Cae Inc. · TSX:CAE
Cae — Investor Presentation (February 2019)
43 slides from Cae's investor presentation, Feb 8, 2019
Slide 1: Investor Presentation
Investor Presentation February 2019 Your worldwide training partner of choice
Slide 2: Caution regarding forward looking statements
Caution regarding forward looking statements This presentation contains forward-looking statements about our activities, events and developments that we expect to or anticipate may occur in the future. These forward-looking statements include, without limitation, statements about our vision, strateg
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 Australia 40 % 56 % Canada 40 % 36 Central and 60 South America Middle East 28 Approximate value including JV sales Europe Civil Aviation Training Solutions Services Defence and Security Products He
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+ 9,000+ Defence & Security Healthcare locations countries employees 7 CAE Inc. Proprietary Information and/or Confidential
Slide 8: FY2018 Select Performance Highlights
FY2018 SELECT PERFORMANCE HIGHLIGHTS $2.8B $2.7B $2.8B +8 % $1.11 +4 % $7.53B $7.85B $1.03 Record Earnings Per Share from Record continuing Revenue FY2017 FY2018 operations1,2 Record Backlog FY2017 FY2018 FY2017 FY2018 12.3 % 11.2% 12.3% 21.5 % 26.5% +10 % $138.7M 21.5% $126.3M Strong Financial High
Slide 9: Civil Aviation Training Solutions
Civil Aviation Training Solutions Your worldwide training partner of choice
Slide 10: Commercial and business aviation market drivers
CIVIL AVIATION TRAINING SOLUTIONS Market drivers Market expansion: ▪ Over the next 10 years, IATA Activity of the 39K COMMERCIAL forecasts passenger trips to installed base 5.3B 27K AVIATION grow by 3.6% annually ▪ Fleet renewal and expansion ▪ Commercial aircraft 3.8B deliveries at historical Activ
Slide 11: 10-Year Airline and Business Jet Pilot Demand Outlook
CIVIL AVIATION TRAINING SOLUTIONS 10-YEAR AIRLINE AND BUSINESS JET PILOT DEMAND OUTLOOK Pilot Population to Exceed ½ Million New Civil Pilots Needed Captain Upgrades Needed Business Additional Commercial Pilots for Growth 10K 530K 300K New Captains 215K 65K Active Pilots New Business Jet in 2028 and
Slide 12: Headroom in a large market
CIVIL AVIATION TRAINING SOLUTIONS Headroom in a large market Civil Training Market $4.2B 35% CAE CAE has potential to increase share in a large and growing market 12 CAE Inc. Proprietary Information and/or Confidential
Slide 13: World's largest civil aviation training network
CIVIL AVIATION TRAINING SOLUTIONS World’s largest civil aviation training network 50+ Training Locations 250+ Full Flight Simulators 10 160+ Academies Aircraft CAE trains 135,000+ pilots every year CAE Inc. Proprietary Information and/or Confidential
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 Electronic Training Suite System SOP Management Tool Supported b
Slide 15: CAE to acquire Bombardier's Business Aircraft Training business
CAE to acquire Bombardier’s Business Aircraft Training business for US $645M (EV) to expand its position in the business aviation training market Expands CAE’s addressable market in Business Aviation Training ✔ • Acquires an established and growing business for the provision of flight and maintenanc
Slide 16: Defence & Security
Defence & Security Your worldwide training partner of choice
Slide 17: Global Presence
DEFENCE & SECURITY Global Presence 3750+ EMPLOYEES London Stolberg 30+ COUNTRIES Montreal Ottawa Rome 50+ Washington DEFENCE AGENCIES Orlando Abu Dhabi Tampa 100+ SITES Singapore 70+ MILITARY AIRCRAFT TYPES Sydney CAE D&S is a $1B+ Business strategically located in key growth markets CAE Inc. Propri
Slide 18: Defence Market Growth Cycle
DEFENCE & SECURITY Defence Market Growth Cycle ▪ 70% spending increase over 10 years ▪ Acquisition of Major Capital Assets ▪ Significant unmet needs ▪ Reliant on US defense technology ▪ Persistent Defence budget increases 20% Canada ($21B, 5% CAGR) ▪ Aerospace & Defence firms are Europe ($169B, 2% C
Slide 19: Defence Training Market Drivers
DEFENCE & SECURITY Defence Training Market Drivers Increased Requirement to Increased use of Propensity to increase Defence spending maintain Live-Virtual-Constructive outsourcing of in all major markets mission readiness solutions for training solutions Integrated Mission Training Growing budgets,
Slide 20: Defence Training Systems Integration (TSI) Market
DEFENCE & SECURITY Defence Training Systems Integration (TSI) Market $17B $1B+ CAE D&S Traditional Flight Simulation Market Integrated training solutions all have Live, Virtual and Constructive components CAE D&S has headroom in this $20B TSI market CAE Inc. Proprietary Information and/or Confidenti
Slide 21: Proven Training Systems Integration track record
DEFENCE & SECURITY Proven Training Systems Integration track record US Army US Navy US Air Force Royal Canadian Air Force • Fixed-Wing Flight Aircrew Training Centre • T45/T6 Goshawk/ Texan Aircrew Training • KC135 Stratotanker Aircrew Training • NATO Flying Training in Canada (NFTC) • UH72A Lakota
Slide 22: Healthcare
Healthcare Your worldwide training partner of choice
Slide 23: The case for CAE healthcare simulation
CAE HEALTHCARE The case for CAE healthcare simulation $ Digital transformation Synergies with CAE’s Explicit desire Shift to value-based enables data-driven next generation to adopt aviation care aligns prices with care and training training solutions best practices patient outcomes Opportunity to l
Slide 24: Market drivers
CAE HEALTHCARE Market drivers Increasing use of simulation Growing emphasis on quality in healthcare of care and patient safety Digital transformation of Reducing medical errors* healthcare training and improving patient outcomes Limited access to live Medical technology patients during training rev
Slide 25: Regulatory shift toward Value-based Care
CAE HEALTHCARE Regulatory shift toward Value-based Care US Centers for Medicare and Medicaid Services’ Hospital Acquired Conditions (HAC) • Uses quality of care as a performance metric 6 Quality Measures 1. Patient Safety Indicators 90 Composite 2. Central line bloodstream infections 3. Catheter-ass
Slide 26: Broadest portfolio of training solutions
CAE HEALTHCARE Broadest portfolio of training solutions Patient simulators Courseware Ultrasound simulators Surgical simulators Simulation centre management solutions 26 CAE Inc. Proprietary Information and/or Confidential
Slide 27: 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 28: Thought leadership and Innovation
CAE HEALTHCARE Thought leadership and Innovation Trusted partner of scientific societies Screen-based simulation for Maintenance of Certification in Anesthesiology (MOCA) The Next Generation Training and Certification Created in collaboration with American Society of Anesthesiologists (ASA) and appr
Slide 29: Financial highlights and capital priorities
Financial highlights and capital priorities Your worldwide training partner of choice
Slide 30: Capital allocation priorities
CAPITAL ALLOCATION PRIORITIES Priorities Invest in superior and sustainable growth 1 Market/customer-led investments in core and close adjacencies with a clear path to market share gains and attractive returns Provide current shareholder returns while generating long term growth 2 Current shareholde
Slide 31: 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 DOI Return % on Capital Deployed in Civil Training (FY14-FY18) FY14 Deployments FY15 Deployments FY16 Deployments FY17 Deployments FY18 Deployments 31% 30% 30% 30%
Slide 32: Current shareholder returns
CAPITAL ALLOCATION PRIORITIES Current shareholder returns 2 Profits returned to shareholders Millions $160 $140 $120 $100 $80 $60 $40 $20 $0 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Dividends Share repurchases CAE prioritizes a balance between long-term capital appreciation and cash returns to shareh
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 FY18 *Not adjusted for IFRS11 impact Net Debt Net Debt-to-Capital CAE’s str
Slide 34: Increased proportion of recurring revenue (services)
CAE’s transformation over the last 2 decades had led to an increased proportion of recurring revenue (services) FY2001 FY2008 FY2018 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 $500 SOI down 14% post $450 ‘Financial Crisis’ $400 $350 SOI down 60% post ‘2001 Crisis’ $300 $250 $200 $150 $100 $50 $0 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY01 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Slide 36: Strong backlog for enhanced visibility
Strong backlog for enhanced visibility Total Backlog Billion $9,0 $8,0 16% CAGR $7,0 $6,0 9% CAGR $5,0 $4,0 $3,0 $2,0 $1,0 $0,0 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Civil Defence 36 CAE Inc. Proprietary Information and/or Confidential
Slide 37: 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 38: Outlook summary for FY2019
Outlook summary for FY2019 CIVIL DEFENCE AND SECURITY HEALTHCARE Continued low double-digit percentage operating income Continued mid to high single-digit growth percentage operating income Resumption of double-digit growth Maintain lead in FFS sales with ~70 growth for the year Continued measured a
Slide 39: Appendix
Appendix Your worldwide training partner of choice
Slide 40: Q3 FY19 business highlights
CAE’S PERFORMANCE Q3 FY19 business highlights FY19 Q3 EPS $0.29 vs. $0.38 in prior year* Revenue $816.3M (-1% YoY) Operating profit $113.0M (-25% YoY*) Free cash flow $155.1M compared to $146.0M to last year Book-to-sales 1.08x Total backlog $9.0B *Q3 FY18 results exclude the impact of the net gain
Slide 41: Consolidated financial results
FY19 Q3 Consolidated financial results Summary of Consolidated Results Three months ended December 31 (amounts in millions, except per share amounts) 2018 2017 Restated* Revenue $ 816.3 $ 828.2 Gross profit 233.3 255.7 Operating profit 113.0 147.2 As % of revenue 13.8% 17.8% Net income 79.5 104.7 Ne
Slide 42: Cash movements
FY19 Q3 Cash movements Consolidated Cash Movements Three months ended December 31 (amounts in millions) 2018 2017 Restated* Cash provided by operating activities $ 123.6 $ 156.2 (before changes in non-cash W/C) Changes in non-cash working capital 94.0 31.4 Maintenance capex and other assets (19.9) (
Slide 43: 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.