Bombardier Inc.

Good morning, ladies and gentlemen, and welcome to the Bombardier Third Quarter 2024 earnings conference call. Please be advised that this call is being recorded. At this time, I would like to turn the conference over to Mr. Francis Richer de La Flesche, Vice President, FPNA and Investor Relations for Bombardier. Please go ahead,

sir. Good morning, everyone, and welcome to Bombardier's earnings call for the third quarter, and it's November 30th, 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 MDNA. 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 Damoski to review our operations and financial results for the third quarter of 2024. I would now like to turn over the discussion to Eric.

So, thank you very much, Francis, and good morning and welcome to all of you. So good morning, everyone, and thank you for joining us today. I am delighted to speak to you about another very positive quarter for Bombardier. Our services strategy yielded record results. Our aircraft sales team is very active in helping sustain our cruising altitude of one on the book to bill. And finally, our defense team continues to put points on the board. The Pegasus program is a great example. A few weeks ago, we just celebrated the first flight of Pegasus aircraft along with our partners at Ansold and Lufthansa Technik. This marks the beginning of the flight testing phases for this new generation German program. Turning to the results, Bart and I will go through the detail of our performance shortly. But let me start by taking a minute to provide some color on how we are shaping up to close the year. All the ingredients are in place to deliver our fourth quarter and our 2024 guidance. Clearly, the fourth quarter has always trended as the busiest in the industry. This year is no different, with the exception being that we are still working through the same supply chain headache as the rest of the industry. I am happy to reaffirm that we are all prepared. I review our operations daily and as of today, we have an excellent line of sight on all deliveries for the next two months. Our team has worked hard to ensure inventories are in place and the completion sites are equipped to do what they do best. When it comes to service volumes, it's simply steady as it goes. And it's been steadily going up year after year. It's a great business for us. We continue to grow or capture rate by making things easy for customers and ramping up new facilities. We are well on our way to meet our long-term growth targets with room to spare. In terms of keeping our -to-bill on pace, the market is well balanced and is providing to be resilient. Of course, that doesn't mean it's excellent everywhere all at once. But that being said, we continue to be successful because we focus on what we control. We have ramped up our international presence to build deep relationships with customers. The same is true on the defense side. With this strategic approach, Bombardier remains ahead of the curve on nurturing customer relationships to capture emerging opportunities as they arise. Not chasing the market is important to drive operational predictability. We have boots on the ground everywhere in the world. And ultimately, our family-like approach has set us apart and elevated our brand. Geographical markets are just as important as customer segments. We are diversified and perform on both fronts. I am happy to underline that today's reported backlog stands at exactly the same point as last year, thanks to the diversity in terms of both geography and customer types. Having exceptional product always goes a long way. The Global 8000 is a great example of our team's ability to not just push boundaries, but also define them for the industry. The Global 8000 will be the fastest civilian aircraft since the Concorde. I am proud to say that our team has their brand on the first unit. In case you missed it, at NBAA Base this year, we announced that program reduction has begun with our site in Texas, Quebec, and Mexico working on the first major structures. We also celebrated reaching more than 60 speed records on the Global 7500. This plane's first years of service have been remarkable. The plane has literally flown circles around the competition and the globe, making the most of a five-year head start. This year, the Global 7500 fleet will grow to more than 200 aircraft. I have the privilege to personally meet customers around the world as they select the Global 7500 or prepare for delivery. I could easily fill this entire call up with the great stories they have shared in terms of what the plane's performance and globe has unlocked for their productivity. But we are here, of course, to review the third quarter. The standout TPI is also closely tied up to our customer. We reached 528 million of service revenue on a total of more than 2 billion for the quarter. Those results speak for themselves in terms of how we have elevated both the client experience and our ability to execute the plan. These efforts were also recognized in an industry survey where Bombardier's service offering placed first versus industry peers. Overall, we are successfully ramping up large service expansion. We are capturing more heavy maintenance as well as capturing power by our customer who upped into our smart parts services. Bombardier innovated that model decades ago and today it has expanded to include offering for scheduled and unscheduled maintenance and digital services like SmartLink Plus, for which we see a high upgrade at time of delivery. Speaking of deliveries, we landed on a solid mix with 30 units, even after pulling some into the second quarter as we discussed last July. Considering this and the typical Q3 seasonality related to vacation period, this is a very solid performance by our team. On the profit side, we continue to see year over year growth, reaching 307 million of adjusted EBITDA. That's 8% more than the same quarter last year. Bart will go into further detail in just a moment, but I do want to underline that our team has performed extremely well managing the business and maximizing the bottom line. We have given ourselves room to maneuver in a flexible and agile way. These are without a doubt two important attributes to keep in a dynamic environment. It allows the entire team to remain laser focused on our priority of deleveraging. A recent example of this is increasing our credit revolving facility by 150 million subsequent to quarter end. Overall, we have set ourselves up to succeed in 2024 and make it another milestone year for Bombardier. I continue to be very encouraged by our strong fundamentals, by our year over year growth, and by overall momentum in all parts of the business. All of this has led us to be recognized as part of the TSX 30 list for the second year in a row. This recognition from the Toronto Stock Exchange for the top performing companies on the TSX is a performance for the past three years into consideration. To cover more on that and our detailed financial, I'd like to end the call over to Bart.

Thank you, Eric, and good morning, everyone. As you just heard, the last few months were certainly filled with many important achievements for Bombardier. The TSX 30 recognition underlines our strong performance and success over the last three years, and we continue to take steps to remain successful for years to come. I'm particularly proud of our services team's performance, including their recent number one industry ranking that Eric just mentioned, as well as the strong financial results they have delivered with a 28% year over year growth in service revenues to a new quarterly record of $528 million in sales. We've talked about the significant growth profile for this business, and I'm confident that this impressive growth will continue well beyond the end of this decade. On the aircraft side, our manufacturing and supply chain teams continue their tireless efforts to keep our deliveries in line with our plan, and order activity remains balanced with deliveries, allowing us to stay on track with our target -to-bill of one ton. Financially, we've delivered a solid quarter. Revenues and profitability are up year over year, and we're on track to deliver our full year guidance. We've also continued to strengthen our balance sheet and ended the quarter with $1.2 billion in equity, which excludes the $150 million increase in our secured revolver that we announced today. De-leveraging remains our top priority for excess cash, and we will continue to be opportunistic in the debt capital markets over the months to come. All put together, our team is performing exceptionally well. We are taking the steps necessary to secure a strong future for our company, and we are demonstrating resilience, especially in the face of heightened geopolitical tensions and continued challenges in the supply chain. So let's turn to our financial performance for the third quarter in a bit more detail. We reached consolidated revenues of $2.1 billion, representing 12% year over year growth. This increase comes from an impressive $114 million, or 28% increase in aftermarket revenues, as well as a $92 million increase in manufacturing and other revenues linked to aircraft mix and higher pricing. Moving to profitability, our adjusted EBITDA for the third quarter totaled $307 million, representing an 8% for $22 million increase versus Q3 of last year. Our adjusted EBITDA margin was 14.8%, which is down slightly from the .4% we had for the same quarter of 2023. However, year over year, we saw solid margin conversions from our incremental aftermarket revenues and improved aircraft mix. Pricing gains for the quarter were offset by cost inflation, as well as disruption costs related to our supply chain. Margins were also diluted by some non-referring costs, including additional expenses linked to share-based compensation programs following the strong run-up in our stock price during the quarter. Adjusted EBITDA was $201 million, a 4% increase from the third quarter last year, with an EBIT margin of .7% and adjusted net income was $81 million, representing $0.74 of earnings per share. Looking at free cash flow, we had $127 million of cash usage in the quarter. This usage includes investments of $149 million in inventories and $46 million in capex. Our cash interest expense is $60 million and advances reduced by $33 million, simply as the result of normal order and delivery mix fluctuations. Finally, we had some annual planned pension contributions in the quarter, as well as one-time outflow in July related to the settlement of the New York bondholder lawsuit. Looking ahead to the end of the year, we remain on track with our full year guidance across all metrics. We are expecting a very active fourth quarter for deliveries, and as Eric mentioned, we are well positioned to meet our delivery target. We are also expecting continued strong aftermarket performance, which, combined with higher -over-year delivery activity, will be the key drivers to reach our full year guidance for revenues and EBITDA. Turning to free cash flow, the cash profile so far this year has been right in line with our expectations. Much like Q4 2023, where we delivered almost $650 million of positive free cash flow on 56 deliveries and $482 million in aftermarket revenues, we expect even stronger cash flow generation this year as we deliver more aircraft as well as incremental aftermarket growth. We expect the cash flow generation to be driven by a significant reversal in inventory, combined with strong EBITDA contribution and continued stable order activity. So to conclude, we are well positioned to close out 2024 in a strong fashion, and we are looking forward to continued success in 2025 and beyond. With that, let me turn the mic back over to Francis to begin the Q&A.

Thanks, Mark. I'd like to remind you that the Bombardier Investor Relations team is available following the call and in the coming days to answer any questions you may have. For the question period, please limit yourself to one question and one follow-up. With that, we will open it up for questions. Operator?

Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touch-down phone. You will then hear a three-tone prompt acknowledging your request. And if you would like to withdraw from the question queue, simply press star followed by two. And if you're using your speakerphone, we do ask that you please lift your handset before pressing any keys. Please press star one now if you do have any questions. First, we will hear from Conor Gupta at Scotiabank. Please go ahead.

Hi, this is Eli, filling in for Conor. Good morning, everyone. Yeah, good morning. Good morning. My first question is on aftermarket. Where do you see any potential need for capacity expansion in your aftermarket services business? Would you be more inclined to tuck in or organically add that capacity?

Yeah, I think this is a great question. You know, the team right now, you know, we're in the mid of developing our strat plan. And we are having discussion right now about what's our next move into the aftermarket to even grow it further and support the plan we have. So clearly, geographically, there is, you know, the US remain an area where we will have to do something which we are thinking about right now. And I would say also, I think Middle East is another area where we are working on right now. We have already had capacity quite significantly about two years ago in Singapore. But still, you know, this is growing so fast around the globe that every single region right now we have things in consideration. So clearly, you know, our strategy of bring your jet home is delivering the expected results as you've seen, you know, we've more than doubled the business actually over the last four years, five years, since we started that journey. And, you know, we are contemplating to even grow it further between now and 2030. So the team is active right now. We'll make some announcement in due time. But clearly, you may think about, you know, pretty much overall everywhere we're going to have to grow our capacity to be able to cope with the work right now.

Thank you. That's helpful. And maybe just one more on outlook. Based on current backlog and your discussion with customers, how do you think about the production rates for Globals and Challengers heading into 2025?

Yeah. So I think, you know, as we said during investor day, we see quite a bit of stability in terms of production rate for the future years. And as I stand today, this is exactly this. We still have that conclusion. So we do foresee, as I said, you know, we have exactly the same dollar backlog or plus or minus that what we have a year ago. So the team has been successful despite the increased number of delivery to keep that backlog, overall backlog. So the demand remain pretty solid and sufficient for us to be able to preserve that backlog. So, you know, our target, we never look at it quarter by quarter. But if we look at the overall year, and I think the number I just quoted, you know, support that is to have it booked to bill of one. So today we said, you know, we think about 150 plus in the next few years. And that's still what we're seeing.

Thanks for the color. Appreciate the time. That's all my question. Thank you so much. Thanks for your question.

Next question will be from Seth JP Morgan. Please go ahead, Seth.

Hey, thanks very much. And good morning.

Good morning.

Just wanted to ask, you mentioned kind of the supply chain challenges that are out there and the operating environment. You know, if we look at if we look at gross margin, I think it was down a little bit year on year, services was up as a portion of the mix. And the mix was also a first year ago quarter. And so when we think about, you know, what's kind of putting pressure on the gross margin, you know, should we think about that kind of representing the inefficiencies that are out there in the supply chain?

Absolutely. This is the main thing that I think explain a very small margin dilution maybe. But if you so there are they can be considered like as a one timer kind of thing. So, you know, and we're not talking about big dollar here, probably 10 million more of EBITDA would have made the same percentage. But, you know, clearly the supply chain disruption remain. This is one thing that I'm telling you, we're working extremely hard. The good news is that I think we have less supplier impacting us. But some of the supplier have not And as you know, we all need we need all the bits and pieces to be able to deliver the airplane. So and especially I said that before engine remain, you know, the main area for us. And I think it's not a bombardy issue. It's an industry issue. I think we've been I think fairly well in that circumstances. We've met our guidance in the last two years in the deliveries, where I think one of the only we am if not the only that has been successful doing that. And we are still going to do it this year again.

Yeah, and Seth, if I could, it's Bart, if I could just add one thing to Eric's comments. We did have a couple of one timers in the quarter, one specifically related to long term incentive comp. You know, it's one of those things that happens when you have great success and your share price runs up very materially. And, you know, we had to take a booking for that. And that amount actually was in excess of the 10 million that Eric mentioned, which is the difference between 14.8 and 15.4. So actually, when you look at it on an all in basis, we probably had an improvement year over year when we take that one time route.

Okay, excellent. Excellent. Good to know. And I'll stick to one this morning. Thank you very much.

Thank you,

sir.

Thank you,

Seth. Next question will be from James McGarigal at RBC. Please go ahead, James.

Hi, this is Louis on for James. Good morning. Yeah, good morning. So just just want to follow up on the announcement from Wheels Up. Do you see that as a tail end for services revenue long term? And do you see further opportunities from fleet operators, either moving to your product or servicing directly with you?

You know, absolutely. I think you've seen, I think we've been bullish on our CPU business and the potential growth. As you know, we have a lot of airplanes in the field out there. Think about a program like the 300 that became the 350 and the 3500. So there is, you know, close to a thousand airplanes in service. Some of them are starting to age. They make a lot of sense for a lot of customer, you know, and the example you just provided is one of them. But clearly there's people looking out there to take these airplanes, refurbish them and, you know, do all the maintenance that is needed. So that's that's clearly a potential for us. And, you know, the the the opportunity is clearly out there to for us to do this. Because I think, you know, with our certified pre-owned program, we bring probably more value than the average, you know, other people that can do it in recertifying, you know, providing warranty and so on and so forth.

Great. And then for my next question, just thinking long term, you know, looking at 2025 pre-cash flow targets, if we think about the opportunity longer term, you know, some growth and defense, steady margin improvement from global services, you know, interest cost savings, paying down debt, no tax, balance, networking capital, this this translates to a double-digit free cash flow kegger out to 2023. So just going to get your take. Are we thinking about that correctly?

Yes, Bart here. I think you laid out our whole strategy actually quite well there and would agree. We are we are looking at very strong free cash flow generation from the core business. Which is key, you know, as we as we continue to grow EBITDA, we have very, very strong conversion rates to free cash flow. We have several hundred million of EBITDA growth in the plan for next year that we've been very candid and clear about that. And with that strong conversion, we're looking at a period that we're going to come into where free cash flow is going to be a big part of our story and value proposition. So I think, yes, you've got that right. That's certainly how we're looking at it. And the key for us, and Eric mentioned earlier, we're right in our strategic planning cycle right now, is how do we deploy that cash the most effectively to drive value for all of our investors and stakeholders? So that's the big item on the menu for us. And we're thinking through that right now. Clearly through our scrap planning exercise this

year, I would say capital allocation was one of the main subjects. You know, how do we do it in the next five to six years, you know, to have the best return

for our shareholder? Great, thank you. I'll turn the line over. Thank you. Thank you.

Next question will be from Benoit Poirier at Desjardins. Please go ahead, Benoit.

Yes, good morning, everyone. First question, when we look at the increase in inventory and work in CAP, I was wondering if you could provide further details about what drove the increase in inventory, whether it was to support the supply chain issues or further investment to support the steeper growth in deliveries next year. And following this larger unexpected investment in the third quarter, should we expect you to come to the lower end of the free cash flow guidance for the year?

Hey, good morning. Benoit Poirier here. So, yeah, on inventory, third quarter in a row, very consistent with last year actually that we had inventory growth. Obviously, we plan for about 40% of our deliveries to come in the fourth quarter, same as last year. So that's a very significant number of deliveries. And, you know, we do need to build inventory to meet that demand, plus starting to put the pieces of the puzzle in place for growth next year. You know that in Q1, because we really emptied the manufacturing facilities and finishing centers in the fourth quarter, we need to be prepared to start to go back to work because there's literally no aircraft when you walk back into the sites on January 1st. So that's a part of it. And it'll continue to be that way. About $800 million in build so far this year. When we look at free cash flow for the year, Benoit, really all the guidance I can give you right now is what we've said so far that we expect to meet our guidance for the year. You know that if you look at last year relative to the first three quarters, how the fourth quarter performed, we're expecting another strong free cash flow performance in the fourth quarter. We have many deliveries to do. And as Eric mentioned, sales activity remains very balanced and positive. So that's really all I can give you for guidance right now.

Okay, that's great. And just to come back on the, in terms of what just to come back on the free cash flow, obviously a pretty solid outlook going forward. Would be curious to get any additional thoughts on the capital allocation and where are you right now in your discussion and the options that you're looking at versus what you, the comments you made earlier at the investor. I was wondering if there was some progress in terms of capital allocation discussion?

Oh, I think Benoit, this is a great question. And you know, we're in the middle, as I said, to work out our strategic plan. And clearly capital allocation was one of the main subjects. You know, we've started to discuss it internally with the board and with everybody. But I think you need to think about this the same way we mentioned it investor day, you know, that we will definitely of course have to reinvest in our business. We're thinking of derivative, we have a defense business now that we need to think about. But also, we need to think about, you know, how we could reward the shareholder, you know, which could be different form. We've mentioned that could be, you know, like buyback and things like that. So we're going to have to think about all this. And of course, one of the main options, you know, could be also the reimburse even further in terms of debt. So those are all in play. We haven't quantified, we're starting to. And we're going to have to be opportunistic and see how things are evolving. But that's how you should be thinking about it for now.

That's great, Caller. Thank you very much for your time.

Next question will be from Kim James at TD Cowens. Please go ahead, Kim.

Thanks very much. Good morning, everyone. First question just on the aftermarket services revenue, very, very good quarter. You know, is it fair to assume that this growth rate moderates going forward? And then I'm just trying to understand if there's anything from there that just caused such a great quarter. I'm not suggesting maybe it steps back down, but just in terms of the growth rate, you know, was there particular new facilities of significant size that came online or what really was behind that great result?

Yeah, so I think, you know, looking at it quarter per quarter is one thing. But if you look at it, the trend moving forward is this business is going to continue to grow for us significantly. And I think we've said that at investor day, you know, we're going to be achieving $2 billion of aftermarket revenue fairly soon. But then after that, you need to think about the install base. As I like to say, we have a bit more than 5200 airplane right now. Every year, we're going to be adding about 150. There's about 50 retiring. So the install base on his own is growing. So and we're working at capturing, you know, with our footprint, more market share. So all this to say that we have an aggressive plan to grow market share, and we've been successful so far, you know, this year will be in the zone of about 50% or close to, you know, we started that journey being at -33% market share. So the market share is growing, the install base is growing quite significantly. So we have a clear line of sight. And on top of it, you know, the airplane that are in the base are maturing, you know, we're replacing usually smaller airplane by bigger airplane, which require more maintenance and are more expensive to maintain. So this is a great story for us. So just that the long term trend, and actually, I say long term, but some of them are pretty short term. And that's what you see, you know, starting to deliver, we've been delivering growth, you know, from quarter to quarter for the last four years. And we're very excited about what we are seeing in front of us. So, you know, we like that business, the margins are good, and it keeps going up. So that's how we're thinking about this.

Great. Thanks, Eric.

Thank you so much.

Next question will be from Miles Walton at Wolf Research. Please go ahead, Miles.

Thank you. I had another question on aftermarket, if I could. Is there a change in the underlying product or service mix of your aftermarket today versus a few years ago when you had only one third of the market share? That is, are you insourcing more of other aspects of the aftermarket? And is there any resultant impact on the margin profile of the mix?

Yeah, so this is a good so we're doing a couple of things. So product mix is helpful. We have a lot more global and more global, you know, and very often I was talking about 50 airplane retiring a year. Usually there's a big mix of Learjet part of that. So we have bigger airplane. The other thing we've done is not only to go and capture, you know, the heavy maintenance work, but vertically, we are more integrated, we do more CRNO work ourselves. So you know, maintenance instead of sending it to somebody else to do with. So we have more work that we are doing internally. So all this together, you have a bigger fleet, you've got more work coming your way, but on top of it, you're more vertically integrated in terms of the maintenance you're performing on the airplane.

So just to clarify, is the margin drop through of aftermarket sales today similar to what it was when you only had a third of the market share?

Yeah, the margin has slightly improving, but we're clearly either maintaining, we've always liked that margin and that margin is getting, you know, slightly better.

Perfect. And just one quick one, how sensitive is the 2025 financial targets to the G800 certification next year?

Global 8,000. Global 8,000, you mean? Yeah, yeah. Thank you, Miles.

We're right on track to bring that aircraft into service. The test of flights are happening as we speak and in-service is planned for the second half of the year, so it won't have a big impact. That will really start in 2026.

Yeah, the real ramp up is in 2026, so there's barely no risk for next year or very little.

Okay, perfect. Thank you.

Thank you. Next question will be from Ron Epstein at the Bank of America. Please go ahead, Ron.

Yeah, good morning. Good morning, Ron. A couple quick ones. On your supply chain, broadly it's getting better, but my understanding is there are still some difficult spots, things like windows, wind screens, engines depending on, you know, which engine. Can you speak a little bit to that?

Yeah, for sure. For sure, Ron. It's a great question. You know, clearly engine remains the main thing for us. When I walk around the factory right now, you know, I've got, you know, work off position and things like that, and it's mainly driven by engine. Wind shield on our side, I think, is much more under control than it was a year ago. We had tire, we had all kinds of issues, but those have been pretty much put under control. So we have a few, I would say, tier two, tier three supplier, you know, that cause issue. But I think we've been, I explained that before. I don't know if you had a chance to look into that, but I have what we call out there, an army of navigator, and their job is to foresee the problem coming early, as early as possible. So my guys cut issue, you know, 12 months, 18 months before they hit us. So we're in a better position to sort them out. But clearly, I think the engine is clearly, and when I say engine, I put APU also in that category. So engine and APU casting has been a real problem. It's, you know, they make a batch, you know, they have defects, and then we need to wait for the next batch to come up. So that's how we've been mainly impacted on our side. But guys have been very creative. We've still been able to move things around and meet our guidance in terms of delivery. And we were hopeful to do the same thing this year.

And I mean, if you could just speculate, I know this is a tough question. And if you can't understand, if the supply chain just could meet what you wanted to do, how much better could your deliveries have been?

Is that you know, we grew a rate, I think we could be probably doing slightly more, you know, eventually this will normalize. But I think, you know, we would like to deliver a few more if we would like the engine, you know, and early in quarter. So that stability, you know, and avoid the Q4 having 40% of the delivery, having a more stable supply chain will be helpful to avoid that. So I think it's not exactly the number of more airplane, eventually you'll catch up and you'll get more airplane in the short term, it's going to be more of a one timer. But as you as you stabilize and get your parts on time, you would see a much better flow, a much better flow from a quarter to another than what we are experiencing today.

Yeah, you know, you know well that when we have more regularity in terms of deliveries per quarter, it takes fluctuations of working capital out, it allows us to perform the work on the aircraft in order, which is a fairly material cost headwind that we've been able to overcome over the past couple of years and expect to in the future. But that's opportunity for us once things do get normalized.

Yes. Got it. And maybe just one last one, switching to the defense business. The US DOD is focusing a little bit more on unmanned platforms. Have you guys thought about that? I mean, is there an opportunity for you there? I know that's a little different than what you're doing, but just broadly speaking. Absolutely,

Ron. This is something we're thinking about. Yeah, that's the short answer. Because there's quite a bit of thinking about that. You're absolutely right. And, you know, we have the talent and the capability of doing SOAR projects. Think about our EcoJet as an example or other platform, which we could probably bring those technologies on. Got it. All right. Thank you. Thank you so much,

sir. Thank you. Thanks, Ron.

Next question will be from Cameron Dirksen at National Bank. Please go ahead, Cameron.

Thanks. Good morning. I wonder if you could just go in a little more detail on what you're seeing on the order front, maybe some color around what geographies are strong. Has there been any, I guess, change in the last quarter from what you commented on a quarter ago?

Yeah. Thanks, Cam, for the questions. It's Eric here. You know, we've seen in Q3, I would say, a very normal in the rest of the world. The United States were interesting in a sense that we had one part of the United States that did perform extremely well. The other part of the United States, thinking about West Coast, East Coast was a bit softer. But, you know, this is history right now. Everything is back to normal. We're working on all cylinder right now across the board. So the U.S. remained pretty positive. And I think, you know, yesterday, the whole election, you know, was creating a bit of uncertainty. I think, you know, having clarity on the results yesterday was probably, is probably a positive for us to complete the quarter and to engage into next year. Middle East remains very strong. I would say the only place that I think been slower this year was Europe. But I think it's very, I'm very encouraged right now because this quarter, we feel that Europe is in a better place than it's been all year. Middle East and APAC is still, you know, doing very well.

Okay. That's very helpful. And this may be one really quick one for Bart. Just looking at the CAPEX year to date, it's sort of trending, I guess, lower than what we've been expecting. Can you just maybe comment on what your expectation is for the for the full year?

Yeah, thanks. Thanks, Cam. It's so full year. We're projecting to be a little bit below CAPEX spend of last year, which was, if I remember right, just around 270 million. We do have quite a bit going on in the fourth quarter, but we'll be, you know, we'll end up towards the lower end of our target range. You know, we guide to somewhere 250, 300 million. So you should expect us to be at the low end of that, or maybe even a bit below to

finalize the year. Okay. That's very helpful. Thanks very much. Okay. Okay. Thanks.

Next question will be from Gavin Parsons at UBS. Please go ahead, Gavin.

Thanks. Good morning. Good

morning.

I wanted to ask about the, you know, manufacturing revenue growth in the quarter, one fewer delivery. You mentioned higher price. Just wanted to get a sense of how price is trending versus, you know, I know you had favorable mix year over year.

Yeah. Good morning, Gavin. Spark here. So on the pricing side, you know, we've seen very good pricing environment for several years now. You have to remember when we have a, you know, close to two year backlog in place, the pricing that you're seeing us, gains that you're seeing us enjoy now are things that were locked in 18, 24 months ago. So that, however, that pattern has continued. We've been able to to work on price increases year over year. We're expecting that pattern to continue in the coming quarters. So overall very constructive. I think as Eric described, you know, we're seeing a very, just a very stable environment when it comes to demand versus availability of aircraft. And when you have backlog in place, obviously that puts us in a good position to be having the right conversations around pricing on aircraft. And that's contributing to revenue growth for us as well. You know, we're up 12% year over year on the quarter from 1.9 to 2.1 billion. And that's translating as well, those pricing gains into a strong EBITDA conversion into free cash flow. So it's all very good on that front.

Okay. That's helpful. And I mean, thinking about that conversion, I think in the quarter you'd mentioned, you know, price gains were offset by inflation and supply chain. If we strip out supply chain or at whatever point that normalizes, should we expect price to still be favorable going forward relative to cost?

Well, certainly, as we're sitting today, they're about even when we think about the impact of inflation, the supply chain relative to the pricing gains. So yes, once we're able to normalize the supply chain, that is a headwind that when coming out should be margin accretive for us.

Got it. Thank you. Okay. Okay. Yeah. Thank you, sir. Thank you.

Next question will be from David Strauss at Barclays. Please go ahead, David.

Hi. Good morning. This is Josh Coran on for David. So just to start, I wanted to ask if you're seeing any benefit from the G700 delivery delays?

Thanks. The honest answer is yes. You know, I think, you know, the 7500 is proven. We have about 200 airplanes that are flying out there. It's been an extremely appreciated airplane so far, reliable airplane. I was mentioning earlier that, you know, and this is true, you know, I'm flying all around the world and meeting customer who have at 7500, everybody is extremely satisfied of the product. And, you know, of course, our availability is, you know, we have availability, so that's great. So people really, really like everybody that's on that airplane, you know, really like it. So clearly, you know, having competitor, you know, with delays and, you know, maybe an unproven platform is helpful for us.

Great. And then wanted to ask about fractional. If you could maybe frame how much is the order activity this year and how much of the total backlog is from fractional customers?

Yeah. The backlog is usually around 20% on the long run, you know, plus or minus. So we got a few, you know, we got a few options being exercised this year. So the pace is continue with the fleet operator very positively. If you look at flight hours for Q3 and you compare to 2019, they are 50%, at 51% on Marge plane. So we have hundreds of order on options. These guys, they're all growing right now. You know, clearly, I think we've explained that before, you know, there was a new normal after COVID post COVID that was established. A lot of people were concerned that that new normal was not going to stay. But I'm telling you, after two years post COVID, it's ticking. And so we see the flight hours even continue to grow for the fleet operator, but even also overall. So the fleet operator and I know that we are extremely well positioned bombards you with the fleet operator, which is a great place to be right now because these guys are seeing quite a lot of growth.

Great. Thank you.

Thank you. Operator, time for one last question.

Thank you. Our last question is from Jay Singh at Citi. Please go ahead, Jay.

Thank you for taking my question. Jay, dialing on for Stephen Trent. Considering the success of the global business jet's traction with

the US military, could you guys see or replicate such success in other countries?

Yeah, I think, you know, it was breaking a little bit, but I understand that, you know, based on the global jet success in the defense world, if we're going to have the potential to work with other countries, that's what I understood. So if that's the question, yes, absolutely. You know, so clearly we have some significant program we won over the last few years. One I've mentioned earlier with the German Army is an air force is going on. So we're working with Germany. We've talked about Sweden, and we of course have the US, but also being on the 80s program with the US is a platform also for the highlight to tap in. So eventually, you know, at first, I think we're going to be delivering 80s program more to the US, but eventually there'll be potential, there'll be possibilities, I should say, for other countries that are highlight countries.

Great. And are you guys happy with your pipeline of mechanics and engineers? Pipeline of? Mechanics and engineers.

Oh, yeah, in terms of resources, in terms of engineer? Yeah, absolutely. You know, we have a good base and we've been able to hire the people we needed to hire all around the world. So we're in a good place there. Thank you for your question. Thank you. Thank you so much. So, thank you, everyone, for joining us today. You know, as this is our last touchpoint before the holiday season, I just wanted to first take a moment to wish everyone on the line from the US a happy Thanksgiving, which is just around the corner. And after that, I wish everyone a warm, safe and restful holiday season and all the best for 2025. Safe travel to all those visiting family and friends. We know first hand how busy the air transport system gets during this time, and we will be very active in supporting our fleet's reliable dispatches. So between now and then, our teams will be very busy delivering our year end, and we look forward to speaking with you all in the new year. Thank you.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, do ask that you please disconnect your lines.