
- Generated strong Free Cash Flow of $28.2 million for the period ended June 30, 2024 primarily derived from operating cash flows.
- Leverage Ratio improved to 3.0 at June 30, 2024 primarily through long-term debt repayments of $79.7 million since December 31, 2023.
- Purchased and cancelled 1.4 million common shares under the current normal course issuer bid (‘NCIB’) during the quarter at a weighted average price of $2.15 per common share.
- Announced agreement to sell Regional Aviation Leasing (‘RAL’) segment (the ‘Transaction’) with closing expected by end of this year, subject to shareholder approval, regulatory approvals and other customary conditions to closing.
- Net loss of $180.6 million for the period ended June 30, 2024, inclusive of a previously disclosed $187 million impairment on discontinued operations.
- Net income from continuing operations of $8.5 million for the period ended June 30, 2024.
- RAL transaction to eliminate $1.7 billion in financings, including all RAL segment aircraft-related debt, substantially all Chorus’ corporate debt, and US $300.0 million in Series 1 Preferred Shares (‘Preferred Shares’).
- Post closing, the Transaction is expected to significantly improve all of Chorus’ key adjusted metrics on a pro forma basis as follows:
- Pro Forma Adjusted Net Income available to Common Shareholders per Common Share, basic, from continuing operations $0.08 and $0.17 for the three and six months ended June 30, 2024, respectively;
- Pro Forma Leverage Ratio of 1.5x at June 30, 2024; and
- Pro Forma Free Cash Flow of $32.4 million and $67.3 million for the three and six months ended June 30, 2024, respectively.
HALIFAX, NS, Aug. 13, 2024 /CNW/ – Chorus Aviation Inc. (‘Chorus’) (TSX: CHR) today announced its second quarter 2024 financial results.
“Chorus’ second quarter results reflect consistent cash flows from our services businesses and an ongoing improvement in our leverage ratio, demonstrating strength in our key metrics,” said Colin Copp, President and Chief Executive Officer, Chorus. “Chorus generated Free Cash Flow of $28.2 million and improved its Leverage Ratio1 to 3.0 at June 30, 2024.”
“We maintained focus on creating shareholder value throughout the quarter, buying back 1.4 million of our common shares under the NCIB. Our aviation services businesses continued to generate consistent and strong cash flows, Voyageur increasing its revenue by $4.8 million over the second quarter of 2023” commented Mr. Copp.
“Importantly, at the end of July, we made an important announcement regarding the sale of our RAL segment which, when completed, will set the stage for Chorus’ steady and sustainable future growth,” said Mr. Copp. “After closing of the Transaction, those same metrics on a pro forma basis1 will see a dramatic improvement, including Adjusted Earnings Per Share, Leverage Ratio and Free Cash Flow after repayment of long-term borrowings.”
Mr. Copp concluded, “While we have seen consistent and steady progress over the last several quarters to help strengthen our balance sheet, the divestiture of the RAL segment will, when completed, unlock the embedded equity value in our business and provide the needed catalyst to enable us to invest in future growth and implement a sustainable return of capital program for our shareholders.”
Second Quarter Summary
On July 30, 2024, Chorus announced it had entered into an agreement to sell its RAL segment. As a result of this Transaction, the RAL segment has been re-classified to discontinued operations, and Chorus’ Regional Aviation Services segment. together with Corporate, is referred to herein as continuing operations. Once the transaction closes, Chorus will have one reportable operating segment and will no longer be required to disclose its results on a segmented basis.
In the second quarter of 2024, Chorus reported Adjusted EBITDA from continuing operations of $51.0 million, a decrease of $2.4 million compared to the second quarter of 2023 primarily due to:
- a decrease in aircraft leasing revenue under the CPA of $4.6 million primarily due to a change in lease rates on certain aircraft;
- an increase in general administrative expenses attributable to increased operations; and
- an increase in stock-based compensation of $1.0 million due to an increase in the Common Share price offset by the change in fair value of the Total Return Swap; partially offset by
- an increase in other revenue of $4.9 million primarily due to Voyageur’s increased revenue in parts sales, contract flying and MRO activity.
Adjusted Net Income from continuing operations2 was $11.2 million for the quarter, a decrease of $0.4 million compared to the second quarter of 2023 primarily due to:
- a $2.4 million decrease in Adjusted EBITDA as previously described; and
- an increase in depreciation expense of $3.3 million primarily attributable to a change in depreciation estimates on certain aircraft and capital expenditures; partially offset by
- a decrease of $3.5 million in income tax expense;
- a decrease in net interest costs of $1.0 million; and
- a positive change in foreign exchange of $0.9 million.
Net income from continuing operations decreased $7.2 million compared to the second quarter of 2023 primarily due to:
- the previously noted decrease in Adjusted Net Income of $0.4 million;
- a negative change in net unrealized foreign exchange of $7.4 million; and
- a decrease in income tax recovery on adjusted items of $0.2 million; partially offset by
- a decrease in employee separation program costs of $0.8 million.
Year-to-Date Summary
Chorus reported Adjusted EBITDA from continuing operations of $105.0 million for the six months ended June 30, 2024, a decrease of $4.9 million compared to the same prior year period primarily due to:
- a decrease in aircraft leasing revenue under the CPA of $9.0 million primarily due to a change in lease rates on certain aircraft;
- an increase in stock-based compensation of $2.3 million due to an increase in the Common Share price offset by the change in fair value of the Total Return Swap; and
- an increase in general administrative expenses attributable to increased operations; partially offset by
- an increase in other revenue of $3.3 million primarily due to Voyageur’s increased revenue in parts sales, contract flying and MRO activity;
- an increase in capitalization of major maintenance overhauls on owned aircraft of $2.1 million; and
- an improvement in the Controllable Cost Guardrail of $2.0 million.
Adjusted Net Income from continuing operations of $23.8 million, a decrease of $3.2 million compared to the same prior year period primarily due to:
- a $4.9 million decrease in Adjusted EBITDA as previously described;
- an increase in depreciation expense of $6.9 million primarily attributable to a change in depreciation estimates on certain aircraft and capital expenditures; and
- a negative change in net foreign exchange of $0.5 million; partially offset by
- a decrease of $7.7 million in income tax expense; and
- a decrease in net interest costs of $1.3 million.
Net income from continuing operations of $13.9 million, a decrease of $20.6 million compared to the same prior year period primarily due to:
- the previously noted decrease in Adjusted Net Income of $3.2 million;
- a negative change in net foreign exchange of $18.1 million; and
- a decrease in income tax recovery on adjusted items of $0.3 million; partially offset by
- a decrease in employee separation program costs of $1.1 million.
Consolidated Financial Analysis
This section provides detailed information about Chorus’ performance from continuing operations for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023.
| (unaudited)(expressed in thousands of Canadian dollars) | Three months ended June 30, | Six months ended June 30, | ||||||
| 2024 | 2023 | Change | Change | 2024 | 2023 | Change | Change | |
| $ | $ | $ | % | $ | $ | $ | % | |
| (revised)(1) | (revised)(1) | |||||||
| Operating revenue | 351,218 | 327,454 | 23,764 | 7.3 | 709,812 | 667,085 | 42,727 | 6.4 |
| Operating expenses | 326,769 | 298,052 | 28,717 | 9.6 | 657,401 | 603,957 | 53,444 | 8.8 |
| Operating income | 24,449 | 29,402 | (4,953) | (16.8) | 52,411 | 63,128 | (10,717) | (17.0) |
| Net interest expense | (8,805) | (9,785) | 980 | (10.0) | (18,096) | (19,386) | 1,290 | (6.7) |
| Foreign exchange (loss) gain | (4,510) | 2,001 | (6,511) | (325.4) | (14,060) | 4,550 | (18,610) | (409.0) |
| Gain on property and equipment | 15 | 10 | 5 | 50.0 | 15 | 10 | 5 | 50.0 |
| Income before income tax | 11,149 | 21,628 | (10,479) | (48.5) | 20,270 | 48,302 | (28,032) | (58.0) |
| Income tax expense | (2,699) | (5,949) | 3,250 | (54.6) | (6,410) | (13,866) | 7,456 | (53.8) |
| Net income from continuing operations | 8,450 | 15,679 | (7,229) | (46.1) | 13,860 | 34,436 | (20,576) | (59.8) |
| Net (loss) income from discontinued operations | (189,023) | 4,639 | (193,662) | (4,174.6) | (182,123) | 17,901 | (200,024) | (1,117.4) |
| Net (loss) income | (180,573) | 20,318 | (200,891) | (988.7) | (168,263) | 52,337 | (220,600) | (421.5) |
| Net (loss) income attributable to non-controlling interest | (1,100) | 1,267 | (2,367) | (186.8) | 2,391 | 1,757 | 634 | 36.1 |
| Net (loss) income attributable to Shareholders | (179,473) | 19,051 | 198,524 | 1,042.1 | (170,654) | 50,580 | (221,234) | (437.4) |
| Preferred Share dividends declared | (8,979) | (8,816) | (163) | 1.8 | (17,827) | (17,687) | (140) | 0.8 |
| (Loss) earnings attributable to Common Shareholders | (188,452) | 10,235 | (198,687) | (1,941.3) | (188,481) | 32,893 | (221,374) | (673.0) |
| Adjusted EBITDA | 50,998 | 53,414 | (2,416) | (4.5) | 105,018 | 109,875 | (4,857) | (4.4) |
| Adjusted EBT | 14,061 | 17,963 | (3,902) | (21.7) | 30,347 | 41,340 | (10,993) | (26.6) |
| Adjusted Net Income | 11,222 | 11,659 | (437) | (3.7) | 23,794 | 27,040 | (3,246) | (12.0) |
Outlook
The discussion that follows includes forward-looking information. This outlook is provided for the purpose of providing information about current expectations for 2024. Forecast information has also been provided for 2025 and 2026 for Jazz Aviation LP (‘Jazz’). This information may not be appropriate for other purposes. Due to the planned sale of its’ RAL segment, Chorus has removed consolidated guidance for 2024. Refer to Section 4 of the MD&A for Post Sale Pro forma non-GAAP Financial Measures June 30, 2024. Chorus’ guidance for Jazz is unchanged.
The CPA provides a Fixed Margin to Jazz regardless of flying levels; therefore, any variations in flying are not expected to have any impact on Jazz’s earnings. In addition, Jazz receives compensation for aircraft leased under the CPA that generates predictable Free Cash Flows. Jazz aircraft have amortizing debt that will be fully paid-off at the end of the original lease term under the CPA. At the end of each lease, Jazz will either extend the lease, sell or part-out each aircraft. Subsequent aircraft leases will continue to produce predictable Free Cash Flow at lower rates as the aircraft will be unencumbered.
| Annual Forecast(1) | |||
| (unaudited)(in thousands of Canadian dollars) | 2024$ | 2025$ | 2026(2)$ |
| Fixed Margin | 60,900 | 59,600 | 43,900 |
| Aircraft leasing under the CPA | |||
| Revenue | 130,000 | 113,000 | 93,000 |
| Payment on long-term debt and interest | 95,000 | 74,000 | 66,000 |
| Total Fixed Margin and Aircraft leasing under the CPA less payment on long-term debt and interest | 95,900 | 98,600 | 70,900 |
| Wholly-owned aircraft leased under the CPA (end of period) | 48 | 39 | 39 |
| Wholly-owned aircraft leased under the CPA available for re-lease (end of period) | nil | 9 | 9 |
(2) Includes estimates for future market lease rates for 12 Q400’s for 2026.
About Chorus Aviation Inc.
Chorus is a global aviation solutions provider and asset manager, focused on regional aviation. Our principal subsidiaries are: Falko Regional Aircraft, the leading pure play regional aircraft asset manager and lessor, managing investments on behalf of third-party fund investors; Jazz Aviation, the largest regional operator in Canada and provider of regional air services under the Air Canada Express brand; Voyageur Aviation, a leading provider of specialty charter, aircraft modifications, parts provisioning and in-service support services; and Cygnet Aviation Academy, an industry leading accredited training academy preparing pilots for direct entry into airlines. Together, Chorus’ subsidiaries provide services that encompass every stage of a regional aircraft’s lifecycle, including: aircraft acquisition and leasing; aircraft refurbishment, engineering, modification, repurposing and transition; contract flying; aircraft and component maintenance, disassembly, and parts provisioning; and pilot training. www.chorusaviation.com.