Good morning, ladies and gentlemen. Welcome to the Chorus Aviation First Quarter 2023 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on Tuesday, May 9, 2023. I would now like to turn the conference over to Mr. Tyrone Cotie. Please go ahead.
Thank you, Jenny. Hello, and thank you for joining us today for our first quarter 2023 conference call and audio webcast. With me today from Chorus are Colin Copp, President and Chief Executive Officer, and Gary Osborne, Chief Financial Officer. We'll start today's call by giving a brief overview of the results and then go to questions from the analyst community. Because some of the discussions in this call may be forward-looking, I direct your attention to the caution regarding forward-looking statements and information that is included and referenced in our MD&A with respect to the results and operations of Chorus Aviation Inc.
For the three months ended March 31, 2023, the Outlook section and other sections of our MD&A where such statements appear. In addition, some of the following discussion involves non-GAAP financial measures, including references to Adjusted Net Income, Adjusted EBT, Adjusted EBITDA, Leverage Ratio, and Free Cash Flow. Please refer to our MD&A for discussion relating to the use of such non-GAAP measures. I'll now turn the call over to Colin Copp.
Thank you, Tyrone. Good morning, everyone. This marks my first analyst call as CEO. I'm very pleased to be here speaking with you today about our first quarter results and outlook. We delivered a strong quarter, which was very much in line with our expectations. Our results demonstrate the execution of our strategy that we outlined during our Investor Day held in Toronto in March. In the quarter, we produced Free Cash Flow of CAD 73.1 million and Adjusted earnings available to common shareholders of CAD 0.11 per common share, representing increases of 51% and 10% respectively.
We continue our transition towards an asset light leasing model that will reduce our leverage, de-risk the business, and provide a higher quality of earnings as we execute on asset sales, allow us to grow and invest in our fund management business at Falko, provide future opportunities to invest in accretive transactions in adjacent and complementary business lines, and provide an opportunity for us to improve shareholder returns and allow for the return of capital to our shareholders. To that end, we continue to pay down the debt and further reduce our leverage during the quarter, resulting in a 9% improvement in our Leverage Ratio, bringing it down to 4.0, which is closer to our targeted range of 2.5-3.5 net debt to EBITDA.
We continue to see encouraging signs of increasing demand in the regional aviation sector with improvements in aircraft rental rates and market values as published by the various industry publications such as Ishka. During the quarter, Falko announced transactions relating to 24 aircraft, including lease extensions on six aircraft, predominantly related to the regional jet sector and European market.
On the fundraising side, we have experienced good engagement and steady progress and continue to anticipate the first close of Fund III by the end of Q2, 2023. We were also very pleased to see an upgrade by Kroll KBRA of Falko's Fund I ABS facility, moving from a BBB to an A-minus. The upgrade is driven by the overall performance of the transaction, where since closing, the loans have received all scheduled interest and principal payments, demonstrating Falko's strength in managing its portfolio.
For the first time in history, Voyageur earned CAD 30 million in quarterly revenue, driven mainly by improved parts sales while maintaining its EBITDA margins. Lastly, we are very pleased to announce the establishment of our new pilot academy, Cygnet Aviation. Cygnet is the first of its kind academy in the Canadian market, offering leading-edge flight training that provides direct access to airline pilot careers.
Cygnet has partnered with CAE to deliver a truly unique offering that will provide a new source of highly trained airline-ready pilots for our operating business units and the wider industry. Last month, we celebrated the launch of the new academy with a gathering at the Cygnet training facility in Kingston, Ontario, which was extremely well attended by local government, key community officials, current and future pilot cadets, the media, and several representatives from CAE and the airline industry. I'll now pass it over to Gary to take you through the financials.
Thank you, Colin. Good morning. In the first quarter of 2023, Chorus reported earnings and Free Cash Flow that were in line with our expectations. With Adjusted Net Income available to common shareholders of CAD 0.11 per common share, an increase of CAD 0.01 from Q1 2022, Adjusted EBITDA of CAD 118.1 million, an increase of CAD 34.8 million over the first quarter of 2022, and Free Cash Flow of CAD 73.1 million, an increase of CAD 24.7 million from Q1 2022. As we look at our performance, the RAL segment's Adjusted EBITDA was CAD 61.6 million, a quarter-over-quarter increase of CAD 29.9 million, primarily due to the inclusion of earnings from Falko.
In the RAS segment's Adjusted EBITDA was CAD 63.9 million, an increase of CAD 6.5 million over the first quarter of 2022. First quarter results in RAS were primarily impacted by an increase in other revenue of CAD 6.7 million related to an increase in part sales at Voyageur and an increase in aircraft leasing revenue under the CPA of CAD 2.4 million, primarily due to higher US dollar exchange rates, offset by an increase in general administrative expenses attributable to increased operations. Corporate Adjusted EBITDA or net expenses of CAD 7.4 million were higher than the first quarter of 2022 by CAD 1.6 million due to an increase in general administrative expenses.
Adjusted Net Income was CAD 30.8 million for the quarter, an increase of CAD 13.1 million over the first quarter of 2022 due to the increase in Adjusted EBITDA previously described and an improvement in the change in net foreign exchange of CAD 2.1 million, partially offset by an increase in appreciation expense of CAD 13 million, primarily attributable to Falko and capital expenditures in 2022. An increase of CAD 5.4 million in income tax expense and an increase in net interest costs of CAD 5.4 million, primarily related to the interest on long-term debt assumed as part of the Falko acquisition.
Net income increased CAD 9.1 million over the first quarter of 2022, primarily due to the previously noted increase in Adjusted Net Income, notwithstanding offsetting changes in certain expenses and a decrease in net unrealized foreign exchange gains of CAD 2.5 million. We continue to pay down our debt as expected, ending the quarter with a Leverage Ratio of 4.0, an improvement of 0.4 from December 2022 due to debt repayments and an increase in Adjusted EBITDA, primarily related to the inclusion of earnings from the Falko acquisition. We continue making progress towards our target of 2.5-3.5 by Q4 2024. During the quarter, we drew on our operating credit facility to fund investments in working capital.
We have expanded our credit facility from CAD 100 million to CAD 150 million starting in Q2 2022, subject to a borrowing base. We expect to support any periodic working capital requirements through this facility. Based on our Q1 2023 results and our forecast for the remainder of the year, the guidance previously provided remains unchanged. Key elements of our guidance for 2023 are contained in the outlook section of the MD&A. We are now ready to take questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. Should you wish to cancel your request, please press the star followed by the two. Your first question is from Hilary Cacanando from Deutsche Bank. Please ask your question.
For taking my questions. I just wanted to get a better understanding of the Cygnet Aviation Academy. I guess you place the graduating pilots into Jazz and, you know, ultimately to Air Canada. Is this something where you could work with other airlines other than Air Canada to place the graduating pilots? Is this considered a business unit that you know, actually, like, make a margin on? Or do you just consider this more of an internal program to enhance your talent pool?
Good morning, Hilary. It's Colin. Yeah, great question.
Okay.
Yeah, the design of Cygnet is really an industry business. It's not specific to Jazz or to Voyageur or any of our internal businesses. Obviously, they're gonna have a priority and their own focus on what their needs are. We've started the business that way, but there are several other airlines that we're working with to start to transition pilots through. Yeah, it's definitely for the broader spectrum. Far as the profitability or the financial side of that business, it is a standalone independent business, and the goal that we have in the plan is for it to be profitable and accretive to Chorus for sure.
Oh, okay. will it be rolled up into part of, RAS, I guess?
Yes, it will.
Is it...?
Yeah. It is.
Okay.
Yes, absolutely, yeah.
Okay.
As a standalone.
Okay. Okay. We'll see a separate line attributed to that.
No, I don't think you'll.
To that academy.
I wouldn't expect a separate line, Hilary. You know, we expect the earnings to be modest as it grows.
Mm-hmm.
It's probably gonna have 120-140 pilots at its peak, at least as currently staffed and put in the infrastructure put in place. It'll be modest, but it will be accretive or it will produce a bottom line.
Got it. Got it. I guess just regarding Fund III, Gary had said that I guess the plan is to invest 100-120 aircraft into the fund. Do you have like a target composition in terms of, you know, which aircraft you're targeting to have in the portfolio and the age group?
It's Gary here. I wouldn't say there's a target per say. When they construct a fund, you know, they go to market. They have concentration limits on particular lessees, geo-geographic limits. They look at the credit worthiness of the various lessees. That's probably the biggest piece. You move into the aircraft itself and whatnot. You know, certainly with what you see in the market, there's E2s as far as new aircraft, there's certainly ATRs and others. I think at this stage though, I would say less equality and the quality of the airline probably weighs more than the aircraft when they're constructing. Yeah.
Got it. Great. Thank you so much.
Thanks, Hillary.
Thank you. Your next question is from Kevin Chiang from CIBC. Please ask your question.
Thanks for taking my question and good morning, everybody. Maybe just on the wind up of the Ravelin portfolio that you noted in your MD&A. It looks like you'll have this completed over the next couple of years here. I guess, one, I suspect some of this is opportunistic. Do you have a sense of how we should think about those asset sales over the next couple of years? Then secondly, how we should be thinking about the EBITDA or maybe the net income contribution today versus maybe what comes out of the earnings stream as you divest of those and eventually have to redeploy that capital?
Yeah. Kevin, it's Gary here. On the Ravelin portfolio, you know, when we look at the Fund I, that Fund I, it's certainly due to be wound up by the end of 25. You know, we would hope to have it done by then or earlier. I think when you look at the asset sales, they will be lumpy. I think we've kind of said that, even for this year, it's gonna be towards the back end of our year or the second half of our year. We didn't really anticipate that much in the first part. You can expect it to be lumpy. Back to what we talked about on our Investor Day.
As we start to sell off those assets, harvest the equity in that, we'll certainly look at our capital allocation priorities, including debt reduction and return of capital to shareholders and reinvestment in the business and make the appropriate decision at that point in time. Yeah, so that's how the asset sales will work on Fund I. I see the upgrade on the debt facility by KBRA there as being a good thing that i t shows that the portfolio is doing well.
If I took it simplistically and said had a target return metric, and you've talked about kind of mid-teens ROE, if I just apply that to the book value, is that kind of a good run rate to think of the earnings? I don't want to call it a headwind, but essentially the earnings adjustments we should be thinking of making as you sell down Ravelin over the next couple of years, or is that too punitive of a way to look at it?
It's a reasonable way. You could also go back to some of the disclosure we gave last year where we broke out the Falko assets because they're under the Falko wing. You could look at that as being kind of the, you know, the adjustment that would happen within it to use that average. That would be another way to go at it.
Okay. That's helpful. Maybe just my second to last question here. Just on the training program, the facility you're opening up here. You, you noted 120 to 140 pilots. Is that, is that what the threshold would be? I just want to confirm that. Then secondly, I guess how many pilots do you normally flow through to Air Canada? Just trying to get a sense of if you're training 120 to 140, you know, what percentage of that you'd likely keep in-house just given your own natural turnover through the flow through program versus, you know, maybe excess training slots that you could, you could obviously sell to other airlines.
Hi, Kevin. It's Colin. Yeah, the Cygnet, the way we design the Cygnet organization is to scale. In the short term, Gary's right. It's in that 140 range in a very, very short term. A little bit longer, we're well over 200, and we're working on a plan to build that out to kind of 200 plus with CAE. There's lots of opportunity there, and we see that growing very, very quickly. We've had incredible uptake there, not only from interested students, but also the industry as far as other airlines. That's pretty much the growth is up to 200 in the near term.
As far as the flow to Air Canada goes, there is no number I can give you that's real because it is all over the map, and it really depends on Air Canada's needs and their plans. You know, we've had years that have been, you know, several hundred, you know, a few hundred pilots flowing in a given year, and we've had years where there is no flow. So it's very much all over the map, and it's really dependent on Air Canada's needs and what they're doing, what their retirements look like, what their growth in fleet, you know, what's going on with their transition in fleet, so on and so forth. We don't see 100% of our pilot needs coming from the flight school or integrated ATPL.
We also have Jazz has multiple other sources of pilots that they're attracting talent from across the industry and various other flight schools. They've got a very broad brush to be able to kind of look at the industry and attract talent. They've been very successful. All of their training classes are full. They have no shortage of ability to get people in the door from a pilot perspective.
What Cygnet does is it really helps support that flow to support the, you know, the needs of Jazz and Voyageur, as well as the broader industry, which is really, you know, one of the big things when we looked at doing this, given that it was such a shift in our thinking around the type of training that we do, the quality of training, that, it would allow us to really provide a kind of a boost to the industry as we go forward here, for pilots. Hopefully I've answered your question and to some degree-
No, that's very, very helpful. Thank you very much. I'll leave it there. Thanks, Gary and Colin. That's very, very insightful.
Thank you. The next question is from Walter Spracklin from RBC Capital Markets. Please ask your question.
Yeah, thanks very much. Good morning, everyone.
Morning.
Yeah, the Cygnet's very interesting. I think it's a great way again to help diversify your business and congratulations on entering that line. I'm just curious as to, Colin, is this something you're focused on in terms of further diversifying your model? Are there other opportunities that you see out there that will allow you to kinda get drive revenue in different places?
And how far afield do you have to go, though? Like how far are you willing to go? T here's a few other companies that kind of are also in regional airline, but they've really gone along a different tack of being more like a holding company of a number of very different businesses. Are you willing to go that far, or do you wanna kinda keep within your wheelhouse of along the lines of aviation as you are right now?
Yeah, I'll tackle the first question, kinda on Cygnet and its growth and relationships there. Absolutely, you know, the real big thing with Cygnet is our relationship with CAE. Fundamentally, that gives you a very broad spectrum and scope in the industry. It also comes with great credibility. I mean, we at our organization bring a ton of credibility, kind of from the training and the industry and the operating side. As you know, CAE brings a ton of credibility from the kind of the flight training side as far as airline business goes. It's a great combination. We see a ton of opportunity there to grow that business, just kind of expand it out and move it into other areas.
As far as the broader picture, of course, and our plans and big picture, you know, we see ourselves sticking in aviation. You know, we don't see ourselves today moving outside of aviation or aerospace, and we think there's lots of opportunity in there. It's the strength that we bring to the table, is really our expertise in-house.
There's nobody else really like us that has, at our level, the Chorus level, the aviation strength that we bring to the table. We see that as quite valuable, as we look at opportunities across the spectrum, and we're out speaking to companies and looking at these various companies, the thing that we always get from these folks is that they would love to work with us and be owned by us, a company like us that understands the business.
That's one of our leverage points versus going to, you know, a pure financial model from a holding co. We see that as leverage and we're gonna continue to stick with that. There's lots of verticals outside of what we're in today that work well with our with our current book of businesses, so.
Yeah, that's very encouraging. Moving over to your leasing side, you were seeing OEMs having longer backlog, bigger backlogs, longer lead times, some delays and so forth. Is that resulting in a pickup or increased demand for aircraft leasing, and as well for your MRO and part provisioning business as some of these delays and longer lead times come from the OEMs?
Yes. Yeah, absolutely. I think when you look at the Falko side of the business and the leasing side of the business, what we're seeing is really strong demand, especially for regional jets. If you have an aircraft today that doesn't need maintenance and that's available, and it's an Embraer product or a CRJ900 or something like that, it's pretty much guaranteed you got a spot to place that airplane. There's no question about that. The demand is extremely strong from that perspective. On the MRO side, what we're seeing is, you know, all of our facilities are full. We have no space, no white space left. Everything is chock-a-block full.
Jazz, their JTS MRO business is, you know, looking at new opportunities to find ways to expand or do additional work, looking for space to do work. Voyageur, all of our 200,000 sq ft is full. There's no room there at all. You know, really strong demand. Used parts, the USM parts side of the business, growing very rapidly, as we expand that. As you can see from the results, I think Gary spoke to it a little bit, certainly I commented on it there, you know, some of our result performance is related to that USM growth for sure.
That's great. I guess that offsets the question I had about risk. You know, we've seen in the news a lot of, you know, some airlines hitting some liquidity issues. You know, I was going to ask whether you're seeing any resurgence in delinquencies or among your leasing clients, but particularly on the low-cost carrier side. It sounds like given the picture you painted on demand, it sounds like if there was a delinquency, that spot would be pretty filled up quickly.
Yeah, absolutely.
Yep. Okay. That's it. That's all my questions. I appreciate the time.
Thank you.
Thank you. The next one is from David Ocampo from Cormark Securities. Please ask your question.
Thanks. Good morning, everyone.
Good morning.
I just wanted to follow up on Walter's last two line of questions. I mean, if I take a look at the amount of lease revenue that you collected in the quarter was at 84%, and if I compare that to Q4, it was 88, and then Q3 was 91. I was just curious if you can comment on what's driving that. Is it concentrated to one counterparty, or is this something that you're seeing throughout your portfolio?
Yeah. Sorry, it's Gary here. What we're seeing, it's really just a handful of airlines we work with. It's pretty consistent quarter-over-quarter as far as that group, and we're pretty comfortable with where things are. It's just you're gonna see some movement in those numbers from time to time, but we're not seeing anything that's alarming at this stage.
How should we see that trending throughout the year? Should that 84 number gravitate higher into that kinda that 90% range?
Yeah, we would hope it will gravitate higher as the year goes on. We continue to work with our lessees and, you know, that I'm talking about there, but, you know, it's something that we're still comfortable with the risk and the lessees in behind it.
Got it. Then just on the fund, I mean, it's been pretty well telegraphed in the market that you're gonna launch this. It does seem like there's a lot of demand out there. I'm just curious if you've already had discussions with airlines even though the fund isn't launched yet, can we expect, you know, a faster deployment of capital than we've seen at the previous two funds?
It's Gary here. I don't know if you would see a faster deployment of capital. You know, you would always hope to, but I think the first thing is to get the fund launched, then you get through that piece, and then you start to moving along. Just to remind, Fund II is still active. They're still placing aircraft and, you know, that's going through the balance of this year.
Then you're gonna start to move yourself into the Fund III piece. Typically, you launch your new fund once you get at least to 75% of the commitments in your previous fund, say Fund II. I would say, I don't think you're gonna see as fast as, you know, or faster deployment of the capital. I'd say it's probably gonna be very similar, at least at this stage.
I guess how are you guys balancing that if you still have dry powder available in Fund II? Is it you need Fund II to fully fill up before you can start deploying capital at Fund III?
No, that's not the way it works. You get to about 75%, then you start working on your third Fund. Typically, I think Fund II is pretty much, you know, it's gonna be fully deployed here in the not too distant future. Yeah, we don't see any hindrance from that into Fund III.
Okay. That's it. That's all the questions I had. Thanks a lot, guys.
Thank you.
Thank you. The next one is from Tim James from TD Securities. Please ask your question.
Thanks very much. Good morning, everyone. I just wanna return to Voyageur for a moment. I think there was a comment about the margin performance being relatively steady. I assume that means year-over-year, but maybe you can just help me understand that. Just thinking about that business, revenue growth was very strong. You mentioned about a mix change. Can you talk a little bit about the moving parts that we should think of for Voyageur margins going forward and as you work your way towards your longer term target of CAD 150 million in annualized revenue?
I guess where I'm going with this is do you feel margin is kind of at a healthy, sustainable rate, maybe there's not a lot of upside there right now? It's really kind of revenue driven, the dollars of upside. Is there the potential for more margin expansion?
It's Gary here. I'll take the first part at least. On the margin, the EBITDA margin, it's consistent with what we gave out on Investor Day. That's what we're referencing. That's the point. It was in the 24-25% range as we listed there. From that perspective, we're feeling very good about where Voyageur is going. They're maintaining the margins while expanding their revenue base.
I think, yeah, I'll try to give you some color on the rest. L ook, we've refocused Voyageur in the last coming as we came out of COVID there and the challenges with that couple of years that we all had. You know, fortunately, we had that time to kind of refocus them on this USM and defense side of the business, and that's been a big part of their growth.
You know, we see continued growth, strong growth in that area. That's where most of their growth is going to come from over the next short period of time. Both those areas, as Gary's alluded to when we talked to during the Investor Day, both those areas have very strong margins. You know, we continue to see Voyageur growing, from a top-line perspective quite well over the next period of time, as well as producing strong margins, on a bigger part of their business for sure.
Thank you. Moving on, and this ties into Cygnet, I suppose, but maybe more broadly speaking about Jazz. Have you been restricted or limited at all recently in your ability to increase block hours and flying for Air Canada due to the availability of pilots?
Yeah, I mean, that's a good question. The pilot flow, as we move pilots around the system, it does, you know, give some ups and downs in our ability to provide block hours. It's really, you know, principally controlled by the flow and the decisions that Air Canada makes on how many pilots they wanna take and when they wanna take those pilots.
Where our job is really, and what we do at, within Jazz is to provide that backfill of the pilots as required. It does take a little bit of time to get those pilots through training and get them up to speed, and back in those seats and transitioning. You know, there's really no significant impact to our ability to deliver on the long term on flight hours. It's more just around, you know, the timing of as you move these pilots around the system, it does create some reductions, plus and minuses in the block hours for sure. The training classes are all full. We have no problems attracting pilots. We've been very successful at getting qualified candidates in the door and in our training classes.
Okay. Thank you. I guess just my final question, I'm just wondering if you can provide any more details or insights around the, what CAE and Chorus bring to Cygnet. I'm thinking in terms of what assets each contributes, what employees each contributes. Just any sort of additional color you can provide there would be helpful.
Sure. It's a standalone business, Cygnet Aviation Academy based in Kingston, Ontario. It is a Chorus-owned company. The Chorus side of the business contributes all of the ab initio training, the flight school, the aircraft. We do basically everything. Where CAE's relationship with us comes in, is really on the initial screening side. CAE brings a great deal of expertise to the screening of talent as you look at new pilots. We utilize a lot of their support and their tools to help us with determining the quality of candidates and selection of candidates. That's also where the other airline institutions come in. As the airlines start to look at students, they're part of that process as we select pilots.
They also, CAE would also be there when you get to the type rating. As the individual finishes up their flight training, they get their integrated ATPL, they will be going on to CAE to do the final endorsement training on whatever aircraft type that might be depending on the airline's choice. That could be a CRJ, that could be a Q400, that could be a 737. It really depends on the airline.
The concept is you've got an airline, you've got a great flight training and operating business that knows the industry, and you've got CAE, who's one of the, you know, the top leading training institutions in the world, all working together to produce an individual as a pilot from day one, as right through till they get in that seat within the airline.
Okay. That's helpful. Thank you very much.
You're welcome.
Thank you. The next one is from Cameron Doerksen from National Bank Financial. Please ask your question.
Yeah, thanks. Good morning. Just back to Fund III for a second. Just wondering if you can give us an update on the sort of the capital raising efforts here. I mean, it sounded at the Investor Day like you were pretty confident in raising at least the minimum. Just wondering, if you can provide any additional information on what commitments you've had so far and, I guess, about your confidence in getting to that CAD 500 million-plus mark.
Hi, Cameron. It's Colin. You know, I can't give you any specifics here. You know, we've been making great progress. Falko's done an excellent job of engaging the key LPs. Lots of progress has been made. We still feel very comfortable with seeing kind of the first close, you know, prior to or around the end of Q2. W e've had lots of interest. You know, like if we were really concerned about it, we'd probably be talking about that. We feel very comfortable and, we see it pretty much on track.
Okay. No, that's good to hear. I guess maybe a question on the asset management fees. You know, I know you've talked about this in the past, but, you know, there's variability quarter to quarter. I just wonder if you can just remind us what would drive that variability. I mean, if it's based on committed capital, I would think it'd be a little more, I guess, steady quarter to quarter. Maybe just a reminder for me. You know, just what drives that kind of variability in the asset management fee revenue line item from quarter to quarter.
Yeah, it's Gary here. you know, typically, as we've said, the asset management fees are 1% to 1.5%. I think if you look at this quarter, it's in line with the average of last year. From that perspective, it's good. There are some fees that, you know, make their way through from time to time, whether they're selling assets or replacing them, that can sometimes give some lumpiness. I think what you do is you just stick with that average and that, you know, 1% to 1.5%, and it gives you a pretty good proxy for where things are. That's what leads to some of the lumpiness in there.
Okay. The committed capital that drives the fees, that includes the capital in Fund I, correct? I mean, I know that the Fund I is consolidated on the balance sheet, but the asset management fee component of that's included in those in the revenue line item, correct?
No, that's, Fund I does not have any asset management fees we recognize because we consolidate it and, where we own the majority of that fund. It only relates to Fund II and managed assets that we have, on the books. It's really related to that.
Okay. Okay, no, that's great. That clarifies that. Just maybe just one other quick, I guess, accounting question. Just in the casual statement, there's an investment in funds line item. I mean, I forget what the number was, CAD 1.9 million or something like that. I'm just wondering what that's related to in Q1.
Yeah. We sometimes have to invest in Fund II and others. Remember, we have the 3.85% that we own of that. There's an amount of money that goes back and forth here and there. Yeah, that's what that relates to.
Okay. I guess there's no way for us to kind of, to model that.
No.
Just quarter-to-quarter.
It's very difficult, Cameron. It's really just comes down to when they need the money in the fund related to asset deployment. You know, you just have to look at the commitments we make and it'll be. It's not gonna be linear. It's gonna be based on demand and need, not it's not just a straight amort schedule.
Right. Okay, fair enough. That was all I had. Thanks very much.
Yep.
Thank you. The next one is from Konark Gupta from Scotiabank. Please ask your question.
Thanks, operator. Good morning, everyone, and congrats on a good quarter.
Thank you.
So-
Thanks, Connor.
Great. My first question. I think you guys mentioned, the asset sales you're expecting this year, are more skewed toward the second half. Do you still have a good visibility on the CAD 50 million-CAD 100 million value that you provided earlier?
It's Gary here. You know, we certainly see the second half of the year. It's traditionally been where we've seen asset sales anyway in the regional space, so that's, you know, certainly why we expect it there. We do have an asset trading desk at Falko. That's been set up and they've had a lot of, you know, they're in the market now as we speak, putting aircraft out there. From that perspective, we're starting to, you know, get visibility and we're getting feedback from the market, and we're still anticipating hitting that CAD 50 million-CAD 100 million in the second half of this year.
Okay. That's great, Gary. Thank you. Are those asset sales, extracted entirely to be driven by the Ravelin wind down, or would the other funds or even Castlelake would be involved?
It is a mix. It includes Fund I, it includes, you know, assets at Castlelake, it includes assets that we acquired as a result of the Falko acquisition that came across. It is a mix of assets.
Okay, that's great. Thanks. In the existing Castlelake business, I'm just wondering, seems like SpiceJet returned about five Q400s, they're off lease now, plus you already had about, I think one Q400 from Philippine. Do you intend to remarket all these six Q400s or would they be monetized as well?
Yeah. We'll, we'll look to do what's best for us. If it's monetize them, sell them, we'll do that. If it's to re-lease them to a client, we're gonna do that. We're out remarketing them as we speak. Yeah, we did take back the five. We're in the process of taking back those five aircraft which we provided for last year.
Okay. Makes sense. Thanks. If you look at, I think in the disclosures, there was a CAD 6.7 million figure for the end of lease maintenance reserve. Is that SpiceJet related or is that something else?
I can say it's not SpiceJet related, so it is something else. These things will come up from time to time in our leasing business, even though it may be specific to a client, so it's really one time to the client. As we start to, you know, take back aircraft, re-lease them and whatnot, you're gonna see these releases from time to time. Anyway, it did not relate to SpiceJet.
Makes sense. Thanks. Last one for me. For the Fund III, I know you're confident in closing the first tranche pretty soon here in the second quarter. Have you seen or have you noticed any, kind of, you know, probably, you know, like volatility or any kind of change in interest given what we have seen in the U.S. regional bank market lately? Or that has nothing to do with the Fund III?
Yeah. Hi, Konark. It's Colin. look, I mean, that's a common question we get. We've gotten that question quite a bit. you know, we've spent a lot of time looking at this and working with Falko closely on this and the LPs. The answer is no, there hasn't been a lot of... There's certainly been questions, but there hasn't been any lack of interest or change in focus or interest in Fund III. It continues to track as planned. You know, like we said earlier, we kinda anticipate things to come together with the first close here as we get close to the end of Q2.
That's pretty comforting. Thanks so much, Colin. Thanks, Gary.
Thank you.
Thank you. The next one is from Matthew Lee from Canaccord Genuity. Please ask your question.
Hi. Morning, and thanks for taking my question. Most of my queries are answered, but maybe just a housekeeping question here. On the collection side, your receivables is at CAD 110 million gross, with the expectation of a decrease to CAD 100 million by the end of the year. Can you maybe just talk about how confident you are on the ability to collect those receivables? Do you maybe have a target as to where you'd like that balance to go in the longer term?
It's Gary here. We're confident in collecting the receivables, so, you know, otherwise we wouldn't leave them on the books the way they sit. Ideally, we want it to be zero, but it will take time to do that. You know, some of these receivables will take a number of years to extinguish, you know, we're confident at this stage.
Okay, great. In terms of sales, just given your earlier comments on the demand of aircraft, is it fair you're still see or fair to assume you're still seeing the opportunity to sell your aircraft at book value or better? Could you potentially accelerate those sales in 2023 if the opportunity arises?
Yeah. Right now, you know, we're in the market, you know, we're still confident in our book value. We're still moving around to get that demand. If we have an opportunity to transact earlier, we are absolutely gonna do it, so. You know, it's opportunistic sales in the sense of, you know, we, you know, we wanna make sure we optimize our value here.
All right. Thanks. I appreciate it.
Thank you. The next one is from Tim James from TD Securities. Please ask your question.
Thank you. It's just a follow-up, and actually it was addressed by a recent comment, so, thank you anyways.
Thanks, Tim.