Chorus Aviation Q1 2026 Earnings Report

Chorus Aviation EPS Results

• Actual EPS: C$0.29
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Chorus Aviation Revenue Results

• Actual Revenue: $325.42 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Chorus Aviation Announcement Details

• Quarter: Q1 2026
• Date: 5/7/2026
• Time: After Market Closes
• Conference Call Date: Friday, May 8, 2026
• Conference Call Time: 9:00AM ET

Chorus is a holding company which owns the following principal operating subsidiaries: 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; Cygnet Aviation Academy, an industry leading accredited training academy preparing pilots for direct entry into airlines; and Elisen & Associates, a leading provider of aerospace engineering and certification services. Together, Chorus' subsidiaries provide services that encompass every stage of an aircraft's lifecycle, including: contract flying, aircraft refurbishment, engineering and certification services, modification, repurposing and transition; aircraft and component maintenance, disassembly, and parts provisioning; aircraft acquisition and leasing; and pilot training.

Chorus Aviation Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: KADEX acquisition closed (Apr 1) for approximately CAD 50 million, which management says is immediately accretive, expected to generate mid‑teen returns and diversify Chorus’s aerospace parts/MRO cash flows.
• Positive Sentiment: Management raised the quarterly dividend by 38% to CAD 0.11, repurchased CAD 5.3 million of shares this quarter, and reiterated a CAD 500–550 million four‑year capital allocation plan that includes buybacks, dividends and M&A/flexible capital.
• Negative Sentiment: Q1 results showed a decline in profitability with adjusted EBITDA of CAD 44.3 million (down from CAD 56.9 million YoY) and free cash flow of CAD 27 million, driven mainly by contractual step‑downs in CPA aircraft leasing and fixed‑margin revenues.
• Positive Sentiment: Balance sheet and liquidity remain solid with CAD 219 million of liquidity (CAD 98 million cash plus CAD 121 million available credit) and leverage improved to a 1.5 ratio, providing flexibility to fund acquisitions and capital returns.
• Negative Sentiment: Chorus acknowledged the March 22 Flight 8646 accident at LaGuardia with two Jazz pilots lost and the matter remains under investigation, posing potential operational, legal and reputational risk.

Presentation

[Operator]

Morning, ladies and gentlemen, and welcome to the Chorus Aviation Inc. First quarter 2026 financial results. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Friday, May 8th, 2026. I would now like to turn the conference over to Matt LaPierre . Please go ahead.

[Matt LaPierre, Director of Treasury and Investor Relations at Chorus Aviation]

Thank you, operator. Hello, and thank you for joining us today. With me today from Chorus are Colin Copp, 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 this call, I ask that you refer to the caution regarding forward-looking statements and information found in our MD&A. This pertains specifically to the results and operations of Chorus Aviation Inc. for the period ended March 31st, 2026, as well as the outlook section and other sections of our MD&A where such statements appear. 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.

[Matt LaPierre, Director of Treasury and Investor Relations at Chorus Aviation]

Please refer to our MD&A for further information relating to the use of such non-GAAP measures. I'll now turn the call over to Colin Copp.

[Colin Copp, President and CEO at Chorus Aviation]

Good morning, everyone, and thank you for joining us today. Before we begin, I'd like to take a moment to acknowledge the accident involving flight 8646 at New York LaGuardia on March 22nd, operated by Jazz. I extend my deepest condolences following the loss of the two Jazz pilots. Our thoughts are also with the two flight attendants and with all the passengers who were affected. This is a profound loss for the aviation community across our country and beyond. Our focus remains on supporting Jazz and the affected families. I also want to acknowledge the extraordinary professionalism and care demonstrated by the Jazz leadership team during this time. I will now turn to our first quarter update.

[Colin Copp, President and CEO at Chorus Aviation]

I'm pleased to report that we remain on plan, and our first quarter results were in line with expectations, demonstrating the resilience of our contracted cash flows, steady execution across the business, and our ability to balance strategic expansion with continued capital returns. We ended the quarter with approximately CAD 219 million in liquidity and a leverage ratio of 1.5, providing flexibility to invest in growth while continuing to return capital to our shareholders. A key highlight of the quarter was the acquisition announcement of KADEX Aero Supply that closed on April 1st. The KADEX acquisition is an important step for Chorus, reflecting our momentum and the continued evolution of our aviation, aerospace, and defense platform. It strengthens our capabilities while further diversifying our business and enhancing the quality and stability of our cash flows.

[Colin Copp, President and CEO at Chorus Aviation]

KADEX is also a strong example of the type of opportunities we are targeting under our growth strategy. It is a well-established OEM parts and supply business with attractive margins, reoccurring demand characteristics, and a durable position within the global aerospace supply chain. Importantly, KADEX complements our broader ecosystem and aligns well with our highly experienced leadership team. Over time, we see opportunities to support internal demand across Jazz Aviation and Voyageur Aviation while continuing to grow the business as a standalone platform serving third-party customers. More broadly, this transaction reflects our disciplined approach to capital allocation, deploying capital into businesses that are immediately accretive, generate strong free cash flow, and delivering mid-teen returns while improving the overall quality and diversification of our earnings. Today, we also announced our quarterly dividend consistent with our capital allocation priorities and confidence in the strength of our business.

[Colin Copp, President and CEO at Chorus Aviation]

As we've said previously, the dividend is sustainable with capacity to grow over time, and we will continue to review it annually. In February, we also renewed our NCIB, deploying capital opportunistically and repurchased CAD 5.3 million of shares during the quarter. Since launching the program in 2022, we've returned over CAD 129 million to shareholders through both NCIB and SIB share buybacks. As previously disclosed, in 2025, we entered into agreements to sell 9 Dash 8-400 aircraft that were scheduled to exit the Jazz CPA fleet for net proceeds of $62 million USD. The aircraft sales continue to go well, with the remaining five aircraft expected to close by mid-year 2026.

[Colin Copp, President and CEO at Chorus Aviation]

The declaration of our quarterly dividend, ongoing aircraft monetization, and continued share repurchases underscores our disciplined approach to capital allocation and confidence in the long-term strength and cash flow profile of the business. Turning to the operating side, our businesses executed very well over the quarter, delivering strong cash flows and earnings and made strategic progress on many fronts. Doug and the Jazz team performed well this quarter and successfully launched the new Air Canada Express transborder services from Billy Bishop, an important operational and strategic milestone. The team continues to advance its cabin refurbishment program for the Air Canada Express fleet, with upgrades focused on improved connectivity and sustainable aircraft enhancements. Jazz's strong culture and organizational depth continues to be recognized, including their 15th consecutive year as one of Atlantic Canada and Nova Scotia's top employer and Canada's Best Diversity Employers.

[Colin Copp, President and CEO at Chorus Aviation]

Cory and the Voyageur team have also executed well this past quarter. The Dash 8 aerial firefighting platform with Metrea continues to move forward with a plan for summer operations with the first aircraft, and the AT contract with the Department of National Defence in Ottawa is now in operation and fully staffed. I'm also very pleased to share that Voyage became a founding member of the Ontario Defence Association, reinforcing their role in the growth and competitiveness of Canada's defence industrial base. Lynn and the Cygnet team are doing a great job of building scale and industry leadership, expanding their pilot training pathways and building new partnerships. Cygnet's specialized pilot training contract with the Department of National Defence supporting the RCAF has been successfully renewed for a second year, and they continue to work on plans for expansion in North Bay. Looking ahead, our priorities are clear.

[Colin Copp, President and CEO at Chorus Aviation]

As outlined in our capital allocation framework last quarter, we are focused on the disciplined deployment of capital into growth opportunities that strengthen and diversify our platform. Our strategy is centered on building a set of complementary aviation, aerospace, and defense businesses where we see strong long-term demand and attractive return profiles. While still early, we are organizing our growth efforts around targeted verticals where we have experience and see clear opportunities to scale. This approach positions us to build a more resilient and diversified business over time while maintaining discipline around returns and execution. In parallel, diversification across our platforms continues to enhance our positioning in a period of geopolitical and industry volatility. We're also continuing to build our M&A pipeline and are actively evaluating opportunities that meet our criteria.

[Colin Copp, President and CEO at Chorus Aviation]

We are encouraged by the quality of opportunities that we are seeing and expect to provide further updates as things progress. I'd like to thank the teams across the Chorus group of companies for their dedication and service excellence, and thank our shareholders for their ongoing trust and confidence. Before I turn it over to Gary to go through the numbers, I will add that the accident involving Flight 8646 remains under investigation, and we will not comment further beyond what I have at this time. Thank you.

[Gary Osborne, CFO at Chorus Aviation]

Thank you, Colin, and good morning. Before I begin, I want to echo Colin's remarks around the tragic accident at New York LaGuardia and extend our thoughts to everyone affected. We're pleased with our first quarter 2026 results, which showed continued strong free cash flow and earnings and good progress executing on our capital allocation strategy. As Colin mentioned, we closed the KADEX acquisition on April 1st, 2026, for total purchase consideration of approximately CAD 50 million, excluding cash acquired. We funded CAD 43 million at closing using our operating credit facility and cash on hand, with the remainder payable over the next two years, subject to achieving certain performance targets. We expect the acquisition to be immediately accretive to earnings and free cash flow and to generate mid-teens returns.

[Gary Osborne, CFO at Chorus Aviation]

We also continue to make progress on the planned sale of the 9 Dash 8-400 aircraft exiting the CPA fleet, with four aircraft sold to date for proceeds of $25.6 million. We expect the remaining five aircraft to close by July 2026 for net proceeds of approximately $36.4 million, bringing the total sale value to $62 million. As discussed in the past, Chorus generates predictable and robust free cash flow.

[Gary Osborne, CFO at Chorus Aviation]

Based on that, we've laid out to our shareholders a disciplined capital allocation plan to deploy CAD 500 million-CAD 550 million over the next four years. That plan includes up to CAD 100 million in share buybacks, CAD 40 million in dividends, CAD 190 million of amortizing term loan repayments, and CAD 170 million-CAD 220 million of flexible capital allocation. Consistent with that plan, we were active in the quarter, repurchasing over CAD 5 million in shares under our NCIB and increasing our quarterly dividend by 38% to CAD 0.11 per share. Over time, we target distributing approximately 25% of free cash flow after repayment of amortizing term loans through dividends. Turning to our Q1 2026 financial results, here are the key numbers. adjusted EBITDA was CAD 44.3 million, compared to CAD 56.9 million in Q1 2025.

[Gary Osborne, CFO at Chorus Aviation]

The year-over-year change mainly reflects the planned step down in aircraft leasing revenue under the CPA and fixed margin revenues. In addition, Voyageur revenues were lower than Q1 last year due to a higher than normal part sales last year, while a portion of this year's expected Q1 sales shifted into Q2. Adjusted net income per common share was CAD 0.54 per share compared to CAD 0.57 per share in Q1 2025. Earnings per share remained relatively stable, reflecting the impact of our capital allocation program with share repurchases in 2025 and year-to-date 2026 totaling approximately 4 million shares or CAD 90 million, which has helped offset the contractual reductions in fixed margin in aircraft leasing revenue under the CPA.

[Gary Osborne, CFO at Chorus Aviation]

Free cash flow was CAD 27 million or CAD 1.16 per share, compared to CAD 40.6 million or CAD 1.51 per share in Q1 2025, primarily driven by the CAD 12.6 million lower adjusted EBITDA mentioned earlier. We also continue to maintain strong key metrics, including liquidity, working capital, and leverage. At March 31st, 2026, liquidity was CAD 219 million, made up of CAD 98 million of cash and CAD 121 million of available credit. Combined with our ongoing free cash flow generation, this provides flexibility to fund opportunities like the KADEX acquisition while executing our capital allocation priorities. In the quarter, working capital generated a deposit of CAD 31 million in cash. We expect it to remain positive for the year, with roughly half of the Q1 cash inflow reversing over the balance of the calendar year 2026 due to expected payment timing.

[Gary Osborne, CFO at Chorus Aviation]

Our leverage ratio improved to 1.5 from 1.7 at December 31st, driven by strong operating cash flows, debt repayments, and progress on aircraft sales, partially offset by the stronger US dollar on US denominated debt. We are now ready to take questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any key. First question comes from James McGarragle with RBC Capital Markets. Please go ahead.

[James McGarragle, Analyst at RBC Capital Markets]

Hey, good morning. Thanks for having me on.

[Gary Osborne, CFO at Chorus Aviation]

Morning.

[Colin Copp, President and CEO at Chorus Aviation]

Morning, James.

[James McGarragle, Analyst at RBC Capital Markets]

Yeah, I just wanted to ask about how we should be thinking about the step-up in EBITDA in Q2 quarter-over-quarter, given, you know, the recent acquisition closing. Is there any seasonality we should be thinking about? Because, you know, if we assume a step-up in EBITDA in quarter over quarter, given the recent deal, and then, you know, stable EBITDA across the remainder of the business, it kind of points to some upside to your current guidance. Just, you know, how we should be thinking about that into Q2.

[Gary Osborne, CFO at Chorus Aviation]

Yeah, fair enough. It's Gary here. When we look at KADEX, I think right now it's a bit early to talk about seasonality, but they seem to be fairly steady across the year. They could have a, you know, some peaks and valleys like any business that sells parts. I think if you go with what we put out in the marketplace there, with the CAD 50 million purchase price, 7.5x multiple, you can kind of figure out what a quarterly earnings profile might look like on that acquisition. You know, it certainly, you know, when we look at our guidance, you know, we're very comfortable with it, and we'll take a look at it as we go through Q2, but we're, you know, extremely comfortable where we're at.

[James McGarragle, Analyst at RBC Capital Markets]

Okay. Appreciate the color there. Also wanted to ask on margins and the negative operating leverage in Q1. You know, I obviously, you know, I think this was expected given the step down versus last year. You know, what's your outlook on margins? You know, not asking for guidance, but, you know, how are you thinking about margins in 2026 and then longer term, you know, any color you can share on the flexibility you have to kind of cut operating expenses as your business evolves?

[Gary Osborne, CFO at Chorus Aviation]

I think when you look at really the step-down, as you saw, it was really related to the CPA, you know, fixed fee and the aircraft leasing under the CPA, That's really just contractual and really just something, you know, we just have to deal with from that side. On the rest of the business, though, we do see the margins, you know, remaining the same or growing over the course of the year. We believe with KADEX coming on board, that certainly allow level of growth. If you recall, we've also gone through, you know, when we came through the RAL sale, we did do some trimming of general corporate costs and things like that, We've aligned those things.

[Gary Osborne, CFO at Chorus Aviation]

I think when you look at the core businesses, we're expecting them to continue to grow and to produce good earnings. The CPA dropdown is, you know, it unfortunately, it is what it is.

[James McGarragle, Analyst at RBC Capital Markets]

Okay. Appreciate the color, and I'll turn the line over. Thank you.

[Operator]

Thank you. The next question comes from Daryl Young with Stifel. Please go ahead.

[Daryl Young, Analyst at Stifel]

Hey, good morning, everyone. I just wanted to ask quickly around Voyageur parts and MRO and other and just some of the step down that we saw there year-over-year and maybe what's happening with some of your larger part out projects and the ATR.

[Colin Copp, President and CEO at Chorus Aviation]

Good morning, it's Colin here. I think on the If you just think of Voyageur, we were expecting last year we were talking a little bit there about some fairly large part sales. Those have come in now. They missed the quarter, unfortunately, and gonna slid into April, but they're done. You're gonna see that reflected in the Q2 numbers. We're pretty happy with that. We feel like they're pretty much on track. Unfortunately, you're gonna see it a little tight in this Q1, which is what you're picking up there. We're not worried about it. We don't see really anything coming off there. It's pretty strong, we anticipate some growth for sure year-over-year.

[Gary Osborne, CFO at Chorus Aviation]

Daryl Young, it's Gary Osborne. Just to give you a little more color. We did pick up, you know, some part sales here in April that, you know, will close. That'll make up the difference we're seeing, you know, year over year for sure. On the other piece, on the contractual flying, which is something you may be picking up, remember, we have been restructuring our way through the UN business. On the contractual flying levels at Voyageur Aviation, you will see some step down in that, but that is expected as we, you know, reposition aircraft out of the UN.

[Daryl Young, Analyst at Stifel]

Got it. Okay. As it relates to the defense side, I think you picked up a new small contract this past quarter. Is the pipeline building there, and is there any upside that we might see or expect to see in the back half of this year, or is it still too soon?

[Colin Copp, President and CEO at Chorus Aviation]

Yeah, I mean, I'll talk about the pipeline a little bit. I can give you some color on that. There's several projects we're working our way through. Voyageur is very busy with a lot of different things. You know, we anticipate growth at some point. There's no question about it. It's a question of when. I think, you know, I've said a few times over the last several calls, you know, that business tends to be lumpy, and those contracts are lumpy. Very hard to give you any kind of clarity on exactly when that's gonna come in or when to project that. We're extremely confident on the defense side.

[Colin Copp, President and CEO at Chorus Aviation]

It could be, you know, a lot of small growth like we're seeing right now, or it could be all of a sudden something fairly big. It's really hard to determine at this point.

[Daryl Young, Analyst at Stifel]

Okay. Just as it relates to your CPA flying, is there plans to source additional regional capacity? How available are regional jets currently in terms of adding to the fleet?

[Colin Copp, President and CEO at Chorus Aviation]

Sorry, are you referring to-

[Daryl Young, Analyst at Stifel]

Just as it relates to the loss of the aircraft.

[Colin Copp, President and CEO at Chorus Aviation]

I'll just touch on that briefly. I don't know, Gary might have some additional view on that as well. You know, we're working through that with Air Canada, but there's really no direct impact from the standpoint of number of aircraft that are committed to Jazz, or any kind of meaningful financial impact as a result of this. Everything remains status quo. We're in discussions with Air Canada on a daily basis on the fleet. Right now, I think there's a couple of aircraft over the 80 anyways, in the fleet. You know, like the minimum is 80. We've said that from day 1. The numbers are pretty clear in the MD&A as to what our income looks like. Really nothing changes from that perspective.

[Gary Osborne, CFO at Chorus Aviation]

Yeah. Daryl, it's Gary. Just to kind of add to that, the minimum fleet is 80. They also, Air Canada can substitute in a different aircraft. For example, they could add a Q400 to replace the CRJ900, so it doesn't have to be like for like. The agreement with Air Canada is 80 minimum aircraft of, I think it's 75 to 79 seats or 78 seats. As long as it's in that configuration, we're fine.

[Daryl Young, Analyst at Stifel]

Got it. Okay. That's helpful. Thanks very much.

[Operator]

Thank you. The next question comes from Alexander Augimeri with CIBC. Please go ahead.

[Alexander Augimeri, Analyst at CIBC]

Hey, good morning. Thanks for taking my question. I just wanted to dig in a little bit more on the contract flying and training segment. Could you give us a sense of how much of that contract flying decline reflects the wind down of those contracts from the UN or the World Food Programme? I think, just to clarify, starting in Q3 2026 is when you won't be lapping those contracts anymore? Thanks.

[Gary Osborne, CFO at Chorus Aviation]

It's Gary here. Essentially, that decrease you're seeing is related to the flying at Voyageur Aviation. From that side it, you know, it's primarily related to United Nations flying and the repositioning there. From that side, I think it's all of that.

[Alexander Augimeri, Analyst at CIBC]

Okay. Yeah.

[Gary Osborne, CFO at Chorus Aviation]

Yeah. What was the other part of your question? Sorry.

[Alexander Augimeri, Analyst at CIBC]

Oh, yeah. I think, starting in Q3 2026 is when you won't be lapping those comps anymore, I think.

[Gary Osborne, CFO at Chorus Aviation]

Yeah.

[Alexander Augimeri, Analyst at CIBC]

From what I remember.

[Gary Osborne, CFO at Chorus Aviation]

I think somewhere, yeah, somewhere around there, Q3. There's still one UN mission, I think in Kinshasa, I think that goes out to mid this year or so or later this year. We'll see where that goes, it's just a couple aircraft flying over there. There's still a bit of flying, it's greatly reduced.

[Alexander Augimeri, Analyst at CIBC]

Okay. Okay. Yeah, just one more follow-up on that. I'm not sure if you can share, but can you share if there's any remaining contracts up for renewal in 2026? Are you guys thinking of doing similar things where you're focusing on the higher margin? Maybe that was it. Yeah. Thanks.

[Colin Copp, President and CEO at Chorus Aviation]

Yeah. Sorry, when you say 26. You're talking about UN contracts this year, or what are you referring to?

[Alexander Augimeri, Analyst at CIBC]

Oh, no, just in that contract flying business, 'cause I know you guys were saying.

[Colin Copp, President and CEO at Chorus Aviation]

Okay.

[Alexander Augimeri, Analyst at CIBC]

Winding down some of the contracts.

[Colin Copp, President and CEO at Chorus Aviation]

Yeah.

[Alexander Augimeri, Analyst at CIBC]

That's it. Yeah.

[Colin Copp, President and CEO at Chorus Aviation]

We should clarify that, you know, it's the UN business that principally has been winding down. It's not other contract flying. Voyageur's still doing different types of contract flying, you know, throughout Canada and even the world, there's other contracts. The reality is, what Gary's referring to is the UN was significantly. It was a big contract. There was a lot of activity there. That's wound down. You're still gonna see some UN flying, a little bit for this next little while, and you're gonna see other flying in there as well that they're currently doing. You know, they're flying the Metrea airplane. They've got various aircraft with other operators that they're operating. There's a charter aircraft. There's a variety of stuff.

[Colin Copp, President and CEO at Chorus Aviation]

It's just not as large as the UN book of business was.

[Alexander Augimeri, Analyst at CIBC]

Okay. Got it. Yeah. Thanks for clarifying that.

[Alexander Augimeri, Analyst at CIBC]

I can pass it back.

[Operator]

Thank you. Next question comes from Konark Gupta with Scotiabank. Please go ahead.

[Konark Gupta, Analyst at Scotiabank]

Thanks, morning, everyone.

[Colin Copp, President and CEO at Chorus Aviation]

Morning.

[Konark Gupta, Analyst at Scotiabank]

Morning. The first question I have is on the CPA. I mean, if I look at the business, and I'm looking just more broadly from a strategic angle, your fixed fee, I think, has stepped down to a level where it kind of is stable now to the end of the term. Your leasing revenue under the CPA, it still comes down contractually, obviously. When you see that leasing part stabilize, I mean, is it subject to your lease negotiations with Air Canada, or under the current sort of contract terms, you know when exactly that leasing revenue is gonna stabilize?

[Gary Osborne, CFO at Chorus Aviation]

Konark, it's Gary here. On the CPA fixed fee, yes, it's stable right to the end of 2035. On the aircraft leasing under the CPA, if you look at our investor deck that we put out last quarter, it gives you the revenue numbers we would expect under that agreement. The only thing that's coming up is there's some aircraft that come to the end of their first lease at the end of 2027 and 2028 that are up for renewal. We believe they'll be renewed, that's yet to be determined. If you look there, that'll give you an idea of where we would expect the revenues to come in with those extensions, assuming they happen.

[Gary Osborne, CFO at Chorus Aviation]

You know, there is some step down there in 27 and 28 on those lease renewals, but you can see it in our disclosures.

[Colin Copp, President and CEO at Chorus Aviation]

Yeah. The only point I'll add to that, Konark, is those assets that Gary's referring to are the ones that we've been talking about Air Canada's just recently put a fairly substantial investment into. We can't guarantee anything, obviously, on lease renewals, but, you know, they have invested in those assets and, you know, we feel fairly confident that, you know, we're gonna continue to have those assets in the fleet.

[Gary Osborne, CFO at Chorus Aviation]

The other thing to remind is, the debt is fully paid off at the end of the first lease, so there's no debt repayments as you go on to the second lease. That revenue, basically, makes its way through that free cash flow line. From that side, you know, we feel really, you know, good about those leases, post 2027, 2028, but it's just a revenue step down, but the cash flows are still good.

[Konark Gupta, Analyst at Scotiabank]

Okay. Thank you for that. I mean, I think there's some puts and takes obviously from quarter-to-quarter, and you're also lapping, I guess, the contract you demarketed recently. Where the business sits today with the tuck-ins you have done, can you help us understand what the revenue profile looks like for that business today and what kind of margin profile do you have?

[Colin Copp, President and CEO at Chorus Aviation]

I mean, I'll pass it over to Gary on a kind of a total revenue base because we're not providing that guidance, like we did in the past. You know, we did have a bit of a lumpy period there with Q1, but like I said earlier, the April numbers basically brought in all of the sales we were looking for and that were in the plan. You know, from our view, Voyageur is fairly much on track. But I'll let Gary comment on how you might be able to pull together revenue view.

[Gary Osborne, CFO at Chorus Aviation]

Yeah. I think if Konark, it's Gary here again. You know, on the revenues, I think as you go down through the segments or the pieces we have there, on the part sales, we still expect to see some, you know, reasonable level increases year over year. That's gonna perform pretty well with as far as we can see for the rest of the year. Just had a bit of a, you know, some sales get deferred from Q1 into Q2. From that side, I think we're okay. MRO and defense, we see that is growing over the course of time, so we see that continuing to grow. It'll be lumpy, as Colin mentioned earlier. You know, you get a contract, and then it goes in and kind of steps up. We continue to see growth there.

[Gary Osborne, CFO at Chorus Aviation]

On the contract flying and training, with Voyageur, you know, we do see the UN business stepping down. As Colin mentioned, we do have flying with Metrea and others that we do, that they're doing. It will be less in quantum, maybe overall, but will be good margin, as we work our way through that. Then on the training side, Cygnet continues to grow down in that line. It's, and, you know, we'll see some growth that'll offset a little bit of the of the piece on the contract flying, and that's kind of the profile we're seeing. Overall, Voyageur is, you know, still growing in the key areas that we kinda outlined there.

[Konark Gupta, Analyst at Scotiabank]

Okay. No, that's helpful. Thanks. Post KADEX and, you know, after the contract changes at Voyageur, is there a big working capital seasonality shift that we can expect going forward?

[Gary Osborne, CFO at Chorus Aviation]

No, Konark. I think typically, I guess on the seasonality, typically in Q1, you can see that we picked up about CAD 31 million, mainly in receivables. There is some true ups that we do with Air Canada, so typically Q1 will be a little bit better from a receivable side with Air Canada. Q2 and 3, you know, the way we see it's pretty neutral. Coming up could be a, you know, some positive cash flows for sure. But, you know, we'll hold steady and maybe make a couple dollars there on the working capital side. Then you come into Q4, typically that's a period where we use our working capital, hence why I've said, you know, we'll see about half of that still retain.

[Gary Osborne, CFO at Chorus Aviation]

Moving forward back to what we said, we do not see big usages of working capital, ± a few CAD million is what we expect. As the businesses grow, yes, they'll need some inventory, they'll need some things. However, they also have payables that offset in some cases. We don't see working capital being a big draw longer run, and our projections don't have that. I know it was a question that's been posed before. In particular, I think you've been looking at on the working capital. We see working capital as essentially neutral to positive generally over the longer term. Last year was lumpy just because of the sale of RAL and various things like that.

[Konark Gupta, Analyst at Scotiabank]

Okay. That's great. Last one for me before I turn over. It's more a strategic question, Colin. You know, you guys have provided a framework for capital allocation recently. You know, in light of what we are seeing today, A, your stock price is kind of still in that low to mid twenties at this point. You know, we are seeing a lot of geopolitical conflict, so, you know, presumably defense opportunities are on the rise. You talked about the M&A landscape as well. Do you need to see or do you see the need to make some shifts in those buckets on capital allocation based on what you're seeing right now?

[Colin Copp, President and CEO at Chorus Aviation]

Hi, Konark. No, it's Colin. Look, I don't think so. You know, we've been pretty clear on our flexible capital allocation in our presentation there. Our focus is really to stay on track. Like, we have a plan. We've been very committed to it. We feel very comfortable with it. We've been listening to shareholders. You know, we've spent a lot of time preparing the plan. There's still quite a bit of flexibility in it from our view. You know, right now we're focused on the growth and returning capital to shareholders and being patient for our share price to come up as people see that, you know, we're executing well, and that's really as simple as it gets.

[Colin Copp, President and CEO at Chorus Aviation]

It's a matter of continuing to execute and getting things done for the next little while and sticking to the plan.

[Konark Gupta, Analyst at Scotiabank]

Okay. Makes sense now. Thank you. Appreciate the thoughts.

[Colin Copp, President and CEO at Chorus Aviation]

Okay. Thanks, Konark.

[Operator]

Thank you, ladies and gentlemen. As a reminder, if you have any questions, please press star one. Next question comes from Tim James with TD Cowen. Please go ahead.

[Tim James, Analyst at TD Cowen]

Thank you very much. Good morning.

[Colin Copp, President and CEO at Chorus Aviation]

Morning.

[Tim James, Analyst at TD Cowen]

If you could talk about the M&A kind of strategy now you've got KADEX done, I'm wondering in particular just in, you know, the changing environment that we've got in Canada with respect to spending, defense spending, just kind of your general updated thoughts on what type of M&A opportunities are best suited for Chorus and kind of where you think the most opportunities are you're seeing in terms of looking at and kind of what to expect over the next couple of years?

[Colin Copp, President and CEO at Chorus Aviation]

Hi, Tim. It's Colin. Yeah, I mean, it's a good question. Absolutely. We tried to outline kind of our general vertical focus there in our presentation, our investor deck. You know, there's the five verticals there that we've been focused on within aviation, aerospace, and defense. I would say we'd be pretty much sticking to those if you look at those categories. You know, there's still a lot of opportunity out there, in our view anyways, and what we're seeing in our pipeline within those. Anything that you could think of in that aviation, aerospace, and defense sector would make sense to us to look at.

[Colin Copp, President and CEO at Chorus Aviation]

We do have, and we've outlined in some ways, and I think we're gonna be a little more clear with our AGM and our shareholder letter kind of, you know, the basics of how we see and value businesses, but it's no different than what you've heard Gary talk about in the past as far as kind of what we're looking for with returns and so on. We've been pretty disciplined about making sure we stick to those. That's really the nutshell of everything, is looking at making sure we get good returns and that they're businesses that we understand well, and that they fit well with our organization. Things like management teams are critical to us.

[Colin Copp, President and CEO at Chorus Aviation]

You know, everything we've looked at and everything we've bought so far has long-term, high expertise within the management organization. Generally, you know, good relationships already exist in a lot of cases with these companies. I'd also add that, you know, generally speaking, most of them anyways that we're looking at are not actively on the market today as being marketed, so.

[Tim James, Analyst at TD Cowen]

Okay, that's helpful. Maybe just to build on that question, if I could, and forgive me, I don't have the PowerPoint in front of me, but I don't think this is in there. Do you think about building scale within kind of your current capabilities, or do you think more about sort of adding on adjacencies that where you can, you know, increase customer wallet share, for lack of a better term? Could they, could M&A involve either one of those, types of businesses?

[Colin Copp, President and CEO at Chorus Aviation]

Absolutely could be either one.

[Tim James, Analyst at TD Cowen]

Okay.

[Colin Copp, President and CEO at Chorus Aviation]

You know, we're looking at both in some cases right now. Yeah, it could be either. We haven't restricted ourselves from that view. It's all about the discipline of deploying capital really effectively, making sure we get the returns, and make sure we understand the business well. It could be smaller stuff, which you've seen us do a little bit of, or it could be a little bit bigger and larger. It's gotta fit within that structure that I've talked about.

[Tim James, Analyst at TD Cowen]

Okay. That's great. That's the only question I had. Thank you very much.

[Colin Copp, President and CEO at Chorus Aviation]

Thanks, Tim.

[Operator]

Thank you. We have no further questions. I will turn the call back over to Matt LaPierre for closing comments.

[Matt LaPierre, Director of Treasury and Investor Relations at Chorus Aviation]

Thank you all for joining. That concludes today's earnings call. Please have a great day.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.

Participants

Executives

• Colin Copp, President and CEO
• Gary Osborne, CFO
• Matt LaPierre, Director of Treasury and Investor Relations

Analysts

• Alexander Augimeri, Analyst at CIBC
• Daryl Young, Analyst at Stifel
• James McGarragle, Analyst at RBC Capital Markets
• Konark Gupta, Analyst at Scotiabank
• Tim James, Analyst at TD Cowen