Q1 2025 Bombardier Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the Bon Bumpy first quarter 2025 earnings Conference call. Please be advised that this call is being recorded at this time I'd like to turn the discussion over to mischief office does he see the flesh.
Speaker Change: President S. P N E and Investor Relations. Please go ahead Sir.
Speaker Change: Good morning, everyone and welcome to Bolthouse. These earnings call for the first quarter of 2025.
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'm.
Speaker Change: 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 Myself, and our executive Vice President and Chief Financial Officer, Bart The Muskie to review of operations and financial results for the first quarter ended March 31 2025.
Speaker Change: I would now like to turn it over to Eric.
Speaker Change: I know it makes people, who see us Balshaw E B, if new attitude.
Speaker Change: Good morning, everyone and thank you for joining us today.
Speaker Change: So last time, we spoke here we were celebrating our 2020 for results and we also have to announce that we would not be providing guidance guidance given the unstable geopolitical context.
Speaker Change: Context.
Speaker Change: Today I am pleased to start on a very positive note and to confirm a strong guidance for 2025.
Speaker Change: Our team has successfully navigated the first three months of the year I am proud of their poise their dedication and their commitment to our customers.
Speaker Change: Since February we have gained a lot more clarity on potential tariff mechanics.
We also took the time to complete multiple deep dives throughout our business.
Speaker Change: It is important to note that despite being in a more volatile environment. We continue to see order activity and we have not seen any cancellations.
Speaker Change: With that said, we expect meaningful increases in our revenues profitability and free cash flow versus 2024, all of which are in line with the journey we began in 2021.
Speaker Change: We stayed confident when faced with a lot of speculation.
Speaker Change: We kept our eyes closely on business aviation flight hours, which went up in Q1, we watched pre owned inventory of challenger and global Jets go down remaining at very favorable levels and finally, we kept a relatively stable backlog and a book to bill close to one achieving Z.
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Speaker Change: We manage our supply chain proactively while this may not be make headlines during a global trade war. It does require a continuous attention and is something we are proud of.
Speaker Change: The tariff landscape is clearly created new challenges for our suppliers and we continue to work closely with them I'll speak more to this later.
Speaker Change: For now let's focus on the detailed results of Q1, they set the stage for the full year guidance number that Bart will cover with you in detail.
As you've seen this morning in our release double digit gains are a major team across our key metrics.
Speaker Change: Looking at the revenue we have raised the bar. We have told this story before and are delighted to tell it again, our operations team remain flexible and agile delivering three more aircrafts than in 2024. We also raised the bar in Q1 for services boasting Enel.
Speaker Change: Other year over year gain the conclusions 19 more represent more revenue and what I am sure. We will all agree was a turbulent quarter for many companies.
Speaker Change: Staying calm and confident ALP us maintain focus on what we control. This really comes through when you look at our adjusted EBITDA, which recorded an impressive 21% year over year jump to $248 million. It represents a margin of 16 three person.
Speaker Change: <unk>.
Speaker Change: We were also much more efficient when it came to our seasonal use of cash I call. It seasonal seasonal because the first quarter is often a very intense time for inventory buildup.
Speaker Change: Adding to this January and February are typically slower on the sales front overall, our free cash usage.
Speaker Change: In the right direction, no what they get 21% improvement versus Q1 last year.
Speaker Change: I also wanted to take a moment to highlight key growth aspect in our business.
Speaker Change: At our Investor Day last year, we introduced the notion of I return on invested capital in our product as well as country diversification through services and defense to start the year, we have seen strategic moves and milestones in all of those categories.
Speaker Change: Let's start with the global 8000, it's a joy to watch the aircraft's smoothly move down the final Assembly line. It's on route to a known time delivery entry into service this year <unk>.
Speaker Change: Excitement for this plane is really building it is being healthy demand because of its unparalleled capabilities.
Speaker Change: I know people have been captivated by the fact that it will be the fastest civilian jets on the market.
Speaker Change: But the bottom line is that it does so much more it combines the size the range the cabin comfort with speed in a way no other jets can.
Speaker Change: Its a total package. It also delivers unprecedented lending performance on shorter runways unlocking cozzens more destination for our customers.
Speaker Change: With a plane that kinder virtually land anywhere service is key there.
Speaker Change: This is why we continue to look at strategic expansions in our network. These it will happen on two fronts capacity and new services in terms of capacity as far as Australia more line station are coming online. We also recently confirm our commitment to the United United.
Speaker Change: Ara Emirates, where our next full scale service center will take shape in Abu Dhabi.
Speaker Change: In terms of new services in the United Kingdom, we have begun construction of a paint facility. This will further drive diversification in how we generate revenues by offering customers more of what they need in the region.
Speaker Change: This worldwide focus on seizing a fortunate. These also translate the Bombardier defense, we can't see you make strategic gains much like the recent order for challenge was 650 aircraft in Australia, our approach and defense has been to remain flexible and collaborative with allied governments in the defense.
Speaker Change: Fear this is as important as the fundamental quality of and performance of the planes themselves.
Speaker Change: The World has changed.
Speaker Change: And it continues to change at a pace that will see requirements quickly evolves.
Speaker Change: Our products all the way up to our global Jets are set to take a more prominent position when it comes to defending vast expenses of land and oceans.
Speaker Change: Our team is working with partners to create customized solution that can enter service fast and that advantages costs.
<unk> continues to be well placed to succeed managing through the short term will remain a priority as markets and our customers react to the international trade landscape.
Speaker Change: We are very happy with our results and our team's performance.
Speaker Change: I do want to have some color on order activity.
Speaker Change: It's important to note that we have a number of order discussion stalled around the March timeframe. We saw a similar trend during the 2023 banking crisis uncertainty caused a short speed bump as everyone involved in transaction slowed down a bit to reassess the situation.
Speaker Change: Asian.
Speaker Change: As things progress to date, we are seeing much better traction and activity I also want to highlight that there are new opportunities emerging as the geopolitical landscape shifts.
Speaker Change: Our existing relationship in all geographies will help us open doors as the year progresses.
Speaker Change: Governments upholding the U S. M C exemption as also contributed to stability.
Speaker Change: It has ultimately preserved aviation jobs in the U S, Canada, and Mexico on a broad scale.
Speaker Change: While we and our customer have not been subject to a tariff on a delivery the whole process has been taxing if you'll pardon the pun.
Speaker Change: We have all all hands on deck approach on being responsive to customers.
Speaker Change: Staying in close touch with governments and working with our suppliers. This has represented a lot of effort and disrupted many days for our teams member specializing in international logistic customs brokerage taxation and other such fields Manny.
Speaker Change: Managing this very fluid situation is not magic. It's hard work, it's recognizing that your need to start working on scenarios. Our needs are starting to work on scenarios early and you need to go as far upstream as you can go to solve the problem.
Speaker Change: This is an approach that help us succeed with supply chain. It's a reflects we have confidentially deployed in our current situation with the threat of tariffs the conclusion to hard to hard to work is simple our aircraft for our U S. MCA compliant, making them exempt of tariffs. Additionally.
Speaker Change: Our guidance accounts for all known tariffs related impacts we have also factored in impact for an impact for aluminum steel and the reciprocal tariffs.
Speaker Change: On non U S MCA compliant materials.
Speaker Change: All of this said Bombardier business aviation as a whole are resilient.
Speaker Change: There are dozens if not hundreds of major international trade deals to be done around the world in the immediate future.
Speaker Change: Business Aviation is an accelerator thanks to the fundamental purpose of our plane to connect leaders across ocean with speed and efficiency.
Speaker Change: It's important that we also carefully consider that in times of such intense and a rapid change there are always at a Portuguese.
Speaker Change: That will be an immediate focus for us we have boots on the ground across so many countries and we will be ready to capture opportunities in defense and also civil markets.
Speaker Change: With that I will turn the floor to Bart to go through our results as well as our outlook for the remainder of the year Bart already.
Bart: Thank you, Eric and good morning, everyone.
Speaker Change: We've certainly started 2025 off on our fall and confidence footing with strong first quarter results and.
Bart: A very impressive year over year growth.
Bart: Compared to Q1 of last year, our revenues adjusted EBITDA and adjusted EBITDA margins have increased by 19%, 21% and 30 basis points respectively.
Bart: The environment around us has been rapidly evolving, but just as we've done over the past five years, we continue to focus on the things that we can control while remaining agile in order to mitigate emerging risks and quickly seize new opportunities in.
Bart: An example of these opportunities is in the continued expansion of our service capabilities.
Bart: Our team is working through a long pipeline of projects to grow the reach and scope of our services business, such as increased component repair and overhaul capabilities for wheels and tires in Wichita.
Bart: Adding more mobile repair teams across the U S U K and Australia, adding.
Bart: Adding paint capacity in the U K, increasing our interiors capabilities in Singapore.
Bart: And adding a new service center footprint in Abu Dhabi and align station in Australia.
Bart: These are just a few examples of the investments we're making.
Bart: Most of which can be put in place quickly and will immediately start generating returns.
Bart: In terms of focusing on the things we can control we've continued to improve our balance sheet in the first quarter.
Bart: Our net leverage has improved by 0.6 turns or 17% versus Q1 of last year. We've.
We've reduced our gross debt by $400 million in the last 12 months, including $300 million. This January and our liquidity remains strong at $1 4 billion.
Bart: From a debt management standpoint.
Bart: You can expect us to remain proactive and to capitalize on opportunities to refinance extend maturities and reduce our coupon rates in this fast changing market.
Bart: Our already strong operational performance is also continuing to improve.
Bart: With our 12 months trailing EBITDA now exceeding $1 4 billion or.
Bart: <unk> 14, $2 billion multiyear aircraft backlog continues to provide us with visibility into our top line well into the future.
Bart: While continued growth in our services and defense businesses offers us more diversification.
Bart: On the cost side with the confirmation that U S. MCA compliant products are not subject to U S. Tariffs, we have considerably more certainty on our cost structure than when we last spoke three months ago.
Bart: All of this puts us in a position to provide you with our full year 2025 guidance today.
Bart: Although there is clearly some uncertainties surrounding the direction of the global economy. The guidance. We have shared today reflects a very strong financial performance and I will provide you with more color on our guidance after covering our Q1 results starting with revenues.
Bart: For the quarter were pleased to report a strong top line performance with total revenues up 19% year over year to reach one 5 billion.
Bart: Our aircraft manufacturing and other revenues grew by $223 million compared to the previous year.
Bart: Primarily driven by three additional deliveries higher defense revenues and stronger pricing.
Bart: Total deliveries in Q1 of this year were <unk> 23 versus <unk> 20 last year, we delivered 12 medium aircraft and 11 large aircraft this quarter.
Bart: <unk>, an increase of three large aircraft deliveries compared to the same quarter last year.
Bart: Our services business grew 4% year over year with quarterly revenues, reaching $495 million.
Bart: And while this level of growth, maybe a bit slower than the same quarter last year, what's telling is that the work in progress and our services network grew by 29% versus Q1 of last year, indicating a marked increase in the volume of aircraft being serviced within our facilities and setting the stage for another impressive grow.
Bart: Here in 2025.
Bart: Shifting to profitability adjusted EBIT or EBITDA totaled $248 million, representing an impressive 21% year over year increase.
Bart: Our adjusted EBITDA margin was 16, 3%, which is an increase of 30 basis points compared to the prior year.
Bart: On the margin side, we continue to just continue to see pressure from supplier related costs, which were higher year over year.
Bart: However, these costs were planned for in our budget as they are the result of disruption that happened over the course of 2024.
Bart: But they did negatively impact our margins in Q1, when comparing to last year and will continue to be a headwind for the full year.
Bart: However, we were able to more than offset these costs through lower SG&A as a percentage of sales, which is 207 basis points lower than in Q1, 2024, as well as through lower R&D expense as we continue to leverage available investment credits against R&D expenses.
Bart: Turning to our other profitability metrics, our adjusted EBIT for the quarter came in at $177 million up 25% from the $142 million reported last year.
Bart: Our adjusted net income was 68 million a remarkable 55% increase from the previous year and highlighting the benefit of our significant tax attributes as our profits continue to grow.
Bart: Our adjusted earnings per share is also up by an impressive 69% or 25 per share and came in at 61 in the quarter.
Bart: Moving onto cash our free cash flow usage for the quarter was $304 million or 21% year over year improvement.
Bart: This usage is driven by our working capital investment of $406 million, resulting from a $566 million investment in inventories in order to support higher delivery activity in the second half of this year.
Bart: As well as a decrease in other liabilities of 98 million largely related to the payment of our 2024 employee short term incentive plan.
Bart: This was offset by higher customer advances of $410 million, reflecting both anticipate anticipated customer progress payments and deposits related to new orders.
Bart: Our book to Bill was 0.9 times in Q1 our.
Bart: Our order pipeline and customer engagement was strong throughout the quarter, but as Eric mentioned, the changing global environment is opening the door to new opportunities for us while some deals did shift to the right.
Bart: Just the economic uncertainty of the first quarter.
Other uses of cash came in from our $33 million in Capex spend and cash interest expense of $99 million.
Bart: So, let's turn our attention to guidance.
And I'll finish my remarks by providing some additional color for what we expect in 2025.
Bart: Despite the rapidly changing environment Bombardier has guided for another strong year of growth in the year.
Bart: Eric mentioned, our aircraft are U S MCA compliant, making them exempt from tariffs.
Bart: Additionally, our guidance accounts for all known tariff related impacts we.
Bart: We have also factored in impacts from aluminum steel and reciprocal tariffs on non U S MCA compliant materials.
Bart: This guidance may be revised if the tariff regulatory environment changes.
Bart: With that being said, our strong backlog diversified top line and better clarity on tariff applicability gives us the visibility needed on our top and bottom line to provide you with guidance today.
Bart: In 2025, we expect to deliver more than 150 aircraft and continue seeing growth in the mid to high single digits for our services business as well as continued growth in defense.
Bart: This translates into revenues of greater than 925 billion.
Bart: In terms of profitability, we expect double digit EBITDA growth once again in 2025% to greater than $1 $5 5 billion.
Bart: This is driven by strong margin conversion on our incremental revenues improved aircraft mix, a net benefit of pricing versus inflation, partly offset by continued supplier disruption.
Bart: Where we do see a wider range of outcomes is on our free cash flow.
Bart: The lower end of our guidance range of 500 million to $800 million takes into account a reduced level of order activity through the first six months of the year with a more stable environment in the second half.
Bart: This would result in a book to Bill below one times in the first half, which could negatively impact our working capital due to lower advances.
Bart: To reach the higher end of the range, we would need to see a return to the same environment. We've been in the last few years with a demand that is in line with our deliveries for the full year.
Bart: From a capex standpoint, we expect to be in the range of $200 million to $300 million.
Bart: We expect our quarterly delivery and free cash flow profile in the year to be similar to 2024 with deliveries again skewed towards Q4, along with inventory build over the first half of the year.
Bart: In the second quarter, we are expecting delivery deliveries to be in the mid <unk> EBITDA margins to pair back versus Q1 due to revenue mix of aircraft versus services and.
Bart: And free cash flow usage.
Bart: Taking a step back and looking at our guidance Holistically I believe that it represents very well the resilient company we have built.
Bart: Strong operational performance in a challenging supply chain environment continued revenue diversification towards high growth businesses.
Bart: Industry, leading margins and the ability to generate significant free cash flow in a volatile environment.
Bart: In conclusion as we've done before we will continue this year with a focus on the things we can control combining disciplined and proactive management to navigate uncertainty and deliver strong results and value for all of our stakeholders.
Francis: With that thank you very much I'll turn it over to Francis and we can begin the Q&A.
Francis: Thanks Mark.
Francis: I would 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'll open it up for questions operator.
Francis: Ladies and gentlemen, if you do have any questions. Please press star followed by one on your Touchtone phone.
Speaker Change: Here, a prompt that Johan has been raised and should you decide to decline from the polling. Please press star followed by two and if Youre using a speakerphone you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions.
Speaker Change: First we will hear from Tim James at TD Cowen. Please go ahead Tim.
Speaker Change: Yes.
Speaker Change: Alright, Thank you very much and good morning, everyone.
Speaker Change: Just wondering first if I could ask about <unk>.
Speaker Change: Apply chain mixed called out a couple of times in the report I know thats been challenging.
Speaker Change: Directionally are you seeing it improve but remain challenging is there anything that's surprising you from a negative perspective are you seeing that sort of this tariff related uncertainty is adding additional complications into that just a general update on sort of where the momentum is in supply chain.
Speaker Change: I think overall, we've seen if you go back a year ago to this year, Tim we've seen.
Speaker Change: Improvement.
Speaker Change: Have less shortages were missing less part today on the Assembly line, whether we use too we've seen for the majority of the engine supplier you, which you know have been have been a challenge.
Speaker Change: One of them is doing actually pretty well the other one is improvements seamlessly since a year.
Speaker Change: We're still working with want to continue to improve the situation. So overall the supply chain as as definitely improve so there is much less issue to deal with than we used to and I think it's been consistent with what we've seen probably in the last two years. So the good news is it's clearly heading in the right direct.
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Speaker Change: Okay. Thank you very much.
Speaker Change: Well something question.
Speaker Change: If I could be R&D I guess, a question for Bart here R&D looks like it was actually a benefit in the first quarter here can you just sort of walk us through what the reason for that was in.
Speaker Change: Kind of what any sort of nonrecurring impacts were that were recorded in R&D.
Bart: Yes. Thanks, Tim Good question. So we're in a advantageous position as a company in that.
Bart: From all of the investments we've made in the past we have significant.
Bart: R&D tax credits available to us about $1 billion of them of our roughly 11% to 12 total.
Bart: Tax attributes available they are noncash, but they enable the use of our deferred tax assets as we grow our profitability.
Bart: There is a.
Bart: Some technical reasons behind why we're starting to release them now when we've been profitable, but the beginning point was getting to.
Bart: Being profitable on a net income basis, and so we achieve that a little while ago as we grow continue to grow our net income in the future, we'll be able to consistently apply these R&D tax credits and so they will form a part of our go forward profitability metrics. So you can expect to see consistent.
Bart: <unk>.
Bart: In the future.
Bart: As we report in the quarters to come.
Speaker Change: Okay, great. Thank you very much.
Speaker Change: Thanks, Ken.
Speaker Change: Next question will be from Noah <unk> of Goldman Sachs. Please go ahead Noah.
Noah: Hey, good morning, everyone.
Noah: Can you hear me.
Noah: Yes again, yes.
Noah: Okay, great yes.
Speaker Change: Bart I guess it just stands out that the 900 million prior free cash flow framework is not in your range.
Noah: Especially as you've discovered that.
Noah: Your aircraft are completely exempt from tariffs, which was you know what what held you back from guidance previously can.
Noah: Can you maybe just talk about that I mean, I know, obviously, it's a slower a little bit slower order environment and you talked about the advances.
Noah: And from that but why no 900 at the high end of the range in the scenario where demand picks back up what other what other differences are there from the prior framework that you have.
Noah: Yes, Thanks, Noah and great question.
Noah: There's a simple answer and it's two word one its supply chain.
Noah: But to add a little more color for you when when we first provided.
Noah: Our longer I'll call it our medium to longer term.
Noah: Objectives or targets back in 2022, we are up those from our original targets that we set in 2021, and we felt that $900 million would be achievable. This year relative to our first outlook of $500 million.
Noah: But that was three years ago and a lot has happened since then and on the supply chain side, Although we as a company as Erik mentioned I think have done just an amazing job with managing the difficulty of the supply chain. We do have work being performed out of order still today and largely due to.
Noah: Engine availability on time.
Noah: And that has an impact on our cost structure.
Noah: And today, it's and I've mentioned it I think last quarter, we said something like a 60 basis point EBIT.
Noah: EBITDA margin headwind, it's roughly $100 million. If you think of it in terms of cash flow and Thats why at the top end of our guidance. We're now 100 million below the 900. So it's simple math is straightforward and that's that's why we set the target there.
Noah: Okay, great that is clear.
Noah: How is the defense effort trending.
Noah: This year and what you've rolled into the guidance versus what you may be thought.
Noah: Six to 12 months ago.
Noah: No I think its its clearly reflected everything we know today is reflected in our guidance and we have a very positive.
Noah: The view on on what's next in defense, there's a lot of momentum right now.
Noah: The geopolitical tension that exists today the pressure on most of the country to increase their spending and.
Noah: Achieve a bigger portion of their <unk>.
Noah: GDP on defense spending definitely is materializing, so we can see across the board.
Noah: Even in our own country in Canada, but also.
Noah: In Europe and in other part of the World Asia also so and the good news is we're extremely well positioned if you think about civilian seriplane and others. We have the airplane that can do it.
Noah: <unk>.
Noah: Some time on a campaign over three participants we are part of we are with two emission out parts speeding so which is increasing the likelihood of us being part and successful in those campaign. So overall there is.
Noah: I would say tens of different campaign going on right now we participate to those with our partners and we feel pretty strong about the.
Noah: Long term outlook, but also this is some of them will start to to be unveiled this year.
Speaker Change: Great. Thank you so much.
Noah: Thank you Sir.
Speaker Change: Next question will be from Kamran Dixon at National Bank. Please go ahead Kevin.
Kevin Dixon: Yes, thanks very much good morning, I just wanted to ask about the order activity I mean, you highlighted that in March just given all the tariff chaos.
Kevin Dixon: That you'd seen kind of a I guess a slowdown in discussions are stalled discussions can you just maybe talk a little bit more about what the hesitancy was from customers was it really just around the uncertainty around the tariffs.
Kevin Dixon: For U S based customers or was it more kind of the macroeconomic backdrop that was causing some of those or discussions to stall.
Kevin Dixon: Okay.
Kevin Dixon: So this is this is a great question Cameron.
Kevin Dixon: Clearly, we've seen the quarter evolving in about three different period of time.
Kevin Dixon: You'll remember that we started the year with an overall threat of 25% on Canada across the board, So which was of course, a concern but the level of activity was okay. When the tariff.
Kevin Dixon: Clarity came out we were able to clarify a lot of things.
Kevin Dixon: First of all that we could if tariff supply deduct.
Kevin Dixon: The U S content from from the level of tariffs to be paid so but all this to say and then we ended up with Usmc exempt so which was the best scenario for us, but I would say probably between.
Kevin Dixon: Beginning of February end of February we have seen a very similar way.
Kevin Dixon: <unk> from our customer base similar to what we saw in 2023, when we had the bank crisis.
Kevin Dixon: About two to three weeks where.
Kevin Dixon: People were paralyzed I would call it trying to understand what is really happening.
Kevin Dixon: Even ourselves everybody was and we had all our expert we were ready for all potential scenario I think that you can imagine.
Kevin Dixon: But then at least clarity did help but for the three to four 2% to three to maybe four weeks of the unclear situation. There was a bit of a pause and we lost a bit of momentum there and then it came back when we got the exemption on U S. M C.
Kevin Dixon: The whole world.
Kevin Dixon: Is that okay. We're moving on so and we've seen a better level of activity. After that so I think it was a bit of a pause which explain a bit that we have a backlog.
Kevin Dixon: I am not concerned about it right now because the level of activity that we have today.
Either in the U S.
Kevin Dixon: In Asia, APAC Middle East continue to be very strong even.
Kevin Dixon: South America right now is doing fine.
Kevin Dixon: I would say the only a ria right now where I see still excitation is probably Europe, it's not completely stalled, but it's slower than what we usually see but overall if you look at the I think the strength of <unk>, we are extremely well diversified but again.
Kevin Dixon: So there is quite a few opportunity arising on the defense side.
Kevin Dixon: Which could have said that so so.
Kevin Dixon: At the end.
Kevin Dixon: These tariff situation and pressure on defense create opportunities.
Kevin Dixon: On the defense business.
Speaker Change: Okay. That's helpful and just one quick clarifying.
Speaker Change: Question, I guess is I guess, the $500 million in free cash flow just wanted to.
See that.
Speaker Change: But at the low end of the range would imply I guess, a full year book to Bill below one if I got that correct.
Speaker Change: Yes.
Cameron: That's right Cameron.
Cameron: That would be that would be the outcome. If we continued kind of on the path of what we saw in the first quarter or even a little bit lower book to build on that which would bring us to the low end of our guidance okay.
Cameron: Okay. That's very helpful. Thanks very much.
Cameron: Thank you.
Cameron: Next question will be from Ben Web Wahid.
Speaker Change: Please go ahead Ben.
Speaker Change: Yes, good morning, everyone.
Speaker Change: Yes first question yes.
Speaker Change: Could you talk a little bit about the.
Speaker Change: Customers advance that you were supposed to receive toward the fourth quarter around the debt for global 8000, prepayment and wetter, we've seen an impact in Q1 or any color about the timing for this.
Yes, no. That's a good point, we talked about that at the last call and we clearly are.
Speaker Change: Are getting.
Speaker Change: Into a different territory right now as I said in Q4, we have an a bit earlier on this call, we have greater and greater confidence about our ability to certified and delivered.
Speaker Change: The global 8000 this year so this.
Speaker Change: Being said that we can have our salespeople being more aggressive in selling starting to sell these airplanes. So we've seen a buildup into the momentum this quarter.
Speaker Change: And actually there is a lot of.
Speaker Change: A lot of.
Speaker Change: A lot of positive reception on on the global 8000, and so far it's going to be the airplane that flies higher or faster further than anything that exists. Today. So we are we feel pretty good about how our customer are.
Speaker Change: Enthusiastic about about the airplane coming into service so we're starting to to.
Speaker Change: To have a lot of conversation some of these deals will close during the year were pretty sure of that and we're participating too many events to promote the airplane.
Speaker Change: It's extremely well received so I guess, we're going to see some some positive this year about the global 8000.
Speaker Change: Okay, that's great color and for the follow up question Bart could you talk a little bit about.
Speaker Change: The opportunities that you see in terms of capital deployment for further debt repayment or maybe your thoughts about the buyback given the share price and your strong balance sheet.
Bart: Yes. Thank you Ben was so right now we're sitting at net leverage of about three times, we had a nice improvement year over year.
Bart: On our net debt to EBITDA of about 17% we ended.
Bart: Q1 of last year at three six times, so we're still targeting over the short term.
Bart: To get our target leverage down to about two to two and a half times I would say from a capital deployment perspective, <unk>, our debt repayment as our number one focus still today for use of excess cash and liquidity.
Bart: We paid $300 million off in.
Bart: The first quarter of this year I think that highlights our confidence.
Bart: In our business prospects and the market generally this year and we have a target.
Bart: To pay down.
Bart: Sorry, I'm not sure what happened there but.
Bart: Approximately another $600 million of net debt reduction remains in the plan for this year, So that's where our capital will be deployed.
Bart: In the short term once we get into 2026, and we start to talk about the next five years approximately we'll come back to the discussion about how we want to deploy but I don't think our options will change certainly rich.
Bart: Turn of capital to shareholders will be on the table clearly investment in our business.
Bart: We'll be on the table that further debt retirement is always an option as well and we have all of that Optionality ahead of us.
Bart: And we'll certainly work to maximize shareholder value through our choices.
Bart: So I think we are in line as Bart said, you know with the with what we said a year ago, we talked about $1 billion of the debt repayment on the gross debt a year ago. We did 400 last year. So as Bart just confirm we're aiming to do another six this year.
Bart: That's perfect. That's clear thank you very much gentlemen, yes, you bet. Thank.
Speaker Change: Thank you Nancy.
Speaker Change: Next question will be from Jim James Mcgarrigle at RBC. Please go ahead James.
Speaker Change: Okay. Thanks, Rob me on just on the on the book to Bill coming in below one in the quarter you mentioned the speed bump.
Speaker Change: And then you kind of also fly that Youre seeing is a much better order activity.
Speaker Change: And just to to Ken's question earlier, you said that thanks.
Speaker Change: Thanks, Dave I think Q1, the book to Bill would come in below one for the year, but if youre seeing a lot better.
Speaker Change: <unk> now.
Speaker Change: Recent trends persist call it since.
Speaker Change: Assistance April <unk>.
Speaker Change: Towards coming toward the higher end the free cash flow guidance in that case.
Bart: Yeah. Good morning, James It's Bart here.
Bart: I'll just I'll just go back to what I said in my prepared comments and you're right. If if we see a book to bill consistent with our planning basis of of one times that would bring us in at around the high end of our free cash flow guidance around that $800 million, if we see order activity.
Bart: Continue to provide us with a book to bill closer to what we saw in the first quarter at <unk>, nine or maybe even a bit lower than that that would bring us in closer to the low end of our guidance and really that's that's the variable that defines the range.
Bart: Okay and then.
Bart: On the margins.
Bart: It came in higher year over year, but below your prior expectations.
Bart: You spoke a little bit in your prepared remarks.
Bart: A little bit of pro from tariffs ought to supply chains are likely driving up some of that as well, but can you just talk talk about the room for improvement.
Bart: Longer term on the EBIT margin side.
Bart: Yeah look.
Bart: There is there is significant opportunity for us if you think through the strategy that we're deploying and where the vast majority of our growth is coming from over the coming years, it's in our services and defense businesses, which provide us with our highest EBITDA margins in the company so that.
Bart: Certainly we'll provide opportunity.
Bart: If we look at the the headwind that we've been working our way through.
Bart: Due to <unk>.
Bart: To perform work out a border on our aircraft manufacturing line.
Bart: Last quarter alone like Q1 of this year, we would have been above 17% EBITDA margin today. So that's another opportunity once the clouds lift and and we start getting engines to the line across the line on time, that's a clear opportunity for us and I know our operations.
Bart: Our team is really looking forward to being able to take advantage of all that and deliver better margin profile for us. So those are the two key drivers I think in the coming quarters and years.
Bart: Thank you.
Bart: Thank you next.
Speaker Change: Next question will be from Myles at Wolfe Research. Please go ahead.
Speaker Change: Hey, good morning give Lou Lou Raffetto on for Myles.
Speaker Change: Good morning.
Speaker Change: Maybe Eric for you the 150 plus deliveries this year I know last year you were split 50 50 medium large how do you think about that this year.
Speaker Change: Yeah, no we feel pretty confident about that number you know we've been a on a regular basis, we do a thorough analysis of our supply chain and their capability.
Speaker Change: Reflecting already some risks that we have and.
Speaker Change: We will see you will see how things evolve, but we feel we feel pretty good about the greater than 150, and we just reassess that's recently.
Speaker Change: And our in line to do that so that's clearly.
Speaker Change: A good place to be I think for us at this stage.
Speaker Change: I'm, sorry, but what about the mix between the medium and large just for this year versus last year.
Speaker Change: The mix is about like it has been last year, probably about half and half in terms of number of units.
Speaker Change: So we don't provide guidance for our product, but overall, it's about a similar mix too.
Speaker Change: About 50 50 ish.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you Bart just just to confirm the $600 million of that is that in addition to the $300 million in the first quarter or is that.
Speaker Change: Including that.
Speaker Change: That's that's right. Louis it's it will be in addition to incremental and that's in our plan for the back half of this year as you know our heaviest period of deliveries in when we released a lot of working capital is in Q4. So that's probably a good time to be to be thinking about that.
Speaker Change: I appreciate it thank you.
Speaker Change: Okay. Thank you.
Cognex Gupta: Next question will be from Cognex Gupta at Scotia Bank. Please go ahead.
Cognex Gupta: Thanks, and good morning, everyone.
Speaker Change: Here you have a lot of clarity now on the tariff side of things for sure.
Speaker Change: Some high level perspective, I'm thinking.
Speaker Change: Probably not impacting your products directly customers as well.
Speaker Change: So broadly speaking things are not changing I guess in that sense, but it will be the whole tariff seep through the macro economy and the sentiment obviously, it's all being down nearly so.
Speaker Change: When you talk to your customers.
Speaker Change: And broadly your major customers like fleet.
Speaker Change: Cooperates and high network.
Speaker Change: Are you seeing or noticing any differences by each of these categories in terms of holiday.
Speaker Change: Doing the order activity in like a sum total of these guys are saying like move on hold somewhat saying, you're going to accelerate and somewhat saying no no change.
Speaker Change: Okay.
Speaker Change: I think if you if you if I go where it's a great question Clarke and.
Speaker Change: I have already said defense is definitely hurts right. Now this is a place where we believe we have quite a few opportunity this year.
On the fleet operator.
Speaker Change: This is actually a pretty good story overall, you've seen a major readjustment.
Speaker Change: For these guys they are.
Speaker Change: Higher than they were.
Speaker Change: In 2000, and 2019 and they are still growing if you look at the fleet our flight hours of Bombardier.
Speaker Change: Compared to a year ago. It went up by 3% in the first quarter.
Speaker Change: And the flight hours.
Speaker Change: From 24 up.
Speaker Change: 39% in 2019 are still up again this year. So overall, we see great momentum either with the operator or either with with the fleet operator.
Speaker Change: The fleet operator, you remember theyre up 57%, 58% since 19. So this is quite significant and the other operator 34 in our case.
Speaker Change: And what's interesting also is the growth comes from.
Speaker Change: The majority of the growth comes from the global and challenges are actually the Lear jet is actually down 1% since last year, but we've seen 3% and 4% on the challenger and global so so the flying hours are very important to us because they are a leading indicator and as we mentioned earlier.
Speaker Change: Backlog of pre owned airplanes.
Speaker Change: Actually has been slightly lower than a year ago and continue to go down so in our case the inventory is at around six 7% right now on the Bombardier plan. So overall, the leading indicators are there we still see cooperation coming to the table because they still need to move around they are gone.
Speaker Change: They see the business aviation as a as a productivity tool for their team and themselves. So so we still have.
Speaker Change: Pretty healthy discussion and we haven't seen.
Speaker Change: A shift in behavior as I said earlier, if you compare to a year ago or two years ago.
Speaker Change: Okay. That's clear thanks, Eric and if I can follow up but maybe for you on the margin bridge.
Speaker Change: Thanks.
Speaker Change: I simply think that numbers you are guiding for 25 and at the low end of our revenue and EBITDA.
Speaker Change: And mathematically implies something sub 17% EBITDA margin, but still pretty healthy compared to $15 70, you added 24, so the incremental margin at 30% plus.
Speaker Change: This year, it sounds like and tough environment like this it's pretty robust, but what's driving this isn't the mix that that global 70 508000.
Speaker Change: Kind of rebounding from a production side of things as it is at the aftermarket services growth and offset by supply chain.
Speaker Change: All of those things and not to support the 30% plus incremental margin anything in cost that I'm missing here.
Speaker Change: Yes, Thanks Con archive the first thing I'd point out is we are we're the industry leader on.
Speaker Change: On margins today and.
Speaker Change: That's a big change from a from a few years ago, and we're very proud of that but our works not done.
Speaker Change: And we do see margin growth opportunity. So if you think about it.
Speaker Change: Adjusted EBITDA greater than $1 $5 5 billion in adjusted EBIT greater than $1 billion for.
Speaker Change: For the year growth.
Speaker Change: We see coming from a couple of different areas in particular pricing.
Speaker Change: On on new aircraft sales relative to.
Speaker Change:
Speaker Change: Well new aircraft sales generally we're seeing strong pricing if you think about where we're at today with the backlog that we have we already know that a lot of that those pricing gains are built into the backlog. So we have real good visibility on those <unk>.
Speaker Change: As well volume mix, we do have projected for the year prior to last year.
Speaker Change: In comparison to last year higher global content.
Speaker Change: So that will provide.
Speaker Change: Margin boost as well.
Speaker Change: And then for the growth we have coming this year for defense and services the revenues there.
Speaker Change: Strong margin conversion there as well so those are the three key drivers for us.
Speaker Change: As I mentioned earlier, though partly offset by supply chain headwinds. So we do have margin growth coming incrementally and.
Speaker Change: And that would be where where it's coming from.
Speaker Change: Okay got it. Thanks, so much broke on the color I appreciate it okay. Thanks.
Connor: Thanks Connor.
Speaker Change: Next question will be from Ron Epstein of Bank of America. Please go ahead Ron.
Ron: Hey, Yeah. Good morning, guys a lot of stuff, we've already gone through great Ron.
Ron: I was just curious have you seen a change in customer behavior sort of given how do I frame. This.
Ron: Different perceptions about the U S. Meaning have you seen from customers, who maybe were going to buy a jet in the U S right.
Ron: Maybe we will go to Canada. That's my first question.
Ron: Yes.
I did actually.
Ron: If I should say that but I did I saw that in a few region, where people said you know.
Ron: We're concerned about what's going on in the U S and we'll definitely be considering your product so.
Ron: But at the end of the day I want to be careful with that because we are a north American company I know people like to classify us as being either Canadian American or or France, If I look at my competitor, but.
Yes.
Ron: The reality around and I think it's super important that people understand that is you know.
Ron: We are a north American company, we have a strong presence in the U S.
Ron: 28 under a supplier.
Ron: We have a presence of course in Mexico with our own operation and also supplier in Canada of course.
Ron: It is important to mention that even if I compare to some of my competitor in the U S. Sometime on the maturity of my product actually I have more U S content than than than them.
Ron: If we are being perceived so the point is that we are a north American company.
Ron: Proud of being located here in head office in Canada, but we are clearly in our supply chain are well embedded but clearly there is a reaction of there in other countries that People's says Hey, we love. The fact that you guys assemble the airplane in Canada, and we're going to definitely consider you know more than ever.
Speaker Change: Got it got it got it and then maybe there's a little bit of a market kind of accounting question, but.
Ron: Under U S MCA.
Ron: Are you guys using that before or were business jets covered by the WTO agreement.
Ron: ATCA I think it goes back to 1979 that I used to cover RJ I, just don't know that it cover Biz Jets are not are where you are.
Speaker Change: Or are you kind of like.
Ron: U S. MCA was how you were doing it so it's there's really no.
Ron: Hi, Ray say transition that has to have had a U S. MCA, we already had a Usmc certificate. The data it was announced so we're using U S MCA, but youre absolutely right. The rules have been actually even before you SMC or NAFTA. The rules were there since 1979 by the World trade organization, where aerospace because of the strong.
Speaker Change: Integration from country to country.
Ron: We're exempt of tariffs.
Ron: This has been the rule and this is why we've built this industry around those rules. So so changing it like overnight, we will have like significant impact of course.
Ron: But.
Ron: We've delivered airplane on their Usmc for many many years.
Ron: Got it alright, thank you guys.
Ron: Thank you.
Ron: Thanks, Ron.
Ron: Next question will be from Gavin Parsons.
Ron: Please go ahead Kevin.
Ron: Hey, Thanks, good morning, guys.
Ron: Good morning, Kevin Good morning, Kevin.
Speaker Change: And free cash flow are there any working capital assumptions like inventory.
Kevin Dixon: Yes generally.
Gavin: Good morning, again, Gavin so so working capital for us long range and over.
Gavin: Most time periods, what we're trying to do is find a balance.
Gavin: <unk> customer advances and in inventories if you look at where we ended last year.
Gavin: We were roughly balanced I'll call it about about $4 billion of each and so working capital neutrality.
Gavin: Is our goal each year when we go into our planning cycle.
Gavin: We try to set our budgets and plans based on what we see from forward looking sales activities et cetera.
Gavin: To build and deliveries to build in AR.
Gavin: An assumption of around book to Bill of one and that book to Bill of one would give us that neutrality.
Gavin: Obviously, theres mix and other things that come into play each year, but from a general perspective, that's that's our target and assuming a one times book to Bill. This year, we should have the working capital neutrality for the year.
Speaker Change: Okay. That's helpful and then coming back to defense any opportunity for Bombardier to do maybe more than special mission or integration and im thinking about the unmanned jet demonstrator.
Gavin: Yes.
Gavin: No I think those are those strategic discussion or have been happening at <unk> and still continue.
Gavin: Yes, we think you know we're talking.
Gavin: When we talk to the mission hours today, I think that they realize more and more or so that we can do more so a more vertically integrated within Bombardier.
Gavin: Supply chain could be helpful for them and of course create extra work for us, but at the same time, clearly echo Jeff brings a possibility.
Gavin: The discussion of unmanned airplane is on the table and we're looking into that.
Gavin: Technology, we said that we were going to invest into our product. We're looking at the appetite of different government. You know four for this and this is something we could do.
Gavin: If the appetite in the market is there, but clearly there is quite a few possibility the jets will be get quite capable product. So so this is definitely one thing we're looking into.
Gavin: Thank you.
Gavin: Sure.
Last question.
Speaker Change: Last question is from Jason at Citi. Please go ahead Jay.
Speaker Change: Hey, Thanks for taking my question Jay dialing on received insurance since you guys pretty much answered all my other questions I just wanted to ask.
Speaker Change: Following the conclusion.
Speaker Change: The U S Army <unk> program do you see.
Speaker Change: Other global military demand.
Speaker Change: The deal is it clean the pipeline and the extent that you can.
Speaker Change: Thank you so much.
Speaker Change: Thank you.
Speaker Change: Great.
Speaker Change: Yes.
Speaker Change: For defense for essentially a plane on defensive I'm, sorry, I missed that sorry, so so clearly there is.
Speaker Change: You know that we are on the ATM program that one a few years ago and there is clearly.
Speaker Change: A strong appetite for our product we said it earlier in defence first we are being perceived as a company is being very agile.
Capable of turning things around faster and adapt to what the customer wants and I know that this is something that is extremely appreciated, especially on the U S side and of course around the world, but we have those come in directly from the Pentagon as they were appreciative of our ability to move fast and help them in terms of.
Speaker Change: They were trying to achieve so I think we've been successful on the Bacon program now we have <unk> that we're working with.
Speaker Change: Sierra Nevada Corporation, that's been selected as the mission <unk> and <unk>.
Speaker Change: That you know our ability to execute and keep the ability of our products are so significant.
Speaker Change: And different than others I think that this will create also other other possibility for us.
Speaker Change: Both in the U S and internationally.
Speaker Change: I appreciate it thank you.
Speaker Change: Thank you at this time I would like to turn the call over back to Eric for closing remarks.
Speaker Change: Okay. So thank you again for joining our call today clearly the excellent progress <unk> has made as the result of more than 18000 passionate individuals.
Speaker Change: We will continue to push the limits of what's possible in business aviation and at the same time, we will remain focus on our people as well as sustainability as we wrap up today's call I want to take a moment to recognize the team for their continued effort on this front our environmental product Declaration initiative is now fully implemented on all.
Speaker Change: All of our aircraft and this was recognized at the Aviation week Laureate Awards. This and many other achievements, we will will be detailed in our upcoming sustainability report.
Speaker Change: So thank you again for joining us today and for those who will be joining our annual general meeting of shareholders. Later today I. Thank you for your continued engagement and also support.
Speaker Change: Thank you Sir.
Speaker Change: Ladies and gentlemen, this does conclude your conference call for today. Once again. Thank you for attending at this time, we ask that you. Please disconnect your lines.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yeah.