Chorus Aviation Inc. (CHR) Earnings Call Transcript & Summary

Thank you. Good morning, ladies and gentlemen, and welcome to the Corus Aviation Second Quarter 2026 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we'll conduct a question and answer session. any time during this call, you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, August 5, 2026.

I would now like to turn the conference over to Matt LaPierre. Please go ahead. Thank you, operator. Hello, and thank you for joining us today. With me today from chorus 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 some forward-looking discussion 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 period ended June 30th, 2026, 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 Kopp.

Good morning, everyone, and thank you for joining us today. I'm pleased to report that Chorus delivered strong second quarter financial results and continues to make meaningful progress towards our strategic growth objectives. We are today a trusted Canadian partner with a global reach focused on growing our aviation, aerospace and defense platform to create sustainable long-term value for our shareholders. We continue to execute on our capital allocation plan, generating $117.7 million in free cash flow and proceeds on aircraft sales in the first half of the year. including $72.6 million in the second quarter. This has allowed us to maintain a strong balance sheet with leverage at 1.5 and liquidity of $204 million that provides financial flexibility in our long-term capital allocation plan to invest in growth opportunities while continuing to return capital to our shareholders. A key milestone in our growth and diversification during the quarter was the completion of our acquisition of Kadex Aero Supply on April 1st. Since closing, the integration has progressed smoothly and the business continues to perform exceptionally well. During the quarter, CADEX contributed revenue of $16.4 million and net income of $1.2 million, including $0.5 million of amortization expense on acquisition-related intangible assets. which tracks ahead of our initial expectations. GADEX has expanded our aviation and aerospace platform, enhancing the quality and diversification of our earnings, and strengthening the resilience of our cash flow profile. Our approach to capital allocation remains unchanged. During the quarter, we repurchase shares under our normal course issuer bid while also maintaining our quarterly dividend. Following the renewal of the NCIB earlier this year, we repurchased approximately $14.8 million of shares during the second quarter, bringing the total repurchases to approximately $20 million year-to-date. And since 2022, we've returned approximately $144 million to shareholders through our NCIB and two substantial issuer bids. We have executed as planned on the monetization of the 9-8-400 aircraft previously announced. Seven aircraft have now closed and being delivered, which include four aircraft transactions completed during the second quarter. The remaining two aircraft are planned to close by the fourth quarter of 2026, generating estimated net proceeds of approximately $14.4 million. Turning to the businesses, our subsidiaries have performed very well this quarter and continue to make inroads on several key strategic initiatives. The breadth of activity across our company highlights the unique capabilities we're building at Chorus. Doug and the team at JADS have been working hard on the Air Canada Express operation at Billy Bishop Toronto City Airport with the launch of service to Chicago, Washington, Dallas and Boston during the quarter. And in June, Jazz successfully completed its IOSA renewal audit, the global benchmark for airline safety management, and they look forward to the renewal. I'm also pleased to report that Jazz recently reached a tentative agreement with its Canadian Airline Dispatchers Association representing the company's 56 flight dispatchers. At Voyager, Corey and the team continue to drive several strategic growth initiatives, positioning the business to capitalize on Canada's growing defense and aerospace requirements. Progress continues on the Dash 8300 Fireswift Aerial Firefighting Program, with the first aircraft going through final certification and a second expected to be completed next quarter. Voyager has also expanded its aftermarket parts business by adding ATR and Boeing inventory and recorded its first sales of Boeing 757 parts during the quarter. adding two new platforms to the AbParts market offerings. As well, their domestic charter operations remain strong, supporting wildfire response efforts across Canada And Voyager has completed the sale of two Dash 8-400 aircraft. Looking ahead, Voyager recently announced the purchase of a Flexrotor uncrewed aircraft system from Airbus, becoming the first Canadian customer and operator of the platform. This represents an important milestone in Voyager's intelligence, surveillance, and reconnaissance capability and expansion into the uncrewed aircraft system market. In addition, Voyager and Airbus signed an MOU to identify and pursue opportunities to collaborate on the delivery of Flexroder remotely piloted aircraft system services for commercial and government customers across Canada. We look forward to providing further updates as this exciting new capability develops. Forger also announced a new engagement with 49North, an NDA space company focused on delivering advanced ISR solutions for Canadian government, defense, and security customers. Combining Voyager's special mission operations, maintenance, and training with 49's mission systems and data analytics capabilities positioned both organizations to support Canada's growing requirements in sovereignty, security, and defense. At CADEX, John and the team completed a 10,000 square foot warehouse expansion at Peterborough Airport. significantly increasing capacity and consolidating inventory, shipping and receiving operations into a single location. The expansion doubles storage capacity, improves fulfillment speed for its growing demand, supports greater inventory levels in Canada, and enhances service for customers. The investment positions KDEX well for its next phase of growth while further strengthening customer service and operational efficiency. For TAFE, Cefane and the team at Ellison, work continues to progress on the Government of Quebec Medevac program. The design review phase has been successfully completed and the aircraft is now being prepared for modifications. The project remains on schedule for completion by the end of the fourth quarter and continues to be an excellent example of the value that can be created through collaboration across the course group of companies. with Ellison and Voyager working together to deliver a specialized solution for the customer. At Cignet, Lynn and the team continued delivering high-quality flight training and strengthening the pilot development pathways. A second destination porter cohort and the 12th JAZZ approach cohort will begin shortly. The innovative JAZZ approach program is another strong example of cross-course collaboration in action. JAZ plays a critical role in the Canadian pilot career pathway through its flow agreement with Air Canada, which has enabled more than 1,700 pilots to transition from JAZ to Air Canada over the past 10 years. Programs like JAZZ's approach are essential to sustaining a pipeline of highly skilled, career-ready pilots for JAZZ and supporting the long-term health of the Canadian aviation industry. Cignet is also advancing plans for its new flight training base in North Bay. which will support expanded training capacity and deeper collaboration with Canada or college. Across the organization, our businesses are executing very well, delivering strong operational and financial performance, while advancing strategic initiatives that support long-term value creation. We remain committed to discipline capital allocation in the pursuit of selective accretive acquisition opportunities that align with our course group of companies and investment criteria. We're encouraged by the opportunities we're seeing and continue to evaluate transactions that can strengthen and diversify our aviation, aerospace and defense business while while generating attractive returns for our shareholders. Through this strategy, we're building a stronger and more diversified company and advancing our vision of being Canada's trusted partner and global leader in aviation, aerospace and defense. I'll now turn it over to Gary to walk you through the financials.

Thank you, Colin, and good morning. We're pleased with our second quarter results.

The quarter really shows the strength of the platform we're building with solid earnings, strong free cash flow, disciplined capital allocation, and good progress on growth. In particular, Voyager and KDEX helped offset the contractual step-downs in the CPA, with KDEX tracking ahead of our initial expectations. We continued to return capital to shareholders through dividends and share repurchases, and we made further progress monetizing Dash 8-400 aircraft exiting the CPA fleet. Looking at the quarter, adjusted EBITDA was $50.7 million, essentially in line with last year. What is important here is the mix. Voyager and KDEX contributed an additional $6.5 million of adjusted EBITDA, primarily from higher part sales, which substantially offset the contractual step-downs in fixed margin and leasing revenue under the CPA. Adjusted net income per share increased to 83 cents, up 54% from Q2 2025. That reflects the earnings contribution I just mentioned, a $2.5 million gain on aircraft sales, along with lower depreciation and interest costs, and the benefit of our capital allocation activity. reduced weighted average shares outstanding by approximately 13% compared to the prior year. Free cash flow was $32.3 million, or $1.41 per share. per share basis, free cash flow was higher than last year, which is a good example of the compounding impact of our buybacks alongside with the cash generation of the business. Leverage, or adjusted net debt to adjusted EBITDA, was 1.5 times, improving from 1.7 times at year-end and remains comfortably within our targeted range of 1 to 2 times. As Colin noted, we closed the KDEX transaction on April 1st. The ADEX contributed $16.4 million of revenue and $1.2 million of net income in the quarter, inclusive of half a million dollars of amortization of acquisition-related intangible assets. That bottom line contribution is ahead of our initial expectations and we're encouraged by how quickly KDEX is adding to both our earnings diversification and our parts and supply chain capabilities. We also made strong progress on aircraft monetization. aircraft have now been sold to date, including four during the second quarter. Those sales generated $40.4 million of proceeds in the quarter and $58.4 million in the first half of this year and contributed to a $2.5 million gain on sale in Q2. Combined with free cash flow of $32 million, we generated $73 million of free cash flow and aircraft sale proceeds in the quarter, bringing the total for the first half of the year to $118 million. The two remaining aircraft are expected to close by the end of the year following completion of required engine work for expected net proceeds of approximately $14.4 million U.S. Turning to capital allocation, we continue to execute against the 2026 to 2029 plan we outlined earlier this year. That plan includes up to $100 million in share buybacks, $40 million in dividends, $190 million of amortizing term loan repayments, and $170 to $220 million of flexible capital allocation. During the quarter, we repurchased and canceled approximately 617,000 common shares under our NCIB program, representing $14.8 million of share buybacks. Year-to-date, we have repurchased and canceled approximately 845,000 shares, or $20 million. We also paid a quarterly dividend of 11 cents per share. When you combine the dividend and the buybacks, we returned $17.3 million to shareholders in the quarter, while maintaining a strong balance sheet and the flexibility to support growth. Liquidity remains strong at $204 million at June 30th. That gives us meaningful flexibility as we continue to balance growth, shareholder returns, debt reduction, and disciplined investment in the business. So, overall, we're pleased with the quarter. The business continues to generate strong free cash flow. Our leverage remains well within our target range. KDEX is off to a strong start, and we are continuing to execute on our capital allocation plan we laid out earlier this year. We also reaffirmed our full-year guidance, which reflects our confidence in the underlying cash generation of the business.

We are now ready to take your questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number 1 on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star. Press star zero followed by the number two. If you are using a speakerphone, please leave the handset before pressing any keys. One moment please for your first question. And your first question comes from Connor Gupta of Scotiabank. Please go ahead. Your line is open.

Thanks, and morning, everyone. Congrats on a good quarter. My first question is on KDEX. Very first quarter with you guys, seems like it has outperformed your expectations in the very first quarter. Can you help us explain what led to the outperformance? You know, what's going better there? Was it all integration or just, you know, the sheer end market? market exposure they have. So yes, any thoughts there and how sustainable we should think for that business, that is.

morning corner could call them yes thanks for the comments yes look we you know we were pretty excited about Kadex from the beginning and we have a lot of a lot of ideas on what we can do with the business as well as sort of the leadership team there. So, you know, it's performed exceptionally well kind of on a current business base. There's been some integration opportunities where we're looking at it. you know, internal cross organization opportunities which are starting to develop. We're working our way through those things, and there's several things to be done as we move forward there. And on top of that, or on top of that is really all the new areas that we're starting to look at, which is kind of a build out strategy. So, you know, I would say there's more opportunities in CADEX today for us to pursue than we can pursue right now. So our focus is just steady growth, you know, working with them to continue to build that business out, continue to make smart decisions on how we invest and where we invest. We talked about their hangar, their expansion they just went through, so they increased some space there. So yes, there's endless opportunities we see and we're working our way through that. Obviously, the internal stuff is going to start to happen as we move forward. It takes a bit of time as we leverage those opportunities, but they're coming together nicely. So excited about the business. you know, exceeding expectations and really no end to what we can do with the business as we move forward.

Thanks for the call there, Colin. If we can switch gears to Voyager. You guys had signed, I think, a couple of MOUs recently, one with Airbus and another with 49 North. Can you explain, is there an overlap between those two MOUs? I mean, do you have to kind of work with both Airbus and 49 North together, or can they be separate? And what kind of discussions are you having? with potential customers? What kind of role are you going to play in these semis?.

Yes, good question. Yes, no, those agreements are not interchanged or exclusive in any way. They're not tied to each other and they're very separate. You know if you think of 49 North What Voyager brings to that book of businesses is different they bring me kind of the operation and the maintenance and the support side, so that's kind of a relationship build that You know is more of a team build where they're going to be working on initiatives and bids bringing expertise from both sides of the business. So, you know, very different companies from that perspective that when they work together have a huge opportunity to pursue all kinds of bids when it comes to ISR. When you think of the Flexrotor opportunity, it's a little different. You know, we're talking there more about Voyager being the operator of the uncrewed drone and it would be essentially a deployment opportunity for them where they would be looking after the deployment they'd be out there flying the flying the machine and doing whatever work needs to be done whoever they're working for. Airbus really is more in that regard is more of, you know, kind of working with them to secure those opportunities. Great company to work with. This machine is well known. It's got thousands and thousands of flight hours on it. It's in multiple deployment opportunities around the world. So, you know, we're excited about it. We think Canada is right. So does Airbus for this type of machine in order to give us kind of lower cost and high higher technology capabilities. And there's several possibilities when you think about this. Generally speaking, You're talking about defense opportunities, you're talking about surveillance opportunities, you're talking about forwarding forestry observation, firefighting observation, mapping. Those are the kind of things that you would see that government agencies where this drone gets deployed in.

Okay, that's very good, Kolar. Thanks. And just a very quick one, housekeeping. On the final two aircraft that you're disposing, any thoughts what led to the delays there? I think you guys were expecting to wrap them up by the third quarter, I think. Now it's ending in Q4.

Any thoughts on the delays? Thanks. Yes, it's the usual stuff. You know, there's always, when it comes to aircraft and moving them between owners, there's always some little things that come up in timing, on maintenance, and so on. So it's all normal course stuff. You saw throughout all of those sales, it takes, you know, there's some that get delayed a little bit and they pop into the next quarter. That's just, it's normal course, nothing unusual, no issues. issues, you know, everything's been pretty much as planned. Just took a little bit of time.

Yes, it's Gary here. It really just relates to waiting for some engines to come back from overhaul to deliver the aircraft. So that's all we're waiting for.

Perfect, thanks for the time. I'll turn the line over.

Thank you. And your next question comes from James McGarley of RBC Capital Markets. Please go ahead. Your line is open.

Hey, congrats on a good quarter and thanks for having me on. I just wanted to ask a question on the guide. There's a sizable Q2 beat, but even at the high end of the range kind of implies a pretty meaningful step down in Q3 and Q4. So can you just talk about the primary swing factors in H2 that can be a factor in H2 that kind of kept you from increasing the guide is that FX or anything else that you can call out.

I'll let Gary take that one, but I didn't hear the first part of the question.

I was just saying that it was a sizable Q2B and then the guidance even at the high end of the range implies a meaningful step down versus Q2 in Q3 and into Q4.

Got you. Okay, Gary, I'll let you take that. Yes, no, really, when we look at it, we are tracking towards the high end of the guidance. There's no question about it. We're not expecting any big step down in the remainder of the year. We do have the aircraft leasing on the CPA. We talked about that. We've given guidance on that. So that's baked in. I think it's just a bit of conservatism to see how the back end of the year plays out. But we feel very comfortable with it. And we expecting Q3 to have more to give on that, but there's really nothing, you know, that we expect really to hit us in the back end of the year. We expect Voyager to continue to perform, KDEX to continue to perform the same as Jazz.

Okay, I appreciate the call there. And then on the new Jazz collective agreement, you know, you cite that as a cost headwind. Can you help us quantify the annual impact from that new agreement and the extent to that being recovered through the controllable cost agreement?.

Gary, I'll let you cover that one too. Yes, so on the labor deal with Calda there that we just completed, yes, all of that is covered under the Air Canada CPA agreement and within the Controllable Cross-Card Rail. So no issues there.

All right, appreciate it. I'll turn the line over. Thank you.

And your next question comes from Cameron Dorskin of National Bank. Please go ahead. Your line is open.

Thanks very much. Good morning. I wanted to ask, I guess, about the aircraft parts sales. I mean, it does sound like the K&X business is, as you mentioned, running a little ahead of your expectations and I assume fairly steady through the year. Just can you maybe update us on your outlook for the Voyager part sales? I mean it sounds like you're got a number of new programs there that are helping that but it tends to be I guess a lumpier business so maybe just any thoughts on what we should expect in the second half of the year as far as part sales specific to the Voyager business.

business. Yes. Hi, Cameron. You know, I think we see this as a growth area right so we're continuing to focus on opportunities to push and grow in areas that make sense So the broader the platform we can build, the more opportunities and flexibilities to invest and grow. That's what you're really seeing us do on the ATR and the Boeing side of things. Those were opportunities that make good economic sense. And so we moved on them. We're going to continue to do that and continue to build that out to a broader platform over time. We've stayed, I'd say principally focused on the narrow body and down type aircraft. Most of what we carry is regional aircraft today, but it's really important really just us slowly building things out where it makes economic sense to do that. And I would say that, you know, we will continue to see, you know, growth in that area for sure over the long run. It is lumpy, there's no question about it. We've seen that in the first quarter where we had some ups and downs and that's just the nature of the business. But overall, if you take the longer view, no question, growth for sure.

Okay, that's helpful. And maybe just a question on labor. Obviously, there's a lot of opportunities that you talked about, perhaps on the defense side for your business and I'm just wondering, you know, is the availability of labor qualified people for those types of programs? Is that a constraint at all for some of the programs you might bid on? I mean, there's obviously a number of other companies out there in Canada that are also pursuing, you know, similar type business. I'm just wondering if labor is one of those things that constrain you or is it not an issue for you?.

No. Yes, it's a good question, but it's not. We've been fortunate because we're a lot of critical size. You get to a critical mass, a certain size of business where you're not you can start to bring on expertise and we've just recently brought on another new expert in this area that has tons of field experience and knowledge. So for us to now grow this out slowly with time, we've had no problems bringing in the right expertise that can help build this out and do the training we need. There will be some training for, we've talked a little bit about that, for the new flex rotor, but there's no constraint when you think of labor. And even if you think of Mazer, when they expanded Mazer in Trenton, that was one of the questions we had and one of the things we had to do some research on to make sure we could get the qualified in the right location. And we've had no problems with that. It's more on the commodity side. When you get into the specialty stuff, I think it's quite easy. When you get into kind of the day-to-day maintenance or day-to-day flying airplanes, or like in the commercial world, It's definitely more competitive and can be harder, but all of the specialty type and niche opportunities, especially in defense, we haven't seen a lot of problems with anything related to labor.

Okay, no, that's helpful. I appreciate the time. Thank you. Thank you. And your next question comes from Daryl Young of Stifle. Please go ahead. Your line is open.

Good morning, everyone. I just wanted to touch on the Flexrotor as well as potential longer-term autonomous firefighting aircraft and and i guess just what you think the capex requirements are going to be coming down the pipe presumably that's part of your discretionary capital in your multi-year plan and then how does the revenue or economics of these these arrangements differ from existing special mission flights that are operating.