Exchange Income Corporation

Good morning, everyone. Welcome to Exchange Income Corporation's conference call to discuss the financial results for the three and 12 months ended December 31, 2024. The corporation's results, including the MD&A and financial statements, were issued on February 26, 2025 and are currently available by the company's website or Cedar Plus. 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 unsure 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 quarterly and annual MD&A, the risk factors section of the annual information form, and EIC's other filings with Canadian securities regulators. Except, as required by Canadian security law, EIC 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. With me today are our normal participants to this call, including Richard Waurick, our CFO, who will speak to our financial statements, financial results, along with Jake Traynor and Travis Muir, who will expand on our outlook for the future. Also joining us are Carmel Peter and Adam Turwin, who have joined us to answer any questions about EIC's recently announced agreement for the acquisition of Canadian North. Canadian North is a strategic acquisition for our essential air services business line, and is one of the most significant that we have announced to date. The routes flown by Canadian North are highly complementary to our existing routes, as there's essentially no overlap. We believe that we have a proven skill set in northern aviation, and we look forward to welcoming Canadian North into our family after all regulatory approvals are received. I'm very proud of our results over the last 20 years, but I'm even more excited about the future of AIC. especially with the strategic acquisitions we executed over the last two years and with Monday's Canadian North announcement. Yesterday, we released our year-end results for 2024. Our annual performance continued to be extremely strong, highlighted by our highest adjusted EBITDA, free cash flow, and adjusted net earning metrics in our history. Other key metrics, including net earnings and free cash flowless maintenance, CapEx, while slightly short of setting records, were also very impressive. These results were generated during the year where I would describe as challenging from a macroeconomic standpoint. Canada and the U.S. were wrestling with inflation and uncertainty over interest rates earlier in the year. Then we had significant uncertainty around the world, particularly in the United States. And lastly, we had a new administration in the U.S. that is providing sound bites on a daily basis, which are moving stock markets and foreign exchanges because of the risk of tariffs and other policies. With that backdrop, these results are really impressive. Our results were driven by our aerospace and aviation segment, and we continue to see positive signs in our manufacturing segment based on record levels of increase. We started to see strong momentum of increase being converted into bookings in our multi-storey windows business line in the latter part of 2024. And we saw more orders at our other manufacturing companies post-election. There are obviously some concerns and headwinds caused by the current political uncertainties. However, I believe the vast majority of our companies are not directly impacted by the potential tariffs. The greater risk lies in igniting trade wars through countervailing tariffs and the secondary risks of significant changes in foreign exchange rates and the reduction in business and consumer confidence. Our teams are regularly meeting to discuss mitigation plans should the tariffs become enacted, and we've taken proactive steps to mitigate the risk. We will try to be as brief as possible when talking about this year's record results, as I think everyone is going to be more focused on the Canadian North acquisition and other events before us. Prior to passing the call to Rich, I want to highlight some of the key performance metrics achieved during the quarter. We set records for revenue, adjusted EBITDA, cash flow, free cash flow, and adjusted net earnings on both the fourth quarter and a full year perspective. 2024 was our second best year, and second best fourth quarter from a debt earnings and free cash flow less maintenance CapEx viewpoint. These are amazing results. This demonstrates the execution of our strategic deployments of capital, whether it be for organic growth or by the way of acquisition by Adam and his team. During 2024, we executed strategic acquisitions for our environmental access solutions business line. with the addition of Duhamel and Spartan. Both businesses exceeded our expectations since acquisition, and they will be highly strategic for our matting business as we increase our growth in Eastern Canada and expand our operations throughout the United States. The system 7XT, which was the new Spartan mat developed in 24, has been a success based on our independent and real-world testing. We have seen great feedback on the MAT and the FOD's product line is continuing to expand in the U.S. Our teams from Canada and the U.S. are regularly meeting to see how we can continue to grow in the U.S. market in 2025 in the MATIC business. Our aerospace and aviation segment continued to set record results. It was driven by investments made in prior years along with contractual wins. The Medevac contracts in both Manitoba and BC are well underway, and the customers are very happy with our performance. During 2024, all of the Manitoba aircraft were received and put into service. We anticipate receiving eight of the remaining 10 new King Air aircraft for the BC contract in 2025. We had hoped to receive some of these aircraft in 2024. However, they were delayed at the manufacturer due to a strike in 2024. However, we've been able to use existing aircraft to service the contract, and we will be able to redeploy those aircraft when we receive the new ones. We hope to utilize some of the aircraft in our recently announced New Finland Labrador Medevac contract, which will start later in 2025. Additionally, we were recently awarded the Interim Rotary Medevac contract to assist New Finland Labrador while a new contract is being finalized. During the quarter, we also submitted our proposal to the Australian government for their maritime surveillance contract. This is the Super Bowl of maritime surveillance contracts, and we were one of three bidders on the contract. We expect to hear back from the government midway during the year as the government weighs the various options submitted by the three parties. As I commented in the past, this was a unique RFP as it was a solutions-based contract. which provided frequency and locations to be monitored. However, it was agnostic as to the type of aircraft and the equipment and where they choose to operate from. We put together a very strong bid and we expect to have as good a chance as any other bidder. We have also received interest from several other countries for ISR assets and are working through budgets and needs assessments. But as a whole, this geopolitical environment has resulted in a notable increase in demand. The future air crew training contract continues to be in the negotiation phase with the prime contractor. The scope is continuing to increase and the work should start under the contract in the latter part of this year. Lastly, our second aircraft in the UK home office contract is in the process of being modified. with the goal for it to start flying with augmented technical capabilities midway through this year. Aircraft sales and leasing continues to ramp its leasing business. The investments we have made in the past are yielding fantastic financial results. The demand for parts and engines is especially high due to parts shortages and metal shortages such as titanium around the world. Our manufacturing sector segment has shown positive momentum in the latter half of the year as we move into 2025, and we are seeing further strength. We started to see increased bookings within our multi-story windows solutions business to the tune of approximately a couple hundred million dollars since Q2. That backlog will benefit production in 2026 and beyond. Darwin Sparrow, our EIC COO, has worked with management to streamline the manufacturing footprint in Toronto. We are well set up to mitigate potential tariff risks in the United States with our Dallas facility. The uncertainty is caused by the talk of tariffs and countervailing tariffs has definitely caused some concern with our customers throughout the manufacturing subsidiaries. We have, however, very little product manufactured in Canada for customers in the United States. and we are continually revisiting our strategies as government announcements are made. Our environmental access solutions business line sees continued interest in several sectors, including transmissions and distributions, which we think have long-term tailwinds. We had record results in Eastern Canada during the year, and we see a number of potential larger products needing matting solutions in 2025 and beyond. So we are bullish about the opportunities that exist in that business, both north and south of the border. Lastly, our precision manufacturing and engineering business has noted some strong results in the back half of 2004, as we saw a significant uptick in orders in several industries, including release in capital by the telecommunications company. The demand has continued into the early part of 2025. In that business line, we've been hearing a lot of noise about supply chains and the risks of tariffs. But once again, our local teams remain nimble and ready to respond. Stepping back and looking at EIC from a global perspective, our subsidiaries' performance have allowed us to pay a growing dependable dividend to our shareholders. In fact, the fourth quarter, we surpassed over $1 billion of cumulative dividends paid. This figure is a credit to our business model, our subsidiaries, but most importantly, our management teams and our employees. Jake and Travis will focus on the outlook for our segments for 2025. However, before passing the call over, I want to speak about our 2025 guidance. Due to the regulatory approval process, we have not updated our guidance to include Canadian North. Our pre-existing guidance provided in the third quarter is continuing until we are able to announce the closing date of the Canadian North transaction. We believe that our adjusted EBITDA will be between $690 and $730 million for fiscal 2025. Our strategy has proven itself over the past 20 years, and I'm extremely excited about the next 20. I'd now like to ask the call over to Rich.

Thank you, Mike, and good morning, everyone. For the fourth quarter, revenue was $688 million, adjusted EBITDA was $167 million, and free cash flow was $111 million. All were fourth quarter high watermarks. Free cash flows maintenance kept at $43 million with our second highest due to the timing of certain maintenance events during the year. Revenue in our aerospace and aviation segment increased by $30 million or 8% to $415 million. Adjusted EBITDA increased by $32 million or 29% to $140 million. The revenue and adjusted EBITDA increases were primarily related to the essential air services and aircraft sales and leasing business lines. Revenue and adjusted EBITDA within our aerospace business line were lower due to planned wind-down of certain training programs prior to the start of new programs and contracts. Additionally, one of the aerospace contracts changed from a performance-based logistics arrangement to a time and materials arrangement, which results in more variability when comparing quarters. Looking at the essential air services business line, the improvements were driven by four key factors. First, previous organic growth capital expenditures in the aviation business over the past number of years, including our rotary wing business. Second, our average load factors improved, which has a direct improvement on adjusted EBITDA. Third, the impact of routes flown on behalf of Air Canada. And finally, the impact of the BC and Manitoba medevac contracts. These have been the same consistent drivers throughout the entire fiscal period. Our aircraft sales and leasing business line revenues increased for two reasons. The first reason was the continued ramp in leasing activity due to investments in the lease portfolio over the past number of years, coupled with the continued improvement in the utilization of our portfolio. We are seeing significant demand for aircraft and even more so on the engine side. Lastly, Q4 saw an increase in large asset sales, which are generally more lumpy than our traditional parts business. The net result was a significant increase in revenue and adjusted EBITDA from the business line. Revenue in our manufacturing segment increased by $1 million to $272 million. Adjusted EBITDA decreased by $6 million to $40 million. Our environmental access solutions business line experience reduced revenues by 7% and decreased EBITDA by 16%, primarily due to reduced mass sales and service activity from the demobilization of a large project which occurred in the prior Q4. The acquisitions of Duhamel and Spartan exceeded our expectations based on our acquisition thresholds, and they partially offset those reductions. We are continuing to see demand for mat and bridge rentals and anticipate when larger projects are approved in 2025, we should have increased mats on rent ramping throughout the year. Our multi-story window solutions business line revenue decreased slightly by 1% when compared to the prior year, however, adjusted even a decrease by 29%, primarily due to three factors. First, there was a change in product mix. Second, there continued to be project delays coupled with our strategic decision to retain experienced staff, which will be required when the backlog and related production start. Last, there were additional costs as we streamlined the manufacturing facilities in the fourth quarter. We also recorded a restructuring provision, which was excluded from adjusted EBITDA and is separately reflected in the financial statements. We continue to see strong bookings, which increase the backlog. However, as previously discussed, those bookings will impact 2026 and 2027. Our overall net earnings were $28 million for the fourth quarter compared to $29 million in the prior year. The higher adjusted EBITDA was offset by increased interest costs of $5 million, increased depreciation of $9 million, and the restructuring provisions noted previously. Both interest and depreciation were elevated from the prior year due to growth capital investments and acquisitions made during the year. Adjusting that earnings were $39 million compared to $34 million in the fourth quarter of the prior year. Free cash flow was $111 million compared to $102 million in the prior year, both for fourth quarter records. Maintenance capital expenditures in the fourth quarter of 2024 were higher by $15 million due to the timing of maintenance events in our aerospace and aviation segments. Growth capital expenditures in Q4 were $43 million and were primarily driven by acquisitions of engines and aircraft in our aircraft sales and leasing business line, increased the leasing portfolio, coupled with aircraft acquisitions in our essential air services business line for additional lift, and expenditures incurred for the second aircraft for the UK Home Office. From a working capital perspective on the year, we had investment in working capital due to a couple of reasons. The most significant reason, which drove The year-to-date and quarter-to-date investment is due to several inventory purchases made within our aircraft sales and leasing business line. This was due to favorable market conditions, and those aircraft will be parted out and drive stronger results in the future. Second, the growth in the business, including revenue and adjusted EBITDA, required additional working capital investment. Third, the corporation collected a $30 million receivable at the end of 2023 for which The corresponding table was not due until 2024, which was a drag on working capital during the year. Finally, certain government receivables were behind historical collection patterns, which are expected to be resolved in 2025. We actively manage our working capital and working with each subsidiary team to convert the increase in working capital into cash. The corporation's aggregate leverage, including both the senior credit facility and convertible ventures, remained relatively consistent, increasing from 3.26 at December 31st, 2023 at 3.36 at December 31st, 2024. Subsequent to the end of the year, the corporation called its Series K convertible debentures, which saw 78 million of this series convert to equity. Pro forma, this conversion and redemption of the remaining debentures aggregate leverages 3.22. On a pro forma basis, our aggregate leverage ratio is the lowest it's been since 2019. All these ratios are calculated using the terms of the corporation's credit facility, which includes pro forma adjustments for the full year impact of acquisitions, but not the full year impact of growth capital expenditures. The growth capital expenditures that did not fully contribute in 2024 will have the effect of pulling down the leverage ratio where a full year contribution is considered. The corporation called its Series J convertible debentures during the fourth quarter, and as already mentioned, its Series K convertible debentures subsequent to year end. Convertible debentures were an effective form of financing in the past. However, we anticipate to transition to more conventional forms of financing to fund future growth. We continue to maintain a conservative balance sheet, and because of those past decisions, it allows us to execute on the strategic transactions like SPARTAN and Canadian North. Because of the financing transactions discussed above, no new equity capital will be required to fund the Canadian North transaction. Our M&A pipeline remains very strong. We are confident that our balance sheet is in a position that allows us to execute on future transactions. I will now turn the call over to Jake, who will provide an update for the 2025 outlook for the aerospace and aviation segment. Thank you, Rich.

Travis and I will split up the outlook session. I will focus on the aviation and aerospace segment. Travis will provide some context for the manufacturing segment. Overall, we're expecting another strong year of growth from our aerospace and aviation segment, as the trends highlighted in Mike and Rich's section are expected to continue into fiscal 2025. The growth investments made in the past, in addition to the contractual wins, whether it be the Newfoundland and Labrador Medevac contract, the second aircraft for the UK Home Office, or the future air crew training will all start to contribute to the profitability during the year. I'll specifically focus on the growth factors by business line. Our essential air service business will see growth driven by a multitude of factors when compared to the prior period. These include the full year deployment of Q400 aircraft to provide services under our agreement with Air Canada. We also expect to see strong load factors and growth across our network when compared to 2024. Lastly, we expect continued growth in our medevac business with both the long-term BC and Manitoba medevacs contracts continuing to contribute to financial results for the full fiscal year, along with enhanced pricing under the government of Nunavut's contract. As a reminder, the BC Medevac contracts returns are expected to be muted until we redeploy the existing aircraft currently being used to service that contract. The redeployment opportunities hopefully will include the Newfoundland and Labrador Medevac contract or charter and ISR opportunities throughout our network. Offsetting some of these gains is the impact of continued labor shortages and the supply chain challenges. Although we're not seeing a worsening of these dynamics, the challenges still remain specifically on aircraft parts and consumables, which are generally denominated in U.S. dollars. Although Canadian North isn't included in our guidance, I wanted to take a few moments to talk about the strategic impact of the acquisition that will be on the essential air services business once the line is completed, or business line once completed. Adam and Carmel will be able to expand on the discussion in the Q&A following the prepared remarks. and we were elated to announce the signing of the binding purchase agreement on Monday. There are a number of strategic benefits to the transaction for EIC. The Canadian North routes are highly complementary to our existing routes, as there's virtually no overlap with our legacy airlines. The addition of Canadian North will allow us to expand our geographies served to be all-inclusive within Nunavut by adding two regions that we currently do not serve. and will also allow for expansion into the Northwest Territories based on Canadian North's existing routes. It also provides the EIC companies with jet service and therefore provides opportunities to future and current customers of our various airlines. Lastly, the infrastructure acquired, including various hangars, simulators, bases, and other physical infrastructure, aids us in providing services for our customers and communities we serve coupled with the potential opportunities for future expansion of our aerospace business line. The aerospace business line is also expected to see growth due to strong flying temple for surveillance aircraft, along with the second aircraft going into service on the UK home office contract, but not until later in the year. However, the revenue increases are expected to be moderated by revenue declines associated with the transition of one of our aerospace contracts moving from a performance-based logistics contract to a time and materials contract that means revenues and profitability will be muted and more lumpy than in the past. Furthermore, we anticipate some declines in our training business as we transition between the planned wind down of pre-existing contracts and the ramp up of new contracts. Our aircraft sales and leasing business is also expected to experience growth as Mike and Richard had talked about the investment in both working capital for future part sales and investment in aircraft and engines within the leasing portfolio. We continue to expect linear growth in the leasing revenues into 2025 as we place those aircraft and engines on lease. With the increase in inventory, we also anticipate greater part sales throughout the year. On a long-term basis, we expect maintenance capex or capital expenditure to increase roughly consistent with the increases in adjusted EBITDA in our aerospace and aviation segment, which is the biggest driver of our consolidated maintenance capex. Growth investments in 2025 include capital expenditures for 8 to 10 new King Air aircraft, which will be used in the BC EHS contract. Certain of those aircraft were originally expected to be delivered in 2024. However, due to the strike of the manufacturer, they're expected to be received in 2025. We also anticipate capital expenditures related to the final modifications on the second aircraft for the UK Home Office, including the augmented technology suite requested. We'll be completing the full motion King Air simulator in the first half of the year. And lastly, regional one is always working on opportunistic aircraft and engine acquisitions, which may result in growth investments being made in the aircraft sales and leasing business. I'll now pass it off to Travis to provide some commentary on the manufacturing segment.

Thanks, Jake. We're anticipating a strong improvement in our revenues and profitability for our manufacturing segment when compared to fiscal 2024. The growth is expected for two reasons. Firstly, we see the continuation of the strong momentum for many of our manufacturing segment subsidiaries, coupled with the annualized impact of DuoML and Spartan in our environmental access solutions business line. All the businesses within the manufacturing segment were experiencing a strong level of customer inquiries in 2024 and into early 2025. Like we saw in the multi-storey windows business, those inquiries started to be converted into firm fixed orders. We saw those conversions to bookings in the multi-storey wind solution business line subsequent to Q2, while we saw the same theme in our precision manufacturing and engineering business line in the latter part of Q4 after the election results were announced. There's been some concern over the risk of tariffs in the shorter term from a customer booking perspective, but we remain optimistic as we're not directly impacted by tariffs, with the exception of our hydronic heating business, which is a relatively immaterial component of our business. And we've taken several activities to mitigate the risk. Our multi-story window solutions business line has continued to see strong bookings. However, as previously discussed, those bookings will be manufactured and installed in 18 to 24 months, consistent with historical trends. For 2025, our multi-story window solution business line revenue and adjusted EBITDA is expected to be lower than fiscal 2024 due to three reasons. Firstly, due to the heightened interest rates in 2023 and into 2024, it resulted in reduced project activity for 2025. Secondly, for the project scheduled for 2025, we anticipate margin pressures due to the type of projects booked. And lastly, there will continue to be operational integration costs as we continue to streamline the manufacturing footprints. We have taken the conscious decision to retain experienced staff, as we see the projects being one requiring experienced staff as we move into fiscal 2026. Quoting in Canada and the U.S. continues to be extremely active. We remain very bullish on this business line as the longer-term fundamentals, which are driving demand, remain incredibly strong. The Environmental Access Solutions business line is expected to generate returns significantly higher than fiscal 2024. The strategic addition to DuoML and Spartan on a standalone basis will result in annualized increases. However, the real benefit is realizing on the strategies for further revenue and profitability growth in Eastern Canada, especially in the transmission and distribution sector. Spartan allows us to expand into the much larger U.S. market, and based on testing of our new System 7 XL mats, we anticipate a strong level of uptake as we market the mats to our customers. Also, the FODDS product line is seeing strong demand in the early part of 2025. On a mass sales perspective, in 2023, we saw the demobilization of some large projects and we had the opportunity to sell a significant number of mats in Q4 2023, which was abnormal and resulted in the period over period declines that Richard talked about. That being said, there are a number of larger multi-period projects which are expected to be mobilized in 2025 and are expected to provide strong demand for the mat and bridge rental business. In fact, we're anticipating mats on rent in Q1 to be larger than the comparative period in 2024. With the change in the U.S. administration, we're also seeing significant increased demand in several sectors. So we talked about our bullish view on the transmission and distribution sector as electric grids have to be expanded and hardened for the new electricity demands. But more recently, we've also seen renewed interest in pipeline and oil and gas sectors, which are legacy strengths for the Wooden Mat product line. The precision manufacturing and engineering business line is expected to improve from a revenue and profitability perspective over the prior year. As previously discussed, we saw an improvement in the bookings after the U.S. election, which is consistent with our experience after previous U.S. elections. We're seeing significant demand in the Canadian telecommunications sector and are also seeing strength in our hydronic heating business through the cold and snowy conditions experienced across large swaths of North America this winter. The business line has a very diversified customer base, and we're seeing strength across various sectors, including the defense industry, technology industries, and the previously discussed telecommunications industry. The anticipated maintenance capital expenditures are expected to be slightly higher than the prior year due to the timing of replacements, and more specifically to the anticipated growth of the environmental access solutions business line and the precision manufacturing and engineering business lines. We're also anticipating growth capital expenditures to be incurred in each of the business lines, but they should be relatively consistent with the prior year. The growth capital expenditures, specifically in the environmental access solutions business line, will depend on market dynamics as they continually reassess their fleet based on the expected future market conditions. I'll now pass the call back to Mike.

Thanks, guys. Carmel and Adam were ecstatic to announce EIC's entering into an agreement to acquire Canadian North. as both of them have been putting significant hours for an extended period of time to get this transaction across the line. Canadian North is a strategic fit for EIC, and both Carmel and Adam are here to discuss the transaction and respond to questions. Because of our conservative leverage, coupled with the conversion of the Series J and K debentures, we will not require to raise any additional equity capital to execute on this transaction. Overall, I'm very encouraged by the state of our business and to the start of 2025. I'm proud of our past 20 years and I'm very excited for the next 20 based on the portfolio of companies that we have built. Excuse me, thank you for your time this morning and we'd now like to open the call to questions. Operator?

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 4 by the 1 on your telephone keypad. You will hear a prompt that your hand has been raised. And should you wish to cancel your request, please press star 4 by the 2. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Matthew Lee from Canaccord. Please go ahead.

Hi, morning, guys. Thanks for taking my question. Hey, Mike. Maybe just starting on one with the Canadian North acquisition. You've known the Canadian North guys for probably over a decade now. Why was this the right time to do the deal?

It's a good question, Matt. You know, I think they got to a point where they recognized that selling was the right thing for them to do. They own another airline called Air Inuit, and I think they're going to focus in on that. And we were able to put a deal together that worked for them as well as for us. So it was more timing than anything else.

Got it. And then maybe talk about your confidence in the regulatory approval process for the deal.

Sure. So maybe I'll just take a step back and talk about what approvals, in fact, we do need to get. Given the size of the transaction and the fact that it is a transportation undertaking, we need kind of two approvals from regulatory folks. The first is competition through approval. So obviously it's well known to EIC and that's probably more straightforward. The second is Transport Canada approval, which is different than, you know, competition obviously focuses in on is there a lessening of competition. Transport Canada is more of a public interest perspective, so different type. And I say Transport Canada, but ultimately it's a cabinet decision. So those are the two approval processes. Timeline. Competition Bureau is much more prescriptive and has timelines. Transport has certain aspects of the process which do have timelines, but others don't. So it becomes very difficult to try and predict how long that might take. You know, the one thing that I would say, if I compare this transactions to the other ones, which has had to go through a similar approval process, and I think there's been four, I think we're at the more simplified end of our transaction. There's no overlap with respect to what us in Canadian North does. So, you know, not a competition issue from a public interest perspective. Obviously, we have a great track record in how we deal with the North our commitment to the communities, what we can bring, that stability of level of service, ability to manage costs in the aviation industry. So lots of good things I think we can explain to the regulators. But timing becomes a little difficult to predict. It's measured in several months. We're hopeful it'll be at the shorter end, as I said. It's unfortunately probably no less complicated by virtue of a likely federal election in the middle of all this. So not able to give you any precision on that, but we'll work towards obviously making it as short as possible.

I think the one thing that fits into what Carmel talked about, our reputation in the North was the press release the government in Nunavut put out when we completed the transaction. Well, they clearly say they're going to look and examine and make sure that it fits for their people. The tone of the press release was very positive. and talked about the strengths of our relationship and actually talked about this acquisition as an opportunity to enhance things in the North. And that's certainly the way we look at it. We've got some great programs that, whether it's the Tick Mason Flying Program, our program with the bombers, our simulators and things like that, that we want to expand into the Canadian North business. So I think there's a lot of reason to be excited that this program not only doesn't impair competition, it actually enhances service to the north. In case you can't tell, we kind of like this deal.

Yeah, no kidding. I guess your orange shirt, blue bomber day is going to be a little more busy.

The bombers might need to add a few seats to that stadium.

I'm sure you could do it.

Thank you, Matt.

Thank you. And your next question comes from the line of Steve Hansen from Raymond James. Please go ahead.

Hey, Steve. Morning, guys. Thanks for your time. Mike, can you maybe, or Carmel, can you speak to the opportunities beyond the obvious deal itself. It sounds like you're obviously getting some dominance up in the north here, but you referenced some additional growth opportunities that could come with it because of the infrastructure improvements that you're going to be gathering or the assets you'll be gathering. So, just maybe walk us through the broader picture in the north after this deal as the first question.

Thanks. Sure. So, I'll start. you know, this is kind of the next big step for us. When we look at where we are today, what we do and what we do well, it was a logical step for us to obviously move into the territories in the far north that we weren't serving that were adjacent to us and made sense to allow us to provide that kind of continuity of service throughout the far north. The kind of, if I'm looking beyond, because I think that's what you're looking for, you know, if you look at the north, I would say that's probably the most significant growth opportunity in Canada, not only from its accelerated growth from a population perspective comparatively to the south, but Arctic sovereignty, the resource sector, which is growing. So all things that by being able to provide the level of service and the continuity of service in the far north and the infrastructure that we will then have in the far north positions as well to be able to capture that growth. And then it also allows us from an EIC perspective to get an additional tool in our toolbox being the jet capacity with the 737 access. And I think that will allow us to provide some greater charter accessibility to our customers and hopefully some new customers And then as you look at the footprint that will be established as a result of the acquisition, it brings us closer to other regions that we can look at, whether Northern Alberta, Yukon, et cetera. So that's the excitement almost post-closing. So we've got excitement there. We've got excitement for what it brings just in and of itself.

And I think the one other piece that's tangential to what Carmel mentioned is a lot of people don't understand the development that's in the north right now and is coming in the north. uh, natural resources and mining are, are strong and growing. There's opportunities in gold and other, we keep hearing about the word critical minerals. Um, these are things that are going to be explored and done up there, which again, the only way you get there is by boat in the summer or by plane in the winter. And so that has the opportunity for growth. And quite frankly, um, The geopolitical uncertainty is going to increase the need for Canada's investment in our military infrastructure in the north. One of the political leaders talked about building a base in Iqaluit in the last couple of weeks. Well, any of those projects increase the flow of goods into the north. The more things that go into the north, the busier we're going to be. So there's a great business there servicing the people of the north. There's developing the resources of the north and the defense of the north. And then, quite frankly, that lets us expand south into markets that are adjacent to where we are. And you see we've done that, quite frankly, in the Manitoba central region, where Comair was a main player in Nunavut for decades. And we've built that into a dominance in central Manitoba and northwestern Ontario. And I think you'll see over time us attempt the same strategy off of the new Canadian north region. And we love the fact that there's no overlap. We're not buying and competing with ourselves. This isn't a business about cutting the number of times we go to a community or reducing service. It's quite the opposite. We want to enhance service because it's all new market stuff.

No, that's great. Just as a quick follow-up, you referenced in the release returns in the first year anyways, they'll be slightly below your return targets. How confident are you in getting to that typical return target? And are you being able to start to map that out just based on the diligence thus far? Thanks.

Yeah, I mean, we're under a remarkably tight NDA about disclosing financial numbers and stuff until this is closed. And I completely understand Canadian North's position on that until the deal is done. That's their purview, and we will give you more details when we close it again. But a lot of the things we know we need to do to get the numbers that are possible in this deal are things we've done before. We're not going out and having to reinvent the wheel here. We're going to be adding Canadian North as an example to our engine overhaul program, which we've negotiated with the overhaul people, which gives us better service, better pricing, and better timing. We can add our fuel purchasing capability, bringing regional one into the parts capability, streaming line overhead that's not in the north, that's down south. And in fact, actually building our base in the north to let northern people manage our northern business. And so there's a very detailed game plan that's ready to go. When we're in a position to share that from a confidentiality point of view, we will. But I think the one thing I'm comfortable telling you is that I think we've proven we know what we're doing in this area, and this isn't new. The big advantage is, I mentioned this a couple of times, is we don't have overlap. We're taking a business that flies beside ours, but services the same kind of customers, brings the same freight in, deals with the same people. This is not new. And so... We'll follow where Canadian North is and then bring EIC's inherent advantages of size to the table, and that will enable us to get to the returns we expect. I mean, one of the cool things about this deal that typically is not the case, in fact, is almost never the case in aviation, our purchase price is essentially fully backed by the assets. We're not paying for goodwill here. We'll create the goodwill with the upgrades we'll make, but we've bought the assets and the infrastructure we need to cover a great piece of the geography of Canada.

I think the one thing I'd add to that, Steve, if you look at our aviation businesses, is that, you know, whether it's with Calm, Perimeter, QA, we love long-term contracts, obviously, that provides our base businesses a lot of stability. And if you look at the, you know, EIT's talked about this in And, you know, past disclosure, if you look at aviation inflation, especially in the north, it's been at unprecedented levels, right? And sometimes it just takes a bit of a process to work through that. And I think that's a statement about all aviation, especially what we've seen EIC has been able to do to this point in time. Appreciate the point, guys. Thanks.

Thank you. Once again, should you have a question, please press star 4 by the 1 on your telephone keypad. Your next question comes from the line of James McGarrigle from RBC Capital Markets. Please go ahead.

Good morning, James. Good morning. I just wanted to ask on the outlook for the environmental matting business. You mentioned some line of sight to a back half pickup. And then Stella Jones reported results today. They noticed they're seeing a little bit of weakness in their utility pool business. You know, your infrastructure markets are not totally related. But can you kind of comment a little bit more specifically on where you're seeing strength in 2025?

Yeah. The long linear projects are not generally stuff that would be using wood poles. The stuff that we're doing tends to be the big metal, larger lines than what we're talking about with what Stella does. We've seen, whether it be the government of Hydro-Quebec, the main, help me here, Travis, in the northern U.S., who spoke about their infrastructure investments.

Yeah, the entire U.S. grid, like the forecasting, the contupling need of investments over the next 10 years over the historical investment. And so, yeah, we see some strong, strong headwinds in the transmission distribution sector within that. And even just looking at some of the lines when our environmental access solutions team was in front of us just the other day, tons of opportunities throughout Alberta in terms of like Eltalink and looking at some of the maps for Eltalink in terms of projects that are under construction and projects that are in the application phase and ready to go. And so, you know, we just see a plethora of opportunities across Canada, whether it be Western Canada and Eastern Canada, and coupled with then, you know, the medium term and longer term, you know, the renewed interest in pipelines. You know, that's nothing that's going to happen over a short period of time, but, you know, there are those strong viewpoints now as to energy independence and, you know, perhaps looking at expanding some of the pipelines.

And when you draw that back into the shorter term, a more micro way to look at this is we've started to see the maths on rent climb. Our maths that are outstanding in the first quarter, which is typically a slow period, but are already ahead of last year. And bear in mind, last year we were coming out of those major big pipelines into BC, which completed, we sold off maths. and now we're building into other projects. So we've got line of sight into this. We've also seen the demand in the U.S. for Spartans products, and we've added new customers for our product. The acceptance of our new product in the U.S. has been good. Adam, you may be able to help me a little bit here with the testing they've done with the new mats, but it's gone well. Like I said, we had our board meetings a couple days ago And they talked about new customers that haven't bought from them before because of the new mats are buying from us.

Yeah, the one thing I can add to Mike's comments is that with the new mat, the new System 7 XT, they've been able to place it in some geographies and some applications where traditionally their historical system, seven that has not been able to be used or perform at the level necessary. And so we've seen it be used in the northern US, but also in different oil and gas applications such as fracking. So it's been very successful and they've had no issues with the quality of the product or any breakage related to those where it's been used in those very difficult, tough industries.

We're really excited about getting our analysts out to see the plant at Spartan next week and show what it is. When we talk about matting like it's homogeneous, it's a little different than our northern matting with the bigger, heavier wood mats. It's a different way of doing things. What the product accomplishes is the same, which is environmental protection while you're building something. But we look forward to showing that off next week.

Yeah, I'm looking forward to getting down there too. And then just, you know, turning to cost inflation, you know, admittedly your aerospace or your aviation segment kind of managed and protected margins in this, you know, high cost inflation environment versus what we've seen from some Canadian peers. But you did bring up, you know, some potential cost inflation. I believe you said maintenance cap X should be up in line with the increase in EBITDA. So can you give us a maintenance capex number for 2025 and then just provide some color on your ability to pass on some of this cost inflation via pricing? You know, can you do that immediately with your contract? Is that reset, you know, every year? Or is that something that we need to wait for our contracts to roll over?

That's contract and area specific, James. Some of them allow for changes for contracts. different items most of the longer term contracts would be tied to cpi we saw where we reset a contract like our uh northern medevac contract as an example uh it had been um materially underpriced for a couple years because of aviation inflation and particularly wage cost inflation we were able to reset that our uh our northern uh passenger contract comes up next year I think in the end of 26, so we'll see that there. But those contracts, particularly with the far north government, they understand where your costs are. We bring to them when there's a challenge and they work with us. In more southern markets, like where PAL operates in the Maritimes or Perimeter or Wasea operate in the south, we would just simply pass on through price increases. We are very thoughtful because of our market share. We want to never be seen as taking advantage of that. So we'll take the time to explain to our customers. But it's something we've talked about, quite frankly, for 20 years is that the nature of our business is an essential service. And if the cost of the maintenance goes up 10%, there isn't an alternative means of delivering the service. It's not like you can get on the train or take a bus or take a truck. The only way to get there is by air. we ultimately pass that on to the customer. It doesn't mean that in a quarter here or a quarter there, there's some lag in passing it on. We have one contract with the government of Manitoba, for example, where we transport judges, which is coming to a close later this year. It's materially underwater on the margins. We'll reset that if we win the contract and we'll doing the appropriate pricing, but our margins are resilient. And you've seen that in our results. And quite frankly, the other piece, to be honest with you, is our R1 advantage. We've got people going into the markets, buying up aircraft, tearing them apart. So our access to parts is second to none, not only in terms of price, but also availability. Sometimes there's hard to get parts regional one knows where to find them and how to find them. And quite frankly, that was why we bought the company way back when. It's grown so much that people don't think of it that way anymore. I think we're close to $150 million Canadian in EBITDA in that business now and still growing. But selfishly inside the company, they're a great provider of supplies.

And I guess, you know, just to sum all that up, I guess you still expect to drive margin improvement there. as we see redeploy some of these assets from the British Columbia deal?

Oh, unequivocally. I mean, BC made a choice to go to all new aircraft. That is atypical in the Canadian MEDEVAC marketplace because a several-year-old aircraft's reliability factor is almost identical to a new one. But the BC government contract was a long-term contract and they took a long-term perspective on this. So the planes we're replacing there are nowhere near the end of their medevac life. And so we will definitely redeploy those. Newfoundland is the poster child, but it's not the only one. And so we'll deploy some of them there. I think there's a reasonable likelihood that some of them are going to turn into ISR aircraft. where we're using some smaller gauge ISR stuff. You may maybe jump in here, but the King Airs have been a big part of our Canadian ISR work in the past.

Yeah, the King Airs have been an important anchor to the contract with the Canadian government. And as we alluded to, there's a lot of interest out in the, you know, globally with the geopolitical instability on ISR services. So that's a key, those King Airs will be key input into potential opportunities down the road.

Yeah, I appreciate it, and I'll turn the line over. Thank you. Thanks.

Thank you. And your next question comes from the line of Cameron Dorkson from National Bank Financial. Please go ahead.

Hey, good morning, Jeff.

Morning, everyone. I have a question, I guess, to follow up on the Canadian North acquisition. I'm just trying to get, I guess, a handle on what leverage for exchange income is going to look like post-close. I mean, we know what the purchase price is. for Canadian North, but I'm just wondering if you can talk in sort of broader terms about what leverage is going to look like kind of post-close. I know there's some leased aircraft at Canadian North, but is there any, I guess, on-balance sheet debt there as well? So anything you can talk about there would be helpful.

I think just one thing to clarify, the purchase price, like in all our transactions, that's the purchase price, debt-free, cash-free, right? So if there's any debt that'll be a reduction in the purchase price. And that's consistent with all the EIC transactions when we announce the purchase price.

So we will look at the leases in that business to decide whether we want to internalize the ownership of the aircraft. Historically, that's been our business model. They fly some larger gauge aircraft, which we're going to take our time and analyze whether we want to lease those or own those. And if we do, decide to buy the leases or buy different aircraft to replace the ones on lease, that would generate a new income stream and it would be accretive based on the transaction or we won't do it. One of the things we did get some feedback from the markets when we announced the transaction, there was concern that this deal was somehow going to either bump our leverage materially or create the requirement for equity. And I would suggest that neither of those are true. Between the debenture call in December and the one in January, we've generated $150 million in equity. That essentially pays for this transaction with no increase in our leverage. And then when you take into account that there will be a significant amount of EBITDA coming out of this enterprise, it actually, as we implement the program, the changes will actually de-lever as opposed to add leverage to the company. Again, I have to be careful because I'm limited as to what we can talk about in terms of financial items, but this does not create any balance sheet issues whatsoever.

Okay. No, that was my thought as well. I just wanted to clarify that. So that's very helpful. And I guess sort of related, and you kind of mentioned it just with relation to the Canadian North, you know, bringing on jet operations, 737 flying. Yeah. I guess maybe the question is, you know, is this an area that maybe the Regional 1 business starts to get into, you know, parting out 737s or leasing them? Obviously, that's more of a potentially competitive market, but maybe it would make sense if you're an operator. Just warning your thoughts around that.

First of all, I'd like to know if you have a bug in our board meetings. Yeah, we've talked a lot about Regional 1 secret sauce is knowledge of the aircraft. Now that we've got a bunch of internal, that we have a need for internal parts, we're going to, we'll see them dipping their feet into opportunities and developing the knowledge of that aircraft. They're certainly going to assist us in supplying ourselves. And as that knowledge is built, I think it's a reasonable assumption that over a period of time, it will give us another product line to succeed in. You've seen Regional 1 start into in thermal props moved to narrow body jets and originally the classics like the crj 200 and the 700 that the 900 we're now transacting in the thousands of crj thousands in europe and erjs in in uh uh the the more narrow body stuff and so we keep growing in these things but we grow slowly until we know what we're doing the secret sauce is being able to buy these things right And we have a track record of being able to do that. And so does the 737 provide an opportunity?

Yeah, and the R1 has touched some 737 engines in the past. So, you know, they're starting to get familiar with it, and that's obviously a particular area that we would be looking for them to get involved in, in addition to the parts. Just given the availability of engines generally in the marketplace is – And again, it's that R1 advantage that we can bring to our airline operators.

That's very helpful. It makes a lot of sense. I'll pass the line. Thanks very much.

Thank you. Once again, let us start and want to ask a question. Your next question comes from the line of Amir Ezzat from Ventum. Please go ahead.

Good morning. Thanks for taking my questions. If I can double-click on that question on Canadian North and R1 and potential avenues of synergies, given that Canadian North primarily outsources maintenance, I just wonder if you guys can comment on your ability in terms of infrastructure and capacity to internalize some of that maintenance. And do you guys have, like, a broad timeline to do that?

Well, the Canadian North does do a significant piece of their stuff internally, particularly on the turboprops.

And then 737, what they outsource is the engine overhauls.

And so that's something we will put with our stuff very quickly. But you are right in terms of the opportunity with the overhauls for us to take a look at our overall capacity and where we do what things. You've heard us complain a lot that because PAL is so busy, with our ISR business that we don't have the internal capability of tearing down the planes that R1 gets that we had hoped to have. It's a good problem. It's because we're too busy. But as we add the capabilities at Canadian North, I think you'll see a streamline how we do turboprops, where we do the jets, and then adding in whether it's more ISR work, whether it's... more 737 work or more tearing down of aircraft. I think it will be integral to that strategy. They're good at what they do, but as opposed to being 100% of one, it's going to be a part of the whole.

Understood. Maybe another one on the approval process. I'm just thinking back in 2019 when Canadian North and First Air merged. It came with a set of conditions from the regulators such as fair and service level commitments and so on. Do you guys anticipate like similar conditions than, you know, like any early responses from Transport Canada? I mean, with a looming election, do you foresee this to play out like post-election, I guess?

So we're just in the process of starting to engage in discussions with Transport. Obviously, you can't predict what's what the election might do or when it will occur. So, you know, stay tuned for that. But as far as the conditions, the merger between, as I call it, Old Canadian North and First Air is different, right? You had two competitors that were merging to become one. Here, what we're doing is we're acquiring an existing air operation that we have no overlap with. So I think the circumstances are much different. I think that you know, the benefits of the transaction are significant to the North. And so those are key factors that I think would cause there to be much less undertakings than what you saw in the first Air Canada North merger.

I think when that merger was done, there was considerable concern amongst the populace up north that this would result in higher fares and a reduced level of service, which is where those additions came from. Us buying Canadian North on face makes no difference to that, but it's actually the opposite is true. When you look at inflation, our ability to buy parts is better than other people's ability to buy parts. So the amalgam is likely to have less price volatility than it would on a standalone basis. And we're really excited about bringing the Chick Mason pilot program into the North. We started it in Rankin Inlet this year, but now with people on the East and West, we're certainly going to have to increase the number of pilot candidates we're bringing in. And it's something we're ecstatic about. We've got about a dozen First Nations pilots that we've never had before. It's come out of the two or three years we've been doing this program and we'll expand that into Canadian North areas. And you'll see that the requirement that was in the other deal doesn't really fit here. We're not going to speak for the government. They're going to do the work they're going to do. And clearly the government in Nunavut is going to do what it has to do. But we know what we're bringing to the table here and it's not something where I'm overly concerned that they're going to say, hey, you have to do X and Y. We're probably going to do X and Y anyway.

No, I understand. That's pretty straightforward. Then if you'll allow me just one more and I'll change gears. On multi-story window, you know, like you guys are speaking about a pickup in the next 18 to 24 months and we've seen like the backlog pickup. I just wonder if you could give us like a bit of color on how the composition of that backlog compared to prior cycles? Are these, like, larger projects with better pricing, or was pricing, like, still depressed? Or any factors, I guess, that could influence margins. And I know it's 18 to 24 months out, but I'd appreciate some color.

Sure. When you look at margins in the window business, there's two things that – two real macros that have hurt our margins about business. Because the contracts are lent 12 months at the absolute minimum, but 18, 24 months is normal. In the business, they didn't have price escalators because for a decade, the prices of aluminum and glass were very stable. There wasn't much, though, if you'd hedge your purchase and that would be it. Well, during COVID, we saw the supply shocks came, projects got delayed, and prices went increased dramatically without the ability to reset those prices. So some of those projects became very difficult. The stuff we're writing now factors in the new world of what the pricing is. So that will take out that challenge we faced in the past. There was a period, particularly early last year or late 2023, when the number of projects being let declined and some of our competitors were hyper aggressive on pricing, we tried to avoid that. So I wouldn't say that the new contracts are at some new higher level. They're competitive, but they reflect the cost structure of the business as it is now. But where the real exciting part of the margin profile is the combination work that Darwin's doing in the businesses. We've got two great businesses in Quest and BV, but they have multiple plants doing the same thing in Toronto. And so one of the first steps is we have actually moved out of Quest's main production facility, and we're in the process of moving that into BV's main production facility. We're looking at some of the satellite plants to see what we'll do with those. And ultimately, we will run something in Canada that looks like it does in Dallas. which is a state of the art, most efficient plant. And we get that it'll reduce costs, but most importantly, it'll increase throughput per employee. When you set up a window plant appropriately, you can do more frames per person and skilled workers are hard to get, and they take a long time to build. So a big part of the margin increases that come in 26 and beyond are going to be driven by the right sizing and the setting up our manufacturing on a more current basis. And then being able to effectively copy what we've achieved in Dallas in Canada. And that's where you'll see the margins go. In 2025, I wish I could tell you that it was better than it is. The sales are choppy because of what we took back 18 months ago and we're in the midst of rationalizing those plans so we'll get through it but that's reflected in our guidance there's no surprises here the stuff that's going on with tariffs or and slower declines in interest rates hasn't changed our outlook any and that's factored into the to the range we talked about earlier in the call and just one other thing that i'd add when you look at the business

As projects have pushed for Quest and BV product, our installation teams have done an exceptional job with their capabilities to install non-Quest and BV product, pulling in jobs to keep our people employed and keep those installation people in-house. But those projects are at much lower margins than the kind of supply and install jobs, so that's impacted margins in 2024 and will into 2025 as well.

Great. Thanks for taking my questions. Thank you.

Thank you. And your next question comes from the line of Christa Friesen from CABC. Please go ahead.

Good morning, Christa.

Hi, thank you for taking my question. Good morning. I was just wondering if you could help us think about the cadence of CapEx this year, just as you have all these aircraft coming through.

Sure. When we look at the stuff for the BC Medevac contract, If I had told you what I thought they were last year, I would have turned out to be not very accurate. We're really at the whim of the manufacturer and it's been a tough time in aircraft manufacturing, but we think that that should be on a reasonably consistent basis starting at the end of Q1 and Q2 and then sort of evenly over the balance of the year should they hit their targets. On the other major projects, we should be largely finished our simulator by mid-year. And so the money for that should be fully deployed. We should be largely finished our ISR aircraft by mid-year. I'm hoping that we'll win a couple more, so we have to start on some other ones. But nothing to say yet on that front. So those two would be front-end loaded. And then I think the biggest wild card is Regional 1. They're doing very well right now. And the market is very demanding. So you've got to be selective when you're buying because the prices are high. And so you can't chase deals because we're at the peak of the market. It's a good time to sell. It's a harder time to buy. But when we can find the opportunities, we're going to jump on them. So that's the part for me, Krista, that I really can't give you a timeline on is the regional one piece of it. On the maintenance CapEx, I see a little bit more of a normal cadence in this year, which would be a little bit more front-end loaded. We try and do as much as we can to the extent possible when the winter roads are in and when business is slower in the first part of the year. Last year was an anomaly in that we didn't get very much done and we had to do it later in the year. The goal is to try and get a little more done early in the year. And again, the the aggregate cost of the maintenance capex should grow basically in line, give or take, with the growth of the EBITDA in that business.

Okay, great. Thank you. And then maybe just one more on Spartan, Matt. Can you just give us an update on the operations there and specifically, I believe you previously talked about doing a bit of a refresh at the facility and Have you started that, and what the plans are there?

I'll hand that to Adam. He's kind of our Spartan mat guru.

Sure, and I'm sure that the guys next week will be happy to give you a fulsome answer on that. I'd say right now, as we discussed, that the new XT mat is just coming off the line and is performing very well. There's strong demand for that. So it's definitely a balance of looking and saying that, you know, we can take, you know, plant down, increase throughput, but we have a lot of customers that we want to service. So I'd say that that decision right now is being weighed and there's been no definitive timeline put down if that's going to be you know, what month in 2025 or if we're able to push that off into 2026. So, you know, decisions still to be made and there's a lot of variables there which are driving that final decision.

I guess I would say that the bias has probably been to defer it if we possibly can simply because the demand for product, we really don't want to shut down and force our customers to buy something else. So, although the offset of that is at some point we run out with the current facility, so it's a trade-off, but right now we aren't shutting down in the near term.

Okay. Thank you very much. I appreciate it. I'll jump back in the queue.

Thank you. And your next question comes from the line of Tim James from TD. Please go ahead.

Hey, Tim. Good morning. Good morning. Thanks for the call, everyone. Quick one, just a housekeeping question. Just want to confirm I heard this correctly. The multi-story window systems, 29% decline in EBITDA, that does not include this restructuring provision that was recorded. Is that correct?

Yeah, that's correct. Yeah. The restructuring provision was taken out of that number.

Okay.

Thanks.

Restructuring is really the one-time stuff that shouldn't recur.

Okay. Um, then turning to the, to the, uh, the outlook for that business and just the cadence and bookings, you mentioned it picked up in the latter part of 2024, which bodes well for 26 and beyond, um, any color you can provide on sort of how that improvement is tracked where, you know, we're almost two months into 25. Is there any, any change in that sort of improved bookings? I'm just trying to understand, you know, the risk to kind of a more positive outlook for 2026, you know, when do you get really comfortable or maybe you are now that you'll see that revenue growth in 26 and that, uh, and that improvement in profitability, or do you still need to see a little bit more or, or, or more prolonged momentum, uh, in the booking strength?

Um, that's a really good question, Tim. Um, we're confident that we're going to see an improvement in 2026. The magnitude of the improvement talks about bookings we're going to make from now forward in the back half of 2026, because the bookings we've taken tend to be closer to the front. And so what we've seen in the tariff stuff is there's been no slowdown at all in bidding requests. The last three or four weeks have been a little bit slower in terms of, uh, converting. And I think it's really just people waiting to see what aluminum prices are, because with the tariffs, the single biggest non-labor part of a window is aluminum and where you're going to get the aluminum from and how you're going to build them. And so on both sides of the border, I think people are waiting for the developers are waiting for clarity on what's going to happen, which we should see over the next 30 or 60 days. Ultimately for us, We're well placed on that because we've got production facilities in both countries, suppliers in both countries. We will be as competitive as anyone in any of the markets. But I think you'll see a further strengthening of that as we go into the year once the dance that Canada and the U.S. are doing on tariffs goes away. Or at least if it doesn't go away, it becomes more certain what it's going to be. The need for housing, it's kind of come off the front page because of the tariff discussion. Kent is still bringing in 350,000 people this year, which in long-term averages is still a big number. And we didn't have enough housing before we brought those 350,000 people in. So there's no doubt what's coming. And that's why we made the decision. I think the barometer of our confidence is the fact that we've kept our skilled employees and said, we'll wait. But for me to give you the magnitude of that for 2026, you're right. It's a bit early other than to say it's going to be better than 2025. And just to give the market an idea, like when we're finished this, this reorg this year, we're going to be able to do a multiple of the business we're running through those factories today. Like, A, they aren't as efficient as the new one is, and B, the demand hasn't been that strong. So we can do two or three times what we're doing now in a future environment, and that's fully what we anticipate. I'm not suggesting that's a 2026 number, but you'll see a momentum into this as people start building at greater paces.

And maybe a little bit on the inquiries and sort of order book, like you talked about sort of the first couple of months. So I think that it's still been strong from an inquiries perspective and there have been some conversions into orders. And as we sort of always talk about, like we're agnostic to the type of project, whether it be condo developments or apartments, we specialize in both. And so you probably are seeing a little bit more apartments being quoted and booked, but that's the exact same space we play in and we're experts at.

Okay, thank you. My last question, and Mike, you just mentioned a few minutes ago about force multiplier opportunities, or maybe it was Jake on the international side. You mentioned you'll finish this second one around mid-year for the UK home office contract. What about... you know, a third, a fourth force multiplier aircraft opportunity. How active is the interest in that? Like, as you look out over the next couple of years, I mean, you guys have capabilities to, in many areas of kind of the ISR market, whether it's the force multiplier or operating logistical support, et cetera, et cetera. Is the force multiplier in that aircraft, is that a decent opportunity as you think about that market? Or should we think more about sort of more you know, what you're looking at in Australia, like those types of opportunities?

Yeah, that's a great question, and I, you know, there's global, I'd say the general demand for ISR services across, and really it's about picking and choosing what fits for us at a given time, knowing, as Mike pointed out, we've got some capacity constraints going through some of our facilities. Australia, obviously, with, you know, the magnitude of aircraft rolling through, and You know, there are a number of countries that are looking for rather than a force multiplier model to simply purchase ISR aircraft. So, you know, we'll be a very opportunistic. We've had a lot of success and we're not afraid to invest in force multiplier style contracts or assets. But we're at a point right now where, you know, we can kind of pick and choose what's going to make sense for us moving forward.

I think the one other thing, in addition to what Jake mentioned, is that you may see us do a different gauge of force multiplier. Like what we built, the first one that's in England right now, that was a big Dash 8 one. For us to perhaps have different sizes available in our force multiplier fleet, like a King Air thing, they're typically faster to deploy. You can get to places quicker and get up and running quicker. I think that's a reasonable assumption that we'll be adding that to the group. And given the aggregate demand in the world, we're not going to not be building something. So if we're not building it for someone else, we'll build it for ourselves.

Yeah, absolutely. Okay, that's very helpful. Thank you.

Thank you. And your next question comes from the line of Jeff Fenwick from Cormac Securities. Please go ahead.

Hi, Jeff. Hey, everyone. Mike, just wanted to ask first on aerospace. I think you touched on it briefly in your comments there, but a pretty big decline in the revenue there. You called out a, I guess, a runoff of a training program and some timing about that coming back on in a couple of changes to some contract terms. What's the expectation of sort of rebuilding or backfilling there with stuff that's in the pipeline in terms of new training programs? Like, are you going to

backfill that relatively quickly now yeah the there's opportunities and that the training businesses when we're talking about that that's largely we're talking about cti in the us and uh just as a quick refresher for everybody that's a very high revenue uh low capital business so that even the margins are much lower so the impact on revenue is bigger than the impact is on ebitda but there were constantly bidding on that so the That's normal variations within the business. And so I anticipate backfilling that reasonably quickly. The other one that Jake mentioned is one of our ISR contracts where we maintain planes for a foreign government. They've changed what they're doing with them. And so we aren't doing it on a contractual basis anymore. We're still helping them. And so that will have, I would suggest, a more meaningful impact. impact on our EBITDA in that segment, but we've got the new planes coming on in Britain and some other stuff. Again, both of those contract changes were factored into our guidance, so there's no surprises here. This is all stuff we anticipated and we built into there. The training stuff probably comes back quicker. It depends on which ones we win. The one in where we were maintaining aircraft, that one will be lumpy. We're still doing stuff for them, but on a more ad hoc basis. But that will largely be replaced as we added the second plane for Great Britain.

Plus the future air crew training.

And the air crew training later in the year, that's correct, yeah.

Okay, thanks for that. And I just want to touch on Air Canada. I mean, you called that out. It's been a source of growth for you. I know there was an incident there out in Halifax back in December. Maybe you speak to how that sort of event factors into the relationship with them and the process of sort of reviewing what happened and does it give them any pause in terms of continuing to work with Palo?

Well, as an aircraft operator, any incident is something that's very stressful, something we bend over backwards to avoid, but it's like driving your car There's always the risk of something. I would suggest to you that this has done nothing in any negative way to hurt our relationship with Air Canada, the way our team handled it. They got people off the plane, got the people looked after at the hangars and off the runway. I don't think it has any negative impact with Air Canada. In fact, I would describe them as very complimentary of the way we dealt with it. That plane is flown for the last time, so we'll replace it. It's fully insured, so that's not an issue. And the challenge that happened with that aircraft was really something fundamental to that aircraft. We're not the first operator that had a similar landing gear issue. We're doing things to see whether we can augment beyond the manufacturer standards to prevent it again. But the Q400 is a big part of aircraft fleets around the world.

Yeah, and I'd just reiterate the manner in which kind of the joint Air Canada PAL team handled the incident really helped to solidify that relationship.

Great. I appreciate that, Collar. That's all I had. Thank you. Thanks.

Thank you. Once again, that is star and one to ask a question. Your next question comes from the line of Frevy Hayhen from Paradigm Capital. Please go ahead.

Morning. Morning. Thanks for taking my question. Just quickly on the Windows business, could you just remind us your revenue split between Canada and the U.S., as well as any market share metrics you could share there?

The revenue split is highly variable period to period. When we had Quest by itself, It was approximately a 50-50 business. When we added BV, it's more Canadian focused. So we would do more in Canada on an aggregate basis typically than we do in the United States, although it does vary period to period. In terms of market share in Canada, we are definitely the largest player. I would suggest that we're less than 50% of the market, but probably close to it. In the U.S., we're a significant player, but we're just a regional player. So we don't have real statistics on that, but we probably aren't 10% of the market.

Okay, thanks. I'll pass the line.

Thank you. There are no further questions at this time. I would now hand the call back to Mr. Powell for any closing remarks.

I'd like to thank everyone for participating in today's call. I look forward to talking to you in May and going over our first quarter results. Have a great day.

Thank you, and this concludes today's call. Thank you for participating, and we all disconnect.