Avio Aktie

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Avio First Quarter 2026 Highlights Presentation. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Nevio Quattrin, Head of Investor Relations. Please go ahead, sir.

Good evening, good evening, everyone, and welcome to Q1 2026 Results Conference Call of Avio. I'm here with Mr. Giulio Ranzo, newly confirmed [indiscernible] Chief Executive Officer of Avio; and Mr. Roberto Carassai, Chief Financial Officer of the company. In a moment, we will go through the presentation we just released on our website, which outlines the main highlights and financial results of the quarter. And in the end, we will, as usual, welcome your questions. Thank you for your attention, and I hand the conversation over to Giulio.

Thank you, Nevio. Thank you all for joining the first quarter results, the additional call we have. As Nevio was commenting, I was reappointed, so I'm not a newly appointed CEO. Secondhand, probably, nonetheless. Off we go.

So another quarter. So overall, this first quarter is in line with expectations, continues to show growth on what we do and numbers in line with expectations. We're ready to go with VV29, the 29th mission of Vega. The SMILE satellite is on the path and is expected to launch on May 19. We had a little bit of a delay over the last few weeks, but we're on track to fly on May 19.

We recently had two important successes of Ariane 6. The first flight for Amazon. You may recall those of you who have followed the stock for a while that this was an important target for Ariane 6, which we achieved together by improving the performance of Ariane 6 to suit the needs of the Amazon customer. So we were very happy on the last flight, we performed the first mission of Ariane 6 with four of our boosters. So a very, very important milestone achieved.

It's also important to highlight to you that we are approaching notable milestones on our liquid propulsion technology projects, which we often refer to, but don't talk much about. We are now accelerating a little bit towards the first [Ariane] milestone. So we want to update you a little bit on that as well.

On the U.S. project, we are progressing as expected. We recently secured the land purchased in Virginia and started to order the plant equipment, which are more -- with more lead time. So we ordered that in advance.

As on the financial side, the revenues continue to grow at a 20% pace versus last year, which is not irrelevant, if I may comment because this is the fourth year in a row that we continue to deliver on the top line growth of 20%, which I can guarantee to you that is anything but simple.

Then based on these aspects here, we obviously confirm the 2026 guidance, which is communicated a few weeks ago. As I said before, Nevio commented, we have a new Board of Directors, five out of nine have been changed in the directors. So myself and the Chairman remain to grant management continuity, but we have also some new relevant additions that have broadened a little bit the perimeter of the competencies we have around the Board of Directors.

So now moving on to Page 5. As I said, the new -- the next Vega C mission is about to be launched on May 19. It's an important flight for the European Space Agency, the SMILE spacecraft. It's a scientific mission to measure something particularly complex with solar wind. The mission will be the first operated by Avio as a launch operator. What does that mean that we will essentially replace the former role held by Ariane Space for many years since the beginning of the Vega launcher. And so Avio will be overall responsible for the whole launch service, which was, as you know, a target we had for a long time. So everything is ready to go. We should see that next Tuesday night, I believe, between Tuesday and Wednesday in Europe.

I told you about the first flight of Amazon Leo. I remember very well when we pursued the customers a few years ago, we promised Amazon to deliver a capable launcher to suit their needs in a peculiar configuration. Now we performed the first flights -- the first couple of flights for them. Now later in July, I believe we will perform the first flight of Ariane 64 with the P160 with the larger [indiscernible] booster that will deliver more performance and therefore, more ability to carry more payloads, more and more satellites in just one flight, which I think is particularly relevant for Amazon because they have, let's say, scattered their flights across a number of different launches.

Ariane 6 covers a portion of their launching needs, but we are delivering as expected, and I believe the customer is very happy about that. So therefore, this is very important for us as we -- every flight deliver the propulsion systems, which are very relevant, as you know, since they grant something like 90% of the [thrust of each launch].

The schedule this year for flights looks pretty busy. There might be as many as eight Ariane 6 flights and three Vega C flights. The schedule for Vega C in 2026 has been made complex by scheduling of the satellites that wasn't ideal because what we envision is that we might have five flights in '27, maybe it would have been better to do four rather than three or five. Nonetheless, the schedule of the flight was set to this tentative schedule for the time being. We continue to have robust backlog on both Ariane 6 and Vega C for the foreseeable future. So we have covered all the way to 2030, give or take. So I think there's quite some visibility over future flights.

Now it's all around execution and making sure we deliver on the promise of raising the flight rate. And next year, for sure, for Vega C will be extremely relevant for Ariane 6 -- already will be relevant this year and for us too in delivering the models.

As we said before, a new Board of Directors with lots of new additions. In particular, we have two U.S. directors, Steven Wood and Heidi Shyu. Particular I want to mention the name of Heidi Shyu. She was a former Secretary of Defense. So very experienced in defense technologies, very important for us to have this addition. And Steven Wood is a financial investor himself, so with quite some experience on the U.S. market. And considering what we have in our plan, I think these are important.

So the combination of these new competencies with us with some that we already had. And therefore, we believe that the usual setup with more than 50% of the directors as independent directors will continue to work. Of course, as I said before, Chairman and CEO remain the same.

As I was saying before, quite some advancements on the liquid oxygen methane technology demonstrator. We are currently integrating to perform the first two tests. This is essentially a prototype of an entirely new next-generation launcher with using liquid oxygen methane propulsion, which is, in a way, a novelty in Europe. It's also a novelty in the U.S., but more so in Europe. So this is just an experimental vehicle. It's not meant for the time being to carry any particular payload, but to improve our technology, hopefully to a completely different degree of efficiency. So this experimental vehicle will perform a number of ground tests and then next year is supposed to perform a flight test to measure essentially the performance of these new propulsion technologies. But not only that, also a completely new avionics system and some other systems that we work not only on the ascent phase, but also on the descent phase in the attempt to control the descent phase.

So essentially making the first steps towards reU.S.A.bility that, as you know, we have embarked on as a development path also with a separate contract to develop reU.S.A.bility -- get that done.

Now to perform these tests, we have put together a --an infrastructure that will allow us to perform both ground tests and flight tests. It's interesting because it's a removable infrastructure. It's very small, but complex and we can mount and dismount this in different locations. So it's quite some new experience for us and a completely new technology, but hopefully, something that will represent the forefront of our knowledge, adding a lot of intellectual property to our assets.

In parallel, we are also reaching a very good level of confidence on our MPGE orbital engine, which is an hydrogen peroxide upper stage, storable engine. This is very important and will continue to be very important for orbital maneuvers. So may in the future be the engine for the upper stage of Vega C and for the propulsion system for in-orbit service modules derived from the legacy upper stage.

So we have never endeavored on developing technologies of this kind. We are very happy now that I wouldn't say we are yet mastering the technology, but we are reaching a good level of understanding of what type of technology that I can guarantee to you is absolutely forefront and way more efficient than any other currently used and also more environmentally friendly.

So we're quite happy to have performed a number of very relevant tests successfully. More tests will be done on an upgraded version of the engine itself, but the whole infrastructure for testing that we have put together has left our team with a lot of new knowledge.

In parallel, in the U.S. We have signed new orders in the course of the first quarter with the U.S. Army in particular. And then we have agreed with the Commonwealth of Virginia, with the state of Virginia, a whole package of incentives to establish our plant for a maximum amount of up to $97 million in a mixed form of tax incentives and some other types of small grants.

On this basis, we have then secured the purchase of 1,200 acres of land in the southern part of Virginia in the Pennsylvania country in the so-called Southern Virginia Multimodal Park, which is an area that is devoted to industrial activities. So in parallel to purchasing the land, we have also started to hire some people and to issue the first orders for the process equipment. So for the plant equipment, the mixers, the idle blades, the pyrometers, all of the relevant pieces of machinery that require a long time to procure.

So that's in a nutshell what happened in the first quarter. I wouldn't spend too much more time on that. I would leave it to Roberto Carassai, our CFO, to walk you through the details of our first quarter financials, and then we will get together again to comment on the outlook.

Okay. Thank you, Giulio. Good evening, everyone. It's a real pleasure to walk you through our financial performance for the first quarter, which marks the solid start for the year.

Moving to the backlog slide. It's worth highlighting that the backlog is still very robust, exceeding EUR 2.1 billion, in line with the last December. This is due to the fact that we have booked EUR 80 million orders in the first quarter, largely thanks to this contract that we have signed with the U.S. Army and for the development, the qualification and initial production of solid rocket motors defense application. Thanks to this order intake, we have achieved on the Defense business segment, the 31% of the total backlog amounting to EUR 650 million. It is increasing also the stake of production inside our backlog the 70% versus 30% related to the technical development.

If we move to the next slide, we focus a bit on the revenue performance. As Giulio was saying, we have again achieved an increase of -- a double-digit increase compared to last year, almost 20% more than last year, achieving EUR 128 million. As you can appreciate, this increase has been driven by all the three segments. So the -- Launch system, the Space propulsion and the Defense. In particular, in the launch system, we have increased the production activity in line with the Vega C flight manifest while on the space propulsion, we are increasing the booster production for Ariane 6. And then the Defense increase is mostly due by the increased production [indiscernible] that we manufacture.

And moving to the next slide, we focus a bit on the profit and loss. And here, it is important to highlight that this growth on the net revenues driven the growth of the EBITDA adjusted reported that achieved 5.2% with a significant increase of 1.2% compared to last year. And this result has been possible despite the ramp-up of the U.S.A. cost in line with the expectation that has -- have achieved EUR 1.5.

In terms of net financial position, we still have a fairly high positive net financial position amounting EUR 560 million, slightly declining from the amount that we used to have in last December. This is as a result of the partial initial slowdown of the advanced payments that we massively collected in the last quarter of 2025 to our suppliers.

Moving to the next slide. We can focus a bit on the quarterly evolution of both EBITDA and net financial performance -- net financial position. In terms of EBITDA performance for the year, we expect to follow the same path of the previous year. And in terms of seasonality, you know that this company's potential bit of business seasonality and the largest bulk of the EBITDA is generated in the second half of the year, in particular in Q4.

In terms of net financial position, we expect this net financial position to partially decline across the year in order to cover the CapEx spending for the U.S.A. project and for the further slowdown to the supplier of the advanced payments we collected last year.

Moving to the last slide. Yes, based on Q1 results, the company confirmed the full year guidance, the [clear guide]. Thank you. Thank you very much. I leave the floor to you again for Q&A.

So for those of you who are new to following Avio's results, the first quarter is typically soft. It's not particularly indicative of the year, in particular in terms of the profit because as you can very well see from the distribution of the profit across the quarters, typically, the -- most of the profit gets accumulated on the fourth quarter. So the first three quarters are typically soft.

So we did well according to expectation, maybe even a little bit more than expectation. So we are on track. I wouldn't take from that the indication that we'll have 20% more at the end of the year. We don't know. But what is indicative instead, and I want to make a clear statement of that, is that crunching revenues at a 20% increase for the first year in a row is not simple. And in my mind, it is telling of the ability to convert all of this market demand growth into backlog first, which reached a record high at the end of last year and into net revenues spend.

So this is requiring a lot of effort, hiring people, mobilizing suppliers, moving a lot of working capital. So, so far, so good. This is moving in the right direction. We will continue to do so, and we'll have more data points maybe by the first half.

So thank you very much for following our presentation. We're open to any questions.

[Operator Instructions] The first question comes from Martino De Ambroggi with Equita.

Three general questions. The first one is on the CapEx plan. So everything is progressing in line with your plan so far, but is it conceivable any acceleration considering the environment for the Defense propulsion? And on CapEx, if you could quantify and remember us the expectation for the full year and what was spent in Q1?

The second is on MBDA because the CEO stated that this year, production, there is a 40% production increase. Is there any update on what is the possible news flow in terms of -- I don't know if it's feasible or not in this call, but any update on the order flow would be appreciated. And very last, another general question because if we look around what happened in the past few months, it seems that demand for Defense propulsion is only growing more than what you expected at the beginning, okay?

The path is long, so you need to build up the plant. But am I right in assuming that the final demand is, I don't know, significantly or in any case, higher than what you assumed when you launched the rights issue?

[Audio Gap]

Purchase of land in U.S. was finalized on the first few days of April. So it actually went outside the first quarter, but we expensed a few millions there. And therefore, there is a little bit less in the first quarter than we had anticipated just because of timing. And acceleration of CapEx, I don't know. We are progressing as we expect. On one side, we look at the CapEx. On the other side, we look at the progress of firm orders on the U.S. land side. Therefore, we try to keep these two things in balance. So not to overcommit on CapEx too early. But at the same time, we need to be able to deliver against customer requests. So that's why we have started to purchase the land order, the equipment and so on.

The amount for the year you asked for, we have planned something around EUR 90 million overall, out of which 2/3 related to-- Today in backlog more orders than we had anticipated just six months ago or a year ago. Every now and then, more orders are coming, in particular on the ASTER-30 side from Europe, maybe less so on CAMM-ER, which is a bit more long term, but the volumes on ASTER are expected to grow.

The process by which we get the orders, as I commented to you many times, is very patchy, so very difficult to predict because it comes from different countries within Europe. We are a supplier, so we don't have visibility over what the final customers decide. We may have some on the Italian customer, but the Italian customer is comparatively small within Europe. But there is no doubt to answer your question that there is an expectation for more orders from MBDA exceeding our earlier expectations.

In the U.S., if I compare the view of when we presented the plan in September, lots of things changed. When we presented our plan in September, the war in Iran was non-existing. Therefore, we have to take necessarily into account a substantial consumption of the missile stockpile was actually done in the course of the last few months. And this inevitably will further grow demand for the future beyond our expectation.

The difficulty we have is to getting precisely analytical on how much this will be and when because it's not yet completely factored in. The process is long because it goes in the U.S. from the Congress realizing that they have to invest more in procurement of weapons then the different services Army, Navy, Air Force, to define exactly what they need and then the primes to receive orders from the end customers and then we, as suppliers, receive orders from the primes, taking into account that we will be a second source of production. We will not be the main source of production. Therefore, we are going step-by-step along this complex path.

But to answer your question, there is no doubt that there is expectation for volume upside with respect to what we envisioned in September and I believe a significant one. Then we will try to be more precise as time goes by.

The next question comes from Gabriele Gambarova with Intesa Sanpaolo.

Back in March, you said that there were some clients let's say, with whom you were holding talks because there was the idea that they could, let's say, exploit the existing capacity in Italy in order to source solid rocket motors even before the opening of the new U.S. facility. I was wondering if you have any-- let's say, any update on this front? And second question is on the guidance for revenues.

If I factor in the plus 19% you recorded in the first quarter, it comes out that in the next three quarters, revenues should stay flat or grow by 6%. So any comment, any color on this would be helpful. And last, sorry, but I totally missed the level of CapEx Martino asked for in Q1 because the line is very bad, I'm sorry.

So first of all, on the story of leveraging Italian capacity, what you are saying is right. In the course of the first quarter 2026, we received a second order for a second product from the U.S. Army for the development of a second product for the U.S. Army to be manufactured in Italy, not in the U.S. And we will also receive requests for raising at some point in the future, the production rates of the two products that they have requested us to develop and all of which will be manufactured in Italy.

So that is definitely something interesting because it allows us to start to work for U.S. customers from Italy while the plant is being constructed essentially. Then the U.S. Army has also asked if in the future, they could leverage both the Italian and the U.S. facility for their needs. And of course, we have made ourselves available for that. So on this basis, I cannot exclude that also other customers other than the U.S. Army may want to do the same. So start using European capacity and then as soon as the U.S. capacity is available, use that as well, okay?

And this is allow me to say a little bit our advantage. The fact that we can use both the European capacity and future U.S. capacity is an advantage maybe versus other players such as, for example, new start-ups and so on. And therefore, we will try to leverage this advantage.

The guidance -- on the guidance. The guidance for the time being, we keep the one we have. We do not have sufficiently precise information other than the sharing of expectations for upside, which are still generic in nature. We have sufficiently precise information for us to raise the guidance for '26. Therefore, we are cautiously keeping it at this. But as I already commented a month ago, it is clear that the scenario calls for a significant upside with respect to what we had foreseen six or seven months ago.

Now when this upside is expected to materialize precisely and how much it's expected to material precisely. This is a bit difficult to forecast since the conflict are still ongoing. We have the Iran war still unresolved. And so it's a bit difficult for us to predict in any more precise fashion.

CapEx in Q1, we have incurred EUR 4 million overall because as Giulio said, the U.S. project was envisaging the land purchase in March, but then at the end, we signed the contract in April. So it was just a little postponement.

If I can make a follow-on on the second contract you got in the first quarter, exploiting the Italian capacity. Do you have in mind a time for the start of production even directionally?

I don't have it on top of my mind, but if you think about the fact that with the first products to the U.S. Army, we already are in production. We started in summer 2024. If everything goes well, we should be able to deliver the first item for production within 18 months -- 24 months max which is a very fast development cycle. So the approach used by U.S. Army is extremely fast, simplified development process is to make sure that they reach production as quickly as possible.

The next question comes from Andrea Bonfa with Banca Akros.

Most of my questions have been answered. I got a curiosity. When is the new P160 engine being, let's say, utilized in a launch? Because it seems that -- there is no official deadline for that. If you can comment on that.

So normally, it should be this summer on Ariane 6. So the way we designed P160 is that it's set to fly on Ariane 64 first and later in time, we will introduce it in Vega C, okay? So it should be this summer on Ariane 64.

Okay. So the line is full. So if I understood correctly, this summer might be used in the Ariane 64. Is that correct?

Yes, yes. We have already manufactured something like 25, 26. So we have that in stock.

The next question comes from Chloe Lemarie with Jefferies.

The first one would actually be on MBDA, which announced recently plans to increase production by 40% in 2026. I was wondering if you were seeing orders from them amounting to roughly that level of growth on the Aster and the CAMM-ER programs. The second one, and I'm aware it may be difficult for you to comment, but have you had any recent discussion with Leonardo following the change in management on what they intend to do with the remaining stake in the company?

And last one, on the Q1 margin expansion for the non-Italian -- for the non-U.S. side of the business. Could you maybe share what were the key drivers between growth in defense? And I suspect some volume tailwind in the launcher business, please?

So regarding MBDA, we definitely are raising the volumes of deliveries for MBDA this year, maybe more so on ASTER-30 than on CAMM-ER, yes. And we will do the same next year as well. So we are on a path to essentially doubling the volumes for them in a matter of a few years. So we are just along this path, and we are committed to them to continue growing production rates, not only this year, but also next year and the following year and so on.

So Leonard -- Leonardo, yes, of course, we have met. I know the CEO very well. We have met. We know each other. He has just started. Of course, he's not new to the company. He knows the company extremely well. I don't know what the strategies will be regarding his share and so on. I think he also needs to have sufficient time to make up his mind as to what he wants to do with the strategy of the company, but he's obviously well aware of the situation. Keep in mind that he was formerly the Chief Commercial Officer of MBDA. So he knows one part of the business he knows extremely well, and we will see. Then we have new directors from Leonardo who have joined the Board, and we have started with the first quarter Board today. So we'll see if the discussion will be ongoing.

By the way, on the sale of the shares, I mean, this is not a transaction that takes place with the company. It's mainly within Leonardo and someone else, not with the company. So I may not necessarily be involved.

Regarding the margin expansion, we don't report margins on the single business lines because, as you know, some of these business lines relate to one or two customers. So we don't want to disclose customer-specific margins for commercial sensitivity. The margin expansion for production activity is a direct function of volumes. So as we grow in volumes, we expect to improve the margins while on development activity, margin is not necessarily linked to the volume of activity.

Therefore, we believe that given the mix we have in the business, which is partly production, partly development, it will take some time to see this full margin expansion, but we are on the right path to do it. And as a matter of fact, you already saw some improvements, modest improvements, I have to say, I have to admit, but some improvements on the margin, and we will continue on that path as we committed to in our plans.

The next question comes from Alex Ciarnelli with Sal Muoio & Co.

Great quarter. Most of my questions have been answered. Just last one. I think in the past, you said part of your strategy is to look at vertical integration. Any color on that? Anything you're doing in? So just something there. Thanks.

Yes. So vertical integration will be yet another step to be taken care of once we have more certainty around the long-term orders. We also explained in our previous calls that we link more investment into the vertical integration also -- as a function of the orders we get, but also as a function of the type of government support that we might have. The government in the U.S. is calling for the urgent need to further consolidate the supply chain at all levels between Tier 1, Tier 2, Tier 3 suppliers, and we are more than happy to do so. But if this were to be the case, then we need significant more funding, okay?

Now as you know, we had already anticipated for the possibility of having to raise additional capital. And if we will see the opportunity to invest them with a return, we will. But we would also like to have together with more equity perhaps more government funding to support vertical integration. As a matter of fact, the U.S. government has put some money available to support vertical integration within the supply chain because they understand very well that the primes and even the Tier 1 suppliers like us, we can commit to triple or quadruple the volumes. Why not? We tell you that we will do it. But if there is one supplier who is critical and is not moving, then we all stay with low volumes.

Therefore, it is clear that this topic will be particularly relevant for the future, but we also have to have the proper funding to do it because-- [Audio Gap]

The next question is a follow-up from Gabriele Gambarova with Intesa Sanpaolo.

Yes, just a couple of question more from my side. I was wondering if you can tell me on space and launchers, if you saw any movement in pricing even directionally, of course. And then the last one is on the EUR 90 billion loan that the Europe approved to support Ukraine. I know you are not a Tier 1, you're not MBDA, but your view on this in terms of effectors, in terms of interception missile, do you think that this could help export of sales of Aster missiles further?

So let me start from the story of the space launchers. What I've seen in the last few months is that everywhere I go, they come to me and they ask for more flight rate, right? So in particular, with the European Space Agency, my question to them was, hey, why didn't you invest more at the last ministerial conference to increase the flight rates? Whereas at the last ministerial conference, a lot of money was invested to attempt to develop so many different rockets around Europe and so on.

I think the system in Europe is realizing that developing an entirely new rocket is a lengthy process. And we never solved the problems of the near-term demand. So I think European member states are realizing that they need to invest more in what they have, which is mainly Ariane and Vega, end of the story to secure flight rates to fulfill their demand.

Then entertaining development projects to create new rockets is an interesting effort. We have reported to you the advancements of our latest technology. It's all very good, but it doesn't solve the problem of getting stuff to space tomorrow. So what I anticipate and I hope European states will do, they will hopefully converge again into funding more capacity expansion for Ariane and Vega to raise their annual flight rates because this is the only way to respond to undoubtedly an increase in demand within Europe.

Then on the story of the 90 billion for defense, I was called in a meeting by the European Commissioner for Space and Defense, along with all the industries for missile manufacturing across Europe, essentially to say, okay, we have this EUR 90 billion, how do we spend them, right? But we are still at the point -- where you get together in the room. There is all the industry in the world, the institutions, but we still need to decide where to invest the money and on which products.

And the problem is that all across Europe, as you know, there are different types of products being used by different countries. Some countries procure products from the U.S., some have their own products, some have other products. So it's a very complex situation. So I think Europe lacks a central procurement policy versus weaponry that in these cases, we unfortunately delay decision-making on increasing volumes on one platform or the other because there is the money on the table, there is everything, but everyone has a different requirement, has a different product.

Moreover, I believe that this EUR 90 billion will likely become [best] for many of the countries. So I don't know how each country will deal with that. So all I can tell you is that it is clear what you say is right. It resonates with what I heard, but it's still in the making.

The next question is a follow-up from Martino De Ambroggi with Equita.

Focusing on the energy costs, which is mentioned as a potential risk, although maybe it's only temporary. But I was wondering, number one, what was the impact in Q1, which is mentioned as a limited impact? If your best estimate today is still for EUR 2 million, EUR 2.5 million for the full year? And if you already started -- as a third question, if you already started negotiations to revise the price because of the energy cost increase?

So the energy price is anything but stable at the moment. It's difficult to forecast what the situation will be for the rest of the year. We have focused our attention to decrease the electricity and steam consumption to the list, okay? And in fact, we achieved one very important result. We pretty much have the same consumption in megawatt hour we had last year, but we manufacture something like 19% more.

So in terms of the efficiency in delivering output with the same amount of energy, we did a great job. And if - and then, of course, the price of natural gas, which we procure for generating steam and so on has unfortunately increased by in March, maybe by 30%, okay? However, on the first quarter, you don't see much of an impact because it was only in March.

Now if this price continues to stay till the end of the year, we might have an impact of about EUR 1 million or EUR 2 million between now and the year-end. But God knows what happens between now and year-end. It may go down again to reasonable levels. We just don't know.

And what's happening in the tradable moves is at the very core of this issue. So I don't know whether the gas price goes up to $100 or what? I have no idea at the moment. We have attempted to see whether we could buy any options to firm the price of gas. But at this point in time, immediately after this crisis, it's impossible to buy an affordable option to do that. We would do that, but the option would be so expensive that it would offset the benefit.

And the idea to negotiate or renegotiate with your main customers, is it possible or it's very difficult?

Difficult, Martino, because this is hopefully a near-term effect. Hopefully, it's not a new normal. So they will tell you, okay, but we are facing the same situation, let's see what happens in six months, let's discuss it. Of course, if this trend were to endure for too many months, you are right we shall go back and discuss and negotiate, but we cannot try to renegotiate a contract every time there is a spike in energy price.

As I told you, we're doing a great job at limiting consumption, which I'm very proud of because that comes as no need for external discussions with customers. And it's, by the way, always our duty to try and limit consumption anyway.

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

Thank you. Thank you, everyone.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices. Thank you.

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Avio Full Year 2025 Results Presentation. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Nevio Quattrin, Head of Investor Relations. Please go ahead, sir.

Good afternoon, everyone, and welcome to 2025 results conference call of Avio. I'm here with Mr. Giulio Ranzo, CEO of Avio; and Mr. Roberto Carassai, Chief Financial Officer of the company. In a moment, we will go through the presentation we just released on our website. And at the end, as usual, we will welcome your questions. Thank you for your attention, and I hand the conversation over to Giulio.

Thank you, Nevio. Good afternoon, and thank you for joining the fiscal year 2025 results. In the interest of time, I would go to the agenda. So we will go quickly over the highlights, and then we'll have some overview of the financial results with our CFO and then go back to the -- to describe the outlook for 2026.

So 2025 was a very important year for the company. We recorded the highest economic and financial performance ever. I remind everyone that we had recently upgraded our guidance for backlog and revenues. We have exceeded EUR 2 billion worth of backlog, never happened in the company, and also revenues over EUR 540 million, never happened before. And net income, EBITDA, net income above guidance and EBITDA well within the guidance on the upper part. So I would say, overall, an extremely positive 2025.

On the operational front, the activity -- the flight activity of Vega was very successful. We completed our last flight in December for Vega C. And with that, we achieved 4 missions within 12 months, which was a target we had for ourselves, and we're very glad we reached that. We also demonstrated acceleration on the Ariane 6 program, which for us is extremely important, as you know, as we deliver many motors to them and growing. And the success of '25 was quite relevant also more recently with the introduction of Ariane 6.4, the 4-booster version, which is even more relevant for us in terms of the delivery of the motors. And that paved the way for further growth in 2026, in particular, for the launches for Amazon Leo that is currently underway.

Towards the end of the year, as you know, we also achieved a good result of the European Space Agency Ministerial Council with over EUR 600 million worth of subscriptions for contracts to be awarded to Avio that will unfold in the course of 2026 and partly 2027, meaning that they will materialize in form of net order backlog within this time frame. Most importantly, in 2025, we achieved over EUR 250 million worth of order intake in the defense propulsion. So we had anticipated and we were expecting growth in the defense business. I think this big accumulation of backlog was a testimony of the right strategy being pursued over the course of 2025. Now the defense propulsion backlog stands at over EUR 600 million. It's never been that high, represents almost 1/3 of our backlog, has never represented 1/3 of our backlog. So a very relevant testimony to the transformation of the company.

As you also know, we achieved a successful capital increase towards the end of the year for EUR 400 million, which is extremely important. If you think about it now, we are in a completely new scenario in 2026 with an active massive conflict in Iran with equity markets that are extremely volatile. I'm quite frankly, very glad we achieved this process before the end of the year. And now we have cash in hand ready to be invested in our projects, which seem to be at the very core of where demand is going to be in the future.

Now we also, of course, prepared a dividend proposal for the shareholder meeting of 2026 in line with our payout. I think there's been quite a lot of shareholder return on the stock. Nonetheless, we proposed the shareholder meeting to also vote for a dividend in line with our traditional payout ratio.

Now one important goal, we will come back to that on the guidance of 2026. As we had anticipated in our long-term plan, we do see continued growth in 2026. But I have to anticipate to you that there may be potential upside with respect to that. Now the question is we are in the middle of an active, massive unprecedented conflict in Iran with a huge consumption of missiles and everywhere in Europe and in the U.S., there is a concrete expectation for far more demand than we had anticipated, probably 2x or 3x more.

Yes, this conflict only started 12 days ago. So we need to wait for the dust to settle before we can correctly plan for the future and guide you through, if possible, updated targets. So far, we have projected a guidance that we feel comfortable with, also remind that converting ideas and expectations and forecast into firm order backlog on the contract is something that takes time. But everywhere we go in our business, we see far more demand than we had anticipated, this we wanted to report to you. Now as soon as we will have more concrete information is needed, we will come back to you and update if needed, any information on the future.

So on the following page, reviewing a little bit the numbers in detail, we put here a summary of what we did in 2023, '24 and '25. Why did we do that? Because it's important how fast the backlog grew over the last 3 years quite consistently from EUR 1.3 billion to almost EUR 2.2 billion. This represents an annual compound annual growth rate of 26%, which, as you can see, is consistent across the backlog, the revenues, the EBITDA and so on.

Now why is that relevant in my mind? Because the backlog demonstrates that the commercial capability we have in the markets we address is actually effective. So we are getting orders as we expect. Converting that into revenues is a completely different story. It tells you that we are capable of converting our commercial capabilities into our industries and turning that into deliveries, maybe not yet in profits, but definitely in deliveries. Now when it comes to profit, you see that also the profit has been growing at a 25% compound annual growth rate.

Now starting from 2026, we will report the split between the EBITDA we generate, so to speak, in Europe and the costs that we have incurred in the U.S. for the setup of the U.S. operations. Why that? Because as we reported to you in our plan, we have a growing EBITDA in Europe. We have a growing set of costs in the U.S. before we are fully functional with our new plant. The result of these two things in our plan would likely be a flattish EBITDA over the next 2 to 3 years. But we have a growing EBITDA in Europe and a set of costs in the U.S. and no revenues for the moment, right? Things may change in the future and for the better, but that's pretty much what we have had so far.

Let me also highlight to you that the numbers in terms of backlog and revenues were far more than the guidance we had given to you back then in March last year, which we had upgraded early in January this year. So we went far beyond that expectation. Last and not least, also the net income surprised positively a little bit above what we had put in guidance. We put the guidance between EUR 7 million and EUR 10 million. We are at EUR 11.6 million, not a huge value, still a healthy situation.

Another last important point is on the NFP. So the cash position stands right now at EUR 592 million. We will see that with Roberto later, A good chunk of that, of course, comes from the capital increase. But as you may appreciate, there is more than EUR 200 million worth of cash coming from the business, which is a huge amount of money, okay? And once again, that is a testimony of how well we can do commercially by drawing advances on the new contracts, okay, which is important and it's a terribly important situation to plan for the business for the future, make sure that we flow down our activities to suppliers and that we execute. Otherwise, converting those orders into future revenues becomes impossible. If you do have the cash, you have many more levers to play for revenue conversion.

Next, let's review a little bit what happened in the course of the last few months. As we said, a very successful flight on Vega C mission VV28 with the Korean satellite. I think that this Korean customer is a very important success. It's an export customer. We had the pleasure to win and make happy. We launched a very heavy relevant satellite for earth observation of the Korean Peninsula. We will do more this year, we'll launch a second Korean satellite. And as you know, we've been successful again in the Far East with Taiwan sending another launch. So that's consolidated a little bit our ability not only to deliver in Europe, but also in the export markets.

On Ariane, I said it before, I am very proud of how Ariane Group ramped up on IM-6. They did a very good job at ramping up Ariane 6.2 with certain missions for Copernicus and for Galileo. But more recently, also for Amazon Leo with the Ariane 6.4 version. So what we have designed together with Ariane Group as a European industrial set up to deliver two complementary load services between Ariane 6 and Vega C is now shaping up, and you can see that almost at full stream. Not yet, but almost at full steam. You see how rapidly we are upgrading our load frequencies.

More contracts for the future achieved just in the last few weeks. A very important one towards the end of the year, the new contract signed with Ariane to deliver boosters for the next so many launches, probably 100 boosters or so. So a very massive contract. It's important you appreciate that these type of deliveries for Ariane Group for IM-6, we get in batches, right? So you get an order every now and so often that lasts 2 to 3 years, then you get another 1 and so on. So we're not going to get, unfortunately, an order for 200 million every year, but this covers pretty much the next 3 years, and we're very proud of it.

Probably, it would be less than 3 years because they are likely to consume boosters far more rapidly than we had anticipated. As I said before, I was very happy also with the new launches sold for Vega C. Very happy to have signed with Airbus for Pleiades Neo, next version. We had launched Pleiades Neo before. Now we have Pleiades Neo Next. For us, Airbus is a very relevant customer. I would say, also for their commercial applications, not only for institutional projects. So we are very, very happy to have this customer and very happy to have recently signed a new contract.

One other important aspect many of you had asked, we are working effectively to increase the launch rate at the launch site. But to do that, we need more infrastructure. So at some point during this year, we were transferred the so-called integration facility for the launcher, the so-called BIL. It's a building that was formerly used for IM-5, where we will be able to integrate the Vega rocket, while another one is being launched on the pad, which is fundamental for us to make sure we can reach a stable flight cadence of 6 per year without any issues of logistics and other complexities, okay? So the building was transferred recently. We are working heavily now on repurposing this site, but this will help in the next few years to grow the cadence without doing any particular other efforts.

The P160 booster for Ariane 6 and Vega C will debut very soon on Ariane 6.4, it is a larger version of P160. As you may recall, this was developed recently as a stretched version of P120. On this, we will accelerate deliveries. This year, we will manufacture as many as 22 as compared to 14, which we manufactured last year. So we are ramping up production and filling up the factories here as per the plan. So very proud about this motor, which ends up being the world's largest monolithic carbon fiber solid rocket motor.

Also progress on Vega E. Complex project, as you know, to upgrade at some point Vega C with cryogenic upper stage with liquid oxygen methane. We are continuing to carry out subsystem-level testing for all of the liquid propulsion management system. We have tested a number of subsystems.

You may recall in previous years, we have developed the engine itself, MR10, now we are preparing all other surrounding subsystems to make sure that at some point, we will be able to field the upgraded Vega C to Vega E with a cryogenic upper stage. So good progress on that as well.

Space Rider, another project, we often times talk about our lunch and reentry spaceship. Small spaceship that will orbit around Earth stay there for a few months and come back on ground and then potentially be reused. As you can see, we are building up effectively the first flight items together with Thales Alenia. We work on the power module and the solar panels and all of that while Thales Alenia works on the aircraft itself. We provide, in addition to that, all of the propulsion systems and the guidance and navigation system. So we are prepping for a flight sometime between '28, '29. And it's a very sophisticated product, may open up new opportunities for business that doesn't yet exist, but it's a very forefront application that we are very happy to be now at a very advanced stage of development.

More innovation for the European Space Agency and the Italian Space Agency is being done with our liquid oxygen engine flight demonstrator on the left of the page. We will -- we are preparing for flight, our first flight item, which would fly sometime in 2027. We will begin testing this year on ground and then fly next year. It is a small prototype of a launcher, using liquid oxygen methane technology. Very complex projects, I have to say, but very rewarding because there's a lot of new technology on that we are finally converging towards demonstrating in flight.

Then we are also preparing what we call the High Trust Engine, which is a larger -- far larger liquid oxygen methane engine that we may want to use for the future. And last and absolutely not least, we have very successfully conducted an extensive number of tests on our new so-called multipurpose green engine, which is an improved propulsion system for our Vega C upper stage that uses hydrogen peroxide, a clean propellant essentially. So a lot of new technology that, as you know, we deliver for the agencies as a customer-funded research effort.

Now on the defense side, as I anticipated to you in my highlights, there is definitely a continued momentum in defense. I would call it more than a momentum. This is probably the highest surge I have ever seen in my professional lifetime. The order book already speaks for itself. We are getting more demand from MBDA for Europe. I have been reached by Italian Armed Forces, by European institutions, all asking how we can improve, increase the production rates, the deliveries and so on.

We are all working collectively between prime contractors, Tier 1 suppliers, Tier 2 suppliers to see how we can grow production capacity. And so in Europe, even there is a great expectation for a completely new expectation for demand. In the U.S., I don't need to say much. We have achieved quite some results in 2025 with the new contracts for Raytheon from U.S. Army and very recently, a second contract for a second product for the U.S. Army, both for development and subsequent production. In addition to that, we have been supported in the U.S. by the state of Virginia for the setup of our production plant, which will be instrumental to serve the U.S. customers for the future.

As I said before, in U.S. defense, for solid rocket motors, given what is happening even over the last few weeks, but not only over the last few weeks, the demand may be 3x more than we anticipate. But at this time, my guess is as good as anybody else's we can only count how many missiles have been launched lately. This you can do yourself, it's massive. So consumption is definitely at a peak surge. And I have to say, if we were to consider how much it would take to replenish the stock and so on, it feels like it will be very many years unless we significantly grow the annual production rate. So we are debating with the customers how to make this happen, how to deploy investment.

And I think we are in the exact sweet spot of adding the cash available to invest towards this effort and to go exactly along the plan that we had projected. So -- it's on one side, very sad. On the other side is a business opportunity, we are here to serve. And I think this is a great, great potential.

I would leave it now to Roberto to go a little bit deeper, although rapidly, across the financials, and then we'll come back to some considerations on the outlook.

Thank you, Giulio. Good afternoon, everybody. Okay, going through the slide on the backlog, we have already commented that we have achieved our record backlog of EUR 2.2 billion. Let's analyze a bit the composition of this backlog. The defense side has reached 28% of the backlog for a total amount of EUR 600 million order we have enhanced. During the 2025, we have booked order for almost EUR 1 billion and out of which the launch system business contributed for more than EUR 400 million. And this is related also to the fact that Avio has become the launch service provider. But the space propulsion as well contributed for more than EUR 300 million. We have already commented the big order we received from Ariane 6 for the boosters for the years to come. And the defense side contributed for almost EUR 300 million, receiving order from both European customers and U.S.A. customers. In terms of the split, our backlog still is made by 70% of production orders and 30% by development orders.

If we move to the next slide, we comment a bit on the revenue performance. I think you can appreciate the good result we achieved, EUR 542 million of revenues with an increase of 23% compared to last year. This revenue growth was mainly driven by the space launch, but also the space propulsion contributed quite significantly and also the defense segment increased and contributed to this outstanding result. In terms of breakdown by activity, you can see that in 2025, the production activity has achieved 58% of the total revenue with 42% coming from the technical development projects.

If we move to the next slide and we comment the profit and loss. First of all, the initial comment is that along the various lines, we have recorded double-digit growth compared to 2024. We have already commented the net revenues. We have achieved an EBITDA reported of EUR 32 million with a percentage margin of 6%, growing from the 5.8% for last year. And this EBITDA result has been possible -- has mostly been driven by the growth on the revenue side. We have also achieved a good EBIT reported amounting at EUR 12 million, increasing by 43% compared to last year, despite the higher depreciation costs related to the increased flight cadence for Vega C and the IT improvement projects.

It is worth highlighting the good result on the net income. We achieved EUR 11.6 million with a huge growth compared with last year. And this is the result of the good operating performance, but also by some financial income that we generated from the average cash on hands.

Speaking about cash, we move to the next slide, and we comment a bit on the net financial position performance. As anticipated, we achieved this record positive net financial position of almost EUR 600 million. If we take away for a while the contribution coming from the net proceeds from the share capital increase, it is worth highlighting that what we call the initial net financial position, the net financial position generated by the business has improved quite significantly from the EUR 90 million of last year to almost EUR 120 million this year. And this also has been possible because we have collected a significant amount of advanced payment related to the orders booked particularly in the fourth quarter of last year.

Moving to the next slide. Here, we can comment a bit the balance sheet. And I think it's worth highlighting that our working capital that, as you know very well, is structurally negative has increased along this line by further EUR 142 million. In terms of net fixed asset, we have increased, as a result of the CapEx we are keeping -- investing to support our business, to support the growth of our business. And it's worth mentioning also an initial spending in the Avio USA related to the Avio USA project that we have presented to you on other occasions. And at the end, it's worth mentioning that the equity of the company as a result mostly of the net -- the share capital increase has achieved more than EUR 700 million.

Moving to the next slide, you can appreciate the quarterly performance of the company. The EBITDA has consistently grown across -- throughout the year, achieving this EUR 42 million at the year-end with the typical -- the usual seasonality of our company, of our business in the fourth quarter. The net financial position has been consistently positive and much higher compared to last year until the fourth quarter for the reason that I explained above, we jumped at EUR 600 million almost of net financial position. Now I leave the floor again to Giulio to conclude the presentation.

So in terms of the outlook, let's have a look at what we plan on doing in 2026, in particular, on our U.S. projects. You may recall, we have identified the site we're to erect our new plant to work on our main customers. Now I think we have -- seems pretty well what we need to do, in particular, with the U.S. Army, which we will start doing in Italy and subsequently move to the U.S. as well.

With Raytheon and Lockheed, with Raytheon, we have started on the Mk 104 project. Let me highlight to you, by the way, that Mk 104 is the motor that powers all the standard missiles, which are on board U.S. Navy ships. You have as many as 9 or 10 destroyers in the gulf presently, each of which has almost 100 missiles on board, and you can see them flying almost every day. So there is where it is most of the missile consumption over these very hours right now.

Additionally, we had signed, as you recall, an non-binding term sheet with Lockheed Martin, which serves mostly ground-based systems largely for the Army. So we will work on these customers and on the erection of the plant. So let's see in more detail what we will do in '26. So starting from what we have already signed with Raytheon and Lockheed Martin, we will have to work to be more precise on the volume forecast. Our expectation guidance is not clearly based on the latest forecast expectation, which may exceed what we see by a factor of 2 or 3, as I told.

Yes, we need to be careful on setting the expectation on the number, especially when we talk about firm order backlog. Anyways, we need to move from these non-binding agreements to binding contracts as quickly as we can, as much as we have done with the U.S. Army and leverage the incentive package we have in Virginia to get going with our investment alongside the proceeds from our capital raise. In addition to that, we will see whether there is any more financing opportunity, attractive financing opportunity to close the loop on what we need to expense.

As we progress in the plant design, we have lots of expenses for the engineering effort around the finishing of the design of the plant. We are about to place the long lead-term orders on the machinery for the equipment to be installed in the plant and at some point, we will kick off work with the general contractor by breaking ground and moving along with the construction of the factory itself. The size of this plant, we have designed from the beginning to be scalable because we had anticipated that it may be a certain size or even twice such size.

I'm afraid we will have to think about making a larger one than we had expected. But this year, we will also work a lot on staffing Avio USA with people that we need to train in time for them to be ready as soon as these programs actually hit the road. Launches in 2026, we will have many more launches of IM-6, probably as many as 8. We will see more or less a very rapid ramp-up, lots of activities across mega constellations, Amazon Leo, Galileo and other military satellites. In Vega C, we will have probably 3 launches, problem is with the scheduling of the launches, some satellites were late. So we are likely to have something like 5 flights in 2027 and 3 this year or something like that. I think it will be anyway a busy, interesting year with a new Korean satellite with another launch for the European Space Agency. So a lot of interesting activity.

Now coming to the dividend. As I said before, this is a little bit a history of what we distributed as dividend, maybe not the most important of your worries at the moment. Nonetheless, as the Board of Directors, we have proposed to the shareholder, during shareholder meeting, a distribution of EUR 6.8 million, which represents a payout ratio of 58.6%, which is definitely in the upper part of our dividend policy, which is between 30% and 60% payout.

Now guidance. So let's be careful on this one. Backlog, backlog for the time being based on the estimates we have for firm contracts to be signed within the year, we see the backlog being in the range between EUR 2 billion and EUR 2.1 billion. This does not incorporate the potential upside we are actually seeing in these very weeks, okay? So this number may be higher. What we don't know yet, we will probably consolidate over the next few weeks is how quickly the customers can convert demand growth expectation into firm orders. I remind everyone that what we put in backlog is firm orders for signed contracts, not soft agreements and shake hands. And that's the reason why we've been cautious on forecasting the backlog. Keep also in mind that in the meantime, we are growing the revenues. So what draws down from the backlog is increased revenues.

On the revenues, I think, we feel comfortable that we will likely be in the upper part of the range we have outlined here. We have explained in our plan that we would expect to grow sort of 10% annually across the decade. I think we will target to do the same. So we will likely be in the upper part of this revenue range. You have seen that also this year we beat our own expectation on revenue growth. So we are quite confident on that.

Relative to the profit, here you see quite an ample range. First of all, in the plan, we said the EBITDA over the next 3 years will be flat because it will be the result of a growing European EBITDA and a growing cost on the U.S. side, meaning a negative EBITDA. The consolidation of which leads pretty much to a flat scenario in the short term before the U.S. operations are at full fruition. So we will stay within such plan. The costs of running Avio USA in 2026 will be higher than in 2025. We had about EUR 4 million, EUR 4.5 million in 2025. We will have between EUR 7 million and EUR 9 million in 2026 as we grow the team, train the team and so on, build the factory and whatever.

Moreover, one warning for the time being is on the risk for potentially high energy costs. Again, we cannot speculate on that. The price of gas has more than doubled over the last 2 weeks. This may stay or may go away. We don't know. But we got to be careful with that, and that is the reason why we have left a bit of an ample range on EBITDA reported. Of course, we will do the best we can to be in the upper part of this range, as one may expect. So the net income will largely be driven by both operating performance and financial performance on whatever cash will remain available. The proceeds of the capital increase will be used to start investing in the U.S. factory. The remaining part will be leveraged for financial income. We will see what type of financial income we can generate.

We've been successful so far if the interest rates stay the same, that will also contribute to net income. So this guidance is good as long as we can potentially update it, if we have more accurate information. But we expect to see continued growth in the course of 2026 and of course, the years come. So I'll give it back to Nevio to conclude.

Thank you, Giulio. Thank you, Roberto, for such complete explanation, and we can open now the Q&A session.

[Operator Instructions]. The first question is from Chloe Lemarie of Jefferies.

Okay. Perfect. I have three, if I may. So the first one would be just on the older backlog guidance. So at the low end, it would imply EUR 500 million roughly of order intake in 2026 when obviously, you mentioned the ESA order potential over '26 and '27 should already be around EUR 600 million. So could you maybe talk to what led you to settle on this guide? How we should think about the order phasing prior to, obviously, the big increase in demand from defense?

The second question is on your comment on missile demand in the U.S., increasing by a factor of 2 to 3 compared to your prior view. Can you maybe talk about the time frame before that incremental demand could materialize and how it affects your footprint planning in the U.S. And last one, on the energy cost, could you maybe share the sensitivity of your cost base to energy prices, please?

So thank you very much, Chloe. First and foremost, what I call backlog rollout, okay? Now we have to keep in mind that our backlog contains a couple of things, backlog from space and backlog from defense. Let's talk about that from space first and then defense. The backlog from the space is composed of things that roll out pretty much linearly as a function of time, okay? So, we have backlog from launches for Vega. We have backlog for research activities that will come as a result of the European Space Agency Ministerial Conference and such. This will roll out in the course of 2026 and it's somewhat predictable, allow me to say.

So we may be off by 1 month, 2 months, it's predictable, okay? The number is well known and so on. If we rush to sign the contract. We can be a little bit faster, but we know what is the total amount, right? So for example, for the development activities is EUR 600 million, this EUR 600 million need to come. So if we can force everything to happen, to sign the contract in '26, we will get EUR 600 million worth of contracts, which is far more than you see now in our expectation for backlog. Typically, what we see is that it takes us a little bit more than a year to convert European Space Agency Ministerial Conference subscription into contracts. That's why we've been a little bit cautious on that.

On the defense side. On the defense side, for us, it's far less predictable how fast we can convert demand into firm orders. Why that? First of all, in defense, as you know, we are a supplier. We are not a prime contractor. So we do not have a dialogue most times with end users, right, except for our relationship with the U.S. Army. As you have seen, the U.S. Army, which is an end user, went very rapidly from idea to firm contracts.

For the rest of the work we do with prime contractors, Lockheed Martin and Raytheon, the conversion from watching the TV news, seeing the missiles fly and getting an order, the road map is a little bit longer because they need to get money from their end customers. Their end customers, by the way, need to get money from U.S. Congress. Then they need to get an order from the government, then they flow it down to us. And that's why this is being longer, okay? There is no doubt whatsoever that the demand is more than what we put in our backlog guidance. There's no doubt on that. But my visibility of that becoming a firm net order backlog within the year is fairly minimal at the moment.

So that's the reason. So I have no worries whatsoever on the fact that the backlog will ultimately grow. But on the timing of that, the situation may be that we are at EUR 2 billion this year and a EUR 3.5 billion next year, something like that, okay? I would love it to be linear, but actually it's not, okay? And it's difficult to predict.

The third point, the story of the energy costs. So we have seen this surge in prices before when the war in Ukraine started a few years ago. This is another peak, unprecedented peak, okay? So until a few weeks ago, we were thinking about a price for gas, which was EUR 36 per megawatt hour. Now we may be somewhere between EUR 50 and EUR 60 or even EUR 70. It may be a spike and then we go down. Quite frankly, I wouldn't do planning in the very middle of what is happening right now. We need to, as I said before, wait until the dust settles and watch what is happening.

What is the maximum impact of this may be? It's relatively modest. It's between maybe EUR 2 million, EUR 2.5 million, something like that, something that we can probably offset with some other opportunities to have more profit than anticipated. So we are not too worried about it. It's important that we flag it as one of the key issues, and that's pretty much all I can say at the moment.

Very good. Can I just ask maybe on the footprint planning in the U.S., would you have to expand further on what you're already planning to meet that higher demand? Or can your facility essentially extend quite significantly?

So the plant is designed to start from a capacity of 700 tons of propellant per year. Now it can be upgraded to twice this capacity or even 3x with a relatively low investment compared to the initial one. Because, of course, most of the initial investment is for the infrastructure, the land and most of the civil works and so on. Putting more equipment at work will not be as expensive. In the meantime, as you have seen, we are also collecting attractive financial incentive packages to support further growth in the plant size.

In fact, the package that we have been awarded, for example, from Virginia already is stretched towards the possibility of reaching an even larger plant than we had anticipated. So we're not very worried on the possibility that this plant may be larger because should this be the case, then there will be more funding -- more cheap funding available to support it, okay? And alongside the proceeds that we already have from the capital increase, I think we're pretty well covered.

The next question is from Martino De Ambroggi of Equita.

Yes. Thank you. Good evening, everybody, and sorry if I repeat some questions because the connection is very bad for me, sorry. So on this order intake, again, could you split in your full year guidance, what is the split between R&D and military business? And specifically, how much of the EUR 600 million presumably is more reasonable to be included in '26 rather than the -- in '27 regarding the European Space Agency orders. And on the energy costs, if I remember correctly, during the previous crisis, you hadn't any automatic adjustment in the new contracts or this has to be managed in a different way?

I didn't quite get the last question. Sorry, can you repeat it?

Yes. For the energy costs, if I remember correctly, in the previous Ukraine crisis, you were not able to automatically adjust the price for your customers for the higher cost of the energy. Has it changed the situation now? Or you are still working on...

Okay. So let me start answering from the first question. A couple of important points on the order backlog. So in 2026, the mix between the expected intake between space and defense, we continue, in my opinion, if nothing changes, to be between 65% space and 35% defense, okay? This may be slightly different if the accelerated programs that they have in the U.S. will actually lead to signing first contracts very quickly, which, as I said, it's a question mark because so far, the process has been lengthy, okay, reliable, but lengthy.

On the space side, you have to take into account that last year, we just signed in December the Ariane 6 P120 contract and that we can't sign every year. We sign every 2 to 3 years, more or less. It's a batch, right? So that one, we will, for sure, not have another order to top that up. But again, as I said before, the intake for '26 may be significantly more than we expected if the event side accelerates turning into firm orders. Now keep also in mind on the net order backlog side, in the meantime, the revenues will go towards EUR 600 million. So you subtract from EUR 2.2 billion, EUR 600 million, then you need to add another EUR 500 million, EUR 600 million, hopefully EUR 700 million or EUR 800 million. And that's where you get with the order backlog at the end of 2026.

Now regarding the energy costs, we don't have a formula that can anyway adapt to such unprecedented changes in the price of energy. No one price adjustment formula would account for a doubling in the cost of gas. There's no way. Typically contracts say that beyond a certain point, you can sit down and renegotiate if you want. But it's unlikely that you can automatically adapt to twice the cost.

However, with respect to what we had 4 years ago, you may recall we had a different energy generation infrastructure here in Colleferro, since then, we have significantly changed our energy production assets in partnership with Enel X. And now we have far more efficient steam generation capacity than we used to have, which is what burns most of our gas. And therefore, that's why we expect that even if we have to have something like a doubling in the gas cost, we will not suffer all that much because we have a far more efficient energy generation capability today than we had 4 years ago.

The next question is from Andrea Bonfa of Banca Akros.

I have the following question. First of all, is that in the light of the sense of urgency coming from the exhaustion of the stockpiles in defense, you can accelerate your, let's say, the time frame of the U.S. factory in terms of construction activities and, let's say, initial operating phase. And the second one if, again, in the light of the urgency of production requirements, some of your U.S. clients can decide to produce locally, i.e. in Italy, the second one.

And the third one is a detail, but in the fourth quarter of this year '25, your defense sales were flattish, slightly negative. How can we project defense sales to grow this year? Just to have an idea. Okay, then I will come back for other questions.

So I will start with the second question. Defense sales are set to grow the most in 2026. So what we expect to see out of our growth between 2025 and 2026 will largely be growth in defense deliveries, okay? So I think that will be driven largely by the volumes of ASTER-30, CAMM-ER and now also with the U.S. Army programs that will start to ramp up this year in production already, okay? Now in fact, U.S. Army has used with us an approach that the other customers have not. They very much, like you said, they realized that the matter was urgent, they didn't even bother to wait for the U.S. factory to be ready.

They said, okay, you manufacture that in Italy. Now interestingly enough, in these last few days, I'm getting pretty much the same message also from the other U.S. customers who are saying, okay, it's good that you do the factory in the U.S. But in the meantime, if you can, and even for the future, we would like to keep some of the production in Italy as well. So I think the opportunity is larger than before because I don't think they find many other providers who can have a new factory in the U.S. plus an existing factory here.

And here, we have the capability of upgrading our capacity much faster than anywhere else because, of course, the plant is already up and running. And as you have seen, we have been growing defense deliveries quite consistently over the last few years, we can continue to do that. So I think what we will see in the future, what I hope we will see is that also other customers will start leveraging our Italian capabilities more quickly and then later, we will transfer in the U.S. That's what leads me to your first question. We will try to accelerate the U.S. factory construction as much as we can, but there are no factories that can be erected overnight. And therefore, it will take time to finish up with the plant. But that will not undermine our ability to deliver to customers for what I just said.

The next question is from Gabriele Gambarova of Intesa Sanpaolo.

The first question regards the sales guidance because on average, you are, I'd say, forecasting a 6% of when you are telling us that the ramp-up in tactical propulsion is ongoing. So I guess that growth will be pretty sizable. And then you have let's say, the doubling in the number of Ariane missiles for space, while Vega is expected to remain almost flat. So it seems to be that this revenue guidance is very, very cautious. I don't know if you can comment on this. And regarding margins on EBITDA specifically, if you have a bigger component of Ariane, in theory, the mix should improve. So margins in theory should improve. Even on this, any comments would be appreciated.

And lastly, if you could quantify the impact of the U.S. plant costs in your -- embedded in your 2026 EBITDA guidance.

Let's start from the first point. I agree with you, Gabriele. The revenue guidance is cautious, okay? And I think -- and as I said before, when I illustrated the guidance, we will be in the upper part of the guidance range, possibly exceeding that as we typically do, right? So sometimes that surprises me, too, that we exceed the revenue guidance. This year, we overachieved guidance by a lot. I think our upper range was EUR 480 million back in March last year. We ended up at EUR 540 million. So there is a possibility, quite frankly, that we go beyond EUR 600 million of revenues. I do not deny that. It's a possibility. We're being cautious because the rate of increase in each of this product is very high. So we want to be diligent and deliver good quality products to our customers. So we got to be careful that we maintain the same level of quality while growing the volume so fast, okay?

That's very important. I prefer to go one step at a time, be safe on what we do, and that's the reason why we projected a cautious guidance. But I agree with you, it is cautious. On the EBITDA, yes, indeed, the EBITDA is improving because if you look at the midpoint of the EBITDA guidance and you add up to that, something like EUR 8 million worth of costs from the U.S., okay, you would end up with an EBITDA 2026 from Europe, which is nearly EUR 43 million, which is significantly higher than what we have today. So if I were to project just the growth of the European size of the EBITDA, it would be a 20% EBITDA growth, okay? But at the same time, we are investing in the U.S. and not everything we do in the U.S., we can capitalize, such as the cost of people. That's why the cost of people in the U.S. for me in 2025 will be [ 8 ] in 2026.

So that's it. And what we said from the beginning when we presented our plan, is that we will finance part of the start-up of the U.S. activity through the growth of the European EBITDA, okay? So that's pretty much what we do.

Okay. If I can follow-up on pricing in space. Do you see any pickup...

Sorry, we could not hear you.

Gabriele, the line dropped.

The next question is from Alex Ciarnelli of S. Muoio & Co.

Most of my questions actually have been asked and answered. I just -- I think you touched upon them already, but I'll just ask again. [ $600 million ] of cash, and I think you have [ $100 million ] from possible incentives. I think you were talking about there would be possible additional needs depending how fast you're going to scale up the infrastructure. Can you comment on that? Do you really need something more at this time? Or you think that you are set for the cash you have? That will be the first one.

And then again, the second one, just tying up with the other questions that were asked. Assuming that your suppliers are able to deliver what you need, would you be able with the infrastructure you have today to provide the number of rockets that the demand is there? That's it.

Okay. So first of all, in terms of cash. Keep in mind that we have EUR 600 million of cash total, EUR 200 million which are working capital, give or take, maybe it will be EUR 150 million will be working capital, which means that this money, we need to transfer to the suppliers as quickly as we can. So we will consume that cash by just putting that back into the suppliers and allowing them to do what they need to do for us to be able to accrue revenues. The way we accrue revenues is by moving money to the suppliers, letting them invoice to us, let us invoice to customers and that's the way we generate revenues, right?

So what we have in terms of cash for the investment is sufficient for what we have to do today. If we need more cash, we will source more cash. I'm not worried about that, as I said before. And by the way, we will not need that tomorrow morning, right? So it's not an urgent need at all, okay? That said, we will look for as many possible sources of cash that are available at a cheap rate because what we need to do for investors is to make sure we have the cheapest possible cost of capital. So we will anyway continue to look for sources of capital because if we end up in the demand scenario that I just portrayed to you, and we will have potentially to invest another EUR 200 million, then we need to make sure that this EUR 200 million comes at the cheapest possible rate. So that's why we will keep on being very careful on the possibility of cheap sources of capital.

Now in terms of ability to deliver with our supply chain, that's a very good question. So far, we have been growing steadily our delivery rates both on the defense side and on the space side. On the defense side, in the past, we have done far more than what we have done today. So we are confident that we can do that. The infrastructure we have in Colleferro has not been built in a day, but in 100 years. So we have deposits and buildings and things that are available.

They were used in the past. They were temporarily kept on hold over the past few years. We can quickly revamp a lot of them and dedicate them to production if we need. Just to give you a measure, here in Colleferro, we have as many as 300 operating buildings. But we have more buildings maybe another 100 buildings available that are not operational anymore, but that we can quite quickly revamp for our purposes with relatively modest capital expenditure. So again, you pointed out as one important element, which is are the other suppliers, are our suppliers ready to deliver? And that's a very good question.

You may recall that when we raised the capital, we said to ourselves, okay, the largest part of this money will be used for the plant in the U.S., true. But a portion of that, we said we may want to invest in vertical integration with our suppliers. So we may want to do a few selected investments in the supply chain to make sure that we secure the sources of supply we really need, okay? We don't need to do big investments in M&A or anything like that. But we need to make sure that we do a few selected investments to make sure we round off our ability not to be under the limit of one point of supply that falls below the expected ability to supply.

The next question is from Tulu Yunus of Lord, Abbett.

We cannot hear you.

[Operator Instructions]. The next question is from Carlo Maritano of Intermonte.

I just have three questions. The first one is related to investments. So could you give us an indication of the level of investment planned for 2026? And in particular, should we expect to be mainly related to the new U.S. facility or rather to unlocking additional production capacity in Italy?

The second one is related to the incentives from Virginia. So could you clarify the form they will take? For example, they will be tax credit, direct grants or a combination of both. And the final question is on -- regarding the potential federal incentives, what kind of time line should we expect. So in previous calls, you've seen that the process might take longer due to the changes in the counterparts you were interfacing with? Are these things moving any faster now?

Okay. Okay, Carlos, let me start from the -- so first question is on the CapEx. And the second one is on the incentives for Virginia. Let me start from the incentives for Virginia. So the incentives for Virginia is a very articulated package, which comprises tax cuts, comprises some tax cuts on different things on the purchase of equipment on the income tax on many other dimensions. Then there are some funds available for the training of the personnel, which is extremely important, in my view, because it's what we drive our ability to actually find people because they will be incentivized to be completely skilled to do this job and so on.

Then a small portion of the Virginia investment will also be grants, okay, trade grants. Now regarding federal funds, the situation is more TBD because the policy for federal grants has largely changed in the course of 2025 since the new administration came. We are discussing with the federal government the potential support. They have very, very cheap sources of financing available, okay? We will see how big a facility we can get, and how quickly, we can get one. Again, I think, there will be money there for this purpose. I know for a fact that there is more money available than projects to use all of this money. So we need to be consistent in pursuing this funding.

And I think this will add to our -- to the rate of return of our investment. Now the size of what we can source. I'm not worried right now because, as I said before, we are not in urgent need of cash. We just raised equity and so on. The reason why we are continuing to pursue these sources is that we want to stack capital in a way that the overall cost will be competitive relative to our cost of capital, right? So rather than rushing to get cash, we are rushing to get the right cost of capital. Then I would leave it to Roberto to answer to you on the CapEx for '26.

Yes. The range of magnitude of the CapEx we are planning to spend in 2026 is EUR 90 million, including something around EUR 60 million related to the U.S. plant. We need to start acquiring the land, and we need to start acquiring -- ordering some long-lead items that takes a while to be provided. And then the rest, the complement to that is the usual capital spending we are incurring in the Avio Group related to both tangible and intangible activities that the group is expected to perform.

The next question is a follow-up from Chloe Lemarie of Jefferies.

Yes. Thank you. Actually, I'm filling in for Tulu, who kindly sent me these questions. So the first one is on the order guidance in defense. Do you have anything baked in from Raytheon or Lockheed or is it strictly what you see from the U.S. Army. The second one is, could you give us an idea of how scalable the Italian factory is at this point? How is it able to potentially serve the U.S. defense demand from there?

So the order backlog currently incorporates in size, largely U.S. Army only, okay? So far...

On the guide, sorry -- on the guidance for backlog at the end of '26, I think the question was.

Well, there is definitely something from Lockheed and Raytheon, not much more from U.S. Army. Considering that in U.S. Army, we -- I mean there is a portion that we just announced, right, that you know of and we quantitatively indicated that. I don't think we will likely get other things near term from the U.S. Army. It may as well be, surprises are possible. So it incorporates largely Lockheed Martin and Raytheon, okay?

Yes. So the Italian factory is scalable for the reasons we said before. We had anticipated already in previous request that today, we delivered between 200 and 300 defense motors per year. We can sort of comfortably reach 600. We are projecting already by the end of the decade to be close to 1,000. We can go beyond that. You have to keep in mind that what we process in terms of propellant every year for space it's just like one order of magnitude or 2 orders of magnitude more than what we do for defense. So scaling up capacity for defense, it's not a question of capacity to cast propellant or anything like that.

It relates more to the availability of tooling specific to each and every product because while in space. We do just a few motors every year of very large size here. To get to large volumes in defense, you need to do very high volumes of very many different products from one another. So it all stays on our ability to source the proper tooling and to equip the plants with the right set of tools specific to each and every project.

[Operator Instructions]. Gentlemen, there are no more questions registered at this time. Excuse me, there's one follow-up from Martino De Ambroggi of Equita.

Just a follow-up on the last question on the output capacity in Europe. If I remember correctly, you are adding EUR 50 million -- EUR 100 million of CapEx for the European plant expansion.

Yes. Correct.

EUR 100 million, yes, with EUR 50 MILLION -- EUR 100 million translate into how much of higher production?

It depends on what we are going to do with that. As I said, the destination of these funds, we have not yet allocated million by million, And will largely depend on [indiscernible]. We also anticipated when we presented the plan [indiscernible] that a portion of this money may well be spent for vertical integration within the supply chain. So not necessarily within the Colleferro premise, but maybe in acquiring 1, 2 or 3 small -- very small suppliers to make sure that some key supplies are completely under our control in terms of ability to deliver, et cetera.

Keep in mind that most of the capacity upgrade for production rates on each product is typically directly paid by the customers. So even, for example, with MBDA, the increase in capacity is part of the pricing of the contract. It's not part of our CapEx. So the CapEx we expense is a surrounding CapEx, allow me to say, that helps us with our infrastructure to make sure that we can actually deliver higher rates and/or some investment in vertical integration within our supply chain.

Just to mention to you a few things. If you want to make so many motors, we have need for several metallic parts that we source from suppliers, et cetera, et cetera. Now maybe one supplier is not sufficient. You need to have 2 or 3 and so on. At some point, we will be better off acquiring a small metallic part manufacturing shop and dedicating that 100% to what we do than trying to source from 4, 5, 6 suppliers here and there, with the risk that they don't deliver. So these are -- it's not going to be a massive M&A effort, but rather something, as I said before, to make sure that our vertical integration is robust and our connection with suppliers is robust.

Gentlemen, this was the last question. So back to you for any closing remarks, if any.

Thank you. Thank you very much for your attention. So we can close the call at this time. Thank you.

Thank you also from me, and looking forward to update you in the coming weeks, I think, we will have the shareholder meeting towards the end of April, 28th of April. Following that, we will have our first Board of Directors. We are renewing the Board of Directors at the next shareholders' meeting and then beginning of May, we will look at the results of the first quarter, which, as you know, it's typically not very indicative of what is happening during the year, but that would be a good occasion maybe to review where we stand with our expectations for growth, for order backlog, et cetera.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices.

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the Avio 9 Months 2025 Results Web call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Nevio Quattrin, Investor Relations. Please go ahead, sir.

Good morning. Good morning, everyone, and welcome to 9 months results conference call of Avio. I'm here, as usual, with Mr. Giulio Ranzo, CEO of Avio; and for the first time, the newly appointed Chief Financial Officer of Avio, Mr. Roberto Carassai. In a moment, we will go through the presentation we just released on our website. And as usual, in the end, we will welcome your questions.

Thank you for your attention, and I leave the floor to Giulio.

Thank you, Nevio, and good morning to you all. So thanks for joining the 9 months results conference.

In the interest of time, I will jump to Page 4 of our presentation, which provides a summary of what we've done in the course of the first 3 quarters. So in a nutshell, I would say results are on track, except that we are ahead of schedule with our backlog. So the backlog exceeds what we had expected. The launch activity is on track. The third Vega launch is scheduled by year-end, I would say, by end of November, very first days of December. Ahead of that, we'll have another Ariane 6 launch next week. So I would say the launch activity is as planned pretty much.

In the Space business, I think what is very relevant for the first 9 months is the launch of another Vega C launch service with SpaceLaunch. We'll talk a little bit about that, and a new contract with the European Space Agency for a reusable upper state.

On the Defense business, we have reported to you, not too long ago, the signature of a contract with Raytheon to expand the collaboration for the qualification of the Mk 104 solid rocket motor for the Standard Missile 6, very relevant development. And also, earlier than that, we had signed a multiyear agreement with the U.S. Armed Forces for manufacturing assembly and integration, which overall consolidate a little bit our efforts to grow in the U.S. defense market.

As you know, the capital increase resolution was approved by shareholders last week with a very ample majority. So the rights offering is expected to be completed by year-end. We are awaiting the last green lights from authorities to actually launch the transaction effectively.

Regarding the financials, as I said, the backlog is ahead of schedule, is exceeding EUR 1.8 billion, which, by the way, is a record high of all times. So it's a very relevant development, I would say. Revenues and EBITDA continue to grow at a rate of about 26% versus last year. But as you know, the first 9 months are just a relatively small fraction of the overall 2025 financials. Nonetheless, we confirm, of course, the guidance of 2025.

So if we move to Page 5, some of the contractual developments in the Space business. First and foremost, I'm very happy to report we signed a new launch service agreement with SpaceLaunch in our new capacity as launch service provider, as you know. I am very happy about that because this was an open international competition [ on commercial ] customer, whose name is still undisclosed. We will be able to disclose that in the course of 2026, but no earlier than that. But it's very important because it proves that Vega C is a competitive product when sold in and outside Europe in competition with other solutions.

In parallel, as you know, we have signed a contract with the European Space Agency for EUR 40 million for the very first phases of technology development of a reusable upper stage. As you know, we are placing lots of efforts to continue developing our technologies for upper stage, even our efforts with Vega E first and with the other activities on liquid oxygen methane technology. At some point, it will be very important to see whether we can have a fully reusable upper stage for it to be even more competitive for the future.

On Page 6, Ariane 6 is getting ready to launch. Here, you see some pictures of our boosters and -- sorry, of the central core stage getting ready for launch. In fact, by now, I think the rocket is fully integrated on the pad. It's an important launch is an Earth observation satellite Sentinel-1D. We're quite happy to see that Ariane 6, as I had reported earlier, it's staying on track with its launch frequency as expected.

And in fact, as you can see on Page 7, this is pretty much what the manifest will tend to look like towards the end of the year. So a total of 4 launches for Ariane and 3 launches for Vega C, which represents a significant improvement with respect to last year launch frequency. So I would say this goes pretty much in the direction of what we expected, meaning the growth in the flight base.

Now, in terms of what we have in backlog for both Ariane and Vega, Ariane continues to have more than 30 flights in backlog containing mega constellations, sub pumps such as project Kuiper, the Galileo constellation and some military satellites with the possibility of soon closing the loop with the IRIS2 opportunity.

Regarding the Vega C launches, we have, give or take, 15 launches in backlog, which include obviously the Copernicus constellation for the satellites for the Copernicus constellation. The IRIDE, Italian constellation. PLATiNO, the Italian satellite and some more opportunities around the world that are in pipeline that we hope to be able to announce soon.

Now, switching gears on Page 8 on the technology evolutions. We have reported to you about our efforts in liquid oxygen methane. Now we are at a very important point. Our liquid oxygen methane technology demonstrator is being ready for flight -- for experimental flight next year. So here, you can see a glimpse of what we're doing on the engine itself on the cryogenic tanks, on the faring, on the avionics that we have developed. This is a very first opportunity for Avio to develop its own launcher technology with a lot of in-house new technologies of, I would say, next generation. So it's by our intentions, an experimental vehicle. It will essentially enable us to demonstrate if our technologies are as competitive as we think, but it's greatly improving our competitiveness for the next decade, I would say.

Moreover, on Page 9, we can report a successful completion of a number of tests of our multipurpose green engine. The multipurpose green engine is an orbital propulsion system. So it's a part of the propulsion we use when in space to allow for orbital maneuvers and potentially for reentry from space. So you see all the parts of what we're doing are now connecting with each other. So this technology, the hydrogen peroxide technology is a very innovative one that a few around the world are developing, and it's very promising because it's very simple in a way and quite flexible to perform orbital maneuvers. We are very glad that this is a genuine Avio design, all done in-house, and it's working pretty well. So we will keep on reporting to you progress. But for now, we can say the first tests have been very successful and therefore, very encouraging.

On Page 10, on the Defense side, as we have reported some time ago, we have signed with Raytheon an agreement for up to $26 million to continue the engineering work to prepare the Mk 104 solid rocket motor for qualification. What does that mean? It's essentially preparing ourselves to manufacture the solid rocket motor in the U.S. Ahead of kicking off production by sometime in 2028, we need to be able to demonstrate that what we manufacture is essentially meeting 100% of specifications. So unless you start this activity well ahead of time, we won't be able to manufacture them. And the fact that we are doing this well ahead of the start of manufacturing is what essentially secures that we will be able to manufacture that in the U.S. plant as soon as the U.S. plant is available. It also testifies the intention of the customer to essentially prepare the production phase ahead of time with some activity that is conducted for the time being in Italy, that paves the road for successful manufacturing thereafter.

In fact, on Page 11, you can see that the backlog on the defense side continues to grow extremely fast. If we were to measure the compound annual growth rate of the defense propulsion backlog over the last 6 years, you would come to something like a 60% compound annual growth rate. So extremely fast. Therefore, what we will see in terms of the defense propulsion production, which we are now better off measuring in tons of propellant per year will be certainly observing a significant growth rate. We do prefer to measure that in terms of the amount of tons of propellant produced per year because as you will appreciate, this is a mix of different products, some of which are small, some of which are large. So it's very difficult to measure them by the units, so much better to measure them in terms of the overall tonnage, let's say, per year.

Now, as soon as we start overlapping the European forecast of deliveries with that of the U.S., we will see an extremely rapid ramp-up with definitely a double-digit growth also in terms of volume. And in the very near-term, meaning '26, '27, we will observe also a rapid growth only of the European part, by the way, to which the U.S. part is starting to overlap because, as you know, what we will be manufacturing for U.S. Army will be first carried out in the Italian facilities until at least 2028. So that means that we will add to the growth side, some of the U.S. customer work performed in Italy until the U.S. plant is actually ready.

Now, let's go back to the U.S. plant for one moment on Page 12. We have presented to shareholders in the context of our pitch for the capital increase. We have presented our plans for erecting a plant in the U.S. We have explained that we are chasing pretty much 3 customers to perform against 10-plus programs with an overall capacity that will be in the range of about 700 tons of propellant per year to be ready by 2028. On this project, we have identified the site. We have signed an exclusivity agreement for us to work on. And we have completed the preliminary design. We are kicking off the design and the early procurement activities to be able essentially to serve our current customers, so namely Raytheon and potentially the U.S. Army, but also some other customers with which we are entertaining final negotiations hopefully lead very soon to an announcement of other agreements of long-term nature. So what we are aiming to do is to reserve a portion of the capacity of this plant to each of these customers such that by the time the plant is ready, it will be essentially nearly filled with demand coming from each of these customers. So each customer will have, what we call a portion, a share of reserve capacity against which they will commit to transfer to us production orders. And we will, therefore, aim at a good capacity utilization of the plant from the very beginning.

Through interaction with investors, we have received lots of questions as to how ready are we to erect such a big plant from scratch on a greenfield project, which represents undoubtedly a challenge. So we, on Page 13, wanted to recap for the benefit of investors and analysts, some of the past experience that Avio has had in erecting new solid rocket motor manufacturing plants. In particular, between 2018 and 2022, we have been refacilitizing all of the Ariane 6 and Vega C solid rocket motor facilities, both in Europe and in French Guyana. Here, you see some of the photos of the activities we have carried out in this period. We have built factories for an equivalent of 60,000 square meters with an overall investment in the range of about EUR 300 million financed by the European Space Agency in this case. And we have put in place a capacity that today exceeds pretty much 6,000 tons per year. So this is something of an order of magnitude larger than what we are aiming to do in the U.S.

Why do we highlight this point? This is important because it's inevitably a risk factor, erecting a new plant in execution is a risk factor. And we believe that our recent past experience with equipment suppliers with the construction of these type of plants provides a very relevant mitigation to this execution risk.

A second point I wanted to focus on, on Page 14 and on which we've had lots of questions is, what is the degree of vertical integration with the supply chain? Many of the investors have asked about our ability to ramp up with volumes so quickly and whether or not the supply chain will follow, okay? So one point we want to clarify is that, our solid rocket motor manufacturing activities are already quite significantly vertically integrated, okay? Here, you see a snapshot of some of the things we do in-house that are typically done by external suppliers instead. So for solid rocket motors, we manufacture and produce our own polybutadiene material, which is the main glue that puts together all of the ingredients of the solid propellant. So it's a very important chemical. It's a fundamental chemical for the mixing of the propellant. We also manufacture our own thermal protection material, which, by the way, it's a patented material. It's an Avio patented material. And similarly, for the pre-preg carbon fiber material that we use for the solid rocket motor cases, we use our own formulation and patented formulation of the resin, and we have our own impregnation factory.

So this is just a glimpse, but to just convey to you the message that we plan on mitigating the risk of such a rapid ramp-up by integrating vertically within the supply chain as much as we can. We cannot integrate 100%. But, of course, we tend to integrate ourselves on the most critical sources of materials that will otherwise become bottlenecks in our quest to reach a high volume increase.

A quick pick up on Page 15 for all of you on -- which are the revenue targets. The revenue targets are essentially moving from the current, give or take, EUR 500 million in revenues that we are targeting for 2025 as per our guidance to something in excess of EUR 1.2 billion by the end of 2035. So if we go along this route, we will be cruising at an annual compound growth rate of about 10% or actually exceeding 10%. And this will happen by shifting the mix of the revenues, essentially moving the contribution of the Defense revenues from the current 20% to something that will be well in excess of 50%, probably closer to 60% share. And also, as you may appreciate, more focus will be on production than what we have today, where revenues are equally shared between production and new research and development activities. Geographically, revenues will tend to be at least 35% to 40% from the U.S. whereas today, we have less than 5% probably.

On the long-term EBITDA targets on Page 16, one important point here. The European activities will continue to grow, as you know, both for Space and Defense. And we expect as we move towards the future years to have an increasing operating leverage, and therefore, a growing European EBITDA as we move along. However, in the meantime, we'll have to ramp up the U.S. business. So between now and 2028, we will not be able to generate a positive EBITDA from the U.S. Rather, we will have costs, but not yet revenues, okay? So what we expect when we add up on these first few years, we expect an overall flat EBITDA until the midterm or, let's say, 2028 time frame when we actually start to have the plant in operation and then a rapid growth in the U.S. EBITDA that will imply an overall EBITDA at group level growing at more than 20% all the way to 2035. So as you may appreciate, the peak of the investment happening in the U.S. will be between now and 2028. The EBITDA will grow as a function of the new volumes and improved operating leverage, although as you know, in our activities, particularly in solid propulsion, the operating leverage is somewhat limited because the fixed cost is relevant. And as you grow in volume, also the fixed cost [Audio Gap] but the overall EBITDA will improve because the mix of different businesses will be improved with respect to that. So more focus on propulsion activities versus system level activity will provide a better EBITDA margin. So by 2035, we should end up with an EBITDA that is essentially fivefold what it is today.

On Page 17, one rapid touch on the capital increase. So the result of the shareholders' meeting was that we had 2 resolutions. One was a EUR 400 million capital increase by way of a rights issue. So with preemptive rights to existing shareholders. This has been approved with an overwhelming majority of 99%, which I think is very encouraging because I believe that this means that shareholders are fully aligned with the targets we have in mind and that we need to invest in order to capture this growth opportunity.

As you know, we also have a second resolution to potentially further increase the capital by another 10% within the next 5 years at the discretion of the Board of Directors with the exclusion of pre-emptive rights. In this case, also the majority was 77%. So again, I think there was an overwhelming majority of positive votes on this. And this, as you know, is the flexibility that we are keeping in the system, should we find in the future further opportunities for growth, should we aim an even better business plan for the future. We want to be quick in raising more capital, making more resources available, invest more for the benefit of all shareholders to get a better result.

So overall, that's what we have done in the first 9 months. We've covered a lot of ground. Now I will stop here and pass the word to Roberto Carassai, our new Chief Financial Officer, to whom, by the way, I wish best of luck on his new mandate, and now he will report to you our results. Once again, one word of big thank you to Alessandro Agosti, who has been with us for a long time, as you may have recall, he has been instrumental also in a very smooth transition with our new CFO. And so, we want to take once again the opportunity to thank him for his excellent professional performance. So, Roberto, to you.

Thank you very much, Giulio. Thank you very much, Nevio, and good morning, everybody.

So now we can move on Slide 19 and then we can comment on the backlog performance of the company. The company has achieved this record high backlog reaching EUR 1,860 million and this astonishing performance has been possible thanks to the very strong order intake during the first 9 months. The company booked more than EUR 480 million, most of them EUR 250 million are related to the Vega program as the result of the transfer of the activity from Arianespace to Avio for the launch service provider activities. But the launch position of the order intake is also due to the defense propulsion for over EUR 200 million and this is the result of the orders we booked from both the European and U.S.A. customers.

In terms of composition of the backlog, Vega still represents 50% of the overall backlog. But with the defense propulsion that has increased to reach 32% of the total. And in terms of composition, the production activities accounts for 60% of the backlog with remaining 40% related to technological developments.

If we move to the next slide, Slide 20, we can comment here the revenue performance. The company has generated EUR 351 million of revenues in the 9 months, significantly higher than last year, maybe the increase of 26%. This is due to the strong contribution comes from Ariane 6 and -- but mainly by the Vega program as well. This is due to the higher production rate that is related to the increased flight cadence on both products. And also the defense propulsion contributed with almost EUR 60 million and generating this important result for the 9 months.

In terms of composition, the revenues have been generated for 58% by production activity with an increase of 4 percentage points compared to last year with the remaining 41% coming from the technological developments.

If we move to the following slide, Slide 21, here we can comment the overall performance of the company and we have already commented the backlog this has achieved. I think once again the EUR 1,860 million in the 9 months. The net revenues achieved EUR 31 million with significant increase by EUR 73 million compared to last year and in percentage terms by 26%. This huge increase in the revenues led to a -- has led to a very positive result in terms of EBITDA reported despite an increase of the energy cost with and EBITDA reported that in the EUR 15.2 million with an increase of EUR 3 million compared to last year. This performance EBITDA level generated a positive EBIT reported of EUR 0.2 million despite higher depreciation cost mainly related to the higher flight cadence of the Vega program and the new IT improvement projects. This enhancement of result of reported result generated a corresponding increase in the adjusted result as well.

In terms of the net financial position, the company closed 9 months with a positive net financial position of EUR 47 million. This is declining from the EUR 90 million booked at the year-end 2024. This is the result of the flow down -- mainly to the flow down to sub-contracts and suppliers of the advance payment that the company booked in December last year, and benefiting from the EUR 10 million coming from exercise of Space Holding warrants.

Moving to slide -- the following slide, Slide 22, we can here comment the quarterly evolution of the EBITDA reported and net financial position. On the top of the slide, you can appreciate the linear growth of the EBITDA until -- during the 9 months achieving the EUR 15.2 million September end. It was highlighting that the performance and various quarters has been always better compared to last year. And as typical for the company is the company's experience also from the last exercises that is the large part of the EBITDA that is expected to be generated in Q4 as a result of the revenue growth in the fourth quarter.

In terms of the net financial position, again, we achieved EUR 47 million of positive net financial position at September end. Again, in the previous quarters as well as in the third quarter the net financial position has been higher -- much higher compared to last year. And this will position the company to have a positive net financial position at the end of the year.

Moving to the last slide, based on the 9 months result that we have just commented, the company confirms the guidance for the year-end, specifically with the backlog that will be in the range of EUR 1.7 billion to EUR 1.8 billion. The year-end revenues between EUR 450 million and EUR 480 million. EBITDA reported between EUR 27 million and EUR 33 million with an EBITDA adjusted of EUR 30 million to EUR 36 million considering EUR 3 million of recurring costs and with a net income of between EUR 7 million and EUR 10 million at the year-end.

Thank you very much. I leave the floor again to Nevio.

Thank you, Giulio. Thank you, Roberto. I think we are ready to open up the Q&A session.

[Operator Instructions] First question is from Martino De Ambroggi, Equita.

The first question is on -- Giulio, on the interview on Sole Ventiquattrore today. You mentioned that one of the 2 U.S. clients, the new ones is in advanced negotiation. Obviously, I do not ask you anything in particular, but should we expect a similar timetable to Raytheon with 18, 24 months of development, and thus, production after 2028 or could be a different timetable?

And the second question, I know I cannot ask you for the amount, but what is the reasonable timetable or the timing for the government grants to be obtained?

And third question is on the Ministerial Conference. What are your best expectations for the upcoming event?

Yes. Martino, thank you for your questions. So, on the new customer time line, yes, I expect something similar as to what we have done pretty much with Raytheon. So we need to kick off some activities that proceed manufacturing, so qualification of the production lines, which we might as well be able to do in Italy, I believe. This largely depends on what type of program you are engaging on. Typically, in the U.S., you will have 2 types of programs. One that can be shared in terms of technology disclosure also in Europe where we can help from here, or there might be some specific programs that will be for U.S.A.s only. And in such case, we will have to work only with U.S. people and U.S. citizens. And in this case, we will have to wait until we ramp up also the team and the personnel in the U.S. I think there will be plenty also with other customers of work to be done in Italy ahead of time before the production in the U.S. This is also in the interest of the customers to get ready sooner for production. So I expect a similar time line.

Now, timing of grants, very good question. So first of all, grants will be split in 2 different pursuits. On one side, you have the state grants relative to the place where we plan to erect the plant that we hope to be able to announce very soon, okay? These are similar to what we have even in Italy. These are somewhat automatically proportional to the number of people you hire to the overall investment you place and so on, and they come in the form largely of tax cuts and funds for the training of new personnel, okay? This, I think, will have a relatively shorter time frame.

Whereas on the federal government level, the answer is, I don't know, because as you know, the new U.S. administration has largely changed the practices and the relevant interfaces. So we are interfacing with the new administration. The dialogue is active and our requests are on the ground. But since the administration changed, of course, we need to deal with new practices. So this may take a longer period of time. I am unable to forecast how long this may take. But what I can tell you is, we are in active discussion for this part as well.

Now, on the Ministerial Conference of 2025, so our expectation is good, something probably like we had in the previous Ministerial Conference or even slightly less would already be a good success for us. You may recall that at the last Ministerial Conference, we had a very substantial contribution. In this case, I'm not sure we can achieve the exact same amount, but close to. So, I think the support from the European Space Agency will be essentially on 2 fronts. On one side, the support for the exploitation of Vega C, as you know, with all kinds of concurrent funds supporting the obsolescence of certain technologies, the activities for maintenance and operations of all of our assets on the low side and so on. And this will enable essentially our expectation for growing the flight cadence of Vega C or in one way, securing flight rates compatible with market demand.

On the second -- on the other front, the Ministerial Conference will focus on extending our development programs, in particular, on the liquid oxygen methane technology for the future. As you know, also coming from the previous Ministerial Conference and from the projects we received out of the Next Gen EU, we have a number of different programs on liquid oxygen methane technology development. So what we will try to achieve with this Ministerial Conference is a consolidation of all these programs, Vega E, the liquid oxygen methane demonstrator, the M60 engine, the reusable upper stage to make them all converge towards a consistent and organic preparation of next-generation launch, which may have a significant portion in liquid oxygen methane.

Now, of course, you are talking about the far future because Vega C has just entered in service, so we will likely be in service for 10 to 15 years. So this effort will continue across the years. And at some point, we will most probably overlap Vega E. And then further on, we may feel something even more sophisticated than Vega E. So overall, I have a good expectation for this Ministerial Conference. I understand that the different countries are projecting to invest a lot, potentially more than in the previous Ministerial Conference, but we will not know until November 25, I believe. So as we have traditionally done in the past, we will convene a conference call with investors and analysts the day after the Ministerial Conference to report to you the outcome and provide you with our read across on the outcome. That will be essentially very telling of the type of orders that we should be getting through 2026 and beginning of 2027. So I think that by the end of the year, we will have a picture, not only of the content of the Ministerial, but also a good hint of what the orders might be in the course of '26 and beginning of '27.

Next question is from Gabriele Gambarova, Intesa.

The first one is on IRIS2. In your slide, you mentioned a major upside. Is it possible to understand what could this program mean to you? I mean, how many flights it could entail for Vega or Ariane? This is the first question.

The second one is on the space alliance between Leonardo, Thales and Airbus. Does this change anything for you? Do you think it can benefit, let's say, the overall situation in Europe?

And the third one is on the results, the 9 months results, we saw a very nice, let's say, growth in the top line without -- almost without operating leverage. So you mentioned energy costs. Is it possible to understand better how energy costs impacted margins? And what are you doing to protect them -- to protect margins in the future?

So, Gabriele, on IRIS2, we have limited visibility of what the launch schedule would be. What we know for the time being is that, this is 280 satellites of medium size. We don't know what is their deployment strategy. And to be honest with you, I think not even the customers would know. We would have to see exactly how they want to deploy them. I expect the majority of them will represent an important opportunity for Ariane 6 to launch them. And this will mean that we will have more opportunities to manufacture boosters at the end of the day, which is, as you know, profitable for us. And the more we grow the rate of production, the more we utilize the capacity, the better we are in terms of margin. Therefore, we see this as a positive and relevant expectation for the future also because it may pave the way for the possibility of growing the currents of production for boosters beyond what we have installed capacity for, okay, by another, say, another 20%.

We may debate this at the next Ministerial Conference. So I hope that this Ministerial Conference also this subject will be on the table. And if this were to be the case, I think this will represent incremental opportunity because if we were to go for an even higher production of boosters, I think at some point, the operating leverage will show up, okay?

Now let me go to your third question. The growth in the top line without much of an operating leverage. The operating leverage, by the way, is difficult to fully exploit in the first 9 months. As you know, we accumulate most of the profit in the last quarter, unfortunately, and this is due to the fact that most suppliers push their costs through the last quarter because almost none of them is listed, so they don't care about the quarters. They tend to wait until the year-end to push all the costs out. I think we should see this year a modest improvement in the operating leverage. We are not yet where we would like to be in terms of capacity utilization rates, but definitely better than the year before. And as you correctly pointed out, with a better situation on energy costs than we had anticipated.

In fact, this year, starting from March this year, we have consistently seen energy prices somewhat below what we had expected. So unless nothing changes between now and year-end, which we don't think, we should have a positive surprise towards the end of the year, which may lead to some good improvement of the operating leverage. But I want to be cautious and see what the numbers turn out to be in the last quarter to finalize on this. But let's say, it's a positive expectation.

On the space alliance, I don't know. I have read the press release just like you. I am not completely into this project. I don't know much about it. What I know is that, before this becomes an industrial reality, it would be a couple of years, at least. And therefore, we will see the effects of this not immediately, but maybe in some time. Overall, my tendency would be to believe that this is somewhat neutral to launch service providers. Both ourselves and Ariane Group are not part of this joint venture. We provide launch services. We used to work well with Thales Alenia and with Airbus. Now that they are joined, we hopefully will work well with them join. So we -- ex ante, we don't see any reason for it to change much for us in the future. Therefore, we wait to see how this joint venture shapes up. I think to a large extent, the intent of the joint venture is to extract synergies within the satellite manufacturing activities, some of which are under severe loss reportedly. Therefore, if they succeed in extracting the synergies and become more successful, we will be somewhat happy to see that and hopefully continue working with them as we have done in the past.

Next question is from Andrea Bonfa, Banca Akros.

Can you hear me?

Yes, we can hear you now.

Very quickly, my question, some of my questions have already been answered, but I would like to, let's say, expand a little bit further on the potential 2 new U.S. clients, in particular the one with the advanced stage. Can we expect some news flow in terms of potential order backlog or size of the initial contract by year-end? And if this client is in the same potential sales as Raytheon, just to give an idea.

Andrea, we didn't get the second part of your question.

No, the second part of the question was if you can also comment or elaborate on the potential size of this potential new client, if he's of the same potential size of Raytheon or if he's smaller or even bigger, just to sense a potential dimension on this.

They are equally big and capable, one of the large U.S. OEMs. So in terms of potential comparable prospect as to Raytheon.

In terms of new orders, we have other things in pipeline, by the way, that we need to accomplish, in particular order for the P160. The P160 we have to recharge, so to speak, the order book for the P160 now that we are ramping up. As you know, we haven't bothered to close the loop on new orders for P160 because in that, it did not fly. There was no need to work on a contract now. They are consuming the stock pretty quickly and now we have to work on that. So I would expect earlier to see orders coming on that front. And we expect we will see, there might be something more coming since we are working on. So between now and the first quarter, these would be the things to watch.

[Operator Instructions] Next question is a follow-up from Gabriele Gambarova, Intesa Sanpaolo.

It is on the Danish SAMP/T contract. I mean the country announced it shows the SAMP/T system 1 month ago, something similar. I wonder if you have any idea of when the contract could be signed, what is the size of the missile component? And even if this contract, which is EUR 8 billion contract for the overall system was included or is included or not in your projections?

The honest answer is that, I don't know, Gabriele, we don't know exactly what the slowdown might look like. We have started to hear this from MBDA, but we don't have the figures yet. We anticipate that this may be quite significant. And therefore, I mean, for example, last year, on a completely different project for CAMM-ER with Poland, we have had, as you may recall, a very important slowdown. I believe that this contract for them may be of similar relevance. But honestly, we don't have the numbers yet. And we have interacted with MBDA, but this is not yet clear.

Okay. And just as a reminder, the CAMM-ER Polish contract, what was the size for you?

It was EUR 150 million order of magnitude.

[Operator Instructions] Next question is a follow-up from Andrea Bonfa, Banca Akros.

Now my question is basically, I'm attaching to the one of Gabriele. Thales is, let's say, keeps mentioning that there are potentially other orders similar to the Danish one. And I was wondering if you -- I mean, are part of this negotiation, if you can see these orders coming and if the magnitude can be of the similar size of Denmark or bigger or smaller?

No, Andrea, we don't have this honestly we don't know. We know that there is an expectation for growth that is when the commented here and there from our institutions, the other institutions as a consequence also of the [ SAFE ] program. But this has not yet been defined at the level of ourselves, which we represent. Our supply chain has not yet been defined in quantitative terms. As soon as we have an understanding of that, we will promptly report that.

[Operator Instructions] Mr. Quattrin, gentlemen, there are no more questions registered at this time.

Thank you. Thank you, everyone, for joining this call.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.