Q2 2026 Chorus Aviation Inc Earnings Call
Speaker #1: Good morning, ladies and gentlemen, and welcome to the chorus aviation Q2 2026 financial results conference call. At this time, all lines are in listen-only mode.
Speaker #1: Following the presentation, we'll conduct a Q&A session. But anytime during this call, you require immediate assistance, please press star 0 for the operator. This call is being recorded on Wednesday, August 5, 2026.
Speaker #1: I would now like to turn the conference over to Matt Lapierre, please go ahead.
Speaker #2: 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.
Speaker #2: 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.
Speaker #2: This pertains specifically to the results and operations of chorus aviation, Inc., for the period ended June 30, 2026, as well as the outlook section and other sections of our MD&A where such statements appear.
Speaker #2: 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.
Speaker #2: 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.
Speaker #3: Good morning, everyone, and thank you for joining us today. I'm pleased to report that chorus delivered strong, Q2 financial results and continues to make meaningful progress toward our strategic growth objectives.
Speaker #3: 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.
Speaker #3: 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.
Speaker #3: 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.
Speaker #3: A key milestone in our growth and diversification during the quarter was the completion of our acquisition of CADEX AeroSupply on April 1. Since closing, the integration has progressed smoothly and the business continues to perform exceptionally well.
Speaker #3: 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.
Speaker #3: Which tracks ahead of our initial expectations. CADEX has expanded our aviation and aerospace platform, enhancing the quality and diversification of our earnings and strengthening the resilience of our cash flow profile.
Speaker #3: Our approach to capital allocation remains unchanged. During the quarter, we repurchased shares under our normal course issuer bid while also maintaining our quarterly dividend.
Since closing, the integration has progressed smoothly and the business continues to perform exceptionally well.
Speaker #3: 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.
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 the head of our initial expectations?
Speaker #3: 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.
Data 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.
Speaker #3: Seven aircraft have now closed and been 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 USD.
During the quarter, we repurchased shares under our normal course. Issuer bid while also maintaining our quarterly dividends
Million dollars of shares during the second quarter, bringing the total repurchases to approximately 20 million year to date.
Speaker #3: 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.
and since 2022, we've returned, approximately 144 million to shareholders through our ncib and 2 substantial issuer bids
We have executed as planned on the monetization of the 9-8 400 aircraft previously announced.
Speaker #3: Doug and the team at Jazz have been working hard on the Air Canada Express operation at Billy Bishop Toronto City Airport with the launch of service to Chicago, Washington Dulles and Boston during the quarter.
7, aircraft, and now closed and being delivered, which include 4 aircraft transactions, completed during the second quarter,
Speaker #3: 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.
The remaining 2 aircraft are planned to close by the fourth quarter of 2026 generating estimated. Net proceeds of approximately 14.4 million US dollars,
According 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.
Speaker #3: 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.
Speaker #3: Progress continues on the -8 300 fireswift aerial firefighting program, with the first aircraft going through final certification and a second expected to be completed next quarter.
Doug and the team at jazz 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.
Speaker #3: 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.
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 the Jazz recently reached a tenant of agreement.
Speaker #3: Adding two new platforms to the AVPARS market offerings. As well, their domestic charter operations remain strong, supporting wildfire response efforts across Canada and Voyager has completed the sale of two -8 400 aircraft.
With its Canadian Airlines dispatchers Association representing the companies, 56 flight dispatchers.
At Voyager, Corey and the team continued to drive several strategic growth initiatives positioning the business to capitalize on Canada's growing Defence and Aerospace requirements.
Speaker #3: Looking ahead, Voyager recently announced the purchase of a flex rotor uncrewed aircraft system from Airbus becoming the first Canadian customer and operator of the platform.
Progress continues on the Dash 8300 Fire Swift aerial firefighting program, with the first aircraft going through final certification and a second expected to be completed next quarter.
Speaker #3: 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 flex rotor remotely piloted aircraft system services for commercial and government customers across Canada.
Roger 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 2 new platforms to the app Parts Market offerings.
As well, their domestic Charter operations remain strong supporting Wildfire response efforts across Canada.
And Voyager has completed the sale of 2-4 aircraft.
Speaker #3: We look forward to providing further updates as this exciting new capability develops. Voyager also announced a new engagement with the 49 North, an MDA space company focused on delivering advanced ISR solutions for Canadian government defense and security customers.
Looking ahead voiz, your recently announced the purchase of a flex rotor uncrewed, aircraft system from Airbus, becoming the first Canadian customer and operator of the platform.
This represents an important milestone in voyageurs intelligence surveillance and reconnaissance capability and expansion into the uncrewed aircraft system Market.
Speaker #3: Combining Voyager's special mission operations, maintenance and training with 49's mission systems and data analytics capabilities, positions both organizations to support Canada's growing requirements in sovereignty, security and CADEX, John and the team completed a $10,000 square foot warehouse expansion at Peterborough Airport.
In addition, Voyager and Airbus signed an mou to identify and pursue opportunities to collaborate on the delivery of flex rotor remotely piloted aircraft systems services for commercial and government customers across Canada.
We look forward to providing further updates as this exciting. New capability develops.
Speaker #3: 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.
Or as you’re also announced, a new engagement with 49 North, an NBA Space company focused on delivering advanced IFR solutions for Canadian government, defense, and security customers.
Speaker #3: The investment positions CADEX well for its next phase of growth while further strengthening customer service and operational efficiency. For TAFE, CEFAN and the team at Ellison work continues to progress on the government of Quebec medevac program.
Combining Voyager special Mission operations maintenance and training with 49th mission systems and data analytics, capabilities positions, both organizations to support Canada's growing requirements in sovereignty, security and defense.
Speaker #3: 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.
At cadex John and the team completed a uh 10,000 square foot Warehouse expansion at Peterborough Airport.
Significantly, increasing capacity and consolidating inventory, shipping and receiving operations into a single location.
Speaker #3: 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 quarter cohort and the 12th Jazz approach cohort will begin shortly.
The expansion doubles storage capacity. Improves fulfillment speed for his growing demand supports greater inventory levels in Canada and enhance the service for customers.
The investment positions kex well for its next phase of growth while further, strengthening customer service and operational efficiency.
The team at Allison continues to make progress on the Government of Quebec Medevac program.
Speaker #3: The innovative Jazz approach program is another strong example of cross course collaboration in action. Jazz 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 Jazz to Air Canada over the past 10 years.
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 Allison and Voyager working together to deliver a specialized solution for the customer.
Speaker #3: Programs like Jazz 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.
Speaker #3: Cignet is also advancing plans for its new flight training base in North Bay, which will support expanded training capacity and deeper collaboration with Canadair College.
At Signet, Lin 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.
Speaker #3: 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 and the pursuit of selective accretive acquisition opportunities that align with our course group of companies and investment criteria.
Jazz plays a critical role in the Canadian pilot career pathway through its flow agreement with Air Canada which has enabled more than 1700 Pilots to transition from Jazz to Air Canada over the past 10 years.
Programs like Jazz 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.
Speaker #3: 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 generating attractive returns for our shareholders.
Sigma is also advancing plans for its new flight training base in North Bay, which will support expanded training capacity and deeper collaboration with Canadore College.
Speaker #3: 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.
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.
Speaker #3: I'll now turn it over to Gary to walk you through the financials.
Speaker #2: 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 discipline capital allocation and good progress on growth.
We remain committed to discipline Capital allocation and the pursuit of selective or creative acquisition opportunities. That align with our course, group of companies and investment criteria,
Speaker #2: In particular, Voyager and CADEX helped offset the contractual step downs in the CPA with CADEX tracking ahead of our initial expectations. We continue to return capital to shareholders through dividends and share repurchases and we made further progress monetizing -8 400 aircraft exiting the CPA fleet.
We're encouraged by the opportunities we're seeing, and we continue to evaluate transactions that can strengthen and diversify our aviation, aerospace, and defense businesses 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 a global leader in aviation, aerospace, and defense.
I'll now turn it over to Gary to walk you through the financials.
Speaker #2: 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 CADEX contributed an additional $6.5 million of adjusted EBITDA primarily from higher part sales with substantially offset the contractual step downs and fixed margin and leasing revenue under the CPA.
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, discipline, Capital, allocation, and good progress on growth.
Speaker #2: 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 which reduced weighted average shares outstanding by approximately 13% compared to the prior year.
In particular, Voyager and cadex helped offset the contractual step Downs in the CPA, with cadex tracking ahead of our initial expectations.
We continue to return Capital to shareholders through dividends and share repurchases and we made further progress. Monetizing -8400, aircraft exiting the CPA Fleet.
Looking at the quarter.
Adjusted debit D was $50.7 million, essentially in line with last year.
Was important. Here is the mix.
Speaker #2: Free cash flow was $32.3 million or $1.41 per share. On a 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.
Voyager and cadex contributed, an additional 6.5 million of adjusted debit to primarily from higher part sales with substantially offset. The contractual step downs and fixed margins, and leasing Revenue under the CPA,
Adjusted net income per share increased to $0.83, up 54% from Q2 2025.
Speaker #2: Leverage or adjusted net debt to adjusted EBITDA was $1.5 times improving from $1.7 times that year end and remains comfortably within our targeted range of one to two times.
That reflects the earnings contribution. I just mentioned a $2.5 million gain on aircraft sales, along with lower depreciation and interest costs.
Speaker #2: As Colin noted, we closed the CADEX transaction on April 1st. CADEX 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.
And the benefit of our Capital allocation activity, which reduced weighted average shares outstanding by approximately 13% compared to the prior year.
Free cash flow was 32.3 million or 1.41 cents per share.
Speaker #2: That bottom line contribution is ahead of our initial expectations and we're encouraged by how quickly CADEX is adding to both our earnings diversification and our parts and supply chain capabilities.
On a 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.
Speaker #2: We also made strong progress on aircraft monetization. Seven 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.
Leverage or adjusted, net debt. To adjust it. If it de was 1.5 times, improving from 1.7 times that year end and remains comfortably within our targeted range of 1 to 2 times,
Action on April 1st.
Speaker #2: 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.
kex 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,
Speaker #2: The two remaining aircraft are expected to close by the end of the year following completion of required engine work. We're expected net proceeds of approximately $14.4 million US.
That bottom-line contribution is ahead of our initial expectations, and we're encouraged by how quickly CADEX is adding to both our earnings diversification and our parts and supply chain capabilities.
We also made strong programs on aircraft monetization.
7, aircrafts have now been sold to date, including 4 during the second quarter.
Speaker #2: 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.
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.
Speaker #2: During the quarter, we repurchased and canceled approximately $617,00 common shares under our NCIB program representing 14.8 million dollars of share buybacks. Year to date, we have repurchased and canceled approximately $845,000 shares or $20 million dollars.
The two remaining aircraft are expected to close by the end of the year, following completion of required engine work.
For expected Pro. Net proceeds of approximately 14.4 million us.
Speaker #2: 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.
Turning to capital allocation, we can 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.
Speaker #2: 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.
and $170 to $220 million of flexible capital allocation.
Speaker #2: 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. CADEX is off to a strong start and we are continuing to execute on our capital allocation plan we laid out earlier this year.
During the quarter, we repurchased and cancelled approximately 617,000 common shares under our NCIB program, representing $14.8 million of share buybacks.
Year to date. We have repurchased and cancelled approximately 845,000 shares or Twenty million dollars.
We also paid a quarterly dividend of $0.11 per share.
Speaker #2: 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.
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.
Speaker #1: 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 one on your touchstone phone.
Liquidity remains strong at 204 million at June 30th.
Speaker #1: You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star zero followed by the number two.
That gives us meaningful flexibility as we continue to balance growth, shareholder returns, debt reduction, and disciplined investment in the business.
Speaker #1: 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.
Though, overall, we're pleased with the quarter, the business continues to generate strong free cash flow. Our leverage remains well within our target range.
Cadex is off to a strong start.
And we are continuing to execute on our Capital allocation plan. We laid out earlier this year.
Speaker #1: Please go ahead, your line is open.
Speaker #3: Thanks and morning everyone. Congrats on a good quarter. My first question is on CADEX. Very first quarter with you guys, seems like it has outperformed your expectations in the very first quarter.
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.
Speaker #3: Can you help us explain what led to the outperformance? What's going better there? Was it all integration or just the sheer end market exposure they have?
Should you have a question please? Press star. Followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised.
Speaker #3: So yeah, any thoughts there and how sustainable we should think for that business that is.
So, you wish to decline from the polling process. Please press star zero, followed by the number 2. If you are using a speaker phone, please, leave the handset. Before pressing any Keys 1 moment, please for your first question.
Speaker #4: Morning, Connor. It's Colin. Yeah, thanks for the comments. Yeah, look, we've been pretty excited about CADEX from the beginning. And we have a lot of ideas on what we can do with the business as well as sort of the leadership team there.
And your first question comes from Connor Gupta of Scotia Bank, please go ahead. Your line is open
Speaker #4: So it's performed exceptionally well kind of on the current business base. There's been some integration opportunities where we're looking at internal cross organization opportunities which are starting to develop.
Speaker #4: We're working our way through done as we move forward there. On 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.
Thanks and uh, morning everyone, uh, congrats on a good quarter. Um, my first question is on KX, um, very first quarter with you guys. Uh, seems like it has outperformed your expectations in the very first quarter. Um can you help us explain uh you know, what led to the outperformance, you know, what's going better there uh was it all integration or just you know, the the sheer uh End Market exposure. They have uh so yeah any thoughts there and how sustainable we should think? Uh for that business that is
Speaker #4: So 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.
Morning, uh, konark call and, yeah, thanks for the comments. Um, yeah, look we, you know, we've been pretty excited about cadex from the beginning, um, and we have a lot of a lot of ideas on what we can do with the business, um, as well as sort of this, uh,
Speaker #4: 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.
Speaker #4: They just went through. So they increased some space there. So yeah, 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.
There are several things to be done as we move forward there.
Speaker #4: It takes a bit of time. As we leverage those opportunities, but they're coming together nicely. So excited about the business. Exceeding expectations and really no end to what we can do with the business as we move forward.
Speaker #3: Yeah, thanks for the color there, Colin. If we can switch gears to what is your you guys had signed, I think, a couple of MOUs recently.
Speaker #3: 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?
Um, on and on top of that or on top of that is really all the new, um, areas that we're starting to look at, which is kind of a buildout strategy. So, you know, I I would say there's more opportunities in cadex today, uh, for us, uh, to pursue then we can pursue right now. So our focus is just steady growth, uh, you know, working with them to continue to build that business out. Um, continue to make smart decisions on how we invest. And where we invest, uh, we talked about their, their Hangar, their expansion. They just went through. So, they increase some space there.
Um, so yeah, there's 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.
Speaker #3: And what kind of discussions are you having with potential customers? And what kind of role are you going to play in these MOUs?
Speaker #4: Yeah, good question. Yeah, no, those agreements are not interchanged or exclusive in any way. They're not tied to each other and they're very separate.
Uh, it takes a bit of time, um, as we leverage those opportunities, but they're coming together nicely. So excited about the business. Uh, you know, exceeding expectations, uh, and really no end to uh, what we can do with the business as we move forward.
Speaker #4: If you think of 49 North, what Voyager brings to that book of business is different. They bring me kind of the operation and the maintenance and the support side.
Speaker #4: So that's kind of a relationship build that 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.
Speaker #4: So very different companies from that perspective. When they work together, have a huge opportunity to pursue all kinds of bids when it comes to ISR.
Yeah, no thanks. Uh, for the color they are calling. Um, if I can switch gears to, um, voyeur, um, you know, the you guys had a sign, I think a couple of use recently, uh, 1 with Airbus and another with the 49 North, um, can you explain like is there an overlap between those 2 mous? I mean, do you have to kind of work with both Airbus and 49 North together? Or can they be separate? And uh, what kind of discussions are you having uh, with the potential customers in? Like what kind of role are you going to play in these summer use?
Speaker #4: When you think of the flex rotor opportunity, it's a little different. We're talking there more about Voyager being the operator of the uncrewed drone.
Yeah, good question. Um, yeah. No those uh those those those Agreements are not a a interchange or exclusive in any way. They're not tied to each other and they're very separate. Um,
Speaker #4: 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 machine and doing whatever work needs to be done wherever they're working for.
You know, if you think of 49 North, uh, what Voyager brings to that book of business is is different. They bring me kind of the operation and the maintenance and the support side. So that's kind of a, a relationship build that, uh, you know, is more of a team build where they're going to be working on initiatives and bids bringing expertise from uh, both sides of the business. Uh,
Speaker #4: And Airbus really is more in that regard is more kind of working with them to secure those opportunities. Great company to work with. This machine is well known.
so you know different, very different companies from that perspective that when they work together have a huge opportunity to pursue all kinds of all kinds of bids when it comes to ISR,
Speaker #4: It's got thousands and thousands of flight hours on it. It's in multiple deployment opportunities around the world. So 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 higher technology capabilities.
Speaker #4: 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 forestry observation, firefighting, observation, mapping, those are the kind of things that you would see that government agencies where this drone gets deployed in.
When you think of the flex rotor opportunity, it's a little different, uh, you know, that we're talking there more about borer being the operator of, uh, the uh, uncrewed drone and it would be, uh, essentially a deployment opportunity for them where they would be looking after the deployment, they'd be out there, flying the, uh, flying the machine and doing whatever work needs to be done. Whoever they're working for, uh, and Airbus really is more in that regard. Is more, uh, you know, kind of working with them to secure those opportunities. Um,
Speaker #3: Okay, that's a very good color, 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?
Great, great company to work with. You know, they this machine is well known. It's got thousands and thousands of flight hours on it. It's in multiple deployment opportunities, uh, around the world. Um, so you know, we're excited about it. We think Canada is right? So does Airbus, uh, for this type of, uh, this type of machine in order to give us
Speaker #3: 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?
Kind of lower cost uh and higher technology um capabilities.
Speaker #3: Thanks.
Speaker #4: Yeah, it's the usual stuff. 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.
Speaker #4: So it's all normal course stuff. You saw throughout all of those sales it takes there's some that get delayed a little bit and they pop into the next quarter.
and there's several there's several possibilities when you think about this um you know generally speaking um you know you're talking about defense opportunities, you're talking about surveillance opportunities you're talking about uh forestry observation firefighting observation mapping,
Those are the kinds of things that you would see in government agencies, where this strong gets deployed.
Speaker #4: That's just it's normal course. Nothing unusual. No issues. Everything's been pretty much as planned. Just took another little bit.
Speaker #3: Yeah, yeah, it's scary 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.
Okay, that's uh, a very good caller. Thanks and just a very quick 1 housekeeping on on the final 2 aircraft, uh, that you're disposing, uh, any thoughts, uh, what what led to the delays there. I think you guys were expecting to wrap them up by the third quarter. I think, uh, now it's ending in Q4. Um, any, any thoughts on the delays? Thanks.
Speaker #3: Perfect. Thanks for the time. I'll turn the line over.
Speaker #2: Thank you. And your next question comes from James McGarley of RBC Capital Markets. Please go ahead. Your line is open.
Speaker #5: Hey, congrats on a good quarter. And thanks for having me on.
Speaker #4: Yeah, thanks.
Speaker #5: I just wanted to ask.
Speaker #3: Appreciate it.
Speaker #5: I just wanted to ask a question on the guide. There's a sizable Q2 beat but even the high end of the range kind of implies a pretty meaningful step down in Q3 and Q4.
Get delayed a little bit and they pop into the next quarter. That's just its normal course. Nothing unusual. Uh no issues. Uh you know, everything's been pretty much as planned.
Just took in a little bit. Yeah.
Speaker #5: So can you just talk about the primary swing factors in H2 that kind of kept you from increasing the guide? Is that FX or anything else that you can call out?
Yeah, it's Gary here. It really just relates to waiting for some engines to come back from from overhaul to to deliver the aircraft. So that's all we're waiting for.
Perfect. Uh, thanks for your time. I'll turn the line over.
Speaker #4: Sorry, I'll let Gary take that one, but I didn't hear the first part of the question. I'm sorry.
Thank you.
I'm doing. Next question comes from James McGary of RBC Capital markets. Please go ahead your line is open
Speaker #5: I was just saying there was a sizable Q2 beat and then the guidance even at the high end of the range implies a meaningful step down versus Q2 in Q3 and into Q4.
Hey, uh, congrats on a good quarter and uh, thanks for having me on.
I just wanted to ask appreciate, uh,
Speaker #4: Gotcha. Okay, Gary, I'll let you take that. Yeah.
Speaker #3: Yeah, 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.
Speaker #3: 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 expect in Q3 to have more to give on that, but there's really nothing that we expect really to hit us in the back end of the year.
I just wanted to ask a question on, on the, the, the guide. Um, you know, there's a sizeable q2b. Um, but you know, even the the high end of the range kind of implies a pretty meaningful step down, uh, in Q3 and Q4. So can you just talk about, you know, the primary swing factors in H2 that kind of cut you from increasing the guide is that FX or um anything else that you can call out?
Sorry, I I let, uh, I'll let Gary take that 1, but I didn't hear the first part of the question. I'm sorry.
Speaker #3: We expect Voyager to continue to perform. CADEX to continue to perform the same as Jazz.
Speaker #5: Okay, I appreciate the color there. And then on the new Jazz collective agreement, you flagged that as a cost headwind. Can you help us quantify the annual impact from that new agreement and the extent that that's being recovered through the controllable cost agreement?
I was just saying there was a sizable q2b and then the guidance, even at the high end of the range, implies a meaningful step down uh, versus Q2 in, uh, Q3 and into Q4.
Speaker #4: Gary, I'll let you cover that one too.
Speaker #3: Yeah. So on the labor deal with Calder there that we just completed, yeah, all of that is covered under the Air Canada CPA agreement and within the controllable cost guardrail.
Speaker #3: So no issues there.
Speaker #5: All right. Appreciate it. I'll turn the line over.
Gotcha. Okay. Gary. I'll let you take that. Yeah, yeah, 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 CBA. We talked about that, we give them guidance on that. So that's, 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 we feel very comfortable with it and we expect in Q3 to have more to to give on that. But there's really nothing. Um, you know, that we expect really to hit us in the back. End of the year, we expect the Voyager to continue to perform kex continued to perform his name as Jazz. So
Speaker #2: Thank you. And your next question comes from Cameron Dorskin of National Bank. Please go ahead. Your line is open.
Speaker #3: Yeah, thanks very much. Good morning. I want to ask, I guess, about the aircraft parts sales. I mean, it does sound like the CADEX business is, as you mentioned, running a little ahead of your expectations.
Okay, I appreciate the call there and then on the uh, the new Jazz Collective Agreement. Um, you know, you find that as a cost headwind, can you help us quantify the annual lot impact for from that new agreement, and the extent to that that's being recovered. Uh, through the controllable costs agreement,
Speaker #3: And I assume fairly steady through the year. Just can you maybe update us on your outlook for like you've got a number of new programs there that are helping that.
Speaker #3: 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 parts sales specific to the Voyager business.
Area that you cover that 1 too. Yeah, so on the on the uh, the labor deal with are are or with the call to there that we just completed. Yeah. All of that is covered under the air conditioner, CPA agreement and within the controllable cost guard rail. So no issues there.
All right, appreciate it. I'll turn the line over.
Speaker #4: Yeah. Hi, Cameron. 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.
Thank you.
and your next,
Cameron. Dorskin of National Banks please. Grab your line is open.
Speaker #4: So the broader the platform we can build, the more opportunities and flexibilities to invest and grow. So that's what you're really seeing us do on the HER and the Boeing side of things.
Speaker #4: 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.
Speaker #4: 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 just to slowly building things out where it makes economic sense to do that.
Yeah, thanks very much. Good morning. I wanted to ask I guess about the the aircraft parts sales. I mean it does sound like the kex business is uh as you mentioned running, a little head of your expectations and I 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 is, it tends to be, I guess a lump your 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.
Yeah, hi Cameron. Um,
You know, we see this as a growth area, right? So we're continuing to focus on opportunities to push and—
Speaker #4: And I would say that we will continue to see growth in that area for sure. Over the long run, it is lumpy. There's no question about it.
Speaker #4: 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.
Grow, uh, in areas that make sense. Um, so the broader, the platform we can, we can build, uh, the more opportunities and flexibilities to invest and, and, and grow. Um, so that's what you're really seeing is due on the ATR and the Boeing side of things. Um, you know, those were opportunities that make good economic sense. Um, and so we moved on them.
Speaker #5: Okay. No, 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 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?
Speaker #5: I mean, there's obviously a number of other companies out there in Canada that are also pursuing 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?
Speaker #4: No. Yeah, that's a good question. But it's not. We've been fortunate because we're at a critical size. You get to a kind of a critical mass, a certain size of business where you can start to bring on expertise.
We're going to continue to do that, and continue to build that out to a, you know, a broader platform over time. Uh, We've stayed, you know, I'd say principally focused on the, uh, on the narrow body and down type aircraft. Most of what we carry is regional aircraft today. But, um, it's really just a slowly building things out where it makes economic sense to do that. And, um, I would say that, you know, we will continue to see, uh, you know, growth in that area, for sure. Uh, over the long run, um, it is Lumpy there's no question about it. We've seen that in the first quarter where we had, you know, some ups and downs. And that's just the nature of the business. Um, but overall, if you, if you take the longer view, uh, no question growth for sure.
Speaker #4: And we've just recently brought on another new expert in this area that has tons of field experience and knowledge and 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, do the training we need.
Speaker #4: There will be some training for. And we talked a little bit about that. For this new Flexrotor, but it's there's no constraint when you think of when you think of labor.
You see there's there's a lot of opportunities that you talked about perhaps on the, on the defense side for your business and uh I'm just wondering, you know, is the availability of Labor or qualified people for for those types of programs is that a constraint at all for for some of the programs you might bid on. I mean, it'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 if labor is 1 of those things that constrain you or or, or is it not an issue for you?
Speaker #4: 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 folks in the right location.
Speaker #4: 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.
No. Yeah it's a good question uh but it's not uh you know we've been fortunate because it was a lot of critical size you know you get to a kind of a critical mass, a certain size of business where um you know you can start to bring on expertise and we've just recently brought on um you know another new expert in this area that has you know tons of field, experience and knowledge and
Speaker #4: 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.
Speaker #4: But all of this specialty type and niche opportunities, especially in defense, we don't we haven't seen a lot of problems with anything related to labor.
So, for us to now grow this out slowly with time. Um, we've had no problems bringing in at the right expertise that uh 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. Um,
For this, uh, for the new Flexrotor. But, uh, it's
Speaker #5: Okay. No, that's helpful. I appreciate the time.
There's no constraint when you think of, uh, when you think of labor, and even if you think of Masair, when they expanded Masair in Trenton,
Speaker #4: Thank you.
Speaker #2: Thank you. And your next question comes from Darryl Yang of Stifel. He's glad your line is open.
Speaker #5: Hey, good morning, everyone. I just wanted to touch on the Flexrotor as well as potential longer-term autonomous firefighting aircraft 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 and your multi-year plan.
You know, that was 1 of the questions we had. And 1 of the things, we had to do some research on to make sure, um, we could get the qualified, uh, folks in the right location. Um, 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, you know, like, in the commercial world,
Speaker #5: And then how does the revenue or economics of these arrangements differ from existing special mission flights that you're operating?
It's definitely more competitive and can be, uh, can be harder. But all of the specialty type, uh, and niche opportunities, especially in defense, we don't— we haven't seen a lot of, uh, a lot of problems with anything, uh, related to labor.
Okay. No, that that that's helpful, I appreciate the time.
Thank you.
Speaker #4: Yeah. Hi, Darryl. I mean, I'll tell you a high level on the initial go with Flexrotor. It's a very small investment for us. It's more kind of the work to get there.
Thank you, and your next question comes from Daryl Yang of stifle. Please go ahead. Your line is open.
Speaker #4: So we don't see this massive investment to get in here. This is a it's a reasonable investment and over time you build it out.
Speaker #4: But Gary's got some sense of it there, doing a bunch of work on it. I'll let you I'll let Gary give some comments as well.
Speaker #3: Yeah. On the AirPass, back to Colin's point, it's certainly covered in our CapEx outlook and we haven't moved that for the year. So Darryl, it is covered in that piece.
Hey, good morning everyone. Um, I just wanted to touch on the flex rotor as well as. Um, 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 and your your multi-year plan. Uh, and then, how does the revenue or economics of these these Arrangements differ, uh, from from, you know, existing special Mission flights through operator.
Speaker #3: And it's a modest investment. It gives us the ability to start the process of getting the capability on the AirPass piece. We have a lot of expertise at Voyager, so this allows them to develop that piece.
Yeah. Hi, Daryl. I, I mean, I, I'll tell you a high level on on the initial, go with, uh,
Flex rotor, it's a very small investment you know, for us, it's more kind of the work to get there. Um,
Speaker #3: And as far as the margins go, those are to be defined, but they're good margins from what we can see in this business is it's really both building the capability right now, but we do expect down the road to actually get some revenue contracts in behind it.
So we don't we don't see this massive investment, uh, to to get in here. This is a, you know, it's a reasonable investment and and
Speaker #3: And if we're to produce some reasonable returns.
The time you build it out, but Gary's got some sense of it there, uh, doing a bunch of work on it. I'll let you, I'll let Gary, uh, give some comments as well.
Speaker #5: Got it. And then second question, just on the M&A front, bit of a higher-level question. We've seen a lot of defense-based partnerships between countries, between NATO nations.
Speaker #5: Is that opening any new M&A opportunities, potentially in geographies you maybe would not have considered historically just given I think there's a shortage of folks with your capabilities and skills around modifications out there.
Speaker #5: So just curious if it's changing your lens on geographic positioning.
Speaker #4: Yeah, it's a good question because as time evolves, certainly we are as especially if you think of Europe or even there's been opportunities in Australia, if you think about some of those other countries where exactly what you said, we're closely tied, those things are starting to kind of slowly show up on the radar.
Yeah. On the ARP has back to phone's points. Certainly covered in our capex Outlook and we haven't moved that for the years so darl, it is covered in that piece and it's a modest investment. It gives us a the ability to start the process of, uh, getting the capability on the iPads, uh, piece. We have a lot of expertise at Voyager, so this allows them to develop that piece and as far as the margins go, you know, those would be defined but they're good margins from what we can see, uh, in this business is it's, um, you know, it's really about building the capability right now, but we do expect, you know, down the road to to actually get some Revenue contracts in behind it and uh for it to produce some reasonable returns.
Speaker #4: It's not something we're pursuing immediately or that we're looking at right now, but it's something we would look at as time progresses here to see how we can build things out.
Speaker #4: The one advantage to being a Canadian defense contractor is your access into a lot of countries and your ability to do things in many countries.
Got it. And then second question, just on the m&a front um bit of a higher level question, we've seen a lot of Defense based Partnerships between countries between NATO Nations. Um, is that opening any new m&a opportunities potentially in geographies you, you maybe would not have considered historically just given, I think there's a shortage of of of folks with your capabilities and skills uh, around modifications out there. So just just curious if it's changing your lens on on Geographic positioning.
Speaker #4: And Voyager's operated in many countries over the years. And still does today in some. So it's a unique opportunity being a Canadian contractor. It really is.
Speaker #4: It gives you kind of leverage in a lot of ways. And you're well-received. So I think we we're moving on that aspect of things as things kind of broaden and grow out.
something we're pursuing immediately or that we're looking at right now, but it's something we would look at.
Speaker #4: And we have really strong relationships into the US, Voyager has extensive relationships into the US, MITRE is a good example. Where they're building the aerial firefighter for them.
Time progresses here to see how we can build things out the 1.
Speaker #4: That's a US defense contractor essentially is what MITRE is. And they have several others, as well, that they work with. There's lots of opportunities as time progress.
contractor is your access into a lot of countries and your ability to do things in many countries and voyagers operated in many countries over the years, uh, and still does today and some so it's, uh,
Speaker #4: Our focus right now is a little more organic on the defense side because we have quite a bit of capability. But I wouldn't rule out as we move forward.
It's a unique opportunity, being a Canadian contractor. It really is. It gives you kind of leverage in a lot of ways, and you're well received. So,
Speaker #5: Got it. Very helpful response. And congrats on the good results, guys.
Speaker #4: Thank you.
Speaker #2: Thank you. And your next question comes from the line of Team James, of TD Collin. Please go ahead. Your line is open.
Speaker #5: Thank you very much for the time. Good morning. My first question, just around the annual guide, we've sort of touched on this a little bit here, but I just want to see if I can kind of round this off and make sure I'm understanding the full year outlook.
I think we, you know, we're, we're, we're moving on that aspect of things, as, as things kind of broaden and, and grow out, um, and we have really strong relationships into the US Fourier has extensive relationships, uh, into the US. Matraye is a good example where they're building the aerial firefighter for them. Um, you know, that's a US defense contractor essentially, is what matray is, um, and they have several others as well, that they work with.
Speaker #5: So you're trending towards the top end of your EBITDA guide for the year. You mentioned CADEX is a little running a little better than expected.
Speaker #5: I know part sales in the second quarter were strong. Some of that, if not all of that, I'm not sure, was a delay, I think, from Q1.
There are lots of opportunities. As time progressed, our focus right now is a little more organic on the defense side because we have quite a bit of capability. But I wouldn't rule out, since we moved forward.
Got it a very helpful response and congrats on the on the good results, guys.
Thank you.
Speaker #5: So can you characterize overall, is there anything or any particular business lines that you would point to as kind of pushing you towards the top end of your guidance, or is it really just kind of conservatism maybe across all business lines in your original range that you provided?
Thank you. And your next question.
Comes from the line of Team, James of TD, Colin, please go ahead. Your line is open.
Uh, thank you very much for your time. Good morning.
Speaker #3: Yeah. Here, I think it's yeah. It's more on the conservatism side Tim. Right now, we just need to see how the rest of the year comes out.
Speaker #3: But we do expect a good end to this year. Just where we're still within certainly the top end of that guidance, we decided to leave it where it's at.
Speaker #3: You look at where Voyager's been trending, if you look year to date, they're and you back out CADEX as performance or year to date numbers, you can see they're modestly up year over year as far as revenue goes.
Speaker #3: But I think what we need to remember there too is we've had the repositioning from the United Nations flights within there. So they're up nicely year over year on the revenue side.
Um, my first question, just around the annual guide, we've sort of touched on this a little bit here, but I just want to see if I can kind of round this off and and make sure I'm understanding the full year out. Looks, so you're, you're trending towards the top. End of your rebate, dog ID for the year. Uh, you mentioned kex is, is a little running, a little better than expected. Um, uh, I know, part sales in the second quarter were strong. Um, some of that, if not all of that, I'm not sure was was a delay, I think, from q1. So can you, characterize overall, is there anything or any particular business lines that you would point to, is kind of pushing you towards the top end of your guidance? Or is it really just kind of, you know, conservatism maybe across all business lines in your in your original uh range that you provided?
Speaker #3: And we just want to see how that plays out, but we expect it to continue to play out. And on CADEX side, we continue to expect them to perform in a similar fashion as they are.
yeah, I think it's
Speaker #3: So I think it's just let's see how the bulk of the year goes, but we do expect to be towards the top end of that.
Speaker #5: Okay. That's helpful. Thank you. And then on the UN, I just wanted to ask, I know you've got a step down that's occurred or another one coming.
Yeah, it's more on the conservatism side. Uh, Tim, you know, we right now, we just need to see how the rest of the year comes out, but we do expect a good, uh, into this year, um, just where we're still within, you know, certainly the top end of that guidance, we decided to leave it where it's at, you look at where voyager's been trending and be looking here to date. They're, you know, and you
Speaker #5: I think actually your contract flying revenue was up sequentially in the quarter. Q2 versus Q1. Is there sort of another modest step down at some point coming related to that, or is that already kind of embedded in your run rate revenues from that line?
Speaker #3: No, that's a good question, Tim. There is another one coming. We've kind of talked about that. We have one mission left with the United Nations.
Speaker #3: That's been extended out into March. Next year or Q1 next year. So it'll be delayed a little bit. Into that period, but and that's a natural extension as far as the contract goes.
Back out uh, cadex uh is performance or year-to-date numbers. You, you can see their modestly up year-over-year. As far as Revenue goes, but I think what we need to remember there too. Is, uh, we've had the the repositioning from the United Nations flights within there, so they they're up nicely year-over-year on the revenue side and we just want to see how that plays out, but we expect it to continue to play out and on cadex side, we continue to expect them to, to perform in a similar fashion as they are. So I think it's just uh let's see how the bulk of the year goes. But we we do expect to be uh, you know, towards the top end of that.
Speaker #3: So you'd probably look at more steady revenue from that over the next couple of quarters from what you've seen in the results.
Speaker #5: Okay. That's great. Thank you very much.
Speaker #3: Yeah.
Speaker #2: Thank you. And your next question comes from Christopher of CIBC. Please glad your line is open.
Speaker #1: Hi. Thanks for taking my question. Maybe just to follow up on some of the defense conversations that you've had on this call. Can you speak to how big you think defense could become for course?
Speaker #1: And maybe just the pace of some of these kind of defense contracts, being awarded, is it slower or faster than you've been anticipating? Thank you.
Okay, that's helpful. Thank you. And then on the UN, um, I I just wanted to ask I know you've you've got a step down that's occurred or another 1 coming. Um, I think actually, your contract, flying Revenue was up sequentially in the quarter, uh, Q2 versus q1. Is there sort of another modest step down at some point? Coming related to that? Or is that already kind of embedded in your your run rate revenues from that line? Yeah, no, that's a good question, Tim. Um, there is another 1 coming, we've kind of talked about that where we have a 1 uh, Mission left uh, with the United Nations that's been extended out into March of next year or q1 next year. So, uh, it'll be delayed a little bit, uh, into that period. But, uh, and that's a natural extension as far as the contract goes. So, um, you know, you'd probably look at and we're steady, uh, in a steady revenue from that over the next couple quarters or, you know, from what you've seen in the results.
Speaker #4: Yeah. It's absolutely a good question. And it's a speculative to really kind of zoom in on it. That's the challenge with it is. If you look at what we're doing, we have a lot of opportunities that they're working.
Okay, that's great. Thank you very much.
Yeah.
Thank you. And your next question comes from Christopher of CIBC. Please go ahead. Your line is open.
Speaker #4: And they're working in a vast range of different things. Across several organizations with partnerships and so on. So that's what you're seeing as build out.
Speaker #4: There's no question that we're starting to see some activity with the government and things being awarded. And so that's very positive. The pace at which that's going is maybe a little slower than I think industry would say than what we were anticipating.
Which is it—slower or faster than you've been anticipating? Thank you.
Speaker #4: But it's still progressing. We're seeing lots of different things coming to the table and being awarded. So I would say yeah, it's going pretty much as planned.
yeah, it's absolutely a good question and it's a, you know, it's speculative to
Really, you know, kind of zoom in on it. That's the challenge with it.
Speaker #4: Voyager is doing everything they can right now to really focus in this area. There's lots of opportunities for them to work on. And there's no question over time some of these things are going to start to come to fruition.
Speaker #4: But I can't really give you any clear indication as to when that will be. And percentage growth, if you start to think about growth, it's pretty hard to it's pretty hard to give you anything at this point.
Speaker #4: We haven't really put anything out. But Gary, I don't know if you have any comments on the growth side.
Speaker #3: Yeah. No, I think you kind of hit it. It will be kind of lumpy and step up and step up as far as those things go when we land a contract.
Speaker #3: You'll start to see the movements up. But if you look year over year, we've seen some nice increase on the MRO and defense up about 15%.
Speaker #3: So it continues to grow nicely. So that's we're hoping to keep that pace and maybe accelerate it if we can land a contractor too.
You know, if you look at what we're doing, we have, uh, a lot of opportunities that they're working and they're working in a, you know, a vast range of different things, um, across several organizations with Partnerships and so on. So, that's what you're seeing as as build out. Um, there's no question that we're starting to see some activity with the government and things being awarded. And, um, so that's very positive the pace at, which that's going is, you know, maybe a little slower than I think industry would say, than than what we were anticipating but it's uh, you know, it's still progressing. We're seeing lots of different things, um, coming to the table and being awarded. So I would say, you know, yeah, it's going pretty much as planned. Uh, Voyager is doing everything they can right now to really focus in this area. Uh, there's lots of opportunities for them to work on, um, and there's no question over time. Uh, some of these things are going to start to come to fruition.
Speaker #1: That's great colors. Thank you. And then maybe just one last one. How do you feel about your kind of competitive positioning in the defense area right now?
But I can't really give you any clear indication as to when that will be.
Um, and percentage growth, you know, if you start to think about growth, it's pretty hard to it's pretty hard to give you anything at this point. We haven't really um,
Speaker #1: Thank you.
Speaker #4: Sure. That's another good one. We really like the position that we're in today because there's not a number one, there's not a lot of competitors in Canada.
Put anything out, but Gary, I don't I don't know if you have any comments on the growth side.
Speaker #4: They're in the same position as Voyager. And the offerings they have. They're like I would say that they're there's probably one or two others that we compete against, which is a healthy thing.
Speaker #4: As we all know. One of the biggest things I think the industry in Canada is lack is having that degree of competition, having that level of expertise growing in Canada.
Yeah, no. I I think you you kind of hit it. It will be uh kind of lumpy and step up and step up as far as those things go, when we land in contract uh you'll start to see the movements up but you know if you look here over here, we've seen some nice increase on the emerald defense up above 15%. So it continues to grow nicely. So uh that's you know we're hoping to keep that pace and and maybe accelerated if we can land a contractor too.
Speaker #4: So we're very comfortable with the competition. We expect that some of these new technologies will see more competitors pop out. And you do see that.
That's a great color. Thank you. And then maybe just, uh, one last one. Um, how do you feel about your, uh, kind of competitive positioning, um, in the defense, uh, area, uh, right now? Thank you.
Speaker #4: Especially on the R&D side with more and more drone operators and development and stuff like that. R&D type stuff. But it's for Voyager, it's there's a high degree of expertise there.
Speaker #4: There's a lot of years of experience. They've done a lot of deployments around the world. So they've built a very niche business that's very hard to replicate.
Sure. That's you know that's another good 1 it. It we really really like the position that we're in today because there's not a number 1, there's not a lot of competitors in Canada that are in the same position as Voyager and the offerings, they have. Um, they're, you know, like I would say that they're, you know, there's probably 1 or 2 others that we compete against, which is a healthy thing. As we all know, 1 of the biggest things, I think that the industry in Canada is is, is lack, is having that degree of competition, having that
Uh, level of expertise growing in Canada.
Speaker #4: The barriers to entry are really hard when it comes to the type of capability they have. So we're in a very comfortable position. Our expectation isn't to be a L3 Harris.
Speaker #4: But they have lots of opportunities to work with these larger defense companies to build out our business. So excited about it. Don't see a ton of competition in Canada.
So we're very comfortable with a competition. Um, you know, we expect that some of these new technologies will see more competitors pop out and you and you do see that uh, you know, especially on the R&D side with more and more drone operators and, and um, development and stuff like that, you know, R&D type stuff.
Uh, but it's for Voyager, you know, it's—
Speaker #4: And I think in general, we are very comfortable with the ability to grow this business.
There's a high degree of expertise there. There's, um,
Speaker #1: Thank you. I appreciate the color.
Speaker #2: Thank you. And you have a follow-up question from Connor Gupta. Please go ahead. Your line is open.
Speaker #5: Thanks for the follow-up. I think I want to go back to your capital allocation discussion. From the last few quarters, so when you laid out the framework back in February, I think you are tracking, I guess, pretty well on that.
Speaker #5: But just wanted to understand from M&A standpoint, so you had this flexible capital allocation bucket of 170 to 220 million dollars. And I guess with the KX and Allison, you probably have burnt about 20% of that.
A lot of years of experience. Um, they've done a lot of deployments around the world, so they built a very Niche business. Um, that's very hard to replicate, you know, the barriers to entry are really hard when it comes to the the type of capability they have. So we're we're in a very comfortable position, um, you know, our expectation isn't to be a, you know, an L3 Harris. Uh, but they have lots of opportunities to work with these larger, uh, defense companies to build out our business. So, uh, excited about it. Don't see a ton of competition in Canada and, um, you know, I think in general, we, we, we are very comfortable with the ability to grow this business.
Thank you. I appreciate the color.
Speaker #5: And on the share buybacks, you have also done about 20% of the 100 million dollars. Do you see the flexible bucket giving you flexibility or enough flexibility to shift between M&A and incremental buybacks?
Thank you. And we have a follow-up question from Connor Gupta. Please go ahead, your line is open.
Speaker #5: Or that bucket we should assume that that's mostly earmarked for M&A?
Speaker #4: I'll just give you a high level and then let Gary chime in as well. And get his view. I think Connor, there is going to be some movement in going forward.
Speaker #4: But what we've done there is we've provided as much clarity as we can on that flexible capital. I think we're going to stay pretty much on track and on plan.
Speaker #4: But you can't predict the future where opportunities lie. And our number one underlying goal as we've said from day one is we're going to deploy that capital to the absolute best ability we can to get the right returns.
Um, do you see the the flexible bucket? Uh, you know, giving you flexibility or in a flexibility to shift between m&a and, you know, incremental BuyBacks or that bucket? We should assume that that's mostly earmarked for m&a.
uh,
Speaker #4: And we've been clear and kind of laying out our returns and what were our expectations are. We've been I think we've been quite transparent on that.
I'll just give you a high level, and then let Gary chime in as well and get his view.
Speaker #4: And we've stuck to that. We haven't come off that. So I wouldn't expect a lot of variance right now. We don't see it. We see lots of opportunities.
Speaker #4: We're still working our way through the acquisition opportunities now. The pipeline. We still plan to continue with our share buybacks. Our dividend as well is something that we're thinking about and focused on and the board is evaluating on a regular basis.
You know, I I think Conor it there is there is going to be some some movement in in, uh, our going forward. But what we've done there is we provided as much clarity as we can um, on that flexible, you know, Capital. Um, I think we're going to stay pretty much on track and on plan, but you know, you can't predict the future where opportunities lie and our number 1. Underlying goal as we've said from day 1,
Speaker #4: So I wouldn't suggest that there's any significant change to what we've laid out there. But things change with time. And we'll continue to evolve the business and the use of that capital in the most efficient way we possibly can.
Speaker #4: That's the key focus. Gary, I don't know what you're.
Speaker #3: Connor, sorry. Yeah. Connor gets Gary here. I think when you look at the 500 to 550 million in free cash flow and asset sales numbers, and the flexible capital allocation within that, we have not allocated any of the flexible capital allocation to M&A at this point.
Is we're going to deploy that Capital to the absolute best ability we can to get the right returns and we've been clear in kind of laying out our returns and what were our expectations are? You know, we've been, I think we've been quite transparent on that and we've stuck to that. We haven't come off that. So, you know, I I wouldn't expect a lot of variance, uh, right now, we don't see it. We see lots of opportunities, uh, we're still working our way through the, um,
Speaker #3: We still have the capacity to borrow, as you know. We're well within a range, one and a half times net debt to adjusted EBITDA.
Speaker #3: So we have the borrowing capacity. We have, when we purchase Kadex, we put it on our operating line. We subsequently essentially paid that off.
Through the acquisition opportunities. Now, uh, the pipeline um, you know, we still plan to continue with our share BuyBacks, uh, you know, our dividend as well. Is something that, you know we're thinking about and focused on on the board is evaluating on a, on a regular basis. So, you know, I wouldn't suggest that there's any significant change to what we've laid out there. Um, but you know, things change with time and and, uh, we'll continue to to evolve the business and and the use of that capital.
Speaker #3: But we have the borrowing capacity. So we've not committed to the flexible capital allocation being to M&A at this point. We're leaving all our options open.
In the most efficient way we possibly can. Uh that's that's the key Focus.
Speaker #3: We have complete flexibility as to how we do that. And so back to Colin's point, we don't see any change to that forecast we've given.
Speaker #3: At this stage, and we'll provide an update when it's appropriate. But we're tracking well with it.
Speaker #5: I see. Makes sense. Thanks. And if I can squeeze in a second follow-up. On Billy Bishop expansion, I think the government shut down, right, the expansion.
Speaker #5: Prospects there. If it were to come back again, I mean, what would be the expectations from you by Air Canada to help fulfill the expansion?
Speaker #5: And I mean, would you be able to fly the CRJs there? Or would you be able to diversify into some other jets?
Gary, I don't know what your thoughts are. Yeah, Conor gets here here I think when you look at the the 500 to 550 million in free cash flow and in in asset sales numbers and the flexible Capital allocation within that, we have not uh allocated any of the flexible Capital allocation to uh m&a at this point we still have the capacity to borrow as you know we're well at with an arranged 1 and a half times uh net debt to adjusted ibida. So we have the boring capacity we have. We when we purchase kex we put it on our operating line. We have some super only essentially paid that off but we have the boring capacity so we've not committed to uh the flexible Capital allocation being to m&a. At this point we're leaving all our options open. We have complete flexibility as to how we do that.
Speaker #4: Sorry, Connor. I apologize. My speakers aren't that good. But what was the first part of the question? I get it was in regards to Air Canada.
And so, back to Colin's Point, uh, we don't see any change to that, uh, forecast we've given at this stage and we'll provide an update when it's appropriate, but uh, you know, we're tracking well within it.
Speaker #4: But sorry, I didn't quite get it.
Speaker #5: Yeah. So the Billy Bishop airport, the Toronto City airport, they were trying to expand. And they were proposals for that. But they got shut down right on those proposals.
Speaker #5: So I was just curious if the expansion opportunity comes back at the airport. How would you be able to participate in that? What would be the ask from Air Canada for you guys?
Speaker #4: Yeah. I'll be honest. I don't know for sure. But there's no question we are their operator in there. We've spent a lot of time and a big investment in setting everything up and being a critical part of that business.
I see makes sense. Uh, thanks. And if I can squeeze in a second follow-up. Um, on Billy Bishop expansion. Um, I, I think the government shutdown, right? The expansion, uh, prospects there, uh, if it were to come back again. Um, I mean, what would be the expectation from you uh buyer Canada uh to help fulfill the extension and I mean, would you be able to fly the crjs there? Or would you be able to diversify into some other Jets?
Speaker #4: So we would fully anticipate being there and expanding as they require on the commercial side. But I don't know what their plans would be if that would happen.
Speaker #4: I couldn't tell you. But certainly, there'd be more flying. I would fully anticipate for us. And we would obviously pursue that. The one thing with Air Canada and our relationship is our goal is to always build that business in any way we can.
Sorry Corner. Okay, I, I apologize. I my speakers are impacted, but the what was the first part of the question? I get I get it was in regards to your Canada but sorry, I didn't quite get it. Yes, so but the bill of Bishop Airport, the Toronto City Airport, uh you know, they were trying to expand and they were proposals for that but they got shot down right on those proposals. So I was just curious. If if, if the expansion opportunity comes back at the at the airport uh how would you be? Yeah, able to participate in that. Like what would be the ask from Air Canada for you guys?
Speaker #4: And we're very close to Air Canada. We spent our whole careers working with them. And we've got a long history and a good track record.
Speaker #4: So our goal with Air Canada and the CPA and the relationship between us is to continue to build that out over time. We haven't seen a lot of growth opportunities in that recently.
Speaker #4: So we're focused in other areas right now. But when there's opportunities for us to work with Air Canada and grow the business, and it makes sense, we're absolutely going to be all over that.
Yeah, I I'll be honest. I I don't know for sure but there's no question. We are there, operator in there. We've spent, you know, a lot of time in a big investment in setting everything up and and being a, a critical part of that business. So, you know, we would fully anticipate, uh, being uh, being there and, you know, expanding as, as they require on the commercial side. But I, I don't know what their plans would be, if that would happen. I couldn't tell you, uh, but certainly there'd be more flying. I would fully anticipate for us and, um, you know, we would, uh, we would obviously pursue that, um,
Speaker #5: Yeah. That makes sense. Perfect. Thanks again for the time.
Speaker #4: You bet.
Speaker #1: Thank you. And there are no further questions at this time. I would now like to turn the call back over to Colin and Gary for closing comments.
Speaker #2: Thank you, everyone, for joining today. That concludes today's call. Please have a great day.
And we've got a long history and a good track record. Um, so you know, our our goal with our Canada and, and the CPA and and the relationship between us is to continue to build that out over time. Um, you know, we we haven't seen a lot of growth opportunities in that recently. So we're focused in other areas right now, but uh, when there's opportunities for us to work with Air Canada and, and grow the business, and it makes sense. Uh, we're absolutely going to be all over that.
Yeah, that makes sense. Uh, perfect. Thanks again for the time.
You bet.
Thank you. There are no further questions at this time. I would now like to turn the call back over to Colin Gary for closing comments.
Thank you, everyone, for joining today. That concludes today's call. Please have a great day.
Ladies and gentlemen, we thank you for participating. Please disconnect your lines at this time.
