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spk_0: the day ladies and gentlemen welcome to the see a second quarter conference call please be advised that the call is being recorded i would now like to turn the meeting over to andrew aren't of it you may now proceed
spk_1: good afternoon everyone and thank you for joining us today before we begin i'd like to remind you that today's remarks including management a book and answers to questions campaign forward looking statements the forward looking statements represent their expectations as of today november eleven twenty twenty one and a quarterly are subject to change such statements are based on assumptions that may not materialize or so to risks and uncertainties actual results we differ materially and listeners are cautioned not the place undue reliance on the forward looking statements that description of the risk factors of assumptions that may affect future results was contain and seed annual and dna available on our corporate website and in our filings with the canadian security the administrators on cedar and the us securities and exchange commission on edgar on the call would be this afternoon or macau sees president and chief executive officer and sonia branco our chief financial officer after remarks from market sonia will take questions from financial analyst and to funnel investors and following the conclusion of that you in a period will open the called the question from members of the media let me now through the call over to mark
spk_2: andrew a good afternoon everyone joining a call
spk_3: let me just start by room
spk_2: remaining remaining all of us that today's november eleven veterans day in the as they were member states and canada so let me just start by saying thank you all veterans for their service iran is deliberate level we honor members of military for past and present that for droplet
spk_3: those who made the ultimate sacrifice for freedom and those who served our country today
spk_2: i can see with privilege work with everyday with many veterans we have over two thousand points you and i could tell you i'm honored to work and be the company of heroes
spk_4: they bring a unique point of view and skillset to company and apply that allows us to cheap new life
spk_2: now onto the court
spk_4: and then environment where we continue to experience that only been recovering a barrier markets and geography what we operate a deliver year over year growth in the second quarter
spk_3: follow the basis we drove sixteen percent year over year revenue growth and seventeen cents on adjusted earnings per share
spk_4: these results he mainly from the strengthening of are still trying business but continued progress or actual cost savings program
spk_3: and integration belfry harris military training into our defense result
spk_4: we also bill and moment that would eight hundred seventy billion the
spk_3: eight hundred seventy one billion dollars an hour for positive book sales ratio at one point or seven times and and eight point eight billion dollar
spk_5: the backlog
spk_6: and civil
spk_3: second quarter average twenty several utilization was fifty three percent up from forty nine percent last year and three percent more than last quarter reflecting usual seasonality but also the very google realities with respect to the cool with nike delta very and the measures taken to contain it's grip
spk_4: for example the american with the benefit of high vaccination rates and in travel restrictions we've done your pre pandemic the demand during this period in bowl commercial and business aviation trade love the same time asia pacific the that back it remained at low levels of countries including malaysia thailand and vietnam renewed wachtell on the order spot we find it will find solutions contract value that four hundred and nine billion dollars or a one point one three times book the sales ratio including nine for flight simulator sale and a five year air aircraft make a strange partnership with your canada a three year exclusive agreement with buckled the airlines a five year agreement with and boy air a four year agreement with pg a portugal yeah and finally a five year agreement with alaska airlines we also announced new partnerships and relationships including it's strategic partnership with better technology to design and develop a best in class pilot and maintenance technician program for the our yeah you be tall aircraft
spk_3: as was your relationship with story church companies for person it's kind program that combines a rigorous training regimen any insurance for single pilot checkers additionally in it that the care aviation group has become the life partner for she's innovative sweet of digital services
spk_4: typically the business aviation market
spk_3: on a fashion front we deploy a boy seven thirty seven that quite silly or europe that are on them trade center
spk_1: and we announced a new play train location in las vegas nevada it or be higher demand enix expand our business aviation footprint which is expected to open the summer las vegas
spk_3: it depends we call the quicker acquisition three harris military training on july second and it delivered followed revenue would double digit margins in a corner in line with what we expected
spk_2: i had to play here to visit your boys and facilities in texas and colorado in august two inaugurate the causing and i could tell you i'm highly impressed by the technologies we've acquired and the potential for even greater good break creation of our training admission support solution
spk_4: i'm also extremely pleased by the great cultural fit with he will live and breathe simulation training and support our customers both critical missions the energy and excitement about combine things that the have for the future is really powerful palpable and fifty acquisition we were pain and i think this is a fantastic fee or sixty seven members of the senior leadership team which is a very strong statement he never tell about strength of our shared vision and the a mutual passion for what we do your gag defense business was negatively impacted this courtroom by delays and orders and program execution particularly international which has been largely due to the pandemic
spk_3: and notwithstanding old head when we booked defense order or four hundred twenty eight million dollars in a quarter representing a book sales ratio of one point zero can touch those orders including included are roughly you know both ever find contract award from the us intelligence community would be beyond greedy prototype for the national youth facial intelligence agency
spk_4: lobby integrating our capabilities o'clock digital digital technology big data architectures machine learning and artificial intelligence making this a prime example of he at the forefront of modeling assimilation expertise permission and operation support across the board the domain and bar
spk_3: other notable defense order to quarter evolve a range of contract for support services similar upgrade and modification in support of customers including us army navy airport and an air national guard and directly for the german our fourth
spk_4: in healthcare we also experienced cold related headwinds your and quarter particularly in florida where businesses and like of the added challenges i can be very encouraged by the dedicate you need treatment of key to deliver double digit you over your topline book in a court excluding the ventilator
spk_2: contract from last year
spk_3: notably this marks the third quarter of year over year revenue go for healthcare as it ramps up ramps up and expanded real rigid really energized organization
spk_2: with that on now call over son will provide additional detail about our financial performance how return of the call at the other called comment on aisle funny
spk_7: thank you mark good afternoon everyone we don't ever hear the new york road during the second quarter and other dog company to reflect the success of the measure that we have taken to track them the company public thirty and ten that expanding rv and adapting to dynamic market condition and internally by lowering costs structure and validated revenue the eight hundred and fourteen point nine million dollars that sixteen percent higher compared to the second quarter last year at just the technique operating income with nine point seven million dollars compared to seventy nine point three million dollars last year quarterly i just pathetic come with fifty three point two million dollars or seventeen cents per share compared to thirteen and in the second quarter last year has provided by operating activities a quarter with got thirty two percent to thirty point nine million dollars compared to forty five point six million dollars in the second quarter of fiscal twenty twenty one prepare for with like point four million dollars compared to forty four point nine million dollars last year the secret for mainly due
spk_8: the by the properly
spk_7: because of for retraction integration and acquisition cost a quarter which amended to talk to them and fifty two million dollars we usually get hired and a non catholic and capital camp in the first half of that that go year as in previous year we expect the portion of that noncash working capital investment to refer in the second half also we continue to talk about one hundred percent conversion of net income to professional for the year growth and maintenance capital expenditures total forty six point seven million dollars quarter mainly for growth and specifically as capacity for local training network to deliver on the long term it because the training contract and are backlog the topic of directly linked to our opportunity to and best incremental capital with talked of return but professional with several attractive market live expansion investment on the horizon we continue to expect total capital expenditure be more than two hundred and fifty million dollars a the school year twenty twenty income tax recovery the quarter about the to thirteen million dollar which normalized capturing integration an acquisition of represent a rate of like that one percent compared to an effective tax rate of fourteen prefer but the second quarter of last year the stated that the bequeath in the cockpit was due to impact the changes impact on fact that the positive impact about it and the make the they come from very short fiction or net that position at the end of a quarter with three point four billion dollars for that that the capital ratio thirty eight point two percent and better than that but the other three point five five times at the end of the quarter of hold between cash and available credit we have approximately two point two billion dollars the chemical liquidity the and that get to school with family attributed to the hoping of the yell three harris military training acquisition and institution of the related final package you to think we're going through to interest that should continue what about that thirty five million dollar quarterly run rate going forward now turn into effect method performance and civil second quarter revenue with table compared to two to that you're at three hundred and sixty two point one billion dollar and the just a segment operating income with up thirteen point four million dollars over the second quarter last year sixty five point three million dollars or margin of eighteen percent this was the result of higher twenty utilization in america after by law product revenues with the delivery of only five simulated that quarter compared with hamlet year and eleven lot cooler the lower simulator delivery thunder the quarter with on plan and we continue to expect deliver to deliver north of thirty simulator for the year our ability to try to make that parking lot of training utilization shows the benefits of the higher pixel training and the followed pullback were making a wrap up by recurring caught speeding initiative and then second quarter revenue for hundred and seventeen point nine million dollars but that thirty eight percent over to to last year the think there's one hundred thirty one five point one million dollars from the integration of the lp harris military training in our financial adapted pigment operating income with twenty six point seven million dollars including sixteen point two million dollars some the acquisition or market at that point for that on an organic basis or consent decree that quarter most in terms of the just that some segment operating income and i've marked pointed out that could mainly driven by the latest product related order and program interactions and delayed particularly internationally a coconut
spk_9: in federal agent
spk_7: underlying the quarterly that them to the field rachel one point or two time where international orders with continue to like that point seven five times book the field and order from the us which were higher at one point one five we call the acquisition early and gonna do you live in the corner were nominal we are progressing well with integration africa on track for the thirty five to forty five million a part total cost energy by the end of your to following up with the transaction and in health care second quarter revenue thirty four point nine million dollar up seventeen percent shooting the ventilator contract last year at the same operating lot with one point three million in the quarter compared to an income a three point two million dollars and to cuba year segment operating income of but broken fgm a expenses in preparation for higher revenue growth and the impact of the corner related but a severe cold conditions and corridor which affected apply for and limited to pimp ability to execute on order with that i work market effectively way point
spk_4: idea
spk_2: as we look at a period ahead
spk_10: often it that will a bird for the pandemic the larger what resilient and more profitable feed and ever before
spk_4: in the
spk_3: i killed it we both man in an embargo despair rate your recovery know market and the geography is what we operate good thing that will likely could be risk factor for several more order to kill a more uniform global recovery pick for we have additional reason for optimism with the reopening of the with order this week to that sedated international travellers and the latest news about the potential of anti viral to mitigate the effects of called with ninety
spk_4: ultimately the hope of our recovery capri pandemic level that beyond read on the timing and rate at which water restrictions a quarantine measures around the world can safely be lifted we certainly haven't standing still waiting for the recovery to happen and we been focus on the things that we can control
spk_1: epic the we be getting stronger by playing offense and a downturn and i'm very encouraged by everything that we've done to reinforce she's base over the last year and a half to bed our arrival a long term sustainable go
spk_3: the pursuit of band group opportunities pipeline had so coordinated the non acquitted acquisition including the most recent enough with a bar grill grima to choir sabres air center airlines operation football you highly valuable we applied and cool man with and optimization soccer shoes as you can enable airline operator their businesses would efficiency and precision and we continue to secure highly attractive opportunities to deploy organic growth capital a cooling a recent expansion of business aviation training in laughlin use the bat and at the same time as a been fees reef externally we sit that we wish that the lowering our cops capture and tv
spk_1: even greater level of operational actual it back on track to reach a rate to sixty five seventy seventy million dollars of annual recurring cough baby by the start of the next fiscal year and april twenty twenty three
spk_3: a civil a greater desire by airline which he which are critical training in digital operational support and crew man with the i expected pilot the man and strong call group for business travel or enduring positive underpinning a secular go far
spk_4: there's considerable pent up demand for commercial passenger travel and what the least try to hire quite activity and training the man
spk_3: or seeing his chain of events manifests itself already eating americans we're we're experiencing a near total recovery in train you live nation and strengthening pipeline appropriate similar order activity
spk_4: we believe that this provides a blueprint for what a group lotto global recovery and air travel should look like
spk_3: yellow corner the market has improved with average twenty three like this and twenty to upwards of sixty percent globally again with the high utilization rate currently in the america's cup buying would feel relatively depressed level in asia in the middle east it business aviation or think we're seeing strong demand for twain across the network propelled by flying activity in the united states and your that is now well above twenty nine eleven the uneven nature of the global recovery is likely to persist for a while
spk_4: but were ultimately in an excellent position would benefit from the more or your cyclical market recovery that's currently underway have for the current fiscal year we that a junior strong local civil waited more heavily to the second half
spk_2: in that a paradigm shift from as the metric year peer threat and a recognition of the sharply increased need for digital immersion be synthetic solutions than that of them are pay one that paper here
spk_4: given the increasingly grew up with the increasing relevancy appointing and simulation our defense unit is also on both at your path to become a larger and more profitable business
spk_3: or currently focused on the successful integration of belfry harris military training business and expect to fully realize the thirty five million to forty five million dollars of cost synergies that we laid out by fiscal year twenty twenty four defense is now more closely aligned with the utmost party and this established as the world leading platform agnostic global training and simulation defense pure played business
spk_4: this is expected to break increase potential to capture business around the world accelerated we expanded capability and customers
spk_2: the pandemic as be international opportunities for to materialize in a current farm but this headwind camper and we have a strong pipeline with some six and a half billion dollars per call pending for decisions
spk_3: we continue to expect to deliver strong and you'll go for fiscal year twenty twenty two with sequential order sequential order the improvements in revenue and just segment operating come back did in second half
spk_2: supporting our view is that patient for a reiteration in order to take especially from be involving international program that pandemic related issues and with that we also expect the defense fills ratio for the fiscal year to exceed one for the first time in a laugh or year
spk_3: other driver for the second half beyond include higher level of execution on program the those involving higher margin potter as well as the progressive realization of synergies as we integrate l three harris military training
spk_4: and lastly i'll vote for healthcare is continued totally year over year growth as we were or expanded in real to energize organization
spk_3: a long term we believe healthcare is on track to become a day the building material and profitable business and to the current fiscal year we project double digit growth compared to last year excluding the ventilator a contract
spk_4: in summary wow there's no doubt that the related combat continued effect over business you know that we increasingly see a clear path to recovery and a larger more resilient and more profitable see in the future
spk_3: specifically for currently targeting to reach a consolidated paulie adjusted segment operating margin of approximately seventeen percent by the time our markets are generally recovery
spk_1: with steady will prefer the improvement after
spk_4: we expect to reach this level of profitability on a significantly larger base of business would oppose pandemic capital structure that will allow us to such pain apple flexibility the further invest in our future we continue to play often during this period destruction as evidenced by nine creative acquisitions and continued growth capital pointed to the pandemic begin
spk_3: as business conditions continue to improve further we look to them this posture as you relate to both organic and inorganic group investment
spk_1: opportunity that continues to very track i personally i've never been as excited about his future as i am today
spk_0: and with that i thank you for your and we're not ready to take your question thank you mark operator i that that you please open the line members of the financial community thank you if you'd like to register for a question please press the one followed by the for on your telephone you will hear three tone prompt to acknowledge your request
spk_11: if your question has been answered and you'd like to withdraw your registration please press of one followed by the three our first question is from fatty someone from the ammo please go ahead but take you good afternoon everyone
spk_12: the question
spk_11: my first question on the on the kind of a few different business it seems like we've been in the seventy seven you bit more margin for the past several colder this quarter and we dropped to three point seven percent and then we operate some some explanations tools what's going on that i'm not sure if you can maybe elaborate little bit give us a couple examples of was really kind of happening in that business and what are you expecting the second half of this year doing the you step back to where we were
spk_3: in past quarter do is more gradual recovery that you should expect from this
spk_13: you know
spk_2: i get organic a difference business
spk_14: got a thanks betty the as it said in remarks say work in italy expect start from you ever go in this year so clearly going to have have a good that pretty get second at and that's and that's
spk_2: for the whole but
spk_3: combining about the quickest information about three hundred and it's the story with the legacy business or shall i call a huge that target we will use of the moment air or day organic business
spk_2: is one of continued college related to shop both on ordering pay and impacting i could do for them
spk_1: it tell him that there is at least five international orders that belief that is among the like the level effected a come in this corner but did not happen and because well
spk_3: delta for example in the retail customers in the belief in park
spk_1: at the internationally as the other factor that i could i could point you like for example for that was like and during the summer with one the hardest it if not the hardest hit as well as the actor which is another big they appreciate it turns out at the cold the effects of that the various attack
spk_2: net so clearly that had an effect and yet to protect somebody that i said before about for training and are we playing international customers or see what thirty eight get it well imagine that no customers coming and i but the way for changing your borders open internet for travelers combat to call the situation is
spk_4: point doubly much better not only caught yet they've been accorded pathetically so those are the guy think that we can see your car which gives us more powerful the elmo and and when you look at the business as a whole gilbert defense of talk about organic puppy great him you know which starting with which were going to be started going out of the band
spk_2: it's or series you see up a the both about was started the airport like for that production of course that happen
spk_4: at post and look or so for all these reasons yeah is it really is called the related impact that we see that really drug that because our book to bill for the last few or that you know in the organic the best business has been below one and eventually yeah
spk_7: you run out of bad about that you can execute energy efficient manner and that's really the situation that we're seeing here but again those orders come with is selected on these orders
spk_15: so i would have i've always expected a backpack defense to be the strong order i saw and that's what i have left core of the but we bought yeah yelling because of cope with it you don't we bought some that it would have left the gotten in the in a second quarter no doubt with doesn't change my beautiful year
spk_7: maybe i could do but funding what that yeah in own just a quick recap and lay it out the way we see it on the organic that that's like delivering as you mentioned patty candidate and seven eight percent range that the in the twenties on the why and then built at my explained as if you build those delayed order rat backed up as an advanced the program that we do have and backlog that has been disturbed by quoted either
spk_16: interrupted or fully
spk_11: fully stocked i in the middle east to i hope that that that as a pandemic related deception eve annually on the contribution on the acquisition as well as during the wrap up the synergy
spk_16: you know that will take us to the thirties and forties that are coming quarters
spk_17: okay okay
spk_11: so that comment thirty forty you're talking about that's why are you gonna get and profile without okay okay
spk_7: that's helpful the other question i wanted to school gone the loved rouge the money and we'll put it in reviewed for you you're you're up to three point five five are probably go up a little bit who is this sabre acquisition being vague and a couple of quarters look how how comfortable are you the type of leverage given the pipeline of maybe opportunity viewed seeing at this point is is is and money in the back burner know until you can get profitability level back to the level of the balance sheet or how are you gonna
spk_18: thinking about this leverage level a given the pipeline of acquisition and you up with the nuclear free
spk_7: part out with i'm very happy about so the particular that thirty percent that that the cap three point five five times that that that that pretty be better with without the financing related to the helping our military training acquisition and with a spectacle than a the eric cantor operation of the and in are you poor will be using our existing liquidity what still drive or not that the cap higher probably a little about the for you for your perfect but we're betting quickly leveraging and next to here with the i would catch that that does that
spk_11: organic the and the cash flow agree that that the new acquisition now yo yo yo remember all the previous capital is that we didn't like twenty one and that was exactly the combined the flexibility to support the organic and inorganic growth opportunities that we thought well you know we feed them opportunity to come out of the other the option disruption
spk_7: and it allows us to use on improving long term value and strengthening the company that become bigger and more profitable we we have cut pigeon to have pipeline
spk_19: but as you seen where patients were disciplined will wait for the right opportunity that the right value as we've done with air center or three harris and even a bargain training so i'm very comfortable and ultimately you know the factor capital allocation priory balance a creative growth organic in our data
spk_7: what a solid financial position
spk_2: okay appreciate the feedback the seventeen percent target can you offer up with the mix behind this like how much of defensive preventing
spk_0: how much of a variation of presenting that's it can we think
spk_20: i think that you know we're providing that guy and a consolidated eight that's really to to underpin the messaging that all of these internal or external matter as really could drive a larger than the a more profitable business so what we're getting at is that at once we get hit
spk_21: every level
spk_22: that not only will we feed creep pandemic measure but on a much larger scale paper bit know
spk_12: that the way better without them in there's no doubt that would that could be made up your new high and civil margin for sure some of that a lot of that with leverage as you said what's the the air conditioner we may as well get double digit the margin and that was going to comply that that makes
spk_20: and you are next question from the line of con arc gupta from scotiabank please go ahead i'm thin that good afternoon everyone me too good afternoon question answered this on defense and below maybe to be to beat them for now the get by people look back and let when you apply the as we know
spk_4: i think it was live hundred and i'm hoping to have a new business
spk_23: also annually and what you did and and the second quarter of the he was about the know that run rate will be i'm i'm i'm kind of wondering if there was some sort of a missionary impact and queue to bear of evil see probably more in our contribution from out you know it's go
spk_20: going forward as as you can do with it them and then the bit lt have it together with the the defense organic bit of assuming it kind of rebounds to the eighth ninth with and to imagine them from so and the synergy
spk_4: it is a loan to help us some kind of bleach and of and the acceptable margin profile for the hospitals will you don't think
spk_24: yeah we met some of it was the lot for your question at the same city and corner
spk_20: yeah i was the money
spk_4: the module pilot defense organic that goes back to eight nine percent margin and then lt have blood the energy mean obviously the double digit martin's right now the overall without the like if it's going to work twelve percent a bit margin that all those
spk_20: oh yeah no the relative or eleven twelve percent the is a good is it is a good the number to plug get longer term for sure i'm a up for it
spk_25: no doubt about that
spk_20: right around the post part of the question about the as we have been able to ramp up rehman here given that the lord they're gonna wait before you have one
spk_26: why thirty days without three harris but i'm quite often what what i'm saying that would that we're going to deliver a or get all the detail three harris stable the all they get the help reduce business it it and energy that would that together we're going to generate what will you be achieved in a market that we talked about we're quite the business and
spk_2: and i definitely see that about quite happy with what we think the first quarter and war that comic right thing for that men on the civil side see it upon a you later levels and clearly america as are doing better asia pacific are like where they are you and your what are you seeing there and then as we hadn't to sort of the seat in the least
spk_3: strong a second half
spk_2: the both commercial and business aviation the should utilize some level you gonna go to sixty percent plus you can call be stuck in the fifties
spk_3: well you know what i read it in terms of the call would pay according to recover recovery look at the think i would tell you it and with head in the on a new remarked that i like what i see in america right now to see the united states in a weird the utilization rate by in it i take back at back and levels our core with a will work but article with nike will seem very high rates of utilization the circa this summer up we pack bother seasonal know what back then and the fact that you know you're kind of minister or summer because of delta but gone or the india you look utilizing google utilization rate are very much correlated by back and eight hundred and it will look at you could use grappling vaccination rate of court that comes with lifting of restrictions on board that governments have to do and the ability for the to help build rebuilding for peace pull the travel we've seen the path of the man and how that driving the i can tell you i was that in every part of the month of october i was that the i at a meeting and in boston and i getting i met a lot of has seals and i i could go there's a possible optimism out there as as vaccination rates you know he took our equipment at this one of us had and when a when we're basically talking to a airline ticket ably it know there's like united states where we are seeing that you know that that increased activity because it'll vaccination rates are higher the level of action both we can see a lot of activity as testimony by the rise in in sales that shares activity which is
spk_20: not only testimony to the orders that we get our so far but he terms of the activity that see which is played night at the moment at that level of and so should really look it turns the in terms of go back to really real question to predicting again and go back said you we would you be what i read and we we have a situation ccd degrading and germany rate that we still have a very low level of vaccination in the forest show i think don't have been acting on now on the long term trend is getting better so we will get better utilization in lockstep with the increasing
spk_4: a funny activity do with by vaccination rate we're not going to get and of it because we don't know we don't know of a the the and you look at there's a wide variety of estimates out there ever since
spk_3: beginning we said well look will follow the i had a a forecast of what that seems to be pretty get a good one although i would tell you i think the u s have as as as beat that you know if question that fish rich will up so long long as you a question but coming back to see
spk_1: all i can say is when we do come across with the traffic it does come back which it will you know what all the actions that we take it i'm extremely confident that would be a much bigger a much stronger and a much more profitable be adaptable right now and that makes them difficult just follow up on the comment you mentioned about the allied seals be optimistic a lot of life have come out recently thing they are scrambling for pilots
spk_2: this is kind of counter intuitive and they did the begin to see lots a lot of it so do you know what's happening there a pilot or people not willing to train as pilots hear that they shot it is coming from or birth mother not stuff like to fun as much as as a result
spk_20: think i've had before just no doubt my mind
spk_0: that there was a pilot shortage of before admitting and has got to be a pilot shortly after were part of the solution to that pop okay and level you try to get additional in the number of commons copy or the level of activity in our in our flight schools and will remember what was the largest network of school in the world for training
spk_27: people to become a lot of at the level of activity here has not reduce traffic and they make except for winner schools were shut down because we could operate because go that i could kill carriers including legacy care off the world have not only in a in a in most cases kept their their
spk_28: there are there of waters with us for number of path and what about when large a increase that and that trend that we see
spk_27: there's that i think become a pilot is a great career and now i could tell you that of my view or darker and i think that's great that's a great thing for us as a business make sense thanks for the answer thinking
spk_29: our next question is on the line with kevin chang from cnbc please go ahead
spk_27: thank you good afternoon and friends with my question if i didn't utilization question
spk_2: just focus on the americas marquee mentioned
spk_3: it looks like these are basically back to the new be prepared don't like levels or or close to given given to the the recovery and a commercial aviation there
spk_2: you are you see a difference and they do this with between
spk_3: what was in source training vs third party training because i guess to a thesis out there that know as you come on of the pandemic to be a greater opportunity for for you to capture maybe more third party training as ones might look to outsource some others to produce their cars are you see men in the us as as they bring back trading much more aggressively
spk_4: guess is yes yes we are seeing it the that the fact as the lot of contract that we that we were down in iraq or previous quarter of our this testimony to that there's a the for number is not one is that people are seeking capacity and the they're looking for back you can turn your path and we can we can offer that capacity
spk_27: the we've been out diverse that the activity we've been doing his movie simulator into that space of other location and actually what the increased our forecasts on capital plunges this year will be enough to the be a two year some of that was going exactly towards this so to me the that that is a trend that it is your we predicted that trend that this is an environment where does going to be a lot more opportunities for you know people considering off as the really only viable global third party option where and fact yeah because you prick already do you do a million hours plus a a year of training we offer a very very good alternative and so heavy it's it's what we have we have lot of discussions on have had a lot of discussions that either we have a lot of discussions on boy and which binding contract at was having contracts for you you were lot or signed a contract for overhaul
spk_2: kind of grimace what people want excess capacity right now and like this is because they needed like right now or they want to be sure that they will happen as we wrap up operation could be able to see the opportunity afforded by chris passing traffic and when we do that you were funny people to longer term contracts so that that actually be possible for thing
spk_4: the democrats i'm i'm not sure that defensively if maybe what that breakdown is no but like movie pre pandemic between
spk_3: pilot training that would have been in source for some outsources prison but today's i suspect is probably
spk_1: pretty fluid and needed tough to pin down at the moment
spk_27: i can't give your heart dumbo right now is it because the first what's that steady at a be very hard to compare apples to apples or
spk_28: number i maybe skin teacher going to get it right now i could use your certainty a number on that but i could tell us more you look at a contract that you that shocked
spk_27: there's that we're ordering simulators than out a will will basically you just signed a contract with you to for you to provide the simulator and position that we we did that with with they would have that they will westjet we get to your cat and of the so definitely more get of can give you a precise number of down through your breakdown
spk_3: maybe just on the on the air center transaction you down
spk_2: the be a week or two ago in future speak to how how you feel about your your your i guess your broader crew manage moon but management portfolio do you feel like you have
spk_3: all the tools now to to kind of capture the higher can be put out there or do you think you need to kind of backfill similar product line tool and then
spk_4: i guess when you look at the air center client base or the customers that they're dealing with person's the ones that you're dealing with that i get to be interested in knowing i guess where the opportunity to cross sell our nor do they have a large subset of customers that you don't know you don't deal with or or vice versa the needy or offers ability to to be to capture revenue synergy
spk_3: all that as a good could be that as i'm pretty excited by this acquisition as said you know when we when we first the party in our periphery really be look first and foremost
spk_1: and then with that of the time we acquired marital at last of us are the simulation is the way we should play operators software market it's over two billion dollars over fifty percent of that spend your bow source and and we're worried that we're apparently you take a leadership stay in their pocket so to be the
spk_3: the crowning each in that strategy and this really what we're doing here you see us over the year move from what was he a few years ago what's really what i joined see moved from be a really a simulator park airlines moving in deliberately towards being creepy partner to
spk_4: the like leave virginia the past year or digital offerings to make are so essential to cuthbert providing him in on your business that really did we could we could deliver them using the the data that we have on your operations and now we're doing is good moving from biggest trading partner
spk_3: to becoming a technology
spk_1: and that's really just about you don't be a growing the amount of work that we could do this share our and i could get it is very well received again and talk about like meetings with that feel happy and i ever got me and you're obviously we were talking about faber at that time because we had that we now see i presume that that
spk_3: so we are assertive or talking about it but we did have mellowed a much smaller but but differentiated offering in that market and i if there was no pushback whatsoever with the got the carolina which our customers about be bringing bringing our it pretty as a partner increase your you like buy it back he was years and actually tension or what we do with them because it it's all about delivery central services to the airline just like we go and training so got this is this is a great asset yeah we have a
spk_27: a pretty much all don't almost all sabres customers are our customers the reason we are getting more customers that for sure but it's so they can leaders will it a lot of opportunity to over shipped across the aisle and as work don't forget i really believe that morning by
spk_30: a contract the first contract we now this order literally is a contract with it technically care i really believe that there's an opportunity said here fooling and fell across business aircraft which is a non apple to do so again
spk_0: a to like a by the way leading the a testimony to july call comes from this do i put are more forth bar most senior action
spk_31: executives in a company elitist business path get ready working and i hear very high confidence that with that get working with a fantastic people that i've seen so far have been better for a saber air center i think will do well that's good color that's it for me thank you for taking my questions thank you
spk_32: our next question is from cameron it irks and from national bank financial please go ahead
spk_33: yeah thanks to an extreme a cig an afternoon and i just want to come back to the yeah i just started a longer term
spk_32: the margin target you got out there seventeen percent
spk_7: obviously that would imply you just have to make improvement from where you are prepared to make i'm wonder if you could talk a little bit about how you see the returns on capital of all the as your and markets normalize because you wanted to capital days has changed here with the acquisition of l three and also with depending on under center acquisition which which presumably has he will lower capital day so any comments around the the return on capital you would expect to to see as things online are we we a back and overturn don't do think with my chance to go through
spk_31: as increasing on the return on capital delhi these are two years ago for the pandemic we we had driven more than three hundred eighty points improvement in just a few years and that are optimized you know discipline deployment of organic and inorganic capitol hill the catholic that when the plane or the arcana capital all had
spk_7: significant incremental return driving twenty to thirty percent incremental the turns within a few years and everything we've that very interesting and a cretin acquisitions and inorganic feel as though deliver on on our expectation they'll be driving and and prove for casual all of the are very careful a accreted and return on capital okay and and going to be second question for me just on the the the restructuring activity just wonder if you can update on of where we stand there i'm particularly interested in the the status of the kind of the the training network reorganisation of a training centers in consolidated things like that so as to where we are in that process apple has a great progress and optimizing the footprint and as mark mention relocating them so taking them were their matter demand that the point that in the americas and so on to for a market that and hillbilly kind of optimizing that the capital and matching up demand or capital with that the man in the colorful and look what do we occurred about thirteen million dollars a call twenty million i guess it it on average second of that and ultimately the twitter we did a fine line them additional uk a consolidation for the uk pretty much done and we've we've got the ball done however a couple of remaining
spk_31: consolidation in europe and south america that will be holding out into for and but we we already are thing
spk_7: significant amount of failing to be theme that on in a quarter with a really good step up on the saving the years have the paper thin on in the quarter
spk_31: that on the several market and right to
spk_2: what i noted that the pipe like the timing of the delivery of avenue on the product because of the lower delivery at the at the like margin expanded to eighty percent for that was the impact of the higher training revenue with and utilization of only fifty three percent and really highlight the great progress on the structural cost saving that were delivered and quarter okay and and would it gets the consolidation activity and the moving and simulators into the ice as you mentioned we don't have a negative impact on utilization rate in the quarter
spk_34: well absolutely when you when you're moving have been better do you guys
spk_0: the down and minute and my pick a few months to burn it down to move it ended the started back up though but that does have some some noise in the utilization metric yeah
spk_35: perfect that that we did for me or much
spk_36: and don't forget about a come on that the that this
spk_37: what is it was a different effect but you know very similar comes the circuit this year the world commercial
spk_38: break break pressure
spk_36: thank you are next question is from know up upon act from goldman sachs go ahead good afternoon everybody that too mark i'm struggling a little bit to follow the the explanation of the utilization rate
spk_2: and the attribution to the geographic difference
spk_4: because if i if i look at the progression and the utilization rate you made it to this kind of fifty percent approximate fifty percent level after the first time of the september twenty twenty quarter and since then global a or sam's have nearly doubled and i understand you have the different geographic exposures with the waiting
spk_3: to europe and asia pacific their north america and that north america has been strongest but you know seat mouse flown in europe in that period of time of also almost doubled they've grown a lot in in asia pacific
spk_4: i think your simulator network is more exposed to narrow bodies and why body so i'm just not following but i understand your you you have these exposures outside north america but there have been here
spk_36: decent recoveries there and if i just take a sort of weighted average of those geography is relative to your exposure it it doesn't it's really explain that utilization rate being flat can you help me square that circle
spk_39: what i we had a model that with that simple the other it's really a campaign for weighted average due to to like get our visit to be there is a number of training center that we out across the world of it yet that day and don't forget that when you look at europe with your talk about their when people applying a lager not claiming a lot of
spk_38: ill and that's why we all have a field bit and the in the in the court so really really what were we get the the if the betraying actually we get is when you're preparing their preparing here good when you have a steady state of tyler preparing their coolant making sure that take a ramp up and you will we see right now we have you like
spk_2: this rate are leaving americans that a new seventies range of that someday fire and here we followed by your which is approaching sixty them and and eighty and belief which is to a pretty depressed level of it's a fact the top of the building to prop up around fifty percent so but you know i can stop that the on the fact that
spk_3: it
spk_1: it's really you know except for united states which is pretty darn you know like it's had recovered capri anaemic level you need to had a weighted average that a perfect correlation to have you just get
spk_2: is there an element where you know in a very severe downturn like we had
spk_4: and when you're working your way back up in a of airlines a do their own simulation during those that have outsourced it and and those that do a combination
spk_39: that you know you just airlines that
spk_40: want to use all their own capacity before they then move back to outsource capacity is that it out
spk_36: what does a absolutely people do that they would do that but i would have would tell you though that people that have all that capacity a the end of the that they will have to drive a lot of pie with them and with those areas that they rap that the ramp up like it as they they actual ramp up jamal path
spk_41: short amount of are now that's been somewhat mitigated in the america by the fact that because of the governors or they haven't yet at the up by a large your reduce the level of that can be to we were a be preferable so they had if you like power power that the but you know to not get into that
spk_42: situational even with that as a that testimony by a higher level of simulator sales you know so far the so far this year any activity level i feel for like that get look like the letters makes me pretty darn optimistic and that that as well i would basically oil
spk_3: eight that would all the conversations i had specifically with ceos of their lives across the world which is would be the confident that wouldn't states in a blueprint for was gonna happen elsewhere that they are couple of that that makes sense
spk_43: and then just last one can can you squares up on them
spk_4: where your business shared revenues and margins are
spk_3: at this point on a on a run rate basis compared to prevent emma
spk_1: that hi
spk_3: are they are both prevent that
spk_2: yeah i
spk_44: good well we're doing well i think were know and that be flipping here but you know the that any level of that that we see if it were higher than prepare a cat code and cool level corporate level in the in the americas certainly we are right now
spk_36: the and i think we we're doing well i in terms of down
spk_0: i don't think i want to get to watch ahead of that predictions that that is that back to the into the outlook that we gave with the backyard garden gone court and you don't supply of that you wouldn't be you know a quarter however you know we're throwing more withhold more level of training activity adequate like pick
spk_45: cause i think they have been you know the bank the baker you're fat depreciation that me
spk_4: that we're not fun to drive which are important for with to wrap up with it with it's doctors that of thing and and a million day at the look at sort with they consider the fact that we're making and eight percent market with fifty three percent new like this
spk_3: i think when you look at that that gotta score that pockets that will make
spk_45: yeah now that's fair
spk_46: okay thank you so much and good
spk_3: our next question is from than what plenty with each other bank capital market go ahead good afternoon everyone
spk_4: given the current utilization rate to do you see burger or communities to reshuffle or redeployed yes sir flee
spk_3: well rounded been at work
spk_40: we've done a lot of that already i would tell you but it was about to say we want the world was doing some but
spk_46: you don't for the past couple of or with the movie will be moving everything that are tied down it i say
spk_7: figuratively speaking but though it is that a lot of up opportunities there so so we've done that but i i think that i don't think that's a huge factor going forward okay okay that's very color and obviously with morello and also paper you're kind of entering of their big address of a market or flight crew management and optimization so we should so it seems that you're you're running at about one hundred eighty maybe in terms of exposure versus a market that you calling close to the two billion so i would be curious to know more about the of fortunately to to capture
spk_33: market share among the two billion dollar market within the next five year wetter you see a fortune is due to to increase your market share on the organic basis and be through further and any
spk_47: i look i think it's too early to talk about that been allow we tell you i'm very confident the business as i said that offer shorter business is to transition a business savvy this as you will you will well no this is a business that are currently critical to the gate to today just like twenty years even perhaps even more so for is make sure
spk_1: to transition of despair well without skipping a beat with the best for our customers at the same time and that factored into the the the type that did they have the our business case on this on this acquisition we've captured money to be a solidify differentiate the business or had a with airline it that alone i think has
spk_0: as has a lot of potential and then yeah then you're talking about the organic organic growth just testimony about a group of aviation myself which will be double digit for quite a few years just recovering from pandemic then comes the market share games and tokyo what i said about there's up to me a business aircraft which means virgin territory but
spk_48: that's direction they want a table in the it's i think it's way to are we have been called out yet
spk_49: okay and left one for me maybe for sonia in terms of net debt it it from the for time foes the sabre acquisition what about the timing to to get back to two point five time and assuming they're still further and many opportunities of the horizon what what would be kind of the max level
spk_48: you would feel comfortable with
spk_50: can we always balance of power balance sheet with the created
spk_46: investments and so you know the timing of whether they're gonna core energetic investors will will drive from the that so you know where we're at investment great combined
spk_48: where we are they comfortable which is and the thirty five point five percent bet that the cat fill the welfare you don't we expected to go a will hire you for and empathy liberal quickly whereas we generate cash
spk_3: and a generate cash out of the the new acquisition and as are you better ramp up quickly and those drive and improve that that er det med det either bizarre ratio
spk_2: okay thanks for the phone
spk_4: operator theory the run a little longer than than usual here i think we'd like to use the last few minutes if we can to open the line to members of the media should there be any questions for media certainly as a reminder if you'd like to register for a question please press one followed by the for
spk_2: our first question is from api and all from little cut back please go ahead
spk_51: were able to mumbai casually boobs talk on
spk_4: of the
spk_52: law on camera
spk_20: dec you want the
spk_53: didn't go
spk_54: the new nuclear demote are they keep your partner to agreed watertown detection
spk_7: you know any details conceptual have lola
spk_48: there are no took the on or the or the player shipped back
spk_29: it i can show he's a cop call on it at the either man ability back yet be on you barbecues the of people good value but this is awesome
spk_55: the
spk_56: oh yeah no open like he's called of yeah all of a go fit the
spk_57: the ticket to be detect is your killing the killer to the ball the the been
spk_2: point them up and a tv he caught a beauty and use it up
spk_4: or not guilty or not on not call in to the elevator button
spk_2: but a lot by the btw make a phone call but yeah you're beyond important some other shit
spk_58: he don't few people
spk_2: amanda like for the gop will be the very back all dumped was a way that will who who have a job where i would you know though that been kept it up
spk_3: sonya to the building that's where did the louvre and been now the data
spk_4: that hostile either main man and put don't watch enough that has studied don't care own owner come in bed cause a good cop bad it feel confident about the capacity we
spk_59: by governments usual dish washing to new the recession people have been made me made me who who who who live we've be voting
spk_60: never neither should you not go down the to push on or percent founder the been rather than all the technology technology he would be the bookie would seek to the
spk_48: that has you on that year
spk_2: put it need be
spk_48: phobos number i don't know good that he quit or don't know what program has that they a they will not that much yeah
spk_4: we you get there early game they're not have a good reviews with though as actively if your goal a feeling that article oil money that of to give up my poor people have the navy
spk_2: thank you voting on the a that's not what the city at felt of the old is everyone to pick
spk_0: peter the the
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