Exchange Income Corporation (EIF) Earnings Call Transcript

Good morning, everyone, and welcome to Exchange Income Corporation's conference call for the first quarter, where we'll discuss the financial results for the three months ended March 31st, 2026. The Corporation's results, which include the MD&A and financial statements, came out on May 11th, 2026, and you can access them right now on the company's website or through SEDAR+. Before we hand the call over to management, listeners should be aware that today's presentation and any responses to questions may include forward-looking statements as defined under the safe harbour provisions of Canadian provincial securities laws. Such forward-looking statements carry risks and uncertainties, and you shouldn't place undue reliance on them. In making forward-looking statements, certain material factors or assumptions are applied, and actual results could differ materially from those expressed or implied in those statements. If you'd like more information on factors that may cause actual results to differ materially from expectations, and on the material factors or assumptions applied in making forward-looking statements, please consult the quarterly and annual MD&A as well as the Risk Factors section of the annual information form and EIC's other filings with Canadian securities regulators. Except as required by Canadian securities law, EIC does not undertake to update any forward-looking statements. Such statements speak only as of the date made.

I'd also like to remind everyone listening that this call is being recorded and streamed live over the internet for the benefit of individual shareholders, analysts, and other interested parties. At this point, I'll hand things over to Exchange Income Corporation's CEO, Mike Pyle. Mr. Pyle, the floor is yours.

Thank you, Operator. Good morning, and I appreciate everyone joining us on today's call. Richard Wowryk is here with me, and he'll walk through our financial results, while Jake Trainor and Travis Muhr will go into more detail on our outlook. We released our first quarter results for fiscal 2026 yesterday. Across the board, our performance during the period was exceptionally strong. These results once again show how important our resilient and stable business model is. On the macro side, the quarter brought volatility, heavy geopolitical activity and trade uncertainty, and fuel prices climbing quickly — and even so, our businesses posted records on every key metric. Even more encouraging was the momentum our business lines built as we came out of the quarter. We saw considerable strength in virtually every one of our business lines. A strong Q1 with momentum that is accelerating gives me a lot of confidence in updating our guidance. We left our goalposts for the quarter unchanged at $825 to $875, but we now expect to land near the upper end of that range, which is a very positive signal. If the current strength holds, we may revisit the top end of the range in future quarters.

Turning to our balance sheet, we took important steps that made it even stronger. In the quarter, we made public our investment grade corporate credit rating and sold $600 million in unsecured notes carrying a 4.324% rate. Our original plan was a $400 million issuance, yet because demand proved so strong, we increased the size of the offering to $600 million. Those notes came to market on March 13th, right in the middle of the geopolitical conflict with Iran. The combination of when we issued and the demand we saw offers outside confirmation of our business model and of how dependable the results are that we discuss every quarter and at year-end. When the year closed, we held more than $2 billion of available liquidity. That liquidity matters to how our business model works, since it lets us move decisively when appealing opportunities come along, whether for acquisitions or for capital investment in organic growth. I don't want Adam and his team to be boxed in by market conditions or to face deal execution risk. Still, to be clear, this extra capital does not alter our conservative stance on leverage, nor does it change our disciplined acquisition metrics and strategies. Instead, having that liquidity available lets us be remarkably opportunistic in the marketplace.

Leverage remains at or close to lows we haven't seen in 15 years, and the five-year unsecured notes give us meaningful real cash interest savings relative to the swap rates available. On top of that, if you look at today's yield curves, those savings become even larger. EIC stands out as a clear illustration of a diversified, resilient business navigating uncertain periods and still thriving. Overall results were powered by revenue rising 30% to $867 million for the quarter. Adjusted EBITDA climbed 27% to $166 million. Those gains look even stronger once you factor in the translation effect of US dollar results, which fell roughly 5% year-over-year. Within our Aerospace and Aviation segment, the improvement came from the Canadian North and Mach 2 acquisitions, higher passenger loads, solid medevac performance, fleet growth investments, stronger tempo flying under our ISR contracts, and a second aircraft added to the UK Home Office contract. Canadian North keeps delivering the profitability we expected and is culturally a strong match with our other air operators. Maintenance capital expenditures stayed elevated during the first quarter and will continue at elevated levels through the next quarter or two.

That said, this was anticipated and had already been shared with the market. Demand remains strong in our aircraft sales and leasing business, and rental rates for leased aircraft and engines keep rising. Parts sales and whole aircraft sales remain very strong as well, and we completed significant aircraft monetization in the first quarter through opportunistic sales. There has been considerable news coverage of airlines changing schedules in reaction to jet fuel prices, which were pushed up by supply-related uncertainty connected to Iran and other geopolitical events. To date, the customers who lease our aircraft and engines have not been materially affected. Management is monitoring the market proactively and engaging with customers to manage any risk. That said, volatility in the market also opens up several opportunities for our business line, and we stand ready to act on any opportunistic transactions that could arise from parts purchases or from buying engines or aircraft. Finally, we keep receiving strong inbound interest from governments worldwide in our world-class ISR capabilities. We announced recently that our proposed ISR bid in Australia was not selected. We have not gotten detailed feedback on our submission, nor have we received confirmation of who the successful bidder was.

Like I said before, the Australia contract is merely one among numerous deals we had been actively chasing. With that said, we were thrilled to report that the Air Greenland contract, covering 2 missionized surveillance aircraft, is close to being finalized. That deal came about as a direct-source opportunity, and the PAL Aerospace team worked diligently to lock in the project, building on a relationship with Air Greenland that goes back a long way. The Air Greenland agreement stands as one of several solutions our team has been actively chasing. We keep going after multiple other opportunities across Canada and Europe. We stay confident in our solutions and in what we put forward both nationally and internationally, and we'll share updates once information becomes available. From a revenue and profitability standpoint, our manufacturing segment was down. Still, if you look beneath the hood, the real story emerges. Momentum was the defining theme for the manufacturing segment in the first quarter, and that momentum was achieved across both the Environmental Access Solutions and Precision Manufacturing and Engineering business lines. Near the end of the quarter and after the quarter closed, we saw customer inquiries convert into firm fixed orders, along with record order amounts at some of the individual businesses. To illustrate, our stainless steel tank manufacturer booked its largest ever order for stainless steel tanks destined for a data farm in the United States.

That order was roughly double the size of the biggest single order they had ever received before across their lengthy and successful history. At the Canadian operations, our Environmental Access Solutions business kept experiencing incremental gains in the count of mats on rent as the quarter came to a close. For our US operations, the backlog of demand for composite mats is still exceptionally strong, and most of the production capacity we currently have is committed through 2026. Construction of the second state-of-the-art plant, located in Saltillo, Mississippi, is moving forward on schedule and within budget. This facility will substantially expand our manufacturing capacity, enabling us to satisfy demand for the best-in-class composite mats. Looking at the wider industry, many announcements have come out about transmission and distribution expansion, together with possible new pipelines and oil and gas development. Over the longer term, we perceive considerable tailwinds for the business line and stay very bullish on their business getting back to the historical highs we saw in 2022. Our Multi-Story Window business line softened in line with what we had expected. We are noticing a few encouraging signals from various levels of government when they discuss accelerating approvals and lowering development fees. Demand for affordable housing persists, and we are achieving some successes across various geographies throughout North America.

But the hangover from an imbalance between supply and demand—one caused by condo development in Toronto and Vancouver that was aimed at investors—is still with us. Tariffs have affected us as well in the year-over-year comparatives. The size of those tariffs isn't material to EIC as a whole, though it comes to under $10 million on an annualized basis. While we expected a slowdown in our business, our teams have carried out key initiatives: shrinking the physical footprint of our manufacturing operations, improving efficiencies inside the plants, and aligning our capabilities in Canada and the US—and all of these are now virtually complete. Once demand inevitably picks up, we'll be able to make more windows at a lower cost. I continue to have a lot of confidence in this business line. As we get back to historical norms down the road, the added revenue and profitability will drop straight to the bottom line, since all of the investments are already made—except for investment in working capital when sales rise. Rich will go over the key metrics for the three months ended March 31st, but before I hand the call over, I wanted to address the additions at the C-suite level and at head office. My mantra for EIC has always been that culture isn't the most important thing; it's the only thing.

EIC’s culture is really one of a kind, and preserving it far into the future matters for us to keep succeeding. Bringing Carm, Marley, and Garth onto the executive team is significant, since they grasp what has made EIC successful and will assist us in growing and expanding. Each of the three has spent a number of years at EIC and ranks among our top performers. We welcome them into the executive ranks, and they will keep driving the EIC culture as we carry on the growth trajectory that has enabled us to deliver a 20% return per annum for shareholders across the past 21 years. Beyond that, Travis and Darwin have taken on broader responsibilities in the C-suite. Jake and Travis will concentrate on the outlook for our segments for the second quarter and the rest of the year. I’ll now hand the call to Rich, who will discuss several of the key highlights from the MD&A and financial statements.

Thanks, Mike, and good morning to everyone. Turning to the first quarter, we posted revenue of $867 million, adjusted EBITDA of $166 million, and free cash flow of $120 million. Free cash flow less maintenance CapEx came in at $41 million. Adjusted net earnings were $34 million and net earnings were $28 million, reflecting rises of 139% and 287%, respectively. On a per-share basis, earnings were 50 cents and adjusted net earnings per share were 61 cents, up 257% and 118%, respectively. Free cash flow per share rose 33% to $2.14, and free cash flow less maintenance CapEx climbed 46% to 73 cents per share. Those per-share gains look even stronger when you consider that weighted average shares outstanding grew 11% versus the prior quarter, largely because of convertible debentures converted in 2025 and acquisitions we completed. Every absolute key performance indicator reached a first-quarter record. Results in Aerospace and Aviation were powered by solid profitability across each business line, thanks to the Canadian North and Mach 2 acquisitions, robust load factors at our various air operators, healthy demand for leases, parts, and whole aircraft and engines in our aircraft sales and leasing business line, and the contribution of the second aircraft for the UK Home Office in aerospace, which began in the fourth quarter of 2025, together with higher tempo flying across various ISR contracts.

Revenue and profitability in our manufacturing segment both declined, yet, as Mike mentioned, momentum built as the quarter drew to a close and kept gaining strength after it ended. Within our Canadian Environmental Access Solutions operations, mats on rent delivered strong results. Profitability, though, came in similar to the prior year, since 2025 included strong demobilization and mat movement operations that were unusual given the business's normal seasonality. In our US operations, demand for composite matting solutions stayed robust. Those accelerating demand trends — strengthening Canadian rentals and strong US composite sales — carried on after quarter-end. During the quarter, we spent $2.5 million in growth capital expenditures on the new US composite mat manufacturing plant. That project remains on time and on budget against the estimated $60 million budget. Our Multi-Story Window solution business line kept moderating as expected. This moderation ties to past project delays and deferrals stemming from developer uncertainty. Our teams have finished initiatives that will raise efficiency at the plant. Affordable housing remains a theme, and once volumes ramp back up, we will be positioned to produce more windows at a lower cost than our prior operations.

Precision Manufacturing and Engineering's first quarter saw results and activities pick up increasing steam as the quarter came to a close. Although the first-quarter figures came in fairly in line with the prior-year comparison, enthusiasm across the group has never been higher, thanks to substantial customer orders booked late in the quarter and carrying into the second quarter. Maintenance capital expenditures totaled $79 million in the first quarter, running $23 million above the comparative period, driven by the addition of Canadian North, greater utilization of the aircraft sales and leasing fleet, and an overall expansion of fleet size in our Aerospace and Aviation segment. Growth capital expenditures came to $40 million during the first quarter, mainly reflecting three King Air aircraft deliveries for the BCEHS contract in our Essential Air Services, together with investments tied to the expanded commercial agreement with Air Canada, and aircraft modifications and other investments for the Newfoundland and Labrador medevac contract. On the cash flow and working capital front, we delivered a very strong result, since the working capital investment was nominal relative to the growth in our financial results. The Corporation's aggregate leverage continues to sit near historic lows.

In the quarter, we shared that EIC received an investment grade corporate rating — BBB Low with a stable outlook — from DBRS. A $600 million bond issuance took place, heavily oversubscribed, carrying an interest rate of 4.324%, delivering meaningful interest savings versus alternative financing products, such as five years money obtained via interest rate swaps when we issued. Given the additional rise in risk-free rates, those savings are even larger now. With more than $2 billion of liquidity available, we hold substantial dry powder for acquisitions and for investing in our existing businesses to drive future growth. For EIC, having that liquidity on hand matters greatly, since it allows us to act as an opportunistic buyer while reducing deal execution risk for Adam and his team. Our approach to acquisitions and growth capital investments remains the same, yet a robust balance sheet plus access to financing lets us complete sizeable transactions whenever opportunities come up. Our M&A pipeline is still very strong. In the first quarter, Adam and his team completed a strategic investment with Mach 2. Diversifying our cash flows and giving Regional One another path to growth has long been our goal. Regional One has established data infrastructure and architecture able to scale into additional aircraft types, and now, with the Canadian North 737 data plus narrowbody and widebody data from Mach 2, together with the seasoned personnel at Mach 2, we can capture significant opportunities in that area.

With 737 and narrowbody operations, we hold the biggest aftermarket parts and leasing business globally, which gives us a distinctive chance to draw on our strengths and generate significant returns for that line well into the future. Regarding further acquisition prospects, our pipeline contains opportunities across both segments that resemble our current businesses. Our foundation of businesses is strong, and whenever we identify ancillary chances to widen our competitive moats, those accretive opportunities always draw our interest. As a reminder about seasonality in our business, the first quarter is our slowest on a seasonal basis, reflecting winter roads and weather-related effects on our air operators, together with softer demand in our Environmental Access Solutions business line in Canada, since frozen ground needs less matting protection. Activity across our businesses peaks in the third quarter, while the second and fourth quarters would come close to the year's average. A solid foundation for the rest of the year was laid in the first quarter. I'll now hand the call to Jake, who will give an update on the second quarter and the rest of 2026 for the Aerospace and Aviation segment.

Thanks, Rich. All in all, we anticipate yet another year of robust expansion in our Aerospace and Aviation segment, since the patterns Mike and Rich described are projected to persist across fiscal 2026. The growth investments we made previously — among them the second aircraft for the UK Home Office, the Mach 2 acquisition, the launch of the Newfoundland and Labrador medevac contract halfway through 2026, and the broadening of the Air Canada commercial agreement — will each add to higher revenues and improved profitability. I'll zero in on the growth drivers by business line. Within our Essential Air Service business line, growth will come from a wide range of factors relative to the earlier period. The largest effect will come from bringing Canadian North in for the second quarter, with nothing comparable in the prior year. We also anticipate that the robust load factors seen in Q1, along with growth throughout our network, will carry on in the second quarter and for the rest of the year. Additional gains include the broadening and extension of the Air Canada commercial agreement, under which the aircraft will begin flying partway through the year. Finally, we look for further growth in our medevac business, among them the launch of the Newfoundland and Labrador medevac contract, which is expected to begin operations in mid-2026.

Continued inflationary pressure on labor, aircraft parts, consumables, and costs overall offsets part of those gains. We expect the aerospace business line to grow, driven by sustained strong flying tempos in the second quarter and through the rest of the year, plus the financial contribution of the second aircraft for the UK Home Office, which will create quarter-on-quarter effects since that aircraft began operations in the fourth quarter of 2025. As Mike said, we're enthusiastic about what we're doing with Air Greenland and the Danish government. Building on our relationship with Air Greenland, they have chosen us as their missionization partners. Some details remain to be settled with the Danish government once it is formed, but we are planning a surveillance program with two aircraft, complete with an integrated ground centre built on CarteNav's AIMS-C4 mission system. Clearly subject to sovereign negotiations, this presents an exciting opportunity in which much of the Arctic and North Atlantic is now covered by nations that use the CarteNav system. What I'm trying to illustrate is a picture in which Canada, Greenland, the UK, and the Netherlands in the North Sea environment are covered by the CarteNav system, operating for friendly nations. That concept aligns directly with our Prime Minister's message of collective defence, shared security, and resilience alongside other Arctic and Nordic nations.

Beyond that, we are actively pursuing several opportunities that are emerging across Canada, Europe, the US, and Asia. Growth is also anticipated in our aircraft sales and leasing business, since the investments in aircraft and engines made during 2025 are being leased out to customers. As Mike mentioned, fuel shortages could pose a potential risk to our lessees. So far, though, we are not aware of any material impacts. History has demonstrated that volatility in the aviation market does create unique opportunities wherever it occurs. Aircraft sales and leasing continues to be an opportunistic buyer and is ready to complete transactions that are accretive to our portfolio. Demand for Regional One and Mach 2 remains robust, as shown by rising lease rates and shortages of critical parts throughout the industry, and we expect that trend to continue. Over the long term, we expect maintenance capital expenditures to rise consistently with increases in adjusted EBITDA in our Aerospace and Aviation segment, which is the largest driver of our consolidated maintenance CapEx. We anticipate an increase over Q2 2025 owing to the inclusion of Canadian North, combined with increased flying from our recent investment in aircraft over the past few years.

To wrap up, we're still putting money into deferred maintenance at Canadian North, and we expect that spending to carry on through 2026. Growth capital expenditures are anticipated in the second quarter as well as across the rest of fiscal 2026. We expect to take delivery of the final King Air for the BCEHS contract sometime around June or July this year. CapEx will be tied to modifying aircraft for the Newfoundland and Labrador medevac contract, plus acquiring aircraft for the expanded commercial agreement with Air Canada, both during the second quarter. Regional One is continuously pursuing opportunistic purchases of aircraft and engines, which could lead to growth investments in the aircraft sales and leasing business. At this point I'll hand things over to Travis for some commentary on the manufacturing segment.

Thanks, Jake. From a manufacturing standpoint for the second quarter and the rest of 2026, we observed considerable momentum across our business lines, as Mike mentioned in his opening remarks. On both revenue and profitability, we anticipate Q2 manufacturing results will be stronger, and that pattern should persist through the balance of the year. Inquiries remain robust in our Multi-Story Window business line. As anticipated, performance has eased during 2026, and on a relative basis that should carry on all year against the comparative periods. Tariffs had an effect on Q1 2026 relative to the 2025 comparative. Worth noting is that the US government's recently announced changes to tariff calculation methods will mean extra costs for goods shipped from Canada into the US. The previous basis was aluminum content; the new basis is the value of goods shipped. Our ability to manufacture windows in the US lets us mitigate those tariffs. We're beginning to hear encouraging comments from various levels of government about spurring affordable housing development via reduced or frozen development charges and quicker approval processes. Additionally, positive signals keep emerging in several regions across the US and in Western Canada.

But builders are still holding back because there’s too much supply of condo units aimed at small investors, particularly in Toronto and Vancouver. For the second quarter and the rest of the year, our Environmental Access Solutions business line should deliver stronger returns. As we closed out the quarter, we kept seeing step-based gains in the count of mats on rent, demand for composite matting is still robust, and the plant is still running at maximum capacity with the vast majority of 2026 output already sold. Our Canadian operations are poised to be a major driver for the business, since we began to see strong results in the fourth quarter from a rental perspective, and that carried on through the first quarter of 2026 and will carry on into the second quarter. Additionally, we expect long linear projects to get underway in the latter half of 2026 or into early 2027 across several industries, including transmission and distribution, pipeline, and oil and gas. The medium and longer term prospects for the business are very robust, because there will be material investments in transmission and distribution across North America owing to growing electricity demands from homes, vehicles, and more importantly, AI and data farms.

For the second quarter and the rest of the year, we expect the Precision Manufacturing and Engineering business line to show improvement on both revenue and profitability, and that's thanks to the significant momentum we've built. This line is quite diversified — it has exposure to the defence industry and to technology industries, which include data farms and telecommunications — and those particular industries are what's driving the growth vectors for this line. As Mike mentioned, certain of these businesses have been getting record forward bookings, and that's going to drive the year-over-year results for the balance of 2026. We expect anticipated maintenance capital expenditures to come in higher than the prior year, driven by the timing of replacement activities given the demand profile for the business line. We also anticipate growth CapEx being incurred across each of the business lines, though those should stay relatively consistent with 2025, with the exception of Environmental Access Solutions. Growth capital expenditures will be outlayed for the new state-of-the-art composite plant, along with further investment in the Canadian rental fleet based on expected market demand. I'll now pass the call back to Mike.

Thanks. We got off to a really solid start in the first quarter of 2026, and because of that I've been able to revise our guidance up toward the top end of the range we shared earlier. My confidence in what lies ahead for this company is very high. EIC sits right where several important themes and trends come together. We've stayed faithful to our principles and to our business strategies, and those are what will keep fueling our success over the long term. Thanks for spending time with us this morning; at this point we'd like to take questions. Operator?

Thanks. We’re moving into a question-and-answer portion now. Should you wish to ask something, press star and then the number one on your touchtone phone. A prompt will tell you that your hand has been raised, and we’ll poll questions according to the sequence in which they arrive. If you’re on a speakerphone, please pick up the handset before you press any keys. Give us a moment, please, while we take the first question. Thank you — the first question is from Matthew Lee at Canaccord Genuity. Please go ahead.

Hey everyone.

Morning — appreciate you having me.

Thanks for letting me ask. Morning, everyone. I realize it's on the early side for this kind of discussion, but considering the momentum you're seeing in A&A and the fact that manufacturing ought to get better sequentially each quarter, has there been any talk among you about lifting that guidance past the $875 range? Is that simply conservatism, or is there something I'm overlooking?

Are there bugs hidden in our office, Matt? There was quite a bit of debate over the correct figure for our guidance. Ultimately, we chose to shift our guidance toward the upper end of the range while leaving the range itself unchanged. That decision had a very simple rationale. Uncertainty in Iran is producing jumps and starts in oil supply as well as in oil prices. Although it has not affected our Regional One business so far, and we see nothing imminent, we did not want to raise our target and then face something dramatic there, which would force us to bring it back down. You're exactly right. The trends you're seeing in our business, it isn't difficult to add up to a number above $875. We'll promise that once the world situation settles down just a little bit.

Appreciate that. My understanding is that you typically pass fuel costs through. If so, what would be the largest risk area that might keep you from hitting or beating that $875, and which businesses do you figure would feel it most?

You've got it exactly right, Matt. Honestly, higher fuel prices barely affect our business at all. We can pass those costs along to our customers, and since what we provide is an essential service, demand stays roughly the same even with fuel price surcharges. Our main worry, I'd say, would be fuel shortages becoming severe enough in some regions of the world that planes stop flying or fly less often — that would cut demand for parts. It's really more about fuel supply in certain parts of the world. In North America, a potential fuel shortage isn't really a concern. We produce enough in North America to take care of ourselves. We don't view that as a problem. It's more of a potential worldwide aviation issue if fuel were to run short.

Matt, Jake here. Just remember that Regional One has aircraft leased all over the world. That's where the exposure lies. Right.

Just to be clear, up to this point we haven't run into any problems.

Correct. We aren't seeing any sign of that — it's really just us being conservative.

That’s useful, everyone. I appreciate that. I’ll hand it over.

Much appreciated, and the following question is from Steve Hansen at Raymond James. You have the floor.

Hi there, Steve.

Morning, everyone, and thanks for making time. Mike, I'd like to revisit what you said about momentum building in manufacturing. You and Travis, I think, offered some solid perspective on that, and record orders came up at one point. My specific question is: what do you believe is behind that? And I suppose the larger question is whether you see it holding up for the rest of the year. The outlook remarks appeared to point that way. I'm simply hoping to grasp the drivers underneath a bit more clearly, and perhaps you could add a little extra context on how things look from where customers sit. Thanks.

Sure. What's fascinating is that, leaving windows out of it, this trend shows up everywhere in our manufacturing footprint. Within matting, the US market is plainly being propelled by transmission and distribution. Utilities need more capacity, and we're only at the very start of that. It will continue for years — possibly decades. I'm not at all worried about how long-lasting it is. In Canada, we're likely about a year and a half behind the US, and those projects are beginning to appear, especially in Eastern Canada. Hardly a day passes without talk of a new pipeline — whether it's the US President discussing pipeline expansion down there, or us heading to the coast with natural gas or bitumen. That's really robust. And when we look at some of our other manufacturers, such as our stainless business, it never previously played any part in data centres. Suddenly, the farms being built are so big that they require actual refrigerant. They used to be cooled with air; now water is what cools them. We're receiving enormous orders to handle that. We've actually reached a point where we're sharing production capacity, since our existing plants can't keep pace, so the window companies have shared some space in both Canada and the US with our manufacturing teams so we can meet the demand.

You're seeing the same thing at our precision metal operation in Ontario, Ben Machine. They're producing components with extremely tight tolerances, and space demand is what's driving it — believe it or not. We're making satellite equipment. It spans everything, and what's interesting is that it keeps speeding up — it's not as if things were already good. Honestly, back in January, I felt it was somewhat sluggish, and I had some worry about our manufacturing business, apart from matting. That has been strong throughout the year. From that point on, it's been one thing after another, and we're scrambling to locate sufficient equipment and sufficient geography in which to place that equipment.

Let me build on that, Steve. Over roughly the past year, we've discussed how strong the inquiry levels have been, and what we observed was that customers kept postponing that decision. I believe there was recently a survey of small and large businesses in the US in which you saw an uptick in capital goods orders during March, and frankly, that matches exactly what we saw. Those inquiries and decisions from the past are now materializing, and we expect that to carry on through 2026, since demand for the goods and services those business lines provide has built up and been held back.

Steve, there are a couple of other forces at play here. One would be what you might call the reshoring of certain production, which ties into what Mike mentioned regarding some of the space work we're doing, but it also involves certain aircraft manufacturers. Compared with before, we now produce a greater share of aircraft parts here at home. The second factor, as we've noted, concerns the data centres and a portion of the manufacturing, yet intertwined with that is our wireline services, where we're observing a growing rise in fibre plowing and long-distance fibre installation, which once again provides the connectivity linking those data farms.

That's really useful, everyone. Appreciate it. I'll get back into the queue. Thank you.

Thanks, and we’ll take the next question from James McGarragle at RBC Capital Markets. Go ahead, please.

James, good morning.

Morning, and thanks for having me on. It's also great to see Garth, Carm, and Marley — congratulations on the promotions, guys. I just wanted to ask how you're thinking about growth as we head into 2027. I'm not looking for 2027 guidance, but on the aerospace side, we have SkyLine, Greenland, further Canadian North integration, and higher returns from the BCE aircraft. Could you help us frame how we should be thinking about growth there? Then on the manufacturing side, we have the new plant, new projects in matting, and the potential for a recovery in windows. I'm just trying to piece all those things together and frame how we should be thinking about the 2027 outlook.

Sure. I'll try my hardest not to cite figures, since we haven't issued 20 2027 guidance, but our outlook for 2027 is genuinely bullish, and the reason is straightforward: the capital we've already put to work. For instance, you'll see the Newfoundland medevac contract delivering a full year of revenue. You'll also see the matting business keep growing. In Canada, I find that really exciting. Visibility is strong once you're bidding projects well ahead of time. We're a major presence in that market. Not every bid goes our way, but we definitely capture our fair share. Given how much we're bidding, I'm quite confident we'll have more mats on rent in 2027 than in 2026, and more in 2026 than in 2025. I see growth in that area. You've got a business that will contribute going forward in 2026 or 2027. The ongoing integration of Canadian North will keep helping as we advance our combi aircraft model and the initiatives we have underway there. I think another item worth touching on — and I'm somewhat surprised we're already seeing it — is that our passenger loads in Nunavut are rising.

Their expansion is outpacing the birth rate, and that's unusual. My sense is this is just the start of something: with the government putting money into the North, people are heading up there — professionals, construction crews, all of that. They fly with us to get there. We're seeing an uptick, and I expect it to carry on. On top of that, we've grown our medevac work. As that business expands, we'll have every aircraft positioned in BC. We're talking with them about adding more routes beyond what we already fly for them. There are plenty of pieces in play. And then, naturally, there's the Air Canada contract too. By that point, all those routes will be operating. We're at a stage where a lot of what I'd describe as structural growth is already funded. Adam doesn't stay idle for long, so I'm fairly confident more will come out of that. I'm not making any promises. That billion-dollar figure is close.

Thanks for that context. I have one brief follow-up regarding the gain on contingent consideration tied to Canadian North. Could you explain what caused that reduction in the earn-out estimate? Was any of it related to a shift in the growth trajectory compared with the assumptions you had at the outset of the deal? Typically, we tend to see that kind of thing when something is going wrong, so any detail you can offer would be helpful.

I genuinely appreciate that question, because without a doubt, the performance at Canadian North has surpassed even the rosiest projections we had when we acquired the business. Things are going really well. We had an earn-out figure tied to securing a contract for the northern charter operations connected to the natural resources side of their business. One of those projects got pushed back, and because of that, the company couldn't sign the new contract, which meant we weren't required to make a payment under that portion of the earn-out. Our acquisition team had flagged this as a potential risk. Now, I don't believe that business has disappeared. We discussed at the time we bought the company that we needed to be sure we were generating profit in the charter operations. I think we've achieved strong progress there since we began. The gain simply stems from one payment we don't have to make, purely because a contract couldn't be signed within the required window for us to owe the vendor. It was a pickup resulting from that contract's delay. This does not in any way signal disappointment or underperformance of the acquisition — quite the opposite.

Grateful for that, and I’ll hand things over now. Thank you.

Much appreciated, and the next question is from Krista Friesen of CIBC. The line is yours — go right ahead.

Hello, and I appreciate you giving me the chance to ask something.

Hello there, Krista.

Good morning. I was hoping we might go a bit deeper on the jet fuel side. Given the contracts you have in place that allow you to pass it through, what kind of lag should we be expecting there?

Correct — we're talking about under 30 days here. In areas such as Manitoba and the Maritimes, where sales mostly happen at market rates, the increase gets passed along as soon as we can notify the customer. Some tickets are pre-sold, so there's a bit of an effect, though it's minor. Under most of our medevac agreements, including the Nunavut one, the fuel price for this month applies next month. A 30-day delay exists on portions of that, yet on the flip side, once prices level off or move lower, we benefit from a 30-day uplift. As you saw in Q1, despite fuel climbing sharply late in the period — between the close of February and the close of March — margin pressure stayed small. For the ISR segment, nearly all of it is invoiced directly to the government. The fuel bills aren't even something we cover; the government handles those payments directly. There is no lag whatsoever there.

That's great, thanks—very useful. So I'm curious whether you could add a bit more detail about how the Mach 2 integration is going. Even though the acquisition only closed quite recently, it looks like things have got off to a strong start. Is there anything more you can share on that front, and on the demand you're seeing? Thank you.

We actually just completed an expansion of our offices at Regional One yesterday, and it's going to let Mach move in with them in that same facility. We're currently working on getting Mach's data into the proprietary database Regional One has built, which is going to help us figure out where to focus. It's really key to grasp that as we start testing the waters in the 737 market, we aren't moving into long-term leasing or anything like that. Those sorts of things are financing plays for banks. What we're doing is acquiring aircraft at the margins that are getting close to the end of their useful life, and we'll begin by dismantling them for parts, and eventually we'll lease out components of them. This is Regional One's model paired with Mach's sector expertise and EIC's capital access. On top of that, we're a natural buyer for certain of those parts through our Canadian North operation. They operate 737s, so the more we purchase from ourselves, the more familiar we become with the market.

Thanks — that's helpful context. I'll hand it over now.

Thanks, and the next question is from Cameron Doerksen at National Bank. Go ahead, please.

Good morning there, Cam.

Thank you, and good morning. Mike, earlier you mentioned that passenger traffic into Nunavut has begun to recover somewhat. What I'd like to ask is how you expect that to develop over the longer term in terms of demand for flights and aviation services in the North. I believe since the previous call, we've seen the federal government announce a fairly sizable investment in new infrastructure, and there's also been some backing for new resource projects up North. Are you now at a point where you're actually in discussions with governments or with prospective resource customers about helping support some of that growth? Do you have any sort of timeline for when activity might pick up more? Clearly you're already seeing improvement, but perhaps a more meaningful increase in activity stemming from some of these investments being made in the North?

Sure. It varies quite a bit. The government side of things is already moving. We're talking with them about several matters — surveillance work, other projects as well. Some items won't be ours to handle directly, such as constructing military bases and similar work. Already we've observed more charter demand in that region. We're holding discussions regarding the iron ore development at Baffinland. Exploration for critical minerals has picked up on Baffin Island, operating out of Iqaluit. It's fairly widespread. It's difficult for me to tell you, well, this is the second quarter of 2027 or anything like that. Some of it will be construction. Seeing it show up in our passenger numbers this quickly surprised me. We didn't expect this. Since we serve enough different locations where it's an essential service, we can compare volumes there with, say, First Nations in Manitoba. Once we identify a market gap in revenue growth, we understand what's driving it. We're only at the start of that. They haven't begun building the new runways they promised, nor the new buildings they promised, nor the military bases they promised. We're not even in the first inning.

The ceremonial first pitch may have been thrown by them, but in this baseball game, that's roughly where we stand.

That's quite clear. If I may ask one brief follow-up, it's about the executive appointments and the shifts in senior management responsibilities. Congratulations to everyone involved, of course. I'm just curious—regarding the reshuffling of duties involving Darwin and Travis, what is the goal? What mandates do they carry in these new positions they've taken on?

As we expand and bring in additional businesses, budgeting, forecasting, and similar matters demand greater financial oversight. Travis possesses an outstanding background in that field, and he'll assume extra duties there. Darwin truly serves as our acquisition whisperer—drawing people into EIC and showing them how to operate within a new conglomerate. Throughout his time here, he has been outstanding, and he'll keep concentrating on that. Operational duties will remain his as well, but we're asking him to take on more regarding integration, while Travis handles more of the numbers, budgeting, and forecasting side. The larger we become, the more Rich—he gets grumpy whenever he receives figures he doesn't anticipate. We're refining the forecasting so we can keep Richie happy.

No, that's completely clear. Thanks a lot for taking the time.

Thank you, and the next question comes from Jeff Fenwick at ATB Cormark. Please go ahead.

Morning, everyone — thanks for joining us.

Good morning to you, Jeff.

Mike, I'd like to begin with maintenance CapEx. You gave us some helpful remarks on that near the start of the call. Looking at the past two quarters, there's a bit of a decline in Q1 compared with where you stood in Q4. I'm simply trying to understand what the right figure is, or whether those are the markers we ought to use for this year. Now that Canadian North is more settled within the mix, have we perhaps arrived at a more normalized level of maintenance CapEx, or how should we approach that?

Yeah, I'd say Q1 came in lower than I expected. The engine slots we managed to secure, along with a few other factors, meant less work got completed in January. I see that as somewhat of an anomaly. The rolling 12s really serve as the better forecasters of what's going on. Q4 was higher. Q2 will be higher once again. We do have some things that will roll through this year that were kind of deferred items at Canadian North. It'll stay elevated for the rest of the year, and Q1 was probably just abnormally light simply because a couple of engine events got pushed since we couldn't get slots — they're sitting on our floor waiting to get overhauled.

Appreciate that. Now I’d like to ask about the Air Greenland deal. You mentioned a relationship already existed with them. Did that involve leasing, or could you describe it for us—and given that relationship, was this a cross-sell opportunity?

Thanks, Jeff. That genuinely represented an opportunity to cross-sell. PAL, simply because of how close it sits to Greenland along the east coast, has handled the heavy maintenance on Air Greenland's Dash 8 fleet for years. With that relationship already in place — and whether the topic was parts or technical expertise built up over time — that is how the conversation got started.

All right. Then I wanted to ask — I noticed an announcement on PAL Aerospace's website regarding some funding received through the Regional Defence Investment Initiative. It wasn't a huge amount, but perhaps you could just explain how that ties into the ongoing discussions, what those dollars were intended for, and how it came about.