Thales S.A.

2024 Order Intake and Sell. I am Alexandra Boucheron, Head of Investor Relations at Thales. With me today is Pascal Boucher, CFO of Thales. As usual, this presentation is audio webcasted live on our website at thalesgroup.com, where the slides and the press releases are also available for download. A replay will be available soon after the end of the event. With that, I would like to turn over the call to Pascal Bouchier.

Okay. Thank you, Alexandra, and good morning, everyone. Before moving on to the numbers, as usual, I wanted to highlight a few items. I'm now on slide two. First of all, let me come back on the quite strong start of the defense and security segment commercial activity in Q1 2024. with four large contracts over 100 million euros and especially two contracts above 500 million euros. These new commercial successes illustrate Thales' unique positioning to capture major opportunities across a wide spectrum of activities in the growing defense markets. And I will come back in greater details on those contracts during the presentation. Second point I wanted to highlight is a closing of the Cobham acquisition, which will be consolidated in our accounts from Q2 2024, as expected. This addition to our existing Agenix business will establish a game changer in the very attractive and fast-growing communication and connectivity markets to the benefit of a more sustainable aerospace future. And we are happy to welcome this highly skilled team of aerospace communication experts within the group. Last point, and I'm sure you saw plenty of communications on the topic already. Thales has announced last month the creation of Cortex, an internal organization dedicated to artificial intelligence gathering over 600 AI experts and bringing together the company's AI capabilities in research, sensors, and systems. So let's now have a look at our Q1 headline numbers. I'm now on slide three. New orders amounted to 5 billion euros at 46% on organic basis. Hence, a very strong start of the year in terms of commercial activity, which I will further comment in the next slides. Sales came to 4.4 billion euros up a solid 7.9% on an organic basis above full year guidance. This level of sales represents a new record high for our first quarter. Looking now into details at our order intake. I'm now on slide four. As you can see, the strong 46% organic growth is fueled by both large and medium-sized orders. Four large orders above 100 million euros have been recorded in the first quarter, all of them in our defense and security business, reaching a total of 1.6 billion euros to be compared to three large orders in Q1 2023. that represented 400 million euros. Two of these three large contracts in Q1 last year were related to space in observation explorations, and one contract was for an enclosed and disclosed large military customers. Orders between 10 to 100 million euros were up 46%, with aero up 56%, and defense and security up 50%. Smaller orders decreased slightly organically as anticipated due to the very high comps in small counts in Q1 2023. But overall, a very strong first quarter in terms of order intake and a new record high for Q1. Turning now to slide five, looking at sales scores. First, a word on currency and scope. The currency impact was not material this quarter, minus 17 million euros, as showed in the graph. The scope impact was more significant, resulting from the acquisition and disposal carried out in 2023. The largest impact was linked to the acquisition of Impervor, closed in December 2023, and fully impacted Q1. We have also finalized the acquisition of Tesserent in October last year. In terms of divestiture, we closed the disposal of the aeronautical electrical system to Safran at the end of Q3 2023. So all of that resulting in a scope effect which contributed 99 million euros in Q1 2024. And as mentioned in slide 2, keep in mind that COBAM will be consolidated from April 2024. The organic growth reached 7.9% ahead of our full year guidance. It was driven by a sharp performance of our defense and security activity. And I will comment in greater detail the dynamics by business in the coming slides. Turning to the geographical perspective, a strong quarter across the board with most geographies strongly up. So overall, a strong first quarter in terms of sales. Now, looking at each segment one by one, I'm now on slide six for aerospace. Orders were done 13% organically with two different dynamics. Aeronautics, good ongoing commercial activities with orders of double digit versus Q1 2023, which was by the way already a strong quarter with a double digit growth. Space, significantly below Q1 2023, where, as I mentioned earlier, two contracts above 100 million euros had been recorded. Sales were up 5.1% organically. Aeronautics continued to perform well overall, with the civil aero original equipment activities up double digits. Space businesses were slightly up compared to federal outcomes in Q1 2023 and fully in line with our full year trajectory. Turning now to slide seven. Looking at the defense and security segments, as I mentioned before, an exception quarter in terms of order intake up 127% organically with four contracts above €100 million and a sharp 50% increase in contracts between €10 and €100 million. Our backlog in defense and security is reaching a new record high at 36 billion euros, representing 3.7 years of sales. Organic sales were up 13.4%, continuing on a positive trend across most business lines, from electronic combat solutions to surface radars or airspace mobility solutions. It's important to note that while we have seen an impressive 13% growth in the first quarter, please keep in mind that this is only the first quarter of the year. And it was supported by more favorable comps. Looking at 2023, H1 was softer than H2. Therefore, it's reasonable to anticipate a bit of reversal of this trend in 2024 with a stronger first half and potentially softer second half. Additionally, as you well know, our defense and security business operates long-term projects with nonlinear revenue recognition. So this strong 13% growth is also resulting from a positive cut-off effect between Q1 and Q2. Last point, despite some easing, supply chain tensions persist, necessitating to remain vigilant regarding their potential impact on production. All of that to say that this first quarter doesn't establish a definitive trend for the entire year. We confirm the mid-single digit to mid-single digit plus organic growth we committed to for the defense business over the full year 2024. Turning now to slide eight. looking at our last segments, digital identity and security. At 960 million euros, sales were down 2.5% on an organic basis. This slight decrease didn't come as a surprise and was resulting from, first, the digital businesses performing in line with our full year forecast, But also, the smart card businesses are clearly down compared to very high comps in Q1 2023, with lower volumes, especially in the banking area in North America, and negative price effects on SIM cards, particularly in Asia. Again, this was anticipated. DIS posted a very strong H1 2023 and a softer H2 2023. Hence, we expect a reverse trend in 2024 with a strong H2 versus H1. For the full year, we expect DIS organic growth to be close to mid-single digits. So let me finish here with slide nine and a reminder of our financial objective for 2024. QAnon represents a solid start of the year, which allows us to confirm the financial objective for 2024. So this concludes my brief presentation. Many thanks for your attention. And I will now be pleased to take your questions.

Thank you, ladies and gentlemen. We'll now begin the question and answer session. As a reminder to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. Once again, it's star 1 1 on your telephone and wait for your name to be announced. Thank you. We are now going to proceed with our first question. And the questions come from the line of Victor Allard from Goldman Sachs. Please ask your question.

Good morning, Pascal, and thank you for taking my question. I have three quick ones, if that's okay. The first one is on defense, and I'm curious if you could help us appreciate in more detail the underlying drivers of the very strong revenue performance in defense. So you mentioned many activities in the double-digit range. I'm curious if there was one segment which stood out or progressed better than your expectation. And also, would you have a reference point to share probably with us in terms of where you are currently tracking in terms of radar ramp-up? That's the first one. Second one is now considering COBAMA Aerocom is now closed and also considering the view in terms of space margin that you shared with us earlier this year. Would you have a view in terms of margins for aerospace over the medium term? If you can squeeze the last one is on DIS. You mentioned, I think, mid-single-digit organic sales growth. Would you have a view in terms of the phasing of that growth profile as we go into the second part of the year, in particular in terms of smart cards?

Thank you. Victor, let me start with your first question about the underlying business lines that support this quite strong growth in defense. I have to say that it's not specific to a single or even a few business lines. I mentioned in particular electronic combat system. I mentioned airborne capability. We could mention also communication. It's really, I mean, across the board that we see this level of growth. Once again, I mean, I guess that you know very well that on our defense and security business, we never reached such a level of backlog. And you have seen, I mean, that is the momentum in terms of demands. from a commercial standpoint is still there, and we expect this to continue, which means that overall, I mean, our challenge in particular in defense and security has become more today a deliberate challenge. So it's more about us being able to keep ramping up our production capabilities, but also to go even quicker in terms of overall project executions, in particular when it comes to specific developments So this is really what supports this course. And I have to say that it's really across the board and probably a bit difficult for me to explain which business lines would lag behind the other ones. Probably a good example of that is what you mentioned on RADAR Rampart. I'm not sure that we share with you figures in terms of what our production output increased, but it's true that we are today investing, in particular, in two countries. in terms of radar's additional production capabilities. One is in France, and the other in a site which is close to Paris, at Limoges, and the second one being in the Netherlands, in particular in Angelo. Those are the two largest sites with regard to the production of radars. And it's true that overall, I mean, what you are getting ready is, but of course this will take time because all of that is a significant investment, but probably what you need to have in mind is that over a three year period of time, it's probably more or almost doubling the overall production capability of our radars and in particular this specific star product which is our grown master radar line which stands out as being a star product and where we keep getting a number of opportunities in many countries across the globe. It's probably a good illustration of what a successful product policy can deliver uh in terms of um in terms of potential for uh for growth uh so this in particular ground master um what our capability is really uh is really developing very nicely uh kuban kuban aerocom closed and your question was about my view about about i mean the mediums What was your question about the overall aerospace segment?

I was just taking stock of the fact that we've now seen COBAM Aircom closing and also I think at Folière you shared an update in space for Margin, so I was wondering if you would have a view to share with us in terms of the potential over the medium term for the division?

Okay, so I mean here, I mean, I need to discuss on one side, I mean, the avionics business and on the other side, I mean, the space business. So on the space business, I think it was quite clear. I mean, because as we released our 2023 financials, we were quite clear about what we're expecting in terms of recovery of a big margin for space business. And we mentioned overall, I mean, 7%. a big margin for space business in the mid-term. Now, when it comes to the avionics business, So overall, it's true that we're targeting in this business a clear, strong double digit. So is it 12%? But probably this order of magnitude in terms of overall level of profitability that we expect from our avionics business. So all of that resulting in a global aerospace business that should be double digit. in the next few years. I mean, it's not a commitment because this is the type of thing that we'll be sharing with you at our Capital Market Day. But as a rule of thumb, yes, I mean, I mean, Our challenge today is really on how to recover the level of, I mean, a good level of profitability in our space business. This is really, I mean, what is driving, what is going to drive the progressions of merging in this overall aerospace business. Your last question was about DIS and the phasing. So yes, as I mentioned, it's true that when you look at 2023, the start of 2023 was especially strong, with in particular a level of organic growth in Q1 2023. which in my recollections was something like 20%. And then we have seen this level of growth dropping, with in particular Q4 being negative against Q4 2023. So we will see a reverse trend in 2024. And I guess it's not a surprise. That's the point that we mentioned a number of times. We're expecting, I mean, again, it's very high comp in the first half of 2023, in particular in Q1. We're expecting to see a negative organic growth in Q1 and this recovering progressively. By the way, I need to share with you that this slight drop that I mentioned in terms of organic growth for the IS in Q1 this year, minus 2.5%, it's a bit better as compared to what I was expecting. Here again, I mean, against a 20% organic growth in Q1 2023. So really, I mean, quite a strong reference base. So overall it's developing pretty much as expected and you will see, in particular in H2, the IS returning to a positive organic growth against the same quarter of 2023.

Very clear, thanks very much. Thank you.

We are now going to proceed with our next question. And the questions come from the line of George Zhao from Bernstein. Please ask your question.

Hi, good morning, everyone. First question, you know, Tesseract and Imperva, you know, they added $131 million of revenue in Q1. But if you look at Q4, they added $70 million, and that was only one month of Imperva contribution. So, you know, was the relatively weaker Q1 all about seasonality? You know, could you share, you know, what's the underlying growth of those two businesses was in Q1. Second one, Pascal, you made some comments earlier about TALIS potentially being interested in the ATOS defense assets. Could you just clarify those comments? Why would that be the best use of cash for TALIS potentially? Thanks.

Okay. Thank you, and good morning, George. What we all need to have in mind is that this type of business is a bit of a seasonal business with, in particular, a very strong Q4. That's something that you will keep seeing as we integrated Interva. Okay, first point. Second point, I don't want to comment specifically on the Q1 organic growth at Imperva, but to give you more how we see 2024 in terms of growth for this business. And yes, clearly, I mean, we are expecting Imperva to be close to double digits. in terms of organic growth in 2024 versus 2023. Now, I mean, I also need to indicate to all of you that this 2024 growth at Imperva against 2023 will not be accounted as organic growth as we would report our 2024 financials because it will be considered as a scope effect. But what is more interesting is really to have in mind that we expect Imperva to be close to double digits in terms of top line growth in 2024. So nothing very specific to mention in this matter. No, I mean, your second question was about ATOS. And let me give you a bit of explanation on this matter. I mean, we have clearly mentioned that, first, no interest at all for Thales to buy ATOS. Second point, no interest. at Thales to buy these specific divisions, which is essentially on cybersecurity, which is called BDS. No interest at all from Thales. I'm very clear on this point. Now, what we know is that within this BDS division, Atos operates a small size defense and security business. And my comment is if this business, this specific defense and security business, which is essentially what we call a mission critical system business, which is quite a small one business, would become available. We might look at it to see whether or not this could be of interest for us. On the side of this business, this defense and security business, within this BDS division, ATOS represents between 200 and 300 million euros of annual revenue. So for you just to get an idea of what we're talking about. So it's quite modest. Once again, it's a minor part of this BDS activity. And yes, as we do, by the way, on many occasions, we will be looking at the merits of this potential acquisition.

Thank you.

We are now going to proceed with our next question. And the questions come from the line of Olivier Beauchef from Redberg Atlantic. Please ask your question.

Yes, good morning, Pascale, Alexandra. A couple of questions on my end. First one on hiring. Can you remind us of your hiring plan for 2024 and how it went in, let's say, the first four months of the year? Secondly, on pricing in SIM and EMV payment cards, can you give us a bit more color there on what happened in the quarter? And lastly, air defense. How much of revenues does that represent for Thales in aggregate at group level? If you could share that with us.

Your last question will be probably the most difficult one. Good morning, Olivier. Let me start with hiring. Just to remind you that in 2023, we recruited a bit less than 11,000 employees at Thales. And we mentioned that in 2024, we are expecting hiring to be at 8,500 new employees. And you see a drop against which in my view is quite positive and the reason is quite simple. We have seen the overall turnover dropping quite significantly. You know, I mean, before COVID, our turnover at Thales was pretty stable and it went up pretty strongly through the COVID until the beginning of 2023. and it's good to see that we have seen since then and progressively the overall turnover getting back to pre-COVID level. So all of that is positive because it means that we need less requirements to make the same type of output requiring less hiring which is very positive because as you know and we have been quite clear on this topic is through that onboarding new employees, in particular new engineers, and in particular young engineers, is a clear challenge. We mentioned, I would like to confirm that this is one of our key challenges. Not just, I mean, onboarding in just a few weeks. I mean, all of that requires time because we get a talented engineer from the outside, but the challenge is for them only to learn what we do at Thales, this overall domain level of competency, which is so important, be able to mix more academic skills to domain knowledge, making them real contributors to execution of our project. So I need to say that, I mean, seeing turnover getting back to a level which is something like 5% overall turnover is really a good news overall for Thales. And the start of the year in terms of hiring is pretty much in line with this overall 8,500 requirements for the full year. Pricing on EMV. First, I mean, looking at the overall, I mean, banking activity. banking counts, we see our prices holding pretty firm, a bit of a drop, which really reflects more the drop in input costs than the drop overall in terms of margin. So overall, banking is doing pretty well in terms of pricing. Now, it's also true, and probably a good occasion to share with you, that on banking, we see a drop in demand, in particular in the US. It was anticipated. All of that was pretty much anticipated. But overall, a drop in volumes and probably some adjustment in terms of level of stocks at our clients, in particular in North America. but overall pricing that are staying pretty at a level which is pretty satisfactory. On the telco signs, Here it's a bit different. We see more pressure on prices, and in particular on some geographies, and in particular in Asia, which led us to decide to exit some specific markets in Asia. Maybe you have in mind that in the last three years, and because of this shortage of components, a clear lack of offer, we decided to re-enter some markets, some geographies, in particular in Asia, taking advantage of a solid pricing. And today we are really adjusting our presence, but in some cases deciding not to bid or to some very specific market in Asia in order for us to preserve the overall level of pricing. But overall, it's more on the telco side that we see pressure on margin. uh last point was on on air defense uh my god uh it's not that uh i don't have a magic uh figure on this matter i mean i mean what by the way air defense cover at uh at thales it covers both i mean censored in particular uh uh uh weather by the way when you when you discuss about air defense air surveillance is also for me part of air defense. I was mentioning before the success of our ground master radar. For me, it's part of defense, even though in some cases it's not associated with effectors, it's not associated to missiles, but then it's still, I mean, airspace protection capabilities. I mean, second is, I mean, effectors, in particular missiles. and in particular our Vichorad, the research branch of air defense, Star Trek, Enloe, LMM, in particular coming from our UK industrial footprint. And then I would add also all the more system parts, integrated air system, which covers, I mean, mid-range capability, what we call SAMTI in particular. So overall, just to give you an idea, but as a rule of thumb, and maybe, I mean, Alexandra and Olivier will come back on this point to you, but rule of thumb for me, I would mention probably something like 2 billion euros. of overall business for us. When you add up maybe slightly below 2 billion euros, but as a rule of thumb, I think it's a good figure. Alexandra and Olivier, we'll come back to you on this matter. That's very good.

Thank you very much, Pascal.

And by the way, with quite a strong demand on all those matters. Thank you.

Thank you. We are now going to proceed with our next question. And the questions come from the line of Christophe Menard from Deutsche Bank. Please ask your question.

Yes, good morning. Thank you for taking my question, Ariadne. three quick ones. The first one is on order intake in emerging markets. I mean, it's obviously strong in Q1. Could you comment on the trend? I mean, in 2023, because of the comparison base, emerging market orders were down. I mean, if we do not consider the large orders, what is the trend in emerging markets and what are you seeing? Is Q1 a good indication? And probably we could talk about the mid-size order intake and the mid-size orders and the small-size orders. So that was the first question. The second question was, I may have missed it, sorry, but the aftermarket growth in avionics in Q1, just to have a reference point. And the last question is on Cobham Aerospace. Now that you have the keys of the acquired entity, are you seeing any significant R&D investment needs for new generation of product or is the current generation already well developed and you can capitalize on it?

Okay, good morning Christophe. So on your first questions, Overall, yes, I mean, Q1 in terms of order intake in emerging market, extremely strong. But here again, I mean, reflecting in particular, I mean, two very large-sized projects. One was, as you have seen, I mean, the booking of the last tranche of the Indonesia project for Rafale with 18 aircraft. And the second is also a pretty large, very large project in excess of 500 million euros for a military customer in a Middle East country that I cannot mention for confidentiality reasons. Probably two good examples of the overall positioning of Thales in those emerging countries. Now, I mean, from, of course, a single quarter, it's very difficult, of course, to draw long-term conclusions. However, I mean, what I can confirm is that we keep seeing, I mean, a number of opportunities in many emerging countries, or what we qualify as emerging countries. It's true, of course, in the Middle East. I'm sorry for this word of emerging country, but it's true that in the Middle East in particular, we keep seeing various opportunities there in many aspects. Asia as well. Of course, I mean, we have mentioned Indonesia with the success of the WAFAL. Indonesia is also a country for our air defense business. Last year we booked quite a large size project for a ground master for what are capabilities here as well and we see other opportunities in the in Indonesia it could be also the case on space in particular on the So you see here, I'm mentioning a number of either projects that we booked in emerging countries, but also potential opportunities. So a bit difficult, but I mean, we keep seeing quite a strong level of demands across the board, but also in emerging countries. uh so uh on uh on civil and civil iro uh so in you probably have in mind and your question was more on aftermarket so you probably remember that last year our aftermarket was especially strong because we mentioned last year that the overall organic growth of our offshore market in 2023 against 2022 was in excess of 30%, in excess of 30%. So what we're seeing in Q1 is some kind of stabilizations on this market in terms of level of demand with still quite a solid demand. But stabilizing on the spare parts business in particular, because it's true that in 2023, there has been some restocking at a number of airlines. So we are a bit more vigilant on this matter in 2023, how we will see aftermarket developing. Of course, it will be in progressions. against 2023 what should be this overall level of growth in aftermarket if you combine both repairs where we keep seeing a quite a strong level of demand and spare parts where i mean there might be more some some some some type of stabilization there in terms of overall level of of demands all of that all of that i mean consistent with uh when we look at our avionics business overall, probably mid single digit to high single digit overall level of organic growth for the overall avionics business at Thalès in 2024 versus 2023. And your last question was about Cobam and the need for R&D needs. So if your question is, because I mean it was a private equity owned company, so if your question was Did Cobham Aerocom drop R&D in the past to boost profitability? It is not our view. Cobham Aerocom managed to develop state-of-the-art communications, but also cockpits. highly secured connectivity assistance that are developing pretty nicely in terms of commercial developments. So, of course, there will be a need to keep investing on R&D, but I don't see us, I mean, to change gears overall in terms of level of R&D, which is already pretty significant in this business.

Thank you very much. It's very reassuring.

We are now going to proceed with our next question. And the questions come from the line of Ben Hillen from Bank of America. Please ask your question.

Yes, morning. Thanks for taking my question. Pascal, I wanted to push a little bit on defense because the orders that you see now over the last 18, 24 months, the book to bill, and I appreciate there's some large orders in there, but the book to bill has been running in the 1.4 to 1.5 level. And you're obviously seeing that demand, not just in the very large orders, but also in the small to medium sized orders as well. So I guess the question is, is that really conducive to mid single digit medium term it just you know looking at it it feels like it should be higher than that um on a medium term basis so if there's any color uh that you can give around that that would be super helpful and then secondly um within aeronautics is there any specific comments that you can give us around in-flight entertainment and exactly what you're seeing in terms of order demand, how the supply chain is playing out there, and where you are from a profitability standpoint in that business. Thank you.

Okay. Good morning, Ben. Thank you for your two questions. So you're pushing a bit on defense in terms of growth expectations. No, I mean, what you say is fully right. I mean, a level of orders which exceeds quite largely our level of revenue, and this for quite a while now. And my comment in terms of level of demand was still very positive on this matter. So when I look, I mean, the challenges that we're facing today is once again a challenge in terms of overall delivery and i think that we are doing pretty well overall in terms of in terms of number of people that we keep training and that will progressively contribute better to our project executions where i need to say that i'm a bit more not concerned but more vigilant is what what is going on on the overall supply chain And I have to say that, by the way, it's not specific for this one because we also see that in particular in our aerospace, in particular avionics business. It's true that we keep seeing a number of challenges on the supply chain. And today, when I look at the supply chain, there are two specific areas where we keep facing some difficulties. One is PCBs, printed circuit boards, not electronic components, but more, I mean, the productions of PCBs. And in particular, it's a challenge on some European countries, starting with France, which is our largest industrial footprint. where today the level of production from a supplier is not in line with expectations in terms of needs to keep growing our business. Second point, and this time it's more across the board, that's a supply chain issue that we face in all countries where we operate, is hardware, in particular mechanical parts. And here again, in many countries, network of SMEs struggling to ramp up overall production output with quite a strong level of demands. Those guys in particular also serve the aerospace business as well, which is also going pretty nicely. And here again, I mean, we see some difficulties to follow the level of demands that companies like Thales are placing to them. So we have been working pretty actively on this matter. Specific difficulties or challenges on defense and security linked with the fact that in most cases, your clients ask you to get supplies from the country. It has to be a domestic supply for several reasons, as you can imagine, which means that there is less flexibility and defense in terms of supply chain to find alternative source outside the country. to go, for example, in Asia, I mean to get supplies that are probably more obvious. That's something that we can do more easily in civil businesses, which is clearly a challenge on defense and security in particular. So we're working pretty actively on this matter in terms of helping our supply chain, in terms of also investing in our own our internal production capability on this matter, because Thales, we also produce PCBs in some sites, but our level of internal production is also quite limited, but we keep investing on this matter and we keep working with our supply chain. That for me, I mean, a challenge. which makes me a bit cautious when it comes to committing the company to go even higher in terms of review. Now you could argue that when we look at Q1 overall in terms of defense and security organic growth, I mean quite a strong double digit organic growth. Now I also need to say that we need also here to be a bit cautious because It's a quarter. We've got a cutoff between Q1 and Q2. So here again, I'm not telling you that this is the type of growth that we'll get for the full year. Big single digit plus, as we did last year, is probably today's the best rule of thumb. That's probably something that we'll spend a bit of time on at our capital market day. I mean, to explain to you, I mean, the various drivers we are working on, I mean, to grow our overall production capability with the constraint I've just mentioned. and in particular IFE. So we see, I mean, the level of demands on IFE. Here it's in particular IFE, not that much connectivity, but IFE. We see a level of demands which is clearly growing. That's something that you probably are in mind that this business, I mean, suffered a lot because of the COVID. And we started seeing new requests for proposal tender from customers that started end of 2022, which has been confirmed in 2023. And it's true that today we have been actively involved in various bids at large customers. And it's true that we see most of our customers willing to reinvest in their overall cabin. And IFE is a key component in terms of overall differentiations for them. we are quite positive in terms of level of demand, which means that IFE will be a growth driver for our overall avionics business in 2024. Probably a bit too early to be more precise, but it's true that we see IFE in terms of level of demand growing. This business, as you know, was quite clear in the past, in 2022, 2023, was unfortunate because of the strong drop in level of revenue, negative a bit, and hopefully it will be able to turn positive in 2024.

Thanks, Pascal. One quick follow-up. Are you back at 2019 levels of revenue in the IFE business now or have you still got a way to go?

We're still not at the level of 2019. My view, it will probably take us, I don't know, what would it be, maybe by 2026, probably getting back to 2019 because once again, It's a business where we got no orders from 2020 to 2022.

Super clear.

Thanks Pascal, I appreciate it.

Thank you.

We are now going to take our last question.

And the questions come from the line of Eric Poulin from Kepler Chevrolet. Please ask a question.

Thank you for taking my question. I've got two complementary questions actually to some of the answers you provided. So on M&A, thank you for the clarification on ATOS, but there are also some press articles suggesting interest in AI and biometric potential deals. Would you be able to comment on those as well? That would be my first question. And the second would be on the guidance. You kept the guidance unchanged despite a strong start on top line in the two most profitable divisions, which potentially could have led to slight increase in the guidance or narrowing of the range toward the higher end of the guidance. and yet you kept that guidance unchanged. And you gave some idea of why the prudence required given the seasonality and some COMP effect. But are there other factors beyond the kind of avionics, the supply chain issues, the timing on the COMPs of the various divisions? Inflation, is it a factor as well?

Okay. Good morning, Aymeric. First, on M&A, in most cases I prevent from commenting what we're thinking about in terms of M&A, but just to remind everybody, our key criteria that support our M&A policy, and I guess it's also quite clear that we're very much focused on the successful integrations of Imperva and Cobam Aerocom, which is the top priority in 2024 for Thales. I think that we mentioned that we have no interest on M&A on AI and the reason is quite simple. I mean, we've got everything we need from the inside, from Thales standpoint. We explain our new organizations, what we are doing on AI through Cortex, and the combinations of work on the upstream parts at our AI lab, but also this time more downstream. I mean to develop AI on sensors, but also on systems and systems of systems. So we presented a number of cases on this matter and all of that means that we've got everything we need in-house and we don't consider any move in terms of M&A on this matter. Biometric is a business at Thales, at our DIS business. It's a business that we would like to grow, I mean, first on organic standpoint. If one day there is something that is available for sale, of course, we will consider. But at this point, there is nothing more than that on this matter. I mean, once again, in terms of key M&A criteria, it has not changed. So, I mean, the growth boosters, allowing us to acquire, I mean, technologies. with also a view on how to expand our geographical scope, in particular where we believe that we can strengthen our presence in some geographies. Easy to integrate, that's a key element for us, which is plug and play type of acquisitions, which I mean, is also in line with the size of these potential acquisitions. And last point, of course, in terms of valuations. Now, again, top priority in 2024 is really the success of integrations on Imperva and Comamairocom. In terms of guidance, Yes, we have not changed our overall guidance, both in terms of revenue, in terms of EBIT, nothing very specific, a bit cautious at this point because we are just on Q1 figures. Maybe for your attention, a point that I have not commented, but the fact that we will get in 2024 uh more restructuring costs as compared to the previous years it's a point that i've already made as we release our 2023 financials in particular at our space business but also as because we account as restructuring costs a cost of integrations, in particular at Imperva and Cobham Aerocom. So because of that, probably more restructurings. I've mentioned as we release our 23 financials, a level of restructuring cost for the full year 2024, 120 million euros. It might be a bit above this level in particular. driven by our space business. This also at a time where clearly in 2024 development costs will be at a peak for our space business in order to finalize the developments for new generations of highly flexible space-inspired satellites. So I mean the combination of the two should also be taken into account when you look at our aerospace business for 2024. That's probably the only point that I have not commented through your questions. We will see in America whether or not we update our guidance but probably end of July as we release our Q2 figures. Thank you. Okay, so if there are no further questions, let me conclude this call by stressing that, as you have understood, Q1 2024 was pretty solid. Of course, we remain focused on the executions of our growth strategy and, of course, the delivery of our financial objectives. So I guess we'll have many opportunities to exchange all together. Thank you very much in advance and have a good day.

Thank you, ladies and gentlemen. If you didn't have a chance to ask your question on today's call, please do not hesitate to send your questions to the Thales Group Investor Relations at ir.thalesgroup.com, ir.thalesgroup.com, and we will get back to you as soon as possible. Thank you all for your participation. You may now disconnect your lines. Thank you and have a nice day.