Leonardo Spa Ord

Good afternoon, everyone, and welcome to our Q1 2025 results presentation. I'm Valeria Ricciotti, Head of Investor Relations and Credit Trading Agencies. Today, our CEO, Roberto Cingolani, will update you on the progress that we have made during the first quarter of this year and how we are positioned looking forward. Then our CFO, Alessandra Genco, will take you through the Q1 2025 results and performance across the group. We will then welcome your question. The call is planned to last no longer than one hour, including the Q&A. The supporting slide presentation is available for download by registering to the webcast. And all the Q&A results material are available on our website under the Investor Relations section. Please note that throughout the presentation, we will be making forward-looking statements, so I invite you to refer to our safe harbor statement, which applies to this call as well. Now, I will hand you over to our CEO, Roberto Cingolani.

Thank you, Valeria. Hello, everybody. Ladies and gentlemen, thank you for participating in this quarter one presentation. Let me start with the numbers. First of all, despite it's only one month and a half that we met for the update of the plan, we have remarkable news. And I think the start of the year is particularly good. as you can see in the table we got comparing the first quarter 25 to the first quarter 24 a remarkable increase of all the kpis orders are increasing by more than 20 percent of course it is comparing the first quarter 24 excluding the submarine activity that was sold as you remember last year so it's a homogeneous comparison We have plus 20.6% new orders and revenues are correspondingly growing by almost 15%. We're just accumulating $4.2 billion in this first quarter of 2025. EBITDA is also growing substantially, plus 18%. And the return on sales is increasing by 2.2% points. The free operating cash flow is increasing by plus 7.6%. And the net debt is considerably reduced down to minus 28%, almost 28%. The rating agencies have upgraded, Standard & Pure have upgraded the position of the ranking of Leonardo, as well as Moody's has given the positive outlook. So we are satisfied of what's going on. I think it's very important to mention that the growth is homogeneously distributed among the divisions. And even aerostructures having normally some problem has been increasing, improving the situation. I will tell you in a minute why. There is an important increase of export, and I think we are starting to measure factually the increase of the KPI thanks to the efficiency, which is globally improved throughout the company. Alessandra will give you more information later, so I will not bother you with the details division by division. What I would like to mention with some specific attention is the increase of international and export order. If you compare in the plot here on the right, you can see here the first quarter of 24. Last year we were exporting 62% and we had domestic orders for 38%. After one year, the export component has been growing to 67%, keeping 33% of domestic orders. This means that we're not capturing a captive market, domestic market. We're capturing real international opportunities. In some sense, our competitiveness is now increasing, and we're very satisfied. We hope this will improve even further over the next quarters. So let me start with aerostructures. I know there is a lot of focus about aerostructures. So I will divide this couple of minutes presentation about the aerostructures in two parts. What we call the standalone industrial plan. This is what we define as scenario number three in the presentation of the plan, which is under implementation. This is kind of mandatory. We have to do it anyway. It's very important to optimize to improve the situation. It consists of... Industrial setup optimization, which has to do with the fingerprint and with the reorganization of the plants. We're working a lot to increase efficiency. Supply chain restructuring, and this has to do primarily in identifying other companies that can participate to the supply chain effort in countries where the labor cost is more convenient to optimize the global cost of the products. WE'RE WORKING A LOT ON OPERATIONS PERFORMANCE IMPROVEMENT. THIS WAS PROMISED THROUGH DIGITALIZATION AND OPTIMIZATION OF THE PRODUCTION PLANTS. AND OF COURSE, WE'RE INSISTING A LOT ON REVENUES INCREASE AND DIVERSIFICATION. THIS IS VERY IMPORTANT BECAUSE WE CAN REGISTER NOW AN INCREASE IN orders from Boeing, plus 77 orders, new fuselages, and also an increase of components from Airbus for the A220 aircraft. But also we're moving our brand new alliance with Bicarb. We are moving, thanks to this alliance, some of the composite production of advanced drones into the Grottaglia site. So this is anyway a diversification that we promised, and we believe it's very important anyway to improve the situation. Now, this is what's going on now in terms of scenario number three, what we call the standalone industrial plan. But, of course, the most important part is that we are running quite fast towards the permanent solution of the problem thanks to the discussion with our strategic partner. As you remember, over the last few months, we indicated, we mentioned that there was a due diligence done internally to the company. We created a task force to face once for all the problem of aerostructures. We developed a standalone multi-scenario industrial plan. Scenario number three was the most advanced that we reminded you in the last meeting, one month and a half ago. And then we start screening to find potential industrial partners to create a new joint venture on aerostructure, the global champion. Now, the good news is that a few weeks ago, we finally identified the partners and signed an exclusive memorandum of understanding. So now the teams are working. This is very important because we are defining the partnership and the development of the joint industrial plan. There is a detailed due diligence activity which is carried out by partners through International Advisor. And just to let you know, in these days, three days ago, before yesterday, yesterday and today, there is a team of experts of the partner supported by the International Advisor that is visiting our plants, the four main plants, and they are checking the actual capability of Leonardo structures to guarantee the production rate of 14, 15 components for monthly shipment. And this is a very important step because we are now entering in the real analysis of the industrial capability. Preliminary results seems to be very encouraging. So we confirm that we expect the principle of the partnership agreement to be defined and finalized before the summer, by July, as I already anticipated. And hopefully by the end of the year, the partnership agreement will be signed. This is our main target. It's very important. This is for us the main challenge because we really want to make something new and something really disruptive to solve the problem that has been lasting too long in Leonardo. Now, concerning flying objects, I want to update you about the JV with bike car for the advanced unmanned devices, generally all payload from very small to big. We are progressing extremely fast. The news is that on April 29, we have signed the head of terms with the bicarb partners. We are really moving very fast. The technology is absolutely complementary. There is a fantastic chemistry with the partners. We plan to sign the agreement for the joint venture very soon, and I can anticipate, you guys, that the joint venture will be very likely presented at the International Aviation Show in Paris in Le Bourget in a few weeks. It should be in June. So we are preparing a surprise for you guys when you will be there, hopefully, and we will present some of the prototypes and also we will communicate the creation of JV. How this is working? At the moment, there are three technical teams that are working on the JV. The technical working group, I mean, needless to say, we are integrating objects, payloads, and flying technologies. So all the requirements are under study at the moment. We are working with an industrial group on the optimization of the production lines. And of course, there is another group working on the marketing and sales working group. Now, ongoing, we have the analysis of the system integration of different payloads. This is underway. We have identified the Italian production sites. There will be three sites in Italy where the integration will be carried out to improve the volumes, of course, to speed up the creation of the new technology, the new machines. And of course, because we are strongly interested in having certification of those drones in Italy and therefore in Europe so that the market can be opened very quickly. As I said, the first public disclosure will be done at the 55th International Paris Air Show. But what is very important now, to my opinion, is that speed is as important as money at the moment. We have to be extremely fast. This is a growing market. Europe is rather behind, and the competitors around the world are ARE ALSO ACCELERATING. I BELIEVE WE HAVE A VERY GOOD POSITION NOW AND THE COLLABORATION WITH BICAR SEEMS TO BE EXTREMELY, EXTREMELY EFFECTIVE. NOW, THIS IS VERY IMPORTANT BECAUSE IN THIS MOMENT, BECAUSE WE ARE TAKING OFF WITH BICAR, GCAP IS TAKING OFF. JUST TO REMIND YOU THAT ACCORDING TO THE JOINT VENTURE AGREEMENT, it has been established that Italy will have the first CEO of the GCAP joint venture. So we have proposed already the Italian CEO for the JV. This is the actual chief of the aircraft division, Dr. Zoff, which has been accepted as a name, as a character by the partners. Of course, we are now waiting for the technical operation that will get started, will start the JV. So Dr. Zoff will move as a CEO of the G-Cup joint venture. And we are therefore... Slightly changing internally the organization of the aircraft division. Dr. Bortoli, who is the actual director of aerostructure, will become the chief of the new division, which will include drones, of course, G-CAP, the NATO of G-CAP, and, of course, the conventional, the legacy aircraft. aircraft activity, the 346, the Eurofighter, and so on and so forth, and obviously, aerostructure. I want to be extremely clear. I don't want any ambiguity about this matter. There is no change of strategy whatsoever for the loss-making aerostructure division. This is our first priority. We are working very seriously. We are very committed in fixing this problem. But of course, in the meantime, we have to allow the company to continue its activity on aircraft because there are so many new things, the drones, the GCAP, that we have to get an organization internally that allows us, that let us work properly and effectively. So in this respect, I hope I've clarified that this is essentially a reorganization, internal reorganization that should allow the company to be as fast as possible, as effective as possible. notwithstanding the fact that we are working 24-24 on the solution of the structural problem, and I told you exactly what is the status now, and I'm very confident by July we will give you the good news. Now we go on the JV Leonardo Rai Metal military vehicles. This is running very well. There was last week a meeting between myself, the CEO of Rai Metal, Armin Papberger, and the chief commander here in Rome. Two infantry vehicles have been delivered. One is already in Italy. The other one will be delivered by the end of... of May at the occasion of the second June bank holiday. Four additional Lynx vehicles will be delivered by the end of the year. Very likely those will already use, adopt the new turrets fabricated by Leonardo with all the payload electronics weaponization. We are in progress in producing 10 platforms under construction for 2026. So as you remember, the original idea was to start with the first delivery shipment of infantry vehicles. Meanwhile, we are working full time on the... I'm sorry. on the integration of the main battle tank. At the moment, the integration of chassis, turrets, electronics, power, and transmission is under study by the joint team of Rheinmetall and Leonardo. And, of course, we are discussing all the requirements of the MBT with the chief commander officer because we are anticipating the necessary choices, technical choices, that will be needed to speed up the delivery over the next few years. So from the land defense point of view, I think we're slightly ahead compared to the agenda. Let me update you about the M&A activities. That's very important also. We're continuing our scouting effort on strategic platforms in the last 12 months. As you remember, one month and a half ago, I told you, if I remember correctly, there were 20 target solutions. Now there are 22. I'm not sure. I think we've been increasing one or two units. Anyway, we have five offers that are still ongoing. Five have been refused, and 12 have been stopped because we didn't find, how to say, a convenient landscape for us to make the investment. Now, the relevant update is shown here. There are two exclusive negotiations ongoing in the cybersecurity area. There's one company from Denmark. The other one is from Sweden. There is a due diligence phase already started in a defense software tech company. This is for our American market, actually. There is another ongoing discussion for a company that could be very useful for our capacity boost strategy, particularly for the land defense systems. And finally, we have started the due diligence for a space company, particularly expert in small satellites. So we are, of course, considering further divestment in minor businesses under analysis, but I think this is what we've been doing since two years. We constantly try to optimize our business, and this means continuously cleaning the portfolio, optimizing the portfolio, rationalizing the portfolio, and divesting on minor businesses that have no big perspectives. Let me go to the efficiency plan, which is a constant effort that the company is running since the very beginning of our industrial plan. We are absolutely on time. You remember in 2024, we got some better performance compared to the expectation, 191 million rather than the forecast of 150 million. So we have a kind of wallet of $41 million that should be considered by year number one. Year number two, at the moment, we got approximately $48 million saving in procurement. So this is most of the saving is coming from procurement optimization. 11% of the saving comes from corporate optimization, 7% from travels, and business disposal, the $25 million, components of the first quarter amounts to approximately 15%. So overall, we estimate 71 million savings for this third quarter, and we are on track according to the prediction for this year. Just want to show you that We are trying to map continuously how this is effective, how the saving problem is effective. I've shown you this plot already last time. According to the nominal inflation, we should have had costs like the gray line with inflation of 5.4%. We made a lot of renegotiation of long-term agreement to mitigate the role of inflation, and we went down from 5.4 to 4.5 equivalent impact of inflation. Then we made the saving plan. The saving plan is this blue line here that I reconstruct by my pen. that was corresponding to 3.3 average inflation. The actual evaluation we have now is approximately a bit less than 3, so it's the green line, which is continuing. So our effort is to stay with this green line also for the next years, for the years to come. All the companies are very committed, from procurement to... TO DISTRIBUTION TO TECHNOLOGY R&D ENGINEERING SO I'M CONFIDENT THAT WE WILL KEEP THE PROMISE. LET ME GO TO THE CAPACITY BOOST NOW BECAUSE THIS IS A CONCEPT WE HAVE INTRODUCED ONE MONTH AND A HALF AGO. THE CONCEPT WAS THAT REARM YOU, INCREASE IN INVESTMENT IN DEFENSE, ALL THOSE THINGS COULD MEAN EXTRA RESOURCES AND EXTRA RESOURCES MEANS EXTRA ORDERS AND EXTRA ORDER MEANS EXTRA DELIVERY. And so we were really committed in trying to forecast what could be the impact of this very complex geopolitical situation because of the existing conflicts and so on and so forth. And we decided to face the problem of the capacity boost in a quantitative manner. Forgive me, I mean, this has nothing to do with the academic lesson, but I just want to show you what is the technical approach. For us, the capture rate means the duration between the net revenues that are effectively captured by the company on the potential revenues that, in an ideal case of no losses, we should be able to catch. I mean, obviously, we would like this ration to be equal to one, which means ideal, no losses. This is a typical fluid dynamical process. It looks like a pipeline of water, or if you want, an arteria in the body, and the flux of blood is actually what we call the revenues. Now, how can we reconstruct this and how can we forecast what happens? Our potential revenues, which is the ideal case, is actually reduced by a number of losses. The first one is the loss induced by non-core product, LN. I mean, we are cutting everything non-core. The second loss is obviously an incomplete portfolio. If we miss some component and we're going to buy it or develop from scratch, this is going to cost more. So we should see which are the weak points in our portfolio. The third loss is loss for production inefficiency. That's a nightmare, of course, because it means many, many things. Digitalization, modernization. We can write a book on production efficiency or inefficiency. Then we have production capacity. Production capacity means how many plants, how many people. Obviously, it's volume related. Loss of supply chain discontinuity, that's a critical issue in this moment. We're working on the supply chain because this can really stop the process and reduce efficiency. And finally, losses due to lack of skilled human resources. Those are the parameters. that normally contribute in reducing the potential revenues and, of course, make the ration quite smaller than one. And we don't want to have smaller than one. We want to have close to one. Now, forgive me, this is just a very ancillary product. I don't spend too much time on this. But obviously... If we don't have a complete portfolio, we miss the water that should enter in the pipeline. It's just a fluid dynamic concept. It should be a differential equation, but this is very simplified. We have a loss of production capability, non-core products, and inefficiency, which can be represented by a too short pipeline, obstructions or vortex, and losses, holes. And of course, if we don't have human resources or if we have the supply chain that doesn't work, we have a shrinkage, a further reduction of the cross-section. So actually, we don't collect water. The EBITDA is small. And therefore, the fluid operating cash flow is small. Now, if we increase... Thanks to the organic growth, new initiatives, and the optimization we are discussing since a few months, if we increase the collection capability, if we expand our pipeline, which means reducing the L, the losses, we can get much better EBITDA, much better free operating cash flow. Each one of those losses is not a drawing. It's a team of people that is working with the support of an international advisor. We have created a team of 15 corporate people working on supply chain, program management, technology and digital solution, finance, HR, commercial and product virtualization, purchasing and infrastructure, together with approximately another 15 people from the divisions. Because of course, this has to enter into the very and the very fundamental activity of divisions with an advisory team that is working and supporting our activity. The concept was launched in March 25, just after having presented you the need of a capacity boost. We are May. We are mapping and making the gap analysis. We plan to give you the master plan by July. Once again, speed is as important as money at the moment. We have to run. I think most of the contribution will come from the big divisions. To give you an idea, helicopter division and electronic division are already fully committed in this effort. Of course, also the others. But you understand that helicopters and electronics on their own, they make a large fraction of the total revenues of the company. So I have to say they are mostly involved in this optimization rate. I don't want to bother you with too many details, also because we are just a month, one work. We still have time to optimize and to, how to say, to calculate this fluid dynamical model, if you allow me to say. But for instance, the electronic division has already made a plan to almost double the surveillance radar production and to increase by 65% the electro-optic technologies for turrets. which is obviously relevant for land defense, metal, and so on and so forth. We made some strategic choice for getting more independent in terms of chip fabrication and electronic device fabrication. And there is a steering committee into the electronic division, which has a very large portfolio, to optimize the portfolio as much as possible in the shortest time possible. Concerning helicopters, There is a plan now which has been implemented by our team for increasing delivery by 40% and services by 30%, increasing the engineering capability by plus 5 million hours per year, and increasing production capability by an equivalent of 11 million hours per year. We're working on synergies and improvement of production in Poland, in Berdziate, in Tessera. So different plans that should be more synergistic. And of course, we are investing in improving and in renewing, refurbishing new machinery, new tools for mechanical production. Those are just examples. I could give you as many as on other divisions, but this is the effort we are doing. As I said, it's one month after we decided to face the problem, to tackle the problem from the very fundamental point of view. And I'm confident in July we will show you something with a clear architecture for the capacity boost. Now, because I'm talking about capacity boost, I should go back to the defense budget because the capacity boost comes from the idea that there should be more resources, there should be more demand. I already shown you, I've shown you already that we increase our export more than the domestic market. But anyway, we have to be more and more competitive. That's the point. And to be competitive, we have to see also what's the market, what will be the potential request of the market. So I'm giving you some more updated numbers concerning the domestic market, Italy. You can see here very clearly, 2024, we had approximately $32 billion investment in defense. Light gray means salaries, army, and so on. The colorful part, approximately 34%, is our addressable market, which comes primarily from the Ministry of Defense and partly from other ministries, like industry or other organizations. In 2025, the forecast is... higher. It should be 36 billion, so plus four compared to last year, with an addressable budget of 39 percent compared to 34. So somehow we expect this to be necessary. This will need a capacity boost because we have to face an increase of demand. Not to mention the international market, where our competitiveness in exports seems to be GROWING STADILY. CONCERNING EUROPE, AT THE MOMENT WE DON'T HAVE NEWS COMPARED TO FIVE WEEKS AGO. FIVE WEEKS AGO OR ONE MONTH AND A HALF AGO. YOU REMEMBER WE WERE TALKING ABOUT REARM OR READINESS PROGRAM, EUROPE, 650 BILLIONS through an increase of GDP investment, average GDP investment in Europe, but this is not yet quantified. And then 150 billions coming from, for loans, coming from the cohesion funds and other funds that Europe made available, but those are anyway funds already distributed to the states. The good thing is that we've been we've been invited. Most of the big companies, the defense company, have been invited by the commission, by the president of the commission in the next few days. I think, if I remember correctly, it's in one week time. And there are a number of meetings at European level to see how this potential happens. investment in defense could be deployed. I don't have other information. I don't think anybody has other information on Europe, but for sure the Italian landscape is clear. Italy is moving towards a 2%, not being reached maybe by 2025, but clearly there is a net positive curve. Let me go now to this is another question I got from many of you. What could be the impact of tariffs on the business of Leonardo? So we have to be very clear. I mean, of course, something is unpredictable, but I think I can safely say that defense and governmental sales should not be impacted by the tariffs. This seems to be the consolidated point of view of all the operators. So there should be no exposure. International footprint has no exposure. If we produce in U.S. and we sell in U.S. because we have our second domestic market is U.S., there should be also no exposure. So those are... good news, let's say. There could be some problem. It's in yellow, not in green, in our traffic light scheme, in case there are problems with the supply chain. But as you know, we are investing a lot in differentiation, diversification of the supply chain. We have more than 5,000 companies in the supply chain overall, as Leonardo, and obviously we can manage geographically, eventually we can manage in a way that we reduce the impact. That's why it's just a yellow warning. The assessment of the impact is also very clear. Military programs, including Leonardo DRS and military helicopters, should not be impacted. Boeing 787 aerostructure should not be impacted because the contract states that Leonardo is not responsible for possible U.S. tariffs. There might be some impact on civil helicopters in the U.S. market. We put this in red. Honestly, it's not a huge market, but that could be the most impacted area for us. We have a number of mitigation actions. I mean, of course, changing a little bit the production, reassessing the production and changing the assembly line geographically, exploiting global procurement in a smarter way. Of course, we can review the contract with the customers. And there are, of course, other options, more financial in terms of temporary imports and so on and so forth. But I'm sure you want to see the final number, which is shown here. The U.S. revenues package is approximately 4.1 business. This is the business related to U.S. This blue part is the U.S. civil helicopters. It's about 50% overall, and this could be impacted by the tariffs. The rest should be... Not so much impacted. So we expect a marginal estimated impact according to current assessment. And to give you a number, an estimate, it could be in the range of 10 to 20 millions in the next couple of years, so 25 and 26, out of a global business of approximately 4 billions. So we can safely say that as long as the situation will be this one, there should be not a big problem for Leonardo. I think with this, I gave you all the information that I hope were fitting with your question and with your curiosity. I leave the stage to Alessandra Genco, our CFO, that will give you more details about the individual division performances and, of course, more details about the financial KPIs. I hope I satisfied your curiosity. at least the most important question you have, and I'll be happy to answer you later after Alessandra has finished her presentation. Thank you very much for your attention, guys. I'll see you soon.

Thank you, Roberto, and good evening, everybody. I'm pleased to be presenting our Q1 results, which show increases across all KPIs. It is a month and a half since we spoke to you in the industrial plan presentation in March. As you know, although the first quarter is important to us as we look to start the year in the right way, it is normally our smallest contributor to the full year, and it's important to bear this in mind. But it's clear that we have made a solid start to the year. You can see this across all group KPIs. continued commercial momentum with solid double-digit growth in order intake, good top-line growth delivering higher volumes of our growing backlog, as we had planned, confirming growth in profits and improving cash flow, leading to reduced net debt. Let me also mention that S&P increased Leonardo's credit rating to BBB stable outlook from BBB minus positive outlook, based on our solid operating performance and improving credit metrics. At the same time, Moody's has also reviewed its outlook to positive from stable, reflecting our solid operating performance since the upgrade to BAA3 in May 2023 and expectation of continued growth amid increasing defense spending across European and NATO countries. Moving now to KPIs, excluding the UIS contribution, group order intake was 6.9 billion, up 20.6%. We're seeing good demand for our defense and security products with strong commercial performances across all divisions, and in particular helicopters and defense electronics. This is reflecting good positioning in key domestic markets as well as export markets. The group order intake growth is again well balanced with a good spread geographically and across business areas and without any concentration in any single country or customer and no jumbo orders. Book-to-bill was almost 1.7 times and our group backlog has risen to 46 billion at March and stands at record level. New orders and our ability to deliver off this backlog drove a top-line increase in Q1 of 14.9% to 4.2 billion, driven by good performances across all segments, in particular defence electronics and cyber across all domains, followed by helicopters. Rupee beta increased 17.9% to 211 million compared to 179 million in the previous year, mainly leveraging higher volumes and return on sales in Q1 increased to 5.1%. Our Q1 free operating cash flow outlook was 580 million, an improvement on last year. This was driven by higher EBITDA and tight working capital management, with acceleration of milestone payments and cash-in towards the end of the quarter. As at March, our GroupNet debt was also significantly lower at 2.1 billion versus 2.9 billion in March 24, including the initial tranche of sale proceeds of 287 million received in January from the sale of our UAS business. So a solid start to the year, on track, and it underpins our confidence in our targets for the full year. It all translates into further steps in delivering on the industrial plan. So let's go deeper into the results and performance at business level. Starting with helicopters, where we saw continued strong positive momentum with good progress on all programs as well as customer support. New order intake was 2.4 billion in the first quarter, up 15.6%, with higher orders on the defense and governmental side, including the AW249 program for the Italian Army, with orders for supply of additional helicopters, plus development of additional capabilities. We also saw multi-platform orders for governmental customers in Malaysia. plus orders on the civil side in the offshore oil and gas segment, and orders for customer support from the UK MOD for its AW101 Merlin helicopter fleet. Helicopter revenues were 1.3 billion, up 16%, driven by increased activity on the AW family in the dual use area, as well as customer support and training, leading to higher profitability and an EBITDA of 70 million. So good performance from helicopters and continued strong commercial momentum with good demand across business areas. Moving on to defense electronics, this segment also had a good start to the year. For the European component, Q1 orders was 2.1 billion euros, up 5.6% year-on-year, excluding the UAS contribution. That translates into a book-to-bill of two times, 2x, and shows growth across domains, geographies, and especially in defense systems. Good demand for upgrade and renewal across a broad range of platforms. We saw additional orders for the Mach 2 radar for the Eurofighter in UK, as well as 16 Eurofighter for the Italian Air Force. And in the naval sector, the order for combat systems for the Indonesian Navy patrol vessels. Electronics Europe revenues were up 10.6% at 1.1 billion euros, excluding the UAS contribution, reflecting higher volumes as we delivered off the growing backlog. EBITDA rose to 125 million euros, an increase of 11.6%, excluding UAS. At the same time, Leonardo DRS in the US had a very good start to the year, showing good growth in orders up 21.6% in Q1 to $991 million, with further orders for electric propulsion components for the US Navy Columbia-class submarines, plus additional orders for sensors for the second-generation infrared vision systems for the US Army Bradley. revenues rose to $799 million on the back of growing volumes, and EBITDA grew from $55 to $66 million, with an increased ROS return on sales of 8.3%. Moving now to cyber and security solutions, which also started the year at a good pace, we see a first quarter with continued growth and increasing demand. New orders stood at €220 million up 8%, revenues €168 million up 21% and EBITDA €11 million up 37.5%, continuing its positive trajectory with increasing volumes and profitability. Order intake growth was mainly driven by domestic markets and included various orders for the Italian public administration through the PSN for digitalization and the cloud infrastructures and secure communications. New orders came also from international customers. In aircraft, we again saw continued strong delivery on profit and high margins, mainly driven by fighters, plus customer support activities. Order intake in Q1 was 839 million, up almost 50% year on year. We continue to have a very solid contribution from the fighter business, with important new orders for Eurofighter logistics and for the supply of JSF wings. Revenues increased 7.5% to 613 million and profitability continued to be very strong with EBITDA up 14.4 million at 63 million and return on sales of 10.3%. Moving to the civil side on aerostructures, what we saw in the first quarter, is a further progress in line with our recovery plan. Order intake increased to almost 500 million, double the level of the previous year. Aerostructures revenue, however, in the first quarter were lower at 150 million and EBITDA losses increases to 56 million. This reflected the decision of Leonardo to slow aerostructure production rates on the B787 program, moving to a single shift per day for the first half of this year with the purpose of unwinding inventory. The plan is then to increase production level again in the second half of the year in line with the Boeing production profile to ramp up the B787 from three to five and progressively to seven ships per month. And this will lead to better underabsorption of fixed costs and reduces losses later in the year. Then ATR's contribution in the first quarter was negative 14 million with performance impacted by the postponement of sun deliveries. Turning now to our space division. In the first quarter, we saw an improving commercial performance and profitability. New order intake was higher and almost doubled year on year to 193 million. notably in Telespazio's satellite system and operations and geo-information segments, also leading to increasing revenues. The more positive EBITDA contribution reflected the confirmed profitability of Telespazio and for TAS, beginning to see some benefits from efficiency plans launched last year. Our strong group EBITDA in Q1 also helped drive a better bottom line performance. EBIT grew to 189 million in Q1 with only a very low level of restructuring costs, while the ordinary net result grew to 115 million versus 93 million the previous year. The bottom line net result of 396 million benefited from the capital gain recognized on the sale of the UAS business to Fincantieri, completed in January this year. Importantly, we have continued to make further progress in improving our cash generation. It is driven by robust performance on the defense and governmental side, and we saw an improved free operating cash flow in the first quarter with a reduced outflow to 580 million euros. This reflected the higher EBITDA, plus again we saw an acceleration of cash-ins and milestone payments towards the end of the quarter. We are pleased with this performance. It again reflects the efforts we have been making to manage working capital tightly. All of this underpins our confidence in our full year target. So 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 on the defense and governmental side are delivering strongly, and the year has started well, especially in order intake, revenues and cash flow. We're confirming the full year group guidance that we recently gave you in March. As we previously said, it is based on the current assessment of the impacts of the geopolitical situation, also on supply chain, tariffs, inflationary levels and the global economy, and assuming no major deterioration. So you can see our full year 2025 guidance here on the slide. We expect this year continued strong commercial momentum, top-line revenue growth delivering from backlog, improving profitability and strengthening cash flow, reducing net debt further. So now to conclude, Q1 was another quarter of delivery with good performance across all key metrics while remembering that it's early in the year as Q1 is our smallest quarter. We are on track delivering our full year guidance and industrial plan, and we are confident of our path forward. Thank you, and I will now hand over to the Q&A.

Thank you, Alessandra. We are now ready to take your question. And I would start from the web. The first one is from Carlos at Bank of America. Could you share any color on the potential space JV with Airbus and Thales? What could be your role in this potential JV? And how do you think about your stake in Hanselt? Germany wants to ramp up defense spending strongly and faster. Is that going to lead to future collaboration between you and Hanselt?

Thank you, Carlos. So concerning the space alliance, well, the space initiatives with Airbus and Thales, I can say that at the moment there is a due diligence in progress. The parties are assisted by international advisors, so we are watching carefully through the financials and the value creation and organization. So this is running, up and running. We are working, all committed. We meet very frequently, regularly. So we let the team make their work, and I believe soon we'll have some more insight. Concerning the space alliance with Thales, we are working very intensively because we are, as I already announced a couple of months ago, one month and a half ago, we are working a lot on the optimization and the update of the space alliance, which has been constituted 20 years ago and now needs some refreshment. The potential role of Leonardo in the alliance with Thales and Airbus, the expanded European alliance, I believe will be primarily on end-to-end satellite services, which is the pillar of our industrial plan. So we have to stay on our industrial plan. And, of course, we will benefit from the collaboration with the other partners. So far, I think everything is very sustainable in terms of Leonardo's industrial plan and also in terms of collaboration. Obviously, financials, so the numbers, and the technology we're going to develop together will be decided and defined in more detail over the next, I think, two, three months. concerning Ensold. So I'm in constant contact with the CEO of Ensold. We met recently, by the way. So we decided to wait for the launch of the new German government. As you know, Herr Merz was nominated recently. So after the situation will be a little bit clarified and also depending on the strategic choices of the German government, we will decide how to continue the collaboration. And needless to say, at the moment we share 23.8% of the company and we are collaborating on several classes of products. Things are doing very well. Now, whether we will increase this part or we'll eventually step back will depend on an agreement that we will take after having spoken to the parties. So let's wait the German company to assess together with the government what they want to do. And of course, we are very flexible, very open. But so far, the collaboration has been very good and we plan to continue as long as there will be a clear scenario with the German partners. By the way... Obviously, the bazooka that the German government has put on the table for the new defense strategy, it's obviously a big opportunity not only for the German partners but also for us because we have very strong collaboration with German companies. So we think that directly or indirectly, we could benefit of this important increase of the investment at Europe level given by the German decision. So I do see very positive moves in the near future, both with Ensold and with the German government, by virtue of the very good relationship we have with the German companies.

Thank you, Roberto. Next question again from the web is Ross from Morgan Stanley, who's asking, Italy does not appear to be willing to increase defense spending. 2% of GDP reached by inclusion of other budget items rather than organic items. What level of spending do you expect over the coming years? And then a second question on aerostructures. What has changed? If you have ongoing discussion with a strategic partner towards a deal, why combine aerostructures and aircraft divisions?

Okay, concerning the first question, I think I gave the numbers. I don't know whether the government will go to 2%, 2.3%, 1.9%. It's not my business. But the numbers of the forecasts that I've shown you before are official. So there is a plus 4 billion forecast in 2025. Addressable budget grows from 34% of 32 billions to 39% of 3.36 billions. So this is for me is enough to say that there is large room for growth. Then the politics will decide. But I don't think that Italy can be so much behind compared to the other countries. So I believe that there will be a continuous improvement of the economy. of the investment in defense, because I think this is unavoidable under the NATO umbrella. With this in mind, with those numbers, I mean, of course you understand that I don't have other information that at this point have become governmental information. I don't know more than that. Concerning aerostructure and the division, this is a very, very simple thing. It has nothing to do with a particular strategy. And as I said before, I want to clarify that there is no change whatsoever on the strategy of aerostructure. Simply, the director of the aerostructure division was Zoff, that is now moving as a CEO of G-Cup when the JV will be launched very soon. And my other top manager, senior top manager in aviation is Dr. Bortoli, who is presently the director of Aerostructure Division. And just by continuity, I cannot move Bortoli as a head of the Aircraft Division, decapitating, leaving Aerostructure Division in such a crucial moment without the person that's been conducting the entire negotiation. So by continuity, I need Bortoli to guarantee the completion of the strategy of aerostructure that I told you is a matter of few months. And in the meantime, serving the company with this experience over the next couple of years. I mean, also generationally, I would like you to consider that Unfortunately, me and Bortoli, we are co-ager, so we don't have 15 years in front of us. Zoff is much younger. And of course, we wish Zoff through the G-Cup to have a bright growth in the future. Whereas me and Bortoli, being a little bit older, we have to take care of the situation now. Bortoli has to guarantee, reassure the market that we complete the aerostructure strategy without any discontinuity. That will be lethal in this moment. In the meantime... serving the company to keep the aircraft division as effective as possible. And, you know, there are many good news in a few months because in this three months, two months, there is a concentration of new things. G-Cup joint venture starting, inclusion of the drone joint venture that went so fast that we didn't expect this to be so fast. Fortunately, it was fast. In the meantime, Quite a rapid conclusion of the aerostructure deal. So those three things happened all between June and July. We don't have time to do big, big change. We prefer to stay on very expert people that know very well the company, very well the situation. And this is the only reason why we did this change.

Thank you. Another question from the web, Ian from Odoo. To come back to capacity boost, if I understood correctly, you launched this plan recently and therefore it is not included in the industrial plan that you presented to us in March. Can you give us a little more color on the potential upside in EBITDA or free operating cash flow?

Thank you. I mean, yes, I confirm that when we launched the industrial plant, that was one year and two months ago, the original version. As you know, no one was talking about rearm you. There were no there was no such pressure. I mean, to be honest, the It was also another era. There was Biden rather than Trump. There was less pressure on the tariffs. So yes, I confirm we were optimizing. You remember we were optimizing the portfolio of electronics. We were trying to digitalize. But there was no such a pressure that could be induced by the fact that we might increase our production rate by 40%, 50%, 60%, which could be a reasonable estimate for the next few years. So one year and a half ago, it was another era. And we were optimizing. Now we feel the urgency. And that's why we made the update of the plan just one month and a half ago. In this update, yes, indeed, we decided to tackle the problem of the capacity boost, which is a bit extreme compared to the standard optimization of the production rates. Honestly, now, after five weeks, six weeks, I'm not able to tell you in a quantitative way what could be the upside in terms of free cash flow and EBITDA revenues. But the teams are working since a few weeks after having analyzed the approach, the algorithms, and how to do it. And I'm really convinced that in July, when we will give you the present, when we will present the plan, we will give you some numbers, some forecasts. Right now, we simply didn't have enough time to be quantitative. We just started on the most urgent things and we will need a few months. So by July, you will see everything.

Okay, now let's take a question from the call. I'm seeing David Perry. Could you please open his line?

Hello, Roberto, Alexandra, can you hear me? Okay.

Hi, hi, David.

Hi, hi, hope you're well. I'm going to do something a bit different. I've got two questions, but can I just begin with a request, which is unusual, I know. And the request is this. I'm a massive fan of everything you and Alexandra are doing at the company. But it would really help if you put the results out at 4.30 when the market closes. This is very hard for us to look at them, especially we came off the Rheinmetall call and yours came out, which you may not have known about. But if you could do it at 4.30, I'd be an even bigger fan of you, and I am already. Thank you.

David, we will do it. Sorry. We will do it.

We could have done. Yeah. Thank you so much. Thank you. So we've got two questions, and they're sort of about startups in the industry. So earlier today, Ryan Mattel told us that they are setting up a JV with Lockheed. And in the space of starting now and by the end of the decade, the revenue will go from zero to five billion, which would essentially be the same size that MBDA is now. And I wonder why MBDA seems to be growing at 10% a year, And this new JV from Rheinmetall and Lockheed can grow so much faster. So I just wondered what influence you have in the MBDA joint venture, whether there's talks to just make massive investments there rather than lose market share. And my second question also relates to a startup in satellites, because, again, Rheinmetall is setting up a JV with ICI, a Finnish company. I've been looking at their websites. And their pitch is that they can build a satellite in 18 months. And I think big organizations like Thales Alenia and Airbus, they're more like four, five, six, seven years. Correct me if I'm wrong on that. I mean, is there a way that Thales Alenia and Airbus can move to making much quicker, cheaper satellites? Is that something that's possible? Thank you.

Thank you, David. I'll try to answer. First, with Lockheed versus, let's say, missiles and bullets, MBDA. I think the main difference between the two bodies is that MBDA incorporates quite a complex governance because, anyway, you have three different states with three different governments. if you want organizational characteristics, they have to take care of national interest, national sovereignty on one hand, and on the other hand, they have to take care of the global market. And I believe that if you make something in U.S., it's just the U.S. ice only. If you make something like MBDA, it is Italian ice only, German ice only, UK ice only, and French ice only. And this sometimes makes things very complicated. Despite this, I think last year at least, MBDA got number one in terms of revenues in the field of rockets, missiles and bullets. So they're not doing bad, but I agree completely with you, the European governance with the 27 member states and the fragmentation doesn't help for speed. As much as speed is concerned, this is a drawback. And to be honest, the same answer holds for for satellites. Having said this, however, I would like to make some technical remark. You are right when you say seven, eight years, maybe for a geostationary satellite, which is a few tons, quite expensive, quite big, quite complex. But the challenge now is on low orbit satellites. I mean, of course, the SpaceX and Elon Musk and NASA, And the investment done by Elon Musk and NASA has been very effective. 50% private, 50% institutional. In Europe, it is approximately 80% institutional. By the time you put the label institutional, it means slower. No discussion, unfortunately. In the field of low-orbit satellites, I think, however, we can be faster. To be honest, the constellation that Leonardo has decided to implement with its own money as our own investment, if things will go properly, and of course we have to work like crazy, they should be launched by the end of 27 and the first half of 28. So as you see, for low-orbit satellites that are smaller and cheaper than geostationary, we could reasonably expect two, three years as a timescale. And maybe not at the cost of the Americans. Now they are massively reducing the cost because they have thousands and thousands of satellites, but we can be for sure rather competitive. The challenge is to get faster, to make a very good engineering, and of course to overcome the problems given by the governance, which implies a lot of fragmentations, kind of cross-correlated vetoes, and this kind of things. You need people that want to collaborate for real, and I believe at this moment Leonardo and Thales, they really want to collaborate for real. And we are really committed in this respect to do things faster and very effectively.

Thank you. Let's take another question from the web, again on aerostructures. In this case is, could you please provide us with more color around Q1 results in aerostructures and what do you expect going forward by year-end in terms, again, of performance? Sure.

Let me anticipate. By year end, I hope there will be no more the problem, because I'm confident that we fixed the problem before. Just go ahead. Sorry.

Sure. No, absolutely. The preface that you made, Roberto, is very important and clear. You know, the trend that you see in the first quarter is as expected, and it's Leonardo's decision to actually save cash flow and leverage the inventory that we have by slowing down production rate in the first half of the year. As you know, last year at some point mid-year Boeing revised downwards its production profile and the number of deliveries it took from Leonardo decreased significantly. As a result of this, Leonardo is now sitting on an inventory in the Aerostructure Division, which we want to unwind. Therefore, through the first half of the year, what we plan to do is very simple. We plan to produce fewer fuselage that the number of fuselage that boeing will pick up from us so that the inventory will go down this is clearly reflected in the volumes the revenue levels as well as in the ebitda as a ebitda level there is a higher under absorption of the fixed cost of the entire division which will, though, change throughout the year. As throughout the year, as Boeing lately confirmed, they're raising from three to five to seven at year end. The pace, their production pace in our delivery to Boeing will also increase throughout the year. As a consequence, in the second half of the year, we will raise our production rates.

Thank you. Let's take another question from the call, final two. So Alessandro Pozzi from Mediobanca. Could you please open the line?

Yeah. Thank you, Valeria. Thanks for taking my questions. The first one is on aerostructures. In your opening remarks, you mentioned positive progressions with regards to negotiations with industrial partners. and based on what we read in newspapers, most likely to be the Saudi Arabia sovereign fund. I was wondering, can you give us maybe a sense of what would be the key pillar of this new partnership with the new entity that is coming in, and in terms of potential new programs they're looking at, potential setting up new facilities in Saudi Arabia, And there's been speculation that that could potentially lead Salerido also to join the G-Cup.

That's the first question.

Thank you.

Yeah, okay. I can't say many things because we are in full due diligence. However, I can give you some color. First of all, this has nothing to do with the GCAP. The position of Leonardo about the GCAP has been very favorable since the very beginning. The other companies, I think they're also favorable. This is a political decision the states will decide. Concerning us, we would be favorable anyway. Having said this, let's go to aerostructures. Roughly speaking, what we want to do is a major player in the aerostructure domain. And, of course, this is an industrial agreement. It's not a financial agreement because we are dealing with partners that own important airlines. So they are massive customers of aircraft of any size. And therefore, they themselves represent big customers with a size that possibly is bigger than a big part of Europe. So in this respect, our strategy is multifold. On one hand, to create an industrial pipeline where it is not because those countries, they really want to accelerate and take off in aviation, especially civil aviation, but not only civil aviation. aviation technologies. We plan not only to work with the civil aviation but also with other technologies because we have quite a portfolio of technologies that could be shared with our partners. Volumes will increase substantially and also the production capability not only related to civil aviation. I can't say more But the business plan will be clarified together with the presentation of the agreement, I hope, as soon as possible and by the summer anyway.

Next question from the call as well. Martino de Ambrogi, could you please open the line?

Thank you. Good evening, everybody. Three questions on DM&A. The first is still on aerostructure because you are looking for a partner taking a minority stake in aerostructure. I clearly understand the reasons for the merger, but could the potential partner be interested in us taking the combined entity aircraft and aerostructure? Number two, in M&A, the five refused offer is just a matter of price or there is any other main issue. And third and last, I read a lot of names interested in Iveco, but frankly speaking, in my view, it's only Leonardo or Rheinmetall that could be the industrial player able to exploit synergies.

Thank you, Martino. Very, very pointing questions. I'll be very synthetic in the answer. So let me go back. The first one was about the aerostructure. I exclude that anybody could access and acquiring our aircraft division. Our strategy with the Eurofighter in the future, with the G-Cup and so on and so forth, this is too strategic for us high tech. And I think we should give time to the partners also to grow with an effective and real aircraft industry. So I think step by step we can start with something and then in the future we will see. So at the moment, I categorically exclude that the the border, the margin of the operation is outside the aerostructure. It will be a nonsense, industrially, but also for the partners. We should be, how to say, reasonable in the industrial approach. And there will be a great mutual benefit, instead, if we can make the joint venture. You will see soon. Second, you were asking about the five due diligence that failed. Now, simply, this is because of price. Because we are dealing primarily with cyber and digital things, and the multiplicators are crazy sometimes. So as you know, I mean, the basic financial approach is that a beta times a multiplicator, you have an enterprise value equivalent. Now, sometimes we find multiplicators that are really crazy. And as you remember, I made a clear statement. We don't want to spend more than roughly 15, 20 percent of the value of the division, of the revenues of the division that is making the acquisition. And of course, if I buy a small company for 200 millions, this is going to be beyond the limit that I put. And primarily, we don't think it's reasonable to invest so much money. There might be some special case, but we didn't find any special case. So simply the multiplicator was too high and others wanted to invest more. Least but not last, Iveco. Well, I mean, in maximum transparency, we obviously presented our non-binding offer together with dry metal. That would make a big sense in terms of production capability, so also capacity boost, in terms of strategy for light vehicles and many other issues. However, we plan to do exclusively an industrial investment, not a financial investment. So we are not available to spend more than the right money to do this eventual, this possible acquisition. So for us, it's a real industrial strategy. And so we will very carefully analyze the financial data. I think the due diligence and the data room will be open soon. So we're totally flexible, totally unbiased. But one thing is clear. This has to be an industrial operation. It has to be a clear advantage and a very fair cost of this operation. Otherwise, it's a financial operation, and we're not going to make any financial operation.

we're really out of time so i want to thank roberto and alessandra for the time and thank you all for being with us this afternoon as usual the ir team is available for follow-ups thank you very much thank you thank you guys