Bombardier Inc.

Good morning, ladies and gentlemen, and welcome to the Bombardier first quarter 2024 earnings conference call. Please be advised that this call is being recorded. At this time, I would 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, 2024. 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 2024. I would now like to turn it over to Eric.

Thank you Francis. Hello and welcome everyone. Good morning everyone and thank you for joining us today. Let me first start by highlighting the great performance demonstrated by our teams during the first quarter of 2024. We continue to execute our plan with discipline and made important strides in positioning ourselves for future growth. Highlights of the quarter include a strong backlog increase, a notable percentage margin improvement, and a highly favorable book to bill. This solid start reinforces our confidence in our ability to reach our guidance for the year. Before we take a closer look at the quarter's result, I would like to come back on the announcement we made yesterday. It's a historic moment for Bombardier. Those who have followed us closely have seen how much we have transformed in terms of our core businesses, our employee engagement, and our balance sheet. So it was time to transform the company brand. The exercise was inspired by people. Our new brand identity reinforces our successful shift towards business aviation and propels the company forward. I hope you have had a chance to take a closer look at our new logo. We have introduced a symbol we call the MOC. It's a forward-facing shape that represents air smoothly flowing over the wing of a jet. Of course, the company's heritage also remains deeply rooted in the name Bombardier itself, after our entrepreneurial founder, Joseph Armand Bombardier. His legacy has carried forward with Laurent and Pierre Beaudoin. Over the next few months, we are excited to show more details about this brand evolution. The first opportunity for most of the financial community on the line today to see its first hand will be during our Investor Day on May 1st. I hope that many of you listening today will be able to attend and see the amazing facility we build at Pearson, but more importantly, the proud and passionate team behind it. To me, our operations in Toronto are practically a metaphor for the transformation Bombardier is completing. We went from a large industrial footprint with many businesses and product lines to a streamlined space that's leaner, greener, focused, and ultra-modern. Our brand evolution elevates what already makes Bombardier unique today. How we put people at the center, creating customer-like family, and creating deep relationships. We truly have a family-like relationship with our customers, and it's a team that is very important today as we examine our earnings for Q1. Customer metrics are at the heart of the good work we have done to start the year. We grew unit orders year over years, as well as posted another double-digit services growth quarter. Jet orders were up 60% versus Q1 last year, which represent excellent traction in our traditional client markets, fleet operators, and new opportunities materializing for Bombardier Defense. Backlog has been a key driver of operational predictability. We saw robust activity on the market with a first quarter unit book to bill of 1.6. This has increased our backlog by 700 million. We therefore continue to stand with a multi-year and well diversified backlog now at 14.9 billion. Services revenue continue their steady progress. posting a 13% year over year gain. Their momentum towards growing into a $2 billion business is remarkable and won't stop there. We continue to fill our newly built services center with more and more of the existing fleet with every passing month. Adding to this, we are seeing a high capture rate for service program like SmartLink Plus on new aircraft deliveries. This is key to continuing our organic growth in the aftermarket. It's a win-win for our customers and who receive peace of mind knowing the OEM is with them every step of the way to help them operate with high reliability and financial predictability. On the delivery front, we remain on track to deliver between 150 and 155 aircraft in 2024. Our teams completed a total of 20 deliveries during this first quarter, down by two aircraft compared to the same quarter last year. This follows our plan for the year, as I already mentioned during our call in February. We adjusted our delivery profile to meet the challenges we are facing with the supply chain. Our focus during the first half of the year is to build our inventory in order to deliver high volumes of aircraft in the second half. We are taking the right step to meet the continued demand for our aircraft and to reach our objectives. The business jet market is resilient and utilization continues to increase. In fact, Bombardier aircraft have recorded a 7% growth in flight hours in March 2024 compared to the same month last year. It's a good sign that people have stuck with business aviation post-pandemic. Regionally speaking, our sales team is well-placed to capture activity as it springs up. We are seeing activity in the Middle East and Asia, and the American market remains strong. We also have signs of an uptick in Europe. From a mixed perspective, You will remember we closed 2023 very strong on challenger 3500 order. The first quarter was marked by strong activity on the large cabin side of the business. As anticipated, we are seeing a lot of activity around the global family, a trend which is expected to continue in 2024. We like what we're seeing with regards to our product and how they line up on the marketplace. Taking a step back to look at our result as a whole, I am pleased to say that we are on track for the year. Bart will go into more details with you shortly on our financials, but I do want to touch on two areas of particular interest. First, deleveraging. It's notable because we continue to do it in a very steady and methodical way. Clearly, we are ahead of where we wanted to be. During the month of March, we further announced a 100 million more debt retirement through use of excess cash. As we balance this all, it will lead to exciting opportunities to move from a transformational and turnaround mindset to future growth. Bart and the team have done a tremendous job of making our balance sheet something everyone can be proud of. Next, when it comes to our operating margins, we have very diligently focused on what we control. This approach has yielded one of the results I am most proud of this quarter, our 16% EBITDA margin. This is a great start to a year and points to how meaningfully we have shifted our cost structure. As mentioned, Services are, of course, a key margin driver, so continuing to grow that business is key to creating a steady base to build on. On the product side, our Challenger aircraft continue to perform extremely well in the market and we're another key driver this quarter. The platform recorded a large increase in deliveries compared to the same quarter last year and had a great impact on our bottom line. Our global family of aircraft also continues to raise the bar with the Global 7500 on track to transition to the Global 8000 in the second half of 2025. With an optimized facility and footprint now in place, we are poised to maintain the program's accretive position. The aircraft is performing on all fronts, on the bottom line and in the air. We have set speed records as have some of our customers. Reliability is very high for a young program and we see a lot of operators using the jet on long legs very routinely. I am delighted that Bombardier has set the bar for the category and will raise it again in 2025 with the Global 8000. Bombardier entered the year with an excellent product mix. We're ramping up Challenger production in 24 and Globals for 25. And while we continue to require more working capital investment in the near term, we will be well placed in the second half of the year and well beyond. Our products will continue to lead the market in that category with the best plane supported by the best people. And before I pass the call to Bart, I want to take a moment to reiterate that it is truly exciting time for Bombardier. We have a clear line of sight on the upcoming year and well as where we need to be for 2025. This represents a generation transformation our employees and stakeholders can be proud of for years to come. Their hard work continues to pay off. And as we round the corner, I wanted to thank everyone who stepped up to the plate to make this all happen.