Thales S.A.

Good morning ladies and gentlemen and thank you for standing by. Welcome to today's Thales Q3 2025 results 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, please press star one and one on your telephone and wait for your name to be announced. I must advise you that today's conference is being recorded. I would now like to turn the conference over to Ms. Alexandra Boucheron, VP, Head of Investor Relations. Please go ahead, madam.

Good morning. Welcome and thank you for joining us for the presentation of Thales 9 Months 2025 Order Intake and Sales. I am Alexandra Boucheron, Head of Investor Relations at Thales, and with me today is Pascal Boucheron, Thales' Chief Financial Officer. As usual, this presentation is audio broadcasted live on our website, salesgroup.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 Bouchard.

Thank you, Alexandra. Good morning, everyone. So let me start with Q3 2025 highlights. I'm now on slide two. Thales continues to record over the third quarter a strong commercial momentum in most of its businesses. The level of demand for solutions continues to be high, notably in defense, where our backlog benefits from stronger European collaboration in particular in the framework of the Readiness 2030 Strategic Defence Initiative. Thales indeed booked in the third quarter several large contracts with European countries, notably in air defence. I will come back to those later in the presentation. Air defence, as you know, is a critical need today in a number of countries. In that context, Thales is proud to have recorded a first export success for the SOM TNG that was selected by Denmark in September. This comes as a major turning point for the SOM TNG and paves the way for further successes. Space also saw some good news this quarter. Thales indeed signed a first contract with Space Wine. the Consortium of Satellite Operators. This contract relates to a first sizable engineering development phase for the Iris Square constellations. Although discussions are still ongoing with the open commissions and Spacewise, this is an encouraging sign that the project is progressively taking shape. Finally, Thales keeps being at the forefront of innovation in its businesses. This is particularly true on the quantum revolution in which Thales researchers are playing a central role. To that end, we launched in September the very first quantum resistance smart card in Europe to receive high-level security certification from French cyber security agency, ANSYP. and industrial standards. This underscores Thales' commitments to staying ahead of emerging cyber risks in the quantum era. Moving on to nine months and Q3 2025 key figures on slide three. Order intake amounted to 16.8 billion euros at end September 25. up 9% organically year-on-year. This performance was driven by continuous strong commercial momentum in the third quarter, which saw a 37% organic growth and the booking of several large contracts that I will comment on the next slide. Sales came to 15.3 billion euros over nine months, up 9.1% in organic terms. Q3 alone recorded a sharp 11.2 organic goals. This put us right on track to deliver our 2025 annual targets. Moving on to slide four, commenting order intake. As mentioned earlier, commercial momentum keeps being strong for Thales, driven by the continued success of our product and solutions with our clients. As you can see on the graph on the right-hand side, all types of orders contributed to this robust performance. A few comments on large orders first, which continue to fuel the backlog. 14 large orders have been booked so far this year, of which four new orders came in Q3. Nine large orders were booked in defense over nine months, including two with a unit value in excess of 1 billion euros. Namely, the order of 26 was filed by the Indian Navy and the contract with the UK MoD for the delivery of 5,000 LMM missiles. Also, five large orders were booked in aerospace, of which four in space and one in avionics. It's worth mentioning that orders between 10 million euros and 100 million euros recorded a remarkable 18% growth, while orders below 10 million euros were continuously solid as well. Moving on to sales on slide five. A few words first on scope and currency impacts. Over nine months, the scope impact amounted to 90 million euros mainly coming from Cobham Aerocom's acquisitions, closed in April 2024. Currency impact was negative at minus 164 million euros over the period, including minus 91 million euros in 2003 alone. All in all, this negative impact led to a one-point headwind on sales reported goals. Sales organic growth reached a solid 9.1% over nine months. This performance is a result of strong sales momentum in aerospace, mostly driven by avionics, and continued double-digit growth in defense. In cyber and digital, sales were slightly down organically over the period, reflecting different trends I will comment later. Both mature and emerging markets contributed to this robust sales growth with a noticeable 14.5% organic growth in emerging markets. Now, moving on to performance by segments, starting with aerospace on slide six. Orders in the aerospace segments amounted to 3.9 billion euros up 7% in organic terms. This performance reflects solid underlying demand in Avionics, fueled by the continued success of Thales Solutions. In space, order intake was up with four large orders booked since the beginning of the year, of which Swin Telco, including the contract related to Erie Square, and also one in exploration. Sales reached 4.1 billion euros over the first nine months of 2025, representing an increase of 6.9% organically year on year. This sustained growth momentum was notably driven by Avionics, which recorded continuous robust organic growth over the period in both civil and military domains. All sub-activities were supportive of this performance. In space, sales were up year on year, in line with our annual expectation for this business. Now, commenting defense performance on slide seven. Order intake in the segments amounted to 9.9 billion euros over nine months, a 12% increase in organic terms. Q3 was especially strong. However, we know that quarterly order intake can be bumpy. In the current supportive context, nine large orders have been booked since the beginning of the year. Three were booked in Q3, including two air defense contracts with the UK and Germany for a combined amount of 1.9 billion euros. These significant commercial successes illustrate that Thales, leveraging its comprehensive portfolio of innovative products and solutions, is ideally positioned to benefit from the ongoing stronger European collaborations in defense. The perspectives remain solid in the coming quarters and years, as countries are progressively increasing their defense spending and benefiting from further support from Europe as part of the Wellness 2030 initiative. Sales were up sharply year-on-year, up 14% organically to 8.2 billion euros. All our defense activities contributed to this robust performance with continuous strong goals. This puts us right on track to deliver our single-digit organic growth for the full year 2025 in defense. As a reminder, we expect a lower Q4 on the back of the high comparison basis from last year, which saw Q4 24 records at 24% organic growth. Now, looking at the cyber and digital, I'm now on slide eight. Sales in the cyber and digital segments amounted to 2.8 billion euros over nine months, slightly down organically at minus 1.3%. In cyber, sales were down year on year over nine months. In cyber products, the business was not yet back to normal in the third quarter. The first half of this year saw the final step of impervious integrations, with the merge of Thales and Imperva sales forces. This, as you know, created some disturbances on the business. Those disturbances continue to weigh on the performance in the third quarter. We are continuously focusing all our efforts to get back to growth in an overall supportive cyber market. Cyber premium services sales were down year on year. The business kept being soft in Australia, where it has a significant footprint. The ongoing execution of our premiumization strategy aimed notably at focusing our sales strategy on selective profitable growth segments. And this is, however, showing encouraging signs. Moving to digital identity, those sales were up slightly over nine months. In payment services, digital banking solution showed outstanding growth over nine months, which was, however, muted by still low volumes and physical counts. We indeed see some areas of the business still impacted by customers' destocking. Secure connectivity solution sales recorded sustained growth over the period mostly driven by the strong momentum of digital solutions, including eSIM and on-demand connectivity platforms. So concluding with our financial objectives for 2025, I'm now on slide nine. The continued strong momentum for both order intake and sales in Q3 2025 and the strong perspective ahead of us make us fully confident to achieve the target set for the year. Accordingly, we fully confirm our 2025 objectives. Book-to-bill ratio will be above one. Sales are expected to grow organically between six and seven persons, corresponding to a range of 21.8 to 22 billion euros, and the adjusted EBIT margin is expected between 12.2 and 12.4 persons. Many thanks for your attention, and I will now be pleased to answer your questions.