Leonardo S.p.a. ($LDO)

Welcome, everybody. My name is Claudia Introvigne. I'm responsible for Investor Relations and Market Analysis here in Leonardo. Today, we are here to present our first quarter results for 2026. And I'm really pleased to have here with me our CEO, Roberto Cingolani; and our CFO, Giuseppe Aurilio. So now we can begin, and I will hand over to Roberto. Thank you.

Thank you, Claudia. Hello, everybody. This is our last meeting and will be the last day of my mandate. So I will leave Leonardo tomorrow. So at that occasion, which we will present the Q1 data, I would like to take a few minutes of your time to wrap up the last 3 years in view of the change of [indiscernible] management and to say goodbye to all of you. Let's start with Q1 and the numbers that you have seen already there on the table. In the first 3 months of 2026, a few months after having launched the Michelangelo Dome in October 2025 and the updated plan, we've got very good and encouraging results. The order backlog has been rising to EUR 57 billion, plus 23% versus 2025. The book-to-bill ratio is 2 and the new orders amount to EUR 9 billion, so plus 31% year-over-year. Revenues increased to EUR 4.5 billion, plus 6.9% year-over-year. EBITDA growing by 32%, up to EUR 281 million. The adjusted net result is EUR 184 million, plus 60% year-over-year. Free operating cash flow has been improved by 29%. It is still in the negative ground. It's minus EUR 411 million. The workforce [ concomitantly ] has been increased by 5,600 units, and we have reached now more than 65,000 people in Leonardo global. This data do not include the upside given by the acquisition of [ Iveco Defense ], which has been, however, estimated as remarkable. Giuseppe will tell you more later. I mean, frankly, guys, the numbers are very good and the upside of IDV is very promising. So we could have even proposed an upgrading in guidance. But because tomorrow, we will have the new CEO, I think for fairness, we'll leave this choice to the next top management. But as you see, the numbers are very promising, and I'm sure they will do a fantastic job. Anyway, Q1 2026 confirms that the plan is solid, credible and feasible. This is in line with the expected further growth, which is foreseen by the new plan. I remind you, by the year 2030, the challenge is EUR 32 billion [ order ], EUR 30 billion revenues, EUR 3.6 billion EBITDA, 12% return of sales, more than EUR 2 billion free operating cash flow. This is in 2030. So this follows the already positive 3 years trend that we registered during the mandate. I just want to remind you that in the last 3 years, we grew up by almost 20,000 people, reaching the 60,000 units. Importantly, 1/4 were women, 64% of the new people own a technical background and more than 1/2 were below 30 years old. The productivity per capita has been increasing. I mean, the pre-COVID to post-COVID comparison, those are data at the end of '25. We're increasing from EUR 290 kilo per headcount pre-COVID to EUR 320 kilo per headcount last year. The share value was growing from [ 10 to 64 ] maximum about 1 month ago, market cap from [ 4.6 billion to 34 billion ]. That was under control. The free operating cash flow exceeded [ 1 billion ] for the first time in 2025. It was a psychological target almost, but very meaningful. And the margins are moving towards double digit throughout the company, which was our main commitment since the very beginning, which were the guidelines of our operations over the mandate. The first one was what we define [ bullets and bites ]. So this intriguing and unexpected merge of hardware and software, digital technologies and defense platforms that we have learned abruptly after the Russian invasion of Ukraine. The second guideline was no one can make on its own so the need of alliances, especially at the European level to fight the to contrast the fragmentation of the European defense space, and also merger acquisition in big collaborations among industries. The third guideline was moving quickly from conventional defense to global security. Not only military defference, but also cybersecurity, space security, so space observation, infrastructure security, energy security is something that we have to work on in the future, and even food security one day, which were the enabling factors that brought us to get good results over the 3 years. First, cleaning the portfolio and withdrawing noncore business activities that were heavy [indiscernible] in the balance sheet. Launching a saving plan a very strategic and systematic saving plan, transversal to all the company, a strong effort in digitalization. Today, we have 1 terabyte per headcount memory and 0.5 teraflop computational power per headcount. Those numbers are world-class. That means AI-driven products and processes, improved manufacturing, digital services towards [ servitization ], of course, use of digital twin in all our hardware platforms, new services. Then the efficiency plan because the demand of defense was growing because of the tremendous geopolitical situation, more than 60 conflicts in the [ planet ]. So we are working actively. We have been working actively in improving efficiency in production. And then most important, that focuses on specific technological priorities, increasing digital capability, as I mentioned before, digital twin, AI, cloud, data analytics, high-performance computing. Develop hybrid warfare technologies, develop interoperability in the multi-domain, develop unmanaged system in all domains. Today, all our platforms, land, sea, air, have an unmanned counterpart of any managed platform. Last but not least, we've been working on building a brand and a digital identity of the company, which was perceived like an old paper-based company. I think this transformation helped a lot in having more confidence in our approach. The tool for all this was the industrial plan, an innovative rolling industrial plan, which started in '23, primarily with a disciplined capital allocation, dividends, debt, clear R&D strategy, organic and inorganic growth. The completion of the product portfolio covering all domains, both through investments in new products. Just to remind you, satellite constellation, high-performance computing, cybersecurity, or through M&A, land vehicles, drones, some new part of cybersecurity, et cetera. The international alliances and merger acquisition market the difference with the past. Land defense are the new impulse through the collaboration with the joint venture with Rheinmetall, collaboration with [ KNDS ], [ Iveco ] Defense acquisition, the recent one. [indiscernible] and the drone technology. By the way, I'm happy to tell you that in a few weeks, we will launch our first drones in [indiscernible], the new models. So this will be -- after a few months, the joint venture started will be an interesting inauguration. Even IVD, Iveco Defense opens up some interesting perspective towards land drones. Again, in the multi-domain concept where you have manned and unmanned systems that are interoperable, interconnected. The new aeronautic division, which is now doing very well with the new orders on the fighters, GCAP and the Eurofighter, the 346 and the Eurofighter. Also has incorporated the [ Aerostructure ], and we've been working a lot to create an international JV on Aerostructures, which is finally a titch. And finally, the cyber acceleration to enhance our AI capability and the new high-performance computing line of business that were created in 2025. In less than 3 years, all of this has generated the Michelangelo Dome project. A blend of electronic sensors and command and control at the center of the multi-domain together with AI and cybersecurity, satellite constellations for earth observation and early warning, manned and unmanned air, land and sea platforms in the digital continuum of the combat cloud. We became the only industrial company in the world that has all the hardware platforms and the AI digital capabilities to create the first [ OpenShield ] architecture for air defense that can accommodate any asset compatible with NATO and our defense doctors. At the same time, the diversification and orchestration of hardware and software technologies makes us increasingly flexible, accelerating Leonardo's transformation from a defense company to a global security company. After 3 years, will leave a free, clean and safe highway that must be traveled with great conviction regardless of who is called to lead the transformation. And I'm sure that my successor and the new top management will move in the continuity because they participated in most of this work done so far. All of this has been possible, thanks to the work of Leonardo employees. Everyone from the first to the last in each of the 126 countries where we operate actively with [indiscernible]. The strategy is built, capitalized and contracted. The plan is communicated. The job now is execution, not strategy anymore. Deviation from the plan could be detrimental for the company. About [ 1 billion ] year self-funded R&D in addition to the customer-funded [ 2 billion ] per year R&D is key to keep the pace of growth and to make Leonardo a world-class player. This is a good capital allocation story, applied to a novel technology story, this is called bullet and bite vision, both very timely in the current geopolitical scenario. Any short-term margin optimization through R&D cut would cause failure. The engineering capability in conjunction with the unique integration of software and digital technologies together with hardware platforms and the consequent enhanced [indiscernible] will increase margins, EBITDA, free operating cash flow and the overall competitiveness of Leonardo. I'm proud of the work done so far, and I'm sure there will be continuity by the next management. The last 3 years were fantastic. I believe there is plenty of room for further growth, and the acceleration ramp of the Q1 2026 is very encouraging. I want to thank all of you, dear investors and analysts, for your support, your constructive attitude and for sharing the dream of a world-class Leonardo. Now it's my time to go, but maybe we will meet again. Thank you, [indiscernible] for your support. Bye-bye.

Thank you, Roberto. And I know that today, I can talk for everyone in Leonardo in thanking you for your outstanding leadership and for the contribution to the group over the last years. So thank you, Roberto. So back to Q1. It was a very strong start of the year, as Roberto said. So outstanding performance in all of our KPIs, plus 30% -- around plus 30% in EBITA, free operating cash flow and order intake. Revenues up by 10% net of the exchange difference and improved profitability up to 6.3% from 5.1% in Q1 2025. So again, a strong start of the year. In the quarter, we completed also the acquisition of [ Iveco ] Defense with for a total consideration of [ EUR 1.6 billion ] is not in the numbers we were discussing earlier. It was consolidated for the balance sheet and for the backlog. But for all the other flows, so income statement and cash flow, it will be consolidated starting April 1, 2026. Third point, very important, progress in the credit ratings. We have improved our rating with Moody's from [ Ba3 to Ba2 ], maintaining also a positive outlook. So good prospects for the future. At the same time, Standard & Poor's confirmed the current rating, but improving the outlook to positive from stable. So this is a very important acknowledgment of the progress we have made from the financial standpoint. So Q1 results, Roberto has gone through them. Just a couple of points. Again, orders were up to [ EUR 9 billion ] in Q1 2026, so plus -- more than 30% plus than last year. Revenues were up by 7%. Again, it's 10%, excluding the negative impact of the translation, mainly of the U.S. dollars and the DRS components. EBITA has increased by more than 30% compared to Q1 2025. And free operating cash flow is negative as it is usual in our business, and it is expected, but much less compared to the past. So plus 30%. It is an important result of our effort to make the trend much more linear over the year, also negative in the first quarter. So let's focus now on orders. As I said, very important result, strong commercial momentum. Orders were up by 31% compared to Q1 2025 with a total backlog at [ EUR 57 billion ]. So it's more or less 2.5 years of production, including also the backlog coming from IDO, which is something close to [ EUR 6 billion ]. If we look at each sector, you see that the progress is spread over all the business. So we can say we are very much on track for getting our full year guidance. We see a very good commercial momentum in all the divisions. Of course, the value -- the total value of EUR 9 billion is only driven -- is also driven by a couple of big orders. I want to remind the NMH order in helicopters for AW149 for the U.K. Armed Forces, which was a very important order for us. It was an important milestone, so very important to get it already in the first quarter. And in the aeronautics, where you see a big peak compared to Q1 2025, we have to remind the big order from the Austrian Air Force for M346. So a couple of big orders driving up to [ EUR 9 billion ], but all the sectors improving. Defense Electronics has improved significantly compared to last year, 20% if we look at Electronics Europe. Whereas Leonardo DRS was negative compared to Q1 2025, but because of a couple of effects. The first one is, as I said, the negative exchange difference. And the second is the fact that in Q1 2025, DRS recognized a very important order on bus activities. So the trend of DRS is very positive. We will see when commenting revenues and EBITDA again. Helicopters, as said, the performance is outstanding, of course, driven by the order for [indiscernible]. But also Q1 2025 had benefited from some important orders from governments, mainly the AW249 from the Italian MOD. So it partially offset the increase relating to the recognition of the NMH order. Aeronautics, as said, we have the Austrian order for M346, but we have also a number of very good success. We have [ IFA ] order from Germany and Italy and also [ C27J ] contract for logistics support for the Italian Air Force. So very good results and very good results also from Aerostructure, we will see better when talking about revenues and EBITDA, but we see an increase of workloads, which is the key metrics for this division. [ Cyber & Space ], smaller division, but again, like last year, growth rate, very important, plus 30% for cyber, 18% for space. This has led us to a book-to-bill, which is at 2x. So very important at a total backlog of [ EUR 57 billion ]. Revenues. So let's talk about the execution of this contract, up by 10%, excluding the negative translation of dollars, with improvements across all the business and all the divisions. So very solid performance, again, very well on track versus our full year guidance. Let's focus on the different sectors, starting from Defense Electronics. We see Electronics Europe's -- Europe growing by 15% compared to last year. So very good improvement, additional scale. Leonardo DRS, you see a red number, but just because of the negative exchange difference. Otherwise, it will be a growth of 6%. So performing very well. Driven by [indiscernible] and Colombia Marine Plus programs. Helicopters. Helicopters, we are growing at a lower rate compared to the overall growth rate of the group, so around 3.8%. But you may remember that this growth is in line with our full year estimate where we estimated a growth of 3.5% for helicopters also due to the fact that over the last 2 years, we have been growing by more than 10% in each year. So very good performance. Very solid performance in aeronautics based on our core programs, so GCAP, EFA, M346 and C-27J. Aerostructure, I said, we see a big increase. Of course, this is mainly due to the increased rate of production on B787. You may remember that in Q1 2025, the rate of production was at around 4 deliveries per month. We started the year 2026 with 7. Now we are at 8. So the increasing rate of production is driving additional revenues and improving the results of Aerostructure. So Cybersecurity and space, again, as we have seen for orders, very -- they are growing a lot, cyber by around 20%, space by 14% on a mix of programs. Space is benefiting from the service components, so [indiscernible] business and satellite systems and operations mainly. So very good performance in terms of revenues, well on track to deliver our full year guidance. And now let's focus on EBITA, where we see an outstanding results, up 33% compared to Q1 2025. And as you can see, of course, this is partially due to the volume effect. So more revenues, of course, more EBITA, but a big increase is due to the improvement in profitability margins. So with the return on sales going up from 5.1% to 6.3%. And again, very important for me, it is an improvement which is spread across all the divisions. So it's a general improvement compared to last year. Let's look now at the breakdown by segment of EBITA. So starting from Defense Electronics, which was the biggest contributor to this increase. Plus 20% on a year-on-year basis compared to Q1 2025. If we look at the different components, you know that inside the EBITA of Electronics Defense, we have 4 building blocks. We have Electronics Europe, we have Leonardo DRS, and we have the contribution from MBDA and salt only at EBITDA level. So if we look at this breakdown, you can see that Electronics Europe has grown up by 25%. So outstanding results. [ ROS ] already in double digit starting Q1. That's a result that usually we get later in the year. This year in 2026, we are already double digit in Electronics Europe in Q1. So very important. DRS has improved by 15% despite it was affected by around [ EUR 10 million ] of negative exchange differences. So otherwise, the improvement would have been much higher. And again, they are running at around 10% return on sales. So they are closing the year at 9.8% with a big improvement compared to last year where they closed the quarter at 8.2%. Aircraft. Aircraft, again, very solid performance driven by the programs I was remembering earlier. So plus 12% in terms of EBITA compared to Q1 2025. Return on sales close to double digit already in Q1. So very good quarter also for aircraft. Aerostructure, as you can see, is negative, of course, minus 45%, but we see a partial recovery compared to last year, where we closed the quarter minus 56%. So it's plus 20%. And of course, this is mainly driven by the increase of rate of production on B787. I was mentioning earlier. So very important, this increase. It gives us much more workloads and so it reduces the losses during the year. Cyber, plus 36%. So again, this is an impact mainly of the additional scale of increasing scale of cyber because we are increasing revenues, but we are increasing cost -- fixed cost mainly and cost below the line much less compared to the increase of revenues. So plus 36%. Again, like last year, you may remember, we got an excellent result also on that. Space, plus 100%. Here, we have a strong performance of the service component, like in line with last year. Also the payload robotics business is performing very well, getting some important orders also on some [indiscernible] activities. But of course, there is also a big difference deriving from the partial recovery of the loss of [indiscernible]. So it is still negative as expected, but it has reduced the loss compared to Q1 2025. And this, of course, has led to an improvement of 100% compared to last year. So key message, ROS is improving across all the business. We are already double digit in electronics, close to double digit in Aeronautics. Overall, very good results, very strong results. And in line with our targets. We have been able to improve our free operating cash flow, which was -- it is a key target for us. It is a key target also to make the negative trend over the first 9 months much more linear over the year. So free operating cash flow in general was up 30%, thanks to the -- our operating performance, of course, but also to the actions we are doing on the working capital and on the effort that we are making to make this trend more linear. So both in terms of revenues, EBITDA and also free operating cash flow. So it is a strong increase. And if we look at cash flow used in operating activities, you can better appreciate the improvement because we have [ EUR 0.2 billion ] in 2026 compared to [ EUR 0.4 billion ], but this EUR 0.2 billion includes also the settlement of the [indiscernible] litigation for which we had a cash out of EUR 100 million in the first quarter. So otherwise, it would have been at around EUR 0.1 billion negative. So a good improvement compared to Q1 2025. And again, this is something we see across all the division. And back for a second to Aerostructure. We have seen the results in EBITA, which was in line with our estimates. Also the cash drag from Aerostructure was in line with our expectation. So overall, again, a very strong results also in terms of free operating cash flow. Free operating cash flow that contributes to the increase of our net debt, which is increasing up to EUR 3 billion as expected, so perfectly in line with our expectation. Starting from [ ]1, of course, we had EUR 0.4 billion of free operating -- negative free operating cash flow plus EUR 1.6 billion related to the closing of the acquisition of Iveco. So EUR 3 billion group net debt, excluding the lease liabilities and the loans from joint venture, our net debt is around [ EUR 0.7 billion ]. So very strong balance sheet in our view, very disciplined approach to our capital allocation. We continue to see the progress, and we continue to see the results. And these results have been well accepted also by our credit ratings. As said, Moody's has improved our rating to [ Ba2 ] with a positive outlook, and we have also a positive outlook from Standard & Poor's. So we will see in the future our possible potential additional improvements. And therefore, if we look now for a second at the full year where -- what we see for the full year. We can confirm our guidance. I mean the Q1 gives us strong confidence in confirming our guidance for the full year, with new orders at EUR 25 billion, revenues at EUR 21 billion, EBITA at EUR 2.03 billion with a free operating cash flow of EUR 1.1 billion despite the settlement of the [indiscernible] litigation I was mentioning earlier. So we confirm our guidance. As I said, we completed the acquisition of [ Iveco ] Defense vehicle in the second half of March. So we are now also in a position to communicate preliminary add-ons to group results coming from the consolidation of Iveco Defense. We will consolidate, as I said, profit and loss order and free operating cash flow starting from April 1, 2026. And you can see what we expect from [ IDV ] for these 9 months. So new orders at around EUR 1.2 billion, revenue EUR 1.1 billion, EBITA at EUR 0.12 billion and free operating cash flow at EUR 0.22 billion. So to conclude, very strong results, very good start of the year, very well on track to deliver our full year guidance and achieve our group results.

Thank you, Roberto and Giuseppe. Let's open the Q&A session. So the first question is coming from Sam Beres from Goldman Sachs.

Firstly, Roberto, I know I'll speak for many when I say, I think you've done an excellent job at Leonardo, and I'm sure many will be sad to see you move on, but wishing you all the very best for whatever is next. With that said, my first question is that the Italian government has said Gulf countries have made urgent requests for air defense and anti-drone systems. Can you just help us understand if Leonardo and MBDA are seeing this translating into orders at this stage? And what might the prioritization there look like relative to other customers? And secondly, I just want to look at -- talk about BMD Plus. Should we think about this as the sort of first major funded step in the broader Italian missile defense architecture? And in terms of the margin, as this comes through, should we expect it to be broadly in line with the electronics margin even in the early phases of delivery?

Okay. In order to give you a rather quantitative answer, I think we should wait and see what happens in the next, say, weeks or just a few months. On one hand, with respect to what Europe is doing and what is the relationship between the 3.1% versus 3% deficit ratio that apparently the country as far as we know, the 3% threshold has been missed by just a few decimal points. So it's unclear what happens there. Now to be very correct towards Leonardo, we should never forget that we export 80% of our products, okay? So in principle, we could say we are a world company, and therefore, most of the market comes from export. And we could certainly say that we are most independent of the domestic fluctuation. However, as you know, it's very important when you sell defense platforms abroad that you show that your defense system has tested them already in-house. So it's a sort of credit card that you get when you sell your products. So this could be the only interplay that I see in case there will be a small reduction of investment in defense by the government. Having said this, I just would like to point out one thing. Our capital allocation has been done in a very safe and controlled way. For instance, for the Michelangelo Dome and what we call the air defense [ Shield ], most of the R&D is already included in our in our capital allocation. There's not so much new to develop. But electronics command and control, and this is part of the organic growth of the company, thanks to our safe allocation. I'm still very positive towards the success of this initiative. I mean, of course, time matters a lot. As you've seen after we announced [indiscernible], for instance, many other countries -- many other companies announced the kind of rebranding their existing products, or moving on the external market. Our Michelangelo design team that goes around in different countries to customize the specific architecture to be developed is supposed to be very busy. So I think we should not -- they should not miss not one day starting from tomorrow because here, we are in a rush actually. And the geopolitical situation imposes a pace a rhythm that is not the usual one. But I'm very optimistic. I would be very optimistic.

Okay. The second question is coming from Alessandro Pozzi from Mediobanca.

I will go one by one, if it's okay with you. First one for Roberto. In your opening remarks, you mentioned continuity with the [indiscernible] management. And I guess you had the handover. And I was wondering if you can share what advice you've given to the next management, if any? And what do you think are the key challenges for Leonardo in its next phase of transformation?

I mean, we are in a rather fortunate situation that the new President has been 3 years member of the Board. So he participated very actively to the entire decision process. He knows step by step, how do we came to this point. And that makes a big difference compared to a President that is [indiscernible] from the outside into the company. And I'm sure this helps a lot in terms of continuity and knowledge of the structure. The CEO, as you know, was in the company for many, many years. We were working together for almost 2 years. So he knows very well people and structure. So I believe continuity should not be a problem. The problem eventually is the competition abroad and the time to market. I mean, the usual, the daily challenges that Leonardo has to face in such a complex geopolitical situation. Having said this, of course, there will be some rearrangement. At the moment, the team is moving, the team that was working. And therefore, they have to recreate the team very soon to not lose 1 day of operational capability. Fortunately, there are very relatively young people that were operating with us in these 3 years, ready to jump and to work on all the different programs. So I believe there is no really big problem. One thing that, maybe, should be addressed, this is something I discussed with my colleagues. As you know, because of my background, I was operating like the kind of a Chief Technology Officer, not only as CEO because of my background. So if a profile like mine goes out, maybe they have to reinforce the technology -- the Chief Technology Officer position that the moment is back end because I was playing that role basically so far. But I think this is -- okay, this is solvable. We have to go in the market and see either internally or externally, whether there are good candidates that can kind of coordinate the multi-mission idea underlying the industrial plan. But it's something -- I mean, in the end of the day, it's a good difficulty finding good people shouldn't be a problem.

My second question is on the guidance. I believe you mentioned that you can even raise guidance at this point given the progress you've made. I was wondering, is there any KPI in particular or things are going way better compared to the initial expectations across order intake, EBITDA and free cash flow? And whether maybe there is any areas of particular strength, I guess, Defense Electronics may be one of them?

I'll leave the answer, of course, to Giuseppe because it will continue, and this will be his responsibility. But let me say one thing with the zero responsibility that I have because I'm leaving. Last time, we were discussing whether we have to be prudent or we have to be, kind of, challenging. And we decided not to increase the guidance when the improvement of the KPI is below some few percent. I would say this time it's really very good in almost all KPIs. So with the braveness that I can have because I'm leaving, I would have increased conversely the guidance. But of course, we need to be more -- they need to be more prudent. First of all, this is a responsibility that the new CEO has to share and he has to agree on that and he has to make his analysis. And then, of course, we will -- I think they will discuss this with the CFO, and they will make their choices. But the numbers are all quite above the expectations. So in the end of the day, I think we could be optimistic. And I stop saying anything.

No, no. The numbers are very, very good. Of course, it was a strong quarter. Of course, we need to factor a couple of things. The first one is that first quarter is the weakest contributor to the full year. So although it is very good, most of the activity has to be done over the last 3 quarters. So it's a good -- very good start, but it's a minor part of our path towards the full year guidance. We have also a number of plus and minus we need to access mainly due to the geopolitical context. So of course, for a prudent view also in the light of the exchange Roberto was mentioning, I think overall, starting from where we are now, it is still a balanced situation versus the guidance. Of course, if you look at the orders, we are already at EUR 9 billion. So it is a particularly good performance. But again, keep in mind that orders are not linear. So we knew that first quarter would have been the best quarter maybe at the beginning of the year, but we have to do lots of things to get the guidance. So we are optimistic. We look at the guidance in an optimistic way that will be a task for the new Board of Directors, but keeping in mind all this.

Just a follow-up on this. I've seen the margin effect is fairly large, about [ EUR 59 million ], much larger than the volume effect. Can you say perhaps what is the main driver of that? And that's the last one.

Yes. I think -- and you see it very well when you look at the split by sector, I think increasing scale without increasing fixed cost is helping us a lot. So we're improving marginality because we're increasing the scale. But also, of course, we are continuing on our saving plan. And of course, we are not increasing fixed cost in a way which is comparable to the increase of revenue. So increasing from scales, benefiting from the saving plan we set a couple of years ago and global contribution overall is improving everywhere. So very solid program performance, which is at the end, the main driver. I think we are performing very well on programs. And so this is a clear outcome of the actions we have been doing over the last years.

Okay. And the next question comes from Ross Law from Morgan Stanley.

I'll start by reiterating [ Simon's ] earlier thoughts, wishing you all the very best for the future, Roberto. The first question is on Iveco, and thanks for the 2026 contribution guidance. I know you don't want to give new group medium-term guidance, but maybe you can provide a bit more color on what you think Iveco could contribute medium term? Should we use Iveco's 2024 CMD outlook as a guide? Or is it better given developments since 2024? And then secondly, just on order intake, specifically with the [ Turkey Typhoon ] contract, it doesn't look like this was included in Q1. Some of your peers have recorded it. So can I just get an update on when you expect to record this?

Okay. On [indiscernible], you see the contribution for 2026. We are still working on the entire plan. And of course, it will be, again, a task to be done together with the new Board of Directors to understand how to implement the entire plan of Iveco Defense vehicles and above all, fully leverage on the synergies we can produce putting together Leonardo and [indiscernible]. So it is something we will update during the year based on the progress of this analysis. But you can see already that we expect a good profitability overall 11% return on sales on the 9 months 2026, and this is something we expect also over the plan. So we think the acquisition of [ IDB ] will be accretive stand-alone, but also including the synergies we can generate over the plan. So we will update on the entire plan, but we see a very positive situation. Regarding Turkey, it is not on Q1 orders, of course. You know that there is a time to flow down the orders from the prime to the [indiscernible] So we are working on that, but it is -- I confirm it is not on Q1 orders.

So the next one is coming from Sash Tusa of Agency Partners.

I've just got two questions. One, can you confirm that the IDV backlog has gone into Defense Electronics and Security? And if that's the case, is that where you expect IDV to remain? Or will you eventually report it as a stand-alone business? Because clearly, it's broadly similar size to 2 of your smaller divisions? And then the second question on your broader ambitions in air defense and particularly Michelangelo Dome. What are the terms under which you can get access to the [indiscernible] missile system and in particular, the effectors given that, that is a joint venture comprised of [ MBDA ] and your rival Thales in the [indiscernible]. Can you get access to [indiscernible] on the same conditions that Thales does? Or do they have a structural advantage because of the [indiscernible] [ teaming ]?

Okay. On IDV, yes, I confirm it is inside the backlog of Electronic Defense. For the future, I mean, I think that will be one of the items to be analyzed by the new Board of Directors. Of course, it has to do with the organizational issues. And so analysis. It's an analysis that, of course, we will do. But at the moment, it is included in the electronic defense. And clearly, the portion, which is -- which has more synergy with IDV is inside -- is currently inside Electronic defense.

Can I -- I mean even though it would not be my business, but you have to consider historically that [indiscernible], so the remaining part of land defense developed by Leonardo is inside the Electronic division. Now we might argue for the future, that was something we were discussing, by the way. We might argue that Iveco Defense plus [indiscernible] is getting so big that possibly in itself could be a sort of land division. But we have to see the industrial synergy. They have to see a number of industrial parameters. It has to be convenient eventually to carve out from the division creating a new division. But clearly, the critical mass of land defense now is much bigger than 1 year ago where the -- where [indiscernible] only could not be enough for a division. It was just a sort of line of business. Though this will not be my business, but I believe it's important to show that how much bigger it became the entire land defense landscape in Leonardo. About the [indiscernible] and the effectors, let me tell you something. I mean, obviously, we expect to have some preferential access to [indiscernible] because we participate into the MBDA and so on and so forth. However, the important point is that Michelangelo is effector agnostic. So as been conceived not to be specifically dedicated to one effector. Of course, we like to have sort of homemade effectors, or at least participated effectors. But we have already started discussions with other producers outside Europe, or not only in Europe to see whether other [indiscernible] can be used in their defense field. This is because [indiscernible] is the only effector-agnostic system that you can think of.

Next question is coming from [indiscernible] from Bank of America.

I think you made some comments on the Aerostructures discussions. Could you just give us a bit more color where are you on that? Is there any time line or probability that you can give around that deal coming to fruition? Then secondly, could you give us an update on where we are in the joint venture with Rheinmetall on the land side? And when can we see orders on that? And then finally, just an update on the Global Combat program. There were some articles about the U.K. struggling in the short term with some funding. I was just wondering if has that impacted the development time line at all, if there's any update there.

Okay. I'll start telling you something. Giuseppe, you go.

Aerostructure, I mean, as we said in March that there is an important outstanding issue with a potential partner that you may remember, we cannot name. It was related to the funding of the local activities, which need to be done to implement -- to fully implement the business plan and the JV. I think they are still working internally on that. They are discussing between an essential part of this plan is the funding agreement and the funding they need to get from their country. So it's a work they are done from their side. We are not part of this discussion. As we said, we set a window -- a summer window to have a go, no-go decision. So they are saying that their analysis will be consistent with the summer deadline, but we will see when they have the results of this analysis. Of course, we can imagine also that it may be somehow affected by the situation in some of the countries of the world.

Which was the next one? GCAP? About GCAP, yes, we heard about -- we read on the news actually about the momentary difficulty in the U.K. for funding the program. But I believe this is a 10 years program. So it will be -- we should not make, I would say, fast decision based on a momentary difficulty. All the partners are working. And last but not least, this is the only one sixth-generation fighter program left in the world. So I think it will be a big mistake to abandon because one of the partners has a momentary difficulty. This can happen to any partner any time. But I believe that the rationale for continuing insisting, trying harder on the GCAP is by far more important than the momentary difficulty. There was...

Yes, very important to add that we got the first order [ Edgewing ], the first international contract at the end of March. So it's GBP 0.8 billion, so coming from the international portion. So funded by all the 3 countries. So it was a very important milestone to progress on the activities which are being made by [ Edgewing ].

Yes. In the end of the day, it's more likely to have a slight delay in the program rather than a stop also because stopping would be a big mistake in that all the others have already stopped. So I think we should make an effort. There was a third question or?

Yes, on the Leonardo Rheinmetall venture.

Yes.

The agenda of Leonardo Rheinmetall?

Joint venture.

Yes, yes. Well, I mean, this is operating -- so far, it's operating on time. The infantry vehicles have been delivered on time. There is a second lot coming. And the -- most of the work done on the big tanks is still dealing with the integration. Basically, integration means the payload produced by Leonardo for the [indiscernible] should be integrated in the chassis of the tanker and the teams are working. They are still working on the integration. So right now, we don't see specific issues. But of course, we are monitoring continuously.

The next question comes from Martino De Ambroggi from Equita.

First of all, it was a pleasure to work with you, Roberto, and all the best. Number one on IDV. Because the free cash flow that you are providing for the 9 months is quite sizable compared to the size of the company. So I just wonder if it's something exceptional this year or there is -- it is a business probably not recurring? Because I knew this business inside [indiscernible] was not clear, obviously, the stand-alone free cash flow, but seems quite important. And still on IDV, could you quantify what is the portion of the business that you are proposing in figures today, which is part of the potential acquisition of from Rheinmetall?

Yes. Relating to the first question, of course, when we say that cash flow is seasonal in defense, it's true for everyone. So of course, excluding the first quarter from the numbers leads you to a very good 9 months results. But just because you are excluding the first quarter, which was heavily negative in Iveco, like in every company in aerospace and defense. So this is not fully an indicator of the full year free operating cash flow of IDV because that will be also affected by the negative results in the first month. So you see only the more positive part of the year, of course.

Okay. Could I ask you what would be the pro forma full year?

Let's say that we don't give guidance on each component of the free operating cash flow, but the first quarter was heavily negative. So if you look at the 2025 results under Iveco control, so it was not our responsibility. It was in the range of [ EUR 160 million to EUR 150 million ].

Okay. And the portion of the business?

The portion of the business in the 9 months on revenues, we see that the balance between trucks and armored and multi-roll vehicles is not stable because, of course, the reversal of backlog in trucks is much faster than in armored vehicles. So if we look at those 9 months, the ratio is around 600 -- of course, if you look at the margins, we get back probably to the split we gave in the past of 70%, 30%.

Okay. And last on the Aerostructure. What is the cash burn embedded in your full year guidance very roughly compared to the [ EUR 200 million ] absorbed last year?

Well, we assume that it will be negative again. The EBIT was around minus EUR 80 million in the year, plus some investments. So it's more than EUR 100 million of cash drag in the year.

Okay. Very last on the GCAP that you commented before. Maybe new entry is a possible way to go ahead quicker?

From an industry perspective, new countries could open new markets in the future. Of course, it is more a political discussion rather than a discussion between...

Governmental decision. I mean from our side, since the very beginning, we were open to any expansion of the consortium as long as there was a clear technical contribution, not only financial, but this is ultimately a political decision. We expressed more than one occasion, but we would agree in widening the team, but it's just a technical position

The next question comes from Sebastian Growe from BNP Paribas.

It's only one really that's remaining around the [ DES ] segment. Apparently the segment started the year much stronger than expected, especially from a margin perspective. I was just wondering what drove really this material margin improvement, both in the European business that was up about 100 bps and then also DRS at almost up 200 basis points. So the two questions related to this are simply, can you provide any color around how we should think about the mix component in the quarter? And how would you assess on the quality in the order book and how it might differ from what we have seen in the first quarter?

Yes. I think it's a mix of positive items. I said that the first one is the program performance that it was very good. So this is the main driver, together, of course, with the increasing of scales because as I said, we are increasing revenues, but not increasing the fixed cost and the cost below the margin in a way which is comparable to the increase of revenue. So we are benefiting from the additional scale we are able to get. And from this point of view, the commercial momentum is key because we see that there are prospects, there are opportunities, and it is a good -- very good sign for the future development of electronic defense. In the comparison, you may also remember when looking at DRS that last year, it was somehow affected by some issues relating to some specific programs and some cost impact on rare materials. So in the difference, you see also the impact of that. But overall, DRS as well is performing very well. You may have seen that they are slightly revising their guidance for the full year, very small number. We are talking about between $5 million and $10 million of additional EBITDA. So very small improvement. But of course, this is a clear sign of how positive they see the rest of the year.

Next question is coming from [ David Perry ] from JPMorgan.

Roberto, I don't want to embarrass you further, but congrats on a good job. You're the ninth Leonardo CEO in the time I've covered the stock, you were definitely the best. So I've got two questions. Giuseppe, I'm sorry, you may have answered this. I couldn't follow all of an earlier answer. Have you said or given a rough guide on which part of [indiscernible] you are going to sell? Because we're adding some numbers to this year, but are we going to take a chunk of that back out next year. So I just wanted some clarity on that. And then, Roberto, if I can ask you an unfair question. What -- as you leave, what do you think is the biggest opportunity for Leonardo to improve its performance? Because you've made a lot of progress, but I still think the company is some way behind some of its peers in some of its financial metrics. So curious what advice you might have for your successor?

Yes. So relating to [indiscernible] consolidation, the numbers you have seen we presented for the full year include also the track portion, which is the one which may be potentially under discussion for a future disposal, but it's just one of the options. So I will say that we will sell. I would say that it is one of the option. Of course, you know that there was a discussion -- there is a discussion with Rheinmetall in place. But the outcome, we will see -- we will evaluate the best option and we will see at the end of this process. So for the time being, we are consolidating 100% of the IDV perimeter, including the truck business, and we will see the outcome of this discussion and potential negotiation also together with the assessment of synergies that Roberto was saying. So of course, we will do the best thing from a value perspective, and we will decide.

David, thank you. Yes, first of all, for your words and the second for the question. I believe that, number one, Leonardo must learn to believe in itself. It's a problem mindset. For that, you -- to change the culture of the company, of course, we need a bit of time, a bit more time. But at the moment, we do have one of the most complete portfolios in the world and for sure, the most complete in terms of nature, services, digital softwares, hardwares and platforms. Now if we understand that this is a plus, and it is a competitive gap compared to the others, we have to make our best effort to take advantage of this unique capability. So changing the mindset, believing in ourselves. Second, Leonardo should start behaving like a truly multinational company, not a domestic company. This is also a change of mindset, but I believe we should have the courage to say, okay, we produce the best product. We invest in R&D and we risk -- this is the company risk. We invest in R&D. We don't stop making innovation. If the products are better than the others, we prevail in the market. I would have a third longer-term vision. I mean we are getting a lesson whenever there is a war, whenever there's a conflict, whenever there's a problem, we end up on energy. I mean this is crazy. Look at the almost Gulf -- the almost shrinkage crisis, price of gas and price of petrol goes up. Look at Ukraine, gas price was up and then electricity is up. So the national security of the entire world is at risk. So if we -- if [indiscernible] will be a real global security company, I think should have the duty to develop advanced technology for modular nuclear reactors for generators -- for generation. You might say, but this is too long. This is a lot of investment. Yes, you are right, but somebody has to do it. Otherwise, we will never be really independent. And I think it's crazy. It's a suicide policy, the one that as you see, after a conflict, we go back and say, okay, from where do we buy gas, from where do we buy petrol. I mean I believe this is going to be the biggest threat to the global security, especially in the Western countries. So I believe Leonardo would have all the capability, all the technology, the industrial capability to launch maybe a new co participated by Leonardo with other investors to do something serious in the field. It's very difficult. If this were easy, somebody else would have done it already. But I believe many companies in the gravity field of defense are thinking in this direction. So mindset, R&D, taking advantage of the unique software, hardware capability and [ servitization ] of the products. And then for the mid- to long term, maybe energy security becoming the most important energy platform for the future. That's all.

We have a last question from Afonso Osorio from Barclays.

I just wanted to reiterate what all my peers have said, wishing you all the best for what comes next into your career. I have a few questions, if I can, last ones. The first one is very quick on the cash payment for the [ NH90 ] settlement. I see this is included in the cash flow this quarter. Just wanted to confirm if that's the full payment or if there's more to come later on this year? And then the second question on Aerostructures. Again, I appreciate you just mentioned that the summer deadline is broadly unchanged here, but just wondering if you can comment on the size of this new venture. I believe you have said before that this would be a much bigger and larger venture. So it would be interesting for me to know the size of the new partnership you're forming here.

On [indiscernible], it was not a full payment, but most of the outcome of the litigation has been paid. So I think we missed something like EUR 10 million or EUR 15 million still to pay in Q2, but most of it was paid in Q1.

You want me to answer about the -- okay. The latest information we have, as we mentioned before, our partners is now negotiating internally ministerial incentives for the creation of the new international joint venture, okay? So we don't touch the ball there. We are looking forward what will happen. However, we were told that the window of the law for the ministerial incentives will be closed end of June, beginning of July. So inherently, they have to make a decision giving us a response because otherwise, they will shut the door -- shut the window and there will be no more incentive law in that country. With this in mind, it's very important to know that the stand-alone plan of Leonardo has been done, approved by the parties, and it's very good, very convenient. We, in turn, approved their stand-alone part of the plan. So industrially, everything has been agreed. Even financially, everything has been agreed. So we could start tomorrow. The point is that the counterpart said we need to have an incentive from the minister because otherwise, there will be no ministerial presence in their team, let's say. So I believe this is more sort of internal political organization. And the deadline that they confirmed a few days ago still stands at the end of June, beginning of July. We know that the situation in the Gulf is difficult, but I don't think it's going to change the deadline of their incentive law. So we look forward to seeing what happens, but this is the situation at the moment.

And if I can quickly follow up on -- we were talking about time lines for the deal with Rheinmetall with the effect of defense. Is there a new message you want to send across by June still? Or can that slip into the second half?

Well, I mean, we stay on the deadline, and I believe we are focused on the end of this first semester. We didn't get any counter signal about that. So we have no reason to expect a shift. I mean that will be really negative also for us. Now give us 1 week to fix the change of top management, but I'm sure that our people will fly again there and press the institution to see what happens. This has been done until a few weeks ago. So we are really riding the horse at the moment. I don't think anybody wants to delay. Sorry, sorry, because -- maybe I didn't get -- the question was on Rheinmetall. So I gave you an answer about -- the question was on... we lost the line?

Yes, we lost the line. So thank you all. We are now closing our Q&A session. Thank you to Roberto, and thank you to Giuseppe. And the IR team is anyway open to any follow-up. Thank you. Have a nice evening. Bye.