Bombardier Reports Second Quarter 2019 Results, Revises 2019 Guidance

Provided by Bombardier Inc/Globe Newswire

• Consolidated revenues of $4.3B, representing 9% organic growth, driven mainly by higher aircraft deliveries and aftermarket growth
• Adjusted EBITDA and adjusted EBIT of $312M and $206M respectively; reported EBIT of $371M, largely driven by gain on the sale of the Q Series program
• Free cash flow usage of $429M during the quarter and $1.5B year-to-date, in line with target for the first half of 2019, supporting Global 7500 ramp-up and progress on Transportation legacy projects
• Full year guidance⁽³⁾ updated to reflect new Aviation reporting segment, largely in line with previous guidance for aerospace segments
• Announcing $250-$300M of additional investments and costs in 2019 to address late-stage, legacy projects and ensure transformation at Transportation remains on track
• Consolidated adjusted EBIT for 2019 now expected to be $700-$800M, reflecting reduction of full-year Transportation adjusted EBIT margin to ~ 5.0%
• Consolidated free cash flow usage for 2019 now expected to be approximately $500M, reflecting the additional investments, costs and timing of project delivery milestones at Transportation

All amounts in this press release are in U.S. dollars unless otherwise indicated. Amounts in tables are in millions except per share amounts, unless otherwise indicated.

MONTRÉAL, Aug. 01, 2019 (GLOBE NEWSWIRE) — Bombardier (TSX: BBD.B) today reported its second quarter 2019 results and provided updated guidance to reflect both the consolidation of the Company’s aerospace assets into a single reporting segment, Bombardier Aviation, and the additional investments and costs needed to complete late-stage, legacy projects and the transformation at Transportation by the end of 2020.

Organic revenue growth in the second quarter was strong at 9% year-over-year, driven mainly by increased aircraft deliveries, solid aftermarket performance fueled by past investments to expand Business Aircraft’s service network and capabilities, as well as progress across the rail portfolio. In the second quarter, Bombardier also completed the sale of the Q Series aircraft program and announced the sale of the CRJ program to Mitsubishi Heavy Industries. The quarter also marked the one-year anniversary of Bombardier’s partnership with Airbus, which has added close to 300 new orders and commitments to the backlog during this time period.

“We are very happy with our continued momentum in aerospace, where our transformation is progressing ahead of plan,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “We have successfully addressed our underperforming commercial aircraft programs and are now fully focused on business aviation, where the ramp-up of Bombardier’s largest growth program, the Global 7500, is proceeding as planned, as are our aftermarket growth strategy and our product portfolio enhancements.”

In 2019, Bombardier will make additional investments and incur additional costs at Transportation, totaling $250 million to $300 million, to both complete the late-stage, legacy projects and protect the delivery schedule for other projects. The investments include adding manufacturing and engineering capacity.

“At Transportation, we have made significant progress and remain on track to complete the transformation by 2020,” Bellemare continued. “As we simultaneously address our legacy projects, complete Transportation’s reshaping to leverage its global scale, and ramp-up to deliver on our strong backlog, we are making the necessary investments to ensure we have the right resources and capacity to deliver stronger, sustainable financial performance in the years ahead.”

Second Quarter 2019 Results

Bombardier’s revenues for the quarter were $4.3 billion. Adjusted EBITDA and adjusted EBIT for the quarter were $312 million and $206 million respectively, mainly driven by a 7.0% adjusted EBIT margin at Business Aircraft while Transportation recorded a 5.1% adjusted EBIT margin. Transportation’s lower margin reflects additional cost pressure mainly on its large, complex legacy projects. On a reported basis, EBIT of $371 million is largely driven by the gain of $219 million on the sale of the Q Series program.

Free cash flow usage was $429 million for the quarter and $1.5 billion year to date, in line with the Company’s expectations for the first half of 2019. Free cash flow performance was solid across aerospace segments, offsetting a softer performance at Transportation. Bombardier also maintained a healthy liquidity position, closing the quarter with $3 billion of cash on hand.

Guidance Update

Link to detail charts

Starting in the third quarter of 2019, Bombardier’s three existing aerospace units will be consolidated into a single Bombardier Aviation business segment. As a result of this change, and to reflect the additional investments, costs and the timing of project delivery milestones at Transportation, the Company is updating its 2019 guidance as follows.

• Revenues increased by 6% year-over-year to $1.4 billion on 35 deliveries, including 2 Global 7500 aircraft.
• Aftermarket revenues grew 3.6% year-over-year or 11% on a year-to-date basis and reflect the disposal of the aircraft training services earlier in the year. Supporting the aftermarket growth strategy, a new Dubai line maintenance station was announced during the quarter to enhance service capabilities in the Middle East.
• Backlog increased by $0.4 billion in the quarter and $1.0 billion year-to-date, reaching an industry-leading $15.3 billion and reflecting broad market interest across all regions.
• Adjusted EBITDA for the quarter was stable year-over-year at $146 million, even as production ramps up on the Global 7500. The adjusted EBIT margin of 7.0% during the quarter is lower against the same quarter last year, mainly as a result of higher amortization associated with Global 7500 deliveries. EBIT margin for the quarter was 6.1%.
• As the Global 7500 ramp-up progresses on plan and with all 2019 deliveries now in completion stages, the aircraft continues to demonstrate unmatched short runway performance by completing the first ever non-stop flight from London City Airport to Los Angeles.
• Subsequent to the quarter, Bombardier unveiled the Learjet 75 Liberty. With improved economics, $9.9 million list price and operating cost comparable with its competitors’, the new member of this iconic brand is a step up for Light jet operators, while delivering better performance.

Commercial Aircraft

• On May 31, 2019, the Corporation completed the previously announced sale of the Q Series aircraft program assets, including aftermarket operations and assets, to De Havilland Aircraft of Canada Limited (formerly Longview Aircraft Company of Canada Limited), a wholly owned subsidiary of Longview Aviation Capital Corp., for gross proceeds of $298 million.
• During the quarter, the Corporation entered into a definitive agreement with Mitsubishi Heavy Industries, Ltd (MHI) for the sale of its regional jet program for a cash consideration of $550 million payable upon closing, and the assumption by MHI of liabilities related to credit and residual value guarantees and lease subsidies amounting to approximately $200 million. The CRJ production facility in Mirabel, Québec will remain with Bombardier and will continue to supply components and spare parts and will assemble the current CRJ backlog on behalf of MHI, CRJproduction is expected to conclude in the second half of 2020. The transaction is currently expected to close during the first half of 2020 and remains subject to regulatory approvals and customary closing conditions.
• Revenues reached $516 million during the quarter on increased deliveries, including 6 Q400 deliveries prior to completion of the Q Series aircraft program sale and 11 CRJ. Year-over-year revenues decrease is due to C Series deliveries included in the comparable for the first half of 2018.
• Adjusted EBIT of $12 million includes $21 million contribution from commercial aircraft programs, offset by $9 million share of net loss in ACLP. EBIT for the quarter of $226 million is largely driven by the $219 million gain on the sale of the Q Series aircraft program to Longview.

Aerostructures and Engineering Services

• Revenues at Aerostructures and Engineering Services grew 24% year-over-year to $565 million as a result of the ramp up of the Global 7500and A220 programs.
• Adjusted EBIT margin for the quarter of 6.5% reflects the ongoing ramp-up of the Global 7500 and A220. EBIT margin for the quarter was 4.4%.
• The Corporation continues to pursue the divestiture of its Belfast and Morocco aerostructures businesses as it focuses its aerostructures activities around the core capabilities in Montréal, Mexico and the newly acquired Global 7500 wing operations in Texas.

Transportation

• Revenues during the quarter totalled $2.2 billion, delivering 2% growth year-over-year, excluding the unfavourable currency impacts. Revenues year-to-date are in line with the revised production schedule announced earlier in the year and consistent with full year guidance of $8.75 billion.⁽³⁾
• Adjusted EBIT margin for the second quarter of 5.1% was below expectations, reflecting additional cost pressure on large, late-stage projects, mainly in the U.K., Germany and Switzerland. EBIT margin for the quarter was 4.0%.
• Full-year adjusted EBIT margin guidance is now approximately 5%, mainly as the Corporation makes additional investments and incurs additional costs, totalling $250 million to $300 million, to both complete the legacy projects and to protect the delivery schedule for other projects. These investments include adding engineering and production capacity.⁽³⁾
• Transportation’s backlog of $33.6 billion reflects book-to-bill of 0.9 during the quarter. The positive market outlook for the rail industry remains unchanged.