Leonardo Spa Ord

Good evening, this is the Chorus Call Conference Operator. Welcome and thank you for joining the Leonardo First Quarter 2023 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Ms. Valeria Ricciotti, Head of Investor Relations and Credit Rating Agencies. Please go ahead, madam.

Good evening, everybody, and thank you for joining us today on our first quarter 2023 results conference call. Valeria Ricciotti, Head of AR and Credit Rating Agencies. Today, our CEO, Alessandro Profumo, will take you through our progress during the first quarter of this year, and then our CFO, Alessandra Genco, will take you through the Q1 financial results and our outlook for the full year. And we will then welcome your questions. And with this, I will now hand you over to our CEO, Alessandro Profumo.

Thanks, Valeria. Good evening, everybody, or good morning if you are in the US. And thank you for taking the time to join us today. Let's start with the key points about our first quarter results and our recent progress. We are pleased to announce results which show a good start to the year, on track, with continuous strong commercial momentum and financial performance. As further evidence of what we have said recently in March, we are continuing to deliver on our promises with growing commercial success, strong delivery and execution. making the group stronger, more resilient and sustainable, and importantly, in a better and stronger position to capture new opportunities. We are continuing to step up and accelerate our commercial performance, achieving very strong order intake of 4.9 billion in the first quarter, up 29.3% on the first quarter last year, and adjusting to 2022, excluding the contribution of the GES. and this is excluding any jumbo orders, with a B2B at 1.6 times. We have continued strong program delivery and grown our top line, with revenues in the first quarter of 3 billion, up 2.6%, on a perimeter-adjusted basis, and delivered solid EBITDA, with a strong performance of 119 million, up 4.4%, in our business division class DRS, reflecting the perimeter adjustment and excluding the expected soft start to the year of our strategic joint ventures, which were down 21 million year-on-year but are expected to improve during the year. And please note that the first quarter is normally the smallest contributor to the year. We have again improved our free operating cash flow to negative 688 million in the first quarter up almost 400 million on the same period last year, confirming the good progress we are making on improving our cash generation. Our net debt is down 1.1 billion versus first quarter 2022 at 3.7 billion, firmly progressing on our deleveraging plan. And first quarter results confirm the strength of our main group defense and governmental business and the continuing recovery in aerostructures. We are on track and are confirming the guidance we have set out recently for the full year 2023. Moreover, two days ago we have also finalized the disposal of the smallest ATM business unit in the US. So, in summary, in the first quarter we have continued to deliver and showing that the group is stronger, more resilient, sustainable, and is better set up to capture best growth opportunities. And I'm also very proud to say that Moody's has just, today, upgraded Leonardo to investment grade, recognizing a stronger execution through the pandemic the delivering track record, solid growth prospects in defense activities in light of a tense geopolitical context, and conservative financial policies with a commitment to further deliver the balance sheet. And you know, the investment grade is one of our key targets set in the industrial plan. As you know, my own experience in Leonardo is coming to an end. after six intense and beautiful years, I should say fantastic years, that have been filled with strong purpose and immense fulfillment. I will pass the baton to my successor, aware of having contributed to building a stronger company over this period, that is capable of facing the future with a long-term perspective. It has been an outstanding experience both personally and professionally. And I thank you most sincerely for the wonderful journey we made together. And with this, I want to hand you over to Alessandra to run through the first quarter results in more detail. Alessandra.

Thank you, Alessandro. And I can speak for myself as well as for everyone in Leonardo in thanking you for the very significant contribution to Leonardo over the last six years. We have so greatly valued your leadership, direction, and purpose. It's a month and a half since we set out our detailed Food Year 22 results presentation. And as you know, although Q1 is important to us, as we look to start the year in the right way, it is as always our smallest contributor to the food year. And it's important to bear this in mind. We had a strong end to last year, 22, and we have made a good start to this year, continuing our solid path of growing commercial success and increasing order intake, strong program delivery, and strengthening of cash flow. With Moody's upgrading Leonardo to investment grade, thus recognizing results achieved, our increased financial strength and the solid outlook. Q1 results are in line with our expectations when we recently set out our guidance for the food year, confirming the strength of our main core businesses, with continued strong demand for our products of defense and governmental, supporting both our order intake and growing top line, and the gradual recovery path in aerostructures being on track. Let me show you the key highlights. Order intake of 4.9 billion, stepping up 29.3% on Q1 22, adjusting 22 to the contribution of GES, which was sold by in August 22. And this performance does not include any jumbo orders. We're leveraging on our strong growing backlog, driving growth in revenues at 3 billion, up 2.6% year over year on a perimeter adjusted basis. Group adjusted EBITDA at 119 million, with a solid performance from key business divisions, up 4.4, and excluding the expected lower contribution in the quarter from our strategic joint ventures, which were down 21 million year over year. Preoperating cash flow improved by almost 400 million to negative 688 million. in line with plan at this stage of the year versus negative 1.1 billion last year. Our net debt is decreasing year over year, confirming our laser focus on the leveraging. We also confirm our strong liquidity position and our recent full year guidance. Let's now look at key group metrics for Q1.

starting with new order intake.

We saw a particularly strong quarter with orders at $4.9 billion, up 29.3%, adjusting 22% to exclude contribution of GEX. Helicopters delivered an excellent performance, more than doubling new order intake year on year to $1.9 billion, with an acceleration in the first quarter due to phasing effect. including orders for 18 AW169 for the Austrian Ministry of Defense, 13 MH139 for the U.S. Air Force, and a number of orders on the civil side, mainly related to the AW139. This provides further evidence of the civil side's steadily recovery. Helicopters is clearly benefiting from its leading market positions in both defense, governmental, as well as civil. And we also saw some orders being accelerated by customers in oil and gas. Defense electronics, again, achieved good order intake with just over 1.6 billion euros in Q1, up almost 10% on last year, growing in all business areas, both in domestic markets, including orders for the Italian army, and on the export side, including for the supply of defense systems for the Philippine Navy plus logistical support. And we saw more orders in the cyber division. Leonardo DRS also achieved good order intake almost $700 million, up 5% in line with expectations, and won additional orders for the U.S. Navy New Generation Columbia Submarine Program for the supply of electric propulsion components. It also booked orders for the supply of infrared countermeasures for the U.S. military. Aircraft order intake was solid at 731 million, slightly below last year, with Q123 orders for the logistic components of Eurofighter, as well as orders under the JSF program. Aerostructures showed some improvement, with new orders of 126 million. So overall, a very strong quarter in new order intake, with a book-to-bill of 1.6, and increasing our order backlog to now just over 39 billion euros. Next, revenues. We have continued our strong program delivery, leading to Q1 revenues of $3 billion, up 2.6% on a perimeter-adjusted basis. Helicopters Q1 revenues were $880 million, slightly below last year, reflecting a phasing effect and lower contribution from NH90 Qatar. Defense electronic revenues rose 9.5% to over a billion euros, continuing to deliver on its backlog. Leonardo DRS revenues were slightly lower at 530, 530 million, or $569 million, up year-over-year, excluding GES contribution, and also reflecting the strong performance that you won last year, due to a non-recurring step-up in the Columbia-class program. Aircraft had a solid revenue performance, slightly lower at 559 million, delivering on the Eurofighter Kuwait program and other programs, while aerostructures increased its revenues from 121 to 151 million as volumes increased. Turning to EBITDA and profitability, We delivered in Q1 group EBITDA of $105 million, or $119 million adjusted excluding for the contribution of Strategic Joint Ventures and Hensel, up 4.4 versus last year, and noting that Q1 is normally the smallest contributor to the full-year profit. We saw solid performances from our main businesses, with further gradual recovery in aerostructures, and a soft start to the year from our strategic joint ventures in Ensold, as expected. Helicopters improved EBITDA in the first quarter to 38 million, up 5.6%, and defense electronics EBITDA was 88 million, with a solid performance and strong profitability. Lower contribution from MBDA due to the very strong comparator last year. MBDA's underlying trend, however, remains very positive, and we remain very confident for the full year. Leonardo DRS reported EBITDA lower at 31 million. Slow start as expected due to business mix. At first quarter, 22 benefited from a non-recurring step-up in profitability on the Columbia-class program. Going forward, we expect growth to accelerate throughout the year. Aircraft reported EBITDA of 54 million, up 3.8% on last year, and confirming the robust profitability on its defense business. Aerostructures showed gradual improvement and reduced its loss in the quarter to 40 million, compared to 46 last year, and in line with the recovery plan. ATR's contribution in Q1 was lower, down from negative 10 last year to negative 16. The company faced some certain challenges related to supply chain and skill shortages, which are common with other companies in the sector. That said, we feel encouraged by ATR's recent new order intake, its growing backlog, and its improving market outlook, confirming their expectation of higher deliveries by year end versus 22. The contribution from space was also slightly lower at $1 million, down from $6 million, while the satellite services segment continued to perform well. In the manufacturing segment, on the other hand, we had some R&D extra costs impacting EBITDA, and we're working with our co-shareholder in TAS with a view to improve its performance in the future. As we have already discussed, EBITDA reflects the perimeter effect and the lower contribution in the quarter from our joint ventures, as we had expected. In particular, we are seeing a soft start to the year in Hensel, MBDA, ATR, and space manufacturing, as we have already discussed. Overall, the negative contribution accounts for 32 million, of which 11 million due to perimeter effect and 21 due to joint ventures. Now, moving on to the below-the-line items, you can see EBIT of 93 million, reflecting the EBITDA and the effect of PPA amortization linked to the acquisition of RADA, and net results of 90 million, also reflecting the performance of equity accounts and holdings in line with expectations. It's worth noting that including the perimeter adjustments and excluding the performance of joint ventures accounted for in EBITDA, net income was almost in line with last year, 54 versus 56 million. We have also made a good start to the year in cash flow terms and again improved our free operating cash flow. In Q1, the usual seasonal outflow was lower at 688 million. corresponding to an improvement of almost 400 million over the previous year, on track and in line with our plan. This is in part due to continued strengthening of our cash flow, with improved working capital and operating performance, much reduced factoring, and a lower level of seasonality. And it's also in part due to concentration in the quarter of cash-ins on milestones, To be clear, these are receipts related to the delivery of existing programs and are not advanced payments on new order intake. This improved cash flow performance makes us comfortable confirming our full year target of increasing pre-operating cash flow to circa 600 million euros. And we're strongly committed to continuing the leveraging process with net debt down 1.1 billion versus Q1 2022. And we're very pleased to announce that today, as Alessandro mentioned before, Moody's upgraded Leonardo to investment grade with stable outlook. The upgrade reflects the strong execution through the pandemic, the solid growth prospects for the defense business in the current macro environment, and the track record of the leveraging we have performed, with a commitment to further progress in this direction, maintaining a stable shareholder remuneration and strong growth prospects. Now moving to guidance. You have seen in Q1 we have made a good start to the year and we are on track with our expectations. Our main businesses in defense and governmental are delivering strongly, and the year has started well, especially in orders and cashing. We are pleased to see the good progress in Q1, and we're confirming the full-year group guidance that we recently gave you at the time of our March full-year results. As we previously said, it is based on our current assessment of the effects of the geopolitical and macroeconomic environment on supply chains, inflation and the global economy, and assuming no major deterioration. You can see it here on the slide. We expect this year continuing good commercial momentum and strong new order intake, top line growing as we leverage off a solid and growing backlog, EBITDA improving, leveraging on higher volumes and driven by efficiencies to balance cost pressures, plus the recovery of our joint ventures. And growing cash flow driven by the defense and governmental business, more than offsetting the cash absorption in other structures, which is itself gradually improving. As we said in March at the full year presentation, we are laser focused on deleveraging. We expect year-end debt to decrease to approximately 2.6 billion, thanks to cash flow generation while continuing to maintain a constant shareholder return. So to conclude, we are pleased with the start of the year while remembering that it's early in the year and it's only Q1 and our smallest quarter. We are on track and we are delivering our plans in line with our full year guidance. Q1 was another quarter of delivery with solid performance across all key metrics. A quarter where we saw further growing commercial success and stronger financial performance. and we're confident of our path forward. Thank you all, and I will now hand over to the Q&A.

This is the Coruscant Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. To remove yourself from the question, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star at this time. The first question is from Alessandro Pozzi from Mediobanca.

Please go ahead. Hi there. Good afternoon. Thank you for taking my questions. First of all, I would like to say the goodbye message has been received, and I wish you, Alessandro, all the best for the next endeavor. I have a couple of questions on Hensold, and I was wondering Of course, they haven't really reported Q1 yet, but I was wondering if you can give us a bit more color on the weakness that we've seen in Q1 and what we should expect for the rest of the year. And also, perhaps, it's been, I think, a year since you completed the acquisition of the stake. And I was wondering if you can maybe give us an update on how Leonardo benefited from this stake other than, of course, for the share price. The second question is on working capital, which usually, seasonally, you have a large build in Q1. And I think this year was much smaller than what we've seen a year ago. And compared to a year ago, can you point to where the working capital, to the main moving part of the working capital where you've seen the largest progress?

thank you sure alessandro i will start with the the second question so working capital as you have correctly pointed out the absorption to 123 was smaller than ordinarily and this is the result of the continued progress that we're making in working capital management and cash flow generation started two years ago with As you can appreciate, quarter-over-quarter progress throughout 21, 22, and continuing into Q1 of 23. Q1 of 23 also had a concentration of cash-ins or milestones on existing contracts that were finalized in the quarter and that were reflected in the free operating cash flow. With respect to hand-sold performance, so Q1 performance in hand-sold is fundamentally stable. What you see reflected in the figures is, and the adjustment is the fact that last year in Q1, we did not include hand-sold Q1 performance because of a misalignment in financial calendars between the company and Leonardo. And that's why you see that we are basically taking it off when we make a like-for-life comparison. I will now leave the floor to Alessandro with respect to Enso's part too.

Yeah, Enso, as we said also during the year-end presentation, we have presented to the Bund a cooperation plan on which we continue to deliver as expected. So we are quite satisfied with that. The relations with the company and mainly with the German government are very positive. And as you were saying, Alessandro, also not considering the share price, which in any case is significantly above the purchasing price. I remember you that we paid 23 when the stock... was 16 today the stock is close to 33.5 so is a completely different situation but irrespective of that we are even more sure than when we bought the stake that strategically has been a right move thank you and just uh follow up on the working capital what was the factoring during q1 please

No factoring, basically.

All right. Thank you.

The next question is from Victor Allard from Goldman Sachs. Please go ahead.

Hi. Thank you for taking my question. The first one is sort of a follow-up on the previous one on free cash flow. So you already gave some color. Thank you for this. And I was just wondering in terms of inventory build, How should we think about the coming quarters? Is that too simplistic to think that it's been also like a tailwind for you in Q1? And then the second question is in defense margins. So if you could help us understand margins in DES. It seems that year over year, you have had like a tougher comp last year. You mentioned mix and six costs, but I was wondering if if inflation was a headwind in the quarter or anything that we might miss. And the last question, if I may, is probably more at a high level in terms of what you make of the recent comments in terms of some of your European peers, which said that we need to see more consolidated defense industry in Europe. And I guess as a side way to this is if you could share your views in terms of portfolio. and if there is any update on that one in particular, thinking about defense. Thank you.

Okay, Victor. So free operating cash flow performance and trends. So free operating cash flow, as mentioned before, is significantly better in Q1 23 versus last year as a result of all the action that the group has undertaken and that continues to deploy positive effects. And you see this performance confirmed quarter after quarter. So what we are experiencing in Q1 is a progress of the steps undertaken in the past few quarters. with a concentration of cash-ins with milestones, contractual milestones achieved in Q1-23 with associated cash-ins from customers, which are also a driver of this performance. Not on new orders, so we're not talking about customer advances, but progress payments on existing contracts. Over the course of the year, we continue to see good trends in terms of improvements of year-over-year cash absorption. On margins, I want to make sure that I heard your question correct. You are asking about defense electronic margins or, in general, all the division margins. Could you repeat that question for us, please?

Yeah, probably thinking more about Europe, yes.

More defense electronics Europe, that's what you said?

Yes, so for context, I was trying to understand if the lower margins that we're seeing in European, you know, the S was mainly a result of having a tougher comp last year with positive mix and fixed costs, or... Is there like anything else that we should think about as we think about, you know, the coming quarters? And in particular, I was thinking if inflation was a headwind in the quarter when you sort of closed the quarter. Thank you.

Okay, no, thank you, Victor, for highlighting the question. No, actually, the performance number that you see in the defense electronics Europe is reflecting also the effect of MBDA and Hansel, and that is basically the driver of the Delta, because in reality, the defense electronics division in Europe For Leonardo, has a profitability which is increasing year over year. And it's increasing both in terms of absolute values and percentages. Therefore, the trend is impacted by the joint ventures. I think, yes, there is a page in page eight of the presentation. that speaks to the fact that defense electronics Europe is up year over year.

Okay, thank you.

And possibly like on last question, if you have any thoughts to share on some more higher levels.

Consolidation. Yeah. I've been always very transparent on that, in the sense that, in my opinion, during the time some further consolidation is needed, mainly because of the fact that all the countries are increasing the defense expenditure, but the quality of this expenditure are not improving, in the sense that we continue to have a duplication of non-recurring costs in order to develop platform and system that are differentiated in Europe. What is the issue is that, in my opinion, before adding an industrial consolidation, we must have an improvement in terms of coordination of the requirements within the defense system. Because if we have a common program and then one country do have a certain requirement and another country do have a different requirement, We have a consolidation, but you don't have any improvement in the way you spend your money. We have some very clear examples with that. So, and on that, we've been always very transparent with the political world, saying it is near that the politicians will price on the defense system in order to have a better coordination of the requirements. I think the GCAP will be a first important example in this direction. Then the consolidation can happen at the program level or company level. In my opinion, it doesn't make any sense to put together companies that are in different domains, but the eventual consolidation has to happen business lines. I think that MBDA is a very good example. It's an example of consolidation in the missile domain. And after some years, we have a development which is very well organized at country level in the sense that there are not any more duplications within the different countries. So making a long story short, I don't think that something happens soon.

Thank you very much.

The next question is from Virginia Montorsi from Bank of America. Please go ahead.

Good afternoon, and thank you for taking my questions. First of all, I just wanted to thank Alessandro and wish you good luck for whatever is going to come next. And in terms of my questions, I just had two quick ones. First one would be on Hensoldt. There's been an article on Reuters quoting the CEO of Hensoldt saying that they might be interested in acquiring part of your defense electronic business. So just wondering if you can share any comment on that. And then second question would be on DRS margins. I think you've been quite clear on what's happening Q1. Could you give us any color on how to think about margin progression for DRS? for the next quarters up to full year. Thank you very much.

Many thanks, Virginia. I think that the declaration of Thomas was an unfortunate misunderstanding in the sense that I'm sure that he was not thinking to an eventual acquisition of our defense electronics equipment. We always said that during the time we think that there could be a combination of our defense electronics with Enso, but is conceptually different from an acquisition.

I hope that I've answered in a very clear way.

Yeah, this is very clear. And maybe just on the DRS question on margins.

Sure, Virginia, yes. So DRS margin progression, we do see a progress consistent with the usual yearly trends. What you see in the first quarter is an unfavorable comparison because last year, Q1 22 booked a revision of margins on an important program. and a one-off increase in data, which over the course of the year will clearly smoothen out. Therefore, what we do see is a progress in increase of profitability that will lead to a margin year-end higher than the full year 22 margin.

Virginia, it's important to say that when we are talking of DRS, This program, which is a very important program, on which the first, I don't know how to call, delivery was a sort of experimental. In the second one, there has been a refreshing, for the first one as well, because usually when you have this kind of program, it's very relevant. you have a price adjustment system in the US, where with the second delivery, they repay all the extra costs for the first one. Why is it very important? Because we have been successful. And secondly, because this is a program is the ohio replacement program of which we spoke in the past we cannot provide details because it's a classified program but we said of this program there will be a sort of continuity because there are many submarines of such a class and this technology we think could be applied as well on surface ships so in reality will become an incredibly relevant profit-making program for DRS. It is very, very difficult for the DoD to switch to another supplier because the risks implied in the program were relevant for us and they are behind our shoulders because we have been successful For any other resources that should try to enter in the program, there will be all the list. Be clear?

Thank you very much. Yes, thank you both. Very clear on both questions.

The next question is from Monica Bosio from Entesa San Paolo. Please go ahead.

Yes, good evening. Can you hear me?

Yes, quite well.

Yes, thanks for taking my question and let me join to the other participants in thanking Alessandro and wishing him the best for the future. Now, coming to the question, I was wondering if we can elaborate a bit on the free cash flow absorption of the other structure business in the first quarter of the year. By year end, I'm modeling the an absorption in the range of 250 million. I was wondering if you can just give me some flavor on this, and if maybe there's room to do a little bit better. I know that the achievement of the procurement is back-end loaded, but there is an increase in production rates from the clients of Boeing. Oh, my God.

Monica, I'm sorry. Before leaving the floor to Alessandra, I do understand that you have a second question. We always said that we have a guidance of 600 million in terms of preoperative cash flow for the year, including aerostructure. We have not provided the number for aerostructure per se. And as we always said, we will become positive with the fuselage 1,407. This is what we said that we can say on aerostructures, so we cannot say anything more.

Yes, I fully understand that you do not give a guidance on the full year for the aerostructure, but in 2022, the free cash flow absorption was close to 300 million. If I remember well, this year should be a little bit lower. I was wondering if you can give us some flavor on the fourth quarter of the year, if it is significant, if not, no problem.

Monica, we always said slightly better, because as you can imagine, we have an improvement because we have an higher production rate, so we have a slightly better contribution. But the real change will be with the fuselage of 1,407. Again, the 600 million are including everything, and as we have said in the first part of the presentation, we are seeing a signal of improvement, which are very evident from the revenues you are seeing. So we cannot say anything more because we've been always – but I think that in terms The previous year, better as well, all the numbers at the beginning we had for the first quarter. We have seen the reduction in terms of debt. Year on year it's almost 1.9 billion, which is not bad. We have been just upgraded by Moody's, so I think that our credibility is relatively relevant.

Okay, got it. And a very final question is on the order intake. So the first quarter was 10% above my estimates and 15% above the market expectations in terms of order intake. Now the guidance has been confirmed. Is there room to have a better... view going forward because it seems to me that the commercial performance is really, really strong, especially for helicopters.

Minister, today what we said that we confirm the guidance is too early to say what you will do next. better of the guidance eventually. We have to remember, last year we made 17.3 billion of orders with a big order of 1.4 billion. So the reality, if you want to compare like for like, is 15.9 vis-a-vis 17 of guidance, because there are no jumbo orders. Clearly, we started quite well, so... We have a positive feeling, but we cannot say anything more. It's too early to say if this is an anticipation of other orders or if this, again, we have a very positive feeling. The commercial structure is working very well. But to say today we changed the guidance is too early.

Okay. Got it. Very clear. Thank you, Ian.

The next question is from Martino D'Ambrogi from Equita. Please go ahead.

Thank you. Good evening, everybody. Sorry to bother you on the networking capital, just to try to figure out if it's temporary or how much is structural and so on. Could you quantify the amount of milestone that you got in Q1? And if I understand correctly, zero down payment from new order intake. And still on working capital, what is the assumption embedded in your full year guidance for networking capital?

So, Martino, what I said is that The underlying trends in working capital reflected in Q1-23 are the same as those that we have experienced throughout Q22 and throughout Q21, so this gradual progress in working capital reduction and better working capital management. What I did say is that the cash schemes, the largest portion of the cash schemes are associated with milestone payments. which are progress payments on existing contracts. There may be some down payments, which are the usual down payments that we have throughout the year and every single quarter of the year. So nothing extraordinary. What I meant to be very clear is that there is nothing extraordinary in this cash performance associated with advances on new orders. But there are natural flow of cash-ins deriving from progress of activities on existing contracts that were invoiced to customers and paid by customers.

Okay, and networking capital embedded in fuller guidance?

We are not inclined to provide guidance on working capital, but we can reassure you that the 600 million of free operating cash flow guidance is confirmed.

Okay, and the second question is on the order intake, because you specified twice during the presentation that the order intake doesn't include any jumbo order. Based on your feeling, when do you expect the NATO countries' military spending will become more visible or will materialize in jumbo contracts? Is it a 24 event or maybe later?

You know, we definitely do see some orders related to NATO throughout the planned time. We do not forecast any specific order in 23. Having said that, for example, MBDA booked a $2 billion-plus order for short-range air defense in Poland a few days back. So clearly this is very specific. What we can say is that in our guidance for the 17 billion of orders we have not included any jumbo orders associated with large opportunities deriving from the NATO countries.

Okay, and if I may, a last question on the joint ventures contribution. I don't know if you are willing to share piece by piece, but overall in your EBITDA guidance, the ATR and BDA, Hansel and DRS contribution that you have in your guidance, could you quantify, if not one by one, at least globally?

Okay, what we can say to help you, Martino, is that DRS, as you have heard also from Bill Lynn and his team, is guiding towards an increase in EBITDA year-over-year, 23 over 22. And from the joint venture, we will see progress. or year over year, which is anchored depending on which division, which we're talking about on the solid fundamentals of defense business, as we've just commented from MBDA. On ATR, recovery of the commercial, on the commercial market anchored on a strong backlog. And on TAS, we are working very closely with our joint venture partner, Thales, accompanying the company TAS in important development programs which require a lot of focus.

Okay, ATR will be positive this year.

As you suggested, we will not be providing guidance on individual transactions.

In any case, we will be providing. Okay, okay. So, all the best, Alessandro. Thank you.

Many thanks. Many thanks to all of you, because all of you are making me the best wishes. To be honest, being from the south of Italy, I'm making a signal of nothing good, I should say, in the sense that I'm in a very good health and I'm very positive. So I'm sure that I will be still around in the future, maybe not working with you, but working with you. My wife would have a different perspective in saying you have to spend time traveling. So I'm very positive, but many thanks to all of you.

The next question is from Gabriele Gambarova from Banca Acros. Please go ahead.

Yes, thank you for taking my question. Just one about defense electronics. And I'm I'm sorry if it was addressed before, but what is your understanding of the industry in Europe? Because we saw some interesting statements from the CEO of Ensoft, for instance, and even you in London back in March were pretty evocative about this. So any thoughts on this ongoing process? would be?

I think that we have been always very clear. There is an ongoing process, which is the cooperation agreement and the way we work together, creating value for both of us. I would say in a very positive way. So mainly working with customer of Enso, with our customer, adding value one to the other in the way we cooperate. As you know, Enso is mainly... producer of sensors and so it's not strong in the system integration. We are quite strong in system integration and thanks to that they can, for instance, provide new services to the German Navy or the German land forces. Having said that, we always said that we have a strategic perspective with Ensolda. Clearly, this has to be realized in accordance with the German governments and our governments as well. Leonardo will remain the consolidator of the business. In the case, it would be a second step. We will see when and when, maybe, because they are, for us, relatively clear. can be realized. Today we are not in the condition of talking about that because, as I said, it is not only in our hands. In any case, we are very positive. Clearly, defense electronics is a key business for the platforms. There is a lot of value for Leonardo in having the platforms. and the defense electronics because, for instance, the avionics of our new helicopters are completely developed internally, which is an incredibly valuable value added. And since all of us, we are talking of system of system, in Leonardo, we are capable to have the platform and to create the system of system, which is not the case for many other competitors because all they have the platform, all they have defense electronics, not necessarily they have both. So we think that, as Leonardo, we have specific strengths, and we are sure that this will be at the base of the future value development of Leonardo.

Okay, thank you very much. Very clear. And if I may, just the last question on the AW249, the new APTAC helicopter for the Italian Army. There is, I think, a second and maybe a third prototype I was wondering if you are considering factoring in any kind of contract on this platform for 2023. Thank you.

We have development contracts. In order to develop the helicopter, we receive money from the defense system. Now I think that the major contracts were in 2022 more than this year because now we have two prototypes and we are pretty close to the third one. So they are flying. It's a fantastic helicopter. I've seen that many times. Flying is impressive what it's capable to do. So now we have to speed up the certification process that we are working in and with our defense system.

Okay, thank you very much.

Sorry, I interrupted you. When before I was saying of the avionics, for instance, the 249 is completely developed internally in terms of avionics, which is really an incredible value add.

Thank you. Thank you very much.

Many thanks.

For any further questions, please press star and 1 on your telephone.

I don't think there are further questions, so thank you again.

So many thanks to all of you. Since you have more or less all of you, you made me the best wishes. Before I was joking, really. I'm always very positive, so I'm sure that Leonardo will continue to grow and to perform well. At a personal level, I'd like really to thank all of you. It's been a fantastic journey. I think that Leonardo is one of the jewels of the Italian industrial base, and I'm grateful to the government for what they allowed me to do in these six years and I'm grateful to all of you that followed the company in a very positive way. So again, thanks also to the analysts because we are a complex company with many divisions, with many variables, so I know that for all of you it's not easy to create a model on Leonardo. I hope that in this year we built as a company on the personal level a reliability on what we have done and what the company will continue to do. So thanks a lot.