Q1 2021 Bombardier Inc Earnings Call
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This conference is being recorded.
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Good morning, ladies and gentlemen, and welcome to the Bombardier first quarter of 2021 earnings Conference call. Please be advised that this call is being recorded and this.
And I'd like to turn the discussion over to Mr. Francis The Shadow definite Vice President financial planning and Investor Relations from Bombardier. Please go ahead Sir.
Yeah.
Good morning, everyone and welcome to the Bombardier <unk>, earning call for the first quarter ended March 31 2021.
I wish to remind you that during the course of this call we may make projections or other forward looking statements regarding future events or the financial performance of the Corporation.
There are risks and actual events or results may differ materially from these statements for.
For additional information on forward looking statements and underlying assumptions. Please refer to the M. D N a.
And I'm, making this cautionary statement on behalf of each speaker on this call.
With me today is our president and Chief Executive Officer, Eric and myself, and our executive Vice President and Chief Financial Officer, Bart The masking to review our operations and financial results for the first quarter of 2021.
I would now like to turn over the discussion to Eric.
Hello, Mr. Lu from a fifth.
Good morning, everyone and thank you for joining us today.
With the sale of our transportation business closing in January so the most of our first earning calls with as a pure play business evolution focused company.
And as you all saw any of the press release. This morning, we started this new chapter with a very solid performance.
And this includes business jet revenue growth margin expansion and a significantly improved cash performance.
Order activity was also strong in the quarter and we continue to make progress executing on the strategic priorities. We shared with you at the last month's Investor day.
Most notably are the actions taken to address our balance sheet significantly reducing interest costs and setting the foundation to becoming a more resilient and profitable business.
So in a nutshell a good start on.
All of which gives us increased confidence in achieving our 2021 financial guidance and delivery targets as we move through this transition year and past the COVID-19 crisis.
Let me say a few words on the overall economic environment.
Clearly we are in a very different and better place than we were a year ago at the onset of the pandemic.
To date, even with parts of the world.
The lockdown and some challenges with the global vaccination efforts, most market trends and indicators all pointing to a gradual reopening and a strong economic recovery.
Collectively these positive macro trends are strong sales activity and favorable industry metrics, including record low used inventory level and improving aircraft utilization rates.
<unk> debt the word the worst of this pandemic may be behind us and better days are ahead.
Moreover, with many new customer choosing private air travel.
Giving the intensified attention the pandemic brought to the safety security and flexibility of our products, we see additional potential for growth.
However, notwithstanding these positive trends at this time with day, it's best to maintain a disciplined approach with respect to our production rates until we are confident that the recovery is indeed firmly rooted and we see sustained backlog growth.
In the meantime, we will continue to focus our efforts on our four strategic priorities to ensure we position the bombardier to deliver sustainable and predictable financial performance.
Of course, we will also not lose sight of our top priority keeping.
Keeping our employees customers and communities safe until the threat of the pandemic fully subsides.
And in that regard we are proud to be working with the Quebec government and local partner and establishing of explanation clinic at our door valve facility to accelerate vaccination effort in the community.
Before I turn it over the bar to discuss the details of our first quarter results. Just a few words on our strategic priorities starting with the global of 7500 learning curve, where we continue to execute and track right on target.
In the past weeks, we celebrated two significant program milestone the.
The delivery of the 58 customer of aircraft and the completion of the one on the Red wing at our Red Oak facility in Texas.
With the program rapidly maturing and deliveries now at target the levels.
We have a clear line of sight to achieving the additional 20% cost reduction target by aircraft 100.
We also continue to make progress expanding our global service network and executing our aftermarket growth strategy.
This quarter, Saudi integration of the Berlin and service Center following its acquisition at the end of 2020.
Major expansion project and Singapore.
And Melbourne and London also continue the progress on plan, we expect the Singapore project, which quadruples the sites with print to be completed later this year and our new 50000 square feet Melbourne, Australia Service Center to come online early next year.
These large scale expansion combined with our recently announced new service offering and capabilities, including the new Challenger and Lear jet engine and repair capabilities, a new line station and Geneva, and expanded digital tools and services all come together.
To support our bring your jet on strategy and.
And position us well toward achieving our objective of growing aftermarket services to approximately 27% of our total revenue by 2025, all the while increasing our customer responsiveness.
And satisfaction levels.
Finally, as I mentioned earlier, we continue to make progress addressing our cost structure and balance sheet.
With the repayment of our secured term loan facility and our successful tender offer we have reduced our cash interest cost by approximately $200 million.
Versus 2020.
We also continue to focus on capturing the benefit of our transition to a more focused organization with lower fixed cost and on executing on the and read of initiative behind of our objective of $400 million and a recurring cost saving by 2023.
With these actions, we continue to improve our cost structure and better position the company to scale up at lower cost and the lower cost base. When the market recovers we are suddenly seeing positive indicator, but we first and foremost the remain disciplined focusing on what we can.
Control and on executing our plan.
So let me stop here and turn it over to Bart to provide the details on our first of all of our.
First quarter results and full year expectation and further deleveraging goals Mark.
Thank you, Eric and good morning, everyone.
Let me just start off by saying that I'm very pleased with both our Q1 financial performance.
And as well as the progress we've made on our strategic priorities.
Before going into more details on our results and full year expectations I did want to take a few minutes to speak about our achievements towards the four strategic priorities, we outlined during our Investor day.
So first our global 7500 unit cost is progressing as expected and the aircraft has begun its positive contribution to EBITDA in Q1.
For now the program remains dilutive to our overall margins. However, we expect this to improve over the next quarters with the objective that the last units will become accretive to our EBITDA margins by the end of this year.
Second our $400 million cost reduction plan is also hitting its stride with savings both on labor and indirect costs starting to hit the bottom line.
As explained during our Investor day. These benefits should continue to ramp up through 2023.
Since our last update we have continued to review our opportunity pipeline.
And have identified and launched incremental initiatives, which will continue to close of the remaining $75 million.
And annual savings to be secured.
Third we continue to execute on our aftermarket expansion goals.
Since Q4 of last year, our footprint has grown and following the integration of our facility in Berlin, Germany and.
And overall productive hours and our services facilities have increased by more than 20% and the and the first quarter of this year versus Q4 of last year.
Finally, we have made significant progress over the last months on deleveraging our balance sheet.
With approximately $2 4 billion of liquidity directed towards debt repayment, we have already ensured that our cash interest paid in 2022 will decrease by approximately $200 million when compared to the cost of servicing our debt last year.
The debt reduction actions achieved to date include the repayment of our secured term facility with hps that occurred in February.
And which dealt with our highest cost of debt capital.
Followed by the recently concluded $1 6 billion tender offer which targeted the selected debt maturities between 2021 and 'twenty three.
Following our first quarter results as well as the conclusion of these actions our pro forma liquidity remains strong at $2 6 billion, leaving ample room for further deleveraging actions.
Overall, our plan continues to progress our objective is to build of three plus maturity runway seek opportunistic refinancing of our existing debt and work to optimize liquidity.
We have just also announced the successful monetization of our $11 $5 million Alstom shares.
For a total consideration of approximately $600 million.
And we are still focusing on.
Stablish and additional working capital facilities to free cash from our balance sheet and.
And optimizing the approximately $400 million of restricted cash that is tied to certain letters of guarantee with more capital effect of solutions.
We are actively working to progress these goals during the second quarter of this year.
With that let's let's move on to our Q1 results, which reflect our first full quarter as a pure play of business Aviation company.
Total revenues for the quarter reached $1 3 billion supported by 26 aircraft deliveries and $269 million and aftermarket revenues.
While this represents a 12% year over year reduction on a reported basis.
<unk> revenues increased by 18% when adjusting for the impact from the divestitures, we made and commercial aviation and Aerostructures.
And then I will provide a bit more detail on this and just a moment.
The business aircraft year over year revenue growth was supported by a higher content of large cabin aircraft deliveries nearly doubling from nine to 16 units, including eight global 75 hundreds.
And it is worth highlighting that while the learning curve benefits unit cost.
It also ensures a more stable delivery profile on this platform.
And benefits from this include more predictable revenues and cash flows and.
And intra quarter cash usage.
On the services side revenues continued their recovery towards pre COVID-19 levels, increasing from $252 million and the fourth quarter of last year to $269 million and the first quarter of this year.
And Q1 overall flight hours for the Bombardier fleet were 19% below pre COVID-19 levels versus 22% below on average in Q4.
The month of March was especially positive with flight hours only down by 10% below pre COVID-19 levels.
And finally divestitures accounted for of $401 million year over year reduction and revenues in Q1 this impact.
<unk> will continue in the coming quarters, but progressively reduce and magnitude over the course of the year.
And just as a reminder, and fiscal year 2020, we had $895 million of revenues related to now divested commercial and Aerostructures businesses and.
And as such we will continue and continue to see some negative impacts throughout the remainder of this year.
Turning to earnings total adjusted EBITDA for the quarter was $123 million, representing and EBITDA margin of nine 2%.
Adjusted EBIT was 29 million four and adjusted EBIT margin of two 2%.
Our adjusted EBITDA increased 43% year over year, and our adjusted EBITDA margins improved by 350 basis points or 61% to nine 2% versus five 7% and the same quarter of last year.
And this is attributable of bolt to the following factors.
Our delivery mix improved due to a higher content of large cabin aircraft.
Aircraft margins were further helped by the progress made on the global 7500 learning curve.
The unit cost on global 7500, and Q1 was in line with our expectations and as we look ahead of the aircraft currently and the build cycle, we continue to see progressive improvements towards our 20% unit cost reduction by aircraft of 100.
Again in line with our Investor day commitments.
Further we are beginning to see the benefits and our cost structure from the hundreds of cost reduction initiatives that were launched in Q1.
A portion of these initiatives is already benefiting our bottom line.
And of helped contribute to the $32 million lower year over year SG&A expense.
And we continue to be on track for the $100 million of targeted benefits in 2021.
Continuing with free cash flow, our consolidated usage was $405 million for the quarter, which includes approximately $100 million of the 200 million and nonrecurring charges that we have highlighted and our full year free cash flow guidance.
Looking at our working capital advance levels have reduced by approximately $400 million consistent with our expectations as we continued to deliver on our global 7500 backlog and.
And we expect to build backlog on our other aircraft platforms. During 2000 to 2021 and to recover a portion of these advances.
Overall, our backlog continues to remain strong at $10 4 billion.
Cash interest costs and the quarter were largely in line with 2020 and do not yet reflect the benefits from the deleveraging actions we have taken.
Now, let me turn to our full year objectives.
Looking ahead to the rest of the year, we are exactly where we plan to be at this point and with the market showing progressive signs of recovery. We continue to be confident that we are well positioned to deliver the guidance laid out earlier this year.
We continue to planned aircraft deliveries to between to be between 110, and 120 units driving our topline expectation of greater than $5 6 billion.
Typical up and down seasonality in Q2, and Q3 should be followed by a pickup and deliveries and the last few months of the year.
And our profitability is off to a good start with adjusted EBITDA margins of nine 2% and the first quarter.
Our objective is for quarterly performance to remain and approximately the 9% range and Q2 and Q3 moving with aircraft delivery mix.
<unk> adjusted EBIT margins should remain approximately and the 2% range.
Finally, our objective is to sequentially improve free cash flow over the next three quarters.
And this should largely be driven by working capital improvements as we collect customer advances and build our backlog.
Partially offset by typical inventory buildup until the end of Q3, which will be delivered in Q4 in line with the seasonal patterns of our industry.
Looking specifically at Q2, we expect working capital improvements will be partially offset by higher cash interest payments.
And which are typically higher in the quarter.
Based on the deleveraging actions taken to date, we will start seeing lower interest costs and the second half of this year.
Lastly, the majority of the remaining $100 million of $200 million and non recurring cash items will be spent and the first half of the year.
So in conclusion 2021 remains a transition year laying the groundwork to ensure that we become a more predictable profitable and resilient business Aviation company.
We are focused on executing on our strategic priorities and have made great progress to that effect and the last months.
And I look forward to sharing more achievements with you and the coming quarters.
No.
Before we open the call for questions I want to briefly address the consent solicitations for a bonds that.
And that we initiated earlier this week.
As we disclosed we received a letter from one of the bondholders and our 2034 notes, claiming that Bombardier is divestitures of certain assets.
Including our transportation business regional jet program, and Aerostructures Division put us in breach of certain covenants under the indenture governing our 2034 notes.
Simply put we believe these allegations are without merit and the.
We are in compliance with all covenants under our indentures.
We believe these divestitures of repositioned our business strengthened our balance sheet.
The accelerated deleveraging.
And positioned us better for long term growth and value creation for our stakeholders.
The first quarter results, we are discussing today validate that we are on the right track.
We worked with our external advisers to evaluate a range of options to address the bondholder matter.
We determined that initiating the consent solicitation says the most expedient and efficient path to maintain value and protect the corporation and all of its stakeholders.
Notwithstanding the primary and pragmatic approach that we're taking by initiating the consent solicitations, we are reserving all of our rights and remedies.
With that said we are here today to talk about our first quarter of.
2021, and our results, which show we're off to a strong start as the business aviation focused company.
Beyond these remarks, we won't be commenting further today on the consent solicitations.
Or our bondholder interactions.
And we appreciate you keeping your questions focused on our performance and our results.
So with that let me please turn it back over to Francis and we can we can get into the Q&A. Thank you very much.
Thanks, Mark and.
I'd like to remind you that the Bombardier Investor Relations team is available following the call and in the coming days to answer any questions you may have.
With that we will open up the line for questions operator.
And if you have the question Keith with Star one on your Touchtone telephone if you on.
We are using a speaker phone. Please lift your handset and then press star one.
And so on your question. Please press star two.
All participants please limit yourself to one question and one follow up.
Our first question is from Noah <unk> from.
Goldman Sachs.
Goldman Sachs. Please go ahead.
Hey, good morning, everybody.
Yes, good morning.
Mark could you just spend a little bit more time on the 7500 margin and how thats progressing and it sounds like you are.
Seeing a nice ramp through the year of just how much confidence do you have on that and then also if you could just speak to a little bit more specific and we have a mix.
Changes for you or against you into the margins through the rest of the year.
Well I'll, maybe I'll, maybe comment on the profitability and then ill.
And I'll turn it over to Eric to talk about mix and a little bit more about the market.
EBITDA on the 7500, it's already positive in Q1, Noah we don't talk specifically about our margins across our aircraft, but we do expect EBIT of the platform to be accretive to overall margins by year and.
And we've got full cost visibility all the way through the aircraft 100, which is already and the build cycle and and all of the learning curve improvements.
And that Eric and I have talked about are right on track.
To deliver the 20% of incremental improvement and.
And just to expand on that most of the vast majority of material costs are already contractually locked in so we're highly confident in achieving our goals there.
And maybe just to build on what Mark just said.
We are clearly.
And in a good place on the 7500, we mentioned at the Investor Day that we were targeting another reduction of 20% on our unit costs were on target to that the Barts point, we just delivered a couple of days ago. The one on the Red wings from Red Oak and and the cockpit and also from Sandler.
And we are building airplane.
The $80 90, something right now in Toronto, So we have very good sight and visibility.
On where we stand in regards to the market. So clearly this is going to have a positive impact on our margin this year.
As we are building airplanes that are more profitable right now the 7500, it was dilutive of to them so moving forward.
And this is going to have a nice a nice contribution. So so clearly the product mix here is going to be helpful.
Thank you.
The following question is from the Fleishman from Jpmorgan. Please go ahead.
Thanks, very much and good morning.
Morning.
Just to follow up on that quickly.
Mentioned bar kind of flattish.
<unk> margins of the move from here, but.
Given the improvement on the 7500 and cost cutting and.
I would expect probably sequential and prevent and the.
And the services.
Revenue and.
What would keep that sequential margin from <unk>.
And then from the Q1 level.
Yes, I think.
The first quarter, we had a we had very strong global platform deliveries.
Which obviously is very helpful to our overall margin and had a great start.
And with margins being in the order of 9% just over actually at nine two.
And so that favorable mix, obviously helped us we.
We do plan for a bit different mix over the next couple of quarters, which is why we think will be.
Relatively stable in that 99, plus percent EBITDA margin range, but as we move into the fourth quarter and we see more deliveries coming on the 7500 and the platform itself, becoming margin accretive by year and we're expecting a strong Q4 finish.
With respect to margins and overall that leads us tracking to our to our guidance for the year.
Okay and.
And it can be clearer than just the follow up real quick I think the.
And as mentioned something about sort of flattish delivery pace for <unk>.
7500 so.
Sort of think about the Q1 level kind of flat in Q2, and Q3 and then the pick up in Q4 can take the deliveries for the year into that and to the range of 35% to 40.
That's exactly right and.
And the helping benefit in Q4 as we as we finish up the year is that the the aircraft itself and with the incremental deliveries starts to become margin accretive. So we'll start to see of ramp up and margin.
And for the business.
Okay, Great I'll take the one thanks very much okay. Thanks.
Thank you I'll follow on.
The question is from Myles Walton from UBS. Please go ahead.
Thanks, Good morning, I was hoping and good morning, I guess on the on the margin question for just the second I think in the.
Financial disclosure that talks about on a $27 million reversal of Rpgs and I just wonder did that helped the first quarter margins and the tax planning some of the flatness for the rest of the year and then it's more of a clarification and then if you can just touch on what Youre seeing from a pricing perspective that would be great. Thanks.
Yes ill just give you the straight answer on the first part and then all of <unk>.
Eric will talk about the ladder and the <unk> had no impact on <unk>.
On margin miles the LPG revert.
Thank you.
The.
On the in regards to pricing.
A good question, what we've seen so far this year is looking very promising it's actually in line or slightly even slightly better than the than our expectation. So so we will.
You know.
Julie we have good momentum in sales right now and we feel pretty good about our backlog, we feel pretty good about.
And what we're seeing and being able to to give good the good visibility on the remaining of the year, so, but the but pricing has been the.
And that's been in line so far.
Okay. Thank you.
Thanks, Bob.
Thank you. Our next question is from David Strauss from Barclays.
Please go ahead.
Okay.
Thanks.
Good morning, B could you.
Morning.
Can you give us a sense the.
Where the 7500 backlog extends to at this point, where and when the first the available years and.
If you could any any sort of similar color around the 5500 6500.
So and talking about the backlog so lab right.
Right now we have a bit of a shift on our backlog and where we needed to build backlog on pretty much all of the platform which is happening.
And on the backlog of the 75 run rate right. Now we are very strong we still have multiyear backlog.
Still have the industry flagship airplane.
We have 50 airplanes delivered.
We have 18 to 24 months should be a normal window for the 7500 so.
We have b.
Consuming some of that backlog right now because of the number of deliveries are significant but we are still in line with the we are still reaching at product majority of 35 to 40 airplane delivery of year and we remain confident on debt. So so we're going to get into a zone right now of 18% to 24 months.
There you know.
This is going to start to attract more sales on the 7500 and allow us to.
To either maintain or even the grow slowly that backlog, but we've seen the amazing momentum on the other platform building backlog year, which was important.
And can I ask on I wanted to ask the follow up on Europe.
You're on 'twenty.
20% EBITDA margin target that you have for 2025.
Or would you expect the 75 of 100 to be margin accretive out there to that 20% of target.
Yes, absolutely and in fact, we're expecting it to become.
Accretive by the fourth quarter or in the fourth quarter of this year and then continuing on a strong momentum from there the 20%.
Cost improvement that we're targeting as Eric has highlighted before.
But it doesn't and there.
Our operations have a very long history of being able to incur.
Incrementally improve margins beyond beyond those kind of levels that we've that we're anticipating the other thing I just wanted to mention on the on the other aircraft platforms. So we are looking for a book to bill above one on those other platforms, but we just we don't.
We want to promote the speculate on a on a targeted backlog level just to add to Eric's earlier comments.
Thank you very much.
Okay. Thanks, David.
Traditionally and it's going to be still the case of this year or Q4.
Is going to probably look stronger due to a higher deliveries, but also.
The cost reduction benefit that we were just talking about either on the 7500 platform. But also are fond of the million dollars Cuss program reduction and that will fully kick in.
Is also.
Giving us more benefit quarter after quarter so.
That the the short answer to your question.
The real certain kind of.
Maybe.
Sort of Guy if I could just.
Build on the Eric censored just just a little bit we've got our production.
For the year.
We know exactly.
What our deliveries are and what our production profiled looks like so we're very very confident in the and being able to achieve those.
The EBITDA margin range that we've talked about.
For the rest of the year as well and and then you are right. We are anticipating a growth towards as the year goes along and our aftermarket revenues and that is of high margin business and that'll help support.
Margin growth as we move towards the end of the year.
Thank you.
Okay. Thanks, Scott.
Thank you.
The question, it's on the Wall-tex price.
Please go ahead and thank you very much operator, good morning, everyone.
Good morning Walter.
So my question is just.
Just to hear one is on your customer conversations obviously, you're expanding your aftermarket services epic.
You indicated, but but I would I would.
I would suspect that you're having customer conversations well before the opening of those facilities and just curious what is the reception from your customers. So far to date what are the.
Is there any indication that and perhaps you'll get a a faster build and revenue and those in that area or is this something that has to be.
Grown over time yeah.
Not just bombardier, but everybody collectively we've delivered more airplanes and the number of orders net orders. So we've all been decreasing our backlog collectively and I think right now and we were at a certain point and we've adjusted the rate for that reason last year and of course, the pandemic has accelerated that decision but.
We are in the level today, where we feel debt with the momentum we have we need to rebuild Abbott couple of good quarter of rebuilding.
Backlog and Thats, our strategy and so far it's working extremely well.
Across the board. So I think we need a couple of good quarter I want to make sure that that momentum is there to stay.
We had an amazing good Q4, Q1, I would say to b to give a bit more color generally was slow but February and March picked up and entering into into Q2 of Q2.
And we've kept actually even accelerated the momentum we had in February and March so.
And we don't foresee and assigning right and all of a slowing and it so clearly.
We're going to be and a much better place and a couple of weeks from now backlog of related and after it is going to be a question of being patient and making sure that the sustain before we make any of any REIT discussions and so we'll be very disciplined about it okay.
Summer base is extremely.
Above the airplane and.
I mentioned the reliability. The cabin is always being something Bambara <unk> has been has been renowned for the craftsmanship and and and the quality of our work.
But at the same time.
Also we have a history of.
All of continuously improving our product so if there's a possibility for us and the next coming years to come to you to improve and raise the bar on the 7500, we will.
So we feel pretty good about where we are we know that there could be possibilities of consuming continues the improving the product, but we are in a very very good place and the responses is very good.
Just to confirm I view not the kind of started discussion of of your customers of yet on pricing at this point I'm gonna get the too early in the game.
The pricing is actually in line with our target. So so the pricing of the 7400, our assumption today are in line with our expectation across all of the platform by the way, but also on the 7500. So so good response and of course as we of as we deliver more airplane and.
Create the appetite for the product I guess, we're going to be.
And the line what our expectation there also and we will see as I mentioned earlier with the backlog now getting to the 18 24 months zone, we're going to start to see also some some pickup and demand.
That's correct and and thanks I.
Thank you thanks car.
The following question.
<unk>.
Please go ahead.
Yes, good morning, and thanks for taking my questions and.
Just wondering if you could talk about the of debt repayment efforts because you previously Diana to reimburse about $3 billion of debt I meant when the 21. So just wondering if the progress so far.
Al achieve that target the or if you could even possibly the <unk> the 3 billion Mark. Thank you.
Good morning.
I would just say about our cash deployment towards debt.
We are taking a a very diligent approach.
To improve the overall capital structure, we have deployed to 4 billion of the 3 billion that had mentioned previously already towards towards debt reduction.
We are absolutely on track to be able to deliver at least 3 billion of overall debt reduction and we do have some room for deleveraging beyond that.
Would emphasize as well that the the access to data of already reduced are are.
Some of it.
Hi, good morning, and thanks for taking my question I, just wanted to dig a little bit deeper on the book to Bill that was greater than one times this quarter and if you could maybe provide more color on.
M Challenger versus global maybe by geography, and I think maybe by customer type as well.
Yes, no absolutely.
And so so the one thing that is clear right now is that momentum is stimulated by a couple of the Ria.
One is.
And as people new comer people.
And I've never flown the airplane on of business jet before very little.
The ring because the C.
Business jet as as the.
The weight of travels.
Safely.
So that's one thing and we've seen also.
And a good momentum and pick up <unk>.
Especially with the fleet operator does not everybody wants to hone and operators on airplanes and so the fleet operator is a good solution. So on the fleet operator level. There is clearly a lot of momentum and I can see debt, but you know that Bombardier is extremely well positioned with the fleet operator.
And that creates momentum for US also at the same time in terms of the bite platform we.
You've seen you know.
As I said earlier, yes, we've been delivering more of 7500, then the number of orders so far but the long backlog is and part of the explanation for that and as I said as we get to the 18 to 24 months, then we're going to see some some momentum picking up again the.
Other question here is on the other platforms. So the other platform we've been growing the backlog quite significantly across the board on challenger and the other global platform. So so we feel pretty good debt.
And we're going to have like.
No white tails at year end and that we are building clearly.
Good momentum, which brings the ability for us to make.
B more predictable on our business and I think the this is what we're translating here today, we feel good about our overall.
Guidance, we're in line and we will also of course make sure we capture at any opportunity.
Thank you very much thank.
Thank you Ed.
Thank you.
The following question is from Robert Spingarn from Credit Suisse. Please go ahead.
Hi, good morning.
Eric I wanted to follow on to that last question, a little bit and the BARDA I have one for you but in terms of the order mix lately I guess on the quarter or even just recently on.
Are you, saying that.
The.
It doesn't reflect the delivery mix, which was two thirds large and one third medium but.
More medium.
And then large on the orders.
Yes.
So as I said.
The mix right now the order intake is very strong on on the medium platform, which is challenging for us.
And also strong on the global 5500 6500, so so we feel we feel pretty good about about this across the board.
Okay, and then Bart.
Thank you Eric Marc just following on David's question about 2025, I think you did say that the the 7500 would be accretive and I think you said at the Investor day that the aftermarket business would be your second most profitable business.
If I remember that correctly, so how do we think about those businesses above 20% EBITDA margins and then how do we think about everything else on the on the.
Other side are they relatively close or or is there a big dispersion in terms of margin.
Yes, I think.
Rob just the way to think about it is.
Obviously margins are going to grow.
For the 7500 platform as we continue through our cost reduction and the margin on that aircraft because it's.
Of where it is and its lifecycle and we will move towards something close to our our aftermarket business all of our other platforms RBC and margin positive and as we continue to see strong demand and overtime.
Refresh those platforms and keep them at the leading edge, we expect margins on the other platforms to b to be strong as well, we don't break it down obviously by <unk>.
By platform, but but theyre relatively close in terms of of overall margin profile.
And the rough on the B.
And sorry to be adjusted if I, if I can just build on what the Bart just said.
This team here will make the decision in accordance to debt, we want to have a profitable business and we committed to be at 20% and we already made a decision.
And divesting one of our platform and that's exactly the reason for it we need to make.
No. Good profit good margin and we are keeping right now and we're very bullish about the product we have and our portfolio today, which is the challenge of the global and our services business.
And equally important to the margin contribution.
Okay and the only other thing I was going to ask Bart on this is how should the spread between EBITDA margin and EBIT margin progress to 2025, just the DNA has stayed fairly static because youre not really investing.
Any more how do we think about that spread out of 20% EBITDA margin.
That's a good that's a good question Rob the.
And we're looking at.
Approximately what is the $450 million by by 2000 22025 by the <unk> and 25 of EBIT.
Okay. So 450, <unk>, sorry, depreciate on my apologies I got that backwards rub $450 million of depreciation by 2025, hopefully that helps with the.
With the math okay.
Okay. So a little of I think a little higher than it's been.
Just a small amount higher than it's been yes, thats right. Okay. Okay. Thank you.
Thanks again for all the time for one more question.
Our last question is from Ron Epstein from Bank of America. Please go ahead.
And good morning, guys.
Good morning.
A bigger strategy picture.
The question here so.
Yes.
Bombardier will be is currently the only.
And the publicly traded business to our company.
And how do you think about the challenges of that presents particularly when we.
Think about the cyclicality of the business jet market right I mean, right now things are looking good and that's that's great and.
Everybody likes that but that won't always be the case. So how do you think about.
Hedging and.
And softening the blow and things ultimately do soften when you're really going to be in one market.
<unk>.
I think around the debt.
The.
And I'll call it the history here of business jet.
To answer your question.
We are as I, just mentioned previously and kind of three businesses. Okay. We are on the challenger, which is the medium segment, we are competing and the large segment, which is our global platform and we have the services business, which we want to growth.
And the services business by definition I've always been fairly stable.
Yes, even if there's a downturn and the economy.
<unk> see something because people are schedule nut and line always with the hours, but they need to come for a five year inspection and 10 year inspection. So so it's driven by calendar so that business is very stable.
If you look at both of our portfolio the challenger will be more sensitive the medium segment will be more sensitive.
To the economy.
But the global platform is an interesting one of the large platform is extremely resilient.
If you go back and this theory, when we had the crisis in 2008 and nine.
Actually we delivered more large airplane.
During the crisis, the following year and.
And it's been a very very resilient business.
And if you look at what happened last year same thing happened again, despite the entire world.
Moving down on commercial and business aviation the number of large airplane that we delivered collectively was equal to the year before.
So what we're seeing and I think we need to be looked at the sweet Yes, we are a pure business play company today.
But I have two of the three businesses that are extremely resilient.
One is a little less but still you know not not to the to the same extent to the light segment. The life segment, which were not anymore, we're going to finish the over delivery. This year is much more effective so when we made our strategic decision of being and those settlement that was part of.
Of the of the of.
And the recession also of course, so so we feel to be in a very good place and probably a lot more resilient and everybody is thinking here in terms of if there is any fundamental bump.
Okay, great. Thank you.
Thanks, Ross Thank you.
Okay. So.
First of all I'd like to thank you for joining us today.
I guess, if you have additional question from US this will be available for your call. So in the meantime until then please stay healthy and and take care and we'll see you and the next quarter. Thank you.
Thank you.
France has now ended please disconnect your lines at this time and we.
Thank you for your participation.
Yeah.
Okay.
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