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Hello, and welcome to the CSG Q1 2026 Trading Update Conference Call. Today's presentation will conclude with a Q&A session. [Operator Instructions] Please be advised that today's conference is being recorded.

I will now hand you over to Peter Russell, CSG head of Investor Relations, to open today's conference. Please go ahead, sir.

Good morning, everyone. It's a pleasure to welcome you to the call on our Q1 update. Today's speakers are Michal Strnad, Chief Executive Officer and Chairman of the Board; and Zdenek Jurak, CFO.

Michal will start with an overview of how CSG is currently positioned in the market, followed by the company's Q1 financial highlights. Zdenek will then provide a more detailed review of our quarterly performance. After the prepared remarks, we'll open the line for questions.

We ask that you take a moment to review the disclosures on Slide 2, which outline important information regarding forward-looking statements and the use of non-IFRS measures.

And with that, I'll hand over to Michal.

Good morning to all of you, and thank you for joining us today. I will turn to our Q1 update shortly. Before that, I want to remind everyone of the strength of the CSG businesses, our model, our strategy and how we execute.

In our core Defence Systems businesses, CSG enjoys scale and expertise in ammunition production. Our production network is a core asset. We [indiscernible] production and assembly facilities across Slovakia, Spain, Serbia, Greece and India. This network is robust and growing. We have a clear goal to scale our own production of large caliber ammunition. We are delivering ahead of plan, capacity on an annual basis was more than 100,000 rounds at the end of Q1.

We are well on the way to 1.1 million rounds in the medium term. We are also seeing a mix [indiscernible] awards extended range ammunition. In 2026, we expect this to account for more than 50% of artillery ammunition sales. Zdenek will speak about production in more detail shortly.

Vertical integration and in-house production are central to our strategy. We are bringing more of the supply chain in-house, propellants, components and subsystems. Take, for example, the build of Bi-modular charges, artillery plant in Slovakia or our new joint venture in Greece were 155-millimeter production is already underway. And more recently, the acquisition of a stake in Hirtenberger Defense Systems to expand our capacity and product portfolio. Every one of these moves reduce input costs and strengthens our control over quality and delivery. This is how a serious defense manufacturer builds long-term competitive advantages.

CSG is trusted supplier to NATO government. We have been winning contracts for years, and we continue to do so. Our credentials have been extensively vetted. This includes by the U.S. government, which confirms CSG as a trusted owner of U.S. defense assets. This trust was recognized with USD 635 million contract to design and build the future artillery complex in Iowa for the U.S. Army.

We are the only European defense group, ever trusted with a project of this nature in the U.S. The pace and quality of CSG's recent deal activity reflects the group's status as a Partner of Choice in defense. In 2026, CSG has won significant businesses across in both Europe and international markets.

Recent contract work includes large caliber ammunition, armored vehicles and Air Defense Systems. Land Systems now represents 48% of our backlog up from 40% at the year-end. Our revenue is also increasingly diversified. Ukraine represented 21% of group revenue in Q1, down from 27% in 2025. We are delivering through a broader customer mix. This includes USD 2.5 billion air defense systems contract win in Southeast Asia. We are also leading this new technology.

In Advanced Systems, we are scaling up production of turbojet engines for long-range UAVs, a market we are strongly positioned to serve. Our customer base, our contract pipeline, our regulatory track record and our Euronext listed status all reflects a company that meets the highest standards of integrity and compliance.

Finally, I want to be clear about the minority shareholder position in CSG Land Systems. As has been widely reported an approximately 10% minority stake is held by a former executive. Any potential liability in connection with this matter sits outside of the CSG Group and eventually will be between me personally and the minority holder. There is no liability at the CSG level whatsoever.

CSG will not have any obligation to make payment or issue new equity, which would be connected to this case. There is no cash flow leakage and 100% of cash flows remain assigned to CSG regardless nor have any special rights being assigned at the group level to the minority holder under any scenario.

Now let's turn to the results. The headline figures demonstrate a strong performance across all key metrics. We delivered a revenue of EUR 1.5 billion, driven by strong momentum across our core Defense Systems businesses. This represents underlying year-on-year growth of 13.8%. Our main measure of profit, operating EBIT was EUR 372 million. This resulted in a margin of 24.1%. This margin performance keeps us at the top of our European Defense peer group.

Our total backlog and pipeline under negotiation reached a record EUR 44 billion. This provides exceptional revenue visibility and evidences the long-term structural demand we see in the market. The group remains highly capital efficient. Net leverage at the period end was 1.3x. We maintained strong cash conversion at 92%. CapEx intensity was 2%. We have remained disciplined in our capital allocation.

As the year progresses, we will continue to invest significantly in production capacity expansion and modernization to serve demand. Net working capital as a percentage of revenue was 31.7%. This reflects our strong build of inventory to support a record order backlog. We remain confident in our full year guidance of below 20% and expect the revenue to improve through the year as deliveries are completed and working capital is released.

Looking at our revenue composition, Defense Systems drove close to 50% of the group revenue. This segment includes our medium and large ammunition and land system businesses. These made up 68% and 11% of total revenue, respectively.

Our other businesses segment, Ammo+ contributed 19%. Overall, this was a very pleasing set of results. Thanks to the strong start to the year, we remain confident in our full year guidance.

Now I'll pass you over to Zdenek, who will take you through our market positioning and performance in more detail.

Thank you, Michal. Welcome, everybody, also from my side. Hello, and thank you for participating on this call. Jumping straight after the key highlights to the Page #7 and going to the more in deep for the backlog and the pipeline.

Order backlog increased again compared to December 2025 to EUR 17 billion and pipeline increased at the same time to EUR 27 billion, as Michal mentioned. Overall, meaning EUR 44 billion of total backlog in the pipeline as of the first quarter 2026.

Increase of the backlog is driven mainly by Land Systems, but keeping a continuous strong demand for medium and large caliber ammunition. Pipeline increased to EUR 27 billion at the same time, including also first EUR 1 billion coming from the Slovakian framework EUR 58 billion contract. More from that contract is expected to come also in the coming periods. Similar to revenue, Land System is balancing going forward, the medium and large caliber ammunition despite the really continued strong and demand throughout the medium and large caliber ammunition subsegment.

On the Page #8, we are explaining our group performance bridge, where the contribution of the revenue as of the first quarter 2026 to expected year-end 2026 total revenues is expected to be approximately at the same level as last year, which means approximately 20% and that is even with the weak contribution of the Ammo+ subsegment in the first quarter of 2026.

Similar contribution, meaning 20% of the total yearly revenues is also expected to be in the second quarter and the higher is to come in the second half of the year. Operating EBIT margin consistent with the year-end 2025 at 24.1% level despite a weaker Q1 in Ammo+ and driven mainly by the Defense Systems business.

Ammo+ margin expected to recover as the market is recovering in the U.S. and the Q1 margins in that subsegment has been driven mainly by the uncertainty around the tariffs in January and then pretty much driven by our investments, which we made in February and March to address the rapid market recovery, trend and investments to get back to 24/7 production due to high demand, especially after the conflict in Iran started.

On the Page #9, we are deep diving into the Defense Systems division. Strong order intake from NATO members and diversification to Southeast Asia are the key highlights here. Together with keeping superior margins on the market, both on medium and large caliber ammunition as well as on the Land Systems side. All the projects for vertical integration are running according to plans and even better if we slip straight to the next slide, where I will show you our progress in terms of our production capacities, as has been also mentioned by Michal during the first part of this presentation.

So on Page #10. Starting this page with the details about the medium and large caliber ammunition subsegment performance where we've recorded a 22% year-on-year growth of revenue and keeping margin above 30%. Our 13 production sites have been further developed and we have introduced an increase of our own production capacities through our efficiency programs and investments into automation. All of that ends up in the incapacities of our own production, so meaning excluding any recommissioning, amounting to more than 800,000 of the artillery and tank ammunition as of the end of Q1 2026.

For more details you can find on the bottom right side, where we are expressing the capacities and the guidance where we should end up by end of 2028, as we've provided during the IPO process.

Further capacity expansion projects are running and total expected capacities in 2026, excluding recommissioning again should allow us to produce more than 850,000 rounds of artillery and tank ammunition in 2026. At the same time, approximately 50% of the revenue from artillery ammunition should be coming from a long-range type of this ammunition. How we want to achieve the capacities to finally reach the mentioned own production of 850,000 rounds in 2026, is shown on the next slide, #11.

Slovakia, Serbia, Greece, Spain and India. Those are the currently running projects. Next to nitrocellulose, which is mentioned under the #4 on the right side of the slide, and which is running well and according to the plan. We want to be ready for the further expansion for long-range ammunition production for which the Bi-modular charges are one of the critical components. Therefore, we started projects, which you can see as the #1 and which has been also mentioned by Michal, in Slovakia called ZVS Strazske.

Setting up this joint venture in Slovakia, where the Bi-modular charges will be produced in cooperation with EURENCO and for which German project will source the nitrocellulose is one of our key projects we are currently running. Other projects for expansion of our own production are focusing mainly to automation, modernization of the capacities and keeping the scale production next to the vertical integration.

On the next slide, I would like to a little bit deep dive more into the capacities as such. So Page #12, I would like to show you how we operate and where we have the capacities in Slovakia. Through the 3 facilities in 3 different locations, we obtaining around 500,000 rounds of our own annual production capacity of artillery and tank ammunition, which still -- with still potential and our plans to be increased.

Next to that, and to obtain and mentioned 800,000 rounds per year of our own capacity, we have 200,000 in Greece and 100,000 in Spain as of Q1 2026. Both Greece and Spain are planned to further increase the capacities for our own production, especially of artillery and tank ammo as well as the capacities which should be developed in India, which has been also mentioned throughout the projects we are running on the [indiscernible] business.

On the next slide, moving to medium -- moving from medium and large caliber ammunition to the Land Systems. Year-on-year significant increase of revenue [indiscernible] trend for our Land System subdivision with operating EBIT margin at the level of 15%.

Steps which we have done recently, like partnership with PGS [ Orava ] are giving us additional capacity and space for expansion, particularly in our existing facilities. EUR 20 billion of total backlog and pipeline for Land Systems gives us also a visibility, uncertainty over the revenue and margin longer periods.

On the next page, #14, Defense Electronics and Advanced Systems subdivisions now presented together, [ air defense ] products and R&D programs which are currently running are very close and we use both subdivision to scale the new operations in turbojet engines and air defense products, applications and software for the subsegment.

4% EBIT margin is a starting point, mostly for turbojet engines where the production just started back in 2025. And now it's further developing to the planned capacities and margins in term as we provided in the guidance. As you can see on the bottom right side, backlog and pipeline for turbojet engines are copying the introduced production and capacities according to the plans and according to our guidance, where we stated that approximately mid-hundreds of millions euros should be coming in the midterm as a contribution to the group revenues.

Defense Electronics, as a prime contractor for [ $2.5 billion air defense ] systems, expecting to grow according to guidance, which we provided as well.

On the Page #15, coming back to the several times mentioned Ammo+ division. Market started to recover in second half of February. Now we can see a very high demand where we were compared. And when we were comparing March 2026 to March 2025, we can see more than 50% increase of the orders in that particular month. We have invested in Q1 to increase and address that production back to 24/7 operational, and we expect that the Ammo+ subsegment revenue, both revenue and the margin according to internally approved budgets for 2026. That should be coming back in terms of margin to the double-digit area.

Supporting the business [indiscernible] and strategy to move to defense in this subsegment more, we can confirm that the NATO certification of the U.S. products in Europe is going according to the plan, expected to be done in -- at the end of the second half and start of the quarter, we should be able to be participating in the tenders in European NATO members.

At the same time, the Kinetic Group as a producer on the U.S. market won a significant contract in the U.S. worth more [indiscernible] USD 100 million with a key U.S. law enforcement. All the steps we've made should bring us back to the double-digit margins by end of [indiscernible] as I mentioned, supported also by the 2 plant price increases during this year to address mainly the price increase of the -- one of the critical components, which is copper. Since we are the market leader [indiscernible] in a market maker, we feel very confident that the market will bsorb the price increase without any impact to the current demand.

On Page #16, I would like to walk you through the net working capital. Net working capital swing is mainly driven by the own production capacity increase and the Land System. To ensure enough critical components and market [indiscernible] we have invested into net working capital through either direct buy or safety stock or through the advanced payments given to source the capacities and to secure those for our -- within our suppliers, mainly in terms of the propellant explosives before we are fully vertically integrated, but also, for example, for the critical components in terms of the Land Systems applications.

Comparing to last year, the total amount of investment into net working capital is lower and I'm confident, according to production plans, which we can see that we will end up below 20% level of the net working capital to revenue as of year-end 2026 according to the guidance.

Moving to Page 17, where we are presenting a cash flow which is very much connected to the net working capital as well. As you can see in terms of the operating cash flow, we grew almost by EUR 0.5 billion year-on-year despite a hard working capital requirements. Through the release of the cash from net working capital which is expected by end of 2026, we are confident to meet the guidance in terms of the cash generation in 2026. At the same time and connected to our capital structure we will be working further to optimize the cost of our capital structure in 2026.

CapEx spendings are expected to be covered from a free cash flow in 2026, supported by the strong cash flow position on the balance sheet. You may see the CapEx intensity relatively lower than expected and guided at the [indiscernible] starting point. Procurement lead times, construction milestones, and the commission schedules, mean the majority of spend will crystallize in the second half of 2026.

To summarize, all of the confidence about the free cash flow is supported not only by the strong performance and the visibility on the cash flow, but also by a very comfortable strong cash on balance sheet which we are presented on Page 18.

Coming to debt. The actual capital structure from cash position on the balance sheet as mentioned, just on the previous page, net leverage lower than 1.3x is also expected for the year-end 2026 according to the guidance. We are, at the same time, continuously working on the optimization of the capital structure, focusing mainly to have optimal [indiscernible] the loans and the bonds moving to the investment-grade structure and further optimize the cost of the debt.

On Page #19, I would like to summarize what you've just heard and what we were walking you through the presentation and highlight the key messages to be taken away.

First one will be strong revenue and record backlog and the pipeline underpinned [indiscernible] EBIT margin. Diversification not only to the new geographies, but also more balanced production of medium and large caliber ammunition and the Land Systems expected to be also in going forward and a subsequent period.

Successful increase of medium and large caliber owned production capacities, which shift from standard to long-range type. Vertical integration projects running according to plans. And last but not least [indiscernible] production in highly growth air defense and UAVs market.

Last page is page #20, where we would like to reaffirm our guidance for 2026 and mid-term. The only change now you can see is the expected leverage to be below 1.3x. And openly saying here that this is with a buffer. And within the expected cash flow of -- confidence about the cash flow going forward and excluding any M&A, it should be even closer to the 1x rather than below 1.3x.

That is bringing us to the end of our presentation. Thank you very much for your attention, and we are happy to answer any of the questions you may have.

[Operator Instructions] We will now take the first question from the line of Sebastian Growe from BNP Paribas.

I have 3, if I may. The first one is on the minorities. I can, sort of, understand that you cannot disclose the status quo with regard to single minority owners in the various subsidiaries. However, I was hoping for greater clarification with regard to the absolute P&L impact that is related to those minorities. So after you recalled, EUR 180 million of minorities in fiscal '25 on the P&L, can you give us an indication what you deem appropriate in the year '26? And would it be fair to assume that this line item is then going to move in tandem with the operating profit growth of CSG in the years thereafter? That's the first question. I have 2 more.

Yes. I can address this question, and thanks for this. Well, if we come back to the 2025 results and if you do the pro forma, the minorities according to the new structure set up within the IPO would be approximately EUR 120 million. I expect for 2026, the net of the minorities should end up in a P&L around EUR 150 million going forward. That is coming mostly from the joint ventures we have established, particularly in Slovakia and Greece. So going forward, this is expected to be -- it's not anything new, and this is according to our plan as we have done.

That is helpful. And then the next one is on working capital. In the bridge, it looks as if the former receivable of EUR 275 million that was related to the group structure optimization, but this has been cashed in. So can you just confirm that in quarter 1, the cash flow benefited from the cash received in that very amount i.e., the EUR 275 million?

Yes, I can confirm. In Q1, this EUR 275 million mentioned in the prospectus for IPO coming from the carve-out of the non-core defense business has been fully settled in cash.

Okay. Perfect. And then the last one on the operations on Ammo+. You mentioned the return to a double-digit margin in the coming months. Following the uptick that you have seen in demand since February and the mentioned price action that you have taken, what is the expectation for the '26 revenues in the segment? So might it be turn out to be flat year-on-year? And when you point to that double-digit margin, am I right to assume that this is after PPA amortization margin? And can you remind us of the PPAs that you would plan for in the year '26?

Yes, this is after the PPA. The PPA adjustment has been done only in 2025. Now it's continuing to be according to IFRS. So whatever you can see on the balance sheet or on the subsegment coming from that. So there will be no adjustment simply set in 2026. And the expectation is to come back to the years, which has been before 2025. So I would assume that the recovery depends on what the price of the copper will be pretty much, but it is [indiscernible] back in double-digit, which would be giving us somewhat more than EUR 1.25 billion of revenue coming from that.

We will now take the next question from the line of Chloe Lemarie from Jefferies.

Yes. I have 2, if I may. The first one is on the performance in Large ammunition. Within the 22% growth in Q1, could you maybe share how much was driven by own production and how recommissioning evolved year-on-year in revenues? And just the second one is a clarification from the question you just answered from Sebastian. In terms of the settlement in cash on the EUR 275 million, can you confirm that this is included in your free cash flow number? Or does that fall below the line in the cash flow statement?

Coming to the first question, vast majority of the production [indiscernible] growth is from our own production. We expect also that the vast majority of the revenue in 2026 will be coming from our own production of the medium and large caliber ammunition.

Second point, in the cash flow, it has been rather reflected in the change of the net working capital than the cash coming from any settlement. It's a normal settlement of the receivable and payable between that. So it is [indiscernible] reflected in the free cash flow calculation.

We will now take the next question from the line of Michael Raab from Kepler Cheuvreux.

I'd like to get back to the frequently debated issue of the minorities. Just to get a confirmation on that, is there any liability related to any other minority you intend to buy out on the balance sheet of CSG?

No.

For you to confirm that perhaps, isn't? Okay. So you said no, that's good.

And then just to confirm that I got something right. For the minority stake in the P&L, my understanding is based on what you said, that you initially expected the minority stake to amount to EUR 120 million in the P&L, but you now rather calculate it's going to be EUR 150 million roundabout simply because the idea to buy out those minorities hasn't been realized yet, right? So the minorities are sitting here, so basically change in your plan? Or is that wrong?

No, no, no. I would like to correct you a little bit, if I may. No, no, no, I'm sorry, EUR 120 million would have been pro forma after all the minorities, which went out pre-IPO would be out as of the end of 2025. Now it is expected since we are growing and since also business with our joint ventures is growing, we expect EUR 150 million in the P&L for2026.

Okay. So the increase in the expected amount is not related to the fact...

Not at all.

Are there still some minorities in there that you failed buying out as opposed to your original plans?

No. No.

We will now take the next question from the line of Pavel Ryska from J&T Banka.

First of all, congratulations on the very solid set of results in the first quarter. I have two questions. The first one regards the recovery on the Ammo+ level. I would like to ask about more color where the recovery is coming from. Is it from the commercial market? Or is it related to the war with Iran, so that military is basically demanding more of small caliber ammunition?

It's basically both. First one, as I mentioned, we increased and we are continuing to deliver one of the key over EUR 1 billion contract for small caliber in defense. Second, we signed and won the contract with the law enforcement in the U.S. And third, yes, obviously, the commercial market is recovering very much as well because of the uncertainty in the U.S. coming mostly from the Iran conflict.

That's very helpful. And my second question regards Tatra. There seems to be pretty high demand for your Tatra chassis across the market. And there have been media reports that there are some disagreements with the minority shareholder in Tatra over capacity expansion, CapEx, et cetera. Is this resolved? Or do you expect like a smooth increase in capacity of Tatra in the coming years?

Okay. I will start to address that question. There is no impact whatsoever. We continue to cooperate with Tatra. Tatra is our JV. So it's operational as it should be. About the minority agreement I can refer to Michal's comment, but the business and the growth and the capacities are according to the plan that are growing according to the guidance and according to the expectations.

We will now take the next question from the line of Sriram Krishnan from Deutsche Bank.

I've got a couple of questions, if I may, please. The first one is actually on the recommissioning part of your Ammo business. Would it be possible for you to give a bit more color on the outlook, especially in terms of visibility which you have in this business? Especially we hear news that the Czech ammunition initiative for 2026 is still not fully funded. So any color around the outlook in that part of the business would be pretty helpful.

The second one is a bit on the Hungary part. So under the new administration, we hear that some of the existing defense projects, including the funds coming from SAFE funds are being reviewed. Is there any risk or any of CSG's projects running the way?

Addressing the recommissioning expectations and the capacity, as I said, the vast majority of the production is expected to be from our own production. If you look at the guidance and if you look at the the composition of the medium and large caliber ammunition, you may expect approximately or more than 400,000 rounds this year coming from commissioning when comparing to more than 850,000 coming from our own production.

So this is where we stay now under the current backlog and pipeline and the production we can see. There is no whatsoever concern about any struggling with the sourcing in terms of the recommissioning and it's not connected to Czech Ammunition Initiative, we have the demand coming from all the NATO members. Clearly, as you can see, it's not the -- not the only business we are running.

And in terms of the Hungary we are confident in the industrial logic and the legal basis of the deal. And I think it's not time to speculate at this point further because we have not received any information or signal.

We will now take the next question from the line of David Perry from JPMorgan.

Yes. My congrats as well on the good numbers. A few questions, please. Can I just -- one just small clarification. I think you've guided very clearly just on the last question on the owned production, I think you said 850,000. So just to be clear, does that include medium caliber or is that just a large caliber?

It's just a tank and artillary, so it's just a large.

Okay. Any color at all on medium caliber?

Well, median caliber is expected to be delivered in several hundred thousand of pieces. I don't have the exact number in front of me, but it's roughly about 200,000 or so approximately.

And -- But that's increasing, is it ?

It is by '28, in terms of the medium, our plan is to exceed 400,000 pieces per year.

Yes, coming back to the Page #9, if I'm not mistake, 10, sorry, Page #10, bottom right side, where we are expressing where we should end up by end of 2028 in terms of the capacities.

Okay. Okay. So I missed that. And then, you've given us -- but I don't think you've given this to us before, but you mentioned the Ammo -- M&L Ammo margin being 32%. Was there anything unusual in Q1? Or is that the kind of margin we should think about for the year?

Well, you should think about this also going forward. We were we were providing an information to the IPO process that we are slightly above after months of the relevant subsegments of our peers, which is pretty much exactly what we were talking about during the process and during the presentations. So I believe going forward, visually around this area, starting with the 3.

Okay. Great. And then the last one was just your comment on leverage that it could be onetime. Does that include expected outflows for M&A this year? Or is that just on an organic basis?

No, it's excluding M&A. If we just simply do the math, we would be probably closer to the 1x, but I'm more prudent in this case on keeping some space and openly saying that.

We will now take the next question from the line of Atinc Ozkan from Wood & Co.

I hope you can hear me clearly. Atinc from Wood & Company. I have 3 questions. The first one is regarding your recent joint venture with ASELSAN, when should we expect that to be active? Rheinmetall is experiencing a significant surge in short-range air defense revenues. And I think with Iran war, that market will get even hotter. So what are your expectations from a revenue generation perspective for this joint venture? That's my first question.

The second one is same question for your new JV in Azerbaijan. I think you are expecting a couple of hundred million euros, but can you provide some more granularity, when we should expect that to start happening?

And the third one is, last week, I visited a SAHA Expo Defense Fair. You guys were present there, but I also had the chance to speak to your subcontractor, [ ARG ] Defense. I do remember you had a EUR 2 billion subcontract with them in 2024. Is this relationship still intact?

Yes. So I will start from the back. Regarding ARG, Turkey, it was the framework contract for different kind of component. So it was not, let's say, used all of the to talent, but the contract is still active and as per the need, we give them or order-by-order for the concrete components if we need.

Regarding Azerbaijan...

I will take the Azerbaijan. Azerbaijan, we are developing together with the Ministry of Defense there, the air system solution -- it's now being tested. If that is tested and going well, we expect approximately first 100 pieces of this air defense applications coming as an order for next 3 years, roughly around [indiscernible] million.

That's the one part. And other part is that we have also set up the JV for the maintenance and the modernization of the platforms. That's what we have announced a few weeks ago. It's already operational. A few first, I would say, Lands platform are already in. So the work has started, and we expect first revenues this year.

In terms of the Aselsan, we are currently forming the, I would say, industrial -- industrial base and the scope of work of this air defense systems. We expect first orders to come this year and the first revenues next year.

Can you elaborate on potential, let's say, size of those orders? Is it going to be small initially? Because I think counter drone is getting more important for everyone, including Gulf countries, not only Europe.

Yes, you are right. Look, our expectations is that in the next year, our revenues, it will be several hundreds of millions of euro.

We will now take the next question from the line of Sebastian Growe from BNP Paribas.

From the U.S. artillery factory, so you mentioned the $635 million contract to build that plant in Iowa. Can you remind us of the strategic opportunity that you see in that market, both in artillery but also in regards to medium calibers? And how should one think of the cadence here? So would you first need to complete that very artillery plant before you might be eligible to seek other opportunities? If you can just kind of walk us through the potential in the U.S. in particular?

Look, we believe a lot in our expansion in the U.S. market. It's the biggest defense market in the world. This project for the Artillery Complex in Iowa is in the construction phase. So everything is as per the plan. On the top of it, we are discussing with U.S. Army and with U.S. government several other significant potential contracts, not only in medium and large caliber ammo, but also in the Land Systems. It means tactical vehicles and other artillery systems.

Can you also give us a certain time line? Or is this kind of really up in the air, as and when you might then also be successful in winning any contracts? Or is it relatively visible that something will come up?

Some of them should be execute as of Q3 this year and other Q4 this year. So until end of this year, we should have a clear visibility if we are going to execute such contracts.

We will now take the next question from the line of Chloe Lemarie from Jefferies.

I have a couple on M&A, actually. So on the comments on M&A and the leverage target, should we read into this that your limit for firepower this year would be to go up to 1.5x net debt-to-EBITDA? Or is it just a rough indication of what you could dedicate to M&A this year?

The second one is on the discussions around taking a potential stake into KNDS. Could you maybe share if you had discussion with the existing shareholders? Or is it something very preliminary at this stage?

Okay. I will answer the first question, and I will leave to Michal, the second part. First question about the M&A and M&A is not counted in the net leverage, and I don't count with that. The goal is to be still at investment-grade position. That's the first goal we are mentioning. So I will be keeping very much at that position, irrespective of the M&A. M&A is simply not counted into that calculation and the guidance.

And in terms of the KNDS, we are here to talk about our strong quarterly performance, and it would not be appreciate to comment on media speculation. That being said, we have an active M&A program and we evaluate suitable options. Our priority is the transactions which reinforce our value chain or strengthen our long-term competitive positioning. And potentially KNDS is definitely on the list.

We will now take the next question from the line of David Perry from JPMorgan.

I just thought I'd ask one more as well. Michal, there's lots and lots in the newspapers about some changes in the battlefield and the greater use of drones as opposed to ammunition. So perhaps it would be helpful for investors just to have a bit of comfort. Can you talk about the pipeline of order campaigns for ammunition? What are the -- sort of which countries are you in active talks with? Are they framework agreements? Are they single agreements? Just anything we should be looking out for or could expect in terms of M&L Ammo order intake would be helpful.

Medium and large caliber ammo, we see still a very strong demand with negotiations with more than 10 countries in Europe for the concrete orders or for the framework of contracts because we still can see and it will continue like this that the stockpiles are empty and the NATO European need to replace or refill their stock. So we feel very confident, and I am sure that you will hear soon about a few new contracts for the European countries. Some of them will be directly and some of them will be through this EUR 58 billion framework contract with Slovakia.

Okay. Addressing David -- yes, addressing your point about the order intake. I can only comment and guide you so that you have a better visibility over that. I can tell you that book-to-bill as of Q1 2026 in first quarter has been more than 1.5x.

So that was for the group, Zdenek, the 1.5x?

Yes, the 1.5x for the group.

We will now take the next question from the line of Sebastian Growe from BNP Paribas.

Apologies for another follow-up. But when flipping through the slides, I couldn't find related minorities impact on the P&L in the first quarter. Could you just be so kind to give us a number. That's all.

Yes, I don't have it in front of me if we haven't guided it. So let me follow up and I will send this separately.

Thank you. There are no further questions at this time on the phone. I would like to hand over to Peter Russell for any webcast questions. My bad -- there is one more question on the phone. And it's from the line of Pavel Ryska from J&T Banka.

More general ones. The first one, what immediate implications or future implications do you see for your business coming from this new conflict in the Middle East, which is now taking longer than first anticipated. And second, Germany is now proving to be the biggest spender and has the biggest rise in defense spending coming up in the next years. Where do you see your potential to supply weapons or other systems to Germany, either directly or indirectly through another contractor?

Yes. So in terms of the Middle East conflict, we see the significant inquiries for -- mainly for the ammunition and the air defense systems coming in, we can see the big movement in terms of the increase sales of [indiscernible] Middle Eastern countries. So that's the trend.

What we definitely see, we have further added -- signed a few contracts for the countries in order to support their armies. That's the one. In terms of Germany, we definitely see that the German defense budget and the German Army is pushing. It will be one of the biggest defense budget in Europe. We are already in Germany through our [indiscernible] nitrocellulose facility plant. We are running there also some production of some another products from the portfolio, mainly connected to the ammunition components and the ammunition itself. And you are right that we have other strategic plans in terms of the Germany, which we don't like to disclose now, but I'm sure that you will hear soon.

Pleasure. If I may, just one comment coming back to the minority question. I have the exact number in front of me. Thanks for [indiscernible] we will be showing this going forward. The minority now in P&L is EUR 32.5 million. So exactly according to the guidance I was provided about EUR 150 million for this year plan. I hope it ends up with the person who was asking.

I would now like to hand over to Peter Russell for webcast questions.

Thank you. Most of the questions have not been addressed in the conversation. Just a few additional points for clarity. Couple of questions from Petra Bartak from Erste Bank. The first is, were there any one-off non-recurring OpEx in Q1 or any other financial costs that were one-off in nature?

And the second question concerns M&L Ammo, just a follow-up to some of the conversation already. How should we think about conversion about M&L Ammo pipeline into backlog over the course of the next few quarters? And what type of growth expectations should we consider?

Okay. So coming to the first question about the non-recurring or one-offs that are not material at all. So the answer would be no. There are none. No significant one-offs. And second point, the conversion. As I was guided, the book-to-bill in the first quarter has been 1.5x with respect to the group level for medium and large ammunition pipeline. Going back, I has been answering in a sense that I expect that 20% approximate of the revenues contribution Q1 to the expected year-end 2026 will be also -- is also expected for the second quarter. So you may expect book-to-bill ratio to be approximately at the same level.

That's great. Thank you very much, Zdenek. I think for now, that's all the time that we have for questions. We look forward to continuing the discussion in our scheduled calls, and those will start very shortly. So we thank you for your time back to the operator.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.