Bombardier : Quarterly Report - Q1 2024

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MANAGEMENT'S DISCUSSION AND ANALYSIS

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

This MD&A is the responsibility of management and has been reviewed and approved by the Board of Directors of Bombardier Inc. ("the Corporation" or "Bombardier" or "our" or "we"). This MD&A has been prepared in accordance with the requirements of the Canadian Securities Administrators. The Board of Directors is responsible for ensuring that we fulfill our responsibilities for financial reporting and is ultimately responsible for reviewing and approving the MD&A. The Board of Directors carries out this responsibility principally through its Audit Committee. The Audit Committee is appointed by the Board of Directors and is comprised entirely of independent and financially literate directors. The Audit Committee reports its findings to the Board of Directors for its consideration when it approves the MD&A and financial statements for issuance to shareholders.

The data presented in this MD&A is structured under one reportable segment: Bombardier, which is reflective of our organizational structure.

The results of operations and cash flows for the three-month periods are not necessarily indicative of the results of operations and cash flows for the full fiscal year.

IFRS and non-GAAP and other financial measures

This MD&A contains both IFRS and non-GAAP and other financial measures. Non-GAAP and other financial measures are defined and reconciled to the most comparable IFRS measure (see the Non-GAAP and other financial measures section).

Materiality for disclosures

We determine whether information is material based on whether we believe a reasonable investor's decision to buy, sell or hold securities of the Corporation would likely be influenced or changed if the information were omitted or misstated.

Certain totals, subtotals and percentages may not agree due to rounding.

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FORWARD-LOOKING STATEMENTS

This MD&A includes forward-looking statements, which may involve, but are not limited to: statements with respect to our objectives, anticipations and outlook or guidance in respect of various financial and global metrics and sources of contribution thereto, targets, goals, priorities, market and strategies, financial position, financial performance, market position, capabilities, competitive strengths, credit ratings, beliefs, prospects, plans, expectations, anticipations, estimates and intentions; general economic and business outlook, prospects and trends of an industry; customer value; expected demand for products and services; growth strategy; product development, including projected design, characteristics, capacity or performance; expected or scheduled entry-into-service of products and services, orders, deliveries, testing, lead times, certifications and execution of orders in general; competitive position; expectations regarding revenue and backlog mix; the expected impact of the legislative and regulatory environment and legal proceedings; strength of capital profile and balance sheet, creditworthiness, available liquidities and capital resources, expected financial requirements, and ongoing review of strategic and financial alternatives; the introduction of productivity enhancements, operational efficiencies, cost reduction and restructuring initiatives, and anticipated costs, intended benefits and timing thereof; the ability to continue business growth and cash generation; expectations, objectives and strategies regarding debt repayment, refinancing of maturities and interest cost reduction; compliance with restrictive debt covenants; expectations regarding the declaration and payment of dividends on our preferred shares; intentions and objectives for our programs, assets and operations; expectations regarding the availability of government assistance programs; the impact of new, or exacerbation of existing global health, geopolitical or military events on the foregoing and the effectiveness of our plans and measures in response thereto; and expectations regarding the strength of markets, economic downturns or recession, and inflationary and supply chain pressures.

In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this MD&A. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

Forward-looking statements can generally be identified by the use of forward-looking terminology such as "may", "will", "shall", "can", "expect", "estimate", "intend", "anticipate", "plan", "foresee", "believe", "continue", "maintain" or "align", the negative of these terms, variations of them or similar terminology. Forward-looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of our current objectives, strategic priorities, expectations, guidance, outlook and plans, and in obtaining a better understanding of our business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

By their nature, forward-looking statements require management to make assumptions and are subject to important known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecast results set forth in forward-looking statements. While management considers these assumptions to be reasonable and appropriate based on information currently available, there is risk that they may not be accurate. The assumptions underlying the forward-looking statements made in this MD&A include the following material assumptions: growth of the business aviation market and the Corporation's share of such market; proper identification and continued management of recurring cost saving; optimization of our real estate portfolio; and access to working capital facilities on market terms. For additional information, including with respect to other assumptions underlying the forward-looking statements made in this MD&A, refer to the Forward-looking statements - Assumptions section in the MD&A of our financial report for the fiscal year ended December 31, 2023. Given the impact of the changing circumstances surrounding new or continuing global health, geopolitical and military events, and the related response from the Corporation, governments (federal, provincial and municipal, both domestic, foreign and multinational inter-governmental organizations), regulatory authorities, businesses, suppliers, customers, counterparties and third-party service providers, there is an inherently higher degree of uncertainty associated with the Corporation's assumptions.

Certain factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to: operational risks (such as risks related to business development and

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growth; order backlog; deployment and execution of our strategy, including cost reductions and working capital improvements and manufacturing and productivity enhancement initiatives; developing new products and services, including technological innovation and disruption; the certification of products and services; pressures on cash flows and capital expenditures, including due to seasonality and cyclicality; doing business with partners; product performance warranty and casualty claim losses; environmental, health and safety concerns and regulations; dependence on limited number of contracts, customers and suppliers, including supply chain risks; human resources including the global availability of a skilled workforce; reliance on information systems (including technology vulnerabilities, cybersecurity threats and privacy breaches); reliance on and protection of intellectual property rights; reputation risks; scrutiny and perception gaps regarding environmental, social and governance matters; adequacy of insurance coverage; risk management; and tax matters); financing risks (such as risks related to liquidity and access to capital markets; substantial debt and interest payment requirements, including execution of debt management and interest cost reduction strategies; restrictive and financial debt covenants; retirement benefit plan risk; exposure to credit risk; and availability of government support); risks related to regulatory and legal proceedings; risks associated with general economic conditions and disruptions, both regionally and globally, that may impact our sales and operations; business environment risks (such as risks associated with the financial condition of business aircraft customers; trade policy; increased competition; political instability and geopolitical tensions; financial and economic sanctions and export control limitations; global climate change; and force majeure events); market risks (such as foreign currency fluctuations; changing interest rates; increases in commodity prices; and inflation rate fluctuations); and other unforeseen adverse events. For more details, see the Risks and uncertainties section in Other in this MD&A and in the MD&A of our financial report for the fiscal year ended December 31, 2023. Any one or more of the foregoing factors may be exacerbated by new or continuing global health, geopolitical or military events, which may have a significantly more severe impact on the Corporation's business, results of operations and financial condition than in the absence of such events.

Readers are cautioned that the foregoing list of factors that may affect future growth, results and performance is not exhaustive and undue reliance should not be placed on forward-looking statements. Other risks and uncertainties not presently known to us or that we presently believe are not material could also cause actual results or events to differ materially from those expressed or implied in our forward-looking statements. The forward-looking statements set forth herein reflect management's expectations as at the date of this report and are subject to change after such date. Unless otherwise required by applicable securities laws, we expressly disclaim any intention, and assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this MD&A are expressly qualified by this cautionary statement.

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OVERVIEW

HIGHLIGHTS

Results of the quarter

1. Non-GAAPfinancial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures.
2. Non-GAAPfinancial ratio. A non-GAAP financial ratio is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non- GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures.
3. Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination (reversals), and restructuring charges (reversals), for the comparative period. See Note 20 - Reclassification, to our Interim consolidated financial statements, for more information.
4. Supplementary financial measure. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics.
5. Only from continuing operations.
6. Represents order backlog for both manufacturing and services.

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Key highlights and events

Bombardier Reports Significant Backlog Growth on 1.6 Unit Book-to-Bill, Expanded Margins and Service Revenues Increase in First Quarter of 2024

1. • Revenues of $1.3 billion for the first quarter reflect 13% year-over-year aftermarket growth and 20 aircraft deliveries, in line with production plan and full year delivery guidance of 150 to 155 aircraft.
   • Adjusted EBITDA(1) of $205 million for the first quarter. Adjusted EBITDA margin(2) rose 140 bps year-over-year to 16%. Reported EBIT for the first quarter was $144 million. Adjusted EPS(2) positive at $0.36 for the first quarter, with diluted EPS(3) at $1.02. 
   • Free cash flow usage(1) of $387 million reflects expected working capital build in inventories supporting production ramp-up. Reported cash flow usage from operating activities and net additions to PP&E and intangible assets were at $343 million and $44 million respectively.
   • Focus on deleveraging continued with $100 million debt redemption announced on March 14th and closed in April; available liquidity(1) remained strong at $1.4 billion. Cash and cash equivalents were $1.2 billion as at March 31, 2024.
   • First quarter unit order intake(4) up 60% year-over-year reflecting solid demand; backlog(5) increased by $700 million since the beginning of the year to $14.9 billion on unit book-to-bill(6) of 1.6.
   • Bombardier's new Aircraft Assembly Centre in the Greater-Toronto Area will play host to the company's 2024 Investor Day on May 1st, 2024, preceding the site's inauguration ceremony taking place the same day.
2. Non-GAAPfinancial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures.
3. Non-GAAPfinancial ratio. A non-GAAP financial ratio is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non- GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures.
4. Only from continuing operations.
5. Unit order intake represents unit orders net of cancellations for the period.
6. Represents order backlog for both manufacturing and services.
7. Defined as net new aircraft orders in units over aircraft deliveries in units.

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INDUSTRY AND ECONOMIC ENVIRONMENT

In the first quarter of 2024, the business aviation industry continued to show persistence after achieving new highs in the post pandemic period. Most industry indicators we track have improved slightly, a strong start to the year. The industry delivered 111 units in the first quarter of 2024,18 additional units when comparing to the first quarter of 2023(1). Per industry consensus, 2024 deliveries are expected to be higher year-to-year and strong order activity from fleet operators could continue to drive up demand for new aircraft (2).

Business jet utilization reached higher levels in 2022 persisting throughout 2023 and now in early 2024. In fact, industry flight hours for aircraft departing North America, South America, and the Caribbeans grew by 1.4% in the first quarter of 2024 compared with the first quarter of 2023(3). For aircraft departing Europe, Middle East and Africa flight hours fell by 1.5% and for aircraft departing the Asian Pacific region they grew by about 10.3% comparing the first quarter of 2024 to its equivalent in 2023(3). Moreover, when comparing first quarter flight hours to the last pre-pandemic year, 2019, total flight hours increased by 38.4%(3). Bombardier aircraft flight hours in the first quarter of 2024 increased by 7.2% above industry average of 1.3% against the first quarter of 2023(3). We expect these levels of flight hours to persist throughout the year(4).

Pre-owned business jets available for sale in all categories, expressed as a percentage of the total in-service fleet, rose to 6.8% in March of 2024 after falling slightly at the end of last year and in January 2024(5). Pre-owned inventory remains well below historical levels and should continue to support favorable market conditions. Pre- owned inventory for Bombardier Aircraft fell in March of 2024 to 6.6% from 7.1% in December of 2023(5). Current inventory levels of young aircraft, at most 10 years old, remain low favoring demand of new aircraft (6).

The industry confidence, measured by the Barclays Business Jet Indicator, settled at 42 from 38 in the previous survey(6). Both the 12-month outlook component of the indicator and the overall current business conditions have improved slightly as well. Commentary in the survey has highlighted higher than anticipated activity in early 2024 and a more balanced market(6). Uncertainty over macroeconomic conditions have kept many buyers and sellers on the fence in completing transactions last year.

We continue to monitor and consider the impact of macroeconomic conditions on the performance of business aviation. A "soft-landing" has become increasingly more likely, globally inflation is easing, growth in most developed economies remains resilient and stock markets around the world have broken new records. However, risks to the global economic outlook remain from rising geopolitical conflicts and the fragility of global supply chains from recent events. Nevertheless, the industry is expected to remain stable in the short-term, driven by a strong and healthy backlog for the industry. In the medium to long-term we expect growth to continue from growth in the number of high-net-worth individuals and a structural shift in demand for business aviation towards safety, convenience, and privacy. As a leading market player in the industry, Bombardier is well positioned to benefit from this continued growth.

1. Based on our estimates, public disclosure records of certain competitors, the General Aviation Manufacturers Association (GAMA) shipment reports and Cirium, excludes very light jet and large corporate airliners.
2. According to J.P. Morgan, Business Jet Monthly of March 2024.
3. According to WingX data, excludes very light jets and large corporate airliners, as of April 1, 2024.
4. See the forward-looking statements disclaimer of this MD&A.
5. According to JETNET and Cirium, excludes very light jet and large corporate airliners.
6. According to the Barclays Business Jet Survey dated March 14, 2024.

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CONSOLIDATED RESULTS OF OPERATIONS

Results of operations

Three-month periods ended March 31

1. Includes revenues from sale of new aircraft, specialized aircraft solutions and pre-owned aircraft.
2. Includes revenues from aftermarket services including parts, Smart Services, service centers, training and technical publications.
3. Includes revenues from sale of components related to commercial aircraft programs.
4. Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination (reversals), and restructuring charges (reversals), for the comparative period. See Note 20 - Reclassification, to our Interim consolidated financial statements, for more information.
5. Includes severance charges or related reversal, as well as curtailment losses (gains), if any.
6. Includes changes in provisions related to past divestitures.
7. Includes impairment or reversal of impairment of PP&E and intangible assets, as well as provisions related to program termination or their related reversal, if any.
8. Supplementary financial measure. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics.

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Other non-GAAP financial measures, non-GAAP financial ratios and closest IFRS measures

Three-month periods ended March 31

1. Non-GAAPfinancial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures.
2. Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination (reversals), and restructuring charges (reversals), for the comparative period. See Note 20 - Reclassification, to our Interim consolidated financial statements, for more information.
3. Non-GAAPfinancial ratio. A non-GAAP financial ratio is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non- GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures.
4. Only from continuing operations.

Analysis of consolidated results

Revenues

Revenues for the three-month period ended March 31, 2024 decreased by $172 million year-over-year mainly due to:

• Manufacturing and Other revenues decreased by $225 million year-over-year mainly due to lower large aircraft deliveries partly offset by higher medium aircraft deliveries; and
• Services revenues increased by $53 million year-over-year.

Gross margin(1)

Gross margin(1) as a percentage of revenues for the three-month period ended March 31, 2024 increased by

1.6 percentage points year-over-year, mainly as a result of higher contributions from aftermarket and medium aircraft partially offset by lower contributions from large aircraft.

1. Supplementary financial measure. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics.

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