Chorus Aviation Inc. Announces Third Quarter 2024 Financial Results

Highlights:

• Generated strong Free Cash Flow^1,2 of $32.4 million for the period ended September 30, 2024 primarily derived from operating cash flows.
• Leverage Ratio^1,2 improved to 3.0 at September 30, 2024 due primarily to long-term debt repayments of $93.6 million since December 31, 2023.
• Net income of $18.4 million.
• Net income from continuing operations² of $19.8 million.
• Adjusted Earnings available to Common Shareholders^1,2 of $11.9 million.
• Adjusted Earnings available to Common Shareholders of $0.06 per Common Share, basic.^1,2
• Adjusted EBITDA^1,2 of $53.9 million.
• Previously-announced sale of Chorus' Regional Aircraft Leasing (RAL) segment is expected to significantly improve all of Chorus' key adjusted metrics on a pro forma basis^1,2,3 as follows:
  • Pro Forma Adjusted Earnings available to Common Shareholders per Common Share, basic, from continuing operations $0.08 and 0.25 for the three and nine months ended September 30, 2024, respectively;
  • Pro Forma Leverage Ratio of 1.5x at September 30, 2024; and
  • Pro Forma Free Cash Flow of $36.7 million and $104.0 million for the three and nine months ended September 30, 2024, respectively.
• Post-quarter end, announced fulfilment of all regulatory conditions to the completion of the RAL sale.
• Today, announced renewal of Chorus' Normal Course Issuer Bid (NCIB) for Common Shares.

_________________________

¹  These are non-GAAP financial measures or non-GAAP ratios that are not recognized measures for financial statement presentation under GAAP. As such, they do not have standardized meanings, may not be comparable to similar measures presented by other issuers and should not be considered a substitute for or superior to GAAP results. Refer to "Non-GAAP Financial Measures" for further information.

² The results of discontinued operations (RAL segment) have been excluded from both current and prior period figures to conform to current period presentation. All amounts presented and discussed in this press release are from continuing operations unless noted.

³ Refer to Pro Forma Financial Measures.

HALIFAX, NS, Nov. 6, 2024 /CNW/ - Chorus Aviation Inc. ('Chorus') (TSX: CHR) today announced its third quarter 2024 financial results.

"Throughout the quarter, Chorus' businesses generated healthy cashflows, and achieved ongoing improvements in our key financial metrics and delivered in line with expectations," said Colin Copp, President and Chief Executive Officer, Chorus. "Our aviation services businesses delivered strong earnings, including those from Jazz's Capacity Purchase Agreement (CPA) with Air Canada. Voyageur reported an increase in its revenue over the prior quarter, demonstrating continued growth in its parts sales and specialty business lines."

"At the end of the third quarter, Chorus improved its Leverage Ratio to 3.0 from 3.3 at December 31, 2023, while generating Free Cash Flow of $32.4 million," said Mr. Copp. "Further, after announcing the agreement to sell Chorus' RAL business, we took several steps during the third quarter towards the completion of the transaction, including the satisfaction of all regulatory conditions. The transaction is expected to close by the end of this year."

"Post-closing, the transaction positions us well to accelerate value for our shareholders and provide the financial flexibility to deliver on our core strengths in aviation services," commented Mr. Copp. "On a pro forma basis, we expect to see significant improvements in our financial measures, including Leverage and Free Cash Flow after debt repayments."

"These improvements will enable us to implement a return of capital program for our shareholders and fund steady growth, post-completion of the sale," said Mr. Copp. "Ahead of that, and in line with our ongoing focus on shareholders, today, we also announced the renewal of our Normal Course Issuer Bid (NCIB) for our Common Shares, reflecting our belief that Chorus' shares remain under-valued, offering an attractive investment and use of available funds."

Third Quarter Summary

In the third quarter of 2024, Chorus reported Adjusted EBITDA from continuing operations of $53.9 million, a decrease of $3.1 million compared to the third quarter of 2023 primarily due to:

• a decrease in aircraft leasing revenue under the CPA of $4.3 million primarily due to a change in lease rates on certain aircraft; and
• an increase in general administrative expenses attributable to increased operations; partially offset by
• an increase in other revenue of $10.3 million primarily due to Voyageur's increased revenue in parts sales, contract flying and MRO activity; and
• an increase in capitalization of major maintenance overhauls on owned aircraft of $2.0 million.

Adjusted Net Income from continuing operations was $11.9 million for the quarter, a decrease of $2.3 million compared to the third quarter of 2023 primarily due to:

• a $3.1 million decrease in Adjusted EBITDA as previously described; and
• an increase in depreciation expense of $3.5 million primarily attributable to a change in depreciation estimates on certain aircraft and capital expenditures; partially offset by
• a decrease of $2.5 million in income tax expense;
• a decrease in net interest costs of $1.6 million; and
• a positive change in foreign exchange of $0.2 million.
• Net income from continuing operations decreased $19.1 million compared to the third quarter of 2023 primarily due to:
• the previously noted decrease in Adjusted Net Income of $2.3 million;
• the Defined Benefit Pension Revenue recognized in 2023 of $29.9 million (Air Canada agreed to compensate Jazz for the one-time impact of the wage increase on the Jazz defined benefit pension plan); and
• an increase in employee separation program costs of $1.1 million; partially offset by
• a positive change in net unrealized foreign exchange of $5.9 million; and
• a decrease in income tax expense on adjusted items of $8.4 million.

Year-to-Date Summary

Chorus reported Adjusted EBITDA from continuing operations of $158.9 million for the nine months ended September 30, 2024, a decrease of $8.0 million compared to the same prior year period primarily due to:

• a decrease in aircraft leasing revenue under the CPA of $13.3 million primarily due to a change in lease rates on certain aircraft;
• an increase in stock-based compensation of $2.2 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 $13.6 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 $4.1 million; and
• an improvement in the Controllable Cost Guardrail of $2.0 million.
• Adjusted Net Income from continuing operations of $35.7 million, a decrease of $5.6 million compared to the same prior year period primarily due to:
• a $8.0 million decrease in Adjusted EBITDA as previously described;
• an increase in depreciation expense of $10.4 million primarily attributable to a change in depreciation estimates on certain aircraft and capital expenditures; and
• a negative change in net foreign exchange of $0.3 million; partially offset by
• a decrease of $10.2 million in income tax expense; and
• a decrease in net interest costs of $2.9 million.
• Net income from continuing operations of $33.7 million, a decrease of $39.7 million compared to the same prior year period primarily due to:
• the previously noted decrease in Adjusted Net Income of $5.6 million;
• the Defined Benefit Pension Revenue recognized in 2023 of $29.9 million (Air Canada agreed to compensate Jazz for the one-time impact of the wage increase on the Jazz defined benefit pension plan); and
• a negative change in net foreign exchange of $12.2 million; partially offset by
• a decrease in income tax expense on adjusted items of $8.1 million.

Consolidated Financial Analysis

This section provides detailed information and analysis about Chorus' performance from continuing operations for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023.

(unaudited) (expressed in thousands of Canadian dollars)	Three months ended September 30,				Nine months ended September 30,
	2024	2023	Change	Change	2024	2023	Change	Change
	$	$	$	%	$	$	$	%
		(revised)^(1)				(revised)^(1)
Operating revenue^(2)	341,987	377,898	(35,911)	(9.5)	1,051,799	1,044,983	6,816	0.7
Operating expenses	315,056	313,301	1,755	0.6	972,457	917,258	55,199	6.0
Operating income	26,931	64,597	(37,666)	(58.3)	79,342	127,725	(48,383)	(37.9)
Net interest expense	(8,810)	(10,456)	1,646	(15.7)	(26,906)	(29,842)	2,936	(9.8)
Foreign exchange gain (loss)	6,218	149	6,069	4,073.2	(7,842)	4,699	(12,541)	(266.9)
Gain on property and equipment	5	3	2	66.7	20	13	7	53.8
Income before income tax	24,344	54,293	(29,949)	(55.2)	44,614	102,595	(57,981)	(56.5)
Income tax expense	(4,542)	(15,387)	10,845	(70.5)	(10,952)	(29,253)	18,301	(62.6)
Net income from continuing operations	19,802	38,906	(19,104)	(49.1)	33,662	73,342	(39,680)	(54.1)
Net loss from discontinued operations, net of taxes	(1,392)	(21,758)	20,366	(93.6)	(183,515)	(3,857)	(179,658)	4,658.0
Net income (loss)	18,410	17,148	1,262	7.4	(149,853)	69,485	(219,338)	(315.7)
Net (loss) income attributable to non-controlling interest	(1,352)	553	(1,905)	(344.5)	1,039	2,310	(1,271)	(55.0)
Net income (loss) attributable to Shareholders	19,762	16,595	(3,167)	(19.1)	(150,892)	67,175	(218,067)	(324.6)
Preferred Share dividends declared	—	(8,799)	8,799	(100.0)	(17,827)	(26,486)	8,659	(32.7)
Earnings (loss) attributable to Common Shareholders	19,762	7,796	11,966	153.5	(168,719)	40,689	(209,408)	(514.7)
Adjusted EBITDA^(3)	53,896	57,017	(3,121)	(5.5)	158,914	166,892	(7,978)	(4.8)
Adjusted EBT^(3)	16,576	21,342	(4,766)	(22.3)	46,923	62,682	(15,759)	(25.1)
Adjusted Net Income^(3)	11,943	14,249	(2,306)	(16.2)	35,737	41,289	(5,552)	(13.4)

(1)	The results of discontinued operations (RAL segment) have been excluded from both current and prior period figures in accordance with IFRS 5 to conform to current period presentation. All amounts presented and discussed in this release are from continuing operations unless noted.
(2)	Air Canada agreed to compensate Jazz for the one-time impact of the wage increase on the Jazz defined benefit pension plan of $29.9 million which will be repaid in 60 equal monthly payments beginning on December 1, 2023. In accordance with IFRS, the associated impact of the wage scale pension assumption change in the pension liability was charged directly to other comprehensive income.
(3)	These are non-GAAP financial measures that are not recognized measures for financial statement presentation under GAAP. As such, they do not have standardized meanings, may not be comparable to similar measures presented by other issuers and should not be considered a substitute for or superior to GAAP results.

Post Sale Pro forma Non-GAAP Financial Measures September 30, 2024

The pro forma financial information in this section is based on the unaudited interim condensed consolidated financial statements of Chorus for the three and nine months ended September 30, 2024 (the "Q3 2024 Statements") and has been prepared to retroactively illustrate the financial impact of the Transaction on Chorus had the Transaction closed on October 1, 2023 for the purposes of metrics which are based on the trailing 12 months ended September 30, 2024 and December 31, 2023 for all other metrics. The pro forma adjustments to the Q3 2024 Statements are tentative, are not audited and are based on current management estimates and assumptions. Furthermore, since the pro forma information is based on historical financial results, it is not indicative of future financial results and should not be regarded as a forecast or projection of Chorus' future earnings, financial position or cash flows. Therefore, undue reliance should not be placed on the pro forma information. (See cautionary statement regarding forward-looking information below.)

Following the closing of the Transaction, which is expected prior to the end of 2024, Chorus plans to use the net proceeds of the Transaction to pay down or redeem its corporate financings including the Preferred Shares, all of the Debentures and early redemption amounts (including the MOIC payable upon the redemption of the Preferred Shares) and the Operating Credit Facility. Following the closing of the Transaction, Chorus will redeem or make an offer to redeem (as applicable) the Debentures in accordance with the terms of the relevant indentures. Chorus' pro forma debt assumes that all of the holders of Series B Debentures and Series C Debentures tender in response to Chorus' redemption offer.

As a result of the redemption of the Preferred Shares, the significant debt reduction and reduction in interest and preferred dividend costs, the Transaction is expected to significantly strengthen Chorus' balance sheet and improve key financial metrics.

Substantially all of Chorus' remaining debt is expected to consist of amortizing term debt relating to aircraft operated by Jazz under the CPA with Air Canada, which is fully supported by the CPA out to 2035, and the Operating Credit Facility that can be drawn from time to time. 

The following table provides a summary of the expected use of the net proceeds from the Transaction and repayment of corporate financings:

(unaudited) (in thousands of Canadian dollars)
Summary of the Transaction
Net proceeds, net of transaction costs^(1)	813,875
Redemption/Repayment:
Debentures^(2)	243,750
Operating Credit Facility^(3)	60,000
Preferred Shares^(1)(4)	490,379
	794,129
Net cash remaining	19,746

(1)   The net proceeds, net of transaction costs and the Preferred Shares have been converted to CAD at 1.3499 which was the exchange rate in effect at closing on September 30, 2024 from USD.

(2)   Principal amount of the Debentures.

(3)   Balance under the Operating Credit Facility at September 30, 2024.

(4)   Chorus will be required to pay a MOIC (net of cash dividends paid) of $85.4 million (US $63.3 million) on the redemption of the $405.0 million (US $300.0 million) Preferred Shares.

The following Pro forma non-GAAP adjusted metrics reflect continuing operations and the effect of the anticipated repayment of corporate financings on the September 30, 2024 results.

Pro Forma Adjusted Earnings available to Common Shareholders per Common Share

(unaudited) (in thousands of Canadian dollars, except per share amounts)	Three months ended September 30, 2024 $	Nine months ended  September 30, 2024 $
Adjusted Earnings available to Common Shareholders as reported    from continuing operations^(1)(2)	11,943	17,910
Interest expense savings, net of tax^(3)	4,274	12,686
Preferred Share dividends savings^(4)	—	17,827
Pro Forma Adjusted Earnings available to Common Shareholders    from continuing operations^(1)	16,217	48,423
Pro Forma Adjusted Earnings available to Common Shareholders    per Common Share, basic from continuing operations^(1)	0.08	0.25

(1)	These are non-GAAP financial measures that are not recognized measures for financial statement presentation under GAAP. As such, they do not have standardized meanings, may not be comparable to similar measures presented by other issuers and should not be considered a substitute for or superior to GAAP results.
(2)	The results of discontinued operations (RAL segment) have been excluded from both current and prior period figures to conform to current period presentation. All amounts presented and discussed in this press release are from continuing operations unless otherwise noted.
(3)	The interest expense on the Debentures and the Operating Credit Facility for the three and nine months ended September 30, 2024 was $5.9 million and $17.4 million, respectively. The interest expense was tax effected using a 27.0% tax rate.
(4)	The MOIC includes Preferred Share dividends that would have otherwise been declared for the three months ended September 30, 2024. If the Preferred Shares are redeemed prior to May 3, 2025, the Corporation is required to pay the holders thereof the liquidation preference plus a 1.4x MOIC (less the aggregate of all dividends paid on the Preferred Shares in cash).

Pro Forma Leverage Ratio

(unaudited) (in thousands of Canadian dollars)	September 30, 2024 $
Long-term debt and lease liabilities (including current portion)^(1)	661,198
Less:
Debentures^(2)	(239,400)
Operating Credit Facility^(2)	(60,000)
	361,798
Less:
Cash at September 30, 2024^(1)	(23,666)
Cash remaining from Transaction after corporate financings repayments^(3)	(19,746)
Pro Forma Adjusted Net Debt^(4)	318,386
Adjusted EBITDA^(1)(4)	213,557
Pro Forma Leverage Ratio^(4)	1.5

(1)	The results of discontinued operations (RAL segment) have been excluded from both current and prior period figures to conform to current period presentation. All amounts presented and discussed in this MD&A are from continuing operations unless otherwise noted.
(2)	Principal amount of the Debentures and the balance outstanding under the Operating Credit Facility at September 30, 2024.
(3)	Chorus anticipates the net cash remaining after the sale of the RAL segment less the pay down or redemption of its corporate financings including the Preferred Shares and all of the Debentures and early redemption amounts (including the multiple on invested capital payable upon the redemption of the Preferred Shares) to be $19.7 million using the September 30, 2024 USD to CAD foreign exchange rate of 1.3499.
(4)	These are non-GAAP financial measures that are not recognized measures for financial statement presentation under GAAP. As such, they do not have standardized meanings, may not be comparable to similar measures presented by other issuers and should not be considered a substitute for or superior to GAAP results.

Pro Forma Free Cash Flow and Pro Forma Free Cash Flow after Repayment on Long-term Borrowings⁽³⁾

(unaudited) (in thousands of Canadian dollars)	Three months ended September 30, 2024 $	Nine months ended September 30, 2024 $
Free Cash Flow as reported^(1)(2)	32,447	91,305
Interest savings, net of tax^(3)	4,274	12,686
Pro Forma Free Cash Flow^(1)	36,721	103,991
Repayment on long-term borrowings^(2)(4)	(13,875)	(59,663)
Pro Forma Free Cash Flow after repayment on long-term borrowings^(1)(4)	22,846	44,328

(1)	These are non-GAAP financial measures that are not recognized measures for financial statement presentation under GAAP. As such, they do not have standardized meanings, may not be comparable to similar measures presented by other issuers and should not be considered a substitute for or superior to GAAP results.
(2)	The results of discontinued operations (RAL segment) have been excluded from both current and prior period figures to conform to current period presentation. All amounts presented and discussed in this MD&A are from continuing operations unless otherwise noted.
(3)	The interest expense on the Debentures and the Operating Credit Facility for the three and nine months ended September 30, 2024 was $5.9 million and $17.4 million, respectively. The interest expense was tax effected using a 27.0% tax rate.
(4)	Excludes repayment of $nil and $33.9 million on the Unsecured Credit Facility for the three and nine months ended September 30, 2024, respectively.

Pro Forma Adjusted Return on Equity

(unaudited) (in thousands of Canadian dollars)	Trailing 12-months ended September 30, 2024 $
Adjusted Earnings Available to Common Shareholders as reported^(1)(2)	19,674
Add: Interest savings, net of tax^(3)	17,488
Add: Preferred Share dividends declared	26,767
Pro Forma Adjusted Earnings Available to Common Shareholders^(2)	63,929
Average equity attributable to Common Shareholders excluding cash
Average Shareholders' equity as reported	966,524
Add (Deduct) items to get to average equity attributable to Common Shareholders excluding cash
Average Non-controlling interest	(88,478)
Average Preferred Shares	(187,609)
Average Cash	(27,587)
Average Cash remaining from Transaction after corporate financings repayments^(4)	(9,873)
	652,977
Pro Forma Adjusted Return on Equity^(2)	9.8 %

(1)	The results of discontinued operations (RAL segment) have been excluded from both current and prior period figures to conform to current period presentation. All amounts presented and discussed in this MD&A are from continuing operations unless otherwise noted.
(2)	These are non-GAAP financial measures that are not recognized measures for financial statement presentation under GAAP. As such, they do not have standardized meanings, may not be comparable to similar measures presented by other issuers and should not be considered a substitute for or superior to GAAP results.
(3)	The interest expense on the Debentures and the Operating Credit Facility for the trailing 12-months ended September 30, 2024 was $24.0 million. The interest expense was tax effected using a 27.0% tax rate.
(4)	Chorus anticipates the net cash remaining after the sale of the RAL segment less the pay down or redemption of its corporate financings including the Preferred Shares and all of the Debentures and early redemption amounts (including the MOIC upon the redemption of the Preferred Shares) to be $19.7 million using the September 30, 2024 USD to CAD foreign exchange rate of 1.3499.

Outlook

(See cautionary statement regarding forward-looking information below.)

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 September 30, 2024). The forecast has changed as a result of updated foreign exchange rates. The forecast has changed as a result of updated foreign exchange rates, changes in assumptions on certain lease rates and lease extensions.

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^(3)	60,900	59,600	43,900
Aircraft leasing under the CPA
Revenue^(4)	132,000	116,000	100,000
Payment on long-term debt and interest	96,000	77,000	67,000
Total Fixed Margin and Aircraft leasing under the CPA less payment on long-term debt and interest	96,900	98,600	76,900
Wholly-owned aircraft leased under the CPA (end of period)^(4)	48	45	39
Wholly-owned aircraft leased under the CPA available for re-lease (end of period)^(4)	nil	3	9

(1)	The forecast uses a foreign exchange rate of 1.3500 for 2024 (previously at 1.3400), 1.3200 for 2025 (previously at 1.2700) and 1.2900 for 2026 (previously at 1.2700) to translate USD to CAD.
(2)	Includes estimates for future market lease rates for 12 Q400's for 2026 with contracted lease extensions to 2030.
(3)	The Fixed Margin will decrease to no less than $60.7 million in 2024, no less than $59.6 million in 2025 and no less than $43.9 million in 2026 with no further changes thereafter.
(4)	Leases on six Dash 8-400s were extended to mid-2026.

Covered Aircraft

The forecasted Covered Aircraft under the CPA for the years 2024 to 2026 is as follows:

			Change		Change
		Forecast 2024	2025	Forecast 2025	2026	Forecast 2026
Dash 8-400	Aircraft Leased under the CPA	34	(3)	31	(6)	25
	Other Covered Aircraft	5	(5)	—	—	—
		39	(8)	31	(6)	25
CRJ900	Aircraft Leased under the CPA	14	—	14	—	14
	Other Covered Aircraft	21	—	21	(5)	16
		35	—	35	(5)	30
CRJ200	Aircraft Leased under the CPA	—	—	—	—	—
	Other Covered Aircraft^(1)	15	—	15	(15)	—
		15	—	15	(15)	—
E175	Aircraft Leased under the CPA	—	—	—	—	—
	Other Covered Aircraft	25	—	25	—	25
		25	—	25	—	25
Total	Aircraft Leased under the CPA^(2)(3)	48	(3)	45	(6)	39
	Other Covered Aircraft^(1)	66	(5)	61	(20)	41
		114	(8)	106	(26)	80

(1)	The 15 CRJ200s are currently non-operational under the CPA.
(2)	After 2026, the 39 owned Aircraft Leased under the CPA have lease expiry dates from 2027 to 2033. Air Canada will determine the composition of the Covered Aircraft fleet on the condition that the fleet must have a minimum of 80 aircraft with 75-78 seats. As leases in respect of owned aircraft mature, the minimum 80 Covered Aircraft fleet will be composed of owned aircraft with lease extensions and/or other Covered Aircraft sourced by Air Canada.
(3)	Lease expiry dates for owned aircraft are as follows: Dash 8-400's: six expiries in 2027; seven expiries in 2028 and 12 expiries in 2030; and for CRJ900's: five in 2028; eight in 2032 and one in 2033.

Capital Expenditures

Capital expenditures in 2024 are expected to be as follows:

(unaudited) (in thousands of Canadian dollars)	Annual Forecast 2024 $
Capital expenditures, excluding aircraft acquisitions	12,000	to	17,000
Capitalized major maintenance overhauls^(1)	14,000	to	19,000
Aircraft acquisitions and improvements	18,500	to	23,500
	44,500	to	59,500

(1)	The 2024 plan includes between $11.0 million to $15.0 million of costs that are expected to be included in and recovered through the Controllable Costs.

Use of Defined Terms

Capitalized terms used but not defined in this news release have the meanings given to them in management's discussion and analysis of results of operations and financial condition ("MD&A") dated the date hereof, which is available on Chorus' website (www.chorusaviation.com) and under Chorus' profile on SEDAR+ (www.sedarplus.ca).  In this news release, the term "shareholders" refers only to holders of Common Shares.

Investor Conference Call / Audio Webcast

Chorus will hold an analyst call at 9:00 AM ET on Thursday, November 7, 2024, to discuss the third quarter 2024 financial results. The call may be accessed by dialing 1-888-510-2154. The call will be simultaneously audio webcast via: https://app.webinar.net/D8kXBR91bQ6.

This is a listen-in only audio webcast. 

The conference call webcast will be archived on Chorus' website at www.chorusaviation.com under  Investors > Reports.  A playback of the call can also be accessed until midnight ET, November 14, 2024, by dialing toll-free 1-888-390-0541 and using passcode 76863 # (pound key).

NON-GAAP FINANCIAL MEASURES

This news release references several non-GAAP financial measures and ratios to supplement the analysis of Chorus' results. Chorus uses these non-GAAP measures to evaluate and assess performance. These non-GAAP measures are generally numerical measures of Chorus' financial performance, financial position, or cash flows, that include or exclude amounts from the most comparable GAAP measure. As such, these measures are not recognized for financial statement presentation under GAAP, do not have standardized meanings, may not be comparable to similar measures presented by other entities, and should not be considered a substitute for or superior to GAAP results. For further information on non-GAAP measures used in this news release, please refer to Section 18 (Non-GAAP Financial Measures) of the MD&A dated the date hereof, which is available on Chorus' website (www.chorusaviation.com) and under Chorus' profile on SEDAR+ (www.sedarplus.ca). Reconciliations of non-GAAP measures to their nearest GAAP measures are provided below.

Adjusted Net Income, Adjusted EBT, Adjusted EBITDA

(unaudited) (expressed in thousands of Canadian dollars)	Three months ended September 30,			Nine months ended September 30,
	2024 $	2023 $	Change $	2024 $	2023 $	Change $
		(revised)^(1)			(revised)^(1)
Net income (loss)	18,410	17,148	1,262	(149,853)	69,485	(219,338)
Less: Net loss from discontinued operations, net of taxes	(1,392)	(21,758)	20,366	(183,515)	(3,857)	(179,658)
Net income from continuing operations	19,802	38,906	(19,104)	33,662	73,342	(39,680)
Add (Deduct) items to get to Adjusted Net Income
Employee separation program^(2)	337	(803)	1,140	867	804	63
Defined Benefit Pension Revenue^(3)	—	(29,916)	29,916	—	(29,916)	29,916
Unrealized foreign exchange (gain) loss	(8,105)	(2,232)	(5,873)	1,442	(10,801)	12,243
Tax (recovery) expense on adjusted items	(91)	8,294	(8,385)	(234)	7,860	(8,094)
	(7,859)	(24,657)	16,798	2,075	(32,053)	34,128
Adjusted Net Income	11,943	14,249	(2,306)	35,737	41,289	(5,552)
Add (Deduct) items to get to Adjusted EBT
Income tax expense	4,542	15,387	(10,845)	10,952	29,253	(18,301)
Tax recovery (expense) on adjusted items	91	(8,294)	8,385	234	(7,860)	8,094
Adjusted EBT	16,576	21,342	(4,766)	46,923	62,682	(15,759)
Add (Deduct) items to get to Adjusted EBITDA
Net interest expense	8,810	10,456	(1,646)	26,906	29,842	(2,936)
Depreciation and amortization excluding impairment	26,628	23,139	3,489	78,705	68,279	10,426
Foreign exchange loss	1,887	2,083	(196)	6,400	6,102	298
Gain on disposal of property and equipment	(5)	(3)	(2)	(20)	(13)	(7)
	37,320	35,675	1,645	111,991	104,210	7,781
Adjusted EBITDA	53,896	57,017	(3,121)	158,914	166,892	(7,978)

(1)	The results of discontinued operations (RAL segment) have been excluded from both current and prior period figures to conform to current period presentation. All amounts presented and discussed in this news release are from continuing operations unless otherwise noted.
(2)	Included in operating expenses.
(3)	Air Canada agreed to compensate Jazz for the one-time impact of the wage increase on the Jazz defined benefit pension plan of $29.9 million which will be repaid in 60 equal monthly payments beginning on December 1, 2023. In accordance with IFRS, the associated impact of the wage scale pension assumption change in the pension liability was charged directly to other comprehensive income.

Adjusted Earnings available to Common Shareholders per Common Share

Adjusted Earnings available to Common Shareholders per Common Share is used by Chorus to assess performance and is calculated as Adjusted net income less non-controlling interest and Preferred Share dividends declared.

Pro Forma Adjusted Earnings available to Common Shareholders per Common Share is calculated as Adjusted Earnings available to Common Shareholders plus anticipated interest savings on repayment of corporate financings and Preferred Share dividends declared. 

(unaudited) (expressed in thousands of Canadian dollars, except per Share amounts)	Three months ended September 30,			Nine months ended September 30,
	2024 $	2023 $	Change $	2024 $	2023 $	Change $
		(revised)^(1)			(revised)^(1)
Adjusted Net Income from continuing operations	11,943	14,249	(2,306)	35,737	41,289	(5,552)
Add (Deduct) items to get to Adjusted Earnings available to Common Shareholders
Preferred Share dividends declared	—	(8,799)	8,799	(17,827)	(26,486)	8,659
Adjusted Earnings available to Common Shareholders - continuing operations	11,943	5,450	6,493	17,910	14,803	3,107
Adjusted Earnings available to Common Shareholders per Common Share, basic - continuing operations	0.06	0.03	0.03	0.09	0.08	0.01

(1)	The results of discontinued operations (RAL segment) have been excluded from both current and prior period figures to conform to current period presentation. All amounts presented and discussed in this news release are from continuing operations unless otherwise noted.

Leverage Ratio

Leverage Ratio is used by Chorus as a means to measure financial leverage. Leverage Ratio is calculated by dividing Net debt by trailing 12-month Adjusted EBITDA. Management believes Leverage Ratio to be a useful ratio when monitoring and managing debt levels. In addition, as leverage is a measure frequently analyzed for public companies, Chorus has calculated the amount to assist readers in this review. Leverage Ratio should not be construed as a measure of cash flows. Net debt is a key component of capital management for Chorus and provides management with a measure of its net indebtedness.

Pro Forma Leverage Ratio is calculated by dividing Net debt, adjusted to remove the anticipated repayment of corporate financings and net cash remaining from the Transaction, by trailing 12-month Adjusted EBITDA.

(unaudited)   (expressed in thousands of Canadian dollars)	September 30, 2024	December 31, 2023	Change
	$	$	$
		(revised)^(1)
Long-term debt and lease liabilities (including current portion)^(2)(3)	661,198	1,755,580	(1,094,382)
Less:
Long-term debt and lease liabilities (including current portion)    related to discontinued operations^(2)	—	(986,921)	986,921
Cash^(1)	(23,666)	(85,985)	62,319
Cash related to discontinued operations^(1)(2)	—	55,432	(55,432)
Adjusted Net Debt	637,532	738,106	(100,574)
Adjusted EBITDA	213,557	221,535	(7,978)
Leverage Ratio	3.0	3.3	(0.3)

(1)	The results of discontinued operations (RAL segment) have been excluded from both current and prior period figures to conform to current period presentation. All amounts presented and discussed in this news release are from continuing operations unless otherwise noted.
(2)	The September 30, 2024 balance does not include the Preferred Shares.
(3)	Long-term debt and lease liabilities related to discontinued operations of $986.9 million and cash of $55.4 million have been removed from December 31, 2023 for comparative purposes.

Free Cash Flow

Free Cash Flow is a non-GAAP measure used as an indicator of financial strength and performance. Chorus believes that this measurement is useful as an indicator of its ability to service its debt, meet other ongoing obligations and reinvest in the Corporation and return capital to Common Shareholders. Readers are cautioned that Free Cash Flow does not represent residual cash flow available for discretionary expenditures.

Free Cash Flow is defined as cash provided by operating activities less net changes in non-cash balances related to operations, capital expenditures excluding aircraft acquisitions and improvements plus net proceeds on asset sales (proceeds on disposal of property and equipment less the related debt repayments for the assets sold).

Pro Forma Free Cash Flow is defined as Free Cash Flow plus anticipated interest savings on repayment of corporate financings. 

Pro Forma Free Cash Flow after repayment on long-term borrowings is defined as Free Cash Flow plus anticipated interest savings on repayment of corporate financings less repayment on long-term borrowings.

The following table provides a reconciliation of Free Cash Flow to cash flows from operating activities, which is the most comparable financial measure calculated and presented in accordance with GAAP:

(unaudited) (expressed in thousands of Canadian dollars)	Three months ended September 30,			Nine months ended September 30,
	2024	2023	Change	2024	2023	Change
	$	$	$	$	$	$
		(revised)^(1)			(revised)^(1)
Cash provided by operating activities from continuing operations^(2)	27,657	136,449	(108,792)	151,707	199,172	(47,465)
Add (Deduct)
Net changes in non-cash balances related to operations	12,725	(63,981)	76,706	(37,887)	(43,144)	5,257
Capital expenditures, excluding aircraft acquisitions	(3,769)	(2,980)	(789)	(9,303)	(9,897)	594
Capitalized major maintenance overhauls	(4,166)	(2,386)	(1,780)	(13,212)	(9,696)	(3,516)
Free Cash Flow	32,447	67,102	(34,655)	91,305	136,435	(45,130)

(1)	The results of discontinued operations (RAL segment) have been excluded from both current and prior period figures to conform to current period presentation. All amounts presented and discussed in this news release are from continuing operations unless otherwise noted.
(2)	Air Canada agreed to compensate Jazz for the one-time impact of the wage increase on the Jazz defined benefit pension plan of $29.9 million which will be repaid in 60 equal monthly payments beginning on December 1, 2023. In accordance with IFRS, the associated impact of the wage scale pension assumption change in the pension liability was charged directly to other comprehensive income.

Adjusted Return on Equity

Adjusted Return on Equity is a non-GAAP financial measure used to gauge a corporation's profitability and how efficient it is in generating profits. Adjusted Return on Equity is calculated based on Chorus' Adjusted Net Income less non-controlling interest and Preferred Share dividends declared divided by Average Shareholders' equity excluding non-controlling interest, Preferred Shares and cash.

Pro Forma Adjusted Return on Equity is calculated based on Adjusted Earnings available to Common Shareholders plus anticipated interest savings on repayment of corporate financings and Preferred Share dividends declared divided by Average Shareholders' equity excluding non-controlling interest, Preferred Shares, cash and anticipated net cash remaining from the Transaction.

(unaudited) (expressed in thousands of Canadian dollars)	Trailing 12-months ended
	September 30,	December 31,
	2024	2023	Change
	$	$	$
		(revised)^(1)
Adjusted Net Income from continuing operations^(1)	46,441	51,993	(5,552)
Add (Deduct) items to get to Adjusted Earnings available to Common Shareholders
Preferred Share dividends declared	(26,767)	(35,426)	8,659
Adjusted Earnings available to Common Shareholders	19,674	16,567	3,107
Average equity attributable to Common Shareholders excluding cash
Average Shareholders' equity	966,524	1,274,446	(307,922)
Add (Deduct) items to get to average equity attributable to Common Shareholders excluding cash
Average Non-controlling interest	(88,478)	(87,718)	(760)
Average Preferred Shares	(187,609)	(375,217)	187,608
Average Cash^(1)	(27,587)	(24,926)	(2,661)
	662,850	786,585	(123,735)
Adjusted Return on Equity^(1)	3.0 %	2.1 %	0.9 %

(1)	The results of discontinued operations (RAL segment) have been excluded from both current and prior period figures to conform to current period presentation. All amounts presented and discussed in this MD&A are from continuing operations unless otherwise noted.

Forward-Looking Information

This news release includes forward-looking information and statements within the meaning of applicable securities laws (collectively, "forward-looking information"). Forward-looking information is identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "potential", "predict", "project", "will", "would", and similar terms and phrases, including negative versions thereof. All information and statements other than statements of historical fact are forward-looking and by their nature, are based on various underlying assumptions and expectations that and are subject to known and unknown risks, uncertainties and other factors that may cause actual future results, performance or achievements to differ materially from those indicated in the forward-looking information. As a result, there can be no assurance that the forward-looking information included in this news release will prove to be accurate or correct.

Examples of forward-looking information in this news release include the discussion in the Outlook section, as well as statements and expectations regarding the Transaction, including the anticipated benefits that would result from the Transaction, and statements and expectations regarding the future performance of Chorus. Actual results may differ materially from those anticipated in forward-looking information for a number of reasons, including: whether the remaining conditions precedent to completion of the Transaction are satisfied; whether completion of the Transaction is delayed or fails to complete; Chorus' ability to realize the anticipated benefits of the Transaction, including the implementation of any capital return program for shareholders; the anticipated net proceeds from the Transaction; the anticipated use of proceeds from the Transaction; the potential impact of the announcement or completion of the Transaction on relationships, including with employees, suppliers, customers, investors and other providers of capital; changes in the aviation industry and general economic conditions; the emergence of disputes under the CPA; a deterioration in Air Canada's financial condition; any default by Chorus under debt covenants; asset impairments; changes in law; and the risk factors in the MD&A dated the date hereof, in Chorus' most recent Annual Information Form and in Chorus' public disclosure record available under its profile on SEDAR+ at  www.sedarplus.ca.

The forward-looking information contained in this news release represents Chorus' expectations as of the date of this news release (or as of the date they are otherwise stated to be made) and is subject to change after such date. Chorus disclaims any intention or obligation to update or revise any forward-looking information as a result of new information, subsequent events or otherwise, except as required by applicable securities laws. Readers are cautioned that the foregoing factors and risks are not exhaustive.

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.

Chorus Class A Variable Voting Shares and Class B Voting Shares trade on the Toronto Stock Exchange under the trading symbol 'CHR'. Chorus 5.75% Senior Unsecured Debentures due December 31, 2024, 6.00% Convertible Senior Unsecured Debentures due June 30, 2026, and 5.75% Senior Unsecured Debentures due June 30, 2027 trade on the Toronto Stock Exchange under the trading symbols 'CHR.DB.A', 'CHR.DB.B', and 'CHR.DB.C' respectively.  www.chorusaviation.com.

SOURCE Chorus Aviation Inc.

Chorus Media Contact: [email protected]; Chorus Analyst Contact: [email protected]