Winning the Long Game

Bombardier—the storied and successful Canadian aircraft manufacturer—hosted its 2023 Investor Day last week.

An overview of the company’s recent progress and future opportunities for diversified growth was presented by Bombardier’s President and CEO Éric Martel and supplemented by Executive Vice President of Aftermarket Services & Strategy Paul Sislian and Executive Vice President and Chief Financial Officer Bart Demosky.

Mr. Martel stated: “In 2021, we laid the foundation for a stronger, more resilient and predictable Bombardier by 2025. Halfway down the road, we can say we are delivering on that promise. All of Bombardier’s strategic priorities are on track or ahead of plan. We are, therefore, proud to announce today that we are confidently raising the bar. The future is bright for Bombardier. While we are carefully monitoring the current market situation, we know that we have all the ingredients in place to remain a driving force in the industry. Our financial performance allows us to secure our vision for the future and enable our exceptional, dedicated, and passionate teams to lead the way toward more sustainable aviation.”

Bombardier, based on strong business execution and fundamentals, announced it is updating its 2025 objectives. The company now aspires to see annual revenues of $9-billion by 2025, with an adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of more than $1.625-billion and a healthy adjusted EBITDA margin of approximately 18-percent. Bombardier, in the coming years, also expects to generate significant free cash flow, to the tune of more than $900-million annually by 2025. By continuing to de-lever its business, the company now expects to reach a net leverage ratio in the range of 2.0x to 2.5x.

Between 2020 and 2022, Bombardier’s revenues grew 23-percent to $6.9 billion. Expanded aftermarket business was an important contributor to the company’s strong performance, with revenues increasing by more than fifty-percent in the same period. Bombardier more than quadrupled its profitability to $930-million in adjusted EBITDA and generated a solid $835-million in free cash-flow over the last two years. In terms of deleveraging, Bombardier maintained its opportunistic and proactive business approach, thereby reducing its total debt by $4.5-billion, a figure which represents, including 2023’s debt-related transactions, a 45-percent reduction compared to 2020. The diminishment of debt occasioned the upgrading of the company’s credit rating by both S&P and Moody’s.

Bombardier will continue to focus on strengthening its balance sheet, optimizing its liquidity requirements, and improving its leverage level. The company is revising its net leverage ratio objective to a range of 2.0x - 2.5x by 2025—a figure that approaches investment grade credit levels. Bombardier’s previous target was approximately 3.0x.

Citing improved business fundamentals, Bombardier now expects to annually generate more than $900-million in free cash flow by 2025, which—as the company’s brass explained during Investor Day—affords Bombardier ample flexibility and sets the plane-maker up for significant future capital allocation optionality.

Continued strong demand in the medium and large business jet categories favors Bombardier and its popular Challenger and Global platforms. Over the past two years, the company has introduced the new Global 8000, an evolution of its flagship Global 7500 aircraft—in so doing solidifying Bombardier’s leadership position in the large business jet segment. What’s more, the addition of the 3500 model to Bombardier’s long-standing and successful Challenger 300 family helped the company maintain its command of the super midsize jet market as well. Thanks to its outstanding aircraft portfolio, Bombardier, for the last two years, has made the highest number of deliveries among business jet manufacturers—so states the General Aviation Manufacturers Association (GAMA).

In 2022, Bombardier fortified its specialized aircraft business by establishing Bombardier Defense in Wichita, Kansas. Over the months since, the company has leveraged its historic and comprehensive expertise in specialized aircraft, knowledge gleaned by dint of its Challenger and Global platforms, as well as its technical capabilities, world-class flight test center, and engineering know-how to command an increasingly large share of the defense market.

Insomuch as defense programs are slow to operationalize, Bombardier has prepared its infrastructures to enhance the company’s long-term participation in the sector. The rising demand for right-sized, flexible aircraft solutions has positioned Bombardier to compete effectively in the defense market. The company anticipates its revenues from defense sales and service will triple to a total of more than $1-billion in the latter half of the 2020s.

Since 2020, Bombardier has invested significantly in its aftermarket business—a segment that has played an important role in the diversification of the company’s revenues. Bombardier’s service footprint has grown by nearly one-million square feet of new worldwide capacity, and its aftermarket team has added more than 250 skilled technicians to its ranks. The strategy has proved effective, increasing aftermarket revenues more than fifty-percent since 2020. Overall, Bombardier is contemporaneously on track to meet its aftermarket goal of $2-billion by 2025, and well positioned to grow significantly beyond.

Launched in 2021, Bombardier’s Certified Pre-owned program has proved a successful addition to the company’s aftermarket offerings. The enterprise will continue to play an important role in Bombardier’s revenue growth and further diversification.

FMI: www.bombardier.com