Indra Sistemas Sa Ord

Good morning. Welcome to INDRA's nine-month 2025 results presentation. And now I'll hand the conference over to Mr. Ezequiel Neto, Head of Investor Relations. Please go ahead.

Buenos dias y bienvenidos.

Good morning and welcome to INDRA's earnings call for the first nine months of 2025. My name is Ezequiel Nieto, Head of Investors Relations. Let me first call your attention to the current slide, which contains the legal framework under which this presentation should be considered. Let me now introduce today's speakers, Jose Vicente de los Monzo, INDRA's Chief Executive Officer, and Miguel Forteza, Chief Financial Officer. Jose Vicente, you have the floor.

Thank you very much Ezequiel, good morning everybody and welcome to INDRA's 9-month 2025 results presentation. INDRA has continued to grow and make solid progress in executing a strategic plan leading the future, delivering financial results in line with our guidance and achieving significant business milestones while we keep on transforming the culture of our company. Starting with the financial results, what I must say is that we are going to overcome, to have better results than what we had set for 2025. So the first question you might ask is why are you not following the guidance where our objective now is to get ready for the new programs which require operational expenses and investments and our priority today is to get ready for the future. Our backlog And intake have grown a double digit compared to the first nine months of 2024. Specifically, the backlog has grown by 35% partly due to the consolidation of tests. And intake by 20%. These figures are prior to the PEMs. special modernization programs. Revenues grew by 6% and EBITDA and EBITDA by 10%. Operating profit has grown by 11% in absolute terms and the net profit reached 291 million euros, 85% compared to the first nine months of 2024, in part due to the consolidation of tests. Furthermore, with the forthcoming contracts under the special modernization programs, our defense backlog will exceed 10 billion euros during 2026. In terms of business milestones, I would like to highlight the main achievements in the implementation of the first phase of Lead in the Future with What we are implementing with a great commitment on the part of our teams, the first pillar of the strategic plan, is interest focus on aerospace and defense. In defense, between September and October, we were awarded a pre-financing of 30 special modernization programs. INBRA received over 4.2 billion euros as coordinating company and a further 3.6 billion through joint ventures in which we participate. Total we will receive 7.8 billion euros and we also aspire to participate as subcontractors in 12 additional programs. So out of the 31 programs we are going to be involved in 29 and these a word, a strengthened interest group position as a national benchmark in defense and as a driving force in Spain's industrial ecosystem and that's something we saw yesterday over 600 companies participated in the second meeting and it's been the biggest amount of companies in the area of defense and this is going to be the starting point to become also reference, a European reference in defense and these results are the outcome of months of work. We have a streamlined supply management and we have concentrated spending among key partners. And we must highlight that 77% of defence procurement was sourced from domestic suppliers and we are tripling our industrial and technological footprint in Spain, enhancing our production and delivery capacity and increasing our regional presence nationwide. Another strategic pillar of the plan is portfolio rotation. In July, we completed the acquisition of Airtek VAS, specialized in unmanned aerial systems, such as the Tarsus family, and we will also be closing the acquisition of Exposada and Istesar in the fourth quarter, strengthening our position in space and secure communications. In parallel, we continue to roll out Inframind, consolidating its commercial positioning and its role within the group's technological growth and at the same time we are expanding our industrial footprint to reinforce our production and delivery to prepare for the growing demand. As one example I'd like to share with you is the launch of our first automated radar production line in Cordoba with an annual capacity above 100 NMUS radars and as you know this radar is a benchmark that will become the future anti-aircraft system both in Spain and in Europe or the launch of a new LTR25 radar line with a capacity of five radars per shift and specifically we will be investing more than 150 million euros over the next two years in Spain And in the United States, 100 million in our factories of Calderón, Vigo and Córdoba, and 50 million for a new plant in Kansas for mobility and ATM. Another key element is our investments in R&D and I, where in 2025 we will be investing between 8% and 10% of our annual revenue. Let's now look at these items. If we focus on a defense area, We have advanced in our position as a European reference group. As you know, the sector is going through a decisive moment driven by a significant increase in investment in Spain and Europe. And there's a clear bet to strengthen technology and industrial capabilities. And in this context, if we take a look at Spain, the government through the industrial and technological plan for the security and the defense has awarded 31 programs to modernize the capabilities and the equipment of our armed forces. Out of them, 16, which is 66%, will be led by INDRA or joint ventures in which we participate. In addition, we will take part as subcontractors in another 12 programs reinforcing our presence across the entire value chain. This achievement consolidates Infogroup as one of the main drivers of Spain's defense industrial ecosystem, like Airbus or Navantia, in their respective domains, and it encourages us to continue to strengthen our industrial and technology capabilities, contributing to Spain's sovereignty and security. Within this context, I would like to highlight five specially relevant programs. First, the Joint Tactical Radio System that will provide armed forces with secure and efficient communications, ensuring real-time information between units in the field. And second, oh sorry, and this program will allow all our armed forces to be able to start using this type of radio in the future. And second, the multi-disciplinary connectivity in air security systems program, and the anti-air artillery operation center system, which will modernize the 18 systems of the army and will create a single integrated one enabling a more efficient and coordinated air combat control. Third, the next generation integrated air system which will allow us to continue with the studies and technology packages of new generation weapon systems within the future combat air system FCIS. This is a key project for Spain's technological and strategic autonomy. And fourth, the Truck Support Vehicle awarded to TESS for the manufacturing of a multi-purpose armored vehicle that will replace the Army's Armored Transport , showing the state's firm commitment to this program. And finally, the Advanced Manufacturing Program in Sustainable Land Mobility I which foresees new self-propelled howitzers on wheels and the replacement of current M109A5 units. And this program has been awarded to a joint venture formed by INDRA and Escribano Mechanical and Engineering. And these programs represent a qualitative leap in the technological capabilities of our armed forces and position INDRA Group as a benchmark within the defense industrial ecosystem. As I have mentioned, we have made a 180 degree of our assessment of our capabilities and we have developed what we are doing in the automotive industry. A clear example is our supply chain. In under a year we have made a significant progress in the management by concentrating more than 90% of the defense expenditure in fewer than 550 Tier 1 suppliers. This optimization relies on a tiered structure that mobilizes a substantial portion of the national industrial ecosystem, ensuring a solid, efficient, collaborative and competitive chain. And within this plan, We haven't left any company behind. This modernization has been used to make sure that we can all work in a more organized way. And our focus has been on strengthening our domestic supplier network. In 2025, 64% of interest total procurement volume have come from Spanish suppliers. We have increased by 14 percentage points the previous year, and in defense, this proportion is even higher. 77% of procurement are sourced from national companies, and our target is to surpass 80%. Through these advances, we reinforce the inverse group's role as a driving force in Spain's industrial ecosystem by fostering collaboration with SMEs, startups, universities, and research centers, as we showed yesterday in the event we held with the Spanish entrepreneurial ecosystem so now is the moment to escalate our manufacturing capabilities to make sure Indra becomes or turns what used to be an industrial company and now now we're going to add this industrial DNA that we truly need and we are strengthening our industrial and technology capabilities through an ambitious plan to triple our industrial footprint by boosting our production and delivery capacity. As was noted by the European Commission, the European Union has around 52% of the defense capabilities it requires, which highlights the urgency of reinforcing our industrial base. Specifically, in Spain, we have decided to open several production and technology centers distributed across our territory in Gijón we are creating a production hub for the design and manufacturing of land platforms and vehicles for all their lifecycle and I can mention today that before year-end we will start with the first operations of 8x8 vehicles in our plant which shows how agile we are transforming our industrial centers. In Vigo, we are reinforcing our technology center to specialize in electronic warfare, counter UAS systems, hardware design, microelectronics, and command and control systems. And we are also participating in the development of gallium nitride. And in Lugo, we are expanding our airdrome for ground and flight testing in collaboration with Inter. It's been designed to be able to test all of Indra's portfolio. In Barcelona we are strengthening a specialised centre specialising communications based on cyber defence. In Seville and Malaga we are creating a centre dedicated to advanced software focused on space applications and unmanned aerial systems, also supported by Airtek DAS in Cordoba. We are opening a new production site to increase our capacity to manufacture radars, command centers and mechanical structures. And within radar manufacturing, our objective is to have an excellent center for European radar manufacturing. And last, we continue to enhance our capabilities in aftermarket activities and Eurofighter support. with the new SMD car production line to be able to support this expansion we expect to hire more than 3,000 new professionals in the next three years in Spain in all geographies and internationally I would like to announce an investment of around 50 million euros for a new plant in Kansas in the United States to be able to support the air traffic management division in the manufacturing of radars for the American market and radio and mobility division with free flow tolling systems. We are already present over five states in the United States in tolling and this plan will generate over 200 new jobs in the United States. Let's now Take a look at a new product, Indromind. This new product that we are very proud of, it's a dual-use line, both civil and military. As presented in the first half, 25 results from Indrogroup, we continue to drive our advanced artificial intelligence platform, Indromind. Our ambition is to offer advanced software solutions that are AI-powered, that will enhance decision-making and ensure the reliability of mission-critical operations. In the recent months, we have consolidated its commercial positioning, aligned with three key market trends in production solutions, cognitive superiority, intelligence and decision, autonomous operations, and cyber resilience. Intramind maintains a dual use focus, addressing both civil and defense needs. But I would like you to know our value proposition a bit better, and that's why in the afternoon I'd like to invite you to follow our Intramind presentation event. As you can see, you have the link, the connection link on this page, and that will take place at 18 hours Spanish time. As a preview of what we will be showing in the afternoon, I'd like to share with you a military use case of Intramine. It has been applied to intelligent combat systems designed for mission planning, autonomous guidance and decision support. Intramine will enable us to simulate complex scenarios through the massive capture of data from multiple sources. satellites, radars, cameras, and ground space networks, allowing more precise and efficient planning. Moreover, it will facilitate the orchestration of fully autonomous operations through collaborative platforms that operate with distributed decision-making. In summary, this use case allows us to first model and simulate scenarios to anticipate situations and support the decision-making process. to build or orchestrate autonomous and collaborative platforms through edge computing and deployable communication nodes. And third, they will be able to ensure protected communications through secure applications and end-to-end encryption. In the afternoon, we will go into greater detail on these and other civil applications during our InfoMind event. And let me now briefly recap the progress achieved in the first phase of Leading the Future that we presented on March 6, 2024, with the first phase lasting till March 2026. Thanks to these advances, we continue to make solid progress on the pillars of Leading the Future, reinforcing Indra's focus on airspace and defense. We have also created a new space division with end-to-end capabilities following the acquisitions of Deimos, East Beside, and Eastesat. The closing of the East Beside and Eastesat transactions expected to take place in the final quarter of 2025. At the same time, we remain focused on high-value offerings, expanding on our digital solutions, advancing the potential investment of non-strategic businesses, and in parallel, we have reorganized our digital capabilities. to be able to cater for the needs of all the business units and capture efficiencies through the new cross-cutting function tech operations which has already been deployed under the leadership of Sebastián Balmonte. We are strengthening our international presence. We have introduced the new role of international director and we have simplified our model. We have gone from 27 to 19 units to increase in agility and focus if we continue with our portfolio rotation through our strategic acquisitions such as TESS and Airtek DAS in defense or Deimos ISPOSAT and Instesat in space. We have also launched a joint venture in the Middle East with Edge Group for the design and manufacturing and selling radars to non-NATO countries besides other operations that will complement and reinforce our value proposition. We have also increased our investment in R&D with milestones such as the creation of Intramine and the deployment of the Intratechnology Hub with around 829 million euros already invested in R&D aligned with our goal of reaching 1.2 billion euros by 2026 and we are also strongly focused on attracting critical talent throughout our country and we have already onboarded three out of the 5,000 new hires planned for 2026. If these three new hires, if we add to those 3,000, the other 3,000 we are going to be adding, as you will see, we would have been able to have hired over 5,000 people in our country. And to finish, I'd like to share an important piece of information, the acceleration of the market, marked by a historic increase in defense investment combined with a sustained and rapid progress across the pillars of our leading the future strategic plan, both in operational and financial terms, places us in an exceptional position. And in fact, we expect that by the end of 2025, on a pro forma basis, we will have nearly achieved the financial targets initially set for 2026. And moreover, Indra Group's perimeter has evolved significantly. We have executed key acquisitions in defense and aerospace, and we have launched new business lines, Indra Land Vehicles, Indra Weapons and Ammunition, and IndraMine that expand our industrial business. technological and digital capabilities and last, these achievements have translated into a substantial value creation for our shareholders. Interest share price has appreciated by more than 190% since March the 6th, 2024 compared to 81% in the defense index, 58% in the IBEX and 16% decline in the IT sector. This has meant that we have triple interest market capitalization in the strategic plan period, reaching around 9 billion euros this week. And that's why I would like to thank our shareholders for the trust. Within the plans framework, the EBITDA contribution from the Fenton ATM has grown and it has now reached 51%. of INRU's group of INRU group and we expect this share to increase further to the group's EBITDA in the medium term and all this means that the internal budgeting work for the INRU group in 2026 gives providers with financial predictions well above the targets originally defined for our 2026 strategic plan so we could say that we have completed the first phase of the plan one year ahead of schedule, and we have already started walking for the future. This would not have been possible without the full support of our executive chairman, Ankele Scribano, whose industrial and technological vision I fully share for our company. And together we have instilled a new renewed ambition across the company that reflects the extraordinary commitment and dedication of all the people who made the Intergroup. I would also like to thank the Board of Directors for their ongoing support. As a result, Intergroup is ready to take the next step in its strategic plan, moving from the focus phase to the scale-up phase one year earlier than planned, from 2027 to 2026. a new stage that will allow us to multiply our rich, accelerate growth and consolidate our leadership in the strategic sectors where we operate. And therefore, I am pleased to announce that we will hold a capital market stay in the second quarter of 2026, a key milestone in the company's transformation journey. During that event, we will present the second phase of our strategic plan, leading the future scale up. We will also share At that point, the roadmap that will help us achieve the 10 billion euros in revenue before 2030, as well as our strategic priorities to improve operating profitability and cash generation. Likewise, we would like to show you how this new stage of the strategic plan will continue to generate value for our shareholders. Let us now review the financial results for the first 10 months of the year for the Intergroup. The figures reflect a solid performance, allowing us to reiterate all the financial targets set for 2025. Our backlog grew by 35%, including the impact of the consolidation of tests, which provides us with greater stability and visibility for future growth. These results were mainly driven by the strong momentum in defence and air traffic management businesses. Order intake increased by 20%, double-digit growth in ATM, defence and mobility growth Revenues rose by 6% with growth across all business areas and stable performance in mobility. We have also improved our operational profitability. The EBITDA margin reached around 11.2% and the EBIT margin 8.8%, both up 10% in absolute terms. And this EBIT could have been higher, but as I mentioned, Our priority right now is to get ready for the plans in operational expenses, training and CAPEX. And this shows that besides tailwinds, we are working, all those of us involved in the Ingrid Group are working to improve our efficiency and create a more balanced business. Net profit reached 290 million euros. an increase of 58% compared to the 2024 thanks to our improved operations and also the incorporation of tests in terms of cash flow we generated 57 million euros slightly less than 2024 due as I mentioned throughout the presentation due to the work that we are doing in preparation for the increasing investment in defense, and finally that debt remained practically neutral, which is a remarkable milestone in a context of strong sector growth. If we take a look at our sales figures in detail, we have achieved a growth of 8% in local currency and 5% in organic growth. We can also see that this positive trend has been reflected in the third quarter of the year with sales increase by 8% in local currency in terms of the distribution, geographical distribution of our revenue. Spain remains our largest market with a growth of around 5% compared to the same period last year. In international business, that already represents 50% of total sales, we can see a special strong growth in Europe, has grown 11%. By division, defense and ATM account for more than half of the contribution to EBITDA, reinforcing their growing weight in line with the objectives of our strategic plan in terms of the evolution of our workforce we have achieved an evolution of 2% in revenue per employee compared to September 2024 and 3% compared to the end of last year and we keep on attracting the best talent in the market aligned with our strategic priority of becoming an employer of choice in Spain and as a result we have increased our headcount by 5% compared to the first nine months of 2024 including a remarkable increase in the defense workflow which has been 35% and we will continue investing in talent acquisition and as you might imagine if we have increased 35% in defense you are probably able to imagine the next few months and years our sales are going to grow similarly And now let's continue seeing the results of our business by segment during the first nine months of 2025. As you can see, our defense business delivered a robust growth in order intake, 47% driven by Eurofighter programs, later contracts in Germany and Oman, and the inorganic contribution of Deimos. Revenue increased by 14%, supported by Eurofighter space and weapons and ammunition, and in addition to these double-digit growth rates, The EBITDA margin stood close to 20% and EBIT margin reached 17%. Those are figures that are a true benchmark in the European defense market. In terms of ATM, in the ATM division, order intake rose sharply, 57%, mainly due to the new radar contracts in the UK and Spain, as well as radio systems in the United States, which position us as a benchmark. for the transformation of air traffic that will take place in the next few years in the United States, and that's why we have already decided to invest in the new plant in Kansas. These sales increased by 16% driven by this double-digit growth both in the Americas, thanks to the United States and Canada, and ITEC, and in Europe, including the United Kingdom, Belgium and Germany, and the everyday margin has reached 15.3% and the EBIT margin 12.4% and now take a look at the mobility division, order intake rose by 10% boosted by urban transport management systems in the San Francisco Bay Area as well as projects in Chile, Colombia and Romania and we are still waiting for new mobility programs within Europe sales remained stable with growth both in Europe and Spain that offset the declines in the Americas and margins have narrowed slightly in EBITDA margin 6% and in EBIT margin as well this is a dimension that we are working on And if we take a look at the mean side results, we have a stable progress expanding our backlog, order intake and revenue with a growth of 14.7%, 6.7% and 3.1% respectively. If we take a look at the other companies of the sector in our country, we can see that we are above any of our competitors. And likewise, the profitability of mean side also improves slightly. EBITDA margin has gone from 7.8% to 8.3% and EBIT margin from 5.6% to 6%. We can see a clear potential of further improvement and under Luis Fernandez's leadership I am sure this transformation will take place in a short time and it's going to be efficient and that's why our current priority is to achieve greater efficiencies, advance on the cross-cutting deployment of our digital capabilities, and getting even closer to our clients. And this is Indra Group's situation, and now I would like to give the floor to Miguel, who will provide further detail on the financial information. Thank you.

Thank you, Jose Vicente. Let us now continue with the main financial highlights for the first nine months of this fiscal year. Starting with free cash flow during the first nine months, we generated around 57 million euros, slightly below the figure recorded in the same period last year. However, as we mentioned in the previous quarterly earnings call, the evolution of the fiscal year follows a pattern consistent with our historical series, particularly considering the seasonality that typically affects this metric during the first nine months of each year and which ends in a very strong fourth quarter. Therefore, we ratify our expectation of achieving free cash flow generation above 300 million euros for the full year 2025. Regarding working capital, Although the evolution of days of sales outstanding has not been as favorable as in the same period of 2024, this variation is mainly explained by the increase of inventories in defense and ATM. or air traffic due to projects with longer life cycles as well as by the rise in trade receivables. As a result, we stand at plus 21 days compared to plus 6 days at the end of September 2024. As shown on the slide, the consolidation of tests had a significant effect, adding 46 days of sales in inventories and 52 days of sales in the heading trade receivables. Let us now analyze the evolution of net financial debt during the first nine months of the year. Over this period, net debt stood at approximately 140 million euros compared with a net cash position of around 86 million euros at the end of 2024. And this change is mainly due to the contribution from operating cash flows, which added 348 million euros, the negative impact from working capital variation for 172 million euros, and finally, Non-recurring financial effects associated with investments amounting to about 257 million euros. As a result, the net debt to EBITDA ratio remains at very solid levels, standing at around 0.2 times. This reflects an almost neutral financial position, very similar to the one posted in September 2024. Finally, regarding the structure of our debt, we continue to reduce the average cost of gross debt now at around 3.2% down from 4.2% at the end of 2024. Consequently, the average debt maturity has extended to around 3.2 years compared with one and a half years in the same quarter of the prior year. On the other hand, we closed the quarter with a cash position of approximately €604 million. The company holds around 790 million euros in available credit lines, including financing from the European Investment Bank of roughly 385 million euros with a defined allocation of funds. We now conclude our presentation and move on to the Q&A session.

gentlemen, the Q&A session 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 Beatriz Rodriguez from Westinburg. Please go ahead.

I have a question about the PEM programs. You said that we already know the loans that were granted in 2025. Can you give us some color as to the percentage of total programs in connection with those loans? Have you received any details from the government concerning these PEMs? Are there any figures that you can share with us? And on the other hand, I would like to know, the outlook for 2026. I understand that you are planning to invest 2% of GDP next year. I would like to know whether you have any outlook for 2026 and subsequent years.

Yes. Good morning, Beatrice. Good morning on the contracts. we have seen for the government we have the joint rating systems it's a contract compared to the funding of 768 million euros it accounts for 65% and this is the first phase because we are going to renew 100% of all the networks of our army so we expect more phases in the future a second program The multidisciplinary connectivity, it's a joint venture with Telefonica with a contract of 785 million euros with a funding of 380 million that accounts for 40%, 48% right. And the crypto capability is a 159 million euro program through Epicon with a funding of 67 million euros. contracts that are launched, we will inform them. Are we working for the PMs from the special monetization programs? Of course we are. I believe there's a commitment of the government of Spain and the president mentioned that they are going to invest 2% to keep on adding and increasing capabilities, so we are working with that hypothesis in mind and we are working around two main axes. Space programs, we believe that we have an important element to play with here, because within the European program, phase one is to improve space capabilities in Europe, and our country has something to say there as well, that's why we are working to ensure the S&Ps include space programs, and that's why we've made an investment, we have paid 725 million euros for ISPASAD, and controlling ISPASAD, and the anti-air system. We have a first phase ready in Spain with 18 teams but with one of our European competitors we are the anti-air system that's better prepared and not only are we thinking about selling in Spain but we are planning to sell in Europe and we believe that in the 2026 plans the first 18 systems that are our part of the plan in 2025 we believe that those are going to be expanded throughout all the Spanish air systems those are two examples on which we are working and that's why we are investing in the case of the anti-air system we are investing in imported and robust production lines to be able to respond to the demand that the Spanish and European markets are requesting.

Next question from Juan Canoas from Alandra Equities. Please go ahead.

Good morning.

Going back to the prior question, could you give us more detail as to the percentage that INDRA would hold in these PEM programs? And concerning contracts in Europe, could you please let us know which your target is in Europe? or how can Indra achieve the same success in Europe as in Spain?

On the two adventures, well, as you know, Once the contract is ready, we need to develop the industrial plan. So when the industrial plan is developed, we will be in a situation which will be able to tell you which is the share we're going to get. Those that are led by us, those are programs we consolidate, and we have to provide both the Ministry of Defense and industry our industrial plan, because let's not forget that we need to deploy over 30%. with 30% have to be in the hands of a Spanish supplier so as the contracts that we work on the contracts we'll be able to tell you which is the share the shares are throughout the value chain on European programs I'd like to show you some examples. Spatial Vigilance Raiders, and we found two in Spain, and we believe that within the European program, we have been the first company in Europe, and that's what I showed Commissioner Kobilius, and I showed it in Brussels a few weeks ago. We have created a portfolio with all our products, all the products that can be used within the ZEP program. And where is Indoor relevant? Well, we've already shown it in Raiders that do use Civil and Military and the TR-25 and the LAMPHA Raiders. Those are Raiders that are at the same level as any other Raider manufacturer in the world, may them be American or European. The NTR system, well, is advanced thanks to the joint venture we have with Excribano, because otherwise, if we did not have that joint venture, We couldn't cater for a whole program within the aerospace and that's why we are working on the possible operation with S3 Banner because that's going to add to our product capabilities and it will include an industrial DNA that at the speed at which we are transforming will be extremely helpful. to keep on catering for the needs of INDRA's objectives.

Next question from Carlos Treviño from Santander. Please go ahead.

Good morning and thank you very much for taking my question. I would like to deep dive into defense possibilities, taking into account the backlog that you announced for 2026? I believe that those $10 billion would account for pure business for Indra, regardless of the participation of other companies in such projects. So do you expect to include all the PEM projects into the backlog that have been awarded in Phase 1, or do you think that there are other projects that could be assigned in subsequent years and therefore would not be included in the 2026 backlog? I would like to know about the average life of such a backlog, taking into account that we are talking about multi-year projects. And considering additional costs in order to address future growth, can you quantify how that has affected your operating profit for the year and what could happen going forward?

Well, we have to make a difference between the washer and intake, all the intake. When we're saying that it's over 10 billion, we are not only thinking about the plans, so we're thinking about SAFE and other international programs. in which we're in and that's why in the capital markets day we will be able to provide more detail once we know all the 2025 programs so once we know safe orders we will be able to provide a I believe that 10 billion is quite conservative. If we take a look at everything that's going on in Europe, these are three to six year programs. And in many of the cases, this is just the first phase. So we're talking about specific programs, the radial program, that's the first phase. In the first phase, with the first phase, we won't be able to transform 100% of the radial system. There are going to be more phases in the next few years. So the anti-aircraft system, with 18 anti-aircraft systems, that's not enough for the Spanish system, so that's one first phase. Well, it is the Ministry of Defense, the one that will set its priorities, and they will explain which are the priorities for the armed forces. What we are doing within these programs, these benchmark programs, is not just thinking about Spain, but actually thinking about Europe. and taking a look at some international markets, because the volume effect will improve our competitiveness to reach markets that may be out of our reach today.

Next question from David Lopez-Sanchez from JB Capital. Please go ahead.

Good morning. I would like to follow up on the prior question about the backlog of $10 billion for 2026. Would that include interest interest as main contractor or should include its participation as a member to joint ventures? And what about the financing that has been recently approved for defense programs? Can you give us some color as to how that adapts with your backlog and the amounts that you expect will be reported in the last quarter of 2025?

In the 10 billion, we include everything, both joint ventures and the ones in which it's just in there. So that's the whole business figure. In terms of funding, Miguel, please.

Okay. Let me explain the dynamics behind this pre-financing in order to get it right. Each contract will be associated with an account. where the Ministry of Industry will be making deposits for this pre-financing that has already been granted. Such accounts will be independent accounts, restricted cash accounts, so to speak, that will only be available As stated explicitly in the agreements, we don't know the details yet, but all the milestones will be set out under agreement. Therefore, that restricted cash will be released according to such terms. When that happens based on certified milestones authorized by the Ministry of Defense, they will be recorded as cash flows for the company now while the financing is on the restricted cash accounts we are going to have a neutral financial effect with other financial assets and liabilities that will have no effect whatsoever on our debt ratios as you very well know These ratios are not impacted by such advance payments. And as for the amounts concerned, they have already been disclosed. There are some pre-financed amounts for each contract, and there are some allocations that will be made in 2025 all the way to 2031. There is a full breakdown of such amounts.

Something I forgot to mention to Carlos Viña from Oxfam Tandera is the impact of the preparation for the special modernization programs. I want you to know that operational expenses made in the third quarter, I asked the team to recover, to have the same EBIT as the one we had in 2024 without preparation, so above 18%.

Next question. next question please next question from carlos iran for paris from bank of america please go ahead and thanks for taking my questions i have two if i may um on the more than 10 billion defense backlog in 2026 Any color about how many billions or what is the percentage of this backlog that is coming from the PEM programs versus non-PEM? And then the second question, just coming back to the path to 10 billion sales, I mean, you already mentioned back in February this year that you could deliver 10 billion sales in 2028. So I guess post-2028, In terms of location, clearly the growth outlook has strengthened significantly. So should we then think that it could be possible to potentially achieve those 10 billion earlier? Thank you.

Let's try to understand this correctly. The 10 billion, most of them are going to be PEMs and special modernization programs, but not just that. We have other elements in which we're working, like SAFE or other European programs or international programs. But the base that we take as a benchmark, and it's simply a conservative figure, are the 2025 PEMs. On the 10 billion, we never said 2026. What we said was... that our ambition was 2030. Today I can say and our president mentioned already that his intention was to be able to get there by in 2028 and that's what we're working towards and I believe that from today till the capital markets day we'll be able to tell you when we're going to reach those 10 billion. Carlos, siguiente pregunta.

Thank you Carlos. Next question please.

Next question from Michael Brist from UBS. Please go ahead.

Good morning. Just on going back to the loan program, I think I heard you say that on the MC3 program, you've got loans of $380 million and the contract value is $785. Is that ratio of loans to order roughly the same across the entire $7 billion loan book. And then just in terms of tests, focusing on the here and now, could you talk about the deliveries in Q3? I know there were 11 in Q2, and you were hoping to do 60 as a minimum this year, but it doesn't look like there was much contribution in Q3, and therefore do you still think you'll hit 60 units for the year? Thank you.

First of all, Miguel will explain the financial part, but on vehicles, our commitment was to be able to provide one division, 57 vehicles and reach 70. That's what we are working for, and that was our commitment. Not just Indra's commitment, but the rest of the partners that are part of TASC. So, General Domecki, Aerodynamics, SAPA and Scribano. Because this is a commitment that has to be a commitment by all of the four companies. Although it is true that starting in July, INDRA is leading TESS. On the figures.

Okay, let me supplement the CEO's remarks. As you know, in Q3, there were no significant revenue coming from tests, but we believe that that will come from future deliveries. As the CEO mentioned, we expect that to take place in Q4. As for financing ratios and contracts, We provided an example concerning the 390 financing for a total contract of 795 million or 48%. You are right. However, we should take into account that we need to wait for the agreements to be formalized. We need to know exactly the terms and conditions governing those agreements. Otherwise, it will not be possible to start setting out a clear ratio and therefore think about an increase in our backlog. We have to weigh whether phases will be established, whether they will have a full or partial scope or outreach. Nonetheless, as soon as we formalize those agreements, we will keep you posted because all that information will be included as part of our backlog and order intake. For the time being, we cannot report a standard ratio because we believe that these figures might change significantly in some cases, and from one contract to another, there might be variations. Next question, please.

Next question from the line of Desika Agarwal from Goldman Sachs. Please go ahead.

Hi. Good morning, everyone. Thanks for taking my question. I just have two on basically the other segments. First of all, the air traffic management. It was like a slight decline organically, but I understand it can be lumpy. So how are we tracking when it comes to that, like, you know, expectation around the low double-digit growth in this segment? And how do you see that developing over the span of next 12 to 18 months? And the second one is basically like any update on MINSATE as in like what exactly we completely understand there is a part like where you want to keep the core and there are some businesses which might be like, you know, which might be like available for sale. So any updates on that would be helpful.

It is true that as for ATM, The past quarter was not as solid as we initially expected, but we should take into account that in the first half of the year, ATM revenue grew by 25%, 26% roughly, and therefore that is what we need to take into account. However, as for the end of the year, we expected double-digit growth in ATM. Maybe you might remember that at the beginning of the year, we said that we expected a high single digit concerning revenue coming from ATM. Now, however, we estimate a double digit growth by the end of 2025. As for Our outlook with regards to the next 12 to 18 months, it's pretty clear, as the CEO pointed out, we expect the same growth as the one we estimate for other regions, such as the United States, where we said we are going to be making an investing effort in the Kansas plant through the contracts that have already been awarded to INDRA. Taking into account the American aviation agencies, they are going to be investing up to 10 billion euros in total. And we're also focusing on Asia Pacific as another region.

Just to reinforce what Miguel mentioned, when we're talking about ATM, we cannot focus on a quota because we don't really control the contracts. We are talking about over 50%. So it's normal in one country to be ahead of time, some others a bit lag behind. It's important to see the difference year to year. And what I can say is that in ATM today we have the most advanced solution in the market. And I'm saying this not just for the sake of it, but I came back from the United States two weeks ago and I can say that airport authorities are very happy with in resolution and we have NAV Canada as well and in London we've got Eurocontrol the Middle East so it's not happening by chance that we are in most markets in the world so I'm not concerned on non-strategic assets at the main site well we both the president and myself we know which are the assets that are not non-strategic There are several processes open, and if there's a proposal that satisfies the needs and the expectations of the company, we will carry it on. We are not in a situation in which we want to lose value or just lose assets. If we understand that there's a proposal and that amount helps us invest on another asset that generates more value for our shareholders, we will do it. and we will inform you as it happens so at a point in which the company is getting transformed and we are talking about 20-50% of contracts or 100% in defense we are getting our portfolio organized we are one year ahead of schedule in our strategic plan and at the same time we haven't increased our leverage at all. So while I believe that there's going to be a business case in the next few years to see how in two years we turned around a company.

Next question.

Next question from Nicholas David from Odo. Please go ahead.

Good morning. Thank you for taking my question. The first one is regarding Indramind. Could you help us understand the magnitude of the opportunity in terms of order intake you see regarding the contracts which are part of PEMS linked to digital and cybersecurity and what could be the timeframe for those allocations? My second question is regarding CapEx. Now that you have a bit more visibility on the contract we signed, what kind of CapEx success do you expect in the coming years? Should it increase or is the level of 2025 something we should consider for the future? Thank you.

Intramind is a solution that Europe needs for its technology sovereignty with a dual use, both civil and military. So, with the President, we assessed. On INDRA, we have many use cases, both civil and military, but we have a platform, and I believe that for that, the European Sovereignty Interbank can provide a solution, both in military and civil cases, because we already have the use cases, so on the information well in the afternoon there's an event at 6 p.m. Spain time and I don't want to advance any of the things that we're going to be mentioning in the afternoon because our teams are working and fighting to explain the market what Intermine is going to be what we're going to do with it and what we expect and I don't think it is right to reveal beforehand what we're going to be communicating in the afternoon So those were the results for the first nine months of the year, and as I mentioned, well, first of all, I want to thank our teams. INDRA Group has nothing to do with what was here before I got here. The arrival of our president in January has accelerated it because we share a vision and we share a project. I believe that yesterday's event with the companies is a clear turning point of what infra means in the Spanish sector. And we, well, finish with the idea of it means it's going to be sold or not. We are working together. We have turned ATM into a leading company globally in its sector. We have transformed mobility with benchmark projects like the bridge in the United States or some other projects we are about to launch in Europe that are going to be relevant from a global perspective in defense. We did a portfolio rotation. For example, we are experts in radars at a world level. We are working on anti-aircraft systems. we have entered the space and security communication and the result of it all is that we have advanced in a year our strategic plan and we are already working on a roadmap towards those 10 billion one year ago none of you expected intra to achieve 10 billion before 2030, and we are going to get there. But not only are we going to get there in terms of sales, but we are going to be leaders in terms of profitability and with a very low debt. And that's possible thanks to the work of the whole team, and we will keep on working. Thank you very much, and see you in the annual results presentation and in the second Capital Markets Day. Thank you very much for your trust.