Bombardier Inc.

All participants, please stand by. Your conference is ready to begin. Good morning, ladies and gentlemen, and welcome to the Bombardier Third Quarter 2021 Earnings Conference Call. Please be advised that this call is being recorded. At this time, I'd like to turn the discussion over to Mr. Francis Richer de la Fleche, Vice President, FP&A and Investor Relations for Bombardier. Please go ahead, Mr. Richer de la Fleche.

Good morning, everyone, and welcome to Bombardier's earnings call for the third quarter ended September 30th, 2021. I wish to remind you that during the course of this call, we may make projections or other forward-looking statements regarding future events or the financial performance of the corporation. There are risks that actual events or results may differ materially from these statements. For additional information on forward-looking statements and underlying assumptions, please refer to the MD&A. I am making this cautionary statement on behalf of each speaker on this call. With me today is our President and Chief Executive Officer, Eric Martel, and our Executive Vice President and Chief Financial Officer, Bart Demoski, to review our operations and financial results for the third quarter of 2021. I would now like to turn over the discussion to Eric.

Thank you very much, Francis. Hello and welcome everyone. Thank you for joining us this morning. I am delighted to share that the Bombardier team once again delivered a solid quarter. The team executed our plan very well and delivered on our commitment across the board. When we last spoke three months ago, we raised guidance based on our solid execution to date and favorable market condition. Today, we are well on track to meet that raised guidance. Before Bart and I go into Bombardier's financial detail, I want to take a moment to congratulate and thank the National Business Aviation Association for bringing our industry back together in person earlier this month. Bombardier was proud to attend and witness firsthand the industry's enthusiasm. Most importantly, our new Challenger 3500 jet was very well received. and this comes at great moment in time. This plane is a clear example of how our investment in product development can bring significant value to customers in a measured and disciplined way. Our order book is filling up fast for the Challenger 3500. Its strong value proposition and market leading status was cemented by a 20 aircraft firm order closed in Q3. Our unit book-to-bill ratio remains very healthy, having reached approximately 1.7 this past quarter. That contributed to our backlog increasing by approximately $500 million to $11.2 billion. This momentum also translated to a 17% year-over-year increase in business jet-related revenue, reaching 1.4 billion in Q3. Flying hours in the industry continue to trend positively. Toward the end of the summer, we observed levels surpassing 2019. This has also led to an increased top line contribution from our higher margin service business. On services, our infrastructure expansion is progressing well, smoothly. We are also looking beyond brick and mortar solution to diversify and grow. Digital application like Smart Parking Plus and our recently signed MOU with signature aviation all will play a part in maximizing our earnings potential and meeting our long-term service revenue objectives. That growth is also occurring with sustainability top of mind. Sustainable aviation fuels for example, are a significant factor in our collaboration with Signature. But our approach will go well beyond that. In fact, it has been detailed in our newest environmental, social and governance report we published just yesterday. The report charts our path to emission reduction and best practices to ensure we lead all facets of sustainability by example. locally and within our industry at large. Communities in which we operate are a key focus. Staying on the topic of our service growth, we are hiring technicians via our relationship we have with many technical colleges across the world. We are also seizing opportunities to retrain and redeploy staff as we are doing in Wichita, for example. Wichita has been a strong aviation ecosystem and we will continue to contribute to its health. Beyond giving production staff new career opportunities in our service network, the site has also been selected to serve as our main hub or center of excellence for our special mission modification offering. We will leverage our engineering talent to deliver more success stories similar to the bacon program with the U.S. Air Force. Turning back to our overall business, I can tell you today that we are in the right place. We are delivering consistently on what we set out to do, especially when it comes to delivering the balance sheet. Bart will detail our specific actions in his remarks in a few minutes. For now, I would like to simply express how pleased I am with the team behind this. We cleared the debt maturity runway on plan and with meaningful cash interest savings. We had a very positive response on the market and have given ourselves flexibility to manage our business. As we continue on to the next phase of our capital structure plan, we will remain opportunistic. We are working toward our 2025 objective to reach a net debt leverage ratio of approximately three times. We are confident in getting to these levels while remaining disciplined and strategic with our product investment. We have done well in cascading technology from program like the Global 7500 to the entire global family and now the Challenger 3500. This type of ingenuity will further help maintain our product portfolio at the top of a very competitive landscape. Flexibility and focus are really key going forward. Flexibility will also come into play as we monitor the worldwide supply chain. It is clear the world is facing pressure when it comes to transportation of goods or securing labor, not to mention fluctuation costs and availability of raw material. I can happily report we have not seen any assembly line interruptions, but this is not by luck. It is hard work. Today, we are deploying more staff to suppliers, sites, to maintain clear visibility as far up our supply chain as possible. We are not waiting for issue to reach us, and the team is extremely proactive and vigilant. We see a lot of tension in the system that does not seem to go away. We will remain very cautious and conservative throughout 2022. With regards to the short term, the good news is we are largely sold out and have everything we need on board through to next year. The people I mentioned we are sending into the regions will help us deal with any longer-term threat, but again, vigilant and a proactive approach are key. When it comes to production, ultimately, we need to keep the right balance. We want to avoid adding too much backlog on certain programs. That's really the equation it comes down to. Pricing, supply chain, and backlog. The plan we build is based on stability and consistency, not having to bank on the large market upswing to meet our numbers. whether it's this year or our 2025 objective. We are in a sweet spot right now and continue to benefit from a better pricing environment. Short term, we will not overreact to one market indicator alone or precipitate a major change that would create unnecessary pressure on logistics or the bottom line. When it comes to profitability, we have seen a good acceleration on the global 7500, The team is doing an excellent job driving the learning curve down, and we have strong visibility on the unit cost of aircraft that will be delivered well into next year. We are very focused on driving what we control. We have good tailwind on the global 7500 learning curve, and we are bringing equal energy and focus to our $400 million recurring saving objectives. The last 20% or so of the plan really focuses on productivity gains and our operational excellence program. On that front, we are delighted to welcome back David Murray. His record and deep understanding of Bombardier will ensure we cement our productivity efforts in a thoughtful and cohesive manner. David will be looking at all facets of our technology infrastructure and company-wide processes to ensure we unlock the most of value from lean operating principle. Through this, we will further our continuous improvement mindset, and I look forward to sharing more on this next year. With that, I'll turn it over to Bart to dive deeper into our key performance indicator and balance sheet. Bart?