CAE Shares Plunge On Mixed Q1 Performance

  • CAE Inc CAE reported first-quarter FY23 revenue growth of 24% year-over-year to C$933.3 million. Adjusted EPS decreased to C$0.06 from C$0.19 in 1Q22.
  • Sales by segments: Civil Aviation C$480.4 million (+11% Y/Y); Defence and Security C$413.3 million (+43% Y/Y); and Healthcare C$39.6 million (+25% Y/Y).
  • Order intake for the quarter increased by 101% Y/Y to C$1.05 billion, and the total backlog increased by 26% Y/Y to C$10.03 billion.
  • The Civil book-to-sales ratio was 1.09x for the quarter and 1.32x for the last 12 months. The Civil backlog at the end of the quarter was C$5 billion (+19% Y/Y).
  • The gross margin contracted by 345 bps to 24.9%. The operating income declined by 54.3% Y/Y to C$39.4 million, and the margin contracted by 723 bps to 4.2%.
  • Adjusted segment operating income stood at C$60.9 million (-38% Y/Y), and the margin for the quarter was 6.5%, down from 13.1% a year ago.
  • Net cash used in operating activities was C$(162.6) million for the quarter. Free cash flow was negative C$(182.4) million.
  • "We had a mixed performance in the first quarter, with Civil delivering results in line with our view for strong annual growth, while Defense came in well short of our expectations, as a result of discrete program charges and near-term headwinds in this early stage of its multi-year growth journey," said CEO Marc Parent.
  • Outlook: The company expects to deliver mid-20% consolidated adjusted segment operating income growth (mid-30% previously) for FY23, weighted more heavily to the second half of the year.
  • Price Action: CAE shares are trading lower by 14.86% at $21.94 on the last check Wednesday.
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