CAE : Financial Report for FY22

Financial Report

Fiscal year ended

March 31, 2022

At CAE, we exist to make the world safer

At CAE, we equip people in critical roles with the expertise and solutions to create a safer world. As a high-technology company, we digitalize the physical world, deploying simulation training and critical operations support solutions. Above all else, we empower pilots, airlines, defence and security forces, and healthcare practitioners to perform at their best every day and when the stakes are the highest. Around the globe, we're everywhere customers need us to be with more than 13,000 employees in more than 200 sites and training locations in over 35 countries. CAE represents 75 years of industry firsts-the highest- fidelity flight and mission simulators, surgical manikins, and personalized training programs powered by artificial intelligence. We're investing our time and resources into building the next generation of cutting-edge, digitally immersive training and critical operations solutions. Today and tomorrow, we'll make sure our customers are ready for the moments that matter.

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Check out our Annual Activity and Corporate Social Responsibility Report!

Our Annual Activity and Corporate Social Responsibility Report is available online. It consolidates information on our company strategy, fiscal year 2022 performance and corporate social responsibility (CSR) into one document. Integrating our reporting in this way enables us to provide stakeholders with a single source of information in key areas. It also signals that CSR is inseparable from our core business strategy and activities.

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Message from the Chair of the Board

CAE celebrated a milestone 75th anniversary this year, a remarkable longevity distinguished by the organization's noble purpose to make the world a safer place. Through its unique innovative culture, CAE elevates safety standards and outcomes, delivers excellence to customers and continually bolsters its societal impact.

These past three years in particular have highlighted the company's extraordinary agility and entrepreneurial spirit. Despite the lingering effects of the

• - crisis on its core markets, CAE generated increasing levels of revenue and profitability through fiscal 2022, a testament to the bold actions the company took from the onset of the pandemic to today.

he nine accretive ac uisitions made over this period bring transformational new capabilities, scale and technology to drive leading growth and profitability. Further partnerships and initiatives introduced this year broaden the capabilities of CAE's Civil Aviation, efense Security, and ealthcare business units.

CAE solidified its market position with data-driven businesses and established growth opportunities in new markets, including the emerging new sector of Advanced Air obility. An agreement with the overnments of Canada and uebec will enable CAE to invest billion over the ne t five years in innovation to develop its leadership in the technologies of tomorrow.

Environmental Social Governance

Actions taken this year reflect the organization's intent to accelerate its commitment to creating a positive societal impact everywhere CAE operates.

Reflecting the importance of environmental, social and governance (ES )

matters for the	industry, our stakeholders and	our organization,	l ne
. agnon was	appointed Chief Sustainability	fficer and Senior	ice

resident, Stakeholder Engagement. nder her strategic leadership in this newly created position, a dedicated team will develop and deploy the company's ES agenda and coordinate efforts to achieve our ob ectives.

ased on the findings of the environmental, social and governance (ES ) materiality e ercise conducted this year, l ne will oversee the organization's development of a multi-year strategy with precise targets to measure and report on the progress of its initiatives. Additionally, CAE issued a new Supplier Code of Conduct and is developing a framework of leading key performance indicators to recognize suppliers with the best ES performance, further reinforcing ES values across the company's entire value chain.

Board renewal

ur renewal process prioritizes enhancing diversity in the skillset and composition of CAE's Board. It gives me great pleasure to note that,

following CAE's Annual	eneral	eeting and the election of irectors
in August, 3 % of CAE's	oard of	irectors will be women - a goal the

organization set for 2022 completion and achieved through appointments made in recent years. ender parity is formalized in CAE's oard iversity

The Honourable

John Manley, P.C., O.C.

and nclusion olicy and is an ob ective we will continue to pursue beyond achievement of this initial target.

Elise Eberwein and Ayman Antoun are up for oard election as first-time

nominees. Elise has more than 35 years of commercial aviation experience; most recently, she held the position of Executive Vice President, People,

Communications and	ublic Affairs for American Airlines,	nc. Ayman is
eneral	anager,	Americas, which includes Canada, the	.S. and Latin
America.	e is also a member of	's erformance eam, composed of its
top 50 e ecutives worldwide.
n April 2022, we welcomed new	oard member atrick . Shanahan, former

.S. eputy Secretary of efense. atrick brings 30 years of e perience in efense policy, strategy, technology, supply chain and operations that will

strengthen our Board.
After a -year tenure on CAE's		oard, four as Chair,	am stepping down.
Alan . ac	ibbon takes over as the new Chair. Alan has made valuable
contributions since oining the	oard in 20 5 and will continue to do so in
this role.
offer my congratulations to	resident and CE	arc	arent, who was
inducted into Canada's Aviation	all of Fame and named the Living Legends
of Aviation ndustry Leader of the	ear, the organization's top award. also
salute CAE	SA	oard	ember	ac hornberry, a 202	recipient of the
Ronald Reagan	eace	hrough Strength Award.

Closing words

CAE has built an e cellent reputation and long-standing customer relationships based on e perience, strong technical capabilities, a highly trained workforce and global reach.

With the arrival of CAE's 75th anniversary, depart this great organization more confident than ever in its bright future and many more industry firsts to follow.

thank my fellow directors and management for their confidence in me. t has been an honour to lead a oard of this calibre and am e tremely proud of what we have accomplished together.

For the last time as Chair, again a word of thanks to all CAE employees for their commitment to the company's core values and its strategy to ensure continued success going forward.

To our shareholders, thank you for your ongoing support and trust in CAE's ability to generate meaningful economic, social and environmental benefits.

Chair of the Board

For 75 years, everywhere you need us for the moments that matter

CAE proudly celebrates our 75th anniversary this year. Our remarkable company with a noble mission to make the world a safer place, reached this impressive milestone by being bold in action, innovative at heart and advanced in our vision.

Our longevity is built on a legacy of long-standing customer partnerships and unparalleled experience. Our history is distinguished by

industry firsts, with employees whose exceptional passion and agile mindset drive CAE's success and our unique culture.

Today, CAE stands as a leader in our markets and a global partner of choice. We equip people in critical roles with the expertise and solutions to create a safer world using advanced technologies to elevate safety standards, human performance and outcomes. Over recent years and in the current context, never have CAE's contributions been so vital. We enable our customers to perform their complex tasks more efficiently and with a lower carbon footprint. At the very core, CAE's mission is to make the world safer.

In the pandemic, the character of our organization shone through our actions. CAE stepped up during this humanitarian crisis. We pushed the limits on all fronts to make the impossible possible.

We delivered solutions that helped save lives - from securing masks, creating a suite of free simulation training for hospitals and frontline healthcare workers, to designing and manufacturing from scratch the medical-grade,ISO-certified CAE Air1 ventilator.

CAE also led a major, first-time initiative that united businesses and government in a social cause to accelerate COVID-19 vaccination, opening the first-of-its-kind vaccination centre in Quebec at our headquarters. This initiative led to 400,000 doses of vaccines being administered through private companies.

CAE adeptly played offence in a market downturn.

During those turbulent times, we went against the tide and took bold decisions that put CAE in a position of strength. We completed nine accretive acquisitions for some $2.1 billion and deployed over $370 million of growth capital since April 2020.

Marc Parent, C.M.

We used the period of lower business activity during the market downturn to optimize CAE's global footprint, improve operational performance, adapt and enhance customer services, and realize significant annual recurring cost savings. We consolidated our training locations to recalibrate our fixed costs following several years of rapid expansion through greenfield investments, acquisitions and partnerships, and optimized our simulator fleet to put CAE's network in lockstep with our customers - achieving greater global reach and efficiency while also increasing our proximity to our customers.

We expanded competitive strengths and entered exciting new markets by taking advantage of market disruption to add capabilities at attractive valuations. Strategically expanding our business aviation footprint in attractive geographic locations gives us a well-placed global network, while notable wins are expanding our growing pipeline. We established growth opportunities in exciting new markets where our core business of safety and simulation technologies can make a difference, for instance in Advanced Air Mobility and Flight Operations.

CAE emerges from the pandemic poised to achieve new heights. Looking ahead, there is a lot to be optimistic about when we look at the markets we serve.

Civil Aviation

In Civil Aviation, we see pent-up demand for air travel as an important growth in the near-term. Recovery to pre-pandemic levels and beyond continues to be driven in large part by the easing of travel restrictions that remain, particularly in CAE's key Asian markets. This year, IATA forecasts that commercial passenger traffic will be roughly a third below pre-pandemic levels. While there is still a lot of debate around the pace and shape of recovery, we anticipate more demand from airlines engaging with CAE as their partner of choice to secure and train new pilots. These customers have acute needs arising from the challenges associated with restoring and growing flight capacity in a competitive market for pilots and flight crews.

We produce and train more pilots than any other company in the world. This tailwind, the strength of Civil Aviation's training recovery in the Americas, and the sharply higher full-flight simulator order activity this past year, provide a compelling blueprint for the potential of a broader global recovery. In business aviation, we remain bullish on the long-term and we believe the market is experiencing a structural expansion, as evidenced by the record 3.3 million flights worldwide in 2021.

President and Chief Executive Officer

And with our recent acquisition of AirCentre, our new digital ecosystem opens access to an even larger portion of the Civil Aviation market we already address. We are providing software and digital technologies to airlines and business jet operators to optimize flight plans, digitize and optimize crew, and help manage airport and airline operations. These services offer multiple benefits, including enabling our customers to lower their fuel consumption and carbon emissions.

In Civil Aviation, we are therefore incredibly well positioned, and we have unbelievable potential for both cyclical and secular growth in this market as recovery ensues. Plus, we are going to start this upcycle at already record margins, with plenty of room to grow.

Defense & Security

In Defense & Security, CAE is on a multi-year journey to becoming a bigger player with expanded capabilities to capture larger multi- domain opportunities.

Our record order intake this past year gives me the confidence that we are indeed on that path. Furthermore, our record level of Defense bids and proposals is the result of bidding more and bidding on larger opportunities. With our increased capabilities across all five domains (air, land, sea, space and cyber), and the critical mass that our transformed Defense business now possesses, there are no programs in our addressable market that are too large or too complex for CAE to bid on with a high probability of success. Defense is now closely aligned with our customers' utmost priorities, which at their foundation, are about defending freedom in the face of near-peer threats.

Relative to our 75-year history, CAE's journey in supporting defence forces has its genesis in one of Canada's major contributions to Allied victory in World War II, the British Commonwealth Aircrew Training Program (BCATP). Our Defense & Security business continues to support that noble purpose with pride.

While we could not have known how or when such geopolitical threats would manifest, they have, once again. We are extremely proud of CAE's role in helping prepare NATO and Allied nations to defend peace and freedom. In the last two years, Defense has established a position as the world's leading platform-agnostic, global training and simulation pure play defence business.

Recent events in Europe are a stark reminder that allied nations must be ready to defend freedom at a moment's notice. We expect the prioritization on defence readiness as a strategic deterrent to translate into additional opportunities for CAE in the years ahead. We also expect continued strong momentum with the integration of L3Harris Technologies' Military Training business.

Together with digital ecosystem partners, CAE is developing complex simulation and visualization technologies to create virtual and synthetic environments that combine data and digital technologies to accelerate and enhance decision-making for governments and businesses into more complex multi-domain battle spaces. A few headwinds still exist for the international defence business in terms of travel restrictions, but we view them as temporary and we look forward to continued growth in the years ahead.

Healthcare

In Healthcare, the long-term potential is increasingly evident for this business to become a more material and profitable part of CAE.

We are seeing a market that values the capabilities of CAE's simulation-based training solutions more than ever, coupled with a global nursing shortage requiring new approaches to healthcare training and education.

Our acquisition of Medicor Lab brings greater capabilities and realism to our patient simulators, while our training simulation solutions are leading to higher levels of learner proficiency through 3D/4D immersive AR/VR simulation and AI integration.

Technology and Innovation

On the technology front, we have consistently evolved to stay ahead of the curve and leverage where technology is going to expand our leadership position.

And we will continue to do more. This year, we confirmed agreements with the Governments of Canada and Quebec that will enable CAE to invest $1 billion over the next five years. These investments will position CAE as a leader in the technologies of tomorrow in our three business segments.

For example, we have invested aggressively to turn simulators into IoT-enabled, data and AI-driven devices that objectively push pilot proficiency to the highest possible standard. We are already doing this today, but we are still at the front end of a powerful revolution in this regard. We are layering onto that effort investments in biometrics to get at the heart of human performance in the context of training, giving us information about pilots that may not otherwise be perceptible externally.

We are developing simulation technologies of the future with VR and mixed reality that offer groundbreaking training solutions in terms of cost and training efficacy - not just for pilots, but for maintenance technicians, healthcare professionals and more. We are integrating disparate systems and applications that aircraft operators use daily to drive efficiencies and network effects across amazingly complex systems. We are creating digital twins for numerous uses, such as virtual training and large-scale coordination, to either serve as preparedness enablers for near-peer threats of the future or address airspace challenges on the global horizon.

To further reduce our carbon footprint, in line with our carbon neutrality, CAE will develop an electric aircraft for our training academies. Such aircraft will also support the decarbonization effort of our customers and reduce noise disturbance for the neighbouring communities. I am very proud of this initiative, which leverages our organization's skills in innovation while enhancing our social and environmental impact.

This is an exciting time for us, one where there is no shortage of amazing technology to invest in and leverage.