Good morning. My name is Anas, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Héroux-Devtek's fiscal 2022 third quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star then the number one on your telephone keypad. If you'd like to withdraw your question, please press star then the number two. Before turning the meeting over to management, please be advised this conference call will contain statements that were forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Refer to slide two of the accompanying presentation available on the company's website for the complete forward-looking statements. I would like to remind everyone that this conference call is being recorded today, Wednesday, February 9, 2022 at 8:30 A.M. Eastern Time. I will now turn the conference over to Mr. Martin Brassard, President and Chief Executive Officer, and to Mr. Stéphane Arsenault, Vice President and Chief Financial Officer of Héroux-Devtek. Mr. Brassard, please go ahead, sir. Thank you very much, Anas, and good morning, everyone. [Non-English content] On behalf of all of us here in Longueuil, welcome to our third quarter earnings conference call for fiscal 2022. As usual, I invite you to follow along by referring to the financial statements, the press release and presentation, which can be found in the investors section of our website. Let me open my remarks this morning by addressing the latest operational environment dynamics across our production sites. As you are well aware, we have to date been successful in sheltering our throughput from the challenges of supply chain and employee absenteeism that plague manufacturing facilities worldwide. In the final weeks of the third quarter, however, the additional challenges brought about by the Omicron variant temporarily led to a lower throughput, particularly for aftermarket products and to higher quality-related costs. It resulted in the financial performance in the low end of the sales range we had targeted for the quarter, short of our ambitions. Yet, all of our fundamentals remain very strong. Our OEM deliveries are on schedule. Our order book is unimpacted, and we are confident in our ability to recover the lower throughput in the quarters ahead. In other words, these sales are essentially moved to the right. I will now turn it over to Stéphane for the key highlights of our Q3 financial results. Thank you, Martin, and good morning, everyone. As usual, please be aware that we will be referring to certain non-IFRS measures during the call, including adjusted EBITDA and adjusted EPS. All non-IFRS measures are defined and reconciled in the MD&A issued earlier today. In Q3, consolidated sales decreased 12.7% year-over-year to CAD 131.1 million. Excluding CAD 4.3 million of negative foreign exchange rate fluctuation, sales decreased 9.9%. Defense sales were down 3.9% in the quarter, while civil sales decreased 22.4% compared to the corresponding period last year, excluding foreign exchange fluctuation. In defense, the ramp-up of deliveries under the Sikorsky CH-53K, Boeing F-18, and MQ-25 programs partially mitigated the impact of the lower throughput caused by the Omicron-induced environment mentioned by Martin. As for civil sales, they continue to be curtailed by the lower OEM demand, particularly in twin-aisle aircraft, as well as by the repatriation by customer of certain Tier 2 contract in the large commercial sector. In prior quarter, this was in part offset by higher deliveries for business jet program, a sector that continued to fare well overall throughout this pandemic. Gross profit as a percentage of sales decreased from 18.7% to 16.3%. Lower throughput and higher quality-related costs explain the year-over-year change. Operating income decreased to CAD 10.5 million or 8% of sales from CAD 13.4 million or 8.9% of sales last year. Adjusted EBITDA, which excludes non-recurring items, stood at CAD 19.7 million or 15% as a percentage of sales, compared to 15.8% a year ago. Finally, earnings per share sat at CAD 0.18 this year compared to CAD 0.24 last year or CAD 0.26 excluding non-recurring items. Let's now discuss our cash flows and financial position. Cash flow related to operating activity reached CAD 17.5 million in the third quarter, down from CAD 26.7 million last year. Last year, cash flow had been positively impacted by CAD 12.2 million of inventory burn down as we adjusted to the lower level of civil sales. As at December 31, 2021, the corporation net debt stood at CAD 158.6 million from CAD 157.5 million nine months prior. Our net debt to adjusted EBITDA ratio remained stable at 1.8 times. Before I turn the call back to Martin for his closing remarks, let me provide you with a brief update on our NCIB. As off February 8, w e had repurchased for cancellation a cumulative total of nearly 2.3 million common shares at an average price of CAD 17.86 per share, for a total consideration of CAD 41 million. Based on the terms of the NCIB approved by the TSX, approximately 117,000 shares remained available for repurchase until May 24, 2022. Back to you, Martin. Well, thank you, Stéphane. In closing, we are confident that our approach and strategy are the right ones, and that we have strong teams and customer relationships that will allow us to overcome the industry's challenges and deliver on our objectives. Our sales diversification in terms of segmentation, geography, and type of product offering is a strength which allow us to maneuver in this turbulent environment. Our employees are very engaged and are working hard to deliver according to plan. Even though it is hard to predict the future with the virus variants, we strongly believe the company is in a great position to capitalize on growth opportunities in the near future. Anas, we are ready to answer questions. Thank you, Mr. Brassard. If you'd like to ask a question, simply press star then the number one on your telephone keypad. If you'd like to withdraw your question, please press star then the number two. Again, if you have a question, please press star then one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from Nauman Satti with Laurentian Bank. Nauman, please go ahead. Hi, good morning, everyone. Good morning. Good morning. My first question, going back to the supply chain issues. I think in your comments, you've mentioned that it sort of came about at the end of the last quarter. I just wanna get a sense how many weeks were impacted, because you've mentioned that Q4 is going to get impacted as well. Just trying to get a sense if that was just like a two-quarter impact that we saw, or is it like a month impact and how that sort of plays out for the fourth quarter? Yes. Thank you for the question. It's as you know that the Omicron started in December and has continued in some of our operations in January. This turbulent environment, you know, has lasted two months or it's still. We see good progress lately in all these since the last week. As an example, we had, let's say, 200 cases that contracted the virus before in November. Now we have 400 people who had contracted the virus, so you can imagine the turbulent environment that we had. Our suppliers are living the same thing. Yes, we will see some disruption in the fourth quarter. However, we have good plans and the teams is engaged to recuperate this late but not fully but to recuperate these late in the fourth quarter. We have a solid plan, and people are committed and focused. Okay. If I understand this correctly, the major impact came from Omicron, where you know, you had 200 cases and employees were not there to work on it rather than procuring of any parts or supply chain issues as such. Both. The suppliers are living the same thing that we do. Okay. No, that's good. Generally, when this is happening, do you adjust the production schedule, or is it like some of production is done, it's just that it's not a final product and you can't deliver it? Just trying to get a sense of how like once things get fully back, how quickly you can sort of scale that back. Well, sometimes it takes, you know, a landing gear is made of a multitude of parts and we have thousands of suppliers. It takes only a few to delay deliveries of a complete ship set or a complete landing gear. That's why we believe that we should see positive results in the Q4. Okay, that's great. Just for the NCIB program, you've said that, you know, you've utilized 95% of it. Any additional color? Is that something that you're going to review, renew it or if any other color there? Well, that's part of you know this one will end at almost the end of May. That's part of the discussion we'll have at the coming Board meeting. We reevaluate that every year, so depending on the opportunity. We'll review in due time. Okay. Maybe just one last one. I don't see backlog in MD&A. Maybe I've missed it. Is that something that you have discontinued giving? Yeah. What we wanna do there, because I just want to make sure that it is pretty clear also, we only include purchase order from our customers so that this reflects only firm order and not, you know, long-term agreement we have with various customer. We will disclose that annually. But it has been stable, you know, when you compare from March to today, it's at about the same level. But we don't disclose because it could give, you know, sometimes I have a customer giving us the order for the full year, once a year. And it's only a view that is short term. For us, it was important to reassure the community and the financial community at the beginning of the pandemic, right? Giving the full visibility every quarter, but now this has stabilized. Okay. Appreciate it. Thanks for that color. Thank you. Thank you. Thank you. Your next question comes from Konark Gupta with Scotia Capital. Please go ahead. Thanks, operator. Good morning, everyone. Maybe my first question is. It's about the supply chain issues you talked about. I'm kind of wondering, I mean, you mentioned the aftermarket products were mostly impacted, which kind of seems obvious given, you know, the supply chain issues were felt in parts that probably supply those aftermarket demand. Where, in terms of regions, are your factories, where did you see sort of the most impact of be it Omicron or supply chain delays? We see it in North America that we were mainly impacted and we prioritize OE deliveries over aftermarket. That's why we're saying that the aftermarket was, you know, reduced compared to our objective because it's important for us that the customers get their product on time to be able to assemble the complete aircraft to minimize the disruption or the impact over their operation. But it's mainly in North America that we had most of these challenges. Okay. Thanks for that. When looking at the margins, obviously they had some compression. I'm not sure if any of these absences they had impact on the margin as well, given you know some of the employees might be absent on pay instead of not on pay. Perhaps you also faced some tough comparison from the wage subsidies last year. Any thoughts on the margin performance? Yeah. While first I'd like to mention that we had the resource, you know, to do more sales than that. Obviously volume for us is key in the margin. We were targeting higher throughput by 10% and obviously margin would have been up, you know, compared to what we have. Yes, we have cost of absentees. Where we lose it is really the production opportunities, right? From absenteeism and all the impact that has on the production system as Martin described. It's not only an employee not being there, it's the impact on the others. A quick example that we had late in December just before Christmas in our Cleveland facility. We have four paints, and the four of them had COVID, so we had to go outside to do the painting. That's a cost that obviously we have, you know, in the business because we needed to outsource to finish an assembly. That's, you know, a good example of the resilience of our people that had to go through in order to go through the difficult month of December we had. Okay. That's good clarity. Thanks for that. On the recovery timeline, so you mentioned the MRB, and like it seems like it's gonna take a few quarters here. What's what do you need to see to see the recovery? I mean, like, is it the employees coming back and supply chain coming back? Or are you kind of have to kind of, you know, accelerate some deliveries to your customers? What's the recovery timeline going to look like? Is it two or three quarters kind of thing, or is it one or two quarters? Yeah, two or three quarters. That's our internal goal, obviously. What we need is to stabilize the workforce. It's not within our operation, it's also within our supplier base. When you go for plating or heat treating or processing, those are highly skilled employees. When it's somebody else that's performing the job that as opposed to a very experienced employee, of course it has an impact. We need to have these people coming back and have a stability and predictability in our workforce planning to be able to recuperate and to expedite those deliveries. Like Martin said, I mean, it's, you know, we lived through that in December and January, so we know actually the month of January, you know, was impacted as well. That's why we know we cannot recuperate this in this quarter, you know, knowing that, you know, the effect is December, January today, right? It looks like it's going the right direction. There's only two months now, so that's why it's gonna be over quarters and not only this quarter. Thanks. Last one for me. On the 777X, it seems like there's been a recent order placed by, I think Qatar on Boeing 777X cargo variant. Any thoughts on where the production for the 777X from landing gear perspective you know goes from here for this year and next year? Oh, that's very good news for us. You know that we have the capacity to produce more landing gears than that. It will be the same facility, the same equipment, the same people that will do 777X than the 777-300ER. We're gonna better utilize our capital asset and Boeing announced a rate increase to three in the middle of the year. That's also good news for us. The Qatar announcement and the launch of the 777X cargo is very good news for us. Great. Thanks for taking my question. Thank you. Thank you. Thank you. Your next question comes from Benoit Poirier with Desjardins Capital Markets. Please go ahead. Yeah. Good morning, Martin. Good morning, Stéphane. Good morning. Specifically for the loss of productivity in the quarter, would you be able to quantify how it impacted revenues in the quarter and how much it could give a boost we might see in Q4? Yeah. Well, essentially, Benoit, as I said, we had a plan to do 10% more sales than what we did. This was a solid plan at the beginning of the quarter. Unfortunately, I think, what happened in December was too fast. I mean, as we described, the number of cases just doubled over two months from a pandemic that last two years. It was too much at the end of a quarter where we have a significant proportion of our sales that is made every quarter at the end of the quarter. It was a very difficult production environment. This explains, obviously, the shortfall in the sales. Okay. Could you talk about the measure you put in place to mitigate the impact and also the measure in place to boost the output and recover the productivity loss in the quarter? The measure that we have implemented and we have designed our protocol is to ensure the health and safety of our employees and to minimize the number of absenteeism. As an example of the measure that we took that will never show up in the numbers, in some of the case, you know, where the risk exists, we ask all the employee before coming back to work after the Christmas holidays to take a test. Fortunately, we've done it, you know, because there was a fair portion of the employee that tested positive. The impact last only one week instead of a month or two. That's one of the first measure is to monitor the health of our people and to minimize the potential propagation of the virus within our workforce. That's something. Now we have planned as of last week and starting last week, we almost have 100% of our workforce back to work now. That with all the people, you know, at their workstation doing things that they're used to do, we should see improvement in efficiencies. Okay. Perfect. Martin, with respect to AAR, you signed a big contract, a four-year agreement back in May 2018, for after-market products on the KC-135, C-130. Could you provide some color related to your ability to renew the contract and maybe expand the scope? Yeah. That contract is not as material as it used to be in our numbers. You know, it's not material anymore. We have been able to replace that shortfall, you know, with this contract with other contracts. Like I said, we're still working with other opportunities. I'm sure that we will have other questions like that. You know, when it's important, when we win a new program, a new product, is first to industrialize the OE and then support the customer with aftermarket services. You saw the platform that we signed, and we delivered and the new product that we introduced. Those are good example of how do we replace, you know, the lack of business or the reduction in the AAR contract. Okay. That's great color. For fiscal 2023, I understand we are still early, but could you provide maybe some color about what we might expect in fiscal 2023 and maybe comment about the potential project or bidding pipeline you're dealing with for 2022? Yeah. Thank you for the question. I think because we prefer that question for you, Benoit. Before, you know, that our fiscal year ends and finish in March 31st, right? Our budget and we review all of our sales budget for the next five years, you know, in November time frame. We crystallize those sales in December. I can tell you that we at that time we were seeing, you know, growth. All right? The orders are there, the opportunities are there. Right now is the challenging environment that we're working on that came so fast, like Stéphane said, that it will be a défi. How do you say that défi? Challenge. A challenge, you know, to make sure that we have all the resources and we minimize the impact of potential or other potential variants impact that could have on our production system. That's the unknown. We're confident that we have the order. We're confident that we have the workforce. It's a total war, but the problem that we don't know is what will be the impact of this bizarre environment that we just experienced in the last two months. Okay, great. The last one for me. Back in Q2, you had a more positive tone with respect to M&A. Is it still the case? Would you give us an update on the M&A? We still have, we're still active. You know, it takes two to tango again. We have opportunities. It's still in our plan. It's still in our growth plan. We want to do acquisition, Benoit, so I cannot comment more. Perfect. That's great. Thanks. Thank you. Thank you. Your next question comes from Cameron Doerksen with National Bank Financial. Please go ahead. Yeah, thanks. Good morning. Good morning, Cameron. Just back to the supply chain, I guess maybe unrelated to COVID. I'm just wondering if you're seeing any other challenges on that front. I mean, we've heard some from some other aerospace suppliers out there that maybe there's some limitations on things like forgings and castings. I just wonder if you could comment on if you're seeing any bottlenecks in the supply chain, sort of beyond the short-term impact that you saw in the last couple of months. Yeah. The raw material is a concern. Raw material forging pricing, you know, inflation that we closely monitor. Great question, Cameron. We have different contracts, you know, for different programs. Some of them we're supplying the forging, the raw material. Some of them it's under agreement, you know, with our customers. It somewhat protect us against shortages and inflation there. For long-term contracts, we always have, you know, inflation or indexation lifetime contract. That is also something like that. Aftermarket, we will have to make sure that pricing reflects those current economic conditions. So we haven't seen, you know, shortages in the raw material because these POs were placed a long time ago, and we have a good procurement team. In the future, I don't know. Like I said earlier, supply chain remains a challenge, so we need to stay close to our suppliers, and that's what we do. Okay. Does that answer your question, Cameron? I know that I gave you more. Yeah. I guess, you know, not an issue now, but something that you're watching closely. Is that probably the best way to summarize it? Okay. Yeah, I agree with that. Okay. So second question, just on, I guess a new contract opportunity. You kinda hinted at this, in an earlier question, but, you know, I know you've been pursuing some of the F-18, repair and overhaul work. You know, I believe that, Boeing was awarded a contract, on that front. So I'm just wondering where things stand with you on that potential new business opportunity. Well, Cameron, you know that, like I said, when we win a new program, you know, we'd like to. I have nothing to announce yet. When we trying to satisfy our customer and then give the top services, and when you give top services, you can maximize, you know, aftermarket revenue with those platforms. That's our strategy, and we're working actively to support our customers. Okay. Fair enough. Maybe just final question from me. Just on the Boeing actuation contract, can you just comment on where things stand on the industrialization ramp-up on that work? Our first ship set is ready. It's tested. It's working beautifully. We're just waiting for the approval from the customer to ship. The second product, the second actuator is a few weeks from now to deliver, so it's going according to plan. Even ahead of schedule. Okay. We should start to see some contribution of that in fiscal 2023. Absolutely, yes. Okay. Perfect. I'll leave it there. Thanks very much. Thank you, Cameron. Thank you. Your next question comes from Tim James with TD Securities. Please go ahead. Thanks, and good morning, everyone. Good morning. Just wondering, and forgive me if you mentioned this earlier, just in reference to the impact on the quarter from revenue delays or deferrals related to Omicron. Did you indicate or could you give us a bit of a sense for how much of it. You know, you mentioned kind of a 10% higher expectation originally. How much of it was sort of commercial aftermarket versus defense aftermarket or looking at that entire 10% piece? It's defense aftermarket. All defense. Okay. On the 777 program, you mentioned of course we know that Boeing is planning on ramping up production rates this year. When does that given your production and delivery timing sort of step up? What quarter does that impact your revenue run rate from that? Normally a quarter prior to the rate delivery of both. A quarter prior to their increase in rate or their delivery. That's right. of the aircraft? That's right. Delivery of the aircraft. Just, you know, going back to the margin, like, you know, by my math, about a 15% EBITDA margin. I think given the situation that you face, this was aftermarket revenue 10% lower than you expected. You know, not something you could plan for. I actually feel like that margin performance in the quarter was quite commendable or good. Was there anything there that sort of helped you out more than you would have anticipated, or it just would have been obviously a better margin performance were it not for these events? Well, absolutely. 15% with that volume, it was good. Obviously, there's plus and minus. You mentioned aftermarket, but there's other plus and minus. It's still a good performance at 15%. It's a bit. You know, if you recall, about two years ago, we said, well, we anticipated between 15 and 16. Obviously, with the higher volume would be closer to the 16% EBITDA margin. Okay. Okay. Again, that gave you more than that. That's helpful. Yeah. No, I just feel like from what you've described, I think that was actually quite an accomplishment. I guess my last question is, and I'm thinking longer term here over the next several years. As you look across the business, are there any areas or programs where you believe cost reductions or learning curve improvements are necessary? I wanna exclude just kind of the normal benefits that you expect as certain programs ramp up their volume, and obviously you'll you know, your margins will increase. Do you feel there's any sort of meaningful initiatives that you need to undertake in the business to get costs down in any particular areas? It's a journey, Tim. We started that, you know, many years. Every year, you know, we're fighting against inflation. We're fighting to reduce our cost base and to be more productive. Those opportunities is always to get a competitive supply chain performance and competitive supply chain. Every year, we have an approach, you know, on every program. We review the supply base or the suppliers of every program. Every year, we attack some of them, the main ones. We have also a journey on automation, trying to automate our process as much as possible and to have, you know, our machinist or operator running more than one machine, like I already said, that helps the hourly rate. That's a journey to use the technology to be more automated. Third of all is the non-quality costs. The non-quality costs, we were second to none. You know, we had a bad performance in Q3 compared to historical level. It's not a recurring theme, but that's also a cost component. Reworks, scrap, and MRB are key objectives to reduce and to keep it at the lowest minimal. We did great improvement over the past years. I'm proud of the ratios, the historical ratios that we had and the improvement, and we need to continue that. We did the first steps in Q3, and we're gonna continue to do that. Okay. That's very helpful. Thank you very much. Thank you. Thank you. Your next question comes from Bryan Fast with Raymond James. Please go ahead. Yeah, good morning. Good morning. Good morning. Just one question for myself. I know that the business jet market was a source of strength over the last two years. Are we seeing a moderation from that end market, or are you still seeing that level of strength? Well, for us, it's the business jet market. Oh, okay. The market where we introducing new product, right? The Falcon 6X, we started the ramp up of delivery this year. As you know, we won the Falcon 10X, you know, in two years from now, we'll probably start seeing some production. For us, it's because we have more programs, right, coming in that market. Despite, as you're referring, maybe some program might slow down, it's not the case in our case because we are introducing new content, right, that we didn't have before. The Praetor remains robust, Bryan, in terms of the business jet. It's a solid airplane. Embraer is doing good. Good. Okay, thanks. Thank you. Thank you. There are no further questions at this time. Mr. Brassard, you may proceed. Thank you. Thank you very much, Anas. Thank you everyone for your support. Thank you very much for having joined us this morning, and have a great day. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.