Q4 2021 CAE Inc Earnings Call
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Good day, ladies and gentlemen, welcome to the CAE fourth quarter Conference call. Please be advised that this call is being recorded I would now like to turn the meeting over to Mr. Andrew <unk>. Please go ahead.
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 for FY 'twenty, 2 and answers to questions contain forward looking statements. These forward looking statements represent our expectations as of today May 19, 2021, and accordingly are subject to change such statements are based on assumptions that may not materialize and are subject to risks and them.
Certainties actual results may differ materially and listeners are cautioned not to place undue reliance on these forward looking statements and.
A description of the risks factors and assumptions that may affect future results is contained in Cae's annual MD&A available on our corporate website and in our filings with the Canadian Securities administrators on SEDAR and the U S Securities and Exchange Commission on Edgar.
On the call with me. This afternoon are Marc <unk>, President and Chief Executive Officer, and Sonya Branco, our Chief Financial Officer.
After remarks from Marc and Sonya, we will 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 and turn the call over to Marc.
And thank you Andrew and good afternoon to everyone joining us from the call.
Before getting into our results I'll first share some of my reflections on how we've been managing.
True the maelstrom of COVID-19, 19, and where I believe CAE has now situated from 14 months later.
So Neil will provide details about our financial performance and our restructuring program that we have underway and then I'll come back at the end of the presentation and comment on our outlook.
Looking back on the fiscal year.
<unk> demonstrated tremendous metal and resiliency and confronting the challenges of COVID-19, 19, and highly innovative ways and and without ever skipping a beat in terms of the critical support that we provide to customers worldwide.
At the same time as we rapidly learn to adapt to a new normal we leaned in and fundamentally strengthen the company for the future.
We took extraordinary steps to protect our.
Our employees and our customers.
And I'm extremely proud of our performance and then their ability and which all of us at CAE rolls up under exceptional circumstances.
We also secured our future by harnessing our 1 <unk> culture and seize on several strategic growth opportunities drawn from expanded pipeline.
We made important progress through the year to significantly enhance <unk> position for future growth.
The added financial flexibility from our capital raises and has enabled a succession of 5 highly strategic acquisitions that we announced over the portion of the last 6 months.
Expanded our ability to address the civil training market by acquiring flight simulation company in Europe, and true simulation and training, Canada, and North America, and we accelerated our expansion is it software enabled civil aviation services.
And our acquisition of <unk> and RMB group the.
And the latter 2 helped to solidify our industrial technology leadership, and further expand our ready and large addressable market.
We also announced a major opportunity and defence with our definitive agreement to acquire <unk> Harris is military training business, which will significantly accelerate our defence growth strategy and aligns us more closely with national defense priorities.
We expect to close the acquisition and the second half of the calendar year.
Over the course of the year, we also accomplished a lot organically and internally to strengthen our position.
And we launched new digitally enabled products and business processes and put a comprehensive program in place to structurally lower our cost base and we bolstered key talent.
The combination of these recent initiatives gives us greater potential than ever before higher growth and profitability and the years ahead.
Turning to the results.
Up against the sharp challenges of COVID-19, I'm, especially pleased with what we've been able to deliver and our fiscal year and the face of the biggest ever shock and the history of civil aviation and major disruptions across the defence and healthcare markets.
And <unk> rebounded to quarterly profitability and positive free cash flow after only our first quarter when the breadth of the pandemic hit US. We believed early on that the year was going to be characterized as a tale of 2 halves and then and the second half was indeed stronger and the positive momentum of our recovery.
And has continued throughout the year and into this latest fourth quarter.
On a consolidated basis, we generated 22 cents absolute earnings per share and a quarter and 47 and adjusted EPS for the year.
Order intake was $928 million for.
And for the quarter and $2 7 billion for the year, giving us a solid backlog of $8 2 billion.
This to me is strikingly positive when considering net global air travel dropped by approximately 90% at the peak of the crisis and hundreds of millions of dollars and expected defence contracts slipped into next year or beyond.
With the measures that we implemented and their resiliency inherent to our business. We also generated strong annual free cash flow of $347 million.
This in of itself makes an important statement about CAE as a sustainable growth company. In addition to the positive investment attributes including secular tailwind.
Our cash generative profile C. CAE has also proven once again to be a safe port and storm.
Now turning to some of the segment highlights as civil.
Average training training center utilization continue to edge higher, reaching 55% and our fourth quarter and we saw sequentially higher adjusted <unk>.
Segment operating income margins, we delivered 14 full flight simulators and a quarter and despite market and logistical challenges. We delivered 36 full flight simulators for the year and the civil business. We also continued to win new orders with $386 million.
Booked in the quarter and annual orders totaling $1 3 billion, including.
Comprehensive long term training agreements with airlines cargo operators and business jet operators worldwide and 11 full flight simulator sales the year.
Civil finished this year with a backlog of $4 3 billion.
In defence.
<unk> is a $370 million and the quarter gave us a book to sales ratio above 1 1 for the first time and the last 5 quarters.
And even with significant expected orders moving out of the fiscal year defense order bookings reached $1 1 billion.
For a $3 $9 billion of defence backlog.
Despite having to code then with COVID-19 headwinds and defence, especially in international markets.
We stabilized the business and made excellent progress to position it for future profitable growth.
During the year, we secured all of our foundational Recompete and we won significant new competitions, and our core markets and expanded our position and digital immersion operational support and security.
<unk> mission is to lead at the frontier of digital immersion with high Tech training and operational support solutions to make the world a safer place.
And a prime example of that is how we're positioning defence for the future and bringing our mission to fruition and is an example of that being our recent win of a black Skip program in the United States called the United States Special operations command or U S. Cellcom to lead the integration and architecture.
Our development efforts for the special operations forces Global situational awareness initiative.
I really want to underscore the significance of.
And 2 defense of our fiscal 'twenty, 1 wins and in particular this U S silicone program and I'll comment more on them and my outlook.
Turning finally to healthcare, we completed deliveries of the CAE <unk> ventilators during the quarter and we reached record level of quarterly revenue, even before the contribution from <unk>.
Our ventilator initiative was an important and humanitarian effort that has the added benefit of generating incremental cash flow and providing employment during a time of crisis.
And the speed and effectiveness.
And which we developed and delivered the C are 1 is a testament to the unique combination of CS agility, our deep subject matter expertise and healthcare and the vast industrial and technological capabilities of the company.
During the year healthcare continued to bolster its position as the innovation leader and simulation based healthcare education and training through the launch of new AI enhanced training tools and digital management solutions and support of our customers' training needs during the COVID-19 pandemic.
We also launched CAE Sim equip.
Simulated medical equipment, and we continue to develop transformation transformative digital training solutions for Oems and leading medical device companies, including Edwards, Lifesciences and Cordis, our Cardinal Health company.
With that I'll now turn the call over to Sonya, 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 Sonya.
Thank you Marc and good afternoon, everyone and.
We continue to see good sequential performance improvements and the fourth quarter consolidated revenue of $894 $3 million was up 7% compared to the third quarter and is 8% lower compared to the fourth quarter last year. Adjusted segment operating income was $106 2 million compared to $97 2 million and Q3 and 100.
$93 $9 million last year quarterly.
Quarterly adjusted net income was $63 2 million or <unk> 20 per share compared to 2002, and Q3 and 46 and from the fourth quarter last year.
For the year consolidated revenue was down 18% to 3 billion and adjusted segment operating income was down 52% to $280 6 million.
Annual adjusted net income was $127 1 million or <unk> 47 per share, which is down 65% compared to $1 34 last year.
Our disclosure this quarter provides the impact of the Canadian emergency wage subsidy and other COVID-19, and government support programs. We have highlighted the impact on some key metrics. During the period, we carried higher employee cost and we would otherwise have been carrying as amounts received from the COVID-19 government support programs either flow through directly to them.
Please according to the objective is a subsidy program and then weighted they were designed to certain countries or the amounts were offset by the increased costs, we incurred and we're putting some of our initial cost saving measures, including eliminating salary reductions and bringing back employees, who were previously placed on furloughs or reduced work weeks.
We have been operating with higher and higher expenses than we would have and the absence of skus and so the impacts of the government support programs are almost entirely neutralized.
Our global training operations are especially cash generative and nature net cash provided by operating activities was $174 6 million for the quarter compared to $246 3 million and the fourth quarter last year and for the year, we generated $366 6 million from operating activities compared to 5.
<unk> hundred $45 $1 million last year, we had a strong free cash flow and the quarter of $170 6 million and.
And $346 8 million for the year, which compares to $351 $2 million last year.
We continue to target and average conversion of net income to free cash flow of 100%.
Uses of cash involved funding capital expenditures for $50 5 million and the fourth quarter and $107 $6 million for the year and line with our outlook total capex of approximately $100 million for the year our growth Capex is directly linked to our opportunities to invest incremental capital with attractive returns is free cash flow with our current view of it.
<unk> market led expansion investment opportunities, we expect total capital expenditures to more than double and fiscal year 2022 versus the prior year.
Income tax recovery this quarter was $3 2 million, representing a negative effective tax rate of 21% compared to an effective tax rate of 25% from the fourth quarter of fiscal 2020 tax rate was low because of the restructuring costs. We incurred this quarter. Excluding the effect of these elements. The income tax rate would have been 16% this quarter and 19% net.
Yes.
Net debt was $1 $4 billion at the end of March for a net debt to total capital ratio was 37%. This compares to $2 4 billion or 47 8 percentage of total capital at the end of last year net.
Net debt to adjusted EBITDA was $2 3 8 times at the end of the quarter all told between cash and available credit we have approximately $2 7 billion of available liquidity.
<unk> liquidity was further enhanced with the completion and in March of the marketed cross border public offering of common shares for gross proceeds of $358 5 million.
As at March 31, 2021, we had a higher cash balance on hand from our recent equity issuances and these proceeds will be used to fund the proposed those re Harris military training business acquisition and other potential growth investments and our pipeline.
On the restructuring front, we are continuing to make good progress. The program is enabling CAE to best serve the market by optimizing our global asset base and footprint adapting our global workforce and adjusting our business to correspond with the expected level of demand and structural efficiencies that will be and Jerry while maintaining our presence in all markets. We've made excellent.
Progress consolidating our global footprint for greater efficiency and to better serve our customers and the U K, we have consolidated 5 locations into 3 and Europe, we and our processes consolidating 17 training locations and to <unk>. In addition to optimizing certain remaining locations and in South America, we are moving from 6% to force.
Locations, we began executing our restructuring program and the second quarter and as at the end of March we had incurred a total of 124.
Zero million of restructuring integration and acquisition expenses for the entire year.
And fiscal year 'twenty, 2 we expect to incur approximately $50 million and additional restructuring expenses related to the approximate $170 million program. We continue to expect to realize significant annual recurring cost savings wrapping up to a run rate of approximately $65 million to $70 million by the end of the new fiscal year.
Now turning to our segmented performance and simple fourth quarter revenue was down 6% compared to preceding quarter and down 36% year over year to $388 2 million.
I would note that revenue is generally not the most representative metric for civil given that there is no recognition of our share of revenue from the large number of joint ventures that we operate around the world and in fact part of the utilization increase that we saw in the quarter was the result of stronger performance and regions, where we operate under joint ventures Civil performance is better.
Represented by adjusted segment operating income, which is up 7% sequentially and down 57% year over year to $66 6 million.
For a margin of 17, 2%.
For the year Civil revenue was down 35% to $1 4 billion and adjusted segment operating income was down 66% to $164 3 million.
For an annual margin of 11, 6%.
The civil book to sales ratio for the quarter was <unk> 99 times and for the year is 0.89 times.
And defence fourth quarter revenue of $334 $4 million was up 12% compared to the preceding quarter and down 2% over Q4 last year and adjusted segment operating income was up 4% over the preceding third quarter and down 42% over last year to $23 2 million for and operating margin of 6.
9%.
For the year Defence revenue was down 9% to $1 2 billion and adjusted segment operating income was down 24% to $87 million representing.
Representing a margin of 7 1% the defence book to sales ratio for the quarter was $1 1 1 times and for the year was <unk> 91 times.
And in healthcare fourth quarter revenue was 171 7 million up 42% from the preceding quarter and 411% from $33 6 million and Q4 last year adjust.
Adjusted segment operating income was $16 $4 million and the quarter compared to $12 9 million and the preceding quarter and $100000 in Q4 last year.
For the year healthcare revenue was $351 9 million up from $124 $5 million and adjusted segment operating income was $29 3 million, representing an increase of $32 8 million compared to segment operating loss of $3 $5 million last year for comparative purposes, the CAE air 1.
And the latest contract with the Canadian government contributed $130 million in the fourth quarter revenue and $236 million for the year.
With that I will ask Marc to discuss the way forward.
Thanks Tanya.
As we look to the period ahead I'm highly encouraged by all that we've done to reinforce <unk> base over the last year and to expand our horizons for long term sustainable growth.
True to our vision to be the partner of choice and we exercise great agility and collaboration is 1 CAE to quickly and effectively protect our employees, our customers, which has engendered, even greater loyalty and engagement and.
And like few other companies throughout the turmoil, we executed a series of 5 highly strategic acquisitions, we raised equity and fundamentally repositioned the company for the future while at the same time launching new products investing into new growth adjacencies and structurally lowering our cost structure.
She is indeed, a unique company with a highly talented team and a shared culture of innovation.
And I expect that we'll continue to make important strides to enhance <unk> position for future growth. We're focused on the successful integration of our force civil acquisitions, and our closing the acquisition of the L. 3 Harris military training business, we look forward to realizing the very significant potential.
The combined businesses to better serve the needs of our customers and at the same time.
And we've ensured that we continue to have the financial flexibility and the bandwidth to.
Cultivate a large pipeline of sustainable growth opportunities, including the deployment of expansion capital and highly accretive and sustainable areas like training and to.
To expand our reach and strengthen our position as an industrial technology leader.
We're leaning in and focusing on the long term bolstering our standing as the global market leader and our field through the application of advanced technologies and by expanding the aperture of our market reach and we're continuing to invest and cease capabilities to revolutionize our customers' training and critical op.
<unk> and increased market share, which digitally immersive solution.
In the short term, we continue to expect to trend positively and there is little doubt that will all that we've done in recent months internally and externally to enhance our position will see strong growth for CAE in the fiscal year 2022.
And the exact flow policies recovery to pre pandemic levels and beyond is dependent on the timing and the rate at which travel restrictions and quarantines can be safely lifted and normal activities resume and our end markets for <unk>.
Global rollout of vaccines to combat COVID-19 is highly encouraging and I believe that the summer months will be very telling you.
This is especially the case, obviously for civil and where we believe that there is considerable pent up demand for air travel and we're already seeing this manifest and regions like the United States, where domestic air travel is ramping up strongly.
We're also highly encouraged by our prospects for renewed growth and profitability and defence the extent of which is in the current fiscal year will depend on among other initiatives due to the potential and timing of closing of the <unk> III Harriss military training business acquisition.
Taking all of those variables into account, we expect to have greater clarity and be and are positioned to provide a more precise growth outlook for fiscal year 2022, when we report our first quarter results in August.
And as we look further out.
I'm more confident than ever before and cease future our strategy and positioning are very well aligned with a post COVID-19 business and geopolitical landscape. We would expect this secular trends favorable for all 3 of our business segments.
Greater willingness to outsource training by airlines higher expected pilot demand and strong growth and business travel are enduring positives for the civil business the.
And the paradigm shift from Ash, a symmetry, a symmetric and near peer threats and recognition of the sharply increased need for digitally immersion base synthetic solutions and natural defence or tailwind is that favor sees defence business and.
And healthcare is poised to leverage opportunities presented by a growing awareness and appreciation of simulation and training to make healthcare safer.
If we look specifically at civil we continue to see training demand preceding and returned to air travel as airline capacity and the associated crews are prepared to reenter service domestic.
Domestic air travel is coming back faster, especially and the reasons with our more advanced ramp up of vaccinations, while cross border E. Trans Continental operations are lagging as they're more tied to the easing of travel restrictions and a.
And in 9 states, we currently have requests and indications of <unk>.
And hiring will resume and the next couple of quarters, and we're already hiring hiring and structures and support of our regional aircraft and customers.
We expect to continue expanding our market share and securing new customer partnerships drawn from a large pipeline of airline prospects. We've made very good progress and last year, having signed exclusive training agreement for its supplemental training capacity on narrow body aircraft with 6 customers.
<unk> major airlines, and the Americas and aircraft Oems as well.
Which is often and initial step towards a more comprehensive outsourcing.
We've also signed exclusive training agreements with 6 new startup Airlines, David elected that have elected to bypass the in source training model altogether.
Our growth and commercial aviation training and fiscal year 2022 will come from these new partnerships additional partnerships that we expect to conclude from our pipeline and of course, the general improvement and flight activities involving existing customers as restrictions ease and we also expect to see the benefits of the lower structural.
Cost base that we've achieved as a recurring as the recurring savings ramp up towards the end of the year.
And business aviation training flying activity and has recovered much faster and commercial and with levels of demand in the United States nearly back to 2019 levels and this bodes very well for training demand and is highly important segment of the civil training market.
Civil full flight simulator sales are driven by new aircraft deliveries and while the total market remained small at present.
We expect to maintain our leading share of available full flight simulator sales.
And we still have the benefit of a large backlog of customer funded full flight simulator orders and we expect to substantially deliver this backlog over the next couple of years, including upwards of 30 and fiscal year 2022.
Over the last couple of years, we've been steadily unifying the digital flight operations ecosystem with the goal of delivering a holistic suite of solutions designed to improve operations and enhance the crew experience.
Further increasing our large addressable market and civil.
Our vision and began in 2018 with the acquisition of Telesis and aviation training courseware developer and publisher with 1 and most comprehensive training and compliance systems and the industry and we expanded on this vision with the launch of CAE rise, our predictive management and training visibility system and and.
The period ahead, where we're going to continue to expand our reach beyond pilot training solutions into the rapidly growing market for digitally enabled crew optimization services. The acquisition of Merlot and RB group are building blocks that allow us to provide and end to end offering of <unk>.
Crew performance software that extends from training through optimized crew operations and is unique and industry.
We're also positioning any advanced air mobility market, which we believe will become another secular driver for pilot training and demand for <unk> expertise in modeling and simulation last week, we announced the CAE had been selected by John Air Mobility to lead the design and development of the John aircraft CIS.
Items integration lab for the company's new all electrical all electric vertical takeoff and landing aircraft and the journey aircrafts.
By leveraging <unk> extensive experience and high fidelity simulation, we're going to work hand in hand, with <unk> to bring best in class simulation and modeling to the aircraft development program from the inception of this program.
And defense at the same time as we stabilize the defence business in fiscal 'twenty, 1 we positioned the business for future profitable growth and I'm encouraged by our new competitive wins and large pipeline of programmed to specifically call. Upon she has expertise in the synthetic domain.
Importantly, as I introduced in my opening comments defence once all of the foundational Recompete Inc.
<unk> and the U S Air Force KC 135, aircrew training systems contract, which also in this contract as training support services for the Air National Guard boom, operator simulator and systems.
We also secured a critical follow on for the U S. Navy T 44 seats and structural services.
These wins underscore the strength of our recurring base of core programs and defence.
And new fiscal 'twenty, 1 competitive wins that are core markets add to that base, including United States Army advanced helicopter flight training services and.
And the France, Germany C 130 day training solutions.
We also signed agreements with Boeing to provide a training support services for the United Kingdom Royal Air Force and with General Atomics to continue the development of a comprehensive synthetic training system for the UK protector remotely piloted aircraft program.
And the protector is general Atomics first major MQ 9 B sales their next generation platform, which is expected to sell hundreds worldwide with CAE, providing is training support.
We also expanded our position and the security market with an agreement from United States Customs and border protection aircraft pilot training services, and we added to our customer base at our Alabama based Dothan training center with the provision of training for the Irish Airport.
Defence also expanded physician and digital immersion with notable wins, including the United States Air Force Advanced Battle management system, and the UK single synthetic environment.
The announcement earlier this week of our selection by the United States Special operations command for the soft.
Global situational awareness initiatives is strategically noteworthy.
After a highly competitive process beginning with over 100 companies, including some of the largest defense Oems and Silicon Valley entrance.
<unk> was awarded.
U S $135 million contract to deliver the scalable and next generation mission command system.
That unifies the special operations forces enterprises through the creation of an integrated common operational picture.
Called the mission command systems common operational picture or Mcs cop.
This system will deliver enhanced global situational awareness to the U S special operators around the world.
<unk> digital ecosystem solution Leverages, our world class modeling and simulation expertise beyond training by integrating data analytics artificial intelligence and digital emerging technologies and.
And through a synthetic and environment to create a powerful tool for analysis planning and decision support.
This technology is a critical enabler for United States and Allied forces to successfully training and operate across all 5 battlespace domains. A mandate that's laid out in the U S National Defense strategy.
Our priorities and defence are focused on the long term investing and our leading position as a training and mission support partner with leading edge capabilities in digital immersion and we're also enhancing our position by laying the groundwork to strategically team with major Oems on next generation.
And with our expertise and integration of live virtual and constructive training along with capabilities to address submissions and operations support we believe that we will make significant inroads into broader defence market in years.
Defence is well positioned to capture business around the world accelerated with the expanded capability and customer ship. Following the expected close of the <unk> Harris military training acquisition.
And lastly, and healthcare.
We're capitalizing on our greater market appreciation of the benefits of healthcare simulation training to improve safety and to help save lives.
And I continue to be encouraged by what our new team has been able to do and I look forward to gaining sustainable scale with our innovation innovative solutions to make healthcare safer.
<unk> has been and continues to be and important dimension of CS social profile and she hasn't been as recently spearheaded the industry for vaccination coalition by gathering support for companies and their Ceos across Canada. The goal of the coalition was to accelerate match backs and.
Asian through the private sector at no cost to governments to restart the economy as soon as possible.
<unk> converted 12000 square feet of conference rooms into a world class operational vaccination Center, which opened on April 26.
In addition to the critical role it serves and the ramp up of vaccinations and Quebec.
Really a great example of 6 corporate citizenship and a source of great price for all of Us at sea.
In summary, our year 2 months after the pandemic began the investment thesis for <unk> is more compelling than ever and.
And I strongly believe that we'll achieve new heights and growth and profitability and years ahead, as we bring to fruition and our recent acquisitions, our new digital products and our expansion and investments are bolstered leadership and our operational efficiencies and with that thank you for your attention. We are now ready to answer your questions.
Thank you Marc operator, we'll now open the lines and members of the financial community.
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The first question comes from Asahi Shimbun of BMO. Please go ahead.
Okay. Thank you good afternoon, everyone.
A couple of questions.
A couple of questions first on.
The capex youre, indicating more than doubling.
<unk> hundred million.
Can you kind of give us a try.
Hey, Marc that gives us something based on what you have and the pipeline.
You can narrow down that kind of guidance, a little bit and is it something like $200 million to $250 million and moving.
Importantly, where are you seeing these opportunities to deploy more capital and you.
Looking at your utilization rate achieved multiple consolidated number it looks like cash flow.
Laura room to grow and through but I'm, just curious where do you hope for cash to grow our.
And all showing up.
But if you will.
Some of that I'm going to be a bit from him.
<unk> because of competitive reasons.
But I think broadly.
And where we feel confident and that Capex number is because we're seeing the opportunities.
And that we've had with conversations customers bolt.
Our commercial and business aircraft, where we can deploy asset simulators.
Either too.
I feel like I talked about overflow agreements and commercial aircrafts. So you might not have seen a complete outsourcing, but <unk> seen a lot. What we've seen though is with secured as I said in the remarks, a number of agreements with airlines that we have if we deploy the capital.
We can and we can basically get over flow agreements that can be converted to a long term training contracts.
Especially on narrow body aircrafts at the same time and business aviation, we see quite good.
At attractive opportunity and the number of locations to deploy.
Business aviation assets and and of course both of those.
Generate some of the best returns this growth capex that.
He is 20%, 30% incremental return on capital employed at or after a very short amount of time, So we'll invest and those invest and those every day.
And then if you want and Thats something that I would just add in.
And in the review and a continuum.
You have our capacity.
And we absolutely redeploy assets, if first and foremost before issuing new and new capex, but opportunities like Marc mentioned they vary by platform right. So the overall utilization metric thats, probably not the best and so where we see demand and our pipeline and secured like Marc said it drives nicely accretive returns 23.
Percentage range within the first few years and appointment so so essentially that leads us to the guidance, which essentially will set at about <unk> more than doubled this years capex.
Okay.
My second question is on the.
The restructuring and the cost savings associated with it.
How much of the savings have you realized in 'twenty 1.
And I'm just curious.
If you have.
And we'll wait for us to think about how little savings play out into 2020. 2 you are saying by the end of the year to be exit rate would be $65 million to $70 million of cost savings. So what what would you expect the contribution for the year overall from those cost savings.
Yeah. So as we said it's going to ramp up during the year, we started to see some some savings, but I think it is really going to start kicking in and in FY 'twenty, 2 and ramping up to like you said around 65% and $1 million by the end of the year. So this will be.
More.
And it into the second half and we're really kind of progressing quite well.
And as I mentioned in my remarks, we're essentially completed in the UK going from price of 5 training centers to 3 and closed out some centers and so on so that savings that will kick in.
As of now and so on some elements and Europe still underway and South America, but essentially.
And what we'll see is a ramp up quarter to quarter with a heavier and heavier.
<unk> in second half as we kind of finalize some of these and reaching about $65 million to $70 million by the end of the year.
Okay. Thank you.
Thank you.
The next question comes from <unk> <unk> of Scotia Capital. Please go ahead.
Good afternoon, and thanks for taking my question.
So maybe the first 1 on civil.
You asked you the revenue and Soi, excluding government support were softer than what you saw in Q3 despite.
And despite the utilization rate and simulator deliveries increasing sequentially.
I guess joint venture accounting, obviously create some noise here, but can you share any color on soi declined sequentially, including perhaps any impact of asset relocation as you restructure or any kind of revenue mix on some of the tariffs pricing thats about its products and services mix. Thank you.
I can start up I think.
Revenue is never a perfect metric and the civil business or actually and all of our business, but certainly in a quarter, but I think youre seeing what youre seeing part of this and.
In terms of the sequential revenue story.
And it's a nuance and our business that nearly 50%.
Our business there are accounted as JV, which doesn't show up on revenue. So the majority of the JV that we have happened to be outside of the Americas and that's what we've seen in this quarter relative to previously is where we've seen the biggest sequential pickup and trends.
So again youre not seeing net revenue pickup, you're seeing and and soi, but youre not seeing it so thats 1 subtlety there at.
At the same time this year.
So you talked about all of the moves that we're making in terms of achieving our restructuring benefits a lot of that involves moving simulators around and we're taking advantage of the period that we're in and we're obviously training is.
Trading is at lower levels.
And would be and a steady state. So we're taking that opportunity to move those simulators around so youre not going to see any revenue from those at the same time.
And frankly, and there is mix as well there is mixed and it always is but there is mixed and this quarter, but I want to add anything to it.
And so to speak to the utilization of it climbed from 50% to 55% and we.
Saw some equipment and the Americas, but.
A lot of the progression with uncertain regions, where we do have more joint ventures like the middle East.
And so what that did is contributed to the soi growth and just to just to kind of correct. You are or clarify there was sequential soi growth of 7% quarter over quarter and that's why we usually indicate and this is the best metric on the civil side because it captures everything.
That increase and joint ventures, translated and and quarterly pick up and Thats why and Thats also 1 of the elements.
And that's driving the margin improvement on the revenue side like Mike mentioned a bit of disturbance because we do have we did take the opportunity and the advantage to relocate.
Several a lot of these.
And simulators, so that we can finalize and certain regions like the U K and so on and and progressed on the savings.
And so that's the start of the revenue for a bit but ultimately we saw.
The contribution flow through on Soi with that sequential increase to 66 million from $62 million and on the margin.
That joint venture was was.
And was a bit of a driver because it has the soi without the revenue and also on the product side.
Did have a good margin mix on the deliveries that we had in the quarter.
Thank you I wish I was actually referring to the Soi decline, excluding the government support programs, but the I guess says and you pointed out before on the call and Theres also kind of costs associated with the COVID-19 right, so that might make sense yeah.
And that trend Conor just.
And I guess, it's a new element and will it.
It's not necessarily new we have been disclosing the government support programs since the beginning of the fiscal year. The update this quarter that we've added new non-GAAP measures to kind of reflect the impact I guess I'd give it more and more visibility and to incorporate some new reporting guidance and so on.
But what we look at is the adjusted Soi because this metric so it shows the contribution benefit but it doesn't show the adjusted.
The adjustments to the heightened operating costs that we've incurred which is essentially neutralizing all the government programs. So we should look at it on the adjusted Soi basis and on that basis, it grew quarter over quarter.
Let me just pile onto that.
Because I noticed the confusion there.
I think it's very important that when we look at the when you look at the profitability of the.
Our civil business with all the noise that is there a number that we use to manage the business is at 17, 2% adjusted <unk> margin and Thats up.
Youll versus <unk>, it was 50% and Q3 and that's really what we're looking at the mass business and going forward, there's going to be a less of this noise because sucess won't be there. So I think you can.
We use that as the benchmark to measure our progress going forward.
Okay that makes perfect sense. Thank you for clarifying.
And my second question is on the free cash flow. So I think the commentary you made and that the.
Disclosures are also free cash flow conversion.
<unk> to be 100% almost on net income this year.
And our conversion was obviously significantly higher last year, because the capex was down but.
But how should we think about.
Free cash flow generation and the ability this.
This year compared to pre pandemic levels and if you can comment on the Capex.
These questions.
Should we expect for growth capex versus maintenance Capex and your guidance.
Yes for the total Capex I think we'll stick to the guidance that we provided debt overall and Italy.
And more than double this year, and total and and I think you can use past trends to kind of split out that and maintenance and Capex I think I think those will hold true and in terms of free cash flow I think.
And in this very to most of US here, we have really demonstrated how cash generative.
Businesses, even at very.
Low levels of activity and so and ultimately we've always targeted in the past, 100% conversion of free cash flow and and we'll do so again for FY 'twenty 2.
That's all my question and thank you.
And thank you.
The next question comes from Noah <unk> of Goldman Sachs. Please go ahead.
Hi, good afternoon, everyone.
Good afternoon.
Just to make sure I have the new <unk>.
Additional disclosure around the margins correct.
Marc would you expect the civil.
Segment margin and the $17. 2 you were just referring to would you expect to see continued sequential improvement from here from that level, even as the.
Government support programs rollout.
I think on necessity wide level definitely we would expect continued growth and that number just because we are going to throw in and we're going to be throwing more revenue as quasi fixed assets and the only thing I will say there is you've got to watch.
And we're at a funny kind of market and you obviously because it's.
And of COVID-19.
And typically what you would see the summer months as you see.
And when airlines are flying them ordered or training as much. So you see seasonal effects that would probably be less pronounced this year, but on a run rate basis definitely as the volume increases and the next few quarters Yoga and FC Soi pickup.
The volume of activity from the restructuring activities that we've put forward. So there's no doubt about that.
And so on a on a financial basis with government programs and a heightened operating expenses essentially neutralized and.
So minimal financial impact non and net basis for the year and so the adjusted Soi.
Really the basis on which where we're providing the guidance and so on and so.
Ultimately what this program allowed us to do is keep employees on through the worst of the pandemic and where volume of activity has returned and we have the employees to operate and and serve our customers and where it hasnt we've made the required reduction.
And so the growth the growth or the guidance that we're giving is on these adjusted.
Adjusted metrics and the margin can fluctuate based on mix that's the growth.
Yeah.
Alright, So certainly what you are saying is.
It's not just that you have the government programs and then you also have just other cost and disruption and that we should adjust for 1 but not the other what youre, saying is there is caution and a system that you otherwise would have been able to manage that youre just not managing because you have the government support and so we should think of those as neutral.
Hauser.
Correct.
Okay.
And <unk>.
Could you elaborate on.
What you saw in the utilization rate within civil Bye.
Large commercial aerospace versus business jet and maybe a little bit more by geography.
Yes.
Business aircraft doing pretty good is as I said.
And the U S in terms of flying activity.
It's pretty much back to COVID-19 levels, which is quite a stunting which is really.
Prior to going back to 2019. So you can expect that that's resulting in some pretty good trading activity and our in our civil training center is a bit slower in Europe because of all is continuing.
Lockdowns and in Europe, mainly people less and less.
And as a fly but even that is recovered faster than you see in commercial aviation is sorry and.
Yeah, and commercial aviation, just Florida, and the United States if.
If I go around <unk>.
Commercial aviation is.
We're a worldwide business so and so your question I think is apropos.
Because really the big pickup for us will be when the big pickup occurs.
The world, but what we're seeing regionally is like it is.
And the United States, our commercial aircraft were actually starting to see realization match pre pandemic levels, we're actually adding capacity and we're hiring structures to support what training, but a lot of airlines and and our flight school classes are now looking to resume and it really full force this summer and with the voluntary furloughs that occurred over.
Past year, and the United States.
And the airlines are seeing a higher need for future pilots as they really need to eventually replace everyone. That's left and they can all our call recall back.
We're seeing we talked about this training bubble before and where.
And starting to see that but it depends on which geography, you're in and countries in countries, where we saw a sudden halt and operations and training, we're seeing a spray and the spikes and our training center utilization as the airlines rush to get their price current again. Good example that was.
Recently, and Columbia, where we really where we're working really hard day were above 100% and our training center to support specifically Avianca and decided to get all of our pilots current again.
And obviously it depends on the timing, but we're going to see this happen.
To me and across multiple locations, where there was pretty drastic lockdowns.
And look at and again, the again going regionally you see India, our utilization and notwithstanding the drastic situations that you see and which is horrific in terms of.
The desk coming from COVID-19, and utilization February was over 80%, 90% just as the domestic marketing was making recovery, obviously that slowed down.
And for good reasons, but.
And if I can go around the world, but youre really.
If you were to basically look at where the remaining of Lockdowns or where do you have travel restrictions and then basically you're seeing a subdued level of trading activity and where youre not like in the United States Youre seeing.
And Youre seeing people return to travel.
You are quite heartily and I'm very encouraged by that and I think that will that will show up.
And our numbers over the next few quarters no doubt about that.
So Marc if you were it sounds like if you were able to disaggregate that 55.
And in training related to domestic.
Domestic U S or something a region and type of flying like that strong utilization.
The utilization rate for you is pretty much back to pre pandemic and it's just that the utilization rate and domestic places that still have a lockdown or related to cross border.
Below the 55.
Pretty much pretty much because again the other factor to look at is that they are really whats picked up is narrow body domestic travel and again thats whats picked up and AD sales. So these statements.
And you just said I would agree with what still pretty slow is wide body.
Oceanic because again of the restrictions and I think that will be slower, but I think the statement. You made is that is correct.
Okay. Thank you.
Thank you.
The next question comes from Tim James of TD Securities. Please go ahead.
Thanks, Good afternoon, and thank you for taking my call.
Okay.
My first question.
Marc you kind of touched on earlier and your commentary about I guess, even though some.
And some of them kind of opportunities for that.
The commercial airlines that may be looking to outsource training and and that's always been kind of a and opportunities we're seeing and I'm. Just wondering if you can kind of update us on.
Now as we kind of come out of the pandemic and.
Any kind of ex.
And these where you see more regional opportunities or.
Maybe just the way customers are thinking about this and if the pandemic has influenced their thinking and it's really going to kind of accelerate some of that outsourced and just any any additional color.
I think I've seen the same thing that I've talked about previously before theres much more conversations we're still at a state where the.
And the majority of world barring and like I said, perhaps the United States are still.
Really dealing with.
Severe restrictions and they look at the situation in Canada, I don't need to describe that to you because you live here, but the fact that the fact is airlines.
Large part of the World are still re really trying to figure out what their fleet mix is going to be so.
If you don't know what your fleet mix is going to be a narrow number of narrow bodies versus wide body and kind of routes that youll move flying is pretty difficult to really decide on what you can outsource the old the dodges and I've used. This example, and before we don't outsource a mess and.
And because either 1 or 2 things that are going to happen either.
Neither you and pay too much or.
Or us and CE.
And we're not going to make a good deal because we don't have a good basis on which to base a outsourcing agreement, but I think that.
I take comfort by the factors I mentioned that.
And perversely COVID-19 has been a great time to start and airline for a number of reasons as I don't need to highlight so we.
We secured contracts with 6 startup airlines that are going straight to basically to the position and of course, we project is to say why would you started training operation. When we can provide a turnkey solution for you. So for 6 of the Star Airlines out what we're doing and at the same time we've deployed.
Training.
Training in our various centers and in customer centers with similar with long term overflow contracts, whereas before and Thats really airlines, saying, hey, I'm not going to invest necessarily in the asset, but I'm going to sign a contract with you and.
And because I really don't know what I want the flex it I don't know what the demand is necessary going to be but I need to maintain that optionality. So they could see the upside and the market and thats attractive because that's always that always has to generate the genesis for outsourcing.
Our business model and I think you've followed us for a long time, you've seen it it's always and true to our relationship whether it would be a simulator, whether it'd be running their training centers.
Doing some training overflow and more and more expanding our relationship expanding our wallet share with customers and I felt very good about that and I.
And again lots of conversations but and <unk>.
<unk>, but I am quite confident that that patience will pay off.
Yes.
Okay. That's helpful. Thank you and then just my second question I'm thinking about kind of the upcoming fiscal year and some of the acquisitions.
And I guess in particular, 1 or 2 acquisitions that you've made and the sales space and the new simulators that you've got and the network is there is there a need to or will you be continuing to kind of relocate move stimulators around this year and am I correct in thinking.
Kind of a good time to be doing that because the utilization is still relatively low, whereas if you were sort of running flat out it would be a bit more disruptive or are you kind of at the point now where you feel pretty good with the location.
Seems throughout the network now.
And now we've been doing that.
The big part or a big part of our restructuring program is exactly that Tim and as I've mentioned, we've done and you've done a lot of that and the fourth quarter, we're going to do some more but I think that's going to come down.
That's we're really going to see a lot of the restructuring savings come from.
Because we're taking advantage of exactly the fact that there is a reduced level of activity to be able to do those moves. So you don't have to do it and a steady state so absolutely right.
Great. Thank you.
Thank you.
The next question comes from Cameron Duerksen of National Bank Financial. Please go ahead.
Thanks. Good afternoon, just really 1 question from me and it's I guess.
Round.
Foreign exchange.
And the fact that we've seen the Canadian dollar strength in a fair bit here and the last few months.
And I guess in the past this has been a kind of a net negative from a revenue growth perspective, but just Tony maybe you can sort of remind us of the.
The FX impact on CAE.
And whether thats changed from where it was a couple of years ago.
And also if you have any sort of sensitivity around FX changes and what that means to neither of operating income or 2 to EPS.
Yeah, So you're right.
It is a bit of a handle and largely as a result of the translation.
And so.
And obviously and it really depends on where the revenues are earned and so on so this sensitivity evolves, but ultimately what I view that as a relative rule of thumb is 1 set on the USD CAD. The whole year is about $2 $5 million of Soi impact.
Okay, So $2 5 million.
Okay, Okay and the translation.
Just on translation so.
Ex centers, especially I guess, the the revenue and the cost would generally be aligned.
That's right.
So margins would be would be similar but the translation would come into a lower Canadian dollar equivalent.
Got it.
Thats all I had thanks very much.
Thank you.
The next question comes from Kevin Chiang of CIBC. Please go ahead.
Thanks for taking my question, maybe just a clarification question Marc you talked about what you're seeing from <unk>.
Utilization perspective by market and a lot of it is being driven by I guess the level of openness.
And those respective economies, but but wondering.
As.
Some countries look at how quickly demand has helped us.
Improved or air traffic demand has improved and in short order and what we're looking at and you also I think we're seeing a pretty strong rebound here.
Are you seeing airlines and Marc.
A little more locked down.
And potentially accelerating their training efforts to maybe prevent any bottlenecks.
And if they think that their own domestic air traffic trends could experience a similar.
Serge.
All lines have seen the past few months share or or are they waiting for more clarity before making that type of training decision.
It depends it depends I think it was making as highlighting and the question from Noah is exactly where CFC net like for example, and South America.
I was using the example that <unk> really really decided to get all of our pilots trained so we had a bubble there where we are operating at north of 100% and their training center and Columbia.
And so that's the example here right now if you look at some of the countries of Chili's and full locked down.
Brazil, no surprise still battling very high cases, so we're going to see so necessary to flying activity isn't there, we're seeing airlines hunkering down.
But that will come back and now.
And when that comes back I would fully expect that we're going to see similar kind of story that we saw in the Columbia Asia Pacific.
Many countries.
And just read the newspapers rides and many countries have pulled back on opening up the green channels that they had due to what's happening in India.
Malaysia declared a national and.
And nationwide Lockdown again, so if you look at our utilization numbers overall.
Well imagine that.
A key partner to Air Asia, which is the southwest Airlines, if you like of Southeast Asia, and so you can well imagine that that Malaysia is locked down and we're about to do and too much there.
And I talked about India, what's happening, we have been high and India, that's coming back down so not surprisingly.
I don't think I think it's pretty mixed situation over there and Europe, we've seen.
Basically it's a day by day situation and I was encouraged to see some opening up recently that we're that they're telegraphing that theyre allow us tourists travel in within Europe right now so that's very good positive.
We see that.
And could go around that can go on and on and Yossi Portugal's, possibly lifting as early as may 17th but until it tailor those lifts happened.
It'll either be slow and I think airlines have been cautious in terms of their trading activity. But then you go to other areas like for example, and Japan with Japan Airlines has never missed a beat there and that training centers are operating at very high levels, because they've taken the tack that theyre going to kids.
Basically the opportunity throat is to maintain their pilots fully trained.
Overall, I think if you look at our business AG and aggregate I think what we've said before is look at the Ida growth.
We're not getting ahead of the IATA.
Growth path that's predicted.
But having said that.
I'm very encouraged by the level of flying activity and ICD, United States and I think that will be reflected I don't think anybody is going to take flying for granted anymore.
Hello.
And that's a fair comment and great color and maybe just.
A clarification point.
Within healthcare the CAE <unk>.
And 1 ventilator you you've completed the deliveries.
And the fiscal fourth quarter.
Is there a reason why you can't.
And so all that.
And the other governments or are there other.
Hospitals.
Is there a reason why this is.
This is.
Kind of a nonrecurring revenue stream or is there something you can actively.
So.
Total NOI per share.
Well I think what Youre seeing there is our discipline, we remain focused and what we're good at and what you saw specifically with the example of ventilator is what Youre seeing is what CAE can do and.
And I always pointed that way you take the Inc.
Fantastic subject matter expertise that we have and healthcare, where we understand everything to do with.
The training 42 patients and everything to do with the use of ventilators. So we were able to see sees that subject matter expertise and considering a crisis. They existed at the time for the civilian and marry that up with our core competencies that CAE of systems engineering and software global sourcing that we have.
And put that altogether and produce it and an absolute record of time, not only and produce them at high rate, but the.
Inventum because there was no there wasn't a ventilator is available and there was no parts available. So we have from scratch. So you saw and example of what we can do so with regards to your question about moving forward. We took a conscious decision basically to say that while we look at the market going forward, yes, we could do that and maybe we could get from <unk>.
But I think with the with the the what's happened and the pandemic a lot of people now produce a lot of ventilators, including.
Typical producers of ventilators across the across the world Oems at Bruce a and letters and there is at the moment I think theres a glut overall I mean, obviously there are some shortages in key areas like for example, the tragically in India for example, but what Youre seeing is overall there is going to be a lot more ventilators on a steady state and <unk>.
We are required and going forward.
Do we really want to be competing against the established players producing <unk> and we say and we have selected note and what we'd rather do though is to again using our subject matter expertise to partner with those companies and producing simulation based training associated with that and.
And then really that we think is a much better way for.
I appreciate the color there and kudos on opening up the documentation center and Quebec. Thank you. Thank you.
Thank you.
The next question comes from Ben Lop off and you have this all day. Please go ahead.
Yes, good afternoon, everyone.
Just for defence when we look at the adjusted operating margin reached 2 2% or $6 9 with government subsidy, which is down from almost 12% a year ago, while revenue were only down 2%. So could you maybe provide some color on what drove that decline and how should we expect.
Defence margins to recover from these levels.
And I think the first number just the same as we've talked about with the margins similar to the $17 2 as simple as it used a higher number.
And number should be looking at because again for the reasons that we talked about the costs that are being offset by the government program.
And so we've talked about before those issues they haven't changed really the wild.
The fact is if you look at the the fact that our book to Bill has been below 1 for the last 5 quarters.
And which has changed this quarter by the way and in a quite nice way and I expect that to continue so you take the lack of orders, particularly product orders because they tend to be higher margin number 1 and the fact is while youre eating off your margin so as you're.
Leading off your backlog says you need healthcare backlog.
And you still you still have a lot of costs. So those are in the end of the day you have to be absorbed as somewhat the other thing is.
Our mix has changed over the past few years to more service contracts they tend to be lower margin.
We have had a host of COVID-19 related issues and defence, particularly internationally U S has been less affected but having said that it has been affected.
I'll just give you an example of quarter before is like our Tampa Training Center, which is with trains C 130 crews.
A large part of the customers that come to that Tampa training center, our overseas customers and because of that and that tends to be a higher margin operations for that reason, but the customers haven't been able to show up because they have been able to travel and so that's been quite a bit of a headwind all year.
But internationally.
And what's happened is.
We've really had issues in regards to.
And basically access to customers Asics access to facilities due to lockdowns overall, so all of those factors explain where we at going forward I mean, the COVID-19 related issues themselves are abating, we still have some access to customers and the middle East for example is still difficult.
So program is still difficult and we are basically execute those programs as we speak but again I'm very encouraged by a couple of things number 1 is the orders that we're signing the volume of those orders that were signed we're on we're getting back on the positive.
The fact that again, what I Should've said at the outset is and as I mentioned in my remarks, we have about $800 million of orders that we expected to sign in the past year and going into this year that a little bit pushed youre right. Because we've had literally these had been delayed largely to again do.
COVID-19, because although defence forces themselves. There is obviously the central service they've kept operational but the large cases that people that would support.
Putting orders contracts in place just haven't been there's been there are certain non force and that's caused the delays that's going to catch up over the next few quarters at.
And at the same time, we've used the opportunity during this COVID-19 crisis.
And to make the investments.
Broadly as a company to make sure that we come out of this as a COVID-19 winter that includes operational efficiencies in defence. Some of that is captured and restructuring service.
The restructuring that you see so that part of that $65 million to $70 million will be reflected in the defence. So I guess long well.
Long answer to show that margins should be going up and I fully expect us to get north of that north where at least and the low double digits before too long.
Okay, but of course really great call and of course and of course everything gets increased when we do the <unk> acquisition and <unk> III Harris acquisition, because on a typical basis. They were they were operating at a higher margin and we are with a.
Trace from more products.
And then services and a much.
Much stickier kind of backlog because their programs they have so that'll improve things as well.
Yes, and with respect to defence how much visibility do you have for fiscal 'twenty, 2 which I mean, what is already and the backlog to meet your growth ambition.
And following your <unk> would be the breakdown between equipment and services and <unk>.
Arms of mix for defence.
Well I think we havent provided much.
Visibility on what we see.
This year for good reasons, because we don't want it well, it's not that we don't have visibility of our existing programs and defence, but it's really in terms of when we expect the closing of the <unk> III Harriss.
And.
The acquisition will occur I think I would point to the fact that the book to Bill this quarter and $1. 1 I think that that's.
Basically starts to tell you that we're getting good coverage.
Of order and take the revenue.
What we really need.
So in terms of.
And that will actually in fact, when I looked at the numbers.
We actually have going into the year, the highest percentage backlog the percentage of revenue to back to fulfill their year. They have the highest percentage of in our backlog already than I've seen in recent history.
If you know what I mean, all day coverage.
Yes, okay.
Great.
Yes, thank you very much.
Thank you.
The next question comes from Ron Epstein Bank of America Merrill Lynch. Please go ahead.
Okay.
Afternoon, guys.
And maybe changing gears, just a little bit here, there's been a lot of focus.
Urban Air mobility and.
And the market has been supportive of many of the different companies developing these vehicles, but maybe 1 of the long tentpoles as who are going to fly. These things. So my question to you is have you been approached it or are you and conversations with any of these urban air mobility companies or other companies that want to operate those vehicles on <unk>.
<unk> around training pilots at least for the time period before those things go autonomous which might be quite some time.
Oh, absolutely absolutely I personally believe that.
And this is going to be.
This is going to be definitely a good part of the market in the future and awesome.
Your guess as to when that happens is as good as mine, but I.
I certainly believe there's some some.
Estimates that are out there thats, probably in terms of pilots funny and needing about and the nature of our estimates 60000 pilots by 2030 for us.
We're very much involved in that space.
Can tell you. They have these specialized meetings of everybody who is in the industry, including all of these.
Companies that are producing these various said <unk> devices I was at the last 1 which is just prior to COVID-19 that was in Dallas sales call, Texas up. So I can tell you I was visiting and myself just last week with 1.
Very strong competitor a contender better aviation that was with their CEO and their team and Burlington, Vermont, just last week and very impressed with their doing we're partnering with them on.
On the going forward and just we announced that we're doing is with Jonathan as I mentioned in my remarks other.
And I won't go through all of them because some of them are competitively sensitive they don't want us to talk about it but doing well.
I think you can rest assured that we're involved with pretty much the whole ecosystem right now as usual, we would take our role that we want to be if you like OEM agnostic. So we want to be able to serve the industry. We serve them not only and training pilots, but also help them a and actual design and certification of the.
The aircraft, which we're doing as I mentioned that the contract that we signed with John.
Is for helping them do they feel like they call it and the industry parlance, the iron bird, where software and Luc So basically where you could fly to vehicle using software where before you ever flight and real aircraft that you prove out all the software interfaces and you can actually certify components of the design.
Using <unk> flying and if you like virtually so again, we're very much part of that and because I think it's going to be part of the future. It's an exciting part and I can tell you that.
And aviation Geeks, and Smile and life I mean, this is where aviation, whereas and the <unk>, where you have a whole bunch of people developing aircraft is like day, So wild west out there is quite exciting but will be part of it.
Great. Thank you.
Thank you operator, I think that's all the time that we have today for investors before we open.
The lines to the media.
Marc will say, a few words and French so Marc.
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Emil polled the vaccine echelon and sublease, Glenn and <unk> gas on month tour spend on the vaccinia books from Etsy mass set minutes. Thanks.
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The old partnership and operator, I think thats all the time, we have for this afternoon, and then we went a bit longer than we usually do but the quarter and certainly lots of great questions I want to thank all participants from the investment community and members of media and I would remind participants that a transcript of today's call can be found zone.
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Thank you very much.
Thank you. This does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your lines. Thank you and have a good day.
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