Bombardier Inc. (BBDB) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to Bombardier's Second Quarter 2022 Media Conference Call. Please be advised this call is being recorded. At this time, I would like to turn the discussion over to Mr. Mark Masluch, Senior Director, Communication for Bombardier. [Foreign Language]. Please go ahead, Mr. Masluch.

[Foreign Language] Good morning, and welcome to this morning's call. Our team is on standby after the call if you require further clarification. So you're more than welcome to reach out to me or to my colleague and team who is with us today. [Foreign Language] Mr. Éric Martel. Eric?

[Foreign Language] So I'd like to welcome all of you this morning to this call. We are excited about sharing our results today with a strong second quarter results and improved guidance on free cash flow. So I think the first thing to say is our Q2 was solid. We are extremely confident in our business but also the resilience that we've been able to structure over the last couple of years. I think one of the highlights for the quarter is clearly the Moody's credit rating upgrade that demonstrate external recognition to what we've been able to achieve. We've launched the Global 8000 also, which solidifies again our position as a leader in the large market segment. We have the [indiscernible] backlog that we had for a long time at the $14.7 billion. This is another positive free cash flow quarter for fifth time in a row, demonstrated our ability also to generate free cash flow. Our adjusted EBITDA, which is, in our mind, our most -- one of our most important indicator is up by 41% year-over-year. And again, the free cash flow guidance that we're telling the market today improved from $50 million to greater than $550 million for this year. So we're also well ahead in deleveraging. We repaid this year $773 million, or $0.75 billion roughly on our debt, so still making progress and deleveraging our balance sheet moving forward. So anyway, those are in our mind, the highlights for the quarter. And with -- okay with everybody, we'll do the questions.

[Foreign Language] If we can now turn to the question period, and I'll leave, Jill, the floor to explain the instructions.

[Operator Instructions] [Foreign Language] And the first question is from Allison Lampert from Reuters.

On the call you were talking about engine jets being considered within your delivery target of greater than 100 jets. Are you referring to delays of delivery of engine to one of your programs, could you specify?

Yes. No, I was not thinking specific here. As I said, and it's a well-known thing, there is pressure in the supply chain right now. It's pretty much across the board, all engine manufacturer. So we've been working, as I said earlier, also very diligently with everyone. And I think one of the things on the supply chain that Bombardier did well is we took action extremely early in the pandemic. We are redeploying more people in the supply chain to make sure that we're going to monitor the capability and making sure that we were proactive. And I think that there's a payback on this today. Also, we brought back the equivalent of 500 people of work in our own factory. So we created within Bombardier 500 new jobs, bringing back work that was at supplier in our facility to actually make sure that we were more solid. On the engine front, yes, there is challenges. We work with every OEM right now to bring everybody back on track and are pleased, we're sharing with them our practices here to make sure that they do the same. But we reiterated our guidance at greater than 120. And that guidance takes into account that there's a couple of risk. So that's why we're saying greater than 120, but still very comfortable with the guidance we submitted earlier this year.

And just as a follow-up. Have you seen cases of chip shortages within your supply chain, I guess, more on the line with Tier 2 to Tier 3s? And how would that be impacting deliveries of products such as for avionics?

Yes. So we did pretty much everybody else. So there is some impact, which has been either mitigated or we're monitoring this very closely. It's been affected a little bit our service delivery of spare parts. But every one of our supplier or partner working with us, they have a good plan in place, and we've been working diligently with every single one of them to make sure that we don't affect our delivery or supplier base. But so far, that's why -- and we're confident to reiterate our greater than 120 delivery and our revenue and other metrics for the year.

[Operator Instructions] So operator, we'll take the next question.

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

The next question is from Nick Van Praet, The Globe and Mail.

I wanted to ask first on supply chain issues. You said you brought the equivalent of 500 people in-house through work that you've taken inside Bombardier. How exactly did you do that? Will you continue to do that? And what is the limit do you see for doing that? I mean in terms of a limit, like how much more business could you -- how much more work could you bring in-house?

We still got quite a bit of capability available. And I'm talking about here more machining, building major structures. So as you know, we have our plant here in Montreal in Canada that we call internally Plant 1. And they are -- this is where we had the majority of the increase. 2 years ago, we had about 100 people in that facility. We now have 1,400 people and the majority of the increase is due to parts we brought back in and that secure our capability and we still have capability. We don't actually operate that shop on free ship with a few exception, and we still have return capability on equipment available. So we've got quite a bit of capability available if we have to do it. It's always a decision of protecting the supply chain and also being efficient ourselves to do that. So -- but we monitor everything going on. There's a few critical suppliers that we already made a decision to bring things back in like almost 2 years ago, we put that strategy forward.

But if you've taken the equivalent of 500 people in-house, could you double that? Could you triple that? What's the thinking?

We could probably easily had another -- we used to have like, in some of this facility, up to 2,000 to 4,000 people. So I guess if we're at 2,000 -- at 1,600, today -- 1,500, sorry, we still have quite a bit of room to increase.