Q3/24 FIRST LOOK; REVENUE HIGHLIGHTS DEMAND WHILE COSTS LIMIT OP LEVERAGE
THE TD COWEN INSIGHT
CJT reported Q3/24 adj. EBITDA of $82.2 million, +17% y/y (TD/cons: $84.2/$83.8 million). Stronger-than-forecast Charter and in-line ACMI and Domestic. Positive is optimistic outlook (not quantified) and fuel expense/surcharge spread (should moderate), although recent stock strength and slight adj. EBITDA difference vs. consensus could limit price response (8:30 am cc could be key), in our view.
Impact: NEUTRAL
Revenue growth across all segments, along with 17% EBITDA growth despite one-
time start-up costs related to 15% ramp-up in block hours, demonstrates resiliency in a challenging environment for many other modes of cargo transportation. The 2% difference in adj EBITDA vs forecast was the net of higher-than-expected Charter revenue and lower Crew Costs offset by a significantly more negative spread between fuel expense and surcharge revenue. To the extent this may be just a timing difference, it suggests a more positive quarter than implied by reported adj EBITDA. NCIB renewal announcement along with commentary indicating commitment to maintaining a share buyback program is encouraging.
Revenue increased 15% y/y to $246 million (TD/cons: $245/$247 million). Stronger-than- forecast Charter ($42 million vs. TD: $33 million; +60% y/y) and ACMI revenue ($70 million vs. TD: $69 million; +12% y/y). Domestic network revenue was in-line ($94 million vs. TD: $94 million; +5% y/y). The y/y increase in Charter largely due to new Great Vision HK agreement and ad hoc charters.
Adjusted EBITDA margin increased 80 bps y/y to 33.5% (TD/cons: 34.4%/33.9%). Adjusted EBITDA margin excluding fuel decreased 250 bps y/y to 66.1% (TD: 66.7%).
FCF of $47.8 million (TD: $11.2 million). Trade and other receivables and capex drove the FCF beat. Cash earnings slightly stronger-than-forecast ($73.9 million vs. TD: $70.9 million).
Fleet Update: 2 B767's in conversion with delivery expected in 2025. Invested in 2 B767 feedstock to 'support additional long-term growth' (unch). Fleet schedule unch from Q2 (42 at yr end 2025/2026, up from 41 at yr-end 2024).
Outlook: Noted strong demand for air cargo services. No update to last 2024 maintenance capex guide of $130-140 million (TD: $135 million), growth capex of $40-50 million (TD: $45 million), and proceeds from dispositions of $105 million (TD: $105 million). Continue targeting net debt-to-adj EBITDA of 1.5-2.5x (Q3/24 2.2x; TD: 2.2x). Renewal of NCIB for up to 1.5 million shares (9.46% of outstanding shares).