Thales Sa · EURONEXT:HO
Thales Sa — Investor Presentation (June 2024)
75 slides from Thales Sa's investor presentation, June 2024
Slide 1: Investor meeting June 2024
Investor meeting June 2024 www.thalesgroup.com
Slide 2: Table of contents
Table of contents 01 02 03 04 Introduction to Thales Key priorities Outlook Acquisitions 05 06 Sustainability: safer, 2023 Full-Year results greener, more inclusive 2
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 29% 11.0% 11.6% Aerospace 10.2% 9.0% Civil 8.1% 53% ~70% ~30% aeronautics: ~10% €18.4bn(a) Defence & Customer- ~€4bn(a) Self-funded security funded R&D ~20% of sales R&D 18% Digital identity & s
Slide 4: Portfolio focused on leading and highly synergistic businesses
Portfolio focused on 3 leading and highly synergistic businesses Critical decision chains Sensing and data gathering Data transmission and storage Data processing and decision making Flight management Aerospace Observation satellites Military communications systems Defence & Security Advanced sensor
Slide 5: Thales builds on key strengths
Thales builds on 4 key strengths Connectivity Big data Mobility analytics Artificial Cyber- intelligence AI security Cutting edge R&D Deep domain knowledge Large digital asset base Global presence ~€4bn, ~20% of sales Top 3 globally or Thales portfolio: Presence in 60+ countries #1 in Europe across
Slide 6: Table of contents
Table of contents 01 02 03 04 Introduction to Thales Key priorities Outlook Acquisitions 05 06 Sustainability: safer, 2023 Full-Year results greener, more inclusive 6
Slide 7: Key 2024 priorities
Key 2024 priorities 1 Continued ramp up to capture market growth 2 Sustained excellence in R&D, a key differentiator 3 Recognition of our sustainability performance 4 Demonstrated optimized capital allocation strategy 7
Slide 8: Confirmed ramp up of recruitment capabilities
1 Confirmed ramp up of recruitment capabilities Global recruitment volumes Pursuing dynamic recruitment in 2023 Number of employees 11,500 10,900 Ramping-up engineering centers in Romania and 9,400 India Prior to 8,700 8,500 Continued increase in production outputs Gemalto acquisition Turnover
Slide 9: Ramp-up in capex and supply chain management to address strong demand
1 Ramp-up in capex and supply chain management to address strong demand Capex ramp-up plan ~720 €m Continued increase in capex 622 IS/IT and other Ramping-up production output to meet growth 525 Several sites extension and footprint optimization 496 446 380 371 Engineering Supply chain disruptio
Slide 10: Sustained excellence in R&D, a key differentiator
2 Sustained excellence in R&D, a key differentiator Self-funded R&D €m and % of sales Sustaining excellence in R&D Among Clarivate’s “top 100 global innovators” 1,108 2024, for the 11th year Portfolio of more than 20,500 patents 797 ~6.5% Leveraging multiple funding sources 6.0% €73m collabora
Slide 11: Unveiling the extent of Thales' capabilities in AI for critical usages
2 Unveiling the extent of Thales’ capabilities in AI for critical usages AI, already a reality for Thales and a business enabler To accelerate customers’ operations To improve decision making › POD Talios: 100 times faster target detection › Maritime patrol: automatic target categorisation › Top
Slide 12: New ESG Roadmap to be communicated in H2 2024
3 Performance also recognized externally: ESG ratings improvement 2030 Targets VALIDATION “A” Rating LEADING LEADING 1% Joined CAC SBTi 1.5 #1of CAC40 1.5% New ESG Roadmap to be communicated in H2 2024 Note: RSCE stands for 'Corporate Scientific Responsibility.' (Responsabilité scientifique des entr
Slide 13: Demonstrated optimized capital allocation strategy
4 Demonstrated optimized capital allocation strategy Successful deployment of capital allocation levers in 2022 – 23 Active M&A strategy: ~ €4bn(a) Positioning Thales as one of the Complementing Thales strong Returns to shareholders: close to €2bn top 5 global cybersecurity leaders leadership in
Slide 14: Further capital allocation levers in 2024
4 Further capital allocation levers in 2024 2024 Levers Consistent M&A strategy going forward Selective acquisitions NO CHANGE Cash-out for AeroComms acquisition: ~-€1.0bn Cash-in from Transport disposal in H1 2024: ~+€1.5bn Dividend pay-out ratio of 40% Focus on targeted M&A opportunities
Slide 15: Table of contents
Table of contents 01 02 03 04 Introduction to Thales Key priorities Outlook Acquisitions 05 06 Sustainability: safer, 2023 Full-Year results greener, more inclusive 15
Slide 16: Avionics: top line growth to normalise in 2024
Avionics: top line growth to normalise in 2024 Key growth drivers for 2024 Global passenger traffic evolution Air passenger traffic Billion RPKs. Source: IATA › Expected to remain dynamic in 2024 vs same period in 2019 Yearly Evolution › Fuelling aftermarket sales albeit at a slower pace than in 2
Slide 17: Space: two main business lines with leadership positioning
Space: two main business lines with leadership positioning Observation, Exploration, Navigation JV structure Telecom - Commercial customers (OEN) - Institutional & defence customers 67% Thales/ 33% Leonardo Leading positioning Best-in-class product range Optical and radar unique offer: All In One
Slide 18: Telecom action plan to restore profitability
Telecom action plan to restore profitability Conjunctural headwinds How to capture new No inflation pass-through mechanism market opportunities • Adjust the workforce to Supply chain difficulties notably for Adapt to the GEO market new size propulsion the current workload Maintain ability to
Slide 19: Defence & Security: ramping up to deliver on new record backlog
Defence & Security: ramping up to deliver on new record backlog and address sustained demand growth Defence & Security end-year backlog 35.2 €bn and 31.0 Confirmation of a robust demand context years of sales 26.1 21.8 23.2 Geopolitical tensions driving sustained budget growth in main 3.6 3.4 year
Slide 20: DIS: global leader on cybersecurity and digital identity markets
DIS: global leader on cybersecurity and digital identity markets Key 2023 highlights fuelling 2024 pipeline 2024 context and priorities x2 eSIM activations 100 Million eSIM for connected cars Cybersecurity x2 eco-friendly payment cards, crossing the › Integration of Imperva and Tesserent 250 Mu mi
Slide 21: 2023 adjusted net income cash conversion above target
2023 adjusted net income Adjusted net income conversion into cash conversion above target Free operating cash flow 162% 185% 2023: fourth year of significant 115% 2,527 free cash flow outperformance 98% 2,515 135%: above Strong order intake, especially in defence markets 2,026 target 113% 1,768
Slide 22: 2024 Financial Objectives
2024 FINANCIAL OBJECTIVES Order intake Book-to-bill above 1 +4% to +6% organic growth(a) Sales corresponding to €19.7bn to €20.1bn(b) EBIT margin(c) 11.7% to 12.0%(a) Note: Those figures assume the consolidation of Cobham Aerospace Communications as of April 2024. (a) Assuming no new major disruptio
Slide 23: Table of contents
Table of contents 01 02 03 04 Introduction to Thales Key priorities Outlook Acquisitions 05 06 Sustainability: safer, 2023 Full-Year results greener, more inclusive 23
Slide 24: Imperva
Imperva THALES ‘lost This document may not be reproduced, modified, adapted, pubiished, translated, in any way, in whole arin part or disclosed fo a third party without the prior written consent of Thales © 2024 THALES. Alll rights reserved. we can all trust
Slide 25: Imperva: leading global data and application security provider
Imperva: leading global data and application security provider Transaction details 2022 revenue by segment Transaction price based on a $3.6bn enterprise value(a) Valuation multiples: › Implied EV/2024E sales multiple of 6.1x 39% Data 61% › Implied EV/2024E EBIT of 17x post synergies(b) security
Slide 26: 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 27: 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 Highly recurring revenue model Double digit High growth, high EBIT margin +8% Structurally high free cash-flow margin US business at scale
Slide 28: 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 Application security > €2bn(a) sales in 2024 Identity & Access management Double digit organic growth Reported within DIS
Slide 29: Imperva: synergies and expected ramp-up
Imperva: positioned for sustained long term growth and cash generation $50m run-rate cost synergies, achieved by Expected ramp-up of synergies 2028 $m, EBIT impact SG&A savings on full perimeter Procurement cost reduction ~110 Real estate footprint optimization ~100 ~70 Revenue synergies $60m
Slide 30: Cobham Aerospace Communications
Cobham Aerospace Communications 30
Slide 31: Proposed acquisition of Cobham Aerospace Communications
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 Thales Avionics business Adding global leading position in safety cockpit communications compl
Slide 32: AeroComms: safety cockpit communication leader
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 (antennas and transceivers) R&D Complete audio and radio management solutions (10%) Passive ant
Slide 33: AeroComms: expertise, products and positions driving superior growth
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 connectivity, Solution and transceiver technology management solutions communications & navigation
Slide 34: Thales & AeroComms on board
Thales & AeroComms on board Radio-navigation antennas Digital Audio / L-Band SATCOM Radio controls Communications Thales Computers/ Cyber Glass cockpit Navigation Flight Control Computers GPS / GNSS Navigation Avionics Critical Computers Displays and head-up displays Inertial Navigation System Cyber
Slide 35: Table of contents
Table of contents 01 02 03 04 Introduction to Thales Key priorities Outlook Acquisitions 05 06 Sustainability: safer, 2023 Full-Year results greener, more inclusive 35
Slide 36: Sustainability ambitions anchored in our purpose
Sustainability ambitions anchored in our purpose Our purpose Our ambitions “Building a future we Maximize the sustainability impact of our can all trust” portfolio of solutions Embed ambitious sustainability commitments in all processes Working to make the world safer, greener and more inclusive 36
Slide 37: Sustainability performance through portfolio of solutions
Take our sustainability performance to the next level: high value contributions in 2023 through portfolio of solutions Greener: ~20% Design solutions to reduce the environmental impact of our Safer: ~60% customers Keep citizens safe in both physical and digital worlds IRIDE radar and optical PureFly
Slide 38: 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-op
Slide 39: Aircraft operations optimization in avionics and Air Traffic Control
Addressing aircraft operations optimization through continuous innovations in both avionics and Air Traffic Control PureFlyt TopSky-ATC One Flight Management System Air Traffic Management system › Improve flight trajectories (climb, cruise, › Deliver civil Air Traffic Control solutions that descent)
Slide 40: Defence is essential to safe, stable and prosperous societies
Defence is essential to safe, stable and prosperous societies We live in a globalised Combining military The protection offered by and increasingly capability, diplomacy and Defence to wider society unpredictable world, development assistance is provides the foundation facing emerging threats necess
Slide 41: 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 training, audit, and focus on continuous improvement Operating ethically; sellin
Slide 42: Continuous progress in ESG performance
Continuous progress in ESG performance Targets Targets -52% 75% of 35% reduction of 0% 49% 87% management 2023 2023 operational CO2 committees with emissions(a) at least 3 women 2018 2023 2018 2023 by 2023 by 2023 2022 result: -40% 2022 result: 76% Strategy 100% of new 0% 100% Diversity & 20% of wom
Slide 43: Thales Low-Carbon Strategy: A Trajectory validated by the SBTi
Thales Low-Carbon Strategy: A Trajectory validated by the SBTi STRATEGY FOR A 2030 OBJECTIVES LOW-CARBON FUTURE VALIDATED BY THE SBTI 43
Slide 44: Gender diversity scorecard and targets
Gender diversity scorecard and targets Gender diversity ratios Glass ceiling KPIs and targets (large European A&D companies) Percentage of management Board of directors 87% committees with 50% at least 3 women 42% 39% 33% (44 committees) 27% 25% 68% Percentage of women in senior Executive committee
Slide 45: Table of contents
Table of contents 01 02 03 04 Introduction to Thales Key priorities Outlook Acquisitions 05 06 Sustainability: safer, 2023 Full-Year results greener, more inclusive 45
Slide 46: Full-Year 2023 highlights
Full-Year 2023 highlights Ongoing strong commercial momentum across portfolio, driving new record backlog Sales growth above top of guidance range EBIT margin up 60 basis points Another year of strong free operating cash-flow generation Accelerated capital deployment: Active M&A strategy roll-out
Slide 47: 2023 key figures
2023 key figures Order intake and book-to-bill Sales EBIT and EBIT margin(b) €m -2% €m €m and % +10.2% +4.9% +0.2%(a) +7.9%(a) +10.9%(a) 1.34 1.26 11.0% 11.6% Adjusted net income(b) Free operating cash-flow(b) Dividend €m €m € +13.6% -19.9% (c) +16% (a) Organic: at constant scope and exchange rates
Slide 48: 2023 order intake
2023 order intake Order intake by contract unit value Another year of strong order intake, driven by Organic growth: +0.2% robust commercial activity in Q4 €m • 13 large(a) orders booked in Q4 2023 • 25 large(a) orders booked in 2023 (vs. 29 in 2022) 2023 book-to-bill of 1.26, and 1.31 excluding Uni
Slide 49: 2023 sales growth
2023 sales growth Significant currency impact Drivers of sales change • Q4: €-73m, -1.4% of sales €m Reported growth: +4.9% • FY2023: €-256m, -1.5% of sales 18,428 Strong organic sales growth, above top 17,569 -256 of guidance range, at +7.9% -223 Currenc • Driven by civil aero, increasing y -1.5% S
Slide 50: 2022 to 2023 EBIT bridge
2022 to 2023 EBIT bridge Gross margin Marketing Equity R&D Scope, & sales G&A Restructuring affiliates currency and 2,132 -82 -41 1,935 pension -26 +2 -19 +25 +338 Naval Group: -28 Others: +9 Scope: +10 Currency: -21 Pension: +36 11.6% 11.0% 2022 2023 EBIT % margin EBIT 50
Slide 51: Aerospace: 2023 key figures
Aerospace: 2023 key figures 2023 2022 Change €m total organic Order intake 5,592 5,892 -5% -5% Sales 5,211 4,705 +10.7% +11.7% EBIT 371 235 +58.2% +60.9% in % of sales 7.1% 5.0% Order intake slightly down vs. FY22 despite strong performance of the Avionics businesses • Aeronautics up at double digit
Slide 52: Defence & Security: 2023 key figures
Defence & Security: 2023 key figures 2023 2022 Change €m total organic Order intake 14,139 13,959 +1% +2% Sales 9,796 9,156 +7.0% +7.5% EBIT 1,251 1,179 +6.1% +7.3% in % of sales 12.8% 12.9% Fifth year record-high order intake with a backlog now at 3.6 years of revenues • 17 large(a) orders booked i
Slide 53: Digital Identity & Security (DIS): 2023 key figures
Digital Identity & Security (DIS): 2023 key figures 2023 2022 Change €m total organic Sales 3,347 3,618 -7.5% +4.1% EBIT 508 494 +2.7% +1.5% in % of sales 15.2% 13.7% Order intake structurally aligned with sales for most businesses Organic sales up mid-single digit, aligned with guidance, with contr
Slide 54: Summary adjusted P&L: from EBIT to adjusted net income
Summary adjusted P&L: from EBIT to adjusted net income 2023 2022 €m EBIT 2,132 1,935 Cost of net financial debt and other financial results (36) (84) Finance costs on pensions and other employee benefits (76) (35) Income tax (370) (331) Effective tax rate 20.1% 20.6% Minorities 12 (18) Adjusted net
Slide 55: Cash conversion: from EBIT to Free Operating Cash-Flow
Cash conversion: from EBIT to Free Operating Cash-Flow 2023, €m 115% Financial Income interest tax Equity Other Transport Change affiliates items contribution +11 Capex in WCR -195 +75 +57 -56 -171 +173 Restructuring, lease Depreciation & depreciations, Amortization: +450 pension… Net operating inve
Slide 56: Movement in net debt over 2023
Movement in net debt over 2023 €m Deficit Free payment operating on UK cash-flow pension Acquisitions & disposals Net debt Net debt at 31 Dec 22 -1,078 at 31 Dec 23 -35 +2,026 Dividends paid Share New buy-back leases -3,464 (IFRS16) Other -634 -461 -166 -187 56
Slide 57: Adjusted EPS and dividend
Adjusted EPS and dividend Adjusted EPS and dividend per share € Adjusted EPS 28% above 2019 Up 24% per year since 2020 Proposed 2023 dividend: €3.40 (a) per share(a) Pay-out ratio confirmed at 40% Up 25% per year since 2020 9%(b) 40% 40% 40% 40% Adjusted EPS Dividend xx% Pay-out ratio (a) Vali
Slide 58: Summary adjusted P&L: from sales to EBIT
Summary adjusted P&L: from sales to EBIT 2023 2022 Change €m % of sales €m % of sales total organic Sales 18,428 17,569 +4.9% +7.9% Gross margin 5,156 28.0% 4,837 27.5% +6.6% +8.0% Indirect costs (3,113) -16.9% (3,013) -17.1% +3.3% +5.1% o/w R&D expenses (1,108) -6.0% (1,064) -6.1% +4.1% +8.2% o/w M
Slide 59: 2023 adjusted net result
2023 adjusted net result Consolidated Adjusted P&L Change in Actuarial P&L Amortization Disposal of fair value of gains/losses €m of acquired assets and derivative FX on other long assets (PPA) others instruments term benefits 2023 2023 Sales 18,428 — — — — 18,428 Cost of sales -13,662 390 — — — -13
Slide 60: Appendix
APPENDIX www.thalesgroup.com 60
Slide 61: A strong set of focused businesses
A strong set of focused businesses Segment Sub-segment Civil Military 2023 sales(a) (€m) Market position Flight avionics(b) #3 worldwide including cockpit avionics, communications, electrical systems, ~2,100 (flight avionics) training and simulation (of which civil: ~€1,400m, military: ~€700m) Conne
Slide 62: Aerospace segment: identity card
Aerospace segment: Sales by solutions Organic sales growth identity card 10% Connected in-flight +12% 40% entertainment (IFE) +6% Flight avionics and other 8% +2% aircraft Microwave 2 Global Business Units equipment tubes and services Avionics -4% -24% Space 42% 2019 2020 2021 2022 2023 Space 18,400
Slide 63: Defence & Security segment: identity card
Defence & Security Sales by solutions Organic sales growth segment: identity card +6% +6% +7% +4% 3 Global Business Units 48% Communications 52% Sensors and Land & Air Systems & C2 systems mission systems -2% Defense Mission Systems 2019 2020 2021 2022 2023 Secure Communications & Information System
Slide 64: Digital Identity & Security (DIS) segment: identity card
Digital Identity & Security Sales by solutions Organic sales growth (DIS) segment: identity card 19% 26% +8% Mobile connectivity (a) Cloud Protection & Licensing (a) +4% +2% n/a 1 Global Business Units 35% Digital Identity & Security Banking & Payment 20% -6% Biometrics 2019 2020 2021 2022 2023 16,2
Slide 65: 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 Sales by activity type 28% Military 81% platforms Flight avionics and other 49% aircraft €2.6bn(a) €2.6bn(a) 43% 51% €2.6bn(a) Narrowbody Aftermarket Original equipment and services (2023
Slide 66: Highly diversified Defense & Security customer base
Highly diversified Defense & Security customer base Defense & Security sales by region, 2023 3% 7% Rest of world Middle East 6% Asia 7% Australia/NZ 31% 43% France outside 8% Europe North America 11% Rest of Europe 6% 9% Germany United Kingdom & Netherlands 66
Slide 67: Thales on board the Rafale
Thales on board the Rafale SPECTRA ELECTRONIC 360° de and action modes in the electromagnetic, laser and infrared domains The first optronic targeting pod {0 cover the entire decision chain, from intelligence gathering to neutralisation Airborne REconnais: System for day/night IMINT, THALES MODULAR
Slide 68: Q1 2024 highlights
Q1 2024 highlights Strong Defense & Security Cobham Aerospace Thales Media Day "AI" commercial activity Communications 4 orders > €100m in Q1 2024, including 2 Acquisition of Cobham Aerospace Introduction of cortAIx, the AI accelerator contracts > €500m, for a total of €1.6bn Communications complete
Slide 69: Organic sales growth per quarter
Organic sales growth per quarter 2020 2021 2022 2023 2024 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Aerospace Defence & Security Digital Identity & Security Total(a) (a) Excluding the contribution from the Transport business from IFRS 5 accounting treatment for all years (Transport business classifi
Slide 70: Q1 2024 order intake by destination
Q1 2024 order intake by destination Breakdown Q1 Q1 Change €m 2024 2023 total organic 5,037 m€ France 1,010 786 +28% +33% 4% Rest of the world United Kingdom 314 393 -20% -23% Rest of Europe 928 995 -7% -7% 15% Middle East 20% France Europe 2,252 2,175 +4% +4% North America 457 487 -6% -17% 6% Unite
Slide 71: Q1 2024 sales by destination
Q1 2024 sales by destination Breakdown Q1 Q1 Change €m 2024 2023 total organic 4,421 m€ France 1,439 1,262 +14.0% +15.5% 5% Rest of the world United Kingdom 290 255 +13.7% +9.0% 6% Middle East Rest of Europe 1,013 944 +7.3% +6.8% 10% 33% Europe 2,742 2,461 +11.4% +11.5% Asia France North America 566
Slide 72: Q1 2024 order intake by operating segment
Q1 2024 order intake by operating segment Q1 Q1 Change €m 2024 2023 total organic Aerospace 1,003 1,199 -16% -13% Defense & Security 3,122 1,371 +128% +127% Digital Identity & Security 903 846 +7% -7% Other 10 6 Total 5,037 3,422 +47% +46% 72 72
Slide 73: Q1 2024 sales by operating segment
Q1 2024 sales by operating segment Q1 Q1 Change €m 2024 2023 total organic Aerospace 1,182 1,156 +2.3% +5.1% Defense & Security 2,305 2,037 +13.1% +13.4% Digital Identity & Security 916 818 +12.0% -2.5% Other 18 15 Total 4,421 4,026 +9.8% +7.9% 73 73
Slide 74: Definition of non-GAAP measures and other remarks
Definition of non-GAAP measures and other remarks EBIT: income from operations; plus the share of net income or loss of equity > Rounding of amounts in euros affiliates less: amortization of acquired assets (PPA), expenses recorded in In the context of this presentation, the amounts expressed in m
Slide 75: Thales contact details
Thales 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 statements due to