Thales S.A.

Good morning ladies and gentlemen and thank you for standing by. Welcome to today's Thales order intake and sales at September 30, 2024 conference call. The presentation will be held by Pascal Bouchier, Thales CFO. It will be followed by a question and answer session at which time if you wish to ask a question you will need to press star 1 1 on your telephone and wait for your name to be announced. I must advise you that this conference is being recorded. I would now like to hand the conference over to Ms. Alexandra Boucheron, VP, Head of Investor Relations. Please go ahead, Madame.

Good morning, all. Welcome and thank you for joining us for the presentation of Thales 9 Months 2024, Order Intake and Sales. I am Alexandra Boucheron, the Head of Investor Relations at Thales. With me today is Pascal Boucheron, CFO of Thales. As usual, this presentation is audio webcasted live on our website at thalesgroup.com, where the slides and the press release 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 Boucher.

Thank you, Alexandra, and good morning, everyone. So let me start with the Q3 2024 highlights before moving on to the numbers. I'm now on slide two. Q3 2024 has been a new quarter of strong commercial momentum, in particular in defense and security. This dynamic was notably driven by large orders. Over the quarter, Thales signed seven large contracts with a unit value over 100 million euros, highlighting again our solid positioning in our major markets. I will come back in details on this excellent performance later in the presentation. Sales growth was also sustained, reaching a 6.2% organic growth year-on-year over nine months. This performance was notably driven by strong growth in defense and security and robust trends in avionics. Q3 was also marked by the announcement of a partnership with Mistral AI, one of the most powerful generative AI systems on the market. Through this partnership, Aiming at developing the use of generative AI within the group, Thales will accelerate its internal digital transformation while ensuring the strict protection of sensitive data. Lastly, we were proud to join the CAC40 EHD Index in September. This comes as a new example of the recognition by the financial community of Thales' commitment and contribution to the protections of society, the planet and individuals. Turning now to slide 3 with the snapshot of Thales' 9 months and Q3 2024 key figures. New orders amounted to 15.6 billion euros as of end of September 2024, delivering a robust organic growth of 23% versus last year and reflecting the confirmations in Q3 of Thales' strong commercial activity. Sales came into 14.1 billion euros, going 6.2% on an organic basis over the first nine months and 6.6% in Q3 2024. This performance puts us right on track to reach our 2024 target. Now, looking into details at our order intake, I'm now on slide four. As you can see, the strong organic growth we recorded in both Q3 and nine months is mainly driven by large orders. In Q3, we booked seven new large orders, which drives to a total of 19 large new orders over nine months. Large orders more than double year-on-year, which is a strong performance. All seven new large orders in Q3 were related to defense and security, reflecting the strengths and the excellent dynamic of this business. It's also worth noting that out of the 19 large orders awarded over the first nine months of 2024, two of them were related to space and one to avionics, demonstrating Thales leadership across all major businesses. The momentum is also good on smaller orders with a 6% reported growth for orders below 100 million euros coming from all our businesses, including our recent acquisitions. Turning now to slide five and nine months 2024 sales goals. I work first on currency and scope. The currency impact was a little bit more material this quarter, minus 22 million euros, leading to a minus 38 million euros currency impact over nine months. As you know, the scope impact is much more significant. resulting from the acquisition of Cobham, Imperva and Deserent, partially offset by the disposal of the electrical activity. All in all, this translates into a positive impact of 469 million euros in line with expectations. The organic growth reached 6.2% over nine months. It was mainly driven by defense and security, with no surprise, but also by aerospace, which still experiments a solid momentum lifted by Avionics while space shows low single-digit organic growth. The IS recorded stable organic growth, reflecting contrasting dynamics in the business that I will detail later in the presentation. From a geographical perspective, nine-month sales organic growth was solid and well-balanced across the board, including good momentum in both mature and emerging markets. Let's now have a look at the performance of each segment, starting with aerospace on slide six. Orders in the aerospace segments came in at 3.6 billion zeros, up 8% in organic terms. This solid pace of growth reflects contrasting dynamics. Avionics continues to record a solid momentum with double-digit organic growth over nine months, driven by both military and civil activities. In space, order intake was down year on year, suffering from a challenging comparison basis. In fact, two large orders above 100 million euros have been booked since the beginning of the year, versus five in 2023. Space reached 3.8 billion euros over the first nine months, an increase of 5.3% organically versus last year. This sustained good momentum was notably driven by Avionics, which recorded mid-single digit plus organic growth in line with H1 2024 trends. This solid performance reflects the continuous strong dynamic of our IFE and flight Avionics OE businesses. However, we anticipate a slowdown in Q4 in Avionics with an expected slower pace of growth due to delays in delivery that our clients are currently facing. Space recorded limited growth over nine months with low single digit organic growth in line with our expectations. Turning now to slide seven. looking at the defense and security segments. Order intake amounted to 9 billion euros in nine months 2024, which translates into an organic growth of 40% versus last year. As you can see, the momentum continues to be very strong in these segments, and Q3 has been again a strong quarter. Defense and security indeed booked seven large orders of the quarter, among which the production of seven additional sections of the 70th new generation for the French air and space forces, or two major contracts with the UK government to provide short-range missiles. Our backlog in defense and security reaches a new high at 37 billion euros, representing close to 3.8 years of sales, providing a very comfortable level of visibility. Sales came at 7.2 billion euros, an increase of 8.5% in organic terms versus last year. This solid level of growth reflects the continued positive trends across most business lines. With the strong backlog mentioned previously and our continued effort to ramp up production and delivery capacity, this sustained pace of growth should continue in Q4. Now, looking at digital identity and security on slide eight, as commented earlier, Please keep in mind that nine months 2024 figures integrate a positive scope effect linked to the acquisition of Tessier and Interva. Additionally, I remind that 2023 figures have been restated to include cyber civil activity transferred from the defense and security segment. At 2.9 billion euros, sales are broadly flat organically year-on-year. Here again, this performance reflects contrasted dynamics. In banking and payment services, we keep seeing destocking in North America that is lasting a bit longer than expected. This decline in this activity is, however, offset by a good momentum in other activities, namely, cybersecurity and biometrics activities are indeed recording a continuous steady pace of growth, and connectivity solutions are delivering double-digit organic growth, reflecting our continued run-up on this market. Finally, concluding with slide nine, and a reminder of our financial objective for 2024. As you understood, Q3 performance was solid across the board, with a good momentum in most of our businesses. This enables us to confirm all our objectives for this year. Book-to-bill ratio will be above 1. Sales are expected to grow organically between 5 and 6%. which corresponds to a range of 19.9 billion euros to 20.1 billion euros based on September 2024 foreign exchange rates. An EBIT margin is expected between 11.7% and 11.8%. Many thanks again for your attention, and I will now be pleased to take your questions.