Chorus Aviation Inc.

Thank you, operator. Hello, and thank you for joining us today for our Second Quarter Conference Call and audio webcast.

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 discussions 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 6 months ended June 30, 2025, 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.

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.

Thank you, Matt, and good morning, everyone. I'm happy to report on a strong quarter for Chorus with solid performance across all key financial metrics.

On June 25, we announced the declaration of our cash dividend of $0.08 per share payable on August 15, with future dividends to be declared at quarterly report outs. And that as we grow earnings and cash flows, we aim to distribute approximately 25% of our free cash flow after debt repayments as dividends to our shareholders.

Through our NCIB program and SIB that we completed in May, we continue to buyback shares and year-to-date, have repurchased a total of $27.2 million in core shares. And on September 30, we will redeem our Series B debentures in the principal amount of $28.7 million, which will further strengthen our balance sheet and position course for growth.

Additionally, on July 21, we were very pleased to announce the strategic acquisition of Elisen & Associates Inc. a leading provider of aerospace engineering and certification services based in Montreal.

This is a business who we have worked with in the past, and we see great potential in. Founded in 1997, Elisen has built a reputation for excellence and innovation and today sits at the core of Montreal's aerospace community, renowned for its ability to deliver complex engineering, defense and sustainable aviation projects.

Elisen will be key to growing and enhancing our specialized MRO capabilities while adding valuable expertise and industry relationships. We are very pleased that founders and co-presidents, Stephane Durand and Taif Rahman will continue to lead Elisen, and we look forward to welcoming their entire team.

The transaction is expected to close prior to the end of the year and is a key strategic move to support growth. On the asset sales side, as we discussed last quarter, we've had significant interest from buyers for the 3 Dash 8-400s coming out of the CPA this year and the 6 next year and we anticipate concluding a sales agreement on the first 3 soon.

Just turning to the operating side. Our businesses have all delivered very well this quarter, providing consistent and strong earnings and securing new contracts.

Let me touch on some of those highlights. Doug and the team at Jazz have again generated strong earnings under the CPA with Air Canada while demonstrating a dedicated focus to operational excellence.

A recent proud moment for us was seeing our partner Air Canada ranked first among North American carriers in on-time performance for the months of May and June and we applaud Jazz for its role as an important operational partner in contributing to that achievement. Cory and the team at Voyageur continue to perform very well and are on track for yet another record year of revenue, EBITDA and income driven by growth in their part sales, specialty MRO and defense business.

And we continue to expect Voyager's 2025 total revenue to come in at approximately $150 million for the year. In this quarter, we saw an accelerated shift in business mix from the lower margin overseas flying to higher-margin flying contracts such as the major contract with DND which will continue to drive improved profitability as we go forward.

This shift has been consistent with our long-term plan and has been accelerated with the geopolitical pressures and funding constraints resulting from the World Food Programme and United Nations reducing contracted flying operations. On the specialty MRO side of the business, Voyager has partnered with Metrea, a global U.S.-based defense and national security company to develop their Dash 8-300 Fireswift aerial firefighter.

The first of 2 aircraft is currently undergoing flight certification and is expected to be completed by the end of the year. Metrea is paying for the program costs and Voyageur could potentially operate the aircraft on their behalf.

Depending on the success of the program, there could be future opportunities for Voyager that may include aircraft modifications and operations. At Cygnet, Lynne and team are making excellent progress towards our pilot training academy and are preparing to welcome their ninth cohort in the coming weeks.

Additionally, Cygnet has recently been awarded the Department of National Defense standing offer, which is valid for up to 3 years to provide continuation training for pilots and we're very pleased to have 6 pilots from 8 [indiscernible] Trenton already in the training program. This quarter, we have seen strong execution against our plan, which is driving improvements in our free cash flow, net income and adjusted EBITDA.

We're very focused on improving shareholder returns and are now well positioned to grow our business going forward. I'd like to thank our shareholders for their ongoing support and our Board of Directors for their strong guidance and recognize our employees across all our first companies for the focus and dedication to our success.

I'll now pass it over to Gary for him to take you through the financials.

Thank you, Colin, and good morning. We are pleased to report our Q2 financial results that are in line with our expectations and demonstrate the steady performance across our subsidiaries and continued reductions in corporate operating costs.

Looking at the results. Adjusted earnings available to common shareholders per share was $0.66, an increase of $0.59 per share over Q2 2024.

This increase is due to the sale of the RAL business and improved financial results attributable to growth at Voyager and lower corporate costs. Adjusted EBITDA came in at $51.3 million for the quarter, an increase of $0.8 million over Q2 2024 and finally, free cash flow was $34.6 million, an increase of $6.4 million over Q2 2024.

Our leverage ratio was 1.5 at June 30, which is in the middle of our targeted operating range of 1 to 2x. This, along with existing liquidity of $246.5 million provides strength and flexibility to support future investments and growth in the business.

We continue to work through the sales agreement on our first 3 Dash 8-400 aircraft due to exit the CPA with Air Canada later this year. During the process, we have seen improvement in current market prices of the Dash 8-400 aircraft.

We now expect to achieve average aircraft net proceeds of between USD 6 million and USD 7.5 million each. We would also expect this range to apply to the remaining 6 Dash 8-400 aircraft exiting the CPA in 2026.

Chorus continues to generate predictable free cash flow from its businesses which allows us to return capital to shareholders and focus on the growth of our company. As Colin noted, we recently announced the initiation of a quarterly dividend of $0.08 per common share beginning with the first payment in the coming weeks.

We intend to pay out approximately 25% of our long-term free cash flow after debt repayments. This will provide an opportunity to grow the dividend over time, while maintaining capital for investment opportunities.

We continue to see Voyageur achieving the goal we set out in our 2023 Investor Day of approximately $150 million in total revenue by the end of the year. We have also updated our U.S.

to Canadian dollar rate in the outlook section of the MD&A for the remainder of 2025 and 2026 to reflect a forecasted U.S. to Canadian foreign exchange rate of 1.35 from the previous 1.40 related to aircraft leasing under the CPA revenue and U.S.-denominated debt.

The underlying lease amounts denominated in the U.S. dollars remain unchanged from our last forecast.

We are now ready to take your questions.

Thanks for all the detail in your prepared remarks. Gary, just maybe on some of the comments you made related to the expected aircraft sale, I guess, of the 9 units, call it, about CAD 10 million per unit.

Can you remind us what's the book value for that? Or what's the potential gain you'll earn if you achieve that sales price?

We're not getting into any gain on it, Kevin, but it being right around our book value.

It's around our book value. Okay.

And I'm sure I can quickly do the math here. But I guess if you were to apply, I guess, what you see as the market rate versus the rest of your covered fleet, is there upside relative to the current net book value you disclosed of $761 million, I guess, at the end of Q2 here?

Or is there upside to that number?

No, I don't think so, Kevin. I think when you look at that, that's -- if you look, those are not all aircraft coming out of the CPA or being sold.

So these are at the 12 to 14 years old aircrafts, so they're a little bit different. We have CRJ900s and some Q400s that are less than 10 years old within that.

So -- but what I would take from it is we've seen an improvement in the current values of the Q400s. And as we go through the sales process, we feel pretty good about where it's been going.

Okay. And maybe just turning to Voyageur here.

Thanks for reaffirming the $150 million of revenue this year. If I look at the first half, though, we've seen a little bit of I guess, I'll call it, quarterly volatility, and I get it sales of parts can be a little bit transactional here.

But as you -- as you look at, I guess, the mix of Voyager's business changing here, especially as you add in Elisen and some other opportunities, I think you've talked about 25% EBITDA margin as kind of the average rate. Does that -- does the mix shift impact that margin over the long term?

It feels like some of the stuff might be higher margin. So maybe not on a -- it might not shift that much as we go from quarter-to-quarter here.

But as we look over the next few years, is there upside to that 25% margin as the mix of this business changes? Or does it all kind of level out at the same rate?

On the EBITDA margin, it's probably around the same, that 24%, 25% has been consistent. I think what we find with the overseas buying Kevin, is the profitability so your net income is a little more challenged because it has a bit more depreciation on it.

So what we see is the overall profitability coming up as we shift away.

Okay. So kind of like maybe an EBIT margin might look a little bit better, even if EBITDA margin staying relatively consistent.

I just wanted to ask a question on the Elisen and some of the expansion opportunities there. It seems to provide some exposure to verticals beyond some of your typical regional markets.

So can you just kind of talk about your role in potentially gaining a foothold in some of the adjacencies here? And any broader strategic expansion opportunities you're exploring in some of these categories?

James, it's Colin. Yes, it's a good question.

I mean the acquisition, as you're alluding to, very strategic for us. We're looking for opportunities for them to continue to grow out their business.

There's a lot of different things they work on. But there's -- I would say, probably a big chunk of what they do is very much aligned with Voyageur on the defense side and special mission side as far as modifying aircraft.

So when you start looking at some of the other stuff they do, they touch on with other customers like they do touch on some rotary stuff. They've done different things, different helicopter type projects.

It gives us a lot of different kind of potential as we move forward with them to look at a broader spectrum of aviation side of things. But most of what they do is fairly aligned with what we're operating or what we do in our current businesses.

And then just on the guidance. There is a slight change to the guidance of the quarter.

Can you just talk about what drove that? It seems like FX probably was a little bit of a headwind, but any additional factors at play there that you can call out?

Yes, James, Gary. There's no other factors other than the U.S.

to Canadian dollar. I think, generally speaking, we've all seen a drop in the U.S.

to Canadian dollar rate. It's been forecasted by all the major banks that you're going to see a weaker U.S.

dollar and there's probably the policy going on down south. So what we've done is reflect it at 135 versus the previous 140, more just a forecast around that.

It makes a bit of a difference on the revenue line. But when you look at the net after debt payments, it doesn't really make a material difference, but we just wanted to get that updated because we are seeing the U.S.

dollar below 140 consistently now. So moving ahead, we moved it to 135.

I just want to follow up, I guess, on the M&A question. I guess what else -- I guess, are you seeing out there as far as potential acquisition targets?

I guess, has anything changed since the last quarter on potential opportunities that might be available to you?

Cameron, it's Colin. Look, like I think we've alluded to it a little bit in the last couple of calls.

We really had -- we had a lot of work to do to get the organization kind of ready and posed for acquisitions. We've done that work.

We've talked a lot about that as far as balance sheet and all those good things. So -- as we've been doing that, the pipeline has been growing, and we've been working quite hard on that behind the scenes with a lot of focus on various aviation opportunities.

So that list is growing, and we're starting to go through that quite aggressively now. Elisen was one of the first ones that popped out.

It was an obvious one. It made a lot of sense, very strategic.

But there are several that are obviously bigger and larger that allow for more diversification that we're working on right now. I can't get into any of the specifics, but they're definitely -- there's a good pipeline there, and we're working through it.

And we're hopeful we'll have more to talk about as we get in towards the end of the year or next year for sure.

Okay. No, that's great.

And maybe second question, I guess, just on the, I guess, the firefighting opportunity here. I mean you announced this, I guess, the first of 2 aircraft that you've modified.

I'm just wondering if you can maybe go in a little more detail on how operating those aircraft might work? Are there, I guess, other companies out there that this product could be useful for that might be a potential contract for you to operate the aircraft on their behalf?

Just any details on how you see that opportunity evolving?

Sure. I can give you a little bit more clarity beyond what we provided there, but not a lot.

I mean, the modification of the aircraft and the product itself is Metrea product. So we did the work under contract for them at Voyageur.

And there's an opportunity, what we're alluding to there that's quite good, and we're excited about, and we're hopeful we can deliver on is an opportunity for us to operate for them. So we would be flying the aircraft on their behalf.

And we have that capability in-house at Voyageur. They obviously needed some of that expertise to do flight testing and various things.

So we're well set up to essentially engage in operating those aircraft on their behalf anywhere in the world that might make sense. So I can't give you any specifics on what that looks like, because we're still working through all that with them, but we'll have more to say about it as time progresses here in the coming weeks.

My first question, are you seeing any specific opportunities coming to light as a result of a push to ramp up Canadian defense spending?

Tim, it's Colin. Yes.

I mean, obviously, you guys are reading what we're putting out. We've been careful on how much emphasis we put on things because our focus is to make sure that we deliver, not just talk about stuff.

But there is absolutely several opportunities that are starting to come together there. We're seeing more and more focus on this.

Clearly, we read everything you guys read in the papers on the defense spending opportunities. Voyageur has been building their business in that area.

As we know, we have an office in Trenton, and we're running the major aircraft on the support side. So there is definitely a focus from our perspective to see growth there.

Elisen ties in very well with that as well as far as needs and having that ability to not only be able to do the engineering, but also be able to do the execution of the modifications and operate the aircraft. So it's kind of having that capability from our perspective is very important.

So we're excited about opportunities that definitely we're going to be involved in and looking at and trying to secure in that area going forward. Definitely a growth area for us to be looking at.

Great. My second question, there were -- just in terms of fleet and the covered aircraft, there were 5 Dash 8-400s, I believe, that were scheduled to come out of the fleet or have been removed from the table in 2025, and those aircraft now appear to be staying in the table until 2026.

I'm just wondering what sort of precipitated that change? And I assume it relates to sort of Air Canada demands, but could you provide any color on that front?

Yes. Tim, it's Gary here.

It's really just Air Canada moving around its fleet a little bit within the 80 aircraft. I think that's really the key.

The extended those aircraft a little bit, and there's really no change to the...

And it has no impact? Is it on sort of revenue EBITDA that finding those aircraft more this year than previously anticipated?

Yes, it wouldn't affect our EBITDA. Those are third-party leased aircraft.

They're basically a flow-through with Air Canada. We earn our same fixed fee.

So no change to any of our guidance numbers. We just have the aircraft longer.

Is it -- if I can -- sorry, just to follow on, on that. I mean are you somewhat encouraged by the fact, I assume that Air Canada said, hey, let's fly 5 additional aircraft more this year than previously expected.

I mean, is that -- correct me if I'm wrong, is that not sort of an encouraging sign?

Tim, it's Colin. Yes, absolutely.

We're -- look, we're keen to operate and do as much as we can with Air Canada. As you know, we're proud supporter of them in many ways.

And we'd love to operate a few more aircraft. But we can't really speak for them as far as what the thing is going to look like and what we're doing.

So we're here to support them and do as much as we can at Jazz. And that's kind of all I can give you really

Just to follow up quick on Elisen. I don't think you guys disclosed the financials there, the transaction value or the revenue EBITDA contributions.

Any sense to that? I know it seems minor, but like is it how meaningful would it be or could it be to the bottom line?

Yes. I mean I think it's less than -- the purchase price was less than $5 million.

It's pretty minor in the grand scheme of things from that side. But the capability side, as Colin alluded to, the engineering talent that we've acquired is very significant.

And they've been involved with Voyager in the past. They are also involved with the Metrea project that we just talked about.

So the capability on that and the defense side they have is quite immeasurable

And they're profitable today. There's no question about that.

They're definitely profitable. It's -- we're just not getting into -- Gary is not getting into any disclosure around those numbers.

But we're more excited about the upside than anything and the potential of what we can do with them and work with them and having that in-house capability tied to Voyageur and their defense business is pretty exciting. And I think the only other comment I'll make on this is there isn't many of these types of engineering firms left in Canada that have the type of capabilities that we're talking about.

There's lots of engineering firms, but they have very limited scope and limited capabilities. Elisen is a broad scope capability engineering firm with everything from being able to build aircraft right back to the manufacturing side of things, all the way to all kinds of special mission stuff.

So there's not really anything in Elisen scope that they can't do when it comes to aviation. So that's the exciting part for us.

Great. No, makes sense.

Makes sense. And to understand the philosophy, I guess, there a bit more.

When you pitch your products and services to different verticals, the special mission or defense or whatever, I mean, would Elisen help you to go out as, I don't know, call it, more capacity proposition to customers along with Voyageur, obviously? Or would it be more like an expanded product offering or service offering to customers?

Like I mean, are you horizontally expanding with this acquisition? Or are you vertically expanding?

Yes, we are. When we look at our team, when we look across our organization, the way I look at it anyways is we have expertise in all of these businesses.

It's quite deep. We've been very focused on all of our businesses having long-term deep expertise.

And whenever we go out to any kind of customer, we're always involving the team. So they would absolutely -- if there's something that's involved engineering or project oriented that would involve modifications or changing aircraft, they would be definitely part of that from our perspective.

And they're integrated with us from a call perspective. We're always talking about new business opportunities.

They will -- once we close, they will become part of that team across Voyageur and Jazz and Chorus.

Okay. And just a final one for me before I turn over.

On the asset sales side, the 3 Q400s are coming up this year, then there's 6 next year, I think. Besides these 9 Dash 8s, do you have any other assets you have identified either for sale or part out or something in terms of monetizing them?

Nothing at this time, Konark, but we continue to review our fleet at Voyageur and whatnot to make sure that it's all needed for the activities we have, but nothing that would be of significance.

Thank you, everyone, for joining today's call, and please have a good day.