Cargojet Inc.

CargoJet Canada Limited conference call hosted by Mr. A.J. Vimani, which was held on Thursday, May 7, 2020, at 8.30 a.m. Eastern Time. At any time during this conference, please type in your... Good morning, ladies and gentlemen. Welcome to the CargoJet conference call. I will now extend the meeting over to Pauline Dillon. Please go ahead, Mr. Dillon.

Thank you, Operator. Good morning, everyone, and thank you for joining us today on this call for the first quarter of 2020. With me on the call today are A.J. Vermani, our President and Chief Executive Officer, Jamie Porteus, our Chief Commercial Officer, and John Kim, our Chief Financial Officer. After opening remarks about the quarter, we will ask the operator to open the lines for questions. I would like to point out that certain statements on the call, such as those relating to our forecasted revenues, costs, and strategic plans, are forward-looking within the meaning of applicable securities laws. This call also includes references to non-GAAP measures like adjusted EBITDA and adjusted EBITDA. Please refer to our most recent press release, NMDNA, for important assumptions and cautionary statements relating to forward-looking information and for reconciliations of non-GAAP measures to GAAP income. I'm going to turn the call over to A.J. now.

A.J. Thank you, Pauline, and thank you, everybody, for joining us this morning. Before I speak to Cargadget's first quarter performance, I want to take a moment to talk about this once-in-a-lifetime moment we are all living in. COVID-19 has disrupted lives, businesses of billions of people around the globe. Sadly, over 4,300 Canadians have lost their lives. Our hearts go out to the families and their loved ones. As a business that has been declared an essential service We've had the opportunity to be in the center of this fast-changing environment. While I've always been proud of my team, but watching them swing into action and put in place new processes to protect our employees, customers, and cargo in record time and still operate at full capacity has been nothing short of remarkable. CargoJet provided a detailed update on our COVID response in our March 19th press release. We are managing unprecedented volumes, often at short notice and not changes, but our team continues to shine every day, just like thousands of other frontline heroes who are serving our country at this difficult time. We have had a long history of working shoulder to shoulder with the courier, freight forwarders, and postal industries. While everyone is being asked to stay home, frontline delivery workers, postal, courier, employees, and e-commerce delivery personnel are busy delivering essential packages to households, allowing them to safely stay home, allowing us to stay home. Being able to support the vital industry during this pandemic has been a real privilege. I salute each one of the frontline heroes. And now let me turn to the targeted first quarter results. We had a very strong start to the year, with revenue growth of 11.4%, gross margin growth of 52%, and adjusted EBITDA growth of 24.5%. of our business is demonstrating strong operating leverage. While I'm particularly proud of the fact that our growth was not concentrated in just line of business, while domestic overnight held its own, ACMI and all in charter and all of our other businesses posted strong year-over-year growth. With over $29 million in adjusted free cash flow, we posted our best ever quarter in the free cash flow generation. We are well capitalized and have sufficient liquidity to meet our day-to-day future growth needs as we navigate these uncertain times. Moving on to operations, we are experiencing some unexpected surge in business-to-commerce, sorry, business-to-consumers e-commerce volumes. But these are being offset by significant declines in business to business volumes. This is due to the national shutdown of virtually all types of businesses. We expect business to business volumes to come back slowly as the provinces allow businesses to reopen again. As a matter of fact, we have started to see some turnaround in the last one week already. While it is fair to say that nothing prepares you to face a challenge like COVID-19, it is worth noting that our ability to rapidly adapt to the new reality is the result of many years of hard work. We've been putting in place the building blocks of our growth strategy and have allowed us to manage extremely variability in volumes as well as the flight network. The foundation of our business is built in five core strategies that I have mentioned on my previous calls. Number one, build the best overnight cost-effective air network. Number two, maximize fleet and asset utilization. Be relentless about our on-time performance. Build a unique cargo jet culture leading to the best employer in aviation. And last of all, financial discipline to build long-term shareholder value. As we move forward, we will continue to be guided by these priorities. While the long-term implication of the full impact of COVID-19 remains unknown, CargoJet is working hard to adopt to this fast-changing environment and the new norm. We have a great team, strong set of assets, highly flexible fleet, and we are well-capitalized to continue to capture growth opportunities in this changing environment. I want to conclude by once again thanking from the bottom of my heart each and every one of our frontline workers. and I feel privileged to be part of an essential service that are keeping our country's supply chain moving. Once again, thank you for joining us this morning. We'll open the lines for questions at this time.