Bombardier Provides Preliminary First Quarter 2019 Financial Results, Updates 2019 Guidance

Provided by Bombardier Inc

April 25, 2019 Montréal Bombardier Inc.,  Press Release

First Quarter 2019 Consolidated Performance(1)

  • Revenues expected to be ~$3.5B; driven lower by timing of aircraft deliveries, slower project ramp up at Transportation, and unfavourable currency translation
  • Adjusted EBITDA(2) and adjusted EBIT(2) expected to be ~$265M and ~$170M, respectively, due to lower revenues and revised cost estimates on Transportation projects
  • Free cash flow usage(2) expected to be ~$1.0B, supporting working capital investments

2019 Guidance(3) Update

  • Consolidated revenue guidance now expected to be ~$1.0B lower at ~$17.0B, representing ~10% growth year over year, excluding currency effects and divestitures
  • Aerospace businesses on track; Consolidated revenue guidance changed mainly due to revised Transportation outlook
  • Consolidated adjusted EBITDA expectations reduced from $1.65-1.80B to $1.50-1.65B, representing a ~20% increase year over year
  • Consolidated adjusted EBIT expectations reduced from $1.15-1.25B to $1.0-1.15B
  • Consolidated free cash flow guidance remains unchanged at breakeven ±$250M
  • Business Aircraft still expected to deliver 150-155 aircraft; Commercial Aircraft deliveries now expected to be 30 vs 35 aircraft as the sale of the Q400 is now anticipated to close mid-year 
  • Transportation revenue expectations revised from ~$9.5B to ~$8.75B, and adjusted EBIT margin from ~9% to ~8%

All amounts in this press release are in U.S. dollars, and all amounts in the tables are in millions of U.S. dollars, unless otherwise indicated.

Bombardier (TSX: BBD.B) announced today preliminary financial results for the first quarter of 2019 and provided updates to its full year revenue and earnings outlook.

First quarter 2019 adjusted EBITDA and adjusted EBIT are expected to be approximately $265 million and $170 million, respectively, on revenues of approximately $3.5 billion. Free cash flow usage in the first quarter is anticipated to be approximately $1.0 billion, supporting the intense ramp-up of key rail projects and Global 7500 aircraft deliveries in the second half of the year.

Preliminary Business Segment Results for the first quarter ended March 31, 2019

RevenuesAdjusted EBIT
Business Aircraft~$970~$74
Commercial Aircraft~$240~$22
Aerostructures and Engineering Services~$470~$66
Corporate and Elimination~$(280)~$(75)

“We had a soft first quarter driven by the timing of aircraft deliveries, foreign exchange headwind and a slower production ramp-up at Transportation,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “We expect to recover and meet our aircraft delivery and financial performance targets for the year in our aerospace businesses. At Transportation, we are adjusting our 2019 guidance to reflect both changes to our production ramp up and cost pressure from a few challenging legacy projects as we continue to drive our transformation.”

Business Aircraft deliveries for the quarter totaled 24 aircraft (2 light, 14 medium, and 8 large jets) with a strong revenue book-to-bill(4) of 1.6 contributing to an industry-leading $14.9 billion backlog. With expected deliveries more heavily weighted to the second half of the year, Business Aircraft’s full year guidance remains unchanged, with revenues of approximately $6.25 billion on 150-155 aircraft deliveries, and an adjusted EBIT margin of approximately 7.5%.

Commercial Aircraft delivered 4 aircraft (3 CRJs and 1 Q400) during the first quarter while recording orders for 16 aircraft. Commercial Aircraft’s expected deliveries for the year are lowered to approximately 30 aircraft as a result of the closing of the Q400 divestiture, which is now expected mid-year. Revenue guidance for the year is correspondingly adjusted to approximately $1.15 billion, with no change to adjusted EBIT estimates (loss of approximately $125 million). 

Aerostructures and Engineering Services guidance remains unchanged for the year, as the integration of the Global 7500wing operations is progressing on plan, with revenues ranging between $2.25 billion and $2.50 billion, and approximately 7.5% adjusted EBIT margin.

At Transportation, revenues for the first quarter are expected to be 11% lower year over year.  Excluding the negative currency impact, revenues for the quarter are expected to be down 5% year over year. These lower revenues reflect a slower production ramp-up on certain large projects as the Company better synchronizes its production output to customer requirements and delivery schedules. While negatively impacting revenue recognition, these changes will result in more efficient working capital and inventory management.

Bombardier now expects Transportation’s revenues to be $750 million lower than its original full-year guidance, at approximately $8.75 billion. This reduction is driven by approximately $500 million from slower production ramp-up, which defers revenues, and approximately $250 million of unfavourable currency impact at current rates.(5) On a constant currency basis, Transportation’s revised 2019 revenue guidance reflects approximately 3.5% growth over 2018.

Adjusted EBIT margins at Transportation in the first quarter are expected to be approximately 4%, reflecting the cost absorption impact of lower revenues and revised cost estimates on certain late stage contracts. The ongoing phasing out of challenging legacy projects and delivery ramp-up are expected to support Transportation’s return to normalized levels. Accordingly, Transportation’s adjusted EBIT margin guidance for the full year is revised from approximately 9% to approximately 8%.

Transportation ended the quarter with a backlog of approximately $33.8 billion. Book-to-bill for the quarter was 0.8 and is expected to improve throughout the year based on a strong pipeline of opportunities.

2019 Guidance by Business Segment

Revenues Adjusted EBIT
Updated GuidanceOriginal GuidanceVariationUpdated GuidanceOriginal GuidanceVariation
Business Aircraft~$6,250~$6,250No Change~7.5%~7.5%No Change
Commercial Aircraft~$1,150~$1,400$(250)~$(125)~$(125)No Change
Aerostructures and Engineering Services$2,250-2,500$2,250-2,500No Change~7.5%7.5%No Change
Transportation~$8,750~$9,500$(750)~8.0%~9.0%(100) bps

Consolidated 2019 Guidance

Bombardier’s consolidated revenue guidance for 2019 has been adjusted to reflect revised expectations at Transportation and Commercial Aircraft. Full year revenues are now expected to be approximately $17.0 billion, approximately $1.0 billion lower than originally anticipated. Year over year, the revised guidance represents approximately 10% organic growth over 2018, excluding currency effects and divestitures.

The revenue guidance change is driven by a combination of (i) approximately $250 million in lower revenues from the earlier than anticipated closing of the sale of Business Aircraft’s training activities and the Q400 program – which is now expected to close mid-year; and (ii) approximately $750 million in lower revenues at Transportation, driven by our production ramp-up adjustments and unfavourable currency impact.  

While earnings expectations across the aerospace businesses are unchanged, Transportation’s adjusted EBIT guidance is reduced by approximately $150 million for the year. As a result, the Company now expects to report full year consolidated adjusted EBITDA of $1.50-1.65 billion, implying growth of almost 20% year over year. Consolidated adjusted EBIT guidance is also revised, and is now expected at $1.0-1.15 billion.

Free cash flow guidance for the full year remains unchanged, at breakeven plus or minus $250 million, as Global 7500 aircraft and key Transportation project deliveries are expected to accelerate in the second half of the year

“The transformation of our aerospace businesses remains fully on track as we begin the fourth year of our turnaround plan. The major risks have been retired, our growth programs are in service and our aftermarket strategy is well underway,” continued Bellemare. “At Transportation, we’ve strengthened our order book, refreshed our portfolio, streamlined our footprint and the team is optimizing our operations to execute on the backlog ahead of us. While this process presents challenges, the business fundamentals and growth potential at Transportation remain very strong.”

Bombardier will release its complete first quarter 2019 financial results on Thursday May 2, 2019, before markets open and host a conference call for investors and analysts at 8:00 am EDT that same day.

bps: basis points

  1. Reflects the adoption of IFRS 16, Leases, effective January 1, 2019, using the modified retrospective approach. Refer to the Accounting and reporting developments section in Other in the Corporation’s MD&A of the financial report for the year ended December 31, 2018 for further information on the adoption of IFRS 16.
  2. Non-GAAP financial measures. See Caution regarding non-GAAP measures at the end of this press release. Prior to the first quarter of fiscal year 2019, the Corporation reported non-GAAP measures labeled “EBIT before special items” and “EBITDA before special items”. Beginning in the first quarter of fiscal year 2019, the Corporation changed the label of these non-GAAP measures to “adjusted EBIT” and “adjusted EBITDA”, respectively, without making any change to the composition of these non-GAAP measures. The Corporation believes that this new label aligns better with broad market practice in its industry and better distinguishes these measures from the IFRS measurement “EBIT” and “EBITDA”.
  3. See the forward-looking statements disclaimer.
  4. Ratio of new orders over revenues.
  5. Assuming foreign exchange rates remain stable at approximately 1.12 for the conversion of the amounts in euros to U.S. dollars.