In an earnings call held on February 23, 2024, Chorus Aviation Inc. (TSX: CHR), one of the leading players in the aviation sector, reported a successful financial year with significant improvements in its balance sheet. The company met its financial expectations for the year and presented a positive outlook for the coming years. Chorus Aviation experienced increased adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and free cash flow, coupled with an improvement in its leverage ratio.
Key Takeaways:
- Chorus Aviation met its 2023 financial expectations with adjusted EBITDA reaching $458.7 million.
- Leverage ratio improved from 4.4x to 3.6x, and free cash flow reached $331.4 million.
- Various businesses under Chorus Aviation, including Jazz, Voyageur, and Falko, contributed to strong performance.
- Growth was noted in Voyageur’s air ambulance and MRO (Maintenance, Repair, and Operations) operations.
- The company aims to continue leverage reduction efforts and explore opportunities for capital return to shareholders.
- For 2024, Chorus Aviation expects adjusted EBITDA between $300 million and $400 million and free cash flow between $290 million and $340 million.
- The company is transitioning to a cash flow model from leasing and targeting higher credit-rated aircraft for sale.
Company Outlook:
- Chorus Aviation anticipates a leverage ratio between 3.1x and 3.5x for 2024.
- The company is optimistic about the improvement in macroeconomic conditions and plans to close Fund III by the end of 2024.
- In the long term, Chorus Aviation aims for a leverage ratio between 2.5x and 3.5x and plans to increase capital expenditures for growth after entering this range.
Bears Highlights:
- Anticipated revenue decline in the RAL (Regional Aircraft Leasing) segment for 2024.
- Expected decrease in adjusted EBITDA due to the sale of two airBaltic aircraft and lease renewals.
Bulls Highlights:
- Positive growth in Voyageur’s air ambulance and MRO operations.
- Steady demand for Chorus Aviation’s services despite the growing A220 fleet of Air Canada.
Missed Points:
- No specific guidance provided for EPS (Earnings Per Share) for 2024.
- Revenue decline expected due to aircraft sales.
Q&A Highlights:
- Chorus Aviation addressed the difference between adjusted EBITDA and adjusted net income.
- The company discussed its ability to offset the decline in CPA (Capacity Purchase Agreement) and emphasized its focus on reducing leverage and generating positive free cash flow.
- Plans for capital expenditures for growth were addressed, and the company’s strategy for reinvestment was highlighted.
In summary, Chorus Aviation demonstrated resilient financial performance in 2023 and outlined clear strategies for leverage reduction and growth. The company remains focused on strengthening its balance sheet, producing strong free cash flow to support future reinvestments, and potential returns to shareholders. With solid performances across various business segments and planned strategic asset sales, Chorus Aviation is poised to navigate the challenges and opportunities in the aviation sector in 2024 and beyond.
source: tr.investing.com / prepared by Melisa Beğiç