Cargojet Inc.

Good morning, ladies and gentlemen. Welcome to the Caldwell Jet Conference Call. I would now like to turn the meeting over to Martin Herrmann, General Counsel and Secretary Secretary. Please go ahead.

Good morning, everyone, and thank you for joining us today on this call. With us on the call today are Pauline Dillon and Jamie Porteus, our co-chief executive officers, Sanjeev Meni, our vice president finance and interim CFO. 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 earning 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 for reconciliation of non-GAAP measures to GAAP income. I will now turn the call to Jamie.

Thank you, 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, and then we will open up the call for questions. Exactly five years ago, our Q1 2020 press release noted, and I quote, while the longer-term implications and the full impact of COVID-19 remains unknown, Cargojet is well positioned to successfully support this new environment, both in the short as well as the long run. Since then, we have seen natural disasters like forest fires in western Canada disrupt rail traffic, lower water levels in the Panama Canal cause ship delays, geopolitical conflicts in the Middle East and Ukraine cause disruption in supply chains, and more recently, the further disruption in the retail sector with the arrival of Timu and Shenzhen, where foreign e-commerce retailers ship product directly from China to global destinations, including Canada. So it is only fair to ask, how has Cargojet navigated these major disruptions since COVID? Five years out, our Q1 2025 revenues are more than double the Q1 2020 revenues. Our adjusted EBITDA in Q1 2025 is double the adjusted EBITDA in Q1 2020. Although it is not up to us to comment on the stock price, you can look up what the stock price was in Q1 2020 and contrast it with the performance of CargoJet over the past five years and draw your own conclusions. Once again, we are now facing yet another global supply chain crisis. This time it's tariffs and a global trade war leading to economic uncertainty. And it is worth repeating that CargoJet is very well-positioned to navigate this rapidly shifting global supply chain environment. We believe that with the expected decoupling of North American supply chains, more cargo will enter Canada directly from China and Southeast Asia to mitigate United States tariffs. Canada also lags well behind other industrialized countries in terms of the penetration rate of online sales as a percentage of overall retail sales. Enhanced customer trust, the abundance of options versus physical stores, and the ease of use are all contributing to rapid online shopping growth in Canada. This bodes well for both our domestic and scheduled charter revenue segments. We are actively pursuing new opportunities and remain at the forefront of helping customers adjust to the new global supply chains. The portfolio diversification we started in 2019 has served us extremely well. For example, softness in our ACMI segment during Q1 was more than offset by the growth in our domestic and charter businesses. We continue to be cautious and manage our growth capex very prudently and expect to fully deploy the three additional freighters as soon as they are accepted into operation later this year. As previously announced, we are adding four 767-300 freighters and returning one Lease 767-200 for a net addition of three aircraft. At the same time, CargoJet is not immune to the impact of larger economic cycles, and we are continuing to monitor this rapidly changing economic, political, and inflationary environment, and we can and will adjust our fleet plans accordingly. During economic slowdowns, we have observed that consumers often substitute a higher price product with a value offering. While this has direct implications on how much the consumers spend, it has far less impact on the number of packages being shipped. Instead of purchasing an $80 pair of shoes, consumers may purchase a $50 pair, but the shoes still need to be shipped. Now for some financial highlights for the quarter. Total revenue grew by 8.1% to $249.9 million in the quarter, a record for the first quarter in the history of cargo debt, led by very strong year-over-year growth in both our domestic and charter businesses. Overall block hours flown only increased by 3.3%, and Q1 adjusted EBITDA of $80.8 million grew 3.1% versus the prior year, in line with the expected margin at 32.3%. In terms of our capital allocation strategy, we continue to generate strong operating cash flow of $64.8 million in Q1 versus $80.3 million last year. The variance versus last year was largely driven by non-cash working capital movements. More importantly, we maintained our net debt to adjusted EBITDA leverage ratio at two and a half times as at March 31st, 2025. This is within our stated targets. We achieved this strong leverage ratio despite investing in Growth CapEx and continuing our share buyback program. During the three-month period ended March 31st, 2025, the company purchased for cancellation an aggregate of 272,922 voting shares under the NCIB for a total cost of 32.2 million. We also continue to improve the return on investment capital and our dividend policy remains consistent with previous years. We remain confident that we will continue to identify new opportunities for cargo jet as customers navigate shifting global supply chains. Our direct exposure to US tariffs is very limited and we remain optimistic about our future despite the growing macroeconomic uncertainty that exists today. We will continue to leverage our unique mix of domestic Canada network, ACMI flying, and our all-in charter segments to maximize aircraft utilization and to grow our revenues and to return value to all cargo jet stakeholders. Let me now pass the microphone over to my colleague, Pauline.