TRANSAT A.T. INC. Sustained Demand in a More Challenging Environment
Second-quarter highlights:
- Revenues of
$973.2 million , up 11.8% from$870.1 million last year - Adjusted EBITDA1 of
$37.6 million , compared to$56.1 million last year - Net loss of
$54.4 million ($1.40 per share), versus$29.2 million ($0.76 per share) last year - Positive free cash flow1 of
$109.8 million , compared to$154.2 million last year - Early repayment of
$36.3 million subordinated debt which was due onApril 29, 2025 - Customer deposits for future travel of
$896.9 million , up 3% fromApril 30, 2023
"Transat delivered double-digit revenue growth for a second consecutive quarter on the strength of increased customer traffic. On the profitability side, adjusted EBITDA declined to
"We are fully prepared from an operational standpoint for the summer season. As such, we recently completed the process of bringing in-house passenger and ramp services at
"We diligently continued to deleverage our balance sheet in the second quarter, reimbursing subordinated debt of
________________________ |
2Geared turbofan ("GTF").1 |
Second-quarter results
For the three-month period ended
Adjusted EBITDA1 stood at
Six-month results
For the six-month period ended
For the six-month period, adjusted EBITDA1 stood at
Cash flow and financial position
Cash flow from operating activities amounted to
As at
Reflecting sound demand, customer deposits for future travel stood at
During the quarter, the Corporation renegotiated its LEEFF secured credit facility with a principal amount of
Key indicators
To date, load factors for the summer period, which consists of the third and fourth quarters, are 2.1 percentage points lower compared to the same date in fiscal 2023, while airline unit revenues, expressed as yield, are 8.0% lower than they were at this time last year.
Reflecting market conditions and aircraft availability, the Corporation made a slight adjustment to its fiscal 2024 capacity expansion plans, which now stands at 11%, versus 13% previously.
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(1) Non-IFRS financial measures
Transat prepares its financial statements in accordance with International Financial Reporting Standards ["IFRS"]. We will occasionally refer to non-IFRS financial measures in the news release. These non-IFRS financial measures do not have any meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. They are intended to provide additional information and should not be considered as a substitute for measures of performance prepared in accordance with IFRS. All dollar figures are in Canadian dollars unless otherwise indicated.
The following are non-IFRS financial measures used by management as indicators to evaluate ongoing and recurring operational performance.
Adjusted operating income (loss) or adjusted EBITDA: Operating income (loss) before depreciation, amortization and asset impairment expense, reversal of impairment of the investment in a joint venture, restructuring and transaction costs and other significant unusual items, and including premiums related to derivatives that matured during the period. The Corporation uses this measure to assess the operational performance of its activities before the aforementioned items to ensure better comparability of financial results.
Adjusted pre-tax income (loss) or adjusted EBT: Income (loss) before income tax expense before change in fair value of derivatives, revaluation of liability related to warrants, gain (loss) on long-term debt modification, gain (loss) on business disposals, gain on disposal of investment, gain (loss) on asset disposals, restructuring and transaction costs, write-off of assets, reversal of impairment of the investment in a joint venture, foreign exchange gain (loss) and other significant unusual items, and including premiums related to derivatives that matured during the period. The Corporation uses this measure to assess the financial performance of its activities before the aforementioned items to ensure better comparability of financial results.
Adjusted net income (loss): Net income (loss) before change in fair value of derivatives, revaluation of liability related to warrants, gain (loss) on long-term debt modification, gain (loss) on business disposals, gain on disposal of investment, gain (loss) on asset disposals, restructuring and transaction costs, write-off of assets, reversal of impairment of the investment in a joint venture, foreign exchange gain (loss), reduction in the carrying amount of deferred tax assets and other significant unusual items, and including premiums related to derivatives that matured during the period, net of related taxes. The Corporation uses this measure to assess the financial performance of its activities before the aforementioned items to ensure better comparability of financial results. Adjusted net income (loss) is also used in calculating the variable compensation of employees and senior executives.
Adjusted net earnings (loss) per share: Adjusted net income (loss) divided by the adjusted weighted average number of outstanding shares used in computing diluted earnings (loss) per share.
Free cash flow: Cash flows related to operating activities less cash flows related to investing activities and repayment of lease liabilities. The Corporation uses this measure to assess the cash that's available to be distributed in a discretionary way such as repayment of long-term debt or deferred government grant or distribution of dividend to shareholders.
Total debt: Long-term debt plus lease liabilities, deferred government grant and liability related to warrants, net of deferred financing costs related to the unsecured debt - LEEFF. Management uses total debt to assess the Corporation's debt level, future cash needs and financial leverage ratio. Management believes this measure is useful in assessing the Corporation's capacity to meet its current and future financial obligations.
Total net debt:Total debt (described above) less cash and cash equivalents. Total net debt is used to assess the cash position relative to the Corporation's debt level. Management believes this measure is useful in assessing the Corporation's capacity to meet its current and future financial obligations.
Additional Information
The results were affected by non-operating items, as summarized in the following table:
Highlights and non-IFRS financial measures
Second quarter | First six-month period | |||
2024 | 2023 | 2024 | 2023 | |
(in thousands of Canadian dollars, except per share amounts) | $ | $ | $ | $ |
Operating income (loss) | (15,161) | 18,740 | (67,590) | (19,363) |
Depreciation and amortization | 54,748 | 42,763 | 104,912 | 83,871 |
Reversal of impairment of the investment in a joint venture | — | — | (3,112) | — |
Restructuring costs (reversal) | 1,911 | (557) | 1,977 | 2,343 |
Premiums related to derivatives that matured during the period | (3,863) | (4,802) | (7,177) | (7,376) |
Adjusted operating income (loss)1 | 37,635 | 56,144 | 29,010 | 59,475 |
Net loss | (54,387) | (29,180) | (115,364) | (85,790) |
Reversal of impairment of the investment in a joint venture | — | — | (3,112) | — |
Restructuring costs (reversal) | 1,911 | (557) | 1,977 | 2,343 |
Change in fair value of derivatives | (4,978) | 13,949 | 17,181 | 23,870 |
Revaluation of liability related to warrants | (6,236) | (3,234) | 5,511 | 6,905 |
Foreign exchange (gain) loss | 28,170 | 15,867 | (13,957) | (6,962) |
Gain on disposal of an investment | — | — | (5,784) | — |
Gain on asset disposals | — | — | — | (2,511) |
Premiums related to derivatives that matured during the period | (3,863) | (4,802) | (7,177) | (7,376) |
Adjusted net loss1 | (39,383) | (7,957) | (120,725) | (69,521) |
Adjusted net loss1 | (39,383) | (7,957) | (120,725) | (69,521) |
Adjusted weighted average number of outstanding shares used in computing diluted earnings per share | 38,713 | 38,222 | 38,645 | 38,153 |
Adjusted net loss per share1 | (1.02) | (0.21) | (3.12) | (1.82) |
Cash flows related to operating activities | 183,216 | 190,559 | 293,918 | 385,647 |
Cash flows related to investing activities | (31,247) | (7,279) | (59,992) | (17,760) |
Repayment of lease liabilities | (42,184) | (29,083) | (85,048) | (69,540) |
Free cash flow1 | 109,785 | 154,197 | 148,878 | 298,347 |
As at | As at | |||
(in thousands of dollars) | $ | $ | ||
Long-term debt | 646,814 | 669,145 | ||
Deferred government grant | 134,182 | 146,634 | ||
Liability related to warrants | 26,327 | 20,816 | ||
Lease liabilities | 1,136,161 | 1,221,451 | ||
Total debt1 | 1,943,484 | 2,058,046 | ||
Total debt | 1,943,484 | 2,058,046 | ||
Cash and cash equivalents | (528,886) | (435,647) | ||
Total net debt1 | 1,414,598 | 1,622,399 |
About Transat
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Caution regarding forward-looking statements
This news release contains certain forward-looking statements with respect to the Corporation, including those regarding its results, its financial position and its outlook for the future. These forward-looking statements are identified by the use of terms and phrases such as "anticipate" "believe" "could" "estimate" "expect" "intend" "may" "plan" "potential" "predict" "project" "will" "would", the negative of these terms and similar terminology, including references to assumptions. All such statements are made pursuant to applicable Canadian securities legislation. Such statements may involve but are not limited to comments with respect to strategies, expectations, planned operations or future actions. Forward-looking statements, by their nature, involve risks and uncertainties that could cause actual results to differ materially from those contemplated by these forward-looking statements.
The forward-looking statements may differ materially from actual results for a number of reasons, including without limitation, economic conditions, changes in demand due to the seasonal nature of the business, extreme weather conditions, climatic or geological disasters, war, political instability, real or perceived terrorism, outbreaks of epidemics or disease, consumer preferences and consumer habits, consumers' perceptions of the safety of destination services and aviation safety, demographic trends, disruptions to the air traffic control system, the cost of protective, safety and environmental measures, competition, maintain and grow its reputation and brand, the availability of funding in the future, the Corporation's ability to repay its debt, the Corporation's ability to adequately mitigate the Pratt & Whitney GTF engine issues, fluctuations in fuel prices and exchange rates and interest rates, the Corporation's dependence on key suppliers, the availability and fluctuation of costs related to our aircraft, information technology and telecommunications, cybersecurity risks, changes in legislation, regulatory developments or procedures, pending litigation and third-party lawsuits, the ability to reduce operating costs, the Corporation's ability to attract and retain skilled resources, labour relations, collective bargaining and labour disputes, pension issues, maintaining insurance coverage at favourable levels and conditions and at an acceptable cost, and other risks detailed in the Risks and Uncertainties section of the MD&A included in our 2023 Annual Report.
The reader is cautioned that the foregoing list of factors is not exhaustive of the factors that may affect any of the Corporation's forward-looking statements. The reader is also cautioned to consider these and other factors carefully and not to place undue reliance on forward-looking statements.
The forward-looking statements in this news release are based on a number of assumptions relating to economic and market conditions as well as the Corporation's operations, financial position and transactions. Examples of such forward-looking statements include, but are not limited to, statements concerning:
- The outlook whereby the Corporation will be able to meet its obligations with cash on hand, cash flows from operations and drawdowns under existing credit facilities.
- The outlook whereby the Corporation made a slight adjustment to its fiscal 2024 capacity expansion plans, which now stands at 11%, versus 13% previously.
In making these statements, the Corporation assumes, among other things, that the standards and measures for the health and safety of personnel and travellers imposed by government and airport authorities will be consistent with those currently in effect, that workers will continue to be available to the Corporation, its suppliers and the companies providing passenger services at the airports, that credit facilities and other terms of credit extended by its business partners will continue to be made available as in the past, that management will continue to manage changes in cash flows to fund working capital requirements for the full fiscal year and that fuel prices, exchange rates, selling prices and hotel and other costs remain stable, and the Corporation will be able to adequately mitigate the Pratt & Whitney GTF engine issues. If these assumptions prove incorrect, actual results and developments may differ materially from those contemplated by the forward-looking statements contained in this press release.
The Corporation considers that the assumptions on which these forward-looking statements are based are reasonable.
These statements reflect current expectations regarding future events and operating performance, speak only as of the date this news release is issued, and represent the Corporation's expectations as of that date. For additional information with respect to these and other factors, see the MD&A for the quarter ended
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