Copa S A : Holdings Reports Financial Results for the Second Quarter of 2022 - Form 6-K

Copa Holdings Reports Financial Results for the Second Quarter of 2022

Adjusted Net Profit for the second quarter came in at US$13.2 million, or Adjusted EPS of US$0.32

Panama City, Panama --- August 3, 2022. Copa Holdings, S.A. (NYSE: CPA), today announced financial results for the second quarter of 2022 (2Q22). The terms "Copa Holdings" and the "Company" refer to the consolidated entity. The following financial information, unless otherwise indicated, is presented in accordance with International Financial Reporting Standards (IFRS). See the accompanying reconciliation of non-IFRS financial information to IFRS financial information included in the financial tables section of this earnings release. Unless otherwise stated, all comparisons with prior periods refer to the second quarter of 2019 (2Q19) (which the Company believes are more relevant than year-over-year comparisons due to the significant impacts in 2020 and 2021 of the COVID-19 pandemic).

OPERATING AND FINANCIAL HIGHLIGHTS

▪	Copa Holdings' adjusted net profit, excluding special items, for 2Q22 came in at US$13.2 million or US$0.32 per share, as compared to an adjusted net profit of US$50.9 million or earnings per share of US$1.20 in 2Q19.

▪	Copa Holdings reported an operating profit of US$42.3 million for the quarter and a 6.1% operating margin, compared to an operating profit of US$82.6 million and an operating margin of 12.8% in 2Q19.

▪

Total revenues for 2Q22 came in at US$693.4 million, a 7.5% increase compared to 2Q19 revenues. Passenger revenue for 2Q22 was 5.9% higher than 2Q19, while cargo revenue was 62.4% higher than 2Q19. Yields increased 10.1% to 13.0 cents while load factors decreased 0.4 percentage points to 84.8%, compared to 2Q19, resulting in Revenue per Available Seat Mile (RASM) of 11.6 cents, or 11.3% higher than 2Q19.

▪	Operating cost per available seat mile (CASM) increased 19.9% from 9.1 cents in 2Q19 to 10.9 cents in 2Q22, driven by higher fuel prices. CASM excluding fuel (Ex-fuel CASM) decreased 4.6% in the quarter compared to 2Q19 to 6.0 cents.

▪	Capacity for 2Q22, measured in terms of available seat miles (ASMs), was 96.6% of the capacity flown in 2Q19.

▪

Including special items of US$110.9 million, comprised of an unrealized mark-to-market gain related to the Company's convertible notes and an unrealized mark-to-market loss related to changes in the value of financial investments, the Company reported a net profit of US$124.1 million for the quarter or US$3.01 per share.

▪	The Company ended the quarter with approximately US$1.1 billion in cash, short-term and long-term investments, which represents 47% of the last twelve months' revenues.

▪	The Company closed the quarter with total debt, including lease liabilities, of US$1.6 billion.

▪	During the quarter, the Company took delivery of one Boeing 737 MAX 9 aircraft.

▪	Including three Boeing 737-700 aircraft in temporary storage and one Boeing 737-800 freighter, Copa Holdings ended the quarter with a consolidated fleet of 94 aircraft - 68 Boeing 737-800s, 17 Boeing 737 MAX 9s, and 9 Boeing 737-700s.

▪	Copa Airlines had an on-time performance for the quarter of 85.9% and a flight completion factor of 99.8%.

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Consolidated Financial & Operating Highlights	2Q22		2Q19 (3)		Variance vs. 2Q19		1Q22		Variance vs. 1Q22		YTD22		YTD19		Variance vs. YTD19
Revenue Passengers Carried (000s)		2,481			2,550			-2.7	%		2,285			8.6	%		4,765			5,138			-7.3	%
Revenue Passengers OnBoard (000s)		3,796			3,810			-0.4	%		3,476			9.2	%		7,272			7,640			-4.8	%
RPMs (millions)		5,047			5,249			-3.8	%		4,585			10.1	%		9,632			10,594			-9.1	%
ASMs (millions)		5,955			6,166			-3.4	%		5,623			5.9	%		11,578			12,581			-8.0	%
Load Factor		84.8	%		85.1	%		-0.4 p.p.			81.5	%		3.2 p.p.			83.2	%		84.2	%		-1.0 p.p.
Yield (US$ Cents)		13.0			11.8			10.1	%		11.8			10.3	%		12.4			12.0			3.8	%
PRASM (US$ Cents)		11.0			10.1			9.6	%		9.6			14.6	%		10.3			10.1			2.6	%
RASM (US$ Cents)		11.6			10.5			11.3	%		10.2			14.6	%		10.9			10.5			4.4	%
CASM (US$ Cents)		10.9			9.1			19.9	%		9.4			16.7	%		10.2			8.9			14.1	%
CASM Excl. Fuel (US$ Cents)		6.0			6.2			-4.6	%		6.0			0.0	%		6.0			6.2			-3.1	%
Fuel Gallons Consumed (millions)		71.5			79.3			-9.9	%		66.5			7.4	%		138.0			160.5			-14.0	%
Avg. Price Per Fuel Gallon (US$)		4.14			2.22			86.1	%		2.87			44.4	%		3.52			2.15			63.7	%
Average Length of Haul (miles)		2,034			2,058			-1.2	%		2,007			1.4	%		2,021			2,062			-2.0	%
Average Stage Length (miles)		1,273			1,279			-0.4	%		1,298			-1.9	%		1,285			1,289			-0.3	%
Departures		29,369			32,676			-10.1	%		27,190			8.0	%		56,559			66,005			-14.3	%
Block Hours		95,315			106,425			-10.4	%		88,474			7.7	%		183,790			216,515			-15.1	%
Average Aircraft Utilization (hours) (2)		11.5			11.2			2.4	%		11.0			5.0	%		11.2			11.4			-1.8	%
Operating Revenues (US$ millions)		693.4			645.1			7.5	%		571.6			21.3	%		1,265.0			1,317.3			-4.0	%
Operating Profit (Loss) (US$ millions)		42.3			82.6			-48.8	%		44.8			-5.6	%		87.0			195.5			-55.5	%
Operating Margin		6.1	%		12.8	%		-6.7 p.p.			7.8	%		-1.7 p.p.			6.9	%		14.8	%		-8.0 p.p.
Net Profit (Loss) (US$ millions)		124.1			50.9			143.9	%		19.8			527.9	%		143.8			140.3			2.5	%
Adjusted Net Profit (Loss) (US$ millions) (1)		13.2			50.9			-74.1	%		29.5			-55.3	%		42.7			140.3			-69.6	%
Basic EPS (US$)		3.01			1.20			151.4	%		0.47			540.0	%		3.49			3.30			5.7	%
Adjusted Basic EPS (US$) (1)		0.32			1.20			-73.3	%		0.70			-54.5	%		1.04			3.30			-68.7	%
Shares for calculation of Basic EPS (000s)		41,212			42,478			-3.0	%		42,006			-1.9	%		41,212			42,478			-3.0	%

(1)	Excludes Special Items. This earnings release includes a reconciliation of non-IFRS financial measures to the comparable IFRS measures.

(2)	Average Aircraft Utilization is calculated based on the Company's active fleet, excluding aircraft in storage.

(3)	The Company believes that comparisons with 2019 are more relevant than year-over-year comparisons due to the significant impacts in 2020 and 2021 of the COVID-19 pandemic.

2

MANAGEMENT'S COMMENTS ON 2Q22 RESULTS

Copa Holdings' second quarter results reflect the impact from the significant increase in jet fuel prices on our operating costs, which was partially offset by higher passenger yields and lower unit costs excluding fuel.

Copa Holdings' adjusted net profit excluding special items came in at US$13.2 million or US$0.32 per share. These results compare to an adjusted net profit of US$50.9 million or earnings per share of US$1.20 in 2Q19. Special items for the quarter totaled US$110.9 million comprised of an unrealized mark-to-market gain related to the Company's convertible notes and an unrealized mark-to-market loss related to changes in the value of financial investments. Including special items, the Company reported a net profit of US$124.1 million or US$3.01 per share.

Copa Holdings reported an operating profit of US$42.3 million, and an operating margin of 6.1% for the quarter, compared to an operating profit of US$82.6 million and an operating margin of 12.8% in 2Q19.

The Company operated 96.6% of its 2Q19 ASMs during the quarter, compared to 87.6% of its 1Q19 capacity in 1Q22.

Total revenues for 2Q22 came in at US$693.4 million, or 7.5% higher than 2Q19 revenues. Passenger revenue for 2Q22 came in 5.9% higher than 2Q19, while cargo revenue was 62.4% higher than 2Q19. Yields increased 10.1% to 13.0 cents while load factors decreased 0.4 percentage points to 84.8%, resulting in Revenues per Available Seat Mile (RASM) of 11.6 cents, or 11.3% higher than 2Q19.

Unit cost (CASM) came in at 10.9 cents, an increase of 19.9% compared to 2Q19, driven by a higher fuel cost. Excluding fuel, CASM came in at 6.0 cents, a decrease of 4.6% when compared to 2Q19, while operating at 96.6% of 2Q19 capacity.

The Company ended the quarter with a cash balance of US$1.1 billion, which represents 47% of the last twelve months' revenues.

The Company has a proven and very strong business model, which is built on operating the best and most convenient network for intra-Latin America travel from its Hub of the Americas^® based on Panama's advantageous geographic position, low unit costs, best on-time performance, and a strong balance sheet. Going forward, the Company expects to leverage its strong balance sheet, leading liquidity position, and lower cost base to continue strengthening its long-term competitive position by implementing initiatives that will further reinforce its network, product, and cost competitiveness.

3

OUTLOOK FOR 2022

As a result of the current volatility in the economic environment, the Company will provide financial guidance only for the third quarter of 2022 and update its preliminary capacity and CASM ex-fuel guidance for the full-year 2022.

Mainly driven by a quarter-over-quarter increase in unit revenues, the Company expects its operating margin to be within a range of approximately 16% to 18% for 3Q22, or 10 to 12 percentage points higher than 2Q22. The Company expects capacity in 3Q22 to reach approximately 6.4 billion ASMs or 100% of 3Q19 ASMs.

Financial Outlook	3Q22 Guidance	2Q22
Capacity (% of 2019)	~100%	96.6%
Operating Margin	~16-18%	6.1%

Factored in this outlook is a load factor of approximately 86%, Unit Revenues (RASM) of approximately 12.7 cents, unit costs excluding fuel (Ex-Fuel CASM) of approximately 6.0 cents, and an all-in fuel price of US$3.80 per gallon.

For full-year 2022, the Company expects to operate approximately 98% of 2019 ASMs and deliver a CASM ex-fuel of approximately 5.9 cents.

CONSOLIDATED SECOND-QUARTER RESULTS

Operating revenue

Consolidated revenue for 2Q22 totaled US$693.4 million, mainly driven by passenger revenue.

Passenger revenue totaled US$656.9 million, a 5.9% increase compared to the same period in 2019, driven by 10.1% higher yields. The second-quarter results are mostly comprised of flown passenger ticket revenue, passenger-related ancillary revenue, and unredeemed tickets revenue.

Cargo and mail revenuetotaled US$26.7 million, a 62.4% increase compared to the same period in 2019, related to higher cargo volumes and yields.

Other operating revenue totaled US$9.7 million, mainly revenues from non-air ConnectMiles partners.

Operating expenses

Fuel totaled US$296.0 million, an increase of 67.0% compared to the same period in 2019, on 9.9% fewer gallons consumed and an 86.1% higher effective fuel price.

Wages, salaries, benefits, and other employee expenses totaled US$89.0 million, representing a 17.9% decrease compared to the same period in 2019, mainly driven by a reduced headcount.

Passenger servicing totaled US$16.1 million, a decrease of 37.0% compared to the same period in 2019, as a result of a simplified onboard product offering due to temporary COVID-19 biosafety protocols.

Airport facilities and handling charges totaled US$47.3 million, an increase of 5.8% compared to the same period in 2019, mostly related to higher airport fees, mainly in the US.

Sales and distribution totaled US$56.2 million, an increase of 9.6% compared to the same period in 2019, due to higher sales compared to 2Q19.

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Maintenance, materials, and repairstotaled US$28.3 million, a decrease of 9.4% compared to the same period in 2019, driven by 10.6% fewer flight hours.

Depreciation and amortization totaled US$65.3 million, mostly comprised of owned and leased flight equipment, maintenance events and IT systems amortizations, a decrease of 7.4% compared to 2Q19, mainly due to a reduction in fleet size.

Flight operationsmostly related to overflight fees, totaledUS$24.1 million, a decrease of 5.4% compared to the same period in 2019, driven by 10.1% fewer departures, partially offset by an increase in overflight fees due to a different fleet and route mix.

Other operating and administrative expenses totaled US$28.9 million, an increase of 2.3% versus 2Q19, mainly comprised of IT systems expenses, aircraft engine rentals, aircraft insurance and cargo expenses, as well as other overhead expenses.

Non-operating Income (Expense)

Consolidated non-operating income (expense) resulted in a net income of US$86.4 million.

Finance cost totaled (US$21.3) million, mostly comprised of convertible notes interest expenses of US$10.5 million, US$7.4 million related to loan interest and commission expenses, and US$1.4 million in interest charges related to operating leases.

Finance income totaled US$3.5 million in proceeds from investments.

Gain (loss) on foreign currency fluctuationstotaled (US$6.8) million, mainly driven by the devaluation of the Brazilian real, Colombian peso, and Chilean peso.

Net change in fair value of derivatives totaled a US$113.7 million unrealized mark-to-market gain related to the Company's convertible notes.

Other non-operating income (expense) totaled (US$2.7) million due to an unrealized mark-to-market loss related to changes in the value of financial investments.

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About Copa Holdings

Copa Holdings is a leading Latin American provider of passenger and cargo services. The Company, through its operating subsidiaries, provides service to countries in North, Central and South America and the Caribbean. For more information visit: www.copaair.com.

CONTACT: Copa Holdings S.A.

Investor Relations:

Ph: 011 507 304-2774

www.copaair.com (IR section)

This release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current plans, estimates, and expectations, and are not guarantees of future performance. They are based on management's expectations that involve several business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statement. The risks and uncertainties relating to the forward-looking statements in this release are among those disclosed in Copa Holdings' filed disclosure documents and are, therefore, subject to change without prior notice.

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Copa Holdings, S.A.

Income Statement - IFRS

(US$ Thousands)

		Unaudited			Unaudited			%		Unaudited			%		Unaudited			Unaudited			%
		2Q22			2Q19			Change		1Q22			Change		YTD22			YTD19			Change
Operating Revenues
Passenger revenue			656,943				620,538				5.9	%		541,255				21.4	%		1,198,198				1,269,328				-5.6	%
Cargo and mail revenue			26,734				16,464				62.4	%		21,537				24.1	%		48,270				31,780				51.9	%
Other operating revenue			9,718				8,100				20.0	%		8,790				10.6	%		18,508				16,163				14.5	%
Total Operating Revenue			693,394				645,102				7.5	%		571,582				21.3	%		1,264,976				1,317,271				-4.0	%
Operating Expenses
Fuel			295,952				177,169				67.0	%		191,256				54.7	%		487,208				347,332				40.3	%
Wages, salaries, benefits and other employees' expenses			88,995				108,342				-17.9	%		89,759				-0.9	%		178,754				222,004				-19.5	%
Passenger servicing			16,074				25,530				-37.0	%		15,607				3.0	%		31,681				51,101				-38.0	%
Airport facilities and handling charges			47,280				44,698				5.8	%		45,787				3.3	%		93,067				90,060				3.3	%
Sales and distribution			56,222				51,289				9.6	%		46,033				22.1	%		102,255				104,421				-2.1	%
Maintenance, materials and repairs			28,311				31,235				-9.4	%		23,350				21.2	%		51,662				59,282				-12.9	%
Depreciation and amortization			65,337				70,549				-7.4	%		63,303				3.2	%		128,640				138,736				-7.3	%
Flight operations			24,068				25,450				-5.4	%		22,039				9.2	%		46,106				51,325				-10.2	%
Other operating and administrative expenses			28,894				28,240				2.3	%		29,674				-2.6	%		58,568				57,537				1.8	%
Total Operating Expense			651,133				562,502				15.8	%		526,809				23.6	%		1,177,942				1,121,798				5.0	%
Operating Profit/(Loss)			42,261				82,601				-48.8	%		44,774				-5.6	%		87,035				195,474				-55.5	%
Non-operating Income (Expense):
Finance cost			(21,270	)			(13,573	)			56.7	%		(20,445	)			4.0	%		(41,715	)			(27,583	)			51.2	%
Finance income			3,526				6,041				-41.6	%		2,545				38.6	%		6,071				11,995				-49.4	%
Gain (loss) on foreign currency fluctuations			(6,834	)			(2,213	)			208.8	%		2,917				-334.2	%		(3,916	)			(8,173	)			-52.1	%
Net change in fair value of derivatives			113,670				-				-100.0	%		(6,752	)			-1783.6	%		106,918				-				-100.0	%
Other non-operating income (expense)			(2,717	)			(2,115	)			28.5	%		(2,664	)			2.0	%		(5,381	)			(2,940	)			83.0	%
Total Non-Operating Income/(Expense)			86,375				(11,859	)			-828.3	%		(24,398	)			-454.0	%		61,977				(26,700	)			-332.1	%
Profit before taxes			128,636				70,742				81.8	%		20,376				531.3	%		149,012				168,773				-11.7	%
Income tax expense			(4,560	)			(19,876	)			-77.1	%		(617	)			639.5	%		(5,177	)			(28,476	)			-81.8	%
Net Profit/(Loss)			124,076				50,866				143.9	%		19,759				527.9	%		143,835				140,297				2.5	%
EPS
Basic			3.01				1.20				151.4	%		0.47				540.0	%		3.49				3.30				5.7	%
Shares used for calculation:
Basic			41,211,540				42,478,415				-3.0	%		42,006,022				-1.9	%		41,211,540				42,478,415				-3.0	%

7

Copa Holdings, S. A. and subsidiaries

Consolidated statement of financial position

(US$ Thousands)

	June 2022		December 2021
ASSETS	(Unaudited)
Cash and cash equivalents		134,125			211,081
Short-term investments		801,132			806,340
Total cash, cash equivalents and short-term investments		935,257			1,017,421
		-			-
Accounts receivable, net		155,322			90,618
Accounts receivable from related parties		1,767			1,832
Expendable parts and supplies, net		88,980			74,778
Prepaid expenses		42,029			31,148
Prepaid income tax		15,832			16,938
Other current assets		8,127			6,054
		312,057			221,368
TOTAL CURRENT ASSETS		1,247,314			1,238,789
Long-term investments		140,374			199,670
Long-term prepaid expenses		9,785			6,727
Property and equipment, net		2,755,741			2,512,704
Right of use assets		137,339			166,328
Intangible, net		77,302			81,749
Deferred tax assets		29,874			28,196
Other Non-Current Assets		15,045			14,098
TOTAL NON-CURRENT ASSETS		3,165,461			3,009,472
TOTAL ASSETS		4,412,774			4,248,261
LIABILITIES
Loans and borrowings		148,158			196,602
Current portion of lease liability		75,494			73,917
Accounts payable		142,711			112,596
Accounts payable to related parties		27,400			7,948
Air traffic liability		711,135			557,331
Frequent flyer deferred revenue		100,230			95,114
Taxes Payable		43,650			32,600
Employee benefits obligations		29,933			32,767
Income tax payable		4,993			3,835
Other Current Liabilities		592			786
TOTAL CURRENT LIABILITIES		1,284,295			1,113,496
Loans and borrowings long-term		1,350,239			1,229,031
Lease Liability		72,745			104,734
Net Defined Benefit Liability		7,006			7,670
Derivative financial instruments		161,420			268,338
Deferred tax Liabilities		18,919			18,782
Other long - term liabilities		221,480			206,813
TOTAL NON-CURRENT LIABILITIES		1,831,810			1,835,368
TOTAL LIABILITIES		3,116,105			2,948,864
EQUITY		-			-
Class A - 34,012,213 issued and 28,770,135 outstanding		21,326			21,289
Class B - 10,938,125		7,466			7,466
Additional Paid-In Capital		100,945			98,348
Treasury Stock		(326,239	)		(176,902	)
Retained Earnings		1,367,868			1,324,022
Net profit		143,835			43,844
Other comprehensive loss		(18,531	)		(18,670	)
TOTAL EQUITY		1,296,669			1,299,397
TOTAL EQUITY LIABILITIES		4,412,774			4,248,261

8

Copa Holdings, S. A. and subsidiaries

Consolidated Statement of Cash Flows

For the six months ended June 30,

(In US$ thousands)

		2022			2021			2020
		(Unaudited)			(Unaudited)			(Unaudited)
Cash flow from (used in) operating activities			327,833				149,669				(56,632	)
Cash flow used in investing activities			(262,743	)			(119,776	)			(48,009	)
Cash flow (used in) from financing activities			(142,046	)			107,806				253,205
Net (decrease) increase in cash and cash equivalents			(76,956	)			137,699				148,564
Cash and cash equivalents at January 1			211,081				119,065				158,733
Cash and cash equivalents at June 30		$	134,125			$	256,764			$	307,297
Short-term investments			801,132				925,680				740,887
Long-term investments			140,374				99,235				95,540
Total cash and cash equivalents and investments at June 30		$	1,075,631			$	1,281,679			$	1,143,724

9

Copa Holdings, S.A.

NON-IFRS FINANCIAL MEASURE RECONCILIATION

This press release includes the following non-IFRS financial measures: Adjusted Operating Profit, Adjusted Net Profit, Adjusted Basic EPS, and Operating CASM Excluding Fuel. This supplemental information is presented because we believe it is a useful indicator of our operating performance and is useful in comparing our performance with other companies in the airline industry. These measures should not be considered in isolation and should be considered together with comparable IFRS measures, in particular operating profit, and net profit. The following is a reconciliation of these non-IFRS financial measures to the comparable IFRS measures:

Reconciliation of Adjusted Operating Profit
and Adjusted Net Profit		2Q22			2Q21			1Q22			2Q19
Operating Profit as Reported		$	42,261			$	8,736			$	44,774			$	82,601
Subtract: Unredeemed Ticket Revenue provision reversal						$	(10,395	)
Adjusted Operating Profit		$	42,261			$	(1,659	)		$	44,774			$	82,601
Net Profit as Reported		$	124,076			$	28,073			$	19,759			$	50,866
Subtract: Unredeemed Ticket Revenue provision reversal						$	(10,395	)
Add: Net change in fair value of derivatives		$	(113,670	)		$	(33,898	)		$	6,752
Add: Net change in fair value of financial investments		$	2,761							$	2,979
Adjusted Net Profit		$	13,168			$	(16,220	)		$	29,490			$	50,866
Reconciliation of Adjusted Basic EPS		2Q22			2Q21			1Q22			2Q19
Adjusted Net Profit		$	13,168			$	(16,220	)		$	29,490			$	50,866
Shares used for calculation of Basic EPS			41,212				42,651				42,006				42,478
Adjusted Basic Earnings per share (Adjusted Basic EPS)		$	0.32			$	(0.38	)		$	0.70			$	1.20
Reconciliation of Operating Costs per ASM
Excluding Fuel (CASM Excl. Fuel)		2Q22			2Q21			1Q22			2Q19
Operating Costs per ASM as Reported (in US$ Cents)			10.9				9.0				9.4				9.1
Aircraft Fuel Cost per ASM (in US$ Cents)			5.0				2.5				3.4				2.9
Operating Costs per ASM excluding fuel (in US$ Cents)			6.0				6.6				6.0				6.2

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