Earnings Call: Q4 2018

Feb 21, 2019

Earnings release

Good morning, everyone. Month periods entering December 31, 2018. The corporation's results, including D and A, and financial statements were issued on February 20th and are currently available via the company's website or SEDAR. Before turning the call over to management, listeners are cautioned that today's presentation and the responses to questions may contain forward looking statements. Within the meaning of the Safe Harbor provisions of Canadian provincial securities law. Forward looking statements involve risk 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 about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in the making forward looking statements, please consult the MD and A for this quarter. The risk factors section of the annual information form and the Exchange Other Filing with Canadian sir securities regular. Tours. Except as required by Canadian securities law, Exchange does not undertake to update any forward looking statements Such speak statements speak only to only as of the date made. Listeners are also reminded that today's call is being recorded and broadcast live via the Internet for the benefit of individual shareholders, analysts, and other interested parties. I would now like to turn the call over to your CEO of Exchange Income Corporation, Mike Pyle. Please go ahead, Mr. Pyle. Thank you, operator. Good morning, everyone. Joining me this morning are Carmel Peter, EIC's President Tammy Schock, our CFO, and David White, our EVP of Aviation. On our call this time last year, we told you how in 2017, we had achieved the best operating results in our history. Today, we are here to tell you that 2018 was even better. We achieved new records across the board in most of our financial metrics, and we demonstrated once again that our proven, prudent strategy was effective at growing and diversifying our revenues and earnings, strengthening our cash flow all the while paying larger dividends to our shareholders. 2018 was the 1st year, which we provided the markets with guidance for our expected financial performance. I'm happy to report that our results met the guidance we provided as we achieved a 12% gain in EBITDA and a 14% increase in our adjusted net earnings per share over the prior year. Not only did we meet the guidance we provided to the market, we hit all time records for revenue, EBITDA, adjusted earnings per share, and dividends per share, and payout ratio. Tammy will go into these financial results in greater detail later in the call. But I would like to emphasize that this performance is just in line with what we have achieved since our inception. Our dividend was increased through the 13th time to an annual rate of $2.19 While at the same time, we reduced our payout ratio to an all time low of 60% when calculated in our free cash flow less maintenance CapEx basis went to 74% when calculated on an adjusted net earnings basis. EIC has always prided itself on a model, which is focused on long term decision making. Decisions are not made based on what they will do in the near term, but rather what they will accomplish in the long term. 2018 was no different as we benefited from investments made and acquisitions made in previous periods. Quest And Munpton Flight College made significant contribution to our growth in 2018. But what is more significant is that they will also be the big drivers of our growth in 2019 The return on investments is not always as immediate or as obvious as these 2 acquisitions, or as the investments we have made growing Regional One's assets. Some take longer to show in our profits, but they are no less significant. Two projects at Provincial Aerospace are good examples. In late 2016, we announced the Provincial would be providing the in service support to Canada's new fleet of search and rescue aircraft, commonly known as fixed wing SARs. When the for the last 2 years, the company has quietly worked on meeting the requirements to begin servicing this contract in 2019. And we will begin to see its impact 3 years as the planes are delivered to Canada. We expect to build a new overhaul facility in Winnipeg in early 2020 to complete the overhauls on this fleet as they come even before where we awarded the contract, it will be close to a decade until the full benefit of this effort will be seen from when we began our efforts. But it will generate profits for decades to come. The Dash 8 Demonstrator surveillance aircraft, which we obtained Force Multiplier is very similar. The design, build and certification of this project took several years, but the vision came to fruition late in 2018 when transport Canada certified the aircraft. Discussions about projects are ongoing with governments around the globe and flying will begin in earnest this year. I will come back to our guidance for 2019 later in the call. But I wanted to let you know that the engines for our continued growth are already in place. West had an exceptional year in 2018. When we purchased the company, it was generating approximately $65,000,000 in annual revenue and $15,000,000 in EBITDA. And it had an order book of over $200,000,000. Today, EBITDA has grown by over 50% to $25,000,000 and the order book now exceeds $350,000,000. The strength of the order book enabled us to build a second facility to increase the production capacity and continue the company's square foot facility in Dallas is approaching completion, and most importantly, it is on time and on budget. We will begin test runs of product late in the first quarter, and the facility is expected to contribute to our results in the second half of this year. Mountain Flight College has been a very unique opportunity for ISD. A worldwide shortage of pilots has impacted the industry for the last few years, and is expected to continue to training commercial pilots for both domestic and international customers. It was an attractive acquisition candidates on its own. But it also provided a strategic component allowing EIC to create and maintain its own source of pilots for all of our airlines. I am pleased to inform you that in addition to the solid financial results, Moncton has delivered, the first pilot trained under the Bill Whirley scholarship program, was completed this year. Bill was the founder of Perimeter Airlines and a lifelong advocate of providing opportunities for our First Nations partners to have careers in the aviation business. The scholarship was set up to train First Nations candidates in aviation. Timothy Mason was the first to be awarded this scholarship, and he not only graduated, but he did so at the top of his class. Mr. Mason is from St. Theresa Point First Nation, who join us in congratulating him on this impressive accomplishment. The strength of our 2018 results was achieved in spite of very challenging conditions for the aviation business, in parts of the year, which saw other airlines experienced declines in profitability. The strength of our market position proactive management and the resiliency of our aviation operations allowed the aviation narrow space segment to match last year's strong performance. Our Manufacturing segment more than doubled their EBITDA contribution in 2018. Of course, Quest was a big driver of this performance, but the balance of the portfolio also experienced significant growth as their EBITDA grew by 33%. Back to our overall results for the year, While I'll leave much of the detail to Tammy, I did want to hit on some key points. First, I want stressed that the past year wasn't all about Quest and MFC. We have a diverse group of operating subsidiaries spanning multiple sectors and geographies, offering diverse products and services providing dependable and resilient 2nd, the growth we achieved in 2018, while substantial was not surprising. Rather, it was in line with what we have been delivering year after a year. If you look at our financials dating back to 2010, the 1st year when results are directly comparable as we converted from an income trust structure back to a corporate structure, we've been growing our revenue EBITDA and adjusted net earnings per share at compounded annual rates of 22, 26 and 12% respectively over this 8 year period. We've also consistently grown our dividend over that time as well. Including an increase in 2018, which was the 13th raise in 15 years. And even with our higher dividend, The growth in free cash flow less maintenance CapEx was greater, resulting in improved payout ratio of 60% for the year, the lowest in our history. I would now like to turn the call over to Tammy. I will update you on our outlook later in the call. Thanks, Mike, and good morning, everyone. First, I'll focus my results or my remarks on the 4th quarter results, and then I'll turn to our 2018 annual results. In the fourth quarter, we had revenue of $315,700,000, which is up 20% compared to Q4 of 2017. Aerospace And Aviation revenue was up 17 percent to $234,200,000, driven by a 10% increase at legacy airlines and provincial and a 32% increase at Regional 1. The Kitictment contract and higher passenger volumes in Ontario drove growth in our legacy airlines. While the addition of Moncton Flight College was the largest contributor to the higher revenue at Provincial. Regional One sales and service revenue was up 64% with the higher sales of whole aircraft and engines. Part sales, which are the most consistent portion of the sales and services revenue stream, was on par with the fourth quarter of 2017. Lease revenues were down 17 of 2017 did not reoccur in 2018. In the 4th quarter, our Manufacturing segment revenue of $81,600,000, which is up 29% over the fourth quarter of 2017. West window systems was the large contributor to the increase. However, the other entities in the segment also contributed significantly. We are pleased with our revenue growth for the fourth quarter, but I'd like to highlight several circumstances that resulted in revenue being pushed from the fourth quarter in 2018 into 2019. The first is the result of extreme weather in Atlantic Canada in December. The extreme weather as well as damaged infrastructure at the Frederickton Airport caused a disruption to pilot training. The pilot training revenue is not lost as those hours will be made up. It has just been delayed into 2019. In December, we also had a flood at Quest Toronto to our manufacturing processes. The disruption did not result in lost revenue, but it did cause the timing of revenue associated with certain contracts to shift from the fourth quarter into 2019, and even after insurance claims that corresponding reduction in profitability occurred. Lastly, Regional 1 had 2 aircraft sales that we anticipated would close in December, but will now close in 2019. Again, the revenue from those sources are not lost. Rather it has just shifted into 2019. Consolidated EBITDA for the quarter was $69,500,000, up $6,200,000 or 10%. $3,000,000 of the increase was from manufacturing and $500,000 was from Aerospace And Aviation. Our head office costs were down $2,700,000, making up the rest of the difference in our EBITDA for the quarter. The lower head office costs were largely the result of reduced personnel costs. The Aerospace And Aviation segment had EBITDA of $63,000,000. EBITDA from legacy airlines and provincial was up 3.8 12%, but was mostly offset by lower EBITDA from Regional 1. Higher revenue and operational efficiencies resulted in the higher EBITDA at legacy airlines. We witnessed fuel prices stabilize in the 4th quarter, while fuel prices were higher than in fourth quarter of 2017. The higher prices were mitigated by the fuel surcharges that we implemented earlier in 2018. Provincial EBITDA for the quarter benefited from the acquisition of Moncton Flight College, although its contributions were muted for the reasons I discussed earlier. A decrease in high margin lease redelivery settlements impacted Regional One's EBITDA for the quarter, which was down 11% to $28,000,000. Regional 1 also had a higher level of transactional sales in the quarter, including the sale of whole aircraft and engines. These sales generally have a lower margin, than other revenue streams within the sales and services revenue. The items that I highlighted in relation certain sources of revenue $2,000,000 as a result of the purchases of capital assets during 2017 throughout 2018, and the depreciation of the capital assets of that we acquired with the purchases of Quest And MFC. We had adjusted net earnings of $24,700,000 or $0.79 a share compared with $22,300,000 costs and acquisition costs, our net earnings increased 9 percent to $18,400,000. Net earnings per share was $5.9 compared to $0.55 in the fourth quarter of 2017. Free cash flow totaled $59,800,000, up 20% from Q4 2017. Our adjusted net earnings payout ratio and our free cash flow less maintenance capital expenditures payout ratio both improved despite declared increasing 5 percent to $17,200,000 from $16,300,000 in the fourth quarter of 2017. On a free cash flow less maintenance capital expenditure basis, our payout ratio improved from 71% to 60%. And on an adjusted net earnings basis, the payout ratio improved from 81% to 74%. Now I'll turn to our financial results for the for the 2018 year. Consolidated revenue was $1,200,000,000, an increase of $190,000,000 over 2017. The revenue breakdown for the year was $884,000,000 or 73.5 percent from Aerospace And Aviation, and $319,400,000 or 26.5 percent from manufacturing. Our EBITDA for the year increased 12% to $278,000,000. EBITDA in our Aerospace And Aviation segment was flat at $247,900,000. EBITDA from our legacy airlines and provincial was up 6%, while Regional One's EBITDA decreased by $8,300,000. The primary driver of the decrease, as I mentioned, was the lease, redelivery revenue, which did not recurve in 2018. Our effective income tax rate for the year decreased to 20.3% from 24.3% and that is due to lower tax rates applicable to our U. S. Earnings and a higher proportion of taxable earnings being earned in lower tax rate jurisdictions than in the prior year. We also had a gain recorded as the result of a revaluation of contingent consideration that is not subject to tax. We had adjusted net earnings per share of 2.94, which is up 14% from the year before. This resulted in our improvement in adjusted net earnings payout ratio from 81% to 74%. And our free cash flow less maintenance CapEx expenditures payout ratio as mentioned has improved to our an all time best of 60%. I turn to the balance sheet, I just want to comment on our adoption of IFRS 16, which is the new lease standard, the new standard that governs the accounting for leases. The new standard will be adopted as of January 1, 2019, and will be reflected in our Q1 report. We have included information about the expected impact of adopting that standard. The balance sheet will be impacted by the inclusion of a new right to use asset and a new lease liability. As a result of this, we expect that assets will increase by approximately 115000000 and liabilities will increase by approximately 119,000,000 expenses Our best estimate right now is that EBITDA will increase by approximately $20,000,000 and earnings per share will decrease by roughly $0.05. As a result of the adoption of this standard. The majority of our leases are for real property as we own substantially all the aircraft that are used in our operations. For this reason, the impact of the new standard on our financial position and earnings is much less than it is for many other airlines. Further, the adoption of this standard will have absolutely no impact on cash flow. So now I'll turn to our balance sheet. We ended the year with cash and equivalents of $43,000,000 and working capital of $301,000,000, with a current ratio of 2.26:one. This compares to cash of $72,300,000 and working capital of $237,000,000 and a current ratio of 1.9:one at the end of 2017. Our cash balance in 2017 included $56,800,000 to fund the redemption of our 7 year 5.5 percent convertible debentures, which were redeemed in January of 2018. Our working capital increased year over year, primarily due to the investments made in Regional One's inventory during the year, and increased business volumes in In our Q3 twenty eighteen conference call, we indicated that we expected a significant decrease in working capital during the fourth quarter, I can confirm that during the 4th quarter, we had cash inflows from working capital of $42,100,000. To have strong capital resources. In May, our credit facility was amended increasing the amount available to approximately $1,000,000,000 and extending its maturity. Subsequent to year end, the credit facility was amended again, further extending the maturity to 2023 and improving pricing. Two series of convertible debentures were redeemed during the year and replaced with new series favorably impacting interest expense and extending maturity dates. As a result, we have no convertible debentures maturing until 2021. That concludes my review of our financial results and all Turning the call back to Mike for some closing remarks. Thanks, Tammy. We are excited about 2019. Not because our growth pattern is about to change, but quite the opposite. We expect our double digit growth rates consistently generated to continue. However, unlike certain other years where the growth was driven by transactions entered into, during the current year. This year's growth will be driven by the investments we have already made. I will quantify our growth expectations in a minute. But I want to speak about the drivers of our growth first. We have spoken about Quest performance regularly in our conference calls with shareholders. The new plant in Dallas, Texas that was announced in the second quarter is approaching completion. And I'm very excited to announce that we have begun to run test products through it. It will take most of the first half of the year to get us through the learning curve and get our new facility up and running and contributing to our results. In fact, it will likely be a drag on our results in the first half of the year, while we incur startup costs and will not generate any meaningful margins. The impact of the new plant, which will double our capacity once fully operational is expected to be evident in the second half of the year when volumes accelerate and we take advantage of our growing $350,000,000 order book. This will keep Quest on its impressive growth trajectory and fuel further growth into 2020 when the Texas facility out of the full year of operation. Moncton Flight College will also drive growth in 2019. The ongoing and, in fact, worsening worldwide shortage of pilot continues to drive demand for MFC's high quality training. The company has entered into extended contracts with a number of its existing customers, which will keep the company running at capacity and at improved margins. Our internal and pilot training program is underway and a major public launch is coming later in the first half of this year. While the first internal pilots have already completed their training at MFC, the program is in its infancy and will not deliver a significant number of pilots to our own operations until 2020. As discussed earlier, Provincial Aerospace has 2 initiatives, which will drive growth into 2019 and beyond. In 2016, the Canadian government awarded the contract to supply replacement aircraft for its fixed wing Northern Search and Rescue operations to a consortium led by Airbus. Provincial will provide the in service support for 20 years. Rincial has been working hard at laying the groundwork for this new work. The first aircraft is expected in late 2019, with others following over the ensuing 24 months. Revenue for this contract will ramp over this period and then plateau once all the planes are in service. Our Force Multiplier has received simul certification and will begin flying missions this year. He is the 1st aircraft with state of the art technology and survey equipment available for missions on a fully staffed basis. We anticipate that the long build and certification process is completed the interest we have from receipt, we have received from potential government customers will turn into firm bookings. Government procurement cycles are often prolonged as we as such, we expect the order book to grow over time as customers were reticent to make firm commitments until the aircraft was certified and timelines could be guaranteed by Powell. Regional 1 has been a big driver of EMEA in growth as we have made significant, investments in its assets when accretive investment opportunities were uncovered. The ability to move quickly has been a key tenant to their success. Results in 2018 were down slightly from the preceding year but in no way does this suggest that the growth phase for the company is over. While revenues continue to climb in 2018, driven by increased sales of parts and engines, parts engines and aircraft, I'm sorry, EBITDA fell slightly because of fewer lease return settlements. Which are highly profitable, but do not occur in every fiscal period. I would like to take the opportunity to discuss a press release we issued on Tuesday announcing the joint venture between Regional 1 and SkyWest to acquire lease and sell CF34 engines. The power that drives the CRJ700 and 900 aircraft amongst others. SkyWest is the largest operator of CRJ Aircraft in the world and has a deep knowledge of these assets. SkyWest recently announced their entrance into the leasing business. We believe that this partnership has the opportunity to be mutually beneficial to both parties as Regional One's domestic and international relationships and distribution network will facilitate placement of assets around the globe. It is important to note that while the joint venture is in its early stages, and investments required, the investments that are required are included in our annual growth capital expenditure estimates for EIC. We believe this partnership brings together 2 of the leading players of the CRJ marketplace and the combined assets and capabilities are an exciting vehicle for growth. I spent significant part of this conference call discussing how we take a long term view of investing, and pointing out how investments made in previous years will drive growth in 2019, 2020 and beyond. We believe that the joint venture is no different laying the groundwork for future expansion. We are pleased to have been awarded the RFP for court share of transport services by the Manitoba government. This serves to further strengthen our relationship with the provincial government in Manitoba. This brings me to our guidance for 2019 and beyond. 2018 was the 1st period which we provided forward looking guidance as to what to expect from EIC. We are expanding this guidance this year as we will not only provide guidance for the current year, but also on our longer term plan to increase dividends while further reducing payout ratios. Tammy explained in some detail the impact that the implementation of IFRS 16 will have on our financial results. We have always owned our fleet of aircraft. And as such, the impact of IFRS 16 and our results is limited compared to most air carriers. For the sake of comparability and simplicity I will provide you guidance based on historical accounting standards. Adjusting to the new standard will simply be a matter of adding the changes Tammy has described. Following this year's increase of EBITDA of 12%, we expect EBITDA in 2019 to grow by a further 10% to 15%. Adjusted net earnings per share, which grew 14% in 2018, are expected to grow by an additional 8% to 12%. Next year. I would team. 2 of the significant factors that differ between regular and adjusted EPS are the amortization of intangible assets created by an acquisition and Both of these expenses are non cash and did not acquire a reinvestment in the asset. The expected reductions in these items which do not impact adjusted EPS, but are part of regular EPS will result in EPS increasing by a much higher rate of 20% to 25% in 2019. We continue to believe that adjusted net earnings per share is a more important, informative representation of the profitability of the company. But we are providing this separate guidance because of the anticipated dichotomy between the two means of presentation. I should also caution that acquisition expenses are highly variable depending on opportunities uncovered. Impact adjusted EPS, but are included in EPS. As such, EPS could change if a significant acquisition were incurred. I would like to point out that The main drivers of the growth, Quest, new facility, Force Multiplier, fixed wing search and rescue and the growth MFC will all ramp throughout the year and have a greater impact and more importantly, our profitability that will enable us to continue to increase our dividend in the future. 2018 was a testament to our strategy as we not only increased our dividend by 4% to an annual rate of $2.19. But also materially reduced our payout ratio. When calculated as a percentage of adjusted EPS, it fell to 74% from 81% and when calculated on a free cash flow less maintenance capital expenditures basis, it has fallen to 60%, our all time best. The stability and reliability of our dividend is paramount to our a new 3 year initiative to further reduce our payout ratio from the 2018 record low. Over the next three years, we expect to reduce our payout ratio to approximately 50% when calculated as a percentage of free cash flow less maintenance capital expenditures or 60% when calculated as a percentage of adjusted net earnings. We have just demonstrated that we can increase our dividend and strengthen our payout ratio at the same time. And that's exactly what we plan to do. While we've been pleased with our operating performance over the last 2 years, the same cannot be said for our stock price performance. It is not a secret that we have been the target of a short attack, which has depressed our share price. Our Chairman discussed this challenge in his year end report to shareholders, and I will not repeat his words, but I would like to reiterate one thought. Stocks are ultimately valued on performance. We provided guidance that we would deliver double digit increases in profitability in 2018 and we delivered on that promise. We are gaining forecast significant growth and even stronger payout ratios. We know that we continue to deliver profitable growth that exceeds the market and a growing safe dividend that our stock will reflect those results and then our stock will ultimately reflect those results. Before I conclude my prepared remarks, I'd like to take a moment to thank Tammy for her years at EIC. She has been a very important part of our team, and I appreciate the way she has handled the changeover to her new job in New York. By staying with us through year end, she ensured a smooth transition. MetLife is getting a star employee. Thank you, Tammy. I am also pleased to announce that our search for a replacement for Tammy as CFO, is coming to a conclusion. We have been fortunate to have a strong pool of applicants. We are finalizing our selection and expect to announce a successful candidate very shortly. I want to thank all of our stakeholders for their ongoing support. 2018 was a great year for EIC, and I simply could not be more excited about 2019. I look forward to speaking with you again following the results the release of our first quarter results in May. We would now like to open the call to questions. Operator? Thank star followed by the number 1 on your touch tone phone. Please The first question comes from Steve Hansen from Raymond James. Just on the fixed wing SARs, Mike, to begin with, you know, this is a large contract that's been a long lead time in the making, but the revenue ramp that you're describing back half weighted. I don't think you've ever really quantified it. And so just trying to give us a sense for what this could mean over the 2 to 3 year ramp and you'd identified 24 months would be helpful as we sort of cast our guidance or forecast out a bit. We have never given really, precise guidance on this. In the current year, the EBITDA is likely to ramp in sort of the $2,500,000 range from this contract. It's been fairly small in the past as it's mostly and recoup of setup costs. And, that should more than double, by the time the planes are all in service in 2020, 2. Okay, very helpful. And then just quickly on this new SkyWest arrangements, just trying to get a broader sense for what again, you think this opportunity set is like. I think you've described what both parties bring to the table, but maybe just a sense for the cadence is how this will evolve. It sounds like more of a 2020 story. 2021 as the engine opportunity ramps up, but maybe just some context around that, engine opportunity relative to, you know, the airframe parting opportunity. Well, the initial deal where we've directly purchased a number of airframes, Carmel, can you help me with Yeah, it's 12 airframes in total, a few of which were part out. The rest we looked to lease together with the engines that will be in the JV. So We certainly do expect to see the impact starting this year and then look to potentially ramp it up in subsequent years. The, the, I think the key takeaway, Steve, here, and this is, this is one of those things that it's really the thin edge of the wedge. The, the regional aircraft have stayed in service far longer than people anticipated a number of years ago. And as such, the engines that some people thought would be coming to the end of their life are now going for shop visits to stay in service for prolonged periods. So the demand for the CF34 engine is very high. And so as, product becomes available, whether it's from SkyWest itself or from third parties, we will buy that with a director in the joint venture and then using the combined resources of the SkyWest and, and ourselves, place that around the world. It's important to understand, SkyWest is by far and away the biggest player in the regional jet market. Carmel will probably crack me here, but they have 300 or 400 aircraft in this segment. They're so big. 2nd place really doesn't exist. And so, for us, the opportunity to partner with a company like that in a product that we know as well as this business. We, it's well known. The deal we had struck with Lufthansa, where we bought a dozen aircraft a few years ago. And did exceptionally well with that. It's really just the, the entry point with SkyWest, and we're excited about working with them. It sounds promising. Thanks guys. Your next question comes from Mona Nazir from Laurentian Bank. Your line is open. Good morning and thank you for taking my questions. And Tammy, all the best to you as you take on your new role. Firstly, I just wanted to touch on the quest and the well, really the 2 kind of nonrecurring items in the quarter. So the flood impact I think it was mentioned that there was a revenue and also some EBITDA flow through and the weather on the Moncton Flight School. So for Q4, just wondering if we could quantify if possible what kind of impact that would have had either on the top line or EBITDA? Conceptually, what happened with us at Quest was the water main for our sprinkler system broke under the building. And the water came up through our floor and shut down our plant. We are still without water there. So we've been running the plant on kind of an ad hoc basis with temporary water systems. So it's been a challenge right up to today. We're about to go back to full production in terms of city water and those kinds of things. Marty and his team did a phenomenal job of managing what could have been a far bigger problem. We were able to meet all our production requirements and keep our customers happy. But it did, it did reduce our profitability in the quarter. MFC, had, some really hard luck in terms of windy weather and then a problem at Frederick And Airport, which limited our ability to fly. Again, those students are in, in housing. They're not going to not do the flying it just pushes things into a subsequent period. The greater so, and it reduces profitability in the current period. The challenge is is it creates a lot of work that we've got to do in the first half of this year because we have to finish what we were going to do last year. Plus take on our full 100 percent capacity this year. And then finally, the one other piece, Mona, because I'm going to give you an aggregate answer to your question. I'm not going to answer add sort of them on a per company basis. We also expect it to sell a couple of other aircraft at Regional 1 and the customer wasn't ready to take delivery. So it pushed that out into a subsequent period. When you look at the aggregate of those, it would have pushed EBITDA for the quarter into the mid-70s. So, a little over a $5,000,000 impact between those three items. But I am not comfortable breaking those down on a by company basis. That's very helpful. And then just secondly, I wanted to touch on the SkyWest deal a little bit more. It seems like it could just be significant, and I understand that. The SkyWest fleet has over 4 70 aircraft. So I'm just wondering if you could talk about, you know, how many engines this could this JV could encompass going forward. I don't know if you can comment on the ownership structure. And would it be fair to say given that the CF 34 engines are utilized on both Embraer and Bombardier aircraft it fits into your existing 1 portfolio, and there could be synergies with your Bombardier agreement as well. That was a long question. The makeup of the, the JV, I am not going to disclose specific percentages, but I will say that, the majority position is held by SkyWest in the project. The initial engine purchase is not dramatic. It's significant. It's included in our, in our, capital expectations for the year. But it's really just dipping our toe in the water. With the number of, of engines they have in their fleet plus the stuff around the world, in other places that joint venture has the ability to grow dramatically, in the future. Quite frankly, one of the things that I find exciting about it is SkyWest is an industry player and they could have picked whoever they wanted to deal with on this. And it's our experience with sisly what you said, the CRJ platform, the ERJ platform, our demonstrated capabilities had them choose us to work with them. And I think that says a lot for, Regional 1 stature in the, in the regional aircraft market. Okay. I know we're only allowed two questions, so I'll step back. Thank you. Your next question comes from Scott Fromson from CIBC. Just give an update on the leasing outlook for, Regional 1, please? And maybe in context of the, the delays of, Sorry, sales and leasing forecast in context of the delays with Q4? Well, the delays we had in Q4 really didn't impact leasing. They were, they were a driver of sales of full aircraft, which we will recoup, in the current year in 2019. Leasing revenue is expected to be, in the same realm as where it was last year. We have moved some of our 2019, some of our, I'm sorry, 900 aircraft that are on lease from power by the hour leases to regular industry standard leases, which will increased revenue in the final 9 months of, 2019. And in terms of the aggregate results, we expect modest growth in Regional 1 in 2019. Just to follow-up on that, can you give a little bit of a on the, on the margin outlook? I've reached the 1. Scott, it's really important. It's really difficult to do that simply because it's a matter of product mix. If you look at the individual components within, the revenue at Regional 1, they're all relatively stable. The margins on aircraft sales are much smaller. They're in the low double digits. Typically when you're selling an aircraft, parts margins are much higher. And so that's where you see when we talk about the sales service margins bouncing around the way they do. When you have a sale of the big aircraft, as an example, we sold an ERJ170 in December. Which is an aircraft worth close to $10,000,000. The margin on that in absolute dollars is significant, but in percentage terms, is much lower than it would be on our parts sales. So that it's really the margin doesn't change much. The product mix changes period to period. And the leasing margins are very high because really the only costs in there are depreciation. So they're very high from a margin point of view. So in sum, the mix, the mix can vary the, the margins are stable across the, the revenue portfolio. Think I'm going to get you to answer my questions. I was a way better answer than I gave. Your next question comes from Cameron Doc Darkerson, Darkan. I apologize, Darkson, from National Bank. Your line is open. Yes, thanks. Good morning. I guess, just a couple from me. I mean, first, just on the Department of Fisheries contract, I know there was an expectation that that be awarded at the end of at the end of 2018. And it sounds like it's more of a something that's coming later this year. I'm just wondering if you can comment on on the delay there why that happened? It would be very dangerous for me to try and explain why governments take how long they take. It's a complicated process. We believe that the contract is going to be awarded sometime in the next Whether it's not in the first quarter, it would certainly be in the second quarter. Our current contract has been extended through the current year. So it would, even if awarded, it would have no impact on revenues in 2019. We remain cautiously optimistic. And one of the things I'd like to point out is the guidance I've given doesn't include any revenue from any of the RFPs we're bidding on, largely big ones being the DFO contract and the Manitoba RFP for Medevac Services, which has also been delayed. Right. Okay. No, that's good. And maybe just maybe a broader commentary on kind of the manufacturing portfolio. We know that Quest is doing extremely well, big backlog growth there over the last 12 months. Maybe you can just comment on some of the other portfolio companies in the in the manufacturing segment, how those things are trending? The manufacturing sector is the most fun when I get to quarter end because everybody ends in their, their results, they're better than last year and they're better than their budgets. We've grown, significantly across the board. Bend machine, in, Ontario has benefited from the increase in, military spending. And they're running at, near capacity. We added extra production equipment there this year. Take advantage of opportunities. Our stainless tank business in, Springfield, hit all time highs for production capacity. And we're, our production in our plant it continues to do very well. Alberta has strengthened somewhat from what it was before, but with energy prices in the 50s, it's still building slowly. It is nowhere near the peak it would have been 3 or 4 years ago. We've seen an improvement in our cell phone tower business. Again, it is nowhere near where it was at its peak. It's very driven by changes in cell phone technology. And until we begin to see the 5G rollout I don't think you'll see it back in the $9,000,000 or $10,000,000 EBITDA range. It's currently in the $3,000,000 or $4,000,000 EBITDA range. And then our business in, BC Overlanders has been solid. It's consistently grown and their order book is strengthening as well. So I think in aggregate, if you look at everyone except Quest, it was up about 33% last year. And we expect further growth in that business this year. But they would all be running, at the high end of, of their capabilities. Okay. No, that's great detail. Thanks very much. Your next question comes from Tim James from TD Securities. Your line is open. Thank you. Good morning. My first question, the report indicates there was 1.1 $6,000,000 in net transfers to, to inventory, from capital assets in 2018. Tammy, I'm just wondering if provide the value for Q4 specifically? When I look at let me just, I'm just having a look here. Net transfers between inventory and capital assets were pretty trivial in the 4th quarter. Then just looking at working capital, it's used at $55,000,000, $65,000,000 in cash over the past 2 years. Is that a pretty good proxy for 2019 or should it move lower? And what are the components of those cash requirements? So the that isn't, it would not be a good proxy for 2019 going forward. We would expect that, working capital will be much closer flat in the current year. We had a ramp up, to fill working capital deficiencies and acquisitions, particularly in MFC, where we funded some, deferred payables that they had as part of the acquisition. And then we had ramped up inventory at Regional 1, during those years. I would expect that absent the material acquisition, there shouldn't be any material build in working capital in the current year. Now, when I say that, I have to put the asterisk beside it, depending on what regional one buys in a given period, they don't buy inventory the way Footlocker does when they phone night can get it equally when as their sales when opportunities come, we'll take them. But generally speaking, the absolute level of inventory. And as a result, the investment in working capital there should be flat through the year. And it is possible that that, an aircraft could, they may, could make a decision to part it out in which case it could come out of capital assets into inventory. That doesn't affect cash, but it affects our working capital position. Right. Okay. And then just actually on that same topic of the $34,000,000 in disposals in 2018 asset disposals, how much of that was from the Regional 1 lease portfolio or is virtually all of that? Virtually all of it. Yes. Okay. Okay, great. Thank you very much. Your next question. Just before we take the next question, I just want to one thing with Tim there. And that was the $34,000,000 in disposals. When we record our growth CapEx and describe CapEx in Regional 1. It's on a net basis. So we're always going to have significant disposals and new aircraft, purchases, which exceed that to the extent there's maintenance capital investment. And then if it's beyond that, it would then be a growth capital. So, I don't want people to think that because there are disposals of over $30,000,000 that somehow The lease fleet has declined. It we sold 34, and we actually purchased more than that. Your next question comes from raveel Afzal from Canaccord. Your line is open. Yes. Thank you. Good morning, Bobby. Good morning, Mike. You know, I'm thinking about the market share for Regional 1. I don't have handle on that. I mean, you guys signed a contract with Bombardier, a partnership with Bombardier now with SkyWest. I'm trying to figure out what your market share is or what your market positioning is in this regional market? Who are the guys who are bigger than you? Where do you guys sit? The hard part with market share, Ravi, is that we have different competitors in different aircraft in different ways. So there's companies as a, for example, like Chorus Aviation who've made long term leases of CRJs to Air Canada. Oh, or there's other less companies like that who AAR and people like that. That's not really our business. In terms of the actual sale of parts for these aircraft aftermarket parts, we would probably be the largest player. In the CRJ market. The turboprop market is probably a little bit more crowded with people like Afmax in Canada. And other people in the U. S. What makes us unique is the short term to medium term leasing and parting out businesses to go together. We have competition in both of those segments. We're very good companies. But very little competition of people who do both. And that gives us a unique view of the market And quite frankly, that's what drives the profitability levels that Regional 1 achieves. It's the fact that we can straddle the fence between those two marketplaces. Thank you for that. And then, congratulations on the charter contract win. Can you, to the extent possible, is it possible to quantify what the upside, downside risk is with some of these other contracts that are coming up for renewal soon? Well, the the DFO contract we have. So if we were to lose that, that, the new contract is much bigger than the contract we have. It's about double the size, depending on exactly how the government awards it. So, that would be a material contract for you to lose it. I don't think in the middle of the competitive process, I want to disclose an EBITDA number. Right. In terms of the Manitoba contract, we have said that we do, between $10,000,000 $15,000,000 in Medevacs and Manitoba. That's a number I said before. And while we don't know our exact market share, my guess is that's about of the market. So the upside is material. Where were we to win that contract? Perfect. Thank you. And just finally, any commentary regarding your acquisition pipeline? Acquisition pipeline is there's lots of stuff to look at pricing is high, particularly in the U. S. There is nothing imminent, but, Adam is very busy coming into my off and saying, what about this? What about that? So, we're excited about it, but I don't think you're going to see a press release in the next 2 weeks. Got it. Thank you. Your next question comes from Mark Neville from Scotiabank. Hi, good morning. Hi, Mark. Just a first question on Quest, the $350,000,000 backlog I'm just sort of curious how firm that is typically how quickly it would get revenue. I'm just trying to think, you know, if there's sort of potentially near term if there's sort of capacity issues there, just given the ramp and, yeah. We've been cautious on how much we've taken for the first half of next year. We aren't the last thing we want to do with a business growing like that business is it's a disappointment mars. So we're confident that we'll be able to meet, the orders we've taken. In terms of the firmness of that order book, things do often move from period to period. So a building that we expect to go up in the first quarter of 2020 goes up in the second quarter of 2020 depending on other things. But there's very few projects that once they reach the order book, they don't ultimately come to fruition. We do not include in that our, our leads list of stuff that we expect to get in that 350. That's simply those are confirmed orders. And that would run out, the bulk of it through, 'nineteen, 'twenty and 'twenty one. And we're booking into 2022. Okay. On the Force Multiplier, has there been any revenue associated with that yet? Not with that aircraft, but because we were a little bit late in delivering, or getting the certification, or at least longer than we thought it would be, We did do a project with other aircraft that we have, in Canada, late in 2018. And the first, the first, contracts are coming very close to fruition, in the current year. But in terms of the Force Multiplier aircraft itself, its virgin voyage is yet to come. Okay. And maybe we can sneak, one last one. And just for Tammy, just on the IFRS 16, just on the asset, the 115, I'm just curious the amortization period, just for modeling. Okay. So there's actually pretty significant mixture in there. If I focus on our largest leases, which drive that asset, there's a couple of them that are property. So for example, Quest's new facility in Dallas would be one of those. So it would run off over the lease term. And then, so that one's actually got a, I think it's less 10 years approximately of an amortization period there. Some of our other airport leases, which collectively add to a big number, are quite long. So they go off for a long period of time. You can kind of work back into it, Mark, that we've given guidance it's dilutive to the extent of about $0.05 a share. And we've given the debt amount, take the interest, take a reasonable interest rate, and then the force is the amortization? Yes. No, that makes sense. Okay. Thank you. That will roll as well. It'll as we as leases come off, they'll be renewed and come back on. So you'll see, I think, some steadiness there. Okay. All right. Thanks, Timmy. And good luck on the new role. Thank you. Your next question comes from Konark Gupta from Macquarie. Your line is open. Thanks and good morning. So first question on the fuel. So oil price has been very volatile since the October. It was down dramatically and then it's kind of rebounding again. How are you managing your margins in the airline business through fuel surcharges and airfares given this volatility? I'm like, how are your discussions with the customers in this up and down cycle? Good question, Konark. Because of our market position in most of the places we fly, not everywhere, But, most of our stuff is an essential service into First Nations communities. And so they don't see the day to day changes in fuel prices. So for us to change our prices as a big communications exercise to explain why we're doing it. And as a result, we typically get an earnings hit during ramp up periods of fuel crisis because we have to take the time to before we did not actually put the fuel price surcharge on. Having said that, because of our position in the marketplace, we're able to pass it on And so during Q2, but especially Q3 of last year, we were able to put the necessary fuel surcharges in place. We are fully covered for the recent run up in fuel prices and probably a little bit more. If fuel prices were to stabilize where they are now, I think you'd see us reduce our pricing, later on in the year. But as you say, it's super volatile. So At this point, we're comfortable with the surcharges we have in place. Okay. That's good color. Thanks. And then secondly, on IFRS I just wanted to clarify some of the comments you made. So EBITDA is going to benefit by $20,000,000 and I guess that's due to maintenance cost and lease cost capitalization, I guess, but EPS is going to see a slight negative impact. Is it because the depreciation, amortization and interest expense altogether will exceed the capitalization of those positive factors in EBITDA? Yes. So there's like over, if you, if you had a stable, portfolio of leased properties over time, the 2 are equal. So the amount that, that EBITDA that comes out of EBITDA and goes into earnings is approximately equal, and there's a slight hiccup in that because of because of what we put in retained earnings upon adoption, the cash flows are the same. So it's gonna, it's it's gonna run its way through on an equal basis. The timing of interest expense on the leases we have in place plus the amortization differs from the cash flows that we were seeing going through EBITDA. So that's where you get a slight, drag on earnings in the early years. Which would reverse itself over time. Okay, understood. Thanks. And just clarifying if you have given any thoughts to the impact on on segments in terms of EBITDA as well as maintenance CapEx because some of the maintenance costs will be capitalized. The maintenance, the maintenance issues are de minimis in our business. When you're looking at, our, over $100,000,000 in maintenance CapEx, the vast majority of that is on airplanes. And we own all our airplanes. And so while this is a much more complicated process, in most companies, like that lease assets, particularly airlines, it doesn't really impact us in that way. Ours, it's almost all real estate leases. Yes. We have one aircraft lease. That's it. Everything else is, property. Okay. And you mentioned anything about the segments at all, like, manufacturing will have minimal impact compared to aviation? Yes, aviation, it has the bigger impact because it's a bigger segment. But, manufacturing, there's facilities that are on lease. So, definitely a portion of it is in manufacturing. Q1 will allocate that for you. We're just finalizing the accounting But I would suggest you it's going to be largely proportional because there's no difference. We need real estate for both parts of the business and that's where most of this is in heard. The single biggest lease, I think, is Quest's new building. And so there'll be an impact there. And we also have significant real estate leases for the ground, where on the airports where all our hangers are. Okay. Thanks for the color. The buildings, but we are port owns the land. Okay. That's great, Mike. Thank you. Your next question comes from Chris Murray from AltaCorp Capital. Your line is open. Thanks guys. Good morning. Mike, just Can we talk a little bit about your kind of guidance assertion on your payout ratio, longer term? And I think more importantly, what that is that you're sort of thinking about, for exchange? I mean, if we look historically, it was always aiming to keep the payout ratio around 70% increase the dividend when you got below that. And there seems to be maybe a bit of thought around the balance between our internal growth and acquisition growth going forward. So I'm just trying to square how we think about dividend growth in the future. How you guys are thinking about it as the company matures? It's a really good question, Chris. Our thought process on a go forward basis is we're proud of our dividend, growth rate that we've achieved over 15 years. And we intend to continue to grow the dividend. But as we've gotten bigger, shareholders are concerned about the stability of the, of the dividend. And while at 70%, I have no doubt we've done it for 15 years that the, the dividend is secure. By moving that payout ratio down as we described towards 50% on the, free cash flow methodology and towards 60% on an adjusted net earnings methodology, it makes the stability of that beyond reproach. It also by lowering the payout ratio does increase the amount of money we have for, internal growth. And you've seen we have the ability to grow, invest in ourselves outside of the acquisition program, but whether it's RFPs or additional equipment, at Regional 1 or those kinds of things. So I think what you're seeing is a philosophy that we're all we haven't changed that we're an income paying company and that we're going to continue to grow it, but we're going to invest the growth in two ways back into ourselves and in the dividend. And as a result, you'll see that reduction, in the payout ratio. Mean, the current year is a good example. The dividend went up by about 4% or 5% payout ratio went down by 10%. I'm not sure that we'll get that kind of impact in every year. But we think that we can drive that thing down to around 50% within 3 years, which will, strengthen the dividend and, provide extra cash to grow. Should we think about the pace then and how we think about dividend policy going forward that you'll be a lot, maybe more conservative kind of starting to aim at a at a lower growth number. As you increase that? Is that maybe a better way to put it? And I would say outside any external major acquisitions or anything like that? I don't, no, I don't, I wouldn't really say that. I think the, the growth rate has been, certainly that 4 or 5% was for 15 years. And, we don't have a precise target of what the annual growth rate in the dividend will be. It depends on our results. But the reduction in the payout ratio that I'm talking about going forward isn't new. We've done more than that in the last 3 years where we've taken it down to the 60% range from the 70 something percent range. So I think we can do both. It's our profitability that's going to drive our dividend growth. And, like I say, the move to 50% wasn't me subtly telling you I'm not increasing dividends anymore. We intend to do both. Okay. Fair enough. And then maybe just a clarification on an earlier comment you made and maybe if you can give us some maybe better color on how to think about it. So you talked a little bit about there were some items from Q4 that will get pushed into 2019. But then you've also talked about seasonality being more back half loaded and then you've got, of course, a normal, kind of winter impact with winter roads on the aviation business. How should we be thinking about kind of the cadence of EBITDA through the year? There seems to be a lot of moving pieces, maybe more than normal this year, in how we should think about your earnings targets? I would suggest to you that, the projects we have that are going to drive growth, don't contribute to the first quarter. And in fact, Quest will be negative in the first quarter as we ramp up the plant. We've hired a lot of people and they're learning how to run their machines. And then after that, you'll see growth in each subsequent quarter. But like I say, more of it in Q3 and Q4, as each of those contracts I've talked about grow, the seasonality of the business shouldn't change. It's really just the rollout of those growth projects that grow in the second half of the year. Okay, thanks. And Tammy, congratulations and good luck with the new role. Your next question comes from Derek Spronck from RBC. Hey, just in terms of you got you have a lot of new growth initiatives in new contracts, coming to permission in the in 2019. How should we think about the EBITDA margin profile next year. Can you provide a little bit of color around that? Well, just give me a second and I'll take a peek at again, the I'll take a look at our internal stuff for where margins are going here. Again, the one thing I just I wanna make sure I caution everybody on is that the makeup of Regional One bounces around, if I sell 2 CRJ170s for $25,000,000, it's going to depress that margin, but increase the sales. If I don't, it'll reduce the sale, the sales, but increase the margin. When you look at our overall, EBITDA margin in 2017, it was about 24.5 if I, remember correctly. And then if it's down to below 24% in the current year, I would expect 2019 to be, more in line with 2017 than 2018. Okay. No, that's helpful. And then just quickly, expectations around maintenance CapEx for the year and your senior debt to, EBITDA is at around 2.5 times. So kind of at the upper end of your target still well below the covenant level. You know, how are you thinking of leverage right now and it sounds like capital intensity should be lower by and large, which would indicate that you know, potentially an improvement in the leverage level. So just a little color around maintenance CapEx expectations and and and and and leverage would be, helpful as well. Thank you. Maintenance CapEx will be similar to the current year. And it's hard for me to give you a precise granularity because of times, I want engines come up changes, but I don't see a material change. And the same with growth CapEx, I think the aggregate of that, our plans inclusive of the new partnership with SkyWest. I'm including that in my estimates for growth CapEx are in line with last year. In terms of the debt position, I think by the end of the year, you should see the leverage level decline. With the growth in EBITDA and free cash flow. The only asterisk I want to put beside that is, is we haven't put anything in the capital if we win the RFPs, but we also haven't put any of the upside to, earnings in that. And it's hard to quantify until we know how the governments award the work. There's a lot of optionality in these contracts about what they actually will purchase. So were we to be successful on either of those 2 big ones we're talking about? We'll give you a revised CapEx number and a revised earnings number in the forecast point of view. But absent those 2 things, which is the way that's all the numbers I presented to you. We should see a decline over the year in leverage. Okay. No, thank you. I appreciate that. Your next question comes from David Ocampo from Cormark. Securities. Your line is open. Good morning, David. Good morning. Thanks for taking my questions. Great color on the SkyWest JV, but just a clarification for me. When I look at the CF34 engines, I mean, the useful life for these probably extend past your normal buy a lease and sell range of 2 to 4 years for Regional 1. Is this kind of one off then? Am I looking at this right? And you guys will stay within that range? It depends on the age of the engine when you roll it into the joint venture and what you do with it when it comes to overhaul. The time between overhaul fits our general, parameters. One of the decisions we'll be making that may be different within the joint venture that we would typically make is SkyWest has great relationships with the engine overhaul companies and, good pricing on those kinds of things. So the JV may choose when some of those engines come due to overhaul that'll keep them in the lease portfolio or they may choose to park them out. Those are decisions that will be made by the JV at the time it happens. But the management of CF34 engines is no different than what we do. We have some and we will make decisions with the strength of the market today. Whether we're going to overhaul them and keep them in service and extend leases or sell them and purchase different ones, it's really the same business. Right. That's great color. And, the backlog at Quest, the 350,000,000, how much of that is from the US greenfield facility? I just wanna know, like, how aggressive you guys can get there or how much of this can actually grow? It's hard for me to tell you how much is for which facility other than I can tell you that we, and we kind of know that breakdown for next year. But after that, both plants can do any job. And so we'll balance them depending on which work we take in a given year. But I could tell you that after you get past, our ramp up phase, we have capacity to grow well beyond the $350,000,000 order backlog. We are once the plant is running production constrained. That's great. Thank you. Your next question comes from Nav Malik from Industrial Alliance. Your line is open. Good morning, Dylan. Great. Thanks. Good morning. Thanks for taking my questions. I just wanted to ask, I guess, on Quest, kind of as a follow-up to what you were just talking about, but When that new facility is up and running, what would you say would be the sort of the annualized run rate from there? That's two questions now. That's how much can it run, how much what's its production capacity and how much do we have orders for it? I'm really not going to answer either of that directly, but what I am going to say is the Canadian plant is 200,000 square feet. The U. S. Plant is 330,000 square feet and the U. S. Plant because it was designed built is more efficient in how it's put together. So the production capacity, as we ramp up our order book in the U. S. Is certainly proportional. Okay. To the real estate. And so I guess, and then the 25 the Quest did $25,000,000 in 20.18 Was that kind of a that was a full sort of, full capacity run? And that Toronto plant, that's there if you walk by, there was a little bit of smoke coming up out of the windows. That's as fast as we can run there. Okay. And then just Okay, fair enough. And then, in terms of, you know, the condition of the Toronto plan, like, is there any other concerns given you know, aging of the infrastructure of that sort, like, you know, given with the, with the water main break, is there any other sort of CapEx that needs to be taken care of on the Toronto plant that you, that you There's ongoing maintenance CapEx. The water main break was our landlords issue. We don't own the real estate there. And the plant is in good shape. Like, there's going to be equipment replaced in the normal course, but it's not big dollars relative to the EBITDA that business is kicking out. Once the Canadian, the U. S. Plant is up and running in full production, the next step will be to decide whether we need more space in Canada. At some point in the future. But we've got a lot of room to run first with Dallas before we need to worry about reconfiguring Canada. Okay. And then just on CapEx. So your growth CapEx for 2019, consistent with 'eighteen. So I guess that's around the $50,000,000 mark I don't know, maybe could you just break that down? I mean, is that, for the, is that a lot of that for the Quest new facility? For the, JV with SkyWest? Like, what's kind of the capital requirements on some of those remaining for 2019? I'm cautious to do this too specifically business by business, but Quest was largely completed in Q4 in terms of the big numbers. There is a carryforward. Into the first quarter. But the biggest driver of growth CapEx is, is at Regional 1, Not exclusively for the, the partnership. That's clearly part of it. In terms of, other drivers for, growth CapEx, they're pretty small everywhere else. With their $3,000,000 project there, $2,000,000 project there. Most of it is Regional 1 and, and class. Okay, great. Thanks for the color. Your next question comes from Mona Nazir from Laurentian Bank. Thanks. I just had a very quick follow-up. It was more clarification on the guidance for 2019 in EBITDA. Particularly as it relates to the IFRS 16 change. So if EBITDA is going to increase $20,000,000 next year and you did $278,000,000 in EBITDA this year. Then we add $20,000,000 getting near to $300,000,000 and then add 10% growth. Is that fair? I'm just trying Yes. No, yes, go ahead, Chad. It's the other way around. Do you see your growth on the consistent accounting policy, the policies, the way it existed in 2018? And then add the $20,000,000. Okay. The simple and then the CEO math is we're about 2 80 last year, 10% on that is 28 and 15% would be, 42%. So you add the 20%. So you're somewhere between 48% higher and, 62 higher than this year. Okay. Perfect. I'm glad I asked. Thank you. Comes from Tim James from TD Securities. Your line is open. Thank you. I just wanted to clarify quickly again related to the guidance 2019. I think you mentioned that it doesn't factor in, winning either of the 2 big contracts. And I'm thinking, in particular, the department fisheries win. Now it sounds as if EBITDA from that either well in all likelihood goes up relative to the current contract, but obviously it could go down if that's lost, but it shouldn't remain at the current kind of revenue cadence. So In 2019, it's going to be the same. Yeah. Because by even if we, if we win the contract, the new contract's not going to take effect in 2019. And if we were to lose the contract, we would continue to service it through 2019. The impact would be in 2020. Okay. That answers my question. That's great. Thank you very much. Thanks, Chip. There are no more questions. I'll turn the call back over to the presenters for final remarks. Given that there's no further questions, I'd like to thank everyone for participating in today's call. We're excited about 2019, and we look forward to updating you on our progress in the quarters ahead. Have a great day. This concludes today's conference call. You may now disconnect.