Q4 2020 Earnings Call
Welcome to the C. D E fourth quarter conference call. Please be advised that this call is being recorded I would now like to turn the meeting over to Mr. <unk> Mr.. Andrew Arnovitz you may not proceed mr. on of its.
Thank you.
Good afternoon, everyone and thank you for joining us today before we begin I'd like to remind you that today's remarks, including management's outlook for fiscal 21 and answers to questions contain forward looking statement.
These forward looking statements represent our expectations as of today may 22nd 2020, and accordingly are subject to change such statements are based on assumptions that may not materialize and are subject to risks and uncertainties.
Actual results may differ materially and listeners are cautioned not to place undue reliance on these forward looking statements.
Description of the risks factors and assumptions that may affect future results is contained in CS annual mdna available on our corporate web site and in our filings with the Canadian Securities administrator on SEDAR and with the U.S Securities and Exchange Commission on Edgar.
On the call with me. This afternoon are marked our Hong sees President and Chief Executive Officer, and Sonya Branco, Our Chief Financial Officer.
After remarks from Mark and Sonia, we'll take questions from financial analysts and institutional investors and following the conclusion of that too in a period, we'll open the call for questions from members of the media, Let me now turn the call over to Mark.
Thank you Andrew and good afternoon, everyone joining us on the call.
I'll first discuss some highly for the quarter and the year and then Sonia will review the detail detailed financials and outlined some of the measures that we put in place to protect our financial position.
And preserve liquidity in the face of the pandemic.
I'll come back at the end of the presentation to comment on our outlook.
We were leading CE two would have what would have been another record year when the coal bid 19 pandemic kit and unfortunately, it impacted us during what is normally our strongest quarter.
More importantly is the rest is suddenly Polish the People's wellbeing and our first response.
Was naturally to ensure the health and safety of our employees in our customers and this continues to be our top priority.
We wasted no time assembling a coben 19 pandemic task force.
Putting our business continuity plans in place.
Im extremely proud of fees employees worldwide, who daily through even the most extreme conditions take to heart the continuity of our customers. Most critical operations and earned a privilege of being either trading partner of choice.
Well makes me more proud is the way our employees went beyond the call of duty in the fight against Cobot 19.
By bringing forward the idea to develop a critical their care ventilator.
It took it took just 11 days for 12 to see engineers and scientists developer prototype.
And now some more than 500.
Employees are delivering on a contract for the government of Canada to manufacture 10000 ventilators to help save lives.
The C. Erewhon ventilator has we've called it is in the final stages, a certification by the health authorities.
Right.
We're going to business of safety after all it in this humanitarian gesture is a true testament to the kind of social impact the CE and its employees have it also underscores the company's agility in our culture of innovation.
Now turning to our results notwithstanding cobot 19 impacting us during our biggest quarter, we still had a strong performance overall as fiscal 20 with double digit revenue growth, 21% operating income growth and 7% higher earnings per share.
I'm, especially pleased with our 98% conversion of net income to free cash flow.
Which underscores the cash generative profile of seized world leading training solutions.
His civil we exceeded our annual outlook with 37% operating income and natural an annual orders totaling two and a half a billion dollars, including additional airline training outsourcing and 49 full flight simulator sales.
Civil finished the year with a record backlog of $5.3 billion.
Again this year, we delivered more than 1 million hours of training underscoring Ses position as the largest civil aviation training company in the world.
In the fourth quarter specifically.
Civil vote orders or $469 million, including the sale of 12 full flight simulators.
Civil saw a significant decrease and training services demand as a result on the reduction in airline at business aircraft operations globally, and the disruption to the global Air Transportation environment itself.
In addition to much lower demand travel restrictions and local shelf isolation measures worldwide resulted in several civil aviation training location closures.
By the end of the March quarter 19 of our over 60 20 locations has suspended operations.
And a further 10 locations began operating a significantly reduced capacity.
In addition to disruptions to our global training network. We also have the suspend the installation and delivery of civil simulator products and under local public directives, our Montreal manufacturing plant suspended manufacturing of civil simulators during the last week of March.
Despite these disruptions we still managed to deliver another was impressive 56 civil full flight simulators for the year.
In defense.
We expected a strong fourth quarter in order to reach our annual outlook for modest growth.
But 82 was impacted by the pandemic.
We achieved modest revenue growth.
While we came up short on operating income, which was down 13% mainly on lowered and expected programs progress on program milestones and delays securing new orders.
A range of programs with defense in OEM customers globally shop project advancements delays due to travel bans client access restrictions and supply chain restrictions and disruptions.
Also we had delays to contract awards of government acquisition Surtees, followed director directives in their respective countries to shelter in place and eliminate travel.
In the middle East to the new realities brought about by the pandemic and low oil oil price has led work on certain programs to be halted and new contract awards to move to the right with customers focused on their new fiscal realities that mitigating depend imec itself.
Despite these headwinds we still booked $1.2 billion of orders during the year for $4.1 billion Billiad, sorry defense backlog, which gives you an additional measure of diversification.
Key wins included a contract for KC 135, aircrew training services and simply or upgrades for the United States Airforce and a contract to provide German Navy would a comprehensive training solution for the any Sninety Sea lion helicopter and to upgrade and modify the German armies any sninety full mission simulators.
For the quarter, we received defense orders in contract options totaling 207, the $7 million.
Notable wins included a contract with Leonardo to provide a mid 346 training devices and upgrade a.
On an order from the systems to supply our see medallion E series visual system.
And then an order from Babcock, France to provide a plateau SPC 21 full missions simulator for the French Air Force.
And finally in healthcare, we were tracking expectations for double digit annual revenue growth when it too was negatively affected by Coleman 19, as medical and nursing school customers came under Lockdown protocols and hospital customers focused attention on the healthcare crisis.
See healthcare did however.
Succeed to bolster its position during the year as the innovation leader in simulation based healthcare education and training.
One the CMS World Innovation award for see areas Aer, the Microsoft Hololens application for Healthcare's emergency care medical.
Healthcare also lost in an innovative products, including new anesthesia since that modules screen based simulation approved by the American Board of NFC is the LNG for maintenance of sort of isn't credits and multiple custom simulators for Oems and leading medical device companies, including Bayless medical and.
Where's life Sciences.
And on the humanitarian front in addition to our ventilator initiative.
Healthcare provided complementary training seminars on how to prepare healthcare workers in a fight against Cobot 19.
We also launched simulation based training solutions to trained personnel in the safe practice of ventilation and innovation, which is key to saving lives.
Additionally, we leveraged our global supply chain to supply some 600095 masks to the Qubec and Manitoba Glover, Manitoba governments in support of frontline health workers.
With that I'll now turn the call or to Sonia who will provide a detailed look at our financial performance I'll return at the end of the call to comment that outlook Sonya.
Thank you Mark and good afternoon, everyone.
And do the pandemic related challenges ahead, we implemented several flexible measures to protect our financial position physician and preserve liquidity, including a significant reduction in capital expenditures. Our current expectation is for approximately $50 million of Capex deployed in the first half of fiscal year, and we will assess the level of the placement as market conditions develop.
We are also significantly reducing R&D investments and we have introduced strict cost containment measures salary freezes salary reductions reduced workweeks and approximately 2600 temporary layoffs, we have since been able to recall approximately 1500 temporarily laid off employees in Canada to the Canada emergency.
Each subsidy program for which we must qualify on a monthly basis.
We have also access and are working to access government support programs in other countries, where we operate.
Other cash preservation measures. We introduced include a suspension of our common share dividend and share repurchase plan.
Additionally, we are working when our defense customers to secure more favorable terms for milestone payment as well as off the contract modifications to increase work scope and working with suppliers for optimal payment terms.
These training operations are inherently highly cash generative. However, the combination of sharply lower demand and the coded 19 related disruptions to our operations are expected to resulted in negative free cash flow in the first half for the fiscal year.
Adding to this we normally see an increase in noncash working capital investments in the first half.
And I would add while connections on time, our timely with defense customers, we expect collections to be slower with several customers based on our current view, we expect to generate pilot positive free cash flow in the second half as markets begin to inflect more positively.
Now looking at our results consolidated revenue for the fourth quarter was down 4% to $977.3 million quarterly net income or specific items was $122.3 million or 46 cents per share, which is also down 4% compared to 48 cents in the fourth quarter last year.
As Mark noted included 19 began to negatively impact our results during our biggest quarter on average we typically generate upwards of 20% of our annual operating income in the month of March alone.
For the year consolidated revenue was up 10% to $3.6 billion and segment operating income or specific items was up 21% to $590.4 million annual net income of course specific items was $359.7 million or $1.34 per share, which is up 7% compared to $1.25.
Last year.
Specific items in fiscal 2019 include the costs from the acquisition integration of them buying it back isn't.
Specific items in fiscal 2020 also includes the impacts of the sentence securities Reorganizational costs and the impact of a goodwill impairment charge recognized in health care.
We generated $185.1 million of free cash flow in the quarter and $351.2 million for the year for an annual cash conversion rate of 98%, which is right in line with our annual average conversion target of 100%.
During the year, we generated higher earnings which converted into higher cash provided by operating activity, which more than offset our higher investment in noncash working capital.
Uses of cash involve funding at capital expenditures for $84 million in the Slickwater and $283.4 million for the year, mainly for the deployment of new simulators to our global training network in support of customer led growth opportunities.
Other uses of cash included the distribution of $110.9 million and dividends for the year. In addition, we repurchased and canceled approximately 1.5 million common shares under the MTV program during the year for another $49.6 million.
In all between dividends and share buybacks CA returned $160.5 million to shareholders during fiscal 2020.
Looking at capital return return on capital employed before specific items and excluding the impacts of life Rsixteen was 10.9% compared to 11.6% last quarter and 12.9% last year.
Net debt was $2.4 billion at the end of March for net debt to total capital ratio of 47.8%.
This compares to 1.9 billion or 43.9% of total capital at the end of last year.
Since we adopted I addressed effective approved April 1st 2019 net debt also includes obligations under capital leases, which were previously accounted for as operating leases and therefore not included in debt. Excluding this impact the net debt to capital ratio would have been 44.2% this quarter.
Subsequent to yearend.
We concluded at new two year $500 million senior unsecured revolving credit facility and expanded our receivable purchase program from $300 million us to $400 million use.
These transactions provide us access to additional liquidity and further strengthen our financial position all told between cash and available credit we have upwards of $2 billion of liquidity, which we believe in addition to the cash we expect to generate from operations in the solid position to manage through the period ahead.
Income taxes, this quarter were $26.9 million, representing an effective tax rate, 25% compared to 13% for the fourth quarter fiscal 2019.
The tax rate in the fourth quarter last year would've been 20% before certain elements in the fourth quarter. This year the income tax rate before the goodwill impairment charge for healthcare would have been comparable 19%.
Now turning to our segmented performance.
In civil fourth quarter revenue was up 1% year over year to 601 $601.9 million operating income of more specific items was up 26% to $153.6 million for margin of 25.5%.
For the year Civil revenue was up 16% to $2.2 billion and operating income before specific items was up 37% $479.4 million for an annual margin of 22.1%.
Double digit organic growth and the successful integration of the combined you bet business contributed to these records civil results.
Notwithstanding the pandemic impacts.
The civil but the sales ratio for the quarter was point 70 time and for the year was 1.1 portal.
In the fence fourth quarter revenue of $341.8 million was down 12% over Q4 last year and operating income before specific items was down 21% to $40.2 million for an operating margin of 11.8%.
For the year defense revenue was up 2% to $1.3 billion and operating income before specific items was down 13% to $114.5 million, representing a margin of 8.6%.
The defense with the sales ratio for the quarter was 0.81 times and for the year as 0.92 time.
And in healthcare fourth quarter revenue was $33.6 million down 17% from $40.7 million in Q4 last year.
Operating income before specific item was point $1 million in the quarter compared to $4.2 million in Q4 of last year.
For the year healthcare with revenue was $124 million up from 121.6 million and segment operating loss for specific items was $3.5 million, representing a decrease of 8.3 million compared to segment operating income of $4.8 million last year.
The lower operating income was mainly because of the negative impact on over 19, which took us off our double digit top line growth trajectory.
Also in healthcare, we recorded impairment charge of $37.5 million relating to goodwill after considering the general economic conditions and performance and specifically the deterioration in the global economic environment and uncertainties of Coven 19 pandemic as part of our annual goodwill review.
With that I will ask mark to discuss the way forward.
Thanks Tanya.
The Covance 19 pandemic is a crisis, so obviously unprecedented speed and many June with respect to the disruption as cost where daily lives.
The global Air Transportation environment, and air passenger travel have been hit, especially hard wood, a vast proportion of the global commercial business jet fleets grounded and according to IMS hiatus latest forecast commercial passenger traffic.
Spect it to be down nearly 50% this.
And compounding this already dramatic situation is the material disruption to see his operations that we continued to experience.
We faced this pandemic however from a position of strength would a global leading market position a balanced business would recurring revenue streams.
And a solid financial position.
We've taken decisive yet flexible actions to help to protect our people and operations and to give us a necessary agility to resume long term growth when the pandemic is behind.
We realize it may take some time before things get back to normal in the meantime.
We're managing the things we can control and we're continuing to identify opportunities for cost savings that we expect to endure long after cold nineteena spot.
In keeping with the notion that the notion of hoping for the best and planning for the worst we're confident in the precautionary measures were taking and that we have the liquidity.
To weather the storm.
The global leadership team and I have monitored daily evolution of the pandemic to evaluate the measures being put in place by local and national governments.
And the resulting impact on a company and to implement necessary contingency plans in real time.
As the situation unfolds.
So far the processes that we've put in place to manage through the pandemic are running smoothly and our effective.
We remain focused on protecting his employees health and safety supporting our customers critical operations and ensuring business continuity.
At the same Todd the management team and I are looking forward to the future and are already in visiting with the post coal with 19 era will be like more specifically, we're managing how will be different and what kind of expanded role the key is likely to play.
There's still much uncertainty with respect to the duration and severity of the market downturn.
But we do know the global Air travel will eventually return and that training will continue to be essential.
We don't expect a quick market rebound.
Well, we don't need to see a complete market recovery to be highly successful in the period following a pandemic.
The ability to continue the ability to continue to find growth in that context, well defined great companies and I have every confidence to see the global leader and training is such a great company.
We're continuing to invest in innovation to enhance our customers experience.
And as the industry thought leader, we're leading the way to modernize the very fundamentals of training in civil defense and healthcare.
For this reason I.
I have recently appointed a new member to our executive team Heidi Wood as CES Executive Vice President business development and growth initiatives.
I created this role specifically to put focus on partnering with our business unit leaders to identify and drive new avenues of growth across the company maximize synergies across the businesses and drive our entry into Adjacencies and leveraged artificial intelligence and digital picked.
Knowledge.
The long term outlook for the company remains compelling with increased potential for long term partnerships and outsourcing.
And the resumption of above market rates of growth.
In the short term however, we expect the pandemic to have a significantly negative impact on our performance.
As we look to the year ahead.
We believe it will be a tale of two have.
With the first half of the year defined by sharply lower demand and major disruptions to our operations.
For the second half of the year, we expect performance to potentially more positive as markets begin to reopen and travel restrictions ease.
For the year overall, we expect a material decrease in operational and financial performance and given the lack of specific visibility.
We're going to refrain from providing our customary growth guidance for fiscal year.
Looking specifically at civil currently eight over and over 60 Civil Aviation training locations have suspended operations.
And 17, our operating a significantly reduce capacity.
These statistics change on a nearly daily basis as local restrictions continue to evolve.
The Montreal manufacturing plant, which suspended manufacturing operations for civil simulator products our March 25th.
It is now gradually ramping up operations.
In terms of backlog so far we've only received one the full flight simulator order cancellations from a small third party training company and we received several request from airlines for deferrals.
Demand for new civil full flight simulators as closely linked to new aircraft deliveries, which according to the aircraft Oems are expected to be down significantly.
While the total market will undoubtedly be much smaller this fiscal year, we expect to maintain our leading share of the available simulator sales.
Whenever travel eventually resumes we expect to continue building on our previously positive momentum in training, increasing market share and securing new customer partnerships with our innovative training solutions.
Meanwhile, it's important to distinguished a civil aviation training is highly regulated and for the pilots to remain active.
They must train at a minimum frequency of every six to nine months just to keep your certifications.
And while airlines globally have suspended the operation of the majority of the commercial fleet.
This does that imply a proportional impact on trading demand.
Dispensations had been given in major jurisdictions, including Europe, and North America to extend the deadline of various time bound training obligations to compensate for travel restrictions and border closures closures, but however, these training requirements will ultimately need to be fulfilled for pipe.
As to retain your licenses and resume flight duty.
When looking beyond that.
We're confident that CE will increasingly be part of the solution going forward and that more airline training partnerships and outsourcing opportunities could materialize as the industry looks for ways to green greater agility and resiliency in the post call benign air.
In business aviation, while growth driven training demand is also being negatively affected our businesses largely based on servicing the regulated training needs of the already is active global business aircraft fleet and the delivery of large cabin business jets.
And in defense, we benefit from a large backlog of contracts with government customers to provide training solutions and operational support services that are considered essential to national security.
To that extent, our training and support services and manufacturing operations should continue to be relatively unaffected by covered 19 travel related restrictions.
Our defense business has been under leading new leadership since February when we appointed Todd Prober as this group President and he has been in the process of bolstering operational efficiencies and effectiveness and expanding its addressable market.
In the short term Covidien banking related issues are expected to continue to complicate our efforts toward reaching program milestones on product programs.
Including some of our most complex contracts in our backlog.
The cold Nike impact on order flow should ultimately abate as restrictions or east however, the additional realities of low oil price.
Environment in the Middle East will likely cause expected contracts in that region. The continued to move to the right.
That being said, we continue to see good bidding opportunities overall with over $3.6 billion occurred bids and proposals submitted and pending decisions by customers.
And beyond the current year the long term outlook for defense continues to be for growth supported by a large addressable market for our innovative training in mission support solutions and the realization of the benefits of our new leadership and bolster organization.
And finally in healthcare, we think the business looks well positioned to experience a change in the appreciation of the importance relevancy and benefits of healthcare simulation and training to help save lives at a steady state and in the healthcare crisis.
With innovative products a demonstrated a bit agility, we're confident that healthcare will become a more material part of the company over the long term.
In summary, we are going through a very challenging period sees history and our performance will reflect that reality in the current fiscal year.
We've taken the most appropriate measures to protect the interest with the company its employees in all of our stakeholders.
The fundamentals of see remains solid with our global leadership position high degree of recurring business at a regulated markets and balanced business across markets and geographies.
He is a highly innovative company with over seven decades of industry firsts under his belt.
And at the same time as we manage through this spend demick, we're focused on the future and I expect we'll be ultimately stronger fourth.
Before we conclude I'd like to welcome General David Perkins for the CE Board of directors.
General Perkins served in the United States Army for over 40 years and commanded at all levels include major Army command that the Forestar level.
His career culminated as commander of the United States Army training and doctrine command.
Where he led the army's concept of multi domain operations, which has become a driver for future changes in operations and training.
We're very fortunate that someone of general Perkins profile on the Seaboard and we look forward to his strategic council as we navigate the way forward.
With that I. Thank you for attention that we're now ready to answer your question.
Thanks, Mark operator, we'll now be happy to open the lines new members of the financial community May have questions.
Thank you if you would like to register a question. Please press the one followed by the four on your telephone you will hear at three tone from to acknowledge your request. If your question has been answered and you would like to withdraw your registration. Please press. The one followed by this week one moment. Please for our first question.
Our first question comes from the line of hedges Shamblin with BMO. You May proceed with your question.
Okay. Thank you and good afternoon, everyone.
Second.
I'm looking at your.
Civil Aviation segment.
Improved operating margin quite substantially this year versus the prior year for low utilization winds from 76%, 70% switching I guess good news.
We're just trying to understand kind of.
Forward for this utilization rate.
Probably going through the bottom electric litigation rates right now you can share with US where are you bottoming out if you can share with us what is kind of a breakeven level for utilization rate.
For this business as you kind of move.
Thank you the Max Golub 60 12 months.
Well I think bag start data may be shifted over to sanya.
Fatty, but look I figure you're right in terms of.
In terms of seeing a bottom I think we've seen it I'm pretty confident that the and that bought it was pretty bottom right we had about to adjust.
In the month of April we hit about 20% utilization and when you think about that's pretty understandable because not only was.
90% of the fleet of commercial airliners grounded across the world.
You also have the fact that even if people wanted to train the lot of cases, it couldn't get to the training centers.
Because either training center was close because.
You had to because of low low local quarantine roles or if you think the example of.
The travel restrictions internationally, even in some cases across states of Ross certainly north South here in Canada. So I think we've seen pad that bottom and yes. It is but the good news is that as we fully expect we don't get to zero, because ray regulated business and in any kind of circumstance.
If the if you look in basically business aircraft, where the same kind of the same kind of situation. We the reality, even though you would've seen the demand for business aircraft, but reality just couldn't get anywhere because you literally one flight plan in some cases, even across state. So so look I think we've seen that bottom we have been stay.
Starting to see the recovery.
It's a tepid recovery of best because airlines are flying that much more yet.
We see as people.
We are able to get into trading we're seeing more training activity I would tell you at the moment, we're hovering anywhere between 25 at 30% right now it has been is sold steady.
Curb up and less three four weeks as what we've seen UBS.
At that at the same time, I think I fully expect that that's going to continue because you'd as I said in my by briefly in my remarks, we still have a number of our training centers are close and a lot of they are still operate on limited.
Utilization.
And you also have the situation that as I mentioned in my notes as well that for the same reason that Zhou of because of the travel restrictions pilots that would have otherwise needed to.
To conduct recurrent training because they are running into their six or nine months expiry of their certifications just physically can get to the training centers. So you saw at phase site he asset.
Providing a delay and that if you like it.
Dispensation of that Nada and but it's always you not replacing you still have to do it by the extended by three months, but thats coming to an end and so we're seeing a pickup at we expect to further pickup at that have that activity. So look.
I think going forward, we based when we look at utilization going forward, we base. It first of all on the fact that look long answer to your question year, but I think it's maybe setting the tone that look air travel is going to come back.
Principal era of air travel remain unchanged to humans potato have the desire to ability to travel and the fact that is suspended it's been temporarily suspended I think the key word there is temporary.
Air travel still the closest thing to a time machine that thats been invented in humans will insist on their right. The flywheel, we already start seeing that in pockets around the world. The recovery will happen. So for us. It's just what's the time when we think and we certainly think we've seen the worst we've we base we're using.
I asked us forecast for long term planning purposes, that's how we've set our expectations for.
The year, when we talk about it.
Hello tale of two halves.
We fully expect that this recoveries, probably young people say V shape as not going to be V. Shape. Appreciate that we're bait were basically assuming like at probably a sawtooth you real recovery.
Because I think it's realistic to expect based on it all the expertise you see out there that you may see a resurgence in the bowling you may see some hot spots in a world.
This this is still I guess, some debate whether or not this is seasonal and whether or not say if thats. The case that affects us maybe in the fall in the winter, but it or the selfless south of the equator. There are they going be turning to winter months in the coming months, So maybe to research and fair. So we're fully expecting and bank.
Net in to our forecast.
So for us.
I think thats.
We will see an increasing dilute utilization as Google for now we don't fully we don't need all that utilizes to come back to do well.
I think you started saying your comment there that we had though we were we achieved pretty.
Pretty good.
Margins like about 25% our assembled network based on lower overall utilization now some of that is mixed we is the or the revenue comes from different sources, but in large part its train.
So the fact that we were able to do that at much lower levels utilization tells you a couple things. One one is the impact of for example business aviation at the acquisition that we do that last year largest in our history of on parties business aircraft training network, which.
Basically gives us nearly 6000 airplanes out there to feel.
But also the fact that we've been working on our effectiveness of our cost structure. So you can well imagine that we don't necessarily have to have all the utilization come back because our breakeven points. We've been working on that and are better than they work and that was your question and of course from a cash point of view.
Yes, there are much lower than.
That we Didnt then that was numbers because you know the bulk of our cost the large largest part of the costs are not in the trend network our Bailey.
Depreciation on the assets themselves as horses noncash.
So.
And that would be as just leave it over to you at this point as well just I guess maybe.
Tag onto the breakeven part of face question. So.
As you know that training business is a higher fixed cost business.
So to the biggest Casa instructor base, which is scalable up or down because we have a base of contingent instructors.
So that helps on the cost structure and of course like mix just mentioned noncash depreciation is one of the larger expenses. So we've taken measures choose ice costed, a new volume and we continued to review.
Cost management on that front.
Last black Swan event that we saw on financial crisis utilization.
Went down to the low sixtys.
And we still generated double digit margins and cash generation now this pandemic as much worse.
But what's key to two to highlight is like Mike said, we don't have to necessarily go back to the same level to be back to very healthy.
Levels and most importantly that the cash utilization could be quite low level for this business model to be cash positive.
On the product side of the business. It is a bit more bounce between fixed and variable cost and we have the ability to adjust.
And and production levels.
With the variations in our backlog.
Last thing I'll say, maybe I'll take what will drive things affect is.
I'm pretty sure to there'll be a lot of pent up demand and that pent up demand will probably initially doors narrow body aircraft.
Because that's the way the I think the industry will probably move at least in a short to medium term find a pandemic and and you'll know that the majority of great majority of the assets and our train networks are geared towards narrow bodies. So I think that.
That could be just fortunately better for us as the as the recovery occurs.
Well to.
Just one clarification.
I realize that a lot of the cost some non cash cost in the training.
Yes, I am codes I guess so is it.
25% to 30%.
As a business cash flow neutral on our cash flow basis does will move total cash flow positive.
Got it operates other cash flow neutral or positive of this 25, 30%.
So what I will say is as I mentioned, we can be cash flow neutral and positive very low levels of utilization won't necessarily share the ranges, but at relatively low level you can imagine at 60% we were selling double digit.
S ally territory indefinitely cash positive.
Then I think you can infer that at much lower levels, we could be cash neutral.
The other thing I'll say it Paddy is that if we if we thought that we stay at that level, we obviously would adjust and because our training centers and our training footprint is made any assumption a much higher tree trimming demand, which we as I mentioned, we fully expect to come Matt. So if we is and so even today.
Okay, even today when we when we look at 25.
25% to 30%.
I mean, some training centers are operating a much higher than that depends where you are I mean, some training centers are close and Thats factors I want to talk about 25% to 30% I'm I'm factory in their summer zero. So.
So basically that we factored all of that those training centers come back online and our expectation as.
A large part those training center should be back online in June.
So and the ability to what's that opens up obviously, we're going to materially move up so.
I think although we'd be hard to make money at this level of 25, 30%, we're not as stated.
Okay.
And one clarification song I think in your comments talking about the free cash flow in the first half of the year being negatives.
And then you mentioned the working capital seasonally megabit are you, saying free cash flow negative before working capital in the first half them. Ultimately you have the seasonal working capital issue that you have to deal with as well.
So so in the free cash flow guidance and we're getting I include the impact of non noncash working capital. So so what we're seeing is as Mark just described the impact on the operations in disruptions.
So that will drive.
Negative free cash flow, but thats, including what we see us some slower collections and some pressure on the noncash working capital.
On the civil side solid connections continue on the defense side in fact.
Many governments are actually accelerating collections as as the port measures and of course, we've put in extensive measures to monitor and manage working capital closely and end measures on inventory and suppliers and such so as we work for this period.
Weve, obviously implemented that cost reductions on cash preservation actions the size to the lower volumes and and reduce the level of expenditures. So so at to the guidance that we've given on Capex, which includes growth and maintenance that we expect that spend.
About guiding to about $50 million for the first half.
Of this year, that's a third of what we spent last year, while reducing the capex R&D and the funding.
The dividends and the answer that.
And so ultimately it's the combination of all that within our regular free cash for that.
Definition, and we expect that to inflect positively as the markets reopened and so on in the second half year.
Okay.
Promising model My last question, but I want to go back to the comments you made mark about kind of you don't need.
To go back to kind of prequalified 19 to get the profitability to improve again, but if I look at your aviation side like you had $8.2 billion revenue 480 million I'll.
Operating income for the last 12 months like we need to see.
Traffic by strategic traffic could return to 29 few level.
I see the scope of niche.
Business to go back to back last 12 months.
Kind of levels.
Okay.
As we move forward LIBOR. Thank you think.
Could make you get to those profit level even wave.
Add lying about our 75%.
The size of what they used to be.
I think I'll start the the comments because I don't want to give into providing guidance when I said a win.
But the I think what I, what I tell you I fully expect their travel come back and go back to what it should be king people want to travel that's not going to change. It's we're talking about timing, which I'll buy thats you picked through timeline, but we I would my own guess about two years, okay. Before it gets back to levels, we've seen before but did as it would be that.
Whatever it is you pick whatever if you think it's going to be later than that it will get back to those levels and I think we will do well as demonstrated but I think that.
If you looked at.
But things that we're coming out of this crisis. This crisis you learn from everyone right like for first and foremost.
Go back to training is regulated.
And that basically ensure that relate to PURENERGY of the business model itself.
Our customers out there are customers out there.
We've made a wholly as a whole either the whole growth that we've had in large part of past years has been to convince customers to you outsource.
All or part they're trading operations to us equal imagine that we think because of our capability because of the service the blue bribed because we do you need insights that we get arrived for customers and the cost and cost benefits that we can provide to our customers goodwill imagine that we will have the we are already.
The having conversations with people to be able to gather more market share in the training itself in both civil and business Erica.
So I think that will help the other thing that will help is that again.
You learn lessons that you the out of this and you can see we're already operating as we've been forced to operate in a different environment. So you see you see what well how can we maintain.
From a cost savings that we see now they're forced upon us obviously, but we're being forced to be to innovate in how we deliver services to our customers. So you can expect that we have a very strong initiative underway to make a lot of lowest cost saving measures structural so we can benefit from him.
So we will have.
We don't have to have all that revenue come back to be able to read to drive it will profit centers of course, if if we do rise tobacco to win and we basically will back to the airline traffic levels that we've seen impassable will disproportionately benefit from that.
Last thing I would tell you is business aircraft, but we'll have our businesses business is business aircraft.
All right and to that end to that and I'm bullish personally.
As we do see an opposite forces at play.
Because business aviation is historically correlated to Gpus us corporate profits, but well, obviously thats probably going to be trending down.
But to.
To me business jet travel may become preferred for business continuity health and safety reasons.
Less frequency of airline trout of traffic into.
Let the airports other than hubs course, a bit early to tell but we'll watch this carefully.
Great appreciate it thank you.
Thank you.
Our next question comes from the line.
Konark Gupta with Scotia Bank you May proceed with your question.
Thanks, and good afternoon, everyone.
Just using a mark hi, just wanted to clarify through the last question on the utilization you mentioned, 20% for April 25% to 30% today are those utilization numbers based on the centers that are open all being sued the ones that you'll.
The include them all over the.
Okay. So zero percent for obviously the close once and then there's some something lower utilization for the ones that.
Yes.
Okay makes sense. Thanks. So yes my question is on.
On the recovery so like if you look at Airbus Boeing and some of the bigger airlines have suggested they are there and distributing a recovery in the market or their travel demand from anywhere from three to five years.
Now as you don't need lets say as much as many training centers and manufacturing capacity over the next three years five years about this.
Shaped express what do you what do you anticipate.
Removing our suspending some of the capacity for longer or permanently.
Well I think it's too early to tell but as a saying at the outset.
If we struck truck if we saw a structural changes that are going to last for long time.
Then we would adapter we've proven in the past that we've adapted the don't forget that it's we've we're very adept at being able to move assets around in our training in our training network.
So that helps us out because.
For the obvious reasons that we just mentioned so look if that happened we would we would that we would adapt our structure I think inherently a lot of our costs in our training Center network our variable.
Already so that that will help us out going forward as well, so but yet as I said before.
Person believes that the air traffic will recover.
We're getting.
Pushes us.
Right.
So.
And then on free cash flow I think maybe its facility are probably more so I understand like the free cash flow you guys define as its after maintenance capex what before growth Capex. So just wanted to make sure.
Let me say free cash positive and second half.
Do you anticipate any significant growth Capex number there and then would you expect the free cash to be positive even after netting out that growth capex.
Well I think right now what we will will guide unit that we expected to inflect positive as the market opens up now we've provided at 50 million guidance on the Capex for the first half and really the second half will be a measure of the level of recovery and free cash flow performance that we see.
Gross capex is inherently discretionary and ultimately is deployed if there are growth opportunities right. So as the market conditions evolve and develop.
Well, we'll take a look at as it is if if.
So I'll growth opportunities aren't on air we won't we won't.
Deploy a lot more capex if there are.
Well, we'll adapt accordingly rates. So so ultimately right now 50 million for the first half the year and then we'll we'll really re baseline as we see.
How the first half the year, both in terms of cash flow and capacity requirements.
It's got a fair to assume that there's going to be minimal or no growth capex on the flip side.
Already had lot of capacity.
That's right I mean, it said theres still below the submits a balance that there'll be some maintenance and there's some some capex that we've got to our own opportunities.
But it will it will be pretty level, yes, you're correct that within state. If the stated if there is growth capex.
It will because we see very strong customer demand or that there isn't any adamant that we put obviously, yes right right now that makes it very last one for me and squeeze on.
Obviously on doing guidance I understand but just develops have the expectations right in the March case.
Can you give your t. suggest what kind of.
Revenue trends or segment operating income trends have you seen so far in this quarter.
Based on the utilization numbers that you gave us because like you don't obviously see how many in some of the just so that you deliver and what kind of the men and women do you are seeing at this point. So if you can suggest you know what kind of decline rates are you seeing at least directionally that would be great. Thanks.
Well, what we won't go into that for the reasons I talked about things are just there's too much too much in flux right now the beat to be able to answer.
That.
That that answer that question any any degree of certain one way or another just too many moving parts and the way forward I think it will define itself a lot better in the upcoming weeks and months.
Okay, and Thats, where I guess awards.
Thank you.
Our next question comes on the line of Steve Our third from RBC capital markets. You May proceed.
Great. Thank you you just a couple of longer term items first following up on civil margins. There were very high in the quarter I don't think I've ever seen them near 25%. So wondering if there's any more color you can offer on what drove that step function higher in particular were there any onetime items in there.
Or as we look at 234 years over the longer term with some of the factors that drove the Q4 levels.
Persistent and things that should indicate longer term capabilities for that segment.
Well I can I can start market. If you want to add jumping also really for this quarter. The 25% as a result of the mix, we had a higher proportion of business Jets, which is at the higher level of our civil margins and also on the product side. The revenue was a little lower than Q4, since we had less deliver.
We spend in Q4 yield a number that was a big ramp up last year at the time.
But improved program ex drove higher as to why contribution on that front. So so really the mix on the programs on the product side and also a higher proportion of the business jets switches that has higher margins since for the year, what that gave us as that 22% margin overall I think a great margin ends and really the results show.
So.
What's achievable at steady state and a healthy environment and frankly that in itself had impact.
Cobot pandemic in March so would have been quite a bit better how they're not in the this this endemic in practice.
The give just just following up on that.
You commented earlier, though in the press release in the discussion further opportunities for outsourcing with the airlines.
Really is obviously can't get into specific discussions, but im just characterize your discussions there relative to say six months ago. The number of those conversations that are going on the nature of them the urgency of the customers.
Looking for solutions here.
Well I think David I won't comment on your urged the urgency to that only to comment about our customers but.
Currently there is more conversations going on.
The media materially more.
Okay, and I guess, just just final one.
With the healthcare situation.
In particular the opportunities there was a ventilators, yes, so amazing work to do what your team has done already.
Is this something that in the short term was the right thing to do and you've dealt with it.
To support the emergency situation or is this a longer term opportunity proceeding healthcare.
Well you know I think we started off from the from that you're doing the right thing humanitarian effort for sure.
And we thought that it will weighted notion was that where the expertise that we haven't seen healthcare specifically.
The fact that we were the business of training people on each basin that kind of using those machines. So we havent pretty good knowledge of those those particular devices and then we could you dovetails with either the great systems engineering at innovation capability at sea at all.
All the skills that we happen to electronics and software in manufacturing. It would just interesting combination of all those things together is the hey, we pull this off and I've been very very impressed of what we've been able to do it I'm not surprised because I knew we could do it but this.
The that which we do Ed and I think what I would emphasize is on this meant there we're not there we're not.
We haven't undertaken a device design from someone else that it will we built the.
Build to print that kind of thing we designed from scratch a new device a new device that's going to be used in IC use in in them on the most critically ill call with patients or anybody else it would need to ventilator. So.
I've been I mean, very impressed and so we'll have the people that are professional health care professionals looking or device. So from that point of view I mean, we haven't built it if you like to as a device with a cost structure to be competitive in markets in the market.
Because he'll for obvious reasons the speed is of the essence here and the government of Canada gave US a contract for 10000 said full speed ahead get that so thats how were operate but what I would tell you is look.
I mean, nothing is off the table nothing's off the table would that would take that.
A good look at this year as were as we're executing its contract and if this is an area that we could further develop.
To be able to pride to self sufficiency, two to Canada to come back.
Or any other reason like that or could we.
You know build it in as a solution that we have as part of emergency response that we provide around the world.
Then we might do that so nothings nothing's off the table I would tell you.
We always look at new ideas and this guy who knows this could be one at the moment, we're building at the deliveries 10000 units.
Great. Thank you.
Okay.
Our next question comes from the line of Kevin Chiang, which CNBC you May proceed with your question.
Good afternoon everybody.
Well I'll start off.
All over more committed.
Mark about.
I see opportunities and you brought in a new member of the executive Tinder Hardie World.
I'd be interested in thinking a little what you think about how you see the competitive environment, maybe changing over the next few years here if memory serves me correct.
I think you had a number of.
Aerospace.
Aerospace.
Oh, we have looked and turn to feel last time, when there was some disruption around defense spending.
Such as Lockheed Martin looking to go into this space, you see increasing competitive pressure potential from.
From some of your more nascent competitors, who who might see their core business shrinking that may be looking at training or or manufacturing full flight simulators and as maybe a weight or to offset some of that other pressure.
Oh look we'll see.
I don't typically spend a lot of time.
Looking in the rear view mirror, if you like at competitors not not to the.
To fill prices on that but we focus on our customers will focus on delighting, our customers and interesting very very close.
To their needs and where they're going to stay in lock step with them in the it providing it providing the the product service, we do as you know where pure play and.
Because of that and new year, we've been able to establish a commanding market share in every one of our segment. So.
We will and we we we do a lot to make sure we maintain that right I talked about delight. Our customers are talking about these substantial amount of R&D, we that we do.
Moving into.
Using digital in AI to differentiated solutions to look I will comment on where the competitor who are doing I don't expect a higher level a higher competitive environment.
More stringent and it was if anything I think at this kind of.
Crisis, I guess shaded customers will remember those that were there when the more they needed a small one sees there throughout this plan and then make it will we we've been there had to service our customers it pretty tough situations, where our personnel were on site.
With delivering because we're in essential service and as I said before this is a regulated markets. So.
Good day, the industry needs us to be around and servicing them either for simulators or providing training I'm talking about simple now, but or simulators or training in order to be able to maintain their they're flying operations were critical today to that so.
I think thats with customers will look at more and we provided the service as that is by design cost effective in the market. So I think we'll continue to play our game and I think will I think we will continue to win.
Okay. That's that's great color, let me just one more for me here. This is for Sonia.
For for this fiscal year 2021, when I look at your contractual obligations you you've laid out and DNA about about half of that is for for purchase commitments. Just just over 200 million just wonder how much flexibility you have there in the event that.
Well some of your.
Product revenue, maybe gets deferred as you mentioned.
You are seeing some deferrals or cancellations.
Do you have flexibility to adjust that while purchase commitments for for materials.
Also lower to reflect reflect some of the fluidity in that revenue line or or is that 200 million pretty much a fixed costs for this year.
No so it so thats.
Purchase commitments and another commitment that we've made with suppliers and other stakeholders.
These are key suppliers.
And our supply chain. So so these commitments.
Have a wider term obviously, we take our our best view in terms of the time commitment and Thats what shown in the note, but there is some flexibility should there be deferrals or or elements on on the timing of our execution of our backlog and there is flexibility in partnership with our supply chain.
Perfect Thats it for me thank you very much.
[music].
As a reminder to register for an audio question. Please press the one follow by the foreign your telephone keypad. Our next question comes from the line have been Wap Wahid with detailed in capital markets. You May proceed with your question.
Yes, good afternoon, everyone.
Mark just if we look into longer term, while its shortages dumas strong rational for training requirements. We we've been talking about the population of 360000 pilots.
For over 300000 pilots over the next 10 years. So in light of the massive layoffs, we see from some airlines how would you reconcile be the pilot shortage and especially that are used to you.
Forecast the to revisit the precrisis levels.
Somewhere 2023 thanks.
Well I think the per se I would say bundle as that pilot shortage has has never been a strong factor in the in the revenue numbers and the growth of she is.
Itself with bank.
The real.
What drives what drives our training business is the active the flying by airlines themselves and the active fleet of pilots that they have.
Where we have had exposure to a pilot you'll passive pilot training, a making pie as steel going from somebody doesn't have a license to become an airline pilots is obviously in our flight training organization. Our Estill network, we have a network schools in the largest one in Phoenix for example, I would tell you that those are all.
Spring.
Those haven't missed a beat since the beginning of you'll actually this pandemic with continued flying we've had to shutdown and do virtual class training, but in terms of the flying activity that has stopped and.
Now going and would future looking at future demand for new pilots yield to be train. It will obviously, we're going to look at that you know very closely because factors that you just mentioned, but I think it's important to note that.
The by design as never been after having a very strong portion of the market in the FTC, though the network Weve added that we never size operations to be anywhere near to be able to meet.
The capacity needs in this the pilot shortage and we the contracts that we have are directly with airlines, so and so far what we've seen is that the airlines that we partner with if anything have reaffirmed the with the contract they have with us. So they there's no if they take somebody.
Couple of years to form a new pilot. So I think look we're going to have to look at this and detailed I think the biggest thing I would say.
It's not a primary driver for revenues in the civil business or earnings.
Okay, that's very good color and when we looked at civil margin. Obviously, you don't want suits and provided the guidance here, but when we look backups fiscal for fiscal <unk> by fiscal AIDS fiscal mine, how should we be looking at the current situation and your ability to probably.
We.
Get margins similar to do the previous levels would it be fair to say that this spend it make is different than the last few downturns, we got even if your mix is more geared toward services.
Well I think look the.
Nothing compares with this patent and make them is the worst that anyone's ever seen.
I think you can derive some lessons from those but I think the steps that we've taken to control first of all control our cost control or liquidity at a rate once that gives us ample liquidity under to me any kind of scenario might want to look at that and weve in our planning in the cuts we've made the weve assumes something actually.
Worst and actually we're seeing right now in terms of for example view that they'll sales outstanding on payments as just an example.
So look as I said before we we are we don't needle that revenue to come back to do very well and.
I think the bundled solutions that we have more simulators and training fully expect.
Simulator sales themselves to be much lower because theres going to be much lower deliveries of aircraft treating however, I think theres, we'll have to see I think theres going as I said I think business aviation could be a tail.
Of.
It will be well it'd be atossa, we'll see we'll see boots, whether it'd be higher or lower depending on which wins as the corporate profits sort of fact that people need to move around in the perceived way of moving around safely and effectively because of limited operate opportunity is on.
On commercial aircraft to get there and back in a reasonable uptime is business aviation I think that will be a factor in.
Again, we're going to be adapting our cost.
Two you'll continue to be efficient and.
Be able to get some structural cost savings out of this.
Which means that we don't have to get all the revenue back in order to get earnings back to a reasonable level.
Okay. That's great that may be one question for Sanyo from the Likud liquidity standpoint, you've been able to bolster your your balance sheet with about 2 billion of liquidity.
When we look at your net debt to EBITDA, where would you expect their ratio to P. taps going through the next few quarter and also could could you talk a little bit about the the free cash flow expectation for the first SOFS, how much is coming from working capital.
Now versus margin the what is driving most of the decline. Thank you.
Yes so.
The level of net debt, we expect will probably increase other over.
The year as as there's cash usage, our revolver usage in the near term and it will follow what we expect with the negative free cash flow in the first half and then inflect.
Positively to positively south so as net that increases a bit and as we've discussed there will be some operational impact a negative financial impact. So we expect EBITDA to be lower in the first half as well so you'll see those ratios increased but we're still I think in very healthy.
Territories, and well below any any covenants that we have in terms of that free cash flow.
I will speak to it Directionally I think it will be a combination of both.
There will be.
The impact from lower cash from ops because of the disturbances on operation and and we see a higher investment on on the non cash working cap now we usually have won in the first half I do expect it to be higher than than usual.
Now that will come mostly from a are.
So on that front, you know our DSO days sales outstanding had been quite add dry decreasing nicely quarter over quarter, and we saw an uptick and we do expect that that slow a little bit in terms of the our and collections you Gotta look at it by segments and products and services So on defense side.
Summers are mostly governments, so of course, our risk and and frankly as I mentioned governments are accelerating payments.
On the civil side, the stimulator orders on the throughout production with progress payments. So that gives us a measure security any add the orders and receivables.
And on the training side.
Terms are generally 30 to 60 days. So we don't have significant concentrate exposure to the air balance of anyone airline, but customers are asking for some extended terms and were looking at each situation case by case and incorporating this as part of our working capital assumptions and scenarios like we have deeper.
Relationship.
All of these customers and worked very closely with them through some past that black Swan event as we do today. So we provide a critical service steady airlines, which obviously can impact continuity of their operations. So this means that training is usually prioritize so realistically you I think you'll see a bit of higher balance on the air side next.
I see we are working.
On the inventory side.
Being very I think judicious on any.
Inventory efficiencies.
And much stricter management on inventory and obviously working with suppliers.
And you side and then the liquidity elements. We also have shored up our a are factoring program, where we can sell some of our IR and that just increased from $300 million to $400 million. U.S. also so I think a combination of factors will keep the working noncash working capital as strictly and monitoring it very tightly but realistic.
We do expect us to grow a little bit.
That's great color, thanks, very much for the talks.
Thank you.
Our next question comes from the line of Cameron Doerksen with National Bank Financial you May proceed.
Thanks. Good afternoon, just question on the on the full flight simulator a business I'm just wondering if we think about Q1 with all the travel restrictions.
What is your ability to actually I guess deliver a simulator or have have customers, even travel to accept or for your own staff to go and install assuming there is that something that we actually need to see travel restrictions remove before you've been able to do that or are there. Some special to go the special ability for them to do that are they have approval to do.
Yep.
It depends it depends mostly you know we operate as essential service around the globe around the globe, though that that provides us the ability to in most places to be able to conduct a work and we obviously look at things on the safety of our of our employees. That's our first priority. So if we can satisfy the sells it to say situation I think.
An upgrade.
Hey, in a safe manner for themselves and their customers than.
By large we can get it done.
Okay.
And maybe just just one second one for me.
This is we think about Jimmy the next couple of quarters have seen onto a lot of airlines furloughing pilots and taking entire fleet types out and usually when that happens you see a lot of I guess pilots having to change the type of aircraft that they fly, which presumably would lead to a much larger training events for them do you see this is somewhat of an off.
Offset if even if the pilot population is much lower there could potentially be so much larger training events for some of these pilots that will act as an offset as that is that your your view.
Yes, absolutely that coupled with the pent up demand.
That we have all we have 60% of the world's fleet on the ground. So thats not going to be that's not going to be something that's going to be sustained obviously I think a portion of the world's fleet will stay ramp it for quite awhile, but sort of that 60%. So as those airplanes start being brought up is going to be pies need to fly them and the.
So the pent up demand of training that will one and the fact is as you just talked about would we've talked about that many in the have made times in the past if we refer to as return in the in the.
In the in the pilot population you can expect usually when I was fairly wed expect that you will see retirement out of that.
People see the opportunity at the airlines in some case are encouraging people retiring for that because a senior already rules that kind of since people bumping different types of aircrafts. So.
Certainly the amount of training demand will not be one to one with you attract.
That the 25% to 30% of current utilization of the of the some network that thats all sort of recurrent training.
No no donors initially was going on as well, but pride primarily.
I would say richert rayna, but not if you think our business aircraft a lot of what we're doing what we're doing a lot of initials right now.
Okay, Okay, great and.
And then I guess, just kind of along that that line of thought what are you or are you getting a sense at this point from what you're.
A big commercial customers are telling you in terms of how they're planning out there recurrent training I mean do you get a sense there looking out to the end of this year, maybe it's early 2021 and.
They are starting to try and asked them what capacity. They will have and then determine their pilot requirements on that basis, so they're kind of looking past the.
As trough and making sure that they've got enough pilots that are staying staying current with their trade. Even if those pilots are not being utilized for say the next two or three months are you getting a sense at all for about that from your customers.
Well.
Again, I don't want to get into Mexico, what our customer the thing is the re what they're saying and they they reported as themselves I can just talk about our own operation today, Yes, we have highlighted just by their nature that we have relationships one way or another with the majority of the World Airlines. So we expect our what we say by the way forward is informed by by those discussions as well as.
Other measures like what I talked about the I add a fourq as itself.
And other other.
Needs of input that we get with regards to business aviation Fleetwood Fractionals are doing that kind of thing.
I think there you could well imagine because of what I gave the answer the previous answer with regards to the amount or training that has to occur to maintain a pilot current enable operate an aircraft a commercial aircraft.
And the fact that there's going to be a lot of it as if they retire fleet for the move into different place. They retire pies that theyre going to be a lot of training events being that being caused by those move.
You can imagine that the airlines are spending a lot of time looking at that.
Are they looking at next year I think again next year is a lot of cases.
Yes, they would have of as little visibility as we have and meal provide that's why when coal as far as give you. An opinion is that later on later than a few months going forward.
Okay, and it wasn't able to questions that thank you.
Thank you operator, I think we've we've gone over the allotted time, but I want to thank everyone for participating on the call today and remind you that transcripts of the call can be found on our website before we conclude will open the lines to see if there any questions from members of the media.
Once again, ladies and gentlemen, as a reminder to register for an audio question. Please press the one followed by the foreign your telephone.
Our first question from the media is from Judy accidental we'd love past you May proceed.
We bought over there.
Well drilled by them.
She I it didn't have that fleet is on for you that Peter Lawson Ns loss Yolanda.
Set out yet who will be done, yes, and then.
You mean model I think lets just a matter within the CSC she's not for you Doug what you'll look to do.
This vasile had not yet just coupon not having issues.
A quick.
At all done will now have a fund but have not come then stood at Liberty shown let's first one on machines led demand and Nokia and would that CBD.
Okay, Okay equal, but yet again, we'll all 10 of them. The you would versus 11 through a sufficient demand npis DDIC jut to roll to roll that you would not wesco convincing nor fit omit to adopt last before is there really is up on updated data.
This call fed the PD do all the while many is also the actual the spin to court will be employed capacity to yes. These are the ended up we will provide male put books of all our pharma mailbox possible that as possible.
Our school bus had kept fab it Asia will put him difference microscopes momoda.
Oh, Okay asset that is okay got it will.
Let me come out that fuel football exact tsusaka.
It was if it not much of the key is today.
Two less well, but that's I think in the amount given that if they put those wind at Ccs up when you because if I take the wall file, Matt, but that gives them off and interest amount of thanks.
I'll call it fall Vettest milando.
Quicker, who this think that got us as opposed to the effect when it got better there Matt.
So to lead volatile of it can't happen now fulfill the.
Yes.
Oh, no data that thanks helped us on us moments I made a portion goes away Sue.
Let us know lot altogether, the wahid Gs bulk of vertical carbon don't be software summit. Good does not know the manages up we drill a key already they'd be demand you end the vendors they DFL the S fab.
Good.
International on the fill uneven demand there's will add over although there will also like any sports gaining people that Peter that Theres Okafor Mayer.
No no PTC, new successfully developed those up wait for competitive have either not yet another key I guess you all know securely instead it affect me equal next to me is unknown does go down well or typical almost windows up wave of.
The new Gtlds he knows away so to current success that company be more.
Yes, yes going is up we all fair that bought 50 fomenting there before data that that's all across the core business now a p. foster profess that stop definitely have investment plus it.
Well the lots about.
[laughter] potatoes.
So again that's declining.
Okay, because like you do have wall to wall that you see look see is sold were all going yet goes like I did point out the generally like White house downloads since you should see Ali.
Yeah, just keep will give yen I mean, it give other tax years Gassier just get back to the NIM. Once you. This Tony tunable clip on the east capacity tall protector just to see the they're not good governance.
Base, but because I think as planned the national My CNS metastases.
The pull them out of the reserve empty. So yes will compress. The also if we determine that may on upon the whole has gone it's kind of confess overcome the offset elsewhere.
Finally, I want that Portware of yes, I'll give you this.
Ill, but again it was just deep clinical benefit in EMEA again on it is satisfactory.
Yes, when I think is until the last fall under competitive fell just for less in Atlanta for one of this has that sends revenue cool when there is a steadily.
Sure enough.
New enough, we pull out like was it a successful.
The way I foresee alone for now you see I love failed its rail mass spec. So they can have the cautionary note that sinatra too we've done all on a constant us. Although he is it fair ablaze window cool the vessel fleet. So as to visit one that Apple those window, how much of a new global.
Paul.
The amount of profits I guess out.
B B P uncle do spassky pickup to sample first see no stake could net net the text across our subsea it ended up males. Any delmonte not to then lateral fair for the whole thing yet again, all these will plateau that yes on FX eight on the audio books chefs.
Is it all cold and that did beyond above that so that the pass any other swell format shown for Nokia be triplet definitely see much of what is the Boston domestically is now the floor pellet Qualcomm listen business, Nebraska no.
Ill gotten appointee company, Indiana at all.
Thank you for their Dominic.
Non-GAAP book would call you point out 10, now freezers she's on a constant notion we.
May pay against on threshold Thompson.
He gets John International Little children, who will be done undertook a CR careerbuilder and hes coil does not FINMA or see boss Snow may I keep all unfavorables name tipped up to now this is Sean on any parts, how confident you leave freedom beyond our that 10 map whatever the mone now.
Thanks.
Tom.
It up and massive is simple computer screen nipples ticket compania. Your name that could also alone CAC or that affect each at our now on the 10 Bcf file and they didn't fair in default journey.
Format, showing new khaki put the Basel O'neal a dire after her amongst the pickup but he is a couple coupled that wall remain pick you deserve our towers, the baby boomers amount that add value. It appears that Tony especial, Okay, often found domain.
On a full GSM onto again vinces shown to see opens up there bonded is setting up for the fact that delta vessel.
Global advocate little Lanzhou, the capacity to adopt and not enough. That's what some of that that extra cost cuts have of Dijon weren't several unusual with the possibility build martina known there compared the company pull that can affect not penman explicitly say next support household.
Now Tennessee.
Is it.
Okay. Operator, I think we'll conclude the call now again, thanks to everyone from the investment community and media for joining us and remind you that a transcript of the call can be found on sees website.
Thank you.
That does conclude the conference call for today, we thank you for your participation enough that you. Please disconnect your lines.
[music].