Earnings Call: Q1 2018

May 9, 2018

Earnings release

Good morning, ladies and gentlemen. Welcome to Exchange Income Corporation's Conference Call to discuss Financial Results for the 3 month period ended March 31, 2018. The Corporation's results including MD and A and financial statements are available via the company's website or SEDAR. Before the call is turned over to manage Listeners are cautioned that today's presentation and the responses to questions may contain forward looking statements within the meaning of the Safe Harbor provisions of Canadian Provincial Securities Laws. Forward looking statements involve risks and uncertainties and undue reliance should not be placed on such statements. Certain material factors are or implied in any forward looking statements and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that may cause results to differ materially from expectations and about material factors or assumptions applied in making forward looking statements, please consult the MD and A for this quarter, the Risk Factors section, of the annual information form and exchanges other filings with Canadian securities regulators, except as required by Canadian securities law, Exchange does not undertake to update any forward looking statements. Such statements speak only as of the date made. Listeners are also reminded that today's call is being recorded and cast live via the internet for the benefit of individual shareholders, analysts, and other interested parties. I would now like to turn the meeting over to the CEO, of Exchange Income Corporation. Mike Pyle, please go ahead, Mr. Pyle. Thank you, operator. Good morning, everyone. Also with me are Carmel Peter, EIC's President Tammy Schoch, our CFO, who will review our financial results in greater detail in a few moments, and Dave White, our VP of Aviation. We are happy to be with you this morning to discuss the first quarter results for 28 and to update you on a number of initiatives, which will enable us to continue to grow in the future. We had a strong first quarter, with a 20% increase in revenue, a 25% increase in EBITDA, and a 55% increase in net earnings. But that's only part of the story. As a public company, there is significant focus on the most recent financial results. But as a management team, we focus most of our time on the longer term. What makes this quarter so significant is the number of acquisitions and initiatives which have been completed or initiated. It is this longer term focus, which has enabled the company to grow profitably over the last 14 years and will facilitate further profitable growth in the future. Tammy will go into our financial results in greater detail in a few moments. But here's a quick overview of the metrics. Revenue grew 20 percent to $266,000,000 EBITDA grew 25 percent to $54,000,000. Net earnings rose 55 percent to $8,600,000 Debt earnings per share increased 50 percent to 0.27 dollars. Adjusted net earnings jumped by 64% to $0.41 a share. The trailing 12 payout ratio improved to 69% from 71 when calculated on a free cash flow less maintenance capital expenditures basis and to 77% from 82% when calculated as a percentage of adjusted net earnings. Both of these improvements were in spite of a monthly dividend increase in the first quarter. Revenue and earnings and EBITDA were all first quarter records for the company. Since the middle of the 4th quarter, we have completed 2 acquisitions, Quest and Moncton Flight College and made a significant investment in a third with Sayer Airlines. MFC closed near the end of the first quarter and was, say, a close subsequent to the end of the quarter. So their impact on the first quarter results were not significant. Quest, however, closed in November, and its results show why we are so excited to add it to the EIC family. You will recall, though when we announced the purchase of Quest, we stated the initial $85,000,000 purchase price of the company was based on an annual historical EBITDA of 15,000,000. Should certain performance targets be met. The contributions from Quest have exceeded our most optimistic forecasts In the quarter and a half, we've owned the company, it has contributed EBITDA of over $10,000,000, while profitably profitability does vary from project to profit project, and therefore, simply extrapolating these results may not provide an accurate forecast for the year. It is safe to say that the company is performing very well and is expected to generate the full earnout to the vendors long before the new plant opens. 1 of the key strengths of the Quest transaction was the size of the order book when we purchased the company. At over $200,000,000, it ensures that the plant would be busy and would generate reliable revenue. In the 6 months, we've owned the company, we have seen growth in the order book, and I am pleased to tell you that it has now reached 300,000,000. There are many opportunities 2nd manufacturing location, which will be located in Texas and will more than double our manufacturing capacity. We expect the capital cost for the facility to be approximately CAD20 1,000,000 and for it to go into production in early 2019. We announced and closed the acquisition of Moncton Flight College in the first quarter. MFC is one of the world's leading flight schools, offering intense pilot training in a university like setting, allowing pilots to achieve full certification in approximately 1 year. The extent of the worldwide pilot shortage has been well covered in the media as recently as last week, Emirata Airlines announced that they would be grounding 20 wide body jets until at least September, at least partially because of a shortage of pilots. The pilot shortage is driven by both fleet expansion and retirement of existing pilots. This shortage is expected to continue for several years at least. The situation in Canada is likely to worsen, as transport Canada has announced plans to shorten pilot workdays, to reduce fatigue and improve safety. The acquisition of MFC is desirable as a profitable standalone entity with robust growth effects. It also provides an internal source of pilots for our airlines. We completed the the transaction with Waseya, where we took an equity position and recapitalized the airline. This has increased our reach into Northwestern Ontario, has improved our relationships with the First Nations in this area and will enable Waseya as well as EIC wholly owned airline provide a better, more integrated service to the customer with enhanced schedules. Utilizing combined resources will in time improve both the efficient of both operations. We completed a new $1,000,000,000 credit facility with an extended term, more flexible covenants but I want to briefly focus on 2 things. Firstly, the new facility with a syndicate of 11 banks provides EIC with access to capital to move quickly whenever a suitable opportunity is uncovered. Our syndicate was very supportive of our business model, and in fact, offered a larger facility than we have chosen to accept. Several syndicate members have financed EIC for over a decade and others since inception. The precision of a facility that is a 3rd larger than our previous facility with greater flexibility and lower pricing, there is witness to their support of our business model and the results we have generated. Secondly, a larger facility does not signal a change in our attitude toward leverage. We have maintained a strong balance sheet with conservative leverage and substantive liquidity since our inception. The larger $1,000,000,000 facility simply provides flexibility to move quickly on an acquisition share buyback or other opportunities should they present themselves. Our attitude towards leverage has not changed since inception, and it's not changing now. I will now hand the call over to Tammy for a more in-depth look at our financial results. Thank you, Mike, and good morning, everyone. Consolidated revenue for Q1 was $266,000,000, which is up $43,500,000 or 20 percent from Q1 last year. Of the increase, $12,800,000 was generated in our Aerospace And Aviation segment, and $30,700,000 in our Manufacturing segment. The Aerospace And Aviation segment generated $189,800,000 in revenue, an increase of 7%. Revenue in the legacy airlines and provincial increased by $12,300,000 or 10 revenues in the Manitoba And Kivolik markets, the benefit of the Kedikme at Medevac contract and increased charter revenue as a result of increased capacity provided to our legacy airlines by Provincial. Provincial's revenue was positively impacted by the acquisition of Moncton Flight College, activity in Air Borealis and higher modification service revenue. Revenue generated by Regional 1 was essentially flat in Canadian dollars, Revenues generated in U. S. Dollars was up by 6%. The increase was driven by growth in sales and service revenue and included the sale of a larger aircraft of CRJ700 during the quarter. Lease revenue decreased by approximately $3,000,000 in the 1st quarter, The decrease is associated with some of the recently purchased CRJ900s being in between leases as leases that were in place at the time of the purchase have expired and are now being remarketed. Manufacturing had revenue of $76,200,000, up 68% or $30,700,000 from Q1 last year. The largest contributor to the increase is Quest, which was acquired on November 14, 2017. Also contributing to the increase is the collective growth in all of our other manufacturing entities. Consolidated EBITDA was 54,000,000 growth and acquisitions in both $700,000, up 9% from the prior year. EBITDA contributed by the legacy airlines and provincial increased by $5,900,000 or 29%. The increase was driven by increased revenue and the benefit of aircraft purchases in previous periods by synergies obtained through capacity sharing, and reduced third party charter costs and other operational efficiencies. Costs in our aviation businesses continue to be impacted by increased fuel prices. However, the impact of this to our earnings has been largely mitigated through our ability to adjust pricing and contracts that pass through fuel costs to our customers. Regional One's EBITDA in U. S. Dollars 16,800,000, which is consistent with Q1 2017. The stronger Canadian dollar and costs incurred in Regional One's Canadian operations, which are associated with servicing EIC's Canadian Airlines, resulted in a decrease in EBITDA 6% to $12,500,000. The acquisition of Quest drove $7,300,000 first quarter performance is ahead of the expectations that we set when we did the acquisition. EBITDA from the remaining entities in the Manufacturing segment was also up in comparison to the prior year. Foreign currency rates did create headwinds for us in the translation of our foreign subsidiaries into Canadian dollars. Had we used exchange rates that were consistent with those prevailing in the first quarter of 2017, EBITDA would have been about $1,000,000 higher. Our Canadian subsidiaries also have exposure to the US dollar. However, because there are a variety of US dollar inflows and outflows such as costs associated with aircraft, parts and U. S. Dollar revenue contracts that certain subsidiaries have, the net exposure in relation to our Canadian subsidiaries is not typically large. And it is not this quarter either. So the decline noted above is flowing from the translation of Regional 1 in Stainless. We reported net earnings of $8,600,000 or $0.27 per share. These compared to net earnings of $5,600,000 or $0.18 per share in Q1 2017. Earnings per share reflects an increase of 1% in the average shares outstanding during the quarter. The improvement was driven by factors that I've already cited including the strong performances interest rates and an increase in our outstanding debt. Depreciation increased by $3,700,000 as a result of capital purchases throughout 2017. And also the amortization of intangible assets has increased by approximately $2,000,000 primarily to the intangible assets that we recorded when we acquired Quest. Income tax expense decreased by $300,000 and the effective rate of tax decreased to 19.5 percent from 29.7 percent. Have had a shift in earnings between tax jurisdictions that positively impacted income tax expense, and we also benefited from the reduction in $1 per share for Q1 2018. This compares to $7,800,000 or $0.25 per share for the comparative period. Adjusted net earnings exclude the amortization of intangibles net of taxes, which has increased as a result of the acquisition of Quest. With Quest, we acquired a significant order backlog. We used both adjusted earnings based payout ratio and a free cash flow less maintenance CapEx based payout ratio to make decisions around our dividends. Our trailing 12 month payout ratio on an adjusted earnings basis was 77%, down from 82%. This improvement reflects which was in excess of our increase in our dividend. Our free cash flow less maintenance CapEx payout ratio, trailing 12 month payout ratio improved from 71% to 69%. Free cash flow for the quarter was $40,600,000, up 20%. Free cash flow on a per share basis was $1.29, which is up from $1.09 per share last year. Investments in the maintenance of our capital assets, which is primarily aircraft related assets, increased by $3,300,000 in the first quarter, to $30,800,000. $7,900,000 of this total is related to depreciation on Regional One's portfolio of aircraft and engines, which is in line with the first quarter in 2017. The legacy airlines and provincial had $21,500,000 in maintenance capital expenditures We have continued work related to large aircraft maintenance. In 2018, a significant portion of the work was related to scheduled engine events. Growth capital expenditures during the quarter totaled $2,000,000. We do not expect, growth capital expenditures matures to be lower in 2018 overall. At the current time, our planned expenditures for the remainder of I should say we do it expect our growth capital expenditures to be lower, for in 2018 overall. At the current time of our planned expenditures for the remainder of 2018, includes the new plant in Texas for Quest and aircraft and ground facilities for Kuwait and to service its Medevac contract in the Baffin region of Nunavut. During the quarter, we completed our acquisition of Moncton Flight College. The purchase price includes an initial payment of $25,000,000 and the issuance of common shares valued at $6,000,000 plus a multi year earn out if certain, performance targets are met. The maximum earn out that can be achieved is $20,000,000. Subsequent to the quarter end in April 2018, we completed our partnership transaction with $25,000,000 in ASEA of which $12,000,000 is an equity investment and $13,000,000 is a loan. During the quarter, $2,000,000 of the $13,000,000 was funded with the remainder being funded subsequent to quarter end. The equity investment in Waseya will be accounted for using the equity method and will be included in other assets on our balance sheet. Turning now to the balance sheet. We ended the quarter with a net cash position of $14,400,000 and working capital of $260,600,000, which represents a current ratio of 2.28:one. This compares to a net cash position of $72,300,000 and working capital of $240,000,000, resulting in a current ratio of 1.91:one at the end of 2017. The increase in our cash position at December 31, 2017 was entirely related to the impending redemption of our 2012 series of debentures. Those debentures were due in September 2019 and were redeemed early on January 11, 2018, for approximately 57,000,000. The increase in our working capital at March 31, 2018, in comparison to December 31, is primarily related to an increase in Quest's working capital because of its growth in business volume and its expansion into the U. S. An increase in accounts receivable and Regional 1 due to the sale of an aircraft with extended terms also, drove an increase. The receivable is secured by a letter of credit. During the first quarter, we redeemed the 7 year 5.5% convertible debentures, which were due in September. 2019. This redemption was funded with a portion of the proceeds of the $100,000,005 year 5.25 percent debentures that were issued in December 2017. Subsequent to the quarter end, the credit facility was amended to increase its size by 250,000,000 and extend its term to May 2022. At the same time, pricing was amended favorably and the covenant within the facility were amended to allow us greater flexibility to take advantage of growth opportunities quickly. The debenture offering reflected a strong level of investor demand and the upsizing of our credit facility reflected a high level of lender confidence in EIC. The company's balance sheet and capital resources are strong. Our leverage ratios capacity within our credit facility now sits at approximately $360,000,000. So we are very well positioned to take advantage of growth opportunities when they are identified. That concludes my comments on the financial results. And I'll turn the call back to Mike. Thanks, Tammy. We are excited about the balance of 20.18. When we released our Q4 2017 results, we provided the market with guidance into what we expected for 2018. Through one quarter of the year, we are well on our way to meeting that guidance. We said that we expected EBITDA and adjusted net earnings per share to grow by between 10% 20%. This amounts to an increase of $0.25 to $0.50 a share for the full year. In the first quarter, we have delivered an increase of $0.16, and as such, we are on track to meet this guidance. I should point out, however, that simply extrapolating this improvement for four quarters would be inappropriate. The financial results of the comparative period in 2017 were the weakest in fiscal 27, and as such, a bigger improvement in the first quarter, reflects a more a return to a more normal operating environment in our Northern Aviation business. The second quarter of 2017 was just the opposite, with the strongest results for the and EBITDA to each grow by between 10% 20%. During our Q4 conference call, we also stated that we expected a significant decline in the level of total capital expenditures versus what was invested in 2017. Maintenance capital expenditures were in line with expectation and our outlook remains the same that they will be slightly above 2017 levels in 2018. In line with our new strategy of doing as much maintenance investment in the 1st 6 months of the year when demand in the airline is lower, we expect that maintenance investment will follow the same pattern as last year. Growth capital expenditures however are expected to be far below the levels experienced in 2016 2017. This is not because of a change in strategy, but rather is driven by the opportunities that are on the horizon. We pride ourselves on being opportunistic and moving quickly when the situation warrants. As such, investment in growth capital could change quickly. But as of now is expected to be very modest. Growth capital expenditures were low in the 1st quarter, as small programs at Provincial were essentially offset by net divestitures at Regional 1. The net divestitures at Regional 1 were a timing anomaly. And we anticipate that modest investment to the company through the balance of the year. The purchase of a fleet of ERJ-one hundred and forty five aircraft in the second quarter will see the net divestiture in the first quarter reverse in the second quarter. Investment levels are expected, however, to remain well below 2017 levels in 2018. At this time, the only major growth initiative is for the new plant for Quest. We are negotiating a lease for a 300,000 square foot facility in the Dallas area. We've placed orders for the manufacturing equipment and expect the $20,000,000 facility to begin operations in early 2019. We will also be making a much more modest investment in aircraft and a hanger for the new Kuwaitan contract in the Baffin region. The contract is increased in scope with additional base where we'll station crews and aircraft. We are also cautiously optimistic about the renewal of our remaining Matevac contract in the Kivilek region. The government is in the final stages of adjudicating this contract, will announce its award soon. The Force Multiplier surveillance aircraft beyond the display at our Investor Day last year is now essentially complete. We're in the final stages of approval with Transport Canada and are in discussions with a number of governments around the world about deploying the aircraft and expect it will begin work either late second quarter or early in 3rd. Interest in the capabilities of this aircrafts remain very high. And we are optimistic that this will translate into revenue opportunities this year. We have completed 3 transactions in the last six months with the purchase of Quest, MFC and their investment in Waseya. We remain very active on the acquisition fronts with a number of interesting opportunities in both aviation and manufacturing in Canada. Our team, however, has been focused on closing an early integration of the recent transactions. And as such, most of the opportunities under investigation are in early stages. We do not anticipate including any transactions in the near term. We are excited about the start to the year. We achieved significant growth in the first quarter with material improvements in all metrics. Of particular significance of the improvement in our payout ratio in spite of an increase in our dividend. The ratio improved whether calculated on a free cash flow less maintenance capital investment basis or on an adjusted debt earnings basis. We were not surprised by this improvement. We have followed the same model for 14 years. For one simple reason. The volatility of our stock price is frustrating. And we are confident that in the long run, stocks are valued based on their financial performance, and we are confident in our ability to continue to deliver reliable, sustainable, profitable growth. On behalf of our board, management and our employees, would like to take a moment to thank all of our stakeholders for their ongoing support. Thank you. And your first question comes from Mona Nazir with Laurentian Bank. Your line is open. Good morning and congratulations on the very strong quarter. Good morning. So my first question is just in regard to the growth CapEx and you did touch on this. It was de minimis in the quarter. Versus the $59,000,000 last year. And just looking at the cumulative growth CapEx spent over the last four quarters, we've seen an over 60% reduction. And you've stated that you expect this to, you know, continued reduction on a year over year basis as we move through the year. I'm just trying to connect the dots, and we haven't seen that significant drop off or any drop off in the Regional One revenue. So I'm just wondering if you could speak to the current portfolio and what we could expect from R1 over the next few quarters? And how much of a drop off in growth CapEx could we see? Thank you. Well, it's opportunistic, Mona. We do completed transaction, in this quarter where we've invested in a number of ERJ-one hundred and forty five aircraft. But in terms of the purchase of big fleets, and, I think the 2 big ones in the period you're talking about would have been the purchase of the fleet of CRJ700s from tons or the purchase of a number of CRJ900s from a couple of different airlines. We don't see anything like that in the near term the horizon. So, investment while positive in, Regional 1, will be at a much lower level than historically. And the other thing I'd touch on is just as it relates to existing lease portfolio, you saw a slight drop off versus last year and the decline versus the full year. Results really, results of a number of factors. 1, we have, some of our CRJ900s that came with stub leases that are off lease. We have, we are in the process of putting those out and it's taken a little longer than we had hoped, but we'll get them out on lease. Secondarily, we have some that are leased on a power by the hour basis. Where, the utilization was lower in the first quarter. That should, improve in the second quarter. And finally, one of the, I think, things that are is not well understood about the lease revenue is it's not just rental revenues that's in there. It includes, things like lease return fees. When a lease, when a plane is at the end of a lease, many of them have, return conditions where a lease need, the plane needs to be brought back to a certain condition, before it's returned. In a case where we have a plane that we intend to part out, we may well negotiate a deal with the lessee where they don't need to do the overhaul in return for a certain payment. And those payments are irregular, but they're included in the lease in in the lease line of our financial statements. And that means that the, lease number is going to bounce around a little bit depending on which quarters we incur those. And I think it's included in our information that we had a material lease return fee of, I think, about $1,600,000 last year that didn't exist in this year's first quarter. So, I think I hope that covered off what you're asking me. Yes. Yeah. And that actually touched because my I was gonna go into, my next questioning, the returns of your lease portfolio versus, you know, why is it seemingly higher than industry averages. So I think you started to touch on that. Is there anything else you wanted to add? Yes, I think that's really important, Mona. Part of the challenge with the, the, short and distort thing that we're facing is people who either don't understand our model or choose not to understand our model. Our lease business is part of the liquidation of the aircraft. We're not a finance lease or who takes a new aircraft leases it out over 15 years to get their capital back and earns a spread on the interest rate. We're dealing with planes that are approaching the end of their life and have varying lease, maturities. And so, included in our lease revenue is more than just the rent on the aircraft. It's also in a number of the cases where, a traditional finance lease would have a lease overhaul reserve where the, lessee is paying into a balance sheet account so that the money is available for when it needs to be overhauled. Because in order for the lessor to get their money back, play it has to be overall the number of times to be able to have the life, to generate the returns to pay off the lease. In our case, most of the time, we don't intend to overhaul the plane at the end of that period. We're just going to part it out. So as a result, that extra revenue that comes from, lease overhaul reserve that we don't maintain as a reserve, we take in as revenue. So that materially affects the profitability of the lease. And then finally, as I talked a little bit earlier, on some of the leases with, where we bought where the lease was a longer term lease coming to a close day of lease return conditions, where we will often let them buy out the return condition instead of actually doing the work they can make a payment to us in which case that flows through there as well. Comparing us to a finance company in terms of leases, is roughly the equivalent of asking why an apartment is cheaper than renting a smaller hotel room on a per night basis. They're not the same business. If you lease a car, it costs less than if you rent a car on a daily basis. Because when you rent a car on a daily basis, there's a whole bunch of other charges that go through the line. It's apples and oranges and we have to generate a higher return. Because we're doing things that are different. We don't have a long term 10 year return on these leases. We have to churn the assets and turn them more quickly as a result, we have a higher return on a percentage basis. Okay. Thank you. That was helpful as you know, just a number of client questions were on that subject. And then just lastly for me before I step back in queue. I'm just wondering if you could touch on Quest. We saw very strong performance there, 7 point $3,000,000 in EBITDA contribution versus kind of the $15,000,000 in annualized contribution when you did purchase it. Can be lumpy and you stated as such, just a couple of minutes ago. I'm wondering if you could touch on, were there any special or large contract or anomalies that contributed to the Q1 results? The business is is the sum of a series of contracts that run through buildings can be $3,000,000 to $10,000,000 in size depending on how many floors and what's involved. And so the quarter was successful for 2 reasons. 1, we were able to run $25,000,000 in revenue through the plant, which only happens if we can time up our projects ideally. So there's no downtime in the plant between projects. And then secondarily, we have said in the past that our U. S. Worked has a higher margin than our Canadian work, and we had a higher proportion of U. S. Work in the first quarter. So that resulted in a, a beat of even our internal forecast that was at the high end of what, of our expectation. And as such, I wouldn't extrapolate $7,000,000 directly, but there's no big weird things that went through the quarter. It reflects the growth in the business from a run rate of about $60,000,000 in revenue when we bought it to if you were to extrapolate the quarter $100,000,000, and that explains a big portion of the increase in profitability. And do you have the mix of U. S. Versus Canada for the quarter versus when you bought it? We do not. That's not something where we publish my Okay. Thank you. Next question comes from Steve Hansen with Raymond James. Please go ahead. Your line is open. Yes, good morning guys. Just a quick one on the quest to follow-up. The new facility that's coming up in Texas in early 2019, I'm just trying to understand a bit better the cadence that we should expect out of that facility as it comes up. Can you just give us some context around the capacity of the facility, the revenue opportunity that's going to generate? Is it was it a clone to the existing facility and how that should impact revenue growth in 2019 2020 for Quest? Yes, that's a good question, Steve. The facility will be slightly bigger than our existing facility. So it's, ultimate production capacity will be higher than what we have in Toronto. But I would caution against the idea that when you open it, you turn on a switch and it goes from nothing to full capacity. We're cautious as to how many orders we're taking for the initial quarter too as we wrap it up and, avoid any kind of execution risk as we start the plant. But we, The opportunities we've seen, Steve, are such that we're very confident we'll be able to fill the plant reasonably quickly. But you will see, a relatively modest contribution in terms of revenue and likely minimal bottom line at the start of the year. And you'll see that ramp up quarter over quarter as we put more, flow through the plant. And as we get up to normal operating efficiency. Okay, that's helpful. And so just to be clear then, so is Q1 then sort of the initial startup phase with minimum contribution referred to and then ramping through Q2 and 3 consecutively. Right. And then we'll give guidance as to how full the plant is and how close we are to Solveau. We have said that we're running near capacity and we're booking into 2020 already. So Okay. Is there any advantage that this plant provides us is the ability to go out and and further sell. And with the capacity constraints that we currently have with the single plant, As we look out to customers, we're unable to fulfill their orders. Having this additional capacity coming online in 2019 helps that customer or satisfy that customer demand. Understood. Just a quick one on the Moncton Opportunity trying to understand this a little bit better. I mean, I'm certainly familiar with the pilot shortage issue and what that means, internationally and even domestically, but you've described a change to the TransCanada regs that I wasn't familiar with. And so I'm just trying to understand 2 things. One is, what is your actually capacity to grow at Moncton? What kind of limitations would you have on growth relative to demand? And then secondarily is, what is the opportunity internationally versus domestically? Like are we really focused on the domestic opportunity here first and then there's opportunities to grow with international clients or just trying to give a better understanding of what that growth profile looks like and what your limitations might be? I'll start with the second question first. Moncton is largely an international player. Currently most of the revenue would be generated by international, of students. In Canada, a typical student is someone who in and they're paying us for their their training just like a student going to university. Whereas, much of our international business, we would contract with the airline who would bring in a 10, 20, 30, 40, 50 students at a time who we would then train up on behalf of the airline. And the contractual basis, we have, demand, that's very strong for the foreseeable future, the rate determining step really isn't infrastructure. It's really not aircraft. That's us very easy to do and relatively inexpensive. It's just making sure that we maintain enough trainers to actually do the training. And it's kind of one of the oxymorons of what's going on with flight training right now with flight pilots in general right now is the shortage creates less training people because they move on to traditional flying jobs. So we're working on programs to grow our number of trainers will facilitate the growth of that business. But the revenue is focused internationally. The synergy in terms of our own airlines is focused locally where we're going to work on building our own pilot streams to fill gaps as we lose pilots to bigger airlines. Yes, that's helpful. And just one last one, if I may. Mike, you mentioned, I think at the outset, your willingness to entertain further buybacks with the added flexibility you've got financially. Stock price has been frustrating. I mean, how do you feel about the allocation of capital to buybacks, just sort of a general philosophy here going forward? It's been part of your strategy in the past, but not a big one frankly. And so do you have a greater appetite for buybacks given the relative performance of the stock recently or how should we think about that? Yes. I mean, if you look at what we were generating when the stock was over $40 a year and a bit ago, our profits are materially higher than they were then, and the stock's 25% lower than it was. We think the valuation today is the best opportunity we have. And so we'll take a look at various options in terms of buying back our stock if it trades at these levels. We think ultimately, the proofs in the pudding and we've now delivered 4 really strong quarters in a row. And, we expect the stock will perform. But to the extent that it trades at these levels, I'm really not sure there's a better investment opportunity for us than our stock. So I think, yes, you could expect us to be relatively active on that. Next question comes from David Tyerman with Cormark Securities. Please go ahead. Your line is open. Yes. Good morning. Very good quarter. Good morning, Gabe. Good morning. Just a couple of quick questions. First on the quest, just going back to why this is kind of a normal rate, sounds like it was a really good quarter. If we use the growth in revenue that you suggested Mike going from $60,000,000 to $100,000,000 and just use that as a driver relative to the original $15,000,000. Would that be a good proxy for kind of the run rate right now in a normal annual rate? So up to $25,000,000 roughly? $25,000,000, David, in all honesty is absolute capacity in our plant. And we need everything to time up in terms of butt ending projects 1 to the next. So, like I say, we did $25,000,000 this quarter. I don't want to say that with one plant, we can do that every quarter. But conceptually, the direction you're going in that we've got that material increase in production, is a reasonable starting basis for where you are I just think, $25,000,000 may not be what we can achieve every quarter if projects don't time out perfectly. If there's a 2 week gap between projects or they overlap in a way that over time is more expensive, where it's always difficult to extrapolate when you're running at absolute capacity. That extrapolation gets a lot easier when the plant opens next, beginning of next year. We actually have surplus capacity. So it's our opportunities that drive the revenue as opposed to our ability to throughput it through the plant. Okay. That's helpful. Thanks, Mike. And then second question, just on the working cap, it used quite a bit in the quarter. And I saw the explanation on the Quest's growth and the and the timing on the CRJ sale. So just wondering for the year, what we should think? I would think the CRJ will reverse the quest I'm less clear on. So do we do you think you're going to use material working cap in the year? Based on the plans that you have right now? The short answer is no. Where there's growth, like Quest is clearly growing, And as, as it grows, we've got higher receivables, higher inventory that we've talked about the sort of scope of that growth. In the grand scheme of EIC, that's not a material number. You're absolutely right on the aircraft. It, the terms are for later this year. There's absolutely no credit risk. It's secured by a letter of credit, but that will reverse later in the year. There's nothing structural in the business for the for working capital to grow materially. I'll maybe let Tammy jump in. But Just one other comment on Quest is, During the quarter and likely continuing into the 2nd quarter, they're making deposits on equipment for that new facility. And until we actually take delivery of that equipment, that those deposits fit in our working capital. So we'll see that come out, towards what once we start taking delivery in the second half of the year. Okay. So would that be enough to make us expect a negative working cap in Q2 also? Q2 ramps up seasonally. So there's always a seasonal impact. But if you take a longer term impact, I don't see I think you'll see if we get back to December of next year, all things being equal, we'll have repatriated the $10,000,000 on the aircraft who have repatriated the growth in the prepaids, which you can see right on the balance sheet. And you will still see some growth as it relates to the receivables and inventory from the growth of Quest. And the other, bot I'd put around this is if Regional One gets the opportunity to buy some great inventory, we're certainly going to do that. That's our business. And so it will jump around quarter to quarter, but there is no plan for a material build of inventory over that period. And when I and the working capital in other businesses, I think the biggest factor that we're seeing in legacy airlines is one of timing And there's something that we've seen that has influenced it in the last year is the timing of large fuel purchases. Where we have to do that in big bulk levels into, the Arctic region. Okay. So just on that, is there, was there a lot in Q1 or is there going to be a lot in some quarter in the future that we should be aware of? I think the, the, if you look at the quarterly changes, they shouldn't be different than last year's. In terms of which quarters are up and down in terms of the seasonality of the business. Okay. And then just last question for me. The tax rate It's a lot lower. I see the explanations. They sound sustainable. So is that a new, good rough level for run rate? Yes. We like our expectation is that, our effective tax rate should run around 20% to 22%. It, it, the biggest influencer there if we, if we bounce outside of that range is the mix of parts US parts revenue compared to Irish lease revenue. If the proportion changes in a quarter, you'll see a little wobble there, but it should be around 20% to 22% I'm expecting. Okay, perfect. Very helpful. And again, good quarter. Thank you. Thank you. Your next question comes from raveel Afza with Canaccord. Please go ahead. Your line is open. Yes. A few questions. First of all, I understand that the leasing business is lumpier compared to the parts and services business, but is there any seasonality in the leasing business that you can point to? I don't think there's seasonality as it relates to leasing per se, but on our power by the hour leases with the customer, we actually have those aircraft with they have a seasonality in their business. And as a result, when they're busier, the power by the hour leases generate more revenue, And seasonally, the first quarter is a slower part of that business. To be clear, it's not just the power by the hour issue that's with our lease portfolio. We do have some 900s that aren't on lease at this moment, and we will deal with that. That's a normal part of the ebbs and flows of business, went through it with the 7 100s when we bought them from Lufthansa. And over the rest balance of the year, we'll lease those aircraft up and you'll see that flow through the, the lease revenue. But there is a seasonal factor as it relates to power by the hour leases. Very helpful. Thank you for that. And then is there some range that you can provide us for growth CapEx for Q2 as it relates to Regional 1 because I know you guys are banks have bought some PRDs? We expect that growth CapEx and I can only tell you about what I know about now, Raveel, and Hank is famous for calling me with Mike, guess what I just found. But assuming I don't get a phone call from Hank, our, our growth CapEx will be modest it'll be positive in the second quarter, but, it's not a big number based on what we have now. And thank you for providing us with color on 2018 maintenance CapEx. Is there anything you can tell us with respect to 2019 exclude Regional 1, of course, that's going to vary based on its leasing business. But when you look at the legacy provincial Can you speak to the maintenance CapEx as you see it now for 2019 versus 2018? Yes, we would expect that there would be a modest decline in CapEx in 2019, just the way the schedule falls with the number of heavy overhauls and the number of engine events. Particularly in 1 or 2 of the subsidiaries. It results in a lower level of maintenance investment. Not dramatically so. But a reduction in 2019 versus 2018. Again, as you pointed out, Russel once a while If we buy a bunch more aircraft in that business, depreciation will go up in solar maintenance CapEx. But based on the status quo, we would expect a decline. Perfect. And just finally, can you speak about the impact on the fuel prices? How you see impacting the legacy margins for the remainder of the year? When the stuff moves around, it takes us a little bit to implement a price increase. Sort of as to how we put those into First Nations communities who don't see the change in the rest of us see the price of our gas going up every day. So we realize that's what's happening. Understand in most of the communities service their fuel goes in once a year and the price is constant. And so it takes us a little bit to implement the change. But as but on the other hand, when we implement the change, if once we've told our customers, it tends to stick. And that's why even in the first quarter, I think Tammy can correct if I'm wrong, but I think it was less than a quarter of a $1,000,000 net cost after our, the recoveries we have from both the direct flow through contracts and the surcharges we put in place. And so we will have a drag a little bit in Q2 as we implement the fuel price surcharges. But it's less of a impact on us than it would be on a WestJet or Air Canada where the ability to flow through isn't as direct as we have. Ours is more timing issues. Now, there's certain routes in certain places where that's not the case, but the vast majority of our business, we have the ability to raise prices it's simply a matter of how long it takes to do and doing it in a manner that explains it to our customers and is respectful to our customers. Thank you very much. I'll get back in the queue. Thanks, Shavi. Next question comes from Chris Murray with AltaCorp Capital. Please go ahead. Your line is open. Thanks. Good morning folks. Good morning, Chris. Mike, just thinking about the ERJs, so I guess a couple of pieces of this. So that's a fairly large fleet. Any just so I understand, is that going to be like a right CapEx or will that be the typical mix of working capital and CapEx to fund that acquisition? In terms of where they're going to show up on our balance sheet, you mean, Chris? Yes, as they were as they were. Yes, we're still working on the final split of what we're going to do with But I think about half of them, a little over half of them, we're going to end up flying, whether that means we resell them as whole aircraft or lease them. And about half of them are probably going to end up getting parted out. Okay. And thinking about the Embraer models, I mean, historically, you talked about the fact that you were able to take, the smaller CRJ-100s and 200s and then turn that into the 70900 leasing program. Any opportunities, to work with Embraer in a similar fashion to start moving up into larger aircraft and maybe moving a different line into the lease portfolio. I know you've looked at acquiring businesses that did this before and it looks like you're kind of growing capability on the Embraer aircraft, but I guess there always a concern you've always said is it's about really understanding the aircraft at a part level. That's the art of this Yeah. I think maybe I'll just let you do the conference call because you're exactly right on what you, what you said. That's a fair description of our, our opinion of things. We've dipped our toes in the Embraer's and we worked with a European bank on liquidating a number of these aircraft and we've developed some knowledge on them. And we've now dipped our toe in directly with the purchase of the 145. So we are looking at other models. We're not going to sprint into that. We'll be in our knowledge and moving slowly and how the engines work is very is different than it works especially in some of the models than it does on the CRJs where the Embraer engines on uncertain whether things are harder to deal with than they are in the CRJs. But we definitely view there to be an opportunity in the arbitrage of these aircraft. And, I think you've seen it in our purchasing that we've moved into it. And I would anticipate over future periods, you'll see us diversifying our portfolio with the addition of more of this type of aircraft. Okay. And then just maybe a broader question. Just thinking about growth rates, you sort of talked about the fact that you're going to be a little conservative on acquisitions for the next little while. Feels like you've got adequate capital to go do stuff. But, is the decision to slow down, is that some sort of change in the way you guys are thinking about allocating capital, or is it kind of a function of where you are in the pipeline in terms of acquisitions or just just difficulty identifying other opportunities. Just some thoughts around that, because it feels like, growth is going to slow over the next few quarters. That we in terms of closing things in the near term, there, that's crack. It is absolutely unequivocally not a change in strategy. And quite frankly, it's really also not, on the acquisition front to lack of opportunities. We've closed three transactions in just over a quarter. And with our total capacity. Understand that whether we do a $25,000,000 deal or $150,000,000 deal, the level of diligence and the work required is the same. And so our team has been focused on the end stages of the deals we've been doing. They're now jumping back in and working on opportunities and letters of intent and expressions of interest. And there's no change in our appetite. I just wanted to be clear with the market that because we've been so focused on closing and integrating what we have, there's nothing that's nearing the end stage of that process. But there's no change in our strategy and there's no change in our appetite for that. The same would also grow for growth CapEx. If somebody found me a fleet of CRJ700s like the Lufthansa 1, I'll sprint to the bank to write the check. But we have to have the right offer opportunities. We've always been disciplined in what we do. And at this point, there aren't any in the future, in the near future. But in no way would I take that as a change in our strategy or our desire to grow simply just practical limitation because of how much stuff we've completed in the last few weeks. Adam's just finished, dapping after all those deals, so getting his sleep back. So, no, Chris, we'll be busy again. Okay. So just maybe as a cleanup kind of to that question. So if you think about the new credit facility, which expanded $250,000,000, and your leverage levels you know, historically, where is your comfort level on dry powder right now? We're like we have 350 or 360 out in capacity? Yes. Yeah. 360. And like I said, our leverage levels, it depends on how we grow it, how we deploy it. We're not changing how we fund things. And so we've got money to do deals as they come or to buy back equity at these levels. There's really nothing has changed. Our appetite for leverage is unchanged over 14 years and I don't see it changing now. And if the opportunities come, we're going to jump on them. We've got a couple of debentures that mature in the next year or 2 and Hopefully, those will convert into equity and, give us fuel for further growth as well there. Your next question comes from Konark Gupta with Macquarie. Please go ahead. Your line is open. Good morning, Mike. On the guidance, Mike, you guided 10% to 20% EBITDA growth for the full year. And obviously, you have seen 25% in Q1, right? Now you're telling that there's some kind of like puts and takes. So I'm like, we should not expect 25% to be extrapolated, right? But Is there any kind of business or asset where you are being sort of more conservative than you should be? I don't think so. I mean, there's no material change in any of the businesses. Like I say, we, we talked about we have a few lease 900s that aren't under lease when those get going, that will ramp up, as well. But when we looked at the aggregate, we knew that if you just look at our year that we're up against in aggregate 10 to 20 what that meant, that in real simple terms, that's $25,000,000 to $50,000,000 in EBITDA and $0.25 to $0.50 in earnings. We're still comfortable with that. We knew that Q1 was the easiest comparative. We know that Q2 is the hardest comparative. We know Q3 and Q4 are about average. Bottom line is we're very comfortable with the guidance we gave. And if I were to speak generally and don't ask me what our forecasts are because we won't tell you, but I will tell you that we're marginally ahead, of our internal forecast through the first quarter. That's great to hear. Thanks. And on the regional one, can you talk about how the leasing business is shaping out in terms of the customer base or the lease terms, especially with the introduction of Embraer's 1.45 and the pending CRJ900s? Well, the 900s, like you say, those have, if I would be perfect to us, they've taken us a little longer to lease out than we had hoped, that's not uncommon when we get into a new platform. The 900s are new. They're slightly more expensive. And as a result, our customer base are just growing into those. And so it'll take us a few quarters, but we'll get it cleaned up. DoctorJs would be more at the other end of the spectrum. Those are much less expensive aircraft. And so, there's a number of carriers in different parts of the world that are interested in those. We have some of them under lease already. I, I'm not in a position to say how many But we have some of them under lease and we expect we will have some more in the near term. And some of those aircraft will be more effective as part. And so some of the fleet we purchased will, will be parted out, and number will be leased. And I wouldn't be surprised if we sell a few of them as well. As operating aircraft. So that's kind of a break up. Those are those fit into our customer base fairly directly because they're inexpensive aircraft. Whereas the 900 are at the higher end of the price and the lease term for our customer base. Great. And lastly on the Alberta market, so the oil price seems to be obviously going up here significantly over the last few months. And that definitely impacts the airlines on a short term basis. But, with respect to your Alberta operations, are you seeing any material benefits in terms of the customer orders or the spot market demand that's kind of being driven by the oil price or the energy market The short answer is yes. It is getting better. It's getting better slowly quarter over quarter. It's a little bit different than the last two oil shocks we saw in 2007, where it rebounded really fast. It was more like a fee recovery. This is more of a slow climb, but we saw a material improvement last year in the second half of the year in that business. And that has continued into the current year, in Alberta. So we're not back to, pre oil price decline levels yet, but we're seeing material improvements quarter over quarter. Your next question comes from Derek Sprague with RBC. Please go ahead. Your line is open. Thanks. Just moving on to the on the ERJ 145, are they how old are the, are the aircraft? Are they fairly old the, the 145 that you purchased in? And did you buy them all from one source or was it from multiple sources? I don't have the ages in front of me. I can get that for you. The, but it was, it was a single purchase of a fleet from a bank that the bank had taken them back and we bought the entire fleet. Okay. And just looking at the CRJ900s, because you mentioned that the ERJ-one hundred and forty five you could part out and perhaps, with the CRJ900s, do you have the opportunity to part those out or will it be essentially get them into a lease if we can't get them to a lease, maybe sell the whole aircraft? Altogether. Thanks. Hang on, Chris. The CRJ900 is still too valuable. Derek, I'm sorry. Yes, it's okay. Having called worst. When I get to question 15, I get a little sloppy. The 900, the value of the aircraft, like as a flyer is too high that the value of the aircraft exceeds the sum of its parts. And so it means that when we buy those, and part of the reason we bought them is because it's the natural progression from our clients who at 200s and we've seen them move from 200s to 700s. The move is from 700s to 900s. So you're bang on that. We're going to need to lease those outdoors, sell them we have no real desire to sell them. It's part of the process. I wish that we at least about a couple of months faster than we have. It's not the end of the world. And quite frankly, That is, for us, the secret sauce is that we're diversified. We have some planes that we thought we'd lease out that aren't leased out and our EBITDA still went up by 25%. Our earnings still went up by 50%. And so I'm not overly worried about the fact that those planes are slow. But you're bang on in your assessment that the planes are too valuable to park them out. So we will lease them up and get them out, whereas the ERJs that we've purchased could be done either way. The size of the fleet is such that I wouldn't want to part out a fleet that big all at once because it'd take me a while to sell it all. But we have a nice combination of flyers where we'll lease them. And there may be some that we sell or not, and then we'll have some that we part out. So That really is the sweet spot of our business. It's a different aircraft type. But it's the sweet spot of what we do in arbitrage. Yes, just getting back to the CRJ, so keep in mind, it's pretty consistent with what we refer to as our step up strategy, which Mike, talked about a bit where we've had, our customers go from the 200 to 700. Well, the next progression is the 900. So what that allows us to do is migrate them to the 900s, get those leased up. And at that point, the 700s can be torn down. There's a demand, significant demand for those parts. So it's all part of the overall way that we monetize the value of our complete assets. Can you get the same returns though presumably the CRJ900s would be then more of a traditional lease versus the the more traditional strategy of Regional 1 where you're squeezing out the last kind of lease life out of the aircraft and then utilizing it for, for parting? Chris, I did it again. Your real is your second name, Chris, there. Derek, you're bang on. In the near term as we lease those out to get them down to a value where we can part them out. The least returns are the more valuable the aircraft the lower the percentage rate return we're going to generate. That's absolutely correct. But ultimately, as those aircraft age, the knowledge we gain the customer base, the part, capability to sell will enable the returns on those to expand. But you're right. If I buy a 200, that I either lease out or part out, I expect my percentage return to be higher than I do on a 900. Okay. And just a couple more for myself. You've sold a couple of not a whole lot, but a few aircrafts over the last couple of quarters. And so for in Regional 1, so you've gone from 43 to 39, but the engines have gone up materially. Are they 2 separate line items or when you're selling the aircraft, are you taking the engines and taking the engines off the aircraft and When we're selling the aircraft, we're selling them with engines. The reason why engines may go up when aircraft go down is if we part out an aircraft, we maintain we make the engines may still have value to be leased out as opposed to part it out. So you could take a plane tear it down and and lease out the engines. And so the pool of engines is independent of the, of the aircraft to my knowledge, we've never sold an aircraft without engines on it. Yes, that's a good point. All right. And then just a couple more quick quickly. I saw in the annual information form, some union collective bargaining agreement potentially am I correct on that? And is it material and or B? How do you feel about the potential for the renegotiating a new agreement? We're in discussions with a number of our unions. Very pleased with how it's going. We're at the final stages in 3 or 4 of them, 3 of them, that were just in the final signature stages. So we've been able to work well with our unions. We have a couple that are earlier stages and discussions, but the important part of the tone and tenor of them is great. I don't anticipate any problems at all. Okay. And then just finally on your leverage, your net debt to senior senior debt to EBITDA. It's at your upper end of your target, maybe a little bog depending on what level of EBITDA you're looking at. On an absolute level, debt has grown And if you include the convertibles, it's at a decent level from an absolute perspective, do you think about, deleveraging at all or you're pretty comfortable around the sustainability around the EBITDA you're comfortable with the absolute level of debt and, and, you still have enough powder in the keg, I guess, to transact. How do you think about debt and where you're at and your potential leverage? Fee over the average, just a tinge over our 14 year average. If you look at our guidance of 10% to 20% up for the year. That gives you something like $275,000,000 to $300,000,000. It leaves our convertibles. We have less than a turn of debt in those. And we're slightly over 2, in terms of, our secured debt. So we're right at that sort of 3 times aggregate debt. We're comfortable with that level. It's sort of been that same sort of goalpost we've had since we started and it bounces around and when we raise equity and when debentures convert can bump that around, up and down in free cash flow opportunities. But we're very comfortable with our balance sheet. We're very comfortable with our liquidity. And, you see our payout ratio declining and with our payout ratio declining, that means we generate more, free cash flow that effectively reduces leverage. So Grand scheme of things, we're very comfortable where we are. And, we've got the liquidity of the new facility that should Adam come with a deal. I cannot refuse. I won't have to refuse. That's great. Thanks, Mark, for taking all my questions. Next question comes from Mark Neville with Deutsche Bank. Please go ahead. Your line is open. Hey, thanks. Just a few follow ups at this point. Just on the quest, when you bought this business, it was, call it, $15,000,000 of revenues per quarter with a bit of 25% margin. This quarter, it sounds $25,000,000 in revenue with about a 30% margin. Those are sort of the rough goalposts to use for this business at this point sort of pre expansion? Yes, that's reasonable. Again, like I said, this was a good quarter. I can't guarantee that we'll run that through the plant every quarter, but it was a good quarter. Okay. At this point, are you running it? The mix of Canadian and U. S. Mark can teach tweak the margin a little bit, quarter to quarter. Okay. Yes, that makes sense. And the just on the sort of the you mentioned capacity constraints? Are you running into issues? Are you pushing old lead times or have any major issues there? No, it's just the terms that we we're not going to take orders that we don't have a slot for in our, in our plant. And so we are running into we've turned down material projects that we were awarded that we just, they took too long to decide. And as a result, we couldn't take the order because I have no capacity in the quarter. They wanted it or the 2 quarters they they asked for. So that's why it's so urgent for us. To get that plant up and running because quite frankly, we're only in a limited number of markets with that company. We're in the, the sort of West Coast across Canada and then limited markets in the east and Midwest, there's places like Houston and Florida and Nashville, and places where we have no presence yet. And, we'd love to go there. So we're excited about the opportunity of adding to our production capacity. Okay. And on the, on the Messiah, transaction. Should we think about that sort of like an investment multiple sort of like past investments in your business or M and A or shorter term, is it sort of more strategic just to build out your footprint there? In the short term, it was more strategic in the longer term, the multiples are in line. It was really an opportunity, we say as greatest asset was their relationship with the shareholder 1st Nations. And they had a relationship in that area that strength enabled us to work with them. And then by integrating our fleets, in terms of schedule so that you can interconnect airline, airline, which you couldn't do before, will improve the service. And that will ultimately significantly improve the performance of not only our airline, but Waseya as well. But that's a work in process. I really opened up a whole new door for us into Northwestern and then ultimately northeastern Ontario as well. Okay. And maybe just on the jet fuel, just to be clear, have you announced or have you pushed those price, adjustments through, or is it it's a Q2 event or Q2, Q3. Just wasn't clear on that. We have put some through already and we're in the midst of doing a second round. When we put them through, it's really a matter of communicating with the First Nations' communities and going to explain chief of the council, hey, our fuel price is up back We're putting a $5 surcharge on the tickets. It'll start in 30 days and this is why we've done it. Not like a communication with the general market. Like, yes, he's going to go talk about it. We're talking with the specific First Nations Because if you look at it in a lot of the places we're flying to, Mark, we have a dominant market position. And the last thing we ever want to be seen as is taking advantage of that? Yes. I think, yes, it's worth pointing out as well that we have a large volume of business where we are contractually able to pass through fuel prices. So we bear no risk in that part of the business. Yes, perfect example. So things like, are new to the passenger contract with the new to the government. We had to adjust quarterly. And so we do have a lag. So for a few a couple of months, we get stuck with the bill, but we know ultimately it works out. And when the price falls off, we also have a lag on the So net net, it's more just a timing issue than it is of an actual decline in pure profitability. Okay. But I mean, the Q1 impacts, I guess, regardless of that was fairly minimal. So It was a couple of undergrad. Okay. Okay. That's all I had. Thank you. Thank you. Your next question comes from Cameron Doerksen with National Bank Financial. Your line is open. Hey, good morning. I guess just truly one quick one for me. I guess on the Medevac contracts, you've renewed, I guess, the the one of the 2 that was up. And there was a scope expansion there. I'm just wondering on the sort of the second one that you're waiting to hear from, and it sounds like it's you're pretty confident in winning that as well. But would that also be a scope expansion? That one was a bit more on a, as is basis. They already had multiple, places we operate out of it. It wasn't a single, a single base already. So I, I don't see a material change in the scope. I mean, I, I'm predicting what somebody's going to do in that. So I, I, I don't want to say anything with certainty, but we're, we're cautiously optimistic on on winning that. We've had that contract for almost 3 decades. So I'm confident, but it's not done until it's done. Right, of course. Yes. And maybe just squeeze in a second one here. Just maybe give us an update on the force multiplier. I mean, you mentioned that your pretty confident you're going to have some customers for that, I guess, second half of the year. Just maybe update us on where things stand there as as customer interest and prospects? Yes. To me, I'm kind of like a kid at Christmas with forest multiplier. We've got the final certifications we're going through with transport. Transport's been great. They're working with us, but it's a one off project. So The certification of that aircraft is labor intensive and it never was quite as fast as you wanted to. We're confident that we're a few weeks away a couple of weeks 3 weeks, 5 weeks from final certification. And no one's going to give us a purchase order till the certification is completed. But we have a number of opportunities in North America and other in other places, to put that out. And so We haven't generated dollar 1 yet, but we're very excited about that project. And, we're pretty confident we're going to have some good hours for that in the second half of the year. Your next question comes from Scott Fromson with CIBC. Your line is open. Hi, guys. After 20 questions, I guess I'm kind of at the bottom of the barrel. And most of my questions have been answered. Just wondering if you can talk about the non quest portion of the manufacturing business, what the, what the quarter looked like and what the outlook is, please? In the aggregate, it was really good. With growth in terms of revenue in all the businesses. And all the one of them had, material EBITDA growth, the one that didn't was stainless fabrication, we had one project, that we had some, some projects of field project that had very low margins. Which will complete up this quarter. But the order books are the best they've been in, a very long time. We expect continued growth in all of them. Okay. That's great. Thank you very much. Your next question comes from Sean Levine with TD Securities. Your line is open. Good morning. Thanks. All of my questions really have been asked and answered. Just one follow-up. On the Quest expansion, is the decision to more than double capacity there. Is that based to a small degree on alleviating some of the capacity constraints at the facility based on the current backlog or is it more to support the expansion opportunities that you're seeing in the Southern U. S? And also what gives you the confidence in being able to fill the capacity at the new plant relatively quickly? Well, it's what gives us the confidence is just the inquiries we're seeing and the opportunities. As a manufacturer, you don't like to turn down projects And we've had to do that, because we don't have capacity right now. We are now booking things into the new facility, Sean. So it's hard for me to say definitively whether it was just that we couldn't fit it in the other plant. Once we've made the commitment, to build the facility. We started taking orders to fill it up. So we have more on the books that we could run through our existing plant now. And that will continue to grow as we take orders for that facility. But I do want to be cautious that you don't turn a plant on and it runs at 100% efficiency. There's a ramp up time and we'll build what we flow through that plant through the year. And I'm in no way telling you that that's going to be instantly at capacity there. We don't have orders for both plants to be at capacity. But I am optimistic that we're going to be able to continue to grow the order book I mean, we went from a little over $200,000,000 to $300,000,000 in backlog in our order book at the same time as we produced something in the range of $40,000,000 worth of product. So that gives you an idea of how much, how many new orders we've taken in that period. Okay, great. That's We do not have any questions at this time. I will turn the call over to Mr. Pyle. Thank you, everybody. I appreciate the opportunity to talk to you today. For those of you who are the Winnipeg area, please come see us. We've got our AGM today. And, we'll be there and we can talk to you one on one and meet you. If not, I look forward to talking to you again after our second quarter in August. Have a great day and go jet. This concludes today's conference call. You may now disconnect.