Leonardo S.p.a. (LDO) Earnings Call Transcript & Summary

Good morning. My name is Marco Fani. I'm in charge of Leonardo's Naval and Underwater Defense Systems Business Development. First of all, thank you for joining this webinar focused on our new small-caliber defense systems that we have considered to take into account the needs of the customers in the Far East region. Before starting, let me introduce the context. We all know the tensions present in this region, for instance, China [indiscernible]. I'm referring, for example, to intrusions on islands claimed by both Philippines and Indonesia. Right this here, I remind to you 220 Chinese vessels were anchored for months at the reef inside the exclusive economic zone of Philippines. Generally speaking, taking into account that in this zone, there are thousand of marked and a marked Chinese vessel, the risk of an accident triggering an escalation is real. But we can also think to the geopolitical situation between India and China. So by dealing with end user in the Far East region, we have realized the need -- the specific need of defense systems suitable for any size of warship, not only large frigates, destroyers, but also very small ship. And this defense system should be capable of covering multiple roles such as patrolling of territorial seas and exclusive economic zones, protection of strategical sites, offshore oil and gas platforms, oil and gas pipelines, civil and military harbors, interdiction and force protection. In order to design, to conceive this small-caliber defense system, we have taken into account that the current operative scenarios are characterized by increasingly common threats such as go-fast boats, helicopters, unmanaged surface and aerial vehicles, midgets. In particular, midgets can penetrate inside the exclusive economic zone of the countries in solid mode. They can sit on the bottom by waiting for the proper moment to get into action by performing, for example, [indiscernible] of divers who could damage strategical sites or launching torpedoes. Besides neutralizing or aborting the missions of such threats, the design of our new defense systems was based on some common concept that are listed below. Design modularity, to allow easy customization and upgrading; easy installation disembarking, this feature is useful especially in case of dual-use ship; easy maintenance and deployment, no need of high-skilled operators; low-cycle cost; and the logistic communality inside, obviously, the same family of products. Last but not least, these defense systems inherit the technological excellence from well-known Leonardo's products such as the 76/62 Super Rapid; the 127/64 lightweight naval gas and our lightweight torpedoes, MU90, that we have designed in the frame of the EuroTorp Consortium; and our 82/44, entirely designed and manufactured by Leonardo. Let's start from the naval domain. Lionfish family includes 4 models of the small-caliber naval gun system that you can see on the left side of the slide: Ultralight, Inner Reloading, Top. This model are 12.7 millimeters caliber. They have been already sold. And then we have the 20-millimeter caliber that we are developing. We foresee to complete its qualification and validation phase next year. These models are suitable to be installed onboard small ships as primary armament, but also onboard larger ships as a secondary armament. They don't need deck penetration. Each model is fully stabilized in elevation and azimuth, thanks to powerful servo-systems in closed loop with the 2 independent gyros or with the 2 tachometers as backup. Each model is endowed with a coaxial electro-optical sensor suite constituted of a daylight camera for daytime missions and infrared camera for overnight missions and the laser range finder. Each turret can compute lead angles with respect to the estimated target future point, but it is also possible to accept a targeted designation from an external source or directly the lead angles. In this case, the turret is fully controlled by an external source. In the next slide, we can see the key features of each model. The Top model. The Top model stands out for the highest-performing electro-optical director, the largest ammunitions magazine, the lowest depression angle. As you know, lower is the depression angle, lower is the blind zone beside the hull of the surface ship. Obviously, it depends also on the position of the target onboard. This model is a stealth. It means that the shield is made up of a composite material. Also, the shape of the shield is -- was designed to reduce the radar cross-section, and the paint used was selected to minimize the radar cross-section of the turret. As a function of the operating environment, we can also provide a de-icing system as an option. Next model is called Inner Reloading model. With respect to the previous model, it is lighter. It is cheaper. It is suitable also for land applications. But the most significant feature of this model is the possibility to reload the magazine from below the deck. For such a purpose, please take a glance at the image on the right side of the slide. Supposing that the turret is firing, before the ammunitions box is completely empty, the firing is stopped, and a light starts blinking, a light of the local control console of the turret. At this stage, the reloading can be performed below the deck by linking a new ammunitions belt with that, that's still present into the gun. Anyway, if necessary, the last rounds can be fired. In this case, the operator has to carry out and override [ command ] by activating a proper switch of the local control console. In this case, the subsequent reloading shall be performed on the deck. The Ultralight model. With respect to the previous 2 models, it boasts the lightest weigh, the smallest deck interface. It is the cheapest model. It is suitable also for land applications. Now I -- we show you a short video that doesn't need comments. [Presentation]

In particular, I can add that in this case, the Ultralight turret has been installed onboard our unmanned surface vessel. [Presentation]

Okay. We can go on. So in this slide, the table sums up the main performances of the 12.7 millimeters caliber models. So as you can see, the Ultralight model stands out for its mass, less than 180 kilograms. The Top model stands out for the largest ready-to-fire rounds magazine, 400 rounds. Each model -- the maximum rate of fire of each model can vary between 485 to 635 rounds per minute. In fact, these 3 models are equipped with a machine gun derived by M2 Browning. It is a recoiled, actuated machine gun equipped with M9 linked rounds. The maximum F2 range is around 1,500 meters in case of NATO standard target whose dimensions are 2.3 meters per 2.3 meters. You can see the training range between minus 155 degrees to plus 155 degrees. Obviously, we can set mechanical and stops at the steps of 2.5 degrees. And via software, we can also set mechanical -- sorry, and stop via software in such a way, the turret can be stopped 1 degree before that the turret touches the mechanical and the stop. The elevation range. The elevation range of the Top model is very wide, between minus 30 degrees to plus 70 degrees. Please take a look of the dynamic performances of this turret in terms of training and elevation speed and acceleration, 60 degrees per second and 150 degrees per squared second. The deck interface diameter of the Ultralight model is just 310 millimeters. And in the last line of the table, you can see the performances of the daylight camera, the infrared camera and the laser range finder. In particular, regarding the day and infrared camera, the 3 numbers are relevant respectively to the detection, recognition and identification. We can provide the turret with 2 different infrared camera. In fact, the Top model is equipped with a cooled sensor in order to achieve better performances. As we all know, a cooled sensor provides a higher resolution and sensitivity. So we can go to the next slide. The last model is called the 20-millimeter model. It is characterized by the longer operative range, thanks to the larger caliber. It presents the higher rate of fire. The first 2 features lead to the larger payload delivery to the target over the time. It is stealth like the Top model. And there is the full commonality with the Top model. In fact, if you compare the 20 millimeters model with the Top model, you can see that the look is exactly the same, except for the machine gun. Basically, this is the unique difference. In this table, we have summed up the main performances of the 20 millimeters model. So in case of burst mode, the rate of fire can achieve 1,000 round per minute. Regarding the maximum effective range, as I said, thanks to the larger caliber, we can achieve a distance of 2 kilometers. You can see the other performances in the table. In particular, the elevation range is exactly the same as for the Top model, between minus 30 degrees up to 70 degrees. And also, the performances of the electro-optical director are the same of the Top model. In fact, in this case, the 20 millimeters model is endowed with an infrared -- a cooled infrared sensor. In general, I would like to underline that all the Lionfish turrets are characterized by a very high accuracy. Take into account that we can estimate the angular speed of the target with an error much less than 0.5 milliroentgens per second. So if we consider to use low-drag ammunitions whose flight time is much less than the fourth second, we -- relevant to the effective range of 2,000 meter, we can accumulate an error much less than 2 milliroentgens that in terms of linear error is much less than 4 meter after a distance of 2 kilometers. So each models can provide this performance that is very important, especially in case of the constant targets that could be confused with the background. In this slide, you can see the architecture onboard. The core, the brain of the system is so-called logic control and move unit. This unit is interfaced with the turret, in particular, with the servomechanism. It is interfaced with the combat management system by means of an Ethernet link. It computes the lead angle with respect to the estimated target future point. It hosts an identification card in which it is possible to store some installation data, for example, the firing zone; for example, the obstacle controlling zone. And this characteristic is very important, especially in case of dual-use ship when it is necessary to disembark the turret for maintenance purposes or for changing the configuration of the ship. In fact, as soon as the turret is installed onboard and the operator switches on the system, the system automatically retrieve the installation data from the identification card. So it is very easy, if necessary, to reinstall the turret on board, as I said, after a maintenance activity or in order to change the configuration of the ship. Then the logic control and move unit is connected, if necessary, to the power supply unit. In fact, the power supply unit is required if the shipboard power supply of the -- doesn't provide the 28 board DC line necessary for the servomechanism of the turret. In any case, the power supply unit is also useful because it contains a backup battery that permits to the turret to work up to 30 minutes even if the shipboard power supply line is in failure, for example. Then the logic control and move unit is connected to the local remote control console. This item is -- this console is innovative, is user-friendly, is equipped with a wide, high-resolution touch screen to reach -- as you have seen in the video, the operator can access, can control all the functionalities of the turret through the touch screen. On the bottom part of the monitor, there are just the selector in order to switch on the entire system -- switch on, switch off the entire system. We have the fire safety selector in order to enable, disable the firing. We have the motion safety selector in order to disable the movement of the turret. We have also the emergency button in order to disable both firing and slewing of the turret. And then we have also the night mode button that is used to activate the night vision of the turret. The last but not least is the selector, local remote that the operator can use in case the turret has to be fully controlled from the combat management system. Then as an option, we can provide the video recorder in order to record what the electro-optical director is pointing to. By the way, the same video is sent to the combat management system by means of the Ethernet link. We can also provide the scenario simulator that is a very usable equipment because it allows to simulate different kinds of area and the surface threats. So it can be used for practice, for training the person, but also to prepare a mission before performing an actual mission. Then we have the safety box that -- it is used when a maintenance activity has to be performed because through the safety box, it is possible to disable both firing and slewing of the turret. And we have the fire inhibitor switch that usually is located in the combat operations center of the ship. Now the next family of small-caliber naval gun system -- let me underline that we consider small caliber also the 30 millimeters and 40 millimeters with respect our 76 and 127 millimeter. So the next family is called Marlin. Marlin family includes 2 model, the 30-millimeter model and the 40-millimeter model. They don't need the deck penetration. Both of them are stealth. They provide a stabilized line of sight and line of fire with respect to the on-ship data. Each model is equipped with an automated dual-feeding system. It means that the operator can simultaneously manage 2 different kinds of rounds that can be selected depending on the type of the incoming threat. Each model, if requested, can provide the target detection tracking capabilities by its own electro-optical director. MARLIN 30. The key features of MARLIN 30 with respect to the 40 model are listed in this slide. It is lighter. It is characterized by more compact dimensions. It provides higher dynamic performances. In fact, it is lighter with respect to the MARLIN 40. It is characterized by the larger ready-to-fire magazine, and it is cheaper. There are 3 possible configurations. Starting from the left, we have the remotely controlled configuration. That is fully managed by the combat management system. In fact, in this case, the turret receives directly from an external source, an external fire control system, the stabilized firing coordinates. Then we have the coaxial electro-optical sensor suite. This configuration is similar to the Lionfish configurations. Last but not the least, we have the independent line of sight that provides better capabilities in terms of searching and detecting. So this configuration is recommended in case of stand-alone use, in case onboard the ship, there isn't a dedicated fire control system, electro-optical director characterized by the proper accuracy and precision. MARLIN 40, with respect to the MARLIN 30, stands out for the longer operative range, thanks to the larger caliber, the higher rate of fire. These 2 features lead to the larger payload delivery to the target over the time. It is compatible with all 40L70 rounds. As you know, 70 is the length of the barrel expressed in caliber. We can manage also rounds equipped with a programmable fuse. So it is possible the proximity mode, the air burst mode and so on, the gated mode and so on. As a consequence, the MARLIN 40 is suitable also for land bombardment according to the type of rounds selected. It is ITAR-free, and if requested, we can also provide a hoist in order to extend -- to enlarge the magazine of the turret. For MARLIN 40, we have 2 configurations. Starting from the left, we have the remotely controlled configuration, similar to the MARLIN 30; and the independent line of sight, similar to the MARLIN 30, the autonomous configuration of the MARLIN 30. In order to pass from one configuration to the other one, it is sufficient to have the local control console, the electro-optical director, and we have to upload the ballistic and target prediction software. If requested, as an option, we can also provide a muzzle velocity radar to measure the velocity of the round at the muzzle of the barrel in order to optimize the ballistic calculations. In this slide, you can see the architecture on board. This architecture is valid independently of the configuration of MARLIN 40. In this case, the brain, the core of the system is called the power and data interface unit. Let me underline just one thing. In this case, we can provide the off-mount control panel that permits to configurate -- to configure the turret. Through this equipment, it is possible to move slowly the turret both on horizontal and vertical plane to test the servomechanism. When the off-mount control panel is connected, the system doesn't accept any command from external sources for safety reasons. In any case, the system provides the status of the turret to the CMS. In this slide, we would like to underline that in case the remotely controlled configuration is chosen, it is possible, for example, interface the turret with our MEDUSA MK4/B. That is an electro-optical fire control system that can manage small- and medium-caliber guns. And it provides an additional line of sight. In fact, its laser range finder can achieve a distance of 40 kilometers. But the significant feature of this configuration is the frequency of the laser range finder because this frequency, in case of burst mode, can achieve a value of 10 [indiscernible], so a very high value. So this configuration allows the operator to track also high-maneuvering targets. By the way, the MARLIN 40 can be interfaced also with other external fire control system. This is just an example. This table sums up the main performances of the 2 models. In terms of the rate of fire, the MARLIN 30 can achieve 200 rounds per minute. MARLIN 30 is equipped with the 30 millimeters ATK MK44 machine gun that we -- that is supplied by Northrop Grumman. Instead, MARLIN 40 is equipped with our machine gun. In this case, it is achievable a maximum rate of fire of 300 rounds per minute. You can see also the maximum effective range, 3,500 meters against 4,500 meters. It depends on the launch of caliber. And please let me underline that in case of MARLIN 40, from the theoretical point of view, the turret can rotate without any constraint. In fact, it has been equipped with slipper ring. Regarding the electro-optical director, you can see the last lines of the table, the performances in this case are higher than the performances of the electro-optical director mounted on the Lionfish turrets. As you can see, for example, the daytime camera can achieve a distance of 20 kilometers as detection, 9 kilometers as a recognition and 4.5 kilometers as identification. Now we can pass to the underwater domain, the Black Scorpion mini-torpedo. The Black Scorpion mini-torpedo is so-called the mini because its length is just 1 meter. Its mass is around 20 kilograms. It was conceived to neutralize threats such as swimmer delivery vehicle, unmanned underwater vehicle, midgets. But in general, the Black Scorpion mini-torpedo is useful to force any underwater threat, also the anti-submarine to commit errors, thus accelerating its classification process. In fact, it's worth to underline that in case of a shallow water, the sonar of the surface vessel or the acoustic head of the torpedoes have to operate in very severe environment. So the confidence level of an acoustic contact is not so high, so good in this operative environment. So our concept of operation is the following. Before launching an expensive weapon like a heavy-weight torpedo, we prefer, for example, to launch from an anti-submarine warfare helicopter, 1, 2, 3 Black Scorpion if necessary because, for example, if there is a submarine sits on the bottom and the acoustic contact is related to a real target, probably the submarine will move. Probably the submarine will launch anti-submarine warfare countermeasure. So in this way, also the sonar of the surface vessel will be able to gain a higher confidence level of the acoustic alarms. And subsequently, it will be possible to deploy the proper weapon to neutralize the turret because, obviously, a mini-torpedo cannot neutralize a submarine, aerial submarine. By the way, can abort, it's an issue, and as I said, can help to classify -- to detect, to classify and track the real target. On this slide, you can see the architecture of the Black Scorpion. It looks like aerial torpedo. Starting from the left, we have the acoustic head that can operate both in passive and active model. Then we have the warhead that contains an insensitive main charge PBX. Then we have the fuse that can be activated after the impact, after a certain time is expired or when the thermal battery is exhausted. Then we have the magnetic preset through which the Black Scorpion can be preset like aerial torpedo according to, for example, the target data to the bottom depth and so on. We have the guidance and control electronics, the propulsion motor and 4 independent fins to maximize its controllability. It can achieve an operative range -- that range compliant with NATO standard, so 200 meters. And it is capable of achieving speed higher than 12 knots. It is impossible -- it is worth to note that the Black Scorpion can be launched from any kind of platforms. So for example, submarines. In this case, we use our [indiscernible] launching tube that we use also to launch our countermeasures. They are called B534. It can be launched from any kind of surface vessel, also smaller ship, like the ship depicted in the picture. In this case, the Black Scorpion has to be inserted into a pyrotechnical canister, and then this pyrotechnical canister is inserted inside a fixed and light launching tube. By the way, in case of larger ship, we can use also our [indiscernible] launchers from which we used to launch our anti-submarine warfare countermeasures. And then Black Scorpion can be launched also from aerial platforms, for instance, helicopters, drones, using size A sonobuoy dispenser. So the presentation is ended. Thank you for your attention. If you have any question, please let me know.

I can read the first question. "Can Lionfish turrets be managed from an external command and control?" Yes, it's possible. In fact, Lionfish turrets are compatible with the standard 48 to 17, which is, as we know, the reference standard for the communication with the drones. In particular, let me underline that it is very important to have the possibility to control the turret from an external command and control, especially for the special forces because, for example, special forces could be carried in the operative scenario through a USV equipped with our turret, with our Black Scorpion if it is required. So afterwards, the special forces get into action, for example, get onboard, hijack the commercial ship. This is just an example. The USV can stay nearby the hijacked ship in order to provide an additional line of fire and an additional line of sight until the completion of the mission. This is just an example. Next question. "Which are the main differences between HITROLE and Lionfish families?" Lionfish turrets, first of all, share the same architecture. And as I said, they inherit the state-of-the-art technology and experience from other best-selling Leonardo products. We have improved a lot the reliability, maintainability. We have also reduced the cost. We have improved the video tracker unit performances. In fact, now we can achieve a better accuracy and precision of the measurements relevant to the target data, also in case of coastal targets that are the targets more difficult to be detected due to the background noise. And in addition, Lionfish turrets are equipped with electro-optical directors entirely designed and manufactured by Leonardo. Next question. "Which are the improvements with respect to the previous model of Marlin?" The first improvement is relevant to the training park that has been increased, thanks to some integrations to the servosystems. In particular, as I said, MARLIN 40 has been provided with a slip ring. In addition, the new Marlin models are endowed with most performing -- more performing electro-optical directors. Next question. "Do the turrets need to air condition and air flow?" Only MARLIN 40. In this case, we recommend to provide to the amount air conditioned and air flow through a proper duct of 140 cubic meters per hour in order to avoid stressing the ammunition -- the ammunitions. Are there other questions? Okay. I go to read another question. "Has the Black Scorpion been already sold?" Yes, it has been already sold in the Middle East. I don't see other questions. So in this case, thank you very much for all the attendees. Please take into account that we are available to deepen whatever subject you decide to be informed by performing one-to-one meeting. So you have our contacts in case of need. Thank you very much for your attention.