Leonardo Spa Ord

Good afternoon to everybody and welcome to our...

Our 2025 preliminary results presentation. I'm Claudia Introvigne, as I think you already know me. I'm the responsible for investor relations here in Leonardo. And today I'm really pleased to have with me our CEO, Roberto Cingolani, and our CFO, Giuseppe Aurilio, who is at his first report here in Leonardo. We are pleased to present our preliminary results which will be focused on 2025. Please remember that you are all invited on the 12th of March to our industrial plan presentation. when we will also present to you our 2026 guidance so please bear it in mind in the q a session that will follow thank you and now i will hand over to our ceo roberto

Thank you. Thank you, Claudia. Hello, guys. Nice to see you again digitally. As usual, we make the pre-closing, the preliminary of the year, the Q4. And then in about three weeks, we will have a much longer session about the update of the new industrial plan. Somehow, this is the last Q4 we celebrate together. So it's a farewell. It's a farewell session. I hope to be back the day after the 12th, of course, March. Today, we want to share with you some of the data. And first of all, let me acknowledge the fantastic work that we did with the new team, with Claudia, that you already met a couple of weeks ago. I think in the last report, the Q3, and with Giuseppe Aurillo, who was integrated immediately in the team. The transition was extremely smooth. Giuseppe knew very well the company, was in the company for many, many years, and we were extremely effective. So maximum satisfaction from my side about the progress of the work and the reporting with the new team. So let's see the numbers. Numbers for the Q4, though preliminary, they're almost exact, I would say. They're very satisfactory. Let me start with the comparison year over year about orders. We were expecting something in the range of 22 to 22.7 billion. So that was the updated guidance. and we closed with 23.8% to be compared to 20.8% last year. So it's plus 14%. Concerning revenues, we closed with 19.5 billion, plus almost 11%. The guidance was... 18.6. Last year, it was 17.6. The EBITDA is also remarkably growing. We closed 175 billions, so plus 18%. Our updated guidance reported 1.66. Last year, it was 1.48 billions. The return of sales is increased by 0.6%. So we go from 8.4 to 9.4, this Q4. Cash generation is also here. I mean, for the first time, we... We break the psychological threshold of 1 billion. I think we finished 1 billion plus some little money extra. The updated guidance was 0.92 to 0.98. Last year, it was 0.84. And the net debt is reduced by 44% down to the level of 1 billion. Last year, it was 1.8%. So I think we got all the results we had in mind, slightly better than the updated guidance. Let me make the story, because this is the last Q4 in the mandate, and I think it's interesting to discuss with you the significant growth and the financial transformation that Leonardo underwent over the last less than three years. So orders have been growing by 38%. When we started our mandate, they were in the range of 17 billion. Today, we are in the range of almost 24. Revenues were growing by 33% over the three years from 14.7% to 19.5%. And I think this is encouraging, but I think this is even more encouraging to see that EBITDA and free operating cash flow were growing super linearly compared to the orders and revenues. As you see, the EBITDA was rising from 1.2% up to 1.75%, 44%. And the free operating cash flow grew by 88% from 0.5 to 1 billion. Now, I think this deserves some consideration. First of all, let me remind you my usual gesture. At the beginning, I said orders, revenues, EBITDA, and FOC, we're not happy because the orders were growing, but the FOC was not growing properly. And actually, the target was to have something like this. So the curve should have been kind of parallel. I think we are on the right track. For sure, orders and revenues are growing, but you see EBITDA and free operating cash flow are growing faster. That means our recovery in terms of performances, efficiency, cleaning the portfolio and so on and so forth are now giving the right results. the analysis of the other KPIs. Let's see, in the last three years, the net debt, as I told before, was going down from three billions to one billion. Actually, this 67% reduction comes from, first of all, the savings, the efficiency, and the rationalization of the portfolio we did so far. It comes from the sale of the under-marine activity, the UAS, and On top of that, it comes from the higher cash generation that really allowed us to go down to a debt level that is unprecedentedly low in the history of the company, recent history of the company. The dividend, this is very important for us. When we started, we had a rather modest dividend that was stationary for many, many years. We were in the range of 14 cents per share. This has been increased regularly every year. Today we are at 0.52 euro per share. So the CAGR was plus 275%. What is important for us is that the dividend yield now is aligned to the European average of the peers. We were below the lowest decade in 2022. And the CAGR of the growth of our dividend is much faster than the average one of the peers in Europe. So we grew up by 55%. And what I would like to anticipate, I mean, for me, this is very important. I would like Leonardo to be always attractive and satisfactory for our investors. This year, we're going to increase further. the dividend, of course, we are making the detailed calculation. This will depend on the net income. Very likely, we will improve kind of plus 20% because this will follow the expected increase of the net income. So anyway, this is very important for Leonardo because we have to be in the right range as a company with ambition. And of course, we want to reward our investors. Finally, the employees. When we started, we were about 50,000 people. Today, we are about 73,000 people. The growth is 22%. What is very important is not only the absolute number, but also the typology of people and the age and the gender. In the three years that we just finished now, we hired a net 17,000 people, one seven, 17,000 people. The important thing is that... About 70% of those people are STEM. So they own essentially a technology degree in science, engineering, mathematics, whatsoever. More than 30% are women. And what is more important is that 55% of those are below 30. below 30 years old. That means that in these three years, we also started an unprecedented transformation in the human capital, getting younger people much more technology-oriented, which followed the portfolio transformation of the company, because we need by far more STEM to be competitive in terms of new technology and new solutions for defense and security. so uh at the beginning of the three years um that was the picture uh we summarize on the left orders this this has been discussed already revenues ebitda 1.2 billions free operating cash flow 0.5 billions dividend per share 0.14 50 000 people roughly and the market cap was 4.6 billion our Our matrix portfolio was relatively complex. We had in the air domain all kinds of aircraft and helicopters, not yet the sixth generation fighter, a lot of electronics in all domain, land, air, maritime, space. And we had some starting cybersecurity projects. activity and very poor digitalization so at the very beginning three years ago there were businesses that were in silos in silos not interacting very well to each other so far from the modern multi-domain concept interoperability concept that are becoming essential mandatory for the future defense there were several unresolved issues in terms of performance and and efficiency and capacity. The product portfolio was fragmented. We had to clean it substantially, also cutting development lines that were absolutely off core business. There was a very limited digital capability. I'm sure you remember this was one of the first, the point when we started our enterprise. Innovation was quite slow and maybe the confidence of the investors was not so high. Now, over these three years, we were working quite hard. I'm not going to read again the numbers, just reminding the thank you to your trust. We could go up in the market cap to $34 billion. And I thank you for this investment, believing in Leonardo. But what is more important is that the matrix of products now is very complete. We cover the entire AIR domain with all platforms, manned and unmanned, which is very important. There was no unmanned whatsoever before. Electronics is becoming the glue of all the platforms. Digitalization is transversal to all our platforms from digital twin to digital toolkit for digital. for manufacturing ai more than 2 200 people that are using ai in production and more than 200 developers of ai capabilities we doubled our computational power and our storage with the new davinci to supercomputer. LAND, with the recent agreement with Rheinmetall, the acquisition of Iveco, other agreements with KNDS and other companies we're starting to discuss with. In LAND, we cover all the manned and unmanned platforms. infantry vehicle, main battle tanks, wheeled and with trucks. Maritime, we own absolutely the control of all the combat system of warship. Space, we started our constellation. We developed with a lot of effort a new division, and now we own the entire spectrum of satellite services applications. And as you know, we are discussing the constitution of big company at European level with our peers. Thales and Airbus, and cybersecurity underwent a strong impulse that you've seen from the numbers, but later Giuseppe will give you more details. So what happened in those three years? New product and portfolio rationalization that was essential to complete the matrix. Without this complete matrix, we cannot be in the multi-domain as a leader and not as followers. We made a number of strategic partnership and joint venture and selective M&A acquisition. This part is what we, you remember at the beginning, we presented as our inorganic growth plan. The strategic partnership are bringing in very good results. We now have all the platforms for drones. By the way, I anticipate that in April, we will launch our first drones from the Ronchi dei Legionari plant in collaboration with our friends in Baicar. GCAP, you know everything. This is the edge wing company that's been constituted. We are up and running. Actually, I think this is the last big consortium left in the international landscape, so we're in a very good position. Bromo for space, I already mentioned. Selective M&A moves, especially in the field of cybersecurity, were very convincing. We now own, in cooperation with our partners, partners' zero-trust capability, and we are developing very quickly the portfolio of cybersecurity. We accelerated the digitalization in a way that has never been done before, including doubling the power the global power computation and storage that we have in the company. We have launched the capacity boost program. I'm happy to say that the capacity boost program has now reached a maturity point. We have more than 300 manufacturing and production pilot programs, and there is a team of about 100 people distributed in the company that are working directly onto the production line. So this went from theory to production line in about six months. And then, of course, we are pursuing our disciplinary capital allocation program. This is fundamental. The numbers are good. The net income is good. Free cash generation is good. Debit is under control. This is the time to make a very ambitious but disciplined capital allocation to accelerate further the growth of Leonardo for the next years. So at the beginning, three years ago, we had a rather incomplete portfolio, little digitalization in that some cybersecurity was the only thing available. And of course, we knew at that time that it was very important to create the capability for a multi-domain platform. Now, actually, after three years with the effort we did, we are able to face the market with a very complete portfolio. There is everything from the Constellation to all the manned and unmanned flying systems, to all the land manned and unmanned flight systems. entire suite for global combat system in the ships. And the space has been substantially improved in terms of data analysis, constellation, ground stations and so on. On top, High-performance computing and cloud for AI generation has been improved substantially. Cybersecurity has been reinforced and it's growing fast. And as I said before, the Constellation is there to provide data and supervision. In the end of the day, we said three things three years ago. Bullets and bytes. At that time, it sounds like a very exotic statement, but I think now it's commonly accepted everywhere in the world. A large part of the effort in defense goes through digital technologies coupled to AI. bullets technologies, let's say metal mechanic or platforms. The second message was no one can make it on its own. So joint ventures, acquisition alliances are fundamental to accelerate the response towards the dramatic demand that we have on the market and also to facilitate the creation of a European space of defence, which is before being political, this has to be industrial. And finally, We are preparing ourselves to face the real challenge of the next decades and possibly more than one decade, which is passing from the bare defence, which means essentially weapons and weapon system, to a much more complicated global security approach, which should defend our countries by the hybrid wars. So no matter whether we will have conventional wars in the next decade or all the wars will finish and we will have another kind of war, which is a cyber war, safety, security of the infrastructures, energy security food security all those things will cause damages and economical losses that are incredibly high so we are preparing leonardo ready to face both challenges this will be the content of the new plan the updated plan that we will introduce to you guys on march 12. i don't say more I cannot spoil more. There will be numbers, there will be forecasts, but of course there will be strategies that will design, will pave the way to the future of Leonardo. I conclude, before giving the words to Giuseppe, with a bit of sustainability. I'm very proud to say that meanwhile, Leonardo was growing quite fast in terms of group revenues. So basically in a few years, we grew up by 40%. Well, of course, consider that this was the COVID time. So that was a very complicated period. Let's say that most of the growth was in the last three years, as I said before. We were able to work quite effectively on water withdrawal, waste production and reduction of emission by scope one and scope two. And you see how counteracting is the growth of the business compared to the improvement in terms of sustainability, scope one, scope two, waste produced and water withdrawal. Those are the numbers if you like to see them. And on top, the workforce, as I told you before, was increasing substantially, improving diversity and improving the global fraction of young people below 30 and also reinforcing the innovation because today we have reached approximately 20% increase year over year in innovation. So today Leonardo can safely state that we invest 15% of our revenues in R&D, which is actually the safest way to be very competitive in the future at the level of the best companies in the world. Now, what we did so far has given very good results in terms of ESG rating. In this radar plot, you see Leonardo nowadays. Those are the main ranking that I'm sure you're familiar to, so I'm not taking time to go through them, where we are always in a very good situation. And this curve is the radar curve averaged of the peers. So it seems that Leonardo has gained a very prominent advantage in terms of sustainability of the business compared to the peers. Of course, the core business is to make the best technology ever, but also being sustainable is very important. Now, before concluding and giving the stage to Giuseppe Aurelio, I want to anticipate two things that I'm sure you're going to ask me, because I promised you to give some important update about aerostructures and about IVECO. So I'm going to do this now. Happy to answer your question, of course, but I think it's good to anticipate the core. So concerning IVECO, The closing, we confirmed the closing by March this year, so we're very close to accomplish the acquisition, to finish the acquisition. We are very happy in terms of industry opportunities, wield and track the systems. The demand is very strong. We are delivering already to the Minister of Defence the early machines with dry metal and the capacity will increase thanks to the Iveco absorption. Concerning the trucks, our colleagues in Rheinmetall are now testing the situation with the antitrust, of course. So this is a mandatory step. So we will give them approximately six months of exclusivity in order to check how this can be developed. Anyway, we're going to close because the agreement is that we close. We are in a hurry. to increase our capacity. The truck business itself is a business that has a rather good margin, 12% to 13%. There is absolutely no warning, and there is quite an interesting backlog of orders. So we look forward to see what the antitrust analysis that our colleagues in Rheinmetall will do together with the Leonardo team, and then we will decide how to proceed, I think, by the mid-26th. There are also other potential challenges companies interested, but as we told you since the very beginning, we try to pursue the strategy with Rheinmetall, wait for the antitrust and then make a decision. There is no worry at all, whatever will be the outcome of those analysis in the next few months. Concerning aerostructures, I have news that are important. So I was personally visiting the top management of our counterpart, potential counterpart. They still ask some confidentiality for six months, but I can tell you where we are in a very detailed way. So our standalone plan was accepted and evaluated very well by the partner. We evaluated the standalone plan of the partner, which is very interesting. The idea is to create a joint venture, which is going to be something like 50-50 at the beginning. It's an international company. The brain at the beginning stays, of course, in Italy, but we... push substantially the production because our partner is both financial and industrial, and they have a strong demand of components for civil aviation, but also for military aviation, rotorcraft, and in the near future, potentially also space. So this is going to be a gate towards a new global company that's starting with their structures, going to open to big markets in the, generally speaking, their domain, air and space domain. Everything is ready. The due diligence lasted the... 14 months so far. There were approximately 70 items, 70 assessment lines. About seven should be finalized this month. The others are completed, green spots, so they're done. Our partners are waiting for the confirmation that some incentives will come. by their local ministers that will complete the financial plan. And the commitment, because the exclusivity is given up to June, is to sign before that date. I think, industrially speaking, we finished our work. Our customers, so the main builder, are aware of that. We, of course, confirmed at the very beginning we will keep absolutely the quality as usual in our plans while we transfer some of that technology, some of those technologies in the partner company, in the partner plants. So we expect a very smooth transition, quite an enhancement of the business, which is going to be because it's going to be a global player, not a limited division, let's say. And I expect to see a positive impact already in the 2026 balance sheet as soon as we complete. I can't say more details because confidentiality is a primary requirement for our partner, but I think I gave you a clear picture. You know where we go and you know that 95% of the job has been done. Thank you very much for your attention. I give the stage to Giuseppe for the financials and then we'll be happy to answer your questions. Thank you guys.