Q3 2024 Bombardier Inc Earnings Call
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Speaker Change: Good morning, ladies and gentlemen, and welcome to the Bombardier 3rd Quarter 2024 Earnings Conference Call. Please be advised that this call is being recorded. At this time, I would like to turn the conference over to Mr. Francis Richer de La Fleche.
Vice President, FP&A and Investor Relations for Bombardier. Please go ahead, sir.
Speaker Change: Good morning, everyone, and welcome to Mobile GA's earnings call for the third quarter, and it's September 30th, 2024.
Speaker Change: 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.
Speaker Change: There are risks that actual events or results may differ materially from these statements. For additional information on forward-looking statements and underlying assumptions, please refer to the MD&A. I am making this cautionary statement on behalf of each speaker on this call.
Speaker Change: With me today is our President and Chief Executive Officer Eric Martel and our Executive Vice President and Chief Financial Officer Bart Demosky to review our operations and financial results for the third quarter of 2024. I would now like to turn over the discussion to Eric.
Eric Martel: Alors, merci beaucoup Francis et bonjour et bienvenue à tous et à toutes.
Eric Martel: So, good morning everyone and thank you for joining us today. I am delighted to speak to you about another very positive quarter for Bombardier.
Speaker Change: Our services strategy yielded record results. Our aircraft sales team is very active in helping sustain our cruising altitude of 1 on the book to build.
Speaker Change: And finally, our defense team continues to put points on the board. The Pegasus program is a great example. A few weeks ago, we just celebrated the first flight of Pegasus aircraft along with our partners at Ensold and Lufthansa Technik.
Speaker Change: This marks the beginning of the flight testing phases for this new generation German program.
Speaker Change: Turning to the results, Bart and I will go through the detail of our performance shortly, but let me start by taking a minute to provide some color on how we are shaping up to close the year.
Speaker Change: All the ingredients are in place to deliver our fourth quarter and our 2024 guidance.
Speaker Change: Clearly, the fourth quarter has always trended as the busiest in the industry. This year is no different, with the exception being that we are still working through the same supply chain headache as the rest of the industry.
Speaker Change: Our team has worked hard to ensure inventories are in place and the completion sites are equipped to do what they do best.
Speaker Change: When it comes to service volumes, it's simply steady as it goes.
Speaker Change: and it's been steadily going up year after year. It's a great business for us. We continue to grow or capture rate by making things easy for customer and ramping up new facilities.
Speaker Change: We are well on our way to meet our long-term growth targets with room to spare. In terms of keeping our book-to-bill on pace, the market is well balanced and is providing to be resilient.
Speaker Change: Of course, that doesn't mean it's excellent everywhere all at once, but that being said, we continue to be successful because we focus on what we control.
Speaker Change: We have ramped up our international presence to build a deep relationship with customers. The same is true on the defense side.
Speaker Change: Not chasing the market is important to drive operational predictability. We have booths on the ground everywhere in the world. And ultimately, our family-like approach has set us apart and elevated our brand.
Geographical markets are just as important as customer segments.
We are diversified and perform on both fronts.
Speaker Change: I am happy to underline that today's reported backlog stands at exactly the same point as last year, thanks to the diversity in terms of both geography and customer types.
Speaker Change: Having exceptional product always goes a long way. The Global 8000 is a great example of our team's ability.
Speaker Change: to not just push boundaries, but also define them for the industry.
Speaker Change: The Global 8000 will be the fastest civilian aircraft since the Concorde. I am proud to say that our team has their brand on the first units, their hands on the first units, sorry.
Speaker Change: In case you missed it, at NBAA base this year, we announced that programs reduction has begun with our site in Texas, Quebec, and Mexico, working on the first major structures.
Speaker Change: We also celebrated reaching more than 60 speed records on the Global 7500. This plane's first years of service have been remarkable. The plane has literally flown circles around the competition and the globe, making the most of a five-year head start.
Speaker Change: This year, the Global 7500 fleet will grow to more than 200 aircraft.
Speaker Change: I have the privilege to personally meet customers around the world as they select the Global 7500 or prepare for delivery.
Speaker Change: I could easily fill this entire call up with the great stories they have shared in terms of what the plane's performance envelope has unlocked for their productivity.
Speaker Change: But we are here, of course, to review the third quarter.
Speaker Change: The standout TPI is also closely tied up to our customer. We reach $528 million of service revenue on a total of more than $2 billion for the quarter.
Speaker Change: Those results speak for themselves in terms of how we have elevated both the client experience and our ability to execute the plan.
Speaker Change: These efforts were also recognized in an industry survey where Bombardier service offering placed first versus industry peers. Overall, we are successfully ramping up large service expansion.
Speaker Change: We are capturing more heavy maintenance, as well as capturing power by our customers who opt into our smart parts services.
Speaker Change: Bombardier innovated that model decades ago and today it has expanded to include offering for scheduled and unscheduled maintenance and digital services like smart link plus
Speaker Change: for which we see a high uprate at time of delivery.
Speaker Change: Speaking of deliveries, we landed on a solid mix with 30 units.
Speaker Change: even after pulling some into the second quarter as we discussed last July. Considering this and the typical Q3 seasonality related to vacation period, this is a very solid performance by our team.
Speaker Change: Bart will go into further detail in just a moment, but I do want to underline that our team has performed extremely well managing the business and maximizing the bottom line.
Speaker Change: We have given ourselves room to maneuver in a flexible and agile way. These are without a doubt two important attributes to keep in a dynamic environment.
Speaker Change: It allows the entire team to remain laser focused on our priority of deleveraging. A recent example of this is increasing our credit revolving facility by 150 million subsequent to quarter end.
Speaker Change: Overall, we have set ourselves up to succeed in 2024 and make it another milestone year for Bombardier.
Speaker Change: I continue to be very encouraged by our strong fundamentals, by our year-over-year growth, and by overall momentum in all parts of the business.
Speaker Change: All of this has led us to be recognized as part of the TSX-
Speaker Change: 30 lists for the second year in a row. This recognition from the Toronto Stock Exchange for the top performing companies on the TSX is a big accomplishment for the team as it takes our performance for the past three years into consideration.
Speaker Change: To cover more on that and our detailed financial, I'd like to end the call over to Bart.
Bart Demosky: Thank you, Eric, and good morning, everyone. As you just heard, the last few months were certainly filled with many important achievements for Bombardier.
Speaker Change: The TSX-30 recognition underlines our strong performance and success over the last three years, and we continue to take steps to remain successful for years to come.
Speaker Change: I'm particularly proud of our services team's performance, including their recent number one industry ranking that Eric just mentioned.
Speaker Change: as well as the strong financial results they have delivered with a 28% year-over-year growth in service revenues to a new quarterly record of $528 million in sales.
Speaker Change: We've talked about the significant growth profile for this business, and I'm confident that this impressive growth will continue well beyond the end of this decade.
Speaker Change: On the aircraft side, our manufacturing and supply chain teams continue their tireless efforts to keep our deliveries in line with our plan, and order activity remains balanced with deliveries, allowing us to stay on track with our target book to build of one-times.
Speaker Change: Financially, we've delivered a solid quarter. Revenues and profitability are up year over year and we are on track to deliver our full year guidance.
Speaker Change: We've also continued to strengthen our balance sheet and ended the quarter with $1.2 billion in liquidity, which excludes the $150 million increase in our secured revolver that we announced today.
Speaker Change: Deleveraging remains our top priority for excess cash and we will continue to be opportunistic in the debt capital markets over the months to come.
Speaker Change: All put together, our team is performing exceptionally well. We are taking the steps necessary to secure a strong future for our company and we are demonstrating resilience, especially in the face of heightened geopolitical tensions and continued challenges in the supply chain.
Speaker Change: So let's turn to our financial performance for the third quarter in a bit more detail.
Speaker Change: We reached consolidated revenues of $2.1 billion, representing 12% year-over-year growth.
Speaker Change: This increase comes from an impressive $114 million, or 28% increase in aftermarket revenues.
Speaker Change: as well as a $92 million increase in manufacturing and other revenues linked to aircraft mix and higher pricing.
Speaker Change: Moving to profitability, our adjusted EBITDA for the third quarter totaled $307 million, representing an 8% for $22 million increase versus Q3 of last year.
Our adjusted EBITDA margin was 14.8%.
Speaker Change: which is down slightly from the 15.4% we had for the same quarter of 2023. However, year over year we saw solid margin conversion from our incremental aftermarket revenues and improved aircraft mix.
Speaker Change: Pricing gains for the quarter were offset by cost inflation as well as disruption costs related to our supply chain.
Speaker Change: Margins were also diluted by some non-recurring costs including additional expenses linked to share-based compensation programs following the strong run-up in our stock price during the quarter.
Speaker Change: Looking at pre-cash flow, we add 127 million of cash usage in the quarter. This usage includes investments of $149 million in inventories and $46 million in capex.
Speaker Change: Our cash interest expense is $60 million and advances reduced by $33 million simply as the result of normal order and delivery mix fluctuations.
Speaker Change: Finally, we had some annual planned pension contributions in the quarter, as well as one-time outflow in July related to the settlement of the New York bondholder lawsuit.
Speaker Change: Looking ahead to the end of the year, we remain on track with our full year guidance across all metrics.
Speaker Change: We are expecting a very active fourth quarter for deliveries, and as Eric mentioned, we are well-positioned to meet our delivery targets.
Speaker Change: We are also expecting continued strong aftermarket performance, which, combined with higher year-over-year delivery activity, will be the key drivers to reach our full-year guidance for revenues and EBITDA.
Speaker Change: Turning to free cash flow, the cash profile so far this year has been right in line with our expectations.
Speaker Change: Much like Q4 2023, where we delivered almost $650 million of positive free cash flow on 56 deliveries and $482 million in aftermarket revenues.
Speaker Change: We expect even stronger cash flow generation this year, as we deliver more aircraft, as well as incremental aftermarket growth.
Speaker Change: We expect the cash flow generation to be driven by a significant reversal in inventory combined with strong EBITDA contribution and continued stable order activity.
Speaker Change: So, to conclude, we are well positioned to close out 2024 in a strong fashion, and we are looking forward to continued success in 2025 and beyond.
Speaker Change: With that, let me turn the mic back over to Francis to begin the Q&A.
Francis: Thanks Bart. 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.
Francis: For the question period, please limit yourself to one question and one follow-up. With that, we will open it up for questions. Operator?
Speaker Change: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by 1 on your touch-tone phone. You will then hear a three-tone prompt acknowledging your request. And if you would like to withdraw from the question queue, simply press star followed by 2.
Speaker Change: If you're using a speakerphone, we do ask that you please lift your handset before pressing any keys. Please press star 1 now if you do have any questions.
Speaker Change: First, we will hear from Karnat Gupta at Scotiabank. Please go ahead.
Speaker Change: Hi, this is Elie filling in for Conarch. Good morning, everyone. Yeah, good morning. Good morning. My first question is on aftermarket. Where do you see any potential need for capacity expansion in your aftermarket services business? And would you be more inclined to tuck in or organically add that capacity?
Speaker Change: Yeah, I think this is a great question. You know, the team right now, you know, we're in the midst of developing our strat plan.
Speaker Change: and we are having discussion right now about what's our next move into the aftermarket to even grow it further and support the plan we have.
Speaker Change: Clearly, geographically, there is, you know, the U.S. remains an area where we will have to do something, which we are thinking about right now. And I would say also, I think, Middle East.
Speaker Change: is another area where we are working on right now. We have already had a capacity quite significantly about two years ago in Singapore, but still, you know, this is growing so fast around the globe that every single region right now we have things in consideration.
Speaker Change: So, clearly, you know, our strategy of Bring Your Jet Home is delivering the expected results that you've seen. You know, we've more than doubled the business actually over the last four years, five years since we started that journey.
Speaker Change: and, you know, we are contemplating to even grow it further between now and 2030. So the team is active right now, we'll make some announcement in due time, but clearly you may think about, you know, pretty much overall everywhere we're going to have to grow our capacity to be able to cope with the work right now.
Speaker Change: Thank you that's helpful.
Speaker Change: Just wondering on how.
Speaker Change: Thank you, that's helpful. And maybe just one more on Outlook. Based on the current backlog and your discussion with customers, how do you think about the production rates for Globals and Challengers heading into 2025?
Speaker Change: Maybe just one more on outlook based on current backlog and your discussion with customers. How do you think about the production rates for global challengers heading into 2025.
Speaker Change: Yeah. So I think you know as we said during Investor day, we see quite a bit of stability in terms of production rate for the future years and as I stand today. This is exactly this we still have that conclusion. So we do foresee as I said, we have exactly the same dollar of backlog or.
Yeah
Speaker Change: So I think, you know, as we said during Investor Day, we see quite a bit of stability in terms of production rate for the future years.
Speaker Change: Plus or minus and that's what we have a year, where we had a year ago. So the team has been successful. Despite the increased number of delivery to keep that backlog overall backlog. So the demand remain pretty solid.
Speaker Change: that we had a year ago, so the team has been successful despite the increased number of delivery to keep that backlog, overall backlog, so the demand remains pretty solid.
Speaker Change: And sufficient for us to be able to preserve that backlog. So you know our target we never look at it quarter by quarter, but if you look at the overall year and I think the number I just quoted.
Speaker Change: and sufficient for us to be able to preserve that backlog. So you know our target, we never look at it quarter by quarter, but if you look at the overall year, and I think the number I just quoted...
Speaker Change: Support that is is to have a book to bill of one. So today. We said you know we think about $1 50, plus in the next few years and that's still what we're seeing.
Speaker Change: you know support that, is to have a book to bill of one. So today we said you know we think about 150 plus in the next few years and that's still what we're seeing.
Speaker Change: Thanks for the color appreciate the time Thats. All my question. Thank you. So much thanks for your question.
Speaker Change: Thanks for the color. I appreciate the time. That's all my questions. Thank you so much. Thanks for your question.
Speaker Change: Next question will be from Seth Schiffman at J P. Morgan. Please go ahead Sir.
Speaker Change: Next question will be from Seth Safeman at J.P. Morgan. Please go ahead, Seth.
Seth Safeman: Hey, thanks, very much and good morning.
Thanks very much and good morning.
Speaker Change: Good morning.
Speaker Change: Just wanted to ask you mentioned kind of the supply chain challenges that are out there in the operating environment. If we look at if we look at gross margin I think it was down.
Good morning.
Speaker Change: Just wanted to ask, you know, you mentioned kind of the supply chain challenges that are out there and, you know, the operating environment, you know, if we look at if we look at gross margin, I think it was down a little bit year on year. Services was up as a portion of the mix.
Speaker Change: A little bit year on year.
Speaker Change: Services was up as a portion of the mix and the mix was also a little bit more.
Speaker Change: and the mix was also a little bit more global-oriented for the first year ago quarter. And so when we think about, you know, what's kind of putting pressure on the gross margin.
Speaker Change: Global oriented for the year ago quarter.
Speaker Change: And so when we think about.
Speaker Change: Whats kind of putting pressure on the gross margin.
Speaker Change: Should we think about that that kind of representing.
Speaker Change: You know, should we think about that kind of representing the inefficiencies that are out there in the supply chain?
Speaker Change: The inefficiencies that are out there in the supply chain.
Speaker Change: Absolutely. This is the main.
Absolutely. This is the main thing that I think explains...
Speaker Change: And I think explain.
Speaker Change: A very small margin dilution, maybe but if he is so there are they can be considered like as a as a one time or kind of a thing so.
Speaker Change: a very small margin dilution, maybe. But if, so there are, they can be considered like as a one-timer kind of a thing. So, you know, and we're not talking about big dollar here probably.
Speaker Change: And we're not talking about big dollars here, probably a 10 million more of EBITDA would have made the same percentage but.
Speaker Change: 10 million more of EBITDA would have made the same percentage.
But, you know, clearly the supply chain disruption remains.
Speaker Change: This is one thing that I'm telling you we're working extremely hard. The good news...
is that I think we have less supplier impacting us.
Speaker Change: But some of the suppliers have not improved, and as you know, we need all the bits and pieces to be able to deliver the airplane. And especially, I said that before, engine remains the main area for us, and I think it's not a bombardier issue, it's an industry issue. I think we've been...
Speaker Change: fairly well in that circumstances. We've met our guidance in the last two years in the deliveries. We're I think one of the only OEM, if not the only, that have been successful doing that and we are still going to do it this year again.
Speaker Change: Yeah, and Seth, if I could, it's Bart, if I could just add one thing to Eric's comments.
Bart Demosky: We did have a couple of one-timers in the quarter, one specifically related to long-term incentive comp. It's one of those things that happens when you have great success and your share price runs up very materially.
Bart Demosky: And, you know, we had to take a booking for that, and that amount actually was in excess of the...
Speaker Change: the $10 million that Eric mentioned, which is the difference between $14.8 million and $15.4 million. So actually when you look at it on an all-in basis, we had an improvement year-over-year when we take that one-timer out.
Speaker Change: Okay, excellent, excellent, good to know, and I'll stick to one this morning. Thank you very much.
Thank you, sir. Thank you, Seth.
Speaker Change: Next question will be from James McGarrigle at RBC. Please go ahead James.
Hi, this is Louis Long for James. Good morning.
Yeah, good morning, Louis.
Louis Long: I just wanted to follow up on the announcement from Wheels Up. Do you see that as a tailwind for services revenue long-term and do you see further opportunities from fleet operators either moving to your product or servicing directly with you?
Yep
Speaker Change: You know, absolutely. I think you've seen, I think we've been bullish on our CPU business and the potential growth.
Speaker Change: As you know, we have a lot of airplanes in the field out there.
Louis Long: think about a program like the 300 that became the 350 and the 3500.
Louis Long: So there is, you know, close to a thousand airplanes in service.
Some of them are starting to age.
Louis Long: They make a lot of sense for a lot of customers, you know, and the example you just provided is one of them.
and, you know, do all the maintenance that is needed.
So that's clearly a potential for us.
for us to do this.
Louis Long: Because I think, you know, with our certified pre-owned program, we bring probably more value than the average, you know, other people that can do it in recertifying, you know, providing warranty and so on and so forth.
Speaker Change: Great, and then for my next question, just thinking long term, looking at 2025 free cash flow targets, if we think about
Louis Long: the opportunity longer term, you know, some some growth in defense, steady margin improvement, and global and services, you know, interest cost savings, paying down debt, no tax.
Speaker Change: Founds Networking Capital. This translates to a double-digit free cash flow CAGR out to 2023. So just going to get your take. Are we thinking about that correctly?
Speaker Change: Yes, Bart here. I think you laid out our whole strategy actually quite well there and would agree. We are looking at a very strong free cash flow generation from the core business.
Speaker Change: which is key. You know, as we continue to grow EBITDA,
Speaker Change: conversion rates to two-week cash flow. We have several hundred million of
Speaker Change: EBITDA growth in the plan for next year, and we've been very candid and clear about that and with that strong conversion.
Speaker Change: We're looking at a period that we're going to come into where free cash flow is going to be a big part of our story and value proposition.
Speaker Change: So I think, yes, you've got that right, that's certainly how we're looking at it. And the key for us, and Eric just mentioned earlier, we're right in our strategic planning cycle right now.
Speaker Change: is how do we deploy that cash the most effectively to drive value for all of our investors and stakeholders. So, that's the big item on the menu for us and we're thinking through that right now. Clearly through our scrap planning exercise this year, I would say capital allocation was one of the main subjects.
Speaker Change: You know, how do we do it in the next five to six years, you know, to have the best return for our shareholders.
That's great. Thank you. I'll turn the line over.
Speaker Change: Thank you. Thank you. Next question will be from Benoît Poirier at Desjardins. Please go ahead, Benoît.
Yes, good morning, everyone.
Benoit Poirier: First question, when we look at the increase in inventory and working cap, I was wondering if you could provide further details about what drove the increase in inventory, whether it was to support the supply chain issues or
Bart Demosky: Hey, good morning. Ben Watts, BART here. So, yeah, on inventory, the third quarter in a row, very consistent with last year, actually, that we had inventory growth.
Bart Demosky: Obviously, we plan for about 40% of our deliveries to come in the fourth quarter.
same as last year.
Speaker Change: So that's a very significant number of deliveries and we do need to build inventory to meet that demand.
Speaker Change: plus starting to put the pieces of the puzzle in place for growth next year.
Speaker Change: The manufacturing facilities and finishing centers in the fourth quarter, we need to be prepared to start to go back to work because there's literally no aircraft when you walk back into the sites on January 1st. So that's a part of it.
Speaker Change: and that it will continue to be that way, about $800 million in build.
Speaker Change: so far this year. When we look at free cash flow for the year, Benoit, really all the guidance I can give you right now is what we've said so far that we expect to meet.
Speaker Change: our guidance for the year. You know that if you look at last year relative to the first three quarters, how the fourth quarter performed, we're expecting another strong.
Speaker Change: Free Cash Flow performance in the fourth quarter. We have many deliveries to do and, as Eric mentioned, sales activity remains very balanced and positive. So that's really all I can give you for guidance right now.
Benoit Poirier: Where are you right now in your discussion and the options that you're looking at versus what you, the comments you made earlier at the investor day. I was wondering if there was some progress in terms of capital allocation discussion.
Benoit Poirier: issue, but I think we've been, I explained that before, I don't know if you had a chance to.
Speaker Change: look into that, but I have what we call out there an army of navigator, and their job is to foresee the problem coming early, as early as possible. So my guys cut issue, you know, 12 months, 18 months before they hit us, so we're in a better position to sort them out.
Speaker Change: But clearly, I think the engine is clearly, and when I say engine, I put APU also in that category. So engine and APU. Casting has been a real problem.
Speaker Change: It's, you know, they make a batch, you know, they have defects, and then we need to wait for the next.
Speaker Change: Next batch to come up. So so that's how we've been we've been mainly impacted on our side But my guys have been very creative we've still been able to move things around and and meet our guidance in terms of delivery and we We're hopeful to do the same thing this year
Speaker Change: And I mean if you could just speculate, I know this is a tough question and if you can't I understand, if the supply changes could meet what you wanted to do how much better could your deliveries have been? Does that make sense?
What?
Speaker Change: You know, I think we could be, you know, we've been in an accelerated mode, of course, you know, we grew a rate.
Speaker Change: I think we could be probably doing slightly more, you know, eventually this will normalize. But I think, you know, we would like to deliver a few more if we would like the engine, you know, and early in quarter. So, so that stability.
Speaker Change: you know, and avoid the Q4 having 40% of the delivery. Having a more stable supply chain will be helpful to avoid that.
Speaker Change: So, I think it's not exactly the number of more airplanes. Eventually, you'll catch up and you'll get more airplanes in the short term. It's going to be more of a one-timer. But as you stabilize and get your parts on time, you would see a much better flow, a much better flow from a quarter to another than what we are experiencing today.
Gaia Chronom Destati
Yeah, you know well that when we have more...
Speaker Change: regularity in terms of deliveries per quarter, it takes fluctuations of working capital, it allows us to
Speaker Change: to perform the work on the aircraft in order, which is a fairly material cost, Edwin, that we've been able to overcome over the past couple of years and expect to in the future. But that's opportunity for us once things do get normalized.
Speaker Change: Yeah, and maybe just one last one switching to the defense business. You know that the US DoD is focusing a little bit more on unmanned platforms. Have you guys thought about that? I mean is there an opportunity for you there? I know that's a little different than what you're doing, but...
Absolutely, Ron. This is something we're thinking about. Yeah.
Speaker Change: That's the short answer, because there's quite a bit of thinking about that. You're absolutely right, and you know, we have the talent and the capability of doing
Speaker Change: sole project. Think about our EcoJet as an example or other platform which we could probably bring those technologies on.
Got it. Got it. All right. Thank you.
Thank you so much, sir. Thank you. Thanks, Ron.
Speaker Change: Next question will be from Cameron Dirksen at National Bank. Please go ahead, Cameron.
Cameron Dirksen: Thanks. Good morning. I wonder if you could just go into a little more detail on what you're seeing on the order front, maybe some color around what geographies are strong. Has there been any, I guess, change in the last quarter from what you commented on a quarter ago?
yet.
Speaker Change: Thanks again for the questions, it's Eric here. You know we've seen in Q3
Speaker Change: I would say a very normal in the rest of the world. The United States were interesting in a sense that we had one part of the United States that did perform extremely well. The other part of the United States, thinking about west coast, east coast, was a bit softer.
Speaker Change: So, we, but you know, this is, this is a story right now, everything is back to normal. We're working on all cylinders right now across the board. So the U.S. remains pretty positive. And I think...
Speaker Change: You know, yesterday, the whole election, you know, was creating a bit of uncertainty. I think, you know, having clarity on the results yesterday is probably a positive for us.
to complete the quarter.
Speaker Change: and to engage into next year. The Middle East remains very strong.
Speaker Change: I would say the only place that I think has been slower this year was Europe, but I'm very encouraged right now because this quarter we feel that Europe is in a better place than it's been all year. Middle East and APAC is still doing very well.
Speaker Change: Okay, that's very helpful. Just maybe one really quick one for Bart, just looking at the CapEx year to date. It's sort of trending, I guess, lower than what we've been expecting. Can you just maybe comment on what your expectation is for the full year?
Bart Demosky: Yeah, thanks Cam. So full year, we're projecting to be a little bit below CapEx spend of last year, which was, if I remember right, just around $270 million.
Speaker Change: We do have quite a bit going on in the fourth quarter, but we'll be, you know,
Speaker Change: We'll end up towards the lower end of our target range. You know, we guide to somewhere $250-300 million. So you should expect us to be at the low end of that, or maybe even a bit below, to finalize the year.
Okay. That's very helpful. Thanks very much. Okay. Okay. Thanks.
Speaker Change: Next question will be from Gavin Parsons at UBS. Please go ahead, Gavin.
Thanks, good morning.
Good morning.
Speaker Change: I wanted to ask about the, you know, manufacturing revenue growth in the quarter, one fewer delivery. You mentioned higher price. Just wanted to get a sense of how price is trending versus, you know, I know you had favorable mix year over year.
Speaker Change: Yeah, good morning Gavin, Spark here. So, on the pricing side, you know, we've seen
Speaker Change: Very good pricing environment for several years now. You have to remember when we have a close to two-year backlog in place, the pricing that you're seeing us, the gains that you're seeing us enjoy now are things that were locked in 18, 24 months ago.
So, however, that pattern has continued.
Speaker Change: We've been able to work on price increases year over year. We're expecting that pattern to continue in the coming quarters. So overall, very constructive. I think, as Eric described, you know, we're seeing...
Speaker Change: just a very stable environment when it comes to demand versus availability of aircraft. And when you have backlog in place, obviously that puts us in a good position to be having the right conversations around pricing on aircraft.
Speaker Change: and that's contributing to revenue growth for us as well, you know, we're up.
12% year-over-year on the quarter from $1.9 to $2.1 billion.
Speaker Change: And that's translating as well those pricing gains into a strong EBITDA conversion into free cash flow. So, it's all very good on that front.
Okay, that's helpful. I've been thinking about that conversion.
Well, certainly, as we're sitting today, there are
Speaker Change: They're about even, when we think about the impacts of inflation, the supply chain, relative to the pricing gains. So yes, once we're able to normalize the supply chain, that is a headwind that, when coming out, should be margin accretive for us.
Got it. Thank you.
okay okay yeah thank you sir thank you
Speaker Change: Next question will be from David Strauss at Barclays. Please go ahead, David.
Thanks.
The honest answer is yes, you know, I think
You know, the 7500 is proven.
We have...
about 200 airplanes that are flying out there.
Speaker Change: And, you know, of course, our availability is, you know, we have availability, so that is great.
yeah
Speaker Change: Great, and then I wanted to ask about fractional, if you could maybe frame how much of the order activity this year and how much of the total backlog is from fractional customers.
Yeah
Speaker Change: The backlog is usually around 20% on the long run, you know, plus or minus.
Speaker Change: So, we got a few, you know, we got a few options being exercised this year. So, the pace continues with the fleet operator very positively. If you look at flight hours for Q3,
Speaker Change: and you compare to 2019, they are 51% up for the Bombardier plane. So, we have hundreds of order-on options.
Speaker Change: These guys, they're all growing right now, you know, clearly, I think we've explained that before, you know, there was a new normal after COVID, post-COVID that was established. A lot of people were concerned that that new normal was not going to stay, but I'm telling you, after two years post-COVID, it's sticking.
Speaker Change: And so we see the hours even continue to grow for the fleet operator, but even also overall. So the fleet operator, and I know that we are extremely well positioned, Bombardier with the fleet operator, which is a great place to be right now, because these guys are seeing...
Quite a lot of growth
Great, thank you.
Thank you. Operator, we have time for one last question.
Speaker Change: Thank you. Our last question is from Jay Singh at Citi. Please go ahead, Jay.
Speaker Change: Hey, thanks for taking my question. It's Jay dialing on for Stephen Trent. Considering the success of the Global Business Jet's traction with the U.S. military, could EIC replicate such success in other countries?
Speaker Change: Yeah, I think, you know, it was breaking a little bit, but I understand that...
Speaker Change: You know, based on the global jet success in the defense world, if we're going to have the potential to work with other countries, that's what I understood. So, if that's the question, yes, absolutely. You know, so clearly we have some significant program we won over the last few years. One I've mentioned earlier with the German army and air forces going on.
Speaker Change: So, we're working with Germany, we've talked about Sweden, and we of course have the U.S. But also, being on the 80s program with the U.S.,
Speaker Change: is a platform also for the eye light to tap in. So eventually, you know, at first I think we're going to be delivering ADs program more to the U.S., but eventually there'll be potential, there'll be possibilities, I should say.
for other countries that are highlight countries.
Speaker Change: Great and are you guys happy with your pipeline of mechanics and engineers?
Bye-bye, love.
Mechanics and Engineers
Speaker Change: Oh yeah, in terms of resources, in terms of engineer, yeah absolutely. You know we have a good base and we've been able to hire the people we needed to hire all around the world so we're in a good place there.
Thank you for your question.
Thank you. Thank you so much.
Speaker Change: I just wanted to first take a moment to wish everyone on the line from the U.S.
a happy Thanksgiving, which is just around the corner.
Speaker Change: And after that, I wish everyone a warm, safe, and restful holiday season, and all the best for 2025.
Speaker Change: Safe travel to all those visiting family and friends. We know firsthand how busy the air transport system gets during this time and we will be very active in supporting our fleet's reliable dispatches.
Speaker Change: So, between now and then, our teams will be very busy delivering our year-end, and we look forward to speaking with you all in the new year. Thank you.
Thank you, sir
Speaker Change: Ladies and gentlemen, this does indeed conclude your conference call for today.
Once again, thank you for attending.
Speaker Change: And at this time, we do ask that you please disconnect your lines.