Q3 2020 Earnings Call

You to the Past?

Excuse me, included Plumbing Capital expenditures for fifty one point six million dollars mainly for growth of our Global training Network to deliver on the long-term exclusive training contract in our backlog. We continue to age total Capital expenditures for the years to be about ten to fifteen percent higher sending the prior-year other uses of cash to the distribution of twenty eight point three million dollars in cash dividends and we use another one point six million dollars to repurchase stock at a weighted average price of $3,269 per common share under the ncib program for which the board of directors just approved our financial position continue to be solid with a net debt of 2.3 billion dollars at the end of the quarter for a net debt-to-capital ratio of 48.5% since we adopted I found effective April 1st 2018 net deck now also includes obligations under these contracts, which was previously accounted for as operating system and therefore not included in DEC.

Putting the impacts the net debt-to-capital ratio would have been 44.9 this quarter we continue to expect to be at the lower end of our Target leverage range, which is 35 to 45% on a periodic birth within the next 30 months.

Return on Capital employed before specific items and excluding the impact the line for a 16 with 11.6% this quarter compared to 11.7% last quarter and last year now looking a message performance in civil. We had double-digit organic growth in the third quarter. And in addition you benefited from the integration of the Lombardi of accident, which also performs very well third-quarter Reagan was up 22% year-over-year to $558 1 million dollars on 12-volt flight simulator deliveries and good demand for a training services with our expanded capacity operating income with a specific item was up 42% to 123.4 million dollars for a margin of 22.1.

on the order front

The Civil book the salesman showed for the quarter was 1.27 times and for the trailing-twelve-month. It was 1.44 times.

In the third quarter Revenue was three hundred ninety two point four million dollars with a 1% over 2G last year while operating income was up 24% to Thirty one point three million dollars for an operating margin of 4% We encourage some reorganization Concepts order to adjust our Global structure for greater operational and Commercial Excellence recording costs defense segment operating income for the call would have been thirty two million for an operating margin of 10% which represents a 32% increase compared to the third quarter last year the fence benefit from a more favorable program across the border as well as on the version of our active in pipeline to order.

The Defence of the sales ratio was higher than quarter of one point one one time and it was eight eight times for the last 12 months lastly in healthcare agency higher sales momentum a third-quarter revenue of 33.0 million dollars up 19% compared to two three laps.

Operating income with stable at zero point six million dollars reflecting a higher investment in our D and sg&a to develop a support and larger future business with that. I will ask Mark to discuss thank Sonia we continue to have a positive outlook for CAE for the balance of the year and over the long term in civil the industry expects approximately 4% long-term passenger traffic growth and this is something continues to underlie our investment thesis.

Higher demand for air travel drives an expanding Global Institute of Fleet of aircraft. And is she giving it needs to attract and create new pilots to meet industry needs.

As a company we're focused on providing comprehensive solutions for our customers to recruit develop and maintain his highly critical Personnel. He had the privilege and responsibility of being the world leader in aviation training and we have a very good momentum in a large addressable market and as we look ahead we expect more opportunities to materialize from the large pipeline of long-term training Partnerships. We also continue to expect another good year for full flight simulator sales wage paying or leading share of the market.

We continue to expect operating income growth closer to 30% for the year on strong demand for our training Solutions.

Since the start of January we received orders for seven more full flight simulators including 6 for the Boeing 737 Max towing package in early January that it would recommend simulator training for the back which if confirmed by the aviation authorities would indeed dryer a higher rate of demand.

Guitar practice respect the time lines of the aviation authorities and not get out ahead of them, especially when it involves aircraft certification for investigations. So I'll refrain from speculating, you know, what the training regulations might entail for the max of Entry the service and instead I'll summarize what has been ceased position so far off on your pipe.

To date, we've sold a total of 56 full flight simulators for Airlines Max Max full flight simulators Airline which represents the vast majority of all sales are lines of that simulator type. The fact is the majority of airlines that have ordered the max aircraft or indeed see a customer's so far off of the 56 simulators ordered. We've delivered 22 as of the end of December and in addition, we've already deployed 3 to see his own training Network page and we're in the process of deploying more.

We mentioned on our lot.

Quarterly called that we'd begun to build additional inventory of simulators in anticipation of pent-up demand and this continues to be our practice in view of the demand that we expect them. I guess the most essential point in all of this because we have our customers covered as their training partner of choice and they recognize the support that we bring to their most critical operations wage the capacity and the capability to respond to our customers training needs whatever the requirements and we look forward to a successful and safe re-entry for service for the aircraft.

Alternates defense we continue to expect a stronger second-half, which is a view supported by a healthy book to sales ratio in the quarter and a robust pipeline. We continue to expect modest growth of the Year taking into account our year-to-date performance that our current expectations for reaching Milestones on programs and back box. We also expect to confirm several more contracts in a in the current fourth quarter and as always as always we don't control the timing of government decision-making but I take confidence knowing that we've already took down selected for the most of them are long-term prospects in the large addressable defense Market remain positive and I'm encouraged by approximately three point eight billion dollars of Defense proposals that we've written that are currently in the hands of customers pending decisions.

Finally talked over officially.

Became our new group president defense and security on January 27th as with his predecessors pot is based in Washington DC where he's very well connected within the US defense establishment and it's a clear view of the military future operational and Mission preparedness requirements.

He's a proven business leader and he brings an excellent defense industry profile to see he has a passion for artificial intelligence machine learning and you development models and his interests change in the seasons background are very well aligned with our emphasis on digital Innovation a very pleased to welcome a leader of his caliber to our executive team and I expect he'll bring significant value package tour company and customer.

And lastly in healthcare. I'm encouraged by the response. He's getting from the market. We expect to continue building on our current sales momentum with our highly innovative solutions wage increase imperative on patient safety was in full evidence at the international meeting on simulation in healthcare, which took place last month in San Diego the event which is the world's largest cock dedicated to healthcare simulation learning research and scholarship with an excellent showcase for see a health care and our latest Solutions. We continue to expect double-digit percentage growth in health care this year.

in summary our overall

The fiscal year is unchanged. We benefit from a strong position and secular Kilwins in each of our core markets, and we look forward to Superior top and bottom line growth in the years ahead with it. I think if your attention it without ready answer your questions, thank you, sir. Well now begin the question-and-answer session will begin with R analyst first. If you would like to register for a question, press the one followed by the four on your touch tone phone, you'll hear a three-tone prompt to acknowledge your request if your question has been answered and you like to withdraw pre-registration, press the one followed by the three, please note. We are now opening the question-and-answer session to our analysts first. Thank you. One moment, please.

Our first question comes from the line of Steve Arthur with capital markets, please go ahead sir.

Great. Thank you very much. Just a question first on the Civil margins. They look very strong in the quarter it around 22% And if I remember correctly, that's about as high as we've seen them but there any one-time items in there that were supporting Iraq or is this more case of civil margins moving meaningfully higher with the evolving business mix

Thanks Steve, you know what the acquisition we guided that there would be a margin accretion of a hundred two hundred fifty basis points. And we see this coming through margin is off like a reflection of the mix of training and the product business. So combined good training margins, but also what it is, it does reflect a good program and the month. So that's really kind of what's driving some of those margins and I just had that sort of time on there was no one time so one-timers, okay. Okay good. So then over the next several years, then we should continue to see that kind of hundred fifty basis point bumper. We're in into the low twenties. You'll get a month. You'll get our outlook for next year very soon, but not at this call, but I think we're very happy with the the performance we have. You know what I think we tend to as you as you've seen we type dog.

Like the guide on the operating.

Comes open the absolute terms, but I think that there's no reason to expect our performance to go down.

Okay, and I guess related and probably a similar answer on the longer-term but defense margins you calling from Modest growth in the year, but you down I think eight or 10% so forth at the date implies a strong finish as I'm sure you're aware. So I guess a couple of things one just in terms of what do you see in the near-term that supports that jump in Q4 and then just looking out over the edge into longer-term. Are we right in thinking about this is kind of a ten to 12% margin business as it has been historically there is something in the Mix Change there.

Well, I think first and foremost. Yeah, same actually. The same as for to a certain extent with the longer-term Outlook still at Sugarloaf business and network on constant of that. I may leave some time for talked over cuz the new head of Defense to get its hands around the business but you know clearly we expect that, you know, we can can do well and we and longer-term I fully expect us to be smart growth in defense. What is about weekend will precise that you know as we've done as we get into the early part of next year as it relates his next year for sure in the short term yet. You're absolutely welcome and plays a strong, you know, very strong exercise a fourth-quarter, but you know, we we did that last year and we have a habit of doing that and it's it's supported by you you would imagine if we're you know, basically committing to it is because you know, we have a strong, you know forecasts of support staff, but that's it's it's supported by The Usual Suspects. It's it's how we actually Tuning phone is that we have in the backlog.

At the orders that we had in the quarter, you know, as I said, it was encouraged by the positive book bill that we had in the course of the strong product orders. Like I talked about the 90 order off very important, but I would tell you it does require that we win. There's a few orders at least win in the quarter and and and that's no different. We always

Have to win orders and order so I mean some of that variability and you you saw bring this down slight your outlook in the last quarter for defense. And that was that was basically on you know, either somebody orders that we had. We're going to be moving of the year, but look, you know again, I have confidence in the orders and because on 8th and over ninety percent of the ones we need money, you know, we've already been selected on so it's not a question of the there a competed contract. It's when it's just decide can we reach the contract that we get to the customers to sign on before in the mark? That's really what we're at on that one. So those are the elements that make up the our outlook for the year.

I think you just final point just on the training centers and customers in China any comment at all in terms of what's happening with your operations there right now, obviously, no crystal balls bit of their Ben COK. Zor zor what's the near-term status of the facilities right now? Yeah, I think well, we're we're following, you know, what the recommendation is mainly of life and and government around the world as you might expect us to do obviously. Our first priorities on is the safety of our employees our customers around the world, you know, in terms of business impacts for both of us right now, you know again, I just say well watching the situation closely we do expect resolve itself, you know, we do see this as a short-term issue from you no problem from our standpoint of what we see, but so far the impact for us has been that we have pulled the our Personnel out of China that will we were for example installing a bath

In a simulator civil simulator in China, so that's similar was expected to deliver this year. So it will

Not at this point, so that's you know, when impact we had some training customers that have canceled their training because of you know, in some cases they were Chinese carriers come to train with us for example in Dubai in other centres. So those are kind of impact we have but you know, we've modeled this and it's reflected in the Outlook that we have for the end of the year. So, you know barring barring a catastrophic installation of this which it has far bigger ramifications over time. I hear we feel good at that the the effects are contained for us.

Okay recall. I thank you. Thank you for your question Mister Arthur continuing on we now have a question from the line of Gupta with Scotiabank. Please proceed wage. Thank you and congrats on a good quarter. Just wanted to follow up on the defense margin and and welcome Todd margin has obviously come down below 11% or the past two years. And I know the mix has been more Security Services lately, but should we not expect the margins to kind of remain below 11% as you continue to grow as a TSI business with more service portion. I mean, is it is it not because of a structural changes or is it something else?

Look, I don't want to get out too much in front of that. You know, we still have our back lot that reflects the outlet that we have today for, you know for the business in terms of market performance. I think it reads you got to remember the ours is a very international business. So, you know, if yes on a typical basis Services tend to run lower and it would have to be bought. It doesn't necessarily have to be the case around the world that you can imagine that if we're we're putting Capital into into at work, you know, we'll be looking for a higher margin than that, but it's really going to be Thursday is going to be based on where the revenue comes from, you know from various jurisdictions around the world and very very importantly it's going to be the product of service to me. As you said Services tend to be lower but I am quite confident that we can continue to build our products business with a portfolio we have so but more to come but you know, I I wouldn't come to the booze at the margin just pleasure. Has the dipstick wage.

Okay, that that's great color Mark. Thanks and then on on the max, so thanks for updating on on orders and backlog. That's pretty useful. Can you talk about your plans for Office Max similar production rate and Outlook. How do you

Foresee this backlog translating into production. And are you seeing any interest in upgrade of existing 737ng simulators as opposed to new orders?

Well, I think it's early to tell what the upgrade you know, I think in in some cases it will really depend on the airline, you know, this typically upgrading a similar wage is like, you know can be quite involved and sometimes you're better off just by a a brand new simulator and the majority of cases. That's what we see in our business even like for example, replace them with a new 327. You know where old 7 3 7 2 vs. New one that people tend to buy new ones. So that's been the history will see from the back if there's if there's a dead sport. We you know, we will we will certainly be there. You know, we have a very big aftermarket business, you know, and and so we would do that as well that would be part of that there. There has been a step up and as you as you saw that, you know testimony by 6 Max orders since since January and you know big acceleration result of the news

That Boeing it was record.

When the max simulator cream but look, I think that you asked for brunch. I'm not going to get out there with tell you what the production rate is, but I can tell you we have increased it wage. But we have a capacity increase it even more of you know, we're still at a rate that you know, we're Below in terms of production rate below what we were when we recovered from the strike last year and we still have lots of capacity. So we're we're following this closely. But you know, we have a bunch of I've got to say how many of Sims as we talked about last time as what we call whitetail buck ready to go and and there's interest out there. So look at I want I don't want to get out more in front of that cuz it's really going to be dependent on what the regulator to the size and you know, the regular package come out. Yeah, so I think we're we're we're holding our fire, but we'll be prepared.

Okay, that's great and lastly Sonia if I can ask you so on the leverage ratio you you still said this is 18 to 30 months of normalization to happen here. But if you if you see any good opportunity out there perhaps because of of recent consolidation in the industry and if somebody wants to divest an asset or something would you pursue wage at current levels issue or would you still wait for for it to normalize? Thanks ethernet at this level. We're in a very comfortable balance sheet position and and birth paucity. So, you know on the hills of the cash generation of a of the acquisition and the other Investments that we've made we have a profiling that can take us to talk to more deleveraging so both on the organic business and the capex that we're deploying all of this generates good free cash flow and so in the leverages, but it's if there are opportunities job.

We of course always.

Various opportunities whether they're organic elsewhere things whether your GPS or or even in organic we continue to look at those or even any any items that may come up space. So the balance sheet is flexible and has capacity and we we can I think comfortably with our our cash flow generation balance some deleveraging and continued to spin off and get that sit for me. Thank you so much and thank you for your question. Sir. Next question comes from the line of Kevin Chang. Please proceed a good afternoon. And thanks for taking my questions here. Maybe first one for me if I could ask a little bit of a different way. You had a 70% utilization in in a civil margins up at 22% And I appreciate that that mix and some of your recent acquisitions have have have aided in the the Improvement in your profitability. But if I think of that utilization wage

getting back to say you know, the

At the high seventy percent we saw maybe a year or so ago is a way to think of the upside to civil operating income as you get that better utilization through your training centers.

Well again, I don't we're not going to get ahead of it. You know, we're not giving your outlook for four years here. And I think you correctly said there's a lot involved in the mix. So I think Thursday we obviously take comfort as you probably do it inherited your question about that. We're able to generate this level of margin that seventy percent utilization the up for sure a lot of the Sims in Elk in the reason that that we're at 70% is because we're moving a lot of simulators around that made you think about we've added that we've we've gone in last three quarters from 266000 to 303 or the last three quarters. So, you know why we're moving Sims or why would bring it Sims are not fully ramped up in terms of Revenue potential my thoughts same time. We have had short-term headwinds in Europe, you know, there's been all the 737 Max has caused some, you know destruction in in the in the overall 737 market we've had some markets.

so they should remember Airline for

But such as Thomas Brooklyn as a result. Look is there is there room to grow earnings? Yeah sure. There's going to earnings how that reflected the absolute absolute margin themselves. It would depend on the map says all not all businesses are of the same learn you learn the statement terms of margin percentage itself. But you know, I think we'll probably continue to practice on absolute income growth as the measure will drive to I appreciate that that's good color there and then and then I know Todd over at as a new new group president in life and it's it's it's a recent hire but you know, is there something like to accomplish longer-term with in defense of your currently not capturing in terms of opportunities in terms of growth or or should we think of long-term strategy essentially being the status quo even with the change of the top of the top of that division.

well, I think that if you really what if I would say

Thing about the fences, you know, you've seen the success that we've had in civil and there's a lot of there's a lot of things that we can bring from our business model civil that are eminently applicable in the defense market. So I think person for most you'll see us applying some of those Technologies for those Lessons Learned of those business models more and more into defense markets, you know, Todd comes from you know, he's very strong this later comes from bad to get very strong position in the background in terms of the US defense department defense department specifically, but with International experience as well, I just prefer also, you know, when as I said before when I was looking for a replacement for Jean color, but he still in this market we're looking for, you know, Monday that could do is way around if you like you lose weight around the Pentagon you was way around the defense Market in the United States and internationally and could and had a dog.

You know basically good view of areas of the US DOD that we don't necessary where we we haven't been focused on and and I think those doors open. So I think first and foremost

It's concentrate on strategy leveraging our core competencies for capabilities including the digital Innovation that we would apply to civil applying them to defense and and package comes with strong capabilities in that regard and then will they will see but actually we're not singling a change in strategy here. But definitely I think we bring strong expertise to the fold that you know, I feel we're we'll we'll as I said, we we very good for she and our customers that's good color. And I mean just last one for me Sonia just to clarify, you know, as I think about wage Capital maybe in the in the fiscal fourth-quarter here or maybe even the fiscal first-quarter. So the next couple of quarters you mention, you know ramping up, I guess some of the month the inventory around the max simulators should I think of the working capital like a seasonality that we typically see maybe q4q one being being a little bit different because of the inventory Builder or wage

It's an immaterial impact in your and how you're working capital flows over the next three to six months. It will have an impact but I I don't see it reversing the the the overall cash which you know, usually

Is the first half investment and and then reversal or partial reversal in the second half and and good performances in Q3 and reversing and 180 million and 1/4 + Tap in the back to what we mentioned last quarter. We expected to continue on that non-cash working capital efficiency to drive a significant reversal. We all that around 75% of that former investment. And that's with some considered investment in the inventory. Now, if some of it turns even quicker in the quarter if you want, there may be some variation there. I don't suspect they will change the overall wage for calling between the first and second half but we we are driving to further reversal in inform.

Thanks for the clarification. And that's all for me. Thank you very much. And thank you so much, sir for your question. Our next question comes from the line of Cameron doerksen with National Bank Financial. Please proceed with your question. Good afternoon, maybe a question for soniya just on the I guess the leverage question that was earlier. I'm wonder if you can maybe talk about your ability if she want to to to pay down debt earlier than expected. I mean, is there a way that you would potentially accelerate debt retirement here or are you kind of restricted on why you can do on a yearly basis just on the terms wage at that. So in terms of the level of financing, we have the private placements that we issued last year and the last Russia in the quarter. We we do have also some flexible with Term Loan. So if we wanted to accelerate that that is an option we do continue to see very good options for for investment and I'll go back.

Capital allocation priorities and and first and foremost, uh, you know continuing to invest in a creative growth organically.

And if there's a any or inorganic approaches to it as well, but to your question if we if we we do have the flexibility to do so if if we wanted to shift a little bit off balance, okay? Okay. That's that's fair. I just just secondly from me and maybe a question for Mark. I just on the the sort of end markets. So we have seen a little I guess less activity on Business Jet flying. I'm just wondering what you're seeing in your business. Training centers. Are you seeing any change in the in the level of demand? Obviously, you've got you know, the the new new acquisition that's driving a year-over-year growth and wage on the sort of Legacy business there. Do you see any change in the demand for training on on business aircraft?

Not really. It depends. It's very dependent on which platform and and what Market but overall no one take the I would tell you we don't really disclose it, but I can tell you that the growth in jobs are printing activity is organically is very strong and and and big component of that is business archive. And and that when you break down business Erica, am I I think a lot of you know, a lot of the growth comes from the acquisition that we made but you know, equally we have in fact, I think we can talk about yeah, we well actually I was going to look for if we have the breakdown we don't have it. But in terms of the organic growth in business aircraft training, it's it's actually been pretty good. We've been outpacing the market itself. Overall. There's a Thursday there the number of the flight activity itself, which is a metric but there's a lot of plans changing jobs as well that stimulates a lot of training activity and in, Georgia.

Business Jets or a lot of activity. So overall, you know we're doing well in the organic growth is pretty good. Do you feel that you've gained some?

The market share in that in that sub segments.

Yeah, we have we have and if you look at the contracts that we had the just this quarter, you know, we had like three year just business hours half alone three year olds pretty regular with packages and it isn't Holdings. That's a very big contract in itself with tag six years would just sleep two four years with the Solaris Aviation. So yeah, there's no that we can share and we're quite happy with the customers that have moved over to see a okay great. That's all for me. Thanks very much. Thank you so much Miss for your question up. Next we have with BMO Capital markets, please go ahead sir.

Okay, thank you. Good afternoon. Just one question. If you can clarify the acquisition I made from Bombardier if they were to be a change in control of those assets. Do you have any exposure they have kind of solid long-term commitment under that transaction that you've done with money.

Yeah, we have a

when a year exclusive agreement in exclusivities that you know with flow over to any potential buyer offending

Okay, that's great. And on the 56th Max order that you received or you sold received order from do you know off the top of your head home line that represents how many total I know is probably all of them, but not sure how many orders are they are lines that we could probably get to that number later. I don't remember exactly how many airlines it is. But as I said, it's it's the the the high majority of all the the airline customers that are bought the max have bought our simulator off.

Okay. Thank you.

I get the number of tell you what it is we're looking.

For your question my pleasure in case you from Capital markets, please go ahead sir. Good afternoon. And thank you for taking my question. I just wanted to come back on the military side. You mentioned in the past that the business makes would evolve favorably in the second half. I think it remain fairly stable in Q3, but the margin is still increased The Fairly significantly in the quarters. I was more wondering if it we should expect a similar performance and Q4 and if they mix will change accordingly, I'll leave it this funny a little bit, but I guess it has to we're going to be the Outlook that we said we are we could again as we're we're have confidence in each keeping it off. I I would caution as well as I usually do said the many times is it's kind of hard to look at the military business on any of the major metrics on a quarterly basis because of the size of the club.

Who sells and and literature service or product? So you know this quarter? Yeah, we had kind of flat Revenue but much higher earnings last time we had you know the country.

So I think it's best to look at it over a number of years and maybe 12 months is the best way to look at it but funny you want to yeah, absolutely. It's it's really because of that variability always been a look at it over over a longer annual basis at least an annual basis and the quarter the more favorable programming drove a higher contribution and contribution of order is signed and and started in the Porter House. So so that drove some of that margin and and while the the revenue was relatively stable also point to the fact that Revenue doesn't our regular landline doesn't capture the revenue from Davies which are accounted for Equity pick up and included in in the events. And so some growth that came from those joint ventures is not necessarily reflected on the revenue line.

Okay, that's great color. And if I we get it back to the Civil ceremony, I think you mentioned in the mdn a lower position rate in Europe. So I was wondering if I could talk a little bit more about the position there, please.

It's Mark spoke to it. And and ultimately we do we are seeing some a bit of head winds in Europe. There's a little bit of consolidation that we're seeing with certain airlines. Now off we see this more as a short-term cuz as they consolidate they'll generally the the traffic will generally be picked up with other customers and and we'll recuperate it that way but there's a bit we see a bit of wind in in Europe on the Elation there and just add in to reiterate with Mark said before some of that headwind is owing to the to the max having been out of service for quite some time now and so our 737 simulator training in in Europe is is directly affected by that as well.

Thank you for the call her and maybe a last one for me Sonia on the capex. I don't I know you don't want to provide guidance for next year. But just directionally would it be fair to assume some growth in fiscal Twenty-One as the the Bible in proportion and he's remained robust in both civil and Military.

We'll come back next quarter with a view on all of of all of the guidance for next year for for this year. We'll stick to our guidance which is slightly higher than last year 10 to 15% over over last month. Are they I think it's important to add though that has a ratio of operating cash flow or of Revenue, you know, that number has been declining so, you know, whatever the quantum but as a ratio of the same size of the business which continues growing and has been declined.

Okay. Thank you. Thank you very much.

Operator I guess that's all the time. We have for questions from members of the financial Community. We are male want to open the lines to do members of the media. Absolutely. Thank you. We took welcomed and press and media to feel free to press the one followed by the 4 to register for a question via Peter SUVs. You get parts of it are fun for office pancake. Mix C. Thank you. One moment, please.

Our first question from the media comes from the line of Allyson lamp with Reuters. Please proceed with your question very much. Just two quick questions on the max first you talked about demand for the max simulator before would you say that that that is the most popular simulator that you're selling right now for to bring this fiscal and secondly, you also mentioned that you would deploy more in your training centers. Where are you looking?

I think that well, I don't think we've we've actually developed all the location of family. It's not yet. But I think it's very first wherever the customers are but and the speed that we have the package. It is in Toronto and Singapore and and in the midst of deploying in Dallas right now and we're looking at other sites, but the those are the ones that are have been deployed.

Right. No, I was thinking if you have any idea of what you're looking in terms of the other sites, I was thinking maybe Europe from what I understand that there is not many not much not many simulators there. So that might be an interesting location off as as marked as we we're looking at where the customer demand drives. Yeah. Yeah. Yeah, that one was over there yet at least off.

Right. It's just my other question would you say is the maximum leader your most popular order your strongest selling model and the moment.

I really haven't looked at the the bracelet, but look, I think that certainly in the since the beginning of January. Yes 6007 right off for the for the year of the whole I wouldn't expect it. So that wouldn't expect to do it wouldn't be normal to be because the airplanes be grounded. So inevitable the airplanes been routed orders the flow to the page 37 max type, but you know going forward with the backlog of aircraft and me to me there's you know, like in front of regulars but there's very there there's to me there's no doubt that the sympathy will resume flying and and the backlog of 737 Max aircraft is very large. So, you know, we'll be delivering Sims for quite a while on faith in in in and I think the ratios of simulators aircrafts will be it will be the same as other narrow-body. So I think that will Prestige, you know many simulator.

your cellphone 737 Max in the future

Thank you. Thank you Miss Lampert for your question. Please proceed. Thank you. I have two questions about the fact that the United announced yesterday or two days ago that they would buy a new Flight Academy. Is it something that is just does it make you nervous or not dead and second question. Could you repeat what you said that the coronavirus add in in any effect in your creation?

Well, I talked to my visit for a virus. I mean as I mentioned before I let me first priority for us is the safety of our employees around the world safety safety of our customers wage. So we've taken you know precautions that are very similar to it in line with recommendations Canadian government. And so in that regard, so, you know, we've our our Personnel that were in China, I don't have you know have left China are we you know, we have we had business impacts with regards to one similar was being installed in China. So we off of course with our people moving back to Canada. Then that activity is has been delayed for the moment. We have some training of Chinese customers that have been postponed for the same reasons. We have put the very strict that you know, hygiene protocols in all of our centers around the world to you know, get to protect our Personnel our customers. So that's I guess the the answer

For a virus or a virus with regards to the previous question on the the center for United. No.

Just reflects the fact that you know, what we've been saying is that the global pilot shortage out there and it's affecting Airlines around the world and and airlines are dead are moving to be able to to ensure that they have the proper storage of highly-skilled Workforce. So to me, it's just testimony that they need that's out there now as the company a and I think I've said this before we we never pretended to want to control the full capacity in this market. I mean, but you know, look, I'm very proud of our customer that we have in our you know training centers at the moment. We it'll have very great contract with on on having issue of Pilots which are you know, New Paths like this which talking to the united with American Airlines Southwest Airlines with JetBlue just get a nice sense alone. So those are all that's been trained from from start to getting an airline typewriting which gate so, yep.

And and in fact, we've we've been the leading the market out there in terms of initiatives to increase diversity, you know, we've given scholarships to five determine the women women around the world.

So they become airline pilots, but look unite. It's a very very good customer of ours and they're taking they're taking action. I can't answer for them. But I take all it does is reflect the the need out there for you.

Okay, and and the about China how many employees do you have over there?

We got stopped working or that you brought back.

What Canadians look I don't remember the exact number but it's it's not a it's not a huge number probably less than fifty-fifty. Let me correct that less than 20 what I was talking about. And where is the $50 each?

Okay, you said so you said less than 20? Yeah, let the 22 Kenny is returned back to Canada.

Okay, and did you return other employees that were from other countries us or anywhere else? So no.

No, and you have permanent employees that are not Canadian in China?

Yes, we do.

And are they still working or are you out to close operation is where we take the same details. I mean, we we have not shut down operations, but I think most people would be you know, we don't have a training center over there. So it's not the same as the exposure. I think we would have people I'm getting outside myself. But here we have any money so we have to do some fishing in Shanghai and Hong Kong and and we are following the measures led by the government. Yeah, a lot of it is work from home that we doing.

Oh gee and grossly talking. It would be how many people working from home or in the in the Tri-Cities you've mentioned.

Well the majority I can't tell of the remaining employees that we have, but would there be hundred employees or there would be no. No it look I don't know the exact number but I it's not more than fifty employees total that we haven't. Okay. Perfect. Let you go. Thank you very much. Thank you. Mr. Continuing on our next question comes from the line of Henry Kennedy with Aviation week. Please proceed with the question. Oh, yes. Could you talk a little bit about what portion of your full flight simulators for commercial aircraft have been upgraded or the wage as a u p r k the upset prevention and Recovery training requirement of all of our civil simulators. I can't tell you.

number but I I do believe it will be a hundred percent and then

We get back to but I think that was requirements. I'm pretty sure I'm sure that's hundred percent that just for the upgrades going on internationally. I think it would be a month old and you know, I think we I think we should get back to make sure I'm right but you know, it'll follow a regulatory requirements by we led the industry and in terms of driving uprt training and pack and simulators. So, you know what leaders were 100% And but you know, we all have to maybe get back to you an exact number. Thank you very much. Okay. You're welcome.

Thank you. Mr. Kennedy all the time. We had for the call this afternoon. I want to thank all of our participants from the investment Community as well as members of the media for having joined us and I would remind you that a copy of the of the transcript of today's call to be found that these website. Thank you. Thank you, ma'am, and that does conclude the conference call for today. We thank you all for your participation and ask that you please disconnect your lines. Thank you. Once again, have a great day everyone.

Dead dead dead.