Exchange Income Corporation (EIF) Earnings Call Transcript

Thanks, operator. Morning, everyone, and we appreciate you joining today's call. With me are Richard Wowryk, who'll take you through the financial results — the simplest task of the day — plus Jake Trainor; and Travis Muhr, who'll go into more detail on the outlook. We issued our fiscal 2026 third quarter results yesterday. We turned in an outstanding performance. Every one of our key metrics hit record levels — revenue, adjusted EBITDA, net earnings, adjusted net earnings, free cash flow, free cash flow less maintenance cap rate, and capital expenditures — and we also posted records in our per-share amounts and payout ratios, along with our strongest debt leverage ratio in 15 years. We got there by running our subsidiaries really well, and because capital spending from earlier periods is now showing up in what we report. Looking at one period against another, nothing material was acquired that would affect the comparison, and that shows how much operating leverage the business has picked up across its different lines. Given the momentum we have, we think fiscal 2026 will land at the high end of, or above, the adjusted EBITDA range we previously set of $8.90 to $9.20. We put out several company milestones as well. I referred to this quarter as the $1 billion quarter, and there are a few reasons why. We shared our 2027 adjusted EBITDA outlook, and it lands between $1.0 billion and $1.06 billion — that's more than 20% growth measured against the midpoint of the 2026 guidance we originally gave. Q3 also marked the first time we brought in over $1 billion of revenue within one quarter. And finally, alongside our third quarter report, we raised our 2026 guidance for the fourth time, saying we now anticipate coming in at or above the high end of the prior range of $8. 90 to $9.20 for adjusted EBITDA; this quarter likewise brought record highs for both net earnings and adjusted net earnings per share. Considering that our weighted share count rose 8% this quarter—reflecting the balance sheet simplification, sorry, and the shift of convertible debentures out of last year’s financing structure—those record EPS results came alongside an adjusted net earnings ratio of 60%, which is historically strong, and a free cash flow less maintenance CapEx payout ratio of 52%. Finally, our leverage ratio reached 2.64x EBITDA, a 15-year <>. Looking at it, every one of these achievements on its own would be worth celebrating — record results across all per share payout ratio and leverage metrics, which I'll go into, and rising dividends show just how solid our business model and strategy are. On top of that, we're gaining from meaningful structural tailwinds right now, and I'd direct you to our future outlook. In and after the third quarter, we announced a number of highly strategic contracts and acquisitions. With Terra Pro, we're able to capture the exciting tailwinds within the Environmental Access Solutions business line, and combining that with what we've invested in our fleet leaves the business well positioned for 2027 and beyond, as large linear projects are set — are scheduled — to get underway. That transaction additionally provides WesTower with greater diversification, and it enables the team to expand into adjacent industries while strengthening ties with telecom firms and infrastructure participants. Regarding aerospace, we finalized definitive agreements that lock in the service scope for the upcoming air crew training program alongside Skyline. Aircraft modification work should kick off in 2027, and the bulk of modification and missionization services will be delivered during the initial 5 years. Training and in-service support will account for the remainder of the 25-year, $750 million contract. The aerospace business line continues to be extremely active, fielding inquiries and responding to requests worldwide. Our central air services alongside aircraft sales and leasing business lines continued to experience robust demand trends. Within Essential Air Services, we saw broad-based strength across scheduled air service, cargo, charter and BetaBag services. Demand remains robust for aircraft sales and leasing, as well as for its parts, aircraft and engine business. We've directed substantial growth CapEx into that business, and it is delivering the returns we anticipated when those investments were made. Lastly, BOC 2 has integrated very smoothly, and the management teams collaborate closely. That business has also been instrumental in working with Canadian North to secure spare parts and components so that Canadian North can meet the substantial demand it is seeing on its northern routes. Our manufacturing results stood out for strong performance in both Environmental Access Solutions and precision manufacturing and engineering. Demand for our composite mats continues to rise, and production from our current facilities exceeded even our own ambitious forecasts — in fact, the quarter set records. We keep observing market share moving in favor of composite mats across the southern United States. Market demand exists for our new Salto plant, which remains on schedule and within budget. That facility ought to be running in the latter portion of 2027, with its output sold as production ramps later that same year. Within our Canadian operations, appetite for our wood map solutions is substantial, rental counts continue to grow, and rental rates are climbing too. By scheduling the Terra acquisition as we have, we'll be positioned to benefit from the substantial tailwind present in that business line during 2027 and—more crucially—in 2028 and afterward. In addition, booking trends in our multistory windows business line continued to look encouraging. Q3 produced a positive book-to-burn ratio for the third quarter in a row. That said, I want to flag that we remain early in this gate, because three quarters don't prove a longer-term trend—we're still encountering very aggressive pricing along with considerable market weakness in Southern Ontario. To sum up, we had a remarkable quarter, with records set for each key metric, and most of our business lines enjoyed favorable conditions—a promising sign for 2027 and later. Jake and Travis will address segment expectations for the fourth quarter at next year. Right now, however, I’ll turn things over to Rich, who will go through several of the top points from the MD&A and the financial statements. Rich?

Thanks, Mike, and good morning to everyone. I'll share a few highlights from the quarterly key performance indicators, and I'll focus on the balance sheet, capital expenditure investment, and the pipeline of acquisition opportunities. As Mike noted, we achieved third quarter records across all of our key performance indicators, including net earnings, adjusted net earnings, and per share amounts. Those per share records look even more impressive when you factor in that shares outstanding were roughly 8% higher than the prior period, driven by conversion of over debentures as we finished the goal of simplifying our balance sheet. Looking at the balance sheet and cash flow, we saw a recovery of working capital in the third quarter and a net investment year-to-date. We kept making further investments in prepaid and inventory for the aircraft sales and leasing business line during the quarter. Purchases of whole aircraft for resale and growth in parts inventory will support additional part sales, and further deposits were made toward future asset acquisitions; a reduction in working capital across our operations from prudent cash flow management offset these investments. In line with EIC's seasonality, we expect the fourth quarter of 2026 to bring a release of cash from working capital, since the third quarter is our seasonally strongest quarter, which makes the working capital recovery in the third quarter even more remarkable. We also expect whole aircraft sales during Q4 to lower the value of working capital, as those assets were bought for resale earlier in 2026. Aggregate leverage sits at a 15-year total leverage ratio best of 2.64x. Even more impressive, we have delevered while delivering significant per share growth, all while continuing to invest for the future. With more than $2 billion of available liquidity, we are well positioned to pursue acquisitions and invest in our existing businesses while keeping our established discipline on capital allocation. The investments made over the past number of years have begun realizing the returns and the vision behind them. Growth capital expenditures generate free cash flow over time as operations ramp up after the initial capital outlay, and we are seeing the impact of those past investments in our current year results, per share metrics, and payout ratios. In the current year, growth capital expenditures were $210 million year-to-date. The manufacturing segment's growth capital expenditures relate primarily to the Spartan state-of-the-art facility in Saltillo, Mississippi, which will serve as an important growth engine and provide significant operating leverage to that business line to meet market demand. Looking at Aerospace & Aviation, our year-to-date growth capex took in spending on the aircraft sales and leasing business, which made up roughly 30% of those investments, while most growth capital spending went toward our essential air services, with outlays for our BP AHS contract, completion of our full motion King simulator, which is now fully certified and running, aircraft purchases tied to the Air Canada expanded and extended commercial arrangement, funding for the Canadian North state-of-the-art cargo facility, which is now up and running in Ottawa, and assorted growth investments across our air operators so they can add capacity and handle scheduled service and charter demand. Those investments are going to drive cash flow growth down the road. Maintenance capex came in above what we had expected internally at the start of the year, since deferrals from the first and second quarters got pushed into the third quarter. During the third quarter, maintenance capital expenditures came to $95 million for Aerospace and Aviation and $8 million for manufacturing. The rise versus the prior year comparators came from timing, inflationary pressures, higher utilization, aircraft — sorry, higher utilization of aircraft, and expansion of the aircraft sales and leasing fleet. Jake will give further guidance for Q4, but I'd point out that even though we ran above our internal expectations, payout ratios were still at record lows. All these meaningful increases in growth and maintenance capital expenditures will push depreciation higher versus the prior year Q4 comparative, as net book value of assets has risen considerably. Our M&A pipeline is still robust. Adam and his team keep working a number of opportunities in both segments. Typically, the more advanced ones are tangential to our existing businesses and sit in high-growth areas. We have a great foundation of businesses. And wherever we can offer ancillary opportunities that widen our competitive moats, those accretive opportunities always interest us. I'll now hand the call to Jake, who will give an update for the fourth quarter and 2027 for the A&A segment.

Thank you, Rich. We anticipate another robust stretch of expansion in Aerospace and Aviation, since the trends Mike and Rich went over should carry on through the fourth quarter. Growth investments, the MACH I acquisition, the launch of the Newfoundland and Labrador Medevac contract, and the broadening of the Air Canada commercial agreement should all help drive greater revenue and profitability as we close out 2026 and move into '27. Within Essential Air Services, we anticipate revenue and profitability for the fourth quarter of 2026 coming in above the fourth quarter of '25. The biggest factor will be sustained robust load factors plus strength in cargo charter and metaback services, together with the broadened Air Canada commercial agreement, since all but one of the aircraft for that contract have now been deployed. Looking at 2027, we expect these trends to carry on, with operations under the Air Canada commercial agreement reaching full operating tempo and the Newfoundland medevac contract ramping up across the year as well. Partly offsetting these gains are ongoing inflationary pressures affecting labor, aircraft parts, consumables and overhaul costs; in Aerospace, we anticipate higher revenue and profitability in the fourth quarter versus the prior period, driven by the continued strong flying tempo of our fleet aircraft along with modification services on the 2 Air Greenland aircraft, which began in 2026 and will run through '27. As we look toward 2027, the FACT contract should affect operating results while requiring minimal capital investment. In addition, we are still pursuing several further opportunities worldwide in Canada, Europe and the U.S. within the aerospace business line. Aircraft Sales & Leasing should also maintain its momentum in the fourth quarter relative to the prior period. Moreover, revenue and profitability are projected to rise in 2027. And the broader trends match prior periods, as we observe substantial demand for our aircraft on lease with rental rates climbing, alongside robust parts demand worldwide; we have invested considerably in growth CapEx and inventory for Regional One, and we expect those investments to keep generating returns in '27. We do not expect any material end of lease adjustments in the fourth quarter, nor anything of significant magnitude in '27 relative to the third quarter of '26. Maintenance capital expenditures should improve in the fourth quarter versus the fourth quarter of '25 thanks to the timing of maintenance events, since spending was heavy in that earlier year quarter; given OEM part shortages, forecasting when engines will be released from the MRO provider is growing less predictable, which could produce quarter-to-quarter variation as parts get inducted into engines at repair shops. For fiscal '27, we anticipate maintenance capital expenditures rising in line with our EBITDA growth, owing to a couple of factors. First, the shortage of OEM parts is driving up costs for each event; and second, there's growth in our fleet as well as how much we utilize that fleet. Given a larger fleet, including aircraft sales and leasing, we expect higher maintenance CapEx consistent with the fleet base. Growth capital expenditures are anticipated in Q4 for the final units of the initial order of King Air 260 aircraft < > BC EHS medevac contract. We are also taking on extra costs tied to aircraft modifications for the Newfoundland and < > Medevac contract, and we are forecasting opportunistic purchases along with aircraft sales and leasing to satisfy strong demand. I'll hand things over now to Travis for his commentary on the Manufacturing segment.

Thanks, Jake, and good morning. Looking at manufacturing, we expect Q4 revenue and profitability to exceed the year-ago period. We also expect revenue and profitability in fiscal 2027 to increase over fiscal 2026, backed by continued momentum, industry tailwinds and growth investments, particularly in Environmental Access Solutions and the precision manufacturing and engineering business lines. Environmental Access Solutions should produce better returns in the fourth quarter than the prior Q4, and 4 factors drive that: robust demand for composite matting solutions in the U.S., strengthening rental rates in Canada, a higher number of mats on rent in Canada and the Terra Pro acquisition. When we look forward to fiscal 2027, the trends we anticipate are much the same. The reasons are the favorable industry conditions in Canada and the completion of our composite mat facility in Saltillo, Mississippi, where output should begin in the fourth quarter of 2027. Demand drivers over the medium and longer term still look encouraging to us, coming from transmission and distribution, from pipeline work, and from oil and gas activity, and our confidence in this business line and its operating prospects is very high. In multistory window solutions, inquiry levels and booking levels remain strong. As Mike noted, this marked our third quarter in a row with a positive bookings-to-burn ratio, and these results encourage us. That said, the landscape is still very competitive, and at this point we aren't reading the trend as evidence that the whole industry is bouncing back, because conditions remain weak in the Southern Ontario condo market, which used to be our biggest market. The team deserves credit for doing a great job of diversifying both geographies and end markets — whether that's serving client hospitals, long-term care homes, student housing or government institutions. Revenues and profitabilities came in where we expected internally and matched the prior year, and we anticipate that continuing into the fourth quarter of 2026. Looking at 2027 compared with 2026, we're expecting a slight improvement on both the revenue and EBITDA fronts. For Q4 2026, we expect Precision Manufacturing & Engineering to see a modest drop in both revenue and profitability versus Q4 2025. The reason: our hydronic heating solutions subsidiary posted an exceptionally strong quarter in 2025, since most of our annual production shipped that year and the revenue was recognized in that fourth quarter — and on top of that, customer orders were deferred because of the Section 338 tariffs put in place in August 2026. The rest of the businesses are performing very well, and we're still seeing strong inquiry and booking trends, with exposure to appealing end markets including aerospace, defense, telecommunications and data farms. For 2027, we expect the business line to see modest expansion in both revenue and profitability. Regarding tariffs, our reports have noted that aluminum duties are still weighing on multistory window solutions, and the 338 tariffs hurt our dryer subsidiary by prompting customers to temporarily hold off on orders. That said, we are actively pursuing mitigation in both of those businesses. Even so, we're pleased to share this morning that the 338 tariffs connected to dry Air have indeed been removed from the HST codes, and our subsidiary is actively contacting customers to identify any orders deferred this year. Maintenance capital expenditures should come in above the fourth quarter of 2025, mainly because of timing and anticipated demand across the business lines. For 2027, we expect maintenance CapEx to exceed 2026, largely owing to investments in our Environmental Access Solutions from growth in their rental fleets and the timing of yellow iron replacement. Growth capital expenditures are anticipated in the fourth quarter of 2026 and for fiscal 2027, chiefly connected to the new composite mat plants and further Canadian rental fleet investments given our strong outlook on that business line. I'll now hand the call back to Mike.

The third quarter came in very strong and carried forward the good momentum from the first 2 quarters. We saw a lot of records during the quarter, and when you put together those record per share figures with a leverage ratio that is the best in 15 years and record payout ratios, it all shows just how strong operations are across our different business lines. Those records together demonstrate the fundamental strength of our business model, along with macroeconomic trends that are giving tailwinds throughout the entire business. That strength has let us set an adjusted EBITDA range of $1.0 billion to $1.06 billion for 2027, which is a significant milestone for EIC. I should note that this guidance does not include any unannounced contract wins or unannounced acquisitions; anything like that would come on top of the guidance we provided. I continue to be extremely confident about the company's future. EIC sits at the intersection of a number of important themes and trends. We have stayed true to our principles and our business strategies, and those will keep driving our long-term success. Thank you for spending your time with us this morning, and now we would like to open the call for questions. Operator?

I simply wanted to inquire about your M&A strategy, especially since your balance sheet is in such a strong position. You essentially have more capacity than at any point before when it comes to pulling off a sizable deal. So could you give us an update on the pipeline? And a lot of your recent deals seem to have had strategic alignment with an existing unit. But has your thinking shifted at all on possibly pursuing something outside of aviation or manufacturing?

Certainly. The pipeline as such, I'd call it robust. You're exactly right that most of the things we've announced, Teinver, what we're already doing. And generally speaking, I think that's what you'll see through the rest of '26 and '27, and we're in discussions on a number of opportunities. Nothing has reached a stage where it's announceable, or I would say so, but I'm optimistic that we'll have something to talk about. As for going outside our current sweet spot, we're always willing to look. We didn't know we loved the matting business until we saw it with Northern Mat and then the Spartan. So we are prepared to be creative. That said, I think our focus will mostly stay within what we're doing unless we find something we really like. But one thing that's really exciting for us is that because we're not the guys who pay so much that we convince people to sell purely on price. We need to make it easy for the vendor to sell to us. And sitting with $2 billion worth liquidity, at the same time, as your leverage is at a 15-year low, lets us be able to do deals without having to tap the equity market; so there's not impact; and as a result, the transactions are more accretive and will still stay way below our historical trends for leverage. It's about discipline and not paid too much and not financing too much in terms of our pay down of debt; that we've experienced, we're in a position to really grow on a very accretive per share base.

Thanks for that detail. Now a quick follow-up about Regional One. Clearly, results there came in quite strong. So is there anything that looks like a one-off? I'm just trying to get a sense of how sustainable that might be as we move into 2027 and look a bit further out, and then I'll hand the line over.

Regional One is, to put it plainly, on fire right now. They're extremely busy. Globally, there's an engine shortage. So anyone who can help fix those problems is sitting in a great position in the market. On your question about whether any one-offs exist: the way Regional One's business works, every transaction is unique. We < > where we bought a fresh aircraft and then sold off its engines. That's not a routine thing for us. There was revenue from lease returns. That happens from time to time, not every quarter; but nothing is outside the ordinary course of business. You'll see that this quarter, in fact, the — the top line isn't large for our was since we didn't sell as men large aircraft. We saw engines, we leased engines. We sold parts. And so earnings were quite good. EBITDA was strong. Revenue was modest. And that is going to vary, and it will continue to vary. But nothing in the quarter falls outside the core business we operate. Regarding sustainability, I would advise not concentrating too heavily on the EBITDA margin. If we sell an aircraft for $10 million or $12 million and earn $1 billion from it because we turned it around quickly, that represents an excellent $1 million gain, yet that EBITDA margin is significantly below the 40 points we would achieve by selling parts. Therefore, when building your model, I would emphasize the total EBITDA figure rather than the percentage of sales. There are 2 of the 6 additional points I want to mention. First, in addition to the profitability Regional One has generated, it has provided us with a strong hedge regarding maintenance capital on our aircraft. We're facing a scarcity of engines, and overhaul providers are taking longer to return them, yet how effectively they resolve these issues for our carriers has been crucial — both in shaping our cost structure and in delivering reliability. Last, I want to mention < >. It has progressed just as we anticipated. They're merging into our operating sales at Regional One in Florida, which is really exciting. Still, we've proceeded cautiously when it comes to acquiring assets and expanding the 737 components in our portfolio. It makes me really happy to share that last night I put a capital request on my desk to purchase two or three 737s. So instead of just dipping a toe in the pool, we're now dipping in the whole ankle. You'll see us build that up over time. But we're excited, since it gives us an additional product line to grow.

Normally I’m not one to offer congratulations on quarters, but with these milestones I’d say it’s pretty justified here. So congrats. I just wanted to spend a minute on the matting business. You mentioned utilization rates and pricing beginning to move. I realize we’re still early in the cycle. But thinking about the cadence, or the sequence, of that ramp—if I recall prior comments, you said late ’26 would be the starting point for some of the obvious points of the cycle. Where are we, though, for the next 12 months in terms of ramp-up? Are we still in early innings? And how confident do you feel about that outlook?

I’ll hand that over to Travis.

Yes. That's a great question. Yes. So we're seeing a meaningful ramp-up when it comes to how many mats are on rent. So we're looking at mats on rent that are equivalent to the numbers back in 2023. And together with that, you then begin to see expansion in rental rates; so we're genuinely excited as we move through 2027 and into 2028 with some of the longer-term linear projects coming online. And that really will drive some of the operating leverage and really drive results down to EBITDA into net earnings from that perspective. So we see plenty of projects underway and coming, especially starting next year and in the latter part of next year and then even growing further into 2028. So a very, very strong viewpoint on that business.

I guess the main thing I would mention is the Terra Pro acquisition — they're terrific people, solid customers, and a strong company overall. Still, a major reason we were interested was really just getting access to inventory. The demand we're seeing come into that business is going to call for more and more matting. And right now the lumber industry in BC is sluggish, and only a very small share of the trees they harvest are large enough to yield timber for matting. One thing we've noticed somewhat, and are simply seeing more often, is possibly shortages of that supply. We're the largest provider and consumer of that type of product, which gives us an enormous competitive edge. As it grows scarcer, we get better at sourcing it, and that lets us expand our fleet faster. So TerraPro gave us a real boost, and going forward we'll keep investing to grow the matting as quickly as we can produce it.

Great, that's helpful. One brief follow-up on the payouts. Clearly, we're approaching attractive levels relative to where they've been historically, and we're beginning to think about next year — at the moment everything is being viewed on a trailing basis — but is there a chance we could be below 50% next year? Is that how you frame the capital allocation approach? Or how are you thinking about that payout going forward?

Yeah. I mean, when we announced the dividend increase last quarter, I believe we arrived there sooner than some had anticipated. And our message was that we could take that step while bringing our payout ratio down; and this quarter shows it. We had the Q3 dividend raise from last year following this year's Q2, and it keeps declining. We absolutely expect that ratio to go under 50% before long. And honestly, nearly as significant is the net earnings payout ratio dropping beneath 60. Looking back before coin, we set 50 and 60 as targets. My view is that 2027 is when we break through both; however, I don't believe we'll stop there—dividend growth will carry on, and that 5% CAGR is something we take pride in. Unless our business shifts in some way, I don't expect that to change. Yet we could keep expanding while simultaneously cutting back on the capital we allocate to the dividend.

My question concerns the 2027 outlook, which clearly looks quite favorable. Mike, you mentioned that no potential major new contract awards are included in your assumptions. I'd like to know if you could describe what you're observing, particularly in aerial surveillance and on the defense side, regarding the pipeline of new contract opportunities. And supposing you did secure a few of them, might they affect 2027 and provide upside compared with your guidance, which obviously remains fairly strong as it stands, yet it appears there could be potential upside should you win some of these contracts?

Let me give this a try — and if I get something wrong, Jacob, < > didn't set me straight. The first thing I'd highlight about the maritime surveillance business is that over roughly the past 18 months, there's been a shift away from RFPs. Those take too long, they're multiyear processes, and clearly governments around the world want to move faster than that; so they lean toward negotiated discussions, since these may not be sole sourced. They could be negotiating with more than one party. So I wouldn't claim we have a large number of RFP efforts in progress. We do have numerous negotiations underway, though. There are talks happening with the Canadian government. Discussions are also taking place in two or three European nations—I can't disclose which ones because of an NDA. We're also talking about growing our Middle East operations, so I expect a few of those deals to be granted within the coming couple of quarters. We accept that not every one will go our way, but it would shock me quite a bit if we came away empty-handed on some of them. Another point worth making: the nature of what we're negotiating varies greatly from one case to the next. Up in Canada, should we take on that work, the model would closely mirror our East and West Coast operations — we own the aircraft, they direct us to the locations to monitor, we perform the monitoring, and then we bill them for that service. That means heavy capital outlay with a strong return. That said, there will also be chances like Greenland, where we're constructing a plane and selling it to them, meaning no capital of ours is tied up. Instead, we get tail revenues from trading, maintenance, and similar streams. So I think you'll see a mix of both types of projects.

Yes, definitely. Mike raised a good point about capital intensity in some of these areas, and it differs depending on the situation. When we own the aircraft we operate and provide a service, that usually means high capital involvement, which is to say we have to purchase the aircraft and fly it to locations where we are either modifying it, providing integration, or delivering services to manage the data. That said, it is low capital work with attractive margins, or it could be something like future aircrew training, which is a large contract where we have no capital, or very limited capital, required to execute it. So once again, we are making sure we maintain a balanced portfolio and keep watch on the capital we are committing, and as Mike said, we have a very robust pipeline across all segments.

All right, that's excellent—really useful. Perhaps just a single quick follow-up on, I suppose, capital as we think about 2027: I'm considering growth CapEx. Could you maybe speak in a directional way about what you're seeing for 2027—I mean, which major projects are on the books right now that will drive growth CapEx beyond the guidance, and obviously the new matting plant being completed, but is there anything else at a large scale that we should keep in mind when we look toward 2027?

Yeah. I can't recall a year when fewer programs were underway; we've wrapped up a lot of things. Our simulator is finished and it's simply performing incredibly at Winnipeg—we're training ourselves, and we're going to train others. The softer appliance will be complete about mid-way through the third quarter of the year. I think where, frankly, most of our money will go is into things that fly, whether that's growing our fleet in the essential air services or the medevac services. We're quite close in negotiations with the government in Nunavut on a long-term extension of that contract, and my expectation is that we'll win it; we've put a lot of money into it because the government wants more from us, which makes us very happy. And then probably the largest use of capital is Regional One. We've watched that company grow more than tenfold—that's remarkable. We've owned it only since 2013 and we're over 10x the size. And when Hank and his team spot opportunities—I mentioned earlier on the 737 front—that's sort of the new horizon for us. We'll go slowly; we'll make sure we don't overpay. We won't chase. But as we build our customer list and do more in terms of where we'll put the parts, you'll see us invest in that. And it's very much—for those newer to our story—it's very much like what we did in every < >, if you go back 10 years ago at Regional One, it was essentially a Bombardier company. We did big turbo props, maybe a bit of the ATRs as well from Europe, but the CRJ product line. We dipped our toe into the ERJs; we helped a couple of U.S. institutions liquidate some fleets. And now we probably do more dollar value in Embraers than in any other aircraft type. And I think you'll see that happening over time in the 737 and perhaps other wide bodies have talked about that in the future.

If I could add just one further point regarding manufacturing—and this matters to a much smaller degree, and leaving the Spartan expansion aside—we are observing, or at least financing, expansion at 5 or more of the manufacturing companies we own in order to satisfy the demand we're seeing in the market. So once again, that simply offers some indication of the tailwinds we're encountering, or our manufacturing portfolio as well.

Mike, and team, congratulations on hitting billionaire status. So, first thing, I suppose —

Getting Konark past the $1 billion mark.

Yes, absolutely. Congratulations on reaching that strong performance milestone. So, starting with the '27 guidance, I mean, I understand you're starting at $1 billion-plus right here, and as you perhaps secure additional contracts and then maybe complete more acquisitions or something, you'd likely move up from there. But honestly, the starting point is approximately $100 million plus growth from '26, and based on what I'm hearing today, it sounds like you folks are still ramping up the contracts, whether that's Air Canada or even like B.C. perhaps, and then you've got matting opportunities ahead of you, manufacturing businesses are doing well too, right? And also I believe the windows business seems to have turned around on EBITDA for the first 5 in 3 years, at least on profitability. Are you more bullish on one segment versus the other in '27 when it comes to EBITDA growth? Or should we expect something more balanced this time?

I think it's — honestly, I can say that 2027 is strong across the board. But I do believe some businesses can flex faster, torque faster. I think you see that in matting, and I think you see it in the Regional One businesses. Those are the ones that can change most quickly. That said, I don't want it to sound like the other businesses don't have opportunities—just some anecdotal examples: the steel plant business is so busy that SFI is opening a second facility across the seed in a large leased warehouse; we've added a new facility in B.C. for our precision battle team there. Our control group in Winnipeg has built a new facility. So opportunities exist across the board. We're going to see revenue growth in the windows business. Margins remain tight there. So it will improve, but we're early in the game. What's exciting is that the American market is getting better. We're doing commercial work. In fact, we put in additional manufacturing machinery over in Dallas so we could handle the demand we anticipate ahead. Everyone's thrilled, and I'll discuss windows the same way I addressed < > once we begin seeing Southern Ontario bounce back; as of now, that recovery hasn't gotten underway. So things have gotten better on the windows side in every region except our main market. Hopefully that addresses what you were asking, but the gains are fairly widespread.

Yeah, absolutely. Thanks for the detail there; and then I think in your disclosures, when you gave guidance for '27, I think you said you're assuming contract renewals in '27 as part of that guidance. Are there any particular contracts, especially the large ones coming up for renewal next year, that we should be watching? And would that be a competitive process?

A few of them are. What I'm attempting to address with that, Konark, is stuff we've held for several periods and that continues on. I don't want to mislead the market so that when we announced we'd secured the renewal, it came as a shock. So it's status quo. If there are things that are highly competitive, we'd let you guys know about that. But what I'm really referring to there is blocking and tackling, the everyday routine. We've got work we do for the courier companies. We've got freight contracts in the North. Things renewed in the normal course of business is really what I've tried to address there.

Understood, alright. So nothing specific stands out there. Great; and this last one is mine before I hand over. On the ISR opportunities, I think you all have been talking about Canada, the optic, for some time now. I know at this point it isn't an RFP. And you folks are, I'd say, in discussions with the government up there. What does the process look like right now? I mean, is there too much going on. Too many things demanding answers, I'd imagine, for the Canadian government and niche building and difference and a lot happening at present. Are they too distracted to focus on this opportunity? Is there some technical hurdle we're still trying to get past?

Konark, I'll handle that one; and I believe you framed it — put it accurately — in saying they've got plenty of irons in the fire; and you can picture, given how much capital is pouring into the segment, given how much activity there is, and, as you phrased it, nation-building plus other sizable procurements. What we're seeing once more is governments having to shift toward a procurement model they haven't used in 15 or 20 years, and that demands sweeping change at the bureaucratic level. Even though politicians and the public want things to move fast, you still run into a constraint: the procurement machinery has to be worked through. So I think this is something common that we, along with many other government suppliers, are encountering — simply how slow the process is. That said, I have to give the government considerable credit, since they've set up a new defense investment authority. They’re also involving another Crown corporation, Canada invests, in the effort. So they are working to take concrete action — and they do see this constraint — but as I said before, it will require some time.

Let me try to approach your last question from a slightly different angle. Given the federal government's emphasis on northern defense and nation-building projects, where do you think the first concrete benefits will show up, relative to Northern Aviation? Would that be the ISR matting side of the business, and is any of that reflected in your '27 guidance?

Yeah. We're already seeing it in our aviation segment. Think about how many projects they're considering up in the far North — runway extensions at rent and new facilities being constructed. People are heading up there, professionals, to get those projects underway. Work hasn't begun yet, so there's more coming, but we are certainly seeing it in load factors up North. The second place I'd say we've seen it is in the very clear appetite for nation-building projects. And it's not only at the federal level. I believe the election of the new government in B.C. will be very helpful for fast-tracking some of those projects. Another example I'd mention, just anecdotally, is LNG 2 moving ahead. That's a significant piece for our aviation business. We fly a lot of workers in for that. So the things we already know about are baked into our guidance. We expect higher volumes on the airlines — that's in our guidance. We expect more < > — that's in our guidance. Big projects we haven't won yet are not in our guidance. So there's upside to the $1 billion guidance we provided. One thing — I want to step back for a moment — it speaks to what you're doing with Gary: we've demonstrated over the last 2 decades that we're a good compounder. And we're a good compounder because we invest in our subsidiaries. A lot of this team are great companies — but IC success is much more than that; it's acquiring these great businesses, but then putting money into them; and we've consistently told the market. Here's what we will do based on what we've already invested. As we invest more, we'll update you on future growth. So as it relates specifically to your question: the things we've laid out are in the model. If we were to do something else — if, just as an example, the whole Southern pipeline that Trump wants to build gets built — that would be incremental to this.

All right, great. I'd like to shift topics. During this reporting period, a few of the other companies have called out fuel costs sort of sneaking up as the geopolitical situation continues to drag on. I understand that most of your aviation exposure gets passed through with a brief lag. But are you noticing fuel or related costs anywhere else in the business that can't be fully recovered? And is there anything else on the cost side we should keep in mind for 2027?

Yes, we are seeing it — first of all, we do see it, but it isn't material. We're noticing it somewhat where certain of our operations use diesel, be it the matting business or our tower construction business. But again, wherever possible, we pass that along to customers, maybe through fuel surcharges; yet for the most part, on our aviation side, that higher fuel expense is offset by pass-through contracts.

On the jet fuel issue, I think one factor behind our strong Q3 results is that we absorbed the hit during the last 30 days of the month when fuel prices spiked; ultimately, we will recover that; but we do take short-term pressure on our margin because our contracts either pass it through in the next 30 days or the next 90 days. So when rents rise fast, it hurts us. It will hurt us in October as well; but on the flip side, when these things come off, we are going to get a benefit because we get to charge the high price for 30 to 90 days. So over the long run, it is not relevant; in the short run, it creates a little noise.

Right. The one other point I’d make is that with fuel surcharge rising more and more, we generally don’t apply a margin on that surcharge, mostly to 3. As a result, you’ll see some compression in EBITDA margin, since revenues are clearly higher without matching earnings.

Yeah, the EBITDA dollars — the percentage there is a bit lower, since fuels went straight past last year.

Congratulations on the quarter. I have one more question about the announcements coming from the government. Do you see a lot of opportunity for you in the productivity mega deduction? And does that perhaps lead you to consider extra investments you wouldn't have been ready to make previously?