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spk_0: third quarter conference call please be advised a good cause be recorded oh no luck to turn a meeting over to mr andrew aren't of it you are pretty much or on it
spk_1: good afternoon everyone thanks for joining a phone call before we begin our remind you that has remarked including management outlook and answers the question contain forward looking statements is forward looking statements represent our expectations as of today february the fourteenth twenty twenty three and accordingly are subject to change such statements debate on assumption that may not materialize our subject the risks and uncertainties actual results may differ materially and there's a caution that place undue reliance on the forward looking statements that description scripture the risk factors and assumptions that may affect future results with containing the annual and dna available on a website and are filings with the canadian kitties administrators on feet are and the us securities and exchange commission on at car on the call up a that afternoon or my car seat president and chief executive officer and on your bronco our chief financial officer after remarks from martin will open the call questions for financial analyst at the conclusion of that segment will open the line and members and the media let me now turn the call over to mark
spk_2: thank you andrew and good afternoon general wondering if on the call had strong results in the third quarter driven by civil double digit row the best sequential improvement and healthcare increase profitability well to ensure our path to future growth by secure securing over one point two billion dollars in total order and take for a record ten point eight billion dollar backlog and one point two two times book the cells ratio
spk_3: it's civil
spk_4: we booked seven one hundred thirteen million dollars of orders from a large opportunist public pipeline resulting in a one point three eight kind of the sales ratio and this is especially noteworthy accomplishment considering this is on revenue this thirty three percent higher than last year order of include long term commercial aviation training agreements with goal airlines and mess that airline animal am open your business aviation training agreement with deluxe public charter
spk_2: we also make excellent progress put our flight operations software solutions with notable agreements including a five year contract with ethiopian airlines or next and crew and operations manager solution sweet and since the end of the quarter an agreement with frontier airlines for addiction operation solution the bad for full plate simulators continues be strong with fourteen sales and a quarter bringing our year to date total to forty three
spk_4: several financial and operational performance was also strong in the third quarter with double digit growth in near record margin we delivered nine for flight simulators and a quarter an average training center you live nation was seventy three percent up from sixty percent last year
spk_2: commercial aviation train them and continued to be strongest in the americas followed by seasonal seasonal up pic in europe and asia we can improve would be ongoing easing of travel restrictions in china and business aviation trained them and continued to be robust throughout our that work reflecting a high level of pilot training just or business aircraft like activity which continues to see pre pandemic level
spk_5: it depends
spk_2: the leading indicator of our progress toward a larger and more profitable business is order and take this quarter of we book or across the main for train and mission supports solutions valued at four hundred and seventy seven million dollars for a one point zero five times book the cells ratio this marks the sixth consecutive quarter that this ratio has been above one resulting in a book to sales ratio of one point two five times on a trailing twelve month face
spk_4: notable orders in the air domain include the provision of a flight train device that maintenance and logistic support for the royal canadian air force the ch one forty nine quadrant search and rescue helicopter the continuation of aircrew training on the case the one thirty five stratum tanker and see what thirty hercules as for life h airforce an international flight training device a brace for the f sixteen fighter jet and siege fifty three heavy lift transport helicopters
spk_2: and the land the main we were awarded funding for our joint terminal control training rehearsals just some which bills on the success of our previous funding awards for a new virtual training capability for soldiers to the us army on the soldier virtual train your program that contract
spk_4: we also booked order in the space and cyber to me highlighted by the proliferation of the solution were distributed network and cyber secure basic training be a us air force scars program and to deal with quarter we've got order in the see the main with our ongoing of work with lockheed martin on a canadian surface combatant ship program it's also continued to build on it's foundation of us army support with a successful competitive rate compete for the us army aviation fixed wing flight training program
spk_2: which involved the provision of comprehensive initial and record training for more than six hundred us army and us airport picks link pilot annually at the see dolphin training center in alabama the approximate total value of the base contract and option is two hundred fifty million dollars us with a period of performance through twenty thirty two this was a warrant was with did effective they commencing our fourth quarter and accordingly will be reflected in our next quarter ordered
spk_4: also involve the us army aviation are primed partner on the us army's future vertical lift bell helicopter was awarded the flower of program which will feel that be to eighty dollar tilt rotor to eventually replace the long serving you age sixty blackhawk helicopter pending protest resolution on this award he will support team ballard by delivering a range of train devices solutions and course where for bell family of systems we we've continued to place a strong focus on our operations and asset optimization in the face of the ongoing macro economic challenges impacting the defense industry as well as a broader economy and and as a result these efforts are financial performance where defense than a quarter improved sequentially and would largely in line with what we've back
spk_2: with that and i'll turn call or fiat will provide additional details but our financial performance for yeah
spk_6: thank you mark and good afternoon everyone and fall of in revenue of one billion and twenty point three million dollars for twenty percent higher compared to the third quarter last year adjusted segment operating income or the hundred and sixty point six million dollars compared to one hundred twelve point seven million dollars in the third quarter last year quarterly adjust the dps was twenty eight and compared to nine pm sent in the third quarter last year and just the dps this quarter included approximate to send positive impact as a result of games on the reversal of impairment of non financial assets following every carpet thing and optimization we encourage restructuring integration and acquisition on a four point nine million dollars during the quarter relating monthly through the air center acquisition and that also included the nine point eight million dollars impairment reversal net cash provided by operating activities that quarter with two hundred fifty two point four million dollars compared to one hundred and thirty eight million dollars in the preceding quarter and three hundred and nine point six million dollars and the third quarter of fiscal twenty twenty free cash flow with two hundred and thirty seven point seven million dollars compared to one hundred eight point four million dollars in the preceding quarter and two hundred and eighty two point one million dollars in the third quarter last year the sequential increase was mainly due to a lower investment in noncash working capital and a higher cash provided by operating activities while a decrease comparative third quarter last year was mainly due to higher investment in not as working capital which was partially offset by higher cash provided by operating activities capital expenditures total of sixty three point four million dollars that quarter what approximately seventy five percent invested in growth is specifically at capacity to our civil global training network to deliver on a long term fighting contract in our backpacks and contact pakistan this quarter with seventeen point one million dollars for an effective tax rate of eighteen percent income tax rate with impacted by restructuring integration acquisition cost a quarter and excluding the be thought the income tax rate was nineteen percent arnett that position at the end the quarter with approximately three point one billion dollars for a net debt to adjust that he better a three point seven four times at the end of the quarter the forty three basis by an improvement from last quarter pets a solidly on track and meet are targeted leverage ratio of below three times that that were just that he picked up by the middle of next year that's finance extent that quarter amounted to forty eight point eight million dollars which is up from forty one point three million dollars in the preceding quarter and thirty four point five million dollars in the third quarter last year personally seventy percent of our debt obligations are fixed rate and they increased finance except lurching reflect the impact of higher interest rates than are variable rate that instruments for now we're assuming a go forward corner they run rate for this expense in the range of the current quarter turning to our segmented performance and civil third quarter revenue was up thirty three percent to five hundred and seven pm point four million dollars compared to the third quarter last year and just thing when operating income was up fifty eight percent two hundred and thirty one point four million dollars worth of the third quarter last year for a margin of twenty five point four percent or so wrong year over year civil performance with mainly due to higher training map in our network your lives and and the integration of earth center into our the which represented approximately ten percent of total revenue in the corner and defend third quarter revenue a four hundred and fifty two point five million dollars would have six percent over two three last year adjusted segment operating income was twenty five point four million dollars for the quarter down from thirty two million dollars in the third quarter last year the revenue growth them from effect translation and the higher level activity on program while the lower it just the thing when operating income reflect higher costs associated with inflation supply chain disruptions and labor shortages that was partially mitigated by reversal impairment on tangible assets following three purpose thing and optimization and cost reduction initiative and in health care third quarter revenue and fifty point four million dollars up from thirty two point one million dollars and que three last year mainly due to the increase sales of patients simulators and center management solution adjusted segment operating income with three point eight million dollars and a quarter for an adjusted segment operating income margin of seven point five percent compared to a lot of two point seven million in two three of last year
spk_7: with that a laugh market discuss the way forward
spk_8: like sonia
spk_2: the phrase that we saw in the third or gives us additional confidence in both our fiscal twenty twenty three i look as well a long term targets
spk_4: and we're excited about civil prospects of we build our our industry leading position with the most innovative training and critical operate with or solutions a like to see significant growth during and beyond the ongoing global aviation market recover
spk_2: we anticipate contains strong rope it commercially the a country as like capacity rises and we traveled a man and as mobility restrictions bay in china which remains a key driver for airlines maley operating in asia pacific but also worldwide and business aviation flight activity is remain above pre pandemic level than would continue to strong demand for business aviation pilot fire we had been and will continue to deploy training capacity in lockstep with the man in this thing if he has segment of the market
spk_4: we continue to expect civil performance to be strongest or fourth quarter what a mix involving about twice as many full flight simulator deliveries as in the third quarter which get the to an as the middle forty five plus delivery for the fiscal year
spk_2: we also have watched the minors coming online in our global training network which makes for a larger base or revenue
spk_4: we've done very well with for quite similar yourself here today and we expect to maintain that moment them winning our fair share
spk_5: in defence
spk_4: despite the macro economic headwinds order to leave the potential us budget complexities which are expected to extend into the next fiscal year our continued sequential growth along with positively trending bookings and backlog when you add to our confidence in almost a year you defense represents a secular growth market for see and we believe this sector is in the early stages of an extended up cycle driven by geopolitical reality and increase commitment the defense modernization iterative
spk_2: what else sustaining higher order and a replenish thing and reviewing our backlog with you and more profitable defense contract and effective friend to continue and put your best to strengthen over a month a year period to a loan double digit percentage segment operating income margin profile we're betting more and will bidding larger what a pipeline have multiple hundred million dollar plus program and a number of one billion dollar both from program that it would bidding over the next three years were highly focused on execution and as we look into the remainder of the current fiscal year we expect further sequential improvement for defense in the fourth quarter
spk_4: and in health care where are the path to accelerate value creation by any share in the simulation training market and driving top and bottom line go
spk_2: we have a strong team and i expected either positive momentum to continue our capital allocation parties on change our to focus on organic investment that are made in lockstep with customer demand we're on track to meeting or leverage target by the middle next fiscal year which at that time will further increase our financial flexibility the see management and board directors are also priors that prioritizing returning capital shareholder in a timely manner which is a key aspect of our capital allocation strategy
spk_9: in summary
spk_4: the strength of our performance in a quarter and hour for an expectation for the bell for the year allow us to reiterate our i'll look for mid twenty percent consolidated be adjusted segment operating income growth for this fiscal year
spk_2: were also reiterating long current target of a three year earnings per share a compound growth rate in the mid twenty percent range with that thank you create tension them are now ready to that's super
spk_1: operator will now take questions from financial analyst
spk_10: sorry thank you and what's going on before before began to ask a question couple of one for by the for a new car phone keypad your way through it on prompt would not require it's caution have been answered your iran us version of the one for by the three and we're not proceed with our first crush on the life from corner cooked a quarterback go right ahead with the question
spk_11: thank you very good up on that one
spk_12: wanted to do our on both side of the margins so already back to the atomic level two and the okay three are you expecting the margins to be nearing the peak or would you expect other side of asia comes back
spk_2: well it got our i say look the other had a look at this quarter the spend your march we we had a it'll quite a favorable make said this quarter and the as that that the past that can be an important back to the margin that morality that question to one with but it was going the other way
spk_4: and if i look at i mean that specifically address your question i get to it but if you look at next quarter we're going to have a lot more or place similar deliveries which you the played a barge it will play a role the margin goes inherently upright bills are although although profitable than not as profitable prey so it was we were we were
spk_2: the plug lotta crazy but lot of training in the or or so you'd expect yeah although we're still feel very strong performance to fill out one that that that to see you know a high margin in the forecourt i would like to be by or third legal expected yeah but long term look a the end that a day of the market goes back as you said with asia coming yeah i'm quite encouraged by what if the in a the pacific and it's been the longest dragon recovery where we're completing the see the positive effects in a travel recovery we're seeing it in turns utilization are training centers but you know it's going to fix is going to take some time he those as we saw
spk_4: in europe and america as the it takes a while for to pick up a that i think we're stubble or as away from the a be fully back in my opinion but they don't mistake you know what i look at the fiscal twenty five and beyond
spk_2: i think we're seeing the pc here but a total recovery taking shape so good factor that plus he at all cost savings that you're seeing your whole to a result i think you really expect that margin get into decrease over the long term
spk_12: okay that's good color market and if the band follow up up there was a recent announcement i get by one of the one of the us airlines given they are struggling with pilot shortage shot they're trying to reduce the number of polish required or pilots carrying on turbine engine what does that really means was he
spk_2: well look i think i'll leave that to the regulators but everybody's always focused on very much on faith the so at at the mall that the i will tell
spk_4: the with barely did that the band of out there and where it were in growth mode so to me i don't kill i don't see that being a factor one way or another to the result of the
spk_13: critical of thinking
spk_0: thank you very much or get her next question on the line has some gear are gonna go with rbc capital markets to go right ahead
spk_14: heroin i hope everyone is wallet dot growth on the strong quarter
spk_15: thanks to thank you
spk_14: so on the the defense margin in a quarter and are the long term targets became established at the a better day able to help quantify a bridge between those two so no supply chain kind of are unknown it is pointing really anyone's guess as to why not improve but he able to talk to the items that you do have line of sight into over the next few quarters are that it actually sir and low margin business rolling off at a high margin contract or honey or off it's at a cost saving related to outreach caught energy
spk_16: but i think it all of the above
spk_17: look as a weekend before they did if one were doing here is ah
spk_2: we're we're basically doing very well on ordering pay you could see like six consecutive court ordered now of a book to build hired than one you have a trailing book the bill last when the twelve months out of one point two five which points too strong growth and and the a poor thing about that is you know the team yet would then go in at the helm his signing contract that are create to a long term goal so what you see it here with his daughter doesn't happen overnight it depends if their products or services or products contribute to results faster but dollars a contract or new contract or replace and contracts and are backlog l some of them to that or drag programs that have been very much impacted by the the head with that we've paid the supply chain as we said that you mention that non labor and and in some cases not only that very well on order and take it or not old older orders are created equal terms that are timing
spk_4: so yeah but look we we have a pretty good line of sight of those factors to yo as we go so that's what he allows me to reaffirm yield not a young for for for the you for for sure and then having enough line of sight of how we doing to year terms of
spk_2: bateman of those factors to give the optimism that i have forged continues sequentially improvements all to next year along the way to our long term target double digit growth a double digit profitability
spk_14: appreciate that bash the color and are also wanted to ask a question of civil and out the potential impact on a slowdown in europe and apollo training and are regulated and that keynote inflated opera macro to a certain extent but can you talk to your conversations with customers in europe are evolving given some of the yeah macro had went in the region and not any stuff your team and taking to prepare for a potential slowdown in that region
spk_4: thank you
spk_17: well i think i would tell you is that bad we're not seeing a food amp we're we're we're up to the
spk_1: certainly in in the in europe and the and in numerical definitely and with see things pick up as i mentioned that ah
spk_2: questioning asia pacific but at the moment we're group mode in were forecast can be will move for a leap into fuel future so the so obviously you know what people talk but risk of especially in europe is early bears watching
spk_14: critically ill as result a pretty face with a potential energy crisis which really hadn't occurred your but look we'll watch yet but we're certainly not see any we're not for can't see it anytime soon at least it as a result of the
spk_10: because present to color and all are trying to light over thank you we get her next question on the line
spk_18: from kevin chang with the have is he can read ahead oh yeah thanks thanks for taking my question good afternoon everybody or congrats on a on a good fiscal que three here needed a song or on the phone into your outlook you mention that little bit of uncertainty here with with the us government budget appropriation issues it just wandered into gives you that primarily impacting i guess that that the timing of of of of a word being allocated or that that op impact because i believe you're you're you're pursuing for cost recovery initiatives with with
spk_2: with the government on just given how inflation it played out here to dictate to these appropriated appropriation issues also impact the time it's a little costs will cover initiatives for you look i can on on on understand the party a questionnaire on on with got to get that this is city point in a recent deal with the budget
spk_4: the and and i would tell you when foolish this in and no not an interesting if the way funding was granted specific to address inflation
spk_2: that public and as i can tell you were working with our customers your to address the replace your items that have been and i said a business been a previous call that i've never been a factor when and that week that resulted known for us submit a request for equity would call
spk_4: equitable adjustments are are yeas and we submitted quite a bit in this or early in the process where i could tell we have received a small adjustments nothing material i would say
spk_19: the and to going back to were you know what i mentioned with the guards to it by just being approved and disruptions there
spk_2: to me is that we could see a for approach a prolonged you know could hear you could you just resolution farm barman defense of
spk_20: so that has the potential for delayed to new program starts because if you're at if you're in that kind of environment you can have a new program starts so we're watching that but i would tell you that even with that factory they may affect the exact timing but it doesn't change by view with regards to sequential grow
spk_18: next year defense now look at that very helpful a maiden will be my second question here you know you tube alluded to know the past couple of quarters looking to return task to shareholders and it sounds like like in a position to provide more details that the next fiscal year
spk_21: but what is a framework which me thinking about like are you looking at a targeted payout ratio on the dividend door
spk_18: from the by that
spk_6: or are you can return to what you're doing pre pandemic to dirty framework you can share with us as as still being contemplated a boardwalk go yeah as we had the first priority is really to do lover and we are really good progress and to treat bring down
spk_18: the leverage ratio by almost half a turn and continue beyond be on a gun and so then we believe will be in a better position to consider the return of capital to now there's i think it's too soon to speak about a framework perform at this point okay now that of actually just what what lot question for me to just get into the control increase in for personal a the later delivery expected in the cooking for any any any with apply chain or all the noble the part that and that and thing that you need to to build a deliver those all
spk_2: i guess all and alcohol and anything that just kind of ready to deliver the stuff by by quarter and here well you never you can ever seen zero risk because you never know it can hit you with although the my our our customers height as we speak so they're built posada issue
spk_4: and so when you know we've worked for the i lived as you who were brief period said that a delivery and certifying full plate similar so
spk_18: i'm marking the some factor that like a with the i qualify almost as act of god i think pretty good on that on you know us getting doses similar certified and as a third parties are not are no longer the factor when you consider that six weeks left in the era
spk_12: now that's super helpful thank you very much i think africa
spk_10: and as my the way i gotta i gotta show that out that thanks to that shout out to the hundreds of people that we have working in customer sites around the world doing that as we speak and and i applaud them to their the heroes making this happen
spk_22: i can much we get her next question on the line and some cameron books international back for national guard ahead thanks and good afternoon and what do you can talk a little bit about the that progress you're seeing to it yet air centre business said you even you survey indicated a couple of you airline a word here sounds like you've got to use some kind of a new next and solution there and sorry talk about with the investments required kind of progress you're making
spk_4: with a with customers on that new solution and you were rid of business i it has recovered to at that point well look to businesses doing exactly what we thought it would do maybe even slightly ahead that other at at at this very moment very very happy with happening as their i also
spk_17: in and a battle that facility after talk about your where we are invested way i would say largely in lima when we had anticipated when we announced the acquisition
spk_4: look i'm very excited by this and in a puff adder because
spk_2: yeah we talked about what our ambitions were it is a problem what is an jason market for us
spk_4: this is playing out this is playing out in your member that we have an extremely large overlapping up customers between our train a similar business and it's plate services business and which greenwood conclusive very very high receptivity of our traditional customers to us be the this market and it comes at a time that were see look worse the yeah as airlines ramp up capacity now it it's obviously very challenging times and and you could see her recent evidence that airline is in many cases have really out roman their technology infrastructure a need to reinvest so he leave you can we will itch
spk_2: you can be well sure that were engaged with all of our customers
spk_4: go to help them as they shake your technology neither future be sure that so i fully expect that would be part of the solution al gore top and be a year currently know and that because you're at the moment would focus on integration
spk_19: it remember the it in this kind of business it's kind of like use terms like any rp implementation taking spirit extended periods of time but once you have them you have the verdict that a beard and as well so look i'm very happy with the list of the that get solutions all about upward service was a burst of legacy on premises
spk_23: we have a we ever a pipeline that pipeline that's growing is going to take time but i'm very happy about our our progressing here
spk_6: yeah i'll just add on the investment are have we were you know
spk_22: operate on mark you know we we seen the ramp up with thing and full shoot at represent about ten percent of to divulge revenue that quarters of a very good in terms of investment will never leave out the effect of the net tens of millions that and at has started to yeah and since the acquisition and is part of the investments that you see after the result okay not that that three color i'm not going to pretend it's like oh and just to quickly on the defense i did you know that canada has formally signed a contract for the thirty five
spk_2: you update us on i guess what your expectation is for the training solution for that and you know how you think your position for that well i will well positioned obvious they because of the that's what we do we do it around the world everything every single day i would start by the for example son and thirty five luanda and other sixteen contract which late so we don't have to do to with that on here eighteen and and majority of fighters out there to world so i could tell you i personally and then numbers like are in discussions at all levels of government in in canada and with the customers the united states that we've met her with the the a thirty five joint program office provide melvin support for the a thirty five program and yeah we're confident that they'd be highly receptive to a proposal by canada to embed additional training and simulation capacity in canada the less they get effort by program and and i was encouraged by the fact that with whether the government and now the of thirty five days out that your simulation be string will be done at the game for space bag villa and or late so i think it's a natural for for see it to be involved here and book i think it's a generational given moment for canada's national security you know i think your canada's chosen well in terms of the
spk_4: tiger for for men and women in uniform and for canada's national sovereignty but here medically and job and canadian innovations of state here would get a with yeah
spk_22: canada nice seize this opportunity of the investment were making year and we can't afford to miss this unique up to be to create and protect the next generation of airspace jobs added that he is well what part of that and and i fully expect us to be part of the
spk_10: okay that's great thanks very much
spk_24: and you get her next question on the line or from fetish i'm honored be imo go read ahead good afternoon thanks for picking my question mark if if business aviation flight hours and that the down by ten percent this year because of the economy or in the next twelve months i guess his early voters who didn't hear ye based on a recent acquisition we have done and your positioning on on on on our your program to
spk_4: the continued to grow in that side of the business
spk_2: absolutely fatty a with the fleet is still growing the about of a new piloted the man
spk_4: it yeah we can have that trouble media now get tell you her i i you know i'm a pilot i could see myself that are crazy letters
spk_2: yeah of would want exaggerate we can't find a parking space in said the parking space them days a week
spk_25: so i'm not overly concerned about a flavor drop in the flight hours of mean we were seeing a very very hot market for build a restraining work continue to get our capacity or car or las vegas trade center has just come online
spk_17: so a thing of or savannah will be online next year we have a train that are orlando available as with our a jp parker a gradual capital which is or some constraints that are opening up in orlando and i can tell you that your we have them and spoken or comment zero strengthens so love
spk_24: that to worry about that just jerk drop and played our that could occur okay that's great color be a second follow up question really on defense mean we have six quarter now of expansion can pentagon be ordered level in the outlook is already forgot to continue when do we start to really experiences kind of demand momentum and to the margin with a greater gonna and
spk_19: influenza is just more to focus on twenty five storey order for schools like it or
spk_26: i'm just trying to understand the trajectory of harvey's headwinds from supply chain and
spk_2: it makes him the backlog you're gonna come off your shoes returning to more normal margin in that segment
spk_4: look it's going to be steady progress that's what i see the the the headwinds that wifi i mean work with as well imagine when i'm sitting on a as you're not doing anything about were doing something about it but it takes time it takes time to hire people it takes time for them in the is a defense sector to get the proper security clearances that we need for and to be able to execute on some reprogram we we have
spk_2: this is not take caught several orders to abate
spk_4: any get but it gets better every or we know what parts we need on the contract that we have a but when you need when you get new contract you need new parks okay that we get better if forecasting or things but it's still an issue because you're the adult the supply chain is not as fast as it was
spk_27: that's what at the same time we're we're factoring potential delays and orders because of things like like talk by the us that defence procurement but make the list day i'm saying steady improvement in our business in terms of were managing yet we have a very happy with it'll it is it terms of the execution of our
spk_28: programs and the level of contingency in those problems that we have execute them well
spk_29: but you know there was a factor in que one and i mentioned that that as that up and seventeen years i don't see that new get that with the rigor to with pretty particular falic i that pool at yale when you talk about wouldn't we we cover back to load double digits book is going to be we're we're on that road fatty and i think that you'll see our next couple years
spk_10: the get into it get great country
spk_12: thank you very much we're going to next question on the line
spk_30: i'm tim james her to the security guard ahead
spk_4: thanks and good afternoon think you or kidding me questions on my first question i guess i just want a return actually to that last topic i'm just going if you could comment on or or characterize a particular pinch point in the supply chain that you know one more problematic and others any any so that you know a killer parts or aspects of the supply chain that are a little bit more problematic in an open it up to either you know your simple business or your defense business
spk_16: but i think i'd start off by saying and it hasn't it hasn't really been a factor are several business
spk_1: and mainly because we've done a good job over the years to design a product that girl is highly repeatable a highly standard an art art art our teams in global sort of thing for example an operation that a very very good job
spk_2: forecasting and then be able to obtain those part so i think that that's been the case it is defense look at it with the the issue is i would take characterized any single part is basically longer lead times on many parts that with really is the factor you the all this be we've had issues you know like everybody it has on your the electronic parts of kind of thing for today
spk_4: it's really longer lead time repeating myself on an inventory many parts and what that does it not only the fact that you missed the part itself is by is the fact that in the meantime you either can't progress on that contract or you're having to do work around and work around it inherently electrician you'll have a baby people that have been idle or or installations yeah having to work around them than airport causing delays all things for the inefficiencies that way down on margin and in it has it would be a double if that because traditionally
spk_31: we are able to execute contract and get i and of ourselves to execute a program faster and therefore generate efficiency and they were in the contrary situation right now and the same effect backward labour you don't have you have the the software engineers that treaty because there's some of factors i talk about about ago
spk_12: the time to get them the time at the time to get them a basically you're a certified with great parents as they need now that gets that get that is getting better because you're obviously demand in the high tech market for software engineers a specially as cooled so we are bit of the bed the benefit of that was seen that but it's can think of your order for that to yell abate by you know to the extent that we get bathroom margins that we have targeted for an hour long term a in an online turn to pass business
spk_17: okay that's very helpful thank you my second question i'm just wondering if there any areas of your your civil business
spk_2: either on the business aviation side or the commercial side where you'd think you know pricing is particularly strong as we sit here today due to that you know the incredible sort of the man conditions and how quickly air travel has ramped up and therefore your pockets of pricing that could come under pressure sure it when we get past with this very strong ramp up period or or you think as some of the other areas that still remain make such as china cetera maybe sort of make up for any of that potential moderation and tracing or or or do not see any kind of their particularly strong tracing at this point
spk_4: well i think i'd start by saying the that in our civil service in in a large part in live in train but as long term twenty contra and and and that for specific strategy as you know is that they are typically i expressed anger or your cp i'd be escalators or villepin though you know that that has a moderate that going up and going down right for you don't really see will be spikes of we have been able to pass on a of the inflationary effect that we've seen over time
spk_31: when contract renewal of come up and the end of the at our our business
spk_10: her our vision always been and always has been and is the way we operate is to delay our customers in it and a corollary to that if we don't gallagher them when the market is going up and they're dead on your begrudge grudges a fair margin so i think all of that comes out to say that i'm quite calm
spk_32: the ball and yo the alberta given with the garcia margins syllable or okay thank you very much
spk_17: thank you
spk_32: look at her next question on the line and have been on one of those up a couple markets are the head
spk_31: a good good afternoon everyone
spk_2: just days on your comment on their recovery trajectory or defense margin of wouldn't be fair to say that high single digit next year might be a bit too optimistic and mid single digit would be more reality i'm not going to get the specific that this time than work or the say as i said in a we're working through the headwinds that week and that we're going to continue to see improvement go on order to sequential basis for sure oh okay that's great and looking at l care capital employ was mostly flat versus last quarter how should we expect capital employed to evolve or to be deployed going for work for l care and reduce the in your fortunately to to monetize disaster given their rich valley
spk_31: tion another spin enough that we've seen as recently mark
spk_4: well of i think and healthcare we're focused on translating the great top line with that there were saying of you look at the revenue this quarter and they and they with it is to oracle
spk_2: italy is translating into bottom line and fruit of notice that were quite happy with that six quarters and aroma of up the yes pretty strong growth at the top like two consecutive quarters positive us one a we have a great team and i would failure we have now just evans at the helm of the business he's got the birds bounty
spk_4: i no one can race with the strongest thing we've ever had in healthcare and they're hard charging the winning in the market and that's what we're focused on and and healthcare so funny so that's that that's a trajectory that were on the okay that's great and which respect to asia fascist pig where are you in terms of recovery versus pretend to make level are you back to half way through the below or still above the well i would say half way through it
spk_2: look up how would i characterize were worried a low seventy percent utilization and in that read it but right now it does it does have seasonal variations
spk_1: i'll give you some maybe data point said it turns a simulator delivery
spk_4: the or orders
spk_32: typically part that as debbie with fifty sell maybe six the a full flight simulators a year to china
spk_10: okay and i would say over the last couple years we've only sold two or three in total so that gives you an idea in terms of simulators them at the more near term recovery comes in training and i'm mainly cause we'd all the training centers in china but it is you know all the training centers and
spk_33: we have an arena course we have a lot of training centers the region the anchor customers that we train in those regions a lot of their a good proportion their flights are in and out a child so our as that recovers get a wifi do you live nation are training center wrap up your i expect that to materialize the over the next few quarters as a recovery taxable
spk_4: okay thank you very much for the time thank you
spk_2: we get her next question on the line has mattingly you kind of courting you're ready to start ahead
spk_4: and a good afternoon happy valentine's day are in on the civil thought i'd when i think about new pilot coming to avenue show training you know is that a higher margin program and of margin benefit than usual annual pilot training than and then you can quantify had to quote you're seeing adding issue just given how many yeah pat is be trained right now
spk_33: it actually lower bargain business than a than i could give when we are next it's on the lower him
spk_4: it's really the when the will look at what that rises it drives good or increase is a christian capacity in normal in our training center network and his partner of are offering to airlines which is very important your airlines are looking for pies the pilot and you know
spk_33: he has one of the the largest network of pie trade center in the world and and don't get we don't we don't basic they pay people off the street and we we only do it for for for airlines themselves so it's it's an important part of the off the offering that we give the airline as a as a complete solution by it but if i pay
spk_10: it by itself yale it's it would be yelled if i like lord and near the average margin that we get our civil the
spk_34: the that her helpful and on the defense as you pointed out of delayed orders coming to fruition that a potential margin driver you know idol contract naturally high margin with more prior in the next are there another reason why though already particular a positive for margin
spk_35: all the of the i would say that i to say all because different facebook pretty good but the great majority of the contract that were signing it would bury a day or are creative to objective of law double digit barges in the
spk_30: okay that's fair help off one
spk_2: thank you from a crush on the line from philly with on the brown to go right ahead
spk_4: yeah fire from them hey mark imagine that the a america quack for ecological and and the penalty can comment on and the process
spk_2: for help or are there said goliath for the cup her to respond back to you if the going to go she a process where the coverage that know
spk_34: you have like a and ability to to appeal the decision
spk_36: but it case by case it depends what i mean by that the sometimes the is the
spk_2: the request very quotable as adjusted you may be submitted to the government itself and sometimes to an intermediary which we contract with on behalf of the government so a case by case we at we do have to as as you might expect we do have to make our a than a lot of documentation related to that of we had that documentation
spk_4: can we are putting okay with or there is no specific timeline for them to recovery
spk_35: well as i say one thing that encourages me very much is and as a as i said previously we had a lot to do with it of that ourselves or our our governor first people washed and did a very good job on this that in the in recent years the budget there is funny specifically granted to address inflation
spk_2: in the industry so yeah we're working with with your our customers and as working you have to prepare your arm claims with the guards had a priest budget or but again there's so there's no timing on that but i fully expect some of that will come to fruition
spk_37: okay and would it would you describe a hill
spk_10: aircraft or the response of been read them all are you conversation like they haven't been unreal what are they a no i don't i don't think there's anybody being unreasonable but you have to make your case but yet we have your case in a we have simulators that that you know where a word literally
spk_38: delivering across the country and one contractor it's about one hundred and eighty transport truck oh web help with armed guards crossing and i'd say that were bad that would gas was two dollars a gallon or know that i gases about two dollar a gallon the more so you can just imagine that just on that basis alone if they let's prepare your that's not exactly a two percent cut natural go for the contract and it receptive to that that kind of thing okay and my second fashion back and q one what are they they charge of the interact with for it and maybe contract with it with sinatra program backfired and to have been extended and if i were happy you're hoping to have it really contracted a better term i'm just wondering how that happened has been recon try to a better terms are you still waiting but still waiting on that one and to me we can't retire talk by that that be near a to contractors will submit the been that they hadn't would they haven't they haven't this like that anyway has barley know
spk_31: okay thank you
spk_39: thank you very much and will proceed next question on the line from anthony valentini with common sucks can read ahead
spk_4: a out a sorcerer are taken a question of for for fanatical that
spk_2: i'm looking at utilization rate and seventy three percent here in the quarter
spk_4: to carry my back to pre pandemic levels and it looks like you guys you actually you know awkward some cases about where you were i'm curious and show you how you guys think you like a capital allocation process of how high that number
spk_2: we can go rafting think any to be some sort of slack and system
spk_4: the and would you get to that number you know whatever it is and how you think through putting new simulators into your network if that makes us
spk_17: yeah we'll look at the short answer is that with that remark we deploy a couple in lockstep with the then you'd will imagine because we're with the market leader year in have been for for a long time both in similar years and in familiar based training we know the mark very well and we go our customers were lungs were constant dialogue
spk_1: with them both in in the the airline actor division center so where we have a pretty good and informed idea of how much demand will be required to remember if they regulated market know people there's that you could just look at how many real fight people expect to make
spk_4: the how many deliveries are coming out of the aliens and you will be able to establish your what is that the man requirement across the world world approximately
spk_12: so so that how we deployed and week in terms of what is the practical capacity look i i'll tell you owe their training center in minneapolis about now three weeks ago where we are angry customers are some real the largest regional cares the united states like go like endeavor for example
spk_4: and i could tell your training centers their operate above one hundred percent and key to do what a great job so yeah we talk about practice capacity you can get up there you could sustain it will you need to and that i believe you me and the it to support the training original cares as states right now they need us to be operating at that level so we can do it so there's there's a last to study their down and practical reasons you know when we define one hundred percent for airline
spk_19: getting a little bit detail year but that six thousand hours
spk_38: a year which is sixteen hours a day so that's what we consider a it all practical limit but again we're doing hired after there's there's flat biblical the demand is there it'll definitely do and will be get that kind of level well yes was in the in minneapolis you know they were so the butchered year good nice tractor trailer
spk_12: there's a or a backhoe was building to do simulator base of bathe in minneapolis while i was there because you're clearly demand is there and and we secure long term contracts are we got speculative on how we deployed at cap
spk_38: okay yeah great that that super helpful i'm curious how long have you tagged our once you decide to add a simulator to a possibility how much time in the paper yesterday to build that sand and that deliberate to be up and running
spk_40: a defensive were going that's a big factor but yeah tip of the we make a decision on an airline and
spk_41: at that a typical simulator but it's it's probably have one we've built before
spk_38: typically between twelve fourteen months i would say
spk_4: okay helpful
spk_17: last one for me to fetch and he highlighted our future vertical at i'm curious and i'm sure you have one hundred thousand dollar contracts but where does that you know kind of rank in terms of the large programs that you have and should we be thinking through that contract being negotiated you know in the in the old strategy or of the new one
spk_4: which is that the attacks targeting double digit percentage margins
spk_42: the new one
spk_38: as as request
spk_10: ah yeah and it just how in terms of rank
spk_43: your have all director and vs lol know it it's it's a large contract is it but yeah i that in the i said in the remark that we have we have lot of contract were bidding in one hundred million our brain we had a lot of contract in a billion dollar range or next three years this is one of the one that qualified in the
spk_44: second category of a billion without getting that they those a large opportunity of guy and but it's not the only one so it it doesn't disproportionately affect you know my view on the porches will have next year is important but it's doubly not the only one often thank you so much with i
spk_2: well turner's question on the line has from christian be walk from morgan stanley to go right ahead
spk_1: oh good afternoon everyone
spk_2: got i can do you know what a follow up but our islets four age and like the bigger picture id they that you know pilot shortage of the already an issue and and the mandatory retirement coming up in the us will likely that debate the issue mean when you look at the program that your customers you're on your kk like to add in a shell and things like that
spk_44: college of these action song like the bigger shortage problem and if not you know what should they be doing to support in city girl because it just seems like there's not enough urgency
spk_45: in terms of action that they should be taking the just want to get an idea of how much you think that kind of thought of action today and if not sure how the thing that gets resolved
spk_46: love etiquette get a great time with to take investment they're not let pilots and are the only issue that the that you pay to industry now of is a the dish good six it if it's been exacerbated by the fact that is the industry was extremely finally home you'll before the pandemic then we went
spk_44: back to help with my back to goal of yeah and so we've been gradually rebuilding that is for every part of it for pilots so are our one part of it that report part for when we play in in a very big way i'm we're in we're doing our part by helping our customers we've been deployed new trick you into the man in terms of like flight school activity will be fine and gore contract with them were operating are training centers that as as mentioned in the previous the answer at your level that are unheard of at least it's certainly the united states right now so look i think it's going to take time and kill a is going to take investment than and and in that's why i think in terms of our business
spk_4: i i think it's going to be a good business or a period of time
spk_47: i'm quite confident than their fears and civil aviation
spk_30: yeah if he gets college a few years not urgency and all
spk_4: if i could sneak a second one on why i will tell you i i i would kiss or target i would tell you that if you tie with severe life i heard that i thought to a huge the letters of year the but sorry go ahead christie
spk_2: yeah great if i could have another one i am an eye on you know when you look at what you've acquired over the years part of that was attributed to your thick fat and some of your competitors in place eating their territory back to you
spk_44: on if such opportunity exists out there would you can find consider lovering up the balance sheet even more today and eminence out there are there even any app available for sale that you can't are solving like you've done in the past decade and are italian like all leverage are you comfortable
spk_1: i'll tell you won't let me
spk_10: but apparently
spk_0: the seriously if if we're focused on the leveraging way now that we don't see any gaps in our portfolio it we did very well during a pen and make a play off his shirt a downturn yeah i'll try that you know we're we we are like big you seen know we done quite a nice job of daily rejigging this quarter i see that continuing along the path that we said that you will get you a level three
spk_48: oh look we never pass up an opportunity that would be good to you know to you're good to pass but yeah i think we gotta be a good job and that were focus on the resume and the leverage in way now looking to your start returning you know cash or shareholders and country continue to get are being a lot of the one party me to grow in lockstep with that the man and that's largely inorganic
spk_2: great well thank you mark
spk_4: you so operator that all the time we have or financial analyst at now ask you to open the queue to members of the media there any question
spk_49: charlie
spk_4: altogether minor for the media if you like to ask a question you may do so now the prussian be won by the for on your telephone key part
spk_30: once again it is still one for from the question or comment you may have
spk_50: and we do have a crush on cued up from different one of my particular job but gotta had about it ago
spk_48: we also the tobacco and conducted there they're they're that only get jumpy i'll get usually or they get knocked bullet but not let it out that it is why abolish the it that at a mediocre bergenfield utility that i need you to dictionary they get me a pm to another bird between the visited types get money back down to that exceed all that and we're like that jumped at the scene of it he he had a bad i can up to have a you that are got a guy but the like a solar that yeah shows i did he appear laps bus it their that down
spk_51: the called hebrew and of mothers on a little the sake of the three early sit down here called on narnia they got done the a more all or no arrests you're the common the i do with you but as don't follow the are still got your body don't need to monitor or point then like don't know
spk_31: they think were founded this your come on canada
spk_2: given zero thirty gotta pay the last night drug dealer business items over the you now mean that see you will pop up off the only thing as a good and and now the feel superior as to harder than a town that come on a stuff fixes i'd lose do come on come on
spk_17: age because you know who are taller co op last sukarno they suck on couple of mother know the our down know that business to develop be se
spk_19: that girl get your present attackers with it
spk_2: in kick at a thank them for granted that lack for gay characters that are you make will see a day
spk_52: and i yardley danny kaye of yen was the editor mom so i can get a piece of good that he is a downfall way they they like the anthony t on the map and
spk_19: he tv and call quality the calculate the it is younger women
spk_4: value that that affected that vs off then of a
spk_53: a week sectors are they can't play at best console worked
spk_30: shit or cost a dollar a that levy i saw that file a build up as the old what the and to in a have thought that the among the film that direction did affect our luck
spk_2: get airborne do us good your on a the on the or then business that has ever done donna and multiplayer that just for that five the avoid the boil the day that the a don't have demanded pierre that sector that yet another by a day
spk_4: a course that are the hospital spare as a guest it can compare the new book is that the oven up on the be a washers were calling to shovel constantly have to circuits often of us that a shell gunmen i learned the the sector though that yes talk about that
spk_54: the shower or or come off our bloody a book called why they are they have a blog my guilt or let off by adding a pet set call the police car called what don't get a debate if that comes on like it or alleles create panic what up the other mom now all vocally a shock i'm overcome on february like
spk_4: could become a gal a that a fault
spk_48: doctor ebell among the don't have let the poor the i use a regular sector key is our are more days has had report new all or not and must be that he has all corsair out there now
spk_55: wow old that the ummah be on a pilot whale and difficult but we all go on a that of var up on the me may emma that's so now but what he had asked the man
spk_56: he give us my
spk_2: the key kids you would add to the if you book on up and they me see our on as the be healthy what am i left shin last year levick the the dead affected actually the felt major scariest among them another the last by the and the dead dead the play thick as little coveted optional work with you won't come on of up and give up after leaves peer yen on as the go home what the past year everybody the company at the end on as the on could buy you go our skin don't have a tragedy and activity acu done on the whole national they do so only fact that get
spk_4: eh have a boy this
spk_48: to like to their incivility don't know there's this is a that is any of the and the internet he have to yell at them awkward people that he added less than that could get mantle they were on what's the coachella or treated lot off the de lemay then if there is to show leadership did in the next thing
spk_57: on on on on know
spk_4: the old west to a shrewd get had done news syndicated me dial or it to me
spk_48: the schedule fact i your are your lot of people are made of his name tall bodies as any other this year the was easier for an exam may get a copy of the as get air the fictional those why indeed the guest guest judge judy the is the a don't have a problem have a down key
spk_58: nominee john wall don't feel that that in fact turkey or could be memo and good young or on our cope with that what are called bookable beaucoup the the bush who were so to put a definite technique
spk_59: the name's yeah got issues your job the same someplace family out of mama or not we are that are the emiliano whole history of the of that
spk_1: of support factors for the croissant of my mom is a blizzard here
spk_60: you're mostly ball measures are lots of available
spk_1: it takes a different study to on as to contact them and effects of a faint all day many check to the a perfect as good as think it's geckos month the made their goal of the like tell me that he did they are ya book will get on the who made made them that get the tickets will it will love you guys in the paper
spk_0: obama the on it if they are the sheeple
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