Earnings Call: Q2 2021

Aug 13, 2021

Quarterly report

Good morning. Welcome to the Exchange Income Corporation's Conference Call to discuss the final results for the 3 6 month periods ended June 30, 2021. The Corporation's results, including the MD and A and financial statements, were issued on August 12, 2021, and are currently available via the company's website or SEDAR. Before turning the call over to management, listeners are cautioned that today's presentation and the responses to questions may contain forward looking statements within the meaning of the Safe Harbor provision of Canadian Provincial Securities Laws. Forward looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward looking statements, please consult the MD and A for this quarter, the Risk Factors section of the annual information form and exchanges of the 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 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 under interested parties. And I would like to turn the call over to CEO of Exchange Income Corporation, Mike Powell. Please go ahead, sir. Thank you, operator. Good morning, everyone, and thank you for joining us today on EIC's 2nd quarter results call. With me today are EIC's President, Carmel Peter, who will provide some operational insights from the quarter and We'll review in additional detail the outlook for EIC and our CFO, Daryl Bergman, who will provide a more detailed breakdown of EIC's 2nd quarter financial results. I am pleased to be here today, not only to report on another strong quarter for EIC, but also to confirm that we are seeing optimistic signs across our business of a transition to a positive post pandemic economy and a return to relative normalcy in our operations. We acknowledge that we have likely not heard the last of the COVID-nineteen pandemic and there may be new challenges in the future. EIC's exceptional performance through the pandemic has been defined by The remarkable efforts of our internal management teams who have consistently found ways to safely deliver essential services for our customers, while positioning us for the post pandemic recovery. Our ability to draw on the diversity of our enterprise to maintain steady cash flow, honoring our dividend obligation to our investors while strengthening our balance sheet and our unwavering focused on building the long term future of our company through accretive acquisition and organic growth. You'll hear these three themes reflected throughout my remarks this morning. The 2nd quarter, as this was the first time the comparative quarter was also fully impacted by the pandemic, offers to reflect on how EIC has navigated COVID's challenges without compromising our foundations. Our results in that context are outstanding. In the quarter, the company grew by 32% grew revenue by 32% to $322,000,000 and increased EBITDA by 31 percent to 81,000,000 We increased net earnings per share by 4.50 percent to $0.44 improved our adjusted net earnings per share by 2 31 percent to 0 point 5 $3 per share. We drove free cash flow Capital expenditures up 44 percent to $37,000,000 and on a per share basis, this was up 34% to $0.98 And perhaps most important and most tellingly, we improved the trailing 12 free cash flow less maintenance Capital expenditures payout ratio from to 58% from 76%. These impressive financial results were achieved even while EIC received considerably less pandemic related financial assistance from governments, a decline of more than $14,000,000 from the comparative period. Absent all government support in both periods, The company's EBITDA increased by an impressive 110% in the second quarter year over year. Even though our operations were mainly impacted by the pandemic, our financial performance tracks closely against our Q2 2019 results, of our last pre pandemic second quarter. Both revenue and EBITDA closed within 10% of 2019 levels, while our free cash flow less maintenance capital expenditure is actually higher than 2019. And our payout The ratio of 58% is the best we've achieved since the full year of 2019, clearly demonstrated the ongoing sustainability of our dividend. I'd like to point out that 2021 versus 2019 isn't necessarily a clear apples to apples comparison for EIC. The company has completed 3 modest acquisitions in the intervening time and integrated those operations into our corporate family despite COVID's challenges. That said, the similarities in our current financial performance and our pre COVID financial performance indicate that EIC has to an extent already recovered towards pre pandemic levels by successfully adapting our of operations to COVID's reality. Our strong footprint our strong footing, sorry, has the company well positioned to exceed Our scheduled airline services are a great example of that positioning. EIC carriers were able to preserve our networks and continue serving our destinations over the course of the pandemic, a testament to the exceptional efforts of our operators. We believe our demonstrated reliability has given us a head start on recovery, which we have seen in part through Q2. Despite pandemic challenges, our operations have been characterized by slow, steady improvement in passenger numbers throughout the quarter, albeit heavily influenced by regional COVID case counts and associated travel restrictions. We're encouraged by significantly improved passenger volumes in the Atlantic region, which are trending towards pre pandemic levels in the Q3. Similar improvements in Central Canada and Nunavut has been restrained as an overwhelmed medical system has limited access to diagnostic appointments and elective treatments, thereby suppressing travel for medical procedures. That said, vaccination rates in the communities that the carriers serve are high, and we are confident travel will quickly rebound as the medical System pivots to accommodate traditional care. There is a significant backlog of patients awaiting treatment and we expect pent up Demand to support robust demand for a protracted period as access normalizes. These patterns drive investments we're making into expanding our airline operations, strong passenger traffic patterns and significant demand increases from our remote mining and freight customers are allowing the net additions of 4 larger gauge aircraft, ATR-seventy two and -eight-four hundred by the end of this year. EIC's model has always supported opportunistic organic growth. These investments in our fleet are another example of the company following the stringent criteria we always used to assess opportunities and deploying our balance sheet as appropriate to accretively expand our existing business. Regional One continues to experience increased demand for parts and larger aircraft components as major airlines have ramped up flying operations to meet consumer demand generated by a rapid recovery in the United States. By contrast, Our aircraft leasing business is historically focused on international markets where recovery has lagged behind the trends in North America. Our expectation remains a return to pre pandemic levels in future quarters as the global economy accelerates on pace of the vaccine rollout and progressive economic recovery. EIC's ISR and Medevac operations continue to provide valuable stability for the company operating consistently at or near pre pandemic levels for the balance of the previous 18 months. This demonstrated resilience supports our decision to increase our overall position in the segment, Making accretive investments of over $100,000,000 in the delivery of our Netherlands surveillance contract and in the acquisition of Carsonair, a transaction I'll return to later in my remarks. The company's manufacturing segment continues to experience strong demand while navigating pandemic challenges related to deferred projects and corresponding dislocation production schedules. These challenges are particularly acute in our Quest window operations, Although robust demand for future products projects, I'm sorry, will allow us to fully deploy in future quarters, The investments we've made in new production and installation capacity. The operational ups and downs of the pandemic. Through the operational ups and downs of the pandemic, we have maintained an unwavering focus on our balance sheet. One of EIC's core principles since inception has been the maintenance of strong liquidity, empowering the company to move quickly to capture growth and investment opportunities without compromising the financial flexibility we've retained to successfully navigate the economic uncertainty. We have always followed the practice of actively identifying investment and acquisition opportunities. To support those activities, the company has undertaken a series of transactions to ensure we maintain access to the financial resources required to execute on our business model without limiting our ability to weather economic uncertainty or withstand disruptions to our operations. The first of these transactions was the completion of a share offering in the quarter generated gross proceeds of 88,000,000 at a price of $39.40 per share. Following the offering, EIC announced a new issue of convertible debentures on July 12, 2021 that generated gross proceeds of approximately $144,000,000 to be used to retire existing convertible debenture series that come due over the next 2 years. This offering closed on July 30, 2021. And then on July 30, 2021, we announced the redemption of the June 2023 debentures to be repaid on September 2, 2021, deploying approximately $69,000,000,000 of the proceeds of the recent offering, with the balance being temporarily to reduce our senior debt facility until it is accessed to retire additional series in the future. Simultaneously, we have extended our $1,300,000,000 syndicated debt facility to August of 2025. These transactions will allow EIC the financial freedom to be active in identifying opportunities for our Freedom Credit and completing strategic acquisitions that fortify our business in the long term. The first of these is the acquisition of Carson Air announced on July 5 for aggregate purchase price of $61,000,000 The company, In addition to their established business lines in air cargo and pilot training is British Columbia's leading provider of medevac services. I mentioned earlier the resilience EIC has seen in our own bedevac services throughout the pandemic. Our analysis and experience tell us Carson is the ideal acquisition to grow our presence and expand our geographic coverage in that segment. Carson's proven management team led by Kevin Hillier has built a sterling reputation in the industry and we are thrilled to welcome them to the EIC family of companies. When added to our existing medevac providers, Carcinare acquisition fortifies ZIC's position as a premier provider of medical evacuation services in Canada. We believe strongly in this business line and will continue to pursue strategic opportunities for growth organically or through additional acquisitions in this space. Beyond the Carson Air acquisition, EIC has announced the execution of 3 non binding letters of intent to acquire Additional companies for aggregate considerations totaling approximately $53,000,000 These are smaller tuck in acquisitions, capitalizing on synergies with existing operations, which we will believe to be immediately accretive. The first of these additional acquisitions closed on August 11, 2021, with the acquisition of Mat Fab Manufacturing for $11,000,000 The company is very closely aligned with our bend machine operations and will immediately add capacity and efficiency to both businesses. We are excited about adding MacPham to our family. The remaining two transactions are undergoing Final due diligence, barring unforeseen circumstances, are expected to close within the next 60 days. Cumulatively, the Carson Air acquisition, Mac fab manufacturing acquisition and the 2 remaining transactions in progress represent a deployment of approximately 114,000,000 to complete accretive acquisitions in 2021. Despite the uncertainty and operational challenges Yes, these are exciting times for the company. We've demonstrated operational excellence time and again, preserving our operations without accepting compromise for the safety of our employees or for our customers. We preserved our cash flow, safeguarding our dividend and preserving the commitment we've maintained with our shareholders in that respect for over 2 decades. But perhaps most importantly, we have never allowed ourselves the luxury of short term thinking, Making easy choices to manage for immediate challenges at the expense of future growth is not an approach we've ever tolerated in ESE. Changing that philosophy during the pandemic would have undermined the growth trajectory we've now demonstrated and ability to retain despite these historically difficult times. Across the company, EIC has recorded significant operational accomplishments through COVID And we've also added major contracts, completed accretive acquisitions and strengthened our balance sheet to support yet more growth going forward, giving us lots to be excited about in the company's future. I want to thank our Board, our management team, our employees, Shareholders and in fact all stakeholders for believing in our vision and I'm looking forward to seeing what the company coming months will bring. I will now turn to Daryl to outline EIC's financial performance in greater detail. Thank you, Mike, and good morning, everyone. As Mike noted in his remarks, EIC has continued to deliver solid financial performance through the Q2 of 2021, while progressively managing the ongoing challenges and unpredictability associated with the COVID-nineteen pandemic. Q2 marked the 1st full quarter that results from comparative period were fully affected by the pandemic. As such, offers an opportunity to reflect on the improvements EIC has achieved in insulating our operations against pandemic fluctuations and delivering financial results comparable to pre pandemic periods. But before turning to operational results, I would like to review the series of transactions Mike outlined earlier that EIC undertook in the quarter to fortify our balance sheet and support the deployment of capital to fund accretive acquisitions and investments. EAC has been active over the last several months using favorable markets to our benefit and setting financial cornerstones that will support our long term success. To begin, within the quarter, as mentioned, EIC completed an $88,000,000 equity offering at a per share price of $39.40 Subsequent to quarter end, EIC closed its convertible its largest convertible debenture offering in company's history, $144,000,000 at 7 years 5.25 percent and lastly on August 6, wraps up an extension of the corporate credit agreement out to August 2025. I would add that both of these subsequent transactions were completed with applicable financing costs remaining constant. We have also called the debentures due in 2023. And when the debentures due in 2022 are redeemed, We will have no debt due until 2025. EIC is extremely appreciative of the continued strong from both our banking syndicate and capital markets, which is evidenced with over allotments on both the equity and the venture transactions being exercised along with a very seamless turnaround on completing the extension of our credit facility. With the near term plan in sight to have no maturing debt of 2020 5 increased liquidity and a 12 month trailing free cash flow less maintenance CapEx payout ratio of 58%, EIC has established a foundation that provides us the necessary flexibility to persevere through potential challenges, whether it be a pandemic resurgence, recession conditions, hyperinflation or other adverse conditions. Simultaneously, we have created additional financial flexibility, capable of supporting growth through additional acquisitions and reinvestment in our subsidiaries. Turning now specifically to EIC's results for Q2 2021. EIC has continued to emphasize continually emphasized a strong focus on our balance sheet of modest leverage and good liquidity. Our efforts in Q2 2021 support our commitment to this principle. The size of the corporation's credit facility as at June 30 remained unchanged at approximately $1,300,000,000 with the ability to access another $300,000,000 in an accordion feature should we choose to exercise it, giving the company the corporation combined access up to $1,600,000,000 As previously noted, subsequent to quarter end, we completed the extension of the current credit Lidio 4 years to August 2025, the credit agreement remains materially same with pricing and covenants unchanged. At the end of the quarter, the corporation had readily available access to liquidity in cash and under its credit facility of $900,000,000 including the accordion. With no material cash burn expected, the corporation's liquidity position continues to be very strong and stands to set to support the growth needs of the corporation. EIC's long term debt net of cash of roughly $686,000,000 is a decrease of approximately $40,500,000 since December 31, 2020. The corporation used the net proceeds from its bought deal equity offering to repay its credit facility, partially offset by using cash on hand to fund growth capital expenditures. Strengthening of the Canadian dollar since December 31, 2020 also contributed to the decrease in long term debt. The corporation targets leverage to be within a 1.5 to 2.5 times senior debt to EBITDA range. Q2 2021 leverage is near the top end of this target range caused by the reduction in EBITDA front on from the impacts of COVID-nineteen. Our current leverage ratio for the quarter for quarter end is 2.41 times, which is well below both the current credit facility covenant requirements of 5 times and notably the 4 time requirement, which will come back into effect for year end. Further on our balance sheet, we ended the period with working capital of $293,000,000 which represents a current ratio of 1.86. This compares to working capital of $324,000,000 and a current ratio of 2.10 at the end of 2020. As I turn to revenue and EBITDA, I will focus on highlighting key quarter over quarter changes. A detailed analysis of both can be found in the quarter's MD and A release on August 12. In Q2, 2021, EIT generated revenue of $322,000,000 which is an increase of $78,000,000 or 32 percent from Q2 last year. Aerospace and Aviation segment revenue increased by 58,000,000 while manufacturing segment revenues increased by $20,000,000 Aerospace and Aviation segment revenue was up 41% to 198,000,000 The comparative increase was driven largely by a comparison to a prior year that experienced significant decrease in passenger volumes and current period strength in passenger and charter revenues and continued strength in our medevac and cargo operations. The corporation's rotary wing operations also delivered strong results in the quarter driven by fire related services and demand for our ISR assets remains strong and continued as well to increase in revenues. Revenues at Regional One were up quarter over quarter with an increase driven almost entirely by an increase in sales and service revenues An accelerated return of travel in the United States has been positive, driving the increased sales and service revenue. Now turning to our Manufacturing segment, revenue grew by $20,000,000 over the prior period. The total revenue for the segment was $124,000,000 The segment continues to experience robust demand slightly offset by reduced efficiencies as operations continue to incorporate essential COVID-nineteen health and safety measures. The acquisition of Wiss in Q3 2020 also contributed the period over period increase in revenues with no comparative in the Q2 of 2020. Moving to EBITDA, consolidated EBITDA was $81,000,000 up 31% or $19,000,000 compared to the prior period. The increase was largely attributable to the Aerospace and Aviation segment, partly offset by a decrease in manufacturing segment and slightly higher head office costs. The consolidated increase was achieved despite overall government funding in the Q2 of 2021 decreasing by $14,000,000 compared to the prior period. When the government subsidies are excluded from the calculation for both periods, EBITDA increased by 110%. EBITDA in the Aerospace and Aviation segment in Q2 2021 was $69,000,000 an increase of $22,000,000 compared to the prior period. The drivers within this segment lending to increased EBITDA are largely the same as what drove revenue. The realization of cost reduction initiatives undertaken throughout the pandemic that took time to be fully realized, including scheduled Frequency reductions, workforce rationalization and various other strategies were more meaningful in the quarter and also contributed to the quarter over quarter increase. In the Manufacturing segment, EBITDA was $20,000,000 a decrease of $2,000,000 compared to the prior period. The decrease in EBITDA compared to the prior period is attributable to the decrease in the SUs received by the segment in 2021. EBITDA at Quest was higher than the prior period reflecting the acquisition of Wiss in the Q3 of 2020 with no comparative in the prior period. And it's important to note that EIC's window installation businesses in the United States have continued to perform above our expectations since acquisition. Turning to earnings and free cash flow. Q2 2021 once again demonstrated EIC's ability to achieve positive earnings and positive cash flow over a period defined by economic uncertainty. Net earnings for the quarter were $17,000,000 and adjusted net earnings were $20,000,000 both representing an increase of $14,000,000 over the prior period. The increase in EBITDA in the quarter along with reductions in interest costs contributed to the increase. And increase in depreciation on capital assets during the current period slightly offset improvements. Mike had mentioned As Mike had previously noted, our improvements in net earnings, adjusted net earnings and free cash flow per share. That said, it should be recognized that the period In the period, the weighted average number of shares increased by 7%, which partially offset any increase on these per share results. In Q2, 2021, free cash flow increased by 36% over the comparative period to 57,000,000 or $1.54 per share. These results are driven by increased EBITDA and partially offset by the higher current tax expense. Free cash flow less maintenance capital expenditures payout ratio on a 12 month trailing basis remains a strong indicator of the corporation's ability to actively manage cash flows despite unpredictability and economic conditions. The 12 month free cash flow less maintenance capital expenditures payout ratio improved to 58% at June 30, 2021 from 76% in the comparative period. This was achieved through the diligent management of cash flow in general and capital expenditures specifically during the pandemic. The resulting 12 month trailing free cash flow less maintenance capital expenditure payout ratio in the quarter is a significant achievement as it continues to trend back to pre pandemic range and is only slightly higher than the comparative payout ratio like December 31, 2019 of 57%. EIC's ability to return the payout ratio on a free cash flow less maintenance capital expenditures basis Back to pre pandemic levels in the quarter is solid evidence the success we have achieved in managing the challenges of the pandemic. We have diligently maintained our focus on cash flow and we are continuing to fortify an already strong foundation for EIC that supports and future growth of the corporation through accretive acquisitions and internal investments. That concludes my review of our financial results. I will now turn the call over to Carmel to share some thoughts on EIC's outlook for the coming months. Thank you, Daryl. The bulk of my comments today will address the near term outlook for EIC across our various lines of businesses. I will then share some longer term observations about While we are, of course, encouraged by increased vaccination rates, easing restrictions and gradual return to normalized operations, COVID-nineteen is not done with us yet and will continue to impact our businesses in the short term. Passenger volumes as we move out of Q2 and into Q3 continue to demonstrate positive momentum, although the speed of recovery is closely tied to geography. In the Maritimes, we are trending towards a return to pre pandemic travel levels in the Q3, while traffic in Nunavut and Central Canada enters Q3 with passenger levels on average about 50% of 2019 levels and although increasing is anticipated to take another couple of quarters to return to historical volumes. This lower trajectory is the result of significant reduced access to medical diagnostics and other treatments due to COVID-nineteen. However, as Mike indicated, there is significant pent up demand and as such we are expecting to see significant sustained demand as access to treatment normalizes. EIC's charter aviation services continue to perform well in Q3, supported by significant demand in the resource sector and by the renewal of our contract with Indigenous Services Canada to facilitate the national movement of their nursing workforce to fly in First Nation community. Similarly, cargo volumes have remained strong moving into Q3 and are trending to exceed historical levels for the period. However, we expect cargo demand to rationalize over time as passenger volumes trend towards pre COVID levels. EIC's Medevac operations are continuing their solid performance moving into Q3. We expect the segment now bolstered by the acquisition of Carson Air to continue to generate strong returns through the balance of the year. The company's aerospace operations have also remained a source of tremendous stability for EIC through the year. Current programs continue to perform well and demand for contracted ISR hours is picking up with increased optimism that we are moving towards the end of the pandemic. For instance, PAL Aerospace's Force Multiplier on demand ISR aircraft will be fully utilized in Q3. Regional 1 continues to meet strong demand in Q3 for parts, particularly for U. S. Carriers redeploying regional aircraft to meet post pandemic demand for travel is now seeing increased interest in aircraft of engine sales. As Mike indicated earlier, Regional One's aircraft leasing business has focused primarily on markets outside North America where recovery has been slower. We are not expecting a return to historical leasing levels for several quarters. In EIC's Manufacturing segment, we continue to see and experience consistent robust demand, which will be further bolstered with the acquisition of MacFab. And while employee absenteeism and efficiencies in the segment have improved with increased vaccination rates, the impact of COVID-nineteen on supply change is increasing as is the challenges with labor shortages. This segment is proactively managing these challenges. As previously discussed, production gas and reduced revenue at our Quest operations will persist for the balance of 2021 and into the first half of twenty twenty two as a result of the pandemic related project deferral. Long term demand remains healthy and Quest is seeing sales inquiries gradually return to pre pandemic levels. Turning now to maintenance capital expenditures. As flight hours increase as a result of returning demand for Travel, a concurrent increase in maintenance capital expenditures will follow in the second half of twenty twenty one. This does not reflect a change in the structure of our maintenance capital investment strategy, and we fully expect the long term expenditure trend to be consistent with 2019 levels and timing adjusted for fleet expansion we have undertaken since that time. As for growth capital expenditures, our focus for the remainder of 2021 will be on the investment in the 2 surveillance aircraft required under the Netherlands contract, The construction of a new hangar required to meet obligations under our fixed wing search and rescue contract, the addition of the net 4 larger referenced by Mike, the service demand seen in our mining and freight customers and the conversion of additional opportunistic purchasing opportunities uncovered by Regional One. Regional One has executed on several asset acquisitions through the first half of twenty twenty one. We expect the pace of acquisitions to accelerate as the pipeline continues to provide sourcing opportunities at attractive prices. With the full understanding, the pandemic is not yet over, evidenced by the emergence of variants of concern, reintroduction of precautionary protections in certain jurisdictions and the uneven pace of global vaccine distributions, we are seeing in our business and through the behavior of our customers a sense that we are nearing the end of the pandemic. With that shift to post pandemic operations in mind, I want to talk more globally about EIC's vision and its implications for the future of the company. We've never believed that EIC's success should be measured by what is achieved in any one quarter, but rather by what we have consistently demonstrated to be our ability to accomplish over time. Positive results over time are the hallmark of EIC's corporate legacy. For the pre pandemic 5, 10 15 years since our inception, EIC has generated annualized full return of 20%. So while the pandemic has certainly impacted our returns, we haven't wavered in practicing the corporate values that have driven our success to this point. We don't focus on immediate results to the detriment of our future. We manage today and we invest in tomorrow. We are agnostic to how we invest in tomorrow. It could be through acquisitions, organic growth or a combination. We are driven by the opportunities and don't choose between whether to invest in this asset or this company as we deploy capital not allocated. The evaluation is whether the opportunity meets our rigorous investment criteria. Once you've identified an investment that meets our criteria, our strong balance sheet or just the ability to quickly move and convert for the benefit of EIC and our shareholders. Knowing that our approach works has given us confidence to complete 3 accretive acquisitions during the pandemic with Carson and McPhab, proactively increase our liquidity and fortify our balance sheet to capitalize on additional opportunities for acquisition, make meaningful organic investments like the investment to support the Netherlands contract or a move into larger gauge aircraft to meet passenger and charter demand, and then over $30,000,000 on a net basis in building Regional One's capital assets and forge new relationships with De Havilland Canada to develop and support a -8P4 special mission aircraft and with Viking to support the Twin Otter fire attack system. By effectively managing our operations through the pandemic for the long term, Following our principles for strategic investment and executing on opportunities that meet our criteria, we believe our collective efforts have positioned EIC to continue accomplishing great things for the future. We're excited to see what the next several quarters bring. Thank you for your time this morning, and we would now like We'll open the call for questions. Operator? Thank You will then hear a 3 tone prompt acknowledging your request. Your first question will be by Steve Hansen at Raymond James. Please go ahead. I believe he may have his line on hold. Next question will be from Chris Murray at AltaCorp. Please go ahead. Yes, thanks folks. Good morning. Just maybe turning back to your thoughts Around the Aviation business, and maybe trying to understand how Carson fits into this in terms of the financial performance. So I think going into the second half, there's a few kind of things going on in here. I'm wondering if you can kind of talk about Some of the new contract wins and how that might be impacting, how we should think about the aviation performance in the second half. Also kind of curious about how Carson, maybe even like what's the contribution look like and seasonality there? And as well, any thoughts around the rental business at Regional One would be helpful as well. Okay. Starting with your questions about Carson. Carson Entered our company right at the start of the quarter. So we expect a full contribution from it beginning in Q3. We didn't give specific earnings guidance from that company, but we did say that it was accretive from the beginning. And we've readily talked about the fact that we have a 15% return threshold on an unlevered basis, Given that the company is expected to exceed value, you can work back into the kind of contribution it will make. There's no material seasonality to the company's business at all. It provides 2 things. It's very well managed. It's an industry leader. It gives us access to the West Coast, which we don't have now. And it helps bridge the gap. There's other opportunities, Whether it be in Canada's North, in the Yukon or the Northwest Territories or the prairies in Alberta or Saskatchewan. So I think there's opportunities to grow organically or by acquisition in those end territories. So it sort of covers off Carcin. In terms of Regional One, the lease Portfolio is stationed largely in Europe, which has begun the recovery, but much slower than the U. S. And so We view that lease portfolio normalizing over the ensuing, don't know exactly 3 quarters, something like that on a progressive basis over that period. Conversely, the parts business, I believe, will be Back at sort of traditional level by the end of the year. It's largely a long way towards that now. And the big thing we're seeing now that we didn't In the Q2 is demand for full aircraft and engines, so bigger transactions. How many of those we'll choose to execute on will be a discussion of margins and the best use of our assets. But I anticipate that you'll see a normalization of that part of Regional One business very quickly. And we're going to There is some, I think, strong demand for leasing on the engine side as airlines ramp back up, MROs are getting full. So having ready access to engines is going to be a demand that we think will just increase as the quarters roll. Okay, fair enough. And just any thoughts around the new contracts like the fisheries business and that impact on the second half? The fisheries will continue. I think we've had it since early in the year, and we're operating at that level, and that will continue through the balance of the year. The Netherlands contract, we will deliver the planes early next year. And so You'll see that starting to contribute in the spring summer of next year. Exact delivery dates Aren't really set yet. But so we'll be continuing to invest in the Netherlands contract and we'll be continuing to harvest under The fisheries contract. The Northern Search and Rescue contract is delayed slightly. The government hasn't accepted delivery as many planes as we thought they would. It doesn't really impact us dramatically. We're busy setting up the infrastructure required to service those contracts, and It's a 25 year commitment. So the delay of a month or 2 here or there is not material. And we are seeing in the back half some Stronger demand for ISR flying, so whether that be Curacao, UAE or the DFO and demand for a 4th multiplier aircraft as well. I think one of the challenges, Chris, you haven't specifically asked it, but it relates to what you're talking about, which is guidance going forward. And the challenge we're having is just trying to understand when things normalize and we've seen a dramatic improvement in the Maritimes, A good improvement in Manitoba and a slower improvement in Nunavut, largely by different factors of each of those regions. So it's hard to say Exactly what happens over the balance of the year, but we're pretty comfortable that we're going to continue to meet and exceed The 2020 levels and approach those 2019 levels. And that's exciting for us because that's kind of A rough definition of normal. We're also pretty confident looking forward that our business is ready to generate $400,000,000 or so of EBITDA when we get to the new normal. The hard part for us is knowing exactly what the start Date of new normal is, is it January 1? Is it December 1? Is it March of next year? But we know we're looking at kind of a $400,000,000 run rate With the improvements we've made and the expenses the additions we've made, I'm sorry, since 2019. It's our intention to give more formalized guidance in November with our Q3 results. We're hoping we'll have a concrete enough View of the future to give our more normal level of guidance for fiscal 2022. Okay. That's helpful. A couple of other kind of cleanup questions. Just thinking about tax for a second. I know that you've got the Regional One business domiciled in Ireland and that certainly helps you with tax. Are there any issues that we should be thinking about for next year in terms of This new kind of international treaty on minimum tax rates that could impact you? Actually for next year, not so much, Chris. I think it actually comes into application in 2020 The global tax the minimum global tax issue is what you're referring to. Again, right now, What we're looking at is ascertaining how it's going to affect our business overall, not just in Ireland, but there's A lot yet to do. I think there's some hiccups in Ireland still yet that Ireland is pushing back on. So we're actively watching it And certainly, we'll be able to ascertain the impact here probably over the next quarter or 2. Okay, fair enough. And then I guess my last question, Mike, and I'll let you figure out how you want to answer this one. Probably in Q4, you've got the opportunity to start thinking about Dividends, certainly, you've got that line of sight, as you talked about, to pretty healthy EBITDA number. How do we think about dividend growth in the near and medium term at this point? It's a good question, Chris. It's actually one that's relatively easy to answer because our view of dividends has always been the same Since we started this, where we generate the cash flow to increase our dividends, we're going to increase our dividends. You've seen us strengthening Our payout ratio over the last couple of quarters and we as we ramp up to a more normal Level of operations that should further improve. And that will spur the discussion internally About when is the right time to increase our dividend. I think the one thing I can tell you though is we're not going to be receiving Government support and increasing dividends at the same time. So as the government support programs wane off, it will increase our ability Look at those things, but we're not going to be doing both of those things at the same time. All right, fair enough. All right, guys. I'll pass the line. Thank you. Thank you. Next question will be from Matthew Lee at Canaccord. Please go ahead. Hi, good morning all. Good morning, Patrick. On the Cartonair acquisition, it looks like that really gives you a pretty solid Western Canadian market share of Medevac. But are there opportunities to expand beyond the current footprint either organically or through acquisition? Yes, absolutely. There are significant medevac programs in anywhere where there's isolated communities. So the Yukon, The Northwest Territories, Northern Alberta, Northern Saskatchewan, and then there's some opportunities as well in Maritime. So we have a little bit more exposure there and the programs aren't as big. So whether it be bidding on contracts, I think A good way to look at this is if you look at the history of KeyWaiton, KeyWaiton, when we bought the company in 2,005 had half of 1 of the 3 major contracts. So we did half of the work in Kivillec. Over the ensuing sort of 10 years, We got the whole contract in Kivillec, added the contract in Baffin, then most recently Added the contract and I'm going to butcher the saying of this in Kentucky, in the West. So that now we hold all three contracts for the We're experts in long, high flight METAVAC. The stuff we do in Manitoba is a different product. They're much shorter flights. And The government still maintains a bigger present in emergent kind of very high risk patients, although we're capable of handling those. When we're flying out of places like Nunavut, those people are unstable and they're in the air for hours. And so the medical programs that go with that are a really important part of the service you provide and our ability to grow our service to the government And Nunavut, I think, bears testament to our expertise in that area. Parsity is a leading provider on the West Coast. Kevin and his team are held in exceptionally high regard across the industry. So for us to add a group like that and then open new beachheads across Western Canada for organic or acquisitive growth is super exciting for us. You see during the pandemic that the Medevac business has been highly resilient and reliable cash flows. And so it's a business we like and we want to expand our exposure to. That's great color. Is there any regulatory reason why you couldn't own the entire market in Canada? No, there isn't. I mean, the customers are very different by region, how the governments do it, how they contract it out. Manitoba as an example today is a licensing system where anybody who has a Medevac license can provide service to the government. They're talking about going to a contracted provider. It hasn't happened yet, whereas Nunavut is 100% a contracted provider. And so If you go jurisdiction by jurisdiction, it's slightly different, but there's no reason we couldn't consolidate that market. And quite frankly, if we don't, I'm going to be disappointed. And we have experiences in all models, so nothing would be foreign to it. That's great. The natural dig in all these places, Matt, is that we have excess capacity. So if an outbreak of some Outbreak is a bad word to use these days with COVID, but we have different respiratory things and other outbreaks in various places Where additional capacity is required, the fact that we've got tens of Medevac planes around the country, we can redirect capacity to help out. And it provides a sense of security to the governments knowing we're going to be able to solve their problem regardless of what happens. All right. Thanks, guys. Congrats again on the good quarter. Thank you. Thank you. And your next question will be from Cameron Doerksen at National Bank. Please go ahead. Good morning, Tom. Yes, good morning. Just wanted to go back to Chris's earlier question on Regional One and on the leasing part of the business. I see that you've added some more aircraft in Q2. I wonder if you could just maybe expand on where you've invested there, what type of aircraft. And I'm just trying to get a sense What the upside is on the business? I understand obviously you've got different potential uses for all those aircraft, but Presumably, most of the aircraft that are in that portfolio right now are not generating any revenue or cash flow. And so I guess what I'm wondering is if you can kind of Sort of scale what the upside would be for that business once things recover and more of those aircraft get back to flying and generating revenue. I'll let Carmel answer the hard part of the question, but I'll take the easy part, which is when you look at the acquisitions in Regional One, it's Important to look at that holistically as part of our whole portfolio. We're constantly buying and selling, so it ebbs and flows. So I would look at it as a specific $30,000,000 investment this quarter because next quarter we may sell more than we buy. It bounces around. In terms of the leasing portfolio, they're not generating Any revenue, we moved most of them to power by the hour kind of leases as opposed to monthly fixed prices. And by doing that, The operators are paying us when they need the equipment, but not with stuck with a payment that they're challenged with. So that will ramp over the next ensuing quarters. It won't be like a light switch coming on, but rather gradually improving and Then the leases switch back to a more traditional format. In terms of aircraft type and that maybe I'll let Carmel handle that one. Sure. So it's Probably best describe it more the same. So acquisitions were SERG 900s, some ERJ 145s, Q400s And engines, I think in Q1, we also had some ERJ 190s. So that gives you a flavor of the nature of the assets. I mean, it's Obviously, focused on the regional jet, that's where we see continued opportunity. With respect to leasing and what we see, just maybe a little bit more color there. Mike is right. We have many of our aircraft on power by the hour, but we're actually seeing that now transition into, I'll call, More fulsome leases, and we're starting to see or get in some deposits for other leases as activity picks up in kind of non North American jurisdictions, all tied to, quite frankly, vaccination rates. We're really seeing a close tie there. And we're going to, in our view, continue to see that demand, and it's a matter of deploying the assets in the best use, whether that's a combination through sales, leasing. That's why Regional One does as well as it does do because of their ability to generate revenues in all different revenue streams, whether that is leasing or whether that's Starting out or whether that is selling aircraft and it's that combination that's made it very successful. So when leasing is down, There tends to be other revenue streams that make up for it, but that's what you'll probably see on a go forward basis. Okay. No, that's very helpful. Just second question quickly. I'm just wondering if you can update us on the expected decisions on the Curacao surveillance contract So renewal and also the Malaysia contract. Just wonder if there's any update on when you expect to hear on those? Sure. So Curacao, Best and final offers are going in Q3. We would hope to hear by the end of the year, so Q4. Malaysia, We are believe that we'll have site visits from Malaysia later this year and hope to get a final decision from them. End of this year, it could slip into the beginning of 2022. COVID has obviously had an impact on the length of time that it's taking to make some decisions, but it's general time frame you can expect. Excellent. No, that's very helpful. Thanks very much. Thank you. Next question will be from Kevin Tang at CIBC. Please go ahead. Good morning, Kevin. Good morning. Thanks for taking my question, everybody. Maybe I could ask About how you look at, I guess, deals moving forward. Obviously, I mean, it's been a Part of your growth profile. But when I look at a company that, Mike, you mentioned is on pace to run rate $400,000,000 of EBITDA, Like how do I square that maybe with deal materiality? Like for example, you closed max fab 11,000,000 Deal price maybe a couple of million of EBITDA like it does seem like for a company of your size that maybe you'd hunt for bigger fish, but maybe you could just help me understand the rationale of we're going after some of these smaller deals given the size of your company today? That's a good question, Kevin. You haven't got bifurcate the answer because there's 2 parts to it. 1 on the bigger deals, our lack of ability to travel during COVID essentially meant That we weren't going to be prepared to write a $100,000,000 check where we didn't get to go and spend a bunch of time with management and know them inside and out. So we pivoted internally, largely talking with our Largely talking with our subsidiaries and saying, what would make you better? And so we took advantage of this opportunity where we know people. And a deal like Mathcrowd, they're the best kind of deals from an Creative nature point of view because they're smaller, you buy them at appropriate multiples. But more importantly, It's going to make Bend Machine more profitable. We've seen that Bend's almost doubled in profitability audit. It continues to grow. We have capacity issues. And so by adding a company like Matfab, we diversify our product offerings and we have an instant additional capacity for our existing customers. And so it's not a case of 1 or the other, it's both. We've added people to our acquisition department. Adam's diversified our team and we continue to add executives in that area. And as travel is allowed back into the U. S. And is more easily done in Canada, you will see us attacking Bigger deals as we have in the past. But if we got a smaller deal, we would never buy a back fab as a standalone. It's a great company and a strong management, but you're right, it's just too small for us. But when you combine it with Ben, it's not much different than buying $10,000,000 worth of new equipment that came with great management people. And so for us, it's just a way to continue to grow those businesses. So I haven't given you a definitive answer other than to say we're going to do both. And We postponed the bigger transaction simply because we were there was no efficient way for us to do them during the pandemic. As the pandemic wanes, I think you'll see us examining bigger deals, almost look at the smaller acquisitions, almost like growth CapEx. We're trying to grow an existing business. So we're buying things that tuck into our existing stuff. You'll see that as Quest normalizes The power of our 2 installation companies, they've done so well during the pandemic. And as we continue to grow the order book There you'll see the power of the vertical integration play. Now those were medium sized deals, not the MATFAB sized deals, but also Not huge. The combination of all those opportunities is when you've got a 15% threshold, That's a high bar, and we need to look at all the ways we can get there and not focus on just one. No, that's a great answer and I appreciate the color there, Mike. Maybe again, Just on this $400,000,000 of run rate EBITDA that you see when things start to normalize. If I look at the math, I guess, very simply, if I take kind of your Q2 results, annualize that, maybe Throw in some of the acquisitions or LOIs you have. I kind of get a ballpark of, let's say, roughly 350,000,000 of EBITDA at a high level. As I look at how much your Regional One is still underperforming versus what you did in 2019, That seems to be the whole. Is that effectively the missing piece here that really to kind of Get that incremental $50,000,000 it just comes down to Regional 1 getting back to close to a $300,000,000 revenue run rate and once you have visibility on that, you'll have more confidence in providing a $400,000,000 guide? At the risk of getting dangerously close to providing you formal guidance, there's 2 or 3 ways we've come up with that number internally. Most of what we've done, to be honest, is taking a look at 2019 and we know what we generated there, 3.20, 3.25. And then we add on the things we know we've added since then, the new contracts, which we didn't have then, This year's acquisitions and return to normal of the other businesses. And you get to that 400 ish range, a number of different ways. The risk in extrapolating our Q2 is that while it's closer to normal, it's not normal yet. Perimeter is flying in this quarter at about 50% capacity. When you add that other 50% in, it does good things to our margins. Now the remainder of the government support disappears And all those things. So there's ins and outs. But to me, the easiest way to come up with what you think the number is precisely is to start off At 3.25, adding the things we've told you about, a little organic growth. And I think that $400,000,000 number becomes pretty clear. Again, the challenge we have isn't providing you what we think we're going to do in a normal environment. The challenge we have is when does normal start. Mike, if someone could tell me normal was starting on February 1, I can give you guidance now. We're just reticent To try and predict the pandemic because I've only been wrong 18 times so far on when it's going to wane and what it's going to do. So For us, we're hoping by November, we'll see the impact of the 4th wave. We'll have a better prediction of Air traffic in general, which is the biggest driver. Our manufacturing businesses with the exception of the holes in Quest schedule And some inefficiencies in our other business because of absenteeism have been pretty reliable through this whole thing. So they're pretty easy to forecast, quite frankly. It's more when do my airlines get back to 100% and when does my lease revenue return to normal at Regional 1. And I just don't have enough general economic forecast ability to answer that yet. We're thinking In November, we'll be able to give you that number. No, I appreciate the color and comments there. I'll leave it there. I'll get back in the queue. Thank you very much. Thank you. Next question will be from Ryals Stroud at RBC. Please go ahead. Good morning. Good morning. Hi, everyone. Thanks for taking my questions. So my first question is on Quest. I was wondering if you can expand a bit on some of the new inquiries And interest you're getting, have any of these turned into bookings? And if they have, would we see this impact in 2022 backlog and revenues at the segment next year? The answer is yes. We have booked new orders out of the sort of post Crisis level of the pandemic, you see those at the end of 2022 and into 2023. Typically, if there's an average, it's probably about 18 months is when you see it booking to financial statements. That could be as low as 12 or as much as 24. But the part that makes us feel confident is it's Not one market that's recovering, it's multiple markets. There was this whole concept that no one's going to live in the city after COVID. And it was the typical overreaction and extrapolation of a short term event. Rental prices in Toronto, as The example are rising again, the demand for units is going in. We're quite frankly very confident in the medium term at Quest. We're confident in the short term, it's just going to be bumpy because there's no way for us to fill a hole in October as an example. There's no project we can get to plug it in. Everything we do is a custom project. So you can't build and put it in inventory because you don't know who's going to use it. So We're going to struggle with that. We'll get through it. But coming out the backside, one of the great sometimes you're smart and sometimes you're lucky. I won't say which one this one is, but it's probably as much luck as Braden's is. When we built that Dallas facility, it diversified our production capability And let us have different plants being affected in different ways at different times by the pandemic, which let us meet our customers' requirements. But the other thing we've learned is how effective being able to build a plant from the ground up is. And as our leases expire in our Toronto facility will be reconfiguring that in a way shape or form. So to fit to set up the next wave of growth as things normalize and we make that plan more efficient. So Quest has been a rapid Growth business for us and we really don't view that as changed by the pandemic. The other kind of positive indicator, which Gives us kind of the optimism is that some of the projects that were put on a hold or delayed are actually starting to come back now. That doesn't mean they come back immediately. There's a ramp up period. And then by the time we get The part where we're doing good, the windows, I mean that is still a 12 month ish window, but also that's a positive sign as well. Okay. That's really helpful color and definitely good to hear. Then just for my last question here. Looking at your outlook comments, It looks like growth CapEx at Regional One is expected to remain relatively elevated to the back half of this year. I just wanted to unpack what's driving this. Is it just being opportunistic on attractive opportunities in the market or in response to expectations in the footprint, I think, customer in demand or perhaps a combination of both? Curious to get your thoughts there. It's again, I'll take the easy part of this. The Regional One is always an opportunistic kind of project. We look for opportunities, and it's our ability to monetize things in multiple ways that lets us perhaps see opportunities when others don't. Well, I'm going to go one layer deeper into answering your question. And we see certain types of assets becoming already very much in demand. The movement of the CRJ700 being reconfigured into a 50 seat kind of aircraft has permeated demand for those aircraft. The engines that run those are very similar to the engines Fly on the CRJ900s as well. So the engine demand for those is both quite high. So you're not only going to see us investing In aircraft in the balance of the year, I think you'll also see us divesting of certain assets where there's opportunities to make a gain where someone wants to make a permanent investment in an aircraft. So I think you'll see increased churn as well as investment. And so in a given period that could be you sell more than you buy or you buy more than you sell depending on the timing. But over time, We intend to continue investing in this business. What I would also add is where we're seeing opportunities is as airlines Line up to go back into full operation. There's some rationalization that's occurring. Subsidies are now either dwindling or have completely stopped. And that is as a result causing some, we'll call, opportunistic buys for us. They're not large fleets like they're not like the Lufthansa CRJ700s we bought like 13 of them, but they're here and there. And With the network that Regional One has, we're able to seize on those. The other thing that you'll probably see us do as well is invest in our own Sweet. So we're I've mentioned that we see a demand for engines. We may very well spend some money overhaul engines, so that we expand or extend their green time and therefore the life on the leasing side of what we do with those assets. Got it. Got it. That makes a lot of sense. That's it for me. Congrats on a great quarter. I'll pass the line. Thanks. Thank you. Next question will be from Karnar Gupta at Scotia Capital. Please go ahead. Thanks and good morning everyone. Good morning, Mike. Good morning, Mike. Maybe I can Get you to provide us actually some guidance here. No, I'm just kidding. I'm looking to understand I'm trying to understand the seasonality here this year. I'm like, I know we are kind of we had a good Summer, I guess, and then maybe again the delta variant and then whatever, this is coming back, 4th wave, etcetera. Do you anticipate, Mike, like with all contract wins and the recent acquisitions, do we see a little bit more pronounced Seasonality in the second half of this year versus typical you saw pre COVID? No, I don't think so. What we've added is less seasonal business like the Carson as an example. Medevacs don't Have a precise seasonality. They do vary quarter to quarter based on outbreaks and diseases and things, but they aren't Like Denver in the winter, worse in the summer and those kind of things. So I think you'll see our results sort of track historical Seasonality. I think the bigger The fact will come from just how fast we can ramp. And that's where I talk about We expect to meet the kind of 2020 numbers and that means we're going to make a lot more money in the business because the back half of last year, if you look back, Had significant amounts of government support, which will have waned away this year, may not be 0, but it will be close to that and replaced with traditional EBITDA. And we'll grow through that to the point where if The 4th wave isn't pronounced, you may see us meet 2019 or who knows. But that's I would look at the seasonality of this where Q3 is always seasonally the best quarter, Q2 and Q4 approximate a running average in Q1 is always the worst. The one thing that will be different in the back half of this year is just maintenance CapEx. Normally, we front end load that into the Q1 when we're slower. With the pandemic, we didn't do that this year. And so as we ramp up our operations, you'll see the maintenance CapEx move directly with the revenue. We haven't Deferred things like not done them when they were due, but they haven't come due in the same way because we haven't flown as many hours. So as the hours go up, we'll be overhauling engines, we'll be overhauling landing gear. It won't exceed historical norms. But as we reach normal, Maintenance CapEx will also reach normal. And if you want to have quotation marks around normal, I'm using 2019 as normal. That's good color, Mike. Thank you. And maybe for Dal, there was a I think $3,100,000 gain on disposal of capital asset in the cash flow statement. I'm just I'm wondering if that relates to any significant asset in the aviation side or is it manufacturing? It's aviation. I mean, this is a thing that frustrates me in our financial statements. We buy and sell planes all the time. And so the gain on which asset whatever is material, that's a normal part of our business. We'll have gains and we'll have losses when we move a plane in and out of operations is part of what we do. Okay. Thanks. And then just like High level kind of thought here. The major airlines in Canada are kind of in domestic Canada, they are adding capacity quite Significantly, like, Canada WestJet Porter, Sunwing, Transat, Player, etcetera. How like you recently expanded some capacity into the Maritimes. How do you see that as maybe impacting your Legacy airlines into the maritime, Sebastian. Yes. Apples and apples, part of the reason the other carriers are adding capacity is because they took it out And permanently retired things during COVID. We didn't retire anything. And so all our stuff is going. We have added capacity In the Maritimes, we will add more capacity there, particularly up gauging some of our fleet from Dash 8300s to 400s. We're going to add more Dash 8 300 capacity in Central Canada to look after mining opportunities and freight opportunities, And we'll be adding some ATR 72 capacity to look after again freight and mining contracts in the far north. So we I think I mentioned, we've got about a net increase in big gauge aircraft of an additional 4 through the balance of the year. And that's driven entirely by essentially contractual demand. And specifically with respect to the Maritimes, Emily, to your question, I view it as, for the most part, complimentary. Our PEL Airlines and the American did a good job filling the need that exists to move customers to larger centers for the majors, which is, For instance, why we have now interline agreements with both WestJet and Air Canada. So look at us more as kind of a solutions provider Hello? We can't hear anyone right now. I'm not sure if you can Hear us, operator? Yes, sir. We can hear you. Okay. Maybe ask someone else for a question. Sorry, I'm still sorry, I can't hear Pam actually. Can I ask you? We were about to send medical assistance, Skonak. No, I was still on the line. I thought Pam dropped. Anyways, that's okay. Maybe the Class 1 before I then go, we're actually on the lease rates in Regional One of the traditional regional aircraft leasing companies in Canada, they recently I announced that they have renegotiated leasing contracts with some of their customers and the lease rates have kind of come down quite significantly. Just wondering, I'm like, your business at Regional One is a little bit different. But do you also see any pressure on lease rates at Time or because it's been powered by the hour, it's not really material for you? Yes. I understand the comparison you're making, Konark, and that Truly is apples and watermelons. In our world, we're much shorter term leases And they're not finance leases. And so it's a very different marketplace. Quite frankly, we may expect the opposite of that to be true as Particularly as it relates to engines, there as ramp up is going, there is now a gain of shortage of MRO space to get overalls done and access to engines on a timely basis may well yield to an increase in pricing in the short term rental and leasing market. I'm not at a stage where I'd like to predict that yet. I would say that we view the leasing prices in what we're doing is relatively stable as the market normalizes over the next 2 or 3 quarters. Great. Thanks again for the questions and good quarter. Thanks. Thanks. Thank you. Next question will be from Matthew Weekes at IA Capital. Please go ahead. Good morning. Good morning. Thanks for taking my questions. I was just going to ask, if you could maybe just provide a little bit more color on Inflation in terms of sort of where you're seeing the most impact in the business right now? I know there was some commentary that is occurring in several places across the business and maybe how you're managing that impact so far, whether it's through cost pass throughs or forward purchasing or things like that and maybe where you're not able to kind of pass through the impact as much? I would suggest to you that we see it In a number, the 2 main ones where we see material price changes is, 1st of all, in fuel and the aircraft business. I'm not sure I would call it inflation though. It's kind of more return to normal. We've seen oil prices return to the high 60s, low 70s, which is Kind of where they were before we started this. We've seen a bounce back. Most of our contracts include direct fuel pricing. So We're able to contractually change pricing where appropriate. And we have a dominant market position in most of the areas where we operate. So To the extent we need to flow those through, we're able to do it. It sometimes takes us a while because of our position, we make sure we talk to our clients and Blaine about what's coming and why it's coming. And so that may delay us putting it through for weeks or months, but It doesn't create much of an issue other than very short term turbulence and we're in good shape there. The other place where we see it is in some of the big commodities in our manufacturing, so steel prices and aluminum. On the steel side, it tends to be included in contracts where we have more room to move, the contract moves automatically. The aluminum prices are a little bit more of a problem because our window projects tend to be fixed price. And so We're eating some of those increases in certain places. We're being careful how we did the future projects in light of those changes. So the financial statement impact is really limited to the commodity side and focused on in the aluminum area, the steel stuff we're able to deal with and the jet fuel stuff we're able to deal with. Okay. Thank you. That's helpful. That's it for me. I'll turn the call back. Thank you. Thanks. Thank you. Next question will be from Norman Sutti at Laurentian Bank. Please go ahead. Good morning, Norman. Good morning. Hi. So my first question is, it's more so this was really a really tough year, I think once in a generation event that happened, but You guys adjusted pretty well. I'm just wondering if there were some lessons learned during this entire process and how Some of the things you would do differently going forward within your business? To be honest with you, Nava, what the Single biggest takeaway for us. Actually, there's 2 of them that come out of the pandemic we've dealt with. One is, we've always believed in being well capitalized and capitalized in advance of opportunities. So when things shut down really hard in March of last year and other people in our industry or related industries were cutting dividends, We had the room and liquidity to be able to manage our way through it. And our shareholders rely on our dividend. So our balance sheet needs to match that commitment. And so you've seen our actions in the last quarter where we raised Because we knew Adam was busy on the acquisition front and our subsidiaries were uncovering accretive opportunities to grow. So we've invested money there. We will continue to do that. We're going to make sure we always have the balance sheet to pay for tomorrow's project today. And then the other thing, and this may be somewhat counterintuitive, but the diversity of our management has been an absolute godsend as we've gone through this. There we have strong teams in each Each of our companies, they tend to be managed as separate silos. But as we went through the pandemic, the ability to put those leaders together and share best practices that help each other out. Particularly, if we look at supply chain as an example, We've had times where we can't get a certain type of steel in a certain market, but our company in the other market can access it through their suppliers. So We're shipping steel around to meet customer demand. We're sharing aircraft assets to make sure we can deal with challenges. A Great example of that is the Indigenous Services Canada contract. So for me, if I were to talk about 2 things we've taken out of it is I'm more committed than ever to our balance sheet strategy and I'm very proud of the fact that we have a diverse management team that we can weave together where we need to, to create corporate decisions. The stuff we've accomplished through this hasn't been corporate. It's been driven by the CEOs and their people in the field that have been able to bring us the opportunities and bring us of solutions. We've just made sure we got the money to pay for it. And we had that confidence in our people when we entered the pandemic, which is why we kept our dividend and our people showed that it was a right decision. Okay. Thank you. That's very helpful color there. I appreciate it. And just maybe a last one, talking about you spoke about your balance sheet as well. You've recently done almost for new acquisitions with 2 letter of intentions. I'm just wondering, are you still actively looking at new files as well? Or is that a time where you sort of absorb these new acquisitions and then wait a bit and then get into the M and A landscape again or are you selective on that front? Well, I'll see if you can get Adam to give me an answer on that. We're actively looking. We're calling Adam So yes, we're still actively looking. The beauty of the stuff we've done recently is That a lot it's mostly tuck ins where it's becoming part of an operation. So The math staff guys are going to be working with our people and Ben, Ben, it really doesn't add any workload, does it head office. We added WIS. It worked as part of Quest and the management team at Quest works with the management folks at West To get on that business. So we have capacity to be able to continue transactions. Dave White and his team in our aviation How we had new reporting company in Carson, but that's really the only quotation marks new subsidiary That's being managed directly by my head office team. So we have capacity and it's a matter of finding things that we love that we can buy at a price that we're prepared to Okay. That's fair. That's it from me. Thank you and congrats on the quarter. Thank you very much. Thank you. Next question will be from Tim James at TD Securities. Please go ahead. Good morning, Tim. Good morning, Mike. Thanks very much for the time. I have two quick questions. Well, actually one's probably quick, one may not be. I'm just wondering if you can remind us of the assets that's involved in the potential Malaysian contract? I'll let Tarbell handle that one. Sure. So we bid it with Q400s, so the Dash 8400 models are new aircraft. We're partnered with De Havilland exclusively on that bid. So there it's for 2 aircraft is what the current program is for with potential of more of many years down the road. Okay, great. Thank you. And then, I just want to return to Quest and go ahead a little bit differently. If I think about the revenue coming out of Quest Toronto Before the Dallas expansion was contemplated and then I add in the Dallas and the capacity, which was significantly greater than Toronto, the capacity or the revenue potential from that And I'm putting aside the additional sort of incremental acquisitions you made since then. When can we think about that Full revenue potential hitting its stride, assuming let's assume for a minute in terms of the pandemic, the world kind of goes back to pretty much normal and starting in 2022. Is your backlog and your kind of line of sight and your the way those Facilities are operating now. I mean, do you think you kind of hit that return to Toronto to sort of pre pandemic levels and get Dallas more or less up to its capacity by 2023 or is it potentially take more time than that? I think in 2023, you'll see growth. I'm not sure that you'll see Dallas in capacity. That has the ability to be more than double the size of Toronto by So building that level of order book will take time. The but to that is the pandemic Reduce the number of people that we've got in the Toronto facility. So we've effectively capped the Toronto facility at a lower number for the time being to make it a safe workplace. And until the governments get a better handle on the pandemic, I don't see that changing. One of the other things with Toronto as well that I mentioned is in the medium term, we've got 2 leases that come out there. It's highly likely we will Find that into a single geographic space and improve the efficiency of that. So we haven't made those decisions yet. But my point being that we've got tons of capacity to deploy. There'll be a return to growth for sure in the back half of next year through 2023. But we could effectively do triple the business that we did under the Toronto plant by adding the Dallas plant to it because it was in fact more than double The capability in terms of size of Toronto. So in terms of running into a ceiling, we've got a ways to go on that. In terms of seeing the growth in our financial statements second half of next year and then really evident to 2023. Okay, that's great. Thanks very much. Thank you. And at this time, I would like to turn the call back over to Mr. Pyle. Well, it was a long call, but there's lots to talk about. I want to thank you all for joining us today. We're really excited about where we are and what we've accomplished. And I look forward to speaking to you again in November when hopefully we'll be able to provide you with some concrete guidance for 2022 and a return to normal. Thanks and have a great day. Stay safe people. Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.