Bombardier Inc.

Good morning, ladies and gentlemen, and welcome to the Bombardier fourth quarter and full year 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 fourth quarter and full year ended December 31st, 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 fourth quarter and year-ended December 31st, 2021. I will now turn the discussion over to Eric.

Thank you very much, Francis. Hello and welcome everyone. Good morning, everyone, and we're happy to have you join us today. 2021 was a strong start to Bombardier's repositioning around business aviation. It is a testament to the team's expertise, dedication to executing the plan, and the driven mindset behind every individual at Bombardier. Bart and I are here to tell you how we are planning to grow in 2022, and it is exciting. But first, here are my reflections on our performance and key achievements in 2021. Execution was our motto this year. This approach was the key to our success. Our team executed to our plan at every level, and the plan helped us stay focused on our priorities while proactively managing supply chain pressure as well as restriction caused by the pandemic. Clearly, we have market tailwind, but we are proud to say that above all, we had the right approach, executed our plan, and delivered. We delivered a fantastic year, and here are some highlights. We raised our guidance midway and then exceeded it. We introduced the Challenger 3500, the next generation of the market's best-selling super midsize jet within our committed CAPEX envelope. Flight tests and certification are on track for production cut in this year. The aircraft has also been a huge success on the sale front. It has significantly contributed to our team achieving the best order intake in the last eight years. Next, we continue to grow our service network in physical capacity as well as capabilities. We also delivered our 1,000 global and progress through our learning curve on the Global 7500 jet to make it a margin contributor, turning now, forward, an accelerator. Our global aircraft also notched a win in the specialized aircraft sphere, securing a sixth aircraft order with the United States Air Force BACON program. This underscores the solid effort we are making to diversify toward defense solution, and leverage our operation in Wichita, Kansas, to grow this business with in-house capabilities. On a financial front, we cleared the debt maturity runway as we committed and materially reduced our interest expenses. We identified and implemented efficiencies and welcomed back David Murray, who is moving the Operational Excellence Program to its next phase. Finally, we outline clear and achievable ESG goals our employees, stakeholders, and partners can be proud of. I believe the words to describe 2021 are planning, execution, and prudence. And for me personally, as the CEO of this great company that is turning 80 this year, pride. We closed the year with $12.2 billion of backlog. This is a significant increase of $1.5 billion. It comes from a solid unique book-to-bill ratio of more than 1.5 for the full year. Overall, our backlog is now bigger and more balanced. In the midterm, we see a healthy product mix and healthy pricing, two very fundamental elements to maintain predictability and resilience for our business. our teams can focus on the right deals, and we are largely sold out for 2022 already. As Prudence is serving us well, we are applying the same mindset to the production rate. We will continue to take into account three factors, backlog, pricing, and supply chain, and won't pressure one in favor of another. That said, we do remain flexible. This year's guidance to deliver more than 120 jets reflects well-planned increases, mostly on our Challenger product line. These extra jets will also see us replace volumes we saw coming in through the light jet category in 2021 and come with a more profitable contribution. We see stability in the large segment as it continues to demonstrate resilience to fluctuation. Long-term, we will ensure we are growing responsibly. We will leverage all efficiencies we have worked on to date to maintain a solid cost structure. That said, we are positioning ourselves to accelerate deliveries by another 15% to 20% as soon as 2023, while maintaining a sharp focus on balancing longer-term production increase with the actual pricing environment. Now coming back to the global 7,500 learning curve, I am delighted to confirm that we have reached steady state production. We delivered 39 of these industry leading jets. Like I mentioned before, we are entering a phase where the product is becoming a margin accelerator and it's exactly in line with where we were planning to be. The aircraft's performance is simply exceptional. and I'd like to thank the teams for their huge efforts on that front. It has positioned us for a smooth transition of manufacturing operation from Downsview to Mississauga once construction is complete. We are very excited to make the move to the new state-of-the-art facility. It will further optimize operational efficiency as well as our environmental footprint. We grew our top line revenue 7% year over year to $6 billion for 2021. Most notably, with business aviation flight hours trending up, our service revenue stream followed suit up 25% and contributing $1.2 billion to our total revenue. As I mentioned before, the business aviation market has firmed up. Low used aircraft inventory remains and flight hours have surpassed pre-pandemic levels. Services are absolutely key to our growth and our success. We are continuing our expansion and keeping the services growth curve steadily trending upward and in line with our 2025 objectives. This year, we plan to inaugurate significant expansion in Singapore, Australia, the UK, and the U.S. We are where our customers are flying and where they need us to be. Our international network and programs are well-placed to be key revenue drivers long-term. Turning to free cash flow, 2021 was a standout year overall. We ended $100 million cash positive from continuing operation, well ahead of where we wanted to be. Overall, our cash profile has greatly improved and we are guiding a greater than $50 million of positive free cash flow in 2022. We are pleased that all factors have converged to significantly improve our profitability. Our solid internal and execution help us post a 220% improvement in adjusted EBITDA year over year. 2021 saw us reach $640 million in adjusted EBITDA, and 2022 will continue the trend upward as we are implementing further initiative in our recurring cost saving plan. We have made significant progress across the initiative we identified for this year, which are essential to reaching our 2025 objective. Looking at the jump we made from 21 to 22, we have successfully built the right fundamentals. We essentially expect to grow our EBITDA 29% year over year, and we are well positioned to tap into free cash flow upside as we progress through the plan. Bart will detail how this all factors into our plan and overall position, but we will also be delighted to share more long-term view during our February 24th investor day. Before I pass the floor to Bart, I would like to once again Thank all Bombardier team members for their effort in executing our plan, serving our customer, and keeping focused on delivering value to our shareholders. We continue to be very vigilant on health and safety in every region. We operate and appreciate everyone's buy-in to keeping their fellow colleagues safe for those who cannot work remotely. We have set a solid foundation for Bombardier's future. I believe that each person listening to this call, whether an analyst, journalist, employee, or investor, can be extremely proud of Bombardier's performance, our product, the company's commitment to ESG, and our contribution to R&D that will make our skies and industry even more sustainable. With that, I'll turn the call over to Bart.