TSE:CHR Chorus Aviation Q2 2024 Earnings Report C$19.11 +0.08 (+0.42%) As of 05/2/2025 04:00 PM Eastern Earnings HistoryForecast Chorus Aviation EPS ResultsActual EPSC$0.08Consensus EPS C$0.06Beat/MissBeat by +C$0.02One Year Ago EPSN/AChorus Aviation Revenue ResultsActual Revenue$351.22 millionExpected Revenue$404.00 millionBeat/MissMissed by -$52.78 millionYoY Revenue GrowthN/AChorus Aviation Announcement DetailsQuarterQ2 2024Date8/13/2024TimeN/AConference Call DateWednesday, August 14, 2024Conference Call Time9:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress ReleaseEarnings HistoryCompany ProfilePowered by Chorus Aviation Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 14, 2024 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen, and welcome to the Corus Second Quarter 2024 Financial Results Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Wednesday, August 14, 2024. I would now like to turn the conference over to Tyrone Cote, VP of Treasury Investor Relations. Operator00:00:26Please go ahead. Speaker 100:00:28Thank you, Joanna. Hello and thank Speaker 200:00:30you for joining us today for our Q2 conference call and audio webcast. With me today from Chorus are Colin Kopp, President and Chief Executive Officer and Gary Osborne, Chief Financial Officer. We will begin today's call with a brief summary of the results, followed by questions from the analyst community. As there may be some forward looking discussion during the call, I ask that you refer to the caution regarding forward looking statements and information found in our MD and A. This pertains specifically to the results and operations of Chorus Aviation Inc. Speaker 200:00:59For the 3 months ended June 30, 2024, as well as the outlook section and other sections of our MD and A where such statements appear. As a result of the agreement to sell the Chorus Regional Aviation Leasing segment, RAL, the RAL segment has been reclassified to discontinued operations and our Regional Aviation Services segment together with corporate is now referred to as continued operations. Finally, some of the following discussion involves non GAAP financial measures, including references to adjusted net income, adjusted EBT, adjusted EBITDA, leverage ratio and free cash flow. This quarter, we have also provided certain of these measures on a pro form a basis to illustrate the financial impact of the disposition of the RAL segment on our capital structure. Please refer to the MD and A for further information relating to use of such non GAAP measures and pro form a figures. Speaker 200:01:48I'll now turn the call over to Colin Collin. Speaker 100:01:51Thank you, Tyrone, and good morning, everyone. As we just recently reported out on the RAL sale transaction, I'll keep my comments short today. I'm pleased to report that our second quarter results with revised comparative figures, as Tyrone mentioned, reflect a strong, steady and reliable business going forward, with our cash generation enabling us to further improve our leverage ratio. As we look forward, Jazz has approximately $1,000,000,000 in contracted revenue in the form of fixed fee and leasing revenue under its CPA for the term of the agreement. And Voyager is steadily growing. Speaker 100:02:30This quarter both Jazz and Voyager delivered strong financial performance with a combined adjusted EBITDA of 51,000,000 dollars 105,000,000 year to date. Voyager delivered a $4,800,000 increase in revenue over Q2 of 2023, demonstrating their ability to seize new opportunities. They purchased a King Air 200 in the Q2 of 2024 in support of their contract with Air Ambulance New Brunswick for the provision of fixed wing air ambulance services. I'm pleased with our results and the progress we've made with improving the financial position of the business. Through the quarter, we also bought back 1,400,000 common shares under our NCIB. Speaker 100:03:18Turning for a moment to our recent announcement on the divestiture of Falco and our regional aircraft leasing business. Process continues to progress well with our shareholder meeting called to approve the transaction in just over a month scheduled on September 25. I'm very pleased with the feedback we've received so far from our shareholders and industry partners, which further reinforces the value creation of this transaction. We appreciate that it will take a few months for us to get through the various approvals and for the transaction to close and that it will also take time for the true value of our business to be reflected in our share price. It is well recognized that this transaction will enable us to significantly deleverage our capital structure, generate more predictable cash flow and provide us with the flexibility to grow and return capital to common shareholders going forward. Speaker 100:04:17Benefits of this transaction cannot be overstated when you consider the strength of our go forward cash flow and liquidity in combination with the simplification and improved flexibility of our business. On the debt side alone, we see a dramatic reduction in our pro form a leverage ratio to 1.5. And post closing, we expect to eliminate substantially and post closing, we expect to eliminate substantially all corporate debt giving us strong financial flexibility going forward. This will create the right conditions to allow us to grow at a steady pace and capitalize on accretive opportunities in the aviation and aerospace sector. I also recognize that our investors want to know more about the return of capital to shareholders. Speaker 100:05:03We appreciate your patience as we work towards the close of this transaction. Our priorities are on shareholder returns, measured growth and managing down corporate costs. Speaker 200:05:18Over the next few months, our focus will Speaker 100:05:19be on closing the RAL transaction, which is subject to shareholder approval, regulatory approvals and other customary closing conditions. We continue to expect the transaction to close before the end of the year. As a final comment, I want to thank our employees for their hard work over the past several months and reiterate my confidence in our ability to grow at a steady pace going forward and to thank our shareholders and Board of Directors for their support. I'll now pass it over to Gary to take you through the financial highlights. Thank you. Speaker 100:05:56Thank you, Colin, and good morning. As mentioned at the opening, as a result of the announced RAL transaction, the RAL segment has been reclassified to discontinued operations and our regional aviation services segment together with corporate is now referred to as continuing operations. Chorus will have one reportable operating segment and will no longer disclose its results on a segmented basis. Quarter results for continuing operations were in line with our expectations and the guidance provided for the Jazz CPA and capital expenditures remain in effect and are contained in the outlook section of our MD and A. As we look at the results from our continuing operations for Q2, 2024, Our adjusted EBITDA came in at $51,000,000 in line with our expectations. Speaker 100:06:47Our free cash flow was $28,200,000 the quarter, primarily derived from operating cash flows. Our leverage ratio was 3.0 at the end of the quarter, down from 3.3@december31, 2023. This has been accomplished primarily through long term debt repayments of $79,700,000 since December 31, 2023. Our adjusted net income available to common shareholders from continued operations was at $0.01 which includes the debt and preferred equity costs, which we intend to eliminate at the close of the RAL sale. We also allocated capital to retire 1,400,000 shares in the quarter at a weighted average price of $2.15 per share. Speaker 100:07:36As Colin mentioned, after closing, the sale of RAL will allow us to eliminate $1,700,000,000 in financings, including all RAL segment aircraft related debt, substantially all of Corus' corporate debt and the US300 $1,000,000 preferred shares. I'd like to also share some additional details on the benefits of the sale to shareholders. Post closing, the transaction is expected to significantly improve Corus' key adjusted metrics. Speaker 300:08:08We look Speaker 100:08:08at this quarter and overlay those effects on a pro form a basis as we show in Section 4 of our MD and A. We see pro form a adjusted net income available to common shareholders per common share from continuing operations of $0.08 and $0.17 with the 3 6 months ended June 30, 2024. This would be more than a fivefold increase in our currently reported figures of $0.01 for the quarter and $0.03 year to date. Our pro form a leverage ratio would be 1.5 at June 30, 2024, half of the 3.0 reported in this quarter demonstrating the significant financial flexibility we will have moving forward. And pro form a free cash flow of $32,400,000 $67,300,000 for the 3 6 months ended June 30, 2024, up approximately 14% from the $28,200,000 and the $58,900,000 reported. Speaker 100:09:09This demonstrates our strong cash flow that will support future return of capital to shareholders and measured growth. Sale of Raub will allow us to make changes to our capital structure that will result in a substantially strengthened and simplified balance sheet. Changes in capital structure will drive improved profitability, primarily driven from reduced debt servicing costs and by eliminating the preferred share dividends, which more than offset foregone earnings from the RAL sale. Our pro form a leverage level will be well below the target range for the company and that of our peer group providing us with flexibility moving forward. I would like to conclude by mentioning that we worked with our lenders led by the Bank of Nova Scotia to put in place significant flexibility in our capital structure with this transaction. Speaker 100:09:59Subject to closing of the sale of the rail segment, we have amended our $50,000,000 bilateral facility secured by the unencumbered aircraft leased under the CPA to be available for future growth opportunities and general corporate purposes. In addition, we are maintaining our $150,000,000 secured operating revolver. This provides us $200,000,000 in financing to support operations and the growth of the company. We are now ready to take your questions. Operator00:10:29Thank Your first question comes from Hillary Catanandos from Deutsche Bank. Please go ahead. Speaker 400:10:54Hi. Thank you for taking my question. So it looks like you're set up very well post the transaction with more flexibility to shareholder value and for growth. And so with a fixed contract with Air Canada as your main business, I was wondering what would be the biggest risk to your story or to your business going forward? Would it be a global recession or geopolitical situation? Speaker 400:11:18Or would you say you're pretty insulated now with that as your main with a fixed business contract as your main business? Main business? Or is there something else that you would consider a Speaker 100:11:31risk to your story? Hi, Hillary. It's Colin. Good morning. Hi, thanks. Speaker 100:11:38Yes, I think on the risk side, Voyager and Jazz are very solid. There's almost we're extremely insulated there with both of them. Voyager is very diversified in what they do. And Jazz is extremely solid with Air Canada with a long term contract, as you know. So we don't see any real apparent risks there at all. Speaker 100:12:00I think our focus is really in 3 areas. As we kind of reiterated over this last few weeks here, it's really about evaluating as we get through the transaction, shareholder returns, looking at measured growth and managing down our corporate costs. Those are kind of our three areas of focus as we move forward. Speaker 400:12:25Got it. Great. Thank you. And then I just have a question on the Signet business. It doesn't look like we really have a pirate shortage situation as you want, I think. Speaker 400:12:37So are you still seeing the same type of like interest level among potential candidates? Or do you think perhaps maybe are we in a situation maybe we have more candidates than demand in the industry? Speaker 100:12:54Yes, absolutely. I think in the U. S, we are seeing a little bit of a slowdown on the pilot side. In Canada, we've not seen that. Signet continues to track very well. Speaker 100:13:06And as the demand, I guess, in the higher level regionals and the mainline operators slows down, there's still a big demand in Canada for pilots at the lower levels. So we see Signet continuing to grow on track, on plan as and we have no problems attracting students, new hires or even finding placements. So we see that continuing on for a long time and most specifically that it's a little bit of a differentiated product with its relationship with CAE. Speaker 400:13:38Got it. Great. Thanks for the time. Operator00:13:43Thank you. The next question comes from James McGarragal from RBC Capital Markets. Please go ahead. Speaker 500:13:49Hey, good morning and thanks for having me on. Speaker 100:13:52Good morning. Speaker 500:13:54I just have a longer term type of question on the CPA. There's a step down in 2026 that you flag in your guidance. But those aircraft that come out of the CPA in that year, how do you expect to redeploy those? And when we think about this even longer term as aircraft come out of the CPA, is that cash flow neutral as these aircraft are potentially redeployed? If you can just provide any color there. Speaker 500:14:21Thank you. Speaker 100:14:23Sure, James. Good morning. All the aircraft that are in the CPA as they come out or come off that all are basically unencumbered. I think Gary's talked about that quite a bit and he can give you some view on kind of the financial side. Right now, our plans are to continue to work with Air Canada and renew those leases and we continue to make progress in that area. Speaker 100:14:47So the immediate plan is obviously to see those aircraft continue within the Jazz CPA and where they can't, they're basically unencumbered assets that we could either redeploy into a great deal of flexibility with regards to those assets. Okay. And then, a great deal of flexibility with regards to those assets. Yes. It's Gary here. Speaker 100:15:10Yes. So if you look at our disclosures, we have 9 aircraft sit in our disclosures is coming off lease. We continue to look for opportunities, whether it's with Air Canada or others to release some of those aircraft. And if not, we can redeploy them as Colin said, but they are unencumbered. They're debt free. Speaker 100:15:27And we have opportunities to redeploy or to sell in some cases. So it does provide some flexibility at least moving forward. Speaker 500:15:37Yes, Rob. Appreciate the color. And then on Voyager, some of your peers have talked about some pretty good opportunities, surveillance, medevac. Anything that you're kind of working on there the immediate term that you can flag? And then is the strategy discussed longer term there still appropriate? Speaker 500:15:56Or any updates that you might want to flag post the recent sale via the raw business? And then after that I can turn the line over. Thank you. Speaker 100:16:07Yes, absolutely, James. I think when you think of Voyager, you look at the various disciplines that they're in and that they've been successful at growing in, which really relate back to kind of the specialty aviation defense side of things and the USM side, the parts business. Those have been the 2 big kind of growth areas. We continue to see opportunity in those that are quite significant. We announced there this quarter the air ambulance, the growth in air ambulance. Speaker 100:16:39Before that, they had an additional King Air that went into Department of Defense into the Maser program. Those are the kind of things that you're going to continue to see as we push forward with them. There's quite a bit of opportunity there and we're pretty bullish on Voyager and where it's headed for sure. Operator00:17:06Any further questions, James? Speaker 500:17:08Oh, no. That's it for me. Thank you. Operator00:17:11Thank you. Next question comes from Fadi Chamoun from BMO Capital Markets. Please go ahead. Speaker 600:17:20Yes, good morning. Maybe one question from me on the areas of focus, Colin, you mentioned kind of as you get past the closing of this transaction and you have a strong balance sheet, you have strong free cash flow that is generated by the remaining operation. How are you thinking about kind of the framework for capital going forward? Like in terms of M and A and opportunity for growth, what type of assets and maybe what is the targeted return on capital framework that you expect to deploy capital towards? Like what are you targeting in these potential growth opportunities, whether it's M and A or organic? Speaker 600:18:15Is it 15%, 20% just kind of to get an idea how you're thinking about that free cash flow redeployment as we get past the closing of this transaction? Speaker 100:18:28Hi, Fadi. Yes, absolutely. I think Gary said a few times and so have I. I. We're focused on mid teen returns. Speaker 100:18:36There's no question about that. And that's whether we're looking at organic growth or we're looking at acquisition. On the acquisition side, we're very much focused on kind of this paced gradual growth, not big huge massive transactions, stuff that's going to move us over time nicely. And so that could be anything that's in Aviation or Aerospace. We're looking quite broadly at the opportunities right now. Speaker 100:19:09So you'll see us definitely in that area, in that zone, smaller opportunities that make sense that we understand well. Those are kind of the acquisition side. And on the organic side, I think I've said a few times, most of that opportunity probably lies today within Voyager and we've been successful at moving them along quite well. I think there's lots of growth still there. And we see that area, especially the defense and the surveillance side is a growing business. Speaker 100:19:43There's no question we're seeing more and more download of that type of work from government into industry. And so those opportunities are the areas that we're focused on. Speaker 700:19:56Okay. Appreciate it. Operator00:20:01Thank you. Next question comes from Konark Gupta at Scotiabank. Please go ahead. Speaker 700:20:08Thanks and good morning. Speaker 100:20:10Good morning. Good Speaker 700:20:12morning. Thanks for taking my question. I just want to understand like in terms of your continuing operations, so there's obviously really three things that you're focusing on, CPA, Jazz essentially and Voyager Plus segment. Maybe obviously Voyager seems like it's growing nicely. Here we saw in Q2. Speaker 700:20:35So on CPA, maybe if I can ask you, in terms of to James' question as well a little bit, you have these minimum covered aircraft, which are obviously changing over time. You have the fixed fee or fixed margin that's kind of it's a step down function through 2026, and then I think it's probably flat line after that. But the leasing revenue is the one where I think it's based on your Investor Day presentation, it seems like it's coming down at least for now through the end of the contract. So you said you are looking to renew some of the leasing agreements with Air Canada. In terms of like what's the discussion like with them? Speaker 700:21:21Like why have they not sort of signed those lease agreements for long term? Why are they retiring them as per the plan today? Like is there something that Air Canada is contemplating to do with the aircraft on their own? Or is it just that typically how these contracts work, they don't sign these long term leases through the end of the Speaker 100:21:43contract? Yes. Good morning, Kornar. Look, AI, just trying to capture what you said, it was a little hard to hear you, but I think I've got it. Look, the leases the DASH, it's mainly the Qs right now that you're looking at if you look at the leases that are that come open over a period of time here. Speaker 100:22:03Those are the ones that obviously we would be engaged with and working with Air Canada to renew and extend within the CPA. That's really been our focus at Jazz. So those are the ones. I think Gary can give you a little bit of visibility as far as what we have in the MD and A and so on. So I'll let pass it over to Hamir. Speaker 100:22:24Yes, Konark, it's Gary. So we have if you look at the MD and A there, we have 9 aircraft that come off officially leased with Air Canada at the end of 2025. They're towards the end of 2025. So typically, this is the time you'd start to consider your options around those aircraft. So I wouldn't read anything into it other than just natural timing. Speaker 100:22:43So from that perspective, we're looking at those aircraft. We'll see what we can do with Air Canada. We also have the option to redeploy. And we also have the option for those that don't get redeployed or whatever to sell them. So we've got some flexibility there. Speaker 100:22:55But I wouldn't read anything into it more than we were always in discussions with Air Canada and we continue to try and see if they need some of these aircraft for a bit. Speaker 700:23:04Okay. No, that's very helpful going in. Just to follow-up on that. So it seems like the fixed margin is a fixed margin, but leasing revenue is an opportunity for you, where it may not decline to the level that people think it might actually be flat or it can actually go up depending on the discussion progress with it at Canada, right? Speaker 100:23:30So on the fixed fee, I think, Konark, the fixed fee is a fixed fee. So I would take what you have there and that would be a good number on the leasing. There's potential for upside. There's no question about it. We've got 9 aircraft there, maybe a potential to have some of those go back in or re lease them somewhere else. Speaker 100:23:47And as time goes on, it's the same thing you'll see as the years go on and there's a few aircraft that come out, there's opportunities with those Speaker 700:23:552. Great. Okay, thanks. And maybe last one for me before I turn the war. Voyager good growth in Q2? Speaker 700:24:04You talked about the opportunities there for the long term. How should we think about growth in that business over the next couple of years? I think you had probably a target for that business at about $150,000,000 ish in revenue. It seems like it's doing about $100,000,000 to $120,000,000 a year right now. Do you have the visibility to get to $150,000,000 by 2025 or it's more of a long term story? Speaker 100:24:35Konark, it's Gary. I think we're still on pace for that 150 for 2025. You see the growth that you're seeing here this year and hopefully you'll continue. And based on the things that Colin talked about like under the Maser contract and a few other things like that, we're starting to see growth and it takes hold. And with Voyager in those particular businesses, it's a little bit of a step growth because once the contract comes online, it takes a little bit and then you start to see the full weight of it. Speaker 100:25:04So we feel like we can still get there. Yes. I think the big thing for them is if you continue to see growth in the contracts, not so much the financial. As Gary said, there's always a little bit of give and take in all of these different contracts, and they are pretty meaningful to their finances. So you'll see some give and take, but the big thing is looking for that continual contract growth and they've been doing a great job of that. Speaker 100:25:33They have lots in the pipeline. So we're pretty bullish as I said on them. Speaker 700:25:40Right. And so the step function you mentioned, is that step function ending in 2025 based on the context you have today? Or should we see a further ramp up beyond 2025? Speaker 100:25:51I think you just the point is you're going to continue to see the revenue go up, but it can go up in chunks as they bring in new contracts. So like a good example is major really came in last year, so that's starting to take effect. That's the type of thing you're going to see. Speaker 700:26:04Okay, perfect. Thanks for the question. Thank you. Speaker 100:26:07Thank you. Okay. Thanks, Konar. Operator00:26:10Thank you. Next question comes from David Ocampo at Cormark Securities. Please go ahead. Speaker 300:26:22Thanks. Good morning, everyone. I just had one and I apologize if those are already asked because I actually missed a few minutes with the call this morning. But when I look at your contract with Air Canada, I know post-twenty 26 you guys have 80 covered aircraft compared to call it 105 today. When we think about that step down in fleet count, is AC looking to bring on other partners to bridge that gap? Speaker 300:26:47Or are you guys thinking that you could bid on that 25 extra fleet count as it relates to your fixed fee with Air Canada? Speaker 100:26:59Yes, good morning. It's Collin. As far as the CPA goes, we are very focused on opportunities with Air Canada. So any opportunities that come up, you will see us working with Air Canada on and bidding on. We've been quite successful at getting our cost structure right and being able to really position things well with Air Canada. Speaker 100:27:22And if you just go back in history in the last 5 whatever years, you can see kind of where we sit in relation to our relationship and partners. So, we're going to continue that. We're very comfortable and bullish and supportive of Air Canada and the work we do there for them and any opportunities that come up for growth, just like we talked about here a few seconds ago on the Dash 8s. We're working with them to see where those opportunities are and to see if we can make things work. So I think Jazz is it has a minimum fleet there, but that doesn't mean that's necessarily the fleet that we're going to be at for sure. Speaker 300:28:06And I guess how early with your discussions are you with Air Canada for that post-twenty 26 fleet? I suspect you might need to do some pilot training if the fleet changes in a material way. So just curious where that stands today since we're hedging closer to 2026 now? Speaker 100:28:24I think it's Gary here, David. If you look at the 80 aircraft of 70 plus seats, they're currently in the fleet. So from that perspective, nothing really needs to change with the fleet in 2025, they can or in 2026. So from that perspective, it is in place. It's just a question of whether it's above the 80 or what the fleet plans are, but it currently exists. Speaker 700:28:48Okay. That's all I had Speaker 300:28:49for you guys. Thank you. Operator00:28:53Thank you. We have no further questions. I will turn the call back to Tyrone Koti for closing comments. Speaker 200:28:59Thank you, Joanna, and thank you everyone for taking part in today's call. Speaker 100:29:03Have a nice day. Operator00:29:06Ladies and gentlemen, this concludes your conference for today. We thank you for participating and we ask that you please disconnect your lines.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallChorus Aviation Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release Chorus Aviation Earnings HeadlinesShould You Think About Buying Chorus Aviation Inc. (TSE:CHR) Now?April 30, 2025 | finance.yahoo.comBrokerages Set Chorus Aviation Inc. (TSE:CHR) Target Price at C$12.25April 27, 2025 | americanbankingnews.comBuffett’s favorite chart just hit 209% – here’s what that means for goldA Historic Gold Announcement Is About to Rock Wall Street For months, sharp-eyed analysts have watched the quiet buildup behind the scenes. Now, in just days, the floodgates are set to open. The greatest investor of all time is about to validate what Garrett Goggin has been saying for months: Gold is entering a once-in-a-generation mania. Front-running Buffett has never been more urgent — and four tiny miners could be your ticket to 100X gains.May 4, 2025 | Golden Portfolio (Ad)Chorus Aviation Plans C$25M BuybackApril 7, 2025 | marketwatch.comChorus Aviation Announces Intention to Commence Substantial Issuer Bid for an Aggregate Purchase Price Not Exceeding $25 Million of Its SharesApril 7, 2025 | finance.yahoo.comCalculating The Intrinsic Value Of Chorus Aviation Inc. (TSE:CHR)February 14, 2025 | finance.yahoo.comSee More Chorus Aviation Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Chorus Aviation? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Chorus Aviation and other key companies, straight to your email. Email Address About Chorus AviationChorus is an aviation solutions provider to customers worldwide. Its operating subsidiaries are: Jazz Aviation, the largest regional operator in Canada and provider of regional air services under the Air Canada Express brand; Voyageur Aviation, a leading provider of specialty charter, aircraft modifications, parts provisioning and in-service support services; and Cygnet Aviation Academy, an industry leading accredited training academy preparing pilots for direct entry into airlines. Together, Chorus' subsidiaries provide services that encompass every stage of an aircraft's lifecycle, including: aircraft acquisition and leasing; aircraft refurbishment, engineering, modification, repurposing and transition; contract flying; aircraft and component maintenance, disassembly, and parts provisioning; and pilot training.View Chorus Aviation ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback PlanMicrosoft Crushes Earnings, What’s Next for MSFT Stock?Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay AwayAMD Stock Signals Strong Buy Ahead of Earnings Upcoming Earnings Palantir Technologies (5/5/2025)Vertex Pharmaceuticals (5/5/2025)Realty Income (5/5/2025)Williams Companies (5/5/2025)CRH (5/5/2025)Advanced Micro Devices (5/6/2025)American Electric Power (5/6/2025)Constellation Energy (5/6/2025)Marriott International (5/6/2025)Energy Transfer (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 8 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen, and welcome to the Corus Second Quarter 2024 Financial Results Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Wednesday, August 14, 2024. I would now like to turn the conference over to Tyrone Cote, VP of Treasury Investor Relations. Operator00:00:26Please go ahead. Speaker 100:00:28Thank you, Joanna. Hello and thank Speaker 200:00:30you for joining us today for our Q2 conference call and audio webcast. With me today from Chorus are Colin Kopp, President and Chief Executive Officer and Gary Osborne, Chief Financial Officer. We will begin today's call with a brief summary of the results, followed by questions from the analyst community. As there may be some forward looking discussion during the call, I ask that you refer to the caution regarding forward looking statements and information found in our MD and A. This pertains specifically to the results and operations of Chorus Aviation Inc. Speaker 200:00:59For the 3 months ended June 30, 2024, as well as the outlook section and other sections of our MD and A where such statements appear. As a result of the agreement to sell the Chorus Regional Aviation Leasing segment, RAL, the RAL segment has been reclassified to discontinued operations and our Regional Aviation Services segment together with corporate is now referred to as continued operations. Finally, some of the following discussion involves non GAAP financial measures, including references to adjusted net income, adjusted EBT, adjusted EBITDA, leverage ratio and free cash flow. This quarter, we have also provided certain of these measures on a pro form a basis to illustrate the financial impact of the disposition of the RAL segment on our capital structure. Please refer to the MD and A for further information relating to use of such non GAAP measures and pro form a figures. Speaker 200:01:48I'll now turn the call over to Colin Collin. Speaker 100:01:51Thank you, Tyrone, and good morning, everyone. As we just recently reported out on the RAL sale transaction, I'll keep my comments short today. I'm pleased to report that our second quarter results with revised comparative figures, as Tyrone mentioned, reflect a strong, steady and reliable business going forward, with our cash generation enabling us to further improve our leverage ratio. As we look forward, Jazz has approximately $1,000,000,000 in contracted revenue in the form of fixed fee and leasing revenue under its CPA for the term of the agreement. And Voyager is steadily growing. Speaker 100:02:30This quarter both Jazz and Voyager delivered strong financial performance with a combined adjusted EBITDA of 51,000,000 dollars 105,000,000 year to date. Voyager delivered a $4,800,000 increase in revenue over Q2 of 2023, demonstrating their ability to seize new opportunities. They purchased a King Air 200 in the Q2 of 2024 in support of their contract with Air Ambulance New Brunswick for the provision of fixed wing air ambulance services. I'm pleased with our results and the progress we've made with improving the financial position of the business. Through the quarter, we also bought back 1,400,000 common shares under our NCIB. Speaker 100:03:18Turning for a moment to our recent announcement on the divestiture of Falco and our regional aircraft leasing business. Process continues to progress well with our shareholder meeting called to approve the transaction in just over a month scheduled on September 25. I'm very pleased with the feedback we've received so far from our shareholders and industry partners, which further reinforces the value creation of this transaction. We appreciate that it will take a few months for us to get through the various approvals and for the transaction to close and that it will also take time for the true value of our business to be reflected in our share price. It is well recognized that this transaction will enable us to significantly deleverage our capital structure, generate more predictable cash flow and provide us with the flexibility to grow and return capital to common shareholders going forward. Speaker 100:04:17Benefits of this transaction cannot be overstated when you consider the strength of our go forward cash flow and liquidity in combination with the simplification and improved flexibility of our business. On the debt side alone, we see a dramatic reduction in our pro form a leverage ratio to 1.5. And post closing, we expect to eliminate substantially and post closing, we expect to eliminate substantially all corporate debt giving us strong financial flexibility going forward. This will create the right conditions to allow us to grow at a steady pace and capitalize on accretive opportunities in the aviation and aerospace sector. I also recognize that our investors want to know more about the return of capital to shareholders. Speaker 100:05:03We appreciate your patience as we work towards the close of this transaction. Our priorities are on shareholder returns, measured growth and managing down corporate costs. Speaker 200:05:18Over the next few months, our focus will Speaker 100:05:19be on closing the RAL transaction, which is subject to shareholder approval, regulatory approvals and other customary closing conditions. We continue to expect the transaction to close before the end of the year. As a final comment, I want to thank our employees for their hard work over the past several months and reiterate my confidence in our ability to grow at a steady pace going forward and to thank our shareholders and Board of Directors for their support. I'll now pass it over to Gary to take you through the financial highlights. Thank you. Speaker 100:05:56Thank you, Colin, and good morning. As mentioned at the opening, as a result of the announced RAL transaction, the RAL segment has been reclassified to discontinued operations and our regional aviation services segment together with corporate is now referred to as continuing operations. Chorus will have one reportable operating segment and will no longer disclose its results on a segmented basis. Quarter results for continuing operations were in line with our expectations and the guidance provided for the Jazz CPA and capital expenditures remain in effect and are contained in the outlook section of our MD and A. As we look at the results from our continuing operations for Q2, 2024, Our adjusted EBITDA came in at $51,000,000 in line with our expectations. Speaker 100:06:47Our free cash flow was $28,200,000 the quarter, primarily derived from operating cash flows. Our leverage ratio was 3.0 at the end of the quarter, down from 3.3@december31, 2023. This has been accomplished primarily through long term debt repayments of $79,700,000 since December 31, 2023. Our adjusted net income available to common shareholders from continued operations was at $0.01 which includes the debt and preferred equity costs, which we intend to eliminate at the close of the RAL sale. We also allocated capital to retire 1,400,000 shares in the quarter at a weighted average price of $2.15 per share. Speaker 100:07:36As Colin mentioned, after closing, the sale of RAL will allow us to eliminate $1,700,000,000 in financings, including all RAL segment aircraft related debt, substantially all of Corus' corporate debt and the US300 $1,000,000 preferred shares. I'd like to also share some additional details on the benefits of the sale to shareholders. Post closing, the transaction is expected to significantly improve Corus' key adjusted metrics. Speaker 300:08:08We look Speaker 100:08:08at this quarter and overlay those effects on a pro form a basis as we show in Section 4 of our MD and A. We see pro form a adjusted net income available to common shareholders per common share from continuing operations of $0.08 and $0.17 with the 3 6 months ended June 30, 2024. This would be more than a fivefold increase in our currently reported figures of $0.01 for the quarter and $0.03 year to date. Our pro form a leverage ratio would be 1.5 at June 30, 2024, half of the 3.0 reported in this quarter demonstrating the significant financial flexibility we will have moving forward. And pro form a free cash flow of $32,400,000 $67,300,000 for the 3 6 months ended June 30, 2024, up approximately 14% from the $28,200,000 and the $58,900,000 reported. Speaker 100:09:09This demonstrates our strong cash flow that will support future return of capital to shareholders and measured growth. Sale of Raub will allow us to make changes to our capital structure that will result in a substantially strengthened and simplified balance sheet. Changes in capital structure will drive improved profitability, primarily driven from reduced debt servicing costs and by eliminating the preferred share dividends, which more than offset foregone earnings from the RAL sale. Our pro form a leverage level will be well below the target range for the company and that of our peer group providing us with flexibility moving forward. I would like to conclude by mentioning that we worked with our lenders led by the Bank of Nova Scotia to put in place significant flexibility in our capital structure with this transaction. Speaker 100:09:59Subject to closing of the sale of the rail segment, we have amended our $50,000,000 bilateral facility secured by the unencumbered aircraft leased under the CPA to be available for future growth opportunities and general corporate purposes. In addition, we are maintaining our $150,000,000 secured operating revolver. This provides us $200,000,000 in financing to support operations and the growth of the company. We are now ready to take your questions. Operator00:10:29Thank Your first question comes from Hillary Catanandos from Deutsche Bank. Please go ahead. Speaker 400:10:54Hi. Thank you for taking my question. So it looks like you're set up very well post the transaction with more flexibility to shareholder value and for growth. And so with a fixed contract with Air Canada as your main business, I was wondering what would be the biggest risk to your story or to your business going forward? Would it be a global recession or geopolitical situation? Speaker 400:11:18Or would you say you're pretty insulated now with that as your main with a fixed business contract as your main business? Main business? Or is there something else that you would consider a Speaker 100:11:31risk to your story? Hi, Hillary. It's Colin. Good morning. Hi, thanks. Speaker 100:11:38Yes, I think on the risk side, Voyager and Jazz are very solid. There's almost we're extremely insulated there with both of them. Voyager is very diversified in what they do. And Jazz is extremely solid with Air Canada with a long term contract, as you know. So we don't see any real apparent risks there at all. Speaker 100:12:00I think our focus is really in 3 areas. As we kind of reiterated over this last few weeks here, it's really about evaluating as we get through the transaction, shareholder returns, looking at measured growth and managing down our corporate costs. Those are kind of our three areas of focus as we move forward. Speaker 400:12:25Got it. Great. Thank you. And then I just have a question on the Signet business. It doesn't look like we really have a pirate shortage situation as you want, I think. Speaker 400:12:37So are you still seeing the same type of like interest level among potential candidates? Or do you think perhaps maybe are we in a situation maybe we have more candidates than demand in the industry? Speaker 100:12:54Yes, absolutely. I think in the U. S, we are seeing a little bit of a slowdown on the pilot side. In Canada, we've not seen that. Signet continues to track very well. Speaker 100:13:06And as the demand, I guess, in the higher level regionals and the mainline operators slows down, there's still a big demand in Canada for pilots at the lower levels. So we see Signet continuing to grow on track, on plan as and we have no problems attracting students, new hires or even finding placements. So we see that continuing on for a long time and most specifically that it's a little bit of a differentiated product with its relationship with CAE. Speaker 400:13:38Got it. Great. Thanks for the time. Operator00:13:43Thank you. The next question comes from James McGarragal from RBC Capital Markets. Please go ahead. Speaker 500:13:49Hey, good morning and thanks for having me on. Speaker 100:13:52Good morning. Speaker 500:13:54I just have a longer term type of question on the CPA. There's a step down in 2026 that you flag in your guidance. But those aircraft that come out of the CPA in that year, how do you expect to redeploy those? And when we think about this even longer term as aircraft come out of the CPA, is that cash flow neutral as these aircraft are potentially redeployed? If you can just provide any color there. Speaker 500:14:21Thank you. Speaker 100:14:23Sure, James. Good morning. All the aircraft that are in the CPA as they come out or come off that all are basically unencumbered. I think Gary's talked about that quite a bit and he can give you some view on kind of the financial side. Right now, our plans are to continue to work with Air Canada and renew those leases and we continue to make progress in that area. Speaker 100:14:47So the immediate plan is obviously to see those aircraft continue within the Jazz CPA and where they can't, they're basically unencumbered assets that we could either redeploy into a great deal of flexibility with regards to those assets. Okay. And then, a great deal of flexibility with regards to those assets. Yes. It's Gary here. Speaker 100:15:10Yes. So if you look at our disclosures, we have 9 aircraft sit in our disclosures is coming off lease. We continue to look for opportunities, whether it's with Air Canada or others to release some of those aircraft. And if not, we can redeploy them as Colin said, but they are unencumbered. They're debt free. Speaker 100:15:27And we have opportunities to redeploy or to sell in some cases. So it does provide some flexibility at least moving forward. Speaker 500:15:37Yes, Rob. Appreciate the color. And then on Voyager, some of your peers have talked about some pretty good opportunities, surveillance, medevac. Anything that you're kind of working on there the immediate term that you can flag? And then is the strategy discussed longer term there still appropriate? Speaker 500:15:56Or any updates that you might want to flag post the recent sale via the raw business? And then after that I can turn the line over. Thank you. Speaker 100:16:07Yes, absolutely, James. I think when you think of Voyager, you look at the various disciplines that they're in and that they've been successful at growing in, which really relate back to kind of the specialty aviation defense side of things and the USM side, the parts business. Those have been the 2 big kind of growth areas. We continue to see opportunity in those that are quite significant. We announced there this quarter the air ambulance, the growth in air ambulance. Speaker 100:16:39Before that, they had an additional King Air that went into Department of Defense into the Maser program. Those are the kind of things that you're going to continue to see as we push forward with them. There's quite a bit of opportunity there and we're pretty bullish on Voyager and where it's headed for sure. Operator00:17:06Any further questions, James? Speaker 500:17:08Oh, no. That's it for me. Thank you. Operator00:17:11Thank you. Next question comes from Fadi Chamoun from BMO Capital Markets. Please go ahead. Speaker 600:17:20Yes, good morning. Maybe one question from me on the areas of focus, Colin, you mentioned kind of as you get past the closing of this transaction and you have a strong balance sheet, you have strong free cash flow that is generated by the remaining operation. How are you thinking about kind of the framework for capital going forward? Like in terms of M and A and opportunity for growth, what type of assets and maybe what is the targeted return on capital framework that you expect to deploy capital towards? Like what are you targeting in these potential growth opportunities, whether it's M and A or organic? Speaker 600:18:15Is it 15%, 20% just kind of to get an idea how you're thinking about that free cash flow redeployment as we get past the closing of this transaction? Speaker 100:18:28Hi, Fadi. Yes, absolutely. I think Gary said a few times and so have I. I. We're focused on mid teen returns. Speaker 100:18:36There's no question about that. And that's whether we're looking at organic growth or we're looking at acquisition. On the acquisition side, we're very much focused on kind of this paced gradual growth, not big huge massive transactions, stuff that's going to move us over time nicely. And so that could be anything that's in Aviation or Aerospace. We're looking quite broadly at the opportunities right now. Speaker 100:19:09So you'll see us definitely in that area, in that zone, smaller opportunities that make sense that we understand well. Those are kind of the acquisition side. And on the organic side, I think I've said a few times, most of that opportunity probably lies today within Voyager and we've been successful at moving them along quite well. I think there's lots of growth still there. And we see that area, especially the defense and the surveillance side is a growing business. Speaker 100:19:43There's no question we're seeing more and more download of that type of work from government into industry. And so those opportunities are the areas that we're focused on. Speaker 700:19:56Okay. Appreciate it. Operator00:20:01Thank you. Next question comes from Konark Gupta at Scotiabank. Please go ahead. Speaker 700:20:08Thanks and good morning. Speaker 100:20:10Good morning. Good Speaker 700:20:12morning. Thanks for taking my question. I just want to understand like in terms of your continuing operations, so there's obviously really three things that you're focusing on, CPA, Jazz essentially and Voyager Plus segment. Maybe obviously Voyager seems like it's growing nicely. Here we saw in Q2. Speaker 700:20:35So on CPA, maybe if I can ask you, in terms of to James' question as well a little bit, you have these minimum covered aircraft, which are obviously changing over time. You have the fixed fee or fixed margin that's kind of it's a step down function through 2026, and then I think it's probably flat line after that. But the leasing revenue is the one where I think it's based on your Investor Day presentation, it seems like it's coming down at least for now through the end of the contract. So you said you are looking to renew some of the leasing agreements with Air Canada. In terms of like what's the discussion like with them? Speaker 700:21:21Like why have they not sort of signed those lease agreements for long term? Why are they retiring them as per the plan today? Like is there something that Air Canada is contemplating to do with the aircraft on their own? Or is it just that typically how these contracts work, they don't sign these long term leases through the end of the Speaker 100:21:43contract? Yes. Good morning, Kornar. Look, AI, just trying to capture what you said, it was a little hard to hear you, but I think I've got it. Look, the leases the DASH, it's mainly the Qs right now that you're looking at if you look at the leases that are that come open over a period of time here. Speaker 100:22:03Those are the ones that obviously we would be engaged with and working with Air Canada to renew and extend within the CPA. That's really been our focus at Jazz. So those are the ones. I think Gary can give you a little bit of visibility as far as what we have in the MD and A and so on. So I'll let pass it over to Hamir. Speaker 100:22:24Yes, Konark, it's Gary. So we have if you look at the MD and A there, we have 9 aircraft that come off officially leased with Air Canada at the end of 2025. They're towards the end of 2025. So typically, this is the time you'd start to consider your options around those aircraft. So I wouldn't read anything into it other than just natural timing. Speaker 100:22:43So from that perspective, we're looking at those aircraft. We'll see what we can do with Air Canada. We also have the option to redeploy. And we also have the option for those that don't get redeployed or whatever to sell them. So we've got some flexibility there. Speaker 100:22:55But I wouldn't read anything into it more than we were always in discussions with Air Canada and we continue to try and see if they need some of these aircraft for a bit. Speaker 700:23:04Okay. No, that's very helpful going in. Just to follow-up on that. So it seems like the fixed margin is a fixed margin, but leasing revenue is an opportunity for you, where it may not decline to the level that people think it might actually be flat or it can actually go up depending on the discussion progress with it at Canada, right? Speaker 100:23:30So on the fixed fee, I think, Konark, the fixed fee is a fixed fee. So I would take what you have there and that would be a good number on the leasing. There's potential for upside. There's no question about it. We've got 9 aircraft there, maybe a potential to have some of those go back in or re lease them somewhere else. Speaker 100:23:47And as time goes on, it's the same thing you'll see as the years go on and there's a few aircraft that come out, there's opportunities with those Speaker 700:23:552. Great. Okay, thanks. And maybe last one for me before I turn the war. Voyager good growth in Q2? Speaker 700:24:04You talked about the opportunities there for the long term. How should we think about growth in that business over the next couple of years? I think you had probably a target for that business at about $150,000,000 ish in revenue. It seems like it's doing about $100,000,000 to $120,000,000 a year right now. Do you have the visibility to get to $150,000,000 by 2025 or it's more of a long term story? Speaker 100:24:35Konark, it's Gary. I think we're still on pace for that 150 for 2025. You see the growth that you're seeing here this year and hopefully you'll continue. And based on the things that Colin talked about like under the Maser contract and a few other things like that, we're starting to see growth and it takes hold. And with Voyager in those particular businesses, it's a little bit of a step growth because once the contract comes online, it takes a little bit and then you start to see the full weight of it. Speaker 100:25:04So we feel like we can still get there. Yes. I think the big thing for them is if you continue to see growth in the contracts, not so much the financial. As Gary said, there's always a little bit of give and take in all of these different contracts, and they are pretty meaningful to their finances. So you'll see some give and take, but the big thing is looking for that continual contract growth and they've been doing a great job of that. Speaker 100:25:33They have lots in the pipeline. So we're pretty bullish as I said on them. Speaker 700:25:40Right. And so the step function you mentioned, is that step function ending in 2025 based on the context you have today? Or should we see a further ramp up beyond 2025? Speaker 100:25:51I think you just the point is you're going to continue to see the revenue go up, but it can go up in chunks as they bring in new contracts. So like a good example is major really came in last year, so that's starting to take effect. That's the type of thing you're going to see. Speaker 700:26:04Okay, perfect. Thanks for the question. Thank you. Speaker 100:26:07Thank you. Okay. Thanks, Konar. Operator00:26:10Thank you. Next question comes from David Ocampo at Cormark Securities. Please go ahead. Speaker 300:26:22Thanks. Good morning, everyone. I just had one and I apologize if those are already asked because I actually missed a few minutes with the call this morning. But when I look at your contract with Air Canada, I know post-twenty 26 you guys have 80 covered aircraft compared to call it 105 today. When we think about that step down in fleet count, is AC looking to bring on other partners to bridge that gap? Speaker 300:26:47Or are you guys thinking that you could bid on that 25 extra fleet count as it relates to your fixed fee with Air Canada? Speaker 100:26:59Yes, good morning. It's Collin. As far as the CPA goes, we are very focused on opportunities with Air Canada. So any opportunities that come up, you will see us working with Air Canada on and bidding on. We've been quite successful at getting our cost structure right and being able to really position things well with Air Canada. Speaker 100:27:22And if you just go back in history in the last 5 whatever years, you can see kind of where we sit in relation to our relationship and partners. So, we're going to continue that. We're very comfortable and bullish and supportive of Air Canada and the work we do there for them and any opportunities that come up for growth, just like we talked about here a few seconds ago on the Dash 8s. We're working with them to see where those opportunities are and to see if we can make things work. So I think Jazz is it has a minimum fleet there, but that doesn't mean that's necessarily the fleet that we're going to be at for sure. Speaker 300:28:06And I guess how early with your discussions are you with Air Canada for that post-twenty 26 fleet? I suspect you might need to do some pilot training if the fleet changes in a material way. So just curious where that stands today since we're hedging closer to 2026 now? Speaker 100:28:24I think it's Gary here, David. If you look at the 80 aircraft of 70 plus seats, they're currently in the fleet. So from that perspective, nothing really needs to change with the fleet in 2025, they can or in 2026. So from that perspective, it is in place. It's just a question of whether it's above the 80 or what the fleet plans are, but it currently exists. Speaker 700:28:48Okay. That's all I had Speaker 300:28:49for you guys. Thank you. Operator00:28:53Thank you. We have no further questions. I will turn the call back to Tyrone Koti for closing comments. Speaker 200:28:59Thank you, Joanna, and thank you everyone for taking part in today's call. Speaker 100:29:03Have a nice day. Operator00:29:06Ladies and gentlemen, this concludes your conference for today. We thank you for participating and we ask that you please disconnect your lines.Read morePowered by