For more than three years now, Bombardier has been reporting financial results that have reflected its efforts to enhance its product line, expand its service offerings, improve its operating efficiencies, and reduce its financial leverage. Its Q3/24 numbers provide evidence that progress continues on all these fronts.
During the seasonally weak third quarter, Bombardier saw its total revenues increase by 12 percent to US$2.073 billion from the US$1.856 billion reported in Q3/23. That performance was the result of a slightly different mix of aircraft deliveries, as well as a growing contribution from the after-market business.
Revenues related to the sale of aircraft during Q3/24 were up six percent to US$1.525 billion from the US$1.433 billion realized in the year-earlier quarter. During the most recent quarter, Bombardier delivered 30 aircraft (13 Challengers and 17 Globals). The year-earlier quarter saw 31 aircraft (16 Challengers and 15 Globals) delivered. Two Globals originally scheduled for delivery during Q3/24 were delivered in Q2/24.
Revenues associated with after-market activities, such as aircraft maintenance and modification work, grew by 28 percent year-over-year from US$414 million to US$528 million. That segment represented 25 percent of Q3/24’s total revenues, compared to 22 percent of Q3/23’s sales.
The gross profit during Q3/24 increased by nine percent to US$416 million from US$383 million in the year-earlier period. The mix of aircraft types delivered was key to that improved performance. The operating income (Earnings Before Interest and Taxes) was up slightly from US$197 million in Q3/23 to US$201 million in Q3/24.
During the most recent quarter, the company had net cash flow usage of US$127 million compared to positive free cash flow of US$80 million in Q3/23. That usage was largely related to large inventories of aircraft that are expected to be delivered by the end of 2024.
At the end of Q3/24, the company had available liquidity of approximately US$1.2 billion. The company’s debt reduction program remains ahead of schedule, and it does not have any significant debt maturing until 2026.
Of note, new order deposits and customer progress payments are largely funding the working capital needs related to aircraft production. This further reduces stress on the balance sheet.
Bombardier’s outlook remains positive. The demand for new business aircraft remains strong. Thanks to an impressive book-to-bill ratio of 1.0X, Bombardier’s order backlog stood at US$14.7 billion at September 30, 2024. That is unchanged from the level a year earlier. The current backlog represents between 18 and 24 months of production, depending on the aircraft model.
Importantly, the current backlog reflects orders from corporations, families, governments and fleet operators. The latter group, including operators such as VistaJet, NetJets and Flexjet, typically represents about 20 percent of the backlog. Bombardier expects that its book-to-bill ratio will remain around the 1.0X in the near term.
The after-market continues to be a bright spot for Bombardier. There are currently approximately 5,200 Bombardier-built aircraft (Learjets, Challengers and Globals) in service. Going forward, approximately 150 new units are expected to be produced annually. Given that about 50 of those aircraft are retired every year, there is an annual increase of 100 aircraft. As aircraft age, they require more work. As well, with the retirement of the smaller Learjet models, the medium and larger aircraft will represent a higher percentage of the operating fleet. This is positive for Bombardier’s expanding after-market business. The United States, the Middle East and the Asia Pacific markets offer significant growth opportunities.
The defence market offers exciting potential for Bombardier as well. Its Challenger 650 and Global 6500 models have already proven to be suitable surveillance platforms for military organizations around the world and the company is optimistic about this market’s growth potential.
Its Q3/24 results confirm that Bombardier remains on track to achieve an enviable financial performance during 2024. As was the case last year, aircraft deliveries during Q4 are expected to represent approximately 40 percent of the full year tally. With its impressive backlog, expanding after-market business and healthier balance sheet, Bombardier’s financial turnaround remains an exciting story.
