CAE reports second quarter fiscal 2020 results

Press Release from CAE Inc

  • Revenue of $896.8 million up 21% vs. $743.8 million in Q2 FY2019
  • Segment operating income(1) of $124.8 million ($126.0 million before specific items)(2) up 28% vs. $98.7 million in Q2 FY2019
  • EPS of $0.28 vs. $0.23 in Q2 FY2019
  • Order intake(3) of $995.4 million for 1.11x book-to-sales(3) and $9.2 billion backlog(3)
  • Concluded 15-year exclusive business aviation training services agreement with Directional Aviation Capital and acquisition of 50 percent of SIMCOM post quarter

Montreal, Canada, November 13, 2019 – (NYSE: CAE; TSX: CAE)

CAE today reported revenue of $896.8 million for the second quarter of fiscal 2020, compared with $743.8 million in the second quarter last year. Second quarter net income attributable to equity holders was $73.8 million ($0.28 per share) compared to $60.7 million ($0.23 per share) last year. Net income before specific items(4) in the second quarter of fiscal 2020 was $74.7 million ($0.28 per share before specific items(5)).

Second quarter segment operating income was $124.8 million (13.9% of revenue) compared with $98.7 million (13.3% of revenue) in the second quarter of last year. Segment operating income before specific items in the second quarter of fiscal 2020 was $126.0 million (14.0% of revenue). All financial information is in Canadian dollars unless otherwise indicated.

“CAE had good growth in the second quarter, with 21 percent higher revenue and 28 percent higher operating income, and we secured nearly $1.0 billion of orders for a $9.2 billion backlog,” said Marc Parent, CAE’s President and Chief Executive Officer. “Performance was led by Civil with 60 percent operating income growth and higher margins, and continued good momentum signing long-term training agreements with our airline partners. In business aviation, we substantially concluded the integration of Bombardier Business Aircraft Training and I am very pleased with its performance to date. Further strengthening our position is our strategic partnership and exclusive 15-year training outsourcing with Directional Aviation Capital, one of the largest, fastest growing, and most innovative corporate aviation service companies globally. In Defence, modest top-line growth and lower operating income reflect order delays and the timing of program milestones on contracts in backlog. We continue to expect a stronger second half in Defence, a view supported by a healthy book-to-sales ratio in the quarter and a robust pipeline. In Healthcare, we received orders for new products that we plan to deliver in the coming quarters, and we enhanced our position in the large U.S. hospital market. As we look to the remainder of the fiscal year, our overall outlook for the Company remains largely unchanged, with a higher growth outlook in Civil offsetting lower expected growth in Defence.”

Civil Aviation Training Solutions (Civil)

Second quarter Civil revenue was $529.9 million, up 35% compared to the same quarter last year. Segment operating income was $100.2 million (18.9% of revenue) compared to $63.3 million (16.1% of revenue) in the second quarter last year. Second quarter segment operating income before specific items was $101.4 million (19.1% of revenue), up 60% compared to the second quarter last year. During the quarter, Civil delivered 18 full-flight simulators (FFSs) to customers and second quarter Civil training centre utilization(6) was 69%.

During the quarter, Civil signed training solutions contracts valued at $602.9 million, including new long-term pilot training agreements with Sunwing Airlines, Loganair and Flightworks. Civil also sold 11 FFSs during the quarter, for 20 sales in the first half of the year. To address the growing global demand for new pilots, Civil launched a new cadet pilot training program to train more than 700 new professional pilots over the next 10 years for Southwest Airlines Destination 225° program. Following the end of the quarter, Civil signed a long-term exclusive training agreement with easyJet to train more than 1,000 new easyJet cadet pilots on a Multi-Crew Pilot License program. In business aviation, Civil entered a strategic partnership with Directional Aviation Capital and its affiliates as part of an exclusive 15-year training outsourcing agreement. As part of the agreement, CAE acquired a fifty-percent stake in SIMCOM Holdings, Inc., post quarter.

The Civil book-to-sales ratio was 1.14x for the quarter and 1.45x for the last 12 months. The Civil backlog at the end of the quarter was a record $5.1 billion.

Defence and Security (Defence)

Second quarter Defence revenue was $336.5 million, up 5% compared to the same quarter last year and segment operating income was $26.0 million (7.7% of revenue), down 24% compared to the second quarter last year, reflecting delays in the timing of orders and Defence’s progress on programs in backlog, and an income growth profile more heavily weighted to the second-half of the year.

During the quarter, Defence booked orders for $362.1 million, including the U.S. Air Force for KC-135 aircrew training services and simulator upgrades and modifications on its KC-135 training devices. Additionally, CAE will continue to provide fixed-wing flight training and support services to the U.S. Army at the CAE Dothan Training Centre and upgrades on MH-60 Seahawk helicopter simulators and T-44C aircrew training services to the U.S. Navy. Other notable orders include a contract with Boeing for upgrades on P-8A simulators, a contract to upgrade the German Eurofighter and Tornado aircraft simulator, and a contract for Abrams M1A2 tank maintenance trainers for the U.S. Army. As well, Defence entered a collaboration with Leonardo to offer integrated helicopter training solutions in the U.S. government market.

The Defence book-to-sales ratio was 1.08x for the quarter and 0.81x for the last 12 months (excluding contract options). The Defence backlog, including options and CAE’s interest in joint ventures, at the end of the quarter was $4.1 billion. The Defence pipeline remains strong with approximately $4.0 billion of bids and proposals pending customer decisions.

Healthcare

Second quarter Healthcare revenue was $30.4 million compared to $30.4 million in the same quarter last year, and second quarter segment operating loss was $1.4 million, compared to segment operating income of $1.3 million in the second quarter last year. Healthcare had higher expenses in the second quarter this year to support the pursuit of a larger business and the launch of new products.

Healthcare launched the Vimedix 3.0 ultrasound simulator with more realistic anatomy and modern user interface. As well, Healthcare, together with the American Society of Anesthesiologists, launched a new Anesthesia SimSTAT module, the latest in a series of interactive screen-based modules approved for Maintenance of Certification in Anesthesiology credits. In response to increased regulations in the U.S. involving hospitals and the growing imperative on patient safety, Healthcare further expanded its reach in the hospital segment by entering a group purchasing agreement with Premier, a leading healthcare improvement company, uniting an alliance of approximately 4,000 U.S. hospitals and health systems and approximately 175,000 other providers and organizations.