Exchange Income Corporation

Good morning, everyone. Welcome to Exchange Income Corporation's conference call to discuss the financial results for the three-month and six-month periods ended June 30, 2022. The corporation's results, including the MD&A and financial statements, were issued on August 11, 2022 and are currently available via the company's website or CDAR. Before turning the call over to management, listeners are cautioned that today's presentation and the responses to questions may contain forward-looking statements within the meaning of the safe harbor provisions of Canadian provincial securities 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&A for this quarter, the Risk Factors section of the Annual Information Form, and exchanges other filings with Canadian securities regulators. Except as required by Canadian securities law, exchange does not undertake to update any forward-looking statements. Such statements speak only as of the date made. Listeners are also reminded that today's call is being recorded and broadcast live via the Internet for the benefit of individual shareholders, analysts, and other interested parties. I would now like to turn the call over to the CEO of Exchange Income Corporation, Mike Pyle. Please go ahead, Mr. Pyle.

Thank you, Operator. Good morning, everyone, and thank you for joining us on today's call. We have a lot to talk about this morning, so I will try to be as brief as possible and leave plenty of time for your questions. With me today are Richard Waurick, our CFO, and Carmel Peter, our president. When we reported our Q1 results in May, we announced a number of exciting things that occurred subsequent to the end of the first quarter, including the acquisition of Advanced Paramedic Limited, Northern Matten Bridge, an enhanced $1.75 billion credit facility, strong results, 2022 and 2023 financial guidance, and a dividend increase for the first time since the onset of the pandemic. I am very pleased to announce that these initiatives are very evident in our second quarter results. The second quarter included only seven weeks contributions from our new subsidiaries, but still recorded new record highs in virtually all financial metrics In spite of the ongoing challenges of the pandemic, supply chain issues, inflation and labor shortages in some subsidiaries, our performance was so strong that we were not only able to hit record highs in absolute and per share metrics, but also enabled us to increase the 2022 guidance we provided last quarter and for the second consecutive quarter, increase our dividends. The second quarter is typically an average quarter seasonally for EIC, as it does not have the winter road issues that impact Q1, but is not yet at peak summertime volumes evident in our aviation and some manufacturing companies. Northern Matt was a large acquisition, but it does not change the seasonality profile of EIC, as it is also slowest in the first quarter and busiest in the third quarter. Richard will detail our financial results in a moment, but I would like to hit on some of the highlights. The 2022 results do not include any subsidies from the government. The comparative period includes $17 million in support, making the size of the improvement over last year that much more impressive. Revenue increased 64% to an all-time quarterly high of $529 million. Adjusted EBITDA increased 42% to $115 million, also an all-time quarterly high. Net earnings grew 82% to $30 million, an all-time quarterly high, and on a per-share basis grew 73% to $0.76 per share. Adjusted net earnings increased by 95% to an all-time quarterly record of $39 million, or $0.98 on a per-share basis. Free cash flow, less maintenance capital expenditures was $1.20, up 22% from last year. The trailing 12-month payout ratio and a free cash flow, less maintenance capital expenditures basis strengthened to a rock-solid 56% from 58%, while it improved to 87% from 118% when calculated on an adjusted net earnings basis. Our second quarter shows the impact. of a long-term focus in investing and decision-making. On a micro level, the numbers were the result of solid performance across the board in our two segments, including our recent acquisitions. But on a more macro level, the performance was driven by the long-term focus of management during the pandemic on investments to facilitate growth when markets improved. We have purchased aircraft to facilitate freight, medevac, and charter demand. We've pursued and won surveillance contracts in new markets around the globe and completed accretive acquisitions. Our aviation business entered the quarter dealing with declines in passenger loads from the Omicron variant of the COVID virus. This variant hit northern communities much harder than earlier versions of the virus. Fortunately, this was relatively short-lived and volumes bounced back during the quarter. The degree of the recovery varies geographically. Powell's business in the Maritimes is fully recovering and is at or ahead of 2019 levels. Central Canada and Nunavut will be between 75% and 95% of 2019 levels. In most markets, the rate determining step to return to or to exceed 2019 levels

is access to medical resources.