Good morning, ladies and gentlemen. Welcome to Exchange Income Corporation's conference call to discuss financial results for the three-month period and full year ended December 31st, 2017. The corporation's results, including MD&A and financial statements, were issued on February 21st and are currently available via the company's website or SEDAR. Before the call is turned over to management, listeners are cautioned that today's presentation and the responses to questions may contain forward-looking statements within the meaning of safe harbor provisions of Canadian provincial securities laws. Forward-looking statements involve risks and uncertainties, undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, actual results may differ materially from those expressed or implied in such statements.
For additional information about factors that may cause actual results to differ materially from expectations about material factors or assumptions applied in making forward-looking statements, please consult the MD&A for this quarter, the Risk Factors section of the annual information form, Exchange's 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 broadcast 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 Carmele Peter, EIC's President, Tammy Schock, our CFO, who will review our financial results in greater detail in a few moments, Dave White, our VP of Aviation. We are very happy to be with you this morning to discuss the results for the fourth quarter of 2017 and for the year as a whole. 2017 was a very unique year for EIC, which combined the best operating results in our history with considerable market turmoil for our stock price. This turmoil was in large part driven by a short and distort attack intended to drive down the value of our stock through a campaign of mistruths. While this campaign undoubtedly caused stress for our shareholders, our board, and our employees, I join you this morning with the best antidote to this misinformation campaign: strong results.
Not just for the quarter or for the year, but for our 14-year history. Let me tell you, the future looks even better. Let's start with our fourth quarter. We hit new highs on virtually every performance indicator for the fourth quarter operations. Revenue was CAD 264 million, up 19%. EBITDA was CAD 63.3 million, up 23%. Earnings were CAD 16.9 million, up 22%. Earnings per share were CAD 0.55, up 15%. Adjusted earnings per share were CAD 0.72, up 24%. Our payout ratio on a free cash flow less maintenance CapEx basis fell to 58%, our payout ratio when based on adjusted debt earnings fell to 73%. The full-year results for 2017 are also very positive, I will leave those for Tammy in her remarks. In short, 2017 was simply the best in our history.
When I say that, most people think that I'm going to be talking just about our financial results. Of course, financial performance is a key indicator of how a company is doing. Evaluating performance is much more than financial results. It's relatively easy to make decisions that maximize your short-term performance, but often this kind of thought process will hurt the company in the long run. At EIC, we pride ourselves on making decisions for the long run. Quite often, the payoff on a good decision is not evident until well into the future. In 2017, we continued to invest in our company. We invested in maintenance capital projects to preserve and upgrade our company's assets. We invested in growth capital in our subsidiaries to enable them to take advantage of opportunities in their markets.
We invested in our people, adding depth and new talent to help us grow the company into the future. We invested in acquisitions both before the year-end and after it to increase our footprint and create new cash flow streams. We invested in our customers by entering into an extending partnership agreement with First Nations across Canada. Most simply put, we invested in the future. There are lots of examples of the benefits of these decisions, but I would like to focus on a couple of them to provide you with a flavor of the non-financial returns these investments have generated. You will recall last year at this time that our Manitoba Airline operations had gone through a challenging Christmas and New Year's season.
A combination of challenging weather, a shortage of equipment, and poor maintenance timing decisions on our part resulted in service that was at a level that was simply unacceptable. We committed to make the changes necessary to ensure this would not recur again, and we took very direct and specific actions to make this a reality. Firstly, we added capacity with the purchase of two Dash 8 aircraft. Secondly, we moved the majority of our overhauls into the slower part of the year at the beginning of the year, while renting capacity just in case. Finally, we brought in sister aircraft when necessary. I am pleased to tell you that we not only met that promise, we surpassed it. This Christmas season, we were well-positioned not to repeat the challenges of 2016. The result was one of the smoothest and busiest holiday seasons on record.
The financial impact is clear, and the service impact is even more evident. The decision to internalize our overhauls and compress them into the first part of the year enabled us to have access to our full fleet when we needed it most, not only at Christmas, as I described before, but this was also very evident in the late summer, when an extreme fire season required the evacuation of thousands of people in four remote First Nations communities. EIC, together with other third-party airlines and the Canadian Air Force, were able to get the people to safety. Then, when appropriate, it was EIC that transported the lion's share of these people back to their homes. 2017 was also an exceptional year for Regional One. We have continued to invest in the company since its purchase in 2013, and the results show it.
EBITDA of the company, which denominated in Canadian dollars, was in excess of CAD 110 million, over six times the level it was when we purchased it in 2013. We continue to benefit from investments made in prior periods at Regional One. While the rate of expansion is certainly expected to slow, it is also expected to remain a growth engine for EIC. Keewatin began servicing Kitikmeot, the third and final region of Nunavut. Keewatin has long-held contracts for the Baffin and Kivalliq regions, and with the addition of Kitikmeot, we now service the entire territory. This will add flexibility and better service to our customers, as we can move capacity from region to region in times of high demand without having to rely on third-party carriers to assist. We began flying under this contract in December, the impact in our 2017 financial results is quite small.
The Force Multiplier made its world debut at the Dubai Airshow in November, made a brief appearance at our inaugural shareholder day in Winnipeg shortly thereafter. This aircraft will provide governments around the world access to a rapid deployment, fully staffed search or surveillance aircraft. At the show, we had strong interest from many countries. The aircraft is currently in its final certification process and is expected to go into service mid-year. Provincial completed the Air Borealis partnership with the Innu and Inuit of Labrador in the second quarter. This partnership enabled them to expand their relationship with the First Nations of Labrador and expand the number of communities that we service. In November, we completed the acquisition of Quest Windows. Quest is an industry leader in providing the complete exoskeleton of high-rise residential buildings.
The company's products enable the glass walls to be put in place from the inside out, thereby eliminating the need for cranes and large crews to skin the building. This system also allows an entire floor to be closed in as quickly as within a week, greatly reducing the construction time and costs. When we purchased Quest, we explained that it had an order book of over CAD 200 billion, that order book has continued to grow and now exceeds a quarter of a billion dollars. In order to take advantage of our opportunities in our pipeline and to enter into new geographies where we have little or no presence today, I am very pleased to announce to you that we will be opening a manufacturing facility in early 2019 in the U.S.
We will announce more details in coming periods, but expect the plant to double our current capacity. It will be built in the southern USA, nearer to our markets and closer to suppliers of glass, aluminum, and necessary human resources. It is expected this facility will have a cost of CAD 15 million to CAD 20 million. Quest contributed almost CAD 3 million of EBITDA in the last half of Q4 2017, we look forward to ramping up its production to increase its contribution in the future. I want to be clear, however, that the increase in production is to enable the company to grow beyond its current backlog and take advantage of opportunities for future growth. It is not required for our existing order backlog. Earlier in the first quarter, we announced we are making an investment of CAD 25 million into Wasaya Airways.
CAD 12 billion of the investment will be made in the form of EIC shares, which will be held by the First Nation owners of the airline. The balance will be in the form of a loan to refinance existing lenders and provide enhanced liquidity. The transaction is expected to close during the first quarter. It will increase EIC's exposure to the Northwest Ontario market and will allow us to partner with the First Nation shareholders of Wasaya. Earlier today, we announced an agreement to acquire Moncton Flight College, Canada's largest flight training facility, for an initial payment of CAD 35 million, with CAD 6 million of this being funded in EIC stock and the balance in cash. This purchase price can rise to CAD 55 million if the company hits certain growth targets after the deal is closed. The transaction is expected to close in the next 30 days.
We are very excited about this acquisition. As with all of our acquisitions, it is immediately accretive to EIC on a per-share basis based on the target's historical results. Should the company hit the earn-out targets, the level of accretiveness will increase significantly. The multiple paid for the subsequent growth is far lower than that paid for the initial deal. While Moncton is an accretive transaction with a strong growth profile, the deal provides far more than just an accretive investment. Moncton will enable us to vertically integrate our pilot sourcing and training. It is common knowledge that there is currently a worldwide crunch of pilots, and this situation is expected to worsen as new aircraft come online over the next five years. The situation in Canada is expected to be even more severe, as Transport Canada is expected to shorten pilot duty days to combat pilot fatigue.
The acquisition of Moncton is a key piece of our strategy to thrive in a world where pilots may be at a premium. Before I hand things off to Tammy to go over our quarterly and annual results in greater detail, I am also happy to announce that as a result of our continued strong performance, the accretive acquisitions of Quest, Moncton, and our investment in Wasaya, and reductions in our future tax costs, I announce our 13th increase in dividends. Effective with our March payment, our dividend will increase 4.3% to CAD 0.1825 per month or CAD 2.19 per annum. I will go into greater detail about the outlook after Tammy speaks about the results in greater detail, but I am pleased to tell you that even with this increase in our dividend, we expect our payout ratio to fall in 2018. Tammy?
Thanks, Mike, good morning, everyone. I'll first focus my remarks on our Q4 results, and then I'll turn to the results for the entire 2017 year. Consolidated revenue for the fourth quarter was CAD 263.9 million, which is up 19% from the fourth quarter last year. The increase reflects significant organic growth in the aerospace and aviation segment, as well as growth in our manufacturing segment, both organically and as a result of the acquisition of Quest on November 14th, 2017. On a segmented basis, the aerospace and aviation segment generated CAD 200.5 million in revenue, an increase of CAD 26.6 million or 15%. Regional One's revenue increased by 36%. This reflects the realization of returns on our previous investments in the lease portfolio and in parts for resale. These investments are performing very well, and we expect further growth as the portfolio of leased assets continues to move towards full deployment.
Other sources of organic growth in the Aerospace and Aviation segment include increased volumes in the Manitoba and Kivalliq markets that are served by our Legacy Airlines, the commencement of the Kitikmeot medevac contract, and targeted growth in Northwestern Ontario. Volumes in Provincial's airline business have increased, this reflects the benefit of our partnership in Air Borealis. Provincial's aerospace business had a decline in revenue due to the impact of the completion of one program and the shift of some others into future periods. Manufacturing had revenue of CAD 63.4 million, up 33% from last year. This significant increase reflects the addition of Quest on November 14th, 2017, also contributing to this increase is the collective strong growth in all of our other manufacturing entities, with the exception of WesTower.
Business volumes in our Alberta operations have continued on an upward trajectory as conditions in Alberta continue to improve. Those business volumes are not yet back to their historical levels. The improvement has been very steady from one quarter to the next throughout 2017. Stainless had strong demand in both its field and shop operations, Ben Machine has benefited from strong demand in the defense sector. WesTower's revenue has decreased. This is due to a downturn in demand for its traditional services. The downturn has been driven by the delay between the implementation of new and existing technologies and is deeper and more prolonged than we have experienced in the past. Consolidated EBITDA was CAD 63.3 million in the fourth quarter, up 23% from quarter four last year. The growth was driven largely by the Aerospace and Aviation segment. The Manufacturing segment had significant growth as well.
EBITDA in our Aerospace and Aviation segment was CAD 62.5 million, which is up 29% from last year. Regional One was a major contributor to this growth. Regional One's EBITDA grew by 42% over the fourth quarter in 2016. EBITDA flowing from our Legacy Airlines increased by 40% in comparison to Q4 2016. This was driven by growth in business volumes that I discussed in relation to revenue, it was also driven by favorable operating conditions experienced in the fourth quarter, as well as more efficient operations. We had a quicker freeze-up this year, which notably reduced fog-related cancellations. Provincial's partnership in Air Borealis has resulted in improved yields in its airlines, evidencing the value of this partnership. Costs in our aviation businesses have been impacted by increased fuel prices and by the pilot turnover that is being experienced across the industry.
Demand for pilots is fully expected to continue to rise, we are very optimistic about the positive impact that we expect from our acquisition of Moncton Flight College. This acquisition positions us very well to mitigate the impact of the rising demand for pilots. In the Manufacturing segment, EBITDA grew by 30% to CAD 8.1 million. The acquisition of Quest drove CAD 2.9 million of that increase. I will note that the contribution from Quest for the fourth quarter of 2017 is ahead of our expectations. EBITDA from Stainless, Alberta Operations, Ben Machine, and Overlanders grew by 17%. Consistent with my comments in relation to revenue, WesTower's EBITDA has declined as a result of the downturn that they are experiencing. I will point out that relative to the prior year, EBITDA was negatively impacted by the translation of our foreign subsidiaries into Canadian dollars.
Had we used exchange rates that were consistent with the fourth quarter in the prior year, EBITDA would've been CAD 1.6 million 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 the US dollar revenue contracts that certain subsidiaries have, the net exposure in relation to our Canadian subsidiaries is not typically large. The decline that I noted earlier is flowing from the translation of the results of Regional One and Stainless. We reported net earnings of CAD 16.9 million or CAD 0.55 per share, and that compares to net earnings of CAD 13.8 million or CAD 0.48 per share in Q4 2016. Earnings per share reflects an increase of 8% in the average shares outstanding in the quarter.
The improvement was driven by factors already cited, including the strong performances by Regional One, the Legacy Airlines, and our manufacturing segments. The most significant reason for the increase in the average number of shares outstanding was the offering of the common shares that we completed in the first quarter of 2017. On an adjusted basis, net earnings were CAD 22.3 million or CAD 0.72 per share for Q4 2017. That compares to CAD 16.6 million or CAD 0.58 per share for the comparative period. Adjusted net earnings excludes acquisition costs relating to the acquisition of Quest in November, and also excluded is the amortization of intangible and accelerated non-cash accretion of interest on the debentures that were called in December for early redemption in January. Those amounts are net of taxes. Free cash flow was CAD 49.7 million, up 22%.
Free cash flow on a per share basis was CAD 1.61, up from CAD 1.42 per share last year. Free cash flow less maintenance CapEx was CAD 27.7 million or CAD 0.90 a share. That compares to CAD 22.8 million or CAD 0.80 a share for last year. We use both an adjusted earnings-based payout ratio and a free cash flow less maintenance CapEx-based payout ratio to make decisions regarding our dividends. Our payout ratio for the fourth quarter on an adjusted earnings basis was 73%, a decrease from 89% in the fourth quarter last year. Our free cash flow less maintenance CapEx payout ratio was 58%, a decrease from 65% last year. The improvements in both of these ratios reflect our strong results, which more than offset the impact of a higher average number of shares outstanding. I'll turn now to a discussion of our annual results.
Consolidated revenue for 2017 was approximately CAD one billion, an increase of CAD 122 million over 2016. Revenue in our aerospace and aviation segment increased CAD 105.2 million or 15%, and revenue in our manufacturing segment increased CAD 16.7 million or 9%. Consolidated EBITDA increased by 17% to CAD 248.7 million. EBITDA in our aerospace and aviation segment increased by CAD 43.7 million or 21% to CAD 247.9 million. The previous investments made in Regional One's business resulted in a significant increase in its revenue and are driving significant increases in EBITDA as well. Likewise, growth in revenue in our Legacy Airlines is driving an EBITDA increase for them. Previous investments in the northern cargo operations have led to operational efficiencies that have positively impacted EBITDA. The partnership in Air Borealis has also had a positive impact on Provincial's EBITDA. EBITDA in our manufacturing segment decreased slightly by less than CAD one million to CAD 23.1 million.
This is the net of the positive result of the addition of Quest during the fourth quarter and a significant year-over-year decline in WesTower's EBITDA, as well as a strong year-over-year growth in all of the other entities in the manufacturing segments. WesTower's financial results have a large impact on the overall results of the manufacturing segment because of its size relative to the other entities in the segment. The addition of Quest has significantly increased the level of diversification in our manufacturing segment. The Canadian dollar has been much stronger on average in 2017 than it was in 2016, and the negative impact of that on the translation of the EBITDA of our U.S. subsidiaries for the year is approximately two and a half million CAD.
We reported net earnings for the year of CAD 72.2 million or CAD 2.33 per share. That compares to net earnings of CAD 61.5 million or CAD 2.18 per share in 2016. The increase was driven by the increase in EBITDA and the gain on disposal of our interest in Innu Mikun, which was part of the Air Borealis transaction. Depreciation increased by CAD 26.2 million as a result of capital asset purchases made throughout 2016 and 2017. Our investments in capital assets during those years have fueled our organic growth. Income tax expense decreased by CAD 2.4 million. The effective rate of tax also decreased.
We have had a shift in earnings between tax jurisdictions during the year that positively impacted income tax expense. We also recorded a recovery of deferred income taxes as a result of revaluing our deferred tax liabilities to reflect the reduction in U.S. tax rates that was passed at the end of 2017. Aside from the reduction in our deferred tax liabilities, which are valued using the reduced rates, the change in the U.S. tax rates did not impact our current taxes during 2017 on U.S.-based earnings. However, the decrease in rates will contribute to a reduction in our overall effective tax rate for 2018. This rate reduction, combined with our expectations around the proportion of earnings that will be earned in the various jurisdictions in which we operate, results in an expectation that our effective tax rate should be in the 20%-22% range for 2018.
Our per share amounts have been impacted by an increase in the average number of shares outstanding during 2017. The most significant reasons for the increase is the offering of 2.3 million common shares that we completed in the first quarter of 2017 and the conversion of debentures throughout 2016 and 2017. Shares repurchased through our NCIB did partially offset those increases. On an adjusted basis, net earnings were CAD 79.7 million or CAD 2.58 per share for 2017. That compares to CAD 72.2 million or CAD 2.56 per share for 2016. Adjusted net earnings exclude acquisition costs relating to the acquisition of Quest, as well as the acquisitions of CarteNav and Team JAS in 2016, and the amortization of intangibles are also excluded.
Also excluded from adjusted earnings is the after-tax gain recorded on the disposal of our interest in Innu Mikun and the acceleration of non-cash interest accretion relating to the debentures that were called in December. With the acquisition of Quest, an estimated CAD 38 million of intangible assets were recorded in the preliminary purchase allocation. This will generate additional amortization expenses in the future. In particular, Quest has significant backlogs for which an intangible asset has been estimated, and this backlog will amortize over a relatively short period of time. The other acquisitions that we have announced are also likely to have intangibles that require amortization. However, those purchase allocations have not yet been estimated. The company's capital resources and leverage are strong. During 2017, we completed an equity offering resulting in proceeds of CAD 93 million. We increased our credit facility by approximately CAD 200 million, and we extended its maturity to 2021.
We also issued CAD 100 million of convertible debentures bearing interest at 5.25%, due in 2022. The proceeds of that offering were used to redeem CAD 57 million in our 5.5% convertible debentures that were due in 2019. Our leverage remains solidly within our target range and well beneath the maximums of our credit facility. Free cash flow was CAD 91.1 million, up 16%. Free cash flow on a per share basis was CAD 6.17, up from CAD 5.83 last year. Free cash flow less maintenance CapEx was CAD 91.9 million or CAD 2.97 per share. These compare to CAD 91.6 million or CAD 3.25 per share last year. This reflects a significant increase in free cash flow which was driven by the 17% increase in EBITDA, and it also reflects an increase in maintenance CapEx.
The decrease in the per share amounts reported is driven by the increase in the average shares outstanding for the year that I discussed a few moments ago. Our payout ratio for 2017 on an adjusted earnings basis was 81%, a slight increase from 78% last year. Our free cash flow less maintenance CapEx payout ratio was 71% versus 61% in 2016. These ratios reflect our strong earnings and free cash flows. However, they also reflect the higher number of shares outstanding in 2017, as well as higher than average aircraft maintenance costs. Investments in the maintenance of capital assets, primarily aircraft-related assets, increased by CAD 26.5 million in 2017 to CAD 99.2 million. CAD 33 million of this total is related to the depreciation on Regional One's portfolio of aircraft and engines, which is CAD 13.2 million higher than the prior year because of the growth in the size of its portfolio.
The Legacy Airlines and Provincial had CAD 63.2 million in maintenance capital expenditures, and that's an increase over the prior year and is related to the increase in the number of overhauls for our large gauge aircraft and an increase in the size of that fleet. Regional One invested CAD 49.9 million in capital assets for growth during 2017, and those expenditures primarily related to the purchase of five CRJ900s in the first half of the year. Our Legacy Airlines and Provincial invested CAD 77 million in capital assets to grow their businesses during 2017. This includes the investment by Provincial and its demonstrator surveillance aircraft and two Beech 1900 aircraft that were purchased to service new routes. Investments in new aircraft and ground infrastructure to support the new Kitikmeot Medevac contract were also made. Custom purchased two helicopters to support their expansion into new geographies and service lines.
Additionally, two Dash 8-300 aircraft were purchased for the expansion into Northwestern Ontario. Turning now to our balance sheet. We ended the year with a net cash position of CAD 72.3 million and working capital of CAD 240 million. This represents current ratio of 1.91:1 and compares to a net cash position of CAD 26.5 million last year, working capital of CAD 178.5 million, and a current ratio of 2.05:1 at the end of 2016. The increase in our cash position at December 31st, 2017, is entirely related to the impending direct redemption of our 2012 series of debentures. That redemption occurred early in January of 2018 for approximately CAD 57 million. The increase in our working capital at December 31st, 2017, in comparison to 2016 and in comparison to the CAD 200 million that we reported at the end of the third quarter is primarily related to the acquisition of Quest.
That increased our working capital by approximately CAD 23 million. Also contributing to the increase was further investments in inventory at Regional One, both through direct purchasing and through the part-out of aircraft. A change of approximately CAD 8 million in our income taxes receivable position also occurred, which was driven primarily by shifts in taxable earnings between a number of our legal entities. Adjusting for the additional receivables acquired with Quest, our consolidated receivable position has decreased as the longer-term receivables from the sale of aircraft by Regional One was collected during the fourth quarter as scheduled. That concludes my comments on our financial results, and I'll turn the call back to Mike for his closing remarks.
Thank you, Tammy. We are very proud of what's been accomplished at EIC over the last 14 years, where we have taken the idea of a diversified holding company paying stable, growing dividends to its shareholders from theory to reality. We've been remarkably consistent in espousing what our business model is and then executing on that model. This model has delivered long-term returns to our shareholders, and we see no reason to change, in fact, quite the opposite. Our enthusiasm for the strategy has only grown. In the past, we have been reticent to provide much in the way of forward-looking information and believe that this may have contributed to the fear factor utilized by the short and distort campaign.
Following the first quarter of 2017, when there was some surprise about the magnitude of invested maintenance capital expenditures, in spite of the fact that the number was in line with our internal budgets, it made it clear that we needed to provide some forward-looking information to the market. We're very excited about 2018. The recent acquisitions of Quest and Moncton and our investment in Wasaya will increase our growth rate, will augment initiatives within our existing operations. I think it's important to point out while we expect to see strong performance from Quest, this new manufacturing facility will not be operational until 2019, as such, we are limited by the capacity of the Canadian plant in 2018. We do expect growth from Moncton as well.
It is expected to take until the end of 2019 for the vendors to fully achieve the growth necessary to take advantage of their earn-out. The Force Multiplier search aircraft will also go into service later this year. While the initial response to it has far exceeded our internal expectations, it will not begin to generate revenue until the second half of the year. How quickly we can monetize its operation is yet to be determined. We expect continued operational improvement in our airline operations based on investments we have already made. When the investment in Wasaya is complete, we will see growth in revenue from northwestern Ontario. When the interconnectivity of the schedules has been optimized to maximize our customer service and cost rationalizations completed, margins in the regions should improve.
We expect the financial performance of the balance of our manufacturing portfolio, excluding WesTower, we have an aggregate level of order backlog. I'm really having trouble this morning. A record level of our aggregate order backlog. Initiatives at WesTower should allow operations to improve from the 2017 levels, but we expect them to remain well below historical norms until the rollout of the 5G platform, likely in 2019. In aggregate, we expect EBITDA to grow by 10%-20%. Adjusted net earnings on a per share basis are expected to grow by a similar percentage range, 10%-20%. As discussed by Tammy earlier, depending on the breakdown of earnings between the geographic regions we service around the world, we expect our effective tax rate to be between 20% and 22%. Maintenance capital expenditures are expected to be slightly higher than in 2017.
While the number of overhauls of large aircraft will certainly decline in 2018, this will be offset by a higher number of engine overhauls and replacements than occurred in 2017. This modest increase is the result of the two acquisitions and the impact of a full year of the larger lease fleet at Regional One. We expect seasonal breakdowns of maintenance capitals to be very similar to 2017, with the possible exception of slightly higher levels in the first quarter this year as many event units are scheduled for that period. Growth capital expenditures are expected to decline materially from 2017. While EIC always has and always will remain opportunistic, based on our current view of operations, we do not anticipate any large-scale fleet acquisitions similar to the 2016/2017 purchase of CRJ900 aircraft at Regional One.
While this could certainly change should a suitable opportunity present itself at some point in the future, only modest sequential investment is anticipated. The only major project anticipated is the new factory for Quest in the U.S. later on this year. Major growth capital will relate to the manufacturing facility for Quest and the completion of the Force Multiplier aircraft for Provincial, as well as some modest fleet additions at Regional One. We expect, given the growth in our business, both organically and through acquisition, stable maintenance capital reinvestment, and a lower tax rate as a result of the tax rates of the various jurisdictions we operate in around the world, and the reductions in U.S. statutory rates, as discussed earlier by Tammy. Even after the implementation of our dividend increase, our payout ratio will fall in 2018 from the levels experienced in 2017.
The payout ratio will fall whether calculated as a percentage of adjusted net earnings or as a percentage of free cash flow, less maintenance capital expenditures. Situations in the world change rapidly. Exchange rates go up and down. Trade agreements are negotiated and then abandoned. Commodity prices go through cycles. We have lived through all of these events over the last 14 years at EIC and have not only survived, we have thrived. Our dividend has more than doubled. Our stock has gone up by four times. Simply put, our model works. Buy right, let the people with the knowledge of the industry run the business, provide them the capital they need, and make sure your balance sheet remains strong while you do it. We are proud of what has been accomplished at EIC, not just in the last quarter or the last year, but since our inception.
We have clearly spelled out our business model and have lived it for 14 years. It has generated profitable growth and reliable cash return to our shareholders in good times and in difficult ones. The turmoil in the capital market in 2017 was unsettling. We never wavered from our model. The outcome? The most profitable year in our history and another dividend increase. In the long run, actions and results are all that matter. The outlook for 2018 is strong. We look forward to speaking to you again soon with these results. I want to thank our shareholders for their support over the last year. We intend to stick to our model. In the words of late great football coach Dennis Green, we want our shareholders to be able to say they're exactly who we thought they were. I'd now like to open the call to questions.
Operator?
Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you do have a question, please press star followed by the number 1 on your touch-tone phone. You will hear a tone acknowledging your request. Your questions will be pulled in the order that they are received. Please ensure you lift your handset if you are using a speakerphone before pressing any keys. Our first question comes from the line of Steve Hansen from Raymond James. Your line is open.
Good morning, guys. Mike, just a follow-up on your commentary regarding the Force Multiplier program. Are you able to provide any details regarding where the aircraft is being deployed and to what duration the contract might be? Just as a follow to that is, what else is in plan for the broader program as it relates to additional aircraft or variants that might be in planning? Thanks.
We're not at the stage, Steve, where I can give you a real concrete answer to that. We're in discussions with two or three governments at the current time, both in Canada, we're in discussions in Mexico as well as other countries who want to use the plane for different things. I'm very confident you're going to see it enter our revenues by late in the second quarter. Be very active in the second half of the year. Exactly which customers, it's too early to tell. We're currently examining, based on the demand we have, whether we should look at building another of these in the future. If we should it be built on the same Dash 8 platform, or would it be better built on a smaller platform to allow a lower cost opportunity to customers?
Those are all things we'll give you better clarity on the future as the plane actually goes into service. I can tell you we're very happy with the level of discussions we have around the world.
Great. No, that's helpful. Just a quick one on Quest, if I may. The decision to build a new plant seems interesting. I presume capacity has been a constraint thus far. As you look to build the new facility going forward, can you give us some sort of sense for what strategic markets you're going to be targeting, where the facility might be, if I missed it in your commentary, and just how we should expect the backlog to improve given your announcement here thus far?
Yeah. You asked a whole bunch of questions, Steve. The plant is being built because we've reached the stage now where we have effectively no capacity into 2020. Our current plant is sold out, we don't like turning away our existing customers when they bring new projects. Quite frankly, the order book, which we announced when we bought the company, was very strong at that point. In the relatively short time we've owned it, less than one quarter, that order book has risen materially. So we see opportunities in the existing markets where we are now, and those would be most of the large Canadian cities, but centered in the Toronto market, the Pacific Northwest, Northern California, and to a lesser extent, in the Northeast in the New York and Washington, D.C. markets.
We see opportunities in a number of metropolitan cities, whether they be Nashville or Austin or Houston, to name a few. The order backlog currently is concentrated in the markets we're in, and as we add capacity, we'll be able to add our marketing efforts to new geography.
We've tapped a very small part of the U.S. market, and we think that there are many regions that we can look to together with expanding our work in the existing regions we are. We are very excited about this opportunity.
Fair enough.
Quite frankly, the need to do it has accelerated. We knew when we bought the company it was something we would look at, quite frankly, the continued growth in the order book and what's in the pipeline that we got to find a way to get into the order book, has caused us to move more quickly. It's not a big expense. It's somewhere in the CAD 15 million-CAD 20 million range to build the plant. It's likely to be built, although we haven't settled on an exact answer, in the central southern U.S., close to other window companies so we would have access to supply of glass, aluminum, and skilled workers.
That's great. Thanks, guys.
Our next question comes from the line of Mona Nazir from Laurentian Bank. Your line is open.
Good morning. Thank you for taking my questions.
Good morning, Mona.
I firstly just wanted to touch on the acquisition of the Moncton Flight College. Could you just speak about how the acquisition was sourced, revenue levels, if you could, historic growth profile? You also touched on the fact that it vertically integrates operations. What kind of relief does the acquisition provide? Does it lock in pilots for your entire aviation operations? Does it keep costs under control? Just looking for more clarity there. Thank you.
We're super excited about Moncton Flight College, largely because it's a big hit on two fronts. First of all, it's accretive on the base deal, which is based on the EBITDA we announced in the transaction. To get to the earn-out, there needs to be a material increase in EBITDA in the near term, which we're confident the company is in a position to generate. In terms of how we will integrate that, I'll maybe hand that to my people here, whether Carmele or Dave, you want to take that and how we're going to use it internally.
Yeah. There's a couple of avenues that we look to. First of all, it's a pool of pilots that we can tap directly and ensure that they understand the career path that the EIC airlines offer. Given the variety of airlines that we do run, there's a variety of careers that pilots can pursue. Also, it allows us to get hours on pilots that we have in our operations that don't have enough experience. They need to get actual air time in order to gain the experience for them to be a member of our pilot teams. One of the ways to do that is to actually allow them to gain greater hours by going back to Moncton Flight College and being an instructor. That also expands the capacity that Moncton Flight College is able to provide.
The more instructors, obviously, the greater capacity that they have for training pilots. That's just but two examples of how we might be able to use and intend to use the flight college to help us deal with the pilot shortage. Obviously, there's two things about pilots. One is access to them, and the other is retaining them. By giving them a career path, by allowing them to gain additional hours are obviously key aspects to getting them to stay longer with us and, in many cases, more permanently with us.
It allow us to take individuals that perhaps are more likely to stay with us, whether that's individuals that are currently residents of the regions that we do service, allowing them to have the opportunity to go and get the training to become a pilot and thereby work with us and back in the communities where they come from.
That was very helpful. Thank you. Just secondly, I wanted to turn to growth CapEx, and we've seen the levels kind of trend down from the first half of the year and last year. You spoke, Mike, to expectedly lower levels in 2018. I'm just trying to get a sense of the level of growth that R1 is able, or Regional One, is able to achieve with the lower growth CapEx. You did just give guidance for EBITDA of 10%-20% growth next year. Just given the significant portion of R1 in the mix, is that kind of double-digit growth something that we could see out of that division?
Yes, it would be at the lower end of that range, yes. We're not saying that we won't invest in Regional One again. One of the things that I think at EIC we could have done a better job of preparing the market for is deals like we did in 2016 and 2017 on the CRJ900s or what we did in 2014 on the CRJ700s. Those kinds and size of opportunity aren't an everyday occurrence, and they have to hit our threshold. They're a unique opportunity. We don't see those on the horizon in the near term. We will continue to grow, but we'll continue to grow one plane at a time or two planes at a time, smaller, more bite-sized pieces. Understand, we have to invest, our maintenance CapEx there I think is CAD 30 million a year.
We got to find CAD 30 million worth of deals just to stay in the same place.
Yeah.
We intend to continue to grow. I just wanted to be clear in here that the fact that we've grown over sixfold in five years, that level of growth is not anticipated.
I think it's also worth noting that the lease fleet grew significantly during 2017, and it wasn't fully deployed during the year. We still have some additional monetization that'll still come from past investments.
Thank you for that.
Our next question comes from the line of David Tyerman from Cormark Securities. Your line is open.
Yes, good morning. My first question's on working capital. You've been using quite a bit, especially in 2017, but also the two preceding years, I think some of it, and maybe you can help clarify this, is related to Quest on your financial statements. I'm just wondering in general, like you do seem to be using working cap fairly continuously, what we should be thinking about in terms of working cap going forward. Are you going to use CAD 20 million, CAD 30 million per year, or have the last few years been a bit unusual on that side?
I think the answer is that the last couple of years have been unique because of certain growth things we've done. If you take a look at the last quarter where it was up CAD 40 million sequentially over the quarter before, in round numbers, CAD 25 million of that was the result of an acquisition. The real growth, apples to apples, was CAD 15 million. Out of that, half of that was an anomaly because of effectively a tax overpayment-
which will reverse itself very quickly. That leaves a net change of mid-single digits, which really just resulted to the timing of a part out of aircraft at Regional One. We don't see any material usages of working capital absent an acquisition or a change in our business. There would obviously be in 2019 sometime when we wrap up the plant at Quest, the second plant, that will require an investment in working capital because we'll be doubling the size of the business.
Yeah.
You won't see that this year. That would be wrapping through 2019 somewhere.
Okay. That's helpful. Thanks, Mike. The second question I had is on the Moncton Flight College. Can you give us some idea of what the depreciation would be at that operation?
I'll talk generally and then we'll have Tammy pulls out another. The depreciation number is modest. We were just working on the purchase equation, and there will be a material amount of amortization of intangible assets. Tammy, have you got something?
Yeah. Our round estimate is that depreciation at Moncton Flight College would be around CAD 3 million a year, and intangible assets should be around CAD 5 million to CAD 6 million somewhere. We're still settling those purchase equations, but round order of magnitudes would be that.
Sure. Okay, so sorry, the intangible CAD 5 to CAD 6, is that the total that'll be amortized over years or per year?
Yeah.
Okay.
Sorry, per year.
That's per year.
Per year.
over for four or five years.
Yeah.
Okay. Then just on the earn-out, what's the main driver there? Is it sales growth or margin improvement or what do they need to do to get to their target?
It's measured in EBITDA, it's effectively sales growth.
Okay.
Yeah. Unlike some earn-outs which have a high multiple of the increase in earnings, this is really almost a profit-sharing kind of concept where the increased earnings flow through to the vendors for a short period of time. We'd be ecstatic to pay them the full CAD 55 million.
What's your thought on that, Mike? That sounds like a lot of growth, but maybe I'm wrong there. Is it likely?
Yeah. Whether they hit the exact number is impossible for me to tell.
Sure.
We strongly believe that there'll be material growth off of, first of all, what last year was. We know this year should be above last year's number, then further growth into 2019. It'll be phased. It's not going to happen all in the next period. I think exiting 2019, the company will be materially larger than the company we bought.
Okay. That's super. Thanks very much.
Our next question comes from the line of Konark Gupta from Macquarie. Your line is open.
Thank you, and good morning. Great quarter, guys. Had a few questions, Mike. Wanted to start with WesTower Communications first. WesTower Communications Canada EBITDA seems to be down for three years, I think, in a row. The cellular tower construction market doesn't seem to be recovering here. What measures are you taking to turn around EBITDA, and could strategic outcome be an alternative there?
I would disagree a little bit on how long it's been challenged for. It's really been a 2017 issue. Your question on a go-forward basis is very relevant. We've worked at expanding the tertiary things we do other than just building towers. Whether it be reinforcing, hanging new equipment, decommissioning towers, working on corrosion testing, working on some laying of cable on behalf of the companies, or even building the actual metal for the towers for other companies. As a result, I'm confident we'll see a rebound in this business. In round numbers, it's been a CAD 8 million or CAD 9 million EBITDA business in the past, and the current year was essentially a break even. We'll see that rebound next year. It's going to take us probably into late 2019, early 2020, to where we expect to see historical levels of EBITDA in that business.
Having said that, the smaller strategic changes, rightsizing of our team, and those kinds of things will see a return to profitability in the current year.
Okay. That's great, Mike. On the Moncton, wanted to follow up. The CAD 20 million earn-out map suggests you're kind of expecting 60% EBITDA growth, keeping the multiple same, and you said that Moncton would be even more accretive with earn-out. Are you expecting solid double-digit growth here for the earn-out, and is that also reflecting some sort of synergies you expect?
The synergies aren't in there financially. They're in there strategically about helping our airlines in a time of shortage of pilots by having Perimeter be able to go select candidates to go in there and train up, knowing they're going to go to Perimeter or knowing they're going to go and be a medevac pilot with Keewatin Air or whatever the case may be. That's clearly part of our plan, but that's not in those numbers. I need to make sure, I think either I misspoke or you misunderstood a little bit. The multiple on the original transaction we gave you was 4.75. The multiple on the earn-out is much lower than that. For them to get that extra CAD 30 million, they don't have to generate four times CAD 30 million. It's a lot closer to just generating the CAD 30 million. Are you with me?
Do you understand what I'm saying?
Our next question comes from the line of Derek Spronck from RBC Capital Markets. Your line is open.
Good morning, Mike and Tamara. Sounds like a lot of positive things occurring across your portfolio. You did mention a couple of headwinds or potential headwinds, higher fuel prices, pilot turnover, anticipated new regulation around pilot fatigue and flight duty times. Can you quantify some of those potential impacts to EBITDA?
The short answer, Derek, is no, because if we take them on one-on-one, the fuel impact we could pass through. Tammy's going to take that one. On the pilot one is turnover really isn't expected to change much from the current level. The cost of enhanced training are buried in our financial statements already. What we will see is once we have our Moncton Flight College acquisition completed and start flowing through pilots to the business, our costs will go down. They're not going to mitigate how much they're going to go up. They're already fully reflected, Derek. We wanted to be able to be in front of the curve, where the big airlines always solve their problems by taking the pilots from the smaller airlines.
Well, our competitors, whether they be the regional carriers in other places like an Air Inuit or Wasaya before we partnered with them, or companies like that, don't have access to the kind of transaction we just completed. By giving ourselves a channel of new pilots, we believe that in the future, we're going to actually reduce our costs as opposed to have an increase in those costs in the near term. Tammy, maybe I'll let you have fuel.
Sure. Changes in fuel prices impact our aviation entities in different ways, depending on the geographies and the nature of the flying that they're doing. Certain of our entities experience a fairly immediate impact on fuel costs, on fuel price increases. For those entities, during 2017, pure fuel costs rose by about 10% in certain parts of their business. The impact of this was highly mitigated in EBITDA as they were able to adjust ticket prices to absorb that. Certain of our entities are not impacted at all by fuel prices because the costs flow through to the customer in those contractual relationships. Then lastly, in certain geographies such as the High North, the impact of fuel price changes is not immediate because prices are changed only periodically in those regions.
In those geographies, we experienced an overall small increase in fuel costs during 2017, probably somewhere between 1% and 2%. There was some fuel price volatility during 2017. The impact of that on our EBITDA was quite muted, to be honest. It's hard to say what fuel's going to do in 2018, but we would likely see our businesses respond in a similar manner.
Okay. Yeah, that makes sense. Just quickly, you mentioned maintenance CapEx will be slightly higher in 2018 relative to 2017. Is that a good run rate maintenance CapEx we should be anticipating going forward?
That's a really good question, Derek. Your conclusion is about right, I got to put one proviso on it. In our Legacy Airlines, we had a big year last year on airframes. We have a big year this year on engines. We anticipate that in the following year, in 2020, 2019, you'll see a slight decline in Legacy to a more average amount of both of those. Having said that, we have grown the business over that period of time, which may fill in those savings. We've added the Moncton Flight College, we've added our interest in Wasaya, we've added Quest and we're growing Quest. I think if you look at it at the current rates, it's probably reasonable, although the makeup of that in future periods may change a bit.
You may see a slight decline in the aviation part of the business and a slight growth in the other part of the business.
Yeah. Okay. I gotcha. Just finally quickly, you're relatively active in the NCIB last year, about CAD 26 million at around CAD 33 per share. You have lots of internal investment initiatives that you're looking at for 2018. Are you still comfortable with your capacity to selectively enter the market on your NCIB in 2018?
The short answer to that is absolutely.
Okay. Thanks.
To be clear, Derek, we don't buy back stock as a strategy to soak up available capital. We buy back stock when the stock trades at a price that's at an anomaly to its inherent value, and I can't generate a better return than by buying my stock. When stock price normalizes and the fear exits the marketplace, and when people take a look at the fact that we've crushed every performance indicator in the last nine months. We've increased our dividend. We've talked about declining payout ratios in the future. I think the need for the buyback will decline. Having said that, Tammy's sitting there with a checkbook every day that it needs to be used on.
Okay. Thanks, Mike. Thanks, Tamara.
Our next question comes from the line of Raveel Afzaal from Canaccord Genuity. Your line is open.
Morning, guys.
Morning, Raveel.
Just a couple of questions on the guidance. Thank you for providing that, the view on the fuel price headwind. What FX assumptions are you using for U.S. Canadian dollar in your guidance, if you can speak to that?
CAD 0.80.
Pretty much prevailing rates.
Yeah.
Perfect. Thank you.
We're not trying to guess that.
I'm very proud of that. The two things I'm not allowed to do in here are guess fuel prices. Actually, it's three currency things or interest rates.
Right. CAD 0.80 makes sense. Then are you factoring in Force Multiplier in your EBITDA guidance or are you leaving it as upside for now?
There's some in it. I would hope there's upside in it, there's some in it.
Okay. Then with respect to the flight school, you've gotten a few questions on that. Just one more follow-up. It's going to grow materially. I'm thinking, is it going to grow materially because you may be able to open up another facility, another school? Is that going to drive this growth? Are you making some efforts to get more pilots through the school? If you could just speak a little bit more about what are the two, three main growth drivers for this business?
You seem to know a little more about this business than I'm comfortable with. Over time, we've made no decision at this point, Ravi, about the methodology of the growth, whether we run more through our two bases we have now, do we build another one in the Maritimes? Do we build one out West? Where the key thing is we need to expand our number of flight trainers. That's the rate-determining step. We're working on plans to grow the number of trainers, because the number of trainers is the rate-determining step. Getting the little trainer planes or getting quarters for people to stay in and those kinds of things, that's relatively easy. We're busy on that.
Yeah. Thanks, Mike. Anytime you go into the flight training business, as Mike mentioned, the biggest factor is who can train. Moncton Flight College today has a very good complement of instructors with over 90 instructors. They have a grove of their own methodology, which they've used historically to make a lot of their own instructors. They're highly successful at that. What we do with that, now that we're partnered up, we have the expertise of our airlines and our flight college to come up with strategic plans of how to approach that, I think it's opening just a great world of opportunity to strategize on that.
Very good. Just my final question, to the extent possible, can you speak about how much do freight costs add to the cost structure for Quest? I'm just trying to figure out when you guys open up this new location, potentially closer to the supply sources, what sort of an impact would we potentially see on the margins? If you can just speak about the cost structure, how much is freight when you look at the overall cost of manufacturing?
The cost of freight in the grand scheme of the window business is not a big number. It's small single-digit %. I think I want to put the emphasis on a different syllable. While building this closer to the market does unequivocally reduce transport costs, the other benefits are much, much bigger in terms of the benefit. The first is when you're out of capacity, you can't sell anymore. We're running that business essentially flat out. This will enable us to move things that are currently in a pipeline that we can't promise a customer. Marty and Jody, the principal and his son at Quest, are dogmatic that we're not going to take work we can't deliver on time with the quality that our customers expect. It's kind of put a brake on our ability to grow till we get this up and running.
Building it down south, more importantly, will let us take advantage of sales opportunities we have. Secondarily, and it may turn out to be not an issue, but no one knows what's happening with NAFTA. I think the people negotiating don't know what happens with NAFTA, and it depends on where the president wakes up on a given day. We want to be ready no matter what the outcome is, and because we have a significant sales level in the U.S., by building our plant there, we inoculate ourselves from trade wars. If worse comes to worst, we'll build Canadian stuff in Canada and American stuff in the U.S. I should caution that we don't think it's a big impact on this business simply because all of the glass and all of the aluminum comes from the U.S. to begin with.
It's not like there's a massive import as part of this from Canada, but we want to be ahead of the curve. If the rules don't change, so be it. We'll sell both ways across the border. They may build a plant or something in our U.S. plant for Canada, or we will build something in Canada for the U.S. To the extent that the border does get more difficult, this will eliminate the problem for us.
Thank you. Very clear. Thank you for taking my questions.
Thanks, Ravi.
Our next question comes from the line of Tim James from TD Securities. Your line is open.
Thanks very much. Good morning. The revenue softness at Provincial, you mentioned that's related to the end of a contract a couple of delays, I think, and some work. Can you talk about what you expect for that business then, as you look at 2018 relative to 2017 or the fourth quarter of 2017, specifically some of these factors that impacted the fourth quarter?
Yeah. It's very difficult for me to predict the completion of projects on a quarter-by-quarter basis in Provincial. It's important to look at Provincial's business. You kind of got to break it into three pieces. We've got all our airline business, so where we're flying airplanes, our partnership with Air Borealis, with the Innu and the Inuit. We've got our flight base operations as part of that. Then on the other side, we've got our aerospace, you need to break that into two pieces. Within the aerospace business, we've got the flying we do, so where we're doing surveillance for Canada and Curaçao and those kinds of things. That's remarkably consistent. That isn't what's driving this decline.
It's when we do projects where we're adapting an aircraft where we complete a project, there may be a gap before we start another one for somebody else. I would anticipate that the slowdown we experienced was clearly in the project part, where we finished some projects new ones were delayed or not started. We would expect that the current year would be similar to what we experienced in 2017 in terms of that. In terms of the flying part, there was no decline, nor do we expect one. As we look forward a little bit more, as we get closer to deploying Fixed Wing SAR, we'll start to see that show up, whether it be later this year or early next year in our results.
Okay, great. Thank you. Just looking at the lease portfolio in Regional One, I see some commentary there regarding, I think it was the longest lease term. I'm wondering if it's possible to provide an approximate weighted average lease term for the portfolio.
Don't have that here, we could probably get that for you for the next conference call. That's not something I have in front. I don't want to guess. Having said that, I will. It's probably less than five years. I would say the average is somewhere in that three-
Yeah
ish range. You have to take that with a considerable grain of salt because I just pulled that out of my pocket.
I think that when you look at our financial statement disclosure, I think we're disclosing approximately two years as an average lease term. There's some shorter contracts in there, we'll be leasing these planes out for longer than that. What we disclose in the financial statements is strictly contracted leases.
Right. Okay.
We will have those 900s on lease for longer than that.
Okay. Then just finally, if I can return to the working capital question that came up earlier. Just want to make sure I understand this. Mike, you mentioned in the fourth quarter specifically that half of the increase in working capital was due to the tax change. If I take a step back and look at the year in total, the CAD 64 million, I believe it was, of usage for working capital, how much of that, or should any of that reverse in 2018?
Well, there was a couple of longer term receivables stuff we dealt with and a little bit of tax. I think the company has grown, if you look at the revenue line, and that explains the growth in working capital. I don't think you're going to see material changes in working capital other than seasonal variations. Clearly busy quarters like Q3 will use working capital. Other quarters like Q1 will probably return working capital just by the nature of revenue levels. There shouldn't be an ongoing burn of working capital.
When you look at the year-over-year change, let's say approximately CAD 60 million, you take CAD 25 million of Quest off that. Our Provincial and manufacturing and Legacy Airlines businesses go up and down, give or take by a very small amount. They are not driving that increase. We do have an increase in receivable levels at Regional One that is caused by the fact that they have a very large lease portfolio that tends to have a month or two of lease payments outstanding at any given time. That growth has driven an increase there. Inventory at Regional One is higher because of the timing of some of their purchases and part outs right in the last part of the year. I don't see any reason to see increases like that persist in the future.
That's where when we talk about it on a go-forward basis, if we choose to part out two CAD 7 million planes all at once, you could see a bump in that, and then you could see a following period where we don't part out any and you could see a decline.
Yeah.
When you smooth out the lumpiness of quarter-to-quarter, there should be no systematic requirement for increases in working capital.
Okay. That's very helpful. Thank you.
I just wanted to clarify whether that I talked about when we'd see returns on two things from Provincial. We will see in the second half of this year our Force Multiplier go into service, we clearly anticipate revenue from that project. In addition to that, by moving into next year, you'll start to see smaller parts of revenue from the Fixed Wing SAR program, where we're supporting Airbus and the Canadian government on the Northern Search and Rescue plane. While that'll be nowhere near the ramped up level, you'll start to see that creep into our results in 2019.
Okay, your next question comes from the line of Steve Hansen with Raymond James. Your line is now open.
Yeah, Mike, just a quick follow-up. You've been very active on the M&A frontier of late. Can you just maybe comment quickly on the M&A pipeline, how you see it, relative to maybe the past six to eight months and what we should expect on that front?
I would describe it, I'll use a football metaphor. We've driven, we've scored a couple touchdowns in the last six, eight weeks with the two deals we've completed. We've got lots of stuff we're looking at. We're back in our own end on those deals. There's a lot of work to do, I wouldn't want to raise expectations that this is the new norm, that we do our deal every quarterly report. That we're likely into the latter part of this year before we're at a stage, Steve, potentially have done anything else. We've got a little bit to swallow here. The pipeline itself is still good.
There's still lots of stuff to look at, but we've done a lot based on our internal capacity, since the fall of last year between the diligence of the two deals, and then closing them, and then the diligence on building a new plant for Quest. I would think we will take a pause, not that we're not looking, but that we're a bit winded.
Okay. No, that seems prudent, and maybe just a question I ask every couple of years on a related matter is, how do you feel about the corporate structure at this point? Do you have the bandwidth or the horsepower you need at the head office to continue to manage all these disparate operations, whether it's systems, people, or otherwise?
Sometimes you're good at things, and sometimes you're lucky. I feel truly blessed with the people we've been able to add to our head office team in the last couple of years. One of the things we do a bit different, Steve, is that we don't wait till we have a specific position to fill. We're a growth company, and we know we need good people. Just in the last, just over 12 months, we've added Dave White, who you hear from regularly on these calls, to run our aviation group. You hear from Garth Waddell, a strong CA who's helped us with the Quest deal, Robert Hutchinson, another finance executive we've added. We're pretty happy with what we have today. We continue to look, and our culture is to hire the best.
If someone else walks in the door tomorrow, we'll find them a desk. In terms of our ability to execute on our business model, I don't think our team's ever been better.
Okay, great. Good to hear. Thanks, guys.
Thanks, Steve.
Your next question comes from the line of Konark Gupta with Macquarie. Your line is now open.
Yeah, thanks. Sorry you got disconnected, apologies if these questions have been asked.
Please.
Mike, it's Regional One, just quickly. There are a bit of Embraer 190s coming up in the used market very shortly. Any sense you would have any interest in that kind of aircraft and any other opportunities?
Yes. We've dipped our toes in the Embraer market as of late in two ways. We bought some stuff for our own account, we've also managed for a bank, the return of a material fleet, then redeployed it on their behalf. That was a win-win. We made a little bit of money doing it, more importantly, we got the knowledge out of doing that. I think you will see an increasing proportion of what we do in the Embraer platform. I'm not suggesting it's going to jump up and match the CRJ platform in the near term, we have largely avoided the ERJ market in the past, I don't think that's what you'll see going forward.
Great. Lastly on Quest, Mike. CAD 2.9 million EBITDA in just half a quarter, seems like pretty good. Is there a reason why not to annualize that number?
Well, yeah. We finished a couple of jobs that were quite good. I would say that it was better than we anticipated, we gave guidance of what we paid off of, we sort of leaked towards people what we thought we would do the next year, material growth rate. What I would suggest is the results in that stub period support the growth rate we talked about. I think if you extrapolated directly and try and say, "Hey, that's half a quarter," if I take 24 times that number, we won't quite Pardon me, it was six weeks, not that, still, we wouldn't meet a pure extrapolation of that.
Okay. Thank you.
Your next question comes from the line of David Tyerman with Cormark Securities. Your line is now open.
Yes. Hi. Just two last questions. Mike, I did want to clarify your comment on the Moncton. If you got to the CAD 55 million, or they got to the CAD 55 million earn-out, would the multiple on EBITDA still be less than 4.75x? Is that what you're saying?
Materially less.
Materially less. Okay. That sounds very good. Then the other question, I hope they make it.
Oh, do we.
Second question is on the CapEx. The last couple of quarters, you've been running CAD 35 million-CAD 40 million all in, maintenance plus growth. Is that kind of a good number going forward, you think, in 2018? Maybe a bit higher in Q1 means you'd tend to do more on the maintenance side. Is that what we should be thinking?
I would expect the maintenance number this year will be higher than last year's maintenance in Q1 just because of the timing of engine events.
Right.
In terms of the aggregate growth
One comment when you look at the aggregate is the latter half of 2017 does include some higher growth CapEx because of the setup of the Kitikmeot project, the completion of Provincial Force Multiplier, and a couple of things to support our Northwestern Ontario operations. We wouldn't necessarily think that those types of things would repeat.
The only material maintenance growth CapEx that we anticipate at this point is the plant for Quest and the final few million CAD to finish off Force Multiplier. There may be a plane here or there in addition to that, we expect growth CapEx to be materially less than it's been experienced in the preceding year.
Okay.
I put the asterisk beside that, David, though, if we get another deal that looks like that CRJ700 deal, I'm going to run, grab it, grab the checkbook. Based on what we see now, we expect that to decline.
Yeah. No, that makes sense. Okay, that's perfect. Thank you.
Thanks.
We have no further questions in the queue at this time. We'll turn the call back over to the presenters.
I'd like to thank everyone for participating on today's call. I'd also like to reiterate our thanks for the loyal shareholdings we've had through what was a tumultuous year. The irony of it was it was our best operating year on record, and the outside noise created some challenges for all of us. We've delivered the best antidote to that, which is strong results. We look forward to speaking to everyone again soon when our first quarter comes out and updating you on our results then. Thanks, and have an awesome day.
This concludes today's conference call. You may now disconnect.