Indra Sistemas Sa Ord

Good morning. Welcome to INDRA's first half 2026 results presentation. And now, hand the conference over to Mr. Ezequiel Nieto, Head of Investor Relations. Please go ahead.

Good morning, everyone. Welcome to our first half 2026 results presentation. My name is Ezequiel Nieto, Head of Investor Relations. Before we begin, let me briefly draw your attention to the disclaimer on the current slide, which sets out the legal framework applicable to today's presentation. Joining me today are Josep Maria Recasens, Chief Executive Officer of Indra, and Miguel Forteza, Chief Financial Officer of Indra. With that, let me hand over to Reca to walk you through the key highlights of the quarter. Reca, the floor is yours.

Thank you very much, Ezequiel. Good morning to everybody, and thank you for joining the current presentation of the first group, first half results of Indra in 2026. Actually, it's a privilege to address you today in my first results presentation as a Chief Executive Officer, and I fully recognize the responsibility that comes with this role. The results that we are presenting today are a result of the work carried out by our teams during the first half of the year. I want to acknowledge and recognize that work and thank everyone at INDRA for the welcome I have received. As you may know, I'm coming from the automotive industry, more than 25 years in the automotive sector, 20 years in the Volkswagen Group and the last five based in Paris in the Renault Group. So I have had different responsibilities and strategy programs Partnerships and Business Development but despite the role were different the equation was always the same turning a strategy into execution by making the right product choices managing programs efficiently and diligently and delivering on our commitments that is the approach I bring to Indra in my first weeks at Indra I have focused on what I think matters the most What I have found, indeed, is a company with exceptional outstanding technological capabilities, a strong backlog, talented people, and a real momentum. My role, in fact, is to accelerate that execution. Let me now turn to the environment in which we have to do that. Actually, every time I join a new venture, and this is a very particular one, I like to understand in which is the environment and context I have to operate. And in fact, I have identified a total of eight challenges. Actually, our industry is at the same time facing both more challenges and opportunities than ever before. First, geopolitical instability and polarization are reshaping the global security environment. Governments are reassessing the capabilities they need to protect their citizens, their infrastructure and their strategic interests. Energy security and resilience have also become part of our national security. The question is no longer only how much energy costs, but whether is it available and secure when it is needed. As a consequence, we are experiencing a sustained increase in defense spending. The 27 EU member states spent more than 400 billion euros on defense in 2025. 20% more than in 2024. In 2026, that figure is expected to reach 450 billion euros according to the latest European Defense Agency report. This is not a temporary spending cycle. It is a structural change in priorities. At the same time, shortages of critical raw materials and pressure on global supply chains are forcing Europe to reconsider its dependencies and strengthen its industrial capacity. That is why sovereignty has moved to the center of government agendas. Governments are asking not only what capabilities they need, but also where they are designed, where they are produced, and who controls the technologies behind them. In this context, scale and innovation are decisive, decisive competitive advantages. Developing excellent technology is not enough. Companies, and this is what Indra aims to be, must be able to industrialize it, produce it reliably, and deliver it on time at the required quality and a competitive Civil and military technologies are also converging, and converging really, really fast. The traditional 5 to 10 year development cycle in defense no longer matches the speed at which threats evolve. Ukraine has shown how commercial drones and satellite communications can be adapted to battlefield needs in months, not years. Disruptive technologies such as artificial intelligence, and Quantum are accelerating this transformation even further, reshaping how systems are designed, how decisions are made, and how capabilities evolve. Together, these forces are redefining our industry. For a company like INZA, this environment is not a threat. Actually, it's our moment. Every one of these forces points to greater demand for precisely what we do. But capturing that opportunity and turning it into results will depend on execution. Given this context, we have defined four clear principles to guide how we operate. The first is delivery and speed. Our credibility is earned by delivering on our commitments, on time and with full control of every problem. That means Managing milestones by milestones, anticipating bottlenecks, and taking decisions faster. In programs such as land vehicles, drones, and radars, the challenge is clear. Increase our delivery capacity and convert demand into industrial output. The second is quality and reliability. In our businesses, quality is not an option. We work on systems that must perform in critical environments over very long cycles Eurofighter is a good example. It is not a program measured in months that indicates. It requires the same level of excellence, mission after mission, and upgrade after upgrade. The speed is, again, essential. But speed cannot come at the expense of reliability. The third is sovereignty. Technologies like Ingramine keep critical capabilities in our hands, in our country's hands, and in Europe's hands. The fourth is competitiveness. Being sovereign is not enough. We must also be competitive in cost, in lead time, in quality, in technology, and in international ambition. Air traffic management proves that INDRA can compete globally and win. That standard must guide us across the globe. And the pinning all four is our industrial footprint and ecosystem. Our plans Engineering centers, suppliers and partners must operate as one single system. These are our four management principles, deliver faster, deliver with quality, control critical technologies and compete globally. That is how we will turn a strategy into execution and backlog into results. With that, let me turn to our first half performance. With that strategic context in mind, let me now turn to the key operational and financial highlights of the semester. The results for the first six months of the year demonstrate the consistent execution of our strategy and the continued progress we are making to deliver our annual targets. In particular, the second quarter marked a clear step up in performance, with a further acceleration in growth and continued margin expansion across the globe, underscoring our ability to deliver profitable growth while maintaining a strong operational discipline. Before taking a closer look at our financial performance, let me briefly highlight some of the key milestones achieved during the first half of the year. In the United States, we strengthened our industrial footprint with the opening of our center of excellence in manufacturing in Kansas. while also commissioning the first radar for the FAA, a significant milestone that reinforces our position in the air traffic management market. In defense, execution remained strong. With tests, we have delivered in half a year more than the full year 2025. And this is a statement we want to keep going on. We also continue to expand our ecosystem of strategic partnerships through agreements with leading industry players such as BAE Systems, Rheinmetall, NADS, IVECO and Kongsberg. These collaborations further enhance our technological capabilities, broaden our market access and strengthen our long-term growth opportunities. In terms of commercial activity, We secured important contracts awards, including Radar Project in Congo and the Transport for Washington contract in the United States, further supporting our future growth outlook. Finally, we continue to advance our portfolio optimization strategy through the disbursement of non-core assets, completing the sale of main site business consulting division and reinforcing our focus on core businesses. Let me now turn to our financial performance and walk you through the key results for the first half of 2026. All the backlog reached a record height, €20.5 billion, more than doubling year on year with a 117% increase. At the same time, all the intake grew by 58% to €5 billion, driven primarily by the strong momentum in defense and the contribution of Ispasat and Isdesat following their integration into the space business. Revenues increased by 30% year-on-year to 3.2 billion euros, supported by an outstanding growth in defense, which more than doubled its revenues, and by a continued expansion in air traffic management. Importantly, this strong revenue performance was accompanied by improved profitability. Erit margin reached 9.9%, after 1.3 percentage points versus the first half of 2025, and 10.6% excluding the impact of test consolidation. In absolute terms, EBITDA and EBIT increased by 22% and 51% respectively. Net income amounted to 219 million euros, representing a 2% increase versus the first half of last year. Free cash flow reached 1.5 billion euro compared to the 65 million euro in the same period of 2025 fully explained by the prepayments received in January 2026 from the special modernization programs. As a result, we closed the first half of 2026 with a strong balance sheet and a net cash position of 1 billion euro implying a net debt EBITDA ratio of minus 1.3 times Providing significant financial flexibility to support our future growth ambitions. Looking to the second quarter on a standalone basis, we saw a clear acceleration in revenue growth, driven by the strong performance across all our divisions. Defense was particularly noteworthy, delivering exceptional triple-digit growth of 103%. This solid top-line performance was also reflected in profitability. Edit margin reached 10.7% in the quarter, an improvement of 1.8 percentage points compared with the second quarter of 2025. Let me now turn to our first half-phase performance. During the period, we achieved revenue growth of 30% in local currency and 16% on an organic basis. This performance was supported by both solid organic growth and the contribution from our recent acquisitions, while FX had a marginal impact on reported revenues. Moving now to the divisional breakdown, I would like to highlight the continued transformation of our business portfolio. Aerospace and Defense now represent more than 71% of the group's EBIT, as illustrated on the chart on the right-hand side. underscoring the strategic importance of these activities and their growing role in driving value creation across the group. Looking at our workforce metrics, headcount decreased by 5% to 58,383 employees, mainly driven by the 12% reduction in Insight. More importantly, this evolution has accompanied by a substantial improvement in productivity, revenue per employee increased by 30% year-on-year and by 21% compared with December 2025, highlighting the benefits of our portfolio transformation and the greater efficiency of our organization. With that overview of the group's results, let us now take a closer look at the performance of each division and the key factors driving growth and profitability across the portfolio. Starting with the defense business, the first half of 2026 confirms the strength of the business in all key performance indicators. Order intake increased by 120%, further reinforcing long-term visibility. Revenues more than doubled year on year, supported by a successful ramp-up of major programs already in execution. Profitability remained at sector-leading levels with an EBITDA margin of 20.9%, an EBIT margin of 17%, excluding the test impact. Looking specifically at the second quarter, Defense delivered a particularly strong quarter with program execution accelerating significantly. or the intake increased by 195% driven by Eurofighter, Air Defense and PEMS. This was accompanied by a remarkable revenue growth of 156% supported by the ramp-up of the test PCR 8x8 deliveries and the strong execution of major programs already underway. Profitability remained resilient with a beta unedded margins of 19% and 16.6% respectively. Following with Space, the first half of 2026 marks a transformational period following the integration of ISPASAT and ISDESAT, significantly expanding the scale and strategic profile of that division. Order intake increased by 98%, while the backlog reached 2.9 billion, providing a strong long-term visibility. Revenues grew by 398%, primarily reflecting the first full half consolidation of ISPASAT and ISDESAT. Importantly, this integration has also reshaped the division's profitability profile, with the EBITDA margin improving to 40.5% and the EBITDA margin reaching 10.6%. Looking at the second quarter, the Space Division continued to showcase the new operation scale of the integration of ISPA-SAT and ISDE-SAT, with all the intake growing by 110% and the revenues by 403%, driven by the strong contributions across Spain, America and Europe. This effect was also reflected in profitability, EBITDA and EBIT margins, improving to 42% and 14.2% respectively. Turning now to air traffic management, the business delivered another strong set of results in the first half of 2026. Order intake increased by 57%, leading by a strong momentum in America, AMA, and Spain, further strengthening the division's growth outlook. Revenues increased by 16%, while organic revenue growth reached 15%. Highlighting the underlying strength of the business. At the same time, profitability continued to improve with the beta and edit margins increasing to 15.2% and 12.6% respectively. Focusing now on the second quarter, Air Traffic Management delivered another solid quarter with order intake up to 84% driven by strong bookings across AMEA and Europe, while revenues advanced 15% in the quarter. The division also delivered a further improvement in profitability, with a better annual margins, reaching 13.9% and 11.9%, respectively. Looking at mobility, the key highlight of the first half was the outstanding commercial performance delivered by the division. At order intake, More than quadrupled year-on-year, increasing by 317%, supported by several landmark awards like the Transport of London Concert, the Saudi Rail Maintenance Program, and the Transport for Washington Concert. These awards drove an increase in the book-to-bill ratio to 5.40 times compared to the 125 times in the first half of 2025, providing a strong revenue visibility for the coming years. Moving on the second quarter, Mobility delivered another solid performance, with order intake increasing by 92% and revenues growing by 2%, while profitability reflected EBITDA and EBIT margins of 2.7% and 2.6%, respectively. Finally, let me conclude the divisional review with Mindsight, which delivered a resilient performance in the first half of 2026, with revenues increasing by 3% while organic growth accelerated to 5%, driven by the strong performance of public administrations and healthcare. Order intake rose by 2%, maintaining a healthy book-to-bill ratio of 1.19 times. Furthermore, profitability remained stable, with an average margin of 5.8% and operating margin standing at 6.9. Sistemas Sa Ord Sistemas Sa Ord Sistemas Sa Ord Sistemas Sa Ord Hand over to our Chief Financial Officer, Miguel Fortefas.