Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Thales H1 2025 Results Conference Call. The presentation will be held by Patrice Caine, Thales' Chairman and CEO; and Pascal Bouchiat, Thales' CFO. [Operator Instructions] I must advise you that this conference is being recorded. I would now like to hand the conference over to Mr. Alexandra Boucheron, VP, Head of Investor Relations. Please go ahead, madam.

Alexandra Baubigeat Boucheron: Good morning. Welcome, and thank you for joining us for the presentation of Thales H1 2025 Results. I am Alexandra Boucheron, Sales, Head of Investor Relations. With me today are Patrice Caine, Chairman and CEO; and Pascal Bouchiat, CFO. The presentation will be followed by a Q&A session. As usual, this presentation is audio webcast live on our website at thalesgroup.com, where the slides and press releases are also available for download. Finally, a replay will be available soon after the end of the event. With that, I would like to turn over the call to Patrice Caine.

Patrice Caine: Good morning, everyone, and welcome to Thales 2025 half year results. So starting with a few highlights of the group's performance so far this year. To start, Thales has achieved a high single-digit sales growth in the first half of the year, mainly driven by Avionics and Defense. Indeed, focusing on Defense, the supportive context has offered Thales increasing opportunities globally with a new order of 26 Rafale fighter jets for Indian Navy, which was booked in Q2 2025 or with a GBP 1.16 billion contract with the U.K. Ministry of Defense for the supply of 5,000 LMM mesiles booked in July 2025. Growing opportunities that we start to see with the Real Europe plan to enhance defense capabilities in Europe and France, are planning to exceed the military programming low by progressively increasing total Defense spending from EUR 50 billion in 2025 to EUR 64 billion in 2027. This amount of EUR 64 billion was initially supposed to be reached in 2029, meaning that we expect a real acceleration in France as well. So this context, along with a constant focus on operational efficiency has led to a strong increase in our adjusted EBIT margin, which I will detail in the next slide. So now moving to our H1 2025 financial performance on Slide #3. Commercial momentum was solid for order intake over the semester, with EUR 10.4 billion worth of orders. This reflects the high level of demand for Thales products and solutions in most of our businesses. The book-to-bill ratio stands once again above 1 in H1 2020. Sales progression was robust in this first half of the year, up 8.1% in total and organic changes to EUR 10.3 billion. Adjusted EBIT reached EUR 1.2 billion, recording a solid 12.7% organic growth. Margin was up sharply and stood at 12.2%. Adjusted net income reached EUR 877 million in H1 2025 or EUR 937 million if we exclude the temporary additional corporate tax paid this semester in France. This compares to EUR 866 million last year. In terms of cash generation, H1 2025 was particularly strong with a free operational cash flow of EUR 499 million. Lastly, net debt position at the end of June 2025, increased by EUR 383 million compared to December 2024 to EUR 3.4 billion as a result of the usual seasonal effects, including dividend payments. And if we compare to end of June 2024, the net debt has been reduced by more than EUR 1 billion. I now hand over to Pascal, who will review our financial performance in greater detail.

Pascal Bouchiat: Thank you, Patrice, and good morning, everyone. I'm on Slide 4, starting with order intake. As Patrice mentioned, momentum was solid in H1 2025 for order intake, which stood at EUR 10.4 billion. One-off contract was signed in semester with a unit value above EUR 1 billion, mainly the order of 26 Rafale by the Indian Navy. This compares to 3 contracts in H1 2024 with unit value above EUR 500 million, leading to a very high comparison basis. Now taking a step back and combining the first half to H1 [ 2023 ] order intake, we observed a robust increase of 21% in H1 2025 order increase, underscoring the group's solid growth projector. Then large orders were booked in H1 2025, [ 16% ] in all domains, illustrating the continued strong momentum and the relevance of our portfolio of projects. 4 in Aerospace, of which 3 spaces and 1 in Avionics, all booked in Q1 2025. Importantly, orders below [ EUR 10 million ] showed robust progress of 40%. Now moving on to sales on Slide 5. First, a word on scope and currency impacts. H1 2025 saw a positive scope impact of EUR 87 million, mostly concentrated in Q1 and mainly resulting from the Cobham Aerospace Communication acquisition. Cobham is integrated in the organic figures since April 2025. Currency impact was negative at minus EUR 73 million due to the strengthening of euro against U.S. dollar and Australian dollar. Excluding those impacts, sales were up 8.1% on an order basis in H1 2025. This solid performance clearly demonstrates Thales' continued strong growth momentum. It goes notably reflects the good momentum in aerospace, mostly driven by evident. In addition, Defense delivered again double-digit growth in the support in context Patrice already mentioned. Cyber & Digital was slightly down in H1. A progressive one-up is expected in H2 and I will come back to this in a minute. Finally, sales organic growth was well balanced between [indiscernible] and emerging markets. Europe posted a solid 8.9% growth in H1 2025, while emerging markets delivered double-digit growth. Turning now to Slide 6 and adding a look at the driver of adjusted EBIT year-on-year [indiscernible]. Looking first of the mechanical impact. Scope effect was positive and amounted to [ EUR 23 million ], primarily linked to Cobham AeroComms acquisition. Currency impact was negative at minus EUR 9 million, while pension costs impact was [indiscernible]. As you can see, the strong progression of our gross margin was the most significant driver of adjusted [indiscernible]. It was up EUR 160 million, driven notably by the sales volume increase on Defense. While costs linked to market and sales are stable year-on-year, R&D expenses were up in H1 2025 and stood slightly above 6% of sales, reflecting sustained R&D investments. G&A expenses we have contained as well growing organically at less than half the pace of [indiscernible]. Restructuring costs were higher in H1 2025 versus H1 2024, mostly driven by the cost line adaptation plan in space. Finally, contribution from equity affiliates increased by EUR 28 million. Most of our JV progressing well with also a few positive one-offs. On the other side, contribution from [indiscernible] Group was handled by the temporary addition corporate tax in France. Moving now to performance by segment and starting with Aerospace. I'm now on Slide 7. orders in the segment came at [ EUR 2.7 billion ], broadly stable year-on-year. Avionics enjoyed a solid underlying demand across most segments and notably intermediate domain. Order intake in Space was slightly down, although 3 large orders were signed in 2025, of which 2 telco for Norway and Japan and one in exploration. Sales amounted to EUR 2.8 billion, leading to an organic growth of 5.8% year-on-year. This reflects, on the one hand, sustained growth in Avionics with a strong performance notably in aftermarket supported by robust air traffic momentum and in military activities. On the other hand, Space sales are still impacted by the low demand experience over the last 2 years in the Telco business. Now commenting adjusted EBIT with a sharp increase of 2.7 points in margin, which stood at 1.1% in H1 2025. This strong progression was driven by the solid double-digit margin in [indiscernible] and also an important importance in Space marketing and try to deliver a positive adjusted EBIT before restructuring costs in full year 2025. Moving on now to Defense on Slide 8. So in Defense, order intake amounted to EUR 5.8 billion in 2025, reflecting strong and continued commercial momentum, although year-on-year comparison is impacted by a quite tough comparison data. 6 large contracts were booked in H1 versus 9 in 2024, which also saw the booking of 3 contracts with in value above EUR 500 million. It's worth noting that small orders were particularly supported this semester. The good news is that additional [indiscernible] are expected to be booked in H2, notably in Air Defense with contracts with U.K. and German government. As a reminder, book-to-bill ratio is expected above 1 this year in decent. Sales amounted to [ EUR 5.6 billion ] recording a sharp organic growth of 12.7% ahead our full year expectation. This was driven by continued double-digit growth after a very strong Q1 with solid momentum in most of the activities. The performance also benefited from continuous production ramp-up. Margin was very stable, around 13% as expected and in line with annual expectations. Moving now to Cyber and Digital on Slide 9. At EUR 1.9 billion, sales of the overall Cyber and Digital segments were down minus 1.9% organic. Commenting Cyber, where sales were down organically in 2025. Cyber growth -- [indiscernible], which represents more than 80% of total Cyber business was handled by the short-term disturbance leads to the merger of Thales and Imperva sales force. This merger has been completed at the end of Q2 as expected. During this process, marking the final step of the integration in [indiscernible] of sales swaps were allocating either a new customer portfolio, running product of [ 20%]. We now expect a progression in it for this -- in Cyber services, low market dynamics, all back growth in H1 As you know, our priorities for this activity an executive of strategy of premiumization to refocus on segments offering more positive holds. While this process implies rationalizing and standard design, Cobham designing some operations, it can temporarily act as a drive on board. Moving to Digital identity. We say that recorded growth in Q2 after Q1, over the fall semester, organic growth are slightly down. H1 2025 was slow in identity and biometrics as the activity is normalizing to a more usual run rate after the COVID catch-up effect that occured until 2024 with the target document activity. In Secure Connectivity Solutions and Payment Services, the performance of Digital Banking Solutions were indeed vigorous in 2025, Digital Solutions and Secure Connectivity also to solid profit cost. The overall adjusted EBIT margin of the segment has been holding well this semester, protected by continued disciplined pricing policy. While overall margin was stable, in Cyber, it's worth noting that the premiumization strategy is starting to bear fruit, its size of services with an increase in margins year-on-year. Margin was slightly down, however, inside our product due to temporary low top line evolutions. Margin was also slightly up in digital identity but also benefiting from a few positive one-offs. Now looking at the H1 2025 adjusted P&L, now on Slide 10. The cost of financial debt and other financial results was up compared to last year. The comparison is impacted by the nonrecurrence of positive one-off recorded last year mainly dividend payments from nonconsolidated affiliates and also a foreign exchange date. The final costs and pensions and also improved benefits were broadly stable. Looking at taxes, you can see the effective tax rate was significantly higher in semester and stood at 26.7%. This is due to this temporary additional corporate tax paid this semester in France, front-loaded in H1 2025 at EUR 60 million out of the total [ EUR 88 million ] impact expected this year have been recording in H. Excluding this impact, the effective tax rate was already stable at 21%. Minorities are down year-on-year, mainly linked to the reduced net loss deferred by Thales and Aerospace. Overall, adjusted net income group share stood at EUR 877 million in H1 2025 or EUR 937 million excluding the tax one-off. This compares to EUR 866 million last year, so leading to 8% growth. Moving now on Slide 11 to free operating cash flow. So the free operating cash flow was particularly strong in H1 2025 and see that EUR 499 million versus minus [ EUR 85 million ] last year. This excellent performance was driven mainly by the significant improvement in change in working capital. This reflects the continued satisfactory payment profile from customers including down payment as a result from ongoing action plans to optimize stock after the increases of the past years. This H1 2025 performance makes us quite confident to achieve our guidance of 95% to 100% adjusted net income to reporting cash flow conversions ratio for 2025. Concluding the financial performance. Moving on Slide 12 with a regime as the net debt evolution. We see net debt amounted to EUR 3.4 billion at June 2025, versus EUR 3 billion end of December 2023. The main drivers of the seasonal increase are the payment of our dividend, resulting in a cash range of EUR 586 million, and new lease for an amount of EUR 118 million. The disposal impact stood at minus EUR 64 million. This is due to the final pipe adjustments related to the sale of [indiscernible] of the transport activity. These impacts were, however, partly compensated by the strong favor in cash flow, I've just discussed. So thank you for your attention. I will turn over the call to Patrice to review our strategic priorities and guidance.

Patrice Caine: Thank you, Pascal. So now turning to our strategy and outlook. So on Slide 14. Here are the 4 strategic priorities for 2025, we shared with you during our 2024 full year results. As you will see, we have made a significant progress following these priorities in the first half of the year. So first, ramping up our capacity, which includes production capacity, but also entering. We have the right talent to seize market opportunities. Second, restoring space profitability key priority for the group this year; third, maintaining our innovation and R&D leadership to increase differentiation and last, fourth, delivering strong value creation from our recent acquisitions, namely [indiscernible] Cobham, which have both undergone successful integrations. So moving to Slide 15 and first, the capacity ramp-up. So due to the current supportive context, there's strong position and value offering. Many of our products are in high demand. And to respond to this trend and serve our customers, we have continued our internal and external efforts to accelerate production internally by investing in some of our production sites and recruiting the right talent externally by supporting our super chain and mitigating potential bottlenecks. Just to give you a few examples of these capacity extensions, Thales launched an unprecedented investment plan of around EUR 350 million for its Chalet site in France, which employs 2,600 people, both R&D, production and service activity, in radio communications, cybersecurity, electronic warfare and satellite communications. This project includes among other developments, new industrial lines for equipment and systems to provide significant increases in production rates expected in the current context. And another capacity expansions have been implemented all around Europe, namely in Angola, in the Neverland and [indiscernible] in Poland. But as I just mentioned, ramping up our capacity also means ensuring we have the right talent in place to seize market opportunities. So we have continued making Thales a very attractive employer brand and our strong brand awareness has once again been recognized the Universal Research Institute ranked Thales as the #1 most attractive employer among engineering students in France in 2025. If I move to Space now, well, as you all know, we have been implementing since March 2024, the transformation plan of Thales Alenia Space, Telecoms business line, in order to, one, optimize its structure; number two, maintain its leadership position. Number three, restore its profitability. This plan mainly consists in the redeployment of 1,300 positions across the group with no force departure. As of H1 2025 we have 35% of positions already redeployed. Moreover, [indiscernible] has had a certain number of recent commercial wins and just to name a few, contracts to build telecom satellites in Norway and in Japan, a contract with Hispasat to start the development of the world's first quantum distribution system capacity from just a tiny orbit and a contract with the European Space Agency to develop the space segment of the navigation system or beating around the move. And this promising business and business growth opportunities show our transformation plan is going in the right direction. Hence, we are confident in a [indiscernible] perspectives for profitability recovery. Third priority regarding our innovation leadership. Maintaining strong R&D capabilities is indeed key to bringing pioneering and differentiating products to our customers. In the end, this is why our customers prefer us versus the competition. A few illustrations of what we have done so far this year in this area. Expanding our Cortex AI accelerator worldwide, with new AI industrialization capabilities in the U.K. and Singapore, targeting 800 AI experts at around 100 PFD students globally at the end of 2025. For those of you who visited Thales standard Paris airshow, I imagine you have seen the number of products over 100 with Thales AI insight. Another example is our future potential partnership with Radial and Foxconn to create an industrial capacity to develop what we call system in package, SIP technology in France. For the more curious among you, this technology enables the integration of multiple electronic components into a single compact module, thanks to an increase in the density of electronic components while reducing their sites. In one word, we are developing the electronic technology and components of tomorrow. It's a definite step towards more strategic autonomy. This partnership with Foxconn and Real will indeed meet the growing needs of the Aerospace, Automotive, Telecom and Defense sectors. First priority, Thales is, of course, strongly committed to delivering strong value creation from recent acquisitions. In [indiscernible] and Cobham [indiscernible] are already providing strong operational performance and synergies across the group. For example, Thales has launched a new solution combining Thales and Imperva's best technologies named file activity monitoring, or SAM. You all have in your company's unstructured data across servers, cloud services and shares, that is to say everywhere, it could take an endless time to look at each 5 defined level of classification and secure it. Thanks to AI capability, activity monitoring. He is doing everything for you automatically. This is just one example of the new state-of-the-art solutions that we are launching. Moreover, the activities stemming from the acquisition of Cobham are showing a very strong performance, thanks to the development of synergetic products such as the 60 satellite communication system, Thales will provide to equip the A400M meter transport aircraft. Moving to the last slide. So all these priorities will bring Thales to continue pursuing ambitious financial targets for 2025. A book- to-bill ratio above 1, organic growth of 6% to 7% or EUR 28.8 billion to EUR 22 billion in sales and 12.2% to 12.4%, sorry, adjusted EBIT margin. Many thanks again for your attention, and we will now be pleased to take your questions.

Operator: [Operator Instructions] Our first question today is from the line of Benjamin Heelan, Bank of America.

Benjamin Michael Heelan: First question, Patrice, or Pascal was on Cyber. Obviously, a very strong decline in Q2, which on the face of it, I think, is kind of marginally worse than than certainly what I was expecting. And you've highlighted again sales integration. Can you just talk a little bit about what is actually going on? Like why is the integration of Imperva sales team being so disruptive to the business? And you have some comments in the presentation about expecting a progressive ramp-up in the second half of the year. Can you just talk a little bit about what we should read into that? Is that a sequential improvement versus Q2? Should we see a return to year-on-year organic growth in that business? So any color around that would be super helpful. Second question on Space. And can we get an update on the discussions between yourselves, Airbus and Leonardo. Any time lines that you can provide there would be helpful. And then finally, on Avionics can you break down a little bit what you're seeing in terms of aftermarket growth versus original equipment? And any color on the IFE business that you have as well would be super helpful.

Patrice Caine: Okay. I start on Cyber perhaps and Space as well. We said since the very beginning that this first semester will be not a normal semester, if I may say. Clearly, it's an important and mandatory, by the way, operation to merge the 2 sales teams. We did so, if you remember well, Ben between Vormetric and Sfnet a while ago. Safnet belonging to Gemalto, Viamet belonging to Thales. So when we acquired Gemalto, we had this merger within the merger between Vormetric and Tested. So honestly, I would like to reassure you, we know how to do it. We knew it would cause some inefficiency. It gathers or sorry, it concerns 1,000 people. So it's a vast sales team and approximately 70% of these people have changed either the customers they were supposed to address before or the products they were supposed to push before. plus the fact that we have aligned incentive scheme, which is also something which is most important and sensitive in this type of business model. So it's absolutely, I would say, expected and normal that some inefficiencies occurred in H1. Now of course, the fact that it was a bit higher than your own expectation, it's pretty difficult to model it very precisely. Now we need to take a step back, be a little bit patient. We are, I would say, very confident that it will progressively come back to fully operational and efficient situation soon. And normally, H2, I'm sure we'll have questions in Q3, but H2, end of H2, end of this year, we will be able to measure to monitor this return to full efficiency in this domain. But the quality of the asset and the quality of Imperva is a high- quality company and the products are of high quality that should, I would say, help us to keep a cool head looking at just Q1 or Q2 figures in this domain, though they may seem a bit disappointing. Now space, not much to say, I may say, discussions are ongoing. And as I've said already in the past, we will, I would say, say something if and when we have something to say. So work in progress. I'm not sure it will get to something which could be positive or something which will be announced to the 3 of us. So too soon to say, but working on it. More color on avionics, Pascal?

Pascal Bouchiat: So Avionics, I mean, very happy with the level of performance in particular intergrowth in H1. In terms of, I mean, the key subsegments where we achieved most of the goals in H1. One is the aftermarket, which has been strong in H1, good development continuing on through H1, first point. Second, also Cobham AeroComms in terms of [indiscernible] growth. You mentioned about [indiscernible]. It's in particular at Cobham AeroComms, where we enjoyed the largest level of growth. For the rest of OEM, it follows, in particular the you mentioned particular IFE overall no concern at all in terms of growth -- underlying growth at this point, I mean the concern is more about our clients being able to get their aircraft or their seat so that we can deliver our own product. That's the point that we mentioned in Q4 last year. And it's true that seems to be a bit better, but we are still not there. And this is today, I mean some kind of limiting factor overall in terms of growth for IFE. Now in terms of underlying level of demand, I mean, IFE is back to what it should be in terms of level of demand.

Operator: Next question is from the line of Olivier Brochet from Rothchild.

Olivier Brochet: Patrice, Pascal. I have a few questions, if I may. Starting first with Cyber and Digital. Could you just give us a sense of how significant in terms of revenue is the Banking Solution business that you mentioned in the presentation? And you also mentioned there positive one-offs. What were they and of what scale weather, please? Secondly, on Imperva to continue on Ben's question. Have you seen some leakage on R&D and key people leaving or on the contrary, has it been quite satisfactory on that front? And third, on ExoMars, if the U.S. gets out of ExoMars, what are the consequences for Thales, please?

Pascal Bouchiat: Okay. So Olivier, I will start maybe on Cyber. So in terms of digital, I mean, there is at this point in terms of size of business, quite a difference between the level of transitioning on the mobile communication system from the classic SIM to the embedded we already commented the transition, which is growing pretty nicely. And very soon, we'll have most of mobile communications system business driven by the digital, i.e., the embedded SIM business. On banking, and that was your question. Of course, I mean the move will take much longer, which means that even though the growth of our digital banking solutions is pretty strong and it's really a double-digit type of growth, the underlying level at this point is still is still a small business. We are talking about a business, which overall represents something like EUR 50 million of annual revenue, but growing fast and paving the way for this progressive transition for the banking business. But once again, that will take time. yes, I mentioned several one-off -- mainly one-offs on cyber and digital in H1. One was a pretty strong level of demand in particular in the specific telco operators in Asia. So that's the first point. And the second is more on JV with in 2024 in terms of one-off positive came in H1 2025. Overall, I mean, the impact in terms of margin for the Cyber business is not that, but I mentioned this point. Imperva...

Patrice Caine: Imperva, of course, we monitor, we say, attrition at [indiscernible] globally speaking, at our SP business. Honestly, we have not observed anything that would be, I would say, worrying or above benchmark, even in the U.S. And you know that in the U.S. also, some big digital or big tech companies have either stop hiring or lay off people. So the turn on the market is -- I would say, probably less stringent than it was before. So nothing to be worried about in this -- of course, good and important question, Olivier, about key people, not only in R&D, but also in the sales team. We have also some key people in the sales area that are important for the business. Moving to Space. In fact, more than [indiscernible] looking very precisely at the discussions and developments around [indiscernible] because you know we have a big stake in this back to the old initiative, we have been reassured by the recent, I would say, vote of the big beautiful BBS, which has, in particular, confirm the right level of credit of funding allocated to NASA on this particular project. So I would say so far, I would say we are sure there is no particular concern. Now let's also acknowledge that the institution in the U.S. is always difficult to predict. So as we see, no concern, but let's keep let be cautious exactly, yes.

Operator: Next question is from the line of Ross Law Morgan Stanley.

Ross Law: So the first is just again on Cyber. Can you maybe be a bit more specific on your second half expectations? Should we be expecting year-over-year growth? Secondly, on Space. You've called out the margin as being significantly improved. Can you maybe quantify that margin for the first half? And also what you're expecting for the full year? And then thirdly and lastly, you called out investing in expanding industrial capacities. Are you doing this on the assumption that Defense spending in France goes above the current LPM trajectory? Or are you continuing to assume the time being that the LPM is maintained in its current form?

Pascal Bouchiat: Okay. I will start with the first one, Patrice, on areas yet as we expect Cyber to get back to positive growth in H2, H1 bit early to quantify. But yes, we expect a progressive to get a year-on-year in Q2, Q4 to be positive. This is how we see the and -- it's the most likely scenario for the Cyber business. And in particular, on the Cyber product subsegment, which is the one where we want to evolve. Maybe see a bit of additional comments. As you know, in our Cyber business. We've got -- which we present the bulk of our business, which is the Cyber product business, overall level of revenue between EUR 1.3 billion, EUR 1.4 billion. And this is clearly where we want to regain growth as quickly as possible, and it should be the case as early as Q3. The second subsegment, which is by far the lowest which is a Cyber services. You know in this business, it's key purpose. It's really, I mean, to drive sales in our Cyber Product business. This is the famous doctor as opposed to the producer of medicines. So Cyber Services is really design is -- meant to foster the sale of products. So this business is a much smaller one. It's a EUR 250 million annual sales, which was significantly down, resulting from 2 factors. One was the softness in terms of demand in particular in Australia. And the second was really our decission to refocus this business on the most attractive segments, market segments, and this is what we keep doing. So on this Cyber Service subsegment, I mean the strategy is not that much both in the short term. It's more, I mean, increasing profitability. On the Cyber product business which is where we should see growth resuming in Q2. Space, Ross, you asked me to quantify it a bit more, I mean the progressions of EBIT. So what I can confirm is what we expect for the full year 2025, we -- you probably have in mind that back in 2024, this Space business overall in terms of level of EBIT, we mentioned was close to minus [ EUR 70 million ] of EBIT. And we said that in 2025, it should be work even before restructuring charges and this is what we expect, overall, a restructuring charge for Space in 2025. It should be EUR 20 million, EUR 25 million, which means that excluding those stocking change, this business should be back even in 2025. And the run rate in H1 2025 overall in terms of level of EBIT will be, I mean, our teams, our support in this overall level of profitability for the full year.

Patrice Caine: Okay. If I take the third one and indeed, it's a good question. It is a good question, I would say, additional funding that has been announced by the French President is news, of course, in terms of business momentum, which will come on top of the already growing multiyear programming law. Now in terms of CapEx, in terms of investments and in the case of France because the question is France, the reasoning would apply to any other countries of Thales, of course, we take a global appraisal. We look at all the markets we serve from France, French market, but also for the export market, number one. And it's mainly based on our, I would say, backlog and some immediate expected contracts, but clearly something which is de facto confirm hence the fact that remove when we have increased the production rate of our radars in a few years, same for our emission business in France, [indiscernible] was really based on, I would say, backlog plus net contracts. So coming back to your question related to the recent announcement of the French President, Honestly, it's been too soon to say that it will trigger additional CapEx. Now again, if it materialize next year, of course, we will always assess continuously our situation and see if it deserves, I would say, additional industry capacity or what we have already enhanced is sufficient to serve this additional requirement of this additional need, so on. To make it short, a bit too soon to say -- if this will -- but if yes, we will adjust as we did in the past.

Operator: Next question is from Chloe Lemarie from Jefferies.

Chloe Lemarie: Patrick, Pason, Alexandra. I'll start one with the guidance update. If you could share with us the moving parts from the initial 5% to 6% organic growth. I assume it's fair to expect maybe slower Cyber versus the mid-single digit, but maybe higher Defense. So if you could just talk around that. The second is actually on restructuring. Could you just remind us what you expect in total restructuring costs for this year? And last point, just on the Cyber performance. Just wanted to see if you had seen any softness in the markets that can have, let's say, amplified the impact of the sales integration or if it's simply the effect of the sales integration is affecting the group at this point?

Pascal Bouchiat: So. I mean you answered your first question -- on the moving part. So yes, I mean, Yes, the upgrade of the guidance of organic growth of revenue moving from 5% to 6% to 6% to 7%. Yes. And the policies, of course, I mean, Defense -- and overall, it's true that today, we see organic growth in Defense in terms of problem of 2025, that would be probably high single digits. This is how we see today and in the most likely scenario. Now it's also true that on the side, if I take Cyber and Digital probably a flat to low single digit. It's probably more what we have in mind considering H1. But overall, and it's true that on this call, we have not discussed a lot about different goals, but true to say that we are quite positive on this business. And overall and considering the size of our Defense business, overall, this allowed us to a great revenue guidance. So second question was about our expectations in terms of level of restructuring expenses for 2025. Overall module is that it should be only around EUR 120 million. Our H1 restructuring expenses was [ EUR 55 million ]. So let's consider that it should be trying a bit more twice is announced for the full year, which, if I remember well, it's probably what we expensed in 2024, with still in 2025, still a level of restructuring charges for sales that will be still material. I mentioned 2025, So this is what I can share with you in terms of restructuring charges for 2025. Patrice, can you?

Patrice Caine: And thank you for your question. Indeed it's a question we've asked workforce. Now what I can say. Well, number one, we have, I would say, market figures only for Q1 and these figures, and we need to go into, we say, quite a detailed analysis because this Cyber market is highly fragmented in terms of freight and therefore, in terms of products. So it needs a deep dive on what is really, I would say, pertinent for us, namely Data Security segment, Efficiency Security, or the IM segment, [indiscernible] management segment. In these different segments where we operate, in fact, Q1 peers, they do not show any kind of softness. So it's reassuring considering your good question. Now for Q2, we are consolidating the year, it's a bit to say therefore, more qualitatively, if I may. So it's not based on figures, but more qualitatively, all the feedback that we have from our team says that the market is there. I mean, there is no nothing has changed in the market. And if we take a further step back, if we look at the number of Cyber attacks worldwide, and we do, we say, published early reports on the Cyber, how we say, the level of higher sites worldwide in our domain. It shows that this, I would say, the situation is worse, if I may say. So needing more and more type Cyber protection, in particular in our domains. So nothing to be, I would say, worried about. And again, the third driver is really the organization that caters these inefficiencies I've already mentioned.

Operator: Next question is from Alexan Roots from Mediobanca.

Unidentified Analyst: I have 2. The first one is on the French Defense budget. As you pointed out in your opening remarks, there is [Audio Gap] an acceleration in Defense spending in France, I was wondering if you have a sense of what could be your capture rate there and how well placed with your products to capture basically the increased spending. And the second question is on the free cash flow. The improvement was in part driven by working capital. Can you tell us maybe what we should assume for the second half of the year for the working capital?

Patrice Caine: Well, I can start on the first one. Thanks for your question. So yes, this announcement was -- is clearly a positive for us and for the Defense industry as a whole. The figures are not negligible with EUR 3.5 billion in addition in 2026 and EUR 3 billion in addition to what was already expected in 2027. Now it's a bit too soon to say how much will it represent for Thales. Good rule of thumb is the fact that we will have our fair share, if necessary, if we take in average what we as a capture globally speaking of the Defense budget. There is no reason why it should not be at least the same. So it's a bit of a qualitative answer. But for the moment, it's the best I can say, on top of the fact that it is a positive, it is a positive, of course. Now always keep in mind that we should see as of next year in terms of order intake. But in terms of sales, it will take a bit more time, of course, as usual. So does it change our sales perspective for 2026, 2027, probably not, certainly not but it's a nice additional opportunity in terms of order intake, of course, for 2026 and onwards.

Chloe Lemarie: Is cash flow, okay?

Pascal Bouchiat: And another questions on cash flow because it seems to be that strong performance on free cash flow was not noticed. Thank you very much for that. Well, yes, as you know, I mean, our working capital is seen at as the second with growth in working capital in H1 and the part in H2, this is the reason why our cash flow generation is much higher in H2 than it is in H1. Now it's true that the way we started 2025 was very strong, nearly above our own expectations. And as I mentioned in the price resulting from 2 factors, one, overall, I mean, a pretty strong payment profile from our customers, both on client project execution, but also on payments. And second was our ongoing actions to optimize our level of stocks. So when you put all of that, then you project your lens to H2, I'm quite positive -- and I think that in my past, I mentioned that we are quite confident to achieve or guidance in terms of free operating cash flow for the full year. Of course, it will depend upon maybe some last minute payments or cutoff in terms of payments from Q4 to Q1 2026. But overall, as you understand from my tone, we are quite positive in terms of cash flow generation, again in 2025, confirming, I mean, this pretty strong cash flow generations at Thales. So our ability to convert I mean all our net income into free operating cash flow.

Unidentified Analyst: Understood. Just a follow-up on the cash flow. In terms of CapEx, what should we assume in terms of year-on-year movement in '25 versus '24?

Pascal Bouchiat: So we should see our CapEx moving up in 2025. In 2024, overall level of CapEx was [ EUR 620 million ], which should be probably around EUR 700 million in 2025, showing that we are accelerating. And in particular, as we see an opportunity in terms of business, which needs the continuous ramp-up, but we have already commented. So clearly, we keep probably increasing overall capital expenditure. Now it doesn't change our view in terms of overall our ability to convert net income to one, which means that -- it's my view that we can do both. On one side, I mean keeping growing our capital expenditure and paving the way for future for organic growth extensions together with maintaining a low level of conversions ratio. And by the way, we committed at our Capital Market Day in November last year.

Operator: Next question is from the line of Herve Drouet from CIC Market.

Herve Drouet: The first one, I'm sorry, is back to Cyber. And if we look at the margins and the way the EBIT margin has evolved compared with first half, it's been, in fact, quite stable despite the pressure on sales. I was wondering, I mean, how do you explain that? Is it because you have taken less integration costs in H1 this year versus last year? Or is it the product mix which has slightly changed as you explained, potentially in the Cyber services? And I was wondering if you can give us as well maybe a split between what is recurring maybe coming from a SaaS type of product versus which is more one-off sales you do on the go. So that's on the Cyber. And the second question is more on the Defense side. and especially on the order intake, which has a pickup in Q2 versus Q1, slightly above 1. But if we look at some countries, especially U.K. and France, I mean, U.K., I think it's minus 25% versus 24% and France, 10%. I understand. I mean, the budget is gradually increasing. I was wondering what explains maybe the softness for those 2 countries? I understand you are expecting some pickup in second half, but do you believe we are going to have still be negative at the end of the year on those 2 countries on order intake or we can go to par versus last year?

Pascal Bouchiat: Okay. Maybe I will start and implementing a bit more on Cyber in terms of margin. And this is probably where I need also to come back on the 2 subsegments that have already commented a Cyber product on one side, Cyber services on the other side because internal margin, it is quite different. So Cyber product is where, I mean, we get most of the margin and a pretty strong level of of margins for this segment. And here, I mean, our participate is resuming growth as quickly as possible. While I mean, there the level of margins that are more in the high-teens -- low 20s, this one is not high-teens, no level of EBIT margin for this Cyber products business. On the other side, I mean, the small size the services is today a level -- is a business where, at this point, the level of profitability is not what we expect at slightly negative. It was negative in 2024, particularly in H1 2024. We managed to improve, I mean, the situation in H1 2025. That's also rename despite, I mean, this lower level of revenue, we managed to maintain quite a good level of margin. It is in particular because on cyber services, we tend to focus on margin improvement as opposed to growth, and this is what happened. So we are pretty happy with -- I mean the directions in terms of improvement of margin for this Cyber service business , even though we are still not yet where we want to be, but it is pretty -- nothing more to report there are no specific one-off sales different type of mix. It's more I mean those 2 different businesses, product on one side, services on the other side and services where today we streamline, we rationalize. We focus on more attractive market to improve the level of profitability.

Patrice Caine: On Defense, if I follow-up on Defense. On one hand, you are right, the figures are the figures. Now in this long-term business like Defense, we are obliged to report on a quarterly basis, but it doesn't make sense. So year after year, we explained why Q1 is up for Q2 is down, but honestly, the right we say, measurement is at least a year in measurement. And typically, you said U.K. is down by 25%. What we have taken or booked the big, big LMM contract in Q2 instead of Q2 a few days after you would have said exactly the contrary. So you see how, I would say meaningless, if you authorize me to say so, it is to look at quarter-after-quarter at order intake. But okay, this is the rule of the game, so we do so, but I do insist that we need to always to take a bigger perspective when we look at OI for Defense, should I say the same layer also for Space or even are unique. Now of course, we do confirm the global, I would say, guidance for order intake in 2025. Book-to-bill ratio will be better than one. And of course, defense will be the key contributor of this strong commercial performance. It's more qualitative near with you, but clearly Defense will be a key contributor of this commercial performance. And this -- and we do expect a strong commercial performance. Again, in 2025 after several years or many years in a row with such strong momentum. And this is due, again, in Defense to the geopolitical situation. So it's another way to take another step back and to look at the commercial momentum in defense and the 1 we see the serve a tariff. So I hope it has reassured you and give a new note color to be confident that Defense is enjoying the strong Defense momentum and in particular, for Thales.

Operator: Next question is from the line of David Perry, JPMorgan.

David Howard Perry: I just want to dig into this plan to increase the defense spending from EUR 50 billion to EUR 64 billion in 2 years that Matco spoke about, I think it was on July 14 in this speech. It's a huge number. It had very little media coverage here in the U.K. or impact on the shares, which suggests to me people don't really believe it. So could you just explain to me here in the U.K. What is now the legislative process to make this happen? What are the next steps? What are the obstacles or the things that will make it happen or won't make it happen? And if it is passed into law, when is the money actually spent, is there a time lag?

Patrice Caine: David, thank you for your question. It's a good question as well, of course. No, I think the answer is quite simple. It just requires a budget look. So it will be embedded will be part of the budget law that France needs to operate global [indiscernible] so, there will be no dedicated law for Defense. There is no intention and no need to change the LPM. It's just, I would say, it will be just translated in the budget law for 2026. Now everyone can speak today about will there be a law or not but clearly, the most likely scenario is that we will have one next year and it will encompass the this increase in terms of Defense spending. I do observe as well that it's largely in France, largely I'm not saying that it's unanimity, but it's largely contentious, control. And I'm not sure that I would say the debate in the House of Parliament will focus on this particular point. There are many other controversial topics to focus on than this one at the House of Parliament in France.

David Howard Perry: So is there a date -- a specific date we should look out for, where, say, at least 2026? Because you're talking about kind of 14% a year growth. And I think most of us have been assuming 6% to 7% growth because I'm just looking at when is this locked down and happens? And does the money gets -- if it's approved for '26, is the money spent in '26?

Patrice Caine: The orders are passed in '26. Now the cash flow, sorry, plan would say specific contracts or contact. But this is mainly this is concerning, I would say, bookings order intake contracts. So what you will see normally in 2026 is a EUR 3.5 billion additional contract pack to the Defense industry.

Pascal Bouchiat: Maybe, I mean, the caveat is that I mean, 3.5% is the overall increase in defense spending covering both OpEx and acquisition. And at this point, there's a split between the 2. As you know, overall, in most countries, and it is also the case in France, acquisitions, tend to represent something like 1/3 of the global defense funding. So you could assume that overall out of the it's considered that in terms of acquisitions. I mean the additional growth on top of the existing LTM, it should be probably EUR 1 billion, at least if we follow this one type of -- for sure. But at this point, it has not been discussed and been disclosed. So we need to be a bit more patient. But there is no intention or no one has said any time that typically, the number of military people will be higher next year. There is no reason why the salary would go through the roof next year -- there will be a portion for OpEx, but there will be no -- CapEx would be the first, I would say, beneficiary of this increase.

Operator: Due to timing constraints, we'll take a final question. This is from Christophe Menard from Deutsche Bank.

Christophe Menard: I have 3. The first one is on strategy and outlook. You mentioned some of the joint ventures. -- with Foxconn. You had one with [indiscernible]. Can you give more details as well. And there's a broader question around joint ventures. I mean, we've seen some of your peers rushing, so to say, to do joint ventures to gain access to technology. Do you have the same approach? Or do you have all the technologies in your portfolio to address future demand? That was question number one. Question number 2 is to get back on free cash flow in H1. The -- I think Pascal, you mentioned it's linked to inventory optimization. So am I right to think that it is structural. It's not just the prepayment of the Indian Rafale that is making that good performance. And the last question is on the 2028 guidance for Defense. I mean, you said on the call, we should be organic sales growth around -- I mean I understood 8%, 9% this year. We were at 13.3% last year. So the 6%, 7% that you described between 24% and 28%. Is it something that is probably I mean maybe updated or may be revised as time goes by?

Patrice Caine: Okay, I'll start with the joint venture strategy. So what we contemplate -- sorry, should I say first. The joint venture that we contemplate to create with Foxconn, Radial and maybe other partners, by the way. First is done. It was taken as an illustration of how we do prepare the future. So take it as an example of, I would say, how do we care not only about short term, but also about mid- to long term, I would say, future of the group. This is, I would say, super exciting, a bit technical, so I'll try to simplify it during my stage, but this is very promising. However, it has no impact on the short term in terms of financial economics. Moving to [indiscernible]. What we used to do with over is to, in fact, to merge our own forces in Norway, and we have had for case nice defense budget and which was -- which is very strong, typically on crypto in Norway with converses in terms of software- defined radio. By the way, in many cases, crypto and radio, it's, I would say, intertwine, quite, we say significantly. So in terms of economics and a couple of hundred of people and in the range of EUR 100 to EUR 150 million, to give you an order of magnitude of what is represent. So it's a nice joint venture. It's a big one, but it's a nice one and it is a nice way to what we say grab a bit more of the Norwegian market share, leveraging [indiscernible] presence which is honestly stronger than ours. Ours is significant. But clearly, [indiscernible] one, if not the Norwegian defense champion over there, it's a smart move. And the last aspect of your question was about technology. The fact that you have observed several joint ventures created by other companies aiming at sharing or addressing technology. It's true that it's less in our case because as you said, by the way, I do think that although we are not perfect, but we are already a very, very wide and strong technology or technical portfolio. Where we do need some joint venture, it's more to address the market, more go-to-market, I would say, approach than sharing, gaming technologies or codeveloping things unless the customer asks us to do so, which is another aspect. But yes, we do not feel, I would say, a strong need to partner to get access to technology in different countries.

Pascal Bouchiat: Yes. So yes, so its performance in H1, I commented, which was pretty strong, and as you have seen, significantly above H1 2024. I mentioned that the profile of our stock was one of the explanations. And you need to understand that we are working pretty hard. I mean to optimize overall the level of stocks at Thales. So we believe that there is opportunity on this matter. And what you have seen in H1 is a first step of overall better management of stocks behind that hard work on things like a more effective sales and operation planning. But also, I mean, in the outcome of a progressive improvements overall on supply chain. By the way, it was -- it was quite interesting in this call that we didn't get any questions on supply chain. I mean, just a year ago, there were many questions on this matter. And this so that we see the situation more on supply chain. Improve though we are still not there yet and the listed some road blocks, but all situations is progressively improving on this matter, which also offer a lower offers opportunities probably to to optimize our overall level of stocks. And all of that, all in overall trajectory where we discuss about the need for us to investment in terms of capital expenditure, while preserving a pretty strong level of conversions ratio. So taking into account this global picture opportunity to optimize stock better supply chain situation, they need to keep ramping up overall our production capabilities. All of that is basically what we do to keep reassuring you on our ability to keep delivering a strong level of cash flow. Your second question was more about organic sales particular on Defense and adjusting, I guess, it was probably upwards our visions 6% to 7% that we mentioned at the Capital Markets Day in November. So to that, I would say, at least need to be this patient. By the way, it is very consistent to what we have said in the last 6 months. We said that all of that will take time. But though we explained that the first step was for the countries in which in which we sell those countries to explain how quickly that we'll be able to to raise their Defense spending. Hence the comment on the French defense spending. And yes, on the need, I mean, to have a statement from Mr. Macron to be translated into the -- all of that resulting in additional order intake that will drive more revenue and more EBIT. So let's take it step by step. You have seen that H1 was pretty strong. This led us to upgrade the overall guidance for the full year, in particular driven by defense. So all of that supporting a pretty positive view on the development of our defense business in the next few years.

Operator: Thank you. I will now pass back to the speakers for any closing remarks.

Patrice Caine: No. No closing remarks. Thank you very much for being with us this morning, and we will be pleased with Pascal to continue these discussions during our road show coming soon this week and early September. Thank you very much, and have a nice summer break for those who are taking vacations. Bye-bye.

Pascal Bouchiat: Thank you very much to you. Bye-bye.

Operator: Thank you. Ladies and gentlemen, if you didn't have a chance to ask your question on today's call, please do not hesitate to send your question to Thales Group Investor Relations at ir@thalesgroup.com. And we will get back to you as soon as possible. Thank you all for your participation. You may now disconnect.