Q3 2023 Bombardier Inc Earnings Call
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Good morning, ladies and gentlemen, and welcome to the bump object third quarter 2023 earnings Conference call. Please be advised that this call is being recorded at this time I'd like to turn the discussion over to Mr. Joseph received enough flesh, Vice President <unk> and Investor Relations for Bob Ramsey.
Please go ahead Sir.
Good morning, everyone and welcome to Beaumont. These earnings call for the third quarter ended September 32023.
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 is that actual events or results may differ materially from these statements.
For additional information on forward looking statements that underlying assumptions please refer to the MD&A.
We're making a discussion that's taken on behalf of each speaker on the call.
With me today is our president and Chief Executive Officer, Eric Mcfadden.
And our executive Vice President and Chief Financial Officer, Martin to review, our operations and financial results for the third quarter 2023.
I would now like to turn over the discussion to Eric.
And Seth Bagshaw.
Good morning, everyone and thank you for joining us today.
I am pleased to share that bombard you add an excellent third quarter powered by exceptional performance.
The strong results, we will review today demonstrate that our plan is working and continues to position us for sustainable and.
And long term success.
These results also show the underlying strength and resilience of our business as well as our ability to deliver on our commitment in any marketplace.
Alright.
So can you meet market demand and position us favorably around the world.
Our services are growing with a solid and consistent CAGR.
Finally, both our top and bottom line performance has grown year over year.
I also want to highlight the incredible work our teams have accomplished throughout the quarter.
We executed the plan and performed very well in a dynamic business environment faced with geopolitical headwinds.
Our rigor and focus app enable us to record a remarkable revenue increase of $401 billion or 28% year over year, and putting cash positive quarter on the board.
Taking a step back these results come after a series of consistent years of Bombardier that led to the company being ranked on the tier sector.
This prestigious recognition I liked the top 30 performing stock over a three year period ending June 32023.
Over this time, our share price grew by 500 million, 22%, while our market cap increased by 533%. This is quite an accomplishment.
While we know the share price has been more volatile and pressure over the past months. The PSX 30 ranking demonstrates that we accept the right foundation to deliver impressive returns.
We are confident that our plan will drive long term shareholder value.
This is a testament to our team's hard work and especially the disciplined leadership from BARDA.
Mark would go into the detail of this quarter's results in a few minutes, but first I would like to walk you through some key highlights.
Profitability remains a priority of Archie and continues on a positive trajectory.
Our adjusted EBITDA rose by an impressive 36% year over year.
With the previous quarter is double digit growth is largely driven by improving operating margins a higher contribution from our market after market business and diligent cost management.
Our services team continues to play a key role as we execute on our commitments.
We are driving significant and sustained revenue growth in Q3.
Recorded a 11% increase in revenue year over year.
If you look at the last nine months, we increased revenue by nearly 16% when compared to the same periods in 2022.
After a rapid and successful expansion of our service Center network. In 2022, we are now focused on operationalize ing and optimizing our facilities.
A more business as more business keeps coming through our insights. Our teams remained active on the recruitment side to ensure we have the workforce to bring more and more of our jets home.
The aftermarket team also consider putting customer satisfaction at the forefront and he's taking concrete actions to ensure we deliver an exceptional experience to that end. We recently launched a new smart services elite program.
Most comprehensive cost per flight hours offering.
Yeah.
Turning to the pre owned market are certified pre owned program keeps drawing attention by offering a premium product with this program bombard he created a new segment within the market.
And OEM backed option for clients looking for pre owned jet.
We may take asleep update each of these planes and leverage the expertise of our service center to present, our client with a turnkey product.
We presented a CTO aircrafts to the North American market for the very first time at MBIA two weeks ago. The 2010 Challenger 300, we had on static display sported a new interior in fresh coat of paint as well as the latest avionics and connectivity offering its receipt.
D to amend this response from attendees and demonstrated once again the significant value of this program.
When it comes to new aircraft delivery. We also performed extremely well with 31 reported during.
During the third quarter, we remain on track to deliver more than 133 aircrafts in 2020.
On this front I want to highlight the efforts from our team and the plants as we ramp up deliveries to end of the year all the while expertsy managing the move into argue Pearson airport facilities without creating disruption to our deliveries this and next year.
Overall, we have a good line of sight for the fourth quarter and everything is in place to deliver greater than 56 aircrafts wisdom already behind us.
Let me also acknowledge our supply chain organization, which has been instrumental in ensuring that we can deliver.
Delivery objectives.
When you look at what is going on across the industry you won't be surprised to hear me say that the supply chain tons, you used to put a considerable amount of pressure on our operation.
However, while the global supply chain basis still under the strain as various disruption and challenges. Our team is very agile and is able to react to identified problems before they escalate. Thanks.
Thanks to their practices, we have been very successful in mitigating challenges and keeping our delivery projection on track.
Speaking of deliveries our backlog remains solid at $14 7 billion, which translate into a order book that is averaging 18 to 24 months on top of this our long term skyline include more than 200 order options from large operators.
We ended the quarter with a book to Bill of one one which provides us with the visibility and predictability are required to look at the future with confidence.
This is exactly where we said, we would and I am happy with occupancy.
Since.
We also benefit from a diversified customer mix, which of course includes large fleet operator Corporation and individuals but also companies that are choosing bombardier aircraft to extend their business and their fleet in a meaningful way. The most recent example is 18 jets space in fetus.
In Phoenix.
John can you spell agreed the purchase of three challenge or 3500 jets with us in Las Vegas.
The company is growing and has positioned itself well to capture demand from individual customer as well as from large fleets sometimes required backup light.
These jets will be transformational for them as they open the door to a larger market segment into Super mid size space.
Our defense Division represents another key example of our diversified customer base.
Over the last few weeks a number of important international different shows were held in the U S and in Asia.
Global 6500, aircrafts, garnering a lot of attention and was put forth at the platform of choice for a wide range of missions. In fact, it was reported that the Sierra Nevada Corporation was selected to provide civilians aircrafts that are based on the global 6500.
This is the latest addition to our long list of program that's rely on our global platform to complete defense missions, including the successful Bacon platform operated by the U S Air Force for which we also announced last week the delivery of the seven airplanes.
As you might have noticed our platform are recognized around the world. Our defense Division is driving and demonstrating it's it's profound expertise and flexibility with many large scale modern as well as input for us.
With that said overall, we see steady order activity in a normalized demand environment.
Our Q4 order pipeline looks robust due to continued demand for our challenger and global Jets are increased profitability.
It's allowed us to record a cash flow positive quarter and to generate $80 million.
This convincing results puts us on track to deliver on our full year guidance of greater than $250 million in free cash flow for 2023.
Our consistency in meeting our objective demonstrates that we have the right business model to deliver strong results and outperformed well into the future in any marketplace. We continue to stay focused on delivery on business under us.
Our business fundamentals and with the talented and engaged team we have in place I am confident that we will continue to meet and exceed expectations.
Now I'd like to invite Bart to share further information regarding our excellent performance over the last quarter and I'll. It paves the way for success in meeting our full year guidance Mark the floor is yours.
Thank you Eric and good morning, everyone. It's absolutely great to be here with you today.
Have to say that was one heck of a quarter, we just had.
When I take a step back and look at what we accomplished our business is firing on all cylinders.
To emphasize this point, let me share with you a few of the key highlights.
First we grew our deliveries by six aircraft this quarter when the entire industry has been struggling with an exceptionally difficult supply chain.
Our revenues are up 28%.
Our margins are up 100 basis points year on year.
Our adjusted EBITDA is up 36% our.
Our adjusted EBIT was up 54%.
Our year to date adjusted EPS is higher than last year by $3 91 sites.
And finally.
Our leverage is 25% improved versus last year.
Now on the cost of going below four times, and we are generating free cash flow.
And even if I look at it. This company is completely different from when this management team stepped in three years ago and it isn't by luck. It is by design.
It is a testament to our continued focus on managing things that we control most.
We are managing our costs ramping up our aftermarket and delivering growing aircraft margins.
These actions will serve margin lift in all environments.
For the full year, we remain on track to meet or beat all of our guided metrics, including aircraft deliveries.
This will be the third year in a row and we expect to meet our delivery commitments.
Supply chain is difficult, but we are not using it as an excuse for missing our commitments.
Looking at our balance sheet available liquidity is strong at 145 billion and our adjusted net leverage continues to improve.
At the end of Q3, we're down to four one times net debt to EBITDA.
And what is even more impressive is that we anticipate to be below four times by the end of the year as we deliver our full year guidance.
Looking at our debt maturities, we continue to monitor markets for the right conditions and remain opportunistic in our deleveraging approach.
We have around 18 months until our next debt maturity, which leaves us with ample time and flexibility to act in the most beneficial way for the company.
Putting all these pieces together Bombardier has made significant improvements to its fundamentals.
With higher and sustainable profitability strong liquidity and a materially de levered balance sheet. We have built a company that is able to perform in all business environments.
Let me now turn to the financial highlights for our third quarter.
Our revenues were up by an impressive 28% year over year, reaching one 9 billion versus $1 5 billion last year.
Our aircraft manufacturing and other revenues grew by 364 million or 34%.
The result of six incremental deliveries versus a year ago with a total of 31 aircraft delivered in Q3 of this year.
Date of our cost structure at a higher inflationary environment.
Our adjusted EBITDA totaled $193 million or 54% versus the same period of last year.
Our adjusted net income has also significantly improved to a gain of $80 million versus a loss of 2 million a year earlier.
And are adjusted EPS came in at 73 cents for the quarter.
This is a 10% loss in Q3 of last year.
As I mentioned in a previous calls in 2023.
We have reached profitability levels, where we have become structurally net income generated.
And we expect to see continued growth in these metrics in the future.
Moving on to free cash flow, we generated $80 million of cash in the quarter.
Our cash conversion bridge is quite straightforward, we delivered $285 million EBITDA and from there we remove our cash interest cost of $75 million as well as 99 billion Capex. The majority of which was to support the completion of our new global is simply facility at Pearson Airport.
Working capital was essentially neutral in the quarter with additional inventory net of panels, bill being offset by incremental advances.
With only two months less than a year, we continue to expect a full year performance to be in line with guidance.
Deliveries are on track for greater than 138.
And with 82 deliveries achieved to the end of Q3, we have a clear path to greater than 56 deliveries to go.
Are unchanged delivery outlook and excellent aftermarket performance continue to support the greater than seven 6 billion in talk line, we expect for the year.
So far this year, we have generated $772 million of EBITDA and.
And we have a clear path to reach our 2023, adjusted EBITDA guidance of greater than $1.125 billion.
On free cash flow, we continue to expect to generate a greater than $250 million for the full year.
This implies a fourth quarter cash flow generations of greater than $639 million.
Our cash usage over the past nine months was largely driven by inventory wrap up.
For which we expect to see a significant release in the fourth quarter as we delivered more than 56 aircraft.
So to conclude Bombardier had a very strong performance in the third quarter.
Our entire management team is focused on delivering on our full year commitments.
Above the quarterly results, we are very happy with the progress we continue to make on growth.
<unk> balance sheet, and we believe that we are in an excellent position to continue to perform and bring value to our stakeholders.
Thank you very much and with that I will turn it over to Frankfurt to begin the Q&A practice.
<unk> I'd like to remind you that nobody investor relations team is available in the following in the coming days to answer any questions you may have.
For the question period, please limit yourself to one question on follow up with that will open up for questions operator.
Ladies and gentlemen, if you would like to add to your question. Please press start followed by one.
You will hear a three tone prompt acknowledging your request.
Like to withdraw from the question queue. Please press star followed by two.
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Before pressing any cheese. Please go ahead and press start one now if you have a question.
And your first question will be from James television Catlin. Please go ahead.
Alright. Thank you good morning, everyone.
My first question returning to the aftermarket service business very nice grocery again in the quarter.
Wondering if you could maybe talk about.
The market growth versus the grocery <unk> driving specifics specifically through new service center openings, just trying to trying to kind of disaggregate market share growth versus just the overall growth in the industry and and flying activity.
So great question him. So I think the growth we we do observe right now comes from different different form I think first of all we we clearly.
Have grilled because we've had it about a million square foot last year, and we'd be selling the capacity very nicely all across the board, but to your point also we see growth in flying hours. So the grown in flying hours of course Ah bring the euro putting more often to our service center. So this has been a bit of a leading indicator.
<unk> also for us.
And you know the reality is also our 5000 <unk>.
Crap out there are agent. So airplane you know a lot of the global a lot of the this is one thing more planning for a lot of the globals or a lot of the challenger all coming to midlife inspection or coming to 10 year inspection, which require quite a bit of maintenance. So I would say between all of our you know of course.
Bigger offering if I may say it this way.
Plus the flying hours, if we'd been observing increasing over the last couple of years.
This lead agent I think that we clearly foresee that girl and we are on target to meet them. What we said, we're gonna do that for about 2 billion dollar or green or in 2025.
Great. Thank you and then if I could just follow up the global 7500 again of course site. It is one of the drivers of your gross margin expansion could you just update us on where the company on that platform is specifically in terms of realizing full margin potential.
How much still lies ahead or or perhaps maybe just more of a timeframe you're thinking about until that platform. Those margins have really reached kind of you know full run rate if I can call it that.
Yeah. Good morning, Sir as far here. So we we've had obviously a tremendous margin growth. The 7500 platform. Since we started delivering the first I've got a number of years ago. The the early part of it was really based on the unit cost.
<unk>, which we achieved fully about eight two months ago approximately.
Now in the pricing large an expansion we are.
Mostly through the large aircraft prices.
We did have some some strong aircraft sales.
<unk> 2019, and 2020th and prices have gone up a fair amount actually on the on the per unit basis. Since then so we'll be delivering those aircraft in 24 and even into a little bit. It's 45, sweet stuck by 25 will be too full run rate.
March and on the on the 7500 platform.
Okay, Great. That's very helpful. Thank you.
Texas.
Next question.
Walter.
Please go ahead.
Yeah. Thanks, so much yeah can you hear me now.
Yeah. We can are you also a good morning.
Yeah, Yeah, I was wondering great results by the way I was wondering if you could perhaps Eric speak to the cadence of demand I know that's been.
A big.
Big question, Mark about out there for many as to whether you see any any signs of weakening demand I know you do use aircraft delivery or use aircraft per cent went up a little bit here, but are you do you think you can still maintain as you go into a very strong fourth quarter here for Dilip.
<unk> do you think you can maintain a book to bill that that ends for the year at above one and and sustainable and to 2024.
Yeah.
Think I'll also get the short answer is is definitely we see we have a line of sight for you know a book to bill of one of the the the.
The man right now is very strong still you know.
We remain positive and and and you know, there's a lot of activity and quite around the globe that surely you know we have stronger activity America Europe I was myself in Europe with the team few weeks ago and the quite impressive activity you know what a special on the large that form in Europe, and also we need back and even in the middle East.
Despite what's going on right now so I have to say that.
We're pleased with it and then you know people are still considering it hurts and <unk> and we have quite a high level of activity as we speak.
Okay, and that's my follow up question.
You know <unk> you called it a heck of a quarter and indeed it was just curious now that with the strength of the the.
A year to date in the third quarter here whenever you have an annual guide in the third quarter, you effectively have a fourth quarter guide in place and and when I look at that.
Your trends seem to be meaningfully cutting it above that is there any <unk> I know you said meet or exceed and I guess, we're underlying exceed here is that the case or is there anything that we should be aware of.
Fourth quarter D. The seasonality or any margin pressure that that we should build into our bottles that perhaps isn't there right now to temper some of the fourth quarter given the full your guy that you have out there.
Yeah, Walter Good morning look, we're we're coming in to a fourth quarter off of a strong third quarter. They were expecting a strong fourth quarter.
We have a full lineup of deliveries the team is performing at an exceptional level, we b C clarified a site to making our our delivery guidance and is Eric highlighted just a moment ago with the with a very strong pipeline of sales activity that we <unk>.
Have let me see a clear path to achieving that <unk> that it satisfies a lot of cash coming in that's a very strong quarter typically because we we tend to have a lot of deliveries in the fourth quarter. This this quarter's even higher than some quarters in the past so that setting this up very well see as I said.
Let me repeat guides across the board.
Okay, that's fantastic congrats on a great quarter section.
Okay. Thank you all sir.
Thank you next question will be from.
At Gmail. Please go ahead.
Yes, good morning, and guess congrats on on good results here, but.
I wanted to ask about kind of the orders.
Kind of momentum going into the queue for I mean, it seems like you've been.
And that's high 20 ordered a quarter for the last nine months I noticed it seasonality typically going into the fourth quarter.
But you know, we're looking for or that as a full boat 50, I guess I'll get you forwarded that normal seasonality are you expecting to for it to be strong go to the typical seasonality and if so what what's driving that stronger like is there a specific order that you feel.
Kind of strongly about to meet that kinda target for the year. So that's one and then follow up.
When we look into your bridge into 150 deliveries I guess by 2025, how how should be characterized that going to 24 do kind of take a small step the 24 into eventually hundred fifties elaborated by 25 is a supply chain can organized in a way that helps you may.
That's <unk> step up in 24 I'm into 2025.
Mmm.
This is a great question. Your morning heavy at currently we we've seen you know I'll put the bill to be around one so far this year <unk>.
And there was a lot of deals that we've been working y'know N S b maturing.
Towards the last couple of months and.
And right now, they're all lining up to in a sense that you know we started to work on contract where it started to you know have a real conversation with the customer to close this being in the quarter. So we've seen a bit of a profile of of the pipeline maturing and it's happening in two four and I'm not just talking of.
<unk> you know.
Traditional customer you know, but I'm talking also about some of the defense deal could be sleep deal. So so there's a few things that are lining up to Athens two four.
And you know to.
To be able to support.
Our our book to Bill and still have a line of sight for a book to Bill of one this year. So so that's kind of what's happening.
And and you know when we looked at the five line, there's quite a bit of.
Things you know that we know will be happening into next year that are already being put forward in this quarter. So it's actually pretty encouraging the level of activity is is actually.
Very good.
<unk> on the bridge 220, 25 and come out confidence in the supply chain to make a step up in very poor.
Yeah no absolutely.
<unk> explains it for and I invited this morning, my team has done a tremendous job.
And proactively managing issue before the art you know our assembly line and and again I think yes, we have some challenge the team is being creative I think when you look at you know what we're delivering today, we're still you know along to meet guidance for.
Two four we pretty much have all of our.
Pretty much at all or parts and everything already with us on the other room. So I can be like just a year to be able to deliver the airplanes. So it's pretty much all under our control right now and when we look at we already have visibility had working with with our supply chain, especially the engine and we M 442024 and 25 so.
So far we we do anticipate the supply chain to be able to support the growth we have and you still see to your line of sight again at all so far for 2045 targets overall.
Thank you.
And can I get my study next.
Next question will be from Cameron Texan National Bank financial Please go ahead.
Yeah. Thanks, Sir Thanks, very much good morning, just I guess a question around.
Cash flow and working capital that's been obviously, there's gonna be a reversal of the inventory.
Investment here in queue for you know I know, it's it's still gonna be to really talk about 2024, but I'm. Just wondering if you can kinda just directionally talk about working capital investment needs as we move into next year I mean, we're sort of out of production right. Now that's that's a little more stable, but maybe incrementally higher. The next couple of years you what what did you like it the investment that's gonna be need.
The inventory to kind of support that as we head into next year.
Yeah. Good morning, Salman Thanks for the for the question and you're right. You know we did have a fairly large inventory build earlier on in a year really over the full first nine months.
With the strong delivery activity.
In case of activity that we're gonna have here in queue for we're gonna have a cover a lot of that is so that's gonna be driving.
A fair amount of incremental free cash flow in the quarter as well so <unk> very positive on that.
As we look into the next year as you can imagine when you've got a quarter like we're going to have on the fourth where what we've got so many deliveries we will need to rebuild some inventory.
In the.
Early part of next year, so that you'll have a bit of an impact on our results. So you should anticipate that as you said, it's a bit early for us to give you guidance, but directionally, that's how I would that's odd.
Have you take a vitamin Joseph models.
Okay, but it sort of think about sort of structural levels of <unk> inventory there.
It shouldn't be a significant increase I guess I'm just kind of a full year basis. In 2024 is that maybe a modest increases that how long have you been thinking about it.
Well there'll there'll be you should expect to see some increase for sure. We're rebuilding inventory at as well is there appointed we pointed out we we believe we're right on track with support from the the supply chain at her own ambitions and the sales order activity, we have to grow towards targeted levels of.
You know out of 150 aircraft delivery, so that would apply some inventory build to to meet that higher delivery target both in 24 and 25.
Okay. That's helpful. I'll leave it alone question, thanks very much.
Okay. Thanks Kara.
Next question will be some get in person.
Please go ahead.
<unk> good morning.
Good morning.
Okay I just wanted to ask about the the backlog versus the unit book to Bill Yeah. I think historically, that's been because you had so much visibility into the global 7500. So I wanted to ask if you could share insight on household out to that platform is and you know when you might expect to see.
Orders refilling their since but the backlog continues to go with the <unk>.
Mmm.
Yeah.
You can go ahead and start Sir yes, Thanksgiving. So we're actually very pleased with.
Our mix of backlog, we've got 18 to 24 months a backlog across all platforms, including the 7500. So so we're in a good position when it comes to backlog this past quarter and if you look at it. We're we're out on a backlog basis on 100 dollar basis, we're really.
About flat from the beginning of the year. So today, which is what you'd expect in an environment of the book the bill of around one so that makes that makes good sense. We did have very strong delivery activity on the 7500 platform. The last few years.
And and last year and coming into this year, it's very strong sales activity as well and that's why the the backlog on the 7500 is that states fairly stable. Two four is shaping up based on pipeline at least today to be a another star quarter for the 7500 platform. So so we're comfortable where we are.
And feel really good about the physician on the backlog for that platform it and all of our platform.
Great and then you know without maybe asking you to upon on K U.
<unk> or treating their supply chain in any thoughts on why maybe you haven't been as as impacted as some of your peers.
Yeah, Yeah, that's an interesting question and then.
Glad you noticed we're gonna be delivering our guidance for a second year in a row.
You know I I agree with you I think.
Pretty much most of the <unk> guidance, so far but that you know what I think I said it earlier my team has done an amazing job.
And and it goes back to you know that I remember summer installed with those are 20, making from the very different decision than most of the people in the supply chain by having people and their supply chain instead of reducing the workforce.
You'll be having people that are out there in the field working with with our supplier to make sure you know they have the people to do the work and if they don't Denver were reacting this actually translated in the last two years into us taking back some work or moving work elsewhere refer to increase our population by seeking work.
And by more than just that about 500 in Montreal. Another 700 in Mexico. So so we took back some work in house to make sure that our supply chain was reliable we have people out there working with the major <unk>, even at the tier two levels extremely proact.
So as I always like to say the sooner you know about an issue the more chance you have to be successful in fixing it and that's and then in fact that your lines. So I think we'd be managing this wait for the last two years very early you're gonna.
And the wind up and then it started to it.
And I think today and last year, we've seen the benefit of that.
Okay. Thank you.
Thank you.
Next question will be from been my Forte.
Please go ahead.
Yes, good morning, everyone and congrats for the solid execution in the quarter. So.
First question any color on the ability to get financing for this gentle printers in light of this higher interest rate environment.
Mmm, Yeah, <unk>. So a couple of things you mentioned that this dead operators, but I would I would extend this to the actual purchasers of the aircraft as well.
Not in the fleet space, but we received no no impact whatsoever in terms of the fleet operators being able to raise capital whether that be through equity through cash flow generation or through access to the debt markets. So we can send you received very strong <unk>.
<unk> is Eric highlighted we signed we announced a deal at L. B double as just a few weeks ago. We've got a number of other deals in the pipeline. So we're seeing no no slow down there whatsoever. In fact, it's it's more of a growth story.
The fleet operators and we're very pleased to be partnering with them and help help and support them. We did a meat as we always do that'd be double eight a few weeks back with.
With the various financing company set to participate in the business aviation space all of them are seeing growth in their books, they're being very supportive of the industry no no signs of pulling back in fact to a to a group. They they all said that they would deploy.
More capital.
Into business aviation, because it's been high performing for them. So no no no negative impact in fact, if anything it's the opposite it's this business has attracted capital because.
So institutions to support it as soon as a as a broker anytime may have been 11 morning, <unk>. I think you you know just the billing won't start just sent the operator also I think are generating their own cash.
You see and you look at the flight hours between 19 and last year. They were up by about 45 per cent for these guys and again in the last 12 months when I look for month to month the fleet operator, I'm talking about the Bumbarger airplanes, you're flying with a seat operator went up by another 50% in the last 12.
<unk>, which is significant growth. So so these guy are growing at a fast pace. They are flying a lot of airplanes on all the reason we've explained before and I think generating cancel at the same time.
That's great color and just for the follow up question. If you could provide an update on the that's moved from Ah Downs, you too Pearson that would be great. Thanks.
Yeah now we're we're please things are are moving forward. We don't expect you know EM any destruction of a disruption of an operation you'll get the move as actually already started so we have.
<unk> not working at <unk>, we had a lineup plus the other day moving when moving the metal fixtures and equipment. So this is on this is happening as we as we as we speak and you know so everything is lining up for us to be your new fully operational you know some time in into one.
That's great. Thanks, Thanks for the time.
<unk>.
Next question will be from Noah.
Fax. Please go ahead.
Hey, good morning, everyone.
Yeah good morning.
Hey, guys. The stock is down 40 per cent traumatize.
It's a 45 dollar stock you have <unk>.
Guidance for 2025 free cash flow for sure that somewhere around $10.
So the stock doesn't believe something you were saying.
Or doesn't believe something you were saying is sustainable.
You know we have a lot of I have a lot of questions in my inbox about the exact orders in the quarter, where they go from here.
I guess.
No.
The orders are down, but they're but they're down from a torrid pace.
But you have plans to increase supply and.
And if you're increasing supply while orders are declining.
You know you can't do that forever.
So.
Are we in a you know tricky macro such that.
You can you have a big backlog. So you can burn a little backlog and then you know two or three years down the line demand accelerates and links up with where you've taken supply.
Or is there or is there another way to think about that I mean, I know, it's a little bit of a strange question I have a lot of questions on mine items and the model.
This seems like the biggest question given with a stock is doing in the face of you beating numbers every quarter. So.
How would you take that on what would you say to the market in response to that.
Yeah, that's a great question and and you know I'm sure you realize I won't comment on the spot Goulding and everything when I can tell you is there any we've said so far we've been delivering on I think they know we're still read the reading our guidance. We're talking about 2025, I understand where some people may it may come from by I have to tell you we are extremely.
Discipline here and I'm, not just trying to be unfortunate disabled with the growth was there we build backlog we are preserving the backlog we have and that's our modus operandi right now we like the 18 to 24 months window, we have and we will.
Called a knee move.
Move right I just read it if needed you know to preserve that backlog or are you know depending on the the order, but the level of activity and I think the one thing that we said also that needs to be understood. When we restructure this company. We take took a lot of time at the time to make sure that our continuously resilience.
And and can you the demand is there and did the men isn't bored and I understand that but we would be disciplined and keeping the the flu the global demand remains hot even in in an environment, where the economy is is it could be struggling we noted the global is being usually.
Still facing well the same thing with our service business. So when I talk about the global and the services that you don't talk to you about 75% of our revenue roughly so so it's it's an interesting model with Bill that's why we grow we grew also our service business quite a bit but we feel you know we.
Have a line of sight again next year, even twenty-five we have quite a few airplanes sold already in 25 and we're in a good place. So we see that and then you'll do what we have to do we are being very careful with managing our cost, but preserving the 18 to 24.
Four months is T. In this business and that's what we do that's what's going to dictate you know and it will give us the discipline to make sure. We don't you know bill inventory and get white tail and things like that so that's not going to happen.
Okay.
<unk>.
Can you put numbers on on this working capital question like.
Like how much specifically I'm absolutely millions of dollars are you assuming you recover in in four Q or what's in the 250, what's in the 925 G.
Just because to your point it has a simple bridge from the EBITDA to the free cash flow.
And I can get to your numbers with that simple bridge, but before G. Number is as big the ramp to 25 is big we sort of are guessing.
We don't know how linear 24 so.
I don't know if you'd be willing to just give us a range or some hard numbers around the working capital that's in each of those periods of time.
Yeah, Good morning, Miller and thanks for the question that.
We've been we've tried to be as clear as we can around how you know.
Timing at least in case of worth the Capitol building and how that'll get released in the fourth quarter, but we don't it's getting down to specifics. This is not something that we just talked about in the past. So what I will say is we did have some free capsule usage, obviously in the first nine months of the year.
For six months and <unk>.
<unk> coming into the business email in the third quarter. We are set up for a very big quarter. When you talk about the number of deliveries.
Going to be happening you can just imagine that took care of that to delivery. So over the first couple of quarters in there.
Delta between those are you're talking.
20 aircraft more 20, plus aircraft more so that they didn't know itself and your ticket number of aircraft should help you understand how much inventory bill we had versus how much will release you got a lot of deliveries coming the after market continues to just stay on all cylinders and it is growing.
It's a very strong PDP quarter for us to lots of cash coming in.
And as well as various highlighted highlighted we've got a great a really strong pipeline on a new.
Water sides. So that's really all I can say at this point in time around that but if you think of it in those 20 aircraft says that's about the dumbest.
Indicated I can provide you.
Okay. It's.
It's next year's free cash flow shaped by quarter similar to this year or is a little flatter.
There, there's less growth and the total year, maybe supply chains, a little better.
Or or is it or is it.
We've got a we've got a couple of things that will that'll be helpful. Next year Rpgs as you know is something with we're basically gonna be Douglas this year, but one really tiny payment of 2025, but that was about 125 million dollar headwind.
So you can you can add that in.
Think of it in terms of perhaps a little bit more although I can guide you right now but directly at least a few higher deliveries and we'll get back to you on with some phone numbers on guidance early.
<unk>.
Okay. Thanks, guys I appreciate it.
Okay.
No.
Next question will be from content.
Bank. Please go ahead.
Except for the money I would Wanna ethics must breathing man I put my <unk> on a good quarter.
Maybe my first question that's on Q3 book the Bill So one to one on a unit basis on dollar basis with like a pen below one obviously pricing on the chance that growing up across the board, but should we attribute this delta between unit then dollar book the Bill.
To witness Q jump near Jackson Dakota.
You don't have to.
Excellent question and yeah actually in terms of number of airplanes, we've got a positive spoke to bill.
But you know overall I would be careful that's a product mix thing you know what may happen to read that over you know a few we pick up a order deliver a few more global pick up a few more but it's usually equalized during the year. If you look at a book to Bill books available backlog since the end of last year, it's pretty much flat.
So, but I think overall, we're pleased where we wanted to be as I I'd like to I'd like I said earlier, we are preserving our backlog, which is what's important right now and despite increasingly delivery. So I think if you look across the board. We have you know what's good.
<unk> and and and actually you know, we see we see that backlog being protected that's pretty much there plus or minus you know what a couple of of maybe even a $100 million. So so it's it's been stable. The backlog has been stable since the beginning of the year and that's what we're building that some.
<unk> right now to you know to try to preserve the backlog is is how we're seeing definitely forward.
That's great, but I think so and then follow up up about maybe basically the guidance of this year. It looks like you and have a lot of excess liquidity by the end of this year, presumably you need oxy stomach would be writing Postop next to your appointment already built up but you should still have a lot of excess liquidity next year do you anticipate who'd be.
<unk> some more death in 2024.
Yeah, Great Great question connect so if you look at our our goal a longer term goal of signs of 2025 that we've highlighted in our our objected to get to somewhere between two and two times.
Get to EBITDA that implies that about.
A billion dollars of of debt reduction from now until the end of that year. So you know.
Where and when it will come over the next.
24, 26 months I can't really say today, but but Q4 does tend to be a very strong cash flow quarter for us. It set this up with strong liquidity at the beginning of the year and and our our strategy.
Days, and it's something that will expect to to continue to use in the in the next couple of years as we.
Totally repair the balance sheet is to deploy cast into debt reduction when we F excess cash beyond their desired.
Liquidity ranch, which in that way I just wanted to ask bill. So so the none of those things are are going to change that's how we expect to.
See those are the things we expect to use his archives to win will deploy that cash and as I say based on our forecasts that that should allow us the opportunity reduce about another billion over the next couple of years or so.
That's great to hear I appreciate the time, that's all right. Thanks, Okay next corner operator will have time for one last question. Please certainly questions will come from miles Walton at Wolf Research. Please go ahead.
Thanks, Good morning.
It part you're you're starting down the paths of the castle walk for 24, so I figured I'd.
Try and get you down for that path I think he mentioned the R. P G tailwind into next year.
I think capex is a similar size, maybe 75 to 100 million tailwind into next year and then interest is probably another 50 million tailwind into next year, and that's before considering broken and deliveries and earnings.
Maybe you can give us the the headwinds because it just looks like you know three four talent.
The the the the tail Wednesday, you've just been good morning miles by the way. Thanks for the question. The tails Wednesday, you described those we do see as being helpful. In the coming year really in the next couple of coming years the.
I I I I wouldn't necessarily agree with all of your numbers, but but certainly those will be beneficial in terms of headwind you know I see it more as an opportunity is Eric highlighted you know we've been able to maintain our book to Bill.
And and as well maintained our backlog. We've we've guided that you know we think we're gonna get to somewhere around 150 deliveries by 25 at least directionally that applies.
Potentially more deliveries next year, obviously inventory to to deliver those aircraft et cetera is a place for that I do some cash so.
Your balance those things out could we see a continuation of a positive free cash flow next year that is certainly what we see but will come out with with more fair guidance here in the next few months.
Okay cause most of the Pearson that's been done this year or does it continue at the 24.
Yeah, most of US most of that is unknown miles in fact, we have some video and pictures of the facility if any of US had been there recently, it's it's coming along very nicely and is Eric said, we expect to be.
Fully yeah into the facilities in the first quarter. So we're we're mostly through through that Capex that.
Alright, thanks, so much.
Perfect <unk>.
Thank you. Please proceed with closing remarks.
Okay. Thank you. Thanks to you all for joining us today N M. As we said already the fourth quarter is already well under way.
As we discuss earlier and we are progressing to meet all our 2023 objective our team across the world are already hard at work to make sure that we successfully close 2023 and can look back with pride on a great year for a bump artsy Friday remains our people and I would like I would therefore like to take this support.
You too thank our team members and I liked the exceptional work that'd be do every day I look forward to reconnecting with you all in the new year to discuss what 2045 at 24 will bring <unk>.
In the meantime, I wish you all a safe and enjoyable rest of the year. Thank you.
Thank you Sir.
Ladies and gentlemen, and just doesn't do you conclude your conference call for today. Once again. Thank you for attending at this time, we ask that you. Please disconnect your lines.