Thales Sa · EURONEXT:HO
Thales Sa — Investor Presentation (September 2023)
76 slides from Thales Sa's investor presentation, September 2023
Slide 1: Investor meeting September 2023
Investor meeting September 2023 www.thalesgroup.com
Slide 2: Introduction to Thales
Introduction to Thales Key priorities Outlook Acquisitions Sustainability: safer, greener, more inclusive H1 2023 results www.thalesgroup.com
Slide 3: Thales today: a set of focused, technology-driven businesses
Thales today: a set of focused, technology-driven businesses Sales by segment EBIT margin R&D total spend 11.5 to 27% Aerospace 11,0% 11.8% 10,2% 9,0% 8,1% Civil aeronautics: ~8% €17.6bn(a) 52% Defense & ~70% Customer- €3.5bn(a) ~30% Self-funded security funded R&D ~20% of sales R&D 21% Digital iden
Slide 4: Portfolio focused on leading and highly synergistic businesses
Portfolio focused on 3 leading and highly synergistic businesses Critical decision chain Sensing and Data transmission Data processing and data gathering and storage decision making Aerospace Observation satellites Military communications Flight management systems Defense & Security Digital identity
Slide 5: Thales builds on key strengths
Thales builds on 4 key strengths Connectivity Big data Mobility analytics Cyber- Artificial security intelligence Cutting Deep domain Large digital Global edge R&D knowledge asset base presence €3.5bn+, ~20% of Top 3 globally or Thales portfolio: Presence in 50+ sales #1 in Europe across digital “by
Slide 6: Key priorities
Introduction to Thales Key priorities Outlook Acquisitions Sustainability: safer, greener, more inclusive H1 2023 results www.thalesgroup.com
Slide 7: 2023: strategic priorities
2023: 4 strategic priorities 1 Ramp-up capacity to address strong demand 2 Sustain R&D investments to reinforce technology leadership 3 Take our sustainability performance to the next level 4 Leverage consistently high cash generation Investor meeting - 7
Slide 8: Ramp-up staffing to address strong demand
1 Ramp-up staffing to address strong demand Step change in recruitment actions Global recruitment volumes initiated in 2022 Global talent acquisition function integrated and scaled up 12,000+ 11 500 New employee value proposition Solid retention performance sustained Prior to 9 400 +32%(c) Gemalto 8
Slide 9: Ramp-up capex and supply chains to address strong demand
1 Ramp-up capex and supply chains to address strong demand Large increase in capex over 2023 Capex ramp-up plan and 2024 ~700 14 site extension projects to be €m ~650 IS/IT and other delivered by end 2024 525 Large increase in engineering and 496 446 Engineering production capacity 380 371 and produ
Slide 10: Sustain R&D investments to reinforce technology leadership
2 Sustain R&D investments to reinforce technology leadership More than ever at the forefront of research and technology Self-funded R&D Among Clarivate’s “top 100 global innovators” in 10 of the past 12 years €m and % of sales Algorithm selected by US NIST as new standard for post-quantum cryptograp
Slide 11: Take our sustainability performance to the next level
Take our sustainability performance to the next level: 3 2023 priorities Deliver on Define new all key objectives medium-term roadmap Achieve all quantitative 2023 Further embed sustainability targets in Thales’s growth strategy Accelerate low carbon Set ambitious new targets strategy: focus on ener
Slide 12: Leverage consistently high cash generation
4 Leverage consistently high cash generation Updated M&A strategy Strategic focus on bolt-on acquisitions Balanced capital allocation to support Priority areas: sustainable value creation - Digital solutions/technologies, cybersecurity - Expanding geographical footprint • Continued investment in own
Slide 13: Cybersecurity: selective M&A to support global leadership
4 Cybersecurity: selective M&A to support global leadership See also slide 39 Thales cyber business focused on 3 Thales cybersecurity portfolio leadership areas Global security products • Data protection Global security products: data protection, • Identity & Access Identity & Access Management (IAM
Slide 14: Solid progress in H1 2023
Solid progress in H1 2023 Capacity 5,300 recruitments completed in H1 2023 1 ramp-up H1 capex up 40%+, ahead of full year plan Technology Multiple wins of ground radar competitions 2 leadership Launch of world’s first certified integrated SIM (iSIM) with Qualcomm Win of new in-orbit servicing demons
Slide 15: Outlook
Introduction to Thales Key priorities Outlook Acquisitions Sustainability: safer, greener, more inclusive H1 2023 results www.thalesgroup.com
Slide 16: Aerospace: robust growth over 2023 and 2024
Aerospace: robust growth over 2023 and 2024 Avionics shipset deliveries by Thales Multiple levers to support High-Single # shipsets 122 Narrowbody Digit organic sales growth over 2023/24 Base 100 in 2015 and regional 100 Further recovery of air traffic and ramp-up 93 of commercial aircraft productio
Slide 17: Defense & Security: ramping up to deliver on new record backlog
Defense & Security: ramping up to deliver on new record backlog and address sustained demand growth Unique demand context Defense & Security end-year backlog Geopolitical situation driving sustained €bn and years of sales budget growth in main Thales geographies 31,0 23,2 26,1 Leading portfolio on a
Slide 18: DIS: global leader on digital identity and security market
DIS: global leader on digital identity and security market See also slides 41-42 Compelling positions on attractive, Main ongoing revenue synergy opportunities Sales of DIS biometric growing markets solutions through Thales Drone management and surveillance global sales network Cybersecurity leaders
Slide 19: 2019-2023 cash conversion target upgraded again
2019-2023 cash conversion target upgraded again 2022: second year of massive Adjusted net income conversion outperformance on free cash flow into Free operating cash flow 162% Very strong order intake, especially in 185% emerging markets 2,527 Upgraded Early payments from customers 98% 2,515 target:
Slide 20: 2023 financial objectives
2023 financial objectives Order intake Book-to-bill above 1 Unchanged Sales +5% to +7% organic growth Upgraded corresponding to €17.9 to 18.2 billion(a) EBIT margin(b) 11.5% to 11.8%(a) Unchanged (a) Based on July 2023 scope and foreign exchange rates. Assuming no new major disruptions of the health
Slide 21: Summary
Summary Focus on 3 leading high tech ESG-aligned businesses Simplified exposure to 3 long-term growth markets Able to sustainably deliver double-digit margins 2023-2024: accelerating growth Strong perspectives across all businesses Sustainable Ramp-up of recruitment and capex plans value creation Re
Slide 22: Acquisitions
Introduction to Thales Key priorities Outlook Acquisitions Sustainability: safer, greener, more inclusive H1 2023 results www.thalesgroup.com
Slide 23: Imperva
Imperva www.thalesgroup.com
Slide 24: Imperva: Transaction highlights
Imperva: Transaction highlights Agreement to acquire Imperva, a leading US-based data and application security provider, from Thoma Bravo, subject to regulatory approvals Rare opportunity to create a world-class premium cybersecurity leader Imperva ideally positioned on the fast-growing data and app
Slide 25: Imperva: Contemplated transaction details
Imperva: Contemplated transaction details Transaction Proposed acquisition of 100% of Imperva share capital from Thoma Bravo description - 2022 sales of $496m - Sustained double digit top line growth, ~20% EBIT margin in 2027 Closing expected by beginning of 2024, subject to regulatory approvals Tra
Slide 26: Imperva: leading global data and application security provider
Imperva: leading global data and application security provider 2022 revenue by segment Leading global provider of cybersecurity software solutions 39% 61% Focused on data and application security Data $496m Application security security Founded in 2002 Based in San Mateo, CA 1,400+ employees 2022 re
Slide 27: Imperva: Creating the global benchmark data security platform
Imperva: Creating the global benchmark data security platform Identity Data security platform Applications A B C Customer Identity & Hardware Security Data discovery Access Management Web App. Firewall Modules & classification Workforce Identity & Data security Encryption DDoS protection Access Mana
Slide 28: Imperva: positioned for sustained long term growth and cash generation
Imperva: positioned for sustained long term growth and cash generation Robust software business model Sales growth Compelling products and technologies Double Highly recurring revenue model digit High growth, high EBIT margin +8% Structurally high free cash-flow margin US business at scale, with hig
Slide 29: Building a world-class global cybersecurity leader
Building a world-class global cybersecurity leader with a comprehensive range of premium products and solutions Key pro forma metrics Global security products • Data security ~€2.4bn(a) sales in 2024 • Application security Double digit organic growth • Identity & Access management Reported EBIT marg
Slide 30: Run rate pre-tax cost and revenue synergies estimated at $110m
Run rate pre-tax cost and revenue synergies estimated at $110m $50m run-rate cost synergies, Expected ramp-up of synergies achieved by 2028 $m, EBIT impact SG&A savings on full perimeter Procurement cost reduction ~110 Real estate footprint optimization ~100 ~70 Revenue $60m EBIT impact of revenue s
Slide 31: Transforming DIS into a world-class cybersecurity leader
Transforming DIS into a world-class cybersecurity leader Strongly expanding Accelerating Materially increasing civil cybersecurity sales growth EBIT potential Total Addressable Market 2022, $bn Sales, €bn EBIT, €m +60% +6-7% +380 organic CAGR 36 ~900(b) 5.4 to 5.5 (b) 22 +13% 3,6 520 ~16.5% 2022-26
Slide 32: Significant enhancement of DIS financial profile
Significant enhancement of DIS financial profile DIS pro forma 2024 sales mix DIS sales and EBIT margin(b) 27% Banking & €bn +6-7% organic Payment CAGR D&S civil 5.4-5.5 cybersecurity business(c) ~4.5 44% 2024 sales(a) 3.6 ~16.5% Global ~€4.5bn 13% cybersecurity Mobile solutions connectivity 14.4% 1
Slide 33: Cobham Aerospace Communications
Cobham Aerospace Communications www.thalesgroup.com
Slide 34: Proposed acquisition of Cobham Aerospace Communications
Highlights AeroComms at a Glance Strategic Rationale Financial Impact Timetable & Next Steps Proposed acquisition of Cobham Aerospace Communications MoU signed to acquire Cobham Aerospace Communications (“AeroComms”) for US$1.1bn(1) from Cobham Aerospace Ltd Significant opportunity to strengthen Tha
Slide 35: AeroComms: safety cockpit communication leader
Highlights AeroComms at a Glance Strategic Rationale Financial Impact Timetable & Next Steps AeroComms: safety cockpit communication leader Leading supplier of advanced, ultra-reliable innovative safety cockpit communication systems AeroComms Revenue Split (FY23E) - Full L-Band Satcom systems (anten
Slide 36: AeroComms: expertise, products and positions driving superior growth
Highlights AeroComms at a Glance Strategic Rationale Financial Impact Timetable & Next Steps AeroComms: expertise, products and positions driving superior growth % FY23E revenues SATCOM 30% Audio/Radio 40% Antennas(1) 30% SATCOM antennas Complete audio & radio Passive antenna systems enabling connec
Slide 37: Thales & AeroComms on board
Highlights AeroComms at a Glance Strategic Rationale Financial Impact Timetable & Next Steps Thales & AeroComms on board Radio-navigation antennas ATG antennas Radio-navigation integrated antennas Aero Comms Digital Audio / L-Band SATCOM Radio controls Communications Audio and Radio Inmarsat SATCOM
Slide 38: Sustainability: safer, greener, more inclusive
Introduction to Thales Key priorities Outlook Acquisitions Sustainability: safer, greener, more inclusive H1 2023 results www.thalesgroup.com
Slide 39: Sustainability ambitions anchored in our purpose
Sustainability ambitions anchored in our purpose Our purpose Our ambitions “Building a future we can all trust” Maximize the sustainability impact of our portfolio of solutions Embed ambitious sustainability commitments in all processes Working to make the world safer, greener and more inclusive Inv
Slide 40: Sustaining progress towards ESG leadership
Sustaining progress towards ESG leadership Greener: ~20% Design solutions to observe and understand climate phenomena and to reduce the environmental Safer: ~60% impact of our customers Keep citizens safe in both physical and digital worlds Major contributor to 5 New “Pureflyt” FMS Copernicus missio
Slide 41: Sustainability: a strong space market growth driver, notably in Europe
Sustainability: a strong space market growth driver, notably in Europe Space projects at the heart of European Sustainability-focused European space budgets Union political priorities, driving (€bn per year) significant budget increases Up Unprecedented European Space Agency +5 to +7% to 5.5 and EU
Slide 42: Optimization of aircraft operations: a major CO2 reduction opportunity
Optimization of aircraft operations: a major CO2 reduction opportunity for aviation Major CO2 emission reduction achievable Possible CO2 emission reduction through operations optimization via aircraft operations optimization (avoided emissions, million tons of CO2) 10 to 15% CO2 reduction - CO2-opti
Slide 43: Aircraft operations optimization through innovations in avionics and ATC
Addressing aircraft operations optimization through continuous innovations in both avionics and Air Traffic Control PureFlyt Redesign of A320 rudder control system TopSky-ATC TopSky-ATC One One Flight Management System Air Traffic Air Traffic Management Management system Syste • Improve flight traje
Slide 44: Defense is essential to safe, stable and prosperous societies
Defense is essential to safe, stable and prosperous societies We live in a globalised Combining military capability, The protection offered by and increasingly diplomacy and development Defense to wider society unpredictable world, assistance is necessary to achieve provides the foundation for facin
Slide 45: Thales: leading in one of the most regulated global industries
Thales: leading in one of the most regulated global industries Strict export controls What we stand for Committed and certified to stringent export control regulations Processes integrated in day-to-day business through Operating ethically; selling training, audit, and focus on continuous our produc
Slide 46: Solutions deliver enhanced performance and reduced environmental footprint
Thales’ solutions deliver both enhanced performance and reduced environmental footprint Sales to defense customers by product type, 2020 Increased efficiency through improved asset collaboration across all domains Increasing mission performance whilst reducing size, weight, power and logistics Netwo
Slide 47: 2022 key non-financial figures
2022 key non-financial figures Targets Targets -40%(b) 75% of 49% 35% reduction of -0% management 76% 2022 2022 operational CO2 committees with emissions(a) 2018 2023 2018 2023 at least 3 women by 2023 2021 result: -36%(b) by 2023 2021 result: 71% Strategy Diversity 100% of new 0% 84% for a low- dev
Slide 48: H1 2023 results
Introduction to Thales Key priorities Outlook Acquisitions Sustainability: safer, greener, more inclusive H1 2023 results www.thalesgroup.com
Slide 49: H1 2023 highlights
H1 2023 highlights Strong H1 order intake, in line with last year excluding jumbo UAE Rafale order Robust sales growth, notably in Aerospace, in spite of continuous supply chain challenges EBIT margin in line with full year guidance range Full Year sales growth guidance upgraded Investor meeting - 4
Slide 50: H1 2023 key figures
H1 2023 key figures Order intake and book-to-bill Sales EBIT and EBIT margin(b) €m €m €m and % +11.4% -24% +5.6% +13.1%(a) -23%(a) +7.7%(a) 1.36 11.4% 0.98 10.8% Adjusted net income(b) Free operating cash-flow(b) Net cash (debt) position(b) €m €m €m +13% -88% (a) Organic: at constant scope and excha
Slide 51: H1 2023 order intake
H1 2023 order intake Order intake by contract unit value Organic growth: -23% Strong H1 order intake, comparable to €m last year excluding jumbo UAE Rafale 11,208 order booked in Q2 2022 6 large(a) orders booked in Q2 2023, 8,563 for a total of 9 in H1 2023 Unit value> €100m • 4 in Defense & Securit
Slide 52: H1 2023 organic sales growth
H1 2023 organic sales growth H1 sales growth drivers Significant currency impact over H1 €m • Q2: -€73m (-1.6 pts) Reported growth: ++5.6% • H1: -€79m (-1.0 pts) H1 sales organically up 7.7% after a Organic strong Q1 growth • DIS and Aerospace delivering double-digit Currency organic growth & scope
Slide 53: H1 2022 to H1 2023 EBIT bridge
H1 2022 to H1 2023 EBIT bridge Gross margin R&D Marketing & sales G&A Restructuring -43 Equity expenses expenses affiliates -53 -11 -2 -37 Scope, currency and Naval Group: -45 Others: +8 pensions 0 +248 Scope: -9 Currency: -6 Pensions: +15 H1 2022 H1 2023 EBIT EBIT Investor meeting - 53
Slide 54: Aerospace: H1 2023 key figures
Aerospace: H1 2023 key figures H1 H1 Change €m 2023 2022 Total Organic Order intake 2,344 2,393 -2% -4% Sales 2,465 2,211 +11.5% +10.1% EBIT 171 97 +76.7% +79.0% in % of sales 7.0% 4.4% +2.6 pts +2.8 pts Order intake slightly below H1 2022, with contrasted dynamics • On-going recovery of civil avion
Slide 55: Defense & Security: H1 2023 key figures
Defense & Security: H1 2023 key figures H1 H1 Change €m 2023 2022 Total Organic Order intake 4,603 7,150 -36% -36% Sales 4,626 4,379 +5.6% +5.3% EBIT 567 545 +4.0% +3.3% in % of sales 12.3% 12.4% -0.2 pts +0.2 pts Robust order intake vs. high comps in H1 2022 • 5 large contracts in H1 including jumb
Slide 56: Digital Identity & Security (DIS): H1 2023 key figures
Digital Identity & Security (DIS): H1 2023 key figures H1 H1 Change €m 2023 2022 Total Organic Sales 1,595 1,631 -2.3% +11.7% EBIT 253 201 +25.9% +35.7% in % of sales 15.9% 12.3% +3.6 pts +4.7 pts Order intake structurally aligned with sales Double-digit sales growth driven by outstanding Q1 perform
Slide 57: H1 2023 Free operating cash-flow
H1 2023 Free operating cash-flow €m H1 2023 H1 2022 Operating cash flow before WCR changes, 1,319 1,176 interest and tax Significant negative H1 WCR variance Change in WCR and reserves for due to higher stocks + (686) 4 contingencies • Higher revenue and impact of inflation Pension cash out, excludi
Slide 58: Appendix
Appendix www.thalesgroup.com
Slide 59: A strong set of focused businesses
A strong set of focused businesses Segment Sub-segment Civil Military 2022 sales(a) (€m) Market position Aerospace Flight avionics #3 worldwide including cockpit avionics, communications, electrical systems, ~1,800 (flight avionics) 27% of 2022 sales(a) training and simulation (of which civil: ~€120
Slide 60: Aerospace segment: identity card
Aerospace segment: identity card Sales by solutions 2 Global Organic sales growth Business Units 38% +6% Avionics Flight avionics Space and other +2% aircraft +1% 46% equipment Space and services(a) 18,500 employees in 31 countries 6% Connected in-flight -4% -24% 10% entertainment (IFE) 2018 2019 20
Slide 61: Defense & Security segment: identity card
Defense & Security segment: identity card Sales by solutions Organic sales growth 3 Global Business Units Land & Air Systems 23% Military communications 31% Mission systems and networks +6% +6% +6% Defense Mission Systems +4% Secure Communications & Comms Sensors and Information Systems & C2 systems
Slide 62: Digital Identity & Security (DIS) segment: identity card
Digital Identity & Security (DIS) segment: identity card Sales by solutions(a) 1 Global Organic sales growth Business Unit 19% 26% +15% Cloud Digital Identity & Security Mobile Protection & connectivity Licensing +2% n/a n/a n/a 15,000 employees in 53 countries 37% Banking & Payment 18% Biometrics -
Slide 63: Global leader in flight avionics and connected in-flight entertainment
Global leader in flight avionics and connected in-flight entertainment Sales by solutions Sales by platform type Commercial sales by activity type Widebody platforms Flight avionics Narrowbody €2.1bn and other platforms €2.1bn €1.5bn aircraft (2022) (2022) equipment and Original (2022) services Afte
Slide 64: Highly diversified Defense & Security customer base
Highly diversified Defense & Security customer base Defense & Security sales by region, 2022 3% Rest of world 10% Middle East 9% Asia 40% 38% France outside 9% Europe Australia/NZ 7% North America 8% 8% Rest of Europe 6% United Kingdom Germany & Netherlands Investor meeting - 64
Slide 65: Thales on board the Rafale
Thales on board the Rafale Investor meeting - 65
Slide 66: Summary adjusted P&L: from sales to EBIT
Summary adjusted P&L: from sales to EBIT H1 2023 H1 2022 Change €m % of sales €m % of sales total organic Sales 8,716 8,256 +5.6% +7.7% Gross margin 2,457 28.2% 2,220 26.9% +10.7% +12.1% Indirect costs (1,509) -17.3% (1,416) -17.2% +6.5% +7.8% o/w R&D expenses (513) -5.9% (486) -5.9% +5.4% +9.3% o/w
Slide 67: Summary adjusted P&L: from EBIT to adjusted net income
Summary adjusted P&L: from EBIT to adjusted net income H1 2023 H1 2022 €m EBIT 993 891 Cost of net financial debt and other financial results 1 (42) Finance costs on pensions and other employee benefits (38) (15) Income tax (175) (141) Effective tax rate 20.0% 19.7% Adjusted net income - discontinue
Slide 68: H1 2023 order intake by destination
H1 2023 order intake by destination H1 H1 Change In € millions 2023 2022 Total Organic ROW ME France 2,058 2,259 -8.9% -8.7% United Kingdom 577 438 +31.7% +37.0% Asia France Rest of Europe 2,771 2,037 +36.1% +39.3% Europe(a) 5,406 4,734 +14.2% +15.6% AU/NZ North America 1,048 1,459 -28.2% -28.0% Aus
Slide 69: H1 2023 sales by destination
H1 2023 sales by destination H1 H1 Change In € millions 2023 2022 Total Organic ROW France 2,639 2,447 +7.8% +8.0% ME United Kingdom 573 475 +20.5% +25.4% France Rest of Europe 2,057 2,020 +1.9% +3.8% Asia Europe(a) 5,268 4,942 +6.6% +8.0% North America 1,215 1,058 +14.9% +14.7% AU/NZ Australia / NZ
Slide 70: H1 2023 EBIT by operating segment
H1 2023 EBIT by operating segment H1 H1 Change €m / % of sales 2023 2022 total organic Aerospace 171 6.9% 97 4.4% +76.7% +79.0% Defence & Security 567 12.3% 545 12.4% +4.0% +3.3% Digital Identity & Security 253 15.9% 201 12.3% +25.9% +35.7% EBIT - operating segments 992 11.4% 843 10.3% +17.6% +19.5%
Slide 71: Organic sales growth per quarter
Organic sales growth per quarter 2020 2018 2021 2022 2019 2023 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Aerospace Defence & Security Digital Identity & Security Total(a) (a) Excluding Transport in all periods (Transport business classified as "discontinued operations" as of 01/01/2021) Investor mee
Slide 72: Adjusted EPS and cash returns
Adjusted EPS and cash returns Adjusted EPS and dividend per share € Adjusted EPS 11% above 2019 Up 6% per year since 2018 2022 dividend: €2.94 per share Pay-out ratio confirmed at 40% Up 7% per year since 2018 Share buy back program on 3.5% of the share capital(b) 3.3m shares repurchased at 28 38% 9
Slide 73: Movement in net debt over H1 2023
Movement in net debt over H1 2023 €m Other New leases Dividends (IFRS16) paid +270 +49 Of which share buy-back: +210 Free Deficit operating payment cash-flow on UK Acquisitions pensions & disposals +7 +468 Net debt Net debt -99 +51 Net debt at 30 Jun 22 at 31 Dec 22 at 30 Jun 23 Of which disc. op: +
Slide 74: Evolution of net pension provision
Evolution of net pension provision €bn 3.4 2.9 0,5 2.3 0,5 2.4 1,5 0,4 1.9 Other countries 0,4 1,1 0,3 0,8 United Kingdom 0,9 0,5 1,3 1,4 1,3 France 1,0 1,1 31 Dec 18 31 Dec 19 31 Dec 20 31 Dec 21 31 Dec 22 Liability discount rate France 1.6% 0.7% 0.4% 0.9% 3.7% UK 2.9% 2.0% 1.3% 1.8% 4.8% Investor
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: Thales investor relations
Thales investor relations 4, rue de la Verrerie 92190 Meudon France ir@thalesgroup.com This presentation contains certain forward-looking statements. Although Thales believes that its expectations are based on reasonable assumptions, actual results may differ significantly from these forward-looking