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Bombardier delivered 26 business jets in the first quarter, on par with a year earlier, but revenues are expected to come in 18 percent higher, according to the company’s preliminary results.
Providing a peek at its anticipated results slated for release on Thursday, Bombardier reported that it expects its business jet revenues to be $1.3 billion, well ahead of what financial data aggregator Seeking Alpha said were analyst consensus estimates of $1.18 billion. Further, earnings appear to have outpaced expectations, with an EBITDA from continuing operations of $123 million. Seeking Alpha reported a consensus EBITDA estimate of $89 million.
“The preliminary financial results we are sharing today validate the actions we have taken to reposition our business and reflect the progress we are making on our strategic priorities,” said Bombardier president and CEO Éric Martel. “The first quarter was a strong start to the year, with our cost-reduction initiatives beginning to contribute to the bottom line, continued progress of our Global 7500 learning curve, and robust demand supporting significant year-over-year margin expansion.”
Bombardier believes it remains on track to deliver between 110 and 120 business jets this year, which keeps unit shipments at about the same level as in 2020 when it delivered 114.
However, the company noted that it received a letter from a holder of debt that matures in 2034 alleging that Bombardier’s sales of its transportation, regional jet, and aerostructures businesses were in breach of the loan covenants. The airframer stressed that it believes the allegations are without merit and that the sales “enabled it to reposition the business, strengthen its balance sheet, accelerate de-leveraging, and better position Bombardier for long-term growth and value creation.”
Even so, the company has decided to launch a consent solicitation with its outstanding senior notes or debentures to “clarify that the transactions are permitted by the applicable indenture and do not and will not give rise to any defaults, events of default, or change of control under the applicable indenture.” Bombardier said it is taking this step in consultation with outside advisors, adding that this will be “the most expedient and efficient path to maintain value and protect the corporation and its stakeholders.”
The sales of its non-business jet businesses were among several aggressive steps the corporation has taken to grapple with a heavy debt load that became even larger as the pandemic took a toll on operations last year.
Bombardier also is discontinuing Learjet production, realigning facilities, and reducing its global workforce to about 13,000 by year-end. In addition, the company made a strategic decision to keep down capital expenses for new aircraft programs over the next several years.
While Bombardier’s first-quarter deliveries remained flat year-over-year at 26 business jets, a shift in mix to far more of its large, ultra-long-range models, including eight Global 7500s, helped lead to an 18 percent increase in business jet revenues, the company reported on May 6. Release of these quarterly results marked the company's first earnings report as a pure-play business aviation organization.
Bombardier delivered 16 Globals in the quarter, compared with nine a year earlier. This year’s first-quarter deliveries included two more Global 7500s. Meanwhile, Challenger deliveries fell from 14 in the first quarter of 2020 to nine in the most recent quarter, while Learjet deliveries dropped year-over-year from three to one as Bombardier moves to end production of that product line by year-end.
Encouraging to the manufacturer is that EBITDA from continuing operations jumped 43 percent year-over-year, to $123 million, not only from a deliveries mix tilted more heavily toward its top-of-the-line Globals but continued cost savings gleaned from Global 7500 production. Also helping with margins were cost structure improvements in divestitures.
The earnings beat expectations. Bombardier reported business jet revenues of $1.3 billion, well ahead of what financial data aggregator Seeking Alpha said was the analysts' consensus estimate of $1.18 billion. Meanwhile, Seeking Alpha had reported a consensus EBITDA estimate of $89 million.
“The preliminary financial results…validate the actions we have taken to reposition our business and reflect the progress we are making on our strategic priorities,” said Bombardier president and CEO Éric Martel. “The first quarter was a strong start to the year, with our cost-reduction initiatives beginning to contribute to the bottom line, continued progress of our Global 7500 learning curve, and robust demand supporting significant year-over-year margin expansion.”
Martel added that the company remains on target to obtain a 20 percent cost savings on the Global 7500 production program from the 50th aircraft to the 100th aircraft. He further noted that the company has a “clear line of sight” on those savings given that some components, including the 100th wing shipset, have been completed.
Martel was also encouraged by improving order activity, with the company achieving a book-to-bill ratio exceeding 1:1 in the quarter. However, he noted that Bombardier needs to rebuild its backlog, which fell from $13.6 billion in first-quarter 2020 to $10.4 billion at the end of this March.
While the ramp-up of Global 7500 deliveries plays into that decline, the pandemic also has taken a toll. Martel noted that order activity started slowly in January but picked up notably in February and March, and that momentum has carried into the second quarter.
Bombardier has continued to chip away at the lengthy Global 7500 backlog, which Martel said is now approaching the company’s goal of 18 to 24 months, a timespan he believed will help attract further orders.
Bombardier said it remains on track to deliver between 110 and 120 business jets this year, which keeps unit shipments at about the same level as in 2020, when it delivered 114.
The company also reported that it received a letter from a holder of debt that matures in 2034 alleging that Bombardier’s sales of its transportation, regional jet, and aerostructures businesses were in breach of the loan covenants. The airframer stressed that it believes the allegations are without merit and that the sales “enabled it to reposition the business, strengthen its balance sheet, accelerate deleveraging, and better position Bombardier for long-term growth and value creation.”
Even so, Bombardier has decided to launch a consent solicitation with its outstanding senior notes or debentures to “clarify that the transactions are permitted by the applicable indenture and do not and will not give rise to any defaults, events of default, or change of control under the applicable indenture.” The company said it is taking this step in consultation with outside advisors, adding this will be “the most expedient and efficient path to maintain value and protect the corporation and its stakeholders.”
The sales of its non-business jet businesses were among several aggressive steps the corporation has taken to grapple with a heavy debt load that became even larger as the pandemic took a toll on business operations last year.
Bombardier also is discontinuing Learjet production, realigning facilities, and reducing its global workforce to about 13,000 by year-end. In addition, it made a strategic decision to keep down capital expenses for new aircraft programs over the next several years.