Indra Sistemas Sa Ord

Good morning and welcome to our 2024 first half results presentation. I'm Ezequiel Nieto, Head of Investor Relations, and as usual, let me refer you to the disclaimer on slide number three that shows the legal framework under which this presentation must be considered. First, let me introduce the participants of this call. Omar Murtra, Executive Chairman of Indra, José Vicente de los Mossos, CEO of Indra, Antonio Mora, Chief Control Officer, and Luis Abril, Managing Director of Meansight. Marc, the floor is yours.

Thank you, Ezequiel.

Good morning to everybody. Welcome to this conference call in which we are pleased to present our results for the first half of 2024. I extend my thanks to all of you for your attendance. It is an honor for me to address you today in my capacity as Indra's executive chairman. The first half of 2024 has been important for INDRA, focused on setting us on the right implementation of our new strategic plan for 2024-2026, Leading the Future, unveiled in March of this year. That is our focus, execution. As defined in our strategic plan, Indra's vision is to become the Spanish multinational of reference in defense and aerospace and advanced digital technologies. Over the last three months, since the announcement of the plan, we have seen good progress, acting as a driver to build a path that will meet our leading the future strategic plan targets. Our double-digit growth in revenues, EBITDA, net income, and free cash flow compared to the first half of 2023 is, in our view, a good headline of our performance. Our increased operational profitability, evidenced by improved EBIT and EBITDA margins, demonstrate the impact of the actions and initiatives we have executed over the past months, some of which we will discuss today. The financial performance is a testament to the work we have made in each of Indra's businesses. In our efforts to develop a defense ecosystem around Indra, we follow a collaboration and cooperation strategy with stakeholders in the sector. As part of it, Indra invested in ITP in the third quarter of 2023 and has now received a 59.6 million euro dividend payment, representing the first returns on its investments. Please remember, ITP is not a financial investment for us. It is an industrial investment, but it has given us a good first return. In air traffic management, we're focused on maintaining our leadership position in Europe, Middle East, and Latin America, ultimately aiming to become the number one player globally, reinforcing our position in North America and Asia Pacific. We are making progress in these new priority geographies, North America and Asia Pacific, leveraging key collaborations to access major renovation programs. In MINSIGHT, we are working hard to evolve towards a digitally-focused portfolio, integrating capabilities in artificial intelligence, cloud, cybersecurity, and other high-potential technologies to establish an industry-leading offering. In fact, digital and solutions joint sales accounted for 50% of Mindsight sales. Integration of mobility into Mindsight, as laid out in our strategic plan, is set to further drive our digital-focused offering. Also worth highlighting are the advancements made over the last months in our technology roadmap. We are immersed in a process to identify the key future technologies, capabilities, and productions in which to invest. This initiative builds upon previous tech developments Indra has been working on, and its progress until 2030 will be closely monitored by a tech control tower. We're strengthening our organization with new appointments. We have recently appointed Miguel Fortez-Agarau, formerly Deputy CFO and Investment Director of the Nortia Group, as our new Chief Financial Officer, also joining INDRA's Executive Committee. Additionally, we are launching a new geographical organization, which our CEO will detail later on, resulting in the appointment of new regional directors. Latin America and South Europe will be led by Pedro Rodríguez Vega, previously in charge of Minsight's international business. Middle East will be headed by Luis Permuy Muñoz Rivero, who has been responsible for Indra's business in Asia, the Middle East and Africa since 2016. United States, United Kingdom and Northern Europe will be overseen by José Jacinto Monge Bravo, who joins the Indra Group. The rest of the world will be coordinated in an export model by Jose Luis Gasco, formerly responsible for the Asia Pacific region. Thank you for your attendance and attention. I will now give the floor to our CEO, Jose Vicente Los Mozos.

Thank you, Marc. Good morning, everybody, and welcome to our first semester 24 conference call, and thank you for being with us here this morning. Let me begin by providing you all within this main headline for the first half of 2024. In terms of financial headlines, these results are a clear sign of a successful kickoff of the implementation of our strategic plan. Our revenues, EBITDA, net income, and free cash flow in the first half of 2024 continue to grow at a double-digit rate. Backlog and order intake grew by 5% and 7% respectively, showing our strong ability to generate business. This strong growth is accompanied by improvement in operating profitability, proved by increased EBITDA and EBIT margin across all our businesses. Given the seasonal traction of leading the future strategy plan and the resulting financial result, With the chairman, we have decided to increase all our 2024 guidance metrics. In addition to this financial result, we are also proud to announce some of our most significant implementation milestones for leading the future strategic plan during this first half of the year. We have successfully launched an automatic scorecard tool focused on granular monitoring of the strategic plans, KPI, and all levels of the organization. This tool acts as an enabler for the company to not only follow the achievement of leading the future up close, but to work together with a common goal in mind. We have also launched our new geographic model at around three focus regions with 11 home markets to ensure we are closer to our customers. During this past six months, we have also focused on one of our most important strategic levels, inorganic growth. With an ambitious M&A target in mind, we have already been working with a broad and deep pipeline of target companies, with advanced conversations being held with a significant number of them. As for joint venture and strategic alliance, we have engaged in partnerships with key players such as Lockheed Martin or Middle East top player Edge Group. Turning back to our financial results, let me highlight the following. The double-digit growth achieved across our main metrics, together with both the volume and quality of our backlog, accounting for three times our revenue, which grew 4.8%, proved to be a good indicator to the near future growth of Indra. The commercial momentum that the company is going through, with revenue growing at 15%, is strongly backed by all our businesses. most notably growth resisted by air traffic management at plus 33% and by defence at plus 31%. All this has also allowed us to improve our margin and cash generation, empowering us to maintain financial leverage below our target of 0.2 per net debt ratio EBITDA. IF WE LOOK AT THE PICTURE FOR OUR SECOND QUARTER OF 2024, WE SEE TRENDS AS POSITIVE AS THOSE OF THE FIRST HALF. REVENUE GREW A PLUS 8 PERCENT RATE AND A BIT UNEVITED MARGIN IMPROVED BY ALMOST ONE PERCENTAGE POINT TO 9.6 PERCENT AND 7.5 PERCENT RELATIVELY. despite higher structural costs given the implementation of the strategic plan and one-off costs due to potential acquisition and disinvestment under analysis. Net profit grew by plus 15% and free cash flow stood at plus 1 million euros, a very positive figure considering the sectionality of this parameter and inclusion of a one-off income tax payment of 41 million euros. As already mentioned, these first-hand results have allowed us to upgrade our guidance for the end of the year, improving all of the previously announced guidance metrics by plus 4%, that is, to deliver revenue of more than 4,800 million euros, EBIT above 415 million euros, and free cash flow over 260 million euros by the end of 2024. One of the main levers behind this result, of course, the acceleration of the strategic plan as its monitorization through a scorecard tool. Designed specifically for the rigorous monitoring and acceleration of the strategic plan, our scorecard tool operates under the guidance of dedicated monitoring committees ensuring that every aspect of our plan is thoroughly overseen and analyzed by business and initiative leaders. THE TOOL LOGIC IS STRUCTURED TO PROVIDE DIFFERENT LEVELS OF KPI VISUALIZATION TO MEET THE NEEDS OF VARIOUS STAKEHOLDERS WITH OUR ORGANIZATION. AT LEVEL ONE, WE PRESENT THE KEY KPIs AT THE INDIRAGROUP LEVEL, OFFERING A COMPRESSIVE OVERVIEW OF OUR OVERALL PROGRESS. LEVEL TWO, BREAK THIS DOWN FURTHER, SUCCESSING THE KEY KPI FOR EACH OF OUR DIVISIONS, DEFENSE, AIR TRAFFIC MANAGEMENT, SPACE, AND MEAN SIZE. THIS LEVEL OF DETAIL ENSURE CLEAR VISIBILITY AND ACCOUNTABILITY FOR EVERY DIVISION ACROSS THE COMPANY. LEVEL THREE PROVIDES AN IN-DEPTH VIEW WITHIN EACH DIVISION, ALLOWING US TO PINPOINT SPECIFIC AREAS NEEDING IMPROVEMENT. Finally, Level 4 offers detailed insights at the initiative level, such as radar design and manufacturing, providing a granular view that helps us to tune our action plan accordingly. Across all these levels, we monitor four types of KPIs, financial, commercial, operational, and talent. This comprehensive approach ensures that we are not only tracking our financial health, but also our operational efficiency, such as use of IE tools, and the development of our talent, such as top talent requirements and attrition. In summary, with this robust tool and structured approach, we are confident in our ability to steer our plan leading the future successfully, making informed decisions that drive us all as a company forward or strategic goal, allowing us to continue producing the king of financial results we are seeing here today. If somebody has doubts about the implementation leading the future, please don't think more. Leading the future will be implementing at the right time, at the right moment. Now, let's shift our focus toward our new geographic model, which was introduced during our Capital Market Day last March. In the last month, we landed this model guided by three key principles. First, to increase local presence in high-value countries and regions, allowing us to be closer to our customers with local production capacity and attracting local talent. Second, the implementation of clear and standardized mechanisms to assign operating models to countries based on a set of objective parameters. Third, the rationalization of legal entities and simplification of structures to increase focus, reduce costs, and reallocate more resources to our home market. As a result, Indergoed will concentrate on these three focus regions and contain several home markets and maintain a poor international export business to ensure that we keep a broad and impactful presence worldwide. The three international focus regions are North America and Central and North Europe, Latin America and Southern Europe, and Middle East and North Africa. By focusing our effort on these key regions, we are better positioned to support our internationalization strategy, optimize our resources, and drive sustainable growth. As a result of implementing this new geographic model, Indragoof will significantly rationalize its international footprint. We will evolve from having a local structure in 45 countries to just 19, which accounts for more than 70% of all international sales. Of these 19 countries, 11 will be home markets with full structure and the remaining 8 will have simplified structure. This strategic consolidation will streamline our operations and focus our resources more effectively. Additionally, we anticipate a reduction of approximately 55 to 65 permanent legal entities in our international footprint. This simplification is a crucial step in optimizing our global operations and reducing complexity. This chance underscores our commitment to enhancing operational efficiency, maintaining and staying present in key markets, and supporting our strategic goals. After having reviewed some of our key financial and business highlights for the first half of the year, please allow me to dig deeper into our financial results. It is important to remark the strength of organic growth once we remove the impact of forest impact and inorganic contribution. 12% for the first half of 2024 and plus 6% for the quarter. On the left hand, Besides, we can see the breakdown of our revenue by region in the period, which are spread across Spain, 50%, Europe, 21%, America, 20%, and America, 9%. Currently, our international business account for 50% of our revenue. In terms of EBITDA distribution, defense and traffic management and mobility represent 52% of the total for the first half of the year. Here we can see the evolution of our workforce. Broken down by business, let me highlight here that we have improved our revenue per employee by 13% while our workforce has only increased by 1% compared to June 23. As you can see, we follow also our productivity. Now, I will leave the floor to our Chief Control Officer, Antonio Mora, for an in-depth review of this performance of the divisio. But before all this, that the Chairman has announced new CFO, I want to thank Antonio Mora for his interest during this one. Antonio, the floor is yours.

Thank you, José Vicente. Good morning, everyone. Now, once the big picture has been presented, let's dive into the performance of each of our four divisions, starting in page 19, Wind Defense. This has been a very strong first half for defense, as you can see in the key figures on the slide. Order intake grew by 6%, mainly thanks to the integrative system and simulation areas, and despite the decline shown in both the EFCAS and Eurofighter projects. More important are the various strong figures at sales, which grew 31% in 1.524, with double-digit growth posted both in Spain and Europe. mostly driven by the contribution of the FCAS project. Excluding this contribution, sales would have increased by 5%. On top of this solid revenue growth, EBIT margin stood at 15.5% in first half 24 from 15.9% large year sign period. Quarter-wide sales grew by 17%, also driven by the FCAS project. EBITDA margin stood at 16.3% versus 17.6% in Q23, mainly due to higher structural costs derived from the implementation of the strategic plan and one-off costs related to potential acquisitions that are under analysis, as we mentioned before. For its part, EBITDA margin was 14.9% for the quarter compared to 16% in Q23. Air management also delivered very strong performance, as you see on slide number 21. The positive performance showed by the oil intake, 57% growth, was mainly due to the contracts signed in Canada and Colombia. Aiming on the new contracts, it's worth noting that NAV Canada has joined the high-tech alliance, thus extending its membership beyond European borders for the first time. Sales in first half 24 grew by 33% with all geographies posting growth, mainly driven by contracts carried out in Belgium, Azerbaijan, China, and Spain, as well as the inorganic growth from the acquisition of Parker in the UK and the sales business in the US. And finally, EBIT margin was in double-digit range of 11.9%. If we move to slide 22, we show the performance of the quarter starting by 8% revenue growth bolstered by Azerbaijan, UK and Norway projects. EBITDA margin stood at 13.3% compared to 13.4% in Q23, implying 7% growth in absolute terms, while EBIT margin posted 9.4% versus 10.2% in Q23. If we move to the Mobility Division, order intake fell 9% explained by the difficult comparable due to the tunnel management system contract in the UK recorded in 2023. Sales grew 13% driven by the world post-ETN geographies especially bolstered by America and Europe. Debit margin in 1.524 improved to 3.8% from minus 3.2% recorded in 1.523. On slide 24, we saw the evolution of the division in the quarter. Revenues increased 9%, boosted by Mexico, Spain, and UK projects. EBITDA margin improved to 5.3% from 6.6% in Q23, and EBIT margin also went up to 4.3% from minus 7.8%. Now, on page 25, Millside also printed a very positive first half of the year. The good commercial momentum goes on, with bad luck growing at 17% and orderly intake 3% in 1 half 24. For this part, revenues in first half 24 grew by 9% driven by the strong performance show in public administration and healthcare, which grew 18% thanks to the positive activity with the public administration in Spain and the election project in El Salvador, one Iraq. Energy and industry posted 7% growth and financial services register a 6% increase. Finally, EBIT margin in 1.524 improved to 5.3% versus 5.2% in 1.523, thanks to higher operating leverage from steady sales growth, as well as improved revenue mix towards digital and solution and the ongoing focus on cost efficiencies. On slide 26, in the quarter, MinSight posted 6% revenue growth, showing all verticals good performance. Financial services, 10%, energy and industry, 5%, and PPA and healthcare, 4%, instead for telecom and media, which declined 3%. Regarding profitability, operating margin stood at 6.9% sale level that took quarter 23. For this part, average margin printed 5.2% sale level than in the second quarter of 2023. On page 27, the breakdown of main-site revenues by our InSontal, where you can see that we have improved our mix once again with digital and solution growing by 13% compared to first half 23, and now representing 50% of our sales. On page 28, we show our order intake and revenues breakdown of main-site. First half, 24 order intake. WhatsApp, 3%. Standing out financial services, 19%. And telecom and media, 3% growth. Moving to the middle of the slide, revenues in first half 24 grew by 9%, driven by public administration and healthcare, 18%, energy and industry, 7%, and financial services, 6%. On the contrary, revenues in telecom and media decreased 4%. On the right-hand side, revenues in the quarter increased 6%, showing growth in all verticals. Financial services 10%, energy and industry 5%, and PPA and healthcare 4% instead for telecom and media, which posted 3% decline. Let's start the financial review with the evolution of the free cash flow on slide 29. That amount, 69 million euros, an excellent figure, taking into account business seasonality, the inclination of the income tax payment of 41 million euros corresponding to the availability of shares of the medium-term remuneration plan for the period 21-23, and considering that we are comfortably exceeding the figure for the first half of the previous year. This level of cash generation, as we see below, has allowed us to maintain our financial leverage in a very low level. Now, in page 30, we see how days of sale improved compared to the same period of 2023. The good performance versus June 23 can be explained by the improvement of accounts receivable minus six days and accounts payable minus five days. Page 31 shows the net debt evolution of first half of 2024. The first step is a strong operating cash flow of 225 million euros due to excellent performance of the business and the resulting higher operating profitability. As mentioned, the working capital stood at minus 69 million euros, same figure as in one half of 2023. Other financial liabilities stood at 16 million euros, similar figure as the previous year, and net interest at 14 million euros, 7 million euros more than in first half of 2023. With all this, we have closed this first half with net debt of 93 million euros and a leverage ratio of 0.2 net debt to EBITDA, as you can see in page 32. Slightly above the figure we presented in June 2023, but still at very low debt levels. And now, to finish my part, a quick look to the debt structure in page 33. In 2024, gross debt has been reduced to 582 million euros, average maturity below two years and cost of debt at 4.3%. The cash position at the end of June was 489 million euros and we also have 680 million euros of underground credit facilities so that we maintain liquidity while cancelling cross-debt with cash. With this, we finish the presentation. Let's move on to the Q&A session. Today, we will take first the question from the analysts that are physically here with us, and then we will answer the question of the audience in the conference call. Thank you, Antonio.

Good morning. Thank you for taking my question. I was wondering if you could give us some color on Insight's performance, taking into account that some competitors have lowered their estimates for 2024. How do you see the evolution in the second half of the year? Are you seeing a slowdown in demand? Thank you.

I was expecting this question, actually. No, actually not. We are relatively confident with the guidance that we've given for the end of the year, 2024, which basically, in terms of the top line, is to be in levels of growth which are higher than mid-single-digit. We see no significant slowdown. We acknowledge that there is some uncertainty, actually, because we see what our competitors are saying. But to be honest, we see a solid pipeline. We see interest in our customers on what we are doing. You know, we are relatively confident with potential additional growth in the future. This may have to do with many things, actually. I think that we are doing things right. We are implementing several internal measures for improving commercial practices. We are adding new profiles of salespeople to our staff. We are redefining some processes. We are adjusting the incentive systems for our commercial people. And this probably is affecting the fact that we are growing. Also, the nature of our activity probably also helps. And by the nature of our activity, I mean The fact that we are typically large customers more than in SMEs, which are more resilient. I mean, helping them in core activities, which give us some resilience as well. But as you've seen, I mean, all the sectors are tractioning well and, you know, growth is being solid. You know, and probably we expect a better growth in the second half of the year than what we've seen in this quarter. As I was saying, you know, the guidance, we maintain the guidance of growing at least at mid-single digit, and we're relatively confident that we'll achieve that.

Thank you.

Good morning. This is David from JV Capital. Thank you very much for taking my question. I have two. The first one is on the defense division. EBIT margin came one percentage lower in Q2. Could you give more color on the reason of the decline in EBIT margin in defense? How do you expect this trend in the coming quarters? And the second question is on the outlook for defense. Can you maintain double-digit growth in sales in the coming years? Are there any bottlenecks in the supply chains or any delays? What is your view on the downside risk? Thank you.

About 1% EBIT, I think we have explained is the mix. I think we need to refocus more to... to increase the sale of the systems. But in spite of this, when we compare our competitors, we are in the betting class in defense. We are not worried about this. About the portfolio and the sales, I think we need to push the internationalization and the sport. If we take, for example, Latin America, In the past, last year, we have sold 9 million euros in defense. We have the potential in security, modernization, that implementation of the plan, for example, is the first region that we are working, that shows us a potential growth. If we take Middle East, that also it was internationalized by SPOR, we have a potential with each group business that we are going to develop. That all this item, the region's implementation will help us. If we take U.S., for example, our agreement with Lockheed Martin also will give us the fruit in the future. One of the KPIs we request to the defense team is off-site FCAS, off-site Eurofighter, we need to grow 1,000 million euro cells. With this indicator, at the end of June, we have achieved more than 400 million euros. That people are focused in the system to sell and to export, not only in Spain, Also, you know, a relevant role in defense industry in Spain, but also internationalization. About supply chain. Well, you know, I came from industrial war. I think to put the order, we need to work by order. The first action has been engineering. Today, we can monitor 100% of the project. We'll be on time. We'll be delayed three months. We'll be delayed more. We know the profitability of the project in granular mode. That is done. Now, industry. Now we are working in the supply chain processes. and also we are analyzing all the bottlenecks in manufacturing. For example, last year we increased 30% the production and this year we continue this growth because we see a potential. The idea behind this is to reduce the order intake of the production to accelerate in the future new possibilities of the process. That is in process, I am confident I think people are very motivated and also study very deeply. I can give you one example that our defense director for 8x8, we have daily monitoring QRAQC in Arnhem Plan to monitor the 8x8 deliveries. That's it. It's a revolution in industry. And that is done in Aranjuez. It's one of the samples we are starting to monitor around the company.

Okay, thank you.

Ladies and gentlemen, the conference call Q&A starts now. If you wish to ask a question, please press star followed by five on your telephone keypad. Our first question comes from the line of Nicholas David from Odo. Please go ahead.

Yes, good morning. Thank you for taking my question. Actually, I have three questions. The first one is regarding FCAS. You recorded a strong revenue in Q2, higher than the trend we probably initially imagined. Is it a pull-forward revenue, or is it a higher run rate, including for the next quarters, this strong revenue you had in Q2? My second question is regarding the one-off costs. Could you detail a little bit? The amount you recorded in Q2 and are they all recorded in Q2 or do you expect more in the rest of the year? And if we look at this in the perspective of the annual guidance that you increase, where does this cost, did they vary also in the guidance perspective? Did they increase or are lower than what you initially expected? That's my second question. And my last question is regarding the space business. Could you comment, please, what could be the implication for your space M&A strategy regarding the recent announcement from Thales and Airbus Space, a potential merger? Does it change something for you? Does it prompt you to wait a bit more? And Nicolas would be helpful. Thank you.

thank you for your question about fcas okay we have massive invoice that we expected in age one we have received 137 million in age 124 versus 49 in 2023 and we expect for 2024 220 million euros versus 139 million euros in 2023 about one off we don't give details about this second half Yes, it's possible. About business space, we have announced in our Capital Market Day that for us it's important space because all the communication will go through the space. To secure communication, we need to develop this business. And we are working in the new co-space around the value chains. And we are looking at all the opportunities in the market and recruiting different companies. And also, we follow very carefully Thales, Airbus, and all the movements in the market. That we are studying, when we have informal relevation, we'll anticipate, but we are following carefully. And when we look what has happened in space business in Europe and worldwide, I think we are confident that it was a good moment to enter in this business space from Indra.

Thank you, Jose. Maybe regarding the one-off cost, just in the guidance perspective, is it something, even if you have costs in H2, is it perfectly in line with your initial plan, or should we understand that you manage to increase annual guidance despite maybe higher exceptional costs, or is nothing related to that? Maybe if I can, a very quick follow-up on air traffic management. Could you give us some color about the decline in Q2? What do you expect in H2 there? Is it just a a small slowdown and you still have a good prospect or is it more structural? Thank you.

You know me, guidance includes everything, okay? Don't worry, I think we don't find excuse, okay? We think we are in a solid moment and we need to continue to grow and improve our performance. But don't worry, everything is included in the new guidance.

Our next question comes from the line of from Alantra Equities. Please go ahead.

Hi. Thanks for taking my questions. The first one is on the geographic restructuring that you presented today. Just wanted to know whether this is mostly an attempt to improve your commercial performance. I don't know if your previous structure was a hurdle from a marketing standpoint or whether this is mostly to simplify the structure and save costs and in that case how much could be the potential savings. My second question would be on the development of the 8x8 Dragon program. You mentioned that you are increasing the monitoring. I don't know if you have seen an acceleration of the production schedule. At the beginning of the year, we saw some pushback from or some criticism from the Spanish government regarding the delays. I don't know if the situation is improved. And also, as you know, it has made the press your interest on Test Defense, which is the company that organizes the 8x8 program. I don't know if you could comment on your interest there. or lack of interest in the SPV. Thank you.

About geographic, it was mainly from export, except the main site in Latin. I think we have copied Latin America main site, and from this experience, we have developed an older company. But when we have analyzed the three regions, first we need to start by the country. We need to be focused in the country that we think we can be relevant. If we take, for example, Latin America, in defense, key country is Brazil. That we have monitored the key country that we think we have potential business. And also we have studied how to improve our businesses in this country. That can be in some country organic and other inorganic. That all this description has been done. And that we have analyzed that we have I think for me internalization is not to go to the country, put the flag and go back. For me it's to study the country and minimum is to have 200 million euros business. That is for me a home country. And that we have studied the 11 countries that we think we are very close of this. and we are in the same way that we have deployed Leading the Future, we are deploying Leading the Future in each country. For example, if we take the Middle East, we have three countries. We have Emirates, Arabia, and Morocco. In each country, we are working in this strategic plan for this whole market or simplified market. Success Tool is a scorecard. And this is very important because we need to find the coherence between objective deployment and the leading the fear result. And with this scorecard, it's very easy to analyze the different indicator, not only the financial, But we need to have also process indicator. Process indicator become from sales, become from industrial, become from engineering. That is very important to find the coherence between process indicator and result indicator. And that has been done in this tool, Scorecard, and we follow with the chairman and myself every two weeks and we're monitoring and that is very easy tool because now when we start in, we have started to prepare the by 2025 will be very easy because we know where we are about the processes and result and that will be very easy to implement the result. About this I leave the floor to the chairman.

Yes, with regards to our test defense and different rumors and different information that have appeared, we have to, of course, refer you to our strategy, our defense strategy, on our objectives in the different dominions, including the land dominion. And if there is anything for us to announce, we will announce it in due time. Thank you.

Okay, thanks. And just on the performance of the 8x8 program, if you could indicate whether there has been an acceleration on deliveries and whether the client is happier with the evolution of the project or if things continue to struggle.

I think it never has been said that Indra is delayed in 8x8. The delay has become by test, okay? I don't want to disclose what has been the reason of the delays, okay? But the announcement has been test delay, not in the delays.

Okay, thank you for the clarifications.

Next question comes from the line of Carlos Iranzo Perez from Bank of America. Please go ahead.

Hey, guys. Good morning. Thanks for taking my questions. I actually have three, if I may. So the first one on defence margins, obviously it's been impacted by the one-offs. So could you please give us some colour on these one-offs to try to understand what was the underlying margin in defence in the second quarter? And just following up here, any update you can provide in terms of cap allocation, particularly regarding East Passat? And the last one, are there any potential cost savings related to the rationalization of the international footprint? Thank you.

Regarding higher structural costs of implementation of the strategy plan and the one of specific costs due potential acquisition and diversities under analysis, sorry, but we don't disclose this figure. But enough, more than enough, to shoot the trend from negative to positive. regarding EBIT, revenues, ratio, and the comparison between years?

About productivity, we monitor the cost saving. You can see the ratio for performer by employee that we have increased 13%, but also we're monitoring by cost. And also including, we are studying what is the effect of the AI implementation in the productivity. That we are in these processes. I think we have answered many times. We are interested in SPI division. We are studying different options, different companies around the value chain. And when we have some relevant information, we will inform you. Very clear. Thank you.

Our next question comes from the line of Laurent Dorff from Kepler. Please go ahead.

Yes, thank you. Good morning, gentlemen. I also have three questions. The first is also on defense. I was more interested in the outlook between 2025 and 2027. Basically, if you were to break down the defense business in three, FCAS, Eurofighter, and the other programs, if you could share your view on those three sub-segments to help us to build our model on the different goals for those years. My second question is on Insight. If you could share with us your exposure to ERP and more particular to SEP and rise with SEP. And my final question is on the EU projects from Insight that have been helping the revenue in past quarters. How much further additional business are you expecting from the EU in the next quarters or next two or three years? Thank you.

Okay. So with regards 2025 and 2026 defense prospects, We won't go into the specifics regarding FCAS or Eurofighter up and above what has been told by official sources in these projects. But what we do see is a consolidation and more strength in the trends we have identified these last few years. Higher defense investment, higher investment in transnational programs and growing importance in the command and control systems that are Indra's core. So I think that all the news we have and that we have been seeing in these last two, three months reinforces with specific data and with political will and with budgets what we see. So if anything, we see much stronger signs than we did three, four months ago. But we haven't translated into specific changes up and above the changing guidance for 2024.

Mark, sorry to interrupt, but I understand you don't want to share everything, but My worry is that it seems like the FCAS is at a trough, at a peak, sorry, in revenue terms. I don't think you have to expect too much from Eurofighter. So I'm just trying to see the growth in defense is going to come from if there is a specific program you will rely on or just multiple sources of small contracts. Anything, any granularity will be helpful on this question.

You know, in defense, we are a system supplier. In spite of what happened with EFCAS, we are working in the system. This system, electronic warfare and other systems, will be implemented in different programs. that for us this project is a buster to reinforce our position or system. For that, we are not pessimistic about this, independent of the program. And Eurofighter, you know we have Eurofighter LT. We have additional business in the following years. We think in spite of these two programs, the rest, we will increase in a strong way. Not only Spain, because I repeat, we are focused in export internalization on some key countries. That we need to understand the total overview of the business and the geography.

And you can see our order intake and our backlog, which will affect 25 and 26. They're doing very well.

The other two questions were in sight. Thank you, Logan. I can take any insights if you want. I will ask you to repeat the second one, because I didn't take it. On the third one, the fact is that if we look at the future, we are expecting growth from all geographies and from all verticals. It is true that Europe and specifically EU funds probably will help and have been helping in the past as well. But as you've seen in the presentation, you know, growth is all around. And there are no specific projects which are actually, you know... moving the needle significantly. You know, actually, if we take a look at the second quarter of 24, it is more the opposite. I mean, if you take a look, for example, at elections figures, you know, the revenues coming from elections in this second quarter have been extremely low, 9 million, I think, or something like that. which is probably a sign of this message, you know, about our confidence in future growth. You know, because as I was saying, I mean, all verticals and most geographies are growing. We have good prospects for Europe, but also for other geographies.

And you said, I mean... The last question was on the SEPI.

SAP, we see good prospects as well for SAP in the next at least two, three years. I think that SAP is doing things well. I mean, all this movement to HANA and with the RISE initiative, I think that it is showing good demand from customers. We are well positioned. I think they are at least in some geographies and in some segments. As you know, we have something like 2,000 SAP consultants. And as I was saying, we expect good growth. This should be one of the digital offering lines that should help us keep on growing, not only in this second half of the year, 24, but probably in 25 and 26.

Okay. I want to thank you so much. I want to thank everybody today to participate and listen us. Living in the future is on track. That I told before, some doubt about implementation. Living in the future will be implementation at the right time with the right performance. Indra is growing in all the division. I want to thank this opportunity to thank all the employees in Indra and all the board support for us and also the president for the confidence because Indra go back.

Thank you. Thank you, José Vicente. Thank you, everybody. Good August.