Indra Sistemas Unsp/Adr

Good morning and welcome to INDRA's 9-month 2026 results presentation. I now hand the conference over to Mr. Ezequiel Nieto, Head of Investor Relations. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to INDRA's 9-month 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 under which we will have the presentation. Joining me today are Josep Maria Recasens, Chief Executive Officer of Indra, and Miguel Forteza, Chief Financial Officer of Indra. Let me now hand over our CEO to walk you through the key highlights of the period. Reca, the floor is yours.

Thank you very much, Ezequiel. Good morning, everyone, and thank you for joining us. for the presentation of Indra Group's first nine-month 2026 results. Let me start saying that the first nine months of 2026 have been a period of strong execution for Indra. We delivered double-digit growth across all our key financial metrics, fully aligned with the 2026 targets, supported by accelerating order intake, a record backlog, and a sustained demand across our core markets. Importantly, this growth was accompanied by a further improvement in profitability, reflecting the increasing scale of the business and the quality of our portfolio. Beyond the financial performance, we also continue to strengthen the foundations for the future growth. We simplified the group's organizational structure to enhance execution and decision making, while expanding our industrial footprint through the acquisition of a new plant in Aspontes. We also reached important milestones in two of our key programs. In defense, the BCR 8x8 program continued to advance steadily, reaching a total of 101 units delivered by the end of September, and demonstrating the successful ramp-up of our industrial and production capabilities. In space, the signature of the Eris Square contract further reinforced our position in one of Europe's most strategic sovereign initiatives. Finally, we completed a number of targeted acquisitions that strengthen our capabilities in strategic technology domains, including cybersecurity, autonomous systems, advanced sensing technologies, and quantum computing, broadening our technological capabilities and supporting our long-term growth ambitions. These developments reflect the progress we are making across the key levels of our transformation. Let me now take you through each of those levers and provide some tangible examples of how they are already translating into execution. Building on the five principles I shared with you in the last conference call, that is speed and delivery, quality and reliability, sovereignty, competitiveness, and dual use, I'm going to elaborate on our five levers to play offense in our markets, markets that are in profound transformation. First, office talent. Offensive talent. The industry is competing for a new generation of engineers, AI specialists, and highly skilled professionals. Attracting them is important, but developing and retaining them will be just as critical. For that purpose, lean operating models are key to entice these professionals. Second, offensive product. Our customers expect more sophisticated, more flexible, and increasingly integrated solutions. We need to shorten development cycles, accelerate innovation, and continuously evolve our product portfolios. For Indra, product development will be key going forward. Offensive Industrial Demand is increasing and the industry must be able to respond. This means expanding capacity, strengthening supply chains, and above all, delivering at the greatest speed and scale without compromising quality. Offensive Ecosystem No company can address today's defense challenges alone. Success will increasingly depend on stronger partnerships with other players, suppliers, startups, research institutions or governments. We have a crucial role to play in strengthening the national ecosystem while forging strategic partnerships across Europe. And fifth, offensive technology, artificial intelligence, quantum advanced sensors or cyber are rapidly transforming our industry. Our challenge is not simply to access these technologies but to integrate them into our products and industrial processes faster than ever before. These five levers are closely connected. Together they will determine which companies can grow, execute and lead in the next decade. Let me start with the offensive talent. We have recently established a leaner leadership team, reducing the size of our management committee by one-third. The objective is straightforward, to accelerate execution, Thank you very much. We'll shape our long-term strategy and direction. Sell will drive growth, deepen client relationships, and span our commercial footprint. The lever will ensure we meet our commitments on time, on budget, and on the highest quality standards. And corporate will enable the entire organization to perform effectively every day. This is the culture we want to build. One company, one team, and one goal. A simple organization with clear accountability, faster decisions and stronger collaboration, fully focused on execution and results. Offensive product. We have reached an important milestone in air traffic demonstrating our ability to deliver highly complex projects simultaneously across different geographies. In just one week, I repeat, in just one week, we successfully commissioned four control centers in Argentina, India, Indonesia, and Peru. This achievement reflects not only the strength of our technology, but also our ability to execute at scale. Working closely with the Air Navigation Service provider in each country, our teams have supported every stage of the process, from implementation and validation through to the final commissioning, adapting our solutions to each customer's specific operational requirements. These new systems integrate route, approach, and tower operations, helping our customers manage their space with greater safety, efficiency, and capacity. This is a strong example of what we can achieve when we combine leading technology, deep customer relationships, and world-class execution. In the United States, we continue to make strong progress with the Federal Aviation Administration. In the first nine months of the year, we have delivered 10 primary and 20 secondary rudders as part of the historic modernization This is a program of significant scale. By 2027, we expect to achieve up to 185 state-of-the-art radars, bringing greater reliability and performance to the U.S. air traffic management system. At the same time, we are making strong progress on the NEXCOM program, having already delivered more than 3,500 radios. Accelerating industrialization is becoming a critical competitive advantage in defense, and the wheeled bridge layer vehicle is a very good example. We signed the contract in January, and less than a year later, we are on track to have the first system ready for customer demonstration. This is the pace at which we want to operate. Our strong backlog brings significant opportunities, but also important delivery commitments, and we need to consistently turn those commitments into results for our customers. In parallel, we are rapidly building sovereign engineering and manufacturing capabilities without compromising on quality. But we cannot do this alone. We are playing a crucial role in strengthening the national industrial ecosystem. Let us continue with our offensive industrial. Gijón is a strong example of the pace at which we are also transforming our industrial footprint. Just six months after acquiring the site, the facility is already operational and contributing to our growing manufacturing needs. The refurbished plan is already supporting the BCR 8x8 Infantry Fighting Vehicle Program, combining advanced industry 4.0 capabilities with proving ground facilities designed to ensure the highest standards of quality and operational performance. To replicate this model, we have created dedicated teams to systemize the integration and ramp up of newly acquired industrial assets, reducing the time needed to bring additional capacity up and running. Our objective is clear, to turn acquisitions into operational capacity as quickly as possible. Staying with the BCR 8x8 program, the delivery of 101 vehicles before the close of the third quarter represents an important milestone and, above all, reflects the strong acceleration achieved in recent months. Since INDRE took control of tests, we have significantly increased the pace of deliveries and strengthened the program's industrial execution. By the way, I am pleased to share with you that this week we delivered an additional 18 more units, not shown in this slide, bringing the year total to 78 and the whole program to 119, and we expect to announce further deliveries in the coming weeks, clearly exceeding our guidance of 90 units for 2026. The acquisition of our new facility in Aspontes represents another important step in the transformation of Indra's industrial capabilities. With an investment of around 18 million, we are adding almost 15,000 square meters of industrial facilities dedicated to the production of integration of military vehicles. The new facility will integrate amphibious combat vehicles, military bridging vehicles, and wheeled artillery systems for the Spanish Armed Forces. It will also provide us with the capabilities to integrate, test, validate, and commission these platforms, including an enlarged proving ground. Together with our facilities in Gijón, ASPONTES will strengthen the industrial footprint of our land vehicle business in northern Spain. More importantly, it will help us build and move on a scalable and highly efficient industrial base capable of supporting the significant growth ahead of us. Let us move to the next chapter, which is the offensive ecosystem. For us, sovereignty is not only about developing critical technologies, but also about building the ecosystem capable of sustaining them over the long term. Through the national special modernization programs, we are committed to achieving approximately 76% national industrial content, mobilizing a broader Spanish industrial ecosystem of more than 1,000 suppliers, and around 60% of which are small-medium enterprises. This gives INDRA a unique ability to act as a catalyst, transforming defense investment into industrial and technological capabilities across Spain. The COAS35 program has already involved more than 180 Spanish suppliers across over 16 autonomous regions, creating a genuinely nationwide industrial footprint. And importantly, more than 55% of those suppliers are small-medium-sized enterprises, together with more than five universities and technological centers. Looking ahead to 2035, the program's industrial plan envisaged a 79% national contribution. That translates into approximately 800 million flowing into the national industrial ecosystem, strengthening Spain's technological and industrial capabilities. We are ultimately talking about products. Industrial capacity and national ecosystem able to deliver critical defense capabilities at scale. Let me turn now to the offensive technology. Iris Square is one of Europe's most ambitious strategic programs and a major step forward in strengthening its technological sovereignty. The program will deploy a new multi-orbit satellite constellation to provide secure, resilient and sovereign communications across Europe and beyond. Iris Square will serve governments, defense and security users while also supporting commercial connectivity and broadband services. With a total investment of 15.6 billion, Iris Square will become one of the largest and most complex space programs ever developed in Europe. Its architecture will combine low Earth orbit and medium Earth orbit satellites together with a dedicated very low Earth orbit constellation and an advanced ground infrastructure. The programme will reduce Europe's dependence on external communication infrastructure and strengthen its ability to operate autonomously in critical situations. The combination of the satellite constellation and the ground segment will also provide greater resilience and additional connectivity when conventional networks are limited or disrupted. Supporting governments and emergency services during crisis. With the first launches planned for 2029, IRIS Square is now moving from ambition to deployment. ISPASAT will play a leading role in IRIS Square. As a member of the SpaceRise Consortium alongside EUTELSAT and SES, It has been appointed prime contractor for the entire ground segment, covering antenna infrastructure, control systems, and connections to ground networks. This represents a budget of more than 1.6 billion and will be the largest and most complex ground infrastructure developed in Europe for a space program. With an additional 300 million budget, ISPASAT will lead the development of the very low Earth orbit layer, focused on direct-to-device mobile connectivity or new experimental services. This marks the first time a Spanish company has taken such a leading role in a major European space program. For ISPASAT, Iris Square represents a major step forward. placing the company at the heart of Europe's future secure satellite communications infrastructure. From 2031 to 2038, ISPASAT will hold commercialization rights for IRIS Square services, opening a significant new opportunity in the satellite communications market. These rights will enable ISPASAT to develop and commercialize a new generation of connectivity services based on non-geostationary satellite infrastructure. For citizens and businesses, this will translate into applications such as direct-to-device connectivity, maritime emergencies or broadband connectivity, particularly where terrestrial networks are unavailable or insufficient. But the potential for this infrastructure goes well beyond the commercial market. The same satellite capabilities will provide secure and resilient communications for governments and armed forces, including in strategically important areas and situations where conventional networks may be disrupted. This combination of civilian and military applications increases both the strategic relevance and the potential utilization of the infrastructure. Iris Square brings together commercial opportunity and strategic sovereignty through a truly dual-use European infrastructure. And by the way, as you may know, on October 27th, INDRA Space celebrated the signature of two contracts with the European Space Agency, European Commission, and the EU Agency for the Space Program to develop a new ground station for the second generation of Galileo, Europe's satellite navigation system, for a budget of 52.3 million euros. Finally, we are taking decisive steps to reinforce our position in the critical and dual-use technologies that will shape the future. Our agreement to acquire 30% of TRC represents another important step, strengthening our cybersecurity capabilities through highly specialized, sovereign technology. With the acquisition of 100% of DER's technology, we are adding advanced synthetic aperture radar and an image processing capabilities to our portfolio for applications such as unmanned systems. We have complemented these moves with a 10 million investment in Kilimanjaro quantum tech through Indramind. This investment plays us closer to the development of physical AI, precision robotics, and autonomous systems. By combining these capabilities with Indra's industrial scale, we are accelerating the development of strategic technologies and reinforcing The technological sovereignty that is essential for Europe. So, having reviewed the progress across the key levels of our transformation, let me now turn to how this strategic and operational progress translates into financial performance during the first nine months of 2026. Backlog reached a record €22.2 billion at the end of September. More than doubling year on year, with a 133% increase. At the same time, order intake grew by 82% to €8.1 billion, driven primarily by the exceptional momentum in defense and by the landmarks IRIS Square Award, which further strengthened our space business following the integration of ISPASAT and ISDESAT. Revenues increased by 29% year-on-year to €4.6 billion, driven by an outstanding growth in defense, which doubled its revenues and by continued expansion of our air traffic business. Importantly, we continued to improve profitability while growing at scale. EBIT margin reached 9.8% at 1% point versus the first nine months of 2025, and at 10.4% In absolute terms EBITDA and EBIT increased by a 62% and 42% respectively. Net income amount to 355 million, representing a 22% increase versus the first nine months of last year. On cash generation, free cash flow reached 1.7 billion compared with 57 million in the first nine months of 2025. As we have explained throughout the year, this performance is driven by the prepayments received in January under the special modernization programs. As a result, we close the period with a net cash position of 1.2 billion, implying a net debt to EBITDA ratio of negative 1.4 times. This exceptionally strong balance sheet provides significant financial flexibility and positions as well to support the Group's strategic priorities and future growth ambitions. Looking more precisely at the third quarter on a standalone basis, we continue to deliver a strong growth, with revenues increasing by 26%, largely driven by the outstanding performance of defense, where revenues grew by more than 95%. This solid top-line performance was accompanied by a resilient profitability, with EBIT margins remaining stable year-on-year at 9.4%. Despite the continued ramp-up of major programs and the strong growth profile of the business, Revenue growth remained broad-based across the group, combining a strong underlying momentum with a contribution from the business integrated over the last 12 months. As a result, revenues increased by 28% in local currency and 16% organically, demonstrating the strength of our core businesses. From a geographic perspective, growth was particularly strong in Spain, driven by the excellent performance of our defense and space activities. As a result, the weight of Spain within the group continued to increase during the period, a trend that we expect to continue in the coming periods, supported by the ramp-up of special modernization programs. International operations nevertheless remained a substantial part of the business, accounting for 42% of group revenues, with solid growth in both AMA and the Americas. One of the most significant developments during the period has been the continued evolution of our business mix. Aerospace and defense continue to increase its contribution across the group, representing 80% of backlog, 46% of revenues, and 69% of EBIT in the first nine months of the year. This reflects the strong growth of our defense activities and the increasing contribution of space Thank you very much. More importantly, revenue per employee increased by 34% year-on-year, highlighting both the strong growth achieved across the group and the continued improvement in operational efficiency and business mix. 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 nine months of 2026 confirmed a very strong momentum we are seeing across all key performance indicators. Defense continues to benefit from an exceptionally supportive demand environment, which is reflected in both the commercial performance and execution of our existing programs. Order intake increased by 80%, For the reinforcing the strong visibility of the business while revenues doubled year on year as major programs continued to move into execution. Lastly, profitability remained at the sector leading levels with an added margin of 16.1% or 20.1% excluding the test consolidation impact. Looking specifically at the third quarter, defense maintained a very strong momentum seen through the year, with revenues increasing by 95% year-on-year. This growth translated into another quarter of a strong profit expansion, with both EBITDA and EBIT increasing by around 50% compared to the third quarter of 2025. Underlying profitability remained resilient, with EBIT margin reaching 17.3%, excluding the impact of tests. Turning to space, the integration of ISPASAT and ISDESAT has significantly expanded both the scale and strategic relevance of the business. As a result, backlog exceeded 4.8 billion, while order intake reached 2.2 billion, including a 1.9 billion contribution from the IRIS Square Program. The first nine months following the integration of ISPASAT and ISDESAT have already demonstrated the value of the transaction, driving revenue growth of more than 370% while supporting a significant improvement in profitability, with EBITDA margin reaching 40% and EBITDA margin 9.9%. Overall, these results confirm the strategic rationale of the integration and the growing importance of space within the group. Looking specifically at the third quarter, space continued to expand rapidly, with revenues increasing by 329% year-on-year, supported by the integration of ISPASAT and ISDESAT, as well as double-digit growth across its operations in Spain, the Americas, and Europe. Profitability also remained strong, with EBITDA and EBIT margins reaching 39% and 8.5% respectively. Air traffic continues to demonstrate why it's one of the most attractive businesses within the group, combining growth, profitability, and strong commercial momentum. Order intake increased by 27%, mainly driven by radar contracts, supporting a backlog growth of 26% to 1.4 billion and a book-to-bill ratio of 1.85 times. Revenues grew by 23%, supported by radars, air traffic systems, and the Canada high-tech program, while profitability remained on an upward trajectory. EBITDA and EBIT both delivered double-digit growth, with margins improving to 15.7% and 12.7%, respectively. Focusing now on the third quarter, air traffic accelerated its growth trajectory, with revenues increasing by 39% year-on-year, supported by radar and radio contracts across the US, AMEA, and Europe. EBITDA and EBIT also delivered double-digit growth in absolute terms, while margins remained at very healthy levels, with EBIT margin reaching 12.8%. Looking at mobility, the key highlight for the division was the exceptional commercial performance during the period, with order intake more than tripling year-on-year driven by the Transport for London contract in the UK, railway systems maintenance in Saudi Arabia, and the Transport for Washington contract in the US. This strong order intake leaves backlog by 74% to 1.7 billion and the book-to-bill ratio of 3.57 times. This commercial success provides a much stronger foundation for future growth and improves the visibility of the business going forward. Moving on the third quarter, on a standalone basis, Mobility maintained a positive revenue trajectory, with sales growing by 3%, supported by double-digit growth in Spain. Importantly, EBITDA grew faster than revenues, driving a 40 basis point improvement in EBITDA margin to 6.3%. Finally, let me conclude the divisional review with MINSIGHT, which continued to deliver a resilient performance while progressing through its ongoing transformation. Reported revenues increased by 1%, excluding the impact of BPO disposal, organic growth reached 3%, providing a clear view of the underlying performance. Growth was supported by public administration's health care, where revenues increased by 12%. Profitability remained stable with EBITDA and EBIT margins and changed year on year at 8.3% and 6%, respectively. Zooming in on the third quarter, mean-side delivered organic revenue growth of 1%. Profitability remained broadly stable, with EBIT margin at 6.6% compared with 6.7% in the third quarter of 2025. Overall, these results reinforce our confidence in the Group's trajectory. We continue to see strong demand across our core markets, a growing backlog and increasing scale in our aerospace and defence activities, all of which support our ambitions for the year ahead. With that, let me hand over to our Chief Financial Officer, Miguel Forteza, who will take you through the remaining financial items in detail.