CAE Inc (CAE) Q3 2026 Earnings Call Highlights: Strong Defense Performance Amid Civil Segment …

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Wed, February 18, 2026 at 10:03 AM GMT+9 4 min read

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**Revenue:** $1.25 billion, increased 2% year-over-year.

**Adjusted Segment Operating Income:** $195.8 million, up 3% from $190 million last year.

**Adjusted EPS:** $0.34 compared to $0.29 a year ago.

**Transformation-related Expenses:** $7.3 million, primarily recorded in SG&A.

**Net Finance Expense:** $54.1 million, down from $56.6 million last year.

**Effective Tax Rate:** 21% on a statutory and adjusted basis.

**Net Cash Flow from Operating Activities:** $407.6 million.

**Free Cash Flow:** $411.3 million, above $409.8 million last year.

**Capital Expenditures:** $50.6 million, with approximately 75% invested in growth.

**Net Debt:** Approximately $2.8 billion, with a net debt to adjusted EBITDA of 2.3 times.

**Civil Segment Revenue:** $717.2 million, decreased 5% year-over-year.

**Civil Segment Adjusted Operating Income:** $141.8 million, decreased 6%, margin of 19.8%.

**Training Center Utilization:** 71%, down from 76% in the prior year period.

**Defense Segment Revenue:** $534.9 million, increased 14% year-over-year.

**Defense Segment Adjusted Operating Income:** $54 million, increased 38%, margin of 10.1%.

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Release Date: February 13, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Defense segment outperformed expectations, leading to an increased outlook for this segment.

The company achieved its full-year deleveraging target ahead of schedule, strengthening its balance sheet.

Strong free cash flow generation, with $411.3 million recorded in the quarter, surpassing the previous year's figure.

Successful strategic partnerships, such as with Saab and the Australian Defense Force, highlight CAE Inc (NYSE:CAE)'s strong market position.

The transformation plan is expected to lead to increased earnings, cash flow, and long-term sustainable value creation.

Negative Points

Civil segment experienced a 5% year-over-year revenue decrease due to lower simulator sales and training center utilization.

Training center utilization dropped to 71% from 76% in the prior year, indicating underutilization of assets.

The company incurred $7.3 million in transformation-related expenses, impacting adjusted EPS by approximately $0.02.

Near-term revenue impact is expected due to the transformation plan and rationalization of the commercial simulator network.

The outlook for the civil segment has softened, with a mid-single-digit percentage decline in annual adjusted segment operating income expected.

 






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Q & A Highlights

Q: Can you help us understand the long-term goals for CAE’s civil business, particularly regarding return on invested capital (ROIC) and the impact of retiring 25 simulators? A: Matthew Bromberg, President and CEO, explained that while specific long-term ROIC targets are still being evaluated, the civil market is expected to grow at 4-5% annually. Retiring 25 underperforming simulators could increase utilization by 400 basis points to 75%, though this will take 12-24 months to execute.

Q: Have you started discussions with civil customers about rationalizing the network, and how are they responding? A: Matthew Bromberg confirmed that discussions have begun, and while each requires a tailored approach, initial conversations are positive. The goal is to resize the network to match current demand, acknowledging that it was previously overbuilt.

Q: What is the nature of the non-core assets identified for divestiture, and how will this affect margins? A: Matthew Bromberg stated that the non-core assets, representing about 8% of revenue, are spread across both civil and defense segments. These are good businesses but are better suited for other owners. The divestiture process will be cautious and strategic.

Q: How do you view the current civil aviation market, and are there signs of improvement? A: Matthew Bromberg noted that the current market is softer than expected, particularly on the commercial side. However, CAE is resizing its network to align with current demand and remains confident in the long-term growth trajectory of 4-5% annually.

Q: Can you provide more details on the defense segment’s margin improvement and future expectations? A: Matthew Bromberg attributed the margin improvement to better program execution and cost controls. While some legacy contracts remain, the focus is on signing new, higher-margin contracts. The defense segment is expected to achieve an 8.5% margin this year, with a goal of reaching 10-11% in the future.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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