Bombardier Inc.

Good morning, ladies and gentlemen, and welcome to the Bombardier second quarter 2022 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 second quarter ended June 30th, 2022. 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 second quarter 2022. I would now like to turn over the discussion to Eric.

Thank you very much, Francis. Hello and welcome everyone. Good morning, everyone, and I hope you are having a safe and restful summer. Bombardier has certainly had a fantastic second quarter. We have been proactive in strengthening our balance sheet and accelerating our debt reduction. We are executing our plan, meeting our commitment, and have further demonstrated our industry leadership with the show-stopping launch of the Global 8000 business jet. In parallel, strong demand for business aviation has carried through, and our team has converted the opportunities to grow our backlog significantly. If I can sum up Bombardier's performance in the second quarter with a few words, they would be confidence, predictability, and resilience. I am also delighted to say our ability to execute our plan was externally recognized most notably with Moody's upgrading our credit rating. I am particularly proud of this achievement, especially when you look at how Bombardier is performing in the context of the current economic backdrop. On today's call, we will indeed touch on the macroeconomic context as well as supply chain pressure, but I would first like to talk about our most significant performance indicators. When I look at our solid performance on free cash flow, it has clearly demonstrated that we have set the right foundation to be a cash positive business and deliver on our commitments. Today, we are raising full guidance on free cash flow to greater than $515 million. I am proud to say that our ability to execute on our initiatives to grow margins and leverage our key contributor to solidifying our overall position. This past quarter saw us continue our margin expansion and reach an adjusted EBITDA of $201 million. This is a 41% better year over year. Our adjusted liquidity position also stands strong at $1.8 billion. We've been well-placed to continue reducing our debt as well as proactively reducing the cost of our debt. Bart will cover our success on these two fronts in greater detail shortly. I would like to thank the team for their tireless efforts on this front. Turning now to demand and the market, A Q2 unique book to bill of 1.8 and backlog increase to 14.7 billion really tells you a lot in terms of demand remaining at very healthy levels. The backlog number itself is impressive. It is also one of the healthiest business aviation backlogs we have seen in terms of customer type mix. When we look at operational predictability, That healthy backlog is where it starts, but also gives us great confidence in raising our cash guidance, as well as reconfirming delivery and earning figures for the year. Looking at industry metrics that shape demand, they remain healthy across the board. We see continuing high flight hours, very low used aircraft inventory, with younger aircraft being scooped up very quickly, and finally, improved pricing. In this quarter, when we've observed slowdowns or stabilization in regions, we have turned our focus to other areas to continue driving the business. Interest and utilization around the world continue to outperform pre-pandemic levels. Demand for business aviation continues to grow to new members of the flying public. With every passing month of airport and flight schedule disruption, business travel becomes a more appealing option. Utilization has also continued to accelerate our services revenue. They grew 22% versus Q2 last year, generating a healthy, $359 million of top-line revenue, which totaled $1.6 billion for the quarter. We see a steady and stable growth path for services as major facility inspections come online, the first of which I was able to personally inaugurate on the last day of Q2 in Singapore, where we have quadrupled our footprint and now operate the largest OEM-owned service facility in the Asia Pacific region. We are in the process of ramping up expansions in London, England, as well as Miami, Florida. To add to this, we will also inaugurate our Melbourne, Australia facility this year. This worldwide expansion of our service facilities allows us to bring more of our jets home. This is the most effective way to channel our high-quality OEM parts to our installed base of jets. We have been executing on this journey for many years and have a proven track record. Our goal to reach $2 billion in annual aftermarket revenue by 2025 is fully on track. We do face what I would call a crosswind on supply chains. With business indicators and demands still driving in a positive direction, supply chain pressure is contributing to keeping delivery ramp up at a conservative and steady space in line with our 2025 projections. The key to managing these crosswinds is maintaining agility and consistent execution. As Bart and I have repeated, we have built a plan that is not dependent on significant volume upside as we needed to confidently and proactively deal with any macroeconomic fluctuation. Our current product lineup, beyond being exceptionally designed and reliable, sits in the most stable categories. Our results to date in 2022 have demonstrated that we can perform underscored by our stable deliveries, expanding margins, and exceptional cash generation. That said, dealing with supply chain pressure is a new normal. Having deployed additional personnel early on was a successful strategy as it continuously helps us identify risks. This mindset and proactive approach started as early as 2020. Right at the start of the pandemic, we secured many small work packages that were at risk and brought them to our team. Today, we are benefiting from that decision through production predictability, and it has also helped create 500 new jobs within Bombardier. Over the last few months, We have been very active in continuing that approach and assessing where it makes sense to repatriate or consolidate smaller work packages or parts to ensure our production line can operate as efficiently as possible. This is a testament to the skilled teams we have that can contribute to securing our deliveries while ensuring we take steps to keep any additional action we take within our working budget for the year. Overall, managing this supply chain pressure does require continuous focus and attention. Today, we have been successful, but we'll continue to work very actively at various tier of suppliers. In terms of burning down any risk, we will not hesitate to act when needed. This is very different economic landscape to previous cycles, like 2009, for example. With demand for business aviation remaining high and production rates having been largely reset, we believe we are in a good place to have a healthy balance of pricing and demand going forward. I can only emphasize, again, that we are taking a predictable approach focusing on the steady increase we have begun. Key to this is having the right product as the market evolves, and our product strategy is progressing fully to plan. The Challenger 3500 aircraft will begin deliveries through the back end of the third quarter, and we have secured the key auto throttle certification during the second quarter. This program is well on track and customers are enjoying the aircraft's elevated experience, both from a cabin design perspective, as well as the sustainable material options. Our attention is turning to the Global 8000 certification campaign. As we announced at EBACE, we have successfully tested the aircraft beyond the sound barrier. This helps pave the path to certify a maximum operating speed of Mach 0.94, which will make the Global 8000 the fastest business jet on the market. Combined with the platform's exceptional low-speed handling, it is truly full, non-compromised package. Response from the market has been nothing short of tremendous. I have personally received a lot of positive feedback on our strategy to offer the performance enhancement to global 7,500 customers as retrofits. All in all, the Reshape Bombardier team has delivered another solid quarter. We stand well placed with services infrastructure expansion, a well-received product roadmap, and positive financial performance that is putting our debt reduction strategy ahead of plans. On that note, I will now turn the call to Bart to go deeper into our financial performance and balance sheet.