CAE Inc. (NYSE:CAE) Q1 2021 Earnings Conference Call - Final Transcript
Aug 12, 2020 • 01:30 pm ET
Certainly. Thank you. [Operator Instructions] And we'll get to our first question online from Fadi Chamoun with BMO Capital Markets. Go right ahead.
Okay, thank you. Good afternoon.
Just a couple of questions on the cash flow, maybe, Sonya. So if I look at your cash flow from operation before working capital, you've kind of more than covered your capex and development costs this quarter. Can we infer from that, that the Civil Aviation segment was also positive before working capital this quarter?
Thanks, Fadi. So, I think, I'm glad that you highlight this, so, despite the fact that more than half our training facilities were closed or reduced capacity and our Civil manufacturing was closed for more than half the quarter, overall, free cash flow was improved. And as you point out cash from ops, although much less -- or cash from ops before working capital, although much lower than last year, was still positive. So the business, overall, despite the challenges, was cash positive before working capital. And this applies to each of the segments, including our Civil overall and our training networks. So, despite living through one of the most challenging quarters in our history, I think it's a great demonstration of the resiliency and the cash generative model of CAE that our cash from ops was positive in this quarter.
Now, of course, we invested in non-cash working cap. Some of that has seen a bit of slowdown in some payments that we're managing through or with some of our airline customers, but a lot of it was still the impacts of the usual seasonality that we see. So if you take a look at the working capital accounts, a lot of the investment was on accounts payable side and that's really a reflection that we see every year of the higher production levels and activities in Q4, which then flow through in the first quarter, but at lesser revenue and obviously very much exacerbated in this quarter with a -- the fall on the revenue side. So, yes, to your point, overall, the cash from operations before working cap's positive and that's in all segments, including our training business.
Okay. No, it's impressive that you can be cash flow positive before working capital, I guess, in a quarter where utilization are in the low 30%. But do you expect working capital to be kind of neutral, reverts back in the nine months coming? Like how do you kind of think about that for the balance of the year?
Yeah. And to your point, Fadi, so -- I think it's impressive, there's resiliency, but also it reflects a lot of the measures we've put in place on cost containment and levers to preserve cash and so that all contributed to the positive cash position. In terms of working capital -- so the first half usually is -- seasonality will drive some investments and then some reversal in the second half. And especially, I think that