CIBC:Big EBITDA Beat Q3 First Look: Big EBITDA Beat
Key Takeaway: Positive impact.
AC reported Q3 results that came in well above our and consensus expectations with adj. EBITDA coming in $1.830B. AC expects to hit the higher end of its 2023 EBITDA guidance. AC’s results differ from what we have seen from some of the other North American carriers, benefiting from continued strength in unit revenue and holding its earnings outlook. Again, this points to the recovery in the Canadian airline space still trailing the U.S. – AC continues to benefit from pent-up demand to travel. The company is hosting a call at 8:00 a.m. ET.
Q3 Recap: We recap AC’s Q3 results below, noting that metrics came in above our and consensus expectations.
• AC reported Q3 revenue of $6.344B, up from $5.32B the year prior and versus our estimate of $6.12B (consensus $6.15B). Cargo revenue in the quarter was $215MM, down from $281MM in the same quarter last year and versus our estimate of $239MM. Passenger revenue outperformed at $5.861B, we had estimated $5.58B.
• ASMs were up 9.8% Y/Y and RPMs were up 13.9% Y/Y. Our expectation for ASMs was up 11% Y/Y (as was AC’s guidance) and RPMs up 27% Y/Y. Load factor was 89.8%, up from 86.5% the year prior and our estimate of 87.9% (consensus 87.7%). Q3 yield was 23.3 cents, up from 21.8 cents a year prior and versus our estimate of 23.1 cents. PRASM was up 20.9 cents, up 10.8% Y/Y versus our estimate of up 18.6 cents, 4.4% Y/Y.
• Adjusted EBITDA was $1.830B, up from $1.06B the year prior, versus our estimate of $1.47B (consensus $1.59B). Adj. CASM was 12.2 cents, up 5.6% Y/Y. AC noted its prudent cost management, with operating expenses rising 5% Y/Y on capacity that increase 10% Y/Y.
• Operating income (excluding special items) for Q3 came in at $1,415MM, up from $644MM the prior year and versus our forecast of $1,044MM (consensus $823MM).
• FCF was $135MM, up from $(43)MM a year ago. Cumulative FCF for the year is now at $2.087B.
• Advanced tickets liability ended the quarter at $4.53B, down from $5.71B last quarter.
Liquidity Update: At the end of Q3, AC’s unrestricted liquidity was $9.95B versus $10.55B at the end of Q2. This liquidity consisted of $8,934MM in cash, cash equivalents, short- and long-term investments and $1,015MM available under undrawn credit facilities. Net debt at the end of Q3 was $5.438B, up from $5.33B at the end of Q2. Leverage ratio came in at 1.4x down from 1.7x at the end of Q2.