Slide 1: Investor Presentation
Investor Presentation November 2017 Your worldwide training partner of choice
Slide 2: Caution Regarding Forward Looking Statements
CAUTION REGARDING FORWARD LOOKING STATEMENTS This document includes forward-looking statements about our activities, events and developments that we expect to or anticipate may occur in the future including, for example, statements about our vision, strategies, market trends and outlook, future reve
Slide 3: Our vision is to be the recognized global training partner of choice
Our vision is to be the recognized global training partner of choice to enhance safety, efficiency and readiness.
Slide 4: CAE at a Glance: Leader in three business segments
CAE AT A GLANCE Leader in three business segments Civil Aviation Training Solutions Defence and Security Healthcare ▪ Commercial Aviation ▪ Training Systems Integrator ▪ Patient simulation ▪ Business Aviation ▪ Virtual and live training ▪ Imaging/Interventional simulation ▪ Training equipment ▪ Trai
Slide 5: Diversified base of business with a high degree of recurring revenue
CAE AT A GLANCE Diversified base of business with a high degree of recurring revenue U.S.A. 4 36 Asia 38 % 58 % Australia Canada 40 % 36 Central and 60 South America 28 Middle East Europe Civil Aviation Training Solutions Services Defence and Security Products Healthcare Total FY17 revenue: $2.7B 5
Slide 6: 6 Pillars of Strength Underlie CAE's Strategy and Investment Thesis
6 PILLARS OF STRENGTH UNDERLIE CAE’S STRATEGY AND INVESTMENT THESIS Strong Underlying competitive secular moat tailwinds Headroom Potential in large for superior markets returns High degree Culture of recurring of innovation business 6 CAE Inc. Proprietary Information and/or Confidential
Slide 7: Unmatched Global Reach
UNMATCHED GLOBAL REACH Corporate head office Civil Aviation Training Solutions 160+ 35+ 8,500+ Defence & Security Healthcare locations countries employees 7 CAE Inc. Proprietary Information and/or Confidential
Slide 8: FY2017 Performance Highlights
FY2017 PERFORMANCE HIGHLIGHTS $2.7B $2.5B $2.7B +20 % $1.03 +35 % $20.32 +18 % $6.37B $7.53B $0.86 Record $15.02 Earnings Per Share from Record continuing Share Price Revenue FY2016 FY2017 operations1 Appreciation2 Record Backlog FY2016 FY2017 FY2016 FY2017 FY2016 FY2017 +32 % $327.9M 11.2 % 10.6% 1
Slide 9: Civil Aviation Training Solutions
Civil Aviation Training Solutions Your worldwide training partner of choice
Slide 10: Civil Aviation Training Solutions Market Drivers
CIVIL AVIATION TRAINING SOLUTIONS MARKET DRIVERS Market expansion: ▪ Over the next 10 years, IATA Activity of the 37K COMMERCIAL forecasts passenger trips to installed base 4.8B 25K AVIATION grow by 4.2% annually ▪ Fleet renewal and expansion 3.2B ▪ Commercial aircraft deliveries at historical Activ
Slide 11: Civil Aviation Training Solutions: Headroom in a Large Market
CIVIL AVIATION TRAINING SOLUTIONS HEADROOM IN A LARGE MARKET Civil Training Market $3.5B 33% CAE CAE has potential to increase share in a large market 11 CAE Inc. Proprietary Information and/or Confidential
Slide 12: 255,000 New Airline First Officers Needed Over Next 10 Years
CIVIL AVIATION TRAINING SOLUTIONS 255,000 NEW AIRLINE FIRST OFFICERS NEEDED OVER NEXT 10 YRS 150K 440K Additional Active Pilots Pilots for Growth Europe + = 50K 290K 105K Active Pilots Replacements Americas Asia-Pacific Middle East 85K & Africa 90K 30K 2017 2027 … AND 180,000 NEW CAPTAINS * CAE 10 y
Slide 13: World's Largest Civil Aviation Training Network
CIVIL AVIATION TRAINING SOLUTIONS WORLD’S LARGEST CIVIL AVIATION TRAINING NETWORK STOCKHOLM OSLO ● ● 50+ Training Locations ● COPENHAGEN MANCHESTER ● LDN / BURGESS HILL DUBLIN ● ● ● AMSTERDAM OXFORD ● SHANNON ●● ● BRUSSELS LDN / GATWICK ● PRAGUE ● PARIS ● FRANKFURT 250+ VANCOUVER ● ● MINNEAPOLIS ● M
Slide 14: Thought Leadership and Innovation
CIVIL AVIATION TRAINING SOLUTIONS THOUGHT LEADERSHIP AND INNOVATION Trusted partner of regulatory organizations and industry associations Constantly developing training solutions for partners Development of the Next Generation Training System Supported by innovative data collection and analysis tech
Slide 15: Defence and Security
Defence And Security Your worldwide training partner of choice
Slide 16: Defence and Security Market Drivers
DEFENCE AND SECURITY MARKET DRIVERS Increase in Defence Propensity to Increase of virtual Necessity to maintain spending in major outsource training training and simulation mission readiness markets solutions for Integrated Mission Training, including Joint and Coalition Forces Training 16 CAE Inc.
Slide 17: Global Defence Growth Cycle
DEFENCE AND SECURITY GLOBAL DEFENCE GROWTH CYCLE ▪ New Defence policy emerging ▪ Sovereignty/North American Defence ▪ Renew International Commitments ▪ Focus on Air/Naval 2% Canada 21% Europe & Middle East ▪ Global Mandate ▪ Preparing across spectrum of conflict ▪ Modernizing all domains 66% United
Slide 18: A Truly Global Defence Footprint in Key Markets
DEFENCE AND SECURITY A TRULY GLOBAL DEFENCE FOOTPRINT IN KEY MARKETS 35 Countries Burgess Hill STAVANGER COLD LAKE HOLZDORF MOOSE JAW Ottawa Montreal Stolberg RAF BENSON FAßBERG BÜCKEBURG SESTO CALENDE NEW YORK 50+ DOTHAN Defence Agencies Orlando Tampa Bengaluru BRUNEI Singapore 80+ Locations Sydney
Slide 19: Defence and Security: Headroom in a Large Market
DEFENCE AND SECURITY HEADROOM IN A LARGE MARKET Training Systems Integration Target Market $15B D&S revenue $1.04B CAE is well positioned to increase share in a $15B market 19 CAE Inc. Proprietary Information and/or Confidential
Slide 20: Training System Integration
DEFENCE AND SECURITY TRAINING SYSTEM INTEGRATION • Simulated Operators • Simulated Platforms Constructive Live Operators • Live Operators Simulated Platforms • Real Platforms Virtual Live Public Air Naval Land Safety 20 CAE Inc. Proprietary Information and/or Confidential
Slide 21: Thought Leadership and Innovation
DEFENCE AND SECURITY THOUGHT LEADERSHIP AND INNOVATION U.S. Army Fixed-Wing U.S. Navy T-44C U.S. Air Force MQ-1/ NATO Flying Training Flight Training Program Aircrew Training MQ-9 aircrew training in Canada (NFTC) U.K. Medium Support Swedish Navy's Naval Naval Training Centre Helicopter Aircrew Warf
Slide 22: Healthcare
Healthcare Your worldwide training partner of choice
Slide 23: Why Healthcare
CAE HEALTHCARE WHY HEALTHCARE Digitization of healthcare Synergies with CAE Explicit desire to adopt training and education augmented / virtual / aviation best practices with potential for mixed reality increased regulation Opportunity to lead in a potentially much larger market as regulations take
Slide 24: Factors Driving Simulation-Based Training in Healthcare
CAE HEALTHCARE FACTORS DRIVING SIMULATION-BASED TRAINING IN HEALTHCARE Increasing use of simulation Growing emphasis on in healthcare patient safety Digital transformation of Reducing medical errors* healthcare training Limited access to live Medical technology patients during training revolution Ad
Slide 25: Broadest Portfolio of Training Solutions
CAE HEALTHCARE BROADEST PORTFOLIO OF TRAINING SOLUTIONS Patient simulators Courseware Ultrasound simulators Surgical simulators Simulation centre management solutions 25 CAE Inc. Proprietary Information and/or Confidential
Slide 26: Culture of Innovation
CAE HEALTHCARE CULTURE OF INNOVATION CAE Healthcare …by using the became the first Microsoft Hololens, company to bring a the CAE VimedixAR commercial Microsoft ultrasound simulator HoloLens mixed- integrates real-time reality application to interactive holograms the medical of the human simulation
Slide 27: Thought Leadership and Innovation
CAE HEALTHCARE THOUGHT LEADERSHIP AND INNOVATION SCREEN-BASED SIMULATION USED FOR MAINTENANCE OF CERTIFICATION ▪ Scenario-based eLearning created in collaboration by America Society of Anesthesiologists (ASA) and CAE Healthcare deployed via the ASA Education Center ▪ Allow users to explore high-stak
Slide 28: Financial highlights and capital priorities
Financial highlights and capital priorities Your worldwide training partner of choice
Slide 29: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES PRIORITIES Invest in sustainable growth 1 Market/customer-led investments with a path to attractive, recurring returns Provide current shareholder returns in addition to generating long term growth 2 Current shareholder returns commensurate with earnings/cash performanc
Slide 30: Investment in Accretive Growth Remains a Priority
CAPITAL ALLOCATION PRIORITIES INVESTMENT IN ACCRETIVE GROWTH REMAINS A PRIORITY GIVEN ATTRACTIVE RETURN POTENTIAL 1 Incremental Pre-tax Return % on Capital Deployed in Civil Training (FY13-FY17) 40% 32% 31% ~$290M capital 30% investment from 25% 24% FY13-FY17 to 21% 20% 19% deploy 47 FFSs 16% 14% wi
Slide 31: Capex Intensity Has Been Decreasing
CAPITAL ALLOCATION PRIORITIES CAPEX INTENSITY HAS BEEN DECREASING 2 CAPEX and CAPEX as % of cash flow from operations Millions $250 80% 70% US $200 Army Fixed 60% Wing $150 50% 40% $100 30% 20% $50 10% $0 0% FY12 FY13 FY14 FY15 FY16 FY17 CAPEX Capex as a % of CF from operations Ex. US Army Fixed Win
Slide 32: Current Shareholder Returns
CAPITAL ALLOCATION PRIORITIES CURRENT SHAREHOLDER RETURNS 2 Profits returned to shareholders Millions $140 50% $120 45% $100 40% 35% $80 30% $60 25% $40 20% $20 15% $0 10% FY11 FY12 FY13 FY14 FY15 FY16 FY17 Dividends Share repurchases Total payout ratio * CAE prioritizes a balance between long-term
Slide 33: Strong Balance Sheet
CAPITAL ALLOCATION PRIORITIES STRONG BALANCE SHEET 3 Millions $2,000 50% $1,800 Optimal Net Debt-to-Capital (35-45%) $1,600 40% $1,400 $1,200 $1,000 30% $800 $600 20% $400 $200 $0 10% FY11 FY12 FY13 FY14 FY15 FY16 FY17 Net Debt Net Debt-to-Capital CAE’s strong financial position provides stability a
Slide 34: Increased Proportion of Recurring Revenue (Services)
INCREASED PROPORTION OF RECURRING REVENUE (SERVICES) FY2001 FY2008 FY2017 15% 43% 60% Products Services 34 CAE Inc. Proprietary Information and/or Confidential
Slide 35: A Resilient Business Model
A RESILIENT BUSINESS MODEL CAE Consolidated Segment Operating Income (SOI) Millions $450 SOI down 14% post $400 ‘Financial Crisis’ $350 SOI down 60% $300 post ‘2001 Crisis’ $250 $200 $150 $100 $50 $0 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY01-FY10 Canad
Slide 36: Strong Backlog for Enhanced Visibility
STRONG BACKLOG FOR ENHANCED VISIBILITY Total Backlog Billion $8.0 16% CAGR $7.0 $6.0 $5.0 9% CAGR $4.0 $3.0 $2.0 $1.0 $0.0 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Civil Defence 36 CAE Inc. Proprietary Information and/or Confidential
Slide 37: Improving Capital Returns with Lower Cost of Capital
IMPROVING CAPITAL RETURNS WITH LOWER COST OF CAPITAL CAE historical ROCE and WACC from an increasingly more recurring business mix 14% 12% 10% ROCE Range (10-13%) 8% 6% 4% 2% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY13 FY14 FY15 FY16 FY17 WACC ROCE 37 CAE Inc. Proprietary Inf
Slide 38: Compelling Long Term Investment Thesis
COMPELLING LONG TERM INVESTMENT THESIS • Services revenue approx. • Market leader 60% of mix and expected • Large addressable to continue increasing • Unique comprehensive markets in Civil Aviation relative to products Solutions and Defence • Long-term contracts in • Unmatched global reach • Innovat
Slide 39: Outlook Summary FY18
OUTLOOK SUMMARY FY18 CIVIL DEFENCE AND SECURITY HEALTHCARE ▪ Generate low-double digit ▪ Mid to high single-digit ▪ Resume growth in FY18 percentage segment percentage growth operating income growth ▪ Increased sales coming from ▪ Ramp up recently won opportunities pipeline and ▪ More progress to pe
Slide 40: Appendix
Appendix Your worldwide training partner of choice
Slide 41: CAE's Performance: FY18 YTD Business Highlights
CAE’S PERFORMANCE FY18 YTD BUSINESS HIGHLIGHTS FY18 Q2 FY18 YTD EPS $0.24 vs. $0.18 ($0.21 before specific $0.48 vs. $0.43 ($0.47 before specific from continuing operations items) in prior year items) in prior year Revenue $646.0 M (+2% YoY) $1,344.9 M (+4% YoY) Operating profit $109.3 M (+43% YoY)
Slide 42: Consolidated Financial Results FY18 Q2
FY18 Q2 CONSOLIDATED FINANCIAL RESULTS Summary of Consolidated Results Three months ended September 30 (amounts in millions, except per share amounts) 2017 2016 Revenue $ 646.0 $ 635.5 Gross profit 188.0 186.9 Operating profit 109.3 76.2 As % of revenue 16.9% 12.0% Earnings from continuing operation
Slide 43: Consolidated Financial Results FY18 YTD
FY18 YTD CONSOLIDATED FINANCIAL RESULTS Summary of Consolidated Results Six months ended September 30 (amounts in millions, except per share amounts) 2017 2016 Revenue $ 1,344.9 $ 1,287.1 Gross profit 400.7 376.9 Operating profit 207.1 165.2 As % of revenue 15.4% 12.8% Earnings from continuing opera
Slide 44: Cash Movements FY18 Q2
FY18 Q2 CASH MOVEMENTS Consolidated Cash Movements Three months ended September 30 (amounts in millions) 2017 2016 Cash provided by continuing operating activities $ 107.2 $ 87.1 (before changes in non-cash W/C) Changes in non-cash working capital (10.1) (30.6) Maintenance capex and others assets (1
Slide 45: Cash Movements FY18 YTD
FY18 YTD CASH MOVEMENTS Consolidated Cash Movements Six months ended September 30 (amounts in millions) 2017 2016 Cash provided by continuing operating activities $ 198.2 $ 193.9 (before changes in non-cash W/C) Changes in non-cash working capital (120.3) (83.2) Maintenance capex and others assets (