Firan Technology Group (TSX:FTG) Q3 2026 Earnings Call

0:00 I would like to welcome everyone to the FTG Q3 2026 analyst call. All lines have been placed on mute. There will be questions and answer session following the call. If you would like to ask a question during this time, simply press star followed by 1 on your telephone keypad. If you would like to withdraw a question, press the star 2. Please note that this call is being recorded. I would now like to turn the call over to Mr. Brad Bourne, President and Chief Executive Officer of FTG. Mr. Bourne, you may proceed.

0:36 Thank you. Good morning. I'm Brad Bourne, President and CEO of Friend Technology Group Corporation, or FTG. Also on the call today is Drew Knight, our Chief Financial Officer. Before we go any further, I must caution you that this call may contain forward-looking statements. Such statements are based on the current expectations and management of the company and inherently involve numerous risks and uncertainty, known and unknown, including economic factors and the company's industry generally. The preceding list is not exhaustive of all possible factors. Such forward-looking statements are not guarantees of future performance and actual events and results could differ materially from those expressed or implied by forward-looking statements made by the company. The listener is cautioned to consider these and other factors carefully when making decisions with respect to the company and not place undue reliance on forward-looking statements. The company does not undertake and has no specific intention to update any forward-looking statements, written or oral, that may be made from time to time by or on its behalf, whether it's a result of new information, future events, or otherwise.

1:39 Our third quarter was another record quarter for FTG. On virtually every metric, we had record revenues, record earnings, record bookings, and record backlog, with continued strong end-market demand tailwinds. More specifically, in our third quarter of 2026, we achieved the following. Bookings were $90 million, marking a 75% increase over Q3 2025, and a book-to-bill ratio of 1.41 to 1 in the quarter. The quarter end backlog stood at $221 million, a 49% rise from 2025 year end. Revenue was $64 million in Q3 2026, a 34.3% increase over Q3 25. Adjusted EBITDA was $15.1 million in Q3, a 97% increase from $7.5 million in Q3 last year. Adjusted EBITDA is $40.8 million for the trailing 12 months. Net earnings were $10 million in Q3 2026, an increase of $7.2 million from Q3 last year. And free cash flow was positive $7.1 million in the quarter.

2:41 Net cash at quarter end was $3.9 million. We had no bank loans at the end of the quarter. Other accomplishments in our third quarter included bookings continued at a record pace, and many orders included both price increases and significant price premiums for quick delivery. FTG continue to leverage increased defense spending. In 2025, we qualified for two large-scale classified defense programs, and in Q3 this year, there were significant orders placed for these programs, and deliveries ramped up, contributing materially to our sales and earnings in the quarter. Strategic leadership appointments made at a number of FTG sites last year has resulted in stronger operating performance and throughput across the company. We continued our efforts to increase our international diversification and thereby reduce our exposure to U.S. tariff risks. Sales in Canada were up 61% in Q3 this year compared to Q3 last year. This included shipments for deliveries for the De Havilland Canadair 515 aerial firefighting aircraft and shipments for the C919 narrowbody airliner, also continuing Q3, driving a 40% increase in sales to Asia in the quarter.

3:54 FTG qualified with new customers in Europe and Australia. We opened our aerospace facility in Hyderabad in the quarter, which will also reduce our tariff exposure and open new markets for us. FTG Aerospace Calgary continued to benefit from efforts to certify and sell its product portfolio globally and had profitable results again in this quarter. An FTG Circuits Toronto Union Agreement with its representative staff was completed and ratified. It is a new four-year agreement. Drew will provide some more details on Q3 2026 shortly, but let me turn to some external items. Our end market demand remains strong. Airbus is targeting 870 aircraft deliveries in 2026, up about 10% from last year. As of August, they delivered 475 aircraft this year.

4:43 But more importantly, they're looking to ramp to over 1,000 aircraft annually in the next few years. Airbus has a backlog of over 8,000 orders. At Boeing, they shipped 600 planes last year, and in the first six months of this year, they shipped 314. They're planning to increase their delivery rate on the Boeing 737 from 42 to 47 aircraft per month. And on the 787, they're planning an increase from 8 to 10 aircraft per month. Boeing's backlog is about 6,000 planes. In the business jet market, Bombardier reported mid-single-digit revenue increase for the first half of this year. They're also pushing hard to add a defense component to their business and have had some success to date in selling their business jets for defense applications. In the helicopter market, Bell Helicopters reported a 12% increase in deliveries in their last quarter. All of this bodes well for us as we look to future demand in the coming years. Defense spending is expected to continue to increase going forward.

5:42 U.S. budget request for next year is for a 45% increase in spending to about $1.45 trillion. with increased spending on various hardware programs, which are most relevant to manufacturers like FTG. There are new commitments from all NATO members, including Canada, to ramp defense spending to 3.5% of GDP with another 1.5% for defense infrastructure. Canada increased their defense spending in their last fiscal year to 2% of GDP. All of this indicates significant increases in defense budgets for all European countries and Canada. So, as we have said for many years, FTG's goal is to participate in all segments of the aerospace and defense markets as each moves through their independent business cycles. It is not often all segments are growing, as has been the case for the past few years.

6:31 Beyond all this, let me give you a quick update on some key metrics for FTG for our third quarter this year. First, as already noted, the leading indicator for our business is our bookings for new orders. Our bookings were just over $90 million in the quarter, again, a record for us. This resulted in a backlog of over $220 million at the end of the quarter, even after record shipments. Q3 sales were $64 million, up 34% from Q3 last year. Within this, our aerospace business sales were up 18% in Q3 to $19.8 million compared to Q3 last year. Sales were up everywhere except Chatsworth, where we continue to see delays in the timing of some orders. While we have held our grand opening ceremony for our new site in Hyderabad, India, the site is not yet shipping products. Calgary saw strong revenues from hardware sales, which were mostly SATCOM radio delivered in Canada and the U.S., but also some additional edge equipment. We also saw some revenue related to weather hardware and increasing weather data revenues as well, mostly related to our NOAA contracts. Licensing revenues from our SATCOM radio were very strong again in the quarter. On the circuit side of our business, sales in the quarter were $45.1 million, up 40% over Q3 last year. Our Minnetonka and Fredericksburg sites were each up between 75% and 80% over Q3 last year.

7:57 Only our Hayborough site was down marginally in the quarter. Overall at FTG, our top five customers accounted for 56.8% total revenue in Q3. This compared to 52.7% last year. The increase was primarily due to the increase in activity from the two defense programs. Both are with existing top five customers. Airlines were three of our top 20 customers in the year due to our flight acquisition. Also interesting to note, of the top 10 customers, seven are customers shared between Circus and Aerospace, and one is a former flight customer. Given the actions of the new administration in the U.S. of implementing tariffs. It's also good to see that two of our top 10 customers are outside the U.S. and another six have operations both inside and outside the U.S.

8:47 While on this topic, 70.9% of FTG sales are to U.S.-based customers in Q3 this year. This includes sales by U.S. sites as well as sites from FTG sites in Canada or China. This compares to 71.2% last year. While sales grew by 34% in the U.S., they grew faster in Canada and Asia as we benefit from previous efforts to expand globally, including things like our content on the C919 aircraft in China and acquiring flight with sales globally. Sales were flat in Europe in the quarter. Sales outside the U.S. are helpful in the event of tariffs the U.S. might impose on our non-U.S.-based sites. Our goal is to continue to grow our non-U.S. revenue for our non-U.S.-based sites but at the same time, we're also happy to grow our U.S. revenue for our U.S. spaces. In Q3, 2026, 31% of our total revenues came from our aerospace business, compared to 35.1% last year. The drop is due to the ramp of the defense programs on the circuit side of the business. I would now like to turn the call over to Drew, who will summarize our financial results for our third quarter this year, and afterwards, I will talk about some key priorities we are working on.

9:58 Drew? Thanks, Brad. Good morning, everyone. I would like to provide some additional detail on our financial performance for Q3 starting with revenue and gross margin. On sales of 64 million, FTG achieved a gross margin of 27.5 million or 42.9% in Q3 2026 compared to 14.5 million or 30.3% on sales of 47.7 million in Q3 2025. The increase in gross margin dollars and gross margin rate is based on top line growth and those that have followed FTG in the past have heard Brad say that top line drives bottom line. When top line revenue grows, FTG's fixed costs allow for much of the contribution margin to fall to the bottom line and improve margin and profitability rates.

10:45 Of note, the improved profitability at Aero Calgary and several US sites has a substantial impact on consolidated margin rates. Aero Calgary continues to benefit from its ongoing licensing revenue that resumed in 2026 a customer contract cancellation charge as well as repeat hardware sales of its AFERS Edge Plus product. Additionally, Aero Calgary also certified and shipped the first units of its WVSS weather sensors, which also come along with ongoing data revenue streams. The U.S. sites improved margins via increased throughput with limited added resources. This heightened capacity utilization drives superior margins. Moreover, The improved throughput at several US sites enabled them to provide quick turnaround deliveries which attract pricing premiums.

11:38 This quick turnaround production is a value-added service that is frequently requested by customers in the aerospace and defense marketplace and FTG has provided this service for many years in certain plants. In Q3, all FTG circuits plants were able to provide this high margin quick turnaround service. Moving on to SG&A, SG&A expense was $10 million or 15.6% of sales in Q3 2026 as compared to $6.3 million or 13.2% of sales in the prior year. The increase of $3.7 million in Q3 2026 was primarily due to increased performance compensation of $2.3 million tied to higher profitability. also driving an expense increase for IT costs tied to the FTG website redesign and CMMC cybersecurity efforts, plus sales and marketing costs associated with increased sales activities, including commissions and added headcount.

12:38 Now, speaking to R&D, R&D costs for Q3 2026 were $3 million, and the Board of Directors of the Board of Directors of recorded in Q3 2025. Regarding foreign exchange, FTG is exposed to currency risk through transactions and also assets and liabilities recorded in foreign currencies and finally from foreign subsidiaries translation of financial statements for consolidation.

13:36 The average exchange rate experienced in Q3 2026 was 1.389 as compared to 1.374 in Q3 2025. which equates to a strengthening of the U.S. dollar by 1.1%, and this helps results for FTG's operations located in Canada. Moving on to profitability and EBITDA, adjusted EBITDA, as detailed in the MD&A, was $15.1 million for Q3 2026 for 23.6% of sales compared to $7.7 million or $16. Adjusted EBITDA improved $7.4 million over Q3 2025 for the same reasons as noted for the gross margin improvement, namely increasing top line drives, increasing bottom line and profitability rates, and due to the significantly improved contributions from Aero Calgary and our five U.S. plants.

14:32 The circuits expedite fees and Aero Calgary's licensing revenue and contract cancellation fee were all high margin revenues for Q3. Regarding earnings, for Q3 2026, FTG recorded net earnings of $10 million or $0.39 per diluted share as compared to $2.8 million or $0.11 per diluted share in Q3 2025. The earnings comparison to prior year was improved by favorable income taxes based on the distribution of profits in 2026 being more widespread and utilizing some historical tax losses that have been carried forward. Speaking to income taxes, in the prior year, Q3 2025 was tax inefficient with a few non-deductible losses unable to reduce taxable income in profitable business units and thus incurred a 30% tax rate.

15:24 Conversely, in Q3 2026, profits were widely distributed and utilized historical tax losses for a tax rate of 12%. I'd like to remind everyone that FTG continues to have substantial tax losses available to offset future income and the accounting benefit of these losses has not been recognized in our financial statements. These tax loss carry forwards are located in both the USA and Canada with the Canadian losses recently acquired in the acquisition of flight in December 2024. Regarding our financial position, FTG maintains a strong balance sheet and repaid all interest-bearing debt in Q3. In other words, we repaid our bank debt and retained the government debt that is interest-free.

16:11 We finished Q3 in a net cash position of $3.9 million as compared sequentially to net debt of $2.9 million in Q2 2026 and compared to net debt of $8.1 million as of 2025 year-end. Free cash flow in Q3 2026 was $7.1 million as compared to negative $4.6 million in Q3 2025. Capital expenditures, including non-current deposits, were $4.2 million as compared to $1.2 million in Q3 2025. Going forward, we expect CapEx to be closer to FTG's long-term target of 3% of revenue. However, as we add production capacity in Canada, the USA, and India, This rate may tick higher to 4% or 5% in the next couple of quarters.

17:02 As at the end of Q3 2026, the corporation's primary sources of liquidity totaled $94 million, consisting of working capital of $66 million and $28 million of unused credit facilities. FTG has plans to improve cash efficiency and minimize stranded cash in various business units. Accounts receivable days outstanding were 61 at the end of Q3 2026, up from 55 days at the year end due to recent revenue and AR ramp-up, and also due to timing of a couple of specific customer payments. Inventory days were 101 at the end of Q3 2026, down from 112 days last quarter and 105 days at 2025 year end. This inventory level is higher than our usual plans and is to address order fulfillment in coming months.

17:59 Accounts payable days outstanding were 69 at the end of Q3 2026 as compared to 58 at the 2025 year end. As we plan to manage working capital offsets with our partners, we're practical. Transitioning to our future outlook, FTG's book-to-bill ratio for Q3 2026 was 1.41 to 1. We entered Q4 2026 with a record backlog of $221 million, of which approximately 84.8% is expected to be converted to revenue through Q3 2027, or in the next 12 months. The new business activities in both the aerospace and defense industries are strong and continue to accelerate. Both the circuits business and aerospace business are increasing throughput and winning their share of new customer RFPs.

18:49 In Q4 2025, we noted the program awards for two substantial classified defense programs. We have since received the opening POs and started deliveries in Q3 2026, though these orders are still only a fraction of the annualized volumes. I should note that FTG's reported backlog only includes POs received and does not include program awards with estimated volumes. As we approach the midpoint of Q4, we are focused on managing cash flow and improving operational efficiency and throughput. Also, we are continuing with the Aero Calgary Revenue Plan, which is already bearing fruit with an incremental benefit from insourcing the manufacturing of their products starting this quarter. I should note that our complete set of quarterly filings are available on CDARplus.com or on the FTG website. With that, I would like to turn things back over to Brad.

19:42 Thanks, Drew. Let me delve into some important items for the future of ATG that will continue to build on our past accomplishments. We will continue to pursue growth in the defense market. As noted previously, we expect defense spending to continue to grow in Canada, in the U.S., and NATO. We had some good success on some classified programs in the U.S. last year, and we are pursuing more new programs this year. We are seeing volumes ramp up in many areas, including electronics for various weapon and electronic warfare systems. With our five sites in the U.S., we are well positioned to capture increased U.S. defense spending. In particular, we had acquired the Minnetonka site in 2023 to be our high-technology, U.S.-based circuit board site for the military market, and we are now seeing the benefits of this acquisition.

20:29 The site has had the highest sales in their history in Q3, and as fast as we can grow and offload work to other sites, we see more demand than we can support. Beyond this, we will look for opportunities outside of the U.S. as well. The NATO defense budget was about one-third of the U.S. budget a decade ago and it's two-thirds today. So it's definitely a market of interest to us. As Canada ramps its defense spending and its commitment to NATO, we're hopeful that it will create new opportunities for FTG sites outside the U.S. A good example of this is the Lombardier Saab Global Ag Program, which is gaining momentum in Europe and Canada. And given our relationship with Lombardier, we will have some content on it. After the US and NATO, the next biggest defense market is India.

21:14 And as we get our site established there, we will look to capture some market share in this market too. We will look to capture more work in the commercial aerospace market and grow as volumes ramp up. As part of this, we will look for ways to increase our activity with Airbus, as they are the stronger performer right now. To do this, we will leverage our Canadian, Chinese, and possibly even our Indian sites. Given the uncertainty regarding tariffs from the U.S., we will look to continue to diversify our revenue streams for our non-U.S. sites. Some of the items I already mentioned will assist this. But it will remain a priority action for us, and to this end, we added a new salesperson in Quebec recently. We will continue to increase our sales staff outside the U.S. to help drive this growth. Tariffs are now impacting input costs in our circuits business.

22:02 This is because a lot of materials used in the manufacturing process originate outside of North America. The impact is highest for our U.S. sites, but Toronto is also impacted when materials ship via the U.S. to Canada. We estimate the overall cost impact to be in the millions of dollars in 2026. We have started to work with our customers to pass these increased costs to them and their end users. Some of our revenue growth in the quarter is a result of price increase. Also, for our circuits business, we are seeing significant cost increases on input costs driven by circuit demand related to AI data centers. The costs are moving up fast, and again, we are working towards passing these costs on to our customers. But it's tough to keep up with the rate of cost increases we are seeing.

22:48 As mentioned, we renewed our collective agreement for our unionized staff in our Circus Toronto facility in July. The wage increases are fair and will not impact the site's profitability. The new contract is four years in duration. And we will continue to take steps to create value from our acquisition of flight. We have renamed the business FTG Aerospace Calgary as we amalgamated it legally into FTG. The amalgamation was done to possibly enable us to use flight tax losses beyond just our operation in Calgary. But to be clear, we do not have certainty that this will be possible. In the Calgary business itself, we believe we are now well positioned to have a strong year as a result of our product certification and SDC efforts last year. We are seeing strong demand for all three products and our pipeline looks robust for 2027.

23:37 Licensing revenue for our SATCOM radio product has returned and should be consistent year to year going forward. The licensed product ends up on Airbus aircraft, so we know the demand is strong. We are now also confirmed as the manufacturer of this product for the licensee to capture additional margin from this product. If things proceed as anticipated, this will benefit us in 2027 and beyond. The product will be manufactured in our Chatsworth site. We're also going to manufacture this product for our own aftermarket sales in Chatsworth as well, and we expect our first shipment in Q4 this year. The Edge Plus WQAR has the key STCs in place, and with our first few deliveries behind us, We are quoting many new opportunities in a number of geographic jurisdictions. And we are starting to manufacture this product in our Tianjin plant to enable us to capture this margin as well. First shipments of this product, manufactured at FTG, should also happen in Q4 this year.

24:36 Sales of their weather product is starting to ramp up as well with our contract with NOAA in the U.S. We obtained our first STC to install the WVSS-2 on a Boeing 737 MAX 8 aircraft in the quarter. The first unit has been installed on a WestJet aircraft. Once approved and installed, there is a recurring revenue stream as we provide real-time weather and water vapor readings to NOAA. We expect to install further units with WestJet through the balance of this year, each incrementally increasing our recurring data revenue potential. These actions should enable FTG Calgary to be a positive addition to FTG and further mitigate the risks from U.S. tariffs. We opened our aerospace facility in Hyderabad, India in Q3. Our decision to expand geographically was partly to us looking for an insurance policy against anything negative that could happen to our China operations, but it was also partly to expand into a new region with growth potential and to add our overall capacity.

25:35 As we analyzed options, we concluded India is a very cost-effective place for manufacturing. And with Prime Minister Modi's Make in India policy, coupled with significant defense spending, it would be an ideal place to operate, a place where we can serve our existing question customers, but also penetrate the Indian aerospace and defense markets. We selected Hyderabad as it has an aerospace hub primarily focused on manufacturing, unlike Bangalore, which is more engineering and software focused. Through the balance of this year, we will be staffing up and training and building some initial products but is expected to be intercompany activities, so no real incremental benefit to FTG before 2027. We expect to have the site certified to key aerospace standards by the end of this year, after which we will be able to ship to external customers.

26:24 We continue to assess possible corporate development opportunities that could fit with either of our businesses. We have a few areas of interest, including establishing a footprint in Europe Growing our presence in India on the circuit side of the business or expanding our technology in a few areas. We are evaluating both acquisitions and greenfield construction to accomplish the above ideas. Related to this, if Q3 revenue is annualized, our run rate is now over $250 million. We still have capacity available to grow by adding people at many sites. We're also still working to add additional capacity by adding some equipment in our circuits Toronto and getting our new aerospace Hyderabad site into production. We are not capacity constrained looking forward, although our rate of growth might continue to be our challenge. With a focus on operational excellence in all parts of FTG, our strong financial performance in the first nine months of this year, our past acquisitions, our key sales wins, we are confident we are on a strong long-term growth trajectory. This concludes our presentation.

27:31 I thank you for your attention. I would now like Open the phones for any questions. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star then the number one on your telephone keypad. And if you would like to withdraw a question, please press star then the number two. Again, that will be star then the number one for you to ask questions. Your first question comes from Nick Corcoran from Ackerman Capital. Please go ahead.

28:03 Morning guys and congrats on the record third quarter here. Thank you. Just a quick question for me. The third quarter is typically seasonally softer. Did you see any seasonal trends that you typically see? And I guess the related question is have you been able to keep momentum into the fourth quarter here?

28:24 Yeah, you're right. Our history is Q3 is a little bit softer in that it's the summer months. For our Q3 is June, July, August. We typically see more vacations and we lose production days. So there's never been a demand issue in Q3. It's more how much can we produce. This year, and Q3 particularly, we've had crazy strong demand. As Drew and I both mentioned, there were some customers looking for really expedited deliveries. So we did everything we could to minimize our production, lost time due to vacations and that, to the benefit of the quarter. You know, the demand is still there going into Q4.

29:09 We continue to work and do whatever we can to ramp our production, support that demand. So, yeah, the momentum continues into Q4.

29:19 Good. And you mentioned that customers are willing to charge premium pricing to expat orders. Has this continued as well?

29:27 Yeah, I mean, there's always some of that in FTG. And, you know, basically we... If we can deliver fast, we can get a premium price. Customers were super keen to get products, so definitely that benefited us in the quarter. But we have some amount of that every quarter. It's just a question of how much.

29:53 And any indication whether the expedited orders were for aerospace or defense?

29:59 Yeah, I'd say mostly on the defense side.

30:04 Good. And then one last question from me. You mentioned that you're in the process of getting equipment to add into Toronto. Would you expect that to be operational?

30:15 I expect it to be operational now, but it's not. But it's, you know, I guess like everything in the industry right now, leak times have pushed out on equipment. I think we're expecting to get the equipment in to the building by the end of the year, and now we're just working with the suppliers. In some cases, we need them to help install and commission it, and we're trying to get that scheduled. That could end up being, you know, in the end of Q1 next year, somewhere around there.

30:47 That's good, Collin. Thanks for taking my question. I'll pass it on. Okay.

30:51 Thanks, Ben. Your next question comes from Razel Stanley from Beacon Securities. Please go ahead.

31:00 Good morning and echo the congrats on our spectacular quarter. Thanks for the question. Maybe first just to follow up on the premium pricing you obtained on expedited shipping. I guess, can you comment as to how broad-based across defense you saw this? So we know the tailwinds are there, but I guess I'm ultimately wondering was it focused in any product categories such as the weapons and electronic warfare opportunities you mentioned earlier.

31:27 Yeah, I guess a couple comments on that. I think I should have said it on the previous question. But I guess first thing, when customers need expedited delivery, there is pricing premiums for us to do that. And there's costs related to it on our side, right, that we need people to work overtime on weekends and that to try to support it. But I guess the point I was going to make is The amount of expedite also drives the premium. So if someone wants to pull an order in a week or two, there's a smaller premium than if they want to pull it in a month or two. And so it's a variable. The size of the premium is variable depending on how desperate they are. And then to your specific question, for sure the two classified defense programs drove significant expedite fees in the quarter.

32:25 Got it. Thank you on that. It obviously doesn't look it from the bookings number in the quarter. Great number there, but the U.S. government is now operating under a continuing resolution. I'm just wondering how much of a headwind risk that might be in future quarters. How long would that need to persist before it might disrupt bookings from your perspective at all?

32:48 I don't know. I'm The U.S. budget process is a complex one. My feel is there's continuing resolutions every year for some amount of time and somehow they work their way through it. Is it a risk? Yeah. But for me to guess what the implications are, I have no idea. It's beyond my pay grade. Whatever happens, happens. But history would say it's unusual when it actually gets to the point where it impacts bookings.

33:22 Got it. Maybe one more for me. Just coming back to the classified defense programs, in the second program in particular, I think on the July call you noted you were waiting on the customer to complete some redesign work. It reads like those orders have started. You mentioned the first program could be really huge in terms of annual revenue potential, but probably split across programs. multiple providers. Are you envisioning the same situation, the same scale with the second program?

33:51 Yeah, they're both ridiculously large. There's no chance we could support it all. So yeah, they're definitely spreading it across a few different suppliers. But yeah, they're both significant in terms of volume, annual volumes, like $50 to $100 million annual potential each.

34:15 That's excellent. I'll get back in the queue.

34:17 Congrats again. Your next question comes from Kalen Purdy with ADB Capital Market. Please go ahead.

34:29 Hey, good morning Brad and Drew. Filling in for Nick Boychuk here. Congrats again on the great quarter. I'll just echo a question that Russell asked there. How significantly did the two large classified contracts impact the financial results this quarter and What kind of updates would you share regarding those program milestones? Any run rate visibility? I know you mentioned $50 to $100 million. Just echoing that that's for those two contracts. And then I guess the multi-year outlook for those efforts. Just any more color there would be great.

35:01 Yeah. I don't know where to start. So in terms of the multi-year, for sure they're both multi-year programs. For sure I don't know what they are, so I'm not going to give you much color on that. And What else did you ask about? How much did they impact a quarter? I don't know. That's a good question. I don't have a hard number on that, but if I was guessing, I'm going to say maybe it was in the order of 10% of our revenue, somewhere in that range, so it's not 50% of our revenue, but it definitely was helpful. And I'm sorry, what else did you ask?

35:39 I think that's great color there. We're good there. I appreciate that, Brad.

35:43 Okay. Yeah. Just another one for me, I guess. Where do the staffing levels and labor availability currently sit across your U.S. facilities? I know you previously mentioned some of them and experienced some tightness.

35:58 That's a good question. A couple of comments. We're seeing some interesting developments across FTG. I'm going to say two sites. Our Fredericksburg site and our Circus Chatsworth site both have new guys running them. Both of those guys are closing in, well, they're doing, I'm going to say, 30% to 100% revenue increases with no headcount. So that's what we like. So it solves the staffing problem because they're just cranking it out with the staff they have. And then Minnetonka, definitely we needed to staff up. The guy running Minnetonka now has come up with a much more aggressive, professional, robust plan for staffing there. We're plus, I don't know, 25 to 30 people, somewhere in that range this year, basically tracking what we needed for that site.

37:01 We're getting them in the door. We're retaining them. The turnover's down. So he's doing a great job of getting the staff in there to support his ramp in volume and It looks like it's going really well right now. At the end of this, some of those challenges and constraints have been overcome in the quarter.

37:25 Okay, that's all great to hear. One last one for me. Have your thoughts on North American capacity increases changed at all as a result of this quarter?

37:36 No, I don't know. It depends what you're asking. I don't see us being overall capacity constrained, as I was trying to say in my talk, that the rate of growth is what we're more focused on than the ultimate total capacity we have available. And so it kind of comes back to your questions on staffing that. So we did great revenue growth in a couple of sites with no staff additions, but to continue to grow, we're going to have to add some people there. and so we're focused on doing that. We're focused on filling out the afternoon and night shifts in these sites so that we can run the equipment more hours a day, which is what drives our utilization.

38:25 We're working to continue to ramp our throughput, ramp our production to support what looks like continuing growth in demand going forward.

38:38 Okay, that's great, Brad. I really appreciate the color, and congrats again on the quarter. I'll pass the line.

38:43 Thank you. Your next question comes from Steve Hansen from Raymond James. Please go ahead.

38:52 Yeah, good morning, guys. Thanks for the time. Brad, I wanted to ask the same question a different way earlier. Are the circuit margins sustainable here? I mean, the expedited premiums, are great, but we're just trying to understand the durability of those margins on the back of this recent quarter, which look pretty outstanding.

39:10 Yeah, don't know, right? It's Definitely some of it's continuing into our Q4. What happens beyond this, we'll see. This is the one wild card with these expedited pricing. They're expedited, so it's not long-term contracted pricing. It's what is the immediate demand of customers and what are they willing to pay to get their product. And it's the nature of the business. Not us, but others in the industry. There's companies that just focus on this expedited delivery, and they go in every month with no orders and hope to book it and ship it. And so the visibility by its nature is really short-term. And so there's definitely going to be some going forward.

39:57 How it compares to where we're at right now, just don't know.

40:02 Okay, that's fair. And just maybe on the military programs again, just to drill down just a little bit, I think Drew mentioned we're still at the relatively early innings here, but can you just give us sort of a sense for the cadence? Are we going to ramp for another three or four quarters, two quarters, two years? Just give us a sense for when we expect to get to those run rate levels.

40:24 It will ramp through next year and then sustain for some number of years after that. and again but you know keep in mind whatever they ramp to it's not going to be 100% FTG revenue there's going to be a split partly you know from the customer perspective just to you know manage risk but also just from a capacity perspective there's no chance we could support 100% of the demand from either of these programs.

40:52 No understood so maybe just a way to rephrase are you suggesting by the end of next year we'll be sort of hitting run rate?

40:59 Yeah, I think that's fair.

41:01 Okay, great. And then just I wanted to go back to the new customer qualifications that you referenced, certainly sub-Global Eye, Bombardier makes some sense. Just how are we thinking about, again, servicing those components and those programs just from a capacity standpoint? It sounds like Toronto will be the logical place, but just give us some color on that.

41:21 Yeah, and I guess start with the Global Eyes. That one's really easy. So Basically, the cockpit of every single Bombardier aircraft ever manufactured uses FTG panels in the cockpit. Maybe that's a slight exaggeration. But we are their cockpit panel supplier for everything they manufacture. And so the Global Eye is a, I can't remember what it is, a Global 6000 aircraft. So by default, we're already on it. If they sell more, we get content just because we're on it. We've seen a little bit of work from Saab where they're customizing a few panels for the cockpit for defense applications. I think we'll see a bit of that continue. That's that one. Other stuff, we're starting to see a little bit of leverage on our side. When Canada buys new defense products, they still source a lot of stuff offshore, but the government generally tries to get offsets basically if Canada is going to spend a billion dollars with someone they want that supplier to spend a billion dollars in Canada and so we are seeing some customers some potential customers that are winning Canadian programs looking for content and are talking to us and that's creating some new opportunities for us you know one of the the new Qualifications I did mention is from an offset program where an international supplier is looking for Canadian content.

42:57 Understood, that's helpful. And then just lastly, I just wanted to get a sense for you, reference corporate development opportunities, just wanted to get a sense for your thoughts on how rich the M&A pipeline might be. and then secondarily, the Greenfield feels like it was a new reference. So I just wanted to get a sense for what you're referring to there on a domestic basis, I presume, but I'm not sure.

43:17 Right. That's good. You were paying attention. I'm impressed. So it was a new reference. And it's, you know, I guess a couple of things. There's a number of opportunities floating around in terms of corporate development. Nothing that's perfect and nothing that's imminent. But they're out there, so there's a reasonable number of opportunities to consider. And then in terms of Greenfield, a couple of comments. So I probably have not mentioned this in the past, but my deal in India, for instance, that I just built an aerospace facility. I have an option on the land next door for a couple of years that I could use it to build a circuits facility.

44:09 For sure, that decision is not made, but it's an option. And so there is land available if we chose to do it. That's an example. I've said for a long time that Europe's of interest to me. It's still of interest to me for both sides of the business. Obviously, I don't have a deal done So now, and I've looked at a number of things, a number of things happened, and I've looked at other people, and there was a company that built out a big circuit facility in Eastern Europe recently in the last year, and then it just caused me to think maybe Greenfield is an option as well. And for me, it's just math and it's trade-off. What's the better deal with the better return? If I can buy something at a good price, that's faster and better.

44:55 but if prices are higher, building could be the better investment. So both are on the table at this point.

45:04 Okay, very good. Appreciate the time.

45:06 Okay, thanks, Steve. Again, if you would like to ask a question, please press star then the number one in your telephone keypad. Your next question comes from Razel Stanley from BN Securities. Please go ahead.

45:19 Good morning. Thanks for the follow-up, guys. Maybe just on simulators, we haven't discussed that in a in a while, I guess, but CAE recently won a large contract with U.S. Air Force to train crews on the C-130, and I'm wondering what kind of opportunity that might represent. Might you see some trickle down from that and how you're thinking about that part of the business?

45:39 Yeah, simulator activity has continued kind of at a steady state, certainly lower than where it had been a number of years ago. and just, you know, the handful of programs that we're involved in, either with CAE or flight safety, there hasn't been huge demand or significant demand on those. But, you know, I guess your question, we've seen some recent quote activity. I guess we're reprioritizing it a little bit within FTG, but where that's going to turn out, you know, result in future orders, future revenue, probably not back where it was but you know continued decent bit of revenue for us.

46:29 Thanks for that and maybe just my last question on with respect to Boeing recently won or were awarded in another sixth generation fighter program this one from the Navy I guess they have both of them now I know these are much longer term but I'm curious from your perspective how much of an opportunity they represent to you and how you're thinking about when you need to start pursuing content on those opportunities assuming you plan to. Thanks.

47:01 Yeah, I guess all I can say on that is first of all, Boeing's done well recently on the defense side. They won the next generation air dominant fighter and now they just won the Navy version. So they're they're doing well and I guess as of Monday this week we had a sales meeting at FTG and one of the topics was we need to make sure we're engaging a lot with Boeing going forward because they seem to have their act together right now but you know this is not something that's relevant or material or something that we need to address probably for a year or two.

47:44 That's it. Thanks for the color. Thanks for the follow-up.

47:47 Thanks, Brad. Your next question comes from Steve Hansen from Raymond James. Please go ahead.

47:56 Yeah, thanks. That's just a quick one just because we're talking about potential stuff. Look, the space environment continues to evolve pretty rapidly. Brad, I know you've got a background in the industry and it's really never represented higher volume opportunities that you could really put your capacity towards. But I mean, how are you thinking about the broader landscape today? There's been a lot of developments here domestically, both in Canada and the US. So just getting a sense for how you think about that broader opportunity set now.

48:22 Yeah, it's a market of interest. As I think I've said previously, typically, the space market ends up being lower volumes, lower potential than what we see on aircraft and other things. But it's still of interest to us. And then it kind of relates back to Canada defense spending. So Canada said they're going to buy some more communication satellites for the far north and tell us that's involved and MDA is involved. And then for sure it's something we'd like to see if we can get our fair share of. And the fact that we just add or are adding a new salesperson in Quebec, for sure one of the focuses will be companies like MDA.

49:07 Okay, very good.

49:08 Thank you. There are no further questions at this time. I'll turn the call back over to Mr. Bourne.

49:19 Okay, thank you. A replay of the call will be available until Friday, November 13th at the numbers listed on our press release. The replay will also be available on our website in a few days. I thank you all for your interest and participation. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.