Exchange Income Corp
TSX:EIF
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Good morning, ladies and gentlemen. Welcome to Exchange Income Corporation's conference call to discuss financial results for the 3-month period ended March 31, 2018. The corporation's results, including MD&A and financial statements, are available via the company's website or SEDAR.Before the call is turned over to management, listeners are cautioned that today's presentation and the responses to questions may contain forward-looking statements within the meaning of the safe harbor provisions of Canadian Provincial Securities Laws. Forward-looking statements involve risks and uncertainties and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such statements.For additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements, please consult the MD&A for this quarter the Risk Factor section of the Annual Information Form and Exchange's other filings with Canadian Securities Regulators. Except as required by Canadian Securities Law, Exchange does not undertake to update any forward-looking statements. Such statements speak only as of the date made.Listeners are also reminded that today's call is being recorded and broadcast live via the Internet for the benefit of individual shareholders, analysts and other interested parties. I would now like to turn the meeting over to the CEO of Exchange Income Corporation, Mike Pyle. Please go ahead, Mr. Pyle.
Thank you, operator. Good morning, everyone. Also with me are Carmele Peter, EIC's President; Tammy Schock, our CFO, who will review our financial results in greater detail in the few moments; and Dave White, our VP of Aviation. We are happy to be with you this morning to discuss the first quarter results for 2018 and to update you on a number of initiatives, which will enable us to continue to grow in the future.We had a strong first quarter with a 20% increase in revenue, a 25% increase in EBITDA and a 55% increase in net earnings. But that's only part of the story. As a public company, there is significant focus on the most recent financial results. But as a management team, we focus most of our time on the longer term. What makes this quarter so significant is the number of acquisitions and initiatives which have been completed or initiated. It is this longer-term focus, which has enabled the company to grow profitably over the last 14 years and will facilitate further profitable growth in the future.Tammy you go into our financial results in greater detail in a few moments, but here is a quick overview of the metrics. Revenue grew 20% to $266 million. EBITDA grew 25% to $54 million. Net earnings rose 55% to $8.6 million. Net earnings per share increased 50% to $0.27. Adjusted net earnings jumped by 64% to $0.41 a share. The trailing 12 payout ratio improved to 69% from 71% when calculated on a free cash flow less maintenance capital expenditures basis and to 77% from 82% when calculated as a percentage of adjusted net earnings. Both of these improvements were in spite of a monthly dividend increase in the first quarter. Revenue and earnings and EBITDA were all first quarter records for the company. Since the middle of the fourth quarter, we have completed 2 acquisitions. Quest and Moncton Flight College and made a significant investment in a third, Wasaya Airlines.MFC closed during the end of the first quarter and Wasaya closed subsequent to the end of the quarter. So their impact on the first quarter results were not significant. Quest, however, closed in November and its results show why we are so excited to add it to the EIC family. You will recall that when we announced the purchase of Quest, we stated the additional $85 million purchase price of the company was based on an annual historical EBITDA of $15 million. The purchase price could rise to $100 million should certain performance targets be met. The contributions from Quest have exceeded our most optimistic forecast. In the quarter and a half, we have owned the company, it has contributed EBITDA over $10 million. While profitability does vary from project to project and therefore simply extrapolating these results may not provide an accurate forecast for the year. It is safe to say that the company is performing very well and is expected to generate full earnout to the vendors long before the new plant opens.One of the key strengths of the Quest transaction was the size of the order book when we purchased the company. At over $200 million, it ensured that the plant would be busy and would generate reliable revenue. In the 6 months we have owned the company, we have seen growth in the order book, and I'm pleased to tell you that it has now reached $300 million. There are many opportunities for the company that we have not been able to act on because of our capacity limitations. We have therefore decided to open a second manufacturing location, which will be located in Texas and will more than double our manufacturing capacity.We expect the capital cost for the facility to be approximately CAD 20 million and for it to go into production in early 2019. We announced and closed the acquisition of Moncton Flight College in the first quarter. MFC is one of the world's leading flight schools offering intense pilot training in a university-like setting, allowing pilots to achieve full certification in approximately 1 year. The extent of the worldwide pilot shortage has been well covered in the media. As recently as last week, [ Emirates ] airlines announced that they will be grounding 20 wide-body jets until at least September at least partially because of the shortage of pilots. The pilot shortage is driven by both fleet expansion and retirement of existing pilots. This shortage is expected to continue for several years at least. The situation in Canada is likely to worsen as Transport Canada has announced plans to shorten pilot work days to reduce fatigue and improve safety. The acquisition of MFC is desirable as a profitable standalone entity with robust growth prospects. It also provides an [ internal ] source of pilots for our airlines. We completed the transaction with Wasaya where we took an equity position to recapitalize the airline. This has increased our reach into Northwestern Ontario, has improved our relationships with the First Nations in this area and will enable Wasaya, as well as EIC wholly owned airlines provide a better, more integrated service to the customer with enhanced schedules, utilizing combined resources will in time improve both the efficiency of both operations.We completed a new $1 billion credit facility with an extended term, more flexible covenants and a reduced interest rate. Tammy will discuss this facility in greater detail in a moment. But I want to briefly focus on 2 things. Firstly, the new facility, with a syndicate of 11 banks, provides EIC with access to capital to move quickly with ever suitable opportunities uncovered. Our syndicate was very supportive of our business model, and in fact, offered a larger facility that we have chosen to accept. Several syndicate members have financed EIC for over a decade and others since inception. The precision of facility that is a third larger than our previous facility with greater flexibility and lower pricing, there is witness to their support of our business model and the results we have generated. Secondly, a larger facility does not signal a change in our attitude toward leverage. We have maintained a strong balance sheet with conservative leverage and substantial liquidity since our inception. The larger $1 billion facility simply provides flexibility to move quickly on an acquisition, share buyback or other opportunities should they present themselves. Our attitude towards leverage has not changed since inception section and it's not changing now.I will now hand the call over to Tammy for a more in-depth look at our financial results.
Thank you, Mike, and good morning, everyone. Consolidated revenue for Q1 was $266 million, which is up $43.5 million or 20% from Q1 last year. Of the increase, $12.8 million was generated in our Aerospace and Aviation segment and $30.7 million in our Manufacturing segment. The Aerospace and Aviation segment generated $189.8 million in revenue, an increase of 7%. Revenue in the Legacy Airlines and Provincial increased by $12.3 million or 10% and this reflects increased volumes and therefore passenger revenues in the Manitoba and Kivalliq markets. The benefit of Kitikmeot medevac contract and increased charter revenue as a result of increased capacity provided to our Legacy Airlines by Provincial. Provincial's revenue was positively impacted by the acquisition of Moncton Flight College, activity in Air Borealis and higher modification and service revenue. Revenue generated by Regional One was essentially flat in Canadian dollars. Revenue generated in U.S. dollars was up by 6%. The increase was driven by growth in sales and service revenue and included the sale of the larger aircraft of CRJ700 during the quarter. Lease revenue decreased by approximately $3 million in the first quarter. The decrease is associated with some of the recently purchased CRJ900s being in between leases, as leases that were in place at the time of the purchase have expired and are now being remarketed. Manufacturing had revenue of $76.2 million, up 68% or $30.7 million from Q1 last year. The largest contributor to the increase is Quest, which was acquired on November 14, 2017. Also contributing to the increase is the collective growth in all of our other manufacturing entity.Consolidated EBITDA was $54 million, up 25% or $10.7 million from quarter 1 last year. The growth was driven by organic growth and acquisitions in both of our operating segments. EBITDA in our Aerospace and Aviation segment was $46.7 million, up 9% from the prior-year. EBITDA contributed by the Legacy Airlines and Provincial increased by $5.9 million or 29%.The increase is driven by increased revenue and the benefit of aircraft purchases in previous periods by synergies obtained through capacity sharing and reduced third-party charter costs and other operational efficiencies. Costs in our aviation businesses continue to be impacted by increased fuel prices. However, the impact of this to our earnings has been largely mitigated through our ability to adjust pricing and contract that pass through fuel cost to our customers. Regional One's EBITDA in U.S. dollars was $16.8 million, which is consistent with Q1 2017. The stronger Canadian dollar and cost incurred in Regional One's Canadian operation, which are associated with servicing EIC Canadian Airline resulted in a decrease in EBITDA in Canadian dollars of about CAD 2 million. In the Manufacturing segment, EBITDA grew by 166% to $12.5 million. The acquisition of Quest drove $7.3 million of this increase. Quest's first quarter performance is ahead of the expectations that we set when we did the acquisition. EBITDA from the remaining entities in the Manufacturing segment was also up in comparison to the prior year. Foreign currency rates did create headwinds for us in the translation of our foreign subsidiaries into Canadian dollars. Had we used exchange rates that were consistent with those prevailing in the first quarter of 2017, EBITDA would have been about $1 million higher. Our Canadian subsidiaries also have exposure to the U.S. dollar; however, because there are a variety of U.S. dollar inflows and outflows, such as cost associated with aircraft parts and U.S. dollar revenue contracts that certain subsidiaries have the net exposure in relation to our Canadian subsidiary is not typically large, and it is not this quarter either. So the decline noted above is flowing from the translation of Regional One and Stainless.We reported net earnings of $8.6 million or $0.27 per share. These compared to net earnings of $5.6 million or $0.18 per share in Q1 2017. Earnings per share reflect an increase of 1% in the average shares outstanding during the quarter. The improvement was driven by factors that I have already cited including the strong performances of both of our operating segments. Interest costs increased by $3.3 million as a result of increased benchmark interest rates and an increase in our outstanding debt. Depreciation increased by $3.7 million as a result of capital assets purchases through 2017 and also the amortization of intangible assets has increased by approximately $2 million, primarily to the intangible assets that we recorded when we acquired Quest. Income tax expense decreased by $300,000 and the effective rate of tax decreased to 19.5% from 29.7%. We have had a shift in earnings between tax jurisdictions that positively impacted income tax expense and we also benefited from the reduction in U.S. tax rates that was passed at the end of 2017. On an adjusted basis, net earnings were $12.9 million or $0.41 per share for Q1 2018. This compares to $7.8 million or $0.25 per share for the comparative period. Adjusted net earnings exclude the amortization of intangibles, net of taxes, which have increased as a result of the acquisition of Quest. With Quest, we acquired a significant order backlog.We use both adjusted earnings based payout ratio and a free cash flow less maintenance CapEx based payout ratio to make decisions around our dividends. Our trailing 12-month payout ratio on an adjusted earnings basis was 77%, down from 82%. This improvement reflects the increase in adjusted earnings, which was in excess of our increase in our dividends. Our free cash flow less maintenance CapEx payout ratio trailing 12-month payout ratio improved from 71% to 69%. Free cash flow for the quarter was $40.6 million, up 20%. Free cash flow on a per share basis was a $1.29, which is up from $1.09 per share last year. Investments in the maintenance of our capital assets, which is primarily aircraft-related assets, increased by $3.3 million in the first quarter to $30.8 million. $7.9 million of this total is related to depreciation on Regional One's portfolio of aircraft and engines, which is in line the first quarter in 2017. The Legacy Airlines and Provincial had $21.5 million in maintenance capital expenditures. We have continued with our strategy of completing as much maintenance as possible during the seasonally slower first quarter. In the first quarter of 2017, the bulk of our maintenance work related to large aircraft maintenance; in 2018, a significant portion of the work was related to scheduled engine events. Growth capital expenditures during the quarter totaled $2 million. We do not expect growth capital expenditures to be lower in 2018 overall. At the current time, our planned expenditures for the remainder of -- I should say, we do expect our growth capital expenditures to be lower for -- in 2018 overall. At the current time of our planned expenditures for the remainder of 2018 includes the new plant in Texas for Quest and aircraft and ground facilities for Kitikmeot service at medevac contract in the Baffin region of Nunavut. During the quarter, we completed our acquisition of Moncton Flight College. The purchase price includes an initial payment of $25 million and an issuance of common shares valued at $6 million, plus a multiyear earnout as certain performance targets are met. The maximum earn out that can be achieved is $20 million.Subsequent to the quarter-end in April of 2018, we completed our partnership transaction with Wasaya Group. EIC has invested $25 million in Wasaya, of which $12 million as an equity investment and $13 million as a loan. During the quarter, $2 million of the $13 million was funded with the remainder being funded subsequent to quarter-end. The equity investment in Wasaya will be accounted for using the equity method and will be included in other assets on our balance sheet.Turning now to the balance sheet, we ended the quarter with a net cash position of $14.4 million and working capital of $260.6 million, which represents the current ratio of 2.28:1. This compares to a net cash position of $72.3 million and working capital of $240 million, resulting in a current ratio of 1.91:1 at the end of 2017. The increase in our cash position at December 31, 2017, was entirely related to the impending redemption of our 2012 series of debenture. Those debentures were due in September 2019 and we redeemed early on January 11, 2018, for approximately $57 million. The increase in our working capital at March 31, 2018, in comparison to December 31, is primarily related to an increase in Quest's working capital because of its growth in business volumes and its expansion into the U.S. An increase in accounts receivable in Regional One due to the sale of an aircraft with extended terms also drove an increase. The receivable is secured by a letter of credit.During the first quarter, we redeemed the 7-year 5.5% convertible debentures which were due in September 2019. This redemption was funded with a portion of the proceeds of the $100 million, 5-year 5.25% debentures that were issued in December 2017. Subsequent to the quarter-end, the credit facility was amended to increase its size by $250 million and extended term to May 2022. At the same time, pricing was amended favorably and the covenants were -- within the facility were amended to allow us greater flexibility to take advantage of growth opportunities quickly.The debenture offering reflected a strong level of investor demand and the upsizing of our credit facility reflected a high level of lender confidence in EIC. The company's balance sheet and capital resources are strong. Our leverage ratios are well within our target range and the available capacity within our credit facility now fits at approximately $360 million. So we are very well positioned to take advantage of growth opportunities when they are identified.That concludes my comments on the financial results and I'll turn the call back to Mike.
Thanks, Tammy. We are excited about the balance of 2018. When we released our Q4 2017 results, we provided the market with guidance into what we expected for 2018. Through one quarter of the year, we are well on our way to beating that guidance. We said that we expected EBITDA and adjusted net earnings per share to grow by between 10% and 20%. This amounts to an increase of $0.25 to $0.50 a share for the full year. In the first quarter, we have delivered an increase of $0.16, and as such, we are on track to meet this guidance. I should point out, however, that simply extrapolating this improvement for 4 quarters would be inappropriate. The financial results of the comparative period in 2017 were the weakest in fiscal [indiscernible] and as such a bigger improvement in the first quarter reflects a more -- a return to a more normal operating environment in our northern aviation business. The second quarter of 2017 was just the opposite, with the strongest results for the year, taking into account the seasonality of our business. We confirm our guidance that we expect adjusted EPS and EBITDA to each grow by between 10% and 20% this year. During our Q4 conference call, we also stated that we expected a significant decline in the level of total capital expenditures versus what was invested in 2017. Maintenance capital expenditures were in line with expectation. And our outlook remains the same, but they will be slightly above 2017 levels in 2018.In line with our new strategy of doing as much maintenance investment in the first 6 months of the year with demand in the airline is lower, we expect that maintenance investment will follow the same pattern as last year. Growth capital expenditures, however, are expected to be far below the levels experienced in 2016 and 2017. This is not because of a change in strategy, but rather is driven by the opportunities that are on the horizon. We pride ourselves on being opportunistic and moving quickly with the situation warrants. As such, investment in growth capital could change quickly. But as of now, it is expected to be very modest. Growth capital expenditures were lower in the first quarter and small programs at Provincial were essentially offset by net divestitures at Regional One. The net divestitures at Regional One were a timing anomaly and we anticipate a modest investment to the company through the balance of the year.The purchase of a fleet of ERJ-145 aircraft in the second quarter will see the net divestiture in the first quarter reverse in the second quarter. Investment levels are expected however to remain well below 2017 levels in 2018. At this time, the only major growth initiative is for the new plant for Quest. We are negotiating a lease for 300,000 square foot facility in the Dallas area. We've placed orders for the manufacturing equipment and expect a $20 million facility to begin operations in early 2019.We will also be making a much more modest investment in aircraft and a hangar for the new Keewatin contract in the Baffin region. The contract is increased in scope with additional base where we will station, crews and aircraft. We are also cautiously optimistic about the renewal of our reaming medevac contract in the Kivalliq region. The government is in the final stages of adjudicating this contract and will announce its awards soon. The Force Multiplier surveillance aircraft we have a display at our Investor Day last year is now essentially complete.We're in the final stages of approval with Transport Canada and are in discussions with a number of governments around the world about deploying the aircraft and expect it will begin work either late in the second quarter or early in the third. Interest of the capabilities of this aircraft remains very high and we are optimistic that this will translate into revenue opportunities this year.We have completed 3 transactions in the last 6 months with the purchase of Quest, MFC and their investments in Wasaya. We remain very active on the acquisition fronts with a number of our interesting opportunities in both aviation and manufacturing in Canada. Our team, however, has been focused on closing an early integration of the recent transactions. And as such, most of the opportunities under investigation are in early stages. We do not anticipate including any transactions in the near term.We are excited about the start to the year. We achieved significant growth in the first quarter with material improvements in all metrics, of particular, significance of the improvement in our payout ratio in spite of an increase in our dividend. The ratio improved whether calculated on our free cash flow less maintenance capital investment basis or an adjusted net earnings basis. We were not surprised by this improvement. We have followed the same model for 14 years for one simple reason, it works.The volatility of our stock price is frustrating, but we are confident that in the long run stocks are valued based on their financial performance and we are confident in our ability to continue to deliver reliable, sustainable, profitable growth. On behalf of our board, management and our employees, I would like to take a moment to thank all of our stakeholders for their ongoing support.We would now like to open the call to questions. Operator?
[Operator Instructions] Your first question comes from Mona Nazir with Laurentian Bank.
Good morning and congratulations on the very strong quarter. So my first question is just in regard to the growth CapEx, and you did touch on that, it was de minimis in the quarter versus the $59 million last year. And looking at the cumulative growth CapEx spend over the last 4 quarters, we've seen in over 60% reduction and you've stated that you expect this as continued reduction on a year-over-year basis as we move through the year. I'm just trying to connect the dots and we haven't seen that significant drop-off or any drop-off in the Regional One revenue. So I'm just wondering if you could speak to the current portfolio and what we could expect from R1 over the next few quarters and how much of a drop-off in growth CapEx could we see?
It's opportunistic, Mona. We do -- we did complete a transaction this quarter where we've invested in a number of ERJ145 aircraft. But in terms of the purchase of big fleets -- and I think the 2 big ones in the period you are talking about would have been the purchase of the fleet of CRJ700s from Lufthansa or the purchase of a number of CRJ900s from a couple of different airlines. We don't see anything like that in the near term in the horizon. So investment while positive in Regional One will be in a much lower level than historically. The other thing I touched on is just as it relates to the existing lease portfolio, you saw a slight drop-off versus last year and the decline versus the full-year. Results really -- result of a number of factors, one, we have -- some of our CRJ900s that came with subleases that are off lease. We've -- we are in the process of putting those out. It's taken us a little longer than we had hoped, but we'll get them out on lease. Secondarily, we have some that are leased on a power -- by the hour basis, where the utilization was lower in the first quarter; that should improve in the second quarter. And finally, one of the -- I think things that are -- is not well understood about the lease revenue is, it's not just rental revenues that's in there, it includes things like lease return fees. When a lease -- when a plane is at the end of lease, many of them have to return conditions where a lease needs -- the plane needs to be brought back to a certain condition before its return. In a case where we have a plane that we intend to part out, we may well negotiate a deal with the lessee where they don't need to do the overall return for a certain payments and those payments are irregular, but they're included in the lease -- in the lease line of our financial statements. And that means that the lease number is going to bounce around a little bit depending on which quarters we incur those and I think it's included in our information that we had a material lease to return fee of, I think, about $1.6 million last year that didn't exist in this year's first quarter. So if I think -- I hope that covered off what you're asking me.
Yes. And then actually [indiscernible] I was going to go into my next questioning, the returns of your lease portfolio versus why is it seemingly higher than industry average, it's like -- I think you started to touch on that. Is there anything else you want to add?
Yes. I think that's really important, Mona. Part of the challenge with the short and distraught thing that we're facing is people who either don't understand our model or choose not to understand our model. Our lease business is part of the liquidation of the aircraft. We are not a finance lessor who takes take a new aircraft, leases it out over 15 years to get the capital back in and earns the spread on the interest rate. We're dealing with planes that are approaching the end of their life and have varying lease maturities. And so included in our lease revenue is more than just the rent on the aircraft. It's also, in a number of the cases where a traditional finance lease would have lease overhaul reserve where the lessee is paying into a balance sheet account so that the money is available for when it needs to be overhauled because in order for the lessor to get their money back, the plane has to be overhauled a number of times to be able to have the life to generate the returns to pay-off the lease. In our case, most of the time, we don't to tend to overhaul the plane at the end of that period; we just did a part of that. So as a result that extra revenue that comes from that the lease overhaul reserve, that we don't maintain as a reserve, we take it as revenue, so that materially affect the profitability of the lease. And then finally, as I talked a little bit earlier, on some of the leases with -- where we bought where the lease was a longer-term lease that's coming to a close, they have lease return conditions, where we will often let them buy out the return condition instead of actually doing the work, they can make a payment to us in which case that flows through there as well. Comparing us to a finance company in terms of leases is roughly the equivalent of asking why an apartment is cheaper than renting a smaller hotel room on a per-night basis. They're not the same business. If you lease a car, it costs less than if you rent car on a daily basis because when you rent a car in a daily basis, there's a whole bunch of other charges that go through the line. It's apples and oranges, and we have to generate a higher return because we're doing things that are different. We don't have a long-term 10-year return on these leases. We have to turn the assets and turn them more quickly, as a result, we have a higher return on a percentage basis.
That was helpful -- as we took a number of client questions around that subject. And then just lastly for me before I step back in queue, I'm just wondering if you could touch on Quest. We saw a very strong performance. They are $7.3 million in EBITDA contribution versus kind of the $15 million in annualized contribution when you did purchase that. I understand the business can be lumpy and you stated as such just a couple minutes ago. I'm wondering if you could touch on whether any special or a large contracts or anomalies that contributed to the Q1 results.
No. There was -- I mean, we -- one of the businesses is the sum of a series of contracts that runs through, buildings can be $3 million to $10 million in size depending on how many floors and what's involved. And so the quarter was successful for 2 reasons. One, we were able to run $25 million in revenue through the plant, which only happens if we can time up our projects ideally so there is no downtime in the plant between projects. And then secondarily, we have said in the past that our U.S. work has a higher margin than our Canadian work and we had a higher proportion of U.S. work in the first quarter. So that resulted in a beat of even our internal forecast that was at the high end of what of our expectation. And as such, I wouldn't extrapolate $7 million directly, but there is no big weird things that went through the quarter. It reflects the growth in the business from a run rate of about $60 million of revenue when we bought it to -- if you were to extrapolate the quarter $100 million and that explains a big portion of the increase in profitability.
And do you have the mix of U.S. versus Canada for the quarter versus when you bought it?
We do not -- that's not something where we publish, Mona.
Next question comes from Steve Hansen with Raymond James.
Just a quick one on the Quest to follow up. The new facility that's coming up in Texas early '19 -- I'm just trying to understand a bit better the cadence that we should expect out of that facility as it comes up. Can you give us some context around the capacity of the facility and the revenue opportunity that is going to generate, is it a clone to the existing facility and how that should impact revenue growth in '19 and '20 for Quest?
That's good question, Steve. The facility will be slightly bigger than our existing facility. So its ultimate production capacity will be higher than what we have in Toronto, but I would caution against the idea that when you open, you turn on a switch and it goes from nothing to full capacity, we're cautious as to how many orders we're taking for an initial quarter to as we ramp it up and to avoid any kind of execution risk as we start the plant. But the opportunities we've seen, Steve, are such that we're very confident we'll be able to fill the plant reasonably quickly. But you will see a relatively modest contribution in terms of revenue and likely minimal bottom line at the start of the year, and you'll see that ramp up quarter-over-quarter as we put more flow through the plant and as we get up to normal operating efficiency.
So just to be clear then, so Q1 and sort of the initial start-up phase with minimum contribution that you refer to and then ramping through Q2 and 3 consecutively?
Right, and then we'll give guidance as to how full the plant is and how close we are. Although we have said that we're running near capacity and we're booking into 2020 already, so --
The other advantage that this plant provides us is the ability to go out and further sell and with the capacity constraints that we currently have with a single plant, as we look out to customers, we are unable to fulfill their orders. Having this additional capacity coming online in 2019 helps that -- satisfy that customer demand.
Just a quick one on the Moncton opportunity. I'm trying to understand this a little better, I mean certainly familiar with pilot shortage issue and what that means internationally and even domestically, but you described it seems to the [ Trans Canada regs ] that it wasn't familiar with it. I'm just trying to understand 2 things. One is, what is your actual capacity to grow at Moncton? What kind of limitations that you have on growth relative to demand? And then secondarily is, what is the opportunity internationally versus domestically, like are you really focused on the domestic opportunity here first and then there's opportunities to grow with international clients or just trying to give a better understanding what that growth profile looks like and what your limitations might be.
I'll start with the second question first. Moncton is largely an international player. Currently, most of the revenue will be generated by international students. In Canada, a typical student -- someone who comes in and they're paying us for their training just like a student going to university, whereas much of our international business we would contract with the airline who would bring in a 10, 20, 30, 40, 50 students at a time who we would then train up on behalf of the airline and in the contractual basis, we have demand that's very strong for the foreseeable future. The rate determining step really isn't infrastructure, it's really not aircraft, that's very easy to do and relatively inexpensive. It's just making sure that we maintain enough trainers to actually do the training. And it's kind of one of the oxymorons of what's going on with flight training right now with flight -- pilots in general right now, is the shortage creates less training because they move on to traditional flying jobs. So we're working on programs to grow our number of trainers, which will facilitate the growth of that business. But the revenue is focused internationally. The synergy in terms of our own airlines is focused locally where we're going to work on building our own pilot streams to fill gaps as we lose pilots to bigger airlines.
And just one last one, if I may. Mike, you mentioned I think the outset -- your willingness to entertain further buybacks with the added flexibility financially, stock price has been frustrating, I mean, how do you feel about the allocation of capital to buybacks just sort of general philosophy here going forward? It's been part of your strategy in the past but not a big one frankly, and so do you have a greater appetite for buybacks given the relative performance of the stock recently. How should we think about that?
Yes. I mean, if you look at what we were generating when the stock was over $40 a year and a bit ago, our profits are materially higher than they were then and the stocks 25% lower than it was. We think the valuation today is the best opportunity we have. And so we'll take a look at various options in terms of buying back our stock if it trades at these levels. We think ultimately the proofs in the pudding where we have delivered 4 really strong quarters in a row and we expect the stock will perform, but to the extent that it trades at these levels, I'm really not sure there's a better investment opportunity for us than our stock. So I think, yes, you could expect us to be relatively active on that.
Your next question comes from David Tyerman with Cormark Securities.
Very good quarter. Just a couple quick questions. First on the Quest, just going back to what is kind of our normal rates and I think it was a really good quarter. If we use the growth in revenue that you suggested, Mike, going from $60 million to $100 million and just use that as a driver relative to the original $15 million, would that be a good proxy for kind of the run rate right now in a normal annual rate -- up to $25 million roughly?
$25 million, David, in all honesty, is absolute capacity in our plant and we need to everything, the time up in terms of [ bud ] ending projects one to the next. So like I say, we did $25 million this quarter, I don't want to say that with one plant, we can do that every quarter. But conceptually the direction you're going in that we've got that material increase in production is a reasonable starting basis for where you are. I just think $25 million may not be what we can achieve every quarter, projects don't time out perfectly. If there's a 2-week gap between projects or they overlap in a way that over time is more expensive, where it's always difficult to extrapolate when you're running in absolute capacity, that extrapolation gets a lot easier when the plant opens next -- we getting a next year and we actually surplus capacity. So it's our opportunity to drive the revenue as opposed to our ability to throughput and through the plant.
And then second question just on the working cap. You used quite a bit in the quarter and I saw the explanation on the Quest growth and the timing on the CRJ sale. So I'm just wondering for the year, what we should think -- I would think that CRJ will reverse the Quest, I'm less clear on. So do we -- do you think you're going to use material working cap in the year based on the plants that you have right now?
The short answer is, no. Where this growth like -- Quest is clearly growing and as it grows, we've got higher receivables, higher inventory and we talked about the sort of scope with that growth. In the grand scheme of EIC, that's not a material number. You're absolutely right on the aircraft that the terms are for later this year. There is absolutely no credit risk. It's secured by a letter of credit, but that will reverse later in the year. There is nothing structural when the business for working capital to grow materially -- or maybe let Tammy jump in that.
Just one other comment on Quest is, during the quarter and likely continuing into the second quarter, they're making deposits on equipments for that new facility. And until we actually take delivery of that equipment that -- those deposits sit in our working capital. So we'll see that come out towards -- once we start taking delivery in the second half of the year.
So would that be enough to make us expect negative working cap in Q2 also?
Q2 ramps up seasonally. So there's always a seasonal impact, but if you take a longer-term impact, I don't see -- I think you'll see -- if you get back to December of next year, all things being equal, we have repatriated the $10 million on the aircraft, we have repatriated the growth in the prepaids, which you can see right on the balance sheet and you will still see some growth as it relates to the receivables and inventory for the growth of Quest. And the other [ but ] I'd put around this is, if Regional One gets the opportunity to buy some great inventory, we're certainly going to do that, that's our business, and so we [ don't ] jump around quarter-to-quarter, but there is no plan for a material build of inventory over that period.
And working capital in other businesses -- I think the biggest factor that we're seeing in Legacy Airlines is one-off timing and there -- something that we've seen that has influenced it the last year is the timing of large fuel purchases, where we have to do in big bulk level into Arctic region.
So just -- on that is there -- was there a lot in Q1 or is there going to be a lot in some quarter in the future that we should be aware of?
I think you -- I think the -- if you look at the quarterly changes, they shouldn't be different than last year's, like in terms of which quarters are up and down in terms of seasonality of the business.
And then just last question for me. The tax rate is a lot lower. I see the explanations; they sound sustainable. So is that a new good rough level for run rate?
Yes. We -- like our expectation is that our effective tax rate should run around 20% to 22%. The biggest influence there if we bounce outside of that range is the mix of parts -- U.S. parts revenue compared to Irish lease revenue. If the proportion changes in a quarter, you'll see a little wobble there, but it should be around 20% to 22%, I'm expecting.
Your next question comes from Raveel Afzaal with Canaccord.
A few questions. First of all, I understand that the leasing business is lumpier compared to the parts and services business, but is there any seasonality in the leasing business that you can point to?
I don't think their seasonality as it relates to leasing per se, but on our power by the hour leases with the customer, we actually have those aircraft, when they have a seasonality in the business and as a result, when they are busier, the power by the hour leases generate more revenue and seasonally, the first quarter is a slower part of that business. And to be clear, it's not just the power by hour issue that's -- with our lease portfolio, we do have some 900s that aren't on lease at this moment. And we will deal with that. That's a normal part of the ebbs and flows of our business, went through it with the 700s when we bought them from Lufthansa and over the rest -- balance of the year, we will lease those aircraft up and you'll see that flow through the lease revenue. But there is a seasonal factor as it relates to power by the hour leases.
And then, is there's some range that you can provide us for growth CapEx for Q2 as it relates to Regional One, because I know you guys are buying -- have bought some ERJs?
We expect that growth CapEx -- and I can only tell you about what I know about now, Raveel, and Hank is famous for calling me with, Mike, guess what I just found, but assuming I don't get a phone call from Hank, our growth CapEx will be modest. It will be positive in the second quarter. But it's not a big number based on what we have now.
And thank you for providing us with color on 2018 maintenance CapEx. Is there anything you can tell us with respect to 2019, exclude Regional One, of course, that's going to be vary based on its leasing business, but when you look at the Legacy, Provincial, can you speak to the maintenance CapEx as you see it now for 2019 versus 2018?
Yes, we would expect that there would be a modest decline in CapEx in 2019. Just the way the schedule falls with the number of heavy overhauls and the number of engine events, particularly in 1 or 2 of the subsidiaries, it results in a lower level of maintenance investment, not dramatically so, but a reduction in 2019 versus 2018. Again, as you pointed out, Regional One is a wildcard, if we buy a bunch more aircraft in that business, depreciation will go up and so our maintenance CapEx, but based on the status quo, we would expect a decline.
And just finally, can you speak about the impact on the fuel prices, how you see this impacting the Legacy margins for the remainder of the year?
When the [ stuff ] moves rapidly like it did at the beginning of the quarter, it takes us a little bit to implement a price increase. We have to be very sensitive as to how we put those in the First Nations communities don't see the change in -- the rest of us see, the price of our gas going up every day. So we realize that's what's happening. Understand in most of the communities, we serve as their fuel goes in once a year and the price is constant. So it takes us a little bit to implement the change, but as -- but on the other hand when we implement the change, if once we've told our customers, it tends to stick and that's why even in the first quarter, I think, Tammy can correct me if I'm wrong, but I think it was less than a $0.25 million that cost after the recoveries we have from both the direct flow through contracts and the surcharges we put on place and so we will have a drag of little bit in Q2 as we implement the fuel price surcharges, but it's less of impact on us than it would be on WestJet or Air Canada where the ability to flow through isn't direct as we've. Ours is more timing issues. Now they're certain routes and certain places where that's not the case, but the vast majority of our business, we have the ability to raise prices. It's simply a matter of how long it takes to do and doing it in a manner that explains it to our customers and is respectful to our customers.
Next question comes from Chris Murray with AltaCorp Capital.
Mike, just thinking about the ERJ, so I guess a couple pieces of this. So that's a fairly large fleet, any -- just so I understand, is that going to be like only CapEx or will that be the typical of mix of working capital and CapEx to fund that acquisition?
In terms of where we're going to show up on our balance sheet you mean, Chris?
Yes, as they were -- as they were --
Yes, I think -- we're still working on the final split of what we're going to do with them, but I think about half of them -- a little over half of that we're going to end up flying, whether that means we resell them as whole aircraft or lease them, and about half of them are probably get -- end up getting parted out.
And thinking about the Embraer models, I mean, historically you talked about the fact that you're able to take the smaller CRJ100s and 200s and then turn that into the 700 and 900 leasing program. Any opportunities to work with Embraer in a similar fashion to start moving up into larger aircraft and maybe moving a different a line in the lease portfolio? I know you looked at acquiring businesses this before and it looks like it kind of growing capability on the Embraer aircraft, but I guess there is always a concern you've always said is, it's about really understanding the aircraft at a part level that's the art of this.
Yes, I think, maybe I'll just let you do the conference call because you're exactly right on what you said that a fair description of our opinion and things. We've dipped our toes in the Embraer and we worked with a European bank on liquidating a number of these aircrafts. And we've developed some knowledge on them and we've now dipped our toe in directly with the purchase of the 145. So we are looking at other models. We're not going to sprint into that. We'll gain our knowledge and move in slowly and how the engines work is very different than it works, especially in some of the models than it does on the CRJs, where the Embraer engines on certain of their. Things are harder and deal with than they are the CRJs, but we definitely view there to be an opportunity in the arbitrage of these aircraft. And I think you see this in our purchasing that we've moved into it and I would anticipate over in future periods, you'll see us diversifying our portfolio with the addition of more of this type of aircraft.
And then just maybe a broader question, just thinking about growth rates. You sort of talked about the fact that you're going to be a little conservative on acquisitions for next for so while. It feels like you've got adequate capital to go do stuff, but is the decision to slow down is that some sort of change in the way you guys are thinking about allocating capital? Or is it kind of a function of where you are in the pipeline in terms of acquisitions or just difficulty identifying other opportunities? Just some thoughts around that -- kind of feels like growth is going to slow over the next few quarters.
In terms of closing things in the near term, that's correct. It is absolutely unequivocally not a change in strategy. And quite frankly it's really also not on the acquisition front, the lack of opportunities. We've closed 3 transactions in just over a quarter and with our internal capacity -- I understand that whether we do a $25 million deal or a $150 million deal, the level of diligence and the work required is the same. And so our team has been focused on the end stages of the deals we've been doing. They are now jumped back in and working on opportunities and letters of intent and expressions of interest, and there is no change in our appetite. I just wanted to be clear with the market that because we've been so focused on closing and integrating what we have, there is nothing that's nearing the end stage of that process. But there is no change in our strategy and there is no change in our appetite for that. The same would also go for growth CapEx. If somebody sell me a fleet of CRJ700s, like the Lufthansa one, I will sprint to the bank to write the check, but we have to have the right opportunities. We've always been disciplined in what we do. And at this point there aren't any in the future -- in the near future, but in no way would I take that as a change in our strategy or our desire to grow, simply just a practical limitation because of how much stuff we've completed in the last few weeks out of just finished nothing after all those deals, can you get sleep back, so no, Chris, we will be busy again.
So just maybe as a cleanup kind of to that question. So if you think about the new credit facility, which expanded $250 million and your leverage levels historically -- where is your comfort level on dry powder right now?
Where we would like to -- we got [ 350 or 360 ] in --
In capacity?
Yes.
Yes, [ 360 ].
And when you say our leverage levels, it depends on how we grow and how we deploy it. We're not changing how we fund things and so we've got money to do deals as they come or to buyback equity at these levels. There's really -- nothing is changed. Our appetite for leverage is unchanged over 14 years and I don't see it changing now. And if the opportunities come, we're going to jump up on. We've got a couple of debentures that mature in the next year or 2 and hopefully those will convert into equity and give us fuel for further growth as well there.
Your next question comes from a Konark Gupta with Macquarie.
On the guidance, Mike, you guided 10% to 20% EBITDA growth for the full year, and obviously you have seen 25% in the Q1, right? Now you're telling that there is some kind of like put and takes and like we should not expect 25% to be extrapolated, right? But is there any kind of business or asset where you are being sort of more conservative than you should be?
I don't think so. I mean there is no material change in any of the businesses. Like I say, we talked about -- we have a few lease -- 900s that are under lease when those get going that will ramp up as well. But when we look at the aggregate, we knew that if you just look at a year that we are up against in aggregate 10% to 20%, what that meant that in real simple terms that's $25 million to $50 million in EBITDA and $0.25 to $0.50 in earnings. We're still comfortable with that. We knew that Q1 was the easiest comparative. We know that Q2 is the hardest comparative. We know Q3 and Q4 are about average. Bottom line is, we're very comfortable with the guidance we gave. And if I were to speak generally and don't ask me what our forecasts are, because we won't tell you, but I will tell you that we are marginally ahead of our internal forecast through the first quarter [indiscernible] to be.
And on the Regional One, can you can talk about how the leasing business is shaping out in terms of the customer base or the lease terms, especially with the introduction of Embraer's 145 and the pending CRJ900s.
Well, the 900s, like you say, those are the -- if [indiscernible] taking us a little longer to resell than we had hoped, but that's not uncommon when we get into a new platform. The 900s are new, they are slightly more expensive. And as a result, our customer base are just growing into those and so it will take us a few quarters, but we'll get it cleaned up. ERJs would be more at the other end of the spectrum. Those are much less expensive aircraft and so there is a number of carriers in different parts of the world that are interested in those. We have some of them under lease already. I'm not in the position to say how many, but we have some of them under lease. So we expect we will have some more in the near term and some of those aircraft will be more effective as parts. So some of that fleet we purchased will be parted out and number will be leased. I wouldn't be surprised if we sell a few of them as well as operating aircraft. So that's kind of break out. Those fit into our customer base fairly directly because they're inexpensive aircraft whereas the 900s are at the higher end of the price and the lease term for our customer base.
And lastly on the Alberta market, so the oil price seems obviously going up here significantly over the last few months and that definitely impact the airlines on a short-term basis, but with respect to your Alberta operations, are you seeing any material benefits in terms of the customer orders or the spot market demand that's going to be driven by the oil price or the energy markets?
The short answer is, yes. It is getting better. It's getting better slowly quarter over quarter. It's a little bit different than the last 2 oil shocks we saw in 2007 where it rebounded really fast, it was more or like a re-recovery. This is more of a slow climb, but we saw a material improvement last year in the second half of the year in that business and that has continued into the current year in Alberta. So we're not back to pre-oil price decline levels yet, but we're seeing material improvements quarter-over-quarter.
Your next question comes from Derek Spronck with RBC.
Just moving on to the ERJ145, are they, -- how old are the aircraft? Are they fairly old -- the 145 that you purchased and did you buy them all from one source or were they from multiple sources?
I don't have the ages in front of me. I can get that for you, but it was a single purchase of the fleet from a bank. That the bank had taken it back and we bought the entire fleet.
And then just looking at the CRJ900s, because you mentioned that the ERJ145s you can part out and perhaps -- would the CRJ900 -- do you have the opportunity to part those out or will it be essentially get them into a lease? If we can't get them into a lease maybe sell the whole aircraft altogether?
Bang on, Chris -- the CRJ900 is still to value -- I'm sorry, Derek, I'm sorry -- when I get to question 15, I get a little sloppy. The 900s -- the value of the aircraft, like as a flyer, is too high that the value of the aircraft exceeds the sum of its parts and so it means that when we buy those and -- part of the reason we bought that is because of the natural progression from our clients, who had 200s and we have seen them move from 200s to 700s. They move this from 700s to 900s. So you are bang on that we're going to need to lease those out or sell them. We have no real desire to sell them. It's part of the process. I wish that we have leased them out a couple months faster than we have. It's not the end of the world. And quite frankly, that is -- for us the secret sauce is that, we are diversified. We have some planes that we thought we would lease out that aren't leased out and our EBITDA still went up by 25%. Our earnings still went up by 50%, and so not overly worried about the fact that those planes are slow, but your bang on in your assessment that the planes are too valuable to part them out. So we will lease them up and get them out whereas the ERJs that we purchased could be done either way. The size of the fleet is such that I wouldn't want to part out the fleet that big all at once, because it could take me a while to sell it all. But we have a nice combination of flyers where we leased them at. There may be some that we sell or not and there were some that we part out. So that really is the -- that's the sweet spot of our business. It's a different aircraft type, but it's the sweet spot of what we do in arbitrage.
Yes. Just getting back to the CRJ, Derek, keep in mind, it's pretty consistent what we refer to as our step-up strategy, which Mike talked about at, where we've had our customers pull from the 200s to 700s, where the next progression is 900. So what that allows us to do is migrate them to the 900s and get those leased up and at that point 700s can be torn down, there is a demand -- significant demand for those parts. So it's all part of the overall way that we monetize the value of our complete assets.
Can you get the same returns though -- presumably the CRJ900s would be then more of a traditional lease versus the more traditional strategy of Regional One where you're squeezing out the last kind of lease life out of the aircraft and then utilizing it for parting?
Chris -- god, I did it again -- your real -- is your second name Chris, Derek? Derek, you are bang on. In the near term as we lease those out to get them down to value or we can part them out lease returns are -- the more valuable the aircraft, the lower the percentage rate return we're going to generate. That's absolutely correct. But ultimately, as those aircraft age, the knowledge we gain, the customer base, the part capability to sell will enable the returns on those to expand. But you're right, if I buy a 200, that I either lease out or part out, I expect my percentage return to be higher than I do on a 900.
And just a couple more for myself. You've sold a couple of -- not a whole lot, but a few aircrafts over the last couple quarters and [ put in ] Regional One, so you have gone 43 to 39 but the engines have gone up materially. Are they 2 separate line items or when you're selling the aircraft are you take the engines -- and taking the engines off the aircraft and --
When we were selling the aircraft, were selling them with engines. The reason why engines may go up with aircraft go down is, if we part out an aircraft, the engines may still have value to be leased out as opposed to parted out. So you can take a plane, tear it down and lease out the engines. And so the pool of engines is independent of the aircraft. To my knowledge, we've never sold an aircraft without engines on it.
And then just a couple more quickly. I saw on the Annual Information Form, some union collective bargaining agreements potentially, am I correct on that and is a material and or be how do you feel about the potential for the renegotiating a new agreement?
We're in discussions with a number of our unions. Very pleased with how it going. We're at the final stages in 3 or 4 of them -- 3 of them. We're just in the final signature stages. So we've been able to work well with our unions. We've a couple that are earlier stages in discussions, but the important part of it tone and tenor of them is great. I don't anticipate any problems at all.
And then just finally on your leverage, your net debt to -- senior debt to EBITDA, it's like your upper end of your target, maybe a little above depending on what level of EBITDA you're looking at. On an absolute level, debt has as grow, if you include the convertibles, it's at a decent level from an absolute perspective. Do you think about deleveraging at all or you're pretty comfortable around the sustainability around the EBITDA that you're comfortable with the absolute level of debt and you still have enough powder in the keg I guess to transact. How do you think debt and where you're at and your potential leverage for?
We'll be slightly over the average -- just a tinge over our 14-year average. If you look at our guidance of 10% to 20% up for the year that gives you some like to [ 275 to 300 ]. If we use our convertibles, we've less than a turn of debt in those and we're slightly over 2 in terms of our secured debt. So we're right at that sort of 3x aggregate debt. We're comfortable with that level. It's sort of in the same sort of goal post we've had since we started. And it bounces around and when we raise equity and when debentures convert, can bump that around, up and down and free cash flow opportunities, but we're very comfortable with our balance sheet. We're are comfortable with our liquidity and you see our payout ratio declining and with our payout ratio declining that means we generate more free cash flow that effectively reduces leverage. So [ grand ] scheme of things we're very comfortable where we are and we've got the liquidity of the new facility that should -- I don't come with a deal I can't refuse, I will have to refuse.
Next question comes from Mark Neville with Deutsche Bank.
Just a few follow-ups at this point. Just on the Quest, when you brought this business, it was called $15 million revenues per quarter with a bit of 25% margin. This quarter sounds $25 million revenue with about a 30% margin. Those are sort of the rough goal posts you use for this business at this point sort of pre-expansion?
Yes. That's reasonable again, like I said, this was a good quarter. I can't guarantee that we'll run that through the plant every quarter, but it was a good quarter.
At this point, are you running --
The mix of Canadian and U.S. market can just tweak the margin a little bit quarter-to-quarter.
And the -- just on the sort of -- you mentioned sort of capacity constraints, are you running into issues or are you pushing lead times or I mean any major issues there?
No. It is just in terms of we can't. We're not going to take orders that we have don't a slot for in our plant. And so we are running into. We've turned down material projects that we were awarded that we just -- they took too long to decide and as a result, we couldn't take the order, because I have no capacity in the quarter. They wanted it in the 2 quarters as they asked for us. So that's why it's so urgent for us to get that plant up and running, because quite frankly we are only in a limited number of markets with that company or in the sort of West Coast across Canada and then limited markets in the East and Midwest. There are places like Houston and Florida and Nashville and places where we have no presence yet and we love to go there. So we're excited about the opportunity of adding to our production capacity.
On the Wasaya transaction, should we think about that sort of like an investment multiple, sort of like past investments in your business or M&A or shorter terms, it sort of more strategic to us to build out your footprint there?
In the short term, it was more strategic. In the longer term, the multiples are in line. It was really an opportunity. Wasaya's greatest asset was their relationship with their shareholder, First Nations, and they are the -- relationship in that area and then strength enabled us to work with them and then by integrating our fleets in terms of schedule, so that you can interconnect airline to airline which you could do before will improve the service and that will ultimately significantly improve the performance of not only our airline but Wasaya as well. But that's a work in process and really just opened up a whole new door for us into Northwestern and then ultimately Northeastern Ontario as well.
And maybe just on the jet fuel, just to be clear, have you announced or have you pushed those price adjustments through or is it -- it's a Q2 event or Q2, Q3, just wasn't clear on that?
We have put some through already and we're in the midst of doing a second round. When we put them through, it's really a matter of communicating with the First Nations communities and going explain the Chief of Council, hey, our fuel prices are back, so we're putting a $5 surcharge on the tickets, it will start in 30 days and this is why we've done it. It's not like a communication with the general market like, yes, [indiscernible] talk about it, we're talking with the specific First Nations because if you look at it, in a lot of the places we're flying to, Mark, we have a dominant market position and the last thing we ever want to be seen as taking advantage of that.
I think it's worth pointing out as well that we have a large volume of business where we are contractually able to pass through fuel prices. So we bear no risk in that part of the business.
Yes. Perfect example. So things like our Nunavut passenger contract with the Nunavut government. We -- they need to adjust quarterly and so we do have a lag so for a few -- couple of months, we get stuck with the bill but we know ultimately it works out and when the price falls off, we also have a lag on the reduction. So net-net, it's more just of a timing issue than it is of an actual decline in pure profitability.
But I mean, the Q1 impacts, I guess, you rather say that was fairly minimal, so --
It was de minims [indiscernible].
Your next question comes from Cameron Doerksen with National Bank Financial.
I guess just truly one quick one for me, I guess on the medevac contracts you renewed, I guess, the -- 1 of the 2 that was up and [ to be able to ] scope expansion there. I'm just wondering on the sort of the second one that you're waiting to hear from and it sounds like it's -- you're pretty confident on winning that as well. But would that also be a scope expansion?
That one was a bit more on [ as-is ] basis. They already had multiple places we operate other than wasn't a single base already. So I don't see a material change in the scope. I mean I'm predicting what somebody's going to do in that. So I don't want to say anything with certainty, but we're cautiously optimistic on winning that. We've had that contract for almost 3 decades. So I'm confident, but it's not done to what's done.
And maybe just squeezing a second one in, just -- maybe give us an update on the Force Multiplier. I mean you mentioned that you're pretty confident that you have some customers for that, I guess, the second half of the year. Just maybe update us on where things stand there as far as customer interest and prospects?
To me -- I'm kind of a like a kid at Christmas with Force Multiplier. We've got the final certifications we're going through a transport. Transport has been great. They're working with us, but it's a one-off project. So the certification of that aircraft is labor intensive and it never was quite as fast as we wanted to. We're confident that we're a few weeks away -- couple weeks, 3 weeks, 5 weeks from final certification and no one's going to give us a purchase order till the certification is completed, but we have a number of opportunities in North America and in other places to put that out. And so we have a very -- we haven't generated $1 yet, but we're very excited about that project and we're pretty confident we're going to have some good hours for that in the second half of the year.
Your next question comes from Scott Fromson with CIBC.
After 20 questions, I guess, some kind of the bottom of the barrel and most of my questions have been answered, just wondering if you can talk about the non-Quest portion of the manufacturing business, what the quarter looks like and what the outlook is please?
In the aggregate, it was really good, with growth in terms of revenue in all the businesses and all of the -- one of them had material EBITDA growth. The one that didn't was seamless fabrication. We had one project that we have some projects or field project that had very low margins, which will complete up this quarter. But the order books are the best they've been in a very long time. We expect continued growth in all of them.
[Operator Instructions] Your next question comes from Shawn Levine with TD Securities.
All my of questions really have been asked and answered. Just one follow-up. On the Quest expansion, is the decision to more than double capacity there, is that based to a small degree on alleviating some of the capacity constraints at the Toronto facility based on the current backlog or is it more to support the expansion opportunities that you're seeing in the Southern U.S., and also what gives you the confidence in being able to fill the capacity at the new plant relatively quickly?
What gives us the confidence is just the inquires we're seeing in the opportunities. As a manufacturer, you don't like to turn down the projects and we had to do that because we don't have capacity right now. We are now booking things in the new facility, Shawn. So it's hard for me to say definitively whether it was just that we couldn't fit it in the other plant. Once we've made the commitment to build the facility, we started taking orders to fill it up. So we have more on the books that we could run through our existing plant now and that will continue to grow as we take orders for that facility, but I do want to be cautious that you don't turn a plant on and it runs at a 100% efficiency. There is a ramp-up time and we will build what we flow through that plant through the year and I'm in now no way telling you that that's going to be instantly at capacity there. We don't know have orders for both plants to be at capacity. But I am optimistic that we're going to be able to continue to grow the order book. I mean, we went from a little over $200 million to $300 million in backlog in our order book at the same time as we produced something in the range of $40 million worth of product. So that gives you an idea of how much -- how many new orders we've taken in that period.
[Operator Instructions] We do not have any questions at this time. I will turn the call over to Mr. Pyle.
Thank you, everybody. I appreciate the opportunity to talk to you today. For those of you who are in the Winnipeg area, please come see us. We've got our AGM today and we will be there and we can talk to you one-on-one and meet you. If not, I look forward to talking to you again after our second quarter in August. Have a great day and [ go jet.]
This concludes today's conference call. You may now disconnect.