#Canada #Montreal #Defense Solutions #Aviation Training #CAE Inc

CAE Reports Third Quarter Fiscal Results for 2026

Introduction
CAE Inc., a global leader in aviation training and simulation, has released its financial results for the third quarter of fiscal 2026, which ended on December 31, 2025. This report highlights the company's revenue growth, earnings performance, and ongoing transformation initiatives aimed at driving efficiency and increasing profitability.

Financial Overview
For the quarter, CAE reported revenues of $1,252.1 million, a modest increase from $1,223.4 million during the same period last year. However, the company's earnings per share (EPS) fell to $0.34 from $0.53 in the previous year, reflecting challenges within its Civil segment. Despite this drop in EPS, the adjusted EPS also improved to $0.34, from $0.29 a year ago, largely due to transformation-related expenses impacting the quarter's finances.

Matthew Bromberg, President and CEO of CAE, noted that the results reflect significant strides in the company’s transformation plan. “While we faced challenges in our Civil sector, which was anticipated, the robust performance of our Defense segment has helped stabilize our overall outlook and growth trajectory,” Bromberg said.

Operational Highlights
The company’s operating income for the fiscal third quarter was reported at $195.8 million, equating to 15.6% of revenues. This contrasts with $262.6 million (21.5% of revenues) from the previous year, with significant fluctuations attributed to gains from the previous year’s reassessment of SIMCOM's value. Notably, CAE exceeded its leveraged target of 2.50x net debt-to-adjusted EBITDA, achieving an impressive 2.30x ratio.

Segment Performance Overview

While CAE’s Civil segment faced revenue declines, with profits reported at $717.2 million, indicative of a 5% decrease from last year's $752.6 million, the Defense and Security segment surged, generating $534.9 million in revenue, marking a 14% increase from the previous year.

• - Civil Aviation Insights

The Civil sector delivered 15 full-flight simulators to various clients this quarter, witnessing a dip in training center utilization, now at 71%, down from 76% last year. The ongoing transformation efforts include optimizing the Civil training network, which may impact short-term revenue but is projected to enhance long-term returns.

• - Defense Segment Growth

In contrast, the Defense segment has shown remarkable resilience, with operating income increasing to $54.0 million. The adjusted backlog in defense projects stands at $11.0 billion, reflecting strong demand driven by geopolitical tensions and increasing military budgets across NATO and allied nations. CAE received new orders worth $571.1 million this quarter, ensuring continued momentum.

Future Outlook

CAE's management remains optimistic about the future, especially regarding the defense sector's growth potential due to escalating global defense budgets. The company is focused on enhancing profitability through careful capital expenditure management, expecting total capital spending to be more than 10% lower than the previous fiscal year, particularly in its Civil sector.

Bromberg emphasizes that the transformation plan is well underway, with CAE identifying non-core assets representing approximately 8% of revenue, planning to initiate divestitures to enhance value creation. Key to this strategy is the removal of 10% of deployed commercial airline simulators, aimed at improving utilization rates and returns.

In summary, CAE's third quarter results demonstrate a nuanced scenario marked by both challenges and opportunities. The robustness of the defense segment provides a solid foundation as CAE continues to navigate through its transformation efforts and optimize its portfolio. Management remains committed to delivering greater value to shareholders and customers in the upcoming fiscal year.

Conclusion
As CAE heads towards the end of fiscal 2026, the dual focus on transformation and market demand positions the company for stronger performance in the future. The upcoming fourth quarter is anticipated to yield the strongest results of the year, as CAE continues to adapt and respond to the evolving landscape in aviation training and defense solutions.