Cargojet Inc.

All participants, please stand by. Your conference is ready to begin. Good morning, ladies and gentlemen. Welcome to the CargoJet conference call. I would now like to turn the meeting over to Martin Herman, General Counsel and Corporate Secretary. Please go ahead.

Good morning, everyone, and thank you for joining us this morning on this call. With me on the call this morning are A.J. Vermani, CargoJet's Executive Chairman, Pauline Dillon and Jamie Porteus, our Co-Chief Executive Officers, Scott Calver, our Chief Financial Officer, and Sanjeev Meni, our Vice President of Finance. After opening remarks about the quarter, we will open the call for questions. I would like to point out that certain statements made on this 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, adjusted earnings per share, and return on invested capital. Please refer to our most recent press release and MD&A for important assumptions and cautionary statements relating to forward-looking information and reconciliation of any non-GAAP measures to GAAP income. I will now turn the call over to Jamie.

Thanks, Marty. Good morning, everyone. And thank you for joining us on the call today. As we've done in the prior quarters, Pauline and I will share our prepared remarks before we pass the call over to our CFO, Scott, to give you a little bit more color on the financial drivers this quarter. Let me start by contrasting the macro transportation sector with cargo jets recent performance. The transportation sector across North America continues to be challenged with weak domestic volumes and the industry has been slow to recover from the ongoing freight recession. However, when you look at cargo jets results, you will notice that we are successfully turning challenges into opportunities. Let me give you a few examples that differentiate cargo jet from the norm. One, with the recent high inflation and an economic slowdown in North America, consumers embraced ultra-low-cost products from China-based direct-to-consumer merchants using new platforms like Timu and Shen. This dampened the domestic e-commerce volumes but created a new stream of China-to-North America air cargo opportunity for cargo jet. We were on the forefront of this shift and secured a long-term scheduled charter opportunity that we announced earlier this year between China and Canada. The frequencies flown per week on this route have continued to rise over the past few months to meet demand. Two, the geopolitical tensions in the Middle East and Ukraine have created supply chain opportunities and an increased need for air cargo services. More recently, the threat of a port worker strike at the East Coast also forced large retailers and manufacturers to think about alternative plans. These disruptions have created new ad hoc charter opportunities on several global routes With available aircraft capacity, we have been proactive in identifying key commodities that need to fly and adding to our ad hoc charter volumes. As a result, we posted very strong 15% growth in overall revenues and a 17% growth in adjusted EBITDA for the quarter. This was despite one less operating day in Q3 2024 versus Q3 of the prior year. We have consistently been diversifying our business from both the product offering point of view as well as from geographic coverage. This combination has provided us with a solid foundation to create predictable earnings and cash flows for our shareholders. In the quarter, domestic revenues grew by 5.2%, ACMI posted a 12% gain, and all-in charters posted a record 60.2% growth versus the third quarter of 2023. Overall, we posted a 14.8% increase in revenues for the quarter as compared to the previous year. The improving interest rate environment and controlled inflation are fostering a more stable and optimistic economic outlook for Canada, which we believe bodes well for future domestic volumes. I talked about our decision to accelerate growth investment in 2767-300 aircraft during our last quarter remarks. Based on our current growth rate and opportunities, we see emerging in 2025, we are confident in our fleet expansion strategy, particularly in the context of reductions in other Canadian freight operators, aircraft freighter fleets, and available air cargo capacity, and the emerging long-range charter opportunities. We are also pleased to note that our growth capex was well within our stated goals on capital allocation, and we are very happy with the progress we are making in our capital allocation strategy. We remain disciplined on optimizing capex and generating free cash flow, including a framework on how we will allocate capital through dividends, share buybacks and debt reduction. Although I should point out that we are not immune to the cost headwinds facing the aviation and overall supply chain sectors relating specifically to wages and other cost increases, which may impact future margins. However, this will not deter us from our capital allocation priorities. Scott will provide more color on how we are progressing against these objectives. We are also encouraged to see stronger peak season volume forecasts from the majority of our customers, and we are well positioned to serve our customers through this most important shopping season of the year. Pauline and I continue to work together on building growth opportunities, attracting the best talent, and staying focused on operational and cost efficiency. We have recently and will continue to strengthen the talent in information technology, cybersecurity, finance, and flight operations areas to meet our growing business requirements. We are very excited and confident about the continued growth opportunities that lie ahead for CargoJet, its employees, and our shareholders. Let me now pass the microphone over to my colleague, Pauline.