CAE Inc (CAE) Q4 2021 Earnings Call Transcript

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CAE Inc (CAE 0.16%)
Q4 2021 Earnings Call
May 19, 2021, 1:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, welcome to the CAE Fourth Quarter Conference Call. Please be advised that this call is being recorded.

I would now like to turn the meeting over to Mr. Andrew Arnovitz. Please go ahead.

Andrew Arnovitz -- Senior Vice President, Strategy & Investor Relations

Thank you. Good afternoon, everyone, and thank you for joining us today. Before we begin, I would like to remind you that today's remarks, including management's outlook for FY '22 and answers to questions contain forward-looking statements. These forward-looking statements represent our expectations as of today, May 19, 2021 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 and 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&A available on our corporate website, and in our filings with the Canadian Securities Administrators on SEDAR and the US Securities and Exchange Commission on EDGAR.

On the call with me this afternoon are Marc Parent, CAE's President and Chief Executive Officer; and Sonya Branco, our Chief Financial Officer. After remarks from Marc and Sonya, we'll take questions from financial analysts and institutional investors. Following the conclusion of that Q&A period, we will open the call to questions from members of the media.

Let me now turn the call over to Marc.

Marc Parent -- President and Chief Executive Officer

Thank you, Andrew, and good afternoon to everyone joining us on the call. Before getting into our results, I'll first share some of my reflections on how we've been managing through the maelstrom of COVID-19 and where I believe CAE is now situated some 14 months later. Sonya will provide details about our financial performance, and a restructuring program that we've have under way. And then I'll come back at the end of the presentation to comment on our outlook.

Looking back on the fiscal year, CAE demonstrated tremendous metal and resiliency in confronting the challenges of COVID-19 in highly innovative ways and without ever skipping a beat, in terms of the critical support that we provide to customers worldwide. At the same time, as we rapidly learn to adapt to a new normal we leaned in and fundamentally strengthened the Company for the future. We took extraordinary steps to protect CAE, our employees and our customers. And I'm extremely proud of our performance and the nobility in which all of us at CAE rose up under such exceptional circumstances.

We also secured our future by harnessing our One CAE culture, and seized on several strategic growth opportunities drawn from expanded pipeline. We made important progress through the year to significantly enhance CAE's position for future growth. The added financial flexibility from our capital raises has enabled a succession of five highly strategic acquisitions that we announced over the course of the last six months. We expanded our ability to address the civil training market by acquiring flight simulation company in Europe, and TRU Simulation and Training Canada in North America. And we accelerated our expansion as a software-enabled civil aviation services with our acquisition of Merlot and RB Group. The latter two helped us solidify our industrial technology leadership and further expand our already large addressable market. We also announced a major opportunity in defense with our definitive agreement to acquire L3Harris' Military Training business, which will significantly accelerate our defense growth strategy and align us more closely with national defense priorities. We expect to close the acquisition in the second half of the calendar year.

Over the course of the year, we also accomplished a lot organically and internally to strengthen our position. We launched new digitally enabled products and business processes, put a comprehensive program in place to structurally lower our cost base, and we bolstered key talent. The combination of these recent initiatives gives us greater potential than ever before higher growth and profitability in the years ahead.

Turning to the results. Up against the sharp challenges of COVID-19, I'm especially pleased with what we've been able to deliver in the fiscal year. In the face of the biggest-ever shock in the history of civil aviation and major disruptions across the defense and healthcare markets, CEA was rebounded to quarterly profitability and positive free cash flow after only our first quarter, when the brunt of the pandemic hit us. We believed early on that the year was going to be characterized as a tale of two halves. And the second half was indeed stronger, and the positive momentum of our recovery has continued throughout the year and into this latest fourth quarter.

On a consolidated basis, we generated CAD0.22 absolute earnings per share in the quarter and CAD0.47 adjusted EPS for the year. Order intake was CAD928 million for the quarter and CAD2.7 billion for the year, giving us a solid backlog of CAD8.2 billion. This, to me is strikingly positive one, considering that global air travel dropped by approximately 90% at the peak of the crisis, and hundreds of millions of dollars in expected defense contracts slipped into next year or beyond. With the measures that we implemented and the resiliency inherent to our business, we also generated strong annual free cash flow of CAD347 million. This, in and of itself, makes an important statement about CAE as a sustainable growth company. In addition to the positive investment attributes, including secular tailwinds and a cash generative profile, CAE has also proven once again to be a safe port in a storm.

Now turning to some of the segment highlights. In civil, average training center utilization continued to edge higher, reaching 55% in the fourth quarter, and we saw sequentially higher adjusted segment operating income margins. We delivered 14 full-flight simulators in the quarter. And despite market and logistical challenges, we delivered 36 full-flight simulators for the year in the civil business. We also continued to win new orders, with CAD386 million booked in the quarter, and annual orders totaling CAD1.3 billion, including comprehensive long-term training agreements with airlines, cargo operators and business jet operators worldwide, and 11 full-flight simulator sales for the year. Civil finished this year with a backlog of CAD4.3 billion.

In defense, orders of CAD370 million in the quarter gave us a book-to-sales ratio above 1.1 for the first time in the last five quarters. And even with significant expected orders moving out of the fiscal year, defense order bookings reached CAD1.1 billion, for a CAD3.9 billion defense backlog. Despite having to condemn with COVID-19 headwinds in defense, especially in international markets, we stabilized the business and made excellent progress to position it for future profitable growth. During the year, we secured all of our foundational recompetes, and we won significant new competitions in our core markets and expanded our position in digital immersion, operational support, and security.

CAE's mission is to lead at the frontier of digital immersion with high-tech training and operational support solutions to make the world a safer place. And a prime example of that is how we're positioning defense for the future and bringing our mission to fruition is -- an example of that being our recent win of a flagship program in the United States, called the United States Special Operations Command, or USSOCOM, to lead the integration and architecture development efforts for the Special Operations Forces' Global Situational Awareness initiative. I really want to underscore the significance of two defense of our fiscal '21 wins and, in particular, this USSOCOM program, and I'll comment more on them in my outlook.

Turning finally to healthcare, we completed deliveries of a CAE Air1 ventilators during the quarter, and we reached record level of quarterly revenue even before the contribution from ventilators. Our ventilator initiative was an important humanitarian effort that has the added benefits of generating incremental cash flow and providing employment during a time of crisis. And the speed and effectiveness, which we developed and delivered the CAE Air1 is a testament to the unique combination of CAE's agility, our deep subject matter expertise in healthcare, and the vast industrial and technological capabilities of the Company.

During the year, healthcare continued to bolster its position as the innovation leader in simulation-based healthcare, education and training through the launch of new AI-enhanced training tools and digital management solutions in support of our customers' training needs during the COVID-19 pandemic. We also launched CAE SimEquip, simulated medical equipment, and we continue to develop transformative digital training solutions for OEMs and leading medical device companies, including Edwards Lifesciences and Cordis, a Cardinal Health company.

With that, I will now turn the call over to Sonya, who will provide a detailed look at our financial performance. And I'll return at the end of the call to comment on our outlook. Sonya?

Sonya Branco -- - Executive Vice President, Finance & Chief Financial Officer

Thank you, Marc, and good afternoon, everyone. We continue to see good sequential performance improvements in the fourth quarter. Consolidated revenue of CAD894.3 million was up 7% compared to the third quarter, and is 8% lower compared to the fourth quarter of last year. Adjusted segment operating income was CAD106.2 million, compared to CAD97.2 million in Q3 and CAD193.9 million last year. Quarterly adjusted net income was CAD63.2 million, or $0.22 per share, compared to CAD0.23 in Q3 and CAD0.46 in the fourth quarter last year.

For the year, consolidated revenue was down 18% to CAD3 billion, and adjusted segment operating income was down 52% to CAD280.6 million. Annual adjusted net income was CAD127.1 million, or CAD0.47 per share, which was down 65% compared to CAD1.34 last year. Our disclosure this quarter provides the impact of the Canadian Emergency Wage Subsidy, and other COVID-19 government support programs. We have highlighted the impact on some key metrics.

During the period, we carried higher employee costs than we would otherwise have been carrying as amounts received from the COVID-19 government support programs either flowed through directly to employees according to the objective of the subsidy programs, and the way they were designed in certain countries, or the amounts were offset by the increased costs we incurred in revoking some of our initial cost saving measures, including eliminating salary reductions and bringing back employees who were previously placed on furloughs or reduced work weeks. As such, we have been operating with higher expenses than we would have in the absence of CEWS, and so the impacts of the government support programs are almost entirely neutralized.

Our global training operations are especially cash generative in nature. Net cash provided by operating activities was CAD174.6 million for the quarter, compared to CAD246.3 million in the fourth quarter last year. And for the year, we generated CAD366.6 million from operating activities, compared to CAD545.1 million last year. We had a strong free cash flow in the quarter of CAD170.6 million, and CAD346.8 million for the year, which compares to CAD351.2 million last year. We continue to target an average conversion of net income to free cash flow of 100%.

Uses of cash involved funding, capital expenditures for CAD50.5 million in the fourth quarter, and CAD107.6 million for the year, in line with our outlook of total capex of approximately CAD100 million for the year. Our growth capex is directly linked to our opportunities to invest incremental capital with attractive returns and free cash flow. With our current view of attractive market-led expansion investment opportunities, we expect total capital expenditures to more than double in fiscal year 2022 versus the prior year.

Income tax recovery this quarter was CAD3.2 million, representing a negative effective tax rate of 21%, compared to an effective tax rate of 25% for the fourth quarter of fiscal 2020. Tax rate was low because of the restructuring costs we incurred this quarter. Excluding the effect of these elements, the income tax rate would have been 16% this quarter, and 19% for the year.

Net debt was CAD1.4 billion at the end of March for a net debt to total capital ratio of 30.7%. This compares to CAD2.4 billion or 47.8% of total capital at the end of last year. Net debt to adjusted EBITDA was 2.38 times at the end of the quarter. All told, between cash and available credit, we have approximately CAD2.7 billion of available liquidity. CAE's liquidity was further enhanced with the completion in March of the marketed cross border public offering of common shares for gross proceeds of CAD358.5 million. As at March 31, 2021, we had a higher cash balance on hand from our recent equity issuances and these proceeds will be used to fund the proposed L3Harris' Military Training business acquisition, and other potential growth investments in our pipeline.

On the restructuring funds, we are continuing to make good progress. The program is enabling CAE to best serve the market by optimizing our global asset base and footprint, adapting our global workforce and adjusting our business to correspond with the expected level of demand and structural efficiencies that we'll be enduring. While maintaining our presence in all markets, we've made excellent progress consolidating our global footprint for greater efficiency, and to better serve our customers. In the UK, we have consolidated five locations into three, in Europe, we are in the process of consolidating 17 training locations into 13, in addition to optimizing certain remaining locations. And in South America, we are moving from six locations to four locations.

We began executing our restructuring program in the second quarter. And as at the end of March, we have incurred a total of CAD124.0 million of restructuring, integration and acquisition expenses for the entire year. In fiscal year '22, we expect to incur approximately CAD50 million in additional restructuring expenses related to this approximate CAD170 million program. We continue to expect to realize significant annual recurring cost savings, wrapping up to a run rate of approximately CAD65 million to CAD70 million by the end of the new fiscal year.

Now, turning to our segment performance. In civil, fourth quarter revenue was down 6% compared to the preceding quarter, and down 36% year-over-year to CAD388.2 million. I would note that revenue is generally not the most representative metric for civil, given that there is no recognition of our share of revenue from the large number of joint ventures that we operate around the world. And in fact, part of the utilization increase that we saw in the quarter was the result of stronger performance in regions where we operate under joint ventures. Civil performance is better, represented by adjusted segment operating income, which is up 7% sequentially and down 57% year-over-year to CAD66.6 million, for a margin of 17.2%. For the year, civil revenue was down 35% to CAD1.4 billion, and adjusted segment operating income was down 66% to CAD164.3 million, for an annual margin of 11.6%. The civil book-to-sales ratio for the quarter was 0.99 times, and for the year is 0.89 times.

In defense, fourth quarter revenue of CAD334.4 million was up 12% compared to the preceding quarter, and down 2% over Q4 last year. And adjusted segment operating income was up 4% over the preceding third quarter, and down 42% over last year to CAD23.2 million, for an operating margin of 6.9%. For the year, defense revenue was down 9% to CAD1.2 billion, and adjusted segment operating income was down 24% to CAD87 million, representing a margin of 7.1%. The defense book-to-sales ratio for the quarter was 1.11 times, and for the year was 0.91 times.

And in healthcare, fourth quarter revenue was CAD171.7 million, up 42% from the preceding quarter, and 411% from CAD33.6 million in Q4 last year. Adjusted segment operating income was CAD16.4 million in the quarter, compared to CAD12.9 million in the preceding quarter, and CAD100,000 in Q4 last year. For the year, healthcare revenue was CAD351.9 million, up from CAD124.5 million and adjusted segment operating income was CAD29.3 million, representing an increase of CAD32.8 million, compared to segment operating loss of CAD3.5 million last year. For comparative purposes, the CAE Air1 ventilators contract with the Canadian government contributed CAD130 million to the fourth quarter revenue, and CAD230.6 million for the year.

With that, I will ask Marc to discuss the way forward.

Marc Parent -- President and Chief Executive Officer

Thanks, Sonya. As we look to the period ahead, I'm highly encouraged by all that we've done to reinforce CAE's base over the last year, and to expand our horizons for long-term sustainable growth. True to our vision to be the partner of choice, we exercised great agility and collaboration as One CAE to quickly and effectively protect our employees and our customers, which has engendered even greater loyalty and engagement.

And like few other companies throughout the turmoil, we executed a series of five highly strategic acquisitions. We raised equity, and fundamentally repositioned the Company for the future, while at the same time launching new products, investing into new growth adjacencies, and structurally lowering our cost structure. CAE is indeed a unique company with a highly talented team, and a shared culture of innovation. I expect that we'll continue to make important strides to enhance CAE's position for future growth. We're focused on the successful integration of our four civil acquisitions, and our closing acquisition of the L3Harris Military Training business. We look forward to realizing the very significant potential of the combined businesses to better serve the needs of our customers. And at the same time, we've ensured that we continue to have the financial flexibility and the bandwidth to cultivate a large pipeline of sustainable growth opportunities, including the deployment of expansion capital in highly accretive and sustainable areas like, training and to expand our reach and strengthen our position as an industrial technology leader.

We're leaning in and focusing on the long-term, bolstering our standing as the global market leader in our field through the application of advanced technologies and by expanding the aperture of our market reach. And we'll continue to invest and seize capabilities to revolutionize our customers' training and critical operations, and increase market share with digitally immersive solutions.

In the short term, we continue to expect to trend positively, and there is little doubt that with all that we've done in recent months internally and externally to enhance our position, we'll see strong growth for CAE in the fiscal year 2022. The exact slope of CAE's recovery, the pre-pandemic levels and beyond is dependent on the timing and the rate at which travel restrictions and quarantines can be safely lifted and normal activities resume in our end markets. The global rollout of vaccine to combat COVID-19 is highly encouraging, and I believe that the summer months will be very telling. This is especially the case, obviously, for civil where we believe that there is considerable pent-up demand for air travel. And we're already seeing this manifest in regions like the United States, where domestic air travel is ramping up strongly.

We're also highly encouraged by its prospects for renewed growth and profitability in defense, the extent of which is in the current fiscal year will depend on among other initiatives, the potential and timing of closing of the L3Harris Military Training business acquisition. Taking all of those variables into account, we expect to have greater clarity and be in a position to provide a more precise growth outlook for fiscal year 2022 when we report our first quarter results in August.

And as we look further out, I'm more confident than ever before in CAE's future. Our strategy and positioning are very well aligned with a post-COVID-19 business and geopolitical landscape, with expected secular trends favorable for all three of our business segments. Greater willingness to outsource training by airlines, higher expected pilot demand and strong growth in business jet travel are enduring positives for the civil business. The paradigm shift from asymmetric to near-peer threats and recognition of the sharply increased need for digitally immersion-based, synthetic solutions in national defense are tailwinds that favor CAE's defense business. And healthcare is poised to leverage opportunities presented by a growing awareness and appreciation of simulation and training to make healthcare safer.

If we look specifically at civil, we continue to see training demand preceding the return to air travel as airline capacity and the associated crews are prepared to reenter service. Domestic air travel is coming back faster, especially in the regions with a more advanced ramp-up of vaccinations, while cross-border and transcontinental operations are lagging as they're more tied to the easing of travel restrictions. In the United States, we currently have request and indications that pilot hiring will resume in the next couple of quarters, and we are already hiring instructors in support of our regional aircraft customers.

We expect to continue expanding our market share and securing new customer partnerships, drawn from a large pipeline of airline prospects. We've made very good progress in last year having signed exclusive training agreement for a supplemental training capacity on narrow-body aircraft with six customers, including major airlines in the Americas and aircraft OEMs as well, which is often an initial step toward a more comprehensive outsourcing. We've also signed exclusive training agreements with six new start-up airlines that have elected to bypass the in-source training model altogether.

Our growth in commercial aviation training in fiscal year 2022 will come from these new partnerships, additional partnerships that we expect to conclude from our pipeline, and of course, the general improvement in flight activities, involving existing customers as restrictions ease. We also expect to see the benefits of the lower structural cost base that we've achieved as a recurring -- as the recurring savings ramp up toward the end of the year.

In business aviation training, flying activity has recovered much faster than commercial. And with levels of demand in the United States nearly back to 2019 levels, this bodes very well for training demand in this highly important segment of the civil training market. Civil full-flight simulator sales are driven by new aircraft deliveries. And while the total market remains small at present, we expect to maintain our leading share of available full-flight simulator sales. We still have the benefit of a large backlog of customer-funded full-flight simulator orders, and we expect to substantially deliver this backlog over the next couple of years, including upwards of 30 in fiscal year 2022.

Over the last couple of years, we've been steadily unifying the digital flight operations ecosystem with the goal of delivering a holistic suite of solutions, designed to improve operations and enhance the crew experience, while further increasing our large addressable market in civil. Our vision began in 2018 with the acquisition of Pelesys, an aviation training courseware developer and publisher with one of the most comprehensive training and compliance systems in the industry, and we expanded on this vision with the launch of CAE Rise, our predictive management and training visibility system. And in the period ahead, we're going to continue to expand our reach beyond pilot training solutions into the rapidly growing market for digitally enabled crew optimization services. The acquisitions of Merlot and RB Group are building blocks that allow CAE to provide an end-to-end offering of crew performance software that extends from training through optimized crew operations, and is unique in the industry.

We're also positioning in the Advanced Air Mobility market, which we believe will become another secular driver for pilot training and demand for CAE's expertise in modeling and simulation. Last week, we announced that CAE has been selected by Jaunt Air Mobility to lead the design and development of the Jaunt Aircraft Systems Integration Lab for the company's new all electrical -- all-electric vertical take-off and landing aircraft, the Journey aircraft. By leveraging CAE's extensive experience in high-fidelity simulation, we will work hand-in-hand with Jaunt to bring best-in-class simulation and modeling to the aircraft development program from the inception of this program.

In defense, at the same time as we stabilized the defense business in FY '21, we positioned business for future profitable growth. And I'm encouraged by our new competitive wins and large pipeline of programs that specifically call upon CAE's expertise in the synthetic domain. Importantly, as I introduced in my opening comments, defense won all its foundational recompetes, including the US Air Force KC-135 Aircrew Training Systems contract, which also in this contract adds training support services for the Air National Guard boom operator simulation systems. We also secured the critical follow-on for US Navy T-44C Instructional Services. These wins underscore the strength of our recurring base of core programs in defense. And new fiscal '21 competitive wins in our core market add to that base, including United States Army Advanced Helicopter Flight Training Services, and France/Germany C-130J training solutions.

We also signed agreements with Boeing to provide P-8A training support services for the United Kingdom Royal Air Force, and with General Atomics to continue the development of a comprehensive synthetic training system for the UK Protector remotely piloted aircraft program. The Protector is General Atomics' first major MQ-9B sale, their next-generation platform, which is expected to sell hundreds worldwide with CAE providing its training support. We also expanded our position in the security market with an agreement for United States Customs and Border Protection aircraft pilot training services, and we added to our customer base at our Alabama-based Dothan Training Center with the provision of training to the Irish Air Corps.

Defense also expanded its position in digital immersion with notable wins including, the United States Air Force Advanced Battle Management System, and the UK Single Synthetic Environment. The announcement earlier this week of our selection by the United States Special Operations Command for the SOF Global Situational Awareness initiative is strategically noteworthy. After a highly competitive process beginning with over 100 companies, including some of the largest defense OEMs and Silicon Valley entrants, CAE was awarded a $135 million contract to deliver the scalable next-generation Mission Command System that unifies the Special Operations Forces enterprise through the creation of an integrated common operational picture. Called the Mission Command System Common Operational Picture or MCS/COP, this system will deliver enhanced global situational awareness to the US Special Operators around the globe.

CAE's digital ecosystem solution leverages our world-class modeling and simulation expertise beyond training by integrating data analytics, artificial intelligence and digital immersion technologies into a synthetic environment to create a powerful tool for analysis, planning, and decision support. This technology is a critical enabler for United States and allied forces to successfully train and operate across all five battlespace domains, a mandate that's laid out in the US National Defense Strategy.

Our priorities in defense are focused on the long-term and investing in our leading position as a training and mission support partner with leading-edge capabilities in digital immersion. We are also enhancing our position by laying the groundwork to strategically team with major OEMs on next-generation platforms. And with our expertise in the integration of live, virtual and constructive training, along with capabilities to address mission and operations support, we believe that we'll make significant inroads into the broader defense market in the years ahead. Defense is well positioned to capture business around the world, accelerated with the expanded capability and customer set following the expected close of the L3Harris Military Training acquisition.

And lastly in healthcare, we're capitalizing on the greater market appreciation of the benefits of healthcare simulation and training to improve safety and to help save lives. I continue to be encouraged by what our new team has been able to do and I look forward to gaining sustainable scale with our innovative solutions to make healthcare safer. Healthcare has been and continues to be an important dimension of CAE's social profile, and CAE has recently spearheaded the Industry for Vaccination coalition by gathering support from companies and their CEOs across Canada. The goal of the coalition was to accelerate mass vaccination through the private sector at no cost to governments to restart the economy as soon as possible.

CAE converted 12,000 square feet of conference rooms into a world-class operational vaccination center, which opened on April 26. In addition to the critical role it serves in the ramp up of vaccinations in Quebec, it's really a great example of CAE's corporate citizenship and a source of great pride for all of us at CAE.

In summary, a year and two months after the pandemic began, the investment thesis for CAE is more compelling than ever. And I strongly believe that we'll achieve new heights in growth and profitability in the years ahead, as we bring to fruition our recent acquisitions, our new digital products and our expansion investments, our bolstered leadership, and our operational efficiencies.

And with that, I thank you for your attention. We're now ready to answer your questions.

Andrew Arnovitz -- Senior Vice President, Strategy & Investor Relations

Thank you, Marc. Operator, we will now open the lines for the members of the financial community.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question comes from Fadi Chamoun of BMO. Please go ahead.

Fadi Chamoun -- BMO -- Analyst

Okay, thank you. Good afternoon, everyone.

Marc Parent -- President and Chief Executive Officer

Hi, good afternoon.

Fadi Chamoun -- BMO -- Analyst

A couple of questions. First on the capex, you're indicating more than doubling versus CAD100 million. First, can you kind of give us framework like, is this something based on what you have in the pipeline? If you can narrow down that kind of guidance a little bit, is it something in like CAD200 million to CAD250 million? And more importantly, where are you seeing these opportunities to deploy more capital? I mean, looking at your utilization rate, which is more of a consolidated number, it looks like a lot of room to grow into, but I'm just curious where these opportunities to grow are showing up?

Marc Parent -- President and Chief Executive Officer

If you don't mind, some of that are going to be a bit circumspect because of competitive reasons. But I think broadly, where we feel confident in that capex number is because we're seeing the opportunities that we've had with conversations with customers, both on commercial and business aircraft, where we can deploy asset simulators, either to, if you like, I talked about overflow agreements on commercial aircraft. So you might not have seen a complete outsourcing, but you've seen a lot -- what we've seen, though, is we've secured, as I said in the remarks, a number of agreements with airlines that we -- if we deploy the capital, we can basically get overflow agreements that can be converted to a long-term training contracts, especially on narrow-body aircraft. At the same time, in business aviation, we see quite an attractive opportunity in a number of locations to deploy business aviation assets. And of course, both of those generate some of the best returns. This growth capex that is 20%, 30% incremental return on capital employed after a very short amount of time. So we'll invest in those every day of the week. Sonya, do you want to add something?

Sonya Branco -- - Executive Vice President, Finance & Chief Financial Officer

[Speech Overlap] I'd just add -- so in the review -- in the continual review of our capacity, we absolutely redeploy assets if -- first and foremost, before issuing new capex. But opportunities like Marc mentioned, they vary by platforms, right. So the overall utilization metrics is probably not the best. And so we're -- we see demand in our pipeline and secured, like Marc said, it drives nicely accretive returns, 23% range within the first two years of deployment. So essentially, that leads us to the guidance, which essentially will set at about more than double this year's capex.

Fadi Chamoun -- BMO -- Analyst

Okay. My second question is on the restructuring and the cost savings associated with it. How much of the savings have you realized in '21? And I'm just curious kind of if you have a way for us to think about how those savings play out into 2022. You're saying that by the end of the year, the exit rate would be CAD65 million to CAD70 million of cost savings. So what would you expect in terms of contribution for the year overall from those cost savings?

Sonya Branco -- - Executive Vice President, Finance & Chief Financial Officer

Yeah. So as we said, it's going to ramp up during the year. We started to see some savings, but I think it's really going to start kicking in, in FY '22, and ramping up to, like you said, around CAD65 million to CAD70 million by the end of the year. So this will be more back-ended into the second half. And we're really kind of progressing quite well. As I mentioned in my remarks, we're essentially completed in the UK going from five training centers to three, and closed out some centers and so on. So that savings that will kick in as of now and so on, some elements in Europe still under way in South America. But essentially, what we'll see is a ramp-up quarter-to-quarter with a heavier ponderance in second half as we kind of finalize some of these and reaching about CAD65 million to CAD70 million by the end of the year.

Fadi Chamoun -- BMO -- Analyst

Okay. Thank you.

Operator

Thank you. The next question comes from Konark Gupta of Scotia Capital. Please go ahead.

Konark Gupta -- Scotia Capital -- Analyst

Good afternoon, and thanks for taking my question. So maybe the first one on civil. I wanted to ask you, the revenue and SOI, excluding government support, were softer than what you saw in Q3 despite utilization rate and simulator deliveries increasing sequentially. I guess, joint venture accounting obviously creates some noise here. But can you share any color on SOI decline sequentially, including perhaps any impact of asset relocation as you restructure, or any kind of revenue mix on simulators, pricing as well as product services mix? Thank you.

Marc Parent -- President and Chief Executive Officer

I can start it off. I think, revenue is never a perfect metric in the civil business, or actually in all of our business, but it's certainly in a quarter. But I think you're seeing -- what you're seeing, part of this in terms of the sequential revenue story, it's a nuance in our business that nearly 50% of our business they are accounted as JVs, which doesn't show up on revenue. So the majority of the JVs that we have, happen to be outside of the Americas. And that's what we've seen in this quarter relative to previously is where we've seen the biggest sequential pickup in trends. So again, you're not seeing that revenue pickup, you're seeing it in SOI, but you're not seeing it. So that's one [Indecipherable] there. At the same time, as Sonya talked about all of the moves that we're making in terms of achieving a restructuring benefits, a lot of that involves in moving simulators around. And we're taking advantage of the period that we're in, where obviously, training is at lower levels than it would be in a steady state. So we're taking that opportunity to move those simulators around. So you're not going to see any revenue from those at the same time. And frankly, and there is mix as well. There's mix. There always is, but there's mix in this quarter. But you want to add anything to it, Sonya?

Sonya Branco -- - Executive Vice President, Finance & Chief Financial Officer

Yes. So to speak to the utilization, it did climb from 50% to 55%, and we saw some improvement in the Americas. But a lot of the progression was in certain regions, where we do have more joint ventures, like the Middle East, right. So what that did is, contributed to the SOI growth. And just to kind of correct you or clarify, there was sequential SOI growth of 7% quarter-over-quarter. And that's why we usually indicated this as the best metric on the civil side, because it captures everything. So that increase in joint ventures translated in quarterly pickup in SOI. And that's also one of the elements that's driving the margin improvement. On the revenue side, like Marc mentioned, a bit of disturbance because we do have -- we did take the opportunity and the advantage to relocate several -- a lot of these simulators so that we can finalize certain regions like the UK and so on and progress on the savings. And so that disturbed revenue for a bit. But ultimately, we saw the contributions flow through on SOI with that sequential increase to CAD66 million from CAD62 million. And on the margin, that joint venture was a bit of a driver because it has the SOI without the revenue. And also on the product side, we did have a good margin mix on the deliveries that we had in the quarter.

Konark Gupta -- Scotia Capital -- Analyst

Thank you. I was actually referring to the SOI decline, excluding the government support programs. But I guess, as you pointed out before on the call, there's also kind of costs associated with the COVID, right? So that might make sense.

Sonya Branco -- - Executive Vice President, Finance & Chief Financial Officer

Yeah. So on that front, Konark, just -- I guess it's a new element. It's not necessarily new. We've been disclosing the government support program since the beginning of the fiscal year. The update this quarter is, that we've added new non-GAAP measures to kind of reflect the impact, I guess, to give it more visibility and to incorporate some new reporting guidances and so on. But what we look at, is the adjusted SOI, because this metric, sort of shows the contribution benefit, but doesn't show the adjustments of the heightened operating costs that we've incurred, which is essentially neutralizing all the government programs. So we should look at it on the adjusted SOI basis, and on that basis, it grew quarter-over-quarter.

Marc Parent -- President and Chief Executive Officer

Right. Let me just pile on that, because I know there's sort of a confusion there. I think it's a very important quarter, that when we look at the profitability of the civil business, with all the noise that is there, the number that we use to manage the business is at 17.2% adjusted SOI margin. And that's up versus 50 -- it was 50% in Q3. That's really what we're looking at to manage the business and going forward, there will be less of this noise, because CEWS just won't be there. So I think -- I mean, you can use that as a benchmark to measure our progress going forward.

Konark Gupta -- Scotia Capital -- Analyst

That makes perfect sense. Thank you for clarifying. And my second question is on free cash flow. So I think the commentary you made and the disclosures of free cash flow conversion continues to be 100% almost on net income this year. Now, conversion was obviously significantly higher last year, because the capex was down. But how should we think about your free cash flow generation ability this year compared to pre-pandemic levels? And if you can comment on the capex to Fadi's question, how much should we expect for growth capex versus maintenance capex in your guidance?

Sonya Branco -- - Executive Vice President, Finance & Chief Financial Officer

Yes. For the total capex, I think we'll stick to the guidance that we provided, that overall, it will be more than double this year's in total and I think you can use past trends to kind of split out maintenance and capex. I think those will hold true. In terms of free cash flow, I think in this very tumultuous year, we've really demonstrated how cash generative this business is, even at very low levels of activity. And so ultimately, we've always targeted in the past, 100% conversion of free cash flow, and we'll do so again for FY '22.

Konark Gupta -- Scotia Capital -- Analyst

That's all my questions. Thank you.

Operator

Thank you. The next question comes from Noah Poponak of Goldman Sachs. Please go ahead.

Noah Poponak -- Goldman Sachs -- Analyst

Hi, good afternoon everyone.

Marc Parent -- President and Chief Executive Officer

Good afternoon. Hi.

Noah Poponak -- Goldman Sachs -- Analyst

Just to make sure I have the new -- or additional disclosure around the margins correct. Marc, would you expect the Civil segment margin, the 17.2% you were just referring to, would you expect to see continued sequential improvement from here, from that level, even as the government support programs roll out?

Marc Parent -- President and Chief Executive Officer

I think on this SOI level, definitely, we would expect continued growth in that number just because we're going to throw -- we're going to be throwing more revenue as quasi fixed assets. The only thing I'll say there is, you've got to watch -- I mean, we're in a funny kind of market, obviously, because of COVID, but typically, what you would see in the summer months, as you see, where airlines are flying more, they are not training as much, we see seasonal effect. That will probably be less pronounced this year. But on a run rate basis, definitely, as your volume increases in the next few quarters, you're going to see SOI pickup from the volume of activity for the restructuring activities that we put forward. So there's no doubt about that.

Sonya Branco -- - Executive Vice President, Finance & Chief Financial Officer

Yeah. So on a financial basis, the government programs and these heightened operating expenses essentially neutralized. And so minimal financial impact now on a net basis for the year and so the adjusted SOI is really the basis, on which we're providing the guidance and so on. And so ultimately, what this program allowed us to do, is keep employees on through the worst of the pandemic and where volume of activity has returned, we have the employees to operate and serve our customers; and where it hasn't, we've made the required reduction. And so the growth or the guidance that we're giving is on the adjusted metrics. The margin can fluctuate based on mix, but that's the base.

Noah Poponak -- Goldman Sachs -- Analyst

Right. So Sonya, what you're saying is, it's not just that you have the government programs, and then you also have just other cost and disruption and that we should adjust for one, but not the other. What you're saying is, there's costs in the system that you otherwise would have been able to manage, that you're just not managing, because you have the government support and so we should think of those as neutralizing?

Sonya Branco -- - Executive Vice President, Finance & Chief Financial Officer

Correct.

Noah Poponak -- Goldman Sachs -- Analyst

Okay. Could you elaborate on what you saw in the utilization rate within Civil by large commercial aerospace versus business jet, and maybe a little bit more about geography?

Marc Parent -- President and Chief Executive Officer

Yeah. Business aircraft is doing pretty good. As I said, the U.S. in terms of flying activity, is pretty much back to COVID-19 levels, which is quite astounding, which is really -- yes, prior to -- going back to 2019. So you can expect that, that's resulting in some pretty good training activity in our civil training center. It's a bit slower in Europe because of all the continuing lockdowns in Europe, mainly people have less ability to fly. But even that has recovered faster than you see in commercial aviation -- sorry, in -- yes, in commercial aviation, just slower than United States.

If I go around commercial aviation, it's -- we're a worldwide business. So your question, I think, is apropos, because really, the big pickup for us will be when the big pickup occurs throughout the world. But what we're seeing regionally is like, in the United States, for commercial aircraft, we're actually starting to see utilization match pre-pandemic levels. We're actually adding capacity and we're hiring structures to support -- we're training with a lot of airlines and our flight school classes are now looking to resume, and it really pulled force this summer. And with the voluntary furloughs that occurred over the past year in the United States, the airlines are seeing a higher need for future pilots, as they really need to eventually replace everyone that's left, and they can no longer be called back.

We're seeing -- we talked about this training bubble before. We're starting to see that, but it depends on which geography you're in. In countries where we saw a sudden halt in operations and training, we're seeing spikes in our training center utilization, as the airlines rush to get their pilots return again. A good example of that was recently in Colombia, where we really -- we're working really hard. I'd say, we're above 100% in our training center to support specifically Avianca, that decided to get all their pilots current again. And obviously, it depends on the timing, but we're going to see this happen.

To me, across most of the locations where there was pretty drastic lockdowns. To look at, again, going regionally, you see India. Our utilization, notwithstanding the drastic situation that you see, which is horrific in terms of the deaths coming from COVID-19, the utilization in February was over 90%, just as the domestic market was making recovery. Obviously, that slowed down for good reasons. But -- and if I can go around the world, but you're really -- if you were to basically look at where the remaining lockdowns are, where you have travel restrictions, then basically, you're seeing a subdued level of training activity and where you're not, like in the United States, you're seeing people return to travel quite heartily [Phonetic], and I'm very encouraged by that and I think that will show up in our numbers over the next few quarters, no doubt about that.

Noah Poponak -- Goldman Sachs -- Analyst

So Marc, if you were -- it sounds like if you were able to disaggregate that 55% in training related to domestic U.S. or something, a region and type of flying like that, that strong, the utilization rate for you is pretty much back to pre-pandemic, and it's just that the utilization rate in domestic places that still have a lockdown or related to cross-border, is still below the 55%.

Marc Parent -- President and Chief Executive Officer

Pretty much, pretty much; because, again, the other factor to look at is that really what picked up is narrow-body, domestic travel. And again, that's what's picked up in United States. So the statement you just said, I would agree with. What's still pretty slow is wide-body, oceanic, because again, of the restrictions, and I think that will be slower. But I think the statement you make is correct.

Noah Poponak -- Goldman Sachs -- Analyst

Okay. Thank you.

Operator

Thank you. The next question comes from Tim James of TD Securities. Please go ahead.

Tim James -- TD Securities -- Analyst

Thanks. Good afternoon. Thank you for taking my call. Just my first question. Marc, you kind of touched on earlier in your commentary about -- yes, I think about some of the kind of opportunities for commercial airlines that may be looking to outsource training and that's always been kind of an opportunity for CAE. I'm just wondering if you can kind of update us on now as we kind of come out of the pandemic, any kind of areas where you see more regional opportunities, or maybe just the way customers are thinking about this, if the pandemic has influenced their thinking and if it's really going to kind of accelerate some of that outsourcing? Just any additional color.

Marc Parent -- President and Chief Executive Officer

I think that -- I see the same thing that I talked about previously before. There's much more conversations. We're still at a state where the majority of the world barring, like I said, perhaps the United States, are still really dealing with severe restrictions. Look at the situation in Canada, I don't need to describe that to you, because you live here. But the fact is airlines, in a large part of the world, are still really trying to figure out what their fleet mix is going to be. So if you don't know what your fleet mix is going to be, a number of narrow bodies versus wide-body, the kind of routes that you'll be flying, it's pretty difficult to really decide on what you can outsource. The old adage is, I've used this example before, we don't outsource a mess, and that's because either one or two things are going to happen. Either you're going to pay too much or us in CAE, we're not going to make a good deal, because we don't have a good basis on which to base an outsourcing agreement. But I think that -- I take comfort by the fact, as I mentioned, that perversely, COVID-19 has been a great time to start an airline for a number of reasons, as I don't need to highlight.

So of this -- we secured contracts with six start-up airlines that are going straight to basically to the position that, of course, we project this to say, why would you start a training operation, when we can provide a turnkey solution for you, so for six of those start-up airlines that's what we were doing. And at the same time, we've deployed training in our various centers and in customer centers with simulator, with long-term overflow contracts, whereas before -- and that's really airlines saying, hey, I'm not going to invest necessarily in the asset, but I'm going to sign a contract with you, and because I really don't know, but I want to flex it. I don't know what the demand is necessarily going to be, but I need to maintain that optionality, so that I can seize the upside in the market. And that's attractive, because that always is the genesis for outsourcing, because our business model, I think you've followed us for a long time, you've seen it. It's always enter into a relationship, whether it be a simulator, whether it be running their training center, or doing some training overflow and more and more expanding our relationship, expanding our wallet share with customers. So I felt very good about that and I -- again, lots of conversations, but I'm a patient man, but I'm confident that, that patience will pay off.

Tim James -- TD Securities -- Analyst

Okay. That's helpful. Thank you. And then just my second question, I'm thinking about kind of the upcoming fiscal year and some of the acquisitions, well, I guess, in particular, one or two acquisitions that you've made in the civil space and the new simulators that you've got in the network. Is there a need to or will you be continuing to kind of relocate, move simulators around this year? Am I correct in thinking it's kind of a good time to be doing that, because utilization is still relatively low, whereas if you were sort of running flat out, it would be a bit more disruptive, or are you kind of at the point now where you feel pretty good with the location of sims throughout the network?

Marc Parent -- President and Chief Executive Officer

No, we've been doing that. The big part -- or a big part of our restructuring program, is exactly that, Tim. As I mentioned, we've done a lot of that in the fourth quarter, we're going to do some more. But I think that's going to come down, and that's where really you're going to see a lot of the restructuring savings come from, because we're taking advantage of exactly the fact that there's reduced level of activity, to be able do those moves, so you don't have to do it in a steady state. So absolutely right.

Tim James -- TD Securities -- Analyst

Okay. Thank you.

Operator

Thank you. The next question comes from Cameron Doerksen of National Bank Financial. Please go ahead.

Cameron Doerksen -- National Bank Financial -- Analyst

Thanks. Good afternoon. Just really one question for me, and it's, I guess, around the foreign exchange and the fact that we've seen the Canadian dollar strengthen a fair bit here in the last few months. I guess, in the past, this has been kind of a net negative from a, I guess, a revenue growth perspective. But Sonya, maybe you can sort of remind us of the FX impact on CAE, and whether that's changed from where it was a couple of years ago? And also if you have any sort of sensitivity around FX changes and what that means to either operating income or to EPS?

Sonya Branco -- - Executive Vice President, Finance & Chief Financial Officer

Yeah. So you're right. It is a bit of a headwind, largely as a result of the translation. And so obviously, it really depends on where the revenues are and so on, so the sensitivity evolves. But ultimately, what I use as a rule of thumb is CAD0.01 on the USD-CAD, the whole year is about CAD2.5 million of SOI impact.

Cameron Doerksen -- National Bank Financial -- Analyst

Okay. So CAD2.5 million SOI. Okay. Okay.

Sonya Branco -- - Executive Vice President, Finance & Chief Financial Officer

On the translations. Yeah.

Cameron Doerksen -- National Bank Financial -- Analyst

Just on translations. So the -- in training centers, especially, I guess, the revenue and the costs would generally be aligned?

Sonya Branco -- - Executive Vice President, Finance & Chief Financial Officer

That's right. So margins would be similar, but the translation would come into a lower Canadian dollar equivalent.

Cameron Doerksen -- National Bank Financial -- Analyst

Got it. Perfect. That's all I had. Thanks very much.

Operator

Thank you. The next question comes from Kevin Chiang of CIBC. Please go ahead.

Kevin Chiang -- CIBC -- Analyst

Thanks for taking my question. Maybe just a clarification question. Marc, you talked about what you're seeing from a utilization perspective by market, and a lot of it is being driven by, I guess, a level of openness those respective economies have. But wondering, as some countries look at how quickly demand has improved or air traffic demand has improved in short order and looking at the U.S., I think we're seeing a pretty strong rebound here. Are you seeing airlines in the market that are more locked down, potentially accelerating their training efforts to maybe prevent any bottlenecks, if they think that their own domestic air traffic trends could experience a similar surge like the U.S. airlines have seen in the past few months here? Or are they waiting for more clarity before making that type of training decision?

Marc Parent -- President and Chief Executive Officer

It depends. It depends. I think I was making -- highlighting in the question from Noah is that -- we're seeing that, like, for example, in South America, I was using the example that Avianca really decided to get all their pilots trained. So we had a bubble there, where we're operating at north of 100% in our training center in Colombia. And so that's an example here. Right now, if you look at some of the countries, Chile is in full lockdown; Brazil, no surprise, still battling very high cases. So we're going to see -- so necessarily the flying activity isn't there. We're seeing airlines hunkering down. But that will come back and when that comes back, I would fully expect that we're going to see similar kind of story that we saw in Colombia.

Asia Pacific, many countries have -- if you just read the newspapers, right, that many countries have pulled back on opening up the green channels that they had, due to what's happening in India. Malaysia declared a national -- nationwide lockdown again. So if you look at our utilization numbers overall, you can well imagine that we're a key partner to AirAsia, which is the Southwest Airlines, if you like, of Southeast Asia. And so you can well imagine, if that Malaysia is locked down, then we're not doing too much there. I talked about India, what's happening. We have been high in India, that's coming back down. So not surprisingly -- I don't think -- I think it's a pretty mixed situation over there.

In Europe, we've seen -- basically, it's a day-by-day situation, and I was encouraged to see some opening up recently that were -- that they're [Indecipherable] that they'll allow some tourist travel within Europe right now. So that's a very good positive. We see -- I can go around, I can go on and on, but you will see Portugal's possibly lifting as early as May 17. But until those lifts happen, it will be slow and I think airlines have been cautious in terms of their training activity. But then you go to other areas, like, for example, Japan, where Japan Airlines has never missed a beat. That training center is operating at very high levels, because they've taken the tact, that they're going to take basically the opportunity throughout, just to maintain their pilots fully trained.

Overall, I think if you look at our business, in aggregate, I think what we've said before is look at the IATA growth -- we're not getting ahead of the IATA growth path that's predicted. But having said that, I am very encouraged by the level of flying activity that I see in the United States, and I think that will be reflected. I don't think anybody is going to take flying for granted anymore.

Kevin Chiang -- CIBC -- Analyst

No, that's a fair comment and great color. And maybe just a clarification point. Within healthcare, the CAE Air1 ventilator, you've completed the deliveries in the fiscal fourth quarter. Is there a reason why you can't sell that to other governments or other hospitals? Is there a reason why this is kind of a nonrecurring revenue stream? Or is this something you can actively sell to other customers here?

Marc Parent -- President and Chief Executive Officer

Well, I think what you're seeing there is our discipline. We remain focused to what we're good at and what you saw specifically with the example of ventilator is -- what you're seeing is what CAE can do and I always point it that way. It takes the fantastic subject matter expertise that we have in healthcare, where we understand everything to do, with the training for intubation and everything to do with the use of ventilators. So we were able to seize that subject matter expertise, and considering a crisis existed at the time for the use of ventilator, marry that up with the core competencies at CAE of systems engineering, software, the global sourcing that we have and put that all together and produce it in an absolute record of time, not only produce them at high rate, but invent them, because there were no ventilators available, and there was obviously no parts available. So we went from scratch.

So you saw an example of what we can do. So with regards to your question about moving forward, we took a conscious decision, basically to say that, well, if we look at the market going forward, yeah, we can do that, and maybe we can get results. But I think with the -- what's happened in the pandemic, a lot of people now produce a lot of ventilators, including typical producers of ventilators across the world. OEMs are producing ventilators and there's -- at the moment, I think there's a glut overall. I mean, obviously, there's some shortages in key areas like, for example, tragically in India, for example. But what you're seeing is overall, there's going to be a lot more ventilators on a steady state than is actually required. And going forward, do we really want to be competing against established players producing ventilators? And we've selected no. What we'd rather do though, is to -- again, using our subject matter expertise, to partner with those companies in producing simulation based training associated with that and really, that, we think, is a much better way forward.

Kevin Chiang -- CIBC -- Analyst

I appreciate the color there and kudos on opening up the vaccination center in Quebec. Thank you.

Marc Parent -- President and Chief Executive Officer

Thank you.

Operator

Thank you. The next question comes from Benoit Poirier of Desjardins. Please go ahead.

Benoit Poirier -- Desjardins -- Analyst

Yes, good afternoon everyone. Just for defense, when we look at the adjusted operating margin reach 2% or 6.9% with government subsidies, which is down from almost 12% a year ago, while revenue were only down 2%. So could you maybe provide some color on what drove the decline and how should we expect defense margins to recover from these levels?

Marc Parent -- President and Chief Executive Officer

Well, I think the first number -- just the same as we've talked about, with the margins similar to 17.2% in Civil, I think use the higher number in Defense, that's the number you should be looking at. Because, again, for the reasons that we talked about, the costs that are being offset by the government program. So we talked about before those issues. They haven't changed really, Benoit. The fact is, if you look at -- the fact that our book-to-bill has been below 1 for the last five quarters and which has changed this quarter, by the way, in a quite nice way, and I expect that to continue. So you take the lack of orders, particularly product orders, because they tend to be higher margin, number one. And the fact is you're eating off your margins. So as you're eating off your backlogs -- so as you eat off your backlog, you still have a lot of costs. So those are -- in the end of the day, you have to be absorbed. That's number one.

The other thing is, our mix has changed over the past few years to more service contracts. They tend to be lower margin. We have had a host of COVID related issues in defense, particularly internationally. U.S. has been less affected. But having said that, it has been affected and I'll just give you an example. A quarter before, it was like our Tampa training center, which trains C-130 crews, a large part of the customers that come to that Tampa training center are overseas customers, and because of that, there tends to be a higher-margin operation for that reason, but the customers haven't been able to show up, because they haven't been able to travel. So that's been quite a bit of a headwind all year. But internationally, what's happened is, we've really had issues in regards to basically access to customers, access to the facilities due to lockdowns overall. So all of those factors explain where we're at.

Going forward, I mean, the COVID-related issues themselves are abating. We still have some, like we -- access the customers in the Middle East, for example, is still difficult. So programs are still difficult, and we are basically executing those programs as we speak. But again, I'm very encouraged by couple of things. Number one is, the orders that we're signing. The volume of those orders that we're signing, we're getting back on the positive. The fact that again, what I should have said at the outset is, and as mentioned in my remarks, we have about CAD800 million of orders that we expected to sign in the past year, and going into this year, that's a little bit pushed to right, because we've had, literally, these have been delayed largely to due to COVID, because although defense forces themselves -- they are obviously an essential service, they've kept operational. But large cases that people that would support putting orders, contracts in place, just haven't been there or certainly non-force and that's caused the delays. That's going to catch up over the next few quarters.

At the same time, we've used the opportunity during this COVID crisis, to make the investments broadly as a company, to make sure that we come out of this as a COVID winner. That includes operational efficiencies in defense. Some of that is captured in a restructuring service -- the restructuring that you see. So that -- part of that CAD65 million to CAD70 million will be reflected in the defense. So I guess long answer to show that, margins should be going up and I fully expect us to get north of -- the north or at least in the low double digits before too long.

Benoit Poirier -- Desjardins -- Analyst

Okay. That's really great color.

Marc Parent -- President and Chief Executive Officer

And of course, everything gets increased, once we do the L3 acquisition, the L3Harris acquisition, because on a typical basis, they were operating at a higher-margin than we are, with a concentration of more products than services, and a much stickier kind of backlog, because of the programs they have. So that will improve things as well.

Benoit Poirier -- Desjardins -- Analyst

Yeah. And with respect to defense, how much visibility do you have for fiscal '22, which -- I mean what is already in the backlog to meet your growth ambition? And following L3, what would be the breakdown between equipment and services in terms of mix for defense?

Marc Parent -- President and Chief Executive Officer

Well, I think we haven't provided much visibility on what we see this year for good reasons because we don't -- well, it's not that we don't have visibility of our existing programs in defense, but it's really in terms of the -- when we expect the closing of the L3Harris acquisition will occur. I think I would point to the fact that, the book-to-bill this quarter of 1.1, I think that basically starts to tell you that, we're getting good coverage of order intake to revenue to what we really need. So in terms of -- well, actually, in fact, when I look at the numbers, we actually have, going into the year, the highest percentage backlog, the percentage of revenue to fulfill the year, the highest percent of -- in our backlog already than I've seen in recent history. If you know what I mean? The coverage. Is that clear?

Benoit Poirier -- Desjardins -- Analyst

Yeah. Okay, that's great. Yeah. Thank you very much.

Marc Parent -- President and Chief Executive Officer

Thank you.

Operator

The next question comes from Ron Epstein, Bank of America Merrill Lynch. Please go ahead.

Ronald Epstein -- Bank of America Merrill Lynch -- Analyst

Hey, good afternoon guys. Maybe changing gears just a little bit here. There's been a lot of focus lately on urban air mobility, and the market has been supportive of many of the different companies developing these vehicles. But maybe one of the long tentpoles is, who are going to fly these things? So my question to you is, have you been approached yet, or are you in conversations with any of the urban air mobility companies or other companies that want to operate those vehicles on a strategy around training pilots, at least for the time period before those things go autonomous, which might be quite some time?

Marc Parent -- President and Chief Executive Officer

Absolutely. Absolutely. I personally believe that, this is going to be definitely a good part of the market in the future. Your guess as to when that happens is as good as mine, but I certainly believe there's some estimates that are out there that's spotty in terms of pilots fighting [Phonetic]-- needing about -- in the nature of our estimate, 60,000 pilots by 2030. For us, we're very much involved in that space. I can tell you, they have these specialized meetings of everybody who's in the industry, including all of these companies that are producing these various eVTOL devices. I was at the last one, which was just prior to COVID that was in Dallas, it was called Texas UP. So I can tell you I was visiting myself just last week, with one very strong contender, Beta Aviation. I was with their CEO and their team in Burlington, Vermont just last week. And very impressed what they're doing. We're partnering with them on -- going forward and just -- we announced that we're doing this with Jaunt, as I mentioned in my remarks, other -- I won't go through all of them, because some of them are competitively sensitive. They don't want us to talk about it. But you will -- I think you can -- rest assured, that we're involved with pretty much the whole ecosystem right now.

As usual, we would take our role that we want to be, if you like, OEM agnostic. So we want to be able to serve the industry. We serve them not only in training pilots, but also help them in actual design and certification of the aircraft, which we're doing. As I mentioned, the contract that we signed with Jaunt, is for helping them do, it's like they call it in industry parlance, the iron bird, with Software-in-The-Loop. So basically, where you can fly a vehicle using software way before you ever fly the real aircraft, and you prove out all the software interfaces. And you can actually certify components of the design using -- well, flying it, if you like, virtually.

So again, we're very much part of that and because I think it's going to be part of the future. It's an exciting part. I can tell you that being an aviation geek just my whole life. I mean, this is where aviation was in the 30s, where you have a whole bunch of people developing aircraft, it's just like -- it's the wild west out there. It's quite exciting. But we'll be part of it.

Ronald Epstein -- Bank of America Merrill Lynch -- Analyst

Great. Thank you.

Andrew Arnovitz -- Senior Vice President, Strategy & Investor Relations

Thank you. operator, I think that's all the time that we have today for investors. Before we open the lines to the media, Marc will say a few words in French. [Foreign Speech].

Marc Parent -- President and Chief Executive Officer

[Foreign Speech]

Operator

[Operator Instructions] The first question comes from Andre Allard of Les Ailes du Quebec. [Foreign Speech]

Andre Allard -- Les Ailes du Quebec -- Analyst

[Foreign Speech]

Marc Parent -- President and Chief Executive Officer

[Foreign Speech].

Andre Allard -- Les Ailes du Quebec -- Analyst

[Foreign Speech]

Marc Parent -- President and Chief Executive Officer

[Foreign Speech].

Andrew Arnovitz -- Senior Vice President, Strategy & Investor Relations

[Foreign Speech] Operator, I think that's all the time we have for this afternoon. I know we went a bit longer than we usually do, but great quarter and certainly lots of great questions. I want to thank all participants from the investment community and members of media, and I would remind participants that a transcript of today's call can be found on CAE's website as well as a link to the replay.

Thank you very much.

Operator

[Operator Closing Remarks].

Duration: 66 minutes

Call participants:

Andrew Arnovitz -- Senior Vice President, Strategy & Investor Relations

Marc Parent -- President and Chief Executive Officer

Sonya Branco -- - Executive Vice President, Finance & Chief Financial Officer

Fadi Chamoun -- BMO -- Analyst

Konark Gupta -- Scotia Capital -- Analyst

Noah Poponak -- Goldman Sachs -- Analyst

Tim James -- TD Securities -- Analyst

Cameron Doerksen -- National Bank Financial -- Analyst

Kevin Chiang -- CIBC -- Analyst

Benoit Poirier -- Desjardins -- Analyst

Ronald Epstein -- Bank of America Merrill Lynch -- Analyst

Andre Allard -- Les Ailes du Quebec -- Analyst

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