Chorus Aviation Inc. Announces Fourth Quarter and Year-end 2023 Financial Results

Results demonstrate strengthened balance sheet and progress on key strategic priorities

Annual Highlights:

Adjusted EBITDA of $458.7 million, compared to $441.0 million for 2022.
Strong Free Cash Flow of $331.4 million, primarily derived from operating cash flows.
Achieved Leverage Ratio target for 2023, improving from 4.4 at December 31, 2022 to 3.6 at December 31, 2023.
Net income of $106.1 million, compared to $51.9 million for 2022.
Adjusted earnings available to Common Shareholders of $57.9 million, compared to $92.9 million for 2022.
Jazz entered into a new agreement with its pilots to address the changing wage environment and enhance pilot capacity.
Falko concluded 57 aircraft transactions in 2023, including new leases, lease extensions, sale and leasebacks and purchase of aircraft with leases attached, utilizing third party capital.
Falko executed a sales agreement for two aircraft in support of the asset light strategy for net proceeds of US $21.9 million.
Voyageur had its best year ever with strong growth in parts sales and specialty MRO and defence, while securing long-term contracts for defence and air ambulance services.

Q4 Financial Highlights:

Net income of $36.6 million, compared to $45.9 million for Q4 2022.
Adjusted earnings available to Common Shareholders of $8.8 million, compared to $22.3 million for Q4 2022.
Adjusted earnings available to Common Shareholders of $0.05 per Common Share, basic, compared to $0.11 for Q4 2022.
Adjusted EBITDA of $116.7 million, compared to $129.5 million for Q4 2022.

HALIFAX, NS, Feb. 22, 2024 /CNW/ – Chorus Aviation Inc. (‘Chorus’) (TSX:CHR) today announced its fourth quarter and year-end 2023 financial results.

“We executed and made steady progress on key aspects of our strategy, delivering on the 2023 financial guidance. That led to strong adjusted EBITDA and Free Cash Flows, allowing for the repayment of over $340 million in debt and a reduction in our Leverage Ratio from 4.4x to 3.6x,” said Colin Copp, President and Chief Executive Officer, Chorus. “Looking forward, we are forecasting strong Free Cash Flows in 2024, which will further contribute to our deleveraging goals. We recognize that robust cash generation and a strengthened balance sheet are essential to our future growth and value creation for our shareholders.”

“Jazz continued to generate predictable earnings and cash flows under its long-term contract with Air Canada, while Voyageur made meaningful strides with two consecutive years of record growth in parts sales, defence and specialty MRO segments,” commented Mr. Copp. “With the recovery in regional aircraft leasing markets and related improvements in airline credits, Falko successfully completed fifty-seven aircraft transactions in 2023; and additionally, signed letters of intent for a further thirty aircraft transactions. Additionally, the execution of a sales agreement for two aircraft for net proceeds of US $21.9 million helped advance our asset light strategy. Going forward, we continue to look for optimal opportunities to sell aircraft assets as valuations strengthen.”

“Throughout 2023, Chorus’ businesses demonstrated progress, contributing to our overall strategy,” said Mr. Copp. “Looking ahead, with our significant skills and deep experience across all aspects of aviation, Chorus is well-positioned for growth as an industry leader.”

In the fourth quarter of 2023, Chorus reported Adjusted EBITDA of $116.7 million, a decrease of $12.8 million compared to the fourth quarter of 2022.

The RAL segment’s Adjusted EBITDA was $62.1 million, a decrease of $5.4 million compared to the fourth quarter of 2022 primarily due to:

a decrease in the net gain on sale of assets of $8.2 million related to the sale of wholly-owned aircraft in 2022;
a decrease in lease revenue of $7.0 million due to the sale of wholly-owned aircraft in 2022 and lower market lease rates on re-leased aircraft; and
increased general administrative expense; partially offset by
a decrease in ECL provisions of $11.9 million related to improved credit ratings on certain lessees.

The RAS segment’s Adjusted EBITDA was $61.3 million, a decrease of $6.2 million compared to the fourth quarter of 2022 primarily due to:

a decrease in aircraft leasing revenue under the CPA of $3.3 million, primarily due to a change in lease rates on certain aircraft offset by a higher US dollar exchange rate;
a decrease in other revenue of $2.0 million primarily due to Voyageur’s decrease in parts sales and contract flying offset by an increase in MRO activity; and
a decrease in capitalization of major maintenance overhauls on owned aircraft of $1.7 million; partially offset by
a decrease in general administrative expenses.

Corporate Adjusted EBITDA was $(6.7) million compared to $(5.4) million in the fourth quarter of 2022 primarily due to an increase in stock-based compensation of $1.2 million due to an increase in the Common Share price offset by the change in fair value of the Total Return Swap.

Adjusted net income was $20.2 million for the quarter, a decrease of $11.6 million compared to the fourth quarter of 2022 primarily due to:

a $12.8 million decrease in Adjusted EBITDA as previously described; and
an increase in depreciation expense of $3.0 million primarily attributable to capital expenditures incurred in 2022 on re-leased aircraft as well as a change in depreciation estimates on certain aircraft; partially offset by
a decrease in net interest costs of $4.5 million.

Net income decreased $9.2 million compared to the fourth quarter of 2022 primarily due to:

the previously noted decrease in Adjusted net income of $11.6 million;
a change in net unrealized foreign exchange of $21.3 million; and
an increase in impairment provisions of $4.9 million primarily related to the planned repossession of two aircraft from one lessee; partially offset by
a change in realized foreign exchange on the settlement of intercompany loans of $26.4 million; and
a decrease in lease repossession costs of $2.1 million.

Chorus reported Adjusted EBITDA of $458.7 million for 2023, an increase of $17.6 million compared to the same  prior year period.

The RAL segment’s Adjusted EBITDA was $237.1 million, an increase of $17.6 million compared to the same prior year period primarily due to:

an increase in lease revenue of $26.5 million due to four additional months of lease revenue versus the same period in 2022 for Falko, the release of end of lease (“EOL”) compensation and maintenance reserves of $13.9 million and a higher US dollar exchange rate offset by a decrease in lease revenue due to the sale of wholly-owned aircraft in 2022 and recovered claims in the Virgin Australia and Aeromexico bankruptcies recorded in 2022 of $10.9 million; partially offset by a decrease in net gain on sale of assets of $10.9 million related to the sale of wholly-owned aircraft in 2022.

The RAS segment’s Adjusted EBITDA was $249.3 million, an increase of $0.5 million compared to the same prior year period primarily due to:

an increase in other revenue of $5.0 million primarily due to Voyageur’s increase in parts sales and MRO activity offset by a decrease in contract flying; and
a decrease in general administrative expenses; partially offset by
a contracted decrease in Fixed Margin of $3.0 million; and
a decrease in capitalization of major maintenance overhauls on owned aircraft of $4.0 million.

Corporate Adjusted EBITDA was $(27.7) million compared to $(27.2) million in 2022, primarily due to:

an increase in stock-based compensation of $1.7 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
a decrease in general administrative expenses related to salaries, wages and benefits, professional fees, and travel expenses.

Adjusted net income of $98.0 million, a decrease of $20.8 million compared to the same prior year period primarily due to:

an increase in depreciation expense of $25.3 million primarily attributable to capital expenditures incurred in 2022 on re-leased aircraft as well as a change in depreciation estimate on certain aircraft and four additional months of depreciation for Falko;
an increase of $13.5 million in income tax expense primarily due to derecognition of deferred tax assets on repossessed aircraft and certain non-deductible expenses; and
a change in net foreign exchange of $2.9 million; partially offset by
a $17.6 million increase in Adjusted EBITDA as previously described;
a decrease in net interest costs of $2.3 million; and
an increase of $1.0 million on the fair value of investments.

Net income of $106.1 million, an increase of $54.2 million compared to the same prior year period primarily due to:

the Defined Benefit Pension Revenue of $29.9 million;
a change in realized foreign exchange on the settlement of intercompany loans of $26.4 million;
a decrease in lease repossession costs of $14.3 million;
a change in net foreign exchange of $13.1 million;
a decrease in restructuring ECL of $10.4 million; and
a decrease in strategic advisory fees of $8.5 million; partially offset by
the previously noted decrease in Adjusted net income of $20.8 million;
an increase in income tax expenses on adjusted items of $18.4 million; and
an increase in impairment provisions of $10.1 million.

This section provides detailed information and analysis about Chorus’ performance for the three months and year ended December 31, 2023 compared to the three months and year ended December 31, 2022. It focuses on Chorus’ consolidated operating results and provides financial information for Chorus’ operating segments.

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