Financial Data and Key Metrics Changes - Consolidated revenue for Q1 2026 was $1,100,000,000, a 2% increase compared to the same quarter last year [35] - Adjusted segment operating income rose 10% to $147,800,000 from $134,200,000 in Q1 2025 [35] - Adjusted earnings per share (EPS) remained stable at $0.21, consistent with Q1 2025 [35] - Net finance expense increased to $54,600,000 from $49,500,000 due to additional lease financing costs [36] - Free cash flow was negative $36,200,000, worsening from negative $25,300,000 in Q1 2025, primarily due to higher investment in noncash working capital [37] Business Line Data and Key Metrics Changes - Civil revenue grew 3% year over year to $607,700,000, with adjusted operating income rising 1% to $107,600,000, resulting in a 17.7% margin [39] - Defense revenue remained stable at $490,900,000, while adjusted segment operating income increased 45% to $40,200,000, delivering an 8.2% margin [40] Market Data and Key Metrics Changes - The commercial aviation market is expected to see a recovery in pilot training demand, with a forecast of 300,000 new pilots needed globally over the next decade [16] - Business aviation remains strong, supported by robust aircraft OEM backlogs and a growing population of high net worth individuals [17] - The defense sector is experiencing a generational upcycle driven by rising geopolitical tensions and increased spending across NATO and the EU [17] Company Strategy and Development Direction - The company aims to enhance shareholder value through deleveraging, targeting a net debt to adjusted EBITDA ratio of approximately 2.5x by fiscal year-end [9] - Focus on operational excellence, capital allocation, and improving free cash flow conversion to drive stronger returns on invested capital [8][18] - CAE plans to leverage its defense technologies across its commercial aviation business to create scalable solutions [47] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the fiscal year, anticipating a rebound in pilot training demand as airlines resume hiring [70][72] - The company is cautiously optimistic about the recovery in commercial training solutions, expecting a positive inflection in the second half of the fiscal year [19][22] - Management highlighted the importance of aligning with national priorities in defense to capitalize on growth opportunities [10][18] Other Important Information - The company opened a new dedicated training center in Central Europe, reflecting its commitment to supporting customers closer to their operations [24] - CAE's defense business is expected to provide a predictable revenue stream, complementing the growth in civil aviation [18] Q&A Session Summary Question: Thoughts on operational efficiency and margin improvement - Management acknowledged significant investments made in capabilities and sees opportunities for optimization in the civil side of the business [55][56] - The focus will be on leveraging investments to drive earnings growth [56] Question: Impact of transient headwinds on near-term CapEx spending - Management confirmed that CapEx is expected to be slightly lower year over year, maintaining a disciplined approach to capital deployment [63][64] Question: Indicators for a rebound in airline pilot training - Management noted that increased hiring activity is expected as airlines resume operations and aircraft deliveries normalize [74] Question: Executive compensation alignment with operational efficiency goals - Management is assessing various metrics for executive compensation, including return on capital and free cash flow [80][81] Question: Defense margin performance and outlook - Management expressed confidence in executing their strategy and maintaining guidance for the defense segment, with a focus on improving margins [86]

Financial Data and Key Metrics Changes - Consolidated revenue for the first quarter was $1,100 million, a 2% increase compared to the same quarter last year [36] - Adjusted segment operating income rose to $147.8 million, up 10% from $134.2 million in the previous year [36] - Adjusted earnings per share (EPS) remained stable at $0.21, consistent with the first quarter last year [36] - Net finance expense increased to $54.6 million from $49.5 million, primarily due to additional lease financing costs [36] - Free cash flow was negative $36.2 million, compared to negative $25.3 million in the first quarter last year [38] - Net debt position at the end of the quarter was approximately $3.2 billion, with a net debt to adjusted EBITDA ratio of 2.75 times [39] Business Line Data and Key Metrics Changes - In the civil segment, revenue grew 3% year over year to $607.7 million, while adjusted operating income rose 1% to $107.6 million, resulting in a 17.7% margin [41] - The defense segment's revenue remained stable at $490.9 million, with adjusted segment operating income increasing 45% to $40.2 million, delivering an 8.2% margin [42] Market Data and Key Metrics Changes - The civil aviation market is expected to see a recovery in demand for commercial training solutions, with a positive inflection anticipated in the second half of the fiscal year [19][22] - The defense market is experiencing a generational upcycle driven by rising geopolitical tensions and increased spending across NATO, the EU, and Canada [17][18] Company Strategy and Development Direction - The company aims to enhance shareholder value through deleveraging the balance sheet, targeting a net debt to adjusted EBITDA ratio of approximately 2.5 times by fiscal year-end [7] - Focus on operational excellence, capital allocation, and improving free cash flow conversion to drive stronger returns on invested capital [6][47] - The company is positioning itself as a strategic partner in defense, engaging with government leaders and aligning with national priorities [9][48] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the next three to five years, citing strong market fundamentals and a clear path to delivering stronger returns [14][15] - The company anticipates a recovery in pilot hiring and training demand, with encouraging signs of stabilization in the commercial aviation sector [21][22] - The defense business is expected to provide a predictable revenue stream and balance the portfolio, complementing growth in civil aviation [18] Other Important Information - The company opened its first dedicated training center in Central Europe, reflecting its commitment to supporting customers closer to their operations [23] - The company has a buyback program in place and may consider reinstating dividends at the appropriate time [7] Q&A Session Summary Question: Opportunities for improving margins and cash flow conversion - Management acknowledged significant investments made in capabilities and sees potential for optimization in operational efficiency [52][56] Question: Impact of transient headwinds on near-term CapEx spending - Management confirmed that CapEx is expected to be slightly lower year over year, with a disciplined approach to capital deployment [63] Question: Indicators for a rebound in airline pilot training demand - Management noted that increased hiring activity is expected as airlines resume hiring, supported by improved aircraft deliveries [70][74] Question: Executive compensation alignment with operational efficiency goals - Management indicated that they are assessing various metrics for executive compensation, including return on capital and free cash flow [78][81] Question: Defense margin guidance and contract mix - Management expressed confidence in executing their strategy and maintaining margins, with a focus on replacing lower-margin contracts with more accretive ones [84][86] Question: CAE's positioning in the US defense market - Management highlighted the unique growth opportunities in the US defense market and CAE's potential to leverage its capabilities across its portfolio [90]