This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk_0: daily rhythm gentlemen and welcome to the see eighty third quarter conference call created by that this call is being recorded i would know like it when i'm eating over to mr andrew or of it please go ahead
spk_1: good afternoon everyone and thank you for joining us today before forward again i'd like to remind you that today's remark including management's outlook and answers the question came forward looking statements is forward looking statements represent our expectations as of today february eleven two thousand twenty two and accordingly are subject to change such statements are based on assumptions the may not materialize and are subject to risks and uncertainties actual results may differ materially and listeners are caution not place undue reliance on this forward looking statements a description of the risks factors and assumptions that may affect future result is contained in eighth annual and dna available on a corporate website and on our filings with the canadian securities administrative on t die and us securities exchange commission on edgar i'm a college me this afternoon and mccarthy's president and chief executive officer and sonia branco our chief financial officer after remarks from martin sonia will take questions from financial analyst and institutional investors following the conclusion that you had a period will open the call to question from members of the media but now out the call over to mark
spk_2: thank you andrew in good afternoon everyone joining us on phone call i'm very pleased with our third quarter performance especially in the context of a skill challenging global environment we delivered double digit growth strong free cash flow and with you double the ordering take compared to the third quarter of last year on a consolidated basis we new revenue by fifteen percent before the contribution of our ventilator humanitarian etiquette issue last year we also rule adjusted segment operating on by sixteen percent a deliver igniting sense of adjusted earnings per share underscoring the cash generative profile of a business we delivered a healthy two hundred and eighty two million dollars a free cash flow we also made excellent progress on the orders from building even more for momentum would nearly one point four billion dollars in orders or book the sales ratio of one points six to time and a backlog of nine point two billion dollars and civil we have strong performance with double digit growth in training and segment and operating income and with margins break above twenty percent for the first time since the start of the pandemic third quarter average training center utilization was sixty percent up from fifty percent last year and was seven percentage points higher than last quarter to me this is impressive result considering a wide ranging disparity in commercial flight activity and train demand across regions and because only crime began to spread the last month at a quarter as we've been seen since the start of the fiscal year demand in the americas was by far the strongest while europe and especially asia asia pacific continue to lag or recovery leading leaving significant headroom to return to prepare them at levels in business aviation training demand man was also robust reflecting a high level applied activity which was above twenty ninety levels in the united states and europe we have very strong odor activities civil in the third quarter booking trading solutions contract valued at seven hundred and fifty three million dollars or a one point nine three book to sales raphael including nineteen full flight simulator self this is in sharp contrast to the eleven for flight simulator orders that we book for the entire fiscal year at the last year and brings are worth it for flight simulator sales for the first nine months the thirty three since he entered a quarter we find orders for another for bringing the gear today took a tally to thirty seven full flight simulator sold inconsistent would be more advanced air travel recovery in the americas over sixty percent of the year to date told are from customers in that region include full plate familiar orders for major us carriers of actually all major us carriers including orders for multiple for
spk_1: like them layers for some of the largest guys airlines this quarter
spk_2: our airline customers any america's have been adding back by capacity and actively ramping up pilot hiring in order to secure the trainee capacity of that they require they've been working with he as your training partner choice and three new long term training agreement and acquiring additional simulators we think this makes for a compelling preview of what an eventual broader global market recovery cause for see notable training contracts for the quarter include five year extension is a commercial aviation training agreements with endeavor error in avianca a nine year commercial aviation training agreement with norwegian as well as five year business a recent trade agreements with global jet luxembourg exo jet investigate in defence we also had double digit growth in a corner with a good contribution of belfry harris military training and as we expected we surpassed the thirty million dollar mark and adjusted segment operating them
spk_1: i'm especially pleased with are ordering take which total five hundred ninety three million dollars in a quarter or a one point three nine times book the sales ratio and a four point six billion dollar backlog
spk_2: we seized on the opportunity of the temporary relaxation in pre only phone call with nike restrictions there as a result or international book the seals ratio was above one for the first time since the start of the pandemic in addition to the positive book the sales were also see more conversion on our defense strategy to pursue more tied to make training and mission support solution orders to date included included competitive prime awards re compete and contract expenses across all fight the main area see space and cyber
spk_3: in the air domain
spk_2: we strengthen our international presence with a german air was competitive selection to provide avenue show pilot training replacing the sixty year incumbent along with his we will i flight training program we also expanded our relationship with the united states navy chief of naval air training or sinatra by adding t forty five life like training for instructional services contract beyond lifelike training we were awarded in the nineteen year base plus options contract from an australian customer to provide integrated support and training on a range of strategic platforms other contract expansions including ford task orders on our simulator common architecture requirement and standard or scars single word idea to as us air force accelerate the integration and sterilization of approximately twenty four hundred simulators a caught across three hundred
spk_4: locations
spk_2: since a quarter we've made additional notable progress to broaden our position beyond our core defense air land and sea programs by winning our first competitive prime contractor in cyber and space we were selected by kenneth department of national defense to expand cyber intrusion detection capabilities detection capabilities on the innovation for defense excellent as security or ideas program and we were awarded are first prime simulation contract in the space domain would a key us customer the strategic cyber and space prime contract along with our first us intelligence community competitive prime when the second quarter are great examples of how would building our defense business for the future by stabbing see it as the world leading platform agnostic training as humor
spk_5: lacey pure plate
spk_2: ensuring mission readiness buy into a solutions across all five the me if i mean healthcare we delivered our fourth consecutive quarter of double digit year over year revenue growth excluding a ventilator as we ramp up or reenergize organization would a clear focus on a feeling greater scale we live updates to expand a feature set and functionality of some of our main products solutions including learning space i simply simulation center management system and limited or ultrasound education platform we also introduce eleven new on demand online digital courses featuring vertigo virtual simulation a collaboration with the british columbia institute of technology with that on now turn to call over sonia will provide additional details about a financial performance i'll return at the end the call to comment on i'll side
spk_6: yeah thank you mark and good afternoon everyone we deliver double digit year over year growth and strong free casual during the third quarter notwithstanding the ongoing challenges of the pandemic our performance reflect the a billion feet and the strengthened some of our and market as well as are excellent progress expand our reach and lower cost action validated revenue of eight hundred and forty eight point seven million dollars was two percent higher compared to the third quarter last year and was fifteen percent higher excluding the money three point five million dollars of revenue in the third quarter last year from a contract to provide the canadian government with ventilator as part of our covert nineteen humanitarian initiative adjusted segment operating income with one hundred and twelve point seven million dollars compared to ninety seven point two million dollars last year and quarterly adjusted net income was sixty point seven million dollars or nineteen cents per share compared to twenty two cents per share in the third quarter lot we incurred restructuring integration and acquisition costs of forty seven point two million dollars during the quarter related to the all three harith military training acquisition and the enterprise wide restructuring program under way has provided by operating activities a quarter was up thirty two percent to three hundred and nine point six million dollars compared to two hundred and thirty four point eight million dollars in the third quarter of the for twenty twenty one free cash flow with also hire two hundred and eighty two point one million dollars compared to two hundred and twenty four million dollars in the third quarter last year the increase with mainly due to a lower investment in non cash working capital partially offset by cash payments of approximately thirty eight million dollars related to the integration and acquisition costs of our recently acquired businesses and costs associated with our restructuring program growth and maintenance capital expenditures totaled seventy six point nine million dollars of quarter mainly for growth and specifically to our capacity to a global training network to deliver on the long term exclusive training contract in our backlog our growth cap acts of directly linked to opportunity to invest incremental capital would attract of returns and free cash flow with several attractive market lead expansion investment opportunities on the horizon to continue to expect total capital expenditures to be more than two hundred fifty million dollars in fiscal twenty twenty two in contact with sensitive quarter was two point six million dollars for an effective tax rate of eight percent compared to an effective tax rate of knell for the third part quarter last year the income tax rate was impacted by structuring integration macrovision caught the quarter and excluding the car the income tax rates of quarter was twenty percent which is the rage you that the base of to determine the adjusted net income of sixty point seven million dollars and adjusted dps of banking arnett that the said the other quarter with approximately two point three billion for a nest at a total capital ratio of thirty six point five percent and that that you're just anybody out with three point two three times but the in the quarter we continue continued expect interest expense of about thirty five million dollars as a quarterly run rate going forward now turning towards segmented performance and civil third quarter revenue with three hundred and nine point one million dollars versus four hundred and twelve point two million dollars and the third quarter last year and adjusted segment operating income with up twenty one point four million dollars over the third quarter last year to eighty three point four million dollars for a margin of twenty one point four percent it's highly improved performance was driven by higher training utilization predominantly in the americas and including our interest and joint venture civil training services as revenue with approximately ten percent higher compared to the third quarter last year the higher revenue in training was offset by law products revenue with the delivery of seven simulators this quarter compared to ten last year the lower number schedule delivery than the quarter was expected and it's consistent with our outlook for approximately thirty deliveries for the get out for the year in defence third quarter revenue a four hundred twenty six point five million dollars was up forty two percent over two three last year this includes the hundred and twenty seven point nine million dollars from the integration of three harris military training into our financial we indicated on the call the call last quarter that we would expect a segment operating income to cross into the thirty million dollar range and indeed it did by reaching thirty two million dollars for the porter including nineteen point six million dollars from the acquisition for a margin of seven point five percent the organic the fence business grew sequentially the quarter but remained lower compared to last year of because of prior period coven nineteen impact on orders and programmed program interruption particularly internationally which have been persistence of the onset of the pandemic and in health care third quarter revenue and thirty two point one million dollars down from one hundred and twenty point nine million dollars and que three last year on a statutory basis that was up seventeen percent excluding the ventilator contract last year adjusted segment operating loss was two point seven million dollars and reporters compared to an income of twelve point nine million dollars into tree of last year the decrease from last year was mainly due to the contribution from the ventilators in the fire period and covered related labour disruption been a higher costs we also running a higher level of us to an expensive to help accelerate hotline wrote would have you to sustainable scale and profitability
spk_7: with that i will ask mark for the flat the way forward
spk_2: thanks on yeah as we look for the period ahead we continue to see a clear path to emerge from the pandemic a larger more resilient and more profitable ce than ever before testimony to that were already delivery stronger financial performance expanding and optimizing our position and booking substantial orders pandemic related head with may persist for some time including supply chain disruptions employees and customer absenteeism due to cope with nike detection operational constraints imposed by local authorities and intermittent borders structure and the emergence at a rapid spread of the only grown very of this past december has certainly standard the timeline too broad global recovery
spk_8: where's not changed our position in a positive view of seized potential as are in markets eventually open more or open up more broadly as we emerged from pandemic
spk_2: in civil a greater desire by airlines to interest see with your critical training in digital operational support and crew manner with these higher expected pile of the man and strong growth in business jet traveled the man or enduring positive underpinning a secular growth market the global recovery continues be narrowly led by the americas which means significant upside remains were more global recovery and we think the americas provide a preview of the kind of the man to follow in other regions when conditions permit since yellow color we've had to contend with only crime related employee cause for absenteeism however the americas are still strongest and we're currently seeing some increase demand for twenty solutions in europe as cool vid nineteen related travel restrictions begin the ease and airlines plan for what they expect will be a more robust summer travel season and beyond as an example easy jet just recently announced the drive to hire one thousand new pilot over the next five years with see as your training partner choice asia pacific is currently the most challenging region would relatively low levels of light activity and training them as as only cra know it makes his way through that region overall since the oven at the end of a quarter are training centers have been holding at about sixty percent average utilization levels global it in business aviation we remain bullish on a long term and we believe that the market is experiencing a structural expansion with three point three million flights the world wide in twenty twenty one the most on a record for a single year coby nineteen headwinds bear mentioning here as well as only one coin key requirements were disrupted tour schedule in january for go for customers and see a structures but we look back on trim i wish the strong demand for training for plot propelled by bust flight activity in the united states in europe any simulation products were encouraged by the higher projected delivery rates of new aircraft coming off manufacturers production line as one of the course the main drivers for full plate similar yourself we're seeing hired a man as evidenced by this quarter's the school flight simulator ordered a coming mainly from customers in the americas and your and respect to maintain are leading fear of the mark the uneven this of the global recovery is likely to continue for some time well were ultimately in an excellent position the benefit of the most i use cyclical market recovery is currently underway we continue expect strong growth and civil for the current fiscal year old wrong and defense the paradigm shift from as a metric to near pure threat and a recognition of the sharply increased need for digital immersion based better solutions across all five the and national defense or tailwind that favor seized business given the increasing read relevancy of training simulations our defense unit is also on a multiyear path to becoming a larger and more profitable business we're currently focused on the successful integration of l three harris military training and we're on track to fully realize their thirty five to forty five million dollars of cost of your geez the we laid out by fiscal year twenty twenty four the pandemic continues to the international opportunities florida mature life but this head when his temper and we have a strong pipeline which some six point two billion dollars a business proposal pending customer decisions or increase orders in a corp which defense on the path to achieving over one time book sales for the rate for the year and first time in the last three fiscal year i do with the business was also and back impacted by pandemic related employ am as cities in january and it currently faces it's temporary budgetary headwind on contract expansions and new program starts as a result of the continuing resolution
spk_9: defenses indeed managing through it's share of ongoing challenges but we're moving in the right direction a we remain confident it will deliver strong annual growth of fiscal year twenty twenty two
spk_2: and lastly healthcare
spk_1: or focused on achieving greater scale by gaining share in assimilation training market and work caught targeting some of the largest cause of value like nursing
spk_2: supply chain restrictions a disruption and staffing shortages are near term headwind for the business to a week continued to expect a double digit growth in the fiscal year excluding the ventilator contract on ears different i want to highlight the see was included in a twenty twenty two bloomberg gender equality index for the for a fourth consecutive year this award recognizes see a is committed to support gender equality for policy development representation and transparency
spk_10: we're proud to continue building and it's in inclusive workplace every day
spk_2: in summary we've been adeptly playing office during this period of market destruction by investing organically and seizing on nine acquisitions to enhance your position and broaden our market reach we're also strength and we've also and see by permanently reducing our cost base across the enterprise the timeline for a broad global recovery is more extended but our actions that are performance today give me even greater confidence that were on the path the strong cyclical recovery and secular growth as a market and actually open and we all emerged from the pendant we're delivering a will we say we we do and i expect to see to continue drive driving higher levels of profitability on a significantly larger based a business and would oppose pandemic capital structure that will allow us to says pain ample flexibility to further invest in actually are opportunities that continues to look very attractive and i've never been as confident about his future as i am today
spk_1: with that i thank you for your attention and were now ready to as request thank you too much he was a top of i'm sorry operate for we open the lines the question i want to highlight that mark last month was honored with one of the world's most prestigious aviation award having been named industry leader of the year by the living legends of aviation we're very proud of him and how this reflects positively on all of us he so a place to join me in congratulating mark
spk_0: we gathered please take questions from analyst an institutional investors thank you if you'd like to register a question or comment past the one followed by the for on your telephone you will hear a street home prompt to acknowledge your request is your question has been answered and you would like to withdraw your registration please press one followed by this three one moment please
spk_11: and our first question cause i'm kevin chang as jvc please go ahead all the possible for my question on all of our go onto the congratulations for all mark on maybe probably start with claw the civil a larger performance as you noted for something the will make more about twenty percent
spk_12: utilization so fucking bulky and on a global said that but i look at a quarter of a quarter of they could for mental margin
spk_11: what about sixty five percent to strike at a sense of what he did a margin trajectory goes here as as you like they can get back to prepare them above over seventy seventy five percent because the mid twenties
spk_2: fri margin didn't given all that you done you know that within the mix of revenue there
spk_1: i i actually kitchen the last by your question carried by think i get the just made i'll trade me let me know that would it look i think i'm very pleased obviously with the margin performance that we had a quarter in several yo twenty one person one one point four percent a margin driven off essentially similar revenue
spk_5: that we had last year and and maybe to support or that would you look at the revenue looks like it's slightly down route that the last year for it for good reasons for the next environment the fact that we had lower deliveries and enterprise but remember that we don't for a widowed to consolidate gb revenue when that's not an insignificant number and that's
spk_2: because the county if you to add back the a jv revenue you what should be seized twenty revenues about up about ten percent your year by coming back to the margin look at as i said i'm free to be happy about that you're going like eighty percent i thing to play one percent twenty one and point for adequate your see their is this whole the the mix a business you have business aircraft which have always said is it as an attractive margin for far we have very good very nice position in and desist aircraft busy aircraft doing a great you seen that transpired you're seeing commercial aviation training in the us you're pretty well as and really a big way which are see his or cost savings which are structural coming to the numbers so that's what you're saying and of course we've always said that we fully expect that the are your margins because of all was reasons that margins going forward to track higher then know that we've achieved in the past i think our peak peak civil martin was just about twenty two percent historically i was certainly
spk_11: but the blow through that on a sustained basis i mean have a seat and one quarter doesn't make a year to move very bold but and that we can be that would be the trend as you get more you like this not at at talladega left a lasting i had of course i said a new remarks as all of that is achieve on a pre narrowly lead recovery that's really united states so i think that's why he says mike office excitement as a broader recovery across the globe your comes to bear well that doesn't make sense just let it affect us to clarify something of a so i look at on not the time that you acquired all the ultra we have military training business his nemesis neglected i think at that time were called out all of the da my jeans or of the fifteen percent of think i look at know what my look like since you've acquired it looks at it how how them pretty well as was your legacy margins are also have talked about half of my little bit below creep pandemic level
spk_2: it sounds like you're talking about up to primarily lot of international restrictions that finally the reason for the underperformed the margins and in any to city will travel restrictions get eliminated before they can and i'll get back to ten percent of anything off color or the margin back well i think there's a few things in there i'm in your ear got to be corrected of was cited defense business is not immune to cold with both were in the l three harris business prickly in the international site or visit ellie the international portion of lp harrison business or the one we've inherited that's were a package is it lord and organic organic business but it's still affected nonetheless and so it's seen as a share of impact there as you can travel to lot of those locations we've also seen some effects of as i mentioned that considers resolution in states that that prevents us from having new program starts or expansion of or existing programs so that is definitely been a headwind and the we hope to see that be resolved pretty quickly yeah good point the contract that were on like that
spk_13: mention the scars contract in the air in a united states and had the gbk gb of the the ground based t deterrent return contract that were on a nice states for i health rehearse that visit or x affairs business
spk_6: it was a big contracts and yeah because you have to see our can just resolution you know it's dear abby the contractors themselves if i if i think about the prime contract on contractor and gps the our neighbor not able to make progress in enlarging that contrasts a lot of excess it and i do i think maybe add that's funny when adding that yeah probably kind of talk to the organic pesticides and and that we talk to an and this is still the cases that basis as football edit sequentially increase of top and bottom line and last quarter and but as you know organic that that has a higher proportion of international is that the net market targets the one that's been the most disrupted by call better international product program felt a couple which are usually higher margins are it so first interrupting execution of existing backlog he has and certain regions where contract earth execution explode or or even stop arm and as restrictions left and programs can we start ah that that will help advance on on both revenue enter and contributions but also the impact of the delays in order and take especially on the international flight with a gun
spk_11: several years or at least they're definitely and pandemic with of the sales less than one as contract are elected etc but not necessarily move to a what it now has been some some good advancement in the quarter with that the book the sales in the international going about one hour and so as as those hey
spk_14: whether that
spk_11: the restriction lifted and we secure those the lead ordered the on the product an international flights are and amount of of course some layer on the continued synergy that that we're starting to ramp up with the acquisition these will contribute to growling are book on the top line and the profitability that said that that's awful but a leaders love with one for me you know i appreciate you know the pipeline of opportunity to see in healthcare and in a bigger are a lot of
spk_2: synergy with your core competencies it's of what you're to do their but
spk_5: linux way to be like when you have incremental dollar capital white how can we be an appropriate place to put that versus what you're seeing that civil defense at the just feels like eating got better skeletal businesses you can generally i would imagine better incremental returns
spk_2: i guess it is a good explains me what wine a dollar to help her with makes this was the other two
spk_15: where did the the person that point two other the fact that you can to strongly believe in him that health care will become a more mature party in a in the not too distant future that i'm quite often a blur well i think that the i would point to to specific ie the question of capital point me as a business largest shall funny i think essentially all
spk_16: how funny and are so eight
spk_0: the question you ask the really really you know where decisions we made with close to that
spk_17: i bet that have any thank you very much thank you thank you
spk_6: the next question cause i'm a karnak gupta of scotiabank please go ahead thanks and an egg with offer them good up and and everyone that and collapse marker on on your accomplishments i'll take a certain of made maybe and my first question that start going on about chemists flashing on civil margin knowledge in the you saw a pretty strong performance you get i understand it is the first job training which is high yielding and that god fearing about going to but anything on sort of long the going and made sure you
spk_17: i think i'm not going to recur again and and queue for the future quarters you saw him shoot three perhaps that against you know
spk_2: now have a kind of pet is just that really you know i can guess step up and operations really yell at thirty five percent increase in as hawaiian on sixty still sixty percent elevation lower delivery better it's really the make your you see the operating leverage that's coming from that that the increase in your life h
spk_6: and our and the cost saving so i think others there's no nonrecurring adams just stuff
spk_17: strong performance on of of i sell goods dakota how can i love those gonna lay motionless about unity in the business right on become a you are probably because at training a stronger and the fourth quarter of and then it kind of drops off and the post office sequentially so like does it does the first shed make people in the malady actually more pronounced and margins because of these i think what we still have be a normal she's now the although it's not as pronounced is here just because there's so much disruption across it i look i'm it's too early to say but i wouldn't expect so i when it's i would said been based on the make the we have i don't expect that will see a profound tree delhi's i don't was really so far the we do editing while i was just caution that you know if there is always volatility on quarter to quarter margin because of the makes and so on so we always you can give it a view on an annual basis side by side you know i think there's no there's no was significant to absurd
spk_6: down oh canada helpful thanks examine in the couple of things on defense the side of things certainly it it it rebounded sequence elites are really on that the vote margin some them and that i think or los gatos on yet he probably would have mentioned that you expect something in the place shortly and then eventually in the forties and himself as a why out what what's your visibility now with it's a kind of recent order and dig deeper does it give you more confidence in that forty blocks as why numbers shot
spk_2: me or are you talking up to leave out well as a cat great a great performance are on the order and taken up quick that gives you confidence that other to build on the on future growth and and what we like it that if it's both on or the us and international flight both are over one time the just like we we spoke about it out last quarter we'd like the in the
spk_17: are you into three hours out and and any based on a few factors securing delayed orders especially on a product international side ah as restrictions less enough and consistently to be able to advance programs that we haven't backlot and then larry on the synergies that that gives us kind of line a fighter at around forty now i'm great order and take but it does take a while to ramp up these orders show at at
spk_2: the end and the average life of the of these orders are over several years so ah yes it's it's the greatest a refill the backlog of of better confidence for the quarterback us we'll we'll see a lot of that ramp up ah maybe just the start of that ramp up and you for and the rest for the upcoming years a corner meme what what one thing i would just that point out your go back to previous questionnaire or at least you're the first part of this question is that a big hit bishop the treaty is usually the strongest of rushed into for i don't expect that to change the one thing as them
spk_6: mention we were impacted like most everybody else in january or with lot of instructors up with a cold related the sickness but eleven strong shorter in the back on trent the couple much and actually on the defensive the allied ask another question on on else we have it's it's it's it's showed some sequence improvement in margin scientist at a wedding is they're comfy thought agree to that margin
spk_17: i was there any synergy that are gonna rely solely on
spk_0: ah yes some the city's research to the city's come through
spk_18: and i guess what i would say is the have always said in defenses is no different than what one quarter is not make a year to have his been lumpy i will expect it from a lumpy where you are she's from she's come from had just out just as much as know we wrap the we're ramping up the education efforts are there were some redundancies action debt consolidation efforts etc so your feet scientific at some of those energy to blow through and and depending on windows and a do you live that they could lie in the organic or or the inorganic paper they will drive and volatility in that case ah a a more on they and organic site or better to marked point second drive from volatility and the quarters and time between fighter essentially that the vicinity time comes from
spk_6: great the of shit on the thank you thank you the next question comes from the amount of bmr to go ahead
spk_2: good afternoon and thanks for sticking my question again or a margin at some yeah you know you're talking about sixty five percent increment the margins order
spk_18: if given reason why you can sustain this level for criminal margin going forward i'm just gonna triangulating little bit you still have no utilization travel recovery still in the early stage and that really metric typically have very high incremental margin
spk_17: if that the right framework to think about the aviation business in the next to you that you can move up that utilization guards
spk_19: where it were also saying we we see the the obviously the mix from business jet which which health and my our on the margins and and that makes will vary especially as real the cat appreciating on the margins as well but you're right that the the operating
spk_17: which i see the operating leverage on the kind of flow through and also big chunk a significant part of cost savings now further than the smoke on those are savings will was i just know but i'll just continue to to help on the operating margin so on on the operating leverage rather self ah you know i think it is a very good performance and you know like mike said we we see this with volume contributing to are exceeding prior pay pre pandemic
spk_18: don't forget fatty of course that the the future revenue will include a greater proportion of full flight simulator a deliveries and ammunition got a worker or per game you get gonna work so that a different margin profile so he can obviously you'd consider it all a trading revenue so yes to your incremental margin but thirty not straight line right okay okay that some the support the follow up question is on he the air mobility market the eat eat dog market i guess yeah gambling and i got some some partnerships gonna coming through right now
spk_2: i'm just trying to understand what exactly you're helping these partners like god i guess it got jammed job and and a couple of others what what what did what exactly see involved with ease partners and done that for a helping them up the training i guess going into these big launches and and to what does this market looked like three to five years down the road does it does it look like more business aviation way of providing fulton t solutions and if you have any color around what kind of size market or you potentially looking out over the medium on guitar yeah okay for your question i refer you personally i would object to the word dabbling dabbling in this market which we've definitely they were we definitely intend to be a major player in this market i think it's a very exciting market have said that before i think it'll it's a market they will materialize field before anybody thinks it does because it's so compelling as in the history of aviation i'm a bit of his his as a big you know bit of history buff insufficient aviation specifically and what a as always stimulated the growth of the aviation his new a power plants technology and what you have here is new power plant technology specific distribute it electric power plants and the mets software systems that permit you to have these very complex vehicles that are inherently unstable to be able to be economically produce so that's why you see a plethora large large number of these companies coming
spk_18: a cubby through to produce vehicles of all types to serve service air mobility market so purse were not picking winners and losers losers here in this market what we're doing is we're getting involved in his by the way we had it's tough guy yesterday we became involved i went to
spk_17: major conference what and i say majored invitation only conference up about four years ago in this in this market was held in texas will were all of the players there at that time were getting together and really saw the potential for this market so short answer to to go back your question is the i should i believe that this market is going to be needing about over sixty thousand pies or next ten years and there's no way that these pilots that would apply these vehicles are not going to be have to train to a high level
spk_13: in order to operate in the the airspace that we have today and congested airspace because by definition these vehicles will fly in and around cities so they had an athlete right so what you see is asked positioning ourselves as the company we are we can help for small define the kind of tree
spk_2: any infrastructure and kind of training standard that will be required by training these piles of these vehicles working with the companies working with the regulators and offering the service as and as you say it may be a business aircraft a pasta or is it may be evolving us selling device says it will be combination of both it is being defined to they just as this market has been defined today but he'll make no mistake i fully expect this as see to be a major part of them mark okay that sounds great our enemies alaska question you mentioned about and how the edition the man had been led by north america us i guess in particular would it wouldn't gonna pick up and not and that travel in asia and some of these market that still are behind in the recovery be more attractive to you because you tend to do let a bit more like training or love it for turkey solution in those markets well i think it it be i think what would if if to look at the overall market us in training we've seen business aviation itself to your train doing very well of course you know that's all with that's very good the rest of the world i think one a point say when when the recovery comes back in asia pacific weekend to do a deal all an average of bit more wet in that region but i think i would point to training it commercially crap as a whole today asia pacific is operating you know at the by fifty percent were was in the pre pandemic so there's a lot of recovery left the have in that market so i definitely i think that any expansion going back to normal twenty nike lead levels were be wet or been dry is going to be good for ski it would be europe where be asia pacific again look back at what's happening in the us in the us today as it is be it's a narrow lead recovery
spk_17: people are scrambling to train your pilots you're buying more similar years the look at a recovery in the simulators that we've had a just this year relative to last year is quite impressive largely driven a state that guy's face and stomach in europe so it's imagine that rolling over in two
spk_20: europe and asia pacific and i think there's a large potential for that and i think that leads us to where i or asset base is today about thirty three percent of our simulators about fifty four simulator equivalent units are the americas
spk_1: in europe there about forty four percent but seventy two and asia pacific thirty six what's interesting though is your eyes least we we talked about during the pandemic we moved simulate a lot of simulators that we launched a lot of similar to go where we thought you're using your gretzky and as the analogy where the puck was going where public going with training a will be and no surprises be led by the i say so if you look at going to next year we're simulators are we're gonna have about the same number and absolute
spk_0: number of similar it cooker italy is equally units in the americas as in europe so we're seeing was shifting are acid based worded demanded i think that's gonna be pretty attractive and that's impressive especially considering that we acquired at the see in the in amsterdam so inherently we've added a lot of simulators
spk_21: in europe itself for the fact that were be a part because you're a very good mood that we've made guaranteed the future for us getting killed appreciate the economy
spk_2: operator just interject years back in here we've got quite a few people on the line wishing to ask questions and we'd like to get all of them we can maybe this point when with their respective one or two part question is so that everybody get a chance
spk_22: thank you
spk_2: the next question cause some time and ducks and of national bank financial please go ahead yeah thanks good afternoon them or i'll stick to one question them he obviously was got maybe a little more visibility you today on how the airlines are going to recover maybe there there's certainly some markets it a little more uncertain but i guess maybe given that you're greater visibility by many airlines
spk_21: can you talk a little bit about what you're seeing on i guess the potential for outsourcing at you know i think money issues the last couple years that iran to know what their fleets real look like and in a when that the mark was can recover but your the said there's problem or disability today someone you trust any those kind of talks around outsourcing deals had picked up at all
spk_16: was it doubly again in a high volume of conversations bickering and their contracts occurring and you're seeing that a testimony to the about of similar that we've deployed indeed i'd say specifically you know as pointing it the answer to fatties question the fact that we've been increasing the know
spk_0: or of simulators you're quite substantially in the united states tunnel and some of that is for business aviation which is growing but yet another large fire that is for the commercial aviation training network and and all of those similar years are going
spk_23: essentially to either you airlines that are starting which are going straight to an outsourcing model for to air airline including legacy carriers debtor clerk interesting see with long term contract or training so that's not your defacto a complete outsourcing what is definitely a
spk_24: different trend that you see where airlines had to eat or to be able security training need that they have been a cute bases you're willing to the other senior trapped in this and are going to long term contract with us for that is a difference but there is continually conversation and you know i would say that was certainly not in a steady state and me with
spk_6: with yeah there was may be better than we were hit you know last year but only cron as he returned a bit of a monkey wrench into your any kind of steady state in the airline business right now
spk_2: don't know that said a double pay for much thank you question cousin christian lack of luck and timing is the ahead i think song you know
spk_6: air traffic had a very recovery
spk_2: oh if google anthropic follows a similarly people covering up a second half of the alpha should it happen
spk_25: does any labor for fighting constrain like could slow down ability of potentially wind the man because with a the you have their it sounds like it should be a pretty good years and he that air traffic on in
spk_2: i don't fear they don't see it he is really they don't see any kind of parts are related issues that way labor
spk_16: i don't see it i think that were well positioned year we spend a lot of time during the
spk_0: during a pandemic special first year we if you go back from the things i've seen you in the beginning as we we will take advantage of that period that we have a lower demand and lord abandoned are meant to optimize our training network and that's where you see a lot recurrent and and permanent cost reduction coming through a week
spk_17: there we keep our powder dry and powder right mean that i said it right from the beginning people who are not gonna give up the freedom they have to travel and we see that we saw we see that is certainly the domestic flight united states are willing to see that and i see no structural it'll reach
spk_26: isn't that we will not benefit from that recovery and the a when that timeline is assured i think the only crime is likely extended that recovery time i may be but that a be measured in much certainly not and year yourself cause very confident the launcher
spk_2: they mother the pakistani the second question on are not here i using in december we finally saw the airworthiness the that this on the t v leaving the returned to serve on a mac are you seeing any celebration in training activity on the back on china well we just we see training for the max training of two matches have high levels that has been for a while on the return users even before the return to service as your people to see the lead the near the airplanes gonna go back into the sky so i would just say it's a high level like to read that could and i prefer i proceeded considering as more and more matches of
spk_1: being delivered
spk_5: think mark
spk_17: a china because you'll see that manifests itself in a largely in full flight simulators sales thank you
spk_6: the next question consummate than what part of this will make up for market please go ahead good afternoon and congratulations part for your prestigious award at mark always been some in any among the airline with spirit them from fear that any thoughts on the weather in any could slow down or accelerate outsourcing and well you look for a more and better every among the airlines the park well i'm not going to predicted said i'm at olive your inevitably yeah
spk_17: you know what the whatever that kind of event happens it's usually catalyst for us to have a discussion with them because the airline itself is looking for new ways of doing things so
spk_2: so i think to me that's where would leave it i get i i can be a predictor of how much money they would have it certainly does a lot of opportunity airline business today it perversely that continues to be a number of quite a number of new mind starts and that's good opportunity for us as well because you know we offer a ready made the international you know go at a global network or a pretty solution still offer them and solution that it was never there before so i think that's good for us okay that's great at my office or sonia you provided great color about yet or defense the fact that it didn't spread out there all the global scale anything particular to i like on what role did be change your comment on during the quarter and order free cash flow generation was there anything unusual or in the corner or should we expect another strong a fourth quarter i'll start on a free cash flow i think it's just very very strong performance and a quarter of two hundred eighty two million dollars that on at strong operational performance and and as you know it's a very cash generated business also driven out with a solid cash were can tap a versatile and a quarter way for over two hundred million dollar either of reversals and really continued a persistent focus on work capital improved collection and version of of work in progress into a or in cash and in and a reflection of high orders still higher at it come in with milestone payments and their deposits on contract so less that that contribute to a really good performance of free
spk_26: successful and that's the fight you know continued cash payments on the restructuring program which was about thirty eight million dollars in the quarter so so nothing unusual just strong performance and good reversal of market cap and that you know we we've got it you continued
spk_0: the hundred percent free casual conversion of net income to free cash flow not your first question i i didn't quite hear on the defend fight or just in december or there's been a big change that booking for defense the i was curious to get for color all about what role that big change a positive tone in terms of cooking
spk_1: what respect to defensive sonia well maybe i can answer that been worth a look at we it's it's it's the be pipeline of order that we talked about them the best the we have they're waiting for customers to to pulled the trigger really does he see a lot of that we we took the advantage especially internationally
spk_2: where do you know break before because we had a period of time yeah we finally start traveling and people were willing to meet us so i can tell you we took our international teams took the opportunity and it to really go after it and feel the pipeline in and they did you know i talked about a defense book to build a bomb
spk_0: one i could tell it well i'm one and two they did have very very nice job and and that reverses the trend that we've had done largely caused by called did that of the of you know that the orders gap in that segment pretty great internationally
spk_27: and then us a look i think it's just good work by our teams great work ratings i love the orders i as i said it in my in in the my remarks to that are coming across on all five domains the first prime contract in in the space the made the first time contract and cyber on top
spk_28: but a great wins like for example the abbey show when that we have to for doing all the training partner the luftwaffe on german yeah beating a sixty year and common i think it's great work by the teams in defense and working in collaboration i would say for example that last contract with their colleagues in
spk_1: in a civil liberties a full power of your will we like to call cause one see
spk_17: thank you very much for the time thank you thank you and and expressing have some tim james to the securities pick i had
spk_1: ah thanks very much good afternoon everyone mark congratulations on that show that you're testing awards real accomplishment
spk_17: having said that i'm receipts and time your actual my my questions have been answered some major oh thank you tim issue
spk_29: thank you
spk_2: the next question as anthony ballentine as goldman sachs fifth go ahead a are you getting at the dollars for know it today thanks to the time the my first question omni ten percent training wrote that you guys are put out of the jd the deck super outlaw an investment you are welcome that are measured on powered i'm curious what that looks like over the last few quarters if you can provide it even like sequentially i think would be would be really helpful
spk_30: and then my second part for for mark i'm just curious
spk_13: what you say the next was gonna be here for the global recovery specifically in asia and i know that you mention the new variant but and we've been having this conversation is cause for last few quarters now out is it a matter of us just learning or just in asia like us
spk_6: me learning to live with pandemic worries at an event like the end of the olympics your call there our be great dice
spk_31: i look i think it's just basically lifting of college restrictions or been there is the real they really impediment to to travel
spk_32: in an air goal revenue brought in training
spk_1: if that largely because people are afraid of getting on airplane is because the people can go anywhere already have to wait like for example in asia pacific in some cases he'll to twenty one day up to twenty one day you you'll have you'll have to quarantine fc combat debase you gotta be you know you got wanted to
spk_0: travel would you have something like that for me it's all tied to the lifting of those restrictions the great news is i think that yeah we're seeing for example at or would get a where you are yet to gear new york but i'll be here tobacco by was being lifting of all yeah essentially all restrictions here come back by the in a march i think that's a very positive use of doesn't do much were travel but i mean it ended patients with the european country with a little one by one basically calling it an to restrictions that's gonna be the catalyst so ultimately i think that's what we gotta see the but asia pacific and the i
spk_33: i'm i'm not a dominant boy can tell you when going to happen but i inherently i know what will happen so barring any new variant simply not but i mean i'm i'm optimistic that there were on a good word a good trendier
spk_34: but eleven a bunch of the yeah it yeah
spk_30: the first er like was also does it get you to the other question yana on the jv of ever do it as a catch twenty two year get us out so terrorism including to training growth including the contributions pretty good on that family has been the last quarter on hand as a couple different elements but i would i would say it
spk_34: higher because of it's easy to get my vision and we saw a really nice wrap up on and
spk_9: regions where we have a joint ventures for we can get back to you with the numbers
spk_2: okay great thank you great operator it look it looks like we're bad run out the our i do want to do that still needs a couple minutes if we can for members of the media there any questions or members of the media
spk_35: after a reminder to the financing i prefer one followed by the for on your telephone keep had to register a question or comment once again no one follow by the for
spk_2: the first question cause cousin stuff and a lot of lovecraft had a again please go ahead
spk_35: wait was on a say about honesty their upon like it
spk_36: and this decision another very families just remembered the air mobility a legislative acts yeah future would it be a complete failure the black you perhaps mcaleese up and as if to benefit them they did in the then data come up as of
spk_34: a better shot at the with a disability becky pretty much you not killer is all with was the actually
spk_37: they eat a worse goes is quite different markets survey reputed been a sharp boss that that matter who they were your images the text book it doesn't set down with my our side of a pixie of look good it isn't so poor that the men you're both call the amount on valid see if any of that
spk_2: via yep it's less it's about a minute is the best game wished it a than a scandal measures raise your shoe cool i'm you say shit except for plus he developed mounted the two seats that other i learned that the federal an old yeah looks or templars the new were exempt they're young and of the top and ever better be a tax on c
spk_35: that burlington those who the moya still a good idea or the at i below sea level my up on we knew we could visit her yard hold the you see i'm similar regular vanilla low low tech syrian soldiers yep the ac
spk_2: he or she did she die designed to put was like why it's a few done of yeah that's a your result but sadly the white basketball that was able you center that was why wait a oh these are the commonly of they come on ebay is a stars glitter montana defazio they come on a deeper and for the kobe need leave the editor the it's flag on the fed ex u p s a bailout that for soccer possible that why you have a city see that didn't feel to divvy it up his shop electric fix it today a cool ed it to take a victory
spk_5: scioscia powerball i join he got that that was playing the next set up of being eligible steeple new dahlia give money to get on hope that are so corny as xd
spk_38: it still manage dexterity it was so did it to stop the vehicle began to shift suggestion this is up a seat at the bus god was he does it all and it got me that goes bust acidic set up or see a and a debts has helped is a soft desperate people more yeah it out of call know
spk_39: yeah
spk_1: in gas is cmos t as get someplace to the doctor or other than it is set of decks out of fix the border with a senior bowl i don't know what it is yeah he saw the new the girl know what illusion and i do get measures yeah but be or development and a croissant statistics
spk_40: against villa
spk_41: examine city and a half as your face a very bad and subsequent a question it up already that masses demanded that she'd yeah like to see and conquer copies of iraqi regime comic book to score a glamour bangladesh globally cutting dog i have yeah they they did that the like all the pick them up at the colorado
spk_1: any athlete leaders leaders had to define is about eight
spk_42: he just sit in the year the machete manges on a bit on on email call it actually is really am pt and that did beat it is get you can't miss it even puppy so electorate a of web or was exempted examiner it's fair
spk_0: manufacturing and answer than i did develop be a the people to tip i got on of foes define as potter tips but if it must be founded as such as shown this skiers who the killer
Disclaimer