Bombardier Inc.

Good morning, ladies and gentlemen, and welcome to Bombardier's first quarter 2023 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 first quarter ended March 31st, 2023. 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'm 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 first quarter of 2023. I will now turn the discussion over to Eric. Thank you very much, Francis.

Hello and welcome everyone. Good morning, everyone, and thank you for joining us this morning. Once again, Bombardier has executed to its plan. I am proud to share our results that reflect a collective team effort. It is a testament to the dedication and engagement I see across the company to meeting commitment with consistency, but also with predictability. Bart and I have talked a lot about the fundamentals going in the right direction. This past quarter, that trajectory brought adjusted net income to a very healthy $113 million. We continue to perform on our front, reducing debt, raising our deliveries, and ramping up production. The planned growth this year will bring us to more than 138 aircraft deliveries. We also reached new highs in services with $424 million of revenue in the first quarter. That is a 17% improvement compared to Q1 last year. If you take a step back and consider this as a run rate, it's well aligned to the progress toward our $2 billion annual revenue objective. In fact, we reaffirmed it at our investor day held just last March. Before we discuss Q1 results further, I did want to take a few minutes to reiterate that these broader results are a first stepping stone in our revised 2025 plan. A few weeks ago, we announced that we raised our target to more than $9 billion total revenues, $1.625 billion in EBITDA, more than $900 million in free cash flow, and most importantly, we have improved our targeted net leverage ratio to between 2 and 2.5 times. This is on the heels of some really outstanding work by Bart and the team. We also further detail our plans in services as well as presented a bold $1 billion defense ambition, in the later half of the decade. As we detail, that ambition really stems from a few key ingredients. First, we find ourselves today with the right size platform for the mission's equipment of the future. Our plane can fly farther, faster, and longer than the previous generation of converted airliners and turboprops. Our globals and challengers are providing their work in countries like the U.S., Sweden, Germany, and many more in multiple mission configurations. There are a few countries we are actively working to add to that list. Our defense team is pursuing prospects globally, and we are well-placed to provide flexible solutions to emerging requirements as countries face threats that require agile aircraft. It's truly an exciting time for those working on this project, as well as for anyone who is about to join Bombardier. If you missed our investor day, you can still watch the entire session or the highlight on our website. Now let's focus on what is immediately before us in the coming months. On the demand front, we are right where we want to be. We spoke a few quarters ago about a cruising altitude around one for our book to build. Our current pipeline of prospect and plan for the years reflects that. And it is important to note that we are operating on a higher level delivery base for this year. We are also looking at this with a long-term view aligned to our 2025 targets. It will see us land in the 150-unit delivery range, and there is encouraging activity and interest in business aviation that has remained. I have spoken personally to a lot of clients in North America, Europe, and most importantly, Asia Pacific recently. Mobility is still a key need for them, regardless of any macroeconomic prediction or sentiment, and our products stand out to them. Considering this, I will categorize the demand environment as stable and well aligned to our plan for the year and future. We have a good mix of customer over multiple geographies and across all product lines. This has continued to contribute to our LT backlog, which is stable at $14.8 billion. It gives us about a two-year production runway so we can focus our energy on maintaining a strict eye on cost and supply chain pressure. Q1 also saw us order a lot of inventory to support the ramp up to 138 deliveries. Bart will detail how that is reflected in our free cash flow performance along with other factors. Let me tell you, getting parts on the dock is a team sport. I continue to be encouraged by our proactive approach and the results I see across the board. We are working hard to mitigate risk all the way down to the tier three supplier. As a company, it's the most detailed we've ever been on a supplier by supplier basis. I want to acknowledge and recognize the team behind this. Don't get me wrong, we still have work to do, but our focus on assessing, mitigating and executing is serving us very well. Speaking about the benefit of execution, revenue this year are up 17% over the same period last year. But most importantly, we have grown the bottom line in all ways you can measure it. I first look at the adjusted EBITDA as a measure of our fundamentals. It's up 27% year over year for Q1 to Q2. $212 million. Our EBITDA margins have also grown to 14.6, a 120 basis point improvement year over year. The positive growth is also reflected in our reported and adjusted net income. I mentioned earlier that we reached $113 million in net income, but also want to highlight that this translated to a learning per share of $1.06. Finally, I'd like to circle back on services. $424 million is an impressive Q1 number as we are still operationalizing facilities that have been added to our footprint. Our customer capture rates are where we need them, and the curve has been progressing steadily and consistently. We are getting lift from capacity growth, organic fleet growth, and customer recapture. Overall, for our company, anyone in my position would be happy to post this kind of growth on the board, but the fact that it's Q1 has me particularly encouraged as it's traditionally one of the lighter quarters in business aviation. Once again, this is a testament to having the right strategy and the right level of execution. All that said, we will remain focused on the leveraging and operational predictability. We are on a good path for the full year, as well as our newly raised 2025 objectives. It seems I'm always ending over to Bart to tell you about successful debt pay down and debt rating upgrades. That's certainly a trend that we intend to keep, and we won't fire of it. But allow me to also commend Bart and the team for a tremendous few quarters and years, really, of making our balance sheet stronger. Most recently, Moody's upgraded Bombardier's corporate family and senior unsecured notes rating to B2 and maintain a stable outlook. On that note, Bart, congratulations, and over to you.