CAE Inc ((TSE:CAE)) has held its Q1 earnings call. Read on for the main highlights of the call.
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CAE Inc’s Latest Earnings Call: A Balanced Outlook with Strong Defense and Business Aviation Performance
The recent earnings call for CAE Inc reflected a balanced outlook, showcasing robust performance in the Defense segment and promising developments in business aviation. While the company expressed optimism about future growth opportunities, particularly in Defense, challenges in the Civil segment, such as the temporary pause in commercial pilot hiring and negative free cash flow, tempered some of the positive momentum. The company remains committed to operational efficiencies and capital allocation improvements.
Strong Defense Segment Performance
The Defense segment of CAE Inc delivered impressive year-over-year growth in adjusted segment operating income, achieving an 8.2% margin. This success was attributed to improved execution and disciplined program management. The segment’s book-to-sales ratio stood at 1.25x, contributing to an $11 billion adjusted backlog, marking a 7% increase from the previous year.
Business Aviation Success
Business aviation continues to be a strong performer, accounting for about half of the Civil segment’s profit. CAE opened its first dedicated training center in Central Europe, enhancing customer support with new full-flight simulators, reflecting the robust market conditions for business aviation.
Continued Investment and Expansion
CAE’s capital expenditures for the quarter totaled $106.9 million, with approximately 75% directed towards growth initiatives. This includes the deployment of simulators to support U.S. Army helicopter training in Alabama, underscoring the company’s commitment to expansion and investment.
Strong Order Intake
The company reported an overall order intake of $1.1 billion, with significant contributions from the Defense sector. Notable orders included the continuation of flight training services for the U.S. Air Force and collaboration with Sikorsky for anti-submarine warfare capabilities.
Commercial Pilot Hiring Pause
A temporary pause in commercial pilot hiring, particularly in the U.S., led to lower utilization and fewer full-flight simulator orders during the quarter. Training center utilization fell to 71%, down from 76% in the prior year period, impacting the Civil segment.
Negative Free Cash Flow
The company reported a negative free cash flow of $36.2 million, compared to negative $25.3 million in the first quarter of the previous year. This was primarily due to higher investment in noncash working capital.
Lower Civil Segment Growth Guidance
CAE revised its Civil segment growth guidance to the lower end of the prior outlook, with expected annual adjusted segment operating income growth in the mid-single-digit percentage range.
Forward-Looking Guidance
Looking ahead to the first quarter of fiscal year 2026, CAE provided guidance on several key financial metrics and strategic priorities. The company reported adjusted earnings per share (EPS) of $0.21 and an adjusted order intake of $1.1 billion. CAE is targeting a net debt to adjusted EBITDA ratio of approximately 2.5x by the fiscal year-end, indicating a focus on deleveraging the balance sheet. The company also highlighted a 71% training center utilization rate and a total Civil adjusted backlog of $8.4 billion, up 27% year-over-year. In Defense, the adjusted segment operating income increased by 45% to $40.2 million, reflecting margin expansion and improved program execution.
In conclusion, CAE Inc’s latest earnings call presented a balanced outlook, with strong performances in the Defense and business aviation segments. Despite challenges in the Civil segment, the company remains optimistic about its long-term growth prospects, driven by favorable market dynamics in both civil aviation and defense sectors. CAE’s focus on operational efficiencies, capital allocation improvements, and strategic investments positions it well for future growth.