Thales Sa · EURONEXT:HO
Thales Sa — Investor Day (October 2019)
76 slides from Thales Sa's investor day presentation, Oct 3, 2019
Slide 1: 2019 Capital Markets Day
2019 Capital Markets Day 3 October 2019 www.thalesgroup.com
Slide 2: Agenda
Agenda 8:30 am Introduction and progress on 11:00 am Financial framework medium-term strategic priorities Pascal Bouchiat Patrice Caine 11:20 am CEO and CFO Q&A session Patrice Caine and Pascal Bouchiat 9:00 am DIS(a): global leader in digital identity and security Philippe Vallée and Eva Rudin 12:0
Slide 3: Introduction and progress on medium-term strategic priorities
2019 Capital Markets Day Introduction and progress on medium-term strategic priorities Patrice Caine Chairman and CEO www.thalesgroup.com
Slide 4: Key messages
Key messages Solid progress on Business model will Gemalto: Ambition 10 initiatives continue to deliver, accelerating our – with enhanced digital strategy 2018 and 2019 resilience ahead of plan 2019 Capital Markets Day - 4
Slide 5: Today's focus: compelling Gemalto acquisition
Agenda Today’s focus: compelling Gemalto acquisition 2019 Capital Markets Day - 5
Slide 6: Thales: a pure player focused on intelligent systems
Thales: a pure player focused on intelligent systems Ground Aeronautics Space Defence Security transportation Addressing some of the most demanding end markets… Critical decision chain …leveraging a Data Data processing Sensing and transmission and decision unique portfolio data gathering and storag
Slide 7: Gemalto acquisition: accelerating Thales's digital strategy
Gemalto acquisition: accelerating Thales’s digital strategy Digital security: a unique differentiator to stay at the forefront of intelligent systems Critical Data Data processing Sensing and decision transmission and decision 3 key technological capabilities chain data gathering and storage making
Slide 8: Gemalto acquisition: expanding portfolio in highly synergistic growth market
Gemalto acquisition: expanding portfolio in highly synergistic growth market Global leader in fast-growing digital Multiple fast-growing markets identity and security market 2019-23 2023 forecasted Multiple growth engines, addressing market size market growth major societal aspirations Data protecti
Slide 9: 2019-23: executing on strategic roadmap
Agenda 2019-23: executing on strategic roadmap 2019 Capital Markets Day - 9
Slide 10: Extending the key strategic priorities to 2023
Extending the 5 key strategic priorities to 2023 Continued focus on Strong development levers operational performance 1 Reinforce customer-centric 3 Accelerate R&D investments organization and culture to drive technological excellence 2 Relentlessly optimize 4 Lead in digital transformation operatio
Slide 11: Solid progress on Ambition 10 competitiveness initiatives
2 Solid progress on Ambition 10 competitiveness initiatives Procurement: transformed Global support function organization delivers transformation under-way Support function cost(a) Worldwide integrated organization fully as a percentage of sales operational 8.2% Global strategies in place for more t
Slide 12: Further R&D step-up to drive technological excellence
3 Further R&D step-up to drive technological excellence Self-funded R&D Gemalto drives 27% increase in R&D €m and as % of sales ~ +25% investments 2018 R&D organic increase ahead of plan +27% >1,400 +10% 2019-23: continued reinvestment 1,115 Further ~25% growth over 5 years Total R&D to reach €4.5bn
Slide 13: Digital as a driver of technology leadership
4 Digital as a driver of technology leadership Digital technologies Adoption of digital Strategy in place to will shape the future technologies sustain leadership of our industry will take time Leapfrog in Highly regulated Thales’s critical decision performance: markets requiring chains are digital
Slide 14: Digital technology leadership enhances long-term growth profile
Digital technology leadership enhances 4 long-term growth profile Quick adoption of digital Breakthrough innovations technologies inside dream products to support top-line New growth digital services and business Design of new services and models business models delivering more recurring revenues Di
Slide 15: Digital offering: expanding the pipeline of digital innovations
4 Digital offering: expanding the pipeline of digital innovations Big data-enabled Autonomous “Smart” Predictive Drone observation trains radars maintenance management constellation for defence AI-enabled Next generation Spare parts Maritime Connected-car optronics airspace market place intelligence
Slide 16: 2019-23: sustaining value creation while further enhancing resilience
Agenda 2019-23: sustaining value creation while further enhancing resilience 2019 Capital Markets Day - 16
Slide 17: Enhanced business model resilience
Enhanced business model resilience 2018 sales, pro forma Gemalto 21% 42% Markets benefiting from long-term growth trends Commercial Defence customers customers Addressing major societal aspirations: security, safety, Customer digital trust, environmental efficiency… mix 22% Diversified, robust custo
Slide 18: Medium-term financial targets
Medium-term financial targets Organic sales growth target EBIT(a) margin target 11.5% to 12% by 2023 10.6% 3% to 5% on average +4.5% 9.8% 8.6% 9.1% 7.6% 2014-18 2019-23 2014 2018 2023 (a) Non-GAAP measure: see definition in appendix Committed to sustained value creation 2019 Capital Markets Day - 18
Slide 19: Today's presentations
Today’s presentations 9:00 am 11:00 am DIS: global leader in DIS: accelerating digital identity and Thales’s digital strategy Financial framework security across all markets Philippe Vallée Eva Rudin Philippe Keryer Pascale Sourisse Pascal Bouchiat EVP, digital VP operations, EVP, strategy, research
Slide 20: DIS: global leader in digital identity and security
2019 Capital Markets Day DIS: global leader in digital identity and security Philippe Vallée EVP, digital identity and security Eva Rudin VP operations, digital identity and security www.thalesgroup.com
Slide 21: Digital Identity & Security (DIS) business overview
Digital Identity & Security (DIS) business overview 15,000 €3.1bn Main footprint ~10.0% employees in 58 countries France: 16% Pro forma Expected underlying USA: 14% 2018 sales full year 2019 EBIT margin 3,000+ Singapore: 9% Mexico: 8% engineers 19% 20% 21% 30% Rest of Biometrics Government Banking &
Slide 22: Building trust in the digital and physical world
Building trust in the digital and physical world Digital identity & security market 2018, €bn Biometrics 3.4 IoT security & connectivity 4.4 Physical Digital Identity& Access Management 4.4 Data protection 4.7 Smart cards 4.8 Total market 22 Note: smart cards = EMV payment cards + removable SIM card
Slide 23: Digital services & solutions: growth accelerating
Digital services & solutions: growth accelerating Multiple growth drivers Digital identity & security market growth Exponential growth in the number of digital transactions Digital platforms connecting millions of €bn +10% ~36 people and objects (device-to-cloud) Sophistication, reach and impact of
Slide 24: Thales: global leadership
Thales: global leadership Top 5 digital identity & security players World # 1 2018 sales, €bn Data protection Secure identification documents 3.1 Smart payment cards (“EMV cards”) Removable SIM cards (“rSIM”) 75% of DIS sales 2.2 eSIM subscription management 1.4 1.2 0.9 In global top 3 IoT cellular
Slide 25: Most competitive range of solutions
Most competitive range of solutions Identity & IoT security & Smart cards Biometrics access Data protection connectivity management Giesecke & Devrient 2019 Capital Markets Day - 25
Slide 26: DIS R&D leadership built on security management expertise from device to cloud
DIS R&D leadership built on security management expertise from device to cloud Critical Sensing and Data transmission Data processing and decision data gathering and storage decision making chain Device Connectivity Cloud Security Device security Cloud security Services and hardware software softwar
Slide 27: DIS medium-term strategy: 3 pillars
DIS medium-term strategy: 3 pillars Digital services & Smart cards Group synergies solutions Maximizing value Capitalizing on unique Maximizing cost and positions in fast-growing revenue synergies high-value markets EMV cards: sustaining market Global leadership positions in Disciplined implementati
Slide 28: Maximizing value in smart card businesses
DIS medium-term strategy Maximizing value in smart card businesses 2019 Capital Markets Day - 28
Slide 29: EMV payment cards will continue to be the leading payment enabler
EMV payment cards will continue to be the leading payment enabler Market growth in volume driven by EMV(a) cards annual shipment forecast renewals and emerging markets Million unit US Market forecasts for annual volume growth Major growth over- • US and China in renewal mode capa • Growth from emerg
Slide 30: EMV payment cards: sustainable market leadership
EMV payment cards: sustainable market leadership Industrial excellence Incremental innovations Economies of scale 900m+ EMV payment cards Recycled plastic produced every year from the ocean 2019 Biometric card Optimized footprint 2018 (1st pilots) 3 main production hubs Dynamic CVV 2017 Proximity wi
Slide 31: Removable SIM cards: maximizing value
Removable SIM cards: maximizing value Market trends Thales strategy Associated software and services essential Significant market to development of secure IoT connectivity commoditization continues Focus on higher value markets No major change in product Comprehensive industrial plan to adapt to mix
Slide 32: Capitalizing on unique positions in high-value digital services & solutions
DIS medium-term strategy Capitalizing on unique positions in high-value digital services & solutions 2019 Capital Markets Day - 32
Slide 33: Focusing investments on key high-value growth engines
Defining global leadership in fast-growing digital services & solutions markets Focusing investments on key high-value growth engines Identity management Mobile connectivity Biometrics Analytics and IoT & data protection Attractive, Public and Focusing on most Securing fast-growing commercial critic
Slide 34: Mobile connectivity: leading in attractive, fast-growing eSIM market
Mobile connectivity: leading in attractive, fast-growing eSIM market Strong growth forecasted for eSIM Historical New market model model Components Future key end-point security technology, making a SIM essential to critical IoT applications All is packaged The components ~800m units shipped in 2023
Slide 35: Identity management & data protection: securing the cloud
Identity management & data protection: securing the cloud Data protection market growth Global leader in data protection Global #1 in HSM and encryption software €bn +15% 8.9 Industry-leading capabilities from joint Thales e-Security and Gemalto 4.4 Significant synergies: unified Thales- Gemalto pro
Slide 36: Biometrics: targeting public and commercial sectors
Biometrics: targeting public and commercial sectors Biometrics market growth Global leader in biometrics #1 in secure identity documents and €bn +9% 5.2 services, 30 years in biometrics business 3.4 Demonstrated technology leadership: #1 in accuracy and global performance test of matching algorithm(
Slide 37: Analytics & IoT: focusing on most critical industrial IoT applications
Analytics & IoT: focusing on most critical industrial IoT applications Cellular IoT module IoT security Security: a major roadblock to market growth market growth sustainable IoT deployment €bn +15% 4.9 €bn Driving increased regulatory focus 2.4 Global leader in analytics & IoT x5 1.5 Top 3 for cell
Slide 38: Maximizing Group cost and revenue synergies
DIS medium-term strategy Maximizing Group cost and revenue synergies 2019 Capital Markets Day - 38
Slide 39: Cost synergies progressing fully in line with plan
Cost synergies progressing fully in line with plan… Expected ramp-up Breakdown of expected of cost synergies run-rate cost synergies 120 R&D and SG&A optimization ~100 in enterprise Overall SG&A data protection ~60 savings 15% 35% ~20 €120m Footprint optimization 2019 2020 2021 2022 and other Integr
Slide 40: Rigorous action plans for all synergy categories
…based on rigorous action plans for all synergy categories Mutualization of support functions (80%) • 300+ actions Overall - ~70% at corporate and DIS levels • ~40% finalized before SG&A savings Rationalization of legal/bank/board/audit fees end 2019 and PR agencies (20%) Supplier panel optimization
Slide 41: Significant EBIT increase driven by digital services & solutions and synergies
Significant EBIT increase driven by strong growth of digital services & solutions and synergies Organic sales growth target EBIT target Synergies €m reported outside DIS +4% to +6% Synergies growth on average reported inside DIS Digital services & ~3.1 solutions Smart 12.5% Digital 300-320 cards to
Slide 42: DIS strategy: key takeaways
DIS strategy: key takeaways Attractive portfolio positioning Global leader in fast-growing market Unique R&D leadership, from device to Growing organically cloud, further strengthened by Thales by 4-6% over 2020-23 Differentiated strategy EBIT margin to reach Maximizing value in mature businesses 12
Slide 43: DIS: accelerating Thales's digital strategy across all markets
2019 Capital Markets Day DIS: accelerating Thales’s digital strategy across all markets Philippe Keryer Alex Cresswell EVP, strategy, research EVP, land and and technology air systems Pascale Sourisse Marc Darmon Senior EVP, international EVP, secure communications development and information system
Slide 44: Digital security is essential in digital critical decision chains
Digital security is essential in digital critical decision chains Critical Data Data processing Sensing and decision data gathering transmission and decision chain and storage making Platforms Platforms Networks & Critical Mission Objects Gateways to manage to manage Mission sensors applications dig
Slide 45: Gemalto brings 3 key digital security capabilities
Gemalto brings 3 key digital security capabilities Digital identities, such as biometrics, enable secure Digital identity identification of critical decision chain users – biometrics Enlarged TAM based on existing leadership positions and time to market/differentiation Field-proven, reliable connect
Slide 46: Market value captured by Thales grows with integration of Gemalto
Market value captured by Thales grows with integration of Gemalto Raised total Captured value value Market Enlarged addressable Digital identity markets for Thales with Gemalto Secure connectivity Revenue Improved win-rate from Data protection differentiated offers and better market reach Digital id
Slide 47: Opportunities materializing in 80% of existing business lines: examples
Opportunities materializing in 80% of existing business lines: examples Digital identity - biometrics Secure connectivity - IoT Data protection - encryption Defence & Security Digital Identity & Security Integration of cybersecurity products Integration of cybersecurity products and improved go-to-m
Slide 48: Cybersecurity: comprehensive portfolio, leading-edge technologies
Cybersecurity: comprehensive portfolio, leading-edge technologies Device Network Cloud & application Security systems & Markets security security security services Addressed market (2018, €bn) 3.5 1.1 6.9 5.2 CAGR 2019-2023 +10% +6% +12% +9% Thales portfolio Large contribution from Gemalto Identity
Slide 49: Cybersecurity: market outperformance through enhanced portfolio
Cybersecurity: market outperformance through enhanced portfolio Action plan Impact on Thales business 1 Leverage Thales go-to-market Through local cybersecurity services & solutions team Enlarged TAM, Through international account management footprint accelerated growth In all Thales vertical market
Slide 50: Homeland security: market trends favorable to Thales
Homeland security: market trends favorable to Thales Addressable Significant long-term growth Market segment market size 2019-23 (2018, €bn) CAGR Well-positioned on most demanding niches Cities Market trends favorable to Thales 2.0 +6% Increased importance of technology: AI, big data, biometrics and
Slide 51: Homeland security: unique combined offering to answer market trends
Homeland security: unique combined offering to answer market trends Enhanced Thales security & smart operations Impact on Thales business Operations centre Enlarged TAM, accelerated growth Support to decision Response management and profitability Thales digital platform Thales homeland security reve
Slide 52: Unmanned Traffic Management (UTM): a key long-term opportunity
Unmanned Traffic Management (UTM): a key long-term opportunity Global commercial UAV fleet High growth of UAV traffic forecasted Million unit 20bn UAV flights in 2029 (x400 vs 19 x19 commercial aircraft flights) Uncertain development timeline 1 Thales: world leader in Air Traffic Management Source:
Slide 53: UTM: our joint expertise uniquely addresses customer needs
UTM: our joint expertise uniquely addresses customer needs Example 1 Example 2 Radars and UAV identity National registries of UAVs and of verification to deliver their operators to support safe efficient sky surveillance traffic management Secure cellular 4G-5G connectivity Gemalto Identity manageme
Slide 54: Defence: from collaborative combat to IoBT
Defence: from collaborative combat to IoBT Major trends enhancing soldier Internet of Battlefield Things (IoBT) capabilities and protection Smart products with embedded AI providing relevant data of higher operational value Seamless connection of all assets Seamless data exchanges - between sensors,
Slide 55: Multiple long-term opportunities in future IoBT soldier eco-system
Multiple long-term opportunities in future IoBT soldier eco-system Soldier Mil Coms personal network Connectivity Military Enlarged TAM, communication accelerated growth connectivity and profitability Market growth, increased soldier capabilities and a differentiated offer Cellular or based on: mili
Slide 56: Revenue synergies deliver growth acceleration now and beyond 2023
Revenue synergies deliver growth acceleration now and beyond 2023 Priority actions Significant revenue synergies Immediate portfolio Short-term opportunities 460 individual customer opportunities in 25 countries Top 10 per country/ region closely tracked Total revenue First wins already in 2019 syne
Slide 57: Revenue synergy opportunities identified to date: examples
Revenue synergy opportunities identified to date: examples Sale of biometrics solutions through New homeland Thales global sales network security offerings Leveraging channels and access For airports and airlines 90 Increasing probability to win on existing opportunities, esp. Gemalto 30 Cross-sell
Slide 58: Revenue synergies: key takeaways
Revenue synergies: key takeaways Digital security is essential to digital critical decision chains across all Thales markets More than 400 customer opportunities already identified Gemalto brings 3 key digital security capabilities that uniquely strengthen Targeting Thales’s competitive positioning
Slide 59: DIS: question and answer session
2019 Capital Markets Day DIS: question and answer session Phillipe Vallée Pascale Sourisse EVP, digital identity and security Senior EVP, international development Eva Rudin Marc Darmon VP operations, digital identity EVP, secure communications and security and information systems Philippe Keryer Al
Slide 60: 2019 Capital Markets Day: break
Mettre à jour par la Dir Com 2019 CAPITAL MARKETS DAY BREAK NEXT SESSION STARTS AT 11:00 AM 2019 Capital Markets Day - 60
Slide 61: Financial framework
2019 Capital Markets Day Financial framework Pascal Bouchiat Senior EVP, finance and information systems www.thalesgroup.com
Slide 62: Ambition 10 delivered even more than expected
Ambition 10 delivered even more than expected Operational Additional EBIT in €m and performance R&D EBIT margin Additional Lower marketing restructuring Naval & sales expenses group 1,685 -209 +23 -116 +77 10.6% Scope, Moving from currency 4.8% to 5.5% and of sales 1,011 pensions -7 +906 8.0% 2013 E
Slide 63: We keep delivering on our profitable growth strategy
We keep delivering on our profitable growth strategy Before Gemalto acquisition 2018 and 2019 fully in line with 2021 objectives Growth Profitability R&D investments Organic sales, % EBIT margin Self-funded R&D, €m base 100 in 2013 and % of sales CAGR CAGR 3 to 5% ~+4% 18-21 average 11% to ~+7% CAGR
Slide 64: Pro forma 2018 P&L: Gemalto brings higher gross margin and R&D
Pro forma 2018 P&L: Gemalto brings higher gross margin and R&D 2018 2018 reported pro forma(a) €m % of sales €m % of sales Sales 15,855 18,722 Gross margin 4,088 25.8% 5,009 26.8% Indirect costs (2,526) -15.9% (3,237) -17.3% o/w R&D expenses (879) -5.5% (1,115) -6.0% o/w Marketing & Sales expenses (
Slide 65: Sustained organic sales growth
Sustained organic sales growth Organic sales Market trend growth target 2019-23 Group organic sales growth target 3% to 5% growth Aerospace ~+1.5%(a) +2-3% on average over 2019-23 Flat(b) Lower growth in first Progressively part of period • Impact of space accelerating thereafter • Recovery of space
Slide 66: Further significant increase in profitability
Further significant increase in profitability Increase in Additional profitability R&D 11.5% Increase in Additional to 12% profitability R&D Gemalto 10.6% consolidation -30 to 10.0% -50 bps -70 bps -60 bps +200 to +240 bps 8.0% +330 bps 2013 2018 2018 2023 EBIT margin EBIT margin EBIT margin EBIT ma
Slide 67: Defence & security sustaining best-in-class EBIT margin, other segments improving
Defence & security sustaining best-in-class EBIT margin, all other operating segments delivering EBIT margin improvement Defence & Digital identity Aerospace Transport security & security +0 to +360 to -40 to +520 to +100 +410 +60 +620 bps bps bps bps 12% 12.5% 12.4%(a) to 13% to 13.5%(b) 10% 10.0%
Slide 68: EBIT growth boosted by CMD 2018 performance levers and Gemalto synergies
EBIT growth boosted by CMD 2018 performance levers and Gemalto synergies EBIT in €m and EBIT margin Further Gemalto Reinvestment margin synergies in R&D increase Organic sales Cost and growth revenue ~€300m synergies Competitiveness 1,866 initiatives 11.5% to 12% EBIT margin Marketing and sales +3%
Slide 69: Multiple drivers deliver significant EPS accretion
Multiple drivers deliver significant EPS accretion Lower More efficient tax rate balance sheet Sales and margin Gemalto Effective tax rate Improvement synergies moving from 27% excluding Gemalto to 23-24% synergies Immediate ~15% adjusted EPS accretion • €120m recurring pre-tax cost 5.55 synergies •
Slide 70: Maintaining strong focus on cash flow generation
Maintaining strong focus on cash flow generation 2019-23: major increase in Cash conversion underlying free operating cash flow Underlying(a) Reported Assuming no new Underlying 2019-23 cash conversion €bn €bn significant down-payments comparable to 2014-18 ~95% ~85% Mechanical positive IFRS16 effec
Slide 71: A more efficient capital structure to support significant dividend growth
A more efficient capital structure to support significant dividend growth whilst maintaining financial flexibility Strong investment grade 2018 reported After Gemalto acquisition(a) maintained (A-, A2) Before IFRS 16 After IFRS 16 Dividend growth in line with adjusted EPS €bn €bn €bn Financial flexi
Slide 72: Financial framework: summary
Financial framework: summary 2018 and 2019 fully in line with 2021 objectives Sustained organic sales growth Multiple levers to keep delivering margin expansion, while further increasing R&D Sustainable shareholder value Efficiency demonstrated by strong cash creation conversion and high ROCE More e
Slide 73: CEO and CFO Q&A session
2019 Capital Markets Day CEO and CFO Q&A session Patrice Caine Chairman and CEO Pascal Bouchiat Senior EVP, finance and information systems www.thalesgroup.com
Slide 74: Technology demonstrations
Technology demonstrations 12 to 12:45: 3 15-minute demonstrations During 12:45 tolunch: 2 stands 2pm: free access Rooms Debussy, Delibes and Mozart in lunch area Seamless travel experience Innovative payment cards Using facial recognition to provide a secure and smooth White Biometric cards and inno
Slide 75: Definition of non-GAAP measures and other remarks
Definition of non-GAAP measures and other remarks Rounding of amounts in euros In the context of this presentation, the amounts expressed in millions of euros are rounded to the nearest million. As a result, the sums of the rounded amounts may differ very slightly from the reported totals. All ratio
Slide 76: Tour Carpe Diem 31 Place des Corolles 92098 Paris La Défense
Tour Carpe Diem 31 Place des Corolles 92098 Paris La Défense France ir@thalesgroup.com This presentation may contain forward-looking statements. Such forward-looking statements are trends or objectives, as the case may be, and shall not be construed as constituting forecasts regarding the Company’s