some of these costs out of the business?

Speaker #10: I know you're, you know, I'm kind of thinking about, you know, your past forward. I know you talked about some SG&A costs, things like the credit cards.

Speaker #10: You know, it seems like there's a maintenance bulge in there. But can you talk about streamlining kind of the operation? And I appreciate it's sensitive given a lot of the moving parts here.

Speaker #10: But can you just talk a little bit about your opportunity to drive some of these costs out of the business? And when you talk about the reduction below your kind of 15% threshold, is that really tied more to kind of, call it an EBIT margin, or is that tied more to the fact that you're going to be higher, just higher CapEx for a while?

Analyst (various: James MacGregor, Chris Murray, Cameron Dirksen, Krista Friesen, Conor Gupta, Gary Ho, Andrei/Amir Izzak, Rexy Hessen, etc.): When you talk about the reduction below your kind of 15% threshold, is that really tied more to kind of call it an EBIT margin, or is that tied more to the fact that you are going to be higher, just higher CapEx draw? I am just trying to understand the kind of the balance of where the issues lie.

Speaker #10: So I'm just trying to understand the kind of the balance of where the where the issues lie.

Speaker #8: Yeah, that's a really good question. So let's break it into pieces. The operating improvement was going to be driven by revenue, and that box is ticked.

Mike Pyle: Yeah, that is a really good question. Let us break it into pieces. The operating improvement was going to be driven by revenue, and that box is ticked. We do not intend to make material changes to passenger prices for the general public. The government contract had not reflected changes to aviation inflation for a significant period, so that is caught up in that contract. That piece is looked after. The operating improvement then is based on costs. I would again break that into three pieces. There is kind of the G&A improvement and things like the credit card, but that is just an example. There is streamlining of some of the accounting systems and sort of bringing them in line with EIC standards, which will make them more effective.

Speaker #8: We don't intend to make material changes to passenger prices. For the general public, the Government contract had had not reflected changes to aviation inflation for a significant period, so that's caught up in that contract.

Speaker #8: So that piece is looked after. The operating improvement then is based on costs. And I would again break that into three pieces. There's kind of a G&A improvement, and things like the credit card, but that's just an example.

Speaker #8: There's streamlining of some of the accounting systems and sort of bringing them in line with EIC standards, which will make them more effective. The next big one we will achieve later this quarter is moving them onto our global insurance plan, which, as a group, we buy at much cheaper prices than smaller airlines do.

Mike Pyle: The next big one we will achieve later this quarter is moving them on to our global insurance plan, which as a group we buy at much cheaper prices than smaller airlines do. You will see the next piece will be the purchasing of parts through Regional One, taking advantage of our group buying capability, which will drive down their operating costs. The last piece, which is the part that is slightly more complicated, will be moving their fleet from pure freighter and pure passenger aircraft to a combination of combi aircraft and pure freighters. There are certain markets that will always require pure freighters. Most of the places that fly out of the italics and galamets that could be more effectively serviced with a combination of passenger seats and freight on each plane. So we do not need to buy new aircraft or anything.

Speaker #8: And then you will see the next piece will be the purchasing of parts through regional one, taking advantage of our group buying capability, which will drive down their operating costs.

Speaker #8: And then the last piece, which is the part that's slightly more complicated, will be moving their fleet from pure freighter and pure passenger aircraft to a combination of combi aircraft and pure freighters.

Speaker #8: There are certain markets that will always require pure freighters. But most of the places that fly out of the Italian that would could be more effectively serviced with a combination of passenger seats and freight on each plane.

Speaker #8: So we don't need to buy new aircraft or anything. You don't need to worry about big capital expenditures, but we will need to take some time to adapt the aircraft and make changes to how they're configured.

Mike Pyle: You do not need to worry about big capital expenditures. We will need to take some time to adapt the aircraft and make changes to how they are configured. That is a relatively modest expenditure, probably more in the hundreds of thousands or million-dollar range than anything significant. It will take a while, and it will take some changes in how we run the aircraft and those things. That will take a slightly longer period. Because of the maintenance CapEx we knew about that are going to be higher in this period, that delays our 15% return simply because the way we define that is EBITDA minus maintenance CapEx, and maintenance CapEx will be high for the next few quarters. I would say we are ahead of track on the EBITDA part of the game.

Speaker #8: That's a relatively modest expenditure probably more in the hundreds of thousands or million dollar range than anything significant, but they'll take a while and it'll take some changes in how we route the aircraft and those things.

Speaker #8: So that will take slightly longer period. And then because of the maintenance CapEx, we knew about that it was going to be higher in this period.

Speaker #8: That delays our 15% return, simply because the way we defined that is EBITDA minus maintenance CapEx and maintenance CapEx will be high for the next few quarters.

Speaker #8: I would say we're ahead of track on the EBITDA part of the game. Our operations, I would say, are improving more rapidly than we anticipated in our business model.

Mike Pyle: Our operations, I would say, are improving more rapidly than we anticipated in our business model. We got some great people at Canadian North who are eager to take advantage of some of our buying power and some of our opportunities. The CapEx will take care of itself over a reasonably modest period.

Speaker #8: We got some great people at Canadian North who are eager to take advantage of some of our buying power and some of our opportunities.

Speaker #8: And the CapEx will take care of itself over a reasonably modest period.

Speaker #10: And Mike, there's one thing I might build on Chris's question there and Chris, it's Adam, and I think you hit it on accurately just going back to the history and the fact that there was a merger that was right after the merger of COVID happened.

Jake Trainor: Mike, I think I might build on Chris's question there. Chris, it's Adam Terwin, and I think you hit it accurately, just going back to the history and the fact that there was a merger. That was right after the merger, COVID happened. I think it has been fairly well known there was some changeover at the CEO level. The fact that the merger happened, then COVID, and a little bit of instability at the top, bringing the two airlines together probably was challenged. To your point, there are opportunities now with Exchange Income Corporation's expertise, long-term ownership, and the fact now that we have this long-term agreement with the Government of Nunavut that helps for long-term planning, there is also that ability to drive additional synergies within that operation. That is to your point, there is that opportunity as well.

Speaker #10: And I think it's been fairly well known there was some changeover at the CEO level. So the fact that the merger happened, and then COVID, and a little bit of instability at the top, bringing the two airlines together probably was challenged.

Speaker #10: And to your point, there are opportunities now with, you know, EIC's expertise, long-term ownership, and the fact that we now have this long-term agreement with the Government of Nunavut. This helps with long-term planning and also provides the ability to drive additional synergies within that operation.

Speaker #10: So that's to your point, there is that opportunity as well. Okay. Thank you. And then just maybe quickly, Mike, you know, historically when we think about maintenance CapEx and the proportion of revenue in the aviation business, we've always thought, we've always sort of seen it on average.

Analyst (various: James MacGregor, Chris Murray, Cameron Dirksen, Krista Friesen, Conor Gupta, Gary Ho, Andrei/Amir Izzak, Rexy Hessen, etc.): Okay. Thank you. Then, just quickly, Mike, historically, when we think about maintenance CapEx as a proportion of revenue in the aviation business, we have always sort of seen it on average, and yet it can be lumpy, but about 12% of revenue. Is that what we should be thinking? Because I appreciate it if you are all 737-200s and larger aircraft, but is that about the right level of magnitude to think about as you get to that 15% number?

Speaker #10: And yet it can be lumpy, but about 12% of revenue. Is that what we should be thinking? Because I appreciate that you're all 737-200s and larger aircraft, but is that about the right level of magnitude to think about as you get to that 15% number?

Speaker #8: Yes. It'll vary period to period. There are maintenance CapEx as a percentage of revenue should be very similar. To what we experience at our other airlines, they in addition to the 737s, they operate a significant fleet of ATRs.

Mike Pyle: Yes. It will vary period to period. Their maintenance CapEx as a percentage of revenue should be very similar to what we experience in our other airlines. They operate a significant fleet of ATRs, which are exactly the same aircraft. In fact, actually, a slightly newer version of them that ComAir operates. So your thought process is correct, although it will be higher than that over the next three or four quarters while certain things are done. We tend to want to do things earlier rather than later. We do not have aircraft out of service during busy periods. With our capital structure, we can do that. I do not want anyone walking away with maintenance CapEx is going up, what they were not doing in maintenance. No, that is not the issue.

Speaker #8: And which are exactly the same aircraft. In fact, actually a slightly newer version of them than com air operates. So your thought process is correct.

Speaker #8: Although it will be higher than that over the next three or four quarters. We'll certain things are done we tend to want to do things earlier rather than later.

Speaker #8: And so we don't have aircraft out of service during busy periods. And so, with our capital structure, we can do that. I don't want anyone walking away with the perception that maintenance CapEx is going up as if they weren't doing their maintenance.

Speaker #8: No, that's not the issue. This thing was there's just a whole bunch of things by timing that engines can't do at the same time.

Mike Pyle: They were just a whole bunch of things by timing that engines cannot do at the same time, and where they may have been missing a replacement. Now we are going to actually overhaul it and replace it or buy a new engine. We knew about that up front. In our mind, it was part of the $200 million in addition to the $200 million we were paying. When you look at, even with just the early stage six-month number that most of that increase relates to Canadian North, you could see that the EBITDA multiple we purchased at this out was very attractive.

Speaker #8: And where they may have been leasing or replacing, now we're going to actually overhaul it and replace it or buy a new engine. So we knew about that upfront.

Speaker #8: And in our mind, it was part of a $200 million in addition to the $200 million we were paying. When you look at even just the early stage six months' number, most of that increase relates to Canadian North. You can see that the EBITDA multiple we purchased at this app was very attractive.

Speaker #10: Okay. That's helpful. And if I can just squeeze if I can squeeze a third one in, you did make the comment I think in the script that you'd be looking at a new factory for the matting business.

Analyst (various: James MacGregor, Chris Murray, Cameron Dirksen, Krista Friesen, Conor Gupta, Gary Ho, Andrei/Amir Izzak, Rexy Hessen, etc.): Okay. That's helpful. If I can just squeeze a third one in, you did make the comment, I think, in the script that you'd been looking at a new factory for the composite mats business that's going better, and the decision has been made to go ahead with that. Can you kind of give us any update on expectations of where that should be cited and any expectations for capital spending as we go into next year?

Speaker #10: That is going that's going better. And sort of the decision has been made to go ahead with that. Can you kind of give us any update on expectations of where that should be sited and, you know, any expectations for capital spending as we go into next year?

Speaker #8: The idea is it's going to be in the Southeast US. We're still working between there's really kind of four states at this point we're looking at.

Mike Pyle: The idea is it is going to be in the US Southeast. We are still working between, there is really kind of four states at this point we are looking at. It could be in Florida with the other plant. It could be in Texas, and it could be in Alabama, or it could be in Mississippi. Those are the four places we are down to. We are giving you one more quarter to give you a budget for it because what we are really working on right now is how big a plant do we build? Do we build this so that we could expand it again without moving? I think that is where we are going. It is hard for me to give you a budget because we are still working on the business model.

Speaker #8: It could be in Florida with the other plant. It could be in Texas. And it could be in Alabama. Or it could be in Mississippi.

Speaker #8: Those are the four places we're down to. Give me one more quarter to give you a budget for it because what we're really working on right now is how big a plant do we build.

Speaker #8: Do we build this so that we could expand it again with out moving? And I think that's where we're going. But so it's hard for me to give you a budget because we're still working on the business model.

Speaker #8: But I would hope by the time we report in November, we'll be able to tell you that we've set up a location we signed some purchase orders and we've got a budget and we'll be able to give you a rough startup date as well.

Mike Pyle: I would hope by the time we report in November, we will be able to tell you that we have set up a location, we signed some purchase orders, and we have got a budget, and we will be able to give you a rough startup date as well. In rough numbers, we think it is at least an 18-month project to get the plant up and running. It could be as long as two years, depending on what the wait times are for some of the equipment. It is very unique, very heavy pressing equipment to make the composite mats. I wish we could operate it tomorrow. The demand is there, and demand is not going anywhere. We are prepared to make the investment. We just want to make sure we do it right. It is a big investment for Spartan.

Speaker #8: But in real numbers, we think it's at least an 18-month project. To get the plant up and running, it could be as long as two years depending on what the wait times are for some of the equipment.

Speaker #8: It's very unique very heavy pressing equipment to make the composite mats. So I wish we could fly a could operate it tomorrow, the demand is there.

Speaker #8: And demand's ongoing anywhere, so we're prepared to make the investment. We just want to make sure we do it right. It's a big investment for Spartan.

Speaker #10: All right. That's helpful. Thanks. I'll pass the line.

Analyst (various: James MacGregor, Chris Murray, Cameron Dirksen, Krista Friesen, Conor Gupta, Gary Ho, Andrei/Amir Izzak, Rexy Hessen, etc.): All right. That's helpful. Thanks. I'll pass the line.

Speaker #2: Thank you. Once again, for participants having issues staying connected, please dial +1-289-819-1350. Once again, that's +1-289-819-1350. And your next question comes from the line of Cameron Dirksen from National Bank Financial.

Operator: Thank you. Once again, for participants having issues staying connected, please dial +1-289-819-1350. Once again, that is +1-289-819-1350. Your next question comes from the line of Cameron Dirksen from National Bank Financial. Please go ahead.

Speaker #2: Please go ahead.

Speaker #10: Yeah. Thanks. Good morning. Can you hear me okay?

Analyst (various: James MacGregor, Chris Murray, Cameron Dirksen, Krista Friesen, Conor Gupta, Gary Ho, Andrei/Amir Izzak, Rexy Hessen, etc.): Yeah, thanks. Good morning. Can you hear me okay?

Speaker #8: We can, Cam. Good morning.

Mike Pyle: We can, Cam. Good morning.

Speaker #10: Okay. Perfect. Just to follow up, I guess on Chris's question just on the matting business, obviously it sounds like Spartan mats, you know, doing very well.

Analyst (various: James MacGregor, Chris Murray, Cameron Dirksen, Krista Friesen, Conor Gupta, Gary Ho, Andrei/Amir Izzak, Rexy Hessen, etc.): Okay, perfect. Just to follow up, I guess, on Chris's question, just on the matting business, obviously, it sounds like Spartan is doing very well. In your prepared remarks and in the MD&A, there was also some commentary about the Canadian matting business, and it maybe struck a little more optimistic tone on increased activity there. Can you just maybe discuss the visibility you have on how that business is looking over the next number of quarters?

Speaker #10: In your prepared remarks and in the MDNA, there was also some commentary about the Canadian matting business. And maybe you struck a little more optimistic tone on increased activity there.

Speaker #10: Can you just maybe discuss the visibility you have on how that business is looking over the next number of quarters?

Speaker #8: Yeah. It was slower in Q2 than we would have anticipated because of the delay of some linear projects, particularly some of the pipeline and transmission line integrity work.

Mike Pyle: It was slower in Q2 than we would have anticipated because of the delay of some of the newer projects, particularly some of the pipeline and transmission line integrity work that we do in the east. It was postponed. We are starting to see that start in the third quarter. But the sheer number of projects that are under consideration and are going to get in the ground over the next 6 months, 12 months is remarkable. Hydro One has talked about, I forget what it is, seven new distribution lines they have got to build. They are talking about there is natural gas work. There are oil and gas pipelines. There is oil and gas digging. It is virtually all parts.

Speaker #8: That we do in the east, it was postponed. We're starting to see that start in the third quarter. But the sheer number of projects that are under consideration and are going to get in the ground over the next six months, 12 months is remarkable.

Speaker #8: Hydro One's talked about, I forget what it is, seven new distribution lines they've got to build. They're talking about there's natural gas work. There's oil and gas pipelines, there's oil and gas digging.

Speaker #8: There's, I mean, it's virtually all parts of the linear part of that business. We're bullish in the medium term; it's still going to take us, whether it's the end of this quarter or the beginning of the next quarter, and we'll start to see that stuff go.

Mike Pyle: wittier part of that business. Our bullish in the medium term. It is still going to take us, whether it is the end of this quarter, beginning of next quarter, and we will start to see that stuff go. A lot of it is tied kind of, you know, in with the infrastructure work that our Prime Minister has talked about. But it is beyond that. It is utility work, particularly even in Manitoba and Saskatchewan. Manitoba Hydro has announced a major program, working on maintenance of the two bipolar lines, which will create work. There is work in Saskatchewan. There is work in BC. We are very bullish about the medium term on that business. Again, it is probably not a Q3 hit, but it will start later in the year and into next year.

Speaker #8: And a lot of it's tied kind of in with infrastructure work that our Prime Minister has talked about. But it's beyond that. It's utility work, even in Manitoba and Saskatchewan.

Speaker #8: Manitoba Hydro has announced a major program working on maintenance of the two bipole lines. Which will create work. There's work in Saskatchewan. There's work in BC.

Speaker #8: We're very bullish about the medium term on that business. Again, it's probably not a Q3 hit, but it'll start later in the year and into next year.

Mike Pyle: The medium term looks great in Canada, which matches what we are already seeing in the U.S.

Richard Wowryk: Okay. No, that's super helpful. Maybe just a second question from you, just I guess on the aerial surveillance opportunities. You mentioned, I guess, a Q3 decision, hopefully here on the Australian contract. Can you just maybe discuss, if you can, any more details on what other opportunities are out there? I am thinking also potentially in Canada with increased defense spending and focus on the north. There are potentially some opportunities for that business there as well.

Mike Pyle: I have to be careful about being too specific because there are negotiations ongoing on a number of things. But I will say that we have spoken in the past about inquiries in Greenland, inquiries from other countries in Europe, discussions with the Canadian government about additional work for them. I would point out we have had the work at the Coast of Canada for 40 some years, just recently extended that for another long-term contract, where we will discuss about other work with the Government of Canada. There is other work potentially down in the Southern Pacific, other than the Australian contract. I am concerned sometimes that because of the size of the Australian contract, the discussions get somewhat fixated on it. That is a hit or miss. Either we win or we do not. But it is one contract. It is the biggest one.

Mike Pyle: But there are opportunities all over the place. I would be very surprised if we do not announce some successes before the year is over. Now, those are things that are unlikely to impact this year's revenue by the time we win the contract and buy the parts and those kinds of things. We are very active in a number of markets. Jake, did I miss anything?

Richard Wowryk: Yeah. No, that is fair. Unfortunately, instability in the world drives the demand for the type of services we provide through the surveillance work. There is a robust pipeline and inquiries from just about every geographic region we are operating in.

Operator: Okay. No, that is definitely good to hear. I will pass the line. Appreciate the time, guys.

Mike Pyle: Thank you. Your next question comes from the line of Krista Friesen from CIBC. Please go ahead.

Jake Trainor: Morning, Krista.

Operator: Hi, thanks for taking my good morning. Congrats on the quarter.

Jake Trainor: Thank you.

Operator: Maybe if I can just follow up on the matting questions there. It certainly sounds like a lot of opportunity in Canada. How do you feel about your supply of mats and being able to keep up with that demand?

Thank you and your next question. Cancel line of Krista Friesen from CIBC, please. Go ahead. Thanks for taking my question. Good morning, and congrats on the quarter. Um, maybe if I can just follow up on the matting questions there. It certainly sounds like a lot of opportunity in Canada. How do you feel about your supply of mattes and being able to keep up with that demand?

Mike Pyle: We are currently managing production so that we do not buy them too soon. One of the advantages that we have at Northern Mat is because we are vertically integrated, we make our own construction decisions, and we have very strong inventory levels of timber. So we can start and stop kind of when we need to. Because the Q2 was slower, we slowed our production in that period. As we see this coming, it is likely we will start up. We operate more than one facility. It is likely our second facility will ramp later this year. So I have very little concerns about our ability to have enough mats in the world. The addition of Duomau has been great for us in the east. They have increased our relations with Hydro Quebec.

Um, we are currently managing production so that we don't buy them too soon. One of the advantages that we have at Northern Matt is because we're vertically integrated; we make our own uh,

Construction decisions and we have, uh, very strong inventory levels levels of Timber, so we can start and stop kind of, when we need to, uh, because the Q2 was slower. We slowed our production, uh, in that period as we see this coming, it's likely, we will start off, we operate more than 1 facility. It's likely our second facility will ramp, uh, later this year. So, I, I have very little concerns about our ability, uh, to, to have enough mats in the world. Uh, the addition of dual amount, uh,

Mike Pyle: We sold them a bunch of mats in the last quarter. We are looking at other opportunities with them. The one other thing I would point out that is bullish for the business, particularly once we get past Q3, is when the transcontinental pipeline was completed, there was a lot of used mats in the marketplace all over the place. Some of our competitors jumped on those and then used very cheap mats as a means to discount their way into the marketplace. That is a good strategy for very short periods of time. But the used mats coming off a pipeline project had very short lifespans. We are starting to see that expire.

Mike Pyle: So the relative health of our portfolio versus perhaps some of the others is going to put us in a great spot as the ramp-up comes because we will be able to provide the mats the customers need.

Richard Wowryk: One of the things I would add is, Adam Terwin maybe talked about just some of the investments that they had made in new mat inventory during the quarter and in anticipation of mat sale demand for new mats. If we got into a spot where the leasing demand accelerated earlier than expected, we would have the optionality to deploy those into our lease fleet or our rental fleet to make sure that we are meeting customer demands on the rental side. We that build-up and the planning that they do as a team to make sure that we are ahead of market demand, positions us well for the back half of the year.

And then use very cheap mats as a means to Discount their way into the marketplace. And and that's a a good strategy for very short periods of time. But the used Maps coming off a pipeline project, have very short lifespans and we're starting to see that expire. And so the relative health of our portfolio versus perhaps, some of the others is going to uh, put us in a great spot as the ramp up comes because we'll be able to provide the map for customers needing. It's the 1 of those things I would add is, um, anybody we talked about just some of the Investments that they had made in new Mad inventory, during the quarter and in anticipation of uh Matt sales demand for new mats. But if we go into a spot where the leasing demand accelerated um, earlier than than expected, we would have the optionality to deploy those into our lease Fleet or a rental. Fleet to make sure that we're meeting customer demands on the rental side. So we that build up in the planning that they do.

As a team, to make sure that we're ahead of market demand, positions us well for the back half of the year.

Operator: Okay, great. Then maybe just shifting gears to Canadian North. I mean, congrats on being able to renegotiate that contract so quickly. Are there other large contracts like that that you will be looking to renegotiate, I guess, over the next six months here?

Okay, great. And then maybe just shifting gears to, um, Canadian North, and congrats on on being able to renegotiate that contract. So quickly are there other large, um, contracts like that. That you'll be looking to renegotiate, um, I guess over the next, uh, 6 months here.

Mike Pyle: Not really as it relates to Canadian North. I am excited that Dave White and the team at Q1 are negotiating the RFP on the medevac business for Nunavut. I am confident that we will continue to serve as the sole provider of medevac services in the North. That contract is under negotiation. Maybe by the time we come in November, we will have something more to share on that. Within ComAir or Canadian North itself, most of the stuff has been dealt with in terms of contracts.

Not really as it relates to as it relates to Canadian Arts. I'm excited that, uh, Dave White and the team at Kiawah are negotiating the uh, other the RFP on the uh uh, Medevac business for dudovich. And uh,

I'm confident that we will continue to serve as the Sole Provider of NVAC services in the north, but that, uh, contract is under negotiation. I may be, by the time we come in November, we'll have something more to share on that. But within Calm, or Canadian North itself, most of the stuff has been dealt with in terms of contracts.

Operator: Okay. Thank you.

Mike Pyle: It was really that the aviation inflation was so high over the last couple of years, and the previous contract really didn't capture that. The Government of Nunavut is, I would suggest to you, perhaps the most progressive in understanding the cost of operating in their area. When we sat down and talked with them, we went back and forth about the best way to minimize costs and the best way to accurately forecast. One of the things that's in this contract that we haven't had in the past that's historically been tied to fuel prices and CPI, where CPI can overstate or understate aviation inflation significantly. The new contract, while a portion of it will the increases relate to CPI, it's more specifically driven by aviation wages, parts costs, and exchange rates.

Okay. It was really the topic.

The aviation, uh, uh.

Inflation was so high over the last couple of years and the previous contract, really didn't capture that. And the government had no of it is, I would suggest you perhaps the most Progressive and understanding the cost of operating in their area. And so we sat down and talked to them, we went back and forth about the best way to minimize costs. And the best way to accurately forecast, the 1 of the things that's in this contract that we haven't had in the past that's historically been tied to fuel prices and CPI. Well CPI can overstate or understate Aviation inflation significantly. The new contract

Mike Pyle: When you put those together, what that means is that the contract will be much more dynamic, both upwards and downwards, depending on what happens with aviation inflation, which means both the airline and our customer are going to be well taken care of because we don't have to have proxies. We actually have really hard numbers for adjusting the cost of the service.

Analyst (various: James MacGregor, Chris Murray, Cameron Dirksen, Krista Friesen, Conor Gupta, Gary Ho, Andrei/Amir Izzak, Rexy Hessen, etc.): If I could just add to that, that aviation inflation formula is very, very important to this. Forward-looking, as this is a 10-plus five-year contract, a couple of years of extension in there. So we are really looking at the forward future, where we are going, and how to have a successful contract with our partners in the Government of Nunavut for a long, long time to come.

Well, a portion of it, will the increases relate to CPI. It's more specifically driven by Aviation wages parts costs and exchange rates and when you put those together, what that means is, is that the contract will be much more Dynamic, both upwards and downwards. Depending on what happens with Aviation inflation, which means both the airline, and our customer are going to be well, taken care of because we don't have to have proxies. We actually have real hard numbers for adjusting the the cost of the service. Mike, if I could just add to that, that Aviation inflation formula is very very uh important to this and forward looking as this is a 10 plus 5 year contract with a couple of years uh extension. And there's a really looking at the forward uh future where we're going and how to have a successful contract with our partners in the GM for a long, long time to come.

Operator: That's great color. Thank you. I'll pass the line.

That's a great color. Thank you all for passing the line.

Mike Pyle: Thank you. Your next question comes on the line of Conor Gupta from Scotiabank. Please go ahead.

Jake Trainor: Morning, Conor.

Richard Wowryk: Morning, Mike. Can you hear me okay?

Mike Pyle: Absolutely.

Thank you. And your next question comes from the line of Conor crypto from Scotia Bank, please go ahead morning. Koh morning. Mike, can you hear me, okay.

Richard Wowryk: Okay. That proves the line works, actually, Conor. Thanks. Okay. First of all, congrats to Carmele Peter and Jake Trainor and Cal for the respective changes and the new future and the careers. So congrats. Maybe first on the capital side of things, Mike Pyle. Your business is obviously growing or expanding all across, broadly speaking. You have a lot of subsidiaries that have growth aspirations, and they need capital, as well as you have, obviously, some of these major contracts that you talked about, like Australia, for example, and some others maybe. How do you, I know the short answer to this, the return on investment benchmarks you have, but how do you kind of balance out or how do you kind of prioritize the capital allocation to these businesses now?

Absolutely.

Richard Wowryk: Considering, obviously, I mean, I know you have headroom on the leverage ratio, with your provenance, but, I mean, you still have a lot of, I would say, capital ask is much higher, I guess, than perhaps the question that you might have on the leverage side.

Smart, you have, but how do you kind of balance out, or how do you kind of prioritize the capital allocation, to, to these businesses? Now, um, considering obviously, I mean, I know you have Headroom on the leverage ratio, uh, with your comments but, uh, I mean, you still have a lot of I would say like Capital ask is much higher I guess than perhaps, the question that you might have on the left side.

Mike Pyle: are betting on about the demand for capital. Your statement is absolutely correct. The way I would answer is our work is what fits our model, what fits what do we want to do? Assuming we want to do it, we really don't view it as a competition between Pam's project and Richard's project. They are both individually reviewed and do they meet the standard? The real test then becomes for us is where does the capital come from? How do we fund these things? The test of that becomes our leverage ratio. When I speak to our investors, one of the pages in our depth shows our historical leverage ratios. We are at the lower end of our historical aggregate debt. When I talk about aggregate, I am talking about secured debt with our bank and convertibles.

I mean, your statement is absolutely correct, but the way I would answer is our, our work is what fits our model, what fits the what do we want to do? And assuming we want to do it. Um we really don't view it as a competition between Pam's project and Richard's project they're both individually uh reviewed and do, they need the standards but the real test then becomes for us is where does the capital come from?

Mike Pyle: We had two sets of convertibles that we have called that turned into equity. The next set is over 25% in the money, so it is callable at any moment. As we need equity in the short term, the convertibles will provide that. In terms of liquidity, we have scads with our bank facility. I think I have mentioned this before, but I would be one of the few Canadian businesses that says the Canadian banks are pretty good at what they do. We are well looked after by our debt syndicate of Canadian banks and a couple of banks out of the U.S. We are sitting with a billion dollars in liquidity, more than that, a little more than that, perhaps. We have equity available to us from those convertible debentures when needed. We are working on now, we will probably, at some point, get a debt rating.

How do we fund these things? And so, um, which the test of that becomes our leverage ratio. And when I speak to our investors, 1 of the, the pages, in our, uh, in our Gap shows, our historical leverage ratios. And we're, uh, we're at the lower end of our historical aggregate debt. Uh, where when I talk about aggregate, I'm talking about secured debt, with our bank and convertibles.

We had 2 sets of convertibles uh that we've called that turned into Equity. Um, the next set is uh,

Over 25% in the money. So it's callable in any moment. So, as we need equity in the short term, the convertibles will provide that. In terms of liquidity, we have Scouts with our bank facility. I think I mentioned this before, but I'd be 1 of the few Canadian businesses that says the Canadian banks are pretty good at what they do. We're well looked after by our debts indicate of Canadian Banks and a couple of banks out of the US. And so we're sitting with a billion dollars of liquidity, more than that a little more than that perhaps and uh,

We have.

Mike Pyle: If we needed to tap the bond markets in the future, we would do that. We would only do it with our historical levels of debt. When we talk about historical levels, I am talking about debt to EBITDA ratios. We have been dogmatic about staying in a band. If you look at it, with the exception of a little bump up during 2020 when EBITDA went down because of COVID, we stayed in that band for our 20 years. We are not going to change that. Our access to capital is sufficient, barring some change, to be able to fully take advantage of the opportunities in front of us. For us to continue to generate 20% plus returns for our shareholders, we need to invest capital.

Equity available to us from from those convertible to Ventures when needed and we're working on now, we will probably at some point. Get a a a debt rating.

So that if we needed to tap the bond markets in the future, we would do that. But we would only do it with our historical levels of that. And when we talk about historical levels, I'm talking about debt to ebita ratios.

We've been dogmatic about staying in a band, and if you look at it, with the exception of a little bump up during 2020 with you, but that went down because of COVID, we stayed in that band for our 20 years. We're not going to change that. So, our access to capital is sufficient.

Uh, barring some change. Uh,

To, to be able to fully take advantage of the opportunities in front of us.

Mike Pyle: When my guys bring me good opportunities, I am glad to give Rich the problem of which bond are we going to take it out of. If at some point in the future we needed equity, we would raise it. We have raised equity at continually higher prices over our history. The last batch I think we did was at $52 or $53. We are now 25%, 30% higher than that, 40% higher than that. But having said all that, we do not need it yet. We do not view that as imminent or even in the medium term. But if we did, I have no reticence to do it to maintain a balance sheet. Circling back to the end of your thing, the more good opportunities we have, the better. We will fund it with a balance sheet that looks like the balance sheet today, just more of it.

For us to continue to, uh, generate 20% plus returns for our shareholders, we need to invest capital. So, what my guys bring me are good opportunities. I'm glad to give Rich the problem of which part we are going to take it out of. And if at some point in the future we need an equity raising, we've raised equity at significantly higher prices over our history. The last batch I think we did was at $52 or $53. We're now...

2530 percent higher than that 40% higher than that. Um, but having said all that, we don't need any Equity if we don't view that as imminent, or even in the medium term, but if we did, I have no reticence to do it to maintain a balance sheet.

Richard Wowryk: From our perspective, Carnegie, it is super exciting to see those opportunities coming up from the subsidiaries because that is part of what our secret sauce is, is keeping our vendors engaged and keeping them for the long term. It is those sorts of opportunities and having the capital to deploy that keeps them excited about their business and helps us generate those returns Mike Pyle is talking about over an extended period of time. So from our perspective, seeing those opportunities come up are an extremely positive thing. To Mike Pyle's point, we will find out how to get the capital to make sure that we continue to generate the returns we have proven that we can.

So circling back to the end of your thing, the more good opportunities we have the better and we'll fund it with a balance sheet. That looks like the balance sheet today, just more of and for our perspective card, it's super exciting to see those opportunities coming up from the subsidiaries because that's part of what our secret sauce is, is keeping our vendors engaged and keeping them for the long term and it's those sorts of opportunities and having the capital to deploy, um, that keeps them excited about their business and helps us generate those uh returns Mike's talking about all

Over an extended period of time. So from our perspective, seeing those opportunities come up for an extremely positive, um, thing and and to Mike's point, we'll find out how to get the capital to make sure that, uh, we continue to generate the returns. We've proven that we can't

Mike Pyle: is a great call. Thanks, guys. That makes sense, and another thing to look at.

Richard Wowryk: Sure, go ahead.

That's uh, that's a great color. Thanks guys. That makes sense and our guys,

Mike Pyle: Our guys, who have, and this is a real-life example, the guys who have proven they can invest money and grow. Regional One, we bought it, did $16 million in EBITDA the year we bought it. It is going to be 10 times that big this year. That is because those guys know how to invest money. When we talked about growth CapEx being negative in Q2, it was pure happenstance that nothing closed in that quarter. If you look a little deeper, we had $20 million in deposits on transactions. I can tell you there is more coming. When Hank calls me and says, "Hey, I got some ERJ 175s or I got some CRJ 900s or Q400s," we are glad to write the check because that just fuels our future growth.

Just our guys who've.

And this is real life.

The guys have proven, they can invest money.

Here we bought it. It's going to be ten times that big this year.

And that's because those guys know how to invest money. So when we talked about growth capex being negative in Q2, it purely happens in stats that nothing closed in that quarter. But if you look a little deeper, we had $20 million in deposits on transactions. And I can tell you, there's more coming. So when Hank calls me and says, "Hey, I got some ERJ 175 or I got some CRJ9 under Q400," we're glad to write the check because that just fuels our future growth.

Richard Wowryk: Thanks for the addition, Mike. Just on the second one, maybe on the portfolio, I mean, you always have the advantage or disadvantage, perhaps, whatever you want to call it, of a diverse portfolio is that some of the businesses will work strongly and some might be weaker for a moment, and then things might flip flop. There are always some puts and takes. I mean, if you look at the Windows business over the last, I would say, four or five years, maybe five years, I mean, COVID, then tariffs, and then some other issues, interest rate, etc. All those factors have had surginous impacts on the Quest business or Windows business. At some point, I know the demand is great and all that, but obviously, we are not seeing that flow through in the earnings, the quarterly earnings at this point, for the last many quarters.

Thanks for the addition mate. Thanks. Um, just on second 1, maybe on on the portfolio. Um, you know, I mean, you always have like, you know, I think the, the, the, the advantage or, you know, disadvantage, perhaps, whatever you want to call it of a diverse portfolio is that, you know, some of the businesses will work strongly and some might be weaker for a moment and then things might flip-flop, right? So, I mean, there's always some button takes, I mean, you know, if you look at, um, you know, the windows business over the last, I would say 4 or 5 years, maybe a 5 years, I mean, Co and tariffs, and then like, you know, some of the issues interest rate, Etc, like all, all those factors have had surgery in US impacts on on the quest, business or Windows business. Um, you know, at some point. I mean, like, I know the demand is great and all that, but obviously like, we not obviously seeing that flow through in the

Richard Wowryk: At any point, would you feel like, I mean, yeah, sure, demand is fine, but then this is it. We do not probably need as big of an asset, so we need to either shrink or sell or do something. I mean, is there a possibility, at least in consideration of strategic opportunities, to optimize the portfolio?

Earnings. The quarterly earnings at this point right? For the last many quarters at any point like you know would you feel like I mean yeah sure demand is fine but then this is it and you know we don't probably need as big of an asset. So we need to either shrink or sell or do something you know I mean like is there is there a possibility at least in consideration of of strategic opportunities uh to optimize support for you?

Mike Pyle: I mean, we look at that stuff on a regular basis. If we see that it has plateaued or there is not something we can do with it, the suggestions you make are stuff that we look at directly. We are nowhere near that in the window business. It frustrates me a little bit right now because we worked so hard to bring those plants together. We closed the Quest plants. It is now all in the BVGlazing facilities. We have done stuff that has improved our margins. Then, the tariffs in the U.S., just wiped out everything we did all at once now. So we have changed how we are manufacturing. We used to be location agnostic. We built stuff for Canada and the U.S., and we built stuff for the U.S. and Canada, depending on what fit our production schedules. Instantly, we could not do that.

What I mean is, we work on that stuff on a regular basis, and if we see that it's plateaued or there isn't something we can do, the suggestions you make are soft. We would look at that directly.

we're nowhere near that in the window business. It it frustrates me a little bit right now because we worked so hard to bring those plants together. We closed the quest plants. It's now all of the DVD facilities, we've done stuff. That's approved, our margins. And then uh the

Mike Pyle: Overnight, we would have to build in the country we are using it for. So that means right now our Dallas plant is very slow. Our Canadian plant is actually reasonably busy. So we are dealing with those. We would not do what you are suggesting, but I would tell you we are nowhere near that conclusion on that business. I think the best piece I can give you is ComAir, if you went back a decade, was my weakest airline in terms of return on capital and most of the financial metrics. If you look at it today, it is at or very near the top. These things go through cycles. The beauty of why Exchange Income Corporation succeeds, when perhaps some others do not, is we do not have to make short-term decisions.

The tariffs in the US like just wiped out everything we did all at once now. So we changed how our manufacturing we used to be uh, location agnostic. We built stuff for Canada in the US and we build stuff for the US and Canada, depending on what Fair our production schedules. Well, instantly, we couldn't do that. And overnight, we could have to build in the country. We're using it for. So that means right now, our Dallas plant is very slow. Our Canadian plants actually reasonably busy. And so we're dealing with those.

Uh, we would do what you're suggesting, but I would tell you.

Mike Pyle: I have more people in my Windows business than I would have if I was only in the Windows business. The strength of my aviation business unequivocally is subsidizing the window business right now. But at the beginning of COVID, the opposite was true. At the beginning of COVID, the window business helped carry some of the other stuff. So we do not have a lack of confidence in it. In fact, quite the opposite. I am very confident in it. But the analysis you are talking about is done all the time. If we need to do something, we will. Right now, we really do not see that as the future, but it is something we look at.

We're nowhere near that conclusion on that business, and I think the best piece of advice I can give you is to call Mayor. If you went back a decade, it was my weakest airline in terms of return on capital and most of the financial metrics. If you look at it today, it's added very near the top. These things go through cycles, and the beauty of why EIC succeeds when perhaps some others don't is we don't have to make short-term decisions. I have more people in my windows business than I would have if I was only in the windows business. The strength of my aviation business, unequivocally, is subsidizing the windows business right now, but at the beginning of COVID, the opposite was true.

At the beginning of Co the window business helped carry some of the other stuff. I said, we we don't have a lot of confidence in it and in fact, quite the opposite and I'm very confident in it, but the analysis you're talking about is done all the time.

And if we need to do something, we will.

Richard Wowryk: Yeah. It's not specific to the Windows business, right? We understand that we live in a marketplace, and an overperforming subsidiary might, you know, you might need to make that assessment on an overperforming subsidiary as well because someone may be willing to pay you more than you think it's worth. It's not specific to the Windows business either. Even talk about that, Conor, like that long-term view that Mike Pyle talks about, it's incredibly important. Whereas, you know, we are also seeing competitors fail and competitors close their plant, which improves our long-term outlook on those businesses, you know, just because they can have greater market share and greater pricing power. We constantly evaluate each of the businesses, but that longer-term outlook provides us a significant advantage in the future.

Right now, we really don't see that as the future. But is this something we look at? Yeah, and...

It's not specific to the Windows business, right? Like...

We understand.

Place and overperform subsidiary might, um, you know, you might need to make that assessment on over performing considered as well. Because someone may be willing to pay you more than than you think it's worth. So it's not specific to the windows business either but and even talking about that code are like the like that long term view that might talk about to incredibly important. You know, whereas

You know, we constantly evaluate each of the businesses. Um, but that longer-term outlook provides us a significant advantage in the future.

Mike Pyle: Okay. That is very helpful. Thanks, guys. Just a quick clarification, as a follow-up, maybe on the guidance. I think you mentioned to Chris, the $35 million incremental would have been higher had it not been forest fires. I am just trying to get the math right, as we kind of contemplate, you guys hitting an $800 million EBITDA mark at some point. Are we looking at probably mid to highest $700s perhaps, without the forest fires? Is that the idea? Or it would have been more or less like $5 million, $10 million more or more had it not been the forest fires?

Richard Wowryk: I think the forest fires are more in the $10 million-ish challenge, than the other. I know you're trying to get me to give you a 2026 number. We will give you one in November. But I will tell you that there is embedded growth that is going to come for stuff we have already paid for. The planes that are going to come out of, the Carson and go into, Powell are going to generate income. I have already paid for the second plane from Brandon. That is going to generate income. I am hoping we stay in the $700s about as long as the longer period of time as the stock stayed in the $60s.

Okay, that that's very helpful. Thanks guys. And just a quick clarification uh as a followup maybe on the guidance, I think you mentioned to Chris, I think um the 35 million incremental would have been higher. Had it not been forest fires, I'm just trying to, you know, get the math right. Um, you know, as we kind of contemplate, you guys hitting and 800 million Mark at some point I guess. Um, you know are we are we looking at, you know probably mid to highest 700. Perhaps you know, without the forest fires is that the idea or or we would it would have been more more or less like 5 10 million more and more had it not been for us. I think I think the forest fires are more in the 10 million.

Challenge um than the other. Um, and I know you're trying to get me to give you a 2026 number. We'll give you what, uh, in November. But I will tell you that there is embedded growth that's going to come for stuff we've already paid for.

the planes that are going to come out of, uh,

of Carson and go into, uh, pal are going to generate income. I've already paid for the second plane for Brands that's going to generate income. And so, um,

I'm hoping we stay in the 700s about as long as the longer period of time is the stocks date of the 60s.

Mike Pyle: Okay. No, that's really helpful, Mike. I'll wait for you guys and for 26. Thanks.

Okay, now that that’s really helped with my calibrate for you guys. And for 2016, thanks.

Mike Pyle: Thank you. Your next question comes from the line of Gary Ho from the Jordan Capital Markets. Please go ahead.

Mike Pyle: Good morning.

Thank you. And your next question comes from the line of Gary Hall from Jordan Capital Markets. Please go ahead.

Richard Wowryk: Morning. Can you hear me okay?

Good morning.

Mike Pyle: Yeah, we can.

Morning. Can you hear me? Can you hear me? Okay.

Richard Wowryk: Perfect. Okay. I want to touch on M&A a little bit. I know you just closed Canadian North acquisition and several growth projects on the go. I think you also mentioned M&A pipeline continues to be active across both segments. So, where are you spending your time on and what do you get excited about? Maybe talk about preference for tuck-ins versus more platform-type opportunities and maybe leverage off Conor's question there on the window segment. If I can flip that around and that you guys take a longer-term view, are you more opportunistic acquirers as well, buying good businesses at cyclical troughs and perhaps attract evaluations? Maybe chat about that.

Mike Pyle: Okay. I will take the second question first. In terms of being an opportunistic buyer, I would tell you an unequivocal yes. We view ourselves as being independent thinkers, and we have done deals that when they first came into us, we could not figure out why they were a business. Regional One would be a great example of that. My acquisition fellow at the time brought it to me, and I did not have any idea why I wanted to be in that business. He was adamant it was a good business. I turned it down. He brought it back again. I turned it down a second time. Finally, he says, "Don't beat with them. Come with me. If you still don't like it, I will stop presenting it to you." I went and met with him.

Yeah, we can perfect. Okay. Um, I want to touch on, uh, m&a a little bit. I know you just closed. Uh, Canadian North acquisition and several growth projects on the go. Uh, I think you also mentioned m&a, pipeline continues to be active, across both segments. Um, so where, you know, where where are you standing your time on and and what do you get excited about maybe talk about preference for tuck-ins? Um, versus more platform type opportunities and maybe it's uh, leverage off Conor's question there on the Windows segment if I can flip that around and and and that you, you take, you guys take a longer term view. Are you more opportunistic acquirers as well? Um, buying good businesses, um, at cyclical drops and perhaps attract evaluations, maybe attract chat about that.

Okay, so I'll take your second question first. In terms of, uh, being an opportunity, this adviser, I would tell you an unequivocal yes.

We view ourselves as independent thinkers, and we've done deals that, when they first came to us, we couldn't figure out why they were a business.

Regional wanted to be a great example of that my acquisition fellow at the time, brought it to me and I didn't have any idea why I wanted to be in that business. He was out of it, it was a good business. I turned it down, he brought it back again. I turned it down a second time and finally he says go meet with them.

Mike Pyle: Literally 45 seconds into the discussions with Jerome and his team, I realized what a great business this was. We were competing with private equity. We had a model of investing in that business, as opposed to wreaking cash out of it that made us a successful buyer. Now we look at today, and it would be 10 times the size of what we bought it off of. Yes, we view ourselves as opportunistic. In terms of what we prefer, whether it is platforms or tuck-ins, I am not sure we have a preference. I would suggest to you that we see a lot more maybe tuck-ins or businesses that are tangential to what we are in.

Come with me and if you still don't like it, I'll stop presenting it to you. And I went and met with them and literally 45 seconds into the discussions with Don and his team, I realized what a great business. This was and we were competing with pride but that would be we had a model of investing in that business uh as opposed to recent cash out of it, that made us a successful buyer and now we look at today and it would be 10 times the size of what we bought it off of.

So yes, we view ourselves as opportunistic.

um, in terms of what we prefer, whether it's platforms or uh,

Uh, tuck it. Um,

I, I'm not sure we have a preference. I would suggest to you that we see a lot more.

Mike Pyle: If we found another medevac business or we saw, with the parts business or where we added the glazers to our window business or if there was an aerial firefighting business as an example, that would be something we would love to have. Most of the things we look at today tend to be related to what we do, but they are typically bigger than what I would classify as a tuck-in. Today, what we are looking at is virtually everything Adam and his team have is very related to something we have. I think I was told by a couple of my significant long-term investors when we bought Canadian North, "Oh, that makes sense. I should have known that was coming." I think if we are successful on some of those deals that we are working on, I think that would be the market's reaction.

Maybe tuck in or businesses that are tangential to what we're in. So if we found another meta that business or we saw, uh, with the parts business or where we added the glazers to our window business. Or if there was an aerial firefighting business as an example, that would be something we would love down. And so most of the things we look at today, tend to be related uh, to what we do. But they're typically bigger than what I would classify as a tuck in.

I think if we're successful on some of those deals that we're working on,

Mike Pyle: I would caution that there is nothing imminent. We are not like at the 10-yard line ready to score here. Adam and his team are working hard on some opportunities. Some of these projects, specifically where we are in a negotiated settlement as opposed to an auction, take some time. But Adam and his team remain busy, and it is both manufacturing and aviation assets.

I think that would be the Market's reaction. I would caution that there's nothing imminent. We're not like at the, at the 10 yard line ready to score here. We're out of this team. We're we're working hard on some opportunities and some of these projects um specifically where we're in a negotiated settlement as opposed to an auction take some time.

Richard Wowryk: To build on what Mike Pyle is saying in terms of being opportunistic and being open-minded to opportunities that were not necessarily directly in that niche within the manufacturing segment or within the aviation segment, we look to acquire a very specific type of company with a great leader and a good management team. We really focus on the long-term fundamentals of that business, given our business plan to own that company for a very, very long time and also to empower the management team there. Being open-minded and opportunistic allows us to have a broader scope of those types of companies. At the same time, given some of the uncertainty that we had last year within both elections, within the U.S.

But, uh, we out of this team, remain busy, and it's both manufacturing and Aviation assets, and then Bristol to build on what what Mike's saying in terms of being opportunistic, uh, and, and being open-minded to opportunities that we're not necessarily, you know, directly in that Niche within, you know, the manufacturing segment or within the aviation segment and and we we look to acquire a very specific type of company, uh, with a great leader and a good management team. And really, you know, focus on the long-term, fundamentals of that business. Uh given our business plan to own that company for a very, very long time and also to empower the management team there. So you know being open-minded and opportunistic allows us to have a a broader scope of those types of companies at the same time, you know, we're given some of the uncertainty

That we had.

Richard Wowryk: and then Canada this year, followed by some of the other uncertainty tied to the geopolitics and some of the economic positions, you often see that there are ebbs and flows of acquisition opportunities and what we call marketed deals coming in. Our ability to have those two funnels, one of the marketed deals and then one of the strategic deals, allows us to be a lot more active on a consistent basis. One of the exciting things when we buy a new company and for that owner coming on is the idea that Exchange Income Corporation likes to continue to grow those businesses, including strategic acquisitions. We are consistently working with all our subsidiaries when they view there is an opportunity to uncover opportunities that help them expand their overall operations. As you can see, that is what our last four acquisitions have been.

Last year, within both elections within the US and then Canada, this year, followed by some of the other uncertainty, tied to the geopolitics. And some of the economic positions, you're often see that there's evidence flows of of acquisition opportunities. And what we call marketed deals coming in, uh, you know, our ability to have those 2 funnels 1 of The Market deals, and then 1 of the Strategic deals. Um,

Richard Wowryk: They have all been strategic opportunities.

Was to be a lot more active on a consistent basis and I'd say that 1 of the exciting things when we buy a new company and for that owner coming on, is the idea that, you know, the, I likes to continue to grow those businesses including strategic Acquisitions. Uh and so, we're consistently working with all our subsidiaries uh when they view their as an opportunity uh to to go uncover, you know, opportunities that have some expanded their their overall operations. And as you can see, you know, that's what our last 4 Acres have been. They've been all strategic opportunities.

Mike Pyle: Okay, great. Makes sense. Maybe just a quick follow-up on the long-term service agreement. The Government of Nunavut has an option to purchase a stake in Canadian North. Talk about the reasoning. Do you have a preference one way or another?

Great uh makes sense. And then maybe just a quick follow, follow up um, on the long term service agreement. Uh, I think the government none of it has an option to purchase a steak and Canadian North, maybe just talk about the reasoning and do you have a preference 1 way or another?

Richard Wowryk: The discussions about typically a long-term agreement like that with the government in Nunavut would have been done through an RFP. There were discussions, and there were reasons for both of us to want to do it quickly. One of the things we said, "Look, if you want to prove to you that we are good partners and we are negotiating this in good faith." Part of that was, "If you want to be our partner and join in, you have to pay the capital like we have, and you could join." The government in Nunavut took comfort in the fact that we were prepared to share the deal with them. If the deal was not fair, we would not have shared it. We are not capital constrained. I do not think I would say that I want them to participate, but I am not averse to it.

um, the discussions about

typically a, uh,

Long-term agreements like that with the government unit have been done through an RFP.

And there were discussions, and there were reasons for both of us to want to do it quickly. And one of the things we said was, look, if you're—we want to prove to you that we're good partners and we're negotiating this in good faith. Part of that was, if you want to be our partner, join in; you've got to pay the capital like we have.

Um and and you can join and I think the government of it took, um, comfort in the fact that we were prepared to share the deal with them and if the deal wasn't fair we wouldn't have shared it. And so um

We aren't Capital constraints.

Richard Wowryk: Having your biggest customer in a territory like that that is going to be growing and is going to be a big part of our future, strengthens our business. I think it is really more about whether the government in Nunavut wants to deploy the level of capital they need to be our partner. If they do, we are glad to have them. It is crystal clear in the operating agreements that while they have board representation and those kinds of things, operating control of how you run an airline lies with EIC. That is what we do. We are prepared to have a partner that we talked about things with, but operating decisions need to stay with us.

Um, and so I don't think I would say that I want them to participate, but I'm not adverse to it. I mean, having your biggest customer in a territory like that, that's going to be growing, and there's going to be a big part of our future strengthens our business. So, um,

I think it's really more about whether the government in Duty that wants to deploy the level of capital. They need to be our partner.

and,

Mike Pyle: It is much more indicative of the degree of partnership that we have with the Government of Nunavut in developing the critical infrastructure in the north, rather than a financial matter.

If they do, we're glad to have them, it's Crystal Clear in the operating agreements that while they'll they have board representation and those kinds of things, operated control of how you run an airline lies with the IC. That's what we do. We're prepared to have a partner that we talked about things with but operating decisions need to stay with us. Okay? And I think it's it's much more indicative of the degree of partnership that we have with the government of Nova in developing the critical infrastructure in the north so rather than a a financial matter. So

Richard Wowryk: I think that we might have had a bigger challenge providing that option to some other provincial or territorial governments than we did with Nunavut. They are remarkably literate from an operating environment about their operating environment. They know how fundamental aviation is to the government, to the territory. They make a good partner. Perhaps not all of the territories or provinces we operate, the governments are as exposed to aviation and as such would be more challenged to be a partner. Nunavut is well situated to be our partner should they choose to. I suspect that will be something that will be decided by the next government in Nunavut. They have an election coming this fall. I would be very surprised if any decision was made before that election. They have a year to decide.

I think that we might have had.

um,

is doing a bit, um,

they, they are remarkably, uh,

Literate.

From an operating Environ about their operating environment, they know how fundamental Aviation is to the government to the, uh, territory and so they make a good partner. Um,

Perhaps not all of the territories or provinces we operate in are well situated for our partnership. The governments are as exposed to aviation, and as such, it would be more challenging to be a partner. None of it is well situated to be our partnership. They choose to, I suspect that will be something that will be decided by the next government. They have an election coming this fall, and so I would be very surprised if any decision was made before that election, and they have a year to decide.

Mike Pyle: Okay, great. Those are my two questions.

Okay, great. Those are my two questions.

Mike Pyle: Thank you. Your next question comes from the line of Steve Hansen from Lehman Chains. Please go ahead.

Thank you. And your next question comes from the line of Steve Hansen from Raymond James. Please go ahead.

Mike Pyle: Hey, Steve. Sorry for the problems with the phone service here. Apparently, we're still having them.

Hey Steve. Sorry for the problems with the phone service here.

apparently, we're still having

Mike Pyle: Mr. Hansen, may you please check if your line is muted? Our next question comes from.

Them, Mr. Henson, will you please check if your line is muted?

Mike Pyle: The operator, just before we proceed, if you want to email me your question, I will read it and get it answered. That way, we can get around the problem with the phone system. If you want to either text me or email me your question, I will read it to everyone, and then I will answer it. Operator, you can go with the next person.

Our next question.

Mike Pyle: Your next question comes from the line of Amir Izzak from Ventum Financial. Please go ahead.

But operator, before we proceed, Steve, if you want to email me your question, I'll read it and get it answered that way. We can get around the problem with the phone system. So, if you wanted to text me or email me your question, I'll read it to everyone and then I'll answer it. Operator, you can go with the next person.

Jake Trainor: Good morning.

Your next question comes from the line of air. Is that from V ventum Financial please go ahead. Good morning.

Mike Pyle: Good morning.

Good morning.

Jake Trainor: Congrats on the quarter. This is Andrei, first of all, on behalf of Amir. On the Australia maritime surveillance bid, given its scale, what is the realistic share of the contract you could control if successful? How do any local content requirements factor into your economics, operational structure, or partnership?

Uh, congrats on the quarter. Uh, just a quick one. Um, well, this is Andre, first of all, on behalf of Amber. But, uh, on the Australia Maritime Surveillance bid, given the scale, what's the realistic share of the contract you could control if, uh, successful? And how do any local content requirements factor into your economics, uh, operational structure or, uh,

Partnership.

Mike Pyle: The contract is probably, while the government does have the right to split it, I would suggest that is highly unlikely. The technology of the aircraft talking to one another, having two different companies with different software, would be remarkably difficult. In fact, I think one of our competitive advantages is our aircraft run the same software that we own, that the helicopter, ISR running. So, I do not think there is any likelihood that it gets split. I think it is a win or a loss. In terms of local content, do you want to take that, Jake?

Um, the contract is probably, well, the government does have the right to split it. I would.

Suggest that's highly unlikely the technology of the aircraft talking to 1, another having 2 different companies with different software would be be remarkably difficult. Uh in fact I think 1 of our competitive advantages is our aircraft run the same software that we own uh that the helicopter uh ISR running. So uh I don't think there's any likelihood that it gets split. I think it's a winner or a loss.

Richard Wowryk: Yeah, I mean, we have committed and required to set up operations in Australia, knowing the time and space. That's not something that can be run remotely. It will have a full operation set up to support a very significant aircraft operation down in Australia.

Um, in terms of local content, do you want to take that Jake?

Yeah, I mean we have committed and required to set up operations in Australia. Knowing the time and space, that's not something that can be run remotely, and you know, it'll have a full operation set up to support a very significant aircraft operation down in Australia.

Jake Trainor: Okay. Great. Thanks. Shifting to Canadian North, you pointed out in the MD&A that the Canadian North infrastructure as a potential enabler for Arctic defense and security opportunities. Could you speak a little bit more about that? Maybe, you know, from a practical standpoint, any steps we can take to monetize that?

Okay, great, thanks. And, um, shifting to Canadian North. Uh, you pointed out in the MD&A that, uh, the Canadian North infrastructure has potential as an enabler for Arctic defense and security opportunities. Could you speak a little bit more about that and maybe, you know, from a practical standpoint, any steps you can take to monetize that?

Mike Pyle: I mean, what you are going to see, I think, in the North is two main themes of growth. One is, we have seen the value of critical minerals. Nunavut is blessed with a lot of them. As those become a strategic asset that we want to have as a country and with our NATO partners and our American partners, you are going to see development of those. That means bringing in people and equipment and stuff into fly-in locations, which is exactly what we did, whether it is ComAir or Canadian North. The other piece relates more to national defense. We are going to need to build facilities in the North. We are built by the F-35 Joint Strike Fighter. We do not have hangars for them. We do not have runways in enough places for them. The government is going to build those.

Yeah. I mean, what you're going to see, I think in the north, is 2.2 ms of growth. One is, uh,

We've seen the value of critical minerals.

Uh none of it is blessed with a lot of them and so as those become a strategic asset that we want to have as a country and with our NATO partners and our American Partners, you're going to see development of those. Well that means bringing in people and equipment and stuff into flying locations which is exactly what we do. Whether it's Conair or Canadian North

Um, and then the other piece relates more to national defense.

We're going to need to build facilities in the North.

Mike Pyle: While I do not think we will be hauling up cement on our ATRs, we will be hauling up the people and rotating crews and doing all that stuff, which is going to create demand for our scheduled services. Because of the infrastructure we have there, it is exceptionally difficult for someone to do that at a better price than we can for the government, simply because we have got hangars, we have got facilities. If someone else wants to try and take that from us, their costs are going to be far higher than ours are. We are excited about the ability to lever the government's investments in defense, with our scheduled airline.

We are focused on doing everything necessary to create demand for our scheduled services. Due to the infrastructure we have in place, it is exceptionally difficult for anyone else to provide those services at a better price than we can for the government. This is primarily because we have hangars and facilities that give us a competitive edge. If someone else tries to compete with us, their costs will be significantly higher than ours. Therefore, we are excited about the opportunity to leverage the government's investments.

Mike Pyle: On top of that, it is not really so much a Canadian North story as it is a Pyle story, but the opportunities for other things like expanding the surveillance we do on the East and West Coast to our Northern Coast. I think there are things like that that we will see discussions of perhaps expanding our role in the Northern Search and Rescue Program, where we already provide the maintenance and overhaul capability for the aircraft which were recently purchased from Airbus. I think all of those are growth opportunities for us where we could partner with the government, intent on increasing our investment in defense and do it cheaper and faster than the government can do it itself.

Uh, defense, uh, with our scheduled airline. And then, on top of that.

It's not really so much a Canadian North story, as it is a pal story. But the opportunities for other things, like expanding the surveillance we do on the East and West coasts to our northern coast, I think there are things like that that we'll see discussions of. Perhaps extending our role in the northern search and rescue program, where we already provide the maintenance and overhaul capability for the aircraft which were recently purchased from Airbus. I think all of those are growth opportunities for us where we can partner with the government, intent on increasing our investment in Defence, and do it cheaper and faster than the government can do it itself.

Jake Trainor: Thanks for the color. I will pass the line.

Mike Pyle: Okay. Operator, before we jump onto the next call, Steve Hansen sent me the question, which is, what's the quantum of maintenance and growth CapEx we should expect this year? I am not sure I can answer that with a specific number other than to say, as it relates to Canadian North, the free cash flow we will generate will not be a huge number in the first two or three quarters because of the maintenance CapEx. Although our, the EBITDA we are generating is improving, and some of the cost stuff we are doing is ahead of schedule. Growth CapEx, I hope there is a lot of it.

Thanks for the caller. I'll, uh, I'll pass the line.

Okay, operator before uh we jump on to the next call. Uh uh Steve Hansen uh sent me the question, which is, what's the Quantum of Maintenance and growth capex? We should expect this year. Um, I I

I'm not sure I can answer that with a specific number other than to say, um, as it relates to Canadian North, the free cash flow we generate won't be a huge number in the first 2 or 3 quarters because of the maintenance capex. Although our, uh, the IBA we're generating is, uh, is improving, and some of the cost stuff we're doing is ahead of schedule.

Mike Pyle: Right now, it is really limited to finishing off the purchases of the King Airs for the British Columbia medevac contract, which will allow us to deploy their aircraft to Newfoundland with only a cost of modifying them, which is relatively modest. Then we have significant investments in Regional One for the balance of the year. That could be in the $50 to $100 million range, depending on which transactions we close. There is a bunch of stuff we are bullish on. Quite frankly, that market today, it is easier to sell in than it is to buy in. When we get the right opportunities, we are all over them. In general, maintenance CapEx will be heavy the balance of this year and into next year. No surprises. That was part of our due diligence. We knew that was coming.

Growth capex. Um, I hope there's a lot of them right now. It's really limited to finishing off the purchases of the King Airs for the BC Matter of Fact contract, which will allow us to deploy their aircraft in Newfoundland with only a cost of modifying them, which is relatively modest. Uh, and then we have significant.

Investments, uh, in uh, Regional 1 for the balance of the Year and that that could be in the 50 to100 million dollar range, uh, depending on which transactions we close. But there's a bunch of stuff we're bullish on, um, quite frankly that market today. It's easier to sell it than it is to buy in. And so, when we get the right opportunities, we're all over them. So in general,

Mike Pyle: We talked about hitting a 15% return by the end of next year. We are more confident than ever that we will do that, both by increasing revenue, decreasing costs, and then ultimately normalizing maintenance CapEx over a period of time. I hope I answered what you were looking for, Steve. Operator?

Maintenance capex will be heavy for the balance of this year and into next year; no surprises. That was part of our due diligence; we knew that was coming. We talked about hitting a 15% return by the end of next year. We are more confident than ever that we'll do that, both by increasing revenue, decreasing costs, and then ultimately normalizing maintenance capex over a period of time.

I hope I answered what you were looking for, Steve.

Operator.

Mike Pyle: Thank you once again. Should you have a question, please press star, then the number one on your telephone keypad. We have the line of Steve Hansen from Lehman James. Mr. Hansen, you may go ahead.

Thank you. Once again, should you have a question, please press star, then the number 1 on your telephone keypad.

We have the line of Steve Hansen from Raymond James. Mr. Hansen, you may go ahead.

Mike Pyle: Steve, are you there?

Richard Wowryk: I think my question has been answered, Mike. I am good. Thanks for that. Appreciate it.

Are you there?

Mike Pyle: I think we can talk to you now, Steve. We do have the technology. People are building AI centers, technology centers. We can complete a phone call.

I think my question's been answered, Mike. I'm good. Thanks for that; I appreciate it. We can talk to you now. Steve, we do have the technology.

Richard Wowryk: We are running long. I think I have told my answer. I appreciate the time. Thanks, Steve.

Mike Pyle: Thanks, Steve.

People are building AI centers and technology centers. We can complete a phone call that we're running on. I think I have found an answer myself. I appreciate the time. Thanks, Steve. Thanks, Steve.

Jake Trainor: Thank you, Steve.

Mike Pyle: Thank you. Your next question comes from the line of Rexy Hessen from Paradigm. Please go ahead.

Jake Trainor: Morning. Morning. Thanks for taking my question. Just two small ones here. On the Windows business, is it fair to say that we should begin to see results from the $100 million in new projects you mentioned flow through in mid-2027 if the world stays the same way? Is that a fair assessment?

Thank you. And your next question comes from the line of Frankie Hassan from Paradigm. Please go ahead.

Morning.

Morning, thanks for taking my question. Uh, just two small ones here. Uh, on the Windows business, is it fair to say that we should begin to see results from the $100 million in new projects you mentioned, flowing through in mid-2027, if the world stays the same way? Is that a fair assessment?

Mike Pyle: Yeah, each project is slightly different, but on average, that is about right. The thing is, $100 million is a good number for this last month or so, but we burn that, we burn that much out of our book every quarter, more than that, actually. While it is a good start and it is encouraging, we still got some work to do to get the actual order taking to where we want it to be. It is a positive sign. One of them was in a market, I am not going to disclose where, but it was a market that was difficult in the U.S. for a period of time. It is exciting to land a significant sale in a market that had been difficult for a while.

Actually, uh, and so that while it's a good start and it's encouraging.

We still have some work to do to get the actual order taken to where we want it to be, but it's a positive sign. One of them was in a market. I'm not going to disclose where it was, but it was a market that was difficult in the U.S. for a period of time. So it's exciting to land a significant sale in a market that had been difficult for a lot.

Jake Trainor: Okay. Okay, great. Then maybe just lastly, on the Australian contract, I am not sure if you mentioned, but can you disclose how many bidders were in the process or how many bidders are left or any idea there?

Okay, okay, great. And then, maybe just lastly on the Australian contract. I'm not sure if you mentioned, but can you disclose how many bidders were in the process? Or how many, but there's a left or any idea?

Richard Wowryk: Right. Right now, we know, you know, we suspect it is not a published thing. We suspect that there are about four bidders that were submitting. Obviously, the incumbent and ourselves, we feel, are the key challengers for this. But as I said, we anticipate there were four bidders.

Right. Right. Right now we know, you know, we suspect it's not a published thing. We suspect that there are about four bids that were submitted, obviously the incumbent and ourselves. We feel are the key challenges for this. But, as I said, we anticipate there were four bids.

Jake Trainor: Okay. Thanks. I will pass the line.

Okay. Thanks, I'll pass the line.

Mike Pyle: Thank you. There are no further questions at this time. I will now hand the call back to Mr. Mike Pyle for any closing remarks.

Thank you.

Mike Pyle: Thank you to everybody for joining us today. It is an exciting day. We look forward to talking to you again in November. Have a great day, everyone.

There are no further questions at this time. I will now hand the call back to Mr. Mike Pyle for any closing remarks. Thank you to everybody for joining us today. It's an exciting day. We look forward to talking to you again in November. Have a great day, everyone.

Mike Pyle: This concludes today's call. Thank you for participating. You may all disconnect.

And this concludes today's call. Thank you for participating. You may all disconnect.