Chorus Aviation Inc. · TSX:CHR
Chorus Aviation — Investor Presentation (November 2023)
41 slides from Chorus Aviation's investor presentation, November 2023
Slide 1: Investor Presentation
TSX: CHR Investor Presentation November 2023
Slide 2: Contents
2 Contents 1. About Chorus 2. Key Investment Highlights 3. Business Groups 4. Summary Appendices 1. Other information 2. Jazz, Air Canada Express Operator 3. Falko, Leading Aircraft Asset Manager & Lessor 4. Voyageur, Speciality Service Provider
Slide 3: Notice to Reader
3 Notice to Reader CAUTION REGARDING FORWARD-LOOKING INFORMATION This presentation may include forward-looking information within the meaning of applicable securities laws. Forward-looking information may be identified by the use of terms and phrases such as “anticipate”, “believe”, “can”, “could”,
Slide 4: Chorus is a leading, global aviation solutions provider and asset manager
About Chorus 4 Chorus is a leading, global aviation solutions provider and asset manager, focused on regional aviation 7 357 USD $3.7 B 240+ 5000+ Businesses or Regional aircraft Assets owned, Customers Employees customers owned, operated operated and under worldwide operating on and/or managed mana
Slide 5: We have an exceptional roster of industry veterans
About Chorus 5 Colin Copp Gary Osborne Jolene Mahody Dennis Lopes President and Chief Executive Chief Financial Officer Executive VP and Chief Senior VP, Chief Legal Officer Officer Strategy Officer & Corp. Secretary We have an exceptional roster of industry 30 Years 30 Years 30 Years 9 Years vetera
Slide 6: Stronger Financial Results
About Chorus 6 Stronger Financial Results Strong Free Cash Flow and Leverage Ratio in 2023 Adjusted EBITDA Adjusted Earnings available to Free Cash Flow Leverage Ratio ($ millions CAD) Common Shareholders per ($ millions CAD) Common Share-basic -8.3% +9.8% -60% -32.4% -24.1% +10.5% + 18.2% 0.37 341.
Slide 7: Our Lines of Business
About Chorus Our Lines of Business 7 Common platforms provide increased revenue and margin opportunity The largest regional The leading pure play A leading provider of An industry leading operator in Canada regional aircraft asset specialty charter, accredited training and the sole provider manager
Slide 8: Key Investment Highlights
8 Key Investment Highlights 1. Regional aviation is a core and resilient sector of aviation 2. Leading regional aviation solutions provider and asset manager with diversified global presence 3. Long-term contracted cash flows and high-quality asset base 4. Strategic transformation unlocks value for
Slide 9: Regional Aircraft - A Strong Asset Class
Core and resilient sector of aviation 9 Regional Aircraft - A Strong Asset Class • Well suited to uncertain demand environments; utilized both in up and down cycles 50% of world flights are 45% of all airports are less than 500 miles1 serviced exclusively by • Supported by core global regional aircr
Slide 10: Regional aviation leader with a diversified global presence
Regional aviation leader with a diversified global presence 10 We are a leading regional aviation solutions provider and asset manager with a diversified global presence
Slide 11: Chorus consistently generates Free Cash Flow: $1.3 B in the last 5 Years
Long-term contracted cash flows and high quality asset base 11 Chorus consistently generates Free Cash Flow: 400 $1.3 B in the last 5 Years $371 M 300 259 M $249 M $237 M 200 $163 M 100 0 2018 2019 2020 2021 2022 Free Cash Flow is a non-GAAP financial measure. Refer to the cautionary statement regar
Slide 12: We have a high-quality, well balanced and diversified asset base
Long-term contracted cash flows and high quality asset base 12 We have a high-quality, well balanced We are and diversified asset base geographically Based on book value1 of Chorus owned aircraft diversified with our businesses or customers A220-300 ATR 72 operating on all seven Dash 8 Ejets2 contin
Slide 13: Our business is strategically shifting to an asset light, Free Cash Flow focus
Strategic transformation unlocks value for common shareholders 13 Our business is strategically shifting to an asset light, Free Cash Flow focus 2006 - 2015 2016 - 2022 2023 + Service Provider Growing Service Service Provider – & Aircraft Lessor Provider & Asset CPA Manager • IPO in 2006 as income •
Slide 14: Significant embedded equity value in Falko aircraft
Strategic transformation unlocks value for common shareholders 14 Significant embedded equity value in Falko aircraft provides monetization opportunity As at December 31, 2022, Millions US $ $1,590 $700 Less Non- aircraft debt controlling $856 interest & other $341 Owned aircraft Embedded equity net
Slide 15: Falko has a proven history of asset sales
Strategic transformation unlocks value for common shareholders Falko has a proven history of asset 15 sales, generating ~$1 B in gross cash flows $443 M $237 M $177 M $114 M Aircraft sold 75 36 30 44 Period 2011- 2013 2014-2016 2017-2019 2020-2022 Produced mid-teens+ gross IRR throughout pre-pandemi
Slide 16: We are creating flexibility to deploy capital
Strategic transformation unlocks value for common shareholders 16 We are Acquisition Opportunities creating flexibility to deploy Capital capital to Co-investment De-leveraging Allocation in Funds Opportunities maximize value for common Return of Capital shareholders Dividends Buy Backs Refer to the
Slide 17: We will take a disciplined approach to capital allocation
Strategic transformation unlocks value for common shareholders 17 We will take a disciplined approach to capital allocation Target Accretive Growth and Return of Capital to Common Shareholders Our priorities will be: Capital Return Deleveraging Share Repurchase Dividends Growth Investment Our target
Slide 18: We have attractive growth opportunities
Strategic transformation unlocks value for common shareholders 18 We have attractive growth opportunities Initiative Growth Opportunity Grow core services, focusing on Defence and recurring long-term contract-based parts sales cash flows Grow recurring asset management Successor funds and new fees f
Slide 19: Targeting growth in capital under management to drive recurring fee streams
Strategic transformation unlocks value for common shareholders 19 We are targeting growth in capital under management to drive recurring fee streams 2026 - 2027 2022 USD $3 B 2015 USD $1 B USD $415 M Co-investment in funds with mid-teen targeted returns Refer to Endnotes, including endnotes 4 and 6,
Slide 20: Growing aviation markets align with our business model and expertise
Strategic transformation unlocks value for common shareholders 20 Growing aviation markets align with our business model and expertise Our Business Model Our Strengths, Skills & Capabilities • Business-to-business and • Logistics specialists government • Deep technical expertise • Long-term contract
Slide 21: Falko: Leading Asset Manager & Lessor
Business Group - Falko, Leading Aircraft Asset Manager & Lessor 21 Leading Asset Highly Favourable Strong Track Manager & Lessor Market Conditions Record • #1 pure play focused on • Significant and growing • Proven capabilities in regional aircraft leasing demand for regional aircraft capital raisin
Slide 22: Jazz: Leading Regional Operator
Business Group - Jazz, Sole Air Canada Express Operator 22 Leading Regional Significant Minimal Downside Operator Contracted Revenue Risk • Largest regional operator • CPA provides • No commercial related in Canada with 114 predictable cash flow risk aircraft until 2035 • Reimbursed for • Main Air C
Slide 23: Voyageur: Leading Provider in Specialty Aviation
Business Group - Voyageur, Specialty Service Provider 23 Leading Provider in Targeting 50% Providing Multiple Specialty Aviation Revenue Growth by Aircraft Exit 2025 Strategies • Unique offerings • Defence sector & aircraft • Maximizing aircraft values including engineering parts sales and and retur
Slide 24: Key Investment Highlights
Summary 24 Key Investment Highlights 1. Regional aviation is a core and resilient sector of aviation 2. Leading regional aviation solutions provider and asset manager with diversified global presence 3. Long-term contracted cash flows and high-quality asset base 4. Strategic transformation unlocks v
Slide 25: Key Takeaways
Summary 25 Key Takeaways Strong Core Cash Acceleration to Accretive Capital Flows Asset Light Leasing Allocation Opportunities • Maintain long term • Unlock embedded • Leverage our capabilities contracted service equity value and and strengths to grow revenues with limited generate substantial funds
Slide 26: Appendices
26 Appendices
Slide 27: Significant deleveraging de-risks balance sheet
Other Information 27 Significant deleveraging de-risks balance sheet and increases Free Cash Flow available for capital allocation Timing of deleveraging will vary due to opportunistic asset sales Leverage Ratio 5.4x 4.4x 3.6x – 4.0x Target Range 2.5x – 3.5x 3.5x 3.5x 2.5x Y2021 Y2022 Y2023 Y2024+ P
Slide 28: Impact of Illustrative Business Transformation
Other Information 28 Impact of Illustrative Business Transformation Embedded aircraft equity value can be used to repay corporate debt and invest the remaining amount in accretive acquisitions and/or share buybacks Annual Impact on 2022 Adjusted Net Income Available to Common Shareholders • Accretiv
Slide 29: Jazz is the Main Air Canada Express Operator
Business Group - Jazz, Air Canada Express Operator 29 Jazz is the Main Air Canada Express Operator • Fixed fee defined until 2035 • Lease income from aircraft CPA in effect until 2035 • Incentives related to operational performance 114 80 625 8.6 M 4,500+ Aircraft Destinations in Flights operated Pa
Slide 30: The capacity purchase agreement model
Business Group - Jazz, Sole Air Canada Express Operator 30 The capacity purchase agreement model is well used throughout North America and Europe Mainline operator purchases the capacity from the regional carrier Jazz Minimal Downside Risk Jazz Responsibilities No revenue risk, such as: • Ticket pri
Slide 31: Jazz is generally reimbursed for the costs it incurs to operate
Business Group - Jazz, Sole Air Canada Express Operator 31 Jazz is generally reimbursed for the costs it incurs to operate Cost Category Description Earnings Risk Pass-through Full reimbursement No impact Cost of non-controllable costs Reimbursement of controllable costs +/- $2M Annual unit rates de
Slide 32: Falko - A Market Leader in Regional Aircraft Asset Management
Business Group - Falko, Leading Aircraft Asset Manager & Lessor 32 Falko - A Market Leader in Regional Aircraft Asset Management Offices in the UK, Ireland and Singapore 212 USD $2.3B ~10,000 USD $650B 1 1 44 Aircraft under Aircraft Value Forecasted aircraft Forecasted market Global airline manageme
Slide 33: A Compelling Market Opportunity
Business Group - Falko, Leading Aircraft Asset Manager & Lessor 33 A Compelling Market Opportunity Forecast demand for Recent changes in the Combination of Falko and approximately 10,000 new regional aircraft leasing Chorus leasing provides aircraft worth ~US $650 B landscape leave only a few critic
Slide 34: Falko Capital Fundraising Track Record
Business Group - Falko, Leading Aircraft Asset Manager & Lessor 34 Falko Capital Fundraising Track Record 2015 Fund I US $415 M Exceeded original capital raising 2019 Fund II US $650 M targets on Funds I and II 2023 Fund III In Progress Refer to Endnotes and the cautionary statement regarding forwar
Slide 35: Strong demand for regional aircraft is largely driven by replacements
Business Group - Falko, Leading Aircraft Asset Manager & Lessor 35 Strong demand for regional aircraft is largely driven by replacements Total: 14,042 Fleet growth of +53% Growth 4,7092 New Deliveries Replacement ~10,9502 6,2422 Fleet 9,2021 2019 Fleet 3,0911 1. Source: Embraer Marketing Outlook 202
Slide 36: Illustrative Example of General Partner Returns
Business Group - Falko, Leading Aircraft Asset Manager & Lessor 36 Illustrative Example of General Partner Returns Term Range Illustrative Example Duration Avg 10 Years 1 – 5 Years to Invest, 4 – 6 to Divest Fund Size US$500 – $800m US $650 M GP Commitment 5% – 15% US $25 M Fund Gross MOIC 1.5x – 2.
Slide 37: Voyageur - A Specialty Service Provider
Business Group - Voyageur, Specialty Service Provider 37 Voyageur - A Specialty Service Provider 39 200+ 350+ 200,000 Aircraft Customers Employees Sq. ft. facility in North Bay, Ontario
Slide 38: Working with other Chorus Companies
Business Group - Voyageur, Specialty Service Provider 38 Working with other Chorus Companies Specialty Speciality Contract Part Sales Defence MRO and Design Flying • Large facility supports aircraft • Completed aircraft transitions from transitions and storage lessee to lessee • Aircraft engineering
Slide 39: Endnotes
Endnotes 39 1. Intrinsic value per Common Share is calculated by using indicative trading multiples based on analyst averages and peer group benchmarking based on the weighted average Common Shares as of December 31, 2022. Chorus’ intrinsic value is calculated based on December 31, 2022 adjusted met
Slide 40: Endnotes (continued)
Endnotes (continued) 40 9. Chorus anticipates its Leverage Ratio will be between 2.5x to 3.5x by December 31, 2024, given the contractual nature of Chorus' earnings, amortizing debt repayments, and the expected asset sales. Deleveraging amounts will vary from quarter- to-quarter depending on the tim
Slide 41: Endnotes (continued)
Endnotes (continued) 41 15. Illustrative plan value analysis is not intended to forecast or predict future events, but rather to provide information utilized by Chorus in measuring performance for business planning purposes, based on the specific assumptions and other factors described herein and in
Chorus Aviation — Investor Presentation (November 2023) on 6ix