CAE Inc.

Good day, ladies and gentlemen. Welcome to the CAE first quarter conference call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Mr. Andrew Arnovitz. You may proceed, Mr. Arnovitz.

Thank you. 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 and answers to questions, contain forward-looking statements. These forward-looking statements represent our expectations as of today, August 10, 2022, 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 any reliance on these forward-looking statements. A description of the risk factors and assumptions that may affect future results is contained in C's annual MD&A, available on our corporate website. and on our filings with the Canadian Securities Administrators on CDAR and the U.S. Securities and Exchange Commission on EDGAR. On the call with me this afternoon are Mark Perron, Cities President and Chief Executive Officer, and Sonia Branco, our Chief Financial Officer. After the remarks from Mark and Sonia, we'll take questions from financial analysts and institutional investors, and 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 Mark.

Thank you, Andrew, and good afternoon to everyone joining us on the call. We had a mixed performance in the first quarter with civil delivering results in line with our view for strong annual growth and increased market share momentum. Defense results were disappointing. However, coming in very well short of our expectations. The shortfall was mainly due to unanticipated discrete charges on two of our legacy programs and an increased intensity of the defense sector-wide headwinds that we're facing in this early stage of our multi-year growth journey. Now, we'd already factored into our prior outlook that the second half of the fiscal year would be stronger than the first, mainly because we're still working our way through the lag effects of a protracted period of less than one time book to sales. and it takes time for new programs' awards to ramp up. We also expected some of the additional headwinds in the first half, but they were significantly more acute than we thought they'd be. Now, order activity is the best indicator of our future growth, and despite a challenging global environment for C8 overall, we secured over a billion dollars in orders for a record $10 billion backlog and 1.12 book-to-sales ratio. In civil... We made excellent progress converting our large opportunities pipeline into $522 million of orders for a 1.09 times book-to-sales ratio. Now, these include long-term training agreements with airlines and business aircraft operators and 11 full-flight simulator sales. Notable training contracts for the quarter involve several exclusive training agreements in the Americas, which adds to the long list of exclusive training agreements that Civil has signed in the last year and a half with the vast majority of major airlines in the region. This quarter, they include a three-year extension to a long-term exclusive training agreement with Mesa Airlines, a five-year exclusive training agreement with United Airlines, a five-year exclusive training agreement with JetBlue, and a 10-year exclusive training agreement with another major North American airline. In the U.K., Civil expanded its existing 12-year exclusive commercial aviation training agreement with Virgin Atlantic to include the Boeing 787 platform, now covering all their existing aircraft platforms under the training exclusivity. In business aviation, Civil concluded a pair of three-year training agreements with TAG Aviation Holdings and the NATO Support and Procurement Agency. Civil year-over-year financial and operational performance was also strong in the quarter with double-digit growth in training revenue and adjusted segment operating income. We delivered 10 full-flight simulators in first quarter average training center utilization with 71%, up from 56% last year. Training demand in the Americas continues to be strongest, followed by a much-improved Europe, and is still lagging Asia-Pacific, which remained at much lower level due to travel restrictions. In business aviation, training demand continued to be robust, reflecting a sustained high level of business aircraft flight activity. Now turning to defense, we booked orders for training and mission support solutions valued at $488 million for a 1.18 times book to sales. And although we were expecting some key orders that push rightward this quarter, This represents a record-level order intake for defense in the first quarter. Now, we normally see some variability in quarterly defense results, and so performance is best evaluated on an annual basis. And to that point, our trailing 12-month book-to-sales ratio of 1.31 times is, to me, a very good indication of the trend in order momentum. We continue to build on that momentum in the quarter, winning orders across all five battle space domains. In the air domain, we entered a contract with the Netherlands Ministry of Defense to provide a training system in support of the NH90 training program. In LAN, the U.S. Army Synthetic Training Environment Cross-Functional Team awarded CAE a task order to develop a soldier virtual trainer prototype with immersive capabilities that empower soldier-led training the point of need, meaning that it's deployable. In the sea domain, in partnership with Lockheed Martin, we were awarded the design support contract on the Royal Canadian Navy's next generation frigates. In space, we were awarded a contract from the US Air Force Research Lab as part of the Starfish initiative to develop prototype software that enables simulation of current and future capabilities operating across a multi-domain environment. And finally, in the cyber domain, as part of a larger team, we secured a position on the approximately $1 billion ACT III IDIQ contract vehicle. And while defense's order activity was generally positive in the quarter, financial performance was clearly not. The loss incurred of $21.2 million was driven mainly by unanticipated charges on a legacy CAE training program with the U.S. Navy and a legacy L3Harris military training classified U.S. program. These two discrete charges totaled $28.9 million in a quarter and result from a reassessment of cost estimates following discussions with our customers this past June. The reassessments are due in part from delays in meeting customer requirements of scope and timing, as well as a change in expectation for the expansion of the program requirements. In the case of the U.S. Navy contract, customer utilization trends have exceeded our estimates, resulting in cost growth on a firm fixed price contract, and our expectations for contract adjustments and extension at more favorable terms have changed. The program in question is the Chief of Naval Air Training, or SINATRA, contract with Contract Instructional Services, where SEAD provides classroom and simulator instructors at five naval air stations to support primary, intermediate, and advanced pilot training for the United States Navy. The second charge stems from a classified U.S. program that's also structured on a firm, fixed-price basis and involves the initial phases of a large, long-term opportunity. The program is a complex national defense priority, and our current work positions us well to capture significant future opportunities on the program. Now, given the nature of the work, which is performed in close quarters, COVID-19-related staff shortages of cleared professionals have been highly disruptive to the program schedule. In addition, logistics and shipping costs, which are significant for this contract, increased our estimated cost to complete. And after a rebaseline review of the program's critical schedule elements and deliverables with the customer in June, the costs to complete were revised upwards. And due to the critical nature of this program and the strategic long-term value it holds for CE, we're working towards meeting our commitment to the customer and positioning defense for future work. I'd add that while we're hopeful that the customer will work with us in the future for equitable adjustments that could help to offset some of the charges taken this quarter, at the moment, we haven't included any of those in our expectations. I'd also add that we have a clear understanding of the specific issues that resulted in the charges taken on both programs. And after thorough analysis, we consider that these provisions capture adequately the expected cost overruns, and I'm confident that there's no more negative surprises like this one in our backlog. And beyond the two program charges, defense performance was still below our expectations for the quarter. Across the company, we've been managing through labor and supply chain challenges that have been consistent with what we observe in the broader economy. However, in defense, these challenges were more acute as sector-wide staffing shortages led to less billable work on cost-plus contracts and inefficiencies on other work. Supply chain challenges were also more severe than anticipated, which pressured schedules. We also experienced delays on a few key orders we were expecting to commence work on in a quarter. Excluding the charges and impact of these additional challenges, defense performance would have been more consistent with our expectations of the full-year plan, which also considers a more elevated level of bids and proposal costs as we pursue several large awards that are in our pipeline. Finally, in healthcare, we continue to drive double-digit revenue growth with our innovative solutions. Healthcare's leadership team transitioned from Heidi Wood during the quarter. We're grateful for her contribution and wish her well in her future endeavors. Healthcare is now being led on an interim basis by Jeff Evans, who was formerly head of sales and has been instrumental in driving the business' extended period of double-digit growth. Now notable during the quarter, healthcare has expanded its strategic relationship with the Mayo Clinic College of Medicine and Science, finalizing a partnership for its Learning Space Center Management Solution for Mayo Simulation Center in Rochester, Minnesota. Healthcare also increased its presence and visibility in the U.S. through efforts supported by CARES Act funding and MonHealth Hospital System to address West Virginia's increased demand for nurses with the deployment of mobile training units. With that, I'll turn the call over to Sonia, who will provide additional details about our financial performance. I'll return at the end of the call to comment on our outlook. Sonia?