Earnings call transcript: Chorus Aviation Q4 2024 shows strong EBITDA growth

Chorus Aviation reported its Q4 2024 earnings, highlighting significant growth in its adjusted EBITDA and a strategic focus on expanding its aviation training and operational capabilities. According to InvestingPro data, the company maintains impressive gross profit margins of 73.4% and holds more cash than debt on its balance sheet. The company also detailed its efforts in reducing leverage and enhancing free cash flow, positioning itself for future growth opportunities.

Key Takeaways

• Q4 2024 Adjusted EBITDA reached $52.7 million, contributing to a full-year total of $211.6 million.
• Free cash flow for the year was $118.8 million, indicating strong financial health.
• The company launched a new pilot training academy, Cygnet Aviation, and completed its seventh cohort.
• Chorus Aviation closed a $2 billion sale of its regional aircraft leasing segment.
• The company is exploring geographical expansion for its Voyager segment.

Company Performance

Chorus Aviation demonstrated robust financial health in Q4 2024, with a notable increase in adjusted EBITDA both quarterly and annually. InvestingPro analysis shows the company maintains a strong financial health score of "GREAT," with a current ratio of 6.9, indicating excellent liquidity. The company’s strategic divestment of its regional aircraft leasing segment for $2 billion and its focus on reducing leverage from 3.3 to 0.4 underscore its commitment to financial optimization. Additionally, the launch of the Cygnet Aviation pilot training academy and expansion of industry partnerships highlight its proactive approach to growth and innovation. For deeper insights into Chorus Aviation’s financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

Financial Highlights

• Q4 2024 Adjusted EBITDA: $52.7 million
• Full Year 2024 Adjusted EBITDA: $211.6 million
• Adjusted earnings per share: $0.39 for Q4, $1.04 for the year
• Free cash flow: $27.5 million in Q4, $118.8 million annually

Outlook & Guidance

Chorus Aviation is targeting $150 million in revenue for its Voyager segment, with a focus on potential mergers and acquisitions and organic growth. InvestingPro analysis indicates the stock is currently undervalued, with a beta of -0.89 suggesting it often moves counter to market trends. The company is also considering geographical expansion, particularly on the U.S. West Coast, to strengthen its existing business lines. Investors seeking detailed valuation metrics and growth projections can find extensive analysis in the Pro Research Report on InvestingPro, which covers over 1,400 US equities.

Executive Commentary

CEO Colin Kopp emphasized the company’s focus on shareholder value, stating, "Creating shareholder value remains the key priority." CFO Gary Osborne expressed confidence in the Voyager segment’s revenue target, saying, "We’re very comfortable with the $150 million this year for Voyager."

Risks and Challenges

• Market fluctuations in the aviation industry could impact revenue streams.
• Geopolitical tensions may affect international operations and expansion plans.
• Supply chain disruptions could challenge operational efficiency and cost management.
• Increased competition in the aviation training market could pressure margins.
• Regulatory changes in aviation may require strategic adjustments.

Chorus Aviation’s Q4 2024 earnings call highlighted its strong financial performance and strategic initiatives aimed at sustaining growth and enhancing shareholder value. The company’s focus on innovation, operational efficiency, and market expansion positions it well for future opportunities and challenges.

Full transcript - Cheer Holding Inc (CHR) Q4 2024:

John, Conference Moderator: Good morning, ladies and gentlemen. Welcome to the Chorus Fourth Quarter and Year End twenty twenty four Financial Results. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, 02/20/2024.

I would now like to turn the conference over to Tyrone Cody. Please go ahead, sir.

Tyrone Cody, Investor Relations, Chorus Aviation: Thank you, John, and good morning, everyone. I’m pleased to report on the fourth quarter. Hello and thank you for joining us today for our fourth quarter conference call and audio webcast. With me today from Corus 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 forward looking information 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 of operations of Chorus Aviation Inc. For the three months and the year ended 12/31/2024, as well as the outlook and other sections of our MD and A where such statements appear. As a result of the share consolidation implemented on 02/05/2025, all per share figures in our disclosures have been disclosed to reflect the impact of consolidation. 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.

Please refer to our MD and A for further information relating to the use of such non GAAP measures and pro form a figures. I’ll now turn the call over to Colin Tom.

Colin Kopp, President and Chief Executive Officer, Chorus Aviation: Thank you, Tyrone, and good morning, everyone. I’m pleased to report on the fourth quarter and our 2024 results. It’s been a period in which we’ve taken significant steps to unlock value for our shareholders and reposition the business for success going forward. On December 6, we closed the sale of our regional aircraft leasing segment and quickly took steps using the proceeds to produce to reduce our debt and corporate financings. This included redeeming all our preferred shares, repaying our Series A debentures and launching redemption offers for our Series B and C debentures.

These actions have resulted in a substantial reduction in our debt servicing costs and further reduced our leverage ratio from 3.3 to 0.4. As per our plan, we have meaningfully strengthened Corus’ balance sheet, improved our financial metrics and reduced our corporate costs, providing us greater flexibility and a solid foundation from which to return capital to our shareholders and fund targeted investments in steady. At this time, fourth quarter results were delivered in line with expectations with strong and steady cash flows, reflecting consistent execution in each of our businesses. Turning to the operating side, all of our subsidiaries have performed well in 2024 and are on plan to deliver as we move into 2025. The Jazz team has executed very well, delivering consistent strong contracted earnings from the CPA and notable year over year improvements in almost all operational metrics.

Jazz was recently recognized as an Award of Excellence winner with Canada’s Safest Employers. This was the eighth consecutive year Jazz accepted an award as one of Canada’s Safest Employers. It’s a testament to Jazz’s commitment to safety. Voyager had another record year, demonstrating their strong position within the special mission, parts sales and specialty emerald space and they remain solidly on target to hit the 2025 growth plans as previously outlined. Further, we see significant potential and are positioning Voyager for sustained growth well beyond 2025, while achieving our goal of $150,000,000 in revenue over the next year.

Gary Osborne, Chief Financial Officer, Chorus Aviation: Notably in 2024,

Colin Kopp, President and Chief Executive Officer, Chorus Aviation: Voyager meaningfully grew their part of the business and successfully built up their Special Mission Support business with the Department of National Defense for the Manned Airborne Intelligence Surveillance and Reconnaissance Program. They also expanded their air ambulance operations at Grand Manan Island, part of the Ambulance New Brunswick (NYSE:BC) Provincial Air Ambulance program. On the pilot recruitment side, Jazz welcomed its first class debut hire pilots from our airline pilot training academy, Cygnet Aviation in October of twenty twenty four. Cignet team continues to grow the business as planned having commenced their seventh cohort at the beginning of Q1 twenty twenty five. Cignet’s pilot training capabilities to train airline ready pilots from the ground up and recent additions of top notch talents to its team is helping to generate a solid flow of airline ready first officers.

At the same time, Cygnet is now moving forward and expanding its industry partnerships with other Canadian airlines and focusing on growing its free agent enrollment. Turning to our shares for a moment. On 02/05/2025, with strong shareholder support, Horus consolidated its shares on the basis of one post consolidation share for every seven pre consolidation shares. The shares began trading on the TSX on a post consolidation basis on February 10. We expect the higher price per share resulting from the consolidation will make our shares more attractive for investment for a wider range of potential investors.

Since the launch of our NCIB in November of twenty twenty two, we’ve invested $46,000,000 under that program and we continue to monitor the market conditions and evaluate other opportunities to enhance return for our shareholders. And as we look forward, First is well positioned, especially during this time of economic uncertainty with a strong balance sheet, low leverage and strong contracted cash flows. Our Jazz business is anchored by its contract with Air Canada (TSX:AC) that runs to 02/1935. Voyager has diversified sales avenues, including its recent growth in parts sales and defense. And we believe the business profile positions us very well and provides flexibility as we work through any future market volatility.

And I’d like to reiterate that creating shareholder value remains the key priority for our Board and for the management team as we move forward. 2024 was a year of heavy lifting with significant change for Corus. I’d like to close by thanking our employees across all our businesses for their unwavering focus, thank our shareholders and our Board of Directors for their support. I’m going to now pass it over to Gary and he’ll take you through the financials.

Gary Osborne, Chief Financial Officer, Chorus Aviation: Thank you, Colin, and good morning. As Colin mentioned, we completed a significant milestone in closing the sale of our leasing segment on December 6. The aggregate consideration from the RAL sale was $2,000,000,000 with net proceeds of US607.7 million dollars which we used to repay all the outstanding Series A debentures for $86,300,000 redeem all of the outstanding preferred shares for US363 million dollars including a MOA of US63.3 million dollars We also repaid the amount outstanding under our operating credit facility. And on 02/03/2025, Corus purchased for cancellation $81,600,000 of the Series B and C debentures. As we close out 2024, our leverage now sits at $1,400,000 down from the $3,300,000 at the end of twenty twenty three.

As we look forward at the year, we’ve made significant payments on amortizing aircraft loans, paid off our Series A debentures and reduced the balance outstanding on our operating credit facility to nil. Our free cash flow generation remains strong with $27,500,000 generated in the fourth quarter of twenty twenty four in line with the same period last year. Our 2024 annual free cash flow come in at $118,800,000 Moving forward, post the RAL sale, we will see improved cash flows related to reduced principal and interest payments on debt and removal of the preferred share dividends. We have been active under our NCID program purchasing $10,000,000 in shares since the close of the RAL sale and plan to continue with share buybacks. We are also focused on growing our business, reducing our corporate costs and improving our earnings.

As we look at the fourth quarter, overall the results for our continuing operations were in line with our expectations. We saw adjusted EBITDA coming in at $52,700,000 for the quarter and $211,600,000 for the year. Our adjusted earnings available to common shareholders came in at $0.39 for the quarter and $1.04 for the year. This of course does not reflect the full impact of the sale of RAL and repayment of corporate financings, which is outlined in our post sale pro form a non GAAP financial measures section of the MD and A. It was a busy quarter with the sale of the RAL segment, redemption of the preferred shares, the repayment of the Series eight debentures and the repayment of the balance on our operating credit facility.

In addition, we recorded an impairment provisions of $10,500,000 on Dash eight-300s that were non operational in conjunction with our plan to now part these aircraft out. As reported in our MD and A, the actual and forecasted covered aircraft under the CPA for the years 2024 to 2026 goes from 01/2014 to the ’80 minuteimum covered aircraft. Included in this planned fleet reduction is the removal of nine owned -eight-four hundred, which are now in the process we are now in the process of remarketing the nine Q400s. In conclusion, I would like to reiterate what Colin said earlier, a strengthened balance sheet and improved cash flows provide our business with much greater flexibility now and we are pleased with the progress we made this past quarter and year. We’re now ready to answer questions.

John, Conference Moderator: We will now take our first question. And this comes from the line of James McGargill from RBC Capital Markets. Your line is now open. Please go ahead.

James McGargill, Analyst, RBC Capital Markets: Good morning, everyone, and thanks for having me on.

Gary Osborne, Chief Financial Officer, Chorus Aviation: I wanted to

James McGargill, Analyst, RBC Capital Markets: ask a question on the medium and longer term strategy here. So any opportunities outside of the CPA? Any potential M and A you might be looking at? Or any organic opportunities right now that you’re looking at as being attractive? Any color you can provide there?

Colin Kopp, President and Chief Executive Officer, Chorus Aviation: Yes. Good morning, James. It’s Colin. Look, it’s a good question and those are that’s one of the key questions we’ve been getting really on the growth side. I think it’s one of the key ones and the others on the capital side as far as returning capital and what are we doing with our cash.

So, great question. Look, we’ve just gotten through the sale transaction really getting the balance sheet cleaned up. So, we’ve been very focused on making sure we execute well on that. We’ve done a great job of it as we said we would. We were pretty clear on where we were headed.

So, we’ve got that done. We’re focused on the cash side here and making sure we’ve got a plan on the capital side, which we said all along we will get to and that’s coming. And on the growth side, we are really on the short term, we’re focused on the existing businesses and really looking at shoring them up and doing what we can to ensure they are very strong. So, that will be the very nearing focus. And on the longer term, we’re starting to think about the growth side and where do we see acquisition opportunities.

We’re in the market looking. We have nothing really to report or to give you, but that is our long term growth is Our long term plan is to see some growth as we stabilize and get everything done that we committed to here. So pretty much on track. Just we’re maybe a little early to start talking about that as we just kind of got things cleaned up. And I think the timing of it has been good for us for sure.

James McGargill, Analyst, RBC Capital Markets: Thanks for the color there. And then just on the Air Canada, their investor day, they mentioned they were focusing on the A220s and the ERJs. Did you see any impact to you guys longer term there or any risk to the use of the G400s? And after that, I can turn the line over. Thank you.

Colin Kopp, President and Chief Executive Officer, Chorus Aviation: Yes. Yes, another good question. Look, yes, the A220 is a pretty big airplane, right? And we have a history with Air Canada moving us around and we’ve been on different routes. It’s always kind of, we can’t speak for Air Canada at all, but it’s always been this about the right size airplane at the right time on the right route.

So, it’s a bigger, significantly bigger airplane. Sure, there will be movement. There always has been movement and flexibility with us. That’s one of the great advantages that we provide is the ability to move aircraft around the country and do different flying depending on where the need is. So, absolutely, a few things could change, but we don’t see any impact or reduction in any way as far as the fleet goes.

Routes are going to be flexible and there may be some advantages coming out of it for us as well as they grow markets. So, but we’re excited that Air Canada continues to grow and we don’t see anything from an impact perspective there at all.

John, Conference Moderator: Thank you. And the next question comes from the line of Konark Gupta from Scotiabank (TSX:BNS). Your line is now open. Please go ahead.

Eli, Analyst, Scotiabank: Hi. This is Eli filling in for Konark. Good morning, everyone. My first question is on the CPA. What do you plan to do with any incremental unused aircraft if some or all CPA leases don’t extend?

Colin Kopp, President and Chief Executive Officer, Chorus Aviation: Yes. Look, we’ve had that question a few times. And look, we’re going to optimize the value of those assets. There’s a whole bunch of options that could happen. We could extend some airplanes with Air Canada.

We could sell the aircraft. We could use them in other operations. So, we’re looking at really optimizing the value, doing what’s best for the shareholder from a return perspective with those assets. Obviously, if Air Canada’s if they can stay in the fleet, we will do that. But if not, there’s lots of opportunities to get value out of those assets.

They’re great assets. And so it’s going to depend. And it’s really speculation to say what might happen to those aircraft over time.

Eli, Analyst, Scotiabank: That makes sense. Thank you. And maybe just one last one. As part of your growth aspirations, do you see an opportunity to expand Voyager operations geographically on the West Coast or even in The U. S.

Through M and A or organically?

Colin Kopp, President and Chief Executive Officer, Chorus Aviation: Yes, absolutely. There’s growth opportunities there. We’ve set a target that we talked about, the $150,000,000 We’re working through that to make sure we’re on track for that this year. And we’re continuing, as I said in my script there, we’re continuing to now look at the next phase, how do we continue the growth path here. We see lots of opportunities.

Exactly where they are and what they look like, I don’t want to comment on because, again, it’s kind of speculating on what might happen. But for sure, growth there, we see beyond where we’re at today and what we’ve given guidance on for sure. And there could be opportunities in The U. S, could be in the West, could be in Central Canada, could be in a lot of different locations.

Eli, Analyst, Scotiabank: Okay. Thanks guys. I appreciate the time. That’s all my questions.

John, Conference Moderator: Thank you. And the next question comes from the line of David Ocampo from Comarch (WA:CMR) Securities. Your line is now open. Please go ahead.

David Ocampo, Analyst, Comarch Securities: Thanks. Good morning, everyone. Just wanted to follow-up on the Voyager line of questioning there, but maybe ask it a little bit differently. I think if you go back to your twenty twenty three Investor Day, you guys laid out that $150,000,000 target and I think pretty healthy margins on that. That was two years ago.

So I’m just curious how much visibility you guys have going forward. Is it a business where you could start to project down another two years? Maybe you’re not comfortable laying out a number today, but just wanted to see how much

Colin Kopp, President and Chief Executive Officer, Chorus Aviation: with a decision on guidance as to what we’ll provide you guys. And I think that’s an important element. I appreciate that that’s something you need to see. But there’s no question that we see growth on a go forward basis for Voyager beyond that 01/1950. We’ll be able to figure out hopefully in the months ahead here what that looks like and how far that guidance goes out.

I can’t really comment on that.

James McGargill, Analyst, RBC Capital Markets: I don’t know if Gary,

David Ocampo, Analyst, Comarch Securities: if you could

Colin Kopp, President and Chief Executive Officer, Chorus Aviation: add some color there?

Gary Osborne, Chief Financial Officer, Chorus Aviation: Yes. No, I think we’re very comfortable with the 150,000,000 this year for Voyager and we still see them growing. But as far as guidance goes, as Colin said, we’ll make a decision on that in the future, but they’re continuing to grow. That’s the main thing.

David Ocampo, Analyst, Comarch Securities: I guess, Darren, what gives you that confidence in the 158? Is it a number two years ago? Is it all just based on contracted business and there’s really no hiccups where or places where it can go wrong?

Gary Osborne, Chief Financial Officer, Chorus Aviation: It’s contracted business for sure. They have a lot of that within their business. They work for United Nations and others. They also have a lot of aircraft part sales as you know. They’ve been building that business and that continues to build.

So we feel comfortable with that. And it’s just the general momentum they’ve built over the last year or two and they continue and based on our forecast, we’re still expecting the $150,000,000 So we’re feeling pretty good about it.

David Ocampo, Analyst, Comarch Securities: Got you. And then on the aircraft that are coming off lease with Air Canada over the next few years, Gary, are you able to provide how much of the net book value that is? I think you guys provide an overall number. Just curious how that stands?

Gary Osborne, Chief Financial Officer, Chorus Aviation: Yes. We’re not providing a net book value number, but we do expect to achieve net book. In the past, we’ve given some guidance to the market that somewhere between an average Q400 is worth today somewhere between $5,000,000 and $7,000,000 U. S. So that’s still a good number to use, but we’re not disclosing the book values.

David Ocampo, Analyst, Comarch Securities: Okay. And there’s no debt associated with that as the leases expire, right?

Gary Osborne, Chief Financial Officer, Chorus Aviation: That’s right. Those nine aircrafts have no debt. Yes.

David Ocampo, Analyst, Comarch Securities: Okay. That’s it for me. I’ll turn the call over.

John, Conference Moderator: Thank you. And the next question comes from the line of Tim James from TD Cowen. Your line is now open. Please go ahead.

Tim James, Analyst, TD Cowen: Thanks. Good morning, everyone. Just returning to Voyager, if I could, revenue growth obviously very strong in the quarter. And really, you don’t want to get into specifics around margin. But could you just talk sort of generally about the moving parts within Voyager that would have impacted sort of the margin and profitability in that business?

I know you characterized it as around 25% EBITDA margins, if I’m not mistaken. I’m just wondering if with that kind of revenue growth, one would reach the obvious conclusion that maybe there’s been some margin expansion. But just help me sort of realize if that’s a good assumption or if what are the drivers there?

Gary Osborne, Chief Financial Officer, Chorus Aviation: Yes. Tim, it’s Gary here. Yes, on the revenue side, they’ve been achieving those margins. I think they were around 24% this year and that’s consistent with what I think we had on the Investor Day. So they’re continuing to see their margins as they expand the revenue base of their holding.

And they’re seeing it in a lot of basis. Parts is one of them. There’s no question that the parts are doing very well, but they’ve also been improving their operations and expanding in their contracts. They’ve got the major contracts, I think, that Colin talked about earlier and others that it kicked in. So they’re doing well on the contracts, part sales and executing on their business.

Tim James, Analyst, TD Cowen: Okay, that’s helpful. Thank you. Then maybe just a more general question. Is there anything you can provide in terms of opportunities, whether it’s specifics or just generals in terms of more parts sales or operating aircraft or medevac contracts? And just anything in terms of sort of as you look forward at future potential business development at Voyageur, what types of opportunities are out there for that business?

Colin Kopp, President and Chief Executive Officer, Chorus Aviation: Yes. And there is the one thing the one reason why we’re so bullish on them is because there are such a wide variety of opportunities that exist in all of those areas that you just mentioned, including the parts side. We still see big potential in the parts side. And all of those things really align well with the strengths that Voyager has as far as their capabilities. So I wouldn’t say that there’s one specific area.

James McGargill, Analyst, RBC Capital Markets: I

Colin Kopp, President and Chief Executive Officer, Chorus Aviation: think all three of those areas, even on the defense side, there were opportunities to bid on contracts that make a lot of sense for us and give us the capability to execute on. So, I think all those areas are all growth areas and they’ll be part of the plan as we continue to push Voyager to the next level for sure.

Tim James, Analyst, TD Cowen: Okay, great. Thank you very much.

John, Conference Moderator: Thank you. And there are no further questions at this time. I would now like to hand the call over back to Tyrone Cody. Please go ahead, sir.

Tyrone Cody, Investor Relations, Chorus Aviation: Well, thank you, John. And thank you all for taking part in today’s call. Thank you for the questions. Have a good day.

John, Conference Moderator: Thank you. This concludes our conference for today. Thank you all for participating. You may now disconnect.

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