CIXXF Earnings Call Transcriptbeta

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the CI Financial First Quarter 2024 Earnings Conference Call. All lines have been placed on mute during the presentation portion of the call with an opportunity for question and answer at the end. [Operator Instructions]. I would now like to hand this conference call over to our host, Kurt MacAlpine, CEO of CI Financial. Please go ahead.

Kurt MacAlpine: Good morning, everyone. And welcome to CI Financial's first quarter earnings call. Joining me is our CFO, Amit Muni. Together we will cover the following: An overview of the highlights of the quarter, a review of our financial performance during the quarter, a discussion on our near-term obligations and the progress separating our Canadian businesses in Corient, an update on the progress against our 2024 strategic initiatives, then we will take your questions. Our adjusted EPS of $0.86 per share is up 6% quarter-over-quarter, reflecting the strength in capital markets, growth in the US business, and the benefit of recent share repurchases. Adjusted EBITDA per share, attributable to shareholders, increased 16% from the first quarter last year and 6% quarter-over-quarter to a record of $1.60 per share. We generated free cash flow of $1.01 per share. Capital allocation remained active during the quarter. We deployed $51 million to settle existing M&A liabilities. We returned $31 million to shareholders through our dividend. And this was the first quarter that investors benefited from the 11% dividend increase that we announced last year. In April, we completed the $85 million substantial issuer bid announced in February, repurchasing approximately 4.9 million shares. The board also declared a dividend of $0.20 per share payable in October, reflecting the normal cadence of declaring dividends one quarter ahead. Our Canadian retail asset management business experienced $1.3 billion in redemptions in the quarter, driven by three factors. One, 40% of our assets are in balance funds, which is the category with the highest redemptions in the industry in the quarter. Two, investors began to anticipate the Bank of Canada cutting rates, which resulted in slowing allocations to cash-like products. And three, the first quarter is normally a slower flow quarter for CI. Our wealth businesses in both Canada and the US continued to generate positive inflows in the first quarter, again highlighting the strength and resiliency of those businesses. We continue to execute against our three strategic priorities to modernize asset management, expand wealth management, and globalize the company. Investment performance across the platform remains strong, with nearly three quarters of our AUM outperforming our peers on a three-year basis. The sustained strong performance highlights the impact that the transformation we made from a series of competing boutiques into an integrated global asset manager has had for our clients. We improved the positioning of our product offering, which resulted in 13 fund mergers and the launch of several innovative products, including our Global AI ETF earlier this week. We continue to have success growing and servicing high and ultra-high net worth clients in Canada and CI's Northwood Family Office was named the best multi-family office in Canada by Family Wealth Report. Corient had another strong quarter, delivering adjusted EBITDA growth of 8% compared to the fourth quarter. I'll now turn the call over to Amit to discuss our financial results.

Amit Muni : Thank you, Kurt. And good morning, everyone. Turning to slide 4, our global assets ended the quarter up 7% to $474 billion, driven by positive markets across all three segments as well as net inflows into our US and Canadian wealth segments. Turning to our financial results on the next slide, I'll focus my comments on our adjusted results. Adjusted net income for the quarter increased to $133 million or $0.86 per share. Adjusted EBITDA also increased to $246 million for the quarter and our adjusted EBITDA margin was 41.4%. Turning to the next slide, I'll highlight the segment results. Asset Management EBITDA increased to $160 million and margins were 61.3%. Canada Wealth EBITDA was roughly flat at $20 million and margins were 9.1%. The slight decreases in margins were due to seasonal expenses related to compensation. Also recall, we noted last quarter that margins in Q4 were slightly elevated due to year-end adjustments to incentive compensation. In the US, pre-NCI EBITDA increased 8% to $108 million and margins expanded to 43%. EBITDA increased 26% from the first quarter of last year, which is greater than the investor group's preferred return. Turning to the next slide, I'll walk through the changes in revenue. Revenues on a comparable basis increased 5% to $699 million. Asset Management revenues were up $7 million as the effect of net outflows and fairly flat fee capture were offset by higher average AUM due to positive markets. Canada and US wealth management fees increased due to higher asset levels from positive flows and positive markets. There were no acquisitions during the quarter. Turning to the next slide, we can review major changes in our expenses. On a comparable basis, total expenses increased 5%. SG&A increased primarily due to seasonal taxes from bonus payments for last year. Advisor and dealer fees increased due to higher revenue earned in our Canada Wealth segment. Interest expense increased due to additional borrowings to fund acquisition-related obligation payments and the substantial issuer bid. Depreciation and amortization increased due to higher depreciation of hardware and computer equipment as part of integration and new leased office space at Corient. Looking forward for the next few quarters, we anticipate interest and lease finance expenses to be in the range of $50 million to $51 million in the second quarter due to higher balances on our credit facility due to settling of acquisition-related payments and US lease costs. We also anticipate higher depreciation and amortization reflecting the impact from integration capital expenditures. Lastly, SG&A costs in our Canada Wealth segment are expected to be in the $1 million to $2 million range higher in Q2 as part of investing in our custody platform. We expect cost synergies from these investments in early 2025. More information is in the appendix of the presentation. Turning to slide 9, we can review our debt and leverage. Net debt was $3.6 billion for the quarter due to payoffs of our acquisition-related liabilities and negative non-cash currency mark-to-market on our US denominated debt. Our net leverage was 3.5 times on a reported basis. The fair value market value of our debt at the end of the quarter was $2.9 billion, which results in a net leverage ratio of 2.8 times. Thank you. Let me turn the call back to Kurt.

Kurt MacAlpine: Thanks, Amit. As we highlighted last quarter, Canada's obligations related to US M&A are rapidly running off. During the first quarter, we reduced the final outstanding obligations from $280 million to $235 million. In the second quarter, we will reduce these obligations by over $100 million, with the remainder being settled by the end of January. Canada will soon be in a position of having 100% of its cash flow to allocate across buybacks and debt reduction in addition to our dividend. On prior calls, we talked about our plans to fully separate our Canadian and US businesses. As we discussed last quarter, the debt is the final piece. We've already fully separated the equity, the governance, and the operations. Corient has established its own board, and day-to-day operations are run by a dedicated management team in Miami. We continue to make progress in working through the final steps to fully separate the debt and have made significant progress in the last 90 days. In February, we announced the establishment of a credit rating at Corient. We were rated A minus stable by Kroll. This quarter, we received covenant relief on the 2025 and 2027 notes that had restrictive covenants preventing Corient from borrowing standalone. Following the July maturity of our 2024 notes with similar covenants, the US will be in a strong position to take on third party debt if we choose. Establishing access to independent Corient debt in the near term will help facilitate inorganic growth opportunities. While we are only a few months into 2024, we continue to make strategic progress in each of our businesses. In asset management, we've been active on the product front, both streamlining our existing lineup and launching innovative new strategies, including the Global AI ETF, which started trading earlier this week. Our private market solution continues to gain traction as it is addressing an unmet need in the marketplace while providing Canadians with access to the world's leading alternatives managers. In addition, we've maintained strong financial discipline with EBITDA margins essentially flat in a quarter with seasonally higher expenses. In Canadian Wealth, we continue to strengthen our position, serving the high and ultra-high net worth segments of the market. As I mentioned, CI's Northwood Family Office, which we acquired in 2022 remains a leader in the space, winning the 2024 Family Wealth Report Award for the Best Multifamily Office. As Amit touched on in his remarks, we are investing to further scale our custody platform and leverage technology to provide a better client experience. We continue to work towards onboarding the remainder of our wealth assets and are having constructive conversations with a number of third parties. At Corient, we are making progress against our strategic plan, and the investments we've made to scale and fully integrate our business are showing in our financial results. Our EBITDA grew 8% quarter-over-quarter, our net flows remain strong, and our solutions such as tax and trust are growing rapidly. In addition, it has created growth opportunities for us that were not present in the early stages of building Corient. We are very excited about what the remainder of 2024 holds for all three of our business lines. By executing over the last few years our three strategic priorities, we've been able to transform each segment of our business and position them for success. We expect to continue to see the benefits of that transformation in 2024 and beyond. We thank you for your interest in CI and we'd be happy to take your questions.

Operator: [Operator Instructions]. Our first question comes from the line of Kyle Voigt of KBW.

Kyle Voigt: Maybe first question just on the separation of the two businesses. You noted good incremental progress in the quarter, including amending the debt covenants. I guess, can you just clarify what else needs to occur to fully separate the businesses and expect a timing around that? Is it just the roll off of the debt that I think you mentioned, which I think happens in July? And then given that we have a schedule for the remaining M&A liabilities for the Asset Management segment, and since the US business is now in a position to take on debt, can you just remind us how you're thinking about target leverage in US business specifically, and where you're comfortable taking that to should you find the right acquisition opportunity?

Kurt MacAlpine: As it relates to the first question, the debt is the final piece of the separation of Canada from the US businesses I mentioned – board, management, day-to-day operations. The business is fully separable now or essentially IPO ready, kind of put otherwise. But we continue to make progress against growing the business to strategic priorities and things like that. As it relates to the debt, having access to debt at Corient on a standalone basis is important to us. We haven't guidance yet as it relates to how we think about leverage at Corient. But if you look at the earnings generated by the business, the transactions that take place in the industry and our spending patterns, I think you'd see that we have great free cash flow being generated by the US plus access to a modest amount of leverage will allow us to grow at a very good pace inorganically as well. So we'll provide more color as we get a little bit closer to it, but I wouldn't anticipate Corient running at high leverage.

Kyle Voigt: Just a second question on the Canadian Wealth business. You noted some of the incremental investments that you're making that's going to ramp G&A a bit in the 2Q and to the remainder of this year. I guess, can you just provide a little bit more details on what you're investing in there near term and then maybe could you frame the size of the cost or the revenue synergy opportunity from those investments as you look out to 2025 and beyond?

Kurt MacAlpine: As a reminder for everybody, so when we initiated the strategy, we had a custody business in Canada that had about $1 billion of assets, limited capacity for scale and growth, and obviously a servicing and support infrastructure that was reflective of the billion dollars of assets, not the aspirations. So a few years ago, we made some investments in that business to grow and scale it, and you've seen through our results that in a short period of time. Through external and internal conversions, we've grown from $1 billion to north of $25 billion. And we're now positioning the business to effectively grow from $25 billion to north of $100 billion. And as a result of that, there's some incremental investments as it relates to servicing and technology that we're making in advance of those upcoming conversions. So some of those expenses are temporary as it relates to preparing for the transition and some of those will remain expenses to service a much larger asset base that's poised for growth overall. We haven't given guidance as it relates to the revenue impact, but you've obviously seen the revenue and the earnings of our wealth business increase as the custody has been implemented and scaled up and we'd expect to see similar-ish experiences as we continue to scale the assets.

Operator: The next question comes from the line of Graham Ryding of TD Securities.

Graham Ryding: Just wanted to touch on the credit side. Like I know that your intention here, it sounds like, is to raise debt at the Corient level and you have a US rating now, but there was also recently an update from Moody's on the credit rating for CI Financial. So I just wanted to get your thoughts on how much of a priority is it for you to maintain your investment grade at the CI Financial level and do you feel like that is going to have any impact on your desires to raise debt down in the US?

Kurt MacAlpine: I would say as it relates to – we talked about at length kind of the priorities of the business and I would say we look at each business effectively on a standalone basis, right? So, for Canada, the priorities are to settle the remaining obligations as it relates to Corient, which are in the final stages of being fully met. And then we have priorities. So then Canada's cash flow will be singularly focused on share buybacks and debt reduction. As always, we take a dynamic approach to capital allocation. And where shares are trading today, buyback would take precedence over deleveraging right now, but as you've seen, we've been able to rapidly reduce our share count and the opportunity to buy shares. With every substantial issuer bid that passes, the overall pool of opportunity gets reduced. From Corient's perspective, the goal is obviously to not have Corient rely on Canada's cash flow as it relates to funding future acquisitions. And effectively, we had a couple of structural impediments ultimately in place that prevented us from doing so, which we're effectively at the final stages of doing right now. So credit rating, I guess, will be a function of how the credit agencies kind of view the deleveraging and then the impact that borrowing at Corient ultimately has on the rating. So we're running the business to deliver the best possible return for our shareholders, kind of balancing those priorities. And then the rating itself obviously will be a function of how people assess those priorities. But what I would say is we're getting near the end of the obligations for Corient and then CI will be singularly focused on its Canadian obligations and then Corient will be focused on its obligations.

Graham Ryding: You flagged that there was organic growth, both in Canadian Wealth and US Wealth in the quarter, is there anything you can sort of quantify for us to give us some sort of context?

Kurt MacAlpine: Nothing to report, I guess, specifically. Growth was strong in both businesses. And we highlighted it just to show the resiliency. Obviously, the Asset Management business, products being sold through intermediaries. Products come in and out of favor, market cycles. But when you're in the wealth management business, you're obviously owning the client relationship. So the relationship stays and the use of products will increase or decrease. And so, we're growing the businesses despite the market volatility or the impact.

Graham Ryding: My last question just would be on the Asset Management side. You flagged your alternatives product offering in the retail channel. Can you just give us some context on sort of how that's progressing and how many platforms you've been improved on or just some color on the progress on that product launch?

Kurt MacAlpine: Kind of the basis for the product, just as a reminder for everybody, if you look at the Canadian marketplace, institutions are typically allocating some balance of 60% of their investments to public markets, 40% to private markets, or 70%/30% or something in that context. Canadian retail, which is obviously the same, and consumers of the pensions are typically allocating zero. And that was, in our opinion, a function not of the product making sense in one channel and not in another, but it was effectively a structure, a wrapper in an administration process, plus access to world's leading managers that were prohibiting that from happening in retail. As you know, we launched the first private markets fund to fund in the space. As soon as we launched the fund, we immediately started our marketing efforts everywhere where we had platform approvals. So it's really a two-pronged approach of growing the fund, and funds from the platforms that we're on today. And we continue to be very active in dialogue, but also working towards getting those approvals on the national platforms as well. So it's really a two-pronged approach. We do have a dedicated alternatives team. There's 12 people on that team that are entirely focused on our private market strategies and we're making really good progress. So I'll keep everyone posted as we continue to grow and scale and innovate that business line.

Operator: The next question comes from Nik Priebe of CIBC.

Nik Priebe: Just wanted to drill into the pattern of Canadian retail flows. I think you had partly attributed the outflows in the quarter to a concentration of redemptions in balance funds as well as cash products. Are you able to give us a general sense of whether those impacts were relatively balanced or was one a bit larger than the other? I'm just wondering because those two product categories obviously garner different margins.

Kurt MacAlpine: Yeah, I would say balanced was a little more impactful, both in terms of assets and obviously economics just given the difference in fee rates.

Nik Priebe: I think you also alluded to Q1 being a bit of a normally slower flow quarter. I always kind of thought of it as a bit of a seasonally stronger period just because the RSP season. Can you just elaborate on the nuance around the first quarter that you were alluding to there?

Kurt MacAlpine: It's a great question. It is, from an industry perspective, seasonally stronger. If you look at our flows historically for the first quarter, it tends to be seasonally lighter. We attribute that to – obviously, we're not a bank. We don't benefit from the, call it, in-branch seasonality of the RSP investments. And then unlike some of our insurance peers, we don't have a retirement platform where you typically see kind of spikes in RSP investments kind of in and around bonus season. So for whatever reason, it just isn't a quarter that historically we benefited from the flows in the same way as you mentioned that the industry does, or more specifically banks and those with retirement platforms.

Nik Priebe: Just last one for me. How should we think about the dividend policy going forward? Like, is there a kind of a target payout ratio that you're contemplating? Is that something that's revisited at year end? I'm just kind of wondering how you're thinking about that.

Kurt MacAlpine: We're constantly allocating or managing dynamically our capital allocation priorities. So let me say we're fully committed to the dividend that we have in place today. And then the question becomes across the three – as I mentioned, Canada really has three different priorities. Do we buy back shares? Do we delever? Do we increase the dividend? I'd say if you're asking where we stand today, we see the greatest value for shareholders of the three in the buyback. But as things change, there's certainly opportunities for dividends to increase. If you look at the reductions that we've made in the share count, the total dividend obligation that we're making is smaller despite the increase, just given the overall reduction in share count. So, certainly, if you were looking at it from a payout ratio, as we continue to reduce the share count, there's certainly room even holding our payout ratio and then obviously room to increase that payout ratio as we go, but it's not like we have a set fixed percentage that we're managing to right now. We're really just trying to maximize shareholder value where we see the greatest opportunity. So we thought the dividend hike last year was important and we'll continue to monitor it going forward.

Operator: [Operator Instructions]. Our next question comes from the line of Tom MacKinnon of BMO Capital Markets.

Tom MacKinnon: Just looking at slide 10, the M&A obligations, am I correct in assuming that those obligations are essentially – you raise debt and then you pay those obligations? Is that what it would look like was happening with respect to your cash flow statement? Is that right, that the payments of those have been funded largely by debt?

Kurt MacAlpine: It's fungible, Tom. We did a buyback as well. So I guess if you're looking at the debt slightly increasing, you could attribute it to the obligations or you could attribute it to the buyback.

Amit Muni: Tom, cash is fungible, right? So, we use our credit facility to both fund our existing working capital needs. We have bonus payments that go out in the first quarter. So we use our credit facility and free cash flows to fund all of those [indiscernible] obligations.

Tom MacKinnon: And the $106 million next quarter, is that going to be borrowed or is that going to be paid with free cash flow? I'm just trying to think of how to think about debt going forward and the uses of the free cash flow.

Amit Muni: It'll be a combination of both. And as Kurt said in his comments, we take a dynamic approach to capital and we'll figure out the right way of allocating that, whether it's to delever, buy back stock or use our free cash flow to pay down these obligations.

Tom MacKinnon: Why take on additional debt to fund them? Why not just fund them with free cash flow and maybe slow down share buyback? Just take us through some of the thought process on – with respect to that.

Kurt MacAlpine: We're very comfortable with our debt levels. As Amit had mentioned, debt was 3.5 turns. If you net out FX noise, it was 3.4. And if you take a look at the market value of the debt, which is reflective of the price that we can buy back that debt, we're at 2.9 turns. So kind of regardless of the lens that you look at it, we're very, very comfortable with the debt levels that we have in place today. We believe the opportunity to buy our shares, given where we're trading, is much more accretive for our shareholders than not buying shares. So from that standpoint, we're looking at it. How do we deliver best outcome possible for our shareholders and we feel that if we have an opportunity to buy shares at the price in and around where we're trading, we feel that that's the best trade for the shareholders that we have. But as we said, that's dynamic, right? So if share price increases rapidly, then the priorities will rapidly shift towards deleveraging through the buying back of our 2051. bonds that have the greatest embedded gain for our shareholders. So we're constantly looking at it and monitoring it. We just struggle to see – we look at the business performance that we've continued to generate, the growth that we've experienced in our business segments, the outsized growth we have in the US and just see a phenomenal opportunity to buy shares. So with that as a backdrop being comfortable with the leverage that we have in place, we see it as an easy decision to make that the primary capital allocation priority. So, at times, that will cause leverage to increase or decrease depending upon how our stock is trading and the opportunity to buy the bonds.

Tom MacKinnon: With respect to being able to raise debt at Corient level, do you see yourselves as using that to fund inorganic growth and maybe you can talk about some of the opportunities you're seeing out there in the marketplace?

Kurt MacAlpine: CI is in the final stages of its obligations to Corient, right, if we think of these, as we do, operationally separate businesses. So, kind of on a go-forward basis when these obligations run off, which I think is the first week of January, Corient will be – to the extent that Corient is doing M&A, Corient will be funding that M&A from its free cash flow and from debt that we ultimately take on to grow the business. I think we've proven that we can acquire well, we can integrate well and drive growth across the integrated platform. So as long as exceptional businesses come to market that are ultra-high and high net worth focus with great underlying fundamentals that see the value of our private partnership and highly differentiated approach, we're going to be in the market. And to the extent that they're not, we're not. But for us, the most important piece was to make sure that Corient was ready to kind of operate entirely on its own with the debt being the final piece. So I don't think of it as – debt readiness is the first step, right? Taking the debt is a function of the opportunities that are presented in front of us. And I do see a good market ahead for M&A. I think that the market is opening up. I think some high quality firms are starting to have conversations. It's so hard to tell, obviously, in M&A, how things break. But I do anticipate having some good opportunities in front of us in the coming months.

Operator: The next question comes from the line of Stephen Boland of Raymond James.

Stephen Boland: I just want to follow up a little bit on Tom's question there in terms of what comes first. Obviously, no acquisitions this quarter, but like you said, you're debt ready. So would that be the first part as you go out to market knowing that you're closing on an acquisition or you close on an acquisition and simultaneously you go out to the market with debt? Is it a signal that if you raise debt in the US that M&A is coming?

Kurt MacAlpine: Not necessarily. No. It's really kind of we're working through the steps, right? I guess the easiest way to think of it is, Canada, right now, and I've mentioned a few times, we see the greatest opportunity for shareholder value creation through our buyback. And that's given just strictly a function of where our stock is trading relative to the underlying fundamentals of our business. We've been active buying. We expect to continue to be active buying. That could change. But the Canadian cash flow is constrained to our buyback, our deleveraging and our dividend depending upon that mix. And at Corient, it's really entirely focused on delivering the business results and pursuing M&A. So I would say if you see a Corient bond offering, I guess to very specifically answer your question, I wouldn't necessarily imply that the bond offering is specifically tied to a particular opportunity. It could be, but it wouldn't necessarily be tied to it. Also, one thing to note, a lot of the acquisitions in the space, right, it's a highly fragmented market. There's lots of different firms in the space. There tends to be frequency of acquisitions, but not a lot of extremely large acquisitions as well. So a particular raise that we do might take into account opportunities for future acquisitions and things like that as opposed to coming to market to specifically fund a single transaction.

Stephen Boland: And you mentioned there's some good possibilities out there in the US. All this capital structuring, it hasn't prevented you from seeing a deal that you wanted to do and you said, no, we're going to push back and wait till we get the businesses separated in the balance sheets. Basically you just saw nothing that was attractive enough to pull the trigger on in the quarter.

Kurt MacAlpine: We're active in the market. I would say the priority has been finalizing the separation of the businesses. So we've effectively kind of gone through, call it, a series of steps. So we founded the Corient business four years ago. First step was really around acquiring the highest quality firms in the industry, period. We wanted to build an exceptional foundation of the best firms in the industry. That was step one. Step two, launching the private partnership and driving the integrated model. And today, as I've talked about in previous quarters, we have a fully integrated model. So every element of our business is integrated and centralized, which was obviously a heavy lift and we're there now. The next step was, as we pursue acquisitions, people are coming into the fully integrated model on day one. So if we bought a business three or four years ago, we would assume it as is and then work to integrate it over time. Because of the efforts that the team has made across the business, we're able to integrate on day one, which is great. So all of that's in place. And then the fourth piece was making sure that Corient was ready to take on debt when it makes sense. So there wasn't an acquisition, I guess, to very directly answer your question, that said we would have done this, but we've opted not to do it because we wanted to wait. There was nothing – because we obviously have opportunities. If we wanted to, CI could temporarily lend money to Corient and just clean it up with a bond raise. So it wasn't necessarily that.

Operator: The next question comes from the line of Geoff Kwan of RBC.

Geoffrey Kwan: Maybe just tacking on, Kurt, to your comments on Corient and I think to your point of there may be just more smaller deals as opposed to bigger ones, from a debt perspective then, does it make sense to have a credit facility do deals, kind of build up the leverage through the credit facility and then term it out with a bond deal or does it make sense to do it vice versa to the bond deal and use that?

Kurt MacAlpine: It's a great question, Geoff. It would really just depend. Call it, the readiness factor most likely would involve having an established credit facility in place, right? So as we kind of work through the final steps that we're talking to, establishing a facility where Corient can borrow on its own, makes a lot of sense. And then, as you mentioned, as the facility – because of the nature of the deals starts to, let's just say, scale up to a certain level, it would make sense for us to roll that debt. So that that's likely what you would see unless there's, let's just say, a flurry of activity that coincides with the separation where there's clarity on how much we're looking for and then we might prioritize a [indiscernible] raise as you suggest instead. So really just a function of the timing and then the pipeline and the obligations.

Geoffrey Kwan: Just my second question is just with the separation of Canada and the US. Just wondering, is there any rationale of moving Canada Wealth into Corient where not only would you have geographic separation, but you'd also have kind of a pure play asset, separation of wealth and asset management, or is there something synergistic or some other reason why it makes sense to have Canada Wealth with the Asset Management business?

Kurt MacAlpine: It's a good question. I think of it as we have three different businesses. We have a Canadian asset manager, a Canadian wealth manager and Corient. So, I really think of – Corient is kind of set up as a separate entity, but Canadian Wealth is separate from Canadian asset management as well. They have separate strategic priorities, fully dedicated management teams, initiatives that they're working on. I guess as long as the company is integrated, we think of them as three different business lines. And let's just say, at the point of separation, instead of splitting the business geographically, could you split the business by business line? Sure. And it could go either way today because of the efforts we've made to separate them into three different businesses.

Operator: We now have a follow-up question from Graham Ryding of TD Securities.

Graham Ryding: Just one more if I could. Once you sort of get past these contingent liabilities payments that are largely due this year, you are going to have a fair amount of free cash flow you can decide to allocate towards either buybacks or paying down debt. If your shares are trading at that point at sort of a similar multiple as they are today, how would you think you would allocate that free cash flow towards those two options? I'm just wondering if you feel it's worth testing the market towards paying down debt as opposed to buybacks and seeing if the multiple responds positively to that?

Kurt MacAlpine: It's just a sequencing thing. So, if the scenario you're saying is fast forward a year, all the obligations are met and the stock's trading where it's trading and the buying back opportunity and the bonds is the same, we're buying the stock. And so, it just becomes a sequencing thing, right? Like, there's not an unlimited number of shares available to buy. And so, we would say if the stock is trading where the stock is trading, the priority would be the buyback. And if the stock increases – so it's just a sequencing thing. Effectively, we're going to do both. Like, as we've said, the Canadian business isn't funding US acquisitions and we're not interested in large acquisitions in the Canadian marketplace. We feel great about the businesses we have and the growth trajectories that we've put them on. So, then it's really just a sequencing thing, so which one ultimately comes first. But we just see it, and we look at this through a lot of different lenses, that a dollar today generated in Canada, the best place to deploy it at the share price today is to reduce the share count. And the second that changes to that dollar being more valuable to pay down the debt, we will pivot and focus on the debt. As Amit mentioned, we look at our debt as it relates to the fair market value, right? That's the price to buy the bonds back today. So when we're looking at reducing it, we're comparing today's share price to the ability to purchase the bonds at the current prices and we still see more value right now in the share buyback. But like I said, once it changes, you'll quickly see our priorities change from one to the other.

Operator: As there are no additional questions waiting at this time, I'd like to hand the conference back over to Kurt MacAlpine for closing remarks.

Kurt MacAlpine: Just wanted to thank everyone for their participation in today's call. We look forward to speaking with you all next quarter.

Operator: Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your line.