Bombardier Inc. (BBDB) Earnings Call Transcript & Summary

So good morning to you all, and thanks for joining us today here in our new facility at the Pearson Airport, which we are very happy to have you guys here today and have a chance to visit it. Our employees are so proud to have started the operation here. You've seen it's full of airplane. We have all the operation here now. So it's an amazing day. It was a good day also, a good way to start the day with a major and significant announcement today. This is on disclosing the press release we had in December with NetJets buying -- coming back to the 3500 and buying 12 airplanes, but options for 232 over the next few years. So that's quite an achievement. And I'll talk a bit later about fleet operator, how important they are part of our strategy. It was a historical moment last week when we launched our new brand, our new identity. And as good engineer, our project was very meticulously run and thought of. We talk to a lot of customers. We talk to a lot of employees. And the feedback -- the project is based on their feedback and the result is based on their feedback. I think one thing we heard across the board is that Bombardier has a unique relationship. Our customers say that, are saying that every day. We are not being seen as a corporation. We are seen as being a family, and we celebrate the people, we celebrate their excellence. And this is like a major change in picturing ourselves also. Internally also, we provide a workplace where heart meets mastery. And as it was mentioned in the video, our long-time purpose is to be at their altitude, being at the altitude of our customer, which have unique demand and being at the altitude of our employees also who are doing something extremely unique. You've heard me saying very often that there's only a few countries in the world that can design, build an airplane and we are one of them via Bombardier. So there's an inspiration that comes with the logo called the Mach. There is a -- it takes into account our innovative heritage. I think every business we've been in since 1942, we've been transforming these businesses. Whatever if it's the snowmobile, the train business, the airplane business, with the CRJs, I think we've always been making significant changes. And today, as a pure play private aviation company, we are extremely proud to present this new brand that shows inspired from the Global 8000 that flew above Mach 1, as you know. And the design is the sign of [ Fines, ] also elegance. So we're extremely pleased with the logo. And the more I look at it every day, the more I'm liking it. So that's great. We know that business -- we know business aviation better than anyone because I think that's our 100% time dedicated to that environment. We've been the #1 OEM in the last 3 years of all in the category we are, of course, competing. Our product are always leading their categories. And we have focused, as you know, on the large and the medium segment, which I'm going to come back to. We have -- we're adapter of new technology. We adapted the Passport engine, the Pearl engines. We have the first aircraft 4 zones in our industry. And first -- we have the first redesign Class C. When we flew, we're going to be flying our airplane at 0.94 Mach with the Global 8000 coming very, very soon. So let me talk for a few minutes also about what we're doing as a pioneer team, unsustainable and business aviation in a few seconds. But I think one distinction that we have at Bombardier is the -- we are recognized as being focused, agile, engaged and responsive to our customer all the time. The one thing that I hear the most out there when I talk to customers and I heard the same thing 2 weeks ago, I was in Washington that we are fresh air, we bring new solutions, new idea, new ways, as an example, on the Defense business, you guys deliver on time, you guys deliver on budget, you're different, and you come up with solution, not a problem. So that's the DNA of our company. The word impossible doesn't exist in Bombardier. We always figure out a way. And what about the 5000 airplane out there, and we'll talk about it later, how precious this is, because the installed base allows us to offer a platform, of course, to the Defense business, but it's a big significant Services business we can tap in and Preowned business also. So all this to say that we're excited about what we've achieved in the last couple of years, but also the journey ahead of us, and we'll talk about it in more detail. So we made a significant commitment as an industry, and Bombardier is leading that path about being net zero carbon emission by 2050. And we know that it's possible. Our dedication to sustainability and business aviation runs deep. We, first of all, championed the widespread adoption of sustainable aviation fuel within our industry, and we walk the talk. We were the first OEM to announce that we are flying all our demo flight and our flight tests using sustainable aviation fluid up to 30% per airplane. We are transparent about our product environmental footprint, and we are the only OEM also that is publishing the EDPs. We have our greenhouse gas emission reduction target. You know that we said in 2021 that we were going to reduce as a company despite our growth, the emission by 25%, and we are right on plan to achieve that milestone by 2025. So our goal collectively is to achieve zero emission, carbon emission, neutral emission by 2050. We have game changer project, as you know, the EcoJet. Actually, Stephen will be around today, our Chief Engineer, to show you the smaller version of the EcoJet, which has flown before. Today, we're flying a bigger version, but that project alone is a technology development project, but we are aiming to reduce by around 20%, the emission just by modifying the shape of the airplane. But what about the results and what about the impressive turnaround that we've delivered in the last few years? You remember, we started the journey in 2020. That's when I was back, right in the middle of COVID, at the beginning of COVID, we had that year 114 deliveries. We delivered close to $200 million of EBITDA, with $5.6 billion of revenue. But what a turnaround, if you look just at last year, those are real results. We've achieved an $8 billion business. We grew our aftermarket by 77% over those years, we grew our backlog significantly, but our profitability was a total change. We went from $200 million of EBITDA in 2020 to more than $1.2 billion last year. So 6x more EBITDA. But I think what was an issue is now going to turn into an opportunity. We are generating cash. We generated $1.1 billion of cash in the last 3 years, and our net leverage went from 41.5% to 7.7%, 4.6%, and we finished the year at 3.3%. Behind all of our achievement lies a committed skill force and very encouraged workforce. We've improved significantly the engagement of our people. And I'm not saying it was easy because they went through a lot of things over the last decade, but I'm telling you that people at Bombardier, they have the company at heart. And they're going to make the extra mile to make sure we are successful in all fields, in operation and engineering across the board. We also have the industry best management team, and I really believe it, and I may sound -- I don't know if it's arrogant, but I really mean it. I have the team that is more knowledgeable about this industry than anybody else. We have several major operational accomplishments since 2020. Employee engagement at sort, as I said, we've made also, and I like the term smart investment. It doesn't mean in aviation that you need to spend $4 billion every time you make an investment. We've made investment in the hundreds of millions. Think about the 3500, which was a small investment in a sense that we've doubled basically our deliveries on the airplane. And we have now the Global 8000 that's going to come up very, very soon. We have grown our sales team. You know quite a bit in terms of services. We have structured also the industry on the defense side. And we today have 17 aircraft subscribed on the Smart Services platform. So a lot of achievement. We also grew our Services business. As you know, I mentioned it. But we added more than 1 million square foot of services, and we've grown the Services business from about $1 billion to $2 billion in just a few years, and there is more to come. But I know what you're interested in today is to hear about what else we're going to do. So the first in the future. So the first thing that I have to say today is we have a very clear line of sight for our 2025 objectives. You remember, we set objectives back in 2021. In March '21, we came out right off the gate after we restructured and said, here's what we're going to do in 2025. I know there was a lot of skeptical people at the time. But by the way, we came out 2 years later and said, "Hey, we're going to do better." And today, we still feel good about doing and achieving these numbers in 2025. Meeting these objectives is just the beginning because we now have a much better line of sight on what's going to happen between '26 and '30. And we have many levers at our disposal. Think about our CPO business, think about our Defense business and think about of our Services business. And all in these revenue stream, we see, and I'll share a number in details with you, a clear growth potential on every one of them, like a significant one. And those could be further enhanced through M&A or partnership. But you will see today, I hope you will be convinced that just by organic growth, this company can grow significantly up to 2030. And on top of it, we're going to have cash liquidity available to make, if they are attractive, some acquisition through M&A. So I think overall, we can say that we have a very compelling proposal. Our transformation has led to a remarkable improvement in our financial position. Our performance in 2025 is in line with leading companies, whether in our industry or even across all sectors. Our debt metrics are nearing investment grade. Our margins are very strong, and we have high-quality earnings. $900 million in free cash flow provides capital allocation optionality for us in the future. $12 billion, that's something we don't talk about very often, but we also have $12 billion in tax attributes, which will keep our cash conversion strong for decades to come. We are strategically positioned -- repositioning the company for long-term value creation through strong growth, value-accretive capital allocation potential for multiple re-rating as we continue to perform. We've got ahead of us right now, a very strong multiyear backlog to execute our plan. Our backlog is strong in a sense that we've barely seen cancellation in the last couple of years. People buy the airplane, they want the airplane. And our backlog has grown by 39% since 2020. And this was our first strategy I discussed with the team. I said, "Guys, we can no longer run this company with being unpredictable, but the backlog allows us to be predictable." That was day 1 conversation for those of you that were around on my team. So it offers an excellent visibility on our future. It is diversified across customer type and product. Our deliveries have grown with our backlog. And since 2020, we have met our delivery guidance, and I'm very proud of that without exception. And by the way, we're the only OEM that achieved that. So we have capacity to do more than 150. We will continue to win in the market. But you'll see later, we're not planning our business despite significant growth just on increasing the delivery profile. So we feel that we can achieve significant growth actually delivering probably 150 [indiscernible] plan even in the next 5 years. Of course, if there's potential, we'll tap into it. But our plan, maybe as a bit of -- we are being conservative in our plan in a sense that we're not banking on this right now. So we're saying, let's keep it at a reasonable level and let's grow the Services business, let's grow the Defense business and less grow the CPO business quite extensively and maybe make M&A acquisition in those fields. If I'm looking ahead also, clearly, the industry backdrop continues to be resilient and robust. And the word resilient is important here. I have always heard as many years as I've been in this industry, that it's a very fluctuating industry. We're going to -- but the reality right now is we are shaping up a company with a bigger stake, and Bart will cover that later with a bigger stake in Services, a bigger proportion of our revenue coming from Defense to be a much more resilient organization. And the second thing that I have to say about this that resilience is the fact that the two markets we decided to be in, which is the medium and large business, the large business, especially have shown a lot of resilience over the years. I said the other day to someone, I was around in 2008 and '09, when in 2009, despite everything going on, we delivered 20% more global the following year. So -- and we'll talk about our unique customer that we have in that industry. But it makes our company more resilient to the fact that we are in the larger business, but also to the fact that a bigger stream of our revenue will come from our Services business, CPO business and Defense business. What you see also here is the count of ultra-high network individual. The definition of these guys is somebody that has USD 50 million and more of liquidity basically. It's been increasing by a CAGR of 6% a year. There was 340,000 people consider ultra-network individuals in 2019, there is now 4.25%. So it's a 6% CAGR growth on basically the customer base we're tapping in, and it keeps growing. Look at the fleet hours also the flight hours, our airplane, the 5,000 airplane out there that I was talking about, they used to fly 206,000 hours in '19. Today, they're flying 293,000. It's almost 50% more -- 40-ish percent more. So not only the airplane are being -- we're selling more, there's a bigger pool of customer. But at the same time, airplanes are flying a lot, and that keeps going. The Bombardier airplanes in Q1 grew 6% more hours than a year ago in Q1 2023. So that's important. So that backdrop is there. And in our view, this is got to continue to go up. We have a very, very strong product lineup. We have delivered more than 170 now Global 7500. And our competitor main competitor is just coming out now 5 years later with an airplane. Between us, it falls short a bit as a response because it actually doesn't achieve the type of performance we've been achieving for the last 5 years. And on top of it, Stephen is working hard with the team. We're going to come up with the Global 8000 next year, which is going to surpass our own performance and will remain the flagship of the industry. Our customers love the Global 6500 and the 5500. This airplane has been refreshed. We have new engine on. The interior cabin gives you the comfort that same comfort you have if you're at home or at the office, connectivity, et cetera. And our Challenger 650 remains a customer favorite. We delivered increasing -- with deliveries increasing in the past few years, the 650 is still an airplane that our customer base love. And our Challenger 3500 is unique, has been a commercial success since the beginning. And of course, it's the category best seller, an example of a smart investment choice we've made as a company. As I said earlier, we almost doubled the deliveries on that airplane for an investment that was modest investment, not a significant investment, but a good investment. But clearly, we see the result of that. We have the right product line to compete and win in the medium and large segment. And this where all the revenue growth is coming from over the next -- if you look at the next few years, the medium and large category will be growing by 2.8% per year. If you look at the light category that we've exited, that category is going to reduce by 0.5% per year. So clearly, the medium and large is taking a bigger space. And I'm telling you, our customers are saying, "I want a larger airplane." So the cabin size of the Challenger, the cabin size of what the Global is offering are what they're looking for. So the medium and large segment represents more than 85% of the industry revenue. So meaning that Bombardier is tapping and investing and building and focusing on what generates anyway 85% of our revenue in the industry. So we believe that by 2030, the industry revenue will be about $25.7 billion, almost $26 billion. And the majority of that, $22.3 billion will be related to medium and large. So another fast-growing segment of the industry are the fleet customer. If you look at the fleet customer, they are -- the fleet operator have become a great entry point for customer into business aviation over the last couple of years. They have experienced remarkable growth in their business. And that is reflected by the flight hours of our aircraft in that segment. Look at the flight hours, overall, everybody else grew by 35%, which is significant. But the fleet operator, if I look at the Bombardier airplane, flying with the fleet operator today, they are flying 57% more than they were in 2019. That's a significant growth. And you remember, I explained that story that in 2020, when commercial airline were grounded around the world, especially in the U.S. at start, people were looking for ways to move around. And the people that could afford a first class C, started to look at, hey, can I buy hours or share of an airplane from one of the fleet operator. And they did. There was a massive shift of people that used to fly first class seat towards flying private. You leave on time, you don't have to go through the airport like we know it's been challenging over the last couple of years. So it's a completely different experience. And people are realizing also that it's, yes, it's maybe a bit more expensive, but it's not significantly that much more expensive. So the fleet operator have been benefiting of that. And of course, by [indiscernible], we did too because the fleet operator, when I'm telling you in 2020 from being very nervous to today looking at more and more airplane and growing their fleet significantly. You've seen the order we announced this morning. This is a Berkshire company, endorsing Bombardier again, not for the first time. But this guy are already flying a couple of hundred of our airplanes. And now they want to buy more 3500, which is the airplane of there [indiscernible] as being the best airplane in the super bid size category. So this is quite an endorsement. At the same time, this is the best way also for us guys you realized to showcase our product because people start by flying and buying shares of the airplane, they love the airplane and then when they have the money or they want to do their own, then they do their own then guess who they're coming to see. So that's another way to see it. And what I love about us delivering around 20% of our deliveries to the fleet operator, it's what it's creating in the installed base. An overall customer will fly 250 hours a year. This guy flies over 1,000 hours a year, then generating more parts, more services. So this is important in our plan and our strategy to deliver the fleet operator because it's creating also growth, but you'll see the evolution of our installed base. Later, I'll talk about this. Capturing also a greater portion of the pre-owned market is important. This is, again, tapping in our installed base. We have a strong growth opportunity in the preowned aircraft market. For our own preowned airplanes, there are about 250 million large transaction on a yearly basis. We see the market growing about -- by about 5% per year between now and 2030. We launched in 2021, as you know, the Certified Preowned Program in conjunction with other product offering, and we have the potential to grow that business somewhere between $500 million and potentially, and we feel good about it to $1 billion of revenue per year, a new stream that we didn't have before and capturing also new customer with the Bombardier ecosystem in the process also coming our way to do maintenance potentially. Let me talk about the customer and the Services business for a minute. This is an amazing story guys for us. Think about this for a minute. It's not just about the number of airplane you have in your installed base. The installed base was roughly -- it's roughly around 5,000 airplanes now. It's actually -- we're delivering 150 a year, but we are also retiring about 50. So the installed base grew by about 100 airplanes, but the mix is different. What we are taking out mainly is Learjet. And what we're having the 150 are all Challenger and Global. I'm sure you realize that between a Global and a Learjet, there's a lot more maintenance cost on a Global. So the path -- the installed base image is changing. It's shifting from being traditionally a lot of smaller airplane, which requires maintenance, too, but less expensive package. So the number grows by 100 a year, but the mix is richer for us in terms of what we're tapping into. And that's a very important thing. So today, we've grown our segment. You can see that we think that the number of airplanes will grow by another 4%. But what is also important is our market share. By having 1 million square foot, by having an installed base that grows with a different mix of product, we see significant growth in the next few years just organically. And on top of it, you've seen that -- you see on this graph here, in 2020, we had about $1 billion of revenue. And we were about 36% of the market share. In the last couple of years, we went to $1.7 billion last year, we're going to do $2 billion this year. So we will have doubled that business in about 4 years. That is quite significant. And it's a nice, reliable revenue stream that is always there quarter after quarter. This year, I was looking at the cash flow coming out of that business, we said $2 billion this year. It's roughly perfectly $500 million per quarter. So it's a predictable revenue stream and cash flow stream for us. But the size of our aftermarket is expected to grow to 5.6. So today, we were tapping in 2.7 a few years ago, thing that in the last -- in 10 years, that market size will double, more airplane, a richer mix, more large airplane, less light airplane. And if we increase on top of it, our market share because we're not done with increasing our market share, we're at 46% now from 31%, we've increased by 15%. You can imagine this year, it's going to be higher. And moving forward, if you take of 50%, that would mean $2.8 billion business, but we think we can grow it to 70% potentially. So there's room there. But -- and this is no acquisition guy. This is just basically organic growth of what we have today. We'll probably have to add space, we'll probably have to add a few things. But imagine on top of it, if we do acquisition, we can potentially do even better. But let's talk also about the other market we're going to be focusing on, which is the Defense market. The robust demand, and we talked last year about the potential of our Defense business in the second half of the decade. We've already made progress, I have to admit, against that objective, and we will be well on our way by 2025. So this is getting a lot of traction. I just said at the beginning, I was in Washington 2 weeks, 3 weeks ago -- 2 weeks ago now, and the appetite for our solution is enormous. We signed the 80s program in December. There was just 1 airplane. Nobody really noticed that. But that airplane, they're going to need a lot more. They're already talking about quite a few for the U.S. Army. And by the way, they're going to -- they're already talking to the also for that program. So this is going to be something growing. And what we do is we bring new solution to their issue, new capabilities that they didn't have before. So we expect the demand for approximately 375 aircraft, which is representing $25 billion to $40 billion in spending, including modification over the next 10 years. So that's a huge market, $25 billion to $40 billion Defense profitable market to tap in for us, and we believe we're going to be successful capturing a lot of that market. So we see potential for that business to reach $1.5 billion for us by 2030. And again, this is purely organic right now. So in 2021, we launched a planned focus on the things that we most control. We have executed and are now positioned to generate substantial earnings and cash in the future. Throughout our turnaround, we've also focused on positioning ourselves for the future, Defense, Services and CPO. That's what we've done in parallel to turning around this company. And now we have multiple growth levers through 2030 that will clearly propel this business to next level of performance and returns. In turn, this is going to continue to drive strong earnings and cash generation with capital allocation optionality to come. Let me talk about capital deployment. We are deploying a capital allocation framework that is based on return on invested capital. That's what we're going to be focusing on. And we are already using that model, and Bart will share some examples with you later. There are multiple allocation opportunities that are available to us. Our base operational plan is for approximately $300 million of capital allocation per year. This is just around the business, modification, small improvement on product, adapting to new regulation. But the excess capital, available liquidity, which we said would be roughly around $900 million, can be deployed in our capital structure to support inorganic growth or to enhance our product lineup. Our focus and actions are aimed to -- at creating shareholder value and ensuring the company's long-term success. So on this, I will turn over to Bart, which will give you a bit more detail. I hope I set up a bit the foundation of what the thinking is behind our plan. And of course, later after Bart's presentation, we will be answering your questions. Thank you.

All right. Good morning, everyone. Can you hear me okay? All right. I did notice that we had a few people who came in a bit late. So if there's anyone who wanted to come forward and take a seat, now is a great time to do it. If not, standing at the back is fine as well. First thing I would say is, clearly, we are at an airport, lots of air traffic happening, which is good. And for us, that is good as well because, obviously, when we finish these aircraft, they're taking off from this very same runway and heading either to our finishing centers in Montreal or to our center in Wichita Defense Center, where we can take aircraft and put them through modifications work, which is a becoming bigger part of our business as well. Let me start then just by kind of going back a little bit in history, and then I'll give you some numbers to help you understand what all of the elements of growth and potential that Éric just outlined in his comments. But if we go back to 2021, we structured our strategic plan at that time to really create a business that was resilient in any kind of market environment. That was important because we were starting out as a turnaround story. We needed to get our company to a place where even in low volumes of deliveries of aircraft, we were going to be not only very profitable but producing free cash flow. And we would be able to then be successful whatever the markets brought us. And that's the path we're on today and we've already got a lot of that behind us, but more accomplishments to come. To do that, we had to focus on the things we control. The great thing about our story is, and Éric explained it to me very well when we first met, we did not need to rely on the market, delivering more volume to us for us to be successful. Our path and our destiny was within our control. And so we set about the task of really working on those things that we control the most, taking out costs, delivering on the full value of our 7500 program, growing our aftermarket and paying down debt. And we've accomplished all of those things in the past number of the years. We're now approaching the end of our first 5-year plan, and it's time to start laying out the groundwork and the bricks and mortar for the next 5, 6 years and beyond. Today, the actions we've taken to date allow us to generate more than $1 billion of incremental EBITDA per year at low aircraft delivery volumes than where we started the journey at when we were only making about $200 million per year. We also have the benefit going forward in all environments and for years to come of much lower interest expense. We've already reduced our annual interest expense by $330 million a year. We were able to reduce our debt this year by another $100 million already. And so we're well on our way to achieving our ultimate goal, and I'll share those numbers with you in just a few moments. All of the growth we've delivered to date, as Éric highlighted, has been organic. That was one of the other big levers for us. We did not have to make significant investments, and we did not have a headwind of CapEx to be able to accomplish what we're doing. And it's important, and I'll probably stated a few times, so my apologies, but it's important to say that all of the growth that Éric just outlined as well that potential that's there for us is also all organic in nature. We're going to use the footprint of assets and the people that we have and the competencies and skill sets and our ability to get out into the world to our markets and our customers to continue to grow at a very high rate once we've achieved our first set of accomplishments. So the foundation is now in place for a much more resilient company and consistent core financial performance. Great. So what does all this mean? Éric provided some numbers for each of the businesses that are going to be the growth drivers for our company. Our next planning phase, we're actually from a conservative point of view assuming that aircraft deliveries are going to level off in the coming years after a number of years of very strong growth. As Éric highlighted, if there's more demand in the marketplace, we will certainly be there to meet it. As you can tell with our brand-new beautiful facility that we have here and our Challenger manufacturing facility that we have in the Montreal area, we have more capacity to grow and meet the incremental demand without having to invest further dollars. So that's an exciting part of our story as well. If I take the growth opportunities that Éric highlighted and I take a low end of the range and add them up and I look at the potential that's there as well, we're looking at aftermarket defense and preowned businesses combined that could be $4.5 billion to $6.5 billion of revenues annually on their own. And combined, these are businesses that will produce greater than 20% EBITDA margins. So they are accretive to our overall profile -- margin profile, and that's by 2030. So if we compare that to where we ended 2023, those businesses contributed $2.5 billion of revenue. So we're looking at $2 billion to $4 billion of incremental revenue over a 5-year period at good margins, that's a very strong growth profile for our company on a continued basis, and it's super, super exciting. As this growth materializes, it will diversify our revenues further, making us even a more resilient company. And we've highlighted here that by 2030, there is definitely the opportunity for those businesses to become fully 50% of the revenues and profitability that we generate as a company. So another material shift in the way our business not only operates but the way it can perform in all market environments. And that's before we consider any inorganic growth whatsoever. That's 50% in total of revenues coming from those businesses. So if there's a message I want to leave with you here today, it's -- we have very strong growth ahead of us, not only for the next 18 months, but for many, many years to come, and it does not rely on higher deliveries to achieve it. Those would be incremental, just like the plan we set out in 2021 when the base plan was 120 deliveries with only modest delivery growth over the coming 5 years. All of this growth is organic. It's all within the footprint that we already have. We've built out the facilities and capabilities. We just need to take advantage of that market as it comes to us and as we go get it. And the last thing message I would leave is we will continue to not only grow our business profitably but diversify in a way that makes us a better company and one that's just that much more formidable. So a little bit on financials. I think our company today, what does all this mean, I guess, we've been on a very significant trajectory of growth and profitability. But there's clearly unrecognized value, I think, in our share price today and a lot of unrecognized potential. We're only just starting to lay out what the path can look like going forward. But we, today, are a market leader, if not the market leader in business aviation. Éric mentioned our installed base. It's growing rapidly. We've got 51 -- greater than 5,100 aircraft in the installed base today and with a 4% CAGR over the next 5, 6 years. We're growing closer to the 6,000 level mark versus the 5,000 level mark. That's a lot of incremental services, deliveries, activities for our customers, hours flown. It will be a natural tailwind of for our company moving forward. There's already 32% of our $2.5 billion in revenues that are -- or $2.5 billion of revenues that are coming from businesses other than new aircraft sales to traditional customers. And that is also going to grow. We have strong margins and meaningful free cash flow generation already. And our balance sheet is nearing, complete repair, and we do expect ratings for our bonds to continue to rise in the coming years. I've talked about this in the past. Our focus there is on getting our credit metrics to around investment grade. Credit rating agencies tend to be a lagging indicator, but that's our goal, and we're well on the way to achieving it. And we will have significant free cash flow that we can deploy to benefit shareholders, benefit all stakeholders and to potentially grow our company even faster if we can find the right investments to invest in. So investment profile. Éric mentioned that ROIC is going to be the focus for our company and the way we allocate capital. And the message I would leave with you here today is that's already the framework that's in place for Bombardier. We have made a number of very material and significant investments for our company while we've been in turnaround. It may not seem obvious to everyone, but when I look at the cost it takes to refresh an aircraft to bring forward the Global 8000 from the genesis of the 7500 to bring forward the 3500 from the Challenger 350. These are investments that are in the $100 million or so plus range, quite small. The returns, however, are very, very significant. If I carry that over to how we've built out our aftermarket business with a lease-to-own model, very, very low CapEx, very high returns. And as well, Bombardier defense taking advantage of the manufacturing, engineering, design and modifications capabilities that we already have in place and have for many, many years. Very small investment, very high return. We don't give guidance on exact amounts, but I can tell you that all of these are well above 20%. And it's those kinds of investments that we want to continue making in our business as we move forward. So that's the approach, ROIC based. We've talked about $900 million or more of free cash flow in 2025 and beyond. That's going to give us a lot of other opportunities that we'll look to deploy that cash into as well. So looking at what those choices might be, first and foremost, we do need to sit down with our Board. We have a couple of our Board members here today. Tony and Bélinda, thank you for joining us, welcome. Later this year, typically around the November time frame, we have our -- we go through our strategic plan with the Board. This is going to be the year where we'll bring forward recommendations and have a good dialogue with them about how we want to deploy cash. But certainly, we've heard from them already, and we believe it, and we've heard from investors that some form of return of cash to investors is probably a good thing. We need to figure out what that looks like and the Board obviously has to approve it, but more to come. But at the same time, we will continue to maintain, sustain and perhaps even further improve our balance sheet with some of that cash. At a minimum, when you have 7.5% debt, paying off that debt is a good investment. So that's another area that we'll look towards as well. From an inorganic growth opportunities point of view, everything we do to invest in our own business is highly accretive. That is going to be the standard for additional investments, being able to achieve at least the same accretion profile. And we do think there are opportunities like that out there in the world. Of course, we will stay within the boundaries of what business aviation is. This is what we are as a company. It's what we do. As Éric said, we believe we are the best at it in the industry, the best overall performing OEM. The data would support that. If you look at our deliveries and what our teams have been able to accomplish in the last few years relative to our peers who've had delivery misses kind of in the order of about 20% for each one of the OEMs we've been right on and I think that's just a testament to the quality and capabilities of our team. And again, I'd be remiss without mentioning yet again, the significant tax attributes that we have as a company, they've been built up over many years of investment as a company in the past. We've been able to carry those forward even when we divested of some of our other businesses, we kept those attributes. Most of them are in Canada and in the United States. And so basically, earnings growth for us is going to translate into almost 100% conversion into free cash flow as we move forward. And that's not just for years, but perhaps decades to come. So it's a very, very compelling story, I believe, on that front. We've been on a journey now for a few years. We're coming towards 2025. I won't belabor this point, but I think the message is super important. As we look ahead, our first goal is to finish what we started. We set out on a journey. We've increased the numbers in terms of what we believe we could accomplish by the end of '25. And our sole task right now is to deliver on that commitment. Finish repairing the balance sheet, achieve the growth profile that we made commitments on. And that is what we are going to be focused on. So I'm just going to take a few minutes to walk you through what does that look like in terms of numbers? So growth in revenues for the next little while, the next 18 months is going to come mainly from incremental deliveries. There's growth in other parts of our business as well. But we've had a very good growth profile on deliveries for our company, both traditional and now additive with defense customers. We'll continue to grow our aftermarket. Éric mentioned, we expect to achieve $2 billion in revenues this year. That's a full year ahead of plan. So we have -- we still have 2025 to achieve more growth there, and that's clearly in line of sight. Our facilities are full. The bring your customer's home strategy is working even better than we had hoped or had planned, and we see a lot of tailwind in the future. So it's growing exceptionally well and poised to do more. And of course, our other businesses, Defense and Certified Preowned, are going to contribute as well to the revenue growth over the next 18 months. On the EBITDA front, I mentioned we do expect strong margin conversion on incremental revenues, and that's across all business segments. Aircraft pricing, net of inflation. We get this question a lot. We expect it to be a net tailwind. It has been this year. It will continue to be this year. It will be next year as well. And with 18 to 24 months of backlog presold, we know the pricing. We know what our bill of materials inflation looks like because we sign up for our supply chain 12 to 18 months in advance of needing to use it. So we know we've got a net tailwind they're coming to us. It tells you something about the strength of the market out there, the demand for new aircraft right now, very much supported by a tight used market. And so even though inventory in the used space or preowned space has come up some, it's still very, very tight by historic numbers, and that is very supportive of new aircraft sales and a strong pricing environment. And lastly, we will continue to make investments to support this growth. In a turnaround, we need to set ourselves up for full success in the future. So we're making investments in R&D. We're making investments in our operations and as well in our own digital transformation. This is something that you'll hear us talk more about in the future, a lot of investment and exciting opportunities that will be coming out of that as we move forward. So all of this gives us the confidence that we're going to reach 1.625 adjusted EBITDA by '25. And lastly, on free cash flow, we really don't have much to announce here other than consistency, which I think is a good thing. We expect our operational CapEx on envelope is going to remain at around $300 million per year, both for this year and for next year, maybe a bit lower this year. Cash interest is going to continue to come down as we repay more debt. We'll end '25 in the $300 million to $400 million range, which is in line with our ongoing deleveraging opportunities. Again, no significant tax payments for those who look closely at our financials. You'd notice it's usually a single-digit number in terms of millions of income tax. And finally, we are planning for a more neutral working capital environment in 2025. We all know that '23 and '24, we've got a lot of variability in our working capital as we've been ramping up production to meet higher deliveries and we've had to play catch up after the fourth quarter each year because as, David Murray, our Head of Manufacturing, is right here, reminds us once we've delivered the last aircraft usually around December 29, 30, there's no planes left in the facilities. So you have to build inventory back up and to keep delivering aircraft for customers. So being the CFO, I'd be remiss if I didn't talk a little bit about the balance sheet and debt. Net leverage obviously has decreased significantly. It will continue to decrease. I mentioned we completed the $100 million purchase of bonds that we announced towards the end of March. We completed that earlier this month. Our liquidity target is going to remain at about $1 billion to $1.5 billion. We found through very high working capital usage periods. That's more than enough to cover ourselves and give us adequate liquidity intra-quarter to operate our business appropriately and give us some downside protection. But we do want to optimize our liquidity position further. Last year -- sorry, the year prior, we took cash on hand and paid down $400 million of debt. We replaced that partially with a $300 million revolver. Okay, those are interesting activities. But the unique thing about that is when you're taking cash off your balance sheet and paying down 7.5 coupon debt, and you've got a standby facility with tens of basis points of cost, that's a big spread that we can pick up. So we do want to optimize that, continue to pay down debt directly and reduce our annual interest expense by another $30 million to $70 million over the next 18 months. Now we have been working to actively reduce our leverage. We're down $4.6 billion of gross debt since 2020. I mentioned our $330 million of interest expense -- annualized interest expense reduction to date. We'll obviously continue to focus on a few other things. One is maintaining an adequate runway for debt maturities. Today, we're sitting at about 24 months. Our next maturity isn't until mid-2026. And we have an opportunity probably in the not-too-distant future actually to clear that remaining debt stack off. So we want to have manageable amounts of debt going forward, debt maturities in each year. As we improve our credit ratings, 750 feels about right. We might be able to grow that in the future, but -- for an annual maturity amount. But what that allows us to do is have absolute confidence that we can refinance our company at any time in almost any kind of market condition. And that's the goal, and we're well on our way to that. The other thing is from an optionality point of view, we do embed call features in all of our bonds. So we can call at times when rates have perhaps come down and we can take advantage of a beneficial rate environment and bring our interest costs down even more quickly. So that's -- in a nutshell, we will obviously continue to be opportunistic as we move forward. I just -- that means we must be out of time, and it's time to get on with the Q&A. So thank you for listening to our presentation. We are obviously as Bombardier and as a company extremely well positioned to be successful in the business aviation space. Our 100% center of focus, whether you look at our products, our financial performance and our growth opportunities and ability to allocate capital successfully going forward. The future is certainly right, and it will be at your altitude. So thank you so much. We're now, I think, I'll bring Francis back up on stage, and we'll get into Q&A, and then we've got some very interesting opportunity for you to meet with our executives, share some time, ask questions and then take a tour through one of our green aircraft. So Francis, over to you. Thank you, everyone.

All right. We're going to start the Q&A. We have a couple of standing mics in the room. We'd ask you to go to the mic to ask a question. And please identify yourself and your firm if you do ask a question for the benefit of everybody participating. Before we start, we also have a question queue online. So I'll let the operator give instructions to ask a question online, and we will be taking some as we go along as well. So operator?

[Operator Instructions].

Okay. Thank you. So with that, I see Fadi, please make your way to the mic to get things started. Thank you.

Okay. Thank you for the presentation, very helpful today. So a couple of points on the -- you laid out kind of ruled out the clean sheet or a new aircraft investment. Over the last 5, 6 years, you have gained market share in the large segment. You have maintained your position in the mid-segment. But there's more competition coming from the and a bunch of Gulfstream aircraft. Can you elaborate on your confidence in being able to sustain that position -- that market share position you have today going into 2030 because that's kind of the implication of some of the forecasts you gave? The second kind of follow-up is on the defense M&A. It sounds like M&A will be focused on the defense, what exact capabilities are you looking for? What kind of a scope of transaction should we be thinking about? And you mentioned partnership, and I didn't understand quite sure what you meant by partnerships?

So Fadi, thanks for the question. I may and you may complete So your first question is an important one. I can reassure you that this management team understand that we're not a short-term play, okay? In order to be -- to have our resolved and the growth sustainable, we need an installed base. If we want to grow Services -- so we look at the next 15 years, okay, even 20 years sometimes, to make sure that we're still going to be having the portfolio that enable that installed base to grow. When I look at it now, today, the view that we have is -- and I said that our product portfolio competes extremely well across the board. I would say pretty much all the OEM right now have played their cards in terms of what product they will be offering in the next few years. But I know that there's things they're working on as we do that are longer term. It is clear also that the customer base what they're asking today, if it's not performance, it's all about the cabin, connectivity, comfort, things like that. And we do quite a bit there. And that's why we're talking about derivative more than a sheet design because we need to stay on top of the game here as we are today, offering new possibility within the cabin environment. The performance, we've played our card, too. I think the 8000 is clearly going to be the flagship for a while. And we know that other -- you talk about the are coming up and offering something new, but we feel very, very strong about what we have today. The third thing that can trigger a clean sheet is new technology. As of today, I don't see any new technology game changer coming in that will justify me to go out there, talk to the Board and justify a new clean sheet. So I don't see it, and the team doesn't see it. So you need something that will be really a revolution. It doesn't mean that there will not be improvement -- incremental improvement. But today to say, we start with a white sheet of paper and we're designing a brand-new airplane, we don't see that. okay? And maybe in 3 years, 4 years, we'll say, hey, there's something coming up, but by the time we assess it. So that's why within the next 5 years, I don't -- I see some interesting derivative an improvement clearly coming up. To your other question -- I hope I answered your question. But clearly, I think what I see between now and '30 is derivatives. They could be significant derivative, but there will be derivative, I don't see a clean sheet. But there will be something that either guarantee or success long term or something that really the customer is demanding also. So that's how we're thinking about this. The other question that you have, which is an important one is what could be a partnership? So there is different things that can happen out there. It doesn't mean we always have to own everything 100% ourself, but there could be partnership possible in maintenance, as an example, or in defense, which are going to be the two area of focus maybe with the certified preowned. So we could enjoy a partner. I'm not talking a partner at the Bombardier Inc. level. I'm talking more creating a joint venture with someone to enable and trigger more volume in Services, more volume in Defense. So they will be strategic. And so there's things we're thinking of, but I'm not ready to talk about it now, but there's things that will be JVs type of structure but always with the mindset of enabling either more airplane deliveries or greater services or offering a better offering in defense also. That's how we're thinking about it. Fadi, you had a third question, what was it?

Defense.

On the M&A defense, yes. I think you need to -- I think there's a lot of possibilities out there. I think we like the aspect that we can bring new solution to the table. I think our relationship with what I call the mission house is important. And I can tell you, we're not going to become a mission house. It doesn't make sense. Sometimes today, I have like 3 mission house competing all selecting the Global 6500 as an example. So they're competing, they're offering to a country a solution, which is different, but they all take our airplane. So why would I go pick up and become a mission house and then have the other guys competing with me. So it doesn't really make sense. But what we do see though is maybe there is more -- there's things I think we can do better than what the mission house are doing today. So we can probably vertically integrate some of the think about the shapes of the airplane, things like that, that we have all the data and the science in our engineering team to make modification on the shape of the airplane. Nobody is better positioned than us. Some other people are doing it today, why would we not engage in doing that, which is something we know exactly how to do it because it's our product, and we have thousands of hours of flight tests and data. So all just to say that we will be meticulous. We're not going to do anything that I think will surprise any of you, but we'll do leverage our capabilities. And I think that's how we've been thinking about restructuring that business in the last 4 years. We are leveraging our capabilities of growing services, we are leveraging our capabilities whatever if it's engineering or production, on leveraging our capabilities in defense also. So that's how we're going to be thinking about that.

If I could just add one comment to Éric's comments, competitiveness in the defense market using our aircraft. We know there's significant demand out there. We see it today with -- we're in many campaigns as we speak, where our aircraft is either going to be the only one, as Éric highlighted, that's in the competition or we're very well positioned. Our Global 6500 as an example, we've had it in different U.S. defense departments now for more than a decade, both in test environments and in full use environments in the field. It's the preferred aircraft. It is -- has the greatest reliability of probably -- and we've heard this directly from the U.S. Air Force of any aircraft in their entire of all the aircraft that they fly. And reliability and capability and known capability is very, very important to them when they're building their campaigns and deciding which aircraft to choose. And when we look at our competition out there, if they're looking for large cabin as an example to use for their various missions out in the field, there really only is one proven aircraft now, and it's ours. The G700 has only just gotten FAA certification. It does not have the flight hours. It is not proven. It will have limitations, flight limitations probably for years until Gulfstream is able to work through all of them. And the 800 is down the road and Dessau, who knows when? That aircraft will come to market. And it's really never been part of their business model to work their aircraft into the defense space. So from a competitiveness point of view and how we plan to approach that market and we've got our executives here that can answer more direct questions when you get some time with them on this, we think it positions us extremely well to continue to fully participate, if not grow and take advantage of that part of the large cabin market.

Thank you. Thanks for your question, Fadi.

Bart and Éric, thank you very much for hosting this event today and a very articulated strategy. My first question is on the EBITDA margin. You've done a good job of improving the EBITDA margin over the years. There's been a few drivers to explain that. You're on your way to achieve 18%. But when we look by 2030, I understand that you don't want to put a guidance out there yet. But when we look at the driver, the increased mix towards Defense, CPO, but also the fact that when we look at the aftermarket, some of your fleet operators have beef up their MRO capabilities. So it looks like that parts could outpace labor/service over the years, and we know that parts are more profitable. So could you maybe walk us through more color about where we might see margins down the road in terms of EBITDA? And the second question, if you could provide more color about criteria in terms of M&A and kind of the ROIC threshold that you're thinking about, Bart?

So let me get started. And so I think what we're telling you, Benoit, this morning -- and thanks for the question and for being here, is the businesses that we're thinking of growing are generating incremental profitability and are not dilutive of the margin we're targeting at 18%. They actually -- they're are 2 businesses, and we said it before, that are getting better than 20%. So what we're telling you today is the 2 business that are Defense and Services that are -- they're the ones that we're going to be growing basically through the installed base, through growing our Defense business. So I think then you should see and Bart showed a slide where 50% of our revenue could come from these 2 businesses, which are incremental in terms of profitability and clearly not dilutive, but incremental. So I think that's how you need to think about that. And maybe I'll let you answer the question now.

Thanks, Éric. And just a little bit of other insight. When it comes to margins in -- I'll use aftermarket as an example. We've had a very large build-out of new facilities. Most of them came on stream at the end of 2022. They were filling up last year. We've been adding resources to be able to do all the incremental work that's coming in. As we gain stability in our aftermarket as facilities as an example, and they're more full, that gives us opportunity for -- to have gains on productivity as well. Historically, I think the turning of wrenches, the hourly work has not been a significant margin contributor. It hasn't really been a margin contributor at all. So that's an opportunity for margin expansion potentially in the aftermarket business and then capturing more of the overall market at the high margins Éric was talking about is the other opportunity there. Defense, we know because of the part of the defense space that we participate in, not the mission house work, which is tends to be a lower margin, but in -- with the aircraft and then modifications and engineering, we really like the -- it's a very compelling profile. And as we grow that business, that will be additive. So I think there's -- Benoit, 2030 is a long way out. But what I would say is if we're able to take advantage of all the potential that Éric highlighted, and we're able to make that next shift from 30% to 50% of those other businesses, there could be opportunity to grow the overall margin profile of the business. But we have some work to do, and we need to figure all of that out. When it comes to new investments, your follow-on question, I did mention earlier that because of the nature of the type of internal investments we can make, and they tend to be low cost but high return. I think probably the direction we'll go and look to is use that as our benchmark or our bar for looking at other external kind of M&A opportunities. Not everything, as you know, fits into a perfect package and whatnot. Sometimes you need to invest to grow down the road as well. But we'll be keeping that in mind. So that's kind of the framework that we're thinking of right now.

Maybe if I may just a quick one on the tax loss carryforward. Obviously, this is valuable for Bombardier for the coming years. Is it something that you could leverage in terms of M&A going forward? And do you see opportunities to leverage this kind of value down the road?

Yes. Benoit, that's definitely something we've considered and are going to look at more for sure. Certainly, as the owner of these attributes, we have a logical position to be able to use them basically anything we add so long as the revenues and profits are coming within the jurisdictions where we have the attributes, Canada and the U.S., which is where most of our profit will be generated from in the future, yes, we can use that to shelter. And it will be part of our decision making because it will allow us to grow, but keep converting basically all new EBITDA growth directly into cash flow as well. So that will be part of the evaluation process, yes. Thank you, Benoit.

Kevin from CIBC. Maybe just two quick ones for me. One, just on the revenue diversification. Just wondering how you think that might impact the seasonality of working capital. It sounds like some of that revenue might be more equally weighted through the year versus new aircraft sales, which are very Q4 heavy. And then just in terms of CapEx, I appreciate the color. It sounds like we're running about $300 million kind of normal operations, but there are opportunities to kind of use that excess liquidity. Is there a way to think of the goalpost of capital intensity? Could that $300 million be in some years, $500 million if you think you need to invest in derivative aircraft? Do you think of it as a percentage of revenue? Just any goalpost in terms of how that CapEx might fluctuate over the next 5 years here?