Before we begin, I'd like to remind you that today's remarks, including management's outlook for fiscal twenty twenty six and answers to questions contain forward looking statements. These forward looking statements represent our expectations as of today 05/14/2025. And accordingly are subject to change. Such statements are based on assumptions that may not materialize and are subject to risks and uncertainties. Actual results may differ materially. Listeners are cautioned not to place undue reliance on these forward looking statements. A description of the risks, factors and assumptions that may affect future results is contained in CAE's annual MD and A available on our corporate website, and in our filings with the Canadian Securities Administrators on SEDAR plus and the U. S. Securities and Exchange Commission on EDGAR. On the call with me this morning are Marc Taran, CAE's President and Chief Executive Officer and Constantino Malatesta, our Interim Chief Financial Officer. Nick Lian Titus, CAE's Chief Operating Officer, is also on hand for the question period. After remarks from Mark and Constantino, we'll open the call questions from financial analysts. Let me now turn the call over to Mark. Thanks, Andrew, and good morning, everyone. We delivered an exceptional four quarter that capped a strong year across all of our key financial and operational metrics.

I'm very pleased with the performance and proud of how the team delivered with disciplined execution and efficient capital management. We generated $289,000,000 in free cash flow in the quarter and a record $814,000,000 for the full year translating to a very robust cash conversion rate of 211%. That level of cash generation enable us to meet our year end leverage target giving us stronger financial position and increased flexibility as we look ahead Importantly, we also continued building momentum for long term growth and profitability. We secured $1,300,000,000 in new orders in the quarter for a record end of year adjusted backlog of $20,100,000,000 which is up 65% from last year. This achievement is testament to the confidence of our customers that have in CAE and the strength of demand across our market. Turning to our segments, I'm extremely proud of what we've accomplished executing our strategy, with dedicated focus and operational rigor. On the Civil side, despite ongoing constraints in global aircraft supply, and the temporary drop in U. S. Pilot hiring, we delivered another strong [indiscernible] Demonstrating both the resilience of our business model and the strength of our global franchise. Civil achieved a record adjusted segment operating margin of 28.6% in Q4, and 21.5% for the year.

Adjusted segment operating income grew 6% year over year particularly good result given the factors that have been holding the commercial market back to more normalized operating levels. Our backlog at Civil grew an impressive 37% to a record $8,800,000,000 supported by $3,700,000,000 in new orders including 56 full flight simulators. During the quarter, Civil assigned training and operate support solutions contracts valued at $742,000,000 including the sale of 14 full flight simulators and long term training and airline operations digital solutions contracts. In defense, we accelerated our path to greater profitability. We delivered an adjusted segment operating income margin of 9.2% in the quarter and 7.5% for the year driven by solid program execution and a near doubling of the adjusted defense backlog to $11,300,000,000 During the quarter, Defense booked orders for $596,000,000 bringing the full year total to a record $4,000,000,000 It's very clear that we're gaining traction and are well positioned for continued growth in a market with significant long term tailwinds. With that, I'll now turn the call over to Dino, who can provide some detailed look at financial performance. I'll return at the end of the call. To comment on our outlook. [indiscernible] Thank you, Mark, and good morning, everyone.

Looking at our fourth quarter results on a consolidated basis, revenue of $1,300,000,000 was up 13% compared to the fourth quarter last year. Adjusted segment operating income was $258,800,000 compared to $125,700,000 last year. Quarterly EPS was $0.47 per share compared to $0.12 in the fourth quarter last year. For the year, consolidated revenue was up 10% to $4,700,000,000 Adjusted segment operating income was up 33% to $732,000,000 and annual adjusted net income was $385,500,000 or $1.21 per share which is up compared to $0.87 last year. Net finance expense this quarter amounted to $56,500,000 which is up from $52,400,000 in the fourth quarter of last year. I expect run rate quarterly finance expense to be approximately $55,000,000 in fiscal twenty twenty six. Which is a bit higher than last year because of additional lease expenses related to recently opened training centers in our global network in support of products. And the financing costs associated with the consolidation of the Syntcom joint venture [indiscernible] Income tax expense this quarter was $45,200,000 representing an effective tax rate of 25%. Compared to an effective tax rate of just 14% in the fourth quarter last year. The adjusted effective tax rate which is the income tax rate used to determine adjusted net income and adjusted EPS was 25% this quarter compared to 47% in the fourth quarter last year.

The annual effective income tax rates in fiscal twenty twenty six is expected to be approximately 25%. Considering the income anticipated from various jurisdictions and the impact from global minimum tax legislative changes. Net cash provided by operating activities $322,700,000 for the quarter compared to $216,200,000 in the fourth quarter of last year. For the year, we generated $896,500,000 from operating activities compared to 566,900,000.0 last year. The strong performance is a result of the team's focus on execution. Hitting program milestones and being highly prudent about cash management. This effort translated into an excellent free cash flow performance this year and we're now targeting a conversion rate of 150% for fiscal twenty twenty six and beyond. This represents a step change increase from approximately 100% conversion rate which we previously target and underscores the highly cash generative nature of our CAE business. Uses of cash involves funding CapEx for CAD109 million in the fourth quarter and CAD356.2 million for the year. Driven mainly by expansion of our civil aviation training network in lockstep with secured customer demand. These opportunities translate to some of our best returns. As our simulator assets wrap up with the first three years of development reaching an average 20% to 30% pre tax incremental return on capital employed.

We remain highly focused on capital efficiency and expect total CapEx in fiscal twenty twenty six to be modestly lower than in fiscal twenty twenty five. This will be concentrated mainly on organic growth investments in similar capacity. To be deployed to CAE's network of aviation training centers which are backed by multi year customer contracts. Our net debt position at the end of the quarter was $3,200,000,000 for a net debt to adjusted EBITDA of 2.77 times. Comfortably below our end of year target of below two times. Consistent with our disciplined capital allocation strategy, and commitment to financial resiliency, we expect to further reduce net leverage to 2.5 times by the end of fiscal twenty twenty six. Supported by strong and sustained free cash flow generation. Now, to briefly recap our segmented performance. In Civil, fourth quarter revenue was up 4% over a year to $728,400,000 and adjusted segment operating income was up 9% year over year to $208,400,000 or a margin of 28.6%. For the year, civil revenue was up 11% to $2,700,000,000 and adjusted segment operating income was up 6% to $581,500,000 for an annual margin of 21.5%. Average training center utilization was 75% for the fourth quarter.

Down from 78% the prior year mainly to the reduction in pilot hiring in Americas related to OEM aircraft supply constraints. Utilization of 74% for the year down from 76% the year prior. In products, we delivered 15 several full flight simulators in the quarter and 61 for the year. Compared to 47 deliveries in the prior year. In defense, fourth quarter revenue of $547,000,000 was up 29% over Q4 last year. Adjusted segment operating income was $50,400,000 or a 9.2% adjusted segment operating income margin. Legacy contracts remain on track. With costs and schedules well managed and the margin excluding legacy contracts was 9.9%. This compares to a negative adjusted segment operating income of $65,700,000 in the fourth quarter last year. For the year, defense revenue was up 8 percent $2,000,000,000 and adjusted segment operating income reached $150,500,000 foreign adjusted segment operating income margin 7.5%. Before I turn the call over to Mark, I'll make a few comments about the potential impacts of tariffs. CAE is well insulated from direct tariff impacts. Approximately 70% of our CAE's total revenues come from services delivered within our customers' own countries. Which significantly limits our exposure to cross border tariffs. For The U. S. Market, this proportion was even higher around 80% last year.

Moreover, our flagship product the full flight simulator is exempt from tariffs under the USMCA. From an enterprise risk standpoint, with roughly one third of our workforce based in The United States a substantial operating footprint and an already significant U. S. Bill of materials we're confident that we have the flexibility to effectively manage any residual risk. Exposure. With that, I will ask Mark to discuss the way forward Thanks, Dito. Before getting into our outlook, I want to take a moment to reflect on how far we've come Over the past few months, I've had the real privilege of onboarding our new directors and our new Chairman and spending time with our teams around the world from training centers to manufacturing and engineering sites, And what I've seen confirms everything that I have always known about this remarkable company of ours. CAE has transformed into a purpose driven high performance organization. Our mission to make the world safer isn't just words, it's really deeply embedded in who we are and what we do. Whether it's preparing pilots for complex aerospace, enabling defense forces to be mission ready, or supporting critical operations. We are there for the moments that matter.

And what always strikes me most is the caliber and the commitment of our people Across two forty sites in more than 40 countries, Our 13,000 employees show up every day with focus resilience and a deep sense of purpose. That mindset combined with our unmatched technology our operational excellence, our strategic position has made CAE a clear leader in this industry. And over the last couple of decades, we've evolved an industrial products company to a global powerhouse training and simulation. We're no longer working to meet the standard. We're defining And with the momentum that we've built, I believe that the best is still ahead. The market has begun to recognize our progress across the business as reflected in our stocks outperformance relative to broader North American indices this year. And as we look ahead to fiscal twenty twenty six, we're carrying forward significant momentum with confidence and clarity. We have an over $20,100,000,000 of adjusted backlog and with the financial and operational discipline that we've demonstrated, we're entering a new fiscal year from a position of real strength. We continued focus on execution, innovation and value creation, I'm confident that we'll build on this foundation to deliver growth higher margins and stronger free cash flow.

In Civil, we remain well positioned with strong fundamentals and solid demand across both commercial and business aviation. Before getting into the specifics of our outlook, it's worth highlighting the recurring nature of our Civil business, which is a key reason that we remain confident in its long term resilience and growth. Recurrent training which is required approximately every six months to maintain pilot certification represents about 70% of total training activity. And these regulatory requirements are consistent worldwide making this Porsche demand durable and relatively insulated from short term economic volatility. The remaining 30% of trading demand comes from new pilot certifications that aircraft type transitions driven by fleet growth and pilot retirements. In the Civil business, we also lead the market in the sale and support of full flight simulators. And while this is entirely more cyclical and closely tied to aircraft deliveries. This part of the business is all supported by very strong long term fundamentals. Because of the short term supply chain constraints that have impacted OEM aircraft output, we expect modestly lower simulator deliveries this fiscal year with a greater proportion occurring in the second half. For the year as a whole, we expect to continue winning our fair share of full flight simulators.

Looking longer term, the outlook remains highly compelling. Boeing and Airbus have a combined backlog of over 17,500 aircraft. And both projects the global in service fleet to nearly double over the twenty years. On top of that, more than 280,000 new pilots will be needed globally over the next decade to support this growth and offset pilot retirements. These structural drivers create a clear and compelling runway for sustained growth in pilot training long term. In Business Aviation, we expect to see continued momentum as we scale operations at need 20 centers and ramp up recent simulator deployments. The business segment is benefiting from growth in number of high network individuals in the world strong OEM backlog, the structural shifts towards fractional ownership. Flight activity levels in The United States are 15% above 2019 and actual twenty nineteen levels and fractional operators like Flexjet have seen a nearly 60% increase in flight hours over the same period reinforcing the underlying demand fundamentals. Our exposures weighted towards larger business aircraft types, which have historically demonstrated greater resilience to economic cycles a dynamic that gives us added confidence in the current macroeconomic environment. In any event, we see no significant indications of worsening conditions at this time.

Another example of the growth and resiliency of our Civil business is our strategic expansion into the air traffic controller training market. Which is a natural adjacency that builds on our decades of experience simulation based training for highly regulated safety critical roles. This initiative has been notably capital efficient with the launch last year of our first air traffic services or ATS training center in Montreal. Which leverages our existing asset base and is in partnership with NAF Canada which manages one of the largest aerospace areas in the world. A mere six months later, the center welcomed its first students and just over a year since announcing our entry into the ATS training CAE has now successfully trained seven cohorts of air traffic controllers and flight service specialists who've now completed their basic trainings and transitioned back to Nat Canada or they're on the job training. Through this partnership, aim to train a 500 personnel by 2028. And our decision to extend into this segment was driven by clear and growing global need. By our own estimates, some 70,000 seventy thousand new air traffic controllers are going to be required over the next decade. And shortages particularly in The United States and parts of Europe are already putting pressure on aerospace capacity and system efficiency.

With our established expertise in high consequence training environments, we're well positioned to support this essential function of the aviation ecosystem enhancing both safety and throughput while adding new durable revenue stream to CAE's Civil portfolio. For Civil overall, we're taking a measured view of the first half of fiscal twenty twenty six as we monitor broader macroeconomic conditions and OEM aircraft delivery rates. In terms of our quarterly cadence in Civil, we expect this fiscal year to begin much like last year in both revenue and margins with performance building progressively towards a stronger second half driven by increased training activity and product deliveries. For the year ahead, we expect segment operating income to grow in the mid to high single digit percentage range with a modest increase in the annual adjusted segment operating income margin. In Defense, CAE is well positioned to benefit from a sustained global up cycle in military spend. The European condition recently introduced to rearm EU program targeting €800,000,000,000 in defense investment by 02/1930 and could potentially be even greater with proposed fiscal rule exemptions. Across NATO and allied nations including a notably stronger commitment from Canada increasing defense budgets are driving demand for the advanced training and simulation solutions or CAE as a clear competitive differentiation.

We've built a strong franchise in Canada over the past several years. With major program wins at extension, including contracts like that contract, the RPAS contract, fixed wing search and rescue, NFTC and the CAE systems engineering support contract. The Canadian Federal government plans to nearly double its annual defense spending from approximately $40,000,000,000 to over $80,000,000,000 by 02/1932. And in spite of this substantial growth opportunity or in light actually of this substantial growth and the scale of our current program base we've recently evolved our defense organizational structure to establish Canada as a standalone region with its own dedicated P and L alongside our U. S. And international segments.

This change reflects the growing strategic importance of the Canadian defense market and our leadership position within it. While also enabling our international team to sharpen its focus on broader global opportunities. We're immensely proud to have been ranked another once more as Canada's top defense company by Canadian Defense Review Magazine marking the third time that SEES has received this honor.

To me this recognition highlights our commitment to advancing global defense capabilities through cutting edge training solutions ensuring that we remain a trusted ally in pursuit of security and operational readiness. Our aim is to be Canada's premier training partner and one clear validation of the progress we're making came in February when Sea was named the strategic partner to the Government of Canada for the future fighter lead in training program. Under this initiative, we'll design and co develop the next generation of training for Royal Canadian Air Force fighter pilots supporting Canada's fifth generation fighter readiness and reinforcing our leadership in high consequence training and mission support. This is just another example of a long term high value opportunities that we see unfolding. And it highlights CAE's growing role in strengthening the capabilities of Canada and its allies. With a defense backlog, that nearly doubled year over year and a solid foundation of program execution we expect continued progress toward reaching our goal of a low double digit percentage margin and above market long term growth. Specifically for the year ahead, we expect defense to have low double digit percentage annual segment operating income growth and an annual segment operating margin in the eighth percent to 8.5% range.

To sum up, CAE is entering fiscal twenty twenty six from a position of strength.

CAE remains both a highly compelling long term growth story and at the same time a very good partner storm. We've built a resilient high performing company, one that's winning in the market delivering for customers and creating long term value for shareholders. We bring together all the hallmarks of an excellent company. A record order backlog, deep customer intimacy strong competitive differentiation a high proportion of recurring revenue and cash flow and exposure to secular growth markets. Our focus remains squarely on innovation, and delighting our customers coupled with capital efficiency, operational excellence and disciplined execution. Lastly, as we manage our planned CEO transition later this summer, the Board and I are committed to smooth and seamless handover. The process to identify the next CEO is well underway and I'm we're confident it's going to result a leader [indiscernible] culture and momentum. I feel very good about our strong foundation, our deep leadership team and the clear path ahead. Steve is exceptionally well positioned for continued success sustainable growth well into the future. With that, I thank you for your attention and we're now ready to answer your questions.

Thanks Mark. Operator, we'll now open the line to financial analysts.

Thank you. We will now begin the question and answer session. Our first question is from Kevin Chiang with CIBC. Please go ahead.

Hi, good morning here. Thanks for taking my question. Maybe just my first one, maybe I can dig into what's underpinning your civil outlook. I understand the prudency just given all macro uncertainty, but maybe we can dig into what you're seeing in terms of commercial trading demand versus business jet training demand? And then on margin outlook for the year, I guess I would have thought mix would have been more of a tailwind if you're selling fewer FFS this year and you have the full benefit of SimCom. Maybe you can just walk me through some of the puts and takes on the margin outlook as Thank you.

Okay. Well, look, I'll kick it off. And maybe turn over to Nick for some additional color on this a bit. Look, I'm just going back to the Civil outlook. I mean, what we're doing, we're taking a measured approach specifically in light of the more cautious tone that we hear from airlines and a bit of softness that we saw late in fiscal year. As we point out, the second half is typically stronger and we've seen that think every year at VINCI. So we're expecting a more moderated environment in the first half both in terms of what we see in terms of deliveries of simulators that we're going to execute and some near term uncertainty. But all that's reflected in the guidance that we had. I think we'll hasten one thing is on the training side, share over to Nick. Trade demand remains very resilient. I mean, we see some regional variation. We see the pilot activity pick up recently in United States. So we're watching that very closely. Coming back to similar deliveries, the which were really a function of delivery of aircraft out of Boeing and Airbus. I mean, what we see is the supply chain issues are getting better.

But they continue to constrain the aircraft production itself, but certainly not at peak production rates. So we're expecting modestly lower deliveries this in the first half of this year. So that's going to be way for the back half. So those are some of the components. So maybe just add a little bit to that.

I'm just going to say, Kevin, just the pilot hiring, if you go through the drivers pilot hiring, which is one of one driver is improving for sure but not not where they were last year. Aircraft delivery, same thing.

Mean, things are improving actually with Boeing, but we've been pretty ided with Airbus. Being the vast majority of the deliveries and therefore, a lot of our product sales have been in in Airbus versus Boeing. And so and of course, the customers themselves, there is there is a certain amount of I guess, slack in the system right now because they were hiring at a certain level. We just need to let all this kind of balance out a little bit.

I think. And so when we look at the we look at the year and we look at the forecast, and the guidance that we've given, I mean, it's taking a little bit of that into consideration. [indiscernible] we see it improving. As Mark said, demand in the training centers is still quite strong. I mean, obviously, it can always be stronger, but the difference is is not that that big as you see. And we are I mean mid to high single digit growth on a base of civil, which is this high [indiscernible] is not is not we need some of these these drivers to improve.

That's helpful. I'll leave it there. This is super helpful. Thank you very much.

The next question is from Fadi Chamoun with BMO. Please go ahead.

Hey, good morning. Thank you for taking my question.

I want to ask about the flight operation business. [indiscernible] You put together few small acquisitions in Sabre And I think I recall you have been investing in kind of modernizing the software and modernizing the approach to market [indiscernible] We recently saw Boeing sell the competing assets to our private equity. I wanted to get your thoughts like what state of readiness that business segment is at right now from competitive position perspective And if you can give us some color about how it's performing relative to the level that you had expected by this time?

Okay. Yes, Sadi, thanks for the question. And I'll kick it off, maybe add again with Nick. Well, look, I mean, we're winning in the market. That's the first thing I'll say. We're very and this is no discontinuing what I've said in previous calls, we're winning a disproportionate proportion of the business that we get in campaigns that we see out there. So our order book is growing. I can tell you that basically I would say we're at capacity for the work that we can take on right now And if anything, we're paced right now in terms of growth at the speed at which the airlines can actually undergo the changes in our operational control centers because when you're making a change, you're adopting a system like ours, it takes a lot of time and effort to think to implement, think like for a company implementing an ERP program. That's the same kind of thing. So there's it takes a lot. So you're working hand in hand with airlines and So we're kind of paced from that standpoint. But look, again, we're avoiding in the market. We're very clear that we have a growth business over the next few years.

What we're seeing with seeing us do right now is we're winning orders that are basically fast kind of profile orders, which means that we are going to be recognizing the revenue and the earnings over a number of years as we execute those orders. It's kind of like the analogy we're moving rather selling a simulator, so selling like an on premise solution We're delivering training, which is over quite a few years.

So in terms of the execution of our business, that's where we stand, quite happy with our position in the market and we're executing well. We have a We have a strong order book. In terms of the question you asked about Boeing selling in the Jefferson deal, I think the strong level of interest that we saw in the market demonstrate the attractiveness of this side of the market So, I mean, I think basically that's what I'd point to that. I know, Nick, if want more with the No, I was just going to say right now the business the number of implementations have ramped up significantly. With all of the wins. So the way I would look at this is we have about $700,000,000 of orders and the average contract is about five years. So we have $250,000,000 of revenue sitting there. That we need to implement solutions that we've sold and start to generate revenue. So the best is yet to come, guess, is the way I would put it. Okay. And just kind of follow-up on these comments. Like from a scale perspective, do you think you have the scale ultimately to be effective in this part of the business?

And are you finding I mean, from the backlog, I guess, the answer is yes. But are you finding a lot of synergies in your commercial approach between kind of what you're doing on the training side and what you're doing on the flight operation side?

Well, I'll just point to one thing just recent example. We just had a big customer meeting of the business just last week in Greece. And we hosted that at the new Asian training center and and that was with the co CEOs of of AG. And I could tell you that reaction of airlines to basically witnessing the scope of CAE both in its training market and then now in the service market just from a brand capability, I think there was definitely synergies there. But that's just anecdotal, if you want to add No, I see. You mean the synergies for this business are primarily in the front end We have teams that are that are active on both sides of the house when it comes to capturing customers and we leverage everything that we do with our customers to support more business with FliteScape in particular. So I mean, it's a different business. But it's another way for us become at the end we want to become as important as we can to our customers. And this is another way to do that. And maybe just to add on, I take that I don't think that would maybe that was part of your question, Fadi.

I mean, to be specific, I mean, we have what we need in this business. It sounds like we need to add any more capability or M and A or anything like that to this business. Again, the portfolio that we have and the various software platforms that we have allows us to have the success we have in the market, which is which is going to fuel a strong business for us as demonstrated in the $700,000,000 of added backlog that Nick talked about.

Thank you.

The next question is from Konark Gupta with Scotiabank.

Thanks and good morning.

Just wanted to kind of touch on defense margin a bit here. Looking at obviously the last year, the sequential progression has been pretty remarkable. The margin exiting the fiscal year at about, call it 9%, if we exclude the tax credit and the legacy dilution. What's keeping sort of the lid on your expectation for this fiscal year when you're expecting 8% to 8.5% margin. I mean, is there a timing in terms of how the legacy programs on unfold? Or is there something in the mix in the background that's not letting the margin kind of exceed that 9% you saw in the latest quarter?

Well, I'll start by saying we're not putting a lid on anything. We're if you think about going to 8.5% on average, what inherent in that is you could continue to see that inherently the progression that kind of progression that you saw this year. I think, look, we all I like to walk before we can run and we've been watching pretty fast. I think we're going to continue to do that.

So look, I'd say I think you saw it in the numbers. We were confident in this year. We continue to feel very good about where we are, how we close the fiscal year. We're carrying very strong momentum into the new year. Look, and there's really two drivers behind the outlook that we're giving. First, what you're seeing is the benefit of strong program execution. We're hitting the milestone. We're unlocking the cash, which by the way was a key contributor to the very strong free cash flow performance that we had this in the fourth quarter. Second, really we're ramping up higher margin programs that we won in Committed to Backlog. If you remember the story that we had quite for quite a few quarters now is that basically what we've been doing is basically retiring programs executing our program that are inherently [indiscernible] at margins that are basically, if you like dilutive or not accretive to the low double digit margin expectations we have in the business, replacing them with contracts that suit. And that's continues to be the story here. And when you look at the size of the backlog, ending the year at 11.3% backlog, which was by the way, I would say and that's not over.

We have like over $7,000,000,000 in bids and proposals are outstanding. So submitted to customers. Waiting in terms of a customer decision. I mean, I really position this extremely well continue reshaping the business, towards a hike towards our goal of higher quality, higher margin work. So look, we'll so I continue again, going back to say there's no lid on this business. I don't certainly expect a perfectly linear upward trajectory. We've done very well. There's always going to be quarterly variability in this business because inherently when you execute depending on which programs you execute in any given quarter. But look, we anticipate look, I would say cadence similar to last year, performance building [indiscernible] Q1 onward. So look, mean bottom line is the fundamentals very clearly improved. We've done a turnaround in this business. And we're very good about this trajectory.

Makes sense, Mark. Thanks you. And I think you touched on the working cap. Capital aspect there. So I wanted to ask maybe from Dino, how should we think about the working capital in this fiscal year? Do you see these cash conversions continuing at a similar clip? Or the mix will have some integrations? So for the question. Effectively I'm really pleased with our free cash flow generation of $290,000,000 quarter and the record $814,000,000 free cash flow generated is worth more than 25,000,000 So conversion rate of 211% So the capital allocation priorities do remain unchanged Deleveraging is central part of what we're envisioning. Going forward. We are aiming to take our leverage down to 2.5 times by the end of the year and that is again as a result of our confidence in the cash recurring jet cash generation nature of our business going forward as well as maintaining a focus on capital discipline including non cash working capital. Now we in this year we unlocked a lot from the non cash working capital for 04/26 to help with the cash flow generation and the deleveraging goals. Next year we'll see a continued focus on non cash working capital efficiency.

And allowing us to maintain our 2.5 times deleveraging target for next year.

Okay. Thank you.

The next question is from Cameron Doerksen with National Bank Financial. Please go ahead.

Thanks. Good morning. Just maybe to follow-up on cash question.

Just on the CapEx indicating modest decline year over year. Maybe just two quick questions on this. Mean, one, what is your expectation for maintenance CapEx for 2026? Should we expect something similar to what we saw in 2025? And then secondly, maybe you can just sort of detail where, I guess, the growth CapEx is going for this year, what specific areas are you investing in?

Yes. Thank you for the question, Cameron. So effectively we had adjusted our CapEx guidance to be $30,000,000 higher than $24,000,000 and we we achieved that by hitting $356,000,000 this year. So total CapEx expected to be modestly lower than last year. Again, continued example of disciplined capital approach. We invest organically to keep pace with the growth of our existing customers. Around 75% of next year's CapEx will be effectively to address some of the market needs going forward, 25% maintenance CapEx. So very similar to what we had this year Generally speaking these opportunities give us the highest returns ramping up with the first years. Of deployment and reaching an average 20% to 30% pre tax incremental return of capital employed, right. We have experienced a more intensive multi year deployment schedule recently Now we're focused on cash generating returning capital and return on capital as well as long term margin profile. So a lot of discipline in our execution going forward next year. Working lockstep with the market to make sure that we have the ability to address and reduce or any CapEx [indiscernible] Maybe just closing it off to Dino's comments. [indiscernible] we just come off as deal set a multiyear investment cycle.

We invest a lot in new 24 locations. We played offense during the downturn in a big way. We seize the opportunity, but we took share We help customers outsource their training. We build these centers for UFOA, expanded a lot, particularly in business aircraft. So now we find ourselves in a place, a very attractive place, where we're now consolidating. And operationalizing that opportunity and that really transitions. Into the guidance we have that basically both CapEx volumes and CapEx intensities going off its peak.

Okay, that's helpful. And maybe just a a follow-up. I mean, just thinking about the growth CapEx, I mean, largely driven by customer needs. I mean, should we think about the the investment here is largely just adding simulators to existing training centers? Or are there still some areas where you think you need a new training center either on the civil side or on the business jet side? [indiscernible] this year, the most of the CapEx that we're we're spending is we're opening Vienna and we're expanding in Orlando after the acquisition. There's a few SIMs there. So and we have a couple of SIMs in one of our existing training centers in CAEPS. So there's no planned new [indiscernible] It's really just growing some of the training operations that we it's part of the business case like SimComm is a good example. The business case calls for a bunch of simulators. So these simulators are starting to be manufactured now.

Okay. So that's very helpful. Thanks very much.

The next question is from Greg Connard with Jefferies. Please go ahead.

Good morning. Morning. Maybe just to focus on Civil backlog. I mean, you gave a little bit of color around flight operations, but if we think about 2025 growth, in backlog of 37%, maybe mid single digit revenue growth, it implies a much higher coverage of 2026 revenue than you've historically have. What shifted in backlog either from a margin perspective or just recognition just given high coverage in 2026?

Was a bit confused about where you were. You started with basically your question with I think flight service or flight scale in that regard.

And maybe add a little bit more segment overall, civil as a whole you're talking about?

Yes. Just given the strong backlog growth and revenue outlook for 2026, I mean, how you think about that backlog converting to revenue just given there seems to be a much higher coverage for 2026 than you've historically had just given the size of the backlog?

Yes, Greg, it's Andrew. I think I know where you're coming from.

One of the big components of the increase is the consolidation of the SimCom JV and Flexjet contract which is spread over fifteen years. So you can't sort of align the period of backlog increase one to one with revenue generation year one.

Perfect.

And then maybe just given on the Civil side, you talked about The U. S. A little bit, but just given most of the training or most of the revenue in '26 is coming from training. Can you maybe just talk about regionally where you're seeing the biggest areas of strength within civil aviation?

Yes. So I think for in terms of by region, would say Americas would would be probably our weakest region right at the moment. And Asia is probably our strongest. Because of all the I guess, the things that you probably inferring in your question, there's a lot of new airlines, a lot of growth in in some of our customers, and in particular, in some of our customers. We're seeing some good growth. Business aircraft, I would say relatively relatively stable. I mean, are expecting some improvement in utilization in Business Aircraft, but nothing outrageous. So I think training demand is pretty strong across board, but of course, The U. S. Is the one which is a little bit more little bit more muted for us.

Thank you.

Once again, any analysts with a Our next question is from Tim James with TD Cowen. Please go ahead.

Thanks very much for taking my call. Good morning. Just one question, Mark, you're highlighting the great growth outlook now for Canadian defense spending doubling, as you've by 02/1932.

CAE already has just a great presence and a lot of very strong contracts in Canada. Can you talk about and maybe it's early, but anything you can say in terms of what that big pickup in defense spending could mean in terms of additional opportunities for CAE and what those might look like, if you have any kind of sense for that at this point?

Well, I can only give directional. And you just look at what I talked about in terms of doubling of the size of expenditure defense budget in Canada over the next few years. I mean, I feel very, very good that that's going to translate into significant growth for CAE. On top of the already very significant level of order intake and actually revenue that we're generating right now from contracts in Canada. And we're I think we will get our what I would say, our disproportionate share because we actually literally are a strategic partner and those are the words strategic partner to the government of Canada as they want to operationalize the acceleration of defense spending in Canada. And when you think about what militaries do when they're not in conflict, hopefully you're never in conflict, but what do you militaries do? Well, basically, they train. They train that's all they do, train, train, train. So obviously, that's what we do. So you can be you could see right off the bat that any capability that they deploy, whether it's new aircraft, which new ship, it's new submarines. All that is going to require very significant and realistic training.

So as Canada's strategic partner, I think we were going to continue to do very well in that market in Canada.

Okay, great. Thank you. Great. Well, I think we'll bring the call to a close. I want to thank all participants for joining us this morning and remind you that a transcript of the call and Q and A will be made available on CAE's website. Thanks very much and a good day to all.

This brings to our close today's conference call. You may disconnect your lines. You for participating and have a pleasant day.