Earnings call transcript: Cargojet Q2 2025 misses forecasts, stock dips

Cargojet Inc. reported its second-quarter 2025 earnings, revealing a slight miss in both earnings per share (EPS) and revenue compared to analyst forecasts. The company posted an EPS of $1.02, falling short of the expected $1.04, and reported revenue of $238.2 million against a forecast of $250.02 million. The immediate market reaction saw Cargojet’s stock dip by 1.58%, closing at $98.72. According to InvestingPro analysis, the company’s current market capitalization stands at $1.16 billion, with a P/E ratio of 12.48, suggesting relatively modest valuations compared to industry peers.

Key Takeaways

• Cargojet’s Q2 EPS and revenue fell short of expectations.
• The company experienced a 14% growth in its domestic business year-over-year.
• Cargojet renewed key partnerships with Amazon and DHL.
• Stock price decreased by 1.58% in after-hours trading.
• Ongoing global trade uncertainties are impacting decision-making.

Company Performance

Cargojet’s performance in Q2 2025 showed strong domestic growth despite missing earnings forecasts. The company achieved a 14% year-over-year increase in its domestic business, driven by robust e-commerce demand. However, a 10% drop in block hours and global trade uncertainties posed challenges. The company continues to leverage its strategic partnerships with Amazon and DHL to strengthen its competitive position.

Financial Highlights

• Revenue: $238.2 million, compared to $250.02 million forecast
• Earnings per share: $1.02, compared to $1.04 forecast
• Adjusted EBITDA margin: 33.7%, up 140 basis points from Q1
• Year-to-date free cash flow: $118.4 million
• Stock price change: -1.58%, closing at $98.72

Earnings vs. Forecast

Cargojet’s actual EPS of $1.02 was below the forecasted $1.04, resulting in a negative surprise of 1.92%. Revenue also missed expectations with a 4.73% shortfall. This marks a deviation from previous quarters where the company has met or exceeded forecasts, indicating potential challenges in maintaining growth momentum.

Market Reaction

Following the earnings release, Cargojet’s stock fell by 1.58% in after-hours trading, reflecting investor concerns over the earnings miss. The stock remains in the lower range of its 52-week high of $105.43 and low of $50.62, indicating cautious market sentiment amid broader market uncertainties. InvestingPro has identified several key factors affecting the stock’s performance, including three analyst downward revisions for the upcoming period, though the company is expected to remain profitable this year.

Outlook & Guidance

Cargojet anticipates an increase in block hours in the latter half of the year, with expectations of a normalized seasonal peak. Capital expenditures for the quarter are projected at $50-60 million, with a total annual CapEx forecast of $80-90 million. The company also expects a potential cash inflow of $170 million from aircraft sales.

Executive Commentary

Jamie Porteous, Co-CEO, emphasized the company’s resilience, stating, "Trade is as old as civilization itself." Co-CEO Pauline Dillon added, "We truly believe that every challenge is an opportunity." Executive Chairman A.J. Vermani highlighted strategic positioning, saying, "We are positioned to take advantage of the new routes and the new openings."

Risks and Challenges

• Global trade uncertainties affecting strategic decisions.
• Potential volatility in block hours impacting operational efficiency.
• Increased competition in the air freight sector.
• Dependence on key partnerships with Amazon and DHL.
• Fluctuating fuel prices affecting operational costs.

Q&A

During the earnings call, analysts inquired about the DHL partnership extension and growth opportunities, the potential recovery in EU-US trade routes, and margin improvements through cost initiatives. Executives addressed potential peak season performance and clarified expectations for future quarters.

Full transcript - Cargojet Inc (CJT) Q2 2025:

Conference Operator: Good morning, ladies and gentlemen, and welcome to the Cargojet Conference Call. I would now like to turn the meeting over to Martin Herman. Please go ahead.

Martin Herman, Unspecified, Cargojet: Good morning, everyone, and thank you for joining us on this call. With us on the call today are A. J. Vermani, our Executive Chairman Pauline Dillon and Jamie Porteous, our Co Chief Executive Officers Aaron McKay, our Chief Financial Officer and Sanjeev Meny, our Vice President of Finance. After opening remarks about the quarter, we will open the call for questions.

I would like to point out that certain statements made on this call, such as those relating to our forecasted revenues, costs and strategic plans, are forward looking within the meaning of applicable securities laws. This call also includes references to non GAAP measures like adjusted EBITDA, adjusted earnings per share and return on invested capital. Please refer to our most recent press release and MD and A for important assumptions and cautionary statements relating to forward looking information and for reconciliation of non GAAP measures to GAAP income. I will now turn the call over to Jamie.

Jamie Porteous, Co Chief Executive Officer, Cargojet: Thank you, Marty. Good morning, everyone, and thank you for joining us on the call today. As we’ve done in prior quarters, Pauline and I will share our prepared remarks, and then we will open up the call for questions. What started in The United States as a Liberation Day on April 2 has clearly set the stage for a new trade world order. While countries and economic blocks such as Japan and the European Union are buying peace and entering into trade deals with The United States, the longer term impact of this seismic change will only emerge in the coming years.

There’s definitely a greater level of uncertainty that is translating to slower decision making. We believe the key to surviving this unprecedented period is resilience and resilience is one of the foundational values that Cargojet was built upon. Trade is as old as civilization itself. The spice route is about 5,000 years old and the Silk Road is over 2,000 Accordingly, we do not expect world trade to come to an end anytime soon. There will be new export countries, new trade routes and new opportunities.

Our mission is to stay one step ahead and we have demonstrated just that by identifying growing ACMI opportunities with DHL by entering into long term contracts for China scheduled charters and we will continue to find new and emerging trade routes around the globe. Closer to home, our domestic network is unparalleled. Despite global uncertainties, our domestic business posted 14% year over year growth in Q2. As I’ve noted before, during tough economic times, consumers often substitute a product with a lower cost item, but we expect the volumes to remain resilient. Our Q2 results clearly demonstrate that such behavior is playing out and that e commerce is still strong and has a long runway of growth ahead of it in Canada.

That said, we did see some weakness in our European ACMI routes after deliberation day, but we remain optimistic that after the EU USA trade deal and our new DHL agreement, air cargo flows will reemerge in the coming quarters. Our charter business posted a 22 growth demonstrating the stickiness of this trade lane that is relatively new for Canada. We did, however, identify an attractive opportunity to streamline our fleet by acquiring a total of four aircraft, three converted Boeing aircraft and the outright purchase of a used factory built freighter. The growing size of Cargojet’s overall fleet now warrants an enhanced maintenance spare fleet to backstop heavy maintenance schedules and to sustain operational reliability for both Cargojet owned as well as CMI aircraft. Management will be selling two older seven sixty seven-three 100 aircraft in Q3 twenty twenty five and one leased seven sixty seven-two 100 will now be returned to the lessor in Q1 twenty twenty six.

This will lead to a net addition of one seven sixty seven-three 100 aircraft. These investments partially funded in prior periods reflect timing differences between cash inflows and outflows, thereby resulting in a net year to date free cash flow of $118,400,000 We expect to fully offset this cash flow shortfall by Q3 twenty twenty five through operational cash generation and the sale of the two aircraft returning to our previously stated adjusted EBITDA leverage ratio range of 1.5 to 2.5 times. During the six month period ended June 30, the company purchased for cancellation an aggregate of 704,533 voting shares under the NCIB for a total cost of $73,000,000 including 1,400,000 share buyback tax. Our dividend policy remains consistent with previous years. We remain confident that our resilient approach to turning threats into opportunities will continue to serve us well into the future.

Our fleet of 43 freighter aircraft and our unique mix of domestic network, ACMI and all in charter revenue segments creates a very strong competitive advantage, provides further growth opportunities and continues to generate value for all stakeholders. Thank you. And let me now pass the microphone over to my colleague, Pauline.

Pauline Dillon, Co Chief Executive Officer, Cargojet: Thank you, Jamie, and good morning, everyone. I would like to stay on the theme of resilience. On July 2, we announced that Amazon had renewed its air transportation services agreement for four years with us with an option to renew for two additional years, potentially extending the relationship till 03/31/2031. Last night, we announced that DHL has also extended its strategic partnership with Cargojet until 03/31/2033 with additional options till 03/31/2037. Let me first recognize the Cargojet team who makes it happen every single day and night.

Consistently delivering on time performance of over 99% month after month, year after year requires a highly engaged and synchronized team that is pulling in the same direction. This is resilience. This is our cargo category. This is our DNA. Our heartfelt thanks to each and every one of them.

We would not have earned these long term renewals without our team, their hard work, their passion and their continued dedication to Cargojet. Amazon and DHL are two of the planet’s largest logistics brands and have reaffirmed their vote of confidence in Cargojet. These global leaders have vast resources to build engines that will drive their business. Our job is to support them in the most cost effective way and to capture those growth opportunities. That is what excites us the most.

Turning towards operational effectiveness. It is worth noting that despite a 10% drop in block hours flown this quarter versus quarter two of the previous year, we have managed to post a strong adjusted EBITDA margin of 33.7%. Sequentially speaking, we improved our margins by 140 basis points versus first quarter of this year. We are starting to see sustainable cost efficiencies as a result of a new work smarter culture we are building in every part of our business. I touched on the need to build strong talent in all key functional areas in my prior remarks.

Today, I am pleased to introduce Erin McKay, who started on August 1 as our new Chief Financial Officer. Aaron comes with strong industry experience and he looks forward to quarterly updates in the upcoming quarters. We are thrilled to have Gord Johnston, a veteran cargo jet executive stepping into the expanded role of Chief Commercial Officer. This new role will streamline our sales processes and generate new revenues by improving capacity utilization in key lanes, including backhaul lanes by leveraging spot and interline relationships. It is one of the key initiatives to improve margins.

We also continue to make progress on our technology transformation project. This project will not only streamline our day to day operations, it will improve financial reporting while reducing working capital. On the operational front, our team delivered a successful Prime Week for Amazon and is gearing up for the back to school shopping season. We call it a warm up for the upcoming holiday season. We are also extremely proud of the health and safety teams that are working on innovative ideas to train our employees using bite sized video technology.

Despite global uncertainty and a slowing economic outlook, we remain very optimistic about our ability to continue to deliver shareholder and employee value. We truly believe that every challenge is an opportunity. Maintaining strong engagement and supporting our team members to deliver the customer promise is a personal priority, and we are thrilled with the progress we are making. Thank you again for joining us this morning. Paul, if you’d like to open the line for questions.

Thank

Conference Operator: First question is from Walter Spracklin from RBC Capital Markets. Please go ahead. Your line is open.

Walter Spracklin, Analyst, RBC Capital Markets: Yes. Thank you very much. Good morning, everyone.

Jamie Porteous, Co Chief Executive Officer, Cargojet: Good morning.

Walter Spracklin, Analyst, RBC Capital Markets: You’ve brought in your block hours. They were looking at they were stable in Q1, but dropped 10% in Q2 year over year. Are we going to run at kind of the lower level of block hours now in the back half? Or is it something that seasonally we might see the year over year go back to prior year levels or stay at the down 10% year over year for the back half?

Jamie Porteous, Co Chief Executive Officer, Cargojet: Walter, it’s Jamie. I can take that. We would expect it to go back to more seasonally a little bit higher than what we saw. The reduction that we saw in Q2 is a little less than what we saw in Q1. If I look at our ACMI overall block hours in the quarter, I think we were down 9% versus 16%, so slight improvement from Q1 and our indications are in the back and equally with the domestic network, our hours were up a little bit, but that was a reflection of the 14% increase in revenue and we would expect that in all three segments, the domestic, the ACMI and our scheduled and ad hoc charter business will be stronger in the

Cameron Doerksen, Analyst, National Bank Financial: back half of the year. Got it.

Walter Spracklin, Analyst, RBC Capital Markets: Okay. And then on the charter, kind of same similar question, it was $46,000,000 in Q1, it dropped to 40,000,000 in Q2. Is that a seasonal or like should we expect it to come back up in Q3 on seasonal? Or is that drop that sequential drop due to some other reason, again, as we look into the modeling for Q3, Q4?

Pauline Dillon, Co Chief Executive Officer, Cargojet: Yes. Walter, it’s Pauline. No, we don’t anticipate to see any further decline in that. We just saw a softening in the economy. As a matter of fact, we’re starting to see things pick up again when it comes to the charter business.

Walter Spracklin, Analyst, RBC Capital Markets: And then on the CapEx side, is it can you give us the your latest on maintenance CapEx that you’re expecting in the year and then the growth CapEx net of your disposals?

Sanjeev Meny, Vice President of Finance, Cargojet: Hi, Walter. Sandeep here. We expect our CapEx to be we will spend about 50,000,000 to $60,000,000 this quarter. And after basically settling up cash what we received from sale of assets, it will drop down to basically 80,000,000 to $90,000,000 at the year end. We are selling two B767 aircraft and then we have a sale and leaseback arrangement for 02/07/1967.

So it will virtually give us $170,000,000 in cash inflow.

A.J. Vermani, Executive Chairman, Cargojet: And Walter, just to make it clear, the 02/1967, we are selling our Pratt and Whitney aircraft. Majority of our fleet, except these two aircraft are Pratt and Whitney, which we bought during COVID time because every aircraft was valuable and strategically, two of a kind, doesn’t give us the synergies operationally. So we are selling those, and replacing it with one GE engine with most of our fleet. So it’s a fleet rationalization that will help with cost and maintenance and synergies. So that was a strategic move that

Sanjeev Meny, Vice President of Finance, Cargojet: we’re doing.

Walter Spracklin, Analyst, RBC Capital Markets: That’s fantastic, Ajay. And that harmonizes that and improves your efficiency there for sure. Last question is just on the DHL and the logic around issuing warrants with your customer. I mean you are the only game in town. Issue warrants and not more traditional kind of contract like you seem to have kind of now developed with Amazon?

Your Amazon didn’t include did include warrants before, didn’t with the new renewal. But for DHL, they did before and you’re doing it I know you’re canceling the other one, but you’re issuing new ones here. Talk to us a little bit about the logic around issuing warrants with this particular customer.

A.J. Vermani, Executive Chairman, Cargojet: Yes. So I’ll take that. We are we do have a fairly big market share in Canada. But keep in mind, all the DHL business we do can be done by other carriers. When I say other carriers, mostly American.

So that part is not, you know, when you say we are the only game in town pretty well. No, we’re not the only game in town. There’s many American carriers who can do that. We fly from here to Cincinnati, five, six flights a day, then we do Cincinnati, Mexico, South America, some Caribbean. Europe, we were doing a while back, then Europe dropped off a little bit.

So any business we do with DHL does have they do have options. And secondly, I think that the relationship with DHL is today nobody is getting eight or ten years or twelve year deals with any carrier. And first of all, we canceled the old warrants, which was 1,600,000 warrants at over $150 per strike price. And we had to make it more interesting to continue with the unique partnership that DHL does not have with any other carrier other than us, which means when the business is down, know, we’re the last one told to, okay, you’re going to take a break for this route. And when the business is up, we’re the first one who gets called.

So to develop that uniqueness and relationship, we also have to show uniqueness in our flexibility of bringing a partnership approach that we both are aligned, we are on the same page and we stand out compared to other carriers. So I think by reducing the number of warrants, by making the price turn, we win by less dilution. They also win by less warrants. They get the motivation to give us more routes and the partnership continues.

Walter Spracklin, Analyst, RBC Capital Markets: Great. Appreciate the time.

Pauline Dillon, Co Chief Executive Officer, Cargojet: Thank you, Walter.

Conference Operator: Thank you. The next question is from Cameron Doerksen from National Bank Financial. Please go ahead. Your line is open.

Tim James, Analyst, TD Cowen: Thanks very much. Good morning. If I could just follow-up on, I guess, the question around the DHL deal. You still had, I guess, a couple more years to run on the existing deal. So I’m just maybe my question is, why now?

Why would it why the extension now? And is there anything, I guess, contractually that’s I mean, than the warrants that you just addressed, but is there anything else contractually different within the new contract?

A.J. Vermani, Executive Chairman, Cargojet: Well, Cameron, the contractually different is obviously the term of the agreement. Secondly, the contractually different is that the warrants that we have now reissued, which are a lot less, The site price is different. And most importantly, the revenue associated with warrants that they have to deliver is more geared towards growth than maintaining the business. So the interest aligned from that, but they’re interested in growing with us based on our performance, our flexibility, our willingness to do more than anybody else. And we wanted to make sure that we refreshed the agreement two years early.

Now you’re saying why two years early? My question to the question is why not early? Why late? Two years, yes, we could have lived the two years, but we could have lived with an outdated agreement that did not motivate the customer or us to do anything different. So two year renewal, two year earlier renewal refreshes the whole agreement commercial terms, adds the minimum block hours, add minimum number of planes and certainly rejuvenates the whole partnership.

Tim James, Analyst, TD Cowen: Okay. So some more potential upside, I guess, for growth with DHL? With the agreement? Okay. That makes sense.

Just on the, I guess, the Chinese e commerce contract, I mean, it did look like it maybe it slowed somewhat, I guess, sequentially in Q2, I think maybe it sort of happened towards the end of the quarter. Can you just talk about how that volume is trending, like weekly flights as we sit here today and what your expectation is for the second half?

Jamie Porteous, Co Chief Executive Officer, Cargojet: Jamie can take that. Yes. Good morning, Cameron. Yes, you’re right. We saw some softness on the weekly frequencies from what we saw in Q1.

We’re down to three frequencies per week throughout the summer and we expect that to increase as we go into the third and fourth quarter.

Tim James, Analyst, TD Cowen: And maybe just final clarification for for Sanjeev just on the cash inflow from the two aircraft sales, I guess, the sale leaseback. I just want to confirm that you said $170,000,000 in cash inflow. If that’s correct, which quarter do you expect to receive that?

Sanjeev Meny, Vice President of Finance, Cargojet: Yes, dollars 170,000,000 is correct. We are already in process of completing sale and leaseback. We expect it to be over this quarter for $100,000,000 and $70,000,000 is also in process. It may be a split between this quarter and next quarter, but we are pushing it hard for SiC to complete the sale this quarter as well. So $70,000,000 might come this quarter or it will be 35,000,035 million dollars

Tim James, Analyst, TD Cowen: Okay, perfect. I appreciate the time. Thanks very much.

A.J. Vermani, Executive Chairman, Cargojet: Thanks, Jeremy.

Conference Operator: Thank you. The next question is from Tim James from TD Cowen. Please go ahead. Your line is open.

Daryl Young, Analyst, Stifel: Thanks very much. Good morning. Just wondering you could speak to training costs and overtime costs. I know just due to growth and other factors, those were had kind of ramped up last year. I think training costs were called out this quarter as I don’t know whether unusually high is the right term, but called out as an impact.

Could you just sort of address, have those normalized as we sit here in early August? And just any color on sort of your forward looking expectations through the balance of the year?

Pauline Dillon, Co Chief Executive Officer, Cargojet: Good morning, Tim. I’ll take that. Yes, they’ve normalized. We had hired a number of pilots last year. We’ve got them all through training.

We’re going to see normalization there. We don’t expect those costs to increase for the remainder of this year.

Daryl Young, Analyst, Stifel: Okay, great. Thank you, Pauline. My second question, returning to the DHL agreement. Is there any opportunity do you think to expand the number of aircraft or routes as part of this agreement? Or should this look over time like just more volume potentially or hopefully more flying on the routes that you’re already familiar with and already have done for DHL since 2022?

A.J. Vermani, Executive Chairman, Cargojet: Yes. Tim, I’ll take that. I don’t think we’ll see tomorrow that there’s going to be new routes, but the intention is to have instruments and agreements in place because obviously there is some forecasting that the customer has done and they expect that once tariff trends and geoeconomic political stuff settles down, there is opportunities to go on certain lanes, segments at certain times. So obviously, we want to be in a position to be the first ones to get in. The other thing that I point out to you, which I pointed out earlier, is that the warrants that have been given are more on the growth side.

So obviously, DHL would not entertain a growth side warrant if they didn’t intend to grow. So the intention of both parties is to grow together and that’s why that deal was done. So obviously it will depend on how the market behaves and how where the demand leads open up, where the trade settles down, what concrete it is going to be. But by putting this in place, we become the first in line. So that was the intention on both parties and the intention was genuine.

Otherwise, no company, as I mentioned, with DHL or any organization in our business has agreements that can stretch to 2,037 today.

Daryl Young, Analyst, Stifel: Okay, that’s great. Thank you very much.

Conference Operator: Thank you. The next question is from Daryl Young from Stifel. Please go ahead. Your line

Walter Spracklin, Analyst, RBC Capital Markets: is open. Hey, good morning everyone. I just wanted to follow-up quickly on Tim’s question about new routes with DHL. There’s some language in the press release that makes it sound like you might have a rover on future opportunities. Is that accurate or is that just more of a blanket statement that was included in there on future work?

A.J. Vermani, Executive Chairman, Cargojet: Well, look, I mean, you can have any agreement and they’re as good as the goodwill behind them. There is no guarantees of anything in this world. But the very fact that a carrier and suppliers, I mean a customer step up and do potentially eight to twelve year deal with growth warrants, certainly show the goodwill and the intention that we have had. Keep in mind, we’ve had this relationship with DHL since 02/2005. We are the carrier that stepped up for them and were flying seventeen, eighteen planes during COVID.

So we have always been there for them. They have always treated us family, as partners. They have gone beyond in ensuring that the contracts and the terms they give us are fair. They’re the ones who ensure that all the cost of living increases, anything that impacts our operation, whether it’s operations, whether it’s financial. You know, for example, DHL has aviation insurance major massive policies around the world.

They let us participate in those so we can keep our costs lower. So it’s more than a customer relationship, it’s a partnership And yes, the new routes will come back eventually. But as I said, they’re not coming tomorrow, but we are positioned to take advantage of the new routes and the new openings that they might have.

Walter Spracklin, Analyst, RBC Capital Markets: Got it. That’s helpful. And then second question, you provided some constructive commentary around the EU U. S. Corridor.

Is there specific work that is coming back and presumably it’s DHL related volumes or maybe there’s some surge ad hoc charter that could be coming from there as well, just as tariffs and trade realign. Is that something you can speak to in terms of what you’re seeing in the magnitude of potential upside there? Yes.

A.J. Vermani, Executive Chairman, Cargojet: So we see some next month or so. We do see some ad hoc charter opportunities as the de menace, you know, is eliminated in the next month or so. So there might be some rush to get the product over to beat that. But that’s the one time or sort of opportunity that might come to all the carriers. I think on the Europe corridor, yes, there has been a Europe America deal.

But would that deal be just a deal or would that have an impact on shipping? We don’t know at this stage and as a matter of fact, nobody knows whether the 15% tariff on European goods is going to be translating into similar level of shipping or more level of shipping or less level of shipping. That will have to depend on the American consumers. But interestingly, there’s a lot of products, for example wine, that has not been part of that 15%. That’s still under negotiation.

So yes, the 15% is a number, but then there’s so many exceptions within the 15% that nobody has been able to absorb or able to put numbers or predictions around it. So we feel that at the end of the day, this is all shaped down to common sense. The stuff that’s not working is going to be thrown out and stuff that’s working will be kept. And I think we have to have an optimistic approach because the world has survived on the trade and all of a sudden, yes, there is some new order, there’s some new spending on defense, there are some other pressures that we use for trade and I think once this settles down, we’re not going to have this continuous for the next four years for sure. So I think at some stage, we’ll find that stability.

Walter Spracklin, Analyst, RBC Capital Markets: That’s great. That’s good color. Thanks. I’ll hop

Martin Herman, Unspecified, Cargojet: back in the queue. Okay.

Conference Operator: Thank you. The next question is from Rasi Hassan from Paradigm Capital. Please go ahead. Your line is open.

Walter Spracklin, Analyst, RBC Capital Markets: Thanks. Good morning. Thanks for my question.

Martin Herman, Unspecified, Cargojet0: I just wanted to ask, is there anything specific you can point to in regards to the 140 basis points sequential increase in EBITDA margins? Anything stick out to you in your opinion is that sustainable what you guys have currently?

A.J. Vermani, Executive Chairman, Cargojet: Yes. Following you on, Jay.

Pauline Dillon, Co Chief Executive Officer, Cargojet: Yes. Thanks, A. J. Good morning, Razi. Yes.

So it’s basically all the cost initiatives that we’ve put into place. It’s something that we’ve been doing from the beginning of this year. We’ll continue to monitor those and continue to see those improve.

Martin Herman, Unspecified, Cargojet0: Okay. Thanks. And then maybe the last two, just on the ACMI growth or increased year over year. Just any thoughts for the remainder of the year, how you’re seeing ACMI play out, obviously, with DHL contract, to your point, maybe more of a longer term growth profile there. But just for the back half of the year, any thoughts?

Pauline Dillon, Co Chief Executive Officer, Cargojet: Yes. We were hoping that it continues to grow. We’ve seen increase from Q1 to Q2. We anticipate to see the seasonal increases that we do in Q3 and Q4. So we’re optimistic.

Conference Operator: The next question is from Kevin Chiang from CIBC. Please go ahead. Your line is open.

Cameron Doerksen, Analyst, National Bank Financial: Hi, thanks. Thanks for taking my question. Maybe just two for me. It sounds like you’re expecting a seasonal pickup here in the back half as usually do. But just wondering more broadly speaking, do you expect a more normal seasonal peak or more typical peak season?

It does seem like some transport companies are assuming something a little bit more muted in the back half of the year, just given all the unusual trade flow we saw in the 2025. Just from a broader peak season comment, do you think it will be more normal for Cargojet? Or do you think it could be maybe a little bit more muted just given some of the front running we’ve seen in the first half of this year?

A.J. Vermani, Executive Chairman, Cargojet: Yes. Kevin, I don’t think we will see a very muted season. We will see some impact with the deminence disappearing. Some of the gifts people are buying that are under 800 in The U. S.

Canada only had a very small deminence anyway. So I think at the end of the day, I don’t know what the definition of very muted and normal is. I think at the end of the day, the Canadian shipping, the domestic, we don’t see that it will be a very muted season. Yes, there could be some softness in the ACMI type of the North American or global charters simply because people don’t understand what is the long term impact of all these things. So peak season is peak season.

People always buy stuff. So I’m not expecting that this is going to be a huge, huge bumper season. It’s a season of adjustments I call. People are in there. Is this product expensive, more expensive?

What are people going to Companies, e commerce companies are still shipping the same what they were doing, tariffs and no tariffs. We certainly feel that it’s certainly going to be closer to a normal season, not a muted season, but not a super bumper season. So we are expecting an above average sort of peak season, but not great, great, great peak season. But we have had surprises before.

Cameron Doerksen, Analyst, National Bank Financial: That’s helpful. Sounds like you’re setting up for heightened volumes here relative to the first half. Maybe, Pauline, you mentioned some of the executive management changes and one caught my attention, you talked about the new CCO role and maybe opportunities for backhaul and improving efficiency. I’m sure it’s early days here. But I guess if you were to look at that opportunity, just wondering, it sounds like there’s some efficiency levers you foresee maybe even revenue levers.

Like, is that something we should see flow through like in revenue per operating day? Are there opportunities there as you take a backhaul? Is it sounds like there’s margin opportunities? Is there a way to quantify the potential upside as you leverage some of these, I guess, I’ll call them inefficiencies that you noted earlier?

Pauline Dillon, Co Chief Executive Officer, Cargojet: Yes, you call them inefficiencies. I’ll call them opportunities. Opportunities. Yes. Know what, we are a domestic player and obviously we’re always looking for opportunities, whether they’re growth opportunities or cost constraint opportunities.

But at this point, I think it’s too early to share or to quantify what you’re asking for. We will embark on it in Q3 and hopefully have something to report at the end of the quarter.

Tim James, Analyst, TD Cowen: Okay. I look forward to that. Thank you

Cameron Doerksen, Analyst, National Bank Financial: very much. Those are my questions.

Pauline Dillon, Co Chief Executive Officer, Cargojet: Thanks, Devin.

Conference Operator: Thank you. The next question is from Ashish Iman from BMO. Please go ahead. Your line is open.

Jamie Porteous, Co Chief Executive Officer, Cargojet: Good morning. Thank you. Jamie, the domestic growth that we’re seeing, I mean, feels like it’s much stronger than the market growth and organic growth that we’re seeing in the market. What’s driving that? Is this kind of broad based across your customer?

Is it driven by kind of specific customer? No, good morning. It’s mostly driven not mostly, I would say it’s all driven by stronger e commerce demand in Canada and e commerce growth that we’ve seen across all of our customer base, including Amazon. As Ajay was alluding to answering the question on growth in the second half of the year, Amazon as an example, Prime Week was stronger than it was in previous years. We see that trend continuing and that’s really what’s driving the growth on the domestic side.

Martin Herman, Unspecified, Cargojet: Okay. So it’s kind of a more broad based across all e commerce channels. Okay. So we should expect on that front kind of typical seasonality from a domestic growth perspective as we go into Q3 and Q4 like with a strength in fatigue in Q4?

Pauline Dillon, Co Chief Executive Officer, Cargojet: Yes. That’s correct. Okay.

A.J. Vermani, Executive Chairman, Cargojet: I want to go back

Martin Herman, Unspecified, Cargojet: to the DHL agreement just to make sure I’m walking away with the right feedback here. So the margin profile of the current tools that you have with DHL doesn’t change. Your minimum block hours profile doesn’t change. This is really an extension of the contract with a framework that is potentially supported for growth. There’s some some growth initiative potentially in the pipeline under the new framework and incentivize customer potentially online growth.

Is that the right approach?

A.J. Vermani, Executive Chairman, Cargojet: To think about?

Martin Herman, Unspecified, Cargojet: Henry, you want to take that?

Jamie Porteous, Co Chief Executive Officer, Cargojet: Yes, absolutely. I mean, that’s as Ajay said earlier, new agreement and the answer to the question of why renewing it early is to take advantage of the growth opportunities as the economies improve global around over the next several years. And really the agreement, it’s the best alignment for us with a major customer that we’ve had a long term relationship with back to 2005 and it certainly incentivizes DHL to direct more business to Cargojet as a result of the warrant agreement than any other global air cargo carrier that they use. As AJ noted, we’ll be first in, last out for any new business. So there’s significant expectation that we’ll have opportunities for growth in the coming years.

Martin Herman, Unspecified, Cargojet: Okay. So there’s no change into the economics of the current business that you do with DHL, it’s all about the growth? Correct. And kind of related question, I mean, international expansion over the last few years have been great for growth, but from an ROIC perspective, it’s kind of been in that single digit range. Does this change with the new contract?

Is there kind of a financial framework that allows you to improve your asset utilization or maybe get economics or a different that would support expansion in the ROIC as we go into the next few years and hopefully you expand that relationship with DHL?

Sanjeev Meny, Vice President of Finance, Cargojet: Hi, Fadi. Sanjeev here. This contract has just been agreed to, so we will see in future how it will turns into and how effective it will be on our ROIC ratio. It is too early for us to comment on that one.

Conference Operator: Thank you. There are no further questions registered at this time.

Jamie Porteous, Co Chief Executive Officer, Cargojet: Right. Thank you joining us. Have a good day.

A.J. Vermani, Executive Chairman, Cargojet: Thank you.

Conference Operator: Thank you. The conference has now ended. Please disconnect your lines at this time. So we thank you for your participation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.