Éric Martel - February 9, 2023

So, good afternoon everybody. It is a real honor for me to be in front of you today at the club. I was here probably a year and a half ago and really today, I've been in the job almost three years now back at Bombardier. It's been quite a journey to be honest because I started April 6th, 2020. So I'm sure you all remember where you were probably sitting at home somewhere not in the office. But it's been quite a journey since then. And today I'm amazed how the team at Bombardier has been able to raise and totally transform where we were and what we became, but always keeping the essence of our culture, our ability to design amazing product, and that's what I want to share with you today, give you a bit of an update on where we are in that journey. So a lot of people say, are you still producing Ski-Doos? Another company produced Ski-Doos, we've sold it in 2003, but we also sold our train division. So today we also exited the commercial aircraft. When I say commercial aircraft, meaning airplanes delivered to airlines. So we don't produce airplanes to airlines. We are strictly focused in business aviation, private aviation. So we build private jets, and we build the Challenger and Global that are the two models we build. There are a few variations of those, but they are clearly today, if you go and travel the world, the most renowned jets are being designed and produced here in Canada, in Toronto and in Montreal, with a large supplier base. One very, very significant path of growth for us also has been our services. We have 5,000 airplanes between Challenger, Global, and the Legacy Learjet flying all around the world. Wherever you go and you land on an airport, there's the likelihood of having at least a Bombardier airplane, or many, is very strong. So we are shining and making Canada shine all around the world, having all these jets in service all around the globe. The other path, the path of service, is very important. It's becoming close to about 25% of our revenue. Last year we increased by a million square foot our service center in the world, and I'll come back to that a little bit later. But we also have one very significant leg now that is starting smaller. We've been around defense for a long time, but it was always a bit of an anecdote. The Americans call you and say, can you do this? We say yes we can with a Global, modify the platform, it becomes a surveillance communication piece of equipment for them, and we've been doing it a lot over the years with all our platforms. But today we decided to create a real business unit dedicated to defense within Bombardier, leveraging the capability of the platform that we have. And today, just to put a few numbers, we just announced our revenue at 6.9 billion, but if you translate into Canadian, we're a company of $9.3 billion Canadian. And our employees today, we have 15,900 people, and I'll talk about more also the supply base. This is just strictly Bombardier people. And I already mentioned the 5,000 airplanes. Clearly, in a business like aerospace, and I was just talking with Bob at lunch, there's not that many countries in the world, and we should be very proud that we can design, manufacture, and deliver airplanes. You can count them with just one hand probably. You're thinking about the US, Brazil, and France. That's pretty much it. Even this week, a very capable country like Japan has been working on an airplane, which was a regional jet, since 2007. The CEO of Mitsubishi came out this week and says, we stop everything. It just doesn't work. It's a very complicated and sophisticated technology journey to be able to design and build an airplane. And we know the capability the Japanese have. They're a very capable country, but they just dropped it. And we can do it here in Canada. So you look at the Global, the innovation has always been part of our DNA. We already today have the Global 7500 in service. We delivered about 130. The green aircraft is manufactured here in Toronto. This is the airplane today that goes in the business aviation faster, further than any other airplane that exists. And just to push the limit, we pushed it with the Global 8000. So last year we went to Geneva at the air show and we said, by the way, everybody loves we have the best airplane, the most performing airplane in the world today, but we're going to come out with the Global 8000 which pushes the limit again of technology. So we unveiled it in May. The airplane is going to be able to do 8,000 nautical miles. So you can sit on that airplane and fly for 17, 18 hours. That's a long flight. And the top speed, and I'll show you a little video after that which we're very proud of, the airplane will be certified at 0.94 Mach. In order to be able to certify the airplane at that speed, almost supersonic speed, we had to fly the airplane more than supersonic to certify the airplane. And proof of that is the next slide, which will be a little video showing the flight test we've done to fly the airplane supersonic.

So, one thing that I have to say is the last airplane, commercial airplane that flew supersonic was the Concorde. So that's the first airplane since the Concorde being able to fly supersonic. I don't know. I'm sorry. Okay, I got the slide back. So quickly, 15,900 people, 10,600 are here in Canada basically. So the majority of our people are based here. We have quite a bit of capability in the US, Mexico, but also worldwide to serve the different airplanes that we're flying out there to serve our customers. We are also making right now a major investment here in Toronto. As you know, we sold our Downsview facility, which had an airport and everything. We are moving our 2,000 people to the Pearson airport. So the airplane is coming together. Actually, we're going to be starting moving our people in in August, Septemberish next year. So we have an all orchestrated ballet here to be able to continue producing the airplane. And the team is working on it and it's going pretty well. So we're happy also because it's going to be a state-of-the-art building with 65% lower in terms of GHG emissions. Just a bit of a note on Bombardier's contribution to the Canadian economy. That study came out about a year ago now. So we contribute 5.7 billion annually to the Canadian GDP. That's quite significant. And we are creating, over and above the jobs I mentioned, of course with all our suppliers, about 33,000 jobs. And Bombardier's operations generate $2.7 billion in wages every year to the Canadian economy. One thing also worth mentioning is the Global 7500 program is $2 billion of GDP. And I just want to remind you, it's a very unique industry. The Canadian government has put about $250 million of borrowed money for a while, and we're reimbursing that money. But you get $2 billion for $250 million. It's a pretty good deal on a recurring basis year-over-year for the government. If you look at our journey also on the financial front, you look at our numbers in 2020, 5.6 billion business with 200 million of EBITDA. This morning, we've announced that our EBITDA has grown from 200 to 930 and 6.9 billion US of revenue. Thank you. And the biggest issue at Bombardier was our balance sheet. We had a huge debt. You can see here the net leverage if you look at the EBITDA and the net leverage that we had was at 40 something. So a pretty ridiculous number. But today we're down to 4.6, which is still not there. We still have work to do, but we have a great path. Actually, the 4.6 was pretty much the target we had for 2025. So we're for 2024. So we're ahead of plan. We've been able to reimburse that. Just last year we reimbursed a billion one with our own cash generated by the operation. So really the business is trending. And you can see here the guidance this morning we've talked about $7.6 billion of revenue US, a billion 125 of EBITDA, and again cash flow generation. And we'll see in terms of, we haven't guided on the net leverage, but our net leverage will continue to improve of course. This is a picture, a picture is worth a thousand words. You can see those are the maturities of debt we had when I started. So we had that in January 21, in May 21, in December 21. We've been able to face all of that with the restructuration using also our own cash. And today, our next maturity is in March 2025. So we are always trying to keep that runway just in case of unpredictability, and we are well on our way to be able to address that way ahead of when it will happen. So clearly, it's been, and we've been upgraded of course by Moody's and S&P a couple of times. So that's clearly showing that the plan is working and we've been on a successful journey here on the financial point of view. One thing that's important also, of course, we have an industry that has its own challenge in terms of emissions. And we have a plan. You can see here that transportation is about 13% of all emissions, and aerospace aviation alone 2%, and business aviation 0.4%. So people can say, oh, that's a small number, but still as an industry, we've committed to bring that 0.4% to neutral by 2050. And we do have a history as an industry of reducing. If you go back to the early 60s, we reduced our emissions by 50% since then, and we will continue. And it's all going to be about technology. And Bombardier is on that journey also because we do multiple things right now. The first one is we committed our company this year to only use sustainable aviation fuel. Sustainable aviation fuel right away reduces our emissions by 25%. And Bombardier is flying a lot. We fly our demos, we need to build airplanes, we need to go test flight the airplanes. We have 100 pilots just to give you a perspective of people all around the world to fly our airplanes. So this is going to be an impact right now of 25%. We have environmental product declarations. We are committed to reduce our emissions as a company by 25%. And we're well on our way to do that. But we do massive, massive investment right now in new technology and R&D. The majority of our R&D budget today, probably around 90%, goes to technology to reduce emissions. And one of these technologies is what we call the EcoJet. I have another small video for you guys. So you'll see a few videos today. But the EcoJet is really changing the shape of an airplane. It reduces friction, improving the aerodynamics. And just with that, we believe we're going to be reducing emissions by around 20% without doing anything else. And then there's other things we'll do about using different sustainable aviation fuel is one of them, but this is adding up. So just changing the shape, and I'll show you a quick video on what we call the EcoJet.

Okay. I just want to spend two minutes on this. The high demand in defense right now. I think we're all concerned about the geopolitical state and the situation right now in the world, and clearly it has created momentum in the last year since the invasion of Ukraine. People wanted to make sure that they have the right equipment to protect themselves and protect their country. So Bombardier has been around for a while as I said, but we created Bombardier Defense last year. There's plenty of opportunity. We have airplanes flying with the US Army for a long time. We have airplanes flying with Germany. We have the GlobalEye airplane, which is a modified Global, flying in Sweden and also flying in the UAE. So we've been quite successful. And the reality of what's happening here is the equipment you put on board to do surveillance and communication is becoming smaller and smaller, and people are saying, I don't need that big platform. Not to name anybody here today, Boeing or Airbus, I don't need that platform anymore. We can do it with a much smaller airplane. On top of it, it costs less to operate. It's more environmentally friendly because it produces less emissions. And by the way, our Global can usually do twice, if not more, the range that those airplanes can do. So we have airplanes that have been flying in the Middle East. They go for a 10, 12 hour mission, come back, refuel, and go back again. They fly like 5,000 hours a year. This is quite unbelievable. So we've been around, we know how to do it. And in Canada right now, I've been public a little bit with that, so I just want to so that you guys understand what's at stake here. Canada doesn't have like the US, multiple contracts every year coming up looking for replacement or increase. But there's one coming up. They're looking at replacing the Aurora CP-140, which is an airplane that can do of course all kinds of missions including defense. And there's an open bid process that is supposed to take place, and those airplanes will have to be replaced in 32, 33, 34. So plenty of time, we have kind of a decade to be prepared. So the only thing we're asking here as a Canadian company is we want to be part of the RFP. So that's very important for us. We have an industry here. A lot of other countries are encouraged and are buying our product. We just want to have, like we say, a shot at it. We're not asking to give us the contract, but we're asking for a fair competition. And I'm sure you've heard before Christmas there were rumors that they may just give a contract award to another company and not do an RFP. We believe with the installed base and I mentioned the 31,000 people, that we should be part of that process. And again, we're not asking for charity. We're asking to be part of the process. If we win, we win. If we lose, we lose. But at least we have a shot at it. And our airplane, we're pretty sure today, very convinced we can do it. We have some partners with us and we know exactly how to bring that airplane to operation to defend our border. Thank you. Thanks for your time.

Over the last year. So I think we've been extremely disciplined. I always tell my team you need two things to be successful: a good strategy and a good execution. You need both. If you have only a good strategy you cannot execute it, you won't get anywhere. And if you don't have the right strategy you can work hard at implementing but you won't get anywhere also. So I think our team, and I have a team that has a lot of experience, they know that industry inside out. And we brought the talent that we needed to make sure we do better as an organization, more financial discipline with Bart that came on board as our CFO. And we've been executing that strategy that I was very convinced three years ago when we came out that it was going to help us to be successful. And of course the market has been helping. So that's probably, the market has helped us to accelerate the execution and be able to generate more cash flow, reimburse more debt, giving us a bit of breathing room. And today we've built, going from a year and a half to two years of backlog on every single platform. So it makes us much more predictable. Like this year we know pretty much every single airplane we're going to deliver and to who. So we don't have to go and try to sell these airplanes. So that's very helpful and makes us predictable.

So this is a very important question. When you look forward, clearly we're facing the challenge of supplier base. We have people, we are going to have a lot of people retiring in the next few years. So at the same time it's a challenge, but it's also creating opportunity to bring new talent in. We are deeply in the roots today of working in every single city we're in with the schools. We go back to the high school to bring kids to visit our facilities so that they get into the right program and they become a technician after and work for us. So this is important as an organization that you need to support the schooling system, bring the kids so that they understand that there's other things than being an engineer. You can be a technician also if you like that type of work, and those are well-paid jobs. So doing that is very important and we need to be proactive in doing it. Supplier, we had a lot of issues in the last year. I would say today, I said this morning, the issues are less, but some are more profound. So we still need to work at it. That's why I think this morning I said it, Bart and I, we were conservative in our guidance because there's a few things we need to sort out to deliver all the airplanes and potentially do better. That's why we guided greater than 138 airplanes. But the problems are there and they're real. So we need to sort them out. But when you look at the growth path, the manpower, having the right skilled labor force will be key. But the other aspect also is you need the money to be able to invest. This is a capital intensive business. When you develop a program you need to spend money, but it doesn't mean you always need to design a brand new airplane. I know the engineers love it, but sometimes you take like we did with the 8000, we went from 7500 and we're improving. We're spending a couple of hundred million dollars to do that, but it's the right thing to do and the company is in a position today because this morning we're sharing and we'll give more guidance at investor day for 2025 at the end of March. But we clearly see that this company right now, the way we perform, generates a lot of cash. We will be generating a lot of cash and we'll be in a good position. Then after, it's our discipline about what do we do with it. Cash allocation. I've been clear in the next two years that's going to continue to reduce our debt and we've done it and we continue to do it. And when we are at the same level, I think we're shooting for 2.2, 2.3 of net leverage ratio similar to our competitor, then we'll start to be happy and say okay we can probably reallocate our capital to do other things. But part of that would be growing, investing in product. And investing in product is not just, hey, you wake up one morning. It's what does the customer want, what is your competition doing, what are the technologies. There's no point today in going out developing a new airplane if you know that technology will be obsolete in 10 years. It doesn't make sense. When you do a program, you want to see it going for 25, 30 years if not more. So there's a lot of things, but we are very disciplined in our approach and it will continue to grow services quite significantly because this is a good business for us.

That's a very important part. And we're so proud of being Canadian and representing our country everywhere. As I said, we have thousands of airplanes flying out there. So we're definitely proud of that, but at the same time, the jobs and the quality of jobs we're creating, some are designing and we need to transmit this knowledge to the next generation also. A lot of brilliant engineers will retire. So we want to make sure we bring students in and that they start learning and they do a program together. We've seen other countries missing it and totally be out of that business in one generation. Not to mention Russia was an example. They were able to produce pretty good airplanes in the 80s, but then they completely missed one generation and they can't today. So I think our presence is important, Mercedes, in a sense that we're the OEM that developed the airplane, built it, but as I said earlier, we have 5,000 suppliers and the majority of them are Canadian. So a lot of smaller suppliers left in Ontario, in Quebec, and some are in British Columbia, everywhere in Alberta are supplying parts to us and they are real partners that we've been working with on other programs for a long time. So our presence is not just Bombardier. Yes, we have 15,000 employees, but it's also a lot of people that are supporting us in that journey. And if we disappear tomorrow, then these jobs disappear too for the majority of them. So clearly, I think the industry of aerospace is important for this country. And it's interesting, we were discussing the other day that Bombardier and a lot of aerospace companies like Avro and Canadair at the time became possible because of the military. They were tasked in the 40s and 50s to build airplanes to defend our country or help our allies. And we kept the knowledge of that and we've been able to create a business that is quite significant today. A lot of jobs, I just shared the numbers, the financial contribution of Bombardier, but if you take the whole aerospace, we're kind of one of the leaders of course, but if you take the impact of this industry, it's quite significant and I think important for this country.

This is very significant. So we're using biofuel as an example to mix with regular fuel right now to the magnitude of about 30%. And when we do that, we do reduce by 25% the emissions. So that's a significant contribution right away. And we know that this technology is maturing. We are working. Yesterday we had people thinking about can we produce some in Quebec or in Ontario or in Canada, because today the majority of those fuels are produced in California and it doesn't make sense to move them here because then you're going to burn fuel on a truck to bring them over. So what we're doing as an example, people came up with the smart idea. We call it book and claim. So I put regular fuel in Montreal on an airplane or in Toronto, but we pay a premium and an airplane in California puts the right fuel. So I pay for it, they don't pay for it, but they get the benefits. Overall, we're burning less emissions. So we're coming up eventually. There's a distribution channel challenge right now. It's all too focused in one area, but we're going to need to develop more capability all around the country, the different countries. There'll be pressure also. I think people are being pressured to use those fuels. So just those fuels will help quite a bit to reduce the emissions. I mentioned we're 0.04% of total emissions, but still as an industry we are very focused, laser focused, and it's not just Bombardier, even my competitor Gulfstream does. We all understand and we laser focus on reducing our footprint of emissions here. So it's going to come not just from one thing. The fuel is going to be one, engine technology is going to be one. I showed aircraft technology also, just changing the shape of the airplane you can burn 20% less fuel. So it's quite an innovative design and we're going to have to figure it out, but we're testing it right now. It's real. So it's not for tomorrow, but we're going to have to work on it, but eventually we're going to use those capabilities on the next new program we're going to be launching. So R&D is at the heart of that.