Cae Inc. · TSX:CAE
Cae — Investor Day (June 2022)
76 slides from Cae's investor day presentation, Jun 7, 2022
Slide 1: CAE Investor Day
All figures in $ CAD CAE Investor Day New York, NY June 7, 2022
Slide 2: Disclaimer: Forward-Looking Statements
Disclaimer CAUTION REGARDING FORWARD-LOOKING STATEMENTS This presentation 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 outlo
Slide 3: Disclaimer: Material Assumptions
Disclaimer MATERIAL ASSUMPTIONS The forward-looking statements set out in this presentation are based on certain assumptions including, without limitation: the anticipated negative impacts of the COVID-19 pandemic on our businesses, operating results, cash flows and/or financial condition, including
Slide 4: Agenda
Agenda Tuesday, June 7, 2022 Lotte New York Palace, Holmes 1 & 2 Activity Presenter Timing ❖ Registration 07:30 – 8:30 • Light breakfast and Technology Demos Andrew Arnovitz, Senior Vice President, Investor relations and ❖ Welcome and Introductions 8:30 – 8:40 Enterprise Risk Management ❖ CEO’s Open
Slide 5: CEO's opening remarks
CEO’s opening remarks CAE Investor Day Marc Parent, President & Chief Executive Officer
Slide 6: We are an essential partner to people in critical roles
CEO’s opening remarks We are an essential partner to people in critical roles who are moving our world forward safely Civil Aviation Defense & Security ▪ Largest global training network ▪ #2 training and simulation provider (1M hrs/year*) ▪ Only global pure-play, platform-agnostic ▪ Leading provider
Slide 7: CAE has evolved over time
CEO’s opening remarks CAE has evolved over time Civil Defense Healthcare Acquisition of Acquisition of Acquisition Acquisition Acquisition of Bombardier’s Schreiner of Medical of Oxford Bombardier’s Acquisition Business Aircraft Aviation Training Aviation Military Aviation Acquisition of Pelesys Tra
Slide 8: Broadening customer workscope and deepening customer relationships over time
CEO’s opening remarks Broadening customer workscope and deepening customer relationships over time Annual training billings from airline partners ($M) Cumulative orders from strategic government customers ($M) $50 $40M+ $40 FY17- 3.5x 4.0x 3.0x $30 FY22 $20 Airline 1 $10 FY11- Airline 2 < $4.0M FY16
Slide 9: Staying ahead of foundational technology shifts
CEO’s opening remarks Staying ahead of foundational technology shifts has long been part of our history 1990s 2000s 2010s 2015 Future Immersive COTS Technology Training Service Cloud VR/AR/MR Synthetic Simulation Enablement Delivery Adoption Environments Fully immersive visual GPU cards, real-time F
Slide 10: Leaning into technology to further transform the business
CEO’s opening remarks Leaning into technology to further transform the business and define the 2020s > AI/ML & Data Analytics Enhance training & mission efficacy. Subjective → objective data-driven training evaluation > Biometric Sensors Fully adaptive learning & training to generate deeper insights
Slide 11: CAE played offense to become bigger, stronger and more profitable
CEO’s opening remarks CAE played offense to become bigger, stronger and more profitable $480M+ of capex* and R&D* deployed Near break-even to strategically expand our edge $70M of structural in Q1 FY21 cost savings** in the depths of the pandemic with to permanently improve our cost structure positi
Slide 12: Numerous indications of strong growth ahead in our markets
CEO’s opening remarks Numerous indications of strong growth ahead in our markets Civil Aviation Defense & Security Healthcare Revenue Passenger Global defence budgets Global healthcare Cyclical growth Kilometers (M) simulation market ~35% ~$1.9T* 3-4% 12% ~8,500 ~$1.6T* Growth IPAC CAGR ~$2.3B* CAGR
Slide 13: Continuing to organically invest to extend our leadership position
CEO’s opening remarks Continuing to organically invest to extend our leadership position and establish future growth markets Strategically expanding business aviation footprint in attractive geographic locations Las Vegas, Nevada Singapore Savannah, Georgia Growing training network with 20+ FFS* dep
Slide 14: Continuing to organically invest to extend our leadership position
CEO’s opening remarks Continuing to organically invest to extend our leadership position and establish future growth markets Developing single synthetic environments CAE delivered the second to accelerate and enhance technology demonstrator for UK’s decision making Single Synthetic Environment Becom
Slide 15: Completed accretive acquisitions since the start of the pandemic
CEO’s opening remarks Completed 9 accretive acquisitions since the start of the pandemic L3Harris Military GlobalJet and 1 FSC 3 Merlot 6 Training 7/8 SkyWarrior Expansion across multi-domain Expansion of maintenance training + 12 FFSs* and extended European Crew optimization software operations as
Slide 16: Positive ESG impact is core to CAE's mission
CEO’s opening remarks Positive ESG impact is core to CAE’s mission Committed to reduction of GHG emissions Strong impact on the industry Climate decarbonization All CAE sites are 100% action First Canadian aerospace sourced with For FY21, 5M+ tonnes renewable energy or CO2e emissions company to beco
Slide 17: Summary
CEO’s opening remarks Summary Civil Aviation ▪ Strong growth from cyclical recovery boosted by secular dynamics Market leader with ▪ Starting an upcycle with near-record margins with room for further expansion strong cyclical and secular growth drivers ▪ Technology and new markets optionality Defens
Slide 18: Civil Aviation
Civil Aviation CAE Investor Day Nick Leontidis – Group President, Civil Aviation
Slide 19: Market leader with strong cyclical and secular growth dynamics
Civil Aviation Market leader with strong cyclical and secular growth dynamics Aviation Aviation Simulation Training ▪ Simfinity XR Series ▪ Pilot Training – Initial and Recurrent ▪ Flight Training Devices ▪ Cadet Academies Leading provider ▪ Full Flight Simulators* ▪ CAE Instructor-Led Training pois
Slide 20: Industry-leading standard for full-flight simulators
Civil Aviation Industry-leading standard for full-flight simulators* Aviation Training Aftermarket Advanced Technology Equipment Services and Innovation ▪ Market leader with the largest ▪ Diverse lifecycle services ▪ Backed by 75 years production of simulators in the to airlines and fleet operators
Slide 21: Seamless experience through all training phases with the CAE XR
Civil Aviation Seamless experience through all training phases with the CAE XR Learn Practice Experience Ground School Flight Training Full Flight Training Solutions Devices Simulators Advanced and reliable aviation equipment to develop skilled and safe pilots 21 CAE Inc. Proprietary Information and
Slide 22: With pilots through their journey – from Cadet to Captain
Civil Aviation With pilots through their journey – from Cadet to Captain CADET EXPERIENCE & TRAINING FIRST OFFICER Assessment Selection Flight Training Experience Building Type Rating Indoctrination Multi-Crew Pilot License MPL Airline Transport Pilot License Flying Hours ATPL Experience OR Objectiv
Slide 23: Global footprint more than doubled in the last decade
Civil Aviation Global footprint more than doubled in the last decade 2010’s 2020’s Full Flight Simulators (FFSs*) 148 300+ Training Locations 28 70 ~1M Training hours per year¹ 135K pilots trained per year¹ CAE Civil has the largest aviation training network *Non-GAAP and other financial measures (S
Slide 24: Deepening customer relationships through flexible partnership models
Civil Aviation Deepening customer relationships through flexible partnership models Training Joint Ventures Aviation Training & Equipment Equipment Training operations Cadet to Cadet to Captain Digital CadetCaptain to Captain and Training Training & Solutions Recruitment Training and Recruitment Rec
Slide 25: Customer Journey Stories
Civil Aviation Customer Journey Stories Today Partner of choice ▪ Pilot training 2000s 2011 2017 ▪ CAE Rise™ training ▪ CAE acquires Air Asia JV ▪ Aviation Recruitment shares Delivering equipment and Started 50/50 joint venture ▪ MPL cadet program services partnership ▪ Agreement to outsource all tr
Slide 26: Customer Journey Stories
Civil Aviation Customer Journey Stories Today Partner of choice >2000s 2018 2022 ▪ Pilot training ▪ 50/50 joint venture ▪ Flight Operations partnership for a new training centre Using AirCentre (Sabre) customers (AirCentre) Delivering Equipment products ▪ JV partner since 2018 ▪ Singapore Airlines b
Slide 27: Commercial and Business Jet aviation markets show continued signs of growth
Civil Aviation Commercial and Business Jet aviation markets show continued signs of growth FY21-22 Rebound FY22-25 Outlook* FY22-25 CAGR* # of Business Aviation flights (K)1 Business Jet EASA FAA +7% 3 684 3 766 3 443 3 045 686 707 +50% +2.9x 631 547 3 059 2 812 2 998 2 498 # of Flights # of Aircraf
Slide 28: Cyclical growth expected to be boosted by secular dynamics
Civil Aviation Cyclical growth expected to be boosted by secular dynamics CAE Pilot Demand Outlook AIRLINE Pilot Demand BUSINESS Jet Pilot Demand 426 New Airline Pilots Needed 264K 93 58 new civil aviation New Business Jet 333 Grow Pilots Needed pilots needed over 126 219 54 Grow 4 the next decade R
Slide 29: Major accomplishments during COVID pandemic
Civil Aviation Major accomplishments during COVID pandemic Training Centres 3 9 Announced Consolidated 6 +1,300bps M&A Deals Sim utilization* Since start of pandemic FY22 vs FY21 Past 2 Majority of $70M years ~50* Annual enterprise FFSs* relocated Since start of pandemic cost savings** 21 FFSs* $2Bn
Slide 30: Investing to build a broad digital ecosystem
Civil Aviation Listening to the market and investing to build a broad digital ecosystem February April December April July March 2018 2019 2020 2021 2021 2022 AirCentre Airline Operations Portfolio On-site On-site demo demo Launched digital Expanded Entered crew Grew into crew Launched $1B Expanded
Slide 31: CAE Rise is a next-generation platform leveraging real-time data analytics
Civil Aviation CAE Rise™ is a next-generation platform leveraging real-time data analytics to increase pilot training effectiveness 3 main capabilities On-site demo 1 eGrading app Increases training efficiency Digitizes training, captures assessment data in a standardized manner and generates traini
Slide 32: Leveraging AirCentre acquisition to broaden our Digital Solutions offering
Civil Aviation Leveraging AirCentre acquisition to broaden our Digital Solutions offering On-site Significant increase in End-to-end aviation operations platform demo customer touchpoints crews supported In-Flight 200K across the globe Flight Movement Crew Services Airport Training Management Manage
Slide 33: CAE positioned to provide end-to-end solutions for the emerging eVTOL market
Civil Aviation CAE positioned to provide end-to-end solutions for the emerging eVTOL market Pre-certification Operational Readiness EIS Phase 2 / Autonomous Engineering Courseware Simulation Technician Workforce Mission Pilot Training RPAS Training Solutions Development Products Training Sourcing Pl
Slide 34: Summary – Civil Aviation
Civil Aviation Summary – Civil Aviation Growth drivers ▪ Industry rebound started in FY22 ▪ Cyclical + secular growth drivers - Double-digit growth expected in passenger traffic - ~264K new civil aviation pilots needed over the next decade CAE ▪ Established market leader leveraging strong IP Positio
Slide 35: Defense & Security
Defense & Security CAE Investor Day Daniel Gelston – President and General Manager CAE USA and Group President, Defense & Security
Slide 36: Defense & Security environment has changed
Defense & Security Defense & Security environment has changed Allied strategy pivoted from asymmetric fight to training for near-peer threat Fighting to training New platforms Land to all five domains More classified Greater need for synthetic environments CAE Defense & Security reimagined based on
Slide 37: D&S: transformed with L3Harris Military Training
Defense & Security D&S: transformed with L3Harris Military Training Training & Simulation Mission Operations ▪ Simulation Products ▪ Prime contractor for digital ecosystems ▪ Broad Range of Training Services ▪ Common Operational Picture (COP) ▪ Training Centers ▪ Real-time modeling and simulation Le
Slide 38: D&S now positioned to capitalize on higher-growth markets
Defense & Security D&S now positioned to capitalize on higher-growth markets Allied Defense budgets are growing 3-4% annually* CAE Addressable Markets* USD USA EMEA IPAC CAN CORE Land CAGR 2021: $746B CAGR CAGR 2021: $485B CAGR 2021: $301B CAGR 2021: $19B ~$14B Training 7% 2.6% 2.6%2027: $871B 3.5%
Slide 39: Core training & simulation competitive landscape
Defense & Security Core training & simulation competitive landscape OEMs Refocusing on Core Platforms: 75+ OEM Seeking training & simulation partnerships Platforms instead of vertical integration 16% 22%** 145+ Sites Demand for Multi-domain Solutions: Mid Tier / 14% 50+ Other Few mid-tier providers
Slide 40: D&S technology portfolio: the leading edge of ensuring mission readiness
Defense & Security D&S technology portfolio: the leading edge of ensuring mission readiness > Revolutionary Digital Training Solution > Next-Gen Situational Awareness ▪ Solving Pilot Shortages ▪ Solving Speed to Decision in Multi-Domain ▪ Speed to Proficiency Environments > Common Operational Single
Slide 41: Larger, more capable enterprise: already yielding results
Defense & Security Larger, more capable enterprise: already yielding results Training every DoD Pilot Air +Beat 60yr German Ab-Initio incumbent Land Solutions for Vehicles and Ground Operators +Position as USAF’s lead Close Air Support trainer All three legs of the Triad Sea +Maritime Integrated Tra
Slide 42: Larger, more capable enterprise: accelerating future growth
Defense & Security Larger, more capable enterprise: accelerating future growth Increased addressable market Larger, more diverse talent base 6x Scale to pursue more complex bids 2.5x increase in prime position on large IDIQ vehicles increase in with total ceiling of $224B engineers 5x 13x increase i
Slide 43: Increasing addressable market: prime IDIQ access
Defense & Security Increasing addressable market: prime Indefinite Delivery, Indefinite Quantity (IDIQ) access ETSC TSC IV ($3.0B) ($950M) TSA IV ATMP ($25B) FTSS IV ($4.4B) ($2.2B) L3H MT Acquisition RS3 RAPTOR PIF ($47.1B) ($1.3B) ($1.4B) SCARS RAPID ASTRO ($1.1B) ($315M) ($113.4B) DIA SIA FCC MAT
Slide 44: Driving our destiny: moving up the value chain
Defense & Security Driving our destiny: moving up the value chain Pre-acquisition Post-acquisition $150M / year in subcontractor orders $800M / year order pipeline, majority as prime OEMs as primes CAE as prime +$500M / yr 400% increase in annual order pipeline with OEM partners; $500M of prime oppo
Slide 45: Prime pursuits: increasing in size and quantity across all domains
Defense & Security Prime pursuits: increasing in size and quantity across all domains Average bid size ($M) Quantity of competitive prime pursuits > $100M $120 $100 FY23- FY25* $80 $60 FY20- $40 FY22 $20 - 10 20 30 40 50 $- FY20-FY22 FY23-FY25* Air Land Sea Space Cyber Joint/Other Average bid size f
Slide 46: Successful integration: positioning D&S for profitable growth
Defense & Security Successful integration: positioning D&S for profitable growth L3H MT Integration Progress Pre-Pandemic Pandemic FY17 FY18 FY19 FY20 FY21 FY22 Leadership Leadership Team = 1/3 legacy Q1 Q2 Q3 Q4 Best-of-breed CAE, 1/3 L3H MT, 1/3 new talent 0.5x 1.0x 1.4x 1.6x 1.3x 1.3x Culture Ret
Slide 47: Summary: Defense & Security
Defense & Security Summary: Defense & Security Growth drivers ▪ Shift from asymmetric fight to near-peer training generates five clear customer requirements ▪ D&S as the global, platform agnostic training & simulation pure play across all five domains provides a clear market discriminator ▪ Leveragi
Slide 48: Healthcare
Healthcare CAE Investor Day Heidi Wood, President, CAE Healthcare Executive Vice President, Business Development & Growth Initiatives
Slide 49: Why Healthcare?
Civil Defense & Security Why Healthcare? 1. 1 Aligned with CAE’s mission and technology Addressing the pilot shortage Using modeling and simulation to train through training & simulation when lives are on the line 2. 2 Natural migration into crucial growth market Healthcare Addressing the nursing sh
Slide 50: Well positioned in a high growth market
Healthcare Well positioned in a high growth market Patient Simulators Software & ▪ High-Fidelity Simulators Digital Solutions ▪ Childbirth & Neonatal Care ▪ Ultrasound ▪ Anesthesia 6% ▪ Cardiac Accelerating 2nd largest player digital offerings, in a fast-growing EMT ▪ E-learning world leader in mark
Slide 51: Patient Simulators
Healthcare Broad suite of capabilities to serve growing markets Adult Pediatrics Trauma/EMS Skills Trainers Patient Simulators Apollo Aria Ares Medicor Nursing Childbirth Anesthesia Neonatal Care Juno Lucina HPS Luna 51 CAE Inc. Proprietary Information and/or Confidential
Slide 52: Digital
Healthcare Addressing the needs of an evolving learning environment Ultrasound Sim Lab Management Cardiac Training E-Learning Digital Vimedix LearningSpace CathLab VR Maestro CPR Defibrillator (AED) Custom Courses Other Certifications Simulated Equip Custom Module 52 CAE Inc. Proprietary Information
Slide 53: Healthcare training and simulation is an attractive growth market
Healthcare Healthcare training and simulation is an attractive growth market benefiting from multiple secular tailwinds USD Global Healthcare Sim Market 22% 6M+ B$USD of pop. 65+ globally $3,0 $3.0 12% by 2030 Total CAGR Addressable $1.7 $1,7 Market $2,3 $2.3 CAE’s $1,3 Addressable $1.3 Market 17M ~
Slide 54: CAE addresses the growing nursing shortage
Healthcare CAE addresses the growing nursing shortage with its suite of training solutions Nurses account for 37% of U.S. healthcare professionals Growing % of U.S. nurses aged 65+ U.S. healthcare professionals by role in 2021 (M) Age distribution of U.S. Registered Nurses Nurses 28% in 2020 Aged +6
Slide 55: Pre-COVID, only 17 states accepted 50% of clinical hours using simulation
Healthcare Pre-COVID, only 17 states accepted 50% of clinical education hours using simulation Simulation training hours recognized ≥ 50% Pre-COVID 50% 50% ≤ 30% & legislation introduced Unregulated 50% 25% 50% 50% 50% 50% 50% 50% 25% 25% 25% 50% 25% 25% 50% 25% 30% 50% 50% 50% 25% 50% 50% 50% Sourc
Slide 56: Post-COVID, every state has introduced or passed simulation legislation
Healthcare Post-COVID, every state has introduced or passed legislation permitting simulation training as part of clinical hours Simulation training hours recognized ≥ 50% Defined existing regulations ≤ 30% & legislation introduced 50% ≥ 50% Post-COVID 50% 50% Indicates policy is in the legislative
Slide 57: Healthcare has demonstrated excellent progress in the last 2 years
Healthcare Healthcare has demonstrated excellent progress in the last 2 years +25% +$55M 1,250 FY22 Revenue Growth Won Value1 increase in FY22 Patient simulators sold compared to FY21 compared to FY21 in FY22, a 22% increase from FY20 1Completed value of Excluding the contribution sales opportunitie
Slide 58: Healthcare is on a multi-year journey to accelerate growth & profitability
Healthcare Healthcare is on a multi-year journey to accelerate growth & profitability Today Tomorrow Future 1 Growing mix of high margin digital sales 2 Adding new levers for profitable growth Scale Flagship Grow SAAS & Grow Task Recurring operations products sales E-commerce Trainers revenue Digita
Slide 59: Leveraging advanced technologies to build sophisticated digital capabilities
Healthcare Leveraging advanced technologies to build sophisticated digital capabilities > Artificial Intelligence/Machine Learning Enable personalized, adaptive learning > Hybrid Cloud Solutions Combined in-person & remote training for sim centers > Data Analytics Assess student performance and elev
Slide 60: Summary – Healthcare
Healthcare Summary – Healthcare Growth drivers ▪ Second largest player in a fast-growing market, bolstered by long-lived tailwinds ▪ Increased statewide acceptance of simulation training could further accelerate growth ▪ Intensifying nursing shortage could further accelerate demand CAE ▪ Acceleratin
Slide 61: Capital Priorities and Financial Outlook
Capital Priorities and Financial Outlook CAE Investor Day Sonya Branco, Executive Vice President, Finance and Chief Financial Officer
Slide 62: Strong growth dynamics and a large pipeline of accretive investment opportunities
Capital priorities and financial outlook Strong growth dynamics and a large pipeline of accretive investment opportunities Organic Investments M&A Investments ▪ Airline outsourcings ▪ Increasing capabilities, scale and customer Significant reach Pipeline of opportunities to ▪ Joint-ventures inorgani
Slide 63: The pillars of our balanced approach to capital allocation
Capital priorities and financial outlook The 3 pillars of our balanced approach to capital allocation Invest in accretive Superior, sustainable and accretive growth to growth earnings, cash flow and return on capital 1 Strong balance sheet Maintaining a resilient and flexible financial position Bala
Slide 64: How CAE assesses and prioritizes capital deployment opportunities
Capital priorities and financial outlook How CAE assesses and prioritizes capital deployment opportunities ▪ Strengthen competitive position and expand total addressable market ▪ Bolster capabilities, scalability and enhance customer experience ▪ Accelerate recurring revenue growth ▪ Accretive to ma
Slide 65: Organic capital driving recurring revenues and accretive compounding growth
Capital priorities and financial outlook Organic capital driving recurring revenues and accretive compounding growth Pre-tax returns on Civil Aviation organic deployed capital** $690M+ organic capital 46% invested in FY17-FY22 Year of FFS* deployment to deploy 77 FFSs* 35% FY17 31% within CAE’s Civi
Slide 66: Acquisition Benefits
Capital priorities and financial outlook Proven record of successfully executing M&A to strengthen our position as the “Partner of Choice” Business Aircraft Training Multiple ▪ ~9x EBITDA* multiple (one-year forward EBITDA) ▪ Sabre ~7x EBITDA* multiple based on pre- pandemic calendar 2019 ▪ Expanded
Slide 67: Acquisition Benefits
Capital priorities and financial outlook Proven record of successfully executing M&A to strengthen our position as the “Partner of Choice” Military Training CMAT CAE Military Aircraft Training Multiple ▪ ~10x EBITDA* multiple including synergies ▪ $19.8M purchase price in Sept 2015 for NATO Flight T
Slide 68: Track record of integrating acquisitions and managing a solid balance sheet
Capital priorities and financial outlook Track record of successfully integrating acquisitions and managing a solid balance sheet Acquisition of Acquisition of Acquisition of Acquisition of Acquisition of L3H Medical Oxford Bombardier’s Bombardier’s Military Training Education Aviation Military Avia
Slide 69: Optimized cost structure will enable record profitability and higher free cash flow
Capital priorities and financial outlook Optimized cost structure will enable record profitability and higher free cash flow* Cost optimization actions Benefits Real estate footprint reduction ▪ Annual recurring structural costs ▪ 9 training locations consolidated savings of $70M in FY23** ▪ Office
Slide 70: Summary – Capital Priorities
Capital priorities and financial outlook Summary – Capital Priorities Track ▪ Successful integration of past acquisitions Record ▪ Steady deleveraging following acquisitions ▪ Above-market revenue growth ▪ Strong, consistent cash flow generation ▪ Sound financial position Looking Ahead ▪ Continue to
Slide 71: Outlook and financial targets
Capital priorities and financial outlook Outlook and financial targets FY2023 Financial Outlook** 3-Year Financial Targets** ▪ Mid 30% consolidated adjusted ▪ Mid 20% EPS* CAGR (FY22-FY25) segment operating income* growth - Civil: double-digit growth and new peak margins ▪ Free cash flow* conversion
Slide 72: Combined Q&A
Combined Q&A
Slide 73: CEO's closing remarks
CEO’s closing remarks CAE Investor Day Marc Parent, President & Chief Executive Officer
Slide 74: Appendix
Appendix
Slide 75: Non-GAAP and other financial measures definitions
Non-GAAP and other financial measures definitions This presentation includes non-GAAP and other financial measures. Non-GAAP measures are useful supplemental information but do not have a standardized meaning according to GAAP. These measures should not be confused with, or used as an alternative fo
Slide 76: Non-GAAP and other financial measures definitions
Non-GAAP and other financial measures definitions Free cash flow Free cash flow is a non-GAAP measure that shows us how much cash we have available to invest in growth opportunities, repay debt and meet ongoing financial obligations. We use it as an indicator of our financial strength and liquidity.