• Revenue of $1,072.5 million vs. $1,012.0 million in prior year
• Earnings per share (EPS) from continuing operations of $0.15 vs. $0.20 in prior year
• Adjusted EPS⁽¹⁾ of $0.21 vs. $0.24 in prior year
• Operating income of $108.6 million vs. $128.3 million in prior year
• Adjusted segment operating income⁽¹⁾ of $134.2 million vs. $143.3 million in prior year
• Adjusted order intake⁽¹⁾ of $1,192.0 million for a $17.0 billion adjusted backlog⁽¹⁾
• Net debt-to-adjusted EBITDA⁽¹⁾ of 3.41x (3.11x excluding Legacy Contracts⁽¹⁾⁽²⁾) vs. 3.17x (2.89x excluding Legacy Contracts) at the end of the preceding quarter
• 463,500 common shares repurchased at a weighted average price of $25.21 and cancelled under NCIB
• Comparative figures have been reclassified to reflect discontinued operations

MONTREAL, Aug. 13, 2024 /CNW/ – (NYSE: CAE) (TSX: CAE) – CAE Inc. (CAE or the Company) today reported its financial results for the fiscal first quarter ended June 30, 2024. The Company also provided an update on its progress to streamline its organization and operations by leveraging opportunities to enhance synergies between business units and drive efficiencies. Based on these initiatives and external market developments, management has also made incremental changes to its full-year outlook.

“Last quarter we took the necessary steps to provide a clear path to margin improvement in our Defense business, and I am pleased with the progress we have made since then to deliver on our commitments,” said Marc Parent, CAE’s President and Chief Executive Officer. “We have also continued to seize on opportunities to streamline CAE to further enhance our execution and operational efficiency. The secular growth backdrop remains compelling in both civil aviation and defence markets, and despite the short-term impact of the current supply chain headwinds on the airline industry, our nearly $1.2 billion in consolidated adjusted order intake and record $17.0 billion adjusted backlog this quarter continue to point to a particularly bright future for CAE.”

Cost optimization and reorganization

Under its recently appointed Chief Operating Officer (COO), Nick Leontidis, CAE has identified additional opportunities to further streamline its organization, remove duplication, and optimize its cost structure. The corporate level COO role now has purview over all five of CAE’s divisions, which enabled the removal of management layers in both Civil and Defense businesses and the further streamlining of support functions, engineering services, and footprint to drive additional synergies across the enterprise. The Company expects to incur approximately $20 million of additional restructuring expenses in the second quarter and expects to fully reach associated annual run-rate cost savings of approximately $20 million by the end of the next fiscal year.

Consolidated results

First quarter fiscal 2025 revenue was $1,072.5 million, compared with $1,012.0 million in the first quarter last year. First quarter EPS from continuing operations was $0.15 compared to $0.20 last year. Adjusted EPS in the first quarter was $0.21 compared to $0.24 last year.

Operating income this quarter was $108.6 million (10.1% of revenue), compared to $128.3 million (12.7% of revenue) last year. First quarter adjusted segment operating income was $134.2 million (12.5% of revenue) compared to $143.3 million (14.2% of revenue) last year. All financial information is in Canadian dollars and results are presented on a continuing operations basis, unless otherwise indicated.

Summary of consolidated results

(amounts in millions, except per share amounts)		Q1-2025		Q1-2024		Variance %
Revenue	$	1,072.5	$	1,012.0		6 %
Operating income	$	108.6	$	128.3		(15 %)
Adjusted segment operating income	$	134.2	$	143.3		(6 %)
As a % of revenue	%	12.5	%	14.2
Net income attributable to equity holders of the Company	$	48.3	$	65.3		(26 %)
Earnings per share (EPS) from continuing operations	$	0.15	$	0.20		(25 %)
Adjusted EPS	$	0.21	$	0.24		(13 %)
Adjusted order intake	$	1,192.0	$	967.9		23 %
Adjusted backlog	$	16,977.9	$	11,183.5		52 %

Civil Aviation (Civil)

First quarter Civil revenue was $587.6 million vs. $540.3 million in the first quarter last year. Operating income was $89.8 million (15.3% of revenue) compared to $105.6 million (19.5% of revenue) in the same quarter last year. Adjusted segment operating income was $106.4 million (18.1% of revenue) compared to $119.0 million (22.0% of revenue) in the first quarter last year. Civil adjusted segment operating income and margins were lower this quarter, mainly due to a higher level of Software as a Service (SaaS) conversions in Flight Operations Solutions and incrementally lower utilization in commercial aviation training. During the quarter, Civil delivered 8 full-flight simulators (FFSs) to customers and first quarter Civil training centre utilization was 76%.

During the quarter, Civil signed training solutions contracts valued at $770.5 million, including a range of long-term commercial and business aviation training agreements, digital flight services contracts, and 11 FFS sales.

The Civil book-to-sales ratio was a robust 1.31 times for the quarter and 1.23 times for the last 12 months. The Civil adjusted backlog at the end of the quarter was a record $6.6 billion.

Summary of Civil Aviation results

(amounts in millions)		Q1-2025		Q1-2024		Variance %
Revenue	$	587.6	$	540.3		9 %
Operating income	$	89.8	$	105.6		(15 %)
Adjusted segment operating income	$	106.4	$	119.0		(11 %)
As a % of revenue	%	18.1	%	22.0
Adjusted order intake	$	770.5	$	730.2		6 %
Adjusted backlog	$	6,585.3	$	5,764.8		14 %
Supplementary non-financial information
Simulator equivalent unit		279		268		4 %
FFSs in CAE’s network		349		327		7 %
FFS deliveries		8		6		33 %
Utilization rate	%	76	%	77		(1 %)

Defense and Security (Defense)

First quarter Defense revenue was $484.9 million vs. $471.7 million in the first quarter last year. Operating income was $18.8 million (3.9% of revenue) compared to $22.7 million (4.8% of revenue) in the same quarter last year. Adjusted segment operating income was $27.8 million (5.7% of revenue), compared to $24.3 million (5.2% of revenue) in the first quarter last year.

Defense booked orders for $421.5 million this quarter for a book-to-sales ratio of 0.87 times. The ratio for the last 12 months was 1.13 times. The Defense adjusted backlog, including unfunded contract awards and CAE’s interest in joint ventures, at the end of the quarter was $10.4 billion, up from $5.7 billion at the end of the fourth quarter of fiscal 2024. This includes CAE’s 50% share of the $11.2 billion, 25-year contract for Canada’s Future Aircrew Training Program that was awarded to the CAE SkyAlyne joint venture. The Defense pipeline remains strong with some $10.0 billion of bids and proposals pending.

Summary of Defense and Security results

(amounts in millions)		Q1-2025		Q1-2024		Variance %
Revenue	$	484.9	$	471.7		3 %
Operating income	$	18.8	$	22.7		(17 %)
Adjusted segment operating income	$	27.8	$	24.3		14 %
As a % of revenue	%	5.7	%	5.2
Adjusted order intake	$	421.5	$	237.7		77 %
Adjusted backlog	$	10,392.6	$	5,418.7		92 %

Additional financial highlights

CAE incurred $10.8 million of costs related to the integration of AirCentre, which is expected to be completed in the second quarter of fiscal 2025, and $14.8 million in connection with its restructuring program to streamline CAE’s operating model and portfolio, optimize its cost structure and create efficiencies. Given additional opportunities for cost optimization and the streamlining of CAE’s organizational structure under its new COO, CAE expects to incur approximately $20 million of additional restructuring costs in the second quarter of fiscal 2025. This primarily involves the removal of management layers, including Group President positions in Civil and Defense and the consolidation of several shared services groups across the organization. CAE expects to fully achieve annual run rate cost savings of approximately $20 million by the end of the next fiscal year.  

Net finance expense this quarter amounted to $49.5 million, compared to $52.4 million in the preceding quarter and $53.1 million in the first quarter last year.

Income tax expense this quarter amounted to $8.3 million, representing an effective tax rate of 14%, compared to 11% for the first quarter last year. The adjusted effective tax rate, which is the income tax rate used to determine adjusted net income and adjusted EPS, was 17% this quarter as compared to 13% in the first quarter of last year. The increase in the adjusted effective tax rate was mainly attributable to an income tax benefit resulting from a tax court decision last year, partially offset by the change in the mix of income from various jurisdictions.

Net cash used in operating activities was $12.9 million for the quarter, compared to $49.3 million in the first quarter last year. Free cash flow was negative $25.3 million for the quarter compared to negative $110.3 million in the first quarter last year. The increase was mainly due to higher net cash from operating activities and lower maintenance capital expenditures.

Growth and maintenance capital expenditures totaled $92.6 million this quarter.

Net debt at the end of the quarter was $3,129.7 million for a net debt-to-adjusted EBITDA of 3.41 times (3.11 times excluding Legacy Contracts). This compares to net debt of $2,914.2 million and a net debt-to-adjusted EBITDA of 3.17 times (2.89 times excluding Legacy Contracts) at the end of the preceding quarter.

Adjusted return on capital employed was 5.7% this quarter compared to 5.9% last quarter and 6.7% in the first quarter last year.

During the quarter, CAE repurchased and cancelled a total of 463,500 common shares under its normal course issuer bid (NCIB), which began on May 30, 2024, at a weighted average price of $25.21 per common share, for a total consideration of $11.7 million. 

Sustainability

This quarter, CAE unveiled its FY24 Global Annual Activity and Sustainability Report. This comprehensive document emphasizes CAE’s integration of environmental, social, and economic factors in its business model and decision-making process to achieve long-term success and create long-term value for both its stakeholders and society at large. This report marks further progress of its 5-year ESG strategic roadmap. Testimony to CAE’s culture of upholding the best transparency standards, the report has been further enhanced for greater transparency. In preparation for compliance with mandatory extra-financial reporting regulations, CAE conducted an external readiness assessment for specific KPIs; findings will be incorporated in our continuous improvement process over the short-term.

The report showcases CAE’s ongoing journey towards environmental stewardship, social responsibility, and the adoption of sustainable business practices, including, CAE’s active commitment as a change agent within the Aerospace and Defense industry to inspire our peers and partners to unlock action and accelerate progress on decarbonization. With its suppliers, CAE fostered greater collaboration around decarbonization including its new CAE Resilient Together program. As a result, CAE’s supplier engagement with Ecovadis is the highest among its International Aerospace Environmental Group (IAEG) peers. CAE has also submitted its near-term science-based targets to the Science Based Targets initiative (SBTi) for validation, a year-long process that required the alignment of the entire organization. CAE also attained the ‘Committed’ status in Progressive Aboriginal Relations certification for the first time, a first significant milestone in its journey toward reconciliation.

For more information on CAE’s sustainability roadmap and achievements, the report can be downloaded at https://www.cae.com/sustainability/.

Management outlook

Civil
The secular demand picture for aviation training solutions remains compelling and the Company continues to be well positioned. Management is now targeting approximately 10 percent Civil annual adjusted segment operating income growth for the fiscal year with performance expected to be more heavily weighted to the second half. Annual Civil adjusted segment operating income margin is now expected to be in the range of 22 to 23 percent, with ample room to grow beyond the current year on volume, efficiencies and mix. The Civil outlook considers the known headwinds that have been affecting a portion of its commercial aviation training subsegment, which are precipitated by OEM aircraft supply chain constraints and the recent actions by some airlines to temporarily reduce pilot hiring. Underlying its outlook, CAE has taken initiatives to drive additional operational cost efficiencies that are expected to partially mitigate the effects of incrementally lower initial training demand in the short-term. The Company is also assuming some easing of commercial aircraft supply constraints and that pilot hiring will begin to resume in the second half of its fiscal year, which is consistent with current training bookings for the period. Also, it expects a continued strong performance in business aviation training, higher profitability in Flight Operations Solutions, and higher volume and profitability from full-flight simulator (FFS) deliveries. Management’s Civil outlook also considers the ongoing ramp up of newer training centres and recently deployed full-flight simulators, partially offset by the more intensive SaaS conversions underway in its Flight Operations Solutions software business.

Defense
Having re-baselined the Defense business and substantially accounted for the previously identified programmatic risk, management expects Defense annual revenue growth in the low- to mid-single-digit percentage range and annual Defense adjusted segment operating income margin to increase to the 6- to 7-percent range in fiscal 2025, also with room to grow beyond the current year. Similarly, management expects annual Defense performance to be more heavily weighted to the second half. Management also expects significant Defense adjusted backlog growth in the fiscal year with the addition of large multiyear programs currently in negotiations.

The Company continues to target three-year EPS growth (FY22-25) in the low- to mid-teens-percentage range.

Finance expense and tax expense
Management expects annual finance expense to be similar to fiscal 2024 on lower interest expense on debt, offset by higher lease expense in support of recent training centre expansions to its global training network in support of growth. The run-rate effective income tax rate is expected to be approximately 25%, considering the income expected from various jurisdictions and the implementation of global minimum tax policies.

Balanced capital allocation priorities, accretive growth investments
As a reflection of its agile and disciplined approach to capital investment, CAE has reduced its total CAPEX outlook in fiscal 2025 to the low end of its previously indicated range of $50 to $100 million higher than fiscal 2024, which totaled $329.8 million. Commensurate with CAE’s ongoing success to capture market opportunities in training, approximately three-quarters of this relates to organic growth investments in simulator capacity to be deployed to CAE’s global network of aviation-related training centres and backed by multiyear customer contracts.  

Solid financial position
A tenet of CAE’s capital management priorities includes the maintenance of a solid financial position, and it expects to continue to bolster its balance sheet through ongoing deleveraging, commensurate with its investment grade profile.

Current returns to shareholders
Given CAE’s progress over the last year to strengthen its financial position, an NCIB was established as part of its capital management strategy and is currently intended to be used opportunistically over time with excess free cash flow. Given the Company’s outlook and cash generative nature of its highly recurring business, CAE’s Board of Directors will also continue to evaluate the possibility of reintroducing a shareholder dividend.

About CAE

At CAE, we equip people in critical roles with the expertise and solutions to create a safer world. As a technology company, we digitalize the physical world, deploying software-based simulation training and critical operations support solutions. Above all else, we empower pilots, cabin crew, maintenance technicians, airlines, business aviation operators and defence and security forces to perform at their best every day and when the stakes are the highest. Around the globe, we’re everywhere customers need us to be with approximately 13,000 employees in more than 240 sites and training locations in over 40 countries. CAE represents more than 75 years of industry firsts–the highest-fidelity flight and mission simulators as well as training programs powered by digital technologies. We embed sustainability in everything we do. Today and tomorrow, we’ll make sure our customers are ready for the moments that matter.