CAE Inc.

Welcome to the CEE First Quarter Coffins Call. It would be advised that this call is being recorded. I would now like to turn the meeting over to Mr. Andrew Arnovitz. You may now proceed, Mr. Arnovitz.

Good afternoon, everyone, and thank you for joining us today. Before we begin, I'd like to remind you that today's remarks, including management's outlook for FY21 and answers to questions, contain forward-looking statements. These forward-looking statements represent our expectations as of today. August the 12th, 2020, and accordingly are subject to change. Such statements are based on assumptions that may not materialize and are subject to risks and uncertainties. Actual results may differ materially, and listeners are cautioned not to place undue reliance on these forward-looking statements. A description of the risks, factors, and assumptions that may affect future results is contained in SEED's annual MD&A, available on our corporate website and in our filings with the Canadian Securities Administrators on CDAR. and the U.S. Securities Exchange Commission on EDGAR. On the call with me this afternoon are Marc Pallant, C's President and Chief Executive Officer, and Sonia Branko, our Chief Financial Officer. After remarks from Marc and Sonia, we'll take questions from financial analysts and institutional investors. Following the conclusion of that Q&A period, we'll open the call to questions from members of the media. Let me now turn the call over to Marc.

Thank you, Andrew. And good afternoon to everyone joining us on the call. I'll first discuss some of the highlights of the quarter, and then Sonia will review the detailed financials. I'll come back at the end to talk about our outlook. Much has been said over the last five months about the COVID-19 pandemic and the profound ways it's changed our daily lives, both personally and professionally. And the word unprecedented has since become synonymous with the crisis. No doubt, the rapid onset and pervasiveness of the economic and social impacts of the pandemic are like nothing we've ever seen before. The impact on our employees and customers has certainly presented us with some very significant challenges. It's in the toughest moments, however, that we're truly put to the test. And throughout all of this, I continue to be very proud of the responsiveness of CAE and its employees. who've been adapting rapidly to this new reality by embracing new challenges, mitigating risks, and innovating new ways to best serve our customers as their partner of choice. As we came to expect in early March this year, the full brunt of the pandemic would indeed hit us hard during our first quarter, manifested by sharply lower demand and major disruptions to our global operations. Right at the start, We acted quickly to ensure the health and safety of our employees and customers by taking extensive measures, and we safeguarded the company's financial position and liquidity. CAE has shown considerable agility and resiliency amid the most challenging conditions our company has ever faced. In the first quarter, we managed to significantly mitigate our inevitable operating loss position to near break-even on a normalized basis. We also improved our pre-cash flow performance compared to last year, and critically, we maintain our resiliency with a solid financial base. Despite the challenging environment, we booked $417 million of orders in the quarter for a .76 book-to-sales ratio, and we ended the quarter with a solid $8.6 billion backlog. Looking specifically at CIVIL, Despite the major operational hurdles presented by mandatory temporary facility closures, including our training centers and main manufacturing sites, and extensive travel restrictions, we managed to deliver two full-flight simulators to airline customers in a quarter, and we averaged 33% utilization of our training network. With more than half of our global training network either closed temporarily or at reduced operations, utilization reached a low point around the 20% range during the quarter. Since then, we've seen average training center utilization rise to upwards of 40% as our facilities reopened and flight crews resumed some of their critical training activities. We also continued to book orders with civil signing training solutions contracts valued at $194 million, including a contract or an Airbus A320 full-flight simulator to China Express, a four-year training agreement with Alitalia, a five-year training agreement with Wamos Air, another five-year training agreement with long-term business aviation partner SC Aviation, and a two-year business aviation training agreement with Air Hamburg. On the OEM front, we also concluded a five-year training agreement with Boeing to support Boeing's ab initio pilot development program. We've been adapting quickly to new realities by introducing new virtual service offerings to support our customers as a response to border restrictions, including remote support for the installation, acceptance, and qualification of the simulators. We also recently obtained FAA and other Civil Aviation Authority approvals for virtual training in certain of our flight training organizations, and we developed remote instructor operating station solutions for live instructor interactions during training sessions. As a product of our ongoing digital innovation initiatives, we launched instructor-led online courses for aviation maintenance training and CAIRSIDE, a new digital community platform that provides training and career resources to pilots, which I would encourage you to visit at airside.aero. In defense and healthcare, the pandemic has also caused significant disruptions, which have hampered customer demand, and our ability to deliver our products and services. Notwithstanding the challenging environment, the defense booked orders for $201 million, including contracts to provide the United States Air Force with upgrades and enhancements to both the KC-135 and C-138 air crew training system programs, and to continue providing a range of in-service support solutions for the Royal Canadian Air Force's CF-18 aircraft. Other notable contracts, including providing Airbus defense space, support for the development of new and upgraded training capabilities for Germany's Eurofighter program. We also received an order to continue providing maintenance and support services for the Royal Navy's Merlin helicopter training system. And in healthcare, we put our full weight into designing, developing, and bringing to market the CAE Air One ventilators. We didn't have any deliveries from this new product line in a quarter, but we did incur some startup expenses, and we're only going to see delivers really ramp up from the 10,000 units ordered by the Government of Canada in the second half of the fiscal year. In response to the urgent needs of our customers, we provided complimentary training seminars on how to prepare healthcare workers in the fight against COVID-19. We also launched simulation-based training solutions, both web and hardware-based, to train personnel in the safe practice of ventilation and intubation, which is key to saving lives, and released a COVID-19 ultrasound training suite to provide hands-on foundational training for physicians. Additionally, as institutions begin to reopen and offer remote education, we provided new tools and training on how to implement distance learning with our solutions such as the distance learning for nursing course. With that, I'll now turn the call over to Sonia, who will provide a detailed look at our financial performance. And I'll return at the end of the call to comment on our outlook. Sonia?