CAE reports fourth quarter and full fiscal year 2025 results

Core Insights - CAE Inc. reported strong financial results for Q4 FY2025, with significant improvements in revenue, operating income, and free cash flow, driven by disciplined execution and efficient capital management [3][7][10] - The company achieved a record annual free cash flow of $813.9 million, reflecting a cash conversion rate of 211$1.3 billion, contributing to an adjusted backlog of $20.1 billion, which is a 65$1,275.4 million, a 13% increase from $1,126.3 million in Q4 FY2024 [7][9] - Annual revenue for FY2025 reached$4.7 billion, up 10% from $4.3 billion in FY2024 [8][9] - Q4 FY2025 operating income was$239.9 million, compared to an operating loss of $533.0 million in the same quarter last year [7][10] - Annual operating income for FY2025 was$729.2 million, a significant recovery from an operating loss of $185.4 million in FY2024 [8][9] Segment Performance Civil Aviation - Q4 Civil revenue was$728.4 million, a 4% increase year-over-year, with an adjusted segment operating income margin of 28.6% [12][17] - Annual Civil revenue was $2,709.3 million, an 11$2,435.8 million in FY2024 [13][17] - Civil adjusted backlog grew nearly 40% to a record $8.8 billion, supported by$3.7 billion in adjusted order intake [4][16] Defense and Security - Q4 Defense revenue was $547.0 million, a 29$1,998.6 million, an 8% increase from $1,847.0 million in FY2024 [19][22] - The adjusted backlog for Defense reached$11.3 billion, reflecting a robust demand driven by increased defense budgets across NATO and allied nations [20][22] Growth Outlook - The company anticipates continued growth in FY2026, supported by higher margins and strong free cash flow, with expectations of low-double-digit percentage annual adjusted segment operating income growth in Defense [5][32] - In Civil, the outlook remains strong due to regulatory requirements for pilot training and the ongoing need to train new pilots, despite some short-term headwinds [31][32] - CAE's business model is characterized by structural resilience and secular growth trends in both Civil and Defense segments, underpinned by recurring revenue streams [6][32] Capital Management - CAE's net debt at the end of FY2025 was $3,176.7 million, with a net debt-to-adjusted EBITDA ratio of 2.77 times, down from 3.36 times in the previous quarter [27][36] - The company expects to further deleverage its balance sheet, targeting a net debt-to-adjusted EBITDA ratio of 2.5 times by the end of FY2026 [36] - Total capital expenditures for FY2026 are expected to be modestly lower than FY2025, focusing on organic growth investments [35]