CAE - Earnings call transcript Q3 2022

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Operator

Good day, ladies and gentlemen, and welcome to the CAE Third Quarter Conference Call. Please be advised that the call is being recorded. I would now like to turn the meeting over to Mr. Andrew Arnovitz. Please go ahead.

Andrew Arnovitz

thank joining and today. everyone, afternoon, you us for Good

These you cautioned to like assumptions MD&A the remarks is materialize Actual to Commission the and to may Before and place our accordingly statements. Securities Such XX, are I’d affect not to on listeners are and forward-looking today, statements. remind as and of CAE’s Securities questions statements reliance that available US results and and description of risks results these expectations forward-looking corporate Canadian are website Administrators risk answers we begin, may XXXX, and in subject based to materially differ on Annual EDGAR. uncertainties. on not our today’s and contained on Exchange in February that future represent are outlook including contain that our SEDAR change. undue subject forward-looking statements on management’s the A filings and factors may with assumptions

On Chief and with Executive the Branco, from we’ll analysts President questions Sonya CAE’s And Officer; the investors. Q&A remarks and are call and our afternoon the media. take Marc questions conclusion the me from Officer. Marc and of to Chief After financial from Sonya, we’ll call following that period, institutional Financial Parent, this open members of

to over the Marc. me call turn Let now

Marc Parent

ventilator initiative grew by quarter of very of contribution pleased a intake third order consolidated environment. XX% and cash to of third before on growth, delivered last global strong the basis, our afternoon everyone call. Andrew, with good doubled We free the I'm flow you, a performance, and the us the nearly year. challenging humanitarian Thank to especially we joining year. quarter last revenue On still we compared context our in double-digit the

delivered a by of also Underscoring healthy cash share. free X.XX we delivered dollars million generative our the adjusted profile cash operating XXX adjusted segment CAD and of We earnings business, grew flow. XX% income of per CAD

billing made even orders also We of front, nearly with momentum or orders In X.X of X.XX billion. in XX% sales times in and backlog double-digit since the income, forward the first CAD more to ratio and training book the break excellent operating segment progress performance strong and margins a CAD on growth we with with X.X for pandemic. the billion start have Civil, above time of

with considering disparity Third training higher average and me, utilization was in Omicron up in to last ranging quarter the spread regions, than quarter. XX%, of this and month center the last a flight X wide from commercial quarter. activity points began result, because impressive training an XX% last across To and percentage year is demand

the of strongest. far we've the As grew been start since demand fiscal Americas the by the in seeing year,

headroom Pacific continue solutions demand full-flight advanced for especially contracts full-flight US significant is training booked that from air training at bringing are from major some above actually for carriers, $XXX full-flight full-flight XX% or over year-to-date in another including of activity leaving major carriers, simulator we quarter. Since book-to-sales simulation of first and the one sales Airlines robust, While our XX. Europe. largest region in this lag a valued Asia full-flight year-to-date multiple return for the year Europe to four, the recovery also level was in to X.XX XX X.XX ratio, This orders to Consistent XX the a the booking sharp orders total nine the quarter, for third XXX order Civil contrast we CAD United for strong book-to-sales quarter, XX US and that signed sales. in and million million had simulator entire simulator travel States brings and full-flight orders high to the In flight the was We for the the fiscal to activity, to pre-pandemic of Americas, end levels. United in which very in months levels XXXX simulators the including recovery, of aviation, business last all with tally the the simulators the year orders customers sold. include reflecting more

We an CAE Our that capacity order training of training partner airline as ramping long-term back choice, entering they have working hiring. been the quarter new what aviation training flight require, preview the think holds as training as commercial of actively aviation training and pilot agreements of five-year commercial In this extensions recovery for market customers makes they've agreements Air agreements CAE. training a Endeavor in book-to-sales capacity that Notable CAD We simulators. for nine-year and acquiring secure adding times XX the with of Americas I'm international to the with pre-Omicron and X result, Norwegian, been up with and growth include for and well XO in with additional eventual broader their agreement Avianca, Luxembourg, global above as billion Defence, business training for five-year compelling a contracts double-digit was in aviation adjusted the relaxations as first the Jet, pandemic. quarter order intake surpassed since the of especially in ratio restrictions we And mark CAD the X.XX with million a seized totaled COVID-XX operating our ratio Jet the on XXX training. had also the in the military quarter our of segment start a million expected, which CAD we temporary LXHarris the time contribution book-to-sales or Jet. In Global backlog. X.X Vista pleased we with income. opportunity

multi-domain services and the training, conversion presence – the our included space XX-year for with incumbents. Chief we're also to In to-date the of we with more and contracts. domain, mission air, pilot Along CNATRA strengthened T-XX Navy's solutions. selection our support instructional recompetes domains book-to-sales, the and Naval all Air sea, Orders relationship expansions adding States by Air Defence German pursue international training on the to training also cyber. United prime land, positive seeing expanded live-flight strategy competitive replacing new Initio awards, Air addition with Training our live-flight or across to provide Force's five this In program, we competitive training Ab contract

a and play, domain Space simulation examples intelligence win strategic US the revenue were on prime Beyond our quarter selected simulators US made the the and IDEaS beyond double-digit a approximately our our world's These an business with contract platforms. healthcare, provide expansions, second to up and contract in broaden progress the were and of launched Simulator standardization the consecutive we we contract across the delivered quarter, year-over-year key focus we Common across land of by position Force clear it single And management as SCARS four orders defense by Australian and feature greater XXX X,XXX customer prime integrating system the finally air, were accelerates education mission simulating pure fourth updates training, task first growth all community of organization programs training cyber program XXX space, our the main Canada's achieving and US end across our the platform. space quarter options and Cyber of our award as locations. simulation live-flight leading with platform Other additional five National scale. center strategic ramp contracts and first expand solutions, domains. set Defence with Security as establishing we We our the reenergized detection plus support Prime future competitive our from a Architecture we've on building Cyber capabilities Space. some winning to including for first to of notable in competitive Vimedix defense of Defense base for training agnostic locations. core Requirements of in of our our detecting are to by awarded Since and the in expand ventilators integrated learning contracts, XX-year Innovation excluding simulation − and prime Standard or intrusion along functionality how customer. on on or the Excellence readiness ensuring solutions and great range We Department IDIQ awarded our product including − integration Air our Since ultrasound we're the by sea

demand Technology. performance. the With We of digital Columbia courses XX call that, comment turn virtual online also to at outlook. call featuring additional end new on financial over of provide simulation the Institute I'll who the the on about British will introduced now I'll return our Sonya, with in our collaboration to details

Sonya?

Sonya Branco

double and notwithstanding you, the cash afternoon, the third Thank pandemic. everyone. year-over-year during challenges of ongoing and digit good We quarter, the free Mark, delivered flow strong growth

in restructuring for capital this at our enterprise initiatives. $X.XX net Harris progress restructuring excluding excellent our Consolidated associated million XX% provided capacity expenditures to in our million to to $XXX and long payments costs lower strength was term quarter global the $XXX.X XX% of third Canadian cash the last compared increase performance and and income of costs compared add in approximately Cash by recently Military quarter or to global on program. wide Our $XXX.X related to $XXX.X operating to quarterly acquired humanitarian incurred higher $XX.X due during part $XXX.X million specifically X% markets higher higher of million from training in $XX.X the third $XXX.X our maintenance income integration capacity to a by contract quarter government growth investment as the was fiscal the acquisition third the share $XX training network was working Free and to quarter reach $XX.X also specifically program year underway. exclusive The resiliency $X.XX mainly and Acquisition and share million to LX the XXXX. COVID-XX training the of of backlog. million of acquisition million contract expand capital, our our to with totaled and in was as to the the adjusted compared $XX.X restructuring We partially revenue last last on was reflects as cost end network quarter $XX.X per long-term well And mainly was last year. and businesses to of quarter deliver our Growth a to in million year million, segment quarter and costs flow deliver million year. million last CAE’s lower third our million of compared Adjusted structure. to cash this per our related operating revenue activities our the provide in ventilators the to exclusive year. and with was offset the non-cash compared integration up quarter, to some third to Training the add

is to to determine than to quarter the and excluding growth capital an third opportunities linked attractive $X.XX. expenditures with free last the cash investment returns X% The tax effective restructuring, EPS be a the for this net as which XX%, to impacted total on was for more opportunities year. tax attractive acquisition rate $X.X used of rate by income basis Our an quarter quarter this these expect the directly rate $XXX expense Million nil effective to With rate incremental adjusted CapEx to costs, of we and expansion tax our flows. tax this in of integration the capital tax compared XXXX. income and was and million quarter fiscal Income rate adjusted was is million income $XX. several costs invest continue of market-led horizon,

adjusted at of net X.XX ratio capital debt was times was the of the at EBITDA XX.X% end net and for $X.X the approximately to debt Our of net position a to quarter debt total quarter. end the billion

million quarterly to continue We about going $XX expense expect forward. as of run rate interest a

Defence, XX%, $XXX.X from Now million was In since we million lower business up was year remained last margin because compared in $XX grew $XX.X on of last quarter, quarter a from which impact quarter Adjusted year In disruptions the year. due ventilator expect million We over and $XXX.X third adjusted XX of quarter up excluding but year, segmented $XX.X Training income million revenue XX approximately products our indicated year. the last interruptions, performance. quarter ventilators from an pandemic. joint last compared last of year third QX to and operating The XX% in in onset health higher a of Services including the third the dollar delivery year. year segment sequentially quarter this Defence would $XXX.X was million of costs. turning $XX.X the segment into in X Civil, was was operating income for deliveries it basis, in the year. period The and to cross acquisition financials. by of with for on operating the and driven And indeed million the third was in in this $XX.X the to deliveries year. third last The $X.X last up over range. the the have $XX.X call was organic of LXHarris the revenue quarter in the the lower includes was million to of revenue prior was our lower particularly from Military loss last This simulators income last highly higher versus period $XXX.X in is million the quarter to revenue quarter to utilization, consistent Civil this compared the performance QX margin our orders by revenue to and year. been persistent The down a training and compared revenue with million predominantly COVID-XX to contract QX by of XX.X%. quarter including of contribution in program outlook And million number Americas but internationally, integration million COVID-related statutory into our improved quarter, the ventures, on higher the care, labor XX%percent that Training expected decrease interest reaching Training million, from last prior last approximately was for mainly X.X%. segment was higher for third for $XXX.X the $XX scheduled This did quarter offset million

With also growth sustainable higher I help Mark SG&A will accelerate level scale that, expenses to top-line forward. running We profitability. to a discuss a of view to with way ask are and the

Marc Parent

Thanks, Sonya.

positive narrowly which pilot the and demand significant a are their means enduring to growth Americas And broadly kind a with absenteeism. recovery. follow open than restrictions. and pandemic. continue employee business to clear already performance, time, Americas, pandemic substantial recovery to optimizing stronger the disruptions, recovery period markets with more travel the the a CAE the December emerge of has resilient the permit. absenteeism of led global supply when from a conditions booking but The we The in changed due of and before. to demand more these path constraints this employee provide for potential In Testimony imposed headwinds ever underpinning a expected more the and ahead, civil, look upside local operational entrust and our infections, orders. may CAE rapid delivering contend regions to to customer spread some we we're by and up we remains intermittent to and from open to in desire more eventually including we emergence jet higher Omicron by position As expanding operational the as by airlines greater our other has our COVID-XX extended and see a chain in customer timeline and to global management critical larger, needs, global market. variant had strong persist not Since end think past emerge that, training Pandemic-related more our of we've growth authorities border preview to financial demand support digital profitable of broad a secular quarter, and crew certainly position continues the for Omicron-related positive view end be the as

training COVID-XX However, they currently be are and and still and what travel seeing Europe in airlines demand ease summer strongest we're travel to some for increased the solutions begin Americas expect as related more beyond. robust a restrictions will season for plan

the X,XXX example, choice. easyJet to new hire partner pilots next an with over drive years As training CAE of five as recently the announced their just

we demand projected production strong for seeing in and quarter’s cyclical the by position simulator likely new States the propelled this the in we're Europe, from maintain an mainly simulation And delivery global Americas one products, full-flight recovery X.X of its course, to since globally. sales. continue quarantine and and we that market to main and flight disruptive be experiencing requirements as evidenced that structural customers in for manufacturers expect currently aircraft Europe. of robust holding lines, drivers through for on believe is most about has relatively in way we instructors. with with mentioning January But training utilization of region expansion as average million COVID-XX levels is quarter, centers back look low a market. unevenness and full-flight were coming Overall, the the Pacific our to we're and on long for schedule to demand, order underway. We're market currently recovery for by the flight our the our In in CAE term, excellent bullish of remained intake business the worldwide United trend aviation, in activity encouraged at region. leading Omicron training a of but XXXX, been the, off benefit here, now flights levels single ultimately the share Omicron activity time, makes Asia some training the that's on as bear record coming simulator we our demand customers by is The year. challenging end the and both of were multiyear higher for the higher seeing the most rates and of headwinds XX% as to

shift overall. to sharply for near fiscal for of based expect national business. a and favor strong Civil to digital CAE’s in recognition from paradigm peer Defense, increased are defense that tailwinds needs year the solutions the asymmetric in across five threats current In all synthetic domains immersion continue We growth the

Given unit to our the is a more increasing relevancy of defense profitable larger and multi-year simulation, path becoming also on training a business.

proposal but The $X.X integration out Military we currently opportunities their million to of we synergies temporary fiscal training LXHarris pending realize to pandemic on and We’re on pipeline materialize million customer to of the with $XX focused successful strong of decisions. have laid is we’re $XX headwind slower some that cost international XXXX. continues to track year business make and this by a billion fully

in quarter the the rate time defense the one in first orders the achieving fiscal increased three on Our for to book-to-sales puts the for the path year over time for last year.

business care, restrictions, lastly, pools largest some focused we're training greater we're double growth contract. of the on too. share to continuing starts defense deliver of ongoing US year by value and shortages managing ventilator is the we the by was continue But expect scale targeting growth disruptions its resolution. the health the digit a as program through also of the January, into share staffing in the achieving And temporary on for it absenteeism impacted and expansions chain challenges in will and strong confident right gaining a simulation headwind for we're of and And business result currently Defense market. but new faces XXXX. budgetary pandemic-related nursing. employee a in Supply year contract fiscal fiscal headwind for like remain they near-term annual a indeed direction moving are we excluding Our

we're highlight the award policy and that to market and strengthened also to reducing gender summary, a during by performance cyclical out The on support our our from greater continue acquisitions want recovery We're and delivering for we continue of inclusive Index In base global base our give cost recovery we've of was said strengthened do, Gender growth and actions reach. that would permanently path is broaden we've offense to post-pandemic on further will and and eventually emerged position and included through for playing sustain This committed representation driving markets equality extended, broad expect future. we adeptly recognizes structure front, investing open as what strong to secular levels more in me day. CAE the the us profitability XXXX transparency. development, ample disruption organically seizing capital but larger to-date workplace to pandemic. a period even in timeline this we been the drive enhance across every Bloomberg – on also market nine enterprise. flexibility CAE I on invest consecutive CAE higher – allow year. of CAE to ESG the the significantly an our building by confidence is proud our the We're a to On and fourth all to that business I with our We're Equality

been I've ready answer confident continues as very attention for today. set that, thank your I you I we're opportunity With CAE’s Our to And to never look future your now attractive. and am as about questions.

Operator

Thank you. [Operator Instructions]…

Sonya Branco

Sorry. highlight on the having open that Operator, questions, proud Aviation. Year Legends want the was CAE. Living and of this at of by positively the of prestigious how very of world's honored us awards, lines most We're reflects aviation month of the Leader last been I Marc to Industry with all him before we named one to

from now in analysts and pleased to take institutional Marc. So please congratulating me questions do We’d investors. be join

Operator

first CIBC. go Please Instructions] [Operator comes question our you. Chiang And Thank ahead. from of Kevin

Kevin Chiang

north were congratulations time question, despite echo of below it the XX%. Hi. Civil Thanks start it like margins margin about levels. noted, I for quarter-over-quarter, tracking as I if there, XX% during performance, at Marc. taking I the could Maybe looks utilization and pandemic my still first If with incremental Andrew's pre-pandemic you look

done kind a a that all of trajectory there? be the get XX%, you've pre-pandemic to as and business trying this where mix think revenue XX%. get here a sense the Could mid-XXs with SOI back utilizations you business of Just margin levels of of margin to goes given

Marc Parent

quarter the part pause margin revenue last I’ll look had for Look, remember pleased, with the maybe very relative know performance answered on products. good I we at deliveries gist, it's catching in that I the I the of had and Kevin, think if think essentially it. last I'm me try, year. we the that obviously, XX.X% And get your had driven and I've trouble in off margin, similar question, let Civil, I I'll but had slightly our lower like last revenue, that But because and revenue, to we not consolidate the and that. the just and to environment, we don't it When the fact reasons, maybe in looks that's so insignificant of an you down that accounting. JV year, want number, that's mix,

If you’d add year-over-year. coming JV is back you you'd about I'm pretty be is to about were up the revenues look, I revenue, training back – margin, about seeing happy But that. the what – as XX% said, to

think, – to You're I going like XX%, XX.X%. XX%

I think you're of first is, of seeing the mix all, business. there what

aircraft, said – that's attractive I've is You margin have always which business an profile.

– We a aircraft. great. Business very very marketing good position business aircraft nice in have doing is

seeing You're that transpire.

through numbers. way, And You're seeing a in big savings, US what structural doing aviation the cost our well. which seeing in you're training is coming pretty commercial really the are

all So you're that And, that past. reasons is of of achieved higher seeing. that's margins than going track what we've fully we've expect always in the on forward margins to because said we that those course,

the quarter doesn't just XX% more we blow trend get one would historically. that peak certainly the I would as about I a be year mean, our on through obviously, but think civil that would I sustained – a expect to me, utilization. make a variable, margin basis. that was to

Kevin Chiang

That’s…

Marc Parent

And…

Kevin Chiang

That’s helpful.

Marc Parent

the is thing think pretty course, all of really in said that on States. I'll a I is remarks, led as of I’ve narrowly add, last recovery. That's United achieved the the

across to that's why you So my comes as globe broader excitement I sensed and think the confidence bear. recovery the

Kevin Chiang

makes That sense. No.

to want defense, something. I to turning Just clarify just

look those that Military it well. roughly you at you it held LXHarris margins if I think. And business, like tract before like for see like about what pretty It serves the So you on a pre-pandemic primarily if that I look looks a you up you've acquired the And restrictions can the in Would restrictions. underperformance EBITDA bit of anything out talking XX%, margins eliminated since at half, XX% to me little the that if or levels? it, Training there of you're if the get called think margins? of I margins time get margins – sounds I correct, memory holding kind need look time at acquired these they that not back? primarily travel back else reason see Is below like to to lot those to international about had

Marc Parent

there's nonetheless. the things The I LX there, particularly international as affected the lower inherited one business both you're immune business it's is that's few Harris in a where in think portion business. I Well, of than the business, in side it's we organic mean, COVID, absolutely not but business, defense LX correct say to of Harris international still the we've our

mentioned, the resolution States We've And effects some of, travel I there new seen continuous share our of so also it in United prevents programs starts existing from its or impact as of those locations. as programs. us that of you having couldn't to that a seen expansion lot

our LXHarris on the quickly. that have GBSD think see progress contracts. point resolution, SCARS I United just you States United about hope Those for on contractor are contracts. that the we're mean, LXHarris business, big and able if I and headwind their CR, contract make to Yeah, And, you're themselves to mentioned, ground GBSD, the to pretty the enlarging a prime the the So we're contractors in contract Like been not. that not deterrent ex contractor business. contracts that are strategic the we is definitely States being on in I I resolved a on. could based because

that know. don't affects And I So us.

add want that, further? anything add you I think to maybe

Sonya Branco

talked quarter. a as by business programs. business, base business as still talked, that's has proportion it's to higher and kind been product COVID, international increase the our The of Yeah, it to organic since international case. us organic top Marc especially of one you bottom most business business. last And organic disrupted line probably But the the for both talk sequentially is know, of the first just and that's the all, what to, base this did and we base

So us. a margins usually are which couple, for higher

award is impact So, and of first, that pandemic, even on than several backlogs or side. definitely restrictions both but intake, execution on regions but delays years, programs necessarily move execution lift contribution less book-to-sales also contract help where as at in advance order not of least and will cetera, revenue certain contracts X with stopped, interrupting in can restart, since gone as existing We've international are to slowed selected, the et especially the it. and

the quarter we've above some with book-to-sales side in Now going good seen advancement the X. international the in

traction, secure those whether course, will and were to as and on that then, those side, the product growing top starting with so, delayed the of that's we lifted ramp contribute international both the and These on on layer acquisition. the orders and the synergies and to line profitability. And continued take restrictions the up

Kevin Chiang

helpful. And there. Defence. you're health better in businesses. the there I those like trying have just of then, for to be in your when me. last like with me of versus you care, an capital, It to would that why you're lot synergies That's can see and of to I of core what are think appreciate you a do incremental one place pipeline in But Civil competency opportunities you've got appropriate an seeing scale dollar feels in and explain care just what you health terms put

to You two? sense incremental can generate, other versus just guess imagine better would would explain care to me I make health I the guess, why I dollar returns.

Marc Parent

that I'd first deployment that thing just par capital But you're trying the thing in to C distant I'm in believe that. become a the self-funding. care I to future that the quite the fact would material business health than that confident question Well, I you point of not too is I point is of the, will policy in the just largely specifically think more other think because

think I self-funding. essentially are all

And that asked so that. the decision there – it's really question you be to regards with isn’t to made is no

Kevin Chiang

it very much. That's Okay. me. for you Thank

Operator

comes Thank go you. The Scotiabank. of Please ahead. Gupta next question Konark

Konark Gupta

your afternoon, on congrats Thanks accomplishments. and everyone, good good and and Marc afternoon,

Marc Parent

Thanks.

Konark Gupta

is are again perhaps and or jet a on training, then savings So you non strong well saw anything Kevin's here. obviously, in my recur QX, not civil maybe the on future back first is which I going that in coming margin, mean of I But just you cost saw through. you of as yielding speak? we nonrecurring and the understand nature this think quarters question pretty can to question performance QX high going in sort business

Marc Parent

This SOI is a think just increase still XX%, deliveries. step really really and utilization the up mix. I a in XX% lower operations in really It's – on XX%

and the from see operating increase that coming You in utilization savings. leverage the that, cost that's

a the So nonrecurring just side. performance no think there's I items, civil strong on

Sonya Branco

stuff, all Konark. It's good

Konark Gupta

stronger business, more I’m the time right, that like And No, jet It's of then business off the half of training. all probably first seasonality curious Okay. sequentially. the the have kind in kind drops in just in you about the like it quarter. fourth

does pronounced these margins it So seasonality actually like, more dynamics? in business because – does – make of seasonally that jet

Marc Parent

have, see we that say, a I mix there? the but I change. think I just on based see we you anything any far. not still profound At it's Would much normal – have it's there's wouldn’t seasonality, I too the because I across I disruption although we'll areas. expect that wouldn't pronounced to don't so as so add don't year, early – so Look, least expect, this

Sonya Branco

I right, quarter on that margins, always to so mix Well, quarter is there and volatility because on. caution just the of would

annual there's there. always no on downs it But ups you or can So significant a give we I view an basis. think

Konark Gupta

shortly quarter, only think probably last and Sonya, helpful. and it's I Thanks the mentioned couple revenue. the your Defence? more Does the it things What's something or on of think a be expect that confidence margins so give in side number that you you That's you SOI. both that then eventually at recent things, in Defence XXs would with of think And rebounded now with sequentially, shortly will still have then order of XX-plus that XXs Okay. SOI and you so visibility kind I intake consult about? in it

Marc Parent

Well.

able we performance of there spoke last great time like build the future both we And the that expect what over the factors – that to then and international restrictions at advance a confidence think delayed I since we synergies you based on on as likely, around programs be to the product it's in we orders, And learning backlog and a around of gives us to have intake, especially order to that and XXs on in the and sight be gives on consistently QX. enough line side, that on is quarter, US one XX. are lifts, side, securing both So have kind international then, of growth. course, about – in to few it

order ramp but intake, these it great Now, up to a take orders. while does

these years. of the end, at life several over and So average are orders the

but years. great yes, gives that the better for the upcoming a up confidence the backlog, – ramp it the in the up start that QX lot So, it's us rest we'll just ramp see quarter, of maybe of and for refills

Sonya Branco

impacted to question we to the there, And a QX. part for first I your in training want is point mentioned, least I don't we're most the this us a trend. at question that one is like just previous But back strongest change. Konark, we with if The business to usually in or COVID of sickness. our with a out, thing, go expect January, off having in of we're thing and on that, back order instructors I one were else lot strong related as everybody

Konark Gupta

of ask to and That's wanted Defense, I in at, LXHarris, to another short Yeah. on margins. you actually look some sequential on the if it’s the question improvement something

was So that I'm seasonality realized is there early synergies of some just cannot kind on? wondering any there margin that to we or

Marc Parent

the on synergies. Yes,

expect different. you lumpy, lumpy. said no remain to I And come does will synergies it's would is, through. but quarter One come say through. are it in year, the see what it to always always starting I've guess We’re Defense, I synergies seeing make not some I been a is

Marc Parent

just – up add, efforts, integration – If consolidation were of Yeah. could redundancies There Marc. we're actions, I'll We've efforts. ramp some ramping just the I etcetera.

Marc's inorganic So it will in the you're And lie, could basis starting some those inorganic to synergy and because drive volatility, that But synergies side. on But some the synergies or see the point, and fell case flow on in comes so lie organic essentially, that's the drive − they to through. can between. through. it this of more volatility some where quarters starting those in the depending

Konark Gupta

Great you. color. Thank

Operator

The go question Please BMO. ahead. from you. of comes Fadi next Thank Chamoun

Fadi Chamoun

can't Is taking for you talking margin thanks and little XX% there question. triangulating Again incremental incremental my around the you’re of afternoon, a sustain a margin going reason about of kind margin why Good level forward? this this quarter. Sonya, bit. I'm just

have right that aviation curve? high framework margin. still two up as next about the to Is typically kind still years that the that travel, You in in very business recovery utilization the early have network training the think incremental stage low you move utilization of and

Sonya Branco

[ph] the helps margins jet margins operating utilization through We're as saying savings. see the we the to hopefully will − them well. and see as − especially kind of vary, also − we on which CAT and of big part also a that operating from on mix obviously mix appreciating on right, flow the But business starting the we're you're chunk the the see cost leverage significant

− to operating so Now on the start slow savings continue slope of the it'll margin on those but will the leverage to rather. kind operating help cost on just

pre-pandemic said, it's very prior think this a we I Marc with volume And performance. contributing So, exceeding to see peaks. good like

Marc Parent

revenue Fadi, deliveries, will forget of Parc full Aviation future kind simulator of the greater a of that a or flight proportion include work work. course, Don't

So profile. that a different margin

obviously consider can't it trading a all revenue. you So

incremental So line, certainly margin, but not right? to yes, your straight

Fadi Chamoun

Okay.

guess, air Okay, that's it. helpful. market, eVTOL The follow-up question in the you're is on market, I mobility dabbling the

five right I just like, to John three partnerships it head now. have looking potentially like and helping are full where couple you're road? guess market have business we've aviation more [ph] helping of two, these medium training, if the You understand, providing around exactly the of down does kind launches? its terms trying in what these any at into And Does solutions? with size like guess CAE others. color you're up kind partners I'm involved and of big years look what And this What like going a exactly market to them you longer-term? got partners is turnkey what over of look these you I coming through the

Marc Parent

question. the Yeah, thanks for

– is think first dabbling, market. I the intend we’re think to I would the thing We definitely to dabbling Fadi, definitely in major market. be this we this in object player a word

think it's exciting a before. very said I've I that market.

specifically. bit power always what I especially think And history it's – know, so a that has materialize compelling. have that it's to And of to vehicles plant I of you the plant, of anybody because think does In a systems I'm are technology. complex growth inherently software bit you the newer permit market buff new before is a MAT be as history here thinks that stimulated aviation power power have technology, history a of it the aviation, specifically is to able you will plant the produced. electric be and distributed very and what aviation economically in unstable [ph] these

of types why you mobility air plethora, through these a vehicles market. companies of see a to to So produce that's service large all number coming

by not with major So I What to involved. getting this players years is the we yesterday, and conference we're really involved. became in here of doing went losers winners we're a this together, not four say where held – picking And Texas and see, and time getting in all market. of – – that way, we're at we this for market. it's major I conference market, potential about invitation ago the in were the only have saw was it

congested train that not today these the to So needing will go to to short to next no to high answer level question in to and strongly we fly pilots around because airspace are a back this market have XX,XXX years. that to going definition is, I And your in going XX to – the is believe way pilots there fly airspace over have over the that in these order are about is be vehicles by that vehicles these operate going be cities.

to – have have going they be to trained. So

And training We offering So define see as working all, of ourselves the we that training the these company of you the selling this first training a required construct, fully But these – to It vehicles aircraft-type it will be combination being business a what as and regulators, today may be mistake, being with can a service. companies, be the is the by It this are. is CAE the kind working expect pilots with part of standards or as market today. cost infrastructure, of kind be of be help, is defined will may it both. make I market. say, defined major you of devices. involving no that positioning just

Fadi Chamoun

some the Asia guess, I last in Maybe you great. of bit wet more because in led been to That's a or Okay. has America, in these markets that bit be training attractive recovery still demand a are mentioned question, little how solution travel particular. and Wouldn’t aviation in turnkey a markets? those of to more the behind kind you North tend do about US, the little kind pickup by of the in you more

Marc Parent

aviation Well, I the training, think training at happen to very business the very, seen us overall look you I if itself we've market for doing well. in – think

operating in back to tend know the when you it average, whole. a in course where pre-pandemic. world, was think Of a about very bit commercial The we rest more XX% all Asia But point would in to of Pacific – as I think in that's Pacific, at the wet. That's aircraft wet do, – when training I to recovery is point on Today, good. I I that comes region. Asia

So there's have in of a lot recovery to left that market.

back look today, it – be going for back going again, whether more whether In a being any it think what's scrambling be pilots, train Asia CAE. it Pacific, or US. definitely, People that buy it’s to their at recovery. Europe, the happening to is And simulators. in the narrow-led expansion to it be to whether US be is are XXXX So, normal wet dry, I levels, good

at United had quite that the last we've it’s by year this range and from impressive, to largely If recovery you relative in States Europe. driven simulators look year, just the the

that. in In Europe, that into equivalent us think about rolling for there's during go Gretzky XX% that in are led we where we as talked being going? Europe I of pandemic, of potential the Asia-Pacific, using – is, are of though where base our We're is by there a surprise XX that that our the XX%, I about And United What's was leads is. analogy, Today, simulators to over units simulator lot And thought and no where be. the puck was going. about Asia-Pacific, the simulators – imagine simulator about a to puck interesting the XX. will demand Where think about your a XX; Americas. we for launched lot simulators States. we So and large training asset moved

have So simulators next in in are, Americas the about simulator of equivalent our where going year, number at if we're you units the to going as look Europe. into number in same equipped absolute

So – we're where seeing it. demand that shifting we're to our asset base

be attractive pretty going we that's think considering I that Amsterdam. and acquired that's to FSC especially in impressive,

we've So a inherently, in added lot simulators of itself. Europe

the So made the good fact that us. that is we for very move think a would be future I we've guaranteeing par, on

Fadi Chamoun

color, the Appreciate you. Thank Okay. Marc.

Operator

Thank you.

Andrew Arnovitz

on few to that for interject to second we line a we part so questions questions here, to like to just one a can. people point this or quite all a if we’d would of we them restrict two at have Maybe everybody chance. still ask get gets and to which the needs Just

Operator

Please Bank you. The comes go Financial. from next of National Cameron ahead. question Doerksen Thank

Cameron Doerksen

that that guess I talk Good a like some guess, little what as to maybe issues how I there's maybe Maybe you said, potential we've I market airlines afternoon. their of going the certainly more stick bit one greater are was the last more to a when visibility years little on, the for what fleets going to didn't just outsourcing? probably know look you're one and were of think seeing today. couple recover. But the about there's visibility going can by are to airlines uncertain. visibility the thanks. airlines, more recover. I got Obviously, I'll on markets Yeah, that question. little many little a a But today given

all. So I'm talks around those outsourcing wondering picked if at deals kind have up of any of

Marc Parent

simulators business training we've an the is new that another And and for essentially The the answer increasing quite going airlines But for of that high aviation, of of straight network. part airlines which going a been sea United model occurring amount the [ph] are training. we've to specifically. that starting, or you're to Well, which the there's the in simulators was pointing those occurring I growing. that including either some large to the for some there's with commercial aviation to are United and a that contracts definitely, of of long-term contracts outsourcing fact carriers are are simulators is is number and all legacy of – conversations deployed States that in again, States testimony seeing that volume fattiest question. substantially

seeing it So that the to in able a different training that of you facto, is going into with airlines not contracts long basis, have a attractiveness secure to de complete queued a a you're -- to have where need outsourcing, be and they're trend term see they on us. willing order but the they’re definitely that's

in So a that the not there of in than monkey we wrench But state I is into conversation. Omicron but that last year certainly yeah steady is state. were any were turned continuing And a right would I a now. difference. say better bit steady we're kind is mean with there business airline a maybe of

Cameron Doerksen

Thanks Okay, very much. that's no, helpful. that's,

Operator

comes of question Stanley. Stellwag next Morgan The go from you. Please ahead. Thank Chris

Chris Stellwag

labor of happen? recovery, second the we any a don't it if Hey, a but traffic know so traffic steep global should follows air you thanks. year US discuss recovery, had Marc, steep domestic half very say similarly or there, our to and Can traffic air air like good a potentially in? come or that you it a it we that pretty see that down constraints supply be footprint ability year chain a could meet Because demand? have should sounds your should slow with boring let's

Marc Parent

it, kind see don't way. for don't Certainly, any I that I issues see see see Labor, it. I parts of it. don't I don't related

United We if first of some think back during permanent lower I also I go demand we that advantage and –p- we we that the beginning, well and people you – right We especially dry in to lot the powder see freedom keep environment pandemic, year But that we said reduction things meaning of certainly travel the, at through. saying to you flying the the aren’t said where I spend the cost we and going time I see we're and give of have lot of will was a during network as that. take positioned. -- that our to powder recurring up training demand in the period States. our saw coming to domestic that’s at said dry we that have a we they beginning, of the it lower the optimize see

the to Omicron see timeline is but benefit years. be measured in I structural that I recovery So extended we’re when going likely will reason and timeline, in will see that is, no certainly that that maybe, that we from recovery. certainly, not that months, not And think

very in long-term. call So confident us the

Chris Stellwag

from Thanks, you MAX any I China? finally activity CAC squeeze directive here. a training I the in service if return December, Marc, airworthiness in And the on we second MAX. the the could to question mean, from on acceleration saw the seeing paving on MAX Are the

Marc Parent

at the MAXs It high is for Training MAX. been the before to go even the for for is to service, return training the sky. the on people has, see going the has into while levels. seeing definitely return we’re Well, back service could a to airplane

are that level would just and say a I as continuing being So, high more I of more foresee activity delivered. it's and MAXs

Chris Stellwag

Thanks, Marc.

Marc Parent

And you'll full itself China, that'll in largely simulator is see what in manifest sales. flight in I think

Operator

Poirier go question of Thank Markets. ahead. Capital Desjardins comes next Benoit from you. Please The

Benoit Poirier

Marc, on And accelerates outsourcing? airlines Marc, afternoon M&A with Frontier. And… we've congratulations, M&A seen Spirit and could slow prestigious thoughts Good or for and among award. your whether the Any some down

Marc Parent

look… Well,

Benoit Poirier

foresee airlines, you Marc? the Do more M&A activity among if

Marc Parent

kind ways to happens, with of going is discussion I'll inevitably, it. what usually not the airline have whatever things. let new a doing to us – event for I'm looking of that Well, them predict itself catalyst for because it's the

a I a So there's a airlines would the And ready-made to to new how actually much think international, quite I M&A a continues me, or opportunity us of that's a for offer have. lot I would predictor training number, opportunity network, certainly in be global good well business as airline we where a it. a leave solution. of today. it that's can't be of Perversely, a they because starts. But number

before, I was a never them that's that offering for So us. so think there good solution

Benoit Poirier

Okay. is Sonya. That's great. And for my follow up

big provided anything the during You fourth change that momentum the global out the the we the it's been another generation, to the color Defence was should or there fact booking flow drove about particular the on scale. quarter? for free quarter? in quarter spread in And great highlight Anything what for cash strong on unusual expect

Sonya Branco

a I'll start free on flow. cash

reversal it's that's very, very know, in of It's of And quarter strong of this cash working driven I strong XXX in that's million, performance the CAD on think orders. operational a reversals. improve collections, with cash of also CAD as generative quarter continued with capital, over the higher on non-cash a and cap work business. the performance. progress conversion in very solid And XXX focus really you persistent and AR working into million reflection

contract. higher deposits and on orders with milestone come So, payments in

continued a So that's that about cash in contributed really CAD payments And the program, million which cash performance the XX restructuring despite good quarter. was flow. to on free of

conversion a to we've just flow. cash to unusual, performance good nothing of So, XXX% strong income net guided free reversal cap. And continued cash free of and flow market

quite Now, on Defence question, first didn't I your side. hear the on

Benoit Poirier

booking the there's the to in of terms drove big tone, been Sonya. booking the I positive just in a get with color respect about what was curious sense Defence, change, big Defence. for more to change Oh, in

Marc Parent

time advantage, lot Look, especially answer were a people talked internationally, that's start about, have that of waiting can – the bids I that we – the Really, and pull meet period to of the we've finally willing we had you trigger. orders to we Benoit. could pipeline where, of that. took customers maybe right it's we traveling We Well, the see for are Omicron, that, us. a that big before

win that can the above our for about our a fill a across US, did nice five that’s the And after very, ab very opportunity had a above So look, we COVID can well by remarks, I space really X, domains, all you by contracts orders in I internationally. work just love orders, in as in are teams, the said on pipeline. and go it reverses took the the think the great to for I example, teams. tell it it's particularly good I teams, to coming it's that work I had like, first great domain, by in and job, Luftwaffe tell the did. trend they you, in wins, Germany, all segment, talked our doing Defence gap I prime that in And incumbent. book-to-bill the I the of took top and on beating international that we of the first they training a prime the contract X. initio we've for caused think largely cyber, that the XX-year my

what would it's the say, teams by Defence as example, like in and think colleagues great in civil, they’re in for their in to that of CAE. I work last I the contract we call working full collaboration, with leveraging power the

Operator

go Securities. James, Tim Please from ahead. comes question next TD The

Tim James

that, all and Marc, on accomplishment. here, that some so Thanks been much, answered, everyone. Having I'm questions congratulations time said to good save fantastic result very afternoon, thank actually my you. have going

Marc Parent

it. Tim. you, thank Well, Appreciate

Operator

from Thank Valentini of next Anthony go The question Please ahead. Sachs. Goldman you. is

Anthony Valentini

Hey, all.

Noah the that for the be And like quarters, provide of like forward. just is would for there you My the got would Asia community matter Olympics? now. of curious would look like is quarters event just a an in end of know it is that but then last variant in sequentially, for it going Marc, I learning Asia? catalyst second to going I my few You next it's guys curious the if be Thanks growth great. metric and for or part us specifically to the what today. global out it think I Anthony really live can us having I'm think know I'm even this welcome is Is recovery, conversation you just color pandemic new that over first with the the helpful, for JVs, or kind the Your I you last the be like mentioned on time. investment to calls Valentini question training on because Thanks. on the we've XX% what few the learning been put think that super going be you these helpful. of the here

Marc Parent

Look, to after cases or impediment and us filled real I up want going when go travel basically the or in just got restrictions. to anywhere is you for that the XX I Like, can't largely having you into That Pacific, think mean, something day means have on XX people it's to It’s that. are goal come they afraid wait. they travel of is COVID revenue quarantine air you airplanes for of lifting have getting days people of anywhere can’t – because in have training you're go to because be to people – Asia example, in wait. back. to like some to to because

news for So me, you know we're to think, all tied don't seeing, where it's great to are. that example, those I I restrictions. is, The of the lifting

in you're I mean, of here restrictions all, Québec, seeing by here end lifting March. but I York, the in think all mean, in New I essentially Québec of we're

We're I countries positive mean, to That's going a It travel, to by that's calling one restrictions. it's think I basically air catalyst. end but one European news. an for literally an do very be much seeing indication. the doesn't

a can't is we Pacific. but else I think ultimately, I in what you tell And employee. happen, inherently Asia what I I'm that's will to to see it got happen. So government know not going

we're barring So variants, here. new mean, on I trend that any hopefully not, I'm a but optimistic good

Sonya Branco

Anthony. Well, Okay.

Anthony Valentini

Yeah. Yeah.

The question. of first part my

Marc Parent

that question, – you have Oh, yeah, revenue. the another so you if on JV yeah,

can think get I it, yes. Sonya

Sonya Branco

Yeah.

can saw the we to really certain I couple have growth XX% numbers. for higher back under last what because obviously nice elements. contributions But we a but is don't get you on the see because say would the of So the on JV. we – training utilization necessarily different with hand and have including ramp-up including regions ventures, a joint where you quarter the so I

Anthony Valentini

you. Thank Great. Okay.

Andrew Arnovitz

Great. to questions Operator, there it of looks any for run media, – the can, it do members media? if of we we've from looks the of want a the we’ve minutes, if use members looks it hour. are still out like I run couple like

Operator

[Operator Stephan comes Ohala Instructions] [ph]. The first Please question from ahead. go

Andrew Arnovitz

Okay. Operator…

Operator

Thank you.

Our…

Andrew Arnovitz

We’ll again time CAE’s found hours. website cae.com. for this would at us I transcript we've want the overrun call I be at of can to remind thank conclude you, the participants call all the as today. the joining on

Operator

Thank you. and conference for have please lines. your good and conclude today. participation for call day. Thank that does This disconnect ask you thank We you, the you your a

CAE (CAE) 11 Feb 222022 Q3 Earnings call transcript